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Lunn prods Bodman on pipeline approvals Canadian cabinet minister presses U.S. counterpart to speed up regulatory process; NEB warns pipeline rationing could hit this fall Gary Park For Petroleum News
Canadian Natural Resources Minister Gary Lunn decided it was time to put some pressure on the United States.
At a summit of the top energy officials from the United States, Canada and Mexico on July 23, Lunn took the chance to buttonhole U.S. Energy Secretary Samuel Bodman over what he perceived as Washington’s foot-dragging on approvals for new oil sands pipelines from Alberta to U.S. markets.
His concern was reinforced July 27 when the National Energy Board said it may have to start rationing space on export pipelines this fall because of galloping oil sands production.
“It is likely that export crude oil pipelines out of Western Canada may experience periods of apportionment by the fourth quarter 2007 and this may continue for the next 18 months,” the federal regulator said.
Acting board Chairman Gaetan Caron was emphatic that “capacity constraints on oil pipelines in Canada are coming.”
David MacInnis, president of the Canadian Energy Pipeline Association, said that unless new pipelines are built by 2009 some production may be shut-in.
Producers already facing apportionment He said producers are already facing apportionment at times on some lines and those limits will become more commonplace.
If producers are not able to move all of their volumes on an ongoing basis there could be an impact on prices, MacInnis said.
The board report was at odds with a study released in June by the Canadian Association of Petroleum Producers, which said there is enough pipeline capacity in place or being built to handle projected output increases until 2012.
But it said now is the time to start working on a new round of expansion, given the lead time needed for regulatory approvals and construction.
The trilateral meeting in Victoria, British Columbia, was a chance for Lunn to tweak Bodman in advance of any cross-border regulatory action relating to natural gas pipelines from the North Slope and Canada’s Mackenzie Delta.
He served notice of his unhappiness prior to the Victoria summit by telling the Globe and Mail he would seek speedier regulatory review of TransCanada and Enbridge pipelines designed to add 1 million barrels per day of new export volumes by 2010.
“We need to look at the regulatory approval process to make sure it is done as quickly and efficiently as possible,” Lunn said.
Without getting into the specifics, he said Canada, the leading external supplier of crude to the U.S. since 2004 and poised to rapidly expand that share of the market, “wants to ensure there is greater access” to southern customers.
He said the U.S. industry is just as eager to free up the logjam at the U.S. federal, state and local levels and streamline approvals to get additional crude flowing at a time when the U.S. is anxious to lower its reliance on the Middle East.
Earlier in July, Lunn said Canada was taking its own steps to build investor confidence by facilitating approvals for projects adding to the C$100 billion worth of energy products it currently ships to the U.S. each year.
“Our goal is to cut approval time in half,” he said. “We’re open for business; we want to attract investment from all corners of the world.”
Mulva cited regulatory roadblocks Lunn found an ally in ConocoPhillips Chief Executive Officer James Mulva who said in June that his company’s hopes of modifying its refineries to handle heavier crudes from Canada have encountered regulatory roadblocks.
“We are having a tough time getting permits,” he said.
The Canadian Association of Petroleum Producers and the Canadian Energy Pipeline Association have done their own leaning on Washington over the last five years to make sure Washington has sufficient staff and funding to handle its expanded regulatory role.
Speaking at a news conference, Bodman assured Lunn that the U.S. government takes his concerns seriously.
But Bodman also quietly pointed out that the primary task of evaluating and permitting pipelines from Canada rests with the State Department, although his own department is working with State to ensure the regulatory process functions “efficiently and effectively.”
“I’m of the view that things seem to be on track,” Bodman said. “As we stand here, I don’t think we have a major issue,” he said, in a gentle rebuke directed at Lunn.
However, Lunn said he and Bodman are committed to working together to create efficiencies within the regulatory system and attracting the investment needed for pipeline infrastructure.
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