No traction on rails
Public, government support lacking for two Canadian plans to move crude to Valdez
Alaska and an electrified railroad are the key elements being held out as an answer to the pipeline impasse stonewalling Canada’s search for a way to ship its oil sands crude to global markets.
That hope is also bogged down in what is viewed by the proponents as an apparent lukewarm response from within government circles in Alaska and Alberta.
Generating for Seven Generations, G7G, which has been advancing the idea of connecting the Alberta oil sands and Valdez for the past eight years, and a relative newcomer, Alberta Alaska Rail Development Corp., A2A, are competing for government, industry and First Nations support and financing.
Now that Enbridge’s Northern Gateway plan to transport 525,000 barrels per day of crude to a British Columbia port at Kitimat has collapsed, after C$600 million of investment, and Kinder Morgan’s 590,000 bpd Trans Mountain expansion is teetering on the brink of defeat, G7G and A2A see an opening for the crude-by-rail option.
But G7G Chief Executive Officer Matt Vickers is frustrated by his inability to generate serious attention from the Alberta government, which has so far confined itself to endorsing the concept to build a double-tracked railroad covering about 1,500 miles from Fort McMurray, Alberta, to Delta Junction, Alaska.
1 million bpdThe scheme currently involves shipping 1 million bpd of undiluted bitumen (which limits the environmental impact of a spill) at Delta Junction, where it would be unloaded, diluted and moved through the trans-Alaska oil pipeline to Valdez.
In addition, the proponents envisage carrying iron ore and other minerals from Yukon mines, which are landlocked and hamstrung by a lack of transportation.
So far the capital outlay and financing plans for both projects - with G7G estimated at C$27 billion and A2A at C$15 billion - remain sketchy.
However, Vickers has told reporters he spent time in China last summer, talking to a number of state-owned enterprises and returned with a memorandum of understanding tied to joint-ventures with First Nations.
He said talks have also been held with a number of big Canadian pension funds.
In addition, Vickers was in the United Kingdom earlier this year to meet with an investor who agreed to backstop the G7G project if it received a non-sovereign guarantee from the Canadian government.
Overtures to First NationsBoth G7G and A2A have been making overtures to First Nations in Canada, with offers of ownership stakes.
Vickers, a business consultant with the Tsimshian-Heiltsuk and Haida aboriginal communities, has been working over the past three years gathering approval from all First Nations along the proposed rail route and seeking a resolution of support from Canada’s National Assembly of First Nations.
He is counting on an early announcement from the chiefs of 25 First Nations along the line that they have secured funding to take an equity stake in G7G.
Vickers said that although G7G is not opposed to pipelines it is against supertankers on the Pacific Coast, leaving rail as the only practical alternative.
Alberta Trader and Economic Development Minister Deron Bilous, following a meeting with Vickers in February, said Kinder Morgan’s Trans Mountain expansion is not the only proposal the government favors for getting Alberta products to market.
The province is “working simultaneously on a number of different fronts. We’re not putting all our eggs in one basket,” he said, without offering any further clues.
Vickers is looking for governments to “take a chance” and is shocked by the slow pace of progress.
Jim Dodson, president of the Fairbanks Economic Development Corp, told Business in Vancouver that despite the efforts of G7G and A2A to gain attention neither is generating much interest or gathering public support in Alaska.