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Vol. 23, No.8 Week of February 25, 2018
Providing coverage of Alaska and northern Canada's oil and gas industry

BC pipe case weakens

Dilbit found to float on water for up to 3 weeks; premier says it would be studied

Gary Park

Petroleum News

As the Canadian pipeline war of 2018 moves toward a pivotal decision, which it is widely assumed will see the federal government of Prime Minister Justin Trudeau ordering work to proceed on Kinder Morgan’s expansion of its Trans Mountain export system, the underpinning of the British Columbia government case against the C$7.4 billion project is weakening.

In igniting the flareup between his province and Alberta on Jan. 30, B.C. Environment Minister George Heyman effectively placed a ban on increased diluted bitumen, or dilbit, shipments across his province pending more studies on the impact of dilbit spills.

Sources within the B.C. government said that declaration caught Premier John Horgan off guard and unprepared at a time when he was on a trade mission in Asia.

On his return, Horgan showed the first signs of softening his government’s hard line.

“It’s never been my intention” to ban bitumen first, then study the issue, he said, although he has not ruled out limiting shipments at some later point after study and consultation with the public.

However, Alberta Premier Rachel Notley has refused to give B.C. the time to clarify its position so long as it subverts federal trade rights.

She has startled her opponents by taking a tough, unyielding stance, starting with a freeze on sales of B.C. wine in Alberta and warning of more reprisals unless Trudeau upholds Canada’s constitution which gives him final authority over the movement of any resources through pipelines that cross provincial borders.

Study counters dilbit view

While the saber-rattling continues, new research compiled by Natural Resources Canada scientists counters the widely held view that an escape of dilbit would be disastrous to open water.

NRC scientist Heather Dettman said tests conducted since 2014, using various grades of dilbit, show that the substance can float for up to three weeks, even under wave conditions that would cause conventional crude to mix with the water.

“The misinformation is that (dilbit) would sink as soon as it hits the water,” she said. “That’s the messaging that’s been out there and that’s not what we’ve been finding, even in fresh water.”

But she did concede that if a storm pushed the dilbit ashore that would pose a serious cleanup problem.

Dettman said the team of NRC scientists is now trying to determine how long a spill would pose a threat to the environment as well as figuring out how much harm would be caused by the toxic solvents used in dilbit.

However, she suggested light crude might actually be more hazardous when it hits water.

“That’s like adding cream to coffee,” she said. “It’s all mixed in and it gets stuck in the sediment.”

Dettman said dilbit “looks ugly and is not good for fish. But because it’s there you can pick it up (and) we get a very high recovery rate.”

Kinder Morgan

Kinder Morgan has made its own moves to gain public support by promising that when Trans Mountain reaches its design capacity of 890,000 barrels per day (three times current volumes), it will provide large, powerful escort tugs through the Juan de Fuca Strait between the B.C. mainland and Vancouver Island to help either avert or clean up spills.

The company said it will send more than C$100 million in extra funding to the Western Canada Marine Response Corp., a federal government agency responsible for mitigating oil spills, as it moves toward a seven-fold increase in the number of tankers leaving its Westridge terminal in the Port of Vancouver to 34 shipments a month.

For now, Kinder Morgan is also standing behind its record of never having a single spill in the 62 years that tankers have sailed from Westridge.

NEB, Trudeau

In the midst of the political furor Canada’s National Energy Board has infuriated pipeline opponents by giving Kinder Morgan the greenlight to start work on Westridge expansion, while ending restrictions on the related construction work around the terminal site.

The federal regulator also indicated it will override any attempts by municipal governments to stall progress on the pipeline expansion.

Trudeau has stepped up his public role in the debate by telling the National Observer that in blocking the pipeline Horgan is “putting at risk (Canada’s) entire climate change plan. If the Kinder Morgan pipeline does not go through, Alberta will withdraw its support for the plan. We will not have Alberta fighting to achieve its carbon targets.”

Industry

The Canadian petroleum industry wants to see the pipeline proceed, although there is no commonly held view on what can be done without damaging Alberta’s economy.

“At the end of the day, it’s frustrating because British Columbia would not last a week without oil and gas,” said Mark Salkeld, chief executive officer of the Petroleum Services Association of Canada.

“They support the LNG industry, so they are all for fossil fuels in their own backyard. But they are ready to mess around with Alberta and hold us back from developing our natural resources because they have access (to tanker ports on the Pacific Coast) and we don’t,” he said.

While the bare-knuckles fight continues, Kevin Neveu, chief executive officer of Precision Drilling, Canada’s largest drilling contractor, said the slowdown in building pipelines makes Alberta’s oil sector “less economic and less competitive.”

Energy consulting firm IHS Energy said the widening gap between West Canada Select heavy crude and benchmark U.S. prices has widened, costing Canada more than C$1 billion in the last two months alone, affecting revenues to producers and taxes and royalties to governments.

Gary Leach, president of the Explorers and Producers Association of Canada, said that while Alberta and B.C. trade blows, ignoring their reliance on resource-based economies, they are demonstrating to outside investors “the worst example of a dysfunctional federation.”

An editorial in the Calgary Herald said Horgan has “exhibited a flair for the worst kind of politics (by obstructing Trans Mountain). He’s apparently quite comfortable with his province facilitating the export (through a Vancouver shipping terminal) of dirty coal from the United States to generate electricity in Asia.”

“Horgan is seemingly quite content to receive Alberta oil that keeps the bulk of B.C. vehicles moving. But he flinches at the prospect that Canada could end its dependence on the United States and send its oil to markets that would pay a higher price - creating needed employment and billions of dollars in revenue for governments at all levels.”



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