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Vol. 18, No. 18 Week of May 05, 2013
Providing coverage of Alaska and northern Canada's oil and gas industry

BC investment chill?

Dix, odds-on favorite to become BC’s next premier, wants to scrap host of projects

Gary Park

For Petroleum News

After three months of pondering, Adrian Dix has put Kinder Morgan in the same category as Enbridge — unwelcome visitors to British Columbia if, as seems almost certain, he becomes premier of the province on May 14.

In the process of reversing a previously held position, the leader of the left-wing New Democratic Party unveiled even more of his ambivalence to resource development and raised fears of a flight of capital from British Columbia.

In declaring his opposition to Kinder Morgan’s plans to almost triple capacity to 890,000 barrels per day on its Trans Mountain pipeline from the Alberta oil sands to the Pacific Coast, Dix put that project in the same category as Enbridge’s planned 525,000 bpd Northern Gateway system (which also includes a twin pipeline to import 193,000 bpd of condensate).

“We do not expect Vancouver to become a major oil export port, as appears to be suggested in what Kinder Morgan is suggesting to the province,” Dix said. “I don’t see that transformation as being the right approach for our economy or out port.”

In January, Dix said he would not be rushed into a decision on Trans Mountain, insisting he would not prejudge the pipeline until Kinder Morgan had filed a regulatory application as part of a federal environmental review.

That stance was dumped April 22. “It’s been an important question for some time. There wasn’t any particular pressure other than the importance of the issue. I reflected on it for a long time,” he said.

Dix said an NDP administration would not support “a massive change in the nature” of operations at Port Metro Vancouver, where municipal governments have voted against allowing Kinder Morgan to increase tanker traffic from its existing terminal to 25-30 tankers a month from the current five-10, most of which deliver to California, with a small percentage serving Chinese heavy crude refineries.

No stand on Kitimat

Dix has yet to take a stand on plans by British Columbia newspaper publisher David Black to build a pipeline to deliver oil sands crude to a refinery at Kitimat, also the terminus for Northern Gateway.

Nor has he taken a definitive position on pipelines that would be needed to provide natural gas feedstock for LNG exports.

His opposition to the Kinder Morgan and Enbridge plans extends far beyond merely trying to block pipelines.

He wants to overthrow an environmental review process that has been holding public hearings over the last 15 months into Northern Gateway and is poised to receive an application for Trans Mountain in favor of restarting hearings with British Columbia’s own review.

Although the federal government has a defined constitutional responsibility to rule in the national interest on the economics of oil and natural gas exports that involve pipelines crossing inter-provincial boundaries, the British Columbia government has the final say on issuing licenses and permits, including those that involve pipelines crossing waterways.

In addition to seeking preeminence for British Columbia in resource hearings, he wants to raise carbon taxes on oil and gas production, continue a moratorium on offshore exploration, ban additional tanker traffic in coastal waters, strengthen the role of First Nations in approving major energy ventures and to ensure British Columbia receives a greater share of the economic benefits of resource development.

He also plans a scientific review into fracturing to unlock the province’s vast shale deposit.

Opposed to other projects

Outside of oil and gas, Dix has indicated he will stand in the way of a new coalmine on Vancouver Island, Taseko’s plan to develop the largest gold and copper deposit in Canada creating 2,500 mining, construction and indirect jobs and proceed with a major hydro dam that would be vital to LNG projects.

Political observers believe that Dix’s sudden boldness on these issues is prompted by two factors — confidence in his apparently unassailable lead in election campaign polls coupled with his unease over the strength of the Green Party, which could eat into the NDP’s hopes of a resounding victory.

“I suspect that Dix climbed down off the fence on Kinder Morgan to prevent the upstart Green Party, which opposes pipelines and tankers without qualification, from siphoning away votes from the NDP in swing (constituencies),” wrote veteran Vancouver Sun columnist Vaughn Palmer.

Others say an NDP government will drive away investment by the resource sector, turning off the taps on revenues needed to pay for his election promises.

Call for regulators to settle

In response, Kinder Morgan wants regulators, not politicians to settle the fate the Trans Mountain expansion.

Ian Anderson, Kinder Morgan’s Canadian president, said in a statement the company believes that the “process, including full applications and supporting evidence, should determine the outcome.”

He said Kinder Morgan is confident it can “satisfy questions and concerns” from both the public and elected officials once the company files its formal regulatory application for the C$5.4 billion project and starts public hearings.

Philippe Reicher, vice president of external relations with the Canadian Energy Pipeline Association, said in a statement that a National Energy Board decision on Trans Mountain would be “made on the merits of the project. Fundamentally, Trans Mountain is a federal undertaking and the federal process needs to take its course. It is a thorough and lengthy process.”

Brian Ferguson, chief executive officer of Cenovus Energy, one of Canada’s top three oil sands producers, told a conference call April 24 his company supports all projects for additional access to existing and new markets.

“It is vital to the economy that Canadian oil companies continue to expand market access for their production,” he said.

“Without pipelines to new markets, Canada’s oil industry will continue to leave billions of dollars of lost revenues on the table every year to the detriment of all Canadians.

“With the third largest oil reserves in the world, Canada has a tremendous opportunity to meet the growing global demand for energy,” Ferguson said.

Cenovus is already a major shipper on the existing 300,000 bpd Trans Mountain pipeline to Vancouver and Washington State and said it receives “higher international prices” for 40,000 bpd of production using pipelines, barges and rail options to access ocean transport, with 11,500 bpd being shipped on Trans Mountain.



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Shipbroker hails Enbridge plans

A veteran London-based shipbroker has painted a vivid picture of the worldwide economic benefits of exporting crude from Western Canada to the California coast and Asia.

E.A. Gibson Shipbrokers, established in 1898, said in a report that Enbridge’s Northern Gateway project alone would generate demand for 50 Very Large Crude Carriers (2 million barrels), 120 Suezmax tankers (1 million barrels) and 50 Afromax vessels (650,000 barrels).

Gibson said the changes to traditional methods of oil extraction and the location of oil sands resources in Alberta “will cause fundamental changes to the existing transportation routes.”

It said the prospect of 525,000 barrels per day of shipments from Northern Gateway, which is tied to the oil sands and import 193,000 bpd of condensate on a parallel pipeline, can be “viewed with some optimism for the crude tanker market.”

Despite fierce opposition to the associated pipelines and tanker traffic, Gibson credited Enbridge with doing its homework “in terms of safety and environmental concerns ... drawing upon the impact of the oil spill from Exxon Valdez” in 1989.

It said tankers from the Northern gateway terminal at Kitimat would “have to navigate the Douglas Channel, a wide, deep fjord similar to conditions found in Alaska.”

The report also noted the proposal by British Columbia newspaper publisher David Black to build a refinery at Kitimat adds to the prospect of tanker shipments from the B.C. coast.

It said that while neither Northern Gateway nor the Kitimat refinery are “done deals, these projects will have to meet some of the most stringent emissions standards anywhere in the world.

“It appears Enbridge has done all it can to bring them to reality,” Gibson said.

—Gary Park