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Rail enters Gateway debate Discussions between Canadian National Railway and the Canadian government delve into use of rail to move crude to Pacific Coast Gary Park For Petroleum News
The wrangling over Enbridge’s stalled Northern Gateway project has taken a fresh twist, with rail entering the picture.
Documents obtained by Greenpeace under Canada’s Access to Information Act disclosed that during a March 1 meeting CN said it had the “capacity to move crude to a variety of destinations, including the Port of Prince Rupert.”
But Canadian National Railway, CN, spokesman Mark Hallman emphasized that the discussions did not delve into a “specific crude-by-rail project” to the northern British Columbia port.
In answer to reports that Nexen, owned by China’s CNOOC, had urged CN to consider the use of rail, he said CN “does not disclose publicly its commercial discussions with customers.”
However, the documents made public by Greenpeace showed that an internal government memo claimed CN said it had capacity to run seven trains per day that could match Northern Gateway’s proposed capacity of 525,000 barrels per day of crude bitumen for export to Asia and California.
Hallman said CN is currently moving crude from the Bakken, heavy oil and oil sands regions of Western Canada and delivered 30,000 rail car loads (about 19.5 million barrels) in 2012, with the prospect of doubling those volumes this year.
The current Northern Gateway plan involves the construction of two pipelines — 525,000 bpd of crude for export and 193,000 bpd of imported condensate.
Issue of environmental assessment Greenpeace also released the contents of a separate memo from government officials to International Trade Minister Ed Fast and former Transport Minister Dennis Lebel, noting that the movement of crude by rail does not require a federal environmental assessment, but proposals for new infrastructure to support rail shipments might need an environmental approval.
Michael Gurney, manager of corporate communications with the Price Rupert Port Authority, said the authority has held previous discussions with Nexen about transporting petrochemical products by rail, although no project has been defined.
He said any new terminal would require a thorough environmental assessment and consultations with the community and local First Nations.
Effort to break deadlock Meanwhile, a prod and an olive branch have been introduced in an effort to break the deadlock between Alberta and British Columbia over building pipelines from the oil sands to Pacific Coast tanker terminals.
The pressure on the producers has also been underscored by their willingness to pay C$30 per barrel to get their crude on tankers at Kinder Morgan Canada’s Westridge dock at Port Metro Vancouver.
A Kinder Morgan presentation to a Canadian crude markets and rail takeaway conference in Calgary showed the Westridge dock price averaged almost C$30 in the first quarter when the spread between world prices and landlocked Canadian crude was as much as C$40 a barrel.
For producers eyeing export markets in California and Asia, the best hope of relief lies in plans by Kinder Morgan to expand capacity on its Trans Mountain system to 890,000 barrels per day from the current 300,000 bpd, plus Enbridge’s 510,000 bpd Northern Gateway pipeline.
Of the current volumes on Trans Mountain, only 75,000 bpd is exported — 75 percent to California and 25 percent to Asia — with the balance destined for a Vancouver and Washington state refineries.
Issue with royalties, revenues But Alberta and British Columbia have been squabbling over whether British Columbia is entitled to a share of crude bitumen royalties and revenues in return for allowing pipelines across its territory and for shouldering environmental risks.
Although Alberta Premier Alison Redford has refused to even discuss the possibility of sharing royalties, a new poll shows Albertans are willing to give up some of their financial returns to see Northern Gateway proceed.
The polling firm of Leger found 68 percent of Albertans back the project, 17 percent are opposed and 15 percent are uncertain, while 49 percent favor creating a fund to clean up any related spills, 27 percent are willing to share revenues with British Columbia and 22 percent endorse paying money to First Nations affected by the pipeline route.
Alberta Energy Minister Ken Hughes said a working group on energy exports of senior officials in the Alberta and British Columbia governments is “going well” in its search for solutions, but he wouldn’t say what options are being discussed.
The working group is “simply one element of a very complex, very intertwined economic relationship” between the two provinces, he said.
Hughes suggested that because Alberta has three times more pipeline than British Columbia and has been regulating the industry for 75 years, that should be proof to British Columbia that his province is not indifferent to the related risks and dangers.
He said there has been a dramatic improvement in the safety record of pipelines in Alberta, from 5.1 incidents per year for every 1,000 kilometers of pipe in 1990 to 1.5 incidents in 2012.
Hughes also said Alberta is in discussions with the Northwest Territories on ways to get northern resources to market.
Up to provinces Canada’s Natural Resources Minister Joe Oliver said that although his government is backing pipelines to the British Columbia coast, it is up to the two provinces to work out a means of sharing the financial benefits.
However, he said his own talks with British Columbia aboriginal leaders, communities and the provincial government suggest that “some of the dire descriptions of attitudes are overstated and not entirely accurate. Many First Nations chiefs have made it clear they see the advantages of resource development.”
Oliver said a team of federal officials visiting British Columbia have explained the “significant benefits” First Nations could derive from pipelines, but Art Sterritt, executive director of Coastal First Nations, said the eight communities in his alliance continue to view Northern Gateway as a “dead project” because of the threats posed by a pipeline and tanker traffic in British Columbia’s coastal waters.
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