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US probes Canadian shipping plans Coast Guard conducting risk assessments of threat of more crude tankers using Vancouver port; Kinder Morgan working with regulators Gary Park For Petroleum News
The U.S. Coast Guard poses a new wrinkle for Kinder Morgan’s revised plans to boost capacity on its Trans Mountain pipeline by almost 200 percent and become front-runner in the race with Enbridge to open up the Asian market for oil sands crude.
Under a legislative amendment by U.S. Sen. Maria Cantwell, D-Wash., and signed into law by President Barack Obama, the Coast Guard has been given six months to complete a risk assessment of a planned surge in crude tanker traffic in British Columbia and Washington waters.
The Coast Guard has been ordered to determine which rules and regulations apply to crude oil tankers arriving at and leaving Port Metro Vancouver and examine the toxicity level of oil sands bitumen carried by those vessels.
“According to reports, Canada is poised to increase tanker traffic through the waters around the San Juan Islands and Juan de Fuca by up to 300 percent,” said a statement issued by Cantwell’s office.
“A supertanker oil spill near our shores would threaten Washington state’s thriving coastal economy and thousands of jobs,” she said.
“This bill will provide crucial information for Washington coastal communities by requiring detailed risk analysis.”
Dangers of crude transportation The study will cover the dangers of transporting crude by supertankers, tankers and barges through the Salish Sea waterways which embrace U.S. and Canadian territorial waters between the south end of Vancouver Island and the mainland.
Ships arriving at port in Vancouver normally sail through U.S. waters next to a national marine sanctuary.
Cantwell suggested the diluted bitumen would likely require a special cleanup technology.
A spokesman for Canadian Transport Minister Denis Lebel said the government works constantly to achieve safe and secure transportation of natural resources across the U.S.-Canada border.
“If any project does not meet or surpass our stringent environmental standards, it will not proceed,” he said.
Increased volumes The Coast Guard assessment coincides with an announcement by Kinder Morgan that it plans to raise volumes in the Trans Mountain system by late 2017 to 890,000 barrels per day, 140,000 bpd more than its previous target and 590,000 bpd more than its current capacity. The estimated capital cost of the expansion has been increased to C$5.4 billion from C$4.1 billion.
Trans Mountain, overbooked for more than two years and operating under a 72 percent rationing in January, has accepted current nominations for 78,000 bpd to its Westridge Marine Terminal in Vancouver and 130,000 bpd to Puget Sound.
Kinder Morgan said the difficulty faced by Canadian producers and markets in exporting crude to saturated U.S. markets has resulted in demands for increased capacity on Trans Mountain.
Those signing on with Kinder Morgan for 15- to 20-year agreements to ship a combined 708,000 bpd on Trans Mountain are: BP Canada, Canadian Natural Resources, Canadian Oil Sands, Cenovus Energy, CNOOC, Devon Canada, Husky Energy, Imperial Oil, Statoil Canada, Suncor Energy, Tesoro Refining & Marketing and Total E&P Canada. Those deals leave about 182,000 bpd available to spot market shippers.
Rare disclosure The lineup, which represents a rare disclosure by companies of their interest in a pipeline project, reinforces their desire to divert their oil away from the U.S. because of their difficulties accessing what is Canada’s only serious export market.
With Canadian heavy crude futures recently selling at a $40 per barrel discount to West Texas Intermediate, the industry is “very anxious” to access new markets, said Greg Stringham, vice president of the Canadian Association of Petroleum Producers.
Kinder Morgan spokesman Andy Galarnyk told Petroleum News in an email that his company has met with the Coast Guard and indicated its interest in the assessment and willingness to share information.
He said Westridge continues to serve about five tankers a month, plus an average of two outbound crude barges and an inbound jet fuel barge.
“Marine safety around tanker movements continues to be a priority for Kinder Morgan Canada and we are working closely with all marine agencies and regulators to ensure this continues to be managed in a safe and efficient manner,” he said.
Galarnyk said that in addition to Westridge serving about five tankers, two outbound crude barges and one inbound jet fuel barge per month, anchorages off the dock are also used by vessels waiting to load or unload at other terminals in the area.
Kinder Morgan estimates the latest Trans Mountain plan would raise the number of tankers leaving Vancouver to 34 a month.
Five major refineries The Washington Research Council lists five major petroleum refineries in the state which process 560,000 bpd of crude and involve 600 oil tankers and 3,000 oil barges traveling through Puget Sound each month.
Ian Anderson, Kinder Morgan’s Canadian president, told a conference call he has no doubt that one of the greatest challenges facing the Trans Mountain plan is to “demonstrate and convince the public that tanker traffic through Port Metro Vancouver can continue to be done in a safe manner. So we’ll be dedicating a lot of attention to that as we already have.”
He said “concerns and angst” are building among Western Canadian producers about their ability to access markets, which he tied to rising U.S. production rather than the fate of Northern Gateway.
In a briefing with reporters, Anderson declined to make a direct tie between the surge of interest in the Trans Mountain expansion and to the current short-term market impacts of North America’s fast-growing crude production.
“I think it’s a broader recognition that pipeline capacity out of Western Canada is growing in its constraints and that more market access is required. This is a piece of that puzzle,” he said.
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