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Alberta, BC mull hydro, pipeline tradeoff
GARY PARK For Petroleum News
Desperate times require desperate measures, an axiom that now seems to resonate with the British Columbia and Alberta governments.
British Columbia is embarking on construction of a huge hydroelectric dam just as the government’s hopes of distributing most of the project’s 1,100 megawatts of output to the natural gas exploration and production end of its LNG industry are faltering.
Meanwhile, Alberta’s struggles to gain pipeline access to tanker terminals to export oil sands bitumen to Asia and Europe are well documented.
Although committed to spending C$8.3 billion on its Site C dam in remote northeastern British Columbia, the government of Premier Christy Clark faces the risk of meeting a 2024 completion date at the time its major customer base has evaporated.
Alberta’s challenge is to get British Columbia to sign off on Enbridge’s C$6.5 billion 525,000 barrels per day Northern Gateway pipeline to a port at Kitimat or Kinder Morgan’s plan to triple capacity to 890,000 bpd on its Trans Mountain pipeline to the Greater Vancouver area.
Using comparatively clean hydroelectric power rather than natural gas-generated power to extract and process its bitumen presents an attractive option to Alberta, which is resolutely committed to reducing greenhouse gas emissions from the oil sands.
Talks underway And this is where pragmatism has taken over, with Alberta Premier Rachel Notley confirming to the Globe and Mail that multilateral talks have been started by the two provinces that could lead to construction of a pipeline to the British Columbia coast in exchange for a long-term contract to buy electricity from Site C.
Notley has even gone as far as hinting she might be willing to consider an about-turn on Northern Gateway from her once-unyielding opposition to that project - clear proof if any was needed of Alberta’s fiscal plight.
“My opinion (on Northern Gateway) has evolved and changed a little bit over time,” she said, while noting that Enbridge faces an “uphill battle” to meet 200 conditions attached to the project’s approval by Canada’s National Energy Board.
Notley also suggested that the Trans Mountain proposal might be a safer bet because it involves expansion of a system that has operated for 63 years with only a handful of leakage incidents.
However, she was not ready to concede that a quid-pro-quo deal might be in the works with British Columbia and a spokesman for Clark, although confirming talks are underway, said his government has not shifted from the five conditions it has imposed on any pipeline project, including world-class safety measures, agreements with First Nations and economic benefits for British Columbia to offset the environmental risks it would take.
Quiet optimism The spokesman said there is now quietly building optimism that the conditions can be met, while the use of hydro power in the oil sands would help Alberta “brand their product better.”
Bolstering the argument on the use of hydro power, a new study by the Canadian Energy Research Institute said that using that energy source could “potentially provide an option to reduce GHG emissions.”
It said that regardless of high initial investments - including about C$300 million to build capacity on an existing transmission link from British Columbia to the oil sands - it might be possible to lower the cost of electricity through long-term contracts.
But the study cautioned that British Columbia does not have a monopoly on the hydro option, given the prospect of a dam on the Alberta border with the Northwest Territories or a partnership with Manitoba to build a dam.
CERI said a transmission link from British Columbia could utilize existing infrastructure within two to five years and “lead to zero to minimal new environmental and social impacts.”
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