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Arctic gets fresh look No ’18 Northern Gateway in-service; feuds open door to Alaska, Beaufort options Gary Park For Petroleum News
Snarled in an endless round of protest, litigation and regulatory delays, Canada’s hopes of exporting crude bitumen to Asia from British Columbia ports are crumbling fast, giving a fresh lift to those who believe there are alternative tanker outlets in Alaska and the Canadian Arctic.
The latest setbacks for the floundering plans to build Enbridge’s Northern Gateway pipeline and triple capacity on Kinder Morgan’s Trans Mountain system are forcing proponents of finding new markets for bitumen to look elsewhere.
Project President John Carruthers delivered the most candid assessment yet for Northern Gateway when speaking to business leaders at the Calgary Chamber of Commerce on Sept. 4, ending years of bobbing and weaving by Enbridge executives.
He said original projections of an in-service date of 2018 for the pipeline are “quickly evaporating ... that’s not going to happen,” coming closer than anyone in the company has so far to admitting that the C$7.9 billion plan to export 525,000 barrels per day of crude bitumen is in deep trouble.
Only four months ago, Enbridge Chief Executive Officer Al Monaco told the company’s annual meeting he would not be tied to a schedule for the pipeline.
“I’m not as fussed on what that date is,” Carruthers said. “I’m more fussed on whether we can have the support we want to go ahead, so that (the project) is positive for all the people of Canada, including aboriginal people.”
Meanwhile, Kinder Morgan is “urgently” asking Canada’s National Energy Board to order the City of Burnaby in Metropolitan Vancouver to allow survey crews to gain access to a conservation area, setting the stage for a legal fight over whether municipal bylaws or federal legislation has precedence.
In its plea to the NEB, the company said the results of “geotechnical and other surveys are urgently required to complete the necessary design evaluations in order to satisfy the deadlines set out by the NEB” to start public hearings on the Trans Mountain proposal.
Tuktoyaktuk a possibility With both projects effectively stalled, a new door has opened with the release of a technical report commissioned last year by the Alberta government on options to deliver crude from northern Alberta to a port at Tuktoyaktuk on the shores of the Canadian Beaufort.
The study by the petroleum consulting firm of Canatec Associates International Ltd. said three options are all technically feasible, adding that a pilot shipment could be started in 2015.
But, even at its most ambitious, a northern pipeline could initially carry only 35 million barrels a year compared with Northern gateway’s 190 million barrels.
The leading option would see a new pipeline built from the oil sands to Tuktoyaktuk, while Plan B would reverse the flow and extend to the Arctic Ocean the underutilized 40,000 bpd line from Norman Wells to Zama City in northern Alberta and Plan C proposes a pipeline to Great Slave Lake in the Northwest Territories where crude would be loaded onto barges for shipment down the Mackenzie River.
But Canatec notes that regardless of how crude is moved to Tuktoyaktuk and how fast Arctic ice melts, a shipping route from that port to either the Pacific or Atlantic oceans would be a “revolution in global logistics, equal in impact to the opening of the Suez or Panama canals.”
NWT pursuing shipping Even so, NWT Premier Bob McLeod hopes to arrange an early meeting with the Alberta government to decide whether to pursue the idea, insisting it is time to find an outlet for resources that have been stranded in Canada’s North for 40 years.
He is confident that initial shipments could start in four to five years, now that the NWT has the authority to reduce its complex regulatory approvals by land and water boards into a single review system.
Separately, work is still proceeding in backrooms to evaluate the viability of delivering crude from Alberta by pipeline or rail to connect with the Trans Alaska Pipeline System for shipment to Valdez.
The longer all of these ideas drag on the stronger the environmental opposition becomes, targeted at the disruption of land and waterways and the dangers of an oil spill.
Carruthers said the odds of another Exxon Valdez, given the technology and safeguards incorporated in revised Canadian government marine regulations, have been reduced to one in 15,000 years, adding that for years tankers have been using the Douglas Channel from the proposed Northern Gateway terminal to the open ocean without a mishap.
Oil sands production stranded Unless Northern Gateway, the Trans Mountain expansion and TransCanada’s Keystone XL and Energy East projects can proceed, about 3 million bpd of oil sands production will remain stranded, putting an end to the industry’s efforts to achieve output of 4.1 million bpd by 2025.
“The headwinds are increasing,” said Judith Darken, director of energy research at ITG Inc. in Calgary, referring to the legal challenges to NEB decisions and this year’s landmark ruling by the Supreme Court of Canada that gives First Nations greater control over non-treaty land.
“It’s getting harder, not easier to get things done,” she said.
The barriers so far erected and threatened by First Nations remain as embedded as ever, despite Enbridge claims that it has funded up to 10 percent ownership stakes in Northern Gateway for 26 First Nations along the 700-mile pipeline route.
The company has also offered procurements deals worth up to C$600 million and jobs covering 15 percent of the construction work force to First Nations communities.
Carruthers said it would be difficult to expand that aboriginal participation and “still have an economic project,” but he emphasized that Enbridge is not giving up as it seeks “re-engagement” with First Nations.
In the meantime, he said, producers who have non-binding shipping agreements with Northern Gateway - including Suncor Energy, Cenovus Energy, Total, Nexen and Inpex Canada - have not wavered in their support, despite the delays.
Burnaby ‘lightning rod’ For Trans Mountain, the City of Burnaby has become the “lightning rod” in the debate, along with the City of Vancouver and the 300 residents of the Tsleil-Waututh First Nation, Kinder Morgan Canada’s President Ian Anderson told the Financial Post.
He said Burnaby’s Mayor Derrick Corrigan and his council “have taken a very firm position that they won’t talk to us and won’t engage with us and won’t consult with us on our plans,” describing any conversations as “a sign of weakness in their stance.”
“That is clearly not how I’d like to do business or how I would want to approach any relationship. But they have chosen that path,” Anderson said.
However, he insisted Kinder Morgan “will never give up,” certain that it can “meet the test of the regulatory authorities in order to have our project permitted.”
The squabbling between Burnaby and Kinder Morgan reached a new low on Sept. 3 when the city’s parks officers ticketed the company for chopping down trees they said were 100 years old and in good shape.
Kinder Morgan replied that it removed seven Red Alders (three standing stumps, three deemed danger trees and one with a rotting core) that it described as “pioneers species - first to grow, first to die” to provide a safe working area for the geotechnical investigations.
While doubtful Trans Mountain can ever gain unanimous support, Anderson said he can prove to the vast majority of British Columbians and Canadians that the C$5.4 billion project “serves national needs.”
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