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Canadian exports go to Plan B;
Suncor, Imperial explore options
Gary Park for Petroleum News
“Keep Calm and Carry On” first appeared on motivational billboards in 1939 to boost British spirits in the final days before the Second World War. It’s had endless iterations since then.
But the inspirational message is often easier said than done, as Western Canadian oil producers and pipeline companies are discovering in their efforts to keep crude from Alberta and Saskatchewan flowing into the United States.
For many, especially since the sudden burial of Keystone XL, the public stance has been to voice high hopes that other pipeline projects will be safe from further closure orders by President Joe Biden.
Topping that list is Enbridge’s Line 5 which is engaged in an open brawl with Michigan Gov. Gretchen Whitmer who has ordered a shutdown of the line in May as part of her anti-fossil fuel crusade.
As the deadline approaches, two of Canada’s largest producers - Suncor Energy and Imperial Oil (owned 69.6% by ExxonMobil) - have started to show their unease, despite reassuring expressions that a shutdown is a “very low probability event.”
A key player in the battle over the future of Line 5 is the Canadian government which has indicated only lukewarm interest in waging an all-out battle to preserve the 645-mile pipeline which has operated for 65 years from Superior, Wisconsin, across Michigan to Sarnia, Ontario, without a spill.
But Canadian Prime Minister Justin Trudeau - rated as Public Energy No. 1 in Western Canada for failing to make a case for Keystone XL - has frequently angered his political opponents this year by sidestepping challenges directed at him in Parliament by Conservative leader Erin O’Toole.
O’Toole noted that Enbridge’s plans to replace a tunnel connecting Lake Huron and Lake Michigan on Line 5 was not even raised by Trudeau in his recent phone calls with Biden and U.S. climate envoy John Kerry.
“Why hasn’t Line 5, specifically thousands of jobs and decades of a safe track record, been a priority for this prime minister?” he asked.
Trudeau has countered with a scripted response by insisting his government will “continue to protect” Canadian interests in Line 5, without outlining his strategy.
Rather than pinning their hopes on Trudeau’s pledge, Suncor and Imperial are rolling out their own contingency plans.
Imperial Imperial said it could deliver crude by Enbridge’s existing main line to the Great Lakes, then by tankers, or rail to refineries in Ontario and Quebec (which relies on Line 5 for two-thirds of its crude).
Imperial Chief Executive Officer Brad Corson told analysts earlier in February that rather than waiting for a possible repeat of Keystone XL’s demise, his company wants to ensure it has “adequate contingency plans in place. We do see other options that we don’t feel like (closure of line 5) will cause us any constraints, but nonetheless we prefer maximum flexibility.”
Local politicians and unions in southern Ontario’s petrochemical region, are “stressed out and on edge” about the prospects of Line 5 closing in May and have resorted to full-page newspaper ads to convey their concerns.
The pipeline currently delivers 540,000 barrels per day of equivalent synthetic crude, natural gas liquids, sweet crude and light sour crude to Ontario and Quebec refineries and to Michigan for converting into home-heating propane, jet and other transportation fuels.
Ontario Energy Minister Greg Rickford rated Line 5 as essential to the entire Great Lakes region.
Plains Midstream Canada said Line 5 supplies 1.2 billion gallons of propane and butane annually, with about 200 million gallons shipped to Michigan, and all the aviation fuel needed at the main Toronto and Detroit airports.
Sarnia Chamber of Commerce President Allan Calvert fears Biden will back Whitmer’s case unless Trudeau intervenes and engages in some push back.
“Anything can happen and we’re not assuming we have this in the bag,” he said.
Suncor, Shell, Enbridge Suncor has its own rescue plan, with Chief Executive Officer Mark Little revealing earlier in February that his company has purchased the stake it didn’t previously own in the 233,000 bpd Portland, Maine, to Montreal pipeline and is ready to use that connection to deliver crude to Canada’s two largest provinces.
Suncor operates a 137,000 bpd refinery in Montreal and an 85,000 bpd refinery in Sarnia.
Shell Canada has not disclosed whether it has alternative plans to delivering crude feedstock to its 85,000 bpd Sarnia refinery.
While Enbridge has said it would defy any order from Whitmer, two online petitions have been launched in Michigan arguing that Line 5 is a critical piece of energy infrastructure in Michigan and Ohio.
There was even one glimmer of hope at the end of January for Enbridge when the Michigan environment department gave its approval for Enbridge to proceed with the tunnel connection.
Line 3 As fast as Line 5 heads to its date with fate, attention has also turned to Enbridge’s plan to replace its Line 3 in Minnesota, trying to keep pace with opponents who are piling pressure on Biden to copy his Keystone XL action.
But a spokesman for MN350 said the climate advocacy group has conceded that the revocation of a presidential permit at the U.S.-Canada border is unlikely because the line is already in place there. Add to that the fact that the Line 3 replacement to carry 760,000 bpd of Canadian crude was given the go-ahead by a consent decree during the Obama administration.
Even so, the activists are targeting Line 3’s U.S. federal water permit, arguing in a suit that the Corps of Engineers failed to address environmental issues or conduct a federal environmental impact assessment.
Enbridge insists the Keystone XL decision will have no impact on Line 3 or Line 5, both of which are currently operating and that all it is trying to achieve is ensure the safety of both lines.
- GARY PARK
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