Kinder Morgan braces for opposition to West Coast expansion
'The political rhetoric,' one analyst observes, 'is through the roof'
Transporting crude oil by tankers makes people nervous. Visions of the Exxon Valdez disaster, where the supertanker ran aground in Alaska’s Prince William Sound in 1989 and spilled 257,000 barrels of oil, have not died away. Any new plans to move crude oil by these massive vessels inevitably raises concerns and opposition.
That holds true for Vancouver, despite the fact the city’s world-class port – No. 1 in terms of export tonnage in North America – has been exporting liquid fuels to California from refineries in Edmonton for going on 60 years. These petroleum products have been transported by the aging, though very serviceable, Trans Mountain pipeline to Kinder Morgan Canada’s Westridge Marine terminal in Burnaby’s Burrard Inlet.
And the amount of crude oil leaving Vancouver bound for offshore markets is poised to increase if Kinder Morgan Canada has its way.
Its project hasn’t received the attention or created the headlines that another export scheme has – Enbridge Inc.’s controversial Northern Gateway pipeline – but the Canadian arm of Houston-based Kinder Morgan wants to double the current pipeline capacity of the Trans Mountain pipeline from 300,000 barrels per day (bpd) per day to as much as 700,000 bpd. Almost all of the stuff will be pumped into tankers bound for offshore markets.
But just as the proposal promises to assist industry in its battle to free itself from persistent crude price discounts, and even though it would make Vancouver a bigger, and more important, crude oil gateway, so too will the proposal increase tanker traffic and the risk of a catastrophic Exxon Valdez-like spill in an area over two million people call home.
And as Kinder Morgan Canada embarked this fall on public consultations for the proposed project, its quiet expansion plan is poised to get noisy.
In many ways, the $4.1 billion project is in an enviable position. The plan is to twin the existing pipeline along most of the 1,150 kilometer route, meaning a new right-of-way does not have to be carved out of the Alberta and British Columbia landscape. There is also no question that the market wants the increased pipeline capacity. The company has received requests for firm service to the coast on the pipeline, specifically from resource companies transporting bitumen from oil sands projects in northeast Alberta.
“We had somewhere between 20 and 30 companies interested during the recent open season, and nine of the companies have committed to firm service,” says Kinder Morgan Canada CEO Ian Anderson. “We are very fortunate to have a very broad inclusion of producers.” Cenovus Energy Inc., Canadian Oil Sands, Nexen and Devon Canada have signed on so far.
In fact, Kinder Morgan Canada’s expansion (the pipeline has been in operation since 1953) could be ready before the Northern Gateway pipeline, which proposes to ship 525,000 bpd of bitumen from Alberta to the northern B.C. port of Kitimat. With a strong safety record and existing rights-of-way agreements already in place, twinning the Trans Mountain pipeline would seem to have few hurdles in dealing with aboriginal groups, public and private stakeholders.
Nevertheless, the project has encountered turbulence. The city councils of Vancouver, Burnaby and West Vancouver are all opposed to the expansion, citing concerns about the risk of degradation to the city’s waterfront and the cost to taxpayers if there ever was a heavy oil spill. “I know the concerns we have are shared by many mayors, including Vancouver, Victoria and the North Vancouver mayors,” Burnaby mayor Derek Corrigan told the Vancouver Sun this spring.
“I haven’t heard anything from Kinder Morgan or any of the other proponents that [would tell us why] this kind of project should be welcomed by us in British Columbia.”
The opposition seems so entrenched in B.C. to the idea of shipping Alberta crude and bitumen from its coast that CIBC World Markets Inc. oil and gas analyst Andrew Potter tabbed the odds of both the Trans Mountain expansion and the Northern Gateway pipeline of being approved and built at 50-50. “The political rhetoric is through the roof,” Potter said.
The opposition to the Trans Mountain expansion is not only a worry to Kinder Morgan’s ambitions, but to B.C.’s as well. Twinning the Kinder Morgan line comes with significant financial rewards to the province. The industry-funded Canadian Energy Research Institute estimates that the Trans Mountain expansion will add $8 billion to the Canadian economy in the next quarter century, with B.C. poised to receive more than half that money, and 66,000 person-years of employment.
Robin Silvester, president and CEO of Port Metro Vancouver, the organization that is responsible for the operation and development of the assets and jurisdictions of the combined Fraser River Port Authority, North Fraser Port Authority and Vancouver Port Authority, sees expansion of Kinder Morgan’s Westridge terminal in Burnaby as part of an ambitious economic and social transformation, consistent with Port Metro Vancouver’s recent “Port 2050” planning document.
“Port 2050 was actually put together before the Kinder Morgan proposal,” Silvester says. “What we concluded in our document and what we’re seeing with this proposal is that there will be more volatility in energy markets and we need to plan for a rapidly changing world.”
“We have a good relationship both with the companies who do business in the Port and stakeholders such as the local governments, private landowners, and First Nations,” he says. “We’ve developed world-class best practices for the transportation of oil, especially under the Second Narrows.”
In 2011, Port Metro Vancouver handled 122 million tonnes of cargo. Right now, oil tanker shipments out of the Westridge marine terminal account for less than one per cent of the port’s total volume. Last year only 32 Aframax-sized tankers sailed under the Second Narrows and Lions Gate bridges, bound for refineries in Long Beach, California.
In the shipping world, the Aframax is classified as an “average freight rate tanker” which carries about 120,000 tonnes or 650,000 barrels of crude. These are smaller vessels than either the Suezmax or VLCC (Very Large Crude Carrier) class ships used in other shipping lanes throughout the world. Canada’s Kevin Obermeyer, president and CEO of Canada’s Pacific Pilotage Authority, told Alberta Oil in July that VLCC’s would not carry crude through the Second Narrows because it’s too narrow to fit these behemoths.
Kinder Morgan’s expanded pipeline would dramatically increase the frequency of tanker traffic to between 20 and 25 tankers per month, with these tankers being either Panamax or Aframax in size. Anderson says some 450,000 barrels per day of diluted bitumen would be shipped via the new line. “That would make up most of the capacity of the new pipeline,” he says.
But the concern over increased tanker traffic and tanker spills in Vancouver waters ignores the advances in safety that resulted from the Exxon Valdez spill 23 years ago. Oil tankers are now double-hulled and in Vancouver they can travel only during daytime hours. All other commercial traffic must cease within the port, and the tankers are towed under both the Second Narrows (Ironworkers Memorial) and First Narrows (Lions Gate) bridges accompanied by two pilot vessels.
To accommodate this increase in traffic, Kinder Morgan Canada would expand its marine dock with a couple more dock spaces, a new berth for fuelling, and various other upgrades which would increase the current dock workforce by 10 new hires. “There’s really nothing unusual about the foreshore work that we’re planning,” Anderson says.
The Port and Kinder Morgan Canada would both consider larger Suezmax tankers, though dredging of the shipping channel would have to take place to accommodate these vessels. “There is a robust permitting process if they want to have larger tankers,” Silvester says.
Kinder Morgan has prepared for an upcoming round of open houses and public forums to discuss its plans. Despite the concerns expressed by city councils and environmental groups over the Trans Mountain expansion,Anderson is confident the consultations and regulatory process will prove the expansion can be done safely and responsibly.
“We’re committed to prudent operation of this pipeline and listening to all of the communities that will be affected. We want to spend time talking about its merits, its footprint, our safety record, and both the spill and marine response capabilities,” he says. “Communities like Burnaby, the Fraser Valley, residents in places like Kamloops and of course the First Nations – they all have different interests. It is a comprehensive regulatory process and there will be a large amount of information disclosed to the public.”
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