Alberta energy minister Marg McQuaid Boyd says neatbit by rail ‘intriguing,’ plans to follow up

Energy East created quite a buzz over the weekend, courtesy of clashes between Alberta and Quebec politicians. But what if neatbit by rail renders the pipeline debate moot?

I wrote several times last week (here and here) about the benefits of shipping Alberta oil sands bitumen as a solid instead of diluting it 30 per cent and sending it by pipeline to tidewater, Eastern Canada, and the Texas Gulf Coast refineries.

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Marg McCuaig-Boyd, Alberta energy minister.

One of my readers was Marg McCuaig-Boyd, Alberta energy minister, who responded to my interview request with this comment:

“The energy industry is constantly looking at new and improved technologies to transport bitumen safely and more efficiently – including doing so using less diluent. In exploring these options, industry looks at a variety of economic factors such as the value of diluent, the value of bitumen, the cost of removing diluent and transportation costs.

The concept of neatbit is intriguing and I have asked my department for a more detailed briefing.”

On the face of it, this is good news. McCuaig-Boyd is an education administrator by trade, not an energy insider, so one wouldn’t expect her to be familiar with neatbit by rail. Asking her bureaucrats for more information is exactly what she should be doing.

My issue is with the bureaucrats.

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Altex Energy neatbit by rail facility. Photo: Altex/Randy Meyer.

Randy Meyer is the CEO of Altex, the company that came up with the neatbit by rail idea in 2008 and turned it into a modest success.

Meyer told me in an interview that he had many meetings with the former PC government and energy ministery bureaucrats over the years, though nothing concrete came from the discussions. The point is, not very deep in the bowels of the Alberta legislature are plenty of (one assumes) reasonably informed people who understand neatbit by rail.

Why haven’t they briefed the minister before now?

The oil sands industry desperately needs new market access, preferably some of it to tidewater. Existing West Coast projects, Northern Gateway and Trans Mountain Expansion, are in serious trouble, and one or both may not be built. The same potent opposition that may kibosh the BC pipeline projects (well organized eco-activists, First Nations, provincial and municipal politicians) is already organizing against Energy East.

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Alberta NDP Premier Rachel Notley.

Alberta Premier Rachel Notley has been quietly politicking behind the scenes, scoring major victories Friday (here and here) by gaining the endorsement of Ontario Premier Kathleen Wynne and Prime Minister Justin Trudeau.

But Energy East success is far from assured and there is a long, difficult fight ahead for TransCanada, the pipeline proponent.

If there is a viable alternative to dilbit by pipeline, why hasn’t the Notley Government been aggressively investigating it?

Neatbit by rail has the potential to completely change the rancorous national debate over transporting Alberta crude oil to market.

Meyer says neatbit by rail is safer, cheaper, more flexible, has lower GHG emissions than pipelines, and is already covered by Canadian hazardous materials regulations. In other words, no environmental assessments or special permitting required.

But he is under no illusion about the Canadian industry suddenly becoming converts to neatbit by rail.

Oil producers and pipeline companies are conservative and risk-averse. Which is usually a good thing. Since new, unproven technologies carry the risk of catastrophic failure – with potentially catastrophic consequences for the environment and a company’s bottom line – engineers tend to take a go slow approach with innovation, often testing it for years or decades in the field until they are confident it will perform as advertised.

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So, no surprise the Canadian industry has been slow to climb aboard the neatbit by rail train.

This is where the Alberta government could play an important role.

One of the objectives of the province-wide carbon tax is to fund innovations that will help the Alberta oil industry adapt to climate change challenges.

Neatbit by rail would seem to be a perfect candidate for government help.

Commission a study or two. Fund a pilot project. Convene a gathering of oil company shippers to get their feedback.

But get moving. Experts say oil prices are likely to start going up later in 2016, some time in 2017 at the latest. Higher prices will have oil sands companies thinking about taking delayed projects out of the moth balls.

Premier Notley has done a good job thus far of showing leadership on pipelines for the provincial industry. Now is the time for her to up her game and seriously investigate neatbit by rail as a full alternative to dilbit by pipeline or as part of a market access strategy for Alberta oil sands bitumen.

Will she act or will she dither?