Jason Kenney is pushing the panic button about pipelines after industry roasted the Trudeau government’s Bill C69, which sets out a new process for environmental impact assessments of major projects. Rachel Notley’s office says panic is premature because her government is negotiating hard for exemptions to the new legislation. Is this not the perfect time to think outside the box about how to get Alberta’s crude oil to market?
The UCP leader penned a March 29 letter to the Alberta Premier proposing a motion for debate that the provincial legislature is opposed to the federal legislation.
“We’ve working closely with the federal government and discussion are well underway on exemptions as well as ensuring that Alberta’s interests are protected. Our job is to stand up for Albertans and our industry, not to pick fights needlessly before final language is presented,” Cheryl Oates, Notley’s director of communications said in a statement.
“We’re heavily engaged with the federal government on this file. This motion is simplistic and premature at this time.”
What isn’t simple or premature is a public discussion about the best way to ship Alberta’s crude oil.
Does it have to travel by pipeline?
If it does, which markets are best?
And where should future pipelines be located?
In Dec., Energi News ran a story about Canadian National Railway’s pilot project with CanaPux, a solid pellet of Alberta oil sands bitumen (which has the viscosity of peanut butter) that can be shipped by rail to tidewater, then transported by ship to international markets.
CN claims the bitumen pucks float in water and do not leak or dissolve, which would address many of the complaints by opponents that diluted bitumen (dilbit) sinks in a marine environment.
Toyo Engineering Canada Ltd. is designing the pilot project that will that will solidify and re-liquefy up to 1,000 b/d of bitumen.
The engineering firm will be supported by provincially-funded InnoTech Alberta, which developed the CanaPux technology.
The Notley government has earmarked hundreds of millions for technology innovation in various aspects of oil sands production, why not a few more for transportation?
Canadian pipelines are stuffed, storage tanks are full, and a wider than normal differential means heavy crude oil sold on the spot market nets producers less profit and the Alberta government less tax revenue.
Why not invest more heavily in CanaPux – and other solid bitumen technologies – to accelerate the move from pilot project to commercial viability?
Northern Infrastructure Corridor
The idea of a country-spanning northern corridor designed especially for pipelines, electricity transmission lines, rail, and any other infrastructure needed to support the natural resource industries was endorsed last year by the Canadian Senate.
Not surprising, it was first floated in Alberta, as a study from the University of Calgary.
The corridor would be approximately 7,000 kms long and follow the boreal forest in the northern part of the west, with a spur along the Mackenzie Valley, and then southeast from the Churchill, Man. area to northern Ontario and the “Ring of Fire” region, then on to northern Quebec and further east to Labrador.
“Not since Sir John A. Macdonald’s National Policy in the 1870s has Canada had such an opportunity to build such a monumental infrastructure project with the potential to transform the country’s economy,” said Senate committee chair David Tkachuk.
“As Canada looks forward to its next 150 years, a national corridor is the kind of infrastructure it will need to tap into new foreign markets.”
Most of those new foreign markets, at least for crude oil, are in Asia, where China and India are expected to drive most of the demand growth until 2040, according to the International Energy Agency.
The Canadian industry doesn’t appear eager to repeat the rancorous public debate over pipelines to the West Coast, but if the projects were part of a broader market access plan championed by the federal and provincial governments, that might smooth the way for increased exports to Asia.
There are all sorts of obstacles – such as the Trudeau government’s oil tanker ban in northern BC coastal waters and First Nation co-operation – to the idea of a northern corridor, but those hurdles are more likely to be overcome as part of a true nation-building exercise instead of individual projects.
US Gulf Coast refineries and dwindling heavy crude oil supply
Current wisdom says that Alberta is too reliant upon American markets.
But one market that remains mostly untapped is the US Gulf Coast, which will be further opened should Keystone XL be built.
And USGC refiners are watching nervously as supplies of Venezuelan crude dry up as the national economy implodes under an authoritarian government.
“As for Venezuela and PDVSA, any oil that can shipped from Venezuela is being taken as payment in kind by Venezuela’s creditors. The least expensive replacement is Canadian crude which continues to be shipped by pipelines and the more expensive crude by rail,” Ed Hirs, a University of Houston energy economist, wrote in an email.
“The Canadian crude will continue to be competitive as crude prices rise generally.”
Mexico, another critical source of heavy crude for the Gulf Coast, has suffered ever dwindling supply for many years.
“For Mexico, the precipitously declining production was anticipated as the Mexican government began to open its domestic industry to foreign ownership and development. PEMEX has been run as a government welfare agency just like PDVSA and not as an oil company,” said Hirs.
Can Alberta take advantage of its competitors’ problems and scoop up more market share? Does industry have the stomach for another battle with American environmentalists, similar to TransCanada’s travails with KXL?
There are plenty of questions just like these and precious few answers at the moment, mostly because no one is asking them.
Maybe Alberta should start. And while negotiating exemptions to Bill C69 might be the perfect time.