As everyone interested in Canadian oil production knows, the new NDP/Green coalition (or not-coalition as the case may be) in BC has made one of the core planks of their agreement a promise to block the construction of the Kinder Morgan Trans Mountain pipeline expansion project (TMX). Combined with the recent US approval of the Keystone XL pipeline (which has drawn a lot of Kinder Morgan’s financial resources) this leaves the future of the TMX at risk. These challenges seem like an opportunity to re-open serious discussion on a couple of competing refinery projects: Kitimat Clean Ltd and Pacific Future Energy both of which propose using neatbit as their source material (I will call them “the Northwest Coast refineries” for ease hereafter). Either of these projects could well satisfy complaints from both the environmental movement and the Alberta oil producers while addressing the chronic shortage of refined fuels on the West Coast of British Columbia and as such deserve renewed attention.
One of the poorly reported features of the TMX was the increase in capacity for refined petroleum products to the West Coast. As anyone who follows BC gas prices can tell you, the West Coast is deeply reliant on a small number of sources for their refined fuel needs. This leaves us at the mercy of the markets and subject to massive price fluctuations. As I have previously discussed, the West Coast’s fuel supplies are supplied via the Trans-Mountain (as refined fuels from Edmonton and crude for refining in the Chevron (Parklands) refinery in Burnaby) or from our neighbours in the Puget Sound to the south. One proposed benefit of the twinning of the Trans Mountain was the ability to free up the original line (called Line 1 in the regulatory submissions) for the transport of light crudes and refined fuels. This would have opened capacity for the transportation of refined fuels from the new Sturgeon bitumen refinery in Alberta while also enhancing the amount of light crudes that could be transported for further refining in the Puget Sound (for those refineries tuned to lighter feed-stock). This would reduce the flow of Bakken crude by rail that is currently taking up the slack in the Puget Sound. As everyone knows by now, oil-by-rail is much less safe for transport than pipeline and we now understand that Bakken crude is much more explosive than many of the other feed-stocks available for use in the Puget Sound refineries. Getting it off the rails represents a good thing from a human risk and environmental perspective.
Assuming the NDP/Green Agreement holds, the completion of the TMX will certainly be delayed. This leaves an opening for one (or more) of the competing Northwest Coast refineries and I anticipate we will be hearing a lot more about them in the very near future. The Northwest Coast refineries have some major advantages over the TMX: an existing transportation route (rail), the mode of transport (neatbit), the economic benefits and “Green” refining technologies, and the product for export (refined petroleum products). I will now address these points in order.
The obvious first benefit the Northwest Coast refineries have over the TMX is that their transportation system is already established. Both refineries are planned to locate close to existing rail lines which means that there will be very little paperwork needed to get them raw materials. As I will discuss below, as an added benefit the product being transported is not a hazardous good which make it possible to be shipped on existing rail lines with minimal additional regulatory approvals.
As for the product being shipped it would not be diluted bitumen (dilbit) but another product called “neatbit” (or the trademarked all capitals NEATBITTM used by Pacific Energy Future). For those not familiar with neatbit here is a great primer on the subject. To summarize, neatbit is simply raw bitumen in a heated railcar. As long as the railcar stays warm, the neatbit will flow, but once the railcar cools down it returns to its almost inert solid form. Neatbit thus addresses the biggest concerns about the overland transport of diluted bitumen (derailments and spills). A train derailment into a river would essentially pose no more danger to the river than a train derailment of any other solid material. Any escaping neatbit would solidify almost instantly upon contact with water and could be cleaned up with shovels and excavators while posing very little long-term risk to the environment. Finally, it would address the concerns about the marine transport of dlibit (including some of the pervasive myths) since almost no dilbit would be involved in the process.
From an economic and political standpoint, the refineries fit the bill in that they keep the economic benefits of the refining process in BC and both projects have been designed as ultra-low emission “Green” projects that include a very high degree of local consultation and First Nations support (note the two refineries’ web sites provide lots of details on consultation and Green technologies so I won’t go further on those topics). Suffice it to say that these projects are not going to be built unless they get community buy-in and as refineries go both include components to make them among the greenest such facilities on the planet.
Admittedly both projects would still require tankers along the north coast to transport their finished products. On the positive side those tankers would be filled with refined hydrocarbons (gasoline, diesel and jet fuels) that, due to their chemical natures, pose a significantly reduced risk to the aquatic environment. This topic could be the Achilles heel of the projects but reasonably speaking if we are going to need to keep using petroleum hydrocarbons for the next 30-40 years then we will need to keep transporting those hydrocarbons. There are no perfect solutions and this seems to represent a reasonable compromise.
My intention in this blog post is to keep it short. I simply wanted to help re-start discussion on this topic so I won’t go into further detail about the two projects here. I will point out, however; that any new BC government needs to be for some economic development rather than being seen as against all economic development. Either of these projects would bring significant investment to the Northwest of our province while addressing serious concerns relating to fuel supply on the coast. Fast-tracking the assessment/approvals process on one or both of these refineries could be a way that our government mitigates the pain associated with their proposed plans re: TMX. If Rachel Notley’s Alberta government saw the BC government working to build one or more of these facilities, it might take the sting out of the TMX part of the NDP/Green Agreement and turn a potential enemy into a potential friend.