This week the Federal cabinet will decide whether to proceed with the Trans Mountain Pipeline Expansion Project (TMX). In response, opponents of the TMX have been out in force making ridiculous claims about the project. This has caused me to summarize some older post explaining why a pragmatic environmentalist supports the project. What follows are a series of short-takes addressing the major arguments used by activists fighting the pipeline and a conclusion explaining why I support the project.
More capacity for light crude and refined fuels to the west coast
A common myth about the TMX is that it is all about moving bitumen. That is not true. The TMX has two major components:
- Line 1 – existing pipeline segments (with pump upgrades) able to transport 350,000 barrels/day (bbl/d) of refined petroleum products and light crude. It has the capability to carry bitumen but at a much reduced volume per day.
- Line 2 – a new pipeline with a capacity of 540,000 bbl/d. It is intended to transport heavy crude oil.
So while Line 2 is about bitumen, Line 1 is intended to help mitigate the supply bottleneck that has Vancouver drivers paying such high prices for gasoline and diesel while supplying the light crude needed by the Parkland Refinery in Vancouver and US refineries in the Puget Sound.
Admittedly Line 1 could be used for heavy crude but even a little bit of heavy oil in Line 1 eliminates the benefits of the upgraded Line 1. Meanwhile Alberta recently completed the Sturgeon refinery and now has a glut of diesel. As such, it makes logistical and financial sense to operate the pipeline in the manner consistent with the NEB proposal which means that Line 1 will almost certainly be used for what it was intended: light crude and refined fuels.
This weekend Mr. Anderson repeated a common claim: that there is no market for Alberta heavy crude in Asia. That claim is bogus. As pointed out in BiV: more than $1 billion worth of Alberta crude was exported by oil tanker via Vancouver in 2018, with China accounting for about one-third of the sales. Remember, this is from constrained pipeline that often didn’t get a full marine allotment to Westridge.
As for Mr. Anderson’s argument that the world is awash in light oil and that heavy oil is somehow inferior to light oil. That is simply false. Heavy oil and light oil are different liquids with different chemical properties and different markets. This argument is akin to claiming that diesel is inferior to gasoline. If you own a diesel truck you need diesel not gasoline. As for refining capacity, Asia has lots of refining capacity for heavy oil and not enough supply, as does California.
According to GlobalData’s report on Chinese refining capacity:
The country’s total coking capacity, catalytic cracker capacity and the hydrocracking capacity is expected to increase during the outlook period. The total coking capacity is expected to increase from 1,991 mbd [thousand barrels per day] in 2018 to 2,371 mbd in 2023. China’s total catalytic cracker unit capacity is expected to increase from 4,359 mbd in 2018 to 5,532 mbd in 2023. Over the five year period, the hydrocracking unit capacity of the country is set to increase to 2,922 mbd from 1,846 mbd.
This is why Asian refineries are buying up all the heavy they can get, often at a premium over lighter crudes. Consider that on June 13th (when I started this blog post)
- Maya (the chemical twin to land-locked Alberta WCS) for export to Far East was selling at $51.16/bbl.
- WCS (the Canadian heavy oil used to represent Alberta heavy) was $39.19/bbl and
- West Texas Intermediate $48.96/bbl.
Look at those numbers. The high sulfur, heavy oil was selling at a premium over the lighter crude and Alberta was losing almost $12/bbl of value because its oil was land-locked. It doesn’t take a PhD in Economics to know that if the market is paying a premium for a product then clearly someone wants that product.
As for that $12/bbl less per barrel. That means less royalty money for the Alberta government, less income for Alberta and less money going towards paying for Canadian social programs.
The world market
This brings me to a topic I’ve been told I shouldn’t touch….our competitors. The reality is that you can’t have a legitimate discussion about the topic of oil without considering the ethics underlying our oil supply.
Some commentators say we should get out of the oil business and cede the field to the despots, the tyrants and the murderers. I disagree. I see a need to supply the Canadian market with Canadian oil, produced by Canadian workers who pay into the Canadian tax system and thus underwrite the costs of Canadian civil services, the Canadian way of life and the Canadian move away from fossil fuels. Do you know who else is making this same argument? Green party Leader Elizabeth May.
Our primary competitors in the heavy oil market (besides Mexico) are Venezuela, Russia and Iran. These are not liberal democracies where individuals are free to marry the people they want; protest their governments without fear of persecution; or are safe from arbitrary arrest and punishment. These are dictatorships propped up by oil money. Their oil is extracted with little or no concern for environmental protection and the profits are used to fund oppression. This is a painful truth that has to be faced by any activist who says we shouldn’t be producing oil in Canada.
Tankers in the Salish Sea
As described in a previous post, if the TMX doesn’t get completed, the refineries in the Puget Sound will still need over 645,000 bbl/d of crude oil. Currently Cherry Point refinery alone sees 500+ tankers a year and Toresco (a committed shipper on the TMX) has said they want to add 120 tankers a year to their Andeavor facility to make up for an absence of supply. Meanwhile Westridge will still be sending out a few tankers a month. So in the end we will still see 700+ tankers a year coming in and out of the Salish Sea with 620+ of them running the narrower and much more dangerous Rosario Strait.
I have written in detail about the relative risks associated with the project to the Salish Sea. Any cold-eyed analysis of the relative risks shows that the TMX reduces our regional risks of oil spills. Blocking the TMX will increase the likelihood of a disastrous rail spill that could spell the end of a major fishery or result in the deaths of dozens of innocents. It will put more tankers going through narrower waters with less support from escort tugs. That is a formula for increased risk.
The BC west coast has been chronically under-served for spill response. One of the big gets for BC in the TMX project was a toll on the new fuel transportation to pay for improved spill response. However, if there is no expansion that toll will not be paid and that money disappears. The result is a loss of spill response capability. Right now we are looking at losing $150 million and several spill response bases. Since the funds for the spill response was coming from the private sector there is no obvious way to replace those funds. When a spill occurs the equipment will not be there to address it. So damage will be greater.
The threat to the Southern Resident Killer Whales
I wrote about this in a previous post. If you look at the entire Salish Sea, and not simply the Canadian side of the border, then you realize that the TMX will likely decrease the risks to the southern resident killer whales (SRKWs) not increase those risks. If the TMX fails, foreign-flagged ships with lower safety standards will be coming in to the same waters, running through narrower straits while not following the slower speeds recommended by DFO to reduce ship noise. It will be more dangerous and louder for the SRKWs. Meanwhile, more oil-by-rail along the Columbia Gorge puts the whales’ winter feeding grounds at risk. All it takes is one spill in the Columbia River to destroy the SRKWs’ winter feeding grounds.
As reported by Global News: the Paris-based IEA forecasts that Canadian crude-by-rail exports will grow from 150,000 b/d a day in late 2017 to 390,000 bbl/day in 2019. In October 2018, rail exports hit a record high at 327,229 bbl/day — a 138.5% volume increase over 2017.
On the American side of the border just three (Tacoma, Anacortes, or Ferndale) of the region’s six refineries moved over 156,800 bbl/d by rail in 2017 and every indicator is that the volume will be increasing absent TMX. These trains are carrying explosive Bakken crude through some of the most densely populated parts of the Pacific Northwest and along the sides of some of the West Coast’s most important salmon rivers.
Rail spill risk
We all know that risk of incident is 4.5 times higher for transportation via rail over pipeline and more of the rail route is along the river sides than is the pipeline. Many activists complain about the sourcing of the 4.5 times stat so let’s go to Citylab and the Sightline Institute, both of which warn about the increase in risk of oil spills associated with this increase in oil volumes by rail. There will be more oil-by-rail spills and because our rail lines run along river sides we will have far more risk to salmon habitat and the SRKWs.
I am a pragmatic environmentalist. My area of professional expertise is the investigation and remediation of former industrial and commercial sites with a specialty in the assessment of petroleum hydrocarbon contamination and its effects on human and ecological health. Working in this field I have come to understand that all industrial activities have environmental consequences.
We live in a society that, like it or not, remains dependent on oil (petroleum hydrocarbons) and petroleum hydrocarbon-based products. Our food is produced on farms that need heavy equipment to operate. That food is shipped around the world by air, water and rail, all of which rely on petroleum hydrocarbons to operate. Contrary to claims from activists, this reality is not going to change anytime soon. While many alternative means of transportation are in developmental pipelines, none are in a position to significantly change our industrial or commercial dependence on liquid fuels, even as we move to electric vehicles for personal use.
In 2015 world leaders passed the Paris Agreement. As part of the process Canada agreed to drop our greenhouse gas emissions to 30 per cent below 2005 levels by 2030. Irrespective of what many activists may claim, Canada did not commit to an economic suicide pact, nor did we agree to abandon all fossil fuels.
Canada certainly did not commit to achieving a fossil fuel-free status in less than two decades. I have read many recent articles written by activists about a Canadian Green New Deal who repeat ridiculous claims like the idea that we can cut our emissions by 50% by 2030. As I have demonstrated at this blog, the claim that we could achieve this goal in the next 11 years does not even rise to the level of laughable. It is simply magical thinking. If we undertake herculean efforts and dedicate a historically unprecedented per cent of our national gross domestic product to the task we have a reasonable chance of weaning ourselves off fossil fuels in 30 years. What this means is that Canada has, and will have, an ongoing need for fossil fuels for the foreseeable future.
To fund that transition needs a healthy Canadian economy. I want the funds generated by Canadian oil to help fund our Canadian transition away from fossil fuels. The first step in that process is getting that oil to market in the safest, least environmentally harmful manner and that means via pipeline. Most importantly, blocking the pipeline is not going to reduce our dependence on fossil fuels, rather it will simply redirect the crude to less safe means of transport while simultaneously reducing our economic ability to fight climate change. One might say we will end up with the worst of both worlds, a greater risk to the environment and less financial ability to finance the fight against climate change.
Author’s note: conflict of interest declaration
Contrary to claims by my detractors, I have no connection, financial or otherwise, to the Trans Mountain pipeline project. My employers holds no contracts (nor anticipates any contracts) with the project nor do I have any financial stake in the project. I am interested in this project because I am an environmentalist who has spent over 30 years becoming an expert in this field and worry that the narrative on this topic is being driven by activists who appear to not really understand the topic and so keep making impossible claims/demands.