Energy battle hits Eastern front as Alberta eyes Quebec as new oil customer

26 Nov

Nicolas Van Praet | Nov 22, 2012.

MONTREAL — Alberta, burned in its effort to export oil through the proposed Northern Gateway pipeline in B.C., is now turning to Quebec as an outlet for its valuable crude.

Whether it will meet a willing partner or another enemy really depends on which side of the two-faced Parti Québécois wins out: The one that snubbed Alberta Nov.14 and accused the province of “wanting to transport its oil on our territory without our consent”; or the one that’s hinted it understands the potential economic benefits.

For a province that imports the vast majority of the oil its uses from Africa and other overseas markets, making it highly vulnerable to supply disruptions, the decision in theory should be easy: Approve plans by Alberta producers to ship western crude to Quebec’s two remaining refineries. Doing so would give you a more secure source of petroleum that also happens to be cheaper at the moment by roughly $25 per barrel versus internationally traded crudes such as North Sea brent.

There are two plans at the moment to pump western crude East, both in different stages of development.

Enbridge Inc.’s Eastern Access program involves reversing and maybe expanding an existing 240,000 barrel-per-day pipeline between Montreal and Sarnia, Ont. The National Energy Board has cleared the first tranche of the proposal. Enbridge spokesman Graham White says the vast majority of the product to be transported will be light crude, which is flowing through the line now.

Calgary-based TransCanada Corp. has a much bigger project centered on converting parts of its underused Canadian Mainline system from natural gas to oil transportation. The plan, which could see up to one million barrels of oil a day shipped to eastern markets starting in 2017, will be more formally tested with customers in the months to come.

PQ Premier Pauline Marois met Thursday with Alberta Premier Alison Redford at the premiers conference in Halifax to discuss the details of the Enbridge project. The two premiers agreed to set up working groups to explore the economic opportunities and possible environmental effects of shipping oil east.

For Ms. Redford, the meeting was an opportunity to win a new market for Alberta oil after failing miserably to sell Enbridge’s Northern Gateway project to B.C. lawmakers. The premier learned from that effort that Alberta needs to listen to concerns with an open mind and address them before they blow up in her face.

In this case, the chief concern that Quebec has voiced publicly about Enbridge’s project is the potential environmental effects on its land in the event of a spill like the one on the Kalamazoo river in Michigan in 2010. Daniel Breton, a former activist who’s now Quebec environment minister, has vowed to hold public consultations on the project, saying Quebec will have its say even if ultimate approval authority lies with the federal regulator.

AP Photo/Paul SancyaIn this July 30, 2010 file photo, crews clean up oil, from a ruptured pipeline, owned by Enbridge Inc, near booms and absorbent materials where Talmadge Creek meets the Kalamazoo River as in Marshall Township, Michigan.

“They couldn’t get their oil though Nebraska in the United States, they couldn’t get their oil through B.C.,” Mr. Breton said recently of Alberta’s oil producers. “Now they want to get their oil through our territory. But we need to have the information before we make a decision.”

Legal experts from Quebec’s environment law centre say the government can request special hearings on the matter, as it did with the shale gas industry. But they say while the results of the proceedings may give the PQ some political weight in a bid to oppose Enbridge’s project, Quebec doesn’t have veto power.

It may not come to that.

Yes, there are members of the PQ caucus who dislike the oil sands and believe Quebec should have nothing to do with them. And there is a lot of sensitivity to arguments made by the Suzuki Foundation and other ecologists that Quebec shouldn’t help Alberta’s oil industry expand if it really believes in fighting climate change.

But since taking office, Ms. Marois has proven she is not the intransigent ideologue some made her out to be. Ultimately, she wants Quebec to wean itself off oil and move to an all-electric existence to seize on its vast hydro power resources. But she knows that requires a sea change in transportation, which won’t happen anytime soon.

The PQ will approve Enbridge’s plan because it realizes that Alberta’s oil costs less than foreign-sourced variants from Algeria and Angola, which aren’t necessarily cleaner, says Pierre-Olivier Pineau, an energy specialist at the HEC business school in Montreal. Blocking one project won’t change overall petroleum consumption in Quebec, he said.

Perhaps more important, the premier realizes that not approving the project could mean Montreal’s only remaining oil refinery, run by Suncor Energy Inc., shuts down if it can’t remain competitive by selling cheaper fuel. The east end of Montreal island, a fortress of PQ political support, has seen five of its six oil refineries closed — a huge blow on the local economy. Quebec’s only other remaining refinery is in Valero Energy’s Ultramar plant near Quebec City.

“[The PQ] will secure the refinery in Montreal, I think,” says Mr. Pineau. “And at least for a while, [Alberta’s] is a cheaper source of oil. So it cannot hurt.”

Ms. Redford may find she has a dance partner after all.

Republished from the


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