PART ONE: What the State Department Keystone EIS says about Kitimat

19 Mar

March 13, 2013 – Robin Rowland

The United States Department draft Environmental Impact Statement (EIS) not only had to evaluate the main subject, the controversial Keystone XL pipeline project, but possible alternatives as well.

So that’s why the EIS took a couple of looks at Kitimat, with two possibilities for replacing the Keystone XL with a Kitimat terminal.

The study doesn’t just include various forms of diluted bitumen from the Alberta bitumen sands, but  petroleum products from the Western Canadian Sedimentary Basin (WCSB) and crude oil from the Bakken shale shipped to the refineries on the US Gulf Coast which would be served by the Keystone XL pipeline if it was not approved.

The EIS examined the Northern Gateway project and rejected the Enbridge pipeline as a possibility for Alberta bitumen and crude because of the continuing controversy.

However, a reading of the report shows that there could be pressure in the future for a bitumen or crude export terminal at Kitimat that would be served by the existing CN rail line (even though the State Department report prefers Prince Rupert as the best choice as an alternative to Keystone).

Enbridge is proposing to construct the Northern Gateway pipeline, which would transport up to 525,000 bpd of crude oil 1,177 km from Bruderheim, Alberta, to the Port of Kitimat, British Columbia. The port would be improved with two dedicated ship berths and 14 storage tanks for crude oil and condensate. Enbridge intends for the pipeline to be operational around 2017. A regulatory application was submitted in 2010, which is undergoing an independent review process led by the Canadian National Energy Board and the Canadian Environmental Assessment Agency. The pipeline would traverse First Nation traditional lands and important salmon habitat. The project has been controversial and has encountered opposition from some
First Nation bands and other organizations. Opposition to the project remains strong as evidenced by media reports of the January 2013 public hearings in Vancouver on the permit application. It remains uncertain at this time if the project would receive permits and be constructed, and therefore the option of moving additional crude to Kitimat was eliminated from detailed analysis.

The report goes on to say that Enbridge is moving the target for the Northern Gateway due the controversy and the longer than expected Joint Review Panel hearings

Enbridge is now stating in investor presentations that the Northern Gateway pipeline
(525,000 bpd expandable to 800,000 bpd) may be operational by “2017+”

However the State Department report does seriously consider transportation of WCSB crude by rail to Vancouver, Kitimat and Prince Rupert. The report takes an in-depth look at the railway to Prince Rupert option.

One reason is that even if it is transported by rail, the market in Asia is still more attractive to the energy industry than using Kitimat or Prince Rupert as a possible terminal for export to the US Gulf.

The transportation costs of shipping to Asia via the Canadian or U.S. West Coasts
would be significantly cheaper than trying to export it via the U.S. Gulf Coast.

The total per barrel cost of export to Asia via pipeline to the Canadian West Coast and onward on a tanker is less than just the estimated pipeline tariff to the U.S. Gulf Coast for the proposed Project, and is less than half the cost of the Gulf Coast route to Asia. If pipelines to the Canadian West coast are not expanded or approved, even incurring the additional cost of rail transport to the West Coast ports (Vancouver, Kitimat, or Prince Rupert), estimated at $6 per barrel, results in a total transport cost to Asia that is still 40 percent cheaper than going via the Gulf Coast Absent a complete block on crude oil exports from the Canadian West Coast, there would be little economic incentive to use the proposed project as a pass through. The high costs of onward transport to other potential destinations tend to mitigate against WCSB heavy/oil sands crudes being exported in volume from the Gulf Coast.

The EnSys 2011 study found that the rail systems of the United States and Canada were not at that time running at capacity, that there is significant scope to expand capacity on existing tracks through such measures as advanced signaling, and that adequate cross-border Canada/U.S. capacity exists to accommodate growth in rail traffic that would be associated with movements at the level of 100,000 bpd cross-border increase per year or appreciably higher. In addition, rail lines exist to ports on the British Columbia coasts (notably Prince Rupert, Kitimat, and Vancouver), which could be used for export of Western Canadian crudes.

And later in the report:

both of these proposed pipeline projects to Canada’s West Coast face significant
resistance and uncertainty, but there are strong cost advantages when compared with moving WCSB crude to the Gulf Coast even if rail were used to access the Canadian West Coast In fact, using rail and tanker to ship crude oil from the WCSB via the West Coast to China is comparable to the pipeline rate to reach the U.S. Gulf Coast. An increase in the transport costs to the Gulf Coast (utilizing alternative transport options such as rail) would have a tendency to increase the
economic incentive to utilize any West Coast export options, if they are available.

The report also notes the change in Canadian laws in the omnibus bills pushed through by Stephen Harper’s Conservative government:

Also not examined above, are more speculative political impacts that might occur as a result of a decision on the permit application for the proposed Project. In 2012, the Canadian government enacted new laws changing the way some major infrastructure projects, such as pipelines, are reviewed. Among the changes made were limits on the amount of time for such reviews. A declared intent was to promote alternative routes for the export of WCSB crude oils, especially
ones that would reduce reliance on the United States as, essentially, the sole market option.

In other words, even if Northern Gateway is stopped, there could be considerable pressure to export bitumen and crude oil from Alberta not only through Prince Rupert, the site preferred by the State Department EIS, but though Kitimat as well.

That might just open the door for David Black’s proposed $16 billion refinery at Onion Flats near Kitimat. As noted elsewhere on the site Black has possible investors for construction of a new oil refinery approximately 25 kilometers to the north of Kitimat BC on a 3,000 hectare site.

Black’s Kitimat Clean website says the refinery would process 550,000 barrels per day (87,445 cubic meters per day) of diluted bitumen from the oilsands region of Alberta delivered to the site by pipeline or by rail. The diluent will be extracted at the refinery and returned to Alberta if needed there. If not, it would be processed into gasoline. The bitumen will be converted into fuel products, primarily for export.

Black’s plans call for connecting the Northern Gateway bitumen Pipeline to the site. From the refinery six dedicated product pipelines will run to a marine terminal on the Douglas Channel. The Douglas Channel is a wide and deep fjord. VLCC (Very Large Crude Carrier) tankers will transport the refined fuels to markets around the Pacific Rim.

If the Northern Gateway is stopped, Black’s plans call for 12 additional 120 car trains running through every day. (Six in each direction)

Republished from NorthWest Coast Pipeline: http://nwcoastenergynews.com/2013/03/13/4307/part-one-state-department-keystone-eis-kitimat/

 

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