Canada Finds New Oil Route to Avoid US Environmental Policy

By |2018-11-02T08:40:03+00:00September 12th, 2014|Tags: , , |

The Alberta Oil Sands in Canada are the third largest oil reserve in the world with 168 billion barrels, but it lies isolated and trapped. Currently, TransCanada’s Keystone and Gulf Coast Pipelines provide a direct conduit from Alberta to the refineries in the Gulf Coast of Texas, but it couldn’t meet the capacity demands. An extension, the Keystone XL Pipeline was planned, but landowners in Nebraska and environmentalists began to protest and lobby, and the project was put on hold indefinitely by President Obama in 2011.

The Alberta Oil Sands in Canada are the third largest oil reserve in the world with 168 billion barrels, but it lies isolated and trapped. Currently, TransCanada’s Keystone and Gulf Coast Pipelines provide a direct conduit from Alberta to the refineries in the Gulf Coast of Texas, but it couldn’t meet the capacity demands. An extension, the Keystone XL Pipeline was planned, but landowners in Nebraska and environmentalists began to protest and lobby, and the project was put on hold indefinitely by President Obama in 2011.

Some supported the idea that blocking the creation of new pipelines would hamper or eliminate oil sands production in Canada. This was a poorly thought out argument, since Alberta oil continues to come to market in the US by rail at a rate of about 160,000 barrels a day. But Canada does not feel its growth and energy markets should be dictated by US environmental policy. So what was the solution?  Build a pipeline that never leaves Canada.

The Energy East Pipeline, to be built by TransCanada, will stretch east from the oil sands in Alberta to New Brunswick’s Irving Oil, Ltd. refineries in Saint John, Canada, along the Canadian-US border. The pipeline will cost $10.7 billion to construct, stretch 2,858 miles (twice as long as Keystone XL), and have the capacity to carry a third more crude (1.1 million barrels per day) than Keystone XL.

Permitting may be completed by the end of 2016 and a product delivered by 2018. Three quarters of the pipeline is already being built, allowing the facility to be working in a few years. The current design would refurbish natural gas pipeline installed in the 1950s and convert it for use with crude. Only the last segments from Montreal to Saint John remain to be built.

Why Saint John, Canada? Irving Oil, Ltd. has a massive complex of refineries there, as well as a deep sea port, which can, and does, accommodate supertankers. Irving Oil, Ltd. provides 60 percent of the gasoline sold in the greater Boston metro area, and the port at Saint John is actually a closer trip to India than leaving from the Pacific Coast. Supertankers can also easily take the products not refined in Saint John by sea to the waiting refineries in Houston, Port Arthur, and Galveston, Texas, to name a few.

Canada sells almost 97 percent of its oil production to the US at a price discount of as much as $43 per barrel, costing Canadians $20 billion per year in lost revenue had it sold in other markets. When this pipeline is completed and Canada has the capacity to compete on the global market, it is unlikely the US will continue to enjoy this sort of sweetheart deal.

Regulations restricting US companies selling natural gas overseas coupled with the federal government’s unwillingness to abide by its own rulings when politically convenient could, and probably will, strongly undermine US dominance in the oil and gas marketplace and the global economy as a whole. The US’ lack of action on Keystone XL has clearly resulted in TransCanada’s consideration of other alternatives.

If the US continues increasing the regulatory burden on our companies, what will be the impact to the economy and industry? We encourage you to reach out to your elected officials and industry representatives and let them know your position on key issues, such as the Keystone XL Pipeline.

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About the author

Kate Lindekugel
Kate Lindekugel
As an environmental scientist, Kate has more than 13 years of experience including ecological surveys and field studies, functional assessments, preparing environmental reports and permits, data management, stream channel and wetland restoration, peer reviewed research, and coordinating with local, state, and federal regulatory agencies, as well as public and private stakeholders.

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