Many people still
don’t realize that Canada’s carbon tax stand infuriates environmentalists in
countries which have carbon pricing or others, like the US, who are trying to
achieve it.(CT26) They fight hard to deny us additional pipelines(CT37), which
are essential to keep the present oil production flowing. In January the
Alberta Energy minister estimated that his province loses $ 20 billion to $30
billion per year because the existing pipelines are full.(EP1) Since that time
the losses have somewhat decreased because trains will soon carry the volume of
one new pipeline. It is also not generally known that despite the fact that 20%
of the world’s GHG emissions and 30% of it’s GDP is covered by carbon pricing (CT32)
total GHG emissions are still rising at 2.6% per year. China’s emissions rise
by 10 % per year while they do a lot of work to develop green energy (CT63).
This will be slowed down if we keep sending them tax free oil.
Taxing our carbon exports
will only be feasible when a global carbon tax has been established. Many
multinational companies, including oil companies pressure their governments to
negotiate such a tax but others in Australia frightened the public and
politicians with gloom and doom predictions (CT40,CT49),which did not
materialize after the tax came in. The article below is shorter than the 2 articles
in post 1 and also covers the 28 October agreement between Washington, Oregon, BC
and California to create carbon pricing for 53 million people with a GDP of $ 2.8
trillion. The article below also shows clearly that a revenue neutral carbon tax
does not harm the economy. So, even those people who are not sure that GHG emissions
cause climate change could take a “better safe than sorry” approach. Note that the
EP and CT reference documents have been extended after the 3 e mails to the government
with copies to Enbridge. The e mail document
now contains 2 additional e mail exchanges with Enbridge. I can’t download those
documents to the blog. If you want to see them leave a comment on the blog and I
will Email them. They are in PDF format
Pipelines and Carbon tax
update
1
Present restrictions
How things change! A few years ago the Keystone XL pipeline was almost
certain to proceed. The US preferred our friendly oil over that of Saudi Arabia
or Venezuela and the Texas refineries are able to handle our particular Alberta
oil. For various economic and NIMBY considerations few new refineries have been built lately, so
for Canada the Keystone XL was a great solution to bring the products of
Alberta oil to the market. Since that time the US developed their Bakken oil
fields, found more natural gas and is less dependent on our oil. At the same
time environmentalist and US officials started doubting that Canada will meet
it’s Copenhagen agreement for greenhouse gas reduction so now the Keystone XL
project is in limbo. The Enbridge Northern Gateway project is a logical route
to transport our oil to Asia rather than to the US but it almost immediately
met stiff opposition because Enbridge has very poor operation and maintenance
records. It’s future is also in limbo unless Enbrige can explain in detail how
regulations have changed, how it’s earlier mishaps have occurred and how they
can’t happen again. Similarly Kinder
Morgan will have to release a lot of factual information to gain approval for
their plan to greatly expand their operations.
An alternative is to convert a natural gas line to an oil line, extend
it through Ontario and Quebec so that Alberta oil can be refined in the East
and even export some of the crude to Europe. That plan also will meet local
opposition while the Europeans don’t like the products of our oil sands for
environmental reasons. (CT 37)
2 Financial
consequences of present restrictions
The limited pipeline capacity leaves us in a rather precarious situation. On
Jan 9th it was reported that Alberta’s energy minister figured that
we subsidize the US with $20 to $30 billion per year because, due to limited
pipeline capacity, we have to sell our oil at bargain prices ($37 per barrel
below the price for West Texas intermediate). The petroleum industry puts their
loss at $15 billion per year.(EP!) No figures are readily available to show how
much the federal government loses in income tax from the petroleum industry and
it’s suppliers but it is something to consider in BC. One of the arguments
against the Northern Gateway pipeline is that the financial benefits are mostly
for Alberta and little for BC. If the federal government does not lose all that
income tax money there will be more available to help BC with financing of
roads, bridges and sewage treatment plants
3 Opposition
from other countries
Before going
into the technical details of the Northern Gateway Project it should be noted
how much opposition there is from Europe and the US. Just recently In London Mr
Harper was met by 30 protest organisations from both sides of the Atlantic
while 6 MPs tabled a motion to keep Alberta oil out of Europe.(CT 37) These
protests are not based on pipeline quality but on our poor environmental
records. Our Kyoto aim was to reduce GHG emissions in 2012 to 6% below 1990
levels. Instead in 2008 we had already increased them by 24%. (CT 36). In
Copenhagen we agreed to reduce our emissions in 2020 to 17% below 2005 levels
(CT 36, 37). Environmentalists and US government officials( CT 1) believe this
is impossible to achieve, considering that extraction of oil in Alberta
requires a lot of energy. The US and Canada are seen as major polluters who
oppose carbon tax. At the Doha conference an evaluation based on 5
environmental criteria ranked Canada as # 58 out of 61 countries and the US #
43(EP2).
4
Carbon pricing
progress in the US and Canada
10 US States have a cap and trade system which added $1.6 billion in value to the economies
of participating states, set the stage for $1.1 billion in ratepayer savings,
and created 16,000 jobs in its first three years of implementation.(CT18) In Canada the BC carbon tax reduced the
consumption of petroleum products by 17% without loss of GDP.(CT48)) The BC
revenue neutral carbon tax system is now used by economist in Britain and the
US as an example how effective it is and how easy it can be implemented and
administered compared to a cap and trade system. That position is endorsed by
10 CEO’s of energy companies, including ExxonMobil. (CT64-68 ) Also, on
28 October Oregon and Washington agreed to adapt BC’s carbon tax which, in
combination with California’s cap and trade, would ensure carbon pricing in
four states and one province which have a combined population of 53 million
people, with a gross domestic product of $2.8-trillion. “California isn’t
waiting for the rest of the world before it takes action on climate change,”
California Gov. Jerry Brown said in a statement. “Today, California, Oregon,
Washington and British Columbia are all joining together to reduce greenhouse
gases,” Brown said.(CT 68,69) Due to the revenue neutral system BC is now among the lowest tax regions in the Western
Hemisphere. (CT54, CT38)). The American coal companies have recognized this.
They buy US coal via BC subsidiaries and ship it through BC ports to avoid the
higher US taxes.(CT38,39) Despite
these successes neither the US, nor Canada has been able to establish a
national carbon tax. This may in 2015
lead to countervailing duties being imposed on our exports by a block of
countries unless a global carbon tax can be reached at that time.(EP1,2)
5 Green energy
development in China
China is seen as a main problem in reaching such a global
carbon tax even though China is considering taxing their carbon.(CT 32 ) China
depends on coal for 70% of it’s primary energy and emits more GHG than any
other country. In 2005 the per capita emission in China was 1/5th of
our emissions(CT56) but due to China’s increasing prosperity that figure will
increase unless they become a lot greener. Like Canada, China spends a lot of
money on research for Carbon Capture and Storage (CCS). This process can reduce
the Global Warming Potential (GWP) from 4.44 to .25 (CT24) The European CCS
team helps China with evaluation of potential storage sites. The Australian
coal companies also commit money for CCS research (CT63). China now has the
largest number of CCS pilot projects in the world and some of these projects
are currently in operation. Six of them are large scale fully integrated
projects(LSIP), driven by state owned power companies with help from major
international partners(CT59,60). When
implemented, China will be able to
operate electric cars on relative green energy. All these efforts will be
slowed down if we keep sending tax free oil to China.
6 The impact of a global carbon tax
Coal will always
be required as a reduction agent in the steel industry and oil is essential to
fly airplanes, power ships, make plastics and many other products so Canada
will not suffer financially when our exports dwindle due to a global carbon
tax. At the present BC rate of $ 30 per ton of CO2 we would cash in
an extra $9.50 for each barrel of crude we sell (CT 72) and depending on grade
between $53 and $62 per ton of coal.(CT 13) Obviously some of that extra income
has to be shared with countries who have no taxable carbon but have to live
with rising energy prices and effects of climate change. Amounts, distribution
and administration for such aid are stumbling blocks in the UN
negotiations.(EP1, EP17, CT 72). Some 100 multinationals, including Shell, Unilever, Cathay Pacific, EDF Energy, Braskem,
Statoil, Swiss Re, Ricoh and Skanska, are frustrated with the slow progress of the UN negations and want a
firm carbon tax agreement so they can plan for the future.(EP17) Unfortunately
other companies predict gloom and doom, which frightens the public and politicians. In Australia BHP Billiton CT49)
Anglo American(CT40) are typical examples. Previously such tactics worked but a
new government felt that Australia needs a carbon tax to meet their GHG
reduction promises.(CT43). Australia’s climate change minister had this to say
to the coal companies: “Claims
of massive job losses
are completely absurd. The coal industry has at least $70 billion worth of
investment coming into it that's committed, 19 new mines opening up that are
committed. You know, the average carbon price cost per ton of coal mined once
the carbon price legislation comes into place is only $1.90 per ton of coal in
the first year - $1.90, as against a coke and coal export price currently in
excess of $300 a ton.”(CT 49) After
the tax did come in the companies did not suffer. Australia’s tax of $25 per
ton of CO2 is far from revenue neutral (CT43), so it should be much
easier to sell a revenue neutral tax, which is just a tax shift to make green
energy more competitive. An in-depth European Union study of the tax shifts
undertaken by Denmark, Sweden, Finland, the United Kingdom, the Netherlands and
Germany found that five of the countries experienced modest economic gains as a
consequence of the carbon/energy tax shift while one country, the United
Kingdom, experienced a neutral economic outcome.(CT32).
7 Opposition to carbon tax
The opposition
to carbon tax is caused by not paying enough attention to how the proceeds are
paid back to the taxpayers. In the US the Heritage Foundation claims that one
of the four bills introduced in the US would cost the average household $1500
per year(CT 15) while the Congressional Budget Office, the Environmental
Protection Agency and several other organisations estimate the cost at around
$150 per year.(CT 17). In Canada the Frazer Institute claims that a 2008
analysis of a $30/tonne of CO2 carbon tax conducted by CUPE suggests
that the poorest quintile in Canada would lose 1.7% of household income, while
the top quintile would lose only 0.86%.(CT 31). The CUPE table (CT29) only shows how much each income group pays in
carbon tax, ranging from $281 to $1380 per year for the 5 income groups with an
average $779 per year. When the lowering of income taxes and special credits
are included a table by the Canadian Centre for Policy Alternatives (CT30)
shows that the poor lose $47 per year in income while the rich gain $311 per
year. This amounts to .3% loss and .2 % gain while all categories in between
lose between.1% and .2 %. It also shows that the average income loss is $0 per
household.
8 Importance of carbon tax to gain
acceptance for pipelines
All the above
carbon tax data are seldom discussed in the media yet all of them, except the
threat of countervailing duties, can readily be found on the internet. Taxing
our carbon will be an important step to gain acceptance for new pipelines.
Until we have a global carbon tax the world’s GHG emissions will keep rising.
Quite some environmentalists want to curb our oil export claiming that our oil
will increase GHG emission. Until we have a global carbon tax it will only hurt
our economy because other countries will increase their exports so the world’s
GHG emission won’t change. Other environmentalists claim that $ 30 per ton of
CO2 is only !/3 of what is needed to reduce GHG emissions. If all
countries agree to $ 30 per ton we likely see a reduction, If not, we can
gradually increase it to the desired rate. Since the above data show that
carbon pricing does not hurt the economy even those who don’t believe that CO2
causes climate change could look at it with a “better safe than sorry”
attitude.
9 The main technological pipeline problems
The internet also readily supplies us with the
technical details required for a realistic evaluation of the Northern Gateway
project. Within 20 minutes you can find 2 headlines about the Kalamazoo
spill:
July
25, 2012, 12:00PM
On
July 25 and 26, 2010, more than 800,000 gallons of heavy crude spilled into
Talmadge Creek and then the Kalamazoo River and Morrow Lake in Comstock
Township - some five years after the company was made aware of more than 15,000
cracks all along in the pipe. (EP 2,3)
Wikipedia
Though alarms sounded in
Enbridge's Edmonton headquarters
at the time of the rupture, it was eighteen hours before a Michigan utilities
employee reported oil spilling and the pipeline company learned of the spill.
Meanwhile, pipeline operators had thought the alarms were maybe caused by a
bubble in the pipeline and, while for some time it was shut down, they also
increased pressure for periods of hours to try to clear the possible blockage,
spilling more oil.[4] (EP3)
Wikipedia also describes 5 major spills in
Enbridge’s lines, 4 of them since 2010. It also refers to construction
problems:
2008 Pipeline
installation in Wisconsin, where over 500 regulatory violations were
incurred in one year of construction. Enbridge has also had over
600 recorded leaks and breaks over the last 10 years.[58][59](EP6)
The 1500 cracks
in the line can be explained by pasting a few lines related to the NTSB report:
"It was
about the numbers," said Matt Nicholson, who led the NTSB investigation.
"They were dealing with large volumes of defects."(EP 20)
About 15,000 cracks were discovered in
Enbridge pipelines, according to a 2005 crack report, Nicholson said. Enbridge
tried to manage these defects by prioritizing them by immediacy. The NTSB
report also shows that the tools used to measure cracks
were inadequate for the type of cracks in Pipeline 6B.(EP
20)
The spill from
Enbridge's 6B pipeline was caused by multiple small corrosion-fatigue cracks in
the pipe that grew in size, linked together and created a rupture over 80
inches long when the pipeline's pressure was increased. Enbridge pipelines suffered more than 800 spills
between 1999 and 2010 (EP20)
The
18 hours duration of the spill can be attributed to the limitations of the
instrumentation. Here are some statements lifted from a long article in a
Bloomberg publication. It was related to the Keystone pipeline (EP 9,10,11,12):
“Sensors along the pipelines measure temperature, pressure, flow rates
and other hydraulic data. The information feeds into the control room, where it
serves two functions—tracking the amount of oil delivered to refineries and
other customers, and monitoring the pipeline for potential leaks. When the leak
detection software senses something that could be a leak—perhaps an abrupt
change in pressure and flow rates—it triggers an alarm. The controllers then
analyze the data to determine whether there's really a problem.”(EP11). There are some 1000 alarms per month, mostly false ones and that
leads to the following: “Between 2002 and July 2012, remote sensors detected only 5 percent of the nation's pipeline spills,
according to data from the Pipeline
and Hazardous Materials Safety Administration(PHMSA).The general public reported 22 percent of the spills during that
period. Pipeline company employees at the scenes of accidents reported 62
percent”.(EP9) The Keysstone XL pipeline will operate at a high flow rate and
will not detect spills below 1.5% of it’s initial flow, which could lead to an
undetected leak of “10,500 barrels (441,000gallons) per day”. For the expanded
capacity it would be 522,900 gallons per day(EP11). For the Keystone XL
pipeline it was stated that if the problem can’t be identified in 10 minutes
the line will be shut down (EP9). . Ten days before the Kalamazoo spill,
Enbridge had told the federal regulators that they could shut the line down in
8 minutes, yet it took 17 hours (EP10). So how can people believe these predictions
if they are not backed up by detailed operating procedures?
10 Promising new technology
Hidden in 4
pages about the instrumentation problems there is one positive note “Another
option is to install external sensors that can detect leaks smaller than 10
gallons per day. But these sensors are
expensive and are rarely used” (EP12). While both Wikipedia and Enbridge statements provide some information on external sensors, little shows up about the
sensitivity. A 4 page article about the Westminster acoustic fibre optic system
shows that in addition to leak detection it protects against vandalism and
detects landslides and earthquakes. No details are given about the
sensitivity.(EP20-23) Enbridge spends
millions on leak detection research(EP29) has used external sensors on the new
Michigan 6B line(EP26) and should by now
let the public know what the options are, what can be expected of these systems
and how they are tested. This is essential information, which, along with all
other improvements should be evaluated before a new pipeline proposal can be
accepted
11 Enbridge’s
improvements
Little publicity is given to the fact that these problems have led
to stricter regulations(EP32), safer designs and improved operating procedures
for pipelines. Enbridge will use external sensors for their Kitimat pipeline.
Some details were discussed in Kitimat but not reported(EP27) They will also
provide thicker than normal wall thickness for their pipes, (EP43), install 50%
more isolation valves.(EP 8, 9), use extra personnel in the control room and
around the clock manning of their pump stations.(EP 43). It also appears that
the public is not aware that Enbridge pays a lot of attention to the seismic
activity along the route and will design the pipeline to accommodate the
maximum ground acceleration.(EP51). Note that an Alaska pipeline was designed
with a flexibility which withstood a magnitude 7.9 earthquake. (EP 37). It
would appear that their design and additional personnel will result in one of
the safest pipelines on the continent. It will however require a lot more open
discussion to convince the public that all previous problems will be resolved.
The draft report of the joint review panel for the Northern Gateway pipeline
shows a number of conditions how consultations have to be conducted, how to
achieve independent reviews and what monitoring involves. It does not show the
resolution of specific published problems or several concerns which have been
raised during the enquiry (EP40). It appears that it was more like a court
hearing. Enbridge was faced with a cross-examination by legal council (EP27)
and had to be careful what to say. Also all efforts were made not to discuss
the US National Transportation Safety Board’s report about the Kalamazoo spill.
(EP38) Obviously the public wants to have simple answers to a number of
unanswered questions about crack detection tools, frequency of inspections, the
new regulations on how to deal with cracks, testing procedures and applicable
rules and regulations related to the construction.
12 Oil
properties
It should also be clarified that diluted bitumen isn’t more
corrosive or requires hotter lines than regular oil. This only applies to
gathering lines, not for transmission lines. By the time diluted bitumen
reaches the interprovincial, international and interstate pipeline network, the
crude oil must meet quality specifications that are posted with the
National Energy Board in Canada and the Federal Energy
Regulatory Commission in the U.S. Pipeline operators in fact take samples of
incoming batches at receipt and during transit to monitor product adherence to
quality specifications required of its shippers. Pipeline operators are
responsible to deliver agreed-upon batch quality. It is often stated that diluted bitumen is
heavier than regular oils but that certainly does not apply to all of them. A
table(EP60) shows an analysis of 14 oils. The Canadian oils, Bow River Heavy,
Western Canadian Select, Cold Lake Blend and Wainwright Kinsella are all considerable lighter than 4 of the 5
California oils, Iran’s Soroosh and Venezuela’s Tia Juana Heavy. Note that the
API gravity degrees rise as the specific gravity lowers. In the table any oil
above 10 floats in fresh water and any below 10 sink(EP61). All oils in the
table float and the sinking to the bottom of the Kalamazoo river is explained
in Wikipedia : “Following the
spill, the volatile hydrocarbon diluents
evaporated, leaving the heavier bitumen to sink in the water column” It
would be interesting to know how long this evaporation takes under various
conditions. The
same table also confirms that the 4 Canadian oils with a sulphur content
between 1.6% and 3.4% are no more corrosive than the 5 California oils, whose
sulphur content range from 2.9% to 5.5%.
13 Shortcuts in
oil transport
A lot can be accomplished by having more personnel available to
oversee the design, construction and operation of our oil transport systems. In
the past too many cuts have been made with disastrous results. Surely more
inspections and oversight will increase the price for our oil but if all
companies are forced to follow all the rules, there will be a level playing
field and the price increase for the oil will be insignificant compared to the
$37 per barrel which we lose at the moment due to limited transport capacity.
The past cost cutting is not limited to Enbridge. Trans Canada continued construction
of their Bison pipeline while they were made aware of shoddy welding and poorly
trained inspectors who were not identifying all the welding problems(EP54).
Railroad transport also has to become much safer. The Quebec disaster revealed
that in order to cut costs, a struggling railroad company was allowed to
operate a 72 car, 5 locomotive fully loaded oil train with only one engineer
without help of a conductor. In addition he was allowed to leave it parked
unattended on a hill for several hours.
For the tanker transport, reservations were expressed about the proposed
number of tugs and pilots(EP7). The public will want to know how that has been
resolved. There is a lot more to be discussed about tanker traffic.(see point 14-h
in the second article of post 1)
