During the last few years there has been so much
opposition to new pipelines that rail transport has increased rapidly’ By the
end of this year there will be sufficient new loading stations and rolling
stock to ship 1,000,000 barrels per day (bpd) from Alberta by rail. If it would
all be destined to the Gulf Coast refineries we no longer need the Keystone XL
pipeline which has an ultimate capacity of 830,000 bpd. Plans are underway to
replace the Northern Gateway pipeline and the Kinder Morgan pipeline with a
railway from Alberta to Alaska allowing shipment of 1,500,000 bpd through the
under-utilized port of Valdez. The railways have certainly helped Alberta’s
economy. Due to insufficient pipeline capacity they had to sell their oil at
bargain prices. In 2012 they lost $ 25 billion. In 2013 the losses dropped to $20
billion and for the foreseeable future they will be $15 billion per year due to
export restrictions to Asia. There are no figures readily available how much
Ottawa loses in tax revenue but it must be billions, which could have been used
to help the provinces with their financial problems.
While not all oil is as dangerous as the North Dakota
type which caused the Quebec disaster, it is clear that transport by rail is
riskier and takes more energy than transport by pipeline. This post gives an
overview of the present rail developments and the objections to pipelines. I
hope that public opinion about pipelines and marine transportation can as yet
be changed.
1)
Replacement
of the Keystone XL pipeline
According to an article in the June 9th
Macleans magazine there is a Calgary investment dealer, Peters and Co, who
estimates there will be by the end of this year enough facilities in Western
Canada to ship more than 1,000,000 bpd. They are an investment dealer that has
specialized in the Canadian oil and natural gas, midstream, and oilfield
services, Their findings are in line with 2013 predictions shown in http://www.bnn.ca/News/2013/7/12/Analysis-Late-to-oil-by-rail-Canada-faces-risks-in-rush-to-catch-up.aspx
:
“In the United States,
shipments swelled to almost 100,000 cars in the first quarter, some 760,000 bpd
based on the 700-barrel cars that are standard for lighter oil shipments,
according to American Association of Railroads data. Canada is poised to catch
up. In 2013 rail shipment was 230 000 bpd.
New loading facilities in Alberta and delivery of rolling stock on order
will soon increase the volume. Business News reports the advantage of bitumen
"Every time we bring in another barrel of Canadian heavy crude, we make
enormous progress with regard to reducing our raw material cost," PBF
Chairman Tom O'Malley recently told analysts. The refiner aims to triple
deliveries to 80,000 bpd by year's end with new rail cars. "That is the
game.". The railroad costs are stated by “Gibson, which is signing up
customers for a 60,000-bpd terminal in Hardisty, Alberta, estimates using a
unit train would cut the cost of moving crude to the Gulf Coast to $14-$17 per
barrel, compared with $17-$21 per barrel on a manifest train hauling mixed
cargo.”
Shipping to refineries rather than to ports is cheaper
by rail than by pipeline. The bitumen does not have to be cooled and diluted. It
can be loaded hot and shipped raw in insulated railcars with heating coils. No
expensive concentrate is required and each car holds 30% more bitumen than if
it was shipped as dilbit. At the refinery the bitumen is re-heated to 150o
C and pumped out. While Gulf Coast refineries prefer our oil, the US has a glut of light
crude and hopes that soon their export ban will be lifted. Canada is
exempt from the export ban and already gets about 268,000 barrels of oil a day
from the U.S. This is why North Dakota oil is shipped by rail to Eastern Canada
for processing and export.
Here is another indication that major oil companies are planning
to ship by rail.
HOUSTON — With limited pipeline options to ship oil sands
crude out of Canada, Exxon Mobil Corp. plans to move up to 100,000 barrels per
day of Canadian oil using a new rail terminal that should be running by 2015,
an executive said Thursday.
The terminal, to be
constructed in Alberta, will cost up to $250 million if it is built to a maximum capacity of 250,000 barrels of
oil per day, said David Rosenthal, Exxon Mobil’s vice president of
investor relations, during a conference call with analysts.
The rail terminal is being
developed by Kinder Morgan and Imperial Oil at an initial cost of $170 million.
Exxon Mobil has a 70 percent ownership stake in Imperial Oil.
2)
Replacement
of Northern Gateway and Kinder Morgan pipelines
What follows was extracted from http://opinion.financialpost.com/2012/11/16/alaska-bound-rail-project-could-solve-canadas-oil-sands-problems/
An alternative to the 525,000 bpd Northern Gateway line and
the additional 590,000 bpd Kinder Morgan
line is a 1,500,000 bpd railway line from Alberta to Alaska. The extra capacity
could be used to ship more oil to Asia or to the Gulf Coast refineries. When it
is double tracked it could transport 5,000,000 bpd. Double tracking would also
allow shipping potash, grain, lumber and minerals. It was original conceived by
Alaska and the Yukon in 2005 and 2007 because oil shipments through Valdez were
dwindling. Following increased
opposition to the Northern Gateway Pipeline the potential was further discussed
with First Nations and an agreement has been reached. The present estimated
cost is $8.4 billion for the single track and $ 10.4 billion for the double
track. This is comparable to the $5.5 billion for the Northern Gateway and $
4.1 billion for Kinder Morgan pipeline. An easement already exists for ¼ of the
route (Fort Mc Murray to Peace River). Alaska is already investing in infrastructure
in anticipation of approval. .An advantage is that every step in the planning
is undertaken after thorough consultation with First Nations. Another advantage is that
shipping from Valdez to Asia is 2-4 days less than through BC ports. Shipping
to Valdez will cost $6-$8 per barrel compared to $5 per barrel for the Northern
Gateway pipeline. Tanker shipment from Valdez costs $2-$3 per barrel to Asia,
$3-$4 per barrel to the Gulf coast and $ 4-$6 per barrel to Europe.
nrunfailco.com/ESW/Files/G7G_Project_Update_Jan-3-2013.pdf
reports that the
$6 Million study of 2005-2007 has been updated
and will be followed by a $40 million feasibility study which will
hopefully receive 25% financial support from the Alberta government.
The February 2014 edition of the Alaska journal http://www.alaskajournal.com/Alaska-Journal-of-Commerce/February-Issue-2-2014/Report-due-in-March-on-Canadian-Alaska-oil-railroad-link/ reports that the Alberta government is funding a $1.8 million pre-feasibility study through the Van Horne Institute at the University of Calgary. Some more details are given about oil quality requirements and the degree of under-utilisation of the port. TAPS owners, which include BP, ConocoPhillips and ExxonMobil, have said they are interested in shipping more liquids through the pipeline, which is now operating at about one-fourth of its design capacity
The February 2014 edition of the Alaska journal http://www.alaskajournal.com/Alaska-Journal-of-Commerce/February-Issue-2-2014/Report-due-in-March-on-Canadian-Alaska-oil-railroad-link/ reports that the Alberta government is funding a $1.8 million pre-feasibility study through the Van Horne Institute at the University of Calgary. Some more details are given about oil quality requirements and the degree of under-utilisation of the port. TAPS owners, which include BP, ConocoPhillips and ExxonMobil, have said they are interested in shipping more liquids through the pipeline, which is now operating at about one-fourth of its design capacity
In February 2014 news came out that the 1.5 million barrels
per day could be shipped by 10 trains. It also explains the First Nations involvement.
The idea of shipping a million barrels of sticky bitumen
a day via a rail line is unprecedented. Jean-Francois Arsenault, of the
Ottawa-based infrastructure development firm, told the Edmonton Journal last
January that G7G’s single-track version of the project would require 10 trains
a day, each pulling 200 cars, to transport 1.5 million barrels.
Vickers said researchers at the University of Alaska
Fairbanks and the University of Michigan are investigating the potential for
the railroad to transport minerals from Yukon mines.
AECOM Canada, a technology company, has already said it
wants 10 percent equity in the project, according to Vickers’ presentation.
First Nations tribes and the six tribes between the border and Delta Junction
would hold a 50 percent stake in a so-called Aboriginal Alliance Trust. The
trust would disseminate dividends among the tribes. The remaining 50 percent
would be held by G7G.
3)
Environmental objections to pipelines
A main objection,
in particular from Europe is that the extraction of oil in Alberta takes a lot
of energy and that with our projected expansions we will not meet our
Copenhagen agreement. We already failed miserable with our Kyoto accord and by
pulling out we upset their carbon trading system. For details of our
environmental records see point 8 in post 1. Our failure to become serious
about pricing of carbon is a main objection, now shared by the US which is much
further ahead than we are and will in all likelihood meet their Copenhagen
agreement which is identical to ours.( see post 16 “carbon tax progress”)
In BC
environmentalists and local politicians reject the pipelines and make the
public feel guilty by stating that our oil exports increase the world’s greenhouse
gas emission, see http://www.vancouverobserver.com/blogs/climatesnapshot/carbon-tsunami-lead-enbridge-northern-gateway-takes-aim-bc
and http://www.vancouverobserver.com/news/vancouver-s-green-brand-be-blackened-oil-pipelines-says-mayor#comment-260670 They overlook that world demand for oil
will keep rising for quite a while and that the emissions will go up regardless
which country supplies the oil. Taxing carbon will eventually ease the flow.
Taxing will however have far more impact on coal than on oil. At the BC tax
rate of $30 per tonne of CO2 the price of thermal coal will go up by
about 70%, while crude oil goes up by only 9% (see post 17, cost of taxed oil
and coal, windpower progress)
Drastic reduction in the use of thermal coal is
the solution to reduce the world’s greenhouse gas emission. Natural gas
produces only about half the CO2 emissions than coal does. By
forcing all power stations to switch from coal to natural gas the world’s
emissions will drop substantially. In the US a newly introduced EPA bill tries
to achieve that. Now even some influential Republicans feel that a revenue neutral
carbon tax will work better, see http://www.jsonline.com/news/opinion/revenue-neutral-carbon-tax-would-improve-on-epa-regulations-b99282755z1-261548361.html
The Sanders Boxer Bill which at $20 per ton of
CO2 includes provisions for border tax adjustments (Import duties)
to encourage other countries to follow the US lead may be the answer see
http://www.carbontax.org/blogarchives/2013/02/15/sanders-boxer-set-gold-standard-but-write-off-fiscal-potential-of-carbon-tax/. Shell, BP Exxon Mobil and Statoil demand a
global carbon tax. They have vast reserves of natural gas and will profit by
selling it for power generation. The tax will encourage development of green
energy so that eventually all energy required to extract the Alberta oil will
be obtained from green sources. Some people claim that it takes the equivalent
of one barrel of oil to extract one barrel. That number is disputed and
certainly does not apply to all Alberta oil. Furthermore some US oil requires
just as much energy seehttp://insideclimatenews.org/news/20130219/oil-sands-mining-tar-sands-alberta-canada-energy-return-on-investment-eroi-natural-gas-in-situ-dilbit-bitumen
In Canada there is quite some opposition to carbon tax.
People still believe that it costs them money, that it is bad for the economy
and that it will hurt the poor. That is certainly not the case in BC, where the
government has to show each year how much money was collected and how it was
all refunded to those who paid the tax. Those who buy less than average carbon get
more money back than they paid. This can be achieved by driving fuel efficient cars
and using a heatpump system to keep their house warm. At the moment there are 16 refund categories
see http://www.fin.gov.bc.ca/tbs/tp/climate/Carbon_Tax_Report_and_Plan_Topic_Box.pdf Note that in 2013/2014
the poor got a refund of $ 195,000,000 via the low income climate action tax
credit. That is over 16% of all carbon tax collected.
4)
Opposition
to pipelines and tanker transport based on past disasters
Enbridge has had
many serious leaks in their lines. The most catastrophic one is the Kalamazoo
spill. It was caused by inadequate leak detection instrumentation and poor
maintenance. The industry relied on internal instruments which in the US detected
only 5% of the leaks between 2002 and 2012. These internal instruments only
detect leaks larger than !½ % of the flow and even misses some of the large
ones because there are so many false alarms that the real ones can be misinterpreted
as happened during the Kalamazoo spill from line 6B, causing a 17 hour shut-off
delay. Here are some details of the cracks which
caused the rupture. They are part of a NTSB
investigation led by Mr Nicholson
“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.” 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. “Federal regulators never fully
reviewed or drilled the company on its spill response plan”.
During the
inquiry of the Northern Gateway pipeline all efforts were made to exclude the
above findings from the discussions. It would have been an ideal opportunity to
show how much extra work will be done to avoid repetition of such disasters and
how important it is to have strict regulations about crack detection and
repair. The government should also be willing to provide sufficient trained
staff to oversee that all those rules are followed.
The Northern
Gateway pipeline has many features which will make the line one of the safest
in North America. The trouble is that most of it only shows up on blogs. Last
year I had 3 email exchanges with Enbridge suggesting that they make far more
technical information available to the public and explain how all the previous
problems can be overcome. In the process I learned something about pipelines
and wrote what is now post 1 of www.neilwilhees.blogspot.ca
On 1 September 2013 I emailed post 1
with all the backup data to Enbridge with the following note . “Having
seen how much opposition there is based on past problems I have included at the
end of my article a number of questions which may change opponents ‘ minds if
you can once in a while point out how things have improved on specific points.”
Enbridge’s reply on !0 September 2013 was “Thank you
Neil - we appreciate your support!”.
