OIL AND GAS:

New pipeline proposal stokes enviro fears of a Keystone XL East

Environmentalists battling Canadian oil companies over the proposed Keystone XL pipeline to the Gulf Coast and another link west to Asia are now girding for what they see as industry's Plan C: Move heavy crude to the East.

At issue is a plan announced this week by Enbridge Pipelines Inc. to reverse the flow of a pipeline that now carries 240,000 daily barrels of imported oil west from Canada's East Coast.

The pipeline company paints its proposal in the same hue that the White House has used in extolling the economic upside of the United States' current oil boom, emphasizing the value to Canadians of relying more on their nation's presently underpriced oil sands crude, but environmentalists see a bigger game afoot.

"It sounds like it really is Trailbreaker in disguise," Conservation Law Foundation attorney Ivy Frignoca said in an interview, referring to the East Coast project that Enbridge jettisoned in 2009 at the height of the global economic slump.

With a price tag pegged at a tenth of Keystone XL's, Trailbreaker could have opened a path to New England ports for Canada's oil industry if a pipeline now running from Montreal to Maine were also reversed. But the three years since Enbridge nixed that project have turned a beam of politically pesky activism on projects that would boost production of the emissions-heavy Albertan crude that greens deride as a once-in-a-generation threat to the climate.

In the post-Keystone XL era, then, Enbridge CEO Pat Daniel's avowal last week that a resuscitation of Trailbreaker is "not as likely" given its imminent reversal of a line between the Midwest and the Gulf Coast rings hollow to environmentalists. They say the company has ample reason to downplay the potential for its only-in-Canada pipeline reversal to ultimately represent an eastern route for the heavy oil that stoked resistance to the XL project.

"Enbridge has probably taken cues from what TransCanada went through," Daniel Kessler, spokesman for the climate advocacy group 350.org, said of the Keystone XL sponsor that last year spent more than $1 million on lobbying for its project in Washington.

Any Enbridge notion of a quiet advance to Canada's East Coast, running through Quebec and near the New England states where organizing against fossil-fuel development is common, struck Kessler as "absurd."

Kate Colarulli, associate director of the Sierra Club's oil campaign, agreed.

"When they head east, they're heading into environmental territory," she said in an interview, contrasting that with the more conservative American Midwest, where "the climate argument never really flew" as a spur for rallying opposition to Keystone XL.

The tough talk from environmentalists drew a shrug from Canadian Association of Petroleum Producers spokesman Janet Annesley, who described the prospect for oil sands crude in New England as a "specter" summoned by those who "want to make this project seem to be bigger than it is, want to make it seem like there's some kind of conspiracy on behalf of the oil industry."

Canadian producers' goal in bringing their heavier oil sands crude east, she added, is to reduce overseas imports by processing more North American crude. The advantage of keeping Canadian oil for Canadians is amplified by the $14-per-barrel price discount it now sees when compared with the Brent oil that is exported across the Atlantic Ocean -- a spread that also is propelling much of the political battling over Keystone XL (Greenwire, Jan. 31).

"Right now there are refineries in Quebec currently running more expensive crude oils" that would benefit from "some more certainty with respect to price," Annesley explained.

Environmentalists arrayed against the oil sands and industry interests eager to tap their bituminous fuel agree that Canadian crude reserves outrank every country in the world but Saudi Arabia's. Where they diverge, to explosive effect, is on the resulting emissions: Conservationists warn that oil sands crude generates up to four times the greenhouse gases of conventional fuel, mostly during production, while oil companies point to "well-to-wheels" estimates that peg the overall emissions difference at no higher than 15 percent on average.

Bureaucratic hurdles

Taking western Canadian heavy crude into New England likely would require not only a reversal of Enbridge's Ontario-to-Quebec Line 9, but also the Portland Montreal Pipeline that connects Quebec's largest city with Maine.

Should that move come closer to fruition, greens are positioned to press for an environmental review of the various pipeline reversals as a complete project, raising the prospect of a new interagency process similar to the one that made Keystone XL's border-crossing permit into national news.

"The true costs of relying on tar sands needs to be something that is fully understood and considered as part of a full and comprehensive public process given the increased risks to waterways and public health," the Natural Resources Defense Council's Canada director, Danielle Droitsch, wrote in a blog post yesterday.

A spokesman for the operator of the Portland Montreal line did not return a request for comment on whether, or if, its plans would change as a result of Enbridge's. That pipeline's parent company last month lost a court clash with environmental groups over building a pumping station that would pave the way to a reversal.

But Enbridge CEO Daniel did not discount the eventual value of bringing oil sands crude to the United States' East Coast refineries, three of which have lingered on the verge of closure this year amid static U.S. demand and high global crude prices (Greenwire, March 19).

Given the price discount for Canadian oil sands crude and fuel from the Bakken formation that stretches into North Dakota, he told investors on a conference call last week, "it's fair to say that eastern refineries, not just Montreal; possibly Quebec City, possibly New Brunswick, possibly around in Philadelphia, would see some significant advantage of being able to access those crudes."

Referring to the eastward pipeline, Daniel added, "we certainly would be looking to see where there's sufficient support to extend the project even further east."

The company's first step, however, is getting through hearings before Canada's National Energy Board on the reversal of the first half of its Line 9 that are slated for next week. Environmental groups are hoping that Enbridge's announcement of its plan to ultimately take oil all the way to Quebec can make their case for a prolonged regulatory review on the northern side of the border.

U.S. advocates are "in the mulling stage as to what the response will be," Frignoca of the Conservation Law Foundation said. "Right now the legal response is occurring in Canada."

Yet Kessler of 350.org advised oil companies against underestimating the ability of the environmental movement to coordinate as effectively against Line 9 as it did against the much bigger Keystone XL.

"We're really building those bridges" between the two nation's organizing networks, he said. "People are going to be gearing up -- if this reaches a climax, I could see large coalitions coming together to oppose it."