OIL SANDS:

Beyond Keystone XL, more pipelines with more problems

Among the new conclusions the Obama administration added to the 1,000-plus pages of its final Keystone XL environmental review, one particular sentence carried a subtle but unmistakable air of portent.

Observing that limited transportation options have depressed the price of heavy Canadian crude in recent years, the administration outlined several projects that America's neighbor to the north has pursued to open up new export markets for its ample oil sands fuel resources. Then, after repeating a warning from its draft KXL review about "significant opposition" to those pipelines, the State Department bureaucratically underlined the thought.

"Nonetheless, all of the proposed pipeline projects within Canada have faced stringent political opposition and substantial regulatory uncertainty," State wrote.

As the federal review of KXL drags through its fifth year, the contours of the lobbying battle over the pipeline are little-changed since a 2011 White House sit-in first pulled it from obscurity to totemic status for a resurgent environmental movement. But even in the growing shadow of their famous cousin, other pipelines proposed to boost oil sands crude are inching along more slowly than first anticipated and facing resistance on multiple fronts.

"What's happening with Keystone is the new normal," Michael Whatley, executive vice president at the industry group Consumer Energy Alliance, said in an interview. "As the opposition groups bring more scrutiny to these projects, it's not surprising that regulators are going to bring more scrutiny."

American Petroleum Institute senior manager Cindy Schild likened the rise of anti-pipeline campaigns to the not-in-my-backyard local push-back against refinery construction that has stalled new domestic crude processing facilities since the 1970s.

But Schild marveled at the nation's heightened awareness of KXL relative to other pending pipelines that, collectively, would carry nearly triple the well-known project's daily volume of heavy crude out of the remote Alberta oil sands.

"We have five other major pipelines being proposed, but everybody knows the name of one?" she said in an interview. "That, to me, is amazing."

New and expanded pipelines are an economic inevitability in a market that sold more oil and gas to the United States in January than the entire Organization of Petroleum Exporting Countries. But the challenges on tap for six major non-KXL oil sands pipelines suggest that greens are embracing the continentwide game of "Whac-A-Mole" seen by many in their ranks as essential to slowing the development of global fossil fuel resources.

The Canadian Association of Petroleum Producers' vice president for oil sands and markets, Greg Stringham, said in an interview that his industry is "looking at a portfolio of transportation options, rather than looking at one specific solution."

Noting that Prime Minister Stephen Harper's government this week revamped its marine spill response framework in preparation for more tanker traffic, Stringham added that "it's not an either-or -- we know we're going to have to continue to expand in all directions."

If activists succeed in defeating or delaying enough of the pipelines proposed to help Canadian producers meet their goals, the State Department pointed to a possible damper on short-term production in its January KXL review. In the long term, however, the administration predicted that rail would rise to meet oil sands crude shipment needs even if all major pipelines were blocked.

Analysts at State projected that a "completely constrained" pipeline scenario would require U.S. and Canadian refineries to take between 1.2 million and 1.5 million barrels per day (bpd) of crude by train in order to meet Energy Information Administration projections for the oil sands. Railways are prepared to ramp up and carry those volumes, the administration said.

Total Canadian oil-by-rail exports reached 146,000 barrels per day on average in the fourth quarter of last year, nearly double the level from the final quarter of 2012, according to that country's National Energy Board (NEB).

One of the six biggest new or expanded oil sands crude pipeline proposals stands to see its fate settled within a month. The other five remain in varying stages of U.S. or Canadian permit applications or, in one case, still in the conceptual phase.

Northern Gateway

Harper's government has vowed to meet a June deadline for ruling on the Northern Gateway, a $7.4 billion bid to run up to 525,000 bpd of oil sands crude west to British Columbia for export by tanker to fuel-thirsty markets in Asia and beyond.

In addition to this week's Canadian marine transportation reforms, including the end of a ban on the use of dispersant chemicals on waterborne oil, Natural Resources Minister Greg Rickford yesterday announced new pipeline safety standards that would apply to any future approval of Gateway. The government vowed to give NEB stronger inspection and audit powers as well as the authority to force repayment from oil companies for spill cleanup costs.

But those conciliatory moves are unlikely to soften the anti-Gateway clamor directed at its sponsor, Enbridge Inc., from conservationists and aboriginal First Nations set against the prospect of more emissions-intensive oil sands running through British Columbia's pristine landscapes.

Some First Nations have filed legal challenges to the thumbs-up from a Harper-designed joint review panel that imposed more than 200 conditions on Enbridge (EnergyWire, Dec. 20, 2013). Offers of a partial ownership stake have failed to sway more than half of the First Nations whose land Gateway would cross on its way to the British Columbia port city of Kitimat, the Canadian Broadcasting Co. reported this month.

The Obama administration noted in its KXL review that Gateway, which could eventually rise to carry 800,000 bpd, "may be operational by '2017+.'"

Trans Mountain expansion

Soon after it finishes work on the controversial Gateway, NEB will begin formally vetting the proposed twinning of Trans Mountain, another oil sands pipeline to Canada's west coast that is operated by Kinder Morgan Energy Partners LP.

Trans Mountain would grow in capacity from 300,000 bpd to 890,000 bpd by 2017 under Kinder Morgan's plan, which NEB must pass on to Harper's Cabinet with a recommendation by July 2015. The regulator granted 400 "intervenors" a possible role in public hearings on the project scheduled to start in January -- a major increase in interest since its 2009 hearings on Keystone XL drew 29 intervenors.

Forest Ethics, a Canadian green group that also operates on the U.S. West Coast, this month filed a constitutional challenge to NEB's process that accuses the government of suppressing public participation by establishing new, higher hurdles before Canadians can comment on pipeline applications.

A First Nations group launched a legal challenge against the project this month, though it remains to be seen whether aboriginal objections to Trans Mountain will reach the current pitch of opposition to Gateway.

Energy East

TransCanada Corp. is in the earliest stages of amassing public support for an $11 billion conversion of a natural gas line to ship crude west to Canadian refineries that tend to rely on light or synthetic oil. The export potential of Energy East, however, would increase due to a new marine terminal set for New Brunswick.

Double the length of KXL and also predicated on hundreds of miles of new pipeline, the project is the subject of NEB open houses in eastern provinces this month aimed at informing locals of their roles in the permitting process. During that time, TransCanada CEO Russ Girling told investors recently, the company plans to keep talking up the pipeline's potential to displace Canadian imports of foreign crude, "something that benefits us all from coast to coast to coast."

Energy East's still-nascent process allows TransCanada to apply lessons learned from the public relations hurdles it confronted on KXL and those facing Enbridge, its rival, on Gateway. But climate activists also see the eastern line as an opportunity to mobilize a new group of critics against the heavy crude that is an average of 17 percent more emissions-intensive than conventional oil.

"It's going to be a big battle because it's within Canada," said Oil Change International's campaigns director, David Turnbull, regarding Energy East in an interview. "There is already a lot of work being done to sort of lift that project up into the public's consciousness."

Portland Montreal Pipe Line

NEB's go-ahead to reverse two portions of an Enbridge pipeline that previously ran west through Ontario leaves the twin Portland Montreal Pipe Line as an open thoroughfare for oil sands crude to reach U.S. East Coast ports -- if its operator pursues a reversal that for two years it has steadfastly declined to confirm is under consideration.

Most observers expect PMPL, as it is known, to eventually seek approval to carry an estimated 300,000 bpd from Montreal through New Hampshire, Vermont and Maine, a trio of independent and conservationist states where activists have no intention of accepting heavy fuel without a fight.

Republican Sens. Susan Collins of Maine and Kelly Ayotte of New Hampshire already have joined Democratic colleagues in pressing the State Department for a presidential permitting review before PMPL can change directions (Greenwire, April 23). If the issue flares up later this fall, Sen. Jeanne Shaheen (D-N.H.) could seize on local skepticism to push back against the pro-KXL pressure she is getting from her new GOP challenger, former Massachusetts Sen. Scott Brown.

Alberta Clipper expansion

Nothing underscores the unpredictable pipeline politics wrought by KXL like the Alberta Clipper, a 1,000-mile oil sands crude link between Alberta and Wisconsin. In 2009, the Clipper coasted to the same presidential permit that TransCanada's famous project is still seeking, but sponsor Enbridge is already working much harder on approval to expand the pipeline from 450,000 bpd to 800,000 bpd.

The Minnesota Public Utilities Commission last year unanimously agreed on a 120,000-bpd expansion of the line, achieved solely through building new pump stations, but the second phase of that state-level review is drawing even more heat from conservationists. Some of those same green groups also are fighting Enbridge's permit application at the State Department, where a draft environmental impact statement (EIS) on the expansion is expected within the next several months.

"Even though we had planned for this process to take longer," Enbridge CEO Al Monaco said of the Clipper delays on a conference call with investors this month, "the contingency we have wasn't enough."

The company now aims to see approval for the expanded pipeline next summer as opposed to this summer. But in the meantime, its executives say they have alternate plans to stay on track for the 120,000-bpd oil bump that would have comprised the first phase of the new Clipper.

Enbridge's Line 3

Replacing Line 3, a nearly 50-year-old Alberta-to-Wisconsin pipeline, with new steel capable of shipping oil sands crude at a cost of $7 billion marks the largest single investment by a company that brings more oil to America every day than Saudi Arabia, according to U.S. Energy Information Administration records.

Enbridge's behemoth status among pipeline operators, however, means that national green groups already are vowing to force the State Department to conduct a KXL-style presidential permit review before the company is permitted to install a new 3-foot-wide pipeline to carry 370,000 more bpd through the climate-conscious Midwest.

State is staying mum on whether it plans to require a new application for Line 3, but the project -- originally eyed for a 2017 completion -- is running into some of the same headwinds as the Clipper (EnergyWire, March 5).

Paul Blackburn, an attorney and independent consultant who is currently helping greens contest the Clipper expansion, credited the so-far successful fight to delay KXL with directing more energy toward other anti-pipeline efforts.

"If it wasn't for the Keystone XL campaign, they probably would have steamed right ahead," Blackburn said in an interview. He also observed that the KXL battle could hurt as well as help, predicting that "some industry players are benefiting from counter-messaging about a delay" on TransCanada's ubiquitous marquee project.

Twitter: @eschor | Email: eschor@eenews.net

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