Alberta looks to woo New Brunswick to create west-east oil pipeline

Steve Mertl
Daily BrewFebruary 4, 2013

It's a scenario you could hardly have imagined just a few years ago: Alberta sitting on a wealth of oil riches but potentially no way to get it to customers.

With the proposed Northern Gateway oil sands pipeline to the West Coast getting a negative reception in British Columbia and the planned Keystone XL pipeline through the United States still in limbo, that's exactly what's happening.

Alberta's been forced to sell its oil sands production at a discount because of a lack of shipping capacity and reduced American demand due to increasing use of homegrown natural gas. That has blown a $6-billion hole in the province's revenue expectations. Albertans have been warned to brace for budget cuts.

The only alternative to pipelines has been costly rail shipment of crude. Canadian Pacific Railway Ltd. can ship more than 70,000 carloads a year, chief marketing officer Jane O'Hagen told analysts last week, The Canadian Press reported.

[ Related: Pipeline proposal is a 'realistic' option, expert says ]

But Progressive Conservative Premier Alison Redford has been nurturing her vision of a west-to-east pipeline that would take bitumin to tidewater for either refinement or export. The concept would convert an existing natural gas pipeline to handle oil.

She's been courting her eastern counterparts on her Canadian Energy Strategy and this week is hosting New Brunswick Premier David Alward on a three-day visit to discuss it.

“New Brunswick has Canada’s largest refinery, the Irving refinery (in St. John),” Alberta Deputy Premier Thomas Lukaszuk told the Edmonton Journal.

“They can refine 300,000 barrels per day. Their capacity is phenomenal, but 83 per cent of the crude they refine for Eastern and Central Canada comes from abroad. Most of Eastern and Central Canada is energized by foreign oil.”

Federal Natural Resources Minister Joe Oliver appears to have blessed the proposal, which still would need environmental approval and co-operation from other provinces, notably Quebec. Redford met with Premier Pauline Marois in November and they agreed to set up a working group to look at the economic benefits and environmental consequences of the plan, the Journal said.

“I met with Arthur Irving (Irving Oil’s chairman) and expressed the support of the government of Canada, in principle, for this initiative,” Oliver said in the CP interview last week.

The Journal said the New Brunswick delegation's itinerary includes meetings in Edmonton and Calgary, including a session with Redford, a tour of oil sands projects in the Fort McMurray area and attendance at the annual Canadian Oilsands Summit in Calgary.

Meanwhile, observers are trying to read the tea leaves after Foreign Affairs Minister John Baird's brief weekend conversation with incoming U.S. Secretary of State John Kerry.

The former Massachusetts senator was sworn in last week and spent the weekend calling key American allies. TransCanada Pipelines' controversial proposed Keystone XL heavy oil pipeline came up during Kerry's chat with Baird, according to CBC News, but a State Department spokesman's comment that they "agreed to stay in touch" on the issue gave little indication which way he's leaning.

[ Related: Alberta picks former oil lobby head as Washington envoy ]

President Barak Obama's administration put the $7-billion project to pipe bitumen from the Alberta-Montana border to refineries on the Texas Gulf Coast in limbo over concerns about the environmental consequences of a spill along the route, especially where it traversed Nebraska's sensitive Sand Hills aquifer.

The state's endorsement of a revised route that avoids the region is thought to have given Keystone XL a fresh boost. But Obama's inaugural address last month highlighted climate change as a major policy priority for his second term, giving hope to environmentalists that he may yet veto the project.

They intend to maintain the pressure on his administration with the kinds of protests that helped shelve it the last time. Demonstrations are planned outside the White House on Feb. 17, CBC News reported.

As for Enbridge Inc.'s $6-billion Northern Gateway project, it remains mired in controversy. There's little evidence of public support in British Columbia to pipe bitumen across the rugged northern part of the province to an export terminal at Kitimat, where supertankers supported by tugs would thread their way past small islands in a narrow inlet to load up.

Months of hearings by a federal environmental review panel have been dogged by protests to the point they've been closed to spectators, who now can only watch via closed-circuit TV from another room blocks away.

Concern centres on the potential for a pipeline rupture along the proposed route, which traverses hundreds of streams and rivers, as well as the danger of a spill along the pristine northern coast if a tanker should run aground.

The Canadian Press reports that studies suggest B.C. still isn't prepared to cope with the increased tanker traffic.

A key group of coastal First Nations has also announced it is pulling out of the review process because it's run out of money and patience, CP reported.

[ Related: John Kerry to 'stay in touch' with Canada on Keystone XL ]

Lukaszuk told the Edmonton Journal that Alberta is not giving up on the West Coast.

"However, we have learned a very important lesson that putting all of your economic eggs into one basket is never a good idea," he said. "We have done that for a long time with the United States. We will not transfer all our eggs to the B.C. basket.”