Canadian oil boom may bring many more tankers to Northwest waters

Seattle Times 6/11/11

One company’s plans to boost shipments of Alberta oil to Asia could quadruple tanker traffic through Vancouver, B.C., and dramatically increase the amount of oil traveling through the Strait of Juan de Fuca.

By Craig Welch

Seattle Times environment reporter

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As people enjoy the beach they can look out and see the oil tanker Monterey anchored off Cates Park in North Vancouver, B.C.

Enlarge this photoGLENN BAGLO / VANCOUVER SUN

As people enjoy the beach they can look out and see the oil tanker Monterey anchored off Cates Park in North Vancouver, B.C.

Enlarge this photo 

 

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In the icy oil fields of Alberta, gargantuan machines traverse open-pit mines to access one of the greatest oil deposits on Earth: Canada’s oil sands.

That massive store of energy has touched off political feuds in the U.S. over a proposed 1,700-mile pipeline to funnel crude oil to the Gulf of Mexico.

But fights over Canada’s oil sands could have an impact much closer to home. One company is hoping to boost oil-sands shipments to Asia through Northwest waters — plans that would quadruple tanker traffic through Vancouver, B.C., and dramatically increase the amount of oil traveling through the Strait of Juan de Fuca.

Some of the tankers the company hopes to accommodate could carry four times more crude than the Exxon Valdez, the supertanker that spilled 11 million gallons of crude into Prince William Sound.

The company has taken only initial steps toward this goal, but that’s enough to make some anxious about oil-spill risks.

“We’re talking about some of the most massive marine vessels transiting some of the most narrow and biologically productive waters in our region,” said activist Fred Felleman, who monitors oil transport through the strait. “And nobody really seems to know about this yet.”

The debate among energy companies, Congress, environmentalists and the White House over a pipeline that would bisect the American Midwest may have obscured the battles brewing just across our border.

But with Alberta’s massive oil fields preparing to double production in the next decade, energy experts agree on this: After the U.S., the next big market for Canadian oil is the Pacific Rim. And the straightest route to Asia cuts right through the Northwest.

“The oil sands are a very big resource,” said analyst Jackie Forrest, who monitors Canada’s oil sands for IHS CERA in Calgary. “The U.S. is the world’s largest oil consumer today, but that demand is not growing. The pull in terms of new markets is to Asia.”

Huge quantities of oil

Canada’s oil sands hold massive quantities of oil — believed to be about 171 billion barrels, or roughly two thirds of Saudi Arabia’s reserves. With development there expected to rise from 1.5 million barrels per day now to more 3.7 million barrels per day by 2025, Canadian energy companies are eager to find new ways to sell it.

That has not been a simple prospect. Most of the existing oil pipelines running through Canada are already operating at or near capacity.

Not surprisingly, the proposed $7 billion Keystone XL pipeline from Alberta to Texas has become a symbol of the fight over America’s energy future.

Supportive Republicans and some Democrats in Congress see a jobs bonanza and a surefire way to reduce U.S. reliance on foreign energy. Environmental opponents argue that Alberta’s oil fields are an ecological nightmare and massively increase greenhouse-gas emissions.

Meanwhile, communities from Omaha to Texas have staged anti-pipeline protest rallies.

Even the Obama administration seems at war with itself.

The decision about the pipeline’s fate largely rests with Secretary of State Hillary Rodham Clinton. But the Environmental Protection Agency just last week complained to the State Department that it hadn’t done enough to evaluate the pipeline company’s long history of leaks and spills on its other lines.

West Coast projects

While this debate captivates Washington, D.C., projects closer to home also are in the works.

One company, Enbridge Inc., wants to build a new pipeline that would carry a half-million barrels of crude a day across Native lands to the northern British Columbia coast. There it would be shipped through B.C.’s pristine islands, where tanker traffic has been banned for 40 years, to China, Japan, Taiwan and South Korea.

That project has become so enormously controversial in Canada that another company, Kinder Morgan, has pitched its Vancouver proposal as a smarter alternative.

Kinder Morgan already operates a 300,000-barrel-a-day pipeline from Alberta to Vancouver, which also sends oil to refineries in the Puget Sound area. That pipeline has been flowing for half a century — longer, even, than the trans-Alaska pipeline to Valdez. The company would merely need to expand its capacity and expand its port facilities.

Kinder Morgan already supplies oil from that port by tanker to California and Asia. In fact, oil-tanker traffic from Vancouver — which at times in the past was nearly nonexistent — has tripled just since 2005.

Late last year, the company asked Canada’s National Energy Board to let it change how it distributes the oil now pumping through its pipes. The company wants permission to send nearly 80,000 barrels of oil a day to offshore markets, about 54,000 barrels worth under long-term contracts.

“That would guarantee a certain volume to our offshore customers so they could develop long-term markets,” said Kinder Morgan spokesman Andrew Galarnyk.

That change, by itself, wouldn’t expand oil coming through its pipeline, he said.

But he acknowledges expansion is the company’s ultimate goal.

“Everyone’s looking for more certainty,” he said. He hopes shippers make progress developing markets so they can come back and say “if you were to expand your pipeline we would commit to taking more of your product.”

A presentation on Kinder Morgan’s website details its hopes to add dock berths and dredge narrow channels near the port to accommodate tankers that hold 1 million barrels of oil, or about 42 million gallons.

The document shows that by 2016 the company hopes to be loading 288 tankers there a year — more than 13 times what tanker traffic through Vancouver was in 2005.

Rising tanker traffic

Tankers traveling to and from Washington refineries from Alaska and elsewhere already have to navigate some of the same waters. In fact, Kinder Morgan’s plans would increase oil-tanker traffic through the Strait of Juan de Fuca by more than 45 percent.

“That’s definitely a lot more crude carriers,” said Chip Booth, a manager with the Washington state Department of Ecology’s spills program. “It certainly represents a bit of a higher risk.”

But it’s far too soon to say how much more.

Kinder Morgan says it has a strong track record of stewardship.

Felleman says that’s not the only factor.

“What’s critical is that if this happens we make sure our safety net grows, too,” Felleman said. “This could be one of the most significant changes to risk exposure to the northern Sound we’ve seen since development of the trans-Alaska pipeline.”

But it’s also not clear how likely it is that the plans will become reality.

Some analysts argue that approval of the northern B.C. pipeline or the Midwest’s Keystone XL proposal would suck up the oil-sands growth.

Secretary Clinton is expected to make a decision on the American project by the end of the year. Enbridge expects to hear an answer on its proposals by 2013.

Still, other oil-industry experts have said it doesn’t matter.

“It becomes complicated to calculate because all the pipeline proposals are competing for a greater share of the volume,” said Greg Stringham, vice-president of oil sands marketing for the Canadian Association of Petroleum Producers.

But Alberta is developing so fast, “I could see a scenario where we need them all.”

Craig Welch: 206-464-2093 or cwelch@seattletimes.com

~ by fredfelleman on June 30, 2011.

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