Monday, March 9, 2015

The Energy East Pipeline: Dispelling Some Myths

Another couple oil train derailments (Gogama and Galena) in the last week have brought my attention back to the topic of oil pipelines. As I have written elsewhere, the safety record of oil-by-rail is one of the reasons why I have supported moving as much oil as possible by pipeline. Put in the simplest terms, pipelines are the lowest cost, safest and least environmentally damaging method of transporting fuel across North America (ref). I know, I know, someone is going to point out the reference that came out a while ago that said that the normalized amount of oil spilled in the US indicates that trucks are worse than a pipeline are worse than rail are worse than boats (Congressional Research Service). That research, however, is dated and is heavily influenced by two significant pipeline spills (Kalamazoo and Yellowstone River) that occurred over the time period covered by the report and by the date of the report. Specifically, the research underpinning the report mostly pre-dates the explosive rise in oil-by-rail across the US and does not include the most recent spate of rail incidents (ref). This means that it was influenced by the small sample size of the oil-by-rail sector at the time it was being prepared. As the volume of oil-by-rail has increased, oil-by-rail safety has regressed to its mean and the recognition of it as being a less than optimal method of transport has become more apparent. Based on my research, I would suggest that in order of pure safety (human health and ecological harm) the optimum methods to get oil from a source to the market go: double-hulled tanker, pipeline, rail/barge and truck. From an energy-efficiency point of view, pipelines also win out big time over oil-by-rail as in order to move oil-by-rail you have to expend a tremendous amount of energy to move the heavy rail cars. The energy expenditure involved in moving oil-by-pipeline is substantially smaller and thus oil-by-pipeline wins out in that respect as well.

As far as I can tell, the majority of the activists trying to stop pipeline development in Canada are doing so based on their concerns over climate change. For these people, pipelines aren’t really an issue, per se, but rather represent the only opportunity they have to fight the battle they actually want to fight, against climate change. It is in effect a proxy war. The activists have been told that if they can block the pipelines in Canada they can choke off the further development of oil sands as a resource. They have been told they can strand this resource and in doing so kill off the “tar sands”. The funny part is that they believe this because that is what the proponents of the pipelines told them when they initially pushed for the development of these pipelines. The problem is that this was never the truth. As indicated in the Maclean's article by Dr. Andrew Leach (ref), given the investment already in the ground the best these protestors can do is to choke off some theoretical further growth of the oil sands. With the money invested to date, existing oil sands facilities, and the majority of underway developments, are not going to stop, even with $50/barrel oil and no pipelines.

There are also those who believe that the transportation of fossil fuels for export must be restricted due to dangers of spills. I tend to agree with the people protesting the Northern Gateway project in that I think it is heading in the wrong direction. I would be amenable to a Northern Gateway that connected to a refinery that shipped refined products out of the north but I admit to not being the biggest fan of bitumen being shipped out of the Port of Kitimat. As I have mentioned previously, I am less concerned about the Trans-Mountain twinning project. This is somewhat ironic since, as I have pointed out elsewhere, I live less than 50 m from that pipeline and cross it by foot on a daily basis. I see it as a realistic and safe way to get crude to the West Coast and as a source of raw material for the refineries in the Puget Sound that have been tuned to the lower API gravity crude from Alaska rather than the lighter crudes that are being supplied by rail from the Bakken fields. However, of all the pipeline proposals out there the one I think has the greatest likelihood of being built is the Energy East pipeline.

For those of you not familiar with the project, Energy East is a 4,600-kilometre pipeline designed to carry 1.1-million barrels of crude oil per day from Alberta and Saskatchewan to refineries in Eastern Canada (ref). It is unique amongst the eastward pipeline proposals in that its entire length remains within Canadian boundaries (does not cross the US border) and would thus not be affected by US political concerns. Backers of Energy East point out that Quebec and New Brunswick currently import more than 700,000 barrels of oil every day – or 86 percent of their refinery needs – from countries such as Algeria, Iraq, Saudi Arabia and Nigeria. (ref). For a full breakdown of the countries of origin of Canadian oil imports see Table 7.2a of CAPP Stats Handbook (ref). As indicated in the Handbook, the direction is swinging towards the US but it still represents imports. While the supporters of the pipeline are predicting over 700,000 barrels/day (b/d), CAPP reports that refineries in Québec and Atlantic Canada currently import 90 per cent of their requirements. This translates to a potential 640,000 b/d domestic market opportunity for Canadian suppliers (ref).

While there are a lot of people fighting Energy East, by far the most entertaining group, and the one I will concentrate on in this post, is the Council of Canadians who present what I feel are some truly intellectually inconsistent arguments in their battle against the Energy East pipeline (ref). Let’s start by remembering who the Council of Canadians are. They are the people who have fought relentlessly against free trade with the US or anyone else for that matter (ref). They have demanded that we never consider the idea of bulk export of water (ref). They rail constantly about the threat of two-tiered medical care (ref). Most entertainingly they have called for an immediate halt to crude shipments by rail (ref). Why is this entertaining? Well let’s look at their talking points (ref) against the Energy East pipeline. We will ignore their factual errors, although being a chemist I would be remiss if I did not point out to their writers that benzene is not a polycyclic aromatic hydrocarbon (PAH) as indicated on page three. Benzene is a monocyclic aromatic hydrocarbon. This may sound like a minor concern to the non-chemist but to me it shouts out their ignorance of the topic in that they don’t have the expertise to catch even the simplest error in their talking points.

Their headline talking point is that Eastern refineries would only have room for 122,000 b/day of oil from Energy East. This is based on a “report” prepared in combination with Environmental Defence Canada (ref). The “report” relies on two major assumptions, 1) that the Line 9b reversal will occur resulting in 250,000 b/day going to the eastern refineries and 2) that US oil-by-rail will supply a further 200,000 b/day. So to be clear, to counter the Energy East Proposal they are arguing that the Line 9b proposal (which they are also fighting) will go through. If they win their Line 9b reversal battle they will actually weaken their anti-Energy East argument? Can you be any more disingenuous? Actually you can, because in order to produce numbers against Energy East they are arguing that it is better to have 200,000 b/day of US sourced oil shipped by rail to the eastern refineries. So the people against free trade are demanding that Canadian refineries depend on US imports to function. Eastern Canadians are asked to rely on US imports for the fuel they need to run their businesses and keep their homes warm during cold winters. Most incoherently, they acknowledge that this oil will be shipped via a route (oil-by-rail) that they are, in the same breath, demanding be halted immediately?  To continue the thought, in the Globe and Mail newspaper Maude Barlow (ref) suggests that Energy East will not stop oil-by-rail, insisting that Bakken crude will still be shipped by rail if the Energy East pipeline is built. She apparently misses the fact that if the Canadian refineries are getting their crude supply via Canadian pipelines then there will be no need for Bakken crude to travel by rail in Canada. As I have written elsewhere, refining capacity in Canada is limited. If the refineries can be supplied with their crude by Canadian pipeline there will be no reason for Bakken crude to be shipped through Canada to them. So when she says it will not reduce oil-by-rail she may be correct in an absolute sense but from a Canadian perspective, that crude will not be crossing the border. It will be shipped via US railways, across the US countryside and exported by US ports. This is something you would expect the Council of Canadians to praise: a system that reduces the risk to the Canadian human health and the environment while building a stronger, more unified Canadian industry. They want 100% government-financed health care, but want to undercut the Canadian industries that provide the financial support for that health care.

The part I find most confusing in the Council of Canadians talking points is that they are particularly angry that Energy East may increase oil exports? I am not sure why this is a bad thing?  I suppose from a climate change perspective there might be a case but from a Canadian perspective a stronger national economy can only be better for Canada. If the Council of Canadians really cared about climate change they would not be fighting pipelines they would be fighting for carbon pricing. The only way to reduce fossil fuel use (and resultant carbon emissions) is to cut the demand side of the ledger. In a world with plentiful oil supplies, from numerous markets, cutting off the Canadian industry from its markets represents cutting off your nose to spite your face. The only realistic way to reduce carbon emissions has to be on the demand side of the ledger. But I suppose a group that fights against freer international trade would not understand that the world represents one big market and unless you treat it as such, any work done in Canada can be just as easily undone in Nigeria, Kuwait or Algeria. It is time the climate change activists stopped fighting these proxy wars and started fighting the actual war they want to fight. Don’t fight against the safest, most environmentally protective form of transport for this necessary resource, fight to reduce the market for the resource. If the demand exists then supply will be found to meet that demand. The only way to address the issue of fossil fuels is on the demand side of the ledger.

1 comment:

  1. Good post. Canada does need to beware of dutch disease. If it exports too much oil the canadian dollar gets stronger and this reduces other industries' vitality. The long term goal should be to export high quality upgraded syncrude. I would design upgraders to make sulfur free 28 degree API, and use a technology other than coking to handle the asphalt molecules. This avoids making coke.