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Stakeholders look at future of Canada’s crude oil production, oil sands
News Articles | The Hill Times | Harris Macleod | May 03, 2010
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As demand for crude oil from the Alberta tar sands somewhat declines in the United States, and fears about the political viability of the oil patch multiply, companies are looking to Asia as the next frontier for selling Canada’s oil.
Oil companies, such as Enbridge and TransCanada, have built an overcapacity of pipelines to bring oil to the Midwest United States where demand is less than they originally thought, and now are looking to build pipelines from Alberta to the Pacific Coast to capitalize on markets in Asia and California, said Richard Girard from the Polaris Institute. “The future plans for Enbridge is to try to get oil to Asian markets, and California by shipping it to the Pacific Coast, putting it on big tankers and sending it across the ocean or down the Pacific Coast to California. But also really focusing on their regional systems in the tar sands, like building little pipelines for each producer,” he said.
These plans could prove contentious, however, because the massive pipeline to Kitimat, B.C., would have to go through many First Nations communities. But Enbridge is no stranger to controversy over its extensive network of pipelines. The 1,600 km, $1.2-billion Alberta Clipper pipeline was finished earlier this month, and will ship oil from Alberta, through Saskatchewan and Manitoba, and into Minnesota and Wisconsin. Aboriginal resistance to the project has been significant, but the pipeline is already starting to fill with crude. It will initially transport about 450,000 barrels of oil per day, with an ultimate capacity of about 800,000 barrels per day.
“Enbridge is going to come against a lot of resistance from the local communities on this because it’s going to be such an invasive project,” said Mr. Girard. “The risk of a spill is very real, but also there’s going to be a lot more oil tankers coming into Kitimat and the risk of an oil spill form one of those tankers is there as well.”
The recent massive oil spill in the Gulf of Mexico and off the coast of Louisiana, which has produced an oil slick the size of Alaska that is visible from space, has reminded people of how destructive a spill can be. According to Mr. Girard, between 1999 and 2008, across all of Enbridge’s operations there were close to 21-million litres in hydrocarbons released into the environment, amounting to approximately half of the oil spilled in the Exxon Valdez disaster of 1988. Oil spills, massive GHG emissions, and other environmental impacts associated with the oil sands are causing the economic juggernaut to be increasingly viewed as a risky business, with some advocates broadening their message to target the economic risks of investing in Alberta oil.
Shareholders from companies with operations in the oil sands, including BP, Royal Dutch Shell, ConocoPhillips, and ExxonMobil, filed shareholder resolutions demanding that the risks from operating in the oil sands be fully investigated, quantified, and disclosed. While these resolutions have only gained tepid traction with voting shareholders, the trend for exhaustive risk disclosure is increasing in lock-step with the perceived risks from investing in the oil sands. Shareholders cite uncertainty around the cost of future carbon liabilities in the presence of a carbon price, lawsuits from leaks from toxic tailings ponds, and the operations’ voracious water consumption among their concerns.
The companies insist that their risk disclosure through their annual reports, Securities Exchange Commission filings, and other platforms is fully adequate. The Securities and Exchange Commission in the United States recently released interpretive guidance as to how to disclose environmental risks, with important implications for oil sands developments, particularly in the absence of clear federal climate change legislation.
The U.S. is still in the process of hammering out a national climate change policy, which could penalize emissions-intensive Canadian oil. If the U.S. legislature fails to pass a comprehensive climate bill, however, the Environmental Protection Agency could use its legal authority to regulate emitters. Additionally, California’s Low Carbon Fuel Standard, which sets maximums for the “well-to-wheels” carbon content of fuels and which has been adopted by over a dozen U.S. states, has the potential to prevent carbon-intense Albertan crude from making the cut south of the border.
Despite Lisa Raitt’s (Halton, Ont.), the former minister of natural resources, assertion in a letter to California State Governor Arnold Schwarzenegger that the Low Carbon Fuel Standard “discriminated” against Canadian crude and could be perceived as an “unfair trade barrier,” the state has continued to develop its standard without making special exceptions for Alberta’s heavy oil.
Tagged with: transcanada, enbridge, alberta clipper, asia
