West Coast refinery proposal puts pipeline debate in new light

OTTAWA – Political, business and union leaders reacted with caution and skepticism Friday to a B.C. newspaper tycoon’s proposal to build a $13-billion refinery near Kitimat to process bitumen from Alberta’s oilsands.

Calgary-based Enbridge Inc., which is proposing the 550,000-barrel-a-day pipeline to ship diluted bitumen to Kitimat for export to Asian refineries, refused to comment on David Black’s proposal to have some or all of that product processed in Canada.

Federal Natural Resources Minister Joe Oliver said Ottawa welcomes any project that boosts Canadian exports and jobs, but said he wouldn’t pass judgment on the idea.

“The reason refineries haven’t been built in Canada since the 1980s is because there hasn’t been an economic case for them, and the private sector just hasn’t seen the advantage,” Oliver said.

He said he assumes Black is serious in his proposal to have a refinery approved by regulators and operational by 2020.

The proposal was pitched Friday by Black as a way to make Enbridge Inc.’s controversial Northern Gateway pipeline proposal more palatable with the public, which has deep concerns about the environmental risks coupled with the lack of financial benefits for B.C.

Black told a news conference that the refinery’s finished products, such as diesel, gasoline and kerosene, would evaporate in a coastal or offshore spill. Diluted bitumen crude, however, would sink and be far tougher to clean up.

But the federal NDP and union leaders, who have long opposed oilsands pipelines, partly because they believe bitumen should be upgraded and processed in Canada, were skeptical.

“I don’t think it changes anything in terms of public opinion in B.C. against the Northern Gateway project,” said Peter Julian, a B.C. MP and federal NDP natural resources critic.

“The pipeline still threatens thousands of jobs in the fisheries and in tourism.”

Julian also questioned Black’s business case, noting that Enbridge’s Chinese partners are funding the $6-billion project in order to get raw bitumen for their own refineries.

Peter Boag, president of the Canadian Petroleum Products Institute, called the proposal “interesting” but speculated that the $13-billion price tag could be low.

“Clearly there are some significant economic and regulatory hurdles that would have to be overcome before we would see that proposal come to fruition.”

Michael Dunn, oil and gas analyst with FirstEnergy Capital Corp. in Calgary, also expressed skepticism.

“If they don’t want a pipeline to Kitimat, I’d be surprised if they’d want a refinery,” he said.

Alberta Federation of Labour president Gil McGowan said his organization has always favoured keeping refining jobs in Canada, “but we are not convinced this is a credible proposal.”

Like Julian, McGowan questions why Black’s refinery could assume it has access to any of the pipeline’s production.

“How does he think he’s going to convince shippers to sell oil to him when the reality is that Chinese companies are buying up the oilsands in order to feed their own refineries? The whole point of the pipeline is to connect Chinese-controlled oilsands projects in Alberta with refineries in China. How does Black think he’s going to stop the Chinese from locking up all the oil shipped down the pipeline for themselves?”

Dave Coles, national president of the Communications, Energy and Paperworkers Union that represents 35,000 workers in the oil and gas, refining, petrochemical and pipeline sectors, said it was “refreshing” to hear a business leader talk about keeping processing jobs in Canada.

“This type of discussion is what needs to take place about upgrading and refining in Canada, so hats off for anybody who wants to start that debate.”

Greg Stringham, vice-president with the Canadian Association of Petroleum Producers, said the West Coast is an important export point for Alberta crude, so any projects that could lead to increased access should be carefully considered.

Asked if the proposal might change the debate in B.C. around getting a fair share of economic benefits from the Gateway pipeline, Stringham said it’s still too early to tell.

Jennifer Grant, oilsands director for the environmental research group Pembina Institute, said she was skeptical a new refinery would substantially reduce the environmental risks of the pipeline project.

“This merits more exploration but it does nothing to address pipeline risk, risk to salmon habitat, First Nations’ concerns and so on. Those will all continue to be in the spotlight.”

Edmonton Journal Fri Aug 17 2012

Byline: Peter O'Neil

With files from Dan Healing, Calgary Herald, and Keith Gerein, Edmonton Journal

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