Canadian Oil Sands -- A Sticky Wicket

Updates

May 6, 2013: In addition to this TransCanada Heartland Pipeline from Hardisty, Alberta, "back" to Edmonton, TransCanada has another oil pipeline in the works. This one makes sense. This is a 300-mile crude oil pipeline to bring heavy oil from the producing area in the Fort McMurray, Alberta, area, south to Edmonton. This is their Grand Rapids Pipeline project and was announced last year (2012). 

Original Post

The more I look at the Canadian problem of getting its heavy oil out of Alberta , the more I think Canada is going to have to solve their problem internally, and forget about relying on the US to help them out, at least under the current administration.

We'll know more when the decision is made regarding the Keystone XL. If that is project is killed by President Obama it puts other pipeline expansion projects in jeopardy. Bloomberg News in The Financial Post this past week reports that even pipeline expansions and natural gas-to-crude-oil-pipeline conversions are at risk in the United States. 

Enbridge Inc.’s request for a permit to boost the volume of oil on an existing pipeline from Alberta to Wisconsin has so far escaped controversy.

That may change as the State Department begins to review the plan, which would almost double the line’s capacity to 880,000 barrels a day — more than the proposed capacity of Keystone.

“We’re very concerned this has flown under the public’s radar,” said Peter LaFontaine, an energy policy advocate for the National Wildlife Federation, which is fighting both projects. “The public doesn’t seem to have the same sort of attention for pipeline expansions as they do for pipeline construction. But we’re talking about a lot of crude.”

Pipeline companies are proposing new ways to export oil from Canada to the south, east and west as rising production overwhelms existing lines and depresses prices. Output from Canada’s oil sands will more than double by 2021 to 3.38 million barrels a day, according to the Canadian Association of Petroleum Producers.

The article goes on to say that John Kerry will have the first "cut" at the request, and most of us know how he feels about Big Oil:

In March, the State Department asked for public comment about what it should consider as it updates a 2009 environmental impact statement for the U.S. permit granted to Enbridge’s original pipeline, known as the Alberta Clipper or Line 67.

The Calgary-based company, Canada’s largest transporter of crude oil, is seeking permission to double the flow through the line that starts in Hardisty, Alberta, and ends at a terminal in Superior, Wisconsin. From there, the oil is shipped to U.S. Midwestern and Gulf Coast markets by other pipelines.

The State Department is accepting comments until May 13. It must complete its environment assessment before it can consider whether the project is in U.S. national interest. The department has jurisdiction over Keystone and the Alberta Clipper because they cross the international border with Canada.

“We will continue to review Enbridge’s application in a rigorous, transparent and efficient manner,” said Jane Gamble, a State Department spokeswoman.

It appears TransCanada and Enbridge are finally getting the message: the current US administration is anti-Big Oil and especially heavy oil, unless it comes from Venezuela.

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TransCanada has recently announced a new pipeline project, the Heartland Pipeline. I think this shows how desperate things really are for the Canadians.

This is a $900 million project -- let's call it a billion-dollar project. What will TransCanada get for $1 billion? A 125-mile pipeline that simply moves their oil from terminals in Hardisty, Alberta, to an industrial area north of Edmonton, Alberta.

Hardisty, Alberta, is the jumping off point for Keystone and Keystone XL.

Shipping oil to Edmonton, Alberta, north of Calgary, and northwest of Hardisty, is taking oil in the wrong direction. It is moving oil farther "inland" if that's possible. It makes no sense. All it does is provide a place of for the Canadians to store all that oil they will be producing. Looking at the TransCanada pipeline system at the link, one notices that TransCanada has no crude oil pipelines leaving the Edmonton area.

TransCanada has a huge natural gas pipeline system in this area and at least two natural gas pipeline projects in the works to take natural gas to the western and northwestern coasts of Canada, the Coastal Gas Link Pipeline Project and the Mackenzie Gas Project, which I suppose could be converted to oil pipelines if necessary. Activist environmentalists in Canada might be successful stopping a crude oil pipeline paralleling the Coastal Gas Link which goes through the Canadian Rockies. A crude oil pipeline along the Mackenzie Gas pipeline would be incredibly expensive and would take several years to plan and build.

This is a fascinating story to watch unfold. I think the Canadian government, TransCanada, and Enbridge, are putting their best faces on this, but the more one looks at this developing debacle the more distressing it appears.

Spending $1 billion to simply build a 125-mile pipeline to store Canadian crude oil in an industrial area north of Edmonton seems to underscore how desperate things have gotten.