An oil tanker passes through the Second Narrows loaded with oil from the Kinder Morgan pipeline. The current 30 to 70 tankers that load at Burnaby's Westridge Terminal each year is expected to climb to about 300 if a pipeline twinning is approved.

Oil pipeline application opens attack window for critics

Kinder Morgan seeks approval of tolls for its customers, triggers early hearings

Opponents of Kinder Morgan’s plan to twin its oil pipeline through the Lower Mainland intend to use regulatory hearings over the business terms with oil customers as an arena to raise broader concerns.

Kinder Morgan Canada president Ian Anderson on Friday announced the company  has applied to the National Energy Board for approval of the tolls and terms for nine major shippers who have signed on to 20-year secure contracts.

Hearings for the toll application will proceed ahead of later NEB hearings on the actual expansion project, for which the company expects to file an NEB application in late 2013.

Anderson stressed the initial application has nothing to do with the construction or the 1,150-kilometre route of the $4-billion oil pipeline from Edmonton to Burnaby, which would be the subject of the 2013 application after extensive study, community consultation and design work.

But NDP associate natural resources critic Kennedy Stewart said the first set of hearings offer an early chance for the public to have their say.

The federal NDP will register as intervenors, the Burnaby-Douglas MP said, adding he expects local cities, interest groups and land owners may do so as well.

“It is the first time we’re going to start getting details about this pipeline,” he said.

“It’s such a massive project we have to get involved at all stages.”

Stewart said intervenors could ask the NEB to increase the toll rates Kinder Morgan will charge its customers to provide extra insurance coverage against a pipeline breach or oil tanker spill.

Likewise, he said, a surcharge on tolls could cover payments to First Nations.

The hearings could also shed light on the future of Chevron’s Burnaby refinery, which critics say could be threatened if it has to pay more for crude oil carried by Kinder Morgan to match the prices the oil fetches in Asia.

Chevron is not among the nine firms Kinder Morgan plans to guarantee secure access to 80 per cent of the expansion volume, but it is seeking priority access to the pipeline’s remaining capacity, ahead of other spot buyers.

Stewart said he wants to see if Chevron registers as an intervenor to fight Kinder Morgan’s toll application.

The loss of the Burnaby refinery would drive Lower Mainland gas prices sharply higher, he warned, because Chevron could no longer supply its stations at lower cost, which other outlets are currently forced to match.

“Chevron’s already being outbid by foreign customers for the existing oil coming down the pipeline,” Stewart said.

“Their supply is being curtailed to the point where it’s cheaper for them to truck in crude oil to be refined. Eventually, if that becomes too expensive, the refinery will close.”

An industry observer this week also speculated Chevron could sell the refinery to Husky, which is among the firms in line for long-term access.

Anderson said he believes Chevron will have sufficient spot market access to the pipeline to supply the Burnaby refinery.

He said the pipeline’s shift to providing access by long-term contract is a fundamental change and it was prudent to seek separate NEB approval to verify the economic underpinnings of the project before moving ahead with detailed work.

It was not an attempt to short-circuit public comment on the pipeline or shorten the later regulatory process on the route, he added.

“We’re not changing at all our commitment process to the proposed expansion.”

Twin pipelines carrying heavier oil sands crude as well as lighter petroleum products are expected to increase the Trans Mountain pipeline’s capacity from 300,000 barrels per day now to 750,000 by 2017.

That would bring about 300 oil tankers a year through Burrard Inlet to load at the Westridge Terminal in Burnaby.

More than 500,000 barrels per day of capacity is now committed to long-term buyers, Anderson said, adding they have signed on the basis of export via the size of tankers that now come to Burnaby, not a larger tanker class that would require dredging of the Second Narrows by Port Metro Vancouver.

Groups opposed to the pipeline expansion also intend to watch the initial set of hearings to see if public access is curtailed as a result of the approval process streamlining passed by the federal government in Bill C-38.

 

Long-term deals

Firms that have signed on to 20-year supply contracts through the expanded Trans Mountain pipeline include:

  • BP Canada Energy Trading Company
  • Canadian Oil Sands Limited
  • Cenovus Energy Inc.
  • Devon Canada Corporation
  • Husky Energy Marketing Inc.
  • Imperial Oil Limited
  • Nexen Marketing Inc.
  • Statoil Canada Ltd.
  • Tesoro Canada Supply & Distribution Ltd.
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