Kinder Morgan boosts pipeline expansion, still cuts Chevron short
Kinder Morgan Canada's announcement that its proposed expansion of the Trans Mountain pipeline will be even larger might not be good news to Chevron's North Burnaby refinery.
In fact, it could be a worse situation than currently exists at the refinery, which has had its crude oil supply from the pipeline restricted to the point the company is having to bring feedstock in by tanker truck.
Kinder Morgan announced Thursday that due to new long-term contracts being signed it will increase the capacity of its proposed expansion from 750,000 barrels per day (bpd) to 890,000 bpd. The 60-year-old pipeline, which runs from Edmonton to Burnaby, is currently carrying 300,000 bpd.
Of the larger figure, 708,000 bpd will be reserved for the 13 customers who signed 15- and 20-year contracts, Kinder Morgan said. Those will largely ship oil sands crude to overseas export markets.
The rest, 182,000 bpd, will serve the "spot market," those not on long-term contracts.
Kinder Morgan president Ian Anderson told Black Press it's anticipated that will be enough to supply existing customers, such as the Chevron refinery in Burnaby and other refineries in Washington State.
But according to Kinder Morgan figures, that's far less than the 246,000 bpd currently allocated to those customers today.
Since late 2010, Chevron and other customers in the spot market have seen "apportionment" or cuts to their supply as a result of there being more demand for capacity than the Trans Mountain pipeline can meet. Last June, Chevron said it was receiving 70 per cent less crude than it had asked for.
On Thursday, Ray Lord, spokesman for Chevron Canada, said he couldn't speculate on the future of the pipeline in its expanded form.
"It doesn't really change our immediate situation here in Burnaby," Lord said.
"In some sense it's intuitive to suggest a bigger pipeline would solve our problems but at this point in time ... there are other customers on that piepline and we need assurance we would have economic access to crude for the Burnaby refinery and that's the situation we're dealing with now and it's one we're going to need to deal with in future."
That's why last year Chevron applied to the National Energy Board (NEB) for a priority destination designation on the pipeline. If approved, it would give the refinery's need for 57,000 bpd priority over other spot market customers, although its supply needs would still not be met until after those of the long-term contracts.
If the NEB rules in Chevron's favour, the decision would take effect on the existing pipeline, the refinery would not have to wait for the expansion to be built, Lord said.
So far, the NEB has dismissed a claim that Chevron's application contravenes the North American Free Trade Agreement, Lord said. The start of hearings for its application has also been postponed to March 26 as it's taken longer than expected for information to be exchanged between the company and those with intervenor status.
As for Kinder Morgan's announcement of additional proposed capacity, Burnaby-Douglas NDP MP Kennedy Stewart said, "I don't think anything this company does surprises me anymore."
He said it makes him think "now they could easily hit a million barrels a day" by the time the company's formal application is submitted to the NEB late this year.
Stewart noted the Conservative government has changed the rules so even if the NEB decides to reject Kinder Morgan's proposal, the energy minister can override the decision.
Concern about the potential route of the expansion and the possibility of expropriation is growing, he said. Already he knows of one person who sold his Burnaby home out of concern for the project's impact on his property value, and others who have retained lawyers.
"In my office I've had panicked people run in and just say, 'what's this mean for my property?' and I can't even tell them because Kinder Morgan hasn't laid out what their route is."
The formal facilities application will set out a 150-metre (492-foot) wide corridor within which the 18-metre (60-foot) wide right-of-way will be located. The exact location of the right-of-way will be the subject of its own NEB approval process.
The increase in the pipeline's capacity raises the cost of the expansion project to $5.4 billion from $4.1 billion. It will also increase the number of tankers in Burrard Inlet from about 25 a month to 34 a month, or about 400 a year.
If it receives all the required approvals, Kinder Morgan will spend two years building the project, which would then go into service in late 2017.
~ with files from Jeff Nagel