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Canada’s Pipeline Deal Completes as Court Rules Approval Process Flawed

by John Brian Shannon

Four things have happened in relatively quick succession in regards to the Trans Mountain Pipeline Expansion project (TMX) that Kinder Morgan proposed back in 2013 and it’s important to understand those before proceeding.

  1. On November 29, 2016 Canadian regulators approved the Kinder Morgan Trans Mountain Pipeline Expansion project.
  2. On May 29, 2018, the Canadian federal government acquired the Trans Mountain Pipeline from Kinder Morgan for $4.5 billion.
  3. On August 30, 2018 the Federal Court of Appeals reversed the original decision of the court to approve the TMX pipeline.
  4. On August 31, 2018, the purchase of the TMX pipeline by the Canadian government from Kinder Morgan finally completed.

If the federal government wants to be able to restart work on the pipeline expansion project and be well placed to sell it to investors, the federal government of Canada must now enter into negotiations with the stakeholders who weren’t consulted in the original consultation process and gain their acceptance to allow the TMX pipeline expansion project to continue.

NOTE: On August 31, 2018 Alberta premier Rachel Notley pulled her province out of the federal government’s national carbon tax plan to register her displeasure with the Federal Court of Appeals and to put more pressure on the Justin Trudeau government to get the TMX pipeline completed.

How to Address Legitimate Safety Concerns of Vancouver and Burnaby Residents

It’s a huge undertaking to sail an oil tanker through English Bay and into Vancouver Harbour under the Lions Gate Bridge and the Ironworkers Memorial Bridge, park it at Parkland Oil Refinery and fill that tanker with 250-thousand barrels of oil, tar sands ‘dilbit’ material, jet fuel, gasoline or naptha (all of them highly volatile or explosive liquids) and then sail out of Vancouver through a frenetic crowd of marine traffic including float planes landing and taking off every few minutes, ferries, pleasure boats, container ships and cruise ships.

Vancouver Harbour is far too congested for this dangerous practice to continue. There are almost half a million people living and working within a few miles of both sides of that very narrow waterway.

It may have been OK back in 1953 when the Trans Mountain Pipeline was originally built, but it’s definitely not OK now.

Oil spill could cost Vancouver $1.2 billion. Image courtesy of Global News.

A Solution Hiding in Plain Sight

What could solve these very serious issues, is to continue the TMX pipeline route on to Deltaport (a major industrial port south of Vancouver) and relocate the existing Parkland Oil Refinery in Burnaby, BC to Deltaport, BC. The existing site in Burnaby would need to be remediated as it’s unsuitable for housing or businesses due to the steep terrain and continuous rail traffic along the water’s edge.

The Delta Superport (Deltaport)

Parkland Refining Ltd., Burnaby, to Deltaport, BC

Parkland Refining Ltd. in Burnaby could be relocated to a much safer location at Deltaport to dramatically enhance safety for marine traffic and hundreds of thousands of people living and working in the Vancouver region. Image courtesy of Google.

The Deltaport facility in Delta, BC is already the site of a major rail terminus where thousands of rail cars offload 29 million of tonnes of coal every day for transport to ports around the Pacific Rim trading area and other large scale industries operate in Deltaport.

There are container ship facilities there and also some shipbuilding and ship repair businesses operate within the industrial zone. The Delta Superport site (Deltaport) was specifically chosen because it’s well away from major population centres in case of land or marine-based accident at the site.

Also, in the event of pipeline construction delays or oil spills along the Trans Mountain Pipeline corridor, railcars could haul Alberta’s oil and dilbit to the Delta Superport as they already travel from Alberta and Saskatchewan to Deltaport 365 days of the year.

For an extra $5 billion (for example) the federal government could continue the pipeline to Deltaport and assist Parkland Oil Refinery Ltd. to move their existing oil refinery to Deltaport, thereby neatly solving every safety issue.

If taxpayer revenue isn’t used to enhance the safety and security of hundreds of thousands of people, what is the point of collecting taxes in the first place? Surely Job Number One for any level of government is the safety of its citizens — especially when such large numbers of people could be adversely affected in the case of a major marine spill and/or fire in Vancouver Harbour.

Moving the Burnaby Oil Refinery to Deltaport Solves Every Safety Concern

Captains of oil tankers that leave port full of refined oil products (like gasoline, for one example) will be happy to find they won’t be ‘deking around’ a dizzying flow of float planes taking off and landing, small transit ferries packed full of commuters, pleasure boats, container ships and cruise ships — as they are forced to do when they arrive and leave through Vancouver Harbour and Burrard Inlet.

In fact, the only activity at Deltaport is the ten bulk carriers (coal) that leave port every day and (judging on personal observation, although not recently) the one container ship that leaves port every night.

As mentioned earlier in this blog post, way back in 1953 the Burnaby location was probably the best option for the region — but with the huge increase of marine traffic in Vancouver Harbour and English Bay since those days, it’s an accident waiting to happen.

If the federal government wants a solution that works for everyone this should be their Number One priority — and failing that — perhaps the proposal I’ve suggested should become a requirement for any potential purchaser of the TMX pipeline before their bid would be accepted.

It’s the responsible thing to do.

Why Justin Trudeau should approve the Kinder Morgan pipeline expansion

by John Brian Shannon

Disclaimer: I have my own renewable energy website and I contribute renewable energy blog posts to another website — so I’m obviously a proponent of renewable energy.

However, back in the day I was an entrepreneur who learned about dealing with various levels of government, about operating within regulatory frameworks, and needing to budget carefully for future large scale projects.

With the foregoing in mind, I offer the following comment about the Kinder Morgan pipeline project proposal (the TMX expansion) that is planned to run from Edmonton, Alberta through to the Westridge oil refinery (Chevron) in Burnaby, BC:

  1. Unfortunately, there are still places where renewable energy won’t work in a cost-effective manner. Eventually, renewable energy technology will develop and become feasible everywhere on the planet. But we still need oil & gas in the meantime.
  2. The past 5 Canadian Prime Ministers and probably a similar number of British Columbia and Alberta Premiers gave tacit approval to the Kinder Morgan pipeline expansion which led the company to believe the twinning of the pipeline would be approved.

For the federal government or any province to pull the rug out from under a company that has been led along for two decades to believe their project would be approved — and which provides a valuable service for people who drive cars and trucks in British Columbia and Alberta — would be unthinkable and two-faced.

The TMX Expansion should be approved based on those points alone as both Conservative and Liberal federal governments have promised the project would be a ‘Go’ and KM proceeded on that basis.

IMPORTANT TO NOTE IF KINDER MORGAN WAS OPERATING IN A TPP COUNTRY: The various levels of government in Canada could be sued for not following through on their tacit approval in recent years — and Kinder Morgan and possibly Chevron would likely win a court judgement worth billions of dollars which Canadian taxpayers would be forced to pay. Not only that, but a TPP court could still order the pipeline built!

However, there is another option which I will cover below.

About the Westridge Refinery in Burnaby, BC

At present, one tanker per week leaves the Westridge refinery (Chevron) in Burnaby BC, sometimes carrying 50,000 or 100,000 barrels of oil, gasoline, diesel, kerosene, or more exotic hydrocarbons like naptha, xylene, toulolene, and other volatile liquids. But once the 2nd pipeline is built, one tanker per day will leave the Westridge refinery.

All of these are explosive liquids and in an accident where fire occurs could easily destroy (yes, entirely destroy) the 2nd Narrows bridge or the Lions Gate bridge, which is why they run under those bridges at 4:00am to enhance their margin of safety. (Thankfully, there are no terrorists in our region)

Kinder Morgan TMX Expansion

FILE PHOTO: Two ships pass under the Lions Gate Bridge that links Vancouver with North Vancouver. Image courtesy of CBC.ca

Proposal to Enhance Shipping Safety in BC by Relocating the Westridge Refinery to Deltaport

I propose relocating the Westridge refinery in Burnaby BC to Deltaport BC, and that the federal government of Canada and the provinces of British Columbia and Alberta offer significant investment, allowing public safety to be dramatically improved.

NOTE 1: I’ve spoken to Ray Lord who is highly respected within the petrochemicals industry and remains the chief spokesman for Chevron’s Westridge refinery and he seemed interested in my idea to move the refinery to Deltaport.

Instead of a 2nd Pipeline – Move the Oil by Rail to Deltaport

It’s magic that Deltaport is the terminus for CN Rail and by using the rail option to move petroleum it means the proposed 2nd pipeline would never be needed.

Public safety would be dramatically improved, Chevron would have two crude oil transportation modes to keep it running, and in the event of a spill it’s well documented that rail spills are orders of magnitude smaller than pipeline spills.

NOTE 2: Pipeline spill incidents average 1.2 million BARRELS of oil, while rail tanker spill incidents average 220,000 US GALLONS. A huge difference!

This option would allow 3 shifts at the relocated refinery instead of 2 as is the case now, and even allow the refinery to continue operations in the event of a failure along the existing pipeline route.

NOTE 3: KM would lose the ability to build the new pipeline but allow it to neatly step out of a public relations nightmare — and it might choose to become an investor in the new Deltaport facility and not lose a cent of profit in the process.

All for less than the cost of a potential legal action brought by Kinder Morgan and possibly Chevron too.

A Fund to Remediate Pipeline Oil Spills

A 6 cents per barrel of oil tax should be applied to all liquids that move through pipelines in Canada which should be held in a trust fund to deal with future pipeline spills. The fund could be invested and the returns would increase the total value of the fund.

NOTE 4: Railways don’t need such a tax as they can’t continue rail operations along that line until the spill is cleaned up, so they’re already highly motivated to clean up rail spills ASAP.

If Canada, British Columbia and Alberta kicked in funding to relocate the refinery:

  • No longer any need for the TMX Expansion
  • Thousands of jobs would be created to build the new Deltaport refinery
  • Public safety would increase by orders of magnitude in British Columbia
  • Chevron, environmental protesters, and Kinder Morgan would be happier

And all that government investment would eventually be recovered through taxes.

Even Chevron liked my idea.

“Site C” hydro-electric dam or Solar Panels? British Columbia’s choice

Site C or Solar Panels? British Columbia’s choice | 18/09/14
by John Brian Shannon

Since the 1970’s British Columbia’s award-winning power company BC Hydro has been making the case for what is known as the Site C hydro-electric dam, touting it as the next power generation capacity upgrade for the province.

It’s a fine idea on the surface, hydro-electric power has a lot going for it, BC Hydro has some world-class expertise and there is nothing intrinsically wrong with hydro-electric power.

But it has remained unapproved all of this time for good reason — and now, as BC Hydro looks forward to the next 20 years of serving its customers with reliable electricity via its interconnected network of hydro-electric dams and electrical grids, it is again promoting the Site C project.

Proposed Site C dam in BC

Proposed Site C dam for northeastern British Columbia would have an installation timeline of 10-years with costs estimated at $8 billion dollars.

This time around it has a unique selling feature

This time, almost all of the power produced at this proposed site is practically pre-sold to the growing natural gas industry in British Columbia’s Peace River region and to the operators of the proposed natural gas pipeline that would run from the Peace River region (where the natural gas is) to Kitimat, BC where the natural gas would be transferred to waiting ships delivering LNG to Pacific Rim nations.

As a stand-alone business proposal it’s a fine idea

But upon considering local concerns and when compared to other power generation proposals the dam begins to burst for Site C. Even though the business-only case is solid for Site C, the negatives are so concerning that this project will likely never see the light of day. Nor should it.

Some of the problems that face the project are that Site C is located far from major demand centres like cities. Which means that if this project is going to produce power far away from electricity consumers, then significant and expensive powerline infrastructure must be built at an average cost of over $1 million dollars per mile to deliver it.

Just for one example; If all of the proposed Site C power were to be delivered to Vancouver, it could cost more to deliver the electricity via the grid than the electricity is worth. If Site C can produce power at $.05 per kWh, but it costs $.10 per kWh to deliver it, you can see that the business case isn’t there.

“But that electricity won’t ever be delivered to Vancouver, as we have gas industry customers to buy a majority of the Site C power generation capacity”

What is different about this Site C application is that the natural gas industry along with the natural gas pipeline operators have promised to buy most or all of the power from Site C. And in their favour, both the regional natural gas industry and pipeline are a whole lot closer to Site C, than Vancouver.

It seems like a match made in Heaven until natural gas/LNG prices crash. Then the pipeline operators and the natural gas processing facilities would cease operations. Then what?

At that point it will cost far too much to deliver Site C power to the rest of the province, unless that electricity is sold at subsidized pricing.

Natural gas and LNG prices are volatile and many investors refuse to ride the roller-coaster, preferring to invest in such ‘heart-safe’ stocks as banks and technology.

If gas prices crash and stay down for any length of time, BC Hydro would have spent $8-10 billion dollars to build the dam, and then it would have to spend significant amounts of money to install powerlines and pylons to deliver the power to Vancouver. Note: It costs more than $1 million dollars per mile to install major powerline infrastructure to bring such huge amounts of electrical current to distant locations.

And let’s not forget, dam construction estimates are often fairy-tales. Unforeseen obstacles can arise, weather can add to construction delays, and gaining right-of-ways can be costly and time consuming. To say nothing of the costs and delays associated with legal challenges.

So, if natural gas prices plummet as they are known to do, Site C will be relegated to providing subsidized power to British Columbia until the day gas prices rebound. Alternatively, Site C could be mothballed until natural gas prices return to profitable levels.

Either way, that’s a lot of taxpayer and BC Hydro money tied up in one parked asset. In the worst-case scenario it could become known as the Mother of all Parked Assets in Canada.

While it helps to have a practically guaranteed customer for most of Site C’s output, we must remember five things;

  1. If Site C construction costs escalate (some hydro dams in the past, have eventually cost twice the original estimates) who pays that? The province? (Meaning taxpayers) BC Hydro? (Meaning all electricity consumers — even the ones who get zero benefit from Site C) The natural gas industry? (Can we have that in writing, please?)
  2. If there are significant construction delays due to citizen protests or construction delays, can China (the customer) sue the province or BC Hydro, due to the now active Canada-China trade deal where China can sue for contract non-performance?
  3. What if natural gas prices fell dramatically at any point during the estimated 10-year Site C construction period. What then? Would the deal be ‘off’ partway through construction?
  4. The natural gas/LNG market is unpredictable at best. Investors will tell you it’s a roller coaster ride on LSD. In the space of only 6 months the whole ride could end; companies could go insolvent.
  5. If the deal to sell all of Site C capacity to the regional natural gas industry/pipeline operators falls through (after the dam is built) the costs to build new powerline capacity to deliver that power to major BC demand centres would be astronomical. Upgrading existing grid capabilities to allow Site C power to piggyback part of the way, would cost even more. Sometimes it is cheaper just to build ‘new’ than it is to upgrade ‘old’ infrastructure. Are we up for that?

All of those are very real concerns, but all of them are merely economic ones. No matter what though, adding more money (courtesy of the taxpayer or energy consumers) will completely solve those problems. That’s a choice citizens and energy consumers will have to make.

Do let us inform our elected officials and BC Hydro about our feelings on these matters in advance, please. It’s only fair to advise them beforehand, and not after the fact.

Are we fine with picking up the tab in the case that everything Site C doesn’t go according to BC Hydro’s best plans and intentions?

We are? OK, fine. Then let’s talk about the other costs of Site C

Renowned agrologist Wendy Holm testified earlier to the Joint Review Panel investigating the project that it would render over 30,000 acres of quality land unfarmable. According to Ms. Holm, that is enough land to feed a million people. (See YouTube video here)

“These soils are completely unique,” explained Holm, a past president of the BC Institute of Agrologists. They are in an east-west running valley with a Class 1 climate. They are alluvial soils. These were undervalued by the BC Hydro process. — CommonSenseCanadian.ca

I felt the Earth move!

Water is heavy. And there’s nothing like the weight and underground seepage of millions of tons of water to lubricate the existing earthquake fault that runs below the western shoreline. That means an earthquake, or earthquake ‘swarms’ are possible (likely?) for the entire time that Site C sits full of millions of tons of water.

You haven’t lived until you’ve lived downstream from a major dam that is built right on top of an existing earthquake fault line.

“What’s that?”
“Relax, it’s the toaster-oven buzzer!”

It’s difficult in principle to be against hydro-electric power. But sometimes hydro-electric dams pass the test and sometimes they don’t. As in every proposed hydro-electric dam project there are benefits, but as each location faces different set of challenges, there can be any number of downsides. Site C just doesn’t make the grade and regulators have said as much.

Need for Site C dam not proven: joint review panel 

The joint review panel assessing the Site C dam concluded that, although there will be an increasing need for power in the future and Site C is likely to be the most cost-effective option, BC Hydro failed to prove that the new energy would be needed within the timeframe set out in the proposal. “The panel concludes that the proponent has not fully demonstrated the need for the projects on the timetable set forth,” says the report submitted this month to the federal and provincial governments. The panel makes it clear that federal and provincial government decision-makers need to be sure the power is needed before giving the go-ahead. Justification for Site C “must rest on an unambiguous need for the power and analysis showing its financial costs being sufficiently attractive as to make tolerable the bearing of substantial social and other costs,” the report says. — DeSmog.ca

The Solar power solution to this fracking problem

Many people are unaware of how far solar panel prices have fallen over the past few years. In the late 20th century, you would pay about $100. per watt (installed price) for solar panels. In the early 21st century we are seeing installed prices of $4. per watt installed (and that’s on rooftops in the U.S.) and $2. per watt (installed price) in Germany and most other nations.

That puts ground-level utility scale solar installations on par with other types of electrical power generation. Like along a pipeline route, for instance.

Instead of building a huge and expensive hydro-electric dam far from energy consumers and spending every day praying that the price of natural gas doesn’t fall, or that weight of all that water doesn’t trigger a decades-long earthquake swarm, or feeling guilty about all that submerged prime farmland that has been lost, why not simply run solar panels along the whole length of the proposed natural gas pipeline route and be done with it?

If the pipeline begins at the natural gas processing facility deep in the interior of British Columbia and terminates at Kitimat, BC, that means that instead of getting power from the very remote Site C location — more than enough electrical power can be collected from the Sun via solar panels installed along the pipeline route.

Instead of the usual 1/4 mile pipeline right-of-way, the pipeline operator or BC Hydro could simply apply for a 1/2 mile wide right-of-way, and run the panels parallel to the pipeline.

Cities like Prince George, Prince Rupert, and smaller towns like Kitimat could all receive benefit from this additional daytime grid capacity.

Yes, the Sun only shines during the day

Obviously this isn’t much of a concern. Of course, it could be ‘amped up’ to become a concern because the Sun doesn’t shine at night. But let’s look at the facts.

Q: When does natural gas need to be moved?
A: Every day.

The power to run the pipeline would come from the Sun, so is every day of the year good enough? Perhaps you wanted more days than that?

Q: When does the natural gas processing facility (the refinery) need to operate?
A: Every day.

See how well that works out?

As the Sun shines everyday, the natural gas can be processed everyday and it can also be moved along the pipeline route everyday.

Gas refinery employees will work the day shift. “Are you saying that I’m permanently stuck with the preferred shift?” Yes.

Not only all of that, but we can do it pollution-free.

Woot! Chalk one up for British Columbia!

And quite unlike Site C, solar panels installed along the pipeline route have following advantages:

  • Build the solar power plant only to the size you actually need
  • Need more power next year? Add another row of panels along the route
  • Need more power next decade? Add another row of panels along the route
  • Cities along the pipeline route will directly benefit from the pipeline-routed power plant
  • Many jobs would be created for locals installing not only a ‘ribbon of pipe’ but also a ‘ribbon of solar panels’
  • Solar electricity is produced close to where it will be used and won’t need expensive transmission infrastructure
  • During the daytime merit order pricing will take effect, and other power producers can taper their power generation
  • No huge subsidies or risk
  • No water-weight earthquakes
  • No submerging of thousands of acres of prime farmland
  • No 10-year construction timeline — where a lot could change over that timeframe
  • No unexpected billions of dollars cost over-runs that are common with many large-scale hydro-electric dams
  • In the case of natural gas price drops and a corresponding shutdown or insolvency of the natural gas industry or pipeline operator, the solar panels will merely continue to provide power without interruption to local towns and cities without any additional billions of dollars of new infrastructure to run huge powerlines in order to deliver power from Site C to major centres like Vancouver
  • We know that Site C will have far too much capacity at first. But in later years, demand will outstrip the maximum capacity of Site C
  • Pollution-free power that is a fine example to industry generally, the gas industry specifically, to pipeline companies and to other jurisdictions around the world

A note about Merit Order ranking/pricing

The Fraunhofer Institute found – as far back as 2007 – that as a result of the Merit Order ranking system – solar power had reduced the price of electricity on the EPEX exchange by 10 percent on the average, with reductions peaking at up to 40 percent in the early afternoon when the most solar power is generated.

Here’s how the Merit Order works.

All available sources of electrical generation are ranked by their marginal costs, from cheapest to most expensive, with the lowest having the most merit.

The marginal cost is the cost of producing one additional unit of electricity. Electricity sources with a higher fuel cost have a higher marginal cost. If one unit of fuel costs $X, 2 units will cost $X times 2. This ranking is called the order of merit of each source, or the Merit Order.

Using Merit Order to decide means the source with the lowest marginal cost must be used first when there is a need to add more power to the grid – like during sunny afternoon peak hours.

Using the lowest marginal costs first was designed so that cheaper fuels were used first to save consumers money. In the German market, this was nuclear, then coal, then natural gas.

But 2 hours of sunshine cost no more than 1 of sunshine: therefore it has a lower marginal cost than coal – or any source with any fuel cost whatsoever.

So, under the Merit Order ranking of relative marginal costs, devised before there was this much fuel-free energy available on the grid, solar always has the lowest marginal cost during these peaks because two units of solar is no more expensive than one. — Susan Kraemer

See, we really don’t need a Site C dam costing billions of dollars and with a 10-year construction cycle, located far from cities, towns and industry and complete with a whole set of other significant drawbacks.

What we need is electrical power capacity installed along the pipeline route (which can be incrementally increased as demand rises) and the pipeline can run relatively near to the electrical demand centres of cities, towns and industry as it wends its way through the countryside to terminate at the port facility.

In short, a continuous solar power array running the length of the natural gas pipeline is what we need, with none of the negatives associated with the proposed Site C hydro-electric dam.

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