The battle over Alberta’s oil sands is spreading east as governments in Quebec and the eastern U.S. are confronted with aggressive moves by western crude producers to access new markets.
The oil industry’s critics in Quebec and Maine are gearing up for a fight over existing plans and potential projects that would reverse the flow of oil in a cross-border pipeline network in order to carry crude from Alberta and North Dakota to refineries in Quebec and perhaps as far as the U.S. East Coast.
The latest flashpoint is in Maine, where activists held a news conference on Wednesday to denounce an allegedly secret plan by Portland Pipe Line Corp. to open a new route to carry western crude by way of Ontario and Quebec through northern New England to the Atlantic coast.
That prospect highlights the mismatch between abundant, low-cost western crude and the reliance of eastern refineries on premium-priced offshore imports. As the oil industry looks to spread eastward, governments in Quebec and New England will be thrust into the centre of oil politics and environmental concerns.
Portland Pipe Line – which is owned by Imperial Oil Ltd., Royal Dutch Shell and Suncor Energy Corp. – currently carries imported crude from Portland, Me., to Canada for use in refineries in Montreal and Nanticoke, Ont.
Portland Pipe’s Canadian market has already been hit by Shell’s closing of its Montreal refinery. , and Imperial’s newly-won access to western crude It will be further diminished if Enbridge Inc. wins approval to reverse its Line 9 route – currently part of the Portland to Nanticoke network – and bring western crude into Montreal.
Enbridge plans to file an application by the end of the year to deliver 240,000 barrels a day of western oil to Montreal, mainly for use in Suncor’s refinery there. As well, TransCanada Corp. is working on a proposal to transform its natural gas line to deliver crude to eastern markets.
In an telephone interview, Portland Pipe president Larry Wilson said there are no current plans to reverse the Portland-to-Montreal line. However, he added the market is changing dramatically and the company needs to be prepared to respond.
“We don’t have a project to reverse our pipeline and we don’t have any plans for movingWwestern Canadian crude at this time,” Mr. Wilson said.
But the pipeline – which has capacity for 600,000 barrels a day – is greatly underutilized, and the executive acknowledged that Enbridge’s plans could have a major impact on its markets. “The challenges are not going by without our care and attention. We are looking at the opportunities for the best use of these assets. We are looking at all our options,” he said.
Western producers are keen to open new markets in eastern North America to reduce the glut of crude in the landlocked mid-continent and reduce the discount they received relative to international prices. Meanwhile, eastern refiners are eager to get access to North American supplies, and refineries in Philadelphia and Saint John, N.B., are already bringing growing supplies of light oil from the West by rail.
Environmental groups have seized on evidence that Portland Pipe is preparing to ship western oil to eastern markets to whip up fears about pipeline safety and North America’s growing reliance on the oil sands. In Quebec, environmentalists are hoping to enlist the new Parti Québécois government to oppose Enbridge’s plan to transform an existing import pipeline to one that would carry western crude, including from the oil sands.
The PQ has aggressive targets to reduce greenhouse gas emissions as well as the use of oil in transportation. “I don’t think that the project is going to be very welcomed by the new government,” said Stephen Guilbeault, director of the Montreal-based Equiterre.
Enbridge spokesman Graham White said the Line 9 pipeline will carry “primarily light feedstock” for the Suncor and Imperial refineries. Enbridge has said it will supply oil from the U.S. Bakken field and growing Western Canadian convention production to those refineries, which are not configured to process oil sands’ diluted bitumen.
Last fall, Portland Pipe’s Mr. Wilson met with Maine Governor Paul LePage – along with officials from the Washington-based American Petroleum Institute and Canada’s Consul-General in Boston, Patt Binns – to brief the Governor on the shifting North American oil market. Documents received under the state’s Freedom of Information show the group provided a briefing on the benefits of oil sands production to the North American energy security and economic activity, and its improving environmental record.
“It doesn’t really add up when they say there are no plans [to reverse the line],” said Dylan Voorhees, director with Natural Resources Council of Maine. “It’s quacking like a duck to us.”