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The Trans Mountain pipeline system, which runs from Edmonton to Burnaby, B.C., would be twinned to carry more crude. (KINDER MORGEN CANADA)
The Trans Mountain pipeline system, which runs from Edmonton to Burnaby, B.C., would be twinned to carry more crude. (KINDER MORGEN CANADA)

Kinder Morgan aims to expand Trans Mountain pipeline Add to ...

A second project has been launched to carry major new volumes of oil-sands crude to Pacific waters, amid mounting industry interest in exporting Canadian oil to Asia.

Kinder Morgan Canada has begun accepting bids from companies prepared to ship oil on a proposed expansion of its Trans Mountain system, which runs 1,150 kilometres from Edmonton to Burnaby, B.C.

The process is called an “open season,” and serves as an important kickoff to a project that has ambitions similar to the controversial $6.6-billion Northern Gateway pipeline proposed by Enbridge Inc. It also promises to raise a new front in the battle between industry and environmental critics over building infrastructure to move oil across B.C. and onto tankers.

Both Northern Gateway and the Trans Mountain expansion seek to open new access to Pacific tidewater, providing a connection to Asian markets for an industry that is increasingly eager to break its dependence on the United States as virtually its sole export destination. That eagerness has been heightened in the past year, as U.S. oil prices have dipped between $15 and $30 (U.S.) per barrel below international prices.

The advantage for Kinder Morgan is that unlike Enbridge, it does not have to dig a pipe into virgin territory. Instead, it can largely build on an existing right-of-way. Trans Mountain is currently designed to carry up to 300,000 barrels per day. Kinder Morgan is proposing to construct a twin pipeline – a quarter of which is already built – that could boost its capacity to 700,000 barrels per day.

The size of the expansion will depend on how much interest oil producers show. Building an extra 300,000 barrels per day of capacity will cost about $3.8-billion, Kinder Morgan Canada president Ian Anderson said in an interview. Adding 400,000 barrels will cost about $4.3-billion.

A 2006 open season for such an expansion was unsuccessful. Since then, however, demand has built for Pacific access. Trans Mountain is now between 40 per cent and 50 per cent oversubscribed. In part, that’s because a leak in Alberta earlier this year led the National Energy Board to order a 20-per-cent cut in flow. But it’s also because the oil patch is slowly sending more volumes to Asia.

Oil flowing through the Trans Mountain system currently fills three or four tankers per month. A year ago, 90 per cent of those went to California, and the rest to Asia. Today, about 25 per cent are sailing for Asia, Mr. Anderson said.

“There’s strong demand, which is what drives you to the open season that we’re undertaking,” he said.

Both Enbridge and Kinder Morgan have argued the relative merits of their projects. Kinder Morgan has said it can build new pipe more cheaply, and therefore deliver oil to Asia more cost-effectively. Enbridge, however, has argued that Northern Gateway is more financially attractive because it will fill tankers with double the capacity of those served by Trans Mountain, creating economies of scale.

The difference stems from location: the larger tankers could dock at Kitimat, where Enbridge hopes to bring oil. Burrard Inlet, near Vancouver, can’t accommodate the largest tankers.

The prospect of loading substantial new volumes of crude onto ships sailing beneath Vancouver’s Lions Gate Bridge has already sparked concern in B.C. Last July, city council discussed the issue. The mayor of Burnaby is also voicing worry, especially after a 2007 construction accident sent crude from the Trans Mountain system shooting into the air in a residential neighbourhood.

“We have obvious concerns,” said Burnaby Mayor Derek Corrigan. “There’s a doubt in our community as to the ability to manage emergency situations by Kinder Morgan, and I think that will cast a pall on any applications there are for expansion.”

Kinder Morgan intends to hold the open season until Jan. 19; if successful, it will launch an environment application. It says the expansion could be built by 2016 or 2017.

The issue is already drawing federal scrutiny. On Tuesday, Kennedy Stewart, the Burnaby New Democrat MP who is the associate critic for natural resources for Western Canada, raised the issue in the House of Commons.

“Will the minister agree to full public consultation on this project, including direct talks with affected municipalities and first nations?” he asked Natural Resources Minister Joe Oliver.

Mr. Oliver replied: “Every major project is reviewed by a regulatory agency. Our government respects the regulatory process and that will proceed in every case.”

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