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Kinder Morgan hikes planned capacity of Trans Mountain pipeline

Kinder Morgan's Westridge marine terminal in Burnaby, B.C.

Rafal Gerszak/The Globe and Mail

Kinder Morgan Canada is thrusting oil sands producers into the spotlight as it makes the case for a much larger pipeline to carry Alberta oil to the B.C. Lower Mainland for export.

Kinder Morgan is publicly enlisting the support of energy firms as it seeks to cross the treacherous western political and environmental geography. It's a decidedly different strategy compared with rival Enbridge Inc., which has yet to disclose all of its oil-company partners and has largely made itself the sole voice promoting the controversial Northern Gateway pipeline.

As Kinder Morgan unveiled plans to enlarge the expansion of its Trans Mountain pipeline to 890,000 barrels per day, it issued a news release naming the 13 companies that have signed binding, 15- to 20-year contracts to ship oil.

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Those companies, which include many of the largest energy firms in Canada, are "really our partners in this – and bringing those partners to the forefront, we've always felt, was an important part of our project," Kinder Morgan Canada president Ian Anderson said Thursday.

Oil and gas companies, he added, "have things that they can offer into this process that we can't replicate, such as some of their on-the-ground consultation and first nations learnings." The companies can also "speak to the importance of accessing more markets for Canadian crude."

It is an unusual strategy in the pipeline industry, where those who bury the steel have traditionally been the visible face of a project, left to win over critics and secure regulatory approvals.

But the industry is facing stiff opposition – for environmental, social and first nations reasons – nearly every place companies seek to work. B.C. has proven difficult ground; Enbridge Inc. has found itself facing bitter hostility that, some say, has tarnished its brand (Enbridge has said it retains strong industry support).

Kinder Morgan's strategy, by contrast, is one where "if we screw it up, we screw it up together," said Rich Ballantyne, who spent decades working for Trans Mountain, including several years as president of the company that ran it.

Naming names is also a show of force, he said, as companies are often reluctant to come out publicly behind a project they only partially support. At the same time, it introduces a raft of names that don't always generate a sympathetic reaction.

"I'm sitting here on Salt Spring Island, which is one of the hotbeds of opposition and having [big oil companies] behind you doesn't necessarily make any friends," Mr. Ballantyne said. "But it does give a whole pile of weight."

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The companies backing the expansion are BP Canada Energy, Canadian Natural Resources Ltd., Canadian Oil Sands Ltd., Cenovus Energy Inc., Devon Canada Corp., Husky Energy, Imperial Oil Ltd., Nexen, Statoil Canada Ltd., Suncor Energy Marketing Inc., Suncor Energy Products Partnership, Tesoro, and Total E&P Canada Ltd.

Suncor, Total and CNRL are new supporters of a project that had previously planned an expansion to 750,000 barrels a day. Following a sharp-elbowed tussle before the National Energy Board, they were able to sign on in recent months, a time that has seen the existing export pipeline network to the United States become effectively full. As if to underscore that fact, Enbridge on Thursday announced an unusual mid-month cut to the amount of oil energy companies can ship through its system.

The full pipes are having a devastating impact on the price of oil and the industry's financial performance, with Canadian heavy crude futures selling at a $36 (U.S.) discount to the North American benchmark. They are also prompting a scramble to send Alberta oil in just about every direction – east, south and west.

"People are very, very anxious to make sure they have that access," said Greg Stringham, vice-president of oil sands and markets with the Canadian Association of Petroleum Producers.

To build the larger expansion, Kinder Morgan will install a twin pipeline measuring 36 inches, as opposed to 30 inches, and fill up to 34 tankers a month, instead of 25. The cost will rise to $5.4-billion from $4.1-billion.

Environmental groups, meanwhile, credited Kinder Morgan with offering more disclosure than Enbridge, although they are also concerned Kinder Morgan is gradually increasing the size of its project.

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"They're trying to make themselves look transparent – this is a very clever move," said Karen Campbell, a lawyer with Ecojustice. But, she said, "it's consistent, I think, with their sneaky incremental strategy of never disclosing their full hand of cards. We don't know where this ends."

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About the Author
Asia Bureau Chief

Nathan VanderKlippe is the Asia correspondent for The Globe and Mail. He was previously a print and television correspondent in Western Canada based in Calgary, Vancouver and Yellowknife, where he covered the energy industry, aboriginal issues and Canada’s north.He is the recipient of a National Magazine Award and a Best in Business award from the Society of American Business Editors and Writers. More


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