New Energy East memo reveals conflicting government views on pipeline’s value

Natural Resources Canada takes different tack from Finance Department on economic impact

CBC News | July 14 | Canada’s oil pipelines are already operating to their full potential and the Energy East project is well-positioned to meet the country’s projected need in increased capacity by 2020, according to a briefing memo to Natural Resources Minister Jim Carr obtained by CBC News.

“Absent this capacity, more oil will be shipped by rail, and some production will be restricted,” reads the document, dated Feb. 15, 2016.

Read the full memo

The memo was released under an access to information request and largely contradicts an earlier finance department memo, obtained in the same way, which suggested Canada already has sufficient capacity between

Andrew Leach, an energy and environment economist at the University of Alberta’s school of business, said he’s more inclined to trust the analysis in the memo sent to Carr.

“[Natural Resources] Canada is traditionally the department where you have the most expertise in studying the ins and outs or nuts and bolts of crude oil markets,” he said.

“So it wouldn’t be surprising for them to have more detail on the specific attributes of the market.”

Implications for Energy East

Canada’s total oil production is expected to reach 4.9 million barrels per day by 2020, according to the memo, up from 3.9 million in 2014.

The document highlights the Energy East pipeline as being well-suited to meet those future capacity needs, given its projected capacity of 1.1 million barrels per day and potential in-service date of 2020 to 2021.

READ FULL STORY

By Robson Fletcher, CBC News Posted: Jul 14, 2016 4:00 AM MT Last Updated: Jul 14, 2016 9:46 AM MT as posted at http://www.cbc.ca/news/canada/calgary/energy-east-value-jim-carr-memo-pipeline-capacity-1.3677473

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Finance Department memo says no new oil pipeline needed ‘until at least 2025’

National Observer | July 14 | Alberta Premier Rachel Notley is telling Ottawa there’s no more time to “dither” on pipeline approvals, but an internal federal analysis may indicate why the Liberals are content to consult widely before making a decision.

A memo to the deputy minister of finance says low oil prices mean there is enough transport capacity in Canada to move oil without any new pipelines for another decade.

Among the key points in the heavily redacted December memo, under the subject line “Energy East Pipeline and Carbon Price,” was a finding that: “the low price environment has led to oil production forecasts being revised downward, meaning that sufficient capacity (from both rail and pipelines) is projected to exist to transport oil until at least 2025.”

That’s not the view from Alberta, where an increasing chorus of voices has been demanding swift federal action on at least one of three major competing oil pipeline proposals.

Notley, whose provincial New Democrats have been seen as sympathetic to the Trudeau government’s environmental agenda, took a more traditional Alberta swipe at the federal Liberals when she urged Ottawa to pick a pipeline — any pipeline — and to do it sooner than later.

“We’re just going to continue to work hard to make the case for why all of Canada needs this pipeline, or a pipeline, to get to tidewater and then a decision has to be made,” the Alberta premier said last Friday.

“We just can’t dither on this for a lot longer.”

Late last month, the Canadian Association of Petroleum Producers issued its long−term outlook with an estimate that Canada will produce 4.9 million barrels of oil per day by 2030, up 28 per cent from 2015 production.

At the time, CAPP president Tim McMillan said the forecast illustrates the need for more pipeline capacity, although the new 2030 forecast is 400,000 barrels per day lower than last year’s prediction.

The forest fire that devastated oilsands hub Fort McMurray in May also spurred angry calls for Ottawa to speed up resource infrastructure decisions to help revive an industry under seige.

The federal Liberals, however, are building in longer review periods by adding additional public consultations on Kinder Morgan’s planned tripling of its Trans Mountain pipeline to Burnaby, B.C. The National Energy Board gave a conditional go−ahead to the $6.8−billion expansion in May and Natural Resources Minister Jim Carr has promised a cabinet decision by mid−December.

The 4,600−kilometre Energy East pipeline from Alberta to New Brunswick also faces a longer 27−month review process.

Apart from transport capacity, the case for new pipelines has rested in part on reducing the discount western Canadian producers receive for heavy crude.

Western Canadian Select (WCS) crude oil is currently trading about $15 a barrel lower than the West Texas Intermediate (WTI) benchmark, but the federal analysis suggests that’s about what should be expected.

“Because refineries have to incur additional costs to refine heavier oils like WCS compared to lighter oils like WTI or Brent, they generally demand a discount of around $9 a barrel,” said the analysis. Existing transportation costs in piping the WCS to Cushing, Oklahoma, add another $5.40, said the memo.

The Finance Canada memo said Energy East would only shave $1.48 per barrel off the Canadian discount “compared to oil shipped by existing pipelines in the U.S.”

A spokesman for Energy East said Tuesday the existence of “firm, long term contracts” with oil shippers shows the pipeline is viable and needed.

“At the end of the day it is market demand which establishes the necessity to move product to market,” Tim Duboyce said in an email.

“And as such, energy forecasts indicate we will require oil over the coming decades despite the increasing role of renewables in the overall energy mix.”

Duboyce also said fluctuating oil prices are a given.

“Producers, refiners, and pipeline companies take into account the rise and fall of crude oil prices over time when developing a project such as Energy East, and not simply current or short−term market conditions. In addition, market access for Western Canadian crude oil both domestically and on international markets should lower the discount Alberta producers are subject to.”


By Bruce Cheadle in News, Politics | July 13th 2016, as posted at http://www.nationalobserver.com/2016/07/13/news/finance-department-memo-says-no-new-oil-pipeline-needed-until-least-2025

Watershed moment: Ontario River Alliance Intervening at NEB (July 2016)

Sudbury Star | July 2016 | Members of the Ontario Rivers Alliance have concerns about the proposed Energy East pipeline and will have a chance to air them during panel hearings later this year.

The National Energy Board granted intervenor status to the ORA, along with 336 other applicants. The NEB had received more than 2,600 requests to participate in hearings, a key part of the review process for projects such as Energy East, a 4,600-kilometre pipeline that would deliver oil from western Canada and the northwestern United States to refineries and ports in eastern Canada.

ORA was one of 337 applicants, out of more than 2,600, to be granted intervenor status from the National Energy Board. They’ll take part in a hearing in North Bay, scheduled for Nov. 1-4.

“Intervenor status allows us to make a submission at an NEB hearing to ask questions of the proponent or other intervenors,” said Linda Heron, Sudbury-based chair of the ORA. “It also provides funding for us to develop our submission and to hire consultants.

“It really does give us an advantage. The other status would be commenter, but they don’t have funding, so they can’t hire consultants to help them develop their submissions.”

While the exact route of the pipeline won’t be determined until the public and regulatory review process is complete, current plans call for it to run through Northern Ontario near Kenora, Dryden and Longlac, then north of the Sudbury area through Hearst and Kapuskasing, before heading south through North Bay and Mattawa.

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As posted at http://www.thesudburystar.com/2016/07/08/watershed-moment

By Ben Leeson, Sudbury Star

Friday, July 8, 2016 10:08:14 EDT PM

Finance Department memo says no new oil pipeline needed ‘until at least 2025’

Canadian Press | July 12 | OTTAWA – Alberta Premier Rachel Notley is telling Ottawa to stop “dithering” on pipeline approvals, but an internal federal analysis may indicate why the Liberals are content to consult widely before making a decision.

A memo to the deputy minister of finance says low oil prices mean there is enough transport capacity in Canada without any new pipelines until at least 2025.

The memo, dated last December but obtained this week through the Access to Information Act, also says TransCanada’s proposed Energy East pipeline would have only a marginal impact on the price differential for Canadian producers.

Canadian oil was selling at a $25-per-barrel discount or more in 2012 and 2013 compared to the price for international Brent crude, but that discount has all but disappeared.

The memo says Energy East would reduce the differential by only $1.48 per barrel compared to oil shipped by existing pipelines to the United States.

A spokesman for Energy East says the proposed $15.7-billion pipeline from Alberta to New Brunswick already has long-term contracts with oil shippers, demonstrating the market demand over the coming decades.

The Canadian Press, Published Tuesday, July 12, 2016 3:18PM ED As posted at http://www.ctvnews.ca/business/finance-department-memo-says-no-new-oil-pipeline-needed-until-at-least-2025-1.2983895