New Layers to Canada's Oil Sand Debate

A newspaper publisher in the Canadian province of British Columbia announced plans for a refinery that would process crude oil expected from the Northern Gateway pipeline.  Canadian pipeline company Enbridge aims to send around 525,000 barrels of oil per day through the pipeline for exports to Asian markets. The project's supporter argues a regional refinery would eliminate some of the risks associated with heavy Canadian crude. It's unclear, however, if the proposal addresses or adds new problems to the Canadian oil sands pipeline debate.

David Black, owner of Black Press Ltd., which operates more than 100 newspapers in the United States and Canada, proposed a $13.2 billion refinery near Kitimat, British Columbia.  The refinery would process all of the oil designated for the Northern Gateway pipeline into diesel, gasoline or aviation fuel. He said the refinery would be designed to process only Alberta oil sands and would be situated on a 7,400-acre site located about 15 miles north of Kitimat.

The government of Canadian Prime Minister Stephen Harper has stepped in line behind Northern Gateway as debate lingers over the prospects for the Keystone XL pipeline in the United States. TransCanada, the company behind Keystone XL, is building the U.S. leg of the pipeline but the entire project is, for all intents and purposes, sidelined by the U.S. presidential race. As is the case with Keystone XL, lawmakers in Canada are divided over the Northern Gateway project. Provincial leaders on the west coast, along with members of the aboriginal community in British Columbia, have expressed concern about the pipeline. Alberta leaders and other project supporters say the pipeline is what's needed for a diverse Canadian energy sector, however.

Canadian regulars have asked Enbridge for information about a 2010 release of tar sands from the Lakehead pipeline system in Michigan. That release was the costliest onshore oil spill in U.S. history. Black, in outlining his proposal, said the refinery near Kitimat would eliminate much of the risk associated with tar sands projects like Northern Gateway. It would be a "state-of-the-art" facility, he said, that would be among the greenest refineries in the world.

"Gasoline, kerosene and diesel all evaporate," he said in a statement. "No extensive remediation would be required if there ever were an accident."

Asian markets may be more keen on crude oil than refined products, however. Black sidestepped the issue by saying there would be "other buyers" should Beijing shy away from Kitimat. His publishing company, meanwhile, operates 150 newspapers in Canada and the United States, with markets ranging  from Ohio to Hawaii. While emerging issues like the tar sands debate may require new solutions, a synergistic relationship between news media and contentious energy issues may be problematic for some. This is especially true given recent controversy surrounding a New York Times article on U.S. energy policy.

Royal Dutch Shell built the last oil refinery in Canada in 1984. If approved, a six-year construction on Black's refinery could begin as early as 2014. Enbridge had no comment on his proposal.

By. Daniel J. Graeber of Oilprice.com