Canada’s pipeline options numerous:

nrCan briefing notes

Despite the federal government’s frantic push for Keystone approval, there are plenty of projects in the works to export more Canadian oil. The question is how quickly they can reach tidewater.Despite the frenzied push by federal and provincial officials to sell the U.S. government on the economic benefits of approving the Keystone XL pipeline, there are multiple projects on the horizon that would send more Alberta crude to tidewater where it can command a higher price.Canada’s oil industry has “a number of pipeline options to move oil to markets beyond 2015,” according to briefing notes prepared last March for NRCan deputy minister Serge Dupont, and obtained by The Hill Times through the Access to Information Act.In addition to TransCanada’s delayed Keystone XL pipeline and Enbridge’s embattled Northern Gateway Pipeline, the document highlights a number of opportunities for expanding existing pipeline infrastructure to send more Canadian crude to the U.S. and beyond.Other projects noted include Kinder Morgan’s Trans Mountain pipeline expansion, which would boost capacity from 590,000 barrels per day to 890,000 barrels per day between Edmonton and Vancouver; the Enbridge Alberta Clipper pipeline expansion, which would increase oil shipments from Alberta to Illinois by 120,000 barrels per day; and Enbridge’s 600,000 barrel per day

Flanagan South Line that would carry Alberta oil on to Cushing, Oklahoma.All of the projects were noted as part of a cache of notes related to another Enbridge project—the reversal of its Line 9 pipeline from Sarnia to Montreal. Last fall the first leg of the reversal from Sarnia to Westover was approved, and the company is now seeking approval for the second leg from Westover to Montreal. That project would have the capacity to deliver between 50,000 and 200,000 barrels a day to Montreal refineries to provide eastern Canada with greater domestic supply.New pipeline infrastructure from the oilsands to refineries in New Brunswick is not mentioned in the document, but since the publication of the report there has been increased national interest in such

a project, with the federal NDP arguing in favour of a project to provide the East Coast with more domestic oil supply and refinery jobs.The document also notes that the pipeline used to import oil from ports in Portland, Maine to Montreal could be reversed, allowing Canada to export an additional 600,000 barrels a day at international pricing. Canadian officials have reportedly been actively trying to dissuade municipalities in Vermont and Maine from passing bylaws against moving oilsands crude through their respective states.“[I]f capacity can be increased to Montreal, there are options to reverse the flow on the 600,000 b/d Portland to Montreal pipeline,” the report states.And if all that fails, there’s always rail.Greg Stringham, vice-president

of oilsands and markets for the Canadian Association of Petroleum Producers, said that rail shipments out of the oilsands have nearly doubled to 120,000 barrels per day in recent years. CAPP expects oil export by rail to reach 200,000 by the end of 2013.“It’s not a million barrels a day yet, but the rail companies are saying that they can actually be a long-term solution,” Mr. Stringham said. “We’re looking to all alternatives at this time as we look to all three markets.”Mr. Stringham estimated that “tens of thousands” of tanker cars are in the process of being manufactured to meet the demand.Industry, the Alberta government, and Ottawa are all keen to see more Canadian oil make it to tidewater on the Pacific, Atlantic and Gulf coasts

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where international pricing can be as much as $30 higher per barrel.A newfound glut of U.S. oil and gas, particularly from North Dakota’s Bakken shale, has weakened U.S. demand for Canadian oil and also tightened the capacity in existing pipeline infrastructure across North America. Multiple pressures on the Alberta oilsands have led Alberta Premier Alison Redford to warn of a “bitumen bubble.”Alan Ross, who represents the government of Alberta in Ottawa, told The Hill Times that the province does not view any one pipeline project as more important than others — each one has strategic importance.“The view of the province is that pipeline development to get resources to market, be it east, west or south, will be critical. The overarching concern is getting access to tidewater,” he said. “The bitumen bubble will continue to exist unless we see some ability to transport product out to tidewater and international markets.”Mr. Ross predicted that the bitumen bubble, which has been blamed for Alberta’s $2-billion deficit in its latest provincial budget, will also impact Ottawa’s revenues in the coming years, and suggested that continued project uncertainty is likely to deter foreign investment in the oilsands.“There would definitely be an impact at the federal level as well with less corporate tax revenue going to the federal government,” Mr. Ross warned.However, the rush to get projects approved comes at the risk of the Canada’s environment and its international reputation, said Nathan Lemphers, an oilsands policy analyst with the Pembina Institute.“We’re not opposed to oilsands development, but we are opposed to irresponsible oilsands development. It needs to be developed in a way that is in step with the environment and right now that isn’t the case,” said Mr. Lemphers.He noted that the federal government has yet to introduce emissions regulations for the sector, nor has it developed a strategy for monitoring tailings ponds and the impact of oilsands expansion on wildlife in northern Alberta. Environment Minister Peter Kent (Thornhill, Ont.) has said that his department will propose draft emissions regulations before the end of 2013.“These are areas where the federal government has dropped the ball and until those issues are dealt with, it’s hard to make the case that oilsands development is responsible,” Mr.

Lemphers said. “Right now we’re seeing a process that approves the oilsands and pipeline infrastructure as fast as possible without concern for the bigger picture.”Feds must get more involved in Canada’s natural resources to benefit country, say critics

The government’s mostly hands-off approach to natural resource development has led to big disparities between resource-having provinces and those that aren’t so lucky, says the Canadian Centre for Policy Alternatives.Canada needs to have a national conversation about how to develop its natural resources, divvy up the riches and deal with climate change, says Canadian Centre for Policy Alternatives executive director Bruce Campbell.“First and foremost there has to be a national conversation. I think the federal government has to take the leadership [role],” he said.The federal government’s generally hands-off approach to natural resource development has led to big disparities between resource-having provinces and those that aren’t so lucky, he said.“Economic imbalances and divergences between Alberta and the non-oil producing provinces have widened in the wake of the petro-boom. Alberta is rapidly distancing itself from other provinces in its revenue-raising capacity and its income per capita level, placing considerable strains on the federation. And the federal government is unwilling to counteract these trends by applying the principles of fiscal federalism embodied in the constitution,” Mr. Campbell wrote in his report, The Petro Path not Taken: Comparing Norway with Canada and Alberta’s Management of Petroleum Wealth, released January 2013. Mr. Campbell told The Hill Times the imbalance is clearly tilted in Alberta’s favour.“GDP benefits, 76 per cent of those benefits go to Alberta, 20 per cent of the benefits go to the U.S. and only four per cent of the benefits go to the rest of Canada,” he said.The imbalance is contributing to tensions between the provinces, he said.“Tensions within the federation can only grow, with this approach to the management of the resource, and management of petroleum wealth isn’t done with a much more active and interventionist…role for the state,” he said.

Though natural resources are a provincial responsibility, he said the federal government has a “big role to play” when it comes to the environment, inter-provincial trade, international trade and the fiscal disparity between provinces.The report compared Canada and Alberta’s natural resource management to Norway, which discovered a large deposit of oil in 1969. “That really started a conversation about how to manage this resource, and there was extensive consultation within civil society,” Mr. Campbell said of Norway.A similar conversation must take place in Canada, but “I’m not holding my breath” he added.

“The federal government has basically removed itself,” said Mr. Campbell. Last week Prime Minister Stephen Harper (Calgary South, Alta.) was in the Northwest Territories to announce a devolution agreement between the two governments. In 2014, Ottawa will no longer have the power to approve or reject resource developments in the territory. The deal could be worth up to $65-million in yearly natural resource royalties, and will include another $65-million annually from the feds to manage the territory’s new responsibilities.Over summer 2012, provinces, led by Alberta Premier Alison Redford, called for a national energy strategy. The talks cooled after B.C. Premier Christy Clark said she would not discuss a plan until the

province’s demands on the Northern Gateway pipeline were met. Last September, Minister of Natural Resources Joe Oliver (Eglinton-Lawrence, Ont.) said that the federal government is already managing the areas provinces have outlined, but it doesn’t call its work a national energy strategy because of that label’s bad reputation in the West.In the meantime, provinces are working together to streamline regulations and innovate. This is an issue for federal, not provincial leadership, said Mr. Campbell. “This is not a government that attaches a great weight to collective action, but I think the necessity of it going forward is going to reduce the chance to even choose,” said Mr. Campbell. At the Canadian Energy Research Institute’s annual natural gas conference in Calgary, Alta. last week Public Works Minister Rona Ambrose (Edmonton- Spruce

Grove, Alta.) said that the natural resources industry remains a priority for the government.“We continue to put in place the conditions that will help to ensure that Canada’s natural gas and other resource industries can compete in this new marketplace,” she said.In 2011, the value of all of Canada’s natural resources was $1.4-billion, according to Statistics Canada. Almost two-thirds, or 63 per cent, of that wealth was due to energy resources, like bitumen, crude, coal and natural gas, while minerals accounted for 26 per cent and timber 11 per cent. The CCPA report makes a number of recommendations to the federal and provincial governments on how to maximize Canada’s resource wealth while minimizing climate issues and inequality.Mr. Campbell suggests that the federal government gradually increase its taxes on natural resources as the economy improves and use the money to create a federal prosperity

fund, similar to one in Norway. In 1996 Norway began contributing oil profits to a prosperity fund. The money is invested abroad and the government puts any returns into the budget. At the time of report, the fund was worth $664-billion, but that has since increased to more than $700-billion, said Mr. Campbell. “Norway is the best example in the world when it comes to sharing the wealth with future generations. It has consistently put aside part of its resource surplus into the Government Pension Fund. As a result, Norway currently holds one of the largest sovereign wealth funds in the world,” Conference Board of Canada analysts Todd Crawford and Alicia Macdonald write in their report, Opportunity Lost? Alberta Is Facing Short and Long-Term Financial Challenges Despite its Oil Wealth, released February 2013.“While Alberta does save a portion of its resource royalties, it has the potential to save much more,” they write.

In the 1970s, Alberta premier Peter Lougheed started a Heritage Fund for the province, but for the last 20 years it has not received any major investments. It’s currently worth $16-billion. The province also has a sustainability fund, started in 2003, that is used to cover short-term budget shortfalls. It is worth $691-million.Federally, the government only receives revenues from natural resources through the general corporate income tax. Mr. Campbell said that after subsidies to the resource industries are taken in to account, their tax rate is seven per cent. In the 2012 budget, the government estimated it would collect $34.3-billion in corporate taxes in 2013-2014. The 2013 budget will be announced March 21. If Canada started a similar fund to Norway, the money could be used for infrastructure and other domestic priorities, said Mr. Campbell.Under Mr. Lougheed’s direction and PM Pierre Trudeau’s National Energy

Program, Canada was heading down a similar path to Norway, he noted. “But I think they took a heavy-handed approach, they didn’t consult in a way that was conducive to reaching a consensus,” he said.The National Energy Program of the 1970s introduced measures to maintain Canadian ownership of the oil sands and lower oil prices to maintain a supply to the east. Alberta and private companies were opposed to the federal intervention and greater taxation, and it’s deeply unpopular in Western Canada to this day.The program was ditched by the Mulroney government in the 1980s. “Government has played a passive role ever since,” said Mr. Campbell. In the report he notes that with NAFTA, Canada lost some of its prerogative to intervene in the resources industry. The report also recommends the creation of sector councils to advise the government, and to promote value-added industries, like refining, related to resources. Currently, two-thirds of Canada’s energy exports are unprocessed, which Mr. Campbell says is a “dramatic shift” from the 1990s. But building refineries or other processing centres is an expensive prospect, said Len Coad, director of energy, environment an technology policy at the Conference Board.“Building those refineries, upgraders, whatever they are, is a very expensive proposition. There have been no new refineries built in North America for decades,” he said.

Other policies could support sustainability research and development and skills training that’s better coordinated between the federal and provincial governments. The next budget is said to focus on labour shortages and enhancing worker skills in close cooperation with the private sectors and provinces. The federal government is also reportedly looking at how to track the effectiveness of its $2.5-billion in labour market transfers to provinces a year. The government also needs to step up its commitments to energy efficiency and mitigating climate change, said Mr. Campbell. “It is time for governments at both levels to recognize that inequality and climate change issues can only be solved through collective action, which is to say, through bold public policy initiatives,” he writes. The federal and provincial governments should also eliminate the $2.8-billion in subsidies they give to the petroleum industry, and invest that money together in a fund that encourages climate change research and other environmental initiatives, like public transit. While the federal government is seemingly reluctant to play a greater role in natural resources policy, Mr. Campbell said “this is not a statement that the situation is hopeless in Canada—because I think it’s not.” RES Canada Announces the Completion of Alberta’s Largest Wind Project

Renewable Energy Systems Canada Inc. (RES Canada), a leader in the construction of wind and solar projects in Canada, is pleased to announce the completion of Halkirk Wind, the largest wind project completed to date in Alberta. The 150MW project hosts 83 Vestas V90 1.8MW turbines and is owned by Capital Power LP, a subsidiary of Edmonton-based Capital Power Corporation.RES Canada served as the balance of plant contractor for Halkirk

Wind. Despite the challenging environmental conditions presented by the extremes of Alberta’s winter and spring weather, and significant delays caused by heavy rains and an early spring thaw, RES Canada completed the project in just 14 months, on budget and ahead of schedule.

“RES Canada is proud to have constructed Alberta’s largest wind farm,” said Peter Clibbon, Vice President of Development for

RES Canada. “The province has abundant wind resources, and we look forward to working on other projects like Halkirk, which will drive investment and create jobs.”At its peak, RES Canada had up to 360 skilled workers on site for the civil and electrical works associated with this large project. The $346 million project is located in central Alberta near the town of Halkirk and will provide enough clean, renewable energy to power approximately 50,000 average Alberta homes.Halkirk Wind’s electricity is sold into the Alberta spot market, and Pacific Gas and Electric Company (PG&E) is purchasing the Renewable Energy Credits (RECs) under a 20-year fixed-price agreement.Halkirk Wind marks RES Canada’s growing position in western Canada. The company is also constructing the MATL (Montana-Alberta Tie-Line), a 345 km high-voltage power line between Lethbridge, AB and Great Falls, MT. RES Canada has 631MW of wind and 30MW of solar built or under construction in Canada, including the 270MW South Kent Wind project, Ontario’s largest wind farm.

direCt energy regulated serviCes announCes natural gas rates for april

2013

Direct Energy Regulated Services has announced default natural gas rates for April 2013. These rates will apply to customers who

have not chosen a competitive supplier within the ATCO Gas North and South service territories. The rates have been verified by the Alberta Utilities Commission.North Service TerritoryThe North territory includes customers living in and north of the City of Red Deer. For customers in the ATCO Gas North service territory, the April regulated natural gas rate is increasing from the March rate of $2.931 per GJ to $3.762 per GJ. This rate reflects a market price for April supplies of approximately $3.310 per GJ as reported by the NGX, and incorporates an adjustment of $0.452 per GJ for March and prior months. The typical residential gas bill for April based on an average 9 GJ of consumption would be approximately $101 in the North.South Service TerritoryThe South territory includes customers living south of the City of Red Deer. For customers in the ATCO Gas South service territory, the April regulated natural gas rate is increasing from the March rate of $2.844 per GJ to $3.472 per GJ. This rate reflects a market price for April supplies of approximately $3.310 per GJ as reported by the NGX, and incorporates an adjustment of $0.162 per GJ for March and prior months. The typical residential gas bill for April based on an average

9 GJ of consumption would be approximately $85 in the South.Further information on regulated gas supply and a complete list of competitive retailers can be found on the Alberta government’s customer choice website at: w w w . u c a h e l p s . g o v . a b . c a .In the North Service Territory, how will a typical bill this month compare to previous months based on 9 GJs? April 2013, a typical residential bill will be $101 April 2012, a typical residential bill was $77 March 2013 (based on 15 GJ), a typical residential bill was $121In the South Service Territory, how will a typical bill this month compare to previous months based on 9 GJs? April 2013, a typical residential bill will be $85 April 2012, a typical residential bill was $63 March 2013 (based on 15 GJ), a typical residential bill was $103How does this month’s market price compare to last month?The regulated rate is based in part on the current market view of natural gas prices for the month, as reported by NGX: As of the time the rate application was filed, the market price for April was $3.310 per GJ. The market price last month at the time of filing was $2.842 per GJ. Last month’s actual market price was approximately $3.14 per GJ.The formula used to calculate the regulated rate accounts for any over-or under-recoveries of actual gas costs arising from differences in: normal and actual weather, which affects the volume of

natural gas consumed; and forecast and actual market prices occurring in April and prior months.Why do natural gas prices fluctuate?Natural gas prices are set in an open and competitive market, and are influenced by many variables throughout North America and the world. These variables include supply and demand, production and exploration levels, storage injections and withdrawals, continental weather patterns, pricing and availability of competing energy sources, and market analysts’ views of future trends in any of these or other variables. Natural gas prices in Alberta are not typically a function of localized weather.Why are North and South regulated natural gas rates different?DERS is required by the Alberta Utilities Commission to purchase natural gas for ATCO Gas’ North and South systems separately. Each system has slightly different load, weather, and supply characteristics that result in a different mix of Monthly and Daily Index purchases.

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