Pipeline Oil Spills in BC – an anomaly or harbinger of future?

Buried in the back pages last week was a story about an oil spill from Terasen’s pipeline that contaminated creeks and land near Abbotsford.

Local residents are worried about the spill contaminating their wells and harming local livestock and the failure for government or Terasen staff to notice the spill until four days after local residents complained of the foul smell. Neither Terasen, the company whose pipeline caused the spill or the government has disclosed how much oil actually spilled.

While the story of Terasen’s oil spill leak is noteworthy, the circumstances surrounding it could be a harbinger of future problems.

Most British Columbian do not realize it yet, but BC is about to become the battleground in the geopolitical struggle for control of oil. The struggle is expressing itself as a race to open new pipeline to ship tar sands crude to new markets in the U.S. and China.

Currently there are three competing proposals to move tar sands oil. Two in BC and Tran Canada’s Keystone pipeline from Alberta to Illinois.

The competing BC pipelines are the

  • Enbridge’s $2.5 billion 1,200 km Gateway project, which would connect the tar sands, with BC’s west coast, for delivery by tanker to California or China.  Enbridge’s Gateway project is an expensive way to move oil to west coast US markets, so Enbridge appears more interested in Chinese shippers. In April, Enbridge announced a memorandum of understanding with PetroChina International Company Ltd, which will eventually secure approximately half the capacity on the Gateway project for PetroChina. The U.S. which is becoming increasingly concerned about competing for oil with China will soon take notice. Enbridge is also proposing the $1.7 billion, 150,000 bpd parallel Gateway Condensate project pipeline project, which would run alongside the oil pipeline, but in the opposite direction. This pipeline would transport imported condensate to the tar sands. Enbridge estimates that it can save $600 million by building the two projects simultaneously.
  • Terasen is proposing the Trans Mountain Expansion project (TMX) which would expand its existing Trans Mountain oil pipeline which carries 225,000 bpd of Alberta oil to Vancouver and Washington State. TMX will increase that capacity by stages, to 850,000 bpd by 2011. Subsequent expansion of the system to Vancouver or a possible “Northern Option” from Alberta to Kitimat or Prince Rupert is proposed for subsequent capacity increases.

Despite the puffing in the media, not all three projects will go ahead. There isn’t a business justification for all three, which would lead to three underutilized pipelines and conflicting pressures to drive down rates and to drive them up. Therefore, the first company to get regulatory approvals and financing wins. Consequently, all three companies are likely to be quite aggressive in advancing their respective projects.

However, which project goes ahead will be determined by factors largely outside the control of the companies and regulators.

The two biggest of these risk factors are First Nations’ opposition because of infringements to their Aboriginal title and rights and oil tanker routing. Obviously, these are issues largely isolated to the projects sited in British Columbia. We will be writing extensively on both of these issues in the coming months.

Until then however, the recent Terasen spill raises serious questions about whether British Columbians should not begin to pay more attention to the role we are being asked to play in the global fossil fuel picture.

Condensate is a mixture of chemicals and petroleum byproducts used to dilute bitumen or other oil products to allow it to be shipped through pipelines.

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