Friday, July 19, 2013

Alberta oil export plan could use Alaska pipeline

By Tim Bradner
Alaska Journal of Commerce

Boats cruise past the Alyeska Pipeline Service Co.’s marine terminal where the 800-mile Trans-Alaska oil pipeline ends in Valdez, Alaska, Aug. 15, 2006. A new proposal could increase the flow through TAPS by adding Canadian oil, carried by rail or pipeline from Alberta to Alaska.

Boats cruise past the Alyeska Pipeline Service Co.’s marine terminal where the 800-mile Trans-Alaska oil pipeline ends in Valdez, Alaska, Aug. 15, 2006. A new proposal could increase the flow through TAPS by adding Canadian oil, carried by rail or pipeline from Alberta to Alaska.

Alaskans might get their long-sought rail connection with the Lower 48 paid for by Alberta oil producers.

They are now interested in shipping Alberta oil, including tar sands oil, to Alaska to be inserted into the Trans-Alaska Pipeline System and loaded on tankers in Valdez.

Another option is a pipeline to a possible Beaufort Sea port at Tuktoyaktuk, Northwest Territories. From there it could be shipped by tanker to markets in Asia via the Bering Straits.

Canadian provincial officials were in Alaska the week of July 15 to build support for new options to exporting landlocked Alberta oil.

“We’re pursuing all options, south, west, east and north,” Ken Hughes, Alberta’s energy minister, told the Pacific NorthWest Economic Region, or PNWER, annual meeting, being held this year in Alaska.

PNWER is a regional association of northwest U.S. states and western Canadian provinces, and includes Alaska, Yukon and Northwest Territories.

Shipping more of Alberta’s oil south to its traditional U.S. market is stymied by the stalled Keystone pipeline. Efforts to ship oil west and to export oil to Asia through a new pipeline to British Columbia are being opposed there.

Given that, Alberta is now looking north, Hughes said.

One option is the rail link or pipeline to Alaska that would transport oil to a possible connection with the Trans-Alaska Pipeline System at Delta.

TAPS, which is operating at one-third capacity, would then move the oil south to the Valdez Marine Terminal for loading on tankers.

The second option is shipping oil through the Beaufort Sea.

A study of a pipeline to Tuktoyaktuk is nearly complete, Hughes said in an interview, while an assessment of the Alaska plan is due to be finished by 2014. Alberta has retained two consultants, Calgary-based Canatec Associations International on the northern pipeline option and the Van Horne Institute and University of Calgary on the second proposal for rail.

G Seven Generations Ltd., a Vancouver, B.C. firm with connections to Canadian First Nations groups, has been pursuing the Alaska rail initiative for some time, Hughes said, and has been talking with Alaska state and industry officials.

Alberta has made a $1.8 million (Canadian) contribution toward the cost of the rail option study, he said.

David Ramsay, Northwest Territories’ Minister of Industry, said his province favors the northern pipeline option because it would provide an outlet for a shale oil play in the region as well as the Alberta oil, and would enhance the construction of a Mackenzie River valley gas pipeline someday.

A lateral connection with TAPS from that project is also being explored that would follow a northern route through Yukon Territory rather than the rail option being investigated by G Seven Generations, Ramsay said. It would offer better terrain conditions, he said.

Alaska officials were not available to comment on the proposals by Alberta but an influential legislator, state Rep. Bob Herron, D-Bethel, said the rail option, “will get a chilly reception here after the Quebec disaster.” Herron co-chairs the new Alaska Arctic Policy Commission.

Hughes said he doesn’t believe the Quebec tragedy will stem the growth of oil shipments by rail but that the oil and railroad industries will have to ramp up sharply on safety.

“The Quebec tragedy reminds us that if we’re to be able to handle the immense amounts of oil we see being developed we’ll have to up and game in all aspects,” Hughes said.

Representatives of G Seven Generations have made contacts in Alaska in recent months and have spoken of a rail system capable of moving up to 1 million barrels per day, but sources in industry said that number is far higher than would be realistic.

One engineering consultant familiar with the rail idea, asking to remain unidentified, says a technical hurdle will be the cost of heating the oil, or bitumen, in the rail tank cars as they are moved in winter through northwest Canada and eastern Interior Alaska, where winter temperatures can drop to as low as minus 70 degrees Farenheit.

There could also be technical problems if bitumen is shipped through TAPS, and the existing pipeline owners, who are also oil shippers and North Slope producers, would be concerned with the degradation of the quality and value of crude oil shipped in the pipeline if it were mixed with Alberta bitumen.

Also, building through hilly terrain through western Yukon Territory and discontinuous permafrost soils in eastern Interior Alaska pose big challenges to a rail or pipeline, the consultant said.

Another problem is that west coast U.S. refineries may be unable to refine the blended Alberta and North Slope crude oil if it is much heavier than the oil now being shipped. Several refineries on the west coast were built or adapted to efficiently process North Slope oil. As the volume of Alaska oil has declined and grown heavier because the changing types of oil being produced, the refiners have had to import lighter oil from Russia and other places to mix with Alaska oil.

If the oil is made even heavier by adding Alberta crude or bitumen it could complicate things for the refineries, resulting in lower values paid for the oil.

A spokeswoman for BP, one of the owners of the Alaska pipeline, said she could not comment on any discussions of the rail/TAPS option.

“The TAPS owners frequently get approached by people with ideas on how to increase the utilization of TAPS. As common carriers, we listen to them all, but those business conversations are confidential,” said Dawn Patience, spokeswoman for BP.

Meanwhile, Alaska Railroad Corp. spokesman Tim Sullivan said the state-owned railroad is still working on its own long-range plan for a rail extension from Fairbanks to Delta, and someday on to the Canada border.

The first increment of that is now under construction, a bridge over the Tanana River at Salcha, east of Fairbanks, Sullivan said. The bridge is dual road and rail and will initially be used by the U.S. Army, who is helping to pay it for it, but the bridge is an essential part of an eastern rail extension because the route must be on the south side of the river.

“We have to take this one step at a time, and the bridge is the first step,” Sullivan said. Route surveys have been done as far as Delta, and the hope is that the U.S. Department of Defense will help pay the costs to Delta to improve logistics for the missile defense facility there.

The extension on to Canada has always been a big question, but if Alberta oil shippers foot the bill along with sections of new rail from northern British Columbia through Yukon, the question will be answered.

University of Alaska minerals economists have done studies showing that rail transportation and less expensive transport costs could lead to more development of mines in Interior Alaska.

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