Alberta’s plan to get its landlocked oil to overseas markets by way of Arctic shores might just become a reality — and sooner than the stalled Northern Gateway or Keystone XL projects.
As the president of the Northern Gateway pipeline told a Calgary business audience on Thursday that a 2018 start date was “quickly evaporating,” the Alberta government was sitting on a new possibility to get its oil to overseas markets: the Arctic. And its first — albeit smallish — delivery could be as early as next year.
That was the conclusion of a newly released report, commissioned by the Alberta government last year, by Arctic petroleum consultants Canatec Associates International Ltd. It suggests that getting oil-sands bitumen to the Far North port of Tuktoyaktuk, N.W.T., could be a cheap, efficient and effective way to get Alberta’s landlocked bitumen to oil-hungry Asia.
The plan, until recently dismissed as dubious by some skeptics, may have finally found the right combination of winning conditions: a hunger for resource development in Yellowknife, a desperate need to find new markets for oil-sands bitumen, an aggressive push from the federal government to reduce environmental oversight in the territory, and the changing northern climate.
One of the biggest barriers for the so-called Arctic Gateway plan has long been the sheer logistical nightmare of moving the oil to a port along the Beaufort Sea.
But a technical report commissioned by the Alberta government last year, which has just been released, suggests a few novel ideas on how to transport the bitumen. The report’s authors — of Arctic petroleum consultants Canatec Associates International Ltd. — propose three potential options, all of which the report deems technically feasible. A pilot project using small test shipments could be started as early as next year, it said.
At its most ambitious, a northern pipeline project could make 35 million barrels of diluted bitumen a year available for trans-ocean export. Northern Gateway, by comparison, proposes to ship 190 million barrels a year.
The most basic scenario would see a brand new pipeline built, connecting Fort McMurray, almost as-the-crow-flies, to the far-north port of Tuktoyaktuk.
Yet, at some 2,400 km in length — more than twice as long as the proposed Northern Gateway pipeline to the B.C. coast — it, like Gateway, is bound to draw environmental controversy over possible risks to the territory’s pristine wilderness.
There is also the tricky matter of navigating the iceberg-laden waters of the Beaufort Sea.
But global warming has the potential to reduce many of the risks that, 20 years ago, might have frozen such an idea in its tracks. The report notes that a quickly melting Arctic would improve navigation, extend the shipping season, and decrease the risks associated with increased industrial activity on the permafrost. During those periods when the ice proves impassable, storage facilities could stockpile oil until the icebreakers can again clear the waters.
The report even says that the shrinking ice fields would allow oil tankers to cross the Northwest Passage and allow Albertan oil to reach Europe.
The authors, not to be accused of downplaying the importance of that scheme, write that a shipping route from Tuktoyaktuk to both Pacific and Atlantic markets would “be a revolution in global logistics, equal in impact to the opening of the Suez or Panama Canals.”
Another longstanding barrier in the past was the hurdles that stood in the way for outside development for the Northwest Territories — an interlocking regime of local oversight and approval for development projects.
But, in finalizing its devolution agreement last spring, the Harper government reduced the layers of oversight, centralizing the territory’s complex land- and water-board system into a single review board, akin to what exists in Alberta.
The board is appointed by the federal minister for Northern Affairs. The result is a far more streamlined approvals system that could well usher a new pipeline through in record time.
Following the release of the report, Northwest Territories Premier Bob McLeod said he was “heartened,” and that he’ll be meeting with his counterparts in Alberta to figure out the next steps.
“We’ve always said that there are significant resources that have been stranded for 40 years and we’re not going to leave them stranded for another 40,” Mr. McLeod told the Financial Post.
He said he expected a full plan could come online within four or five years.
One significant remaining gap in developing any such project is preparing for the contingency of an Arctic oil spill. The authors do point out that “Canada’s oil spill response system lacks the equipment, personnel and logistical capacity to effectively respond to oil spills in the Arctic,” something that must be fixed if this plan is to go forward.
The allure of becoming a shipping powerhouse has already piqued the interest of the territory’s government.
Wendy Bisaro, MLA for Frame Lake, which includes parts of Yellowknife, says that there’s definitely enthusiasm for the plan.
“It would be a huge boost to our economic development,” she says. “Cabinet, I think, is behind this sort of development.”
‘We’ve always said that there are significant resources that have been stranded for 40 years and we’re not going to leave them stranded for another 40’
Ms. Bisaro says the plan obviously needs to be environmentally sound before it moves forward.
But the unified board newly created by Ottawa could mean any proposal could be considered, and (if it met environmental standards) likely approved, in pretty short order.
From there, it would need the green light from the National Energy Board and from First Nations governments that govern much of the treaty-bound territory. While that might portend much of the same resistance Enbridge Inc. now faces in B.C. for the Northern Gateway proposal, local territory governments have proved themselves rather receptive to development — fracking projects in the region have been ramping up, with the support of First Nations.
The second, Plan B, route proposed by Canatec would extend an existing line, which connects the Alberta hamlet of Zama City to the Northwest Territories’ shale gas hub of Norman Wells. The downside with that plan is that the existing pipeline only has a capacity of about 40,000 barrels a day — a fraction of what other new pipelines can move.
The third option would have the oil head by pipeline to the Hay River Delta, where it would be loaded onto barges in the Great Slave Lake and sent up the MacKenzie River. Barge traffic wouldn’t be new to the river: it was a prime artery for steamboats during the gold rush. But communities nearby have been wary of increasing the limited number of ships that presently use the route.
For a risk-averse government, the report recommends that road or rail could be used to avoid the controversy that comes along with building such an extensive length of pipeline.
Alternatively, the authors suggest, the deep-water port in Churchill, Man. could be connected to this scheme in order to move oil through the Hudson Bay and into the Atlantic.
Dennis Bevington, the federal New Democrat MP for the Northwest Territories, says his party opposes virtually any pipeline project that would send oil overseas to be refined.
While the plan might be feasible, he says, there is a litany of issues for Northerners: pipeline safety, ecological effects of increased barge traffic, the need to upgrade the territory’s antiquated rail lines, and the fluctuating conditions of the Beaufort Sea.
In any case, a government report is only that: for the plan to come together, the industry itself would need to develop and submit a formal proposal.
A spokesperson for pipeline company TransCanada Corp. said there doesn’t yet appear to be much inclination to developing the North among the company’s shareholders and clients.
Enbridge says it never considered the Northwest Territories for the original Northern Gateway line.
But with interest growing in Alberta and the Northwest Territories, and this report revealing more promise than any previous assessments, the appetite may soon follow.