David Black: It makes sense to build a refinery on the coast

Our country must focus on three vital things: develop more good jobs, because many are disappearing; build new businesses that can be taxed, rather than increase the burden on existing taxpayers; and improve our physical environment while we do this.

One obvious way to achieve this is to encourage “value-add” in the oil industry. Instead of exporting our crude oil to other countries, let’s process it here. Refineries can be built along B.C.’s coast employing large numbers of workers in good-paying jobs for decades and generating massive new taxes for our governments. (It is uneconomic to build export refineries in Alberta, which is why there are none there. All export refineries in the world are built on the ocean.)

Up to 85 per cent of a refinery’s annual operating cost is the price of the crude oil and the natural gas that it requires. Because Canada has large inexpensive reserves of these two resources consultants say that an export refinery near to the oil fields would be the lowest cost refinery on the entire Pacific Ocean. If we build it we can provide a substantial market for B.C. natural gas and help Alberta and Saskatchewan make 20 per cent more from their bitumen than if it is exported.

By keeping the refineries in our backyard we can also opt to decrease their CO2 emissions. Shipping diluted bitumen (dilbit) to any other country would result in far more global warming. A proposed refinery at Kitimat for example was going to save 23 million tons of CO2 emissions per year when compared to every other bitumen refinery in the world. That is equivalent to taking six million Canadian cars off the road forever. Some people were concerned about the proposal because they worried about increased emissions from within Canada. Should that be our concern or should we be working to reduce CO2 emissions globally?

Coastal refineries would also protect our ocean from dilbit. Dilbit differs from the conventional oil in Alaska-to-Washington tankers, which floats if spilled. There is only one published study that shows what would happen if there were a spill of dilbit in B.C.’s coastal waters. The study was thorough and overseen by Environment Canada, Fisheries Canada and Natural Resources Canada. It proves that because of all the grit in the ocean from B.C.’s glacial rivers, most of a dilbit spill falls to the bottom within three hours. There is no way to prevent that and no way to retrieve the dilbit so the ocean and fishery would be ruined for generations.

We are imposing carbon taxes on our oil industry. That made sense years ago when neighbouring countries were also promising to tax carbon emissions. However, it does not now because they did not. As a result companies worried about taxes are simply moving south of the border. Many, like Royal Dutch Shell, France’s Total, American ConocoPhillips, Norway’s Statoil, American Marathon Oil, and American Koch Industries have recently pulled out of Canada and increased production elsewhere. Carbon taxes are crippling our economy while accomplishing nothing to reduce global warming.

There is a better approach to reduce CO2 emissions in the oil fields. Governments should push for, and help support, pilot plants to test the use of cold solvent catalysts instead of hot steam and water, to melt the bitumen out of the sand formations. Most field emissions would then disappear.

One last point. Refineries are the source of most chemicals used by mankind. For that reason huge and fundamental industries locate near refineries to use the chemicals in manufacturing, scientific research and medical research. If we build large refineries we can capitalize on these associated opportunities too.

So, here are some common sense ideas to achieve the three vital needs:

Instead of punishing our oil companies with carbon taxes, and actually hurting our economy, let’s help them switch from using steam in the oilfields to cold solvent catalysts. Then let’s increase Alberta and Saskatchewan production in order to build more jobs, increase government tax revenues, and reduce CO2 emissions in other countries where emissions are high.

Instead of encouraging the oil industry to export our raw resources, let’s process them here and create several thousand new jobs in the refining and chemical industries, especially in B.C.’s northwest where they are badly needed, as well as more new taxes for governments.

Instead of shipping dilbit by pipeline to the coast, let’s transport dry inert bitumen by train. This will be less expensive because the rail lines across B.C. are in place and the distance is short. If and when a derailment occurs, backhoes can pick up the bitumen.

Instead of putting dilbit in tankers, let’s ship refined fuels that float and evaporate if spilled.

Instead of shipping dilbit to other countries, let’s build the greenest refineries on the planet in B.C., cutting the world’s CO2 emissions and producing the cleanest fuels on the globe. We would become a world leader in environmental refining, and other countries would follow.

Let’s use our common sense to improve things in Canada and the world. The added benefits would be economic growth, increased government tax revenues and a greener planet.

David Black is chairman of Black Press Ltd. and founder of Kitimat Clean. 

‘West Coast Exit’ For Canada’s Oil

By Geoffrey Morgan,  November 16, 2015

Forget tankers and pipelines, David Black has a plan for a ‘West Coast exit’ for Canada’s oil

Canadian PressDavid Black believes that given the recent government moves dimming the prospects of the Keystone XL and Northern Gateway pipelines his proposed refinery is the best option for Albertan oil exports.

CALGARY – David Black’s plan to build a $22-billion refinery on the coast of British Columbia has long been derided as a pipe dream. But Black believes that given the recent government moves affecting the Keystone XL and Northern Gateway pipelines his proposed refinery is the best option for Albertan oil exports.

Moreover, Black said in an interview he won’t need a pipeline to build and operate his proposed 550,000 barrel-per-day Kitimat Clean refinery on the north coast of B.C., for which he expects to file applications for federal and provincial regulatory approvals by Christmas.

“You’re going to have to focus on what it takes to get a West Coast exit for your oil, and God knows a West Coast exit is far more lucrative than a southern or an eastern exit,” said Black, the owner of Kitimat Clean Ltd. and the Black Press Group Ltd. newspaper chain.

Major oilsands producers have been unwilling to sign contracts with Kitimat Clean because, Black said, their executives didn’t know if the project would ever be built. And Kitimat Clean hasn’t been able to get financing without signed contracts with major oilsands producers.

Producers have had their hopes of new export pipelines dashed in the past two weeks, but Black said he was hopeful they will now take another look at his refinery proposal.

On Nov. 13, U.S. President Barack Obama rejected TransCanada Corp.’s application to build the Keystone XL pipeline after years of regulatory delays. A week later, Prime Minister Justin Trudeau said he would follow through on an election promise by asking Transportation Minister Marc Garneau to “formalize a moratorium on crude oil tanker traffic on British Columbia’s North Coast.”

Analysts have said a moratorium would hurt Enbridge Inc.’s plan to build the $7.9-billion Northern Gateway project between the Edmonton area and an export terminal at Kitimat, B.C. An Enbridge spokesperson said it is committed to the project despite the moratorium.

Black hasn’t met with the new federal government yet, but said Kitimat Clean would be unaffected by such a moratorium. “I don’t think that particular decision implies any problem with refined fuels,” Black said.

He added the Kitimat Clean proposal has been reconfigured in the past six months so that it is no longer dependent on a connecting pipeline. “I’ve gone to a place I never thought I would go: I started thinking about shipping it by rail,” Black said.

Canadian National Railway Co. has rail lines connecting Fort McMurray, Alta. and Kitimat.

“I’ve been talking to CN (Rail) and terminal operators in Alberta about how we ship 100 per cent bitumen,” Black said.

Oilsands bitumen needs to be cut with diluent, which turns the mixture into slurry, in order to travel through a pipeline. Black said that by using railway cars he could eliminate the need for costly diluent, potentially allowing producers to ship more bitumen to his proposed refinery without a pipeline.

“I think it might be a better way than the pipeline,” Black said, referring to potential spills and safety issues.

Unlike crude oil from southern Saskatchewan and North Dakota, oilsands bitumen (without diluent) has a low flash point and is unlikely to explode in the case of a train derailment.

“It makes all the difference in the world because you’re basically shipping something that’s fairly solid and then what you have to do is heat it up again at the other end,” Black said.

If he is able to attract the support of the Calgary oil patch and financing for the project, which he describes as the most environmentally friendly refinery in the world, Kitimat Clean could be operational in eight years.

It would take two years to go through the regulatory process, followed by six years of construction and, Black said, could operate without a pipeline.

Feasibility Study Complete

KITIMAT CLEAN LTD. PRESS RELEASE

December 4, 2014

We are pleased to announce that Hatch Ltd, a Canadian based worldwide engineering firm, has completed its seven month design and feasibility study for the Kitimat Clean Ltd heavy oil refinery. The report, consisting of some 270 pages, provides for a robust design which will enable the refinery to process 550,000 barrels per day of diluted bitumen from Alberta into 460,000 barrels of refined fuels. With a capital cost estimated to be $22 billion the refinery will be one of the ten biggest in the world and we believe the largest single project ever constructed in Canada.

The plant will employ approximately 3,000 operations people, at an estimated payroll of $300 million dollars. Most likely a further 3,000 direct jobs will be created in nearby petrochemical plants. These new manufacturing jobs will go a long way to mitigate the ongoing loss of employment in BC’s resource industries.

All levels of government will welcome the annual tax revenue from the refinery of approximately one billion dollars. The business plan is sound because the refinery will be the lowest cost producer in the whole of the Pacific basin.

As requested by Kitimat Clean, Hatch has configured the greenest heavy oil refinery in the world. CO2 emissions are expected to be in the order of 10 million tons per year which is one-third of the 33 million tons generated by a normal heavy oil refinery producing and burning coke by-product. There is a price to be paid for this, as the Kitimat refinery will cost $5 billion more than a standard coking refinery. The plant will also incorporate the best pollution control equipment in the world to control all other emissions, there will be no waste water, and power for the refinery will all be generated internally. If this refinery is not built in British Columbia, subject to Canada’s tough environmental regulations, it will be built in Asia and likely utilize standard coking technology with the result that approximately 100 rail cars of coke will be burned daily in the atmosphere.

One of the greatest advantages of this refinery has to do with the sea. All received bitumen will be converted into diesel, jet fuel and gasoline. Since these refined products float on water and evaporate, the consequence of any spill at sea is greatly diminished. A discharge of conventional crude oil or synthetic crude oil, on the other hand, is extremely difficult if not impossible to remediate, as we have learned from the Exxon Valdez disaster. In that case conventional crude oil was spilled. After four years of effort by up to 11,000 people only 7% was recovered. A bitumen spill would be far worse as much of it would sink in coastal waters like ours and not be recoverable, and the remainder would harden up on beaches and mudflats and be impossible to remove safely.

Locating the refinery in the best spot is critical to the economics and the environment. Most of the refined product will be exported and all export refineries are built beside the sea. (It would be uneconomic to locate this refinery in Alberta for example). The advantage of choosing a site near Kitimat and Terrace is that there is no need to transport diluted bitumen by pipeline or rail along the hazardous route beside the Skeena River.

Lenders are willing to put up the money for the refinery but insist on some skin-in-the-game from Canada. Therefore Kitimat Clean is offering compensation to the federal and provincial governments to obtain their debt guarantees. The federal government has stated that it will provide conditional approval given that the refinery is nation-building at its best and the best environmental solution for the planet.

Our next steps include applying for environmental permits, agreeing with the Kitselas and Haisla First Nations on acceptable compensation for the use of their traditional territory, negotiating feedstock contracts with oil and gas producers, negotiating offtake contracts and funding with Asian participants, and completing the last phase of the engineering preconstruction work. All of this work will require two years. Construction will take an additional six years.

 

David Black

President, Kitimat Clean Ltd.