‘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.