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2013 CANADIAN OIL PIPELINES REPORT

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Oil Sands Development Continues to Drive Expansion Projects
By Bradley Kramer

Canada sits atop the third largest crude oil reserve in the world, with the Alberta oil sands, and the country also shares one of the most prolific formations of the shale oil and gas boom, with the Bakken region at the U.S. border in Saskatchewan. Continued demand from the United States and growing interested from Pacific Rim countries is driving pipeline expansion throughout the provinces.

Production from the oil sands is approaching 1.7 million barrels per day (bpd), according to a 2011 report by the Canadian Energy Research Institute (CERI). In “Economic Impacts of New Oil Sands Projects in Alberta (2010-2035),” the research group argues that the oil sands operations are central to the country’s energy industry, as well as significantly contributing to Canada’s GDP.

 

canadian-report

“Of the oil that Canada exports, both conventional and unconventional, almost all goes to the United States,” the report states. “On the other side of the border, the [United States] imports more oil from Canada than from any other country. The energy ties between these two nations are therefore tight, and the oil sands in particular are increasing in significance for both countries.”

The oil sands provide an economic boost to both Canada and the United States, according to CERI, as “investments made in new oil sands projects and the monies spent on continuing operations create jobs that, in turn, generate ripple effects throughout both of these economies.”

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CERI estimates that new oil sands projects will provide an additional $2.1 trillion (CAD) to the Canadian GDP from 2010 to 2035, while increasing employment from 75,000 jobs in 2010 to 905,000 jobs in 2035.

Furthermore, the investment and operation of these projected new oil sands projects in Alberta would make important contributions to the U.S. economy as well. CERI reports that the U.S. economy receives the second largest impact from Alberta’s oil sands after Alberta, with an expected $521 billion added to U.S. GDP by 2035 and employment growing from 21,000 jobs in 2010 to 465,000 jobs in 2035.

There are a number of oil pipeline projects currently under construction or awaiting approval from the Canadian government, many of which will expand already existing transportation systems that transport crude from the oil sands to various markets. What follows is an overview of those projects and their current progress:

Alberta Clipper Capacity Expansion

Location: Alberta, Manitoba
Stakeholder(s): Enbridge
Overview: Due to increasing demand for pipeline capacity, Enbridge is proposing to expand capacity to its existing Line 67 (initially known as the Alberta Clipper Pipeline) from 450,000 to 570,000 bpd. The Canadian portion of Line 67 is 1,078 km and transports crude oil from the company’s Hardisty Terminal in Alberta southeast to the Gretna Station in southern Manitoba. Line 67 then connects at the international border to the U.S. portion of the system and continues to Superior, Wis. The pipeline capacity expansion includes installation of one new mainline pump at eight facilities, four new mainline pumps and an electrical substation at the Metiskow Station and an addition of a metering terminal and booster pump at the Hardisty Terminal.

Progress: Enbridge Pipelines submitted its application for the project to the Canadian National Energy Board (NEB) in October 2012. Subject to receiving regulatory and environmental approvals, construction is scheduled to commence in May 2013, and anticipated construction completion and in-service timing is mid-2014.

Athabasca Pipeline Twinning Project

Location: Alberta
Stakeholder(s): Enbridge Athabasca
Overview: Enbridge is proposing to develop a new 345-km, 36-in. crude oil pipeline to provide transportation service for increased oil production in the Kirby Lake area in Alberta. The new pipeline would generally follow the company’s existing Athabasca Pipeline right-of-way, starting at the Kirby Lake Terminal, near Winifred Lake, Alberta, and ending at the Battle River Terminal, located in the Hardisty crude oil hub area. The project also involves two new pump stations.

Progress: Enbridge Athabasca submitted an application for the project to the Alberta Energy Resources Conservation Board (ERCB) in March 2012 and received approval in November 2012. The company expects to begin right-of-way clearing and pipeline construction in the Green Zone (Crown Land) once frozen ground conditions exist in December 2012. Pipeline construction in the White Zone (privately held land) is expected to begin in August 2013, and civil construction at pump station locations in October 2013. The planned pipeline in service is January 2015.

Bakken Pipeline Project

Location: Saskatchewan
Stakeholder(s): Enbridge
Overview: In the effort to connect Canadian energy resources with the U.S. Midwest, this 124-km, 16-in. pipeline began construction in August 2012 and went into service in January. The pipeline connects to the Enbridge Pipelines Inc. (EPI) mainline and will serve as a continuous, long-term source of supply to Eastern Canadian and U.S. Midwest markets, thus maintaining the long-term competitiveness of refineries in those regions. In its application to the Canadian Nation Energy Board (NEB), Enbridge requested approval to build and operate a new pump station along with the pipeline to transport crude oil from the Bakken and the Three Forks Formations in Montana and North Dakota to refinery markets in North America. With a starting point in Steelman, Saskatchewan, the pipeline will be linked to EPI’s mainline in Cromer, Manitoba. The NEB approved the project Dec. 22, 2011. The board has also given Enbridge Bakken approval to acquire and operate Line EX-02, which is currently owned by Enbridge Pipelines (Westspur) Inc. The capital cost for this project was estimated at $180.1 million.

Progress: The Canadian portion of the Bakken Pipeline is in service, but Enbridge continues to build an additional portion of the line in the United States. The company has also undertaken a number of other facilities and pipeline expansion projects related to the Bakken shale formation, including the PortalLink Reactivation and Reversal project. Meanwhile, reclamation activities are expected to continue until September.

Edmonton to Hardisty Pipeline

Location: Alberta
Stakeholder(s): Enbridge Pipelines Inc.
Overview: Enbridge proposes to construct and operate a new 181-km, 36-in. pipeline to transport crude oil from the company’s existing Edmonton Terminal to its Hardisty Terminal. The project also includes the construction and operation of a new initiating pump station at the Edmonton Terminal, construction and operation of two new pump stations at its existing Kingman and Strome stations, as well as associated facilities and infrastructure at its Edmonton and Hardisty terminals. The proposed pipeline right-of-way will be alongside and contiguous to an existing Enbridge pipeline right-of-way and other linear disturbances for approximately 96.6 percent of its length. If approved, the pipeline would deliver crude oil to other existing pipelines and facilities located in the Hardisty area, including delivery onto the Enbridge Mainline system.

Progress: Enbridge filed an application with the NEB in December 2012. The board is currently holding public information sessions on the project.

Line 9B Reversal and Line 9 Capacity Expansion

Location: Ontario and Quebec
Stakeholder(s): Enbridge
Overview: Line 9 is an existing 30-in. diameter pipeline with a current capacity of approximately 240,000 bpd, extending from Sarnia, Ontario, to Montreal, Quebec. The pipeline transports crude oil from areas such as the North Sea, West Africa and the Middle East, in a westbound direction. The scope of the proposed project includes reversing the flow of the 639-km section of Line 9 from North Westover, Ontario, to Montreal (Line 9B) by modifying existing facilities. After conducting a commercial open season for the project in May and June 2012, Enbridge confirmed additional demand to ship crude oil — mainly light crude oil — on the reversed pipeline from what had been originally anticipated. As a result, the company has proposed to expand the capacity of Line 9B from 240,000 to 300,000 bpd. The project will take place within existing Enbridge properties and rights of way with the exception of some temporary workspace required for the installation of a small new metering facility near Enbridge’s North Westover Station. The project work also includes facilities upgrades at a number of stations and terminals to account for the capacity increase.

Progress: Enbridge received approval from the NEB in July 2012 to reverse the flow on Line 9B running between Sarnia and North Westover, Ontario. The company filed an additional application with the board in November 2012 to approve the reversal of the segment of Line 9B between North Westover, Ontario, and Montreal, in addition to requesting an expansion of the entire Line 9 capacity from Sarnia, Ontario, to Montreal and a revision to the Line 9 rules and regulations tariff to allow transportation of heavy crude.

Norealis Pipeline Project

Location: Alberta
Stakeholder(s): Enbridge, Husky Oil Operations Ltd.
Overview: Husky Oil Operations chose Enbridge Pipelines (Athabasca) Inc. to construct and operate a new pipeline and associated facilities to transport blended bitumen from the Husky-operated Sunrise Energy facility to Enbridge Athabasca’s existing Cheecham Terminal, located about 60 km south of Fort McMurray, Alberta. The project proposal includes a new terminal, a 112-km, 24-in. pipeline from Hartley Terminal to the Cheecham Terminal, various facilities at the existing Sunrise Energy site, two new connector pipelines, approximately 9 km long, between the existing Sunrise Energy facility and the Hartley Terminal, and facilities at Cheecham Terminal.

Progress: Enbridge received full approval of the Norealis project from the Alberta Energy Resources Conservation Board (ERCB) in April 2011, and the company began construction that summer. The project is expected to be in service in winter 2013.

Northern Courier Pipeline System

Location: Alberta
Stakeholder(s): TransCanada Corp., Fort Hills Energy LP
Overview: TransCanada was selected by Fort Hills Energy to design, build, own and operate the proposed $660 million Northern Courier Pipeline project, which comprises a 90-km pipeline system to transport bitumen and diluent between the Fort Hills mine site and the Voyageur Upgrader located north of Fort McMurray, Alberta. The pipeline is fully subscribed under long-term contract to service the Fort Hills mine, which is jointly owned by Suncor Energy Inc., Total E&P Canada Ltd. and Teck Resources Ltd., and is operated by Suncor Energy Operating Inc. Northern Courier is conditional on and subject to the Fort Hills project receiving sanction by its co-owners and obtaining regulatory approval.

Progress: TransCanada has started engaging with Aboriginal communities and stakeholders about the pipeline route and has initiated environmental field studies. The company expects to file an application with the ERCB in early 2013. Pending all required regulatory and project approvals, construction is expected to begin in 2014, with an in-service date of mid-2016.

Northern Gateway Pipeline Project

Location: Alberta, British Columbia
Stakeholder(s): Enbridge
Overview: The Northern Gateway system would include two 1,177-km pipelines from Alberta to the British Columbian coastline, with associated storage tanks and terminals, at a cost of $5.5 billion. A 36-in. diameter oil pipeline would carry 525,000 bpd of crude westward from Edmonton, Alberta, to Kitimat, B.C., where the product could then be taken by ship to the Pacific Rim countries or U.S. markets on the West Coast. The second pipeline (20-in. diameter) would transport 193,000 bpd of natural gas condensate eastward. Condensate is used to thin petroleum products for pipeline transport.

Progress: The project is currently under review by the NEB joint review panel, which is expected to continue until mid-2013. Pending approval, construction would begin in 2014, with an in-service date of 2017.

Northwest Mainline Komie North Extension Project

Location: Alberta
Stakeholder(s): NOVA Gas Transmission Ltd. (NGTL), a wholly owned subsidiary of TransCanada PipeLines Ltd.
Overview: The proposed project involves the construction and operation of four new segments of pipeline and related facilities that would add another 166 km to what is commonly known as the Alberta System. The new sections would be built alongside or contiguous to existing rights of way over a distance of approximately 115 km, while the remaining portion, about 51 km long, would require new rights of way. The projected in-service date would be April 2014.

Progress: The NEB recommended partial approval of the project on Jan. 30. In its application, NGTL proposed to build a $333.2 million project consisting of two separate pipeline segments. The NEB recommended approval for the Chinchaga section, a 33-km pipeline loop running between the Chinchaga meter station and the Meikle River compressor station located about 76 km northwest of Manning, Alberta. The NEB did not recommend approval for the Komie North section, which is an extension to the Horn River Mainline and includes approximately 97 km of pipe, which is proposed to be located 110 km north of Fort Nelson, B.C. The board concluded that proposed toll treatment is inappropriate for the Komie North section, and NGTL’s evidence did not provide any alternate toll treatment for consideration, which led to the conclusion that this section was not economically feasible. The NEB also concluded that approval of the Komie North section, as proposed, would have negative commercial impacts on other parties. With regards to the design of the Komie North section, the board found that NGTL did not establish the need for a pipeline of the proposed size to go to Fortune Creek at this time. The board concluded that the Komie North Section is premature.

Woodland Pipeline Extension Project

Location: Alberta
Stakeholder(s): Enbridge, Imperial Oil Ltd.
Overview: The Woodland Pipeline is a 137-km, 36-in. pipeline that went into service in September 2012 to transport crude oil from the Kearl oil sands to the Cheecham Terminal, with an initial pipeline capacity of 200,000 bpd. Enbridge is developing a 385-km, 36-in. pipeline to extend the Woodland Pipeline. The project would also include two new two new pump stations, one at the Roundhill Station and the other at the Cheecham Terminal.

Progress: The ERCB approved the project in August 2012. Enbridge is in the process of completing design and engineering details, with construction expected to begin in 2013 and in in-service date of 2015.

This is not a comprehensive list of the oil pipeline projects in Canada. For more information about these and other projects, you can visit the NEB website at www.neb-one.gc.ca or the ERCB site at www.ercb.ca.
North American Oil & Gas Pipelines provides quarterly updates of oil and gas pipeline projects in the United States in Canada. The next update will be May, covering U.S. oil pipeline projects.

Bradley Kramer is managing editor of North American Oil & Gas Pipelines. Contact him at bkramer@
benjaminmedia.com.

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