Politicians and industry have long boasted of the ability for an expanded Trans Mountain pipeline to get oil to lucrative Asian markets from Burnaby’s Westridge terminal.

But experts in Washington State are increasingly concerned that the twinning of the Edmonton-to-Burnaby pipeline may in fact lead to an expansion of the Puget Sound Pipeline, a 111-kilometre “spur line” from Trans Mountain that branches southward at Abbotsford to carry oil to four large refineries in the Puget Sound region.

If Kinder Morgan shareholders vote to approve the deal, Canada will purchase the Puget Sound Pipeline as part of the $4.5 billion deal for the existing Trans Mountain line — meaning the decision to expand the spur line would eventually fall to Ottawa.

Trump may use Puget Sound Pipeline to punish Canada for trade conflict

According to a recent analysis from the Cleveland-based Institute for Energy Economics and Financial Analysis, the presence of the Puget Sound Pipeline in the $4.5 billion sale to Canada may end up being the very thing that scuttles the deal.

That’s because the U.S. government is required to approve the purchase as it crosses the border, including review by both the Committee on Foreign Investment in the United States and State Department.

President Donald Trump would ultimately decide the verdict of the deal — which he may oppose given his erratic approach to addressing ever-growing trade tensions between the two countries.

The reports authors conclude the Puget Sound Pipeline could theoretically be removed from the deal, but it’s no easy task.

“It would probably further delay this,” Kathy Hipple, financial analyst at the institute and co-author of the report, told The Narwhal.

“They would have to work again, re-draft the contract. Lawyers would have to be involved, new documents drawn up, a new price tag put on the deal,” she said, adding the change would raise a new tranche of questions: “what is the valuation of [the Puget Sound Pipeline] and how does that reduce the price from the $4.5 billion if it’s not included?”

“It’s not as simple as an eraser on a pencil and taking the price down,” she said.

Despite the potential challenges of the transaction, others say there is an appetite for an expanded pipeline south of the border.

“I could see it happening very easily,” Mike Priaro, a Calgary-based independent oil and gas consultant, said in an interview with The Narwhal.

“Those refineries in Puget Sound would want to get the cheapest crude they could get their hands on. Sending it by pipeline from the oilsands directly to the refinery is the cheapest way to get crude there.”

The Trans Mountain pipeline meets the Puget Sound pipeline in Abbotsford, where the oil can be carried south into Washington State. Graphic: Carol Linnitt / The Narwhal

A report by Morningstar Commodities Research in January 2017 concluded that “some if not all Washington State refiners are very keen to get their hands on Canadian crude” and that the Trans Mountain expansion “will end concerns about limited crude supply for Puget Sound refineries.”

Kinder Morgan Canada’s prospectus for an initial public offering a few months later, in May of 2017, referenced the possibility of a Puget Sound Pipeline expansion — five times.

Specifically, it reported that the Puget Sound pipeline system is capable of being expanded from approximately 240,000 barrels per day to approximately 500,000 barrels per day.

Two-thirds of oil shipped on Trans Mountain ends up in Washington State

Most of the oil transported on the existing Trans Mountain pipeline already ends up going to refineries in Washington — either by pipeline or tanker.

According to data from the National Energy Board, an average of 295,600 barrels of oil per day was transported on the Trans Mountain pipeline in March 2018, the most recent month of reporting.

About 62 per cent of the oil went to Washington State via the Puget Sound Pipeline.

Another 21 per cent went to the Westridge terminal, while the remaining 17 per cent was transported to Burnaby for distribution, refining or storage. The Burnaby refinery, recently sold to Parkland Fuel by Chevron, has long complained about lack of supply because most of the oil is designated for exports.

Washington State’s Department of Ecology reported that between January and June 2018, an average of 163,500 barrels per day of oil was transported from Alberta via the Puget Sound Pipeline.

All of the oil that made it to Westridge was “domestic heavy,” or diluted raw bitumen from Alberta.

That’s opposed to “domestic light,” which includes conventional oil and bitumen upgraded into high-quality synthetic crude — and is primarily shipped to Washington refineries via the Puget Sound Pipeline. Some diluted bitumen also arrives at Washington refineries by tanker or barge from Westridge, with more shipped to California. Some oil is also transported from Alberta to Washington by rail.

Between January and June 2018, 1.55 million tonnes of crude oil (the Port of Vancouver measures oil in tonnes rather than barrels) was shipped from Westridge on tankers and barges. Of that, 92 per cent went to the United States (while 4.8 per cent went to South Korea in April and three per cent went to China in May).

This is an overall increase from previous years. For comparison, only 1.77 million tonnes of crude oil was shipped out of Westridge in all of 2017.

Washington State has limited ability to process heavy oil — but that could change

Historically, Washington refineries have relied on oil from the Alaska North Slope.

But production has collapsed in recent decades, down to only 525,000 barrels per day (bpd) in 2018 from over two million barrels per day in 1988. About a quarter of Alaska Slope supply was replaced by oil from the North Dakota shale boom, transported by rail.

Imports from Canada almost doubled in that time, from an average of 110,000 bpd in 2009 to 195,000 bpd in 2016 via the Puget Sound Pipeline.

Only two of the five refineries in Washington State have “coker units” that are required to process non-upgraded bitumen from Alberta. Combined, the two refineries have 83,000 bpd in coking capacity, which limits the amount of heavy oil the region can process. As a result, most of the Alberta oil imported to the region has been conventional or synthetic crude (already upgraded in Alberta).

Morningstar advised the two other refineries to upgrade their facilities to accept heavy oil.

Alberta oil processed by a coking refinery was much more profitable than other types of oil in 2016 at Puget Sound refineries: $24 per barrel, compared to $10 per barrel for Bakken oil and $6 per barrel for Alaska oil.

Washington ports deeper than Vancouver’s, allowing bigger tankers

If there’s not currently much demand for heavy oil in Washington State, what’s the concern?

For starters, an expanded Puget Sound Pipeline would allow refineries to rely far more heavily on Alberta oil, encouraging them to invest in coking units that maximize returns. The future of Alaska North Slope oil is currently uncertain compared to oilsands imports, which offer a stable long-term option.

This alone could justify an eventual and significant increase in capacity.

But there’s also speculation that Puget Sound could become an export terminal of its own.

The Westridge terminal in Burnaby — which will soon belong to the Canadian government, pending approval from Kinder Morgan shareholders — has serious depth restrictions that limit loading to Aframax-size tankers, which can only be partially filled with about 500,000 barrels.

Comparatively, BP’s Cherry Point terminal in Washington State’s Whatcom County can receive Very Large Crude Carriers (VLCC), with tankers docking in late 2017 carrying 900,000 barrels — almost double the capacity of Westridge.

“The reality is those Aframax boats are not great for international shipping,” Clark Williams-Derry, director of energy finance at Sightline Institute, told The Narwhal.

“Westridge is always going to be a crummy place for the Government of Canada to be shipping oil out of because you’re going to boost the cost by a few bucks a barrel, at least.”

A BP spokesperson recently told The Seattle Times that it “plans to process any additional Canadian crude coming to the Cherry Point refinery within the facility.” However, the refinery only has 57,500 bpd in coking capacity, so it’s unclear how it could process a significant increase in imports.

Either way, the idea of increased availability of various products from the Alberta oilsands would likely appeal to both producers and refiners.

Considerable opposition to fossil fuel expansion in Washington State

But a doubling of the Puget Sound Pipeline wouldn’t be an easy thing to pull off.

The owner — soon to be Canada — would have to twin the pipeline, add some additional pumping stations and build a tank farm at a refinery.

“It would be one of the most unpopular things you could do in Whatcom County,” Alex Ramel, extreme oil field director with the environmental advocacy group Stand.earth, said of the prospect.

Washington Governor Jay Inslee has condemned the Trans Mountain expansion but as Victoria Leistman of Sierra Club points out, he hasn’t specifically addressed the potential of a Puget Sound Pipeline also being widened or twinned.

“If there’s any risk for this to be expanded, we need him to explicitly put that to bed,” she said.

Tara Lee, deputy communications director of Governor Inslee, said the Puget Sound Pipeline is on his radar.

“We have concerns about that expansion that mirror the concerns the governor has expressed about the Trans Mountain Expansion,” Lee told The Narwhal in an e-mailed statement.

“If there is a change in operations with the Puget Sound Pipeline expansion, then they must work with our state Department of Ecology spills program.”

Williams-Derry said it would be complicated given a recently renewed six-month temporary moratorium by Whatcom County Council on exports of unrefined oil from Cherry Point, which may eventually lead to a permanent ban.

And there’s precedent for activism stopping fossil fuel export projects in the area. In 2016, the local Lummi Nation successfully fought a proposed coal export terminal.

But Williams-Derry emphasized there are still potential profits on the table: “Just because there’s political opposition here — there may actually be a bunch of people in the oil industry who really want to make that happen.”

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The National Energy Board’s decision to grant Costco intervener status in its review of the Kinder Morgan Trans Mountain pipeline even though it had missed the deadline to apply is raising questions given that the U.S. Environmental Protection Agency (EPA) was denied its request for an extension to the same deadline.

Costco submitted a late application to participate in the review of Kinder Morgan’s proposal to triple the capacity of its pipeline to Burnaby on April 9, 2015. The company argued that it received formal notice of the pipeline’s potential impacts on its Langley property on Feb. 4, 2015, when it was served with notice for land acquisition.

In a letter sent to all interveners, the National Energy Board wrote that Costco had provided sufficient reasons for the board to consider a late submission based on the fact “the project may cross Costco’s lands and it has the potential to be directly affected.”

American authorities are nervous about Kinder Morgan’s proposal to increase oil tanker traffic by a factor of seven through the shared waters off B.C.’s coast, particularly in light of the recent slow response to a small fuel spill in Vancouver Harbour.

“A catastrophic oil spill would set the Puget Sound clean-up effort back decades, and result in billions of dollars in harm to our economy and environment,” the state’s Ecology Department officials wrote to Washington Governor Jay Inslee in 2013 in documents obtained by the Globe and Mail.

The officials also raised red flags about Canada’s oil spill response capability, writing: “B.C. lacks authority over marine waters, and their federal regime is probably a couple of decades behind the system currently in place in Washington State. … When it is spilled, we are concerned that dilbit oil may be considerably more toxic and damaging, and far more difficult to clean up, than conventional crude from Alaska.”

The documents also indicate that American officials urged the U.S. to sue the NEB for barring the EPA from participating in the hearings on the grounds that it had missed the deadline to apply.

Ultimately, the EPA was granted a lower status as a “commenter,” which does not provide the same ability to provide sworn evidence or ask questions of the proponent.

Asked why Costco was granted intervener status when the EPA was not, National Energy Board Communications Officer Tara O’Donovan told DeSmog Canada that the EPA never officially asked for intervenor status — instead, they asked for an extension to the deadline to apply. The board denied that request in this ruling “as the EPA had not outlined how it would be impacted if it was not able to submit a late application.”

“This letter did not provide any information about the EPA’s mandate, why it sought participation in the hearing, or whether it sought intervenor or commenter status. The Board is required by natural justice to make each decision solely on the basis of the information filed on its record,” O’Donovan wrote via e-mail.

The EPA subsequently filed a late application to participate as a commenter, which “included further details on the agency and the relevant information or expertise it could provide to the board.” The board then granted the EPA commenter status in an April 2, 2014, ruling.

The Globe reported this week that EPA officials wrote in e-mails that the NEB’s decision was contrary to the boards’ obligations under Canadian law. The Canadian Environmental Assessment Act requires the NEB to “consult and co-operate” with the EPA.

 “It does appear that NEB should have consulted with the U.S. (and, in turn, EPA and other such agencies) given the scope of the project which will increase tanker traffic in the [Puget] Sound. … NEB never actually sent out an offer to consult as contemplated by Section 18 of the CEAA,” wrote Courtney Weber of the agency’s Seattle office in the documents obtained by the Globe.

The National Energy Board is expected to make its recommendation to the federal government by January 2016.

The board has been criticized for eliminating all oral cross-examination of evidence during the Trans Mountain review. Many of the province of British Columbia's questions — including its request to see Kinder Morgan's oil spill response plan — have been refused. The City of Burnaby says only three of its last 217 questions were answered.

In late March, several B.C. mayors declared non-confidence in the National Energy Board and called on the federal government to put the current process on hold. The mayors also called  upon the Government of British Columbia to re-assert its role in environmental assessment and to establish a provincial process to assess the Trans Mountain proposal.

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Kinder Morgan, the company currently seeking permission to nearly triple the capacity of the Trans Mountain pipeline to carry Albertan crude to the west coast, has engaged in a protracted fight with the province of British Columbia in an effort to keep its oil spill response plans a secret.

The company alleges its motivation has to do with ‘security concerns’ although a look back at the to and fro with the province of B.C. paints a story of either incompetence or pure, defenseless hubris.

Either way, what Kinder Morgan is refusing to produce for B.C. and other intervenors in the pipeline review process, the company willingly disclosed south of the border for portions of the pipeline that extend to Washington State.

A read through the detailed spill response plans Kinder Morgan has in place for the U.S. shows just how far the company went to prove they can handle a pipeline spill. 

It also highlights how outlandish it is that Kinder Morgan has not released similarly-detailed plans to the province of B.C.

It is also troubling that Kinder Morgan expects the government of B.C. to consent to a massive pipeline expansion — the proposal calls for a twinning of the pipeline which would lead to a fivefold increase in tanker traffic — without adequate assurances the best available emergency plans are in place.

So, what did Kinder Morgan tell Washington State that it refuses to tell B.C.?

1. Details for every unique section of the pipeline

In its Emergency Management Plan (EMP) documents released to regulators in Washington State, Kinder Morgan provides detailed information about every individual section of the pipeline, including the thickness of the pipeline’s walls, where it crosses water, the location of shutoff valves, peak volumes and a ‘spill volume profile’ for each geographical 'zone' of the line.

A map from Kinder Morgan shows worst case scenario spill zones.

1. Worst case scenario plans for five individual zones

Based on previous spill data going all the way back to 1955, maximum flow rates and maximum shut-down response time, Kinder Morgan estimates what the worst case discharge might be for any given segment of the pipeline. The company uses these estimates to plan detailed spill response measures. It even calculates for elevation, adverse weather conditions, whether shut off valves are automated or manual and how these factors might help or hinder response efforts. The company also provides these details for storage tanks at terminals along the pipeline.

If that wasn’t enough, the documents show exactly how Kinder Morgan arrived at its estimates so the methodology can be evaluated independently.

1. Who exactly is responsible for spills in each individual location

Pipeline companies are obligated to obtain something called ‘mutual aid’ from spill response agencies and private companies expected to respond to a spill. Kinder Morgan lists every single company and agency it anticipates would respond to a spill from the Trans Mountain pipeline or terminals in Washington State. The company also lists ‘activation instructions’ outlining the steps to be taken in the event of a spill in order to draw upon the resources of their mutual aid partners.

Kinder Morgan also provided regulators with confirmation letters (example below) from numerous companies that agree to provide aid in the event of a spill. These letters include signatures from personnel at the managerial level providing the state with some assurance that response plans, equipment availability and other expectations have been previously discussed.

Kinder Morgan provided this letter of intent to regulators in Washington State to confirm NRC Environmental Services will provide spill response services. Kinder Morgan refused to supply the province of B.C. with similar letters of intent as part of the Trans Mountain pipeline expansion review process.

Kinder Morgan refused to provide B.C. with the names of agencies to be notified in the event of an emergency, leaving the province to question if the company is relying on out-of-province first responders which could lead to lengthy response delays.

Without such information, B.C. argues Trans Mountain has no “ability to substantiate the assertions it has made” about spill response preparedness in its application.

A side by side comparison of primary response contractors documentation demonstrates the extent to which Kinder Morgan redacted information provided to B.C.

1. What will be cleaned up, where, with what, and who’s bringing it

Not only does Kinder Morgan list all of the individuals, departments, agencies and companies it will rely on in the event of a spill, but also documents the skills and equipment each of these responders would provide.

For instance, O’Brien’s Response Management can supply highly-qualified personnel like Incident Commanders and Safety Officers. The Centre for Toxicology and Environmental Health can provide 24/7 professional air monitoring and environmental sampling and can arrive via the company’s KingAir 200 airplane if necessary. The company BakerCorp. will deliver ten 21,000 gallon tanks to a spill site within 12 hours and has enough pumps and hose to move 6,300 gallons of oil per minute.

Kinder Morgan also lists what the pipeline carries — crude oil, synthetic crude, or diluted bitumen — so first responders know in advance what they’ll face in the event of a spill.

1. Detailed spill response timelines for each zone

Forty-eight hour timelines are presented for each of the potential spill zones outlining how much oil could be recovered in the event of a spill, what equipment and how many people it would take.

For example, for zone 1 in Bellingham, Kinder Morgan estimates it could have 22 people on site within two hours of a spill. In addition it figures that within two hours, it could have 4,000 feet of oil boom for oil spilled in water and the capacity to store 381 barrels of recovered oil. Within six hours, the company estimates 137 people would be on site, with a total of 41,150 feet of oil boom and the capacity to hold 2,953 barrels of recovered oil.

Excerpt from detailed spill response plans released to Washington State regulators by Kinder Morgan. No similar documents were released for spill response plans in B.C.

Kinder Morgan redactions “excessive, unjustified and prohibitive”

Despite providing this information to regulators in Washington State, Kinder Morgan argued that for personal, commercial or security reasons the company would not disclose similar details to B.C.

In a motion the province of B.C. told the National Energy Board that Kinder Morgan’s redactions are “excessive, unjustified and prohibitive.” The province added that the withheld information “thwarts” their review of the project and “precludes a thorough understanding of Trans Mountain’s EMP by the [National Energy] Board and all intervenors.”

The province also argues that disclosure of emergency plans south of the border “renders inexplicable” the company’s insistence that it keep the information secret in B.C.

“That fact calls into serious question the legitimacy of Trans Mountain’s claim that what is presumably almost identical information ought, for ‘personal,’ ‘security,’ or ‘commercial’ reasons, not to be disclosed.”

Kinder Morgan Trans Mountain Puget Sound Field Guide by DeSmog Canada

Image Credit: Trans Mountain

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