Global Forces Making Vancouver a Major Oil Port
China craves oil sands fuel. Ottawa wants to diversify its US market. So huge amounts of crude will have to pass through a risky Second Narrows.
Every few days, tankers freshly laden with crude from Alberta's oil sands squeeze through the shallow Second Narrows channel in Burrard Inlet, make their way through swift currents in the southern Gulf Islands and on towards offshore markets.
Vancouver -- the "world's greenest city" in the words of Mayor Gregor Robertson -- has quietly become a major outflow of what Greenpeace calls "the world's dirtiest oil." This unlikely circumstance has happened with virtually no public debate and is driven by geopolitical forces now converging on the place many regard as the birthplace of the environmental movement.
Those forces include:
China's hunger for oil and investment in the Alberta oil sands.
Washington's emerging resolve to regulate against high carbon emitting fuels like the oil sands.
And Ottawa's resulting desire to find alternative Asian markets for oil sands oil.
Add in stolid First Nations resistance to a proposed pipeline from the tar sands to Kitimat, and all these powerful pressures converge on the aptly named Second Narrows, which already has seen its oil tanker traffic rise precipitously in the past decade.
A $200 billion need for new outlets
Vancouver was not envisioned as a major crude oil port. The pipeline from Alberta to Burnaby and Bellingham, Washington has been in existence since the '50s and originally supplied four refineries in Burrard Inlet with conventional oil from western Canada.
Three of those refineries have since closed. The current owner of the pipeline, American energy giant Kinder Morgan, recently expanded capacity to 300,000 barrels per day "...to transport growing volumes of product from Alberta's oil sands." Crude shipments from Vancouver have increased almost tenfold since 2001.
The occasional transit of surplus crude from Vancouver using comparatively small vessels has now become regular shipments using the largest class of tankers that can navigate the narrow and dangerous confines of Burrard Inlet.
The driver of this transformation is the Alberta oil sands, which saw production climb to 2.72 million barrels of synthetic crude last year. The vast majority of this oil and bitumen is transported by pipeline to U.S. refineries, where it now supplies eight per cent of domestic demand.
But companies that have so far invested $200 billion in northern Alberta remain vulnerable to an almost complete reliance on American markets. Growing concern about climate change and the election of Barack Obama mean that the enormous carbon footprint of the oil sands may eventually become a cost to producers.
Proposed carbon pricing legislation in the U.S. as well as low carbon fuel standards being adopted by California and other states could make many oil sands projects marginal or entirely uneconomic in future.
A recent assessment by Citi oil analysts warned investors that Alberta syncrude "...is not a fuel source that sits naturally within a low carbon economy and is unlikely to be a strategic winner as climate regulation tightens, albeit gradually, in North America."
What to do? Increasingly, oil sands investors are looking to China, and China is looking to the oil sands.
China buying stakes in oil sands
This year the Conservative government approved the sale of $1.9 billion in oil sands assets to two companies controlled by the Chinese government. Prime Minister Harper said at the time to "expect more Chinese investment in the resource and energy sectors... there will definitely be more."
He wasn't kidding. Another $4.65 billion deal this spring will bring Beijing's investment in the oil sands to $7 billion and counting. China typically buys into resource ventures not merely as an investment, but to feed their ballooning demand for raw materials, and oil is top of their list.
All this means that both oil sands operators and Chinese government now want to expand pipeline capacity through B.C. to the coast.
While much attention has rightly been focused on the proposed Enbridge Northern Gateway pipeline to Kitimat, local First Nations have made it clear they will seek to block the project. A long and likely litigious battle began this month when Enbridge applied for regulatory approval.
Which brings us to back to Burrard Inlet -- the only current oil sands access to the ocean. While it is true that small oil tankers have moved surplus oil out of Second Narrows for decades, it has never been done on this scale -- or using ships that exceed the dimensions of what the Port Metro Vancouver (PMV) previously considered safe.
Port has seen freighter slam bridge
Tankers exiting the Kinder Morgan Westridge Terminal in Burnaby must thread the narrow spans of the CN Railway bridge in Second Narrows, only at the highest tides, and only during daylight hours. The navigable channel here is only 121 metres across and as little as 12 metres deep at zero tide. The PMV Operations Manual from 2007 states that tankers with a draft up to 12.5 metres can only transit through Second Narrows at a high tide of 14 feet.
These restrictions seem well founded. The CN Railway bridge has the highest navigational hazard rating designated by the Canadian Coast Guard. In 1978, the freighter Japan Erica struck one of the bridge piers, shutting down rail traffic to the North Shore for several months. This vessel was one fifth the size of tankers now plying Second Narrows, and had a marine pilot on board at the time.
The Second Narrows navigation restrictions date back to the 1970s, but are now being rolled back. In May of last year, PMV announced to the shipping industry changes allowing for tankers to transit Second Narrows with a draft of 13.5 metres (document available to the right). These new procedures were publicly released in April of this year.
This new policy was apparently the result of a 2008 Risk Management Assessment (available to the right) involving stakeholders only from the shipping industry, though Transport Canada's methodology for Pilotage Risk Assessments defines stakeholders as "any individual, group, or organization able to affect, be affected by, or believe it might be affected by, a decision or activity."
B.C. pilots are highly competent and are being trained with tug operators on simulators to deal with the increased challenges of bringing larger vessels through the Second Narrows bottleneck. That said, the Pacific Pilotage Authority stated in a memo that vessel drafts should be limited to 13 metres until these simulations are proven to "translate to real life."
AFRAmax tankers such as those moving through Burrard Inlet can have a draft of more than 14 metres when fully loaded and carry up to three times the amount of oil that spilled from the Exxon Valdez. The Port recently intimated plans to move to bigger Suezmax tankers in the future with a draft of 18 metres, requiring dredging of Second Narrows.
While allowances for larger tankers have changed, the hazardous confines of Second Narrows have not. The highest tides needed for AFRAmax tankers leave a slack water window of about 20 minutes before Burrard Inlet begins to empty with currents reaching five knots. A worst case scenario spill in those conditions would flush crude out into the Georgia Strait and eventually throughout the South Coast.
Vancouver -- the hometown of Greenpeace and the "greenest city in the world" -- has quietly become a major outflow for controversial Alberta syncrude. The global forces driving these changes are converging on a narrow stretch of treacherous water that stands between the oil sands and the world.