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Fraser Institute fellow explains why Black's refinery plan not appealing to oil sands

Plans by newspaper baron David Black to build an oil refinery on B.C.'s west coast are a tough sell to Canada’s oil patch, argues a Fraser Institute senior fellow, because they challenge some "basic economic considerations."

"[Black] is reportedly puzzled by the lack of interest by potential Canadian investors," Gerry Angevine wrote in a recent op-ed on Troy Media. "The answer to his puzzlement is fairly straightforward… expected gains from new refineries are scant these days."

Angevine's employer, the Fraser Institute, is a right-leaning think tank with offices in Vancouver. His logic is as follows: North America is so flooded with oil right now that oil sands producers can make more money selling unrefined bitumen to Asia.

Add to that the fact that new refineries are "complex and costly", Angevine argues. Not to mention risky: changing environmental laws can quickly render them uneconomic.

The upshot in Angevine's opinion, and the point Black’s proposal seems to ignore, is that oil sands producers simply don't regard oil refineries as lucrative investments.

Projects such as Black's, then, "require large amounts of capital, offer only limited profit margins and therefore, aren't very attractive to investors at this point," he writes.

During B.C.'s recent election, Premier Christy Clark’s Liberals dedicated a full page of their platform to Black's $25 billion refinery proposal, calling it "a tremendous game changer for our children and their children."

Then, only two weeks after taking power, Clark's government formally opposed Enbridge's Northern Gateway pipeline, which would transport Alberta's bitumen to the west coast, and in theory, to Black's refinery.

Black nevertheless remains committed to his proposal.

"I don't think the oil patch will embrace [the refinery plan], and so that means I will have to build it," he told the National Post earlier this month. "And I probably have to run it. I don’t need them to put their money up, and I don’t need their expertise. I can get the money elsewhere and I can buy the expertise."

Geoff Dembicki reports on energy and climate change for The Tyee.

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