New pipeline policy could solve Keystone XL problems

New pipeline policy could solve Keystone XL problems 06/08/14
by John Brian Shannon John Brian Shannon

Which are the most dangerous pipelines?

It’s an easy answer. Old pipelines.

Oil companies don’t advertise the first 15 years as the safest pipeline years. All bets are off after 30 years. And almost every pipeline spill in North America shows a pipeline well past 30 years of age.

One of the biggest problems contributing to leaks and ruptures is pretty simple: pipelines are getting older. More than half of the nation’s pipelines are at least 50 years old. — How Safe are America’s 2.5 Million Miles of Pipelines? published by propbulica.org

The average age of North America’s petroleum pipelines is getting older all the time (as there are few new pipelines are being built) so the existing pipeline network continues to age. But some pipelines built 30+years ago are so fragile from a maintenance perspective that they shouldn’t be allowed to transport toxic crude oil, dilbit, petroleum distillate, bunker fuel, or coal oil.

Forty-one per cent of U.S. oil pipe was built in the 1950s and 1960s; another 15 per cent of the country’s 281,000-kilometre network was built before then. In Alberta, 40 per cent of pipe was built before 1990. — Globe and Mail

How long does it take to ‘pay off’ a pipeline investment?

Depending upon the terrain a pipeline is traversing, pipelines can cost anywhere from thousands of dollars per mile up to millions of dollars per mile, especially when laying them through populated areas or under or above rivers and lakes. It can cost billions of dollars to build one pipeline.

Of course, if you want to move petroleum through a pipeline to your oil refinery, you are going to pay a significant dollar amount to transport that oil across the continent. Each oil refinery can refine up to one million barrels of oil per week. The oil refinery has only so much storage available to it on-site so it usually ships the refined product out ASAP via another pipeline system to a rail network, or direct to the customer via yet another pipeline.

U.S. petroleum pipeline map
U.S pipeline map. Toxic liquids show in red colour, while natural gas shows in blue. Image by propublica.org

After 15 years of operation, pipeline companies finally ‘break-even’ on their original investment

“Now we can finally make some money!”

Pipelines are quite costly to gain approval for from national and local regulators, to buy or lease the land, to design, build and operate. It also is the case that oil companies pay millions of dollars per year to the pipeline companies to move their liquids around. It is an annual business of billions, not millions.

We all need to make money and pass the ‘break-even’ point in our investments

We all want and need to make a return on investment (ROI) which is the reason we start businesses in the first place. But, just at the point that a pipeline has finally broken-even investment wise for its investor group, it is beginning to seep oil at the gaskets (called ‘weeping’) and also leak oil at the pump stations, and at areas where the pipeline has been disturbed by ground movement due to frost, ground settling, or earthquake movements. Some of this weeping can continue on for many years before anyone visits that remote area, which may not have been visited since the construction of the pipeline. Running toxic liquids across a continent safely, but economically, are mutually exclusive matters.

But without oil pipelines, our economy would grind to a halt within 90 days

Without pipelines, only coastal cities would be able to receive gasoline, diesel, kerosene, or other liquids used for transportation fuels, via international shipping lines. Other users of petroleum, such as chemical, plastics, and pharma companies would need to relocate to coastal areas to receive their petroleum ingredients.

It is a case of need vs. greed

  1. “We need the oil, keep it coming,” say consumers.
  2. “We need to keep our environment clean,” say a rapidly growing number of citizens/consumers.
  3. “We need to recoup our pipeline investment and make a profit in order to stay in business and we do it all for groups #1 and #2,” say the pipeline companies.

If ever there were a situation calling out for compromise, this has got to be it.

But the simple fact is, old pipelines weep plenty of oil and eventually burst, releasing tons of toxic liquids into the environment. New pipe does not burst or leak — unless it was to be hit by a derailed train, a transport truck, or an airplane crash — all of which are very unlikely events.

A mechanism for safe petroleum transport that works for all

Add a mile of new pipeline | Remove a mile of old pipeline

There are many pipeline systems that have been transporting petroleum for 30+ years in North America. These old pipes weep oil everyday. You might not see it, some of them are underground, or in wilderness areas where pipelines often traverse, or are just not accessible for viewing by the pubic or inspectors for that matter.

Some pipelines in North America are 45+ years old and they are big leakers — and just like purchasing carbon credits — one pipeline company could sell their RRR credits to another company that is ready to build a new pipeline.

It may seem odd for you to hear this solution from a renewable energy proponent; We should build more new pipelines!

What? Yes, but only if we completely remove 30+ year old pipelines on a mile-per-mile basis and remediate the soil and replant native species of plants along the historic route of the removed pipeline.

If pipeline company “A” wants to build a new pipeline, (such as Keystone II, for example) then government regulators should require that for every mile that they want to install new pipeline, the pipeline company is required to completely remove and remediate the soil and plant life, from whence an old pipeline has been removed.

This would help us to get rid of thousands of miles of old, leaking, and rusting pipelines that even the oil companies have forgotten about. They are environmental catastrophes just waiting to happen.

You can never completely empty a pipeline so they just sit there decade after decade weeping oil into the groundwater. Some old pipelines, although very leaky, are kept in place just in case of emergency so oil can be quickly diverted to the old pipeline for transport to a different junction in the system — and thereby still arrive at the oil refinery (and likely a day late and a few tens of barrels of oil short).

But that isn’t the best solution for the environment.

The best solution is easier approvals for newer and safer pipelines, contingent upon Retiring, Removing and Reclaiming (RRR) the land on the same total mileage of 30+ year old pipeline in the North American petroleum distribution network.

If Keystone II is 3500 miles of shiny new, high-tech, and state-ot-the-art pipeline, that’s great. It’s orders of magnitude less likely to leak, than 3500 miles of old pipeline.

All pipelines over 30 years old should be allowed to qualify for this removal/remediation programme. And the pipeline companies signing up for the Retire, Remove and Remediate (RRR) pipeline plan should receive tax incentives to assist in this regard. And, bonus, they can sell the land, once it is remediated.

Birth of a new industry

With the high prices of metals these days, oil and pipeline companies could find that passing the actual RRR work to another company could be the way to go. Even if the old pipe and pumps and pumphouses, etc, end up being sold for the scrap metal value, millions of tons of 30+ year old pipeline is sitting on the ground or just underground, waiting to be picked up and recycled.

Add in soil and plant remediation, and you have a whole new business model. A business where the workers could feel proud of the work they do!

“What do yo do for a living?”

Wouldn’t it be nice for an petroleum industry employee to be able to reply;

“I remove old, leaky pipelines, remediate the contaminated soil, replant the areas with native plants, and recycle millions of tons of old, leaky, pipeline metal.”

That has got to be the feelgood moment of the year, for any oil company employee.

Not your typical oil company employee job description

Yet, with some executive-level decisions and with a common-sense regulatory framework, RRR could finally solve the problem of the many thousands of miles of dormant but still weeping pipelines — and spawn a whole new business model — while helping to protect our North American ecosystems that wildlife depend on.

Enbridge Northern Gateway Pipeline Project: ‘Approved’

Joint Review Panel recommends approving the Enbridge Northern Gateway Project, Dec 19, 2013

CALGARY ― The Joint Review Panel (the Panel) for the proposed Enbridge Northern Gateway Project today recommended that the federal government approve the project, subject to 209 required conditions.

Based on a scientific and precautionary approach to this complex review, the Panel found that the project, if built and operated in compliance with the conditions set out in its report, would be in the public interest.

The Panel also recommended that the Governor in Council determine that the construction and routine operation of the project would cause no significant adverse environmental effects, with the exception of cumulative effects for certain populations of woodland caribou and grizzly bear.

In these two cases, the Panel found that cumulative effects as a result of this project and other projects, activities or actions are likely to be at the low end of the range of possible significance. The Panel recommended that these effects be found to be justified in the circumstances.

Enbridge Northern Gateway Pipeline Project
Enbridge Northern Gateway Pipeline Project

The Panel concluded that the environmental burdens associated with project construction and routine operation can generally be effectively mitigated and that continued monitoring, scientific research and adaptive management could further reduce adverse effects.

The Panel stated that “the environmental, societal and economic burdens of a large oil spill, while unlikely and not permanent, would be significant.” The Panel found that Northern Gateway had taken steps to minimize the likelihood of a large spill through its precautionary design approach and its commitments to use innovative and redundant safety systems.  The Panel also found that, after mitigation, the likelihood of significant adverse environmental effects resulting from project malfunctions or accidents is very low.

The Panel found that “opening Pacific Basin markets is important to the Canadian economy and society.”  The Panel also found that “the project would bring significant local, regional, and national economic and social benefits.”

After weighing all of the oral and written evidence, the Panel found that Canada and Canadians would be better off with the Enbridge Northern Gateway project than without it.

The Panel’s conditions, which would be enforced by the National Energy Board, include requirements for Enbridge Northern Gateway to:

  • Develop a Marine Mammal Protection Plan;
  • Implement the TERMPOL Review Committee Recommendations;
  • Prepare a Caribou Habitat Restoration Plan;
  • Develop a Training and Education Monitoring Plan;
  • Prepare an Enhanced Marine Spill Trajectory and Fate Modelling;
  • Develop a Research Program on the Behaviour and Cleanup of Heavy Oils;
  • Conduct Pre-operations Emergency Response Exercises and Develop an Emergency Preparedness and Response Exercise and Training Program.

The Enbridge Northern Gateway Project is a proposal to build and operate two pipelines and a marine terminal. The pipelines would run 1,178 kilometres from Bruderheim, Alberta to Kitimat, British Columbia, where the marine terminal would be built.

One 914 mm (36 inch) outside diameter line would carry an average of 83,400 cubic metres (525,000 barrels) per day of oil west to Kitimat. The other line, a 508 mm (20 inch) outside diameter pipeline, would carry an average of 30,700 cubic metres (193,000 barrels) of condensate per day east to Bruderheim. Condensate can be used to thin bitumen for pipeline transport. The Kitimat Marine Terminal would have two tanker berths, three condensate tanks and 16 oil storage tanks. Costs for the project are estimated at $7.9 billion.

The Joint Review Panel for the Enbridge Northern Gateway Project is an independent body, mandated by the Minister of the Environment and the National Energy Board. The Panel assessed the environmental effects of the proposed project and reviewed the application under both the Canadian Environmental Assessment Act, 2012 and the National Energy Board Act.

The report, this news release, a backgrounder on the hearing process and a list of frequently asked questions can be found on the Panel’s website at: www.gatewaypanel.review.gc.ca

How Does China Do It?

by John Brian Shannon

Why do all the jobs keep going to China? Everyone wants to know.

The Western nations are short of jobs. At present, 150 million jobs have left Europe and North America over the past 40 years and have been relocated to Asia.

This trend has been in play for a few decades, but it began in earnest back in 1973 when the Arab Oil Embargo caused millions of Americans to purchase economical Japanese cars instead of Detroit’s offerings at the time – the thrilling but thirsty American gas guzzler.

Since that time, not only Japan but South Korea too have exported cars to the Western democracies by the millions. The market share of imported cars registered in 1960’s North America was microscopic but now sits at over 50%. China is now exporting cars worldwide and they are increasing their market share in Western nations.

That about covers the automotive market discussion.

But it is not the entire story. There are other factors at play some of which I will cover below and in future blogs. It’s a big topic… trust me.

For another example, when the West decides to design, engineer and build a new fighter plane at a cost of 100 billion U.S. dollars (a hypothetical number, just for comparison purposes) up to one-third of that money is diverted to corporate profit and doesn’t influence the final product.

When communist China decides to design, engineer and build a new fighter plane at a cost of the equivalent of 100 billion U.S. dollars (a hypothetical number, just for comparison purposes) all 100% of that investment goes towards the design, engineering and build quality of the fighter plane.

This is but one example which can be demonstrated many times over. It’s not just fighter jets. Every military ship, airplane, vehicle, guns, ammunition, along with civilian cars and trucks, industrial mining equipment, farm machinery, electronics, railway cars, locomotives and even the railway tracks can be built for less in China.

Communist corporations which do not have to make accommodations for profits have an advantage over ones that must make accommodations for profits. On the hypothetical American example above, 30% of 100 billion U.S. dollars is… drum roll please… 30 billion dollars! That is a lot of R&D money diverted to corporate profit from product testing, build quality – or marketing and advertising which almost always results in more sales.

Anything we can manufacture, China can manufacture at a lower cost when compared to the Western manufactured item. Thirty percent is just the beginning as some items can be manufactured for 1000% less than comparable products in Europe or North America.

During a telephone interview in February, a sitting Member of the Parliament of Canada told me that it is much cheaper for North American oil companies to dig up the tar sands in Alberta, Canada, transport that material to China for refining and then transport it back as finished products to North America.

It’s easy to do some quick math here. The Canadian Enbridge Northern Pipeline is projected to cost over 5 billion dollars if it gets built. The plan is to pipeline the material to Canada’s west coast (highly diluted with petroleum condensate) and ship it across the ocean to China where it can be refined into pure gasoline, motor oil, diesel fuel and other products normally made from conventional petroleum.

Super-tankers will pick up the tar sand/condensate mixture, which is called ‘dilbit’ once it is mixed together into a consistency which will flow through the pipeline system and transport it in that form to China, where new refineries are being built to receive the dilbit material. New Chinese oil refineries cost 1 – 2 billion Canadian dollars (equivalent), while new North American refineries with their higher land, construction, permitting, labour and emission control costs are estimated in the 12 billion Canadian dollar range – which is why no new refineries are planned for North America.

New SuezMax super-tankers cost between 500 and 900 million dollars a copy, depending on how many barrels of oil they carry and whether they are single-hulled ships or an infinitely safer design – the double-hulled super-tanker. Some super-tankers carry over 1 million barrels of toxic dilbit. Expect China to run 24 – 32 new super-tankers between the west coast of Canada and China 365 days per year.

After refining in China, SuezMax super-tankers will return the finished products to North America for distribution throughout the western United States and Canada’s western provinces.

Even with all these additional transportation costs and other activities – the gasoline, diesel and other products will cost 30% less than when compared to Canadian or American oil refineries performing the same refining operations here.

It remains to be seen whether the oil companies will pass along those cost savings to consumers.

John Brian Shannon writes about green energy, sustainable development and economics from British Columbia, Canada. His articles appear in the Arabian Gazette, EcoPoint Asia, EnergyBoom, Huffington Post, the United Nations Development Programme – and other quality publications.

John believes it is important to assist all levels of government and the business community to find sustainable ways forward for industry and consumers.

Check out his personal blog at: http://johnbrianshannon.com

Check out his economics blog at: https://jbsnews.wordpress.com

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