The province has signed an agreement with Energy East Ltd. Partnership to purchase firm capacity of up to 100,000 barrels per day for 20 years on the proposed TransCanada Pipelines eastern main line conversion project, according to financial documents released last week.
“We’ve always indicated that we’re prepared to put our shoulder to the wheel to help ensure that we get access to markets and this is an example of what we are prepared to do,” Energy Minister Ken Hughes said in an interview Thursday.
Depending on approval to construct the pipeline, the province — through the Alberta Petroleum Marketing Commission — would pay an estimated $5 billion in tolls over the 20-year term of the deal.
“It’s a substantial commitment on the part of the province of Alberta, but it actually doesn’t cost us money,” Hughes explained. “It costs the use of a strategic asset, which is the bitumen royalty in kind.”
The Alberta government has access to 400,000 barrels per day of bitumen in lieu of receiving royalties.
Even with the 37,500 barrels per day it has already committed to refining into diesel fuel through its pending North West Upgrader partnership, the province still has ample supply to meet the 100,000-barrels-per-day commitment to the Energy East project, Hughes said.
Alberta Petroleum Marketing Commission CEO Richard Masson said the pipeline could help raise the price for all three million barrels per day of oil produced in Alberta, which would increase royalties for the province.
Even if it doesn’t help raise the price of oil across the board, it will boost the price of the 100,000 barrels in the pipeline above what Alberta would get selling its crude into a common pool in Edmonton, Masson said.
“The biggest drawback is there’s always a risk that we end up with too many pipelines built ... and you’re not making money shipping oil that far east,” he said. “But that risk looks pretty low these days. In general, the industry feels that we need many options because we have so much oil production coming out of the oilsands over the next 10 years.”
Premier Alison Redford said last month during a visit to Saint John, N.B., she was hopeful bitumen from the oilsands can be flowing to the East Coast within a few years, but she never mentioned Alberta committed financially to the project last March.
Hughes said the information was “commercially sensitive” until recently, but pointed out it was disclosed in his department’s annual report.
Calgary-based TransCanada solicited binding commitments last spring from petroleum producers to ship oil through the 3,000-kilometre line to Quebec, saying if there’s sufficient interest the company plans to build a 1,400-kilometre extension to Saint John.
TransCanada spokesman Philippe Cannon said the company has had a “successful discussion” with prospective buyers.
“We are encouraged by the level of bid submissions in the open season and continue to feel positive about the prospects of Energy East moving forward,” he said.
Should TransCanada elect to proceed, it will apply for approval to construct and operate the Energy East pipeline, with a potential in-service date in late-2017 for deliveries to Quebec and 2018 for New Brunswick, Cannon said.
Opposition party critics said they support the concept of the east-west conversion, but questioned the wisdom of committing $5 billion in pipeline tolls to the project.
Liberal Leader Raj Sherman called the pipeline “a great idea” but wondered why Albertans weren’t informed of the plan to commit so much money to it.
“If the government is spending $5 billion, you would think there would be a major announcement,” he said. “The fact they didn’t raises some questions.”
Sherman wondered if it means the governing Tories have given up on two other pipeline projects — Keystone XL to the U.S. Gulf Coast and the Northern Gateway line to northern B.C. — to get bitumen to other markets. “Certainly the west-east pipeline is a good idea,” said NDP MLA David Eggen. “But does Alberta need to foot the whole bill?”
The multi-billion-dollar project has the potential to provide 850,000 barrels a day of oil to Eastern Canada.
Original Article
Source: calgaryherald.com
Author: Darcy Henton
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