Market News

 October 01, 2014
TransCanada plan to switch crude oil for gas in local pipeline

 NORTH BAY, ONT.---From his many-windowed fifth-floor office at city hall, Mayor Al McDonald points to the Laurentian escarpment to the north, then to the shimmering blue waters of Trout Lake to the east. Vast Lake Nipissing is visible to the west, though you have to crane your neck to see it. Below are the Victorian buildings and tree-lined streets of the downtown.

McDonald clearly loves showing off the view. But it also pitches him into anxiety.

"If something happens to Energy East here, if there is a spill, we'll be ruined," he says. "Who would want to come here then?"

Somewhere near the escarpment and Trout Lake, there is a natural gas pipeline.

It has been there for four decades, but has become a source of concern in this northeastern Ontario city.

TransCanada Corp., the Alberta-based oil giant, wants to repurpose the pipeline, now carrying natural gas, to transport crude oil from Alberta's oil sands to New Brunswick. Dubbed Energy East, the project is TransCanada's $12-billion oil dream.

If the company got the go-ahead, it would be the largest and longest oil pipeline in North America.

And if North Bay had its way, that would never happen.

Most of the city of 55,000 is united in its opposition to Energy East: the mayor, professors at local Nipissing University, farmers, landowners and, of course, environmentalists are worried about crude running so close to Trout Lake, the city's only source of drinking water, and about the impact of a potential spill on the environment.

They also fret over the age of the pipeline. And there is the inevitable question: what's in it for North Bay?

It isn't a case of left vs. right, or landowners fretting about plummeting property prices.

It isn't NIMBYism either.

And TransCanada, locals insist, has made things worse by brushing off their concerns.

But first, about Keystone XL, briefly.

Also proposed by TransCanada, Keystone will run between Hardisty, Alta., and the refineries on the Texas Gulf Coast if it's approved by the U.S. State Department. The steel pipeline, 91 centimetres in diameter, would carry 750,000 barrels of diluted bitumen every day.

Keystone has been the most debated pipeline on both sides of the border.

Now, about Energy East.

TransCanada wants to repurpose the 40-year-old, 121-centimetre-wide natural gas pipeline, which runs from Saskatchewan to Ontario and connect it with an as yet unbuilt pipeline to run through Quebec to export terminals and refineries in New Brunswick.

The 4,600-kilometre pipeline would carry up to 1.1 million barrels of crude oil each day and lead to massive export of crude via tankers from the Atlantic coast to the much larger markets of Europe, India, China and the U.S.

TransCanada wants to convert the gas pipeline to one that carries oil because fracking has drastically brought down the price of natural gas, say experts.

"The other reason is that a lot of the crude available in Alberta is stranded," says Michal Moore, an energy economist at the University of Calgary. "It can get out of a series of smaller and smaller pipelines, but the efficiency of moving that from place to place is just not great."

TransCanada is expected to file a formal application with the National Energy Board in the next few days.

Energy East would be longer and have more capacity than Keystone and it would carry more crude, but it hasn't whipped up similar opposition.

Except, so far, in North Bay.

Why North Bay is against Energy East is easy to understand yet complicated. It's a mélange of concerns and anger against TransCanada's perceived arrogance.

There have been no issues with TransCanada's natural gas pipeline, which snakes through the escarpment and one side of Trout Lake.

But a pipeline carrying crude changes the game, says McDonald.

For him, protecting Trout Lake is more important than anything else. In addition to providing drinking water, the picturesque, four kilometre by 11 kilometre lake is ringed by hundreds of homes.

The pipeline runs along the north of the lake through the watershed and crosses beneath the lake in the east corner. It also runs through a significant groundwater "recharge" area and crosses vulnerable water valley systems.

"Any spill would make its way into the lake quickly," McDonald says. "What happens to 55,000 people and their drinking water? We would never be able to recover from that stigma. The economic impact would be astronomical."

McDonald is planning to apply for intervener status at the National Energy Board as soon as TransCanada makes its formal application for Energy East. It would cost about $200,000 in lawyer and expert fees, a lot of money for a small municipality. "But we have to do it," he says.

Brian Tayler, chief administrative officer for the North Bay-Mattawa Conservation Authority, has been outspoken against the pipeline.

He did not respond to repeated requests for comment from the Star, but Tayler told the North Bay Nugget earlier this year that the conservation authority has four primary concerns: the protection of Trout Lake as the source of drinking water, environmental impact on aquatic and terrestrial ecosystems, vulnerability of the pipeline infrastructure in slopes, floodplains and valleys, and preservation of the watershed.

The gas pipeline doesn't run through Matt Parfitt's property, but he lives about two kilometres away. A retired geological engineer, Parfitt, 49, worked in the mining industry before returning home to the 500-acre family farm.

If there is a spill, says Parfitt, not only would his property be worthless but his family --- including his parents, who are in their 80s --- would be rendered homeless. "It isn't as if the pipeline has been incident-free in all of its life."

There have been at least six significant explosions in the pipeline's 40-year history, according to reports.

The most recent was in 2014, when a fire broke out in a community south of Winnipeg. There were no injuries but some temporary evacuations.

Parfitt says he doesn't have to be a scientist to know that an oil spill wouldn't move uphill. "It is an old pipeline . . . it is 40 years old. Who knows how safe and good it is?"

He and many others in North Bay note that regulations for old pipelines are not as stringent as they are for new ones.

"If TransCanada really wants to do this right, why not build a new pipeline through the entire route," says Parfitt. "It would stop a lot of criticism and even concern."

Drinking water, environment and public health are the main issues in this narrative. But so is trust --- or the lack of it.

TransCanada has held a few open houses in North Bay and Mattawa, a town of about 2,000 people southeast of North Bay. The natural gas pipeline runs close by.

Mattawa shot into headlines recently when it was revealed that it had accepted $30,000 in 2012 for a vow of silence --- that it would ask no questions of TransCanada's business. Some have called it a gag order.

Depending on whom you ask, TransCanada emissaries have been pleasant, reading scripted answers at open houses. Others say they have been downright rude.

But most people, including Parfitt and McDonald, agree they haven't been helpful: they have rarely given straight answers.

Graham Robinson, a web developer who lives in a lakefront house with his wife, Amber, and their four young children, says he isn't anti-development.

"I use petroleum products, I know how this works," he says. "But we are talking about crude running through where I live, hundreds of others live. TransCanada has tried to bury our questions in jargon and I find that deceitful. How am I supposed to trust them?"

Robinson, who is in his 30s, respects global organizations such as Greenpeace that worry how use of fossil fuels will worsen global warming. "That is fair. But our concerns are very local. If there is a spill, will TranCanada provide us with drinking water? Will it replace this home? And what if there is a spill in the winter when the lake is frozen? Are there plans how to deal with it?"

On its website, TransCanada says its application to the energy board will contain thousands of pages of detailed safety, environment and socioeconomic studies identifying the impacts the project may have, and proposing remedies.

Bob Berry is in his 60s and worked at Ontario's Ministry of Health before retiring to his 65-acre property just north North Bay proper. Two TransCanada pipelines run through it. Berry, a shy man with a rare smile, says he never wanted either but had no choice.

He was paid about $6,000 for both, which take up about six acres.

During the past year, he has attended every TransCanada open houseand sent questions to the company in emails, now printed out and stacked in a purple folder in his kitchen. He says hasn't received any adequate responses.

"Crude oil will run through my property," he says. "I am entitled to some answers."

In an email to the Star, TransCanada spokesperson Shawn Howard said the company has engaged with communities across the country, including North Bay. "They have a number of questions about the project, and we're happy to answer them. TransCanada has met with local officials, first responders and stakeholders in the community of North Bay, to answer questions, provide updates and work on emergency response plans."

Energy East, he said, is committed to working with landowners affected by the pipeline to resolve issues and to obtain voluntary easement agreements. "The final route will take into consideration landowner and other stakeholder issues, as well as more detailed fieldwork and environmental surveys."

But that's not how some in North Bay see it.

TransCanada's "contempt" of people has helped those who are highlighting the pipeline's risks, says Yan Roberts, who runs a farm stay a few kilometres southwest of North Bay.

He calls himself a "concerned hippie."

"There are people who have been on the fence. But when TransCanada people have refused to answer questions, or treat people who have asked (questions) with contempt, they have made those on the fence believe that Energy East isn't good for us."

Roberts says he has heard, off the record, "that TransCanada considers North Bay its No. 1 trouble spot. That's funny, I know, but the truth is we are just a loose collection of strong-hearted people. And we don't bicker, we are united in this."

It isn't an equal match, this contest between a small Northern Ontario town and Big Oil.

But TransCanada is up against a feisty opponent.

In July 2010, a pipeline operated by Enbridge in the state of Michigan burst and flowed into the Talmadge River, a tributary of Kalamazoo. More than 20,000 barrels of diluted bitumen from Alberta's oil sands spilled, making it the largest inland oil spill, and one of the costliest, in U.S. history.

The volatile hydrocarbon diluents evaporated and the heavier bitumen sank. Almost 70 kilometres of the Kalamazoo River had to be closed for cleanup. In March last year, the Environmental Protection Agency ordered Enbridge to return and dredge portions of the river and remove submerged oil and oil-contaminated sediment.

That cleanup continues.

North Bay has its own cleanup, which has been going on for two years.

In May 2012, a transport truck bound for Temiscaming, Que., crashed on a curve of Highway 63 above Silver Lady Lane, spilling 36,000 kilograms of formaldehyde. Trout Lake is just a few metres away.

The driver of the truck was killed.

Residents were evacuated, some for several months, as environmental clean-up crews removed as much of the chemical as they could. Those who drew their water from the lake were warned against drinking it.

More than 200 transport truckloads of soil, vegetation and other material have been removed. Last year, several dozen injection and monitoring wells were drilled in the area of the crash. Hydrogen peroxide was injected to neutralize remaining formaldehyde.

Mayor McDonald remembers the accident well. It was the Victoria Day holiday, and the crash happened early in the morning. "There were cops, firemen at the scene . . . We had to tell people about what had happened and that they shouldn't use water directly from the lake."

The only good thing about the spill was that formaldehyde dissolves quickly in water, says McDonald.

On an early September morning, the mayor is at the crash scene. He is in jeans and a red Canada sweatshirt and pointing to the narrow wells drilled into the ground, saying warily: "It wasn't a disaster, like it felt that day, but just imagine if that had been a crude oil spill."

McDonald won't talk about the cost of the cleanup, saying the matter is in courts.

On safety concerns, TransCanada's Howard say his company invested almost $1 billion in 2013 in "proactive inspection and maintenance programs . . . TransCanada's pipeline integrity programs are designed to meet and in some cases exceed government standards. Pipelines are the safest, most efficient and environmentally friendly method of transporting large volumes of oil over long distances."

"It is hard for us not to worry about a pipe that will carry crude oil so close to the lake," says McDonald.

Four decades ago, a pipeline proposal didn't raise eyebrows or lead to heated debates.

"If someone told you then that a pipeline was coming through a field, you would maybe ask, 'Well, will it be done right?' and then you would say, 'OK,' " says Warren Mabee, an energy policy expert at Queen's University in Kingston.

But there has been a sea change in the way Canadians view pipelines. "We were early with our experiences with pipelines," says Mabee. "We hadn't had any leaks . . . The spills we have had the past four or five years have really frightened people. They hear about spills like, say, Kalamazoo and project that on their own landscape and wonder what if it happens here?"

In Alberta and Saskatchewan, people are generally comfortable with that infrastructure "and less likely to raise red flags," Mabee continues. But as you move to Ontario, it changes drastically because this population hasn't seen a big pipeline project in years."

The most intense pipeline opposition usually comes from local communities and is often linked to the fear of a spill, says Keith Stewart, a climate and energy campaigner with Greenpeace in Toronto.

Most pipelines were built in the 1950s, '60s and '70s, but now, with the rapid increase in oil production, companies want more in the ground. But oil companies haven't helped shape public opinion in their favour with the way they have handled spills.

The real wakeup call was the Kalamazoo spill.

"It was the first major dilbit (diluted bitumen) spill and it didn't behave like a regular oil spill. It also happened in a densely populated place unlike spills that usually happen in the middle of nowhere where no one sees them."

But it was the sheer incompetence of Enbridge that was mind-boggling, continues Stewart. "Pipeline companies have always said, you know, don't worry, we have it all under control. With that spill, it became clear that they don't."

Oil companies are also sneaky, says Brennain Lloyd of NorthWatch, a northeastern Ontario environmental group.

Lloyd lives in North Bay, close to Trout Lake, and says TransCanada representatives are known to enter private land to check on the pipelines despite agreements saying they won't without prior notification.

It's not a big deal, she agrees. "But things like these add up and people lose faith."

There are broader questions about the economics of the proposed pipeline, the dirty oil and its impact on climate change. Experts across Canada have weighed in on those issues in different studies.

One report by The Council of Canadians focuses on the threat the pipeline poses to waterways in case of a spill.

Another report by four environmental groups says Energy East's benefits are greatly exaggerated.

Mayor McDonald has read some of them, but "it is the drinking water that is the biggest concern for me," he says.

Any council meeting that has the pipeline on the agenda is sure to see a packed house, he says. "There are so many questions around the risks that haven't been answered."

Energy East is always on McDonald's mind nowadays, but he often talks about how green his city is.

There are 73 parks and 31 lakes in North Bay, he says.

And there is a ski hill.

And, to his chagrin, there is a natural gas pipeless set to become a conveyor of crude oil