Keystone boosters turfed from office in bitumen’s homeland

Written by David Thomas, Canadian Contributing Editor

Prospects for the contentious Keystone XL pipeline proposed to connect Alberta’s northern tar sands with U.S. Gulf Coast refiners has endured another brutal body check, this time from the home team. The province’s brand-new, left-leaning government elected May 5 says it will cease its predecessor’s long campaign of supplicating and bullying President Barack Obama for the pipeline’s approval.

Cross-border transportation of much Alberta bitumen may thus default to rail—on condition that producers figure out how to ship the stuff without the highly volatile naptha and hydrogen components artificially added to make the goop flow and to juice up its energy content.

Alberta voters shocked the oil industry by electing an avowedly pro-environment, pro-union government with a strong majority while repudiating the right-wing party through which the petroleum industry openly dominated the province for the previous 44 years.

While the socialist New Democrats earned 54 of the province’s’ 87 legislative seats, the governing Progressive Conservatives were reduced to a third-party rump of 10. That dismal score may well shrink to a single digit in the by-election that must be called to replace the day’s big loser, Jim Prentice, who simultaneously resigned the premiership and renounced his personal re-election even as votes were still being counted.

The premier-elect, 51-year-old labor lawyer Rachel Notley, began her four-year term by declaring she would invite her peers from Canada’s other 10 provinces to join in reversing Canada’s reputation as an environmental rogue, an unwelcome status earned by years of official contempt both in Alberta and in Ottawa for the science of climate change and for public concern outside the country.

The Alberta election result is particularly inauspicious for Canada’s Conservative Prime Minister Stephen Harper, whose own power base of Calgary soundly rejected his party’s provincial subsidiary. Harper’s unseemly use of millions of dollars in public funds to promote TransCanada Pipelines’ entirely privately owned Keystone XL alienated many voters across the country, but nobody suspected Albertans were among them.

The new Alberta premier said during the campaign that she would cease her predecessors’ futile and humiliating supplications to Washington on behalf of Calgary’s TransCanada. Instead, she favors purely domestic pipeline routes to get the tar sands to eastern and overseas markets. Such alternatives are years away, given rising resistance from native communities, environmentalists and destination provinces.

Before last winter’s twin oil train disasters in northern Ontario, conventional wisdom was that old DOT-111s could be reassigned to Alberta bitumen service as they were phased out for more volatile crudes, particularly Baaken. The CN derailments and chain reaction explosions revealed that bitumen is no longer benign, barely flammable tar once it has been diluted with highly explosive naptha or synthetically charged with hydrogen.

If CBR is to continue as a conduit for Alberta’s modified bitumen, shippers will have to find a way to reduce its volatility. U.S. regulators are making clear that new tank cars and operating rules are just the first step in de-weaponizing the shipment of crude by rail. It now seems clear that new rules are on the way to require removal of explosive gases before loading into railcars, instead of adding them as bitumen shippers do now.

The only visible option is to heat raw bitumen so that it will flow into and out of tank cars. That requires special tank cars with internal steam coils that re-melt the bitumen at its destination. Such steam-coiled cars are rare and none conform to the new DOT-117 specification. In fact, the new tank car specs do not even consider steam coils as an option.

Thus, Alberta’s dumping of Keystone XL as an objective of public policy creates a long-term opportunity for CBR, but only if tar sands bitumen can be carried across international boundaries in a state acceptable to regulators and politicians.

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