Busting Dogwood’s “Myths” on Oil-by-Rail and Crude Oil Exports

This week the pipeline debate returned to the headlines and with it have come the anti-pipeline activists who have ramped up their outrage machine to 11 and have been on the various media platform presenting their case. What I find most frustrating is the intellectual laziness of the these activists. It is almost as if they have simply stopped trying to convince the informed and are directing all their efforts at their dedicated base and the uninformed. As such, their messages have become increasingly simplistic and, most problematically, seem dependent on out-of-date or misconstrued references. Last week I wrote a piece about the Wilderness Committee’s laughingly sophomoric screed against the oil sands and today I will focus on the latest pronouncements by Dogwood and a representative from the Wilderness Committee.

The latest from Dogwood BC would be a combination podcast and online article titled: “The Top Ten Kinder Morgan Myths — BUSTED!” Now typically I don’t listen to these podcasts as they tend to drag, but based on the content of the web page I felt it necessary to listen to the start of this one and I wasn’t disappointed. It didn’t take more than a couple minutes for Economist Robyn Allan to make some truly astounding statements. Specifically she starts by stating [my transcription so may not be perfect]:

There are no Asian markets for Alberta’s crude oil, there certainly are refineries in Asia that process oil but they are not accessing it from Canada. We have experienced it historically with the lack of our ability to develop markets in Asia. In 2012 the NEB gave KM unprecedented preferential treatment by approving their request for guaranteed 79,000 bbl/day of access to the Westbridge dock, Kinder Morgan promised that if that access was granted markets in Asia would develop. Well what we find from the statistics from Port Metro Vancouver and even from the NEB itself is that those markets have not developed. In 2016 not one tanker went to Asia all the tankers went to US markets…

Now I have previously recommended that when listening to the activists you must pay attention because they will say things to misdirect you. In this case, Dr. Allan conveniently forgets what happened to the world markets since 2012. Oil prices tanked and suppliers were dumping onto the market. In that challenging market, what happened to Alberta heavy crude on the West Coast? It was all snapped up by the Americans before we could even get it to Asia. Yet somehow Dr. Allan announces that this was a bad thing. Certainly access to tidewater didn’t open up new Asian markets, instead Alberta was able to open up a very important new North American market: the rest of PADD 5.

In case you don’t follow the US crude business there are some important things to understand about the US market. The US market is broken into Petroleum Administration for Defense Districts (PADDs) and PADD 5 (the West Coast, Alaska and Hawaii) is not effectively interconnected to the rest of the US by pipelines. As such it mostly must be self-sufficient or must import oil. Historically, BC crude has been pretty much restricted to the Puget Sound in Washington State due to lack of export capacity. California and Alaska have historically supplied the lion’s share of the demand in PADD 5. What most don’t know is that that California produces some of the highest GHG intensity fuel on the planet (even higher than oil sands crude). Alaskan oil, meanwhile, is drying up. This leaves much of PADD 5 with a supply shortage. Thanks to access to tidewater Alberta crude, which couldn’t get to California, is now flowing there. Dr. Allan sees this as a bad thing as California isn’t Asia but for oil producers it is a great thing. The trip to California is much shorter than the trip to Asia and as such the cost to move the crude much lower. So while Dr. Allan may be correct, we haven’t opened up new Asian markets, what we have done is open up the North American market in a way we never did before. An expanded Trans-Mountain can tap into the entirety of PADD 5 in a way it never could before, and, if enough supply exists it could also make a dent in the Asian market as a bonus. So while conditions changed since 2012 they did so in a good way and this is something to be celebrated not cursed.

As for the other big domestic market we need only look south to the Puget Sound. As I have written more times than I care to remember, the Puget Sound needs oil to run its refineries as their current supply from the Alaska north slope is drying up. The safest way to get that oil is via the Trans-Mountain through the existing pipeline network. Absent that pipeline supply they are getting more and more oil via rail. To repeat an expanded Trans-Mountain won’t need new tankers to get the fuel to the Puget Sound because it has an existing pipeline network to do the trick.

This brings us to the big falsehood being presented by the anti-pipeline activists that oil-by-rail is not happening, will not happen and/or has collapsed. The seed for this blog post was planted on Monday (July 31st) while listening to a radio debate between Climate_Pete (Peter McCartney from the Wilderness Committee) and Cody Batershill. During the debate Peter repeated his claim that oil-by-rail had “collapsed”. This, of course, is not the case. Certainly oil-by-rail decreased in 2016 but as the NEB statistics clearly show Canadian oil-by-rail exports have rebounded and are back where they were in 2013 and 2014. Put simply, Climate_Pete’s talking point is out-of-date and needs to be re-examined in light of the most recent data.

Dr. Allan, in the Dogwood podcast, was more careful with her words. She limits her discussion of oil-by-rail to marine export facilities, which she points out do not exist and will not exist on the West Coast. Once again you have to really pay attention, she has completely changed the topic and created a straw man to attack. The oil-by-rail we are talking about of the West Coast is the oil that is going to the Puget Sound and California that could be getting there via a safer alternative (the Trans-Mountain). Ironically, while Dr. Allan and her crew are claiming that oil shipments by rail are not increasing, the Sightline Institute in the US is documenting a massive increase in oil-by-rail to the West Coast. It is mildly amusing when an activist group does my debunking for me. As I discussed above, PADD 5 is running out of domestic crude and much of the remaining crude it has is of the very high-GHG variety. Absent supplies via pipeline the alternative being used for supplying the Puget Sound and California will be oil-by-rail.

Now I know that some particularly parochial activists will argue that oil-by-rail in the US is better that oil-by-pipeline in Canada but that ignores the fact that we share one planet and one border. As the near disaster of the oil train derailment outside Mosier Oregon almost showed, an accident on the US side of the border can have massive repercussions for Canadians. Canada and the US share the Columbia River and all the major rail lines for oil-by-rail run along the Columbia River Valley. A spill in the Columbia River Valley will hurt Canadians as well as Americans.

Going back to the Dogwood page we get another classic example of activists using out-of-date information to fuel their talking points. Their third “busted myth” is that the oil companies will use oil-by-rail irrespective of whether pipelines are built. Looking carefully you will note that this claim backed up by a 2015 Cenovus press release where Cenovus reports that they bought a rail terminal to ship oil-by-rail. The problem is that the activists have such short memories. Can anyone remember what major event happened in 2015? Oh yes that would be when President Obama rejected the Keystone pipeline. Now here is some information you never actually hear from the activists. Only Phase 4 of the Keystone pipeline network was rejected by President Obama. Phases 1 through 3a were completed and Phase 3b is under construction. Since the Canadian section of the pipeline (Phase 4) was rejected Canadian producers planned to use a “rail bridge” to bypass the hole in the pipeline network. Thus, Dogwood’s claim that oil companies will use rail anyways is not supported by the references presented in their article. Rather the reference they produce to bust a “myth” actually reinforces that fact. The oil-by-rail they cite was bought specifically to allow a bridge from Canadian producers to newly developed pipeline facilities in the US. Had the pipeline been built Cenovus would not have needed the oil-by-rail facility in the first place.

Honestly folks, this game of whack-a-mole is intensely tiring. It is late at night, I am 1500 words into this blog post and have only had time to debunk two of the first three “Kinder Morgan Myths – Busted” by Dogwood. I have started to tire of this whole debate because it is becoming increasingly clear that the activists really don’t care about putting in the effort to provide reasonable arguments. The time spent in their echo chambers has made them intellectually lazy. They create a talking point in 2015 (oil-by-rail is decreasing) and then they don’t bother to check whether the information is still true two years later (it isn’t). Honestly, these are paid activists. This is their job. Yet they can’t be bothered to check the NEB website once a year to see if their talking point still applies. They argue against straw men while ignoring real data and what is being reported on the ground. They make arguments that are directly debunked by friendly activists groups just on the other side of the border. Sure, it sounds convincing when spoken to a sympathetic interviewer on a Dogwood podcast but it just sounds silly when viewed in the light of the North American oil market.

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3 Responses to Busting Dogwood’s “Myths” on Oil-by-Rail and Crude Oil Exports

  1. Eric says:

    It’s all politics and ideology. Logic doesn’t stand a chance.

    Like

  2. One comment says:

    Dumb economist–perhaps she might(?) understand how important it might be to diversify our market for oil. US is a mature market and growth is in Asia.
    Having one customer (think softwood) makes us vulnerable.
    Having one customer (think economics!!) also makes us potentially vulnerable to being able to finance Canada’s development in capital markets down the road. The US$ may not always remain as the world’s reserve currency and creating the flexibility to do business in Remnimbi is only prudent. Otherwise, the US can treat Canada as its oil bitch which is what we have been lately given the huge discounts Canada’s oil producers have had to face these last 5 years or so.

    Is this what Robyn Allan suggests as informed policy for Canada ?

    Even Justin not that dumb!!

    The USD

    Like

  3. chrism56 says:

    You are doing a great job showing that the anti-oil people rely on factoids and falsehoods, but I feel that it is wasted effort. As Eric points out, things like inconvenient facts just don’t get a look in.

    Like

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