Alberta move to cut energy shipments expected to hit more than B.C. fuel prices

By Dan Healing - The Canadian Press
April 17, 2018 - 3:55pm

CALGARY -- Economic damage will extend far beyond the fuel budgets of B.C. residents if Alberta passes and enacts a bill allowing it to restrict exports of oil, natural gas and refined fuels to the province as part of its ongoing pipeline dispute, observers say.

The Bill 12 legislation and the trade war escalation it might spark would damage Alberta and Canadian businesses and citizens as well as those in British Columbia, warned Greg D'Avignon, CEO of the Business Council of B.C.

"By punishing British Columbia because of the actions of the government of the day — while it might feel good and I completely understand it — it actually has consequences people aren't thinking about for the citizens of Alberta and our country as a whole," he said Tuesday.

On Monday, Alberta introduced legislation that allows the energy minister to use export permits to tell truckers, pipeline companies and rail operators how much of what products can be shipped when and where.

The province says it might use the legislation to fire back at British Columbia if it continues to block the Trans Mountain pipeline expansion in the courts. The dispute is headed for a showdown on May 31, the date on which proponent Kinder Morgan Canada Ltd. has said it will cancel the $7.4-billion project unless it is convinced it will be allowed to proceed to completion.

D'Avignon pointed out that Alberta and B.C. have the most integrated economies in Canada and if costs rise in B.C., it will affect the cost of trade goods going to Alberta and the cost to ship Alberta products such as grain from West Coast ports.

He said it could also affect the availability of B.C. residents to work in Alberta's oilpatch and B.C. exports of electricity and natural gas to Alberta, while possibly reducing federal income taxes paid by B.C. residents.

The Alberta government said Monday it might restrict shipments on the existing 300,000-barrel-per-day Trans Mountain pipeline from Edmonton to the Vancouver area to diluted bitumen, thus halting the refined products and light oil it carries.

Such a move would likely push fuel costs higher in B.C. but would also negatively affect Alberta's four refineries, said Brian Ahearn, Western Canada vice-president for the Canadian Fuels Association, which represents the refining industry.

He said about 25 per cent of the gasoline, diesel, jet fuel and other products produced at the Edmonton-area refineries goes to B.C., a total of 80,000 to 100,000 barrels per day.

"Directionally, we are supportive of the government's overall objective and the reason is we are a supporter of the Trans Mountain pipeline expansion," he said.

"(But) if there's curtailment all the way to the point of discontinuing that flow of product ... that utilization taken away from the refineries would have a pretty negative effect on the refineries."

Refiners would be forced to find alternative markets, accept lower prices or, in a "worse-worse case scenario," run their operations at less than optimum capacity to restrict output, he said.

Ahearn says the Trans Mountain pipeline carries about 45,000 to 50,000 barrels per day of refined Alberta products to B.C. The rest is shipped by train or truck to B.C. customers.

Tighter supplies of gasoline and diesel in B.C. would likely drive up prices in B.C.'s Lower Mainland by about 10 cents per litre, said fuel market analyst Michael Ervin, senior vice-president at the Kent Group Ltd.

That's lower than other experts have estimated but he said it's high enough that refiners on the U.S. West Coast or possibly even Asia Pacific would be motivated to overcome logistical hurdles and start supplying the market.

In Alberta, meanwhile, the glut of gasoline and diesel would likely result in cheaper prices for motorists, especially in the Edmonton area, he said.

Ervin said cutting off light oil supplies through Trans Mountain would hurt Alberta-based Parkland Fuels Corp., which bought the 55,000-barrel-per-day Burnaby refinery last year and has enjoyed good margins thanks to its access to low-cost Alberta feedstock.

Imperial Oil Ltd. spokesman Jon Harding said Tuesday the Calgary-based company, which ships refined products on Trans Mountain, "understands the rationale" for Bill 12 and will comply if it's passed but hopes a solution can be found that negates the need for its use.

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