Alberta seeks Eastern oil route as Keystone drags

Wed Feb 6, 2013 12:06am GMT

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* Alberta, New Brunswick premiers cooperate on pipeline

* New Brunswick offers huge refinery, deep-water port

* Redford won't discuss ways to smooth way for Keystone

By Jeffrey Jones

CALGARY, Alberta, Feb 5 (Reuters) - The premiers of oil-rich Alberta and New Brunswick agreed on Tuesday to cooperate on promoting a cross-Canada pipeline to move heavy oil to the Atlantic seaboard as delays in projects to export the fuel generate deep price discounts.

Alberta's Alison Redford and David Alward of New Brunswick met with energy executives this week to discuss concepts for shipping the oil sands-derived crude as far as the Irving Oil refinery in Saint John, New Brunswick, Canada's largest, and to international markets through that city's deep-water port.

The talks come as Washington decides whether to approve TransCanada Corp's long-delayed Keystone XL pipeline to the U.S. Gulf Coast and as Canadian regulators consider Enbridge Inc's contentious North Gateway pipeline to the Pacific Coast. Both are well behind their initial schedules.

Redford has devoted time and effort trying to convince Canadians across the country that oil sands development is beneficial for the national economy, and now envisions a big opportunity for moving the supply to a market seen as unworkable even two years ago.

"The time we've spent together working with industry leaders from companies that are producing in the oil sands to pipeline companies that are interested in these initiatives, it's all playing into what we know is important for Alberta, which is getting access to world markets to ensure that we get the best price that we can for our product," Redford told reporters.

She said last month that tight pipeline capacity to traditional markets such as the U.S. Midwest, and delays in moving forward with major new projects, were resulting in prices for Alberta heavy crude that are less than half the value of international Brent oil.

That has led to a C$6 billion ($6 billion) shortfall in expected revenues for the province's upcoming budget. Redford warned she faces tough measures to prevent a spiraling deficit.

Alward said New Brunswick is open to opportunities to get the crude to Irving's 300,000 barrel a day refinery, which now runs the more expensive imported oil, and to discuss using the Canaport harbor facility in Saint John as an export point.

"That port is the deepest water port on the Eastern Seaboard. It is also ice-free. We have a 60-year tradition of handling the world's largest ships in and out," said Alward, who toured oil sands developments in northern Alberta on Sunday.

Redford has also agreed to talk about the prospects for shipping Alberta oil to Quebec with Premier Pauline Marois.

She is forging the links within her own country as the Obama administration moves closer to deciding whether to approve the Keystone XL project, following its initial rejection last year. A U.S. government source told Reuters last week that a decision may not be made until early summer.

MUM ON KEYSTONE CONCESSIONS

Redford declined to say what new environmental initiatives Alberta might be prepared to undertake in the oil sands to help convince Washington officials, including new Secretary of State John Kerry, that the pipeline will not trigger a major increase in pollution and carbon emissions.

Alberta's new envoy to Washington said on Monday that the province has "much more in our toolbox" but did not elaborate.

The premier pointed to moves she said have already shown Alberta's commitment to improving environmental performance, including expanding water monitoring and establishing a land-use plan for the production region.

"The record that we have stands for itself. I think that as we move forward we'll be watching the process very closely, but I won't answer a hypothetical question," she said.

Alberta could help make the oil sands more palatable for the United States by raising its levy on carbon, currently set at C$15 per tonne, to a level that would drive more emission reductions, said Simon Dyer, policy director at the Pembina Institute, an environmental think tank.

It could also mandate carbon capture and storage for oil sands projects, Dyer said.

"The Keystone battle is really about failure of Alberta and Canada to regulate greenhouse gas emissions for the oil sands," he said. "Clearly, if Alberta and Canada can really defensibly show how oil sands expansion is actually consistent with Canada meeting its international obligations, that would go a long way to addressing these concerns."

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