Pipeline politics of trying to find help for B.C. drivers at the pumps
Credit to Author: Stephen Snelgrove| Date: Thu, 29 Aug 2019 01:00:18 +0000
VICTORIA — B.C.’s chronic shortage of gasoline could indeed be rectified by shipping more refined product through the existing Trans Mountain pipeline, according to the National Energy Board.
But the board reckons the switch could only happen through concerted action by the buyers and sellers who currently ship petroleum products through the heavily-used line.
Canada’s pipeline regulator weighed in with the how-to-do-it suggestion in a submission to the government-ordered inquiry into gasoline prices, being conducted by the B.C. Utilities Commission.
The commission had identified reduced shipments of gasoline through the pipeline since 2015 as one factor in creating shortages and driving up prices here in B.C.
It asked the energy board: “Is it possible to ship more refined product into B.C. for local use?” And if so, “please describe these scenarios.”
“It may be possible to ship more refined products than are currently being shipped on the pipeline,” replied the NEB in a written response posted earlier this month.
But it would be up to Trans Mountain users to facilitate the shift.
“Under Trans Mountain’s existing tariff, no priority is given to shipments of heavy oil, light oil, or refined petroleum products,” according to the board.
Rather, it was decisions by shippers “that ultimately determine the types and volumes of petroleum products that are transported.”
Hence the scenario that could increase the supply of gasoline arriving at the receiving end here in B.C.
Shippers could propose putting more gasoline into the line to B.C. Then “all else being equal, the Trans Mountain pipeline would carry more refined petroleum products,” wrote the NEB. “Shippers could also choose to acquire additional pipeline capacity through the secondary market.”
But the would-be scenario for delivering more refined product to B.C. comes with a wrinkle or two.
As the board itself acknowledges in a footnote, “shippers’ decisions are based on a number of different factors, including contractual terms, the types of products shipped and market forces.”
Plus judging from other submissions to the inquiry, the NEB itself would appear to have had a hand in changing the balance of products in the pipeline when it revised the allocation process back in 2015.
“Changes in 2015 to the allocation process for acquiring pipeline space have resulted in less refined products being shipped on the Trans Mountain pipeline,” argued Suncor Energy.
“Market economics favour shipping crude over refined petroleum products, which, in conjunction with the purchase by crude shippers of additional pipeline space in the secondary market and the revised allocation methodology, has diluted the share of line space allocable to refined product shippers.”
Here’s Parkland Fuel Corporation, operator of the refinery in Burnaby: “The evidence is unequivocal that constraints on Trans Mountain since 2015 have had a significant upward impact on B.C. prices.
“The refined products shipped via the pipeline are one of the cheapest sources of delivered supply for the B.C. market. With the supply of refined products shipped via the pipeline having been reduced by approximately half since 2015, B.C. demand has been met by increasingly costly sources of supply from as far away as California, the U.S. Midwest and the Gulf Coast.”
Imperial Oil noted how it had expressed the view back in 2015 that the changes, “which are now in effect are largely inappropriate and punitive toward refined product shippers.”
But that could change with action from Ottawa.
“The government of Canada, as owner of Trans Mountain pipeline, could choose to allocate more capacity to refined products versus crude,” argued Imperial, while acknowledging the shift “would need to be negotiated with committed shippers.”
None of these considerations would be as much of a factor were it not for the constraint identified by the pipeline company itself on Aug. 8, the final day for submissions to the inquiry.
“The pipeline capacity is fully utilized,” wrote Trans Mountain, disputing assertions, based on what it said were misinterpretations of NEB data, that the line is underutilized.
“As operator of the pipeline system, Trans Mountain is in the best position to verify data related to its system.”
Looking ahead, Trans Mountain raises a longer-term solution to the capacity problem, namely construction of the controversial TMX expansion project.
By almost tripling pipeline capacity to the West Coast, “the project will offer shippers expanded capacity to all markets served by the pipeline including the crude and refined product markets in B.C. and be capable to fully supply it.”
But that would be subject to policy, regulatory and commercial decisions, plus the willingness of the owner of the pipeline (presuming it is still Ottawa) to attach a political priority to guaranteeing gasoline supplies to B.C.
All of which suggests a possible answer to a concern raised by Premier John Horgan, back before he ordered the commission’s inquiry into gasoline prices.
“We need more gasoline to meet the demand in the marketplace,” he told reporters back on May 1. “I’ve said, and I will say directly to the prime minister that you own the pipeline. Get some gasoline into that pipeline so that we can relieve pressure into the Lower Mainland.”
It remains to be seen what the commission will make of all this. The final report of the inquiry is scheduled for release Friday, the deadline set by the Horgan government.
But with a federal election coming, there’s surely an opening to call on Ottawa to free up space its pipeline and provide more gasoline to consumers in B.C.
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