It’s becoming increasingly difficult to get oil-sands pipeline projects off the ground, and Alberta’s worst spill since 1980 will probably make it tougher.

A rupture in a line operated by Nexen, a unit of China’s Cnooc Ltd., spewed 31,500 barrels of bitumen, waste water and sand into the bog-like muskeg of the province’s north this month, igniting outrage from communities along pipeline routes. The crude in the slurry would be enough to make gasoline to fill up about 15,000 cars.

The leak is bolstering opposition that has stalled every major crude export project from Canada in recent years and may lead to more stringent regulations. The delays to multibillion-dollar pipelines such as TransCanada Corp.’s Keystone XL are threatening output growth and have led producers to turn to costlier trains for transport.

“Every high profile incident and spill, especially those that involve operator malfeasance, gets major play and adds to the call to stop new pipelines,” said Michal Moore, a University of Calgary economist and former California energy regulator. There’s “no question” this one will lead to more scrutiny, he said.

Alberta Premier Rachel Notley said the leak will shake public confidence and called for an investigation that “can produce clear, meaningful recommendations to ensure that it doesn’t happen again.”

Among aboriginal leaders expressing concern is Byron Bates, a councilor from a Fort McMurray band that has lands as close as 10 kilometers (6 miles) from the spill.

“It’s still two big football fields of black goo,” Bates told reporters on July 24 after a visit to the site.

Aboriginal Backing

Support from communities is an important consideration in pipeline investment decisions in Canada. Indigenous groups across the country have said leaks may harm lands where they fish and hunt.

Enbridge Inc. has put off a firm timeline for its Northern Gateway line to the Pacific Coast as it tries to win aboriginal backing.

“The Nexen spill is going to be brought into the larger conversation of why we don’t need tar-sands pipelines,” said Kendall Mackey, the national tar-sands campaign manager with Energy Action Coalition in Washington.

On July 15, a worker identified the leak from the eight-month-old line used to deliver crude to a processing facility. The spill may have begun as early as June 29, when it was restarted after maintenance, Ron Bailey, senior vice-president of operations at Nexen, said at the site on July 22. It will take months to investigate the cause, he said.

‘Root Causes’

“Our focus today is really the safety, the environment and the root causes,” Nexen Chief Executive Officer Fang Zhi said at the site.

It’s too early to know whether rules will change, Colin Woods, manager of enforcement and surveillance at the Alberta Energy Regulator, said while touring the site.

Requirements the regulator could consider include scheduled and random inspections of pipelines during construction and while in operation, as well as better spill detection technology, University of Calgary’s Moore said.

In the meantime, the spill is getting bad press in Canadian newspapers every day.

“An incident in the oil sands reinforces this general negativity that’s playing into the challenge to get pipelines built,” said Steven Paget, an analyst at FirstEnergy Capital Corp. in Calgary.

Source: www.bloomberg.com

Please leave comments and feedback below