An unlikely player has emerged with a proposal to build a $13-billion refinery near Kitimat that will process oilsands crude from Enbridge's Northern Gateway Pipeline.
Victoria resident David Black, who owns 150 newspapers in Canada and the U.S., said Friday he will submit an environmental assessment application to the federal government immediately and spearhead a drive to raise investment capital for the "world-scale" refinery, which he says will produce 6,000 jobs over a six-year buildout and 3,000 long-term jobs in operation and spinoff employment.
Black's company, Kitimat Clean Ltd., is proposing to build the refinery at the Dubose site, 25 kilometres north of Kitimat, and pipe gasoline, diesel and kerosene 40 kilometres to a marine terminal on the Douglas Channel for loading on tankers.
The refinery, which would be the first built in Canada in 25 years, would be capable of processing 550,000 barrels per day, ranking it among the world's top 10 in capacity. By comparison, the Husky refinery in Prince George puts out 12,000 barrels while the only other refinery in B.C. -- Chevron's Burnaby facility -- produces 55,000 barrels. Kitimat Clean would be the third oil refinery in B.C. and the first commissioned in the province in 45 years. The Burnaby refinery was commissioned in 1935 while Husky's Prince George refinery opened in 1967.
From another perspective, the refinery's $13-billion price tag, which is expected to creep higher, is nearly double the $7.9 billion cost estimate for the Site C Dam project proposed for the Peace River.
Black said it would have the capacity to process the entire output of the planned Enbridge pipeline, separating the diluant that makes oilsands bitumen flow in a pipeline and sending that product back to Edmonton via a second line.
Black said moving refined fuels "removes the threat of off-shore pollution from a heavy oil spill."
He said gasoline and diesel would all evaporate in the event of a spill at sea and no "extensive remediation would be required..." when compared to a bitumen spill.
Timing is key for Kitimat Clean. Black and consulting engineer Glenn McGinnis, a 40-year industry veteran, hope to being construction in 2014 and finish by 2020. The proposed pipeline would be finished sooner, in late 2017, according to an Enbridge timeline.
Black said he would personally fund the environmental review process, expected to run in the tens of millions of dollars, and raise the $13 billion through partnerships with an operator, fuel buyers likely from Asia and investors on Wall Street and Bay Street, including mutual fund brokers and pension funds "eager to fund infrastructure projects."
Black, who describes himself as a "British Columbian and quiet environmentalist," said principal issues will be air, land and water protection. Refineries require a huge land base, fresh water supplies and release massive of amounts of greenhouse gases in to the air -- in this case seven million tonnes of CO2 per year.
"We hope to avoid drawn out controversy during the environmental process by setting specifications that make this the cleanest and greenest refinery in the world," Black said.
He said oilsands crude would otherwise end up being shipped to countries with less efficient refineries and lower environmental standards.
"We're all one planet and you can do it somewhere [in Asia] or put the scrubbers on and do it with the world's best standards here in British Columbia," said Black.
The proposed refinery, which would sprawl over 10 square kilometres and require a natural gas cogeneration plant to provide steam and electric power, is on Crown land zoned for industrial use. Along with the terminal site, both cover traditional territories of the Kitselas and Haisla first nations. The sides have yet to have serious discussions, said Black.
The Enbridge pipelines are planned to run through the property.
Black said he's had an interest in a refinery for years, first proposing the concept to Canada's oil companies in 2005 when he was chairman of the B.C. Progress Board under then-premier Gordon Campbell.
He said there remains little interest in refineries among oil companies because profit margins are much lower than other areas of the industry such as drilling and transporting energy. "No company has stepped forward ... [so] I have decided to do so myself," said Black.
"I am hoping to serve as a catalyst to attract an industry consortium that will undertake the project. But if no industry player steps forward during the two years of environmental assessment, I will do all that I can to organize the capital and build the refinery."
Black said the U.S. enjoys a pipeline and refining monopoly on all crude leaving Canada. He said American law effectively prevents the export of crude from the U.S., even if the oil comes from imported sources like Canada.
"We are the largest exporter of crude oil to the U.S. and, in the process, we have exported most of our potential refinery jobs to that country as well," said Black. "There is a lot of employment in running refineries, very little in operating pipelines."
Markets for refined fuel from Kitimat will include the entire Pacific Rim and should also result in lower prices for consumers in B.C., he added.
Canada has 24 refineries and upgraders, a far cry from the more than 40 operating in the 1970s. The Conference Board of Canada noted in a recent report that while expansions to existing facilities have increased capacity, annual growth output has been on a steady decline. The report noted Canada only refines about a quarter of the oil that is produced in the country.
Calgary-based Northwest Upgrading is building a $5-billion upgrader refinery near Edmonton that is expected to be in operation by 2015.
Refinery details
Most of the major components of the refinery would be pre-built offshore, rather than in Alberta, because labour costs are lower and because of the ease of transporting the pieces to the site. Builders would deliver the massive tanks and operating systems via ocean barges rather than attempting delivery via rail or truck from Edmonton because of constricting tunnels, overpasses and roadways.
The site for Kitimat Clean would cover 10 square kilometres and include its own railway and gas-powered cogeneration plant.
The refinery would contain more than 50,000 valves, hundreds of thousands of miles of pipe and wire and thousands of computers and instruments to control processing.
Oilsands crude would be stored in tanks before entering the refinery and be monitored for emissions and surrounded by earthen berms.
The plant will process up to 550,000 barrels per day of dilbit (condensate diluant and Alberta oilsands bitumen). The plant will produce 240,000 barrels per day of diesel, 100,000 barrels of gasoline and 50,000 of kerosene.
The refinery would have two processing lines and feature delayed coking to convert heavy bitumen into lighter fuels and "hydrocracking" to further increase yields and reduce emissions.
The fuel products are then blended to market specifications and piped 40 kilometres to a marine terminal and stored in finish tanks for loading aboard tankers.
Massive amounts of fresh water would be required to operate the refinery. Kitimat Clean projects a need for 2,500 cubic metres per hour. Water would be pumped from wells near the Kitimat River and heated in a natural gas cogeneration plant to generate steam. The facility would also collect, treat and recycle wastewater, rainwater and snowmelt.
Steam is used to heat processing units to separate crude into commercial products. Steam is also used to create hydrogen for the hydro de-sulphurization units and the hydrocracker and to produce electric power.
Diluted bitumen would be processed in a distillation unit that recovers diluant and returns it to Alberta on the proposed twin line. Methane and ethane gases from the distillation unit would be used for fuel in the refinery. Propane would be sold locally and butane would be mixed with gasoline to increase octane levels.
Other residuals from the distillation process will produce additional fuel products as well as petroleum cokes that will be exported for fuel to steel mills and sulphur, also for shipping overseas. They would be delivered by rail from the refinery site to the proposed marine terminal or shipped to Ridley Island at Prince Rupert for loading.
