August 18, 2012:

Political, business and union leaders reacted with caution and in some cases deep skepticism Friday to a B.C. community newspaper publisher's bold proposal to build a $13-billion refinery near Kitimat on the West Coast. David Black floated the idea of building the refinery to reframe discussion on Enbridge Inc.'s controversial Northern Gateway oil pipeline by promising 10 times as many jobs and eliminating the shipment of oil off the B.C. coast. The idea is to process all of the 550,00 barrels a day of crude oil from the proposed Northern Gateway pipeline in the refinery, and then ship refined oil products such as gasoline, diesel and kerosene. Black argues if there was a tanker spill, the refined products would cause less damage because they float and evaporate. Black, who acknowledges he has no support from oil producers, hopes his proposal will temper opposition from British Columbians and first nations, many of which have rejected the $6-billion project because they say the economic rewards for B.C. are not great enough to offset the risk and consequence of an oil spill on the pipeline or off the northwest coast of British Columbia.

He said he does have support for the concept from Enbridge CEO Pat Daniel, although the Calgary-based company declined to comment Friday. Black also said he has no financial backers, no partners and has not discussed the idea with potential Asian customers. He has had only brief discussion with a pair of first nations in the Kitimat area. Still, Black, who owns more than 150 community newspapers in B.C. and the United States, said he believes support and financial backing can be found for the refinery and that people will listen to him. "I'm hoping this will jump start a change in the debate," Black told reporters at a Vancouver news conference. "In other words instead of just saying 'no,' let's say how can we work with this to our advantage - get a lot out of it and solve potential problems at the same time. Peter Boag, president of the Canadian Petroleum Products Institute, called the proposal "interesting" but speculated the $13 billion price tag could be low. "Clearly there are some significant economic and regulatory hurdles that would have to be overcome before we would see that proposal come to fruition." Michael Dunn, oil and gas analyst with FirstEnergy Capital Corp. in Calgary, also expressed skepticism.

"If they don't want a pipeline to Kitimat I'd be surprised if they'd want a refinery," he said. "Assuming a pipeline doesn't spill, it would make for a cleaner harbour at Kitimat than a refinery on the water there."He added there is excess coking capacity in upgraders on the U.S. Gulf Coast, so it makes far more economic sense to send heavy crudes there for upgrading than to build new plants elsewhere. There's lso excess capacity in refineries on the east coast of Canada and the United States. "I suspect the economics are not too enticing. Kitimat is reasonably remote and it would not be the cheapest place in the world to build a refinery," said Dunn. The proposed refinery site is 3,000 hectares of industrialzoned land 25 kilometres north of Kitimat known as Dubose, which Black has not purchased. He has reserved a name for a company, Kitimat Clean Ltd., but has not incorporated the company.

Black said he plans to submit an environmental assessment to B.C. regulators next month, using his own money, which he estimates will cost a few million dollars. He made it clear he would not be investing in the refinery himself, noting even a one per cent stake would cost $130 million. Natural Resources Minister Joe Oliver said the federal government welcomes any project that boosts Canadian exports and jobs, but said he wouldn't pass judgment on the idea. "The reason refineries haven't been built in Canada since the 1980s is because there hasn't been an economic case for them, and the private sector just hasn't seen the advantage," he said.

"If he's serious it's presumably because he's pushed the numbers and come to a case. But I'm not in a position to know whether this is likely or not," said Oliver. University of Calgary professor Michal Moore said it was "naive" to think a refinery would be built near Kitimat. The Asian market is not looking for refined products, but oil, he said. It would also be virtually impossible to mobilize the labour force and infrastructure in a "tiny place" such as Kitimat to support a refinery, said Moore, an expert in energy markets with the school of public policy. Black acknowledged his refinery proposal did not address concerns about the pipeline's safety, adding Northern Gateway should not proceed unless there is confidence that any pipeline leakage will be immaterial.

Josh Paterson, staff lawyer at West Coast Environmental Law said Black's announcement caught the environmental movement off guard. "I don't see this going anywhere. There are no backers, no support no financing in place," he said. Jennifer Grant, oilsands director for the environmental research group Pembina Institute, said she was skeptical a new refinery would substantially reduce the environmental risks of the pipeline project. "Suggesting a major gasoline or diesel spill would just evaporate and not require remediation seems a bit of an oversimplification of a potentially much larger incident," she said. The associations representing Canadian oil producers and refiners offered modest support. Greg Stringham, vice-president with the Canadian Association of Petroleum Producers, said the West Coast is an important export point for Alberta crude, so any projects that could lead to increased access should be carefully considered.

However, he added the refining market in North America is currently very competitive, so it's uncertain how another plant might fit in. "The margins have been relatively tight and that's what people are looking at in evaluating this. So there are pros and cons we'll have to look at it very carefully," he said. "At the end of the day, it's going to have to be the commercial interest that will evaluate and decide on it." Alberta Federation of Labour President Gil McGowan said while his organization has always favoured keeping refining jobs in Canada, "we are not convinced this is a credible proposal." "Is this a real proposal or is it simply a ruse to help get the pipeline built?" he said. Black said Daniel, the Enbridge CEO, has given him support. "Pat Daniel told me personally he is OK with a refinery; that would be fine. But he's got a lot of partners there. Most of the people in that partnership are not Enbridge. They are oil producers and some of them have been very clear to me: they would much rather put it in tankers - heavy oil in tankers - than sell it to a refinery."

The refinery is estimated to create 3,000 jobs, half of those directly in the refinery and the other half in contract jobs. Another 6,000 workers would be hired during the fiveyear construction period. Black is proposing to reduce capital costs from Canada's high labour rates by building refinery modules offshore to be shipped to Kitimat.  The Northern Gateway pipeline is estimated to create about 350 permanent and contract jobs in B.C., onetenth of the permanent jobs a refinery would create. A pipeline would also create thousands of jobs during its three-year construction phase. With files from Dan Healing, Calgary Herald, and Postmedia News Services.

By CalgaryHerald