Submission by the Canadian Association of Petroleum Producers. to the. Standing committee on Transport, Infrastructure and Communities

Transcription

1 Bill C-48 An Act respecting the regulation of vessels that transport crude oil or persistent oil to or from ports or marine installations located along British Columbia s north coast Submission by the Canadian Association of Petroleum Producers to the Standing committee on Transport, Infrastructure and Communities October 2017

2 INTRODUCTION The Canadian Association of Petroleum Producers (CAPP) represents companies, large and small, that explore for, develop and produce natural gas and crude oil throughout Canada. CAPP s member companies produce about 80 per cent of Canada s natural gas and crude oil. CAPP's associate members provide a wide range of services that support the upstream crude oil and natural gas industry. Together CAPP's members and associate members are an important part of a national industry with revenues from crude oil and natural gas production of about $110 billion a year. CAPP s mission, on behalf of the Canadian upstream crude oil and natural gas industry, is to advocate for and enable economic competitiveness and safe, environmentally and socially responsible performance. CAPP welcomes the opportunity to provide the Standing Committee on Transport, Infrastructure and Communities our views on the An Act respecting the regulation of vessels that transport crude oil or persistent oil to or from ports or marine installations located along British Columbia s north coast. BACKGROUND On May 12, 2017, the Government of Canada introduced the Oil Tanker Moratorium Act that seeks to formalize an oil tanker moratorium on British Columbia s north coast. The moratorium would prohibit oil tankers from loading and carrying more than 12,500 metric tons of crude oil or persistent oil product. During the brief consultative process undertaken by Transport Canada, CAPP did not support the proposed moratorium because it is not based on science and facts. There were no science-based gaps in safety or environmental protection identified that might justify a moratorium. Furthermore, there was no risk-based analysis provided to support a moratorium of any length of time (short-term or longterm). CAPP s letter to the Honourable Minister of Transport is attached to our submission. TANKER SAFETY Canada has an outstanding record on marine safety due to its stringent regulatory, monitoring, enforcement regime and good operating practices deployed by industry. Canada has extensive experience in moving crude oil and petroleum products by sea. For example, condensate has been safely imported on tankers for many years into Kitimat, in British Columbia s north coast region. The federal government has been a leader in ensuring that Canada has a world-class marine safety system that continues to evolve over time. Modern day tanker safety measures are robust and include the use of state of the art tanker navigation, double hull design, segregated ballast tanks, inert gas systems, compartmentalization and seafloor mapping. The government had set up an independent Tanker Safety Expert Panel to review and assess Canada s Marine Oil Spill Preparedness and Response regime. The panel concluded that the regime is fundamentally sound and made some recommendations which were endorsed by the federal government. The national Oceans Protection Plan launched by the Prime Minister will continue to ensure Canadian leadership in marine safety. 1 P a g e

3 MARKET ACCESS The Government of Canada has made a commitment to increase access to tidewater for export of Canadian natural resources thereby ensuring long-term economic benefits to Canadians. Bill C-48 as written, would prohibit marine access along British Columbia north coast ports to Asia for a very broad range of hydrocarbons. Our production of crude oil and natural gas and natural gas liquids continues to grow. Canada needs to diversify its energy markets away from the United States. Asia offers a large new market opportunity for Canada s large oil and natural gas resource base. Marine transport is the only way to access these new potential markets. The moratorium would cut off the most economic path to Asia and sends yet another signal to the investment community that Canada is not open for business. Also, the expansive definitions contemplated in the Act could preclude the optionality for future opportunities of condensate shipments from liquids rich natural gas and light tight oil plays that are in the earlier stages of exploration and development. Results to date have been very promising, providing a strong indication that the liquids rich plays offer a long term significant economic opportunity for Canada which aligns with government priorities, including jobs for middle class Canadians, investment in a high tech industry and government revenues. Further the liquids from the liquids rich natural gas plays (including the condensates) provide a lower carbon energy alternative that can help position Canada to take a leadership position in a world transitioning to a lower carbon economy. The United States is now one of our major competitors and is exploiting export market opportunities utilizing marine transport. In 2015, the United States lifted the ban on crude oil exports introduced in the 1970 s. Most recent data from the U.S. Energy Information Administration shows that U.S. exports of oil and condensate was 1.6 million barrels per day of oil. As of today, Canada is a net importer of condensate but over the next 3-5 years, there is an opportunity to become a net exporter of condensate. DEFINITIONS The proposed regulations include three definitions applicable to oil: oil, crude oil and persistent oil. These are described as follows: Oil means petroleum in any form, including crude oil, fuel oil, sludge, oil refuse and refined products. Crude oil means any liquid hydrocarbon mixture that occurs naturally in the earth including a liquid hydrocarbon mixture from which distillate fractions have been removed or to which distillate fractions have been added whether or not it has been treated to render it suitable for transportation. Persistent oil means an oil, or an oil of a class of oils, set out in the schedule. 2 P a g e

4 The proposed regulations would prohibit the transportation of crude oil OR persistent oil OR any combination of the two. There is considerable lack of clarity as to what the crude oil definition covers. A list of persistent oils included in the moratorium is provided in the Schedule to Bill C-48. However; because an oil product is not identified in the Schedule does not mean it can be transported because it may still fall under the definition of crude oil. In addition, while persistent oil is defined by reference to the specific hydrocarbons listed in the Schedule to Bill C-48 which can be amended by regulation, crude oil and oil are broadly described with no opportunity to amend through regulation. Having a persistent oil and a crude oil definitions is confusing. It is CAPP s understanding that the intent of the government was to impose a moratorium for oil tankers carrying persistent oil products along the British Columbia North Coast. Recommendation CAPP recommends that Bill C-48 only includes one definition of persistent oil that links to a Schedule that can be modified by regulation. Alternatively, CAPP recommends that the crude oil definition be amended to say something like Any liquid hydrocarbon designated by regulation. PERSISTENT DEFINITIONS Crude oil is made up of a wide range of hydrocarbons ranging from volatile, light materials such as propane and benzene to more complex compounds such as bitumen, asphaltenes, resins and waxes. The concept of persistent and non-persistent oils is important as it informs the response required in the event of a spill. The distinction is based on the likelihood of the material dissipating naturally. As a rule, persistent oils contain a large proportion of heavy hydrocarbons and dissipate more slowly and require clean-up. In contrast, non-persistent oils are generally composed of lighter hydrocarbons which tend to dissipate quickly through evaporation. In the Schedule to Bill C-48, condensate is considered a persistent oil if less than 50% of it, by volume, distills at a temperature of 340 o C and if less than 95% of it, by volume, distills at a temperature of 370 o C when tested in accordance with the American Society for Testing and Materials ASTM D86 method. While the ASTM D86 distillation thresholds have been used broadly to define persistence, there are other key physical properties that should be considered such as viscosity API, flash point, evaporation, interfacial tension, and emulsification tendency/stability. Of note, definitions of persistent oil vary (for example Australia references the AMSA / ITOPF standards which refer to API gravity and viscosity in addition to alternative distillation criteria) and alternative definitions and thresholds should be explored further. Western Canadian condensate is a unique, light hydrocarbon product that has very different physical and chemical properties and behavior than heavier oils and products. The timeline for condensate persistence in a marine environment is often hours or days. 3 P a g e

5 Recommendations CAPP recommends that alternative definitions of persistent oil and thresholds be explored further. CAPP is seeking consideration for alternative treatment of condensate from the list of persistent oil products. SCIENCE-BASED RESEARCH The safe and reliable transportation of our products by all means of transportation is critical to CAPP and its members. The need for additional science-based analyses to better understand the fate and behaviour of various crude oil types under various environments has been identified and we in industry are responding to this identified need. As such, CAPP and the Canadian Energy Pipeline Association have commissioned an independent study with significant cost which should be completed in Recommendations CAPP recommends that the federal government undertake science-based risk assessments related to oil tanker movements along the British Columbia north coast and additional fate and behaviour studies under the Oceans Protection Plan. CAPP is seeking clarity on the principles and science-based rigor that would allow for products to be exempted from the Schedule and the moratorium lifted. CONCLUSION CAPP believes that the overarching goal should be as state in the Minister s mandate letter - to ensure that Canada s transportation system supports our ambitious economic growth and job creation agenda. Canadians require a transportation system that is safe, reliable and facilitates trade and the movement of people and goods. CAPP does not support the tanker moratorium as it is not based on science or facts. Recognizing the intent of the government to proceed, CAPP seeks to eliminate the confusion of overlapping definitions of persistence and crude oil ; to encourage further evaluation of the relevant characteristics of persistence ; and to have the flexibility to revise the scope of persistent oil through regulation consistent with future learning. CAPP also desires clarity as to what factors would lead to the moratorium being lifted for any specific type oil or all types of oil. 4 P a g e