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Crude Observations

Egress Options

Has there ever been a better metaphor for the energy sector writ large and Alberta’s place in it than the sight of a giant transport vessel wedged across the Suez Canal, effectively bringing to a grinding halt a significant portion of international trade and shipping, including somewhere around 2% of the daily volume of liquid fossil fuels transport (oil and LNG)? Didn’t think so.

 

It works on so many levels.

 

Are we the lineup of ships stuck behind the canal plug desperately trying to get our product to market?

 

Are we the plug itself standing in the way of a diverse array of products that just want to get by?

 

Or are we the plucky but helpless excavator trying to dig the ship out of the channel – the small fish in the massive pond battered by forces beyond our control, destined to lose battle after battle in our efforts to return things to normal.

 

All of these are relevant to Alberta today as we struggle through the energy transition and find ourselves seemingly daily on the losing end of so many different battles – pipelines, public relations, social license, prices, investment… The latest of which of course is the appeal to the Supreme Court about the constitutionality of the federal carbon tax/levy/fee.

 

I’m not a legal scholar by any stretch, and I have been told that there was in fact some good basis to challenge the carbon tax, but in the back of my mind I had given this challenge somewhere between a zero and never chance of succeeding. The writing is on the wall globally for a tax like this, it’s coming in the United States and it’s reality pretty much everywhere around the world, so the challenge seemed quixotic at best, a distraction at worst.

 

At any rate, that’s not what I wanted to talk about. The wounds are too fresh and the Suez metaphor too tenuous to tie it to a carbon tax court challenge loss. Nor do I want to compare that poor excavator to the Alberta government and take gratuitous shots at the Bigfoot hating War Room.

 

Instead, I am drawn to the blindingly obvious – the Suez Canal blockage as a metaphor for Alberta’s ongoing egress problems, which are pervasive, constant and a major thorn in the sides of industry and government while still being catnip on social media.

 

With KXL now fading in the distance and Lines 3 and 5 becoming focal points of anti-fossil fuel activists like Jane Fonda, the egress conundrum will not go away. How do we get Alberta’s resources to market?

 

As expected, there are many opinions on how to do exactly that.

 

Some people want to resurrect Energy East, even though the project proponent, TC Energy, is suspiciously absent from any discussion of this ultimately uneconomic project.

 

Others want to bring back Northern Gateway, under the mistaken impression that Enbridge has the appetite to try again where it failed so badly a mere six years ago.

 

Some still cling to the Keystone XL project, confident that with enough lawsuits, veiled NAFTA threats and backroom conversations between governments that it can somehow be brought back from beyond the grave and make it past all the route challenges and become a real and viable thing.

 

Then there is the grab bag of ideas, some good, some downright weird. There’s a bizarre proposal to go to Churchill, Manitoba – an isolated three season port that isn’t deep enough to accommodate big tankers. There’s a railway to Alaska that will end just outside of the no-go shipping zone defined by Bill C48, otherwise known as the “Gitcher Bitumen outta my water” act.

 

Then there is the Eagle Spirit idea and variations thereof which is the energy corridor cutting boldly across the North. Finally there are all the ideas to utilize North America’s extensive rail network to get bitumen to any market aside from the United States and by pass pipeline regulations. These include bitumen hockey pucks and other hardening, colling and heating ideas – all very expensive and in the case of the pucks, Canadian. But, ironically I know, still pipedreams.

 

Heck, even CP is getting into it with their purchase of Kansas City Southern which of course is not to be confused with Burlington Northern, long a portfolio company of no less an investment legend than Warren Buffett and the largest crude by rail carrier in North America.

 

I head the federal government is even in on the game, theoretically building a pipeline called the Pierre Eliott Trudeau Memorial TransMountain Expansion Pipeline. I say theoretically because quite frankly of you live in Alberta you would probably not be aware of it, given how rarely it is mentioned.

 

At any rate, lots of ideas, but you know what I say? I say screw em. Screw em all.

 

We are Alberta and we will take matters into our own hands. We are going to channel that lonely excavator in the Suez and do what needs to be done to get our product to market.

 

What I propose is bold. It will require nerves of steel and capital. Lots of capital. To access that capital, we will have to drain the Heritage Fund, take over the Alberta portion of CPP and most likely use whatever money is left in the Alberta teachers retirement fund when AIMco is done with it. With this capital we will create, through a newly commissioned and completely unaccountable private corporation, the single greatest and diversified oil shipping company the world has ever seen. A testament to our cowboy and maverick spirit. A true reflection of the entrepreneurial genius only Albertans can show.

 

And we will call it Ever Oil.

 

Ever Oil will be divided into three core divisions, just like a military – air, land, sea. And space. I guess that’s four divisions then. Each of the divisions will be responsible for coming up with their own transportation systems to deliver oil to existing and new markets. Some of these ideas have been under development for some time so fortunately we can get a head start.

 

Air Division

 

The first and primary delivery mechanism of the Air division is going to see us develop and manufacture the world’s largest fleet of transport blimps and stage them directly out of Fort McMurray. Building on Alberta’s long history of aviation excellence, Bitumen could be loaded into specially designed, lightweight containers, attached to the blimps and then released into the sky. With the prevailing winds and jet-stream, the oil blimps could travel along a route that would be very close to the never happening Energy East pipeline. A key value added here is that the blimps will be using renewable energy (wind) to deliver a fossil fuel product so it actually results in a lower carbon footprint for Alberta oil. I understand that there may be some safety concerns about massive amounts of oil floating overhead of large population centres, but last time I checked, there had never been a major blimp disaster in real life, only movies. Final point – if Phineas Fogg can go around the world in 80 days, surely our oil can make it China in less time using our much improved tech.

 

Another idea in the air division is going to involve the repurchase of WestJet from Onex and using its fleet of Boeing 737 Max planes to deliver oil from specially modified cargo holds in record time. This idea is genius on many levels, but primarily because it gets the airline away from its Toronto-based owners and avoids relocation of yet another head office, but it also repurposes a whole bunch of planes no one wants to fly on. Plus, if one should happen to crash, bitumen isn’t that flammable.

 

Sea Division

 

As a landlocked province, having a sea division may seem a bit out there, but there are solutions. If we can get our oil on tankers, then we have no need for pipelines, all we need to do is avoid all the sensitive headwater areas where pretty much all of North America’s drinking water comes from. The idea here is actually quite inspired and it involves digging a dedicated canal to get our oil to places that are willing to pay for it.  It’s worked for Egypt (mostly), I see no reason why it can’t work for us.

 

In fact, why stop at one? Let’s dig three canals. Three giant, deep canals that are large enough to allow mid-sized tankers to pass back and forth. The first one is obvious. It would start near Edmonton and run East all the way to Thunder Bay. Once in Thunder Bay the tankers could continue East through the Great Lakes to the Saint Lawrence River, hitting Montreal and Quebec City along the way before dropping off the rest of their cargo at the Irving refinery in Saint John. Kinda like a floating Energy East. Heck, if they still had oil left the tankers could continue on to India! The second canal would start in the same place but head southeast, cross the US border and then cut across the Dakotas, into Nebraska and finally into Cushing Oklahoma where the oil could be put into storage or pumped into the US leg of the Keystone XL project, which has been moving oil to the Gulf Coast for almost seven years now. The last canal is of course the most challenging, but this one would start outside of Edmonton, cross the Rockies into British Columbia and take a hard turn south and west before connecting with the Fraser River into Vancouver and then out to sea. The best part of this is that the tankers would avoid the Great Bear Rainforest and not be subject to any coastal tanker bans. Any one of these canals could be considered a nation-building project in its own right. Doing all three is downright genius. I know pipelines would be easier, but as a province and country we need to aspire to great things.

 

Land Division

 

So far the best idea for the land division is a bit out there, but it builds on the proliferation of craft breweries that have popped up around the province since 2015. Specifically, the idea is to rebrand Western Canada Select as WCS IPA. Really, who doesn’t love a cold, crisp, hoppy IPA? I bet if we renamed it would be way more popular. Plus, as a craft beer, you can charge more which solves the differential problem quite handily. As for market access, everyone knows beer can travel the world in a variety of ways – can, bottle, keg – the options are quite limitless and everyone knows that beer trucks are plentiful across North America, as are roads. It’s brilliant. Add in the fact that Canadians are beer-swilling kooks and we can probably increase domestic consumption at the same time. While our interprovincial trade barriers might make it more difficult to move across the country, I’m sure this is something the federal government could fix, especially if Quebecers decide that they like our beer. Right? As for crossing into the United States, even with the border closed for COVID there are all those remote bootlegging routes that Canadians used during Prohibition.  Of course, now that I think about it a little more, 4 million barrels a day is going to need a lot of beer cans and trucking them would be really expensive. What we really need then is a pipeline to the border. Fortunately, TC Energy has one already built and we own part of it. I am sure if he thought it was IPA and not “that other liquid” (nod, nod, wink, wink) crossing the international border, that Presidential Permit would be renewed pretty quick by one beer-loving Joe Biden.

 

Another land division plan is to have even more crude by rail. Look, I know the government decided to get out of the crude by rail game just a short year and a bit ago, but that is so yesterday’s news. The reality is that crude by rail is expanding as rapidly as the private market and the rail companies can do it so why can’t the Land Division get its piece of the action. Never mind all the nay-sayers and their complaints like “what about the farmers” and “it’s too expensive” and “there’s not enough capacity”. To this, I say balderdash. Crude by rail has always had a critical role to play and much like the canals proposed above, in Canada at least the great railways have always had a special cachet. So why not build a new one! I think this is something that the TC Energy/Alberta government Joint Venture should seriously consider. With all this right of way and eminent domain expropriations for Keystone XL, who’s to say you couldn’t just slap down a thousand kilometres or so of track and then, when the time is right, start running miles long trains up and down bringing wonderfully sticky bitumen to the masses. I bet the approval process for new train track is nowhere near as baffling or subject to political interference as pipelines. The best part is that once the track is built, it seems no one really cares what you ship on it, as long as you don’t have to sit at a level crossing for too long.

 

Space Division

 

A bit of an afterthought, the space division came together at the last minute as an offshoot of the air division due to a difference of views regarding the airworthiness of some of the ideas being floated. While blimps are predictable and safe, there is nothing remotely techy about them and with a government eager to expand the aerospace sector and diversify the economy, this division may be the ultimate game changer for our embattled energy sector.

 

The approach is thus two-pronged. The first is to attract none other than Elon Musk to the Fort McMurray region to build a SpaceX launch pad from which we can send specially designed rockets loaded with bitumen into space, allow them to orbit the planet a couple of times before gently dropping their payloads at refineries the world over. A few glitches to be worked out along the way, such as the propensity for SpaceX rockets to blow up and safety issues associated with hard landings, but you know what I say to that? Details! This is genius and brings Elon back to Canada.

 

This last idea of course is the best. Invent a Star Trek Transporter or one of those wormhole thingies. It’s inspired. It’s aspirational. Those dilithium powered transporters were super cool on the show and I bet that if we invent one, we could rig it so that it could deliver oil from one spot to another on a continuous flow to address the volume issue. Alternatively, the wormhole seems to be a fairly continuous passage which would work as well, the only drawback I see being black holes, dark matter and the end of the universe if mishandled. Ultimately, it really becomes a logistics issue – securing the locations where demand for Alberta oil is the highest and beaming it there. Once established we could put the best and brightest minds at work to figure out how to scramble, rescramble and unscramble the molecules such that what comes out at the end of the transport process is some form of refined product. This of course will save us all tons of money from having to build refining and upgrading capacity at home. And since it will make pipelines obsolete it should be a hit with the environmental movement. Taken to its extreme, this type of technology I suppose makes transportation fuel obsolete which will crush the oil industry, but I hear there is a hefty deposit of dilithium crystals in the Eastern Slope of the Rockies that can be easily strip-mined if we can just change some of those pesky regulations. This would create a whole new industry for us. It’s like a win-win without the win.

 

Well, there you have it. The basic outline and business plan for the new Alberta government owned Ever Oil, the most innovative oil transportation company in the world. Harnessing our ingenuity and capital to create egress options for Alberta oil and gas because the federal government just isn’t doing it for us.

 

I know some of the ideas seem a bit out there but that’s what people said about the Suez Canal when it was being dug.

 

What could possibly go wrong!

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