The shutdown of the Prudhoe Bay oil field in Alaska shows the need for more pipeline capacity in Canada and the U.S., say Canadian line operators.
"There is a need to be able to respond to situations like this," says David MacInnis, president of the Canadian Energy Pipeline Association (CEPA). "Right now, we just don't have (that ability) in North America."
BP PLC says it could take months for Prudhoe Bay, which was producing 400,000 barrels (bbls) per day of crude oil, to re-open completely following the replacement of a 26-kilometre stretch of damaged pipeline.
Oil prices spiked to more than $77 US per barrel and fluctuated dramatically after the closure was announced.
BP, the world's second-largest oil company, has attributed the damage to severe corrosion.
The rust was discovered when the company conducted tests ordered by the U.S. government following a 5,000-bbl oil spill - the largest ever on Alaska's North Slope - at Prudhoe Bay last March.
More pipeline capacity refers to either new pipelines or the expansion of existing systems. MacInnis says producers have the ability to boost production incrementally and pipeline companies have little surplus capacity that can be used to deal with situations like the Prudhoe Bay closure.
Calgary-based CEPA represents Canada's transmission-pipeline operators, including BP's Canadian subsidiary BP Canada Energy Co., Alliance Pipeline Ltd., Atco Pipelines, BP Canada Energy Co., Enbridge Pipelines Inc. and TransCanada PipeLines Ltd.
Transmission pipelines move almost all of Canada's daily crude oil and natural gas production to Canadian and U.S. markets.
MacInnis says CEPA is calling on U.S. authorities to speed up the pipeline-permit application process, regardless of whether proposed projects are accepted or rejected.
He contends companies seeking to build lines as part of the long-awaited Alaska Highway Pipeline face a slow approval process because the projects are subject to state laws and deal with government agencies that have overlapping and duplicate roles.
Prudhoe's pipeline damage occurred on a gathering line into which producers feed their crude before it is transferred to a main line that transports it to the port of Valdez for shipment via ocean tanker to California and other western U.S. locales.
No Canadian pipeline operators will be affected by the shutdown.
MacInnis says the shutdown shows that other jurisdictions should adopt the Canadian industry's pipeline-integrity practices. It re-affirms the fact CEPA members are world leaders in utilizing the latest inspection and maintenance technologies, he says.
Pipeline operators use computerized sensors that can monitor a pipeline 24 hours a day and send alerts on potential problems in real time.
They also employ aerial surveillance by helicopter and workers frequently make checks on foot.
"The goal is zero pipeline incidents," says MacInnis, adding CEPA members have a world-leading safety record.
BP has expressed surprise at the amount of corrosion discovered on the Prudhoe Bay network.
The firm says it went nine years without using a robotic device called a "pig" to clean out its lines because company officials did not think the procedure was necessary.
Pigs are used frequently in Canada, and advertisements for such procedures, performed by service companies, appear often in trade publications.
MacInnis says Canadian regulators leave it up to individual companies to achieve their safety and environmental goals. Pipeline companies that operate in Canada are required to file an integrity-management plan with the National Energy Board (NEB).
Together, they set safety standards for maintaining pipelines and the NEB then audits companies to ensure compliance.
"It's a system that differs from anywhere in the world, where you see, for the most part, more proscriptive measures," says MacInnis.
A one-size-fits-all inspection process does not work, he adds, because every pipeline is unique based on its location and geographical factors.
John Bennett, of the Sierra Club of Canada, says: "We really do have some pretty good regulations in terms of pipeline operations, but we have to ensure they are constantly updated - and not rely on industry to do their own self-enforcement.
"They (industry) need to have government looking over their shoulder to ensure everything is done properly or it could lead to some serious problems."
A report by the NEB released last March suggests the system is working well. The number of ruptures has declined since 1997, says the report, with no ruptures reported on NEB-regulated pipelines in 2003.
While information on more recent years is still being tabulated, there have been no reports of any major ruptures or leaks, said board spokeswoman Carole Leger-Kubeczek.
The self-policing model will likely come under further scrutiny in future years as pipeline operators seek to capitalize on the proposed Mackenzie Valley natural gas pipeline from Canada's Arctic and the Alaska Highway Pipeline, which may both pass through both B.C. and Alberta.
Calgary-based Kinder Morgan Canada Inc., formerly known as Terasen Pipelines, is also seeking approval for its Trans Mountain expansion project, which expands an existing line between Northern Alberta and the Vancouver suburb of Burnaby. The line currently transports 225,000 bbls per day of bitumen, the tar-like oil produced in the oilsands, and aims to add 35,000 bbls per day next year and 40,000 bbls per day in 2008.
Ultimately, the line will reach a capacity of 1.1 million bbls by 2010-11, says Kinder Morgan spokesman Philippe Reicher.
"There's definitely need for additional capacity out of Canada to several markets, in our case specifically West Coast markets," says Reicher.
He says the Prudhoe Bay shutdown shows "relying on a single (transmission) source is always a problem.”
Reicher says his firm has developed a good record by maintaining a distinct and strong pipeline-integrity program for more than four decades.
In addition to conducting aerial and on-foot checks, Kinder Morgan uses cathodic devices that can coat three-dimensional objects such as pipelines and makes periodic "cut-outs" whereby sleeves of pipe are cut out and examined.
Glenn Herchak, a spokesman for Calgary-based Enbridge Pipelines Inc., says his firm is working hard to boost capacity through its proposed Gateway project between Alberta and the port of Kitimat, B.C., along with its Wapiti and Athabasca lines and planned Alberta Clipper pipeline between the province and the U.S.
Enbridge is also working with producers in hopes of participating in the Alaska pipeline project and has conducted discussions with the Alaskan government.
Herchak adds Enbridge has a 60-year history of safe and reliable pipeline operations. "We have the world's most sophisticated pipeline maintenance system," he says. "It's fast and (operates) around the clock every day of the year."
The Prudhoe Bay closure will likely be a hot top at the sixth annual International Pipeline Conference to be held in Calgary, Sept. 25-29.
Conference organizer Linda Abercrombie says more than 1,200 delegates from 31 countries, including China, which is viewed as a key source of future demand, are slated to attend.
Social responsibility will be the conference's theme and sessions will cover project management, pipeline design and construction and environmental issues.
- With files from CP (Monte Stewart can be reached at monte@businessedge.ca)
