SPECIAL REPORT-A Canadian family's 'Plan B' to pump tar sands oil

Thu Mar 27, 2014 9:00am EDT
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By Richard Valdmanis and Dave Sherwood

SAINT JOHN, New Brunswick, March 27 (Reuters) - Keystone XL, a pipeline proposal to pump Canadian oil sands through the heart of America, has alarmed environmentalists and become one of the most contentious issues of the Obama presidency. But there is a "Plan B" to cut the United States out of the picture, and it is championed by one of Canada's wealthiest business dynasties.

Since 2012, the billionaire Irving family has been advocating a proposal called Energy East. The 2,858-mile (4,600-km) pipeline would link trillions of dollars worth of oil in land-locked fields in the western province of Alberta to an Atlantic port in the Irvings' eastern home province of New Brunswick, north of Maine, creating a gateway to new foreign markets for Canadian oil.

The C$12 billion ($10.8 billion) line, which would pump 1.1 million barrels per day, would include about 1,865 miles of existing natural gas pipeline converted to carry oil. The rest would be new construction, most of it along the banks of the Saint Lawrence River and into New Brunswick.

The industry is keen. Pipeline company TransCanada Corp, which is also backing Keystone, unveiled plans in August to build and operate Energy East by 2018. Customers as far away as India are lined up to take the oil, according to New Brunswick provincial officials. Canadian oil companies, frustrated by Washington's dithering on Keystone, say they have seized on it as a viable alternative to the route through the United States.

"The genesis of this is really the Keystone XL pipeline, and the continuing political obstacles to getting approval for it," said Frank McKenna, former New Brunswick premier, Irving family friend and vocal advocate of the project.

The Energy East proposal began with the Irvings, people familiar with the project say. If it is built, it will stop with them, too, at a C$300 million marine terminal they are planning to build in Saint John, New Brunswick, to service the project.

The Irvings also would be among the top beneficiaries. A study commissioned by TransCanada and prepared by Deloitte calculated that the pipeline's access to cheaper crude from the west would save as much as C$1.2 billion per year for a refinery owned by the Irvings, while creating 121 direct long-term jobs in sparsely populated New Brunswick.

The idea of a pipeline from west to east was not new: TransCanada had been looking at a possible route that would stop in Quebec, but that plan had not left the drawing board. The Irvings' proposal breathed new life into it.   Continued...