Cashing in on Canada's tar sands: oil transporters
Which companies are profiting from oil sands transport operations? Major movers include Enbridge, TransCanada and Kinder Morgan. Second in our series exploring who has the highest stakes in the oil sands.
According to the Canadian Association of Petroleum Producers (CAPP), 79 per cent of the world’s oil reserves are controlled by national governments. Out of the 21 per cent left accessible to private industry, more than half is located in Alberta’s oil sands.
Prime Minister Stephen Harper and his administration insist that exploiting the oil sands is necessary and beneficial to our country’s long-term economic health. But for the average Canadian, it can be tough to see exactly where these benefits lie.
So what are the corporations, businesses and individuals with big stakes, who stand to gain from tar sands operations? And how much are they worth?
Part one of this series focused on the top oil extractors in Fort McMurray and how much they’re raking in each year. Now, we take a look at some of the corporations with high stakes in other areas.
Oil transport and pipeline operators
Now that we know who’s responsible for extracting the oil product, we can move on to some of the other key players needed to get it to market. Getting it to market first means transporting oil and raw bitumen from the tar sands mining operations, and that generally means constructing pipelines that can carry it.
North American pipeline map courtesy of the Canadian Association of Petroleum Producers (CAPP).
As you may have guessed from the ongoing Keystone XL and Northern Gateway pipeline controversies, Enbridge and TransCanada are the two most well known companies working to transport tar sands oil to international clients.
Enbridge operates a network of pipelines running southeast to terminals and refineries across the United States and southern Ontario. Their proposed Northern Gateway pipeline would cut across northern British Columbia, serving a coastal port in Kitimat that would transport tar sands products to Asia.
Enbridge’s total revenues for 2010 reached $15.1 billion. Financial reports show net earnings of up to $963 million for the year, with $512 million from oil pipelines alone.
TransCanada is another major winner in the oil sands industry, even though their primary operations are in natural gas transportation. Growing production out of the oil sands has prompted company executives to put more weight behind expanding oil and liquids systems, and the major result of this push was the Keystone project.
The existing Keystone pipeline runs from Alberta south to Nebraska, Oklahoma and Illinois. With Keystone XL, TransCanada hopes to expand operations to reach the Gulf Coast.
Net income for TransCanada was over $1.2 billion in 2010, although not all of that can be attributed to tar sands operations. With their combined ownership of natural gas and oil pipelines, the company reports a $47 billion asset base.
However, the delay facing TransCanada’s fiercely-opposed Keystone XL pipeline has likely resulted in a significant loss for the company’s bank books. Speaking at last week’s anti-pipeline forum in Vancouver, Naomi Klein mentioned that the company had preemptively bought thousands of kilometres of pipeline that they’re now paying millions per day to store.
Despite the media focus on Enbridge and TransCanada, there’s another important pipeline operator that has increasingly been on environmentalists’ radar – Kinder Morgan.
With plans to expand their operations on the southern BC coast and build a new line north to Kitimat, American-owned Kinder Morgan is becoming the next big target for tar sands opposition. In fact, a recent NEB approval has already given the company the go-ahead to increase oil traffic in Vancouver’s Burrard Inlet by up to 25,000 barrels per day.
Founded by former Enron executives, Kinder Morgan was built on an existing and lucrative framework of pipelines bought when Enron was going under. The corporation currently operates terminals at the Vancouver Wharves and in Strathcona County, Alberta, and transports about 20 per cent of Albertan liquid petroleum products to markets on the West Coast. In addition to their pipelines from the tar sands to Vancouver and to the United States, a large proportion of their business comes from separate oil, CO2 and natural gas pipelines south of the border.
According to financial data for 2010, Kinder Morgan boasts a total market value of $33 billion. Their net income for the year came to $1.3 billion.
There are a few other companies operating crude pipeline systems in the United States, including Shell Pipelines (the transport division of oil giant Shell), Sunoco and BP. While these pipelines don’t necessarily rely just on tar sands crude, they are an important part of the network connecting the dots in the North American oil trade.
Communities and landowners
As members of the Gitxsan First Nation demonstrated last week, there’s also potential for individual communities and landowners to benefit financially from pipeline operations. Companies like Enbridge are willing to pay steep fees in exchange for unhindered use of traditional territory or privately owned land – in the Gitxsan’s case that meant a $7 million deal to benefit the impoverished community.
Landowners affected by pipelines that cross their property often negotiate compensation and sign a right-of-way agreement with the operator. The National Energy Board (NEB) offers a guide to help such individuals through the potentially complicated process.
Often, these deals can be lucrative and difficult to turn down, but it’s a fine line to tread when dealing with oil and gas companies in this political climate. In response to last week’s Gitxsan announcement, other leaders from the First Nations community struck back against the hereditary chiefs who initially made the decision, pledging their solidarity with other Aboriginal groups against the Northern Gateway pipeline.
To read part one of this series, click here.
Next: We look at refineries and other related industries that stand to gain from tar sands operations.