Will Stockwell Day’s no-subsidy, pro-aboriginal green refinery fly?


Stockwell Day’s refinery project on the B.C. north coast leaves little room for error.

The Pacific Future Energy refinery, proposed by the firm of the same name and headed by several men with experience outside of the refining business, must build a plant against a backdrop of closing refineries across Canada, convince local First Nations to come on board as they fight over petroleum projects in the region, and achieve a stated goal of near-zero emissions during production.

If it sounds crazy in practice, it sounds perfect on paper — especially to the political class.

British Columbia has put up stiff resistance to the Northern Gateway pipeline and tanker project, which would carry unrefined bitumen products through the province’s north and along its coastline, because of spill risks and the lack of aboriginal consent. But the drop in U.S. energy demand and the ever-present hunger for oil in Asia remain a critical concern for policy-makers looking to expand Canada’s energy sector.

The attraction of this type of project as a solution to the complex new paradigm whereby both governments and companies have to achieve a ‘social license’ is so great that Premier Christy Clark even had the Ministry of Energy, Mines and Natural Gas pen a report on the potential of another ‘clean’ refinery in northern B.C. last year. Just this week, Alberta Premier Jim Prentice suggested Kitimat, the port chosen for Northern Gateway, may not be the best route for oil to make its way to Asia.

“It’s a happy constellation of challenges that has given us this opportunity,” said Day, who pitched the project to the Economic Club of Canada at the Chateau Laurier yesterday morning. It’s one of three refinery projects for the B.C. coast: one named Kitimat Clean has been proposed by newspaper magnate David Black and another by the Aquilini Investment Group.
Day, a senior advisor to Pacific Future Energy who left a storied 10-year political career in Ottawa for the private sector in 2011, is in an odd position vis-a-vis his fellow Conservatives as he makes the case to build the refinery, now past the concept phase and looking for financing.

For one, the project is an opportunistic challenge to Enbridge Inc.’s Northern Gateway, now fumbling its way through aboriginal opposition and delaying its start date despite getting federal government approval in March. The Conservative government roared out of the gates when Gateway began the last phase of its regulatory process, slagging environmentalist opponents and streamlining its permitting at the National Energy Board in 2012.

But despite threatening a project that the NDP are hoping will be an albatross around the neck of Conservatives in the next federal election, Day doesn’t believe he’s eating away at his party’s support.

“I haven’t talked to (Industry Minister James Moore) specifically about this project, but I can tell you from everything I’ve seen him say, we’re virtually on the same page,” said Day, referring to one of the more outspoken B.C. Conservative cabinet members. “We think under the right conditions, under the right technology, economic arguments can be made that are also environmentally sustainable.”

The Pacific Future Energy refinery hopes to make a niche for itself among British Columbians opposed to raw bitumen in tankers, but less antagonized by the transportation of refined products like diesel and gasoline.

The company’s promotional material states that during a spill, “bitumen immediately sinks to the ocean floor and stays there.”

That’s a unapologetic departure from the federal government’s own research, which thanks to a report released in January, found that bitumen only sinks if it mixes with sediment in water.

“The scientific debate is strong,” said Day. “But nobody argues with this fact; a bitumen spill has a much greater impact on the environment than an unrefined product.”

Day’s father made a career shift from Montreal to B.C. to work on a trawler, said Day, and his attraction to Pacific Future Energy is linked to the importance his home province puts on the environment.

“They have a heightened sensitivity regarding environmental issues,” said Day. “As I looked more into this, I became acutely aware to the reality of the fear, some of it rational, most of it rational, of bitumen on the water.”

It also puts him into a similar camp as the NDP, who on Tuesday unveiled a bill that would ban the transportation of oil – any kind – in tankers off B.C.’s north coast, unless they’re meant to serve B.C. communities.

Pacific Energy Futures isn’t supporting the use of legislation to protect B.C.’s waters from economic activity that could result in a spill but is helped by the NDP bill.

“The sentiment in B.C. is so strong about the risk of bitumen in the water,” said Day. “But that legislation reflects the sentiment, so that doesn’t hurt our proposal that we’re talking about. So we’re leapfrogging past legislation to bring it into reality.”

The project is also trying to win its ‘social license’ from British Columbians by designing a refinery that would emit almost zero emissions. Forty per cent would be reduced by the combination of natural gas and renewable energy sources, fifty two per cent by using carbon capture and storage technology and the remaining reductions will be met by using a biogas fuel source, says the firm.

Pacific Energy Futures is in conversation with two companies with carbon capture and storage technology that are still at the non-disclosure phase, said Day. It has retained the services of Italian engineering firm Simeco, which has built similar low-emissions refinery designs in the past, he said.

But more important than winning the good graces of the B.C. general public will be winning the support of First Nations along the northern coast. Emboldened by the results of a Supreme Court of Canada case in June that granted aboriginal title to the Tsilhqot’in First Nation, coastal First Nations are currently deliberating new strategies in their land claim negotiations with the B.C. government.

There are at least nine First Nations identified in the Coastal First Nations alliance, a group of first Nations living along B.C.’s northern and central coast. But Pacific Future Energy won’t disclose which communities it is talking to publicly because it feels this would preempt the conversations the firm is having with leaders, said Jeffrey Copenace, senior vice-president of indigenous partnership at the company. It also hasn’t settled on an exact location.

“There are numerous discussions ongoing,” said Copenace. “But the last thing I want to do is negotiate with First Nations through the media.”

Pacific Future Energy’s consent may also hinge on provincial and national aboriginal leadership, said Copenace, a former deputy chief of staff to former Assembly of First Nations (AFN) National Chief Shawn Atleo. The company is sponsoring the AFN’s golf tournament in Ottawa next weekend, he said.

Pacific Future Energy won’t ever get off the ground if its $10 billion project doesn’t make money. In North America, where demand for gasoline and refined projects isn’t on the rise, building a new refinery is a tough go.

During committee hearings in the House of Commons two years ago, general manager of integration and planning, refining and marketing at Suncor Energy Inc. John Quinn told legislators that refineries are only profitable near the markets they feed. That way, the product can be adapted for demand.

For example, a refinery in India that imports oil from overseas could refine enough of it for domestic demand and still be able to sell refined oil back to the original country at a profit, he said at the time.

Despite growing its oil production, Canada has gone from 39 refineries in 1980 to 16 today, according to the Natural Resources Department.

Pacific Future Energy will not accept subsidies to get it off the ground, Day told the Economic Club.

“We are not asking or looking for subsidies,” said Day. “If a government comes along, be it provincial or federal with some kind of massive proposal that might involve training or something else of course it would make sense.

“That’s why I can stand here and talk freely about it and no one can say that I’m lobbying,” he said later.

Later, during an interview, Day explained that the company would be asking the B.C. government to clarify its tax regime for building a refinery.

“In the Alberta experience and with LNG, whenever there’s lack of predictability on the tax regime, it’s always going to affect you investors,” said Day. “So what we’re going to look for is predictability. We’ll get a sense of where it might land, we’ll build that into our economic model, and we’ll be able to handle the extremes of our range. But clarity and predictability will be important.”

“We’re not asking for special treatment other than, as you can realize, this is a unique project,” he said.
Pacific Future Energy’s executive vice-president of communications and research Mark Marissen is the former spouse of B.C. Premier Christy Clark.

Correction: An earlier version of this article included a typographical error that misrepresented Day’s comments on lobbying. We regret the error.

Leave a Reply

Your email address will not be published.