New pipeline project seeks to get western oil to the East Coast

Canadian Prosperity Pipelines seeks to succeed where Energy East failed

Montreal– A new transcontinental pipeline project similar in concept to the defunct TC Energy’s Energy East project is in its formative stages.

Canadian Prosperity Pipelines Corporation is in its formative stages, but their idea is to get oil from Hardisty, Alberta, to Saint John, New Brunswick, and a marine tanker terminal, for potential export. As a matter of course, the mainline would pass through Saskatchewan, Manitoba, Ontario and Quebec to get there. The project is called the Canadian Prosperity Pipeline Project, or CP3, and is expected to cost $23 billion.

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On Sept. 17 Pipeline Newsspoke to president and CEO Duane Lauritsen. He was born and raised in Grande Prairie, Alta., and graduated from civil and structural engineering degree from the University of Calgary. His career has been in the oilpatch in Alberta, principally designing and building oilsands projects for the last 25 years, working with large engineering, procurement and construction companies or owners, from the front end to back end, with the exception of the mining shovels. This included an industry first undiluted bitumen pipeline between Firebag and Suncor’s base plant.

We also spoke to Doug MacLellan, who is director of project management and strategy, and a recent addition to the team which so far numbers four, plus three advisors. The other two directors are Eugene Van den Berg, executive vice president of finance and CFO, and Collin Daniels, director of regulatory affairs. MacLellan has deep Saskatchewan roots, having been born in Kamsack, and grown up in Saskatoon. He’s a chemical engineer by trade, having graduated for the University of Saskatchewan College of Engineering. MacLellan spent most of his career with Amoco, working on heavy oil and oilsands projects that have since come under the purview of Canadian Natural Resources Limited. His CV includes heading up the construction of a new, 12,000 bpd topping plant oil refinery in Kyrgyzstan.

As mentioned above, the project is still very much in its formative stages, and they’re holding most of their cards close to their chest. The size of the pipe is hypothesized to be 36 inches, although MacLellan indicated that could change, and perhaps it could be a larger pipe. Lauritsen indicated a capacity of 1.1 million barrels per day.

Creating unity

“It’s an amazing story for Canada on so many levels,” Lauritsen said. He noted that the recent attacks on Saudi Arabia’s oil infrastructure could have an impact on oil supplies in Eastern Canada. “Energy independence and energy security, for Canada, especially Eastern Canada, is getting heightened awareness.”

“The vision for the Canadian Prosperity Pipeline is creating Canadian unity,” he said. Having lived in the west, and for the last two years in the east, he said, “I have experienced the polarization west to east. There’s a similar polarization, albeit a different story, east to west. The underlying vision of the CP3 project is creating Canadian unity achieved through breaking through communication barriers in an informed and factual manner. Lauritsen’s leadership philosophy is “collaboration equates to harmony.”

“Lots of people love the idea of unity, but at the end of the day, what 99 per cent of people care about is ‘What’s in it for me?’

“The unity-prosperity equation actually results in them being able to see money in their pocket at the end of the day – every Canadian. Every Canadian that wants to be part of this has an opportunity to,” Lauritsen said.

Pension plan investment is one of the avenues. Lauritsen added, “This project is attracting significant attention, internationally, from an investment perspective.”

He noted international investment interests, and that should drive attention to other energy investment into Canada as well. “The investment climate is changing. A shift is happening,” he said.

The results of the upcoming election don’t matter to him. One of the key issues has been Bill C-69, the recently implemented Impact Assessments Act.

Lauritsen said, “We have done a deep dive into Bill C-69, every section with a fine-toothed comb. We have completed a comprehensive review of Bill C-69 to identify specific risks in order to develop assessment and engagement strategies.

Hence, Lauritsen said they are “well appraised of Bill C-69,” and the engagement expected of it.

“To that end, from a prosperity perspective, we will be putting into trust shares for Indigenous groups that do not have the ability to participate in an equity partnership with us, we will be intending to gift those shares from the corporation, to those Indigenous groups, those bands and so on. We are optimistic that we can generate prosperity for all Canadians,” he said.

“Our economic analysis indicates strong allocations of cash flow after debt service to Indigenous groups, federal, provincial and local governments whilst retaining strong returns for equity public-private-partnership project funders.

They will be in the black, but they will spread out the prosperity of what they are doing, to everybody.

”We are going to make meaningful equity available to them, that is typically not evidenced in projects of this nature, so they can capture some of the prosperity of what we are doing,” he said.

MacLellan said, “There is some way to have an interest in the project without money up front. There’s going to have to be some give and take.”

Lauritsen said, “We are focused on getting the money back to the people. We will be paying taxes on whatever income we have, but that income is going to be shared with people with a real-time mechanism throughout the year, and they’ll be able to pay their relevant taxes on it.

“Our team includes deep experience of having successfully worked on- and gained valuable insights to how empowerment is done to lift people out of poverty in other parts of the world where similar approaches were taken in other large infrastructure projects, and we intend on duplicating it here in Canada. We are moving the needle on empowerment and Indigenous benefit opportunity through participation via shareholding.

“We are going to empowerment and engagement like it’s never been done before, and it’s going to be the way projects are done here in future.”

He said as a new company, they will have an advantage over the incumbents, “because we are a new organization. All of our policies, procedures and actions are going to be done, right from the get-go, in compliance with C-69.”

Project details

Two-thirds of Energy East was already in the ground, as it would have repurposed an underutilized 42-inch pipeline currently used for natural gas. This project, according to MacLellan, would be entirely new pipe – approximately 4,500 kilometres of it. It would be a new pipe, and a new right-of-way. “

The pipe will be a large-diameter install. They haven’t done the hydraulic work yet to finalize the size. But they’re aiming for 1.1 million barrels per day in capacity. There is identified market demand in Eastern Canada. “Whatever is surplus from that is able to go internationally,” Lauritsen said.

“We’ve done analysis of international markets for the viability for premium, heavy Canadian crude, and have affirmed that there is a demand internationally.

“At the end of the next 12 to 16 months, we have two objectives on the supply and marketing end. I want to have in place defined memorandums of understanding with supply in Western Canada, and with international markets, and with the refineries that effectively say, ‘We’re aware of you. We want you to succeed.’

“When you get a little further down the road, the MOU is an invitation to reconnect with them and start contract negotiations on supply and marketing,” Lauritsen said.

He acknowledged that they are still new, so it will take a while for those other parties to have confidence in their company.

As for the product through the pipe, that will depend on what those negotiations result in.

“It could be batched. It could be dilbit (diluted bitumen). It could be light oil from Saskatchewan. It could be a number of things,” Lauritsen said. “We know there’s a demand. That’s a start point.”

“We’ve got some route ideas, but we’re going to keep it confidential,” MacLellan said.

“We have three potential routes,” Lauritsen said, the details of which are proprietary at this time. In the next 12 to 16 months, they intended on doing extensive validation on them, potentially including aerial surveys, to validate and select the most probable route.

Several premiers, including Saskatchewan’s Scott Moe and New Brunswick’s Blaine Higgs, have been trumpeting a “national energy corridor.” To that end, Lauritsen said there is good awareness, from a political perspective. “We’ve achieved outreaches with Alberta, Manitoba, and New Brunswick,” he said, adding they are waiting for their outreach to be successful with Ontario and Saskatchewan.

“Quebec is the last one we’re going to approach formally,” he said, He added they already have support from one major union there and are seeking support of unions and their pension plans by way of potential investment.

The big pension funds are also key. If they can get major Quebec pension backing, Lauritsen feels that will go a long way to bringing Quebec on board. 

Lauritsen noted CP3 will be the largest intra-provincial infrastructure project in Canadian history and will be identified as the longest and safest operating pipeline in the world, after the Druzhba, in Russia, which is currently the longest oil pipeline network in the world. CP3 will have the first ever fully-functional artificial intelligent reality (AiR)machine learning operating system on any currently operating pipeline in the world

Quebec

It’s no coincidence they are incorporated in Quebec headquartered and in Montreal. The choice was strategic. 

Opposition to oil pipelines in Quebec was a leading factor in the collapse of the now defunct Energy East project.

After personally finishing a big contract late 2018 and taking some time off, Lauritsen noticed a significant increase in western separatism sentiment. Their messaging campaign is an “inside-out” marketing approach “to inform and educate the people of Canada about what the energy industry means to the Canadian confederation.”

This includes factually-driven broadcasts in both official languages. He thinks there is support among the people, and politicians across Canada.

Lauritsen approached TransCanada (Now TC Energy) about this idea, but he was told TransCanada is focusing on other projects, and they wished him good luck. He approached other pipeline companies, and received a similar result, so he decided to go it alone. “In alignment with our marketing strategy and campaign, I chose to incorporate and headquarter the Canadian Prosperity Pipelines Corporation in Quebec, where I now live,” Lauritsen said.

There will be a smaller, secondary headquarters in Calgary where much of the technical expertise would be based.

He said they intend on a national advertising marketing campaign from very early on in the process, addressing different social aspects in each province, but with an over-arching theme of Canadian unity and prosperity. 

 

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