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The Wall Street Journal: Energy From Another Backyard

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Canada Takes On Projects
Unpopular With Americans
January 4, 2007; Page A10

Saint John, New Brunswick

The oil and natural-gas industry is increasingly looking to Canada as a home for big energy projects Americans don’t want in their backyards.
A patch of coniferous forest near here, on Canada’s Atlantic coastline, represents both the promise and the challenges of that approach. The land, owned by closely held Canadian energy company Irving Oil, is earmarked for the possible construction of a 300,000-barrel-a-day crude-oil refinery that would cost $5 billion to $7 billion — the first new refinery in the U.S. or Canada in more than 25 years. Irving hopes a refinery, if it chooses to build one, would be operational by 2013.

The challenges include drawing international partners and a skilled work force to the sparsely populated area, as well as convincing locals that the changes are for the better.

The refinery development is the cornerstone of a concerted regional attempt to construct a huge “energy hub” in New Brunswick, supplying the markets of Boston and New York with gasoline, natural gas and eventually petrochemicals and related products. That would increase U.S. energy reliance on Canada, which already supplies 16% of its imported oil and oil products and about 85% of its imported natural gas.

The effort is the latest sign of increased interest just outside U.S. borders, in part to supply the U.S. market. Two liquefied-natural-gas where gas shipped from overseas in transportable liquid form will be processed for consumer use — are planned for British Columbia.

Mexico also has drawn interest. In August, an LNG terminal on the country’s east coast owned by Royal Dutch Shell PLC of the U.K., Total SA of France and Mitsui & Co. of Japan accepted its first delivery. Others are planned for Mexico’s west coast, intended to supply some gas to Southern California. But Mexico’s energy infrastructure is less-developed and the nation faces its own supply concerns.

Confronting ‘Nimby’

The rise in U.S. energy demand shows no signs of easing, despite higher prices as supplies world-wide become harder to find. The country also has been slow to invest in the infrastructure necessary to bring extra imports to consumers, due in part to concerns about the cyclical nature of the energy business. Also hurting matters is the widespread not-in-my-backyard attitude — “Nimby” for short — toward new industrial investment, which has notably delayed development of LNG terminals in the U.S.

Saint John, which is conveniently close to the U.S. Northeast, has both a natural deepwater port that could accommodate more shipping and a large amount of unused land suited for industrial development.

Irving Oil, which already has a 300,000-barrel-a-day refinery at Saint John that exports petroleum products to the U.S., also is building an LNG terminal there in conjunction with Spanish energy company Repsol YPF SA, with plans to import about one billion cubic feet of natural gas a day to meet U.S. demand.

Irving is in talks with potential partners and is gauging local support for the possible new refinery, with an eye to applying for a refining permit early this year. Local officials hope that will contribute to the economic regeneration needed by Saint John, a city hard hit by the decline of both the shipbuilding industry and Atlantic cod stocks. The campaign of New Brunswick’s recently elected premier, Shawn Graham, focused on making the province a leader in energy generation.

“Canada has been a reliable supplier of energy to the U.S., and that’s something we’d like to expand,” said Irving Oil President Kenneth Irving, grandson of the company founder. “As long as we keep getting [local] encouragement, we’re going to try our best to make this a reality.”

The company says it is negotiating with potential oil-supplying partners, though it won’t disclose names. To attract a partner, Irving is touting the potential refinery as a processor of heavier grades of crude oil, which are tougher to refine and which oil producers can find harder to sell in world markets.

Irving and local supporters hope to win locals and attract skilled labor, which has left the region in recent years due to a lack of work and the oil-sands boom in faraway Alberta. Last month, regional advocacy group Atlantic Canada published a brochure in Alberta’s major cities, seeking to draw workers back to Eastern Canada by illustrating the region’s affordable living and laid-back lifestyle.

The Irving family owns many local businesses, in fields from construction and shipbuilding to forestry and newspapers. The family’s local dominance has led some locals to question whether the regional government is holding Irving Oil to full account. In 2005, the New Brunswick legislature capped property taxes on the LNG terminal at 500,000 Canadian dollars (US$430,000) a year for 25 years. Opponents of the deal say that’s about a tenth of what U.S.-based Anadarko Petroleum Corp. will pay in taxes on the similarly-sized, though less expensive, Bear Head LNG terminal in Nova Scotia.

Power Play

“Irving Oil has so much power in Saint John and New Brunswick that people are afraid to stand up to them,” said Leland Thomas, a founding member of the group Friends of Rockwood Park, which opposes the route chosen for the pipeline to the LNG plant. “They’re not paying full value for what they’re getting.”

City officials claim the property tax cap was vital to ensure the LNG terminal was built in Saint John. At the time, Mayor Norm McFarlane said the decision “would rest well for the next 50 years here.”

Some locals still see the terminal as a safety hazard, with a terrorist attack on LNG facilities a particular concern. “We’re taking all the risk, and yet all the supplies are going to the U.S.,” said Carol Brown, a Saint John restaurateur who refuses to refuel her car at Irving Oil stations.

Irving Oil says it’s had a largely positive response from the local community. The company believes its policy of consulting with locals about the project at an early stage — before applying for any permits have been made — will enable it to convince them of its merits. “The information we’ve had so far has been very encouraging,” said Mr. Irving. “We believe this project has the right balance of aligning commercial interests along with those of the community.”

Write to Norval Scott at [email protected] and its also non-profit sister websites,,,,, and are all owned by John Donovan. There is also a Wikipedia article.

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