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Brandon Sun (Canada): Shell launches roadshow to sell Sarnia oil refinery expansion

TORONTO (CP) – Weeks after Ontario was engulfed in a gasoline shortage of epic proportions, Shell Canada (TSX:SHC) is asking the public whether it would support construction of a new Sarnia-area oil refinery.

The company is to hold an open house Wednesday afternoon at a hotel in Wallaceburg, Ont., north of Chatham, to outline plans for a multibillion dollar refinery that would process heavy crude oil from Alberta.

The facility would be built alongside Shell’s existing refinery in St. Clair Township, said Leigh Anne Richardson, a spokesperson for Shell Canada.

Another consultation meeting is to be held at a Sarnia hotel on Thursday afternoon, she said.

“We’re looking to integrate our oil sands production in the Ontario region,” said Richardson, noting the new refinery would also help ease Ontario’s thin margin between supply and demand of oil products such as gasoline and diesel.

The province’s available fuel inventory became an issue in the aftermath of last month’s fire at Imperial Oil’s (TSX:IMO) refinery in Nanticoke, Ont.

Hundreds of gas stations across the province ran out of fuel in the weeks following the Feb. 15 blaze at the refinery, which normally processes about 118,000 barrels per day.

The shortage began at Imperial stations but soon spread across the market as consumers filled tanks at rival companies, including Shell’s own 600 stations.

“The supply situation is tight in Ontario and this refinery would be a welcome addition to help that out,” Richardson said.

Richardson said Shell has an option to buy about 2,400 hectares of land in Lambton County, near its current refinery, which processes 65,000 barrels per day of crude oil, and employs about 290 workers. The projected capacity of the new refinery would be 150,000 to 250,000 barrels per day.

The refinery project is in its infancy stages, however, and consultations will focus on drafting the terms of the environmental assessment, Richardson said. So far there has not been much opposition to speak of, she said.

“The reaction so far has been pretty positive,” said Richardson.

But Jim Brophy, the executive director of the Occupational Health Clinic for Ontario Workers, located in Sarnia, said the project could have a serious impact on the health of the public, which is already exposed to thousands of carcinogens from 30 local industrial facilities, including refineries, chemical and plastics plants.

“I appreciate the economic issues at stake here, but we need to have a serious examiniation of the potential health impacts that a brand new refinery could bring,” Brophy said.

Brophy, who has a doctorate in occupational and environmental health, said the Ontario Medical Association has singled out Sarnia for the highest rate of pollution-related deaths in the province.

“It’s a public health issue,” Brophy said. “The environment already has more than its fair share of toxic exposures.

But Richardson said emissions control technology has advanced significantly since the last refinery was built in Canada in 1984.

“We’d be looking to utilize newer technologies available to minimize the environmental footprint,” Richardson said.

Shell has hired Jacques Whitford, an environmental engineering consulting firm, to conduct an environmental impact study. It has set aside $50 million for the study this year. The company also has a team of 40 staff in place, and has set up an office in Sarnia.

The planned $8.7 billion privatization of Shell Canada by parent company Royal Dutch Shell PLC could also throw the project into question, a Calgary analyst, who declined to be identified, said earlier this month.

Royal Dutch Shell now owns about 90 per cent of the Calgary-based Canadian unit.

The energy giant may decide to expand refinery operations in Alberta, or use existing refineries in the United States, the analyst said.

This is also a worry for Mike Bradley, Sarnia’s mayor, who said he’s telling the community to be cautious and not get excited just yet.

Bradley also said there hasn’t been any opposition to the project, and he speculated it’s because the refinery will be state-of-the art, will have no immediate neighbours, and will be removed from the local river, reducing the chance of water pollution.

“If it goes ahead, it’s almost like southwestern Ontario would be a mini Alberta,” he said, of the potential economic spinoffs, including construction jobs and more refinery workers.

“If it did go ahead it would be a chance for Eastern Canada to benefit in the tar sands directly,” Bradley said. “It’s a massive investment.”

Bradley also said the recent fuel shortage underscored the need for more refining capacity.

Michael Ervin, a Calgary-based oil and gas industry analyst, has said that overall, fuel supply has been tight in the North American market for several years. Demand has increased, but the industry’s capacity has not kept pace with new refineries.

Ontario’s five refineries, four in Sarnia and one in Nanticoke, have a current refining capacity for crude oil of about 474,000 barrels per day, according to the National Energy Board.

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