Creating an 'AESO' for Oil Pipelines

By 2009 it was clear; the process to obtain clear approvals for constructing electrical transmission could be prolonged indefinitely by "stakeholder" objection processes. So the Alberta government created Bill-50, and the Alberta Electric System Operator (AESO), to successfully solve the problem.

By very close analogy, the process to obtain clear approvals for constructing oil transmission (pipelines) can today be indefinitely prolonged by "stakeholder" objection processes. It is time to solve this problem. Perhaps we need to create a new Bill and the Alberta Pipeline System Operator (APSO).

The AESO is responsible for planning a safe and reliable electricity transmission grid in Alberta. Albertans would benefit from such a thing for its oil transmission grid too.

The AESO’s role is established in the Alberta Electric Utilities Act. The AESO’s role is to ensure that new transmission lines are constructed when needed, so that during peak electricity demand, all ‘in-merit’ generators can operate without being constrained by the electric grid. This means that transmission lines need to be constructed prior to the need or constraints occur which can require using expensive generation or rotating power outages across Alberta; which can have a huge negative impact on Alberta’s economy. This is all nearly applicable to oil transmission lines also.

Delving slightly deeper into the AESO analogy:

The electric transmission grid has tie-line connections to BC, Montana and Saskatchewan which have resulted in lower electricity prices for Albertan’s and the opportunity for off-peak energy sales to outside of Alberta. This creates economic benefit to companies, provides jobs for their employees and revenue for governments. The AESO has successfully maintained the reliability of the electric transmission grid, both within Alberta and the tie-lines outside of Alberta, to contribute to the economic success and growth of Alberta.

In Alberta, the generation of electricity is de-regulated and generators compete daily to provide the lowest price of energy, under the 24x7 operational and commercial management of the AESO. The transmission lines are privately owned but are regulated and receive a regulated rate of return on investment as determined by the Alberta Electric Utilities Commission (AUC).

When new transmission lines were proposed by the AESO approximately 10 years ago the Alberta public process regarding new transmission lines was causing significant delays and the lack of these transmission lines threatened to cause constraint to the distribution of electric energy. Fortunately, this did not occur because the Alberta government stepped in and introduced Bill 50 to ensure that new transmission lines were constructed in time. Bill 50 defined certain new transmission lines as critical infrastructure and made their creation a matter of legislative law, so when the public process failed, essential power lines were still built in time.

Why is this AESO analogy relevant to oil transmissions?

The point to be made here is that the electric grid is working as intended, to ensure the delivery of electric energy, without constraints. This cannot be said about the oil and gas pipelines within and going outside of Alberta. Despite controversy, one can argue the relative efficiency, capacity, and flexibility of rail. But now that oil is being trucked from Alberta to the Vancouver area and to Manitoba, it is impossible for anyone to suggest our current framework for transmission of oil is working with anything resembling efficiency, sufficient capacity, or reliability. The only special interest group that reasonably could disagree is perhaps companies that sidestep paying Alberta royalties and corporate tax by shifting profits to refineries they own or have creative deals with in the United States; permissible by our glaring policy, regulation, and taxation loopholes. 

Should the planning and construction process for gas and oil pipelines be set up similar to the electric transmission system; to ensure new facilities are in place when needed? This is an idea worth considering. This would mean that the oil and gas producers remain un-regulated and operate as they presently do now, similar to how electric generators operate in Alberta. However, all oil and gas pipelines would become regulated, similar to most of the electric transmission lines. I'm not generally a fan of government solutions, but when the playing field is dramatically tilted for anyone, freedom and opportunity diminish. There is also an argument for standardizing pipeline observation and maintenance so that the chance of spills is reduced; which is part of the reliability argument.

There is also an argument in the form of future planning. Everyone knows that the bunker oil (fuel oil) standards are shifting very soon to require less than 0.5% sulphur. That's where 12 million barrels of oil per day get burnt. All heavy oil and bitumen I am aware of from Western Canada has much higher sulphur content than 0.5%. Diesel standards are restricting further also. How much demand will there be for sulphur rich, Canadian bitumen and heavy oil? How much demand will there even be for diesel, as trucks and vehicles transition acceleratingly toward electric powered, CNG powered, and hydrogen fuel cell powered? The future will require us to leave carbon and sulphur in the ground for economic efficiency reasons, and we need to have capacity for transmission of vast amounts of energy through our pipelines in the form of hydrogen.

The other thing about hydrogen is that it is the final product. I tip my hat to Ian MacGregor, Larry Vadori, and others who understand that keeping more of the value chain in Alberta is an economically useful idea. The end member for fully upgraded final energy products, is pure, low cost hydrogen; for transportation, for heating, for cooking, for almost everything we do now with hydrocarbons. In addition it can make fertilizers, ammonia, upgraded fuels, and many other useful things.

The hydrogen economy is an old idea, but until now, it was not feasible for both technical and economic reasons. Now the technical challenges are all solved, perhaps as demonstrated by mass-production of the Toyota Mirai and the rapid expansion of fuel cell vehicle fueling stations worldwide. The only remaining challenge to the hydrogen economy is getting less expensive per joule of energy than oil and gas. Now that is solved too, and so Alberta needs to adapt a little and get on board with the future. We have a lot of projects and experience which can be leveraged toward clean energy using the Proton Technologies approach. www.proton.energy 

As a Calgary-born Albertan, I'd like to see Alberta with a robust economy 2, 5, 10, and 30 years from now. I recognize that for a variety of reasons it is absurd to believe Alberta will continue to expand oil production for decades, even though technically it is possible. Our economy is must rely on something. That something is mainly hydrogen. Our government would benefit from realizing that if encouraged, hydrogen royalties and tax base can eclipse what is today coming from oil and gas.