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REPORTING · 5th November 2013
Walter McFarlane
Kitimat City Council received a surprise presentation by David Black on Monday, November 4th. While he was not on the agenda, he was given almost an hour of Council’s time to answer questions about his proposed refinery. Joining Black at the table was Mike Green.

“There has been a lot of progress made on all the fronts, and there is a lot of fronts and no serious roadblocks in anything that I see. I’m confident that it will happen,” said Black.

He told Council he is talking about building one of the biggest refineries in the world. It would cost $18 billion for the refinery, $3 billion for the pipeline, $1 billion for a fleet of tankers built to Canadian standards and powered by LNG to shuttle the product and $1 billion for a share of one of the Natural Gas Pipelines. $26 billion in all.

“There is a good business case so that is why I’m quite confident that it will be built,” said Black. “We will be processing 550,000 barrels a day of Diluted Bitumen from the Oil Sands. They will be delivered, hopefully by Pipeline, but if not, by railway to the refinery and the dilbit will be extracted here, in Kitimat, about 150 barrels of the 550, sent back to Alberta. The other 400,000 barrels of Bitumen will be converted under the new process we’re talking about, into 500,000 barrels of refined fuel.”

He expressed the benefit to British Columbia is enormous. 3000 permanent jobs tied to the refinery which would lead to tax revenues. In addition, the refining business produces spin off jobs at a rate of 1 to 1. Black told Council the refinery would produce chemicals which are used by other factories, such as ethylene which could be converted to Polyethylene for rope. Of course, all of these factories will have to go through environmental permits.

He suggested this is one of the biggest projects in Canadian history, in both investment and number of jobs created.

“The pipeline, which there is a lot of controversy about, everyone is worried about the pipeline. That is really important to Canada’s future because Canada is in a lot of danger of getting its oil land locked and a huge part of our economy of Canada is tied to being able to export our oil,” said Black.

Black told Council the United States is finding a lot of oil now and they are decreasing their dependency on foreign oil. The amount of oil Canada is producing is going up, so the country is desperate for other customers. He explained China and India are using more oil every year, while Canada is using less, as Canadians are getting more mileage out of their cars.

However, Black stated the polls are showing 2/3 of all British Columbians are against the pipeline. However, if there is a refinery, 2/3 of British Columbians are in favour of the project because the refined fuel floats and evaporates. While it is still toxic, it goes away.

“They do go away, compared to Dilbit, which does not. It essentially, as the dilutent boils off out of that mixture, the left over tar is going to coat, does coat, the rocks and the beaches and the mudflats, kills all the life, and then sinks and kills the life so it’s not something we want to be involved with and that’s why I got involved in the first place. I didn’t want that,” said Black.

He opened the floor to questions. Mayor Joanne Monaghan wanted to know what the procedure was to diminish the emissions.

Black replied the heavy oil refineries were built with Coker Ovens. Normally, in the refining process, there is a little amount of material which is leftover. However, the Bitumen is dirty and is the wrong mixture to boil off easily. 40% of the material is left over which can be converted to a form of coal as a by-product which is usually disposed of because it is not good coal. He could send it to Asia but it would create a mess in the atmosphere.

The new process would use an old approach called Fischer–Tropsch. Black told Council this would be the first time this process would be applied to oil. The idea is to burn organic mass to create diesel. However, it is expensive so it is not used often. He plans to do this using hydrogen atoms instead of carbon atoms as they get a lot more diesel fuel out of the process and is cleaner.

Black stated he was told this process is not only better for the environment, it would make more fuel (although he added he is not in it for the money) and reduce CO2 Emissions. In addition, they are not putting Diluted Bitumen into tankers to ship to Asia and Canadian Standards for industrial activity are better than the standards in Asia.

He listed the gasses which would be controlled better by Canadian Standards.

Councilor Mario Feldhoff stated there are naysayer politicians out there. He asked Black to shatter the naysayer myth as to why he chose Kitimat as a location. Black replied he wanted the major companies in Calgary to build a refinery because he’s opposed to shipping of Bitumen in tankers. He approached them but none of them wanted in for various reasons. He mentioned that one company agreed with what he wanted to do but refused to become a partner.

He stated these big companies are not owned by Canadians so they have little interest in Nation Building. Black told Council he would like to have a legacy and keep the environment clean while building jobs and helping Canada. He said refineries are successful when they have a cheap feedstock of oil which usually makes up 80% of the cost of running a refinery.

“The consultants say that this refinery, here in Kitimat, will be the cheapest producer in the entire Pacific Basin by a landslide,” said Black.

As for the location, he expressed it is difficult to build refineries which are not on the coast, as the size of the components are too big to be transported after being prefabricated in low cost areas and the Canadian building seasons are cut short due to weather. To build in Alberta, it would cost 10 billion dollars more.

The other reason he wants to build on the coast is it takes one pipeline to feed the refinery but it takes 8 pipes to take away the products because they cannot be mixed. He stated there are no other sites on BC’s Coast and there are no sites where a refinery can be put in the United States.

Councilor Phil Germuth asked if it was possible to sell refined products domestically. Black told him Propane and Butane would probably be sold locally reducing costs.

Councilor Corinne Scott wanted to know how successful Black was in finding a Canadian Investor. Black replied he did not have anything nailed down yet. He has met with the Federal Government and they want to provide the Canadian Component. They have stepped up to provide capital for other projects which are vital to Canadian interests. Black going to ask the Federal Government for an 8 billion dollar loan.

He stated this kind of loan is common for the Federal Government. They have jumpstarted huge projects and made money doing it.

Councilor Rob Goffinet stated the Northern Gateway Pipeline would transport 500,000 barrels of Bitumen a day while the proposed refinery would process 550,000 barrels of Bitumen a day. However, Enbridge Northern Gateway would be shipping unprocessed Bitumen while Black wants to ship refined products. He asked Black for his opinion of the Refinery in the Context of Northern Gateway.

“If Northern Gateway were to proceed, the refinery could still proceed. Canada needs to export at least a million barrels to the west and China, for example, would take a million barrels. They need 500,000 barrels a day more, every year. They need that for a long time and they still only have 10% of the cars per capita then we do,” said Black.

Goffinet clarified this would create a second pipeline and ship 1,000,000 barrels of oil off the North Coast. He pointed out 2/3 of the province were against the Enbridge Project.

“If Enbridge were to succeed, yes. There is no value add on the Northern Gateway Proposal. There are no jobs in that. There are jobs to build it, there are hardly any jobs afterwards. What I think of as value added, is we take our resources in Canada, we do something with them and we employ a lot of our own fellow citizens. That’s the refinery business. We’re talking thousands of jobs. That’s not the export of Dilbit business,” said Black.

He stated there probably will not be a shipping accident, but if it were to happen, the Dilbit would create a big mess. He questioned why they were putting dangerous material into ships when they could process it and create money for schools, hospitals and jobs. He said he was all about the value added products but he is just one person and if Enbridge proceeds, it does not prevent the refinery from happening.

Feldhoff stated people are saying the Chinese want raw products, not refined. Black explained he has talked to Chinese investors and this is not true. They are pulling oil out of many countries and want many suppliers in case one gets cut off. Canada’s laws, price and stability makes us the perfect country to deliver it to them.

“At the end of the day, we can make refined fuels and transport them to China cheaper than they could make them by a lot. When China understood the economics of that, they were thrilled that we were going to do this and that was the clincher for them,” said Black.

He explained the oil companies in China lose money on every barrel of oil they refine so they do not want to do it.

Feldhoff asked if Black has talked with the BC and Alberta governments and Aboriginal Community. Black said he and Green have been meeting with them and having positives meetings. There are worries about pipeline leaks but they are willing to swing around if he can prove the pipeline will be leak free.

He told Council modern Pipelines do not leak. Every leak has to be reported and they are all online. In the past ten years, the leaks from pipelines have been caused by excavators digging in the wrong place, other leaks are in pumping stations and refineries where valves and pumps end up spilling barrels. The only other leaks are pinhole leaks and he is going to find out what causes them. He added there are no systems for finding a pinhole leak and his problem with the Enbridge proposal is the Tanker component.

Feldhoff reminded him about Kalamazoo, Black stated he is talking about modern pipelines, not older ones. He added the Provincial Governments of BC and Alberta are keen on the pipeline.

Germuth mentioned there is a way of detecting leaks but did not go further into it. He asked how much a refined barrel is in China and how much one was in Canada. Black told him it would be about $115 per barrel in China. It would sell for $110 in Kitimat. Germuth clarified, admitting he was wondering if there was a case for selling the refined product in Canada.

“The consultants have said that we are a lower cost than any other supplier in the entire Pacific Basin and that will include the suppliers in Vancouver and so on. We could provide it cheaper, but then you’re entering into a price war to do it because there is already a current supplier. You’re not going to do very well at the end of that because some of these suppliers are enormous. They can wait you out. However, if you send it over to a country that is growing and needs more every year, then you get full price for it,” said Black.

Feldhoff asked what the next steps are. Black told him he has a memorandum with the Industrial Bank of China. He wants to get one with the China Development Bank. He wants a Memorandum of Understanding with the Canadian Government and wants to try to receive some feasibility study funding. He wants to apply for the environmental permits this fall. They need to sign agreements with the BC Government and the First Nations for the port and pipeline.

He said they will have to pay $200 million for a feasibility study which will study $100 million worth of engineering. It will look at every building on the site, the cost for the building, what is it and how it ties in to all the other buildings on ten square miles of land. He estimated it would be three years of hard work to get the pieces into place and five years for the construction.

Councilor Edwin Empinado asked how the project has changed in relation to Enbridge, how the Provincial Government’s plans for LNG affect the project and how Black sees the project moving on. Black told him that originally, he wanted to talk Enbridge into ending the pipeline at the refinery. Enbridge did not mind, but several of their partners did not want this. Black decided to put in another pipeline for his project.

He explained the Provincial Government is keen on both LNG and Refinery projects and Black’s refinery plans include using LNG. The refinery received a page in the government’s 25 points on the Enbridge proposal. He stated it was not an election issue because the NDP were not talking about it and the Liberals did not want to bring it up because British Columbians were not too keen on the Enbridge Pipeline.

Black added the Pipeline has been given five conditions. “It must be safe, I have to prove that too them. There has to be something in it for First Nations, The marine side of it has to be safe, Economic Benefit to the Province. Anyway, the refinery and the pipeline we’re talking about does it, hit’s all five. I don’t think there are any issues there,” concluded Black.

Monaghan thanked him for answering the questions and taking time out of his schedule to speak with him. She looked forward to him keeping them informed.
Oh Nooooo! More smoke and mirrors!
Comment by Bill Vollrath on 9th November 2013
Why in God's name would he build a refinery here!? Why not near the BC / AB border? Sure...get a little of AB's business in BC but don't pump the raw material 1100 km through mountains, rivers, streams and prime rainforest hunting and fishing, forestry land! It makes absolutely NO SENSE...except as a ruse, a detractor to get the pipeline in so they can get at the Chinese market. Once the pipeline is in, the refinery project will come off the table. It's so easy to see...Same reason why Christy Clark released her potential agreement with what's her name in AB during the time when Rob Ford was dominating the news. Smoke and mirrors folks...That's what it is.
Comment by rick on 7th November 2013
more snakes in the grass,then you know. sneaking around ,like the liberals. amazing , one can be brided,to do anything . seens this is the new canadian way. bribe,bribe,bribe........congrates to councilors involed. hope it was worth it. we know that, all councilors didn`t agree,only the ones with there hands out. not hard to see who` s honest ,on this council. like harper,like clark,too many deals behind closed doors. thank-you for destroying enviromental concerns,on behalf of the this council , industry thanks you,for opening the doors.
Comment by Larry Walker on 6th November 2013
Give me a break.....mayor and council did not know he was coming?......come on. I can only speculate that they did not want any enviormental or negative voices to be present. God forbid we get some meaningful discussions taking place.