U.S. oil refiners are raising quality concerns about crude oil from the newly finished Trans Mountain Pipeline expansion (TMX), which Canada’s government supported despite ballooning costs, safety concerns, and a rapidly progressing climate crisis.
Several refiners on the U.S. West Coast recently filed complaints about the pipeline’s initial oil having higher sulphur content, acidity, and vapour pressure. These indicators raise concerns, Reuters explains, because they could damage equipment or increase air pollution.
So far, 10 companies and industry associations—including Canadian Natural Resources Ltd., and U.S. companies Chevron and Valero Energy—have asked the Canada Energy Regulator (CER) to narrow the pipeline’s technical specifications in light of these concerns. Chevron also told the CER the oil’s vapour pressure is higher than the regulatory limit for storage tanks at the company’s California refineries.
But according to Trans Mountain, the current vapour pressure and acidity specifications were developed through a shipper consultation process and Trans Mountain “was aware of newly raised shipper concerns” prior to the complaints “and had engaged in an updated consultation process with shippers which is ongoing,” the company told Reuters.
To date, the complaints do not appear to be affecting demand because of the Canadian product’s lower price and proximity to West Coast and Asian buyers.
The newly finished pipeline is tripling the capacity of crude oil flowing to Canada’s West Coast, with markets in Asia and the U.S. West Coast anticipated as top export destinations. While noting the concerns raised by U.S. companies, traders and analysts are waiting to see how Asian markets respond to the crude from TMX. Some Chinese refineries are unable to process the oil because of its high density and sulphur content, says Oil Price.
For markets accepting the oil, TMX is likely to displace product coming from some South American countries, and possibly also from Iraqi Basrah. Refineries are also expected to continue buying crude oil from California and Alaska North Slope, Reuters reports.
The TMX project was purchased by the Canadian government in 2018 from Houston-based Kinder Morgan Inc. for C$4.5 billion. Analysts have decried the project as counterproductive to both the country’s emissions reduction goals and to reconciliation with Indigenous peoples. TMX also drew attention from regulators for safety concerns regarding the quality of materials used in construction.
Construction costs for the project inflated well beyond expectations, reaching a $34 billion price tag as of this past March. Critics suggest TMX’s rising costs mean the government will ultimately take a loss when it eventually sells the pipeline. A 2023 survey revealed that Canadian taxpayers don’t want to foot that bill, and prefer that oil companies themselves pay up.
