David Black’s low-carbon refinery needs federal loan guarantee

If it's ever built, a $22 billion oil refinery in Kitimat would be Canada's largest

B.C. newspaper owner David Black thinks Canada should be refining its oil, not shipping it offshore | Glen Korstrom

Will the federal Liberal government put up a $10 billion loan guarantee for David Black’s $22 billion low-carbon refinery in Kitimat?

That is just one of the financing issues the B.C. newspaper magnate needs to resolve if he is to succeed in building what he says would be Canada’s biggest – and the world’s cleanest – oil refinery.

In the meantime, there are environmental issues to be addressed, as the project moves through the initial stages of a federal environmental review.

The Kitimat Clean project is currently in the first stage of an environmental review by the Canadian Environmental Assessment Agency (CEAA).

The public has until August 12 to make written submissions on the basic framework of what should be examined as part of a full environmental review.

Unlike the Northern Gateway and Trans Mountain pipeline proposals, it will not need to go through a National Energy Board (NEB) review process, as the bitumen that would come from Alberta’s oil sands to refine into gasoline, diesel and jet fuel would be brought in by rail, not by pipeline.

The refinery, 25 kilometres north of Kitimat, would process more than 400,000 barrels of gasoline, diesel and jet fuel per day, with the biggest market expected to be China.

The refinery would not only provide Alberta oil producers a gateway to Asian markets, it would also address some of the concerns that British Columbians have expressed over oil pipelines.

And since refining is such an intensive industrial process, it would create a considerable number of jobs, Black said.

“This one refinery will create more jobs in B.C. than all 20 of those LNG plants would have,” he said.

In its project description, the company estimates the refinery would sustain 1,250 full time jobs, and another 1,250 contract jobs related to operations and maintenance.

Since petrochemical industries often co-locate with refineries, the company estimates an additional 2,500 full-time jobs could created in an associated petrochemical plant.

The bitumen would come by rail from Alberta. In the event of a rail car derailment, there would be little chance of it running into waterways, since bitumen is so viscous.

And since it would be refined into fuels before going onto a ship, it would also address the biggest concern B.C. has with oil pipelines: a bitumen spill at sea.

But the biggest selling point of Black’s proposal, from an environmental perspective, may be its low carbon intensity.

The Kitimat Clean refinery would use a Fischer Tropsch process that would reduce CO2 emissions from the 33 million tonnes per year that a more traditional refinery would produce to 10.9 million tonnes.

It would also use a flare gas recovery process to further reduce greenhouse gasses from flaring.

“This will be, by far, the greenest in the world,” Black said. “We’re spending an extra $5 billion on it to cut the CO2.”

Some skeptics think Black may have a hard time finding investors, however, since the trend in Canada with respect to refineries over the past few decades has been in the other direction.

Since 1970, 33 refineries – one of which was nearly a century old – have shut down across Canada, according to the Canadian Association of Petroleum Producers.

Between 1983 and 1995, five refineries in B.C. shut down, leaving only the 55,000-barrel per day (bpd) Chevron refinery in Burnaby and smaller 12,000 bpd Husky Energy refinery in Prince George.

The one country that is trying to build out its refining capacity is China, and Black thinks his Kitimat refinery is well positioned to fill some of China’s needs.

Initially, Black had planned to raise all of the financing for the refinery from Chinese investors, but now plans to broaden his pitch to investors outside China as well.

“The Chinese said they wanted to put up all the money and take all the diesel and gasoline that comes out of the refinery,” he said. “There are many others that counseled against that – getting too close to one buyer.”

But critical to raising the investment capital he will need is federal government backing in the form of a $10 billion loan guarantee, similar to the one it provided for Newfoundland’s Muskrat Falls hydro-electric project.

Black said former Prime Minister Stephen Harper had promised him the federal government would provide a loan guarantee.

“Of course, there’s been a change of government, so now I’m starting to work with the Liberals and hopefully they’ll get there too,” Black said. “I’ve got to convince them it’s the right thing to do.”

Another critical partner is First Nations, particularly Kitimat’s Haisla First Nation, which does have a history of working with industry on large-scale projects, such as the Rio Tinto aluminum smelter and large-scale liquefied natural gas projects.

“Haisla are vital,” Black said. “It doesn’t go ahead without them, and we are having good discussions with them right now.”

The CEAA’s assessment began on July 12. The current public comment period, which ends August 12, is to determine what a full assessment should include.