Environmentalists claimed victory last week when a small coastal town in Maine voted to block heavy crude exports from its harbor. The South Portland city council’s decision is the result a long-running campaign by green groups to prevent the flow of oil from Canadian tar sands through a pipeline to the port.
While petroleum industry groups have vowed a political and legal fight to overturn the town’s ban, securities analysts dismissed the significance of the measure, known as the Clear Skies Ordinance, altogether. They argued that there are other routes to get the oil to the East Coast.
“It is a hollow victory, almost meaningless,” said David McColl, an analyst who focuses on oil sands and pipelines for the investment research company Morningstar.
The controversy centers on a 236-mile pipeline owned by ExxonMobil Corp. that runs between Montreal and South Portland. Built in 1941, the system currently flows west and carries about 150,000 barrels of crude oil from South Portland to Montreal every day. By reversing the flow, the operators could use the line to complete the connection of Alberta to one of the East Coast’s largest oil ports.
With access to the Gulf of Mexico and the West Coast limited because of delays with the Keystone XL and Northern Gateway pipelines, the East Coast is largely seen as the remaining option to export Alberta’s oil sands via pipeline—and the Portland-Montreal line is the only existing route connecting Alberta to Maine.
“We see [the ban] as a huge setback for the oil industry,” said Lisa Pohlmann, executive director of the Natural Resources Council of Maine.
The council and allies fought the pipeline plan because of the risk of toxic spills and air pollution, Pohlmann said. Dozens of heavy chemicals are added to bitumen extracted from tar sands to help the peanut butter-like substance flow through pipes. Before the mixture can be loaded onto tankers, these chemicals must be burned off, releasing toxins including benzene, a human carcinogen, into the air. The export hub in South Portland would be located just steps from an elementary school, a popular waterfront park and residential neighborhoods.
ExxonMobil has never formally announced plans to pump tar sands crude through the Portland-Montreal line. Portland Pipe Line Corp., the company that manages it for Exxon, let a permit expire last year that would have allowed the flow reversal. However, environmentalists believe the company may still try to convert the line for tar sands in the near future.
One of the reasons analysts are unfazed by the ban is that the Montreal-Portland line’s capacity is smaller than other proposed routes for tars sands, and once the oil reached the port, it would have to be shipped to refineries elsewhere. That would be a lot of steps for so little oil, which softens the blow of not being able to use the line, McColl said.
In addition, there are other East Coast options for the Alberta oil. McColl cited a proposal from TransCanada, the company behind the Keystone XL plan, to link Alberta to New Brunswick through a series of existing and new pipelines. The line would carry as much as 1.1 million barrels daily to shipping terminals and to refineries in Montreal, Quebec City and Saint John.
While the council’s vote may temporarily slow exports, demand is too high for the oil to stay landlocked, said Phil Flynn, an oil analyst with Price Futures Group. “You plug up one export option, another will open up somewhere else,” he said. He pointed to rail as one option, which began taking off as an export alternative earlier this year when the first full oil sands-only train hit the tracks in Edmonton, Alberta.
“One thing we’ve learned in the last couple of years is you can move oil by rail very, very quickly,” said Tom Kloza, an oil analyst at GasBuddy.com, in an interview on NPR. “The crude’s going to come from the oil sands to the United States and other points.”
For all that, environmentalists are still embracing the South Portland measure as an important win limiting the industry’s options. According to Anthony Swift, an attorney with the Natural Resources Defense Council’s International Program on tar sands development, competing pipeline plans also lack refineries at their end points—though there have been proposals to build such facilities on those sites, unlike in South Portland.
If the ordinance holds up, the oil industry will have to rely on either rail or TransCanada’s New Brunswick system, known as the Energy East project, to move its product east. And building the Energy East project won’t be easy. The pipeline faces opposition from green groups and communities along the route, including the First Nations, which is successfully delaying the Northern Gateway pipeline.
“Industry can downplay it all they want, but this is a big deal,” Swift said. “Every obstacle means reduced expansion, which is a big win for climate.”
Clarification: An earlier version of this article misrepresented the capacity of the Portland-Montreal pipeline. The line currently carries 150,000 barrels per day, but its maximum capacity is 602,000 barrels per day.