CALGARY – A newspaper owner with a $26-billion plan to refine oilsands crude on the West Coast said Wednesday he’ll be seeking loan guarantees from Ottawa in support of the proposed project.
David Black said he plans to approach the federal government in the spring and ask it to guarantee about one third of the total financing it needs for a new facility near Kitimat B.C.
That doesn’t involve Ottawa putting up the money, but a federal guarantee would enable Black’s company, Kitimat Clean Ltd., to secure loans at a lower cost.
Black told reporters on the sidelines of a Calgary energy conference there’s no reason to expect the feds to say no.
“There’s a precedent in Canada for the federal government to do that when it’s of vital importance to the country. They’ve done it many times,” he said.
For example, Ottawa made a $1-billion loan guarantee for the $7.7-billion Muskrat Falls hydroelectric project in Labrador.
Kitimat Clean’s Chinese backers initially agreed to provide all of the financing, but later said they would be willing to put up only 70 per cent because they want to see Canada have more “skin in the game.”
“I must say, I understand that. All the banks I’ve ever borrowed from wanted that,” Black said.
A memorandum of understanding between Chinese bank ICBC and Kitimat clean covers the financing and agreements to buy the refined product.
Black’s proposal is meant to address one of the biggest concerns with Enbridge Inc.’s (TSX:ENB) Northern Gateway pipeline: tankers filled with raw bitumen travelling through northern B.C. waters.
If the bitumen is refined into products like gasoline and diesel at Kitimat before being sent overseas to China, the environmental impacts would be much less severe in the event of a spill, Black said.
Black, who doesn’t believe Enbridge’s controversial $6-billion proposal will be approved, admits oilsands producers have not warmed to his idea, as they want the option of selling their raw bitumen abroad.
But he thinks it will win support amongst British Columbians because it would address the tanker issue and the refinery would have a small environmental footprint.
The $18-billion refinery would use a technology pioneered by Calgary-based Expander Energy that would cut carbon dioxide emissions to half that of a traditional refinery. It would also produce absolutely no petroleum coke, a byproduct of heavy-oil processing that Black calls “gruesome.”
“The benefit is so great that it almost neutralizes the extra CO2 given off in the oilsands production process.”
The remainder of the $26-billion pricetag covers a $6-billion pipeline from Alberta to Kitimat, a tanker fleet and a natural gas pipeline to supply the refinery.