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 Since 2012, the billionaire Irving family has been advocating a
proposal called Energy East. The 2,858-mile (4,600-km) pipeline
would link trillions of dollars worth of oil in land-locked fields
in the western province of Alberta to an Atlantic port in the
Irvings' eastern home province of New Brunswick, north of Maine,
creating a gateway to new foreign markets for Canadian oil.
The C$12 billion ($10.8 billion) line, which would pump 1.1 million
barrels per day, would include about 1,865 miles of existing natural
gas pipeline converted to carry oil. The rest would be new
construction, most of it along the banks of the Saint Lawrence River
and into New Brunswick.
The industry is keen. Pipeline company TransCanada Corp, which is
also backing Keystone, unveiled plans in August to build and operate
Energy East by 2018. Customers as far away as India are lined up to
take the oil, according to New Brunswick provincial officials.
Canadian oil companies, frustrated by Washington's dithering on
Keystone, say they have seized on it as a viable alternative to the
route through the United States.
"The genesis of this is really the Keystone XL pipeline, and the
continuing political obstacles to getting approval for it," said
Frank McKenna, former New Brunswick premier, Irving family friend
and vocal advocate of the project.
The Energy East proposal began with the Irvings, people familiar
with the project say. If it is built, it will stop with them, too,
at a C$300 million marine terminal they are planning to build in
Saint John, New Brunswick, to service the project.
The Irvings also would be among the top beneficiaries. A study
commissioned by TransCanada and prepared by Deloitte calculated that
the pipeline's access to cheaper crude from the west would save as
much as C$1.2 billion per year for a refinery owned by the Irvings,
while creating 121 direct long-term jobs in sparsely populated New
Brunswick.
The idea of a pipeline from west to east was not new: TransCanada
had been looking at a possible route that would stop in Quebec, but
that plan had not left the drawing board. The Irvings' proposal
breathed new life into it.
The family's industrial empire in New Brunswick, a century in the
making, can help make it possible: Here in Saint John, their
flagship company, Irving Oil, runs the East Coast's only ice-free,
deepwater oil port capable of receiving the largest crude tankers.
It also operates Canada's largest oil refinery — the source of
nearly one in three tanks of gasoline imported to the East Coast of
the United States.
The Irving advantage extends beyond infrastructure. The family's
companies generate two-thirds of New Brunswick's global exports and
are the province's largest private sector employer. Their buildings
dominate the Saint John skyline: Irving's Atlantic Wallboard, Irving
Tissue, Irving Pulp and Paper, Irving Canaport, the Irving refinery;
many of them chuffing white smoke into the winter air around
downtown. That commerce — and a strong grip on the province's media — gives the Irvings significant political influence in a heavily
indebted part of Canada where one in 10 people are without a job.
Irving Oil's CEO, Paul Browning, said at the formal announcement of
Energy East that the company was "extremely pleased to be partnering
with TransCanada." Representatives of both the Irving family and
Irving Oil declined comment for this article.
A TransCanada spokesman said the Energy East project was the
culmination of hard work by "many different parties."
MEET THE IRVINGS
The Irving empire got its start more than 130 years ago, in a
fishing village huddled on New Brunswick's northern coast. A
Scottish immigrant named James Dergavel Irving built a saw mill and
a general store in the late 1800s near stands of spruce and fir. But
it was J.D.'s son, Kenneth Colin, born in 1899, who drove the
family's success.
In his early 20s, K.C., a car salesman, convinced his father to let
him open a gas station in front of the general store to sell fuel
for the Model Ts he retailed. That service station, and the hundreds
that followed, became the center of a conglomerate. Though K.C. died
in 1992, many here still refer to the man rather than to the
business empire, a feature of the company-town feel of this Canadian
province.
"If it moves in New Brunswick, the Irvings are involved," says
Donald Savoie, a New Brunswick historian.
Today, the Irving holdings span 162 companies in the Atlantic
provinces. Two of K.C.'s sons, Arthur and James, are now the
family's most powerful members. They own Irving Oil and forestry
giant J.D. Irving, respectively, the group's two largest companies.
Forbes Magazine's 2014 billionaires list placed Arthur's net worth
at around C$6.1 billion and James' at C$6.7 billion. Irving-owned
companies build warships, sell French fries, run a railway network
and operate a private security firm.
The family is also a huge landowner. Its 1.2 million acres of
timberland in Maine made it the No. 5 U.S. landholder in 2012,
according to the Land Report. In Canada, the Irvings own more than 2
million acres, and operate timber licenses on another nearly 2.5
million acres of public land, according to a 2013 audit by KPMG.
Canadian Business Magazine's 2014 edition ranked the Irving family
third on its Top 25 most wealthy Canadians list, placing its riches
at some C$7.85 billion — nearly the size of the province's total
projected revenues for the year.
PLAN "B"
The Keystone XL pipeline was proposed in 2008 as a way of getting
830,000 barrels per day of crude from Alberta to the U.S. market. It
would start near the Canadian town of Hardisty, Alberta, and
terminate in Steele City, Nebraska. There, it would link up to an
existing pipeline network terminating in Nederland, Texas, near the
coast of the Gulf of Mexico.
TransCanada says the project would be "the safest and most advanced
pipeline operation in North America." U.S. environmental groups say
it will threaten American groundwater resources and hasten climate
change by fuelling expansion of Alberta's oil sands. The Obama
administration has delayed making a final decision that could anger
environmentalists, a key constituency of the Democratic president.
In October 2012, representatives from Irving Oil and New Brunswick's
government traveled to the western Canadian oil hub of Calgary to
present their alternative: a west-east oil pipeline that would go
all the way to the Atlantic. Irving Oil had asked for the meeting,
according to a person who attended. Waiting for them in a conference
room were Canadian provincial energy officials, executives from
TransCanada, and representatives from industry heavyweights Canadian
Natural Resources, Imperial Oil, Suncor, and Shell Canada.
Representatives of all the companies involved declined to comment on
the record about the meeting.
Alberta's oil minister, Ken Hughes, whispered into the ear of his
counterpart from New Brunswick, Craig Leonard. Never before, Leonard
remembers Hughes saying, had he seen so many of the major oil sands
players together in a single room. And they were listening keenly.
"It was like a light bulb turned on," said Leonard. "It was very
clear from the reaction that this was an idea that had tremendous
potential."
According to Leonard and others at the meeting, Mike Ashar, at the
time the CEO of Irving Oil, outlined how a pipeline east across
Canada to Saint John could help get Alberta's oil efficiently to the
world market, paving the way for higher prices and the potential for
expanded production.
Ashar said the pipeline could provide a reason to build Canada's
first oil sands upgrader — a facility that processes tar sands into
a product that can be more easily refined into gasoline, diesel and
other fuels — on the Atlantic coast. There, lower labor costs and
easy access to imports could reduce the facility's multi-billion
dollar price tag by 40 percent, according to an attendee who asked
not to be named.
The need for a new route for Canada's oil was acute, say industry
experts. While the United States delayed Keystone, Canadian supply
mounted and prices dropped. The Canadian Imperial Bank of Commerce
estimated the glut and lack of pipeline capacity had cost Canada
C$25 billion in oil revenues in 2012.
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"The value destruction as a result of not getting our crude to
market is a staggering cost to Canada. It needed a solution," said
former New Brunswick premier McKenna, who is now on the board of oil
sands producer Canadian Natural Resources.
As Irving Oil prepared to make its sales pitch to TransCanada and
the oil sands producers, it stepped up its lobbying efforts in
Ottawa. Irving Oil executives held more meetings with Canadian
regulators and office-holders in 2012 than in the two previous years
combined, according to federal lobbying disclosure documents
reviewed by Reuters. These included repeated meetings with Joe
Oliver, then Canada's natural resources minister, the ministry's
director of oil sands, advisors to Prime Minister Stephen Harper,
and environment ministry officials. Now Energy East has the public
support of Canada's conservative government and the government of
New Brunswick, where much of the new pipeline construction would
take place. The project has also moved much more quickly, from
conception to requesting regulatory approval, than its all-Canadian
rival, Northern Gateway, which would transport oil over the Rocky
Mountains to the Pacific Coast.
The Northern Gateway project, announced in 2006, took four years to
file its request and still does not have approval due to questions
about how it would install and operate the line in an
environmentally sensitive region. By comparison, TransCanada filed a
preliminary request for Energy East with the National Energy Board
in February and plans to submit the full request this summer, just
over a year after the project was announced.
"BRING IT ON"
New Brunswick has also moved fast. Just two months after the initial
Calgary meeting, the provincial legislature was ready to act. The
assembly voted unanimously to endorse "construction of a west-east
crude oil pipeline to bring western crude oil to Saint John" eight
months before the project was officially unveiled.
If the Energy East pipeline is built, it would be a blow to those
who oppose oil sands development on environmental grounds: Energy
East would pose no less a threat than Keystone. It could even be a
bigger problem, Canadian environmental groups say, because the line
would be longer and carry more oil. Their opposition hasn't gained
much traction.
"Unlike in other provinces, we just said, 'bring it on,'" said David
Coon, leader of New Brunswick's Green Party, which has no seats in
the assembly. "There was no serious debate. No serious discussion.
No inquiry," he said.
Keystone, by contrast, has seen virtually every detail scrutinized
by U.S. media and environmental groups, who have fervently
questioned the project's promises for job creation, spill-prevention
and climate change impacts.
Supporters of Energy East say the economic environment in New
Brunswick explains local eagerness: The province's 10 percent
unemployment rate is 3 points above the Canadian national average.
Saint John could also use a boost. Municipal records show a
population decline of 25 percent since the early 1970s. It has the
6th highest concentration of low-income residents among cities in
Canada, according to Statistics Canada.
It isn't clear that the Energy East project would do much to help,
though. The Deloitte study estimated that the pipeline would create
1,427 direct jobs in the development and construction phases in New
Brunswick, but only 121 jobs long-term.
Mark Tunney, former editor-in-chief of Irving's flagship Saint John
Telegraph-Journal, attributes local support for the pipeline in part
to the Irving family's control of media in the province. The
Irvings' Brunswick News owns all the province's English-language
daily newspapers and three-quarters of its weeklies — 20 newspapers
in all. They also own Acadia Broadcasting, which operates 10 radio
stations in three provinces.
A March 4 editorial in the Telegraph-Journal called on provincial
politicians to stand united in support of Energy East and against
the "small minority" who oppose it. The editorial was written in
reaction to a small public protest against the pipeline days
earlier.
Patricia Graham, the ombudswoman for Brunswick News, which publishes
the Telegraph-Journal, said the company was committed to providing
balanced coverage, including of Irving ventures.
"I am unaware of any facts that demonstrate that the number of
papers owned equates to poor journalism," she said. "But management
at Brunswick News is sensitive to these types of concerns and won't
shy away from considering or addressing them."
The Irvings are a major employer. They decline to say how many
people they employ today, but a 2006 Canadian Senate study estimated
their workforce at one in 12 of New Brunswick's 750,000 people, and
concluded that the family's combination of a large industrial
presence and high media ownership concentration in New Brunswick was
"unique in the developed world."
In a Reuters interview in December, Saint John Mayor Mel Norton said
the Irvings had earned a "social license" — or popular support — to
industrialize the city and win public incentives to do so, mainly
because of their importance to the economy.
As an example: The New Brunswick legislature passed a law in 2006
allowing Saint John to freeze taxes on an Irving/Repsol LNG terminal
for 25 years, in hopes of attracting more jobs to the depressed
city. According to registry documents the terminal pays C$500,000 in
taxes a year, on a property-value assessment of C$300 million — the
province's most valuable private real estate. It employs 40 people,
according to its website.
By contrast, the Moncton, New Brunswick hospital is valued at half
the price of the LNG terminal but pays five times more in taxes and
employs 2,899 people.
ASSEMBLING THE PIECES
By early 2013, at Irving Oil's headquarters in Saint John on the
fog-shrouded Bay of Fundy, the plan to ship crude across the
Canadian continent was proceeding apace.
Under a corporation named 658273 N.B. Ltd., the family consolidated
land holdings on Mispec point in East Saint John, taking small plots
of land they had already purchased from local residents and bundling
them into larger lots, according to registry documents.
Blanketed in forest, Mispec is home to Irving Canaport, a large
industrial facility already receiving crude supertankers. It is also
the site of a shelved refinery project with energy giant BP, for
which Irving still holds a valid Environmental Impact Assessment.
Irving Oil has declined to comment publicly about the possibility of
building an upgrader on Mispec point. But a former Irving official
who spoke on condition of anonymity confirmed the idea was being
studied.
Former premier McKenna said Irving Oil was assembling the pieces for
what could become a petrochemicals hub.
"If we can get a million barrels a day coming to the East coast, it
takes some of the stranglehold away that the U.S. market has on us,"
he said. "Let's face it, for Canada, developing our raw materials in
our own country is probably in our best interests."
(Reporting by Richard Valdmanis; editing by Ross Colvin and Sara Ledwith)
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