Terminal Diagnosis? A trip to a US Kinder Morgan facility sheds light on the Canadian struggle

By Drew Penner

The way you’re neck and neck on the freeway clogged with giant trucks hauling combustible goods across Carson, California, reminds me of driving through Central Alberta at the height of the frack boom. One wrong twist of the steering wheel, popped tire or errant deer – and the worst could happen. It’s this fear that keeps you present. It’s this awareness that prevents environmental catastrophes. The main difference is when you stop for a bite, the cheap eats aren’t a juicy steak or pork chop, but tacos and ceviche.

As Prime Minister Justin Trudeau mulled his response to insurgent BC Premier John Horgan’s efforts to halt the expansion of Kinder Morgan’s east-west Trans Mountain pipeline, to the sheer delight of environmentalists and the power-wielding provincial Green Party, we headed down to a region already chock full of the kind of oil and gas transport and development Canadian opponents fear. South of Los Angeles you’ll find miles upon miles of oil refineries and the two largest ports along the West Coast. You feel like you’re driving on an industrial Mars-scape of the future as you approach the Kinder Morgan terminal at 2000 East Sepulveda Blvd. Except you’re not facing extraterrestrial frigidity, but sweltering heat.

“It’s a refined petroleum products terminal,” explained Melissa Ruiz, a Kinder Morgan spokesperson, explaining that despite the appearance of grandiosity, it pales in comparison to the corporation’s grand scheme of things. “We have 152 terminals.”

You’re minimized, as you peer out over the property Kinder Morgan picked up in 2001, allowing the firm to store up to 4.7 million barrels of oil at a single time. In classic LA fashion, the unassuming office used to manage the space is decorated with a variety of gorgeous green palm fronds. It’s a lush and controlled setting on the cusp of 100 acres of land used in the service of an apparent human need: to pump underground material into our collective bloodstream. To satisfy our energy cravings, we’ve decided, we need pipelines. And we need these sorts of terminals.

“It’s an important cog in the distribution system for the Pacific Southwest,” said David Hackett, president of Stillwater Associates LLC, a transportation energy consulting firm, of Kinder Morgan’s Carson facility. “It provides an independent source for petroleum products for transportation fuels for the area.”

There are pipes sticking up into sky as far as the eye can see, emitting gas in a variety of greys. It’s rhythmic. Musical. Cylindrical tanks the size of a small apartment complex aren’t just dotted here and there. They are a dominant architectural feature. These range from 60 barrels on the low end to 178,000 barrels on the upper. Back in 2005, Kinder Morgan got permission to build 19 more tanks and to knock down four older ones. In Burnaby, Kinder Morgan has been gearing up to demolish one tank and build 14 more this year.

The approach to oil and gas development has been much different in this jurisdiction that what we’ve seen in Canada. Opponents have focused on different things to rein in a powerful industry. But while news about Trudeau regularly makes it onto American airwaves, discussion about Kinder Morgan’s Trans Mountain has never seem to appear. That doesn’t mean US environmentalists aren’t concerned about the future impacts of supporting companies that get some of their product from Alberta’s carbon-intensive oil sands.

“Most of the hydrocarbons that come from Canada are crude oil,” Hackett explained. “There is some gasoline blending components that come down the Trans Mountain pipeline.” Locals are more worried about immediate air quality problems that expose vulnerable populations to carcinogenic pollutants and cause life-threatening asthma attacks.

The 2005 approval for Kinder Morgan’s petroleum storage tank expansion is instructive. Carson, California, gave the go-ahead in part because Kinder Morgan signed off on a “Good Neighbor Agreement” with local environmental groups[1]http://ci.carson.ca.us/content/files/pdfs/planning/sr/2009-02-24/529.pdf
. The company agreed to pitch in cash to upgrade municipal infrastructure. But the City noted it wasn’t on the hook for ecological enforcement, since the environmental agreement was done privately. In Canada, opposition to the Kinder Morgan expansion is virtually a prerequisite to being considered a good environmentalist. And Burnaby’s mayor famously called it a threat to the province’s autonomy.

So green proponents, in this US industrial area that resembles South Edmonton or the Gulf Coast, were on board. And the community was all good to allow construction to zoom ahead. But four years later, only four of the tanks had been installed and an older tank tear-down had been put on hold due to cost and “market conditions.” Much like with the rejection of the Keystone XL pipeline, economic conditions – particularly the price of oil – seems to have had more power to sway politicians and business leaders than environmentalists could ever dream of. The Carson terminal now boasts 53 tanks. In Burnaby there’s just 13.

Kinder Morgan’s Carson development also tells the interesting story of California’s history of environmental regulation. In 1996 the state’s Air Resources Board forced refineries to add methyl tertiary-butyl ether (MTBE) to gasoline products. The organic compound helped reduce emissions, but it actually ended up contaminating groundwater during accidents. The board phased it out by 2003 and increased ethanol requirements. So the company came back to Carson administrators seeking to build another tank, this time for ethanol. Of course, critics contend such efforts have led to an artificial rise in corn prices, resulting in the unnecessary expansion of farms. This ends up actually releasing more carbon into the atmosphere (not to mention inspiring similar policies around the world, as tropical nations try to keep up with American agriculture), according to the national environmental regulator[2]https://www.epa.gov/sites/production/files/2014-12/documents/environmental_challenges_associated_with_corn_ethanol_production.pdf.

When Kinder Morgan asked for its ethanol tank, the company agreed to have a qualified archaeologist on site every time they moved dirt around or installed trenches, since the Gabrielino Tongva Nation pointed out a native burial ground was discovered there in 1998. The Nation pointed to the potential for significant cultural harm, but also said it looked forward to participating in development discussions. In Canada, Kinder Morgan’s pipeline expansion activity is officially contingent on giving First Nations heads up that they’re going to do work near their communities.

Kinder Morgan’s South LA operations emit volatile organic compound gases (VOCs) like benzene, xylene and ethylene. It must follow the rules of South Coast Air Quality Management District (SCAQMD), a non-government regulator. The reality is Kinder Morgan, just like every other oil and gas facility in the area, tends to break them.

“They’re going to have dozens of violations every year,” said SCAQMD spokesman Sam Atwood. “They have hundreds of thousands of fittings.”

The organizations records show, for example, that Kinder Morgan’s 2000 East Sepulveda location was out of compliance in December 2016, when it was discovered the company hadn’t followed the monthly “tank throughput limit” rule of 241,667 barrels for one of its tanks. The problem was fixed and the regulator gave Kinder Morgan the stamp of approval on the issue. Ruiz, the Kinder Morgan spokesperson I talked to, declined to answer questions.

But the number of infractions won’t tell a complete picture of the true environmental risk of such massive terminals, SCAQMD’s Atwood stresses.

“Based on the sheer size and complexity there are likely going to be some violations,” he said. “It doesn’t mean the facility is a bad actor.”

Richard Rojas, acting planning manager for the City of Carson, says for the most part it’s just business as usual for companies like Kinder Morgan.

“Unless there’s a problem, we don’t really hear about it,” he said. “They come to the City when they need something.”

Rojas also said he isn’t aware of any cases where Kinder Morgan had an oil spill or caused any kind of significant environmental incident over the four years he’s been with the municipality. That’s not to say the community isn’t worried about the impacts of oil and gas. They’ve just been more focused on plans to expand an old British Petroleum site into the largest refinery on the West Coast. It’s so huge it stretches across two different cities. When that project, owned by Andeavor, was given the go-ahead by the SCAQMD, Carson wasn’t too happy. It threatened to sue the regulator, noting that emissions were only estimated and weren’t actually based on real measurements. Instead the company sweetened the pot with an additional $45 million for goodies like parks and roads, pacifying the City.

While some environmentalists raised concerns about the potential to drive demand for Alberta oil sands products (and explosions during transport) by building more capacity in California, Rojas says those issues weren’t top of mind for Andeavor opponents. “The majority of the comments had to do with air quality,” he said. Another factor at play has to do with immigration a sizeable chunk of the population is made up of undocumented immigrants from Mexico and Central America, who are too afraid of deportation to fight oil and gas expansion.

California grew up on petrochemicals, but it’s only recently that proof of how this production affects human health has come into more stark focus. “We’re trying to figure out how we can address a lot of these environmental concerns and impacts,” Rojas said, noting there still isn’t adequate monitoring info for sites like the Kinder Morgan terminal on Sepulveda. “We didn’t have specific data on what exactly is being emitted from these facilities.”

Oil companies make the point that upgrades to their operations could actually reduce some emissions. Andeavor, for example, argued that while increasing production by 6,000 barrels of oil a day and replacing aging infrastructure it would cut its greenhouse-gas footprint. To some extent at least, these sorts of claims have been borne out in the region. Some estimates say the entire Port of LA area has seen air pollution cleaned up by about 1/3rd.

At least on one end of the Canadian pipeline, things have been trucking right along. In Sherwood Park, Alberta, where Trans Mountain originates, the Kinder Morgan Base Line Terminal has already built four of 12 tanks. Strathcona County says the company has the option to expand another 1.8 million barrels, too. The County expects crude oil production will increase this year, although oil sands spending is expected to fall by about $2 billion. Kinder Morgan maintains that Trans Mountain is crucial because it’s the only pipeline network on the continent that transports both crude and refined products to the west coast[3]https://www.strathcona.ca/files/files/at-edt-economic-update.pdf

In Burnaby, Kinder Morgan Canada Ltd. said it would seek public input to help determine the colour of the tanks it wants to build there, with their website highlighting how lighter colours reduce emissions. Much of the Canadian public’s gaze was fixated more toward bigger picture items. Many were looking to the carbon footprint of the tar sands. Others fretted about oil spills along the pipeline route.

The existential threat of a potential pipeline rupture seized upon by Canadian environmentalists is not without merit. But the California context shows that there are other concerns that shouldn’t be ignored due to the prominence of ones with greater political currency. Not too surprisingly, the Trans Mountain expansion hasn’t raised the alarm about fossil fuel emissions that Keystone XL did in America. But it hasn’t even really made waves within the barbed wire fences of the company itself. Multiple US Kinder Morgan sources told ThinkPol the halt to a Canadian pipeline expansion isn’t something that’s come up around their US offices. Or as one guy at one of their California liquids terminals put it, “We ain’t hear nothin’ about that.”

That says a lot on the relationship between the two countries, considering National Post political commentator John Ivison described the situation north of the border as “the most serious threat to the federation since the last Quebec referendum.” Compare that rhetoric to how Wall Street views the scenario – with a certain degree of apathy. In the week Kinder Morgan announced it was putting things on hold, their stock price actually went up, reversing a year-long slide on the New York Stock Exchange. Kinder Morgan’s Canadian ultimatum likely had nothing to do why investors gave the company a boost in the days that followed, one analyst who requested anonymity told us. “I think they probably didn’t care,” said the New York-based observer covering oil and gas stocks, noting the energy sector as a whole jumped that week.

After all, there are other production issues looming larger on the horizon for the oilmen and women of California. A recent report by Stillwater notes that the success of environmental activists in getting local communities to ban hydrofluoric acid (HF), a dangerous chemical used in refining, could lead to a significant shutdown at important California refineries[4]http://www.aqmd.gov/docs/default-source/rule-book/Proposed-Rules/1410/stillwaterpres.pdf. That would mean consumers would pay more at the pump. And California would have to rely increased imports of gas products travelling halfway around the world to get here, most arriving from places like India and Korea. But some of it, Stillwater’s Hackett told us, might come by ship, after a journey down the Trans Mountain pipeline, through Burnaby.

References   [ + ]

1. http://ci.carson.ca.us/content/files/pdfs/planning/sr/2009-02-24/529.pdf
2. https://www.epa.gov/sites/production/files/2014-12/documents/environmental_challenges_associated_with_corn_ethanol_production.pdf
3. https://www.strathcona.ca/files/files/at-edt-economic-update.pdf
4. http://www.aqmd.gov/docs/default-source/rule-book/Proposed-Rules/1410/stillwaterpres.pdf