More Canada crude is coming, but trade war could hamper flow

Washington state oil refineries are taking advantage of a newly expanded tanker terminal just across the border near Vancouver, Canada, to up their imports of discount Alberta crude. The increased oil deliveries using tankers approaching three football fields long meet demand that has outstripped the capacity of a local pipeline. But they also raise two very different concerns.

In the environmental community, there’s heightened fear about the potential for oil spills in the Salish Sea.

On the industry side and for gas-powered and hybrid vehicle drivers, there is uncertainty whether crude oil will be caught up in a looming U.S.-Canada trade war.

Crude oil is Canada’s number one export to its next-door neighbor. Recent data from the U.S. Energy Information Administration, Washington State Department of Ecology and a citizen watchdog in British Columbia corroborate how the controversial Trans Mountain Expansion (TMX) pipeline and pier project upped Canada’s market share in your gas tank.

“Since TMX came online in May, early data indicate that refiners on the U.S. West Coast have been key buyers of the new export volumes. Between June and September, the U.S. West Coast accounted for just over half of all maritime crude oil exports out of Western Canada, with the rest going to destinations in Asia,” wrote U.S. Energy Information Administration analyst Kevin Hack in a recently published report.

The Trans Mountain Pipeline expansion roughly tripled the volume of Alberta crude the pipeline can carry to an enhanced tidewater terminal in Burnaby near Vancouver. The costly Canadian government-owned project aimed to open landlocked Alberta’s oil riches to a wider pool of buyers around the Pacific Rim. To a degree, it’s achieving the objective. Many more laden oil tankers are departing Vancouver’s harbor each month bound for Asia and California than in prior years. The tankers’ route to the ocean passes the San Juan Islands and Olympic Peninsula.

A twist not heralded in advance was that North Puget Sound refineries would charter large oil tankers — usually around 820 feet long — to bring in more Canadian crude, too. The short-haul trips are puzzling on their face because Washington’s four biggest refineries have a direct connection to the Alberta oil sands via a more efficient, lower-risk spur pipeline across the border.

“The reason they are moving it by tankers is because the Puget Sound Pipeline is full. The capacity is full going from BP Cherry Point (refinery) south,” said Fred Felleman, a Port of Seattle commissioner and also a longtime marine protection advocate in his other role as Northwest Consultant for Friends of the Earth.

Media spokespeople for the Phillips 66 refinery near Ferndale and the Marathon Petroleum and HF Sinclair refineries in Anacortes either declined to comment or ignored requests for comment about their Canadian crude imports. Outside observers have not noted any maritime deliveries since May from the Trans Mountain export terminal in Burnaby to BP Cherry Point, the fourth northwest Washington oil refinery and closest to the head of the pipeline.

The increased shipments of Canadian crude to Washington oil refineries displaced imports from Latin America, particularly from Argentina and Brazil, according to quarterly reports on crude oil imports produced by Ecology. Brian Kirk, oil spill prevention section manager at Ecology, said the overall number of tankers coming into Puget Sound to supply those refineries has stayed about the same this year.

“The amount and type of oil matter very much,” Kirk said in an interview. Matt Bissell, the oil spill preparedness section manager at Ecology, added that heavy crude from Alberta could sink in the water, which would make it particularly difficult to corral and clean up. The agency said it requires all oil shippers to always plan for that possibility.

As tallied by Ecology, inbound crude oil shipments by vessel from Canada to western Washington increased from around half a million barrels during the final quarter of 2023 to nearly six million barrels in the July–September quarter of this year after the Trans Mountain Expansion hit its stride.

The state’s crude import data showed that North Puget Sound refineries most commonly supplement their pipeline deliveries with crude from Alaska’s North Slope and then from the menu of foreign sources. The state’s smallest refinery, U.S. Oil in Tacoma, has no nearby crude pipeline to tap into. Now as before, it relies on deliveries by barge and rail chiefly from British Columbia and North Dakota.

Trump wouldn’t really slap tariffs on oil imports, would he?

In late November, President-elect Donald Trump threatened on social media to impose a 25% tariff on all imports from Canada and Mexico when he takes office unless those countries take action to stem the flow of migrants and drugs across the border. Within days, Canadian Prime Minister Justin Trudeau flew to Trump’s Mar-a-Lago club for a long talk with the president-elect and key advisors over dinner aimed at averting a trade war.

But Trump has given few signs since then that he is backing down. He has repeatedly trolled Trudeau and Canada in late-night posts on his Truth Social platform.

Energy analysts at Wall Street firms such as Goldman Sachs and Macquarie Capital said they expect the incoming U.S. administration to exempt crude oil from import tariffs because of the ripple effect on retail gasoline prices. A tariff on oil imports would raise prices at the pump in the U.S., which is the opposite of what Trump promised would happen to energy prices if voters returned him to office.

However, even if the Trump administration exempts oil imports from the proposed tariffs, Canada could impose a crude export tax to inflict pain on the American economy. This sort of retaliation would be a leverage tactic to force the U.S. to back down. Financial newswires reported in mid-December that Ottawa was considering options of this very sort, just in case.

The premiers of Canada’s energy-producing provinces want to nip that talk in the bud, though.

“I’m doing my best to try to convince my colleagues that a tariff war is one we cannot win,” Alberta Premier Danielle Smith said in an interview with the Fox Business news channel Dec. 17.

“I am hopeful we can once again find common ground as we have in the past, and demonstrate leadership and stability,” Smith added in a post on X.

The conservative Smith noted that Alberta’s rising crude production and exports to the U.S. mean Americans get cheaper gasoline. She said she was looking forward to attending president-elect Trump’s inauguration later this month.

Alberta’s crude tends to sell at a significant discount to the global benchmark price (Brent) because of quality differences (e.g., higher sulfur content), transport costs and market access limitations. Over the past week, the Western Canadian Select benchmark price was about $16 less per barrel than Brent crude.

Tankers taking the scenic route

Another eye-catching aspect to the rise in tanker traffic from the expanded Trans Mountain terminal is the circuitous route the vessels are taking to deliver to the nearby Anacortes and Ferndale refineries. It certainly caught the attention of Simon Fraser University professor emeritus David Huntley, who lives near the export terminal.

“When observing the tankers, I frequently get the impression that the process is inefficient,” Huntley wrote in a blog post. “Tankers hang out for days, or even weeks, in the Pacific Ocean, apparently waiting for work. Even stranger is that a tanker that has discharged its oil in Washington state may travel all the way west through Juan de Fuca strait and loiter in the Pacific Ocean before retracing its path to come to Vancouver, all the while reporting that it is coming to Vancouver.”

Huntley tries to log every tanker arrival and departure from the Trans Mountain berths. His log showed large tankers (Aframax class) loaded crude for Washington state refineries 21 times between late May and late December of 2024. That compares to an average of one to five tanker loads over a whole year destined for Puget Sound from Burnaby before the export terminal expansion became operational. Smaller crude-carrying barges were counted separately and that traffic hasn’t changed meaningfully.

Vessel tracking websites showed the Puget Sound-bound tankers carrying Canadian crude typically go all the way around the outside of the San Juan Islands via Haro Strait — often adding an additional detour past Victoria and Port Angeles — before heading inland to Anacortes or Ferndale.

Capt. Ivan Carlson, president of the Puget Sound Pilots, said he expects a more direct routing will be possible by the end of January. He said the international border created complicated logistics for the enroute exchange of Canadian and American ship pilots and escort tugs. “Everybody is motivated” to get a direct route that hews closer to the mainland, Carlson said, and the details were nearly worked out.

Pulling for another rescue tug along the swirling border waters

Canadian energy regulators conditioned the Trans Mountain Expansion project approval on a raft of added safety measures. Trans Mountain paid on behalf of its shippers to enhance oil spill prevention and response capabilities at multiple new bases on Vancouver Island near the international shipping lanes. Large tankers are required to have tug escorts the whole way on the short-haul, cross-border deliveries to Washington refineries.

Ecology’s Kirk said there haven’t been any oil spills from Trans Mountain-loaded tankers this year, or in any prior year in Washington waters. He expressed confidence in the collaborative spill prevention and response system “to ensure the continued protection of our waters.”

Some environmental groups such as Friends of the San Juans remain uneasy. Underwater noise and disturbance to endangered killer whales are additional concerns besides spill risk, said Lovel Pratt, marine protection and policy director for the Friends group in Friday Harbor. Pratt said it is high time to station a standby rescue tug near the San Juan Islands.

“The need for this additional oil spill prevention asset, it was needed even before the Trans Mountain expansion just for the existing vessel traffic,” Pratt said in an interview.

Pratt said it made sense for Canada to pay for an added rescue tug to respond to ships that lose steering or propulsion. She reasoned so because most of the rising commercial traffic through Haro Strait and Boundary Pass is going to and from British Columbia ports.

Gov. Jay Inslee heartened environmentalists in December by publicly endorsing the proposed additional towing capacity, which he said ideally would be homeported in Sidney, on the Canadian side of the shared boundary waters. Inslee also met with the Canadian consul general and followed up with a letter to press the case.

“The risk because of the huge expansion of traffic there really justifies a rescue tug, and they have in my book proved their efficacy,” Inslee said. “We are talking to our friends in British Columbia and the federal government in an effort to move forward.”

This story originally appeared in The Salish Current.

Update notice, Saturday, 1/4/24 at 9:36 a.m.: This story has been updated to provide additional comments from officials with the state's Department of Ecology.