No propane for Portlandia

About a year ago Canadian midstream operator Pembina Pipeline scrapped plans to build an export terminal off the Canadian west coast near Prince Rupert Sound, instead striking a deal with the Port of Portland in a fairy tale agreement. The contract would make the two groups partners in the biggest private investment project to grace the city of Portland, Oregon: a $500mn rail-fed propane export terminal. 

Portland’s residents, nestled a cozy 1,500 kilometers away from western Canada’s key storage and trading hub in Edmonton, Alberta, are not one bit fond of petroleum projects. And Pembina’s link to Alberta’s heavy oil sands turned toxic as environmentalists in Portland and beyond smear the company for making billions on such a “dirty” fossil fuel.

But this is a propane project. The overhang in western Canada is prolific; and suppliers in the face of desperation are likely to pay their consumers to get it off their hands.

Western Canada propane prices are headed for unthinkable lows. Spot propane traded in Edmonton, Alberta, traded in negative territory for the first time earlier this week. Prices can’t go much lower than that. And a Canadian export takeaway solution couldn’t be more far-fetched.

West coast demonstrators are celebrating what’s considered a David versus Goliath victory over a $6bn corporation that threatened the progressive and green city with what opponents called “tanks of doom.”

Transportation safety is clearly an issue, particularly when rail is involved. It’s no easier to pass a rail-fed export terminal expansion on the US east coast in a town like Newington, New Hampshire, when it comes to transporting flammable liquids.

Now Portland has turned its back on Pembina after initial support. Pembina ended up readily defeated by local backlash, including a full-out withdrawal of mayoral backing.

North American producers should consider this lesson and what it means for future projects. The odds of a Portlandia-like solution for pent up Canadian propane supply seem increasingly unfavorable.

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