America is at war, and with temperatures
plunging below freezing, winter has arrived in the northern latitudes
of the North American continent.
As Americans enter the winter heating season, they
must rely upon the security of foreign imports of oil and natural
gas to heat their homes, offices and factories -- and Canada, with
its highly integrated, transcontinental system of pipelines, is
a key energy supplier to the United States.
But is Canada's oil and gas infrastructure immune
to terrorist threats?
Twenty-four Canadians were among those who died in
the terrorist attacks of September 11. In response, Canada joined
the allied efforts. At press time, one-third of the Canadian Navy
was en route to join the war.
And as a military ally of the United States, Canada's
population -- and its critical infrastructure -- could be vulnerable
to terrorist attack.
"To date, there have not been any terrorist threats
to Canada's pipelines," said Bob Hill, president of the Canadian
Energy Pipeline Association (CEPA). "Accordingly, we believe that
security levels taken, to date, are adequate, given the risk."
Canadians, however, remain on guard.
"Pipelines are really hard to protect," said David
Ray, managing director-western Canada, for Kroll, a risk management
firm, and former head of security for Shell Canada. "The risk is
getting up there ... I could see a situation where terrorists might
shut down hydro and gas supplies to the United States in a multi-phased
attack at a pinch point."
A pinch point, he explained, is an area that includes
several terminals in close proximity.
"The perception is that the Americans would freeze
in the dark," Ray added, "but it would only be for a matter of a
few days." Because of their modular design, pipelines are usually
easy to repair.
In terms of market share, Canada supplies over 15
percent of America's natural gas needs and is one of the country's
major foreign oil suppliers. According to Canada's National Energy
Board, natural gas exports to the United States have risen steadily
from 0.92 tcf in 1985 to 3.6 tcf in 2000.
Similarly, heavy and light oil exports to the United
States have risen from 187 million bbls (heavy) and 201 million
bbls (light) in 1995 to 284 million bbls (heavy) and 222 million
bbls (light) in 2000.
"When you look at risk, you look at probability and
criticality," said Ray, who helps his clients to assess which sites
and components in those sites are most critical to the companies'
continued operations. "Since September 11 the probability changes
-- sometimes hourly."
Ray recommends a staged approach where the probability
of risk is ramped up from levels one to three, with three being
the most serious. For example, risk level one might involve increasing
alarm systems for pipeline compressor stations; level two stepping
up aerial over-flights and manned patrols; and level three shutting
down the pipeline.
Ray says that some insurance companies are canceling
their insurance warrants on terrorism, and describes how one Calgary-based
oil and gas company has had its policy cancelled three times since
September 11 -- only to have to renegotiate with a higher premium
each time.
"If companies can't transfer their risk through insurance,"
Ray said, "they need to be even more vigilant in protecting their
critical infrastructure."
Heightened Awareness
"Business as usual has changed," said Greg Stringham,
vice president of markets and fiscal policy for CAPP, the Canadian
Association of Petroleum Producers. "Companies are evaluating prudent
practices for communications and early warning systems for new vulnerabilities."
Stringham cited examples of companies that have cancelled
public tours of pipeline control rooms and field facilities.
"We're operating at a heightened level of awareness,"
said Jay Godfrey, manager of public affairs for the Alliance Pipeline
Limited Partnership in Calgary. "Regardless of the method of the
incident, the response and reaction is the same."
Alliance, like all other pipeline companies operating
in Canada and the United States, has an emergency response plan
(ERP) in place to deal with leaks, ruptures and explosions. Responsibility
for pipeline security and integrity lies with each pipeline company.
In control rooms that resemble an air traffic control center, companies
monitor pipeline performance around the clock. Operators can shut
down segments of the pipeline, isolating leaks, ruptures or explosions.
Field surveillance consists of routine over-flights
and manned patrols to monitor activity on the right-of-way.
In rural areas, companies rely upon local residents
to report anything of significance.
"Through the rural areas, you have the eyes and ears
on those folks," Godfrey said. "It's a policy of watch and protect."
The Alliance pipeline started commercial service
on Dec. 1, 2000. Originating in northeastern British Columbia, the
pipeline stretches 1,768 kilometers through Alberta, Saskatchewan,
North Dakota, Minnesota, Iowa and Illinois, delivering about 1.4
bcf of natural gas to Chicago every day.
The Alliance line is an express -- or bullet -- line
with 40 receipt points for small laterals. In the event of a stoppage,
"shippers" or oil and gas companies could redirect their product
through other pipelines, given capacity.
"Shippers don't have all their eggs in one basket,"
Godfrey said. "This adds flexibility so that they can manage their
portfolios."
Ready for Emergencies
TransCanada Pipelines Limited (TCPL) has built an
impressive network of approximately 38,000 kilometers of pipeline
that services markets in Canada and the United States.
On its mainline, TCPL ships 7 bcf of natural gas
per day, with 60 product heading south of the 49th parallel. Additionally,
TCPL owns or controls approximately 1,900 megawatts of power --
enough energy to meet the needs of two million average North American
households.
The National Energy Board (NEB) is the federal agency
that monitors pipelines crossing interprovincial and international
borders. According to Ross Hicks, a NEB public affairs officer,
"the pipeline facilities have been designed to meet any unauthorized
access" -- and that includes terrorist attacks.
Hicks said that a loss of shipping capacity from
a terrorist attack might be similar to a loss experienced during
a routine shut down for maintenance and cleaning -- the product
is usually re-routed through an extensive series of interconnected
lines.
Canada boasts a 540,000-kilometer pipeline system,
comprised of three different kinds of pipelines -- upstream, transmission
and downstream distribution networks.
Only 10 percent of the critical infrastructure in
Canada is controlled by the federal government -- the remainder
is controlled by provincial governments and the private sector.
In order to disseminate communications and intelligence between
all levels of government, military, police and the private sector,
the Canadian government established the Office of Critical Infrastructure
Protection and Emergency Preparedness (OCIPEP) this past February,
which issues informational notices, advisories and alerts from its
24-hour monitoring center in Ottawa.
Within weeks of the September 11 tragedy, OCIPEP
met with the energy and utility sector in Calgary.
"We're somewhat unique worldwide because we're the
only country that combines emergency management with critical infrastructure
protection," said Max London, OCIPEP's chief of public affairs.
The agency communicates with its international and
American counterparts: FEMA (Federal Emergency Management Agency),
the FBI and the newly-formed Homeland Security Office.
The U.S. Energy Information Administration (EIA)
in October published its Short-Term Energy Outlook, in which it
predicts that demand for electricity, heating oil and natural gas
will decline during the winter heating season 2001-2002.
A slowdown in the U.S. economy is to blame, the report
said. Weak industrial demand -- combined with a temperate summer
in 2001 -- has led to the collapse of North American natural gas
prices. Accordingly, working gas in underground storage has swelled
to close to 20 percent above last year's level and about 10 percent
above the previous six-year average.
Barring any unforeseen disruptions of production
or pipeline transmission -- and using the EIA's projections -- America
appears to be in good shape get through the winter heating season.