Parkland’s B.C. refinery plans $600-million expansion of renewable fuel production

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Parkland Corp. PKI-T is planning a $600-million construction program at its B.C. oil refinery to expand the facility’s production of renewable fuel and lower its overall carbon intensity.

The refinery in the Vancouver suburb of Burnaby has the capacity to process 55,000 barrels a day of crude oil, but also produces about 1,500 barrels a day of sustainable fuel such as renewable gasoline, which is derived from materials such as vegetable oils and animal fats.

Parkland’s plans call for the facility’s daily renewable-fuel output to be increased to 5,500 barrels, and for the construction of a new wing that would be devoted to the production of an additional 6,500 barrels a day of renewable diesel.

The company’s Monday reveal is the latest in a series of announcements over the past year by energy companies keen on expanding production of renewable fuel in Canada, said Omar Mawji, a Toronto-based analyst with the Institute for Energy Economics and Financial Analysis.

Tidewater Midstream and Infrastructure Ltd., for example, plans to build a new facility for renewable diesel at its oil refinery site in Prince George, B.C.

Parkland’s refinery obtains its oil from the Trans Mountain pipeline, which stretches 1,150 kilometres from the Edmonton area to Burnaby. In 2018, the federal government bought the pipeline and a West Coast terminal from Kinder Morgan Canada Inc., as well as the company’s pipeline expansion plans.

Continuing construction on the pipeline will add a second line and nearly triple the system’s total capacity to 890,000 barrels a day by fall of 2023.

But Parkland’s refinery operates on a constrained amount of property and won’t be taking on additional amounts of oil from the expanded Trans Mountain system, Ryan Krogmeier, the company’s senior vice-president in charge of the Burnaby facility, said in an interview on Monday.

Instead, the Burnaby refinery, which supplies Chevron gasoline stations in the B.C. Lower Mainland, will be focusing its expansion strategy on processing feedstock such as canola oil, animal tallow and wood pulp byproducts into fuel. It is already receiving some animal tallow from Vancouver-based West Coast Reduction Ltd.

“We’ll be looking to decarbonize, helping our customers meet their low-carbon solutions,” Mr. Krogmeier said.

The B.C. government will be contributing to the refinery’s expansion through the province’s low-carbon fuel standard compliance credits. Those provincial incentives could help offset roughly 40 per cent of the project’s capital costs.

“Those credits are released to us as we meet key project milestones,” Mr. Krogmeier said.

Calgary-based Parkland expects to make a final investment decision in the second half of 2023. About 1,000 construction jobs would be created if the company pursues the project. It aims to start operations at the new wing in 2026.

One of the issues yet to be resolved is whether Parkland will also pursue what the industry calls sustainable aviation fuel, a renewable alternative to traditional jet fuel. Parkland is studying the feasibility of doing so, and holding discussions with the federal and B.C. governments on potential incentives.

Bruce Ralston, B.C’s Minister of Energy, Mines and Low Carbon Innovation, welcomed Parkland’s announcement. “Harnessing Parkland’s technical expertise and infrastructure to lower the environmental impact of our transportation is something we can be proud of,” he said.

To access the low-carbon fuel standard credits, energy suppliers must progressively reduce the average carbon intensity of the fuel they supply to B.C. users. The program encourages suppliers to invest in low-carbon alternatives, Mr. Ralston said.

Parkland chief executive officer Bob Espey said renewable fuel plays a critical role in helping meet Canada’s climate goals and decarbonization efforts.

The B.C. government and Parkland estimate that the Burnaby initiatives would effectively remove two million tonnes of greenhouse gases from the atmosphere a year – the equivalent of taking 700,000 cars off B.C.’s roads, or one-quarter of the province’s passenger vehicles.

B.C. Environment Minister George Heyman said in a statement that renewable fuel will be part of the energy transition in the years ahead. “Accelerating the production in B.C. of low-carbon fuels is one in a series of essential actions outlined by the CleanBC road map to 2030 to significantly reduce greenhouse gas emissions, while generating low-carbon economic opportunities for our province,” he added.

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