CANADA A family plan to pump Canada’s oil Keystone, a pipeline to carry Canadian oil through the U.S., is in limbo. Oil producers are betting on an alternative. BY RICHARD VALDMANIS AND DAVE SHERWOOD NOT STANDING STILL: Irving Oil, the company founded in 1924 by K.C. Irving (statue pictured), is pushing ahead with an ambitious energy project. REUTERS/DEVAAN INGRAHAM SPECIAL REPORT 1 CANADA A ‘PLAN B’ FOR KEYSTONE SAINT JOHN, NEW BRUNSWICK, 27 MARCH , 2014 eystone XL, a pipeline proposal to pump Canadian oil sands through Kthe heart of America, has alarmed environmentalists and become one of the most contentious issues of the Obama presidency. But there is a “Plan B” to cut the United States out of the picture, and it is championed by one of Canada’s wealthi- est business dynasties. Since 2012, the billionaire Irving fam- ily has been advocating a proposal called COMPANY TOWN: The Irvings dominate New Brunswick’s economy and operate Canada’s largest Energy East. The 2,858-mile (4,600-km) oil refinery in Saint John, source of nearly 1 in 3 tanks of gasoline imported to the U.S. East Coast. pipeline would link trillions of dollars REUTERS/DEVAAN INGRAHAM worth of oil in land-locked fields in the western province of Alberta to an Atlantic port in the Irvings’ eastern home province breathed new life into it. of New Brunswick, north of Maine, creat- The family’s industrial empire in New ing a gateway to new foreign markets for Brunswick, a century in the making, can Canadian oil. C$1.2 help make it possible: Here in Saint John, The C$12 billion ($10.8 billion) line, their flagship company, Irving Oil, runs the which would pump 1.1 million barrels per billion East Coast’s only ice-free, deepwater oil day, would include about 1,865 miles of Projected annual savings for port capable of receiving the largest crude existing natural gas pipeline converted to Irving Oil if Energy East tankers. It also operates Canada’s largest oil carry oil. The rest would be new construc- goes ahead refinery - the source of nearly one in three tion, most of it along the banks of the Saint tanks of gasoline imported to the East Lawrence River and into New Brunswick. Source: Deloitte Coast of the United States. The industry is keen. Pipeline company The Irving advantage extends beyond TransCanada Corp, which is also back- say. If it is built, it will stop with them, too, infrastructure. The family’s companies gen- ing Keystone, unveiled plans in August to at a C$300 million marine terminal they erate two-thirds of New Brunswick’s global build and operate Energy East by 2018. are planning to build in Saint John, New exports and are the province’s largest private Customers as far away as India are lined up Brunswick, to service the project. sector employer. Their buildings dominate to take the oil, according to New Brunswick The Irvings also would be among the the Saint John skyline: Irving’s Atlantic provincial officials. Canadian oil compa- top beneficiaries. A study commissioned by Wallboard, Irving Tissue, Irving Pulp and nies, frustrated by Washington’s dithering TransCanada and prepared by Deloitte cal- Paper, Irving Canaport, the Irving refin- on Keystone, say they have seized on it as culated that the pipeline’s access to cheaper ery; many of them chuffing white smoke a viable alternative to the route through the crude from the west would save as much as into the winter air around downtown. That United States. C$1.2 billion per year for a refinery owned commerce – and a strong grip on the prov- “The genesis of this is really the Keystone by the Irvings, while creating 121 direct ince’s media - gives the Irvings significant XL pipeline, and the continuing political long-term jobs in sparsely populated New political influence in a heavily indebted obstacles to getting approval for it,” said Brunswick. part of Canada where one in 10 people are Frank McKenna, former New Brunswick The idea of a pipeline from west to without a job. premier, Irving family friend and vocal ad- east was not new: TransCanada had been Irving Oil’s CEO, Paul Browning, said at vocate of the project. looking at a possible route that would the formal announcement of Energy East The Energy East proposal began with stop in Quebec, but that plan had not left that the company was “extremely pleased the Irvings, people familiar with the project the drawing board. The Irvings’ proposal to be partnering with TransCanada.” SPECIAL REPORT 2 CANADA A ‘PLAN B’ FOR KEYSTONE From west to east Irving Oil and TransCanada are planning to build a C$12 billion pipeline that will carry 1.1 million barrels of crude oil per day from Alberta to Eastern Canada. The 2,858-mile Energy East Pipeline will consist of a combination of newly constructed pipelines and existing natural gas pipeline that will be repurposed to carry oil. Oil sands Alberta Sask. Manitoba CANADA Edmonton HARDISTY Proposed Ontario Energy East Quebec Winnipeg pipeline New Brunswick Proposed Keystone Keystone XL pipeline Ottawa pipeline SAINT JOHN Chicago Omaha U.S.A. STEELE CITY Washington D.C. PATOKA CUSHING Keystone 500 miles Gulfcoast pipeline Atlantic 500 km NEDERLAND Ocean HOUSTON Sources:TransCanada; MEXICO Thomson Reuters. Representatives of both the Irving family on New Brunswick’s northern coast. A service station, and the hundreds that fol- and Irving Oil declined comment for this Scottish immigrant named James Dergavel lowed, became the center of a conglomer- article. Irving built a saw mill and a general store in ate. Though K.C. died in 1992, many here A TransCanada spokesman said the the late 1800s near stands of spruce and fir. still refer to the man rather than to the Energy East project was the culmination of But it was J.D.’s son, Kenneth Colin, born business empire, a feature of the company- hard work by “many different parties.” in 1899, who drove the family’s success. town feel of this Canadian province. In his early 20s, K.C., a car salesman, “If it moves in New Brunswick, the MEET THE IRVINGS convinced his father to let him open a gas Irvings are involved,” says Donald Savoie, a The Irving empire got its start more than station in front of the general store to sell New Brunswick historian. 130 years ago, in a fishing village huddled fuel for the Model Ts he retailed. That Today, the Irving holdings span 162 SPECIAL REPORT 3 CANADA A ‘PLAN B’ FOR KEYSTONE companies in the Atlantic provinces. Two of K.C.’s sons, Arthur and James, are now the family’s most powerful members. They own Irving Oil and forestry giant J.D. Irving, respectively, the group’s two largest companies. Forbes Magazine’s 2014 bil- lionaires list placed Arthur’s net worth at around C$6.1 billion and James’ at C$6.7 billion. Irving-owned companies build warships, sell French fries, run a railway network and operate a private security firm. The family is also a huge landowner. Its 1.2 million acres of timberland in Maine made it the No. 5 U.S. landholder in 2012, according to the Land Report. In Canada, the Irvings own more than 2 million acres, and operate timber licenses on another nearly 2.5 million acres of public land, ac- ALL IN THE FAMILY: James Irving (pictured) controls the Irving business dynasty with his brother cording to a 2013 audit by KPMG. Arthur. Their combined net worth has been estimated at C$13 billion. REUTERS/SANDOR FIZLI Canadian Business Magazine’s 2014 edition ranked the Irving family third on its Top 25 most wealthy Canadians list, If it moves in New Brunswick, And they were listening keenly. placing its riches at some C$7.85 billion – the Irvings are involved. “It was like a light bulb turned on,” said nearly the size of the province’s total pro- Leonard. “It was very clear from the reac- jected revenues for the year. Donald Savoie tion that this was an idea that had tremen- Historian dous potential.” PLAN ‘B’ According to Leonard and others at the The Keystone XL pipeline was proposed government traveled to the western meeting, Mike Ashar, at the time the CEO in 2008 as a way of getting 830,000 barrels Canadian oil hub of Calgary to present of Irving Oil, outlined how a pipeline east per day of crude from Alberta to the U.S. their alternative: a west-east oil pipeline across Canada to Saint John could help get market. It would start near the Canadian that would go all the way to the Atlantic. Alberta’s oil efficiently to the world market, town of Hardisty, Alberta, and terminate in Irving Oil had asked for the meeting, ac- paving the way for higher prices and the Steele City, Nebraska. There, it would link cording to a person who attended. Waiting potential for expanded production. up to an existing pipeline network termi- for them in a conference room were Ashar said the pipeline could provide a nating in Nederland, Texas, near the coast Canadian provincial energy officials, execu- reason to build Canada’s first oil sands up- of the Gulf of Mexico. tives from TransCanada, and representa- grader - a facility that processes tar sands TransCanada says the project would be tives from industry heavyweights Canadian into a product that can be more easily re- “the safest and most advanced pipeline op- Natural Resources, Imperial Oil, Suncor, fined into gasoline, diesel and other fuels eration in North America.” U.S.