By Dave Sherwood and Richard Valdmanis

Irving Oil the company seeking to become the gatekeeper for a new crude oil pipeline from western Canada to the Atlantic Ocean has struggled to control air pollution at its existing marine terminal in Saint John New Brunswick.

Irving Oil records reviewed by Reuters show the vapor recovery equipment at the terminal on the edge of the province's largest city was shut 37 percent of the time between December 2012 and March 2015 due to near-constant mechanical problems as millions of barrels of gasoline were loaded onto ships mainly bound for New England.

Official data on the unit's operations after March 31 2015 were not immediately available but an Irving Oil spokesman said the vaper recovery unit's (VRU) performance had been nearly flawless ince June. "The VRU has routinely met and surpassed our operational and performance goals" spokesman Andrew Carson said.

"For example since June 2015 the VRU's availability has exceeded 96 percent and over the same timeframe has shown an average vapor recovery rate above 93 percent."

The terminal handles fuels from the company's 300000-barrel per-day Saint John oil refinery Canada's largest and is the source of about one in three gallons of gasoline imported into the U.S. Northeast. Vapors can escape during ship loading when fuels are briefly exposed to open air.

Scrutiny of family-owned Irving's environmental record has intensified as it seeks approvals to build a new larger export terminal and tank farm nearby to serve TransCanada's Energy East now broadly seen as the most viable Canadian oil sands pipeline project after its Keystone XL pipeline to the United States was rejected by the Obama Administration last week.

Energy East would carry some 1.1 million barrels of western Canadian crude per day more than 2800 miles (4600-km) to New Brunswick by 2020 for the first time linking trillions of dollars worth of oil reserves with overseas markets. Irving plans to build and operate a C$300 million ($226 million) storage tank facility capable of serving more than 100 ocean-going tankers per year.

Newly elected Canadian Prime Minister Justin Trudeau has promised to continue to support development of Canada's oil sands riches but has emphasized the importance of rigorous environmental review and of building community support.

MECHANICAL BREAKDOWN

The C$26 million vapor recovery unit installed at the East Saint John terminal by Irving in 2011 is designed to reduce air pollutants such as volatile organic compounds (VOCs) some of which have been shown to increase the risk of cancer. Irving said it expected the unit to recover up to 90 percent of VOC emissions during gasoline loading.

But the equipment suffered mechanical issues within months of startup. They started worsening in 2012 particularly during winter months according to the records. In the first three months of 2015 the unit was offline 78 percent of the time compared with 38 percent in 2014 and 25 percent in 2013.



Carson the Irving spokesman did not address questions about the unit's mechanical problems between late 2012 and early 2015. But he said the unit's installation had cut pollution from the terminal sharply from 2010 levels and added that Irving believed its long-term environmental and safety record positions the company well to operate a new terminal for Energy East.

In 2012 the first full year the equipment was in operation VOC emissions from the East Saint John terminal dropped to 156 tonnes from 623 tonnes in 2010. They have since risen to 181 tonnes in 2013 and 265 tonnes in 2014 according to data compiled by Environment Canada.

Irving detailed the mechanical issues in monthly reports issued to the New Brunswick Department of Environment and Local Government. The company's provincial permit for the terminal signed in December 2012 lists maintaining the vapor recovery unit as a requirement to operate and says Irving must "ensure consistent and effective VOC recovery operations with minimal downtimes."

A spokeswoman for the department of environment said it was working with Irving to address "challenges" with the unit but said it had received very few local complaints since it was installed. She did not respond to questions about whether Irving had violated its permit or whether officials had informed residents about the equipment failures.

ENERGY EAST GATEKEEPER

Air quality is a touchy issue in Saint John where Irving-owned businesses dominate the skyline - Irving's Atlantic Wallboard Irving Tissue Irving Pulp and Paper Irving Canaport the Irving refinery - many of them belching white exhaust into the air around downtown.

Research commissioned by the Conservation Council of New Brunswick in 2009 showed lung cancer rates in the city 50 percent higher than in the capital Fredericton though the research was unable to identify a cause.

Inka Milewski a New Brunswick-based scientist who advises the Conservation Council and authored the peer-reviewed study said the problems at the East Saint John terminal should cast doubt on Irving's Energy East partnership. "With the company unable to manage the existing problems and the province unwilling to be more proactive in their enforcement of operating approvals any talk of building a new 18-tank storage facility and marine terminal is simply irresponsible" she said.

Environmental fears over the project have mainly focused on the risk of pipeline spills but critics have also raised concerns about the safety of storage and shipping. Irving has logged at least 19 accidents classified by regulators as "environmental emergencies" at its facilities since 2012 according to documents previously detailed by Reuters.

Irving said at the time that its refinery is one of the lowest sulfur dioxide emitters in North America and that the company had invested more than C$300 million over the last decade to enhance its environmental performance.

($1 = 1.3250 Canadian dollars)

Reuters