Business of Energy - October 2022

INFRASTRUCTURE CORRIDORS WILL ACCELERATE ENERGY EXPORTS

by David Yager

The cost, supply and future of global energy has changed dramatically in the past year. What was unthinkable in 2021 is now accepted and growing.

It is again okay to own shares in oil and gas companies. The way markets are going, your investment portfolio could be at risk if you don’t. ESG investment vehicles that attracted attention by promising to avoid fossil fuels are changing their marketing out of necessity.

While Net Zero by 2050 and the so-called energy transition are not dead, they’re no longer big news. Headlines are dominated by the RussiaUkraine war, falling real estate, growing energy shortages, and the rising cost of everything because of inflation and interest rates.

What about subsidies? Until recently there were continuous allegations that fossil fuels were heavily subsidized. Now many countries are offering direct cash subsidies to consumers to make electricity and engine fuel more affordable, even if they come from coal, oil or gas.

Mothballed coal-fired generating and nuclear power plants are being restarted. Those scheduled for shutdown are having their retirement dates extended.

Even Canada’s federal government is finally saying different things. Because of the situation in Europe, the official position of the federal government is now to increase oil and gas production as much as possible, while somehow

still meeting Canada’s promised 2030 emission reduction targets.

Notwithstanding the Prime Minister’s confusing musing on LNG exports, Finance Minister Chrystia Freeland uttered words not spoken outside of western Canada in years when she said, “We have a lot of energy. I think it is a political responsibility for us as a country to support our allies with energy security. This is a very tough moment for many European countries right now as they shift from their dependence from Russian oil and gas and I think it’s very important for Canada to step up and say, ‘We’re going to help you.’”

It turns out that the obligations of G7, G20 and NATO membership has far more influence on Canadian energy policy than the views and aspirations of the 10 million Canadians who live in the four western provinces outside of the lower mainland of B.C. and Vancouver Island.

This has put natural gas exports in the form of LNG to global markets back in the news. But how? After years of policies and regulations that create delays or kill projects, could Canada actually build a new plant or pipeline in a timely manner, even if it wanted to?

A great solution that has been stalled for years is infrastructure corridors for long-distance transportation assets like pipelines, power lines, roads and railways. These corridors are fixed routes where development and land-use issues have been resolved in advance.

David Yager | Infrastructure Corridors Will Accelerate Energy Exports

It used to be the best route for this type of infrastructure was a straight line from point A to point B because it was the shortest and cheapest. The only thing that got in the way were lakes, rivers and mountains, and later, communities.

But the primary reason Canada has any longdistance infrastructure whatsoever is because most of it was built in simpler times and before lots of people showed up.

One of the primary catalysts of development obstacles has been the oil and gas industry and its stubborn attempts to build more pipelines to tidewater to export hydrocarbons south, west and east.

Not only did people, politicians and environmentalists not like pipelines but they hated the contents even more.

New pipelines to the Pacific and Atlantic Oceans and the Gulf of Mexico have been proposed then opposed by green activists, landowners, municipalities, provinces, states and countries.

So many resource projects have been overstudied, mothballed, cancelled or prohibited that among international investors we have earned the title as the nation that can’t get anything built.

Which is bizarre, because the only reason Canada is wealthy enough to afford to not build anything new is because of the infrastructure that already exists.

A novel resolution for development objections and conflicts is infrastructure corridors, prearranged routes along which all the reasons for opposition have been identified, discussed, negotiated and resolved.

Fortunately, Canada has enough vacant or sparsely-populated land it could, if desired, avoid concentrations of people and conflicts.

There are several in various stages of development. None are proceeding, but that may change in the months ahead.

Following the cancellation of the Northern Gateway pipeline from Edmonton to the Pacific in 2016, pro-development Indigenous groups assembled to create the Eagle Spirit Energy Corridor which would include oil and gas pipelines.

It was originally conceived in 2017 as a multiple pipeline corridor from Alberta with its terminus in Prince Rupert. With a cost of $16 billion, founder Calvin Helin told Global News in September 2018 that the ambitious project “has 100 per cent Indigenous backing along its route.”

However, major concerns were Bill C-48, the northern tanker ban, and Bill C-69, the new development application process, and the impact they would have on their project. Eagle Spirit backers filed a lawsuit to try to prevent Bill C-48 from becoming law in January 2018.

Eagle Spirit was back in the news briefly in June 2019 after both bills became law. This made a key component of the project, the oil pipeline, technically against the law. It has dropped out of the news, and may have lost its relevance when construction of the Coastal GasLink pipeline to Kitimat began.

The rail line to the port at Churchill on Hudson Bay has been mentioned multiple times as the foundation of an infrastructure corridor from the oil producing regions of Alberta, Saskatchewan and even Manitoba to tidewater.

The original rail line dates back to the early days of prairie development. It was completed in 1929 and supported grain exports and mining activity in northwest Manitoba. However, a severe washout in 2017 damaged the rail line and the owner was reluctant to repair it.

New owners were sought. The railway and associated storage and shipping assets in Churchill were purchased on August 31, 2018, by a consortium including the Arctic Gateway Group Limited Partnership, Fairfax Financial Holdings and AGT Limited Partnership. Arctic Gateway includes First Nations interests and

Infrastructure Corridors Will Accelerate Energy Exports | David Yager

Fortunately,Canada hasenoughvacantor sparsely-populated landitcould,ifdesired, avoidconcentrationsof peopleandconflicts.

Infrastructure Corridors Will Accelerate Energy Exports

Missinippi Rail Limited Partnership with short-line railway operating expertise. Through the Western Diversification Program, Ottawa supplied $117 million of which $74 million was for the asset purchase and repairing the rail line, and $43 million was for operations and upgrading the assets at Churchill. The railway is again running.

Hudson Bay is regularly mentioned as a viable option for oil and gas exports because it is not in B.C., Ontario or Quebec, proven sources of opposition to fossil fuels and pipelines. It has recently been mentioned as an opportunity by candidates for the leadership of the United Conservative Party and the Conservative Party of Canada.

Critics say that because Hudson Bay ices up in the winter, it is not ideal for year-round tanker traffic. However, Russia and Finland have proven that they can keep their arctic ports functioning in the winter with powerful icebreakers.

With so much land in Canada’s north affected by Arctic Ocean ice, continuous commercial activity is surely an important sovereignty and jurisdictional issue, not just a business opportunity.

The last noteworthy player in the resource corridor space is the C2C2C Unity Corridor project, a foundation which describes itself as a “…neutral national entity championing the development of a resilient network of corridors that can link Canada’s economic opportunities, help create more resilient supply chains and support access to global markets.”

The purpose of C2C2C is ensure development issues and obstacles are dealt with in advance, not after the fact. This is materially different to how things work today.

The C2C2C approach is different in that the “why” precedes the “what” and “where”. Why is because Canada still needs resource development and investment so sustain a growing economy and population. With that box checked, what and where become easier to negotiate. Historically, a commercial developer like a pipeline company confirmed shipper need and financial support, then set about securing a route. But as it seeks to distract, disrupt and dislodge people affected by the development, the benefit is not always obvious.

What makes the C2C2C approach relevant in today’s environment is that global events are have answered the “why” before it even starts. We’re building these pipeline for the world to reduce energy prices and prevent energy poverty and starvation.

And maybe make a few bucks in the process.

OK then. Let’s find the best route.

C2C2C’s officers, directors and advisors have significant experience in resource development, community consultation, politics and the importance of Indigenous participation. Their purpose is to help project sponsors work through the issues before they become challenges.

Should Canada actually decide to rejoin the global community and expand developing and exporting the energy the world needs, it will have to be done differently than in the past.

Infrastructure corridors were a good idea before, and they’re a better idea now that there might actually be a chance to build something. BOE

David Yager is a Calgary oil service executive, energy policy analyst, writer and author. He is president and CEO of Winterhawk Casing Expansion, a new wellbore and methane remediation technology company. His 2019 book From Miracle to Menace - Alberta, A Carbon Story is available at www.miracletomenace.ca.

David Yager | Infrastructure Corridors Will Accelerate Energy Exports

PRODUCING A CLEANER BARREL OF OIL

by Melanie Darbyshire

The second largest producer of oil and gas in Canada today, Cenovus Energy’s story traces back to the dawn of Alberta’s energy industry over a hundred years ago. Its evolution includes exploration, innovation, mergers, acquisitions and splits. Private and government-created corporations, multiple commodity cycles, and changing cultural and political trends have all played a part.

And while its name, people and operations have changed many times over the years, the company has remained true to its original purpose: providing energy to the world to make life better.

It’s a purpose CEO Alex Pourbaix – who joined Cenovus five years ago after 27 years with TC Energy – believes is as vital in 2022 as ever before.

“It’s becoming increasingly clear to everybody that there’s no switch to turn off our reliance on hydrocarbons,” he says, “not if we intend to keep people safe, fed, heated, cooled and transported. I’ve not seen any credible forecast that doesn’t show oil and gas remaining an extraordinarily important part of the global energy mix for many, many decades in the future.”

In fact, fossil fuels – oil, gas and coal – account for 84 per cent of global energy consumption today. Renewables and other low carbon sources of energy (i.e., nuclear) account for just over 15 per cent.

The key going forward, Pourbaix believes, is to make the production of oil and gas as clean as possible. For Cenovus, this means immediate and meaningful action to address

GHG emissions from the production of oil. “We look at it from the perspective that if we were able to decouple the carbon emissions from the production of oil, we could create the most desired and the most ESG-friendly barrel of oil in the world,” he explains. “We really do believe that we can have both increased production and get to net zero emissions over the long term.”

CENOVUS ENERGY

CEO ALEX POURBAIX ON THE PATH FORWARD FOR CANADA’S OIL & GAS INDUSTRY

Producing a Cleaner Barrel of Oil | Cover

Alex Pourbaix.

Photo by Riverwood Photograhy.

Producing a Cleaner Barrel of Oil

Pourbaix notes that while Canada’s heavy oil industry has somewhat higher emissions than the average global barrel produced, great strides have already been taken to reduce emissions.

Over the past 15 years, the company has reduced its per barrel GHG emissions by around 22 per cent. “And if you look at our flagship oil sands facilities, Christina Lake is one of the lowest GHG intensity facilities in Alberta, it’s comparable to the average global barrel,” he says. “And Foster Creek is only slightly higher than Christina Lake.”

Cenovus has also set targets to reduce absolute scope 1 and 2 GHG emissions by 35 per cent by year-end 2035, and, as part of the Pathways Alliance (comprised of six oil sands producers responsible for about 95 per cent of Canada’s oil sands production), has the ambition for net zero emissions by 2050. “There is no single pathway,” Pourbaix notes of the Alliance’s strategy. “The Alliance is pursuing multiple technologies, starting with proven technologies we can scale up now, progressing to emerging technologies.”

The largest initiative proposed is the foundational carbon capture network, which would be one of the largest in the world. The plan would include a carbon transportation line to gather CO2 from more than 20 oil sands facilities and move it to a proposed hub in the Cold Lake area of Alberta, for safe, underground storage.

“Carbon capture and storage is a proven process,” Pourbaix points out. “We know it works and once operating it can quickly make a difference. Alberta has some of the best geology in the world for safe, permanent storage of captured CO2.”

It’s an important step to help preserve the more than $3 trillion in estimated oil sands contribution to Canada’s GDP over the next 30 years, including roughly $500 billion to various governments.

Cenovus’s Foster Creek SAGD facility in northeastern Alberta.

Cenovus’ contribution to this economic fortune is significant and promises to continue to be. Its acquisition of Husky last year has resulted in a much more integrated company. Now with both upstream and downstream operations, the combined company is able to both pay down its debt and reduce its exposure to the heavy oil differential.

“We created a company with a stronger balance sheet,” Pourbaix reflects. “Right now we’re on track to produce about 800,000 barrels of oil or oil equivalents per day. And this is after divesting about 40,000 barrels per day of production” in the past year. Cost synergies, in the region of $1.4 to $1.5 billion per year, have also been realized.

With operations in the field (primarily oil production in Alberta and Saskatchewan, with some offshore operations in Asia and Canada’s east coast) all the way to consumers, thanks to refining and upgrading capacity (Cenovus owns two refineries in the U.S., with the acquisition of a third pending, as well as a refinery and upgrader in Lloydminster), the company can actually process its own molecules, and in particular, Canadian heavy oil molecules.

A focus on ESG metrics permeates the business. The entire leadership team and Board of Directors believe that strong ESG performance is tied to strong business results and longterm financial resilience. “Environmental and social considerations are shaping everything we do now,” he says. “They’re embedded in our strategy, business plans and capital allocation processes. This creates a realistic path to achieve our ESG targets and supports buy-in across the organization at all levels.”

The company also has a strong focus on giving back and supporting the communities in which it operates, many of which are Indigenous communities in northern Alberta.

“A lot of it is making sure those communities benefit as our shareholders do from developing those resources,” he explains. “We’ve been able to do great things like bringing Indigenous contractors to work with us, which has brought opportunities for those communities. We’re continuing to grow those opportunities and we’ve actually set a target to add more Indigenous-owned business opportunities to our operations.”

One initiative is the Indigenous Housing Initiative, launched in 2020, which commits $50 million over five years to build homes in the six First Nation and Metis communities closest to the Foster Creek and Christina Lake operations. The program was conceived after Pourbaix visited a number of the company’s Indigenous community neighbours and partners where he saw and heard first-hand of the challenges they faced in providing housing.

“I was really taken aback by the living conditions in a lot of these communities,” he recalls. “And that’s not at all intended to be critical of leadership. They have extraordinarily limited funding and resources, and do a great job with what they have, but there just wasn’t enough money. I saw an opportunity to give back.”

To date, close to 50 homes have been completed, with a target for 200 by the end of 2025. Pourbaix is thrilled with the success of the initiative, which will likely be extended.

Producing a Cleaner Barrel of Oil | Cover

Cenovus’s Lloydminster Upgrader.

Producing a Cleaner Barrel of Oil

“We’re not just gifting homes to these communities,” he notes. “We’re actually giving them the money and the resources to build them. We’ve partnered with regional colleges where young people in these communities are getting experience in carpentry, plumbing, electrical, you name it. They can be involved in the construction of these homes and actually pick up trades, which will help them in their later lives.”

On a broader, global scale, Pourbaix is optimistic about Canada’s ability to continue to provide the world with the secure energy – the importance of which has been underscored by the Russian invasion of Ukraine – it needs. “As we head into winter, I fear it’s going to be incredibly tough for everybody,” he cautions. “Particularly in Western Europe and poorer countries. I think we’re all getting a real-time education in the importance of cheap, reliable energy, not just for our economies, but for the health and safety of our citizens.”

This reality check has fostered more nuanced conversations with investors when it comes to ESG: “Investors still want to see companies make strides on ESG, particularly with respect to carbon emissions, but there is a much more balanced view now that energy security is probably one of the most important global challenges we have to deal with now.”

It’s a challenge ripe for Canada’s taking. “We’re sitting on the third-largest reserves of oil in the world,” Pourbaix points out. “We are a democracy where rule of law prevails. We have extraordinarily tough and transparent rules on how we do this business. We are honest about how we report emissions. The world needs Canadian oil and gas, and we see that opportunity to supply it, while also, through initiatives like Pathways, decarbonize the product.”

In existence since the birth of Alberta’s energy industry, Cenovus is now leading it – each step cleaner than the last – into the future. BOE

Cover | Producing a Cleaner Barrel

Christina Lake steam-assisted gravity drainage (SAGD) facility in northeastern Alberta.

Providing Energy Solutions for the Future

by Rennay Craats

SECURE

CEO, Rene Amirault, knows what it takes to grow a company.

Throughout his early career, Amirault held various positions at Imperial Oil Ltd. and Canadian Crude Separators (CCS) in sales and marketing, business development and corporate development. From 2001 to 2006, he held the position of vice president of Corporate Development at CCS.

He left CCS in 2006, and through his strong network and the trust he had built, customers continued to reach out for help with treatment and disposal of oil, water and waste. To meet these industry needs, SECURE Energy, a midstream infrastructure services company was formed by five people in 2007. Amirault joined the team soon after and was appointed president, chief executive officer and director of the Board.

Rene Amirault. Photo by Riverwood Photography.

“Our values were based around treating others as you want to be treated, helping the customer, and acting with honesty and integrity,” he explains. “The culture was very entrepreneurially driven. We had a simple vision and that was to grow to be a billiondollar company.”

The first step toward achieving this lofty goal brought the fledgling company south of Grande Prairie where SECURE opened an oilfield waste Class II landfill facility. Over the next eight years, the company grew organically and through acquisition and by 2015 had added another 36 facilities to its portfolio – growing from six to over 1,400 employees across Western Canada and North Dakota.

Despite its size, SECURE remained agile and when the bottom fell out of the energy sector in 2016, the team quickly pivoted. They negotiated long-term contracts, established anchor tenants, and generated more recurring revenue while diversifying the business

by adding industrial clients on the fluids management and reclamation side. Even through the challenges of the past several years, the company continued to grow its production-based midstream division and introduced feeder pipeline systems while increasing its capabilities in drilling, production and environmental services businesses through acquisitions.

In 2021, SECURE announced a plan to grow again, this time through a merger with Tervita, that brought the company’s employee base to around 2,200, increased its Indigenous partnerships to 20, and expanded its service offerings and geographic reach. The new SECURE integrated the strengths of both companies to better serve clients and was careful to preserve the culture of collaboration and entrepreneurship that made both so successful.

“Now we’ve advanced our ESG goals with this larger network, and we have specific short-term water reduction and emissions goals. We also have a larger recurring revenue base and long-term contracts, and that feeds into a stronger balance sheet,” he says. “We truly believe this will enable us to have growth opportunities for the next five or 10 years.”

Some of these growth opportunities include accommodating the diverse processing, treatment and disposal needs of clients by adding on to existing facilities rather than developing new ones. SECURE is also looking at ways to grow its ESG opportunities, whether that’s through CO2 injection, building water pipelines to reduce the amount of fluids transported by diesel trucks, capitalizing on hydrogen opportunities, or recycling and maximizing the oil recovery out of waste.

Always with sustainability in mind, today’s SECURE offers tailored solutions spanning the life of the project with expertise in environmental impact, drilling fluids, flowback waters and waste disposal, and ultimately remediation and reclamation. The company has become a trusted one-stop shop for efficient customer-driven solutions for its many clients across several industries.

“We were one of the first companies in our peer group to really embrace ESG and produce an ESG Sustainability Report,” Amirault says. “Our mission is to help our customers have the

BMO congratulates SECURE Energy on 15 years of success.

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We look forward to continuing our partnership and helping SECURE Energy achieve their goals.

The

is bright,

SECURE is looking beyond this anniversary to

many more anniversaries to come.

lowest cost energy in the world and also have the highest ESG standards.”

SECURE’s help also extends to the communities in which it works. Through a fundraising event that involved clients, vendors and staff, the company made contributions of more than $637,000 to the Red Cross supporting Ukraine, KidSport, The Alex, Calgary Food Bank and

AGAT

Providence. SECURE has donated an additional $340,000 to charities and regional local community initiatives as of the end of June 2022 as well as local causes important to staff in all of SECURE’s 120+ locations.

Despite its incredible growth, SECURE has continued to connect with communities, provide individual service to clients, and foster strong business and personal relationships. As Amirault and his team celebrate 15 years, they are excited for a future that finds them part of the made-inCanada solution to the world’s energy deficiency.

The future is bright, and SECURE is looking beyond this anniversary to ensure the business is around for many more anniversaries to come.

“The ultimate vision here is that we have a 50-year history and the team that’s in place today grows and develops the next decade’s leaders and so on,” concludes Rene Amirault. “There’s a lot of emphasis on employee development because we want successors. We want our people to grow. We want them to be tomorrow’s leaders.”

403-984-6100

1-877-518-4321

Rene Amirault. Photo by Riverwood Photography.

LIFTBOSS

HANDLING

MATERIALS HANDLING

last few years have brought some curve balls to most Alberta businesses. For Liftboss Materials Handling, an Alberta born and raised material handling and JCB equipment dealer, it also brought a long overdue move from their original Edmonton location of 16 years, into a completely renovated dealership in the heart of Edmonton’s northwest industrial area. Having outgrown the previous building and yard, they were looking for a space that would allow future growth. They were able to find a large five-acre yard with a building that will allow expansion, as well enough land to incorporate a full acre on-site “proving grounds”. This demo space will allow customers to operate a number of different machines as they would in the field, ensuring they end up with the correct unit for their application.

The

The owner group worked very closely with JCB corporate through the whole process and were

very proud to find shortly after moving in, that the facility was selected as a Canadian dealer standard for new JCB facilities, meaning that all new JCB dealerships built will be based on the concept of what Liftboss has helped create. As a result, a JCB Canadian Dealer advisory council meeting was held at the facility the last week of July, and the staff were proud to show off their new home to a number of other JCB dealers from across the country.

With that project complete and behind them, expansion of a third facility in Grande Prairie and a similar renovation of the existing Calgary facility are next on the list, both expected to be completed into 2023. If you are in need of new or used equipment, parts, rentals or service on all makes and models reach out to the Liftboss team and they will be happy to help you.