The Facts on Natural Gas

Upstream Dialogue

The facts on:

Natural Gas

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Contents The Facts................................................1 UNIT 1: The Resource........................3 UNIT 2: Energy.................................. 19 UNIT 3: Economy.............................. 27 UNIT 4: Environment 4.1 Air................................................... 33 4.2 Water............................................. 41 .4.3 Land............................................... 49

The facts Upstream Dialogue toolkit Upstream Dialogue started in 2008 as the Canadian Association of Petroleum Producers’ (CAPP) e-newsletter – providing broad industry information and stories in an easy-to-read, non-technical format.

The Upstream Dialogue toolkit is expanding to include resource-specific fact books. The first of these was The Facts on Oil Sands. A version for American audiences, About Canada’s Oil Sands, was also released. The Facts on Natural Gas is the third in the fact book series.

If you would like to receive the e-newsletter, e-mail your request to upstreamdialogue@capp.ca.

Handy and credible CAPP is the voice of Canada’s upstream oil and gas industry – representing companies that produce about 90 per cent of Canada’s natural gas and crude oil.

Our research indicates that Canadians want a balanced discussion about energy, the economy and the environment. This pocket book is designed to give you fast,

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easy access to natural gas facts that will help you get in on the discussion.

Facts are sourced from credible third parties or are developed using CAPP data that is checked against other public data sources, including government reports.

More facts?

Are you curious about facts that aren’t covered here?

Visit www.canadiannaturalgas.ca for objective, factbased educational materials about Canada’s natural gas resources. You can also send your questions and comments to upstreamdialogue@capp.ca. Additional sources are provided at the back of this book.

Updates A regularly updated online version of this natural gas fact book is available at www.capp.ca/upstreamdialogue.

To order more printed copies of The Facts on Natural Gas, e-mail upstreamdialogue@capp.ca.

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The Resource

UNIT 1

The resource wHAT is natUral gas?

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The Resource Canada is the world’s third-largest producer of natural gas.

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Natural gas is a naturally occurring hydrocarbon consisting primarily of methane, but it may also contain small amounts of ethane, propane, butane and pentanes. As natural gas flows out of the ground it may also contain sulphur compounds, nitrogen, carbon dioxide, water and other substances. These compounds are removed from the natural gas at processing plants.

Ethane Methane

Hydrogen Carbon

Formation Natural gas was formed over millions of years as heat and pressure transformed decaying plant and animal matter buried in sedimentary rock layers. The gas produced is trapped under an impermeable layer of rock that keeps it from flowing to the surface.

Canada’s Gas History Natural gas has been a part of Canada’s energy mix since it was first discovered in 1859 in New Brunswick, where it was flared as a waste product. In 1883, natural gas was discovered in southeast Alberta. Canada’s first offshore discovery was made south of Sable Island, N.S., in 1967.

Today about 30 per cent of Canada’s entire energy needs are met by natural gas.

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The Resource

Natural Gas

Location Natural gas is found in many regions of North America.

The amount of recoverable resources continues to grow through exploration and as technological advances make unconventional natural gas sources economically viable.

North American Natural Gas Reservoirs

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The Resource

Natural Gas

Attributes Abundant – Canada’s resources can provide natural gas to consumers for the next 100-plus years at current consumption levels. With advances in recovery technology, potential supplies of natural gas have grown dramatically.

Affordable – Canadian natural gas is a cost-competitive, economic energy source that meets a wide range of needs.

Cleaner-burning – Natural gas is the cleanest-burning hydrocarbon fuel. Appliances, vehicles and power plants using natural gas are highly efficient. This high efficiency makes it a cleaner energy option than other fossil fuels. In fact, it is 50 per cent cleaner-burning than coal.

Source: Natural Resources Canada

Reliable – Natural gas is there for Canadians when we need it. About 480,000 kilometres of pipeline help deliver natural gas safely and dependably to more than six million homes, businesses and institutions across Canada.

Source: CGA

Versatile – Natural gas is used to heat homes and businesses, to generate electricity, to fuel vehicles, for industrial use and as a feedstock for fertilizers and chemical processes. Source: CGA 7

Sources Natural gas extraction is often referred to as conventional and unconventional. The key difference is in the manner, ease and costs associated with extracting it. North America’s recoverable natural gas resources have increased over the past decade. Canada is now estimated to have 700 to 1,300 trillion cubic feet (tcf) of natural gas.

The increase is mainly due to technological advances in the recovery of natural gas through unconventional means.

These new technologies now make it possible to develop these resources in a manner that is more cost-effective and economically viable. Unconventional natural gas includes shale gas, coalbed methane and tight gas.

Canada’s Natural Gas Resources 700 – 1,300 trillion cubic feet (tcf) Unconventional Natural Gas

Produced Conventional Shale Gas

Tight Gas

Coalbed Methane

Source: CSUR 2010 Canada’s annual production is 5.3 tcf/year

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Conventional – Conventional natural gas refers to gas trapped in multiple, relatively small, porous zones in various rock formations, like sandstone. This natural gas is often difficult to find, but once discovered, it is typically the easiest to produce through standard methods, including hydraulic fracturing, which have been used for the last 60 years.

Unconventional – Most growth in supply from today’s recoverable natural gas resources is found in unconventional reservoirs. Technological advances in horizontal drilling and multi-stage hydraulic fracturing have made shale, tight gas and other unconventional gas supplies commercially viable.

Shale gas – Natural gas found in fine-grained sedimentary rock called shale. The natural gas is tightly locked in small pore spaces in the reservoir rock requiring advanced technologies to drill and fracture the gas-bearing zones.

Coalbed methane – Coalbed methane (CBM) is natural gas that is found in coal seams. The natural gas is trapped in the matrix of the coal by a process called adsorption.

Reducing the pressure in the coal seam allows the natural gas to be released from the coal and flow to the wellbore.

Tight gas – Natural gas found in sands and carbonate that have a very low permeability, which is a measure of how well a gas or fluid flows through a rock. The natural gas is stored in the very small pore spaces in the rock.

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The Resource

Produced – Represents cumulative Canadian natural gas that has already been recovered primarily from conventional sources.

Recovering the Resource

Natural gas resources are developed and processed using various methods and technologies.

Vertical drilling – Drilling rigs drill vertical wells directly into the porous geological formations that hold the natural gas.

Horizontal drilling – Horizontal drilling uses the flexibility of drilling pipe coupled with a steerable motorized bit to turn a vertical well onto a horizontal plane at a measured depth. This process of intersecting the reservoir horizontally allows the well to have much greater contact with the reservoir and access to natural gas.

Hydraulic fracturing – Hydraulic fracturing pumps fluid (water with a small amount of additives) and sand (or another proppant) down a well at high pressure.

The pressure causes the surrounding rock to fracture.

When the pumping pressure is relieved, the water disperses or flows back to the well and leaves a thin layer of sand to prop open the cracks. This layer acts as a conduit to allow the natural gas to escape from tight (low permeability) formations and flow to the well where it is recovered and shipped by pipeline to market. Hydraulic fracturing has been used in conventional natural gas 10

The Resource

production for over 60 years. Recent innovations using multiple stages in hydraulic fracturing have helped open up unconventional fields.

Geology of Natural Gas Resources

300m

Aquifers

2000m

rock

4000m

Source: EIA

Processing – Once out of the ground, natural gas flows through pipelines to processing plants where the product is refined. The resulting natural gas is shipped to Canadian users and for export.

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Production – Canada produced 5.3 trillion cubic feet (tcf) of natural gas and Eastern Canada imported 1.0 tcf in 2011, with Canadians consuming 2.8 tcf of natural gas. This represents about 30 per cent of all energy consumed in Canada. Canada exported 3.2 tcf of natural gas to the U.S. in 2011.

Pipelines – Natural gas pipelines are used to transport natural gas from gas wells, to processing plants, to distribution systems and is delivered directly to homes and businesses across Canada through an extensive network of distribution pipelines.

Natural Gas Delivery Network (actual configurations may vary) Processing Plant

Compressor Station Electricity Generating Station

Transmission Lines

Underground Storage

Compressor Stations

City Gate Delivery Lines

Residential Customers

Commercial Customers Residential Customers

Natural gas comes out of the ground at the producing wellhead, where it is fed into gathering lines that connect to a compressor station. Compressor stations pump the natural gas through pipelines to a processing plant or underground storage for later use. Processing plants

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Source: CEPA

Producing Wellheads

Gathering Lines

remove natural gas liquids from the natural gas to ready it for end use.

From the processing plant, the natural gas is pumped via compressor stations to electricity generating stations or, through a city gate, to residential and commercial customers.

Perspective on

Hydraulic Fracturing Regulations – The Canadian natural gas industry is highly regulated by government. While each province has its own regulations, all jurisdictions have laws to manage environmental impacts, to protect freshwater aquifers, and to ensure safe and responsible development.

Size and depth of fracturing – When a horizontal well is fractured, the wellbore is drilled into the geological zone containing the natural gas. Shale and tight natural gas resources are contained within specifically identified zones. These zones are typically tens of metres thick and 13

extend hundreds of metres laterally. The fractures created extend like a three-dimensional spiderweb in the formation, possibly extending 50 to 100 metres, and extending to the top and bottom of the hydrocarbon zone. The fractures are only a few millimetres wide, enough for a few grains of sand to prop them open. The fractures created are contained within the natural gas-bearing zone (or in close vertical proximity to it). They are separated by a sufficiently thick layer of rock that prevents communication between the fractures and the zones containing shallow aquifers.

Depth of resource – Shale and tight gas reservoirs are found 2,000 to 3,000 metres below ground. As a comparison, the CN Tower in Toronto is 550 metres tall.

Depth of drinking water aquifers – Drinking water aquifers are usually found at depths less than 300 metres.

When natural gas wells are drilled through these shallow aquifers, steel casing is cemented into place to isolate the aquifer from the natural gas-bearing zone and all activity inside the well. The protection of freshwater aquifers is strictly regulated by provincial governments.

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Here’s an analogy: Imagine you are making coffee in a drip coffee machine. If you use 200 coffee beans without grinding them, they have a surface area of about 0.02 m2, slightly larger than this page. If you grind them, their surface area increases to about 800 m2, about half the size of an NHL rink. With ground beans, as water passes through them, you get coffee in about one second, while whole beans have to be boiled in water continuously for about 40,000 seconds (11 hours) to make coffee! The larger surface area makes all the difference. When we drill into shale rock and perform hydraulic fracturing, it increases the surface area open to the wellbore to free the natural gas. Without fracturing it would take 27 years to recover natural gas from one metre around the wellbore.

Source: Dr. Basim Faraj, Questerre Energy

200 beans .02 m2

800 m2

11 hrs 1 sec

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The Resource

Why do we fracture?

CAPP Guiding Principles for Hydraulic Fracturing Canada’s shale gas, tight gas and tight oil industry support responsible and safe approaches to hydraulic fracturing and water. Protecting water during sourcing, use and handling is a priority for our industry. We support and abide by all regulations governing hydraulic fracturing operations, water use and water protection. In addition, we commit to following these guiding principles:

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We will safeguard the quality and quantity of regional surface and groundwater resources, through sound wellbore construction practices, sourcing fresh water alternatives where appropriate, and recycling water for reuse as much as practical.

2

We will measure and disclose our water use with the goal of continuing to reduce our effect on the environment.

3

We will support the development of fracturing fluid additives with the least environmental risks.

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We will support the disclosure of fracturing fluid additives.

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We will continue to advance, collaborate on and communicate technologies and best practices that reduce the potential environmental risks of hydraulic fracturing.

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The Resource

CAPP Hydraulic Fracturing Operating Practices The operating practices support the guiding principles for hydraulic fracturing. They strengthen the shale gas, tight gas and tight oil industry’s focus on continuous environmental performance improvement and transparency, and they apply nationally.

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Fracturing Fluid Additive Disclosure: Publicly disclose on a wellby-well basis the chemical ingredients in fracturing fluid additives used, including trade names, general purpose and concentrations.

2

Fracturing Fluid Additive Risk Assessment and Management: Identify and manage the potential health/environmental risks associated with fracturing fluid additives and increase demand for more environmentally sound fracturing fluids.

3

Baseline Groundwater Testing: Develop domestic water well testing programs and participate in regional groundwater monitoring programs.

4

Wellbore Construction and Quality Assurance: Ensure the proper design and installation of the wellbore, confirm wellbore integrity prior to initiation of hydraulic fracturing operations, and develop remedial plans in the unlikely event that the wellbore is compromised.

5

Water Sourcing, Measurement and Reuse: Evaluate available water source options, monitor water sources as required to demonstrate sustainability of the resource, and measure and report water withdrawals.

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Fluid Transport, Handling, Storage and Disposal: Identify, evaluate and mitigate potential risks related to the transport, handling, storage and disposal of fluids, and ensure a quick response to accidental spills.

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Anomalous Induced Seismicity: Where appropriate, establish monitoring, mitigation and response procedures to avoid or minimize any adverse effects of induced seismicity associated with hydraulic fracturing.

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Groundwater Protection

Every natural gas well has an engineered steel casing system that is cemented externally to prevent any fluids from migrating from the wellbore to groundwater aquifers.

Source: Apache Corporation

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Energy

UNIT 2

Energy why DO WE NEED natural gas?

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Energy Natural gas is a vital source of energy for Canada and the world.

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Canada’s

energy

In 2009, the average natural gas consuming home in Canada used approximately 94,800 cubic feet of natural gas.

Source: NRCan

Energy

Natural gas is an important part of Canada’s energy mix, along with oil, coal, hydro, nuclear and renewable energy sources. Currently natural gas meets about 30 per cent of Canada’s energy needs.

5.3 trillion cubic feet Canada produced 5.3 tcf of natural gas in 2011.

Source: CAPP 2012

2.8 trillion cubic feet Canadians consumed 2.8 tcf of natural gas in 2011. Canada produces more than enough natural gas to meet domestic demands.

1,300 trillion cubic feet An estimated 700 to 1,300 tcf of Canadian natural gas can be recovered and marketed. Given current domestic natural gas consumption, Canada has enough of the resource for 100-plus years. Source: CSUR 2010 21

Natural gas use Residential – Natural gas is the single-largest form of energy used in Canadian homes. Over six million homeowners use natural gas to heat their houses and their water. Canadian homes are also enjoying the benefits of increasingly efficient natural gas furnaces and appliances.

Industrial – Natural gas accounts for about half of the energy used in the industrial sector. Industrial customers prefer natural gas because it is readily available and provides heat for industrial processes, like manufacturing steel. It is also a key feedstock for the chemical and fertilizer industries.

Generating electricity – Natural gas currently provides five per cent of Canada’s power generation, and because it can be delivered and scaled quickly as appropriate, it is an excellent partner for Natural Gas Use by Sector renewable power in Canada (% share) sources such as wind and solar.

Transportation – Heavy-duty natural gas trucks and buses can reduce greenhouse gas (GHG) emissions by 20 to 30 per cent.

Source: NRCan

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Commercial 17%

Industrial 33%

Residential 22%

Electricity Generation 28%

Transportation 0.1%

Source: Natural Resources Canada, CGA

Canada is the world’s third-largest producer of natural gas. Total annual production reached 5.3 trillion cubic feet in 2011 and could reach 7.1 trillion cubic feet by 2020.

Source: CAPP 2012

Top 5 Natural Gas Producers in 2011 United States Russia Canada Iran Qatar

0

5

10

15

20

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2020 (Price recovery) 19.6

48% 52% 7.1

Trillion Cubic Feet

Source: BP Statistical Review 2012

Source: BP Statistical Review 2012

Canadian Production Year Production average ( billion cubic feet/day) Conventional natural gas Unconventional natural gas Total annual natural gas production (tcf)

1980 7

2011 14.4

2020 (Cont. low price) 14.1

100% 0% 2.6

86% 14% 5.3

50% 50% 5.1

Source: CAPP 2012

ontinued low price case – assumes price remains C below $4/GJ. Price recovery case – assumes price recovers to $5.50/GJ before 2015.

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Energy

Energy supply

Energy

demand

Global Needs Global demand for energy is expected to increase 40 per cent* by 2035 as economies in both developed and emerging countries continue to grow and standards of living improve.

Global demand for natural gas is expected to increase 55%* by 2035.

Source: International Energy Agency (IEA) 2011 *Growth from 2009 to 2035, New Policies Scenario.

Global Primary Energy Demand (New Policies Scenario) Other renewables Biomass and waste Hydro Nuclear Natural gas Oil Coal

20 Billion tonnes oil equivalent

18 16 14 12 10 8 6 4 2 1990

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2009

2020

Source: IEA World Energy Outlook 2011

2030

2035

Source: IEA 2011

Changing

Traditional markets for western Canadian natural gas are changing: exports to the U.S., Canada’s only export market for natural gas, have dropped 16 per cent over the past five years and are projected to drop further because of the U.S.’s own growing supply. In the major eastern Canadian markets, western natural gas competes against supplies primarily from the U.S. that are closer. In 2011, Canada imported 1.0 tcf of natural gas from the U.S. Source: NEB

With exports to the U.S. declining, Canada’s industry is exploring new markets for Canadian natural gas. Several liquefied natural gas (LNG) export LNG is natural gas cooled to -161 terminals have been proposed degrees Celsius, at on Canada’s West Coast. which point it condenses Asian energy demand into a liquid. LNG is ideal continues to grow, with to store and transport China’s demand for natural natural gas. gas growing five per cent annually.

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Energy

Markets

Existing Markets Canada has the infrastructure to move natural gas from Western and Eastern Canada to other parts of Canada and for export to the U.S.

Western Canada Washington Ontario Rockies California

Midwest

Eastern Canadian QuĂŠbec Supply East Coast

New York State

Source: CERI 2011

Western Canadian Supply British Columbia

Future Markets

Asian markets would be an eight-day to 11-day sail from proposed LNG terminals on Canada’s West Coast.

Kitimat

China

South Korea South East Asia

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Japan Pacific Ocean

Source: Apache Corporation

BC

UNIT 3

Economy How does natural economy

gas development and production contribute to the economy?

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Economy

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Economy

Natural gas is an important part of Canada’s economy, providing thousands of jobs and significant revenue for provincial and federal governments.

Economic

contribution economy

Government revenues $285 billion could be collected in personal, corporate and indirect taxes across Canada from western Canadian natural gas production over the next 25 years.

Source: CERI 2011

$98 billion could be collected in royalties from natural gas in British Columbia, Alberta and Saskatchewan over the next 25 years. Source: CERI 2011 $1.8 billion has been collected by the province of Nova Scotia from the Sable Island Energy Project from December 31, 1999 (project inception) to March 31, 2012.

Source: Nova Scotia Department of Finance

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Jobs In addition to paying significant royalties and taxes, the natural gas industry is a major employer and creates jobs throughout North America.

317,000 jobs The natural gas sector is expected to provide 317,000 jobs (direct, indirect and induced) across Canada by 2035.

This is almost double the 172,000 natural gas jobs in 2010. Source: CERI 2011 Canada’s natural gas producing industry is centered in the West, so the majority of the direct jobs are focused there.

However, all provinces have natural gas-related jobs. Even those with no natural gas production have direct jobs in areas such as natural gas distribution, pipeline transportation and construction services.

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$339 billion Over the next 25 years, natural gas employees could earn $339 billion. Source: CERI 2011

By 2030, Canadian natural gas operations could provide 76,000 jobs (direct, indirect, induced) in the United States.

Source: CERI 2011

$13.3 billion In 2011, natural gas provided $13.3 billion in export revenue to producers.

Source: Statistics Canada

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economy

76,000 U.S. jobs

Industry in action

Dalhousie

Dalhousie University and Jeffery Hale Hospital have switched to natural gas as a heat source. Their decision is environmentally and fiscally responsible, and positions both as leaders in environmental sustainability.

Dalhousie’s annual savings from the fuel switch are estimated to be over $2 million, and will eliminate the university’s sulphur emissions and significantly reduce carbon dioxide emissions. This translates to a reduction of over 12,000 tonnes of greenhouse gas emissions or the equivalent to the removal of 2,400 vehicles from our roads.

Jeffery Hale Hospital decided to replace its heavy fuel oil equipment with high energy efficiency natural gas appliances. The conversion could save the hospital up to $25,000 a year. By converting to natural gas, the hospital will also reduce its GHG emissions by more than 31 per cent. That’s 600 tonnes of GHGs that will be avoided annually, which is equivalent to permanently removing about 150 cars from the road.

Read more Industry in Action stories: www.capp.ca/innovation 32

UNIT 4.1

Environment: AIR How does natural gas production impact the air and Environment

GHG emissions?

AIR

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Air Natural gas is the cleanest-burning hydrocarbon with a wide variety of uses in our homes, businesses, industry and communities.

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GHG emissions Canada, with less than one per cent of the world’s population, produces two per cent of global GHG emissions. Natural gas, the cleanest-burning hydrocarbon, can be used in a variety of ways to help reduce Canada’s GHG emissions, including in the transportation and electricity generation sectors.

Canada’s GHG Emissions by Sector – 2010

Environment

Other Energy – Stationary 31.2%

Energy Transport 28.0%

Industrial Processes 7.4%

Other Oil & Natural Gas 15.2%

Agriculture 8.0%

AIR

Oil Sands 6.9%

Waste 3.2%

Source: Environment Canada 2012

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CO2 emissions Carbon dioxide (CO2) is a GHG emitted by burning fossil fuels for electricity generation, industrial uses, transportation, and for heat in homes and buildings. The natural gas industry reports GHG emissions annually to provincial and federal regulatory agencies.

Flaring Flaring is the controlled burning of natural gas as part of production and processing. The flaring of natural gas is highly regulated across Canada.

In Alberta, environmental regulations cut the amount of natural gas flared by 80 per cent from 1996 to 2010, reducing GHG emissions by more than eight million tonnes.

In British Columbia, regulations will eliminate routine flaring by 2016.

End-use emissions The cleanest-burning of the fossil fuels, natural gas still results in the release of CO2 and nitrogen oxides when burned. Particulate matter and sulphur oxides are also produced but in very small amounts compared to the combustion of other fossil fuels. Source: Environment Canada Lifecycle GHG emissions of natural gas produced from shale resources are only slightly higher than those of natural gas produced from more conventional sources. Source: NRCan 36

GHG reductions Electrical Generation Electricity generated by natural gas has 50 per cent fewer GHG emissions than coal-generated electricity.

Canada’s Power Generation Portfolio Wind 1%

Oil 1%

Biomass/Solar/ Geothermal 2% Natural Gas 9% Coal/Coke 14%

Hydro 59% Nuclear 14%

Environment

Source: NEB 2010

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AIR

Canada generates approximately 8,900 MW of electricity from coal-fired plants. For every 1,000 MW of coalfired power generation converted to natural gas power generation, annual CO2 emissions are reduced by 5.1 million tonnes or about one per cent of Canada’s total.

Transportation Heavy-duty trucks and buses running on natural gas reduce GHG emissions by an estimated 15 to 30 per cent compared to diesel trucks and buses.

For example, compared to a diesel truck, a Westport GXequipped liquid natural gas truck provides a 26 per cent reduction in carbon emissions over the life of the vehicle.

For a truck that travels 200,000 kilometres per year, this represents an estimated 70-tonne annual carbon benefit.

Lifecycle GHG Benefit – Westport GX-equipped Truck – Quebec 2009 Extraction

Processing

Fueling, transportation and storage

Emissions at end use

Total life cycle

1,016 g/km

Natural gas (LNG*) 94 g/km

25 g/km

55 g/km

842 g/km

1,365 g/km

Diesel 148 g/km

132 g/km

6 g/km

1079 g/km

Source: Westport Innovations; modeled by (S&T)2 Consultants Inc. using GHGenius model 3.15, May 25, 2009 * includes 3% diesel pilot fuel

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Industry in action

Waste Management Vancouver Collection Vehicle

Waste Management, Inc. For Waste Management, Inc. natural gas plays an increasingly important role in moving the wheels that pick up our garbage and recyclables.

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AIR

In Ottawa, Waste Management is using 25 brand-new natural gas-powered trucks to pick up loads. Another 18 diesel trucks that collect industrial waste in the capital will be gradually replaced with natural gas-fueled vehicles.

Environment

In Vancouver, North America’s leading waste management company plans to replace 100 diesel trucks with collection vehicles running on compressed natural gas (CNG). Sixty have been switched already. They’re fuelled at a company-owned filling station in Coquitlam, just east of Vancouver.

Industry in action continued Each CNG truck lowers Waste Management’s use of diesel fuel by an average of 30,280 litres per year. That’s equivalent to reducing greenhouse gas emissions by 22 metric tonnes annually.

The CNG trucks will take Waste Management a step closer to meeting one of its sustainability goals of reducing its fleet carbon footprint by 15 per cent and increasing fuel efficiency by 15 per cent by the end of 2020.

Waste Management first started looking at natural gas as an alternative to diesel in the mid-1990s. Today, almost 10 per cent of the company’s vehicles are running on either CNG or liquefied natural gas (LNG). The benefits of using natural gas rather than diesel are numerous, according to Waste Management. Natural gas is more affordable than the diesel used by most heavy-duty trucks. It burns cleaner, making it easier and less costly to maintain than a diesel truck, and CNG-fuelled trucks are quieter than their diesel-run counterparts.

Read more Industry in Action stories: www.capp.ca/innovation

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UNIT 4.2

Environment: WATER How does natural gas production impact water Environment

resources?

WATER 41

Water Canada’s natural gas industry is committed to using water responsibly and to protecting water resources.

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Water use Natural gas operations require water in the well drilling and completions phase – that is, before the well begins producing natural gas. Natural gas processing plants also require water.

400 to 600 m3

Drilling of a conventional natural gas well uses 400 to 600 m3 of water.

86 % of Canada’s natural gas production comes from conventional wells.

Environment

5,000 to 100,000 m3

WATER

Shale gas and tight gas resources currently being developed in B.C. using horizontal wells with multi-stage fracturing require 5,000 to 100,000 m3 of water per well. The volume of water required depends on geological and reservoir characteristics.

A well is typically only fractured once and will produce for 20 to 30 years.

Source: BC Oil and Gas Commission

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Water use Freshwater is an important resource. Government and industry are working together to ensure it is used in a responsible manner. Provincial governments regulate how much water can be diverted from freshwater sources for use by both citizens and industry.

For example, in 2009 14.7 billion m3 of surface water was collected for use in British Columbia, excluding hydro power. Of this volume, 0.6 per cent, or 86.5 million m3, was allocated to the oil and natural gas industry. Industry’s actual use was estimated to be less than five per cent of the authorized volume.

British Columbia Surface Water Allocated

by Sector (excluding water power) Aquaculture 3%

Agriculture 11%

Waterworks 12% Mining, Natural Gas and Petroleum 1%

Industrial and Commercial 14%

Conservation and Land Improvement 59%

Domestic <1%

Source: BC Oil and Gas Commission 2010

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Arc Resources Water recycling unit in the Montney shale gas play.

98.5% Fracturing fluid is about 98.5% water and sand.

175,000 wells have been hydraulically fractured in Alberta and British Columbia over the past 60 years with no documented incidents of drinking water contamination from this process.

Source: CSUR 2010

Environment

25 to 40 % Between 25 and 40% of water injected during hydraulic fracturing is recovered. This water is reused or injected into deep water disposal wells.

WATER

Public disclosure of fracturing fluid additives is mandatory in B.C. Other provinces are working on similar plans.

Source: CAPP 2010

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Most water used for natural gas production is withdrawn from surface freshwater sources, such as lakes, rivers and dugouts. The natural gas industry is working to reduce freshwater use by using poorer quality water sources. So what are these alternative water sources?

Brackish water Water extracted from slightly saline aquifers is called brackish and can be used with limited treatment.

Saline groundwater Water extracted from deep saline aquifers can be used for hydraulic fracturing with treatment in some cases.

Flowback Water injected during hydraulic fracturing that flows back out of a well can be reused in subsequent wells with limited treatment.

Produced water Water naturally present in the reservoir or injected into the reservoir to enhance production. It is recovered along with the natural gas and can sometimes be reused with limited treatment.

Municipal waste water Municipal effluent can be reused by industry in some cases.

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Industry in action

Dawson Creek Project Reclaimed Water

DEBOLT WATER TREATMENT PLANT

Innovation reduces freshwater use in natural gas development Natural gas producers are continuously decreasing freshwater use in hydraulic fracturing operations by switching to alternatives where possible.

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WATER

Shell will pipe its share of the water from the plant to its natural gas operations about 48 kilometres west of Dawson Creek where the company operates the Groundbirch gas field.

This innovation will virtually eliminate Shell’s need to draw on local freshwater sources for their Groundbirch operations.

By doing so, Shell not only reduces its reliance on freshwater but will also remove three million kilometres a year in truck traffic from local roads.

Environment

In September 2012, Shell Canada and the City of Dawson Creek opened the Dawson Creek Reclaimed Water Project.

The facility, with a capacity of 4,000 cubic metres per day, treats municipal waste water for use in Shell’s Groundbirch natural gas venture and the City of Dawson Creek’s municipal operations.

Industry in action continued Another example of industry innovation is the Debolt Water Treatment Plant, opened in June 2010 as a joint venture between Encana and Apache Canada in the B.C. Horn River Basin.

The water treatment plant â&#x20AC;&#x201C; the first of its kind in North America â&#x20AC;&#x201C; takes sour, saline water from the Debolt formation, an aquifer approximately 700 metres below potable water sources. The plant pumps the water to the surface, removes the hydrogen sulfide, and then Encana and Apache use the water for hydraulic fracturing in the Horn River Basin.

Using treated water from the plant means a drastic reduction in the volume of freshwater needed for fracturing operations.

The materials used in the plant have to deal with a highly corrosive product caused by high temperatures, hydrogen sulfide, carbon dioxide, water and acidity. As a result, very precise water analyzers had to be developed. The plant also functions as a closed system. The flowback water management system allows for reuse of the water over time by re-injecting it in to the Debolt formation so that it can be treated.

While water treatment is a great solution in these particular cases, the water realities are different in different regions. Local factors have to be considered to make such projects a reality.

Both projects, however, demonstrate there are water alternatives that make economic and environmental sense given the right geological and geographic circumstances.

Read more Industry in Action stories: www.capp.ca/innovation 48

UNIT 4.3

Enviro nment: LAND How does natural gas production impact the land?

Environment Land

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Land Canadaâ&#x20AC;&#x2122;s natural gas industry is committed to minimizing its footprint, reclaiming all land affected by operations and maintaining biodiversity.

Land Use Advances in horizontal drilling and the use of multi-well drilling pads have greatly reduced the amount of land disturbed in drilling operations.

A 20-well horizontal drilling pad disturbs about five per cent of the land of an equal number of vertical drilling pads.

A Horizontal Multi-well Drilling Pad vs Vertical Single-well Drilling Pads

Environment Land

Several horizontal wells, drilled from a multi-well pad (left), can access a greater area of the reservoir from a smaller piece of land than vertical wells drilled from single-well pads (right).

Source: Encana

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Land

reclamation Reclamation planning starts at the beginning of the project and physical reclamation proceeds when natural gas resources have been depleted. To minimize impact, companies avoid sensitive habitat, use narrow seismic lines, employ low impact pipeline methods and utilize mulch to reduce surface disturbance.

The Great Sand Hills in Saskatchewan is one of the largest native grassland tracks within the largest sand dune complex in Canada.

Canadian Natural Resources Limited development in this environmentally sensitive region is focused on minimal disturbance drilling and pipelining, thereby reducing the need for land reclamation.

Five years It generally takes at least five years for a well site to be reclaimed â&#x20AC;&#x201C; from capping the well and removing equipment to cleaning up any contaminants, replacing soil and replanting native vegetation.

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Industry in action DEVON ENERGY

In the past, access roads to natural gas drilling sites in forested areas involved creating wide right-of-ways and trucking-in large amounts of sand and gravel to build permanent roads for heavy equipment. Through innovative thinking and partnerships with stakeholders, Devon chose another option â&#x20AC;&#x201C; mulch.

Environment

This minimal-disturbance technique involves reducing the size of the required right-of-way by up to 50 per cent. Any timber that cannot be sold or waste wood is mulched and layered on the right-of-way. Once the access road is no longer needed, the mulch can be collected and reused for another project. Benefits include conserving plant and wildlife habitat, maintaining natural vegetation and root structure, reducing the introduction of new species, recycling of natural and waste materials, and reducing the need and cost of reclamation.

Land

By using this alternative to traditional right-of-ways, Devon is improving its land stewardship and environmental performance, as well as how it works with stakeholders, one project at a time.

Read more Industry in Action stories: www.capp.ca/innovation 53

Aboriginal opportunities The aboriginal youth population is growing and often lives near natural gas development projects across Canada.

Solid relationships with aboriginal communities have created mutually beneficial employment and business opportunities. An example is the Kitimat LNG export facility planned to be built on First Nations land under a partnership with the Haisla First Nation.

Consultation Industry understands the value of consulting with aboriginal communities at the earliest stages of project development to identify concerns and mitigate potential impacts in a proactive manner.

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MORE FACTS

Find out more about natural gas.

Alberta Environment www.environment.alberta.ca BC Oil and Gas Commission www.bcogc.ca Canadian Association of Petroleum Producers (CAPP) www.capp.ca Canadian Centre for Energy www.centreforenergy.com Canadian Energy Research Institute www.ceri.ca Canadian Gas Association www.cga.ca Canadian Natural Gas Initiative www.canadiannaturalgas.ca Canadian Society for Unconventional Resources (CSUR) www.csur.ca Clean Air Strategic Alliance (CASA) www.casahome.org Energy Resources Conservation Board (ERCB) www.ercb.ca Environment Canada www.ec.gc.ca

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MORE FACTS

Frac Focus Chemical Disclosure Registry www.fracfocus.ca Go with Natural Gas: An Industry and Government Initiative www.gowithnaturalgas.ca Government of British Columbia Ministry of Energy and Mines www.gov.bc.ca/ener National Energy Board www.neb-one.gc.ca Natural Resources Canada www.nrcan.gc.ca New Brunswick Department of Natural Resources www2.gnb.ca/content/gnb/en/corporate/promo/ natural_gas_from_shale.html Nova Scotia Department of Energy www.gov.ns.ca/energy/oil-gas Statistics Canada www.statcan.gc.ca U.S. Energy Information Administration www.eia.gov

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The Canadian Association of Petroleum Producers (CAPP) represents companies, large and small, that explore for, develop and produce natural gas and crude oil throughout Canada. CAPP’s member companies produce about 90 per cent of Canada’s natural gas and crude oil. CAPP’s associate members provide a wide range of services that support the upstream crude oil and natural gas industry. Together CAPP’s members and associate members are an important part of a national industry with revenues of about $100 billion-a-year. CAPP’s mission is to enhance the economic sustainability of the Canadian upstream petroleum industry in a safe and environmentally and socially responsible manner, through constructive engagement and communication with governments, the public and stakeholders in the communities in which we operate.

www.capp.ca/upstreamdialogue upstreamdialogue@capp.ca

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DECEMBER 2012 2012-0014