Pipeline News June 2010

PIPELINE NEWS Saskatchewan’s Petroleum Monthly

June 2010

FREE

Volume 3 Issue 1

Focus Edition: Regulatory

Sask. addresses venting & Ă…aring Page A2

North Dakota Surge Page A8

Q&A Alberta Energy Minister Page C4

Flaring and venting are being tackled by the government of Saskatchewan with new regulations. This Ă are stack is west of Estevan. Photo by Brian Zinchuk

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A2

PIPELINE NEWS June 2010

Associated Gas Conserved, Flared and Vented 2,000

Oilsands Quest pursues SAGD Test Oilsands Quest Inc. has filed key regulatory submissions to advance development of its Axe Lake bitumen project in northwestern Saskatchewan, including a test to see if steam-assisted gravity drainage (SAGD) will work on the deposit.

The first is a proposal to the Saskatchewan Ministry of Environment (SME) for approval to produce up to 30,000 bbls per day of bitumen using SAGD. The second submission is for approval of a SAGD test to confirm the containment characteristics of the glacial till overlying the Axe Lake reservoir and to determine the operating parameters of a commercial project.

Filing with the SME is the first step in a twostage process to apply for approval of a commercial lease for oilsands development.

The second stage of the process consists of an application for commercial project approval to the Saskatchewan Ministry of Energy and Resources.

The company plans to submit the commercial application following the successful completion of the SAGD test.

NuLoch Tableland well results NuLoch Resources Inc. reports that its second well at Tableland, Saskatchewan achieved an average production rate of 186 bbls per day (130 bbls a day net) of crude oil over 30 producing days. The water cut was 65 per cent at the end of the period.

TriOil Resources Ltd. has a 30 per cent interest in the well and in three other Three Forks Sanish wells currently at the completion or early production phase.

The horizontal well was fracture stimulated in 27 stages using 10 tonnes of ceramic proppant (man-made sand) in each stage.

NuLoch has three additional wells in completion or early production phases in the Three Forks Sanish formation in Saskatchewan. The sixth well in the program is being drilled with a further two wells planned for the second quarter. NuLoch has a 70 per cent working interest in all of these horizontal wells.

Briefs courtesy Nickle’s Daily Oil Bulletin

2 016 106 m 3 96

1,600

95.7 % 95

1,400 1,200

94

1,000 93

800 600

698 106m 3

92

Percent Conserved (%)

Notes

Associated Gas Flared and Vented 6 3 10 m

News

1,800

97

400

90.2 %

91

200 0

90 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

Alberta has reduced solution gas Áaring by 71.5 per cent since 1996 and venting by 56.4 per cent since 2000. Source: GGFR Implementation Plan for Canadian Regulatory Authorities.

New draft Àaring directive subject to public review

By Geoff Lee Pipeline News Regina – Saskatchewan’s long-awaited draft directive on flaring and venting standards for the oil and gas industry promises to be a topic for continual discussion during a 90-day public consultation period before it’s enforceable.

“We will allow the public and the oil and gas industry 90 days to submit comments” said Todd Han, director of petroleum development for the Energy and Resources ministry in advance of the report release.

“If we get some comments and need to fix our document then we would fix it based on the comments we received. We may re-release it as another draft if it’s needed.”

The draft Directive S10: Saskatchewan Up-

stream Petroleum Industry Associated Gas Conservation Standards is the work of a joint government/ industry committee.

Their directive report focuses on economical and practical methods to reduce the flaring and venting of associated gas with a minimal impact on business activity.

Saskatchewan’s oil and gas industry flared and vented an estimated 0.578 billion cubic metres in 2008 of Canada’s 1.87 bcm total volume flared and vented.

By contrast, current global flaring and venting of associated gas is estimated by the Global Gas Flaring Reduction Partnership (GGFR) is at 150 to 170 bcm per year.

According to the World Bank, global flaring of associated gas adds about 350 million tons of

CO2 in annual emissions worldwide.

“One of our goals is environmental protection by reducing flaring emissions and greenhouse gases. At the same time there has to be an economic benefit,” said Han. “It wasn’t the purpose of putting this directive together to shut down the industry – rather it was to have a win-win situation where the environment and the economics of Saskatchewan win.”

Han says there are three main reasons or drivers behind the push for new requirements beginning with the need to conserve oil and gas as mandated by his ministry’s Oil and Gas Conservation Act. “We do not want wasteful operations,” said Han. “Venting and flar-

ing where it’s not necessary, where it can be gathered, is a wasteful operation. That’s driver one.

“The second one is that we are required to develop our oil and gas industry in a sustainable manner and protect the environment from the development of oil and gas.

“The third thing is we are supposed to maximize our resource recovery or benefits to the province – that’s where the royalty kicks in.

“All three are priorities in terms of developing this directive and releasing this directive and enforcing it.

The new flaring and venting standards will apply equally to light and heavy oil and oilsands companies and operations in the province. ɸ Page A6

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PIPELINE NEWS June 2010

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Wall’s vision of “New West” becomes reality News

Notes Rig usage up with a bullet

Saskatchewan’s drilling rig fleet is getting back into action in a big way, with 72 rigs in action by May 19, as reported by Nickle’s Rig Locator. Coming off of road bans, that’s almost a straight line up to mid-January levels. The rate of return to work has been much more pronounced that 2009 or 2008.

Utilization rates on May 19 were 53 per cent of 135 rigs, outpacing the utilization rate in Alberta (16 per cent) and British Columbia (39 per cent).

All of Manitoba’s 10 rigs were still down, due to road bans.

Saskatchewan Premier Brad Wall, centre, signs the New West Partnership Agreement. To the left is British Columbia Premier Gordon Campbell while Alberta Premier Ed Stelmach, is on the right.

Story and photos by Brian Zinchuk Pipeline News Regina – Long before he was premier, Brad Wall spoke of his vision of a “New West,” one in which the western provinces worked together on several fronts. A substantial part of that vision was realized on April 30, when Alberta Premier Ed Stelmach and British Columbia Premier Gordon Campbell joined Wall at Regina’s Government House to sign the New West Partnership Agreement.

The agreement comes into effect July 1, and Saskatchewan will fully implement its role over the following two years.

The key elements of the agreement include nondiscrimination between workers and businesses among the three provinces, transparency on new measures, rules and procurement, and streamlined regulations.

Provinces maintain flexibility to protect public interests like public security, environment, provision of social and health services, and the health and safety of workers. Finally, there is a dispute resolution mechanism.

Penalties of up to $5 million can be handed down if a government is found to be non-compliant with its obligations.

The agreement also speaks of co-ordinating research and development activities, including sharing information and undertaking joint projects. Initial proj-

: r u

o Y l

F

r o

l A

ects listed include advancing carbon capture and storage technology and value-added forestry diversification.

The three provinces will also work together on international trade.

Wall made a point of having the signing take place in the office of original lieutenant-governors of what was once the Northwest Territories, and spoke of Frederick Haultain’s vision over 100 years ago of “Buffalo.”

Buffalo was originally envisioned as one province, but would become Alberta and Saskatchewan. However, when asked if Haultain was right, said he liked the uniqueness of Saskatchewan.

Practical applications At the joint press conference after the signing, Wall spoke of practical things, like simplifying truck weights, so that a truck could drive from Saskatchewan to British Columbia without stopping repeatedly at inspection stations. The three provinces are looking towards a single inspection regime, officials noted in the technical briefing.

Wall pointed out his brother is a trucker in Alberta.

He found out that the weight limits in one case were the same for British Columbia and Alberta, but differed by 1,000 kg for Saskatchewan. He said they will try to move quickly on transportation issues, advancing the implementation schedule to July 1, 2011, from the originally planned July 1, 2012. ɸ Page A7

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Legacy acquires Villanova Legacy Oil and Gas Inc. has announced plans to acquire Villanova Resources Inc., a Saskatchewan-based private oil company.

Through the acquisition, Legacy said it is acquiring high quality, high netback, light oil assets focused in the company's southeast Saskatchewan core area for total consideration of $18 million in cash and 8.1 million Legacy common shares.

The share exchange ratio as part of the transaction was determined using a price of $12.95 per Legacy common share, or $105 million in share value at the time of the announcement.

The producing properties are predominately operated with high working interests, 3-D seismic coverage and control of key producing infrastructure and are associated with a light oil prospective undeveloped land base.

The acquisition also adds several key sections of land in Legacy's Taylorton core area.

Current Villanova production is 1,000 bbls of oil equivalent per day, 100 per cent light oil. Proved plus probable reserves are estimated at 4.5 million BOE. Undeveloped land amounts to 60,818 net acres.

Briefs courtesy Nickle’s Daily Oil Bulletin

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EDITORIAL

PIPELINE NEWS June 2010

Pipeline News Publisher: Brant Kersey - Estevan Ph: 1.306.634.2654 Fax: 1.306.634.3934

Mission Statement: Pipeline News’ mission is to illuminate importance of Saskatchewan oil as an integral part of the province’s sense of community and to show the general public the strength and character of the industry’s people.

Editorial Contributions: SOUTHEAST Brian Zinchuk - Estevan 1.306.461.5599 SOUTHWEST Swift Current 1.306.461.5599 NORTHWEST Geoff Lee - Lloydminster 1.780.875.6685

Associate Advertising Consultants: SOUTHEAST • Estevan 1.306.634.2654 Jan Boyle - Sales Manager Cindy Beaulieu Glenys Dorwart Kristen O’Handley Deanna Tarnes SOUTHWEST • Swift Current 1.306.773.8260 Doug Evjen Stacey Powell NORTHWEST • Lloydminster Daniela Tobler 1.780.875.6685 MANITOBA • Virden - Gail Longmuir 1.204.748.3931 • Estevan - Jan Boyle 1.306.634.2654

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Editorial Southern neighbour will soon outpace us Saskatchewan has a lot to gain from watching what’s happening directly south of Estevan, in northwest North Dakota. That’s because that area of the state is coming to define the term oil boom in a big way.

The state has doubled its oil production in the past two and a half years, to 260,000 barrels per day, and will soon top 300,000 bpd in the coming months. One forecaster suggested it could go as high as 900,000 to 1 million bpd within eight short years. If they continue on this trend, the state will soon eclipse Saskatchewan’s current production of 425,000 bpd, much of which relies on heavy oil.

North Dakota’s growth of production is potentially on scale with Fort McMurray projects, where substantial expansions are often quoted in 100,000 bpd increments.

For instance, Canadian Natural Resources Ltd. is working on a 132,000 bpd Horizon oilsands mine.

Put another way, the expansion of production in North Dakota in the next few months will equal the total production of PetroBakken, one of Saskatchewan’s leading producers. PetroBakken reported average production 43,000 bpd for the first quarter of 2010 (not all of that is from Saskatchewan, either).

North Dakota is going to have so much money, they’re not going to know what to do with it. It will likely lead to inflation on a grand scale for things like housing.

What’s important here is that fundamentally, Saskatchewan and North Dakota are chasing the same play, except that they have more of it. It’s deeper, more

expensive to get at, and more abundant. But it’s basically the same oil and techniques of recovery.

The state is already seeing similar pressures southeast Saskatchewan has felt – needing lots of workers, but having nowhere to stick them. “Man-camps,” as they call them, are the order of the day. The local Minot paper even reported there was some friction being felt between the new workers and the locals around Stanley, N.D., over competition for local women in a now highly male-dominated region.

State politicians, be it Governor John Hoeven, Senator Byron Dorgan, or Congressman Earl Pomeroy, talk about North Dakota’s role in North American energy security. The underlying question is, why are we (Americans) paying dictators for their dirty oil, when we’ve got plenty to develop here?

And more to the point, it’s a sure bet a number of North Dakotans are wondering why their men and women in uniform are dying for oil in Iraq, when they could be drilling at home.

A big issue for the industry in North Dakota is pressure on hydraulic fracturing. They are scared spitless that some potentially messed up frac job in New York is going to lead Washington to come down hard on what they feel is a long-proven technology. That would put a serious crimp on North Dakotan production.

Will this boom peter out? Not likely. Now that they’ve ‘cracked the nut’ on Bakken, and now Three Forks extraction, North Dakota is going to be humming for a long, long time. Hopefully, we will be too.

PIPELINE NEWS June 2010

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Opinion

Oil, water and wind: They don’t seem to mix From the top of the pile Brian Zinchuk

Sometimes, you just can’t win.

The New York Times reported on April 28 that U.S. federal government had given way to the nation’s first offshore wind farm, just off of Cape Cod. The project still faces a mountain of regulatory and lawsuit hurdles. It seems every man and his dog wants to oppose the 130 wind turbines, each 440 feet tall.

“The Cape Wind project has been a matter of fierce contention for years, splitting politicians and environmental groups. While some environmentalists are prepared to go to court to stop the project, other major groups, including the Sierra Club and Greenpeace, support it,” the Times reported.

Everything from radar interference to Native American rights regarding an unobstructed view of

the sunrise is being thrown in the mix of opposition. Why environmental groups would be fighting such a project is beyond me. Isn’t wind supposed to be the white knight in the energy mix?

The U.S. has been reluctant over the years to do anything offshore other than fish, apparently. There has been a congressional ban on offshore drilling for decades just about everywhere except the Gulf of Mexico. Apparently it’s okay for American companies to drill offshore all over the world, just not at home. When you consider how much crude production comes from the Gulf of Mexico, it’s surprising they haven’t opened up other areas.

It was just starting to look like that was going to change, when an oil rig blew up and sank off the coast of Louisiana. By mid-May, it was still leaking 5,000 barrels a day, and the spill continues to threaten most of the same coastline that got walloped by Hurricane Katrina a few years ago.

As the National Post noted on April 28, “But as the oil spill grows, so does the chance that it will impact efforts by the U.S. Congress and President Barack Obama to open more offshore areas to limited oil and gas drilling.

“Mr. Obama on March 31 called for a limited expansion of offshore oil and gas drilling in an effort to win Republican support for new proposals to fight climate change.”

As the month went on, and the oil continued to

flow, the president’s mood darkened considerably, as BP struggled in vain to cap the well.

Offshore drilling just shot off its feet, with both barrels. There’s no way the Republican Party’s “drill, baby, drill” mantra is going to happen in any new areas off the coast of the U.S. So in this context, it’s hard to imagine what the fuss is about regarding offshore wind turbines. If one did fall over, it would make a splash, and maybe zap one or two fish until the safeties kicked in. It’s not going to create any sort of spill like the Deepwater Horizon drilling rig. Nor is it likely to take 11 human lives, like the Horizon.

It’s painfully obvious the U.S. does have energy resources offshore, be it oil, or wind. However, like a swimmer afraid to dip their toe in the water, they’ve stayed on the beach. When it comes to oil, they are likely going to stay there. You can expect the clamp down on offshore drilling to be extreme.

If Americans are not going to make use of their own resources, this is where Canada can step in.

Newfoundland has no intention of cutting off its off-shore treasure trove. Indeed, on May 15, the National Post reported that Premier Danny Williams wanted to take over the federal governments’ share of Hibernia. If they’re not going to be getting their crude offshore, it’s time for Canadian producers in the Bakken, Cardium, and oilsands to step up. It seems that oil, water and wind do not indeed mix.

Gulf explosion harms public image too Talk about timing. Behrooz Fattahi, the 2010 president of the Society of Petroleum Engineers focused much of his talk on the “Challenges of the Future” at the Lloydminster SPE chapter technical lunch in April on the subject of public education.

“My aim is to address the broader issues of the future. There are many uncertainties on the road ahead that can impede our growth and impair our industries image,” he stresses.

As fate would have it, one week later, the Deepwater Horizon rig, 80-km off the Louisiana coast exploded and sank, killing nearly a dozen workers, and leaving an oil slick many miles long with untold environmental damage.

Fattahi is a heavy oil development coordinator for Aera Energy LLC, a California exploration and production company, and tells his audience it’s important to let the public know, “We have oil platforms in the Gulf of Mexico, and hurricanes come – and not one drop of oil is spilled. That’s technology.”

The accident in gulf occurred two days before Earth Day and destroyed, temporarily at least, any attempts to project goodwill messages of safe, environmentally sound offshore drilling practices.

“The public perception of the industry in vari-

Lee Side of Lloyd Geoff Lee

ous parts of the world varies significantly. We have to continue and enhance our effort in public education,” Fattahi states in his presentation.

Fattahi’s message that U.S. companies have spent $58 billion on protecting the environment hardly add up or count at times like this when lives are lost and the environment is harmed.

Adrian Rose, the vice-president of rig owner Transocean Ltd., said the explosion appeared to be a blowout, in which natural gas or oil forces its way up a well pipe and smashes the equipment.

Whatever the cause, the rig was contracted to BP, which is ironically recovering from the fallout of a 2005 refinery explosion in Texas that killed 15

employees and injured many more.

If there is a timely educational message, it’s one the Fattahi would agree with – that oil exploration is not without risk – and further exploration and production is necessary if society wants to maintain its standard of living.

There is an inherent risk to airline travel too, and despite continual safety improvements, deadly airplanes crashes occur each year, but people continue to fly – in part to maintain their personal lifestyles.

The difference between plane crashes and oil accidents is that the latter harms the environment and the public is usually shown images of explosions, fires, dead oily birds, spoiled beaches and ugly oil slicks.

Media-focused oil and gas accidents do a lot of residual harm to the public image of the industry that Fattahi implores all SPE members to strive to improve.

Public education, notes Fattahi, “deals directly with the image of our industry. If we don’t repair that bad image, then young people will not come into the industry and will not go to petroleum engineering schools, and will not plan to be part of this industry so we are going to be short.”

It’s a message worth repeating.

IF YOU ARE INVOLVED WITH THE CLEAN UP OF THE GULF COAST OIL SPILL - WE WOULD LIKE TO HEAR YOUR STORY. PIPELINE NEWS INVITES OPPOSING VIEW POINTS. EDITORIALS AND LETTERS TO THE EDITOR ARE WELCOME. Email to: brian.zinchuk@sasktel.net

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PIPELINE NEWS June 2010

The nuts and bolts of it all

ɺ Page A2 Continuous sources of vented and flared gas occur from casing gas vents, associated or solution gas and from glycol dehydrators, production storage tanks and pneumatic devices.

Intermittent sources are attributed to well blow outs, accidental releases, pressure relief/pressure safety valves and facility blowdowns.

“The venting concentration in the province occurs in southeastern Saskatchewan where there is light to medium oil production from horizontal wells, and secondly from heavy oil industry because of the nature of heavy oil – they have casing vent gas at the single well battery,” said Han. “Right now in our regulations, we say can you cannot vent or flare associated gas by more than 900 cubic metres a day from an oil well.

“But that doesn’t provide any kind of direction to the oil and gas industry in terms of how they are going to control that.

“The purpose of the committee was to come out with a real nuts and bolts plan to have this practical recipe in terms of how we are going to execute the requirements of the regulations.

“There should be no surprise for the companies with what’s coming out. We spent two and a half years developing it and consulting.”

The committee was comprised of representatives from the Canadian Association of Petroleum Producers, the Small Explorers and Producers Association of Canada, Energy and Resources, Saskatchewan Environment, TransGas Ltd. and SaskPower.

“Those groups have been keeping a very high level of communication with their members,” said Han. “It was very much industry-led – and a full industry partner in authoring this document. We

Saskatchewan aims to further cut levels of Áaring and venting associated gas with a new draft directive.

Photo submitted

weren’t going to give industry something that cannot achieve.”

As a member of the GGFR, Saskatchewan will model its gas solution conservation regulatory program on Alberta’s plan regarded as a practical solution.

Alberta’s industry is guided by Directive 060:Upstream Petroleum Industry Flaring Incinerating and Venting.

That province reduced associated gas flaring by 71.5 per cent from 1996 to 2007 and associated vent-

ing by 56.4 per cent from 2000 to 2007.

“There will be a standard that you have to reduce by and there will be monitoring and reporting of flaring and venting volumes,” said Han about Saskatchewan’s model for oil and gas companies.

“If they are not conserving gas they have to justify why they are not conserving that gas,” explained Han. “It will be similar to Alberta, but it’s how it will be delivered that will be different.

“Saskatchewan’s oil and gas business is different that Alberta’s, and that’s why we took two and a half years to ensure that what we are putting together works for Saskatchewan – we don’t just do a cookie cutter process from Alberta.”

The targets to be spelled out in the S10 directive will apply to small and large companies, but Han says neither is penalized by the directive’s practical approach.

“The small company is like a large one, if they can provide the rationale that is uneconomical and takes more energy to collect that gas than not collect the gas, then certainly there is an exemption that’s provided,” he said.

“A big company spending $50,000 to collect the gas is no different than a small company spending $50,000 to collect the gas when the gas will give you a return of $100,000 profit.

“It’s independent on the size of the company. It’s more dependent on the economics of recovery.”

Han also says the directive will lead to better infrastructure for gas gathering, more gas plants ”or at least higher capacity at gas plants” to process this gas.

“In addition, a job that requires technical skills to either improve efficiency or to calculate the economic justification would be created in province,” he said. g

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Yearly Oil Production (2007) MMBbls 103 M3 61,281 385.6

Alberta Conventional oil and Bitumen Alberta Surface Mineable Oilsands BC Non-Accord Federal lands (NWT, …)

Newfoundland and Labrador (Offshore) Newfoundland and Labrador (Onshore) Manitoba Saskatchewan Total

Yearly Associated Gas Production (2007) BCM BCF 16.09 568.4

45,518

286.4

0

0

1537 858

9.6 5.4

1.04 0.185

36.5 6.5

21,381

134.5

4.46

157.6

0.705

0.00443

0.000445

0.0157

1267 24,811 156,653.7

7.9 156.1 985.5

0.0232 1.99 23.7

0.823 70.3 840.1

Saskatchewan signed on with a World Bank-led initiative in 2005 to cut associated gas Áaring and venting globally. Now a Saskatchewan Upstream Oil and Gas Industry Flaring and Venting Emission Reduction Committee has a draft directive on how to further cut Áaring and venting emissions.

Source: Global Gas Flaring Reduction (GGFR) Implementation Plan for Canadian Regulatory Authorities.

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PIPELINE NEWS June 2010

A7

Saskatchewan joins “New West” ɺ Page A3 “Fundamentally, the cost of transporting goods affects costs of all goods,” said Dylan Jones, Saskatchewan assistant deputy minister of Intergovernmental Affairs.

B.C. Deputy Minister of Corporate Initiatives and Intergovernmental Relationships Lorne Brownsey noted that is an area they can move quickly in, i.e., within a year, to take down impediments.

Emergency medical technicians, with varying standards between the provinces, was another area cited for common standards.

Asked how the agreement differs from TILMA, the Trade, Investment and Labour Mobility Agreement signed by British Columbia and Alberta several years ago, Wall responded, “That was a trade agreement, and an agreement on labour mobility. This is an economic partnership. This adds to trade and labour mobility in terms of our provinces working together on procurement issues, innovation and international.”

International co-operation was another component of the agreement, with joint trade missions between the provinces.

Indeed, three weeks after the announcement, the three provinces announced a joint trade office would be opening in Shanghai. The three premiers went on an Asian trade mission together.

Joint procurement was another area the provinces will work on, seeking to maximize return on the dollar.”

“We are eliminating unnecessary regulation,” Campbell said.

While the press conference was dominated by questions for and responses by Wall, Stelmach on the other hand said almost nothing. Campbell spoke of parlaying the success of the recent Olympics into in-

Premiers Gordon Campbell, Brad Wall, and Ed Stelmach take questions on the New West Partnership Agreement.

vestment opportunities.

Asked if there was anything in the agreement specific to the oil and gas sector, Jones said there was nothing specifically targeted. However, he pointed out better labour mobility, fewer re-certifications of staff, and more efficient transportation as cost reductions for the industry.

Also, royalties cannot discriminate between Saskatchewan, Alberta or British Columbia companies.

Royalty rates themselves, however, are exempt from the agreement.

Licensing, certification, registration, leasing or other disposition of rights and minerals are exempt from the agreement. Exploration, development, management or conservation of energy and mineral

resources are also exempt.

Response Saskatchewan Leader of the Opposition Dwain Lingenfelter took issue with how much public consultation was done leading up to the agreement. He said, “Premier Wall said himself that no major trade or investment deal should be entered into without consultation. The hypocrisy with which he is now operating is unprecedented. To sign an inter-provincial deal that has implications for the economic, environmental, and political future of Saskatchewan without consultation with the public and without full legislative review is short-sighted, undemocratic and yet another example of Brad Wall’s mismanagement of the province.”

“It’s ironic that there is an entire portion in this document entitled ‘Transparency,’ yet this process has been anything but transparent. Three of the four socalled agreements are not legally binding agreements at all, so we are left wondering what the government’s true agenda and real priorities may be.”

During the news conference, Wall said “There’s no surprises here,” and added, “I think there’s been a lot of consultation, and a significant implementation.”

Saskatchewan Liberal Leader Ryan Bater said, “Any agreement that will reduce the barriers for trade is something we should look at. The trade office in Shanghai is way overdue.”

Bater sees “tremendous value” in external promotion, and working together, the three provinces will have more clout, and get better bang for their buck.

Internally, however, he said the details are a little fuzzy, and that the Saskatchewan Party will have to explain why they didn’t sign onto TILMA in the first place. He said the “Buy Saskatchewan” policy is now null and void, which is a major policy shift.

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PIPELINE PIPE PI PELI LINE NE NE NEWS WS JJune 20 2010 10

BNSF Railway built this oil-to-rail loading facility at Stanley, N.D., to accommodate the oil that the pipeline system can’t handle.

Everything’s bigger in North Dakota Story and photos by Brian Zinchuk Bismarck, N.D. – They say everything’s bigger in Texas. They might have to revise that, to say everything’s bigger in North Dakota.

It was reflected in the near doubling of the previous record attendance at the Williston Basin Petroleum Conference, held May 2-4 in Bismarck, N.D. The conference alternates each year between Saskatchewan and North Dakota. Last year, about 900 people came out to the Regina conference, while about 1,400 attended the 2008 Minot show. This year, the final total in Bismarck hit 2,750.

The state is riding a tremendous wave of surging oil production. In the past two and a half years, production has doubled. In February, the state was putting out 260,000 bpd of oil, and within a few months, is expected to reach 300,000 bpd. One speaker at the conference, David Hobbs of IHS CERA, even made the bold prediction that it could reach 900,000 to 1 million barrels per day eight years from now. That would be the equivalent of several large scale Fort McMurray projects, except that this is light, sweet crude of the highest quality, not bitumen that is a struggle to recover and turn into usable oil.

As it stands now, the state has jumped for eighth place in oil production among states to fourth, surpassing Louisiana.

Much of what his happening in North Dakota

is a direct reflection of Saskatchewan. Similar technologies are used on both sides of the border. While Saskatchewan’s Bakken and Three Forks reserves may not be as significant, it is also a lot shallower, and therefore easier to get at.

Whereas the Bakken play in Saskatchewan is founded on oil traps that have captured migrating crude, the western side of North Dakota is the source of that oil. It’s not easy to get at – a typical Bakken well is two miles (3.2 km) deep and the same distance across for its horizontal leg. Multi-stage fracturing is the norm. Drilling one of these wells runs around $6.5 million U.S. each, compared to the $1.7 million Cdn. for a one-mile deep, one mile across single leg Bakken well drilled in Saskatchewan for PetroBakken. The drilling rigs you see along the Highway between New Town and Stanley are all massive triples, so big they make a typical southeast Saskatchewan rig look like a toy.

Oh yeah, and a typical Bakken well might see 2,200 bpd in initial production.

By early May, there were 113 drilling rigs working in the state, and they appeared more common than the Minuteman intercontinental ballistic missile silos that dot the same landscape.

The pipeline capacity is so stretched that producers have been doing anything they can to get the light sweet crude out of the state. Last year, BNSF Railway opened a large oil-to-rail loading facility at Stanley,

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where numerous unit trains of oil tankers can be seen. Truckers have been bringing oil across to delivery points in southeast Saskatchewan, so that crude can make the circuitous route north to places like Steelman, Sask., northeast via Enbridge Saskatchewan pipeline to Cromer, Man., and then southeast again on the Enbridge mainline system towards Clearbrook, Minn. Enbridge expanded its capacity in January, 2010 to pipeline crude out of North Dakota, and that capacity is already full.

At Stanley, N.D., the town has a census population of 1,279, according to city coordinator Ward Heidbreder. (In North Dakota, the threshold for being called a city is considerably lower than the 5,000 required in Saskatchewan). Yet an “unofficial guestimate” by Heidbreder puts the population in the town proper at 2,200, and another 1,000 to 1,500 in the immediate vicinity, primarily staying in camps. He hints more workers may be on the way in the near future. One of the town’s two cops quit recently, looking for a quieter place to work.

The North Dakotans call oilpatch accommodations “man-camps,” and they are desperately needed to accommodate the workers. In a nation that has been suffering through a deep recession, there’s work to be found in North Dakota, and the state Governor John Hoeven boasts of a $1 billion surplus.

Fittingly, Hoeven wore steel-toed work boots while giving his keynote address. When he was done, the industry gave him a gold-plated six-shooter in appreciation.

Besides the labour and housing pressures, there’s also the need for water. A frac job on a North Dakota well might see 100 tanks on site, compared to the three dozen or so seen on a recent well near Estevan. One company is using irrigation pumping hardware to move water to the wellsite, as opposed to trucking it.

Thankfully for the state, the Garrison Dam, built in the 1950s, created a 150-mile long reservoir that cuts right through the heart of Bakken territory. ɸ Page A9

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PIPELINE NEWS June 2010

A9

The main auditorium was full to the back with participants of the Williston Basin Petroleum Conference in Bismarck, N.D., May 2-4.

North Dakota surging ɺ Page A8 While much of the talk has been about the Bakken, the Three Forks formation directly below it is also burgeoning in production. Its area is closely affiliated with the Bakken. One company, Hess, is now drilling bilateral wells, with one leg in the Bakken, and the second in the Three Forks, directly below it and parallel. They won’t say what the results are, but they are drilling more like them. Hess has embarked on a pattern of drilling six wells on a pad, each with a Bakken and Three Forks leg, going two miles deep and two miles out. Three wells go north, and three wells go south, covering 2,560 acres, or four sections of land. The cost to drill, complete, and tie in oil and gas production for one of these units is $64 million, and they’ve done and are working on several.

On April 29, the state released as study on Three Forks reserves. In a release, the state said, “The Three Forks Formation could yield as much as two billion barrels of petroleum, enhancing the sustainability of the play over time, according to a recently completed study by the North Dakota Geological Survey and Department of Mineral Resources. Study authors said the results were not a surprise, considering what they already know about the geology of the region.

Currently, there are 181 wells drilled in the Three Forks Formation. This confirms that it will be an important part of the overall Bakken play.

“According to the report, there is a high likelihood that the expected ultimate recovery from the Bakken and Three Forks combined is approximately four billion barrels of oil, 2.1 billion from the Bakken and 1.9 billion from the Three Forks Formation. The upper 50 feet of the Three Forks Formation is the lowermost portion of the Bakken pool.”

There was a lot of talk at the conference about the Three Forks play picking up right behind the Bakken.

Call it a triple after a home run.

North Dakota Governor John Hoeven made a point of wearing steel-toed work boots during his keynote address to the Williston Basin Petroleum Conference.

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A10

PIPELINE NEWS June 2010

Movin’ on up: North Dakota

By Brian Zinchuk Bismarck, N.D. – North Dakota is movin’ on up in oil production, jumping from eighth to fourth in production among states, even surpassing Louisiana.

That’s according to Lynn Helms, North Dakota Department of Resources, and co-chair of the Williston Basin Petroleum Conference held in Bismarck, N.D., May 2-4.

The state had 260,000 barrels per day produc-

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tion in February, 2010. “We will go off the top of this graph in the next few months,” he said. The graph topped out at 300,000 bpd.

In comparison, Saskatchewan’s current production is around 440,000 bpd, including light, medium and heavy oil.

Helms said it was a more sustainable boom than before.

As for permitting, he said, “We’re going to be at close to 1,200 wells this year.” He said that was a huge amount of wells, and that as of May 2, they already had 113 rigs active.

“The recipe has been discovered to make the Bakken work along the Montana border,” he said.

Even so, “We’re looking at recovery factors of two to nine per cent, unless we come up with a plan for enhanced oil recovery (EOR).”

The last year also saw the Three Forks formation take off, he noted, and the new kid on the block in the spearfish, just south of the Waskada area of Manitoba, where things are picking up.

Major pipelines are expanding, and the rail loading system at Stanley, N.D., has been very active with the current shutdown of the Mandan refinery.

Rich natural gas is now shipping to Chicago, he said. There were two recent huge announcements totalling $300 million for two gas plants projects.

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A11

SIAST cuts geomatics program

By Rose Ditaranto Estevan Mercury Moose Jaw - It was a decision of rationality to cut Saskatchewan Institute of Applied Sciences and Technology’s geomatics program at the Moose Jaw campus, said SIAST’s senior vice-president academic David Walls.

Out of the college’s 160 current programs, 14 were affected by the school’s decision, whether it be in downsizing enrollment or being done with the program all together, as is the case with the geomatics course.

“It’s an enrollment issue, we don’t seem to be able to attract enough students. In 2008 we had full enrollment, but that was an unusual year,” said Walls.

Walls said that since 2002, the geomatics program at SIAST has graduated 34 students which only averages to about three a year.

However, Walls said those who are currently enrolled in the program, prior to Fall 2010, will be able to complete the course.

Steve Drew, land survey project manager for Midwest Surveys in Estevan, said he would not have been able to move as forward within his career as he has done, if it were not for the geomatics program at SIAST. “The benefits of the program for me, was it enabled me to move up. For anybody else who graduates from the program, there is a job waiting for them,” said Drew.

However, Drew said he suspected low enrollment would become the ultimate reason the program was cut and not because there was a lack of demand in the field.

“Well, I’m a little disheartened that they cut the program. I don’t know if the reasons were low enrollment. The reason wasn’t for lack of employment after graduating from the program; I think everybody that goes there gets a job,” said Drew.

David Quirk, Midwest Surveys office manager in Estevan, said the course is imperative for those wanting to become a surveyor because of the technology boom that has taken place in the industry.

“Today’s technology with GPS, and computers and the technology hat takes to the surveying, it is virtually mandatory to have some post-secondary education, we just cannot train people anymore.

“At one time you used to go out and watch the guys work with it for a few years and you could learn, but today’s technology this doesn’t seem to work; you need to have post-secondary education to make that work.”

To say the least, surveyors were shocked to hear news that the program was being suspended and for the Saskatchewan Land Surveyors Association it was disheartening.

“The Land Surveyors Association was more than a little distressed at the announcement. We have come to count on that program for a number of different ways of entering the land survey industry and the profession,” said Carl Shiels, executive director for the

Saskatchewan Land Surveyors Association. The association celebrated its 100th anniversary earlier this year.

SIAST’s decision to get rid of the program all together affects the province as a whole, for now there is no college or university, province-wide, which offers the geomatics program, forcing those interested in the profession out of province.

“What it means for the industry is it creates a huge problem for the industry and the profession, and I’m speaking more on behalf of the profession, it means that there are no avenues to get education in the geomatics or surveying field here in Saskatchewan.

“The only source would be out of province and once the students start going out of the province, then we got the problem of how we attract them back,” said Shiels.

Drew said he agrees this move by the college will negatively affect Saskatchewan.

“I think it works against the province because people are going to leave the province to go get this education if they want to do it and they might not come back.

“For me, if the program was out of province, I probably wouldn’t have taken the course elsewhere, I would have found something else to do,” said Drew.

Quirk said the province will suffer because every province offers the program and now “it kind of looks like we’re a substandard community” if we don’t have one.

“We have the best luck hiring people that are from the area, to return to the area, and of course now we have to encourage them to go away somewhere else and then come back to Estevan.

“We tried our best to support the program and hire as many graduates as we could,” said Quirk.

Shiels said that although it may seem like a minor issue now, it will definitely mean worse for the province in the long run.

“It creates a huge problem for us at a time when this province is really starting to get its legs, economically, and when one considers that surveying is the leading edge of economic development, almost no new economic development is going to occur without a survey being involved.

“It may not be a huge problem just now, when things are perhaps a little slow in Alberta and B.C. but when their economies start to recover, as they inevitably will, then we are going to be competing for all of our own students who go to the other provinces to get educated, we are going to be having to compete to bring them home again and that’s really going to put us at a significant disadvantage,” he said.

However, Walls assures that just because the program has been suspended does not mean it will not “piggyback” other programs the college has to offer in order to produce skilled personnel to con-

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A12

PIPELINE NEWS June 2010

I demand your respect

By Brian Zinchuk Redvers – Imagine the boss saying this at a staff meeting, “I demand respect.”

And then a pause, followed by, “And you should demand respect from me, and from each other, and you should respect yourself.”

Those powerful words were spoken by Brett Herman to his staff in the past, and it’s a fundamental principle of how the serial CEO operates.

While some might have expected the former TriStar and Result CEO to speak about corporate dealings and selling companies for billions of dollars when speaking at the Redvers Oil Showcase banquet on May 7, Herman took a different tact.

He spoke about core values, those held by himself and his management team. That team has successfully and repeatedly built up and sold numerous oil and gas companies in recent years.

“Keep things simple and straightforward,” he said.

“I believe the successful implementation of simple core values in an organization ultimately empowers people to make the most complex decisions when the time is appropriate. In contrast, complex messages from management just cause confusion, and don’t allow people to make their own decisions.

“Today I’m an unemployed guy, looking for work,” he joked.

More seriously, he said, “Core values are timeless and don’t change. They remain fixed, while things like operating practices, processes, and technology innovations change in response to changing times.”

Core values define the character of the company, he said. “In the long run, it’s not the leader who holds the company together; core values hold the company together.

“You cannot instill new core values into people. You need to select the people who have them,” he said. Herman added the key is providing the right environment for people to flourish, ensuring success.

Respect is fundamental, according to Herman, and mutual respect breeds teamwork.

Herman illustrated a pyramid of values. The base of the pyramid was teamwork. “A successful team is a powerful thing – the right people with complimentary attitudes.”

The team needs to be put before individuals, he notes.

“It’s human nature to get your back against the wall when receiving constructive feedback, so it’s a tough thing to do. What people need to understand that it’s not personal; it’s for the good of the team.

“As a leader, a key to success is ensuring the team’s focus is in a positive

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”

- Brett Herman, former CEO of TriStar & Result direction.”

Too often, a person quits before doing their very best, he explained.

To emphasis his point, he played an extended clip from the football movie Facing the Giants. The coach blindfolded a disheartened player, and had him crawl the length of the field with another player on his back. The player thought he would only go half the distance, but had the inner strength to make it to the end zone.

“If we can get inside people’s heads to push themselves, to go that extra few yards, it changes a mindset from questioning if it’s possible, to believing you can accomplish your goals. And when a team believes in themselves, literally anything is possible,” Herman said.

Effective communication includes listening, according to Herman. “Listening is the most important part of communication.”

To that end, he added, “Please don’t forget about the benefits of talking to people one on one.”

He personally prefers direct dialogue, in person or over the phone, as opposed to email. At TriStar, he made an effort to talk to each of their 167 employees at least once a month. He even kept a staff list and checked if off as he went.

Doing so builds trust, and talking to people one-on-one fosters respect, he said. Herman called it a true open-door policy, and each person felt they were part of the team.

Hard work was the next step on his pyramid, followed by safety. “I am a fundamental believer that all else being equal, those who work the hardest achieve their best,” he said.

“Don’t misunderstand my comment. I believe in a staff having a strong work-life balance and I am not a slave driver by any means. But I do expect everyone to be a hard worker, and more than that, care about the work they are doing.”

On the safety side, safety is mandatory and no shortcuts would be allowed. While accidents happen, most are preventable if proper precautions are taken, he explained.

Finally, accountability crowned the pyramid. “Accountability in the simplest terms is the obligation to report, explain, and be answerable for the resulting consequences. That means empowering people, treating them like a professional, letting them make decisions, but knowing that they are answerable to them,” he said.

“You will not get true accountability out of someone if you keep telling them what to do.”

To all this, he added the importance of having quality assets. “Saskatchewan has an abundance of quality assets in oil and gas, and in people.”

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A13

Acquire, exploit, explore Brett Herman’s insight into a management team’s repeated success

Brett Herman, repeat-CEO of numerous Bakken oil companies, was the keynote speaker at the Redvers Oil Showcase on May 7.

Redvers – If they were in sports, they would be a leading contender for the cup, and would have a team name. However, in the oil business, Brett Herman, CEO extraordinaire, and his elite eight have been racking up consistent winning seasons time and again.

Recently, the group headed up TriStar Oil and Gas Ltd., one of the leading players in the Bakken, before merging it with Petrobank Energy and Resources Ltd. to form PetroBakken Energy Ltd. PetroBakken is a subsidiary of Petrobank. Shortly after that, they built up Result Energy Inc. in

Alberta’s Cardium play before selling it, too, to PetroBakken. In the last year, the team has crystallized over $3 billion in returns, including the merger/ sales of TriStar Oil and Gas and Result Energy to Petrobank/ PetroBakken.

Herman was the keynote speaker for the Redvers Oil Showcase, addressing the banquet on May 7. While his speech focused on core philosophies (see story, page A12), he explained some of his and his team’s operating methods to Pipeline News at the speech’s conclusion.

Investors and oilpatch media speak of

management teams who will build up a company, sell it, and start over again. Herman and his team have done it so many times, you almost need a flow-chart to figure it out.

Most of their time in recent years has been spent building up the Bakken play in southeast Saskatchewan, pursuing tight oil. They were the first to drill a horizontal Bakken well, drilling three around the Stoughton with their company StarPoint Energy Trust. The frac didn’t work out too well on the first well, but it was a beginning. ɸ Page A14

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PIPELINE NEWS June 2010

Brett Herman and the elite eight ɺ Page A13 “It was a disaster,” he said with a laugh. “We fraced out of the Bakken and into the Lodgepole, and got water.”

Six years later, technology has changed tremendously, he noted.

StarPoint grew from 200 barrels per day production to 38,000 under their leadership.

Since that time, the team, largely intact from the early days, has spun out Mission Oil and Gas, and merged StarPoint with Acclaim Energy Trust to create Canetic Energy Trust. The team

went on to run TriStar Oil and Gas. TriStar was merged with PetroBank to create PetroBakken, and the team went on to recapitalize and run Result Energy. Result has since been purchased by PetroBakken.

TriStar had 20,400 BOE daily production according to its last quarterly report, Q2, 2009, before the merger.

“The team at StarPoint was almost the same at TriStar. The team was the same at Result,” said Herman “You get comfortable as a team, and you go

“

I absolutely love what I do

“TriStar was the first company to do a short horizontal – as little as 500 m – but to frac nine times.”

Result Energy was primarily a land deal.

“We recapped Result Energy. We grew from two sections of Cardium land to over 100,” Herman explained.

Soon after they recompany to company,” engineering, business placed the management, Herman explained. development; Jeremy the stock moved from 10 There are eight Wallis, landman; Michael cents a share to 40. That people on that team. Wihak, operations; Fil- allowed the company to They are Brett Herman, ippo Angelini, controller; issue stock for cash. “It CEO; Jason Zabinsky, and Shauneen Wilson, allowed us to grow our finance; Eric Strachen, human relations. land position well in exOf the eight, half cess of 100 sections.” geologist; Graham Kidd, are from Saskatchewan.

The play is similar to Herman himself spent the Bakken, he said, with his early years in Win- tight oil and low recovernipeg, before ending up ies. Multi-stage fracing in Calgary. At 42-years- knowledge acquired in When hiring Scott Land, YOU hire the Advantage... of-age Herman is a char- the Bakken could be ap• Surface Acquisitions, Freehold Mineral Leasing, Administration Projects tered accountant. plied to it.

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Kurtis Greenman, Mineral Manager 306-790-4350 1460 - 2002 Victoria Avenue ally, and a lot of the other “We had big plans to Chad Morris, Surface Manager 306-790-4363 Regina, SK S4P 0R7 guys, the fear of failure grow it. Certain things Laurie Bielka, Assistant Branch Manager 306-790-4360 Toll Free: 1-888-939-0000 drives us more than the just happen. You always Crown Sale Inquiries 403-261-6580 Fax# 306-359-9015 glory of success.”

Main Line 306-359-9000 www.scottland.ca have to be moving forWhy did Herman’s ward.” group get into the BakThe TriStar/ ken?

Petrobank merger is the “It was an area origi- most prominent recent nally a lot of oil and gas deal for the team, with a companies were getting reported value of $2.24 out of due to royalties,” billion. “It was our idea to Herman said, when asked start consolidation of the what attracted them to Bakken,” Herman said. the Bakken. “Saskatche- He would have liked to wan has large oil in place head up the merged firm, assets, lots of oil, but low but there can be only one recovery.” boss. “In the end of the Bring In Your An example he gives day, they wanted to run Pressure Washer is the Star Valley Pool, it,” he said, noting there For Repair which had a typical re- is some rivalry there. covery rate of 15 per Asked at what point cent. Now, it has a recov- do you decide to sell a ery factor of 55 per cent, company, Herman rehe said, and it is produc- plied, “It’s what’s best for ing more today than in your shareholders. Your the 1960, when Imperial shareholders are the boss.

Oil had it.

That has to be the major driving factor.”

He noted, “We

”

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never had a time frame set to sell a company.”

The TriStarPetrobank merger was an absolute success for shareholders, he said. It consolidated the Bakken play and got access to capital.

Is there some guilt from moving on, after having built up strong companies? “Absolutely,” Herman said. “We’ve done what’s right for shareholders, but you can’t hire everyone.”

He often comes across former employees whenever he passes through Estevan, for instance.

They had 18 people when TriStar was started, and 167 when it merged with Petrobank.

As for himself, Herman said, “If I’m out of a job, either I’ve done well by my shareholders, or I shouldn’t be working in the first place.”

Herman jokes about being unemployed since April 1, but don’t expect that condition to remain.

He would have liked to have been working April 2. “I’m a type ‘A’ guy who likes to work,” he said.

He wouldn’t offer any hints as to what their next move will be, but Herman did not there are plenty of plays with large oil in place. They have to stay out of the Cardium for six months, however, due to a noncompete arrangement signed with the sale of Result Energy.

His elite eight have stuck together, and are biding their time for their next big chance.

“The team at some point will resurface again.

We’re evaluating opportunities. We’re opportunity driven,” he said.

“I absolutely love what I do.”

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PIPELINE NEWS June 2010

A15

Growth and pitfalls Bismarck, N.D. – The organizers were expecting a big one, but the turnout for the Williston Basin Petroleum Conference in Bismarck May 2-4 exceeded their wildest expectations.

The previous record set for the event, about 1,400 in 2008, was nearly doubled, with a total admission of 2,750. Of that, about 250 were from Saskatchewan.

A basic geology session was set up for 200 people on the opening day. They borrowed chairs from the neighbouring room, and still they were spilling out into the hall, after the standing room was taken. A repeat of the session was scheduled for the last day of the conference.

Ron Ness, president of the North Dakota Petroleum Council, Kent Campbell, Saskatchewan deputy minister of Energy and Resources, and Lynn Helms, director of North Dakota Department of Mineral Resources, took questions from reporters regarding issues the conference addressed.

Asked about pitfalls, Ness noted there were bottlenecks increasing every day due to workforce and housing pressures. “The economics are there. People are going to invest,” he said.

Campbell echoed those sentiments, saying human resources and housing are the biggest challenges from the public perspective.

“We’ve reached the limit for what we can use for groundwater sources,” Helms said. North Dakota is now looking at non-potable water, he said.

Helms noted there is low geologic risk, with over 80 to 90 per cent of wells making money.

“We remain concerned about pipeline bottlenecks,” Ness added. “Our projections for drilling activity show the current infrastructure being full by 2012.”

The biggest obstacles they identified might be in “the Beltway,” i.e. Washington. Hydraulic fracturing, the key technology that makes Bakken oil recovery work well, is under criticism in the northeastern states, where drilling is a new and foreign thing.

Asked about energy security, and how Saskatchewan fits in Campbell said, “I see Canada and the U.S. integrated from an energy perspective, but also from a broader economic perspective. It makes the most sense for us to sell our fossil fuel resources into the American market. We have more than we need.”

Helms added, “For the U.S., energy independence is a significant way off. Our economy runs on energy. For us to develop the type of energy sources for complete independence is a long way off, if attainable at all. However, North American energy security is achievable in the short term. That typifies our partnership between us and our largest oil provider, which is the nation of Canada.”

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A16

PIPELINE NEWS June 2010

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A17

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A18

PIPELINE NEWS June 2010

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PIPELINE NEWS June 2010

A19

Jumping in, feet ¿rst

By Brian Zinchuk Bismarck, N.D. – At first you see him at the Saskatchewan Oil and Gas forum in Regina, taking notes in the back row. A few days later, Ben Hudye can be found cruising the convention floor at the Williston Basin Petroleum Conference, his brother and business partners in tow, soaking in all they can.

This would not normally be remarkable, except that Ben Hudye and his brother Greg are prominent farmers and ag supply merchants from Norquay, Sask., and the biggest farmers in the area. Their main operation on a hill a couple miles west of Norquay has grown considerably over the years as a vertically-integrated agricultural supply operation.

However, they have now bought land and mineral rights in the U.S., and are looking to exploit it. Their new venture is Hudye Energy, to complement Hudye Farms and Hudye Soil Services.

“We’re looking at farm-outs, and what this industry is about,” Ben, the talker of the two brothers, told Pipeline News.

The company has already done one and a half wells in southwest Manitoba, in the DalySinclair field. “We’ve got a second well being drilled,” he said on May 3. The drilling was caught by road bans, and had to wait to be finished. It’s anticipated to be completed in mid-June.

Along with the two brothers are two more business partners, Bryon Godin, and accountant, and James Rosowsky, a lawyer. They have a total of 10 Canadian partners, and one American.

The company is based in Burlington, Colorado, and was initiated in the summer of 2009.

They have 8,400 acres of mineral rights, and 16,000 acres for farming

between Colorado and Kansas. “We started purchasing since 2003,” Ben said. “The sole purpose of Hudye Energy is to exploit these mineral acres.

We have production next door to us.”

There is natural gas nearby, and oil production three-quarters of a mile away. “We’re looking for any and all opportunities,” Ben said. “We would like to participate in North Dakota.”

On the web: www. hudyesoils.com

Ben Hudye, left, and his brother Greg, are launching a new energy company called Hudye Energy.

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A20

PIPELINE NEWS June 2010

From exporter to importer Regina – Low gas prices and corresponding low drilling in Saskatchewan are lining up to change a simple but important fundamental in Saskatchewan natural gas production.

“We have been a net exporter of gas. We are on the cusp of moving from a net seller to a net consumer of natural gas,” Debbie McKague,

vice-president of TransGas Market Services and System Management, told the second annual Saskatchewan Oil and Gas Forum on April 30. The forum was put on by Insight Information.

TransGas is a wholly owned subsidiary of SaskEnergy Incorporated (SaskEnergy) and has the exclusive right

to transport natural gas within the province.

McKague pointed out the low number of gas wells drilled last year and just 180 anticipated by PSAC this year. “I’m optimistic in time it will recover,” she said. However, in the meantime, Saskatchewan will have to source natural gas from Alberta.

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successful, McKague explained, with storage fully contracted for over a decade. Gas goes into storage over the summer, and is withdrawn in the winter.

“We are in the process of looking at doing a service expansion,” she said, floating the idea of it operating like a utility service. It would have certainty of cost and evergreen renewal rights. “Even in this pricing situation, we’ll be able to sell out this expansion,” said McKague.

In southeast Saskatchewan, the company is putting in a new $22 million 10-inch pipeline from Alameda to Whitewood. “We are well on our way to getting that pipeline in the ground this year,” she forecast.

It will use mostly existing right of ways, except around Moose Mountain Provincial Park. There, it will swing to the east, skirting around the park.

“We’re going to be tendering for construction really quickly,” she said on April 30.

“From a producer’s perspective, your gas is well connected, not only to outside markets, but outside the province, McKague said.

“TransGas is just a hauler of the gas. We never take ownership of it.”

PIPELINE NEWS June 2010

A21

Nectar of the re¿ners Regina – Bakken oil may not be the nectar of the gods, but for refiners, perhaps it is the next best thing.

Steve Kelly, senior vice-president with Purvin and Gertz Inc., an independent energy consulting firm, spoke of refining and upgrading and its impact on Saskatchewan at the second annual Saskatchewan Oil and Gas Forum on April 29.

The two-day event, held April 29-30, was put on

by Insight Information of Toronto.

“I look on Saskatchewan as an area of great opportunity,” said Kelly, a chemical engineer with masters degrees in both engineering and business administration.

Horizontal, multistage fractured wells have revolutionized the once dormant Williston basin he noted, saying, “The crudes being produced are like nectar for refiners.”

Kelly compared it them to West Texas Intermediate or Louisiana Light Sweet, and could be worth more to a refinery than the other crudes.

“These crudes in the marketplace will realize very high values if they reach the market in a segregated manner,” he said.

He added there was predictability of technological developments in its recovery, and that the exploration risk is much less for Bakken development.

Kelly presented a graph showing production from Saskatchewan, North Dakota and Montana since Jaunary, 2007.

It showed steady growth in Saskatchewan, slow decline in Montana, and a near doubling of North Dakota production, which he called “a hotbed of activity.”

The issue becomes logistics in getting it to market to realize the full value.

Ironically, while the Williston Basin is right in the middle of the continent, with the Chicago market nearby, refiners are turning to heavy crude. As a result, Cushing, Oklahoma, might be the outlet for Williston basin crude in the future.

Action on climate

refineries and needing to build more. That’s change quickly in the past few years,” he added.

Refining margins have reached very poor levels, he said, and there will now be a “very narrow light/heavy differentials for the near term. That’s a good sign if you’re a heavy crude producer, because demand for heavy crude is outstripping the supply often.”

Differentials are expected to be tight for several years, Kelly added.

He said that the demand for refined products will change. As fuel efficiency requirements for passenger vehicles rises, cars are downsized and ethanol increases in use, United States gasoline demand is expected to peak by 2015. Canada is - Steve Kelly closely linked, he noted. change cuts across issues “Diesel demand is of the global economy, going to continue to market factors, regulatory grow,” he said. That’s goand resources limits. “It ing to lead to structural clearly affects everything changes what refineries we do in this industry. get out of a barrel of oil, It looms large for heavy seeking more diesel than producers," he said. gasoline.

“The recession apTouching on oilsands pears to be over, but we’re development, Kelly said, not out of the woods yet.” “There is potential for Distillate, according to oilsands in Saskatchewan, Kelly, is the barometer of and we’re quite hopeful growth in the economy. that the potential will be That growth, or lack realized.” thereof, is having a direct As for gas drilling, he impact on refiners. “A few noted, “Well completions years ago, we were talking have fallen off a cliff in reabout not having enough cent years.”

“

Well completions have fallen off a cliff in recent years

”

Steve Kelly of Purvin and Gertz, Inc., speaking at the Saskatchewan Oil and Gas Forum on April 29.

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A22

PIPELINE NEWS June 2010

The 2009 pause is over

Melinda Yurkowski, acting director of petroleum geology for Saskatchewan Energy and Resources, provided an overview of Saskatchewan’s Williston Basin operations.

Saskatchewan Energy and Resources Deputy Minister Kent Campbell pinch-hit for Minister Bill Boyd, who could not make it to the Williston Basin Petroleum Conference due to commitments in the Legislature.

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Bismarck, N.D. – Things are picking up in Saskatchewan, according to Melinda Yurkowski, acting director of petroleum geology for Saskatchewan Energy and Resources. She made Saskatchewan’s presentation to the Williston Basin Petroleum Conference in Bismarck, N.D., on May 3, and was followed up by Deputy Minister of Energy and Resources Kent Campbell.

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portion of Saskatchewan that falls in the Williston Basin.

Light oil is taking up the slack of heavy and medium oil production, she noted.

From 1950 to 2004, there were a total of about 111 Bakken wells drilled in Saskatchewan. In 2005, the number was 66. Last year, she noted, there were only around 100 wells drilled in Saskatchewan’s Bakken.

However, Bakken production has risen from 760 barrels per day in 2004 to 60,000 bpd in December, 2009.

Yurkowski pointed out that while the Viking oil and shallow gas have been well developed over the years, producers are going back in, and starting to push multi-stage fracs.

Another area of interest is the Birdbear play, north of Kerrobert, she said. “That’s an exciting new play.”

The Three Forks group along the U.S.-border is also attracting attention.

Crown Land sales to date in 2010 have almost caught up to the sales for all of 2007, and it is already the third-strongest lands sales year on record. “The pause in 2009 is over,” she said.

Yurkowski pointed to Enbridge’s efforts to expand capacity in southeast Saskatchewan, and that ATCO Midstream had just opened a new gas plant capable of processing five million cubic feet a day. Petrobank’s Toe-Heel Air Injection (THAI) project has commenced, and Cenovus’ Weyburn CO2 project is working on additional injection. Crescent Point has three pilot waterflood projects in the Bakken, she added.

Saskatchewan produced 155 million barrels of oil last year, according to Campbell (providing a year-round average of 425,000 bpd). Of that, about 14 percent was Bakken production.

“We have more than 45 billion barrels in place, of which about 13 per cent are recoverable,” he said.

Saskatchewan accounts for 17 per cent of Canada’s crude production.

PIPELINE NEWS June 2010

A23

Bee¿ng up pipeline infrastructure to accommodate Bakken oil Regina – Increasing Bakken oil production in the southeast, and more importantly, North Dakota, has Enbridge on a continual path of expansion of its capacity.

It comes at a time when pipeline capacity in North Dakota has been under such pressure, a major rail facility was built by BNSF in Stanley, North Dakota, to provide producers with a non-pipeline shipping option, competing with Enbridge.

Perry Schuldhaus, vice-president, business development with Enbridge Pipelines Inc., spoke at the second annual Saskatchewan Oil and Gas Forum, put on

by Insight Information on April 30. He described how Enbridge has been increasing capacity in southeast Saskatchewan by adding lines and pumping horsepower, and enough room to jack up total capacity as needed. Phase two will be completed this year.

“We believe that will be sufficient to accommodate near term capacity in Saskatchewan,” he said. But the biggest change is the planned reactivation of a line that has been dormant for several years.

Indeed, an Enbridge expansion south of the border than went on-stream in January is already full, he said, and substantial volumes are still being trucked north across the border to Enbridge Saskatchewan delivery points.

It had been as high as 31,000 bpd, but was 7,000 bpd in February.

“With the pressure on the North Dakota system, we’re looking at re-activating that Portal link to provide some relief.”

Put into operation in 1996, the Portal Link originally allowed southeast Saskatchewan production to head from Steelman, Sask., to Berthold, ND, and tie into Enbridge’s lines there. It was shut down in 2006. Now the plan it to reactivate it, reverse its direction, and allow burgeoning North Dakota production to flow northward and join up with the mainlines at Cromer, Manitoba.

It will have a 30,000 bpd capacity, and is expected to be brought online by the second quarter of 2011, providing temporary relief for North Dakota production for about 12 to 18 month, according to Schuldhaus.

“Saskatchewan barrels will take priority over North Da-

kota production on the Westspur line,” he said.

Eventually, an additional parallel 16-inch line is planned from Steelman to Cromer, something Schuldhaus referred to as a “bullet line.” It’s anticipated to be in services in 2012 or 2013, and is expected to be a long-term permanent solution.

That capacity is likely going to be needed, with presentations at the Williston Basin Petroleum Conference in Bismarck, N.D. the following week speaking of incredible growth of production from the state. David Hobbs of IHS-CERA made the bold prediction of North Dakotan oil production rising to up to 900,000 or even 1 million barrels per day by 2018, depending on the price of oil. North Dakota is expected to top 300,000 barrels per day production in a few months, up from the 260,000 bpd in February, according to Lynn Helms, director of Mineral Resources for the state.

Burgeoning North Dakota Bakken production is having an impact on Saskatchewan’s pipeline infrastructure, according to Perry Schuldhaus, vice president, business development with Enbridge Pipelines Inc. The company is seeking to expand its capacity in this province.

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PIPELINE NEWS June 2010

Doing homework on duty to consult Peter Snow

Regina –Some background knowledge can be a big help when dealing with First Nations and the duty to consult.

Paul Favel, a lawyer with McKercher LLP and Peter Snow, president of Snow and Associates Inc. spoke of the importance of working

Paul Favel

co-operatively with First Nations at the Insight Information second annual Saskatchewan Oil and Gas forum, April 29-30.

“Know who you are dealing with, know the landscape, and the history,” Favel said. That includes knowing it the

community is Cree, Saulteaux, or Dakota. “It will serve you well going forward.”

He suggested taking advantage of publications by the Saskatchewan Office of the Treaty Commissioner for guidance.

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consult is that the honour of the Crown is always at stake, and that the primary responsibility rests with the Crown, even if it is a company pursing development.

“Consultation is basically a reconciliation between aboriginal people and the Crown,” he said.

Both Saskatchewan and Canada have developed consultation protocols that are ever-evolving, he said. Attempts made to engage First Nations in consultations on these protocols have met with “varying degrees of success.”

Favel noted First Nations need to articulate their assertions with clarity, and that priority afforded to a First Nation may be grounded in their

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proximately to the development.

“There could be a spectrum of the types of consultation which is dependent on the strength of a First Nation’s claim, and the potential impact on the First Nation’s rights,” he said.

He recommended keeping a good record of discussions.

Favel said one must understand the First Nations’ position in geography, historical and present day land uses, relations with other communities, and past interactions with government and industry.

He noted that front line industry people are often in a “precarious position.”

He concluded by saying “First Nations do not have a veto.”

Snow spoke of a formalized approach used by the Stony Nakota First Nation of Alberta, includ-

ing a questionnaire called a “Stony Information Letter” they use to identify issues.

“We need to understand what the project is, from a First Nation’s perspective,” he said.

Mitigation was an important consideration.

“How do you mitigate for a tepee ring encountered during construction?” he asked.

“It is very important to have people familiar with working with First Nations at the table,” Snow added. He cited the traditional practice of presenting elders with tobacco when speaking to them, something that might not seem obvious in broader society.

For a 40 km pipeline with about a dozen wells, the process took about a year, he said, but a well can be accomplished in a few days.

“We often need to get on site, and view the project impacts,” he said.

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PIPELINE NEWS June 2010

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Technology leading the way

By Brian Zinchuk Regina – The Bakken might be gaining mainstream status, but in the eyes of those who drill for it, it’s still not particularly easy oil.

R. Gregg Smith, president and chief operating officer of PetroBakken, spoke of the pursuit of the marginal barrel at the second annual Saskatchewan Oil and Gas forum, hosted by Insight Information. Picking up on another speaker’s comments that Bakken oil is like nectar to refiners, Smith added it may be nectar, but it is still marginal oil.

“It’s all about technology,” he said, repeating this mantra throughout his presentation: “More fracs, more oil.”

Smith spoke of the progression of his company’s Bakken development, going from eight frac stages on a mile long horizontal well, and progressing to the current “Bakken 3.0” of incarnation of well development. It involves 15 stages each on two 1,400 m bilateral wells, for a total of 30 frac stages. One of these wells, with a pumpjack, now costs the company about $2.3 million, only $600,000 more than a mile long, 20-frac stage well. Yet they achieve substantially more production. “We switched to bi-laterals in August, 2009.”

By putting in bilateral, they can produce another 10,000 barrels in the first six months of a well’s life.

“These wells are vastly exceeding their neighbours,” said Smith.

Comparing bilateral production to single lateral wells in the same area, he said with some caution, “To us, it looks like we can get an additional 50,000 barrels by drilling a bilateral well.”

The company has an inventory of about 1,100 bilateral wells left to be drilled in southeast Saskatchewan.

“We’re re-investing more money than we’re making,” he said, noting they are creating a bigger company for better recognition on the stock market.

“Most of our value is light oil, over 80 per cent, almost all from southeast Saskatchewan. That is the foundation of our company,” Smith said.

The company has operation in an area about 90 km by 90 km, where the Bakken play is developed. They have over 500 wells drilled, over 160 km of pipelines, and will tie in more wells this year.

Noting the pressure to conserve natural gas, the company is planning a pilot this year, trucking natural gas from the wellhead to a collection facility.

“Increasingly, technology will lead our oil and gas industry into other plays that were previously inaccessible to us,” Smith said.

He pointed out that Saskatchewan’s regulatory environment has been predictable. “We can’t say enough about working in Saskatchewan.”

PetroBakken is planning on drilling approximately 200 net wells in 2010, of which approximately 100 net wells will be Bakken, another 45 will be conventional wells, and a further 65 net wells would be done in the Alberta Cardium play.

Drilling in the Lower Shaunavon may be driven more by royalty holidays, he noted.

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PIPELINE NEWS June 2010

New home for Halliburton’s pumping divisions

Mike Phillips, personnel development co-ordinator with Halliburton, explains the process of the frac underway near Estevan.

Photo by Brian Zinchuk

Estevan – Halliburton has been in Estevan, left, and come back again, and is now ramping up its capabilities in the southeast.

On May 15 the company held a show and shine at its new location for its pumping units, in part to get the community to know them, as well as to get to know the community. Specifically, the company is looking for local employees, and had two recruiters on hand, collecting resumes, at the event.

The new location is one of three in Estevan for Halliburton, and brings the total number of product service lines to ten. In Estevan, Halliburton’s product service lines now include frac, coil tubing, completion tools, cementing, open-hole wireline, cased-hole wireline, directional drilling (Sperry), drill bits, nitrogen and drilling fluids.

The Estevan hub covers from Swift Current to Brandon, Man., according to Allan Carruthers, Estevan area service manager.

The new shop will be home to two frac crews, and potentially more. It will also host three cementing units, open-hole and cased-hole wireline units.

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“We’ve been working in the area without a facility for about a year and a half,” Carruthers said of the pumping units. They’ve been doing it with Alberta crews, but without a home base to call their own.

The company had been active in the region until 2002, when it pulled out completely due to economic reasons. That decision was reversed in 2007, however, and since that time, the Sperry (completions) and directional drilling product lines have returned, each with their own shops. Additional product lines have come one over time.

The new shop for pumping units had been the home of KRJ Custom Fabricating until this spring. They are putting the finishing touches on a new building just next door.

On the other side of the new KRJ facility is ATCO’s Estevan Lodge, a 200-bed camp that opened in March.

It’s fortuitous for Halliburton, because they have been using the lodge to house crews there from the get-go. It’s close enough to the shop that crews can easily park their units at the shop, instead of the camp.

Currently the frac units are coming out of Medicine Hat and Red Deer, Alta. The intention is to localize the staff as much as possible, hiring new local people and perhaps bringing some experienced hands over by way of transfers. Carruthers says there is a possibility of additional frac crews being deployed from Estevan in the near future.

“We’re actively recruiting for all product service lines,” Carruthers said. Speaking of the frac, cementing and wireline lines, he said, “We could have 60 to 75 people here, including locals and guys rotating in. We would really like to be more local.”

Carruthers personally bought a place this spring, moving to Estevan Mar. 1, a month after the new shop went into operation. He grew up in Cold Lake, took petroleum engineering at NAIT in Edmonton, and has worked with Halliburton for ten years. The first five were spent in Grand Prairie, Alta., and the last five were in Fort St. John, B.C., where he was the ‘camp’ manager for cementing. (Halliburton refers to their localized operations as ‘camps,’ as opposed to an accommodations ‘camp.’)

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Going strong in the southeast Redvers – The Redvers Oil Showcase was a chance for new and established businesses in the region to get out and make an impression. Most of the business with an established local presence reported good things about the show, and how things were going for them in general.

Rick Mann, operational manager for Ensign Energy Services in Oxbow, also known as by its local division name Big Sky Drilling, said they will have 22 rigs in southeast Saskatchewan, and be providing labour for another two working on potash projects.

“We’re booked 80 per cent now. I believe we’ll get to 100 per cent this summer or fall.”

Josee Bittner, a recruiter with Ensign Energy Services, came from Nisku, Alta., for the show. “You know, if someone should come by looking for a job, I’m happy to help out. We’re always looking,” she said.

Asked if they were short of people, Bittner noted, “We will be in a few weeks. We will be needing people by June.”

Beside her was an impressive 3-metre tall metal drilling rig model, configured for mini-golf. You shot into its base, and the ball would be hoisted up to the top of the derrick, then roll down a tube to land in one of the holes. ɸ Page A28

PIPELINE NEWS June 2010

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3Way Power Tongs of Manor has grown from one truck to six over four years. This is their outside display at the Redvers Oil Showcase.

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PIPELINE NEWS June 2010

New and established companies making an impression in Redvers

Rick Mann, operational manager for Ensign Energy Services in Oxbow, lines up a putt into a minigolf drilling rig they had on display.

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ɺ Page A27 The model was built by Hank Van Drunen, maintenance manager for Ensign in Nisku. Sitting in his chair equipped with joystick controls, he said it is a scale model of a smaller double drilling rig. “We’ll do 100 to 150 balls at a trade show in eight hours,” he said.

The rig requires a large shipping crate to move.

A company called 3Way Power Tongs, with offices in Manor and Elkhorn, Man., had booths both inside and outside. “We have been growing since 2006,” said representative Stephen George.

The company started with one truck, and now has six units, according to George. Their work is about evenly split between service rigs and drilling rigs.

John Dyck, a salesperson with Frontier Peterbilt of Estevan, said they made some good contacts, with serious people talking to them. “I like going to these things for that very reason,” he said.

Ken Singleton, who owns and operates Parkside Field Services of Kennedy, had a good opening day for the show. “I sold five buildings today,” he said, which was good, because his diversified company has just recently got into building sales.

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Robin Bertram of AJM Petroleum Consultants noted Saskatchewan’s reserves have either been growing or holding steady.

Photo by Brian Zinchuk

SOLUTIONS Bakken wells improving with experience Regina - The more data you have, the better you can determine reserves, according to Robin Bertram of AJM Petroleum Consultants.

Speaking at the Insight Information second annual Saskatchewan Oil and Gas Forum in Regina on April 29, Bertram provided the perspective of how an independent evaluation firm for oil and gas properties reports on reserves. He pointed out the conservative nature of evaluators, as opposed to the more optimistic numbers that companies might be hoping for.

Clear communication between the company and the evaluator helps.

Bertram said, “The evaluator’s role is pretty simple. They have to know the rules and apply them correctly.

“Saskatchewan’s established reserves have either been growing or holding steady,” he said of Saskatchewan oil.

Bertram spoke about various methods of determining reserves, including analogies, volumetric, material balance, production decline analysis, and reservoir stimulation. “More data means better estimates,” he said. “Three months of production history is better than one month.

“They’re trying to get a really big number, based on a 24-hour production test, or a week,” Bertram explained of some producers. Generally, several months are needed for a determination.

While plays like the Alberta oilsands

and Bakken are somewhat known quantities, Bertram cautioned that oil shales should be approached with extreme caution, by companies with deep pockets.

Speaking of rules used to evaluate reserves, he noted, “As an industry, we need to look at some of the unconventional methods to evaluate these unconventional plays. Both the client and the evaluator need to share their knowledge to come up with the most reasonable reserve estimates.”

Looking at production data over vertical versus horizontal wells, Bertram pointed out that vertical wells in the Bakken have done poorly in Saskatchewan. In contrast, horizontal Bakken wells that have reached initial production of 250 barrels per day in Saskatchewan, but 140 to 150 bpd is more average.

Of particular note, wells drilled in 2008 have seen better production than comparable wells in previous years, showing the industry is learning and bringing on better production rates.

“The big question is, is the Bakken economic or not? Well, using our current price deck, we’re thinking, yes, it is. At $80 a barrel, you’re realizing positive economics.

Some wells are going to do better, some wells are going to do worse, but in total, we think drilling of Bakken wells in southeast Saskatchewan is a very profitable venture to be in.”

Lower Shaunavon On the more con-

ventional side, Bertram noted the Lower Shaunavon play is not as large or pervasive as the Bakken, but the play has lots of upside as well.

Horizontal wells don’t necessarily do better than vertical wells in the Lower Shaunavon, Bertram explained, but they have accelerated production over vertical wells. “You’re going to recover that money a whole lot quicker drilling a horizontal well,” he stressed.

There can be as high as 350 bpd initial production with horizontals.

Saskatchewan is a hotbed of activity, Bertram summarized.

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PIPELINE NEWS June 2010

Saskatchewan kept it stable, and it worked Regina – Two common threads were heard throughout the presentations given on the first day of the Saskatchewan Oil and Gas Forum on April 29 – the Bakken oil play is something of a sweetheart, and part of

its attractiveness is due to the Alberta’s ongoing alterations to its royalty regime.

“Alberta did a really good job of screwing it up, while Saskatchewan did a really good job of keeping things stable,

Lawyer Jeff Lawson pulled no punches in comparing Saskatchewan and Alberta’s royalty regimes.

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and it worked,” said Jeff Lawson, principal, corporate finance, with Peters & Co, a Calgary law firm whose sole focus is the energy sector.

Lawson noted that even with its fourth incarnation of royalties in recent years, they still don’t know what the final Alberta royalty regime will be.

Lawson was the final speaker on the first day of the two-day conference in Regina. It’s the second annual event, put on by Toronto-based Insight Information.

His job is convincing institutional investors to place their money with a company to get the best return on their investment. “Saskatchewan has been, and continues to be, an excellent place to put your money,” he said, adding Saskatchewan companies have had better access to capital than other companies.

“A big thing for us in certainty,” he said, referencing Alberta’s continual changes with royalties. Saskatchewan’s maintained consistency in policies. “That’s kept capital coming here,” he said.

He noted how Saskatchewan’s oil-heavy versus gas-heavy nature has benefitted the province. “Oil is an incredible return compared to gas,” he said.

As for the current consolidations, he noted, “Big guys need smaller aggregates to put things together.”

Regarding ease of access to the resources, Lawson noted that Saskatchewan is a lot flatter than Peru, where machete’s, helicopters and barges down the Amazon River are the order of the day to produce oil. “You can drive down a road here,” he said in comparison.

The current price of oil is resulting in services at reasonable rates, yet a nice return, according to Lawson. When prices get much higher, inflationary pressures set in.

Saskatchewan returns are better than Alberta, he noted. “You can make money here, and good money, even at prices down to $45/bbl.

There’s a lot of room to move now with that $85 price we have now.”

(The price of oil subsequently dropped 20 per cent, to $70 a barrel, in the two weeks after his presentation.)

“You have a lot of cushion here, in this province, with the type of resources it is, how easy it is to get at, and the type of money that is available.”

Lawson added that shrinking differentials between heavy oil and light oil prices are a great economic driver.

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PIPELINE NEWS Saskatchewan’s Petroleum Monthly

B-Section June 2010

New chemical company on the horizon

Cutting the ribbon on the new Moose Mountain Mud and Equal Transport shop is Jason Waugh, who heads up Saskatchewan operations for Canadian Energy Services. Staff of the two companies Àll out the photo. Holding the ribbon to the left of Waugh are Craig Nieboer and Ken Zandee, and to the right is Tom Simons.

Story and photos by Brian Zinchuk Carlyle – The grand opening on May 13 might have been in honour of the new shop for Moose Mountain Mud and Equal Transport, but the big news is what’s happening right next door, where a similar building is under construction.

That will be the home of a new company, PureChem Services, which will greatly expand the reach of parent company Canadian Energy Services LP (CES) and make Carlyle their central hub and manufacturing facility for production chemicals and drilling products. CES is also the parent company of Moose Mountain Mud and its affiliate Equal Transport.

The new PureChem facility is anticipated to be ready late this year or early next year.

Over the past several years, Moose Mountain Mud, and more recently, Equal Transport, have become so engrained in the community of southeast Saskatchewan, one might think they were locally owned and operated. It’s hard to find a rink board or other community project that doesn’t have their logo.

That’s by design, according to the senior management of CES. The company was formed in 2006 through the merger of Canadian Fluid Systems and Impact Fluids.

Rod Carpenter was one of the founders of CES. He was an owner of Canadian Fluid Systems, which had been around since 1978. He and partner Ken Zandee hired Jason Waugh to fire up Moose Mountain Mud in 2003. Both Zandee and Waugh originate from Manor and worked the rigs together.

“We hired him to run our business down here,” Carpenter recalled, saying it was better to have a local entity than a branch office. “It was set up as a standalone business that he ran and built.”

It fired up in Estevan, but moved to Carlyle in 2005.

In 2006, Canadian Fluid Systems and Impact Fluids merged, and created the publicly traded entity known as Canadian Energy Services. The idea was to cover the entire Western Canadian Sedimentary Basin. Canadian Fluids had operations in southeast Saskatchewan and the oilsands, while Impact Fluids was in the foothills, deep gas drilling and heavy oil.

From that, other business opportunities showed up, according to Carpenter.

One was the trucking of produced fluids – oil and produced water – resulting in the creation of Equal Transport two years ago. “Now we’re getting into production chemicals,” he said.

Craig Nieboer, chief financial officer of CES, said Moose Mountain Mud is built by locals for local business needs by locals. “That’s why it’s successful. It’s a Carlyle company.”

It’s a familiar refrain, repeated by all the senior management Pipeline News spoke to. And they all credit it to the insistence of Jason Waugh to keep a local focus, even to buying screws from the local hardware store, quips CES vicepresident of marketing Ken Zandee. “When we sat down, Jason, Rod and I, one of the first things Jason said was he wanted everything local, and to give back to the community.

“We’ve got a lot of faith in this part of the world,” he said.

CES president and CEO Tom Simons said they are now the biggest drilling fluid provider in Western Canada, with about 25 to 30 per cent of the market.

Equal transport was a natural outgrowth of Moose Mountain Mud. Equal started two years ago by hauling their own drilling fluids. “We landed on the idea we should haul production for customers, not just drilling fluid.”

They now run around 35 trucks. “There is so much development of these oil plays through multi-stage frac, the business is sustainable,” said Simons.

A further logical progression of the business was to start producing chemicals. “This is a step-change for the business,” he said. Currently they outsource blending of their products. The new company, PureChem, will eventually manufacture their chemicals for the entire company, servicing plays throughout North America. And it’s all going to happen in Carlyle.

Currently they service the four western provinces, North Dakota, Wyoming, Utah, Michigan, West Virginia, Pennsylvania, Kansas, Oklahoma and Texas. As it happens, Carlyle is relatively central to all of that.

“We have a PhD chemist who is head of the team building formations or recipes,” Simons said. ɸ Page B2

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PIPELINE NEWS June 2010

This new building to the north of Moose Mountain Mud and Equal Transport’s new shop will be the home of PureChem Services.

There’s a large parking lot around Moose Mountain Mud and Equal Transport’s new shop, and it was nearly full with trucks on day of the grand opening on May 13. That was reÁected in the line-up for food.

Jason Waugh cooks up sausages for a long line up of people at the grand opening of Moose Mountain Mud and Equal Transport’s new shop. Waugh heads up both, and will soon add PureChem Services to the mix.

Buy screws from local hardware store ɺ Page B1 New to CES will be the production and retailing of production chemicals for oil companies. “We can tailor to different reservoirs, different production problems,” Simons said, noting the products will be exclusively made for the southeast Saskatchewan market. “That product will go into trucks and go all over North America.”

Drive “This exists because of [Waugh’s] ambition and his drive,” Simons said. “He is a home-grown success

story for the town. His mandate is that it is number one – the most work, the safest work, number one for the customer, best service, and best technology.”

CES has just over 200 people company-wide, with over 80, and growing, at Carlyle. PureChem is projected to hire another 15 to 20.

While a lot of good things are said about Waugh, he in turn speaks of his staff and their recognition.

“It’s not me. This facility and the growth of this business would not be possible without the staff I have.

“It’s all about giving back to the community and investing in infrastructure, not just giving money back but community involvement.”

Personally Waugh is involved on a number of

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“The big thing for us in southeast Saskatchewan is the oilfield activity is consistent, not huge ups and downs,” he said.

Waugh started on the rigs right out of school, and had progressed from roughneck to driller by the age of 21. However, he wanted a more career-oriented job. He worked at Prairie Mud in Estevan for eight years, and felt there was an opportunity to start his own company. That’s when he approached Carpenter and Zandee.

“When I was raised, my idea of being entrepreneurial was not being stuck in an rut,” he said, desiring to develop new technologies. He was interested in the “Liquidrill” product Canadian Fluids Systems was carrying. Waugh wanted low-damage products for Saskatchewan reservoirs.

“PureChem is going to allow us to have a line of products from beginning to end. It’s not just about drilling a well, it’s completing it. We will compete with the majors,” he said.

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Redvers Oil Showcase attracts 1150 Redvers – The 2010 Redvers Oil Showcase drew approximately 1,150 people over May 7-8.

While many of the exhibitors were local, like Poplar Services and Danstorp Services of Redvers, a large number was from the surrounding region. Waterood Services was one, and Fast Trucking group of companies another. Two coil tubing entrants – Essential Coil Tubing and Maple Creek Endless Tubing, had rigs present. There were a few entrants who came a long way, like Grit Industries of Lloydminster. Prodahl Environmental Services of Lloydminster came in support of The Rig Store in Estevan, which will be carrying their line of secondary containment. Safety Source, based in Virden, made their Redvers debut, having held the grand opening of their new Redvers location on May 6.

Brett Herman, former CEO of TriStar Oil and Gas and Result Energy, was the speaker at the pig-on-a-stick banquet.

Poplar Services’ Brian Le-Nouail, one of the organizers, said, there were people from Carlyle, Carndu, Manor, Storthoaks, Pierson, and Virden present. “We drew from a pretty good area, overall,â€? he said.

Their own company “made some good contacts, set up some good working relationships,� according to LeNouail.

A landman from an oil company with prominent operations in the area could be seen checking out Dangstorp’s recent addition, a powered broom meant to clean lumps of dirt o the highways after operations like a rig move.

One of the highlights of the event was the draw for a commercial lot along Highway 13 that the showcase committee had purchased from the town. Goldlevel sponsors were entered into the drum, and the winner had the option to take the lot, or a $2,500 travel voucher.

The initial winner was Spectra Credit Union. However, the credit union had just recently completed a renovation of its Redvers facility, so they donated the lot back, and another draw was held. This time, Essential Coil Tubing was the winner. They elected to take the travel voucher.

Classic Vac of Alida, that won the draw two years ago chose to build on their site and in turn leased a portion of the building to TS&M Supply. ɸ Page B4 Master of ceremonies Marius Ericksen talks about the broad community support for the Redvers Oil Showcase.

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PIPELINE NEWS June 2010

Exhibitors plan to return A rat-hole rig was set up by Prairie Rat Hole at the Redvers Oil Showcase.

Brian Dangstorp, left, explains to a land man the advantages of his new rotary broom for cleaning up highways after a crew comes off a muddy road.

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ɺ Page B3 However, since then two separate companies have approached the committee about purchasing the lot, which is the last available commercial lot in the commercial subdivision developed last year. A camp is nearing completion nearby on two of those now-spoken-for lots.

The commercial subdivision is completely gone, said Colette Branigan, one of the event organizers. Her day job is handling economic development for the community. They will now be looking at more lot options, she said.

“Out of the surveys I got back, they were all returning,” Branigan said of the exhibitors. There were 71 indoor booths, and another 29 outside exhibits.

Branigan said there were some suggestions to hold the event over a Thursday-Friday instead of the Friday-Saturday this year’s event took place.

Attendance was lower on the Saturday.

Marius Ericksen, one of the organizers and MC for the banquet on May 7, spoke of the broad community support and listed numerous tasks, big and small, that people contributed towards the success of the event. A presentation was made to Randy and Tammy McCannell, owners of Classic Vac, in appreciation of their building a shop as a result of winning the lot given away at the last oil showcase. “We were fortunate enough to pick Randy’s name,” he said.

PIPELINE NEWS June 2010

Getting into the area Redvers –A number of new entrants to southeast Saskatchewan could be found populating booths at the Redvers Oil Showcase, May 7-8.

Mel Forsyth of Sinclair, Manitoba-based Forsyth Plastics produces rotational plastics. After three years in operation, Forsyth said they are just now breaking into the oilpatch market. “After BSE, we had to start changing,” said the cattle farmer.

“We sell mostly through different companies, mostly ag companies,” he said.

He had on display an “enviro-barrel holder,” a form of secondary containment for chemical barrels at the wellhead. The company also makes spill con-

This is the view from the control centre of one of Essential Coil Tubing’s rigs, on display at the Redvers Oil Showcase.

tainers and tanks.

Maple Creek Endless Tubing Services Ltd. is also trying to break into local market. “We’re trying to get into southeast Saskatchewan, southwest Manitoba,” said operator Dwight Wenzel. “We built this unit just for this area, the deeper horizontals,” he said.

The crew for the truck comes out of Medicine Hat, Alta.

Marvin Draghici was showing Groeneveld’s integrated backup camera/sensor/alarm system for trucks. The system uses radar like you’ll find on a minivan, but with a more sophisticated array that can be mounted to suit the unit. “It’s all about safety,”

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Draghici said. “They’re very big in Europe.”

Tom Korte is heads up BAR Engineering’s new Weyburn location. “We’ve got a couple of small projects under our belt now, one on oil and gas, and one on commercial construction,” he said. “The number of calls we’re getting is increasing.”

Neil Noble, one of the principles of BAR, who came down from Lloydminster for the show, added, “We’re still continuing to do lots of business development.”

Stating that they are building their business, he added, “We’re getting opportunities outside of the oilfield,” referring to some structural work.

Neil Noble, one of the partners in Lloydminsterbased BAR Engineering, mans a booth promoting their new Weyburn ofÀce at the Redvers Oil Showcase.

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PIPELINE NEWS June 2010 Brent MacDonald, left, is the new trainer for Safety Source, while Rhonda Miller is the manager of the new Redvers store.

Safety Source sets up Redvers location Redvers – Virden, Manitoba-based Safety Source has been in operation for two-and-a-half years, and has just launched its second location, jumping across the border to Redvers, Sask.

The store started operations on April 5, and held its grand opening on May 6, the day before the Redvers Oil Showcase.

“We had an idea for where we wanted to expand,” said Dale Lewis, who owns the company with Kate Kernel. “It’s in the heart of the oil activity coming about, and still a small town,” he said.

“Our focus is going to be on training, safety supplies, consulting and possibly some on-site safety consultation, basically a mirror image of what we have in Virden,” Lewis explained.

He said there’s no one else in the area doing exactly what they do, providing safety training, consulting and supplies.

Their location is near the intersection of Highways 13 and 8.

Brent MacDonald is the company’s new trainer.

A full-time firefighter and paramedic at CFB Shilo, his seven to eight 24-hour shifts each month allows for all kinds of time for him to offer training services on the side.

MacDonald will be offering courses in first aid, CPR, ground disturbance, confined space entry and rescue, fire safety, fire extinguishers, transportation of dangerous goods, WHMIS, and tower rescue. “We have a network of trainers we can access and resource,” he explained.

The company will also provide consulting in the field. On jobs with a significant confined space issue, they can assist in setting up procedures and have trained personnel available on-site to respond.

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before I went to Shilo,” he said. He may be working on a Canadian Forces Base, but he’s a civilian. The fire service there is a dual service, meaning each firefighter is also trained in medical response.

Prior to his medical work, which began in 2000, he worked as a pipeliner in Saskatchewan and did road construction work. MacDonald’s father was a workplace health and safety inspector for 19 years for the Government of Manitoba, so you could say he grew up in the safety field.

Rhonda Miller is the Redvers branch manager.

She has lived in Redvers for three decades. That fit into Safety Source’s desire to have an employee with community ties. Miller is a former recreation director for the community. She’s new to the safety field, and said she is always looking for new challenges.

“Dale and Kate are very good teachers, full of knowledge,” she said.

PIPELINE NEWS June 2010

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Not exactly cattle earmuffs

Marge Garnier, right, and her huband Harvey, middle, make Velcro bands to keep hose connections from coming loose.

Redvers – There were a lot of different things to see at the Redvers Oil Showcase – coil tubing rigs, model pumpjacks, and a company that sells earmuffs for newborn calves.

Marge’s Muffs of Redvers is now Marge’s Muffs, Etc., and has come out with an inexpensive solution to a potentially big oilpatch problem. Marge Garnier, and her husband Harvey, sew straps used to secure cam locks on the hoses used to hook up oil tanker trucks to tanks and the like. The strap is made of seatbelt material, backed with Velcro.

It wraps around the cam locks of the hose connections, keeping them secured despite vibration.

If the connection lets go, there can be a lot of crude on the ground before the problem is corrected. “It doesn’t take much to hold them down, but if that hose comes off, you’re in trouble,” she said.

“I started making earmuff for calves,” Marge explained. “My brother was hauling crude.

He got a piece of Velcro

strap, and it didn’t last,” she said.

For a prototype, she raided the seatbelt out of an old truck from the pasture. Now she buys the material new from a wholesaler. “I started last July-August,” she recalled.

The strap will fit a three- or four-inch hose connection, and has a metal loop to double back the hook-and-loop through. She said it should work even when soggy. One driver re-

portedly used it all winter, and operated it with his winter gloves on.

They report several local trucking firms have purchased the straps.

Harvey said, “We both sew,” something that occasionally raises eyebrows, they report.

They farm between Redvers and Storthoaks, with 60 head of cattle.

“My grandson works for environmental. He thinks grandma is awesome for this,” Marge said.

The Velcro-backed seatbelt material Marge Garnie is displaying wraps around hose connections, preventing the cam locks from coming loose.

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PIPELINE NEWS June 2010

Manitoba’s theme: Go horizontal Manitoba’s Assistant Deputy Minister of Innovation, Energy and Mines John Fox speaking at the Williston Basin Petroleum Conference in Bismarck, N.D.

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Bismarck, N.D. – Manitoba’s Assistant Deputy Minister of Innovation, Energy and Mines John Fox said his province’s theme is “Go horizontal.”

The newest play is development of the Spearfish formation at Waskada, initially by EOG Resources.

Manitoba had 260 wells drilled in 2009, and by early May, had 126 drilled in 2010. The province is forecasting 420 wells for this year, the majority being horizontal.

“In 2006, less than 10 per cent of the wells drilled in Manitoba were horizontal. Last year, over 80 per cent had been horizontal,” Fox said.

The province’s production has doubled over the last five years. Last year, the province produced 9.5 million barrels, up 10 per cent over 2008.

In 2009, Bakken production accounted for about half of the total, while the Spearfish made up about 18 per cent.

Four waterfloods are planned for or are in progress in the Daly-Sinclair field, near the Saskatchewan border.

The hope is to see recovery factors increase from 10 per cent to 20 per cent.

In the past 16 months, EOG has drilled 74, with plans for another 240 over the next three years, Fox said. The company has applied to build a 40,000 bpd, 100 km pipeline from Waskada to the Enbridge station at Cromer.

PIPELINE NEWS June 2010

Teaming up on secondary containment

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John Dow, left, serves up sausages for Vernon “Butch” McLean at the Redvers Oil Showcase on May 7.

Redvers – When Pipeline News first spoke to Prodahl Environmental Services Ltd. of Lloydminster nearly two years ago, Brian Prodahl spoke of setting up franchises for their line of Sioux Steel secondary containment products.

That initiative was seen coming to fruition at the Redvers Oil Showcase on May 7-8, when Prodahl could be found assisting Estevan’s The Rig Store and their display of a secondary containment unit.

John Dow, who heads up The Rig Store, was serving up some of the biggest sausages you’d ever seen on a barbecue in the tent. The Rig Store began operations earlier this year.

“We’re happy so far,” Dow said. “We just got this line now of secondary containment and have been fixing all kinds of power tongs with Prime Tongs.”

Prime Tongs is their line of power tongs.

“We’re a long way from home here, but with The Rig Store, we’re happy to supply them,” Prodahl said. While they have smaller distributors, The Rig Store is their first large store to carry their product.

“As The Rig Store expands, we hope to expand with them.”

After the show, The Rig Store manager Warren McEwen said, “It went really well. We had a lot of people come through, made a lot of contacts, and met some good people.”

He credited the show organizers for putting on a good event.

Left: Prodahl Environmental Services of Lloydminster is teaming up with The Rig Store of Estevan to provide secondary containment.

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ETI looking for U.S. business Trent Jordens, left, and Craig Brown of Southeast Regional College tell Wayne Sanstead, the North Dakota equivalent of our minister of education, about the beneÀts of the new Energy Training Institute about to be built in Estevan.

Bismarck, N.D. – Construction hasn’t even started yet, but the senior management of the new Energy Training Institute (ETI) in Estevan were already flogging its benefits at the Williston Basin Petroleum Conference in Bismarck, N.D., May 2-4.

A week later, the new ETI went to tender, with those tenders due to close at the end of May. “We’re hoping in June to put a shovel in the ground,” said

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Craig Brown, president and CEO of Southeast Regional College, the parent school of the ETI. “It’s been very aggressive timelines. Trent and I have been meeting with the architects every two weeks, then weekly. It’s right down to the fine details now,” he said on May 4.

“Out of any oil show we’ve done, this is the most interest, the most opportunities,” said Trent Jordens, vice-president of business development for Southeast Regional College. “The show itself is massive, and extraordinary for the industry.”

Brown said he went booth to booth, and found at least three dozen companies interested in working with them. That included providing equipment, partnering with the ETI, or safety training.

South Dakota missed out on Bakken Bismarck, N.D. – The Williston Basin probably covers onethird of South Dakota, but unfortunately, the state seems to have missed out on the Bakken sweepstakes.

“The Bakken pinches out before South Dakota. At least we haven’t found it,” said Mack McGillivray, while making the state’s official presentation to the Williston Basin Petroleum Conference on May 3.

The state is just getting going on Three Forks development, he noted.

There are some shale gas tests going on, according to McGillivray.

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Sask. geology draws interest Saskatchewan provincial geologists Erik Nickel, second from the left, and Gavin Jensen, second from the right, take questions after their presentation on the Bakken and Birdbear formations in Saskatchewan.

Photo by Brian Zinchuk

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Montana production in decline Bismarck, N.D. – While most of the presenters at the Williston Basin Petroleum Conference May 2-4 were upbeat, Montana’s official presentation was not.

Tom Richmond, of the Montana Board of Oil and Gas Conservation, started by showing a slide of two mountains, and said that represented the twin peaks on Montana production. In particular, gas production in Montana has dropped off from 2007 until present.

“We have a lot of tight gas wells in Montana that require closer spacing than what we started with,” he said.

Two areas in the eastern portion of the state, the Bakken and Cedar Creek anticline, are of interest. Cedar Creek is a prime candidate for CO2 injection, he noted, as production is in decline.

Richmond took issue with the current debate in the United States on hydraulic fracturing.

“An awful lot of oil and jobs are not possible if hydraulic fracing wasn’t allowed. In Montana, we would lose about half of our gas production,” he said. “Hydraulic fracturing has been blamed for a lot of evils, and most of us can’t explain why.”

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PIPELINE NEWS June 2010

PIPELINE NEWS June 2010

B13

New shop needed for electrical company Carlyle – Dale and Devin Faber plus some additional help could be found drilling holes and inserting poles for their new shop on May 13, a shop that is needed due to growing demand for their electrical services.

“We’ve outgrown the one we have,” said Dale Faber, who heads up Faber’s Electric.

About a third of their business is oilpatch-related. Faber’s Electric does a lot of work on rigs, as well as commercial and residential interests that are directly or indirectly tied to the oilpatch. “It all relates back to the oilpatch,” he said, citing the example of a new house being built for a family moving in to work in the patch.

“We’ve done everything from wiring drilling rigs to repairing them in the field,” he said.

The new shop will be 70x140 feet, substantially larger than their current 1500 sq.-ft. shop and 800 sq.-ft. workshop. It is located on the southeast edge of Carlyle, east of Highway 9.

The new building is of pole-frame construction, and they are doing a lot of the work themselves.

Devin Faber cleans the auger after drilling a hole for the corner pole of Faber Electric’s new shop.

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B14

PIPELINE NEWS June 2010

Listen Up There was considerable interest in Erik Nickel’s presentation on the Bakken formation in Saskatchewan. He noted “It’s added up to 30 per cent of our bottom line as far as our light oil we’re producing.” Nickel is a geologist with Saskatchewan Energy and Resources, and he was speaking at the Williston Basin Petroleum Conference in Bismarck on May 3.

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Moving a lot of water Bismarck, N.D. – The fracs done in North Dakota can have more than 40 stages, and the wells are two miles deep, and two miles long horizontally. They require mas-

sive amounts of water, and several hundreds of truckloads for one job.

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with irrigation equipment Dale Behan of the International Western Company told the Williston Basin Conference on May 3 how they are

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using massive pumps and overland pipes to get most of those water-hauling trucks off the road.

Drilling wells for water is not a preferred source, he said. “There are more valuable uses for fresh water than pumping it down a 10,000-ft. hole.”

Yet fresh surface water seemed to be just fine with him. Ponds, stream and lakes are the sources he listed. “Utilization of this water is much preferred,” said Behan.

Trucking has the disadvantage of cost, safety issues, lack of capacity, and infrastructure damage. His company, using high capacity pumps and overland irrigation pipes, can fill a frac tank in four to five minutes, with little or no infrastructure damage.

The technique was pioneered in Texas, he said.

There’s been a learning curve in North Dakota, with the cold winters, but Behan said they did a five-mile transfer at -10F for five days. “It can be done, but it’s not advised,” he said.

The company is looking at installing buried pipeline which would draw water from Lake Sakakawea to distribution points in particular areas of drilling.

Lake Sakakawea is a large reservoir formed by the Garrison Dam on the Missouri River.

It bisects much of the Bakken drilling area.

PIPELINE NEWS June 2010

B15

Southern Paci¿c Calgary – Southern Pacific is putting together the money for further SAGD development, while expanding its recently-acquired northwest Saskatchewan Senlac property Southern Pacific Resource Corp. closed a deal May 18 to raise $100.8 million through the sale of 84 million common shares at $1.20 per share to fund its STP-McKay SAGD thermal project in the Athabasca oilsands.

The underwriters have an option to purchase an additional 12.6 million shares at $1.20 up to 30 days after the closing date that could raise the gross proceeds to $115.92 million.

The remaining portion of the estimated $388.3 million cost of the STP-McKay thermal project will be funded through available debt financing options, which includes project financing debt and public or private market debt.

Southern Pacific is waiting for approval of its May 2009 application to build a 12,000 barrel per day (bbl/d) commercial steam-assisted gravity drainage (SAGD) oil sands project on its McKay block. Regulatory approval is expected before Aug. 31, 2010.

The company also plans to file an application to produce an additional 24,000 bbl/d at two new 12,000 bbl/d project sites at the north and south blocks of the McKay leases.

The latest financing follows a previously announced deal to purchase the remaining 20 per cent interest of 59 sections at McKay for $33 million from Bounty Developments Ltd. by June 1.

This will give Southern Pacific full control over its oilsands leases at McKay.

In addition, Southern Pacific keeps finding more silver in the lining of its Senlac thermal project in Saskatchewan since it purchased the property for approximately $89.3 million on Nov. 3, 2009, to help fund the McKay project.

The Calgary-based company increased its proved plus probable (called 2P) recoverable heavy oil reserves at its 100 per cent owned Senlac property to 10.4 million barrels, an increase of 14 per cent from the previous estimate back in Dec. 31, 2008.

The report released on April 26, adds 20.8 million barrels of recoverable oil at Senlac to the total proved plus probable plus possible (3P) reserves category, an increase of 33 per cent.

In between the two reserves estimates by GLJ, Senlac has produced approximately 2.1 million bbls of oil with proven reserves estimated at 6.92 million bbls.

Between the same period of time, cash flow from the Senlac project, after operating costs, capital and royalties, was estimated at $26.9 million or an average of $5.4 million per month.

In a news release, Senlac reports production averaged 4,430 bbls per day over the same period, exceeding expectations despite lost days of production due to some unusual mechanical and power issues that have since been resolved. The project averaged 4,600 bbls a day in April.

Since acquiring the Senlac thermal project, Southern Pacific has reprocessed and interpreted the 3D seismic data that was included with the acquisition, developed a geologic and reservoir model of the project, and completed a full field development

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plan.

The plan includes the drilling of two horizontal wedge wells in the Phase G pad that began in early May. Two steam-assisted gravity drainage (SAGD) well pairs in Phase H are expected to be drilled in the fall of 2010 to complete this year’s development activities.

The wedge wells and the Phase H SAGD well pairs are the initial phases of Southern Pacific’s development plan, which aims to keep the facilities processing between 4,000 and 5,000 bbls a day of heavy oil on an ongoing basis.

Southern Pacific also reported a significant increase in the value of its oilsands lands on March 25 with improved 2P reserves estimates by GJL at 168.1 million.

In addition to 2P heavy oil and bitumen reserves, Southern Pacific has 116.7 million bbls of best estimate contingent bitumen resources (P50) identified in the McKay area.

When the value of the reserves at McKay are combined with the value of the reserves at Senlac, the total net present value before tax of Southern Pacific’s 2P reserves is estimated to be $562 million (discounted at 10 per cent).

Cessna This Cessna Citation I business jet could be seen at the Carlyle airport on the day of the grand opening of Moose Mountain Mud and Equal Transport’s new shop. The FAA registration says the registered owner is Skypro Enterprises Ltd., of Las Vegas. At 38-years old, the plane itself was built in 1972, and its serial number, No. 500-0025, makes it one of the Àrst of its type. While most people don’t drive 38 year old cars, it’s a lot more common in aviation to Áy a decades-old aircraft.

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B16

PIPELINE NEWS June 2010

First Nations could plug into oil and gas sector

By Geoff Lee Regina – Go green.

Go Saskatchewan. Renewable energy projects with First Nation players could help SaskPower meet the growing demand for electrical power from its mayor oil and gas and pipeline customers.

SaskPower and the James Smith Cree Nation, Chakastaypasin Band of the Cree and the Peter Chapman Band report they will work together to study the feasibility of developing a renewable energy project on the Saskatchewan River system.

A feasibility agreement announced on May 13, includes the tri-nations’ development

partners Brookfield Renewable Power and Peter Kiewit.

The Pehonan Hydroelectric Project as it’s called in Cree could be provide 250 megawatts (MW) of power to the provincial electrical grid.

Two days earlier, SaskPower and the Black Lake First Nation announced similar plans to work together on feasibility studies on a run of the river project at Elizabeth Falls that would provide up to 50 Megawatts to the provincial grid.

Both announcements follows on the heels of a new Aboriginal Energy Partnership Program in Ontario that aims to pro-

vide financial support to help First Nations and Metis communities in that province build renewable energy generation projects.

“We don’t have a program similar to that, but certainly SaskPower has made it clear that we must expand generating capacity, and we would like to discuss ways of involving First Nations,” said SaskPower spokesman James Parker.

“We have had preliminary discussions with individual First Nations about certain proposed projects, particularly on the hydro side.”

If the Pehonan project proves to be an economical supply option,

the First Nations-private developer partnership would develop the site, build the power plant and enter into a long-term power purchase agreement with SaskPower.

Pehonan in Cree means ‘we're waiting by the creek.’ The name reflects the proposed location downstream from the forks where the South Saskatchewan River meets the North Saskatchewan River.

“We are pleased to see that this government is making it a priority to work with First Nations and engage us in opportunities that will benefit our members and hopefully make this vision a reality,” said James Smith Cree Nation chief Wally Burns in a news release.

The Black Lake First Nations hydro project would redirect a portion

of the flow in the nearby Fond du Lac River at the east end of Lake Athabasca.

“This project with the Black Lake First Nation highlights the efforts of our government to actively engage First Nations in our province’s growing economy,” said Bill Boyd the Minister responsible for SaskPower.

The agreement between SaskPower and the Black Lake First Nation allows for environmental and engineering studies to begin at the announcement date, SaskPower signed the agreement with the Elizabeth Falls Hydro Development Corporation, which was established by the Black Lake First Nation to oversee the project.

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starting to make on this important project,” Black Lake First Nation chief Donald Sayazie said.

“Should it proceed, this hydro project will bring many benefits to the people of the Black Lake First Nation and communities in the region.”

Pursuing emission free hydroelectric generation was one of the medium and long-term supply options SaskPower identified to meet its electric power needs.

SaskPower is predicting power demand will grow at about three per cent annually over the next 10 years, which is twice the historical rate of growth.

“The oil and gas industry and the pipeline sector are major customers,” said Parker.

“We’ve seen robust activity in both industries, and that’s resulted in increased demand for electricity. The mining industry is also active, and as you know the province is growing.’

SaskPower’s total available generation capacity was 3,840 megawatts in 2009 but with continual growth led by the energy sector, the province needs to rebuild, replace or acquire 4,100 MW by 2030 to fill the supply gap.

The current power generation mix includes coal, hydro, natural gas and wind power and all options are open with private power producers.

“We are interested in boosting our hydro production certainly over the medium term. That would naturally involve First Nations because there are reserves in northern Saskatchewan,” said Parker. ɸ Page B17

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PIPELINE NEWS June 2010

B17

SaskPower lines to energize pipeline facilities Regina –SaskPower continues to plug ahead with its plans to build two new transmission connections to service the expansion of TransCanada Pipelines (TCP) pumping facilities near Liebenthal and Stewart Valley.

“These lines will help meet the needs of the oil and gas sector in southwest Saskatchewan,” said Mike Marsh, vicepresident, transmission and distribution in a launch statement.

“SaskPower must

ensure there is reliable energy to meet the growing demands of TransCanada Pipelines.”

T h e first project is a 16-km, 2 3 0 - k i l o vo l t ( k V ) transmission line that SaskPower is proposing to build between an existing transmission line and the TCP Keystone Liebenthal Pumping

Station, 5-km east of Liebenthal.

The planned completion date for the

Leibenthal project is October, 2010 at an estimated cost of $3.8 million.

“The pipeline industry is a big customer of ours,” added Parker. “It takes a lot of electricity

to move their product through pipelines.”

The second project is a 138-kV transmission line that is proposed to be built between an existing transmission line and the TCP Keystone

Stewart Valley Pumping Station located 8-km northeast of Pennant.

The Stewart Valley project is expected to be completed by September, 2010 at an estimated cost of $3.2 million.

New power lines are in the works for servicing mainline pumping stations.

Photo submitted

First Nations, SaskPower working together ɺ Page B16 “There are First Nations who are very interested in economic development. There are hydro opportunities on their traditional territories.”

Should the Black Lake project prove to be an economical supply option, the two parties would negotiate a contract for SaskPower to buy the electricity provided by the project, which would fulfill a growing need for electricity in northern Saskatchewan.

Parker says First Nations are also welcome to participate in SaskPower’s net metering program, a small power producer’s program and a green options partner program for producers of renewable

energy to sell it to SaskPower.

The Cowessess First Nation, five kilometres southeast of Regina is the host site for the development and demonstration of new wind energy storage technology in partnership with the Saskatchewan Research Council (SRC) and the Ministry of Environment.

That project will harness wind energy at heights in the range of 70 to 90 metres above ground and include testing energy storage technology.

The project was announced April 14 with $1.4 million in the Ministry of Environment’s Go Green Fund, an

amount matched by the Cowessess.

“By working with the Cowessess First Nation and other partners to design, install and monitor a wind turbine and energy storage system, we will be helping a Saskatchewan community meet a current energy need while modeling a future wind energy solution,” said SRC president Laurier Schramm in a news release.

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PIPELINE NEWS June 2010

Regulating oil¿eld roads Kitscoty – The County of Vermilion River that includes the City of Lloydminster in its boundaries has a love-hate relationship with the regulation of its high maintenance oilfield roads.

“Our biggest issue in the County of Vermillion is that most of the county has heavy oil so we have roads being used to ship oil instead of pipelines,” said administrator Glenda Thomas at the county office in Kitscoty.

“We have quite good cooperation from the oil and gas companies, but the province gets the royalty.

As a municipality, we are unduly impacted by the oil and gas industry.

“We are thinking the province needs to address this. We think there should be some kind of a factor in our road grant.

With a 3,700 kilometre road network, the County has the most roads per dollar of tax assessment in Alberta, but receives the least assessment dollars per kilometre.

“That makes it difficult to keep up with infrastructure improvements,” said Thomas.

“What happens is the new areas that get developed by heavy oil wells – the road structure is meant for local traffic – but they can’t stand up to the heavy traffic.”

This year, the county received approximately $3.4 million from Alberta Municipal Affairs’ Municipal Sustainability Initiative (MSI) capital and operating funds for road building and bridge projects. Last year’s MSI total was $1.7 million.

The county’s 2010 budget for road construction is $5.2 million covering seven hamlets.

“Roads have to be our focus, so consequently things like recreation and other services have to be

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Administrator Glenda Thomas says $5.2 million of this year’s budget is earmarked for road improvements and public works.

kept to a minimum to deal with the pressures we have,” said Thomas.

Road bans that went into effect March 17 are off now, but seasonal road repairs and construction are in full swing as oilfield traffic picks up.

Some of the 24 hour traffic counts conducted last summer tallied as many at 1,051 vehicles traveling RR14 north of Highway 16 near Lloydminster and 1,074 along RR20 south of Highway 16.

The County has a fleet of 19 motor graders, three

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buggies, three cats, four loaders, a pothole patcher and a road reclaimer with maintenance graders stationed at 10 different locations. The County also has own asphalt plant.

“When roads bans come off we do road maintenance,” said Pat Ellard maintenance shop manager for the county. “We get really busy. We will get rid of ruts in the roads, filling in holes and making them drivable again.

“The oilfield takes a heavy toll on the roads, but they help to maintain them too.”

Formal maintenance agreements between oil companies and the County allowed 100 per weight limits on sections of more than 20 roads during this year’s spring breakup.

“We have an arrangement with the oil companies whereby they bond the road and are allowed to carry 100 per cent weight on those roads,” said Thomas.

“They have graders on the road and get gravel going on the road if needed. We are trying to help them be functional and maximize their resources.”

Of the numerous road work projects on the go this year, two of them will be financed by cost sharing agreements with oil companies.

Under the arrangement, industry pays 100 per cent of the project cost, but the work is conducted by the County with no profit built in.

“The cost would be less with us doing the work than with private enterprise,” explained Thomas.

Rock Energy and Husky Energy will cost share $350,000 to reconstruct a 2.5 mile section of RR32 south of Highway 16 and CNRL will pay the County $115,000 to repair a portion of RR24 north of Highway 641.

Infrastructure funding tops the priorities in the County’s strategic plan covering 2010 that notes the County will “continue to lobby government for fair treatment or royalties and funding for infrastructure needs associated with heavy oil.” ɸ Page B19

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PIPELINE NEWS June 2010

B19

consumes county’s budget ɺ Page B18 This year, the County received a rural transportation grant of $863,117 for local road construction and related engineering costs, as well as for dust control on local roads.

The County also received a $702,940 provincial resource road funding allocation to pave two miles of busy township road 494 from RR20-14 eastbound to Husky’s upgrader.

Other road improvement grants are also available from the province and from the Canada Alberta Rural Infrastructure Program.

The County is actively working on identifying new sources of gravel for road maintenance as a supply shortage has forced the County to purchase gravel from neighbouring counties in Alberta and Saskatchewan.

“It’s more expensive and harder to find, and, of course, we are using it up,” said Thomas. “What we thought was a 20 year supply turned into 15 years with the increase in oil development and more roads.

“When oil companies go into a new area that was never developed, the traffic goes from a few cars and grain trucks to an everyday flow of heavy trucks and maximum weight, and that’s just eating our roads up.”

Dust control is another issue the County regulates, and affected home owners can pay for an application of cold mix at a rate of $10 per metre for the first 100 metres of road fronting their property and $20 for each additional metre up to a 200 metre limit.

The County also runs its own natural gas utility, and in 2008, won the coveted Emerald Award from the Alberta Foundation for cutting greenhouse gases with participating oil companies.

The County continues to work with oil companies to gather heavy oil casing vent gas previously emitted into the atmosphere and clean and transport it to other well sites for running motors or to heat residential homes.

In fact, the County is gathering enough vent gas from new wells to fuel more than 7,500 homes year round.

In 2009, the gas utility installed a System Control and Data Analysis or SCADA system to control gas loss in its system.

Oil companies can also tap into the County’s gas pipeline system as an alternative to heating oil with propane.

“They can install a pipeline to their well site and have natural gas,” said Thomas.

“It’s also a more reliable source because it’s piped. You don’t have to haul it in like propane. It’s not dependent on someone forgetting to order it or having to use the roads.”

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PIPELINE NEWS June 2010

Kitscoty has “lots� to celebrate before centennial Kitscoty – The Village of Kitscoty expects cheery news from the merry month of May to lead to more glad tidings in the lead-up to centen-

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The list of good news topics starts with the public sale of 30 new residential lots in the

Lakeview subdivision that went on sale at the end of May along with a grand opening. “We have been planning it for awhile,� said

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Harold Trew, the village chief administration oďŹƒcer. “That’s all we can do in the north end and that will complete our plan for that part.â€?

The new lots are in demand following the sellout of all available lots in the ďŹ nal phase of the Southridge Glens subdivision.

The buyers say Trew include new employees of Automated Tank Manufacturing and people who work in the oil industry in Lloydminster 22 km east on Highway 16. “It’s young families looking for rural life and a small town atmosphere.

That’s what we are continuing to provide here,� he said. “We have the schools, the hockey arenas, the ball diamonds, the golf course, the curling rink and a large hall for a dinner catering. That’s why they wanted to come.�

Work started on servicing the new Lakeview lots in May and Trew expects the subdivision streets will be in by September when houses can be built.

The Lakeview subdivision is just 70 metres from an old landfill site that’s been dormant for years and will be the site of a new anniversary year play park to be called Centennial Park.

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CAO Harold Trew adds up Kitscoty’s savings for a proposed $2.1 million extension of 53 Ave. to connect Highway 897 north with Range Road 32 one mile to the west.

Photos by Geoff Lee

“It seems like the ideal time to do it,� said Trew. “It’s the old land fill. It’s been closed for over 50 years. “We can plant trees but we can’t build residential houses on it. “It will be a playground and a park.

There is body of water to the north of it, and I understand it’s one of the best bird watching areas in Alberta.�

The village held a public centennial planning meeting at the Kitscoty Senior Centre in late April and project ideas continue to surface from a homecoming of former residents and a parade to an old fashioned community chicken supper. The next meeting is June 14 at 7 p.m. “There is talk about a threshing machine

demo if the weather cooperates and a quilt making event,� said Trew who says the village can count on the continued support of oil companies that do business in the area. “We have some newsletters going out and I know some oil companies have spent some time and money on the centennial projects. We are just kind of kicking it off.�

Kitscoty is an Active, Creative and Engaged or ACE Community in Alberta and hopes to obtain related program funding to complete a walking trail system to link Centennial Park with other parts of the village. The trail will include a safe crossing of the CN rail tracks. ɸ Page B21

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Travis Hutt owner/operator Cell: (306) 487-8120 Bus: (306) 487-2608 Fax: (306) 487-2296 Lampman, SK. Email: huttholdings@sasktel.net

PIPELINE NEWS June 2010

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Real estate booming in Kitscoty ɺ Page B20 The need for the trails is recognized in Kitscoty’s Municipal Sustainability Plan that allows for the development of a new 8.5 acre village property into four one-acre commercial lots.

An additional acre is reserved for a street and utility laneway with the remaining 3.5 acres in use as a public works storage yard.

The new lots went on the market last September but have yet to sell despite the ideal location near the intersection of highways 16 and 897 north to Cold Lake.

“The lots are zoned commercial property so that may be why oilfield-related companies aren’t jumping at it,” said Trew, who has received some recent inquiries.”

The commercial lots are directly west of Automated Tank Manufacturing that started construction of a new fabrication shop in May as that business grows.

“When Automated Tanks started they wanted to provide a clean industrial area. That means there is not going to stuff stored outside except the tanks,” said Trew.

“They plan to build a berm and plant trees on the east side of the site, so there will be separation from the commercial area and it will reduce any noise. It’s all part of the sustainable plan.”

The new commercial lots are built by the village on a cost recovery basis through sales and the price includes servicing that’s meant the replacement of a sewer line – another project that started in May. “The old line is 50 years ago so while we have this opportunity we will put a new line in that will lead to the lift station,” said Trew.

High on Kitscoty’s to-do list is securing provincial and federal funding for an estimated $2.1

million extension of 53 Avenue with Highway 897 one mile north of Highway 16.

“It’s an emergency issue and a convenience traffic issue,” said Trew, who noted if a train were to cross Highway 897 in an emergency two thirds of the village population to the north would have no exit route.

“We are shovel-ready and have been for a couple of years,” he said. “We have been turned down once for federal infrastructure funds.

“We have taken some training in grant application writing and we are hoping that will help us access funding from the federal government, and we have been meeting with the province (Alberta Transport) regularly during the last five years.

“We wanted it built last year. We feel part of the responsibility for the intersection is the province.”

Kitscoty has raised its $700,000 share of the cost including $233,921 worth of clay for road

#6 - 461 King St. • Estevan, SK

building and $433,000 in provincial grants.

The village has also been promised a safe turning lane by the province on Highway 16 for westbound traffic accessing Highway 897 north outside the village limits. Funding for a more expensive overpass solution is also on the horizon.

The intersection is notorious for accidents including a violent mishap last Dec. 22 when an eastbound super-B tanker carrying diesel fuel burst into flames after colliding with rear of a service rig attempting to turn onto Highway 16 from Highway 897.

“That really brought it to the attention of the community,” said Trew. “You could see this black cloud of smoke. If the wind was blowing from the southeast it would have blown right into the village.

“We are concerned about safety as much as the oilfield is and they are the ones who are lobbying with us to get this intersection built.”

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It is an ideal community to raise a family or just the right place to retire.

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PIPELINE NEWS June 2010

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PIPELINE NEWS June 2010

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Husky Upgrader due for a turnaround Calgary – The Husky Upgrader in Lloydminster is scheduled for a 60-day turnaround in the third quarter of this year to undergo maintenance and enhancements.

That news is one of the highlights of Husky Energy’s first quarter results reported on April 27.

Total U.S. and Canadian refinery throughput was 246,400 barrels per day in the first three month of 2010 compared with 236,600 barrels per day in 2009.

“Husky’s midstream business operated at a high level in the quarter,” reported Terrance Kutryk, vice-president of midstream and refined products in a conference call.

“Upgrader throughput averaged 82,100 barrels per day and operating costs were $1.11 per barrel lower than in Q1 of 2009.

“However, earnings were down as a result of upgrading differentials that were $4.20 per barrel lower than in the same period of 2009.”

Husky president and chief executive officer John Lau noted major contracts have been tendered for Husky’s Phase One plant and field facilities for the Sunrise Oilsands project in northern Alberta.

Construction work continues on the East Athabasca highway and with plant site preparation,” reported Lau. A decision on project sanction is expected by the end of the year, with first oil in 2014.

In the first quarter, three additional well pairs were drilled at the Tucker Oil Sands project 30 kilometres northwest of Cold Lake, Alberta. Steaming is expected by the third quarter with production by year end.

In Western Canada, Husky continued to build its position in a number of gas resource plays and now holds more than 946,000 net acres around established assets in the Alberta foothills and northeast British Columbia.

In the first quarter, Husky acquired 22 sections of additional land in the Komie area of the Horn River shale gas play located in northeast British Columbia, adjacent to 24 sections of existing land.

Husky acquired seven sections in the South Bivouac area which increases Husky’s holdings in the Jean Marie/Kakisa plays to 629,700 acres.

In the first quarter, seven wells were drilled

by Husky in the Bivouac area and two wells were drilled in the Ansell area.

On the financial front, Lau reports that results in the first quarter of 2010 reflected a stronger commodity price environment, partially off set by a stronger Canadian dollar and lower product mar-

Novus farms-in at Dodsland Novus Energy Inc. has entered into a farm-in agreement with a private oil and gas company to earn certain key lands within its Dodsland Saskatchewan core operational area.

The agreement will provide Novus with rights to farm-in on an estimated 10,400 acres or approximately 16.25 sections of lands with petroleum and natural gas rights in the Viking formation. With this agreement, and pending the successful closing of the proposed acquisitions previously announced on April 27, Novus will control nearly 70 net sections of land in the Dodsland area.

Under the terms of the farm-in agreement, which has an earning term of four years, Novus will pay 100 per cent of all of the farmor's drilling costs to earn all of the farmor's working interest, while the farmor will maintain an industry standard royalty interest in any production.

Novus has agreed to drill 13 development wells prior to April 30, 2011. The agreement provides for a rolling option to earn the remainder of the farm-in lands.

gins in downstream.

“Crude oil prices have strengthened over the past twelve months while natural gas prices have remained weak,” said Lau in a news release.

“The Canadian dollar relative to the U.S. dollar has increased over that time, reducing the benefit of higher oil prices.”

Husky’s production in the first quarter averaged 296,000 barrels of oil equivalent per day, compared with 2009 first-quarter production of 342,000 barrels of oil equivalent per day.

This is up from 292,000 barrels of oil equiva-

lent per day in the prior quarter.

Total crude oil and natural gas liquids production was 209 thousand barrels of oil per day in the quarter, compared to 250 thousand barrels per day in the first quarter of 2009 and up from 203 thousand barrels per day in the fourth quarter of 2009.

The company's 2010 capital budget is $3.1 billion, focusing on maintaining production and investing in projects in western Canada, offshore Canada's East Coast, and in South East Asia.

Capital spending in the first quarter of 2010 was $734 million.

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PIPELINE NEWS June 2010

SPE president alerts heavy oil to demand challenges

By Geoff Lee Lloydminster – Behrooz Fattahi, president of the Society of Petroleum Engineers was the guest presenter at the Lloydminster SPE chapter technical lunch in May on the topic “Challenges of the Future” as global oil demand increases.

Fattahi is heavy oil development coordinator at Aera Energy LLC, a California exploration and production company jointly owned by affiliates of Shell and ExxonMobil.

He has a PhD in aerospace engineering and a PhD in mechanical engineering from Iowa State University.

This was his first official visit to Lloydminster and said he was impressed by the amount of heavy oil produced in the area and pleased with the level of involvement of the SPE in the heavy oil industry community.

“There is lots of enthusiasm in town and it shows by the number of activities here,” he said in his opening remarks. “I know that every technical presentation in the past has been well attended.

“I am grateful for your attention to the oil industry and what SPE is doing for you as well.”

Fattahi made similar comments to SPE chapters in Calgary, Edmonton and Regina during his western Cana-

dian swing as part of his job to wave the SPE flag and encourage members to speak up for their industry.

“Public education deals directly with the image of our industry,” said Fattahi.

“If we don’t repair that bad image then, young people will not come into the industry, and will not go to petroleum engineering schools, and will not plan to be part of this industry.

“We need to let people know we are here to serve and that we are responding to what society wants us to do – they want energy and oil and they want to keep their lifestyles.”

With that in mind Fattahi began his presentation, stating the oil industry is challenges to sustain our standard of living by finding ways to unlock in place reserves of six to seven trillion barrels of oil.

Most of those reserves are unconventional oil with Canada having 2.7 trillion barrels of unconventional oil in place or 40 per cent of the global supply.

These numbers compare with an estimated 1.2 trillion barrels of oil worldwide that can be produced – putting the industry in a state of urgency as demand grows. ɸ Page B25

Behrooz Fattahi president of SPE delivered a talk in Lloydminster on challenges for unconventional oil.

Photo by Geoff Lee

PIPELINE NEWS June 2010

B25

Reminding the public of supply and demand ɺ Page B24 “The U.S estimates demand for energy will increase 50 per cent by 2030,” said Fattahi. “The gap between supply and demand will grow to 20 million barrels a day in 20 years.”

To step up supply, Fattahi says the challenges are to better manage human assets, promote technology from development to application, improve process optimization, engage in collaborative efforts, and better manage risks and uncertainty.

Asked which one was most important for the heavy industry in the Lloydminster area, Fattahi, replied, “Honestly I think all of them are important.

“Human resources are pretty important because you need people to come here and tackle the tough problems that you have in Lloydminster. If the people with the knowledge and skills and the experience leave, then you are going to be short of people.

“The technology is also important. We need to develop technologies to get even more oil out of the ground.

“You guys in Lloydminster are dealing with a tough problem and you have a lot of experience and knowledge that can be used in other places in the world.

“Heavy oil is a big part of the future. The world needs Lloydminster to produce as much as it can.”

During his formal presentation, Fattahi noted there was no game changing technology on the horizon to unlock high volumes of unconventional heavy oil or oil from bitumen and shale.

He encourages industry to partner with universities, and private and government research labs to develop technology solutions and cut the time from development to actual field application.

He also points out that companies can gain a business advantage by being an early adopter of technology.

On the challenge of process optimization, Fattahi says it is important to have efficient management and to streamline processes to cut waste and add value. He also argues for “bottom up” industry initiatives.

Fattahi notes meeting the challenge of collaborative efforts can expedite progress and cut costs. “We need to nurture an atmosphere of working together,” he said.

His suggested solutions include sharing best practices and initiating research and development consortiums.

The challenge of managing risks and uncertainty is difficult says Fattahi given pressures such as evolving political environments, demand and supply shocks, cost controls, climate concerns and the fact big oil is often a target of public wrath.

“When it comes to oil, the public forgets the economic principles of demand

and supply,” said Fattahi returning to his theme of education.

“The risks and uncertainties associated with the business and the global nature of our industry – we have to continues and be persistent and aggressive in educating the public.”

Fattahi showed the audience a chart showing oil at $70 a barrel is relatively inexpensive even though it is a depleting commodity, compared with many other non depleting commodities that we consume without concern for prices.

An equivalent barrel of anti-wrinkle cream for example, would have a price tag of $16 million and a barrel of ice cream would cost $1,500. There are 42 gallons of oil in a barrel.

“Another misconception of the public is the ownership of so-called big oil,” said Fattahi. “A chart published recently by API shows that 98 per cent of U.S. big oil is owned by the public. Anyone today can be a partner in big oil by buying stocks.

“Since our image can impact young people’s decisions to go into the industry, we must be aggressive in educating the public.”

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PIPELINE NEWS June 2010

Baytex builds its Lloydminster heavy oil portfolio Calgary – Baytex Energy Trust acquired new cold heavy oil assets in the Lloydminster, Sask., area from a private company in April for $40.9 million in cash.

The acquisition gives Baytex approximately 32,000 net acres of undeveloped land and production of about 900 barrels of oil per day from the bought assets.

Specifically, the deal involved the purchase of

shares from an unnamed company paid for by Baytex’s revolving credit facility. The deal is expected to close by the end of May with shareholder approval.

News of the acquisition was included in an investment presentation by Baytex president Anthony Marino at the Raymond James Heavy Oil Conference in New York on May 3.

Baytex Energy Trust is a conventional oil and gas

income trust focused on maintaining its production and asset base through internal property development and delivering consistent returns to unitholders.

The Calgary-based company trades on the Toronto and New York stock exchanges.

Baytex says it is confident its new heavy oil assets and can be readily integrated into their existing producing infrastructure in the Lloydminster area.

In fact, the acquisition does not affect Baytex's current production mix, which is approximately 80 per cent oil.

The purchase leaves the company’s capital budget for exploration and development activities for 2010 virtually unchanged at $235 million, as minor amounts of capital will be redirected toward the acquired assets.

Legacy bats a 1000 Legacy Oil and Gas Inc. drilled 18 (14.2 net) wells with a 100 per cent drilling success in the first quarter of 2010.

Legacy increased its undeveloped land holdings from 21,652 net acres at the end of the first quarter of 2009 to 285,743 net acres at the end of the first quarter of 2010.

The company spent $50.3 million on capital expenditures in the quarter: $31.9 million on drilling and completions, $7.2 million on equipping and facilities and $11.2 million on land, seismic and other.

At Taylorton, Legacy said it continues to be encouraged with its drilling results since it took over operatorship of the property. Refinements to the completion technique have continued to result in better initial production rates compared to the property’s historical average. Legacy operated the drilling of two gross (1.5 net) Bakken wells at Taylorton in the first quarter of 2010.

At Heward/Stoughton, the company has applied completion refinements developed at Taylorton and continues to achieve better than historical initial production rates and water cuts from the Bakken. The company operated the drilling of six gross (5.5 net) wells in the first quarter of 2010.

Nickle’s Daily Oil Bulletin

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PIPELINE NEWS June 2010

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PIPELINE NEWS

C-Section June 2010

Saskatchewan’s Petroleum Monthly

Source to enjoy the ride in the seller’s seat

By Geoff Lee Lloydminster – Houston, we don’t have a problem. Let’s make the deal.

No doubt, that was the gist of a conversation to complete a $25 million Cdn. purchase of Source Energy Tool Services Inc. in Lloydminster by Logan International Inc. in Calgary. The agreeable parent company is Logan Oil Tools in Houston, Texas.

The acquisition benefits Source by opening international markets for its flagship MultiStim Fracture Isolation completion technology used by oil and gas producers for the fracturing of horizontal wells.

It also fits the plans of Logan International, formerly Destiny Resource Services Corp., to grow and add shareholder value as a publicly traded company.

“We intend to aggressively grow this business in Canada and introduce the technology in the U.S. and internationally through our existing network and relationships,” said Gerald Hage, chief executive officer of Logan International.

The benefit of the retrievable MultiStim tool for oil and gas producers is that it leaves a fully open well bore which

Operations manager Sean Campbell from Source Energy (red coveralls) assists with an application of the MultiStim system.

Photo submitted by Sean Campbell

allows for increased production flow and easier downhole intervention, if required.

Source also sells and services downhole products including packers, bridge plugs, fishing tools and services, liner hangers, casing patches and mud motors.

“The attraction of the deal for Logan is our MultiStim isolation system and our service technicians,” said Wade Moorhead, Source’s

chief financial officer.

“We developed the technology here and we’ve expanded in Western Canada, and there is an opportunity for international sales.

“Logan isn’t in the service business right now, so this gives them a foot in the door in Canada.

“I think Logan is in a good position to expand that market. I am quite excited about it. It gives us a lot of oppor-

tunity in international markets that we are not into already.

“It gives us some technical and manufacturing expertise for developing our R and D for other products, plus it helps us in our sales force.

“The Logan organization has a pretty strong sales force, and that’s just going to improve our business. I think it’s an exciting move. I think it’s great for Lloydmin-

ster, and I don’t see us slowing down.”

Source was founded in 2001 in Lloydminster and is known as a leading provider of equipment and services for completion, workover fishing activities and drilling motor systems.

The company has service locations in Lloydminster, Edmonton, Grande Prairie, Kindersley, Bonnyville, Brooks, and a sales office in Calgary.

Source’s newest Weyburn service location is included in the acquisition and Moorhead said, “If anything, we will probably expand our locations.”

Source’s customers include many of the most active senior, intermediate and junior oil and natural gas producers who use horizontal drilling and completion techniques in resource plays such as the Bakken, Viking, Cardium, Montey and Marcellus.

“We have done quite a bit of work already in the Bakken area,” said Moorhead. “The projections are that we are going to continue with existing customers in that area and expand to new ones.”

Moorhead says he thinks clients will have positive reaction to the acquisition, “because now, they will have more support and quality assurance support.”

Logan International will utilize the majority of the Source product line in key unconventional oil and natural gas resource plays in Western Canada.

The company will also introduce the proprietary MultiStim technology into the U.S. initially focusing on the light oil Bakken play in North Dakota. ɸ Page C3

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PIPELINE NEWS June 2010

PIPELINE NEWS June 2010

Source Energy Tools Energy Services Inc., an innovator in the completion technology founded in Lloydminster in 2001, has been purchased by Logan International based in Calgary.

Photo by Geoff Lee

Lloyd. operation now part of larger company ɺ Page C1 Using Source’s existing locations, Logan Oil Tools will also have the ability to boost revenue through an enhanced distribution of its downhole tool products in Canada.

“Additionally, we expect to achieve significant synergies by leveraging Logan International’s engineering expertise and manufacturing excellence and by increasing sales through utilizing the expanded combined distribution systems of Logan Oil Tools and Source,” said Hage.

Logan Oil Tools is one of the largest fishing and rental tool companies in the world, and only recently acquired Destiny Resource Services and its seismic front-end services as a Canadian platform for growth.

With the Source purchase, Logan International will sell a complete line of downhole products including retrieving tools, stroking tools, surface tools, remedial tools and high performance polycrystalline diamond compact cutters and bearings for workover, intervention, drilling and completion activities.

The acquisition was paid in cash in Canadian dollars for all issues and outstanding shares of Source and assumes approximately $1.1 million of indebtedness to the selling shareholders.

The four principle owners of Source will be retained with signed non-competition agreements, and the existing principles will be entitled to earn an additional $4 million over two years if sales targets are met for their horizontal multi-fracturing tool and services division.

Moorhead was unsure the day after the news broke, if he would continue to be CFO or if Don Turner would remain as Source’s president, but he noted, “It will be business as usual, and we are going to add some personnel to our operations to fill some gaps that we have and we are going to push forward.”

As for a business name change, Moorhead said, “I think we will continue to operate as Source Energy Tool Services. We might have to disclose on our letterhead that we are a division of Logan International. I think they realize there is some goodwill there amongst our customers.

“Will we continue to develop new tools? Absolutely. That is the cornerstone of our business. If we don’t develop new tools and technology for the downhole industry, our business would stagnant.”

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C4 PIPELINE NEWS June 2010

Alberta Energy minister vows to streamline regulations

By Geoff Lee

Q

&

A

with Alberta Energy Minister

Ron Liepert

AS LOW AS

AS LOW AS

Lloydminster - Alberta’s energy minister Ron Liepert, who was born and raised in Saltcoats, Saskatchewan, spoke with Pipeline News about new pending oil and gas regulations during his visit to Lloydminster on May 3.

Questions about oil and gas regulations are timely as the Alberta government has formed a Task Force on Regulatory Enhancement chaired by Parliamentary Assistant Diana McQueen.

The task force will complete a full review of the natural resource regulatory system in Alberta by the end of the year.

Q: What kind of regulatory enhancements are forthcoming for the oil and gas industry?

A: It’s a difficult question to answer because what we’ve done is to set up a joint industry/government task force chaired by an MLA (Diana McQueen).

We are focusing on three departments of government – Sustainable Resource Development because of the land issue, Environment and then Energy which includes the ERCB (Energy Resources Conservation Board).

The task force will issue a final report by the end of this year, and a progress report within the next month or so. Their task jointly with industry is to hear concerns that industry has expressed and then make recommendations for change.

I think the one concern that I’ve heard most often from industry is the duplicative processes that industry has to go through. As an example, they may make their application with the ERCB, go through the whole processes, which may take a year, and they

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have to start all over with Environment. We need to look at ways of streamlining those applications and that’s going to be the task force’s role.

Q: Will new regulations apply to light oil and heavy oil?

A: Yes, they will apply across the board including oilsands.

Q: What’s the number one issue you hear in your travels? Is it royalties?

A: I think regulations more than royalties. We have made some moves on royalties, and we are going to make some other adjustments. I think if you talk with industry, they will say that’s it’s regulations that are hampering them from doing business more than anything else. It’s the amount of duplicate and triplicate processes they have to go through.

Q: Do you think there are too many regulations?

A: Absolutely. I think we just need to streamline processes, and that’s what we’re going to do.

Q: Are any of these regulations a reaction to the recent oil spill in the U.S. Gulf Coast?

A: No. What we did almost a year ago now was commence something called the Competitiveness Review. We wanted to see how Alberta stacked up against not only Saskatchewan and British Columbia, but with a number of states in the U.S. The one thing that we found was that our regulatory burden was heavier than in other provinces and the U.S. Some of that is understandable because of the history in Alberta, but some of it is lack of attention to let regulations build up, and they are not necessary. ɸ Page C5

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PIPELINE NEWS June 2010

Regulations discussed ɺ Page C4 Q: What is the thrust behind the new regulations?

A: The thing we have to understand is that this is not about lowering standards. It’s about ensuring industry doesn’t have to be repetitive when they are getting things approved. So it’s more streamlining – not lowering standards in anyway.

Q: Do the regulations apply to environment, safety and production?

A: It’s all of those but again, it’s not a matter of lessening the standards for environment or for safety. It’s about ensuring that all of those things are taken into context when you go through the regulations and process – not individually with different departments.

Q: Is there any move toward inter-provincial standardization of regulations?

A: We have to look at three provinces. You are probably aware that recently, our premier was in Regina and the three western premiers have signed this economic partnership agreement (New West Partnership).

The intent there is to determine what are things that individual governments in the three provinces have imposed that aren’t consistent with the other provinces – how can we streamline some of these things?

I have invited my Saskatchewan and British Columbia counterparts to the Global Petroleum Show in Calgary in June ( June 8-10). I would like to sit down when them and ask ‘what are some of the things that are different for Saskatchewan versus B.C. and Alberta’ and ‘can we standardized some of this stuff?’

Industry moves back and forth. Why does industry have to have different rules in different provinces? I think now with the three governments thinking very similarly, it’s time to make some of those changes.

Q: What brings you to Lloydminster?

A: Two things. I was asked by the Lloydminster Oilfield Technical Society to speak to their group tonight (May 3) encouraged by Lloyd MLA Ed Snelgrove to do that, and I am happy to do that. It also gave me the opportunity to spend a couple of hours to visit the Husky Upgrader and get a better sense of what Husky’s investment is in this part of the province.

It’s very impressive.

Q: How is the switch from the health ministry to energy?

A: It’s very different to go from the department that spends most of the money to the one that earns most of the money. Health is very passionate issue for every Albertan so you got very attached to that portfo-

lio. Energy is different.

It’s a portfolio where you are dealing with people who are just interested in getting the job done. I wouldn’t say that one was more important or more rewarding than the other.

They are just different.

Alberta Energy minister Ron Liepert says new oilÀeld regulations will apply across the board.

Photo submitted

, ASME

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PIPELINE NEWS June 2010

PIPELINE NEWS June 2010

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First regulations report by stakeholders due in June

By Geoff Lee Edmonton – One day after Alberta Energy Minister Ron Liepert spoke with Pipeline News in Lloydminster about oil and gas regulations, his ministry announced the provincial Regulatory Enhancement Task Force will engage stakeholders in the review process.

A series of ongoing stakeholder meetings up to this fall will allow representatives from industry,

Symposium ahead with one deadline down Lloydminster – Hurry up and wait. That’s the mode for organizers of the 2010 Heavy Oil Technical Symposium to be held in Lloydminster September 15-16 as they await last minute submissions of presentation topics.

The final deadline for the submission of speaker abstracts and biographies to the Lloydminster chapter of the Society of Petroleum Engineers (SPE) expired May 31 on the theme, “Challenge, Opportunities, Change.”

The topics to be selected for the 17th annual symposium will cover a broad range of interests from new innovations for the future and field research and pilot studies, to workover techniques, production issues and relevant case studies.

The symposium will once again be held at the Stockade Convention Centre and should draw a large crowd and follow a proven formula for success.

Presentations on

heavy oil issues are short but informative with questions and answer exchanges following each speaker.

No formal papers from the symposium are published, although printed copies of slides presentations may be handed out and registered attendees receive a handy guide book.

Those who attended last year may also recall the timely presence of banquet guest speaker and champion curler Kevin Martin from Alberta.

Martin and his rink went on to win the gold medal at the 2010 Vancouver Olympics thanks in part to the hefty round of applause he drew from his oilmen fans in attendance.

This year’s banquet speaker has yet to be announced but fame could await their performance too.

In the meantime, check the SPE website at (specanada.org/Lloydminster) for further contact information.

landowners, municipal and environmental groups to have a say in how the government can improve the oil and gas regulatory system.

“Alberta is committed to addressing delays and unnecessary complexity in the oil and gas regulatory system,” said Energy Minister Ron Liepert in a news release.

“Our initial focus will be on addressing the process. We want to engage a wide range of stakeholders to find an efficient process that continues to maintain high environmental standards and respect landowner rights.”

Written submissions can also be made through a link at the Alberta Energy website that will be updated regularly.

“I look forward to working together with many interested groups to improve Alberta’s competitiveness,” said Task Force chair and Drayton ValleyCalmar MLA Diana McQueen.

“Regulatory enhancement means having a sys-

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The task force has also named Gerry Prottias an industry advisor and recently, a former executive advisor with Cenovus Energy to support the review.

Protti brings 35 years of experience on regulatory and environmental issues to the task force and was the founding president of the Canadian Association of Petroleum Producers (CAPP), as well as a former Assistant Deputy Minister with Alberta Energy.

The first progress report will be delivered to government by the task force in June. This will include progress on implementation of near-term regulatory enhancements; changes to support deployment of innovative, new technologies; and the process for comprehensive review of the regulatory system, with specific milestones and measurable objectives.

A final task force report will be delivered to government by Dec. 31.

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PIPELINE NEWS June 2010 Mayor Gordon Hall expects the stadium at the agriculture grounds will be full for the chuckwagon races at the town fair June 4-6.

St. Walburg growing Story and photos by Geoff Lee St. Walburg – It’s not often that a municipal office building is for sale, but that is the case for the Town of St. Walburg.

The town has found roomier quarters next door to keep pace with growth driven by oil and gas activity, agriculture and tourism.

St. Walburg is located on Highway 26, one hour north of Lloydminster on the northern fringe of heavy oilfields with potentially large reserves of natural gas underfoot along with pockets of light oil.

There is also an abundance of recreational lakes and farms to sustain community growth year round.

“The town booms in the winter with seismic, and in the summer with tourists,” said Mayor Gordon Hall who teamed up with administrator Susan Hamm for an interview with Pipeline News.

The assignment led off with questions about the sale and move that began that morning of May 11.

“We are actually starting to move today, and we will continue for a couple of days,” said Hamm. “We are very excited. It will be a very big undertaking. We plan to be open by May 17.”

The new town hall office was offered for sale by Synergy Credit Union that moved to a new downtown location and gives the town space for a library with wheelchair accessibility.

“We get a lower level entrance and we’ve got more storage. It got to the point where our building needed some major work,” said Hall.

The first day of moving week was the also the final council meeting at the old town hall but, Hall didn’t expect much nostalgia.

“It will be business as usual,” he said adding, “it’s been an exciting time in the community. We have some major projects.”

Topping the list is the pending construction of a new biological water filtration system using microbes to eliminate ammonia levels and the amount of chlorine currently added to treat drinking water.

The town was awarded a $783,000 grant from the Canada-Saskatchewan Municipal Rural Infrastructure Fund toward the approximate $3 million cost of the upgrade.

“The piloting is over and now we are waiting for construction approval,” said consultant Hugh Mack from Associated Engineering in Edmonton who was on hand to update the project. ɸ Page C9

PIPELINE NEWS June 2010

C9

St. Walburg seeks more commercial space ɺ Page C8 On the to-do list is a plan to acquire a 2.5 acre site from Imperial Oil for badly needed commercial development at the south end of town with highway frontage. The property is fenced and currently off limits due to soil contamination.

“Downtown commercial we have space for, but the oilfield companies need highway frontage,” said Hamm. “We need highway commercial. You are working with big trucks and they want easy access.

“We are going to have to do something. If we had that Esso property, we could do a better plan.

“We have contacted Devon Estates (manager of Imperial Oil’s surplus properties) and we have contacted our MLA who is going to look into it.”

“Council has been good at being a business friendly community,” added Hall. “The new oilfield service businesses have dramatically added to the town’s tax base.”

Hall added, “I would have to take you around and show you the number of new buildings and the people that are employed in the oilfield” to fully understand the impact of the industry on the town.

“It starts off with RJ Hoffman (oilfield service

Town ofÀce for sale: Administrator Susan Hamm began moving her equipment to a new building next door with room for a town library.

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trucking) who started here. They are local boys and now they have a big operation in Lloydminster as well.”

Rick Sim Trucking Inc., Marshall’s Field Ambulance, C.J. Seguin Trucking and Wesco Services Ltd. ready mix are among the active and growing list of oilfield service companies.

“We still have a number of farmers that are working in the oilfield in order to keep their farms going, but they don’t want to give up their farming,” said Hall.

“The oilfield has brought a number of people in who find our lakes so beautiful.”

St. Walburg is awash with motels and restaurants to accommodate visitors, work crews and newcomers.

“Originally, it was big game hunters, and then in comes the seismic crews and the drilling crews and more rooms were needed,” said Hall.

“The business community has met that need quite well. There are a lot of motels because of the oil activity.”

There are just over 800 people living in St. Walburg today, and more are welcome as the town has an inventory of more than 20 serviced residential lots for sale in its newest subdivision.

“As for who has been buying, Hamm says it’s mainly young families who want to move out of the big city.

“It’s a good area for young families. I think it’s very friendly and outgoing,” she said. ɸ Page C10

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PIPELINE NEWS June 2010

St. Walburg aims to remain a livable community ɺ Page C9

petition backed by the United Nations’ Envi“There is a real sense ronmental Program. of community pride here The town is also fawith a lot of volunteer- mous for its summer fair ism. Those who come that goes head June 4-6 into town really notice this year with a parade and chuckwagon races. that.”

The 2010 Blueberry St. Walburg boasts a K-12 school and a medi- Festival will be held Aug. cal clinic that includes a 27-28 and is expected to nursing home for elderly draw more than 5,000 people to town for the residents.

“We have slowed annual celebration on down on retirements,” the main street.

“Tourism is a big noted Hall. “We have some retired farmers factor in town,” said coming in but it’s young Hamm. “Our biggest atfamilies mostly. It’s a liv- traction is how close we are to surrounding lakes. able community.”

St. Walburg won We have Bright Sand back to back awards for Lake and Turtle Lake being one of the world’s that aren’t far from us. most sustainable com- They have great fishing munities in 2007 and and boating.”

The list of in-town 2006 in a global com-

Consultant Hugh Mack, councillor Tony Leeson and public works manager Brian Hayes discuss the biological water Àltration pilot project at the treatment plant.

attractions includes the St. Walburg and District Historical Museum and the Imhoff Art Museum Art Gallery and Farm House.

The latter is named for famous German immigrant painter Count Berthold Von Imhoff who settled in town in

the early part of the last century.

Local modern day artist Susan Velder created a life size statue of the artist on horseback located at the welcome sign on Highway 26.

St. Walburg is also a recreation destination with the popular Eagle

Ridge Golf Course, Centennial Park and a network of hiking trails including a section of the Trans Canada Trail.

“We have a large communiplex with a fairly new bowling alley, a curling rink and a hockey rink. It’s a hockey town,” said Hamm.

PIPELINE NEWS June 2010

C11

Last summer, crews were busy building new facilities for TransCanada Corp.’s Keystone Pipeline at the Hardisty Terminal.

Photo by Geoff Lee

NEB pipeline approvals in the public interest B Byy G Geoff eoff ffL Lee ee Calgary – National Energy Board (NEB) rulings on interprovincial and international pipeline applications are similar to the proverbial scales of justice measuring a case’s opposition and support.

Projects get the go ahead when the NEB hears all the evidence from intervenors, letters of comment and oral statements, and decides the benefits of the project outweigh the burdens.

That is the case for TransCanada Corporation that got the green light from NEB on March 11 to construct and operate the Canadian leg of the Keystone XL pipeline from Hardisty, Alberta to the U.S. border at Monchy, Saskatchewan.

The decision followed a public hearing in Calgary by the NEB from Sept. 15 to Oct. 2, 2009.

In its news release, the NEB stated that it found the proposed pipeline “to be in the public interest and accepted that the project would connect a large, long term and strategic market for Western Canadian crude oil with the U.S. Gulf Coast in a manner that would bring economic and other benefits to Canadians.”

In 2007, the NEB approved an application from TransCanada Corp. to build its original Keystone pipeline after concluding that project’s benefits outweighed its burdens.

Thee latest Th latest Keystone Keystone XL applicaappli lication examined the merits of constructing 529 kilometres of pipeline and related facilities, including pump stations, tanks and other related works and activities.

TransCanada hopes to begin construction of the pipeline project in Canada by middle of this year and complete the project by 2012.

This Alberta/Saskatchewan portion of pipeline would have an initial capacity of 700,000 barrels of crude a day expandable to 900,000 barrels per day.

Work will take place simultaneously on different sections of the system in Alberta and Saskatchewan with crews of up to 500 to 600 workers per section.

The NEB’s approval to proceed with this project includes 22 conditions, which all must be met before TransCanada will be granted permission to open and operate the pipeline.

Key conditions target safety, protection of the environment and landowner rights. The NEB also imposed an obligation to monitor greenhouse gas (GHG) emissions.

At least 60 days before construction can start, TransCanada must file an assessment of the greenhouse gas emissions to directly result from the XL pipeline and associated facilities. It must also account for emissions vari-

Introducing:

abl bles and d provide provid ide mitigation miitiga i tion i measures. measures ables The full pipeline extension will run through Saskatchewan, Montana, South Dakota and Nebraska. It will then link up with up with a section of the Keystone pipeline to be built through Kansas, and Oklahoma, all the way to the U.S. Gulf coast in Texas.

The NEB approval for the Keystone XL only concerns the $1.7 billion Canadian segment along with authority to approve pipeline shipment fees called tolls and tariffs.

Applications for U.S. regulatory approvals to the construct the line are proceeding and decisions are anticipated during the fourth quarter of 2010.

TransCanada reports construction on the U.S. extension is expected to begin in the first quarter of 2011 with deliveries of crude oil to the U.S. Gulf Coast to begin in the first quarter of 2013.

Upon completion, the Keystone pipeline system will include the 3,461

killometre K ki eystone pipeline piipeli line and d the h kilometre Keystone 3,134 kilometre Keystone XL line or Gulf Coast Expansion Project as it’s also called.

The NEB approval of the Keystone XL pipeline comes at a time when some U.S. refineries are publicly reporting plans to get out of their shipping contracts for oilsands crude.

They claim the XL line adds to over capacity, and fear construction cost overruns could lead to toll hikes and higher gasoline prices at the pump.

NEB spokesperson Paul Lackhoff says if the application hearing were being held today, “We would listen to those arguments about over capacity or over supply or under supply.

“At the end of the day, we would make a decision. Presumably, instead of someone saying ‘There is XYZ’ hopefully, they would provide some evidence too. We look at each project on its own merit.” ► Page C12 Troy Illingworth Cell: (780) 808-3183 Tim Sharp Cell: (780) 871-1276

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PIPELINE NEWS June 2010

Journeymen can train more apprentices Regina – A skilled labour shortage has been a persistent issue in the oilpatch in recent years, and now the provincial government is moving to alleviate the problem.

Changes were announced May 11 to the Apprenticeship and Trade Certification Regulations, 2003 which will allow employers to hire additional employees to meet the needs of the growing economy and labour mar-

ket, the government said in a release.

The Ministry of Advanced Education, Employment and Labour (AEEL) on the recommendation of the Saskatchewan Apprenticeship and Trade Certification Commission (SATCC) has amended the regulations which set out the required ratio of apprentices to journeypersons for each job.

In the past, the ratios

in most trades had been one apprentice to one journeyperson. The new amendments will: • increase the number of apprentices per journeyperson, from oneto-one to two-to-one in 27 of the 47 trades and 16 of the 23 sub-trades; • exclude final level apprentices from the apprentice to journeyperson ratio requirement in all trades and sub-trades; • and enable jour-

neypersons to receive training and certification to complete work in a related compulsory trade.

“Saskatchewan has a growing need for skilled tradespersons, and these amendments are another way our province is meeting the needs of the economy and labour market,” Advanced Education, Employment and Labour Minister Rob Norris said.

“The SATCC and industry stakeholders have

indicated to us their desire for ratio changes. We are responding to this feedback with the confidence that Saskatchewan will continue to maintain a high quality of skilled trades standards.”

Consultations were conducted by the SATCC from in July 2008 to determine the apprenticeship ratios to be amended to assist employers in meet-

ing skill shortages. AEEL undertook further consultations between May 2008 and October 2009.

The SATCC expects that apprentice numbers will grow over time as a result of this change. The Commission's mandate is to provide training for apprentices and they continue to ensure that apprentices receive training opportunities.

NEB looks at Mackenzie Valley ɺ Page C11 Decisions are based on a review of factors such as the economic, technical and financial feasibility of the project along with the environmental and socioeconomic impacts of the development.

“We ultimately look at whether the pipeline is in the public interest,” said Lackhoff. “Are there markets and is there supply?”

In addition, the NEB audits and inspects the construction and operations of pipelines to ensure engineering, safety and environmental requirements are met.

As a national regulator, NEB oversees the construction and operations of international power lines and designated interprovincial power lines.

The NEB also authorizes energy exports (oil, natural gas, natural gas liquids and electricity) and imports of natural gas.

The NEB’s application caseload includes a pending decision on the Mackenzie Gas Project specifically, the construction of a proposed 1,220 km natural gas pipeline through Canada’s north.

The NEB began hearing evidence back in 2006 on five applications filed by Imperial Oil Resources Ventures Ltd., the Mackenzie Valley Aboriginal Pipeline Limited Partnership, Imperial Oil Resources Ltd., ConocoPhillips Canada (North) Ltd., Shell Canada Ltd. and ExxonMobil Canada Properties.

During the final argument phase that began April 12, 2010 for the McKenzie project, each applicant or intervenor in the NEB hearing process has the chance to make their case for or against the project. It’s the same process for all pipeline applications.

Final arguments must be based on evidence that has already been presented to the NEB. “It’s a very open process,” said Lackhoff. “All the material is posted on the website.

“There will often be an audio feed over the Internet, too, during the hearings. The public can attend the hearings.”

The submissions deadline for the Keystone XL hearing was June 9, 2009, for intervenor applications and July 30 for letters and oral presentations.

The record of evidence archived online includes a 2009 letter from the Federation of Saskatchewan Indian Nations arguing stakeholder and public hearings don’t qualify as consultation according to Treaty Rights. ɸ Page C13

PIPELINE NEWS June 2010 Rge-12W4

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This map is an illustration of the proposed Keystone XL Pipeline Route as of July 28, 2009.

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KEYSTONE XL PIPELINE PROJECT Canadian Section

C13

TPL154-01-104 Rev. 11 Based on July 28, 2009 Route

The NEB approved the construction of the Keystone XL pipeline to run from Hardisty Alberta to Monchy, Saskatchewan with 22 conditions.

Map submitted

The NEB has approved the Canadian leg of the Keystone XL pipeline following public hearings last September in Calgary. The NEB approved the original Keystone pipeline shown on the map in 2007. It’s up to U.S. regulators to okay construction of the XL line from Montana to Texas.

Map submitted

A posted written final argument from the Sierra Club of Canada argues the environmental and socio-economic assessment for the pipeline is inadequate and the application should be denied.

“If you want to give formal evidence you have to register as an intervenor, and then you can present your evidence whether that is for, against or neutral,” said Lackhoff.

The full list of intervenors for the Keystone XL hearing on record on the NEB website includes individuals, companies and organizations such as the Canadian Association of Petroleum Producers and the Communications, Energy and Paperworkers’ Union of Canada.

“We will come up with a list of issues and that is going to be determined by submissions to the NEB,” said Lackhoff. “We don’t go

with any pre-conceived – that we’re only going to look at XYZ. “Essentially the NEB comes up with a list of issues that’s

agreeable to all parties. They go through a hearing, listen to all evidence and at the end of the process, they make a decision.”

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PIPELINE NEWS June 2010

Teens cut their teeth for welding in ATM

Students St tud uden dentts ts E Ethan than th an O O’Neill ’Nei eill ill a and nd dK Kyle yle yl le Gr G Graham rah aham ham llearned earn ea rned d tthe he s he skills kill ki lls ll s th they ey n needed eed ee ded to ded to win trophies and medals at a regional Skills Canada competition from their journeymen co-workers at Automated Tank Manufacturing.

Photos by Geoff Lee

Kitscoty – The kids are alright. Kitscoty Junior and Senior High School students Kyle Graham, 18, and Ethan O’Neill, 17, are the youngest welders on the payroll of

Automated Tank Manufacturing (ATM), in Kitscoty and two of the quickest learners.

Graham and O’Neill finished first and second respectively at the 2010

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Lakeland Regional Skills Canada Competition in April for aspiring welders to demonstrate their knowledge and skill of welding and oxy-fuel cutting principles.

The competition is the only national, Olympic-style, multi-trade and technology competition for young students and apprentices in the country.

The regionals qualified them for the provincials held in Edmonton May 11-13, where they finished out of the med-

als while fueling their interest in becoming journeymen.

O’Neill plans to get his journeyman ticket, then study welding engineering at SAIT. Graham vows to start apprenticing with ATM in the fall and attend trades classes at Lakeland College in Vermilion.

“My plans are to continue working, get my journeyman, and just keep on doing that. I love it,” said Graham as he and O’Neill were starting a shift at ATM. “There are great guys here, good people to work for and I love the welding part. I like learning new things all the time.”

Both teens may give the provincials another crack next year in Edmonton where O’Neill finished eighth and Graham in 10th in a field of 22. Next year, Graham can compete in the post secondary competition.

“There was a lot of pressure,” said Graham about the provincials.

“It was different than it was in Vermilion. It was different setting. It was a good experience that’s for sure.”

Each of them credits their showing and career interest in the trade to their after school work experience at ATM that began in October 2008 for O’Neill, and two

months later for Graham.

“They taught me everything. I didn’t know how to weld before,” said O’Neill. “I applied here to clean up and one guy asked me if I wanted to learn how to weld and I took the opportunity.

That guy is not with us anymore, but the guy who filled in showed me how to do all the stuff.”

Ditto the endorsement of his co-workers from Graham who said, “I had a little bit of knowledge about welding before I started, but that’s grown majorly.

“You have to do every position of weld here, eventually. They’ll get somebody who is doing it and they will say ‘come over and I will show you how to do it. You might as well practice here because if you screw up we can fix it.’

“The guys are great.

You go ask anybody and they will do their best to show you how to do it.”

ATM manufactures 750 and 1,000 barrel tanks with just-in-time manufacturing using manual welding and robotic devices for lengthy horizontal and vertical welds.

O’Neill and Graham were required to cut and weld the letters S and C for Skills Canada and affix the letters to a base in a six-hour project judged on criteria such as quality, appearance, curves

and straight arcs.

Technically, they describe the test welds as: a flat 6010, fill and cap, Mig route, 7018 uphand fill and cap and lap joints with four welds (Mig uphand, 7018 uphand, 6010 horizontal and Mig horizontal).

Their confidence was boosted by the volunteer mentoring they received

by ATM’s journeymen welders prior to the regionals.

“They’ve helped me with anything I have had problems with,” said O’Neill. “One of the guys that was my lead on nights – he came in on Saturday on his own time and helped me practice for the Skills Canada. I was pretty appreciative of that.”

As for his first place position, Graham remarked, “I was pretty shocked. I didn’t think I would be that good.”

Graham says he and O’Neill were friends before they starting working at ATM and noted, “As we have we have worked here we have gotten to be better friends.

“Right before we went in, I told him ‘I hope you get first’ and he looked at me and said ‘I hope you get first.’ Whoever won, we were hoping it was one of us anyways.

“I thought Ethan would do better than me.

I guess it’s however the judges worked it out.”

Phone# (780) 874-9900 Desi Latimer Cell : 780-214 - 8311

Grade 12 student Kyle Graham is hooked on welding after landing an after- school job at Automated Tank Manufacturing in Kitscoty.

PIPELINE NEWS June 2010

C15

Energy regulator stirs tailings pond controversy Edmonton –Directive 74 introduced a year ago by Alberta’s energy regulator to reduce oilsands tailings ponds has failed its first major credibility test.

The Alberta Energy Conservation Board or ERCB conditionally approved applications by Suncor Energy and Syncrude Canada Ltd. to construct tailings ponds projects but admits the Syncrude projects “did not fully meet ERCB requirements” in its April news release.

The two tailings projects are the first of those submitted by six oilsands operators in September, 2009, for ERCB review.

“Despite the tough talk about cleaning up tailings, Alberta has accepted a plan from Syncrude that does not comply with its own rules to clean up tailings waste,” said Joe Obad, interim executive director for Water Matters.

Under the new rules, operators are required to re-

port on their ponds annually, reduce the accumulation of tailings by capturing fine particles and specify dates for construction, use and closure of tailings ponds.

The ERCB however, has placed six conditions on its approval of Syncrude’s Mildred Lake site 40-km northwest and Fort McMurray and the Aurora North site 80-km northeast of Fort McMurray.

The conditions relax the allowable percentage limits of fine tailings in ponds along with the timetable to comply with the new standards.

Directive 74 states companies must capture 20 per cent of fine tailings as solid material by June 30, 2011, 30 per cent a year later, and 50 per cent a year by 2013.

At the Mildred Lake site, Syncrude is allowed to meet a “fines capture” target of just 9.3 per cent this year, 14.6 per cent next year and 34.6 per cent by 2013-

14 – a ruling that irks Simon Dyer, the Pembina Institute’s oil sands program director.

“Oilsands environmental regulations should not be negotiable,” said Dyer.

“Not enforcing environmental rules stifles innovation and the clean up that is required, is unfair to companies that are proposing to address the tailings problem, and further damages Alberta’s and Canada’s reputation.”

Syncrude is currently in the design stage of its tailing plants at Aurora and plans to have the plant operational by 2014 when it will be compliant with Directive 74.

Syncrude currently uses composite tailings technology to convert fluid tailings to a solid deposit.

The company successfully argued it needs more time to develop new technology to meet new tailings standards.

In fact, Syncrude spokesperson Cheryl Robb told Reuters that it will cost hundreds of millions of dollars. to build the plants to meet Directive 74 requirements.

Syncrude will build a commercial demonstration plant at Mildred Lake for mature fine tailings centrifugation process that separates tailings into water, clay and silt by August 2012 and build another one at Aurora North.

The ERCB has also imposed two conditions on Suncor’s Fort Hills tailings pond project, now in the pre-construction phase. The conditions apply to technology testing and tailings management.

Fort Hills, located 90-km north of Fort McMurray is a partnership project of Suncor, UTS Energy Corp. Teck Ltd. and Fort Hill Energy Corp.

The ERBC is also reviewing the tailings plans submitted for approval by Albian Sands Energy Inc, Canadian Natural Resources Ltd. Imperial Oil Resources Venture Ltd. Shell Canada and other plans by Suncor.

Directive 74 also requires oilsands operators to convert fine fluid tailings into reclamation-ready deposits five years after no more deposits are made.

Alberta Premier Ed Stelmach is on record saying he intends to “force an end to tailing ponds” that have grown to cover over 170 sq. km and contain 840 million cubic metres of fine fluid tailings.

Tailings are created during the oil sands extraction process and are a mix of water, residual bitumen, sand and silt, and undisolved chemicals.

Tailings ponds pose an ongoing threat to surface water and groundwater through seepage, could become pose a risk to wildlife and water fowl.

In 2008, 1,600 ducks died after landing on one of Syncrude’s tailing ponds.

The company has pleaded not guilty to a variety of provincial and federal charges and the case has gone to trial this spring.

C16

PIPELINE NEWS June 2010

PIPELINE NEWS June 2010

C17

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PIPELINE NEWS June 2010

Try-a-Trade aimed at bright-eyed student Lloydminster –The inaugural Bi-Provincial Try-a-Trade Career Expo held in Lloydminster in early May would have been the perfect opportunity to reconstruct the city of Rome – in just one day.

The host Exhibition Grounds Expo was teeming with trades organizations, trades educators and trainers and employment recruiters eager to engage more than 1,400 regional students from Grade 9 to 12 who came to ponder trades careers.

It was also fitting that the event took place while qualified journeymen from a variety of trades were hard at work on the new addition to the exhibition complex.

The Try-a-Trades event was the mastermind of the Lloydminster Construction Association and Dorothy Carson, the executive director, said it’s going to become an annual event.

“We have had a positive reaction to it both from the employers and the school divisions – it’s been phenomenal,” she said while greeting visitors.

“Lakeland College and SIAST have worked together to bring more booths and Try-a-Trade demos for the kids to get a look at.

“A lot of people in the trades are saying they didn’t have the information they needed at a young age so we are trying to promote the trades.

“The workers that we have today are aging, and we do need the youth coming up and taking their place.”

Paul Blankestijn, a youth apprenticeship consultant with the Saskatchewan Apprenticeship and Trade Certification Commission, said there’s a huge shortage of skilled workers in Saskatchewan including the oil and gas industry.

“The oilfield is huge with the demand for oil, and we have a couple of trades that are very significant in the oilfield including the rig technician and pipefitters.

The interest from students is good and, of course, with the demand for skilled labour, it increases every year.”

The Apprenticeship and Trade Certification Commission offers training in 47 different trades in Saskatchewan, and Blankestijn said there is a demand for every one of them.

“We have a significant problem – it’s the retirement age with folks that are in the trades,” he said.

“That’s a big part of our mission here is to encourage our young people in high school to get involved in the trades so they can qualify to get these jobs once retirements happen.”

Earl Greyeyes, a job coach at the Battlefords Industrial Career Centre for the Saskatchewan Indian Institute of Technologies (SIIT) in Saskatoon, said a lot of the questions he gets asked by First Nations students are about jobs in the oil and gas industry. ɸ Page C19

Dorothy Carson, executive director of the Lloydminster Construction Association, reports more than 1,400 students attended the Try-a-Trade Career Expo to learn about careers in trades.

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C19

Employers and hopeful employees meet ɺ Page C18

school.”

Gerry Wilkins, maintenance plan“There is lots of interest from Ab- ning supervisor for Tartan Canada original people looking for employ- Corp. in Lloydminster, is hoping the ment in the oil industry,” he said. career expo will encourage students “The more training that we can to become third and fourth year millprovide for them, the more employ- wrights and auto engine mechanics on ment opportunities will arise for the their hiring list. individual going into the oil industry.

“We have met lots of students who “From our location in North Bat- don’t want to be mechanics, but there tleford, we are dealing a lot with car- are a few who have shown an interest pentry and welding, and we are also in the mechanical trades,” he said. dealing with heavy equipment operator “This show is a chance to showcourses, and any other courses SIIT has case what we do in Lloydminster, and to offer. attract some people like some of those “Every class that we have put on apprentices we need.” has been filled to capacity, and that’s Tartan is a company focused on the from our seven First Nations surround- mechanical maintenance on wellhead ing the Battlefords area.” drives, engine skids and their primary Richard Bennett, a career employ- customer in Lloydminster is Husky ment consultant with Alberta Employ- Energy. ment and Immigration, one the major A recruiter for Flint Energy Serfunders of the career expo, views these vices Ltd. in Cold Lake, Mike White exhibits as a great way for students in said Flint employs welders, pipefitters, Alberta to think about trades as a ca- gas fitters, iron workers, electricians, reer option. and heavy equipment operators.

“We wanted our students to know “We are into commercial constructhey could come here and get a hands- tion as well so we hire plumbers, caron experience with the trades. penters – you name the trade, we likely “Students can take with employers have a home for them,” he said. and ask them want the requirements “We are very much focused on the are, and how they go through the education sector, so we support growth trade,” he said. and employment through the education Maureen Sander, a contract re- system – indenturing students – going cruiter for Cenovus Energy in Cold from apprenticeship to journeyman.

Lake, employed a Frisbee giveaway to “We have had quite a few studraw students to her booth and the dents drop by and ask questions. They ploy worked. are quite surprised by the size of Flint.

“We have had a lot of students We have 60 sites across Western Cancome by to find out what the operation ada and the U.S. We employ just over is all about and where we are located,” 10,000 people.” said she.

Stan Bugiera, a trade qualification “At our operations at Christina officer with Alberta Advanced EduLake and Foster Creek (northeast Al- cation and Technology said, “we still berta), we employ journeymen mill- haven’t made the impression that the wrights, electricians, instrumentation trades are a viable career option. people, gas fitters, pipefitters. We also “We favor doctors, lawyers, airline look at hiring operators for power en- pilots. We are saying, get a trade first. gineering.

“A lot of employers are filling the “We always like the opportunity to need by going overseas and recruiting talk with kids who are thinking about immigrant workers. starting off their careers. There is really “We are trying to promote trades good opportunity for growth and ad- as a viable career to the aboriginal folks vancement in the oil industry. and the young women who are out “We believe the future for us is there too. These events are an opportuthese kids here who are coming out of nity to expose young people to trades.”

Earl Greyeyes representing the Battlefords Industrial Career Centre, Àelded a lot questions about trades opportunities for First Nations students.

C20

PIPELINE NEWS June 2010

Sim Trucking driven by staff know-how and teamwork Story and photos

by Geoff Lee St. Walburg – The Town of St. Walburg is quiet and that allows Rick Sim to keep his ear close to the ground to hear about business opportunities that could come his way.

Sim is the owner of Rick Sim Trucking Inc. and he said, “I’m hearing lots of talk that activity is supposed to pick up considerably, but we will wait to see that happen.

“We are busy right now, but it’s been up and down over the last year and a half.”

Sim Trucking has 34 owner-operators on the payroll to haul produced fluids and oils and provide fluid for service rigs in the heavy oilfields to the south.

The local company also owns a couple of tractor units and smaller

vehicles including a pup trailer to haul equipment around.

“Our main customer is Husky,” said Sim. “We are doing work for them from Fort Pitt to the north side of Edam following the river (Saskatchewan).

“We are in the business of hauling production water from tanks to disposals. We try to get everything to the closest facility to keep our customers happy.

“We try to do everything in their best interests which is in our best interest.

“We are quite proud of our safety record and our spills record. It’s very low.”

Safety coordinator Jordan Salz conducts task observations in the field, keeps track of safety tickets and assists customers with their online documentation.

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Sim started the business with his wife Lorna in Paradise Hill in 1997 with three trucks and moved it to St. Walburg in 2003.

By 2005, the company had grown to 10 owner-operators, and from 2005 to the present day it has mushroomed to 34 and counting.

“I am hoping it will hold its own here,” said Sim. “It’s possible it will get bigger, but I am comfortable where it’s at right now.”

His most recent move came in August, 2009, when he bought a car and truck wash adjacent to the shop where he keeps and maintains his fleet.

“I originally bought it because it’s so close to our shop, and I have access to it 24 hours a day. It works hand in hand with that,” said Sim. “We have one Rick Sim, owner of Rick Sim Trucking, hauls oil and Áuid with the use of 34 truck wash and two small owner operator units. He is shown here with one of his own tractor units car bays. ɸ Page C21 for hauling equipment.

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PIPELINE NEWS June 2010

C21

On ‘the bit’ staff keeps things running smooth

Dispatcher Naomi Larre stays in close contact with vehicles in the Àeld.

Payroll clerk Carole Husch keeps computer data Àles up to date.

Administrator Gail Hall smiles for the paparazzi.

ɺ Page C20 “It’s steady and I have positive feedback from the town.

“St. Walburg has been a very good town for me.

There’s good people – friendly. It’s just all you want out of a small town.

“We try to contribute to hockey and ball and lots of charities. We try to do a lot of stuff around town.”

Sim is buoyed by the high level of seismic activity going on in all directions around the town which he thinks could lead to more business down the road.

“There’s some promising stuff. Right now, everything seems to be south, but there is a bit of stuff that might go north.”

Sim attributes his success so far in a small community to his staff and a parliamentary approach to running the business with input from his 10 office staff and owner-operators.

“With our owner-operators, we let them have a say in what goes on here. When it was slow last year, we put stuff to a vote so it’s not just me,” he said.

“They all voted for work share. It was going to help everybody to get through until times got better.

“That makes them feel more a part of our company. You gain a bit of knowledge every time you hire an owner-operator.”

Sim says what sets his company apart from the competition based in Lloydminster is the professional attitude and field knowledge of his employees starting with his right hand man, foreman Gilbert Hardes.

“Gilbert has been with me since 1998, and he keeps hands-on with what’s going on in the field. He is very detailed and he wants everything to work for the customer and the owner operator,” said Sim. “He has a lot of respect with the owner operators and our customers we serve.

“The staff we have here are right on ‘the bit.’ If something needs to get done, it gets done right away.

It doesn’t get put off.

“We have a very strong dispatch which helps in this business. You have to have the people knowing what’s going on out there.”

Sim adds that he and Hardes are not far removed from that owner-operator seat either.

“Up to 2005, we were both driving. We’ve both got 20 years of experience driving,” he said.

Most of the mechanical repairs are done by Brent Sequin, a former owner operator from Maidstone who Sim notes “has been around oilfield stuff all his life.”

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PIPELINE NEWS June 2010

Off-season oil¿eld crews a gusher for inn St. Walburg – An early morning breakfast, home cooked meals, crew rates, and oilpatch service with a smile.

That’s the business model for the St. Walburg Inn and Restaurant owned by Garry and Hazel Nedelec whose daughter and manager Dawn NedelecMcKellar welcomes media inquiries in their absence.

Dawn says the concept is working well and prompted her dad to purchase the Blueberry Inn in 2008 to accommodate the overflow business at the St. Walburg from oil and gas workers seeking rooms.

“We never seemed to be able to accommodate everyone,” she said, noting the fall and winter seismic crews that have led to posting ‘no vacancy’ signs during the dead of winter.

“We had two seismic crews last winter. One company will take the whole Blueberry Inn, and they are here all winter. It’s easier for me to bill too. It’s one whole company and one bill,” said Dawn.

“These are reputable companies too, so you know you are getting paid.

“If it weren’t for the oilfield in this area, you have the farmers and that would be it. There would be nothing to keep the young people in town. They would all move away looking for work.

“This is a good place to be located in the past few

years – especially in the last five years, it’s been really quite busy.

“Rumors have it, we are supposed to get busier in this area in the oilfield. Hopefully, that’s true.”

The Nedelec clan is well acquainted with the needs of the oil patch and accommodating guests

Dawn Nedelec-McKellar helps the run the St. Walburg Inn and the Blueberry Inn owned by her parents Garry and Hazel Nedelec.

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He grandfather owned a couple of area motels including another motel in town also called the St. Walburg Inn. Her dad Garry used to own and operate Nedelec Vac Services before he bought the St. Walburg Inn. To top it off the connections, her husband Terry is an oilfield drilling rig consultant.

He is currently employed by Shell north of Fort McMurray working 24 day shifts with 2 weeks off, so the whole family knows the recipe for running an inn geared to the oilpatch.

“They want a restaurant – someplace they can eat when they get off work,” said Dawn. “They don’t want to stay in a place where the restaurant is closed when they get off work or there is no restaurant.

“We accommodate the crews. The restaurant is usually open from 7 a.m. to 9 p.m., but if they are getting in past nine, we will stay late and cook them their meal or supper.”

Guests at the Blueberry Inn which used to be the town hospital, can cook their own meals at a central kitchen or scoot over to the Walburg to eat.

“The food is good,” said Dawn, who was enjoying a home-cooked lunch at the time.

“Monday to Friday, we have a buffet over lunch time. It’s homemade cooking. It’s a different menu every day. On our menu is sandwiches and burgers, pastas and steaks – we have a big menu.”

The St. Walburg includes two kitchen-equipped apartment buildings with a choice of single, double or triple rooms for long-term crews.

“If you are staying a week away from home, it gets expensive eating restaurant meals every day,” said Dawn.

“They like to have the kitchen. Each building has its own laundry and every room has wireless Internet and cable TV.” There are video lotto terminals in the lounge as part of the entertainment package.

Having an overnight room is the only way to fully appreciate the wonder of the annual blueberry festival that incites a stampede of more than 5,000 people into town on the fourth Saturday of August.

“I don’t know if you have ever been to St. Walburg before on the day, but it’s insane,” exclaimed Dawn.

“You have to be here to believe here. It’s just nuts.

“It’s a one-day event and everybody works. Nobody gets that weekend off. That day, we just have a huge ‘smorg’ on. It’s a buffet all day, and our menu is cut down to just burgers.”

Dawn laughs at a suggestion winter oilfield business at the inns is similar to a mini-blueberry festival, but she agrees seismic crews help to sweeten the bottom line.

“It’s definitely nice. You don’t have to worry about bookings,” she said. “They are here all winter for about four or five months. Everything just runs so much smoother.”

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C23

Hoffman’s oil¿eld service straddles two provinces St. Walburg – RJ Hoffman Holdings Ltd. is switching into a higher gear to provide tank cleaning, vacuum, flushby, steamer, slop handling and pressure truck services to busier heavy oilfield customers in Saskatchewan and Alberta.

That’s the word from operations manager Gerald MacNab, he keeps his finger on the pulse of company operations in Lloydminster and St. Walburg, where the company was started by Robert and Julius Hoffman in 1993.

“It’s pretty busy in St. Walburg,” said MacNab. “We do a lot of de-sanding, loading wells and working with rigs and flushbys and steaming.

Most of the work is south of Westhazel, Edam and North Tangleflags.”

MacNab is on side believing local rumors of

oilfield activity picking up in the area this summer.

“It seems like it,” he said. “I think it’s due to the price of oil, and everybody’s is just tired of waiting for it to go up.

The price of oil is not too bad. Spring break-up is just about over, too.”

Hoffman is busy in the Lloydminster area too where they dispatch their fleet of more than 80 ve-

hicles to all points from Vermilion to the west, east to North Battleford, south to Macklin, and north to Tulliby Lake.

About 50 vehicles are based in Lloydminster

and 30 in St. Walburg, with five full-time mechanics in Lloydminster and three stationed in St. Walburg.

MacNab says their competitive niche at both

locations is based on having good competent workers and what he calls good iron.

“We have no old junk. We keep up all of all equipment,” he said.

“That’s why we have so many mechanics. Everything runs good and we have no breakdowns.

“We also have good training programs. We have a good core of guys.”

During the slowdown a year ago, Hoffman went ahead and built 16 new trucks in Lloydminster and Edmonton.

“When everyone else slowed down we stayed busier,” said MacNab. “Building the trucks was a lot easier then. Now, it can take six months to a year to get a truck built.

During the slowdown, we were getting them done in 30 days. ɸ Page C24

Truck mechanic Clint Panter took a photo break from changing a hydraulic Àlter.

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PIPELINE NEWS June 2010

Rumor has it: Oil¿eld activity is picking up ɺ Page C23 “Having new iron makes a big difference.

You are not breaking down all the time. You can go out there and do the job and do it safely.”

Hoffman also has qualified safety watch personnel for battery turnarounds and shutdowns.

MacNab has been with the company since the Hoffman brothers started the business with a dream and a solid work ethic that carries over to their current 24/7 service and success.

“The owners are the key to it all,” said MacNab. “They worked hard when they started and they have a real good rapport with all the oil companies.

“When I started with them, they only had three trucks and they worked all the time.

I started out swamping and worked my way up.

“They started it up.

They had a little better stuff and a little better training. They are good to the, guys too. They are

RJ Hoffman has a Áeet of about 30 oilÀeld service trucks at its St. Walburg location.

here five days a week all the time. They are also in Walburg more than I am.”

What amazes MacNab on his trips to St. Walburg is how much the town grown along with the oil activity.

“There are just one or two houses for sale, no rents – everything is

full. It’s a good place to do business,” he added.

“The town is really good – they are always willing to help you out.

Small towns are always good. Everybody knows everybody.”

MacNab is certain that it won’t be long before St. Walburg is completely encircled by oil and gas explorers

and producers that are activity hunting in the area for new energy resources.

“It is slowly moving forward. There are some gas wells north of Loon Lake and there a couple of drilling rigs in Meadow Lake,” he said.

“It’s all speculation too. They have to find it, but they find it every day

in new places. The stuff north of St. Walburg is heavy – hard to work with it – way heavier than in Lloyd, but they will be able to get out it with steam plants. Husky owns a bunch of land up there.”

Wearing his St. Walburg tourist hat for a moment, MacNab encourages everyone to

put the town’s annual blueberry festival, to be held August 28, on their summer do-list.

“Everybody should go and see the blueberry festival,” he said.

“Everybody’s friendly.

There is a lot of people and good food too. It’s a really good thing to see.

Everybody is helping out. It’s a lot of fun.”

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PIPELINE NEWS June 2010

C25

Automated Tank on the grow with new fab shop Kitscoty – It looks like the just-intime tank manufacturing process of Automated Tank Manufacturing or ATM in Kitscoty also applies to the construction of a new 3,000 sq. ft. fabrication shop.

ATM president Joe Bowser says the decision to apply for a building permit was made a week before construction began on April 23 and he expects the job will be done by June 15.

“We have a fabrication shop, but we are growing out of it,” said Bowser.

“We need more floor space to increase the amount of tanks that we are manufacturing in the main shop.

“It will be a shop for our fire tubes and ladders, manways, repads and other small tank components. We already build those now on site. We are just going to move it over to a separate building.

“The shop is in response to growing demand on our site through the clients that we have. Things are going good.

“We are moving about 3.5 tanks a day out of the main shop. We have put a third shift on as of April 26.”

ATM can build 750 to 1,000 barrel tanks for clients 24 hours a day, six

days a week with its just-in-time manufacturing process and use of robotic welders. The company is looking to hire eight additional employees to keep with the workload.

The new 40 ft. by 75 ft. fabrication shop is being built by Castlerock Construction Lloydminster Ltd. that built all of ATM’s original buildings on its 22-acre site near the intersection of Highways 16 and 897.

The new fabrication shop leaves ATM with another 76 metres of land for further expansion to its western boundary where the village has developed four new 1-acre commercial lots for sale.

“Growth is always nice for a small community,” said Bowser about his potential business neighbours who will enjoy a view of trees to be planted on a berm that is in the works.

“Probably over the next year and a half, we will be putting trees in,” he said. “It blocks the view and adds a bit of beautification to the area.”

Justin Ferguson discusses construction details of a new shop with Automated Tank Manufacturing president Joe Bowser in Kitscoty.

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C26

PIPELINE NEWS June 2010

Big pink one-ton to drive

By Kelly Clemmer With files from Pipeline News Wainwright – Wainwright’s Barry Gosselin, along with brothers, Dean and Brian Tucken, have a new enterprise, one that not only works in a dangerous field, but it also is raising money for the Canadian Breast Cancer Society.

The one-ton truck for Team Snubbing Service Inc., is painted entirely pink to raise awareness for breast cancer and turn heads.

Gosselin explained that a portion of the daily work ticket (2.5 per cent) that is written will go to the Canadian Breast Cancer Society. “We’re also going to encourage the companies to match it.”

The pink one-ton headed to Sarnia, Ontario in

May to work for Enbridge, just because of the Pepto-pink colour and what it stands for, Gosselin explained.

It is expected to be driven to the Husky Up-

grader in Saskatchewan following the Ontario job.

Team Snubbing is based out of Rocky Mountain House, but Gosselin doesn’t expect it to be home very often as business is picking up for the oilfield service.

General Manager for Team Snubbing Service Inc., Jeff Redmond explained that snubbing is one of the most dangerous jobs in the oilfield as the truck and operator service gas wells that are under pressure.

Snubbing is the act of putting drill pipe into the wellbore when the blowout preventers (BOPs) are closed and pressure is contained in the well.

“What duties we perform are now very safe in the oil patch due to our outstanding safety procedures and those which have been put into place by all trades in the oil and gas industry,” said Redmond.

Redmond will be behind the wheel on the road to Ontario and plans to switch off with other employees on trips in the pink painted truck.

In Wainwright, Wainalta Motors donated their time and material to paint the vehicle pink and Fountain Tire also donated work towards it. ɸ Page C27

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PIPELINE NEWS June 2010

C27

breast cancer fundraising

This pink truck from Team Snubbing Service Inc. based in Rocky Mountain House will perform work for oil and gas companies and donate part of the ticket to breast cancer research.

Photo courtesy of Wainwright Star

Plans for the expansion of Team Snubbing will depend on how much work the truck gets in the coming year but Redmond, for one, is optimistic.

“We have also now incorporated push/pull units into our ever growing fleet of equipment to accommodate the drilling rig side of our field work as well,” he said.

“We have proven ourselves in the oil and gas industry time and time again that our little snubbing units are recession proof and provide cost savings to our clientele, so now some bigger exposure is coming our way, and we look forward to the challenge with open arms.” kelly@starnews.ca

OIL and GAS LAND AQUISITION SPECIALISTS Providing Land and Environmental Service throughout Saskatchewan 1616 CHEADLE STREET WEST 216A MAIN STREET SWIFT CURRENT, SK S9H 0E2 EATONIA, SK S0L 0Y0 Ph: 306-778-4430 Ph: 306-967-2622 Fax: 306-778-4432 Fax: 306-967-2627 www.mland.ca 40229214•09/05/08

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ɺ Page C26 Gosselin explained Team Snubbing is set up with a yearly contract with the Canadian Breast Cancer Society, which will be reviewed annually.

“Our mission here is to raise money for breast cancer. We believe in the never-ending battle against cancer and believe that every little bit of funding helps somewhere along the line.

“It’s a really good cause,” explained Gosselin.

“Obviously, it’s for company exposure as well, but it’s a win-win situation for the company and the breast cancer society.

“Everyone you talk to has been affected in one way or another by cancer. We think the industry will embrace this cause along with us.”

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PIPELINE NEWS June 2010

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PIPELINE NEWS June 2010

INTEGRATED THERMAL SOLUTIONS INC. is looking for

Building Crews & Industrial Insulators

Career

C29

Opportunities 52016600•05/14/10

Applicants should have a construction background, be quick learning and have a knowledge of the oilfield.

Safety tickets are an asset. We will train.

Clean driving record an asset.

To apply: Fax: 634-5148 • Phone: 634-6656 Email: admin@integratedthermalsolutions.com

OPERATOR The successful candidate will be responsible for: • Driving Wireline unit to and from various job locations • Serving Servicing of various down hole tools and auxiliary equipment • Cleaning and maintenance of Wireline units, shop vehicles and shop • Rig up and rig out of all related Wireline Cased Hole or Open Hole equipment This position is shift work with 24 hours on call and scheduled days off.

Individual must be willing and able to travel with wireline crew and must work well individually and in a team environment.

QUALIFICATIONS • Must be able to pass pre-employment drug and physical test • Physically fit • Valid Class 3 Drivers license with air brake endorsement • Valid H2S Alive ticket an asset • Any other industry standard safety courses are a definite asset Candidates must also have excellent customer service communication and organizational skills and possess the ability to work both independently and within a team environment.

Fax or mail resume to: Box 694 Estevan, SK S4A 2A6 Fax: 306-634-9728 or for more information call: 306-634-4726

Wireline Services

Field Service Technician Fiberspar is the leader in high-strength; fiber reinforced tubular products for the oil and gas industry. We are seeking to fill this full time position in the Lloydminster area.

Wanted: Class 1A Drivers • Benefits package offered • Safety tickets an asset

Primary responsibilities will be to supervise and install composite pipe lines.

Ideal candidate will have some oil field experience.

Truck Drivers Wanted Brady Oilfield Services LP. Weyburn, Halbrite and surrounding area, OilÀeld Safety CertiÀcates an asset but not necessary.

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Training will be provided.

Crew Foreman

Fiberspar offers a full benefits package.

Interested individuals should contact Charli Ann at 281-854-2609 or email/fax resume to cramin@fiberspar.com, Fax 713-849-9202.

Experienced FOR LLOYDMINSTER AREA

www.suretuf.com

PLASMA TABLE OPERATOR Applicants must have welding background.

Driver’s license required. Reliable, team player.

Wages depend on experience. Benefits available.

Performance bonuses.

Only those to be interviewed will be contacted.

Apply in confidence to: Fax (780) 808 - 2273

MUST: • Have Valid Drivers License & Be A Team Player • Safety Tickets • Picker & Bobcat Experience An Asset C’s OFFERS: • Top Wages • Benefits Package • Performance Bonuses • Scheduled Days Off • Opportunity For Advancement • C.O.R. Safety Program • AB & SK B31.3 Q.C. • Premium Equipment DUTIES: • Daily Operation Of A Light Picker Truck • Pipe-fitting & Construction

OILFIELD SERVICE LTD.

CONSULTING & CONSTRUCTION

Apply in confidence to: Fax (780) 808-2273

BJ Services Company Canada is the leading provider of high pressure pumping and coiled tubing services to the oil and gas industry in Canada. Key to the company’s success is our focus on attracting and retaining the best people as well as the training and career development programs offered. We are currently hiring for the following positions:

Equipment Operators - Estevan Cementing, Fracturing Successful candidates will be responsible for driving, operating and maintaining assigned equipment, ensuring that all operational and safety requirements are met. A valid Class 1, 3 or 5 driver’s license is required.

Journeyman Mechanics/Apprentice Mechanics - Estevan Successful candidates will be responsible for maintaining equipment according to company standards. Other duties include performing equipment repairs on company units and ensuring safe working practices are followed.

We offer: • A competitive salary • Excellent benefits • Professional training • Career advancement

EMPLOYMENT OPPORTUNITIES

Looking for Operator’s and Labourers in our Saskatchewan and Alberta locations.

• Body job vacs • Pressure trucks • Trailer vacs

• End dumps • Hydro-vacs • Rod rig

• Water trucks • Flush-by • Steamers

• Drilling mud hauling

We offer a competitive pay structure to commensurate with experience, a full benefits package, and an optional RRSP plan.

To become part of our team, please forward your resume and driver’s abstract to: BJ Services Company Canada T: 306-634-1572 F: 306-634-9499

bjservices.ca

If you are interested in a rewarding career with a progressive, growth oriented company, for the above mentioned, please submit your résumé and driver’s abstract in confidence to:

Alisha Schmidt, Human Resources Manager Fax # 780-753-6141 Email: Schmidt.Alisha@cleanharbors.com Web: www.cleanharbors.com

PIPELINE NEWS June 2010

Career Opportunities

C30

SpeciÀc Targeting

Employment Opportunity

Contact your local pipeline sales rep. to get over

is an industry leader in Safety Services and is currently seeking

Safety Personnel to keep up with increasing customer demands.

28,000

If you are interested in becoming part of the Target Team and enjoying our growth with us, let us know!

Please forward resume with copies of tickets to: resumes@targetsafety.ca or fax to 780-870-5359

Fax: (780) 872-5239

Circulation on your career ad!

Field Service Technician Estevan/Carlyle area

Requirements: Experience with oilfield instrumentation, basic networking capabilities as well as servicing instrumentation on drilling and service rigs.

This position requires the ability to work independently during irregular and sometimes long hours. Strong organizational and problem solving skills are an asset.

Please send resume to: careers@rigmanager.com

Carson Energy Services has immediate openings for full time

Pipeline Labourers in Pipeline Division. This position will be based out of Lampman.

Carson Energy requires individuals who are self starting with positive attitudes, willing to ask questions and learn.

Competitive wages and group beneÀts offered based on qualiÀcations.

Safety tickets would be an asset but not a necessity.

Email resumes only to: khall@carsonenergyservices.com.

Only those selected for further consideration will be contacted.

Carson Energy Services has immediate openings for full time employment in the pipeline division, as a

Crew Foreman

AREA MANAGER Badger Daylighting, the largest Hydrovac operator in North America, has an opening for an Area Manager for S.E. Saskatchewan. Primary responsibilities include all aspects of operations, including fleet maintenance, implementation of Badger’s safety program and business development. This position can be based anywhere within 1 hour of Carlyle. Oilfield experience essential.

Individual will be operating a 1 ton knuckle picker truck.

This position will be based out of Lampman.

Individual must have oilÀeld experience. Carson Energy requires individuals who are self starting with positive attitudes, willing to ask questions and learn. Competitive wages and group beneÀts offered based on qualiÀcations. Safety tickets would be an asset.

Email resumes to: khall@carsonenergyservices.com.

Only those selected for further consideration will be contacted.

Safety Coordinator

Interested candidates are encouraged to forward resumes to: mlyle@badgerinc.com or fax (403) 228-9773.

Visit www.badgerinc.com for more information.

General accountability:

An established earth moving construction firm in southeast corner of Saskatchewan is currently recruiting for an experienced Safety Coordinator. The successful applicant will report to the Company President. The safety coordinator will be responsible for orientations, training, and implementation /revisions of new and existing policies, practices and procedures as it pertains to the Health and Safety Manual and ISN Network. The Safety Coordinator will work closely with the Controller on tender safety matters and will work with supervisors on all site safety matters including, but not limited to, inspections and safety meetings, investigations and documentation. This is a full time position and the head office is in Estevan, Saskatchewan.

Skills and Qualifications Required:

Tarpon Energy Services, a service company in western Canada, is searching for skilled people to join our E&C group in the Swift Current and Moose Jaw area for a project starting in June.

Apprentice and Journeymen Electricians Valid drivers’ license, First Aid and H2S training required.

The ideal candidates will have prior Industrial or Oil and Gas experience.

Tarpon offers a very attractive compensation package that includes competitive wages, matching RRSP program and a full benefit plan that is effective upon hire.

If you are interested in joining our team, forward your resume to careers@tarponenergy.com or fax it to 403-457-3396

High School diploma or GED Valid Construction Safety Officer certificate, either Alberta or Saskatchewan Minimum of 3 to 5 years experience in construction safety or related field Current driver’s license, class 5 Comply with drug and alcohol policies Complete and maintain incident reports, statistics, individual training records, orientations Ongoing review and updating of company policies, practices and procedures Do drug testing and documentation Assisting Supervisors in maintaining and enhancing a safe work environment Good record keeping and reporting skills Strong organizational skills and multitasking Work well under pressure and in a fast paced environment, and must be decisive Proficient computer skills Demonstrate commitment to a continuous improvement in health and safety for all Provide daily updates to upper management - verbal and written Monitor daily tool box meetings, Conduct some safety meeting on job sites, Conduct regular OH&S meetings

Working Conditions: Will vary from office work to outdoor job site visits in variable weather conditions, and possible variable locations.

Salary will be determined based on qualifications.

Please forward resumes to - Kelly Panteluk Construction Ltd. PO Box 190 Estevan, SK S4A 2A3 Or email to - office@kpcl.sk.ca Or fax to -306-634-7822

PIPELINE NEWS June 2010

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(780) 875-6535

Design, Engineering & Manufacturing

C32 PIPELINE NEWS June 2010