Pipeline News Sept. 2015

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PIPELINE NEWS Saskatchewan’s Petroleum Monthly

September 2015

Canada Post Publication No. 40069240

FREE

Volume 8 Issue 4

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Wall talks energy and the federal election A3

FOCUS: Commercial Property A14, A16, A31

National Trucking Week A22, A24-26

Join us for a fun afternoon of best-ball golf, BBQ dinner and prizes. Proceeds provide valuable scholarships for post-secondary students attending the Southeast College.

Friday, September 11 at 1:00 p.m. Weyburn Golf Course Weyburn, SK

To register a team or sponsor this event, visit:

www.southeastcollege.org or contact Dave at (306) 848-2531

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PIPELINE NEWS September 2015

INSIDE SECTION A 4

Saskatchewan's energy issues in the ĨĞĚĞƌĂů ĞůĞĐƟŽŶ͗ tĂůů

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PIPELINE NEWS September 2015

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TOP NEWS

Alliance Pipeline shut down due to H2S &RQWHQWV RI SLSHOLQH Ă DUHG QHDU $ODPHGD DQG $UFROD „ Story and photo by Brian Zinchuk Alameda – A plant operational upset at Keyera’s Simonette gas plant, located 60 kilometres southwest of Valleyview, Alta., led to the complete shutdown of the Alliance Pipeline system in early August. On Aug. 6, Alliance Pipeline advised in a press release, “An amount of hydrogen sulfide (H2S) entered into its mainline pipeline system as a result of complications experienced by an upstream operator.â€? The next day the pipeline company met with stakeholders, stating in a release, “Alliance is carefully and safely managing the situation. In order to correct the situation Alliance is commencing mitigation activities which are expected to result in a zero flow condition on the pipeline. It is anticipated that this will begin impacting commercial stakeholders mid-morning on August 7, 2015 and will continue for an indeterminate amount of time. “The H2S has been isolated in a section of the Alliance mainline where it will safely remain until it is removed through the flaring process.â€? As part of this, Alliance flared the impacted natural gas in order to safely dispose of it, commencing flaring at two locations. The first, started Aug. 9, was at a block valve near Arcola. The second, at the Alameda compressor station, commenced Aug. 10. Multiple flares were used at each site. The Alameda compressor station is located six kilometres north of Alameda and 1.6 kilometres west of Highway 9, at 4-25-4-3-W2. The flare stacks used at Alameda were 30 metres in height, and the flame was nearly that height again. The sound was deafening, akin to standing near a jetliner about to take off. “Our chief concern now is to ensure the safety of the public, employees and the environment. We are working to remove the H2S from the pipeline in a controlled and safe manner,â€? said Daniel Sutherland, Alliance’s vice-president, commercial operations. “We apologize for any inconvenience this may cause to our customers and we are working with our partners and the regulator to determine the cause.â€? By Aug. 11, Sutherland said, “Our flaring operation is on track and the amount of hydrogen sulphide in the small segment of pipeline is being reduced to a safe level. Our monitoring indicates that all ambient air quality standards continue to be met.â€? Alliance spokesperson Tony Straquadine explained to Pipeline News that they tracked the H2S as it moved through the system, isolating it to a section in southeast Saskatchewan. He noted that

ĹŻĹŻĹ?Ä‚ĹśÄ?Äž WĹ?ƉĞůĹ?ŜĞ ŚĂĚ ƚŽ Ĺ‡Ä‚ĆŒÄž Žč Ä‚ĹŻĹŻ ƚŚĞ Ä?ŽŜƚĞŜƚĆ? ŽĨ Ĺ?ĆšĆ? ƉĹ?ƉĞůĹ?ŜĞ ĨŽĆŒ Ä‚ Ć‰Ĺ˝ĆŒĆ&#x;ŽŜ ŽĨ Ĺ?ĆšĆ? žĂĹ?ŜůĹ?ŜĞ Ĺ?Ĺś Ć?ŽƾƚŚĞĂĆ?Ćš ^Ä‚Ć?ĹŹÄ‚ĆšÄ?ĹšÄžÇ Ä‚Ĺś Ä‚ĹŒÄžĆŒ ,2^ Ĺ?Žƚ Ĺ?ŜƚŽ ƚŚĞ Ć?LJĆ?ƚĞž ĹśÄžÄ‚ĆŒ sĂůůĞLJǀĹ?ÄžÇ Í• ĹŻĆšÄ‚Í˜ dĹšĹ?Ć? Ĺ‡Ä‚ĆŒÄžĆ?ƚĂÄ?ĹŹÍ• Ä‚Ćš ƚŚĞ ůĂžĞĚĂ ƉƾžĆ‰ Ć?ƚĂĆ&#x;ŽŜÍ• Ç Ä‚Ć? ƚŚĞ ÄŽĆŒĆ?Ćš ŽĨ ĆšĹšĆŒÄžÄž ĞǀĞŜƚƾĂůůLJ Ć?Ğƚ ĆľĆ‰Í˜ /Ćš Ç Ä‚Ć? ĎŻĎŹ ĹľÄžĆšĆŒÄžĆ? ƚĂůů͕ ĂŜĚ ƚŚĞ ŇĂžĞ ĞžĹ?ƊĞĚ Ç Ä‚Ć? ĹśÄžÄ‚ĆŒĹŻÇ‡ ƚŚĂƚ ƚĂůů Ä‚Ĺ?Ä‚Ĺ?ĹśÍ˜ dŚĞ ĆŒĹ˝Ä‚ĆŒÍ• Ä‚Ć? ĹšÄžÄ‚ĆŒÄš Ä‚Ćš ƚŚĞ Ć?Ĺ?ĚĞ ŽĨ ƚŚĞ ĆŒĹ˝Ä‚ÄšÍ• Ç Ä‚Ć? ĚĞĂĨĞŜĹ?ĹśĹ?͘ Photo by Brian Zinchuk

was the best location to do the flaring, in a rural area. Asked why the concentration of H2S, mixed with gas from over 60 other gas plants, wouldn’t have simply been diluted to the point of being a non-issue, Straquadine replied, “In a large pool, you’d think it mixes together.� However, a pipeline is not a large pool, and the H2S contamination meant the gas in the line no longer met the specifications for gas the pipeline needed to deliver downstream. Alliance is a sweet system, Straquadine explained. While he noted many upstream users of the pipeline have alternative shipping paths, with dual or multiple connections, that has not been the case for all. Indeed, a ripple effect was felt throughout

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the region Alliance collects from. The National Post noted, “Seven Generations, Athabasca Oil Corp., Crew Energy Inc., RMP Energy Inc, NuVista Energy Ltd. and other producers announced they were temporarily suspending or reducing their natural gas production in northwestern Alberta as a result.� Seven Generations Energy Ltd. said in a release on Aug. 7, “This suspension will result in a deferral of essentially all of Seven Generations’ production until the situation is resolved. 7G intends to use this temporary event to conduct maintenance of its production and processing facilities.� Some companies took advantage of the downtime by performing maintenance Keyera’s press release of Aug. 7 noted, “There was no risk to the public or to the environment as a result of this upset. However, gas which did not meet sales gas specifications entered the Alliance Pipeline system. “We have offered our assistance to Alliance Pipeline and are working with our producer customers to divert gas and find alternative solutions for their production until regular operations resume on Alliance. The raw gas that comes into the Simonette plant is usually about 0.6 per cent sour on average, based on various inlets that feed the plant, according to Keyera’s Nick Kuzyk, manager of investor relations. The Alliance Pipeline was constructed in 1999 and 2000, and collects almost all of its gas from northeastern British Columbia and northwestern Alberta. However, it does have a delivery receipt point in Saskatchewan from the Steelman gas plant, which is just a few kilometres west of the Alameda compressor station. There is also a lateral that runs from Tioga, North Dakota, to the mainline just south of where it crosses the Canada/United States border south of Gainsborough. The pipeline’s delivery point is the Aux Sable natural gas liquids and extraction facility at Channahon, Illinois, which is about 80 kilometres southwest of Chicago. All the gas delivered via the Alliance Pipeline is processed at ASLP’s Channahon NGL Facility. Aux Sable states it is one of the largest NGL extraction and fractionation facilities in North America. To replace natural gas lost as a result of the flaring process, and to increase the pressure to expedite the flow in the pipeline, Alliance issued a request to existing shippers for purchase of up to 400 million cubic feet of natural gas. As Alliance acquired and received the natural gas, it began a carefully controlled restart of the pipeline and achieve the targeted resumption of service on Thursday, August 13.

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PIPELINE NEWS SEPTEMBER 2015

BRIEFS Crescent Point reduces rigs

After leading the country for much of 2015 in the number of active drilling rigs working for them, Crescent Point Energy Corp. has been steadily reducing that number. That number had be 23, but by Aug. 19, Rig Locator listed just 13. The total Saskatchewan active drilling rig count fell to 31 by that date, account for just 31 active rigs out of a total of 127, or 24 per cent active. This is by far the lowest number for this time of year since Pipeline News started publication in its current format in 2008. The number of active rigs is down by more than half compared to 2013 or 2014 for the same time period. Alberta wasn’t faring much better, with 24 per cent of its rigs working. That meant just 128 of 531 rigs were at work. Manitoba had six of 14 rigs working, totalling 43 per cent of its fleet. British Columbia saw 38 of 83 rigs working, for an activity level of 46 per cent.

Briefs courtesy Nickle’s Daily Oil Bulletin

WĹ?ƉĞůĹ?ŜĞĆ? Ä‚ĆŒÄž ƚŚĞ žŽĆ?Ćš Ĺ?ĹľĆ‰Ĺ˝ĆŒĆšÄ‚ĹśĆš ÄžĹśÄžĆŒĹ?LJ Ĺ?Ć?Ć?ƾĞ Ĺ?Ĺś ƚŚĹ?Ć? ĨÄžÄšÄžĆŒÄ‚ĹŻ ĞůĞÄ?Ć&#x;ŽŜ ĨĆŒŽž ƚŚĞ Ć?ƚĂŜĚƉŽĹ?Ŝƚ ŽĨ WĆŒÄžĹľĹ?ÄžĆŒ ĆŒÄ‚Äš tÄ‚ĹŻĹŻÍ˜ tÄ‚ĹŻĹŻ Ć?ƉŽŏÄž Ä‚Ćš ƚŚĞ ^Ä‚Ć?ĹŹÄ‚ĆšÄ?ĹšÄžÇ Ä‚Ĺś KĹ?ĹŻ ĂŜĚ 'Ä‚Ć? ^ĹšĹ˝Ç Ĺ?Ĺś tĞLJÄ?ĆľĆŒĹś ŽŜ :ƾŜÄž ĎŻÍ˜ Photo by Brian Zinchuk

Saskatchewan’s energy issues in the federal election: Wall „ By Brian Zinchuk Regina – The day after the first leaders debate in the 2015 federal election, Pipeline News spoke to Premier Brad Wall about the energy issues important to Saskatchewan in this election. Wall spoke by phone with Pipeline News on Aug. 7. Pipeline News: What issues, particularly with regards to energy, are important to Saskatchewan in this federal election? Brad Wall: The transportation of energy is right at the top of the list. There are a few others, but we’ve got to be able to get our product to tidewater. We’ve got to start acting like a country that has the third greatest oil reserves on earth, because we don’t (act like it). If we did act like a country that has that quality and quantity of reserve, we would be doing whatever we could to get to tidewater and maximize value for the oil. We wouldn’t have just one customer. I think we all understand where Keystone XL is at; on the desk in the White House. We can’t really control that one. Gateway has obvious sensitivities. Energy East is a conversion for the most part – two thirds of it. It replaces the need to import foreign oil There’s a long list of things that commend this pipeline to approval. That’s a big issue, and what I’m hearing so far in the election is not that hopeful. I’m hearing at least two of those wanting to be prime minister, not unequivocally, but are leaning towards concerns about the pipeline. The other issue is the intersect between energy and the en-

vironment. We all need to do our part with respect to climate change. But if we’re going to talk about a national cap-andtrade plan, as one party, I think the New Democrats are proposing, I think there should be a worry in Western Canada about it being, on a de facto basis, another transfer payment. Another redistribution of national economic capacity and fiscal resources from one part of the country to another. Again, the devil is in the details, and we don’t know that yet. Those would be a couple of concerns with respect to the federal election and energy issues. P.N.: Can you elaborate on your recent comments on equalization, its treatment of hydro versus petroleum, and possible payment through a pipeline? Wall: The latter was kind of to make the point, and it was pretty blunt, I admit. But I certainly stand by it. If you do the math, Saskatchewan taxpayers pay about a half billion dollars into the $17 billion federal equalization program. Alberta residents pay about $2 billion. By way of background, we looked at the federal government. Almost all their revenue comes from taxes, whereas provincial governments have other revenues. So a per capita analysis got close to the numbers, the basis of a half-billion from our taxpayers and two billion from Alberta. Those payments have been made on the strength, to a great degree, of the natural resource economies of the West and specifically oil and gas. ɸ Page A8

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PIPELINE NEWS September 2015

To build or not to build pipelines A cheat sheet on where federal leaders stand on various pipeline projects

Toronto – Petroleum, and more specifically the pipelines that carry it to market, was a major part of the Aug. 6 federal leaders debate held in Toronto and hosted by Macleans. Here we’ve provided a cheat sheet clarifying what each leader said about each of the four major pipeline projects that have been in the works for several years, but none of which have begun construction. The pipelines in question are TransCanada’s Energy East, TransCanada’s Keystone XL, Enbridge’s Northern Gateway, and Kinder Morgan’s TransMountain Expansion. These are each of the leaders statements, as recorded in the transcript provided by Macleans. Paul Wells of Macleans acted as the moderator. If there is no comment listed under that pipeline heading, it’s because that leader did not refer directly to that project during the debate. In some cases, comments from the moderator or other debaters have been included to help clarify the comments.

Green Party Leader Elizabeth May Energy East: No direct comment made. Keystone XL: No direct comment made. Northern Gateway: The Green Party opposes every single one of the pipelines that are proposed, risky pipeline schemes to get unprocessed oil out of this country — Mr. Mulcair’s right. Every single one of these raw bitumen, unprocessed oil pipe-

line schemes is about exporting Canadian jobs. That’s why the Green Party knows we can oppose every single one of them. TransMountain Expansion: And I would like to have Mr. Mulcair’s answer clearly. Will you join us and fight against the risky pipeline and tanker expansion tripling the transport of unprocessed oil from Vancouver? Will you help us defend our coastlines? Well, with all due respect, Mr. Prime Minister, your record on climate is a legacy of – litany of broken promises, including one that’s directly relevant to the questions that Paul Wells was asking you about exports. You committed in 2008 not to export unprocessed oil, bitumen, to countries that have weaker emissions standards than Canada. That would obviously include China, the destination point for Enbridge and Kinder Morgan, which only the Green Party on this stage opposes. It makes no sense to export unprocessed oil to countries with poor environmental records. *** (To Mulcair) I’m still not sure where you stand on Kinder Morgan, because it’s pretty straightforward. They plan to put three times as many tankers moving out Vancouver, loaded with diluted bitumen. It’s very hazardous, risky material. And we know, whether– regardless of what kind of process it goes

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Raging River Exploration Inc. achieved another quarterly production record in the second quarter and first half of 2015 although it wasn’t enough to offset lower cash flow, earnings and revenue due to lower commodity prices. The company said that focusing on the cost structure of the business has enabled it to materially decrease its sustaining capital requirements. Through increased efficiencies and reduced service provider costs, the average onstream capital cost per well has been reduced to the current level of $700,000 to $750,000 per well from its historical average of $900,000 to $925,000 per well. To maintain a flat production profile in 2016, Raging River would be required to spend approximately 85 per cent of its cash flow at the current 2016 strip price of US$50 per bbl WTI. Facilities construction and injector conversions for previously discussed waterflood expansions along with new initiatives are in progress with first water injection occurring in July 2015 on three of Raging River’s six project areas. Success with the waterflood expansions is anticipated to set up further full scale waterflood initiations in 2016 and beyond, which will assist in mitigating longer-term decline rates within its asset base, said the company.Â

through, it should not go ahead. It must be stopped. ɸ Page A9

Briefs courtesy Nickle’s Daily Oil Bulletin

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BRIEFS Raging River lowers well costs

Pipelines to the west, south and east were a major feature of the federal leaders debate on Aug. 6. File photo

„ By Brian Zinchuk

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PIPELINE NEWS September 2015

PIPELINE NEWS

EDITORIAL

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.

Publisher: Brant Kersey - Estevan Ph: 1.306.634.2654 Editorial Contributions: EDITOR Brian Zinchuk - Estevan 1.306.461.5599 Associate Advertising Consultants: SASKATCHEWAN & MANITOBA R5 -. 0 (5g8ifl8lij8hlkj Cindy Beaulieu Candace Wheeler Kristen O’Handley Deanna Tarnes Teresa Hrywkiw R5 ,&3& 5g8ifl8jki8hkhk Alison Dunning

NORTHWEST SASK. & ALBERTA R5g8ifl8jlf8mjgl Harland Lesyk

To submit a stories or ideas: Pipelines News is always looking for stories or ideas from our readers. To contribute please contact your local contributing reporter. Subscribing to Pipeline News: Pipeline News is a free distribution newspaper, and is now available online at www.pipelinenews.ca Advertising in Pipeline News: Advertising in Pipeline News is a newer model created to make it as easy as possible for any business or individual. Pipeline News has a group of experienced staff working throughout Saskatchewan and parts of Manitoba, so please contact the sales representative for your area to assist you with your advertising needs. Special thanks to JuneWarren-Nickle’s Energy Group for their contributions and assistance with Pipeline News.

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Gasoline prices in Sask. jump 16 cents in one day?!?! In mid-August, if your truck ran on gasoline instead of diesel, you were in for a shock. Gasoline prices at the pump in Saskatchewan spiked 16 cents in a day. It must have felt like a kick in the teeth to anyone working (or more importantly, not working) in the patch. The reason this time, as seen throughout much of the media, was that the shutdown of the 410,000 barrel per day BP refinery in Whiting, Indiana. Some pipes apparently had some holes in a 240,000 bpd portion of the facility. As a result, we in Saskatchewan got hosed when hooking up the gas pump hose to the gas tank. At least, that’s the story we’ve seen in every other media source, those whose editorial and financial resources are much greater than ours. They’ve been looking into this conundrum on a regular basis for years, and never seem to get an answer that makes sense. They might as well be looking for Jimmy Hoffa. He only disappeared 40 years ago in July 1975. The odd thing is, in Saskatchewan, most of our gasoline is sourced from the Regina Co-op Refinery complex. Here’s an excerpt from our 2010 story on the Regina refinery: “The Regina complex provides fuel directly to Saskatchewan, Manitoba, and the eastern side of Alberta. Exchange agreements with other refiners allow CCRL to supply fuel to gas stations other

than the Co-op and Tempo brands in this region and, in return, Co-op stations in British Columbia and the remainder of Alberta are supplied by other refiners. It’s a common practice in the industry across Canada, according to Bud Van Iderstine (then senior vice-president of refining for Federated Co-operatives Ltd.).� But there’s always a reason for high gasoline prices. It’s summer driving season. A refinery had a maintenance outage (as if it’s the only refinery in North America, and obviously must be supplying our local pumps). A war broke out in the Middle East. The sun set. Gravity. Any other ideas? Amazingly, when the price of crude oil goes up, gasoline goes up in lockstep. But when it comes down, oh, there’s a refinery outage. Thus, a 16-cent hike in one day is hard to take. It might make sense if Saudi Arabia had just been invaded by Iran, or Israel bombed Iran, or Iran took a shot across the bow of an American aircraft carrier in the Strait of Hormuz. (Note the common thread here?) But in this case, Iran, with its Obama-approved nuclear deal in hand, is about to flood the global market with even more cheap crude. Oilpatch workers, most probably didn’t mind paying a high price for gasoline if it meant a high paycheque. But when that paycheque is down substantially or not there at all, this is a bit much.

PIPELINE NEWS September 2015

From the Top of The Pile

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OPINION

By Brian Zinchuk

This is looking like the 80s Three times on the same day, in conversations with three different people in three different towns, this phrase came up: “This downturn is like the 80s.” And that, my friends, is really not a good thing. Over the years numerous people I’ve interviewed had told me the story of their lives and their businesses. And the ones who have been in business the longest invariably reflect on the hard times, the times they just squeaked through or nearly lost their business. While 2009 was tough in other areas, it wasn’t that bad in southeast Saskatchewan. One person called it “a bit of a road bump.” In contrast, 1998 was worse. And 1986 was much, much worse. More and more I have been hearing that this current downturn is shaping up like that, from what I understand. I was 11 in 1986, but I’ll take the word of those who are much wiser than me. Even the National Post ran a headline on Aug. 5 saying “With crude at US$50, oil firms fear deeper crisis than in 1980s.” It’s not just the depth of this downturn, but the length, with no end in sight. On August 11, the Daily Oil Bulletin reported West Texas Intermediate cash price at $44.83 a barrel, while the September 2015 contract price was $44.96. A year ago on the same date that price was

$97.65. Saskatchewan had 37 drilling rigs working, two of which were drilling for potash. Crescent Point had 12 rigs working down from 23 it had for most of the winter and summer drilling season 2015 until mid-July. Several people I spoke to expressed concern that number could drop much lower. (A week later, there were 31 rigs working. On Aug. 9, 2014, there were 74 rigs working in Saskatchewan. On the same date in 2013 it was 75. So 37 or 38 is a huge drop. And unlike the peaks and valleys seen in recent years during the summer, this year has been flat. The one bright spot is that some of the juniors have picked up their drilling as Crescent Point shed rigs. Triland, Torc, Silver Bay, Spartan, NAL and Villanova 4 were drilling. The Viking play also had 10 rigs going. But these numbers are nowhere near what we’re used to. I spent Aug. 10 driving around Alida, Alameda, Carnduff and Oxbow. What did I see? A lot of iron, just like I saw in Weyburn the week prior. Yards are full of trucks, generators, service rigs, excavators, dozers, pickups. I have never seen so much iron parked in the middle of summer in all my time reporting for this paper. There were rigs racked everywhere. It is a sad sight to see all that equipment lined up in what has probably been the best weather

we’ve had for summer activity in years. While some areas have had a bit of rain, the constant lament of “it’s too wet” I’ve heard ever since 2011 is certainly gone. My grass in Estevan is so dry and brown you would think it was a sepia toned photograph. Yards are full of stacks of mats because there’s no need for them. Another phrase I’ve heard from numerous people is “It’s getting ugly out there.” We saw a round of layoffs eight to six months ago. That was mostly junior, less experienced staff. I’m afraid we’re soon going to see another round, and this time it’s going to be the 20-year men let go. Companies that have been holding on as much as they can may find they can’t any longer. Trust me, there will be auction sales coming. One person told me the Dayman family of Estevan selling their iron early this year was a stroke of genius, getting out while prices were still good. I highly doubt anyone taking a truck to Ritchie Bros. this fall will do well. It’s getting ugly, all right. Brian Zinchuk is editor of Pipeline News. He can be reached at brian.zinchuk@sasktel.net.

Oilpatch conventional wisdom will be wrong again By David Yager Things will get better because they can’t get worse. We’re at or near the bottom. Better times ahead. But you’d never know based on oil prices or the news. WTI closed August 11 US$43.08 a barrel, a price unseen for more than six years since the dark days of 2009. The commentary is universally bearish. Everyone from analysts to oil company CEOs are saying what you see is what you get for the foreseeable future. Comparisons to the great price collapse of 1986 and the 15-year nuclear winter that followed are again making headlines. It’s not awful; it’s worse. Numerous challenges exist. Every day there’s yet another reason why oil prices will never increase. Iran. China. Greece. Global inventories. OPEC overproduction. Rising North American rig counts. Carbon taxes. Corporate tax increases. Royalty reviews. No pipelines. The news is so depressing more are saying this downturn is the worst ever, although there is significant evidence to the contrary. This is not new. What the industry has always done is extrapolate; whatever happened yesterday will continue. If things are good, they always will be. If things are bad they will remain so forever. After 36 years of writing about the always-volatile oilpatch, the only constant is the herd is usually wrong, regardless of the direction it is headed. First the bad news. The modern oil industry has never operated without Saudi Arabian or OPEC supply management. The possibility of Iran increasing production if its nuclear inspection agreement is ratified weighs

heavily on market sentiment. This is new. Commodity prices as a group — oil, potash, iron ore, coffee, and copper — are at lows unseen since early this century. This is made worse by a strong U.S. dollar. Hedge funds specializing in commodities are losing money and shrinking as profits become more elusive. This too is new. Future oil demand is in doubt for three reasons, all new. 1. China, the world’s second largest economy and commodity consumer, has serious financial problems with the long-term impact unknown. The latest blow was devaluating the Yuan. 2. More governments unquestioningly link oil to climate change and are taking steps to ensure consumers use less. We’re told daily the future of mankind depends on using less oil. 3. Near zero interest rates and quantitative easing no longer stimulate economic growth. This affects commodity demand and price. The replacement cost of tomorrow’s barrels seems unknown. Current production is thought to be impervious to price. Lower prices have always reduced production. That low prices somehow won’t crimp future supply this downturn is also new. Hide the sharp objects. This is a big batch of misery. Now the positive. With the exception of oilsands mines, all reservoirs yield less oil tomorrow than today. Typical decline rates for the best conventional reservoirs is 3 per cent to 5 per cent per year and the output of most shale oil wells falls 50 per cent or more in the first year. At 4 per cent globally, this is a 3.8 million bpd decline in the next 12 months at current output of 96 million bpd. Without continued investment production will fall. The latest information is U.S. shale oil production peaked in April and will decline by 360,000 bpd by September. Global oil and supply

demand curves simply must and will cross and they will. Comparisons of the current situation to the mid-1980s remain ludicrous. When oil prices collapsed in 1986 and remained low in real terms for 15 years, world oil supply exceeded demand by about 14 million bpd. This was nearly 25 per cent of world demand of 60 million bpd. The current surplus of supply over demand in Q2 was about 3 million bpd, or 3 per cent. This is shrinking. This is nothing like the situation in the mid-1980s and to suggest otherwise is uniformed and irresponsible. Rig counts are rising in the U.S. and Canada because they must. Oil companies must drill to survive. Efficiencies always emerge when they become essential. The rise is not meaningful. It is impossible for the reactivation of only 42 of 981 laid down drilling rigs in the U.S. to sustain or increase production. The next market turn will be dramatic and will be up because it can’t go down. The current mantra is for the first time in recent history and without supply management (see above) somehow crude oil is the only commodity that will trade in a narrow and predictable band when supply and demand achieves equilibrium. The futures curves are wrong. There is likely no good news in the short term, the next couple of months. Prices may even fall further. Keep the faith. In the medium term — the next six months — there will be growing stability and confidence if federal and provincial politicians don’t do anything really awful. But the long term looks good. The herd is wrong again and global oil supply and demand will prove it. David Yager is the national leader, oilfield services, for accounting firm MNP. He can be reached at david. yager@mnp.ca.

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 September 2015

Why is petroleum factored into equalization but not hydro?

Premier Brad Wall at the Weyburn Oil Show in June.

ɺ Page A4 In order for us to continue to do that, to continue to contribute the way we want to contribute to equalization, to stay have provinces; well, we’re going to stay have provinces, to be able to nationally do these sorts of transfers, part of that formula has to be maximizing the value for the oil, moving oil across the country. In any given year we can lose in the budget up to $300 million because we sell at West Texas (Intermediate) versus the Brent price, because we have the one customer and we can’t get it to tide water. It was a way to say look, equalization payments are a huge program, $17 billion, is funded in part because of a strong natural resource economy. Maybe that can be recognized by provinces in supporting Energy East. With respect to the hydro piece, this isn’t new. I’ve been saying for some time it is unfair hydrocarbons are very much part of the calculation for

equalization, oil and gas, obviously, and hydro, which is increasing in terms of value because it is a green source of energy, is not. So provinces like Manitoba and Quebec and others that have a lot of hydro, that’s not included in the calculation of their economic capacity. To me, that’s a fairness issue. It’s a form of energy, gaining in value, it’s exportable, those jurisdictions can sell that electricity across the border, and they should. It’s a good thing they have it, I’m glad they do, but it should be part of the equalization formula. That’s one improvement we could make to the program. P.N.: Isn’t it curious the have provinces all produce petroleum, be it natural gas, primarily in B.C., or oil in Alberta, Saskatchewan and Newfoundland? And yet the ones with the highest hydro capacity happen to be the ones that happen to be the long-term have-not provinces. Wall: It is. You’re exactly right. Having hydro is valuable for a jurisdiction because it offers a

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low-cost energy for their respective economies, and that’s a good thing. I’ve had people point out to me the equalization is there because we want to equalize things across the country. It’s not like the government put the oil and gas in the ground. It’s the good luck that we have. They’re absolutely right. The same argument can be made for those that have a lot of hydro. It allows them to have a lot of low-cost energy. It allows them to sell that energy interprovincially and across the U.S. border. This is a good thing for them, but surely it’s got to be part of the calculation. The name of the program is equalization, which speaks to me as an equal treatment of different forms of energy, whether it’s fossil fuels or hydro, and that doesn’t happen today. P.N.: There was a lot of talk of “carbon pollution” during the federal leaders debate, but not a lot of talk of carbon capture. Should carbon capture and storage be an issue in this election? Wall: It should be, and here’s why. Canada’s responsible for something less than three per cent of global emissions. We can talk about carbon taxes here in Canada, pricing and levies, cap-and-trade as Ontario and Quebec are talking, but were we even to completely eliminate all CO2 emissions, which of course wouldn’t happen, we would have dealt with three per cent of the world’s problem. Meanwhile there are 500-plus coal plants on the books in India. Meanwhile China’s building a coal plant every 13 days at about 600 megawatts. Meanwhile Japan is reanimating coal and building new coal to replace nuclear production. Germany has reanimated coal. The United States is still using coal. In carbon capture, and we really have demonstrated it at Boundary Dam 3, which is still working, in quote-unquote clean coal technology, we’ve got something to offer for a big part of the problem. Forty per cent of energy production worldwide, and it’s likely more than that, is from coal. If Canadians want to be serious about contributing to the fight against climate change, we would actually do more for the worldwide problem by focusing on technologies that can be applied in these economies. Getting the price down so they make sense, we’d be better off focusing on them than shifting around and moving around the three per cent of emissions we’re responsible for. Not that we shouldn’t all be doing our part internally, I’m not advocating that, but carbon capture should be part of the debate around the post-carbon economy. It gives us a chance to actually do something about a huge part of the problem world-wide.

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Green leader grills NDP leader Éş Page A5

New Democratic Party Leader Thomas Mulcair Energy East: With regard to Energy East, it could be a win-win-win: better price for the producers, more royalties for the producing province. It could also help create those jobs in Canada. And of course it could help with Canada’s own energy security. But here’s the rub. Mr. Harper has gotten the balance all wrong. He has scrapped a series of important environmental laws, starting with the Navigable Waters Protection Act. Species at risk has been affected; fisheries. Instead of dealing with First Nations on a respectful, nation-to-nation basis, he spends a hundred million dollars a year fighting them in court. We’ll take a different approach. We’ll work with First Nations. It’ll be a new era in relations with First Nations because they are the resource rulers in a lot of these cases. Mr. Harper’s belligerent, butting – butting heads approach is not working, and that’s why not one of those projects has gotten off the table. *** In the case of Energy East, for example — where we would be replacing the super tankers that right now come down the St. Lawrence to Saint-Romuald across from Quebec City, we’d be replacing the extremely dangerous trains that are going through communities all across Canada. That’s the type of evaluation that we should do — it’s an objective evaluation — if we can get back to a credible system, which we’ve lost. Paul Wells:  In a – in an interview with our colleagues at l’ActualitÊ, you also said that, for Energy East to make sense, you’ve got to internalize the price of carbon in the price of the project. That sounds like a carbon price. Would that be felt by consumers at the gas tank? Mulcair: Internalizing the cost, as I just said before with regard to sustainable development, making the polluter pay, that’s a normal rule of sustainable development; otherwise, you’re making everybody in society bear it. User pay, polluter pay – basic rules of sustainable development. I brought in overarching legislation in Quebec. It went so far as to change the Charter of Rights to include the right to a clean environment. Keystone XL: Getting our resources to market is critical. But Mr. Harper’s gotten the balance wrong. He’s gutted our environmental legislation, and he knows that that’s hurting jobs in our resource sector, it’s hurting our economy, and frankly, it’s hurting Canada’s international reputation. Building on my experience as an Environment Minister, when I brought in overarching sustainable development legislation, I would enforce that type of legislation: make polluters pay for the pollution they create. And these projects would get looked at with a thorough and credible environmental assessment process. Mr. Harper and Mr. Trudeau both agree with Keystone XL, which

represents the export of 40,000 jobs. I want to create those 40,000 jobs here in Canada. Northern Gateway: I believe that a clean environment and a strong economy do go hand in hand. What we especially said in the case of Northern Gateway — and I got a chance to visit the Douglas Channel — was there was no safe way to bring those large super tankers into that narrow channel. That just doesn’t make any sense. What I have said in the case of Keystone XL — you just heard me repeat it — part of sustainable development is creating those value-added jobs in your own country. You don’t export them to another country. *** By the way, that 40,000 job figure is Mr. Harper’s own figure. Mr. Flaherty and him were boasting in the States that it would create 40,000 jobs there. I want to create those 40,000 jobs here in Canada. *** This is part of my track record, that people are free to consult. When it was the Rabaska liquefied natural gas plant across from Quebec City, and I was the Minister of the Environment, I didn’t even want to look at it because of the danger of those tankers in the St. Lawrence, the same approach I took with regard to Northern Gateway and the tank— dangerous tankers in the Douglas Channel. *** TransMountain Expansion: With regard to these other projects, we have to be able to look at them objectively with thorough, credible environmental assessment processes. I am taking the position that you can study these thing— these projects. Ms. May takes the position that you can say no to them, all of them, in advance. Mr. Harper is taking the position that you can say yes to all of them in advance. We want a clear, thorough, credible process that the public can have confidence in.

Liberal Leader Justin Trudeau Energy East: Mr. Mulcair has been somewhat

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inconsistent on pipelines. In English he’ll say that he supports the Energy East pipeline; in French he said that it’s out of the question. And that kind of inconstancy, quite frankly, isn’t the kind of leadership we need for Canada. You can’t say one thing in English and its opposite in French. The fact is we need to restore public trust in our ability as a government to create a level playing field upon which proponents of a project can acquire social license, can gain the public trust from the communities it’ll touch, by working in concert with First Nations, Metis Nation, and Inuit peoples to make sure the right partnerships are in place, and also to make sure that the scientific oversight and rules and guidelines are actually protecting Canadians. This is about not just doing right by our environment; it’s also about doing right by future generations. I have three kids, and I know I want my kids to grow up in a country as fresh and pure and clean as Canada was when – as we remember it to be and as it used to be. And for that to be – take hold, we have to have a government that’s actually demonstrating leadership, that understands that you cannot make a choice between what’s good for the environment and what’s good for the economy. In the 21st century, they go together. Investing in clean tech, in jobs, investing in the kids of pollution reduction and emissions reductions that we need is what this country hasn’t done well enough under Stephen Harper. *** Canadians know that we need an actual approach that gets it, that restores that public trust that we have simply lost over the past years. Mr. Harper has failed on the environment, and therefore he’s failed on the economy. Mr. Mulcair continues to – to say different things in both languages. But I will say that, on Energy East, I have consistently said that it needs to gain social license. And the Conservatives in New Brunswick, you know, criticized me roundly when they were in government. So I don’t know what Mr. Harper’s talking about in terms of that. ɸ Page A10

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Government doesn’t build pipelines: Harper ɺ Page A9 Keystone XL: The reason environmental groups in Canada and across the United States are so concerned about Canadian oil is because Mr. Harper has turned the oil sands into the scapegoat around the world for climate change. He is – has put a big target on our oil sands, which are going to be an important part of our economy for a number of years to come, although we do have to get beyond them. And his lack of leadership on the environment is hurting Canadian jobs and Canadian relations with other countries. Northern Gateway: No direct comment made. TransMountain Expansion: No direct comment made.

Conservative Leader Stephen Harper Energy East: (in response to Trudeau) Well, Mr. Trudeau, you do exactly what you accuse Mr. Mulcair of doing. You go to one part of the country, Atlantic Canada, you’re for Energy East; you go to Quebec, and you’re against it. All of these – all of these – all of these parties have opposed all of these projects before we’ve even had environmental assessments. That’s not the responsible way you do things. The government has environmental assessments. You do – take your – you take the evaluation based on that and you move forward. And that’s – you know, that’s taking the jobs and the economy seriously along with the environment. The way you don’t deal with this problem is start imposing carbon taxes that will inevitably – they raise money for the government. They don’t reduce emissions. They hit consumers, and they hit consumers hard.

Keystone XL: Well, in fact, our energy exports have increased, not just our — until recently, obviously — not just our oil and gas exports to the United States, but we’ve also seen increasing uranium exports and coal exports and others to Asia. But I would say this, Paul: the federal government does not build pipelines. We obviously favour seeing a diversification of our exports, but we – we establish an environmental assessment process. Companies have to go through that, and they are going through that process. In terms of the Keystone pipeline, as you know, that’s a – that’s a situation under control of the United States. I’ve had many conversations with President Obama. He’s not asking Canada to say anything. He’s saying he will simply make a decision that’s in the Americans’ best interests. But as you know, there’s overwhelming public support on both sides, so I’m very optimistic in the long run about the future of that project. Paul Wells: Do you think we simply have to wait for a new President to get Keystone passed? And what if that President is a Democrat? Harper: Well, that may be poss– that may be the case. But the reality is that there is overwhelming public support in the United States, including in Congress on both sides of the aisle. So I – I (sic) actually very confident, looking at the field, that whoever is the next President I think will appro– will approve that project very soon in their mandate. The project went through a rigorous environmental assessment with a time limitation, as we established. The assessment recommended some 200 conditions on the project. We approved the

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project subject to those conditions. It’s now up to the – up to the proponent to fulfil those conditions. And that is how the system works in this country. Northern Gateway: the position of the government is that we have a scientific expert evaluation of every project before we decide to proceed. That’s how the government’s – that’s how the government has handled these projects. Mr. Mulcair, by his own admission, has already ruled out a number of projects before they even went through the process and is – and is positioning himself to be against others as well. That – that is the record of the NDP. They’re always for projects till they actually face one, and then they’re against it. That’s why in British Columbia they oppose even liquefied natural gas. TransMountain Expansion: No direct comment made.

On the Web Here are the web pages for each of the pipeline projects in question: R5 , (- )/(. #(5 2* (-#)( www.transmountain.com/proposed-expansion R5 , (- ( 5 3-.)( 5

keystone-xl.com R5 , (- ( 5 ( ,!35 -. www.energyeastpipeline.com R5 ),." ,(5 . 1 3 www.gatewayfacts.ca/

PIPELINE NEWS September 2015

A11

Crescent Point lowers its dividend (Daily Oil Bulletin) Calgary – In a major shift in corporate strategy, Crescent Point Energy Corp. has cut its monthly dividend on Aug. 1 to 10 cents from 23 cents and reduced its capital budget by $100 million to $1.45 billion. While most producers’ reduced budgets are far below their original projections, Crescent Point’s revised total equals its original 2015 budget of $1.45 billion. Powered by acquisitions, Crescent Point increased production in the second quarter but reported a $240 million net loss. The company reported derivative losses of $246.25 million for the quarter compared with derivative losses of $154.15 million in the same period last year. Crescent Point reported net debt of 1.9 times funds flow from operations at the end of quarter and unused credit capacity of $1.7 billion. The company said the revised budget announced with its second quarter results on Aug. 12 reflects cost savings and less drilling-related capital. Production guidance remains unchanged at 163,500 boepd. Besides cutting its monthly dividend to 10 cents a share from 23 cents, Crescent Point is suspending its existing share dividend plan (SDP) and dividend reinvestment plan (DRIP), effective with the August dividend. As of Sept. 15, shareholders who were enrolled in the SDP or DRIP will receive the regular monthly cash dividend of 10 cents a share. The reduced dividend is effective with the August dividend which is payable in cash on Sept. 15. Crescent Point president Scott Saxberg said these measures — cutting the dividend, cutting the

capital budget and suspending the dividend reinvestment plans — protect the company’s balance sheet amid extremely low prices and highlights the goal of internal funding rather than increasing debt or issuing equity. The cuts in the capital budget have been evident as the company, which had been leading the country in the number of active drilling rigs it employed steadily dropped in recent months. On June 11, the company had 24 drilling rigs going. By July 10 it dropped. As of Aug. 13, it was down to 11. Second quarter review Crescent Point said its second quarter production increase was driven by its development program, ongoing waterflood success and strong results from its cemented liner completion techniques. Bakken During quarter Crescent Point drilled 35 (32.9 net) oil wells in the Viewfield Bakken play. In the first half of 2015, the company successfully converted 11 producing wells to water injection wells, with a total of 30 planned for the year. Crescent Point continues to advance its waterflood program and is currently working on unitizing its second of four units in the play. Based on results to date, the company estimates it has reduced decline rates by up to 10 per cent in waterflood-affected areas in the Viewfield Bakken resource play, compared to areas not under waterflood. Crescent Point is encouraged by its new closable sliding sleeve technology, which was used on 22 net wells in the quarter and is currently being deployed in all cemented liner completions in the play. Since 2014, Crescent Point has cut drilling and

completion costs in the Viewfield Bakken by 22 per cent and continues to seek service cost reductions and to improve overall efficiencies. Torquay The company is pleased with drilling results to date in the Torquay play at Flat Lake, having drilled nine (nine net) oil wells during the quarter, including two (two net) step-out wells. This year Crescent Point has drilled seven (seven net) step-out wells in the Torquay, extending the boundary of the play. The company continues to modify and experiment with various fracture stimulation techniques, which have the potential to further increase the economics of wells drilled in the play. Midale The Midale unconventional light oil resource play is a highly economic, large oil-in-place pool with a low recovery factor to date and is in the early stages of horizontal well development. Crescent Point significantly increased its position in this play with its acquisition of Legacy Oil + Gas Inc., which closed on June 30. The acquirer said its infrastructure in the Midale area allows it to realize the associated gas and NGL produced from the play. In the first half of 2015, Crescent Point and Legacy drilled 15 (15 net) oil wells in the Midale play. Crescent Point has plans to drill 22 (21 net) Midale oil wells in the second half of 2015. The company has more than 400 internally identified drilling locations in the play, of which 38 net are booked as probable locations and 67 net are booked as proved locations. ɸ Page A12

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A12

PIPELINE NEWS September 2015

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These two rigs were drilling for Crescent Point just southeast of Stoughton on July 31. The company, which had led the country in the number of rigs it employed for the ÄŽrst half of the year, has been curtailing that number as the price of crude dropped again. Photo by Brian Zinchuk

Éş Page A11 Southwest Saskatchewan Crescent Point

continued to expand and optimize its waterflood program in the Shaunavon resource play during the second

quarter, with a total of 52 water injection wells operating in the play. During the first half of 2015, the company

converted 11 producing wells to water injection wells, which represents about 30 per cent of planned conversions for

2015. Based on results to date, Crescent Point estimates it has reduced decline rates by more than 10 per cent in waterflood-affected areas in the play, compared to areas not under waterflood. Alberta and west-central Saskatchewan During the quarter, Crescent Point continued its drilling program in the Dodsland area of the Saskatchewan Viking resource play, drilling 48 (47.5 net) oil wells and achieving a 100 per cent success rate. The company is pleased with production results to date, as wells have been coming on production at, or better than, internally forecasted rates. Crescent Point has begun to implement its sliding sleeve technology in the Viking play, and continues to refine its completion technology. Since 2014, it has cut drilling and

completion costs in the Saskatchewan Viking play by about 24 per cent. The company expanded the waterflood program in the Swan Hills Beaverhill Lake play in second quarter 2015, with a total of five water injection wells currently in operation, including its own operated well and four non-operated injection wells currently operated by Coral Hill Energy Ltd. (On July 2, Crescent Point announced its planned acquisition of Coral Hill, which was expected to close around Aug. 14.) Crescent Point continues to see a strong waterflood response and is encouraged with results to date. The company plans to advance its waterflood program in the Swan Hills Beaverhill Lake play during the second half of 2015, after integrating the Coral Hill assets. ɸ Page A13

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PIPELINE NEWS September 2015 Éş Page A12 United States In the second quarter Crescent Point took part in the drilling of 25 (16.4 net) oil wells in the Uinta Basin, achieving a 100 per cent success rate. The company remains excited about future opportunity in the Uinta Basin, which is a multizone, stacked play in the early stages of horizontal development. Last year, Crescent Point drilled two horizontal wells targeting the Uteland Butte and Douglas Creek zones, followed by four additional horizontal wells during 2015 targeting the Wasatch, Douglas Creek, Black Shale and Castle Peak zones. The

company is encouraged with drilling results to date. During the quarter, Crescent Point successfully reduced drilling time on its second Douglas Creek horizontal well from 24 days to 16 days, reducing drilling and completion costs. Since 2014, the company has decreased drilling and completion costs in the Uinta Basin by 20 per cent. Crescent Point is in the initial stages of interpreting data from its operated 3D seismic program, covering about 140 square miles, primarily in the Randlett area. The data will help identify prospective locations for future horizontal and vertical drilling, and will help with the overall development of its operated lands.

A13

During second quarter, the company also participated in the drilling of 6 (4.1 net) oil wells in North Dakota, targeting both the Bakken and Three Forks formations. Crescent Point is encouraged with results to date in both formations and is making significant progress in lowering overall drilling and completion costs. Hedging As of Aug. 5, Crescent Point had hedged 54 per cent of its oil production, net of royalty interest, for the remainder of 2015 at a weighted average price of about $88 a bbl and 32 per cent for 2016 at a weighted average price of about $83 a bbl. The company’s oil and gas hedges extend into 2018.

LETTER TO THE EDITOR Tax hike in Alberta hurts oil industry Dear Editor, Lest anyone think that provincial prosperity is pure luck of the draw based upon the global price for commodities, Alberta’s recent tax hikes should be a sobering reminder that bad policy can cripple an economy faster than any downturn. Earlier this year, the recently elected NDP government in Alberta proudly announced a twenty per cent hike in taxes and that they would be undertaking another royalty review on that province’s energy industry. Fast forward a few months and energy companies like Canadian Natural Resources Ltd. (CNRL) are posting their second quarter numbers. CNRL is taking a $579 million hit thanks to the NDP’s new taxes. This is, the company’s report says, equivalent to about 4,100 jobs down

the drain. The numbers for other energy companies in Alberta are similarly bleak. And that province’s NDP government still has a promised royalty review coming down the pike. The Saskatchewan Party government has promised no royalty reviews or new taxes on an industry that is already reeling from slumping global prices. We’re committed to maintaining a stable and fair royalty regime, and to keeping taxes low for families and businesses alike. Unlike the NDP penchant to raise taxes first and consider consequences later, our government’s first priority is keeping Saskatchewan strong.

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A14

PIPELINE NEWS September 2015

Building more commercial properties as oil sector slows down: DSI Weyburn – Building contractor DSI Contracting of Weyburn has been adapting its strategy to deal with the changing economic environment in a community where oil is king. That means, ironically, they are actually doing more commercial work now than residential work, which had been a primary focus. “We’re fortunate. We’re still at capacity,� said Darcy Iversen. “We’re doing some travelling for commercial jobs. We can’t complain. “Residential has slowed up. We’re doing a lot more commercial – some in farming, some industrial, i.e. concrete work for a fertilizer plant at Central Butte.� Darcy and his wife Sandy had headed up the operation of the company, but the torch has now been passed to their son Justin, who has taken over as general manager. Darcy, who started contracting work 1977, now acts as the gopher. “It’s hard to let go. But if I want Tuesday off, I’d like to get Tuesday off,� Darcy said. DSI did the restoration work at the popular Pump Jack’s bar after a fire in the fall of 2014 caused extensive damage to the kitchen. As part of the project, they revitalized the bar

&rom leĹŒ, JusĆ&#x;n, Sandy and Darcy /Ç€ersen are the ownership team behind DS/ ContracĆ&#x;ng. JusĆ&#x;n is now heading up the operaĆ&#x;on. Photo by Brian Zinchuk

area. “We also added on some square footage, and put a ramp in to make it easier to bring supplies into the kitchen,� Darcy said. “We’re still lucky to be just as busy,� Justin said, adding they have

not had layoffs. That’s due to the fact the company is not directly tied to the oilfield, although some of their projects are. Sandy, who does the administrative work, noted it takes a while

for things to slow down once the ball is rolling on a project. However, the projects in play now tend to be shorter ones, not the big 12- month projects they have seen in the past. ɸ Page A15

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A15

Zight͗ Part of the restoraƟon of Pump JacŬ͛s in teyburn by DS/ ContracƟng was the reǀitalinjaƟon of the bar.

>eŌ͗ Three buildings in this shot were built by DS/ ContracƟng͗ The SAZCAE worŬshop on the leŌ, tor-<in Centre in the centre, and Prairie tind ZecreaƟonal >td. on the right.

ɺ Page A14 One of their key focuses is the development of the east end of the Ebel Road industrial park. The grand opening for the Wor-kin Centre took place on Aug. 27. It was a three-stage project which included a wood shop and SARCAN facility in one building, and the main Wor-Kin Centre in another. DSI is the lead developer of the area, which has four lots left of the 16-acre development. A motorsports dealer now occupies one of the lots in this development, and DSI was the contractor on the project. “You can buy the land. We’re open to develop-

ing it for you or you can purchase it and select your own builder,” Sandy said. “We knew it would be a long-term investment,” Darcy said. They’ve installed utilities, curbed and paved the next section of road for the next lots to be developed. Ebel Road has the benefit of being a paved subdivision not far from highway access. DSI built several projects on Ebel road, including a supply shop, oilfield services company and truck wash. Another recent project has been converting a former school to office use. Now they are working on projects in “The Creeks,” on the northeast corner of the city, including foundation work for

a strip mall. That project is being done for PCL of Regina. DSI is also looking at an Estevan project, but that is in the preliminary stages. DSI has four shop spaces available for rent across three buildings. Their main shop on the west side of Weyburn has two spaces, of which they are occupying one. Across the street are two others. One is being used by a cabinet maker. The other building is currently unoccupied. Ideally they would like to move operations to that new building, but the 50x75 foot shop is more attractive to potential renters than the shop space they are using now, so finding a tenant right now is the priority.

A16

PIPELINE NEWS September 2015

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This wall, framed of steel. is light, accurate and strong. Photo by Brian Zinchuk

Estevan – When your kids open a Lego set, there are a few things you may notice: first, the number of pieces is precise – there is no wastage. You get what you need, no more, no less. Second, there are instructions. Third, there are labelled bags for each part of the process. Now imagine if you could construct buildings like this. Well, you can, using steel-framed buildings produced by FrameTech Systems in Estevan. The company is owned and operated by Brad Wilhelm. It started operations in September 2014, and is located right in the centre of the Energy City. “We get an architectural drawing and convert the whole building to steel,” Wilhelm said. Their software will design individual rafters, studs and joist. They just have to click “run” and send it to

the machines to be produced. As an example, he pulled up drawings of a three story house destined for Edmonton. The custom built home would have an elevator and grassed terrace on the roof. Residential, multi-residential as well as lightcommercial projects are a few of the applications that steel framing can be used for. FrameTech’s precision roll-forming machines will take flat steel and form it into studs. Each stud is pre-cut and pre-dimpled for easy assembly. Service holes will be punched where necessary. The result is something that Wilhelm says, if not like Lego, “Is more like a Meccano set.” “Every stud is labelled for where it belongs in the wall system,” Wilhelm said. This labelling corresponds with the construction assembly drawings. ɸ Page A17

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PIPELINE NEWS September 2015 Éş Page A16 As for wastage, he noted there’s less than one per cent waste. A stick-built wooden framed building can have up to 20 per cent waste. Also, Wilhelm has noticed a decline in the quality of wood available over the last ten years. “We came from wood-building backgrounds. You pay a worker all day to sort lumber, which is not very cost-effective. “Steel is 30 per cent stronger and lighter than wood. It’s 100 per cent recyclable, non-combustible, it will not split, rot, crack. Steel is naturally mould and pest resistant,â€? he said. The steel used is galvanized and has a G90 coating. To prove the point of its resilience, FrameTech assembled a small shack and put it on the corner of their property, leaving it exposed to the elements to show it won’t rust. Rapid assembly takes place at their Estevan location where they will assemble walls, rafters and floor joists. Every stud is predrilled to make assembly fast and simple. “You just line up the holes and screw the studs together,â€? he said. There are holes for running electrical or water lines. Grommets are used to prevent any wear against the edge of the holes. Regular wire can be used, as BX shielded wire is not required. The open web of the floor joist truss design allows for drain pipes to easily pass through. “Ninety per cent of the buildings we send out are pre-assembled. Then we can go to the site and erect it,â€? he said. FrameTech’s own staff or authorized builders do the framing. Wilhelm said it’s 30 per cent faster than stick-built framing with wood. He added he’s seen it done even faster than that. “We can manufacture a 1,600 square foot bungalow in a day in the shop.â€? The whole system is engineered. A sub-contracted engineer looks over plans for structures over a certain size. Certain clients, like power utilities and the oilfield prefer having an engineer-stamped project. Additionally, the software will tell you down to the screw if it will pass or fail. Utilizing the FrameTech System can reduce labour costs on an entire project up to 15 per cent, Wilhelm said. This system of framing also makes it easier for following subtrades, he added. Plumbers, electricians, drywallers, cabinet and finishing carpenter’s times are reduced because of the system’s accuracy and detailed engineering. FrameTech is a sister-company to Wilhelm’s other venture, Estevan Eaves & Exteriors. The metal-working tools and workers’ skillsets have a lot of overlap. FrameTech Systems not only services Estevan and area, but they provide their steel framing to Western Canada and the northern United States.

There are other metal framing systems, but they generally are simply another method of stick-built construction, substituting standard sized wood studs for steel stud, resulting in dumpsters full of off-cuts. FrameTech Systems unique technology is one of a kind so far in Canada, according to Wilhelm. In the oilfield, this system has applications in treater shacks, MCC buildings and jobsite trailers as just some examples. “Using this construction method, fire rated buildings are easily achieved along with design flexibility,� he said. As an added bonus, FrameTech’s steel framing system can help protect the environment, preserve our land and benefit our ecosystem, he added.

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A18

PIPELINE NEWS September 2015

Strong Asian gas prices help boost Husky’s second quarter results By Pat Roche (Daily Oil Bulletin) Calgary – Husky Energy Inc. reported reduced but solid cash flow and remained profitable in the second quarter despite sharply lower oil prices. The company’s realized oil and natural gas liquids price averaged $56.79 a bbl, down from $90.33 in the second quarter of last year. In contrast, the company posted a strong average realized natural gas price—$6.09 an mcf versus $6.42 in the second quarter of 2014. This was driven by strong Asian prices. At its Liwan gas project in the South China Sea, Husky got about $14.50 an mcf for its gas, CEO Asim Ghosh told a conference call after second quarter results were released this morning. Combined gross gas sales volumes from the Liwan gas project, including the Liuhua 34-2 field, averaged 295 mmcf a day, up about 13 per cent from the first quarter of 2015. Sales of associated natural gas liquids were about 15,000 boepd (gross). Husky’s share of gas sales from Liwan reverted to its equity interest of 49 per cent in late May following the recovery of exploration costs. Companywide production in the second quarter averaged 337,000 boepd compared to 334,000

boepd in the corresponding 2014 quarter. This takes into account steady results from thermal heavy oil projects, strong performance at the Liwan gas project and the ongoing ramp up of production at the Sunrise SAGD project. Output was affected by scheduled turnarounds at the Tucker SAGD project in northeast Alberta and the Ansell resource play, as well as planned maintenance at several thermal heavy oil projects and on the partner-operated Terra Nova floating production, storage and offloading (FPSO) vessel offshore Newfoundland. Alberta tax bites earnings Husky’s second quarter net earnings of $120 million, down from $628 million a year ago, reflected several one-time items, including a $157 million impact from a corporate tax increase in Alberta to 12 per cent from 10 per cent. This was recognized in the second quarter as the legislation was enacted in June. Other one-time items included a $79 million recovery from tax provision releases in Canada and the United States and a $29 million after-tax impact from the write-off of the isocracker unit at the Lima Refinery. This was mitigated by $58 million (after tax) from insurance recoveries, which largely

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offset the earnings impact from the business interruption to the end of June. Husky said it is building on the $1.3 billion in cost savings realized since 2010 with additional supply, procurement and operating efficiencies. The company said it is on track to achieve its $400-600 million target in cost savings this year, with about $575 million locked in to date. Sunrise SAGD The Sunrise oilsands project is steadily ramping up production towards expected capacity of about 60,000 bpd (30,000 bpd net to Husky) around the end of 2016. “Volumes continue to be a little ahead of our plan,” Rob Peabody, chief operating officer, told the conference call. The company said strong reservoir and facility performance has contributed to increasing volumes, which are currently in the range of 5,500-6,000 bpd (gross). Steaming is underway on 43 of 55 well pairs, with 25 well pairs on production. Plant 1B is on schedule and in the final commissioning phase. Thermal oil In the Lloydminster area heavy oil belt, total production from thermal projects, including planned maintenance, averaged 41,000 bpd. Including Rush Lake, the company expects to add more than 34,000 bpd of heavy oil thermal production over the next 18 months as it advances its low-risk, modular construction templates. The 10,000-bbl-a-day Edam East project is scheduled to come online in the third quarter of 2016, the 4,500-bbl-a-day Edam West project is set to begin production in the fourth quarter of 2016 and the 10,000-bbl-a-day Vawn project is expected to start up in the fourth quarter of 2016. In keeping with Husky’s transition towards low-sustaining-capital projects, about two-thirds of its heavy oil production will use thermal recovery processes by the end of 2016. Additional opportunities to expand thermal production are being evaluated. Downstream/midstream Throughputs at the refineries and Lloydminster upgrader averaged 313,000 bpd compared to 304,000 bpd in the second quarter of 2014. This takes into account reduced capacity at the Lima refinery and unscheduled maintenance at the upgrader that began in late June. The Lloydminster upgrader shut down for unscheduled maintenance in late June for an estimated six to eight weeks. A six- to eight-week maintenance turnaround at the Lima refinery has been scheduled to start in March 2016. As a result, the isocracker is expected to resume operations at the same time as the refinery startup. On the midstream front, expansion work on the company’s South Saskatchewan gathering system continued in the second quarter and is now about 50 per cent complete. The project is intended to create further capacity for Husky’s rising thermal heavy oil output.

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PIPELINE NEWS September 2015

A19

Garrison Oilwell, a close-knit service provider

Deet the 'arrisonsÍ— >eĹŒ to right are Eatalie DarĹŹ, BeÇ€erly 'arrison, Darryl 'arrison, Sheldon 'arrison and Chantelle silleneuÇ€e. The 'arrisons also haÇ€e three granddaughters and one grandson. WŚŽƚŽ Ä?LJ 'ÄžŽč >ĞĞ

„ By Geoff Lee Lloydminster – Garrison Oilwell Servicing Ltd. is in its 37th year as a family run business that is co-owned by Darryl and Beverly Garrison in Lloydminster.

The Lloydminsterbased company does completions, blowout preventions, workovers, abandonments and a variety of pump to surface work with its core fleet of five service rigs. The Garrisons have two daughters, one son

and a son-in-law on the payroll, all of whom are vital to their succession plan with retirement looming in a few years. “They’ll probably look at taking over slowly over the next few years,’ said Darryl, who is 58. “They’ll be

doing more than they are right now.� The Garrisons also have three granddaughters and a grandson waiting in the wings. The Garrisons believe running a hardworking family business like theirs can

help to generate new business during the current downturn in the industry. “It helps because everybody works that much harder for the company. The family works that much harder, too. It’s partially

theirs, too,â€? said Darryl, who is company president, with Beverly as office manager. The couple’s youngest daughter Chantelle Villeneuve works as the safety coordinator while her husband Shawn is the rig manager in charge of one double double and four single double service rigs. The Garrison’s oldest daughter, Natalie Mark, handles the payroll and billing while their son Sheldon is a field supervisor. The company had four of their rigs active in the field when Pipeline News dropped by their office in late August with oil hovering around US$45 a barrel WTI. “We’re working around Lloyd and in the Provost and Macklin area too. We’re working more in light oil down there. It’s a little better price than heavy oil is right now,â€? said Darryl. ɸ Page A20

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Vehicles(s) may be shown with optional equipment. Dealer may sell or lease for less. Limited time offers. Offers only valid at participating dealers Retail offers may be cancelled or changed at any time without notice. See your Ford Dealer for complete details or call the Ford Customer Relationship Centre at 1-800-565-3673. For factory orders, a customer may either take advantage of eligible raincheckable Ford retail customer promotional incentives/offers available at the time of vehicle factory order or time of vehicle delivery, but not both or combinations thereof. Retail offers not combinable with any CPA/GPC or Daily Rental incentives, WKH &RPPHUFLDO 8SĂ€W 3URJUDP RU WKH &RPPHUFLDO )OHHW ,QFHQWLYH 3URJUDP &),3 )RUG (PSOR\HH 3ULFLQJ ´(PSOR\HH 3ULFLQJÂľ LV DYDLODEH IURP -XO\ WR 6HSWHPEHU WKH ´3URJDP 3HULRGÂľ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Š2015 Ford Motor Company of Canada,Limited. All rights reserved.

A20

PIPELINE NEWS September 2015

37 years in business for Garrison

'arrison Kilwell SerÇ€ice has a core Ňeet of ÄŽÇ€e serÇ€ice rigs including one double double and four single double rigs. WŚŽƚŽ Ć?ĆľÄ?ĹľĹ?ƊĞĚ

Éş Page A19 “We’ve been doing completions and workovers and we were doing some abandonments there for a while.â€? As for the Viking light oil play in the Kindersley area Darryl said that’s slowed down lately as oil prices fell back after a bit an uptick in June. “When it was $60 a barrel there was work coming up, but now that it’s down to $42 a barrel today, the work has kind of slowed down again too,â€? he noted. “There are projects coming up, but they’re just on hold until the price stabilizes again.â€? Garrison Oilwell Servicing is equipped to service horizontal wells in the region with four truck-mounted TMX Xcelerator units, three pumping units with tanks and nine-inch blowout preventers. Over the years, their crews have worked everywhere from Turtleford and North Battleford in Saskatchewan to Provost and High River Alberta and many points in between. The company started in 1978 with one single single rig and a slow and a steady mindset to growth during the boom and bust cycles of the oil and gas industry. The key to their longevity is, “just growing slowly and to with the ups and downs in the oilfield,â€? explained Darryl. “We’ve slowly expanded here in the last five years, too. “We went from three rigs up to five rigs and we built two brand new rigs and we rebuilt the other three rigs, too.â€? The company saves money by owning its equipment and doing its own maintenance at its yard south of Lloydminster or at a shop on the Garrisons’ acreage and in the field. “We don’t have any lease payments. There are some bank loans out there, but we’ve got everything under control pretty good too,â€? said Darryl about their financial footing. “We’re going to hold tight right now for a while. We’ll probably stay at five rigs for a while with everything all paid off and then we’ll see what happens if the oilpatch gets busier.â€? ɸ Page A21

is pleased to introduce the newest addition to our eet of cranes 245 Ton Terex-Demag 5800 Explorer with a tip height to 350’

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PIPELINE NEWS September 2015 Éş Page A20 Their prudent approach to running a family business has helped the Garrisons wait out bad downturns in ’86, ’99 and ’09 and the current downturn that caught them off guard. “This one didn’t look as bad to begin with, but it’s looking like it could be long-term with the price of oil going down and staying down. It could last a year or two, who knows,â€? said Darryl. “I find it kind of scary,â€? added Beverly. “To me, it just seems like one of the worst ones because the whole world economy seems to be in turmoil and nobody seems to have an idea – everybody’s speculating.â€? Darryl admits he keeps a close watch on the price of oil while cutting costs and looking for efficiencies with his field operations. “Everywhere you can cut costs – you watch your people and make sure they are as efficient as possible. We make sure we keep our equipment well-serviced so we are not spending an extra bunch that way,â€? he said. “We haven’t laid any people off. We slowed down a bit last fall, so we didn’t hire for the last couple of rigs. “We just kind of kept everybody going and we’re moving people around between rigs. We’ve got job sharing going on too.â€? That work policy allows rig hands like Bailey Abellanosa to pitch in as office receptionist for a day or two as he did in August and earn a paycheque until he goes back to the field. “Being a small company we like to think we have better employees. They are closer knit. We treat them as family and they work that much harder and give really good service to the oil companies,â€? said Darryl. “A lot of our people have been here over 10 years.â€? Garrison Oilwell Servicing also gives back to the community as a current sponsor of the Bobcats hockey team in Lloydminster and a variety of other minor sports teams, causes and events over the years. “All of our money that we bring in here stays here in Lloydminster and the surrounding area,â€? said Darryl. Darryl said the most memorable aspect of running a family business through thick and thin has been the opportunity to meet a lot of different people. “We’ve got of friends from years back too. It’s been pretty good. Of course, you go through slow times too. There’s good times and bad times in the oilfield,â€? he said. Despite the stress of working during the ups and down in the oil and gas industry, Beverly said everyone in the family gets along. “We’re really fortunate that as a family our communication is pretty good. We all seem to get along really well,â€? she said. “There is really not much friction or conflicts. We can all have good communication as far as work and stuff goes.â€? The downside is finding a time that the entire Garrison clan can vacation together. “We can do it at Christmas and during breakup, but the rest of the year, we pretty much go one family at a time type of thing,â€? said Beverly. The Garrisons are especially pleased that their kids are well-trained for their jobs and they are proud of their accomplishments. “Chantelle has taken her safety course through the University of New Brunswick and passed with really high marks – and she’s training all the time,â€?

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For more information or to register contact: Southeast College (306) 848-2852 or 1-866-999-7372 southeastcollege.org

A21

said Beverly. “Natalie’s done some courses in safety and bookkeeping – she did a little bit in college which has helped her out immensely.� Sheldon just got his pilot’s licence and has taken welding course and is an instrumentation technician. “He can work inter-provincially anywhere in Canada, which helps out a lot with the company,� said Darryl.

Beverly and Darryl Garrison have owned and operated Garrison Oilwell Service for the past 37 years growing slowly with the ups and downs in the oil industry. WŚŽƚŽ Ä?LJ 'ÄžŽč >ĞĞ

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A22

PIPELINE NEWS September 2015

PIPELINE NEWS September 2015

A23

Produced water and oil chew through aluminum tanĹŹs once the liner is compromised. ,ere Denis Jolicoeur worĹŹs on replacing an internal valve on a Super B trailer. Jolicoeur worĹŹs in the Three Star TrucĹŹing body shop.

Heavy truck collision repair available with Three Star Trucking in Alida

JusĆ&#x;n DcEish holds one of Three Star TrucĹŹingÍ›s welding shop creaĆ&#x;ons.

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“We do a lot of glass on our own company trucks,� he said. Typical basic repairs the body shop does include damaged hoods and fuel tanks, often caused by bumps. They don’t get a lot of major repairs, yet, but they’re working on it. “Our busiest thing is the industrial blasting and painting. We’re pretty steady on that,� he said. “We’ll do anything.� Examples include a pumphouse for a new drilling rig and a liquefied propane trailer. Skipper is a red-seal collision technician. He has three other workers in the body shop. It makes a difference when you’re working on heavy trucks. “You don’t need two guys to put a steering box on a pickup, but you do on a Mack,� he said. The body shop has two journeymen bodymen and two sandblasters. The industrial blasting and painting “took off,� according to Skipper. “It’s one of our mainstays. We’d like to see more heavy trucks come in. We’re a bit out of the way, but it’s coming. People don’t want to spend money right now,� he said, commenting on the low price of oil and its impact on the industry. The company has a bed truck that can be used to move rig components for blasting and paint. They haven’t had any service rigs come in yet, but they’re working on it. “We’re ready to rock and roll any time,� Boettcher added. Welding Rounding out the mechanic and body shop is the welding shop, its own division. It’s a Transport Canada-registered tank repair shop, with B pressure certified welders. The welding shop is equipped with a 12-foot brake and 10-foot sheer, each capable of handling quarter-inch thick material. There’s also a roller and lathe. Five people work in the welding shop. Four are

70

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„ By Brian Zinchuk Alida – When you have a large fleet of trucks and are in a relatively remote area, it helps to have an in-house repair capability. But Three Star Trucking of Alida has gone beyond having in-house mechanics. They now offer full welding and body work shops that cater to third-party clientele in addition to their own units. The range of services available include heavy truck and trailer collision repair, sandblasting, welding and fabricating. Alan “Skip� Skipper is the body shop manager, which includes industrial sandblasting and coating. “We started getting heavy into it when I came on about 18 months ago,� he said. A few years ago several of the larger trucking fleet operations, including Three Star, started up their own trailer repair operations. It turns out that there’s something in the Bakken oil and produced water that likes to chew through aluminum trailers. Justin Boettcher handles field sales and supervises NGL operations with Three Star. He said, “Salt water, produced from conventional oil and Bakken oil is very corrosive and raises hell with aluminum tanks.� They were repairing their trailers along the way, sub-contracting the work, before deciding to bring it in-house. Boettcher said, “We started repairing trailers and decided to get SGI-accredited and move into heavy trucks. Their mechanic shop works primarily on inhouse units, but will do things like brakes and tires for third parties. They can also do safety inspections and repairs for leased operators. The body shop came into being two years ago, and received its all-important SGI accreditation in the spring of 2014. Skipper noted they are the only shop in the area that handles major collisions for big trucks. He said they just completed a $130,000 repair on a 2013 Mack tri-drive tractor that had rolled over. They completely swapped the cab and bunk, replaced the stack, fuel tanks and hood.

Have your land co-ordinates available.

Shops For Rent

t Y t Y t Y Located on Coteau Ave. W., Weyburn

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Call 403-291-0005 Toll Free 1-877-784-9696 www.briskenergy.com SK. Licensed Operator.

red-seal journeymen welders, and three hold B pressure certifications. Justin McNish is the welding shop manager. He said, “We fix our own tanks and customer tanks, SGI claims.� The welding and fab shop, like the paint shop, is SGI-accredited. “We do rollovers, collisions, rotten tanks,� he said, “and tornado repair.� The welding shop builds boxes and chain racks for trucks and trailers. A lot of the work is repairing rotten tanks, including cutting out and replacing sumps and valves. Coatings used to line the inside of tanks eventually fail, resulting in corrosion and the need for corrective repair. Boettcher said of the coatings, “Of over 100 trailers we’ve had, they’ve all failed.� A new trailer might see two-to-three years before requiring repair, depending on its use. Doing transfers involving seven loads a day takes its toll. The first step is to blast the tank to see how weak it is. Then they remove and repair the corroded parts. If it’s pitted, it needs to be cut out. Bolt-on valves are typically replaced. Once put back together, the paint shop tackles coating the interiors of tanks. While aluminum is widespread in trailer construction, there are steel trailers, too. And they will also rot out when the coating inside fails, according to McNish. “Salt water eats it up.� Three Star is trying different coatings to see if there’s a better one out there. With the price of oil down, it makes more sense to repair a trailer than replace it, according to Boettcher. A new trailer might cost $130,000, whereas the cost of repairing on is less than half of that. “Between the mechanic, paint and weld shops, I don’t think there’s anything we can’t do,� Boettcher concluded. “A lot of times a trailer starts in the mechanic shop, does the whole loop (of shops) and comes back.�

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Welder Darlo CuÇŒ worĹŹs on a upper ÄŽĹŒh wheel for a trailer in the Three Star TrucĹŹing welding shop.

A24

PIPELINE NEWS September 2015

National Trucking Week

It’s theirs, again

Sept. 6-12 SERVING THE OILPATCH OF WESTERN CANADA -SINCE 1957-

Three Star TrucĹŹing is an enĆ&#x;rely-family owned operaĆ&#x;on again, owned by <en and Tim BoeĆŠcher. JusĆ&#x;n Boetcher, <enΖs son, handles ÄŽeld sales and supervises EG> operaĆ&#x;ons with Three Star TrucĹŹing.

Long Hauls Canada/US

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Salute to the

TRUCKING INDUSTRY

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r $VTUPN #SPLFST r 'PSXBSEFST $POTVMUBOUT r *NQPSU 4QFDJBMJTUT

Head Office North Portal

Estevan

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Several years ago, there was a wave of long-held family companies in southeast Saskatchewan that sold out to larger firms as the ownership started looking at retirement. One of those companies was Three Star Trucking of Alida, which has been owned and operated by the Boettcher family for over 50 years. They sold a majority stake to Provident Energy in

HUTT’S TRUCKING LTD.

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October 2011. Provident was then sold to Pembina Pipeline Corp. As a pipeline company, their trucking operation wasn’t a fit. “They didn’t want to be in trucking, so they gave us a deal,� said Ken Boettcher, one of the owners. Thus, in August 2014, the Boettchers bought back the part of the business they had sold just a few years before. “We bought it back. We got a good deal,� Ken said, agreeing that the retirement strategy he spoke of a few years ago has gone to the wind. “It’s a lot nicer owning your own company than just a part of it,� he said.

Proudly Saluting the Trucking Industry! ˆ 4EVXW ˆ 0IEWMRK

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‡ (VWHYDQ ‡ 6DVNDWRRQ ‡ :LQQLSHJ ‡ %UDQGRQ ‡ 5HJLQD 89 Escana Street, Estevan

Phone: 306-637-2121

Toll Free: 1-866-332-2121

PIPELINE NEWS September 2015

A25

National Trucking Week

Sept. 6-12 Alan Skipper, head of the Three Star Trucking body shop, stands in front of a trailer in the process of sandblasĆ&#x;ng. /ndustrial blasĆ&#x;ng and painĆ&#x;ng is a key part of the Three Star Trucking body shop.

CLIFF NANKIVELL TRUCKING LTD.

No business like snow business Alan “Skip� Skipper has been doing autobody work, primarily on heavy trucks, since 1982. “I never saw an oil rig until five years ago,� he said. Now he runs the Three Star Trucking heavy collision repair shop in Alida. He had worked on painting drilling rigs before coming to Three Star. He started out as a basic painter, then became a lead hand and finally was the paint manager at Do-All Industries before the rig builder when bankrupt. Skipper was the crash of 2009 when he was working in Grande Prairie. At Three Star, he said, “We’re not dead in the water. We’re holding our own.� “There’s no business like snow business. You get snow on the road, you get business,� he said of collision repair. It takes a while to pick up the slight twinge of a Nova Scotia accent in his voice, when he said, “Never mind, me son.� The 55-year-old said, “I’m from Nova Scotia. I spent seven years with the Royal Canadian Regiment in the infantry.� He was posted at New Brunswick’s CFB Gagetown. Upon leaving the military he worked at a car dealership for a year. A “nasty incident� involving cleaning up a wrecked vehicle and a clump of maggots turned him off from light vehicle body

work. He was in Nova Scotia from 1983 to 1995, when he moved to Bancroft, Ont. “I opened up my own business. I’m a good body man. I was lacking in business experience which became my downfall. That’s been rectified since then,� Skipper said.

That business was around for about four years. He then headed to Calgary for the next five years, followed by three years back in Nova Scotia, where he worked for an excavating company. In 2008 Skipper found himself painting Pontiac GTOs for a col-

lector in Davidson, Sask. “He had one for every year, make and model. It was his retirement fund. I spent three to four months on a car,� he said. Skipper now lives in Lampman, where he had found work with a local body shop before going to Do-All.

37

1978

Kalvin Nankivell President 2IĂ€FH )D[

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Claudia Mullis Vice-President %R[ .LVEH\ 6. 6 & / QDQNLYHOOWUXFNLQJ#VLJQDOGLUHFW FD

Saluting National Trucking Week

306.634.5555 National Trucking Week September 6 - 12, 2015 Proud to be a part of the Industry!

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A26

PIPELINE NEWS September 2015

Weatherby owners wonder about expanding

ChrisĆ&#x;e and Dean Wigley own and operate Weatherby OilÄŽeld Services. Photo by Brian Zinchuk

Estevan – When it came time to pick a company name, the Wigley’s turned to something they knew

well. “Weatherby rifles is how that came to be,� said Dean Wigley, who owns and operates the company with his wife

Small electric scissor lifts all the way up to boom lifts that reach 85 feet.

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Christie. Christie was a hair dresser for many years before she switched gears and began clean-

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with Complyworks. Christie also works with H&R Block. “I run pilot truck when they need it,� she said. “We’re kind of where we want to be right now, but we are definitely thinking of adding another truck. Is it going to be busy enough to justify expanding?� Dean said. “It’s pretty dependent on drilling.� Christie noted they were no longer seeing 250 billable hours a month, but it still pays. “We definitely had to do a rate adjustment,� Dean added. It helps that diesel prices came down. Dean was born and raised in Edmonton and came to Estevan at the age of 19. Christie was born and raised in Estevan. The couple have been married 17 years, and have two sons.

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working in the oilfield for 18 years, and Weatherby has been around for four. Those 18 years included hauling pipe and then moving, servicing and managing shacks for two rental companies and another larger trucking company. “The evolution was to buy one (a truck), so we did. When you’ve got the house, the truck and the dog financed, you hope the phone rings,� Dean said. Well, sort of. Christie added, “We don’t even have a dog!� They bought their own truck in January. “I was contract driving before that,� Dean said. “I do almost everything but drive the truck,� Christie said. That includes safety, payroll, admin and handling COR audits. The company is SECOR certified, and is listed

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ing shacks for the shack rental company Dean had worked for. They had employees cleaning shacks at the time, and needed to set up a company name. It was bird season, and Dean looked over to his shotgun and said, “Why not Weatherby? It works.� Weatherby Oilfield Services Ltd. is a one-truck outfit, but, as Dean said, “I take on lease operators as I need them.� As of early July they had four leased operators on board. All the trucks are winch trucks, and all are tandem drive. Dean said much of their work is moving shacks, 400 barrel tanks, centrifuges, shale bins and floc tanks. Shack hauling is the bulk of the work. “That’s wat we strive for, I guess,� he said. Dean has been

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PIPELINE NEWS September 2015

A27

Terry Gunderman SE Sask Oilman of the Year Well Servicing, and Alberta-based company with operations in Kindersley and Oxbow. “Bill Snider and I left there in 1980 and with some backers, including Bill Dutton of Estevan, we started Anchor Well Servicing,” he said. They ended up sell-

ing the company in February 1986, just before things turned south. “We had been negotiating. We didn’t think it would happen, but we sold. I stayed on with them a while.” Gunderman noted how from April to the end of that year, things were bad. Indeed, this

year is looking like it might even be worse than 1986. He played around a bit with the farm, and took a trip with Shelley that they had never been able to do before. They headed east for several months, and his eyes still shine talking about it. ɸ Page A28

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with impeccable timing, just before the industry came to a crashing halt in a slowdown. This time, he’s riding it out. “I started in 1977,” Gunderman said. “That’s 38 years now.” He was still in high school at the time. He tried his hand at farming for a few years, but it wasn’t for him. “I tried a little bit. I wasn’t a successful farmer. I harvested my last crop in 1988 and sold my cows in 1985. “At one point I thought maybe I’d like to be a farmer, but I got wrapped up in the life of the oilpatch,” he said. It’s been the oilpatch ever since. One thing he reiterates several times through the conversation is the importance of his wife, Shelley, as his business partner in all his ventures. On Aug. 30, 2015, they will be married 35 years. “I’m pretty lucky. I am. I married my high school sweetheart,” he said. Shelley ran the office for 25 years, and has stepped back a bit in recent years. She still does the accounting and acts as the company’s controller. But instead of having an assistant, now she often helps out as the assistant. But before there was any office, there had to be a rig. Gunderman

became a part-owner at a young age, just 19, in 1980. He had been working for Widney

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By Brian Zinchuk Oxbow – Terry Gunderman of Oxbow was honoured in early June by being inducted as one of two Southeast Saskatchewan Oilmen of the Year during the Saskatchewan Oil and Gas Show in Weyburn. Pipeline News caught up with Gunderman at his Oxbow office on Aug. 10 to discuss how he got to where he’s at. First of all, he hasn’t gone far. The land their shop is on is the farm his parents bought in 1960. His parents followed his dad’s drilling rig when it came to southeast Saskatchewan in 1953, right when the southeast oilpatch was starting to get established. “My dad worked on drilling rigs. I followed him around,” he said. “In the end he drilled and pushed. The last ten years on the rigs working winters. ” Terry has spent his life working, owning and operating service rigs. “We’re a well servicing contractor. We do repair and maintenance on existing wells and workovers and completions on new ones,” he said of Red Hawk Well Servicing Inc. This is the third time at it for Gunderman. The previous two incarnations were sold

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PIPELINE NEWS September 2015

Riding out this downturn

Red Hawk Well Servicing Rig 8 arrived in May, when it was too late to cancel and work had slowed down.

ɺ Page A27 “In May 1987 we bought Red Hawk, a company out of Estevan. It was Shelley and I, Bill Snider again with his wife Adelle and a few more partners, Bill Rae, Russel Kerr and my brother, Mike Gunderman for a short time.” They started with one rig. Bill Snider left in 1989 to focus on his own oil company. Bill Rae retired in 1993, and Russell Kerr got out shortly afterward. “At that point my wife and I remained as the sole shareholders.” That company was sold in 1997. Again, he got out at just the right time, as times were tough for the industry in 1998. Gunderman said, “They came beating

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hard. We accepted the offer.” It was a tough year for the Gundermans. Shelley’s father passed away, as did a close personal friend. The new owner was Jetstar, a small public company whose only asset was Red Hawk. “When we sold to Jetstar, it was like a tonne of bricks off my shoulders,” Gunderman said. Jetstar merged with another company, Petro Well Servicing. Then Cenalta bought the combined entity. They also had rigs in Weyburn. There were a total of 28 service rigs under that banner in southeast Saskatchewan, and a total of 160 overall. After a while Gunderman found working for others hard to do when you’re used to being your own boss. “It was just change, and it wasn’t for me,” he said. A few weeks after tendering his resignation in the spring of 2000, several key employees he had worked with for years tracked him down. They didn’t want to stay with the new company, either. So Gunderman went out and bought a new rig fairly quickly then built two more. Red Hawk was more like a phoenix now, reborn. The company endured the 2008-2009 slowdown without too

much difficulty. “2009 was a bit of speed bump. We went from working seven days a week to having days off on weekends,” he said. This time around Gunderman is riding out the stormy times. There’s a hiring sign on the edge of Red Hawk’s property in early August, but by this point Gunderman noted it was more for decoration than anything. “We did hire some guys in July. Anyone whose got a steady job right now should hold onto it for dear life, in my opinion.” Earlier this summer the company took delivery of its eighth service rig, a brand new unit. “We couldn’t send it back. From the time we ordered it to the time it got here, there was a drastic change in the amount of work. “We’ve been through a lot of these. This is a tough one,” he said. He noted in recent years there have been frustrations with increasing regulation. Pointing out he’s lived his whole life in the area and intend to keep doing so, thus the environment is important to him. He’s very much in favour of safe work practices and the environment. It just seems that increasing regulation makes it harder and harder to do business. ɸ Page A29

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PIPELINE NEWS September 2015

A29

Terry Gunderman was honoured as one of two Southeast Saskatchewan Oilmen of the Year during the Saskatchewan Oil and Gas Show in Weyburn. Photo by Brian Zinchuk

Éş Page A28 “Regulation is killing the industry. In these economic times, it’s an added burden. Companies can’t handle it right now.â€? “I’m not against any of it, but it is what it is. Common sense is a bad word nowadays.â€? What has made a difference over the years is working with good people. Gunderman said, “I’m surrounded by very good people. “Those core people are still here. “There’s 55 of us. We’re holding our own. We had a decent July, the best month so far in 2015.â€? Drilling is always up and down, cyclical in nature, but service work is typically a steadier pace, he noted. “This slowdown is a lot less typical,â€? Gunderman added. Smart Power In 2008 a new venture, Smart Power, was started with Terry and Shelley and their partners Trevor and Tammi Goetz. “Trevor used to work on the rigs at Red Hawk,â€? Gunderman said. When it sold, he went to work for a production company. He started running a handful of generators on the side for a few years, and the business grew to the point where it

was either jump in with both feet or give up, so they jumped in. Goetz started running Smart Power full time, and they bought 20 more units in 2011. That total is now 135 of their distinctive orange trailers that look more like cattle trailers than a typical gen set. The enclosed design is meant to discourage fuel theft as well as provide its own secondary containment. They’ve also added a few light towers of their own design along the way for clients who have been asking for the service. “This is Smart’s main shop,� Gunderman said of their Oxbow location. With drilling activity down right now, there are plenty of gen sets in the yard. Trailers are brought into Oxbow where they are assembled with their respective generators. Another location was opened in Virden, Man. last spring. Shelley is very active with her horses, while you will find Terry on his motorcycle a bit. “I’m not a biker, but I have a bike,� he said. They also fish a bit and enjoy the use of their boat. Gunderman noted with a glint in his eye they’re new grandparents, too.

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A31

Little interest in new projects, says contractor that his son, Wade, has modelled his own business, Wade Laurent Construction Ltd., of Regina, on it. “He’s a one-man operation. He hires trades and supervises,” Laurent said of his son. He has an affinity for Alida, since there’s a deep family tie to the community. “My great-grandfather came

Harry Laurent is considering shuƫng down his construcƟon business, and building a shack up north.

t Alida – A new office and shop has sprung up just north of Alida. No, it’s not another oilpatch shop, but rather an organization that has benefitted from the oilpatch – the RM of Reciprocity. And inside the shop, putting trim on the windows, one could find Harry Laurent driving finishing nails with his cordless nailgun. Laurent is the owner of Arcola Building Supplies Ltd., and mayor of Arcola. On top of that, he’s the oneman contracting firm, Harry Laurent Construction Ltd. Laurent has built many buildings in the oilfield over the years, including in recent years a substantial shop near Carnduff. But there’s not much building happening in the oilpatch today. “It is what it is. We’ve done well with the patch,” he said. That said, interest in new construction these days is pretty much zero.

“We’re not even getting a phone call to question. They used to price out before – speculating. The speculating’s gone,” he said. These two buildings for the RM of Reciprocity will allow the municipality to use its old shop in town to become their fire hall, according to Marilyn Larson, RM administrator. “We just finished on a project for Coderre Construction in Stoughton, a gravelhauling outfit,” he said. Laurent acts as the general contractor, but he subcontracts everything else, from cement work to framing to finishing. “On my crew, I hire all my subtrades. I’m myself and one or two,” he said. “We try to hire local people, i.e. if we’re doing a shop in Carnduff, we’ll hire a Carnduff electrician and plumber.” Laurent does interior finishing, including cabinets and millwork. He has an extensive shop for that purpose in

Arcola. Having such a lean operation has its benefits during lean times, with minimal overhead. It’s a model that’s worked well enough

from Alsace-Lorraine in France. He came here from Melita with oxen to Alida, and that’s where they set up.” This happened during the First World War, when AlsaceLorraine was invaded by Germany. That great-grandfather had mineral rights on land that one day would become worth a

lot of money, but personal issues led to him losing it, and the rest is history. Harry Laurent Construction Ltd. may be history, too. He said, “We’ve had a good run,” but added, “I’m thinking of shutting it down. “I bought a piece of property up north. I’ll build a shack up there,” he concluded.

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PIPELINE NEWS September 2015

Slowdown impacts Lloydminster retailers randomly „ By Geoff Lee By mid-August Pet Smart was geĆŤng ready to open its doors in the new Brentwood Commons mall along with several other new retailers opening during a slowdown in the energy sector. Lloydminster Chamber of Commerce president John Winter hopes many of the new retailers will join the organiÇŒaĆ&#x;on to beneÄŽt from its advocacy roles and programs and services.

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Lloydminster was ranked the number one Canadian entrepreneurial city by the Canadian Federation of Independent Business in 2014. It’s not surprising to discover the Lloydminster Chamber of Commerce has 574 members at last count in August. There are many new potential retailers to come aboard and benefit from the chamber’s business advocacy activities and its networking programs and services for members. Phase 2 of the new Brentwood Commons mall is nearing completion with store grand openings happening almost weekly. The Lloyd Mall is also undergoing an expansion and renovation to add to the mix of retail. With the slowdown in the oil and gas sector, we asked chamber president John Winter, who owns Cooper Concrete, to assess the impact of the downturn on the chamber’s retail, commercial and industrial membership with the focus on retail. Pipeline News: Would you say you have a healthy active membership of businesses in Lloydminster? Winter: We have a really nice cross section of members. We have non-profit, retail, small business, oilfield and construction. In Lloydminster, there are a lot of small businesses so that would take the cake the majority of it. We have a very active chamber. A lot of people are very happy with the services the chamber provides. Behind our leader in Pat Tenney (executive director) we have a strong board and strong leadership there. Being bi-provincial leaves a lot of unique situations for us. PN: What’s behind the development of Brentwood Commons and renovations at Lloyd Mall at different locations along Highway 16? Winter: The stats are speaking for themselves. There’s the downturn

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in the oil right now, but a lot of these investors are pretty rich people and they are looking long-term. They don’t think this is going to affect Lloyd for a long time. The number Lloyd puts up (consumer spending) is somewhere near double Saskatoon and Edmonton for the average price people are paying at food stores and stuff. They’re thinking long term so it’s good to see that people are still investing in Lloydminster. Ed. Note: According to statistics from the Lloydminster Economic Development Corporation, the city has a population of 31,377 with a growth rate of 15 per cent from 2011 to 2015. The median household income is $86,110. PN: What do you think of the mix of new retail at Brentwood Commons? Winter: It’s exciting. They are kind of taking a copy of some other places like Stonebridge Mall in Saskatoon and Camrose (Commons) and some other areas where they’ve seen some success. It’s new to Lloyd and there are a lot of new exciting places. PN: Are you surprised by all of the retail development given there is a downturn in oil and gas economy? Winter: Nothing surprises me in Lloydminster anymore. I’m a born and raised resident of Lloydminster, so I’ve seen a lot of changes in the town. It’s very promising and good to see. PN: What are retailers telling you about the downturn? Winter: It depends what sector you are in or what industry you are in. Some people are saying they haven’t felt a single thing this year and some people are just starving. ɸ Page A33

PIPELINE NEWS September 2015 ɺ Page A32 That’s another unique thing about Lloydminster – we’ve got agriculture; we’ve got oil; we’ve got entrepreneurs – we’ve got so many different types of business and business people. It kind of depends what you’re in as to how you’re getting affected. Some people are looking for job fairs and some people are laying people off. It’s very unique. PN: Are you sayings retail is not badly impacted by

the downturn? Winter: I wouldn’t lump retail all into “not affected.� It’s the same with the oilfield. Some oil companies have closed doors even and some are still going strong. It depends even on what you’re doing in oil that can be affected, too. I think everyone’s felt the hit. It’s just who can position themselves the best to come out of this strong. PN: Are retailers telling you sales are down in this oil slowdown? Winter: I think they’d be down in general. People are trying to do what they

A33

It’s all doom and gloom as people say. It’s definitely making people think twice about things and maybe tightening the purse strings a little bit. PN: Does the downturn mean there are a lot of retail bargains for consumers and more sales? Winter: That’s probably the way it should be. You shouldn’t be able to ask whatever price you want and just expect to get it. A little bit of competition in town is a good thing. People are always going to need food and clothes and vehicles. ɸ Page A34

can with what they can. If you’re like me personally in construction, we didn’t gear up with as many guys. We’re not working as many weekends. We’re still working very efficiently and we’re still very busy. It may be not the full blown or full throttle like it has been in the past years, but I don’t know if I’d call it a recession that we’re in. To me that word means kind of dirty thirties living on nothing type of thing. I’m at the lake right now and there’s people driving $100,000 boats all over the place.

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A34

PIPELINE NEWS September 2015

Employers have more choice in candidates ɺ Page A33 PN: Are retailers having any problems hiring labour during the downturn in the energy sector? Winter: I would say it more in the employers’ hands. The last half dozen years it was kind of in the employees’ hands where if they didn’t like the job, they could go down the street and get another job. It’s more in the employers’ hands now where they have some stronger candidates coming in and more to choose from. Some people are looking for employees and some people are laying them off. PN: Are some laid off oil workers applying for retail jobs?

Winter: Some people are still holding out for the oil industry if that’s all they’ve ever done. There’s definitely more options for kids coming out of school. For people moving to Lloyd there is a lot of options. PN: Why does Lloydminster rank so high as a place for entrepreneurs and new business each year? Winter: It starts right at the schools here. They have a lot of opportunities for kids coming out of school. We have Lakeland College and you have high academics. Holy Rosary (High School) just ranked the highest class grade average in 30 years so there are smart kids coming out school. Their parents are

Lloydminster is strengthening its reputaĆ&#x;on as a great city for entrepreneurs and small business with the opening of new stores at the Brentwood Commons mall on the west end of the city on Highway 16. Time will tell what impact the downturn in oil and gas acĆ&#x;vity will have on sales.

doing well, they’re doing well, so there’s some money to spend there,

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and kids are following their dreams doing whatever they want to do – if they want to start a business. With all the strong industries in town, a lot of people are moving to Lloyd as well. Entrepreneurship is a wonderful thing and it keeps middle size communities like ours strong. PN: Is your own Cooper Concrete business busy during the downturn? Winter: Yes, we are very busy. This is kind of our peak season right

now, so we should be busy now. We definitely are seasonal compared to say January or February. It’s been an interesting year though – different looks than the last five – not as predictable, but still lots of work coming in. PN: What are the main types of work you are doing right now? Winter: We do a little bit of everything. We do residential, commercial and industrial plus some oilfield stuff. We don’t just focus on a certain industry. We kind of do a bit of everything so that’s kind of what we’re doing right now is a bit of everything. PN: Are you looking forward to a slew of annual small business event coming up in October? Winter: I’m very excited for October. The chamber business awards (Celebration of Excellence Oct. 22) is always a great time of the year to recognize all the outstanding businesses in town. Small Business Week (Oct. 18 to 24) is the same thing. There are a lot of different things going on in the community for people to celebrate all the hard that we do throughout the year. The Indigenous or I-Summit (Oct. 14-15) is gaining momentum as a cornerstone event for the community to

unite the indigenous people with the Lloydminster business community. The committee does a lot of work bringing in the top indigenous speakers. It’s a full day of workshops and different things. It’s pretty exciting. PN: What is your main focus as president regarding advocacy and networking that the chamber does? Winter: I’m focused on just kind of keeping that communication (about advocacy and networking) with our members. It’s kind of an education piece for some members to show them what we really do. Some people don’t get the full benefit of what the chamber does – so listening to our members about what they need and letting them know what we offer so that they get maximize value out of their membership. Especially for people that have been affected in this downturn this is a great time to kind of get that networking. A lot of people didn’t have time or they were too busy or too committed to suppers or whatever. But now, if you’re slower this is a great time to turn to the chamber and make more connections and gear yourself up for when things pick up.

PIPELINE NEWS September 2015

A35

Crescent Point’s recent purchase of Legacy Oil + Gas is likely going to be one of the last for a while. Here, Stampede Drilling could be seen in July drilling in Legacy’s, now Crescent Point’s, Midale formaƟon oilĮeld near Eorth Portal. Photo by Brian Zinchuk

er Service Ltd. Curly’s Pick Mark T. (Curly) Hirsch

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Crescent Point to take a breather from acquisitions By Pat Roche (Daily Oil Bulletin) Calgary – Crescent Point Energy Corp., a major acquirer in recent years, doesn’t expect to do any acquisitions in the near term. “We’ve been very acquisitive over the past 15 years and we just completed two acquisitions. [We’re] in the phase right now of consolidating those acquisitions,” president Scott Saxberg told analysts August 12. “We’re going to be really patient in this market, and into the next while here, and look to try to fund any kind of future acquisitions through internal cash,” Saxberg said during a second quarter results conference call. “And so at this stage we don’t see a lot of opportunity. I don’t think there’s a lot of sellers in this market at this stage,” he said, noting he expects that

to continue into next year. Saxberg said Crescent Point has gone nine months or a year between acquisitions in the past. Asked if the company would consider selling any assets or rationalizing, he said: “We’re a very focused company.... We’re not sellers typically.” He added the company has looked at the possibility of spinning out assets to smaller entities, “but we don’t see any need to sell any assets. Our balance sheet is strong. We have a very focused asset base as it is.” In July, Crescent Point completed the acquisition of all of the issued and outstanding common shares of Legacy Oil + Gas Inc. by way of arrangement. The company also entered into an arrangement agreement in July to acquire all of the issued and

outstanding shares of Coral Hill Energy Ltd.

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PIPELINE NEWS September 2015

Environmental assessments key on pipeline project, says NDP candidate Weyburn – Vicky O’Dell, a health care worker from Weyburn, is the New Democratic Party candidate for Souris-Moose Mountain, the federal constituency that encompasses the entire southeast Saskatchewan oilpatch. Pipeline News posed these questions to both the NDP and Conservative candidates in the Oct. 19 election. O’Dell responded by email.

Pipeline News: Rail transportation is federally regulated, and thus crude-by-rail falls under federal responsibility. Saskatchewan was in the process of seeing sizeable second-phase crude-by-rail development, with substantial facilities in the works for Kerrobert and Northgate, until the price of oil plummeted. What should be the role of crude-by-rail?

Should it be encouraged? Regulated out of existence? Vicky O’Dell: When it comes to crude oil transport, and with the rapid expansion in production and transportation of crude oil, we need enhanced safety protection. This makes sense no matter what the method of transport. Since 2009, under this Conservative government the

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staffing levels decline. This isn’t the kind of leadership that Canadians expect. Conservatives have failed to keep Canadian communities safe. ɸ Page A37

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PIPELINE NEWS September 2015 ɺ Page A36 P.N.: Crude-byrail plays closely into the pipeline debate. If we can’t build pipelines, the industry will turn to rail. What is your take on that? O’Dell: Public Safety must be a top priority of any government, and Canadians expect both pipeline developments and rail transport to be safe. We must do better than the Conservatives have done on rail safety to ensure that we never allow another LacMÊgantic to occur, and pipelines need to pass a thorough, credible, environmental assessment process before they can proceed. It is not one or the other – we can do both. P.N.: Pipelines have been a major issue during the last six years. What is it going to take to get a major pipeline, any pipeline, built in this country? O’Dell: Canada’s natural resources are a tremendous gift and, managed properly and sustainably, can be important drivers for our economy. By dismantling environmental protections and limiting community consultation, Conservatives thought that they were making it easier to develop pipelines. But when Canadians don’t trust the process, we see that it becomes much more difficult to acquire a social license. Not one major pipeline project has been built

under Stephen Harper’s watch. The NDP will work with provinces, industry and with indigenous and other communities to revamp the environmental review process for the approval of major resource infrastructure such as pipelines. We will restore public confidence in the assessment regime while protecting our economy and environment. P.N.: TransCanada’s Keystone XL has been stymied by President Barrack Obama. What does that mean for the energy sector and Canada-U.S. relations? O’Dell: There are very serious concerns in the US over the environmental impacts of Keystone XL and what it means in terms of expanded of oil sands production without proper environmental protections in place. No question, contributing to the decision on Keystone by President Obama is the Conservative’s failure to address the environmental impacts of oil sands development here at home. Their inaction on climate change is giving our resources a bad name with key trading partners. Keystone XL will ship away thousands of quality, well-paid jobs to south of the border. The government should be doing more to protect value-added upgrading jobs right here in Canada. We don’t think this is the right project for Canada. We need to

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find the right balance, something the Conservatives have refused to do. P.N.: In lieu of American dithering on Keystone XL, the Conservative government came out strongly in favour of the Enbridge Northern Gateway project. Now that enthusiasm seems to have waned. What should happen with regards to Northern Gateway? O’Dell: Conservatives have mismanaged the Northern Gateway proposal from the start. They failed to properly consult First Nations, they failed to listen to the people of B.C. and failed to properly manage resource development. It has failed to obtain a social licence in B.C. and Conservatives should have said no to the Enbridge Northern Gateway pipeline. Allowing supertankers into the Douglas Chan-

nel should be a nonstarter and a spill would be catastrophic for the environment and the economy of the entire region. This proposal is wrong for Canada and an NDP Government will set aside the approval of this project. P.N.: The one pipeline that will have the most impact on the Saskatchewan oilpatch is the proposed TransCanada Energy East. Its planning includes a terminal near Moosomin that would accept Saskatchewan oil (via a lateral from Enbridge’s Cromer terminal) as well as North Dakota oil via the proposed Upland pipeline. What is your take on Energy East? O’Dell: Moving oil from west to east makes sense, but we need to ensure that a strong environmental review regime is in place to determine if projects

like Energy East are safe and sustainable before they can proceed. Unfortunately, the Conservatives have systematically dismantled environmental assessments and limited public input into major project reviews, meaning that a rigorous and credible assessment just isn’t possible under these circumstances. We know that the Conservatives just want to rubber stamp these projects. An NDP government will strengthen the environmental assessment regime to ensure that the economy, public interest and our environment are protected. P.N.: The federal government contributed $240 million to the Boundary Dam Integrated Carbon Capture Project. This riding is the home of the largest carbon capture project of its type in the world.

A37

What path should Canada take on greenhouse gasses? Should carbon capture be a big part of it? O’Dell: Tom Mulcair has been clear that an NDP Government will rise to meet our international climate change obligations by creating a cap-andtrade system that puts a clear market price on carbon. We’ll use the revenue generated by that cap-and-trade system to reinvest in the future of our energy sector. The NDP will invest in renewable energy projects in the regions where that revenue is generated. Canada can become a leader and create tens of thousands of jobs in the clean technology sector of tomorrow. Carbon capture can be a part of that future, but it is one tool and there is much more that needs to be done.

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A38

PIPELINE NEWS September 2015

Energy East should be built: Conservative candidate Estevan – Estevan chiropractor Dr. Robert Kitchen is the Conservative candidate for the Souris-Moose Mountain constituency in the upcoming Oct. 19 federal election. Pipeline News posed these energy-related questions to Kitchen, who, if elected, would represent the entire southeast Saskatchewan oilpatch. He responded by email. Pipeline News: Rail transportation is federally regulated, and thus crude-by-rail falls under federal responsibility. Saskatchewan

was in the process of seeing sizeable secondphase crude-by- rail development, with substantial facilities in the works for Kerrobert and Northgate, until the price of oil plummeted. What should be the role of crudeby-rail? Should it be encouraged? Regulated out of existence? Dr. Robert Kitchen: Railway Transportation is federally regulated. Crude oil by rail has increased to meet production increases. The Federal government

has introduced legislation to ensure oil tank cars meet environmental and safety standards. Older tanker cars are being retired and new tanker cars need to be double-hulled. Moving oil-by-rail is a reality that isn’t going away. Recent changes introduced by government include speed limits in communities, changing routing patterns to skirt highly populated areas and implementing mandatory breaking systems. ɸ Page A39

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PIPELINE NEWS September 2015 ɺ Page A38 Oil is transported by rail as pipeline capacity is currently at a peak and as the capacity to move oil improves with new pipelines. I suspect the economic and environmental impetus to reduce oil activity by rail may occur. P.N.: Crude-by-rail plays closely into the pipeline debate. If we can’t build pipelines, the industry will turn to rail. What is your take on that? Kitchen: In order to move oil we need both pipelines and rail. In southeast Saskatchewan we see oil transported by truck, by pipeline and by rail because of geography and there is a need for all three. P.N.: Pipelines have been a major issue during the last six years. What is it going to take to get a major pipeline, any pipeline, built in this country? Kitchen: We have been successfully building pipelines in Canada for the past 60 plus years. With respect to Northern Gateway, Kinder Morgan and Energy East there is a review process underway. This process involves regulatory, environmental, affected communities, First Nations, NEB hearings and so forth. These are fair and objective steps that with the support from all participants could allow for pipelines to be built. P.N.: TransCanada’s Keystone XL has been stymied by President Obama. What does this mean for the energy sector and Canada-US relations? Kitchen: As Premier Wall recently stated this isn’t good, but U.S.-Canada relations will continue to evolve and move forward as we are neighbours with common interests. We see Canadians and Americans crossing the border daily to conduct business and visit friends and family. This will continue irrespective of bigger political decisions that are in play. P.N: In lieu of American dithering on Keystone XL, the Conservative government came

out strongly in favour of the Enbridge Northern Gateway project. Now that enthusiasm seems to have waned. What should happen with regards to Northern Gateway? Kitchen: The National Energy Board conducted four years of hearings incorporating all interested parties and their conclusion was that Northern Gateway is still a viable project if some 209 conditions are met. The federal government accepted the NEB findings and has stated it is up to the proponents of the pipeline to ensure these conditions are met. P.N: The one pipeline that will have the most impact on the Saskatchewan oilpatch is the proposed TransCanada Energy East. Its planning includes a terminal near Moosomin that would accept Saskatchewan oil (via a lateral from Enbridge’s Cromer terminal) as well as North Dakota oil via the proposed Upland pipeline. What is your take on Energy East? Kitchen: Energy East should be built. There is a regulatory process and application that needs to be completed. As the MP for Souris-Moose

A39

Mountain, I will ensure that the process is objective and meets the needs of all parties. I would add that once a conclusion has been reached, then a decision needs to be made. We can’t have a process that goes on forever. P.N.: The federal government contributed $240 million to the Boundary Dam Integrated Carbon Capture Project. This riding is the home of the largest carbon capture project of its type in the world. What path should Canada take on greenhouse gasses? Should carbon capture be a big part of it? Kitchen: The carbon capture project is technology designed to reduce emissions from coal generated power creation on the one hand, and to enhance oil extraction and carbon storage on the other. This is a realistic approach to dealing with the fact that we use fossil fuels to generate power for industry, business, farms and for our homes. It is a made in Saskatchewan project to reduce some greenhouse gasses which I think can be adopted by other coal generating power facilities around the world.

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A40

PIPELINE NEWS September 2015

Crown land sales just $3 million in August Regina – One of the lowest Crown mineral rights land sales in recent years was announced on Aug. 13, with just $3 million in land sales across the entire province. After four sales in 2015, land sale revenues total $35.7 million. “Even during current oil prices, Saskatchewan offers the petroleum and natural gas industry one of the most attractive jurisdictions in Canada for long-term investment by conventional producers,� Economy Minister Bill Boyd

said in a release. “Our province’s diversified and opportunity-rich economy, along with our strong businessfriendly operating environment, will help support continued growth and activity for our communities and industry stakeholders.� Sales in Alberta and British Columbia have been similarly impacted this year as single-sale lows in British Columbia and Alberta raised $203,533 and $3.0 million respectively. The next sale of Crown petroleum and natural gas rights will

be held on October 6, 2015. The August 10, 2015 sale of Crown petroleum and natural gas dispositions generated $3,041,306, an average of $306/hectare ($124/ acre). This compares to $9,831,054, an average of $570/hectare ($230/ acre) received at the last sale held on June 8, 2015. The top purchaser of acreage in the province was Mammoth Land Services Ltd., who spent $937,004 to acquire six lease parcels. The top price paid for a single lease was

$373,269.60 that was paid by Mammoth Land Services Ltd., for a 291 hectare (720 acre) parcel situated predominantly within the Leitchville Shaunavon Oil Pool, 10 kilometres north of the town of Shaunavon. Three of the licences in this sale received no acceptable bids with the fourth receiving no bids. The highest dollar per hectare in the sale was received from Fire Sky Energy Inc., who paid $3,192/hectare ($1,292/acre) for a 32.37 hectare (80 acre) parcel located within the Workman Midale and Frobisher Beds Pools, 20 kilometres southeast of Carnduff. All sold parcels were located within oil prone areas of the province. Parcels offering only deeper rights brought in $30,229 (one per cent of the sale) for an average price of $117/hectare. Lloydminster area The total bonus received in the area was $167,239, an average of$220 /hectare ($89/ acre). This compares to $1,939,721 with an average of$1,410/hectare ($571/acre) at the last sale. The top purchaser

of acreage in this area was Windfall Resources Ltd., who spent $108,631 to acquire three lease parcels. Top price paid for a single lease in this area was $107,914 that was paid by Windfall Resources Ltd. for a 242.81 hectare (600.00 acre) parcel situated 10 kilometres north of the Northminster Sparky Sand oil pool, 20 kilometres north of Lloydminster. The highest dollar per hectare in this area was received from Croverro Energy Ltd. (50 per cent) and Chair Resources Inc. (50 per cent), who paid $1,255/hectare ($508/ acre) for a 16.19 hectare ( 40 acre) parcel located within the Celtic McLaren Sand Oil Pool, 20 kilometres south of St. Walburg. Kindersley-Kerrobert area The total bonus received in the area was $420,580, an average of $151/hectare ($61/ acre). This compares to $398, 141, an average of $157/hectare ($64/ acre) at the last sale. Top purchaser of acreage in this area was Scout Energy Ltd., which spent $319,546.43 to acquire three lease parcels. Top price paid for a single lease in this area was $217,847, paid by Scout Energy Ltd. for a 259 hectare (640 acre) parcel situated 15 kilometers north of the Druid Mannville Sands Oil Pool, 20 kilometres northeast of Kerrobert. This is the highest dollar per hectare in this area at $841/hectare ($340/acre). Swift Current area The total bonus received in the area was $1,412,854, an average of $334/hectare ($125/

acre). This compares to $1,374,495, with an average of $219/hectare ($89/acre) at the last sale. Top purchaser of acreage in this area was Mammoth Land Services Ltd. They spent $688,546 to acquire four lease parcels. The top price paid for a single lease in this area was $373,270, paid by Mammoth Land Services Ltd. for a 291 hectare (720 acre) parcel situated predominantly within the Leitchville Shaunavon Oil Pool, 10 kilometres north of the town of Shaunavon. This is the highest dollar per hectare in this area at $1,281/hectare ($518/ acre). Estevan-Weyburn area The total bonus received in the area was $1,040,633, an average of $480/hectare ($194/ acre). This compares to $6,118,697, an average of $866/hectare ($350/ acre) at the last sale Top purchaser of acreage in this area was Mammoth Land Services Ltd., who spent $248,457 to acquire 2 lease parcels. Top price paid for a single lease in this area was $232,000, paid by Midale Petroleums Ltd. for a 259 hectare (640 acre) parcel situated 3 kilometres south of the Viewfield Bakken Sand Pool, 25 kilometres north of Estevan. The highest dollar per hectare in the sale was received from Fire Sky Energy Inc., which paid $3,192/hectare ($1,292/acre) for a 32.37 hectare (80 acre) parcel located within the Workman Midale and Frobisher Beds Pools, 20 kilometres southeast of Carnduff.

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A41

Northern Blizzard to deploy two steam generators „ By Lynda Harrison (Daily Oil Bulletin) Calgary – Having acquired two additional 25-mmBtu steam generators from another operator in the first half of this year, Northern Blizzard Resources Inc. is evaluating the best way to deploy them so it can expand heavy oil operations but it is likely they will be installed at Plover Lake, a second-quarter conference call heard on Aug. 11. “This would include drilling new wells to use up that steam capacity because we have enough steam capacity for existing wells,â€? John Rooney, chairman and chief executive officer, told callers. The two generators would increase steam generating capacity to 9,000 bbl. of steam per day from the current 6,000 bbl. Located approximately 30 kilometres northwest of Kerrobert, Plover Lake produces primarily from two main Mississippian Bakken pools after coming on production in 2014. Plover Lake SAGD production climbed to 1,090 boepd during the second quarter of 2015, from 760 boepd during the first quarter of 2015. “We are targeting and have seen recent SORs of approximately 2.5 in this project area,â€? said Rooney. Ramp up of oil production at Plover Lake has continued since quarter end, with July production averaging 1,440 boepd. Output

is expected to exceed 2,000 boepd later in 2015. At Winter, Northern Blizzard is planning to drill seven producers and three water disposal wells in the second half of 2015. Work is underway to further optimize the water disposal system in preparation for the expected increase in volumes. The company has already activated one drilling rig at Winter, where rates of return are acceptable even at current prices, Rooney told analysts. During the second quarter of 2015 at Winter, average output was 3,550 boepd and capital expenditures were $700,000. Company-wide output for the second quarter of 2015, of 21,598 boepd (96 per cent oil), increased 10 per cent from second quarter 2014 production of 19,665 boepd. Volumes fell four per cent from first quarter of 2015 production of 22,469 boepd. Second-quarter 2015 cash flow rose four per cent increase from the second quarter of 2014 thanks to higher realized gains on financial derivative contracts, partially offset by lower operating netbacks. During the second quarter of 2015, Northern Blizzard gained $17.5 million on financial derivative contracts. The gains realized on Canadian dollar WTI contracts were due to lower-than-hedged oil prices and were

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partially offset by losses on WCS differential contracts due to narrower-than-hedged heavy oil differentials. Operating costs for the second quarter of 2015 were $17.41 per boe, a decrease of 20 per cent from the second quarter of 2014 and an increase of seven per cent from the first quarter of 2015. Spending on facilities and pipelines was $9.9 million and related mainly to polymer powder for the Cactus Lake polymer project and advancing the Cactus Lake SAGD project. Net debt at June 30, 2015, of $366.5 million decreased by 10 per cent from the end of the first quarter of 2015 because funds from operations exceeded capital expenditures and cash dividends by $36.5 million. This was also due to an unrealized foreign exchange gain on Northern Blizzard’s senior unsecured notes caused by a stronger Canadian dollar on June 30, 2015, relative to March 31, 2015. Operations review During the first six months of 2015, Northern Blizzard drilled four wells with a 100 per cent success rate. Capital expenditures at Cactus Lake for the second quarter of 2015 were $8 million, mainly related to the

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Bakken polymer flood. Average production in the second quarter was 7,525 boepd, a five per cent decrease from the first quarter of 2015. Polymer injection began at Phase 1 in early 2013. “We continue to inject polymer at Cactus Lake,� said Rooney. “We see a positive response from there and the economics are very strong.� According to Northern Blizzard, more

than 30 per cent of the producers in Phase 1 are demonstrating positive polymer flood response (i.e., increasing oil rates and decreasing water cuts). In addition, more than 20 per cent of the producers in Phase 2 are responding to the polymer flood initiated in early 2014, it said. Phase 3 expansion of the Bakken polymer flood started in March 2015 with the inclusion

of 16 injectors and 36 producing wells into the existing scheme. The expansion is expected to be completed in early 2016, adding an additional 48 producing wells and 14 injectors. Second-quarter 2015 average production at the Coleville Viking light oil project was 1,270 boepd, a 23 per cent decrease from the first quarter of 2015. Capital expenditures were $400,000.

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A42

PIPELINE NEWS September 2015

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Crusader Drilling giving back Earlier this summer Yorkton-based drilling contractor Crusader Drilling donated $10,000 to Yorkton ComžƾŜĹ?ƚLJ ĹŻĆľÄ?ĹšŽƾĆ?Ğ͕ ƚŚĞ Ä?ŚĂŜĹ?Äž ĆŒŽŽž Ä‚Ćš ƚŚĞ zĹ˝ĆŒĹŹĆšŽŜ ĨŽŽĆšÄ?Ä‚ĹŻĹŻ ĂŜĚ ĆšĆŒÄ‚Ä?ĹŹ ÄŽÄžĹŻÄšÍ˜ WĹ?Ä?ĆšĆľĆŒÄžÄš ĹŻÄžĹŒ ƚŽ ĆŒĹ?Ĺ?Śƚ͕ ZĹ˝Ä?LJ ^ĹšÄ‚ĆŒĆ‰Äž ĂŜĚ :Ä‚Ć?ŽŜ &Ä‚ĆŒĆŒÄžĹŻĹŻ ĨĆŒŽž zĹ˝ĆŒĹŹĆšŽŜ DĹ?ŜŽĆŒ &ŽŽĆšÄ?Ä‚ĹŻĹŻÍ– ŽŜ ZĂĞ͕ :ŽĂŜŜÄž WÄžĆŒĹŹĹ?ĹśĆ?Í• ĹśĹ?ĞůĂ DÄ‚Ć?ŏŽ͕ ĹŻÄ‚ŜŜÄ‚ <ĂnjĂŏŽč ŽĨ ĆŒĆľĆ?Ä‚ÄšÄžĆŒ ĆŒĹ?ĹŻĹŻĹ?ĹśĹ?͘ Photo courtesy Roby Sharpe

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This massive tornado swept through though the heart of Manitoba oil country on July 27. Photo courtesy the Greg Johnson, a.k.a. The Tornado Hunter

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326 King Street East, Virden, MB, R0M 2C0 Phone: 204-748-2300 Fax: 204-748-2340 Risk Management | Insurance Brokering | Disaster Recovery Planning Harley McCormick CIP, CAIB Account Executive Oil & Gas Specialist Cell: 204-851-6104 Email: hmccormick@guildinsurance.ca

Massive tornado passes through Manitoba oil country „ By Brian Zinchuk Reston, Man. – When it comes to luck with the weather, the Reston area of Manitoba seems to have just one type: bad luck. In recent years they’ve had two flood events and a tornado two years ago. On July 27, a mammoth tornado went past the town, one Environment Canada said was on the ground for two-and-a-half to three hours. The tornado formed north of Pierson and appears to have made its way north to north of Virden, right through the heart of Manitoba’s oil country. Along the way it tossed around a few fibreglass tanks at Spearing Service Ltd.’s Pipestone

yard. “We lost a couple tanks, two 500 gallon ones. One’s a mile down the road,� said Rick Bloomer, manager of the Pipestone branch for Spearing. Bloomer lives on the main street of Reston. “I could hear it. It just missed Reston. It was about a mile wide. She was big. “I had my wife and dog in the basement, and I was ready to head down there next.� He noted the tornado sucked up pieces of asphalt and a bridge from Highway 256 south of Reston. The intensity seemed to be the worst near Tilston. To his knowledge, nobody was hurt.

PIPELINE NEWS September 2015

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