PIPELINE NEWS Saskatchewan’s Petroleum Monthly
December 2015
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Canada Post Publication No. 40069240
Volume 8 Issue 8
MADE IN CANADA
A3 Wall stands by BD3 project
A5 New Kerrobert train loading facility
A12 SaskPower CEO Q&A on carbon capture controversy
Brandon Dugas, a fabricator with Weyburn’s Stewart Steel, cuts a hole in a new stainless steel tank. Producing stainless steel tanks is one way Stewart Steel has been coping with the downturn in oilfield manufacturing. They are even considering a hiring program. Photo by Brian Zinchuk
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PIPELINE NEWS December 2015
INSIDE SECTION A 4
Obama rejects Keystone XL
5
New Kerrobert train loading facility
6 Editorial 7 Opinion
21 Why Crescent Point slowed down in September to one drilling rig 22 TransCanada reacts to Keystone XL rejection 23 Moratorium on tanker traffic could be death knell on Northern Gateway
12 SaskPower CEO Q&A on carbon capture controversy
28 Estevan Meter buys Acutec
16 NDP critic sees BD3 as expensive, not viable
30 WPS focuses on non-traditional work during slow time
19 Grit develops new products
32 Slowdown allowed Stewart Steel to diversify and find new markets
20 Drilling activity bottoms out, then picks up
PIPELINE NEWS Saskatchewan’s Petroleum Monthly
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January 2016 Focus Contact your Sales Rep to be a part of the focus edition
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ESTEVAN OFFICE: SE & SW SASK. & SW Manitoba • Phone: 306.634.2654
Candace Wheeler
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Alison Dunning
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Northern Sask. Phone: 306.460.7416
Teresa Hrywkiw
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Editor Phone: 306.461.5599 EDITORIAL
CARLYLE
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LLOYDMINSTER & KINDERSLEY
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Harland Lesyk labean@sasktel.net
Brian Zinchuk
brian.zinchuk@sasktel.net
PIPELINE NEWS December 2015
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TOP NEWS
Wall stands by BD3 project, despite setbacks By Brian Zinchuk Pipeline News Estevan – Premier Brad Wall spent much of late October and early November on the hot seat with the NDP opposition questioning the Boundary Dam Integrated Carbon Capture and Storage Project, the Saskatchewan Party’s signature initiative on climate change. In the midst of this, Wall was in Estevan on Oct. 29 for a roast for retiring Estevan MLA Doreen Eagles. There Wall spoke to reporters about the Boundary Dam project. The premier does not think the issues surrounding the Boundary Dam Unit 3 (BD3) carbon capture project will affect Saskatchewan’s standing on the world stage. He noted SaskPower’s been pretty clear that in a commissioning year, whether it’s a carbon capture unit or a gas plant, you’re going to have ramp-ups and ramp-downs and adjustments to makes. “That’s exactly what’s been happening,” he said. “It could be in a couple weeks, that the challenges have been met. It could well be that further adjustments are needed as well.” “Here’s the good news. This is what’s positive, for the world. Ninety per cent capture is exactly what it’s doing. CO2 moves through the amine technology, and it works. It works at the scaled up level. That’s why the world’s been interested and, I think, will stay interested. In fact, we’ve been fielding inquiries through all of this.” Asked if SNC-Lavalin, the prime contractor, should be held responsible, Wall said, “They are, absolutely. They must. “Through the warrantee agreements we have and legal action, we’re going to be recovering all the money that we think is owed by the consultants to get it right.” Wall used the example of Saskatchewan’s other big science project in recent years, the Canada Light Source, or synchrotron, at the University of Saskatchewan. “In 2003 … the NDP government unveiled it. People were concerned. For the first three months, nothing worked. You’re going to have a year of difficulty with major projects. And now, it’s an outstanding asset and a great facility. In fact, we’ve added to it, with a Cyclotron and PET scan and other things, as part of the nuclear centre we’ve put up there. “This project (BD3) has actually achieved the 90 per cent capture, and we’ve sold 400,000 tonnes for capture and sequestration and enhanced oil recovery, first. So we’re actually going to turn a small profit on this, SaskPower is, this year. That’s basically a year later. I’m pretty happy about that. I’m very happy about that. We’re going to get back what we need to get back from SNC-Lavalin,” Wall said. In the feisty question periods in the Legislature on the subject had Wall countering NDP Leader Cam Broten by demanding to know where the opposition leader stood on continued coal-fired power production in Saskatchewan. Wall said, “We don’t really have a choice but to make this work. Well, maybe we do have a choice. That’s what the debate was about. We’re going to make
sure this technology works, and continues to work as it is, and can perhaps be applied to (Boundary Dam Units) 4 and 5. Because if we don’t, we’ve seen the coal regs from the federal government. We don’t know what the new federal government might do. If we don’t apply this world-leading technology and clean up coal, we’ll have to shut it down. That’s 500 jobs, and a lot of contractors at the power plant itself, and another 400 mining coal, and a lost opportunity to sell this technology to other countries in the world that are going to keep burning coal, period, like India and China.” Wall said he couldn’t get an answer out of Broten (as reflected by the debate transcripts in Hansard). He asked what the provincial NDP’s position is on coal, since Alberta’s NDP government has said they would phase out coal. “If that’s the NDP plan here, fair enough, we’ll have a debate. But they should be letting folks know, especially here, in Estevan.” Much of the NDP’s line of questioning had been around the aggregate amount of carbon dioxide captured – 400,000 tonnes in the first year of operation, and trying to square that with Wall’s, and SaskPower’s, assertions the plant captures 90 per cent of the CO2 passing through it. (SaskPower had initially projected the plant would capture one million tonnes per year of carbon dioxide.) Asked about the differences between the instantaneous and aggregate capture numbers, Wall said, “When the plant is shut down, it’s not capturing any CO2. It gets shut down for these adjustments. (Then) the facilities is turned on and it hits 90 per cent carbon capture, then the engineers notice some things about efficiency and capacity, and they bring it down and make adjustments. When we were down with the (United States) senators, there was no capture going on. So to have that happen throughout the year, and still capture 400,000 tonnes of CO2, successfully, and sold it, for a small profit, it good news. “They’re applying the cumulative number to a moment in time. It’s a specious argument. It’s just not true. It’s capturing 90 per cent when it’s on, when the technology’s working, but it’s been down for adjustments. “ Wall added similar issues happen with a combined cycle natural gas power plant starts operation. “This one, there’s a greater likelihood of that, because there’s nothing like it on earth. This is the first one. When you step out, and I would call it technological leadership by SaskPower, as the province as done, you’re going to have issues. I think the people of Estevan and area need to know this technology is capturing at 90 per cent, what we tell the world is true, and proof is in the pudding.” He added the plant was expected to go online again in early November, and it did. Wall noted there’s ongoing interest from southeast Asia in the project. “But even if the only purpose of Boundary Dam 3 was to make sure we can keep coal in the mix, as and affordable mix that keeps coal and wind and natural gas and renewables … if this technology allows us to keep coal in the mix, it’s pretty
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Premier Brad Wall spoke at a retirement roast for Estevan MLA Doreen Eagles on Oct. 29. He spent much of the fall legislative session battling the opposition over the Boundary Dam Integrated Carbon Capture Project. Photo by Brian Zinchuk
important. We’ve got 400 years of this stuff.” Wall, along with other provincial premiers, was invited to be part of the Canadian delegation to the COP21 United Nations Conference on Climate Change which will run from Nov. 30 to Dec. 11 in Paris. Carbon capture technology will be presented in the “technology week” before world leaders gather, he noted. “There’s a lot of interest in having Boundary Dam 3 there and SaskPower will be there,” Wall said. “My job is to defend the interests of the province of Saskatchewan. What I mean by that is we’ve said to the previous and current federal governments we need to do more in terms of emissions. We need to do that in Saskatchewan. But let’s be careful to balance some of the economic considerations, especially in the West. Right now, the West is suffering from US$45 West Texas. We’re suffering from oil prices and we see layoffs. We can’t sign onto anything that’s going to ‘kneecap’ the economy. The economy’s what’s going to pay for various environmental measures. “I think I’ll be suggesting that we all remember that Canada’s responsible for about two-and-a-half per cent of the world’s emissions, and we need to do more. Our province has a high per capita level of emissions. But we need to remember if China’s building coal plants, one every 13 days, and India has about 540 coal plants on the books to build, we need to focus on this technology at Boundary Dam 3. Canada should focus on technological solutions, not simply carbon taxes or cap and trade. “We also won’t be signing on with any cap-andtrade, if it’s proposed. Some provinces are looking at Ontario and Quebec’s model. We’re not. We need to do something about emissions, and that’s the technological solution,” Wall concluded.
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PIPELINE NEWS December 2015
BRIEFS Integrated Resource Information System is here On Nov. 19, the Saskatchewan Ministry of Economy’s new business management system went online, a substantial change from previous well licensing practices. The Integrated Resource Information System (IRIS) is an online business system that supports the development and regulation of Saskatchewan’s energy and resources industry. Through IRIS, the oil and gas industry completes regularly performed business activities and regulatory tasks with the province online. In order to enact the changeover, the Ministry cut off issuing of new well license as of Oct. 30 until the new system was in place. The new system will allow for licenses to be issued for routine wells almost immediately, down from twoto-four days in the past, according to Ed Dancsok, assistant deputy minister. “We’re going to be ready for that upturn, when it comes,” he said.
Briefs courtesy Nickle’s Daily Oil Bulletin
President Barack Obama, right, talks with Vice President Joe Biden, left, and Secretary of State John Kerry, centre, in the hallway outside the Oval Office prior to entering the Roosevelt Room to announce the administration’s rejection of the Keystone XL pipeline on Nov. 6, 2015. (Official White House photo by Pete Souza)
Obama rejects Keystone XL, in his own words By Brian Zinchuk Washington – The Keystone XL Pipeline proposal, as it stands right now, is dead. President Barack Obama on Nov. 6 formally rejected the project, which has been under consideration for over seven years. After years of fractious debate and numerous delays in making a decision, Obama finally made his view clear: He’s rejecting it. Here are his words: Several years ago, the State Department began a review process for the proposed construction of a pipeline that would carry Canadian crude oil through our heartland to ports in the Gulf of Mexico and out into the world market. This morning, Secretary Kerry informed me that, after extensive public outreach and consultation with other Cabinet agencies, the State Department has decided that the Keystone XL Pipeline would not serve the national interest of the United States. I agree with that decision. This morning, I also had the opportunity to speak with Prime Minister Trudeau of Canada. And while he expressed his disappointment, given Canada’s position on this issue, we both agreed that our close friendship on a whole range of issues, including energy and climate change, should provide the basis for even closer coordination between our countries going forward. And in the coming weeks, senior members of my team will be engaging with theirs in order to help deepen that cooperation.
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Now, for years, the Keystone Pipeline has occupied what I, frankly, consider an overinflated role in our political discourse. It became a symbol too often used as a campaign cudgel by both parties rather than a serious policy matter. And all of this obscured the fact that this pipeline would neither be a silver bullet for the economy, as was promised by some, nor the express lane to climate disaster proclaimed by others. To illustrate this, let me briefly comment on some of the reasons why the State Department rejected this pipeline. First: The pipeline would not make a meaningful longterm contribution to our economy. So if Congress is serious about wanting to create jobs, this was not the way to do it. If they want to do it, what we should be doing is passing a bipartisan infrastructure plan that, in the short term, could create more than 30 times as many jobs per year as the pipeline would, and in the long run would benefit our economy and our workers for decades to come. Our businesses created 268,000 new jobs last month. They’ve created 13.5 million new jobs over the past 68 straight months – the longest streak on record. The unemployment rate fell to 5 percent. This Congress should pass a serious infrastructure plan, and keep those jobs coming. That would make a difference. The pipeline would not have made a serious impact on those numbers and on the American people’s prospects for the future. ► Page A8
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PIPELINE NEWS December 2015
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New Kerrobert train loading BRIEFS Crew sold facility for Plains Midstream heavy oil 50 people to be hired for 24/7 operations By Brian Zinchuk Kerrobert – Plains Midstream Canada (PMC) is putting the finishing touches on a new crude-by-rail terminal at Kerrobert as well as an expansion of its storage canvern facility. Mike Mukuska, vice-president, crude supply and pipelines, Plains Midstream Canada, responded to our questions about the project by email on Oct. 26. Here are his responses: Pipeline News: We understand Plains Midstream Canada is working on a crude-by-rail project at Kerrobert, as well as expanding its storage cavern capacity. Can you elaborate on these projects? Mukuska: Plains is building the Kerrobert Train Loading Facility to utilize our assets in the area and give our producers shipping options. Plains is improving the access of Saskatchewan crude oil for local producers to markets in the United States. This should result in fewer restrictions of pipeline volumes (apportionment) and therefore higher profits for Saskatchewan producers. The facility will be located close to the Enbridge Mainline, which transports large volumes of product from Western Canada to the United States’ Midwest. The facility will be built approximately four kilometres from the existing Plains Kerrobert Storage Facility, on Section 23-33-22-W3. The crude oil products will reach the terminal via a pipeline from the Kerrobert Storage Facility. The Plains Kerrobert Storage Facility holds crude oil product received from our truck terminal and
The new Kerrobert Train Loading facility will be able to load 15 cars at a time, and is able to do so indoors. Photo courtesy Plains Midstream Canada
the Manito, Bodo and Cactus Lake pipeline systems, as well as the Enbridge Mainline. We will be hiring approximately 50 new employees for the rail terminal to operate the facility 24/7. Plains is also the operator of four salt caverns at the Kerrobert Storage facility. We are working on a project to develop two new caverns and
retire three existing caverns developed in the early 1970s that have reached the end of their life cycle. The project includes the development of salt caverns 5 and 6 that will be used for storing natural gas liquids (NGL). Cavern 2 and Cavern 3 are currently not operating and Cavern 1 will be taken out of service when Cavern 5
is in-service. The new caverns being developed will function identically to the retired caverns, helping store natural gas liquids (NGL) and assisting in moving product to market to meet customer demand. P.N.: What is the capacity of this new rail facility? What lines can it ship on? Mukuska: The loading facility will be able to handle one unit train per day of crude oil. A unit train consists of up to 120 rail cars specifically designed for safe transportation of petroleum and up to 80,000 barrels can be loaded onto one unit train daily. P.N.: Can you describe the facilities? Did you build a loop track? Will you have tank storage and loading racks? Or will you transload from trucks? Mukuska: The facility will be a loop track designed to load fifteen cars at a time. Major equipment for a typical crude loading facility, similar to the one being proposed, will include the following: • Main control center with office • Electrical and mechanical buildings • Onsite storage tanks • Vapor handling system (incinerator) • Rail car loading spill containment system • Drain tank (for pig receiver barrel and for drains in loading area) • Instrument and utility air compressor/dryer packages • Track mobile garage • An enclosed loading area under full canopy housing the crude loading racks and pump systems. ► Page 10
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A decision to shut in uneconomic natural gas in northeast British Columbia ultimately trimmed total third quarter volumes by five per cent, Crew Energy Inc., reported. During the third quarter, Crew Energy drilled 15 (13.7 net) wells, sinking a total of 27 (25.4 net) wells in the year to date. Capital spending in the quarter reached $58.6 million, focusing on drilling, completions and infrastructure in West Septimus, Septimus and Lloydminster. The figure includes $27.2 million spent on drilling and completions and $28.9 million that went to facilities, equipment and pipelines, mainly related to the West Septimus facility and other area infrastructure. Also during the third quarter, Crew sold a noncore, heavy oil asset package in Lloydminster for about $50 million. By the end of the quarter, the company had reduced net debt by about five per cent, compared to this year’s second-quarter figure. Management said lower product prices and production contributed to the company’s third-quarter net loss, as did a $55 million, noncash impairment charge on the company’s Lloydminster heavy oil asset. Offsetting much of that impairment charge was a $34 million gain booked on the sale of certain of Crew’s non-core, Lloydminster heavy oil properties, management said. Briefs courtesy Nickle’s Daily Oil Bulletin
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PIPELINE NEWS December 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 • Estevan 1.306.634.2654 Cindy Beaulieu Candace Wheeler Deanna Tarnes Teresa Hrywkiw • Carlyle 1.306.453.2525 Alison Dunning NORTHWEST SASK. & ALBERTA • 1.306.460.7416 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.
Published monthly by the Prairie Newspaper Group, a division of Glacier Ventures International Corporation, Central Office, Estevan, Saskatchewan. Advertising rates are available upon request and are subject to change without notice. Conditions of editorial and advertising content: Pipeline News attempts to be accurate, however, no guarantee is given or implied. Pipeline News reserves the right to revise or reject any or all editorial and advertising content as the newspapers’ principles see fit. Pipeline News will not be responsible for more than one incorrect insertion of an advertisement, and is not responsible for errors in advertisements except for the space occupied by such errors. Pipeline News will not be responsible for manuscripts, photographs, negatives and other material that may be submitted for possible publication. All of Pipeline News content is protected by Canadian Copyright laws. Reviews and similar mention of material in this newspaper is granted on the provision that Pipeline News receives credit. Otherwise, any reproduction without permission of the publisher is prohibited. Advertisers purchase space and circulation only. Rights to the advertisement produced by Pipeline News, including artwork, typography, and photos, etc., remain property of this newspaper. Advertisements or parts thereof may be not reproduced or assigned without the consent of the publisher. The Glacier group of companies collects personal information from our customers in the normal course of business transactions. We use that information to provide you with our products and services you request. On occasion we may contact you for purposes of research, surveys and other such matters. To provide you with better service we may share your information with our sister companies and also outside, selected third parties who perform work for us as suppliers, agents, service providers and information gatherers.
Forget Keystone XL, Trudeau is about to kill Northern Gateway all on his own Our newly minted Prime Minister Justin Trudeau could almost be forgiven for his underwhelming response when President Barack Obama rejected the TransCanada Keystone XL project after 7 years. It was Prime Minister Stephen Harper’s fight, and Harper lost. But what hardly got any press at all was his own pipeline-killing announcement, done somewhat slyly, under the radar. In ministerial mandate letters published on the prime minister’s web page, Trudeau made public his explicit marching orders to each of his new ministers. Buried in the letter to Minister of Transport Marc Garneau, Canada’s first astronaut, was this shocker: Among Garneau’s top seven priorities, he is to “Formalize a moratorium on crude oil tanker traffic on British Columbia’s North Coast, working in collaboration with the Minister of Fisheries, Oceans and the Canadian Coast Guard, the Minister of Natural Resources and the Minister of Environment and Climate Change to develop an approach.” In other words, Prime Minister Trudeau is going to effectively kneecap a pipeline proposal that already has National Energy Board approval. There is zero point to building a pipeline if you can’t load your product on ships. Enbridge's Northern Gateway is now all but dead. For those who are counting, in the space of a week we went from four potential oil export pipelines to two – Kinder Morgan’s TransMountain Expansion (TMX) and TransCanada’s Energy East. This comes after years of the industry saying we were going to need all of the above when it came to export pipeline
proposals. Losing Keystone XL was expected. Many had become disillusioned with Northern Gateway’s prospects. But to lose both, that’s a body-blow to the Canadian oil sector. A tanker moratorium would also preclude the usage of crude-by-rail to the northern B.C. coast. It means that West Coast exports are now all-or-nothing; Kinder Morgan’s TMX, or nothing. Abandon all Pacific and possibly south Asian markets. It doesn’t make a lot of sense to ship oil from Fort McMurray, to St. John, New Brunswick across the Atlantic, through the Suez Canal in the opposite direction of all other loaded oil tankers, around India to China. The Panama Canal could be another option, but instead of taking the shortcut great circle route to Asia, you are going all the way across, then around North America, and then around half the planet along the equator to get to Asia. Perhaps this is why, during the televised leaders’ debate, Trudeau said nothing directly about either Northern Gateway or TMX. Now we know – he intended to kill Northern Gateway all along, he just wasn’t going to let the other leaders make an issue of it. If this was an election promise, it wasn’t one he broadcast widely. With the upcoming climate change conference, COP21 in Paris, Trudeau is planning on making a very, very big deal out of it. He’s taking all the premiers along with him who want to go, as well as opposition leaders. By mid-December we will have a very clear idea of how much more of our industry he plans to lay waste to. With a prime minister like Trudeau, who in our industry needs enemies?
PIPELINE NEWS December 2015
From the Top of The Pile
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OPINION
By Brian Zinchuk Third and long for Keystone XL, TransCanada punts, but Obama blocks
On Nov. 2, TransCanada shook up the pipeline debate, asking Secretary of State John Kerry for a pause in its Keystone XL pipeline application. At this stage in the metaphorical international pipeline game, it was third and reallllly long. Continuing with the current drive is not working. The defense has had its way with you and sacked you at every turn. Maybe TransCanada chose to punt instead? Better to improve your field position than mess up the play and turnover. In this case, a turnover means the end of the game. And on Nov. 6, President Barack Obama rejected the project. He blocked the punt. My kids spend less time stalling cleaning their rooms than the Obama administration had in making a decision. The atomic bomb was conceived, developed, tested and dropped in less time than this pipeline had been considered. Remember, fundamentally a pipeline isn’t that much different in concept than the plumbing in your house feeding your garden hose. As for the environmental issues, this sort of work happens all over the continent, each and every day. It’s not rocket, or nuclear, science. So now, all of a sudden, Obama became decisive. If George Bush was “The Decider,” then Obama has been “The Undecider” until now. I can’t imagine it had anything to do with the upcoming climate change conference in Paris, COP21, a few weeks later.
“Look at what I did to save the planet!” is essentially what Obama was saying. In the meantime, we got thrown under the bus. Here’s what we lost in Saskatchewan. During construction, there would have been two companies working on the Alberta and Saskatchewan portions. When you add up all the people collecting a direct paycheck, including TransCanada personnel, contractors and subcontractors, it would have been around 1,200 to 1,300 people. They would have worked two winter and two summer seasons to do it. During that time, the money pouring into Shaunavon, Swift Current, Leader and Burstall would have made your head spin. More importantly, we will continue to lose hundreds of millions of dollars more on the price differential for heavy oil. A few years ago I inquired with the Ministry of Economy as to how much money the province was losing in revenue each year due to that Western Canadian Select to West Texas Intermediate differential. Now, remember, the dollar was close to par and oil was around US$100 a barrel. But at that time, the Ministry came back with a figure: C$300 million a year. That’s a lot of money. Keystone XL would have gone a long way in addressing that differential. Now, with a world of US$45 oil, the number of oilsands project being cancelled or postponed is enormous. Pipeline proponents, like Premier Brad
The Mineral Corner By Cameron C. Wyatt The two most asked question that we field at MineralRights.ca are, “I received an offer to lease my mineral rights for X dollars and Y royalty rate, is that a fair offer?” or “What are mineral rights leasing for in this market?” Both of those questions are impossible to answer in the current state they are presented. From a technical perspective, fair market value for leasing mineral rights is derived from engineering and geological analysis of the quarter section of interest. There is no magical “one value suits all” that Orientation Vertical Vertical Vertical Vertical
Type of Well Drilled Type Developmental Developmental Exploratory Exploratory
Horizontal Horizontal Horizontal Horizontal
Developmental Developmental Exploratory Exploratory
covers leasing metrics within a specific region. If you receive an offer that is higher or lower than a neighbour, typically the reason for the difference is an engineering or geological interpretation of the mineral rights of interest. The most intriguing and differentiating aspect of oil and gas exploration is one’s technical (geology and engineering) interpretation of opportunities vs. another’s interpretation; which continually evolves with technology. Put simply, there is no easy answer to either questions above. If you are unsure
37,770 100,720 37,770 100,720
that you’re receiving fair market value (defined as a price for an item to which a buyer [lessee] and seller [lessor] can agree), do as much research as you can and negotiate with your best interest in mind. Dec. 1, 2015 is Saskatchewan’s last Crown land sale of 2015 which, to date, has generated approximately $45 million of revenue to the government, down from approx. $197.87 Million in 2014. Another question is, “Why do crown land parcel typically receive higher bids than freehold mineral right lands?” As mentioned last month, government entities tendering process is designed to generate immediate revenues while maximizing economic activity (not strictly royalty revenues) for
$2,832,750 $7,554,000 $2,832,750 $7,554,000
Brian Zinchuk is editor of Pipeline News. He can be reached at brian.zinchuk@sasktel.net.
Is my lease offer fair?
A Comparison of Non-‐Heavy Oil Royalty Regimes -‐ Crown VS Freehold Royalty Incentive Gross Revenue Crown Royalty Depth (bbls) @75/bbl Share @ 2.5% Non-‐Deep 0 $0 $0 Deep 50,360 $3,777,000 $94,425 Non-‐Deep 25,180 $1,888,500 $47,213 Deep 100,720 $7,554,000 $188,850 $0 $0 Non-‐Deep Deep Non-‐Deep Deep
Wall, have often said, “We need all the above,” meaning Keystone XL, Northern Gateway, TransMountain Expansion, and Energy East. But this notion is based on Canadian oil production growing to six million barrels per day, up from the current 3.8 million barrels per day. With oilsands projects being postponed or abandoned en masse due to the rout in oil prices, the likelihood of reaching 6 million barrels per day is becoming remote, indeed. So will we need all these pipelines? The one must-have is TransCanada’s Energy East. This pipeline will also have the most impact for Saskatchewan producers. With its planned on ramp at Moosomin and connections via lateral running to Cromer, Man., nearly all of southeast Saskatchewan’s oil production could potentially find its way onto Energy East. Energy East would displace most, if not all, foreign oil imports into Eastern Canada. Strategically, it would protect us from any foreign oil embargo. Keystone may be dead. Trudeau may choke off Northern Gateway. It’s time for a concerted effort on Energy East. Our industry could desperately use a touchdown right now.
$70,819 $188,850 $70,819 $188,850
the citizens of their respective province. The government does this by implementing a royalty regime with a low upfront royalty (2.5 per cent in Saskatchewan) for a specific production volume, thus promoting investment and allowing the oil company to retain a higher portion of profits to recover its substantial capital investment. A freehold mineral right owners mandate is simple, create the highest amount of economic benefit as possible, to the owners of the freehold mineral rights. The following table shows an economic comparison, from a royalty revenue perspective, between Crownowned royalty regimes and the standard freehold royalty regime. Let’s look closer at our opinion of the least risky well an oil company can drill; a
Freehold Royalty Share @ 17% $0 $642,090 $321,045 $1,284,180 $0 $481,568 $1,284,180 $481,568 $1,284,180
Difference between Freehold and Crown $0 $547,665 $273,833 $1,095,330 $0 $410,749 $1,095,330 $410,749 $1,095,330
non-deep developmental horizontal oil well. This well type receives a royalty incentive of 2.5 per cent on the first 37,770 bbls of production generated from the well resulting in Crown royalty revenue of approx. $70,818. Assuming a freehold royalty rate of 17 per cent, that same well generates the freehold royalty owner approx. $481,568 or a difference of $410,749. If the oil company drills three wells on that quarter section of land the additional royalty cost to the oil company is $1,232,246 compared directly to the Crown royalty regime. This royalty difference is why oil companies pay a higher upfront value for Crown mineral rights VS freehold mineral rights. From all of us at MineralRights.ca – have a happy and safe holiday season! Watch for next month’s publication – Tips on Effectively Monetizing you Mineral Rights. Cameron Wyatt is the founder of Homestead Energy Ltd and MineralRights.ca with 15 years’ experience in the industry. He can be reached at cameron@mineralrights.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 December 2015
Shipping 'dirtier crude oil' into the U.S. ◄ Page A4 Second: The pipeline would not lower gas prices for American consumers. In fact, gas prices have already been falling – steadily. The national average gas price is down about 77 cents over a year ago. It’s down a dollar over two years ago. It’s down $1.27 over three years ago. Today, in 41 states, drivers can find at least one gas station selling gas for less than two bucks a gallon. So, while our politics have been consumed by a debate over whether or not this pipeline would create jobs and lower gas prices, we’ve gone ahead and created jobs and lowered gas prices. Third: Shipping dirtier crude oil into our country would not increase America’s energy security. What has increased America’s energy security is our strategy over the past several years to reduce our reliance on dirty fossil fuels from unstable parts of the world. Three years ago, I set a goal to cut our oil imports in half by 2020. Between producing more oil here at home, and using less oil throughout our economy, we met that goal last year – five years early. In fact, for the first time in two decades, the United States of America now produces more oil than we buy from other countries. Now, the truth is, the United States will continue to rely on oil and gas as we transition – as we must transition – to a clean energy economy. That
“And all of this obscured the fact that this pipeline would neither be a silver bullet for the economy, as was promised by some, nor the express lane to climate disaster proclaimed by others.” - President Barack Obama
transition will take some time. But it’s also going more quickly than many anticipated. Think about it. Since I took office, we’ve doubled the distance our cars will go on a gallon of gas by 2025; tripled the power we generate from the wind; multiplied the power we generate from the sun 20 times over. Our biggest and most successful businesses are going all-in on clean energy. And thanks in part to the investments we’ve made, there are already parts of America where clean power from the wind or the sun is finally cheaper than dirtier, conventional power. The point is the old rules said we couldn’t promote economic growth and protect our environment at the same time. The old rules said we couldn’t transition to clean energy without squeezing businesses and consumers. But this is America, and we have come up with new ways and new technologies to break down the old rules, so that today, homegrown American energy is booming, energy prices are falling, and over the past decade, even as our economy has continued to grow, America has cut our total carbon pollution more than any other country on Earth. Today, the United States of America is leading on climate change with our investments in clean energy and energy efficiency. America is leading on climate change with new rules on power plants that will protect our air so that our kids can breathe. America is leading on climate change by working with other big emitters like China to encourage and announce new commitments to reduce harmful greenhouse gas emissions. In part because of that American leadership, more than 150 nations representing nearly 90 percent of global emissions have put forward plans to cut pollution. ► Page A9
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PIPELINE NEWS December 2015 ◄ Page A8 America is now a global leader when it comes to taking serious action to fight climate change. And frankly, approving this project would have undercut that global leadership. And that’s the biggest risk we face – not acting. Today, we’re continuing to lead by example. Because ultimately, if we’re going to prevent large parts of this Earth from becoming not only inhospitable but uninhabitable in our lifetimes, we’re going to have to keep some fossil fuels in the ground rather than burn them and release more
dangerous pollution into the sky. As long as I’m President of the United States, America is going to hold ourselves to the same high standards to which we hold the rest of the world. And three weeks from now, I look forward to joining my fellow world leaders in Paris, where we’ve got to come together around an ambitious framework to protect the one planet that we’ve got while we still can. If we want to prevent the worst effects of climate change before it’s too late, the time to act is now. Not later. Not someday. Right here, right now. And I’m optimistic about what
Estevan bypass Estevan MLA Doreen Eagles, in blue, and Estevan Deputy Mayor Lori Carr, in red while making comments on the grand opening of the Estevan truck bypass on Nov. 10. The new route 13-kilometre route cost $45.5 million, of which $17 million came from the federal government. Photo by Brian Zinchuk
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we can accomplish together. I’m optimistic because our own country proves, every day – one step at a time – that not only do we have the power to combat this threat, we can do it while creating new jobs, while growing our economy, while saving money, while helping consumers, and most
of all, leaving our kids a cleaner, safer planet at the same time. That’s what our own ingenuity and action can do. That’s what we can accomplish. And America is prepared to show the rest of the world the way forward. Thank you very much.
Burstall – Calgary-based Veresen Inc. announced on Nov. 12 it will build and operate a new whollyowned ethane storage facility located near Burstall, Saskatchewan, roughly 20 kilometres north of the Empress natural gas liquids (NGL) complex. The salt cavern facility will have capacity to store about one million barrels of ethane, and will be connected via pipeline to Veresen’s Alberta Ethane Gathering System. The expected capital cost of the storage facility and related infrastructure is approximately $140 million. “Veresen is committed to building the best connected network of natural gas and NGL infrastructure within our geographic footprint, and delivering on this opportunity demonstrates our strategy in action,” said Don Althoff, president
and CEO of Veresen. “The Burstall facility will provide our customers with valuable operational storage, as ethane imports to Empress from the North Dakota Bakken grow. and we are excited to add another project to our portfolio of secured growth opportunities.” Veresen and NOVA Chemicals Corporation have entered into an agreement where NOVA will use the majority of the storage capacity under a 20-year arrangement. Subject to final regulatory approvals, the facility is expected to be in service in the second half of 2018. Once operational, Veresen expects the storage facility will contribute annual EBITDA in the range of $15 million to $18 million, comprised largely of fixed payments which are not dependent on utilization levels.
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PIPELINE NEWS December 2015
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◄ Page A5 Plains is committed to meeting all applicable regulatory requirements set out by Saskatchewan Ministry of Economy and Saskatchewan Upstream Flaring and Incineration Specifications, Directive S-20 as well as the Clean Air Act. P.N.: Is this a phased approach, i.e. transload first, then tank storage and load-
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spots. P.N.: Can you tell us how much Plains has invested in this project? Mukuska: The project was approved for US$140 million. P.N.: When will it be operational? Mukuska: The Kerrobert Train Loading Facility is scheduled to be commissioned by November, 2015. The additional tanks will take longer to construct and will be commissioned at a later date. P.N.: Where will this oil end up – U.S. Gulf Coast, Canadian Pacific Coast, Canadian East Coast or U.S Atlantic seaboard? Or will it be somewhere else? ► Page A11
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PIPELINE NEWS December 2015 ◄ Page A10 Mukuska: Our parent company, Plains All American Pipeline, has constructed two unit train offload facilities at St. James, Louisiana, and Bakersfield, California. These markets currently do not have access to Canadian heavy crude. The Kerrobert train loading facility has the ability to ship a heavy barrel of crude with much less diluent added than is required to ship via pipeline; providing higher netbacks for heavy oil producers. In addition to this, there is also new demand for Canadian heavy volumes that are currently inaccessible by export pipelines or rail. P.N.: In a world where oil has been floating around US$45/ bbl WTI (It’s US$50 today), and crude-byrail can cost as much as $12-$15/bbl, does crude-by-rail still make sense? What can you tell us about the business case? Mukuska: The lower WTI price has narrowed price differentials on Canadian heavy crude which, in some instances, is making pipeline economics better than rail economics. However, there is still not enough pipeline export capacity out of the Canadian basin which
"The Kerrobert train loading facility has the ability to ship a heavy barrel of crude with much less diluent added than is required to ship via pipeline; providing higher netbacks for heavy oil producers." - Mike Mukuska, Plains Midstream Canada is creating demand for crude export by rail. Only if production in Canada declines to a point where export pipelines have the ability to ship all the volumes being produced in Western Canada, will we have to adjust our strategy. However, this is unlikely to affect the Kerrobert facility which will be able to deliver Canadian crude to markets such as the Los Angeles basin and the eastern U.S. Gulf Coast. P.N.: Is this Plains Midstream’s first crude-by-rail facility, or have you built others? Why have you decided to take this path? Mukuska: Specific to rail loading facilities, this is the first one being constructed in Canada by the Plains
organization but (we) have built numerous, similarly sized Liquid Petroleum Gases (LPG) and crude oil rail facilities in the U.S. Plains is pursuing crude oil rail terminals based upon our expertise in transportation services. We operate numerous train loading/unloading facilities across North America and, as of June 30, operates a fleet of approximately 5,400 rail cars, making Plains an integral part of the energy-by-rail midstream market. P.N.: If and when major pipelines like Keystone XL and Northern Gateway get built, will there still be a business case for crude-by-rail, or while rail’s flexibility to ship anywhere on the
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continent continue to make it an important marketing option? Mukuska: As part of Plains’ six-year plan for growth, we are building rail terminals in key production areas. There are a number of factors for this, including, pipeline capacity constraints, the increased approval timeline from regulators, and an increased demand for crude oil rail transportation. It could take five years to build a new pipeline, whereas a rail terminal can be built in a fraction of that time. P.N.: A legal settlement in the Lac-Mégantic disaster is in the news this month. That
tragedy made crudeby-rail unpalatable to many people across the continent. How do you address this concern? Mukuska: The safety of our employees, contractors and the public, as well as the protection of the environment, are our top priorities for Plains. Plains will ensure all regulatory and safety requirements will achieve compliance with all regulatory bodies. Compliance includes the development of a rail safety management plan prior to operations and a specific spill management procedure. A site-specific emergency response plan will also
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be developed for the Kerrobert rail terminal. The new facility will include an onsite laboratory to test the chemical composition of crude oil being loaded into a rail car. The crude will be tested twice: once when it enters the storage facility and once when it leaves to the rail loading facilities. The testing is to ensure proper classification for meeting both Canadian and U.S. Transportation of Dangerous Goods regulations. Plains uses the safest standard of rail car for the transportation of our products. The new rail cars (CPC 1232) are made with thicker steel, full or half head shields and come with rollover protection for the valves. As well, the primary car to be used at Kerrobert are double-walled and will have a layer of fire-resistant insulation between the walls.
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PIPELINE NEWS December 2015
SaskPower CEO Q&A on carbon capture controversy By Brian Zinchuk Regina – The problems with the SaskPower Boundary Dam Integrated Carbon Capture Project have dominated the debate in the provincial legislature and headlines in the press for much of late October and early November. Pipeline News spoke to SaskPower president and CEO Mike Marsh about the issues at length by phone on Nov. 9. Pipeline News: Can you describe how operations have gone for the BD3 carbon capture project since it fired up in late 2014? Does it work, and how often does it work? Mike Marsh: Yes, it works. It works, and as a matter of fact, the first few weeks, we had very good performance out of that plant. We actually pushed it up. We were achieving 80 per cent capture rates in the fall of 2014. We never did achieve the 90 per cent the plant is designed to, but we were in the 60 to 80 per cent range. Several of the processes, the subprocesses inside the facility we knew we weren’t going to be able to get started because of the construction delays we had and some of the issues that we knew as we were heading into the startup of that plant. By and large, the plant operated very well in those initial months. So we know the technology works. We continue to be in discussions with CANSOLV and they work with us and have been for the past year as we completed improvements at various
parts of the year. In terms of the overall operations, we started to experience a few other technical issues in the spring of 2015. We had a number of component pieces that did not perform as expected. We had some issues coming back from an overhaul in April, where some equipment didn’t perform after we tried to come back up after a short outage in April, which didn’t help the situation. Although we started very well, we got into other operational matters. Even until very recently, we’ve been able to continue to operate and still achieve about 60 per cent for periods of time. The issue has become the number of outages the plant has taken has reduced the overall volume capacity over the year down to 40 per cent. If we can continue to target the mechanical issues, and by that I’m talking about heat exchangers, some of the valves, some of the control systems, some of the steam and temperature control systems in the plant, then I know we can get the amine capture back up into the 80 and 90 per cent range. P.N.: How much carbon dioxide has the capture plant been capturing on a daily basis and over the course of the year? Marsh: The plant has been capturing approximately 65 per cent of the time over the past year. The average capture rate for the days it’s operating is about 2,000 tonnes. So we’ve had 205 operating days where it’s been
discharging to the pipeline, and we’ve had a little over 400,000 tonnes, which works out to about 2,032 tonnes on average. P.N.: There seems to have been some contention between the capture plant’s instantaneous capture rate and its aggregate capture over the year, with the opposition trying to “show light” between the premier’s statements and SaskPower’s. Can you explain what the difference is? Marsh: Let me clarify that. First of all, there was a statement made when the plant was fully started up and the premier had made the statement the plant is fully operational. Of course, that’s an operations term which means when a plant is up and running, after it’s been on construction, it’s now into an operations mode, and “fully operational” means it’s operating. Whether you’re at part load, half load, full load, you’re still fully operational. The other point was that various terms have been thrown around about 90 per cent capture rate, 90 per cent efficiency, the volume capacity of the plant while it’s producing... To be very clear, the plant has achieved a measured capture rate of 80 per cent. That happened on Nov. 15, 2014. The design capture rate is 90 per cent. If the plant was operating at 80 per cent capture rate, and this would represent 89 per cent, if that happened over the course of the year, you would achieve 90 per cent capacity over the
course of the year. Remember the plant is designed for 3,240 tonnes per day at the 90 per cent capture rate for the facility, capturing 90 per cent of the carbon dioxide in the exhaust gas from Boundary Dam 3 P.N.: I understand there have been a lot more operational shutdowns than initially anticipated. What was the nature of these shutdowns? For a complex facility that is the first of its type in the world, what is the expectation of operational efficiency and operational days? Can what is essentially a new chemical plant be expected to have the same uptime we expect of our power generation facilities? Marsh: The availability we targeted for the plant is 85 per cent. The availability for the generating station is 90 per cent. That’s the expected target for the station. We didn’t expect the capture plant to be as available as BD3, but certainly it’s close. As I indicated before, there was lots of work needed on auxiliary systems. We had to replace heat exchangers. We had to bring the unit down to do cleaning of ash deposits in the SO2 absorber, for example. Looking at areas where the design of some of those components where the exhaust gas entered the plant wasn’t doing the job that we expected it to. We had to take the plant down a number of times for cleaning. That resulted in days offline. That, of course, reduces production. ► Page A13
PIPELINE NEWS December 2015 ◄ Page A12 Was it expected, though? We expected, certainly in the first year, to be running above 50 per cent for sure, and moving towards 85 per cent moving into the second year. It only achieved, on average, 40 per cent capacity, by volume, over the past year. P.N.: Was SaskPower perhaps overly ambitious in its stated expectation of performance, at least for initial operation? Could any new facility be expected to run at full capacity, i.e., 90 per cent capture, from the get-go? Marsh: The answer to your second question is “No.” That’s where I think the clarification as to what the expectations should have been from the get-go we realize in hindsight. We probably should have done a better job in educating not only ourselves here, but the province of Saskatchewan and the rest of the world this is going to take some time. I believe we’ve spoken about that a lot in conferences, but in a lot of the written information, it probably was not as clear. Any industrial facil-
ity takes a long time. We probably overstated the expectation, and that’s probably why we’re having to explain this today. If we had talked about it’s going to take two to three years, and we are going to work at getting above 50 per cent in the first year and shooting towards 80 per cent in the second year and 85 per cent availability in the third year, it would have set a different expectation. So no, no new facility of this size, first of its kind in the world, especially, is going to run at full capture rate for the first year. P.N.: I’ve heard of several issues with regards to commissioning process – issues with welds, contractors being brought in to redo work of the initial build contractors, and most recently, the replacement of the tile-lined, masonry amine storage tank with a new stainless steel one that made headlines as it was shipped across the province. Have these indeed been some of the teething issues? Or are there other, more significant issues? After a lengthy shutdown this fall, including the replacement of that tank,
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are we at a point where most of the bugs have been ironed out? Marsh: First of all, the issues with the welds occurred on the generating station and had nothing to do with the carbon capture facility, per se. There might have been a few. Most of the redo work on the piping was done in the generating station itself. The amine storage tank had developed a leak actually prior to us going online, but it was something we thought we could live with until the next major overhaul in 2015. But as time went on, it became apparent it couldn’t be slowed down and was going to result in more problems. Together with the contractor, it was replaced, and it was replaced at the contractor’s cost. It was one of those items that were identified over the course of first-year operation. ► Page A14
Mike Marsh is president and CEO of SaskPower. File photo
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PIPELINE NEWS December 2015
Expectations of performance weren’t met ◄ Page A13 There were certainly other issues that were identified throughout the course of the year. Again, nothing we would consider abnormal in the first year of operation, but it takes time to work through all these systems. There’s thousands of components and many, many subsystems inside here that have to be brought up to speed, have to be checked, have to be proven out and operating within the engineering tolerances. P.N.: So do you think you have most of the bugs out now? Marsh: Yes, we do. That was the reason for this major overhaul. It was always planned, and, of course, dealing with issues we knew when we started it up, together with issues we learned over the first year of operation, allowed us to get many major components replaced. There were heat exchangers replaced. There were pressure vessels. There were a couple of pumps. We’ve done the amine tank, you know about that. And there was some control system modifications so we can continue to fine-tune this facility and drive the capture rate up and the volume capacity of the plant up to where it needs to be. P.N.: If I buy a truck, I don’t expect to replace the engine and
transmission in the first year. Marsh: That’s a good example, perhaps, but on the other hand, manufacturers make thousands and thousands, if not millions of vehicles every year. They’ve been doing it for years and years. This is a first-ofits-kind facility. We’re using amine technology which has been proven in industry before, but we built a worldscale, production-scale facility next to a power station. So (there’s) lots and lots of learnings on the first-of-itskind. I think that kind of comparison is not really a fair comparison. I’ve been comparing this to an oil and gas refinery or petrochemical plant. There’s a lot of work, especially when you’re designing specific plants, first-of-its-kind plants. There are teething problems. You’re going to go through many months of work and re-work as you figure out where the gaps are and where to close the gaps. We have a great technical team that’s working on that. We’ve just come back from an overhaul. In fact, the facility was producing CO2 to the pipeline earlier today. It’s performing very well, according to the plant people. We fully expect we have resolved many, many of the issues we had in the first year. P.N.: What are your operational
expectations for the capture plant in its second year of operation? Are we going to be running close to that 90 per cent capture rate, and 800,000 or 1 million tonnes per year, or is it too early to say and perhaps that might be an expectation for a year or two down the road? Marsh: Right now I’m going to say we’re going to try to demonstrate that we can achieve that 90 per cent capture rate as soon as we possibly can. I’ve set a target for our team for 2016 of 800,000 tonnes, which is double what we achieved last year. I would consider that success. If we can achieve high capture rates with good reliability, in other words, more days on than off, and achieve close to that 800,000, I think that would be, I think, very good success. P.N.: With reference to the federal regulations requiring new coal facilities, has the performance of the BD3 project, in its first year, matched that of a combined-cycle natural gas plant, in terms of emissions? Marsh: On an annual basis, it has not yet achieved the federal targets. If we looked at the days operating, it has achieved the federal targets. It’s been offline for scheduled outages and other outages, and another two months
for unplanned outages over the course of the year. It’s been off quite a bit of the time. It’s only been operating 64 per cent of the time, and so it has not achieved the federal regulations, yet. We will achieve that through 2016, for sure. P.N.: It’s become clear that the six-month delay in going online has cost SaskPower penalties under its contract with Cenovus. Can you elaborate exactly what these were in 2014 prior to first CO2 production, and since then? Are we making or losing money under the contract? Marsh: Yes, the six-month construction delay resulted in us not being able to produce CO2 for the better part of the year. We were only able to produce from the end of October to the end of the year. We had, in addition to daily takeor-pay amounts in the contract, we had a volume commitment we had agreed to in the contract that could not be achieved in those three months, and therefore we were obligated to pay a penalty to Cenovus. That penalty was approximately $12 million. That was offset with some revenue from CO2 sales from October, November and December, but not enough to make up that entire penalty. ► Page A15
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PIPELINE NEWS December 2015 ◄ Page A14 In 2015, it’s turned mostly the other way. We’re still going to be somewhat short on volume commitment as we look to the end of the year. We’re forecasting right now in the area of $5 or $6 million. We’ll see how that works at the end of the year. Our revenues right now are in the $10 to $11 million (range) at the present time. It will be net positive $5 to $6 million. That’s our forecast today. P.N.: How many lawsuits are in play right now with regards to this project, and what are their nature? Marsh: We have an arbitration process today with our one contractor, SNC-Lavalin. We have an appeal in place with the Saskatchewan Court of Appeal in our dispute with AB Western via either going down the path of litigation or arbitration. Those are the only two that are in place right now. Of course, throughout the process, there will be other subcontractors and others probably named, but those are the two issues in play right now. P.N.: Climate change meetings and conferences don’t happen down the road where you can stay at the local motel. Isn’t Mike Monea’s job in part to be a travelling salesman on a global scale? Can you speak to the questions about his travel expenses?
This is one of the large heat exchangers built into the carbon capture plant. Several heat exchangers had to be replaced during the carbon capture plant’s first year of operation. File photo
Marsh: Carbon capture technology on coalgenerating stations is of interest around the world. The fact we’ve built the first carbon capture at a commercial scale has attracted a lot of interest. At the same time, we’ve been out sharing our knowledge, sharing our experience. As the community of interest around carbon capture increases around the world, we want to make sure people know where Saskatchewan and SaskPower is and what we’ve done. That’s been part of Mike (Monea’s) job, to promote the project, promote carbon capture technology, and really look for opportunities where we may have the opportunity to capitalize on the data we have and the expertise that we have. We do not own the specific technology, the amine technology. That is owned by CANSOLV, a subsidiary of Shell. Some of the intellectual property is owned by the engineering companies that have done work on this. But Mr. Monea’s role has been
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one to promote carbon capture and to tell our story and to try to attract attention at this early stage in carbon capture technology, looking for opportunities that may pay off at some point down the road. His expenses that have been talked about, amounting to $400,000-plus over the last four, five years, has certainly attracted some attention, but travelling internationally is not inexpensive. Most of the organizations interested in carbon capture like we are, are from as many as 30 different countries throughout the world. Europe, southeast Asia, to name two, are very interested in carbon capture. The amount of coal use in Asia is going to stay high for a number of years. Around the world, the percentage of electricity generated from coal is going to remain very high. This technology, we believe, will become part of the industry at some point. It’s a very effective way to mitigate greenhouse gas emissions and provide cleaner energy from coal.
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PIPELINE NEWS December 2015
NDP critic sees BD3 as expensive, not viable By Brian Zinchuk Regina – Saskatoon-Nutana MLA Cathy Sproule, the NDP critic for environment and SaskPower, has been holding the provincial government’s feet to the fire on the poor performance of the Boundary Dam Integrated Carbon Capture and Storage Project. On Nov. 13 she spoke to us about the opposition’s concerns about the project and the Saskatchewan Party government’s handling of it. “Right now, with the information we’ve been given, our main concern is the plant isn’t operating, and we’ve been mislead about what the government’s been saying about the plant,” she said when asked about her primary concern. She doesn’t know if the recent overhaul will solve the capture plant’s issues, saying she’s not privy to all the attempts SaskPower is making to get it operating. “Certainly we’re concerned about what we do know, and that is the amount of money we’re spending extra, over and above the initial cost, and that’s very concerning,” Sproule said.
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Asked if it’s reasonable to expect such a complex project, first-of-its-kind, to perform perfectly out of the gate, she said, “I think absolutely, that’s the case. I think what we’re talking about here is much beyond that. If you look an article by the editor of Power magazine (Gail Reitenbach, PhD), her quote is that this project, ‘has fundamental operationally crippling problems.’ I think what we’re looking at here goes beyond normal start-up glitches.” Would it be fair to give the project a few years to settle out the bug? Sproule responded, “If they were just bugs, it would be fair to give it some time. This is obviously much more than working out bugs.” SaskPower’s contract with Cenovus, which operates the Weyburn unit, destination of the compressed carbon dioxide product from the capture plant, has resulted in millions of dollars in penalties due to the lack of delivery of certain volumes of CO2 in a timely fashion, according to Minister of the Economy Bill Boyd during several question period rounds on the topic. With regards to that, Sproule said, “That’s very concerning. The problems we see now with Cenovus could have been avoided. I think at the time of April 2014, when the contract was signed, I think there were changes made subsequent to that. It would have been very clear at that point in time SaskPower would not be able to deliver the 100,000 tonnes of captured carbon. So we’re concerned about the negotiations and why they went the way they went when SaskPower knew there was no way they could have met those requirements, right from the get-go.” In defence, Premier Brad Wall has been ques-
tioning the NDP’s stance on coal, and its use in generating power in Saskatchewan. To this Sproule said, “Obviously, coal is a very important part of our power mix here in Saskatchewan. It has been for decades. I think what we see happening in the future we know the coal regulations are here, they’re not likely to get less stringent. Most people would suspect they’ll get more stringent as time goes on. “So, if carbon capture is not going to be economically viable, I think SaskPower and the Sask. Party need to deal with that reality and start planning adequately for the future. “Obviously other jurisdictions are dealing with this as well. There’s some very robust mixes of power generation that would include other types of baseload. We have natural gas, we have hydro, we have biomass. And, of course, renewables are playing a bigger role in green economies. So SaskPower is behind other jurisdictions and the Sask. Party is not moving forward as quickly as other jurisdictions on those types of considerations,” Sproule said. Asked If carbon capture isn’t developed for other applications beyond power generation, such as refineries, upgraders, SAGD, how will our economy and planet survive, Sproule said, “Other parts of the economy are looking at all sorts of technologies, including carbon capture. Certainly the SaskPower project is not the only carbon capture project in the world, either. There are a number of other technologies being developed. So, yes, for industry, when we know those regulations are coming forward and there’s going to be tighter controls on emissions, all of that is going to be important considerations and important research so those industries remain viable and carbon emissions go down.” ► Page A17
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PIPELINE NEWS December 2015
MLA Cathy Sproule is the NDP critic for environment and SaskPower. File photo
◄ Page A16 Should Saskatchewan start building nuclear power plants, which have zero carbon emissions? “No, we should not start building nuclear power plants in Saskatchewan. That was a clear mandate from the people of Saskatchewan when we did the review back in 2009. There is just no call for nuclear. It’s way too expensive, and there’s still the issues of dealing with the waste. There’s still
zero emissions, per se, but the waste and the cost, and there will be a lot of emissions around the building of it. It’s just not something that should be looked at right now.” Sproule said, “Most importantly, the Sask. Party has really put all their eggs in one basket, down in Boundary Dam 3. We just found out recently they have delayed considering carbon capture for Boundary Dam 4 and 5. I think most of the questions around whether or
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not this is the right technology need to be reflected to the Sask. Party government and whether or not they’re willing to make that commitment to carbon capture. I think right now, after what we’ve seen, it’s pretty clear the Sask. Party is not ready to make that commitment yet, and they really need to answer those questions.” Making a decision now, a year in, wouldn’t seem early, if it had been working better than expected, she said. “I think by all accounts, by everything we understand is that there were higher expectations, even understanding there would be problems to work out. “I think there is a considerable amount of disappointment in the technology right now that is beyond what would be normally expected. I think that’s something the Sask. Party government needs to deal with,” she said. While she acknowledged Boundary Dam is capturing carbon dioxide, more than any other power plant in the country, Sproule pointed out, “We’re paying huge amounts of money to do that.
Again, the taxpayers and rate payers; SaskPower users, are the ones that are paying for this. It’s got to be economically viable, as well, and we’re certainly not seeing that at this point in time.” The NDP has factored in the additional royalties from additional CO2-usage in enhanced oil recovery in its considerations of this file. Sproule suggests wind-generated power is a cheaper way to reduce carbon dioxide emissions. Nuclear is more expensive, from what she understands, but natural gas is an easy one to look at.
“It’s not free. Nobody’s suggesting creating sustainable power is free. I don’t think that’s fair at all. But $1.5 billion for one project that
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might not actually be used for Boundary Dam 4 and 5 seems to be a lot of money, to be focusing on one project,” she concluded.
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PIPELINE NEWS December 2015
PIPELINE NEWS December 2015
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New concrete product in the works to make use of idle secondary containment equipment
Grit Industries’ Cold Weather Technology indirect heaters are now being deployed in vertical treaters in North Dakota. Photo submitted
Lloydminster – Grit Industries of Lloydminster and North Battleford is ever-changing, and they are shifting their focus from the remaining field work they had to their primary work, manufacturing. Along the way, the company has stretched its wings on an indirect heating system that’s been in play for 15 years, diversifying into agriculture and precast concrete products. “We sold part of the company, A-Fire Burner Systems, and the field technicians, electricians and combustion technicians, to Guest Controls back in July,” noted Wayne King, owner, on Nov. 6. The intention was to focus on Cold Weather Technologies heating systems. “Primarily, the reason we wanted to focus there was, with all the talk environmentally on the petroleum industry, and all the concern about naturally drafted fire tube burners and inefficient, unsafe conditions they’re operating in, we wanted to distance ourselves from naturally-drafted fire tube burners and
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move towards safe, indirect, highly efficient heating systems, the Cold Weather Technology systems have to offer. My goal 15 years ago was to find a new technology that was safe, efficient and silent. Now the time has come to focus on the Cold Weather Technologies systems we use for the heating of natural gas and for the heating of crude oil,” King said. This technology is used in the heating of natural gas in natural gas distribution systems. Often one can see their distinctive green and aluminum units on the edge of Saskatchewan towns at SaskEnergy sites. King started working on this technology in 2000, and continues to develop new models and designs. “The Cold Weather Technologies manufacturing plant, which is located in North Battleford, is very busy,” King said. “Because we have very little activities left in the petroleum industry, we’re focusing primarily on natural gas distribution and light oil as well with this new heating system. We sent our first couple of big units into Mexico in September. We’re taking orders for big units across Canada. We’re just now, today, down in North Dakota installing some of the first units in the light oil in the Bakken for the heating of light oil in vertical heater treaters, which we feel is a big opportunity for us.” He started talking about it in Bismarck ten years ago. North Dakota producers didn’t have to run their fire tubes very hard. He explained, “But with the new rail regulations that came in over the last 12 months, now all of a sudden they have to heat their oil to a higher temperature to get the light ends to flash off so they can increase the flash point of the crude oil by reducing the condensate and light ends before they can load it onto a rail car.” “They have to add much more heat then they have had to in the past. Fire tube failures have risen dramatically. The longevity of fire tubes has decreased dramatically, and they’re looking at alternative heat systems now,” King said. This is a direct result of the crude-by-rail derailments at Lac-Mégantic, Que., and Castleton, N.D., both of which resulted in massive fireballs. The resulting regulatory changes sought to reduce the possibility of similar explosions in the future. Operating costs are another factor, according to King. “The industry is having to heat their oil to a higher temperature. A fire tube runs at about 40 per cent thermal efficiency. Sixty per cent is going up the stack as wasted heat and contributing to greenhouse gas emissions. Sixty per cent.” A fire tube has been around for 100 years, he noted, “as unsafe and primitive as it is.” The Cold Weather Techology system was developed by King, who has a long history as an inventor. He said, “It’s called a two-phase thermal syphon. It’s a closed system. It does not require electricity. There’s no pumps, motors and that sort of thing. It operates silently. It’s a closed system, drawn on vacuum. “When you’re creating steam, under vacuum, and what we use is a 50/50 mixture of water and glycol, water boils at 43 C. Water turns to steam at a very low temperature under vacuum. The idea is, when the flame cuts on, water and glycol mixture in the boiler has glycol boil at a higher temperature in the boiler. The water boils, turns to steam, expands 1,600 times its volume, and with that expansion in volume, roars off the boiler at very high velocity and very quickly goes into the heat exchanger. (There it) transfers its energy into the fluids that are surrounding the heat exchanger.” In that heat exchanger, the steam transfers its energy through latent heat loss to the process fluids. Once that occurs, if condenses back to water and flows back to the boiler to be reheated and reused. When it gets back to the boiler, it hits a hotbed of hot glycol and immediately flashes back to steam, cooling the glycol so the glycol doesn’t overheat. “We call it a heat-driven loop, or a circulating system that takes heat from the flame bed and depositing in the process fluids using steam,” King said. The boiler is fed by natural gas, either casing gas or utility gas, using a flame bed similar to a barbecue. “Our system runs at 80 per cent thermal efficiency,” he said.
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One unit is heating natural gas at a SaskEnergy facility just north of Weyburn, where it feeds the city of Weyburn. “We have not been able to get into the oilfield in Weyburn and Estevan. We’re still working on that,” King said. “We’ve got lots in the Lloydminster area, heating crude oil and production tanks. We have hundreds of these units in the Kindersley, Elrose and Kerrobert area, heating light oil.” The system fits in the same throat as a conventional fire tube in a tank. “In the Kindersley-Elrose area, we pull fire tubes and put in our units all the time,” King said. “You cannot heat light oil in a tank for processing purposes. It’s against the law. The skin temperature of the fire tube is higher than the flash point of the light oil. The regulatory bodies will not allow industry to treat light oil in a tank for processing purposes, using a fire tube. They can heat light oil in a tank using our indirect, steam-heated system. We’ve got approval for that.” Other ventures Throughout the years, Grit Industries has continued to evolve, offering new products, moving on from old ones. “What we’ve got left in the petroleum industry is secondary containment – we still manufacture secondary containment. It’s reliant on drilling. As new wells are drilled, they put secondary containment around the tanks. That portion of my company has slowed down absolutely down to maybe 10 per cent of what we were when the drilling rigs were going strong.” King said forecasts are positive, and oil companies have started to renew some of their drilling licenses and budgets. “There is still some optimism out there, but it’s still months away,” he said. Containment work hasn’t stopped, but it has slowed down dramatically. “We’re a manufacturer, so we moved those people into other positions in the company. We certainly have had layoffs. There’s no question about that. The bulk of the staff reduction was due to the sale of the A-Fire burner division.” Grit still manufactures the burner equipment for Guest Controls. Several years ago, Grit sold off its trucking division to focus on manufacturing. They manufacture components, wellhead drive and skids for a pump company. They also manufacture handling equipment for the transport by rail of catalyst used in the upgrading of crude oil. “We manufacture the equipment that is used to load the rail cars. We modify rail cars to handle this catalyst by bulk. Then we manufacture the unloading equipment for recycling facilities in the U.S. where they extract these metals out of the catalyst and use it for the steel-making industry.” That area of Grit’s business is still active, as refining has not slowed down. This equipment is made in Lloydminster and North Battleford. Grit has about 60 people on payroll these days, the bulk of which are in North Battleford. “We’re getting orders from across Canada and the U.S. that is keeping our staff busy in our manufacturing facility,” King said. Grit is attempting to diversify into the agriculture industry, specifically livestock handling and augers, working cooperatively with a Saskatchewan company which has a unique design. “We’re making every effort to diversify.” New precast concrete product Grit is currently prototyping a new concrete product. Using a roll-forming machine that is usually used for secondary containment manufacturing, they are taking that profile and adding concrete to introduce a whole new line of landscape and paving products. It’s a steel and concrete slab, made in a shop. It can be transported to remote locations. It can reduce the cost of concrete floors in agriculture and industry. It’s a precast concrete slab in a metal encasement. In northern areas, it means concrete can be used where a concrete plant is not available. They can be used for driveways or Quonset floors, for example. Retaining walls and decking are other options.
Have A Ball… It’s Christmas! As we celebrate another holiday season, we thank you for giving us so much to celebrate this past year. HAPPY HOLIDAYS TO ALL!
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Grit has moved away from old-style burners to indirect heaters like this. Photo submitted
The advantage of having it encased in metal is the metal becomes the form and rebar. “You can now weld these units to hold them in place. You can use them in retaining walls, they can be used as structural member for stairs and docks. You can’t weld pre-formed concrete,” King said. Eliminating the need to employ concrete crews to set forms and pour the concrete is a cost savings, he noted. Sizes will vary from 24 to 46 inches wide, and perhaps up to 20 feet long. They will be four inches thick. All kinds of decorative finishes can be applied to the aggregate.
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PIPELINE NEWS December 2015
A Precision Drilling rig could be found drilling near Forget after sunrise on Nov. 7. Photo by Brian Zinchuk
Drilling activity bottoms out again, then picks up Kindersley – Saskatchewan’s active drilling rig numbers took a tumble yet again in mid-November, and there’s one big reason for it – wet weather in the Kindersley area. The most notable decline has been in the Kindersley Viking play. For a while early this fall it was one of the leading drilling areas. On Nov. 9 there were two rigs working near Eston for Crescent Point, and one rig just southwest of Kerrobert drilling for Whitecap. The reason was pretty simple, however. Raging River Exploration president and CEO Neil Roszell explained that wet and snowy weather meant RMs didn’t want to issue permits to move rigs. “It got wet,” he said.
The decline is weather related, he said. Roszell expected drilling to pick up when the weather improves. By Nov. 9, there were only 20 drilling rigs working in the province, and one of those was drilling for potash. Of that 20, 14 were working for Crescent Point Energy Corp., which had 14 of those 20 rigs working on that day. Other active drillers included Fire Sky Energy, Husky Oil Operations, Surge Energy, Torc Oil and Gas and Whitecap Resources, all with one rig each. The Lloydminster area had one rig working west of Edam for Husky. Five rigs were working in the
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southwest, four for Crescent Point, and one for Surge. In the southeast, three rigs were drilling for Crescent Point in the Torquay play, three more in the Bakken Viewfield area, one in the Pinto area and on northwest of Alameda. The last two rigs were north and east of Alameda, for Fire Sky and Torc. By Nov. 17, the rig count rose to 28 rigs and many more companies were now back in the game. Raging River Exploration, Caltex Resources, Northern Blizzard Resources and Rocky River Petroleum all picked up a rig each in the Kindersley area. R.I.I. North America Inc. drilled nine miles south of Marshall, in the Lloydminster area. In the southeast, Cenovus resumed drilling in the Weyburn Unit. Astra Oil Corp. had a rig near Hirsch. Federated Co-op drilled south of Oxbow while Torc drilled north of Oxbow. Spartan continued its one-rig program south of Gainsborough while Fire Sky drilled halfway between Alameda and Carlyle.
Crescent Point had 14 rigs working in the province on Nov. 9, with two in the Kindersley area, three in the Shaunavon play, three in the Torquay region, three in the Viewfield Bakken, two in the Pinto area and one north of Gainsborough. Two rigs were working on potash projects on that day. Ed Dancsok, assistant deputy minister with the Ministry of the Economy, said there has been a 50 per cent drop in wells drilled in Saskatchewan from January to September, compared to the same period in 2014. Just 1,550 wells were drilled in Saskatchewan during the first nine months of 2015. He noted the previous year was a record year, but the 2015 number is still a 43 per cent drop against the five-year average. The last time such a drop was seen was in 2009, when there were 1,188 wells drilled in that time period. The Lloydminster region has been heaviest hit, with a 70 to 80 per cent decline in wells drilled in the heavy oil region.
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PIPELINE NEWS December 2015
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Why Crescent Point slowed down in September to one drilling rig One of the toughest times for the oilpatch this year, outside of spring breakup, was in early September when the number of active drilling rigs fell to the 17-18 range. At that time, Crescent Point Energy Corp., which had been the most active driller in the country, by far, for almost all of 2015, dropped down to one active rig for about two weeks. Brent Forster, vice-president, drilling, completions and facilities for Crescent Point, explained on Nov. 13 the reasoning behind Crescent Point’s actions in September. He said, “We were seeing a drop in oil prices. We were looking at our costs. We had up-to-the-minute what we really, truly thought our costs were at. We were working with our vendors, trying to get a better handle if we could improve our costs more. With oil prices dropping, we’ve got a concern that the cost we were at today, picking Sept. 1 as a day, that our economics are so tight now because we honestly believed oil prices were going to keep dropping, we need to lower our costs. “So we wanted to take a breather and make sure we were really, truly comfortable with what our go-forwards costs were. We tried to get with our vendors and say, ‘What more can we trim here? This is a grim environment. We don’t see it improving in the near terms, so where can we get with costs? I know we’ve talked bargain-basement pricing, but is there a way to get lower so we can keep moving ahead?’ “It was a twofold thing. We wanted to evaluate what we were doing, making sure we were comfortable that the go-forward cost estimate we had in place was actually a reality, and where more we could cut back on those costs, to really ensure we were correct in our assumptions on a go-forward basis. It’s so tight, from our standpoint, and the suppliers’ standpoint. What can you do? Can you do more? With the price we have right now, where is it going to go from here? Are you going to have to turn around and hit us with an increase right away? Look at it from both sides of the coin.” December 2014 and spring breakup 2015 in particular Crescent Point looked hard at its drilling costs, but Forster noted, “At the end of the day, revisiting our costs and working with our vendors is continuous. Every day of
the week, I would have to say, somebody is trying to find a way to save with one of our, or some of our vendors. We do have a supply chain group that’s very involved.” A big chunk of what they do every day is looking at costs. But is there any more room to go down? “That’s a good question. I hope so. If oil goes down, I don’t think there’s much of a choice. The vendors are of the same standpoint. “The big point here is not only are we going to our suppliers and trying to get a cost, but our suppliers are going to their vendors, trying to figure out how to lower costs in order to pass those savings back to us. Do I think, personally, there’s another 30 per cent? I don’t believe that, no. I don’t think the margins are there, and you have to take some consideration into the American dollar. “On fracking, for instance, chemicals and sand for the most part are out of the U.S. Lower oil price means, for the most part, a lower Canadian dollar, which means a higher exchange rate to buy those products.” Forster added, “Where we’re at now, everyone’s belts are very tight. The next 10 per cent is going to be a heck of a lot harder to get than the first 10 per cent.”
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A22
PIPELINE NEWS December 2015
TransCanada reacts to Keystone XL rejection
By Brian Zinchuk Calgary – To TransCanada, proponent of the Keystone XL Pipeline project, the game is not yet over. In a blog post on their keystone-xl.com web site, TransCanada president and CEO Russ Girling said, “TransCanada and its shippers remain absolutely committed to building this important energy infrastructure project. “We will review our options to potentially file a new application for border-crossing authority to ship our customer’s crude oil, and
will now analyze the stated rationale for the denial.” The company’s blog posting when on to say, “We are disappointed with the President’s choice to deny the Keystone XL application. Keystone XL continues to have the support of American and Canadian workers, labor organizations, industry and most of all, the American and Canadian people. With their continued support, we believe that a pipeline will eventually be built as this is the safest, most economically efficient means of getting crude oil to market.
“Today’s decision deals a damaging blow to jobs, the economy and the environment on both sides of the border. This denial will result in more oil moving by rail along with an increase in GHGs. By denying a presidential permit, by extension, 9,000 jobs for Americans, 2,200 for Canadians building Keystone XL and the 42,000 related jobs across the U.S. value chain have also been denied as a result of this decision.” It added that counties and communities were going to miss out on hundreds of millions
of dollars in taxes. The project was also “shovel ready” in Canada since the National Energy Board’s approval in
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2010. The blog post concluded, “It is disappointing the administration appears to have said yes to more oil imports from Saudi Arabia and Venezuela over oil from Canada, the United States’ strongest ally and trading partner, a country with rule of law and values consistent with the U.S.” The Keystone XL
Pipeline is a proposed 1,179-mile (1,897 km), 36-inch-diameter crude oil pipeline beginning in Hardisty, Alta., and extending south to Steele City, Neb. It would have a capacity of 830,000 barrels per day. While most of that would have come from the Canadian oilsands, a portion was expected to carry Bakken oil from North Dakota.
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PIPELINE NEWS December 2015
A23
Moratorium on tanker traffic could be death knell for Northern Gateway Ottawa – There’s no sense building a pipeline to the coast if tankers aren’t allowed to haul its oil. That’s the tactic the newly-elected Liberal government is taking with regards to the Enbridge Northern Gateway Pipeline project. Just days after U.S. President Barack Obama rejected the TransCanada Keystone XL Pipeline on Nov. 6, Prime Minister Justin Trudeau issued “mandate letters” to each of his newly sworn-in ministers. Minister of Transport Marc Garneau received the following orders as one of his top priorities: “Formalize a moratorium on crude oil tanker traffic on British Columbia’s North Coast, working in collaboration with the Minister of Fisheries, Oceans and the Canadian Coast Guard, the Minister of Natural Resources and the Minister of Environment and Climate Change to develop an approach.” In December 2014 Northern Gateway had received National Energy Board approval from the Joint Review Panel, with 209 conditions attached. However, if a moratorium on crude oil tanker traffic is brought into place, then the entire $6.5 billion project is moot. According to Enbridge’s website regarding Northern Gateway, www. gatewayfacts.ca, “The Kitimat Marine Terminal will include two ship berths and 19 tanks for oil and condensate. While docked at the Terminal, tankers loading export oil will be surrounded by a containment boom. The forecast is
for the terminal to have the capacity to serve around 220 ship calls per year.” Tankers coming in and out of Kitimat would have “Only licensed, local B.C. Coast Pilots will guide our tankers. Loaded tankers will be escorted by two tugs — one of them tethered at all times. As an added precaution, tugs will carry spill response and firefighting equipment. “Tankers must be double-hulled, under 20 years old and meticulously certified. Crews must be certified by the International Maritime Organization, and officers must be English speaking.” The project, which would run 1,177 km from Bruderheim, Alta, to Kitimat, B.C., would have an oil pipeline running from Alberta to the coast and a condensate pipeline running the opposite direction.
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A24
PIPELINE NEWS December 2015
They owe me money. What can I do? By Brian Zinchuk Estevan – What do you do when someone or a company owes you money, but isn’t paying up? This was the subject of a presentation by Eric Johnson and Rick Van Beselaere of the Regina office of Miller Thomson. They spoke to an Estevan Chamber of Commerce luncheon on Oct. 22 about dealing with debt, especially debt that is owed to you as a business. Van Beselaere noted Miller Thomson is the
only national law firm in Saskatchewan, with 500 lawyers across 11 cities from Vancouver to Montreal. They have offices in Regina and Saskatoon, and have now established a presence in Estevan. Prior to their merger with Miller Thomson, the Regina firm was known as Balfour Moss and has a history going back to 1895. Van Beselaere and Johnson specialize in financial services, specifically debt, credit, insolvency, collecting
unsecured debt and major refinancing. Some of the firm’s financing projects they’ve done include the Ottawa Senators and Winnipeg Jets hockey teams. They were in Estevan to talk about debtor-creditor relations. “This really doesn’t have anything to do with the downturn in the oil and gas industry. It’s not totally inconsequential – we note it, we’ve seen it. Our offices that deal with oil and gas have seen it as well. But it is a timely topic, even
Canada’s National Law Firm Providing Legal Services throughout
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For more information on our “Debt” story in this edition, or any other legal matter you wish assistance with, please call Rick Van Beselaere or Eric Johnson at
when things are going well. “It’s something all businesses should, in our mind, be cognizant of and dealing with it,” he said. “We’re looking at this (as) you are the business, and you’re dealing with people with whom you have credit issues.” “If you’ve got a situation where a debtor is in default and you’re not getting paid, what can you do? What are some of the options you can pursue?” Van Beselaere said. When dealing with a debtor, there’s a matter of balance, with a difference in how you should deal with someone who owes you $1,000 versus who owes you $100,000. Competitiveness If you’re a supplier of widgets among 20 other widget suppliers, and you make it too difficult to do business, your client might go to someone else. “You’ve got to balance taking care with what you’re doing with the customer and making sure you understand
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who you’re dealing with, what your risks are, managing your risks, and chasing away business by being just too damned tight and too damned difficult to deal with.” In knowing the debtor and doing due diligence, you can plan and set your credit risk. In Saskatchewan, there’s no exception to word of mouth. People know each other, he noted, but even good businesses can run into trouble. Understand if you’re dealing with a partnership, sole proprietorship or corporation. Then there’s joint ventures, limited partnerships and general partnerships. “When you’re dealing with someone, it’s very important to know if this person across the table is speaking on behalf of himself or herself, or is there a corporation behind them or partnership?” he said. A well-known person, well-off financially could be working for a startup with a lot of risk and be highly leveraged, for instance. “Obviously, if
they’re new to your community, you’re going to want to be a little more diligent,” Van Beselaere said. One tool is the publicly accessible personal property registry (www.isc.ca/SPPR/) to search for liens. “That will give you some idea of what kind of debtor situations that person is into, who the creditors are. It might list a bank, if I’ve got an operating loan if I’m a business, or if I’ve got financing with a bank. It may list a finance company or a supplier of vehicles. That will give a bit of a picture.” Johnson noted searching the personal property registry is useful in personal lives as well. For example, if you are buying a second-hand vehicle and not from a dealer or someone in the business of selling vehicles. It’s electronic and easy to do. You can ask for copies of their most recent financial statements. The income and expense statement shows retained earnings. “A corporation, you can only go after the company. A general partnership, you can go after the partners, all the partners. If you have a partner that’s strong financially, and one that’s not as strong financially, you can pick and go after the best one with the deepest pockets or the path of least resistance,” Van Beselaere said. But for limited partnerships, that doesn’t apply. They are more like corporations, and you can go after the assets of the corporation. Credit checks are an option. ► Page A25
GLAD TIDINGS
to you
CLIFF NANKIVELL
TRUCKING LTD.
Office: (306) 462-2130 Fax: (306) 462-2188
PIPELINE NEWS December 2015
Rick Van Beselaere, right, and Eric Johnson (not visible), lawyers with legal firm Miller Thomson, spoke to the Estevan Chamber of Commerce about dealing with debt owed to you. Photo by Brian Zinchuk
◄ Page A24 “You may want to ask for some backup security,” he said. It’s also possible to ask for a written guarantee that a debt will be paid from a principal of a company, for example, or a related party to your debtor . “Be aware if their equipment is leased,” he added. The lessor may have priority to the
equipment as security. Johnson stressed, “Get the stuff in writing.” That includes contracts, but can be as simple as a memo everyone signs. An email isn’t a contract, but it can be evidence of one. “Not only can it give you a binding contract to enforce if the debtors don’t pay you, getting something
in writing forces clear thinking. “This is what we do,” he said. “When a debtor is under pressure, crazy things can start to happen. Desperation sets in. People’s memories get faulty. They forget, conveniently, at times, what they said they were going to do or agreed to do. They start
denying it and pushing back, which makes your job dealing with them, trying to get paid, that much harder,” Van Beselaere said. It’s important to put interest rates in writing and specify an annualized rate, especially if it is over five per cent, i.e. one per cent per month compounding.
PipelineNews_December_Layout 1 11/09/15 10:26 AM Page 1
“It is a lot tougher to get a deal signed when things have gone south,” Johnson said. Van Beselaere noted there are limitation periods. While limitation periods in relation to debt is a complex area of law in Saskatchewan, a lawsuit must be started within two years from the day the claim is discovered, generally when payment is due and not paid. If you secure a partial payment, that two-year clock starts over. Johnson pointed out that two years can come up quickly. When granting credit to a corporation, Johnson suggested getting a guarantee from the principal of the company, but get it in writing. If the guarantee is in an agricultural context, independent legal advice might also be required. When dealing with defaults, they suggest working with the debtor. Emails are good to “put some structure in place.” You can go to cash on delivery or install-
A25
ment payments. You can also take some security, if there is some to be offered. “There always has to be what’s called ‘consideration,’” Van Beselaere said. “There has to be something. But If I owe you money, I’m asking for a deferral, and you ask for something, and I give it to you, that’s consideration. You don’t have to agree to the extension, and I don’t have to agree to giving you the security. We align our interest and have legal consideration.” Sometimes you just walk away and never do business with them again. But other times, you should give a written demand payment, with a period of time to satisfy it. It’s a good practice to give a final deadline. “If they don’t pay, you can sue them,” Van Beselaere said. If you have security or a guarantee, that’s something different. There may be some rules you need to follow to enforce them. You may wish to hire speak with a lawyer. ► Page A26
PipelineNews_December_Layout 1 11/09/15 10:26 AM Page 1
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A26
PIPELINE NEWS December 2015
Get some security if at all possible ◄ Page A25 Having something as security, even if not top of the priority list, is better than nothing. An unsecured creditor’s last recourse is a judgement and then seeking to enforce it can be a long and expensive process. Johnson said there are two avenues to sue: Small Claims Court and Court of Queens Bench. Small Claims Court has a $20,000 limit for payment. “Small Claims Court staff and judges are extremely helpful and useful,” Johnson said. “You could, if you’re ambitious enough, do it yourself. The costs are relatively minimal.”
Queens Bench is more complicated, but there are certain actions that can only be done through Queens Bench, including issues regarding land titles and builders liens. There are various stages of litigation before the case goes to trial. Using the courts allows enforcement actions, including the ability to seize and sell assets. The vast majority of actions in Saskatchewan are settled before trial, they noted. “Think long and hard about what actions you want to take,” Johnson said. “And, you can lose,” Van Beselaere added. They touched on bankruptcies, insolvencies and seizures of assets. There’s a fundamental difference
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between a true bankruptcy and someone who says they can’t pay, Van Beselaere noted. He noted unsecured creditors rights can be limited to none. In contrast, the Canada Revenue Agency, for instance, is the ultimate preferred creditor. “A lot of times, secured creditors, because they come ahead, will have eaten up everything that’s in there. Sometimes when companies or individuals go bankrupt, it is because there’s really nothing there.” Thus taking a security interest ca elevate you at least to the level where you might get something. Receivership is generally instigated by secured creditors. As a creditor yourself, sometimes you can get a judgement to put your debtor into bankruptcy. Van Beselaere concluded, “Bankruptcy is not a good thing, generally.”
Tuscany to drill
In the second half of November, Tuscany Energy Ltd. planned to begin drilling operations on a horizontal well targeting a potential heavy oil Dina structure on its Winter prospect in Saskatchewan. The Winter horizontal 191/05-36-042-25W3 well was expected to start drilling on Nov. 20, 2015. If successful, the company plans to have the well on production by the middle of December. Tuscany also plans to shoot seismic over its Sparky prospect at Macklin, Saskatchewan, to help identify the potential upside of this prospect. While the company continues to adhere to its plan of minimizing expenditures during this oil price downturn, Tuscany is undertaking these expenditures at this time to meet the obligations of a flow-through share issue completed in December 2014.
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PIPELINE NEWS December 2015
MS RS
A27
Ron’s The Work Wear Store closes in Estevan Weyburn and Carlyle locations remain in operation Estevan, Weyburn – In operation in Estevan since 1986, Ron’s The Work Wear Store Ltd., closed its doors in the Energy City this fall. “We shut the whole operation down as of Sept. 30,” said Rick Tourand, who, with his brother Martin, owns and operates the long-time family operation. The Tourands still have stores in Weyburn and Carlyle. Rick runs the Weyburn operation, and Martin looks after Carlyle, which has consistently been the sales leader of what was once a three-store independent operation. Weyburn was the original store, opened 33 years ago, followed shortly by Estevan, then eventually Carlyle in the late 1990s. The two brothers took over the business from their father Ron, who retired five years ago. The store was never flashy, eschewing fancy displays in favour of lower prices and a place where workers could feel comfortable coming in straight from the job site, in their work clothes, to pick up some Bama socks, composite boots or warm gloves. “We started in the worst possible time, ever,” Rick said of the 1986 Estevan opening. That year has been widely regarded as the worst for the oilpatch in Saskatchewan in the last four decades. Well, at least until 2015. “We’ve endured a half-dozen booms and busts. This is the most pronounced we’ve seen, and the worst in Estevan,” Rick said. He’s spent decades driving Highway 39 to come into the Estevan location a few days a week. “Estevan has always been a challenge, even in the good times,” he said. “Estevan has its own unique culture. It’s difficult to reach the working man whose not from the area.” The completion of the Boundary Dam Integrated Carbon Capture Project in 2014 certainly
Rick Tourand had the sad duty of closing the Estevan location of Ron’s The Work Wear Store in September. He continues to run their Weyburn location, seen here. Photo by Brian Zinchuk
caused a dip in their business. “It really did,” Rick said, especially on the type of inventory they carried that was applicable to that sort of project, but not the oilfield. “When the downturn in oil came, it compounded,” he said. “At one time, I had four employees, plus myself. It was down to two at the end. January was like someone had pulled a plug.” Rick said people simply weren’t spending money, and you can’t blame them. “There’s no blame involved,” he said. He added that their location, adjacent to four banks on the main drag, was once one of the best they could have had, but no longer. “The first rule of business is location,” he said.
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Perhaps with the new truck bypass, Estevan’s downtown may improve, but he noted, “The downtown is a highway, and treated as such.” The Estevan location was going up for sale in mid-November. With the two stores remaining, they can hold on. “I can do as much business in two stores as I can in three. That’s as plain as I can put it,” Rick said, adding they have enough activity to keep them afloat. Much of that has to do with customer loyalty built by Ron. “We still do business with people in Estevan. We’re developing an online presence right now. We’ll have a website you can order from. We’re still a phone call away,” he concluded.
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A28
PIPELINE NEWS December 2015
Estevan Meter acquires Acutec By Brian Zinchuk Estevan – Estevan Meter Services Ltd. has acquired Acutec Systems Ltd. of Lampman, effective Oct. 31. Acutec had been part the The Quest Group, which also has interests in tank rentals, satellitecapable systems and gauge manufacturing. Indeed, The Quest Group will continue to manufacture the key product Acutec offers – the Level Pro gauge system, and Estevan Meter will be the exclusive distributor of the product in Saskatchewan and Manitoba. It is a cash deal for an undisclosed amount. Acutec was owned by John Grimes. Grimes pioneered the electronic tank gauging business for the oil field in the 1980’s when he first developed the TPZ tank gauging and alarm callout system with the assistance of the Saskatchewan Research Council. This system largely reduced spills and help mitigate environmental risk for oil exploration and production companies. Grimes sold this technology to Titan Technologies in 1993 and subsequently founded Acutec Systems Ltd., which has specialized in sales and
service for the full line of Grimes tank gauging equipment including his most recently developed product which is the Level-Pro tank gauging system. The patented Level-Pro again offers industryleading technology at a low cost, with high accuracy and reliable level measurement that can easily be incorporated into almost any vessel without major or costly modifications. The Level-Pro instrument can be used in conjunction with Acutec’s satellite communications callout system the “Messenger System” for alarming and remote monitoring or with industry standard 4-20 mA output signal connected to any industrial control device such as a PLC. In addition to providing the Level Pro sales and service, Acutec is also an approved panel-building shop. “There’s a need and marketplace for improved service level on tank gauging in general,” said Doug Martens, president of Estevan Meter. “Our ability to supply and service the full line of Grimes’ tank gauging products along with our process application knowledge will provide client solutions in what is a continuingly more challeng-
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ing regulatory environment for our clients with respect to venting, flaring, and measurement”. There are three principle items in the acquisition. First is an existing book of business. Second is distribution of the Level-Pro. Third is a need to improve service for all tank gauging products in general. “That’s the part that complements our business very well,” Martens said, noting it will create some efficiency and cost savings for customers. “That’s the hope – a one-stop shop. We’re not stealing work from anybody, but will save customers money by having one service company go out instead of two or three.” “They’d like to have one truck come out and do it all,” he said. It’s one of the ways companies can reduce costs for oil producers who have been seeking efficiencies wherever possible. The deal has been in the works for a while. Martens said, “John approached us approximately a year ago.” The lower activity level in the oilpatch allowed for the necessary time to be found to work out the deal. Discussions took place in earnest over the last six months. “If things were busier, it would have been difficult to execute,” he said. “It’s obvious a lot of people would question the timing of this, but I think it positions us a little stronger in the marketplace,” Martens said. Both companies have tried to keep costs to their customers very low, he added. ► Page A29
Wishing You a Season of
Wonder
May every moment of your holiday be magical and bright. We hope the season finds you surrounded by loved ones, laughter and all the makings of new memories you will cherish for a lifetime. We owe our success to the faith and support of our good friends and customers here in the community, and we are grateful to share another year with all of you.
Thank you.
Merry Christmas!
306.634.5555 • Safety • Quality • Innovation • Integrity • Reliability www.logancompletionsystems.com • MultiStim Fracture Isolation Systems • Casing Patches • Open Hole Packers • Completion Tools • Liner Hangers
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PIPELINE NEWS December 2015
“That’s the hope – a one-stop shop.” We’re not stealing work from anybody, but will save customers money by having one service company go out instead of two or three.” - Doug Martens ◄ Page A28 All Acutec employees outside the Grimes family have been offered positions, with eight coming over. They will be working primarily out of Estevan, but there will be a presence that is minimized in Lampman but not shut down. Those staff members are primarily field staff. The addition of Acutec brings three field service trucks. “It’s our intention to retain those people.” Martens said. Both companies have worked in similar operating areas. When it comes to the Level-Pro, he said, “We’ll be looking for sub-dealers in Swift Current, Kindersley and Lloydminster, and markets outside the oilfield as well.” The Level-Pro has applications outside the oilfield, using its float-travelling-on-a-rod system in numerous fluid tank applications. Other systems, such as radar, can be less reliable and more expensive than this system, Martens noted. Installation of the Level-Pro is also relatively simple. “It hangs from a half-inch bolt hole.” In the last one to two years, the product has been refined to a high level of reliability, according to Martens. “We installed some of these products a year ago and checked customer references,” he said. There will be an ongoing relationship with Grimes, Martens noted. “Our ties don’t sever. We’ll still have access to the product developer.” Estevan Meter Services Ltd., is a privately owned provider of instrumentation, controls, combustion, technical sales, and services to the petroleum industry since 1967.
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A29
Doug Martens is the president and CEO of Estevan Meter. Photo submitted
www.crescentpointenergy.com
Have Yourself a Merry Little Christmas
It’s shaping up to be a great season, and customers like you are thereason! Thanks for your generous support and friendship at the holidays and all year. We wish you and yours all the best!
Season’s Greetings Here’s hoping your holiday is beautiful in every way.
Thanks for your business! A Schlumberger Co.
Phone (306) 487-2525 Cell (306) 421-0528
A30
PIPELINE NEWS December 2015
WPS focuses on nontraditional work during slow time
Oleg Khotynskyi of Waterflood Production Systems works a skid package for utility usage. Photo by Brian Zinchuk
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306-634-1025 | HWY. 39 WEST, ESTEVAN
Estevan – While other companies are staying put, Waterflood Production Systems Ltd. of Estevan is preparing itself for the next time the oilpatch pick up, by readying a new shop it will move into in the summer of 2016. The new facility is a new shop built near the Estevan brick plant. WPS has been working on a substantial upgrade to the facility, with extensive dirt work and new concrete pad. “We moved 50,000 yards of dirt,” said general manager David Heier. The work means room, and more importantly, improved drainage, with new culverts and a generous amount of gravel. The access road needed adjustment, as well. One of the results was the creation of a one-acre parcel with fill. Harvey King, president of WPS, said the building had become vacant. It will provide approximately 20,000 square feet of manufacturing space, plus a small office and parts area. That’s a substantial increase from their existing location on the south end of Estevan. It will also have an overhead crane that runs out of the building. The new facility will allow the company to embark on larger projects once things pick up. “We’re going to get into larger pressure vessels and production tanks,” said Heier. The intention is to design the new products through 2016 and,
hopefully, begin building them in 2017. WPS sees opportunity in the market, not just in southeast Saskatchewan. “I’m hoping we can build a product that goes further,” Heier said. Waterflood’s primary work has been skid packages for the oilfield, but oilfield work slowed down quite a bit. However, they’re in their third year of a three-year project for a utility that has kept the company moving. “It’s utility work. It’s not really oilfield, but it’s a market that’s there,” Heier said. Right now, they are working on a fourmonth backlog of orders for their products. The utility work is a diversification from what they’ve usually done for exploration and production oil companies. “But it fits in with what we usually do, skid work and piping, on a larger scale,” Heier said. They’re currently working on their 2016 projects in that regard. WPS has 28 people on payroll, with 10 to 12 working in manufacturing and the rest in servicing, engineering and sales. “We’re looking forward to a good year of non-traditional oilfield work,” Heier said, adding they’re doing some compression and electrical cogeneration projects. Those cogen projects will be up to 1,000 kilowatt power generating facilities that will supplement electrical power for production
batteries. WPS is also doing preliminary work on nitrogen generating capacity, basically a form of compression, and then stripping oxygen and other gasses from the compressed air. The application would be for a water-alternating-gas flood for enhanced oil recovery. “They’re trying to determine if nitrogen will work the same as CO2,” Heier said. “The fact we’re interested in that is we’re not overrun with other requests. We’ve got no other requests,” King said. “If we were doing a normal year of traditional work, we’d be hard-pressed to get it done,” Heier said. “We’re considerably down. Quoting is down, and winning jobs is down, but it’s not nill.” Tough year “I started working at Waterflood when I was 12 years old at $3 an hour,” Heier said. Asked if this downturn is as bad and 1986, he replied, “Worse. It feels like Bill-42. When I was a kid, Estevan dried up and blew away. Dad sent crews to Regina to protest.” Bill-42 was a law passed by the Allan Blakeney NDP government in 1973 which brought oilpatch activity in the province to a standstill. Many oilpatch veterans over the years have told Pipeline News that period was their bleakest experience in Saskatchewan’s oilpatch. ► Page A31
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PIPELINE NEWS December 2015 companies. “Nobody’s spending money,” according to King. Therefore, he’s going to start looking further afield for electrical work. “We didn’t market very
much for 10, 20 years, ever since I started the business,” King said. Waterflood will be using the federal work-sharing program, something they used in
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1999. “We used it for a whole year,” Heier said, adding, “The problem is the gap.” That gap occurs between projects, he noted.
Oleg Khotynskyi, left, and Roman Kovalchuk assemble a flange on a skid package.
◄ Page A30 The difference, Heier pointed out, was back then, Estevan was full of five-or-six employee shops, not 50 or 60 employees each. “You can’t buy a job,” he said. King concurred. “I’ve not seen it before where things aren’t even being maintained.” Heier said, “All it is is a bump on the road of life. It will come back. You have to be ready for it.” King noted, “You have to make it to the end.” They agreed it’s more like making it to “the next start.” “We need to get to the next start. I like that,” King said. To that end, King noted the importance of keeping a core of staff, which can be expanded upon when things pick up. Heier said, “We’re
working towards more CNC equipment in the Edmonton and Lloydminster branches. We’re looking at automating more manufacturing of vessels and pipe spools. We’re going into iron workers (for stamping and sheering) and a plasma table.” Phone isn’t ringing One measure King gauges activity by is how often his phone rings. Indeed, during a typical hour-long discussion in his office, it will ring almost off the hook. Not these days. “There were only two messages in the last hour,” King said. “On the electrical side, I haven’t been affected until this month. The wheels have fallen off.” P.S. Electric, an industrial electrical contractor and King’s other venture, has had to lay off 15 people in the last month, bringing their workforce down
to 15. He explained all work related to the Boundary Dam carbon capture project is being concluded, and the oilfield is really struggling, especially when there’s wet weather. “Nothing will go ahead when its wet,” he said. “Here we are in November, usually our peak season, and it may not come back until spring. I deemed this a 10-year catch up, catching up on paperwork and procedures. We had a good run. I’m getting really caught up,” King said. “Most of our work is industrial. If it’s not for the oilfield, it’s for a service company for the oilfield. At this point, we don’t know when it will come back. I’ve never seen it this bad. We’ve always had service work, and this time it’s shut off.” That includes oil producers and service
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PIPELINE NEWS December 2015
Slowdown allowed Stewart Steel to diversify and find new markets By Brian Zinchuk Weyburn – The slowdown in the oilpatch has allowed Weyburn manufacturer Stewart Steel to step back, put thought into new products, and develop new, diversified markets. Now, when many companies have
already laid off staff or may be considering it, Stewart Steel is considering a hiring program. Brad Stewart, owner, spoke to Pipeline News by phone on Nov. 9. His company has long been a manufacturer in the agriculture
sector, and during the recent boom years, picked up substantial business in the oilfield. But as the oilpatch has languished with low oil prices for over a year now, they’ve gone back to the global marketplace, developing new products.
Looking for work across the globe isn’t new for the company,
Stewart said, but they’ve been “lulled to sleep” in some respects as the
busy local market kept them busy. ► Page A33
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PIPELINE NEWS December 2015
Journeyman welder Ben Schneider works on a venture for the Dose ‘n’ Go, a new concrete produce Stewart Steel has come up with.
◄ Page A32 “The good news is steel prices have shrunk and overall labour costs have shrunk due to less overtime,” Stewart said. As a result, the net price of a storage setup, for example, is less than it was two years ago. “We are still trying to do things to help customers be successful,” he said. That means four focuses: manpower, machinery, method and material. Stewart said, “That’s our key.” When it comes to manpower, an in-house training program has been paying dividends. “Our team in the shop is the best in 30 years,” he said. “We’ve been able to retain all our staff and, at present, things look
like we’ll be starting a hiring program and beefing up our training. Honestly, our in-house training allows us to become quickly adaptable” That includes working for different customers, in different environments and with different requirements. With machinery and methods, they are currently putting in larger equipment to improve Stewart Steel’s capabilities. As for materials, Stewart Steel has developed stainless steel products, including making tanks as large as 24 feet in diameter and 40 feet tall. The new stainless steel tanks were initially for the ethanol industry, and have found use in
We’re dashing through the snow to say, “have a happy holiday!” May all of your wishes come true this season. Thank You!
mixing and storage for chemical companies which also service the oil sector. They’ve also been used by the fertilizer industry, part of the ag sector which was Stewart Steel’s origin. The slowdown in the oil sector has allowed Stewart Steel to step back a bit and put more consideration into new products. One is an application machine for use in the concrete industry. “It’s a helix dose machine,” Stewart explained. The machine is used in concrete for dosing or adding the right proportions of additives (such as fibreglass) to concrete. In most cases, this is done to replace rebar. The machine has found use in tunnel construction in New
York. “It was prototyped in the shop just after the oil slowdown,” Stewart said. Their oilfield work continues, including working with service rigs to enhance their production. Trailer manufacturing is slow, but there is some work there. Things are quiet on their drilling rig work, where in recent years Stewart Steel has manufactured the beefy metal buildings used as drilling rig components. The Vac-U-Spread, a large vacuum unit pulled by a tractor and used in land spreading applications of drilling mud has better designs coming, Stewart said, but not much action.
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PIPELINE NEWS December 2015
A pipeliner’s take on Keystone XL Red Deer, Alta. – For pipeline contractor Wes Waschuk, who, with his brother Kevin, owns Waschuk Pipe Line Construction Ltd., the cancellation of the Keystone XL project won’t have much impact. The company, which worked on the last two major big-inch pipeline projects in Saskatchewan (Alliance, 1999-2000, Enbridge Alberta Clipper, 2008-2009) did not land a contract for Keystone XL. Besides, the bidding for that took place a long, long time ago. “We bid on it seven years ago. The Canadian portion was bid seven years ago. It was awarded in Alberta and Saskatchewan. They installed a bunch of directional drills across major rivers, and everything else went on hold, went on hold, and then expired,” he said on Nov. 9. Waschuk Pipe Line was not one of the successful bidders. It was a little over 500 kilometres in Canada, and two contractors were expected to work on it. The total number of workers between the two construction crews, TransCanada and subcontractors, would have been about
1,200 to 1,300, on the job, during construction, according to Waschuk. “They always thought they were going to get it done in six months, or eight months. They were moving ahead, assuming they were going to get it done, that the U.S. was going to accept it. It came to a point where they had to stop, pull their reins in, and now, of course, Obama is saying we have ‘dirty oil.’ He’s totally wrong, as we all know in the industry,” Waschuk said. “It seems to be the flavour of the month if you’re an American. “None of this is any good for Alberta or Canada, let me put it to you that way, at this moment,” he said. “Other countries would take our oil in a minute if we could get it to the damn ocean,” he said. Between the three other proposed major export pipeline projects; Kinder Morgan’s TransMountain Expansion; TransCanada’s Energy East; and Enbridge’s Northern Gateway, it’s the one to Kitimat that is the most important, according to Waschuk, when asked which is the most important now. “In my opinion, Gateway, Alberta
Wes Waschuk owns and runs Waschuk Pipe Line Construction Ltd. with his brother Kevin.
oil getting to the Pacific Ocean. You’ve got more options to sell your oil, and it’s closer than the Atlantic Ocean, obviously. “The way you have to look at it is, if the U.S. doesn’t want our oil, we have to look somewhere else. So what is the most cost effective way to get it to market? Japan, China, Malaysia. They’d love to get that oil. Northern Gateway has not been put out to bid yet, nor have the other projects. Waschuk noted the British Columbia government has become more friendly to the project, and there are environmental and aboriginal concerns, but the project has been approved. In the week following Waschuk’s interview with Pipeline News, Prime Minister Justin Trudeau released his mandate letter to the new Minister of Transport Marc Garneau, instructing him to put a moratorium on crude oil tankers in the north Pacific area of Canada’s West Coast. In April, Waschuk Pipe Line finished a year-and-a-half-long project for Interpipeline Fund, and in November was kicking off a 251 kilometre portion of the Enbridge Norlite project from Fort McMurray to Fort Saskatchewan. That will keep them busy until April 2017. “It’s a really good spread in these
times, as we’re going through really tough times right now economically, as Canadians and Albertans.” “There’s a little bit of work. It’s going to be busy next year. There’s (Enbridge’s) Line 3 replacement that is being bid right now that will go next summer. That’s a year-and-a-half job for two contractors. I believe the TransMountain Kinder Morgan stuff is coming out for bid soon, starting within a year.” “The pipeline industry is fairly healthy, still. There’s jobs that have been coming out two or three years ago where they’ve ordered the pipe, they’ve got the permits, and all land and all the issues are done. So they are moving forward with these,” Waschuk said. “Our industry doesn’t look shortterm. Our industry has to look medium- to long-term. They might cut back on some smaller things that are not necessarily imminent, but the bigger jobs like Line 3 replacement, is replacing a line. They need that oil. Obviously, that’s going to go. These other jobs were always on the books a year-and-a-half ago. In my opinion, the bigger jobs aren’t necessarily cancelled. They may be pushed out a year, but a lot of this is still happening. Seventyfive per cent of it is still happening, which is a lot better than drillers in the drilling industry,” he concluded.
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PIPELINE NEWS December 2015
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Redvers Oil Showcase coming this spring Redvers – Preparation is well underway for the 2016 edition of the Redvers Oil Showcase, with exhibitors now able to book their booths. “The show is May 12-13 of 2016,” said Marc Wolensky, past president of the organizing committee. Prices for exhibitors have not changed since the 2014 show, which attracted 1,200 people. Registration can be done online at www.redversoilshow. com or by calling 306-452-3225. Past exhibitors are given priority before registration becomes wide open on Jan. 15. The show features both indoor and outdoor booths, and typically brings in a large number of local oilfield services companies as well as support businesses. They are continuing with the Thursday-Friday timings, with the banquet and yet-to-be announced guest speaker. Supper tickets are already selling fast. In previous years, speakers have included CEOs of active junior oil producers and the Minister responsible for Energy and Resources. “We hope to see people out to our show during this time with low oil prices. We have big and small businesses. We would hope the networking between smaller and larger businesses will still take place.” The show now has a Facebook page under Redvers Oil Show.
April 12 is the deadline for sponsorships, and April 26 is the deadline for booth registrations. Wolensky said, “The focus of the event is to
build networks and business opportunities, showcase their trends and development in the oil industry.”
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Box 1605, Estevan, Sk. S4A 2L7 Cell. (306) 421-3174, (306) 421-6410, (306) 421-2059 • Fax: (306) 634-1273
Wishing our friends and neighbors a most harmonious and joyful season!
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PIPELINE NEWS December 2015
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