Pipeline news december2016

PIPELINE NEWS Saskatchewan’s Petroleum Monthly

December 2016

Canada Post Publication No. 40069240

FREE

Volume 9 Issue 7

Consultants: Hiring the know-how to get the job done

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Husky spill report released A2

Feds approve pipelines

Mel Grimes 1947-2016

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Milton Vicary of Estevan has been consulting since 1990, and has no intention of stopping any time soon. Here he was overlooking lease construction for Federated Co-operatives Limited near Carievale on Nov. 25. Shaw Earth Moving Inc., of Gainsborough, provided the dozer service. See story page A14. Photo by Brian Zinchuk

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PIPELINE NEWS December 2016

The dirt did it

Ground movement cited as cause of pipeline spill that reached North Saskatchewan River dated Nov. 3, 2016.

In its report submitted to the Ministry, Husky said it had completed a thorough investigation into the 16TAN pipeline incident and submitted its report to regulators. (“16TAN” is Husky’s name for the pipeline). The report addresses the cause of the incident and identifies actions to prevent a similar incident, Husky added. “The investigation was informed by reviews conducted by internal and external experts covering the following areas: metallurgical, geotechnical, pipeline integrity, leak detection system performance and operator response.

“Stantec Consulting’s geotechnical report, filed on IRIS (Integrated Resource Information System), has concluded that the pipeline break was the result of geotechnical activity (ground movement). Acuren Group’s metallurgical report, filed on IRIS, has concluded that the break was a sudden, one‐time event in a section of the pipe that had buckled due to the force of ground movement. Its report also concluded the break was not the result of material defects, deficiencies or corrosion.”

Based on its findings, Husky is moving forward with a number of immediate actions while regulators continue with their review.

Actions In their report to the Ministry of Economy, Husky noted, “While the investigation has concluded the Saskatchewan Gathering System was designed and constructed in accordance with applicable standards and operators responded appropri-

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This graphic, as seen in the Acuren metallurgical report done for Husky into the July 21 oil spill on the North Saskatchewan River, shows where the pipeline bent and broke due to ground movement.

ately, Husky is implementing improvements to the systems and operating procedures.”

Those actions include ensuring geotechnical risks are addressed and re‐assessed over the life of a pipeline with mitigation and monitoring strategies. This would include route selection, design consideration for stress relief through excavation, and additional monitoring technologies such as inclinometers.

Husky will also work on applica-

tion of additional safety loading factors to locations which are susceptible to potential geotechnical risk, which would increase the force that could be exerted on the pipeline. Husky is reviewing and consolidating existing leak detection processes and procedures. Improvements will include a defined time period for diagnostic analysis before proceeding to a mandatory shutdown. Finally, Husky is adjusting variables on the leak

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detection systems to reduce the number of false alarms.

Severe buckling The 16-inch pipe buckled, with the bottom of the pipe bulging and splitting, as indicated by numerous photographs in the pipeline metallurgical failure analysis report conducted by engineering firm Acuren and written by Brian Wilson, M.Eng., P.Eng. senior materials engineer.

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 By Brian Zinchuk Calgary – The dirt did it.

More specifically, wet dirt did it.

The much-anticipated engineering reports explaining the cause of the July 21 Husky pipeline oil spill north of Maidstone which then flowed into the North Saskatchewan River cited ground movement, caused by rain, as the culprit.

That spill, of approximately 225 cubic metres (1415 barrels) of blended heavy oil and condensate, contaminated the primary fresh drinking water source for several major communities along the North Saskatchewan River, including North Battleford, Prince Albert and Melfort. Those communities scrambled to put into place alternative water sources. North Battleford relied on its groundwater treatment plant and eventually additional water from the Town of Battleford. Prince Albert built an overland water pipeline, essentially a large hose, from the South Saskatchewan River. Melfort put an old water reservoir back into service. By mid-September the all clear was given and Melfort and Prince Albert began drawing on North Saskatchewan River water again.

On Nov. 17, Husky Energy Inc.’s two reports were released by the Ministry of the Economy.

Those reports, initially required

by Oct. 21, were granted an extension of 30 days by the Ministry. The pipeline metallurgical failure analysis report, by engineering firm Acuren Group Inc., was dated Oct. 24, 2016, while the geotechnical investigation Report, by engineering firm Stantec Consulting Ltd., was

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Line 3 Replacement, TMX approved; Northern Gateway rejected by cabinet out coal-fired power in Canada by 2030.

He noted Canada is rich in energy of all kinds, conventional and renewable.

“I have said many times, there isn’t a country in the world that find billions of barrels of oil, and leave it in ground while there is a market for it,” Trudeau said. “But it isn’t enough to just exploit that resource for our short term interest. Our challenge is to use today’s wealth to create tomorrow’s opportunity. Ultimately, this is about leaving a better country for our kids than the one we inherited from our parents.”

Trudeau said major pipelines could only get built if we had a price on carbon and there was strong environmental protection in place.

Indigenous peoples must be respected and part of the process. He strongly credited Alberta Premier Rachel Notley’s climate change initiatives as being key to these approvals.

With that, he announced the Government of Canada approved the Kinder Morgan Trans Mountain Pipeline Expansion, a $6.8 billion project to twin the existing pipeline running from Edmonton to Burnaby, B.C., tripling the capacity

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In 2009, Enbridge built its Alberta Clipper pipeline through Saskatchewan, seen here near Kipling. In 2017, it will build its Line 3 Replacement, now approved by the federal government. File photo

of the system. Similarly, the $7.5 billion Enbridge Line 3 replacement, from Hardisty, Alta., to Superior, Wi., is also a go.

In rejecting the Northern Gateway project, Trudeau reiterated a statement from his election campaign, saying, “The Great Bear Rainforest is no place for a pipeline and the Douglas Channel is no place for oil tanker traffic.”

Kinder Morgan “This is a defining moment for our Project and Canada’s energy industry,” said Ian Anderson, President, Kinder Morgan Canada. “This decision follows many years of engagement and the pre-

sentation of the very best scientific, technical and economic information.

We are excited to move forward and get this Project built, for the benefit of our customers, communities and all Canadians.”

The $6.8 billion 1,150-km Trans Mountain Expansion Project will expand the existing Trans Mountain Pipeline system – between Edmonton and Burnaby, B.C. Its capacity would increase from 300,000 barrels per day, to 890,000 barrels per day.

Kinder Morgan noted this final federal approval triggers a number of next steps. Trans Mountain will continue to seek all

Canada’s energy resources to market.

“The Line 3 Replacement Program is the largest project in Enbridge’s history at approximately $7.5 billion, and will enhance the safety of the line and restore its original capacity of 760,000 barrels a day.”

The current Line 3 is operating at reduced pressure, thus lowering its throughput to 390,000 barrels per day.

The anticipated inservice date for this project is 2019, pending U.S. regulatory approvals.

Regarding the rejection of $6.5 billion Page A7

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necessary permits, and is planning to begin construction in September 2017, with an in-service date for the twinned pipeline expected in late 2019.

Other next steps will include a final cost estimate review with shippers committed to the project and a final investment decision by the Kinder Morgan board of directors.

Enbridge reaction In a statement on its website, Enbridge said, “We’re pleased by the federal government’s decision to approve the Line 3 Replacement Program, an essential maintenance project that will ensure the safe and reliable delivery of

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 By Brian Zinchuk Ottawa – November 2016 just may be the turning point for the great pipeline debates affecting Canada for the better part of the past decade. On Nov. 29, Prime Minister Justin Trudeau announced that Kinder Morgan’s Trans Mountain Expansion and Enbridge’s Line 3 Replacement both got the go-ahead from the federal cabinet, but Enbridge’s Northern Gateway is dead.

On Nov. 8, Donald Trump was elected president of the United States. He emphatically promised to approve TransCanada’s Keystone XL pipeline (which was kyboshed by President Barack Obama a year ago) puts a third major export pipeline in play.

After years of consternation, pipeline companies are planning to scratch dirt by next summer.

Trudeau said, “Canadians know that strong action on the environment is good for the economy. It makes us more competitive by fostering innovation and reducing pollution.”

He prefaced his announcement by referring to recent actions by the federal government to put a price on “pollution” (suggesting CO2 is pollution), an “oceans protection plan” and the intention to phase

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PIPELINE NEWS December 2016

PIPELINE NEWS

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Two out of three ain’t bad, Trump’s election makes three out of four When it comes to “pipeline news” this is about as big as it gets. Prime Minister Justin Trudeau announced on Nov. 29 the approval of Kinder Morgan’s Trans Mountain Expansion (TMX) and Enbridge’s Line 3 Replacement, but nixed Enbridge’s Northern Gateway. Meatloaf sang, “Two out of three ain’t bad,” and that just about sums up the situation. Oh, and with Donald Trump soon to be in the Whitehouse and standing Canadian approval for Keystone XL, that will soon be three out of four.

On May 27, President-Elect Donald Trump responded to questions from Pipeline News about the Keystone XL pipeline.

Pipeline News: “Would you approve the project?

Would you invite TransCanada to build it?”

Donald Trump: “Yes I would. Totally. It should be approved. I’m not saying we shouldn’t get a better deal.”

He might even approve the pipeline as early as his first day in office, Jan. 20, 2017.

These developments dramatically change the dynamics of the Canadian oil industry. Suddenly we’ve got three of those of those pipelines we’ve been so desperately seeking. It will shake up, well, everything.

Northern Gateway is dead. A tanker ban and the prime minister’s utter disdain for the project have destroyed its chances. So be it.

Enbridge’s Line 3 Replacement project will bring online an additional 370,000 barrels per day in capacity (525,000 bpd if additional pumping capacity is added).

Line 3 has been so problematic, it’s been running at 390,000 bpd instead of its nameplate 760,000 bpd, just to make sure it doesn’t spring a leak somewhere. And since the new pipe will be slightly bigger – 36 inches over 34, and additional pumping capacity could be added, it could carry as much as 915,000 bpd. That means the replacement will add almost as much takeaway capacity as Northern Gateway would have. Northern Gateway just became redundant.

Trans Mountain Expansion will triple its capacity, adding 590,000 bpd to its current 300,000 bpd.

Keystone XL will add 830,000 bpd, 85 per cent of which is for Canadian production.

Suddenly we’ve got three major pipelines, possibly all in play at the same time. That begs the question of what will happen with TransCanada’s proposed Energy East, which is bigger, by far, than any of the other projects. It also has the most strategic implications.

Energy East would replace a large amount of oil imports from countries who make no bone about not liking us too much. While Irving Oil says they will still import Saudi oil, one wonders how long that would last.

While the other projects improve our takeaway capacity, Energy East is fundamentally nation-building.

However, if the other three projects go ahead, Energy East is likely going to get punted down the road again, perhaps a decade or more. It doesn’t help the entire NEB panel reviewing the project quit due to a meeting with former Quebec premier Jean Charest, now a TransCanada lobbyist.

Do we really need that pipeline, with the other new pipelines in place? That will be the key question for a Liberal cabinet squeamish about upsetting their base in central and eastern Canada. Do they want DAPL-type protests in Quebec? Fat chance. In a US$45 per barrel market, are we even going to see the expansions in the oilsands needed to fill the first three pipelines?

More broadly, these pipeline approvals mean hope, after two years of downturn. It’s much more hope than the oil industry ever thought they could expect from a prime minister named Trudeau. It means the Canadian oil industry will have room to grow for years to come.

Finally, there’s some light at the end of the tunnel.

In summary, Northern Gateway’s dead, TMX and Line 3 Replacement are a go, Keystone XL will be a go, and your children might see Energy East built.

MS RS

PIPELINE NEWS December 2016

Did Trudeau actually just approve two pipelines? Trudeau???

Prime Minister Justin Trudeau may have just gotten it done, when it comes to pipelines, in a way former prime minister Stephen Harper did not.

I need to swallow real hard before I type this.

The Bailey’s Irish Cream in my coffee has worn off, and it’s been a long night of reading stories and analysis of pipelines. I’m still having a hard time believing it.

On Nov. 29, Trudeau took the podium in Ottawa and announced approval for two of three major pipeline projects, Enbridge’s Line 3 Replacement, and Kinder Morgan’s Trans Mountain Expansion. He killed the Enbridge Northern Gateway proposal, and, as promised, promised to make law a moratorium on oil tanker traffic on the northern British Columbia coast.

That last part will be painful for Enbridge, as they had received approval from Harper’s government in 2014, with hundreds of conditions. A Federal Court ruling earlier this year quashed that approval, saying the federal government didn’t do its job consulting indigenous people.

In June 2014 I wrote, “The reality is the Conservative government is not going to be in place forever, and both Liberal leader Justin Trudeau and NDP leader Thomas Mulcair are promising to kill the project if and when either of them get elected to government.

“With years of aboriginal consultations and

OPINION FROM THE TOP OF THE PILE

By Brian Zinchuk

legal challenges in the way before work actually begins, it is highly unlikely we will see the Conservatives hold onto power long enough for this project to become a fait accompli before a new government kills it.”

That’s exactly what happened.

TransCanada’s Keystone XL has already got approval, from Harper, on the Canadian side. I keep reading in various media that President Elect Donald Trump is likely to approve the project on his first day in office. If so, it could mean three pipelines start construction next summer, and be in service within the following two years.

If that happens, Trudeau, a Liberal, will have succeeded where Harper, a Conservative, a supposedly very pro-pipeline Conservative, did not. Three, count ’em, three major oil export pipelines may be in place before the next election.

On Kinder Morgan, Trudeau, the Liberal, put pipeline critics in their place, including, it seems, the outspoken mayor of Vancouver, one of its most ardent opponents. “If I thought this project was unsafe for the B.C. coast, I would reject it. This is a decision based on rigorous debate, on science,

sultants

ecialists

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and on evidence. We have not been, and we will not be swayed by political arguments, be they local, regional or national. We have made this decision because we are convinced it is safe for B.C., and it is the right one for Canada. It is a major win for Canadian workers, Canadian families, and the Canadian economy now and into the future.”

As for the demise of Northern Gateway, I’m not too broken up. As a prairie boy, I questioned how safe the narrow Douglas Channel to Kitimat, hundreds of kilometres long, was for tankers. If Prince Rupert was the terminus, it would have made much more sense. There, a tanker makes a left turn, a right turn, and they’re on open ocean.

Enbridge was stuck on Kitimat, and paid the price.

Trudeau’s distaste for oil (but not natural gas) pipelines through the Great Bear rainforest would have likely killed it either way.

In one fell swoop, more pipelines may be built under Trudeau than Harper. Who would have thunk it?

Brian Zinchuk is editor of Pipeline News. He can be reached at brian.zinchuk@sasktel.net.

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PIPELINE NEWS December 2016

Second pipe damaged, but no leak ▲

Page A2 The report concluded, “Based on the findings of this investigation, it is Acuren’s opinion that the submitted nominal 406.4 millimetre OD by 7.9 mm WT pipeline sample failed as a result of localized severe buckling deformation in the bottom half of the line, followed by brittle cracking on the ID surface of the pipe at the apex of the buckle and subsequent ductile overload fracture

from these brittle cracks, resulting in a through-wall fracture within the buckle.

There was no evidence of a progressive time-dependent cracking mechanism (e.g. fatigue) associated with the brittle fracture.

The timing of the original buckling of the pipe could not be determined in our investigation and determination of the source(s) and nature of the applied loading conditions on the pipeline necessary to cause

this buckling and the subsequent cracking within the buckle were beyond the scope of this metallurgical failure analysis.

“There was no evidence found to indicate that substandard pipe material or corrosion contributed to the failure.”

The 16-inch pipeline, built in 1997, was operating at 5,550 kiloPascals pressure, at a temperature of 53 C. It was transporting 273 cubic metres per

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ments is that there was in fact a second pipeline in the same ditch, an eight-inch pipeline whose flow was in the opposite direction of the 16-inch line that leaked. A figure in the metallurgical report indicated the second pipe, immediately adjacent to the larger one, bucked at nearly the exact same spot.

However, it did not leak.

That eight-inch line transported condensate.

“This condensate line also exhibited buckling deformation at approximately the same location as the buckled leak site in the 16TAN line. Samples were also cut from the nonfailed buckled locations of these two pipelines and submitted to Acuren for examination and testing,” the Acuren report said.

Results of the have been addressed in a supplemental Acuren report to Husky.

Geotechnical report Stantec’s report on the geotechnical causes of the ground movement cited high precipitation as the ultimate culprit, saying, “Given the available data to date, the more recent movement affecting the pipelines was

likely triggered by a high precipitation event, surface topography that impedes drainage and the weak pre-sheared foundation of Cretaceous clay shales,” it said.

The report didn’t leave a lot of options for actions to prevent further ground movement in the future.

This report was authored

by Carrie Murray, M.Eng., P.Eng,, senior geotechnical engineer, and Richard Guthrie, M.Sc., PhD, P. Geo., director of geohazards with Stantec.

“Remedial stabilization measures were considered infeasible given the large size and complexity of the landslide,” the report noted, citing the size of the valley in question. The south slope is 104 metres high, from the top of the valley to the water’s edge.

The horizontal length is 1080 metres, giving an average slope of 10:1, or 5.5 degrees slope inclination.

“Slope modifications such as slope re-grading or removal of soil loads at/ near the top of the slope are not recommended given the scale of the slope and considering that small

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hour (1,717 barrels per hour or 41,208 barrels per day) of blended crude oil.

The metallurgical report noted, “The line was understood to have been pigged on a monthly basis and was being continuously treated with Cortron RU-166 corrosion inhibitor and batch treated with Bactron K-48 biocide. The outside surface of the pipe was reportedly covered with Yellow Jacket YJ2 extruded polyethylene coating, overlaid with polyurethane foam insulation, which in turn was covered with a black polyethylene outer coating. There has reportedly been five in-line inspections performed on this line over its history, with the most recent ILI being in January 2015.

There have reportedly been no previous failures associated with this pipeline.”

The pipeline deflected approximately 21 degrees, centred on the buckle.

“The external surface of the pipe, including the buckled zone, did not exhibit any evidence of corrosion damage,” Acruen said.

Second pipe What was not mentioned in previous state-

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Two export pipelines now in play, third expected soon ▲

Page A3 Northern Gateway, which would have transported 525,000 barrels of oil per day 1,177 kilometres from Bruderheim, Alta. to Kitimat, B.C., the company said, “Enbridge is disappointed the federal government has directed the NEB to dismiss the Northern Gateway application. This was an important project to ensure Canada gets its resources to international markets, where Canadian producers can receive the best returns, benefiting our provincial and national economies.

“Northern Gateway also represented an unprecedented partnership with indigenous people. The 31 indigenous communities who had a one-third ownership in Northern Gateway stood to realize $2 billion in benefits to their communities and would have played an important stewardship role in the project.

“In advancing Northern Gateway, we relied on a process that saw the federal government approve the project. The Federal Court of Appeal then found that the federal government failed to properly consult indigenous communities, but affirmed our engagement on the project.

“Given today’s decision, we’ll need to assess our alternatives which we’ll do in consultation with our partners, including our Aboriginal equity partners.”

Saskatchewan implications Of the four pipeline proposals in play, Trans Mountain Expansion and Northern Gateway have little direct bearing on Saskatchewan production.

However, Enbridge’s Line 3, as part of the Enbridge mainline system, has a direct impact for all of Saskatchewan. Nearly every drop of oil produced in Saskatchewan that does not travel by rail finds its way onto the Enbridge system. With additional pumping capacity, the new Line 3 could go beyond the restored capacity of 760,000 bpd to a new capacity of 915,000 bpd, effectively 525,000 bpd more than the current, old Line 3.

That number is very close to the maximum production Saskatchewan reached before the oil crash. Lloydminster oil can reach the system via the Husky mainline, from Lloydminster to Hardisty, the Kerrobert terminal, or at Cromer, Man., from the Enbridge Saskatchewan System (which is in the process of being acquired

by Tundra Energy Marketing Limited).

Additionally, Lloydminster-area oil could also find its way on the Keystone XL pipeline, via Hardisty.

Saskatchewan Premier Brad Wall has been arguably the loudest proponent for pipelines among Canadian premiers. Wall said on his Facebook page, “The federal government’s announcement today with respect to pipelines is a step in the right direction and we welcome the approval of Kinder Morgan’s Trans Mountain and Enbridge’s Line 3. As for the latter pipeline, it will involve significant investment and new jobs in Saskatchewan during construction, and it will create opportunities for Regina-based Evraz.

“Any pipeline taking Canadian oil to tide water will reduce the differential in price that has resulted in Canadians selling their oil at a discount versus the world price.

“Saskatchewan remains hopeful that the pipeline project of greatest importance and impact to our province, the Energy East pipeline, will also be approved by the appropriate review and decision making process.

“We thank the Prime Minister and the federal government for this an-

nouncement.”

Alberta reaction Alberta Premier Rachel Notley said Trudeau has shown “extraordinary leadership.”

“Our province has been brutally slammed by the collapse in commodity prices. It has been a long, dark, night for the people of Alberta as a result.

Today, we are finally seeing some morning light. We are getting a chance to break our landlock. We are getting a chance to sell to China and other new markets at better prices.

And we’re getting a chance to reduce our dependency on one market, and therefore be more economically independent. And, we’re getting a chance to pick ourselves up and move forward again.”

She added this is part of a strong, new national environmental policy by getting rid of coal by 2030, capping oilsands greenhouse gas emissions, and phasing in a carbon tax.

CAPP Regarding the Trans Mountain Expansion approval, Canadian Association of Petroleum Producers president and CEO Tim McMillan said, “Through West-Coast access to the Pacific Rim, Canada can grow its international trade, create more jobs and prosper-

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The fight is just starting Greenpeace Canada spokesperson Mike Hudema said in an emailed statement, “Apparently Justin Trudeau’s sunny ways mean dark days ahead for climate action and indigenous reconciliation in Canada.

With this announcement Prime Minister Trudeau has broken his climate commitments, broken his commitments to indigenous rights, and has declared war on B.C. If Prime Minister Trudeau wanted to bring Standing Rock-like protests to Canada, he succeeded.”

Hudema added, “We will stand with First Nations, municipalities, and communities across Canada to ensure these pipelines are never built.

Whether it is through lawsuits, protests or peaceful direct action, we will live up to the promises our governments have made, even if they won’t. These pipelines will never make it into the ground.”

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ity at home and grow its international reputation as a place to invest.

“The government has made the right decision for Canadian prosperity; we will take responsible steps forward to make sure the project continues successfully.”

CAPP did not put out a statement regarding the other pipelines.

Pipeliner responds Wes Waschuk, owner of Red Deer-based Waschuk Pipe Line Construction Ltd. , said “I’m glad Kinder Morgan and Line 3 got approved.

Northern Gateway was very important to Alberta. That’s pretty disappointing.”

Waschuk Pipe Line has been one of the prime pipeline contractors on the last two major pipelines to go through Saskatchewan, Alliance (1999-2000) and Enbridge Northern Clipper (2008-2009). They had bid on Keystone XL seven years ago. Waschuk said it would be rebid. He anticipates bidding on Line 3 Replacement as well. “I hope to get some of that,” he told Pipeline News.

For his company, it

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A8

PIPELINE NEWS December 2016

Spartan buys $700 million of Arc Resources properties in SE Sask.

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ewan and represents a continuation of Spartan’s strategy to develop an asset base that is capable of funding repeatable, low risk growth within a subset of cash flow, the company noted in a press

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PIPELINE NEWS December 2016

A9

Can't do much with the slope ▲

Page A6 disturbances to the slope may initiate further movement,” the Stantec report said.

Similarly, buttressing the toe of the slope with a toe berm or retaining structure is not practical, as it would require multiple tiers and would need to the extend some distance both east and west of the pipeline corridor, at a very significant cost.

Dewatering the slope is not likely feasible due to the nature of the clay shale present.

Thus, monitoring slope movements to manage pipeline integrity risk and implementing mitigating design measures as necessary are suggested.

On the other side of the river, the north slope has no open ground cracks along the pipeline alignment, but an open ground crack was observed 100 to 300 metres east of the pipeline alignment. No pipeline integrity issues have been reported along the north slope, but the reports recommends future moni-

toring be undertaken along with monitoring of the south slope.

Minister responds Minister of Energy and Resource Dustin Duncan spoke to reporters in the Legislature on Nov. 17. He pointed out the Ministry had just received the report.

“We’ll have to take some time to look at it as part of the ongoing investigation that the Ministry is conducting. Again, I want to stress this isn’t our final report, this is just Husky’s final report on the incident. It’s an important part of the ongoing report the Ministry is conducting, but the Ministry’s work still continues.”

“The conclusion that is drawn in the report, in terms that ground movement was the cause of the breach of the line, is consistent with the ministry officials that are part of the investigation.

It’s consistent with our findings to date,” he said, adding the Ministry’s report is not yet complete, and could say something different.

The Ministry has

Prairie Mud Service

been in contact with other pipeline operators to look at their programs and ensure there isn’t a risk of other pipelines doing this.

“We’re going to have to look at, as a part of not only the outcome of this report, but going forward, what we need to do, if anything, to give assurances to the public there aren’t further risks out there, going forward,” Duncan said.

Duncan anticipates the Ministry’s report will be done in early 2017.

Asked about potential charges, Duncan said once the Ministry’s final report was complete, they would be in a better position to speak about

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Nations.

“A toll-free line will be monitored regularly so as to assist with any further inquiries. The number is 1-877-2622111.”

The press releases dated since July 21 currently listed do not include references to the spill.

In an emailed statement, Husky spokesperson Mel Duvall said, “We know the impact this incident had on communities and would like to acknowledge the extraordinary assistance we’ve received throughout. From the beginning we have

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taken full responsibility and continue to do so.

“Based on our findings, we are moving forward with a number of immediate actions while regulators continue with their review. While the investigation has concluded the pipeline was designed and constructed in accordance with applicable standards and operators responded appropriately, it is our intention to use these findings to further enhance our systems.

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consequences for Husky.

Ministry staff are working on the report, with the assistance of a third party engineering firm, SkyStone International.

As of Nov. 21, Husky’s web page, www. huskyenergy.com, no longer carried a direct link to their spill response page.

The company's news web page references have been limited to the following, “Shoreline cleanup operations on the North Saskatchewan River have been completed. Monitoring activities will continue through the winter and into 2017.

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A10

PIPELINE NEWS December 2016

Mel Grimes changed the landscape business, he left the oilfield. He had offers to go overseas to work, but being with his family was important. Stacey noted he had said, “This is where I wanted to be.”

Margaret would become integral in the family business, with Stacey saying, “Mom was one of the first implement dealers to get a computer. They were always forward thinking like that.”

“He went into partnership in 1984 with Southern Resources with Paul Grimes (a cousin),” Stacey said.

Southern Resources was a junior oil company working in southeast Saskatchewan.

“Dad got out of implement dealing in 1989, but he still kept his land. Seeding and harvest were his favourite times,” she said.

Mel bought out Paul eventually, and was in turn bought out by Talisman Energy Inc. in 1995. Stacey recalled her father wondering what he would do with himself.

By then he was buying and selling used pumpjacks.

Around this time the company was a small operation and very much a family affair, with Clinton as the picker operator, Kent Lees as the swamper, Gerald Garton as the shop foreman/mechanic, and Margaret doing the books. Stacey’s husband, Keith Wempe, was in dental school. He was put to work painting pumpjacks in the summer.

Page A11 ▲

Lampman – Melvyn Duane Grimes, who everyone called “Mel,” played a large part in literally transforming the Saskatchewan oilpatch landscape. He passed away Nov. 15 at the age of 69 after an over two-and-a-halfyear battle with prostate cancer.

Born Feb. 2, 1947, Mel Grimes grew up the third of five children; Gary, Judy, Melvyn, Barbara and Karen.

Since the 1940s, their parents, Clayton and Kathleen Grimes, owned and operated Grimes Sales & Service Ltd., a Lampman-based farm implement dealership. The dealership included brands like Versatile, New Holland, Degelman and Morris Rod Weeder. Clayton Grimes served as mayor of Lampman for 25 years.

After high school Mel found work in the oilpatch, becoming Dome Petroleum’s youngest field operator, at 19, according to his daughter, Stacey Wempe, on Nov. 23. He would work both in the oilfield and with his father’s business.

In 1968, at age 21, he married Margaret Mayer of Frobisher.

Stacey was born to Mel and Margaret in 1971, followed by Clinton in 1974.

In 1972, Mel’s father Clayton passed away, leaving the operation of the business to his family. Kathleen did the books, and Mel took over running the business, Stacey explained. Once established in the implement

Mel Grimes. Photo courtesy Stacey Wempe

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▲

Service was critically important for Grimes Page A10

Stacey talked about often going for flights with her dad. Mom wasn’t so keen on flying, but she did it nonetheless. “He loved to fly. He was a very good pilot,” she said.

Tragedy struck the Grimes family in 1997, when Clinton was killed in a vehicle accident with a train. He was 23.

“After Clinton died, it was very, very hard on Mom and Dad,” Stacey said, noting the expectation was he would eventually take over the company. Stacey went on to become a dental hygienist, working with her husband, now a dentist in Estevan. Like her mother, Stacey is the office manager in their family dental business.

The HG pumpjack Paul Cheung played a large role in Grimes’ life as his business partner in the pump jack business that would become so intimately associated with Mel Grimes.

Pipeline News spoke to Cheung on Nov. 24.

A Canadian for 40 years, Cheung was born in Hong Kong, having moved to Canada in 1971. He’s a Calgary geologist by trade with his own junior oil company operating in southeast Saskatchewan, Grand Bow Petroleum Ltd. Grimes Sales & Service supplied pumpjacks for Cheung’s company, Grand Bow, before they got into business together.

The design of the HG pumping Page A12 ▲

Service It’s important to note here that in the name “Grimes Sales & Service,” the “Service” part was not an afterthought. Everyone Pipeline News spoke to emphasized how service was absolutely key to Mel Grimes’ way of doing business. “Service was so big for Dad. Reputation was a big thing for Dad. Growing up, we’d get calls at one in the morning and Dad would go to the shop,” Stacey said.

“If there were any problems, he made sure they were fixed right away.”

Mel got his pilot’s wings in 1966, and that became an integral part of his business and life. In a 1983 Canadian Business article, he said, “We’re out in the sticks here. If somebody’s combine breaks down, he wants his parts now, not the day after tomorrow. I can be in Regina in 20 minutes. I’ll take a mechanic with me, pick up the part, and we’ll fly right out to the farm. Most of the farms here are close to landing strips. I used to have a Super Cub that I could land right in the field, but I can’t do that with this aircraft (a Beechcraft Bonanza V35B at the time).

Indeed, in later years one of his favourite pastimes at the end of the day was to hang out with buddies at his private hangar at the Estevan Municipal Airport.

Other times he would be seen happily mowing the lawn at the Lampman Airport, across the road from his primary shop and office.

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A11

A12

PIPELINE NEWS December 2016

The pumpjack that took over Saskatchewan ▲

Page A11 unit was neither Grimes' nor Cheung’s. It’s actually a Chinese design, for which they acted as distributors.

Cheung explained that in 1997 he was looking for a drilling rig in China, as there was a shortage locally at the time. He did not

find one, at first, but he did end up partnering with the China National Petroleum Company (CNPC), which had plans to develop drill-

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chinery, the manufacturer, according to Cheung.

Looking for someone local to work with, Merlin Skjonsby suggested to Cheung that he work with Mel Grimes. Grimes and Cheung became 50/50 partners in the pumpjack venture.

Stacey said that Cheung was the visionary, and he and Grimes worked really well as a team to get the product going.

They brought in six pump jacks initially for testing. Two went directly to Cheung’s own wells near Carlyle. That was in 2000.

Several years were spent in refining the pumpjack, with Stacey noting there were binders full of notes and lots of calls between her father and Cheung.

Using rough numbers, he said, “The first year (2001), we ordered 20. The second year it was 80. The next year was close to 200.

And then the next year was 400. Then that was the time we bought into the plant,” he said. Grimes and Cheung bought into the factory, near Beijing, that was manufacturing the pumping units.

By the time the Bakken boom was in full swing in 2008, HG pumpjacks dominated the landscape.

“Our best year was 2012. We did 1,400,” he said.

By that time, Mel once told Pipeline News that the

HG jack had about 90 per cent of the local market. A drive down any highway in southeast Saskatchewan would bear his words out.

Mel told his daughter that over 11,000 HG jacks have been sold. Indeed, the HG pumpjack, in 14 different sizes, would spread beyond southeast Saskatchewan to other parts of the province, and into Manitoba. Its largest units could be found south of the border, in North Dakota. It’s now in Utah as well. They’re also sprinkled throughout Alberta.

In 2014, Pipeline News encountered a large pad of numerous HG jacks near Rocky Mountain House, Alta.

While the company’s sales grew by leaps and bounds, all was not well in Lampman. Mel lost his wife, Margaret, to cancer in 2009.

In 2011, Stacey and Keith accompanied Mel and Paul Cheung on a trip to the Chinese factory.

“They threw a party for Dad and Paul,” Stacey said, noting it was Chinese New Year. “They were very grateful for Dad and Paul.”

That year Pipeline News asked a production foreman in southwest Saskatchewan why they were using HG jacks there, too.

He explained they were more energy efficient and less expensive. But just Page A13

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ing contracting operations around the world. They would end up as equal partners with him in what became Estevan-based Advance Drilling Ltd. “That’s when they showed me the pumpjack,” he explained. “One thing led to another.”

CNPC showed Cheung the pumpjack, and he wanted to bring it to the Canadian market, using it first on his own wells.

The distinctive shape is due to its curved walking beam. According to promotional material on the Schlumberger website, “The HG curved-beam pumping unit uses two counterweights instead of one: the conventional crank weight and an adjustable beam weight positioned at the end of an engineered curved walking beam. This innovation increases energy efficiency in a number of applications.

“At the beginning of the upstroke, when the horsehead is down, the motor and the counterweights have to do the most work to bring the rod and fluid up. The curved walking beam places the beam weight at the furthest distance from the samson post to provide maximum leverage, helping the crank weight and motor in bringing the horsehead back up.

The result is lower pump energy consumption, as well as reductions in the net torque curve.”

The name HG is derived from the Chinese words for River North Ma-

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A13

A frequent, generous, and often anonymous philanthropist ▲

Page A12 as importantly, the service was unbeatable. When they got a new jack, they would call up Mel Grimes, give him the size of the well, the rods and weights expected, and he would tell them right away how to set it up. It would be working properly right away, without fuss.

Cheung agreed with those statements. “We had this belief that if anything was wrong with the product, we would replace it,” he said. That would often go beyond a one-year guarantee.

“The product itself was good,” he said, but the market dominance was due to Mel Grimes, saying it was because of Grimes they had such strong market penetration in the southeast.

Working with Grimes, Cheung said, was “Really easy, as long as you are doing things that didn’t hurt the sales. It’s all about the sales. It’s all about the business.

That’s fine. He was pretty adamant … If it’s not good, he wouldn’t let it happen.”

Stacey noted that the company had a very small employee base. Jackie Steinke worked alongside Margaret from 2004 to 2009, and took over as office manager that year after Margaret passed away. Steinke said they peaked at 25, but most of the time, including now, the company ran with around 20. Many were long-term employees.

It’s telling that Steinke, not Mel, had the largest office in the building. Mel’s small modest office was the second one, one without an outside window. “Come on in and have a coffee. The coffee’s always on,” she recounted him frequently saying.

In the spring of 2014, the business, including interest in the factory in China, was sold to Schlumberger, the largest oilfield services company in the world. It happened at a time when Schlumberger was snapping up pumping businesses, including Platinum Pumpjack Services and Kudu Pumps.

Cheung said, “Schlumberger approached us.”

Stacey noted that around the time the sale took place, her father was diagnosed with prostate cancer.

He stayed on as a consultant, and his last day worked was Oct. 11, a month before he passed away. Kent Lees remains as operations manager, and Jackie Steinke continues to run the office. “He was very good to work for,” Steinke said. “He was a very generous person…He will be missed by many, many people.”

Community Mel Grimes was, in many ways, a private man who in later years would eschew publicity. He was a frequent and generous philanthropist who strongly preferred to give anonymously, often to hospital charities. Once,

in support Estevan’s new skating arena, he donated a pumpjack for charity auction, but he told Pipeline News he regretted the attention it brought. He preferred to be anonymous.

“He was always very community-oriented and all about the community,” Stacey said.

She concluded, with a smile, saying, “He had three children – me, Clinton, and his business, his baby. I grew up with the love, and the passion, mom and dad had for their business … I was very close with Dad. Clinton was the same way … His grandchildren were the love of his life, Katie and Garrett, as well as his family … and his employees. Dad would say, ‘The number one reason I’m successful is because of my employees.’”

Mel Grimes is survived by daughter Stacey and son in law Keith Wempe and his grandchildren, Garrett and Katie, his special friend Norma Hudye, many family and friends. Stacey said he will be missed by his many family, friends and customers throughout the years.

At his request, Mel Grimes’ funeral will be held on May 13, 2017, at 2 p.m. at Our Lady of Seven Sorrows Parish Cemetery, Lampman. A luncheon will follow at his Lampman home, beside the Grimes Sales and Service shop. And in keeping with his style, KFC will be served under a big tent.

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A14

PIPELINE NEWS December 2016

The Estevan Curling Club would like to thank the following local businesses for their generous sponsorship for the 4th Annual World Curling Tour held in Estevan Nov. 25 - 28, 2016.

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 By Brian Zinchuk Estevan – When it comes to working as an oilfield consultant, Milton Vicary of Estevan has seen it all. He worked on his own, grew a consulting business to 26 people, then pulled in his horns and eventually became a one-consultant operation again. Along the way, he’s worked on a wide variety of projects, one of which has had a profound impact on the local oilpatch.

These days Vicary is one of two consultants who look after Federated Cooperative Limited’s field operations in southeast Saskatchewan. On Nov. 25, that meant supervising lease construction. The rig would be arriving a few days later.

Vicary’s company is VPC Supervision Ltd. He’s been consulting since 1990.

But you don’t become an oilfield consultant without experience behind you. He ran all sorts of equipment, including trucks, dozers and backhoes over the years prior to every hanging up his shingle as a consultant.

As a young man he went to work out west, like

many others. “I went to work in Alberta in 1973. I started with a small backhoe business. I stayed there for three years and came back to Saskatchewan,” he said, adding that, back then, you saw all sorts of people from Estevan on the streets of Brooks, Alta. He spent a year in Cranbrook, B.C., too, in the early days.

Back in Estevan, he spent many years with Aero Construction.

“Aero was a big company. They had Cats, hoes, trucks, crew trucks. They had 120 to 130 people.

We did every phase of the oilfield – pipelines, setting pumpjacks, lease construction, oilfield maintenance,” he said.

Vicary started supervising in the mid-1970s.

By the time he broke out as a consultant in 1990, he had been a supervisor for around 15 years.

“Aero Construction went out of business. They decided to shut down,” he said. He worked a couple years as a salesman at Viking Surplus. He started his own small oilfield construction company in the early 1980s called Royal

Energy. It had three or four workers. That was right around the time a major downturn in the industry, similar to today’s downturn, occurred. Vicary said, “It didn’t go well. Things were flying apart.”

After about three years with Royal, he bounced around for three years, running equipment and supervising projects. “That’s when I started consulting in 1990,” he said. “I had a friend in Calgary, Lloyd Jeffries, who was a consultant down here.”

Jeffries asked Vicary to go consulting, working directly for Paramount Resources. Vicary was reluctant at first, but the push gave him the boost of confidence needed.

“When he phoned, I said I didn’t think I had the background to be a consultant. He told me, ‘You’re way above the consultants I’ve been using,’” He was hired.

Vicary said, “I went out to south of Fort McMurray, doing lease preparation for drilling rigs, in the muskeg. He had been all over Alberta and into

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Experience, management, safety, and accurate reporting are key to consulting: Milton Vicary

Page A15

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From one in the field, to 20, to one Page A14

he said. At that time, he had started hiring people, growing the business.

“My wife and I decided we’d hire four to five guys. By 1997, we had 20 people in the oilfield as consultants, and we had six people in the office. We had two draftsmen I did a lot of design work for batteries and vessels,” he said, noting he would rough out the design then give it to the draftsmen.

“I was writing the AFEs, allocated funds for expenditure,” he said of these projects. They would be sent off to Calgary for approval. He also did design basis memorandums, or DBMs, explaining the

scope of a project.

During this time he worked for Trilink Resources for 12 years, which had a lot of properties around Kipling. North Rock was another major client. North Rock eventually sold to Taqa North, and that resulted in Vicary being moved into the drilling department.

In 1998, things flew apart again. “Everyone went home. I had seven people working for me,” he said. “We kept five to seven people around until about 2000.”

Eventually he decided to slow down and downsize. The drafting department was kept for a few

Milton Vicary has been consulting since 1990, looking after everything from pipelines and batteries to crude-by-rail facilities. Here he’s looking after lease preparation near Carievale before the drilling rig shows up. Photo by Brian Zinchuk more years, then it, too, was shut down, as was the office near the hospital.

Operations were once again run out of home,

and he was working on his own, again, with Denise handling the paperwork.

With Taqa North he was scouting and survey-

ing leases, looking after the logistics to get drilling going. This extended into southwest Saskatchewan,

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the Northwest Territories, doing lease construction, looking after camps and ice roads. Working in muskeg was a real learning curve there, dealing with stuff I had never seen before.”

One winter up north was enough. He came back to southeast Saskatchewan.

In 1970 he married Denise, who has run the business for him for all these years. “She runs the office completely, and she does an excellent job – invoicing, accounting, bill collecting,” Vicary said.

“By 1995-96, we got so busy, we set up an office by the hospital,”

Page A16

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Page A15

Ontario, and all their American operations. It took him to Montana, Wyoming, North Dakota and Colorado. It was easier to work in the U.S. while working for a larger company than as an independent consultant.

“I was on the road probably 75 per cent of the time. I hired people I trusted. It was the people I hired, not the company.”

That trust allowed him to cover other areas with good people while he was away. “You establish relationships. That’s how you make things work,” he said. “They know what they’re doing. Safety is a big thing. They’re not going to take chances.”

In 2010 he left Taqa North and took a year off, getting some travel in. The next year, someone from

Crescent Point Energy Corp. called, saying they had a small rail project in Stoughton. He would end up supervising not only that initial project, but the follow-on project a little further up the line which would dramatically expand the company’s rail

loading capacity. The new facility provided the company with the capability of shipping nearly all its southeast Saskatchewan oil by rail if it chose to.

The Stoughton facility would become the largest crude-by-rail location in southeast Saskatchewan.

At 65 now, he said, “Over the 50 years I’ve spent in the oilpatch, I’ve seen a lot. I’ve learned a lot I’ve seen a lot of downturns. I’ve seen a lot of consultants come and go. When there’s a boom, there’s a lot of consultants, but when there’s a downturn, they all go home. When you have a boom, anyone can be a

consultant.”

But, he added, it’s the ability to manage, depth of experience, safety, reporting accurate costs and daily reports; those are the things that have kept him going.

See an additional consultant story about a Saskatoon well site supervisor in Saudi Arabia on www.pipelinenews.ca

New Pipelines Amendment Act

Regina – On Nov. 28 the Government of Saskatchewan introduced The Pipelines Amendment Act, 2016 in the Legislature, replacing The Pipelines Act, 1998.

“Our efforts to enhance and reinforce our regulatory oversight of the oil and gas industry in Saskatchewan are a continual process to ensure that it is held to the highest standards,” Energy and Resources Minister Dustin Duncan said. “This updated legislation also serves to address the provincial auditor’s previous

recommendations with respect to our work with this industry.”

Some of the components of the new legislation include creation of a legal framework for phased-in licensing of more than 80,000 flowlines which are exempt in current licensing under the Act. It means building an online pipeline licensing system using the Integrated Resource Information System (IRIS). It will establish new inspection, investigation and compliance audit powers for ministry staff. Penalty

provisions will be updated and modernized.

The act has improvements regarding pipeline licensing, construction, operation and abandonment There are requirements for financial assurance from operators for pipelines that are in high-risk locations like water crossings. The act sets up new obligations associated with environmental issues that might occur following pipeline abandonment.

“These objectives allow us to complete the recommendations made in the 2012 Provincial Auditor’s Report,” Duncan said. “It will also address relevant public concerns regarding Saskatchewan’s pipeline system by updating current requirements.”

About 90 per cent of Saskatchewan’s current spending on pipeline regulation is paid for through the annual well levy. The new legislation is not expected to trigger any additional costs for taxpayers.

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Stoughton crude-by-rail

These days Vicary works for Federated Co-operatives Limited, whose upstream asset management is provided

by Adonai Resources Corp. He’s been working steady with FCL as a consultant. He looks after pipelines, facilities, building batteries, lease construction, road construction and more.

RS

QU

A16

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