Pipeline News November 2017 by Pipeline News

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Pipeline News spoke to each of the five candidates for leadership of the Saskatchewan Party over a four week period, asking them what their energy policy and stance is. The winner will be our next premier at the end of January, replacing retiring Premier Brad Wall. Photos by Brian Zinchuk

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PIPELINE NEWS November 2017

TOP NEWS October land sale shows high interest from Bengough to Tribune 12 TOWNSHIPS SNATCHED UP IN EXPLORATORY LICENSES By Brian Zinchuk Regina – With a hard look at the map of exploration licences sold in the Oct. 3 land sale, and one could easily get the impression there’s a new play in the works in Saskatchewan. According to a map provided by the Ministry of Economy, the acquisitions extend primarily in Township 2, 3 and, at the western end, 4, from Range 14 to the eastern edge of Range 24. That correlates in an almost contiguous region along Township 3 from just south of Tribune to a line running south of Bengough, close to Highway 34. There is a noticeable gap along Range 21. From Lake Alma to Minton, it extends southward into Township 2. Between Lake Alma and Gladmar, nearly the entire Township 1, Range 18, West of the 2nd meridian (1-18-W2) is included, right to the U.S. border. To the east, a portion of 1-17-

W2 is also included. While there has long been oil production in this region, it hasn’t been a happening place for a very long time. Royce Reavley, professional geologist and manager of Crown sales, Lands and Mineral Tenure, Ministry of the Economy, provided some context for Pipeline News by phone on Oct. 19. Asked if it was a new play in the works, Reavley said, he couldn’t support or deny that it is. The October land sale did pick up on the heals of the August land sale, which saw six exploration licences in the same general area sell for a total of $1.6 million. That sale saw 17,612 hectares sell, nearly two townships. The ministry press release noted, “These parcels are prospective for multiple targets including the Ratcliffe Beds of the Madison Group and the Bakken, Torquay, Birdbear, Winnipegosis and Red

River Formations.” As for what the targets might be, he noted, “There actually is potential for all those zones. There’s producing wells for all those formations in this immediate area.” In most, but not all cases, the licences extend from the surface to the PreCambrian boundary – essentially the entire sedimentary column. That means the prospective oil companies could be looking at anything and everything. The gap along Range 21 has existing Minton, Red River, Winnipegosis and Hardy South Red River pools, thus likely accounting for why they didn’t appear in the sale. While 19 licences sold, one posted parcel did not sell due to no bids received. Asked if companies might be posting additional land, then not bidding on them as a way of bluffing their competition, Reavley said the ministry has a policy

The blue indicates the 19 licenses sold in the Oct. 3 Crown land sale. It does not indicate the additional six licenses sold in the same area in the August sale. specifically meant to discourage “smoke parcels.” The ministry requires, in writing, a reason why companies posted a parcel, but chose not to bid on it. Four land companies purchased 18 of the 19 licences. Due to confidentiality policies, the ministry cannot reveal much beyond that as to who is behind the bids. A lease has a five-year primary term, allowing an oil company the right to explore, produce and sell

oil and gas from the lease. They also secure a certain amount of land as wells are drilled, thus an oil company has up to five years to get drilling before their lease expires. An exploratory licence, such has those in this sale, has a much shorter period. In this case, the oil company has only two years in its primary term to lock up land. The measured depth of wells drilled impacts the number of sections a company can

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PIPELINE NEWS November 2017

The buyers were there and the sellers came: SIMSA Oil and Gas Supply Chain Forum By Brian Zinchuk Regina – The 3rd Annual Saskatchewan Oil and Gas Supply Chain Forum, held in Regina on Oct. 5, held its attendees attention, and for good reason. The event was put on by the Saskatchewan Industrial and Mining Suppliers Association (SIMSA). The purpose of the day-long conference was to let service companies know how to sell their services and wares to some of the biggest companies in the oilpatch, and that’s exactly what they heard. For instance, Laura Agnew, team lead, supply management contracts and materials management for

Crescent Point Energy Corp., laid out exactly what steps and requirements are needed to get work with the largest oil producer in the province. For instance, if you want to work for Crescent Point, your company needs an internal sponsor, a Crescent Point employee. You also need to be on Complyworks for going on location. She even listed insurance requirements they expect – the type of detail that might not otherwise be immediately evident. While there was a small tradeshow which sold out, one of the highlights was the opportunity for “speed networking.” It was designed to be very

much like “speed dating,” but instead of romance, it was all business. Husky Energy, Crescent Point, TransCanada, Enbridge, Plains Midstream, Torc Oil & Gas and Teine Energy, making up most of the largest oilfield companies in the province, each had a table where one or ever two people from their procurement departments entertained pitches from interested vendors. It was a chance for these vendors to cut through all the difficulty in making a lead and speak right to the people who make the decisions. Most of the tables had substantial line-ups with eager vendors queuing up for their five minute chance.

Largest sale in years ◄ Page A3 would go up for $1.75 per hectare for a licence to $3.50 per hectare for lease. As for the volume of land involved in this sale, if not the dollar amount, it harkens back to large sales of the 2005 shallow

Milk River gas play in west central Saskatchewan and the Viewfield Bakken play in 2007-2008, when Saskatchewan had its largest Crown land sale ever. With 112,567.9 hectares sold, roughly 12 townships of land are into play from

this sale, plus another two townships from the last sale. For perspective, the area in question is roughly half the size of the Viewfield Bakken pool. Reavley said it was probably the largest sale since the downturn.

There were two lineups to speak to procurement people from Crescent Point during the speed networking portion of the 3rd Annual Saskatchewan Oil and Gas Supply Chain Forum. Photo by Brian Zinchuk Speakers included Bill Whitelaw of JWN Energy, a sister company to Pipeline News, Mark Salkeld of the Petroleum Services Alliance of Canada and Dustin Duncan, Minister of Environment, and prior to that, Minister of Energy and Resources. Companies who took the stage included Plains Midstream, Enbridge, PwC, and TransCanada. B.J. Arnold of TransCanada had the tough duty of going on stage and

speaking for his company just hours after news broke, early that morning, that its Energy East Pipeline project was being cancelled. It was the elephant in the room that everyone was talking about. Eric Anderson, executive director of SIMSA said, “We had just under 300 in the room today. We sold out the trade show a couple weeks ago, which is great. We sold out the sponsorships a couple weeks ago, which is great.

But that’s all based on the support of the oil producers and pipeline companies. Our show is based on the buying people talking to the selling people, and if they buying people aren’t here, then the selling people don’t show up. So the buying people committed, Enbridge, TransCanada, Torc and Teine and Crescent Point.” Watch for additional coverage in our upcoming December edition of Pipeline News.

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PIPELINE NEWS November 2017

Cheveldayoff thinks stability is important, as are pipelines By Brian Zinchuk Weyburn – Of all the five candidates running for the leadership of the Saskatchewan Party, and position of premier, Ken Cheveldayoff has spent the most time as an MLA. First elected in 2003, the MLA for what is now Saskatoon-Willowgrove has served in several ministerial portfolios, including Crown Corporations, Enterprise, First Nations and Metis Relations, Environment, SaskWater, Public Service Commission and, most recently, Parks, Culture and Sport. Cheveldayoff met with Pipeline News in Weyburn on Sept. 28, a week before TransCanada cancelled its Energy East Pipeline project. Asked what his energy policy is, Cheveldayoff said, “I strongly support the expansion of pipelines, to port development in Canada. I think it’s unfortunate the federal government is holding Canadian producers and pipelines to a double standard, compared to imports from other countries, with less rigorous environmental standards. Pipeline reviews should be based on high environmental and safety standards, not political considerations. “I support the concept of developing infrastructure corridors in Canada, where projects like pipelines and other infrastructure projects, like electrical transmission, can be provided with more certainty concerning the approval process. This can be done with the same, or better, environmental and safety requirements. This approach would substantially increase the ability of investors to develop these types of projects in Canada, as compared to other countries. Pipeline projects will increase government revenues and

create jobs, while ensuring high standards of environmental protection and safety. We have to clear the federal longjam,” Cheveldayoff said, adding he’d work with other provinces on this. “Basically, I’ve very pro-pipeline. I believe it’s the most efficient way and environmentallyfriendly way to transport oil and gas, and I’m certainly wanting to do all I can to encourage, whether its Energy East or Keystone XL. Asked how he would clear those logjams, Cheveldayoff talked about how Premier Brad Wall has worked with other premiers, talking about mutual benefits. Using science and keeping politics out of it are part of it. Asked if Energy East went down, (which it did, a week after the interview), how he would differentiate markets, Cheveldayoff said, “First of all, as premier, you have to be clear on your stance. You have to be very supportive. You have to reach out to the oil and gas community and let them know you have an advocate for their position here, in the premier of the province, and in the cabinet. The energy minister is an important position. I believe we have done our job, in that regard. The people I talk to, in the oil and gas industry, very much approve on how we’ve handled things. We’ve been a strong, strong advocate, and the premier’s brought up things at the federal-provincial level, when the prime minister is in the room, and I think you have to continue to do that. “If it goes down, you have to ensure the government is there to help the private sector.” Wall has gone to Washington several times on trade missions

Ken Cheveldayoff

to support the energy industry, in particular, the Keystone XL project. Asked if he would do the same, Cheveldayoff said, “Absolutely. I think the relationship with Ottawa and the relationship with Washington is very important. In fact, I had the opportunity to accompany Premier Wall on one of those initiatives to Washington. We have the benefit of some very good people working for the province of Saskatchewan in Washington. They were able to open some doors and allow Premier Wall to make the Saskatchewan position known to those like Senator Lindsey Graham, of South Carolina, and others. We have an opportunity to lobby key decision makers, and we lobby from a sound environmental and economic background. I think that’s key to the future in this industry.” Regarding energy royalties, Cheveldayoff said, “When I talk to CEOs of oil companies that have oil interests in Saskatchewan, what they

tell me is what has had the most beneficial for their growth in the last 10 years has been stability. They say in Saskatchewan, you know what you get, you know what the future’s going to be. That has been so important for them to access capital and to go to the lenders and say we know what we’re going to get. “Is that going to be in place forever? I think a new government would have to take a look at where we are, and if any changes are needed. But if any changes come in, the most important thing is giving the industry a long lead time for them to understand. If there is even a slight change indirection, I would see the new premier and new cabinet giving the industry a long lead time so they can adjust to those changes as well.” He doesn’t feel the province needs a change at this time, but changes in taxation, such as the PST, needs to be addressed. He talked about a panel, like the Vicq panel, to look at it. On

day one, he would appoint a tax commission to spend 60 days to look at taxation in Saskatchewan. Asked if royalties could go down, he pointed out we’re short $1.2 billion on resource revenues. “The bottom line is we have to be competitive on our rates in Saskatchewan,” Cheveldayoff said, “But most importantly, they want stability.” Cheveldayoff says he would look at red tape to make it easier for the oilpatch to be ready for when the industry does come back and is ready to spend money. He noted imported oil into North America has much lower emissions standards, and our companies meet very high standards. “You advocate, you listen closely to the industry, you make sure that all know the high standards we meet here. Regarding carbon tax and carbon capture and storage, Cheveldayoff said he is absolutely against the carbon tax. “I think you’ll find every candidate in this leadership will be against the carbon tax. The next question is, ‘So what?’ “I believe if you’re against something, you have to be able to provide an alternative. What I’ve done is gone to scientists at the universities and talked to them about alternatives to the carbon tax. To look at innovation in food science, for example. I’ve talked to them about photosynthesis in plants, for example. It happens at six per cent, right now. If we could get it up to eight per cent, that would be the same objective of what the federal government is trying to do with the carbon tax. So given the opportunity to choose between a carbon tax, which would be so onerous for the entire

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economy, or investing in food science and innovation in the industry, I would invest in innovation, every time.” Asked to clarify on the photosynthesis point, he said he was talking about plants in general, all types of vegetation, work that’s being done at the University of Saskatchewan right now. “There’s a scientific argument here, for how we can use innovation and plant science to reduce our carbon in Saskatchewan. That is one alternative, different from a carbon tax, that’s different in how we can do it.” He added that agriculture is a carbon sink in the province. On the Boundary Dam project and carbon capture and storage, Cheveldayoff said he’s always been a proponent of the project. “This is Saskatchewan punching about its weight, when it comes to world-leading technology. Are there risks involved? Absolutely. Again, we don’t get enough credit for the leading edge work that we’re doing. Federal ministers have come out here, the minister of environment has been out here and said positive things when they toured the facility. I just don’t think on the whole, national scale, we get enough credit.” “Personally, I think there’s a future for it, but I’d have to have the detailed information in front of me to make that decision, for the new premier and cabinet to decide. On a personal basis, I very much believe in the technology. I believe it’s the way of the future. We have 300 years of coal here, and I’m very much a proponent of a balanced electrical generation cycle where we have wind, coal and biomass, hydro, for sure, as well,” Cheveldayoff said.

PIPELINE NEWS November 2017

PIPELINE NEWS

EDITORIAL

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Basking in the balance of anti-oil journalism Oct. 1 kicked off with a series of stories by the Toronto Star, Global News and National Observer, targeted on the Saskatchewan oilpatch. The stories were part of a much larger project, backed financially by the Corporate Mapping Project (CMP). CMP’s website notes, “The tremendous concentration of power and influence we see in the fossil fuel industry today places sharp limits on our democracy. “And as oil, gas and coal corporations pursue their relatively narrow, short-term profit goals, crafting effective responses to the climate crisis becomes more difficult. “The Corporate Mapping Project shines a bright light on the fossil fuel industry by investigating the ways corporate power is organized and exercised.” Really balanced, no doubt. Its lead-off pieces came out around Oct. 1, targeting Saskatchewan, and in particular, H2S issues in southeast Saskatchewan. Subsequent stories later in the month targeted petrochemical production areas in Ontario, the other end of the pipeline. Expect more to come. That Saskatchewan was targeted for this project can be directly attributed to the impetus provided by University of Regina geography professor Dr. Emily Eaton. Her Facebook paged noted on Oct. 1, “A heartfelt thank you to Patti Sonntag for taking up my pitch, to Trish Elliott for spending the last eight months of her life on this project and to the many students across the country who worked so hard on this project. Thanks also to Robb Cribb, the National Observer and the Corporate Mapping Project for making this happen. No communities should be expected to live under these conditions.” Sonntag is listed as the series producer, and as a Michener Fellow, based at Concordia University.

Eaton’s editorial, published in the National Observer as part of the same series, was entitled, “Hey Saskatchewan, let’s talk about the ‘ugly side’ side of oil.” The University of Regina School of Journalism student film which is part of the project, “Crude Power: An investigation into oil, money and influence in Saskatchewan” lends heavily from items in Eaton’s 2016 book, Fault Lines: Life and Landscape in Saskatchewan’s Oil Economy. It also should be noted that Eaton’s husband, Simon Enoch, Saskatchewan director for the Canadian Centre for Policy Alternatives, is on the steering committee for the Corporate Mapping Project. The Corporate Mapping Project lists as its partners the universities of Regina, Waterloo, Northern British Columbia, Simon Fraser, Lethbridge and Victoria. It also lists the Canadian Centre for Policy Alternatives, Parkland Institute, LittleSis, and Unifor, Canada’s largest public sector union. Apparently more than 30 students and 50 reporters in total took part in this project. But when we asked Sonntag on Facebook if any had taken the day-long H2S Alive course, she replied, “Most of our sources took it and live it every day.” In other words, no one did. Perhaps that’s why a series, in which one headline breathlessly declared, “How the reporters in an historic Canadian journalism collaboration cornered a silent killer,” implies that no one knew about H2S until these journalists figured it out, even though the industry has been dealing with this for decades. H2S training was our front page photo on our very first edition in 2008. It’s commonplace, when taking an H2S Alive course, to have the instructor ask how many times have people there recertified the course (required every three years). Gener-

ally you’ll have several hands go up for five, six, seven or even more times. Pipeline News recertified the course for the fifth time this past spring. But to read the series of stories that came out in early October, you would think we just found out about it now because the National Observer, Toronto Star and Global News discovered it. Never mind provincial initiatives like Directive S-10 to reduce venting and flaring, which came out several years ago. We didn’t know until they “cornered” it. When you see statements like, “Where were the public danger warnings?” in the stories, one wonders if they have every noticed the warning signs at the gate of any sour well or facility. Or if any of these people have ever been to such a site, beyond the gate? The opening of the Global Regina piece shows a sign saying in capital letters, “NO TRESPASSING, DANGER H2S POISONOUS GAS. AUTHORIZED PERSONNEL ONLY. NO SMOKING.” Apparently that isn’t a public danger warning. So there, we in Saskatchewan have now basked in the balance of anti-oil journalism. Expect more to come, likely from more elements from Eaton’s book. Her Facebook page used to have a photo of her standing on a pipeline right-of-way in Regina, protesting pipelines, but it has since disappeared, along with the numerous other pictures of her protesting everything from pipelines to boycotting Israel. In early 2015 she was keynote speaker for a meeting in Saskatoon seeking to start a movement to ban fracking in Saskatchewan, a meeting where a Saskatoon-based wellsite supervisor was turned away because he worked in the industry. Since the Corporate Mapping Project has taken up Eaton’s suggestions, we should know what to expect.

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PIPELINE NEWS November 2017

OPINION

We can’t let these things slide, at all

Sitting in a lecture theatre on Oct. 4, watching a University of Regina School of Journalism student film called “Crude Power – An investigation into oil, money and influence in Saskatchewan,” I had several realizations. First of all, my heart rate was up the whole time. Wearing a jacket with “Pipeline News” emblazoned on my back, and sitting in the front, I was likely the only visible presence there, from the oilpatch, except for Norm Sacuta from the Petroleum Technology Research Centre. He was one of four panelists who spoke after the 47-minute film, as an industry representative. No oil company was willing to send someone, apparently. The film was well puttogether, and raised some very harsh questions, but it was also obviously slanted against the oilpatch. For instance, in its portion of hydrogen sulphide(H2S) venting, it failed to mention that for those working in the oilpatch, H2S Alive

training is a condition of employment. How you can do a piece on H2S and NOT mention it? That, to me, is either a gross oversight or deliberate exclusion. And since I know for certain they spoke to someone who is very familiar with the program, I’m leaning towards deliberate exclusion. The film spoke of four areas: “Fire” – the influence of oil in Saskatchewan, speaking to people around Estevan, “Air” – H2S venting and flaring and its negative impacts, including a fatality, “Water” – the Husky spill into the North Saskatchewan River in the summer of 2016, and how it affected the James Smith Cree Nation, and “Earth” – concerns at Thunderchild First Nation about infringements onto sacred land, and a farmer’s decades long struggle with oil companies and their contamination of his land. The film was not kind to the oil industry. In a lecture theatre on the U of R campus, filled

FROM THE TOP OF THE PILE

By Brian Zinchuk

with students and family members of the students, as well some of those in the film, it wasn’t surprising to hear the harrumphs, missive comments and gasps at the expected times during the film. Revelations of the statistics – almost exclusively without context – made the oilpatch sound like the devil’s afoot on the prairie. The reactions were in tune with that. Having spent the whole week speaking to people about this journalistic endeavour, and many times sharing in the outrage from the oilpatch’s perspective, I realized something. We, in our insular world of the oilpatch, may feel items like this film are indicative that the world is against us. They just don’t get it. And in many cases, they don’t. Those spill counts imply nothing is

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cleaned up, or how most of those spills are inconsequential. In the case of the pipeline spill, while an atrocious event, the pipeline failure itself was a result of ground slumpage on a river valley. That wasn’t referenced in the film. But the way Husky dealt with James Smith Cree Nation is inexcusable. We, as an industry, have to realize that this is the world we live in now. It really doesn’t matter what we think. We cannot allow these things to happen anymore, because we now live in a zero tolerance society. There is no more expectation of leniency, or that “things happen.” When it comes to H2S, this may mean that in some instances, flarestacks, particularly at batteries, may need to go the way of the dodo bird. We know they are not

getting it all, especially in high winds. Perhaps oil companies will have to buck up and spend the money on incinerators, which are much more efficient than flare stacks. I spoke to someone much smarter than me who said that’s exactly what he thinks. My kids should not be smelling H2S in the back seat of my SUV when we drive down Highway 18. No one should. Nine years ago, when we were looking at houses in moving to Estevan, I considered a farmyard near Bienfait that was for sale. But there were sour wells just across the road, and I did not want to run the risk, no matter how slight, of that affecting my family. One of the comments on this topic on our Facebook page said, “I have

worked in this industry for many years. Last year my buddy and his six-year-old son were gassed in their yard. The government gave the company a slap on the wrist and that well to this day stinks. A man died here people. How the f do you defend that?” There is no defence of that. As for Shirley Galloway, who was the lead interview in the Toronto Star’s piece, I have seen the viciousness of backlash come at her from all sides. It became apparent the student film was spot on when it came to community backlash. We can’t let these things slide. The greater public has no tolerance for it, and neither should we. After all, we live here. Brian Zinchuk is editor of Pipeline News. He can be reached at brian.zinchuk@ sasktel.net.

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Alanna Koch would do more trade missions ing approach by government. Those would be the things I would ensure will be in place from an energy policy perspective,” Koch said. “That stability that has occurred has been very important.” On royalties on oil and gas, she said, “We’re not in a climate where we’ll be talking about changes to royalties. This stable approach to energy companies and seeing growth in the energy sector has been based on a stable approach, and now is not the time to be shaking things up. We would completely decimate the industry, that’s already had its challenges.” Asked if royalties should vary with prices, she noted that Saskatchewan has lots of volatility on resource revenues, including on potash and uranium. As a result, the government took other tax measures to reduce the reliance on resource revenue, by broadening the tax base even if some of those decisions were difficult. “I think that’s the right approach. Some people might say, ‘Well, maybe they went too far in a little

bit of this or a little bit in that, on the taxation side’ but overall, in principle, I think that’s the right approach, the steady-state approach.” Wall went to Washington several times in support of energy, and in particular, the Keystone XL pipeline. Would Koch go to Washington or Ottawa? “I think our premier was, in fact, very effective in getting out and speaking for Saskatchewan’s interests. In fact, Alberta, and others, were looking for us to speak up for their interests, too, because nobody else was speaking for them. So, I think that proactive, really aggressive, really clear message as to what it’s going to take to ensure Saskatchewan’s interests are being taken care of is vital for the leader of our province. “We’re an exportbased economy. We need to get out and talk to the people who we’re trading with and who we’re working with, and making sure that the message is getting out. The infrastructure we need, pipeline policy, the U.S. was going to have some of their decisions,

Alanna Koch and still are, on Keystone. This is vital we get the message out, clearly. We can’t count on the federal government, because sometimes the message is different. So I think, our premier, speaking directly to those decision makers down there, is vital. I would do the same. “In fact, I would do more,” she said, adding she had travelled with Wall on all but one of his trade missions. “It’s vital. The difference is, I would do more.” Sustained presence is

vital, with ministers and businesses continuing such missions. On the Keystone XL and Energy East pipelines, she said, “They’re both vital. We need to see them proceed. On Keystone, I understand there’s a few states in the way. It’s coming, is what I’m told. So we need to keep the pressure up. “Energy East is a big challenge. We need to continue to work with who we can find support, for this, in Canada, and continue to get the message out that

we don’t want to move oil by rail. It’s better to move by pipeline, for all kinds of reasons, and Eastern Canada needs our oil. It’s a common sense solution for what we need that seems to be meeting all kinds of challenges with emotional response and non-sciencebased approaches. Is there anything she, as premier, could do about the downturn affecting the oilpatch? Koch responded, “The way I look at it is, it’s up to governments to set the ► Page A9

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By Brian Zinchuk Weyburn – Alanna Koch stands out as the only person running for the Saskatchewan Party leadership, and premier, who is not an MLA. Prior to entering the leadership race, Koch was deputy minister to Premier Brad Wall (making her head of the Saskatchewan public service), and has served nine years as deputy minister for agriculture. The interview took place on Sept. 20, before TransCanada announced it was cancelling the Energy East Pipeline. On that day, Pipeline News spoke to her in Weyburn about her energy policy. “Similar to what I’ve said on most policies – Brad Wall set us on the right path. I think that’s the same case for energy policy. We’re on the right path. We’ve seen the government provide a stable place for investment, an encouraging regulator climate, a strong business climate that has allowed businesses to build out and grow, when growth was there. Now, obviously, we’re in a different time. (He) made sure we had that encouraging, welcom-

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PIPELINE NEWS November 2017

We won't see emissions reductions with a carbon tax ▲

Page A8 right climate. I think of the policies I put forward: free market solutions, competitive business climate, free trade, science-based decision making, fiscally responsible government. I also say we have to take care of our most vulnerable, and growth and prosperity takes care of everyone, right? Good quality of life. If you think of those other five, that’s what’s going to drive strength and growth in the energy sector. Beyond that, I guess I would take that same sort of approach. Otherwise, I need to get

out of the way. Government needs to get out of the way. Government has its rightful place as the proper regulator; that we don’t over-regulate, that we properly regulate, so industry has this sound regulatory framework that we are able to count on, rely on and speak to those responsible, and get out of the way so business can do business.” On carbon capture and storage, and a carbon tax, she said, “First of all, I’m opposed to the carbon tax, because it doesn’t do anything the federal government claims it would. We

wouldn’t see a reduction in emissions. We’re going to see the economy buried. What’s the point of it? I’m opposed. I would stand up against the federal government for it. But what I would do differently is I would speak to that made-inSaskatchewan solution, which is the science and tech and innovation, which BD3 (Boundary Dam Unit 3 Carbon Capture and Storage Project) is absolutely about, which carbon capture and storage is absolutely about. “I was on those trade missions talking about them in Asia. I see

the interest. We’ve got some leading edge technology. Take some time to prove it up, to get the word out, but I believe it’s the future. When you think of all the coal that Asia is relying on, they need to do something different. Our technology can allow them to help clean up their act, and it’s going to allow us to continue to use coal. We’ve got a resource here we need to make the best use of. Not only does it allow us to make the best use of our coal resources, it allows us to make the best use of our oil recovery. Think of our advancements in tech-

nology. That’s an exciting story for Saskatchewan. That’s part of our future. “Absolutely, we’re going to see more of a case for renewables. We’ve said that, but it has to be part of the equation that includes our fossil fuels as well. We’ve got it here, we need to make smart use of it, we need to be responsible from an environment perspective and emissions perspective. But if we declare that we’re not going to use those resources anymore, it would seem to me pretty irresponsible, when you think of the power rate burden that

will bury our industries and bury our citizens in unaffordable energy. Renewables – solar, wind, biomass, whatever, okay, they’re part of the answer, but we’ve got cold climates. They’re not stable energy sources. So it’s in combination with a futuristic approach to the use of coal and that’s why it’s that bigger Saskatchewan story we’ve not done a good job in telling.” She added agriculture, grasslands and forests sequester carbon, and uranium production allows other places to reduce their carbon output.

Summit ESP came to Weyburn in 2016, now part of Halliburton Weyburn – Electric submersible pump (ESP) and horizontal pumping system (HSP) provider Summit ESP has set up shop in Weyburn. Brendon Billings is the business development manager for Saskatchewan. “We moved in here just over a year ago. I moved in here the middle of November last year. We’re one of the competitive companies in North America for ESPs,” he said on

Sept. 18. This is their first venture in the region. “We’re a startup company, that began seven years ago in 2010. We grew to be the number two ESP service provider in North America. We attained that goal at the end of 2015 and have been there ever since,” Billings said. “We were successful, as an independent, because we came with very good technology, but with a service-based

mentality. That’s where we’ve had our growth and success, based on what we call our goldstandard service,” he said. The company does ESPs and HPSs. “We were acquired by Halliburton on July 5. Since the acquisition, we are still called Summit ESP, but we are also ‘A Halliburton Service.’ Now they will grow us internationally, as well,” he said. “We’re intending on

having a positive impact on the community, over time, as an engaged member of the community.” They have five people working in Saskatchewan, including Billings. Their facility is in Weyburn, but two are working out of Estevan. The Halliburton artificial lift shop in Weyburn and the Summit shop will soon be combined.

Their major centre in Canada is in Leduc, Alta. “ESPs have always had a place in the artificial world – high volume and deep. Those are the two prerequisites. With the developments in drilling and multistage fracking, where you used to see six wells drilled, you now see one, because it will be an extended reach horizontal. The marketplace has

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PIPELINE NEWS November 2017

Beaudry-Mellor doesn’t like the vilification of energy businesses By Brian Zinchuk Weyburn – Tina Beaudry-Mellor, MLA for Regina University since April 4, 2016, was the first person to throw their hat in the ring for the Saskatchewan Party leadership, and, with it, the position of premier. She had been minister of Social Services prior to the leadership race. On Oct. 16, in Weyburn, Pipeline News spoke to her in-depth about her energy policy. “I think we’re going to build on what we’ve been doing up to the present time. We’ve been hearing from a lot of our stakeholders that they’re pleased with the position the Saskatchewan Party government has made on energy policy. They’re pleased with the climate of investment we’ve established. They’re certainly pleased with the advocacy on the national and global stage, with respect to energy policy,” she said. “I frankly am frustrated, as I’m sure are many others in this community, about the National Energy Board’s regulator environment. I think that’s something we are going to need to aggressively attack, from

the perspective of not just Saskatchewan’s interests, but Western Canadian interests in energy production and resources. We do have significant work being done on carbon capture and storage.” She noted Husky’s pilot project with carbon capture and storage (CCS) near Lloydminster and the two CCS projects in southeast Saskatchewan. Additionally, zero-tillage agriculture factors in as a carbon sink. “These things are not getting factored into the federal equations when it comes to emissions.” Noting the candidates all will want to protect and advocate on behalf of resource industries in the province, and be opposed the federal carbon tax, she said what differentiates her is, “One of the additional angles or dimensions on this, on Energy East, Canada just lost 8,000 or so jobs. This is significant when you consider, here in Saskatchewan, the incredible pressure on human services ministries. Threequarters of our budget is health, social services and education. And if we want to reduce government footprint, that’s going to

Tina Beaudry-Mellor be difficult to do if we’re not able to grow jobs.” She said the impact of the carbon tax, small business tax changes, and cancellation of Energy East, make a difference. Asked about oil and gas royalties, BeaudryMellor said, “I don’t have an appetite for chang-

W O R K B O OT

ing them, certainly not upwards, and, if we were going to adjust them downwards, we would have to make up that lost revenue in other places.” Premier Brad Wall went to Washington several times, lobbying for the energy industry. Asked if she would do the same,

she said, “Absolutely.” “I’ve had the pleasure, already, of being in Washington as a guest of (Senator Lindsey) Graham, (fomer U.S. ambassador to Canada) David Wilkins, in May. It was a family vacation, but also an opportunity to create connections with them. That’s probably one of the most exciting aspects of the job, to be frank with you. My overall vision for province is we become the economic powerhouse of the West. I think the premier has done an excellent job in building that foundation, but with this election of the Green/NDP in B.C. and the Notley government in Alberta, and the existing relationships Premier Wall has built in Washington, I think we can play a very key role in the next decade, and an important role, if you look at (President Donald) Trump’s positions around the Trans-Pacific Partnership and North American Free Trade Agreement. There’s some significant concerns. there, particularly with respect to livestock, for example,” she said. With regards to pipelines, and particularly the now-failed Energy East

project, she said, “Pipelines are far safer than road or rail, so that nullifies that one particular argument. The second reason to advocate for pipelines is to be able to get to tidewater or to eastern crude markets. “I have a number of frustrations about this file. The first one is the regulatory environment from the National Energy Board. The second one is the environmental argument and the third is the safety argument. I think all three are flawed. I’ve already spoken to the safety argument. The National Energy Board – the regulatory red tape that companies have to go through in order to invest in a major job creation project is asinine. I’m shocked the federal government doesn’t step in and advocate to clean that process up before a company spends a billion dollars on regulator red tape. The government should be advocating on their behalf, for such a project, not sitting idly by and then cheering when it fails. It’s nonsensical, on so many levels. I think the premier’s quite right, that we need to rethink equalization payments if this is ► Page A11

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Moe looks to challenges over the next decade By Brian Zinchuk Weyburn – Scott Moe, MLA for Rosthern-Shellbrook since 2011, has served as Minister of Advanced Education and Minister of Environment, in addition to other legislative duties. Now he’s taking a run at the leadership of the Saskatchewan Party, and the position of premier. Pipeline News spoke to him in Weyburn on Sept. 13, just prior to his tour of a local drilling rig. The interview took

place prior to TransCanada announcing it was cancelling the Energy East Pipeline. In describing his energy policy, Moe said, “I think the direction we’ve had over the past decade, as the Government of Saskatchewan, has been to expand all our industries in the province, for a number of reasons: one, to grow our jobs in our communities across the province, the rural population of the province. Two, we

feel when we compare, for all industries, including energy, we feel that we compare what we do here in the province of Saskatchewan and, quite frankly, even in Western Canada, to other places in the world, the suite of environmental protection that we operate under is as good as anywhere in the world, and we’re proud of that. We feel we need to continue in that direction. “That being said, the challenges that we face in

many industries, maybe especially the energy industry, are changing, and are changing rapidly. We can talk about carbon taxation and the government of Saskatchewan’s stance on that has been, I think, crystal clear. That will continue. I won’t speak for the other leaders, but that will continue under leadership I will be involved in. For certain, a $2 billion or $2.5 billion cost that doesn’t need to be borne by our $26 to $32 billion worth of

exports, which is our source point of wealth and employment in the province.” He alluded to his announcement earlier in the day on growing exports in energy, mining, agriculture and manufactured goods. “In order to do all that, some of the policy efforts and initiatives that are currently underway under the current premier, Premier Wall, are on how do we get some of that product to market, whether that

be through rail or, more ideally, through pipelines of some nature. I think, if you compared to a decade ago, the conversation around pipelines is very different today than it was in 2007. “So as we had that plan for growth, to 2020, that we had, we are approaching that as we look forward to the next decade. I think it’s time for us to update that plan and go further and really start asking the questions ► Page A12

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Beaudry-Mellor would invoke not-withstanding clause Page A10

the kind of approach we’re going to take,” BeaudryMellor said. She said the inclusion of natural resources in the equalization calculations needs to be revisited, saying there are two options. One is to press on the equalization position. “The second one, I’ll be frank, is we clearly have a federal government that does not have western concerns in mind.” On carbon capture and storage and a carbon

tax, Beaudry-Mellor said she’s not familiar with all the science, but like her colleagues, will oppose a federal carbon tax. But if a court challenge is not successful, we need a made-in-Saskatchewan solution. “Given all the other things the federal government is doing, I would be inclined to invoke the notwithstanding clause, though,” she said. “I am not convinced it is unwinnable, and I think that we have an important role to play in sending a

very strong message that the combination of all these policies is wrong.” Saskatchewan could do a better job talking about what we’re doing carbon capture and agricultural carbon sinks, and it’s not easy to do in 140 characters, she added. Beaudry-Mellor is interested in building an entrepreneurial ecosystem in the province, thinking towards the next 10 years. “I would be interested in hearing from the energy industry what kinds of

innovations we could support through an entrepreneurial ecosystem based on innovation.” “I’m looking at the next generation and I’d like to see where we might take our energy industry, going forward, and if there are any made-inSaskatchewan innovations that we could help foster.” She’s thinking of a synergy between the Petroleum Technology Research Centre and the Sask Capital Network or some other angel invest-

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ment. “We would have to feed our skills training from Sask Polytechnic, obviously, the University of Regina and University of Saskatchewan faculties. But then provide a space, like an incubator space, for these things to incubate.” “I’d like to see our tech sector grow, and I’m particularly interested in the tech side of this.” To that end, she’s also like to see entrepreneurship and financial literacy as a mandatory part of the

K-12 education. “I’m increasingly frustrated with the vilification of business in this province,” she said, noting that many businesses make strong contributions to communities. “We need to turn that narrative around. It’s very frustrating, when I see, ‘Stop the cuts,’ when the same group will cheer for the loss of Energy East, not realizing the loss of those jobs would result in pressure in our human services ministries that we can’t sustain.”

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PIPELINE NEWS November 2017

Royalties are part of competitiveness; Moe ▲

Page A11 about what are our challenges through the next decade. How are we going to persevere through some of those challenges, and most importantly, what do we want to look like as industries, communities, and a province in the year 2030,” Moe said. Asked about his stance on royalties, he said, “The royalty structure we have in the province, I think, has served us well, all of us well; the people in the industry and the province. As we move forward, again, understanding we’re a little over $32 billion in exports here in the province a year ago. This past year we’re doing to a little over $26 billion, most of that due to a depressed energy market, quite frankly. We have these other challenges before us, things in the way of carbon taxation, things in the way of getting our product to market, in particular pipeline construction across the province. I think royalties, whether it be in the mining industry, in the energy industry or forestry industry, wherever that is, we always have to be willing to work with those industries on where the appropriate level is to ensure we’re not dipping in, and getting ourselves into additional challenges in NAFTA negotiations, things of that nature, but

are keeping us competitive with like industries, particularly in North America, but also around the world. Ultimately, if we’re going to be 1.165 million people exporting plus $30 billion each and every year, and the intention is to increase that every year, we need to be competitive. Royalties are part of that competitiveness.” Asked if royalties would remain static, he noted that remaining static on the carbon tax will be a gain for Saskatchewan compared to its neighbours. “The whole conversation on carbon taxation is something that started with our federal government. When you get to the commitments that were actually made, with respect to the Paris Accord and the whole conversation around emissions, it was a 30 per cent reduction by 2030. There’s no mention of carbon taxation, or anything of that nature in the Paris Accord. When we talk with industries across the province about what have you done, from an emissions perspective, and what’s possible between now and 2030, they’re all willing to have the conversation about what we can do. It really doesn’t matter what industry it is. Some can do more, some can do less. When you start talking

about carbon taxation and what impacts that will have for the industry, transportation, agriculture, mining, they’re very real, and they’re dollars taken directly out of your pocket. They’re dollars that will makes us directly uncompetitive in many cases, on those $30 billion of exports, and they’re dollars that will force businesses to move out of the province. That’s something we’re not going to commit to.” Does that mean Saskatchewan should invest more in carbon capture and storage? Moe said some of the latest carbon capture plants in the world have been driven by the need for CO2 for enhanced oil recovery, and there are opportunities there. “The fact of the matter is, in the electrical generation world, the opportunities are multiple in how you reduce your emissions. You can do wind and solar, backed up by natural gas, or coal with CCS, for example, or you could bring hydro in, if you have that opportunity, biomass, other opportunities. You have a lot of low-hanging fruit in your electrical generation mix. And that takes investment. I think Saskatchewan has been committed to, over time, making intelligent decisions on making that investment. We have until 2030 to work through that.”

Scott Moe

On carbon taxation, he said some jurisdictions made investments in how they generate electricity, raising electrical rates, and the tax is yet to come, while others have implemented the tax, but haven’t moved to lower emissions sources. Saskatchewan will make investments to lower emissions, but not the carbon tax. On the Energy East Pipeline, he said, the reasons behind the delay are problematic for communities and the province, because of the potential benefits Saskatchewan has to potentially feed directly into that line. “The discussion around upstream and downstream emissions is tremendously problematic. I think it’s problematic for us as a province, for me as an

MLA, and as a leadership candidate. And here’s why: There’s about a million barrels a day imported into Canada. Thirty per cent of that is coming from Saudi Arabia, Algeria and Nigeria. I would put Saskatchewan’s environmental suite of protections, any day of the week, against any of those nations, quite frankly, including from an emissions perspective. “There’s no upstream and downstream emissions being measured against, with those jurisdictions, where we’re importing that oil, nor is there any upstream or downstream emissions measured on that dieselpowered boat that’s bringing it here. If we’re going to look at climate change from a global perspective, then it needs

to be a fair comparison of what upstream and downstream are.” Moe said, “There’s times, during this, we’re going to have to stand tall and we’re going have to stand firm, to ensure we protect the competitiveness of our industry, of our energy industry, of our agricultural industry, our mining industry, our manufacturing industry. We have to be competitive, with not just the United States. We export the majority of our product there. They’re our biggest export market. They’re also our biggest competitor. And we need to be cognizant and aware of that. We need to stand up for communities and industries across this province. We’ve done it for the past decade, we need to do it for the next 10 years.

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Wyant says carbon tax is about wealth redistribution, not emissions

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By Brian Zinchuk Regina – Gord Wyant, MLA for Saskatoon Northwest since 2010, was Saskatchewan’s Minister of Justice and Attorney General until he announced his intentions to run for the leadership of the Saskatchewan Party, and with it, the position of premier. The long-time Saskatoon lawyer spoke to Pipeline News in Regina on Oct. 5 regarding his energy policy. Earlier that day, TransCanada announced it was cancelling the Energy East Pipeline project. Wyant started out by saying, “As a province, we have to continue to support the oil and gas industry. It’s fundamental to our economy. And so, I think, in terms of policy, we need to continue to support the industry. I think it’s fair to say I’m not interested in any kind of royalty review. I think having some stability in the oil and gas sector is important, to ensure we continue to have the flow of revenue we need for the

Gord Wyant province. My perspective, I ing about a royalty review. think, the policy the provThings are fine the way ince has, currently, is the they are, and they support policy we continue to follow ongoing development in the as the premier.” industry,” Wyant said. “You saw what hapCould royalties go pened in Alberta when they down? “They could be. I started tampering with roy- think what we need to do as alties. I think we have the a government, is ensure we Alberta government of the set policy in Regina that is day to thank for some of the going to be productive as far enhancements of developas the industry is concerned. ment in this province. From We certainly don’t want to my perspective, I don’t think see industry leave the provanything needs to change ince. We don’t want to see in the industry, especially in a reduction in the number that it’s just starting to reof wells being drilled or the cover. It would be the worst number of people worktime to start thinking about ing in this industry. We’ve those kinds of things, or to already seen that. even speculate about think► Page A15 info@cpenergy.ca

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A15

Energy East cancellation a sad day for Canada: Wyant ◄ Page A14 “I wouldn’t rule anything out as far as reduction of royalties are concerned, but I think we have to take that all into context.” In discussing the impact of the downturn, he said, “My son’s a geologist, and he’s not working. And so, a lot of this strikes home to many, many people in this province. I don’t think you can meet too many people, especially in the southern part of the province, that aren’t affected by the commodity price reductions. So it affects everyone.” On pipelines, he said, “There’s no question about the fact pipelines are the safest way to move our commodity. I’m not sure how anyone from this province can speak against pipelines, when you compare the safety record of pipelines to the safety record of transporting it by rail. We need to get our commodities to market. We don’t have a port here, in this province, so we need to find the most efficient way of getting our products to market, and pipelines are that vehicle. So, in terms of our continued government support of pipeline development in this country, there’s not going to be any change in policy. This government will continue to advocate for the construction of pipelines, because we need to get our product to tidewater.” Premier Brad Wall had done several trade missions in support of pipelines, and Wyant said he would do the same. “I would continue

to work on ensuring we can secure export markets, not just for oil, but for other commodities as well.” On Energy East, he said, “This is a sad day for Canada. It really is. When you start thinking of a confederation of provinces and territories, and you have these divisions among regions in this country, where one region in this country isn’t interested in seeing the success of another region of this country, I think it’s a very dark day for this country.” He was quite angry about Montreal Mayor Dennis Coderre’s comments about, “What’s in it for us?” Wyant said, “The fact of the matter is, the more successful the province of

Saskatchewan is, the more successful the province of Alberta is, the more money there is for equalization. And at the end of the day, it’s Quebec that’s the big benefactor of equalization. So why a province or a mayor of a large Canadian city wouldn’t want to see a province like Saskatchewan be economically successful, by getting its product to market, it just baffles me. I don’t understand it at all, especially a guy who pumps millions of litres of sewage into the St. Lawrence, and he’s worried about our oil.” “For the National Energy Board to change the rules about upstream and downstream carbon, it baffles me. I don’t understand it,” he added, wondering why an energy

self-sufficient nation is importing oil. “If they’re going to say ‘no’ to pipelines, when are they going to say ‘no’ to trains? They’re much more dangerous when it comes to the transportation of oil, so when are we going to start saying ‘no’ to trains? I gotta tell you, if environmentalists get their way, there’s going to be more and more and more regulation on the transport of oil across our rails. It’s going to be more and more expensive, and it’s going to have more and more impact on the economy of this province.” When it comes to carbon capture, Wyant said he was minster responsible for SaskPower, but not when the decision was made to

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PIPELINE NEWS November 2017

Craig Lothian responds to H2S concerns Regina – With hydrogen sulphide (H2S) issues in Saskatchewan receiving national attention in early October, Pipeline News asked for the perspective of an oil company working in the Oxbow area, the region highlighted in the Toronto Star, National Observer and Global News stories. E. Craig Lothian, president and CEO of Regina-based Keystone Royalty Corp., and acting president, CEO and chair of Villanova 4 Oil Corp.,

sent us this response by email on Oct. 20. Lothian wrote: The recent negative press (essentially a smear campaign) about H2S in southeast Sask., has emboldened the critics in that area and in the province generally. As an industry we feel that we are under an existential threat from outside political forces (federal government; provincial governments in British Columbia, Alberta and Quebec and environ-

mental activists both at the local, national and international level). Fueling this is a well-financed (largely by U.S. activists) anti-oil campaign. Most recently, the Toronto Star joined the fray with an article entitled, “That rotten stench in the air? It’s the smell of deadly gas and secrecy.” The article which was co-authored by the left-leaning Star and the National Observer, with research assistance provided by a

Pretty good legal case fighting carbon tax: Wyant ◄ Page A15 the legal challenge to the carbon tax. I can tell you, from a constitutional perspective, we’ve got a pretty good legal case against the federal government. Between my ministry, and the Ministry of the Enviroment, I can tell you we’d have a very, very good case. If the federal government carbon tax is

about emissions, I think this province has made some pretty good commitments in terms of carbon emissions. If it’s about the redistribution of wealth, and that’s exactly what it’s about, then that doesn’t play in this province. It will have a devastating effect on the economy, and we need to do what we can to stop it,”

Wyant said. In summation, he said, “The energy industry in this province is one of the lifebloods of Saskatchewan. We need to, as a government, make sure we have policies in place that not only ensure successful industry, but make sure safeguards are in place to make sure the public is protected as well.”

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number of universities including our very own University of Regina (home to Saskatchewan’s only petroleum engineering program). Unfortunately, the subtitle of that article should have been, “That rotten stench in the air… is the smell of shoddy research mixed with biased and unethical journalism.” Clearly, none of the journalism students had taken the Balanced Journalism: 101 class. If they had, they would have at least in passing included some or all of the following facts: Since the original complaints in the Oxbow area arose (allegedly in 2012), gas conservation in that has increased from approx. 30 per cent to 77 per cent in April 2017. Oxbow has been an oil-town for over 50 years, and the significance of that resource to the area and its economy is reflected both on the town website and in the pump-jack sign as you enter town. Despite that fact, none of the 26 in-

dividuals and 20 institutions credited with the story, provided a single quote from a single representative of the energy companies operating in that area. Perhaps they didn’t know how to find them. If they want to do so in the future, here’s a tip: look for the trucks with the oil company logos on the side, or the workers wearing hardhats, safety glasses and protective coveralls. While any death is a tragedy, to use the death of one oil field worker in 2014 as the basis for suggesting that industry is both under-regulated and has little regard for human life is a stain on the journalistic abilities of both the current reporters and those aspiring to that profession. Perhaps they could have spent five minutes on the WCB website and then reported that in the past five years, there were only two fatalities in the Sask. energy sector (the second on a drilling rig in 2016). If fatalities are a proxy for calling for the termination of

a particular sector of our economy, they may have wanted to do some “research” into the “Elementary and Secondary Education” sector in this province, as they reported two fatalities in that same five-year period. In 2016, the energy sector had zero fatalities and only 87 registered claims involving time lost. By contrast, “Elementary and Secondary Education” had 215 claims and one fatality, and “Health Authority, Hospitals and Care Homes” had 1,646 claims and one fatality. Surely there must be an exposé to follow from the Toronto Star or the National Observer, calling for increased regulation and a public inquiry into our schools, universities, hospitals and care homes. Or perhaps there won’t be, as that wouldn’t support the anti-oil narrative that they are promulgating … under the banner of journalism. Regrettably, it seems that President Trump may actually be onto something with his “Fake news” mantra.

PIPELINE NEWS November 2017

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What is going on with H2S in Saskatchewan, from the ministry’s perspective? By Brian Zinchuk Regina – A series of stories in posted in early October by the National Observer, Toronto Star and Global News cast a harsh light on hydrogen sulphide (H2S, also known as sour gas), much of it focused on the province’s regulatory oversight of the industry, and an implied lack thereof. The series of stories was backed by the Corporate Mapping Project, which itself has the backing of the Canadian Centre for Policy Alternatives, Unifor, LittleSis and several universities. On Oct. 4, Pipeline News spoke to Doug MacKnight, assistant deputy minister, Petroleum and Natural Gas Division, Ministry of the Economy. The position is a key regulatory role for upstream oil and gas. Our questions focused on broad concerns mentioned in a Facebook post by the instigator behind the stories, Dr. Emily Eaton, University of Regina geography professor, in

Doug MacKnight is assistant deputy minister, Petroleum and Natural Gas Division, Ministry of the Economy. Photo by Brian Zinchuk

addition to concerns in those stories. Eaton said that from seven years of research, the regulations are not enforced, the ministry is horribly understaffed and does not properly inspect industry practices. On the question of regulation enforcement, MacKnight said, “We, of course, do enforce the regulations. We have an extensive inspection program. We think our

regulations are solid and comparable to other jurisdictions. “Sour gas is not new to southern Saskatchewan, as you well know. So we fully believe we have the regulatory systems we need to manage it. We have people doing inspections. I do want to emphasize, since 2012, when some of these compliance issues started to emerge, there’s been some significant changes. We put more inspection staff into our Estevan field offices. We bought new H2S detectors which can get us down to parts per billion, so allow us to identify sources. We acquired FLIR (infrared) cameras to look for venting. And, of course, we’ve done some fairly extensive sweeps in the area to assess levels of compliance. “So, overall, I think that we do have the regulatory rules we need. We have the staff, now, that we feel is what we need for the challenges down there.” He added IRIS

(Integrated Resource Information System) has been a major change for ministry so they now have the data systems they need to support inspections and incident response. As a result of all the above, he said that a lot of the issues that came up in 2012 have been addressed. Regarding staffing numbers, he said they have six inspectors in Estevan. The most recent budget added another inspector in the Estevan office. One position was moved from another role into inspection, and another was transferred from another office. MacKnight added, “We use a lot of engineering co-op students to assist in inspections. That substantially expands our work. These are not just in the summer, but throughout the year.” The series of stories implied that a low percentage of sites inspected in any given year. “We do, province-wide, about 20,000 inspections a year, very much risk-

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PIPELINE NEWS November 2017

Public complaints get 100% response ◄ Page A17 that are particularly large facilities. It’s very much risk-based. “Certainly, in terms of any public complaints – 100 per cent response. Public complaints are absolutely confidential. We protect that information very carefully. But we when we get a complaint, we’re out there.” Proximity of residences is an important consideration, but also the size of facilities is another. As for Eaton’s assertion that the ministry does not properly inspect industry practices, MacKnight said, “We inspect wells and facilities against the regulator standards. That’s the benchmark we’re applying against. Assuming the industry practice aligns with our regulatory practice, that’s what our inspection will focus on.” Roughly three years ago the province implemented a series of regulations, in particular, Directive S-10, meant to reduce venting and flaring. The Global story implied there was a secret map that no one had seen before about H2S hotspots. (The

map was from a time before S-10 came into play). Asked about progress with venting and flaring reduction, MacKnight said, “I’m going to begin by saying you can’t vent sour gas. The S-10 directive doesn’t apply in situations where you have sour gas. You have to handle sour gas safely. You can’t just let it into the atmosphere. “S-10 deals with gas conservation, encouraging companies to use the gas as opposed to flaring or venting it. That is fully implemented now. Companies are required to do economics on conserving the gas, and where it’s not economic, they are able to flare, under 900 cubic metres per day. That is being done. So we’re implementing, but it is a challenge. We have a lack of infrastructure in southeast Saskatchewan, and that pipe is critical. So if you’re doing economics on a well or facility, and there’s no pipeline in the area, it’s hard to make the case.” Asked if you can’t vent sour gas, why can one still smell it driving down Highway 18, in particular from Oxbow to

Glen Ewen, MacKnight responded, “Sour gas can be detected at a very low level. So when I say you can’t vent it, you can’t vent it at an unsafe level. So on lease, that’s 10 parts per million as the Occupational Health and Safety standard. The ambient air level is 10 parts per billion. You can still smell sour gas down at those levels, which is why, when you do see exceedances above the provincial standard, we’re pursuing that. If you will, sour gas, the human nose is extremely sensitive to it. When I refer to venting it, I’m referring to levels that are unsafe.” Todd Han, who had been director, Petroleum Development Branch, a senior bureaucrat within the ministry with regards to venting and flaring and who had been a key figure in writing regulations in that regard, was let go by the ministry several years ago. Asked about that, MacKnight said, “I can’t discuss a (human resources) related matter. I will say there was a reorganization in 2015, and changes were made in and around that period while we were establishing a standalone

regulatory division, which we have now.” “What I can discuss is the nature of some of the regulations that were being considered. The one we are talking about right now, related to new penalties, contemplated penalties, that in the end, we concluded we already had penalties – half million dollar a day penalties under the Oil and Gas Conservation Act. We already had tools like suspension orders, compliance tools that were making the changes we were looking for in terms of operator compliance.” He noted there’s even a prison term, if necessary. But such fines have not been used. “We have not pursued a prosecution. You understand that a prosecution, for that kind of penalty, is a judicial process. A lot of the times, when you have a sour gas issue, it’s a piece of equipment failed, those kinds of things. It’s not where someone knowingly went out, and did a thing that caused an emission. So those kind of large penalties and fines are needed in situations where there’s some willful action. A lot of cases with

sour gas, it was a thief hatch venting or equipment not being attended to that we needed to get the company’s attention to, to get the company’s focus back in getting that work done. “The sweeps and inspections we’ve did have had the effect. There’s evidence by the improvements we’re seeing in the field,” MacKnight said. “Penalties are there, but in fact, suspending operations, shutting in, giving direction, are extremely effective in getting compliance.” Asked if they have any teeth, he replied, “A shut in order is pretty toothy if your in the business of producing oil and gas.” The stories claimed there was a great deal of government secrecy about H2S. Asked about that, MacKnight said, “I would say there’s no secrecy. The access to the information, for people who don’t know where to look, can be a challenge. “Every site with an H2S risk has to be marked. One of our inspection activities is to make sure those signs are there. If you’re a landowner in the

area, you will know, quite visibly, of H2S in the area,” he said, adding that operators also need emergency response plans. Prior to 2012, reporting focused primarily on spills, according to MacKnight. “We don’t have good data on sour gas in that pre-2012 period. With the IRIS system, we have gas reporting now. The system for publicly reporting those instances went public in June (2017). We had some transition issues from 2015.” The information is not secret, he said. They are developing plans public release of information. There’s a weekly spreadsheet of incidents reported, but he added there hadn’t been a sour gas incident reported since the system went live in June. Incidents like fatalities are reported via Labour Relations and Workplace Safety. “Our kind of reporting would have been the data on the nature of the incident and what had been released.” With regards to the Ministry of Economy’s reporting not including fatalities or injuries with ► Page A19

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A19

Safety culture has been a real focus of industry ◄ Page A18 relation to H2S incidents, MacKnight said, “It’s a legitimate question, but

right now, I struggle to think in terms of what we use that information for, why we would need to

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start tracking it.” MacKnight noted that data is with Labour Relations and Workplace Safety. Regarding safety training, he said, “The oil and gas industry has done really a great job in strengthening its collective focus on workplace safety. Workplace safety goes hand-in-hand with a good wellsite and a good facility, so there’s real practical benefits on the regulatory side. H2S Alive, of course, is front and centre the basic training. But goes deeper

than H2S Alive, all the best practices and training operators get in the field, through Enform as well as the engineering they put into those facilities. “Everybody has H2S Alive, but with H2S Alive, that’s just one component of the safety culture industry is working to develop. It’s front and centre. Sour gas management is part of that,” MacKnight said. None of his staff can get on a site without the course. “The general trend, on workplace safety, time

losses, has been on a downward trend for decades now. Again, it’s been a real focus in the industry on that, the safety culture.” With regards to the incident reported by Shirley Galloway of Oxbow (see related story, page A20), the lead interview in the Toronto Star story, MacKnight said, “That was one of the focusing events for us. I can’t go into specifics in terms of what transpired there, in terms of the family. That kind of experience is just

not acceptable. So it was investigated in terms of the source, and that was dealt with, ordering the source to be shut in and fixed, the obvious first step. After that, there was a broader response, looking at other facilities in the area, and eventually a fulsome sweep of the area, looing at wells and facilities. That kind of event is kind of a focusing event. It’s not acceptable.” Regional air quality is also monitored, he added. The Oxbow “air pointer” monitor is being relocated.

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PIPELINE NEWS November 2017

Shirley Galloway, in her own words, on H2S concerns Service Rig Level IV Re-Certification By Brian Zinchuk Oxbow – Shirley Galloway of Oxbow, was the lead interviewee in the opening piece on a series of stories on the Saskatchewan oilpatch done by a collaboration of the Toronto Star, Global News, National Observer, and journalism schools at the University of Regina, Ryerson University, Concordia University and University of British Columbia. She has had a string of serious concerns about oilf ield operations near and around Oxbow, describing continuing issues with poisonous H2S and a serious incident in her own yard in 2012. She’s seen continual conflict during the past f ive years, and has had frustration with both the companies operating there, and the government’s enforcement of its regulatory obligations. A senior health, safety and environment (HSE) consultant, Galloway has offered training in H2S Alive for many years, and is quite familiar with the topic. Here are her words on the matter, by way of email,

on Oct. 11, 2017. Pipeline News: Just what exactly has been going on around Oxbow and area over these recent years? What happened in 2012? Shirley Galloway: A family member was exiting their vehicle. When they opened the door, they were exposed to H2S gas. They vomited almost immediately and experienced burning eyes and throat. I went outside and was immediately confronted with a strong H2S smell. I brought them inside and retrieved my four-head monitor. It alarmed out at 100 ppm. This was the second time that this particular facility, which was three per cent sour, vented H2S and had affected someone. The previous occurrence was a few weeks prior on the road as this person was driving by. They, too, had vomited. It took almost three hours to finally find out and contact the owner of the facility. There was no available ERP number. After I had notified the Ministry, I received

a very terse email from one of the owners of that facility stating that “I ruined their family because you reported this to the regulator.” The Ministry investigated and found that this facility was out of compliance and I believe it was shut in. It is now repaired and we have had no further issues from this facility. It took almost two years, but it is now operating as far as I am aware, in compliance. The Ministry underwent a series of inspections and found that over 70 per cent of facilities were operating out of compliance and were leaking dangerous levels of H2S. This was, and still should be, very concerning to everyone. The South East Sask Airshed has been monitoring air quality. Several years ago, Glen Ewen had exceedances of H2S and particulate matter for more than half of the months. Wauchope presently has far too many days where the air quality does not meet the provincial standards.

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stated, “I can enforce the regulations, or I can eat.” Again, that should concern every person in this province. P.N.: Understanding that you are trained as a nurse practitioner, and an H2S Alive instructor, did you take your family member to the hospital, or call an ambulance, at that time? Galloway: They

sought medical attention after I gave initial treatment. P.N.: What efforts have you made since then to resolve this matter? What has been the response of the oil companies, and of government? Galloway: As noted above, I received a terse email. When I spoke with the CEO of the ► Page A21

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Page A20 operating company of this facility, he was very annoyed that I had reported this. Not once did he ask about the health of the person who inhaled the H2S. The best he could come up with was “Well, tanks vent you know.” The government has responded in random and incomplete ways. They have been quite secretive. The Ministry has kept many things hidden about the scope of non-compliance and sour gas/particulate matter emissions. They have fired good people because they wanted to resolve issues. Through an access to information request, I have evidence that the government knew about many problems, but did not act. They are not allowing the regulators to do their jobs. The executive director of the Petroleum and Gas Division asked me directly why I would have moved to Oxbow if I did not like oil and gas. My response was simple and twofold: “When I moved here 22 years ago, it was not like this. And I never said that I did not like oil and gas. I am very pro ‘RESPONSIBLE’ industry. However, this government cares not

for the health and safety of the public at large. They are not promoting responsible development.” That is their attitude. P.N.: Has there been any sort of resolution over this time? Galloway: Yes, with the particular well noted above. However, I have had many people come forward to me with their concerns about H2S around their homes and in the town itself. People are concerned about all of the smoking flares. Directive S-20 states that a flare can only smoke for six minutes, and then it must be rectified. When a flare is smoking, it is emitting particulate matter that is extremely harmful to human health. One doctor I spoke with advised me that he has seen more cases of asthma and breathing problems in this area, than in most. Anecdotal? Perhaps. However, many people have stated to me that when they leave the area, their breathing improves. Minister Erhardt, who was also in the (Toronto Star) article, had to leave her home for 17 months in order to regain some of her lung function. P.N.: How have you been treated by

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the community, and industry, since you’ve come forward with your concerns. We have heard unflattering things directed your way. Are you receiving backlash? Galloway: From what I understand, there have been some not so nice comments; however, no one has spoken directly to me. I suppose it is easier for these people to attack from behind. I certainly am open to respectful and rational discussion. This is why others have not spoken up. One person I spoke to who works in the industry, has been made ill by the constant gas exposure. He will not speak up for this very reason. Another person who also works in the industry, was gassed in their own yard. This person spent several days in the hospital and does not want to speak up because the family is afraid of the backlash. He has gone to both the government and the oil company. They are trying to avoid the entire conversation. I sometimes feel that thinking with a broad and reasonable perspective can be difficult. It is easier to

judge. Not one person has asked me why I spoke about or what my views really are. I find it very difficult to understand why anyone can think that breathing in H2S gas and particulate matter is ok? It is not inherent to oil and gas operations. The chief scientist at CAPP stated much the same. He advised industry that there is no reason why there should be H2S or particulate matter being emitted into the atmosphere. I am not an anti-oil Liberal. I truly believe we can have a robust oil and gas industry without jeopardizing the health, safety and wellbeing of the public, the environment or workers. I am concerned about public health. As a health professional and a health and safety specialist, I would be remiss not to come forward and point out that these emissions, which we know through scientific study are harmful to our lungs, our brains and our bodies. Children and the elderly are more vulnerable. Why would we all not advocate to do better? On the upside, I have had numerous

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Galloway: The government needs to allow regulators to enforce the regulations. They need to work with industry to improve. Industry must operate in our communities with due care and attention and be responsible. They must follow the regulations. I work for several smaller oil companies and a few large ones who are concerned for the communities and people that live there; they follow the regulations and endeavour to make it healthy and safe for the public and their employees. So I know it can be done. P.N.: Is there anything you would like to add? Galloway: We can disagree on many things, but still be decent to one another. We can engage in intelligent, respectful conversations without being odious, contemptable or unsavoury. We do not have to bully, harass, threaten, slander or intimidate. That makes for poisoned and divided communities, which doesn’t do anyone any good. We all need to work together for the health of our families and our communities.

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messages that support more transparency and accountability from this government. The people in the community of Carievale have many concerns. People are sick. A pipeline company CEO emailed me and applauded what the story stood for: Accountability from the government. He stated that Saskatchewan was an easy place to work, because no one checked if you were complying with any regulations. Another person stated the following: “I am not so ashamed or dissatisfied with my life that I have to be mean and cruel to anyone. If I have an issue, I will speak to you, not about you. I am ashamed of how some of my colleagues have been behaving. Some of these people sit in my church reviewing scripture, yet they act like godless fools. Hypocritical. Just know that when they speak like that, I shut them down immediately. I have no problem with more government accountability. That is how we as an industry will improve. ” P.N.: What needs to happen to make things right?

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PIPELINE NEWS November 2017

Energy East is dead By Brian Zinchuk Calgary – TransCanada gave up on its proposed $15.7 billion Energy East Pipeline project on Oct. 5 after four years of trying to jump through regulatory hoops In January, the NEB process was reset after concerns about lobbying efforts, a major step back. Then those hoops got even tougher when the National Energy Board announced changes to how it will evaluate carbon footprints on pipelines. In September, TransCanada suspended its application. Now, it’s dead. So is the Eastern Mainline project. Energy East would have repurposed a 42 inch pipeline that had been used for natural gas delivery from Alberta to Ontario as part of its multi-pipeline mainline system. Since the price of natural gas has been in a funk for roughly a decade now, gas production in Alberta has declined and deliveries through the mainline have dropped in turn. This left the mainline system running substantially under capacity. Converting one pipeline to oil transportation, as TransCanada did with its original Keystone XL pipeline (which makes a

right turn in Manitoba into the United States Midwest), would have brought new life to the mainline. A new mainline would have been built through Quebec and New Brunswick, extending the reach of the existing pipe. At one point, a marine terminal was also planned on the St. Lawrence River. The 1.1 million barrel per day pipeline would have supplied Central and Eastern Canadian refineries with oil from Alberta, Saskatchewan and Manitoba. These refineries are currently processing imported oil from overseas, including Saudi Arabia and Nigeria. With Western Canadian oil supplanting imports, it would have allowed all of Canada to be energy independent from the rest of the world with respect to oil. The terminus of the pipeline would have been the Irving Refinery and Saint John, New Brunswick, allowing Western Canadian oil to “reach tidewater” and thus demand prices more in line with the international Brent benchmark, as opposed to the oftendiscounted West Texas Intermediate benchmark. For Saskatchewan,

Energy East would have allowed new markets, especially for southeast Saskatchewan. Currently, all oil produced in southeast Saskatchewan that doesn’t go by rail (and rail is hardly used these days), flows through the TEML Westspur system to Cromer, Man. From there it joins the Enbridge Mainline, running into the American Midwest. Energy East would have included a new three-tank terminal northeast of Moosomin, and a connecting pipeline to Cromer known as the Cromer Lateral. That 16 inch pipeline would have had the capacity to take every drop of southeast Saskatchewan oil onto Energy East, if producers chose to use that pipeline instead of Enbridge’s mainline. The result would have been diversified market opportunities for Saskatchewan oil, including the possibility of international export to overseas buyers. Additionally, TransCanada had proposed another pipeline, the Upland Pipeline, that would have run from Williston, N.D., to Northgate, Saskatchewan, and from there to either Cromer or Moosomin. Upland would have allowed North Dakota oil to

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access the same eastern markets via Energy East, including international exports. With Energy East dead, it takes Upland with it. TransCanada President and Chief Executive Officer Russ Girling said in a release, “After careful review of changed circumstances, we will be informing the National Energy Board that we will no longer be proceeding with our Energy East and Eastern Mainline applications. TransCanada will also notify Quebec’s Ministère du Developpement durable, de l’Environnement, et Lutte contre les changements climatiques that it is withdrawing the Energy East project from the environmental review

process. “We appreciate and are thankful for the support of labour, business and manufacturing organizations, industry, our customers, Irving Oil, various governments, and the approximately 200 municipalities who passed resolutions in favour of the projects. Most of all, we thank Canadians across the country who contributed towards the development of these initiatives. “We will continue to focus on our $24 billion near-term capital program which is expected to generate growth in earnings and cash flow to support an expected annual dividend growth rate at the upper end of an eight to 10 per cent

range through 2020.” As a result of its decision not to proceed with the proposed projects, TransCanada is reviewing its approximate $1.3 billion carrying value, including allowance for funds used during construction (AFUDC) capitalized since inception and expects an estimated $1 billion after-tax non-cash charge will be recorded in the company’s fourth quarter results. TransCanada stopped capitalizing AFUDC on the project effective August 23, 2017, as disclosed on September 7, 2017. In light of the project’s inability to reach a regulatory decision, no recoveries of costs from third parties are expected.

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PIPELINE NEWS November 2017

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What about H2S Alive? By Brian Zinchuk Calgary, Weyburn – While a series of stories published in early October in the Toronto Star, Global News and National Observer highlighted safety issues surrounding hydrogen sulphide (H2S), or sour gas, none of the stories explicitly stated that all who work in the field in the oilpatch must have H2S Alive training, which is provided by the organization formally known as Enform. After merging this past month with the Oilsands Safety Association, the organization is now known as Energy Safety Canada (ESC). Murray Elliott, president of Energy Safety Canada, responded to our inquiries via email on Oct. 20, stating, “Safety is a constant in our industry. There is nothing more important than the safety of our workers and the

public. The oil and gas industry in Canada has never been safer than it is today and is working hard towards a target of zero injuries and incidents. In the last 15 years, the upstream oil and gas industry in Saskatchewan has made significant improvements in safe work performance. The provincial lost-time claim rate in our sector, based on Energy Safety Canada’s Saskatchewan funding industry codes, has declined by two thirds – 67 per cent between 2002 and 2017 Q2.” He went on, “The dangers of hydrogen sulphide are well-known in industry and there are measures in place to protect workers and ensure safe operations in communities. A valid H2S safety training certificate is an established condition of employment for most oil and gas companies.”

Bob Ross, manager for Energy Safety Canada in Saskatchewan, based in Weyburn said via email, “There has been a consistent and consecutive reduction in Saskatchewan Workers’ Compensation Board premium rates for the Saskatchewan oil and gas funding industry codes, particularly in operation of oil wells (D32) which has decreased by 32 per cent. The 32 per cent is the largest reduction within all industries in Saskatchewan.” ESC noted their H2S Alive program is the most widely recognized safety training program for hydrogen sulphide safety. Since 2007, more than 1 million workers across Canada have taken H2S Alive training. Since 2012, over 82,000 certificates have been issued to workers residing in Saskatchewan.

H2S Alive training has been a condition of employment for field personnel in the oilpatch for a very long time. This photo, which appeared on the front page of Pipeline News’ very first edition, in 2008, profiled H2S training. File photo

Spartan has reduced drilling times from 8 to 4 days Spartan remained active in the field throughout the third quarter of 2017, with three rigs continuing to operate across its southeast Saskatchewan asset base. Third quarter activity levels have been in line with budget and included the spudding of 32 (22.2 net) open-hole wells (including eight (3.2 net) Ratcliffe wells), six (5.4 net) frac Midale wells and one (0.4 net) Torquay well. The company brought a total of 35 (26.5 net) wells on production in the quarter and had an additional 14 (8.7) net wells spud but not on production at the end of the quarter. In its open-hole Frobisher/Alida/ Tilston plays, Spartan brought 18

(14.3 net) wells on production in the quarter. These locations were drilled across its extensive asset base, with wells brought on in its core Greater Queensdale and Winmore areas, as well as in the Wordsworth, Carlyle, Willmar, Viewfield and Browning areas. A number of these locations targeted new pools or pool extensions, allowing Spartan to continue to organically expand its drilling inventory in key areas. Average results from its open-hole wells have continued to exceed its internal type curves, with initial 30 day production (“IP30”) rates for open-hole wells brought on production in 2017 outperforming its unrisked type curve by approximately

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(17.9 net) wells drilled year to date. Third quarter drilling consisted of two (2.0 net) wells at Alameda, two (2.0 net) wells at Pinto and two (1.4 net) wells at Elcott. Its frac Midale wells have delivered superior results in 2017, with average initial 90 day oil production rates approximately 39 per cent above its internal type curve. Spartan also drilled and completed its first operated Torquay well in the third quarter, which was drilled on its Oungre acreage. The well was brought on production in September and is currently in clean-up stage. Spartan intends to drill one (1.0 net) additional Torquay well in the fourth quarter of 2017.

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28 per cent. Spartan has continued to leverage its experience in southeast Saskatchewan to improve drill times for its open-hole wells. The company delivered spud to rig release times as low as four days in the third quarter, down from an average of eight days when Spartan acquired the assets in 2014. Overall drilling costs are tracking its budget, and Spartan’s combination of low individual well costs and production outperformance continues to produce top tier capital efficiencies. Unconventional plays On its frac Midale acreage, Spartan drilled six (5.4 net) wells in the third quarter, bringing its total to 22

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PIPELINE NEWS November 2017

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