PIPELINE NEWS NORTH

h t r No

Northern British Columbia and Alberta's Oil and Gas Industry Vol. 1 Issue 12 • dist: 20,325

december 30 • 2011

• Free

in this issue: • diesel drought hits the west • northern gateway review begins • why bc continues to frac image courtesy dave oleck0, nexen

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2 • PIPELINE NEWS NORTH I December 2011

The annual Fort St. John Petroleum Association curling bonspiel was a great success again this year, although participation was a little lower than expected by tournament organizing committee chair Ed Pimm.

They had hoped for 48 teams, but they were down to 46 for the event this fall, which ran from November 16-19.

“I think because it was busy in the oil industry this year, it had a bit of an effect on it,” said Pimm

ThIS YEARS WInnERS: A EvEnT WInnER Champion Technologies #2 skipped by Barry holloway A EvEnT 2nd plACE d and d Insulators skipped by vic peebles B EvEnT WInnER Rhyason Contracting skipped by Curtis Schaeffer B EvEnT 2nd plACE Multi Chem skipped by henry Michalski C EvEnT WInnER IpAC skipped by Shawn Ward C EvEnT 2nd plACE pimm’s production skipped by Clarke lang d EvEnT WInnER CCT skipped by Tim pavlis d EvEnT 2nd plACE Epscan skipped by don Stirling E EvEnT WInnER Rogers Trucking skipped by Curtis Rogers E EvEnT 2nd plACE pronghorn Instruments skipped by pat Magnusson

PETROLEUM ASSOCIATION - HAPPENINGS

industry news

December 2011 I pipeline news north •

3

health concerns Government to study impact of oil and gas development james waterman Pipeline News North Following up on a promise made during a town hall in Fort St. John, British Columbia in March, 2011, provincial Minister of Health Mike de Jong has committed to launching a study into the human health impacts of natural gas operations in northeast B.C. The announcement, made in early November, was largely a response to questions and comments directed to the minister when he visited Fort St. John with Premier Christy Clark and Minister of Energy and Mines Rich Coleman, shortly after Clark was appointed the new leader of the BC Liberal Party and only about a week after she had established her new cabinet.

That timing is partly why it has taken this long to announce plans to undertake the study, according to Ministry of Health spokesperson Ryan Jabs.

“That was kind of what keyed off the original [plan] for us to start looking at it,” said Jabs, referring to the Fort St. John town hall. “Because he did say we were going to do a review. … And it’s just taken a bit of time to figure out, okay, what do we want to do here? What do we want to look at? How are we going to do this?”

The Ministry of Health had also been sent a letter from the British Columbia Medical Association (BCMA) urging them to conduct a study into the health impacts of natural gas development, but Jabs noted that the project was well underway before the ministry received that letter.

“We started looking at what we were going to do about six or seven months ago,” he said.

The Ministry of Health has issued a Request for Proposal (RFP) in order to procure a contractor to undertake the three-phase human health risk assessment. The first phase will involve engaging with the public and other stakeholders to determine the scope of the study.

Phase two will be a scientific review to determine the human health risks and the phase three will be reporting those findings to the public. The Ministry of Health expects the contractor to start phase one

28231

in January, 2012 and complete the study over the course of the following three months.

This announcement is good news to grain farmer Brian Derfler, one of many concerned landowners in the area of Farmington, B.C., a community that is close to much of the activity that is occurring in the Montney tight gas play. Derfler is almost as worried about voicing his concerns about the health risks of natural gas development near his home after feeling that they had been sensationalized by other media outlets, particularly the CBC. “I said I’ve been affected by air quality issues,” said Derfler, referring to a story that appeared on the CBC’s website on September 28, 2011 that mentioned alleged claims that he had had three separate encounters with clouds of toxic gas.

“I never said at any point it was like a toxic release,” he continued. “So, they’ve changed things. I told them right at the start I didn’t want it sensationalized. I don’t know what it is that they have to sensationalize it.”

However, Derfler has experienced what many of his neighbours have experienced, which is the smell of hydrogen sulphide (H2S), also known as sour gas.

“You get this acid taste in your mouth,” he said.

“I don’t know what the levels were,” Derfler added. “All I know is that I went through air quality that was definitely an issue of concern to me. That it wasn’t right. I never said it was toxic.”

The main concern shared by Derfler and his neighbours is the possible cumulative effect of inhaling those fumes. He is also hopeful that the study into those effects will be done at arm’s length from both government and industry, largely just to be certain of what is fact and what is fiction when it comes to exposure to H2S. Derfler has been told that H2S occurs naturally in the human body and so may actually be good for people in small amounts. He has also seen studies showing that cows exposed to similarly small amounts of H2S have demonstrated greater productivity, calving earlier in the year. Interestingly, a fellow farmer

B.C. Minister of Health Mike de Jong addressed concerns about the effect of the oil and gas industry when he visited Fort St. John in November. image courtesy b.c. government

believes that the two-headed calf born to one of his cows is the result of H2S exposure. Derfler has seen a photograph of the calf, but hasn’t yet seen any evidence to suggest that poor air quality due to oil and gas activity was responsible.

“I don’t know personally if you can say it was directly from oil and gas development and air quality concerns, but he feels it is,” said Derfler.

His related concern is the absence of detection and protection equipment for residents not involved in the oil and gas industry, as well as training and procedures for dealing with incidents such as a serious sour gas leak.

“We can live … 100 metres from a wellsite or a gas plant,” he explained. “Any infrastructure, basically, all we have is 100 metres.”

Landowners can push that distance to 250 metres through mediation with the companies.

“But, generally, if they want to put something 100 metres from your house, they have the right to do it,” said Derfler.

“We have no protection equipment, no de-

tection equipment, no safety meetings, no community plans. And, of course, if you’re …100 metres away from a potential release with a 15 kilometres an hour wind, you have 24 seconds to either evacuate or to shelter in place. And, of course, there isn’t time for them to notify you.

“We’ve got problems with the emergency response plans, because they’re really inadequate,” he continued. “And if you look up the definition of evacuation, it means remove from harm or danger.

Our emergency response plans cannot do that. There’s no way to evacuate anybody who is in a toxic release. … They don’t even want you turning your cell phone on or starting a vehicle in that situation. So, they’re certainly not going to be driving in there to rescue you. And you shouldn’t be trying to leave either. So, it’s basically a shelter in place.”

Consequently, Derfler believes the government should not only be looking into the human health impacts of oil and gas activity, but also doing a better job of preventing health risks.

“We should be proactive,” he said.

4 • PIPELINE NEWS NORTH I December 2011

industry news

h t r o Diesel shortage N William Julian Regional Manager 250-785-5631 wjulian@ pipelinenewsnorth.ca

fuel shortage leads to new challenges and companies see no end in sight james waterman Pipeline News North

Alison McMeans Managing Editor 250-785-5631 editor@ pipelinenewsnorth.ca

James Waterman Reporter 250-785-5631 cell:250-263-1878 jwaterman@ pipelinenewsnorth.ca

Dan Przybylski Sales 250-782-4888 ext 101 cell: 250-784-4319 dcsales@ pipelinenewsnorth.ca

Ryan Wallace Sales 250-785-5631 cell:250-261-1143 rw.fsjsales@ pipelinenewsnorth.ca

“It’s just whether or not

Tom Kirschner Alberta Sales cell:780-625-2717

you get lucky and show up

tk.fsjsales@ pipelinenewsnorth.ca

to get fuel.”

Janis Kmet BC Sales 250-782-4888 cell: 250-219-0369 jkmet@dcdn.ca Published Monthly

by Glacier Ventures International Corp.

The Pipeline News North is politically independent and a member of the B.C. Press Council. The Pipeline News North retains sole copyright of advertising, news stories and photography produced by staff. Reproduction is prohibited without written consent of the editor.

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When the hydrogen shortage at the Suncor oil refinery in Edmonton, Alberta coincided with the October 6 explosion at the Consumer Co-operative Refineries facility in Regina, Saskatchewan, companies throughout western Alberta and eastern British Columbia that either sell or consume diesel fuel really began to feel the pinch.

Almost three months later, the western Canadian provinces are starting to see signs of a return to business as usual, but it has been a bumpy ride to this point.

“It has had a fairly dramatic impact on our ability to maintain regular hours of operation,” said Ed McCoy, Vice President of Petroleum for UFA. Most of UFA’s western Canadian diesel fuelling stations, including their Fort St. John, B.C. location, have had to move from 24-hour days to 12-hour days during the shortage simply because they haven’t had the supplies to maintain their regular schedule.

“Now they have to get organized a different way,” said Art Jarvis, Executive Director South for Energy Services BC, discussing businesses that rely on diesel fuel to do their work.

“The system usually is you fuel up at night when you come in so that, in the morning, you’re not held up,” he continued. “But you can’t do that.”

Alternatives to that practice include having workers filling tidy tanks during the day to swap them at night as well as driving fuel to work sites during the day.

“So, of course, costs go up, and inconveniences are created,” Jarvis added.

“Of course, it will affect traffic,” he continued. “Because now you don’t spread all these people out over a 24hour period. You’re jamming them into a 12-hour period.”

The results are long lines, increased idling and late deliveries of shipments.

“It equates into many hurdles and challenges,” said Jarvis.

Fort St. John-based pipeline construction company Surerus Pipeline experienced those hurdles and challenges firsthand, the worst period being early to mid November. For example, their employees had been limited to 300 litres per card when refueling at the local Co-op cardlock station.

“So, then the guy’s got to go over there with five or six cards to try to fill up his tidy tank to fill up the machines,” said Jaret Surerus, Operations Manager with Surerus Pipeline.

They haven’t had to endure such limits at UFA or Petro-Canada, but the supply hasn’t been consistent either.

“It’s just whether or not you get lucky and show up to get fuel,” Surerus said of those stations.

Additionally, Fort St. John has been the hub of their refueling headaches.

“Alberta,” said Surerus, beginning to describe the regional differences in diesel supply. “We’re hauling a bunch of stuff up to Fort McMurray and Cold Lake and they’ve had no problems as of yet being out of fuel. And Fort Nelson – I’ve had trucks going up there. I’ve had a bunch of trucks going up there and they don’t have a shortage at all.”

“It’s made things a little tight,” said Lee Wells, Manager of the Petro-Canada diesel station in Fort Nelson.

“But we haven’t had our PetroPass shut off or nothing,” he added. “So, it’s kind of business as normal up here. Down south, they’ve been hurting a little more.”

However, Curtis Brewster claims that his Chetwyndbased transport company, Aim Trucking, hasn’t been affected by the diesel shortage at all.

“Our supplier here, Chetwynd Petroleum, we were never restricted and we had all the fuel we could burn,” said Brewster.

That isn’t to say Chetwynd Petroleum hasn’t had its rough moments, too.

“We’re struggling along here, but so far, so good,” said Matt Dalke, President of Chetwynd Petroleum. “It’s just a shortage. The refinery’s buggered up.”

His solution has just been to try to obtain fuel from any source possible, a strategy that has been aided by being an independent company not affiliated with a specific supplier or producer.

“We don’t have to have a big meeting and all that,” said Dalke. “We just throw some money at somebody and they’ll sell you fuel. You got to go down south or on [Vancouver Island] or wherever. Alberta. And you can buy from whoever. We’ve been in business for 45 years, too. Lots of contacts.”

“We’re doing okay,” he continued. “We’re still keeping everybody that we had on. We’re not trying to take too much new. Most of the people say, ‘Well, if you get [business] from us now, we’ll be your customer forever.’ But I don’t do that. It’s just not the way I operate. If I can help them at the time, I do.”

Dave Smith, who owns Smith Fuel Services in Fort St. John, has also been able to muddle through the diesel shortage and keep his business running normally by getting creative.

“It makes it so we have to source our product elsewhere from alternatives and new creative areas,” said Smith. “We were trucking out of Alaska. We were trucking out of Burnaby. Different sources and customers out of Alberta that had some reserve product. It creates a bit of a logistical nightmare, but survivable.

“There was concern about cost, obviously,” he continued, discussing his customers. “With the increased trucking, the cost was up significantly. And we gained a lot of new customers, because we did have fuel. So, there was a lot of happy people from that aspect.

“We were busy, regardless, but that just added to the load.”

The situation is starting to improve for Surerus Pipeline, but that is partly because they have finished their recent job in the Fort St. John area.

“So, now we’re just trucking everything up to Fort McMurray and Cold Lake,” said Surerus. “So, it’s not as bad, but it’s still hard, because even just filling machines up before they go out to the jobs, they’re three or four hundred litres. So, you’ve got to get the guy to go over there three or four times a day and with four different cards. It’s costing us more in the long run for labour.”

Surerus noted that tidy tanks have been sufficient to keep equipment running all day in most cases, but there have been exceptions, too.

“The one [job] we did across the border, it put them two or three days behind just because they had a lot of big [equipment],” he said. “And so they burn a lot more fuel in a day. So, the guys were trying to keep up with them and it was really hard. … Sometimes you got to fill them up twice a day. And they were only being able to fill them up once a day. So, they were getting about half production out of them.”

While Surerus is saying that the situation is improving for his company, Carl Rosenau, President of Edmonton-

billing:

Lisa Smith Accounting Manager 250-562-2441 ext 352 Fax:250-960-2762 accounting@ pipelinenewsnorth.ca

– Jaret Surerus, Operations Manager with Surerus Pipeline

December 2011

pipeline news north •

5

limits local businesses based transport company Rosenau Transport – which has shops across western Canada, including Fort St. John and Fort Nelson – was far less optimistic in mid December.

“They say the diesel shortage is cured,” said Rosenau.

“Well, it’s not cured.”

“When they get all this stuff back on stream,” he continued, “you got a mess of trucks out there running around with no fuel [and] you got a whole mess of cardlocks with no fuel in the underground storage tanks.”

As Rosenau explained, trucks delivering diesel to the cardlock stations have a capacity of 55,000 litres of fuel, while his trucks hold 800 litres of diesel in their gas tanks.

“That’s only 68 trucks that you just filled up,” he said.

Although the issue at the Suncor refinery has been corrected, the diesel producers are returning to full production, and UFA was taken off allocation by one of their suppliers on December 9, their reduced operating hours weren’t about to change at the midpoint of the month, largely because of the problem that Rosenau described.

“The issue we have is that our inventory levels have been dragged down to a point where we still can’t build inventory to, in fact, maintain 24/7 operations,” McCoy said during the December 9 interview.

The supply has to return to normal before their business can return to normal.

“As I like to put it, the industry can handle one hiccup at a refinery, but it can’t handle two hiccups,” McCoy continued, referring to the two “hiccups” that occurred this fall. “And that’s in essence what happens. Every time you have one problem, generally speaking, the industry handles it. A second problem at the same time proves always to be very problematic for the industry.”

“Our production versus consumption rate with respect to the refining of petroleum products for diesel

and gasoline, that margin, it’s a fine margin,” said Mark Salkeld, President of the Petroleum Services Association of Canada (PSAC).

Salkeld hasn’t heard much feedback from PSAC’s member companies – which serve the oil and gas industry – in terms of difficulties working during the diesel shortage, but he knows it can be a challenge. He was in procurement for a drilling company in Fort St. John when a similar situation occurred about five years ago.

“And I was scrambling to phone around and establish contracts as preferred customers at the time with Petro-Canada and Esso and UFA, to make sure that we were on top of the list for our diesel requirements,” said Salkeld.

Rosenau was put in the same position this time around.

“There’s pockets where you just can’t get fuel,” he said. “Like in the Red Deer area, we’re having trouble.”

One of his employees has a photograph taken of a diesel fuelling station in Fort St. John that states that all customers with outstanding accounts have been cut off.

“One way of collecting your bills, eh?” Rosenau laughed. “So, if you’re not current, you don’t get fuel.

And when there is no fuel around, that makes it pretty easy going. In Fort Nelson, we didn’t have problems up there.”

Rosenau has resorted to sending his drivers to regular

gas stations on the street, where diesel is more expensive than at the cardlocks.

“We pay a hell of a lot more,” he said. “And we sucked it up and we paid the difference.

“The whole ripple effect,” he continued. “Somebody gets a load of fuel in and all of a sudden there’s a line-up at that cardlock. Where before you used to just slip into a cardlock, fuel your truck, and away you go. Well, now there’s a line-up because you know they got fuel. And then what they were doing, some of the fuel companies were limiting your cardlock to 300 litres. Well, my trucks go through 600 litres a day.

So, what do I do for the other 300 litres?”

Rosenau didn’t change his routes to ensure that his drivers were passing cardlocks with fuel, as has been the case with other transport companies, but he did start holding onto freight that wasn’t an urgent need.

“Like your Christmas wrap,” he said. “Did you really need that two weeks ago? That can wait another week until we know we got lots of fuel. And that’s what we’re kind of doing, is picking and choosing.”

Although he always finds a way to make his way through these diesel shortages, Rosenau is becoming frustrated with the frequency at which they are occurring.

After all, the last major shortage was just last year.

Continued on Pg 21

“The industry can handle one hiccup at a refinery, but it can’t handle two hiccups,”

– Ed McCoy, Vice President of Petroleum for UFA

Dawson Co-op Petroleum

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6 • PIPELINE NEWS NORTH I

December 2011

special features 10 Trapped in the tar sands:

the economic impact vs.

environmental concerns 14 Under pressure: why BC

continues to frac

industry news power electricity for gas

community

james waterman

24

25

25

26 28

28

Keeping it local: supporting BC business is rewarding Peace Region Students Receive Awards Encana races against hunger Donation for education Safety on the job: bringing the message home Mom’s the word

industry news

2 Health concerns:

4

6

7

8

12

18 20

21

government to study impact of oil and gas development Diesel shortage limits local businesses: leads to challenges and companies see no end in sight Power and authority: electricity for alternative energy Gas infrastructure: spending money to make it Winter of discontent: Enbridge agreement is beginning to fray Asian mission: Clark heads East to sell western energy Sharing the West’s wealth Going deep: Encana plans water resource hub Investing in oil and gas futures

environment 22 Dinosaurs: fossils in the oil

and gas business 23 Liquid finances: report on

water use by industry

profiles 27 VE Brandl: doing business

for half a century

Pipeline News North As British Columbia’s burgeoning liquefied natural gas (LNG) industry continues to take shape, one of the questions facing the province is how liquefaction plants on the coast will be provided with the large amounts of electricity required to turn dry natural gas into a liquid product ready to ship to Asian markets.

The Kitimat LNG partnership consisting of Apache Canada, Encana and EOG Resources is closest of all proposed LNG export terminals to becoming a reality after receiving a twenty-year export license from the National Energy Board (NEB) this fall. According to the provincial Ministry of Energy and Mines, the existing power transmission facilities are adequate to supply the first phase of that project with the necessary energy, but the second phase will require upgrades to the province’s energy infrastructure.

Art Sterritt, Executive Director of the Coastal First Nations, believes that Kitimat LNG is just one of four LNG export projects proposed for the B.C. coast that seem likely to proceed. If his prediction comes true, the province will need new electricity infrastructure in order to power those facilities, and Sterritt insists that the Coastal First Nations are ready to help fill that gap.

His assertion stems from the Coastal First Nations Reconciliation Protocol that they signed with the provincial government in early 2009. One element of that document was a commitment to developing an Alternative Energy Action Plan. So, the Coastal First Nations communities began working with the Ministry of Energy and Mines, BC Hydro and independent power producers in the area of their communities to develop a renewable energy plan for the region.

“Basically, everybody in the region was in the room helping put together this plan,” said Sterritt.

“We like our plan,” he continued.

“Lots of people like our plan. But the reality was it would have been a fairly hard sell. The way it’s designed is just to get energy to BC Hydro [that] doesn’t cost them any more than it would normally cost them, because they operate under legislation that will not allow them to raise the price of energy for the public any more than they have to.

“So, we were committed to doing that. That required us to go out and do some financing – some creative financing – because our power is going to cost us more than BC Hydro is willing to pay. And what it means though is that we have to finance for a while, while the cost of living and increments of power costs go up over a period of time. And eventually we will be making money. But in the meantime we do have to do some financing.”

So, the plan is to create a power authority that would purchase elec-

tricity from the independent power producers along the coast. That power authority would then resell the electricity to BC Hydro at an appropriate rate.

Sterritt is confident their plan can satisfy the future demand from the LNG industry.

“We’ve come up with a plan that can produce as much as 4400 megawatts,” he said.

That is a significant amount of energy.

“Site C dam, if and when it’s built, would be 1100 megawatts,” Sterritt continued, noting that he expects the LNG export facilities to require about 500 megawatts each.

“Even if we built Site C,” he said, “we would be hard pressed to take all of that power, which is intended for growing needs in British Columbia, and just put that into LNG. So, then along comes our plan. We, within a reasonable period of time, could come up with anywhere from 400 to 600 megawatts. And then over another period of time, probably double that, to the point where we could likely solve their problem.

“And now one of the problems with renewables is they need to be shaped. The wind doesn’t always blow and you don’t – Art always have water. We’re not building dams to block water flow. We’re just run of the river. So, these are less static kinds of power.

So, there needs to be a bit of shaping.”

The Coastal First Nations appear to have a willing partner in the provincial government.

“Government is committed to the development and operation of an LNG industry, with sufficient sources of electricity to make it possible,” said a Ministry of Energy and Mines spokesperson. “The Ministry of Energy and Mines is working with BC Hydro to identify potential electricity supply options to support industrial development in northern British Columbia.

“Investments in critical infrastructure to power future LNG facilities will be balanced with the need to keep rates affordable for the people of British Columbia,” he added.

Sterritt is certain that LNG is the main reason why the province has been supportive of the Coastal First Nations’ renewable energy plan.

“Approval of the plan is pending, and work is underway to ensure the plan moves forward,” said the Ministry of Energy and Mines spokesperson.

“We enter into a lot of different projects where it takes us seven, eight, nine [years], even a decade to get them done,” said Sterritt. “And this is one of those projects that held a lot of promise, but we were pretty

sure that it would take us a number of years to get it through the system and approved and with all the components looked after. But along comes LNG.” Sterritt also remarked that Rio Tinto is set to move forward on its Kitimat smelter expansion plans, which will be another significant draw on electricity. So, there is a pressing need for additional power supply in the region, but Sterritt insists that natural gas fuelled power generation isn’t an option.

“There are other ways to do it,” he said, discussing the renewable energy plan, “but our people are not crazy about having LNG come along and generate all their own power, which they could do. Greenhouse gas emissions out of that would kind of erase any of the benefits you get by exporting [LNG] to China, where [it] could be replacing coal [for power generation].

“Everybody’s admitted that’s not in the cards,” he added, admitting that natural gas could be a component of local power generation during the early stages, as the renewable energy plan is still coming together.

“There’s an objective of zero [natural gas],” said Sterritt.

As an additional Sterritt benefit for the Coastal First Nations, Sterritt expects the Alternative Energy Action Plan will provide economic benefits for their communities, as they are in the process of negotiating agreements with the independent power operators.

“We will negotiate benefit agreements where people are employed in those [projects],” he said. “We’re the only ones who live in those regions. So, it’s going to take quite a capacity building exercise to make sure that we have the expertise to fill the jobs that come up. But these are not jobs that are going to happen tomorrow. It takes a while to get these in place.

“We think we’re ahead of the game enough that we can access those jobs,” he concluded.

Meanwhile, the Coastal First Nations are working to gain a better understanding of what is involved in extracting the natural gas from northeast B.C. reservoirs.

“Because we have as many concerns as anybody else,” said Sterritt.

“We need to inform ourselves,” he continued. “We’re not going to be trying to create a platform for an industry that’s causing problems for people in Fort Nelson, for example.

“So, we’ll talk to those First Nations. We’ll talk to industry. We’ll inform ourselves. And at the end of the day, we’ll find out whether or not we, as an organization, can come out and say … we either support or don’t support [LNG] based on our findings.”

“The wind doesn’t always blow and you don’t always have water.”

December 2011 I pipeline news north •

7

gas infrastructure spending money to make it james waterman Pipeline News North Efficiency is the name of the game for Bill Gwozd.

The Vice President of Gas Services for energy industry consultants Ziff Energy Group is part of a team of experts from his company and Gas Processing Management Inc (GPMi) that is currently completing a two-pronged study into future natural gas and natural gas liquids (NGL) production in western Canada, as well as requirements for associated gas processing plants in the region. Gwozd believes that proper application of their forecasts could lead to more efficient use of resources within the oil and gas industry and financial gains for the provincial governments.

The first of two reports, which is focused on the Montney tight gas play of northeast British Columbia and northwest Alberta, is set to be released at the end of December, 2011. The second report, examining the Kaybob area of northwest Alberta, is due at the end of March, 2012.

“We want to forecast natural gas and natural gas liquids to the year 2020 by sub-region for these seven sub-regions,” said Gwozd, discussing the Montney portion of the study in which the team divided the tight gas play into seven sections for the purpose of doing the forecasts.

“The second objective,” he continued, “is then to determine where new processing plants are required and what type of processing plants are required. And so if we have a forecast and it says production is going to grow in a sub-region, then the infrastructure has to grow with it. And since we also have H2S, CO2 and C3 liquid concentrations, we can determine what types of plants are required.

“So, rather than just say we need a plant to process one bcf (billion cubic feet) more gas, we can say we need a new plant in region two to process an incremental 75 million [cubic feet] of sour gas, typically three per cent H2S and two per cent CO2. And we need two plants, one in area four and one in … area seven, that required 200 million [cubic feet] more capacity, one of sweet, one of sour. Very, very specific numbers. That way industry will not trip over their feet and individually build and site new facilities. Because if everybody works individually – because nobody talks to anybody – each operator may build their own plant and [we] may have a way overcapacity region, just like

Natural gas development and associated processing and transmission facilities in the Montney formation in northeast British Columbia.

A new joint study by Ziff Energy Group and Gas Processing Management Inc. could provide companies working in the region with the opportunity to improve their efficiency. image courtesy Ziff energy group

western Canada is way overcapacity.”

That integration could mean substantial capital savings for the producer companies.

“And because the new plants may be required in British Columbia, then British Columbia benefits hugely by operators not wasting money on redundant plants,” Gwozd added. “And so that way the operating costs are better, the gas cost royalties are better.”

It could also allow companies to reduce their footprint on the land base, which is why Gwozd believes the study will be well received by industry regulators.

“A regulator who’s trying to abide by landowners to reduce infrastructure in certain areas and so make sure it’s all done in the best optimized way almost has a blueprint for the entire area before even asking for it,” he said.

The study team created its gas production forecasts by looking at well completions, well productivity and well decline

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rates in each of the sub-regions.

“When we roll the production forecast up for an individual region,” said Gwozd, “we can then very quickly see how much capacity – how much plant capacity – is in the region and where new gas gathering systems are required with pinpoint accuracy.”

“While no one can always predict the future,” he continued, “looking at it logically through engineering principles and geological assessments, we can locate where the reserves are, identify a production pattern for it, plan it, bring it on, and say we’re short X capacity.”

The study team also assessed the transmission infrastructure for the region.

“There’s the Spectra,” said Gwozd.

“There’s the Alliance pipeline. And there’s also TransCanada. What do they have in the region? And are they going to be adequately sized to transport the gas out?

Since we know where those giant spears are stuck in this Montney region [and] we

know the production forecasts, we can quickly surmise whether TransCanada’s new spear will be great enough to handle all the production or whether TransCanada will have to go back and approach for an expansion.

“Likewise for Alliance. We know where the Alliance transport system is. It literally goes through the heart of Montney. It’s an excellent system. Literally right diagonally straight through the Montney. It couldn’t have been built in a better place in my mind. And so if there are expansion opportunities, folks like Alliance would be well positioned to go into all of the regions that Ziff Energy and GPMi have carved out and tap in and harvest incremental production.

“And then the Spectra system – which is really the old system from many years ago – covers portions of the [region], but will it be able to transport incremental gas out to the west office for factors such as the Kitimat LNG export projects?”

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8 • PIPELINE NEWS NORTH I

December 2011

industry Winter of discontent james waterman Pipeline News North When the Gitxsan Treaty Society announced they had signed an agreement with Enbridge to become an equity partner in the pipeline company’s Northern Gateway project, it set off a firestorm of discontent within the Gitxsan First Nation and among the other First Nations in British Columbia.

The deal was announced on Friday, December 2, without prior knowledge or consent of the Gitxsan Clans respresented by the Treaty Society.

On Sunday, December 4, the Gitxsan Clans met to discuss the issue and quickly declared that the negotiators who signed the deal with Enbridge no longer represent the Gitxsan First Nation. That trio consists of head negotiator Elmer Derrick, negotiator Beverly Clifton Percival and executive director and negotiator Gordon Sebastian.

The trouble for the Gitxsan First Nation is that Enbridge views that document as a binding agreement.

“They are the negotiating authority for the Gixtsan and we have a signed agreement with them,” said Enbridge spokesperson Paul Stanway.

“As far as we’re concerned it’s

not binding because the person that signed it was not authorized to sign it on behalf of the hereditary chiefs,” said Larry Patsey, a Gitxsan Hereditary Chief with the Gitga’at First Nation.

“Back in 2009,” he continued, “Enbridge was introduced to the Gitxsan people and [we signed] some kind of a memorandum of understanding to explore options on how the Gitxsan people could benefit from this thing. But that was the last we heard of it. And three years later, which is today, we found out that a deal had been signed by our negotiator.

“So, during that three year process, none of the chiefs – the hereditary chiefs – were consulted or even asked to come to a meeting of any kind to discuss anything to do with Enbridge. So, when that news came down, certainly we were very upset and shocked on the conduct of our negotiator.”

This deal could prove to be a public relations nightmare for both Enbridge and the Gitxsan First Nation, largely because the Gitxsan First Nation stand to profit from a project that is wholly opposed by the other B.C. First Nations when the pipeline doesn’t even enter their territory.

“Enbridge is just not going to

news

happen,” said Chief John Ridsdale of the Wet’suwet’en Hereditary Chiefs in a press release. “We have said no and banned this pipeline from going through our territories – not only to protect ourselves and our lands, but also all the communities downriver from our lands. We have reviewed the project, and we have made a decision based in our traditional laws that we will not allow the devastation of an Enbridge oil spill in our lands to affect us and other communities further away who are all connected to us through the water.”

“Enbridge has always had a strategy of offering money to lots of First Nations,” added Chief Jackie Thomas of Saik’uz First Nation in the same press release.

“Lots of First Nations have refused this money. This is just the same old divide and conquer tactic we’ve known for centuries. It doesn’t matter who they get a deal with. The wall of First Nations saying “No” is unbroken. They plan to come through our territories and we’ve already said no, and we’ll use every legal means we have to stop them.”

Promptly after the agreement was announced, opponents of the pact from within the Gitxsan First Nation – led by hereditary chiefs such as Patsey who had not participated in negotiating or signing the deal – stormed the Treaty Society office, demanding the resignation of the

December 2011 I pipeline news north •

9

negotiators and effectively shutting down The protest outside the Treaty Society office (shown above on Dec. 8) led to it being the treaty office. It was boarded up and left boarded up by Dec. 12 (below and lower left). vacant on Monday night when the negotiaSubmitted photos tors wouldn’t resign. Gitxsan men stayed to guard the building.

Patsey couldn’t imagine why the Treaty Society signed the deal.

“We’re trying to get to the bottom of that yet,” he said. “We’re trying to find out what the agreement is, where it’s at. We don’t even have a copy. I don’t have a copy.

And we’re just trying to find out what our obligations are to Enbridge through that agreement. And once we find that out, we’ll take the next necessary step.”

Patsey even insists that the deal was signed in contravention of traditional law, although the negotiators dispute that notion.

Elmer Derrick fought back by publicly explaining his decision in an editorial published in the Vancouver Sun on December 8.

“Over time we have established a relationship of trust with Enbridge, we have examined and assessed this project - and we believe it can be built and operated safely,” said Derrick, claiming that Northern Gateway is in line with the “vision and leadership” of the Gitxsan First Nation.

Derrick also argued that the pipeline is of “vital importance to the future of Canadian energy security and prosperity.”

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10 • PIPELINE NEWS NORTH I

December 2011

special feature

trapped

The co-generation unit at Syncrude’s Aurora project in the Athabasca oil sands of northern Alberta. Although companies like Syncrude aren’t directly involved in the Enbridge Northern Gateway project, they are at the heart of the controversy. Opponents of the of the pipeline say it will just increase activity in the oil sands, producing more greenhouse gas emissions and exacerbating the climate change problem. However, proponents believe that the goal of environmental groups opposed to Northern Gateway is simply to shut down the oil sands despite the improvements companies like Syncrude have made in terms of their environmental performance. image courtesy syncrude canada

james waterman Pipeline News North

get built, the people in China and India, for example, are simply going to say, ‘Okay, if we can’t get it from Canada, we won’t bother buying that fuel,’” he said. “That’s quite frankly ridiculous. They are going to buy that fuel anyway. And if they don’t buy it from Enbridge will be facing stiff opposition from environmental groups and First Nations us, that means they’re going to buy it from somebody with less stringent standards. communities over the coming year as they seek regulatory approval for their Northern Somebody who sells a less ethically produced product, produced less sustainably.

Gateway project.

They will go to Venezuela. They will go to Nigeria. They will go to other sources of oil If approved, the proposed pipeline will ship oil sands bitumen from Bruderheim, around the world. It won’t mean that that oil won’t get shipped and used. It just won’t Alberta to Kitimat, British Columbia for export to foreign markets, primarily in Asia. come from Canada, that’s all.”

However, public hearings held by the Joint Review Panel (JRP) assessing the project – The big issue for Enbridge and the oil industry is that Canada currently has a maswhich are set to begin in January – are attracting a host of dissenting voices to the list sive resource and only one customer. of registered intervenors, ranging from environmental organization ForestEthics to the “The only place that we export oil is to the United States,” said Stanway. “So, we are Coastal First Nations. tied to the U.S. price, which is way below the world price. There have been times this The main issue for environmentalists appears to be increasing activity in what they year when it’s been over $20 a barrel less than the world price. So, for a nonrenewable call the “tar sands” that would likely result from the construction of the pipeline. resource that we only get to sell once, Canadians are not getting proper value for that “We’re concerned about how much this would facilitate tar sands expansion and resource. The only way we get proper value is by having market diversity. We need angreenhouse gas emissions,” said Nikki Skuce, Senior Energy Campaigner for Forother customer. You never get the best deal for selling anything if there’s only one perestEthics. “And concerned about the need to actually start transitioning off fossil fuels. son you can sell it to. So, we need more than one person. We need access to global And this is putting us in the wrong direction.” markets. And the way to do that is to build a pipeline to the west coast. It would give us Eriel Deranger, Interim Executive Director for Sierra Club Prairie and a member of the market diversity that would immediately increase the value of that resource.” the Athabasca Chipewyan First Nation, echoes those concerns.

Stanway suggests that we need look no further than the diesel fuel shortage that “We work sort of in coalition with numerous different struck western Canada this fall to see the benefits of groups that try to get increased participation at the JRP shipping oil to Asia via Northern Gateway and to see the hearings, because Enbridge and the government had true motives of the opposition to the project. announced that the public could make oral testimony,” “The diesel shortage was a lack of refining capacity,” she said of the role Sierra Club Prairie has chosen to play he explained. “One of the things that you find is that to in the process. “And so we sort of put out an action alert build refineries, to build upgraders, you need capital to do to get people to sign up to give oral testimony at the JRP that. Somebody’s got to be convinced to spend hundreds hearings, and to just sign up for the hearings in general. of millions – sometimes billions – of dollars to create And that was to increase, not just the public participation, upgrading capacity, refining capacity, inside Alberta. Our but also the amount of hearings that would happen so critics often say, ‘Well, instead of exporting it to Asia, why that adequate voices would be heard, not just in British don’t you just simply upgrade it here in Alberta and sell it Columbia, but also in Alberta.” to somebody?’ But without pipeline capacity, who are you “We run a pretty aggressive tar sands campaign here going to sell it to? You need to be able to ship that to marin Alberta,” Derganger continued. “Really working on tryket, whether it’s refined product or bitumen. You still need ing to ... make the government more accountable to the to be able to get it to a market. All of which tends to point [public] as far as … regulatory policies to ensure the tar to the real motives of our opponents, which quite frankly sands don’t further impact and erode the environment.” is simply to stop production of oil sands oil.”

Enbridge spokesperson Paul Stanway feels these “We’re a transportation company,” he continued. “We – Paul Stanway, Enbridge spokesperson transport environmental groups are ignoring the contribution the energy from A to B. We’d be perfectly happy oil sands industry makes to the national economy and to transport upgraded bitumen, refined products – we’re the progress the sector has made in terms of its environmental performance, work that capable of transporting all those things. But at the moment the demand is to transport trade with Asian markets could facilitate through that injection of capital. some of the bitumen from Alberta to the west coast and then on to the world market.

“I think the oil sands producers are doing that job anyway and will continue to do that We don’t have the upgrading capacity right now. No doubt, some of that capacity would job,” Stanway said of the sector’s improved environmental performance since oil sands be built, particularly if there were a pipeline that gave us access to world markets. But development began. if you’re somebody that’s looking to build an upgrader, that takes an enormous amount According to statistics provided by Enbridge, companies operating in the oil sands of capital to build that. Why would you do that when there’s a question mark over your have reduced greenhouse gas (GHG) emissions by over 30 per cent per barrel of oil access to a market? Once you’ve built that refinery, that upgrader, then you need produced since 1990. So, Stanway takes particular exception to the climate change to sell the product. So, you’ve got to sell it to market because we’re only 3.5 million argument against Northern Gateway. people in Alberta. We can’t use all that product ourselves. We’ve got to ship it some“What people who oppose the pipeline are assuming is, that if that pipeline doesn’t where.”

“It won’t mean that that oil won’t get

shipped and used.

It just won’t come from Canada.”

December 2011 I pipeline news north •

11

in The tar sands

The economic impact of extracting oil pitted against environmental concerns

Essentially, the industry wants to find a good market for the oil that isn’t being consumed at home so that it can afford the refining capacity to refine the oil that can be consumed in Canada.

However, oil sands expansion and related climate change issues aren’t the only areas of concern for Skuce and ForestEthics.

“We’re also concerned about the impacts that the pipeline would have on our wild salmon watersheds,” said Skuce.

“In terms of oil spills, but even in terms of the construction,” she continued. “There’s something like 71 crossings that have to happen where there’s no identified, what they call, least risk period. Which means that they’re going to have to kill some form of salmon at some stage of it’s cycle, whether it’s killing off a bunch of the eggs or whether it’s putting at risk a bunch while they’re spawning.”

Enbridge seems confident that they can mitigate those risks by careful consideration of the specific factors at play for individual watercourse crossings and choosing the option that creates the least impact. One of those options is directional drilling.

“And that essentially takes the river out of play,” said Stanway. “You drill a hole for the pipeline that would go underground some distance from the waterway. Depending on the particular water crossing, you could be anywhere from 30 metres to 100 metres underneath the waterway. So, you are nowhere near the water.”

“Somebody asked us at a public meeting we had last week in Fort St. James, ‘Okay, what if something goes wrong with that pipeline? That deeply buried pipeline underneath the streambed?’” he continued. “Well, the reason you take it down that far is to find a very stable level so that generally not much happens with a deeply buried pipeline. But, if under some circumstances, after some years, that pipeline needed to be replaced, you could do that. We actually have a situation on an older pipeline right now with a directional drill underneath a waterway where we’re simply taking that pipeline out of production and out of service and drilling another directional drill some distance away under the same waterway, putting in a new pipeline.”

“Generally, you’re aiming for a strata below the river that is very stable, which means a high level of safety,” Stanway added. “It doesn’t interfere with the waterway at all.”

Another of ForestEthics’ concerns – introducing oil tanker traffic into the area of the Great Bear Rainforest – is also the primary issue that the Coastal First Nations have with the proposed pipeline. Art Sterritt, Executive Director of the Coastal First Nations, has filed a motion with the JRP to delay the hearings until they receive answers to the questions they have about tanker traffic along the Pacific coast.

“We also asked the JRP to compel Enbridge to identify the other [project] proponents,” said Sterritt. “We don’t think it’s a reasonable thing to have a number of proponents who are calling the shots hide behind Enbridge and not be held accountable. …

This is quite a critical factor for Coastal First Nations because the reality is Enbridge runs the pipeline, but who runs the tankers? We don’t know who runs the tankers. And most likely it’s these other proponents.

“We have no opportunity to review the safety record or anything else of these other people,” he added. “Because we don’t know who they are. And so we think this is a reasonable request of a legal process to compel the other proponents … to identify [themselves] so we can question them as well.”

It is an important issue to a coastal people who mostly only have access to their communities via water, not to mention a history that binds them to the sea.

“We’re connected by water,” said Sterritt. “And we live on the water. We live off of the water. We eat the foods … that come from it. Our people dry seaweeds and kelps and that for nourishment. And those things, they’re impacted by tanker traffic without a spill.

There’s certainly an impact. But that’s not the game breaker. The game breaker is oil. If we have an oil tanker – a crude oil tanker – that was to hit the rocks in Douglas Channel. And we’ve seen boats crash. We’ve lived on the water all our lives. If that happened, a spill the size of the Exxon Valdez would cover the coast from the B.C.–Alaska border down to and including the top end of Vancouver Island. It would coat it with oil completely. And would destroy all the herring stocks, salmon stocks, seals, cockle beds, clam beds and everything.”

Sterritt is anxious about losing the self-sufficiency that their communities are able to achieve by hunting and gathering foods from these sources that could be destroyed by an oil spill. That is a significant concern for a region that enjoyed full employment just thirty years ago, but now has an unemployment rate around 80 per cent.

“We have people with no jobs anymore,” he said. “They’re still living a good life.

They’re able to go out and collect all the food they need. And so we’re not going to allow a project that’s going to take all hope for the future away from us. We just won’t do that. And Enbridge, on the other side, comes along and says, ‘Well, we’ll offer you a little equity stake in our pipeline.’ But there’s no jobs.”

“In Douglas Channel, there’s 24 foot tides,” Sterritt continued, describing the difficulty workers would have trying to clean up an oil spill in those waters. “The flow of water, it’s incredible. There are vessels that they plan their travels according to the tide because they can’t run against this flowing river of water. So, this is what strikes fear into the hearts of our people. [An oil spill] would wipe out everything that we represent.

And not only that, but we already have an industry on the coast that’s providing well over 30,000 jobs. This includes the wild fisheries in salmon and halibut and black cod and gooey duck and crab and prawns and on and on and on. And the processing jobs.

And then there’s the sport fishery.”

Stanway pointed out that the identity of those intending to ship the oil is proprietary information that can’t be divulged at this time.

“There are some proprietary issues here dealing with some of the engineering and

also with some of the commercial aspects of demand,” he explained. “Who are our customers? Who are our suppliers? Some of those issues relate to proprietary commercial information that we wouldn’t be wanting to disclose at this point. A lot of that is requests from the people involved, either contractors or suppliers or shippers, because we don’t actually have a project yet. It’s not until the approval is given that we … can actually begin the final work on the Gateway project.”

Regardless of the identity of the shippers, Enbridge believes they have a system in place that can considerably reduce the risk of incidents of the type that Sterritt fears may occur.

“There’s a whole range of measures that we would take to ensure the safety of traffic coming in and out,” said Stanway. “And the one thing I would stress is that these measures are not in place right now. These are things that Enbridge would do that would improve the safety for all shipping on the north coast, not just the stuff coming in and out of our terminal at Kitimat.

“There was an interesting report last year by the federal auditor general on the lack of resources for the Canadian coast guard,” he continued. “For example, there are no radar stations north of Vancouver Island on the B.C. coast. None. There’s a lack of navigational aids on the north B.C. coast. And one of the things we’ve said is that to ensure the safety of our own shipping, but also to the advantage of the other shipping, we would install a lot of these other navigational aids, including radar stations. And the sort of requirements we would have to allow shipping into the Kitimat terminal would be very stringent… And they’re our requirements. They’re not Transport Canada’s. Right now, the shipping coming in and out of Kitimat does not adhere to any of these rules that we would put in place. Nobody seems to have a problem with that. Same with the port of Vancouver. The Port of Vancouver has some of its own regulations. But there are tankers coming in and out of the port of Vancouver every day of the week. And nobody seems to be even concerned with that, which would lead me to believe that the concern is more to do with trying to stop our project than it is with any issues of safety.”

Continued on Pg 19

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12 • PIPELINE NEWS NORTH I

December 2011

industry news

asian mission Clark heads East to sell Western energy

Premier Christy Clark speaks at the a luncheon hosted by the BC Guangdong Business Council and the BC Guangzhou Friendship Society held in recognition of the community’s support for the BC Jobs & Trade Mission. image courtesy b.c. government

james waterman Pipeline News North British Columbia Premier Christy Clark was playing the part of traveling salesperson when she embarked on her Jobs and Trade Mission to India and China this November.

It is the role that Clark promised to play when she was declared the new leader of the BC Liberal Party and the new leader of the province last February. She is doing so at an interesting time in B.C.’s history, too, especially as it relates to the natural resources sector and burgeoning economic relationships with Asian nations that are emerging as global powerhouses. After all, prolific natural gas reservoirs in the northeast are poised to supply Asian markets with energy in the form of liquefied natural gas (LNG) through export terminals on the coast; Enbridge’s Northern Gateway pipeline project designed to ship oil sands bitumen from Alberta to Asia via B.C. is facing almost a year of public hearings as part of the Joint Review Panel (JRP) process in 2012; and B.C.’s First Nations have just recently developed a strategy for fostering economic relationships with Asian companies and investors interested in natural resources within their traditional territories. Additionally, Clark made an announcement in late summer that her government was committed to growing the LNG industry in B.C. So, the links between B.C. and Asia are as undeniable as that continent’s growing stature on the global economic scene.

“When we arrived in Guangdong province, the skyline really told the whole story,” Clark said of her first glimpse of China as premier.

“Simply put, China is growing at a mind-boggling rate.

And, as a result, the centre of global economic and

political power is shifting to Asia. British Columbia is in a remarkably good position to take advantage of their growth. Unlike many other jurisdictions around the world, B.C. is on solid economic footing. We have a triple A credit rating and a record of strong fiscal prudence, all of which makes us a safe harbour for investment during this global economic storm. So, I focused on telling Asian investors about B.C.’s vast natural gas potential, industry and service sector expertise, and competitive investment climate, which all continue to offer certainty for investors.

“In Canada, the energy sector is a good place to start a sales pitch,” she continued. “That industry represents the largest single private investor of capital and is a primary driver behind foreign direct investment. It also has a positive economic impact on other industries, such as financial services, engineering services, equipment manufacturing and construction.”

Clark recognizes that B.C. isn’t the only jurisdiction actively pursuing trade and investment opportunities with Asian nations such as India and China. She noted that supplying those nations with LNG is one area where B.C. has strong competitors.

“When it comes to LNG,” said Clark, “we are very aware that timing is critical, as many other jurisdictions around the world are considering exporting LNG to Asia, including the [United States] and Australia. But, overall, this trip confirmed to me that B.C. is well positioned for a changing, more demanding energy economy. Not only are we a leader in safe and responsible natural gas development, but we have an abundant supply of natural gas to meet new demands and new development.

LNG export will allow us to take advantage of what we have to offer. These are all appealing factors for foreign investment.”

Longstanding cultural ties to Asia and the fact that B.C. is the closest North American port to China are reasons

to believe that B.C. is well positioned to benefit from Asia’s thirst for LNG and other trade or investment opportunities that may exist, according to Clark.

“We have a few key advantages,” she said.

“As a leader, I think one of the most important things I can do is to promote B.C. goods and support the companies producing them in whatever ways I can so that they can be successful in foreign markets,” Clark added.

“China and India have an incredible future and, judging from the size of our Jobs and Trade Mission, British Columbians are inspired to be part of it.”

Indeed, the trip involved over 350 representatives from over 150 companies.

Asian companies are also becoming strong players in B.C.’s natural gas industry through investments and joint venture partnerships, but there have also been setbacks in that arena such as the deal between Encana and PetroChina that fell through this past summer.

Clark isn’t deterred by such failures.

“I want the world to know that B.C. is open for business and that’s what our Jobs and Trade Mission was all about,” she said. “I discovered that investors were eager to find out more about B.C. and the opportunities we have here. LNG is a big part of our future growth potential. Cultivating relationships with Asia and other emerging economies, while also developing new infrastructure to enable the transportation of energy products to new markets, will go a long way to growing our LNG capacity and maximizing the benefits of our energy resources. We have seen some foreign companies develop partnerships with large industry players already operating in B.C. These and future joint venture partnerships can accelerate the pace of natural gas sector growth. And possible LNG development.”

The two topics that constantly rise to the surface when discussing resource development in B.C. are the role of First Nations and the environmental impacts of that activity.

“B.C.’s First Nations communities have a lot to offer China and our government wants them to take advantage of opportunities to create jobs and economic growth,” said Clark. “We look forward to working with the First Nations Energy and Mining Council to attract Chinese and other investors to British Columbia. One of the ways we’re going to do that is by establishing an Aboriginal Investment Council and work is well underway in getting it ready to launch. The Council’s Terms of Reference are currently being drafted, a list of potential candidates for Council members is being compiled, and we’re putting a plan in place so the Council can achieve success in creating jobs, attract investment and grow the economy.

“My message has always been that industrial growth doesn’t need to come at the expense of environmental protection and natural gas is a great example,” she continued. “Natural gas is the cleanest hydrocarbon fuel.

It has fewer emissions of sulphur, carbon, and nitrogen than coal or oil, and when it is burned it leaves almost no ash particles. In fact, increased use of natural gas to displace higher carbon fuels is a key mitigation strategy for climate change. Globally, there is a growing need to ensure all sources of energy are developed and used in ways that are environmentally responsible and socially acceptable. B.C.’s regulatory oversight and environmental standards ensure our province is a reliable, safe energy supplier. Strong, consistent environmental guidelines for industry provides international investors and interested operators with the confidence they need to look at B.C. for opportunities in natural gas. I think our environmental track record is one of our greatest strengths.”

Clark emphasized that her Jobs and Trade Mission was just the beginning for growing economic ties between B.C. and Asia.

“Marketing to Asia didn’t stop the moment I got off the plane at YVR,” she said. “We are literally on the doorstep of the fastest growing middle class in human history.

That’s a market we need to be a part of and we are continuing to work with our partners there to strengthen relationships and encourage trade. B.C. is going to lead Canada into the next century, in large part because of the relationships we’re building in Asia today.”

December 2011 I pipeline news north •

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Report released on future North American LNG exports james waterman Pipeline News North The premium price market for natural gas in Asia is the key reason North America has seen a shift from plans to import liquefied natural gas (LNG) to plans to export LNG over the last few years, according to a new report released by an oil and gas industry consulting firm.

The report, authored by Ziff Energy Gas Analyst Julia Sagidova, explains that there are presently ten viable LNG export projects being developed in North America, including the Kitimat LNG project on the British Columbia coast. The emergence of shale and tight gas plays across North America, combined with high natural gas prices in Asia compared to North American prices, has caused producers to shift their focus to exports.

“The oil price is like $100 a barrel and the gas price in Canada is $4.00 an mcf (thousand cubic feet),” said Bill Gwozd, Vice President of Gas Services with Ziff Energy. “And that creates a large ratio between oil and gas.”

However, Gwozd explained, Asian countries base their natural gas prices on oil prices. So, the natural gas price in Asian markets is currently $14.00 per mcf.

“It’s a premium price market,” he added.

Asia is also demonstrating a growing demand for LNG. The remaining question addressed by the report is whether or not LNG export projects are cost effective.

“What’s the price forecast going to be in western Canada to the year 2020?” said Gwozd. “On top of the price forecast, what are you going to pay a pipeline guy

to transport the gas? Then what are you going to pay the boat people to ship it?

And then what are you going to pay to liquefy the gas? What [are] all those costs rolled in? And how much money is left for the producer?”

Sagidova determined producers would still be making between $2.00 and $4.00 per million British thermal units (mmbtu) of natural gas exported as LNG. “When she rolled it all in,” said Gwozd, referring to Sagidova’s calculations, “she found that the premium – the leftover money – above the AECO price was $3.00 and higher. So, not only do you get the AECO price, but after you pay for all your costs, she was finding that these guys will still get a premium of $3.00.

Basically, 75 per cent above the AECO price after all their expenses. And these are real prices.”

Ziff Energy has also played a role in moving LNG export plans forward by testifying as experts during the National Energy Board (NEB) hearings on Kitimat LNG. “We did supply-demand assessments,” said Gwozd.

Sagidova also evaluated the North American LNG projects that are currently in the works and identified strong links between natural gas producers and specific markets in Asia in the form of relationships between North American energy companies and Asian energy companies or investors. Gwozd cited November 29 announcement of a joint venture between Nexen and Japan-based INPEX CORPORATION to develop Nexen’s properties in northeast B.C. as a perfect example of

that trend.

“INPEX doesn’t have any market needs here in Canada. Consequently, it is our independent interpretation that INPEX wants to transport Horn River [Basin] gas to Asia.”

“Second,” Gwozd continued, “we looked at the Penn West [Exploration]-MitsubishiKOGAS consortium in the Cordova [Embayment]. … While KOGAS has operations in the oil sands and, therefore, they could be looking at just gas supply for the oil sands, Mitsubishi is probably the other way around.

So, again, looking at perhaps exporting.”

Shell Canada’s LNG export proposal is linked with China, as well as Korean company KOGAS and Japanese company Mitsubishi.

“That could be very positive because Shell’s a big player … in the Groundbirch in the Montney area,” said Gwozd.

Progress Energy has also developed a joint venture partnership with Malaysian

energy company Petronas in the Montney tight gas play.

“They have no operations here in Canada,” Gwozd said of Petronas. “And so, again, the question [is] what are they looking at. It must be some sort of LNG link.”

Gwozd is confident of that assessment because of the sums of money that Asian companies are investing in Canadian natural gas.

“They’re dropping nominally a billion dollars each,” he said.

“And so we see the producers linking their resource with markets at the other end of the fence,” Gwozd continued. “So, that’s a match made in heaven in our mind, if you can get the producer linked up to specific markets.”

Current and proposed LNG export licences for facilities in North America. image courtesy Ziff energy group

Nexen announces joint venture partnership for NEBC assets james waterman Pipeline News North Continuing the trend of Asian investment in Canada’s oil and gas industry, Canadian energy company Nexen has announced an agreement to develop a joint venture partnership with a group led by Japan’s INPEX CORPORATION to help them unlock the potential of their lands in the shale gas plays of northeast British Columbia.

The agreement, which was announced on November 29, 2011, will see Nexen sell a 40 per cent interest in its holdings in the Horn River, Cordova and Liard basins for $700 million. The owner of that 40 per cent will then be INPEX Gas British Columbia, a joint venture between INPEX and JGC Corporation, a

e 29329

leading engineering contractor that also originates from Japan.

Nexen will remain the operator and continue to hold a 60 per cent interest.

“We identified earlier in the year, in the first quarter, that one of the things we would be looking at doing would be [finding] a way of monetizing the value from our very large land position in northeast B.C.,” said Pierre Alvarez, Vice President of Corporate Relations with Nexen.

“Obviously, from a Nexen point of view, it gets a return to our shareholders for the significant investment we’ve made up there,” he continued. “But I think probably the most interesting part is it brings to us a partner with tremendous skills and experience in resource development around the world, tremendous knowledge

about natural gas markets around the world. And as we look into how we’re going to monetize it, and look at options, including, possibly, LNG (liquefied natural gas), they also have experience there. So, it really brings to us a partner with skills that we don’t currently have to complement the resource development skills that we’ve got.”

INPEX presently has interests in two LNG projects in Indonesia and Australia in addition to building a regasification plant in Japan that will transform the liquid gas back into dry gas. JGC Corporation also has experience with LNG, as well as gas processing.

Consequently, it appears that Nexen may be enjoying good timing with this deal considering the fact that Kitimat LNG recently received National Energy

Board approval for a twenty year export license to ship northeast B.C. natural gas in the form of LNG from the west coast to ports in Asia. However, Alvarez remarked that there was no intention on their part to align those two developments.

“We didn’t set artificial deadlines,” he said. “We wanted to conclude a deal over the course of the year with a partner that we felt comfortable working with. And we’re very pleased that we were able to meet those dates that we had set out at the beginning of the process. We wanted it done by the end of the year. And here we are.”

The partnership may help Nexen move forward on costly initiatives to improve their northeast B.C. operations.

“It’s a question of having a financially strong partner who’s

into the development of this resource over the long term,” said Alvarez. “And that allows us to think big picture and think about new ideas, including ways that we can improve our efficiencies and reduce our impact on the environment. So, I think a strong technically capable partner helps on a whole bunch of fronts.”

Currently, Nexen is drilling an 18-well pad in the northeast that is expected to be completed by the fourth quarter of 2012. Early 2013 should see gross production volumes reaching levels of about 155 million cubic feet (mmcf) of natural gas per day. Overall, the holdings involved in the joint venture partnership could produce 4 to 15 trillion cubic feet (tcf) of natural gas in the Horn River and Cordova Basins and 5 to 23 tcf of natural gas in the Liard basin.

14 • PIPELINE NEWS NORTH I

December 2011

special feature

under pressure Why BC continues to frac while other jurisdictions hit the brakes james waterman Pipeline News North An interesting – but not surprising – piece of news emerged from France on October 3. The French government had just rescinded three exploration permits for shale gas plays belonging to Total SA and Schuepbach Energy. The reason those permits were revoked while about sixty other permits remained valid was simple. The two companies involved insisted that they should employ the method known as hydraulic fracturing to liberate the natural gas from the rock deep underground despite the fact that the practice had been banned in France earlier in the year.

Other jurisdictions such as New Brunswick and parts of the eastern United States that touch on the Marcellus shale have also been cautious about allowing the controversial technique. Quebec has responded to public concerns about the process by putting a hold on all fracturing activity unless it is for the purpose of better understanding fracturing.

So, the question is why fracturing still appears to be so widely accepted in British Columbia when there is so much opposition to the method throughout so much of the world.

“I think part of the reason is that the oil and gas activity in B.C. is in the northeast [where it isn’t] as populated,” said Mark Salkeld, President of the Petroleum Services Association of Canada (PSAC).

Salkeld takes pride in the fact that the member companies of his organization have played a significant role in building a positive public image for fracturing in western Canada simply by doing their jobs.

“Our members do it and they do it really well,” he said.

“We started fraccing 150 years ago. It was like dropping bottles of nitroglycerine down the hole. We’ve known that opening up those formations increases production.

And Canada in and of itself is so highly regulated and controlled that we’ve only gotten better. And we’re very,

very good at it.”

Salkeld gives some credit to the critics of the industry for making sure that PSAC’s member companies – who he describes as experts in their field, committed to innovation and research and development – are good at their work.

“It’s not bad to have people looking over your shoulder,” he said. “Because it helps ensure that things are getting done right.”

However, Salkeld admits that it is easier to create a positive public image in the remote northeast corner of B.C. than in some other regions.

“It’s up in a region where people understand the industry,” he added. “That’s just part of the way of life.

If you brought that down to Vancouver and tried to do it in Coquitlam or something closer to a highly populated base, you’d probably get a bit different response.”

Steve Dunk, BC Operations Manager for the Canadian Assocation of Petroleum Producers (CAPP), also suggests geography is part of the reason fracturing is so well accepted in the province.

“One of the things that I find is similar across all the examples is these tend to be jurisdictions where there isn’t a lot of oil and gas activity [and there] hasn’t traditionally been a lot of oil and gas activity,” said Dunk.

“The first well that was hydraulically fracced in B.C. was in 1950,” he added.

The upshot of having that history of oil and gas development in a particular region is that even the critics of the industry who live amid the activity possess the knowledge to understand and appreciate advances in areas such as efficiency and environmental protection, while critics from jurisdictions without that history may remain skeptical regardless of the information presented to them.

“The more people understand, I think the better they will have comfort regardless of what their particular interest is,” said Alan Boras, a spokesperson for Canadian natural gas producer Encana, which is active in the

natural gas plays of northeast B.C. The interesting factor at play now, as Boras explained, is that the discovery of shale gas and the technological advances that make the exploitation of that resource possible has brought the oil and gas industry to jurisdictions that lack a history with that sector.

“Let’s look at Quebec,” he continued. “It said we kind of want to take a timeout on this. And it wants to understand what’s going on. And the government has a responsibility to ensure that the public interest is managed and protected and preserved with respect to all developments.”

It is all about context, according to Boras.

“So, Quebec obviously hasn’t had this kind of development in oil and gas or in natural gas, but it’s certainly expert in hydro,” he said, suggesting that Alberta would have its challenges convincing its citizens of the merits of hydroelectric generation – just as Quebec has its struggles with oil and gas – if the roles were reversed.

“Pennsylvania has had a long history of oil and gas development,” Boras continued. “Not so much with natural gas, but it has an established regulatory system [and] they’re moving ahead with it.”

Ironically, Encana has run into trouble with the Environmental Protection Agency (EPA) related to their operations in Pavillion, Wyoming, a jurisdiction with a long history of oil and gas exploration. The EPA released a report on December 9 that stated that the local groundwater had been contaminated by chemicals used for fracturing by Encana. Encana refutes the report, however, arguing that the EPA’s methodology was faulty.

“These preliminary conclusions do not stand up to the rigor of a non-partisan, scientific-based review and that is of paramount importance to every natural gas producing community, every citizen and business that relies on natural gas and every industry worker,” said Eric Marsh, Encana’s Executive Vice-President, Natural Gas Economy and Senior Vice-President, USA Division, in a news release issued by the company on December 12.

December 2011 I pipeline news north •

“Safe and responsible natural gas development is vital to North America’s energy security, and hydraulic fracturing is an important, necessary and safe part of natural gas development.”

“What we find is that when people hear about these things, they want to understand from us about how our operations [work],” said Boras, describing how such incidents can have a negative impact on public relations even in relatively industry-friendly jurisdictions like northeast B.C. “So, we do have community relations,” he continued.

“We do that on an ongoing basis. So, we have an ongoing relationship with the people where we operate, in those communities. And we explain our operations and they have an understanding of that.”

However, if other communities hear news such as the EPA report regarding the Pavillion gas field, they begin to wonder if it could happen in their region as well.

“And then we explain the uniqueness of this circumstance in Pavilion,” said Boras. “Plus, we again reinforce how we operate in those areas. And people are just curious about information so they understand. So, yes, we do get additional questions. And, yes, we work very hard to try to build the understanding so that people obviously have confidence in our operations.”

“Education and understanding is always the path to building trust within any sort of circumstance,” he added.

“So, we have videos on our website. We publish brochures. We ask people to explore and understand. And we continually work to try and build the understanding so that they can have confidence in how we operate.”

Boras believes that the people of B.C. generally have a very positive view of its natural gas industry.

“I think there’s very good acceptance,” he said. “And the communities of northeast B.C. and the province of British Columbia have embraced the natural gas developments there. The government has had a very strong strategy to make natural gas development a key component of their economy. They’ve been very successful at that. And they continue to do that looking forward because they see it is a fundamentally important industry.

“They see it as a key platform,” Boras continued.

“And they have been supportive. And they’ve been supportive in a manner to make it competitive. And you’ve heard a lot about that from the provincial leaders.”

Paul Jeakins, the new Commissioner of the BC Oil and Gas Commission, also believes that the industry – including fracturing – is seen in a favourable light in Although hydraulic fracturing has faced strong opposition in other jurisdictions, it continues to be well accepted in northeast British Columbia. images courtesy dave olecko, nexen

the province, noting that he has heard very few negative reports.

“I know there was a fellow arrested in Vancouver recently, but it’s not the top issue that we deal with mostly with the public up here,” he said.

While Salkeld and Dunk have used geography to explain the differing opinions of fracturing from jurisdiction to jurisdiction, Jeakins first looks to geology, as well as issues with private landowners, particularly in the U.S. “I think it’s just a completely different system that they’ve got down there,” he said. “The geology is quite different. I know that the recent stuff that’s been in the news through the EPA was a much shallower formation than what we’ve got here. Our formations are anywhere from 1500 metres to 4000 metres in depth.”

However, people who live in the northeast often say that the rest of the province doesn’t know or understand what is happening in their region in terms of the oil and gas industry. As people in those other regions hear stories along the lines of fracturing bans in France and groundwater contamination due to fracturing in Wyoming, a homegrown opposition to fracturing is starting to build.

“From a regulator’s perspective, our job is to provide as much factual information as we can and make sure our regulations are as up to date and modern as possible,” said Jeakins, explaining the role of the regulator in addressing public concerns.

“We take a lot of input [from the public],” he continued. “We differentiate between the technical regulations that the [Commission] oversees through its board and then the order and council regulations that the Ministry of Energy deals with. So, our technical regulations, we revisit them on a fairly regular basis. OGAA just came in – the Oil and Gas Activities Act just came in – a little over a year ago. So, we’ve been analyzing that over this past year. And we’re going to do a little bit more robust analysis just to see if we’re still at the top of our game in terms of modernizing our legislative framework. The input from the public absolutely plays a part in that.”

Public concerns prompted the Commission to begin research into potential links between fracturing and earthquakes in northeast B.C. this fall.

“We take that one seriously,” said Jeakins. “We take anything around fraccing and the environment seriously.

So, we’re just awaiting the results of the investigation.”

15

CAPP also has a part to play in ensuring the public is comfortable with industry activity.

“The first thing we need to do is we have to acknowledge there are some concerns,” said Dunk. “And I’m hopeful that we’ve been doing that. Basically, the public wants to understand more about hydraulic fracturing.

And, quite honestly, a lot of it is related to water resources. Of course, we understand and respect that. So, I think what we need to do as an industry is continue to do some of the things that we’re doing.”

That work includes creating and updating CAPP’s list of Guiding Principles for Hydraulic Fracturing that was unveiled in September.

“I think we have to continue to do studies – independent science-based studies – that look at the risks associated with hydraulic fracturing. I think we need to continue to have studies that look at the supply side of water, for example. You know, the possibility of using more recycled water, saline water.”

PSAC is sensitive to the public concerns, but Salkeld believes that many of those are based on myths and misconceptions.

“Worrying about the water aquifers and the communication below surface with the water aquifers,” he said, citing an example.

Salkeld doesn’t claim to be an expert in hydrology, but he does know that the formations from which the industry is extracting natural gas in northeast B.C. are about two to four kilometers below groundwater aquifers.

Additionally, he has never heard of a community in B.C. or Alberta where the drinking water has actually been contaminated with methane due to fracturing, which is one of the main concerns.

“It’s naturally occurring methane,” he said of natural gas that occasionally appears in drinking water. “It’s everywhere.”

“A funny side story to that is my in-laws live in Quebec,” he continued. “And my father-in-law’s a diamond driller. He drilled a well in his backyard for water for his vegetable garden fifty years ago.”

That was on the island in Montreal where no fracturing has occurred.

“And he lit that well on fire for a joke every now and again,” Salkeld said with a chuckle. “Just for fun. Because it’s naturally occurring methane that comes out of there. And that’s a fact.”

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16 • PIPELINE NEWS NORTH I

December 2011

careers & training JANUARY

COURSE OFFERINGS S U N D AY

M O N D AY

1

2

New Year’s Day

All Campuses Closed

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T U E S D AY

W E D N E S D AY

T H U R S D AY

F R I D AY

S AT U R D AY

3

4

5

6

7

OFA 1 DC

H2S Alive DC

GODI DC OFA 1 FN

OFA 1 CH Oilfield Heavy Hauler DC FOODSAFE 1 FN

9

10

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GODI CH OFA 1 DC OFA 1 FN OFA 1 TR Red Cross Standard First Aid TR

H2S Alive DC H2S Alive FN OFA TE FN Airbrakes FSJ

Confined Space CH OFA 1 FN H2S Alive FN OFA TE TR

H2S Alive CH GODI FN

Confined Space FN

OFA 1 CH FOODSAFE 1 DC OFA 1 FN

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16

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OFA TE CH

OFA 3* CH BST DC OFA 1 DC

Airbrakes DC H2S Alive DC Forklift Safety FSJ

Fall Protection CH GODI DC Supervisor Safety Management FN

Snowmobile Safety FN OFA 1 FN GODI FSJ Fall Protection FSJ

H2S Alive FN

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*runs until Jan 27

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Fall Protection DC Forklift Safety DC OFA TE FN

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OFA 1 CH OFA 1 DC Confined Space FN OFA 1 TR

H2S Alive CH H2S Alive DC OFA TE TR

CH – Chetwynd Campus DC – Dawson Creek Campus FN – Fort Nelson News Campus FSJ – Fort St. John Campus TR – Tumbler Ridge Campus

27

OFA 1 FN

HAPPY NEW YEAR!

C O U R S ES

C A M P U S ES

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BST – Basic Security Training GODI – General Oilfield Driver Improvement LDV – Light Duty Vehicle Driver Improvement OFA – Occupational First Aid OFA TE – OFA Transportation Endorsement

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December 2011 I pipeline news north •

17

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18 • PIPELINE NEWS NORTH I

December 2011

industry news

Premier Christy Clark and Minster Pat Bell participate in the New West Partnership Investor Roundtable.

image courtesy b.c. government

Sharing the wealth of the West james waterman Pipeline News North Solidarity was the key theme during a press conference with the premiers of Canada’s three western provinces that took place in Edmonton, Alberta on Tuesday, December 13.

New Alberta Premier Alison Redford was hosting British Columbia Premier Christy Clark and Saskatchewan Premier Brad Wall to discuss issues relevant to all three members of the New West Partnership. When they weren’t beating their chests about the strength of their unified front, the conversation turned toward matters such as developing a national energy strategy and the Enbridge Northern Gateway pipeline project that is facing another year of its Joint Panel Review (JRP) process.

“We’ve got a lot of common interests right now,” said Redford, discussing the content of the meetings. “We talked a lot about a Canadian energy strategy, which you know is something I’ve been talking about. We also talked about labour force development, immigration, and ensuring that we are part of a national conversation on issues that matter not only to Western Canada, but to Canada as a whole in terms of economic development.”

“We talked about infrastructure as well, which, of course, is part of economic development,” added Clark. “British Columbia’s coast does not just belong to British Columbia. It belongs to Alberta, Saskatchewan, Manitoba, Quebec, Ontario and the Atlantic provinces. And it’s essential that our ports and our infrastruc-

ture all across the West are functioning what’s going to get the facts out on the as well as they possibly can, because table for us.” that’s what allows trade to flow outside That wait-and-see approach is robour country and that’s what puts people bing British Columbia of its voice in the to work.” process because that voice will be heard Clark’s comments baffled NDP energy too late, according to Horgan. critic John Horgan.

“British Columbians have to make their “Constitutionally,” said Horgan, “our arguments now,” he said. “That’s what the coast belongs to British Columbia. Begintribunal and the assessment process and ning, middle and end. There is no dispute permitting process is all about. It’s not to about the administrative boundaries of wait and see what citizens feel and exthe province of British Columbia within perts allege or argue. It’s about coming to the context of confederation. a conclusion, making a case, and stand“I interpreted ing behind it.

“British Columbia’s coast does not just it as deferring That’s what belong to British Columbia. It belongs to people expect the decision on Alberta, Saskatchewan, Manitoba, Que- from politiwhat British Columbia’s view is bec, Ontario and the Atlantic provinces.” cians. They on tankers and don’t want – Premier Christy Clark infrastructure them to wait on the coast,” and see where he added. the wind is blowing. They want them to Horgan was equally disappointed with stand up and say, ‘Based on the evidence Clark’s comments concerning Northern that I’ve seen, these are the conclusions Gateway. that I’ve come to, and therefore my opin“Certainly, in British Columbia, we ion is [this]. recognize the big contribution that the “But I didn’t get that sense. This is oil sands make to Canada and to our clearly an issue that the premier doesn’t national economy,” said Clark. want to touch while she’s in her re“And in British Columbia, we’re watchcreation mode going from talk show host ing the national environmental review to statesperson. It’s all well and good to process as it works its way through. So, stand beside the premier’s of Saskatchwe’re watching to see. And I think that ewan and Alberta and declare you’re a we’ll be in a position in British Columstatesman, but statesmen make tough bia to have a real fulsome, meaningful decisions and they stand by them. I debate about it once we have all the facts haven’t seen that from Christy Clark. on the table about the impacts for British “The issues are pretty clear,” he Columbia and the benefits for British continued. “Northern Gateway has been Columbia and for Canada as well. And so on the table for some time now. We’re we’re watching this environmental review shaping our position. It’s pretty clear that process very closely. Because that’s many of the people in our party [aren’t

interested]. Gary Coons representing Prince Rupert – not interested. The people that he represents – not interested. The Haida – not interested. And the confusion around where First Nations are, I think, only further muddies the water. And to have the premier then come up and say … it’s not for me to say what happens in British Columbia. Well, what are you the premier for? Perhaps you should go back to being a talk show host. In this business, you have to stand for something, and this is a very decisive issue for many people.

There are those certainly that want to see this happen. And many, many more, based on my assessment that don’t. Our focus is on trying to continue to grow our natural gas sector, which is providing jobs, tax revenue, royalty revenue for the province of British Columbia. The pipeline moving Alberta commodity to market seems to me to be a lot of risk and not a lot of reward.”

The Canadian Association of Petroleum Producers (CAPP) was encouraged by the focus on developing a national energy strategy, however.

“I think there’s a lot of positives to take away from the fact that the leadership in the west is focused on the role energy plays and the things that are going to be important going forward,” said CAPP spokesperson Travis Davies.

“Things like market access via the west coast. Things like regulatory and fiscal regimes that are competitive and harmonized by this jurisdiction. Certainly, the competitiveness of this industry is the key focus for the industry, as is the understanding of people around how our industry works and how we’re performing on the ground. And I think that all bodes well.”

BC supports LNG export

Happy Holidays to all Our

staff Pipeline News North

Peace Country Neighbours

29852//12

A BC Chamber of Commerce poll of the business community in British Columbia shows solid support for the infrastructure needed to build a liquefied natural gas (LNG) industry in the province.

78 per cent of those surveyed said they were aware that BC’s huge gas resource could power domestic and export markets for the foreseeable future. 61 percent of those contacted agreed that BC should develop oil and gas infrastructure that will diversify our exports to include Asian mar-

kets in addition to existing US destinations.

“We must quickly determine how to compete internationally to meet Asia’s voracious appetite for energy while at the same time building capacity for our growing domestic needs,” says John Winter, President of the BC Chamber of Commerce.

A majority also agree the region could become a world leader in the development and export of LNG. Most of those polled believe their businesses could experience added opportunity through the growth of the energy sector and over half believe that natural gas could play a future role in the generation of hydro power.

December 2011 I pipeline news north •

Review must be above-board

Continued from Pg 10 Those motives may not matter if Skuce, Sterritt and Deranger are right when it comes to their doubts about the integrity of the JRP process. Skuce is concerned by the fact that the JRP doesn’t include a single British Columbian, while Sterritt and Deranger are upset with comments made by Prime Minister Stephen Harper during his trip to China, when he remarked that Canada would start moving its oil west toward Asia after TransCanada’s Keystone XL pipeline – which would ship oil sands bitumen to refineries in Texas – incurred yet another setback.

“We’re getting some pretty bad signals federally,” said Sterritt. “The federal government is giving some pretty tough instructions to the JRP. And when you hear a prime minister talking in China and saying that they’re now going West because the t XL pipeline is down, they’re talking about Northern Gateway. And we think that’s a little bit premature when there’s a JRP going on. They have no doubt that the instructions are going to those people to approve the project.

“This is a legal process,” he added. “I think it compromises the

process totally. We’ve had the minister of finance saying that oil’s going to go west now.”

“It’s completely out of line,” said Deranger. “I mean, the fact that we have government officials making statements like that before there has been adequate public review of these projects is completely – it’s misrepresenting, misleading and it’s undemocratic, the fact that our [prime minister] is saying something like that.

“I think,” she continued, “that if it does get approved, regardless of the fact that there has been massive opposition to it, not just from the environmental sector, but from the small landowners and the First Nations communities along the pipeline corridor, I think there’s going to be appeals to that process. And if the pipeline does get granted, there’s going to be a huge [uprising] from the people.”

Annie Roy, Manager of Communications for the Canadian Environmental Assessment Agency, one of two federal bodies leading the JRP process along with the National Energy Board, insists that Harper’s comments will have no impact on the decision of the JRP.

“The government establishes an independent panel to give recommendations to the government,” Roy explained. “And this is a joint panel.

It means that it’s fulfilling requirements of two acts, which are the Canadian Environmental Assessment Act and the National Energy Board Act. So, in terms of the Canadian Environmental Assessment Act, the panel is a recommendation body that needs to look at the project, the environmental effects, and submit their report to government.

“And in the report they will say the project will have significant environmental effects or not, depending on the mitigation measures that are proposed. So, basically, they will submit that to the government and the government will respond to it and say [they] agree with the report or [they] don’t.”

“Just for the record, the government never went against a panel’s recommendation,” she added. “The last one that didn’t go ahead is Prosperity Mine. The panel said the project will have significant effects even given all the mitigation measures that are suggested by the proponent.

And cabinet agreed with the panel.

So, the project didn’t proceed.”

19

Encana sells Cutbank Ridge midstream assets to Veresen james waterman Pipeline News North

Encana announced on December 7 that they have agreed to sell their Steeprock natural gas processing plant in northeast British Columbia and their Hythe natural gas processing plant in northwest Alberta to Veresen.

When the Canadian natural gas company’s plans to develop their Cutbank Ridge properties in a joint venture partnership with PetroChina fell through in June, they declared that they would continue to seek joint venture opportunities and move to sell their midstream assets in the region.

“So, this agreement is obviously part of that objective,” said Encana spokesperson Carol Howes. “The discussions are still ongoing in terms of joint venture opportunities for the undeveloped lands in the area.”

“This sale agreement marks the conclusion of the major components in our 2011 divestiture program, which, upon closing of all transactions, will result in proceeds of about US$3.5 billion,” said Randy Eresman, Encana’s President & CEO, in a news release issued by the company.

“This divestiture of two Cutbank Ridge natural gas processing plants unlocks midstream value that we can profitably reinvest in our core business of developing natural gas and growing liquids production,” he added.

The two plants included in the deal boast a processing capacity of about 516 million cubic feet (mmcf) per day of natural gas and approximately 370 kilometres of associated pipeline. Steeprock is just 50 kilometres south of Dawson Creek, B.C. The Hythe plant is about 10 kilometres east of Steeprock, just across the Alberta border.

The deal is expected to close in the first quarter of 2012.

The agreement to sell the midstream assets was quickly followed by the December 9 announcement that Direct Energy is acquiring Encana’s producing natural gas assets in the Carrot Creek area of west-central Alberta, approximately 160 kilometres west of Edmonton.

“Basically, what we did was we sold Direct Energy certain production reserves for the $58 million,” said Howes.

“And then in return for that, we received some assets as well. It was a swap. There was a sale and also a swap.

And the swap is basically CBM (coal bed methane) properties.”

Direct Energy also receives a gas processing plant with a capacity of 40 mmcf per day of natural gas in adCancor Rathole in Fort St. John unveiled their new rathole dition to 6.2 mmcf per day of production and an increauger – the biggest in North America – on December 13.

Photo james waterman mental 25.6 billion cubic feel equivalent (bcfe) of proven plus probable reserves. The CBM properties in southeast this sort of thing on the road.”

Alberta that Encana receives in the deal also includes Service rigs were included in the legislation and that associated infrastructure. was good enough until Cancor began to use Watson “The development potential of the Carrot Creek assets 2500 series rigs that required tri-drive, tandem steer represents a promising addition to our North American trucks. The new truck is a tri-drive, tri-steer. upstream gas business as we seek further opportunities Hosker gives most of the credit for making his idea a to increase production and reserves,” said Chris Weston, reality to Jeff McNeal at Inland Kenworth, Tyler Kosick at President and CEO of Direct Energy.

Trans Carrier Ltd. (TCL), and Sam Lam, an engineer with “Carrot Creek will provide us with the opportunity to the provincial Ministry of Transportation. leverage our upstream operational experience in the He is pleased that his company is the first to put this region to yield substantial well development and producsort of machine on the road, but he doesn’t think that tivity,” added Badar Khan, President of Direct Energy their auger will be the biggest one for very long.

Upstream. “Today’s acquisition strengthens our growing “Once people see this and see it work and hear about position in Alberta and the western Canadian energy it, well, then, of course, it will spread,” he said. market.”

Giant rathole auger gets to work james waterman Pipeline News North The biggest rathole auger in North America was finally put to work on December 14 after four years of planning and over eleven months of construction.

Daryll Hosker, President of Cancor Rathole in Fort St. John, British Columbia, ordered the new truck on January 31, 2011 in response to the changing wellbore design and the move to multi-well pads that has resulted from the growth of the shale gas industry in the northeast corner of the province. Almost a full year – and $1.75 million – later, the machine is finally ready to go.

“If it wasn’t for shale gas and just the change in wellbore design, then it wouldn’t be needed,” said Hosker.

“But the way things progressed over the last four years – five years – with shale gas, it has really changed what we do.”

The six axle truck was built by Kenworth and is equipped with a Watson Drill Rigs Model 3110TM unit that offers the ability to drill to depths of 160 feet below surface. The cost of the truck also includes a separate truck and trailer necessary to carry equipment such as pipes and augers.

The big challenge getting the truck road ready had to do with weight. The truck requires six axles just to fit below the maximum weight per axle and it was only a few hundred kilograms under the total weight limit when it left the garage.

“We’re just squeaking it in,” said Hosker.

“And to make it all fit on the road, we had to have the rules changed with the [provincial government] to allow

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20 • PIPELINE NEWS NORTH I

December 2011

industry news

going deep Encana planning water resource hub james waterman Pipeline News North Just as they did with their Debolt Water Treatment Plant in the Horn River Basin shale gas play of northeast British Columbia, Encana is working toward using saline water from deep underground aquifers for their completions operations in the Bessborough-Farmington area near Dawson Creek.

The Canadian natural gas heavyweight is planning to develop its Farmington Water Resource Hub with three goals in mind: reduce surface water use; reduce disturbance to the community; and improve overall safety in the region.

The key ingredients are using a saline water source that isn’t suitable for human consumption or agricultural purposes and reducing the amount of truck traffic on local roads.

In order to accomplish those objectives, Encana intends to begin with construction of a saline water storage facility in 2012. Saline water taken from the PaddyCadotte formation – approximately 1000 metres below surface – via existing natural gas wells owned by Encana will be held at that site and initially trucked to wellsites to be used in completions operations.

“To be able to pull the water from that area, we need to have mineral rights to it, because there is a little bit of gas associated with it,” explained Encana Surface Land Representative Jason Blanch.

“So, when we laid our land map or our land picture over top of that geology picture, we came up with two location which will be our two saline source wells.

So, what they are, they’re existing gas wells that Encana has. But those gas wells no longer meet our natural gas production requirements. So, instead of abandoning those wells and putting them to bed, Encana’s plan is to utilize existing infrastructure to minimize our impact or our footprint on the land.”

Encana is also working with the Ministry of Transportation and Infrastructure on improving road infrastructure in the Farmington-Bessborough area based on their preferred truck routes, partly to reduce the impact of industrial traffic on those roads.

“Some of the roads in here are older roads,” said Blanch. “Any amount of industrial traffic really beats those roads up.

So, our engagement with [the Ministry], actually getting them to improve that road infrastructure, actually helps everyone.”

Additionally, Encana has consulted with the Peace River Regional District, the Provincial Agricultural Land Commission, and the BC Oil and Gas Commission to develop a plan for the project that is palatable to the community. The saline water storage is just the first of three stages.

“The reason for the initial phase is we don’t have a lot of long-term tests on this formation to date,” said Blanch, noting that short-term tests have indicated that the water source is adequate for future operations in the region, which aren’t expected to change over the next two years.

“Until we have that long term test,” he continued, “we don’t want to spend a lot of money on infrastructure to build a huge site here that ultimately may prove unproductive. And we’ve had a lot more disturbance to the land. So, upon completion of phase one, and a proven water resource [from] a saline source, we’ll implement phase two, which really starts to increase our water production.”

Saline water is produced in association with natural gas at two of Encana’s compressor stations in the area. Typically, that water would be separated from the natural gas at those sites and sent to a disposal site. The second phase of this project – which is expected to be completed by late fall or early winter of 2012 – will see that water transported by pipeline to the Water Resource Hub, where it will be stored and blended with Paddy-Cadotte water to be used for hydraulic fracturing.

Eventually, a third phase will have flowback water from fractured wells being sent to the storage site via pipeline to be blended with saline water from the first two stages of the project and again used for fracturing. By that time, pipelines will be constructed to distribute water to Encana’s operations in the region. That final phase is expected to be completed by late 2012.

The industry is presently conducting a study to determine the limits of using recycled flowback water for fracturing and those involved in this project will be keeping an eye on those results. The key issue is salt concentration, which increases with the number of times a volume of water is used in completions operations.

“I believe that there is a restriction on salt concentration,” said Encana Water Advisor John Horgan.

Cam Buss, Team Lead for Natural Gas Development with Encana, mentioned that a great deal is already known about

Encana plans to extract saline water from deep underground for their hydraulic fracturing operations in the Farmington-Bessborough area of northeast British Columbia. The saline water well is on the same property as an existing natural gas well owned by Encana, far below the groundwater aquifer. image courtesy encana

dissolved solids concentrations with respect to fracturing.

“When we’re talking about hydraulic fracturing, there’s different methods,” said Buss.

“When we look at putting in a gel type of fracture system,” he explained, “the amount of saline water that we put in a gel system has to be like 100,000 parts per million of total dissolved solids. And some of produced Montney [water] is upwards of 250,000 parts per million. So, we would have to blend with a less saline water source to get it down to [100,000 parts per million] in order to use that type of system. But if we go to a slick water type of fracturing system, we can actually use a higher total dissolved solid concentration in the water.”

Ultimately, the system should provide approximately 120 cubic metres of water per day to be used for fracturing.

“It’s not a huge amount,” said Horgan.

However, the project team is confident that that resource will meet all of Encana’s water needs for the region.

“The goal is a significant reduction in surface water usage with a long range goal of [being] self-sufficient on saline water for completions operations in this area,” said Blanch.

“As far as being self-sufficient and using

no surface water, that’s going to be out in the future,” added Buss. “But we’re still going to have to use some surface water in the short-term. But the goal is to get to be self-sufficient and use this system almost as a recycle system to be able to use our produced water for future wells.”

“The advantage here, number one, is it is a source of water that is not being utilized by industry right now for completions operations,” said Blanch. “We’re going to utilize that instead of disposing it. Number two, it will actually reduce the amount of trucking from these two sites because the water will actually get pipelined underground to this site versus [being trucked] to a disposal site.”

Blanch remarked that Encana estimates 1900 truckloads of water will be necessary for completions operations in the area in 2012. If that can be eliminated by pipelining water to site, that would mean a considerable reduction in truck traffic on those roads, which is an important goal for Encana considering that truck traffic repeatedly appears as one of the biggest concerns of local residents.

“So, less traffic equals less dust, less noise, less inconvenience,” said Blanch.

“We feel that if there’s less vehicles on the road, than the road is safer for everyone.”

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December 2011 I pipeline news north •

21

Investing in oil and gas futures james waterman Pipeline News North

The Alberta School Boards Association honoured the Canadian Association of Petroleum Producers (CAPP) with a Friends of Education Award at a luncheon in Edmonton on Tuesday, November 22.

The award recognizes the organization for its Energy in Action program that travels to elementary schools throughout western Canada to teach students about the oil and gas industry and environmental stewardship. Visits to Cold Lake Elementary School and Iron River School in northern Alberta prompted Northern Lights School Division (NLSD) No. 69 to nominate CAPP for the prize.

“CAPP has really shown an interest in partnering with Northern Lights on various school and community projects and this award helps recognize those efforts,” explained NLSD Board Chair Walter Hrycauk in an NLSD press release. “CAPP’s Energy in Action program provides an invaluable service to Alberta schools on many different levels. It’s not just about classroom instruction and aesthetics in the schoolyard. It is about making the industry operations in each community more relevant to the students and creating an environmental project that benefits the school and community on a long-term basis.”

The event at Iron River School included the construction of an outdoor classroom similar to those built at two northeast British Columbia schools – Ecole Frank Ross School in Dawson Creek and Parkland Elementary in Farmington – last spring. The visit to Cold Lake Elementary coincided with Community Playground Build Day, during which a greenhouse was built. Energy in Action also made stops at Ecole Westhave School in Edson, Alberta and Chalo School in Fort Nelson, B.C. during their 2011 sessions.

“After nine rounds of Energy in Action, we’re extremely excited about it, especially the fact that it’s coming from our target audience,” said Laura Perry, Energy in Action Coordinator with CAPP. “And that’s the schools. It was the Alberta School Boards Association. So, that means they see that we’re adding value and enhancing their curriculum, which is a great feather in our cap, I think.”

Perry took the reins of Energy in Action in 2008,

when the program largely consisted of planting trees in schoolyards.

“No discussion with the schools about sustainability, maintenance, watering and what kind of legacy were we leaving,” she said. “And I realized very, very quickly that tree graveyards in schoolyards was not a good thing for the industry to leave behind.”

“I looked at the program and realized that we needed to make some changes,” she added.

So, the award is personally satisfying for Perry, who has seen the program grow under her supervision.

She is particularly proud of the shift to creating outdoor classrooms at the schools they visit.

“I think that really empowers the students because they can see the change they’ve made,” said Perry.

“They can get their hands dirty and say, ‘I contributed to that.’ That’s why it’s important to me, because I can see the changes that I initially thought needed to happen are on the ground and they are taking shape.”

Perry acknowledged that CAPP shares this award with the member companies that volunteer their resources to the program as well as participating school boards such as NLSD. “It’s a triumph for them,” she said of NLSD. “Because all the school divisions do submit nominations for programs that they’ve benefited from. And so it was really nice that our program and Northern Lights’ nomination was the one that was selected for this award.”

“I just think it’s great that CAPP was recognized,” said Sam Sedlowsky, who represented Encana during the Energy in Action sessions in 2011.

“And we can all be a part of that,” she continued.

“It means, I think, a lot of interest in the future, which is great. I think schools will be knocking and banging down the doors to have Energy in Action come in to their school to see this really great program.”

Perry noted that CAPP and its members had actually been looking at opportunities to raise the profile of the program through awards along the lines of Friends of Education, but this particular honour was a surprise.

“This came to us out of the blue,” said Perry.

“And we’ll be able to say this is an award-winning program,” she continued. “So, it certainly improves our

Receiving the Friends of Education Award. Left to right: Walter Hrycauk, Chairperson of Northern Light School Division; Kimberly Gray, Communications Advisor at CAPP; Laura Perry, Coordinator Energy in Action at CAPP; Jacquie Hansen, President of the ABSA. image courtesy CAPP

credibility with our member companies as well.”

Although CAPP hasn’t had much difficulty convincing member companies to participate in Energy in Action, Sedlowsky suggested that this could help the cause going forward.

“I think it’s just one more proof that it’s a valuable program in the schools and that companies will want to be behind it,” she said. “I think most companies are behind it. But anyone who hasn’t been onboard to date will certainly see that it’s a meaningful thing for the schools.”

“For CAPP, it’s a one day event,” said Perry. “For [the companies], it should be a long term relationship building opportunity. So, it gives us that much more clout and credibility with them when we say, ‘You know what?

We are making a difference in schools and in school divisions. They’ve recognized us.’ And so it will make the member companies realize how important it is that they’re getting into the schools and working with the students and acting as a resource to them.”

Shortages hit Western Canada hardest Continued from Pg 5 “I just say it’s just getting a tad worse every time,” he said. “I don’t think it was quite as bad, but it was bad last time, too. Same thing. We just couldn’t get fuel. And scrambling in the middle of the night. Switching trucks because you knew that truck was full of fuel and the other one was empty.”

“We buy a lot of fuel in the course of a year,” Rosenau continued. “I can buy fuel in Mississauga, Ontario cheaper than I can from Edmonton. And don’t forget Ontario’s got fifteen cents a litre tax. We got nine [cents a litre]. So, when you add the taxes in, excluding GST or HST, we can buy our fuel in Ontario six cents a litre cheaper than we can in Edmonton.”

So, Rosenau feels companies in Alberta and eastern B.C. are getting the short end of the stick when the oil is produced and refined in Alberta, but diesel is less expensive and more plentiful in other jurisdictions, including the United States, “How we get ourselves into these situations, I got no idea,” said Rosenau. “Number one, we produce the fuel here. But yet there’s no fuel shortages in Ontario. There’s no fuel shortages in the U.S. My recommendation would be to slow the pipeline down a bit until our stocks are restored.”

“My American division didn’t experience fuel shortages one iota,” he added. “And fuel in the U.S. is cheaper than I can buy it in Canada. And it’s Canadian fuel. Are we getting ripped? You bet we are. But what

are we going to do? We need the fuel.”

“It’s a struggle,” echoed Dalke. “They haven’t built a refinery [in Canada] in 40 years. They’ve shut down four or five that I can think of. Instead of sending all our oil to the States, they should build some refineries and send them finished product.

“If we have any finished product left, then sell it to them,” he continued. “But to send all our oil down there and they refine it. And they’re not as busy as we are. Then [we] just turn around and buy it back from the States. And that’s a gong show too.

“Even inter-provincial’s tough enough.”

The circumstances have some people wondering why the Canadian petroleum industry is so eager to ship crude oil from Alberta’s oil sands to U.S. refineries via TransCanada’s perpetually delayed Keystone XL pipeline and to Asia via Enbridge’s embattled Northern Gateway project when there is a domestic market for diesel fuel that isn’t being satisfied.

“So, what’s the solution?” said McCoy. “You could say easily more refining capacity. That sounds pretty simple. But at $5 billion for a refinery, it isn’t quite that simple.”

Salkeld pointed out that exporting oil to Asia could be an important piece to the puzzle when it comes to solving Canada’s perennial diesel woes, as those revenues could fuel the improvement and expansion of Canada’s oil refining industry.

“That’s the money that will help us develop here,” he said. “Without a doubt.”

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22 • PIPELINE NEWS NORTH I

December 2011

environment

dinosaurs fossils in the oil and gas business james waterman Pipeline News North Their purpose might not be the same, but oil companies and palaeontologists share a common quest: uncovering the remains – and the mysteries – of prehistoric creatures hidden beneath the surface the earth.

Obviously, oil companies are pursuing fossil fuels, while palaeontologists are simply pursuing fossils.

However, occasionally, the two ambitions cross paths, just as they did on Monday, November 14, when heavy equipment operator Maggy Hovarth found the almost complete skeleton of a Plesiosaur at Syncrude’s Mildred Lake site about 35 kilometres north of Fort McMurray, Alberta.

“We were all really excited,” said Syncrude spokesperon Cheryl Robb. “And for the operator who works for us and who actually did find it, I know she was quite excited, and she actually called her son right away to let him know that she had found a fossil.

So, it’s always really exciting for us to find [fossils]. Because I think there’s a four year old kid in all of us. And so when you talk dinosaurs or fossils – prehistoric fossils – it’s quite exciting.”

The slab of rock containing the specimen has since been excavated under the supervision of staff from the Royal Tyrrell Museum. It will remain on the Syncrude property until spring.

“And then, once the weather turns warm again, we’ll go up and plaster it and cut the blocks down to a manageable size and bring it back here,” said Don Brinkman, Director of Preservation and Research at the Royal Tyrrell Museum.

At that point they will study the specimen to determine its exact identity.

“We know it’s a long-necked Plesiosaur,” Brinkman continued.

“There’s three other specimens that have been collected. One juvenile.

And one part of the pelvic and pectoral girdles.

And based on that specimen, we know that the plesiosaur that occurs there is different from what occurs anywhere else. So, what we’re anticipating is that this will be a better specimen of that kind of Plesiosaur. And we’ll get a better idea of what the animal is like and who it’s related to, how it lived, that sort of thing. And then we don’t have specific plans. It’s going to take a couple years to get it prepared once we get it back here. But it is the kind of specimen that will go on exhibit at some point.”

This discovery marks the tenth time a fossil has been found at the Syncrude site, the last one being a 110 million year old Cretaceous Ichthyosaur found in 2000.

“For us, it’s great,” said Brinkman. “Because there’s no way any of these would have turned up if they weren’t moving that amount of rock. These are obviously very, very rare animals. This is the tenth one, but it’s been ten years since they’ve come up with one. So, they’re very rare animals. And there’s no way we’d be getting any of these if they weren’t doing the work. And Syncrude’s been very proactive in terms of ensuring that they’re preserved.”

Syncrude isn’t the only oil company that has uncovered fossils in their pursuit of fossil fuels. Suncor found an armoured dinosaur known as an Ankylosaur in the spring of 2011. CNRL has found invertebrates that are now in the Royal Tyrrell Museum collection. Resource mining industries are responsible for many of the discoveries that have been studied by the Peace Region Palaeontology Research Centre (PRPRC) in Tumbler Ridge, British Columbia.

“We’ve had quite a few of our sites that have either been uncovered or discovered by industrial operations in British Columbia,” said Richard McCrea, Curator of Palaeontology with the PRPRC, adding that coal mines in Alberta and B.C. have produced numerous large dino-

saur track sites.

A track site was found in a coal mine near Tumbler Ridge this year, while the southeast has also had numerous similar discoveries from coal mining operations.

“I know there was at least one site – track site – that was discovered by a seismic survey crew from CCGVeritas a few years ago,” McCrea continued. “That was in the area of Tumbler Ridge.”

“They just were stringing some seismic lines and were doing creek crossings and things like that,” he said. “And they discovered what they thought were dinosaur tracks on a bank of one of the creeks. The seismic stuff is a lot more low impact these days than it was in the past. When they told us they were coming in the area, I wasn’t all that concerned about their impact. That must have been about three or four

years ago.”

Tracks belonging to an Ankylosaur were discovered at a BG Canada gas wellsite in the summer of 2008.

“They turned over a bunch of rocks while preparing a platform for one of their gas wells,” McCrea recalled.

“And a resident of Tumbler Ridge, actually, recognized that there were footprints on some of these slabs that they’d overturned.

And we went and had a look at them.

And identified about ten track slabs. Big. Like some that weighed a couple tonnes.”

“We contacted BG Canada and asked if they would mind donating those slabs, because it was on their lease,” he continued.

“And they not only agreed to do that, but they transported them to the museum for us.”

Two years ago, Shell Canada donated a bone fossil that they found in one of their borrow pits near the B.C.-Alberta border to the PRPRC. Similar to the recent discovery at the Syncrude site in Alberta, the fossil was uncovered by a heavy equipment operator, Brian Halliday, who works for H.F. Nodes Construction in Pouce Coupe, B.C. The find was part of the tibia of a duck-billed dinosaur known as a Hadrosaur.

“And it had a Tyrannosaur bite mark on it,” added McCrea.

Halliday was fairly confident that he had uncovered a fossil, as he regularly treks through the backcountry near Tumbler Ridge with his brother, trips during which they have seen their fair share of prehistoric relics.

“It was just kind of an interesting thing to find,” he said of the dinosaur bone, which was identified so quickly that photographs were sent to the office in Calgary within half

an our of the discovery.

“Discoveries like this are exciting,” said Carson Newby with Community Affairs at Shell.

Newby knows the story well, as he recently wrote an article about the discovery for Shell’s own Groundbirch Gazette Newsletter.

“I can confidently say,” Newby continued, “if Shell discovered another one today, we’d do the same thing: stop work, find out what we have, and proceed only with the advice and knowledge of staff like those found in the Peace Region Palaeontology Research Centre.”

McCrea noted that the PRPRC has been developing a solid relationship with natural resource industries when it comes to finding and preserving fossil artefacts.

“We have some informal contacts,” he said. “People often get in touch with us in industry. Before they come into an area, they ask what the potential is for the discovery of fossils and often ask our advice on how to recognize them so that they can report them in case they come across them.”

PRPRC has also been involved in creating palaeontological encounter procedures for resource industry companies operating in the region, including recent work for Capital Power Corporation’s Quality Wind project.

“We came up with an encounter procedure that gives them a process to follow in case they come across something that they suspect is of fossil origin,” McCrea explained. “And we also did a workshop for them to help them identify such material.”

The benefits of this relationship go beyond the recovery of rare artefacts that might not be found if oil and gas companies weren’t working on the land in often remote areas where dinosaurs used to roam. Seismic crews have been particularly helpful, according to McCRea. “We’ve been able to piggyback on helicopter support with them to undertake projects,” he explained. “And they’ve helped us bring a lot of specimens back to the museum here that we wouldn’t have been able to have done otherwise.

I mean, one year, we had about $100,000 worth of helicopter support donated to us. So, we have a small museum, but we were able to act like a big one for a little while.”

“It’s good,” McCrea continued, discussing how the natural gas boom in northeast B.C. has helped the cause of the PRPRC. “They’ve helped out in pretty important ways. Of course, we’d like to see them jump in a little bit more.”

McCrea was recently working on a $35 billion liquid natural gas (LNG) project in Australia that required a palaeontological assessment and the company involved immediately offered a $50 million endowment for a museum.

“We don’t hear that here,” he said.

“It’s like pulling teeth. They’ll help you out with small things, but we haven’t seen anything really big.

“Palaeontologists and people in oil and gas, we’re kind of looking for the same sort of thing,” McCrea concluded. “We’re looking for a resource that’s in the ground.”

The complete skeleton of a Plesiosaur thought to be like the one found at the Syncrude site this November. image courtesy royal tyrrell museum

December 2011 I pipeline news north •

23

liquid finances report on water use by industry money. So, you may see less of an impact. But I don’t know about other sectors because I’m not sure how much it costs them to use water.”

One issue is that it could prove controversial to commoditize a resource that many see as a basic human right.

“This is one of the concerns whenever you talk about pricing water,” said Mark Parent, Vice Chair of the NRTEE and one of the authors of the report. “In the report, we very clearly say water has a value, has an economic value, has a value in terms of sustaining life. It has a value in terms of recreational value. It has values across the board. As a subset of that, when we’re looking at 86 per cent [of Canada’s water use coming from the natural resource sectors], is there a way in which a pricing mechanism might help drive more sustainable use of that?”

“It’s a hard thing to place value on,” said Payment. “I think water’s a very emotional issue for almost everyone. I mean, everyone uses it, of course, and is very protective of it. I don’t know how they’ll ever place a value on water. It is invaluable, essentially, not just for industries,

but for people and their every day use.

And I’ll be curious to see the reaction if the government were to introduce more water markets and pricing mechanisms.”

Parent believes the introduction of a water price – or any mechanism that reveals the economic value of water – should be combined with more education about the intrinsic value of water.

“And most of the industries, on an industry level, do understand, not because it’s a cost to them, but because they use so much water,” he said, noting that the cost of water use in all natural resource sectors is low – particularly when compared to energy costs – even when volumes of water used can be quite high.

Parent suggested that a small increase in the cost of water via mechanisms such as water licensing fees or royalty payments to the government could “result in very significant efficiency gains, which keeps the resource there, so that the competitive advantage that our industries have in water worldwide is maintained.”

It may surprise critics of the petroleum sector that the oil and gas industry actually has the lowest water use intensity Continued on Pg 29

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Revealing the economic value of water was among the main recommendations presented in a National Roundtable on the Environment and the Economy (NRTEE) report on water use by the natural resources sector in Canada that was released in November.

Charting a Course: Sustainable Water Use By Canada’s Natural Resource Sectors suggests that small increases in the price of water could translate to significant improvements in terms of water use and conservation across the board.

It is an intriguing notion when considering the use of water by the oil and gas industry for hydraulic fracturing in the tight gas and shale gas plays of northeast British Columbia, particularly if activity ramps up as the sector continues to move toward exporting liquefied natural gas (LNG) from the B.C. coast to Asian markets where the price of natural gas can be almost triple the North American price.

After all, as the value of B.C. natural gas climbs, so must the value of the water

used to extract that resource from the ground.

“Where there is wastage, that’s one way to tighten it up,” said Tara Payment, Manager of Water and Reclamation with the Canadian Association of Petroleum Producers (CAPP), adding that introducing a price on water is just one possible tool for encouraging efficient water use, along with water trading mechanisms.

As a Master’s student, Payment took a course in environmental economics that discussed water management and so she knows this is a complex issue that may require complex solutions.

“It’s just so hard to wrap your head around,” she said. “I think it could have a positive impact. Because, I think, in our homes, for example, water is very cheap for us to use. And I’m pretty sure if our water at home was priced higher, you’d definitely see a reduction in what people were using.”

“It doesn’t really cost you anything to turn on the tap,” Payment continued, “whereas, in industry, it does cost us to use water. The treatment facilities. The pipelines. The trucking. All that costs

34110

james waterman Pipeline News North

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24 • PIPELINE NEWS NORTH I

December 2011

community

keeping it local

supporting BC business is rewarding brock campbell Pipeline News North Shell Canada has been recognized by Energy Services BC for their support of the British Columbia Based Business Certificate Program.

In a presentation held Tuesday Nov. 15 at the Community Futures office, Dave Turchanski,

President of Energy Services BC, presented Rej Tetrault, Northeast British Columbia Operations Manager for Shell Canada with a certificate of recognition for Shell’s support of the program and the local economy.

Energy Services BC is a member-based non-profit organization that serves as a representative for British Columbia’s oil and gas

services sector.

The group is committed to ensuring that growing revenue and thousands of jobs created by the oil and gas industry stay within the province.

“The first company to be in full support of [the BC Based Business Certification] was Shell,” declared Turchanski, who thanked Shell for their dedication

and advocacy of the program.

“In order to increase our confidence level in defined BC based or local businesses, Shell prefers to rely on information from a reputable third-party verification and certification organization, such as Energy Services BC,” stated Tetrault about the significance of the certificate program.

“Shell Canada supports the

use of local businesses in our activities,” said Tetrault. “We track our local spending and on a month by month basis we vary anywhere from 40 to 60 percent on our local spent.”

The program was created by as a method for companies to properly identify British Columbia based businesses and guarantee local hiring.

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British Columbia ended a weaker land sale year on a positive note this week, taking in $60.17 million in its final auction of 2011, the highest at a single sale in 2011.

A total of 42,347 hectares were sold at the Dec. 14 sale at an average price of $1,420.82. For the year, the province collected $222.68 million in bonus bids on 191,529 hectares at an average of $1,162.66. This was the lowest bonus total since 1999 when $176.17 million rolled into provincial coffers.

In 2010, the natural gasprone province collected $844.41 million in bonus bids on 381,132 hectares at an average price of $2,215.54.

Key parcels in the December sale included a group of four drilling licences covering 21,884 hectares located in the Red Creek North-Inga area, about 32 kilometres northwest of Fort St. John.

Collectively, these licences earned $44.4 million in bids at an average of $2,029. The bonus high was produced by Plunkett

Resources Ltd., which paid $13.93 million for a 5,797-hectare licence parcel. The broker picked up three tracts and several sections at 85-22W6, 8523W6, 86-22W6 and 8623W6. Windfall Resources Ltd. acquired an adjacent 5,804-hectare licence for $12.86 million at an average of $2,216. Also in the area, Scott Land & Lease Ltd. picked up a 4,481-hectare parcel for $10.31 million at an average price of $2,301. Stomp Energy Ltd. scooped up a 5,802-hectare licence for $7.29 million at an average of $1,257.

A 3,380-hectare drilling licence in the Aitken Creek North area, about 110 kilometres northwest of Fort St. John, attracted a bonus of $6.3 million at an average price of $1,862 per hectare.

For B.C., the weaker numbers this year reflect the impact of low gas prices and the recognition that large tracts have been acquired by large operators in the most economically prospective areas of the Montney and Horn River, noted Gary Leach, executive director of the Small Explorers and Producers Association of Canada.

“Given these dominant factors are not changing in 2012, it is difficult to see a catalyst that will move the needle in B.C.,” he said. “We think there is potential for better investment levels if the government would consider some changes to their deep gas credit and even to their oil royalty framework that could encourage more investment, particularly from junior and intermediate producers.

“We hope to engage the B.C. government on discussions on these topics in 2012.”

Brad Hayes, president of Petrel Robertson Consulting Ltd., said for B.C. sales in 2012 to even match 2011, there will need to be some success in early wells in prospective but currently risky areas like the Liard Basin, Cordova Embayment and northerly reaches of the current Montney fairway.

“Otherwise the decline may well continue,” he said. “I doubt there will be long-term weakness. I’m not sure what the next big thing will be but with the advances we have been making in thinking and technology, there’s sure to be something.”

December 2011 I pipeline news north •

25

peace region students receive awards staff writer Pipeline News North

Adeline Charlie receiving her award from Paul Perkins, Community Engagement Advisor for Talisman Energy. . submitted photo

Four Northern Lights College students recently were presented with Talisman Energy New Student awards.

Valued at $1,250 each, these awards are available to any Aboriginal student enrolling at Northern Lights College for the first time in any program, except Career and College Preparation.

Student applicants are asked to indicate how the award will benefit their educational goals and the local energy industry featured heavily in their plans.

Three of the recipients are from the Fort St. John Campus: Derek Lalonde (Power Engineering and Gas Processing); Emma Tsakoza (Applied Business Technology); and Brittany Zarichney (Power Engineering and Gas Processing).

The other recipient, Adeline Charlie (Health Care Assistant), studies at the Dawson Creek Campus.

Emma Tsakoza receiving her award from Vice President Academic and Research Peter Nunoda. submitted photo

Encana races against hunger brock campbell Pipeline News North 2010 WPCA Dodge Pro Tour Champion Mark Sutherland can now add 2011 Food Driver of the Year to his long list of career achievements as a chuckwagon racer.

Sutherland is the winner of a contest between drivers of the World Professional Chuckwagon Association, that challenged its chuckwagon racers to raise the most funds and collect the most food for food banks along the Dodge Pro Tour circuit. In total Sutherland personally raised $7,300.

“All thirty-six of the professional chuckwagon drivers had an opportunity to participate and try to raise money, and I was lucky enough to get some local community members behind me and my totals were the most,” said Sutherland about the overwhelming support he received in Dawson Creek.

The Food Driver of the Year challenge was created by Encana as an addition to the Race Against Hunger Campaign – a food drive established in 2010 by Encana and the WPCA in partnership with the Salvation Army.

On tour stops over the summer WPCA chuckwagon drivers would participate in challenges at each community grocery store helping to bag groceries and sell food hampers, meanwhile rallying support for Race Against Hunger.

In recognition of the WPCA’s efforts, Encana offered to match every dollar contributed and $2 for every pound of food donated to each community up to $10,000.

Due in large part to the competition and Encana’s support, Race Against Hunger raised a total of $57,000. The funds gathered this year is more than double the total collected in 2010, when the Race

Against Hunger was inaugurated. As for the food collected, 14,000 pounds of food has been brought in, a number far exceeding last year’s amount of 3,800.

Encana also honoured Sutherland for his commitment to the campaign by allowing him to donate the proceeds he earned himself, along with Encana’s matching contribution of $10,000 to the community of his choosing, with Dawson Creek and it’s Salvation Army branch as his selection.

“A lot of the totals that I raised came directly from the people in the community,” said Sutherland about his decision to donate his proceeds to Dawson Creek, “I went around to people that in some cases were already planning on donating to the food bank already, and they just took advantage of the Encana matching grant.

“You know if I have people bringing $3,000 dollars in from this community, it just makes sense to choose Dawson Creek.”

“Dawson Creek was actually the best location we had, raising over 5,100 pounds of food,” added Brian Lieverse Community Relations Advisor for Encana, who was extremely pleased with how well the campaign went In total, over $23,000 dollars was raised by the Race Against Hunger campaign.

“It gives us a good opportunity to fill all the needs of the community,” said John MacDonald Family Services and Food Bank Director for Salvation Army. “Canada wide, food bank usage is up twenty percent over last year and we know that all the heating bills get high in the winter time so this way we’ll be able to help a little bit more through the winter season.”

Derek Lalonde receiving his award from Campus Administrator Roberta Kuropatwa. submitted photo

Brittany Zarichney receiving her award from Vice President Academic and Research Peter Nunoda. submitted photo

34109

26 • PIPELINE NEWS NORTH I

December 2011 jl

Making time work for you: the magic of compounding Patti and Eric recently got married, and both have started to invest $100 a month in a Registered Retirement Savings Plan (RRSP). They often worry that they’re not investing enough for a comfortable retirement, but they have just bought a house and have found that $100 a month is all they can realistically afford.

Time is working for Patti and Eric through the magic of compounding One of the best ways to make your money grow is through the magic of compounding. Compounding means that you earn money on your capital, or initial investment, as well as on accumulated interest.

For example, if you hold investments that generate dividends or interest in your RRSP, that money is reinvested. The value of your investments increases, so you are now actually generating income on dividend and interest income you have already earned.

As a rule, the more time you have to let your money compound, the faster your savings grow and the sooner you can retire. Plus, the earlier you start, the more you may have when you retire.

Check out the numbers Here’s an example of how much you could save with a $100 per month contribution, at 8% return per year.

Age started Amount contributed Total value of RRSP 25

$48,000

$322,108

35

$36,000

$140,855

45

$24,000

$56,900

55

$12,000

$18,012

A company for all seasons james waterman Pipeline News North Sand and gravel hauler Trans Carrier Ltd (TCL) has expanded its operations in northeast British Columbia and northwest Alberta with the acquisitions of Backcountry Truckin’ and Envirowest Drilling, which were announced on October 1.

“Earlier last summer, I got into discussions with [General Manager Bill Brown] over at Backcountry, and we decided to start moving forward on it,” said Tyler Kosick, General Manager at TCL, noting that Brown will continue to serve as General Manager of the new addition to his company.

According to Kosick, the move benefits both TCL and Backcountry, as the bulk of the sand and gravel business is during the summer, while hauling contaminated soil – Backcountry’s specialty – primarily takes place during the winter.

“We’ve kind of dabbled in contaminated

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$48,000 can yield $322,108 - thanks to the effects of compounding and investing over a longer period of time.

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soil for a long time,” said Kosick, “but [have] never been really strong players in it.

“We can just feed off of one another and actually hit some bigger projects,” he added.

Envirowest Drilling complements the merger because their area of expertise is drilling core samples for environmental studies, thereby determining if soils have been contaminated and the extent of contamination.

“We still have the trade name Envirowest Drilling, but the assets have [been] rolled up and will be running under Backcountry moving forward,” said Kosick.

“Nothing’s really going to change,” he continued. “And we look forward to serving everybody to the same level of service or higher moving forward.”

The new shop at TCL’s Baytree, Alberta location is also expected to be ready early winter of 2012.

Montreal-based SNCLavalin has been awarded a contract by MacKay Operating Corp. to provide detailed engineering and procurement services for the MacKay River central plant project.

The central processing plant approximately 40 kilometres west of Fort McMurray will be designed to process 35,000 bbls per day of bitumen using SAGD (steam assisted gravity drainage).

“Our SAGD team has industry-leading knowledge of oilsands technology and

heavy oil recovery, as well as extensive experience on many similar SAGD projects. This award confirms our ongoing position as a SAGD service provider of choice in the oil sands market in Alberta,” Andy Mackintosh, executive vice-president, SNCLavalin Group Inc.,, said in a news release.

The engineering phase is underway and construction is scheduled to begin in the third quarter of next year with the expected mechanical completion date for the construction in 2014.

MacKay Operating Corp. is a Calgary-based

joint venture between the subsidiaries of PetroChina Company Limited (60 per cent) and Athabasca Oil Sands Corp. (40 per cent).

MOC is focused on the development of a jointly owned asset (MacKay River oil sands lease) and is committed to developing the assets in a socially responsible manner and utilizing environmentally friendly SAGD technology.

The MacKay River commercial project is expected to produce 150,000 bbls per day bitumen with an initial phase of 35,000 bbls a day projected for 2014 start-up.

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Students registered in safety courses at the Fort Nelson Campus of Northern Lights College will be the beneficiaries of a generous $5,000 donation from Esso Imperial Oil. Kandys Stanek of Esso Imperial Oil recently presented a cheque to Workforce Training coordinator Ramona Nehring.

The funds will be used to purchase student manuals for H2S, General Oilfield Driver Improvement (GODI) and First Aid courses offered at the campus.

Kandys Stanek of Esso Imperial Oil and NLC Workforce Training coordinator Ramona Nehring. submitted photo

December 2011 I pipeline news north •

profiles

VE Brandl

27

Quote of the Month

doing business for half a century and still going strong

“And while the law of competition may be sometimes hard for the individual, it is the best for the race, because it ensures the survival of the fittest w for every individual.”

- Andrew Carnegie

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Janette Taylor

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janette@jetsue.ca

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james waterman photo

james waterman Pipeline News North It was fifty years ago this November that a young Vic Brandl purchased his first piece of equipment and went to work on a construction project on the Graham River in northeast British Columbia.

It was a slow year in the oil patch.

So, Vic was pretty fortunate to be supervising the work on a fairly large project for another contractor, a first job that was the beginning of 50 years as VE Brandl Construction, one of the most successful companies of its kind in Fort St. John over that period.

“I can even remember the serial number,” Vic said, reminiscing about that first machine.

It hasn’t been an easy 50 years.

“With the oilfield, it’s always up and down,” said Barry Brandl, the current Vice President of VE Brandl.

Barry and his brothers became shareholders of the company in 1992. Vic stayed on for another ten years before turning the reins over to his boys completely, although he still holds the title of President.

“There’s never a steady pace,” Barry continued. “It’s usually really busy or really slow. And we usually have, it seems like, about three or four good years followed by a couple slow years.

“I guess one of the things that’s helped us most is that practice of keeping debt low so you’re not in a bind having to sell off assets when things do slow down. We’ve grown to about 85 pieces of equipment now.”

Their core business is building roads and lease sites for oil and gas companies. That work takes them into Alberta and up to Fort Nelson.

Business has been good lately, too.

“Nobody expected to be this busy this year.,” said Barry. “Last year

was so-so. And we thought it would be maybe a little busier this year, but the companies we work for were really busy.”

Vic can remember harder times such as the early seventies when B.C. had its first NDP government.

“We were down to three drilling rigs at one time here,” he said.

“That’s all the activity there was in the oil patch. So, that’s about as quiet as we’ve ever had it in this province.”

Another bad spell hit in the eighties.

“The hardest years were during the eighties, of course,” said Vic. “But I was liquid. I had my debt load at just about nil. I could see this coming. I could see it couldn’t go on the way it was forever. We had double-digit inflation and double-digit interest rates. At one time they hit a high of 21 or 22 per cent. And I knew this couldn’t go on. But those conditions were compounded by that National Energy Program, which practically killed the oil patch. Those were the toughest years.”

During the slow years, Vic supplemented his workload and his income by clearing land for farmers and making use of his inventive mind to build new equipment.

“This kept things going in between the flat spots in the oil patch activity,” said Vic. “There have been good years and bad years,” added Barry. “Of course, natural gas price has been down for quite a while. But, in 2008, when everything else crashed, it crashed here too, but all this unconventional gas being here really made this area weather it a lot better than some areas.”

“This area got kind of lucky with this unconventional gas,” he continued, “because even with low gas prices people are trying to lock up the fields. … They believe it’s a long

term investment. And with the talk about LNG (liquefied natural gas) terminals in Kitimat, that should help this area.”

VE Brandl is a family business, but they have benefited from bringing in good people like operations manager Art Smith and quality supervisors and operators.

“We’ve got about ten people working in our shop now just on maintenance and repairs,” said Barry.

“So, our equipment’s probably in better shape than a lot of the other guys. We stay on top of repairs and that. So, that helps keep people too when your equipment’s not breaking down on the job and that. So, it’s tough even with the amount of mechanics we’ve got. We could probably use another one or two just to stay on top of it.”

Improving their safety standards have been a major priority in recent years and their scores on annual safety audits are proof of those efforts, which is important when it comes to getting contracts with the big companies.

The future looks promising for VE Brandl with the emergence of the LNG industry in B.C. “Right now, gas is at a ten year low,” said Barry.

“You’d think there would be nothing going on here with those kind of gas prices. In the past, it’s always been really slow. But with big players with deeper pockets that are looking longer term, you can sustain this [activity]. So, with the amount of money they’re putting in to build these pipelines, it sounds like more of a long-term kind of thing. And that should stabilize things once they can find other markets besides [the U.S.]” “Right now,” he concluded, “natural gas totally depends on domestic and U.S. consumption.”

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VE Brandl Construction’s Vice President Barry Brandl (left) talks shop with President and company founder Vic Brandl.

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28 • PIPELINE NEWS NORTH I

December 2011

community

safety on the job

bringing the message home james waterman Pipeline News North WorkSafeBC is trying a slightly new angle for their 2012 Student Safety Video Contest, hoping for more emotional messages this time around with the theme of “Home in One Piece.”

“We try to make it different each year so that the people watching them can see different things come out,” said Trudi Rondou, Manager of Industry and Labour Services with WorkSafe BC, noting that the 2011 safety video contest revolved around exposure in the workplace.

“One year, we did the right to refuse,” she continued.

“Because we think that’s a fundamental thing for youth to know. For … the one … the students can currently enter into, we wanted something that was a little bit more motivational.

“More looking at the underlying aspects of behaviour [and] the psychology of what makes you want to come home from work in one piece.”

“We’re hoping for some very meaningful, emotional messages on why you should take your own health and safety seriously,” Rondou concluded.

This marks the seventh year that Work-

SafeBC has run the video contest, which is geared towards students from grades 8-12.

“Research has shown us that having youth engaged – and so youth giving other youth peer to peer messages – is one of the most effective ways of communicating,” said Rondou, explaining the goal of the program.

“So, there’s us, the regulator, coming at them with this is what we think you should know about health and safety as one approach. But if we can engage people to create a message for other young people, it tends to be a lot more effective. You know, the language, the medium used, sense of humour or drama, whatever approach they take, seems to be more readily accepted by their peers. And in the end it’s more compelling for them.”

Rondou suggested that this sort of initiative can have a significant impact in locations such as northeast British Columbia where many teenagers are considering jobs in the natural gas industry immediately after high school.

“I think it’s critical, actually,” said Rondou. “A lot of youth who live in more rural areas end up working in more primary resources. And not even just oil patch

specifically, but primary resources.

“We tend to identify primary resources as being more high risk occupations than others,” she added.

Rick Newlove, Manager of BC Operations with Enform, the health and safety association for Canada’s upstream petroleum industry, agrees that the contest could play a role in improving safety within the energy sector.

“We’re pleased to see this type of thing going out,” said Newlove.

“Anything that can make the industry safer, we support,” he continued. “It’s pretty clear. Because that’s our mandate, is to try and ensure that the upstream oil and gas industry is one of the safest that can be. So, anything that can help to promote that is good. So, having knowledgeable students from the get-go would clearly increase that awareness and that mentality. Because trying to change the culture of the industry to ensure that they are very aware of the safety issues is paramount.”

However, according to Rondou, participation in the contest in northeast B.C. hasn’t been as strong as in other parts of the province.

“We tend to market the [contest] at teacher conferences,” said Rondou.

“There tends to be more uptake from lower mainland, interior. Again, whether it’s because those school programs have more, better-funded media departments, we don’t know. But what we’ve said is you don’t have to be in a media program, you don’t have to be in a theatre program, you just need an engaged teacher.

As long as the teacher signs off on the student’s work.”

The submission process and the awards are slightly different this year, too.

“This year’s the first time we’ve had online submissions, which I think is going to be great,” said Rondou. “In the past, students would have to just send us a DVD, we would judge them, and we would post the winners. We’ve tried to make it more interactive this year. They can post them [online]. We’ll go and grab them [and] put them on our site. People can vote for the videos online.

Rondou added, “And now there’s a new people’s choice category. And then at the end of the year … when the contest closes, we’ll do the technical judging of the videos. And we’ll also give out the prize for the people’s choice, which is a combination of the most votes and the highest votes.”

The missing piece Mom’s the word propane left off the map

james waterman

Christina Meir receives the Audrey Clark bursary from Dr. Peter Nunoda. submitted photo

Christina Meir, an Applied Business Technology student at the Fort St. John Campus of Northern Lights College, is the 2011 recipient of the Audrey Clark Memorial Entrance Bursary.

The presentation was made recently by NLC’s Vice President of Academic and Research, Dr. Peter Nunoda. The award is valued at $5,000.

The award was created by Penn West Exploration in memory of Audrey Clark, a former employee of Penn West, and is open to single parents entering full-time studies in either the Applied Business Technology or Business Management programs.

Pipeline News North The Canadian Propane Association (CPA) was left searching for answers when propane was left out of the Natural Gas Use in the Canadian Transportation Sector Deployment Roadmap that was launched on December 9.

CPA President Jim Facette responded by sending a letter to federal Minister of Natural Resources Joe Oliver on December 12 to insist that propane should be part of the shift from diesel and gasoline to less carbon intensive natural gas fuels. He is particularly disappointed with this turn of events because he believed that propane was going to be included in the roadmap.

“We met with Minister Oliver this July to discuss with him energy policy, where things were going in Canada, in advance of the energy ministers meeting in Kananaskis,” said Facette. “Subsequent to that meeting, we received a letter from the minister stating very clearly – articulating very clearly – that propane would be a part

of an energy plan with the Government of Canada.

And then on Friday we see this. So, we’re disappointed that propane was not included in an initiative that’s looking at natural gas liquids to be included in possible transportation alternatives for fleet managers and larger trucks where warranted. Propane is and has been for some time a very efficient fuel for this area. And technology has changed over the years to the point now where it is a seamless transition from one source of fuel to another, from gas to propane.”

“Transport Canada themselves completed some research with a major manufacturer in this area earlier this year,” he continued. “[They did] a series of studies. And they looked at propane in trucks. In particular, the demo vehicle was a Ford E150 van. And saw some very real results in the decrease of GHG (greenhouse gas) emissions.

There was no lost torque.

No loss of power. No loss of distance to the vehicle.

And it [works] extremely

well for home refueling of fleets. So, with those types of realities, we would hope the minister would find his way to include propane in this type of initiative. So, we remain hopeful that that will happen. And only really had the presence we have in Ottawa for less than that amount of time with me hiring staff and all that stuff.

So, we are playing catchup. We acknowledge that.

But we’re hoping that the minister can find his way to include us going forward.”

It appears that the government and industry representatives who developed the roadmap feel that propane isn’t a good fit for the focus of the plan.

“During the Roadmap development phase in 2010, based on the business case modeling work undertaken to identify the optimal end-use applications, it was determined that the Roadmap scope should focus specifically on the use of natural gas in medium to heavy-duty onroad transportation,” said a Natural Resources Canada spokesperson. “This was found to have the greatest value proposition.”

December 2011 I pipeline news north •

environment What is water really Worth?

29

report questions how we manage our shared resource

Continued from Pg 23 all natural resource sectors in Canada, according to the NRTEE report. Oil and gas is responsible for 23 per cent of the total economic output of all those sectors, but only accounts for 0.6 per cent of water use by those sectors.

“It’s interesting,” said Parent. “The oil and gas sector suffers from that both in terms of water usage and in terms of greenhouse gas emissions.”

Contrary to public perception, water use and greenhouse gas emissions are both low for the oil and gas industry, remarked Parent.

“However, that industry is expected to grow and its [water] use grow,” he admitted.

“And so people [key] on that. But actual use of water, it was one of the lowest. The highest is the thermal electrical industry, which uses quite a significant amount of water. But oil and gas is very small. Thermal electric is in the future, out to 2030, to go down by about two per cent. Use in terms of oil and gas will go up by about 95 per cent, I believe. But still it will be lower than three per cent [of total natural resource sector water use] by 2030 in our estimates.”

Escalating activity in the shale gas plays of northeast B.C. is expected to drive that increase in water use.

Payment was pleased with how the NRTEE explained increasing oil and gas industry water use in terms of demonstrating that a 95 per cent increase on a small amount of water used is still a small amount of water. However, she did note that the report used Statistics Canada data from 2005 that likely isn’t as current as CAPP’S information.

“Because of our water reporting requirements, we have a lot more recent data,” she said.

“And I’m not sure if some of the other sectors probably do. Or some of the other provinces do at least. But maybe not across Canada. So, some of their recommendations about more transparent, consistent, easily accessible water data, that’s something we would like to see as well.

“It’s hard when you’re comparing six year old data, and we actually have more recent data, and other provinces don’t. It’s definitely a shortcoming.”

“There isn’t accurate data,” said Parent. “We’re calling upon the federal government to provide adequate data not only of what we have now, but forecasting what the use is, and make this data transparent, so that industry can make decisions on it. Informed decisions.”

A significant problem is that baseline data on most watersheds is lacking presently. Any baselines that are established baselines now will be baselines for altered resources and will not reflect the historical baselines.

“We’re not going to be able to establish a baseline of what was there for forecasting as well as if we’d gotten onboard faster on this,” Parent admitted.

“We are able to do a baseline on present usage right now. And we’re fairly confident of those figures. But in terms of replenishment of an aquifer, how big is the aquifer and the replenishment, it’s already been used.

“They’re not going to be able to do a baseline prior to that. It won’t be possible. Now, some baseline studies have been done. For example, in Nova Scotia, I’m aware of an aquifer, the Annapolis Valley aquifer, which is a big agricultural area, the third largest agricultural area in Canada after the Niagara and the Okanagan, and the government has done quite a good study there.

“So, some have been done. But there are huge gaps in knowledge and information. And unless you have proper information, you can’t make proper policy decisions. So, we need to know more of what’s there, the replenishment rate, and what is forecast to be there.

But in terms of pristine data as to what was there

Charging more for water could lead to better conservation, but it could also bring up human rights issues. metrocreative photo

originally before industry came onboard, we just don’t have that information in a lot of places. And we’ll never have it.”

“I don’t know how you do a historical baseline given that things are so different now than they were 50 years ago,” echoed Payment. “As far as being a knowledge gap, all we can do really is establish a baseline going forward.”

That is why the NRTEE report recommends the joint production of a Water Outlook involving the provincial, territorial and federal governments on a regular basis, the first one to be published in two years. That should help identify long-term trends that will allow government to shape the future of water use and management.

“Because you don’t have the historical data,” said Parent. “The baseline data. So, you’ve got to sort of backfill it in. … And that’s why every two years is what we’re calling for.”

The other key recommendation in the report is improving watershed governance.

“Many of the watershed commissions feel that the

clarity of responsibility’s not there,” said Parent, adding that they also feel they need better resources in terms of financing and expert advice.

Now that the report has been released, the NRTEE is organizing a conference to take place in Ottawa in January that will allow forty people representing industry and environmental organizations to respond to the report.

“And then getting response from them as to how to move the agenda forward from here on in,” said Parent.

“There’s a lot of work being done on water in various ways. Most of that is focused in on drinking water, which, of course, is a concern. But not a lot done on the natural resource sector use of water. And so the next step in our program will be bringing [people] in from across Canada, and looking at the report, and say, ‘Okay, how do we then move from a report that doesn’t just sit on the shelf to actually being used by decision-makers to help in these three areas of promoting greater efficiency, data collection and better governance at the watershed level?’”

30 • PIPELINE NEWS NORTH I

December 2011

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industry news

expanding services SNC-Lavalin acquires Harder Associates james waterman Pipeline News North Engineering and construction company SNCLavalin announced the acquisition of Harder Associates Engineering Consulting on Monday, December 5.

Harder Associates – which was founded in 2003 – is based in the heart of northeast British Columbia’s oil and gas industry with offices in Fort St. John and Fort Nelson, B.C. and Grande Prairie, Alberta and provides consulting services to the energy sector, as well as the construction, environmental and geotechnical engineering fields.

Nothing beats youthful energy

SNC-Lavalin was eager to add Harder Associates to their team for those reasons.

“Harder Associates expands SNC-Lavalin Environment’s (SLE) offering in the geo-environmental, geophysical and hydrogeological markets,” said Jacques Benoit, Senior Vice-President and General Manager of SLE in a news release issued by the company “We are delighted to welcome this firm into the SNC-Lavalin family,” Benoit added, “as they share our strong values related to quality work, health and safety, and the importance of our employees.”

Jeanne Coleman, Manager of Marketing and Communications with SLE, remarked that there will be no lay-offs at Harder Associates as a result of the acquisition.

“We see so much opportunity for growth with this acquisition that we may be hiring more people,”

she said.

“And this acquisition builds on an acquisition that we closed about July 5 of 2011,” Coleman continued. “It was an acquisition of MDH Engineered Solutions, who deal in a similar discipline of geotechnical [and] geo-environmental [engineering]. They’re based in Saskatoon. So, this is expanding on those services, but in B.C. and Alberta.”

Coleman noted that the natural resource industries in those regions are driving the need for services in the geotechnical and geo-environmental fields.

“The acquisition allows us to certainly offer those services in those areas, which we couldn’t really do before,” she said.

Harder Associates will continue to operate under the same name, but now as Member of the SNCLavalin Group.

$73 mil. buys 34 wells

Jesse Pritchard, a student at the Fort St. John Campus of Northern Lights College, is the 2011 recipient of the Bonavista Energy Corporation New Student Award. The award is valued at $500, and is given to a full-time student enrolled in the Oil and Gas Field Operations program. submitted photo

Daily Oil Bulletin Backed by a capital budget of approximately $73 million, Longview Oil Corp. plans to drill 34 (25.3 net) wells in Alberta and Saskatchewan next year.

Plans include seven (5.5 net) horizontal Midale wells in southeastern Saskatchewan; 11 (4.6 net) horizontal Cardium wells at Ferrier/Pembina, Alberta; five (4.6 net) vertical

wells in the Sparky/ Waseca formations at Eyehill/Lashburn, Saskatchewan; four net horizontal Wabamun wells at Nevis; three horizontal Belly River wells at Westerose; two Rock Creek horizontals at Chip Lake; one horizontal Glauconite at Camrose and one vertical well targeting various formations.

The program also includes analysis of cores that were taken

from the Duvernay and Nordegg shale formations on a well that was drilled at Sunset in the fourth quarter. Further evaluation of these zones will depend on the results of this analysis.

Longview has contracted three rigs, two of which will target Alberta prospects. The third rig will target the Midale formation in southeast Saskatchewan.

December 2011 I pipeline news north •

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32 • PIPELINE NEWS NORTH I December 2011