PNN JUNE 2018 by Pipeline News North

ANALYSIS: 11 answers to questions about Ottawa’s Trans Mountain buyout / 6 JUNE / JULY 2018

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Northeast B.C. leaders react to Ottawa’s $4.5-billion deal with Kinder Morgan over the Trans Mountain expansion; Travis Eggers ends Kevin McNee’s win streak at the annual Oilmen’s golf tourney; Petronas steps up to LNG Canada table with a 25% buy-in; and a B.C. firm finds a breakthrough on scrubbing carbon dioxide from the atmosphere

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JUNE 15, 2018

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COMMENTARY

Resource towns never asked for a war on their way of life

atural resource industries in Canada are facing challenges unlike any other industry on the planet. It’s reached crisis level. Using extreme exaggerations, professional activists have set a tone and narrative that says Canadian natural resources are bad and should be stopped. I disagree and have spent the past number of years researching their public and political influence strategies and tactics. This past weekend, I had the honour of visiting Fort St. John to talk with a number of resource people who have had enough of being pushed around. The provincial and national crisis has moved people to take time from their busy lives to stand up and be heard. This is the silent majority stepping up to say enough is enough. So many resource people have told me how they don’t appreciate activists unfairly characterizing them as being on one side of a good/bad divide; because when activists make those nasty assertions about natural resources they are really talking about the resource people who work in them. They are really talking about you and I — the truckers with years of experience moving things safely; the engineers and technicians with years of university and technical education applying their expertise within the industry; and, the scientists who do the real research to find solutions to the world’s challenges. Resource people are the operators that, through their daily work, find innovative solutions and build better practices; they are the industrial medics and safety services that do the training and inspections that keep people and the community safe. They are the welders, pipe fitters, electricians, and mechanics that build it right and keep it working safely. Not only do these people make up Canada’s resource industries they are also the hockey coaches, volunteer firefighters, Girl Guide and Boy Scout leaders, Rotary club members, Cancer Society campaigners, search and rescue volunteers, United Way contributors, and youth mentors. Not one of them gets up in the morning, grabs their lunchbox and says, “I’m off to destroy the

environment.” These people are society’s real providers and protectors. Unfortunately, today, their resourcebased communities are under attack by wily politicos; obstructionist activists working full time to exacerbate a fake economy versus environment divide with smear campaigns aimed at winning at all cost. They impart negative brands on industries to create the politics of division. They claim to do this for the sake of the environment. Maybe they did at one point in time, but the contest has gotten carried away. It’s more of a sport for them today, than real problem solving. Common sense is lost. Unfortunately, the people who really get hurt are resource families. We’ve seen it before. B.C.’s War in the Woods and attacks on aquaculture leave communities in uncertainty or worse in shambles when an industry gets shut down and investment driven away. It’s not a war resource communities asked for. It’s an invasion by special interests forcibly imposing their way. No tactic is off the table for these invaders, including fear, intimidation, and outright fabrication of nonsense. For too long, these professional disrupters have been redefining the way people feel about natural resource industries. Oddly enough, industry is not their target. The general public is. It’s funny, because when I tell people this, it causes them to do a bit of a double take.

Sometimes, I get pushback from people in the city. They will say it’s not about them; it is about the industry. Then I ask them how much they know about modern forestry, or oil and gas, or what ever the so-called controversy of the day might be. I ask them how they came to know certain details about the resource industry currently in the headlines. Why do they know about Kinder Morgan, Energy East, Northern Gateway, or Keystone, and haven’t heard of Atlantic Sunrise, or Rover, or Leach Xpress — just three pipelines making up the 12,875 kilometres of new pipelines built in the U.S. while the Canadian ones were held down? Were they in the bubble bath one day when suddenly the thought of multi-well pads and frac fluid popped into their head? Were they grocery shopping when suddenly they were concerned with the mining end of the oil sands, irrespective of the environmental engineering and post project reclamation? No. Someone trying to recruit the public to action their agenda placed those thoughts there. Think about it. There is no show for these activists without the people. And it is the show that politicizes and polarizes, divides and conquers. The advanced marketing techniques employed by activists prey on people’s trust, goodwill, and emotions. Applying fear and emotionally charged tactics ensure people are bought in before they have a chance to rationally think through what they are buying into. Who can argue with ‘save the planet’, ‘save the wildlife’ or ‘clean water for everyone’ placed up against ‘foreign corporate interests’, ‘deniers,’ and ‘old economy’? These are often the platitude level catchphrases that attract and retain followers. Resource people are catching on and recognize the need for a new approach. Collectively, we need to take a page out of the professional protester playbook and get ourselves organized. My hat is off to the people of Fort St. John for getting the ball rolling. Steve Simons is president of Beyond.Action Strategy, and founder of ResourcEd.

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TRANS MOUNTAIN

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Kinder Morgan buyout draws skepticism, criticism MATT PREPROST The Canadian government says its plan to buy the Trans Mountain pipeline and other assets from Kinder Morgan for $4.5 billion is a necessary and temporary move to protect jobs and invests in the country’s future. But political leaders in Northeast B.C. are skeptical of how the decision will play out, and say the move leaves many unanswered questions about constitutional jurisdiction and the future of private investment in Canada. “The announcement to buy the pipeline assets may be good for the proponents of the pipeline provided the federal government actually proceeds with the project. However, it does not answer the fundamental constitutional question about jurisdictions,” said Taylor Mayor Rob Fraser. “Who has the authority to approve and ensure interprovincial projects proceed? I would have rather the federal government moved more quickly, earlier on in this debate, rather than just buy the problem. What happens with the next controversial project? Do we buy that as well? This is a slippery slope I do not want Canada to be on.” Finance Minister Bill Morneau announced May 29 that the government will buy out Kinder

Morgan Canada and take over its $7.4-billion twinning project from Edmonton to Burnaby. Kinder Morgan will resume its work as the sale is finalized through the summer and, once acquired, the government will try to sell the project to new investors, according to Morneau. “We believe this is the best way to protect thousands of well-paying jobs and the safest and most effective way to get our resources to world markets,” Morneau said. “Make no mistake, this is an investment in Canada’s future.” The announcement comes two days before Kinder Morgan’s May 31 deadline and demand for Ottawa to give it investment certainty that it could carry on construction without political interference. The pipeline has been stymied by antipipeline activism, and a volley of trade threats between B.C. and Alberta. The BC NDP government and its powersharing partners in the BC Greens are both vehemently opposed to the project, and the province has filed a reference case to the courts to determine its jurisdiction in regulating the flow of oil from Alberta through the province. Alberta responded earlier this year with a brief boycott on B.C. wine, and has introduced so-called “turn off the taps” legislation that gives its

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Visit our website www.versaframe.ca energy minister extraordinary powers to regulate oil and gas exports from the province in return. “While this may look on the surface to be an excellent approach, it still leaves questions in my mind about the situation with B.C. and the relationship between B.C. and Alberta,” Fort St. John Mayor Lori Ackerman said of Ottawa’s decision. “As well, what signal is sent to private investors?” According to the Canadian Press, Ottawa’s Kinder Morgan purchase includes the Trans Mountain pipeline, along with pumping stations and rights of way along the route between Edmonton and Vancouver. It also includes the marine terminal in Burnaby, where oil is loaded onto tankers for export. Export Development Canada will finance the purchase, the Canadian Press reports. Dan Davies, the BC Liberal MLA for Peace River North, called the Kinder Morgan buyout a “raw deal” for Canadians. He lay the blame for it squarely at the feet of the BC NDP and Premier John Horgan. “This is just another example of how the Horgan/Weaver government has used its political power to derail an incredible opportunity for private investment,” Davies

said. “The BC NDP is reckless and now we are all in debt. John Horgan picked a fight with Alberta and provoked a conflict with Ottawa over a federally-approved project. This is the embarrassing result.” Two Fort St. John companies, Surerus Pipeline and Macro Industries, are involved in joint ventures that had been selected to build segments of the Trans Mountain expansion. “The advancement of the Trans Mountain Expansion Project is very good news for our business and the Canadian economy,” Sean Surerus, president of Surerus Pipeline, said. “We look forward to furthering our construction plans as we learn more about the projected timeframes ahead of us.” Officials with Macro Industries did not respond to a request for comment. According to 2018 first quarter results for Macro Industries, which is traded on the TSX Venture Exchange, the company noted the estimated value of the Trans Mountain work for its 50/50 joint venture with Spiecapag Canada Corp. was $375 million. —Pipeline News North

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TRANS MOUNTAIN

11 answers to questions about Ottawa’s Trans Mountain ownership NELSON BENNETT Last month, the government of Justin Trudeau took a surprising and dramatic step to salvage the $7.4 billion Trans Mountain pipeline twinning project. The project is critical to oil producers in Alberta, since it would expand the current pipeline’s capacity of 300,000 barrels per day to 890,000. But after facing lengthy delays, legal challenges, public protests, and opposition from B.C.’s NDP government and the cities of Burnaby and Vancouver, Kinder Morgan Canada threatened to cancel the project. The government announced it will buy out Kinder Morgan’s Trans Mountain pipeline assets and assume the financial and political responsibility for getting the twinning project built. Q: What is Canada buying and how much will it cost? A: Ottawa is buying Kinder Morgan Canada’s existing Trans Mountain pipeline and associated assets for $4.5 billion, which includes the $1.1 billion Kinder Morgan has already spent on the expansion project. Assets include the Westridge Marine Terminal in Burnaby, Puget Sound pipeline, a jet fuel pipeline to Vancouver International Airport and terminal and tank farms in Kamloops and Sumas. It does not include assets unrelated to the pipeline, like the Vancouver Wharves bulk terminal. The sale is worth $13 per share to Kinder Morgan shareholders. Q: What will Ottawa own now, and why? A: The existing Trans Mountain pipeline is a critical piece of the $7.4-billion twinning project. One cannot be built without the other. The new line generally shares the same pipeline corridor as the existing one, and requires expansions to key pieces of Kinder Morgan infrastructure, including Westridge Marine Terminal. Kinder Morgan felt that because of opposition from the B.C. government, there was too much political uncertainty to move forward on the expansion project, and Ottawa agreed, saying it is better positioned to deal with B.C. “What we have here is risks and delays caused by political uncertainty,” federal Finance Minister Bill Morneau said. “A private actor can’t deal with that uncertainty between provinces. We’re saying, in order to deal with that uncertainty … we’re exerting our federal jurisdiction by purchasing the project. Over the next stage we are looking to move this project back into the private sector.” Iain Black, CEO of the Greater Vancouver Board of Trade, said, “The government made the best decision from a list of really bad options.” Q: How does this deal work? A: Kinder Morgan has agreed to immediately

resume construction of the $7.4-billion expansion project, with Ottawa agreeing to cover the costs. The sale of the Trans Mountain assets is expected to close in August and is subject to a vote by Kinder Morgan shareholders. In addition to Kinder Morgan’s assets, Ottawa will acquire the management team assembled to build Line 2. Kinder Morgan and Ottawa will try to find a buyer for the existing pipeline and twinning project. Kinder Morgan’s team will essentially end up building the project on behalf of the new owner – the Canadian government – unless some other company steps in right away and buys the project outright. Q: What if Canada can’t find a buyer? Is this a bad investment? A: If Ottawa can’t find a buyer, Canadian taxpayers will be stuck with a highly profitable pipeline. The existing Trans Mountain pipeline made $300 million in revenue last year, with a 9.5% return on equity, according to University of Calgary economics Prof. Trevor Tombe. But Morneau has made it clear his government has no desire to be a long-term pipeline owner. Tombe doesn’t think Canada will find a buyer until after the twinning project is complete, however. “The tricky part is getting it completed,” he said. “But once it’s complete, it’s a very valuable asset.” As Tombe points out, pipelines receive stable revenues from petroleum producers, regardless of where oil prices go, so they are reliable moneymakers. “Once it’s built, they’ll easily be able to offload the asset to a private buyer,” he said. Solomon Associates consultant Jihad Traya agrees: “Bluntly, this is a great asset. It’s a very profitable, very strategic asset.”

are what led to Ottawa committing $4.5 billion to acquire Trans Mountain assets and potentially at least $7.4 billion more to complete the twinning project. Q: Will tolling rates change for the 13 shippers? A: That is a question that the Finance Ministry was unable to answer, and which Alberta oil producers like Cenovus Energy Inc. will be asking as the deal is finalized. Thirteen oil producers in Alberta made longterm commitments for Line 2. Their main concern now is that if the project goes significantly over budget, they could be asked to pay higher toll rates. “As a committed shipper on the project, we will be looking for more details to ensure that our commercial terms will remain reasonable,” said Cenovus CEO Alex Pourbaix, a former longtime CEO for TransCanada Corp. “It is our hope that this additional financial certainty, combined with the federal government’s ability to assert jurisdiction over national infrastructure projects, will allow the project to proceed without further undue delays or significant cost overruns.”

Q: How does this new arrangement address opposition from B.C. and anti-pipeline protesters? A: As a private company, Kinder Morgan does not have the authority to overrule a hostile provincial government – but Ottawa does. B.C. Premier John Horgan has even conceded it will be easier for him to deal with Ottawa, rather than with Kinder Morgan, when addressing provincial concerns over the pipeline. “I do believe that the federal government now is totally accountable, not just for regulation and approval of a pipeline, but they now are responsible from wellhead to tidewater and beyond, Q: Are revenue-sharing agreements with B.C. and I think that allows me to have more candid and First Nations still on the table? discussions with the owners of the pipeline than A: Yes. Morneau said existing benefits agree- I would have been able to when they were sharements negotiated by Kinder Morgan with First holders in a Texas-based oil company,” Horgan Nations will remain in place. The Ministry of said. “The federal government now is completely Finance has also confirmed that the $1 billion accountable, and I think that is probably at the revenue-sharing agreement that Kinder Morgan end of the day a good thing.” struck with the former provincial government reAs for protesters, some of whom have shown mains in place. up at Kinder Morgan shareholder meetings, their The federal government might take some heat adversary is no longer a big Texas pipeline comfor that because the revenue-sharing agreement pany, but their own federal government. Last was part of a bargain with the B.C. government, week, they were already showing up to protest which has since reneged on its support for the Morneau’s appearance before the Calgary ChamTrans Mountain project. ber of Commerce. The revenue sharing – which would provide B.C. with $25 million to $50 million per year once Q: Who might ultimately end up owning and the twinning is completed – was one of five con- operating the expanded pipeline? ditions the previous BC Liberal government set. A: It could be some other midstream comAll five had to be met before the provincial gov- pany, or a joint venture that might include penernment agreed to support the project. sion funds, First Nations, and oil producers that But the new NDP government essentially with- would use the new pipeline. Kinder Morgan itself drew the provincial government’s support. The could even end up being one of the shareholders. B.C. government’s attempts to halt the project “I would not be surprised if it’s the same group,

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PIPELINE NEWS NORTH •

TRANS MOUNTAIN

Workers construct the Trans Mountain pipeline from Edmonton to Burnaby in 1952.

reconstituted with some sort of ownership structure change,” Traya said. “Theoretically you can still have Kinder Morgan having portions of it.” The Cheam First Nation is one Indigenous group that is interested in taking a stake. Chief Ernie Crey said one way of gaining equity is through the federal government’s reconciliation efforts. “Definitely I see an open door to the possibility of taking out an equity position in the pipeline as part of what I would describe as economic reconciliation with Canada,” Crey said. “But for sure we would have to go to large lenders and borrow funds to take out a stake in the pipeline.” Q: What happens if the $7.4-billion twinning project goes over budget? A: Ottawa and Alberta have agreed to indemnify the twinning project, should it encounter unforeseen delays or cost escalations as a result of “political uncertainty.” Alberta has committed $2 billion to cover such unforeseen overruns. Any money Alberta spent would be converted to equity in the pipeline. Moody’s Investors Service says the deal is “credit negative” for Alberta. Some observers have predicted the twinning project’s cost could ultimately be as high as $12 billion. But if the project goes over budget, it will still be a valuable, revenue-generating asset for decades to come, Tombe said. “Even if it gets as high as $12 billion, it’s still economic in terms of the ability to generate revenue once it’s completed.” Q: What cases are still before the courts that could jeopardize the project? A: None, according to Robin Junger, a lawyer specializing in Aboriginal and environmental law with McMillan LLP. More than a dozen court challenges against the Trans Mountain pipeline project have failed. Cases still in play include the B.C. government’s referral to the BC Court of Appeal to clarify

whether it has the authority to restrict the flow of diluted bitumen from Alberta through B.C. The best the province can hope for is acknowledgment that it has the legal authority to impose some conditions on the pipeline under provincial environmental laws, Junger said. “There is no scenario in which the BC Court of Appeal says you can stop this pipeline,” Junger said. “The only question is this: ‘If you have the ability to regulate bitumen at all … how far can you go without stopping it?’” Another important case is still before the Federal Court of Appeal, with a ruling expected any day. In that case, five First Nations argued Canada failed to properly consult Aboriginal stakeholders. It is essentially the same argument made against the Northern Gateway project. In that case, the same court ruled Canada had failed to properly consult, essentially ordering the government to redo its consultations. That never happened, however, because the new Trudeau government put an end to the Northern Gateway project. The worst that could happen is additional delays to the project – delays the federal government is now prepared to indemnify. Q: What message does this send to international investors? A: Nationalizing Trans Mountain addresses one particular project, business leaders say, but more generally it sends a very negative signal. The Trudeau government has essentially conceded that, even though it claims to have jurisdictional authority, it cannot exert that authority without owning the project. “We view the announcement as negative for entities considering large, resource-focused capital investments in Canada such as LNG, pipelines or oilsands projects, given the inability for the rule of law and regulatory approvals to allow projects to move forward,” GMP Securities said in a note to clients. “We are left questioning why any company would pursue large capital investment in Canada.” Jerry Bailey, a former Exxon Mobil Corp. exec-

utive and CEO of Petroteq Energy, which is focused on oilsands production in Utah, said the Canadian government’s decision to nationalize the pipeline was the right one. He expects it will renew investment confidence in Alberta’s oilsands. “I think it will be a big boost,” he said. “There’s no point in investing in anything if you think you’re going to be stuck with a product with no way to get it to market.” But Canadian business leaders say Canada needs to address the deeper problem of a dysfunctional regulatory and political system that has resulted in cancellation of multibillion-dollar projects, divestment from the oilsands by major oil companies and a general flight of capital – all of which are signs that Canada has become unsafe for investors. “All of this talk about investment slowing down – it’s for real,” said Brad Hayes, president of Petrel Robertson Consulting. “Canada has always sold itself as being a low political risk and great regulatory regime. But it is, for real, developing the reputation of being a higher political risk, not because there’s any dictators that are going to take over or whatever, but just because you propose something reasonable and somebody says they don’t like it and it gets ground to a halt.” The Greater Vancouver Board of Trade’s Iain Black called the project “a poster child for why we have to have a very thorough review of what’s going on and fix the problems that are inherent.” Greg D’Avignon, president of the Business Council of British Columbia, agreed, saying controversy over the pipeline “has shone a light on what companies have known for years: Canada is too costly, too complex and takes too long to come to a decision and get things done. “The system has broken down to the point where taxpayer dollars are required to complete major infrastructure projects that support our collective prosperity when there have been willing private-sector, taxpaying investors.” — Business in Vancouver

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OILMEN

Travis Eggers is all smiles after winning the championship flight of the 56th Oilmens Golf Tournament.

Travis Eggers claims top title at Oilmen’s Golf Tournament DILLON GIANCOLA For the first time in six years, Kevin McNee’s name won’t be engraved on the Oilmens Golf Tournament trophy. Instead, that honour goes to Travis Eggers, who won the tournament for the first time since 2012, the year before McNee began his five-year winning streak. In just his second year playing at the Oilmens since 2012, Eggers defeated Dillon Maier Saturday morning, June 9, at Lakepoint Golf and Country Club. “I played really well, as I did all week. It’s nice to win again,” Eggers said. Eggers beat McNee on June 8 in a semi-final match that came down to the final hole. McNee knocked Eggers out of the tournament in the same match in 2017. “Me and Travis had a really good match like we usually do. He just played a little bit better than I did this time. He’s tough to beat and deserves to win,” said McNee. Eggers said the Oilmens tournament was a different beast to conquer than most golf tournaments. “It’s different to prepare for mentally. It takes longer, and your focus isn’t on golf as much as it’s about having a good time. It’s a get-together

where we happen to be playing golf,” said Eggers. McNee echoed the sentiment. “It’s just a whole lot of fun. The golf is secondary to socializing and getting a chance to see your coworkers and friends.” Eggers said the event was important as most of the other players are either a customer or competitor. “It’s a good place for guys who are competitors to just be friends for a weekend,” he said. The Oilmens association is hoping to see a change of the guard at the tournament. A large amount of players are in their 60s or 70s – one player, Ian Titley, 74, won the fifth flight — but there aren’t as many in the younger ages. The chair of the golf tournament, Dan Bonin, said one reason the event has lasted 56 years is because everyone that has ever worked in the oil patch continues to come back and support the tournament. “It’s an opportunity for different generations to come together, and that’s really important,” said Bonin. The golf tournament committee made a decision this year to eliminate a flight, going from 202 players to 192, and it was the right decision. “We’re going to leave it at 192 for the next little while. We can keep it full at that number with a good-sized waiting list,” Bonin said.

FLIGHT WINNERS Championship Flight Travis Eggers 1st Flight Jeremy Clothier 2nd Flight Bud Stewart 3rd Flight Dave Buziak 4th Flight Andrew Moody 5th Flight Ian Titley 6th Flight Colby Wagar 8th Flight Al Levers 9th Flight Len Falls 10th Flight Jay Greenwood

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JUNE 15, 2018

LNG

Petronas to take 25% stake in LNG Canada project NELSON BENNETT It’s official – Petronas, which pulled the plug on its $36 billion Pacific NorthWest LNG project in 2017 – is back in the LNG game in B.C. Petronas and LNG Canada have confirmed earlier reports that Petronas would take an equity stake in the $40 billion LNG Canada project. Earlier this month, B.C. Energy, Mines and Petroleum Resources Minister Michelle Mungall let it slip in an interview with Business in Vancouver that Petronas would join the LNG consortium. Petronas plans to take a 25% stake in the LNG Canada project in Kitimat, to become the secondlargest stakeholder. Shell, the lead partner, is reducing its stake from 50% to 40%. PetroChina Canada Ltd. will hold 15%, Diamond LNG Canada Ltd., a subsidiary of Mitsubishi will hold 15%, and Kogas Canada LNG Ltd. will have 5%. “Petronas is in Canada for the long-term and we are exploring a number of business opportunities that will allow us to increase our production and accelerate the monetization of our world-class resources in the North Montney,” Petronas CEO Tan

Sri Wan Zulkiflee Wan Ariffin said in a news release.” LNG is just one of those opportunities.” The buy-in is still subject to various regulatory approvals, and will take a few months to be finalized. “The transaction announced today does not amount to an FID (final investment decision) which remains pending,” Shell Canada said in a news release. “The timing and outcome of an FID will be decided by joint venture participants

based on global energy markets, and the overall competitiveness and affordability of the project.” One outstanding hurdle for the project to clear are 45% duties Canada slapped on fabricated steel products from China, South Korea and Spain. LNG Canada and Woodfibre LNG have both stated that Canada does not have the expertise to build the large LNG modules needed to chill natural gas gas to below 160 below Celsius, and have appealed to the federal government for exemptions. A final investment decision on the $40 billion LNG plant and the associated Coastal GasLink pipeline, are expected this year. LNG Canada CEO Andy Caltiz has twice this year confirmed plans are to start construction this year. When Petronas announced last year that it was cancelling its $36 billion LNG project in Prince Rupert, the company said that didn’t mean it was divesting entirely from Canada. The company held onto its significant upstream assets in northeastern B.C. – assets acquired when the Malaysian energy company acquired Alberta’s Progress Energy for $5 billion. — Business in Vancouver

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INNOVATION A breakthrough on scrubbing CO2 from atmosphere NELSON BENNETT

Carbon Engineering has spent three years demonstrating direct air carbon capture at its pilot plant in Squamish.

capture since 2009, running our pilot plant since 2015, and we now have the data and engineering to prove that DAC can achieve costs below (US$100 per tonne). “No prior research in the peer-reviewed literature provides a design and engineering cost for a complete DAC system– and this paper fills that gap.” Carbon Engineering is proposing an industrial scale direct air capture (DAC) plant that would remove 1 million tonnes of CO2

from the atmosphere per year and turn it into “net-zero” fuel. The most likely market would be in aviation – the one sector that is unlikely to ever be able to switch from fossil fuels to electric power. Although burning the fuel would produce CO2 emissions, since it came from CO2 that was removed from the atmosphere, the fuel would be considered to be carbon neutral. — Business in Vancouver

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Removing carbon dioxide from the atmosphere can be done on an industrial scale that would be economically viable, according to a new study published in Joule by Carbon Engineering. Carbon Engineering is the Canadian company that built a pilot plant in Squamish that removes carbon dioxide from the atmosphere and uses it to produce a synthetic “drop-in” fuel that could be used in aviation – the one transportation sector that cannot switch to electric power. The company’s largest private investor is Microsoft founder Bill Gates, and its chairman is Dan Friedmann, the former long-time CEO of Macdonald Dettwiler. To date, atmospheric carbon capture has been deemed too expensive to be practical, because of the high energy inputs. Those energy inputs would put the cost of atmospheric carbon capture at up to $1,000 per tonne of CO2, meaning it would be far more economic to simply reduce carbon emissions. But in a paper published in Joule, Carbon Engineering says it has demonstrated that its engineering approach could reduce the costs to $94 to $232 per tonne. “Until now, research suggested it would cost (US$600 per tonne) to remove CO2 from the atmosphere using DAC technology, making it too expensive to be a feasible solution to removing legacy carbon at scale,” said Carbon Engineering founder David Keith. “At CE, we’ve been working on direct air

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JUNE 15, 2018

RESOURCE RALLY

Fort St. John was one of five B.C. cities to a hold a rally May 26, 2018, in support of natural resource development, and the Trans Mountain pipeline expansion.

Resident Craig Stevens holds a sign outside a truck window during a motorcade down the Alaska Highway May 26, 2018, as part of a natural resource rally in Fort St. John. Brian Surerus, Surerus Pipeline.

Peace River North MLA Dan Davies speaks with ResourcEd founder Steve Simons.

A truck makes its way down the Alaska Highway May 26, 2018, as part of a natural resource rally in Fort St. John. Below, Residents gather at the end point for the motorcade at Charlie Lake.

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RESOURCE RALLY

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JUNE 15, 2018

IN BRIEF

Shell sees step change in Montney well productivity Shell just keeps getting better at Montney natural gas drilling. The company’s well productivity in the play has improved by approximately 200 percent since 2016, according to a research report this week from Peters & Co. Shell acquired much of its Montney Groundbirch asset from Duvernay Oil Corp. in July 2008, giving it one of the oldest legacy positions in the Montney. It currently has over 350 producing wells yielding about 520 MMcf/d of natural gas. Rates have increased by 16 percent in the last 12 months, analysts noted. From 2012 to 2015, well rates were consistent with initial 30-day flow rates below ~4.0 mmcf/d. This increased to ~5.0 mmcf/d in 2016

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The Canadian Association of Petroleum Producers (CAPP) has increased its crude oil production forecast for the first time in five years, but its CEO isn’t getting excited about the bump. Oil shipments, which include diluent to blend with bitumen, are already exceeding pipeline capacity, CAPP said. Despite oilsands capital spending that is expected to drop for the fourth consecutive year, CAPP is looking out at Canadian oil production growth above last year’s forecast, averaging about 300,000 bbls/d higher between 2019 and 2030. Total Canadian oil production is now expected to reach 5.4 million

bbls/d in 2030, up from last year’s forecast of 5.1 million bbls/d. The oilsands is expected to grow to 3.82 million bbls/d in 2030, which is up from last year’s forecast of 3.67 million bbls/d, and the 2017 actual rate of 2.65 million bbls/d. The annual forecast is based on a survey of CAPP members. It is a summary of their individualized views of the future, and makes no assumptions about market conditions or pipeline development. CAPP CEO Tim McMillan says the modest increase in growth expectations “a bit of a positive trend.” “There still is some capital spending going in, and companies are working out ways to be more efficient and lower cost,” he said. “The bigger difference is a line which we didn’t put on here, which is compared to where we were in 2013 and 2014. Just a few years ago our growth profile was substantially higher.” — JWN Energy

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as Shell began to drill longer lateral lengths, and averaged ~9.0 mmcf/d in 2017 with 25 new wells coming on-stream. “Well results have demonstrated a step-change in productivity yearover-year since 2016,” Peters & Co. said. “In 2017, wells produced over 1 Bcf of gas in the first five months (on average), compared to 10 months for wells brought on-stream in 2016. In 2018, the results have shown a marked improvement again; there are six wells with average lateral lengths of ~3,100 meters that Shell brought on-stream in January (on the same pad).” These wells have an average initial 30-day natural gas rate of ~12.0 mmcf/d, and produced at an average rate of ~11.7 mmcf/d in month two. Analysts noted that the wells are likely being restricted to have a relatively flat month-over-month profile. — JWN Energy

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• Distributed to the community in general through these ﬁne publications, Alaska Highway News, Dawson Creek Daily and Fort Nelson News. • Distribution by mail and direct drop-off to Oil & Gas companies,and related businesses and organizations, in the following communities: BRITISH COLUMBIA – Arras, Baldonnel, Cecil Lake, Charlie Lake, CHETWYND, Clayhurst, DAWSON CREEK, Farmington, FORT NELSON, FORT ST. JOHN, Goodlow, Groundbirch, HUDSON HOPE, Moberley Lake, Pink Mountain, Pouce Coupe, Progress, Rolla, Rose Prairie, Sunset Prairie, Taylor, Tomslake, TUMBLER RIDGE, and Wonowon. ALBERTA – Baytree, Bear Canyon, BEAVERLODGE, Berwyn, Bezanson, Bonanza, CLAIRMONT, Eaglesham, FAIRVIEW, Falher, Girouxville, GRANDE PRAIRIE, Grimshaw, Grovedale, HIGH PRAIRIE, Hines Creek, Hythe, LaGlace, MANNING, McLennan, PEACE RIVER, Rycroft, SEXSMITH, Silver Valley, Spirit River, VALLEYVIEW, Wembley, and Worsley, Zama City.

JUNE 15, 2018

PIPELINE NEWS NORTH •

IN BRIEF Keyera proceeds with next phase of Montney plant Keyera Corp. says it is proceeding with phase two of its Wapiti Gas Plant near Grande Prairie, Alta., in the liquids-rich Montney play. The project, which has an estimated cost of approximately $150 million, will add 150 million cubic feet per day of sour gas processing to the plant, which is currently under construction. Keyera is also expanding the two gathering systems that will deliver volumes to the plant, supported by commitments from its two primary customers, Paramount Resources and Pipestone Oil Corp. “With the volume commitments we are seeing, it is evident that producers continue to have confidence in this region as one of the most economic developments in the Western

Canada Sedimentary Basin,” CEO David Smith said in a statement. The expansion announcement was not a surprise to market analysts. “Keyera had been indicating the second phase at the Wapiti facility was likely ever since the original plant was announced in May 2017,” GMP FirstEnergy’s Ian Gillies wrote in a research note on Wednesday. “Keyera improves its corporate and project return metrics from adding these bolton projects that improve cash flow with only modest capital requirements.” Despite recent announcements about Keyera expanding into blending and storage in the U.S., the Montney play is its most meaningful near term source for growth, Gillies said. As most of the spending for the expansion is expected to occur in 2019-2020, the company has not increased its 2018 capital spending forecast. The project is expected to be complete in mid-2020. — JWN Energy

Three-quarters of B.C. doesn’t want tax dollars tied to pipeline The majority of British Columbians likely aren’t pleased with Ottawa’s plans to put tax dollars to work on the Trans Mountain pipeline expansion, according to a new poll from Research Co. Survey results released May 31 reveal 76% of B.C. residents are uncomfortable with the idea of the federal government using taxpayer’s money to subsidize a foreign corporation. The survey was conducted from May 25-28, concluding one day before the federal government announced it’s paying Kinder Morgan Canada $4.5 billion for the controversial Trans Mountain pipeline and its related assets.

The results appear to show that British Columbians aren’t keen to the idea of Ottawa stepping in, with 57% of respondents saying they did not back the government’s earlier proposal to indemnify the $7.4-billion project. It’s decision that may come back to haunt Prime Minister Justin Trudeau, at least on the West Coast. The poll shows that 49% of British Columbians say they’re “less likely” to vote for the federal Liberals in the next election. This figure includes the 36% of residents who voted for the governing party. “The federal Liberals, who had one of their best performances in the province in 2015, now stand to lose more than a third of their support base,” Research Co. president Mario Canseco said in a statement. — Business in Vancouver

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