PNN SEPT 20 2018 by Pipeline News North

SPOTLIGHT: Jobs Minister Bruce Ralston tours the Peace / 10 SEPTEMBER / OCTOBER 2018

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B.C. municipal leaders reject fracking ban JEREMY HAINSWORTH Union of BC Municipalities delegates Sept. 14 rejected a call for government to place a moratorium on hydraulic fracturing, the energy industry’s process to extract oil and gas in areas where underground resources can’t be accessed by conventional drilling. The practice, also known as fracking, is used heavily in the province’s northeastern Peace region as well as in Alberta. North Saanich Mayor Alice Finall told delegates the moratorium was needed because the process contaminates millions of litres of water that is then sequestered in the ground. She said seismic activity possibly caused by fracking could cause the release of that contaminated water to the environment. The resolution before UBCM delegates called for a moratorium on fracking until it is proven safe. District of Taylor Mayor Rob Fraser said the UBCM should wait for more information. “The province has a scientific review panel looking at this,” Fraser said. “Let’s look at that report before we make a decision.” Dawson Creek is a centre for energy activity in the Peace Region. City Coun. Shaely Wilbur asked delegates to look at the importance

of the practice. “Water is reused,” she said. “It’s the only way to get it out of the ground. It’s a consumer-use product.” Vancouver Coun. Adrianne Carr, however, supported Finall. “The science is clear that there are these negative impacts . . . regarding water, regarding seismic activity, regarding toxicity,” she said. The BC Oil and Gas Commission (BCOGC), which regulates fracking, has identified waste-water disposal and fracking as causes of seismic activity. “Both activities introduce pressure under the Earth’s surface, which may trigger a seismic event,” the BCOGC website says. “None of the events that have taken place in B.C. have resulted in any property damage or hazards to safety or the environment.” Some delegates questioned why the resolution has returned to the UBCM when similar suggestions have been rejected before. The issue has been controversial worldwide. Quebec said in June it was banning the practice provincewide. It is also banned in the Maritimes and Yukon.

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SEPTEMBER 21, 2018

WHAT IS FORT ST. JOHN PETROLEUM SOCIETY? The purposes of the society “Fort St John Petroleum Association” is to create a nonproﬁt fraternal organization for educational benevolent and social purposes.

• To create a medium through which the society members may express themselves in Social activities, Educational pursuits and Athletic endeavours. • To contribute to the community in supporting worthwhile projects as decided upon from time to time by the society. • To provide entertainment that is enjoyable, instructive and beneficial to its members and families. • To encourage a spirit of good fellowship among the society members

MEMBERSHIP REQUIREMENTS. REGULAR MEMBER: a member who is directly engaged and derives 85% of his subsistence from any of the following petroleum industry enterprises: MANUFACTURING

EXPLORATION

PRODUCTION

MARKETING

DRILLING

CONTRACTING

CONSTRUCTION

CONSULTING

SERVICES

SUPPLIES ASSOCIATE MEMBER: a member who does not qualify for regular membership under the prescribed conditions, but in the judgment of the Board of Directors will provide a worthwhile contribution towards the society objectives. Worthwhile contributions to the society would be participation in the organizational committees for any of the Association’s events (eg: Christmas Party, Hockey Tournament, Golf Tournament, Family Camp Weekend, Trap Shoot, Curling Bonspiel, or any other activity requiring assistance. The associate member shall be entitled to all privileges except that of standing for election to the Board of Directors. A person who intends to apply to become an associate member shall be sponsored by a director. Associate members attending less than SIX regular meetings during the year will be dismissed from the society. VISIT http://fsjpetroleumassociation.com FOR MORE DETAILS

SEPTEMBER 21, 2018

PIPELINE NEWS NORTH •

COMMENTARY

The Port of Vancouver.

Our economies rely on market access

ews that the Federal Court of Appeal had ruled against the approval of the Trans Mountain Pipeline Expansion Project sent shock waves throughout the region and across the country. After more than a year and a half of waiting for the Liberal government to come up with a concrete plan to ensure this project is completed, Canadians are now left wondering where do we go from here? To add insult to injury, Kinder Morgan shareholders voted to approve the sale of the pipeline shortly after the ruling, leaving Canadian taxpayers on the hook for a pipeline that the government isn’t even allowed to build. The fact that the court ruled that the Prime Minister failed to meet his own standards when it came to the consultation process is

troubling. By failing to adapt to the changing legal landscape, the Liberals have failed our workers and the Indigenous Canadians who saw the economic potential in the expansion of the Trans Mountain pipeline. Further cited in the ruling was the fact that project-related tanker traffic was not included in the review. It’s projected the expansion will increase the number of tankers needed from five per month to approximately 34, meaning an

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additional one ship each day. Under our previous Conservative government, measures were taken to strengthen an already robust tanker safety system and when you compare the amount of tanker traffic in ports around Canada and the world, it’s clear this increased traffic can be done safely. For example, in the Netherlands, the Port of Rotterdam sees approximately 30,000 deep-sea vessels, including 8,200 tankers each year. In 2016, the Straits of Malacca and Singapore saw more than 25,000 tankers, up almost seven per cent from the previous year. According to Transport Canada, each year tankers already carry about 80 million tonnes of oil safely from our coasts. In fact, oil tankers have been moving safely and regularly along Canada’s West Coast since the 1930s.

As we know here in Northeast B.C., it’s vital that we get our resources to international markets. The future of our national economy depends on it. I share your frustration with the Liberal government’s gross mishandling of the Trans Mountain Pipeline Expansion Project. I know many of you are angry, and you have every right to be. The livelihoods of hardworking men and women in our resource sector depend on important projects like this one. My Conservative colleagues and I will continue to push the Liberal government to stand up for this sector, come up with a plan to ensure that this pipeline project is built, and fix this mess of their own making. Bob Zimmer is member of parliament for Prince GeorgePeace River-Northern Rockies.

• PIPELINE NEWS NORTH SEPTEMBER 21, 2018

OUTLOOK

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Above: Representatives from Steelhead LNG, Huu-ay-aht First Nations, Hyundai Heavy Industries and the B.C. Provincial government at Gastech 2018 in Barcelona, Spain. | Supplied Photo

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Hyundai Heavy Industries awarded FEED contract for Steelhead LNG project The Kwispaa LNG Project at Sarita Bay on Vancouver Island achieved another significant milestone in its development this week as Kwispaa LNG signed a contract with Hyundai Heavy Industries for the front-end engineering and design (FEED) of two proprietary At-Shore LNG hulls. The award of the FEED contract is the start of the process leading to construction of two At-Shore LNG hulls at a total price of US$500 million. The contract secures the price for the future construction of the hulls and allows for fair price adjustments for certain defined parameters that could change throughout the FEED process. The signing follows the recent invitation to tender to shortlisted EPC (engineering, procurement, and construction) contractors for the FEED work on the At-Shore LNG topsides, marine facilities, pre-treatment, and balance of onshore plant facilities. All FEED work is expected to begin in early 2019. Representatives from Steelhead LNG, Huu-ayaht First Nations, and Hyundai Heavy Industries’ shipbuilding division attending the Gastech conference in Barcelona, Spain, formalized the contract for the design of the two hulls as part of the

first phase of the Kwispaa LNG Project. Each hull is expected to measure 340 metres in length and 60 metres wide and feature five individual tanks that provide approximately 280,000 cubic metres of internal LNG storage. “This agreement with Hyundai Heavy Industries for two At-Shore LNG hulls again demonstrates the technological innovation and creative solutions that we are developing as part of the Kwispaa LNG Project to offer Asia-Pacific buyers with cleaner and competitively priced LNG from Canada,” Nigel Kuzemko, Steelhead LNG chief executive officer, said in a release. The Kwispaa LNG Project is a proposed LNG export facility on land owned by the Huu-ay-aht First Nations. The 475-hectare site provides natural deep water and is a short distance to open ocean for efficient access to market. With a final investment decision anticipated in 2020, the first phase of the project is expected to be operational in 2024, and will provide capacity of approximately 12 mtpa (1.9 bcf/d) with the ability to expand to 24 mtpa in the future. — Daily Oil Bulletin

SEPTEMBER 21, 2018

PIPELINE NEWS NORTH •

OUTLOOK

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September sale draws $835,492 B.C.’s September land sale drew $835,492 in bonus bids this week. The government sold 2,782 hectares on Sept. 12 at an average price of $299.78. Elk Run Resources Ltd. picked up a 2,228-hectare drilling licence for $607,419.64, or $272.63 per hectare. Storm Resources Ltd. picked up a 559-hectare lease for $228,072.50, or $408 per hectare. Year-to-date, the government has attracted $60.51 million in bonus bids on 58,330 hectares at an average price of $1,037.30. That compares to $169.18 million over the same stretch of 2017 for 64,050 hectares at an average price of $2,641.30. The September sale capped off a weak third quarter in which the province took in just $1.06 million in bonus bids on an average price of $259.40. That compares to $15.82 million ($328.16/ha) in the first quarter and $43.63 million ($7,220/ha) in the second quarter. There are three sales left in B.C.

this year. The next sale is scheduled for Oct. 10. “In our view, the most interesting results [at the September sale] were near Laprise,” said a note by TD Securities Inc. where Storm Resources Ltd. “acquired two sections for $0.2 million (average of $165/acre).” TD stated: “Although this is not contiguous with any publiclydisclosed Storm acreage, the acquired lands are offsetting Saguaro Resources. Additionally, there was another land parcel (~8.5 sections) acquired for $0.6 million ($110/acre) slightly further up-dip from the Saguaro Montney lands and that could be prospective for Montney as well, but it has higher risk due to potentially lower pressure and higher water production. There has been no industry Montney activity surrounding these 8.5 sections … but we will watch with interest.” — Daily Oil Bulletin

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OUTLOOK

Geoscience BC, UBC project maps sour gas A new study will map poisonous sour gas pools in Northeast B.C. as part of a project to improve safety and cut costs of natural gas production, Geoscience BC announced. Geoscience BC says the project will map and predict where sour gas and hydrocarbon liquids are found throughout the Western Canadian Sedimentary Basin in the region, including the Montney, Doig, and Duvernay formations. The project is being led by the University of British Columbia. “The Montney, Doig, and Duvernay formations are important areas for natural gas activity, but the distribution of sour gas within these formations is complex,” said Dr. Marc Bustin, an earth, ocean, atmospheric sciences professor, and principal investigator for the project. “By mapping and predicting its location, natural gas production can be safer as well as easier and cheap-

er to plan.” Sour gas is a type of natural gas that contains hydrogen sulphide, which is colourless but has the distinct smell of rotten eggs. At levels of just 500 parts per million, it can kill a worker in seconds, according to WorkSafeBC. That creates health, environmental, and economic hazards for operators that come across the gas in the production process, Geoscience says. “This project will provide detailed maps of produced gases and isotopic analyses, as well as predictive maps of hydrogen sulphide distribution across northeast British Columbia,” said Carlos Salas, chief scientific officer and executive vicepresident of Geoscience. “It will also include reservoir production models to help plan resource exploration and drilling programs.” —Pipeline News North

A sour gas well north of Fort St. John.

B.C. awards $139M in royalty credits for oil and gas projects Energy companies are receiving $139.3 million in royalty credits for 27 infrastructure projects that support oil and gas development and cut emissions in Northeast B.C., according to the province. The province has awarded $120 million in credits for 20 projects through the Infrastructure Royalty Credit Program for new roads and pipelines. The province says the value of the projects totals $743 million in private capital investment, and creates more than 1,740 jobs. Five of those projects use electricity to reduce emissions, it adds. Meanwhile, the province award-

ed $19.3 million in credits for seven projects through the Clean Infrastructure Royalty Credit Program for cutting emissions in oil and gas exploration and production. Those seven projects represent $78 million in capital investments, and will cut emissions by 0.6 million tonnes of CO2 equivalent, the province says. Companies must fully fund and finish a project before it can apply for the credits, which allows them to write off a portion of their costs by reducing the amount of royalties they would otherwise pay to the province for production. —Pipeline News North

SEPTEMBER 21, 2018

PIPELINE NEWS NORTH •

OUTLOOK

Appeals court quashes Trans Mountain pipeline approval Kinder Morgan Canada shareholders approved the sale of the Trans Mountain pipeline and expansion project to Ottawa for $4.5 billion minutes after the Federal Court of Appeal dealt the project a major setback last week. On Aug. 30, Kinder Morgan confirmed that 99.98% of shareholders voted in favour of selling the beleaguered pipeline project to Canada for $4.5 billion. The expansion is now Canada’s headache, and the headache just became a migraine. Earlier that morning, the Federal Court of Appeal quashed the order in council that approved the project, sending it back to the drawing board. Trans Mountain has confirmed that work will now stop on the $7.4 billion expansion, which is almost now certainly going to cost more than that to complete. “Trans Mountain is currently taking measures to suspend construction related activities on the project in a safe and orderly manner,” the company stated in an email to Business in Vancouver. Canada is now stuck with a project that will almost surely escalate in costs, because the project must now go back to regulators, if it is to proceed at all. At a press conference in Ottawa, Federal Finance Minister Bill Morneau said his government plans to move ahead with the acquisition of the existing Trans Mountain pipeline and expansion project. Morneau refused to say whether his government will appeal the court decision to the Supreme Court of Canada, or simply go back to the drawing board. “We will analyze this decision,” Morneau said, adding it is 275 pages long, “and we will respond promptly. That is what the court has asked us to do. We will do that, but we have not gotten to conclusions on the exact response.” In either case, it means the expansion project will be delayed. The last estimate of the expansion was $7.4 billion. But in a proxy statement to shareholders, Kinder Morgan put forward a number of scenarios. One of the scenarios was a completion date of 2021 and a capital cost of $9.3 billion. Given the delay that either a Supreme Court challenge or a regulatory redo will cause, that number is looking more realistic now than $7.4 billion. The Government of Alberta has agreed to cover up to $2 billion worth of overruns in exchange for equity in the expanded pipeline.

Sean Surerus, president of Surerus Pipeline, speaks at a resource forum in Fort St. John earlier this year.

The Federal Court of Appeal ruled that the National Energy Board (NEB) failed to properly consider the impacts of increased tanker traffic on the marine environment from an expanded pipeline. The expansion would increase oil tanker traffic from five to 34 tankers per month. Because it failed to consider the impacts on the marine environment, including the impact on killer whales, the appeal court said federal cabinet was not fully informed on environmental impacts when an order in council gave the expansion the green light.That order in council decision is now quashed. The court has ordered that the issue of marine traffic now be referred back to the NEB “or its successor.” The court noted that, despite acknowledging potential impacts on Southern Residents Killer Whales, the NEB considered marine traffic impacts to be incidental, so a full environmental impact assessment on the marine environment wasn’t done. “The unjustified failure to assess the effects of Project-related shipping under the Canadian Environmental Assessment Act, 2012 and the resulting flawed conclusion about the environmental effects of the Project was critical to the decision of the Governor in Council,” the court writes. “With such a flawed report before it,

the Governor in Council could not legally make the kind of assessment of the project’s environmental effects and the public interest that the legislation requires.” As with the Northern Gateway pipeline project, the court also found that the federal government failed to do a proper job of consulting First Nations. Five First Nations were part of the consolidated federal appeal court challenge. The court has ordered Canada and its regulators to redo Phase 3 consultations with First Nations. “Only after that consultation is completed and any accommodation made can the Project be put before the Governor in Council for approval,” the court writes. Local business impact According to the Canadian Press, Trans Mountain reported more than 2,000 people were working on the pipeline. That was expected to jump to 5,000 next year. Two Fort St. John companies, Surerus Pipeline and Macro Industries, are involved in joint ventures selected to build segments of the expansion in B.C.’s Interior. Macro’s portion of the work with JV partner Spiecapag Canada Corp., involved 85 kilometres of pipeline to be built along the Coquihalla-Hope cor-

ridor. That work was valued at $375 million, and was expected to last two years. “At this point we don’t know any more than what the news is saying,” President Frank Miles said in an email Thursday. In Macro’s second quarter results released last week, two days before the court ruling, the company noted it was continuing discussions with stakeholders and waiting for its notice to proceed. “The exact timing on this project is not determinable at this time,” the company reported. Surerus shares a 50 per cent stake with London-based J. Murphy & Sons in the Surerus Murphy Joint Venture, selected to build 180 kilometres of pipeline between Black Pines and Merritt. President Sean Surerus could not be reached for comment earlier this week, but has previously called Trans Mountain the “backbone” to the company’s growth. Both companies are working on the $1.4-billion North Montney gas mainline under construction in Northeast B.C., and have been selected to build portions of the $4.8-billion Coastal GasLink pipeline to Kitimat, pending a positive final investment decision for the LNG Canada project. — Business in Vancouver, Pipeline News North

• PIPELINE NEWS NORTH SEPTEMBER 21, 2018

COMMUNITY

FACEBOOK/FORT NELSON FIRST NATION LANDS DEPARTMENT

September 18 marked Day 1 of a restoration project that Fort Nelson First Nation Lands Department and the BC Oil and Gas Commission is conducting to trial new restoration techniques that are more environmentally and culturally appropriate. This old campsite along the Clarke Lake Road is being restored and the two organizations are conducting soil decompaction before winter and will plant the site with native species next spring.

The oil and gas environment and me SHAURYA KARKI This was a very interesting summer, touch wood. I was in the middle of “stretching” myself and loose muscles have never felt better. I was up north interning with the British Columbia Oil and Gas Commission (BCOGC). In a nutshell, this single-window regulatory agency is responsible for

overseeing oil and gas operations in British Columbia, including exploration, development, pipeline transportation, and reclamation. Keeping things on point, I worked on ensuring that there aren’t any lasting environmental impacts after the completion of oil and gas activities. This is an important step in moving towards a balanced ecosystem as it confirms that surroundings are back to a

healthy state. Learning about industry norms and terminology has been challenging but worth it. As a student in chemical engineering, I am avidly learning about groundwater sampling and aquifers. I look forward to contributing to the policy guideline for hydrogeologists/hydrologists/public to characterize aquifers under the oil and gas sites as part of risk assessment/man-

agement or general interest. Correctly characterizing aquifers will help find the optimum location for sites and thus minimize risks associated with it. Shaurya Karki was a summer student with the BC Oil and Gas Commission.

SEPTEMBER 21, 2018

PIPELINE NEWS NORTH •

COMMUNITY Oil companies key to success of Fort St. John sports DILLON GIANCOLA The ability of volunteer groups and organizations in Fort St. John to put on impressive and first-class sporting events is no longer a surprise — it’s expected. Whether it’s big hockey events like the World Under 17 Hockey Challenge, the Crystal Cup, the Alberta Junior B Provincials, or events like high school rodeos and disc golf tournaments, residents can expect volunteer groups to put in a ton of work, time, and energy to make sure the events are the best they can be. What’s often overlooked is the role local companies in the oil and gas industry play in ensuring sports continue to thrive in Fort St. John. Sponsorship is key to these events and leagues taking place each year, and the oil companies take pride in giving back to their community. Lee Hartman, owner of Black Ace Supply, which provides pipes, valves and fittings to oil and industrial companies, has first-hand knowledge of the importance of sponsorship from oil and gas companies to the success of sports events. He’s also the general manager of the Fort St. John Senior Flyers, and prioritizes sponsoring local events as much as he’s grateful to companies who sponsor the team. “With the Flyers, we couldn’t do what we do without the support of the local businesses,” Hartman said. “Companies whose owners have been in this community for many years and who appreciate what organizations like the swim club and hockey teams do make sure they support us. Almost every locally-owned company donates to and sponsors events in Fort St. John, and that it’s a solid community that supports its kids in sports and entertainment, Hartman said. Other companies involved in sponsoring events are Northern Metalic Sales Inc., Tom’s

The Ross H. MacLean Peewee A Flyers take donations for the Salvation Army at the Senior Flyers game on Nov. 30. Industry is key to supporting minor hocke yin For St. John, which helps develop to-notch talent and good citizens.

Construction, and Rogers Trucking, to name a few. “We try to donate as much as we possibly can. It’s very important for us because we’re a local business and locally run,” said David McDougall, store manager at Northern Metalic, a company that sells industrial supplies for the oil and gas industry. “The owners work here and the majority of us grew up in the community, and at one point or the other were probably beneficiaries of these programs. Northern Metalic sponsors both the Fort St. John Minor Hockey Association and the Senior Flyers, tournaments organized on by the Fort St. John Disc Sports Club, and have sponsored curling and basketball in the past.

For Hartman, it’s important to him as a business owner that community members and customers see that when they buy product from Black Ace, the money goes back into the community and isn’t shipped away. Black Ace sponsors several events put on by the Fort St. John Petroleum Association (Hartman also organizes the Oilmen’s hockey tournament), a commercial league golf team, the Flyers, and the B.C. High School Rodeo Association. The larger, national and internationallyowned oil companies that work in the area sponsor local events as well, though Hartman said it’s usually for bigger, national evens, such as the World Under 17 tournament. — Pipeline News North

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SEPTEMBER 21, 2018

POLICY Jobs Minister Bruce Ralston tours the Peace British Columbia’s minister of jobs and trade Bruce Ralston wrapped up a two-day tour of the Peace Region Sept. 6 with a stop at the Coal and Energy Forum in Chetwynd. Ralston arrived in the Peace to meet with government, business, and education leaders in between tours of industry operations, including Louisiana Pacific and Conuma Coal. Ralston said he’s maximizing his time touring the province before the legislature resumes sitting next month. “I’ve tried to get out and hear what’s going on in various sectors,” Ralston said in a phone interview from Tumbler Ridge. In Dawson Creek, Ralston said he met with Mayor Dale Bumstead and Chamber executive director Kathleen Connolly about energy and transportation issues, and Northern Lights College President Bryn Kulmatycki about the training and employment needs of the region. He had a chance to tour Lousiana Pacific’s facility, which is expanding to produce house construction siding and creating 55 new jobs. Conuma Coal continues on a strong growth track that keeps active in the community, and has been a success story for the Northeast, he said. “I heard about Conuma Coal, but meeting with the CEO and hearing the story of Conuma and… what they’ve done so far in terms of hiring, the diversity of their labour force, the way in which they’ve engaged the labour force, and the degree to which they’re active in community supporting community activities, and reaching out and creating training opportunities, and inspiring young people to enter the industry, has really made a strong impression on me on this trip,” Ralson said. Ralston had planned to tour an Encana gas plant on Tuesday, but a billion-dollar transit announcement by Prime Minister Justin Trudeau in the Lower Mainland changed his plans. Ralston did not tour the $10.7-billion Site C dam being built outside of Fort St. John, a project that had more than 3,000 employed at last count. “I wasn’t able to fit it in this time,” Ralston said, who couldn’t say whether he will in the future. “We’ll see. Technically, I’m not the minister responsible, that’s the minister of energy. That may be something I do in the future, I’m not sure.” Ralston later met with Fort St. John Mayor Lori Ackermanafter the forum in Chetwynd, where he wrapped up his tour with a speech at the Coal and Energy Forum in Chetwynd, where he noted he was “pinch hitting” for Michelle Mungall, the Minister of Energy, Mines and Petroleum Resources, who had a child in July. He talked about the importance of resources in the Northeast, specifically coal. “Sometimes it’s not appreciated in the Lower Mainland and some of the more urban areas, that the degree to which resources and the export of

BC Minister of Jobs, Trade, and Technology Bruce Ralston tours Louisiana Pacific’s Dawson Creek facility on Sept. 5, 2018.

Minister Bruce Ralston at the Coal and Energy Forum in Chetwynd.

resources is a solid basis to our economy,” explains the Surrey-Whalley MLA. “Coal is our single biggest export — people don’t always realize that. Metallurgical coals, steel making coals are linked to a lot of other industries that are sometimes thought of as more futuristic, whether it’s wind power, or lithium batteries, or any of that kind of stuff. Steel making coal is important for obviously making steel, and steel is increasingly important as we move towards a greener planet.” He also spoke to LNG. “I think we have taken a competitive look at the LNG framework, and we’re optimistic that LNG Canada will make a decision to go forward, which will trigger hopefully a big investment which will have an impact on gas producers here in the region.” A question and answer period that followed his

speech at the forum was calm, however, one participant asked him for the government’s thinking on the new payroll tax — a decision he stood by. “One of the commitments made by the Premier and the campaign was to abolish MSP premiums,” he told the audience member. “Many other provinces have a payroll tax like that, we thought that was fairest way to go.” Ralston said he’ll be reminding the premier and his caucus colleagues about the importance of the Northeast when he returns to Victoria. “We’re well aware of the importance of the region, both as a job generator and a revenue generator,” Ralson said. “There’s quite a range here. Sometimes, I think the region feels maybe that their voice isn’t heard. But that’s why I continue to visit, and that’s why I wanted to visit again.” —Pipeline News North

SEPTEMBER 21, 2018

PIPELINE NEWS NORTH •

OPERATIONS Encana expects to double Montney liquids volumes PAUL WELLS Encana Corporation is on track to double its Montney liquids production for the second year in a row and expects to exit the year averaging between 55,000 and 65,000 bbls/d, a conference heard this morning. “In the second quarter we grew liquids by over 18 per cent versus the first quarter. Our liquids growth trajectory has continued into the third quarter and we are currently averaging over 45,000 barrels a day,” Doug Suttles, president and chief executive officer, told the Barclays CEO EnergyPower Conference in New York City. Suttles said the early start-up of the company’s Tower North-Central Liquids Hub has ensured that Encana’s fourth quarter liquids production growth plans remain on trend. “The Tower liquids hub came online at the end of June, well ahead of schedule. The early startup of the facility further de-risks our ability to deliver our 55,000 to 65,000 barrels a day of liquids production we’re targeting for the fourth quarter in the Montney,” he said. “The cadence of our drilling program remains largely unchanged from our initial plan. This means we will ramp into the new liquids capacity over the second half of the year as new wells come on.” The company’s Montney program will be further bolstered when the Pipestone liquids hub begins operations later this year. “Construction of the Pipestone liquids hub is on track. We expect that facility to start up early in the fourth quarter, adding 10,500 barrels a day of net condensate capacity,” Suttles said. “Similar to our approach in filling the Tower infrastructure hub, we expect to ramp into the Pipestone hub over the fourth quarter of this year and into 2019.” In light of continued weakness in AECO pricing, Suttles said Encana will continue to strategically shift its Montney program to drill the richest inventory and focus on liquids growth. “We expect our focus on liquids production to continue in 2019. Our agility in adjusting our program to market conditions is another example of how our strat-

egy is working to combine market fundamentals, capital allocation, high-quality resource and operational excellence,” he said. “We continue to be focused on driving value from our assets, not just volumes.” Suttles said the company is closely monitoring the AECO situation and has taken steps to lessen

the impact of sputtering prices. “As we progress through the year we’ve seen continued weakness in the AECO market. Through a combination of physical sales and financial basis hedges, we have AECO basis protection for about 80 per cent of our expected 2018 Canadian gas production,” he said.

“We continue to optimize our activity and operations to focus on cash flow. This has meant that at certain times this summer we have shut-in dry gas volumes when we’ve seen very low spot prices. This obviously has some impact to our gas volumes but maximizes our financial performance.” —Daily Oil Bulletin

• PIPELINE NEWS NORTH

SEPTEMBER 21, 2018

PIPELINES

TransCanada seeks dismissal of Coastal GasLink challenge ELSIE ROSS The National Energy Board (NEB) has been urged by TransCanada PipeLines Limited to dismiss an application from a British Columbia environmentalist seeking federal oversight for a pipeline that already has B.C. government approval. Mike Sawyer has asked the NEB to determine that the company’s Coastal GasLink pipeline to the LNG Canada terminal is within federal, rather than provincial, jurisdiction. “The Application causes public, regulatory, and investment uncertainty, and puts real, tangible, long-term benefits for communities and First Nations in B.C. at risk,” Catherine Davis, vicepresident of natural gas pipelines law for TransCanada, says in a letter to the board. Sawyer, it suggests, is attempting to use the NEB to indirectly challenge natural gas development in B.C. “The facts indicate the substantive objective of the Application is to frustrate upstream natural gas development in British Columbia,” says the letter. “This ulterior purpose renders the Application vexatious and an abuse of process, which should lead the Board to dismiss the Application under its broad public interest jurisdiction.” The $4.8 billion pipeline would transport natural gas from northeastern B.C. to the LNG Canada terminal at Kitimat. Proponent Royal Dutch Shell plc and its partners are expected to make a final investment decision on the LNG project by the end of this year. Sawyer filed his application with the NEB on July 30, 2018. The applicant had an opportunity to participate in the B.C. Environmental Assessment Office’s (EAO) stringent multi-year regulatory review of the Coastal GasLink pipeline six years ago but chose not to do so, TransCanada points out. And while Sawyer has been aware of the issues raised in the application for at least four years, he has waited until the eve of the publicly known FID date for the LNG Canada project to affect that project and associated developments (including the pipeline), says the company. “The applicant again seeks to

create uncertainty masked in a question of constitutional law,” says TransCanada in its letter, noting that four years ago Sawyer mounted a similar challenge to another provincially-approved TransCanada pipeline. In that case, he argued that the Prince Rupert Gas Transmission (PRGT) pipeline was in federal jurisdiction as it would have transported gas from the North Montney pipeline which crosses the B.C./ Alberta border to the PETRONAS LNG project near Prince Rupert. That project was later cancelled. According to TransCanada: “it is not in the public interest to allow an applicant to proceed at the eleventh hour on a legal question that in effect challenges provincial competence over project assessment and approval, without that person demonstrating they have made every, or at least any, reasonable effort to participate in the provincial review process, that they raised their question within a reasonable time, and that they possess some specialized expertise or material information to illuminate the alleged flaws in the regulatory framework.” The pipeline also was subject to detailed technical review by the B.C. Oil and Gas Commission (OGC) in 2014 and 2015 that included additional public consultation and consideration of environmental impacts. The process culminated in the issuance by the OGC of eight permits authorizing construction and operation of the

project in 2015. “Mr. Sawyer could have sought to participate in the OGC process or challenge the OGC permits in the courts. He chose not to do so,” says TransCanada. “If Mr. Sawyer’s position is that the EAO or OGC assessments of the Project were inadequate, the proper process was to challenge the EAC or OGC permits through judicial review in the B.C. courts,” it says. “Challenging the EAC and OGC permits indirectly through a jurisdictional application to the NEB years after B.C. issued them is an abuse of process that should not be condoned by the Board.” According to TransCanada, Sawyer has not demonstrated that a technical constitutional question on the division of powers will directly and materially affect his interests. “Mr. Sawyer is an activist who has repeatedly raised concerns about the upstream impacts of natural gas development in B.C. and has questioned the robustness of B.C.’s environmental assessment process,” it says. “This background does not enable Mr. Sawyer to detect jurisdictional flaws in the regulatory system that no other party and no government has identified.” In addition, “he has failed to demonstrate any specialized expertise or material information that would warrant the NEB spending time and resources reviewing the jurisdiction of a Project that obtained valid provincial permits four years ago,” says the company.

Another reason for the NEB to dismiss the application is that the facts on which it depends are hypothetical, says TransCanada. “Based on the facts today, the Project is a provincial work with no connection to any federal work or undertaking,” it says. “The public interest is not served by the Board conducting a jurisdictional inquiry based on speculation about what facts may or may not exist in the future.” In his application, Sawyer said the Coastal GasLink and the Prince Rupert Gas Transmission pipeline which would have been connected to the federally-regulated North Montney pipeline were “virtually the same.” However, TransCanada in its letter dismisses that argument. “The project and the NGTL System are not functionally integrated, and the facts of the Project are materially different than PRGT,” says the company. There is no current proposal to physically connect Coastal GasLink to a federal work and undertaking (such as the NOVA Gas Transmission Ltd. system) and if the pipeline were to connect to the NGTL system in the future, the two systems would serve different functions, it says. “The NGTL System would not be dedicated to the Project and could function without it. The Project will function as an express single-purpose pipeline for one downstream provincial facility, the LNG Canada project.” —Daily Oil Bulletin

SEPTEMBER 21, 2018

PIPELINE NEWS NORTH •

PIPELINES

All First Nations agreements now in place for Coastal GasLink TransCanada says it has signed project agreements with all 20 indigenous communities along its Coastal GasLink pipeline route from Northeast B.C. to Kitimat. Support for the agreements comes from both traditional and hereditary leaders in the communities, the company said in a news release. “This is an important milestone for the Coastal GasLink team,” Rick Gateman, president of the Coastal GasLink Pipeline Project, said in a statement. “When we first began this project over six years ago, our goal was to build more than just relationships with First Nations communities in B.C.; it was to build trusted partnerships, and that has made all the difference. We are grateful to these First Nations communities for this opportunity and appreciate the incredible support they have shown us over the years.” Earlier this year, TransCanada said it had signed agreements to provide $620 million worth of contracts to more than a dozen First Nations governments and businesses.

Another $400 million in contract awards are expected, totalling a $1 billion impact for indigenous communities and businesses, TransCanada says. Karen Ogen-Toews, CEO of the First Nations LNG Alliance, said the announcement was great news. “When the pipeline goes through, it will mean employment and career opportunities for Indigenous people, and long-term revenue for their communities and councils,” Ogen-Toews said in a statement. Indigenous communities with agreements include: 1. Stellat’en First Nation 2. Saik’uz First Nation 3. Cheslatta Carrier Nation 4. McLeod Lake Indian Band 5. Saulteau First Nations 6. Kitselas First Nation 7. West Moberly First Nations 8. Lheidli T’enneh First Nation 9. Nadleh Whut’en Indian Band

10. Burns Lake Indian Band 11. Blueberry River First Nations 12. Halfway River First Nation 13. Doig River First Nation 14. Wet’suwet’en First Nation 15. Yekooche First Nation 16. Nee Tahi Buhn Indian Band 17. Skin Tyee First Nation 18. Witset First Nation 19. Nak’azdli Whut’en 20. Haisla Nation The $4.8-billion Coastal GasLink pipeline will take natural gas from Northeast B.C. to Kitimat, where it will processed and shipped to Asian markets through Shell’s LNG Canada project. Both projects have secured regulatory approvals by the province, and a final investment decision on LNG Canada is imminent. The project has been challenged over whether the province has jurisdictional authority over the pipeline, or the federal government. — Pipeline News North

Northern B.C. mayors pen letter against pipeline challenge Mayors in Northeast B.C. say they are disappointed with an 11th hour effort to stall a key liquefied natural gas pipeline from being built to the west coast. Mayors Lori Ackerman, Dale Bumstead, Rob Fraser, Bill Streeper, Merlin Nichols, Don McPherson and Lorraine Michetti have signed their names to a letter to Michael Sawyer and the West Coast Environmental Law Association, which are challenging the province’s jurisdiction over the Coastal GasLink pipeline.

TransCanada’s $4.8-billion pipeline will take natural gas from Northeast B.C. to Kitimat, where it will processed and shipped to Asian markets through Shell’s LNG Canada project. Both projects have secured regulatory approvals, and a final investment decision on LNG Canada is imminent. Sawyer, however, wants the National Energy Board to determine and issue an order that the pipeline is within federal jurisdiction and subject to the board’s regulation rather than the province of B.C.,

which earlier approved the pipeline. The mayors say they recognize the right to launch the challenge, but say both projects have been reviewed for years with plenty of opportunity for comment and challenge. “We find it disappointing that your challenge is being raised at this point in time, when the respective project partners are on the verge of making an investment decision on what could be the single largest private investment in our nation’s history; an investment decision

that could deliver an abundance of benefits to so many people in our communities, region, province, and across our entire nation,” the mayors write. “We stand united in our support for seeing the development of LNG Canada, and we will continue to voice our support for this project.” The mayors of Burns Lake, Mackenzie, New Hazelton, Terrace, Houston, Vanderhoof, and Kitimat also signed the letter. — Pipeline News North

• PIPELINE NEWS NORTH SEPTEMBER 21, 2018

IN BRIEF

PSAC disillusioned at federal Trans Mountain decision The Petroleum Services Association of Canada (PSAC) said they were disillusioned and frustrated by the Federal Court of Appeal decision to stop Trans Mountain Pipeline Expansion Project approval. “This will go down in history as a pivotal point for our economy, our Indigenous peoples, and the global environment; one that sees Canada allow its own prospects for prosperity be quashed while relinquishing the ability to reduce global GHG emissions with our responsibly developed oil,” said Tom Whalen, President and CEO of PSAC. The Canadian Press reports the Canadian Government is considering hiring a former judge to consult with Indigenous communities on the work thus far. The government expects to announce the next steps before end of September, and a decision within

the next six to eight months, before the federal election, and Alberta’s provincial election next May. “This decision, if allowed to stand, means the loss of thousands of middleclass jobs, economic opportunity and a pathway from poverty for our Indigenous peoples, billions of dollars in tax and royalty revenue to our governments to support social programs such as health care, education and roads,” added Whalen. The Petroleum Services Association of Canada represents the service, supply and manufacturing sectors within the upstream petroleum industry. — Pipeline News North

Suncor running automated haulers Suncor Energy has completed the first step in the commercial rollout of electric driverless heavy haulers across its oilsands operations. The company’s North Steepbank Mine is now fully operational with automated haulage systems (AHS), CEO Steve Williams told a Barclays

investment conference in New York. North Steepbank is one of two mines that feed Suncor’s 350,000 bbl/d base plant north of Fort McMurray. The company started deploying AHS at the mine in January, following a field pilot that commenced in 2015. Over the next six years Suncor expects to increase its AHS fleet to over 150 haul trucks, which it believes is one of the largest investments in electric

autonomous vehicles in the world. “The rollout of this new technology at our mines in the first quarter was first in North America and to my knowledge it’s the first application of autonomous trucks in the world’s soft rock mining industry,” Williams said. Suncor expects that AHS will save $1/bbl in cash operating costs.

/22 drum conun pture NUARY / FEBRUARY 2016 ca n o JA s carb t: B.C.’ nmen Enviro ics vs. m o n rt: Eco l Repo Specia FREE! TH.CA

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SEPTEMBER 21, 2018

PIPELINE NEWS NORTH •

IN BRIEF AltaGas in infrastructure deal for Inga Montney AltaGas Ltd. has entered into definitive agreements with Kelt Exploration (LNG) Ltd. to provide an energy infrastructure solution for the liquids-rich Inga Montney development located in northeast British Columbia. The commercial arrangements underpin the expansion of the Townsend Complex, including the addition of a 198 mmcf/d of C3+ deep cut gas processing capacity. The additional natural gas liquids will increase utilization in AltaGas’s existing liquids pipelines, positions the company well for an expansion of the North Pine fractionator to 20,000 bbls/d which already has regulatory approval, and provide additional propane

supply to the Ridley Island Propane Export Terminal (RIPET). The commercial arrangements provide Kelt with firm processing of 75 mmcf/d of raw gas under an initial 10-year take-or-pay arrangement, and includes raw gas gathering, liquids handling, field fractionation and propane marketing arrangements including export through RIPET. The expected commercial operations date of the Townsend Deep Cut Facility is expected in the fourth quarter of 2019. The infrastructure investment for expansion and increasing the capture area of the Townsend site is estimated to be $180 million. The economies of scale and synergies at the Townsend Complex will result in capital efficiencies approaching $750,000 per million cubic foot of deep cut capacity. The total value proposition delivers attractive returns for AltaGas that exceed standalone gas processing projects. “We have significant investment opportunities ahead of us, with Gas being the primary growth

driver followed by U.S. Utilities over the next few years,” said David Cornhill, chairman and interim co-chief executive officer of AltaGas. “Our presence in the two most prolific gas plays, the Montney and Marcellus/Utica, positions us to participate in energy export projects on both coasts of North America. Additionally, the recent NEB approval of the TransCanada North Montney expansion will enable producers to move ahead with their growth plans. AltaGas with its strategic infrastructure in Northeast British Columbia is well positioned to be a part of that growth.” Raw gas gathering, liquids handling and fractionation The commercial arrangements include expansion of the raw gas gathering system at Townsend and AltaGas will provide firm transportation service on AltaGas’s existing liquids pipelines for Kelt’s share of C3+ and C5+ produced at the Townsend Deep Cut Facility to AltaGas’s North

Pine Fractionation Facility, where AltaGas will provide firm fractionation and terminalling services. Energy exports Kelt has entered into marketing arrangements with AltaGas whereby all of the company’s propane produced at North Pine will be exported through RIPET and will receive premium Far East Index pricing. “AltaGas’s relationship with Kelt illustrates the value of our integrated solution, including gas processing, liquids handling, field fractionation, and energy export,” stated Cornhill. “Our ability to provide producers market access to premium Asian markets, with the soon-to-be completed Ridley Island Propane Export Terminal, is a competitive advantage for us.” — Daily Oil Bulletin

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