Pipeline News North March 2017 by Pipeline News North

Special Report: 2017 marks 70 years of Peace River Natural Gas No. 1 / page 12 MARCH / APRIL 2017

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Engineering firm makes its pitch to electrify northern oilfields to reap economic and environmental benefits; Enbridge and Spectra merger complete; $439-million Towerbirch expansion receives federal approval, construction expected to start next month; and the leaders of the NEB Modernization Expert Panel reflect on Canadians’ concerns and the task ahead of them BE PREPARED AND BE SAFE AT THE WORKPLACE WITH RIP’S CLEATS

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FORT ST. JOHN

PETROLEUM ASSOCIATION Come out and support the

14th Annual FSJ Oilmens 4 on 4 Hockey Tournament

April 5, 6, 7, & 8, 2017 Cabre Oilfield took home the title at the 13th Annual Fort St. John Petroleum Association 4-on-4 hockey tournament 13th Annual April 7 to 9 2016. Cabre won the final 9-5 against Fort Motors.

55th Annual FSJ Petroleum Association Golf Tournament entry form is now available - visit www. fsjpetroleumassociation.com today!!

May 11

SAVE THE DATES:

General Meeting @ 6:00 pm - 10:00 pm FSJ Curling Club

June 7-10

55th Annual FSJ Petroleum Association Golf Tournament

MARCH 17, 2017

PIPELINE NEWS NORTH •

COMMUNITY

MATT PREPROST PHOTO

The Fort St. John Petroleum Association gathers for its March meeting at the Lido Theatre quickly taking care of business before moving on to the entertainment for the evening.

FSJ Oilmen fill the Lido The Fort St. John Petroleum Association made quick business of its March meeting at the Lido Theatre March 9 before diving into an evening of laughs served up by Gavin Matts and Toby Hargrave. More than 100 gathered for the meeting, which provided updates on the upcoming hockey tournament, this fall’s curling bonspiel, and the Peace Island Park Pavilion. HOCKEY TOURNEY The 14th annual FSJ Oilmen’s Hockey Tournament runs April 5 to 8 at the North Peace Arena. Association President Luc Chretien says the tournament is still looking for around a dozen players before the puck drops. “We’ve got room, it’s a great event,” he said. PAVILION PLANS The paperwork is complete and all that’s left is to break ground on the Peace Island Park Pavilion. The hope is to have the pavilion ready in time for the Family

Campout Weekend this summer, Chretien told members.

OVER

S E RV IC

NOMINATIONS WANTED The association is still accepting nominations for Oilman of the Year and the Ivor Miller Award. “There’s a few names that have been brought forward, however, if there’s any other members you know of that are deserving of the Oilman of the Year or Ivor Miller Award, we’re still open to nominations,” Chretien said. Nominations can be sent to Chretien, or any other member of the board.

LAND / REGULATORY ENVIRONMENTAL ARCHAEOLOGY GIS ANALYSIS & MAPPING UAV AND REMOTE SENSING

CURLING BONSPIEL The dates of this year’s curling bonspiel have been pushed back to Nov. 15 to 18. The event was pushed back as FSJ plays host to the World Under-17 Hockey Challenge Nov. 5 to 11. Visit fsjpetroleumassociation.com for a complete list of upcoming events and association contacts.

TERRACE FORT ST. JOHN PRINCE GEORGE FAIRVIEW

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MARCH 17, 2017

#oilsands

PNN MISSION STATEMENT Our mission at Pipeline News North is to provide the most current, interesting, and relevant news and information about the oil and gas industry in Northeast B.C. and Northwest Alberta. Have an interesting story to share or a news lead? Email us at editor@ahnfsj.ca.

WILLIAM JULIAN REGIONAL MANAGER 250-785-5631 wjulian@ pipelinenewsnorth.ca

MATT PREPROST PHOTO

Hélène Lauzon (left) and Gary Merasty, co-chairs of the National Energy Board Modernization Panel listen to a forum participant speak in Fort St. John on March 2.

MATT PREPROST MANAGING EDITOR 250-785-5631 C: 250-271-0724 editor@ ahnfsj.ca

Q&A: The future of the NEB RYAN WALLACE ADVERTISING MANAGER 250-785-5631 C: 250-261-1143 rwallace@ ahnfsj.ca

ROB MONAHAN SALES ASSOCIATE 250-785-5631 C: 250-794-2683 rmonahan@ ahnfsj.ca

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

The National Energy Board Modernization Expert Panel spent two days in Fort St. John March 1 and 2, part of a 10-stop, cross-country tour to solicit feedback from Canadians on the future of the country’s energy regulator. The co-chairs of the five-member panel bring with them interesting perspectives: from the east, Hélène Lauzon, who chairs the the Quebec Business Council on the Environment and co-chairs Quebec’s Climate Change Advisory Committee; and from the west, Gary Merasty, a member of the Peter Ballantyne Cree Nation who served two terms as grand chief of the Prince Albert Grand Council and as a Member of Parliament serving northern Saskatchewan. Their two days in Fort St. John were the first outside a large urban centre and inside a city in the heart of upstream development. Here, they heard a host of new issues when it comes to developing Canada’s resources, from land acquisitions to compensation agreements to landowners’ rights. The two recognize the importance of their work, and the care and caution that must go in their report and recommendations to the federal government, due by May 15. While the National Energy Board Act saw updates in 2012, it’s still a piece of legislation that hasn’t seen many significant updates since 1959. Pipeline News North sat down with Lauzon and Merasty to discuss their work. The following has been edited for length and style. Read the full interview at pipelinenewsnorth.ca. The panel is accepting comments until March 31. Visit www.neb-modernization.ca.

Pipeline News North: How has response been from Canadians so far? Gary Merasty: I think the response has been very positive. I think there’s an appetite for change, an appetite to see a modernization occur. And a lot has changed since 1959, whether its indigenous rights and the Supreme Court decisions, to Canadians expectation of transparency and accountability of all its public regulators, to the emergence of renewable energy and the concerns for international commitments on greenhouse emissions, and carbon limits and budgets. Hélène Lauzon: They really believe in the process. They would really like this to be changed and we are very grateful because they are nourishing in our reflection. You can see that these people were kind of waiting for something like that. They want to be heard, they feel that they don’t have they’re opportunity to be heard, so I think it’s becoming very important for them to get this heard and to have us incorporate their concerns in our recommendations. GM: I want to add something to what Helene said. Very clearly they say, “will this make a difference? Will your report be seriously considered by government or is this a waste of time?” We don’t believe it is. We believe that based on how it started and the commitments there that it will result in some action. But you know, there’s huge expectation that something will come of it. CONTINUED ON PAGE 11

MARCH 17, 2017

PIPELINE NEWS NORTH •

OPERATIONS Engineering company pitches oilfield electrification Connecting B.C. gas plants and drilling sites to the electrical grid will yield economic and environmental benefits for Dawson Creek, a representative from a company that builds power lines told city council last month. At a council meeting Feb. 20, Valard Group VP Keith Sones pitched Dawson Creek on the province’s oilfield electrification scheme, which the Ministry of Energy and Mines announced last year. The B.C. government hopes it can incentivize northeast oil and gas producers to connect to the BC Hydro grid in a bid to drive up electricity demand and reduce emissions. A handful of gas plants are currently powered by BC Hydro’s largely renewable electricity, but most producers continue to burn their own natural gas for power. Valard is Canada’s largest utility construction company, Sones said, and has already built oilfield-related transmission lines including BC Hydro’s $296-million DCAT project. The company has also built and financed private power lines for producers in the Groundbirch area.

JONNY WAKEFIELD PHOTO

Keith Sones of the Valard Group says electrifying oilfield operations will benefit Dawson Creek.

He estimates 10-15 per cent of a company’s gas goes back into on-site compressors and generators, which means higher emissions and wasted product.

Local government endorsements could help get the electrification plan off the ground, he said. “We’re a commercial venture, we’re in business to make money, so we’re not asking you to endorse the Valard Group of Companies in preference to anybody else,” Sones told council. “We’re simply looking for your endorsement of (the province’s) approach: to work with First Nations, to work with BC Hydro, to work with the oil and gas producers to turn this into something larger… that will provide economic benefit for everybody in the Peace River.” In an interview last year, Energy Minister Bill Bennett said electrification would help the province meet its climate targets, while creating demand for the Site C dam and independent power producers. The opposition NDP says the plan amounts to “chasing customers” for Site C, the demand for which critic Adrian Dix says has not been proven. Council endorsed the electrification plan Feb. 20. Coun. Cheryl Shuman spoke in favour. “I’m absolutely in favour of electrifying the natural gas fields,” she said. “I think it’s very prudent, just to be able to let them use (electricity), and sell that product instead of using it and creating greenhouse gas emissions.”

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MARCH 17, 2017

OPERATIONS Enbridge and Spectra Energy complete merger Enbridge Inc. announced Feb. 27 the completion of the previously announced stock-for-stock merger transaction to acquire all of the outstanding common stock of Spectra Energy Corp. Trading in shares of Spectra Energy common stock on the New York Stock Exchange was suspended effective as of the opening of trading Feb. 27. In connection with the completion of the merger, the shares of common stock of Spectra Energy will be delisted from the NYSE and will be de-registered under the U.S. Securities Exchange Act of 1934. Common shares of Enbridge will continue to trade on both the NYSE and the Toronto Stock Exchange under the symbol “ENB.” Shares of Spectra Energy common stock represented in book-entry, non-certificated form will be automatically exchanged for common shares of Enbridge without any further action on the part of such Spectra Energy shareholders. CST Trust Company, the exchange agent for the Transaction, will be sending out letters of transmittal and other instructions in the next few days to Spectra Energy shareholders who hold stock certificates representing shares of Spectra Energy common

stock, outlining specific actions that such shareholders will need to take to surrender their shares for common shares of Enbridge. Shareholders of Spectra Energy holding stock certificates should wait until they receive the letter of transmittal before surrendering their certificates. With the merger, the combined company will be a global energy infrastructure leader and the largest energy infrastructure company in North America with roughly C$166 billion (US$126 billion) enterprise value. Leading strategic business platforms including liquids and natural gas pipelines, natural gas distribution utilities and renewable power generation. The company also has an industry-leading C$27 billion (US$21 billion) of secured growth projects, and approximately C$48 billion (US$37 billion) of probability weighted projects under development drives transparent longterm cash flow growth. The company expects 10 to 12 percent average annual dividend increases from 2018 through 2024. “We are very pleased to have now received all required regulatory clearances and we look forward to realizing the significant customer

and shareholder benefits of combining these two strong companies,” said Al Monaco, President and Chief Executive Officer of Enbridge, in a statement ahead of the merger. “With the completion of the Transaction, Enbridge will become a leading global energy infrastructure company and the largest in North America with roughly C$166 billion (US$126 billion) in enterprise value and the strongest liquids and natural gas infrastructure franchises on the continent. “We will have a diverse set of low-risk businesses comprised of a best in class network of crude oil, liquids and natural gas pipelines, a large portfolio of strong, regulated gas distribution utilities and a growing renewable power generation platform. The combined company will be positioned to provide integrated services and first and last mile connectivity to virtually all key liquids and gas supply basins and demand markets in North America.” For more information about the merger transaction, shareholders are encouraged to visit the investor page on Enbridge’s website, www.enbridge.com.

Townsend plans move forward

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The first train of the AltaGas Townsend Phase 2 expansion is expected to begin commercial operations in October. President and CEO David Harris gave the update during a conference call on the company’s 2016 fourth quarter and year-end results, according to the Daily Oil Bulletin. The first train and the field compression equipment are expected to be fully contracted with Painted Pony Petroleum Ltd. under a 20-year take-or-pay agreement. AltaGas also is in discussions with multiple parties to contract and build the second train of the expansion, said Harris. According to the company, the estimated cost of the first train of Townsend Phase 2 will be approximately $80 million and with the addition of incremental field compression equipment to move raw gas production from the Blair Creek area to Townsend, the estimated total cost will be approximately $120 to $140 million. NGL produced from Townsend Phase 2 is expected to be transported approximately 70 km to AltaGas’ North Pine Facility via existing and planned NGL pipelines owned by AltaGas.

2017-03-06 2:50 PM

NORTH PINE PROJECT Site preparation is underway 40 kilometres northwest of Fort St. John, B.C., for the North Pine facility with two separate NGL separation trains each capable of processing up to 10,000 bbls per day of propane plus NGL mix (C3+), for a total of 20,000 bbls per day. The first phase will also include 6,000 bbls per day of condensate (C5+) terminalling capacity, with ultimate capacity for up to 20,000 bbls per day. MONTNEY GAS/LIQUIDS PROCESSING In January 2017, AltaGas entered into a non-binding Letter of Intent (LOI) with a significant Montney producer to construct a 120 Mmcf/d deep-cut natural gas processing facility and a NGL separation train, capable of processing up to 10,000 Bbls/d of NGL mix, and a rail terminal (the Montney Facilities). Completion of the project is subject to, among other things, negotiation and execution of definitive agreements, which AltaGas targets to have signed within the first quarter of 2017. Subject to regulatory approvals, the Montney Facilities are expected to be on-line in early 2019. —PNN, with DOB files

MARCH 17, 2017

PIPELINE NEWS NORTH •

OPERATIONS

Increasing oil production in natural gas-heavy B.C. contributing to major shift in Canadian supply growth NELSON BENNETT nbennett@biv.com

UNIVERSITY OF CALGARY PHOTO

Peter Tertzakian

Alberta’s oilsands or offshore drilling platforms are being threatened from a massive disruption. And it’s not just the disruption coming from renewable energy, but disruption from within the oil and gas industry itself. In just six years, unconventional oil and gas extraction (hydraulic fracturing and horizontal drilling) has replaced conventional extraction. The oilsands industry’s share of capital investment has fallen from 45 percent of total new investment to just 33 percent—“one-third of the [capital expenditure] but 95 percent of the attention, because we’re still fixated on yesterday’s news,” Tertzakian said. “I’m not going to say [the oilsands] is obsolete by any stretch. It’s going to supply three percent of the world’s oil needs over the next many decades, but that’s not where the growth is.”

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Massive growth in Alberta’s oilsands is yesterday’s news, some of the Canadian oil pipelines that have been approved won’t get built, and the smart money in energy stocks is shifting from Fort McMurray to Fort St. John. Those were some of the key takeaways when Canadian energy guru Peter Tertzakian addressed the CFA Society Vancouver March 6. CFA members include investment bankers, pension fund managers, investment advisers and other institutional investors. Based on daily news headlines, those advisers could be forgiven for thinking they need to shift their clients’ money away from pipelines and oil and gas companies and into electric vehicles, wind farms and solar energy. Except that there have been 117 bankruptcies in the solar energy business, and even if everyone follows Tertzakian’s lead and buys an electric vehicle—which he did two months ago—the world will still need oil and gas for decades. Tertzakian said the disruption coming from renewables and the move toward decarbonization is significant. “There is no time in history that this magnitude of substitution has ever occurred.” But he added that doesn’t mean the world still doesn’t need fossil fuels like oil and gas. “There is not a lot of evidence to suggest that global oil demand is waning any time soon,” he said. But multibillion-dollar megaprojects in

Unlike oilsands or offshore oil drilling, which require massive capital investments, have long payback periods and leave vast environmental footprints, tight oil and gas plays provide quick returns on investment, produce hydrocarbons with lower carbon content and have smaller environmental footprints. “The real action is over here,” Tertzakian said, pointing to the Montney formation on a map of Alberta and B.C., “and particularly in areas that are yet undiscovered or are in their infancy.” Pointing to a photo of a tight cluster of pumpjacks, each of which taps a horizontal well, Tertzakian said an operation of this kind produces 1,000 barrels of oil per day. The photo was taken on the B.C. side of the Montney play. “This is not only an Alberta thing,” Tertzakian said. “All of a sudden British Columbians are waking up—orr maybe you haven’t woken up to it yet—its happening on your side of the border, too. So all those who are anti-oil, well, we’ll see how your attitudes change when you find out you have significant quantities of that stuff in your backyard too.” According to the BC Oil and Gas Commission, traditionally natural gas-heavy B.C. is now producing more oil than condensate—26,800 bbls/d of oil compared to 16,560 bbls/d of condensate. That’s a small amount compared with production in Alberta. But B.C.’s wells are attractive to investors because they provide quick returns for relatively low capital, he said.

• PIPELINE NEWS NORTH

MARCH 17, 2017

PIPELINES

Towerbirch construction expected to start next month NOVA Gas Transmission Ltd. expects to start work next month on its $439 million Towerbirch expansion project which Friday received federal government approval, subject to 24 conditions, says a TransCanada Corporation spokesperson. “Pre-construction conditions are currently being met, construction contracts are being awarded and we expect to begin building in April 2017,” Shawn Howard said in an email following the announcement by Jim Carr, federal natural resources minister. The Towerbirch pipeline facilities, which will transport gas from the Montney in British Columbia to North American markets, are expected to be in service in the fourth quarter of 2017. “Approving the Towerbirch expansion project subject to binding conditions reflects the government’s principled approach to developing and transporting Canada’s natural resources in a way that creates jobs and protects the environment,” Carr said in a statement. The project will create up to 750 jobs during construction, address the need for increased natural gas transmission capacity along the existing NGTL system and support economic

growth, said the government in announcing the approval. The Towerbirch expansion includes the construction and operation of approximately 87 kilometres of new natural gas pipeline and associated facilities, consisting of the Tower Lake Section (roughly 32 kilometres of 30inch pipeline) and the Groundbirch Mainline Loop (approximately 55 kilometres of 36-inch pipe). Approximately 82 per cent of the project will parallel existing rights-of-way or existing disturbances, and 89 per cent will be located on private land. NGTL’s planned in-service date for the pipeline components of the project is Nov. 1, 2017, along with the Groundbirch East receipt expansion and the Tower Lake receipt station. Three additional receipt meter stations will come into service over the following year. The project is underpinned by contracts totalling 859 mmcf per day of FT-R (firm transportationreceipt) contracts, including eight-year contracts with the Cutbank Ridge Partnership (CRP) for 590 mmcf per day. CRP executed contracts with NGTL for incremental receipt service at three new

meter stations in the Tower Lake area (Tower Lake, Dawson Creek North and Dawson Creek No. 2) and at one existing meter station connected to the Groundbirch Mainline (Tremblay No. 2). The National Energy Board (NEB) earlier had determined that the Towerbirch expansion is in the Canadian public interest and recommended government approval. Last month, the project received an environmental assessment certificate from the British Columbia government. The board will require the company to meet 24 conditions that will help ensure the project is built and operated safely. These conditions will address the key concerns, including: • Old growth forest bird habitat • Environmental protection • Indigenous monitoring • Waterways In January 2016, the government announced a set of interim principles to guide decisions on major projects already being reviewed while longer-term reforms to environmental assessment processes are underway. The Towerbirch project was assessed using the interim principles. —Daily Oil Bulletin

TransCanada strikes long-term toll deal NELSON BENNETT nbennett@biv.com

Natural gas producers in B.C. and Alberta have signed up for long-term commitments to ship gas on the TransCanada Corp. (TSX:TRP) Canadian Mainline to Eastern Canada – a move that will make them more competitive with American gas producers. TransCanada announced March 13 that it had concluded a successful open season, after offering gas producers a simplified toll rate in exchange for long-term commitments. Producers have signed on for binding 10-year commitments. According to an analysis in November, HSB Solomon Associates LLC predicted gas production in Western Canada could fall by 1.1 billion cubic feet per day over a nine-year period, and that securing long-term commitments would be worth $25 billion to the Canadian gas industry between 2018 and 2027. B.C. is Canada’s second largest gas producer, so the agreement is an important one for B.C. American producers in the Marcellus and Utica shale formations in the U.S. northeast have been increasing their exports of gas to Eastern Canada in recent years. Meanwhile, TransCanada’s Canadian Mainline pipeline, which runs from Alberta to Southern Ontario, has been under utilized. In November, TransCanada held an open season offering, but failed to get long-term commitments from Western Canadian gas producers. It recently held a second open season, and offered a simple, flat toll rate of $0.77 per gigajoule (GJ). Previously, rates had varied both above and below that new flat rate. TransCanada said that an undisclosed number of gas producers in the Western Canadian

Sedimentary Basin (WCSB) have agreed to the new toll rate and have signed up for binding, long-term contracts to take capacity on the pipeline. “Today, WCSB producers are facing a much more challenging landscape than they have in the past,” TransCanada CEO Russ Girling said in a press release. “This new offering helps our customers compete more effectively by utilizing existing capacity on the Canadian Mainline, and demonstrates the importance and value of this system to deliver their products to markets in Eastern Canada and the Northeast U.S.” “It was nice to see the see the level of cooperation between gas producers and TransCanada to establish a competitive toll structure that will ensure B.C. natural gas can be delivered to Eastern Canada at a competitive cost,” B.C. Natural Gas Development Minister Rich Coleman said in a press release. Coleman said the new agreement will create 6,000 new jobs in Western Canada. Those job numbers are based on estimates from the Canadian Energy Research Institutes. —Business in Vancouver

MARCH 17, 2017

PIPELINE NEWS NORTH •

On February 01, 2017, the voice of BC's construction sector became stronger. We are pleased to announce that Energy Services BC (ESBC) has merged with the Independent Contractors and Businesses Association of BC (ICBA).

Despite increased cost, Kinder Morgan Canada president Ian Anderson says shippers still committed to long-term capacity commitments.

Cost of Trans Mountain expansion rises $600 million NELSON BENNETT nbennett@biv.com

The estimated capital cost of expanding the Trans Mountain pipeline has risen again by an additional $600 million. In an update March 9, Kinder Morgan said the cost of expanding the 1,150-kilometre pipeline is now estimated at $7.4 billion. That’s a $2 billion increase from the $5.4 billion estimate in 2014, and a $600 million increase from the more recent estimate of $6.8 billion. Despite those additional costs, the company said shippers who have committed to long-term offtake agreements are still on board. In a news release, Kinder Morgan said several factors have increased the project’s estimated capital costs, including 157 conditions established by the National Energy Board. And as a result of public pressure, the company also agreed to using a thicker pipe, and decided on a more costly routing option in Burnaby—tunneling under Burnaby Mountain—to reduce impacts on the city. The project is also facing $1 billion in additional long-term costs from what has been described as “extortion” from the B.C. government. Kinder Morgan recently agreed to a revenue sharing agreement that will see the B.C. government receive $25 million to $30 million annually in revenue sharing from the pipeline over a 20-year period. When the pipeline’s expansion was first proposed, 13 shippers signed up for long-term commitments to pipeline capacity for 15- and 20-year periods. Those commitments accounted for 708,000 barrels of capacity – 80% of the total capacity of 890,000 barrels. Following the NEB’s approval, Trans Mountain went back to shippers with the new updated cost estimate to give them the option of maintaining their commitments or backing out. Kinder Morgan said shippers have “turned back” just 22,000 barrels in commitments. That freed up capacity is now be offered to other shippers in an open season bid. “It’s been a lengthy and rigorous process and in spite of the many changes in the markets over the five years since our customers signed on, we knew commercial support for this project remained strong,” Kinder Morgan Canada president Ian Anderson said in a press release. “Over the past five years, we’ve listened to Canadians and made changes to the Project that have increased costs, but made our project better. “We’re proud of the project we’ve developed and how it reflects the values and priorities of our communities and we’re pleased our customers have re-confirmed their support and interest in its purpose of delivering much needed west-coast access for their products.” —Business in Vancouver

TOGETHER, ADVOCATING FOR GROWTH AND INVESTMENT IN NORTHEAST BC For Northeast British Columbia and our businesses, this means we will now have a much stronger voice when dealing with important issues in our area - especially in the case for jobs and investment in the region.

To learn more about this merger please visit

www.icba.ca/esbc

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MARCH 17, 2017

EXPLORATION Oil, gas exploration explodes in B.C. Peace region NELSON BENNETT nbennett@biv.com

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After a two-year downturn that pushed the Peace Region from having close to zero unemployment to the highest jobless rate in B.C. last year, jobs are suddenly flowing back into northeastern B.C. Oil and gas companies have dramatically stepped up drilling this winter compared with the last two years. “It’s been crazy,” said Dawson Creek Mayor Dale Bumstead. “It was like somebody turned a switch on about November, December. Before Christmas, all our hotels were almost 100% occupancy and rental accommodation was filling up.” “There’s optimism out there right now,” said Mark Salkeld, CEO of the Petroleum Services Association of Canada (PSAC). Between 2015 and 2016, new oil and gas rights sales dropped dramatically and drilling in northeastern B.C. slowed to a trickle, thanks to a sustained plunge in oil and gas prices and growing uncertainty over large liquefied natural gas (LNG) projects. But on January 18, the auction for petroleum and gas rights generated more sales in a single day – $40 million – than the total reaped in all auctions held in 2015 and 2016. PSAC recently bumped up its estimate for the 2017 winter drilling season in B.C. to 367 wells from 280. “We’re seeing it in company guidance,” said Mark Oberstoetter, lead oil and gas analyst with Wood Mackenzie. “A lot of companies are doubling or adding a lot of spend in 2017, versus the low scene in 2016. So we’re seeing a lot of optimism.” Art Jarvis, owner of FloRite Environmental Systems, said companies in Fort St. John that parked equipment and laid off 40% to 60% of their staff during the downturn are now scrambling to find workers again. While some might view the sudden activity as a sign of renewed optimism that an LNG industry will develop in B.C., Oberstoetter said it’s really just economics. Even throughout the last two-year drilling drought, midstream companies have pumped billions into the Montney, building new gas processing plants and pipelines. Veresen Inc. and Encana Corp. for example, are spending $2.5 billion building three new gas processing plants in the Fort St. John and Dawson Creek area under the Cutbank Ridge Partnership. But the more labour-intensive exploration side of the business, drilling and fracking, all but stopped between 2015 and 2016, thanks to a sustained plunge in oil and gas prices. Gas well drilling is labour intensive. Each well takes a crew of about 135. That’s not including all the related jobs created for service businesses like Jarvis’ company, which provides truck-mounted pressure vessels that bleed off pressure to separate liquids from gases at wellheads. In the Montney, companies will typically spend $3.5 million to $5 million per well, although some deeper and more complex wells may cost as much as $15 million. The Montney has proved to be one of North America’s lowest-cost regions. The sheer volume of gas makes for good wellhead economics, and an abundance of liquids such as light oil, condensate and propane provides added value to producers. “You get a lot of volumes for every well you drill,” Oberstoetter said. “They’re very big wells, and well costs have come down a lot.” During the last drilling cycle, between 2012 and 2014, much of the drilling was being done by companies like Progress Energy (owned by Petronas) and Shell, which were proving out wells in anticipation of a liquefied natural gas industry developing. The current boom involves companies that are after natural gas liquids, including some newcomers, like Crew Energy Inc. and Tourmaline Oil Corp., which have been buying up assets in the Montney in both Alberta and B.C. Last year, Tourmaline bought $1.4 billion worth of natural gas assets from Shell in Alberta’s Deep Basin and B.C.’s Montney. Last year, when Terra Energy went bankrupt, Crew Energy snapped up some of its wells and processing assets. —Business in Vancouver

MARCH 17, 2017

PIPELINE NEWS NORTH •

NEB CONTINUED FROM PAGE 6

genesis in the perception of NEB being too close to energy.

PNN: How hopeful are you both about your report being received? GM: We have to really look at how can we make these recommendations, attract the interest and opportunity for government to make the changes that we propose. It will probably be structured in a way that maybe there’s some immediate action items, maybe there’s some short, maybe there’s some medium, maybe there’s some long term. Maybe there’s clusters of opportunities, maybe there’s certain themes, and maybe there’s, you know, very concise and clear recommendations. It’s a challenge we’re fully aware of because if our report is extremely cumbersome and difficult to understand it makes it more difficult for it to be used effectively. PNN: What are the common themes that you’ve been hearing from Canadians? GM: Overall, I think there’s some trust issues there that find their

HL: Public participation is an issue. People would like the opportunity to get heard, and the way now it is, it’s that you have to demonstrate you are an affected party. And indigenous people, and non-indigenous people, are saying “it’s not because a pipeline does not cross our property that we are not an affected party, because we can be affected eventually within our area, region, or even with the watercourses we are using.” They would like NEB to open the doors. PNN: Any particular comments that stand out for both of you in your travels? HL: This thing that western science versus traditional knowledge should be on the same level. GM: A lot of overlap between indigenous and non-indigenous concerns. A lot of similar concerns around cumulative impacts longterm, the process, the participation, the decision making.

HL: Yes. And here, it is on a topic for which we had not heard a lot, on land acquisition issues, agreements, compensation, right to entry. GM: I think just what Helene said, is the landowner, the land acquisition, the upstream impacts, and they’re aware of the mid and downstream benefits that are experienced and is there a balancing of benefits in the whole life cycle? Yes, there’s jobs here, and there’s opportunities for procurement and construction. But there’s a lot of downstream benefit that arises out of here, the upstream, so that came through very clear today, the last day and a half. And then yeah the land acquisition, the owners, and the treatment they perceive or really experienced from companies. Yhey actually cited some of the agreements sometimes put in front of them date back, it’s an old agreement on land acquisition that are 40 years old. These documents haven’t changed in, you know, 40, 50 years. So a lot of real pragmatic, real life issues that affect people on a daily basis has really hit more home here than perhaps in any other area.

PNN: As you get ready to sit down and write your report and your recommendations, are you keeping in the back of your head ways government can ensure that legislation is always staying current, that it’s not taking more than 50 years for an update? GM: Your aspirations are that national institutions withstand the political tos and fros, and that really contributes to nation building that these institutions can actually stand the test of those changes and those ying and yangs, and pulls and pushes, because it’s piece of legislation or institution that does represent everybody. You want to get it to a point where’s there’s that trust and that transparency and that accountability. I’m trying not to sound rhetorical, but it does represent Canadians, and be careful to those who try to be political in its approach. I think that’s what we’re striving for here, to build something that stands the test and actually is a true nation-building type of document. Read more at pipelinenewsnorth.ca

ICBA and Energy Services BC invite you to an exciting evening of networking and fun to celebrate our merger. Raise a glass with us at this free social event that brings together construction professionals from across northern BC. Win prizes from local sponsors, including two grand prize draws for a trip for 2 to:

Thursday, April 6, 2017 5:30 p.m. – 8:00 p.m. London Bull Restaurant 8403 93rd Street, Fort St. John

• Seattle for a Seahawks home game* • Vancouver to see the Canucks* *You select the game of your choice to be played in the fall of 2017.

RSVP to Zoe@icba.ca by Friday, March 31 Independent Contractors and Businesses Association of BC 250.263.9356

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MARCH 17, 2017

LEGACY THE GAS WELL THAT CHANGED EVERYTHING Peace River Natural Gas No. 1, B.C.’s first successfully ‘spudded’ well, began producing in 1947

JONNY WAKEFIELD reporter@dcdn.ca

On a cold day in December 1947, crews working in the shadow of a wooden derrick east of Dawson Creek did what many before them had thought impossible: they struck gas. Peace River Natural Gas No. 1 became B.C.’s first successful natural gas well on Christmas Eve that year, forever transforming the region from a sleepy farming district into an oil and gas powerhouse. Seventy years later, local leaders are looking back on the impact of that well and the sprawling industry it spawned. “The (amount of ) activity that’s occurred in Northeast British Columbia… has really been unbelievable,” Dawson Creek Mayor Dale Bumstead said at a Feb. 27 Canadian Association of Petroleum Producers gala commemorating the discovery. Between 1955 and 2000, companies drilled 5,500 wells in B.C., Bumstead said. Another 7,500 have been drilled in the region since 2000, with hydraulic fracturing technologies opening up hardto-reach gas. Before Peace River No. 1, petroleum explorers had for decades tried and failed to strike it rich in B.C. According to the Ministry of Natural Gas, B.C.’s first officially registered well was Steveston No. 1, drilled 1,200 feet into the Fraser River delta in 1906. The well reached 1,200 feet before being abandoned. In the decades that followed, companies drilled wells across the province— including in Sooke on Vancouver Island, in the Cariboo, near Kamloops and even on the Queen Charlotte Islands (now Haida Gwaii.) It wasn’t until 1947, though, that Western Canadian oil and gas took off. That February, crews at Leduc No. 1 set off Alberta’s oil boom after discovering a major crude oil deposit. Within a decade, Canada was a global oil exporter.

While less well known, Peace River No. 1 would have a similarly transformative effect on Northeast B.C. Thousands of wells have since been drilled into the Montney and other shale plays in the region. Pipelines would be built linking the gas fields to the Lower Mainland and transmissions systems in Alberta. In 2000, gas began flowing through the Alliance Pipeline between Northeast B.C. and Chicago, tightening the region’s ties to U.S. markets. The legacy of Peace River No. 1 is mixed. The “cumulative” impacts of natural gas development on the environment, wildlife and local communities are only now being taken into account. It transformed a region that had relied on farming, hunting and trapping into an industrial area, in some cases creating conflict with farmers and First Nations. Mike Readman, whose grandfather lived near Peace River No. 1, sees the positives the benefits the discovery brought to the region. His grandfather worked on the rig for a time, and he remembered hearing stories about blowouts, bonanzas and abandoned derricks while growing up. Others recall picnics by the gas wells, which at the time emitted flames from the pipe couplings. Readman first started to investigate his family ties to Peace River No. 1 on a trip to the Rolla Pub, where a photo of the derrick hangs on the wall. “It connects you to the history, particularly the industrial growth in the area throughout the years,” he said. “It reinforces that it’s what connects a lot of people to having successful, good lives in the area.” PHOTO: An Encana drilling rig in the Montney. The company has become one of many prolific drillers in the Peace Region since Peace River Natural Gas No. 1 became B.C.’s first successful natural gas well on Christmas Eve 1947. Photo Copyright © Encana Corporation. All rights reserved

MARCH 17, 2017

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MARCH 17, 2017

IN BRIEF

February land sale nets $3.7M JONNY WAKEFIELD reporter@dcdn.ca

Compared to January, February’s oil and gas drilling licence auction was a bit of a disappointment. Compared to last year, however, it was a windfall. Nine drilling licences and two land leases sold at B.C.’s petroleum and natural gas rights auction Feb. 22, netting the provincial government $3,727,424. That’s down from last month’s $39.6 million bonanza, which raised more than the past two years of land sales combined. The sales have been low the past two years due to the oil and gas downturn, which led companies to scale back exploration budgets amid a global supply glut. Last February, B.C. brought in $0 from an auction for the first time in history.

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piece. Canadian Natural will also become 70 percent owner of the Scotford Upgrader (Shell will remain the operator) and 100 percent owner of Shell’s Peace River and Cliffdale in situ operations. The deal adds more than 200,000 bbls/d to Canadian Natural’s portfolio, which should increase its overall volumes to over one million boe/d (production was 859,577 boe/d in the fourth quarter of 2016). It also adds 3,100 employees from Shell and Chevron, including 2,760 at the mines, 110 in the Peace River region and 230 in Calgary. “It is a rare opportunity to be able to acquire a world class oilsands mining and upgrading asset like AOSP,” Canadian Natural CFO Corey Bieber said in a statement. —JWN Energy

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Canadian Natural Resources is purchasing all of Shell’s operated upstream oilsands assets as well as non-operated leases for consideration of $12.74 billion, the company said March 9. The centerpiece of the deal is that Canadian Natural will become operator of the Athabasca Oil Sands Project (AOSP), taking over Shell’s 60 percent majority ownership. The AOSP started operating in 2002 and has current capacity of 255,000 bbls/d of synthetic crude oil through its integration with Shell’s Scotford Upgrader. Canadian Natural will become 70 percent owner and operator of the AOSP, as an agreement has also been made for Canadian Natural and Shell to acquire Marathon Oil Corporation’s 20 percent share. Indications are that Shell will retain a 10 percent ownership

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Land agents bid on parcels for oil and gas exploration at the monthly sales. The auction is considered an indicator of future development activity because it gauges demand for new drilling licences and land tenures. Sales have also dropped off due to a growing shortage of land. The province leases drilling licences and land to oil companies for threeto five-year terms, meaning much of the prime land in the area has been acquired. January’s sale was propelled by a $35-million parcel located near Pouce Coupe, which sold to Scott Land & Lease. The average price per hectare at the February sale was $451. The top parcel went for $1,407 per hectare and is located 45 kilometres northwest of Fort St. John in the Stoddart West area. The next sale is set for March 22.

Shell exits upstream oilsands operations

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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.

MARCH 17, 2017

PIPELINE NEWS NORTH •

IN BRIEF

DC biz aims to put PPE within reach for low-income people JONNY WAKEFIELD reporter@dcdn.ca

Showing up to a job site with the wrong equipment is a good way to get sent home. When she worked in the oilpatch as a pipe inspector, Letty Gingell saw that scene play out all too often. “If you show up for a job without the right gear, you’re going home,” she said. “It’s that important.” Now, Gingell is working to make sure the high-priced equipment needed for oilfield work isn’t a barrier to employment for low-income people in Dawson Creek. In February, she opened Ariel’s Closet, a donations centre at the Nawican Friendship Centre where those in need can pick up work clothes for any type of job. While the closet includes clothing for office work and job interviews,

the focus is on personal protective equipment, also known as PPE. Steeltoed work boots, hardhats and liners, gloves, and particularly fire-retardant coveralls are in high demand. “That stuff alone is $200-$300 apiece,” said Gingell, who is Northern Corridor Employment Coordinator with the friendship centre. “The most important thing was the work gear, the outer-gear that’s so expensive, because a lot of our people work in the oil and gas industry. There’s also the professional clothing. For a lot of people, that’s a barrier— Aboriginal and in our community.” With work picking up after a twoyear downturn, Gingell said PPE equipment is needed now more than ever. She’s hoping donations will start to pick up in the coming weeks. Ariel’s Closet accepts donations weekdays at the friendship centre between 9 a.m. and 4 p.m.

JONNY WAKEFIELD PHOTO

Letty Gingell says high-priced personal protective equipment can be a barrier to entry for low-income people seeking work in the oilfield.

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