Pipeline News North by Pipeline News North

Northern British Columbia and Alberta's Oil and Gas Industry Vol. 3 Issue 3 • dist: 18,000

MARCH/APRIL • 2013

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in this issue:

• THE INDUSTRY’S NEW CLOTHES - A BETTER BRAND OF SAFETY IN THE OIL PATCH • ALL TOGETHER NOW - psac members sign working energy commitment • GoING NATIVE - RECLAMATION GETS THE NATURAL TOUCH

look inside for feature on Fort St John’s PEtroleum association 2013 oilmen’s hockey tournament

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HYDRAULIC FRACTURING COMPANY SANJEL CORPORATION IS ONE OF TEN PSAC MEMBERS TO SIGN THE WORKING ENERGY COMMITMENT - SANJEL PHOTO

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MARCH 15, 2013

PETROLEUM ASSOCIATION - HAPPENINGS

MARCH 15, 2013

industry news DOLLARS AND SENSE

Big announcements mark first day of international LNG conference james waterman Pipeline News North British Columbia Premier Christy Clark was full of big announcements on the first day of the first international conference solely discussing the liquefied natural gas (LNG) industry that is expected to be an economic boon for the province. Kicking off the Fuelling the Future: Global Opportunities for LNG in B.C. conference in Vancouver on Monday, Feb. 25, Clark announced that her BC Liberal government would be providing $32 million to a partnership of 15 First Nations known as First Nations Group Limited Partnership (FNLP) so the group could make a non-equity investment in the Pacific Trails Pipelines (PTP) project proposed to transport northeast B.C. shale gas to the coast for liquefaction and export. “B.C. has a once-in-a-lifetime opportunity by exporting natural gas to Asia and we want to make sure First Nations are part of this industry’s future,” said Clark, discussing the amended economic partnership agreement with First Nations LP that will bring new revenue to all First Nations communities within the group. “This announcement creates a valuable model for industry proponents who seek to work in partnership with First Nations while ensuring their communities benefit from the growth of our natural gas sector,” she continued. Since an initial agreement was signed between the Province and FNLP, there have been changes to the construction timeline for the pipeline and Chevron Canada has replaced EOG Resources and Encana as Apache’s partners in the associated Kitimat LNG project. Revisions to that agreement were R001424264

deemed necessary as well. If completed, PTP would transport B.C. natural gas a distance of 463 kilometres from Summit Lake to the Kitimat LNG facility. Building the pipeline is expected to generate hundreds of jobs over a three-year period and $200 million in financial benefits to FNLP First Nations through a commercial agreement between that group and PTP that was also announced on Feb. 25. The agreement includes business and training opportunities. “These agreements secure significant financial and economic benefits for First Nations who play a vital role in one of British Columbia’s leading LNG projects,” said Chief Raymond Morris of FNLP’s executive committee. “It not only establishes that industry and First Nations can cooperate in the successful development of major projects, it also points to how it can be done.” “This benefits agreement represents another milestone for the PTP and Kitimat LNG projects,” said Janine McArdle, who serves as senior vice president with Apache and president of Pacific Trails Pipelines Management. “The support of First Nations for our projects continues to be tremendous and we look forward to building on these integral relationships as we move forward,” she added. “By working closely with First Nations and industry, we are creating jobs and economic development for remote communities,” said Rich Coleman, minister of energy, mines and natural gas. “This updated agreement is an example of industry’s collaboration with First Nations throughout our province to secure a prosperous future for B.C.” A ministry spokesperson noted the important role First Nations can

play in the development of natural gas pipelines and LNG projects in Kitimat and Prince Rupert. “By working in partnership with Aboriginal people and local communities, we can reach our goals of new investment and job creation while protecting the environment,” he said. “The creation of the Aboriginal Business and Investment Council is an example of our commitment to ensuring Aboriginal people across the province are a part of B.C.’s LNG economic future,” he added. Infrastructure was also the focus of the second announcement of the day, an offering of as much as $120 million dollars in royalty credits to industry through the Infrastructure Royalty Credit Program (IRCP) that was created in 2004. “We have a real opportunity to create significant wealth and jobs for British Columbians through continued support to our natural gas sector,” said Clark. The program encourages industry investment in infrastructure such as the 133 pipelines and 82 new roads built since the initiative began. That amounts to a total investment of over $1.7 billion. “This program keeps our natural gas sector competitive by encouraging investments in new roads and pipelines, which will help B.C. transition into a global supplier of cleaner energy and a world leader in liquefied natural gas,” said Clark. The ministry of energy, mines and natural gas will accept applications for projects under the IRCP until April 18 and only those offering a significant economic benefit to the province will be approved. A project proponent has to show that the project increases revenue to continued pg 22

PIPELINE NEWS NORTH •

special feature 16 Industry’s new clothes - oil patch safety wear 18 The competitive world of liquefied natural gas

community 6

Shell donates $100,000 to United Way

industry news 8 Quebec studies shale gas impacts in Peace Region 13 CN making a difference in western Canada

profiles 21 Bud Smith proud to defend the resource sector

environment 9 11

Peace Region air monitoring project underway Reclamation work gets the natural touch

careers & training 29 The future is now - new tech changing the patch

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MARCH 15, 2013

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industry news ALL TOGETHER NOW PSAC aims to unite stakeholders with Working Energy Commitment

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james waterman Pipeline News North Now that hydraulic fracturing is becoming part of the daily routine in the oil and natural gas producing regions of western Canada, the companies that do the work are taking a step toward ensuring residents of those communities are comfortable and confident with the practice. Ten member companies of the Petroleum Services Association of Canada (PSAC) announced the signing of a Working Energy Commitment on Feb. 20 that describes how they should act when performing their tasks. Beginning in April, PSAC members will be collaborating with stakeholders in their operating areas in Saskatchewan, Alberta and British Columbia to develop a code of conduct for the industry. “There’s been lots of chat of late about hydraulic fracturing by everybody but the people that actually do the work,” said PSAC president and CEO Mark Salkeld, explaining why his industry chose to move in this direction. “PSAC represents pretty much all the companies in Canada that pressure pump or hydraulic fracture,” he continued. “And they want to talk to people about it. So, they’ve come to us and asked us to help get something organized so we can go out and talk to the communities where we’re the most active and where the concern is. And out of this develop a code of conduct that everybody understands. “Hopefully allay the fears and let us continue on doing what we do best.” John Gorman, first vice chair on the PSAC board of directors and vice president of Halliburton Group Canada, one of the companies to sign the Working Energy Commitment, spoke positively about the initiative during his presentation at the Growing the North Conference in Grande Prairie on Feb. 21. “We haven’t done a very good job [of] being advocates for our own business,” said Gorman, adding that the industry has to assume that responsibility, starting with the public consultations on the code of conduct in April. Gorman suggested the effort can also play a role in ensuring the industry continues to recruit the workers necessary for its success. “[We need to] make sure our young people are informed of what a good industry we are in,” he said. Sanjel Corporation, another signee to the agreement has operations throughout the Western Canadian Sedimentary Basin. “Throughout our history, Sanjel Corporation has always strived to the highest level of corporate citizen-

ship in the communities we operate in,” said COO Warren Zemlak. “Today there is an increased public interest in the energy service industries’ day-to-day operations and we as a collective group must become more proactive in ensuring accurate information is communicated in a transparent manner,” he added. The code of conduct will not deal with regulations, which are set out by government and enforced by agencies such as the Energy Resources Conservation Board (ERCB) in Alberta and the Oil and Gas Commission (OGC) in B.C. “It won’t get down to the specifics of the actual procedure,” said Salkeld, noting that the code will actually revolve around local environmental stewardship, fostering good relationships with communities and improving transparency around the work that is being done in the patch. “The best part about … developing these codes is talking to the communities and hearing what their concerns are and developing the code around that,” he continued. “The most important part is getting the feedback from the communities.” That is why the consultation starts in April. “Spring break-up,” said Salkeld. “When things settle down in the industry, we can get out there and get our subject matter expert out to the public.” The exact locations the group will be visiting haven’t yet been determined, but the tour will surely include stops in Saskatchewan, Alberta and northeast B.C. “And then eventually out to eastern Canada and even down into Vancouver,” said Salkeld. “We’re going to open it up to whomever,” he added. “We’ll make sure that everybody in the vicinity knows. All are welcome to come and ask questions and hear what we’ve got to say.” It is expected that the code of conduct will be released by the end of 2013. During his Growing the North speech, Gorman noted the connection between this new initiative and the Community Partners program that was launched in 2010 by a collection of industry associations that included PSAC. “We weren’t seen as being very cooperative with stakeholders,” said Gorman, recalling the decision to develop Community Partners to remind workers of the courteous and respectful behavior expected of them by the industry and the members of the communities where they work. “It ties in nicely to the Community Partners,” said Salkeld. “That’s just basic courtesy.”

Salkeld remarked that he has spent most of his career in the field and so he knows full well what people want to see from his industry. “It’s just like closing the gates behind you and slowing down on gravel roads in front of farmhouses and not kicking up a lot of dust,” he explained. “And talking to people. Letting them know what you’re doing in their backyard or in their neighbourhood. And that’s what this is about. Because we’re already there.” However, the size of the presence has increased considerably with hydraulic fracturing. “Instead of ten trucks rolling by to set up a drilling rig and an operation,” he continued, “you’ve got that plus hydraulic fracturing spreads, which could be 20 more trucks or more.” Salkeld is happy to see so many PSAC members sign onto the Working Energy Commitment. “Just impresses the heck out of me and makes me really like my job,” he said. “It’s the companies that are actually doing the work.” Salkeld said that over 175,000 oil and gas wells have been hydraulically fractured over the last 60 years and records kept by the regulatory bodies in the three westernmost provinces support that fact. “And without an incident. And we’ve only gotten better and better at what we do,” he added “We’ve gotten so good now that we’ve opened up known resources and just created a whole resurgence with respect to oil and gas [and] energy development. And it’s a very good thing for western Canada. A very good thing for Canada as a whole.” That is why a group of senior executives from the major hydraulic fracturing companies meet every month to discuss the bad press about their industry and work toward correcting the misinformation about their work. “These are guys that, when they go back to their offices, they’re heavy competitors,” said Salkeld. “But they’re coming together today to help this industry – and this aspect of the industry – do the right thing.” The ultimate goal is alleviating fears and concerns about fracturing. “Telling them the truth about exactly what we do,” said Salkeld, suggesting the best way to accomplish that task. “And just make sure that they’re absolutely comfortable with what we’re doing and what we’re providing as a service.” It is all about earning social license. “We need to have public acceptance of what we do and understanding of what we do in order to operate safely and efficiently.”

MARCH 15, 2013

PIPELINE NEWS NORTH •

lEADING THE WAY TO PROSPERITY Premier Redford tackles tough topics at Growing the North james waterman Pipeline News North “Good leadership leads to prosperity.” When Alison Redford said those words during the Growing the North Conference in Grande Prairie last month, it didn’t seem to be a boastful claim regarding her ability as premier of Alberta, but a modest promise that her province can weather its current economic storm with her hands on the reins. “This is a fun speech,” Redford said with a laugh as she began to dip into the muddy waters of the tough fiscal situation in Alberta, largely the result of oil price volatility that Redford said could cost her province as much as $6 billion this year. That number is equivalent to Alberta’s education budget. “When we get bitumen to tidewater, we get world price,” said Redford, alluding to the link between prosperity and embattled pipeline projects such as Keystone XL and Northern Gateway that would push oil sands bitumen into world markets. “We’ve seen a certain drop in the Western Canada Select (WCS) price,” said Chris Bordeau of the Alberta Treasuring Board and Finance, discussing the “bitumen bubble” situation in early February. “And the spread between WCS and WTI (West Texas Intermediate) has certainly grown significantly over those last couple of months. And it’s really become sort of disassociated from the WTI price.” The government may also experience lost income and corporate tax revenues due to the oil price situation and the fact that oil companies are moving personnel to Vancouver offices to be closer to the the liquefied natural gas (LNG) industry, but Bordeau indicated that is a small part of the problem compared to the loss of royalty revenues. “Some would even say that a lower WCS price [is] impacting how much we’ve been able to get when we do these Crown lease sales,” he said. “But the direct correlation is definitely the royalty that the companies pay to the province is lower when the price of WCS is lower.” That was the scene as Alberta was heading toward the budget speech – and Redford’s birthday – on March 7. It has been a time of hard choices. During the weeks leading up to the budget, the government held an online discussion known as the Alberta Economic Summit that saw over 70,000 Albertans express their views on the economic priorities of the province. “Albertans told us to invest in infrastructure,” said Redford. The premier noted that “innovative partnerships” have led to an unprecedented amount of highway construction along Highway 63 between Edmonton and Fort McMurray, the oil sands capital of the province, projects that face challenges ranging from tough conditions that come with muskeg and boreal forest landscapes to the presence of pipelines and caribou management concerns. Such partnerships are also resulting in the twinning of the highway between Grande Prairie and Edmonton. “People from Edmonton need to come here,” said Redford, suggesting the economic value of Grande Prairie in resource-rich Alberta.

Alberta Premier Alison Redford displayed charm and wit as she discussed the difficult subjects of oil price volatility and the provincial deficit during her stop at the Growing the North Conference in Grande Prairie this February.

JAMES WATERMAN PHOTO

The Growing the North audience gave Redford a rousing cheer when she announced that her government would not be introducing a sales tax. Redford also announced that there would be MLA pay freezes and changes to public sector wages, while most government spending in the near future would be for infrastructure improvements. “We’re not going to have across the board cuts,” she said, adding that such measures “hurt vulnerable people disproportionately.” When the budget was unveiled on March 7, it was noted that the Province is taking a considerable hit in terms of natural gas royalty revenues as well, also associated with low commodity prices. Natural gas royalties for the fiscal year concluding March 31 are expected to be just $554 million, a far cry from the projected revenues of $1.22 billion. The government expects to receive $965 million next fiscal year from an industry that contributed $8.39 billion in royalties in 2005-2006 and $5.99 billion the following year. It was also announced that the annual regulatory levy paid by oil and gas producers would increase to pay for the new energy regulator. “Last year, the Department of Energy provided $44.8 million to the [Energy Resources Conservation Board],” said government spokesperson Janice Schroeder. “That is being eliminated and will need to be offset by increased industry levies,” she added. “I spoke with the energy minister about this immediately following the budget speech to express EPAC’s

disappointment that industry was being asked to help shrink the deficit through increasing fees at a time when many companies are facing difficult times due to low commodity prices,” said Gary Leach, president of the Explorers and Producers Association of Canada (EPAC). “This further emphasizes the need for the Alberta government to deliver on the implementation plan for the new regulator in a timely manner so industry and other stakeholders will realize the expected process efficiencies and cost savings,” said David Pryce, vice-president of operations with the Canadian Association of Petroleum Producers (CAPP). As for oil royalties, the forecast for the 2013-2014 fiscal year has been decreased from $1.91 billion to $1.62 billion. That change is linked to the growing amount of oil production from horizontal wells, which can receive a low five per cent royalty rate for up to four years, rather than just the first year, as is the case with other wells. The budget finally revealed that lower royalty revenues would result in an operating budget deficit of $451 million for the next fiscal year, but a surplus of $1.48 billion is forecast for the following year. “What we’re seeing in terms of our revenue picture is not a royalty-based issue, it’s a market-based issue,” Alberta’s finance minister Doug Horner said during a customary post-budget speech at the Calgary Chamber of Commerce on March 8. “Our economic activity is continuing,” he added. “We’re still going to grow faster than any other jurisdiction in Canada.

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MARCH 15, 2013

community

COMMUNITY SPIRIT Shell celebrates $100,000 donation to United Way

james waterman Pipeline News North It wasn’t just about a pat on the back for a job well done when Shell Canada invited the United Way and community groups that organization sponsors into their Fort St. John offices on the morning of Feb. 26. Shell’s northeast British Columbia staff were celebrating their $100,065 donation to the United Way, the result of a 2012 fundraising campaign that included a charity golf tournament, a fire truck pull and a payroll deduction drive whereby the company matches every dollar donated by a Shell employee, but they were also looking for the inspiration to top that performance with their 2013 campaign. “I’ve been inspired by some of the stories I’ve heard,” said Rej Tetrault, Shell’s operations manager for northeast B.C. Tetrault remarked many times that inspiration was the keyword of the day as the audience heard testimonials from groups such as the Literacy Society, which spoke of helping German and Russian settlers in Wonowon

integrate themselves into the North Peace community through outreach English as a second language instruction, and Community Multicultural and Immigration Services, which told about their community kitchen program that helps new Canadians living in the region grow comfortable in Fort St. John through social interaction with each other. “We heard from a small minority of them today,” Tetrault said of the numerous organizations that receive support from the United Way. “I feel that we have made a difference based on what I’ve heard today in terms of the impact,” he continued. “It inspires me. And inspires me to do more. To hear the stories – personal stories – about where we can help.” A young woman new to Fort St. John just last year told of how programs and services at the Women’s Resource Society put her on the right track after a tough start in her new hometown. Lori Slater of Spinal Cord Injury BC discussed the impact the generosity shown by Shell has had on that association through the United Way. “We wouldn’t be able to do that without your help,”

Slater said of programs that allow individuals with spinal cord injuries to continue to enjoy life in the community that they call home, even if that community is as cold and snowy as Fort St. John can be in the winter. “It’s extremely important to be involved in the United Way,” said Dean Freeman, a lifelong resident of northeast B.C. who has led Shell’s local efforts to support the United Way for the past four years. “We have a large staff base,” he added. “And what we can contribute back into the community is huge.” “The message is that we live in the community,” said Tetrault. “The people that work hard to develop those resources live here,” he continued, adding that many of those employees also raise families in the region. “My team – it’s a local-based team.” Tetrault noted that Shell is fairly new to the area, their Groundbirch shale gas operation west of Dawson Creek being their most significant project in the region, but they are committed to contributing to the local communities from Tumbler Ridge to Fort Nelson through the United Way.

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MARCH 15, 2013

PIPELINE NEWS NORTH •

Two of the most successful fundraising events for Shell’s Peace Region team in 2012 were their charity golf tournament and the annual fire truck pull that pitted them against other local companies and organizations in a battle of both physical and charitable might.

JAMES WATERMAN PHOTO

Niki Hedges of United Way Northern BC is very grateful for that support. “United Way is about building healthy communities,” said Hedges. “We help flow funds to help support programs and services where there is a critical need,” she continued. “So, the more that we build awareness in our community about the work of United Way and the long lasting impact – positive impact – that we have on large numbers of people in communities in northern B.C., we change people’s lives. And people are helped and supported to become strong and stand on their feet in order to be able to be part of the community in which they live. “I think we all like to feel that what we do matters. And I strongly feel that, through supporting United Way, you know that your money is going to have a strong, long lasting impact that will help the most amount of people in your community.” Tetrault said that Hedges is “one of the best

coaches” for her constant encouragement during the fundraising campaign. “It’s not a relationship that I’ve had before,” he continued. “The energy that she brings to her role helps encourage us all to do more regardless of what companies we work for. We can all [make] a positive impact. As long as we’re healthy and we have our families and we have secure employment, you look to give back and do more.” Hedges was clearly thrilled with the result of Shell’s 2012 campaign that brought in over $100,000 after raising just under $13,000 in 2010 and over $56,000 in 2011. “It’s hard to describe that feeling when you realize that a group such as Shell Canada has pulled together in such a strong way, with terrific leadership from within, to raise $100,000,” said Hedges. “It is staggering,” she added. “We have terrific support in the community and Shell Canada is part of that. They’re great partners.” “I was surprised,” Freeman said of the funds

raised in 2012. Freeman said that the company was proud of their efforts at the midway point of the year, but still felt that they could do more, particularly since they had actually set a goal to exceed $100,000 for the year. “What’s going to take it to the next level?” he continued, recalling the discussion at that time. “And when we worked with the United Way and brought in a guest speaker to talk about the Women’s Resource [Society], it put a personal touch towards it. And then that personal touch inspired us to even go further. And when we saw the final tally, it was just like, ‘Wow, we accomplished that as a group.’ And the impact that that is going to have in the community is immense.” Shell is going to have to work hard to beat that record this year. “We’ve got a lot of exciting things planned,” said Freeman. “2013 is going to be even better.”

LEFT: Niki Hedges of United Way Northern BC accepts a $100,065 donation from Dean Freeman (left) and Rej Tetrault (right) of Shell Canada. RIGHT: The 2012 fundraising campaign barely complete, Tetrault and Hedges are already thinking hard about how they can top that success in 2013.

JAMES WATERMAN PHOTOS

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MARCH 15, 2013

industry news STRANGER IN A STRANGE LAND Quebec studying shale gas industry in Peace Region

Daniel Bezeau-Gervais, a graduate student studying management at HEC Montreal, was visiting Fort St. John in February and March conducting research on behalf of the Quebec government. Quebec is examining the social, economic and environmental impacts of shale gas development during the provincial moratorium on that industry to decide how they should proceed.

JAMES WATERMAN PHOTO

james waterman Pipeline News North It almost sounds like a spy novel, a mysterious stranger with a French accent wandering the streets of Fort St. John, British Columbia, asking probing questions about the local industry, meticulously taking notes. But it is just a day in the life of Daniel Bezeau-Gervais, a graduate student in management from HEC Montreal and a member of a team conducting a research project on corporate social responsibility and local community development in the shale gas

industry under the guidance of the Ministry of Sustainable Development in Quebec. “In Quebec right now there’s a [moratorium] on shale gas,” said Bezeau-Gervais, taking time for a cup of coffee on a sunny Fort St. John morning in the midst of his whirlwind tour of the region. “The reason for that is that Quebec is quite new at all those issues,” he continued, noting that the province lacks the experience with the petroleum sector – and the shale resources segment of that industry in particular – that has been the norm in Alberta and northeast B.C.

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“There’s no legislation and people are concerned. So, government thought it was better for the Province to do some research.” Bezeau-Gervais, whose background is in economics and sustainable government with a focus on the relationship between companies and the communities where they operate, is concentrating on the social aspects of shale gas development. The study is also examining the economic and environmental aspects. “Our goal is to go into communities – we’re going into six communities – where shale gas has been exploited,” said Bezeau-Gervais.

“What we want to see is the important factors that have to be there in order for shale gas to be extracted in a good way, so that the community does benefit from it and doesn’t feel too much of the impacts,” he continued. “Because it’s natural resources. Every time you do extract natural resources, there are some impacts, but there are also ways to mitigate those impacts. That’s what we want to study. We want to know, if there is shale gas [development] in Quebec, based on [what has happened in] other communities, what would be the potential impacts and what could we set as legislation or what would we like companies to do in order to be ready for those impacts.” Fort St. John was recommended to the research team by the provincial oil and gas industry association in Quebec, the Quebec Oil and Gas Association (QOGA), as a good fit for the study. “It was fitting our criteria,” said BezeauGervais. “It was large enough. It was resembling the cities of Quebec where there would be shale gas. And so they felt there would be the same issues we could have in Quebec. And they felt that with the experience of Fort St. John with oil and gas in the past it was a city we should definitely go to.” The team also has researchers in Dawson Creek and Grande Prairie, Alberta, as well as natural gas producing jurisdictions in the United States such as Texas and Colorado. “To see as many people as possible from as many backgrounds as possible.” The young researcher met with municipal and provincial government officials, the school district, the BC Oil and Gas Commission (OGC) and local oil and gas industry representatives, including Energy Services BC (ESBC), which represents the oil and gas industry service sector in the province. “They are the ones who are most willing to talk with us,” Bezeau-Gervais said of the service sector companies. “They have been really generous in giving their time and their expertise in better understanding the impacts,” he continued. “They are benefiting directly from shale gas because they are servicing those companies and at the same time they have been in town for like 30 years. “They have a good background in what is happening.

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environment

MARCH 15, 2013

PIPELINE NEWS NORTH •

EVERY BREATH YOU TAKE Industry and government collaborating to monitor air quality

The natural gas that is heating homes and heating the economy in British Columbia isn’t the only substance found deep in those underground reservoirs. Its neighbours include compounds ranging from water to carbon dioxide (CO2) and hydrogen sulphide (H2S) that natural gas producers must remove before selling that fuel to the customers. The industry and the provincial government, curious about the impact trace amounts of those compounds might be having on overall quality in the Peace Region as that sector continues to grow, has set a new air monitoring program in motion that aims to address that question and the concerns of local residents. “Initially, the focus is mostly on the oil and gas activity and trying to characterize impacts in the region from that activity specifically,” said Gail Millar of the Ministry of Environment in Prince George. The program was announced on June 6, 2012, which was known as Clean Air Day, and a working group that features local representatives of the oil and gas industry and various other stakeholder organizations was brought together in December. The responsibilities of the working group include identifying air pollutants to monitor and determining appropriate locations for the monitoring stations. Two of the three stations will be south of the Peace River and the other station will be north of that waterway. “We don’t have them sited yet,” said Millar.

“Currently, they’re actually in Prince George,” she continued. “And there’s a lot of preparation work that has to be done to get them ready to be able to monitor in the field.” Millar explained the working group has only had a pair of meetings at this point, but will be coming together again in April to choose locations for the stations. The stations will measure total reduced sulfur (TRS) and sulfur dioxide (SO2). According to the Ontario Ministry of Environment website, TRS compounds are not usually hazardous to human health, but they do cause strong rotten egg odors. Sources include swamps and bogs, as well as industrial activities associated with oil and gas, steel and pulp and paper. The United States Environmental Protection Agency (EPA) website indicates that SO2 can cause a variety of respiratory problems. The stations will also provide information on wind speed, wind direction, relative humidity and temperature. “These ones are real time,” Millar said of the monitors. “What they will give us is an hourly average.” Millar noted that information could be delayed by an hour or two, but the stations will essentially transmit data to the ministry in real time to be displayed on their bcairquality.ca website. “Anyone can have access and look to see what the current conditions are,” she said. This project is a bit different than most air monitoring programs. “We’re not planning to be monitoring

Redford defends Edmonton’s decision in Medevac controversy james waterman Pipeline News North Alberta Premier Alison Redford responded to concerns surrounding the closing of the Edmonton City Centre Airport during her visit to Grande Prairie for the Growing the North Conference on Feb. 20. The City of Edmonton has chosen to close the airport, which means that Medevac flights will now be landing farther from hospitals at Edmonton International Airport, a decision of great concern to northern Albertans who perform dangerous jobs in remote locations as part of the province’s natural resources industries. Redford said that the Province respects the decision made by the City of Edmonton, noting that it would cost over $8 billion for the provincial government to expropriate that land to keep an airport in the city centre. The premier also promised a state-of-the-art facility at the International Airport, including ground ambulances based at that location. “We have the ability to manage urgent care,” she said. Eighty per cent of Medevac patients arriving in Edmonton are undergoing scheduled procedures or being transferred to a higher level of care. Only five Medevac flights per month are actually urgent situations. Redford noted that Shock Trauma Air Rescue Society (STARS) helicopters would continue to operate in Edmonton. That fleet now includes helicopters capable of flying in adverse and icy conditions.

right in Fort St. John or Dawson Creek,” said Millar. “Not right in the communities,” she continued. “And when you do ambient air quality monitoring, a very typical approach is to monitor in the communities first where most people are. But the focus right now is more the oil and gas.” That is why the three year study will focus on areas outside the communities. “After the three years, there will be more questions,” said Millar. “Do we continue monitoring? Do we need to monitor more? Should we move into where the communities are or [not just focus] specifically [on] oil and gas? Those bigger, broader questions will start coming out. “But you really have to start at step one. And the concern is the oil and gas industry. So, that’s where we’re focusing initially.” Funding for the project isn’t just coming from the provincial government, but also through the BC Oil and Gas Commission (OGC), the Canadian Association

of Petroleum Producers (CAPP) and the Science and Community Environmental Knowledge Fund (SCEK). SCEK is an industry-sponsored fund administered by the OGC, CAPP and the Explorers and Producers Association of Canada (EPAC). “It certainly will provide some very credible information about ambient air quality up in that region, and it’s something that we don’t actually know a lot about,” said Millar. “It takes a while for you to collect enough data to assess what’s happening.” The ministry hopes the monitoring program will start to answer questions about local air quality concerns and help the government make decisions around issues such as public health, pollution management and other environmental impacts. “It really will depend on the information we gather and input from the communities in terms of if we’re going to continue with monitoring,” said Millar. “It will guide that process as well.”

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MARCH 15, 2013

industry news

POLL POSITION Survey says most western Canadians are unaware james waterman Pipeline News North

of Trans Mountain expansion plan

People say telephone poles are common, but perhaps no pole – or poll – is as common these days as those assessing the public opinion of new oil pipeline projects. Just about two weeks after releasing the results of a poll discussing Enbridge’s Northern Gateway plan to transport Alberta oil sands bitumen to an export hub in Kitimat, British Columbia on Feb. 4, Insights West published the numbers stemming from a similar survey of 512 British Columbians and 562 Albertans concerning Kinder Morgan’s proposal to expand their Trans Mountain pipeline to Burnaby, which would also increase

transmission of Alberta crude to the west coast for export to foreign markets. Among the key findings was an apparent lack of awareness of the Trans Mountain project in comparison to Northern Gateway. “That’s not a huge surprise,” said Insights West president Steve Mossop, referring to the level of awareness and the disparity in awareness levels between B.C. respondents and their counterparts in Alberta. Only 60 per cent of British Columbians are aware of the Trans Mountain expansion plan, despite the fact that the project is largely just twinning the existing pipeline from Edmonton to Burnaby. Virtually all British Columbians surveyed during the Northern Gateway poll

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were aware of that project. Just 28 per cent of Albertans are aware of the Trans Mountain expansion, but 87 per cent are aware of Northern Gateway, according to the earlier poll. “We’ve had such huge opposition and very vocal opposition,” Mossop said of the situation in B.C. “That’s really generated the press coverage. That’s leading to the higher awareness levels. Of course, in Alberta, they just don’t have that same environmental segment that makes a lot of noise. So, it’s no big surprise that awareness is quite a bit lower.” Mossop said the difference is also attributable to the different cultures of the two provinces. The oil and gas industry is well known throughout Alberta, where there is already over 400,000 kilometres of pipeline, but firsthand knowledge in B.C. is mostly restricted to the northeast corner. “I know the stance of the population,” Mossop said of Alberta, drawing from his long experience in the Calgary office. “And they’re just so used to the oil industry, it just doesn’t phase them. “It’s a non-issue.”

Mossop also suggested that Northern Gateway is an exceptional case as far as public awareness. “You have to live under a rock to not be aware of it,” he said. Three quarters of Albertans and 38 per cent of British Columbians support the Trans Mountain project, numbers which closely mirror the results of the Northern Gateway poll. Just over half of British Columbians and just under a quarter of Albertans oppose the plan. “The differences are dramatic,” said Mossop. “And it really shows that B.C. sort of stands alone.” Mossop said that Insights West polls conducted in Ontario have shown strong support for the oil industry in Alberta, but B.C. continues to be a “little island” with different views from the rest of the country. “Here’s a big oil company creating jobs and doing something positive for Canada, but British Columbians don’t buy into that,” he said. “Just amazing how big the differences were between Ontario and Alberta versus B.C.”

B.C. introduces flexible grants to support trades training STAFF REPORTER Pipeline News North The British Columbia government has developed a flexible student aid grant program that will help address the workforce needs of the province by supporting trades training. The Labour Market StudentAid BC Grant will provide as much as $2 million in annual funding to 300 deserving students attending Northern Lights College, Northwest Community Colllege, College of New Caledonia and Thompson Rivers University, including students in programs important to the oil and gas industry such as oil and gas field operations and power engineering and gas processing. “Our new … program is another step to ensure that our post-secondary training opportunities align with our province’s job market,” said John Yap, minister of advanced education, innovation and technology. “It will help meet our Skills and Training Plan goal of ensuring that we are matching skills to jobs and jobs to skills so we have the right mix of workers, in the right regions, at the right time,” he added. “The northern region of B.C. is facing significant economic opportunities across a range of sectors,” said Pat Bell, minister of jobs, tourism and skills training. “It is critical that people living in the region have access to the skills and training needed to meet the labour market demand created by these opportunities. “The BC Jobs Plan committed to the creation of Regional Workforce Tables to foster local collaboration on workforce and training issues and inform initiatives like the student aid grant program.” Brent Deinstadt of Northern Lights College indicated that his school is pleased with the creation of the program. “The announcement of this funding is important for northeast British Columbia and Northern Lights College,” he said. “For the individuals who volunteered on the Northeast Regional Workforce Table over the past year, this funding is an important step in responding to their recommendations on labour market needs in the region.”

environment

MARCH 15, 2013

PIPELINE NEWS NORTH •

GOING NATIVE

First Nations plant nursery bringing natural touch to reclamation

These two Twin Sisters Native Plants greenhouses will soon be home to hundreds of plants that will be used for reclamation work in the energy and forestry sectors.

TWIN SISTERS NATIVE PLANTS PHOTO

james waterman Pipeline News North

coal mines, plus, of course, the oil and gas sector.” Walter Energy has been part of the Over 50 species of grass, wildflowproject as a significant funding partner and ers, shrubs and trees native to the repotential customer from the very start. gion will be produced in approximately Their operations in the area include 14,000 square feet of greenhouse just the Brule coalmine 45 kilometres south north of Chetwynd, British Columbia of Chetwynd, the Willow Creek coal mine this summer. 45 kilometres west of Chetwynd and the It is good news for the natural reWolverine coalmine 25 kilometres south source sector and local residents with of nearby Tumbler Ridge. concerns about maintaining the ecologiWalter Energy has committed to using cal integrity of the area, not to mention locally sourced native plants for their the Saulteau and West Moberly First reclamation projects, particularly those Nations who are about to work with the associated with the Brule Mine. mining and oil and gas industries in a “The need for these plants is very new way as equal owners of the native substantial,” said Keefer, noting that Tipi plant nursery. Mountain Native “My company’s plants virtually sells “The need for facilitating the deout every year, its velopment of a new customers including these plants is very BC Hydro and mining native plant nursery business that’s being companies operating substantial.” called Twin Sisters in both the south and Native Plants,” said the northeast. Mike Keefer of Keefer “I would envision – Mike Keefer, Ecological Services. this new nursery, with Keefer Ecological Services its current size, to The idea actually stems from a almost sell out just similar project with meeting the needs of Ktunaxa First Nation in his hometown of the coal sector alone,” he added. Cranbrook, B.C. That suggests the long-term potential “We opened a native plant nursery of the business could be huge, particudown here that’s now called Tipi Mountain larly considering the growing demand Native Plants,” he explained. “And we from the oil and gas industry for their have 24,000 square feet of greenhouses. reclamation work. And what we do is we grow native spe“Shell does already use them on a cies for use in, primarily, reclamation or number of their projects,” said Keefer. ecological restoration. Down south, our “Over the years, Shell has taken reprebiggest market are the coalmines. sentatives from First Nations, members “Twin Sisters’ biggest market will be of the community and environmental the Walter Energy mine, and then other groups to our active reclamation sites

to share our work and seek their feedback,” said Shell Canada spokesperson Stephen Doolan. “Shell plans reclamation activities early in our projects with the goal of returning the land as close to its original state,” he continued. “With that in mind, it would make sense that Shell would use some of the same native plant species available at local greenhouses in our Groundbirch reclamation activities.” Groundbirch sits between Dawson Creek and Chetwynd. “They’ve moved away from traditional reclamation,” Keefer said of Shell. “I believe many of the other companies are ready to follow.” Traditional reclamation techniques involve planting non-native grasses and legumes via a process known as hydroseeding, which is simply spraying a mixture of seeds and mulch over an area.

The usual result is a manmade grassland. “And those grasslands are known to very much change the migrations of wildlife and cause long-term shifts in ecosystems,” said Keefer. That is an important consideration when movement of ungulates such as deer and moose into caribou territory, following the trail of grasslands perfect for grazing, are being examined as a contributing factor to declining caribou numbers. Wolves are thought to follow the deer and moose into those areas and subsequently prey on the caribou as well. “Now that we have mountain and boreal caribou as a major issue, we really don’t want to be luring the deer and elk into ecosystems they weren’t previously found,” said Keefer. “What we try to do with the native continued pg 27

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Chevron looking for long-term sales contracts for Kitimat LNG Daily Oil Bulletin

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Chevron Corporation said on Tuesday, March 12 it would like to have 60 to 70 per cent in long-term sales locked up before making a final investment decision on the Kitimat LNG plant, while company officials also stressed the need for a competitive pricing structure for its LNG projects. “We want to have 60 or 70 per cent to long-term sales before we go into FID on a project,” said George Kirkland, vice-chairman and executive vice-president, upstream, when asked about the Kitimat LNG project at the company’s security analyst meeting. “I feel much better when we have that; we know the pricing, we know what underwrites that project and we’ve followed that model, I think, on Gorgon and Wheatstone [in Australia] and it’s proven to be, I think, a very good model. “I think we have built a really successful partnership [with Apache Corporation]. Of course, the next step is to get some customers to sign up to get to that 60 or 70 per cent level.” Chevron and Apache hold 50 per cent each in the project, with San Ramonbased Chevron as the operator. The project is still in the front-end engineering and design stage. Negotiations with off-takers are continuing, but no timeframe has been given for FID. John Watson, Chevron’s chairman and chief executive officer, added that these LNG projects are going to continue to need strong pricing. “We think oil-linked pricing makes sense for these buyers given their alternatives, and that is certainly what we strive for,” he said. “We won’t take final investment decision on projects that don’t have economics that support the costs that are going to be incurred. Kirkland reviewed progress on key growth projects under construction. “We are advancing our project queue as planned. Construction on our Australian LNG projects, Gorgon and Wheatstone, is progressing very well, with first LNG for Gorgon targeted for early 2015. Construction continues on the Jack/St. Malo and Big Foot deepwater projects in the U.S. Gulf of Mexico, both of which are scheduled for start-up in 2014.”

industry news

MARCH 15, 2013

PIPELINE NEWS NORTH •

ALL THE RIGHT MOVES CN making a difference in western Canada james waterman Pipeline News North

CN is trying to fill the gap. “It’s a big area of opportunity for us,” said Cory. “And we’ve seen our growth in It has been a tough winter for CN Rail. that commodity in terms of carloads go Actually, business has been good from zero to 34,000 carloads last year.” lately, the end result of about twenty The destinations have been eastern years of improving efficiency and acquirCanada and the Gulf of Mexico in the ing railroads, but winter is always difficult United States, which CN can access for a rail company. thanks to their 2003 acquisition of the “I’m born and bred in Winnipeg,” said Wisconsin Central Railroad. Mike Cory, senior vice president for CN’s Cory explained that proposed and western region, during his visit to the existing refineries in both locations are Growing the North Conference in Grande hungry for oil. Prairie on Feb. 20. “Winterpeg.” “It will continue to grow and we’ll do Cory began his long career with CN it in a safe and sustainable and realistic washing windows and cleaning bathrooms manner,” he said of shipping oil by rail. where his father spent his days hauling “I see it being a very good opportunity goods between trucks and boxcars. for western Canada.” “The winters are never easy,” said The acquisition of the Wisconsin CenCory, drawing on his long history in Cana- tral has also increased CN’s involvement da’s frigid north and the railroad industry. in the oil and gas industry as a shipper of “With all the ingredients we’re trying sand used in hydraulic fracturing. to put together now – better customer “Frack sand has been tremendous service, more collaboration, the growth of growth out here,” said Cory, particularly the business – we really got set back this noting its high demand in the natural gas winter on the prairies between Edmonton industries of northern Alberta and northand Winnipeg,” he continued. east British Columbia. The sub-zero temperatures of this winThat sand travels the Wisconsin Central. ter have shown CN that they lack a certain “We see that as a big source of degree of resiliency along that route. growth,” Cory continued. “And really it The trouble is that metal just doesn’t serves the community well. Because like the severe cold. fracking is needed for numerous types of “You’ve got rail. You’ve got locomoactivities. Not just natural gas, but contives. You’ve got wheels. And things start densate, anything that’s in the ground. to slow down,” said Cory. “It’s a big part of what we’re doing and The effects of the cold weather, we’re building infrastructure to support it.” coupled with growing quantities of goods Obviously, CN is an end user of pesuch as grain, coal and forest products troleum fuels as an operator of diesel that need to be transported, has led to locomotives, but this winter also marks serious problems, including shortages of their first attempt to change their fuel train cars. consumption with a test run of liquefied “We haven’t been able to just catch natural gas (LNG) engines between our breath,” said Cory. “You can’t wait Edmonton and Fort McMurray. all winter for good weather to come.” “It’s going well,” said Cory. Cory noted that CN has invested “It’s very isolated to that one line strategically in an attempt to manbecause you need the locomotives to be age those issues, but this winter has captive,” he continued. “We homogenize proven that their work isn’t yet done in our locomotive fleet to interchange with that department. other railways.” “Every year we get better,” he said. LNG locomotives must be kept in “We get better locoareas where facilimotives. We get “Every year we get ties exist to fuel and better technology.” maintain them. That is good “We’ll look to take better. We get better other news for oil steps as we producers across go, but at some point locomotives. We get it will be an industry western Canada. Insufficient jump,” said Cory, addbetter technology.” ing that a few trucking pipeline capacity is a problem for both companies are moving light oil producers that direction. – Mike Cory, CN Rail in Manitoba and “I think BC Ferries Saskatchewan and is looking at it,” he oil sands producers remarked, noting the in Alberta, who are awaiting decisions on appeal of LNG as a lower cost and lower TransCanada’s Keystone XL, Enbridge’s greenhouse gas (GHG) emissions fuel. Northern Gateway, Kinder Morgan’s That is partly why the market for LNG Trans Mountain Expansion and fledgling transportation fuel is growing. plans to push oil east via existing pipe“We’re positioning ourselves to be part lines to learn how – if ever – they can get of that growth,” said Cory. their product to world markets. “We want to keep growing, obviously,

Mike Cory, senior vice president for CN Rail’s western division, discussed the progress his company has been making in western Canada during the Growing the North Conference in Grande Prairie in February. That progress includes increasing oil transport considerably over the past two years. JAMES WATERMAN PHOTO

because that’s how companies succeed,” he continued. “Revenue growth. We want to do it at a smart, sustainable pace. And especially in line with the service needs of our customers [and the] markets that they’re serving. It’s a challenge, but that’s the challenge that we’ve embraced. “Our growth has been tremendous in western Canada. Forty per cent growth in the last five years.” The western Canadian segment of CN, which ranges from Thunder Bay, Ontario in the east to the ports of Vancouver and Prince Rupert, B.C. in the west, accounts for over half of the product moved by the company. CN has been investing heavily in improving their service in Alberta and B.C. particularly, including increasing the number of long sidings that allow them to use longer trains rather than a greater number of trains. “We want to be able to service customers properly, but at the same time maintain speed,” said Cory. “Because speed creates capacity. So, whether it’s sidings on the Grande Cache side, sidings up in the Chetwynd area, facilities such a new locomotive shop up in Prince George

that will be able to service locomotives that previously would have traveled many more miles to Edmonton to get service. It makes them available more often for these locations out here. And it also provides another level of reliability to other initiatives we’ve taken. Really, it’s about speed and reliability. That’s what a railway thrives on.” CN is also exploring the idea of a investing in a multi-modal logistics hub in Grande Prairie that will allow their trains to travel to one facility, not a series of sites in that area. “We’re not as nimble as trucks,” said Cory. “If this can be shared with other people,” he continued, “I think it’s a big benefit. Just allows more people access to ply their trade where today they don’t have it.” Cory explained that these investment decisions are the result of a new focus in the past few years on engaging with everybody along the supply chain in an effort to find the best solutions for all parties. “This is about actually collaborating with customers and with ports,” he said. “It’s created innovation. It’s created a lot of growth. It’s created an understanding of what each party needs to succeed.”

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MARCH 15, 2013

special feature THE INDUSTRY’S NEW CLOTHES

University of Alberta researchers bringing a better brand of safety wear to the oil patch james waterman Pipeline News North The oil patch of northern Alberta is a long way from the runways of Milan, but it is now a proving ground for a new line of apparel lending credibility to the idea that safety is fashionable. Megan Strickfaden, a design researcher at the University of Alberta, has been hard at work with one of her graduate students, Sihong Yu, developing new garments to address one of the emerging safety issues in the oil industry of northern Alberta: human contact with steam and hot water that are often under high pressure. That project began with field trips and site visits to learn about the activities during which those dangers exist. “We identified seven specific tasks,” said Strickfaden. The tasks range from assessing the quality of steam used in heavy oil production to working in the vicinity of high pressure valves. “The one that seems to be happening the most is spraying steam onto wellheads,” added Strickfaden. Imperial Oil was one of the companies that participated in the site visits. “Imperial has been involved with this research initiative at the University of Alberta for the past five years,” said Pius Rolheiser, Imperial Oil spokesperson. Rolheiser noted that the value of this project lies in the fact that the industry is now using steam on a regular basis for oil production. Imperial Oil is no exception, as their largest operation at Cold Lake recovers oil using a process known as cyclic steam stimulation, which involves injecting steam into the oil well to heat the heavy oil to a temperature where it can flow more freely. “Increasing numbers of workers are dealing with steam and hot water,” said Rolheiser. “Imperial continuously looks for ways to better protect our workers from workplace hazards,” he continued, “and we believe

The innovative new safety wear in action. The garment protects against hot water and steam, increasingly common dangers in Alberta’s oil industry, as steam is often used to extract bitumen from oil sands reservoirs. Existing clothing only protects against flash fire and radiant thermal energy.

UNIVERSITY OF ALBERTA PHOTO

this initiative will result in better protection for workers in the industry.” A key concern around the use of steam and hot water is that pressures can reach as high as 13,500 kilopascals in those situations. “It’s a heck of a lot of pressure,” said Strickfaden. “When you have that pressure hitting any part of the body, you obviously don’t want that to directly hit the skin,” she continued. “But it can also channel up a sleeve or down into a boot or up a pant leg or down through the front of that jacket.”

Although those jobs might only take 10 to 15 minutes to perform, the risk of injury is quite serious. “And steam can be up to 370 degrees Celsius,” Strickfaden continued. “So, it’s very hot. Hot water has less pressure, but there are still pressurized water sprayers or hoses used. And so it can be quite high pressure. But not as high as steam.” The water temperatures can reach 80 to 90 degrees Celsius. “The resulting injuries can be partial thickness burns to the skin, first to third degree burns or even fatalities,” she added.

The existing clothing wasn’t addressing those issues. Coveralls typically worn in oil industry operations in Alberta protect workers radiant heat and flash fires, but not steam and hot water. “And there were some industry reports that came through of various injuries that occurred as a result of steam and hot water,” said Strickfaden. “And so it was really this call from industry that there was an issue around protection [and] a need for this kind of protection.” The PVC material used to make coats R001424176

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and overalls worn in the patch was the first problem to catch the eye of the research team. “That garment was expected to be worn indoors and outdoors and in temperatures that related to the summer and the winter,” said Strickfaden. When exposed to cold winter temperatures, the material becomes rigid and starts to crack. Conversely, hot summer temperatures cause it to become quite soft. The middle of that temperature range is when the material is at its best. Unfortunately, it doesn’t breathe very well at any temperature due to its plastic nature. “That garment didn’t really provide any mobility for people,” Strickfaden continued, noting a tendency among workers to remove the clothing as quickly as possible when it no longer had to be worn. “Getting it on was a real pain in the butt because workers literally had to take their boots off,” she added. “They’re doing that on a concrete plant floor. Doing that in the middle of the field somewhere. It might be snowy. It might be muddy. “It’s absolutely ridiculous.” The team thought that tackling the breathability problem might also help address the problems associated with removing the clothing, simply because workers wouldn’t be so eager to get out of uncomfortable safety wear. “If we had a garment that was what we call semi-permeable, that did have some breathability, that people would want to wear it longer,” said Strickfaden. The team also had to consider the design elements. “What we designed is what we would call a level two garment, which means that they would be putting it over top of their coveralls to protect them when they’re exposed to steam and hot water,” Strickfaden explained. The most vulnerable body parts – wrists, ankles, feet, neck, lower face and front torso – were given special attention. “We were really looking at improving the interface between the gloves, the boots and the garments,” said Strickfaden. “We were looking at improving mobility so that they could wear this thing and actually do the crawling, climbing and stretching that they did in their various job tasks,” she continued. “So, not just limiting it to the job tasks related to steam and hot water.” Improving the fit of the safety wear was another goal. “Because a well-fitting garment will protect better,” said Strickfaden. “You can control the air gaps that are happening in the garment. You can control the closeness – the gapping or the gaping of the garment – and how close it fits to the body. … You don’t want a lot of bagging and a lot of gaping, because not only can that catch on stuff around them in their environment, but that also provides pockets for steam or hot water to get caught in.” The prototype was a “two-part system” consisting of pants and a jacket, not the traditional coveralls. “One of the things that’s great about a pant and jacket combo is that you’ve got an overlap between the jacket and the

pants,” said Strickfaden. “That can work for you or against you,” she continued. “If you have pants that just hit the waist or are low-risers, than your jacket isn’t covering too much. But in our case, we did a high-waisted pant so that it would maximize the coverage of the body, but also maximize fit. “The high-waisted pant is good for men and women. And we did observe that there are more and more women in the industry. And that, frankly, the bibbed overall is the biggest nightmare from a safety point of view for women. Because it hangs off of the bust, creates a big gape [where] potentially something can either catch the bib or you can get something spraying into where that bib is. “The high-waisted pant sits on the smallest part of the torso. It’s tight on the ribcage. It’s right below the bust on a woman. And on a man it’s at their smallest point, which is right below their pectoral muscles.” The pant also includes a small vest at the top that is designed to distribute the weight of the fabric and improve mobility. The inspiration for that element was gear worn by firefighters. A wider leg on the pant was included to allow workers to keep their boots on their feet when putting the clothing on and taking it off. Pockets for kneepads are another new feature. “We did some venting in the lower part of the leg on the pants so that people weren’t overheating in them,” said Strickfaden. “Because we’re concerned about the safety aspect of heat exhaustion. We want people to be thermally comfortable. … If they’re overheating, they could become heat-stressed, and that would be an issue.” The jacket has vents at the shoulders. “It’s got a drop hem at the back so that, for people who are driving trucks, it’s nicer to wear, because that jacket’s going to sit under the bottom and not be riding up,” Strickfaden continued. “It’s got a high collar,” she added. “And that high collar is going to maximize the protection of the torso and the lower face and the neck.” The adjustable waist on the jacket is meant to give workers the best fit possible. “Helps to provide that higher level of protection,” Strickfaden remarked. “And then the final feature is an enhanced layered system at the wrist where the glove sits between two pieces of fabric so there’s no way for there to be any funneling. “The steam can’t pour into the sleeve because of the way that it fits.” Field-testing of the garments took place in November and December of 2012 with the help of Devon Energy and four members of their staff in northern Alberta. The men wore the clothing 12 hours a day for 14 days. “The new suits helped the workers feel much more confident and comfortable when having to work with and around steam,” said Steve Beggs, a health and safety professional for Devon’s Jackfish operations. “The guys working out on the well pads especially work with steam quite often because the well pad is where the injection of steam into the well formation takes place,” he continued. “The employees noticed that

the steam didn’t penetrate their garment the way it would when they were just wearing normal fire-resistant coveralls.” “What was really interesting about that test is that we had designed the garments to be taken on and off, but the workers did not actually take them on and off too frequently,” said Strickfaden. “Because they really liked wearing them. That was really testament to our design.” Since the material also protect against fire and radiant thermal exposure, the garments can actually be worn instead of the coveralls, as long as the worker also wears a fire resistant shirt. Beggs noted that the men were quite pleased with measures taken to distribute the weight of the material, a nice change of pace from having “straps dig into your shoulders.” “I think the men who were wearing them really appreciated the more tailored fit of the pant,” said Strickfaden. The workers didn’t like the wide legs, however. “I thought that was quite interesting,” she continued. “But, at the same time, they weren’t taking them on and off. So, there was no need for them to appreciate the leg. Had they been taking that garment on and off, and only wearing it for the 10 to 15 minute intervals, I think that they probably would have appreciated it more.” The workers weren’t happy with the colour of the prototypes either, but that was one element beyond the control of the research team. “The fabric was available in orange or blue,” Strickfaden explained. “And Devon wears blue, as most people do. But because the fabric is quite costly, we had it donated to have the prototypes built. So, we didn’t have any choice as to the colour. I would have preferred to build them in blue. “They stood out as the test rats,” she added. “The rest of the group was apparently teasing them for what they were wearing. That was pretty amusing.” “I am really proud of the guys for stepping up and volunteering for this,” said Beggs. “They got a little bit of ribbing

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for having to wear the orange coveralls, but then people realized what they were doing was extremely important for safety and garment development in our industry. “I think that it’s really important for companies like ours to be able to participate in these kinds of projects because it’s really ground breaking for industry.” “That’s essential to the project,” Strickfaden said of the industry participation. “Safety wear is a highly complex problem,” she continued. “Because you’re dealing with mobility. You’re dealing with thermal comfort. You’re dealing with ease of putting it on and off. You’re dealing with workers needing to store radios and other equipment. You’re dealing with ease of laundering. There’s a look to safety wear. “All of that makes this a design problem that there is absolutely no way that it can be resolved without involving people in the industry.” The research team met extensively with industry, including staff responsible for occupational health and safety, and garment manufacturers prior to designing the new safety wear. “We were trying to get at the problem from as many different angles,” said Strickfaden. The cost of such clothing made it essential to cover all the bases. “This is a garment system that is not going to be cheap,” said Strickfaden. “You want to make sure you get it right. You want to make sure it’s something the people are going to be able to wear and really enjoy wearing and that it’s really going to do the job that you’ve assigned it to do. That involvement … is absolutely crucial. “We need people to try it before we manufacture it.” The research team hopes Devon and the same group of four workers will join the summer trial, particularly because they want the same people experiencing the product at minus 25 degrees Celsius and plus 25 degrees Celsius. “That’s the next step before we can move to the next development or finalizing the design.”

University of Alberta graduate student Sihong Yu was part of the research team, along with design professor Megan Strickfaden, that tackled to problem of developing a new form of safety wear that protects again steam and hot water, but still allows oil patch workers to perform their daily tasks.

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special feature

STIFF COMPETITION Conference highlights value of Canada winning international LNG race

The presence of Canada’s minister of natural resources Joe Oliver at the LNG conference in Vancouver this February underscored the national importance of the LNG industry that is growing in British Columbia.

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james waterman Pipeline News North After the lights went out, the stage was swept clean and all the delegates to the first international conference focusing solely on the liquefied natural gas (LNG) industry had gone home to their office towers and government buildings across the world, the word still clinging to their lips was competitiveness. As British Columbia operations manager for the Canadian Association of Petroleum Producers (CAPP), Geoff Morrison is particularly interested in that issue. After all, his jurisdiction has huge shale gas resources that could be stuck in the northeast corner of the province until pipelines and liquefaction facilities are built on the west coast to push that fuel into Pacific Rim markets as LNG. B.C. isn’t alone in that pursuit. Discussing the topic shortly after his return from the Fuelling the Future: Global Opportunities for LNG in B.C. conference that took place in Vancouver at the end of February, Morrison emphasized the importance of staying competitive with Australia, as well as other emerging players in the LNG game. “When you look at the world LNG market, which is about 30 bcf (billion cubic feet) a day, almost a third of that market by demand is Japan,” said Morrison. “It’s about 9 bcf a day,” he continued. “And

Japan imports natural gas from over a dozen countries. And so we need to make sure that we’re not just competitive with Australia, but also those other existing competitors and those other emerging competitors.” CAPP weren’t part of the presentations at the conference, but Morrison was in attendance to discuss issues around Canada’s LNG competitiveness. “We’re trying to come to a common understanding of what competitiveness means,” he said. “That’s a dialogue that we’re encouraging and promoting.” That dialogue includes a request CAPP has made to the federal government to change the tax classification of LNG facilities from class 47 to class 43. “Basically, it allows accelerated depreciation,” Morrison said of a change that would see income taxes go from an eight per cent declining balance to a 30 per cent declining balance. “Classifying LNG facilities more appropriately with other like assets,” he continued. “And so essentially it would mean a change in the way taxes were paid, but not the total tax bill. “It levels the playing field with other jurisdictions like Australia and the [United States] that do treat those assets in that same way. Currently, Canadian LNG assets would be taxed at a higher rate and therefore would be at a disadvantage to Australia and the United States.” “The reclassification through Revenue

Canada will create a 10 per cent difference in the competitiveness of our facilities,” said Lori Ackerman, mayor of Fort St. John, fresh from her visit to the conference. Ackerman noted that move would make Canada’s LNG industry competitive with the Australian industry on a dollars and cents basis. “And then the proximity to market just takes us over that edge,” she added, remarking that Kitimat and Prince Rupert can compete with Australian ports in terms of the time it takes to ship product to Asia. “Not just natural gas, but all the other resources we have,” said Ackerman. “And it’s interesting that if these LNG facilities move forward, the way they’re planning on moving forward, the ports are really going to be stretched for land,” she continued. “And so there is a little, teeny, weeny town called Kitsault. And there’s a fellow who bought Kitsault. And it’s a deepwater port as well. It is the most northern ice-free port in Canada. And so I met him as well. And they’re very interested in making sure that this industry is aware of Kitsault.” Morrison said that geography is one of the challenges facing the Canadian LNG business, particularly when Canadian gas is currently landlocked and lacking pipeline access to the coast, while U.S. natural gas is near the coast where infrastructure already exists. “Canada is not a low cost environment for finding and producing oil and gas,” Morrison began. “The U.S. has several LNG import plans that are being contemplated to make those export.” Morrison noted that liquefaction is a far different process that gasification, which is the process that occurs at LNG import stations, but he also said that the advantage the U.S. enjoys in already having those projects in the works is that they have pipelines, power supply and brown field sites at the ready. The words spoken by one economist during the conference has Ackerman less concerned about competition from the U.S. “Natural gas in the U.S. is mostly on the eastern seaboard areas or just inland from there, as well as the Gulf Coast,” said Ackerman, recalling that presentation. “So, really, they’re not as much in the market to get over to Asia because they have to either go down around through Panama or farther around [Cape Horn],” she continued. “And I’ve never been through the Panama Canal, but evidently the cost to go through the Panama Canal for some of these commercial enterprises is just about to the penny what it would cost for them to go around the Cape. “It’s not worth a commercial liners time to go around the Cape considering some

of the other issues that there could be.” Still, shale gas production in the U.S. is causing a sense of urgency when it comes to shipping B.C. natural gas to Asia from the west coast because eastern U.S. natural gas is supplying the eastern Canadian demand, effectively eliminating that market for western Canadian producers. “That just really re-emphasizes the fact that, if Canada is going to get maximum benefit from its resources, it needs to go to Asia,” said Ackerman. “And the timeline has to be a lot tighter because we’re running against Australia and other countries. We need to make sure that we get them done quickly.” “Right now, we do have a stranded asset in North America,” said Mike Bernier, who attended the conference as mayor of Dawson Creek. “So, we’re stuck with the North American pricing,” he added, noting that natural gas is presently selling for as high as $15 per gigajoule, stark contrast to the $3 per gigajoule or less being paid in Canada. “Just recognizing that there’s a business case here that can benefit everybody,” he continued, discussing this budding relationship between Canada and Asia in terms of the natural gas market. “They can get the gas they need in order to start driving their energy needs. And they will look to us, who has an abundance of that supply.” Bernier was impressed by the international flavour of the sold out conference. “And they were all there talking about how important British Columbia can be on the world market when it comes to LNG,” he said. “The one message they were saying is that time is of the essence. If B.C. doesn’t figure out how to make this work, there’s other places in the world that might beat us. It’s really a race.” The potential impact on Dawson Creek if B.C. fails to lead that race is what really concerns Bernier. “It’s really important that we just recognize that our economy and our region … that’s doing so well based on the natural gas industry, can definitely be negatively affected if we have a stranded commodity,” said Bernier. Competitiveness isn’t all about tax regimes and regulatory approvals for pipelines and liquefaction facilities that still need to be built. It is linked to ensuring that northeast B.C. communities at the centre of natural gas exploration and production in the province are ready for rising level of activity that would occur if LNG export plans move forward. However, northeast B.C. wasn’t even part of the conference agenda. “This conference focused more on what’s needed to happen on the coast,” said Bernier. “One of the biggest questions that I had

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to me during this LNG conference is: the northeast is not on the agenda and why isn’t it on the agenda?” said Ackerman. “And I said, ‘Because we’re talking LNG.’ But they said, ‘Yes, in order to have LNG, you need to have the natural gas.’” Bill Streeper, mayor of the Northern Rockies Regional Municipality (NRRM), home to Fort Nelson and three major natural gas reservoirs, including the prolific Horn River Basin, attended the conference to further discussing how Fort Nelson can grow its community and improve its infrastructure in the absence of an industrial tax base and Fair Share funding. “I enjoyed the conference,” said Streeper. “I enjoyed the positive remarks that were coming out. But the best thing about it all was the breakout meetings. I had quite a few breakout meetings with different oil companies that were there. I had some discussions with Chevron, discussions with Apache, joined discussions between the two, getting the direction on where they’re going.” Apache and Chevron are the proponents of the Kitimat LNG export project. “What I’m getting from them is very positive,” Steeper continued. “They’ve got one or two little things they’ve got to discuss, but Chevron was fully confident in my mind that all this will eventually be done.” That has given Streeper cause to be more enthusiastic about the LNG industry than he had been prior to the conference. There was also progress in terms of Fort Nelson’s infrastructure issues and negotiations with the provincial government to work out an agreement as to how the two parties can join forces on a community development plan. “The government now is starting to say, ‘Yes. We realize we just cannot concentrate on the West. We’ve got to start looking at the East. Because without the foundation in LNG that the northeast offers, the northwest would not exist.’ And they do recognize this,” said Streeper. “Northeast is where they’re going to get the income from land sales and basically that’s where the gas comes from that creates the royalties.” That seems to have helped NRRM in their negotiations over the community plan. “That is progressing quite well,” said Streeper. “It’s basically down to dotting the I’s and crossing the T’s,” he added, suggest-

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ing that a deal could be done near the middle of March. “It’s the cumulative impact that this community is going to see,” Ackerman said of Fort St. John. “If you look at the timeline for the LNG and you look at the timeline for Site C, we’re going to be going flat out here,” she continued. “The community’s going to have to work very hard to be an attractive community where people will want to come and live and work. We’re going to have to work hard to attract new Canadians to our community. And there’s going to be a lot on our plate. “And it’s really about the services that we provide to our taxpayers and how those are going to be managed. It’s everything. It’s RCMP. It’s fire. Water and sewer. Everything that we provide and how that is going to be managed and whether or not the Province is going to step up to the plate and look after their part. And so using the RCMP for an example, with that much growth in activity outside of the city boundaries, are they going to increase the complement of RCMP officers here?” When asked if those concerns should be part of the discussion around the fate of the Fair Share program and how the Province will manage a proposed Prosperity Fund that would draw money from the LNG industry to fund social programs, reduce taxes and eliminate the deficit, Ackerman said there wasn’t sufficient information available about the Prosperity Fund to comment on that idea. “Fair Share has nothing to do with that,” she added. Ackerman used the local RCMP detachment as an example of how issues relating to provincial government funding and municipal services and infrastructure should be discussed. “We pay 90 per cent of that,” Ackerman said of the municipal police unit in Fort St. John. “And we need to ensure that we’re not [subsidizing] the province. We realize that there’s definitely going to be some give and take. That’s why we pay 90 per cent, because the federal government pays the other 10 per cent. And so they have access to … 10 per cent of our personnel. We just don’t need that 10 per cent growing into 20 per cent when we are still paying 90 per cent. So, we’re just going to have to keep an eye. “If this community is going to become fi-

nancially sustainable, we have to keep an eye on some of our biggest cost centres.” Dawson Creek could be a very significant element of the LNG industry. During the conference, the federal government announced that they had approved the export license for LNG Canada, one of a handful of plans to ship LNG from Kitimat. That particular plan is led by Shell Canada, whose Groundbirch operation just about 50 kilometres west of Dawson Creek is expected to be a major source of natural gas for that project. “The federal government and provincial government are recognizing how important this is,” said Bernier. “But what that means to us locally is we know that once everything’s in play there could be a lot more activity in this area. We recognize that we need to keep working with the companies in this area to make sure that … the people in this area continue to have the opportunity for investment, for jobs. That’s what we really want to see. “How can we convince more businesses to set up shop here and hire more people and help the communities grow?” Bernier noted that Shell has been a good partner in that respect, including contributing to the construction of a water treatment plant in Dawson Creek that turns sewage into water that Shell can use for hydraulic fracturing and the City can use for tasks such as watering playing fields. “They understand their social license,” said Bernier. “We’re in a position right now where people recognize water is needed for fracking. You can’t hide from that right now. And Shell recognized that. And I believe they’re doing an amazing job using our reclaimed water. Using recycled water. So, they’re still able to operate, extract the gas from the ground, and they’re not having that significant of an impact on the water table.” Ron Poole is the chief administrative officer for the Kitimat community that is the point where that Groundbirch natural gas could be leaving Canada in liquid form. Poole was invited to discuss community perspectives at the conference. “Which talked about the impact of LNG development and how communities like ours were having to prepare for it,” said Poole. Poole thought it was important to show investors and developers from Asia what to expect from a B.C. community that is going to experience the

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impacts of those developments. “I didn’t want to think that I could really speak on behalf of Prince Rupert or Port Edward or even Kitsault, which is kind of the newest player in the game, but I wanted them to understand that Kitimat has always been an industrial town,” said Poole. Kitimat has its roots in the aluminum industry as a community that grew around an Alcan smelter in the fifties. “Realistically, our community was planned for 50,000 [people]. We’re around 10,000 [people now]. So, we’re only 20 per cent of what we realistically could be,” said Poole. “We’ve got lots of room to grow, but at the same time, we expect in two to three years to have more people in work camps than people living in town. And these work camps will all be in our municipal boundaries.” Kitimat can build a camp for 5,000 workers, which would only be occupied by those workers for a few years. The camps can become homes for permanent residents living within the municipality after that construction phase is over. “So, I talked about the effect of these work camps and how Kitimat has to prepare during these phases on health, policing, education, affordable housing,” Poole said of the message he tried to spread during the conference. “And that work camps can have a good impact and they can also have a negative impact,” he added. “Our goal as a municipality working with industry is to reduce the negative impacts.” The big benefit of the conference for Poole was the opportunity to make important connections. “When I got off that stage, my phone had 23 emails, most of them people wanting to join me on my LinkedIn account. And I’ve never seen that before,” he said. It was largely because Poole had finally put a face to the Kitimat name. Representatives from three companies even decided to charter flights to Kitimat to see the community firsthand after the conference was over. “It wasn’t until I got down there that I realized why they wanted me to speak,” said Poole. “I think it had a lot to do with my position and connection to the community. And I think they felt this was a great way to connect with a lot of these international companies that were coming in. “I think I underestimated it.”

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industry news p ECONOMIC HEARTBEAT Ambrose praises northern Alberta in Growing the North speech james waterman Pipeline News North It should have been no surprise that the relationship between northern Alberta and the Canadian government was the topic of conversation when Rona Ambrose took to the Evergreen Park podium in Grande Prairie on Feb. 20. Ambrose, who serves as Canada’s minister of public works and minister for status of women, was visiting the bustling natural resource town just a few hours drive from her Edmonton riding for the fourth annual Growing the North Conference, one of the premier economic development events in the province. “Northern Alberta is particularly important to me,” said Ambrose, calling the region the “economic heartbeat of Canada.” The minister said her government has been focusing on infrastructure projects that reflect the priorities of Albertans, exemplified by the $477 million spent since 2006 on efforts such as upgrading Highway 63 through the booming oil sands city of Fort McMurray. Grand Prairie has also been a beneficiary with investments in the local wastewater treatment plant and power engineering training facilities at Grande Prairie Regional College. Power engineering is among the most high demand occupations in the natural resources sector, particularly the oil sands. “Natural resources are an important part of the fabric of Canada’s economy,” said Ambrose, noting that federal and provincial government revenues from those industries amount to about $30 billion per year, which is about half of the amount spent on hospitals last year. Additionally, approximately ten per cent of Canadians rely on natural resource industries for their jobs,

Rona Ambrose, federal minister of public works and minister for status of women, said her ministry has concentrated on infrastructure improvements in northern Alberta because of the economic importance of that region for all of Canada during her address at the Growing the North Conference in Grande Prairie this February.

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according to Ambrose. “There’s a reason everybody’s moving west,” she remarked, alluding to Alberta’s important role in Canada’s recovery from the recent recession that has given the country the best job growth record among G7 nations and the honour of being named the best place to do business in the world by Forbes. Ambrose said the government is committed to main-

taining that status through its Responsible Resource Development plan designed to guarantee efficient regulatory reviews for the over $650 billion worth of major resource projects in the works, a list that includes Enbridge’s proposed Northern Gateway pipeline to ship Alberta oil to the British Columbia coast for export to foreign markets. “This is great news for northern Albertans in particular.”

B.C. government starts work on marine spill plan STAFF REPORTER Pipeline News North The British Columbia government is continuing to do their part to address the issues discussed in their five minimum requirements that must be met to lend their support to new heavy oil pipelines passing through the province. The government has contracted Nuka Research and Planning Group to assess current marine oil spill prevention

and response practices as they work toward developing a world-class marine oil spill plan. “We are taking an important first step in the creation of a world-leading marine spill plan for B.C. while respecting federal authority over marine-based protection and response,” said environment minister Terry Lake. “Ultimately, a spill response plan for the B.C. coast is a shared responsibility and we will continue to press the federal

government for a stronger role in the work they are undertaking on a world-leading marine-based spill response model so we can ensure the interests of British Columbians are being met.” Nuka Research will be focusing on oil transport as they examine current and potential traffic on the B.C. coast and identify best oil spill prevention and response practices from around the world. “Nuka Research is pleased at the opportunity to support the B.C. government

in establishing a world-class marine oil spill preparedness and response regime for the west coast,” said Elise DeCola, operations manager and principal consultant with Nuka Research. “The B.C. government has shown a strong commitment to apply world-leading practices and technologies to protect their marine waters and coastline, and Nuka Research is excited to contribute our spill response preparedness expertise to this effort.”

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profiles

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BUD SMITH Proud defender of the natural resources sector james waterman Pipeline News North

Prince Rupert is becoming a hot topic in natural resource industry circles these days. Not only is it the point where huge volumes of grain, coal and petroleum coke from Alberta and British Columbia leave Canada for foreign markets, but it may soon be the site of a natural gas liquefaction and export project involving British Gas Group, Spectra Energy and the Prince Rupert Port Authority. “I am proud to defend the resource industry,” said Bud Smith, the chair of the Prince Rupert Port Authority, addressing the audience of the fourth annual Growing the North Conference in Grande Prairie, Alberta on Feb. 20. Smith applauds the contribution natural resource industries make to the Canadian economy, although he can see other Canadians targeting resource communities and their inhabitants for being “hewers of wood and drawers of water” supposedly stuck in a past that fails to reflect modern values. The story Smith tells of the resource industries is one of innovation. “We are very, very good at hewing wood and drawing water,” he said. Smith cringes at mention of the “insidious moniker” of Dutch Disease when it is applied to the Canadian economy. “The idea amounts to barnyard droppings,” he said. The problem from his perspective is that there is an attitude of class distinction in Canada that suggests important jobs in the resource sector are less admirable than other professions that may not contribute to the economy to a similar extent. “Our resource communities are unwise to let the Dutch Disease discourse slide,” said Smith. “Where resources are extracted, we are relatively small in number,” he continued, explaining that resource communities tend to own few votes and quiet voices due to their size and remote, rural nature. “Our best ally is communication.” That communication was clearly top of mind for Smith when he agreed to speak at the Growing the North Conference to tell the tale of the port he represents, a Prince Rupert community that began to soar when CN Rail increased capacity to that area in the eighties. That was when petroleum coke and coal from sources such as the Quintette mine near Tumbler Ridge really began flowing through the port, along with grain passing through a terminal actually financed by the Alberta Heritage Fund. Smith spoke of these developments as evidence of enduring connections between the resource communities of the west. “It is a virtuous circle of positive economic news,” he said. The Prince Rupert Port Authority was still in trouble as recently as 2004, but now has $25 million cash in hand and an additional $75 million of untouched credit. The promise of liquefied natural gas (LNG) exports is encouraging the expansion of rail and utilities to Ridley Island where Nexen already has land earmarked for a liquefaction and export facility. There is still work to be done, however. For example, utilization of the grain terminal is at less than half of its capacity, a fact Smith points to as evidence of a “growing need for multi-use dock space” that can handle a variety of commodities. Smith believes the port can grow into a “major player in the LNG export market” and an increasingly important export gateway for northern Alberta resources, even oil

Bud Smith, chair of the Prince Rupert Port Authority, spoke passionately of the contributions natural resource industries such as coal, oil and natural gas have made to Canada, warning that it would be economically distastrous if development of those resources was to stop due to insufficient access to world markets.

JAMES WATERMAN PHOTO

from the oil sands. The Prince Rupert Port Authority and the Alberta government are working together to solve logistical problems to help both parties. CN could play a big role in that process. It is the most efficient rail route from the “plains of North America to the Pacific Ocean,” said Smith. “The Prince Rupert gateway matters to Alberta,” he added, referring to the port as “Alberta’s port” and a key element of any “Pacific trade strategy.” Smith suggested that the rail route through the canyons of the Thompson and Fraser Rivers on the way to Vancouver is too risky to be Canada’s only significant access point to the Asia-Pacific market. That region is prone to natural phenomena such as landslides and earthquakes that can wreak havoc on the railroad business. Smith indicated that the route to Prince Rupert manages those risks. “Two meaningful ocean exits,” said Smith, discussing the value of both Vancouver and Prince Rupert being strong export hubs that aren’t competitors, but partners in the same strategy. Canada must continue to exploit its natural resources for that plan to be successful. Smith attacked the “precautionary principle” behind moratoria as a “pseudo scientific” policy that suggests resource projects should only proceed if there is a risk-

free guarantee that is actually impossible to promise. The idea that resources gain value by saving them for future exploitation was met with similar scorn. “U.S. coal markets have dried up,” said Smith, discussing conversions of coal-fired power generation plants to natural gas. The shale gas revolution in the U.S. has also resulted in declining demand for B.C. natural gas across North America now that our neighbour to the south is able to supply its own demand and the demand of the eastern Canadian market. The National Energy Board (NEB) could soon declare natural gas pipelines from western Canada to the eastern portion of the country “stranded assets,” said Smith. “We need to move heaven and earth,” he added, emphasizing the importance of securing access to foreign markets. Leaving Canada’s abundant resources in the ground could mean “fiscal calamity for provincial treasuries,” he said. That is why Smith is disappointed to see other Canadians attack the commodities that pass through Prince Rupert, protesting the people and industries that make so much economic activity possible. It is why he despises the notion that Canada suffers from Dutch Disease. “Resource workers,” said Smith, “are not carriers of some illness.”

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MARCH 15, 2013

industry news Latest round of royalty credits could help address provincial economic woes

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British Columbia Premier Christy Clark, shown discussing the oil and gas industry with staff of Spectra Energy’s Dawson Processing Plant during the grand opening of the facility last summer, brought good news about First Nations investment in the Pacific Trails pipeline and a new round of infrastructure royalty credits for natural gas producers to the first day of the LNG conference in Vancouver in February.

JAMES WATERMAN PHOTO

to cut personal income taxes and invest in health care, education and infrastructure improvements. “The safe recovery and export of our abundant supply of natural gas presents an opportunity for prosperity unlike anything we have ever seen before,” Clark said during that announcement. It is thought the fund could top $100 million and erase the provincial $56 billion debt by about 2027. “The Prosperity Fund, I think, is really important as well,” said Bernier. “Because, as the industry continues to grow, we need to recognize that some of that money needs to be reinvested, but we need to also put some aside for

future generations to be able to help out in tax reductions. “It’s all great news if we can make it come to fruition.” It isn’t simply about royalty credits and tax reductions for Bernier. “At the LNG conference here, it’s great to hear all of the hype, all of the discussion, all the great talk about LNG and the prospects we have for northern British Columbia,” he said. “Some of the talks we have around investments for training. And making sure some of that money goes back into the communities to make sure that we have … people in place so as the industry grows we have B.C. workers doing B.C. jobs.”

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the Crown, offers access to new oil and gas exploration areas, enable year-round industry activity, provides benefits to other oil and gas industry companies or other natural resource sectors and minimize the environmental footprint of the industry. The proponents must fund their projects initially, but each can recover up to 50 per cent of the cost of that initiative through royalty reduction credits after the road or pipeline is generating revenue. LNG is also at the centre of this latest offering of royalty credits, as the infrastructure resulting from the program will assist the production of natural gas necessary to fuel that emerging industry. Interestingly, the announcement that $120 million of royalty credits is up for grabs comes after months of talk about low natural gas prices and the associated low natural gas royalty revenues being the cause of B.C.’s approximately $1.5 billion deficit. “Definitely, we’re seeing lower gas prices than normal right now,” Mike Bernier, mayor of Dawson Creek, said from the LNG conference. However, he also noted the amount of investment coming into the province’s natural gas industry from outside of B.C. “We’ve got hundreds of people in this room from all over the world who are here talking about wanting to come to British Columbia, wanting to have major investments in the billions of dollars here in British Columbia,” said Bernier. “We’re starting to see some of that already.” Indeed, those investments can be seen in his own backyard where Canadian natural gas giant Encana has partnered with Mitsubishi Corporation to develop their Cutbank Ridge assets in the Montney shale gas play and Shell Canada is working with Canadian subsidiaries of Mitsubishi, PetroChina Company and Korea Gas Corporation (KOGAS) to move natural gas from their Groundbirch operations to an LNG export facility in Kitimat. “We’ve already had quite a few billions

of dollars invested in British Columbia. And I think that’s just a small piece of what’s to come.” Besides, the royalty credits can help solve the Province’s economic woes, according to Lori Ackerman, mayor of Fort St. John. “This royalty credit could mean the difference between drilling activity and no drilling activity with the price of natural gas being so low,” said Ackerman. “Producers using this credit will invest in our region on projects that could keep our local companies and workforce busy,” she added. “Our government is looking to enhance industry capital planning and investment,” said a ministry spokesperson. “The Infrastructure Royalty Credit Program plays a fundamental role in facilitating development in B.C.’s natural gas sector,” he continued. “The program supports growth and prospects in natural gas by expediting development and increasing industry’s access to new, underdeveloped resource areas. “It does this without any direct expenditures by government.” A review of the program was conducted in 2009, examining applications submitted between 2004 and 2006. The review determined that over 80 per cent of projects not approved under IRPC were not built at all. “While 15 per cent were built at a significantly smaller scope,” said the spokesperson. A subsequent review looking at the 14 projects that weren’t approved in 2009 took place in 2011. “This review revealed that one project was built but delayed by over one year, one project was built at a much smaller scope and 12 were not built as of December 2011,” said the spokesperson. Bernier also discussed the benefits of royalty credits, as well as the Prosperity Fund recently announced by the Clark government. The Prosperity Fund will use LNG revenues to eliminate the provincial debt, as well as allow the government R001461754

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MARCH 15, 2013

PIPELINE NEWS NORTH •

hughes’ top priority Energy minister looking at all options for moving Alberta oil to world markets

Alberta energy minister Ken Hughes said pipeline access to the west, east and south, as well as rail transport, are all necessary for his province to realize the potential of its vast oil resources.

JAMES WATERMAN PHOTO

james waterman Pipeline News North Market access for Alberta oil was top of mind when Ken Hughes took the stage to kick off the second day of Grande Prairie’s Growing the North Conference on Feb. 21. The energy minister is part of an Alberta government trying to manage a $6 billion budgetary shortfall due to the price differential between landlocked Alberta bitumen and crude from reservoirs such as the southern United States and the North Sea where producers enjoy tidewater access to world markets. “We’re in a really interesting time in our life in our province,” Hughes began. Hughes continued to claim that Albertans are the “luckiest people in the world” thanks to the fact that the oil sands rank third behind Saudi Arabia and Venezuela among the largest oil reserves on the planet. The oil sands accounts for half of the global oil supply that isn’t controlled by state-owned enterprises, which possess 80 per cent of the oil in the world. The numbers put Alberta in a good position as far as attracting investment to their oil and gas industry, but the well-documented labour shortage and poor access to foreign markets are impeding progress in that sector, as well as hurting the provincial coffers. During his conference address, the energy minister announced a plan that could help fix both of those problems. Hughes is working with the United States ambassador to Canada on a plan to recruit unemployed or underemployed U.S. military personnel, who have returned from Iraq and Afghanistan and may have skills, knowledge and experience suitable to the oil patch, and put them to work in the oil sands as temporary foreign workers.

Job fairs will be taking place in Chicago into the spring. “We are doing whatever we can and working with industry to get access to the workforce that we need,” said Hughes, noting that 100,000 newcomers arrive in Alberta every year, but the labour pool remains tight regardless. “It’s a two way street,” he said during his speech, indicating the need to build friendships and goodwill in the U.S., obviously alluding to the ongoing saga of TransCanada’s Keystone XL pipeline that has yet to receive approval from the U.S. government. That pipeline, which would transport oil from Alberta to southern Texas refineries, is just one plan under consideration that would move Alberta oil sands bitumen into the world market. “We need goodwill everywhere,” he added. That is simply because all current plans to ship Alberta oil to tidewater are facing opposition, usually on environmental grounds. Keystone XL is no exception, as concerns about environmental issues such as groundwater contamination are angering Americans along the proposed pipeline route. Enbridge’s proposed Northern Gateway pipeline to Kitimat, British Columbia and Kinder Morgan’s proposed expansion of their Trans Mountain pipeline to Burnaby are also lightning rods for environmentalist discontent. It may be just as difficult to convince Ontarians and Quebecers with limited experience with the oil and gas industry that transporting oil from Alberta to the Irving Oil refinery in Saint John, New Brunswick is a good idea, too. “There hasn’t been adequate capacity,” said Hughes, explaining the plunge in royalty revenues from the oil industry. “America is becoming increasingly self-sufficient,” he added. The result is that Canada is missing out on as much as $30 billion in revenue annually because oil resources are just pooling in northern Alberta, far from ports that offer access to the world market and the world price for oil. “When we lose that revenue, we have no chance to get it back. That means we have to find solutions as quickly as possible,” said Hughes. “And it’s worth a lot to us to get access to markets. So, we’re prepared to play as constructive a role as we’re needed to, as the government of Alberta, to get access to these markets.” Hughes explained facilitating market access for Alberta’s natural resources has always been an important role of government, but there is a greater sense of urgency at the moment because this lost revenue situation has come about much more quickly than anticipated. “That really does put an additional point on the effort to try and clear up this access,” said Hughes. “This is not a short term fix,” he continued. “Say there’s approval on pipelines. It takes three or four or five years to get a pipeline built.” Keystone XL is an exception, as it could be moving oil in two years. “What’s happening now is the train industry has really responded really well,” said Hughes. “And that is actually moving so much energy, so much oil and bitumen product, that that’s providing a really solid interim measure. But it’s more costly than pipelines. Although it is more flexible in where they can take it, too.” Hughes admitted that he has been approached by Generating for Seven Generations (G7G), a consortium proposing a dedicated oil railroad between Fort McMurray and Alaska that would eventually bring Alberta oil to the Petro Star Valdez Refinery, which processes a waning supply of oil from Alaska’s North Slope and could likely handle new volumes coming from Alberta. “Well worth exploring,” he said, adding that the plan could also mean long-term economic development for

both Yukon and Alaska. Currently, approximately 600,000 barrels of oil per day are shipped out of the Bakken play by train because of limited pipeline capacity. Routes to the ocean through the Northwest Territories and Churchill, Manitoba are also under consideration. However, Hughes stressed that pipelines remain essential. Progress is being made on the eastern front. TransCanada is considering converting one of their natural gas pipelines stretching from western Canada to Quebec to oil transport. Enbridge is trying to reverse their Line 9 pipeline to move oil from Sarnia, Ontario to the unused refining capacity in Montreal, Quebec. Alberta Premier Alison Redford has been discussing plans to move Alberta oil east with New Brunswick Premier David Alward. “It turns out the Irving facility … is closer to the west coast of India than [our] west coast,” Hughes said of the Saint John refinery. Currently, eastern Canada imports between 600,000 and 800,000 barrels of oil per day. Hughes noted that replacing those imports with western Canadian crude would create jobs and help address the oversupply issue in Alberta. “We still haven’t solved our problem,” he cautioned, indicating that Keystone XL, Northern Gateway and Trans Mountain Expansion are all important. “We need them all,” he said. “We need Keystone XL, we need east coast access and we need west coast [access] by 2020 to take off all the production that we’ve got coming onstream.” Hughes said the Asian oil market should continue to grow as the U.S. market dries up thanks to their newfound wealth of oil and gas resources. “We have to go to Asia,” he said. “And that means west coast access. Somehow. However we do it. We respect that there are people who may be opposed to west coast access, but we’ll work hard to find a way to work with people to make it work.” The Alberta government has launched an Oil Market Diversification Strategy that includes promoting its cause in the sometimes hostile environment of B.C. and encouraging oil refining and upgrading at home in Alberta. “There’s only been one new initiative of a refinery in Alberta in the last 30 years and that’s the Northwest Upgrader that recently was commissioned and will come into play in two or three years,” said Hughes. “That is a very difficult business. And requires both talent and a lot of capital and other resources – like water – to do. So, we want to be very careful that we don’t overheat our economy as well, which is why I have the view that adding value anywhere in Canada is good for Alberta.” The Energy Resources Conservation Board (ERCB) recently released a stack of raw data resulting from a study of shale resources in Alberta, where exploration in liquids-rich shale gas plays such as the Montney and Duvernay is already gaining steam, but Hughes doesn’t seem to think that resource can help address Alberta’s economic woes to any great extent. “We have the same thing going on in the natural gas marketplace that we do in the oil marketplace and that is an immense oversupply,” said Hughes, adding that both industries need tidewater access, particularly when it comes to the emerging liquefied natural gas (LNG) industry in B.C. “That’s an area where British Columbia and Alberta have a completely aligned interest,” he continued. “Historically, there’s been well over $2 billion a year in natural gas exported from British Columbia through Alberta. And we’ve never once thought about asking for a share of the revenue off of that or royalties or anything. “We see this as being an opportunity for us to work together to advance getting LNG exports off the west coast.”

• PIPELINE NEWS NORTH

MARCH 15, 2013

industry news Talisman announces drilling results for north and south Duvernay Daily Oil Bulletin Talisman Energy Inc.’s first well on its southern Duvernay lands yielded about 1,000 bbls of liquids per mmcf of natural gas. The company says it has a total of 350,000 net acres in the Duvernay formation, an emerging shale play in northwest and west-central Alberta that is generating excitement as a potential analogue to the liquids-rich Eagle Ford play in Texas. Industry activity has been mostly focused in the northern Duvernay where more than 100 wells have been drilled with encouraging results. But last year Talisman began appraisal activities in the relatively under-explored and under-appraised southern Duvernay near Willesden Green, said Paul Smith, executive vice-president of North American operations. “We hold ... the largest single position in this part of the play with 189,000 net acres of land positioned in what we now believe to be the richest portion of the condensate and volatile oil windows,” Smith told analysts. Talisman’s Duvernay drilling results and its plans to seek buyers or joint venture partners for vast swaths of its North American gas resource base were announced at the company’s investor open house in Toronto on Wednesday, March 6. The company estimates it has a prospective resource of 600 million boe on its southern Duvernay lands where it has now drilled three and completed two wells, Smith said. “Our first well, the 11-03 well [in the southern Duvernay] was completed with a relatively short lateral of only 3,500 feet with only five effective [frac stages],” he said. However, the 11-03-041-05W5 well had a 30-day initial production rate of about 300 bbls a day of condensate [50-API oil] and a total liquids yield that topped 1,000 bbls per mmcf of gas, Smith announced. Not surprisingly, Talisman will hang

onto its southern Duvernay lands, but will seek buyers for some or all of its North Duvernay acreage, which has also produced strong results. “Our second [southern Duvernay] well, the 02-06 well, which is slightly to the northwest of the first well, has only been tested in the last few weeks, again with a relatively short lateral of 3,500 and only seven stages completed,” Smith told analysts. During its first seven days of production testing, Talisman’s second well (02-06-04205W5) in the southern Duvernay flowed 1.1 mmcf a day of gas with a condensate yield of 110 bbls per mmcf, he said. A third well has been rig-released but not completed. Smith said Talisman is currently drilling its fourth well into the southern Duvernay and expects to bring another two or three wells onstream in the southern portion of the play this year. He said the company is developing plans for a phased development scheme for the southern Duvernay, starting next year. In the northern Duvernay, meanwhile, Talisman has about 159,000 acres in the Kaybob area with a prospective resource of 800 million boe, Smith said. So far, the company has drilled three pilot wells on its northern Duvernay lands. Each well was completed with an average of only six stages per well. The wells are relatively short because they’re in pilot phase. Smith said the three pilot wells resulted in an average 30-day initial production rate of 3.2 mmcf a day and 60 bbls a day of field condensate. “In addition, we would expect to see, on average, an additional 290 bbls per day of NGLs from each of our three pilot wells processed through a deep-cut facility,” he said. “Put another way, we estimate that an optimized development well in our pilot area, drilled with a 5,000-foot lateral and completed with 12 stages, would result in a well of approximately 6.5 [mmcf] a day of gas and 700 bbls a day of condensate and NGLs.”

Despite the stellar results, Talisman plans “to divest all or a portion of” its stake in the North Duvernay, said chief executive Hal Kvisle. Smith said the decision is part of the company’s effort to focus its North American portfolio in the near term: “We intend to commence a process to dilute our North Duvernay position, preferably through an outright sale.” Kvisle told analysts and reporters that Talisman’s North American gas acreage is too much to develop on its own. “We simply are not a large enough company, we do not have the financial resources,” the chief executive said. The statement that Talisman is too small to develop all its lands indicates the vastness of its holdings and cost of development. Talisman’s Montney acreage, which is in northeast British Columbia, holds the biggest single chunk of its resource base. Kvisle said the company will consider two options for its Montney lands. One would be a complete exit from the play. He said the other option may be to sell or form joint ventures on “one or two” of its three main Montney areas. He estimated the company’s entire Montney acreage is worth between US$2 and $4 billion. (All dollar figures are U.S. unless otherwise indicated.) Smith noted Talisman’s 2013 capital budget of $1.1 billion for North America is half of what the company was spending in the region two years ago when gas prices were higher. In recent months the company curtailed spending in the huge Marcellus shale gas play in the northeastern U.S. “I want to emphasize this should not be seen as a negative reflection on the Marcellus property,” Kvisle said. “I’ve seen few properties in my career that have the quality and predictability of our Marcellus gas. But as this point in the gas price cycle, it’s important that

we pull back.” Smith said Talisman has reduced Marcellus spending to the minimum needed to honour lease obligations and protect core acreage: “This works out to be about $150 million per annum. This year we will allow approximately 10,000 non-core acres to expire and will end the year with around 200,000 net acres in the Marcellus.” The company expects to bring on only 18 net wells in the Marcellus this year. “As a result, base decline management and optimization are key performance drivers for us this year,” Smith said. “Last year, we saw an average annual base decline of 31 per cent. This year we expect it to be lower at approximately 27 per cent. Given this, we expect full-year Marcellus production [of about] 410-420 [mmcf] a day.” He added: “We’re very well positioned to take advantage of a recovery in gas prices to a level of around $4 an mcf when the Marcellus can effectively compete for capital within the Talisman portfolio.” Apart from low North American gas prices, Talisman’s steep spending cuts result from its past failures to deliver promised growth of five to 10 per cent a year. “And the reality is this didn’t happen. And so today we need to stabilize the company and refocus our efforts,” said Kvisle, the retired TransCanada Corporation boss and upstream veteran who took the reins at Talisman about six months ago. Kvisle said Talisman today has “a large and very valuable portfolio of assets that produce little or no cash flow, and some of this is the direct result of the activities that we’ve been pursuing in recent years. But we need to take steps to surface the value of those assets, either by developing them and turning them into cash flow, or by divesting them.” As reported on Wednesday, the company has committed to global divestitures totalling $2 billion to $3 billion in the next 12 to 18 months.

B.C. regulator prepares for shale gas growth Daily Oil Bulletin British Columbia is using the current activity lull by producers for some “breathing time” to prepare for what it hopes is coming, an unconventional gas conference has heard. Although the earliest a liquefied natural gas (LNG) plant will come onstream is 2017, the total projected output of those facilities is two to three times the province’s current gas volumes. So, the BC Oil & Gas Commission is planning for growth, Ken Paulson, its chief operating officer, told the Hart Energy and Canadian Society for Unconventional Resources’ 2013 DUG Canada conference and exhibition in Calgary at the end of February. If the OGC receives two to three times the usual number of licence applications from producers, it wants to be ready to handle them. So, it has devised a business transition strategy, has streamlined its core processes and is building an accompanying electronic system. “I think over the next two-and-a-half to three years you’ll

see significant changes in how you interact, at least on the application side of things, the review side of things, with the commission,” said Paulson. The commission is hiring staff and developing a separate regulation for LNG. Currently, LNG requirements in its regulations are under its pipeline and facilities regulation within the Oil and Gas Activities Act, he said. That is consistent with the federal government’s National Energy Board Act and pipeline regulations, Paulson added. However, through experience gained from approving two LNG plants, the OGC believes a distinct LNG regulation is needed. It is expected to be drafted this fall, he said. The OGC continues to look for regulatory improvements and is engaging with stakeholders to avoid challenges with water and hydraulic fracturing. B.C. has four primary basins and established unconventional gas reserves of more than 1,000 tcf, said Paulson. The Liard Basin has only three producing wells and daily production is still confidential. The Horn River

Basin, where 202 wells have been drilled, has OGIP of around 448 tcf, a number that rises each year as better data is acquired, he said. The Cordova Embayment’s production from 19 wells is also confidential but there is enough geological information for a preliminary estimated OGIP of about 200 tcf. There have been 1,246 wells drilled in the Montney, producing 1.6 bcf per day for cumulative production of 1.5 tcf, he said. Its estimated OGIP is about 150 tcf, but that is under review. In 2007, 85 per cent of wells in B.C. targeted conventional gas while the other 15 per cent were horizontal, hydraulically stimulated wells. Today, approximately 90 per cent of B.C.’s wells are targeting unconventional gas, noted Paulson. Multiple well pads mean more predictable placing, dry holes are rare, shales are valuable reservoirs, there is very low hydrogen sulphide content and it is necessary to find alternative markets for the province’s gas production, he said.

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• PIPELINE NEWS NORTH

MARCH 15, 2013

industry news FROM START TO FINISH Pumpers and pipeliners talk reliability at Growing the North james waterman Pipeline News North One industry wrestles the oil and natural gas from its rocky reservoirs and the other industry pumps those resources through mile after mile of steel pipe, but they shared the Growing the North Stage on Feb. 21 with a common message of safety and reliability. “Challenges,” said Philippe Reicher of the Canadian Energy Pipeline Association (CEPA). It was the word of the day. Both industries are at the centre of human and environmental health debates. Hydraulic fracturing is thought by many to cause earthquakes and contaminate groundwater, while plans to ship Alberta oil sands bitumen to southern Texas and the British Columbia coast to access world markets is causing international controversy for Enbridge, TransCanada and Kinder Morgan. Reicher explained that there has always been controversy around major projects along the lines of Enbridge’s Northern Gateway pipeline that would move bitumen from the Edmonton area to Kitimat, but the climate has changed considerably in recent years. Indeed, climate change is a big part of that issue, along with concerns over potential oil spills, prompting protesters to line up against the oil sands and any project that might supply new customers with that resource. However, the negative perception of pipelines is the result of myths created by oil and gas industry opponents, said Reicher, adding that pipelines are the safest and most reliable method of transporting oil. “Pipelines in general have been out of sight, out of mind for decades,” he continued, explaining why it has been possible to create such a negative image of the industry. The majority of Canadians simply aren’t familiar with pipelines. Reicher explained that the pipeline industry is virtually 100 percent reliable, which means that incidents almost never occur, but that isn’t the impression left on the general public when reports of pipeline failures reach the media. When a spill or leak does occur, it creates a perception that it “must be a systemic problem,” said Reicher. Consequently, the public starts to doubt the pipeline industry, paving the way for purveyors of myth and misinformation. Reicher questions the motives of those opponents. “Is it really about the pipeline? Or is it really about the product?” he said. “We cannot hide.” That is why CEPA launched Integrity First last August. The program is aimed at improving performance in the sector and improving public engagement so that Canadians better understand the pipeline industry. “When it comes to energy literacy, Canadians are really not well informed,” said Reicher, remarking that is even the case in parts of western Canada

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Philippe Reicher of the Canadian Energy Pipeline Association awaits his opportunity to speak about pipeline safety and reliability during a resource industry panel discussion at the Growing the North Conference in Grande Prairie in February.

JAMES WATERMAN PHOTO

where the oil and gas industry is prevalent. Many Canadians also lack an understanding of the hydraulic fracturing business. John Gorman, vice president of Halliburton Group Canada, was eager to dispel the myth spread by the anti-fracking crowd that his company is an enemy of the environment, just as he was eager to discuss efforts to reduce the environmental footprint and greenhouse gas (GHG) emissions associated with fracturing. Halliburton’s series of CleanSuite Technologies were among his favourite topics. Their CleanStim Formulation replaces chemicals traditionally used in fracturing fluids with acids and enzymes found in common foods. CleanStream Service replaces biocides used to kill bacteria in the wellbore with ultraviolet light. “Sun tanning bugs to death,” said Gorman. However, Gorman was especially eager to discuss the challenges facing the oil and gas industry in Canada. “Alberta is very landlocked,” said Gorman, suggesting that isn’t just a problem for Alberta and Canada, but also a global issue. “We need to diversify our customers.” Canada might rank third in oil reserves and place in the top seven in natural gas resources, but its traditional market for petroleum fuels, the United States, is now self-sufficient when it comes to natural gas and still producing its own oil, although not to the extent that would eliminate the market for Canadian

crude in that country. “They actually don’t need to use much Canada gas at all,” Gorman said of the U.S. “A lot of people are very negative on gas right now,” he added, noting his company is more interested in the vast potential for the natural gas industry than the low commodity prices woes currently affecting activity in the Peace Region. “Sometimes, the best deal you make are in a downturn,” said Gorman, discussing his company’s increased investment in fracturing equipment since 2009, a period that spans the global recession and the present era of record low natural gas prices. Gorman also remarked that demand for natural gas is expected to grow three times as much as the demand for liquid resources in the coming years. Canada has a unique opportunity to take advantage of that demand scenario because its natural gas supply far outstrips its domestic demand, but moving that resource to where the demand is highest is a competitive business. “There’s a certain sense of urgency,” said Gorman. There is a similar sense of urgency in the oil space. Reicher explained that oil production in Alberta would be stranded without new pipelines to access world markets, which would be a tough economic pill to swallow considering that 25 per cent of Canada’s wealth flows through pipelines. “The value pipelines create is quite fundamental.”

environment

MARCH 15, 2013

PIPELINE NEWS NORTH •

Using native plants in reclamation helps solve invasive weed problem cont’d from pg 11

species approach is … mimic what nature does following disturbances. So, the end results are ecosystems that closely match what was there before the industrial disturbance.” Using native plants for reclamation could also help correct the invasive and noxious weed problem that is growing in the northeast. “Very often lower grades of seed are used for the hydroseeding, which include invasive species,” said Keefer. “Some of the invasive species include timothy grass, alfalfa, Kentucky bluegrass, Canada bluegrass, smooth broom – these are part of some of these reclamation mixes.” Additionally, the manmade grasslands created with those seed mixes tend to remain as grassland rather than gradually turn into forest typical of that site because of the amount of grazing by ungulates. “If it was a forested site [and] you plant the right plants, it should go back to forest,” said Keefer. “Many of the invasive species need full sun,” he explained. “So, what we’re doing is essentially helping nature create the shade that will repel those species.” “The first step is to establish a greenhouse [where] we can grow native plants that can be used in ecological restoration,” said Rick Publicover, the lands manager with the Saulteau First Nation, also remarking the potential use of the plants goes beyond reclamation work in the oil and gas and mining industries to work being done in the forestry and wind energy sectors as well. “It crosses all resource sectors,” he said. “One of the issues that affects First Nations is, when a mine goes forward, often the impacts are very long term,” he continued. “And so we want to make sure that [we] re-establish what we call functioning ecosystems.” That isn’t just to benefit wildlife, but also to ensure that the Saulteau and West Moberly First Nations can keep practicing their traditions. “That can be from a gathering perspective in terms of berries or medicinal plants or other food plants that are used by First Nations,” said Publicover. “And so that’s what we’re trying to target in terms of the growth of these plants. And have them incorporated into ecological restoration plans by companies.” Publicover is also enthusiastic about the educational opportunities. “There are no formal education programs for native

Construction of the Twin Sisters Native Plants greenhouses not far from Chetwynd, British Columbia. The business is equally owned by the neighbouring First Nations in the area, Saulteau First Nations and West Moberly First Nations.

TWIN SISTERS NATIVE PLANTS PHOTO

plant nurseries,” he said. It looks as though that is about to change, however, as the two First Nations have begun working with mining companies Walter Energy and Teck, Keefer Ecological and their Tipi Mountain Native Plant Nursery, Royal Roads University

The nursery will hold over fifty species of native grass, wildflowers, shrubs and trees, including alpine fescue, saskatoons, blueberries, trembling aspen and native conifers.

TWIN SISTERS NATIVE PLANTS PHOTO

and Northern Lights College to develop a curriculum for a native plant horticulture program. The program would likely include subjects such as seed identification, collection, storage and stratification, as well as the other essentials of maintain a garden and a greenhouse. The First Nations and the mining companies would be contributing funding for the education program, as well as the Investment Agriculture Foundation of British Columbia. The nursery could also provide educational opportunities for young people in the region, particularly First Nations children who want to explore the traditions of their people by learning from elders at the nursery about the food and medicinal uses of native plants that grow in the region. Another initiative is an ethnobotany project that will bring together information about the traditional importance of the plant species. The economic potential is considerable. “We’re hoping to train probably 10 to 15 people to work in the nursery,” said Publicover, noting that the regular staff will only be about half a dozen people, but additional staff will be necessary during the busy season. “We’re working with Walter Energy, as well as other companies, in terms of developing [a system] where we survey areas prior to mine development to look at what species are growing out there, developing ecological restoration plans that include strategies for enhancement of certain wildlife species,” he continued. “Developing businesses around ecological restoration.”

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MARCH 15, 2013

c Montney parcel help drive Alberta’s land sales results Daily Oil Bulletin

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The Alberta government collected $58.89 million in bonus bid revenue at the March 6 land sale, with interest in the Montney likely driving most of the highpriced parcels. Industry purchased the rights to 144,942 hectares at an average of $406.29 per hectare. After four sales so far in 2013, the government has attracted $194.1 million in bonus bids on 601,210 hectares at an average of $322.85 per hectare. To the same point last year, the province had collected $261.02 million for 561,947 hectares at an average of $464.49. [It] looks to me like the Montney play is still driving the high prices,” said Brad Hayes, president of Petrel Robertson Consulting. “There are a lot of areas where companies are discovering that it will yield liquids or liquids-rich gas, some in deeper Deep Basin areas and others within or flanking long-established pools further north on the Peace River Arch.” Highlights of the sale included the land sale bonus high bid of $9.02 million successfully submitted by Windfall Resources Ltd., which produced an average price of $7,049.73. The 1,280-hectare licence included sections 11, 14, 15, 21 and 29 at 78-12W6 for petroleum and natural gas below the base of the Doig formation. Windfall also picked up an adjacent 1,088-hectare parcel for $6.63 million. The licence, which produced an average price of $6,094.73, included sections 15, 16, the southeast quarter of section 21, 22 and 23 for petroleum and natural gas below the base of the Doig formation. Hayes noted that rights were posted below the base of the Doig in an area where there has been a lot of Montney activity historically. “These parcels are focused on the Montney, and obviously companies feel that recent drilling has de-risked the play in this area, so high land prices can be supported,” he said. He noted that a parcel in the same area, but posting only shallower rights, above the Montney, went for less than 10 per cent of the per-hectare price of the above parcels. Other sale highlights included two licences in the area around 77-11W6 and 77-12W6 combining for total bids of $5.21 million, both for petroleum and natural gas below the base of the Doig. One parcel, a 512-hectare licence acquired by Windfall, produced an average price of $7,097.40 and a bonus of $3.63 million. It included section 31 at 77-11W6 and section 36 at 7712W6. The other, picked up by Plunkett Resources Ltd., received a bonus of $1.58 million and a per-hectare average of $6,173.30. The 256-hectare parcel included section 25 at 77-12W6. Steve Hager, senior exploration analyst with Canadian Discovery Ltd. said

that these parcels, along with the other two high-priced parcels, are located in the Pouce Coupe South Field on the B.C. border where Birchcliff Energy Ltd. (to the southwest), Encana Corporation (to the northeast) and Canadian Natural Resources Limited (to the east) have been successfully drilling and completing Montney horizontal wells with multi-stage fracs. A further three licences at townships 67 and 68 combined for total bids of $9.29 million. One of the parcels, scooped up by O & G Resource Group Ltd., attracted a bonus bid of $3.82 million, which produced an average price of $4,975.23. The 768-hectare parcel included the following: section 30 at 67-05W6 for petroleum and natural gas below the base of the Fernie group; section 25 at 67-06W6 for petroleum and natural gas below the base of the Charlie Lake formation; the eastern half of section 36 at 67-06W6 for petroleum and natural gas below the base of the Halfway formation; and the eastern half of section one at 68-06W6 for petroleum and natural gas below the base of the Bluesky-Bullhead, to the base of the Halfway formation. Another of these parcels, picked up Stomp Energy Ltd., attracted a bonus of $4.26 million and an average price of $4,752.69. The 896-hectare parcel included section 14 at 68-07W6 for petroleum and natural gas below the base of the Fernie group and the western half of section 17 and sections 18 and 19 at 68-06W6 for petroleum and natural gas below the base of the Charlie Lake formation. Hager said that these two licences (three and 3.5 sections, respectively, featuring various rights below the Cretaceous, including Montney) are on the border of the Gold Creek and Elmworth fields northeast of the Paramount Resources Ltd.-operated Karr Montney A Pool and east of the Sinopec Daylight Energy-operated Elmworth Montney M Pool. Other Montney operators in the area include Shell Canada Limited and CNRL. “It seems that all the companies with deep pockets have a Montney agenda,” he said. The other licence was a 1,536-hectare parcel picked up by Stomp for $1.21 million. The broker paid an average of $785.98 for all rights at sections 10,14,15, 20, 22 and 23 at 68-02W6. This six-section parcel is located in a mostly unexplored area at Economy Creek, Hager added. It straddles Shell Canada’s horizontal Montney new field wildcat at Economy 08-16-68-2W6, which is currently standing at 3,752 metres. Also at this week’s sale, Vesta Energy Ltd. picked up a 2,960-hectare licence in the Plains region. The company paid a bonus of $4.35 million for the parcel, which produced an average price of $1,470 and included three tracts at 41-28W4.

MARCH 15, 2013

careers

PIPELINE NEWS NORTH •

THE FUTURE IS NOW New technology changing the way we work in the patch

That tiny object in the sky is an unmanned aircraft used by ISIS Geomatics to fly visual, thermal and infrared sensors, as well as a multi-spectral camera, and acquire information about the landscape ranging from changes in elevation to vegetation health. Applications in the natural resource industries are almost limitless.

ISIS GEOMATICS PHOTO

james waterman Pipeline News North “Are you ready for the future?” It was a relatively simple introduction to a complex era of data transmission, remote sensing and – believe it or not – unmanned vehicles. It is the future of the natural resources sector in Canada. And that future is now. “The Venn diagram is there just to make all the engineers in the room comfortable,” Doug Hanna said jokingly as he began to explain the world of mobile robots, an area of expertise for the Defense Research and Development Canada veteran. Now part of the Canadian Centre for Unmanned Vehicle Systems (CCUVS), Hanna was visiting Grande Prairie in February for the Growing the North Conference to discuss his past and Canada’s future in terms of unmanned vehicles. “The tasks that were dirty, dangerous and dull,” said Hanna, describing the reasons for developing drone technology to aid in mine detection, as well as detecting chemical, biological and radiological (CBR) weapons and weapons of mass destruction (WMDs). Hanna added that unmanned vehicles proved to be 40 times more efficient at mine detection than human operators. “It gives the user more options and more opportunity to address a greater number of problems,” he said. “[But] they’re not smart like humans are.” Hanna explained that CCUVS was created to reduce barriers to entry into the unmanned vehicle space, an effort that

includes helping develop standards and regulations for the industry and providing access to a launcher that propels unmanned fixed wing aircraft into the air. Such launchers are too expensive for most small to medium businesses. CCUVS also creates air space, a no-fly zone for testing aircraft. Hanna said an advantage of using unmanned aircraft is that “they don’t get tired or bored.” That can be a particular benefit to the resource industries, especially when it comes to tasks such as pipeline inspection, during which a drone is able to fly low, slow, carry a variety of sensors and accurately replicate pipeline routes without risk of human error. Natural resource industry applications of unmanned vehicles are the domain of surveying expert Owen Brown and remote sensing specialist Stephen Myshak, who met as graduate students at the University of Lethbridge to form a company known as ISIS Geomatics. “He just approached me one day and said, ‘I have a really good idea about how we can collect remotely-sensed data,’” said Brown, recalling the early days of the partnership. “He needed someone that could survey,” he continued. “And I thought it was really interesting. And we just kind of ran with it.” ISIS employs four different sensors – visual, thermal, infrared and a multispectral camera – on an unmanned aerial platform to perform tasks such vegetation health mapping and vegetation species differentiation, where the infrared sensor allows them to actually determine chlorophyll

levels and cellular health within the plants. The technology can assess farmland, determining where additional water and fertilizer are necessary, so that farmers can design their irrigation systems appropriately. Other applications include livestock inventory, search and rescue operations and pipeline spill response during which the system can be used to map the area, develop an elevation model and predict where the oil will travel based on drainage regimes. “You can do all kinds of volumetrics,” said Brown. Those applications include determining volumes of gravel and topsoil mounds. The thermal sensor can be useful for wildlife inventories because it will pick up objects that radiate heat. “The surrounding area is usually cooler than what an animal is,” Brown explained. “You can actually see them in there. And then you can go in and geotag those different animals or whatever you’re looking at and get counts.” A lot of work involves the Geographic Information System (GIS) processing of the data after the imagery has been collected. “Creating spatial data from your imagery,” said Brown. “We’re doing a lot of proximity analysis. How far is this lease pad from a body of water? Things for lease planning and actual lease scouting. “There’s so many different applications,” he continued. “The volume stuff is huge. When you start looking at piles of aggregate and things like that. You’re just that much more accurate. “You’re actually producing higher quality data than what a survey crew can ever produce. And I guess another big value-add is you’re always having imagery on top of whatever [information] you’re actually looking to acquire. So, you actually have a visual record. “You’re killing two birds with one stone.” ISIS Geomatics is still a young company and so they spent last summer conducting pilot projects and building case studies for locations where they might work and services they can provide. “So, we actually have something to give hard evidence to a client – okay, this is what we can do. “We’re just breaking into that market.” During their visit to Grande Prairie for the Growing the North Conference, the entrepreneurs met with Mike Head of Vieworx Geophoto, a small company that provides remote sensing services such as geo-referenced imaging to the resource sector. “We’ve been doing a lot of large pipeline inspections,” said Head, noting that his service brings the field to the client, making it so the client doesn’t have to go into the field. That is the power of remote sensing. “They’re basically having total access to every inch of their land base now instead of trying to, every time something happens, react,” Head continued. “They’ve just got to run out and send somebody out to see what the heck that thing looks like. And now we’ve

given them the vision of the whole field, whether it’s on their iPad or IPhone or desktop computer.” Vieworx is also moving into the liquefied natural gas (LNG) business in their own way. “We just came back from the west coast on a couple projects looking for larger sized areas to put LNG sites,” said Head. Vieworx met with the men from ISIS Geomatics because Head has been following the advances in unmanned vehicles fairly closely. “It’s just a great little tool to go out and grab some quick data on a smaller-sized project,” he said. “Great planning tool.” However, the drones aren’t an ideal fit for a lot of the work Vieworx is doing at the moment. “We basically cover a couple thousand kilometers a week,” said Head. “And the only thing that’s held us back from the drones is it’s a little bit more on the smaller scale sized projects.” Kurt Menzies and SNAP Security are on a slightly different wavelength. It is still remote sensing, essentially, but Menzies’ work involves delivery of live and recorded video information and a process known as video analytics, which is the automated analysis of that video to gather information about an event. According to Menzies, it is a vast improvement on closed circuit television (CCTV), as studies have shown that 95 per cent of information is lost through a CCTV system utilizing just two cameras and a pair of eyes over a 22-minute time span. “Being able to stop things before it becomes a crisis,” said Menzies, discussing the benefits of video analytics. During his Growing the North presentation, Menzies presented an unmanned North American Rail station as a case study of the services his company can offer. Menzies described the site as an integrated GPS station that comes life as soon as the train arrives. “The entire station puts itself back to sleep,” he added. The emerging markets for this type of technology include the energy sector. “We provide a total end user solution,” said Menzies. “It’s from the technology, the sensors, all the way to having it in their hands.” Applications can range from pipeline security to improving workplace health and safety at job sites. “Some of our clients have [asked] us to pull the human element out of the hot zone or danger zone,” he continued. “As an example, in the [hydraulic fracturing] industry, we’ve had opportunities to provide an unmanned camera system that has also inspection – like thermal imaging – on it. That’s allowed us to actually pull the human out of that space and they can run it right from the data van.” Menzies said that allows companies to continued pg 30

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MARCH 15, 2013

careers

Conference given glimpse of new era of data collection cont’d from pg 29

particularly in the north. “Getting that information off of those remote sites back to people who need keep workers away from the possibility of injury or even death 90 per cent of the time. it,” said Menzies, noting how easy it is to “When they do go in there – that 10 per capture that information at one point and transmit it to various parties throughout cent – it’s only because they have inforthe company simultaneously. mation that allows them to say, ‘Hey, this “We’re using cellular technologies, wireis what I’m going in on.’ They can actually less technologies, satellite technologies, zoom in on a bolt and see if they should whatever means we need,” he continued. be going into that space.” Menzies admitted that can be a cost The technology can also be a useful tool at remote sites, which are common in saving for the company, but he really focuses on the workplace safety aspect the oil and gas plays of western Canada, when a company is able to R001463653 GAS LINK INDUSTRIES LTD. reduce the amount of hours Facility Construction Company their workers spend driving Has an immediate opening in Fort St. John for a up and down access roads PROJECT MANAGER to check on well sites. - Minimum of 5 years experience in Oil & Gas Industry “[He can] do a site survey - Extensive knowledge of Bidding Facility Projects through real time video, real - Excellent Organization & Time Management skills & the ability to effectively time data sensors, and then communicate with people both orally and written - Solid Background in Project Management, QA/QC, Job Costing etc. he only has to go where - Valid Class 5 Drivers License, H2S, Whmis, and First Aid there’s an actual problem,” - Familiar with Windows XP, Microsoft Office, Outlook & Projects said Menzies. “So, you’re not just sending him all If you are interested in being a part of an Aggressive Facility Construction Company, that offers Competitive Wages, Company over the place. Some of our Transportation, and Full Benefit Package, please fax or email resume to: clients are taking full adGAS LINK INDUSTRIES LTD. vantage of that. Where now 250-785-9586 or mmorton.gaslink@gmail.com

Owen Brown of ISIS Geomatics explains how his company uses unmanned vehicles and remote sensors during the Growing the North Conference in February.

JAMES WATERMAN PHOTO

they have the guy who normally would drive ten, twelve hours sometimes, he can check on all 200 sites from an iPad. “You eliminate the cost of maintenance and wear and tear on your vehicles. You eliminate the liability and insurance of having them on the road all the time. And

the cost of sending the guy up there. “We can get all that information remotely now. You don’t have to go out there anymore.” The possibilities are almost endless. “The technology doesn’t care where it’s applied.”

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MARCH 15, 2013

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