Pipeline News North

Northern British Columbia and Alberta's Oil and Gas Industry Vol. 1 Issue 1 • dist: 20,275

January • 2011

h t r No

• Free

in this issue: • Horn River Basin - it’s going to be an interesting year • Montney Water Project - how much water is really out there?

• A cool solution - liquid nitrogen comes to Dawson Creek

Service sector companies that work with the oil and gas industry are always looking for new ways to deal with common issues, such as process equipment scaling. BioteQ’s processes recover dissolved metals and remove sulphate from wastewater, producing clean water that meets environmental compliance for on-site re-use or safe discharge to the environment. See page 22. (Photo courtesy of BioteQ Environmental Technologies)

www.inland-group-fsj.com

2 • PIPELINE NEWS NORTH I January 2011 special features 3

20

Horn River Basin - it’s going to be an interesting year Opportunity knocks - year round drilling in north B.C.

opinion 2 From the pipeline 4 Opinion

community 5 Dawson Creek donation 17 Aim Trucking - looking

for a fair shot

industry news 6

6

8

9

21

Communty partners becoming part of the people Rosenau Transport planning to stick around Energizing Investment - a new framework for royalties Western provinces sign MOU Calfrac - welcome to the neighbourhood

environmental 11 Montney Project - how

much water is really out

there?

14 Path of progress innovative resources for

access roads

from the pipeline...

I must be crazy.

How else can one explain moving all the way from southern Ontario to the northern climes of Fort St. John, British Columbia at the brink of winter to write exclusively about a subject that is as foreign to southern Ontario as good driving habits?

Or maybe I am just Canadian.

I remember my Russian history professor at Carleton University explaining to us one morning that the one thing that almost all Canadians, Americans and Russians have in common is a frontier mentality. And it is unique to our three nations. We are the only people on earth with this history of conquering so much supposedly unknown and uncharted territory. We are the only people who have had so much supposedly unclaimed land to conquer.

But I wouldn’t say that I am exactly in the conquering business. Not being an astronaut or a submarine captain, there just isn’t much left for me to conquer. I am not even the first of my southern Ontario friends to see Fort St. John. And judging by those whom I have met since my arrival, I have just been following in the westbound footsteps of numerous other Ontarians almost exactly like me. Even journalists. Not that I am too eager to call myself a journalist. My typically Canadian frontier spirit prefers to defy such easy labels. Just call me an explorer. The term is just abstract enough to pacify my natural restlessness to the point where I might actually want to stay put for a few months.

It is also the term that I prefer to apply to the men and women of the oil and gas industry now that I know something of their work. And that should make sense to anyone who knows anything about the role our natural resources play in the history of our country. Canada was built by intrepid souls who were one part explorer and one part farmer or fisherman, logger or gold prospector, miner or oilman. And the modern oil and gas industry in this region still operates on the frontier of our civilization in areas such as the Horn River Basin and the Liard Basin. Areas that still largely belong to spruce trees and wolves, not those of us who happen to work in their territory. Its men and women rank among the pioneers of today, bravely building homesteads of gas rigs and trailers in some of our most forbidding wilderness so that they can make their living from that land. It isn’t exactly trappers in the log cabins of old Quebec forests or subsistence farmers in the sod houses of a pristine Saskatchewan prairie, but one could argue that it is our modern equivalent.

But I have seen that this distinctly pioneer aspect of our oil and gas industry extends beyond its geographic

safety 18 Surerus - showing ‘em how

safety is done

technology 22 Treating it right - BioteQ

water treatment technology 24 A cool solution - liquid

nitrogen comes to Dawson

Creek 25 Keeping an eye on the

pipeline 28 Pumping propane - an

innovative alternative

profiles 26 Laurie Dolan - working with

the community 27 Good Prospects

wendy webb Editor Pipeline News North Welcome to our debut!

It’s finally done and fresh off the press, a very exciting time for all the dedicated staff that have contributed to the high quality of this publication.

Pipeline News North is a free, full colour, monthly edition focused on the Oil & Gas Industry and covering a variety of topics including industry news, innovative technologies, business and personal profiles, safety, community events, environmental initiatives - just to name a few.

We concentrate on all progressive aspects of the oil and gas industry in northern British Columbia and northwest Alberta – from heavy oil to unconventional shale gas, and its associated service industries.

With a readership of 20,000 plus households and businesses across the region, the Pipeline News North offers

position in relation to the various hubs of our human civilization. As shown by the stories in this issue, it is an adventurous spirit that pops up in innovative solutions to water and land management concerns arising from hydraulic fracturing and the construction of pipelines and access roads. It is evident in their new approach to community relations, recent workplace safety accomplishments, and bold plans to export its products to Asian markets. Even if a few of their journeys into the unknown and the uncharted might only enjoy the sort of success experienced by such famous expeditions as

james waterman

Reporter Pipeline News North Sir John Franklin’s last unlucky Artic voyage—but minus the scurvy, frostbite and cannibalism—their endeavors are still significant. After all, the quest to learn the fate of Sir Franklin led to other important discoveries, just as the quest to correct past mistakes can produce new and important innovations.

So, although I was always so far away from the industry that I never thought I would even touch its periphery prior to accepting this job, I am drawn to its stories of pioneering efforts and the adventurous spirit of its characters who seem as anxious to resist the all too confining parameters of easy labels as I am.

And so that is how one can explain my move from southern Ontario to northeast British Columbia to write for this Pipeline News North. It is the frontier mentality at work. The urge to conquer supposedly unknown and uncharted territory. And revel in my triumph even if it turns out that metaphorical Inuit and Vikings already beat me to the punch.

I am a Canadian explorer of Canadian explorers.

And just possibly crazy. information and stories that many never get to read in the regular media.

We tell of mulch roads and nitrogen fraccing and other innovative projects in progress for enhancing responsible environmental stewardship.

We talk to local businesses in the communities that are looking for opportunities to provide services to O&G in their area.

We interview the movers and shakers in the industry who are working toward better community support.

In short, the Pipeline News North is the Voice of the Oil and Gas industry for northern B.C. and northwest Alberta.

The staff at Pipeline News North invite you to make this your paper. We welcome story ideas, suggestions for columns or other subjects you’d like us to cover.

Got a great photo from time out at camp? Send the picture in with a little information and we’ll publish it in the next edition. Have a penchant for writing or an opinion to express? Send us a guest column or submit a letter to the editor.

Prefer to read online? No worries. The Pipeline News North has a companion website, www.pipelinenewsnorth. ca, which will host a full digital edition of our publication plus extra stories and features throughout the month between print editions.

The website allows you to comment on articles in the latest edition of the Pipeline, conveniently submit a letter to the editor, cruise the Careers ads for prospective employment or drop us a line in the Suggestion Box. We hope you enjoy reading the articles contained in this premiere edition as much we have enjoyed presenting them. Read on and enjoy!

special feature

January 2011 I pipeline news north •

3

dave olecko photo

horn river basin

- it’s going to be an interesting year james waterman Pipeline News North

It could be an interesting year for Canadian natural gas, particularly in the shale gas play of northeast British Columbia’s Horn River Basin.

Low natural gas prices, the great distance that gas must be transported to move it from the Horn River Basin to traditional markets, and the vast quantities of natural gas coming out of the Barnett and Marcellus shale gas plays in the United States – transforming a nation that was previously a net importer of natural gas into a net exporter – have elicited a variety of responses from those companies working in that remote northern region of the province. The current circumstances have raised a few

concerns about the practicality of working in the area at the present time as well.

So, it would only seem natural that casual observers might jump to conclusions when ConocoPhillips announced on November 23, 2010 that they were laying off eighty employees from their Canadian natural gas division and shutting in the equivalent of 28,000 barrels of oil per day in natural gas, about fifteen percent of their production.

“Essentially, there were no impacts from the staff reductions into our northeast B.C. operations,” said ConocoPhillips spokesperson Rob Evans, dissuading the notion that those cuts were being felt in the Horn River Basin. “It was largely in our western Canada gas infrastructure in Calgary. The majority of the cuts hit our Calgary operations and groups that support the western Canada gas operations.”

However, Evans noted that the com-

pany is not immune to the uncertainty about the Horn River Basin that is being caused by low gas prices.

“Nothing has changed,” said Evans in an interview in early December, 2010.

“However, with the natural gas prices forecast – or where they’re headed – we’re certainly looking at all our operations to see what makes good business sense.

But there’s not been decisions made at all. Our capital budget hasn’t been established or anything. So, we continue with where we were headed.”

According to Evans, their situation is partly a result of the gas price and transportation cost issues, but also influenced

by ConocoPhillips’ position as the new kids on the block of northeast B.C. natural gas.

“We’re very much at the beginning,” he said. “There [are] a lot of companies that are into full operations out there.

We’re still in the very infancy—start of our program there. So, it’s kind of hard to

compare them.”

Although Devon Canada is much further along than ConocoPhillips in terms of its northeast B.C. operations, Nadine Barber, Manager of Corporate Communications and Public Affairs, indicated that there is also an air of caution surrounding that company’s plans for the Horn River Basin heading into 2011.

“Approximately thirteen percent of our capital [in 2010] was spent in Horn River,” said Barber. “And so we would expect that that may decrease somewhat for a number of reasons. One of which is economics, gas prices being what they are. And Horn River being the distance it is from market certainly factors into that. But we are still planning to spend dollars there—significant dollars there—just not as much as we likely would have had the economics been better. We have spent about $2 billion in that area in the last couple of years.” continued pg 12 28231

www.pimms.ca

4 • PIPELINE NEWS NORTH I January 2011

opinion Life in the camps

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

Wendy Webb Managing Editor 250-785-5631 editor@ pipelinenewsnorth.ca

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

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

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

Tom Kirschner Sales 250-785-5631 cell:250-785-3522 tk.fsjsales@ pipelinenewsnorth.ca

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by Glacier Ventures International Corp.

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The Pipeline News North retains sole copyright of advertising, news stories and photography produced by staff. Reproduction is prohibited without written consent of the editor.

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steve thorlakson Contributor

Life in camp - what can be said? Certainly things are considerably different than they were 20 or 30, or even 10 years ago.

In those former times, rooms had bunks, with two, and sometimes four people to a room with hardly any space and certainly no privacy. Conflict was inevitable, and the reputation of people drinking and brawling are more than just legends.

Just consider the realities - few camps banned alcohol, and men were in close quarters for very extended periods of time. There were no cell phones, no internet, no fax machines, no mail service, and radio phones were pricey commodities beyond the reach of the working man (there were few women in camps in those earlier days other than camp attendants and cooks).

Workers could not maintain contact with their families, and they might be isolated for three or even six weeks at a time - and sometimes longer.

Today, almost all camps have single rooms, some with their own bathrooms and showers. Satellite TV with up to 20 channels is the norm, as is wireless internet coverage. Skype means that those with laptop computers – and you might be surprised how many that is - can video conference with family on a daily basis.

The rooms are more spacious and comfortable, in newer trailers. Cooking facilities and the range of options rivals any restaurant in your home town. The one shortage seems to be recreational facilities or workout rooms, which exist only in the larger facilities.

Most workers rise before 6 am to have breakfast and then work from 7 am to 7 pm for 24 days straight, before a legally required four day break, and then having supper in camp, showering and perhaps doing some laundry. There is little time for recreational pursuits - more

likely a little TV and to bed, to repeat the cycle a few hours further along. Those who perform hard physical labour may be too tired to even watch TV! All the comforts of home? Not really – but a lot closer than our fathers may have enjoyed.

Contributed by Steve Thorlakson while staying at the Royal Camp, Km 52 on the Komie Road in the Horn River Basin, some 175 km Northeast of Fort Nelson.

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Statement from Enbridge Gina Jordan

Spokesperson, Enbridge A report released recently raises important questions around the liability and compensation in the event of a marine spill. Spills are not inevitable and while the probability is remote, Northern Gateway has placed high priority on both the assessment of risks and the measures required to mitigate those risks, as well as response capabilities and the equipment and logistics support a rapid response would require. Oil spill responsibility, compensation and spill response are all thoroughly covered in our project application in Volume 8. Our plans are to a be a model of world class safety and environmental standards, and to that end, the equipment and logistics support to enable a rapid response in the channel will greatly exceed regulatory requirements. We also expect these topics to be thoroughly reviewed in the regulatory process.

The goal of our marine safety program is to reduce the chances of an oil spill to as close to zero as we can and in fact the probability is remote. Det Norske Veritas, an independent Norway-based organization specializing in marine risk assessment was chosen in a round-table process involving stakeholders and participating aboriginal groups to do this risk assessment. Both the choice of risk analysis study firm and the assessment study itself were independent of Enbridge.

What was found was that under our proposed marine safety program, the probability of a “large” spill of 20,000 cubic metres (126,000 barrels) is once in 2,800 years, and the probability of a “major” spill of 40,000 cubic metres (252,000 barrels) is once in more than 15,000 years (project application Volume 8C, Section 3, page 3-2).

The main weather impacts on shipping include sea states caused by strong winds and sea fog. To mitigate these climatic states, vessels movements within the channel will only take place in conditions that are safe and within navigational limits.

Northern Gateway has undertaken a Full Mission Bridge Simulation with assistance from the British Columbia Coast Pilots at the Force Technologies facility in Denmark. These findings show that the tanker routes can be navigated safely within environmental parameters.

In the case the responsible party is the marine terminal owner/operator, Northern Gateway would accept full responsibility for all for the costs related to the emergency response and for any property damage as a result of the spill. In the event of a spill at the marine terminal, Northern Gateway would fairly review and cover claims for losses. In the event of a spill from a ship, Northern Gateway would liaise with the community and the pollution fund administrators to make sure that those losses are also fairly reviewed and covered. Together with our Community Advisory Board, we would take the lead in making sure that people are fairly dealt with and have access to the funds that have been set up to deal with ship-sourced pollution events. In either event, Northern Gateway accepts our responsibility to the community to make sure that people do not suffer losses from our project and from ships calling on the Northern Gateway Kitimat Terminal..

For spills originating from a ship, the ship owner would be responsible. Under Canadian law and international conventions, ship owners are required to carry insurance to cover spill damages. In addition, shippers of oil pay into international and Canadian pollution funds to cover the costs of spills over and above insured losses.

The international standards and procedures for spill compensation provide up to $1.33 Billion in coverage, an amount determined by nations around the world to be appropriate and sufficient to cover the costs of most, if not all types of oil spill events. If Parliament decides that greater coverage is required , that adjustment can be made via the Canadian Ship-sourced Oil Pollution fund, a fund that has rarely been called upon in Canada given the excellent record of the shipping industry on both of our coasts.

January 2011 I pipeline news north •

community Fort st. john - Petroleum Association Midget Flyers

5

Dawson Creek Jamie Woodford Staff Writer

The Petroleum Association Midget Flyers put forth a strong defensive effort against the Prince George Cougars in their Jan. 8 match-up at the Pomeroy Sport Centre in Fort St. John.

photo by kelly lapointe

Submitted by Al Karasiuk, Fort St. John, B.C. The Petroleum Association Midget Flyers hosted their Midget Tier 2 Tournament in memory of Kyle Bakstad Jan. 7-9 at the Pomeroy Sport Centre.

The Prince George Cougars defeated the Terrace Kermodes 4-2 in the final to take first place.

The Petroleum Association Midget Flyers finished in third place, posting a significant 5-1 win over their Alaska Highway rival, the Dawson Creek Canucks.

In the round robin, the Flyers beat Mackenzie 5-2 and Dawson Creek 4-1 with losses to Terrace and Prince George.

Michael Bacso led the Flyers’ offence with three goals and three assists followed by Sam Aitken with five assists and Cayle Bell with four goals. Contributing three points each were Blair Karasiuk, Jayton Wieler, Kyle Leonard, and Tyrell Fenton followed by Tanner Moulton, Beauden Lancaster and Brett Howard with two points apiece. Chad Roberts, Braylan Eklund, Brent Loewen, Jordan Eckel and Derek Donis contributed singles.

Both Ty Helgason and Ryan Bueckert provided solid goaltending. The Flyers put their 5-0 All Peace League record on the line as they hit the road next weekend for games against High Prairie and Peace River.

Newcomer to town Ferus Inc. donated $75,000 to the city to go towards the Calvin Kruk Centre for the Arts (CKCA).

“We’re very excited about it,” said Ferus Vice President of External Affairs, Joe Ladouceur. “We feel it’s extremely important that we involve ourselves more directly with the community rather than just setting up an operation and coming and doing our business, we really want to become part of [Dawson Creek].”

Ladouceur said the company decided to donate to the arts centre because it seemed like the perfect project to become associated with.

“We have spoken to Mayor Bernier over the past several months and asked, ‘How can we help? What can we do? How can Ferus really become associated with some of the bigger projects that are happening in the area?’ ” he said. “[Bernier] had mentioned that this project was ongoing, and they were pretty excited about it and we thought well this is a perfect way for us to start off with our entrance into the Dawson Creek community and into the area, and for Ferus to get involved.”

Mayor Mike Bernier was energized about the donation.

“This is really exciting that they’re right in the middle of building their plant and moving to Dawson Creek, and what a great way to say welcome to Dawson,” he said. continued pg 27

Dawson Co-op Petroleum

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6 • PIPELINE NEWS NORTH I January 2011

industry news

Mike Doyle, President of the Canadian Association of Geophysical Contractors (left), Gary Leach, Chair of the Small Explorers and Producers Association of Canada (centre), and Kim McCaig, Vice President and COO of the Canadian Energy Pipeline Association field questions during the B.C. launch of the Community Partners program in Fort St. John on Nov. 29, 2010.

photo by James Waterman/pNN

community partners - becoming part of the people

james waterman Pipeline News North

A partnership of seven oil and gas industry trade associations officially launched the Community Partners program in British Columbia on November 30, 2010.

The program, aimed at oil and gas industry companies, their employees and their contractors, is designed to promote courteous and respectful behaviour between these energy sector workers and other land users in areas where they ply their trade. This is an industry-wide initiative that was launched in Alberta on

October 22, 2010 and will be launched in Saskatchewan in 2011.

During a press conference in Fort St. John, British Columbia on November 30, Mark Salkeld, President and CEO of the Petroleum Services Association of Canada (PSAC), explained that the Community Partners program has its roots in a surge of energy sector activity in Alberta about five years ago.

It was at that time that the concerns of landowners, regarding the behaviour of oil and gas company workers, became a routine topic of conversation. A subsequent survey of twelve western Canadian communities that was conducted in 2009 identified communication with residents, community livability and environmental protection as the three main areas in which the public felt that the industry

could improve.

A major concern was a lack of respect for property. Salkeld is familiar with those concerns. As a registered trapper with a trap line in the Fort St. John area, he saw firsthand the disregard for the property and wellbeing of others shown by individuals in the oil and gas industry. He believes that Community Partners can go a long way to fixing those problems.

Companies that have signed onto the program are already receiving materials— vehicle magnets, air fresheners, windshield stickers, hard hat stickers—created to remind workers about common public concerns such as noise, garbage, and unsafe driving.

“These are just commonsense ideas,” said Kim McCaig, Vice President and COO of the Canadian Energy Pipeline

Association (CEPA), during the press conference.

Mike Doyle, President of the Canadian Association of Geophysical Contractors (CAGC), stressed the importance of Energy Services BC (ESBC)—an organization that acts as an advocate for oil and gas service sector companies in the province—being part of the Community Partners program.

“I think it’s extremely important that the B.C. entity has involvement,” said Doyle, noting that he has lived in northeast B.C. and understands the issues regarding the oil and gas industry in the region.

“Many of the folks in the area are already involved in the industry in some fashion,” he continued, speaking specifically of northeast B.C.. continued pg 7

Rosenau Transport planning to stick around Energy sector activity in northeast B.C. is driving Rosenau Transport’s expansion in the region.

The company opened its first permanent terminal in Fort Nelson in November 2009 after having a presence in the town for the previous two years.

Rosenau Transport also opened a new Fort St. John terminal in May 2010 and is currently building a new facility set to open in Dawson Creek in April 2011.

“Northeastern British Columbia—you know, we’ve always got expansion

plans on the table. Chetwynd-Tumbler Ridge—that will be our next one,” said Carl Rosenau, President of Rosenau Transport, also mentioning that the company only built its terminal in Grande Prairie approximately five years ago.

“When Dawson Creek’s done, we’ll probably be building a terminal in Chetwynd.”

According to Rosenau, approximately fifty percent of their business in Fort Nelson—as well as in Fort St. John, Dawson Creek and Grande Prairie—is related to the oil and gas industry, and his company has seen a fifty percent increase in business in the region since opening their Fort Nelson terminal. However, he notes that the new terminal has been good for

the community, not just his bottom line.

For example, Roseneau Transport now has regular runs between Prince George and Fort Nelson that brings a variety of products to the town. The company sponsors local sports teams, participates in community events, and even hosted a dinner for the Fort Nelson Trappers Rendezvous—an annual week-long festival—in their building.

“One of my mandates always has been to support the local community,” said Rosenau.

The terminal has also had benefits for Fort Nelson in terms of the local economy, particularly job creation.

“The building cost $3 million,” Rosenau

added. “And all local trades were offered the first right to quote on the job. And we ended up with about ninety per cent local content. “What the Fort Nelson terminal did now is—it didn’t force us—but now we’ve got a lot better opportunities to hire local drivers,” he continued. “Because before our line haul drivers were Edmonton-based or Grand Prairie-based. Now they’re Fort Nelson-based. We’ve hired more people since we opened our terminal there. And, of course, we’re doing more work, also.”

Rosenau Transport, an ISNetworld certified company, won the Fort Nelson Chamber of Commerce Small Business of the Year Award in 2010.

January 2011 I pipeline news north •

cont’d from pg 6 “The large majority, probably. So, we start to get … clouded with the work and contract issues and stuff.

So, I think it is very important to see a local entity like Energy Services BC being part of it. It adds more credibility to those who may genuinely be experiencing issues.”

Doyle added that ESBC can not only help address the concerns of the service sector, but also the concerns of residents who are trying to deal with “nuisance issues” such as garbage and dusty roads. He believes that the presence of ESBC can help facilitate a “stronger dialogue” between the companies and the communities in order to correct those problems.

Laurie Dolan, an ESBC representative in Fort Nelson, is confident that will hold true.

“Most of these associations represent people in the field,” said Dolan.

“The drillers. The pipeliners. The petroleum people. Energy Services BC is one of the only ones in that group that is actually on the ground here.”

“It’s given a new perspective in these meetings,” she continued. “Because it’s not all about Alberta and it’s not all about Calgary.”

However, there is a certain amount of skepticism surrounding the project. During the press conference, the

panel of industry trade association representatives was challenged on how the tenets of the program would be enforced, and how its performance would be evaluated. It was also asked if foreign-owned companies working in the region would actually comply with an essentially voluntary program being instituted so far from their head offices.

McCaig responded by emphasizing that a large number of companies already have policies that demand the sort of conduct that Community Partners is endorsing. He also remarked that this concept of good behaviour is universal and so it should not matter where the base of any company’s operations might be.

Local farmers and trappers were frequently mentioned during the press conference as being the sort of land users with whom the oil and gas industry is trying to build better relationships through Community Partners.

However, attempts to interview local chapters of the British Columbia Cattlemen’s Association and the British Columbia Trappers Association revealed that they had not yet heard of the program.

“It’s not a concern as much as I’m hoping that they will be visited and educated about this program,” said Dolan. “I mean, now that Community Partners is out there, we can’t just

7

Mark Salkeld, President and CEO of the Petroleum Services Association of Canada stressed the importance of Community Partners as a way of encouraging “respectful behaviour” between energy company employees and other land users.

photo by James Waterman/PPN

Pat Pimm, MLA for Peace River North, attended the BC launch of the Community Partners program in his new capacity as Parliamentary Secretary for the Natural Gas Initiative to the Minister of Energy.

photo by James Waterman/pNN

stop and say, ‘Ok … this is what we’ve all done.’ We need to continue to sell it and continue to monitor it.”

“The worst thing that could happen with a program like this is we all just leave it,” she continued. “And we can’t. We have to keep talking about it. And as it grows, and we talk about it, new issues will come up. And maybe the program will grow or change. And it will change. It has to. Nothing can stay the same for too long anyway.”

Pat Pimm, MLA for Peace River North, was present at the program launch in his new capacity as Parliamentary Secretary for the Natural Gas Initiative to the Minister of Energy. Despite the skepticism, he is confident that Community Partners is a step in the right direction.

“They will be accountable,” Pimm said of the companies participating in the program.

“I think you will find, if there’s a phone call made, you will see that the companies will respond. They will react. And that’s also up to the contractors. They should sign on.

They need to know what’s expected of them.

And if they’re not abiding by the rules, then they have to be made to abide by the rules as well. It’s not just the big oil companies.

It’s the local guys that are doing the pipeline job. It’s the guys that are doing the pipefitting job. It’s everybody that has to be responsible

Our Service Makes The Difference

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and accountable.”

Pimm admits that the region is experiencing “growing pains” with the recent escalation in energy sector activity over the last few years, but he also notes that initiatives such as the Summer Drilling Incentive Program have already contributed to oil and gas companies and their employees integrating into the communities where they work by making their presence in the area a more permanent one.

According to Pimm, Community Partners simply makes sure that the industry remains aware of what it takes to be good corporate and community citizens.

“You need to build communities,” he said.

“You need to build service sectors. And you need to build service centres. Both Fort St. John and Dawson Creek are service centres for the natural gas industry here. Fort Nelson has to be a service centre for the natural gas industry that’s up in Fort Nelson. And I think, as time goes on, what you want to do is, you want to bring people into your community.

You want them to become part of your community. You want them to buy a house.

You want them to raise their families. You want them to put their kids into the schools in your community. And that’s a big challenge.”

Pimm insists that Community Partners promotes that goal.

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8 • PIPELINE NEWS NORTH I January 2011

industry news

energizing investment

- a new framework for royalties in the O&G industry

james waterman Pipeline News North

The Alberta provincial government officially put its new Energizing Investment plan into action on January 1, 2011, but, as Minister of Energy Ron Liepert explains, a number of its elements have been in place on an interim basis since the recent global recession made them necessary.

“When we brought in the new royalty framework a couple of years ago, and then the economic downturn hit, we brought in a number of interim measures,” said Liepert. “And as a result of Energizing [Investment], we made a number of decisions. In some cases, it was making those interim measures permanent. So, they kind of didn’t have a date that they took effect.”

Other interim measures—such as the

drilling royalty credit program that is due to expire in March, 2011—are going to be allowed to expire, as components of the new policy will compensate for the loss of those specific initiatives.

“The permanency of it is effectively in January,” Liepert concluded.

Essentially, the new program is designed to ensure Alberta’s continuing competitiveness in the global energy market by restructuring the associated fiscal regime and regulatory framework, as well as encouraging innovation that will address issues of productivity and environmental sustainability as the industry moves forward.

It was drafted with the input of the energy sector through a competitiveness review process that sought to examine how Alberta compared to other Canadian provinces, and parts of the United States, where the oil and gas industry has a significant presence.

“One of the things that transpired during the whole royalty review was a breakdown in trust between industry and government,” said Liepert. “And by … going through the whole competitiveness review, where we involved industry, and

then making the changes as a result of that collaborative approach to it, we’ve rebuilt trust in industry.

“Now, how has that transpired going forward? Well, you know, if we take a look at some of the initiatives that are out there today, on some of the campaigns against the oil sands, as an example, we’re doing a number of things to counter those campaigns.

I don’t think you could have had that cooperative approach going forward if you hadn’t rebuilt the trust in the first place.”

The competitiveness review was partly a response to industry concerns about changes to the province’s fiscal regime prior to the recession.

That is why a restructuring of the royalty framework is such a significant component of Energizing Investment.

“There [were] some sort of general principles that we attempted to meet with all of our changes,” Liepert explained. “One was to reward up-front capital. Two was to encourage new technologies. And three was to bring down the high-end price point on the royalties. So, everything we did was within those three kind of parameters.”

Traditionally, front-end royalty rates had been higher in Alberta than in British Columbia, Saskatchewan, and the United States, meaning that putting capital into Alberta oil and gas was a riskier proposition for investors due to the possibility that they might never see a return on their investment, let alone break even.

The maximum five percent front-end royalty rate that was instituted during the recession will now become a permanent feature of the province’s fiscal regime as part of Energizing Investment.

The maximum production royalty rate will also be adjusted to ensure that both investors and Albertans profit from the province’s energy sector. The previous maximum rate of fifty percent will be reduced to forty percent for conventional oil and thirty-six percent for natural gas.

According to Liepert, these changes are in recognition of two important factors: the critical role that oil and gas development plays in the Alberta economy; and the need to attract investors that will allow the continued prosperity of the province.

“Well,” said Liepert, “I think the best way to describe it is that if you’ve got activity in a rural community, it means that, as an example, the local dealership for half ton trucks does very well. And as a result of that dealership doing very

well, he or she is employing a number of people, everyone from sales people to parts men, and they obviously spend money in restaurants and travel and those sorts of things. And buying new furniture and new houses. So, real estate benefits from it. I mean, you can kind of carry that supply chain all the way through.”

“Absolutely,” he continued when asked if he saw the energy sector as the hub of economic activity in the province. “And that was one of the things that a lot of Albertans didn’t even recognize, how much their personal wealth was the result of a vibrant oil and gas industry.”

Liepert notes that this fresh commitment to encouraging and facilitating investment in the industry is already bearing fruit.

“Our land sales this year have topped $2 billion,” he said. “It’s a record.”

Furthermore, Liepert contends that Alberta is in a solid position moving forward.

“I think we are on the plateau that we need to be,” he continued. “We have a fiscal regime in place that is very competitive. We will be making significant changes to streamline our regulatory processes.

We have, I think, those intangibles that many other places don’t have. And that is, we’ve got an industry that is welcome in the province, and that’s because a lot of people [have] grown up in the oil and gas industry. So, we’ve not only got infrastructure in place, but we don’t have to encounter the kinds of things that they’re encountering in places like New York and Quebec where people simply aren’t used to having oil and gas in their community.”

However, he does concede that the province faces significant challenges in terms of low gas prices, the distance its oil and gas products must travel to reach traditional markets, and the competition for a share of that market with other oil and gas producing regions, particularly the United States. The effects of globalization are also a concern as many nations are now trying to produce and export natural gas, thereby posing another threat to Alberta’s market share. Another considerable concern is combating the negative image of Alberta oil that is promoted by environmental groups. The Energizing Investment program is designed to help address those issues.

“On the gas side, it’s all around price,” said Liepert, discussing the challenges.

“I mean, there’s no shortage of people wanting to produce gas, and we’ve got huge reserves. So, it’s all around price.

And if we can open up new markets and get our product to markets other than the U.S., I think that would help the price a lot. Secondly, on the oil side, the biggest challenge we have is ensuring that we get our message out that we’re developing the oil sands responsibly.” continued pg 9

January 2011 I pipeline news north •

Alberta Minister of Energy Ron Liepert officially launched a new Energizing Investment program in January 2011. The program is designed ensure that Alberta remain competitive in the global energy market.

Photo courtesy of Alberta Energy

cont’d from pg 8 Although Alberta’s neighbouring provinces, British Columbia and Saskatchewan, are also oil and gas producers, Liepert does not necessarily view them as competitors.

“I don’t sort of look at it so much as competition,” he explained. “I look at it as ensuring that an Alberta-based company isn’t put at any disadvantage by working in Alberta versus British Columbia or Saskatchewan. And a lot of things go into that disadvantage. It could be we have more regulatory burden. It could be our fiscal regime isn’t as generous.

You know, it’s generally a combination of things. And we want to ensure that, at

the end of the day, when industry takes a look at all of their factors, Alberta can stack up with anyone.”

However, Liepert does admit that competition with the United States is a bigger issue.

“They’ve discovered huge reserves of shale [gas] and they don’t have the transportation-to-market challenges that we do. So, it is very competitive.”

He also attributes the low gas prices and the potential for an increasingly tight market to the glut of natural gas in large shale formations such as the Barnett in Texas and the Marcellus in the Appalachian Basin of the eastern states. As a result of these shale gas plays, the United States is now flirting with becoming a

net exporter of natural gas after years as a net importer of petroleum products.

“I don’t view us competing with B.C. and Saskatchewan,” Liepert reiterated as he discussed the matter of vying with the United States for market share. “In fact, I think there are a lot of things we could do collectively that would make us, as three western provinces, a pretty strong economic block. But, clearly, if there’s shale gas developed in Pennsylvania or in New York, that is competitive for us, because they don’t have the transportation cost.”

According to Liepert, one of the ways that this western block can ensure competitiveness with our southern neighbour and guarantee a fair share of the market is to work together to see that pipelines proposed for the west coast of Canada— pipelines that would facilitate the export of western Canadian products to gashungry Asian markets—become a reality.

Indeed, the Minister of Energy planned to discuss that very subject with his counterparts from British Columbia and Saskatchewan during a meeting in Calgary in mid-December.

Another significant concern for the industry in Alberta is what the Energizing Investment document refers to as “regulatory complexity.”

“When I talked to industry as we were doing that review,” said Liepert, “they felt that we needed to make some changes to our fiscal regime. But it was frustration with the layers of regulatory burden that had built up over the years to probably cause them more grief. And so we undertook a major review of our regulatory policies.”

The results of that review were set to be released at about the time when Energizing Investment was scheduled to take effect.

“We want to ensure that it’s easy to do business in this province,” Liepert continued. “And that’s why we went through a very extensive regulatory process.

So, I think that what Alberta industry’s telling me on the gas is they recognize the depressed prices. You know, in this industry, prices do go up and down. And they’ve had highs and they’ve had lows.

So, they accept that. They don’t like it, but they accept it. But what they want us to do is to sort of ensure that we’re not putting up unfair regulatory burdens for them.”

A key initiative has been to deal with the lack of coordination and collaboration that comes with having about ten different government departments involved in the oil and gas industry in some shape or form. However, the energy sector is primarily the realm of just three of those departments: the Ministry of Energy, the Ministry of Environment, and the Ministry of Sustainable Resource Development.

The aforementioned regulatory review has largely been a process of those three

departments discussing how they can make the interaction between government and industry more efficient.

“Today,” Liepert began, offering an example of how government can improve its regulatory efficiency, “if a company wants to build an in-situ oil sands plant, they apply first to the department of Energy.

They go through the whole approval process. Get approved. And then they have to start all over again with Environment.

And they go through the whole process.

And then they have to start all over again with another government department.

Some of these things can take up to four years to get approved. And all we’re saying is, ‘Why can’t we do much of that stuff all at once?’ It’s not about lowering the standards. It’s about streamlining the processes.”

“BC, as an example,” he continued, “they have something that’s called ‘one project, one process.’ We’re not necessarily saying that’s the model, but it’s a direction that we think makes a lot of sense.”

The last major component of Energizing Investment is a mandate to enhance production in the energy sector while reducing environmental impact. This initiative is partly an extension of a lesson taught by the advent of horizontal drilling.

“Our fiscal regime was still geared towards old technology, which was vertical drilling,” Liepert explained. “Industry said to us, ‘Look. We can access much greater reserves through horizontal drilling with one environmental footprint. But the way your structure is set up, both regulatory and fiscally, you’re not recognizing that.’

And so we made some changes that absolutely recognize it.”

According to Liepert, reserves in which only vertical drilling had been used could have been considered exhausted after yielding only ten percent of the oil in that reserve.

“With horizontal drilling,” he continued, “you could increase that to twenty percent and really not have any more disturbance at the surface. And so, as a result, we gain more royalty revenue for the province.”

“Those are the kinds of things we [are] trying to encourage.”

Finally, one phrase featured prominently in the Energizing Investment document seems to summarize the intent of the new program: sustainable prosperity.

“I think ‘sustainable’ looks at two things,” said Liepert. “One is, you need a regime in place, both fiscal and regulatory, that can be sustaining, that investors can look at it and say, ‘It’s predictable.

We know what’s coming.’ And so that’s what we wanted to design. But, secondly, there is a lot of attention paid today to ensure that the development of resources is done responsibly. So that’s part of ‘sustainable’ as well. And if you do all of that well, it will be prosperous.”

Western provinces sign MOU The provinces of British Columbia, Alberta and Saskatchewan have agreed to work together for the benefit of western Canada’s oil and gas industry by easing regulatory headaches and facilitating trade with Asian markets.

British Columbia Minister of Energy and Minister of Natural Resource Opera-

tions Steve Thomson, Alberta Minister of Energy Ron Liepert, and Saskatchewan Minister of Energy and Resources Bill Lloyd met in Calgary, Alberta on December 16, 2010 to announce the signing of a memorandum of understanding aimed at accomplishing those objectives.

“Today is somewhat historic,” remarked Liepert, mentioning that the MOU is an important extension of the New West Partnership between the three provinces that was ratified in April 2010.

“This is really the first major initiative out of that new partnership,” he contin-

ued. “And I think it’s important that it is in the energy portfolio because this is the industry that is driving the Canadian economy today. And while it’s driving the Canadian economy, there are challenges. And I think that what we can do cooperatively, we can address some of those challenges.”

A key goal, according to Thompson, is improving energy sector labour mobility between the three provinces through the collective recognition of accreditation received in any one of the provinces and addressing issues in areas such as trucking regulations, permitting and

9

worker safety standards that can cause considerable delays when petroleum companies are crossing provincial borders. It is all aimed at improving the “efficiency and competitiveness of the sector.”

The other key goal of the MOU is helping Canada’s oil and gas industry access new markets outside of North America in light of its declining North American market share as a result of the substantial reserves of natural gas in the United States. continued pg 23

10 • PIPELINE NEWS NORTH I January 2011

regional map

environmental

January 2011 I pipeline news north •

11

montney project - how much water is really out there? james waterman Pipeline News North

Geoscience BC has recently begun work on a study known as the Montney Water Project, aimed at compiling a comprehensive inventory of all water resources in the area of the Montney shale gas play in northeast British Columbia.

The study – which includes surface water, ground water, and deep saline aquifers – is being conducted in partnership with seven resource companies that are currently active in the region, the provincial government, the British Columbia Oil and Gas Commission and the Canadian Association of Petroleum Producers (CAPP). CAPP and the Commission, along with the Small Explorers and Producers Association of Canada (SEPAC), comprise the steering committee for the Science and Community Environmental Knowledge (SCEK) Fund that is providing a portion of the funding for the project. The remainder of the funding has come from the oil and gas industry partners and Geoscience BC itself.

“We’re … kind of assessing the resource that’s there in the way of just how much water is there at surface, what are the water-

sheds, what’s the water flow in those various watersheds, what do we know about domestic and commercial water wells, just trying to compile all the available information so we can start developing a hydrologic model of the area,” said ‘Lyn Anglin, Director, President and CEO of Geoscience BC, describing the purpose and scope of the study.

Anglin has held that position with Geoscience BC since 2006. A geologist by trade, she has brought a wealth of expertise to the job and this study, as she has more than twenty years experience managing geoscience research projects across Canada, most recently as the Director of the Pacific Division of the Geological Survey of Canada (GSC).

“Right now,” she continued, “we are trying to, in fact, compile a lot of existing information.”

Presently, a great deal of that information is scattered in bits and pieces throughout various government ministries and other organizations, all of which have different responsibilities concerning aspects of water quality and quantity.

“The information’s not in one place,” said Steve Dunk, Manager of BC Operations for CAPP, noting that relevant information also exists in the offices of participating energy sector companies. continued pg 16

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Oil and Gas — Fast Facts Hydraulic Fracturing in British Columbia

The BC Oil and Gas Commission (Commission) is an independent, single-window regulatory agency with responsibilities for overseeing oil and gas operations in British Columbia, including exploration, development, pipeline transportation and reclamation.

The Commission has offices throughout British Columbia and employs over 200 British Columbians who are committed to preserving the province’s quality of life. Come see us at the office in your region: • Fort St. John, #100-10003 110 Avenue • Fort Nelson, #101-4701 55 Street • Dawson Creek, #3-1445 102 Avenue

To learn more visit www.bcogc.ca Follow us on Twitter Phone 1-250-794-5200

What is it?

Hydraulic fracturing – also known as fraccing or fracking – is a term used often in today’s oil and gas industry, but what exactly is it?

To put it simply, it helps get natural gas out of underground geologic formations. Hydraulic fracturing creates paths within the gas-bearing formations allowing natural gas to be collected at natural gas wells.

Around the world, British Columbia is becoming increasingly known for its abundant natural gas reserves – the shales within the Horn River Basin and the Montney siltstones are referenced in many presentations on shale gas and tight gas as key global gas plays.

But the natural gas, commonly referred to as “unconventional,” is trapped in geological formations – normally shale, siltstone and sandstone – as deep as five kilometres below the earth’s surface. It’s called unconventional gas because it’s trapped within low permeability rock that under traditional operations do not allow the gas to flow. That’s where hydraulic fracturing comes in.

To release the gas trapped in the rock, fractures have to be created to allow the gas to flow. This is achieved by pumping fracture fluid – a mixture that is generally over 99 per

cent water and sand – into the formation at high pressures. When the pressure is great enough, the formation fractures, the sand holds open the fractures and gas begins to flow.

What happens to the fracture fluids?

The fracture fluid is pumped into the reservoir, but when its job is done, most of it flows back to the wellhead. The collection, temporary storage, reuse and disposal of these fluids is regulated by the Commission.

Over a period of weeks to months, the fracture fluid is collected at the wellhead.

The fluid comes back from the formation containing a mix of the pre-fracture formation fluids, dissolved and suspended solids and sometimes dissolved hydrocarbons. This fluid is either stored, treated and re-used – a preferable method in regard to reducing the amount of water used by the oil and gas industry – or pumped back down into a deep underground formation, using a well reviewed and approved by the Commission.

How is groundwater protected?

Unconventional gas reservoirs, such as those in northeast British Columbia, are typically found 2,000 to 5,000 metres below the earth’s

surface, while potable groundwater aquifers are generally less than 500 metres down.

Regulations ensure that potable groundwater is protected. This is achieved by drilling practices that include the use of non-toxic drilling fluids under certain circumstances as well as requirements for ensuring the well is adequately cased. Drilling and production regulations outline in detail how industry must ensure our water resources are protected.

What is the Commission’s role?

The Commission ensures that hydraulic fracturing projects in British Columbia are done safely for the public and the environment. Each division at the Commission plays a key role, whether it is at the application stage, the compliance and enforcement stage or the cleanup stage.

Companies must make an application to the Commission for deep well disposal. The Commission reviews these applications to ensure: oil and gas resources are not impacted; the proposed disposal or injection zone is compatible with the disposal fluids; the disposal fluids will remain within the underground formation and the applicant has obtained the necessary rights to the formation.

12 • PIPELINE NEWS NORTH I January 2011

Horn River Basin - its going to be an interesting year cont’d from pg 3

Barber describes Devon as a microcosm of the industry as a whole in that the company is neither all oil nor all gas, but has interests in both commodities.

“We have several in situ oil sands projects that are producing,” she said. “That’s where a lot of the capital will be going in 2011. But the conventional [oil] and the gas properties, they’re still a lot of effort internally. You only have so much to go around and we compete internally. We have such good plays, both in Canada and the U.S., it’s tough competition internally for that capital. It’s important that you get it out of the ground better, faster, cheaper, safer than everybody else.”

That, according to Barber, is one of the reasons that the Horn River Basin may not see as much capital in 2011. The Barnett shale gas play in Texas, where Devon has been working for thirty years, is so close to market that companies are actually drilling within the city limits.

By comparison, the Horn River Basin is almost impossibly remote. So, if it comes down to choosing between the Barnett and Horn River, the capital will almost certainly be allocated to the Barnett. The same could be said for companies working in the Marcellus shale gas play in the eastern United States.

However, Barber insists that Devon remains enthusiastic about the resource.

“It’s still early days,” she said. “There’s lots of interest, lots of excitement, absolutely. And there’ll be money spent there, absolutely, in 2011.”

Finally, Barber suggests that one should not infer an industry trend from the actions of one company, as every company has its own unique set of circumstances.

“We have choice,” she said. “For some companies, they may not have choice. They have to spend those dollars because they need that production. In our case, we have choice. If we need to meet production targets, we can use oil properties to meet production targets.”

The differences between companies as they pertain to the Horn River Basin are nowhere more evident than when comparing Pengrowth Energy Trust with the likes of Imperial Oil and Nexen in terms of their plans for 2011.

Wassem Khalil, Manager of Investor Relations at Pengrowth, remarked that Pengrowth is still a number of years away from gas production in the Horn River Basin and so they are focusing on the Montney formation, where they already have better infrastructure in place.

The Montney is also more economical at current gas prices, according to Khalil.

“We are still excited about the Horn River and the potential that the play holds,” Khalil stated via email in November, 2010, “but in the current price environment, we will not be allocating any capital to the project in 2011.”

Contrarily, Imperial Oil plans to be quite busy in the region over the next two years, building on their winter work program of 2009 and 2010. That program included drilling and testing exploration wells and acquiring seismic data in order to better understand the potential of the 321,000 Horn River Basin acres accumulated since 2007 in partnership with ExxonMobil Canada.

According to company spokesperson, Laura Bishop, Imperial Oil intends to start drilling on a brand new multi-well horizontal production pad in 2011. Production is expected in 2012.

Nexen’s Vice President of Corporate Relations Pierre Alvarez is not able to go into much detail about that company’s

plans for 2011, but it appears that they could be just as busy in the Horn River Basin as Imperial Oil plans to be.

“We’re in the process of drilling a nine well pad,” said Alvarez.

As one of the first to arrive on the Horn River scene, Nexen is well aware of the potential of the resource, just as they are aware of the challenges that face the natural gas business, not just in that region, but throughout Canada.

“We were one of the very early entrants into that,” said Alvarez, describing Nexen’s position in the region. “We had been in northern B.C., both as a gas player, but [also] in the Hay River as an oil player, for years, and had been watching things carefully. So, as we started to see opportunities open up on the Horn side – on the shale side – we were one of the very earliest. And we secured a very, very significant land position right up in the middle of that fairway. And a key for us then was, when the government did call for proposals on their net profit royalty system, we were one of the early applicants for that. We think it’s a terrific program. And it’s because of our success in the Horn and the government’s approach to development … we, this past summer, secured further land in northern B.C.and other shale plays.”

According to Alvarez, Nexen views shale gas as “one of the three strategic platforms for growth in the company” and so they are also staking a claim as early arrivals on the emerging Liard gas play, also in northeast B.C.. It suggests a confidence in the future of natural gas in Canada despite the current challenges.

“We’ve got good rocks,” said Alvarez, referring to the potential of the shale formations in northeast B.C.. “We’ve got a tremendous workforce. And we’ve got very supportive government policy in terms of net profit royalty and in terms of the infrastructure program. So, from our point of view, it’s an environment that has kept our interests at this point. And, in fact, we’ve expanded our interests.”

“I think you got to put it into context,” he added. “There are challenges for gas, period, in Canada. You look at the amount of shale gas that has entered into the U.S. market and backing out Canadian gas. So, gas is challenged to some extent.”

“A lot of these projects,” Alvarez continued, “you’re not thinking of gas that’s going to come on in a winter drilling season, the way you are with conventional gas. Some of these take a couple of seasons or a couple of years. It really is a question of where people think the future gas prices are going to go. And I think, secondly, there’s an awful lot of excitement about accessing new markets out of the west coast for oil and gas. And I think people are looking at that in terms of diversifying markets being a good thing for western Canadian resources.”

The clear goal for the Canadian natural gas industry is exporting its products to gas-hungry Asian markets.

“There’s an awful lot of work being done out there saying that this is the logical next step for northern B.C. resources,” Alvarez concluded.

Bill Gwozd agrees with the notion that the Asian market will play an important role in the future of Canadian natural gas. As Vice President of Gas Services for Ziff Energy, one of the top natural gas consultancy firms in North America and the only organization of its kind currently operating in Canada, he certainly has the expertise and the wealth of first rate data—not to mention almost thirty years continued pg 13

A Nexen employee climbs the gas rig at their Dilly Creek operation in the Horn River Basin of northeast British Columbia.

Photo by Dave Olecko/Nexen Inc.

A pair of Nexen employees examine data at one of the company’s natural gas operations in the Horn River Basin.

photo by Dave Olecko/Nexen, Inc

January 2011 I pipeline news north •

13

Well pads at Nexen’s remote Dilly Creek location in the Horn River Basin of northeast B.C. The great distance from traditional markets is one of the challenges facing the oil and gas companies working in that region. (Photo by Dave Olecko, Nexen, Inc.)

cont’d from pg 12 worth of credibility – necessary to properly assess the condition of the natural gas business in Canada today.

“If you’re an Asian company,” said Gwozd, “you may be what we call ‘cash rich, asset poor’. You’d be quite interested to poke holes in the ground at very low gas prices in North America because you’re selling your gas at an oil price in Asia. So, in fact, the lower the gas price, the bigger the driver to move gas offshore.”

Gwozd suggests that that is the reason for so many new partnerships between Canadian and Asian energy companies.

As he explains, the attraction for Asian companies is simply the price of gas. The Henry Hub price for natural gas in the U.S. is commonly higher than the AECO price for natural gas in Canada. Asian companies essentially sell natural gas at an oil price in their countries. Therefore, less expensive Canadian gas translates into a bigger profit for those companies at home compared to American gas. As a result, western Canada is a very attractive opportunity for those investors.

“Somebody who would be very active would be somebody who wants to move that Horn River gas to … Asia,” added Gwozd, discussing his well-informed view of companies that plan to be busy in the Horn River Basin in 2011 and beyond.

“Because there, the driver is perfect. Very low gas prices in western Canada and very high gas prices in Asia.”

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According to Paul Ziff, CEO of Ziff Energy, gas prices are different in Asia than they are in North America because the availability and usage of petroleum resources also differs in that continent.

Firstly, as Ziff explains, the energy value ratio of oil to natural gas is 5.8:1, which means that about six units of natural gas can produce the same amount of energy as one unit of oil.

“Gas is a gas. Oil is a liquid. There is a lot more power or energy in the oil,” said Ziff.

“However,” he continued, “the markets are very different in a sense that about two-thirds or three-quarters of oil is used for gasoline, which is a premium need, whereas virtually zero natural gas is used for gasoline. In fact, gas is particularly used for space heating, for the oil sands – those are two of the biggest uses.”

The key difference is that in an Asian country such as Japan, where gas is used instead of oil because they lack an oil resource, gas sells for as much as just fifteen percent below the oil price. North America has considerable oil resources and an attitude that gas is far less valuable than oil. Consequently, gas is sold at a much lower 24:1 ratio, instead of the 6:1 energy value ratio.

“That will change,” said Ziff, “either when there’s a very stiff carbon tax that would penalize … oil and coal or when all the cars start burning gas. Don’t expect the latter soon. Not sure I expect the former soon.”

This disparity between the prices of

oil and gas has turned the natural gas business in North America into a rather peculiar animal.

“If you think of any good and service,” Ziff added, “if the price gets knocked down from a buck to twenty-five cents per unit, the people supplying it just would go out of business. Or they stop producing.

Then the market would correct. But not with gas.”

That is why Ziff applauds ConocoPhillips’ decision to shut in gas in November, 2010.

“ConocoPhillips, I think, is prudent in saying that ‘we’re not going to give away our limited supply of gas at markets that are far below replacement.’ I think more producers should be doing that,” said Ziff.

“It was just based upon where gas prices were at,” said Evans, discussing ConocoPhillip’s decision to shut in fifteen percent of its production in November.

“It didn’t make economic sense to keep that production flowing where gas prices were.”

“It’s bad for the companies,” he continued, “but it’s also bad for the provinces because their royalty – everything – is impacted by it. You’d rather have it in the ground and get a better price for it than sort of pump it out of the ground at the levels it’s at right now.”

“A lot of that gas has been brought back into the system … in anticipation of the cold weather window and higher demand,” Evans added. “So, a lot of that has been brought back on. But in the early periods of the fall it just made no sense

to be bringing that out of the ground.”

“Periodically,” said Ziff, “producers have shut-in, although the shut-ins have usually been in the early fall when the prices are low. And the fact that ConocoPhillips is actually laying staff off indicates that they don’t necessarily view this as just a very short-term phenomenon. But I think the way to compare it is to gold or resource miners. And when the price gets high, they usually go to the less rich ore body and get it while they can. And if the price goes too low, they just shut down for a while. But the gas producers don’t shut down.”

So, the question remains: if natural gas prices are low throughout North America, why is this a particular problem for Canada and, especially, the Horn River Basin?

The simple answer is location.

“The value of gas, let’s say, in the Marcellus is worth a whole bunch more than gas in Horn River,” said Gwozd, citing the disparity in transportation costs.

“What I can say,” he continued, “is that the Horn River is not one of the lowest cost gas supply sources inside North America. And one of the reasons why it’s a bit higher is because operators are just getting their feet wet in it and, as a result, their operating costs are a little bit higher than others. Second reason, it’s a little bit farther away, where nobody lives, so you have to transport it a long way.

“And so those are the two major reasons why the Horn River is a little more expensive.”

It is going to be an interesting year.

14 • PIPELINE NEWS NORTH I January 2011

environmental

path of progress - innovative resources for access roads james waterman Pipeline News North

Every now and again, industry and government find a way to work together to accomplish something truly remarkable.

Doug Kulba is making a career out of those moments. As Resource Assurance Specialist for the Regional Integration Branch of Alberta Environment, he has been deeply involved with a program known as Partners in Resource Excellence, an initiative committed to bringing stakeholders together to develop innovative resource solutions. It is a position that has allowed him to be part of a pair of significant developments recently put into practice by Devon Canada: wood mulch access roads and Innovative Pipelining Strategies.

The relationship between Kulba and Devon Canada in terms of these projects really began with an attempt by Kulba to address concerns that had been expressed by farmers in the Grande Prairie, Alberta area whose machinery had been damaged while contending with sunken trench lines on their properties.

The crux of the problem was the conventional method of digging trenches for petroleum pipelines. The trenches would be excavated with large buckets, creating ditches 36” to 42” wide and producing large spoil piles that caused additional problems in terms of backfilling the ditches and compacting the soil.

The soil in those disturbed sections of the properties was never as firm and dense as it had been prior to excavation.

Consequently, sunken ditch lines and damaged equipment were commonly the end result.

“I got together with an innovator and I explained the challenge that we were encountering,” said Kulba. “And he said, ‘I can help you there.’”

The innovation was a narrow bucket for digging pipeline trenches just 11” to 22” wide, considerably reducing the amount of disturbance to the site as well as alleviating the backfilling and compacting issues by producing a much smaller spoil pile. A trench line compaction wheel was also introduced to help eliminate problems that could arise from poor compaction.

That was the spring of 2007.

It was during that period that Devon Canada was also receiving a lot of complaints from farmers in the region about incidents involving their extensive network of pipelines and, particularly, the trenches.

Furthermore, they were starting to spend a lot of money fixing sunken ditch lines and replacing farm equipment.

“And then I received a call from Devon Canada,” said Kulba. “And why this was so important was that, prior to receiving that call, I had given Devon Canada some recognition in terms of some innovative topsoil salvage processes that they were involved in.”

Kulba subsequently met with Devon Canada to discuss the solution to their problem.

“Within six months,” he added, “they changed their [pipelining] policies.”

“We have a long relationship with

Alberta Environment and Doug Kulba,” said Kevin Stark, Manager of Surface Land for Devon Canada. “We bounce a lot of stuff off of Doug. Doug bounces a lot of stuff off of us. And just the mindset and the experience on both sides of the fence lends a lot of expertise to us and to him as well. We’re not scared to try new ways of doing things and [it’s] pretty nice to have somebody from the regulatory side of the business to give us some direction on what he believes will work as well. Because they’ve to a lot of experience on their side of the fence as well.”

According to Kulba, the relationship between industry and government that Stark describes is exactly the type of relationship that Partners in Resource Excellence is designed to nurture.

“I work with the government,” he explained, “and twenty-eight years of experience has told me that, ‘Geez, Doug, we need to do something different.’ We were in a command and control process.

Industry was waiting for us to legislate.

“So, whenever something went wrong, what would we do? We would develop a new rule or regulation. That was as a result of us never really taking a close look at what the fundamental problem was.

“And so we would develop systematic solutions … one of those examples would be the introduction of ongoing updated legislation. And so what does that do?

It didn’t inspire people to be innovative.

That kept them focusing on that line, on that standard of, basically … a standard of failure.”

“My experience has been that, in a lot of cases, industry is open to ideas,” he continued. “But you know what? They’re fearful of failure because … they’re worried about us coming down on them.”

Kulba insists that the key to changing that system was building trust between industry and government, thereby bringing an end to the adversarial relationship that had been the status quo for so long.

Partners in Resource Excellence plays a big role in that process by acknowledging that governments are not just regulating bodies, but also organizations that can encourage and inspire innovations that can benefit everybody in the province – from industry to stakeholders, landowners to government.

“When they have the trust,” said Kulba, “they become more innovative. And when we learn that we can do things a little differently, they become innovative.

And then innovation leads to profitability.”

It is all about removing that fear of failure, according to Kulba.

“Failure brings us one step closer to success,” he added.

Devon Canada has taken that message to heart, tackling the problem of constructing environmentally friendly access roads with a trial-and-error approach that has seen varying degrees of success, but has also achieved some excellent results so far.

“It was something internally that our Surface Land department said, ‘There’s got to be a better way. And how can we look at using existing material to build roads?’” said Nadine Barber, Manager of Corporate Communications and Public Affairs for Devon Canada. “So, for instance, if you’re in an area where you’re not sure, when you’re going in there, if you’re going to have success or not—a

Kevin Stark, Manager of Surface Land for Devon Canada. His department is the group of innovators responsible for developing the environmentally friendly access roads that use wood mulch as a road base.

Photo courtesy of Devon Canada

lot of it’s very true exploration. So, does it make sense to build a permanent road into a well site or a couple of well sites when you’re really not sure what the economics may be or what you’re going to find?

“How long it’s going to take you? All that kind of stuff. So, why would you build a permanent road? Create that impact?

Spend the dollars? All that kind of thing.

When maybe there’s another way to do it.

“So, they tried a number of different experiments and one was, ‘Well, if you’re taking down a small right of way of trees, enough to get your equipment in, well, could you mulch those trees, put that as your road base, if you will, and take your heavy equipment and all that in and out of there if you’re successful?’ And you drill a couple wells … and you go, ‘Okay, now we can build a permanent road, potentially.’

“Or, if you’re not, or even if you want to wait for a couple years, you can roll that mulch back up again and reuse it somewhere else. And all that root structure underneath all the mulch will just kind of spring back to life.”

“If you build permanent roads,” she continued, “you damage the root structure. The reclamation is so significant

[that] you have to do there—why would you go through that effort if you don’t have to?”

“That was all by trial-and-error,” added Stark, discussing the experimentation process. “We get a pretty long rope around here to go try stuff and see what works and what doesn’t. And, typically, the guys in the field—I mean, they’re the ones that we challenge to come up with innovative ways to access the land or utilize the land base.

“So, that’s pretty much how we come up with it, is just by trial-and-error with our expertise in the field.”

The challenges, according to Stark, are variables such as the amount and weight of traffic that the roads will see and the terrain upon which the roads are built.

Through their experiments, they have discovered that larger wood fibres are best for soft ground that has to support heavy trucks.

A finer mulch is best for sandy conditions, as the two ingredients mix together to create a very solid foundation.

“Some of the first issues were in restricted areas where we weren’t allowed to build high-grade, all-weather roads,” continued pg 15

January 2011 I pipeline news north •

cont’d from pg 14 said Stark, noting that certain wildlife restrictions prohibit the constructions of such roadways.

“What we did in that case was, actually, rather than take a twenty-metre access, we took a ten-metre access – I believe it was – went in and logged the trees—the timber—and then mulched the timber right in place, right over top of the stumps and the root mass, and used the mulch for a driving surface to carry on our operations.”

Stark also mentions that they use a variety of trees for their mulch roads, depending on what is available, but emphasizes that it is all non-merchantable timber that “historically, would have gone up in smoke.”

“In the past,” Barber explained, “that’s always been considered waste wood.

Some people pile them up on the side of the road. Some people burn them.”

Devon’s mulch road system has mostly been used in the Grande Prairie area, but is also being put to work in areas of muskeg in northeast Alberta. The technology is also being incorporated into the construction of lease sites in those areas.

“You have a waste product that you can re-use,” said Barber, discussing the many advantages and applications of the system.

“And it is existing. You’re not introducing any new plants or any new issues, because you’re using existing plant material that’s already there. So, the concept is very simple, but it’s one of those things where people say, ‘Hmm, never thought of doing that before.’”

It is also a concept that is being recognized by the industry, including a Steward of Excellence Award from the Canadian Association of Petroleum Producers (CAPP).

“Stewardship award recipients such as Devon Canada exemplify the responsibility and innovation Canada’s oil and gas industry strives to achieve and maintain while delivering economic growth, mitigating environmental impacts and providing secure and reliable energy to customers across North America,” said CAPP

spokesperson Travis Davies in an email.

Kulba is also thrilled with Devon Canada’s achievements.

“They’re very good,” he said.

“We support that because … we’ve learned that by doing things differently, in the right place and the right conditions, we’ve discovered ways that we can reduce the environmental footprint.”

“The way it happened is by [Devon Canada] feeling secure that they could try these different things,” Kulba added. “So, the way forward is to work together, with our industry partners, and encourage and inspire them to try different things.”

Eager for the public to see the positive work of this kind that is being done by the energy sector in Alberta, Partners in Resource Excellence participated in creating the Evergreen Centre for Resource Excellence and Innovation in Grande Prairie, an interactive park where visitors can learn about industry innovations such as wood mulch access roads and Innovative Pipelining Strategies.

“We’re seeing that other industry players are recognizing the attention that Devon Canada is getting and I think they’re seeing that they would like to participate and get some of that recognition for some of the things that they’re doing,” said Kulba. “I see that it is having a very positive effect.” I really believe that in Alberta we need to do things differently,” he concluded. “We need to develop a different culture of developing solutions and of managing our environment.”

He clearly believes that Partners in Resources Excellence is helping the province accomplish that goal.

www.remaxaction.ca

29323

mulch magic – (photos left to right below)

Waste wood that traditionally would have been burned or left by the side of the road is being turned into mulch that will form an access road where those trees once stood.

A truck carries wood mulch down an access road already made from that material. The road is durable enough to transport the necessary heavy equipment in and out of drilling sites.

After an access road is no longer in use, the wood mulch can be recovered from that road and taken to another location.

The wood mulch is deposited on top of the ground without disturbing the existing root system or causing harm to the neighbouring trees. So, after the wood mulch is taken to another site, the site can restore itself naturally.

Photos courtesy of Devon Canada

15

16 • PIPELINE NEWS NORTH I January 2011

montney - how much water is really out there? cont’d from pg 11

Dunk is playing a dual role in the study, providing a broad industry perspective as a CAPP representative while serving as SCEK representative as well.

He also has 25 years of experience in the oil and gas business and a history of involvement in addressing issues concerning the industry and the management of water resources. Furthermore, his presentation at the Peace Water Workshop in Fort St. John, B.C. in February of 2010 served as a preface to the Montney Water Project at a time when Geoscience BC was still trying to secure funding in order to carry out the study.

“Industry, of course, has – through our drilling of oil and gas wells – gone through some of the potential aquifers,” Dunk added. “But nobody’s ever sat down and mapped them as a whole. So, we’re really pleased about the project because basically it will give us a sense of where there [are] some potential water sources.”

“So,” said Anglin, beginning to explain the process of compiling the data, “one of our Ministry of Environment colleagues was, I believe, in Fort St. John not too long ago talking with the various other government organizations and water well drillers, just trying to make sure that they have all their data sets up to date. And then we are compiling them all to be in a consistent format so we can compare information and include with that all of the information that we have about surface water sources just from topography and watershed information.

“And, in addition, we have some consultants in Calgary who are working compiling all of the information in the public data sets from wells that have been drilled through the units that we think are going to potentially be deep, subsurface aquifers. And so they are working … with another company called Canadian Discovery Ltd. to try and develop, essentially, a hydrogeological model of the deep aquifers to get a sense of how much water is there in the saline aquifers that are non-potable and not communicating at all with the surface water.”

“I think we’ll be identifying some data gaps of things we need to go out and collect new information on in order to make a better hydrologic model for the area,” she added, alluding to the possibility of a second phase to the study.

The start of the first phase of the Montney Water Project was officially announced at the BC Energy Conference in October of 2010, although some of the work was already underway by that point. The anticipated end date for the project is the end of March of 2011. The information will first be provided to the project partners to determine if there are any gaps in the data. The results will finally be published later in 2011.

The consensus among the government and industry partners is that the Montney Water Project is an important and timely initiative.

“I think everybody recognizes that water is a very important resource,” said Anglin. “And so there are a lot of public concerns about how much water is there going to be, particularly in the area of the Montney play, because it’s a relatively dry area of the province. And there are a lot of users there. There are communities. There are agricultural operations.

There is forestry. There are a lot of competing users for that water.”

The oil and gas industry is increasingly prominent among those competing users due to the demand for water for their

hydraulic fracturing processes.

“The industry wants to know how much water is there and what options do they have to really reduce … the environmental footprint,” she added. “And that’s their primary concern.”

According to Anglin, the key interest for industry is the possible existence of deep aquifers of non-potable saline water from which they can extract water for hydraulic fracturing. Deep aquifers can also provide a site for disposing of produced fluids where other water sources will not be affected.

“Because they can’t dispose of those fluids at surface,” she concluded, remarking that companies are also exploring other opportunities to limit their environmental impact, including recycling and treating the water they use.

One company that is determined to reduce its footprint through its approach to water use and management is Shell Canada, one of the seven industry partners contributing to the Montney Water Project.

“Shell recognizes that the energy industry is becoming one of the largestconsuming industrial sectors of fresh water and must take steps to manage its water footprint in a responsible way,” said Margaret Taylor, spokesperson for Shell Groundbirch. “Shell is reviewing its water management practices, technology applications, capabilities, and processes so that we can develop a roadmap to reduce our footprint across our businesses, projects, and value chain. The roadmap includes a research program to reduce the water footprint of unconventional gas development, and benchmarking the water intensity of our sites.”

“Shell believes that the local Montney Water Project is a critical first step in being able to manage water resources effectively,” she continued. “A better understanding of surface water resources in the area will benefit government, First Nations, industry, and other stakeholders.”

In addition to their participation in the Montney Water Project, Shell is also in talks to build a plant in Dawson Creek—at the southeast end of the Montney formation—that will turn wastewater into reclaimed water. That water will be transported via pipeline to Shell’s Groundbirch project 45km west of Dawson Creek for use in their oil and gas operations at that site, significantly reducing their need for fresh water resources.

CAPP and the Commission are both enthusiastic about the project, too.

“One of our mandates in the Oil and Gas Commission Act is [to] provide for effective management of the environmental values,” said Howard Madill, Director of Stewardship for the BC Oil and Gas Commission, also mentioning that, as the provincial regulator for the industry, the Commission is responsible for issuing permits for the allocation and use of water under the provincial Water Act. “So,” Madill continued, “we need to continually turn our mind to the effects of oil and gas development on water resources in the province. So, we have a strong interest from that perspective. And … one of our interests in the project is improvements to the knowledge that this project can bring on how the hydrological characteristics in the Montney shale gas development area can be used to identify the best options for sourcing of water and disposing of waste.”

“We believe that the information from this project can be useful to ensure that the potential environmental impact of oil

The map above indicates the study area of the Montney Water Project. The study is aimed at compiling a comprehensive database of surface water, ground water and deep saline aquifers in the oil and gas hotbed. The results could help energy companies reduce their consumption of potable water. (Map courtesy of Geoscience BC)

The tight and shale gas in the Montney play is projected to represent the lions share of rising deliverability over the next few years. (Chart courtesy of National Energy Board)

and gas development in the area is effectively managed,” he concluded.

“It’s definitely useful for everybody,” added Dunk. “We obviously hear the concerns in the northeast about industry use of water. So, basically, a lot of the concerns, we feel, are related to the fact that the landowners, the local folks, aren’t quite sure how much water there is available. And, I think, doing this project will give everybody a sense … there’s quite a bit of water available.”

“I think it definitely benefits the entire area,” he continued. “Because knowledge is a good thing. So, if everybody knows what water is available, I think there’ll be less concern about use of it.”

Dunk has firsthand knowledge of local fears about water shortages that may have grown in intensity after the drought in Dawson Creek this past year. He was living in northeast B.C. in the early nineties when the Kiskatinaw River virtually ran dry one summer.

“Again, it’s not just about the rivers and the fresh water flow for us,” he said. “It’s about all of the sources. In a situation like a drought like you had last summer up

there, what this will help is it will help us know where all of the water sources are, including the deeper ones that are not really connected to the hydrogeological cycle. The stuff that we get from down deep is not connected to the shallow stuff.”

A statement issued by the newly formed Ministry of Natural Resource Operations also stressed the importance of the initiative, mentioning that the provincial government’s participation is “consistent with recommendations included in the Auditor-General’s December 2010 report on groundwater protection.”

That report by provincial Auditor-General John Doyle noted that one-quarter of B.C. residents rely on groundwater and the demand is escalating. Therefore, the province must act immediately to protect and conserve its fresh water resources.

As part of achieving that goal, the ministry is assisting Geoscience BC with mapping and classifying aquifers in the area of the Montney shale formation, as well as providing expertise in processing continued pg 17

January 2011 I pipeline news north •

cont’d from pg 16 well water data and inputting that information into B.C.’s WELLS database, a record of ground water wells and aquifers in the province.

The Montney Water Project is in many ways an extension of two previous Geoscience BC studies that allowed that organization to develop its current relationships with CAPP, the Commission and the oil and gas industry.

According to Dunk, CAPP’s interest in the work of Geoscience BC really began to grow with the Nechako Seismic Project in the Nechako Basin southwest of Prince George, B.C..

“They did a review of the oil and gas potential there,” said Dunk. “So, obviously, that’s useful for industry when they can do that sort of almost pre-industry type assessment on a basin type scale.”

“Interestingly enough,” Anglin began, discussing the origin of the Montney Water Project, “it came about because, last year, we did a study of the subsurface saline aquifers in the Horn River Basin.

We did that in partnership with the Horn River [Basin] Producers Group. And we released those results in April of this year.

And it was as a result of that work that … a couple of the companies in the Horn River [Basin] Producers Group, who are also involved in the Montney, talked to us about whether it would be possible for us to do a similar kind of a study in the Montney area.

“And then some other companies who’d heard about the work that we’d done after we’d released the Horn River study results also contacted us. So, it really was a number of companies who said, ‘Yes, we’re very interested in that kind of a regional context’, because a lot of companies are doing their own research on their own land.

“But what they were looking for was an opportunity to work collaboratively to get the bigger picture on what is the overall water situation in the Montney, as we had done in the subsurface in the Horn River.

That’s essentially where it came from.”

“We think that the work that was done

community

in the Horn River by Geoscience BC has been quite useful,” said Madill.

“They provided some credible information that’s been useful to identify alternative water sources that have less environmental impact – primarily from the Debolt formation – than taking fresh water from surface sources.”

This may prove to be an opportune time for Geoscience BC to be proving its worth to the oil and gas industry as well. The organization is almost at the end of its funding after receiving a $25 million grant from the province in 2005 and a pair of grants in 2008 totaling $12 million.

“We’ve been spending it on achieving our mandate, which is to attract exploration and development investment into British Columbia, the minerals and oil and gas,” said Anglin. “And so we are in the process of presenting a proposal to government to provide us with future funding.”

“We certainly hope that all our projects are valuable,” Anglin added, discussing the idea of ensuring they can continue

17

their work by proving their worth to the oil and gas industry. “I think there will be some good results that come out of this.

We’ve certainly been getting good feedback from the oil and gas companies that we’re working with. The Horn River Basin Producers Group, we’re talking with them, in fact, about doing a second phase of work in the Horn River Basin. So, in that sense, we are getting good support from them and from CAPP in terms of seeing some value in what we’re doing.”

Madill indicates that the Commission is supportive of the organization and its work. I think one of the key values,” said Madill, “is they can bring a lot of partners together to help fund and design studies and the collection of knowledge and information that’s useful in an oil and gas management context.

“And one of the other values is they’re an independent third party. We’ve been very involved and very keen to see what the results of this project will be,” he concluded. “And very keen to apply those results to oil and gas management.”

Aim Trucking

- looking for a fair shot

At less than twenty years old, Aim Trucking is still one of the oldest oilfield related trucking companies in Chetwynd, BC. Owner and operator Curtis Brewster hopes he can attract more business as more oil and gas companies discover the services that are available to them in his hometown.

photo by James Waterman/PPN

As a young man, Curtis Brewster was anxious to escape the small northeast British Columbia town of Chetwynd where he spent his childhood years, but now he runs a successful trucking company that calls that burgeoning and beautiful city its home.

It seems that his return was a smart decision for the entrepreneur. Activity in the nearby Montney shale gas play has begun to offer service providers in

Chetwynd—and Chetwynd itself—the opportunity to profit from the region’s natural gas resources. Aim Trucking, the business that Brewster has operated for the past eighteen years, is one of those service providers anticipating those benefits. The only obstacle is finding a way to guarantee that the gas companies notice his valuable presence right in the backyard of their operations.

The issue, as described by Brewster, is that it is difficult for service providers to develop lasting relationships with the gas companies working in the area, partly because they contract those services prior to moving into the region and so they are usually unaware of the local options for services, such as those that a trucking company can provide.

“Representation in Calgary,” said Brewster, explaining the necessary first step to correcting the problem of gas companies not using local service providers in Chetwynd. “Or Calgary getting out in front of it and saying, ‘Listen. Let’s phone out to Chetwynd, see what we got out there. If we’re going to be out in that area, let’s see what we got out there for services.’”

Brewster has said that he tries hard to be proactive, but also admits that the best that he can do – contacting the companies that are planning work in the area to let them know about Aim Trucking – is often insufficient.

His feeling is that the industry has to take the initiative to learn about the various service providers in the region, an effort that he believes will both be good

for their business and for the reputation of the industry in communities such as Chetwynd.

“It’s going to be in their interest to deal locally,” he said. “It’s not only what we can do for them, what we have going on, but if they’re here in the area and using us and they need a vac truck, well, we can direct them to a vac truck. Or we can direct them to a water hauler.”

“We’re all trying to do the same thing,” he continued, discussing the importance of having the industry and the community work together. “They’re bringing a lot of their people with them when they come, but [local] people are in place in these areas that they’re coming to.” continued pg 28

18 • PIPELINE NEWS NORTH I January 2011

safety

surerus

- showin’em how safety is done

Surerus’ Health, Safety and Environmental Manager John Steward, a Canadian Registered Safety Professional.

Steward is responsible for developing and implementing the safety programs that led to Surerus’ achievement of two million man-hours without a lost time incident. photo by james waterman/PNN

james waterman Pipeline News North

Surerus Pipeline officially accomplished what would be an impressive feat for any construction company on October 15, 2010: a record of two million man-hours without a lost-time incident.

This means their last lost-time incident was almost four years ago on January 27, 2007. The achievement is a credit to the work of John Steward, a Canadian Registered Safety Professional and the Health, Safety and Environmental (HSE) Manager at Surerus. He has literally written the book on workplace safety for the company and he is cautiously proud that his efforts have paid such remarkable dividends so far.

Steward’s role with Surerus has been to develop, monitor, and implement health, safety and environmental systems, as well as conduct safety meetings and training sessions to educate all employees on the contents of the workplace health and safety manual that he has produced. Writing that manual has been a collaborative effort involving discussion with the employees who must follow its regulations. Also, according to Steward, it is a job that is never really complete, as there is always room for improvement.

His tenure with Surerus has proven that old adage holds true.

When he began working for Surerus, the company’s Workers’ Compensation Board (WCB) rate—a sort of insurance premium that all employers must pay— was $5.35 per $100 of payroll.

“It’s a fairly significant expenditure for a company,” he said.

However, since that time, the health and safety program that he has implemented has allowed Surerus to reduce those rates to approximately $2.50 in British Columbia and approximately $1.40 in Alberta.

“We develop culture,” he said of the results of establishing a solid health and safety protocol. “People begin to understand that these things are necessary.

And we share with them the advantages that we have commercially, as well as, obviously, the most important one – personal safety.”

Developing that culture is a work intensive process that requires a meticulous attention to detail and includes vehicle and facility inspections, work site regulation compliance audits, and incident and accident investigations, all in the interest of assessing possible hazards and mitigating potential risks.

“We’re lowering the threshold of hazard,” said Steward. “The risk is always there.”

“Of course,” he continued, describing the inherent risks of the pipeline construction business, “heavy equipment is a

big part of it. So, you’ve got your dozers and your side booms and you’re lifting heavy pipe. You’re manhandling heavy components, materials, and so forth. In one particular job, like last year, we had 500 people on one construction project.

So, that brings a lot of variables into play.

So, it’s a difficult thing. It takes a lot of framework to control the variables that come with that.”

Although Steward does admit that it is difficult to completely eliminate the occurrence of workplace incidents in this industry, he is confident that Surerus can continue to work toward reducing the severity of the incidents, which has been one of the keys to achieving their current safety record.

“We are having injury incidents,” he said, noting that a new modified work system has also helped to reduce the number of lost-time incidents, “but the severity of those injury incidents are not to such a place that a person has to miss work because of it. So, in other words, the whole issue of lowering the severity is an important factor.

“We are having less severe incidents.

We are still having more incidents than we want to have. So, our whole goal now is to lower our focus and look at the next category, which is medical aid incidents.

Incidents that involve people that are hurt bad enough that they got to go see a practitioner of some kind.”

Surerus has had only two medical aid incidents in 2010 after having eight such

incidents in 2009, when the exposure in terms of man-hours was also greater.

They had a total of 788,000 man-hours in 2009, which was a “huge year” for the company. By comparison, the previous year was only 467,000 man-hours, simply because they do not always have so many big jobs throughout the year every year.

Steward’s goal to eliminate medical aid incidents may have been a factor in how he chose to celebrate the company’s recent achievement, as his idea was to invite Eric Giguere of Safety Awareness Solutions to deliver his “Buried Alive” presentation at the Lido Theatre in Fort St. John on December 15, 2010. Giguere had been working on a sewer line project in upstate New York on October 4, 2002 when the six-and-a-half feet deep trench in which he was kneeling suddenly collapsed on top of him.

He had not been using a trench box as state regulations required of such a situation, partly because it was not the habit of the company to do so, and partly because of his own certainty that he was untouchable. During his presentation, he explained that the accident was the result of taking the sort of shortcut that construction workers take all the time, the sort of shortcuts that may often only result in the kind of medical aid incidents that Steward would like to eliminate, but nearly cost Giguere his life on that occasion. continued pg 19

January 2011 I pipeline news north •

19

cont’d from pg 18 “You people are looking at a walking miracle,” he admitted.

Standing on a stage decorated for a Christmas play, dressed in the blue jeans and baseball cap of the “every day, average, hardworking guy” that he professes to be, he described how his carelessness had cost him his livelihood and a marriage that was only six days old at the time of the accident.

“He spoke of being “a 27 year-old cowboy” who had been transformed into a man who was afraid of the dark, a man who required two and a half years of psychological and cognitive therapy following the tragedy. Eight years after the incident, he can still only sleep a few short hours every night.

“I don’t swim anymore,” he said, mentioning that he lives among the beautiful Finger Lakes of New York. “I never want to hold my breath again.”

Giguere continually talked about the wives, husbands, and children that are the reason so many of us go to work every day and the terrible impact that an avoidable accident can have on their lives. It was powerful and especially poignant considering the season. It also emphasized Steward’s message to the men and women who work for Surerus, seemingly saying that everything that Giguere lost by his carelessness is their daily reward for their dedication to maintaining a safe workplace, not to mention a reminder of the need to be vigilant.

“That’s an amazing accomplishment,” Giguere said in an interview, discussing the reason that he was brought to Fort St. John to deliver his presentation. “I go to a lot of companies who have a really hard time with safety … and to accomplish something like [two million man-hours without a lost-time incident] … that’s an amazing feat.

Amazing accomplishment.”

He began doing his presentation because he felt that it was important to share his experiences with others, not only for the sake of those who could make the same mistakes, but also for his own wellbeing.

“This is therapy for me,” he said. “I was very lucky to survive. I went through a lot. And I just wanted to start sharing with people, to let them realize what the dangers are.”

“I dress like them,” he continued, referring to his audiences at vocational schools and companies like Surerus.

“I act like them. I am them. I could go to work with these guys. And I just tell them that these are the things that I did, and that I know that there may be times where [they] feel compelled to do them too. And it’s just not worth it.”

His background definitely helped him to connect with the Surerus crowd, many of whom approached him after his speech to shake his hand and thank him for telling his story, as though they really did see one of their own on that stage. That response also serves as a testament to the culture that Steward has tried to foster at Surerus.

It is a culture that Steward has seen extend to how their construction crews leave their job sites, how their employees do household chores such as mowing the lawn, and how their employees carry these values on to other

Eric Giguere of Safety Awareness Solutions (left) and John Steward offered Giguere’s “Buried Alive” presentation on December 15th at the Lido Theatre in Fort St. John, B.C. Giguere came to talk to Surerus employees about his experience being buried in a trench during a sewer line job in upstate New York in 2002.

photo by James Waterman/PPN

construction companies.

“Our employees are transient, cyclical type of employees,” he explained. “So, they could be working for us for three months and go work for another pipeline company for another three months – or somewhere else. And we often hear them come back and say, ‘We really appreciate what you guys are doing because we didn’t have that over here.’”

According to Steward, the work that goes into this type of achievement is both good for their business and the industry as a whole.

“How we got to the record does add value to the people in the communities,” he said. “It adds value to the owner of the pipeline. Because, not only did we run a safe job, but now it’s a quality job. So, it becomes a quality issue.

‘It raises the bar for everyone playing in the same

arena,” he concluded.

Obviously, Steward is thrilled with Surerus’ accomplishment and proud of his own role in reaching two million man-hours without a lost-time incident.

“I look at it as being a real achievement for us to be able to reach two million hours,” he said, noting that it creates a feeling within the organization that even greater feats are always possible. “When we reached one [million], I was ecstatic.”

However, his is a joy that is tempered by a sobering acknowledgement that he is working in an industry in which a safety performance of this nature is hard to maintain. We recognize that nobody’s perfect and no company is perfect,” he said. “So, perhaps, some day, we’ll see that [record] gone. We hope not. And we’re going to work to keep that from happening. But, if it does, we understand.”

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20 • PIPELINE NEWS NORTH I January 2011

special feature opportunity knocks - year-round drilling in northern B.C. james waterman Pipeline News North

Bill Streeper has called Fort Nelson his home for most of his life.

Until he sold his business after thirty years on the job in 2006, he was the owner of Streeper Contracting, an oilfield transportation company operating out of that small northeast British Columbia town. It was his experience with the oil and gas industry, along with the increase in gas company activity in the Horn River Basin during the last decade, that prompted him to put retirement on hold and run for mayor of the Northern Rockies Regional Municipality.

“I saw the activity happening in the oil patch and I knew that this town had to go forward and meet it,” he said. “We had to get the town ready to go that direction.”

One of his objectives as mayor was to encourage and facilitate the work that was starting to be done by gas companies outside of the usual winter months, the customary window of opportunity for an area that is rich in shale gas, but also offers the seasonally hazardous muskeg terrain of the northern Boreal Forest.

It was what Laurie Dolan of Energy Services BC – a proud Fort Nelson resident – calls “the hundred days of Hell.”

Essentially, gas producers would try to cram a year’s worth of work in the Horn River Basin into four winter months, before the spring thaw created conditions too dangerously soggy for their rigs.

“Most producers, and us being no exception, would try and mobilize fifteen, twenty, thirty rigs to get everything we wanted done between late December and the middle of March,” said Mark Taylor, Team Lead for Horn River Development for Encana’s Canadian division, a position he has held since October, 2008.

Encana was really the founder of the Horn River Basin shale gas play. According to Taylor, the company first encountered what appeared to be commercial gas in that play in 2003, but it was not until 2006 that they began to put in test wells to determine the quality of the resource. However, this was not their first foray into northeast B.C.. They began work in nearby Maxhamish and the Jean Marie play just over a decade ago.

“And back then it was pretty much ‘winter only’ access,” said Taylor.

The move away from that “hundred days of Hell” that Dolan mentions was, as Taylor said, “a push to reduce the cost of doing business and developing the gas in northeast B.C..”

“The strategy we started to pursue was – instead of having that mad rush over the course of ten weeks every winter – to get a much smaller number of rigs out there and basically run 365 days out of the year,” he explained. “So, one of the things that allowed us to do that was the wood matting that we put down on drilling leases and access roads now, so that we can work over top of the muskeg in many locations in the summer.”

As Northern Rockies mayor, Streeper participated in drafting the province’s Summer Drilling Incentive Program that has played an important role in making Encana’s summertime activity in the Horn River Basin not only logistically possible,

but economically feasible.

“What it is,” said Streeper, discussing the program, “is any well butted between the end of April and the end of October qualifies for a $100,000 royalty tax credit.”

“It’s kind of a ‘get out of jail free’ card when you’re playing Monopoly,” he added, explaining the royalty system.

“When you owe royalties for producing gas – you owe $200,000 in royalty – you take your $100,000 royalty tax credit and a check for $100,000, and you send it to the government. So, you don’t pay them that $100,000 or portion thereof that you get. So, basically, you’re not sending your money to Victoria and trying to get it back. You just don’t send Victoria the money.”

“That’s one of the things that the B.C. government does very well, is look at how they can make gas development in northeast B.C. competitive with the rest of North America,” said Taylor, describing how the royalty tax credit has assisted Encana in pursuing its year-round drilling plan.

According to Taylor, the provincial government has not only facilitated the production of the wood mats that Encana uses to cover the muskeg on lease sites and access roads, but has also contributed to building infrastructure that has really helped turn natural gas into a year-round business in northeast B.C..

Royalty credits and other creative royalty structures have aided the construction of all-weather gravel roads into previously isolated spots such as the Two Island Lake area where Encana does a great deal of their work in the region. Taylor also gives the provincial government a lot of credit for the important Sierra Yoyo Desan Road northeast of Fort Nelson, and a pipeline that Encana has constructed to serve the Horn River Basin.

“The government stepped up and said, ‘OK, we recognize that industry needs key pieces of infrastructure to be able to access the gas in northeast B.C.,’” said Taylor. “To have a main artery for traffic, so when you go to develop acreage up there, you’re not starting from Fort Nelson and having to figure out how you’re going to get out there. You’ve got the main infrastructure as far as roads go.

Building main infrastructure, again, to get the gas out once you’ve developed it.

We’ve put a 65 km, 24” pipeline in, where we started flowing any gas out of Horn River, because there was no pipeline into the area.”

“Programs helped to cover some of that cost by deferring the royalties that we’re paying to the government,” he concluded.

Dolan feels that the increase in yearround activity in the Horn River Basin has had a positive impact on Fort Nelson.

“Now it’s more of a lifestyle, instead of, you know, work like Hell to make a living,” she said. “You can make a living in oil and gas twelve months out of the year.”

“In that year-round drilling,” Dolan continued, “other jobs are coming to light that can be facilitated here because you don’t have to keep bringing somebody in.”

Streeper also emphasizes the benefits of year-round activity in terms of local employment.

“You can’t hold top quality employees

Bill Streeper brought 30 years of oilfield experience into his role as mayor of Northern Rockies Regional Municipality in Fort Nelson. As mayor, he participated in drafting the Summer Drilling Incentive Program that has helped increase year-round activity in the Horn River Basin.

(Photo courtesy of Mayor Bill Streeper)

on just working them four months,” he said.

“One thing I did broadcast, too, when I was running for mayor, [was] that I would support the local businessman,” Streeper added. “And I’ve seen a vast improvement in the local hiring from the oil companies. It’s not to the level I want to see it yet. I want it to increase. But I have seen a vast increase … they’re starting to talk a lot more on the local aspect and hiring local. I’ve broadcasted … this is a B.C. industry, so B.C. people will work in the B.C. industry.”

“The aspect of year-round drilling is going to dramatically improve Fort Nelson.

It’s going to create a better life, a better family life, along the aspect where there is year-round jobs. We’re going to see our youth growing up, being educated, and coming back or staying in the community more to work, rather than go out because of the job situation. We’re going to see a higher quality lifestyle. We’re going to see a higher quality community because there is going to be, now, year-round employment, rather than feast and famine.”

Taylor suggests that Encana’s yearround presence benefits not only the community, but also the men and women who work on the rigs.

“We’ve got an area around Two Island Lake where we’re focusing a lot of our activity right now, where we’re into more or less a continuous cycle of drilling and completing wells,” he said. “On the drilling side, the rig we’re currently running in the Two Island Lake area is Trinidad 48.

And that rig has been working for us nonstop in that Two Island Lake area since October, 2008.”

Taylor notes that most of those individuals working on that rig do not live in Fort Nelson, but he feels that its year-round operation creates a level of consistency that is beneficial to both the company and the community.

“As opposed to a traditional rig environment where every time they go to work their rig would be parked somewhere different,” he said, “these guys have been flying into Fort Nelson every time they come back on from a crew change for the last two years. Just over two years now. And then they go to the same camp.

And that rig’s been working within a 10km radius for that entire period of time. So, it’s a much more almost office-like environment.

“And then for the service providers continued pg 21

January 2011 I pipeline news north •

21

Horizontal drilling on Encana’s multi-pad well site in the Horn River Basin in late spring. The wooden mats that have made year-round drilling possible in that difficult terrain are barely visible under the mud.

Photo courtesy of Encana

cont’d from pg 20 out of Fort Nelson specifically, the same thing. They could never have enough staff in the past to keep up with our 35 or 40 rigs running in the Jean Marie for ten weeks in the winter. When the spring thaw came up, they didn’t need any of those people. So, you had a very transient workforce. It really didn’t help attract people to come and want to live in Fort Nelson, because you couldn’t afford to move your family there if it was only ten weeks of work every year; whereas, now, with us being able to basically develop the gas resources year-round, you have more opportunity for people to actually say, ‘Ok, we can move up there and I can work for this service provider out of Fort Nelson

because there’s actually an opportunity.

I can be working 365 days a year.’”

“It certainly provides a much more stable workforce,” he concluded.

According to Streeper, gas production has increased noticeably in the past few years, thanks in part to the Summer Drilling Incentive Program. Well, production, of course, is up overall, both summer and winter,” he said. “So, if you’re comparing now to ten years ago or now to five years ago, the amount of production is definitely higher, due to change in markets, advancement of pipelines, stuff like this.

Of course, we’re all anxiously waiting for the liquefied natural gas on the west coast, over at Kitimat. That will open new markets again to Asia. And a lot of us, myself, see that to be very positive.”

Streeper suggests that a pipeline system supplying Horn River Basin natural gas to the West Coast could be the response to those who might suggest that year-round activity in the region may not be sustainable because of low gas prices and the distance to traditional markets.

“The distance from market is not a disadvantage when you look at where the market is. We’re very close to the market, when you start to talk about the Asian market,” said Streeper.

Taylor is not overly concerned about the sustainability of year-round activity in the Horn River Basin either.

“Horn River is definitely a world class accumulation of gas,” he said, noting that the basin contains at least 500 trillion cubic feet of natural gas. “So, it’s a very

industry news

significant play. It’s probably one of the top three or four shale gas plays in North America. So, there’s a huge amount of opportunity for all of the companies that have acreage in Horn River to make a significant impact on their companies.

“Again, the challenge is always going to be, how do we compete with guys who are in Pennsylvania or Louisiana or a little closer to where they’re going to burn the gas in the United States?

“So, we’re always looking for the innovation where we can drive our costs down and we’ve been fairly successful over the past four years in really ratcheting down our cost of doing business. And then the government is playing an equally important role there with some of the programs.”

calfrac

- welcome to the neighbourhood james waterman Pipeline News North

Calfrac Well Services is planning to build a new facility on a recently acquired plot of land in Dawson Creek in the spring of 2011.

The new building – located near the corner of the Dangerous Goods Route and Highway 97 North – will be a permanent base for Calfrac’s operations in British Columbia, housing well service equipment and offices for the necessary on-site staff. The Calgary-based company has been in Dawson Creek on a temporary

basis since the summer of 2009 and they appear eager to call the city their home.

“We have a very large customer base in the area,” said CEO Doug Ramsay, explaining the decision to establish a long-term residence. “We believe that Dawson Creek has got a very good working population base we can draw from.

They’re very business friendly. Mayor [Mike] Bernier has been very good to deal with.”

Mayor Mike Bernier is equally enthusiastic about welcoming Calfrac into the Dawson Creek business community on a permanent basis.

“It’s a major company who does a lot of work up in our area,” said Bernier. “And for them to move into Dawson Creek, they are going to bring in a lot of jobs.

They’re willing to make a huge investment in our community … and it’s really exciting to see that things are moving along so quickly for these companies and they plan on being up and running here in 2011.”

According to Ramsay, Calfrac’s objective is for the new facility to employ between 150 and 250 full-time employees by the time that it is fully operational.

“We don’t hire short-term employees,” he said. “We hire long-term employees.”

That motto is indicative of the company’s commitment to becoming an important part of the communities where they set up shop.

“We’re a big part of the community and we draw a big labour pool from the community,” he continued, noting that Calfrac routinely sponsors community groups

ranging from 4H clubs to minor sports teams, while also encouraging their employees to get involved in local sports and events.

“Actually,” said Ramsay, “as a corporation, we think it’s responsible to reinvest in the community where our employees live. And that’s how we’ve always done it, since day one.”

“It’s a great family town,” he added, discussing the benefits of working and living in Dawson Creek. “British Columbia has a great resource base in … oil and gas. And we feel very strong about [the] opportunity to expand into B.C. alongside our customers. And we feel very comfortable in the large capital investment we’re going to have there.”

22 • PIPELINE NEWS NORTH I January 2011

technology

treating it right

- BioteQ water treatment technology

BioteQ provides environmentally and economically sustainable solutions to enhance water management – achieving water recovery rates of up to 99%, delivering environmental benefits, and maximizing resource recovery.

(Photo courtesy of BioteQ Environmental Technologies)

james waterman Pipeline News North

BioteQ Environmental Technologies, a Vancouver based water treatment company specializing in recovering dissolved metals and removing sulphate from water that has been contaminated by its use in resource mining, is striving to integrate its unique toolbox of processes into British Columbia’s oil and gas industry.

“The business really has been built on treating mine-impacted water,” said Tanja McQueen, Vice President of Corporate Development. “And those waters have been from acid mine drainage, from ground water [and] surface water sources, tailings water, metallurgical bleed streams—there’s sort of a range of areas within the mining industry that create metal and sulphate contaminated water.

“We are now looking at how we might apply those same technologies into the oil and gas sector, looking at produced water from SAGD (Steam Assisted Gravity Drainage) operations and also now looking at fraccing water from shale gas operations.”

“It’s early days for us in looking at the opportunities in the oil and gas industry,” she continued, “but we’re optimistic that there are potential applications for our technologies there. We have partnered with Newalta.

“They’re Canada’s largest waste management and environmental services firm. And they’re a well-known

supplier in the oil and gas industry. And we’re looking, with them, at the water treatment opportunities in the oil and gas industry. The entry into oil and gas will happen with and through Newalta and the relationships that they already have in the oil patch.”

Jointly, BioteQ and Newalta have had discussions with specific companies in the oil and gas industry concerning the applications of BioteQ’s water treatment technologies, but they are not presently at liberty to divulge the identities of those companies or the details of those discussions.

According to McQueen, BioteQ offers water treatment solutions to fit a variety of circumstances, including the specific water chemistry of the site and the motivations of the client company, which tend to fall into three main categories: guaranteeing compliance with water quality regulations; securing reliable access to a steady water supply; and financial concerns.

“First and foremost,” said McQueen, “they’re looking to comply with water quality regulations and our process technologies can reduce those contaminants to very low levels that comply with the discharge limits. The second main driver would be access to water supply and water reuse. So, the processes that we have recover up to ninety-nine per cent of the water for reuse back into the process. So, it’s a very high rate of water recovery. And, for many industrial operations, they are under increasing pressure to reuse their processed water rather than use fresh water supplies.

And that would be, I think, a main driver in the oil and gas industry. And then the third area – the third driver – would be looking at lifecycle cost for water treatment and trying to find a lower lifecycle cost. continued pg 23

BioteQ’s processes recover dissolved metals and remove sulphate from wastewater, producing clean water that meets environmental compliance for on-site re-use or safe discharge to the environment.

(Photo courtesy of BioteQ Environmental Technologies)

January 2011 I pipeline news north •

chain of command for BioteQs water treatment process BioteQ’s water treatment offers practical solutions for treating contaminated wastewater so that it complies with regulations, reduce environmental liabilities, and lower life cycle costs for water treatment.

(Photo courtesy of BioteQ Environmental Technologies)

cont’d from pg 22 “The fact that we are able to treat water and recover byproducts that have a value and, therefore, can be sold to offset the treatment cost means that we can generate revenue streams that lowers the overall lifecycle cost of water treatment.”

The byproducts include gypsum that is produced as a result of the sulphate removal process, metal sulphides of base metals such as copper, cobalt, and nickel that can subsequently be sold to a refinery, and stable forms of toxins such as lead, mercury, or arsenic that can be safely sent to the landfill.

Among the contaminants that are commonly removed from the water are sulphate, barium, and strontium, which are also typically associated with scaling problems. “If you’ve got calcium or magnesium sulphate in your water, it will create scale in your process equipment,” McQueen explained, noting that the scale is very similar to the problems frequently experienced with calcium build-up in teakettles and showerheads.

The scale can force the company to incur additional costs in terms of fresh water consumption, chemical anti-scalants and equipment maintenance. BioteQ is determined to eliminate those extra costs by eliminating the problem.

“The starting point for us with a customer is first to look at the water chemistry of the site,” said McQueen, describing the process. “So, we want to know what’s in

the water and how much water is there to be treated. And, based on that, we will do an analysis that identifies the appropriate process flow sheet. In other words, what technology pieces do we need to put in place to be able to treat that water. Water treatment is a complex issue because there is no silver bullet. There is no single technology that can solve all water treatment issues.

“And so, generally, what it will require is a treatment train, a series of different treatment processes that remove the various contaminants of concern to meet the specific requirements of the site. So, we’re in a bit of a specialized part of the water treatment business in that we take really complicated-to-treat water and we tailor – we customize – a treatment process specifically to treat the water at that site.”

BioteQ’s early success is proof that the resource mining industry has certainly had an appetite for its water treatment solutions; McQueen is confident that trend will continue as the company moves into this new frontier of oil and gas.

“We’ve grown fifty per cent this year,” she said, “and we’ll probably do that again next year. So, very strong growth prospects. We’re going to continue to work in the mining industry and we are taking very active steps to diversify into the oil sector, as well as into the power generation industry. Our primary focus has been in the mining sector. Oil and gas is really a new target market for us.”

Provinces sign MOU cont’d from pg 9 “We ultimately see from an Alberta standpoint that we’re going to need all of the markets,” said Liepert. “It’s never good business to be reliant on only one customer. And we also recognize that from the gas side of the business we have two different price points: one is North America and one is elsewhere.

And if there’s an opportunity to do what we can to get our gas producers into the international marketplace, that’s obviously a benefit for them.”

“BC is the gateway to the AsiaPacific,” said Thomson, discussing the need to work with industry in B.C. to ensure that western Canada has the necessary infrastructure to access those Asian markets.

However, the MOU is not simply about building pipelines, according to Liepert. It is geared toward addressing all the issues involved in guaranteeing that Canada maintains a prominent position in the increasingly competitive international oil and gas market.

“It’s not just as simple as ‘get our product to the coast’,” he concluded.

www.actionservices.ca

605572

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24 • PIPELINE NEWS NORTH I January 2011

technology

a cool solution

- liquid nitrogen comes to Dawson Creek

BioteQ provides environmentally and economically sustainable solutions to enhance water management – achieving water recovery rates of up to 99%, delivering environmental benefits, and maximizing resource recovery. (Photo courtesy of BioteQ Environmental Technologies)

james waterman Pipeline News North

Calgary-based Ferus is expanding the scope of its western Canadian operations in 2011 by bringing a new liquid nitrogen plant – the first of its kind in British Columbia – to the city of Dawson Creek.

Liquid nitrogen produced by the new facility – at the rate of 200 tons per day – will be used by oil and gas companies in the region that require the product for their hydraulic fracturing processes. The cost of constructing the plant is expected to be approximately $20 billion, including the cost of purchasing the land on the Dangerous Goods Route and preparing the site for delivery of the plant.

“The plant is actually not built on site,” explained Joe Ladouceur, Vice President of External Affairs with Ferus. “It’s built at a manufacturing facility. And it’s a modular type of a facility. So, the idea is that it’s mobile. We can put the plant up into the Dawson Creek area and then, down the road, for a cost, we would be able to move that plant to a different location if the demand changed or whatever the case may be.”

Work that must be done on-site before the plant arrives includes pouring a large concrete pad to support the plant and additional concrete bases for storage tanks that will hold several hundred tons of liquid gas. Metering stations, weigh scales, and piping to connect the facilities must also be installed.

“All of that work is being done at the site and it’s all being sourced locally,” said Ladouceur.

The benefits for the local workforce extend beyond the construction of the facility as well. Ladouceur expects that the operation will initially employ between fifteen and twenty local residents once it is fully operational.

“We’re designing it,” he added, “so that we can add another plant up there if the demand requires it. And as we add another 200-ton-a-day plant, for example, then that would increase the number of jobs up there. So, that’s what our initial expectations are.”

The plant should be up and running by the end of 2011.

“One of the things that Ferus has always done, and is really the fundamental basis of our business model, is that we put facilities into locations where the demand is,” Ladouceur continued, describing the company’s reasons for choosing Dawson Creek as the home for its new facility.

“And it’s something that completely differentiates us from the other companies that supply these types of products. So, our competitors would be large industrial gas companies … and typically their model is to build a plant next to some kind of an industrial process, because their plants are producing more than liquid nitrogen.

“They also produce liquid oxygen, which they can supply to the welding industry, or even to the medical industry. So, their focus is to distribute these products into a whole bunch of different areas. They like to locate close to large industrial processes or large urban areas.

Our model has always been, ‘Find out where the demand is for the product.’

“We’re exclusively focused on the energy business – we don’t supply to the food business or to the medical business or to the welding business. We strictly supply to the energy business. And so what we do is find out where the demand is and where the most product is being used and that’s where we put our plants.

“And right now, the amount of activity that’s going on in northeast B.C., particularly in the Montney formation, is just increasing dramatically – and has been for a number of years.

“So, we have two nitrogen plants in Alberta right now, and we’re constantly trucking product from just outside of Red Deer and just east of Calgary, all the way up into northeast B.C., just because the demand continues to increase.

“It just is a logical extension of our operations to build a plant there so that we have access to product. And it’s better for our customers because it’s a shorter turnaround time, it’s cheaper to haul it, and they know that the product is going to be there.”

Mayor Mike Bernier is thrilled that Ferus has chosen Dawson Creek as the hub for its expansion into northeast B.C..

“For Ferus to choose Dawson Creek to make a permanent home here is really important to the community,” he said.

“It shows that there is some trust and certainty in the investment market for the Dawson Creek region. When we have companies like Ferus – who have been traveling in and out of the region for the last couple of years—they realize now that it’s a good economic move to move up into Dawson Creek. And to make a

substantial investment like that and to be part of our community is welcomed and it’s really important for the industry as well.”

Bernier was given the opportunity to discuss the move with Ferus representatives in Dawson Creek last summer. He was also invited to Calgary for a couple days on another occasion. As a result, he has been able to build a good relationship with the company, one that has him eager to see them join the Dawson Creek community for the foreseeable future.

“Actually, Ferus has been an excellent company to work with,” Bernier added.

“We quickly gelled, even on a personal level. They’re really wanting to be part of every community they’re in.”

According to Ladouceur, this commitment to community involvement is an element of a corporate culture that insists on hiring locally and contributing positively to local life.

“One of the things that Ferus is very much focused on in the communities that we operate in is making sure that we use as much of a local presence as we can,” he said. “So, we try to, wherever possible, hire locally when we’re doing construction. We encourage our employees to live in the communities [where] we work, just because we’re planning on being there for many years, and we think it’s very important for us to be involved in the communities.

“Our corporate culture is really focused on that local community support and involvement. So, we’ll support local hockey teams and we’ll support local cultural initiatives and we’ll support local continued pg 25

January 2011 I pipeline news north •

25

cont’d from pg 24 fundraising for various charities. And it’s specific to the communities, because we know that our employees live there, we know that they work there, we know that we’re traveling there. And so we’ve been very fortunate to kind of see the reciprocation of that type of relationship.

“The communities are delighted to have us there. And we try and sponsor various community initiatives wherever we can. And, in turn, it helps out with the acceptance of the communities that we’re involved in.”

Ferus obviously takes this role seriously. As a member of the Business Council of British Columbia since 2009, they frequently talk to other companies in the region about joining that body and participating in the lives of the communities where they work.

“It creates a visibility,” he continued. “And I think the people in the community appreciate it. And our people who work for Ferus, who live in the communities, are delighted, because it sort of gives them a chance to kind of give back to the areas they live in.”

However, Ladoucer does admit that their liquid nitrogen plants have caused some anxiety in certain communities in the past, especially concerning the possibility that they might be upsetting the natural nutrient cycle by removing valuable nitrogen from the air.

“We’ve had this question in a lot of communities,” he said. “And the answer is ‘absolutely not.’ The quantity of nitrogen that we’re actually taking out of the air is infinitesimal compared to the atmosphere of the surrounding region. And, in fact, the byproduct of producing liquid nitrogen is pure oxygen. So, we literally just vent pure oxygen back into the atmosphere.

“It has no effect on the construct of the chemical makeup of the atmosphere or the ground or anything like that at all. And we set up our first nitrogen plant in Strathmore [Alberta], right around the farming community, and we had that question come up a number of times. So, we did some research into it, and there’s certainly no issues there at all.”

A Ferus liquid nitrogen plant essentially separates the air—which is 78 percent nitrogen and 21 percent oxygen—into its component gases. It subsequently liquefies those gases by lowering their temperatures to a frosty -180C. Only the liquid nitrogen is put into storage, to eventually be transported to drilling sites for use in hydraulic fracturing. The oxygen is returned to the air again

With water in such high demand for other uses, nitrogen promises to be a viable alternative for fraccing.

as a gas.

“These plants have very long lives,” Ladouceur concluded. “They can be around for thirty or forty years. So, in five or ten years, if the demand shifts from Dawson Creek to Fort Nelson, we can move the plant. It’s a kind of unique and creative type of facility that doesn’t exist in the province today.”

Keeping an eye on the pipeline Ryan Lux Staff Writer

Prompted by security problems at remote oil and gas well sites, one local business developed new technology to allow companies to monitor their properties at all times via their smartphones and e-mail.

Cole Busche, owner of Eagle Vision Video located in Fort St. John, saw a hole in the security sector following the bombings of Encana’s remote infrastructure throughout the region.

The bombings concerned the local entrepreneur because he lives, with his family, just 800 metres from a well site.

“Public safety is always a concern once we have these crazies blowing up well sites,” said Busche.

He said he was specifically concerned by the presence of hydrogen sulfide, otherwise known as sour gas, in many of the local wells.

“That stuff is extremely poisonous and can kill you very quickly,” Busche explained.

Available security technology was prohibitively expensive, slow to set up and very noticeable to vandals, so energy companies had no way of effectively securing their remote sites.

“We were really surprised that there was nothing out there to deal with the problem,” said Busche, “We’ve got some leading-edge technologies that just aren’t

known to the larger companies.”

After discovering the gap in the security market, Busche, along with his partner Benjamin Haab, decided to design a product of their own.

Busche invested $79,000 to develop the security system in January of last year, and has been testing the cameras at remote Encana sites across the region for the last three months.

“Tests have been going great and the company is very happy with the results so far,” said Busche.

The pair specifically designed their new technology for remote locations. It features infrared night vision, is motion activated, transfers video and photos to a designated phone or e-mail within 15 seconds, and uses solar energy so companies don’t need to connect the cameras to a grid.

An especially important feature, explained Busche, is that the new security system is virtually undetectable to vandals. The units are housed in six-inch by six-inch cubes and can be installed in various on-site equipment.

During the three-month testing phase, Busche said his technology has successfully detected unauthorized people at well sites, and relayed that information to Encana instantly. While the equipment has yet to foil vandalism or theft, Busche said the results prove his technology is effective.

What started off as a practical concern for his family and neighbours has transformed Busche’s 12 year-old video production and photography business.

Haab and Busche recently won a Business & Technology Award at the

Benjamin Haab, left, and Cole Busche from Eagle Visioin Video Production and their T.R.U. Security remote stand alone security system.

photo by Brent Braaten/Prince George citizen

eighth annual B.C. Natural Resources Forum for their innovative technology.

“The level of interest we’ve received is overwhelming,” said Busche, “There is such a need for this that we have clients calling for units while we’re still developing them.”

During the short interview with Alaska Highway News, Busche had to push back two calls regarding his new security system.

One was interested in installing a camera ASAP, and the other client was looking for ten cameras as quickly as possible with a subsequent order of 15 more for next year.

In addition to companies requesting units to monitor their sites, a large-scale equipment manufacturer has been in contact with Busche to negotiate the possibility of installing the systems in many of its products to provide companies with a ready to use surveillance system as a part of ordinary equipment purchases.

More than just the threat of bombings is driving the interest in Busche’s technology. Officials in the oil and gas industry recently met with RCMP outside of Calgary to discuss the effects of theft at remote well sites. continued pg 27

26 • PIPELINE NEWS NORTH I January 2011

profiles

laurie dolan - working with the community

Laurie Dolan of Energy Services BC in Fort Nelson is a proud proponent of life in the north and the valuable role of the oil and gas industry in northern communities.

(Photo courtesy of Laurie Dolan)

Jamie Waterman Pipeline News North

Laurie Dolan is proud to describe herself as a “real believer” in living in northeast British Columbia.

As a local representative of Energy Services BC (ESBC) and a woman who has spent the better part of her life in some of the most northern climes that western Canada has to offer, she certainly knows the advantages of residing in that remote region, particularly in an age when oil and gas development in the area is producing significant social and economic benefits for communities like her adopted hometown of Fort Nelson.

Born in Burnaby, Dolan would eventually move to Dawson Creek, Edmonton and finally Yellowknife before ultimately landing in Fort Nelson in 1974.

“I moved here in grade eleven,” she said with a chuckle, “which shouldn’t have been a good experience at all, coming from Yellowknife.”

However, it appears that the move taught her a valuable lesson about the true quality of life in a small town.

“It’s such a great lifestyle,” she said.

According to Dolan, the greatest advantages of being a high school student in a small town, as opposed to a

big city, are the opportunities to participate in just about anything and everything. As a teenager, she played on the basketball team and the volleyball team. Students could almost instantaneously start new clubs. It is the type of experience that she has also allowed her children to enjoy, as both of them were born and raised in Fort Nelson.

“You can do it all,” she added. “You’re not in a school of 5000 people.”

As an adult, Dolan found herself between jobs when her mother fell ill.

“I spent the year with her before she passed away,” she said.

It was at that point that Dolan discovered an opportunity to stay in Fort Nelson as part of ESBC, an organization that acts as an advocate for oil and gas service sector companies throughout the province. She is quite obviously thrilled with her career choice, especially considering the role that it allows her to play in her own community.

“Just being a part of the growth that’s going on in what I would call my hometown,” she said, describing the joys of working with ESBC in Fort Nelson. “And a part of the positive growth. And I feel really fortunate for that.

Oil and gas has been here for a while … we can either make it positive or negative – and there [are] so many

people that want to make it positive.

“It’s been a lot of fun and a lot of learning, being on this end. And we’re grassroots. We’re just kind of starting out. It’s very exciting.”

Presently, ESBC is committed to building its membership, a goal that Dolan insists they are accomplishing slowly but surely. The next step will be to engage those member companies in discussions that will allow them to guide the direction of the organization and provide the service sector with a strong, unified voice for presenting concerns to the oil and gas industry, effectively bringing both parties together.

ESBC is also interested in ensuring that those individuals employed by out-of-province companies involved with oil and gas development in B.C. are able to integrate themselves into those host communities. Through their partnership in a new Community Partners program that encourages mutual respect and courteous behavior between all the various land users, they are steadily working toward achieving that objective.

“We want to make sure that B.C. does win at all this,” she concluded, emphasizing the importance of local communities and companies being able to benefit from the oil and gas resources in their own backyards.

Dolan and ESBC consistently work with the Chamber of Commerce and the economic development team in Fort Nelson to try to create a single, united vision for the economic future of the town.

“These three agencies kind of know where we want to take the community,” she said of their relationship.

According to Dolan, Fort Nelson has also profited from the relatively new presence of the Horn River Basin Producers Group. Established almost four years ago as a consortium of energy companies with interests in the region, the group has pledged to work with Fort Nelson for the good of the community. They hold monthly meetings to discuss Fort Nelson and the impact that their work in the Horn River Basin has on the town. Being able to exchange information with that group has been of great benefit to ESBC as they work toward their goals.

“It’s been a wonderful, positive idea,” said Dolan.

She has also said that the creation of this group is an indication of how the oil and gas industry now views the importance of Fort Nelson and their own interaction with communities in northeast B.C..

“Things have changed now in oil and gas,” she continued. “Communities now expect more. They want to be responsible to their community. And oil companies are actually listening to that.”

Furthermore, Fort Nelson’s role in the oil and gas industry of northeast B.C. is helping to debunk the myth that the youth of such remote communities are always anxious to abandon their small home towns for big cities after graduating from high school.

“There [are] a lot of people who don’t want to leave because there [are] jobs here,” Dolan remarked. “The work is good. And you can’t find that everywhere.”

However, Dolan will also adamantly insist that Fort Nelson has a lot more to offer its citizenry than just its lucrative relationship with the energy sector.

“We have thirty below,” she confessed. “But you know what? You can still get outside in thirty below.”

Dolan describes Fort Nelson as a surprisingly diverse town with a unique lifestyle and culture that includes plenty of lakes, rivers, camping, and walking trails for outdoor enthusiasts. Most importantly, according to Dolan, it also provides a sense of community that can be lacking in big cities.

“We only have each other,” she said. “And that’s the success of a small community.”

Quote of the Month

The successful man will profit from his mistakes and try again in a different way.

- Dale Carnegie

January 2011 I pipeline news north •

27

good prospects

- Enbridge could make all the difference

James Waterman Pipeline News North

Chris Johanson, the manager of the CE Franklin supply centre in Chetwynd, is anxious to see how his business and his town might benefit from the proposed Enbridge Northern Gateway Pipeline.

The project will transport petroleum from the Edmonton area to Kitimat, passing just south of Tumbler Ridge.

As a supplier of parts for the oilfield industry, providing a range of essential products including pipes and valves, Johanson believes that his CE Franklin branch is in an advantageous location for the pipeline project as a “last stop” for necessary materials between Grande Prairie and Prince George.

“Even Prince George doesn’t have a lot there for this kind of industry,” he said.

There is reason for Johanson to believe that his hopes for the pipeline project will bear fruit.

“An important priority for Enbridge is to ensure that local communities receive maximum benefits during project construction and operations,” said Enbridge Pipelines spokesperson, Gina Jordan, in an email. “The construction and operation of Northern Gateway will deliver sustainable economic and social benefits to local communities in Alberta and British Columbia.

“Should the project receive regulatory approval, it will create a lasting legacy of local investment, tax revenue and jobs for the North. At a time when the economy in northern B.C. is changing, many communities are looking for other sources of revenue and employment. Northern Gateway can be one of those opportunities.”

According to Jordan, Enbridge expects to spend approximately $112 million on goods and services in northeast British Columbia during pipeline construction.

Labour and services that the region will be asked to provide range from skilled construction work to site restoration, as well as the supplies offered by CE Franklin.

It is important to Johanson that this possibility turn into a reality, as the oppor-

tunity to consistently provide materials for a major pipeline project could be an economic boon for his company. Although ninety percent of his business is related to the oil and gas sector, he receives little of that from the nearby Groundbirch development and Montney shale gas play.

“We don’t get any of the Groundbirch stuff,” he said.

“It’s pretty close to us, but all the crews are coming out of Fort St. John. Some of the buyers are there. So, they’re going to phone Fort St. John companies first, because they’re from there.”

“We get some of the Hudson’s Hope stuff,” he continued, addressing his activity in the Montney play. “We get a little bit out in Monias.”

The issue, according to Johanson, is that a lot of Montney business is done with companies in Fort St. John and Grande Prairie, larger centres where the energy sector knows they can get the products and services that they require.

“It’s pretty tough,” he said. “If you don’t know anybody from [Chetwynd], you’re probably just going to phone up whoever you know, or whoever you’ve used in the past.”

However, despite all these obstacles, he still loves living and working in Chetwynd. Johanson said that he did live in Fort St. John for seven enjoyable years, a period during which he met a lot of great people, but he prefers his current hometown.

“It’s a nice, small community,” he continued. “People are friendly. It’s almost a little bit less industrial than, say, a Fort St. John or a Dawson [Creek].”

Eye on the pipeline cont’d from pg 25 CEO of the Petroleum Services Association of Canada Mark Salkeld told CTV News in an interview that remote sites are easy targets for thieves looking to cash in on expensive tools and equipment at the sites.

“We go out to remote locations, and even in areas around populated communities we’re still 10 to 15 kms. Out of town. And there it is – it’s wide open for anybody with a pickup truck who wants to come along and take what they can,” said Salkeld.

From an industry-wide perspective, Salkeld said, thefts from remote site

across B.C., Alberta Saskatchewan represent millions of lost dollars each year.

Dealing with the demand has Busche already searching for a new staff member to deal with the strain.

“I can see this eventually becoming its own business rather than a part of Eagle Vision Video,” said Busche, “It’s just so different from our [original] business focus.”

Busche originally got into the video and photography business to produce videos and photos because of his creative interests in those areas. He produces safety videos for industry and does all kinds of photography.

Dawson Creek - donation cont’d from pg 5

www.cysticfibrosis.ca

“From us, I think it’s really exciting because all these companies are showing that, hey, this is important, we need to have things like this. We want to keep people in Dawson Creek,” said Bernier.

Ladouceur confirmed that view, stating that Ferus feels quite strongly about hiring locally wherever they have operations. “We want to have people that are residents of Dawson Creek working for our company and conversely they will benefit from any supports or sponsorships or associations that we have in the community as well,” Ladouceur said.

“It’s a best win for everybody all around. It helps us out, it helps our employees out, and we believe in helping the community out.”

Bernier said the donation is probably the first service sector company to make a major contribution.

“We’ve have a lot a of the big companies like Encana, Shell and Murphy,

those kind of companies, but this is the first major service sector company, which is one that works for those big companies,” he said.

With Ferus coming forward, the amount of money raised for the CKCA is well over $7 million, said Bernier of the $13 million project. He added that including the government grants bring the total raised to about $10 million.

“That’s $75,000 less we need to borrow,” he said in regards to the alternative approval process that is currently underway in the city.”

Bernier reiterated that the city said it would do everything it could to lessen the borrowing amount.

“I want to everybody to know that we’re not just going out and borrowing and saying that’s it,” said the mayor.

“We’re still doing everything we can to raise money and Ferus is an example of that.”

Construction is already underway for Ferus’ $20 million liquid nitrogen plant.

Ladouceur anticipates it should be up and running by the fall 2011.

28 • PIPELINE NEWS NORTH I January 2011

technology

pumping propane

- an innovative alternative for fraccing

A GasFrac operation in the Western Canadian Sedimentary Basin mixes liquid propane with proppant for use in hydraulic fracturing. The use of liquid propane as a fracturing fluid eliminates the need for water in the fracturing process.

Photo courtesy of GasFrac Energy Services

james waterman Pipeline News North

It all started with one intrepid individual in the energy sector insisting that a company should be able to pump propane as a fracturing fluid.

After all, the industry had been searching for a fracturing fluid with one specific characteristic that propane has by nature: low surface tension. That was the moment when Dwight Loree, founder and CEO of GasFrac Energy Services, began his rapid journey toward creating the company and its liquid petroleum gas fracturing process.

“All of us that are in that pumping space,” said President and COO Reid MacDonald, discussing GasFrac’s unique niche in the field of well fracturing services. “The difference between GasFrac and the rest of them is that we don’t pump anything but liquid petroleum gas.

And, in our case, the majority of that is propane. It’s either propane or butane.”

The motivation for Loree and GasFrac was discovering a fracturing process that is both compatible with petroleum products and can also address a number of key logistical and environmental concerns commonly recognized throughout the industry. Obviously, we’re going to have to stimulate wells to make them produce,” MacDonald explained. “In the

old days, there [were] lots of easy plays.

So, you drilled a hole in the ground and you produced it for some time.

“And then you went in to enhance that production. So, you did that through some type of stimulation.”

According to MacDonald, the early reservoirs had good petroleum content and very high permeability that allowed easy production of the site, but now the industry is increasingly working with depleted wells and tight formations with small pores and low permeability.

Consequently, production is becoming difficult and hydraulic fracturing is becoming prevalent. The fracturing process involves pumping a fluid into the rock at a rate and a pressure that exceeds the

mechanical strength of the rock, thereby splitting the rock and holding the formation open slightly.

A ‘proppant’ is subsequently added to the fluid stream traveling down the well to hold the formation open after the fracturing team stops pumping the fluid. The proppant is sand, a synthetic material, or a combination of both ingredients.

Synthetic proppant is all perfectly round. As a result, the spaces between the individual units are all identical in size and shape, which means that the flow of fluid through the proppant is quite easy, especially compared to the tortuous path that it has to navigate through the various sizes and shapes of sand proppant. continued pg 30

Aim Trucking - looking for a fair shot cont’d from pg 17 Brewster is also eager to mention that local companies in the region have the same safety programs, equipment standards and employment standards as those service providers based in larger centres.

“All that we’re asking for is a fair shot.”

Still, this is not simply a David versus Goliath story for Aim Trucking or Chetwynd, but possibly a case of David and Goliath inevitably finding a way to work together. Brewster has noted that he has developed great relationships with a number of “very good customers” in the industry over the years. He has also admitted that Chetwynd is a relatively young town in the oil and gas game, but one whose profile is

steadily rising.

“We’re one of the oldest oilfield related trucking companies in Chetwynd and we’re only fifteen, twenty years old,” he said. “There’s still opportunity here.”

Aim Trucking offers a variety of services, including picker trucks that are used in plant maintenance and new construction, as well as garbage bins, garbage trucks, and hauling services from Edmonton and Calgary.

Brewster has seen a steady growth in his business, thanks in part to its advantageous position on the edge of the Montney Basin. It is a trend that reflects the steady growth that he claims Chetwynd has always shown, and should continue to show, due to its

proximity to that shale gas play.

“It’s not going to be a boom,” he said, imagining the future of his hometown. “It’s not going to be like a Fort St. John or a Grande Prairie that can boom over night.”

Brewster seems to be content with that prospect.

He and his wife were both raised in Chetwynd and they returned to the city with the intention of starting their own business where they can enjoy the “small town feel” that it still offers. According to Brewster, the move was not just a solid business decision, but also a good lifestyle choice.

“We look at Chetwynd as probably one of the best cities,” he said.

January 2011 I pipeline news north •

careers & training

29

LAPRAIRIE WORKS INC. LaPrairie Works Inc. is an experienced, diversified, full-service Contractor with over 25 years of industry experience in northern BC and Alberta.

We are seeking energetic, skilled personnel to complement our team for the 2011 trucking season in the Horn River Basin, Fort Nelson area.

SUPER-B & PNEUMATIC TRACTOR-TRAILER DRIVERS If you have solid trucking experience in off-highway / oilfield environments, a Class 1 driver’s license with a clean driver’s abstract, and you enjoy working shift work, you may be the person(s) we are looking for.

Calfrac has grown from a small oilfield services company to an international leader in fracturing and coiled tubing well services.

Rotational Opportunities

HEAVY DUTY MECHANIC(S) We are also seeking an energetic individual(s) with the ability to work unsupervised in either a shop or field environment. This person must have a solid background troubleshooting hydraulic, electric and electrical over-hydraulic systems. If you are a person who demonstrates initiative with sound work ethic and possess a valid driver’s license, you may be the person(s) we are looking for. After hour call-outs may be required.

As a key part of our strategy, we’ve developed a rotational schedule for our Canadian operations.

Preference will be given to those with Provincial or Interprovincial Red Seal certification.

The 3-weeks-in, 2-weeks-out field positions currently available are:

LaPrairie Works Inc. offers top wages and hourly performance / safety bonuses for selected positions.

Supervisors, Fracturing & Coiled Tubing Operators, Fracturing & Coiled Tubing Transport Operators Electronics Technicians/Instrumentation Technicians Heavy Duty Mechanics Please include this code on your application: CWS003 Call us: 1-877-908-FRAC (3722) Fax us: 1-403-234-6655 Apply online: www.calfrac.com/careers

Forward your resume to: Manager of Human Resources LaPrairie Group of Companies Fax: (250) 242-4529 Email: lgcsafe@telusplanet.net

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11-228 Calfrac -Pipline News North 5 col x 100 lines (5.667” x 7.1”)

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30 • PIPELINE NEWS NORTH I January 2011

Pumping Propane - an innovative alternative All of this points to the important issue of conductivity—or flow—and the surface tension of the fracturing fluid.

“We want the lowest surface tension possible,” said MacDonald.

Surface tension is measured in dynes/ cm. Water, the most common and least expensive fracturing fluid, but one that does tend to cling to surfaces, has a relatively high surface tension of 72 dynes/cm. Frac oil has a much lower surface tension of 21.8 dynes/cm. However, the surface tension of propane is a whole magnitude lower than that of water at only 7.6 dynes/cm. The ideal scenario is a combination of a round, uniform proppant and a fracturing agent with a low surface tension that together ensure a maximum return on the fracture, including recovering as much of the agent as possible.

GasFrac seems to have proven that liquid propane is the perfect solution.

“We used to say that a super-successful frac was fifty percent of the fluid recovered,” said MacDonald, noting that many fractures might only recover about half of that amount.

“The beauty of propane,” MacDonald continued, “is that, if we release the pressure and/or increase the temperature into the vapor fold, it becomes a gas, and then it has no surface tension, and that’s why we get it all back. So, we recover a hundred percent of what we treat with. And so that’s an anomaly in the business.”

Producers attempt to decrease the surface tension of water to increase the return on the fracture by adding surfactants, but this only addresses one part of the problem that the use of water poses. Water, unless it is distilled, also contains bacteria that will multiply when introduced into warm rock formations.

So, producers also add biocides to the water to kill that bacteria.

According to MacDonald, there are just three possible ways to handle water containing biocides: boil and re-condense the water; dilute the contaminated water with potable water until it is fit for ground level disposal, a process that is costly in terms of both money and water; or pump it into a disposal well deep in the ground, permanently removing that water from the ecosystem. GasFrac has designed their system to eliminate this problem completely by recovering and reusing all of their fracturing agent, not to mention avoiding the use of water in their process.

“One of our goals here is to just recycle the resource,” said MacDonald.

MacDonald has stated that the industry’s response to the technology has been very positive, remarking that they have completed a few test wells for one major Canadian energy company in the Maxhamish area of northeast British Columbia in the past two years and also pump fracturing fluid for another major Canadian energy company on a regular basis.

The process has been tested in various locations throughout North America, including New Brunswick, Texas, and the Marcellus shale gas play in Pennsylvania, where GasFrac was invited to prove that the resource could be exploited in such a way that does not threaten the water supply. Still, the bulk of GasFrac’s work is in western Canada.

“There’s a line up of people to use it,” said MacDonald, “but we’re constrained by the size of the company.”

The system is also surprisingly safe and practical, according to MacDonald.

“As in everything in the oil field, there’s a risk,” he said. “But our job, of course, was to mitigate that risk. It was easier than we thought it was going to be, because of the fact that, if you think of your propane bottle [on] your barbecue or a lighter, it’s a liquid inside the lighter, and when we pull the trigger on the lighter, it goes to a gas, and then it burns. So, we need to maintain all of the liq-

uid under pressure to keep it as a liquid.

So, then our whole tankage system isn’t in pits or in open tanks. It’s in contained vessels. So, we have to build those ourselves … we have to own that.”

This system eliminates the possibility of spillage or other similar issues that can possibly occur with frac oil held in open tanks, particularly since liquid propane will immediately turn to a gas outside of containment.

GasFrac maintains the pressure necessary to keep the propane in a liquid state by using gaseous nitrogen within the vessel. The propane is gelled so that it assumes a “custard-like” consistency that is sufficiently viscous to carry proppant into the well. The proppant is loaded into another pressurized vessel and the two elements are subsequently mixed in a totally enclosed system, with no air interface.

“It’s basically compatible with any formation,” MacDonald added, “because it’s just a naturally occurring element within that formation. Now, not all formations

produce resident propane or butane … but propane is a natural deviscosifier to oil. When propane, butane—any of those LPGs (liquid petroleum gases)— come in contact with oil, they go into solution on contact. So, it occurs both in oil wells and in gas wells. And that’s why it’s compatible with both.”

Now GasFrac is attempting to add to their resume—and their environmentally friendly credentials—by eliminating flaring at their project sites. “Our ideal is to get to zero flare,” said MacDonald.

A prototype system for completely eliminating flare will be out in the first quarter of 2011 and a commercial model is expected to be ready by the end of next year. It is a process designed for capturing gas as an alternative to flaring, even for those operations that are not specifically drilling for products such as ethane, propane, or butane.

“If we can recover that,” MacDonald continued, “we can then sell that to the next guy down the road. Or they can put it back into the propane grid of the world

and get a claw-back on their money. So, from that point of view, we then become a cheaper alternative.”

MacDonald is confident that the future is bright for GasFrac.

“The bang for the dollar,” he said,” is definitely in depleted reservoirs, because nobody can use anything but propane to stimulate those wells. Now every well in the world will fall into that pressure regime, because it will start out big and go to nothing. So, if we don’t do them today, we’ll do them later.”

However, it is not always all business with MacDonald, as he consistently returns to the environmental benefits of the technology.

“From an environmental point of view, water usage is our key [concern],” he reiterated. “We’re not using potable water.

We’re not having to dispose of it when it comes back. We don’t use biocide.

We’ll reduce flare and that will eliminate thousands of tons of CO2 emissions.

And so, from that point of view, it’s just a perfectly green product.”

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January 2011 I pipeline news north •

publication scheduleNorth 2011 Pipeline News North Publication Schedule

Issue No.

Publication Date Last Friday of Each Month

Booking Deadline Thursday Two Weeks Prior to Publication

Ad Copy Deadline Friday Two Weeks Prior to Publication

Ad Approval Deadline Tuesday Week Prior to Publication

1

Regular Issue

28-Jan-11

13-Jan-11

14-Jan-11

18-Jan-11

2

Regular Issue

25-Feb-11

10-Feb-11

11-Feb-11

15-Feb-11

3

Regular Issue

25-Mar-11

10-Mar-11

11-Mar-11

15-Mar-11

4

Regular Issue

29-Apr-11

14-Apr-11

15-Apr-11

19-Apr-11

5

Regular Issue

27-May-11

12-May-11

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6

Regular Issue

24-Jun-11

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7

Regular Issue

29-Jul-11

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8

Regular Issue

26-Aug-11

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9

Regular Issue

30-Sep-11

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10

Regular Issue

28-Oct-11

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11

Regular Issue

25-Nov-11

9-Nov-11

10-Nov-11

15-Nov-11

12

Regular Issue

30-Dec-11

15-Dec-11

16-Dec-11

20-Dec-11

Designates an exception due to Statutory Holiday

Full Page 6 col x 206 ag (9.88” x 14.71”)

Half Page horizontal 6 col x 102 ag (9.88” x 7.28”)

Half Page vertical 3 col x 206 ag (4.86” x 14.71”)

advertising rates (colour included)

Back Page - $1500 Full Page - $1200 Half Page - $750 Quarter Page - $500 Quarter Page vertical only 3 col x 102 ag (4.86” x 7.28”)

Banner 6 col x 42 ag (9.88” x 3”) – 1/2 Banner ( ---) 3 col x 42 ag (4.86” x 3”)

“Pipeliner” 2 col x 32 ag (3.18” x 2.28”)

Front Banner - $500 Banner - $300 Half Banner - $175 Pipeliner - $100 Discounts: 1 yr - 25% 6 mths - 15%, 3 mths - 10%

31

32 • PIPELINE NEWS NORTH I January 2011

The truck of choice in today’s oil patch.

605575

2011 Toyota Tundra NEW 2010’S NOW AT CLEARANCE PRICES

Last Remaining AWD, DVD, 7 Pass

2010 TOYOTA SIENNA

Save up to $7,548

$ Last Remaining

#10136

24,490

2010 TOYOTA CAMRY

17,890

$ 2 Models to Choose from

2010 TOYOTA MATRIX

28,854

2010 TOYOTA PRIUS

$ 3 Models to Choose from

26,760

2010 TOYOTA VENZA

#10213

2010 TOYOTA YARIS

Starting at

Starting at

14,890

2010 TOYOTA COROLLA

26,560

$

$ 3 Models to Choose from

15,311

$ $220/Month for 84 Months

Save up to $7,210

Starting at

$

NOW

Starting at

Save up to $4,205

Save up to $4,946 Starting at

2 Models to Choose from

Was $18,620

NOW

NOW

35,990

$ #10103

Save up to $4,260

Was $28,937

Was $41,586

4 Models to Choose from

2010 TOYOTA TUNDRA

Toyota is the first full-line manuufacturer to make all of the elements of th eStar Safety Systems standard on every new 2011 vehicle.

Start the year off right with great offers on select Toyota Models. †† Vehicle Stability Control Traction Control Anti-Lock Braking System

Brake Assist Electronic Brake Force Distribution Smart Stop Technology

www.peacecountrytoyota.ca

801 - 118th Ave Dawson Creek, BC

Mon to Fri 8am - 6pm Sat 9am - 5pm

1-800-663-3895 250-782-6614

“Incentives will be deducted from the negotiated price after taxes and for some models all or a specified portion of the incentives cannot be combined with special lease and finance offers (i.e. is “noncombinable”). Quantities of certain vehicles are limited and dealer trade may be required. Dealer trade availability may also be limited and will very by model. Offers subject to change;cancellation without notice. Offers valid on retail delivery of select new 2011 unregistered Toyota vehicles when purchased/financed/leased, registered and delivered between January 4 and January 31, 2011. For all available incentives and rates on 2010 and 2011 Toyotas, contact your dealer today.