Pipeline News North by Pipeline News North

Northern British Columbia and Alberta's Oil and Gas Industry Vol. 2 Issue 5 • dist: 20,325

May/June • 2012

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ons i t a l ratu . John g n o C t St on r n o o F i t e to th socia ry of s A sa um r e e l v o i r n olf n G Pet A s ’ h n e 0t the 5 nual Oilm t! n en the A Tournam

in this issue: • WESTERN DREAMS - HISTORY OF WESTCOAST ENERGY • WELDING IN THE WILD WEST • STRONG AND FREE - SHELL’S TRUE NORTH FOREST 32530

Trembling aspen stand in shell true north forest - PHOTO courtesy of shell canada

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MAY/JUNE 2012

Fort St. John Petroleum Association President Tyler Kosick welcoming the crowd to the third Fort St. John Energy Expo on Wednesday, May 23.

Fort St. John Petroleum Association Secretary Reg Marquardt (middle) and Vice President Sean Thomas (right) talk about the club with a visitor to the Energy Expo.

The presence of the Fort St. John Petroleum Association was certainly felt at the curling rink during the third annual Fort St. John Energy Expo, a trade show style gathering of service companies and oil and gas producers held on May 23-24. The networking opportunity, which was meant to give local contractors a chance to talk shop with the real decision-makers from the energy sector head offices in Calgary featured many businesses with ties to the Petroleum Association, either as exhibitors or sponsors of the event. Club President Tyler Kosick also welcomed visitors and exhibitors to the show on the morning of May 23 and introduced the master of ceremonies for the Expo Dinner, NHL hockey great Lanny McDonald, that evening. The Petroleum Association sponsored the event as well. “Hopefully gain some new members in the club,” said Reg Marquardt, Petroleum Association Secretary, about their involvement in that capacity. However, that was only part of the story. “With all the local business content and all the petroleum producers and whatnot in the area, the Fort St. John Petroleum Association is proud to sponsor the third annual energy expo here in Fort St. John,” added Vice President Sean Thomas. “The fact that we co-sponsor it should show the community that we care about what they do,” he continued. “And [for] our members, giving them the venue and the opportunity to showcase the materials and the equipment and the services that they provide.”

PETROLEUM ASSOCIATION - HAPPENINGS

industry news all together

MAY/JUNE 2012

PIPELINE NEWS NORTH •

special feature 10 Western dreams - the history of Westcoast Energy

Most of B.C. agrees on developing resources james waterman Pipeline News North The only surprise from the results of the British Columbia Oil and Gas Management Public Opinion Survey that were released this spring was that there were few differences in the responses from all regions of British Columbia. The purpose of the study, which was sponsored by the BC Oil and Gas Commission (OGC) and the Science and Community Environmental Knowledge Fund (SCEK), was to assess the opinions and beliefs held by all British Columbians regarding the oil and gas industry in the province and how it is regulated. Howie Harshaw, the researcher from the University of British Columbia (UBC) who led the study, suggested that the results actually cut through a lot of the North versus South name calling and stereotypes that exist in B.C. to get to the real heart of the matter. “I think we get kind of caught up sometimes in this dichotomy,” he said, “that we have the folks up North – people would call them rednecks, I suppose – who are mostly concerned with rural values and those sorts of ideas. They understand the resource connection a bit more closely. They actually work in the resource industries. “And we have the – what do they call them? – the cappuccino-suckers down on the Lower Mainland who are very environmentally-minded and… generally opposed to these sorts of developments. Those are sort of the stereotypes. “And that didn’t really bear out in this project,” he continued, adding that “there were really no differences, statistical or otherwise, between the four different regions that we looked at.” Harshaw noted that a concurrent survey concerning attitudes about using bio-fuels yielded similar results. “Asked the very same questions about environmental attitudes,” he said. “And they were pretty much exactly the same. So, I feel pretty confident about that result. In general, British Columbians’ environmental attitudes are pretty much the same across the province. “Certainly, their motivations may 28231

differ, but their overall attitudes are essentially the same.” That didn’t actually surprise the OGC. “The study is important because, as the regulator, we’re accountable to all British Columbians,” said OGC spokesperson Hardy Friedrich. “A detailed understanding of the topics investigated in the report are important to efficient and effective regulation of oil and gas activities. So, the results of the survey will help identify priorities and objectives that may be useful for our framework. And they can also inform how programs are implemented in order to increase opportunities for public engagement and more involvement in the regulatory process. “The results did not display really any unexpected responses,” he added. “We understand similar surveys done in other industries had similar responses as well.” The similarity between responses in the four regions of the province identified by the study is interesting considering the commonly held belief in the Northeast, where most of the oil and gas industry activity occurs, that the rest of the province, particularly the Lower Mainland and Vancouver Island, does not know or understand what is happening in their jurisdiction. “I think that was reflected in some of the handwritten comments we had on some of the surveys, particularly from folks up in the Northeast,” Harshaw said in discussing that notion. “And I would expect that’s true,” he continued, “just as people in the Northeast probably aren’t as aware of different resource contexts in other parts of the province. We kind of just are aware of our local context or regional context, generally. But I think people in the Lower Mainland and sort of the southeast part of the province – certainly on the coast – are aware of oil and gas development issues and do have some concerns.” Harshaw explained that those polled were presented with a group of seven resource values and asked to identify which of those values should be priorities in terms of resource management and industry regulation.

“And sustaining clean drinking water was by far the highest priority among all people in the province,” he said. “And the way that they ranked and then listed those different resource values was essentially the same, with the minor difference, I think, in the Northeast.” That minor difference was that respondents in the Northeast indicated that sustaining economic benefits was a slightly higher priority than it was for respondents in the rest of the province. “There certainly was the recognition that oil and gas developments can have environmental impacts, can have effects on habitat,” said Harshaw. However, he also remarked that respondents from all four regions indicated “human ingenuity and technology” could allow the industry to manage issues of sustainable development and limits to growth in the sector. “There is a sense that, yeah, we recognize there are these problems, but then there’s also a sense that, you know, I think we can probably address these problems with what we know,” he added. Harshaw said it was important to get the survey results out to the public as quickly as possible, but that there is still work to be done as well. “My next steps are to look at some of the relationships between the different questions to try to better understand what’s driving certain attitudes and responses,” he continued. “I think [the OGC sees] a lot of value in this work … to establish this baseline for public attitudes and to try to understand what’s required, perhaps, for a real social license to regulate oil and gas resources. “Perhaps, down the road, they might want to revisit these questions to see if public attitudes are changing.” “We’re responsible to all British Columbians in our oil and gas regulatory process,” said Friedrich. “And the study was initiated to understand that public perception. Areas such as the public participation and trust were identified, and those results help us inform how we can best involve the public in the process and show the public that we are a trusted, unbiased source for oil and gas information in B.C.”

community 19 24

Duncan Cran Elementary wins Energy Diet Challenge Horn River Basin Charity Hockey Tournament

industry news 4 New man on campus - Ken 5 18

Hughes takes reins of Alberta Energy Global Well Servicing works hard to stay safe Natural gas vehicles gaining traction

profiles 12 End of an era - Jeff Lekstrom retires for NLC

environment 8 20

Counting sheep - Stone’s sheep study complete Strong and free - Shell’s True North Forest

careers & training 6 26

Welding in the wild west New recruits - Fort Nelson’s first power engineering grads

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

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Janis Kmet BC Sales 250-782-4888 cell: 250-219-0369 jkmet@dcdn.ca Published Monthly by Glacier Ventures International Corp. The Pipeline News North is politically independent and a member of the B.C. Press Council. 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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industry news NEW MAN ON CAMPUS Ken Hughes takes the reins of Alberta Energy in new Conservative government james waterman Pipeline News North He might be a newcomer to the Alberta legislature, but Ken Hughes has been given one of the most important jobs in the province. Hughes, MLA for Calgary-West, was sworn in as the Minister of Energy in Premier Alison Redford’s newly re-elected Progressive Conservative government on May 8, consequently becoming the third person to hold that office over the past year. Although he brings energy sector experience and the education of a five-year stint as a federal member of parliament under Brian Mulroney to the post, he also comes with the baggage of three highly criticized years as chair of the Alberta Health Services board. Regardless, Hughes feels he has the full confidence of the premier, a longtime friend who included him in her transition team when she was named leader of the party. “You can be sure I considered a lot of names, but I will say that Ken was one of my very first considerations and I settled on him very quickly,” said Redford. “I have not only a great deal of confidence in his ability to learn and understand the industry, but also his knowledge of the industry to date.” “I’m really honoured,” Hughes told Pipeline News North, discussing his appointment as the new energy minister. “I think the next four years in Alberta are going to be some of most exciting years in terms of building the development capacity and the access to markets for Alberta products,” he added. Hughes was introduced to the oil and gas industry in the eighties when he worked alongside a pair of well known Canadian oilmen, Gerald Maier and Charlie Fischer, at Bow Valley Industries. “In addition to that,” said Hughes, “I was chair of an oil and gas service company for the last seven years called Wenzel Downhole Tools. And Wenzel is a world class technology company that primarily builds and sells and rents mud motors for directional drilling. So, it’s at the leading edge of an industry with leading edge technology in a way that’s helping to transform the whole development of the energy industry.” Recently, he also served about nine months on the board of a small oil sands company that is yet to do any development. “He’s got the ear of industry,” said Keith Brownsey. Brownsey is a professor at Mount Royal University with a doctorate in political studies from Queen’s University. He has also edited texts on provincial politics and natural resource policies. “Ken Hughes has the ear of the premier,” Brownsey continued, suggesting that their long relationship should be seen as a positive, not as

a reason to be skeptical about the choice or his ability to do the job. “And his voice will be heard at the cabinet table,” he added. “Especially since the new cabinet structure is much leaner than it was.” Still, there are some significant challenges on the horizon, according to Andrew Leach, who teaches about energy industries and markets in the Alberta School of Business at the University of Alberta. “The market access one is the big one that most people are talking about,” Leach said of those pressing issues. “I would say the other two from, an energy perspective, are the value added bitumen royalty in kind type of questions and then cost inflations issues. Certainly as they relate to oil sands. I mean, the natural gas situation’s another issue all in and of itself.” Another key issue is creating a sense of stability considering the number recent changes in the energy ministry and the upheaval in the government overall. “I guess there has been a lot more movement in Alberta politics in general in the last year – or really in the last three years – than we’ve had in a long time,” said Leach. “There has been, probably since Ralph Klein resigned, kind of a significant amount of uncertainty on the policy side of the energy industry and on the market side,” he continued. “We’ve seen so many changes in terms of oil markets, gas markets, all these sorts of things.” Leach suggested that the four year mandate on its own can provide stability. “And what the energy industry will look for now is to see them lay out that agenda,” he said. “Put the meat on the bones.” “They do need to establish some sort of stability, continuity,” echoed Brownsey. “I think both of the outgoing ministers of energy – Ted Morton, Ron Liepert – were very good at their jobs. They knew what they were doing. They were good administrators. I see little change with Ken Hughes. Except in a public relations sense.” As an example, Brownsey suggested that Hughes will be “much more conciliatory” when dealing with those in opposition to the Enbridge Northern Gateway Pipeline project that would transport oil sands Bitumen to the Pacific Coast if approved. “I think he understands it’s a multistakeholder universe out there,” Brownsey continued. The Canadian Association of Petroleum Producers (CAPP) is optimistic. “Obviously, the energy portfolio is very important to us and to Albertans,” said CAPP spokesperson Travis Davies, citing Hughes’ past experience in politics and the oil and gas industry has reason to believe he is up to the task. “Our issues remain the same,” he added. “There’s always going to be changes in government. And we

have to be ready to work with whoever lands in the seat. And, at least, in this case, we’ve got someone with some background, with some business sense. I think that there’s always going to be a learning curve.” Hughes is also aware of the need to establish that stability. “My business activities are primarily in another sector, in the insurance industry, where I’ve developed my own business,” he said. “But I understand the critical importance of stability to investors.” The minister describes Alberta as a “world class” opportunity for investment. “And we are seen that way by global investors,” he continued. “And it’s quite clear to the premier, who has a very good understanding of the energy industry in Calgary, because she’s worked hard to understand it and to get to know people since she was first elected four years ago. Between the premier and myself, we have a team that is really intimately familiar with the drivers of this industry. “And this industry in general in Alberta – the Alberta energy sector – is driving, not just the economy of Alberta, but the economy of Canada. And, in many ways, a large part of the North American continent. And so we have a big role to carry out to ensure that we continue to have the opportunity to invest and to grow our business and to sell our products globally.” Hughes recognizes that he has a few things to learn to be able to do that job effectively. “There are a lot of smaller but important issues that obviously I have much to learn about as a new minister,” he said. “One of the things I bring to the table is a keen understanding of why one listens a lot and how to listen and to work with a lot of people to make sure that we’re able to articulate where we’re going as a Western Canadian economy and how we’re going to get there,” he continued. “We’re not going to have all of that fully formulated right off the bat on day one, because there’s a lot of work to be done with a lot of other players. “And, obviously, British Columbia is a really key partner of Alberta’s as well in terms of ensuring that we continue jointly to have a robust economy and that we’re able to get products to market.” It appears as though the criticism of his time with Alberta Health Services is going to dog him into his career as energy minister. “[He] has a lot to answer for as the chair of the Alberta Health Services superboard, which oversaw almost the complete failure of our health care system,” charged Wildrose Alliance leader Danielle Smith. “Having him in the most important position – the energy portfolio, which is the most important ministry for the health of our economy – has me continued pg 22

MAY/JUNE 2012

PIPELINE NEWS NORTH •

UP TO THE CHALLENGE Global Well Servicing knows it has to be tough to stay safe in the patch

Global Well Servicing’s Rig 6, winner of the CAODC Safety Excellence Award for service rigs this April, roaming its stomping grounds in Zama City, Alberta. photO COURTESY OF GLOBAL WELL SERVICING/CAODC

james waterman Pipeline News North Nigel Woollam, president of Global Well Servicing, recognizes the challenges facing service rig contractors trying to achieve the best health and safety records possible in an often hazardous oil and gas industry. Even though Global’s Rig 6 won the Safety Excellence Award for service rigs from the Canadian Association of Oilwell Drilling Contractors (CAODC) on April 28, Woollam think his company can do even better. He explained that the crux of the problem is a recurring issue that affects the energy sector across Western Canada. “We’ve made some leaps and bounds,” Woollam said of his company’s recent health and safety performance. “We didn’t have the best year that we typically would have liked to have seen,” he continued. “We’ve had three cases where people were injured working on pipe and pipe racks. All injuries are preventable. All injuries are ankle or foot related. The working environment that we were given to deal with – we didn’t refuse to do it and we should have in all three cases.” Woollam noted that 95 per cent of health and safety incidents that his company has experienced are foot, ankle or knee injuries, usually caused by working in rough terrain that ranges from soft ground to rocks to icy conditions. Part of the problem is navigating that terrain while carrying heavy loads.

“You try to ensure that the client will provide some decent working conditions for you,” said Woollam. That can include smoothing uneven or unstable ground by back-blading or grading. If that isn’t possible, the producer company can take other initiatives such as installing rig matting around the wellhead so that workers don’t step in holes or ruts in the ground. They can also put catwalks on which to lay pipe over uneven ground. “It varies by area as well,” said Woollam, discussing how producers in the different regions where Global works deal with those conditions. The core area for Global – the region where they really began working – is Zama City in Northwest Alberta, where the company operates six service rigs. They also have four rigs in the Coronation-Veteran region of eastern Alberta. Their head office is in Drayton Valley, where ten rigs serve the Pembina oil field and the corridor between Hinton and Whitecourt. “It is very hard to make the decision to refuse unsafe work,” said Woollam. “For the most part, at the time that you’re conducting the tasks, you may think, ‘Well, you know what? I’m just jumping up three and a half [feet]. Not a big deal.’ Until an incident happens when you sit back and analyze it and say, ‘You know what? We should have refused to do that.’” Woollam certainly appreciates the Safety Excellence Award, particularly for what it means to Global’s 175-person staff, but

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he doesn’t believe that message is finding its way to those wellsite supervisors and changing the health and safety culture of the industry at that level. “What is going to help is to set some proper training for a wellsite supervisor,” he said. “Right now, in order to be a wellsite supervisor... you need to have a BOP ticket, H2S ticket, a First Aid ticket and a [Safety Management and Regulatory Awareness for Wellsite Supervisors] certificate. If you’ve got those there, regardless of your experience, you can become a wellsite supervisor. There is no competency testing.” Woollam believes that the oil companies try to do their best to hire qualified wellsite supervisors and make certain that their operations are running smoothly onsite. “It does happen,” said CAODC President Mark Scholz. “There is a level of lack of competency – and I’m not saying it’s the vast majority. Certainly, there are wellsite supervisors that are contracted by the oil companies that are very good, very diligent, show tremendous leadership. “[But] there’s no question that there is that happening in the field. I can’t give you any sort of statistics, because it’s kind of a blurred topic, to be honest with you.” Scholz and his colleagues are taking the problem seriously, too. CAODC has discussed the issue with the Canadian Association of Petroleum Producers (CAPP) and Enform, the health and safety association for the upstream oil and gas industry in Canada. “And, in fact, Enform is looking at putting together a database where competency on the technical [side], as well as the soft skills, can be evaluated in some way,” said Scholz. That fledgling program is known as the Wellsite Supervisor Competency Pilot Project. “I, in fact, envision a time where we’re going to be able to weed out some of these rogue wellsite supervisors that have very little understanding or [don’t] hold safety as a priority,” Scholz continued. “Weed them out of the industry. Because it certainly is causing a safety concern for our people. “And the wellsite supervisor is the boss man on site. And if the boss man has lousy leadership on safety, it’s going to be reflected in terms of the environment our crews are working in. We want to make sure that we get this right.” If coping with incompetent wellsite supervisors isn’t enough to make the Safety Excellence Award more meaningful for Woollam and his company, there is also CAODC’s improved method of gathering and verifying the health and safety information used to pick the winner over the past few years. “They’ve put in more of a stringent guideline for controlling the quality of the informa-

tion that’s coming in,” said Woollam. “It used to be that you could just submit whatever you wanted to submit and it wasn’t necessarily accurate.” “What Enform is actually doing is putting an injury matrix together that analyzes WCB (Workers’ Compensation Board) information from B.C., Alberta and Saskatchewan,” said Scholz, explaining one recent development that has allowed CAODC to ensure they are rewarding the right companies with their safety award program. “And puts it all together,” he continued. “And it helps us trend injury statistics better.” CAODC has also developed their own system over the past six years. “Our members submit their data to us through our online data software, if you will, and we actually compare it to WCB statistics,” said Scholz. “So, if there are outliers out there in terms of the overall content and data points that contractors are providing us, then we do an investigation to make sure everything’s accurate.” Scholz also noted that it isn’t easy to hide a workplace injury. “Because WCB is a mandatory reporting database,” he said. “With CAODC, obviously, it’s up to the employer to report honestly to us. But if we have an ability to crossreference that information with something that’s mandatory, then it kind of works out in our favour [as far as] being able to scrutinize the data better.” CAODC has seen a considerable improvement in safety records for the industry over the past fifteen years. “Every year we become better at improving safety in the field,” said Scholz. “And that’s reflective in the statistics through WCB, but also through our own statistics in house here.” Woollam said that the benefits of the CAODC award program – and receiving the Safety Excellence Award – range from company pride to ability to recruit new workers. “I believe that a good safety record will bring people into industry,” he remarked. “I also believe that showing people that you have pride in your company, that you have a company that has family morals and values, and that you have a company that cares about people that work here, that brings people in. “Obviously, if you’re hurting people, people are going to be reluctant to come work in [your] industry,” he added. According to Woollam, the key to good health and safety is being proactive, not simply reacting to a problem when it arises. The award program can help encourage that behaviour. “It also gives a goal to meet,” he explained. “I believe every contractor would probably like to win.”

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• PIPELINE NEWS NORTH MAY/JUNE 2012

careers WELDING IN THE WILD WEST The life of a tradesperson in Fort St. John james waterman Pipeline News North

When Cowger began his career, welding was one of the few trades in the oil patch at the time that actually required a ticket, which meant a lot to somebody just Back in 1986, when Mike Cowger was still barely out starting out in the profession. of high school and working as a welder’s helper, he was “As an apprentice,” said Cowger, “you were always given a choice that would determine his career path for working with qualified people. You got a good hands on the coming decades. knowledge right from the start of the dos and the don’ts That choice was between apprenticing as a welder or and the whys, as opposed to: ‘This is what we always a mechanic, or enrolling in a junior foreman program. do; so, this is why we do it.’” “The junior foreman program,” Cowger explained that there said Cowger, explaining his are four main parts to welding decision, “you stayed with that trade: structural work, which particular company and traveled involves building items such as “I’m a rig welder. wherever they had work. The stairs or railings; pressure work, idea of having my own tickets, which can be a big part of the I have my own truck, my work in the oil and gas industry which could travel anywhere with me, was more appealing. because of the construction own company. When the of pipelines and other associAnd between mechanicking or welding, I chose the welding end ated facilities; utility work, which of it.” involves maintenance of machinphone rings, I go He felt that the hours were ery and heavy equipment. better as a welder. “And then finally you just got to work.” “Mechanics are busy all the your knick knacks,” he said. time,” he said, “but, typically, “Someone brings almost anyat the end of the shift, when thing to you – can you fix it? – Mike Cowger, Welder machinery is shut down for the “And the conditions can be day’s work, is when a mechananything mother nature throws ic can get busiest. Because he at you,” he continued. “I’m a rig has to maintain it for tomorrow morning. Where from welder. So, I have my own truck, my own company. the welding point of view, you’re in the same condiWhen the phone rings, I go to work.” tions, it can be cold and wet and miserable, but you That business is simply M. Cowger Welding. typically work your 12 daylight hours so that you’re “So, whatever the day sends you is what you’re not, in the middle of the night, being busy.” working in. And so you learn to adapt. You bring with

you forms of shelter, whether it’s umbrellas or these little portable structures. But the only thing that stops you is if the weather is too negative for a quality weld to be performed. So, it’s raining too hard, blowing too hard, snowing too hard.” Cold temperatures can also be a factor. “If you cannot maintain a certain pre-heat in the items that you’re working on, it’s cooling too quickly,” said Cowger. A few short years into his life as a professional welder, Cowger was given an opportunity to go to work for Westcoast Energy – now Spectra Energy – where he spent seven years as a welder during the nineties. “I chose to go work for Westcoast because they had jobs that I would not normally have gotten to participate in had I stayed as a contractor straight through,” he explained. It was a lot of specialty work. “Westcoast was doing a lot of expansion during the early nineties when I hired on with them,” he said. “And they would do big inch [pipe]. Typically, in the Fort St. John area, from two inch to twelve inch is the range of pipe that you get to work with. With Westcoast, we were working on up to 42 inch in facilities. Not big jobs, but big items.’ It was a period of professional growth for Cowger. “It was one of the best opportunities I had in my career to see, learn and practice new skills that you don’t normally get to see anywhere else just because of the scope of their work,” he said. However, according to Cowger, that sort of learning experience isn’t all it takes to succeed as a welder.

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ancing all the time.” That uncertainty – and neglecting to prepare for the lean times – is an issue that Cowger has seen cause trouble for some welders in the patch. “I was raised on a farm,” he said. “We still own our farm. We learned very early that there can be a rainy day and you better be prepared for it. And that is what we’ve seen with a lot of the other oil and gas regions of Western Canada. They can have some very slow downturns. “This year was not as good as they had thought because natural gas prices dropped. For the first time in ten years, I believe, it dropped below $2.00 a unit. So, that really slowed down a lot of projects that had been forecasted for this winter. We were steady, but we were not as busy as first projected.” Cowger described Fort St. John as a “bubble” where the slow seasons aren’t felt as deeply and don’t last as long, but they can still be difficult to manage. “The only thing I would caution is that it can be very good here, [but] if you’re not careful with how you handle your money, you can become destitute in a real hurry because of the cost of living and all those others things,” he said, suggesting that people get stuck in the mindset that there will always be more work – and more North Peace native Mike Cowger has worked in the oil patch as a welder for over twenty years, including seven years with Westcoast money. Energy during the nineties. During that time, he has learned a thing or two about how to make the best of life in the oil and gas industry “There can be quite a space of time in Fort St. John. between this job and your next one,” he JAMES WATERMAN photO continued. “Like right now, it’s slowed “To thrive in this sort of career you have a job in an office don’t even get a don’t like a circumstance where you’re down for spring break-up. For myself, this have to be, first of all, an outdoors sort,” chance at,” he added. “For us, it’s every working, you have the right to move on, is the first time in four springs that I have he said. “You have to be a hands on perday – almost.” and you have the ability, because you’re had any amount of time off, because the son. One who likes to work. You have to Cowger found himself in a good positaking your equipment and your skills company I’ve been working for, Shell, have a good imagination because there tion when he left Westcoast, partly bewith you. chose this year to slow down a little bit, will be times when you can’t necessarcause of the work he had done with them “It has always treated me very well. regroup themselves, instead of working ily see how this is going to be accomand partly because of the reputation he I have not had to travel outside of the straight through. plished, but through a good imagination, had built prior to joining that company. Fort St. John region to ever get a job. “Being a local, one of the first things is some... hands on experience previously, “I had worked for everyone,” he said. I’ve always worked for a local company. you learn very quickly that there can be a you will see that it can be done.” “When I came back out, they all knew Maybe we traveled long distances, but it slow time and to be saving your money. The imagination is a really important where I had been and they… understood was with a Fort St. John company. You don’t want to get caught up in the rat aspect considering the kind of problem the sort of work that we did do [at West“The negative is long hours,” he conrace of: ‘There’s always another job; so, I solver a welder often has to be. coast],” he continued. tinued. “If you’re a family person, you’re can buy this toy and I can buy that toy.’ “There will be a lot of instances where “We did a lot of specialty welding in tie- quite often away from home in camp. You “People have been caught in very a problem or a task is brought to you with ins, construction – small scale, but very don’t get to see your family for long petough financial circumstances. So, I no clear way of accomplishing it,” said technical – that typically were not accomriods of time. As would tell kids: Cowger. plished or there wasn’t the opportunity with any industry, great opportunity, “You need to be able to think outside [to do] outside of Westcoast. So, when there’s the potenbut understand the box,” he continued. “In many cases, I came back, it was a real feather in the tial of drugs and “One of the first things that it’s not forwhere we’re in some of these remote cap because I had those skills. alcohol and all of ever.” areas, we have limited resources. We “And you have to remember, at that the downsides to is you learn very quickly One of the just have what’s with us. And then how time, we would be working, as a Westthat. biggest changes can we manipulate something that may coast employee, with most of these “You can the welding that there can be a slow in not be intended for that task but can be fellows, because they were doing the retire early – or business in the utilized. construction for the outside companies, earlier – if you’re St. John area time and to be saving Fort “If you’re truly interested in your trade, wanting to tie-in to the Westcoast system. very careful, but since Cowger that will become And I would getting to that got his start has natural. Because be there, or point takes a lot your money.” simply been the you are going to the guys I was of discipline and growth. When he look forward to the “You’re always juggling working with takes a lot of unbegan his career, – Mike Cowger, Welder challenge of it.” would be there, derstanding from there were just 45 The opportuaccomplisheveryone in your rig welders in the with the idea of when ing that. You’re family… You’re nity to experience city, but there are remote and rugged working almost not available for now over 200, including a growing numthe next job will be if hand-in-hand landscapes is also certain family functions. You’re gone. ber of female welders and skilled tradespart of the appeal with the same You can’t always say no to your boss if: people from other industries and other of the profession for I choose not to accept people, but ‘Hey, we’ve got a birthday party for a five regions of Canada who have decided to Cowger. now you’re on year old daughter. Can I get a few days bring their skills to the patch. “I have had opthe other side off?’ Because you might be replaced and this one.” “There’s a lot more local purchasing portunity to work of the fence. not allowed back because they’ve got than… back when I first started, because right from NorthAnd we were someone else.” there are more people,” said Cowger. – Mike Cowger, Welder west Territories to doing welding Refusing one job could turn out to be a “And most of the guys were busy all Vancouver Island,” procedures and poor decision for a welder because it isn’t winter. he said. “Some so on, so forth always clear when and where the next “The downside is that they give the of that work has that only we job will be. wrong impression that it’s the land of no included flying with helicopter, where were allowed to do, because we had the “You’re always juggling with the idea limits. And there are limits. And people you strip all your equipment down to its qualifications and the experiences to do. of when will the next job be if I choose to need to understand that just because the bare necessities so it can be carried in. “Today, it is invaluable. There’s a lot of not accept this one,” said Cowger. truck is big and shiny and they’ve got all Hauling all your parts and pieces, all your jobs I get because of my previous “And that is where time in the busithe toys in the yard – all the welders got equipment you’re going to work with, experience.” ness plays to your advantage somewhat, toys in their yard, riverboats, quads and perform your task or your job onsite, and The profession and the oil patch have but not always. When a company needs whatnot – doesn’t mean they’re paid for. then load it all up and fly it all out accordbeen good to Cowger over the years, but people, they need people today, and Doesn’t mean that fellow owns them. ing to what your helicopter can in fact it has had its drawbacks as well. they’ll find them. And you might be sitting “The downside is a false sense of carry. “Financially, it can be very lucrative,” regardless of who you are. security when people watch the welders “It’s an opportunity that most folks that he said. “You are your own boss. If you “It is definitely a tightrope. You’re balin Fort St. John.”

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environment

COUNTING SHEEP Results of Muskwa-Kechika Stone’s sheep study released to industry sponsors james waterman Pipeline News North After seven years of hard work, research biologists studying the Stone’s sheep population in the Muskwa-Kechika region of Northeast British Columbia were finally ready to present their findings and management recommendations to the North Peace Stone’s Sheep Sustainability Steering Committee this spring. That steering committee includes representatives from the Canadian Association of Petroleum Producers (CAPP), the BC Oil and Gas Commission (OGC) and the BC Ministry of Energy and Mines – as well as representatives from other government departments, the MuskwaKechika Advisory Board, Kaska Dene First Nations, BC Wildlife Federation, Northern BC Guides Association and the North Peace Rod and Gun Club – because the research directly affects oil and gas exploration and production interests in the area. The Muskwa-Kechika Management Area Act stipulates that pre-tenure planning is required before land tenures can be sold to energy companies interested in conducting oil and gas operations on that tract of land. “It identifies what the exceptional values are in that area,” said Brian Churchill, discussing the need for pretenure planning. Churchill, an experienced wildlife biologist who operates Chillborne Environmental, is the chair of the Stone’s Sheep Science Advisory Committee for the project. “In the bigger land use plan, there’s a balance,” he continued. “There’s areas like the Horn River Basin where the land use plan says its priority [is] for industrial activity. And there’s places like parks where the priority is for preservation. And the Muskwa-Kechika’s in between.” Churchill explained that when the public consultation with government concerning local strategic plans required by the Muskwa-Kechika Management Area Act began in 2003, an area near Stone Mountain Provincial Park was identified by local stakeholders as an important site for Stone’s sheep. That area is known as Sulpher/8 Mile. “They thought the special values for Stone’s sheep were so high [there] that oil and gas activities would be devastating,” said Churchill. “There’s an area set aside called the High Elevation Zone,” he continued, “where they don’t want to advance any potential oil and gas tenures until the research has been done to substantiate or not substantiate the concern.” That research was managed by Pamela Hengeveld and Clint Cubberley, both biologists from Synergy Applied Ecology. Churchill expects that their findings and recommendations will finally go through the steering committee and the MuskwaKechika Advisory Board this June, after which the advisory board will submit a pre-tenure plan to the provincial government.

According the Muskwa-Kechika Management Area Act, a study into the Stone’s sheep population of the region had to be conducted before land tenures could be sold to interested oil and gas companies. The researchers’ findings are presently under review by the North Peace Stone’s Sheep Sustainability Steering Committee. photO courtesy of brian churchill

However, Churchill noted that some elements of that plan may already be fairly obvious simply based on the research that has been published online. “It’s kind of interesting because there’s never been this extensive a Stone’s sheep project done before,” he said of the work. A significant component of the project was fitting a group of female sheep with what are known as mortality collars. “They have a thing on [them] that, if the collar stays still for four hours, it starts sending a different signal,” said Churchill. That usually suggests that the animal is dead. “Then we go and find out what killed it, if we can,” added Churchill. Another aspect of the study was learning what parts of the region actually comprise sheep habitat, a part of which was a winter inventory to determine their range during that season. “And the interesting part about that is that, because we had all these collared animals out there for mortality, we could know if they were alive or not,” said Churchill. “So, that means they were able to do what we call a mark-recapture.” By calculating the percentage of marked animals that were actually seen, the researchers could determine the visibility of the whole population, which is about 82 per cent for the Stone’s sheep in that region. “There’s a significant chunk that are just not visible, even from a helicopter in the middle of winter, and it’s snowy and they’re confined to a very small area,” he added. They also had GPS collars on a collection of both males and females that they used to mark the locations of those

animals on certain time intervals throughout the day and night. “And then when [you] get the collars back, you get all these data points,” said Churchill. “And we have a total of 58,000 data points.” Every data point included a date, time and location, which allowed the researchers to map lambing areas and rut ranges, for example. “You think you got a handle on them for winter,” said Churchill, “because you can fly [over] and see the tracks in the snow and all that. So you can identify where their winter range is. Now what’s important for the rest of the year? “Obviously, lambing is one of those,” he added. The study area was actually just a small part of the Sulphur/8 Mile region where potential for oil and gas development has been identified. That area was divided into two sub-regions: the Low Elevation Zone and the High Elevation Zone. “The first thing was obvious,” said Churchill. “As expected, sheep didn’t show up in the Low Elevation Zone.” The High Elevation Zone is intersected by the Toad River, one section to the north and one section to the south. “There’s no sheep in the High Elevation Zone north of the Toad River,” Churchill continued. “The perceived conflict [between Stone’s sheep range and land with oil and gas development potential] isn’t a conflict.” “It’s pretty clear that the standard guidelines for oil and gas should be applicable,” he added. The north and south sections of the High Elevation Zone, as defined by the Toad River, are approximately equal in

size, just as the High Elevation Zone and Low Elevation Zone are approximately equal in size. The southern half of the High Elevation Zone – the area in which Stone’s sheep are found – is only about one quarter of the total study area. “And then we refined it down to area that sheep actually use within that southern part of the High Elevation Zone,” said Churchill, concluding that Stone’s sheep only use about ten per cent of the whole study area. “What the study’s allowed us to do is narrow down our area of concern to about ten per cent of the original area that we looked at,” he added. Essentially, ninety per cent of the region is free of Stone’s sheep, which means that the animals and efforts to conserve them should not be obstacles to oil and gas development. However, that isn’t all that was learned over the course of the study, which received funding from a handful of companies, organizations and government agencies concerned with the oil and gas industry. The Ministry of Energy and mines contributed $100,000, BP Canada Energy Company contributed $8,000 and TransCanada Pipelines contributed $175,000. The largest funding partner, the Science, Community and Environmental Knowledge Fund, which consists of funds from fees and levies on oil and gas activity and is overseen by representatives from OGC, CAPP and the Small Explorers and Producers Association of Canada (SEPAC), contributed $650,000. The second largest donor was the Habitat Conservation Trust Foundation, which provided about $350,000 in funding. The result of that funding was consider-

MAY/JUNE 2012

able baseline information about a species that has not been the subject of much research in the past. “They’re there all year round,” Churchill said of the Stone’s sheep in that small section of Sulphur/8 Mile. “They use all of that ten per cent most of the year,” he added. “The only time they don’t really use it all is during winter when… the snow confines them to smaller areas.” The sheep tend to disperse from their winter range as soon as spring arrives, but quickly return to that area in June. Their population density is quite high in that habitat overall. “Basically, even the winter areas are being used year round,” said Churchill. “And all the areas around it, of course, are being used as soon as the snow goes. The only thing that sort of makes them spread out a lot is they need mineral licks. And so they go looking for mineral licks. And most of the mineral licks are outside their sort of real core areas. And some of those mineral licks are along the Alaska Highway.” Churchill was intrigued by the fact that the sheep usually frequent mineral licks along the highway during the high motor traffic hours of 10:00 a.m to 4:00 p.m. “That was a little bit surprising,” he remarked. “That means you’ve got a high potential for collision. And, of course, we documented a bunch of collisions. And the mortality on female sheep [in the] Stone Mountain Provincial Park area is a significant [concern].” Churchill didn’t express any concern about increased road fatalities in Sulphur/8 Mile if oil and gas development doe occur in that region, but he did note the need for sheep management efforts coinciding with future improvement of the Alaska Highway, which would partly be a byproduct of increasing industry activity in the Horn River and Liard Basins, as well as the associated growth of Fort Nelson. “Some major consideration is going to have to go into how you reduce that mortality on that part of the highway,” he said, suggesting that the sort of fencing and overpasses used to keep ungulates off the roads in the Banff, Alberta area might be a solution. “Increased traffic on the Alaska Highway for a variety of reasons including oil and gas – it will be a concern,” he continued. “Upgrading of that highway needs to make provision for reducing or eliminating collisions with Stone’s sheep.” Two segments of the population – one near Stone Mountain Provincial Park and one near Muncho Lake – are particularly at risk for road mortality. The study also produced information on diseases affecting Stone’s sheep. “We wanted information on disease to see how the population’s doing,” said Churchill. “But we’re also looking at the baseline of what diseases are out there. Have these sheep come into contact with, say, domestic sheep that have a bunch of other diseases [that] tend to kill sheep?” The researchers actually discovered winter ticks on a few sheep, which hasn’t been common in the past. “There weren’t very many of them,” he said. “So, not

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One of the greatest threats to Stone’s sheep in the Muskwa-Kechika is traffic on the Alaska Highway, as there are popular mineral licks near that road. Biologist Brian Churchill said that should be a management consideration if oil and gas industry activity in Northeast British Columbia spurs increased traffic and highway improvements. photO courtesy of brian churchill

a big concern. But it was one of those little interesting tidbits.” Historical evidence suggests that the sheep won’t eventually extend their range beyond that ten per cent of Sulphur/8 Mile into land that may be tenured for oil and gas, but the reason is unknown. “Part of the study was to take and upgrade the mapping – the habitat mapping – for sheep,” said Churchill. “And that was done by a professor at University of Northern British Columbia from satellite imaging. “That upgrades the biophysical mapping as to areas that sheep would use and not use,” he added. However, that only shows where the sheep live. It doesn’t explain why they don’t live north of the Toad River. “The part north [of the Toad River] has some elements that look like they could have sheep,” said Churchill, “and yet there are no sheep.” Discussions with local families and First Nations communities with long histories in the area revealed that Stone’s sheep have never been seen outside of the region identified as their range during the study. “That’s what you call traditional knowledge,” said Churchill. “And they indicated no knowledge of sheep in that area. And then we also did what we call a community knowledge study. We had [people] go out and meet with all the old, longtime residents and all the old guide outfitters and stuff from that area, and try to identify if

there’s any sheep in that area. Again, that came up with no historical evidence of sheep there.” Determining the reason for that would require additional study. “But we’re satisfied that historically, traditionally and currently there’s no sheep in that area,” said Churchill. “There’s better things to be doing than worrying about sheep in that area.” That includes protecting the sheep that do live in that small section of Sulphur/8 Mile. “It’s a really, really important sheep area and a really, really important sheep population,” Churchill added. “The largest, most accessible and hunted sheep population of Stone’s sheep. “You’re going to have to protect those sheep,” he continued. “And you’re going to have to protect those sheep’s habitat. “Nowhere [for them] to expand to that we can see. And, in fact, if you take away any of the habitat there, you’re going to decrease the number of sheep.” Part of the issue is that the sheep population is “showing density dependent effects” That means that they have difficulty increasing their population with young sheep. “There’s more mortality in the winter of the lambs,” said Churchill. “More health related mortalities from injuries. “Eventually, they die of heart attacks and everything critters die from.”

Shell: LNG on the way

Energy group officially announces gas plans STAFF REPORTER Pipeline News North It was fitting that Premier Christy Clark was on her second Jobs and Trade Mission in Tokyo, Japan on Tuesday, May 15, as the city was an ideal backdrop for celebrating the official announcement that a third liquefied natural gas (LNG) export facility is planning to set up shop in Kitimat. After all, not only is that LNG likely destined for markets in Asia, but the Shell Canada led project – known as LNG Canada – also involves Japan’s Mitsubishi Corporation, as well as PetroChina Company and Korea Gas Corporation (KOGAS). “While B.C. is lucky to be blessed with abundant natural resources,” said Clark,

“it’s also our government’s smart investments in infrastructure and skills training that make us a desirable, safe harbour for investment, as we see here today with this announcement.” LNG Canada is the third project to officially declare their intentions to export LNG from B.C. to foreign markets, an important number for a BC Liberal government that set a goal in its BC Jobs Plan of having three LNG facilities operating in the province by 2020, with one of those export terminals and the associated pipeline ready by 2015. The other two projects are the BC LNG Export Cooperative and the Kitimat LNG joint venture between Apache Canada, EOG Resources and Encana. “This brings us one step closer,” said Clark.

Shell purchased the old Methanex Corporation site near Kitimat from Cenovus Energy in October, 2011 with LNG in mind. Stakeholder consultation, environmental assessments and engineering studies still have to be completed before the partners will make a decision whether or not to move forward on the project, which will include a liquefaction plant capable of producing six million tonnes of LNG per year, as well as storage and shipping facilities. Shell is optimistic about the economic benefits to the province that would stem from this enterprise. “The proposed LNG Canada project will need thousands of jobs during construction and hundreds of full-time, permanent jobs during operations,” said Lorraine Mitchelmore, President of Shell

Canada. “The community would also experience the near and long-term economic development opportunities that accompany and energy infrastructure project,” she added, also noting the value of developing new markets for Canadian natural gas. LNG Canada still has to go through environmental assessments of its liquefaction and storage facilities and its marine shipping terminal before it can go forward. It will also have to receive a Transport Canada Termpol approval and a National Energy Board (NEB) export license. Shell Canada will hold a 40 per cent stake in the project while Mitsubishi, PetroChina and Kogas will each hold 20 per cent.

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special feature

western dreams

How one man’s vision built a Canadian energy icon

Spectra Energy’s McMahon natural gas processing plant in Taylor, British Columbia still bears the name of the legendary founder of Westcoast Energy, Frank McMahon, who built the company on a dream of supplying natural gas to the rest of the province and the Northwest United States from a Peace Region natural gas play. photO courtesy of Mike McNicholas/westcoast energy archives

james waterman Pipeline News North Mike McNicholas’ personal history with Westcoast Energy only began in 1979, but his almost encyclopedic knowledge of the company would suggest that he was sitting right next to Frank McMahon when the founder of Westcoast saw that Pouce Coupe gas well burst into flames in 1921. “I was working on… the Queen Charlotte Islands,” said McNicholas, reminiscing about his introduction to the company where he still works today. “And some oldtimer there told me I should go to Fort Nelson and work for Westcoast Transmission. I didn’t know anything about the business or what Westcoast Transmission was about, but I was prepared to get out there and see what it was. So, he phoned our hiring office and said, ‘I’m sending this guy in. Go ahead and hire him.’ With that, I had a job in Fort Nelson.” He spent seventeen years at the gas plant in Fort Nelson before moving to the McMahon plant in Taylor for five years. “Then moved on to the transmission system,” he added. “And I’ve been there for a dozen years. “In that length of time, you get to know a lot of people and a lot of the history of the organization. Come across a lot of the archives for the company. A lot of old photo albums and that. And it was really interesting just to get to look at the history of the people, particularly on the transmission system, since that was the original facility. It’s really neat, because we have second and third generations of those original employees. That was my big interest.”

It was also the story of Frank McMahon that caught his attention. “He was a wildcatter,” said McNicholas. “He was just out there to do the wildest things. And some paid off and some didn’t. He went broke many times… But when he struck it rich, it paid off big time. “And he followed the dream. His dream of building the Westcoast Transmission company – that took him 20 years. It took an awful lot of work. He had to get acts of parliament changed. He took many trips to Washington because there was a lot of people in Washington objecting to the fact that Canadian gas was going to flow down into the U.S.” McMahon’s dream of creating Westcoast really began when he saw the flame from that gas well that was struck by Imperial Oil geologists in 1921. Imperial had no interest in the well. Gas was almost seen as a nuisance byproduct of producing oil. Besides, there was no market for Pouce Coupe gas and nobody to build a pipeline to transport the fuel regardless. It was too remote. The tale sounds vaguely familiar to talk of the Horn River Basin shale gas play and the quest for liquids-rich gas in the Montney and Duvernay today. “But there are still the dreamers out there that are looking further out than that,” said McNicholas. “And they don’t worry about cycles. There have been so many cycles in the natural gas business since Frank McMahon’s day. “We know that there will be change,” he continued. “A few years ago, we didn’t know that there was going to be such a glut of gas. That glut of gas is a great opportunity to create new industries.” Imperial Oil had no interest in that gas

well, but McMahon thought it could be the first clue to a Peace River gas field big enough to rival the prolific Viking play in Alberta, not to mention one that could supply Vancouver – and possibly the Northwest United States – with natural gas. Construction of the Westcoast pipeline that would finally accomplish that goal didn’t officially begin until 1956. The work actually started in October of 1955.

“What happened at that time,” McNicholas explained, “was that he was really confident that he was going to get approval for the pipeline, but he did not have approval from the National Energy Board.” He secured a $19 million loan from the bank and went about the business of convincing “everybody that the safest place to store thirty inch pipe was in the ground.” Construction was soon underway. “Originally, they were just going to put the pipe up in the northern sections,” said McNicholas. “Out of sight. But, no, they started right at the U.S. border. Put the pipe in the ground and took that gamble that they would get approval. “When they bought the 30 inch pipe,” he continued, “it was just sitting around. And they weren’t too concerned about that because they knew that they could resell the pipe. Once you put the pipe in the ground, it’s really hard to dig it up and sell it and make any money on it. So, they took quite a gamble there about getting approvals.” Of course, a lot happened in the 36 years between the day McMahon witnessed the fire of the Pouce Coupe gas well and the day the pipeline was complete, not the least of which were the Great Depression and the Second World War. Engineers had drawn the first map of what would eventually be that Westcoast transmission line in 1937, but that was two years after the provincial government in British Columbia decided oil and gas would be developed by the province alone. They wouldn’t be selling any mineral rights. “He was very much a capitalist,” McNicholas said of McMahon and his aversion to that policy, especially since it

Welding 36 pipe sections at Sikanni River circa 1980. As is typical of installations on steep slopes, the pipe is encased in concrete to protect it from the rocks. photO courtesy of Mike McNicholas/westcoast energy archives

MAY/JUNE 2012

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posed above ground as it wound its way to the coast. “They only built that line under a lot of pressure from the government at the time,” said McNicholas. “Because there was no economics to justify putting that line in. But they were coerced to do it and they did it. They didn’t have enough money, of course. And what they had to do in some areas, where it was just impossible to bury the pipe, they just had it strung along, hanging off the mountain. “It was anchored off trees in different places,” he added. “And that particular section of pipeline, that has suffered from slides many times over the years. There’s been lots of landslides there, rockslides, and it takes out the pipeline.” Eventually, Westcoast was purchased by Duke Energy in September of 2001. “When Duke bought Westcoast, we really didn’t see an awful lot of change,” said McNicholas. “Duke accepted that Westcoast was a very strong company. And they didn’t come marching in to make a whole lot of changes. It was the existing management that stayed in place and just kept running business as usual. “But at about the same time,” he added, “the Enron organization imploded, and that had a huge impact on oil and gas business all over North America.” That meant that there had to be a few changes. “Duke was a really big organization,” McNicholas explained. “They finally said, ‘Okay, we’re not getting the full value for our shareholders, because folks can’t understand us being too complex.’ Because, at that point, they had all this oil and gas stuff. And they had nuclear and coal. “So, they split the company,” he continued. “And Duke kept all of the electrical business. And they formed a Pipeline construction near the Coquihalla Highway in 1979. new company, Spectra Energy, which was all the oil and photO courtesy of Mike McNicholas/westcoast energy archives gas and pipeline stuff. stood in the way of achieving his dream. Westcoast wasn’t faring quite as well, however. The “I think the timing of that was really good, too, be“He didn’t mind taking gambles,” McNicholas added. company didn’t make a profit during its eight years precause they formed Spectra and then there’s a resur“And as you read more about him, you find that he was ceding construction or the ten years following gence in the business and things have been going really very successful, and he would take risks in other areas. construction. well for Spectra ever since.” He wanted to be the wildcatter, invest that money, and “He was a really good salesman to be able to conIt is obvious that McNicholas make a return on it.” vince the investors to keep firmly believes that he has been McMahon’s perseverance paid off in 1947 when the putting money into it,” said part of something for the the last failure of a $1 million exploration and development McNicholas. 33 years that has been genuinely project known as Commotion Creek prompted the Westcoast gained a measure “One of the advantages important and valuable to the provgovernment to leave the oil and gas business to private of financial security by cutting a ince of B.C. companies. deal with El Paso Natural Gas that [McMahon] had “When they were doing the Meanwhile, McMahon and his brothers had struck it that saw the U.S. company opening ceremonies for the rich in Alberta’s Turner Valley oilfield with their oil combuy 70 per cent of gas travelwas that he was one Westcoast Transmission system pany, West Turner Valley Petroleum. Producing 3500 ing through Westcoast’s main in Vancouver,” he said, “the very barrels of oil per day in the winter of 1938, the well was transmission line. of the richest men in same night, [Premier] W.A.C. Benthe most prolific that the play had ever produced. El Paso needed the gas nett, he announced the kick off for He was able to put that oil money to good use when it Wescoast was providing just as the [W.A.C.]Bennett Dam. So, you the country. He was came time to build the pipeline. much as Westcoast needed the had all of this stuff happening at “One of the advantages that he had at that point in money, but the gas sales still the same time. worth about $50 million, “All of that helped promote time was that he was really one of the richest men in the weren’t sufficient. country,” said McNicholas. Consequently, McMahon farming and opened up the “He was worth about $50 million, which, in 1955, was launched the plan to build a which, in 1955, was an country big time,” he added. an awful lot of money.” pipeline from the main line in “It was huge. I couldn’t even McMahon had a bit of good luck, too. Prince George to Prince Rupert hazard a guess at how much awful lot of money.” “Once things started going good for him, they went reand start a retail natural gas money has been spent in the last ally well,” said McNicholas. “He invested in race horses business known as Pacific sixty something years. Oil and just simply because he thought it would be a tax write Northern Gas (PNG). – Mike McNicholas, gas producers, they have spent off. He just bought winners. So, he just made lots of The plan was trouble from fortunes. The wealth that’s been Spectra Energy money on horses. the start. taken out of here has just been “His second wife introduced him into the movie busiIt required a $36 million pipephenomenal.” ness and he invested in movies there. Again, couldn’t go line when projected revenue would only allow for a $28 Of course, the legacy of Westcoast extends beyond wrong. Instead of a tax write off, he had a tax burden, million pipeline. British Columbia. because all these movies that he invested in just did McMahon and his crew simply defied convention and “It’s all interconnected so much,” said McNicholas. wonderful.” reduced costs by leaving large sections of the line ex34550

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profiles

End of an era Jeff Lekstrom retires from Northern Lights College after 23 years increase and improve the workforce. You know, qualification, certifications, so that they can easily transition into careers in chosen pathways. As one of the industry reps [with] Northern Opportunities, I give guidance to the educational institutes as to what kind of stuff we’re after. And that’s how Jeff and I worked together a lot.” They also collaborated on specific projects, such as the recent power engineering program offered in Fort Nelson, which was sponsored by Encana, Spectra Energy and the Northeast Aboriginal Skills and Employment Program (NEASEP). “It’s stuff like that that we work on together a lot,” said Beale. “And I’m hoping to do more of those kinds of things. Of course, with Jeff going, it gives us a bit of a hiccup, but, nevertheless, that position is integral to helping industry and the education institutes work at such a high level. “We just really appreciate the touch that he’s had on thousands of students,” he added. “And his major contribution to the formation of Northern Opportunities and the Dual Credit opportunities between the high school and Outgoing Dean of Trades, Apprenticeship and Technology Jeff Leksrom talking to a pair of graduates from the power the college. He’s right at the foundation of it all.” engineering program that just wrapped up at the Fort Nelson campus of Northern Lights College. Beale puts Lekstrom’s trades background at the heart photO courtesy of Northern Lights College of his successes at NLC and his contribution to the james waterman out his tenure. industries that utilize the trades that are taught at the Pipeline News North “I’ve been his sidekick for the last 13 years,” said college. Eales, noting that that relationship began when Lek“I see him as a talented tradesman, for a start, which When Jeff Lekstrom left the Dawson Creek campus of strom was an instructor. gave him a good understanding of what’s required by Northern Lights College (NLC) so many years ago as a “The joke is that we share the same brain.” industry and also the opportunities that can be had by graduate of their welding program, he had no idea that Eales said that Lekstrom brought a similar approach getting into industry, especially early,” he explained. he would one day be leaving the school again as the deto working with the students as he brought to working “And he communicates in a very passionate, parentalparting Dean of Trades, Apprenticeship and Technology. with his colleagues at the college. thinking kind of mindset that is, obviously, technical in However, that is exactly what happened on April 27, “Truly,” she continued, “here’s a guy that supports you nature, but very, very colloquial and approachable for the day Lekstrom finally bid farewell to the college after throughout anything. Encourages you to try anything. students, parents and folks like myself in industry. a 23 year career in education that also included a stint He’d put you in situations that would allow you to experi“He runs tight, very good, well delivered programs,” as a welding instructor. ence new things, to grow, to shine and all that. he added. “And when it comes to sort of the recruitIt was another instructor at NLC who first gave Lek“But you always knew he had your back. I’ve never ment side, he’s got just a perfect pitch with parents and strom the idea to try his hand at teaching the tricks of his worked with anyone like him. And he is going to be one students.” trade when he was in Dawson Creek for a job. individual that’s truly hard to replace. Being a Dawson Creek native hasn’t hurt either, said “He said, ‘You ever thought about instructing?’” Lek“He wanted to ensure that the experience was good Beale. strom recalled. for the students,” she added. “That they got top notch “Clearly, his local knowledge, having grown up and He hadn’t yet considered the possibility, even though training and, when they left here, all that here in Dawson Creek, his father had also taught welding at the college during that they were job ready.” makes him an invaluable contribthe seventies. “I’ve worked with Jeff for the utor to both the college and then “He kind of planted the seed,” Lekstrom said of that last five years,” said Mark Heartt. “I see him as a talented local industry as he interfaces instructor. “And so the more I thought about it, the more Heartt, the other associate with us.” I thought, ‘That’s pretty interesting. I think I’d like to try dean along with Eales, is a resiLekstrom admitted that tradesman, which that.’” dential construction instructor and his roles at the college have Prior to that career change, he had been a profesthe Trades and Apprenticeship included their own unique chalgave him a good sional welder operating his own business and had also Chair in Dawson Creek. lenges, but he believes that is served a supervisory role in the mining industry. “One of the most professional true of any job. “I’ve tried to bring a trades perspective to the academmen I’ve worked with,” he added. understanding of what’s He prefers to focus on the ic world,” said Lekstrom. Heartt was self-employed prior rewards. “It is a huge part of our college,” he continued. “Trades to joining the NLC faculty and he “Helping the students and required by industry.” and apprenticeship [and] technology account for a real credits Lekstrom with making that making a positive impact on their high percentage of the student activity at Northern Lights transition an easy one. lives every day,” he said, noting – Jeff Beale, Encana College.” “Pretty much seamless bethat he had a very different view Sandra Sandvik can attest to his impact on the trades cause he didn’t micromanage of his impact on students from and technology programs at NLC. us,” he said. “When he trusted the dean’s chair than he did as As the campus administrator in Fort Nelson, Sandvik you, he trusted you to make the an instructor. worked closely with Lekstrom to bring programs such as decisions.” “You move into administration, it’s a little different,” power engineering and oil and gas field operations to the Jeff Beale never did work with Lekstrom at NLC, but Lekstrom explained. “You’re kind of behind the scenes. small Northeast British Columbia community. the two men have been colleagues of a different sort for So, you don’t get that instant gratification. They also managed to offer welding and heavy equipa number of years. “A student doesn’t say thank you for giving them a ment operator programs to students in Dease Lake. Beale, an aboriginal relations advisor with Encana, program,” he continued. “[Although] that happened for “Pretty exciting for the community to get that training has had a long relationship with the college as the inthe welding program when I was helping move it up to right there,” said Sandvik. dustry co-chair of Northern Opportunities, a partnership Fort Nelson. A student came up to me and was very “Those trips that he made up there,” she continued, between natural resource industries, First Nations, NLC emotional, and I’ll remember that to the day I die, that he “he was just amazing at selling and promoting trades and the school districts of Northeast B.C. that allows said thank you for moving the program there. He knew training to the students. He’d go into the classrooms and students to earn secondary and postsecondary credits that I had helped on the administrative side of things. talk to the kids. And could really relate to kids and get during their high school years through the Dual Credit “He was thankful because he said he would never them excited about it. That was really cool. program. have that opportunity to take that program anywhere “And then to see some programs happen in the com“It improves graduation rates for those that can get else, because his family lived up there, he couldn’t afford munity was a great opportunity for the community. He in,” Beale said of the program. “And it provides an opto attend college any other way.” just gave everything for the students to make stuff happortunity to get a leg up on trades particularly, but also Lekstrom is grateful to NLC for giving him the flexibility pen. And be there for the students. And the same for the academic and other vocational programs, too, so that to make those programs – and those moments – happen. programs we’ve done in Fort Nelson.” students basically come out with a partial first year of One challenge that Lekstrom did address is the Trades and Apprenticeship Coordinator Pam Eales, academic programs and definitely a first level [training in dynamic nature of industries that employ the trades who will also serve as one of two associate deans until a a trade]. students learn at NLC, as those changes can be both new Dean of Trades, Apprenticeship and Technology is “That’s why we work together so much,” he continued. positive and negative. in place, has also worked closely with Lekstrom through- “And, of course, as industry, we have a desire to kind of “I think it’s cyclical in nature,” he said. “You’ve got the

MAY/JUNE 2012

ups and downs of the different industries, whether it be mining or oil and gas or forestry or anything. One thing with trades, and I maintain this, is… everybody uses trades, whether you’re in the mining or the oil and gas or the forestry or the construction industry. “There’s very few programs here at Northern Lights College in the trades that are specific to one industry. That provides the versatility of people coming out of these programs to go and do a number of different things. “If one industry’s up, then they go to work in that. If that industry happens to go in a downturn, they’ve got skills that they can be transferable to other industries with. And that’s good because the trades and apprenticeship programs we have at the college are Red Seal – for the most part they’re all Red Seal trades. That gives you the ability to work across Canada. Well, basically, across the world.” The news of his retirement has brought mixed reactions from the colleagues who know him best. “I was pretty disappointed,” said Heartt. “There’s going to be some very, very big shoes to fill.” “Because I’ve known him and worked with him so closely, I wasn’t surprised,” said Sandvik. “I thought he was getting ready to make that move and make a bit of a change in his life, because he’s been with the college a long time. And I’m very excited for him. “I think this is a really cool opportunity,” she continued, discussing his plans to continue his career in education at an international level. “And I think he’s ready for that change too. He’s given

everything to the college while he’s been there.” Sandvik that Lekstrom was a good friend in addition to being a good colleague. “You can always phone and yack to him about stuff,” she said. He was always there for the staff… Good person. Going to be missed. But we wish him well. We really wish him well. Because this next phase for him will be exciting too.” Eales echoed Sandvik’s sentiments. “So happy for him in this is something that he has wanted to do for a long time,” she said. “And you know he wants to grow too.” Still, Eales is reluctant to say goodbye. “I’m very sad to see him go,” she continued. “To me, I work with the best team of people, and there’s not a day that didn’t go by that we weren’t bouncing ideas off of each other, whether it was about work or family or friends. Whatever, right? You spend so much time with the people that you work with. And to know that he’s going so far away, that’s the hard part. “I’m totally selfish. I’m so happy for him and his family. And this is wonderful. Like if he didn’t take it, I’d kick his ass. “But on the other side, it’s like, ‘I don’t want you to leave because I like this team.’ We’ve got a good thing going here. You establish a friendship and everything. And it’s like, oh, I’m losing a friend, a mentor, a support system.” However, Eales is also confident that the team Lekstrom has helped to build will be able to succeed in his absence. “This is a guy that, when you talk to him, he’s not going to bullshit,” she added. “And he’s one of those individu-

PIPELINE NEWS NORTH •

Jeff Beale of Encana presents Jeff Lekstrom with a gift in honour of his contributions to Northern Lights College and the development of the Dual Credit program through Northern Opportunities. photO courtesy of Northern Lights College

als that his word is a contract. You know, when someone says they’re going to do something and they shake your hand, that’s Jeff. “Whether it be at work or outside of work, I knew that if something happened, I could pick up the phone and there’s no questions asked. And if he says he’s going to do something, he does it. And he really looks out for everyone else. Just his whole family. “I think Dawson Creek’s losing someone.” It seems that Lekstrom is going to miss

Dawson Creek and NLC too. “I’ve been very fortunate to do something I love,” he said. “I’ve been really fortunate to work with a great group of people. The instructors here are excellent. They’re all here for the right reasons. They’re very studentfocused. “It’s just time for me to move on. I’ve been given some opportunity to pursue some stuff internationally. I’ve had a great, great career at the college. The college has been very good to me.”

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community EXTRAORDINARY EFFORTS Duncan Cran Elementary wins Shell’s Energy Diet Challenge

Ashley Nixon and Rej Tetrault of Shell Canada congratulate the students of Duncan Cran Elementary in Fort St. John on their performance in the Classroom Energy Diet Challenge on Tuesday, May 8. katelin dean photO

KATELIN DEAN Pipeline News North Two months ago, every single class at Duncan Cran Elementary in Fort St. John started a diet. And the fruits of their labour paid off. “Duncan Cran, you are extraordinary,” said Dr. Ashley Nixon, Shell Canada’s Stakeholder Relations Manager. “It’s such a privilege to come in and see what you’re doing.” No, students at Duncan Cran did not lose body weight, but they reduced the amount of energy used at the school, and they took home Canadian Geographic and Shell Canada’s big prize of $3,000. “What does it actually mean that you are the top school?” Nixon asked the elementary school crowd at a celebratory assembly. “You had nearly 500 classrooms all across Canada (competing) for this, about 11,000 school students competing for this prize. “There are schools that have won from Newfoundland all the way to Vancouver, but Duncan Cran has won the top prize, so that really is an important thing,” he continued, “because of that you get to spend some money – you get to spend some money in a great way.” The students, many of whom were dressed in green, all cheered. “I was really excited for the kids because I knew they’d be really happy with the win,” said Vice Principal Christine Todd. “They worked really hard. “It wasn’t originally about oh, we’re trying to win this prize,” she continued. She said they got involved in the competition because she really loves “science.” Nixon said the students at Duncan Cran were selected as winners because of the significant participation. “The competition is about going with 25 assignments, which were monitoring the use of energy in classrooms through to actually writing to local newspapers to say, this is what we think is important about energy in Canada, and Duncan Cran stands out in Canada because it’s the only school where every single classroom competed in the challenge, so they got the top school prize,” Nixon said. Todd noted that the school did two garbage audits,

and learned about phantom power. “We weighed all the garbage from each classroom and we wrote (down) the things that were in the garbage, what it was mostly made up of, and how we could reduce it,” she said. “And the next week, we re-weighed to see if there was a difference in their garbage.” She said most classrooms had reduced their waste. She noted that she also taught students about phantom power, which she said is looking to see what is plugged in needlessly. Even though it’s not being used, “it still draws power.” Because of that, over breaks and summer holidays, all printers and microwaves will be unplugged. “They (students) try and trick me too,” Todd said with a laugh. “What they’ll do is they’ll plug things in in my classroom and go, ‘Mrs. Todd, you got that light plugged in over there.’” She also said that she’s gotten great response from parents about the project. “Even today, I got a note from a parent who signed in the agenda saying that ‘we’re being green at home too, instead of using the dryer, we’re hanging our clothes to dry,’ which is nice to see,” said Todd. She also noted that one of their challenges also involved transportation. “We talked about how yes, there are cars, there are trucks, but we do need to get around; that’s the type of world we live in, but there are things you can do to save energy even though you’re using energy,” she said. She said one of the most important things the students learned was that they could make a difference. “From watching the children, I think the most valuable lesson is that they can make a difference and that they know they need to do something to help the world, and they shouldn’t be wasters of energy, or wasters of food, or items and that even though they’re five to 12 (years old), they can make a difference,” she said. “What’s really neat is when they tell their parents…and so maybe it’s kids teaching adults something.” Rej Tetrault, the senior Shell Canada representative in Fort St. John, was also on hand for the presentation today. “It makes me feel very proud to be part of this community and have a local school win,” Tetrault said.

Students had written and performed a song about how green Duncan Cran is. “When I heard the school song, I nearly cried,” he said. “I felt really emotional that the students felt that strongly about energy efficiency. “I really hope that this message can get carried forward to other schools next year,” he continued. “It seems like it had a great impact on the school, and ultimately that impact on the school will bring back fruit to bear in the community as well.” Tetrault noted this focus on energy efficiency is important. “There’s only a finite amount of energy and we can’t be wasteful with our energy,” he said. “We need to be really smart about how we use it, and smart about understanding where it comes from.” Nixon agreed. “Energy is vitally important in all of our lives, and some of us sometimes forget that it runs schools, it runs hospitals, it runs roads and towns like Fort St. John, and people in all walks of life often forget how important it is,” he said. “We have a contribution to play in society.” Todd said the $3,000 prize will be used in three different ways. “One thousand for a school celebration, $1,000 for school supplies and $1,000 for donations to charity,” Todd said. She noted that the charities that are being donated to were all chosen by the kids. On behalf of the school, $200 will be going to each of the following charities: Ronald McDonald House B.C., Make a Wish, Feed the Children Canada and the World Wildlife Federation. Tetrault left the kids with a bit of competitive spirit. “(Next year) you’re going to be defending your title; people are going to try to knock you guys off,” he said. Nixon continued. “You are a green school; it’s truly inspiring,” he said. “I hope that you stay with this message for a long time. “We’ve had so much success this year that we’re going to run it again next year,” Nixon said. “Do you think you can do it?” The students all responded with cheers and applause. They all yelled in unison, “Yeah!”

Duncan Cran students proudly display the banner presented to them by Shell Canada representatives for their achievement in the Classroom Energy Diet Challenge. katelin dean photO

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Mountain Rises Kinder Morgan finalizes contracts for proposed Trans Mountain expansion Daily Oil Bulletin Shippers have signed binding 20-year contracts for approximately 510,000 bbls per day of capacity in support of a Trans Mountain pipeline system expansion to the West Coast, operator Kinder Morgan Energy Partners, L.P. said today. Based on these finalized commitments, the proposed expansion will increase capacity on Trans Mountain to about 750,000 bbls per day from approximately 300,000 bbls per day at a projected cost of $4.1 billion. The final commitments were about 150,000 bbls per day less than the company announced on April 12 following the open season due to a few shippers failing to obtain the approvals of their boards. “We are pleased to finalize these binding contracts with our shippers and to refine the preliminary scope of the proposed project,” Ian Anderson, president of Kinder Morgan Canada, said in a news release. The proposed project will significantly increase market access for Canadian crude and will expand Trans Mountain by completing the twinning of the existing pipeline from Edmonton, Alberta, to Burnaby, British Columbia. An estimated 400,000 bbls per day to 450,000 bbls per day of

total capacity will be going over the Westridge Dock, said company spokesman Andy Galarnyk. Kinder Morgan will continue with consultations and work on its facility regulatory application which it expects to submit by late 2013 for a 2017 in-service date. This summer, the company plans to submit to the National Energy Board a commercial application that sets out the terms and conditions of the tolls and tariffs. Meanwhile, Kinder Morgan Energy Partners said today that shippers will be able to move only 32 per cent of nominated crudes on the Trans Mountain system in June due to apportionment. The company said uncommitted tanker nominations at the Westridge Dock in Vancouver are oversubscribed by 88 per cent while landbased nominations are overbooked by 70 per cent for an overall system oversubscription of 68 per cent. A Joint Review Panel is currently holding hearings on Enbridge Inc.’s proposed Northern Gateway project, also designed to ship Canadian crude to Asian markets. The $5 billion project consists of a 525,000 bbl per day crude oil pipeline from Edmonton to Kitimat, British Columbia and a 193,000 line bringing imported condensate back to Edmonton.

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industry news

NOT QUITE FULL SPEED AHEAD Proponents of natural gas vehicles get a jumpstart but still face roadblocks That can mean lost revenue of $40 to $50 per trip because those trucks have to carry less freight to manage their weight. Additionally, profit margins in the trucking industry can be razor thin, as operating costs are a huge percentage of the total cost of doing business and the injection of capital into the industry is low. As fuel prices rise, profit margins shrink. Competition is intense, too. According to the report, there are over 12,000 freight carriers in Canada and many of those companies experience bankruptcies every year. The decision to convert to natural gas hinges on an economic incentive that companies may not recognize considering those circumstances, unless companies simply choose to switch from a social or environmental responsibility perspective. “I don’t think that will happen until they’re basically regulated or the price of carbon is directly tied to the fuel that you’re using,” said Gill. “With that said, natural gas – there’s still significant carbon emissions that come from it as well. So, it’s not like it’s a There is a lot of hope for natural gas replacing gasoline and diesel fuel in everything from heavy trucks to the average car, such as this zero carbon fuel. You’ll be looking at basiVolkswagen converted to compressed natural gas (CNG) by inventor Bob Mann, but there is still a great deal of work to be done. cally a maximum reduction of 20 [to] 25 photO COURTESY OF BOB MANN per cent. It wouldn’t be the overwhelming james waterman “This regulation will help us build on ing freight carrier fleets to natural gas, factor. Pipeline News North our global leadership in clean transportawhich can be both positive and negative. “Given how competitive the trucking tion,” he added. “It stemmed from our interest – and industry is, I don’t really see too many Proponents for the use of natural gas Environment Minister Terry Lake our ongoing interest – in clean energy [companies] having that as their driving as a transportation fuel in British Coechoed those thoughts. and alternative transportation fuels,” said [motivation],” he added. lumbia got a boost from the provincial “By increasing the use of natural gas Vijay Gill, one of the authors of the report, If widespread conversion to natural government on Tuesday, May 15. in fleets around the province, we are discussing the Conference Board’s reagas is going to happen, said Gill, governMinister of Energy and Mines Rich making a clean transportation choice that sons for tackling the subject. ment incentives along the lines of the Coleman announced a new greenhouse reinforces our climate change leaderThe report notes the financial bennew GHG reducgas (GHG) reduction regulation designed ship and reduces GHGs,” he said. “The efits for trucking tion regulation in to promote the use of natural gas for bus, shift from vehicles that use costly, higher companies that B.C. have to be truck and ferry fleets, as well as encourpolluting diesel to those that use locally exist in the current implemented. “Natural gas is the age construction of compressed natural sourced natural gas is just another examlow natural gas “There hasn’t gas (CNG) or liquefied natural gas (LNG) ple of the many made-in-B.C. innovations price environment really been a transportation fuel fuelling stations. that are part of our green economy.” caused by the great deal [of Under the regulation, utility companies “The use of natural gas will be a big shale gas glut in incentive],” he will be able to spend as much as $62 part of the future for the transportation North America, choice of the future.” continued. million on incentives for vehicles and industry,” said Blair Lekstrom, Minister of but also points to “The biggest ferries to switch natural gas. They can Transportation and Infrastructure, noting the considerable example is what – Blair Lekstrom, also spend up to $30.5 million on LNG the cost savings for fleets that do switch capital cost of the Province of stations and $12 million on CNG stations. to the less expensive fuel. converting fleets B.C. Minister of Transportation Quebec has done The Clean Energy Vehicle program that “We are already seeing trucking comto natural gas enwith the accelerand Infrastructure was launched last November already ofpanies moving to natural gas,” he added. gines, as well as ated capital cost fers a maximum $2,500 rebate on certain “And it is a part of BC Ferries’ long-term the problems of allowances (CCA) CNG vehicles. vision. inadequate refuelthat they’ve proColeman suggested that it is all about “Natural gas is the transportation fuel ing infrastructure and the limited range of vided for natural gas trucks. The gist of it taking advantage of the natural gas choice of the future.” natural gas vehicles compared to trucks is if you’re based in Quebec, and you buy supplies in B.C. and shifting to less The announcement of this new regulastill burning diesel. a natural gas truck, you’re going to be carbon-intensive transportation fuels than tion comes shortly after the April release The process of increasing the energy able to write it off a little bit more quickly gasoline and diesel. of a new report from the Conference density of natural gas by either comthan you can in other jurisdictions. That “It makes sense to develop a market Board of Canada discussing natural gas pressing or liquefying the fuel also adds helps in terms of absorbing a bit of that for natural gas transportation here in as a transportation fuel in the trucking to costs. capital cost. B.C. by using our abundant natural gas industry. Compounding the capital cost concern “That’s worth about a few thousand reserves,” said Coleman, also noting the Cheap Enough? Making the Switch is the fact that LNG trucks tend to be dollars or so. It’s not worth forty or fifty potential for new jobs as the popularity of from Diesel Fuel to Natural Gas ad400 to 500 kilograms heavier than diesel thousand dollars. But that’s the main difnatural gas vehicles (NGVs) grows. dressed the financial aspects of converttrucks due to the mass of the LNG tanks. ference. We really haven’t seen any other

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A glimpse under the hood of one of Bob Mann’s compressed natural gas Volkswagens. photO COURTESY OF BOB MANN

A prototype of the the compressed natural gas refuelling system designed by Bob Mann. The system would allow natural gas vehicle owners to fill two gallon reserve tanks in their own homes. photO COURTESY OF BOB MANN

provinces do that. I’m not sure if it’s on the agenda. But I think that’s the type of thing that the trucking companies… would like to see on kind of a national level.” Interestingly, the report notes that natural gas as transportation fuel has been exempt from the sort of excise taxes put on diesel fuel. “That, in itself, is actually a much larger benefit than any CCA rate increase,” said Gill. “Perhaps,” he added, “if they wanted to promote the use of natural gas in the sector, part of that would be being clear about whether or not you’re going to maintain that exemption. As we’ve seen in the past with other fuels, at any time, really, the federal government or the provinces could come and start taxing it as they do diesel if it becomes popular. And that’s an uncertainty for anyone who wants to adopt the equipment. “I would say that whether or not the federal government or the provinces want to promote the use of the fuel, they should be clear about what they want to do with the excise tax. “The worst thing that can happen is, over night, they just decide – the province or the feds – that they’re going to start taxing it like they do diesel. The best thing they can do is say, ‘We are or we are not going to do this. And here’s when we’re going to do it.’ “And you do it five or ten years out. So you can say,

“We only have five natural gas pumps in the state, ‘Look. We recognize there’s an exemption right now. It’s they’re owned by one guy, and they’re $2.45 a gallon,” not really for any particular reason. It just happens to Mann explained. “He’s got a gouge in and nobody cares. be it’s not used much as a transportation fuel.’ And they But all our city trucks and buses are all run on it. It’s a might say, ‘We’re going to keep it exempt for ten years great gig. I wish I had his gig.” so you don’t have to worry about us coming in after Mann began researching pumps that would allow him you’ve made the decision to jump in the market and all to refuel his car using the gas line into his own home, of a sudden taxing it.’” discovering that they can cost over $4000 and can reAnother question regarding the use of natural gas as quire as long as seven hours to fill the gas tank. a transportation fuel concerns what the average motorHe quickly thought ists can do if there of a solution. aren’t certified natural Mann’s company, gas conversion kits NatGasIt, is curfor their vehicles or if “Whether or not the federal rently participating their jurisdictions lack in MassChallenge, adequate refueling government or the provinces want a competition that facilities. gives entrepreneurs Bob Mann, a mechanic turned invento promote the use of the fuel, they the opportunity to win funding and tor from Boston, Masmentorship for their sachusetts, is busy should be clear about what they startup businesses. working on solutions “We have a small, to those problems want to do with the excise tax.” reserve-type tank,” right now. he said. “Low cost, “I grew up in a high pressure, and stock car racing – Vijay Gill, can handle the deal. world,” said Mann. Conference Board of Canada Presently, in the “Daytona. My father home market, these was a big engine residential pumps builder and race car are a long fill time. They can take anywhere from six to builder.” seven hours to fill a car, which works. It’s fine. Consequently, he has a long history of experiment“But we’re trying to develop a little different way of ing with cars, experiments that turned more and more going at it where we have a small reserve system for the toward natural gas when he saw gasoline prices start homeowner or the fleet type or smaller business operaclimb the charts. tor. It will give them like a two gallon quick fill.” “I started to research heavily on natural gas and found Mann is also interested in creating a system similar that it wasn’t all that hard,” said Mann. to propane tanks for barbecues where gas stations or “And I did my first Volkswagen Beetle with a low cost convenience stores can actually provide those reserve kit out of Argentina. And that worked well. And then from there I just progressed to some other more sophisticated tanks, reducing the need for fuelling stations. However, pumps are the key ingredient. kits out of Europe and developed some of my own com“Without pumps, and pumps for everybody, we’re still ponents to work around them.” where we are today,” said Mann. A big obstacle, however, is access to fuelling stations “Not very far.” in Boston. 28392

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environment

strong and free Shell True North Forest could be a sanctuary for a diverse array of boreal wildlife

True North Forest, a new conservation project developed by Shell Canada and the Alberta Conservation Association, offers a taste of both the history and the ecology of the landscape. JAMES WATERMAN photO

james waterman Pipeline News North Just west of Spirit River, Alberta, there is a tract of land where elk graze, chorus frogs chirp and red-tailed hawks patrol the boundaries between the fields and trembling aspen stands in search of prey. It is a land that has largely been home to hay and cattle since early settlers first bought the farm equipment that is now rusting in the grass and built the pioneer log homes that are still slowly crumbling around their antique woodstoves. It is also a land sparsely dotted with small oil wells, pipelines stitching seams of atypical plant life across the landscape. That 740 hectares just south of Moonshine Lake Provincial Park, Blueberry Mountain Conservation Site and a popular birdwatching site at Jack Bird Pond was purchased by Shell Canada and the Alberta Conservation Association (ACA) this April with the intention of managing the habit for its many wild residents, including the barred owl, which is a Species of Special Concern provincially. Ungulates such as elk, moose and mule and white-tailed deer are expected to support carnivorous predators like cougars, not to mention the ubiquitous black bears who have left their claw marks on

almost every large aspen in that forest. Fox hunt smaller game in the meadows and woodpeckers such as yellow-bellied sapsuckers find their food and chisel their roosts in the trees. It may even be home to some of Alberta’s dwindling population of sharptailed grouse. “We’ve been working in partnership with Shell since 2007,” said Darren Dorge, Land Program Manager with ACA, explaining the joint venture with the oil company to preserve that piece of nature. “We’ve got focus areas set up, up in the boreal there,” he continued. “Obviously, this property is in one of the focus areas already. And then we heard of the opportunity of this guy potentially going to sell. So, we approached the landowner and approached Shell with the opportunity and all that. And it ended up working out perfect.” The tract of land near Spirit River – now known as the Shell True North Forest – was identified as an ideal parcel for ACA and Shell to acquire through Geographic Information System (GIS) analysis of the ecosystem. “There’s a number of different criteria that we use when we do the GIS analysis,” said Dorge. “Obviously, it brings up these areas of importance. And then with

Shell, obviously, they’ve got an interest in that area as well. “This one obviously fell into our lap from a number of different criteria,” he added. The spruce and aspen stands combined with river valleys caught the eye of ACA. “It’s just the whole diversity of the property as well,” Dorge continued. “There’s a diversity of habitat types on there. It’s important to so many different species. I think there’s four kilometres of riparian area there associated with the river running through the property. Obviously, that’s pretty important as well. And from a species perspective, there’s obviously a variety of different wildlife. “From a diversity perspective, it’s obviously pretty important.” Shell is tackling these types of shortterm conservation initiatives because of the long timeframe of land reclamation projects in their oil sands operations. During the course of the decades necessary to reclaim those sites, Shell can help conserve significant parcels of natural spaces. Their efforts have led to the conservation of land equivalent to fourteen percent of their Jackpine and Muskeg River Mine operations at this point. “Overall, from an ACA perspective, working with these companies is a great thing,” said Dorge.

The True North Forest is home to many animal species. Boral chorus frogs (left) can be heard calling for mates during the spring, while signs of elk (right) can be seen all year, even if it is just scat, tracks or this skull, which may also be evidence of predators. JAMES WATERMAN photO

“They know that they’ve got a little bit of a footprint on the landscape,” he continued, adding that ACA’s Corporate Partners in Conservation Program (CPIC) has been a great way to help the organization and the oil companies achieve their conservation goals. Energy sector participants in that program also include oil heavyweights Suncor, Syncrude, Canadian Natural Resources, Devon and PennWest Energy. Interestingly, other oil companies such as Paramount Resources have producing wells on the property at this time. Those companies will be receiving information from ACA about the acquisition of the land and their plans for its future. “Once those wells expire or whatever, then there’ll be a reclamation plan for those areas,” said Dorge. “And we’ll work directly with that company there on reclamation plans.” Baseline inventories of plant and animal life are first on the agenda. “They’ll kind of do a bit of a mapping exercise on what vegetation is there, what wildlife species are there, come up with some recommendations on how we could make that site better from a wildlife perspective,” Dorge explained. “It’s quite a detailed inventory. And we’ll end up getting a report at the end there that summarizes all the pertinent information on that property.” That information will be used to develop a management plan, although ACA is already certain that they will continue to manage some of the hayfields as hayfields to benefit elk – the area is an important elk corridor – and other ungulates. “It is an important winter range for elk and other ungulates as well,” said Dorge. “But the big thing is, with the elk, we’re hoping we can attract them into those areas, especially during the winter months. If we can control some of the elk depredation on surrounding lands by attracting some of the elk onto this property, obviously, some of the local landowners will benefit from that as well. “We can keep a lot of those elk numbers on that property by managing those hayfields and keeping them pretty productive,” he added. “They’re obviously going to be pretty attractive to species like elk.” ACA might also start a tree planting program on the site to spur reforestation. “We can throw that draft management plan by Shell as well,” said Dorge. “They may have a couple of objectives they’d like to see happen there too. It’s a good partnership thing. That collaborative effort, I think, is huge there.” A variety of land uses for the forest are also under consideration, including its potential as an educational tool for local schools. “If they were going to do a field trip or something,” said Dorge. “And a site like that, where it’s got the variety of species of wildlife and the diversity of habitat and all that there, it would be a great little educational site for them as well. So, definitely open for those opportunities.” It could also be used by everyone from hikers and hunters to birdwatchers and nature photographers. “And it’s basically done by foot access only.”

industry news

MAY/JUNE 2012

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ziff has his say Energy industry expert says it is time to get creative to solve low price woes james waterman Pipeline News North Ziff Energy Group CEO Paul Ziff added his expert voice to the ongoing discussion over the plight of natural gas prices in North America with the release of a white paper this April. Natural Gas Under Siege discusses the causes of the low gas prices as well as solutions to that problem in terms of creating greater demand for the product and reducing the supply until prices recover. Basically, the conclusion is that the industry must apply the same sort of “ingenuity and creativity” that led to the shale gas glut – a significant cause of low gas prices – toward creating or accessing new markets for the fuel. Driving unconventional natural gas demand is essential, according to Ziff. His paper noted that exports of liquefied natural gas (LNG) from both Canada and the United States would be a key ingredient to that solution. He is also optimistic about a joint venture between Talisman and Sasol to produce synthetic crude oil from natural gas in British Columbia, turning a low price commodity into diesel or other more energy intensive fuels. Ziff also endorsed policies that would encourage the use of natural gas as a transportation fuel. Replacing coal with natural gas for power generation and increasing the use of ethanol – which is produced from natural gas – in gasoline were also discussed in terms of more conventional demand solutions. The report also emphasized the need for “cost discipline” by natural gas producer. “Not only to constrain current gas drilling until more of a supply/demand balance is achieved, rather to shut in gas production from gas fields that can be produced later,” wrote Ziff. “A minority of producers are doing this, however, to a very modest extent.” The need for these solutions is fairly urgent, according to Ziff, because “all producers are losing a ton of money” with gas prices being too low to recoup operating costs. The question is how long this depressed price environment can last. Rig counts have declined across North America since hitting their peak numbers. The U.S. peak was 1500 rigs in 2008, but the number of active rigs is considerably lower now. The Canadian peak was just 360 rigs in 2005 and 2006. The 2012 estimate is just 360 rigs.

R001113598

Paul Ziff, CEO of Ziff Energy Group, explained in his most recent white paper that the full cycle cost of producing natural gas in North America is far too high for industry activity to be economic in the current depressed gas price environment. IMAGE COURTESY OF ZIFF ENERGY GROUP

“But these figures tend to understate the better. level of actual effective drilling, as a major“Look for natural gas prices to fall off a ity of wells are now drilled horizontally cliff,” he said, conjuring up the image of into the shale and tight gas reservoir, and Niagara Falls. therefore yield more reserves and produc“That is what gas prices should look tion than prior like – a large and vertical wells,” Ziff sudden rapid fall,” cautioned, sughe continued. gesting that dwin- “Gas will be the power... “Many gas dling rig counts producers have aren’t necessarily source of the future.” closed their an indication of mailboxes and decreasing supmay not have replies, which could ceived my memo; – Bill Gwozd result in higher however, it will Ziff Energy Group gas prices. be a real brutal According to Bill summer. Pity the Gwozd, Vice President of Gas Services poor gas producer!” with Ziff Energy, the situation is likely to Interestingly, the industrial sector doesn’t get worse for gas producers before it gets mind where gas prices sit today, Gwozd

added, noting that the low gas prices are also good for the natural gas vehicle, gasto-liquids and LNG export sectors. Big winners are oil sands producers that use large amounts of natural gas in steam assisted gravity drainage (SAGD) operations. The losers are those who receive the royalty payments, such as the provinces of Alberta and B.C. The problem won’t be rectified quickly either, Ziff remarked in his paper, as increasing demand will have a very gradual effect. Still, he suggested that there is reason for optimism over the long-term, particularly when it comes to the use of natural gas for power generation. “In my view,” said Ziff, “gas will be the power generation source of the future.”

• PIPELINE NEWS NORTH MAY/JUNE 2012

industry news Merger of Environment and Sustainable Resource Development part of new Alberta cabinet cont’d from pg 4

Rights Advocate Act, which only became an election issue towards the end of the concerned,” she added. campaign, because it is considered a A great deal of the criticism stems from paper tiger by land and mineral rights a report published by the Health Quality owners concerned about the powers Council of Alberta (HQCA) this February granted cabinet through Bills 19, 24, 36 that identified Alberta Health Services has and 50. an impediment to physicians adequately They charge that the Property Rights advocating for their patients. Advocate would have no real power or Words such as “muzzling” and authority to help them receive adequate “intimidation” were used in relation to compensation for land or mineral rights administrative bodies in the health care lost by the government exercising the system – including Alberta Health Serpowers given to them by those four bills, vices – stifling the advocacy process which include the power to rescind minby some physicians that were polled by eral leases under Bill 36, the Alberta Land HQCA when they were compiling the Stewardship Act. report. It was considered a fairly rural issue, However, the report also indicated but Brownsey believes it resonates in the that other physicians polled had positive cities as well. advocacy experiences and positive feel“This is a basic, fundamental issue,” ings about Alberta Health Services when he said. “And the oil and gas guys who it comes to advocacy. are giving all kinds of money over to the “He’ll have to explain it,” said Wildrose Alliance, it’s my understanding Brownsey. “And he can explain it by saythat some of them woke up to the probing, ‘It’s a different government today. We lems that this could cause when it was were constrained politically back then.’ described to them exactly what property Easy to do.” rights meant. Hughes doesn’t seem to feel a need to “The Wildrose Alliance will make this explain anything at as issue,” he this point. added. “But if the “The electors Conservatives of Calgary West “Looking at play their cards had a chance to right, it won’t be fully review that environmental oversight an issue much issue and their longer. They vote at the end of can keep the of air, land, water, the day was quite Wildrose in the resounding,” he rural areas. And, wildlife – all those said. like many other “That’s all I’m protest parties issues under one going to say on the right, they about it.” will fade.” Smith also umbrella – makes good Brownsey criticized Redford wasn’t impressed for not appointby the merger sense in terms of being ing an MLA from of the Ministry the Fort Mcof Environment efficient.” Murray region and the Ministo her cabinet try of Sustainbecause of the able Resource – Ken Hughes, significance of oil Development Alberta Energy sands operations (SRD) under the in that area. direction of Diana “I would be McQueen that accompanied the cabinet working very closely with the two MLAs appointments. from the Fort McMurray area,” said “Contradictory,” he said. “Any enHughes. “And I’ve spent time there. I vironment department, their job is to have a reasonably good grounding in the protect the environment, not necesdynamics of the community.” sarily to promote development. And I That is only the beginning of tough think McQueen will have difficulty, on issues facing Redford and her governthe one hand, to address environmental ment when they return to the legislature, concerns at the same time promoting according to Brownsey. resource extraction.” At the top of that list is the Property CAPP feels the realignment makes

Rookie energy minister Ken Hughes is confident that he can handle one of the most important portfolio’s in Alberta Premier Alison Redford’s new Conservative cabinet. photO COURTESY OF ALBERTA ENERGY

sense. “Looking at environmental oversight of air, land, water, wildlife – all those issues under one umbrella – makes good sense in terms of being efficient,” said Davies. “Especially if you’re going to look at cumulative effects as an important piece going forward, you want to have that all in one spot.” Davies also noted that the merger is a logical decision considering the move towards creating a “one stop” regulator for the oil and gas industry. “I think that speaks well to how they’re going to enhance the regulatory process going forward,” he said. “That talk has been around for at least a decade,” Brownsey said of the “one stop” regulator idea. “I’ve heard this talk for a decade and I haven’t seen any action on it,” he continued. “This may be the time when we see some action on cleaning up the regulatory process a little bit. For oil and gas

companies, that probably is – well, I know it is – just as frustrating as dealing with … stakeholder groups.” Regardless, Hughes is looking forward to working closely with McQueen. “She’s a very strong minister,” he said. “She has very good depth in her areas of responsibility.” Hughes is also excited about being part of the new blood in cabinet. “There’s a real energy around the table, I can tell you,” he said. “There’s a real sense of excitement.” Hughes is confident he can bring something to the table, too. “I’m a businessperson that can bring the best practices from business to the table and that includes helping ensure that regulatory processes are streamlined, but [that] the outcome is respectful of the requirement to develop resources appropriately from an environmental perspective as well.”

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BEST FOOT FORWARD CAODC hands out safety awards to drilling and service rig crews james waterman Pipeline News North Companies operating drilling and service rigs took some time out of their busy schedules to celebrate their health and safety records at a pair of Canadian Association of Oilwell Drilling Contractors (CAODC) awards banquets held on April 14 and April 28. Approximately 2300 drillers and drilling rig managers received awards at the April 14 banquet in recognition of surpassing 200 days without a recordable health and safety incident. “What it means is that there was no medical treatments, there was no lost time, there was no restricted work,” explained CAODC president Mark Scholz. “None of those existed on that rig or with respect to that individual and those that he supervises,” he continued, “For example, a driller could only be recordable [incident] free if himself and those that are below him – so, pretty well the entire crew – is recordable [incident] free.” The Safety Excellence Award for the drilling group was given to Rig 50 of Ensign Energy Services. “On the drilling side, we have actually gone away from recognizing individual companies and focused on the individual,” said Scholz, discussing the Safety Excellence Award, which was only presented for the second time in the 32 year history of the CAODC safety awards this spring. “This award is all about the individuals that really have the most skin in the game and are the ones that are making those cultural changes, changing the attitudes of safety in the field,” he continued. “And those are the ones that we want to recognize. So, we’ve kind of changed the focus from more specific to the companies and focused on the guys.” Every CAODC member company is given the opportunity to nominate an individual or a whole rig for the award. “And so that’s one way for us to really focus more of the limelight … on the guys,” Scholz added. Service rig contractors earned just over 1400 awards, which were presented at the April 28 ceremony, including the Safety Leadership Awards, a competition

between companies that is divided into However, according to Scholz, it is just four categories based on man hours. as important to show the public the reality The Class D award was shared by Deof the industry and life on the rigs in this narii Well Servicing and Alberta Heavy Oil day and age. Well Servicing, while the Class C award “A phenomenal career prospect to went to Treeline Well Services, the Class those that are looking for a rewarding caB award went to Essential Well Services reer [and] an extremely safe and diligent and the Class A award went to Precision industry that really looks after its people,” Drilling. said Scholz. Rig 6 from Global Well Servicing He believes the safety awards help received the Safety Excellence Award on spread that message. the service rig side. The numbers don’t lie either. The in“This year is probably the first year that dustry has seen significant improvement we have taken a very aggressive stand to in its Total Recordable Incident Frequenpromote this to the general public,” said cy (TRIF) over the past decade. In 2001, Scholz, discussing the organization’s efthe TRIF was over 15.00, but it was only forts to address common misconceptions 4.87 in 2011 and has been below 5.00 about the health and safety record of the since 2009. The industry wants its TRIF drilling and service rig industries. This to be as low as possible. has also included launching a service rig “Predominantly, there has been a careers and training website in the fall cultural shift,” said Scholz, explaining the and re-designing the drilling rig careers low TRIF. and training website for its re-launch this Along with that cultural shift, said winter. Scholz, there has been the development “It’s not an unusual number of safety of new technologies and health and awards [comsafety systems that pared to what] we have contributed to have issued in improving the rethe past,” Scholz cord of the industry. “This industry is continued. “It’s just not “What is difacceptable to extremely serious ferent [this year] hurt people,” he is that we are “And I think about safety. It’s one added. saying, look, we we have a social have promoted license to operate of the priorities.” this inside of our now. industry very well “The industry, I – I mean, there think, has said – – Mark Sholz, CAODC are many indilook, we need to viduals within the do a better job, we drilling and service want to protect our rig contracting people. And they community that got serious. And understand the significance of these they actually dug their heels in and they awards – but it hasn’t been until … this said, look, let’s get serious about safety. season of awards that we’ve wanted And we’ve seen the success of that posito take this and show it to the broader, tion and those priorities over the course general public. of the decade.” “And show the public that this industry Scholz credits the Certificate of Recogis extremely serious about safety. It’s one nition (COR) system whereby health and of the priorities that we have and we’ll safety management systems are audited continue to have down the road.” and evaluated with contributing to the It is important to show the public that cultural shift, particularly in Alberta and the oil and gas industry has a positive Saskatchewan. impact on the economy and the “general “We have seen that those that have a standard of living of Western Canadians safety management system tend to have and all Canadians,” said Scholz. better safety performances,” he said,

adding that those contractors often stand a better chance of being chosen for work by producer companies as well. It is an industry that has its health and safety challenges, Scholz admitted, noting that one of those challenges is the labour shortage so often discussed with respect to Western Canada’s oil and gas sector. “There is a tremendous demand on contractors to quickly train and bring competency to the workforce to be able to take advantage of the level of activity that there is in the industry,” said Scholz. “There’s that level of demand on companies to really recruit individuals, get them trained, and then get them into the workforce so they can basically do the business that they’re asked to do. “Right now,” he continued, “companies have to deal with [the fact] that there are a number of green hands in the field. And it also is important for the senior crew members to really take the bull by the horns and use the leadership and the discipline that they’ve learned over the years to mentor these young folks, to make sure that they’re safe and that they’re watching out for one another. That is definitely a challenge.” Also, as far as the labour shortage is concerned, Scholz believes that drawing more attention to the CAODC safety awards and the safety record of the industry of a whole could help bring new workers onto the rigs who may have previously been deterred by misconceptions about the risk associated with the profession. “For whatever reason, even today, with the advances of health and safety within the industry, we have still managed to have this negative perception of the industry” said Scholz. “I think they’re not realistic comments or views of the industry [today],” he continued. “I mean, certainly things have changed. The really nice story behind giving out thousands of safety [awards] is that it does send a message to young folks that this is an industry that’s really committed to health and safety. “And it’s an industry that I think really values the leadership of individuals that want to keep people safe and make sure that they get home safely to their families.” 33551

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industry news

LNG projects big part to Spectra Energy expansion plans Daily Oil Bulletin

Spectra Energy Corp is poised to invest an additional $4 billion to $6 billion in British Columbia beyond 2015 in projects anticipated to include pipeline infrastructure in order to serve LNG export facilities on the B.C. coast. Further infrastructure development also will be required to unlock additional growth in the Montney, Horn River and other developing natural gas resource areas, said the company. Opportunities include additional natural gas gathering and processing services; extraction of natural gas liquids in the Montney region; and new pipeline transmission capacity to deliver incremental unconventional natural gas supplies to cur-

rent – and emerging – North American markets. Spectra is currently making progress on its $1.5 billion B.C. expansion program in the 2009-2013 period. The program was designed to safely, reliably and responsibly develop the necessary natural gas infrastructure to meet B.C.’s domestic natural gas needs, as well as those of other energy markets in North America. It includes construction of two new natural gas processing facilities in northeast B.C., including associated natural gas gathering pipelines, and further expansion of the company’s natural gas transmission system in B.C. These projects will create more than 1,350 construction jobs and result in $120 million in contracts with northeast B.C.

First Nations and local contractors in the province. In addition, as a result of Spectra Energy’s extensive infrastructure and ongoing investments in B.C., the company’s annual property taxes now total $64 million, making it the single largest contributor to property taxes in the province. “I’m pleased that we’re aligned with the province of B.C.’s natural gas and LNG strategies and am confident that our shared interests in job growth and economic development activity will continue for many years,” Doug Bloom, president of Spectra Energy’s western Canadian operations, said in a news release. “We’ve been investing in communities across B.C. since 1957 and believe we are an integral part of the province’s

energy sector.” As the industry continues to develop natural gas supplies in B.C. to meet its domestic energy needs, Spectra also is looking farther afield to Asia where countries are looking for increased supplies of natural gas from diverse and stable suppliers, he said. Spectra is committed to in-depth consultations with community members across the province as it looks ahead to large-scale pipeline projects that will connect natural gas from B.C. to Asian markets, said Bloom. “We fully intend to incorporate local input into project design and ensure maximum benefits for communities across the province as we continue to grow our business.”

Hockey tournament raises $81,000 for Hospital Foundation james waterman Pipeline News North The Fort Nelson Hospital Foundation has approximately $81,000 to add to its equipment fund thanks to the Horn River Basin Charity Hockey Tournament that took place at the Northern Rockies Regional Recreation Centre (NRRRC) on April 17-19. The funds raised during its second year was a modest improvement over the first annual tournament, the brainchild of a handful of local businesses and the members of the Horn River Basin Producers Group, a collection of oil and gas companies operating in northeast British

Columbia. “They wanted to host a charity hockey tournament,” explained Carla Peace, executive director of the Fort Nelson Hospital Foundation. “And they approached the Hospital Foundation to be their charity of choice.” The inaugural event involved 94 players on six teams and the proceeds allowed the hospital to acquire eight new electric beds and therapeutic mattresses. Participation increased this spring with 106 players on eight teams and a Blue Jeans Banquet featuring silent and live auctions that also contributed funds to the Hospital Foundation. “It was a huge success this year being

that we were all in the new Northern Rockies Regional Recreation Centre,” said Peace. “That made a huge difference to the participants. “And it’s just going to get bigger and better as we continue to be successful,” she added. It hasn’t yet been determined how the funds will be used this year. “The hospital kind of helps us determine where the greatest need is,” said Peace. Peace is impressed with the support from the energy sector and the involvement of those companies in the Fort Nelson community. “We have great corporate support all

the way from Calgary to Fort Nelson,” she said. “And it’s absolutely amazing. I think we had more corporate sponsors this year than we’ve had ever in the past. “It’s a really good opportunity for them to give back to the community that they’re working in,” she continued. “And especially it allows them to really feel invested in the care of their employees and their staff that’s in the field, being that their partner is the Hospital Foundation.” Peace was also impressed with the caliber of hockey during the tournament. “The teams play to win the Horn River Basin Charity Cup, [but] the real winner in the whole thing is the hospital.”

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Canada Must Act Fast On LNG Daily Oil Bulletin Canada only has until the end of this decade to build up its liquefied natural gas industry or face being overtaken by other countries looking to cash in on booming demand for the fuel throughout Asia, Royal Dutch Shell Plc’s chief executive said on Tuesday. Shell, which plans a multibillion-dollar liquefaction plant on Canada’s West Coast, believes Ottawa’s controversial moves to streamline regulatory reviews for energy projects are necessary to avoid missing the opportunity as the Asia-Pacific LNG market is forecast to double by 2030, CEO Peter Voser said. “A lot of projects are coming in over the next five to six years, and then there is kind of a window. Then we can see, already, later on after that window the next wave coming,” Voser said after meeting the oil major’s Canadian staff in Calgary. “So there’s clearly a window to be captured.” This month, Shell, along with part-

ners PetroChina, Kogas and Mitsubishi Corp., detailed plans for a two bcf a day LNG plant at Kitimat on the Pacific coast to be in service by around 2020. It joined at least two other groups planning similar plants at that port, one led by Apache Corp. and another that includes the Haisla First Nation. None of the proponents have sanctioned the projects yet. Canada’s gas industry, buffeted by depressed North American markets, is looking to the Asian market as massive gas reserves get unlocked in the Horn River shale basin of British Columbia and in other deposits. Shell has a growing British Columbia unconventional gas play called Groundbirch. That prospect, along with LNG plans and massive Alberta oilsands and heavy crude holdings, will account for a growing percentage of Shell’s worldwide spending, which is now about $32 billion annually, Voser said. Prime Minister Stephen Harper’s Conservative government is proposing

a series of legislative moves to speed up approvals of projects, including putting fixed timelines on reviews and taking final decision-making away from the regulators and handing it to the federal cabinet. Green groups complain that the streamlining amounts to gutting environmental protections. “I’m aware of what is the discussion -- effective, efficient and time-bound -- and at Shell we would be very happy to use British Columbia as a test project for that,” he said. “I think we need to work on this new regulatory framework, and personally think it can be done, and it can be done in a reliable and sustainable and environmentally adequate way so that you can have all these discussions you need to have upfront.” “If this upfront period is 10 years, then others will fill the hole.” The company’s biggest project in Canada is the 255,000 bbl-a-day Athabasca oilsands project, in which it has a 60 per cent stake.

Current plans are to increase that by 80,000-90,000 bbls per day through the end of the decade in three phases of “debottlenecking” the current equipment. That can be done at oil prices of less than $50 a bbl, or less than half the current Brent crude price, Voser said. The company is also awaiting regulatory approval for its steam-driven Carmon Creek oilsands holdings in Alberta’s Peace River region. On Monday, Shell said it was selling another development, known as Orion, so it could focus on Peace River. “It is not making the ranking internally. Carmon Creek is a long-term technology play, where we think we bring different strengths to the table. We want to develop that huge resource,” he said. Current plans call for two 40,000 bbla-day phases over the next decade. Voser said he expects Canadian oilsands spending to rise into a high single-digit percentage of Shell’s overall budget, up from five per cent to six per cent currently.

Ernst & Young pins Canada’s LNG hopes on joint ventures and partnerships Daily Oil Bulletin Joint ventures and partnerships could make all the difference between capitalizing on global liquefied natural gas opportunities in Asian demand markets and losing ground to foreign suppliers, says a new Canadian Ernst & Young report. According to the new report, “Rising to new challenges in the face of global demand: liquefied natural gas in Canada,” countries around the world are capitalizing on Asian LNG demand and fast becoming powerful threats to potential Canadian market share. “Total Pacific basin demand is expected to rise from 120 million metric tonnes today to 241 million metric tonnes per annum in 2020, and exporters in Australia, Russia, Malaysia and Qatar have been quick to respond,” says Lance Mortlock, of Ernst & Young’s oil and

gas practice. “These countries are already well on track to developing the necessary infrastructure to fulfil the needs of this expanding market – leaving little room for Canada.” Seven U.S. LNG terminals have also been filed for application, which, if approved and built, could put them ahead of Qatar in export capacity, changing the regional dynamics in Asia significantly. While Canada has immense domestic gas reserves, it lacks the population to consume supply. Now add reduced demand from the U.S. – Canada’s only external customer – following the shale boom as well as sustained low gas prices, and Canada is facing limited opportunities for LNG development. “To avoid losing out on opportunities in emerging demand markets, Canada must accelerate infrastructure development, seek new capital sources, and tie down

long-term customers,” says Mortlock. An estimated C$50-billion industry investment is expected to be needed over the next five to 10 years if western Canadian producers are to take full advantage of opportunities in Asia, says Ernst & Young. But LNG projects can be too big and too risky for companies to tackle on their own. Pursuing JVs and partnerships will allow Canadian companies to accelerate their LNG plans. However, with JVs and partnerships also come many complexities. Companies must consider the various aspects of their business operating model, including strategy, business processes, information systems, structure and governance, leadership people management and corporate culture. All will be critical for success, says Ernst & Young.

Duvernay shale could rival Eagle Ford Daily Oil Bulletin Alberta’s Duvernay shale could turn out to be a liquids-rich play similar to the Eagle Ford shale in Texas if successfully proven up, says John Manzoni, president and chief executive of Talisman Energy. “We’re optimistic this will prove to be another liquids-rich shale rather like the Eagle Ford,” Manzoni told the company’s annual meeting on Tuesday. He said Talisman will continue to progress its understanding of the Duvernay, where it has a large land position. In the first quarter the company drilled the second well of a six-well Duvernay pilot program planned for this year. Responding to reporters questions after the meeting, Manzoni said evaluating such plays takes time: “You can’t get ahead of the rocks.” With many industry wells being drilled into the Duvernay, there’ll be plenty of data to assess. “There’ll be lots of people who get all excited very quickly, but, you know, this is a long game,” he said, adding that Talisman has been “sensibly paced” on its Duvernay program. “The Duvernay has the potential to

be Alberta’s very own liquids-rich shale -- which would be fantastic if it works,” he said. “And I think you will find through the course of 2012 as industry drills a number of wells, there’ll be some mixed results in the early stages.... There’ll be ups and there’ll be downs... but nothing we see so far is discouraging.” Asked for his views on tight oil, Manzoni suggested the jury is still out on most of these plays. “I think it’s a little early to call,” he said about tight oil plays in general while acknowledging successes such as the Bakken. The Talisman CEO believes tight oil potential is enormous, but “a lot of it has to do with economics. We know the oil is there. The question is: How do you get it out?” While numerous tight oil plays are being touted, most “don’t add up to much yet. So I think we’ve got to wait and see.... [It] will take a little time,” he said. The Duvernay’s liquids potential is consistent with Talisman’s current strategy in North America, where it has shifted capital out of dry gas in response to the lowest gas prices in a decade. In Asia, meanwhile – which now accounts for roughly one-third of Talisman’s gas production – the company is getting

about $10 an mcf, Manzoni told shareholders. In the United States, “we’ve redirected substantial capital from our Marcellus operations – which [produce] dry gas – to the Eagle Ford [which is] 50 per cent liquids, so it’s probably the most profitable shale play in North America today,” he said. In the Pennsylvania Marcellus, Talisman’s gas production was 529 mmcf a day in the first quarter, up 51 per cent from the first quarter of 2011. The company reduced the number of rigs from 10 at the end of December to one in April. Talisman continues to ramp up its development program in the Eagle Ford, where it is currently running 12 rigs, up from 10 at year-end. In the first quarter, Talisman signed a number of deals with midstream companies to secure significant, long-term egress for its Eagle Ford output. In the Montney play in northeast British Columbia, Talisman has reduced its rigs from 11 at the end of 2011 to four currently, and plans to further cut this to three. Talisman is weighing its long-term options for Montney gas. Because of the size of its Montney resource – 20-30 tcf of gas – Manzoni believes converting the gas – either to liquid fuels using gas-to-

liquids (GTL) technology, or to liquefied natural gas (LNG) for export – would make strategic sense. Nearly a year ago Talisman completed a previously announced joint venture agreement with South Africa’s Sasol to explore the economics of converting its Montney gas into higher-value fuels such as diesel. Sasol is a world leader in the conversion of gas into liquid fuels. Sasol and Talisman have been doing a pre-feasibility study for nearly a year, and in the next few months Talisman will decide whether to take the evaluation to a further stage, which would include front end engineering and design (FEED) work for a potential gas-to-liquids plant. “That would be ... a hundred or so million dollars of investment into a FEED study, but it wouldn’t be a final [investment decision],” Manzoni told reporters. Keeping its options open, Talisman is also weighing the economics of converting its Montney gas to LNG, though it has said relatively little about that alternative. “We’re a bit less public, but we are in various conversations about possibilities of LNG as well as GTL,” Manzoni said. Talisman, he said, might choose LNG or gas-to-liquids technology, but not both.

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careers

NEW RECRUITS

Power engineering grads ready to get to work

The first ever group of Power Engineering and Gas Processing students to study at the Fort Nelson campus of Northern Lights College celebrated their achievements this spring. photO COURTESY OF NORTHERN LIGHTS COLLEGE

james waterman Pipeline News North Natural gas producers in the Fort Nelson area now have a new team of homegrown power engineers at their disposal. They are the product of Northern Lights College’s (NLC) Power Engineering and Gas Processing program at their Fort Nelson campus. The ten-month program was just completed this spring. It was an option that NLC had been considering for some time, considering the growing exploration and production activity in the Horn River Basin shale gas play of northeast British Columbia. “We had spoke with Encana and Spectra [Energy]

because they’ve come to us and identified that there was going to be a need for power engineers in the Fort Nelson area,” said Jeff Lekstrom, who just retired from his post as Dean of Trades, Apprenticeship and Technology at NLC this April. The energy companies had also expressed interest in helping provide training for Fort Nelson area residents to enter the industry in that capacity. “What we [have] found through all of our programs through Northern Lights College is, if you train people locally, they tend to stay local,” said Lekstrom. “That was really important from Spectra’s and Encana’s point of view, that they would train local people to fill the jobs.” Nancy Stevens, who has called Fort Nelson her home

for the past six years, was excited for the chance to learn a trade in her own backyard. “Obviously, that was huge to be able to do it in our hometown,” said Stevens. “It just wouldn’t have been possible otherwise. “I’ve been looking for a change in career,” she added. “And something that would be financially rewarding and something that I could grow in. “There’s an awful lot of opportunity in the industry.” NLC did face a few challenges presenting the power engineering program in Fort Nelson, particularly finding a qualified instructor, who must be a first or second class power engineering according to BC Safety Authority regulations. continued pg 30

Northwest Territories open to LNG option Daily Oil Bulletin The government of the Northwest Territories, hit by persistent delays in development of a $16.2 billion natural gas pipeline, could support a liquefied natural gas alternative for vast reserves in the region’s Mackenzie Delta, one of its ministers said on Tuesday, May 1. A month after proponents of the Mackenzie Valley gas pipeline said they had chopped spending on the project, David Ramsay, the territories’ minister of industry, tourism and development, said LNG has to be looked at as an option. “I think as a territory we have to keep all our options open -- that’s the most important thing. We have the resource. How do we get it out? How do we get it to market? All of those options have to be analyzed,” Ramsay said in an interview after a press conference at an offshore technology conference in Houston. “We just need to move forward. We can’t just sit back and wait for things to happen. We have to make things happen.” Holders of gas reserves in Canada’s Far North have discussed a pipeline to southern markets since the 1970s, and

Imperial Oil Ltd. has led efforts over the U.S. markets. past decade to move the project forward Ramsay met with officials from Mackwith support from aboriginal groups who enzie project partners Exxon Mobil Corp. seek economic development in their and ConocoPhillips while in Houston, communities. and said he remains optimistic that the The Mackenzie pipeline project won proponents will soon be able to put a regulatory approval timeline on movin 2011 following a ing forward with seven-year review, the development. but Imperial and its “First and fore“First and foremost, we most partners have not we support given a corporate the Mackenzie support the Mackenzie Gas Project and green light to it as North American we will continue gas prices languish to do that,” said Gas Project.” near 10-year lows Ramsay. and talks aimed “But at the end – David Ramsay, at getting financial of the day, all of support from Ottawa our options need Northwest Territories have not borne fruit. to be kept open One partner, and we’re willing Royal Dutch Shell, to discuss any put is stake on the opportunities or block last year but has yet to announce options with anybody who’s interested in a buyer. developing our resources.” Major oil companies seeking to In April, Imperial and ConocoPhillips develop even larger reserves on North said they had chopped spending on the Slope of Alaska have devoted efforts Mackenzie project and closed some to moving supplies to a proposed gas regional offices in the Northwest Territoliquids plant in Valdez to be shipped to ries, but stressed that the proposal was Asia, where prices are richer. Previously, not dead. most resources went to attracting interest For ConocoPhillips, the slowdown in a $40 billion pipeline to Canadian and prompted a $525 million impairment

charge. Besides being a Mackenzie partner, it has a 75 per cent stake in the Parsons Lake gas field in the delta, which was discovered in the 1970s. For its part, lead partner Imperial said the partners have examined LNG options in the past, but they remain focused on the 1,196 kilometre pipeline, which would carry up to 1.2 bcf a day to Alberta, where it could be routed to numerous Canadian and U.S. markets. “I would be loathe to comment on what others might offer in terms of development, but we continue to believe that is the best approach to commercializing Mackenzie gas,” Imperial spokesman Pius Rolheiser said. He pointed out that the regulatory permit is based on the pipeline. The other partner in the Mackenzie pipeline is the Aboriginal Pipeline Group, owned by the region’s native groups. It would own up to a third of the project. Ramsay was in Houston to talk about the sparsely populated territory’s other energy potential as well, including an early-stage shale oil development in the central region near Norman Wells and immense but hard-to-develop oil reserves in the Beaufort Sea. There, Chevron plans to gather seismic data this summer.

industry news

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PIPELINE NEWS NORTH •

staying optimistic Enbridge courting First Nations support for Northern Gateway

Daily Oil Bulletin The proposed Northern Gateway pipeline is critically important to Canada and Enbridge wants to find a way to develop it with the strong support of First Nations, many of whom oppose it, the company’s top executive reiterated Wednesday, May 9. “We must diversify the markets for the most important export that we have as a nation for the well-being of this country, for our children, for our grandchildren,” Pat Daniel, chief executive officer, said in response to a question from a First Nations proxy holder at the company’s annual meeting in Toronto. “The project is so much in Canada’s national best interest that we are committed to working with First Nations who are presently opposed to bring them onside and even host a meeting ... to try to find some kind of common ground so that we can make this a win-win for First Nations, for communities along the right-of-way,

for all of Canada,” he later told reporters. While acknowledging that so far it has been unable to reach an agreement, “you have our commitment to try to continue to work with you to try to reach some sort of agreement that will make the project make sense for you and for us,” said the CEO, who is to retire by the end of this year. “We are not going to force anything through,” Daniel told a shareholder, although he also pointed out that Enbridge has never developed a project without some opposition. Over the past 10 years, Enbridge has held 2,500 public meetings, 123 open houses, 150 presentations and 64 workshops on Northern Gateway, which would provide access to Asian markets for Canadian crude, Daniel told the meeting. Through that outreach it has met directly with more than 17,000 people. To date, Enbridge has entered into equity and long-term partnership agreements with 22 of the 45 groups within

80 kilometres of the pipeline route that have received such offers, the meeting heard. “But we want more; we want everybody on side.” It anticipates executing similar agreements with additional groups in coming weeks, he said. The company, though, is not prepared to reveal the names of the groups that have signed on. “We think it is up to them to self-disclose and they have signed on in confidence.” Responding to another questioner, Daniel acknowledged that there’s a political risk in British Columbia in terms of the timing of the project. “Right now, we don’t have clear support from the British Columbia and the NDP (the Official Opposition) have indicated they would be opposed to Gateway.” Shareholders defeated a resolution from NEI Investment, the Ethical Funds portfolio manager, which raised concern about the risk that First Nations’ opposition to Gateway presented to the

company. The vote was 28.5 per cent in favour and 60.8 per cent opposed with 10.7 per cent abstaining. Enbridge had opposed the motion, which in part asked the board of directors to present a report to shareholders by May 2013 explaining how it has assessed that risk and its impact on the company’s decision to proceed with the project. Speaking on behalf of the resolution, Jamie Bonham, NEI Investment proxy holder, said Enbridge has spent considerable time building a reputation as one of the more progressive companies in the energy sector. “This reputation benefits all aspects of the business, from acquiring the social licence to operate to recruiting talent,” he said. “Damage to this reputation has implications for the business as a whole.” Although the shareholder proposal did not pass, “we hear the message,” said Daniel.

Quicksilver hoping to secure Horn River upstream partner by year end Daily Oil Bulletin Quicksilver Resources is continuing its search for an upstream joint venture partner for its Horn River Basin development in northeast British Columbia, and is aiming to secure this by later this year. During the first quarter, the company retained an investment bank to help evaluate the opportunities for an upstream joint venture partner to help exploit the Horn River acreage after closing a Horn River midstream partnership deal with Kohlberg Kravis Roberts & Co. L.P. (KKR). Quicksilver drilled four Horn River wells in the first quarter to complete its 2011/2012 winter drilling program. All of the company’s exploratory licenses have now been converted into 10-year leases. Average daily production in the first quarter of 2012 at Horn River was 11.3 mmcf equivalent per day, compared to 11.1 during the same period last year. The company expects to bring as many as eight wells online in June and drill up to another eight by the end of 2012. “Quicksilver has certain development commitments in the Horn River Basin,” said Glenn Darden, president and chief executive officer, during a first quarter

conference call. “These commitments tie to contracts for quality of the reservoir and production for our potential pipeline transportation.” partners.” In the Horseshoe Canyon, Quicksilver connected five The company’s volume commitment is 75 mmcf per (4.3 net) wells to sales in the first quarter. The company day for the rest of 2012, building to 100 mmcf per day in expects to drill up to 14 wells in the Horseshoe Canyon May of 2013. by the end of the year. “There may be certain delays on the Production there in the first quarter dropped [Spectra Energy] side “Quicksilver has certain to 57.9 mmcfe per day on the pipeline and from 59.4 mmcfe a processing side, which development commitments in the day during the same could allow us to delay some of that ramp-up three-month period to 75 million a day,” last year. Horn River Basin.” Overall, Quicksilver Darden said. “The reported a first quarter commitments to KKR – Glenn Darden, Quicksilver net loss of US$60 in our midstream joint million compared to venture are contained within these volumes and are not in addition to them. a net loss of $71 million in the prior-year period. First quarter 2012 results were negatively impacted by a $63 “We will be bringing on our first multi-well developmillion non-cash impairment of oil and gas properties ment pad in the next 30 days in order to satisfy these due to lower average natural gas prices compared to obligations,” he added. “In anticipation of this activity Dec. 31, 2011, a non-cash loss of $15 million related to and new production, Quicksilver has the majority of the restructure of the hedge platform and a $22 million Canadian gas hedged. “In addition to meeting pipeline commitments, we benon-cash charge related to an unrealized loss on new 10-year hedges. lieve that these new Horn River wells will showcase the

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industry news

DRILLING STATS 101 Every quarter, the story of oil and gas exploration and production activity in Western Canada is told in the form of numbers: operating days, and rig counts, and total metres drilled by the producer companies or the service providers during those three months. They look like the scores in some sort of contest. PennWest Exploration won the drilling competition with a total of 437,704 metres as of March 31. The runner up in that category, Canadian Natural Resources, clocked in at 417,323, but held onto the spot of top operator according to rig releases at 337 wells. The numbers go on and on. But what do these numbers really mean? And how do they fit into the historical context of such an old industry considering the recent advent of multipad wells, horizontal drilling and hydraulic fracturing? And what do they tell the uninitiated about industry activity? “A spud is when you initially drill the well,” said Mark Scholz, president of the Canadian Association of Oilwell Drilling Contractors (CAODC). “Rig release is when you’ve completed that well and you go onto the next project. “When we initially drill the well and we release, which means the drilling rig is re-

moved off the location and has completed that job, it doesn’t necessarily mean the well is completed,” he continued. “It means that it’s been drilled. So, it could be months before you would complete that well. And that’s where … it’s kind of confusing.” Citing a hypothetical situation, Scholz explained that a company could drill 12,000 wells in a year, which means there would be 12,000 rig releases, but 16,000 wells could be completed. “And what that means,” he said, “is that there were some wells in a previous year that were completed in the following year. But they were drilled the prior.” A rig release number doesn’t necessarily indicate production during that year, because that well may not produce until the next year. “And it could have been a dry hole,” Scholz added. “It might not even get to production.” Still, that is only the simplest fraction of the story. “Metres drilled is going up, and the operating days are going up as well,” said Scholz, discussing recent trends in energy sector activity. However, Rig Locator reported on April 30 that operating days for CAODC member companies during the first quarter dropped from 37,332 days in 2011 to 35,926 days in 2012, while metres drilled went up from 6.69 million metres to 7.18 million metres.

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james waterman Pipeline News North

Scholz suggested that the decline in operating days and the increase in metres drilled in the first quarter of 2012 over the first quarter of 2011 are likely due to advances in drilling technology. Horizontal drilling, which is a relatively new practice, is a big part of that equation when it comes to metres drilled. Indeed, 5.41 million metres of the 6.69 million metres drilled in the first quarter were horizontal wells. “The vertical depth is different than the true depth,” said Scholz. “The vertical depth is basically from the surface of the ground to the lowest vertical depth that actually is… Maybe it’s only 1500 metres. Maybe 2000 metres. But the true depth is the entire length of the well that’s drilled. And so that is going to be much higher. And it could go up to 4500 metres.” Wade McGowan, President and CEO of Ironhand Drilling, also pointed to the way in which technological developments are changing the industry. “But it’s not just the horizontal drilling,” he said. “There’s been improvements in bit technology. There’s been improvements in mud technologies. There’s been many things that have gone on over the past decade that make rig productivity better.” According to McGowan, horizontal wells that took 45 days to drill about ten years ago now only require about 15 days. Furthermore, multi-well pads help minimize what is known in the industry as non-productive time, which is when the rig isn’t actively involved in drilling, but is between wells and still on the clock. So, the industry is becoming more efficient. “You want to try to minimize your nonproductive time,” said McGowan. “When you’re on a pad and you’re skidding a rig from one location to the next location on that pad, you’re minimizing the amount of non-productive time because you don’t have to totally disassemble the rig to move it to the next location to spud. “There’s numerous benefits of pad drilling,” he continued, “including lesser upfront land cost from a surface perspective, less pipelining, higher concentration of assets produced to one central location, less operating cost because your operator isn’t running from quarter section to quarter section going to each individual well. You can stop at one central site and check on several wells at a time. “There’s very clear economic benefits as a result of drilling on a pad location.” The story is complicated by looking at rig utilization percentages instead of the rig release numbers. “The utilization is certainly not as high as you would see in the 2005-2006 years because some of the inventory that is in our fleet isn’t capable of meeting the demand of these projects,” said Scholz, noting that new rigs are being built to better handle wells where a high number of metres will be drilled. “In 2006,’ he added, “we had a gas market. And there was shallow gas. And so some of the smaller rigs were able to take advantage of those projects. Now we’re seeing these multi-frack horizontals that some of the rigs aren’t capable of drilling.” “Not every rig is created equal,” echoed McGowan. “I mean, we’ve got a fleet of singles, a fleet of doubles and a fleet of triples. And

the depth capacity of each rig is compounded by how many pieces of pipe you can rack in the derrick, and that’s what separates a single from a double from a triple. The bigger the number, the more depth they can drill. “As recently as ten years ago,” he continued, “before horizontal drilling was really becoming a mainstay in the industry, all of our wells were drilled vertically. So, the capacity of the rig fleet was largely on the back of the singles and the light teledoubles for the bulk of the work. As such, our depth drilled per rig was quite shallow.” The game changer was when producer companies realized the potential of drilling and fracturing horizontally in terms of maximizing reservoir exposure. “At the end of the day, [that’s] what they’re trying to do – maximize reservoir exposure,” said McGowan. “We have now moved towards a different category of rig that is the main backbone of the industry and that’s the heavy tele-double,” he added. “So, these rigs are bigger and have higher horsepower capacity… A bit of a different class of rig than we’ve seen in the past. “The tele-double is now … making some of the older triple technology obsolete for one reason: their non-productive time is characteristically higher in a triple than it is in a double. A triple rig takes longer to move, it takes longer to rig up. “The triple has always been able to offset that non-productive time because of its ability to trip (lower drill pipe into the well) faster. But now we’re keeping the bits on bottom longer. The mud systems are better. The bits are more durable. … So, the triple just hasn’t been able to offset its non-productive time by faster tripping, because we simply don’t trip as often as we used to.” The result of these advances, said McGowan, is the impression that the industry has vastly improved its efficiency, now drilling a greater number of metres at a lower level of rig utilization. “What you’re really seeing is the fact that we’re just simply drilling deeper wells faster.” As McGowan explained, it is necessary to understand the true reality of the rig utilization percentage to understand that difference. “When you look at utilization numbers, you have to realize it’s a ratio,” he said, noting that the rig inventory in the Western Canadian Sedimentary Basin has gone from 450 rigs fifteen years ago to 800 rigs now. There were more than 800 rigs in the region in 2008. “We’ve got 50 per cent of 800 rigs running versus 50 per cent of 450 rigs running,” McGowan continued. “There’s definitely more rigs running. The utilization numbers can kind of belie the true underlying fact that we’re running more rigs today than we have, probably, ever.” However, he does admit that efficiency is improving overall, citing the metres drilled versus operating days information released by Rig Locator on April 30 as evidence. “The depth of well that we’re drilling is higher and the number of days on location has moved up only a small proportion,” he said. McGowan looks to the metres drilled as a true indicator of “the health of the industry” over rig releases and operating days. “And, yeah, we’re definitely drilling more metres today than we did a decade ago.”

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Progress Energy anticipates Canadian LNG success Canadian liquefied natural gas exports are positioned to succeed, said Progress Energy Resources’s president and CEO Michael Culbert on Wednesday, May 2, as the company and its partner PETRONAS continue studying the feasibility of building an LNG plant to send gas overseas. “We’ve connected ourselves ... with a successful partner, the Asian demand is growing for natural gas,” he said at the company’s annual general meeting. “Canada is a stable environment both provincially and federally and to date has been very supportive of our efforts. “We also believe with our discussions to date that the First Nations are supportive of LNG. It’ll take a lot of work and continued communication, but we feel that we have a very well positioned and good relationship with First Nations and we’ll continue to work at that as we move forward.” The detailed feasibility study (DFS) for the LNG Export Joint Venture (LEJV) that was launched in November, 2011 is approximately 75 per cent complete. Completion of the DFS remains on track for the end of the third quarter of 2012, at which time the project is expected to enter the pre-FEED phase. “What we’re looking for is ultimately nine tcf of 2-P reserves to support the LNG facility,” he said. “[As for] the pipeline to the B.C. coast, we believe there’s a number of alternatives. We have engaged with third party pipeline companies, experts in pipelining. “We will look to those experts to provide us with a competitive pipeline route to the West Coast,” Culbert added. “Export licences, once we get to FID, are also very important, so we’ll be filing for those as we move into 2013 and forward.” The continuing weakness in natural prices sparked another cut to the company’s capital spending program for 2012, the producer announced Wednesday. In February the company said it would

reduce this year’s capital spending to $365 million net to the company, down from the $465 million announced earlier (DOB, Feb 8, 2012). Yesterday, Progress further lowered its planned 2012 capital spending program to $270 million net. “We have a long-term view of our business,” Culbert said. “We’re looking forward to what natural gas is going to make up as far as energy markets as we move into the next 50 years. We believe it’ll be a key fuel both here in North America as well as worldwide. “We want during this time of low prices to preserve the high value of our asset base.” The company on Wednesday reported a first quarter loss of $6.81 million compared to net income of $1.63 million during the same period last year. Progress holds the industry’s largest Montney land position of roughly 800,000 net acres. The company’s primary focus is in the North Montney in the Foothills of northeast British Columbia where Progress holds approximately 625,000 net acres of largely contiguous Montney rights. “The North Montney is liquids-rich in some of our areas so we have the capability of having an uplift on the natural gas prices by about 50 cents for the heat content increase,” Culbert said. “After we strip out the liquids, we have about another $1 of revenue. And then we receive about $2.2 million in deep well royalty credits from the British Columbia government on our drilling as well. “And then, of course, this gas is sweet so the processing and cost of handling it is materially lower than sour gas or high CO2 gas.” In the quarter, Progress drilled seven horizontals targeting both the upper and lower Montney and, as per the capital reduction, only two of the wells were completed. In addition, Progress completed three wells that were drilled in the fourth quarter of 2011, one Montney horizontal at Caribou and two Montney horizontals at Town North. All five of these wells were tested successfully but are now shut in as

Alliance Pipeline president and CEO announces retirement Daily Oil Bulletin Alliance Pipeline has announced that Murray Birch, president and chief executive officer, will be retiring on July 31, 2012. “Through Murray’s strong leadership, Alliance has added new pipeline services, lowered pipeline costs and leveraged the existing operations to include green power generation while ensuring the safe operations of the system,” said Alliance Pipeline chairman Stephen White. “Over his tenure, the Alliance pipeline system has had record availability and throughput at the same time there were no lost time accidents – an impressive achievement. On behalf of the board of directors and everyone at Alliance, I’d like to thank Murray for leading Alliance through a key time and positioning the company for success in the future. We all wish him well in his retirement.” Birch served on the board of Alliance before being appointed president and CEO in March 2005. “I’ve been fortunate to have the opportunity to work with great people and a state-ofthe-art system,” said Birch. “With the pipeline’s flexibility to transport a wider range of natural gas and gas liquids, I know the company is well positioned to provide economic benefit to shippers for today’s rich gas drilling. I want to thank all my Alliance colleagues for their dedication, tenacity and expertise – it has truly been an enjoyable and rewarding experience.” The board of directors of Alliance Pipeline will announce Birch’s successor in the near future.

part of the company’s corporate shut-in program. Progress, along with its partner, has begun aggressively developing the North Montney joint venture (NMJV) properties at Altares, Lily and Kahta. Gross capital spending on the NMJV in the quarter was $113.4 million ($14.2 net) and included drilling and completions, three 3D seismic programs, facility construction and selective land acquisitions. Five horizontals and two vertical Montney wells (3.5 net) were drilled in the quarter, with horizontals targeting both the upper and lower Montney at Lily and a vertical test at Kahta. Drilling in the Altares area is ongoing with two rigs running through spring breakup. Preliminary results have confirmed the in-situ overpressuring and robust thickness of the Montney on the NMJV lands with the first five horizontals in the Lily area testing at an average flow test rate of 5.2 mmcf per day after five days. The first NMJV production will be onstream by mid-May through newly constructed facilities at Lily. During the quarter, the NMJV acquired an additional nine strategic sections of land that fell within the Lily area. In addition all 156,851 acres of the NMJV now have 3D seismic coverage, which is currently being processed and will be available during the second quarter. As part of the total consideration of $1.07 billion that PETRONAS paid to acquire a 50 per cent working interest in the Altares, Lily and Kahta properties, $802.5 million will be paid in the form of a capital

carry over the next three to five years. At the end of the quarter, the remaining capital carry balance was roughly $745 million. Progress drilled six wells (4.5 net) targeting its Dunvegan light oil play in the Deep Basin of northwest Alberta. Four of the wells were completed and brought on production in the quarter while two will be completed in the third quarter of 2012. Current production from the Dunvegan is approximately 1,800 bbls of oil equivalent per day, 75 per cent liquids, from 7.5 net wells. Progress plans to drill six additional Dunvegan horizontals in the second half of the year, with exit production expected to be approximately 2,600 boe per day. Progress holds a material land position covering approximately 250,000 net undeveloped acres in Alberta’s Deep Basin, including approximately 110,000 acres of Montney rights. Given the large and contiguous nature of the land base, the company is able to test play concepts, including liquids-rich gas plays and light oil plays, and with success can quickly capitalize on its existing land position at a lower cost than industry competitors. The company’s board said that the second quarter eligible dividend will be maintained at 10 cents per share. The eligible dividend will be payable on July 16 to common shareholders of record as of June 30. The ex-dividend date is expected to be June 27, 2012. Based on the May 1 closing share price on the Toronto Stock Exchange of $11.27, this represents an annualized yield of 3.5 per cent. R001243767

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careers Power engineers in high demand in northeast B.C. cont’d from pg 26 “And then they’ve got to be willing to go up to Fort Nelson,” said Lekstrom. “To find somebody in Fort Nelson that we would be able to use was impossible,” he continued, “because of the wage scale that the college comes to as opposed to what the industry’s paying. Quite a wage inequity there. You’ve got to find somebody that’s in the right time of their life – and I’m not talking about retirement mode either – [who] wants to give back and everything like that. “And everybody up there is going full bore.” Another challenge was making sure all the necessary equipment was on hand, which was accomplished by transporting equipment back and forth between Fort St. John and Fort Nelson. Stacy Smith, Chair of Trades and Apprenticeship at the Fort St. John campus, was key in solving those logistical problems, said Lekstrom. “He was instrumental in that program in Fort Nelson,” he added. “And I would like credit to be given to him.” Lekstrom also gave a lot of credit to the college’s partners in offering the program, which also included the Northeast Aboriginal Skills and Employment Program (NEASEP) in addition to Spectra and Encana. “Encana and Spectra and NEASEP were the funding agencies,” he explained. “[NLC] delivered the training. They did the funding and enabled the students to be able to come into that program as far

as the tuition goes, the living expenses, wanted to be able to offer that to people all that kind of stuff. Without Spectra and in the area,” he said. Encana and NEASEP … there’s no way Lekstrom was impressed with the comthe college could have ever thought to mitment of the students in the program, put a program on like that without those too. He noted that 16 students started the contributions. program and only one student, who left “Also, those companies took the the program for personal reasons, was students on practicum placements,” he unable to finish. added. “And they “They’ve all moved them anywrote all four levels where from Chetof the gas prowynd to all up and Lekstrom “Everybody up there cess,” down the Alaska said of the remainHighway to their ing 15 students. is going full bore.” different plants, “Because, not only, and made sure in this program, those students got do you get Part A – Jeff Lekstrom, NLC all their practicum and Part B of the placements compower engineering, pleted.” but you do get all Stevens, for four levels of gas example, did her practicum at Encana’s process operations. That makes them Steeprock gas plant in Dawson Creek. valuable to companies in more than one The three funding agencies also way. encouraged First Nation participation in “Some have to rewrite their Part B,” he the program, which resulted in a student added. “That’s not unusual in the power body that was approximately 75 per cent engineering field.” aboriginal. Lekstrom had said in the past that “That was kind of looked at as a posipeople who enroll in trades, apprenticetive thing from a funder’s point of view,” ship and technology programs at the colsaid Lekstrom. lege are driven to succeed in their chosen It also made sense, according to careers and he found that the students Lekstrom, considering the emphasis on in the Fort Nelson power engineering training Fort Nelson locals to work in the program were no different. patch and the significant First Nations “First of all, there was a fairly intense community in the region. process that they had to go through to get “That just speaks well to the commitinto the program,” he said. ment of the companies that are involved, Those students also had to do what that were the funding people, that they Lekstrom called “pre-program prepara32433

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tion” as part of the program. “In that we could take people from a Grade 10 level and move them to a Grade 11 level for math and physics,” he continued. “Had to do a complete four months of that. And that was done from 5:00 in the afternoon to [9:30 or 10:00] in the evenings. Just to show you the dedication, we had high school students in there, and they were coming after school for that program. Or were working full time, coming to school to work in the evening. “We had one fellow in particular from Prophet River First Nations, drove every day, and he would come for class at 8:30 in the morning, because he wanted to upgrade himself even further. He would stay there until 9:30 at night, go back to Prophet River, and he would do the same thing again the next day. That fellow never missed a day of class in 14 months. That shows you the dedication that some of these students have.” They even had to stay in residence for three weeks in Fort St. John to complete their 160 hours of firing time on the boiler, which is also required by the BC Safety Authority. “We run longer days and put them through the 160 hours of firing time basically in three weeks,” said Lekstrom. Now that her studies are over, Stevens has her eyes on the future. “Hopefully, full time [work],” she said of her immediate goals. “And just keeping working on my classing up and developing a career.”

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