Pipeline News North

Northern British Columbia and Alberta's Oil and Gas Industry Vol. 1 Issue 9 • dist: 20,325

september 30 • 2011

h t r No

• Free

in this issue: • 2011 bc oil & gas conference • LNG markets - the future of natural gas • site reclamation - putting it all back Northern Rockies Regional Municipality Mayor Bill Streeper (front left), Senator Richard Neufeld (front centre) and Peace River North MLA Pat Pimm (front right) share a laugh after cutting the ribbon on the new Northern Rockies Regional Recreation Complex at the BC Oil and Gas Conference in Fort Nelson.

(James Waterman photo)

2 • PIPELINE NEWS NORTH I September 2011

The Fort St. John Petroleum Association’s second annual Family Weekend at Peace Island Park was a huge success.

The event, which was held on the weekend of August 19 to August 21, featured everything from live music to helicopter rides, as well as a number of games and activities for the kids, including races, face painting and bouncy toys courtesy of a local church group. The festivities attracted about 325 people.

“We got great turn out,” said Blaine Kitzul, chair of the Petroleum Association’s family weekend organizing committee, noting that the weather was also picture perfect for the event. “A whole bunch of people and kids. And it’s really nice to see.”

Two highlights of the event were the helicopter rides and the duck race, which both took place on the Sunday, and the children obviously enjoyed the opportunity to take to the air and get a bird’s eye view of the area.

“We’re dropping ducks out of a helicopter,” said Kitzul, explaining the duck race. “And we sold 600 ducks that were sponsored by Talisman. And it’s awesome. Everyone buys a $5 duck.”

“There’s four prizes for the ducks,” he added.

The Saturday featured a quad run on the nearby Septimus Trails and a boat trip up the river. There was also karaoke and a live band on Friday and Saturday.

“This year we thought – because everyone heads back to their campsites – we thought we’d put the band on wheels,” said Kitzul. “And they went to all the campfires … and played. So, it was pretty cool.”

Kitzul remarked that this young event is an important addition to the Petroleum Association calendar, as so many of its members spend a great deal of time away from their families during the busy months, and their other events – such as the golf and hockey tournaments and the trap shoot – are not as family-friendly as a weekend that offers so much for the kids to enjoy. “It’s huge,” said Kitzul. “And they took the time this weekend to come down and bring the kids down, bring the RVs down, and have some fun.”

“And the kids absolutely love it,” he added.

Kitzul noted that the organizing committee did learn some lessons from the inaugural Family Weekend held last year, but he also mentioned that the first family weekend was a great success too “Last year went amazing,” he said. “Everyone was really, really happy the way it turned out last year. We got nothing but huge compliments. All the kids left with smiles, gifts. They all wanted to come back next year, which made this year really easy for us.”

“This is the second annual,” Kitzul continued, “which made this year a lot easier than the first year, because the first year was a whole bunch of planning. What are we going to do? What do the people want to see?

What do the kids want to see? What do we want for prizes?”

Photos by James Waterman & The Fort St. John Petroleum Association

PETROLEUM ASSOCIATION - HAPPENINGS

September 2011 I pipeline news north •

community

3

big bucks

- donation to Junior curling dan chalcraft Staff Writer

Ed Pimm, Chairman of the Oilmen’s Bonspiel, and Treasurer Ross Sexsmith handed over a $19,600 cheque to the Fort St. John Junior Curling program on September 6.

The cheque presentation was attended by 2010 Olympic Gold Medalist Kevin Martin and his team from the Fort St. John Petroleum Association ‘s 50th Bonspiel, which was held Nov. 17 to 20 of last year.

The donated money had been raised last November by ‘auctioning’ each member of Kevin Martin’s team to sit at a table during the fundraising dinner. A broom used in the 2010 Olympics and a shirt of Mark Kennedy, second lead of Martin’s rink, were also

auctioned at that time.

The number of junior curlers, between 8 to 18 years old, at the Fort St. John curling club has been growing significantly – from eight players in the 2008/2009 season to 36 curlers in 2010/2011.

According to Fort St. John Curling Club President Dan Bonin, the money will be used to train coaches getting them to the next level and increasing their knowledge of the sport. Some funds will buy supplies such as sliders, brooms, and shoes for junior curlers.

Bonin added that the club hopes to host a bonspiel, this year, to bring some out-oftown curlers here and help local teams compete at a higher level.

Bonin felt that interest in curling was sparked among youth and adults when Kevin Martin won the Olympic Gold at the 2010, Olympics in Ed Pimm, Chairman of the Oilmen’s Bonspiel, and Treasurer Ross Sexsmith (left), handed over a $19,600 cheque to help the Fort St. John Junior Curling program on Sep 6.

Vancouver. •

dan chalcraft photo

Oil Person of the Year Northern Rockies Regional Municipality Mayor Bill Streeper presents the Oilperson of the Year Award to the family of Harland “Swede” Svean, who passed away in 1998 after years of hard work in the oil patch of northeast British Columbia.

james waterman photo

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4 • PIPELINE NEWS NORTH I September 2011 2011 conference 12 Rex Murphy at the banquet 13 Christy Clark’s announcements 13 Pat Pimm takes the podium 14 Ezra Levant on ethical oil 15 Community talk preconference workshop 18 Perspectives - Fort Nelson FN 18 EOG’s water management 19 Lighten up - trying out the

Ignite format

industry news

the nature of gas – are prices going up?

community 3

8

Big Bucks - donation to Junior curling Up, up, away - fly in/fly out issues

industry news

4 The nature of gas - are

5 6

10

24

24

28

prices going up?

Ron Leipert’s US mission NDP & O&G - setting the record straight Payday projection - wage increases for 2012 Ziff Energy - natural gas demand for the oil sands Spectra shows promising growth LNG markets - the future of natural gas

environment 22 Reclamation - putting it back

careers & training 16 NLC courses for Oct-Nov 30 Riggin’ it up - NLC

community information

technology 20 Packers Plus - new

repeaterPORT technology

profiles 25 Kim Gray - getting hooked

on energy

international 26 First Nations Summit transforming relationships

ryan lux photo

james waterman Pipeline News North

Josef Schacter is predicting a perfect storm for natural gas prices.

Indeed, according to the president of Schachter Asset Management, the recovery for the ailing commodity could begin with hurricane season, although he admits that it does depend on the frequency of significant storms this fall and whether they hit the Gulf Coast region.

“If we do see an active hurricane season … and it does shut down production in the Gulf, than we could see a spike up,” said Schachter during a recent interview.

According to Schachter, if that does occur, we could see the NYMEX natural gas price rise by about a dollar to just over five dollars. However, that is only one of the conditions that could push the resource up the charts for both NYMEX and AECO. “More importantly,” he explained, “we’re looking, this winter, for prices for NYMEX to get over seven dollars, AECO over five dollars.”

As of August 19, NYMEX was only at $3.94 USD per million British thermal units (MMBtu) and AECO was at just $3.42 CDN per gigajoule (GJ). So, he is forecasting a considerable increase in prices, as well as a widening gap between NYMEX and AECO prices, which is largely due to the fact that the eastern United States doesn’t use much Canadian natural gas.

“And the reason for that,” Schacter continued, discussing the prices, “is we’re seeing significant increases in demand, we’re seeing inventories at the lower end of the five year band, and heading to the bottom of the five year band on a weekly basis as we get the data points. The drilling activity for oil is so much higher than it is for gas – and rigs have been moved from gas to oil – that the future deliverability of the industry is coming down.”

Shachter also pointed out that the low price for dry natural gas has motivated a number of companies to redirect their focus to liquid-rich gas plays such as the Montney and Duvernay formations in Western Canada, which is also reducing the dry natural gas supply.

“When you extract natural gas, actually, you’re not really extracting just natural gas, which is methane,” said Peter Chong, Energy Markets Analyst with Aegent Energy Advisors. “You’re extracting other natural gas

liquids. So, ethane, butane, pentane and propane. With that in mind, if you were a producer, and you can make money on natural gas liquids, having the methane come out at about $3.50 or $4.00 may not be a big problem if you’re making anywhere between $10 [to] $15, or even up to $20, per MMBtu worth of natural gas liquid.”

“Not all shale deposits are equal,” he continued.

“Some are full of liquids and you can get an even bigger profit margin than one that’s just dominated by methane.

There’s actually a nice graph issued by FERC (Federal Energy Regulatory Commission).

“You hear talk about natural gas liquids in the press, but there’s no real number attached to it. But the FERC has in its monthly reports, a nice graph showing over the last year or so what the price has been for natural gas liquids and natural gas. You’ll see that the natural gas liquids are about three to even four times higher than regular natural gas. If you’re a natural gas producer, it’s almost like an afterthought. So what? It’s methane. So what? I’m making a killing on everything else. So, I’m still coming out ahead.”

So, Schachter believes that a busy hurricane season combined with high demand and low supply as we head into winter could mean that we “have the ingredients for a major shift in the whole commodity board for natural gas.”

Adding to that cocktail is the effect of public worries, environmental issues and the prospect of even tighter regulations in the industry, which seem to be of particular concern in the Marcellus natural gas play in the eastern United States. As Schachter explained, those factors could increase the cost of production and eventually drive up the price by further reducing the inventory, as that increased cost will almost certainly delay production or even bring it to a halt completely.

These are circumstances similar to those the industry is already experiencing.

“The economics of the gas is just not there,” said Schachter. “So, it’s not a question of the quantity. It’s the economics that dictate what you can bring on efficiently at a certain commodity price.”

While Schachter is bullish about natural gas prices, Chong and his associates at Aegent Energy Advisors are less optimistic – or at least more cautious. For the winter of 2011-2012, Aegent Energy Advisors forecasts that NYMEX likely won’t exceed $4.55 and AECO likely won’t exceed $3.87, a far cry from the seven dollars continued pg 5

September 2011

pipeline news north •

5

cont’d from pg 4 and five dollars, respectively, predicted

by Schachter. However, those numbers are higher than the NYMEX and AECO settlement prices of $4.32 and $3.67, respectively, as of August 19. So, they are slightly more optimistic than the market suggested in mid-August.

One reason for the difference between Aegent Energy Advisors and Schachter may be that Aegent Energy Advisors don’t explicitly account for weather in their forecasts.

“Because we’re using market prices or published numbers,” said Chong, “part of the idea is that the prices reflect, largely, as much as possible, what is known in the market. For example, on August 19th, it was felt that the month price for September, if you wanted gas for delivery in September on the NYMEX exchange, you’d pay $3.94 US per MMBtu. So, the idea is that that price would be deemed to be … fair for delivery. Now, of course, the price can change the next day, next week. At that moment … that was deemed to be a fair price. Of course, if there’s a hurricane that comes up, that price will shoot right up.”

That is exactly what Schachter anticipates, but he also noted that the greater impact of weather and the other factors affecting supply and demand will be felt over the long term, not just over the next year.

“We’re so weather-related in that window,” said Schacter. “Hurricane season is active or not active. Winter is normal or cold versus normal. In the next three to five years, the underlying thematics that we’ve talked about will come into play, but it will take that amount of time for them to finally push prices where they should be based on those issues.” •

Ron Liepert’s US Mission james waterman Pipeline News North

Invited to be the keynote speaker at the Barclays Capital Energy Conference in New York City on Wednesday, September 8, Alberta Energy Minister Ron Liepert took the opportunity to speak with media and investors.

The subject was the positives of the Alberta oil industry and TransCanada’s proposed Keystone XL pipeline that has recently received so much negative attention in the United States.

Liepert was invited to speak at the Barclays Capital Energy Conference by former federal finance minister and Canadian ambassador to the United States, and current chairman of Barclays Capital Canada, Michael Wilson. It was an opportunity for Liepert to speak to companies from both Canada and the U.S. about Alberta as a responsible oil producer.

“I don’t think you can ever have too many opportunities to get the message out,” said Liepert, adding that the trip was able to generate some positive press for his province’s energy sector on Bloomberg and in the Wall Street Journal.

“In all the cases with the investor community, it was answering their questions

relative to oil and gas,” he continued.

“Not just oil sands, but to oil and gas.

So, it’s just ongoing advocacy. We have to take every opportunity to tell our story, because some others aren’t.”

Liepert noted that these sorts of trips help put a human face – jobs and families – on an Alberta oil sands industry that is often characterized by phrases such as “tar sands” and “dirty oil” by opponents the U.S. “That’s exactly what our message is,” said Liepert, “A couple dozen protestors doesn’t necessarily represent the majority of Americans,” he continued.

His experience meeting with the elected officials and the business community south of the border tells him that probably ninety per cent of Americans aren’t concerned with the origin of their oil.

“If they did know or care [where there oil came from],” he said, “ninety per cent of them would want it to come from Canada rather than other parts of the world. One of the things that always concerns me is when people here in Alberta or Canada say, ‘Well, to Hell with Americans if they don’t want our oil.’ Well, quite frankly, that’s not what most Americans think. And so we can’t be influenced by a few dozen protestors.

And so that’s the one learning that you consistently get back from those who you meet in the U.S.” Liepert also makes the case that Alberta’s oil sands have provided eco-

nomic benefits to the U.S. For example, approximately 200 Caterpillar haulers worth $5 million apiece, manufactured in the U.S., have been purchased for use in the oil sands over the past few years.

The timing of the trip was advantageous, as the U.S. State Department had just released its Final Environmental Impact Statement on the Keystone XL pipeline on September 2. The report was quite favourable to the project.

“I think it was even more than favourable,” said Liepert. “First of all, no one could argue with the thoroughness of the review that they did. And despite that extensive thorough review, their words were there would be minimal environmental impact. I think it was an incredibly positive report.”

“They now have a 90 day public comment period,” he continued. “But we’re now over the environmental hurdle.

We’re not going to go back and review the environmental aspects of it. What they will do over the next 90 days is determine whether it’s in the national interest of the United States. And I’ve said this publicly in my remarks down there – I don’t understand any possible way that they could find that it wasn’t in the national interest of the United States.

It’s in the national interest of the United States to have their oil come from Canada versus other countries that are less friendly to the U.S. It’s in their national interest [for] job creation. I don’t know how they could come to any other conclusion.” •

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September 2011

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james waterman Pipeline News North

Amid speculation in certain circles that a New Democrat government in British Columbia might not be particularly friendly to the province’s oil and gas industry, NDP energy critic John Horgan arrived in Fort St. John on Wednesday, August 24 and promptly dispelled that notion.

Horgan addressed the idea that an NDP government could scare petroleum companies out of the province following a scheduled town hall meeting, during which he discussed a variety of provincial energy issues ranging from BC Hydro’s controversial Site C plan to the equally controversial natural gas industry practice of hydraulic fracturing.

“Let me start by using a quote from Tommy Douglas,” said Horgan, “who famously returned to a cabinet meeting after a raucous discussion with the oil and gas industry in Saskatchewan, way, way back. And he said, ‘The bad news is the companies are leaving. The good news is they’re leaving the oil behind.’ So, what I mean by that is, the resources in the Peace [region] and every corner of British Columbia belong to British Columbians.

We need private sector development and investment to extract those resources. And I believe that over the course of the next number of years, industry will be as comfortable working with the NDP as they’ve been with any other government.

“The NDP established the Oil and Gas Commission in the 1990s. The NDP recognized the enormous potential for the industry at that time. I believe that most reasonable people in the sector remember that. Certainly the people I talk to remember interactions with Dan Miller when he was the Minister of Energy. I was an assistant to him at that time.

“I understand the value of private sector investment.

Adrian Dix understands that value as well as Christy Clark or Gordon Campbell. I don’t believe there’s any difference in approach in terms of how we would manage a free market economy. The difference in approach might come with respect to the regulatory regime that would be put in place to ensure that the public interest is being protected.”

However, Horgan did note one significant difference between the current BC Liberal government and a possible NDP government that isn’t entirely concerning the regulatory regime. It revolves around the New West Partnership formed by B.C., Alberta, and Saskatchewan and the associated Memorandum of Understanding signed by the reigning energy ministers of those three provinces on December 16, 2010.

The MOU included an emphasis on facilitating trade of Western Canadian petroleum products to Asian markets, a goal that could be aided by the construction of an Enbridge Northern Gateway pipeline that would transport Alberta oil from Bruderheim, Alberta to Kitimat, B.C. for export to Asia. Horgan stated that an NDP government wouldn’t support that project.

“Not going to happen,” he said, insisting that he wouldn’t change his tune even if it meant likewise support for plans to transport B.C.’s liquefied natural gas (LNG) to the coast for export to Asia, an idea that he fully supports.

“I’ve met with [Enbridge] representatives on a biannual basis,” he said. “They meet to update the Opposition on what their activities are. And that’s appropriate.

If they want to make the case that their project is in the public interest, than they have every right to do that.

I’m not going to stop that. I’m not going to lay down in front of any band. I’m not going to be at the front of any parade to stop it.

“I believe that the public is speaking very loudly and very clearly on their views on the Enbridge proposal.

And I’m going to leave that to the public. But having said that, I don’t see the value to British Columbia of an Enbridge proposal as I do the value of an LNG proposal. And that just speaks to local job creation, value added to our resource, and improving our market

position. I would prefer to sell [natural gas] at $10 a unit over $3 a unit. I think the industry would as well.”

Horgan is also skeptical of elements of that MOU concerning easing regulatory headaches through a better alignment of regulations throughout the three western provinces.

“I don’t subscribe to a lowest denominator approach when it comes to these issues,” he explained. “I think our regulatory regime should be in the interest of British Columbians, not necessarily the interests of people in Alberta, people in Saskatchewan. Having said that, I think there [are] obviously advantages and benefits to collaboration a western collaboration. I’m a born and raised Westerner. I grew up on Vancouver Island. I understand the enormous potential of our resource wealth [from] Manitoba west.”

“I do believe,” Horgan continued, “at the end of the day, it’s the responsibility of the government of British Columbia to protect the people of British Columbia and their interests and their resources. I wouldn’t exclude further discussions with other jurisdictions on how we could collaborate, but the Enbridge pipeline is an example. I believe that a better course of action for B.C. and the energy minister in British Columbia will be to focus on an LNG facility in Kitimat rather than a port for supertankers to move Alberta crude.”

“I believe it’s the role and function of the Minister of Energy in a B.C. government to focus on our resources and our citizens, and that’s what I would do,” he concluded.

A B.C. government, whether led by the NDP or the BC Liberals, certainly has some issues to address in terms of regulations and policies that impact the energy sector. The matters of freshwater use for hydraulic fracturing and how the province expects to meet its 2020 greenhouse gas emissions targets, while developing Horn River Basin shale gas that is high in carbon dioxide, has caused the likes of academics and First Nations leaders to question how different government departments are able to work together.

“The fracturing – if I can use that term – of responsibilities within government [had] been accelerated under the Campbell administration,” said Horgan. “Gordon Campbell took one last effort to consolidate all of those issues under the one ministry (Natural Resource Operations or NRO) back in the fall of last year. He then resigned his position. Government was realigned. The [NRO] kept some of the responsibilities that Campbell had put into the portfolio, but not all of them.”

Horgan admitted that the NRO was an idea with merit, but suggested that it was also a flawed idea that was attempted at the worst possible moment during Campbell’s term as premier.

“At the time of those … internal changes to government structures, Gordon Campbell was the most unpopular politician in the history of North America,” he said, noting that approval polls support that claim. “And I think that that tainted what they were trying to do with respect to the regulatory processes in B.C.” “Having said that,” Horgan continued, “my biggest concern at the time was the removal of policy personnel from ministries away from those that are … issuing permits. I think that policy and permits need to be together for the obvious reason that, as you’re developing new policies, you want to make sure that when those hit the ground in program areas, there’s an understanding and a collaboration between the people that are developing the policy and the people that are implementing it.

“The Natural Resource Operations ministry, as Campbell constructed it, took all of the permitting away and left the policy in these little satellite areas. There was an energy ministry, but nothing really happened within the energy ministry. All of the approvals were done through Natural Resource Operations.

“So, policy decisions were being made in isolation, absent any understanding of what the program area and permitting area was seeing on the ground. Similarly, oversight and management by environment staff – conservation officers, the regulatory process – managing that was, again, separated.” continued pg 7

September 2011 I pipeline news north •

7

NDP energy critic John Horgan held a town hall in Fort St. John on Wednesday, August 24 to discuss the energy sector in Northeast British Columbia from an NDP perspective.

Photo by James Waterman.

cont’d from pg 6 Horgan contends that the poor condition of Campbell’s administration at the time of those changes made it virtually impossible for him to gain the necessary support from the public service, environmental groups and industry.

“That’s not to say that the initiative was flawed from the beginning,” he said. “It’s to say that it was never going to fly because of the environment in which it was hatched.

Would we review that and perhaps institute some of the changes that were proposed? Maybe. But there’s a time for everything. And the time to make those decisions is after you form the government, not before. And that’s not to say we have a secret agenda.”

“I was a public servant for ten years in B.C. and five years in Ottawa,” Horgan continued. “So, I understand that we live in a grey world, not a black and white world.

And industry certainly understands that. And when I speak with captains of industry – whether they be in oil and gas, forestry, mining – they want certainty.

“They can live within just about every regime. I mean, people are making money in some pretty bizarre places around the world with regimes that are far less stable than the province of British Columbia. … And the advent of an Adrian Dix government should not lead to a paralysis of capital. It should be an opportunity for investment to renew its commitment to British Columbia and similarly British Columbia’s ability to renew our commitment to industry.”

Horgan remarked that an NDP government would certainly review policies concerning industry and the stewardship of the province’s natural resources, including how we deal with climate change and manage industrial use of freshwater, but not to such a degree as to make B.C. unattractive to the oil and gas industry.

“I think I can say with some confidence that what we

will try and do is streamline areas where streamlining is possible and put in place regulation to protect the public interest where we believe it’s lacking at this point in time,” he said. “What we need is a pragmatic approach to our regulatory processes. A pragmatic approach to approvals.”

“We have a regulatory process with respect to the Environmental Assessment Act that is incongruous with the realities that we’re living in,” Horgan continued, citing the Prosperity Mine proposed for the Cariboo region as a perfect example. The provincial environmental assessment process led to an approval for the mine, but the federal process disagreed wholeheartedly. Horgan and the NDP want to close that gap.

“So,” he said, “does that mean that we’re going to be more onerous? No. Does it mean we’re going to be more rigorous? Yes. And I think that there is a distinction there.

And I’m hopeful that industry is listening and hearing that when they talk to me or they talk to [NDP leader] Adrian Dix. We don’t want to curtail investment. We want to make sure that investment is done wisely by those with the capital and that that investment in turn leads to safe, sustainable jobs for people in our communities.”

Horgan traveled to the Peace region this August at the invitation of Dawson Creek mayor Mike Bernier, who was eager to show the MLA for Juan de Fuca how his city and Shell Canada are collaborating to use reclaimed water for the petroleum company’s nearby hydraulic fracturing operations. He also met with representatives from natural gas giant Encana, who are similarly reducing their freshwater use by tapping into saline water from the Debolt formation in the Horn River Basin.

So, not surprisingly, industrial water use was a hot topic of conversation during his visit, particularly the fact that Talisman Energy is drawing water from the Williston reservoir for hydraulic fracturing at their Farrell Creek operations.

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“Draining Williston for fraccing concerns me greatly,” he said. “Particularly after I’ve seen, over the last couple of days, the innovative approaches that Encana and Shell are using.”

Horgan’s position is that Williston was “created for the express purpose of generating electricity for all British Columbians, not for the express purpose of subsidizing an already well-subsidized oil and gas industry.”

It has been suggested by Lana Lowe, Lands Director for the Fort Nelson First Nation, that royalty revenues that are being put toward building new roads should be redirected toward recycling hydraulic fracturing water.

“When you give me those two choices, new road infrastructure for industry or new research and development to reduce the impact on the environment, I’m going to go with the latter,” said Horgan.

“However, I do believe that infrastructure investments benefit not just industry but the broader community. I come from a community where logging roads are king, through mountain passes, through valleys, where people don’t tread and the Ministry of Transportation does not go on their own accord. They only go when forced to because they need to get from A to B. Similarly, in the vast expanses of the Peace, road works are not going to be developed unless there’s a motivation to do so for industry.”

“My concern,” he continued, “is that some of these subsidy programs were put in place at a time when industry was in its infancy, relative to what it is today.

And I believe that the competition, the amount of land under lease, the amount of work that’s being done, the amount of profits being made – I think [that] dictates that we review those subsidy programs and see if they’re still valid today. And if we are going to be taking public resources to benefit the industry … it may well better be put to get a better handle on what we’re doing with our water resources.” •

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8 • PIPELINE NEWS NORTH I

September 2011

community

up...up... away

- fly in/fly out issues

Regional Municipality of Wood Buffalo Mayor Melissa Blake discussing the good and bad of the oil sands’ impact on Fort McMurray during a discussion of the fly-in/fly-out model at the BC Oil and Gas Conference in Fort Nelson on Thursday, September 8.

james waterman Pipeline News North

Facing a projected population increase of approximately 2000 people by 2020, the Northeast British Columbia town of Fort Nelson has concerns about how their community is going to take shape during that growth.

The expected growth is largely due to shale gas development in the nearby Horn River Basin. The resource potential of the play is as much as 500 trillion cubic feet (tcf), which could translate into numerous jobs and years of exploration and development activity. That work is really just beginning, especially compared to the Montney formation farther south.

So, the activity level is bound to increase considerably, leading to a larger oil and gas industry presence in Fort Nelson.

One major issue concerning the impact of shale gas development on the community was discussed during the BC Oil and Gas Conference by a panel that included Northern Rockies Regional Municipality (NRRM) Mayor Bill Streeper, who represents Fort Nelson and the surrounding area, and Regional District of Wood Buffalo Mayor Melissa Blake, whose jurisdiction is centered in the Alberta oil sands boomtown of Fort McMurray. That issue is the fly-in/fly-out (FIFO) model that has become a staple of the energy sector across

Western Canada and its socio-economic impacts on the communities bordering on oil and gas developments.

Fort Nelson is already feeling that impact.

As noted by Jack Stevenson, Director of Community Development and Planning for the NRRM and moderator of the FIFO discussion at the conference, the airport in Fort Nelson has experienced doubledigit growth in scheduled flights over the past four years.

“This year,” he said, “we’re on target for a twenty per cent increase in scheduled passengers through the airport.”

That number doesn’t include charter flights, which is also increasing, bringing a greater number of large aircraft into the facility.

“In 2010,” said Stevenson, “we had 86 Boeing 737 flights into Fort Nelson. That’s quite a big jet. So, our airport is busy. In 2012, we’re planning for 21,000 passengers coming in on Boeing 737s.”

Air traffic into Fort Nelson will continue to include smaller aircraft as well. “This level of growth obviously will severely challenge the airport infrastructure and the folks who have to manage it,” he added. “The short to medium term requirement for capital at the airport is probably in that 25 to 30 million dollar range. And that doesn’t consider a new terminal.”

Blake discussed the fact that Fort McMurray had to contend with similar challenges as oil sands development began continued pg 9

September 2011 I pipeline news north •

cont’d from pg 8 to affect the community. When the boom began – a boom that took the population of Fort McMurray from about 34,000 in 1996 to 78,000 now – the existing airport was adequate, but that wasn’t the case for long.

“The capacity that they built in there was very comfortable for a very long time, until we had the massive growth that happened in the region,” said Blake.

The existing airport terminal in Fort McMurray was built in the mid-eighties. A new facility is under construction at a cost of about $247 million. Increasing levels of air traffic made the expansion necessary.

“Your airport people are telling you this is becoming hazardous,” said Blake.

FIFO has been part of that issue, including growing air traffic from private, company-owned airstrips, as well as requests for additional airstrips.

“If you’re a big mining company with thousands of people coming in and out all the time, than you’re likely to have the desire to have your own corporate aircraft and your own airstrip right in proximity to your site,” Blake explained in interview.

One company that has had a presence in the region for a number of years already had a low volume private airstrip that had been in place for a long time.

However, companies new to the oil sands also began doing a large amount of flying workers in and out of the area, some building new airstrips that could accommodate a Boeing 747.

“That volume is a whole lot more than what we were experiencing before,” she added.

So, as more and more companies began to request their own private airstrips, the municipality had to put their foot down, demanding that companies share their airstrips. After all, a study of the air traffic patterns revealed that flights taking off from private airstrips were actually delaying scheduled flights from the airport.

Obviously, air traffic isn’t the only concern that communities have when it comes to FIFO. There are also a number of local socioeconomic concerns ranging from availability of affordable housing to local employment and convincing people to call towns like Fort Nelson their home. FIFO and the associated work camps play a role in all those issues.

As explained by Blake, the current population of 78,000 in Fort McMurray doesn’t include the “shadow population” of nearly 35,000 people in work camps or other accommodations who are not permanent members of the community.

“It’s such a tight, competitive labour market,” said Blake. “And the work camps were ... not being built as quickly as they were filling up. That meant there were people that were required to work, but they didn’t really have the accommodation for them. ... So, they created things called living-out allowances.”

Ordinarily, the oil companies cover the cost of room and board at the camps.

Since the workers who can’t be accommodated at the camps are still being flown into the region specifically to work in the oil sands, the oil companies decided they had to provide a monthly stipend to cover those living expenses. So, only workers who don’t reside in Fort McMurray on a permanent basis are eligible for living-out allowances.

“These were tax-free cheques that were provided to people to find their own

accommodation,” Blake added.

Living-out allowances can be as high as $3000 per month, which has led property owners to decide that they can raise their rents to almost that amount. Rent for a two-bedroom apartment in Fort McMurray in April 2011 was over $2000.

“Because that’s just money on top of their paycheques,” Blake explained.

That can make life difficult for Fort McMurray residents who don’t receive living-out allowances, but still need accommodations in the city.

“You absolutely have to prevent it from happening in the first place,” Blake said of the living-out allowance and its effects.

“There’s no going back once it’s there. It’s a competitive element that the companies have to use and escalate as they go along. So, if you’re Company A and you’re looking for a workforce and you’re struggling to get the workers, you’re going to give them incentive. And if that’s the incentive, there’s harm that comes. And so what I would strongly encourage is, if you get a working group between your municipal leaders and your stakeholders in the community and the industry, that’s one of the things that you need to get right off the table.”

Additionally, the current price for a single-family home in the city is over $700,000.

Blake explained why that price tag makes FIFO an attractive

ic benefits to the community.

“They will eat in restaurants,” she said. “They’ll buy groceries in the stores.

They’ll buy gifts at different shops throughout town and take them back to their families. And so there’s some positive economic impact that way.”

Streeper has put an emphasis on maximizing the local economic benefits of Horn River Basin development – particularly in terms of contracts for local service providers – since he decided to run for mayor in Fort Nelson, but he is also working toward making the town attractive to workers who could join the community as they join Horn River Basin development. The new Northern Rockies Regional Recreational Complex (NRRRC) is part of that initiative. So, appropriately, the BC Oil and Gas

option for the workers. If homeowners

from another parts of the country are considering relocating to northern Alberta to work in the oil patch, they would have to sell their houses for much less than the cost of a new home in Fort McMurray.

“And you’ve got the opportunity for a fly-in/fly-out option,” said Blake, “all of a sudden your full paycheque takes care of your property back home.”

“There’s tremendous benefits for the communities that are sending people out,” she added.

“Infrastructure costs are still borne locally even if the property taxes and the wages of the workers aren’t spent locally,” explained Greg Halseth, a professor in the geography program at the University of Northern British Columbia (UNBC), who also spoke during the discussion.

His area of expertise is rural and small town geography, particularly social issues facing resource towns.

“So, there’s a gap there that challenges our infrastructure deficit,” he continued.

“That deficit is already pretty significant for us all. There’s still a population bump that has to be dealt with no matter how extensive the fly-in/fly-out is.”

Blake noted other negative aspects of FIFO. “When they come, they don’t bring their families or their doctors or things that a community would benefit from, but when they’re here they do use those services,” she said. “So, the hospital is overwhelmed by the number of people that are coming in for not really emergency situations at all. It’s just that without a family doctor, where else do you go?”

However, she also remarked that her shadow population does provide econom-

Conference was the first major event held in the new facility, which also features hockey and curling rinks and the new Visitor Centre.

It is something that Blake has worked hard to accomplish in Fort McMurray.

“We’ve always been a community of families,” she said. “It’s just that when we had a large intake of people that were doing work exclusively … we started to think of ourselves as sort of a transient town.

And that was never the case.”

She mentioned that the local Big Spirit campaign has played a significant role in developing a sense of community pride.

“People really sort of got into the spirit of the Big Spirit Campaign,” she said.

“We got a recreational complex that we redeveloped and that really became the heart of the community,” Blake continued.

“So, we added some new capital infrastructure that really reflected the young population. And then something as simple as community place-making, which is really an initiative to put flowers, shrubs, bushes, and way-finding signs in each of our areas. And it draws the community together. There’s just a great sense of pride that comes from that landscaping.”

Blake thinks Fort Nelson is on the right track with its new NRRC, but she also offered some advice for the future such as preserving green spaces.

“And the distance planning,” she said.

“One of the things that we really messed up on was having a municipal development plan [the projected] 60,000 people in our region over a 25 year period.

In about year three of that plan, we’d already achieved that. So, for the next 20 years, we don’t have the right plan. So, it’s a matter of making sure they consider all the possibilities and not to be afraid of over-planning. You don’t have to overdeliver, but you should over-plan.”

Another initiative being considered for Fort Nelson is the proposed Centre Road, which could help reduce use of the FIFO model for Horn River Basin development,

9

while also attracting families to settle in Fort Nelson, by making it possible for workers to commute from Fort Nelson to natural gas operations on a daily basis.

“The centre road concept was presented to us as council and we looked it over,” Streeper said in an interview following the presentation. “One of the things was that they wanted some of the money that was committed to the SYD (Sierra Yoyo Desan) Road, which did create a lot of controversy about relaying that money. We looked it over. And one of our decisions from council was, as long as this helps promote local employment and local contracting, we were a hundred per cent behind the Centre Road. And we have talked to the oil companies. We have a six point agreement with them to reallocate some of the funding to the Centre Road as long as we

will get the benefit of having the operators, their workforce that are here on a permanent basis, located in Fort Nelson, and the maintenance and the building of the road is done by local contractors.”

Blair Lekstrom, Minister of Transportation and Infrastructure, remarked that he is certainly willing to explore the Centre Road concept, particularly if it benefits the Fort Nelson community.

“Mayor Streeper had spoken to me about it, saying … they had an idea about how they thought it might actually improve access to the Horn river Basin, allow people actually more ability to live in Fort Nelson, work in the fields, and be home every night with their family,” said Lekstrom.

“We said we would entertain looking at that with them, in cooperation. It’s in it’s very early stages now, but any time you can look at an idea that helps build on your community in the benefit of the families that live there and also to attract new families coming in, it’s always a good deal.”

“I’m not a supporter of fly-in/fly-out,” he added. “I think that devastates our communities.”

“I come from the Northeast,” Lekstrom continued. “I’ve lived in Dawson Creek all my life. We accept the fact that the oil and gas industry is a huge benefit, not just to our region, but the province. But that benefit has to be shared with the families that actually live and want to work in the region.

“So, companies that fly their employees in and out – I’m not a supporter of that. They know that. They’ve known that for ten years.”

Lekstrom stated that he shares a common goal with Fort Nelson, Fort St. John and Dawson Creek.

“We’ve got some of the nicest communities anywhere in the province,” he said “So, if you’re going to come up here and extract a resource that we all own … we want you to actually be part of our community. And I fully support that.” •

10 • PIPELINE NEWS NORTH I

September 2011

industry news

payday projection

-wage increases for 2012 james waterman Pipeline News North

Although British Columbia is home to one of Canada’s most robust industries, it also ranks dead last in the nation in one important academic category, according to the Hay Group’s annual wage increase projections that were released on Tuesday, August 23.

The report stated that oil and gas places second to mining among Canadian industry sectors with a projected wage increase of 3.7 per cent for 2012. However, despite the natural gas boom in the northeast corner of the province, B.C. falls below the national average of 2.8 per cent with a projected wage increase of 2.5 per cent, the lowest number of all provinces and territories.

Additionally, B.C. lags far behind Newfoundland and Labrador at 3.4 per cent, Alberta at 3.4 per cent, and Saskatchewan at 3.2 per cent, three provinces where mining and oil and gas play a significant role in wage increases.

B.C. also places below Ontario’s 2.7 per cent projected wage increase, even though Ontario’s manufacturing sector has taken a substantial hit due to the recent economic downturn and they lack our natural resource industry.

“One … factor that rationalizes the percentage adjustment is the percentage of companies that are going to freeze pay,” explained Karl Aboud, Director of Canadian Reward Practice with the Hay Group. “They’re not going to have an increase. And B.C. is the only province that noticeably exceeds the national expectation of salary freezes. So, in Canada, the expectation of freeze is five per cent of companies. And B.C. is at ten per cent. There’s no other province that exceeds five per cent. So, one of the reasons B.C.’s numbers are low is that there’s proportionally a lot of freezes going on.”

However, as Aboud noted, wage freezes are only part of the story. The oil and gas and mining industries in B.C. represent a proportionally low number of companies operating in the province as compared to Alberta, Saskatchewan and Newfoundland and Labrador.

“B.C. has proportionally more forestry in its natural resource [economy],” said Aboud. “And forestry, unfortunately for them, has been the worst performing industrial sector in the last five years, in part because of political sanctions in terms of exporting wood across borders.”

According to the Hay Group report, forestry expects one of the lowest wage increases for 2012 at only 2.3 per cent.

John Horgan, MLA for Juan de Fuca, discussed the issue during his visit to Fort St. John on Wednesday, August 24. The NDP energy critic suggested that the projected wage increases are indicative of a problem that has plagued the province for years: the constant shift from one resource industry to another without diversifying our economy.

“That’s been the challenge for B.C. for 25 years,” he said. “I think that the forest industry is in dire straits right now. Markets in the U.S. are not likely to rebound. The BC Liberals are championing raw log exports to China as the future of the industry. If that’s the case, than we’re in deep, deep trouble.”

“I’ve come from a resource-based community on Vancouver Island where the forest sector is virtually non-existent,” Horgan continued. “But yet for 150 years, my community, and the communities around where I live, grew and thrived and prospered on the back of forestry jobs. Not just falling jobs and truck driving jobs, but

milling jobs. And that value-added that we talked about for 25 years never materialized. And it has to. It’s vital if we’re going to keep wealth in British Columbia and not export it to other jurisdictions.”

That is why Horgan believes

B.C. should focus on exporting its own liquefied natural gas (LNG) products through terminals in economically depressed coastal communities such as Kitimat and Prince Rupert rather than support an Enbridge Northern Gateway pipeline to transport Alberta oil to the west coast and beyond.

“The [economic] benefits flow almost exclusively to Alberta and the [environmental] risks flow almost exclusively to British Columbia,” Horgan said of Northern Gateway. “LNG is an opportunity that would be exclusively our domain.”

Horgan would also like to see improvements to Highway 37 to take advantage of mineral opportunities in the Galore Creek area.

“There’s tremendous wealth potential there, but it’s not being realized,” said Horgan.

“Where wealth is being realized is right here [in northeast B.C.],” he continued. “And it’s palpable. As someone from away, coming here and just talking to people and seeing the trucks, the activity, the help wanted signs in virtually every window, and going to well sites and talking to working people that are feeding their families and creating a life for themselves and their community,

that’s the power of a strong economy.”

As Horgan explained, the problem is that while Alberta experiences a trickle down effect with its oil and gas industry, where exploration and development benefits other sectors of the economy throughout the province, the natural gas boom in Northeast B.C. isn’t having that same impact on the province as a whole.

“Because of the proximity to Alberta, I think a good deal of the wealth that’s created here is going [to Alberta],” he said.

Indeed, Fort St. John residents frequently shop in the nearby Alberta cities of Grande Prairie and Edmonton, where consumers aren’t required to pay sales tax on merchandise as they are in B.C. Horgan insists that government should try hard to combat that trend.

“The government has no influence on what people choose to do with their disposable income, where people choose to live,” he said. “What government can do is put in place policies that will encourage people spending and redistributing their wealth in the community that they live in.”

The position of the oil and gas industry in the Hay Group’s wage increase projections again sheds light on another key issue plaguing the sector: the labour shortage.

“A bit of a stretch,” said Aboud when asked if the wage projection announcement could help alleviate the labour shortage problem by attracting workers to an industry with relatively high paying jobs.

“We also asked organizations what their … priorities are,” he continued. “And the only provinces that cited labour issues are the energy provinces, the mining provinces.”

The focus of the conversation is what the Hay Group has termed the “war for talent” in the energy sector.

“The need to compete for either just warm bodied people or highly skilled people,” said Aboud. “And it was just Alberta and Nova Scotia saying one of [their] priorities is war for talent. The other provinces weren’t citing it because there’s not as much of a competitive environment for people.”

Mark Salkeld, President of the Petroleum Services Association of Canada (PSAC), knows all about that competitive environment.

“I’ve been hearing horror stories about people getting stolen away from other companies, getting offered double the wages on a two year contract or two year guarantee,” he said. “It’s just horrible. Right now all we’re doing is shifting known labour around within the buildings of Calgary and the rigs. We’re not adding any more. You get a group full of producers or … drillers in a room, and they’re just trading employees. We’re not bringing new talent in.”

In that context, projections of wage increases aren’t necessarily a positive sign for the industry, but actually an indication of a real problem within the sector.

“I guess the frustrating part of it is that I know a lot of the PSAC member companies, if we could just have consistent – relatively consistent – year-round work, where we could retain a workforce, a strong enough workforce, than you wouldn’t have these spikes [in wages],” Salkeld explained.

“It’s been a tradition of the oil patch for as long as ever that there are cycles,” he continued. “Right now we’re in a position where oil prices are high, there’s a continued pg 11

September I pipeline news north •

cont’d from pg 10 demand for equipment, and we need people. And in order to attract people, we raise [rig] rates and we increase wages.

And then when forces beyond our control … shift the focus and our industry kind of quiets down, rigs get racked, we lay people off. Then the producers want us to cut our rig rates. And it’s just kind of this vicious circle that goes around and around. And it’s unfortunate, because there’s certain elements of that vicious circle that I think can be managed. …

Part of it is more consistent work.”

Part of the problem is the constant battle with the weather that comes with working in a highly seasonal industry.

“It’s inevitable,” Salkeld concluded, referring to the expected wage increases, also adding his hope that the announcement will help attract workers to the industry. “They’re going to raise the rate because they need to retain the people we have. We compete against other industries … and other provinces. … And we’re competing against other industries closer to home. And so we need to raise rates, raise the wages, and get them in here. Because we’re going to be short.

Everybody knows that. We’ve been talking about that for months now.”

Cheryl Knight, Executive Director and CEO of the Petroleum Human Resources Council of Canada, also has her eye on the relationship between wages and the labour shortage, just as she is hopeful that the announcement will help lure people to the sector. However, Knight wonders if the Hay Group’s numbers reach enough people to make that sort of impact. “I don’t know if these sorts of announcements get picked up by the average person thinking about their own employment situation,” she said.

Knight also wonders if the Petroleum Human Resources Council should play a role in spreading that information.

“Because, certainly, wage prospects do attract people, do motivate people to make a change,” she added.

Knight agrees with Salkeld in terms of how the labour shortage is contributing to rising wages, partly because workers in the industry also have an increasingly strong sense of their own value in the sector.

“It’s playing a significant role,” she said of the labour shortage. “So, yes, the current shortages and projections around future shortages are driving up the cost of labour. So, basically, you see anybody who’s making changes from one company to another within the oil patch, they’re very aware of their market value. Matter of fact, I just was part of elevator conversation, somebody saying, ‘Oh, are you heading to the oil sands?’ And the answer was sort of, ‘I don’t know. It will cost you.’”

Furthermore, market value in the petroleum industry doesn’t necessarily match market value for the same profession in another industry.

“I think the oil and gas industry tends to be a relatively high payer,” said Knight. “If you look at engineers, for example. The industry pays the most out of any sector.

Now that wouldn’t follow for every single occupation, but I think, on the whole, it’s fair to say that the industry is very competitive, if not exceeding the competition. And part of the reason for that is that some of the working conditions in industry require us to use wages to attract people to jobs where otherwise they may choose others.”

Knight suggested that one area where this announcement could have a positive impact on the labour problem in the energy sector is in attracting workers from Ontario and Quebec, two provinces hit hard by the loss of manufacturing jobs.

“I hope so,” she said. “What we found is that the interest and awareness of the

oil and gas industry in central Canada hasn’t been that either great or positive.

And there could be a variety of reasons for that. Perception of the industry. The sense that things are going to turn around and people maybe thinking they’ll wait it out. Strong family ties. I think Ontario [and] Quebec are generally less mobile than other parts of the country. I don’t have stats on that, but that’s my gut feel.

“But, certainly, sort of one of the fundamentals of labour economics is that demand drives supply. And so what that really means is [if] people understand that a sector or certain jobs are in demand, they’re going to be more likely to seek it out, because that translates into secure opportunities, furthering your financial position.”

“There is lots of people in Ontario and Quebec who have the skills that we need, and we’d be very much interested in them looking at our industry,” she added.

“We’ve beaten that one around too,” said Salkeld. “It’s just it’s certain pockets – it’s certain areas – of Canada where people just do not want to move. We already have a significant workforce from Eastern Canada – the Maritimes and even Quebec – that are flying back and forth, twenty days in, eight days out.

The majors up in the oil sands do it on a regular basis. The producers can afford to do that.”

Salkeld is cautiously hopeful this news will reach workers who have been laid off from the automotive sector and encourage them to relocate to Western Canada to pursue new careers in oil and gas.

“There’s folks there that are just waiting and hoping that their car factories open up again and they go back to work,” he said. “I would think that the increase in wages, if the information can get out there, will attract some,” he continued.

“But I hold back hope for mass exodus out of Ontario into Alberta. We could definitely use some of the skilled talent.

There’s no doubt about it.”

The Hay Group’s wage increase projections are based on a survey conducted every summer. The organization received 655 responses during June and July of this year concerning expected wage increases for 2012.

“Our projections are a bit more aggressive this year for next than they were a year ago,” said Aboud. “So, right now, we’re projecting 2.8 [per cent]. A year ago we were only projecting 2.6 [per cent].

So, there’s optimism.”

Their projections have been quite accurate in the past, apart from a blip three years ago, just before the economic downturn. In the summer of 2008, the Hay Group forecast a 3.7 per cent wage increase for 2009, but the actual number was on 2.3 per cent.

“We were way too optimistic and not assuming that there could conceivably be a recession,” said Aboud, noting that the difference between projections and actual wage increases has only been two tenths of a percentage point at most in other years.

The projection numbers paint an interesting picture of where Canada sits in the world.

As Aboud explained, there are essentially two types of countries: established countries and emerging countries.

Canada’s projected wage increase of 2.8 percent put them near the top of the list of established countries, just behind the United States and Italy (3.0 per cent) and France (2.9 per cent), but ahead of Germany (2.5 per cent), the United Kingdom (2.1 per cent) and Japan (2.0 per cent). However, Japan is a unique case because their rate of inflation is far below that of other industrialized nations. continued pg 30

11

Keystone To Test Regulatory Gridlock Daily Oil Bulletin - www.dailyoilbulletin.ca

By Pat Roche The proposed Keystone XL pipeline will be a litmus test for a United States regulatory process which is overwhelmingly inclined to not approve any new energy projects -- even those using renewable energy, says a former Washington energy bureaucrat.

“This is a very, very important project,” said Karen Harbert, president and chief executive officer of the U.S. Chamber of Commerce’s Institute for 21st Century Energy.

Harbert, a former assistant secretary for policy and international affairs at the U.S. Department of Energy, said whether Keystone XL gets approved is important not simply because it’s a vital source of oil for the U.S. or because of the jobs involved, but as a “big litmus test” for the U.S. regulatory process.

U.S. President Barack Obama is expected to make a decision by year’s end on the proposed TransCanada Corporation project to ship oil from Alberta to Gulf Coast refineries. The Canadian portion of the proposed pipeline was approved months ago, but environmentalists have delayed a decision in the U.S. “If we can’t get this built, we’re not going to get anything built,” Harbert told a Calgary Chamber of Commerce breakfast on Wednesday. Citing a U.S. unemployment rate of 9.1 per cent, she said: “There’s lots of jobs at stake in the oilsands -- about 80,000 jobs on our side of the border.”

But she argued the more serious issue is that the vast majority of applications for new U.S. energy projects are either rejected or left to languish indefinitely in regulatory limbo. She said this happens not only to proposed nuclear plants but also solar and wind projects.

“Companies in the United States are voting with their pocketbooks and capital is going elsewhere or is on the sidelines.

In the United States you’ve got $2 trillion sitting on the sidelines [due to] regulatory uncertainty,” Harbert said.

She noted every president since Richard Nixon has tried unsuccessfully to reduce U.S. dependence on foreign oil, and she predicted the country will depend on fossil fuels for many decades into the future. However, she said 97 per cent of federal waters are off limits for exploration.

Harbert said nine drilling rigs have left the U.S. Gulf of Mexico as a result of the regulatory paralysis that followed the huge oil spill from the blowout of BP plc’s deepwater Macondo well. Noting that the operators of 20 other Gulf rigs are still in negotiations with federal regulators, she warned some of those may also depart unless they’re allowed to go to work soon.

She said the U.S. has become “the Saudi Arabia of natural gas” with reserves that will last more than 60 years, but environmentalists -- with their opposition to established oilfield practices such as hydraulic fracturing -- are making it hard to get that gas to market. •

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12 • PIPELINE NEWS NORTH I

September 2011

bc oil & gas conference

speakers, please

Northern Rockies Regional Municipality Mayor Bill Streeper (front left), Senator Richard Neufeld (front centre) and Peace River North MLA Pat Pimm (front right) were joined by representatives of companies who contributed to building the new Northern Rockies Regional Recreational Complex for the official ribbon cutting ceremony for the new facility. The BC Oil and Gas Conference from September 7-9 was the first event to be held in the complex. james waterman photo

- Rex Murphy at the banquet james waterman Pipeline News North

Dry wit, patriotism, and a Newfoundlander’s view of Western Canada’s petroleum sector...

All of this was on the menu during the banquet beginning the 2011 BC Oil and Gas Conference in Fort Nelson on Wednesday, September 7.

It was all courtesy of popular CBC television and radio personality Rex Murphy, who took the podium to tell humorous tales about Queen Elizabeth’s visit to the Purity biscuit factory and his comedic misadventures in provincial politics, when he actually lost to a real estate sign, finishing fourth in a three candidate race.

Finally, he found his way to the demise of the Atlantic cod fishery in 1992, when 31,000 Newfoundlanders essentially lost their jobs in a single day, an event that he described as a shocking attack on the culture and history of the region.

“Newfoundlanders, as they had done in the past, they scattered,” said Murphy, explaining that many of those newly jobless men and women moved to Western Canada and its thriving oil and gas industry.

“Thank God you were there,” he added.

Murphy continued to discuss the detractors of the industry who vilify its members for supposedly destroying the environment, urging the sector to speak publicly about its positive contributions, including saving the people of a “stricken province” and acting as the “central business that maintains the structure of the country that we own.”

“Take stock of yourselves,” he commanded.

Jaime Lawrence, Community and Aboriginal Relations Representative with Quicksilver Resources in Fort Nelson, grew up not far from the Purity biscuit factory once visited by Queen Elizabeth.

“I graduated in ’95,” he said. “And the cod fishery shut down in ’92. And I was in that generation where my grandparents and ... everybody all of a sudden woke up that day and had no work.”

“My generation, that graduation, there was a mass exodus,” he added. “Most of my friends are out here.”

Lawrence moved west in 1996.

“I knew there was no hope to find work back home,” he said. “And [Murphy] touches on the immediate reaction, the 31,000 people who were, overnight, out of a job. And that would be like more than half a million in Toronto out of a job.”

Murphy also tackled the environmental debate surrounding the oil and gas industry, using the slaughter of so many sperm whales in pursuit of oil for fuel described in Moby Dick to put the environmental record of the energy sector into perspective.

“It isn’t Greenpeace,” he said, considering the question of who has been responsible for saving the most whales.

“It’s probably Texaco.”

“The oil and gas industry has saved the whale,” he added wryly.

“People take it to the ends of the earth to show how evil the industry is in Canada,” said Lawrence. “Everybody makes mistakes, but we’re held accountable to it, whereas if you go to Russia or China and look at the mistakes that are being made over there, and no one’s held accountable. There’s oil spills in Russia that have been sitting there for a hundred years.”

“When he talks about ... being proud of what you’re contributing to society in

general,” Lawrence continued, “I think it’s important to keep that in mind. And I think that a lot of the folks who are the naysayers and do protests and are speaking out against the oil and gas industry are the same folks that heat their homes with natural gas, are using cell phones.”

Murphy continued to discuss how the country’s oil and gas industry has helped put Canada in an enviable position in a world of economic uncertainty, violent social upheaval in the Middle East, riots in Greece and Great Britain, and famine in Africa.

“One small island of partial exemption – Canada,” he said, expounding on the efforts of pioneers who built the oil and gas industry and the country, as well

as the “dignity of employment” that the energy sector has brought to so many Canadians.

According to Murphy, it is time for the oil and gas industry – and the small towns such as Fort Nelson that are central to so much of that activity and create the Canadian culture that he believes we all admire – to take credit for socio-economic benefits the sector brings to the country and promote its advances in environmental sustainability. “Don’t buy the indictments of your enemies,” he said. “No one turns off their own heater. They want you to turn off yours.”

Finally, Murphy concluded his speech with a simple message – “Take care of yourselves.” •

Popular CBC personality Rex Murphy encouraged the energy sector to show pride in its contribution to the country. Murphy received a resounding standing ovation at the conclusion of his speech.

james waterman photo

September 2011 I pipeline news north •

2011

- Christy Clark’s announcements Premier Christy Clark brought a pair of big announcements to lunch during the second day of the BC Oil and Gas Conference in Fort Nelson on Thursday, September 8.

The first announcement regarded a new commitment to greater transparency concerning hydraulic fracturing in the province’s natural gas sector, an initiative that involves an online registry to be launched in January 2012. The registry will include searchable information about fracturing activities and practices, as well as additives used by oil and gas companies in their fracturing fluids.

The program has the full support of the Canadian Association of Petroleum Producers (CAPP), who are simultaneously introducing their new guiding principles for fracturing in shale and tight gas wells.

The industry has agreed to voluntarily provide information on their fracturing activities, eliminating any need for the government to legislate disclosure.

“I met with people in the industry,” said Minister of Energy and Mines Rich Coleman, who accompanied the premier to the conference for the announcement.

“And every time I went through, I said, ‘What is your issue about disclosure on anything to do with fluids?’ And they all said they didn’t have any problem with it. So, I went to CAPP and I went to the industry and I said, ‘Look. There’s ways you can do this, right?”

Coleman noted that Texas legislated industry disclosure of information pertaining to fracturing, but that raised alarm bells with the public.

“So, I had industry saying we’re absolutely comfortable with disclosing everything,” he added. “So, I said, ‘Okay, let’s get into a protocol where it’s voluntary.’

And if that doesn’t work, then we would worry about it in the future. But they’re all

keen to get it done.”

Clark was thrilled with the industry’s commitment to the project.

“I think it really showed leadership on the part of the industry to decide that they were willing to start making this information public,” she said in an interview following her speech. “And I think the leadership was important because I don’t think they have anything to fear. I think that the work the industry does is in a very safe manner. We regulate it very carefully. We have the best regulations for fraccing of anywhere in the world here in British Columbia. And so I think making it transparent and available to people is only going to build support for the industry and perhaps set aside some of those myths that have built up. When you keep things closed and secret, people can imagine the worst. And it’s not the worst. In fact, we are the best here in British Columbia.”

“It spurs innovation so that they’re continuing to do better,” Clark added.

“So, I think it’s a great thing. And putting it online is a B.C … government specific initiative. Because we want to make sure people can look at it from British Columbia and all over the world.”

Considering the collaborative approach of the initiative, as opposed to simply forcing compliance with a new regulation, the program is reminiscent of work being done by Partners in Resource Excellence, an industry-government partnership that has developed in Alberta.

“As a minister,” said Coleman, “I want to move down those roads. Air quality monitoring will be next.”

Coleman has plans to install air monitoring stations as soon as that can be arranged with the Ministry of Environment.

He is pleased with the environmental performance of the industry to date.

“If we managed our water and our waste as well as this industry [does] in the cities, we would have a whole dif-

13

Premier Christy Clark addressed the BC Oil and Gas Conference on Thursday, September 8 to announce a new program to inform the public about additives used in hydraulic fracturing fluid and $4 million worth of upgrading for Highway 52/Boundary Road.

ferent look at how we did garbage, how we did sewers, how we did water, and how we managed to treat stuff,” he said.

“Because they’re doing it. And they are incredibly environmentally sound these days.”

The second announcement concerned an investment of $4 million to upgrade Highway 52/Boundary Road west of Tumbler Ridge. Funding for that program is coming from the Oil and Gas Rural Road Improvement Program (OGRRIP), which has contributed $19 million to highway and road improvement in the South Peace region this year.

“Our highway system is the backbone of a strong economy and we need reliable roads for the people who want to create jobs and the people who want [to work],” Clark said during her speech.

The announcements fit with the theme of her speech, which was focused on what she described as the need for B.C. to move “from a culture of no to a culture of yes.”

“We need to get people thinking about how we are going to get behind economic activity and projects that are going to create jobs across the province,” said Clark.

“And I’m tired of hearing people say, ‘No, I don’t want that development. No, I don’t want those trees cut down. No, I don’t want that mine. No, I don’t want that well drilled.’

“We need to move to yes. We need to move to yes as a province. As citizens.

And we need governments to move to yes as well. And get out of the way of economic activity if we want to succeed in British Columbia.” •

Pat Pimm takes the podium james waterman Pipeline News North

Christy Clark wasn’t the only B.C. politician to address the conference crowd.

Peace River North MLA Pat Pimm kicked off the first full day of events at the 2011 BC Oil and Gas Conference by presenting Northern Rockies Regional Municipality (NRRM) Mayor Bill Streeper with a proclamation from the provincial government declaring September 4-10

29329

Oil and Gas Week in British Columbia.

Pimm also used the opportunity to deliver the opening remarks for the conference to explain his role as Parliamentary Secretary for the Natural Gas Initiative, which he boiled down to five key categories: • continuing to build service centres in Dawson Creek, Fort St. John and Fort Nelson; • increasing electrification of the natural gas sector to reduce greenhouse gas emissions, particularly in the Horn River Basin where the shale gas has as

much as twelve per cent carbon dioxide content and on the coast where liquefied natural gas (LNG) projects will require considerable energy; • exploring new technology; • increasing the use of natural gas in transportation; • creating new job opportunities, particularly in infrastructure construction for projects such as the planned liquefied natural gas export terminal at Kitimat.

“We have an awful abundance of natural gas,” said Pimm, adding that B.C. needs communities that can sup-

port development of the possible 1000 trillion cubic feet (tcf) that exists in the province.

Pimm suggested that the province has to play a role in making Fort Nelson an “attractive place to live” and a “thriving community in the future.

“Industry can make commitments that can allow this to happen,” he added, noting that the brand new Northern Rockies Regional Recreational Complex (NRRRC) that was built with support from the energy sector was a great first step in that direction. •

14 • PIPELINE NEWS NORTH I

September 2011

bc oil & gas conference - Ezra Levant on ethical oil james waterman Pipeline News North

Ezra Levant can be a polarizing figure.

Despite speaking to an energy sector audience that can largely be considered sympathetic to his views on Alberta’s oil sands industry, the author of Ethical Oil still managed to stir the pot and ruffle a few feathers during his visit to the BC Oil and Gas Conference in Fort Nelson on Friday, September 9.

Levant made his case for the oil sands using the same values he believes are espoused by the environmentalists who decry the industry: environmental sustainability, peace, treatment of workers and human rights.

“We need crude oil,” he said during his speech. “Our American friends need crude oil.”

He then continued to differentiate Canada’s oil industry from the other countries in the top ten list of oil reserves, a list dominated by oppressive OPEC regimes and nations such as Venezeula that aren’t particularly friendly to North American nations.

“Russia is actually not a member of OPEC,” he admitted. “They don’t need to be. They’re terrifying enough.”

Levant also addressed improvements in the environmental record of the oil sands industry, noting that carbon dioxide (CO2) emissions in oil sands development have been reduced by 29 per cent since the industry began, according to Environment Canada. It is also a less carbon intensive fuel than Venezuelan oil and California heavy oil produced in the United States.

Additionally, he mentioned that the mining projects that have become symbolic of those developments account for a small portion of the industry. Most of the work is in situ projects that have a very small footprint on the land.

Consequently, he called Canada the “fair trade coffee of the world’s oil industry.”

Turning to human rights, he contrasted the advantages and opportunities that women in Canada enjoy against the lives of women in OPEC nations where being a rape victim is actually the crime of adultery.

“Sudan is an oil producer,” he said, noting that there was 6.5 millilitres of human blood spilled for every barrel of Sudanese oil exported during the period when 300,000 men, women and children were killed by Sudanse government in Darfur.

“But that’s not CO2,” he said. “So, let’s not regulate that. Let’s not protest that.”

Levant made too many strong points in favour of Canada’s oil sands to recount and his arguments certainly made an impact on the conference crowd.

“I thought it was really inspiring,” said Laurie Dolan, Executive Director North with Energy Services BC. “I really did. It was so nice to see that somebody’s acknowledging the advances that oil companies are making and trying to work with local communities, with local environmental groups. There’s been huge strides made in that. And too often they hide that. And they hide the whole development of it.”

Dolan was particularly struck by Levant’s discussion of the Sudanese oil industry and the treatment of workers in Canada compared to other oil producing nations.

“That just made us feel a lot better about how we do treat our employees, how much we pay them,” she said.

However, Elizabeth Bigger, Eco-Advisor with the Northern Environmental Action Team (NEAT) in Fort Nelson, was not as impressed with Levant and his rhetoric. Particularly, Biggar took exception with his classification of Canadian oil as “ethical”, suggesting that any oil can’t be considered ethical if it contributes to climate change and severe weather that she associates with the current famine in Africa.

When she tried to raise her points to him during a question and answer session, Levant dismissed her as a Zoe – his name for young environmentalists – and accused her of hypocrisy for driving to the conference that day.

“I feel like he was very rude,” said Biggar, who was still steaming after her confrontation with Levant during his speech. “And he was calling me ‘Zoe’, which isn’t my name. And he was trying to make fun of me and my ideas. He called me a peacock, which is really ignorant.”

It was an interesting turn of events considering that Levant began his speech with an account of why he

Author and television personality Ezra Levant stopped by the BC Oil and Gas Conference on Friday, September 9 to explain why Canadian oil is the ethical choice. james waterman photo

chose to write Ethical Oil. “I’m a right wing guy,” he said. “Can a right wing guy convince a left wing girl?”

Although he characterized his reason for writing the book as an effort to convince that generic left wing girl of the moral case for Alberta’s oil sands, that goal flew out the window as soon as he was challenged by Biggar.

He called her job a “hobby” after she mentioned that she drove to the conference that day to collect the food scraps for a NEAT composting effort, which was part of

the conference organizers’ goal to reduce waste from the event. “It’s not my hobby,” she said.

“He just attacked me,” Biggar continued. “And he just put up the wall right there. He probably labelled me as one of those people, put me in the group that he does, and that’s it. He probably didn’t even hear what I had to say. Because I’m pretty sure I said twice that I agreed that it is better to get our oil from Canada.”

Biggar felt that it was the disagreement that Levant just refused to hear. •

Peace River North MLA Pat Pimm presents Northern Rockies Regional Municipality Mayor Bill Streeper with an official proclamation from the provincial government declaring September 4-10 Oil and Gas Week in British Columbia.

james waterman photo

September 2011 I pipeline news north •

15

2011

community talk - pre-conference workshop

james waterman Pipeline News North

Before all the delegates and keynote speakers began their presentations, the 2011 BC Oil and Gas Conference got underway with a free Community PreConference Workshop in the brand new visitor centre at the Northern Rockies Regional Recreation Complex in Fort Nelson on the afternoon of Wednesday, September 7.

The session was meant to build on the dialogue between industry and the community of the Northern Rockies Regional Municipality (NRRM) that began a few years ago with the Horn River Basin Symposium, an initiative led by the provincial government and the Horn River Basin Producers Group, an organization of ten energy sector companies operating in the region.

Christopher Adams, Oil and Gas Specialist with the Ministry of Energy and Mines, and Rob Spitzer, Vice President of Exploration with Apache Canada, led the discussion, which was an update on resources and activities in the natural gas plays of northeast British Columbia, as well as an update on the work of the Horn River Basin Producers Group.

“Communication and education,” said Adams, explaining the purpose of the session. “Having the community know exactly where the activity is, what the purpose is, what the operators are doing, what they’re up to. Gives them a sense of, okay, there’s a little bit more to this than I thought.”

“I think it’s hugely important,” added Spitzer, “because, at the end of the day, there’s got to be an integration between the producers and the community to get a successful project.”

Adams, who has over thirty years of experience in the industry with the Ministry of Energy and Mines, the National Energy Board (NEB), and Spectra Energy, provided information on the geology and natural gas reserves in Montney formation in the Fort St. John and Dawson Creek area, the Horn River Basin just north of Fort Nelson, the Cordova Embayment in the far northeast corner of the province, and the Liard Basin, which is just northwest of Fort Nelson.

“Relatively unexplored,” he said of the 1.25 million hectare Liard Basin, noting that Apache has been operating in the Petry area of the play since 2008.

Conversely, he described the Montney as “one of the most active gas plays in North America right now.”

Adams also discussed the activities of the major players in the various natural as plays. Not surprisingly, Encana leads the pack in both the Montney and the Horn River Basin, where their joint venture work with Apache has led to the construction of the innovative Debolt water plant, designed to ready saline water from the Debolt aquifer for hydraulic fracturing purposes.

Joint ventures were a recurring theme throughout

Chris Adams, Oil and Gas Specialist with the Ministry of Energy and Mines, informs Fort Nelson residents about the resources and the industry activity in the natural gas plays of northeast British Columbia during the community workshop james waterman photo preceding the BC Oil and Gas Conference.

Adams’ presentation. For example, Penn West Exploration is working with Japan’s Mitsubishi Corporation in the Cordova, which also illustrates the growing interest from Asia in B.C. natural gas.

The way some of these companies operate is that, once they’ve gotten into the basin, they want to increase their capital,” Adams said of the joint venture operations. “And they do that with joint ventures just like in the [United States]. In some of the basins, they go to midstream companies to process their gas. That just seems to be the way things are done. Many of those companies that are in the Horn River also operate in the U.S. shale gas basins. And that’s the way they do things down there.

It’s not done as readily in Canada, but I think that’s the focus, is to put capital into the project and have midstream operators handle the gas stream.”

The industry has also started to work jointly in the Horn River Basin in areas such as minimizing their footprint through collaboration on items such as access roads, com-

municating with other stakeholders, and placing an emphasis on local procurement. That work has been done through the Horn River Basin Producers Group.

“It’s still not perfect, but it’s getting better,” said Spitzer.

During his presentation, Spitzer noted that he has had a lot of conversation with Laurie Dolan, Executive Director North for Energy Services BC (ESBC) based in Fort Nelson, regarding hiring locally in the Northern Rockies and the obstacles both the industry and the community are facing in that regard. Spitzer mentioned that one key obstacle he has discussed with Dolan was lack of communication between Calgary and service sector companies in Fort Nelson on items such as new safety requirements.

“It’s been a great relationship” said Dolan, discussing the Producers Group after the presentation.

“There will always be challenges,” she continued. “There will be nightmares. But as long as you know there’s somebody on the other end of the phone in both directions, it’s a

win-win situation. You’ll figure out a solution.”

“The interesting thing, though, with Fort Nelson, is we figure out fast solutions. And sometimes Calgary and Victoria are a little bit slower.

So, we’d like them to get up to our speed. If there’s something wrong, we can fix it.”

Spitzer continued to discuss the important – and often unappreciated – work done by the communications group in the Producers Group, as well as collaborative efforts to minimize the industry’s environmental footprint through Geoscience BC studies geared toward understanding water resources and reducing freshwater use and the move to low impact seismic that doesn’t create large cut lines through the forest.

“I think it’s important to convey how important gas price is to what happens in the area,” he added, noting that a lot of activity in the region began when the natural gas price as about six dollars per million cubic feet (mmcf). continued pg 21

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16 • PIPELINE NEWS NORTH I

September 2011

careers & training OctOber

Course offerings M O n D ay

CH – Chetwynd Campus DC – Dawson Creek Campus FN – Fort Nelson News Campus FSJ – Fort st. John Campus TR – tumbler ridge Campus

t u e S D ay

cOurSeS

caMpuSeS

S u n D ay

W e D n e S D ay

t h u r S D ay

f r i D ay

CORE – Conservation & outdoor recreation education GODI – General Oilfield Driver Improvement LDV – Light Duty Vehicle Driver improvement OFA – occupational First Aid OFA TE – oFA transportation endorsement PAL – Possession and Acquisition License (Canadian Firearms safety Course) PST – Petroleum safety training RJHSC – responsibilities of Joint health and safety Committees TDG – transportation of Dangerous goods

1 oFA 1 CH oFA 1 FN h2s Alive FN Fire extinguisher 2 FSJ

2

3

4

5

6

oFA te CH global ground Disturbance FN

oFA 1 DC Light Duty Boom truck FSJ

h2s Alive DC oFA 1 FN

oFA te FN goDi FSJ hazard recognition & Control TR

h2s Alive CH h2s Alive FN h2s Alive FN Fall Protection FSJ Fire extinguisher 2 FSJ Fall Protection TR Lock-out Awareness TR Confined Space TR

9

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h2s Alive FN h2s Alive FSJ

global ground Disturbance FN Airbrakes FN FooDsAFe 2 FSJ Pst FSJ

oFA 1 FN

22

THANKSGIVING

oFA 1 CH goDi DC h2s Alive DC oFA 1 FN oFA 1 DC Confined Space FN Forklift operator Airbrakes FSJ safety FSJ red Cross standard First Aid TR

7

S at u r D ay

8

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AtV safety FN

oFA 1 DC solar thermal installer DC global ground Disturbance FN LDV TR

AtV safety CH h2s Alive DC Fall Protection FN goDi FSJ

oFA 1 FN h2s Alive FN Oilfield Heavy hauler FSJ

Oilfield Heavy hauler DC oFA 1 FSJ h2s Alive FN LDV FSJ

oFA te FSJ Commercial Vehicle inspection FSJ PAL FSJ global ground Disturbance FN

23

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oFA 1 FN

Airbrakes DC rJhsC FSJ oFA te FN

Confined Space FN Core FSJ h2s Alive FSJ oFA 1 FN

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oFA te CH oFA te FN

29 oFA 1 CH oFA 1 FN Core FSJ PAL FSJ FooDsAFe 1 FSJ

upcOMing cOurSeS fort St. John campus Oct 25-28 Management skills for supervisors Part 2: team Building FSJ Oct 26-27 Building Your Communication toolbox FSJ nov 29-Dec 2 Management skills for supervisors Part 3: Administrative skills FSJ

NortherN Lights CoLLege

WOrkfOrce training Customized Industry Services.

We can provide your business with customized training in the classroom or on-site.

Find out how we an help improve your employees’ skillset and efficiency with training developed specifically for your company by calling the Workforce training Department located at your nearest Campus.

Dawson creek 250-784-7576 Hugh McNair hmcnair@nlc.bc.ca

chetwynd 250-788-2248 Verna Rowsell vrowsell@nlc.bc.ca

fort nelson 250-774-2741 Ramona Nehring rnehring@nlc.bc.ca

tumbler ridge 250-242-5591 Donna Merry dmerry@nlc.bc.ca

fort St. John 250-785-6981 Rick Newlove rnewlove@nlc.bc.ca

fort nelson 250-774-2741 Kate Ring kring@nlc.bc.ca

September 2011 I pipeline news north •

upComing in

nOveMber

nov 2 goDi FSJ nov 8-10 Airbrakes FSJ nov 14-15 Light Duty Boom truck FSJ nov 16-18 heavy Duty Boom truck FSJ nov 16 h2s Alive FSJ

oN-LINe SAfeTy TRAINING THRoUGH NLC (Morning start times recommended).

• WHMIS • Bear Aware • Ground Disturbance • pST (petroleum Safety Training IRp #16) • CSTS (Construction Safety Training System) • Transportation of Dangerous Goods (TDG)

Call the Workforce training Department at your nearest Campus.

NLC’S WoRKfoRCe TRAINING DepARTMeNT

Your local provider delivering the right training to suit industries needs our Workforce training Department can organize a wide variety of courses for industry, business and the community

soMe exAMPLes: • Air Brakes • ATV Rider • Boom Truck operator • Snowmobile Rider Safety • Confined Space • Construction Safety Training • CoR/SeCoR • Detection and Control of flammable Substances • Driver Training • electrical Code Update • electrical Course for Instrumentation personnel • enform Courses • enform Chainsaw Safety • fall protection • Firefighting • first Aid • forklift Safety • Gas processing (all levels online) • GpS • General Oilfield Driver Improvement (GoDI)

• Ground Disturbance – Global • Hazard Assessment • Hoisting and Rigging • H2S Alive • H2S Awareness • Incident and Accident Investigations • Management Skills • Oilfield Hauler • Oilfield Swamper • petroleum Safety Training (pST.IRp #16) • pesticide Applications • Portable Extinguisher Firefighting • power engineering (all levels online) • private Security Training • S100 fire Suppression • Safety program Development • Safety Training for Wellsite Supervisors • Scaffolding • Seismic Blaster Safety • Track Inspection • Traffic Control • Transportation of Dangerous Goods (TDG) • Well Blowout prevention…and more!

call the Workforce training Department at your nearest campus.

For more information or to register for any course listed in the monthly calendar:

• call the appropriate Workforce Training coordinator • call toll free 1-866-463-6652 and ask for the Workforce Training department at the campus where the course is offered • check the website at nlc.bc.ca, and click on the programs tab. the courses listed in the monthly calendar are accurate as of september 14. however, new courses are being added on a regular basis at each NLC campus. For updated schedules, go to nlc.bc.ca and click on the Workforce training logo.

Are you interested in: • taking a course that currently is not scheduled?

• having a course designed specifically for your company?

• having a course offered at your workplace?

Contact the Workforce training coordinator at your local campus.

We will work with you to meet your needs.

17

18 • PIPELINE NEWS NORTH I

September 2011

bc oil & gas conference

perspectives

- Fort Nelson FN james waterman Pipeline News North

Few presentations at the 2011 BC Oil and Gas Conference were a better reflection of its “Communities Leading Change” theme than the presentation featuring the Fort Nelson First Nation and their evolving relationship with the industry.

The circumstances surrounding the presentation also demonstrated the strong sense of community that exists in Fort Nelson. Bill Streeper, Mayor of the Northern Rockies Regional Municipality (NRRM), began the conference with a moment of silence for two men from the Fort Nelson First Nation, Lucas and Charles Dickie, who died tragically in a car accident on Highway 97 on Saturday, September 3.

Chief Kathi Dickie had been scheduled to deliver the presentation, but she was understandably absent from the event, as the deaths not only deeply affected her community, but her family as well. Fort Nelson First Nation band councillors Sharleen Wildeman and Bernadette Makowski took her place.

They were appreciative of the condolences and moral support expressed by the Fort Nelson residents and those attending the conference, but the presentation was obviously a difficult and emotional experience for the duo.

The focus of the presentation was how to measure the success of their relationship with industry in northeast British Columbia

and how to continue to develop the natural gas resources in the region in a manner that is beneficial to all stakeholders.

They cited traditional use studies and partnerships with telecommunications company Northwestel and worksite accommodation provider Black Diamond – Waterways Communications and Black Diamond Dene, respectively – as positive forward steps for the Fort Nelson First Nation.

Wildeman also noted work with companies such as Encana and Spectra Energy – who have sponsored programs at the Fort Nelson campus of Northern Lights College that have facilitated the entry of local First Nations into the oil and gas industry – and the success of First Nations owned company Eh-Cho-Dene Enterprises as examples of an improving relationship with industry.

“This is a prime example of meaningful engagement,” said Wildeman, discussing the activities of Paramount Resources in the Nelson Forks area, particularly their commitment to consulting with the Fort Nelson First Nations and environmental stewardship.

“I think it’s important for our people to grow, to understand oil and gas, and be a part of it,” she continued.

“We welcome jobs and economic opportunity.”

However, Wildeman acknowledged that her community still has concerns and that there is still work to be done. Forestry and oil and gas activity has left a mark on the land, which was well illustrated by Geographic Information System (GIS) maps produced by Fort Nelson First Nation Lands Department GIS Technician Roberto Concepcion.

Representing the Fort Nelson First Nation, Band Councillor Sharleen Wildeman provided a First Nations perspective on natural gas development in the traditional territory of her james waterman photo people.

The Fort Nelson First Nation is concerned about the cumulative effects of this activity, which they believe needs to be studied at greater depth before

exploration and development grows any further. “It’s an appropriate time for all of us to take a look at how we can care for our earth as a whole,” said Wildeman. •

EOG’s water management james waterman Pipeline News North

Water use for shale gas development was front and centre yet again during the final day of the BC Oil and Gas Conference in Fort Nelson.

Colin Harfman, HSE Advisor at EOG Resources Canada, addressed the hot button issue during a three part presentation on water management innovations on Friday, September 9, discussing his company’s efforts to manage their water use and reduce their surface water consumption.

“Water resources are a growing concern across Canada,” said Harfman, “As our well count grows,” he continued, “we require more and more water. So, with that in mind, we’re looking at other … sources of water other than surface water in the area.”

Harfman noted that EOG is unable to follow in the footsteps of Encana and Apache by making use of saline Debolt water for hydraulic fracturing in their northernmost positions, but that may be a possibility in their operations farther south. However, EOG has another idea up their sleeve.

“We’re looking at and in the development stage of a water recycling facility,” he said. “So, our objective for this water recycling facility is to be able to remove all oils and greases, metals, chlorides, and have a major reduction in the total dissolved solids (TDS) in the water. To date we’ve seen some great successes with it. And as we are able to recycle more and more water, it just reduces our dependency on surface water in the area.”

“There’s an explosion of companies out there that can clean water,” Harfman added. “It’s trying to find a system that can deal with the higher chlorides and TDS that we have up in the area. That seems to be the chore.”

Harfman explained that EOG has also taken steps to improve their surface water use.

“What we’re doing today is we’re using our borrow pits that are used for construction to build roads and pads, we’re using that to be able to store surface water that we’re pulling from lakes and creeks,” he said.

EOG draws its water during spring freshet when lakes and rivers are inundated with run-off water from the spring snowmelt.

“And it’s less of an impact on the lakes and surrounding ecosystems to pull at that time of the year,” Harfman added.

Consequently, the water is also drawn during spring break-up when EOG isn’t typically doing any completions work. It can be stored in borrow pits where evaporation rates are lower than in the area lakes, which are generally shallow water bodies with large surface area.

The borrow pits are relatively deep and have a relatively low surface area in addition to being shaded by trees.

Those factors explain the lower evaporation rates.

“Some of these borrow pits we’ve converted over to lined pits and that allows us to store a lot of our initial flowback water that’s coming out of the wells,” Harfman said.

That water can then be reused for subsequent completions.

“We don’t have any water sources right now that are close to roads and are easy to access,” he continued.

“They’re all anywhere from four to ten kilometres or farther away from our own field operations. So, what we’ve been doing there is we run surface [pipelines] down, following seismic lines, out to these lakes or creeks where

we’re then able to transfer that water in to field operations and store in our borrow pits.

“And then from there we have the options of running through buried pipelines to whatever location we need to go from there. This helps us reduce our truck traffic on our roads. Being able to transfer through pipelines takes a lot of trucks off the roads. And it reduces our human incidents.”

EOG has also gone to automated pumping systems because those water sources are in such remote locations.

“It makes it very difficult to get out to the areas during spring freshet times,” said Harfman. “So, you’re kind of left with the options of helicopter or marsh masters to get out there.”

“So,” he proceeded, “what we went to over the last couple years is a completely automated water transferring system where it’s all done off a laptop computer, where you can turn on your generators, turn on your pumps. And we have continuous real time monitoring in our lakes.”

The system always knows the depth of those water sources. If it measures a ten centimetre drop in water level, it automatically shuts off the pump.

“It’s a failsafe shut-off,” said Harfman, mentioning that the system also shuts off the pumps when they reach their daily water allowance as per their Section 8 water approval from the Oil and Gas Commission.

“So it takes away all human error,” he added.

Harfman noted that EOG has also installed a weather station to monitor precipitation and temperature and examine how surface water resources react to those conditions.

“Our goal is to use sustainable water supplies,” he concluded. “And we are committed to meet and exceed our regulatory expectations. •

September 2011 I pipeline news north •

lighten up

19

2011

- trying out the Ignite format

james waterman Pipeline News North

Twenty slides, fifteen seconds per slide, and five minutes to make your point – those are the basics of an Ignite presentation.

The concept – which was born in a bar in 2006, the brainchild of a pair of colleagues at O’Reilly Media – was brought to the 2011 BC Oil and Gas Conference by event organizer Judy Kucharuk of Footprint Management Systems. Four brave speakers were given the chance to address the audience who subsequently voted for their favourite speaker.

The winner was awarded a $1000 cheque to donate to a Fort Nelson area charity of their choice.

“I was at a conference in Portland,” said Kucharuk, explaining how she was inspired to add Ignite to the conference. “And one of the other delegates there – who’s another … corporate planner – and I got to talking about them. And she said that she’d been to one and it was really great. And it was an opportunity for people to get a message across in a very quick manner. And it was a challenge. And so I thought, for this conference, it would give an opportunity to those individuals who might not necessarily be asked to present or be able to present. And then to have the added benefit of being able to link it to a charity of their choice and have a winner. [It] not only gives it a little element of competition, but it also elevates the charity and draws interest to the charity.”

The Ignite session immediately had the crowd laughing and clapping when Pearse Walsh of the BC Safety Authority took the stage with a can of beer to calm his nerves and good-naturedly fumbled his way through his presentation.

“This thing’s taking off on me! Is this fifteen sec-

onds?” he exclaimed.

Walsh was followed by Kristina Van De Walle, Recruitment Manager at Northern Lights College, who spoke about education opportunities at the school and how they can lead to a rewarding career in the oil and gas industry.

“Currently, up here, we’re also offering power engineering and gas processing thanks to NEASEP, Encana and Spectra Energy,” she said.

Van De Walle also used to her session to announce that the Northern Lights College Education Foundation has established a bursary in memory of Lucas Dickie, who was killed in a car crash on Highway 97 on Saturday, September 3.

“The family will be presenting that to a Fort Nelson student,” said Van De Walle, noting that any Fort Nelson student can apply.

Andrew Tylovsky and Kyle Thomas of Motion Media discussed how social media can be used to the benefit of any business or organization, while Elaine Armagost from the North Peace Invasive Plant Committee spoke about invasive plants, how they have been introduced into the region, their negative impacts on local ecosystems and wildlife, and residents can do to deal with these noxious weeds.

Walsh won the competition, earning a donation to the BC Children’s Hospital.

“I can see why this would be in a bar setting,” he said. “Because I think, after a few beers, you probably talk a little faster. I certainly found I was talking slower and, as a result, my script got a little bit out of sequence. But it was absolutely awesome. It’s just awesome. It’s a great way to get a message across. A fun way to do it. And I think it was great.”

“I think it was phenomenal,” added Kucharuk, noting that it was a good change of pace from the presentations full of heavy data and serious industry issues. “I had a really good time. And I think everybody in the audience seemed to be really enjoying it.” •

Kyle Thomas (left) and Andrew Tylovsky (right) of Motion Media extol the virtues of social media during their Ignite session. james waterman photo

Pearse Walsh of the BC Safety Authority struggling to keep up with his slides during his Ignite session. Each speaker had five minutes to go through twenty slides with this fast-paced presentation format.

Kristina Van De Walle, Recruitment Manager at Northern Lights College, during her Ignite session.

28392

20 • PIPELINE NEWS NORTH I

September 2011

technology

packers plus

- new RepeaterPORT technology

Packers Plus new RepearterPORT technology increases the number of hydraulic fracturing stages per well, while reducing completion time and volumes of fracturing fluid.

Image courtesy of Packers Plus.

james waterman Pipeline News North

Packers Plus introduced new technology in mid August designed to increase the number of hydraulic fracturing stages in tight oil and liquidsrich shale gas wells, while reducing completion time and fracturing fluid volumes.

Their new RepeaterPORT sleeve is the next step in the evolution of high density (HD) fracturing technology that Packers Plus first introduced to the oil and gas industry in 2001 with their StackFRAC HD system.

“The industry has determined in some of these resource plays, like the shale plays and some of these tight oil plays, that even our HD technologies were not sufficient to drain these reservoirs,” said Dan Themig, President of Packers Plus, explaining the genesis of the new technology.

“Our industry has figured out that the number of fracture treatments [necessary to drain a reservoir] is not a small num-

ber,” Themig added. “It’s a large number.

In fact, it may be a very large number.

And so there’s really no other technology that’s efficient enough to allow operators to perform as many treatments as they need to.”

RepeaterPORT basically builds on technology that Packers Plus first introduced with their FracPORT sleeve, which allows specific sections of the wellbore to be isolated and fractured independently.

The sleeve is bookended by a pair of RockSEAL II packers in order to achieve that isolation. When using the FracPORT sleeve, an actuation ball of a specific diameter is pumped into the wellbore, landing on the ball seat in the sleeve where the diameter of the wellbore is too small for the ball to pass through. That location is the port. Consequently, the wellbore below the sleeve is sealed off from the top portion of the wellbore so that it isn’t affected when the pressure is increased in the top portion of the wellbore. When the port is moved into the open position, the zone isolated by the sleeve is fractured. This can be done in series throughout the wellbore using progressively larger actuation balls in order to isolate each zone. The RepeaterPORT, which is used in tandem with FracPORT,

allows the operator to do two stages with the same size of ball, thereby doubling the number of fracturing stages.

“Currently, the one we have in commercial use doubles the number of stages from about 20 stages to about 40 stages,” said Themig. “And then we’ve got another version that’s shortly to go to trial. So, it will take us into 50 to 60 stages and beyond.”

It can also replace the traditional “cemented plug and perf” method.

“In doing horizontal wells, you would have to intervene with some device to block off the previous fracs that you’ve done,” explained Themig. “And so, essentially, you’d either pump or push down with coil tubing a device to blank off previous fracced stages. And then you’d have to perforate additional holes to continue to frac in a cemented liner.”

Trials for the second version of RepeaterPORT, which are just beginning, should take three to six months. Trials for the initial version of RepeaterPORT, which is currently commercially available, began just over a year ago. The technology was in development for about two years and the cost of development was approximately $1 million.

“My guess is we will be continuing to

develop our RepeaterPORT technology for the next ten to twenty years, because it’s such a key technology for our industry,” said Themig. “I mean, if you look at the automotive industry, the Model T was a long, long time ago, and now you look at the latest and greatest Porsche or Lamborghini or Honda racecar. It’s just incredible advances.”

“Our RepeaterPORT technology,” he added, “is one of the key technologies that’s going to make some of the more difficult resource plays both economic and profitable to our operators.”

The key advantages are in terms of efficiency.

“A 30 stage frac that somebody may do, for example, in the Bakken formation in North Dakota, that would probably take somebody using a cemented liner and plug and perf … in the range of five to six days to complete,” said Themig. “And with this technology, we can complete that in one to two days. But even more important than that, we’re able to complete it in a couple of days, and actually have production coming out of the well in two days.”

It takes about fifteen days to get to continued pg 21

September 2011 I pipeline news north •

cont’d from pg 20 production with other techniques.

“The other key thing about it is that one of the shortages in our industry has been and continues to be frac crews and frac equipment,” he continued. “And it’s almost in every basin that you go to. … There’s a continual delay in getting wells online. And this technology should all but [eliminate] those issues with shortage of frac equipment, because, essentially, the frac companies become more effective and more efficient in being able to get a higher number of stages done on a monthly or a yearly basis, maybe by three to four times as many.”

Currently, operators often have a great deal of capital tied up in nonproducing wells simply because the crews and equipment aren’t available to fracture so many wells at a rate of five to seven days per well. RepeaterPORT could reduce that backlog considerably.

“Some people think that open hole multistage frac systems are … costly,” said Themig, noting that systems like RepeaterPORT fall into that category. “But if you look at the total well cost, they save a great amount of money.

I was just in Texas last week visiting with a company … that has now installed over 200 systems in over 200 wells. We were actually down to celebrate their 200th completion using our StackFRAC system. And their commentary was that they’re saving a considerable amount of money, around ten per cent of the total well cost, by using Packers Plus.”

The technology also reduces the necessary volumes of fracturing fluid.

“In conventional techniques, what operators are forced to do is, to move from one stage to the next stage, they have to use great amounts of fluid to push perforating guns down into the well … to be able to perforate and move to the next stage,” explained Themig. “And so,

essentially, what we do is we eliminate all the fluid that’s used to pump perforating guns down.”

The reductions are significant.

“One operator I was talking to in Texas,” he continued, “they said, on each stage, it takes them five to seven hundred barrels of water, essentially, to push the perforating guns down using a plug and perf method.”

It is common for operators to be doing 30 to 50 stages and pumping perforating guns down into the wellbore that many times. Even just 500 barrels of water per stage for 30 stages adds up to 15,000 barrels of water.

“It’s just a massive amount of water that has to come from somewhere,” said Themig, adding that all the fluid used by the RepeaterPORT method is used to fracture or carry proppoant, not to

push perforating guns down in the wellbore.

Themig remarked that the industry has been quick to adopt the technology.

“Our biggest issue is we very much underestimated our manufacturing requirements,” he said. “And now we’re trying to play catch up. … In fact, I just had a meeting this week with our manufacturing people, and that was one of the key subjects, is ramping manufacturing up on our RepeaterPORT.” Themig has seen immediate interest in western Canada in the tight oil Cardium play and the liquids-rich Montney and Duvernay formations. RepeaterPORT has been similarly attractive to operators in the Bakken play

21

of North Dakota.

“They’re trying to do long reach lateral wells, which means their stage requirements are extremely high,” he said of the Bakken producers.

Themig also believes the technology will make its way into the Eagle Ford shale play in Texas, the Marcellus play in Pennsylvania, and the Niobrara formation in Colorado and adjacent states.

“In fact,” he said, “we’ve got customers that are kind of hammering on us to get our capacity up to be able to deliver more systems with the RepeaterPORT. I was in Denver a while back and one of the key drillers in the Niobrara tight oil play was kind of hammering me a little bit, saying, ‘You guys need to get this up quick, because we need it.’ And they were using a combination of Packers Plus plus conventional. And the guy told me conventional is just eating their lunch. And the RepeaterPORT is really the solution for where they need to go.” •

The RepeaterPORT sleeve that makes possible the increase in fracturing stages and the reduction in completion time and fracturing fluid.

Image courtesy of Packers Plus.

cont’d from pg 15 Natural gas currently sells for less than four dollars per mmcf.

“That is a concern,” he said, remarking that activity in the Horn River will slow if that trend continues.

Spitzer insisted that it was important to be so straightforward about the economic circumstances of the industry during the community session.

“We don’t want to set up false expectations,” said Spitzer. “So, you want to tell it like it is according to what we see.

And I think we have to do that. It’s our obligation to do that so there isn’t false expectations.”

“It actually was meant to be a positive story,” he added. “Everybody knows that gas price is pretty low. People understand that. And it’s happened – low gas price has caused companies to move their dollars around. That’s happened in the past. I think people know that. The best way to avoid [mis-

conceptions about the industry] is to be honest about it and figure out how we can work together to avoid that possibility. And that’s what this presentation was about.”

Dolan suggested the current low gas price provides Fort Nelson with an opportunity to “plan, instead of react.”

The community is already expected to grow by about 2000 people by 2020.

The growth curve could be a lot steeper with higher gas prices and faster development.

“I think we’ll use it as a time to rebuild, retrain, hold workshops, build on it,” said Dolan. “I really do. Because that’s what we do here. We won’t just hide our heads in the sand.”

“In order to facilitate some growth here, we have some work to do on the ground,” she added. “We have to start building subdivisions. We have to get some more retail. We have work to do.

So, thank God this won’t come in the next month or two.” •

Quote of the Month “Technology is a gift of God. After the gift of life it is perhaps the greatest of God’s gifts. It is the mother of civilizations, of arts and of sciences.”

- Freeman John Dyson

31282

Community talk - cont’d

22 • PIPELINE NEWS NORTH I

September 2011

environment

site reclamation - putting it all back

This species of bumble bee is one of the common pollinators native to Northeast British Columbia. Research is showing that native pollinators that pollinate rare native plants are relying on introduced plant species for food, posing an interesting challenge for reclamation and restoration work.

Photo by James Waterman.

james waterman Pipeline News North

News from the energy sector is always full of technological advances in areas such as horizontal drilling and hydraulic fracturing that have led to new heights of natural gas production in shale formations that were all but inaccessible not too long ago.

However, new scientific knowledge is also making a mark on work that is done after pipeline construction crews have left the land and oil and gas wells have ceased to flow.

That is the work of site remediation and reclamation.

Robert Martens, Group Lead for Environmental Liability Management with Encana, may have received his initial training in environmental sciences and structural engineering in Europe, but he now does remediation and reclamation work in the oil and gas fields of western Canada. He has a Master’s degree in environmental management from Royal Roads and holds credentials as a professional engineer and agrologist in both Alberta and British Columbia.

Martens is also among those in the industry who have begun to see the advantages of using First Nations knowledge of traditional-use plants in reclamation work.

“I can’t speak for other companies, but for us it’s definitely emerging,” he said, adding that he tried using traditional plants on two sites in the Fort Nelson area in 2007.

During those projects, Encana consulted with members of the Fort Nelson First Nation, who assisted in identifying native plants that they traditionally used for food or medicine.

“We … used some native muskeg, and the plants and

seeds that were imbedded in those top layers, transplanted them to the lease,” Martens continued. “We had some really good success with that. So, I’m working on a couple other sites right now.”

Angela White, a Surface Land Representative with Encana in Fort Nelson, was part of a traditional plant study involving the Prophet River First Nation that concluded this year. The project sparked her interest in traditional plants and how that knowledge could be used in site restoration.

“Remediation on well sites was essentially just grass seed to get it greened up as quickly as possible,” said White, discussing how restoration had been done in the past.

That practice has changed under the new Oil and Gas Activities Act (OGAA).

“The Oil and Gas Commission prescribed a certain seed mix,” explained Martens, “which means, for the South and the North Peace regions, they said, ‘Okay, if you reclaim a lease, your topsoil’s now restored, you have to use this kind of a seed mix.’ Industry always kind of had questions about that, because … even with a Grade A seed mix you implement potentially noxious weeds. Because there’s no such thing as 100 per cent clean seed that you buy off the shelf.”

“So, under OGAA, they did something really innovative,” he continued. “They basically left those seed mixes out and they said that you had to restore your vegetation and your soils – your topsoils – to … ecologically sustainable conditions. They left it wide open. So, at that point, industry could basically say, ‘Okay, let’s leave the … seed mixes apart and use something at the local level.’

So, the native berries and the native plants that grow in that area – transplant them to the lease. And they’re already in their natural environment.”

A key benefit is reducing the introduction of noxious weeds.

White’s experience trudging through the bush with elders from the Prophet River First Nation to learn about

traditional plants, where they grow and how they are used by First Nations, has made her a firm believer in their use for reclamation.

“With oil and gas, the land base is kind of disturbed a little bit longer than with forestry,” she said, hinting at her forestry background. “And by putting the grass seed back, you’re not putting back a traditional plant.”

As far as White is concerned, it only makes sense to restore a site with traditional plants that are not only used

by First Nations people, but are also important to local wildlife.

“Environmentally, it’s better too, I think, to put back what was there,” she added.

“I think it’s always been on people’s minds – people working in reclamation – that it would be nice to put back something more native, something that grew in that location to begin with,” White continued, addressing the fact that that wasn’t really possible before the new OGAA regulations.

“And then this project, I think, just sort of brought it to the forefront again, when we’re talking about traditional plant use, and now we have this opportunity where we can apply what we’re learning.”

White thinks it was just good timing that let all these elements came together now.

“I’ve heard lots of people talking about this – even a few years ago – about using traditional plants for reclamation,” she said. “And I’ve even seen the sites that just kind of naturally happen that way. It was just the right conditions and the right slope and the right soil conditions. The plants seeded themselves. And it looked really good. When I saw that, I thought it would be great if it could all look like this.”

Unfortunately, many sites across the province, including those that have been disturbed through resource industry operations, are now home to numerous introduced and invasive plant species. Modern research into the interactions between native pollinating insects and plants continued pg 23

September 2011 I pipeline news north •

23

Sites restored by Encana gradually returning to their natural state.

Photos courtesy of Robert Martens, Encana.

cont’d from pg 22 is revealing that simply removing those non-native plants isn’t really the best solution to the problem, largely because native pollinators are now relying on those non-native plants for food.

Elizabeth Elle, a biology professor at Simon Fraser University, has been part of this relatively new research, building what are known as ‘interaction webs’.

“You have to catch bees off of the plants,” said Elle. “Or flies. Or whatever the important pollinators are. … And then you keep track of which things are caught on which plant. And then once the identifications are done, then you can build an interaction web pretty quickly. So, the hard part is not even the catching of the bees. It’s the identifications of them. And then building the interaction web becomes – it can be automated with a computer program.”

Elle noted that applications of this research are just starting to be used in a species conservation context, as well as for site restoration projects.

“A lot of restoration is about … planting the plant species and then animals will come,” she said. “But when you’re thinking about restoring a degraded ecosystem, sometimes what you really want to know is whether this functioning is working.”

The question is whether or not a fully functioning, intact ecosystem has been recreated. Research into interaction webs has revealed the importance of non-native plants in some habitats, particularly in cases where a small population of a rare native plant may be growing near introduced or invasive species.

“This plant is rare,” said Elle, stating the hypothetical case. “What pollinates it?

And that’s part of the story. You say, okay, this is the thing that’s visiting [the rare plant]. But then if it turns out that that bee also gets food from ten other plant spe-

cies, you might need to be thinking about what those plant species are. Because if you only have one bee that visits the rare thing, you’ve got to make sure that bee sticks around, or the rare thing is going to not reproduce.”

“There are some people who have built these interaction webs,” she continued, “and it turns out there’s some invasive species that’s providing 90 per cent of the food for the bee. And the bee also then visits this rare thing. Well, if you got rid of the invasive species, the population of that bee then would probably just completely tank. And then the rare species would follow.”

So, the solution is a painstaking and expensive process.

“I’m not an expert in restoration ecology, but everything I’ve ever read about it, and the people I know that do it, tell me that it’s unfortunately a combination of removal and addition,” said Elle, explaining how to remove the non-native plants while protecting the population of native plants and their pollinators.

“We have Himalayan blackberry issues here,” said Elle, discussing another method of controlling introduced species while conserving indigenous wildlife.

“Everybody loves blackberries, except that they form these monocultures. Nature Vancouver … has said, ‘Well, you can’t just go in and remove them, because then all these really common bird species will have nothing to eat.’”

“So, what they recommend is a phasedin removal,” she added, suggesting that that method could possibly apply to pipeline right-of-ways.

The industry could remove non-native plants from short stretches of the rightof-way, all separated by stretches where those plants continue to grow.

“And then the next year you do the next patch over so that it’s phased in that way,” she concluded. continued pg 31

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24 • PIPELINE NEWS NORTH I

September 2011

industry news

ziff energy

- natural gas demand for the oil sands james waterman Pipeline News North

Western Canadian natural gas producers can expect demand for their products from Alberta’s oil sands operators to triple over the next decade, according to a recent Ziff Energy Group report.

Ziff Energy released the report on August 30, indicating that natural gas use in the oil sands will likely grow from the present use of 1.1 to 1.3 billion cubic feet (bcf) per day – which is about one third of total natural gas consumption in Alberta now – to about 3.0 bcf per day by 2020. Led by Gas Analyst Julia Sagidova, Ziff Energy examined data concerning over sixty mining and in situ projects to forecast the natural gas demand for the industry.

“It’s really the spread between oil price and natural gas price,” said Cameron Gingrich, Senior Manager for Gas Services at Ziff Energy, explaining the growing natural gas demand for the oil sands. “So, oil price at $100 is equivalent to a $17 per mmbtu (million British thermal units) gas price. And, of course, gas price is at $4. So, it’s almost like a pseudo-gas-to-liquids type project going on in Fort McMurray. Basically, producers are taking gas molecules and converting them into oil molecules and getting that huge uplift from that.”

Gingrich likened it to liquefied natural gas (LNG) projects like the proposed Kitimat export terminal and the SasolTalisman Energy joint venture to explore gas-to-liquids (GTL) opportunities in the Montney tight gas play.

“So, this kind of spread between oil and gas – cheap [gas] molecules due to the explosion of shale in north America and expensive oil [because] the availability of oil resources for major producers to attach themselves [to] is limited,” Gingrich continued. “A place like Fort McMurray is a great place to invest.

Canada’s politically stable. You can have a great partnership with U.S. companies, with European companies. They feel comfortable investing here. They can’t invest a billion dollars into Iraq or Russia without political risk. So, that’s really what’s driving it. The difference between oil and gas and the huge reserves up at Fort McMurray accessible to anybody who wants it.”

Gingrich doesn’t believe the oil sands demand for natural gas will really change if the natural gas price climbs the charts, because, as he explained, the oil price is the key factor. Mining projects use about 0.5 million cubic feet (mmcf) of natural gas per barrel of oil produced. In situ projects use just over 1.0 mmcf of natural gas per barrel of oil, which is only a cost of about $4 per barrel presently.

Even if natural gas went up to $10 per mmcf, oil sands development would still be cost effective in terms of natural gas consumption.

“We have a lot natural gas in western Canada,” said Gingrich, addressing the origin of natural gas used in the oil sands. “We produced 14 bcf a day last year. Approximately 20 to 25 per cent of North America’s demand is supplied by western Canadian producers. So, there’s a lot of gas in Western Canada.”

According to Sagidova, natural gas demand for the oil sands will only account for about four per cent of total North American natural gas demand in 2020.

She also explained that the approxi-

mately 3.0 bcf per day of natural gas use for the oil sands in 2020 that is stated in their report is based on a conservative model, accounting for a variety of factors that may limit production. She also remarked that there is a slim chance that natural gas consumption for the oil sands could grow to 7.0 bcf per day over that same period, but that is highly unlikely.

“That’s assuming that all the projects that are there, no matter what their regulatory status is, that they will all proceed and they will come online at their scheduled time,” said Sagidova.

“That’s kind of the upper limit case,” Gingrich added.

Gingrich noted that there will continue to be strong demand for Alberta oil during over the next decade.

“Our assumption here is that there will be takeaway pipe built,” he said, mention-

ing TransCanada’s proposed Keystone XL pipeline and the Enbridge Northern Gateway project as examples.

“There will be takeaway capacity,” he continued. “And, of course, huge demand in North America [and] overseas … for barrels of oil. So, I think the demand worldwide is still growing and strong in this time period as well.”

“This is a good thing for North American gas producers,” Gingrich conluded.

“We talked about the shale explosion in North America. That technology unlocking all that resource. We need demand [for natural gas] right now in North America.

We have that with oil sands. We probably have some power [generation] growth going forward as well. So, this is helpful and will bring prices up above this … freeze that we’re seeing in western Canada right now.” •

Spectra shows promising growth james waterman Pipeline News North

Growth was the key word when Doug Bloom, President, Spectra Energy Transmission West, provided an update on his company’s activities in British Columbia during the second day of the BC Oil and Gas Conference in Fort Nelson.

He explained that Spectra are presently involved in a $1.5 billion expansion program in northeast B.C. About $1 billion of that capital is being directed toward the Horn River Basin, mostly going toward natural gas gathering and processing facilities, but also some additional pipeline capacity. The remaining $500 million will be spent in the Montney region.

“Our McMahon gas plant there is the heart of the operations,” said Bloom.

“It was the first plant, named for the founder of company. Started operations in 1957. And it’s now processing more gas than it ever has in the 54 years of its

existence.”

“Early this year,” he continued, “we built a gathering pipeline called Bissette that will help take some of the Montney gas up to McMahon. And then later to our [new] Dawson gas [processing] plant, first phase of which we’ll have completed later this year.”

Initial capacity at the new Dawson plant – which is one of two new plants being added to Spectra’s sixteen existing facilities in B.C., along with a new plant in the Horn River Basin – is going to be 100 million cubic feet (mmcf) per day.

“We’ll double that [capacity] by the end of the next year,” said Bloom.

Approximately half of Spectra’s growth capital, which is usually in the neighbourhood of $1 billion per year, is being invested in northeast B.C. “We spend about $600 million a year inspecting and maintaining existing assets that we’ve got, whether it’s gas plants or gathering systems or distribution facilities,” Bloom added.

Bloom mentioned that Spectra began an expansion program in the Fort Nelson area in 2009 by looping and reconfiguring elements of its gathering system and later reactivating unused gas processing capacity at their Fort

Nelson plant last year. It is all part of an effort to serve almost 800 mmcf per day of additional firm contracts.

“Beyond this expansion, we do see more opportunity,” said Bloom. “There’s clearly a massive resource here. And we’re working with a number of parties that are active in the Horn River Basin, Liard [Basin] and Cordova Embayment.

Clearly, gas prices and markets for the gas are going to be vital pacing factors for us. ... That’s going to be something we all have to watch closely. We are working with a number of producers right now on what could be accepted pace of expansion in the Fort Nelson area. ...

We’re looking at different facility solutions here. But generally we’re looking at expansion around our Fort Nelson gas plant location.”

“We’re looking at ways of getting this gas to market, which is obviously pretty critical,” he added.

Those efforts include looping parts of the Fort Nelson mainline and adding new compression capacity at a station in the southern part of the region, as well as building a new compressor station and pipeline to connect to NOVA Gas Transmission system in the Dawson Creek area. That will increase capacity

by 500 mmcf per day heading east into Alberta and beyond. Further looping on the Fort Nelson mainline will also increase capacity in that area by 360 mmcf per day next year.

“These expansions will allow the gas to get to a variety of markets,” said Bloom, “whether it’s local, or Alberta and eastward, or the traditional markets that we’ve served for many, many years here in British Columbia and the Pacific Northwest.”

“We’re going to go do some things that will create more liquidity at Compressor Station 2, which has become something of a hub in northeast B.C.,” he added.

“And that will provide more flexibility for producers and buyers, to allow them to source gas and also sell gas into different markets, as well as provide a very good jumping off point for LNG exports, which we think are important too.”

“We believe that natural gas in British Columbia is the economic engine and can be the economic engine and we need to keep it firing on all cylinders,” Bloom concluded.

“We’ve got to grow domestic demand for this product. Commercial uses.

Transportation uses.” •

September 2011 I pipeline news north •

profiles

25

kim gray

- getting hooked on energy james waterman Pipeline News North

Kim Gray traces her passion for the energy sector back to her teenage years.

Born in Ottawa, Ontario, her family brought her west to Calgary, Alberta when she was fifteen years old. Subsequently, during her last year of high school, her father took a corporate security job in Fort McMurray for one of the oil companies operating in the oil sands.

Gray would spend the next two summers living and working in Northern Alberta, immersing herself in the culture of the resource town and becoming familiar with the petroleum industry.

She was hooked.

“I had obviously been exposed to a lot of the negative press about the industry and the challenges communications-wise that industry faces,” said Gray, noting that she followed her interest in the energy sector to study communications and public relations at Mount Royal University in Calgary.

“That really got me intrigued in how I could contribute to this industry and, more importantly, to the communication side,” she added.

Being outgoing and adventurous, not to mention bilingual, Gray decided to apply for a student exchange program through the university that took her to France for four months in the fall of 2009.

“And it was the most amazing experience of my life,” she said. “I learned so much. I met so many people from across the world and so many diverse backgrounds.”

Being Canadian, she automatically had a reputation as “super-friendly” among her fellow exchange students, and her temporary home was quickly known as the spot for social events ranging from study groups to parties.

“We were kind of the ambassadors for this big group of people,” Gray said of the Canadian contingent, “which I thought was fitting considering it is also a very multicultural and accepting country.”

It was during her last semester at Mount Royal that Gray authored a research paper about the evolution of environmental activism and its effects on the reputation of the oil sands. The project provided her with additional motivation to inform the public about the energy sector, further urging her to join the industry in the capacity of a communications professional.

“And so I got a job with CAPP (Canadian Association of Petroleum Producers) as a student in 2010,” she said. “And I was kind of the Jill of All Trades here. … And my work with CAPP just drove my passion further for the energy sector and for all the challenges that go hand in hand with this in communications.”

Gray is now enrolled in the Master of Arts in Environmental Education and Communication program at Royal Roads University in Victoria.

“I wanted to do something in either sustainable development or environ-

mental communications,” she said, explaining her decision to follow that route. “Royal Roads offers the ability to work and do distance learning at the same time, which was convenient for me. And then you spend three or four week terms in Victoria doing courses on campus.”

Part of the appeal of the program for Gray is that it attracts a diverse group of people, yet she was surprised to arrive in Victoria and discover that she was the youngest student in her section and the only one among them representing the energy sector.

“It was a little intimidating at first, I suppose,” she admitted. “But then I realized that I have a bit of a unique and important position amongst that group, because a lot of them are nonprofit or educators or government, and there was no industry side of things to speak to the energy issues and the environmental implications of those issues.”

“I slowly began to realize that I have a very important role to play,” Gray continued. “And a very important perspective to deliver to these students about the work that I’m doing in energy and about the work that industry is doing to better the environmental challenges that we face. And to communicate those challenges with the public.”

Her position with CAPP exposes her to speakers and presentations that may not be experienced by her fellow students. She is able to share that information and those perspectives with them through the program.

“It’s really offering another side of the coin that they really don’t see, because a lot of them just participate in the negative aspects of the industry,” said Gray.

Conversely, Gray is also provided the opportunity to hear the concerns and issues surrounding the oil and gas industry that is discussed in the other segments of the population represented by her peers at school.

Consequently, she can return to CAPP to share those views with her colleagues. That is highly beneficial in her mind.

“This group of individuals that I’m in school with are very green-conscious and very aware of the environmental issues going on in the world,” she explained. “So, it really does help me bring back to work – to my colleagues here at CAPP – their perspective and what they’re concerned about. And that helps us here as industry form communication strategies to communicate those things to this audience of people.”

Working with CAPP has provided Gray with some interesting opportunities and experiences as well. Most recently, she was part of the Energy in Action team, which travels to elementary schools in communities where petroleum companies have a presence, educating children about energy and sustainability. The program allows the students to do activities such as building bird houses or planting trees, while their schools receive donations of books for the library, as well as new facilities such as outdoor classrooms

(above) Kim Gray planting shrubs for the new outdoor classroom during an Energy in Action event this spring.

Photo above by James Waterman.

Photo right by Kristian Jones

in some cases.

“I loved the Energy in Action experience,” said Gray. “It was so wonderful. I really enjoyed the program. And I think it’s great to see industry collaborating on any level and working together to better the communities that they work in.”

“The relationship-building on behalf of the industry and getting to know the communities on a personal level,” she continued, describing a few of the highlights. “And to see the effects on those communities, especially in some of the rural schools that don’t have the resources that a lot of the urban schools have. Seeing the smiles on the kids’ faces. Often, the kids are kind of like, ‘Oh! This is the best day ever! I’m so excited!’”

As for Gray, she was happy to get out of her Calgary office for a few days and get her hands dirty building bird houses and planting shrubs.

“It’s nice to get out and to be in these communities where industry development is taking place,” she said.

“We can go into these communities and create environmental legacies for these.”

However, Gray is now shifting gears from Energy in Action to her new role at CAPP as an advisor for natural gas communications.

“It’s very different,” she said. “It’s a lot more big picture thinking and strategic, whereas Energy in Action was more logistical and tactical. So, it’s hard to shift the brain to big picture thinking and thinking on a national level, instead of just a rural community level.”

Her student exchange trip to France has been helpful for this new position. It allowed her to practice and perfect her French language skills, which are coming in handy now that she has to deal with media from Quebec, one of the provinces that has natural gas resources.

Gray describes CAPP as her “professional home.”

“I’m one of the youngest in our team,” she said. “And everybody kind of has a unique role to play. And I’ve been learning something from everybody since I’ve been here.

So, the colleagues that I have here and the teamwork at CAPP, the camaraderie that we

have, it’s really special. It’s different than anywhere else that I’ve ever worked. We’re a tight knit group of people. And we work together really well.”

The young woman is obviously proud to be part of the communications side of the industry, a profession that is “stacked with a lot of talented women.”

She is even part of an association called Calgary Women in Energy that offers education sessions for women in the industry.

“There’s a lot of good opportunity for women – up and coming and young professionals – to get involved [in the industry], whether it’s in communications or engineering or technical or procurement, whatever it may be,” said Gray. “There is a ton of opportunity here for growth and development and just starting your career. It’s a great sector to get started in, because I feel like I can pretty much go anywhere from here.”

Appropriately, Gray admits that long terms career goals seem to shift all the time, noting that she is just “starting to come into my own.”

“I definitely see myself in energy,” she said.

“I feel a particular calling to this sector.”

“Ultimately,” she added, “I would love to … be a director of communications in an energy company. But that could change tomorrow.”

“I’m young and I still have a lot to learn.

And I’m learning stuff every day from school and from work and from the people that I’m surrounded by. I’ve been really fortunate to be part of such a great cohort at school and such a diverse group of people at CAPP. And I just want to keep learning.” •

26 • PIPELINE NEWS NORTH I

September 2011

Understanding market volatility: it’s a part of investing! jl

You may have heard the terms “bull market” and “bear market” batted around. What do these terms really mean, and do they affect your investments?

A bull market is a period of time when stock prices are on the rise.

These are the times when the markets give a 20 per cent return for a number of years in a row. A bear market is when stock prices fall for a sustained period of time. The fear and uncertainty of a bear market is what makes most people nervous about investing in market-based products. Bear and bull markets, along with in-between periods of less dramatic ups and downs, are a normal part of investing.

The markets have seen some pretty dramatic fluctuations over the past few decades. Market volatility is not an unusual experience. In fact, severe short-term volatility happens regularly - about every two years or so.

While there is no way to completely protect your money from this volatility, you can put a plan in place to moderate the impact. Think back to when you put your savings plan into place. Your advisor helped you to create your plan based on your long-term goals and expectations. You considered your hopes for the future, your comfort with investing and even market volatility.

No one can predict what the markets will do tomorrow, but remember to keep a few points in mind.

Asset allocation Your advisor may have walked you through the asset allocation process to build your plan. This process includes selecting a mix of investments to diversify your portfolio and help minimize risk and maximize return. It’s designed to help cope with market volatility.

Dollar cost averaging Investing a set amount of money on a regular basis, such as through a monthly savings plan, can offer you more buying power. When the markets are down, your regular contributions purchase more units when prices are low. When prices rise, you’ll purchase fewer units at the higher price. The result—the average cost per unit could end up being lower.

Before you make any decisions about your investments, talk to your Sun Life Financial advisor.

Submitted by: First Choice Insurance & Investment Services Inc. ©Sun Life Assurance Company of Canada, 2007.

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28381

international first nations

summit - transforming relationships james waterman Pipeline News North

It is no secret that Asian investors and companies are becoming increasingly interested in the abundant natural resources in British Columbia.

China is at the forefront of that movement. As that country continues to invest and operate in the province, its companies must interact with the First Nations communities and their traditional territory where so much of those resources exist.

That is why B.C.’s First Nations leaders put their heads together back in the summer of 2010 to start developing a strategy to build a mutually beneficial relationship between the two sides.

As explained by Grand Chief Ed John, Political Executive for the First Nations Summit, there is a need to educate Chinese investors about the rights of First Nations people in Canada, not to mention the fact that natural resources such as the shale gas in the Horn River Basin are being developed on First Nations territory.

“Governments … are saying, you know, come over here, we have all these resources, invest in Canada, invest in British Columbia,” said John.

“And what’s not really clear is the circumstances around those investments.

What due diligence is required on the part of the investors? And we’re saying part of the due diligence, of course, is you have to understand the nature of the legal framework, the rule of the law in Canada.

And the rule of law, of course, includes aboriginal and treaty rights. And that is really not explained.”

“There are many opportunities for sure,” he continued. “And we support development. But we’re concerned about the kind of development that’s out there that’s being proposed. And we’ve seen those kinds of developments – those [that] are strongly opposed by First Nations communities. And somewhere there’s a line, of course. And there are many opportunities out there. And First Nations have entered into agreements with companies, mining interests, forest interests, energy interests.

“And we’re not saying no to development. We’re just saying, look, we need to see benefits to our communities. We need job opportunities. We need business opportunities ourselves. If somebody is benefiting from the resources in our territories, why aren’t we benefiting?”

According to John, Chinese investors and developers have not only been unaware of First Nations rights, but have also been unaware that First Nations people live in these resource-rich areas.

“For example,” said John, “I met with a vice president of PetroChina last year. He, in fact, never met an Aboriginal person or First Nations person ever. Even though they’re expressing interest in investments in Canada.”

So, the First Nations Summit invited a group from PetroChina to travel to B.C. to visit First Nations communities and get a firsthand look at their way of life. This was during the same period that John was part of a Canadian delegation that visited the earthquake-ravaged Chinese province of Sichuan.

“We got a lot of questions, too, when we were in China,” said John. “What is the legal landscape? What should we do?

Who should we talk with? And so we felt that was an opportunity for us to be able to be involved in explaining who we are.

You know, there are a lot of consultants out there doing that – and some of them pretty badly. And we’re just saying we have to tell our own story. We shouldn’t try to get other people to tell our stories for us. And so that’s really part of the strategy.”

The First Nations community in B.C. is already working on a number of initiatives, largely through the First Nations Energy and Mining Council, as part of this new First Nations-China strategy known as “Transforming Relationships.”

That work involves developing a set of best practices for consultation and collaboration with First Nations that can be used by Chinese investors and developers and promoting personal interaction between both sides, including annual First Nations visits to China and Chinese visits to British Columbia. There is already a China trip planned for October 27 to 31 of this year, which will include National Chief Shawn Atleo from the Assembly of First Nations.

“The centre of that trip is really the raising of a totem pole,” said John. “It’s a five-metre pole that we brought to China last year.”

The totem pole was made by First Nations students from the Freda Deising School of Northwest Coast Art at Northwest Community College.

“A tribute to the survivors, but also a tribute to the ones that were lost,” said John, referring to the earthquake that hit Sichuan Province on May 12, 2008.

One of the key elements of the strategy is creating a China Desk where investors and developers interested in B.C.’s natural resources can learn about First Nations and their interests, as well as how to proceed in terms of dealing with First Nations.

“We’ve had specific interests in fisheries, for example,” said John. “Well, we can help direct that. Or if there’s specific interests in forestry, we can help direct them. Or in energy or mining development, for example, we can help shape that. And then just provide some direction.

Same with First Nations who are interested in, let’s say, exporting timber or lumber products.”

“There are other components to it,” he added. “It’s not entirely just that. Tourism is a big opportunity.”

John noted that the Aboriginal Tourism Association of BC has been working to continued pg 27

September 2011 I pipeline news north •

27

Grand Chief Ed John of the First Nations Summit telling earthquake survivors about First Nations culture during a visit to China. John has played a key role in developing the new First Nations-China strategy to develop mutually beneficial relationships between the First Nations people of British Columbia and Chinese investors and developers interested in natural resources such as natural gas on First Nations traditional territory. Photo courtesy of First Nations Summit

promote those tourism opportunities.

“So whether it’s fisheries or mining or energy or tourism or cultural exchange, educational exchanges, those opportunities are there as well,” he concluded.

Obviously, when people discuss natural resources in B.C., natural gas is usually first and foremost in their minds. Part and parcel of that discussion is the growing demand for petroleum products throughout the Pacific Rim and the fact that B.C. is striving to satisfy that demand. The demand isn’t just coming from China, but the First Nations leadership in B.C. decided that that emerging economy is an ideal focus for this initiative.

“More than half the world’s population is in that continent,” said John. “And so the need is pretty dynamic – the need is pretty immense – even in China. And so our thinking was, we just can’t be everywhere. We can be in one strategic location. And in our case we chose China, largely because it’s an important growing economy and the need is there.”

The First Nations Summit, along with the Union of BC Indian Chiefs, the BC Assembly of First Nations, and the First Nations Energy and Mining Council, worked with the provincial government and the Canadian embassy in China as they developed the strategy, but much of the important work was accomplished with the Asia Pacific Foundation of Canada.

“Asia Pacific Foundation has a mandate and an important one,” said John. “And they’ve been pretty proactive in promoting opportunities, but also more connecting people.”

“We only played a facilitation role,” said Yuen Pau Woo, President of the Asia Pacific Foundation of Canada. “This is not our strategy. It’s a First Nations Summit strategy. They wrote it. These are their ideas.

So, what we did was, number one, to convene a group of advisors to exchange ideas with members of the First Nations Summit. We also had a staff person at the Foundation be available to provide research and information as requested by the … team at the First Nations

Summit. And finally we provided feedback on the draft documents. Again, not to put ideas in their head, as such, but to just look for errors and misinterpretations or data inaccuracies.”

Woo described the initiative as being “absolutely critical” for both the First Nations community in B.C. and the energy sector in Western Canada as it tries to access new markets in Asia, particularly considering the struggling economy and glut of natural gas in our trading partner to the south.

“The big issue is not whether First Nations work directly with the Chinese,” he said. “The big issue is that First Nations understand the importance of China for Canada’s economic future and, therefore, for the economic welfare of First Nations communities. If they have this understanding, and if they develop a plan to cultivate relationships with potential investors, if they are open to business opportunities that benefit them, than we will achieve the potential for resource development on First Nations land that may or may not involve Chinese companies, or other companies, but which will have the consent and the support of First Nations communities. That’s the key thing.”

“And I know for a fact that other First Nations are calling up the First Nations Summit and asking about the strategy, and wondering how they can be involved, and getting advice on developing their own strategies,” added Woo. “This is not just a B.C. wide initiative,” John echoed.

“First Nations across Canada are very interested in this.

We have been working with our national assembly, the Assembly of First Nations, for quite some time. And we brief the chiefs across the country at every meeting we have, whether it’s at our general assembly in the summer or our mid winter assembly in December. And so First Nations, whether it’s in Saskatchewan with potash interests or in northern Quebec with the James Bay Cree, there are interests.”

“There definitely are relationships that have emerged and developed,” he added. “And we want to continue to build that.” •

For information on Membership

contact Art Jarvis, Executive Director South or Laurie Dolan, Executive Director North for contact information see www.energyservicesbc.org

31664

cont’d from pg 26

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28 • PIPELINE NEWS NORTH I

September 2011

industry news

lng markets - the future of natural gas james waterman Pipeline News North

A recurring theme throughout the 2011 BC Oil and Gas Conference was the need for British Columbia to find new markets for its abundant natural gas supplies in the current environment of low North American natural gas prices.

So, it was only logical that the BC Oil and Gas Commission, Spectra Energy Transmission, and Apache Canada should team up to discuss plans to export liquefied natural gas (LNG) to Asia via an export terminal at Kitimat during the second day of the event.

Interestingly, the concept of building an LNG terminal at Kitimat first took root just over five years ago, but as an idea to import the product into B.C. “And we had a tough time getting our head around that,” said Gary Weilinger, Vice President, Strategic Development and External Affairs, Spectra Energy Transmission West, during the presentation. “Because we saw ourselves as one of the biggest advocates and proponents of the tremendous wealth and resource in natural gas we have here in the province. And we were having trouble getting our heads around the one stinging comment where folks would say, ‘Well, isn’t that like bringing coal to Newcastle? Why in the world would we bring LNG to British Columbia?’”

Spectra was brought into the conversation because of their transmission infrastructure in B.C. that has helped make the province a “natural distribution hub” for natural gas products, considering its interconnection with infrastructure in the United States in the Midwest and Pacific Northwest, access to Alberta and eastern Canada, and proximity by sea to Asia.

“So, it really did make sense in terms of having B.C. as a natural distribution hub for potential imports,” said Weilinger. “But the other stinging comment that I recall distinctively was [from] a delegation from Japan. And they said, ‘You know, we get that it may make sense from a distribution perspective, as to why their may be LNG imports into British Columbia, and then getting into North America. But, frankly, from a commercial point of view, we’ll pay anything.’”

The shift from importing to exporting LNG has largely taken place because of how circumstances facing the natural gas industry in B.C. have changed considerably in the last five years.

“Five years ago, our customers were saying we’re on a treadmill,” said Weilinger, explaining that average production per well at that time was declining and the natural gas reserves were an estimated 35 trillion cubic feet (tcf).

British Columbia now boasts a potential supply of approximately 1000 tcf of natural gas and the industry is becoming an increasingly significant player in the provincial economy in terms of jobs and revenues for the province.

“The next 100 years,” said Weilinger, “we’ve got certainly more supply than we could ever use ourselves in western Canada.”

However, the natural gas price is presently so low that product being sold from B.C. into Washington is occasionally going for only “pennies.”

“B.C. is not at $4.00. We’re not at $4.50. We’re at $3-something,” said Weilinger, stating that B.C. natural gas is discounted due to our great distance from market, which translates into high costs and a lack of trading partners.

That is why the quest for new markets has become such a hot topic.

“The good news is that we have a tremendous resource here in British Columbia as part of our section … of the Western Canadian Sedimentary Basin,” said Weilinger, noting that the Horn River Basin contains about 500 tcf of natural gas and the Montney play contains about 450 tcf of natural gas.

“The other interesting thing though is that this is not a B.C. phenomenon,” he continued. “It’s a North American phenomenon. And what we’re seeing is similar opportu-

Artist rendering of the proposed liquefied natural gas (LNG) export terminal at Kitimat.

Image courtesy of Apache Canada

nities in a lot of the major unconventional gas basins in the U.S., our biggest trading partner, our biggest export partner. … We love our biggest customer. We want to continue to supply them with natural gas. But the interesting dynamic that is developing is they’re finding as much gas as we are. … This is why we need to start looking for some new markets.

“In order for us to continue to enjoy the benefit of the industry investment, the continued growth and the continued advancement of the sector, we absolutely, positively have to start looking at new markets,” he concluded.

The industry has opportunity to tap into domestic markets such as natural gas power generation and natural gas powered vehicles, but exporting LNG to Asia apparently continues to be the most popular option.

Apache Canada began work on the idea of exporting LNG from a terminal at Kitimat in January, 2010 with EOG Resources joining that summer and Encana coming onboard the following spring. The three companies now comprise the KM LNG Operating General Partnership.

As explained by Elio Artuso, a senior business representative for KM LNG, the export terminal will not only be important to the province’s natural gas industry and the B.C. economy, but it could be a boon for the struggling Kitimat community and Kitimat Village, where unemployment is approximately 67 per cent.

“The terminal site is located on Bish Cove,” said Artuso, discussing the details of the project during the conference presentation. “It’s First Nations land. It’s about fourteen kilometres west of the town of Kitimat, across from the Kitimat Village [of] the Haisla people.

The major industry in the town of Kitimat is Rio Tinto Alcan. They operate an aluminum smelter. There’s two other main businesses in Kitimat. One is the Eurocan pulp and paper mill. And the Methanex facility for methanol. And the Eurocan paper mill and Methanex have closed. That resulted in the loss of about 400 jobs from Eurocan and another 150 from Methanex. So, many of the residents maintain homes there, but a lot of them work elsewhere.”

Peak manpower during construction of the facility is expected to be in the neighbourhood of 2000 to 2500 people in 2015, adding up to 1500 employment years.

“A lot of local folks see this as a great opportunity to come home back to Kitimat to work there in their town,” said Artuso.

The Pacific Trail Pipeline that will carry natural gas from northeast B.C. to Kitimat will provide another 1000 to 2000 jobs over a period of two years. The project partners have been working with fifteen First Nations groups with stakeholder interests along that pipeline route, gaining strong support for the initiative.

However, there is still a long way to go on this project.

“The major environmental approvals have been obtained,” said Artuso, but he also noted that the group is still awaiting a verdict from the National Energy Board (NEB) on their export license application, which is expected in late October.

They have applied for a twenty year export license, intending to begin exports the fourth quarter of 2015.

Although part of the lease has been cleared of trees, the group is waiting for permitting to clear additional trees, an operation that must be completed prior to the bird nesting period in the spring.

“The entire lease is about 170 acres,” said Artuso, adding that it is second growth forest that has been logged previous. “We’ll probably be using about 105 acres so that we accommodate for environmental buffer zones.”

“It’s a perfect site for navigation,” he continued, “but in terms of the landscape there’s a lot of work that needs to be done.”

The project is presently in the front end engineering and design (FEED) stage, which is expected to be completed by the fourth quarter of this year. That is also the timeline for the final investment decision (FID). Transport Canada’s TERMPOL route assessment study is also currently underway.

“The plan is to build an initial train and export five million tonnes of LNG … per year,” said Artuso. “The train is a process where the natural gas is cooled at -152 degrees Celsius and it gets into a liquid state. The volume reduces to one six hundredth of the volume of gas.

And then it’s a loaded onto a vessel – an LNG carrier. It’s sent to destination and it’s re-gasified.”

Artuso also did his best to allay fears about the safety of the LNG project.

“LNG has an excellent safety record,” he said.

“There’s been more than 8000 LNG voyages to date and there’s never been a major incident.”

“As the vessels arrive just into the strait there, Transport Canada pilots will board the vessels and navigate them into the Douglas Channel to the site,” he continued, adding that Bish Cove has been a shipping route for forty continued pg 29

September 2011 I pipeline news north •

29

cont’d from pg 28 years and that the project group is placing a strong emphasis on protecting the marine environment since the good fishing in the area has long been an important part of the Haisla way of life.

Paul Jeakins, Deputy Commissioner and COO at the BC Oil and Gas Commission, also indicated that the provincial government has been anticipating LNG projects – as illustrated by elements of the new Oil and Gas Activities Act (OGAA) – and so the Commission is prepared to be the regulator for this emerging part of the industry.

Since the proposal involves building the plant on Haisla First Nation land, it is under federal jurisdiction, but both the federal government and the Haisla First Nation have endorsed the Commission as regulator of the facility.

“The Commission and other B.C. government agencies have been working with the Haisla and federal government on the development of a new regulation for the Kitimat LNG plant for the past few months,” said Jeakins. “Our goal is to have that new regulation ready for this fall, ensuring that government is ready when industry is.”

“Marrying federal and provincial requirements,” he added.

The 460 kilometre Pacific Trail Pipeline – which will tie into existing Spectra facilities – is an especially long transmission line, but Jeakins states that processes are in place at the Commission to deal with the application, including protocols for consulting with First Nations communities and working closely with the Environmental Assessment Office (EAO).

“On the pipeline, we’re ready to review the application when it comes in,” he said.

Jeakins remarked that applications LNG facilities like the one planned for Kitimat will be very similar to those for gas processing plants.

“The economic scale is a lot bigger than the applications we see on a regular day-to-day basis,” he said. •

Elio Artuso, a senior business representative for KM LNG, discussing the liquefied natural gas (LNG) export terminal proposed for Kitimat. james waterman photo

A spotlight on O&G careers james waterman Pipeline News North

Students and recent graduates interested in careers in the oil and gas industry will be given an opportunity to get a glimpse into the sector during a weeklong online event to be held from October 10 to 14 this fall.

It is the second Career Spotlight: Petroleum to be co-hosted by career website TalentEgg and the Petroleum Human Resources Council of Canada.

TalentEgg has created a “Focus on Petroleum” mini-site on its website that will be populated with new resources for jobseekers aged 18 to 25 at a rate of two or three per day during the five days of the event.

The resources include editorials such as advice on how to launch a career in the oil and gas industry. Eight company sponsors also participate in the program, providing links to employer profiles,

information about opportunities within their organizations, and a look at their company culture. Last year’s sponsors included: petroleum companies Canadian Natural Resources, Talisman, Shell and Cenovus; surveying, mapping, planning and engineering firm McElhanney, drilling service providers Savanna Energy Services and Ensign Energy Services; and National Oilwell Varco.

“We were pretty happy with the breadth of the sponsorship and the number of companies,” said Cheryl Knight, Executive Director and CEO of the Petroleum Human Resources Council of Canada.

The event makes use of Twitter and Facebook to give young people an opportunity to interact with industry representatives throughout the week, while the materials stay on the website for a full year. It is their hope that the promise of daily updates and the opportunity to communicate with potential employers through social media should drive traffic to the site so that as many people as possible continue to utilize the service throughout the year.

After all, it is designed to educate

youth who haven’t yet chosen a career path, as well as those are already pursuing a career in the oil and gas industry, but who haven’t yet joined the workforce.

“We want youth,” said Knight, noting that TalentEgg’s scope includes all of Canada and a number of sectors of the economy.

TalentEgg certainly attracts young Canadians. The site reaches a minimum of 80,000 students and recent graduates per month and about one million per year, which is very significant considering the labour shortage that the energy sector is currently facing.

“We found that youth are generally becoming less interested in industries like oil and gas than … older people,” said Knight. “And I think it has to do with perceptions of the industry around the type of industry it is, alignment with values, even about how connected youth are with their friends and social media. … So, we are finding young people are being much more demanding about their expectations of jobs.”

“For example,” she continued, “if you’re working in the field in the oil and gas industry, you may be out of cell ser-

vice range. … And you may be gone for a three week rotation, for example.”

Another issue is that many youth think the industry conflicts with their environmental conscience, failing to see the opportunities to be part of ensuring the industry is as environmentally responsible as possible.

“There tends to be a bit of a black and white understanding of whether an industry’s environmentally friendly or not,” said Knight. “And it’s just not that straightforward. The oil and gas industry is working with non-renewable resources and does have an effect on the environment.

“However, oil and gas is a necessary energy source for our lives. And so our industry works in many ways to respect the environment, to work in the most environmentally friendly way possible, to develop new technologies to reduce the environmental footprints. So, I don’t think that awareness is as sophisticated and well-rounded as it [could be].”

“That grey [area] needs to be better understood, because it’s just not as black and white as it’s painted,” she added.•

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30 • PIPELINE NEWS NORTH I

September 2011

careers & training

riggin’ it up

- NLC community information session

james waterman Pipeline News North

Many Fort St. John residents wasted an opportunity to ask questions and voice their concerns about a new installation at Northern Lights College (NLC) that is expected this fall.

The college is adding a 40 metre tall, triple-cantilever, beam-leg mast oilrig to the simulated well site at its Jim Kassen Industry Training Centre. Recognizing that nearby residents might have concerns about the project ranging from noise to public safety, NLC held a community information session during the evening of Thursday, August 18. Although homeowners living within one kilometer of the school were specifically invited to the event, it was very poorly attended.

Regardless, Dwayne Hart, Vice President of Finance and Administration at NLC, delivered a short presentation about the oilrig installation and fielded questions from the few who did attend, before leading them outside to see the future site of the newest addition to the college.

“This is not a new vision,” Hart said during the presentation, noting that this has been in the works since the inception of the Industry Training Centre and the simulated well site about ten years ago.

It is finally happening now thanks to the generosity of Nabors Canada and Shell Canada, who have donated the rig, valued at approximately $6 million. The rig has actually been in the field as recently as this past spring.

There isn’t a fixed date for the installation, since they are still hammering out the transport and delivery details, but the hope is that the rig will be up before the snow, and operating by next academic year.

“I think it’s incredible that industry does this,” said Hart. “You know, when you look at the knocks that a lot of industry gets, that they don’t contribute enough tax and such … we as a college, which is a B.C. [institution], supported by taxpayers, is getting a $6 million donation. Industry steps up to the plate so many times for us.

Without them, we couldn’t be doing this incredible type training and helping people find jobs and get the right training for those jobs.”

When the project was first conceived, the houses across the road from the college had not yet been built.

NLC took that into account when considering potential issues such as public safety, noise, light, and environmental concerns. The simulated well site is already enclosed by a fence, but the new installation will be surrounded by a second twelve foot tall security fence, topped with razor wire to deter those who might want to try climbing the rig.

It is expected that the noise level will be in the neighourhood of 90 decibels on the rig floor, which is similar to the noise of a lawnmower.

The closest house is 300 feet from the rig site, at which distance the noise level drops to 60 decibels. This is well below the noise levels of the train and trucks on the road, which are both closer to the houses than the rig site. Since classes at the college run from 8:00 a.m. to 6:00 p.m,, additional lighting is necessary at the rig to comply with WorkSafe BC standards. This is a particular concern during the short days of winter when it is dark long before classes end, but that lighting will be directed away from nearby houses.

The only visible light outside of school hours will be the aircraft warning light, a Department of Transportation requirement, although the rig is over five kilometers from the nearest landing site. Finally, all drilling at the site will be conducted within a 200 metre deep enclosed hole with absolutely no chance of communication with the water table. Furthurmore, use of the rig won’t actually involve any oil or natural gas.

“No environmental impact whatsoever,” said Hart.

NLC has deemed this addition necessary in order to offer the best possible training for a new generation of oil and gas industry personnel in a labour pool that is struggling to meet the demands of the energy sector.

“We have programs that are up to 5 months [or] 10 months in length,” said Hart. “And we also have one day courses. So, everything from H2S to safety training to three day courses. And then we’re going to have all the

Dwayne Hart, Vice President of Finance and Administration at Northern Lights College, delivered a presentation discussing the impending installation of a drilling rig in the college’s simulated well site during a community information session at the Jim Kassen Industry Training Centre on Thursday, August 18.

James Waterman photo.

rig training programs.”

“The supervisory courses are obviously something that we’re considering,” added Rick Newlove, Coordinator of Workforce Training and Continuing Education at NLC. “A lot of the training [is] rig specific, everything from the entry level – leasehand, floorhand, derrickhand – right up to a driller we’re intending to try to incorporate into the use of the rig, to try and have it utilized as much as possible.”

“From my knowledge,” he continued, “the only other training infrastructure we have in Canada is in Nisku, Alberta. So, having something like that up here is very important. We’re going to simulate exactly what you see in the field,” said Hart.

It was also noted that the oilrig can help allay the fears of parents of children who are heading into the oil patch

and educate residents not involved in the industry about the work that is done on site by giving them a firsthand look at those operations.

“We’re working closely with the City of Fort St. John,” said Hart. “They’re going to be building their new interpretive centre in town. And part of the interpretive centre and our collaboration with the City of Fort St. John is to use this site as a type of education centre for people, both in town and tourists who are coming through town, that they can come and see what a rig site looks like right in town. And they’ll be able to see the type of work that goes on at a rig site.”

The addition of the oilrig follows close on the heels of the donation of an amine unit – which is a sour gas sweetening process – that arrived in early August. •

Payday projection - cont’d cont’d from pg 11 The really interesting comparison is between Canada and the emerging nations that are leading the pack – India (11.7 per cent), Russia (9.8 per cent), China (8.4 per cent) and Brazil (5.3 per cent).

“So, these countries are expecting forecasts much higher than ours,” said Aboud. “But then their inflation is in line with an inflation rate that’s three, four, five times Canada. They have to pay higher wages to convince people to stay at work, rather than change to another company. Their rate of general economic development … is much higher. So, the evolving country economies are much higher rates than ours.”

An intriguing aspect of that comparison is that Canada and the U.S., both countries with considerable natural resource industries, lag so far behind Brazil and Russia, which also have large natural resource industries. Oil and gas are leading industries in all four countries.

“Certainly, us, relative to the established countries, we are, more than any of them, a resource based economy,” said Aboud. “So, you would argue that we – at 2.8 [per cent] – we justifiably are above some other countries. But at the same time, U.S. productivity standards have always exceeded Canadian productivity standards. And that’s one of the factors that rationalizes to a company how much more adjustment they can make to payroll.

“If their people are being more productive than the same type of company in Canada, the American company can afford to increase payroll to a higher extent. And the American productivity standards blow Canada’s away.

“So, productivity is a factor of why we’re not that much higher even though we’re resource-based. Our productivity’s pretty low. To the emerging countries, they’re not all resource-based. I mean, China’s not resource-based. China’s a consumer of resources. But their growth of economic expansion is just monstrous.”•

September 2011 I pipeline news north •

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Site reclamation - cont’d

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cont’d from pg 23 The labour intensity of those solutions really underscores the importance of limiting the invasion of non-native plants as much as possible, while encouraging populations of native plants that can sustain native wildlife.

“I think there’s a lot of initiatives on the go,” said Martens.

“First of all,” he continued, “you have to understand that invasive and noxious weeds are implemented in three or four different ways.”

“The biggest culprit is moving vehicles and equipment and people, especially all the oil and gas traffic.

But also tourist traffic on the Alaska Highway from the [United States] up north and from other parts of B.C. and Alberta, traveling north. They leave a lot on the road. Because, really, if you see the impact along the Alaska Highway, it’s quite interesting, all the way into the Yukon.”

“Roadsides are full of all sorts of things that you don’t see growing in forests,” said Elle. “Because it’s open, the soil is disturbed, it’s been turned over a lot.”

Part of the problem is that plants that are considered weeds are usually able to reproduce in their first year, which can really turn removal into an uphill battle. That isn’t the case with desirable plant species, which can take up to two years to reproduce.

“Then you have weeds that already exist that are transported by wildlife,” Martens continued. “That happens quite a bit. And then from wind and erosion, that’s blown all over the map.”

Martens noted that there are washing stations to remove non-native plants seeds from equipment and machinery.

“I know Encana and other operators are members of those invasive plant committees in Fort Nelson and also in Dawson Creek,” he added. “We also develop a province-wide noxious weed management plan. So, an integrated vegetation management plan. We just renewed that earlier this year and it was published on our website for a couple of weeks for public consultation. We also did the consultation with the First Nation bands. It’s mandatory to do that. So, it’s definitely being addressed. And I also hired a full time vegetation advisor late last year.” •

32 • PIPELINE NEWS NORTH I September 2011

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“Incentives will be deducted from the negotiated price after taxes and for some models all or a specified portion of the incentives cannot be combined with special lease and finance offers (i.e. is “non-combinable”). Quantities of certain vehicles are limited and dealer trade may be required. Dealer trade availability may also be limited and will vary by model. Offers subject to change; cancellation without notice. Offers valid on retail delivery of select new 2011 unregistered Toyota vehicles when purchased/ financed/leased, registered and delivered by September 30, 2011. For all available incentives and rates on 2011 Toyotas, contact your dealer today.

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