Pipeline News North

Northern British Columbia and Alberta's Oil and Gas Industry Vol. 3 Issue 2 • dist: 18,000

febrUARY/MARCH • 2013

h t r No

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in this issue:

• PATHWAY TO PROSPERITY - CLARK WANTS LNG TO BENEFIT ALL BRITISH COLUMBIANS • black gold turning green - OIL AND GAS INVESTS IN RENEWABLES • leading the charge - ENCANA driving the LNG FUEL business

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stars RECEIVED OVER $1 MILLION FROM ANNUAL OIL AND GAS INDUSTRY FUNDRAISER - STARS PHOTO

2

• PIPELINE NEWS NORTH

FEBRUARY 15, 2013

PETROLEUM ASSOCIATION - HAPPENINGS

industry news

GETTING IN THE GAME

AltaGas takes logical step into LNG business james waterman Pipeline News North

plan to export LNG and liquefied petroleum gas (LPG) from Canada to Asia that was announced at the Debbie Stein would suggest that it end of January. only makes sense for AltaGas to enThat partner is Idemitsu Kosan. ter the fray of the emerging liquefied “They’re the second largest natural gas (LNG) export industry in petroleum company in Japan,” Stein British Columbia. said of the other half of the Alta“We are in the energy business,” Gas Idemitsu Joint Venture Limited said the vice president of finance Partnership. and CFO of the diverse natural gas, “They have a 50 per cent ownerpower and utilities company. ship in one of the largest LPG supThat business includes the only pliers in the world,” she continued. existing natural gas pipeline to “They don’t have natural gas. They the Pacific don’t have Coast, the But they “We know the natural LNG. Pacific have big infraNorthern structure … gas market. We know that they own Gas (PNG) system, and operate.” which is the the basin. We know the AltaGas sort of indoes have frastructure natural gas producers.” that would in addition to be an esinfrastructure – Debbie Stein, AltraGas sential piece in Canada. of any plan “We have to move fuel organizationfrom the resource plays of northeast al capability to build and operate B.C. and beyond to liquefaction and these assets,” Stein explained. “We export hubs in communities such as know the natural gas market. We Kitimat and Prince Rupert. know the basin. We know the proHowever, securing a market for ducers. So, we believe that there’s the product is also a critical compo- an opportunity here. nent of any LNG export enterprise, “We’re not looking to export 2.0 and Stein believes that AltaGas bcf (billion cubic feet) of gas,” she is in good shape in that regard as added, noting that that volume is well, thanks to their relationship considerably less than other LNG with their equal partner in their export proposals.

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Stein said that Japan has a petrochemical industry hungry for natural gas as well as a high demand for propane, and LPG that hasn’t been mentioned in other LNG export projects in B.C. “What’s developing in North America is an oversupply of propane.,” said Stein.

“So,” she continued, “to the extent that we can find a way to get the propane over there, we believe that there’s an opportunity here to export propane. We’re going to spend some time looking at how we develop that business opportunity, because there is supply in Canada and there’s demand over there. So, we’re going to try and find a way to put those two together.”

The joint venture partnership will soon be starting discussions to find natural gas suppliers and customers as they launch their feasibility study.

“The feasibility studies will evaluate and develop the commercial arrangements, the capital requirements, the construction plans – all of those things to make this into a business that is profitable for our shareholders and adds value to the Canadians and the Japanese,” said Stein.

AltaGas appears confident that the partnership will bear fruit.

“We have the boots on the ground in Canada,” said Stein. “They have the boots on the ground over there.”

FEBRUARY 15, 2013

PIPELINE NEWS NORTH •

3

special feature 14 Bitumen bubble - beating

the oil price differential 28 Beefing up for the boom -

Fort Nelson gets ready for

the LNG business

community 10

22

STARS & Spurs Gala breaks fundraising record Spectra donates to Northern Lights College

industry news

4 Steady as she goes - the

5

year ahead in the patch Back to normal - OGC lifts water suspensions Pathway to prosperity - LNG

6

to benefit all of B.C. 11 Riding the rails - shipping

Alberta oil by train 16 A lesson in liability 26 LNG Canada earns export license

environment 18 Black gold turning green -

oil and gas industry driving

the renewable energy sector

4

• PIPELINE NEWS NORTH

FEBRUARY 15, 2013

North

industry news

STEADY AS SHE GOES

PSAC predicts a good year for the oil patch William Julian Regional Manager 250-785-5631

Alison McMeans Managing Editor 250-785-5631

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James Waterman Reporter 250-785-5631 cell:250-263-1878

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james waterman Pipeline News North Steady is the word Petroleum Services Association of Canada (PSAC) president and CEO Mark Salkeld uses again and again when talking about the year ahead in the Canadian oil patch.

PSAC updated their drilling activity forecast for 2013 on Jan. 24, now suggesting it will be a slightly busier year they than originally anticipated when they released their earlier forecast in November.

“Last year, we were down. Last year, we dropped significantly,” said Salkeld, adding that 2013 is expected to see a three per cent increase in activity over 2012.

A big part of that increased activity as projected by PSAC is a bit of a surprise to Salkeld, simply because it is taking place in the natural gas fields of northeast British Columbia, where producers have been suffering from low commodity prices and market access issues stemming from the remote nature of the plays, the growing shale gas glut in the traditional export market of the United States and the slow development of a liquefied natural gas (LNG) export business that is still years away from becoming a reality.

“There’s just a really good interest in developing the gas there,” said Salkeld, explaining the 13 per cent increase in projected activity since the November forecast.

PSAC originally forecast 385 wells for the province, but they are now predicting 435 wells in B.C. this year.

“We’re talking the bigger players, the guys that can afford to play longer-term games,” he continued, citing Shell Canada and the money that company is investing in their B.C. operations and LNG export plans as an example.

Salkeld suggested activity is starting to pick up in northeast B.C. in preparation for LNG projects that are on the way.

“Not huge, but steady,” he said.

“Because it’s still a tough area to play in. Expensive to operate.”

PSAC expects 7,165 wells in Alberta this year, which is a two per cent increase over the November forecast, but a good portion of that is being attributed to exploration activity in the Fort McMurray area.

become energy self-sufficient and “The producers in the area are still just identifying the scope of their an energy exporter,” he continued. assets,” said Salkeld.

“So, the gas prices are down just “These wells are exploratory,” he because of the supply side. And the added. “And not saying they can’t demand has got to grow. On the oil become producers.” side, it’s the same thing.

The forecast for Saskatchewan “It’s still demanding a higher price, is staying the same at 3,199 wells, but Canada’s at the bottom rung on but Manitoba is down 13 per cent the ladder when it comes to pricing from the original forecast with 100 because of our situation.” fewer wells than the 750 predicted in That situation is that Canada is a November. landlocked basin far from producing Salkeld said that activity in Maniheavier oil than other oil plays that toba has been picking up in recent are also closer to refineries. years because new technologies “It costs more to produce here,” such as hydraulic fracturing and said Salkeld. “And you have to directional drilling have allowed truck it out versus pipeline. So, producers to tap into unconventional it costs more to get our product reservoirs that the industry has to surface and … to refineries. known about for over 50 years.

And [there is] competition against “They’re having success,” said fields that are closer to the refining Salkeld. capacity.

However, Manitoba suffers from a “We’re hurting in Canada overall lack of transportation infrastructure. because our oil is not priced as well “A lot of these wells, the oil’s got to as lighter oils closer to refineries.” get trucked out. So, that limits your Salkeld said that situation highcapacity to deliver,” he continued. lights the value of developing new “Definitely lots of resource there. markets for Canadian oil and natural And lots of good initiatives. But until gas. the infrastructure gets developed “Like getting our product down and we can get our products to mareast to the refineries on the east ket – to other markets – it’s going to coast and getting our product … be a little bit tight.” down into the U.S. to the megaThat is a problem that doesn’t just refineries in Texas City.”

There is also the foreign market plague Manitoba, but also causes trouble for oil opportunity off the Pacific Coast. producers in “We have across Alberta and “Just the natural gas amount of cusproducers in North America now tomers out there B.C. that we can sell PSAC said to if we can just an abundance of that their get it there,” said Salkeld. forecast for natural gas.”

Still, Salkeld is 2013 is tied expecting a good to the fact year. that the Ca– Mark Salkeld, PSAC “Part of the nadian dollar nature of the should close to par with the U.S. dollar throughout Canadian oil patch in that if isn’t the year and the fact that natural gas season, it’s political or it’s pricing,” and oil prices should stay fairly low, he said. “We’ve been facing those averaging $2.95 CDN per thousand kinds of situations for years. And we rise to the challenge in the boom cubic feet (mcf) and $90 USD per barrel, respectively. times and we struggle through in the Combined with market access bust times. And right now we’re in between. We’re steady. constraints, the strong Canadian “We got a steady price for oil,” he dollar and low commodity prices repcontinued. “We’d prefer gas to be resent a real challenge for Canadian up, but we still have to use it. Gas is producers. still in demand. So, we still need to “We have across North America now an abundance of natural gas,” produce it. said Salkeld.

“It’s steady as she goes. It’s going “The U.S. is working hard to to be a good year.”

FEBRUARY 15, 2013

PIPELINE NEWS NORTH •

5

BACK TO NORMAL

OGC lifts water suspensions thanks to big snow and warm weather to a ‘normal operating practice’ with respect to our short-term water application process.

“For industry, it means a return to normal practice.”

Chapman explained that the OGC tried hard to help natural gas producers access water required for their operations between the beginning of August and the end of October, subsequently working with producers to evaluate river flow information to determine if and when the water withdrawal suspension could come to an end.

“I believe oil and gas operators will learn from the 2012 drought and water suspension and will bring into practice

Extreme dry conditions throughout northeast British Columbia last summer forced the Oil and Gas Commission to institute water withdrawal suspensions for many water bodies throughout the region. Suspensions remained in place for some lakes and rivers until snowfall and warm weather finally brought water levels back to normal in January.

JAMES WATERMAN PHOTO

james waterman Pipeline News North

proved,” he said.

Consequently, the OGC lifted water withdrawal suspensions for the Peace It is finally back to business as usual River watershed on Nov. 14. for natural gas producers in northeast “For more northern areas – the Fort British Columbia after almost six full Nelson and Liard River drainages – we months of water use restrictions. partially ended the suspension, but kept The BC Oil and Gas Commission a requirement for operators to provide (OGC) announced that water withfield-based measurements of river flow drawal suspensions for the region have to support an application to withdraw been brought to an end, again allowing water,” Chapman continued. companies to access their customary “This was because of a lesser amount sources of water used for practices of regional stream flow data in that area ranging from building ice roads to hyto provide an understanding of what the draulic fracturing. general flow conditions were, as well as “This was due the development of a indications from a couple of gauges that strong summer drought that continued low flows were persisting. into late fall,” OGC hydrologist Allan “We continued to monitor river Chapman said of the water withdrawal conditions.” suspensions that began on Aug. 2, which Periods of warm weather in December included all waterways in northeast B.C. and January caused sufficient snowmelt apart from some for river levels to rise larger bodies along significantly.

“For industry, it the lines of the In fact, data colPeace and Fort lected Water means a return to Surveybyof the Nelson Rivers Canada and the Williston had shown that normal practice.”

Reservoir. northeast B.C. rivers Chapman were at levels rangexplained that the ing from 200 per cent – Allan Chapman, Commission kept to over 500 per cent Oil and Gas Commission of their normal levels a careful eye on weather conditions for the middle of and water levels January. throughout the following weeks.

“Given these flow conditions,” said “Rain occurred in late October and Chapman, “we ended the partial susearly November and river levels impension that still remained and returned

measures to ensure continuity of water supply and water conservation,” said Chapman.

Chapman is anticipating a better summer in 2013 as well.

“Although we’re only halfway through the winter, things are off to a good start in the northeast with respect to water supply (for the) next year,” he said.

“Mountain snowpacks are near normal,” he continued. “And the low elevation and valley bottom snowpack are well above normal.

“Should these conditions persist through to April,” Chapman concluded, “groundwater recharge and river flows will likely be good.”

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• PIPELINE NEWS NORTH

FEBRUARY 15, 2013

industry news PATHWAY TO PROSPERITY All British Columbians to benefit from LNG james waterman Pipeline News North

The British Columbia government got a jump on Valentine’s Day on Feb. 12 by expressing their love for the burgeoning liquefied natural gas (LNG) industry and the associated economic benefits it is expected to bring to the province.

Premier Christy Clark and her crew also sent a love letter to the people of B.C. in the form of a Prosperity Fund that will use LNG revenues to eliminate the provincial debt, as well as allow the government to cut personal income taxes and invest in health care, education and infrastructure improvements.

“The safe recovery and export of our abundant supply of natural gas presents an opportunity for prosperity unlike anything we have ever seen before,” said Clark.

Anticipating $1 trillion in cumulative GDP stemming from LNG projects over the next 30 years, the government is expecting the Prosperity Fund to top $100 billion after it starts accruing revenue in 2017.

It is thought the fund could erase the provincial $56 billion debt by about 2027.

“British Columbians can secure tens of thousands of

new jobs for decades to come by developing this clean energy resource, and protect this new wealth for the benefit of all of us today, as well as our children and their families, tomorrow,” Clark added.

“Our LNG industry is quickly developing,” said Rich Coleman, minister of energy, mines and natural gas.

“Large industry players are investing millions of dollars now to prepare for the opportunity ahead. We owe it to British Columbians to create the greatest economic return possible, so we can ensure this opportunity delivers benefits to our citizens for generations.”

“I look at something like the Prosperity Fund as a great idea when we look forward to the growth of LNG,” said Mike Bernier, mayor of Dawson Creek – a community that is central to the LNG industry as a hub for oil and gas activity in the Montney shale gas play surrounding the city.

“Instead of just having that money just roll over into general revenues, to be able to put it into a specific fund to look at paying down the debt or lowering the taxes in the province,” he continued, “I think that’s a great approach.”

It will be interesting to see how cities such as Dawson Creek and their Alaska Highway neighbours Fort St.

John and Fort Nelson are able to share in the Prosperity Fund dollars.

All three communities are home to service sector outfits and branch offices of oil companies working in the Montney, the Horn River Basin, the Liard Basin and the Cordova Embayment, the primary sources of natural gas for the LNG industry. Consequently, all three communities could experience an influx of new people and an additional strain on their local health care, education and recreation systems, not to mention their road, water and sewer infrastructure, as exploration and production activity ramps up along with the LNG business.

“One of the big things for me is, as the industry grows and as the area grows, so does our percentage that we receive through Fair Share funding,” said Bernier, suggesting that financial support from the government for local infrastructure could exist regardless of how the Prosperity Fund is spent, depending on the fate of the Fair Share program.

“One of my big pushes,” Bernier continued, speaking as Liberal candidate for the Peace River South riding in the upcoming spring election, “is to make sure that, as continued pg 24

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Life’s brighter under the sun

Making time work for you Making time work for you: the magic of compounding Patti and Eric recently got married, and both have started to invest $100 a month in a Registered Retirement Savings Plan (RRSP).

They often worry that they’re not investing enough for a comfortable retirement, but they have just bought a house and have found that $100 a month is all they can realistically afford.

Time is working for Patti and Eric through the magic of compounding One of the best ways to make your money grow is through the magic of compounding. Compounding means that you earn money on your capital, or initial investment, as well as on accumulated interest. For example, if you hold investments that generate dividends or interest in your RRSP, that money is reinvested. The value of your investments increases, so you are now actually generating income on dividend and interest income you have already earned. As a rule, the more time you have to let your money compound, the faster your savings grow and the sooner you can retire. Plus, the earlier you start, the more you may have when you retire.

Check out the numbers Here’s an example of how much you could save with a $100 per month contribution, at 8% return per year.

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$48,000 can yield $322,108 - thanks to the effects of compounding and investing over a longer period of time.

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* Contribute early - By making your investment in January of the current tax year, instead of at the last moment in February of the next year, you’ll have an extra 14 months worth of compounding working to your advantage. * Monthly contributions - If you can’t make a lump sum contribution early, you can still gain additional income by making monthly contributions. And to make it even easier to contribute regularly, you can choose to have your monthly contribution automatically transferred from your savings/chequing account into your RRSP. * Consider an RRSP loan - If you can’t maximize your RRSP contribution, consider borrowing the money. You can use the tax refund to help pay down the loan, and take advantage of the power of compounding. * Pay yourself first - Think of your RRSP investment as a regular bill you pay to yourself.

But remember to set realistic, attainable contribution goals.

Even if there are times in your life when you can’t make a contribution, you can feel good knowing the money you have already invested is continuing to work for you through the magic of compounding.

Talk to your Sun Life Financial advisor to find out how to make the most of your savings to reach your goals.

Submitted by: First Choice Insurance & Investment Services Inc. © Sun Life Assurance Company of Canada, 2011

FEBRUARY 15, 2013

PIPELINE NEWS NORTH •

7

BRING ON A BRAND NEW RENAISSANCE Shale gas inspiring a new industrial age in western Canada james waterman Pipeline News North The shale gas revolution could spark an industrial renaissance for British Columbia.

Speaking during a Fort St. John and District Chamber of Commerce luncheon on Jan. 22 as part of a natural gas education program, Garth Johnson, vice president of the pipeline division with Spectra Energy Transmission West, and Doug Stout, vice president of energy solutions and external relations with FortisBC, both said the opportunities arising from the substantial natural gas supply in B.C. should go beyond the much discussed liquefied natural gas (LNG) export business to other applications such as power generation, transportation fuel and production of petrochemicals ranging from methanol to fertilizers.

“I want to emphasize the word potential,” said Johnson, discussing the benefits in terms of economic activity and provincial and federal government revenues that could stem from the natural gas industry in B.C. “B.C. stands to benefit substantially.”

Johnson explained that as natural gas production in the province is increasing due to shale development and advances in pad drilling and hydraulic fracturing, exports to our traditional market in the United States are set to decline significantly.

The obvious solution appears to be LNG. “LNG gets B.C. gas to hungry Asian markets,” said Johnson, noting that the natural gas price in Asia can be as much as five times the North American price, simply because it is more closely tied to the price of oil.

However, B.C. isn’t alone in that pursuit.

Australia, just a hop, skip and a jump from Asian ports, has as many as seven LNG export projects in the works, while the U.S. is busy converting LNG import terminals into export facilities to take advantage of the Asian market as well.

Canada needs other options.

Johnson said that power generation is near the top of that list, particularly where natural gas is a replacement for coal. Burning natural gas to generate electricity can produce up to 60 per cent less carbon dioxide than burning coal. Natural gas doesn’t produce mercury emissions and almost eliminates the production of particulate matter that causes smog.

Stout noted that remote communities not connected to the electrical grid are looking at LNG, as well as its cousin, compressed natural gas (CNG), as replacements for diesel fuel presently used for power generation.

One example of that is Haida Gwaii.

Transportation is also a high priority when it comes to growing the natural gas market.

Stout said that FortisBC is focusing on promoting LNG and CNG as transportation fuels for return-to-base operations such as public transit, waste collection, ferries and railroads.

One success story in that vein has been the conver-

Spectra Energy and FortisBC stopped by the Fort St. John and District Chamber of Commerce luncheon on Jan. 22 as part of a province-wide natural gas education program. The companies discussed the variety of applications for British Columbia’s abundant natural gas supply, which range from exporting liquefied natural gas to producing methanol and fertilizers. Pictured are Garth Johnson, vice president, pipeline division, Spectra Energy Transmission West, and Doug Stout, vice president of energy solutions and external relations, FortisBC.

JAMES WATERMAN PHOTO

sion to LNG of a truck fleet operating in Abbotsford.

Fort St. John mayor Lori Ackerman was curious about the use of LNG and CNG for transportation in the northeast corner of the province, where temperatures can drop well below zero degrees Celsius in the winter.

Canadian natural gas producer Encana knows that is a viable option.

“We have a number of CNG trucks that we use in our operations in northeast B.C.,” said Encana spokesperson Doug McIntyre, discussing the light truck fleet that Encana has converted to that fuel.

“We have found them to be very reliable in terms of running in the cold weather that is experienced in northeast B.C.,” he continued, adding that the CNG trucks have also performed quite well in Encana’s operating areas in southern Alberta, where there has been significant cold snaps over the past few months.

“Since CNG is still in a gas state,” McIntyre explained, “CNG-fueled vehicles do not have the problems associated with starting up in cold weather that can be associated with a liquid fuel such as propane, which can freeze when temperatures drop to low levels.”

Encana is also participating in the CN pilot project discussed by Johnson during the session that involves testing LNG locomotives on a rail line between Fort McMurray and Edmonton, Alberta.

Johnson said that using LNG for rail transport can reduce CO2 emissions by 30 per cent and reduce nitrous oxide emissions by as much as 70 per cent.

The heart of the industrial renaissance mentioned by Johnson could be the production of methanol, fertilizers and other petrochemicals from natural gas, as well as utilizing the fuel as a power source for metal and glass manufacturing.

Johnson and Stout said the role of Spectra and FortisBC is only to transport the fuel and promote its use, but it is up to companies operating in those industries to launch those projects.

One company, Blue Fuel Energy is interested in building a pair of methanol plants in Fort St. John, one that would convert natural gas into methanol and one that would turn CO2 from waste streams such as natural gas processing into methanol.

Johnson added, “Multiple opportunities for natural gas.”

8

• PIPELINE NEWS NORTH

FEBRUARY 15, 2013

industry news

BUILDING CAPACITY Spectra launches second phase of Dawson Processing Plant

The second phase of Spectra Energy’s Dawson Processing Plant was up and running at the end of January. That increases the processing capacity of the plant, which opened its doors in the spring of 2012, to 200 million cubic feet of natural gas per day.

SPECTRA ENERGY PHOTO

james waterman Pipeline News North Montney natural gas producers are about to enjoy greater processing capacity with Phase 2 of Spectra Energy’s Dawson Processing Plant coming online at the end of January.

The plant, located approximately 16 kilometres west of Dawson Creek, began processing natural gas from operations in the South Peace in the spring of 2012 at a Phase 1 capacity of 100 million cubic feet (mmcf) per day. Phase 2 adds another 100 mmcf per day of processing capacity to the facility, bringing the total processing capacity in the area to 1.6 billion cubic feet (bcf) per day.

“They’re introducing some product onto the system today,” said Spectra’s Jay Morrison during a Jan. 25 interview.

“And then it will be up and running early next week.”

Natural gas is delivered to the plant via Spectra’s Bisette Pipeline, which was brought into service in 2011, where carbon dioxide (CO2), hydrogen sulphide (H2S)

and natural gas liquids (NGLs) are removed. The resulting sales gas is subsequently moved to the NOVA Gas Transmission Groundbirch Pipeline via the Bessborough Pipeline.

The removed CO2, H2S and NGLs travel through the South Peace Pipeline to Spectra’s McMahon Gas Plant in nearby Taylor along with unprocessed natural gas.

Morrison explained that the process of preparing Phase 2 to receive natural gas didn’t end with the completion of construction.

“The final commissioning, which they’re doing this week, required that they depressurize Phase 1,” said Morrison.

“The depressurization allows them to actually tie-in mechanically and physically all of the Phase 2 into the Phase 1.”

The shutdown valves within both Phase 1 and Phase 2 are also tested while the plant is depressurized, since depressurization rarely happens, but is necessary for that work to occur.

Depressurization took about ten hours starting on the

morning of Monday, Jan. 21.

“About a week it will be depressurized and then they’ll be bringing stuff back online shortly,” said Morrison.

Phase 1 was operating at capacity at the time of depressurization; so, the expectation is that Phase 2 will run at capacity as well.

Still, the future demand for processing services at the site isn’t exactly certain.

The plant is connected to a pipeline system that allows for transportation to Alberta, where oil sands operations are a major source of natural gas demand, or foreign markets, which are the focus of liquefied natural gas (LNG) discussion in British Columbia.

However, oil sands demand is partially tied to embattled plans to bitumen to the Gulf Coast and Asia via pipelines such as TransCanada’s Keystone XL and Enbridge’s Northern Gateway, while LNG exports from the B.C. coast are at least five years away.

“If there’s future demand either domestically or internationally,” said Morrison, “that’s what will drive more growth in that area.”

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FEBRUARY 15, 2013

PIPELINE NEWS NORTH •

9

GAUGING GATEWAY Enbridge taking latest public opinion poll in stride james waterman Pipeline News North Another day, another poll.

That appears to be the life of the proponent of a new heavy oil pipeline, particularly when that project is Enbridge’s Northern Gateway plan to move Alberta oil sands bitumen from a point near Edmonton, Alberta to an export hub at Kitimat, British Columbia.

“We are aware of the numerous polls that have reported on Northern Gateway – some showing more support than others,” said Ivan Geisbrecht, Enbridge spokesperson.

The latest is a poll conducted by Insights West, the results of which were released on Feb. 4, showing that the majority of Albertans continue to support the project, while most British Columbians still stand in opposition to the controversial plan.

“At the end of the day, we are driven by our intent and objective of earning the trust of British Columbians and Albertans. That is our focus,” Geisbrecht continued.

“We recognize we have more work to do and we are committed to doing it. The regulatory process is a long one, with a regulatory decision on our application not expected until the end of 2013. We will use this time to continue to gather input through the hearing process as well as our many community relations activities along the proposed route and beyond.”

Insights West president Steve Mossop doesn’t think the poll held very many big surprises, but he is still intrigued by some of the numbers.

“We knew that Albertans would be less opposed to the The latest Northern Gateway poll conducted by Insights West shows that Albertans and British Columbians remain divided pipeline and what we found was quite an overwhelming when it comes to the pipeline. It also reveals that both sides understand the economic benefits and environmental risks level of support,” said Mossop. associated with the project.

The poll, which considered responses from 562 AlENBRIDGE MAP bertans, indicates that 75 per cent of Albertans support ans are familiar with Northern Gateway, a number that “We have a series of agree-disagree statements Northern Gateway while only 18 per cent oppose the hasn’t changed since a July, 2012 poll, but only 20 per on positives and negatives to do with the pipeline project and 7 per cent remain undecided. cent are very familiar the project. development,” said Mossop. “And what we found was The poll also shows that 30 per cent of Albertans Awareness is actually lower in Alberta where 87 perpeople on both sides acknowledged each other’s strongly support Northern Gateway, which stands in stark cent are familiar with the pipeline proposal and just 10 arguments. In other words, the folks who are opposed contrast to the 61 per cent of British Columbians who per cent are very familiar with the plan. acknowledge that there are economic benefits that will oppose the plan. strength of the opposition appears to be grow“The create jobs, that will create tax revenue that we won’t The portion of the B.C. population that strongly oping,” Mossop continued, noting that the opposite is see otherwise. poses Northern Gateway is larger than the Alberta “On the flipside, the folks who are in favour also see contingent that strongly supports the project in terms of a usually true when there is such a large amount of public discussion. the downsides as well.” percentage of the population at 38 per cent. with all the public debate,” he added.

“From the Almost all Albertans surveyed agreed that Northern “And Insights West surveyed 512 British Columbians, advertising that Enbridge is doing to the daily press Gateway would create jobs and new capital investment revealing that 35 per cent of the coverage about the plans for the and support economic growth, but over three-quarters provincial population supports pipeline, we haven’t seen any moveof British Columbians surveyed also agreed with those “We recognize we Northern Gateway, which is a ment in the positive direction. statements. smaller group than those strongly Additionally, an overwhelming majority of British “In fact, it’s been mostly negative have work to do and opposed to the project. Only Columbians are concerned about increased oil tanker for Enbridge, unfortunately.”

11 per cent of British Columbitraffic near Kitimat and environmental impacts of associMossop compares the Northern ans strongly support Northern we are committed to Gateway situation to public debates ated with pipeline construction, while over 70 per cent of Gateway and just 4 per cent are Albertans also share those concerns. on hot button topics such as the HST undecided. doing it.” situation in B.C. where the momenConsidering the similarity of their views, the question Support was higher among tum starts to favour the opposition that remains is why the overall attitude toward Northern males than females in both side early in the discussion.

Gateway is so different between those provinces.

– Ivan Geisbrecht, provinces. The highest support in “And it almost snowballs,” he Mossop believes it is a cultural difference between a Alberta came from those 55 years Enbridge explained.

“And it’s difficult to reverse province where the oil and gas industry is prevalent and old or older. Mossop said both of that snowball effect once that moa province where the oil and gas industry is tucked away those trends are fairly common mentum is going.

And that’s what we in the far northeast corner. when it comes to these sorts of projects. have happening here.

No matter what is thrown at the “We often lump ourselves together as western Ca“The other thing that jumps out at me is that, with the issue, the opinions are not changing.” nadians,” he said, adding that issues such as Northern level of public debate on this topic area over the past Interestingly, the poll suggests that many Albertans Gateway prove that B.C. and Alberta don’t always share twelve months, we’re surprised that we haven’t seen understand British Columbians’ reasons for opposthe same views. more people turn in favour [or seen] the opposition deing Northern Gateway, just as a significant number of “It does say that we have a long way to go in the provclining,” said Mossop.

Albertans would be British Columbians understand why ince of B.C. … taking debates like this and rationalizing The poll indicated that 96 per cent of British Columbisupporters. them a bit better.”

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i community COWBOYS FOR A CAUSE STARS & Spurs fundraiser enjoys record-breaking success

The 2013 STARS & Spurs Gala raised $1.1 million for the air ambulance service that is so important to the oil and gas industry in western Canada.

james waterman Pipeline News North The 2013 STARS & Spurs Gala is going to be tough act to follow next year.

The annual Petroleum Services Association of Canada (PSAC) fundraiser in support of the Shock Trauma Air Rescue Society (STARS) raised a record $1.1 million on Jan. 19. STARS & Spurs has now raised over $9 million throughout its 19 years working with the air ambulance service.

“A fantastic event that highlights the generosity of PSAC member companies and … this particular industry as a whole,” said Mark Salkeld, president and CEO of PSAC. “It was an incredible amount raised that evening and there’s no way to properly express our appreciation for the support from PSAC,” said STARS spokesperson Cam Heke.

“Last year,” he continued, “we were completely blown away by the amount of support that we saw. And the fact that they raised an even a larger amount this year – again, we just don’t know how to properly express our appreciation.”

Highlights of the night included a toast to Ken King, who became the first STARS paramedic to fly 1,000 missions in June.

“I enjoy the opportunity to make a difference,” said King. “It’s thrill-of-a-lifetime work.”

The gala crowd also heard the story of STARS Very Important Patient Michelle Salt, a young woman who lost her leg, but held onto her life thanks to a STARS helicopter crew that rushed her to the Foothills Medical Centre in Calgary after a near fatal motorcycle crash in 2011.

“I am grateful every day to STARS for saving my life,” said Salt.

“Beautiful young lady,” said Salkeld, adding that Salt now competes as a

STARS PHOTO

Paralympic snowboarder.

“Everybody seems to know a STARS situation,” he continued, telling the tale of his brother-in-law who also narrowly escaped death after a car accident thanks to STARS. “There’s just 1,000 stories out there like that.”

Many of those stories concern the oil patch in one way or another.

Salkeld explained that a significant number of PSAC member companies inform STARS of the location of their drilling and service rigs when their crews are working in remote locations.

“If there’s an incident out there, then the STARS helicopter can GPS right into it,” he said.

“We work with industry to try and make sure that the people working in industry are as safe as possible,” added Heke. “On any given day, the STARS Emergency Link Centre has approximately 4,000 worksites registered with our centre. And what that does is it allows us to have a direct link right at some of these remote work areas so that we can help employees when they may experience a medical emergency or there’s an incident that occurs at the site whereby there’s a traumatic injury and we need to get there quickly and help out. Or provide direction over the phone by using our doctors or connecting with other emergency services in the area.”

Salkeld said that connection between STARS and industry can also help other individuals such as hunters who are often out in remote areas.

“They’ve got stories they can tell where … a hunter was injured and he was bleeding out in the bush and he managed to call in,” said Salkeld.

“It’s not just about flying the helicopter. There’s a lot more to them than people realize.

“That’s what the PSAC membership sees and that’s what they support.”

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RIDING THE RAILS Alberta oil could be hopping a train to Alaska

james waterman Pipeline News North

was officially announced on Nov. 14, 2012.

Vickers was referring to Enbridge’s proAlberta oil sands bitumen could be posed Northern Gateway pipeline from flowing through the Peace Region by Bruderheim, Alberta to Kitimat, B.C. and the end of the decade, but the mode of Kinder Morgan’s plan to twin their Trans transportation might not be pipeline and Mountain pipeline to Burnaby, B.C. its destination might not be the British Both of those projects have seen conColumbia coast. siderable opposition from First Nations Calling it a “nation changing” project, and environmental groups such as the a consortium known as Generating for Dogwood Initiative.

Seven Generations – or G7G – is propos“The greatest strength of our Albertaing to construct a 2,400 kilometre rail line Alaska railway concept is the support it capable of moving five million barrels per has received from First Nations along the day of Alberta crude from Fort McMurray, route,” said Vickers.

Alberta to Delta Junction, Alaska, where Now G7G is trying to gain the support it will hitch a ride on the Trans-Alaska of the Alberta government as well.

Pipeline to the port of Valdez, Alaska on The group is set to launch a feasibilits way to oil-hungry Asian markets. ity study at a cost of approximately $40 The railway million with the – known as hope that the “Studies have already Alberta governUnifying Nations Railway Comment will pay pany or UNdemonstrated that a rail about a quarter RailCo – would of that bill. turn northwest link to Alaska is a viable Vickers has near Peace said that G7G River, Alberta will not be alternative.” and pass through discussing the the communities project with the of Fort Nelson, media as long as – Matt Vickers, B.C. and Watson that decision is Generating for Seven Generations Lake, Yukon as still up in the air. it heads toward A Jan. 3 press Alaska. release indicates “Studies have already demonstrated that G7G was scheduled to meet with that a rail link to Alaska is a viable alterAlberta Energy in January to discuss native to the oil pipelines currently being the matter, but a statement from ministry planned through British Columbia,” said spokesperson Mike Deising said that G7G CEO Matt Vickers when the plan “there will not be a decision in January

“The tar sands, of course, is being and there is no time on if or when a deciforced … to find a route to the Pacific,” sion will be made.” said Streeper, suggesting that Canada is There is definitely interest in shipping guilty of an economic sin by relying too oil by rail. heavily on one customer when it comes “The focus on rail is telling as far as market demand and shippers lookto selling its natural resources. ing for creative ways to move product “Not everybody investing in the stock to market,” said market buys one Canadian Assostock,” he added.

“Rail will grow, ciation of Petroleum Jean-Francois Producers (CAPP) Arsenault, an econobut remain a small mist with transportaspokesperson Travis Davies, adding that tion sector consulting percentage of crude firm CPCS Transthe industry is also going to need new com, noted that rail transport.” can be an attractive pipeline capacity alternative to pipeto the west coast, eastern Canada and lines from an eco– Travis Davies, CAPP nomic development the Gulf Coast in the United States. standpoint because “As pipeline railroads offer the ability to ship other products as well. capacity grows tight, creative options such as rail become more attractive and However, Arsenault also remarked economic,” he continued. “Rail will grow, that transporting oil by pipeline is less but remain a small percentage of crude expensive than rail because of the ongoing costs of operation and maintenance transport.” associated with railroads.

“This plan goes back a long, long ways,” Bill Streeper said of the oil-by-rail Transporting oil by rail might make idea. sense at the present time considering that there is insufficient pipeline capacity “And it kind of died a natural death.”

Streeper is the mayor of the Northern for the large volumes of oil being proRockies Regional Municipality, a jurisdicduced in North America, not to mention tion that includes the community of Fort that many small markets don’t have Nelson and the shale gas play known as pipeline access, but Arsenault has doubts the Horn River Basin, where natural gas about the feasibility of this Alberta-toproducers are facing similar issues as Alaska project. those facing operators in the Alberta oil “You give a pen and a paper to an engisands – access to markets beyond North neer and he will make it work,” he said.

America is minimal and the North American price for the commodity is too low. continued pg 25

Trains carrying oil could be moving through the Peace Region on their way to Alaska if a plan to ship Alberta oil sands bitumen by rail succeeds.

JAMES WATERMAN PHOTO

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industry news LEADING THE CHARGE Encana opens first LNG fuel plant in Alberta

Encana’s Cavalier LNG plant is the first facility of its kind in Alberta to produce liquefied natural gas for transportation and high horsepower applications.

ENCANA PHOTO

james waterman Pipeline News North Encana is building a reputation.

Obviously, they are already well known as a Canadian natural gas heavyweight with operations throughout North America, but the reputation they are building now is all about how they use that resource.

The company announced at the end of January that their Cavalier LNG facility near Strathmore, Alberta was up and running, the plant being the first of its kind in Alberta to convert ordinary natural gas into liquefied natural gas (LNG) fuel for transportation and high horsepower applications.

At the time of the commissioning of that plant, it had recently been announced that Encana would be building a second LNG plant with Ferus near Grande Prairie.

All of this came after Encana started converting their own light truck fleet to compressed natural gas (CNG) and building CNG fueling facilities to service those

trucks, after Encana converted the transport fleet of one of their service providers in Louisiana to LNG with the help of mobile LNG fueling stations and even after Encana began working with CN to test LNG locomotives on a short run between Edmonton and Fort McMurray.

The Encana name is quickly becoming synonymous with domestic uses for natural gas that go beyond heating homes, generating electricity and coaxing bitumen from the oil sands of northern Alberta.

“We’re proud to have a plant there in Alberta,” said David Hill, vice president of Encana’s natural gas economy group, noting that the plant isn’t far from their corporate headquarters in nearby Calgary.

“It’s very meaningful for us to be able to open our first of several LNG facilities,” he continued. “This is a big deal for Encana. … We’re really excited about it. And I think we’re going to see great things happening.”

The location wasn’t only chosen for its proximity to Calgary, but also because it is adjacent to their Cavalier gas plant that processes methane from their coalbed

methane (CBM) assets in the area.

“We’re using coalbed methane gas, which is very pure methane,” said Hill. “So, we have a very minimal pretreatment required to remove impurities and water.”

The plant will be able to produce 15,000 to 17,000 litres of LNG per day when fully operational.

The first customers for fuel produced at the site will be Ferus, who is working on converting their truck fleets to LNG as part of their partnership with Encana to build the second Alberta LNG plant near Grande Prairie, and CN, who is using LNG provided by Encana for their Alberta pilot project.

“One of the things I like to stress is Ferus and CN are first movers in this space,” said Hill.

“It’s important to really team up with like-minded companies that see the benefits of using natural gas beyond price,” he continued, referring to the record low natural gas prices that are so enticing to consumers at the present time.

“Obviously, natural gas as a fuel is a lower cost than diesel or gasoline today. So, that’s a benefit. But both of these companies … see it beyond that.”

Hill believes their interest in natural gas goes past the fact that it can be up to 40 per cent less expensive than gasoline or diesel to include the environmental benefits, which feature a 30 per cent reduction in carbon dioxide (CO2) emissions and a 90 per cent reduction in particulate matter that causes smog.

Additionally, natural gas is a domestic fuel.

“They see it as part of their sustainability program.”

Hill seems particularly excited about the rail market because of the large volumes of fuel that industry can consume “And CN is definitely a leader in this space on innovation,” he said.

Interestingly, the ties between CN and the oil and gas industry are growing as the oil sands industry struggles to get their product to market and cope with the uncertain futures of TransCanada’s proposed Keystone XL pipeline to ship Alberta bitumen to Gulf Coast refineries and Enbridge’s proposed Northern Gateway pipeline to transport that fuel to an export hub at Kitimat, British Columbia.

Speaking during the Insight Canadian Oil Sands Summit on Feb. 6, CN’s vice president of petroleum and chemicals James Cairns said that railways and pipelines are both good options – and both necessary – when it comes to moving oil to market.

“Before the first pipeline is full, you better have the second pipeline built,” said Cairns. “Because if you don’t, full means full.”

Rail can offer temporary transportation when pipeline

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capacity isn’t available.

Actually, a lot of the recent talk about transporting oil by rail began with light oil discoveries in the Bakken play of Saskatchewan and North Dakota where pipeline capacity couldn’t match production.

“Rail had to be part of the supply chain,” said Cairns, noting that it was never a question of logistic or economic viability.

“It had to happen.”

The oil sands producers are facing a similar dilemma as they attempt to access foreign markets in the absence of Keystone XL and Northern Gateway at a time when the price differential between Western Canadian Select and Brent or West Texas Intermediate is growing to a debilitating level.

“Shipping by rail allows you to connect new production with markets that are not pipeline served,” said Cairns.

It can also be economical because it doesn’t include the cost of diluent necessary to ship heavy oil by pipeline.

Suncor Energy is one oil sands producer seriously examining the possibility of shipping oil by rail as they attempt to move their oil sands output to their Montreal refinery.

“It gives you a great deal of flexibility, particularly around some of the poorer quality streams from western Canada where you could get those in sooner than pipelines could be reversed,” said Suncor’s president and CEO Steve Williams.

“Even if pipelines are reversed, you have an opportunity to make a good margin.”

It is possible that Canada could soon see large volumes of heavy oil transported by trains powered by natural gas.

Ferus, however, is already closely tied to the oil and gas industry as a supplier of cryogenic fluids such as liquid nitrogen and liquid CO2 that are used in enhanced oil recovery and hydraulic fracturing.

“It’s not easy,” Hill said of the conversion to natural gas.

“Changing your fueling pattern, changing the fuel, driver behavior – it’s difficult,” he continued. “We’re experiencing the same problems and challenges in our

are actively bringing natural gas into the own fleet of light duty vehicles with CNG. So, we’re able to really communicate with high horsepower market with products them at the right level that we understand such as natural gas locomotives and the frustrations and the challenges. Bemine haul trucks. cause we’re doing it ourselves, too.

“One of which would be fully capable of “It makes a good partnership.” serving the oil sands up in Fort McMurHill is encouraged by the way vehicle ray,” Hill said of those mine haul trucks, manufacturers are starting to embrace further describing the synergies between the natural gas option. oil and gas industry operations and un“Just in the last … three years we’ve conventional uses of natural gas. seen a significant shift in the market,” “And now we’re seeing the marine marsaid Hill, noting the emergence of natural ket moving in this direction as well,” Hill gas fuelled trucks manufactured by continued. “A lot of the ferries on the west Chrysler and General Motors after a decoast of Canada and the west coast of the cade during which the Honda Civic was [United States], as well as the east coast the only natural gas vehicle available. in Manhattan, looking at natural gas.”

Marine transportation outfit TOTE The heavy duty truck manufacturers are also coming onboard.

Shipholdings announced on Dec. 4, 2012 Until this year, the only engine options that they had contracted General Dynamhave been a small 8.9 litre engine and ics NASSCO to build the first two LNG a large 14.9 containerships on litre engine, but the ocean.

“We hope the market an intermedi“These are ate 11.9 litre pretty significant continues to expand and movements that engine will soon be available were not even on we expand the facility the radar three from Cummins Westport years ago,” said with the market.”

“Kind of filling Hill. “And really the gap in my attesting to the view,” said Hill, abundant natural – David Hill, Encana “which is regas story that Enally important to cana and others provide trucking have developed firms a choice on the kind of horsepower in North America.”

Hill said that approximately one-third of they need. And torque. That’s going to be a big move for the market. the LNG produced at Cavalier will go to “We anticipate that really accelerating the on-road market, while the remaining the market in the on-road.” two-thirds will go to the off-road market.

Hill noted that Encana has been using “We hope the market continues to exnatural gas for off-road, high horsepower pand and we expand the facility with the applications in their drilling operations market,” he added. since 2007, but that hasn’t been an area “Today, we just got an approval on a contract for another customer to fuel their trucks where there has been a lot of movement off the LNG from the Cavalier facility.” outside of the company.

However, interest in the fuel produced at “We began to expand that here in the the plan is still difficult to gauge at this point. last three to four years,” said Hill. “And also move into our pressure pumping “The interest was high, but it was just talk – tell me more, tell me when, come services and using natural gas there on our large engines.” back when you have something,” Hill said Now manufacturers such as Caterpillar of the year and half leading up to com-

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missioning of the plant.

“Now we have our production and dispensing facilities,” he continued. “Now there’s something tangible that they can come out and see, touch, feel – and talk to a customer or talk to somebody that’s already using it.”

Encana will be working hard throughout 2013 to ensure that the Alberta market is aware of the availability of LNG at the Cavalier plant and the abundance of natural gas feedstock.

Hill admits that it is a risky venture.

“A lot of uncertainty. A lot of very legitimate concerns” he said.

“What about this? What about that?

Will this work? Will the price be here two or three years from now? Will I still have the same price? What about the cost of these trucks or these engines? Are they going to come down?

“That’s why I said you really have to work with the first movers. … You want to find those companies and work with them to develop a win-win solution for them and the fuel.”

Still, there are rewards for leading the charge.

“Being a first mover, they get to take advantage of any pricing power they might have by being a lower cost fuel,” Hill said of their first LNG customers.

“And also they can talk to their customers and say, ‘I’m taking this step. I’m using natural gas. It’s a better fuel. A lower greenhouse gas emissions. Lower criteria pollutants.’ They can talk to their customers now before everybody else and say they’re taking advantage of this and they can provide a better service to their customers. That begins to resonate with some of their customers.

“We’re asking our supply chain to do the same thing,” he continued. “Join us on this transformation. We’re doing our bit. We’re building CNG stations. And LNG. And join us. We should be using the fuel that we’re drilling for. There’s absolutely no reason it won’t work. We’re trying to demonstrate that.

“We’re just excited to be part of it.”

The first customers for fuel produced at the Cavalier LNG plant are CN and Ferus. Ferus already has a strong relationship with the oil and gas industry as a supplier of cryogenic fluids used in enhanced oil recovery and hydraulic fracturing. CN’s relationship with that sector is growing as they work with Encana to test LNG-powered locomotives and consider expanding transportation of Alberta oil by rail.

CN PHOTO

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special feature

BURSTING THE BITUMEN BUBBLE

Why Alberta has to beat the oil price differential

Alberta oil producers are struggling from an oil price differential between Western Canada Select and West Texas Intermediate that could be solved by new pipelines connecting Alberta with world markets.

JAMES WATERMAN PHOTO

james waterman Pipeline News North Keystone XL and Northern Gateway could offer a solution to the “bitumen bubble” problem facing Alberta, but the fates of those projects are beyond the control of government.

As Premier Alison Redford has said during television addresses in recent weeks, her government is looking at a $6

billion shortfall in provincial revenues because of the differential between Alberta oil prices and the West Texas Intermediate (WTI) or Brent Crude prices.

“It’s been a reference that’s been used to talk about the differential that a lot of Alberta producers are getting for bitumen up in northern Alberta,” said Chris Bordeau of the Alberta Treasury Board and Finance.

“It’s the Western Canada Select (WCS)

price that a lot of producers get per barrel “But the direct correlation is definitely of oil compared to what the North Amerithe royalty that the companies pay to the can price is, like WTI price, and then province is lower when the price of WCS certainly compared to the global Brent is lower.” price,” Bordeau explained.

The land sales do present some inter“We’ve seen a certain drop in the West- esting numbers. ern Canada Select price,” he continued.

For example, the first land sale of 2013 “And the spread between WCS and WTI attracted $85.05 million compared to has certainly grown significantly over $63.43 million for the first day of 2012, those last couple of months. And it’s rebut the first 2013 sale averaged $239.94 ally become sort of disassociated from per hectare for a total of 354,476 hectthe WTI price.” ares and the first 2012 sale averaged an Historically, said Bordeau, WCS has impressive $403.88 per hectare for just followed a similar trajectory to WTI. 157,063 hectares.

“In the last couple months, we’ve seen The first 2013 sale also revolved around the liquids-rich Montney shale gas play, a disconnect where WCS price has come down, whereas the WTI price has mainnot oil resources.

“We brought in $3.3 billion in sales of tained its upper level.”

The obvious way that price differential Crown leases,” Bordeau said of 20112012 fiscal year. is felt by the provincial government is At the halfway point of the 2012-2013 through royalty revenues.

“The lower fiscal year, the price that sales had “The lower the price that land our produconly brought ers get, the in just under our producers get, the less $600 million. less royalty they pay to “We were the province,” projecting the royalty they pay.” said Bordeau. to bring in “We’re defibasically $2.0 – Chris Bordeau, Alberta Finance nitely seeing billion,” said an impact on Bordeau. our bottom “We’re already line for royalties. It also has an offshoot projecting to be $1.3 billion under what impact, too, on things like corporate taxes we brought in [last fiscal year] for Crown that are paid to the province. … When the leases. But, right now, for six months profit margins decrease for companies it we’re below that even.” affects how much they pay in taxes. So, Consequently, the Alberta government it’s got a bit of a side impact to some of is looking at being shy $6 billion in revour other revenue sources. enue for the 2013-2014 fiscal year.

“Some would even say that a lower “We’ve been working on a plan for a WCS price [is] impacting how much while to improve market access even we’ve been able to get when we do before this current fiscal situation came these Crown lease sales,” he added. up,” said Bordeau. “The premier’s talked

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a lot about a Canadian energy strategy and the importance of that and how that will help us work with other provinces and increase the number of customers we have that can buy our oil.”

However, if growing the customer base requires the successful completion of pipeline projects such as TransCanada’s Keystone XL and Enbridge’s Northern Gateway, which would move Alberta oil to Texas and the British Columbia coast, respectively, it is somewhat out of Alberta’s hands.

“Out of all the major oil producing jurisdictions in the world, Alberta’s the only jurisdiction that’s landlocked,” said Bordeau. “We don’t have direct access to a coast where we can then get a higher price for our oil. That’s why we’re doing what we can. That’s why the premier is advocating the Canadian energy strategy. We’ve put a focus on Asia and having an Asia office. We’ve got our Washington office as well [and] we’re working through them and working with the federal government on those issues.

“But, ultimately, if you’re looking at Keystone, for example, that’s a decision that the [United States] government needs to make. And they’ll make the decision based on their best interest.

“In that sense, it is out of our control.”

The Alberta Enterprise Group (AEG), an organization of business leaders devoted to the prosperity of Alberta, clearly believes that too much of that control is being given to individuals or organizations that want to block major projects like Keystone XL and Northern Gateway.

AEG feels that they do so regardless – or ignorant – of the economic benefits.

“Economic illiteracy has long been a problem,” said AEG’s vice president David MacLean, adding that Canadians are easy to convince of the environmental ramifications, but it is far more difficult to teach them the economic consequences of oil price differentials.

“We’re behind the eight ball to start with because what we’re trying to communicate is endlessly more complicated,” he added.

AEG went public with their concerns in late January after a luncheon with Enbridge CEO Al Monaco.

“It is becoming increasingly difficult to develop the Canadian economy,” said AEG president Tim Shipton following Monaco’s speech.

“Whether its pipelines, power lines,

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Alberta, home to oil sands operations belonging to companies like Suncor, is the only major oil resource in the world that is landlocked. That lack of marine access to foreign markets is a big part of the “bitumen bubble” problem.

SUNCOR PHOTO

mines or hydroelectric projects, the debate ton. “It’s not just about jobs and profits, focuses on why we shouldn’t build instead but also vital government revenues of why we should. Canada is paralyzed by needed to finance growing governspecial interests and complacency.” ment pension liabilities and expanding “It’s never been like that, historically,” services. said MacLean, adding that Canada was “The lower price Canadian energy exporters receive is costing the Canadian built on calculated risks such as the and Albertan decision to construct “It is becoming increasingly governments billions each a railroad year – paid in across the difficult to develop the turn by taxnation. payers across “Every Canadian economy.”

Canada.” day we MacLean take risks,” admitted MacLean – Tip Shipton, Alberta Enterprise Group that AEG continued. fully supports “If we all Northern decided to Gateway, but also noted that the embatstay home, we’d all make no money and we’d all be poor. And I’m afraid that tled pipeline project isn’t the only issue Canadians en masse are deciding to at hand when it almost impossible to just stay at home.” build new power transition lines in Alberta and when it took ten years of regulatory “What is at stake is the balance wrangling to approve a uranium mine in sheet of the entire country,” said Ship-

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Saskatchewan when the same project would have been approved in just a year and a half in Europe.

Still, Northern Gateway was the example MacLean used when discussing why Canada has to stop being so “cautious” and favouring a “not in my backyard” attitude when considering projects that could prove vital to the national economy.

“It’s $2.3 billion in government revenue to all levels of government,” MacLean said of Northern Gateway.

“That’s a huge number,” he continued.

“That’s enough to employ 1,000 doctors, nurses and teachers for 25 years.”

However, MacLean suggested that that message from B.C. government has been that $2.3 billion and 300 jobs in Kitimat isn’t sufficient to support the project.

“If that’s not enough, how much is?” he continued. “How much is it going to cost as a nation, how much will it take in terms of revenue, for government to make a project like this worthwhile?

“Meanwhile, there’s tankers going in and out of the port of Vancouver every week. There’s 100,000 barrels a day that goes down that Trans Mountain line into the port of Vancouver – some of it heavy – every damn day.

“We can’t have tankers, but you certainly have tankers coming into the port of Vancouver with cheap products to service Walmart. It comes the other way.

We can’t ship stuff back to Asia. I don’t think people really think deeply on it.”

MacLean said that the consequences of rejecting pipelines that would move Alberta oil to foreign markets, thereby bursting the bitumen bubble, would be either higher taxes or reduced government services for Canadians.

Benefits of approving those pipelines would include becoming a net exporter of energy.

“And being a player in the global marketplace,” he added.

“We’ve got to keep talking. We’ve got to raise the discussion,” he said.

“We take responsibility as an organization for doing whatever we can, whatever small part we can play, in injecting some economic literacy into the debate.

And making sure that people know that we’ve got to put a price tag on taking an energy development approach in this country.

“I don’t think we’ve done a good enough job of that in the past.”

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FEBRUARY 15, 2013

industry news

A good LESSON IN LIABIILTY

Fort St. John Petroleum Association learns the ins and outs of Bill C-45 james waterman Pipeline News North

Terry Betts of Advantage Fleet Services paid a visit to the Fort St. John Petroleum Association on Feb. 7 to offer a warning to managers and business owners about what it can mean if they fail to create a culture of safety in their workplace.

The reason was that the recently introduced Bill C-45 – also known as the Westray Act – holds supervisors, managers and owners criminally responsible for the actions of their employees and contractors.

“We never think anything bad is going to happen to us,” Betts said of the common mentality that can lead to workplace incidents.

It is an issue of particular concern to the oil and gas industry, considering the inherent risk involved in working in remote locations on well pads and pipeline construction sites, the homes of some of the most dangerous jobs in Canada.

Additionally, workers involved in that sector frequently drive considerable distances in everything from pick-up trucks to dump trucks, pickers and transport trucks.

Betts had that same mentality during his 25-year career as an RCMP officer, until a shootout with an armed man cost him three fingers on one hand.

“It wasn’t going to happen to me,” he added.

The problem is that incidents do occur, often involving businesses where somebody along the chain of command was negligent, occasionally resulting in the deaths of innocent bystanders.

Betts cited a motor vehicle accident involving a Terry Betts of Advantage Fleet Services gave the Fort St. John Petroleum Association a lesson in Bill C-45 during their driver who was working for C & J Construction in monthly meeting on Feb. 7. Bill C-45 holds supervisors, managers and company owners criminally responsible for the Alberta. actions of their employees or contractors. Betts told stories of incidents where individuals in management roles and companies have been charged with criminal negligence for incidents involving their employees.

“It’s just another tool,” he said of the attitude many JAMES WATERMAN PHOTO workers have towards their trucks, but adding that motor vehicle accidents are probably the most violent way to increase the fine to $1 million. get insurance. die judging by his experience in the RCMP. The owner of the company, who had no previous “If they don’t have insurance, they can’t operate,” said “A lot of drivers take a different attitude when they criminal record, was personally fined $90,000, while the Betts. drive a company vehicle,” he continued, suggesting that project manager was charged Betts noted that ICBC can cancel an insurance policy was the case when the C & with criminal negligence. if the policyholder is convicted of a criminal offence while “A lot of drivers take a J construction driver, who That is how Bill C-45 is driving. was ignoring traffic laws and changing the landscape of oc“It happens,” he said. impaired by drug or alcohol, “ICBC is very zealous.” different attitude when they cupational health and safety. killed five people who had Additionally, insurance companies can ask if an apUnder Bill C-45, the aubeen sitting in a car stopped thorities don’t need to prove plicant has ever had their insurance canceled. drive a company vehicle.” at a red light in Calgary.

“If you ever get cancelled, you may have yourself a criminal intent for an action It was determined under problem.” that causes death or injury.

Bill C-45 that the company – Terry Betts, They only need to prove However, Betts stressed that it is possible to avoid the was aware of that driver’s negligence. problems that could arise from violating Bill C-45.

Advantage Fleet Services habits and attitude and that The answer can be as easy as using seatbelts and Betts explained that police management should have officers are currently being turning off cell phones or as complex as conducting a known that such an incident was a definite possibility.

Road Safety Performance audit to determine National trained with respect to the Westray Act and there is a It was tantamount to willful blindness. push to have a prosecuting attorney in every province Safety Code profiles.

Betts also told the story of a construction company in who is an expert on that law.

“We look at the low hanging fruit,” said Betts.

Ontario that was fined three times its net earnings – a The Canadian Steelworkers Union, said Betts, is very Betts also emphasized the importance of practictotal of $200,000 – after the deaths of four employees at aggressive in their attempts to have charges laid under ing safe behaviour “for the right reasons” and not just one of their job sites.

Bill C-45 when worksite incidents occur. because it is the law or company policy.

“That’s precedent,” said Betts.

A long-term problem for a company convicted “Most of those policies or procedures are all best The Crown is appealing that sentence in an attempt to under Bill C-45 is that they may no longer be able to practices.”

FEBRUARY 15, 2013

PIPELINE NEWS NORTH •

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FEBRUARY 15, 2013

environment

BLACK GOLD TURNING GREEN

Oil and gas industry driving the renewable energy sector

Well known as an oil and natural gas transmission company, Enbridge is also involved in numerous renewable energy projects, including the Massif du Sud Windfarm in Quebec.

ENBRIDGE PHOTO

james waterman Pipeline News North Renewable isn’t a dirty word never to be spoken in the hallways of companies that toil in the oil and gas industry of western Canada. Actually, as the Canadian energy landscape changes to include technologies such as wind, solar and geothermal on an increasingly large scale, companies ranging from oils sands giant Suncor Energy to pipeline outfit Enbridge are diversifying their portfolios with green energy projects popping up across the country.

Suncor and Enbridge even grew up together as modern wind power pioneers after they decided to join forces on building the SunBridge Wind Power Project in Saskatchewan in 2001.

“After about four or five years of trying to find a project that would fit for us, our first project basically came along in 2001,” said Don Thompson, vice president of Enbridge’s Green Energy department.

That was the 11-megawatt wind farm in Saskatchewan.

“They basically were looking for a partner and we were looking for a project,” Thompson said of the partnership with Suncor.

“And, of course, Suncor is a very large shipper on the Enbridge system. So, it was a really good fit.”

Additionally, Enbridge felt a responsi-

bility to contribute to the electricity grid in Saskatchewan as one of the largest consumers of power in the province.

“That was a start,” Thompson added.

It is now twelve years later and Enbridge has just launched the first phase of their thirteenth wind project, the Lac Alfred Wind Project in Quebec, bringing their total wind power generation up to 1,250 megawatts.

Suncor has been busy, too.

The oil company now has three additional wind projects in Alberta and another two wind projects in Ontario.

“We believe that wind power, a clean, safe and renewable energy source, is an important part of Canada’s future energy mix,” said Nicole Fisher, Suncor spokesperson.

“Suncor is committed to developing and supplying energy options that meet the needs of both today and tomorrow,” she added. “As a Canadian pioneer in wind energy, we currently operate six power developments with other projects in the planning stages.”

“For all of our operating projects, we are the investor,” said Thompson, noting that Enbridge has not always been the proponent of those projects.

“We essentially bought the late-stage or near-ready-to-construct projects,” he explained. “We have typically not gone … into the development side. And when I say development, that’s the guy who basi-

cally goes out, takes the wind measurements or negotiates the land access or works with the [utility] to get the access to the transmission.

“We basically buy it after those pieces have already been developed. And then we basically take it to the next step, which is the construction and then eventually the operations.”

Thompson said that Enbridge has grown increasingly comfortable with their role in the wind energy sector.

“Our ability to actually invest in those development projects earlier is much greater,” he said. “And our appetite, frankly, for those early stage projects is getting much larger.”

Enbridge believes that they are encouraging those visionary individuals who develop renewable energy technologies and projects through their investments in that area.

“For them, this is about recycling their investment,” said Thompson.

“They’re quite an interesting group,” he added. “They don’t all just take it and put it in the bank and go home. They plough it back into new development.”

However, building a wind farm isn’t just about power supply and demand issues, tackling the financial hurdles or ensuring that the project is profitable for companies like Enbridge.

They must also consider safety and environmental impacts.

“We bring a tremendous amount of expertise,” said Thompson.

“The construction of utility-scale projects is not at all easy, all the way through permitting, as well as making sure that we have labour organized, subcontractors organized, materials organized,” he continued.

“That’s what I think we bring to the equation.”

Thompson cites the Lac Alfred wind farm in Quebec as an example of Enbridge’s ability to manage the logistics of such a project.

“It’s a 300 megawatts project,” he explained. “There’s 150 turbines. The road servicing this is 180 kilometres of road. There are very few companies that can actually execute that project well.

And, frankly, that’s what we really pride ourselves on. And then the long-term operation of projects.”

The responsibilities that come with operating a wind farm aren’t only about satisfying minimum code requirements, but ensuring that there are no incidents that cause harm to people or the environment.

“These are all high voltage systems,” said Thompson.

Another Canadian company with roots in the oil and gas industry that is also gaining experience and expertise in the renewable energy sector is AltaGas. continued pg 27

FEBRUARY 15, 2013

PIPELINE NEWS NORTH •

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FEBRUARY 15, 2013

careers i People FOR THE PATCH CCIS training a new crop of power engineers james waterman Pipeline News North A small group of new Canadians are on their way to becoming new power engineers thanks to the Calgary Catholic Immigration Society’s Oil and Gas Training Programs (CCIS OGTP).

CCIS is working with SAIT Polytechnic, Enform and the Alberta Boilers Safety Association (ABSA) to deliver the 37-week program that began on Monday, Jan. 28 with a group of 16 students selected from hundreds of applicants. All the students are either new Canadians or unemployed and underemployed immigrants with previous science and technology training suitable to the trade.

“What makes this program unique is the fact that we’re able to provide the training in only 37 weeks,” said CCIS spokesperson Ana Hoepfner.

“We’re able to do this in such a short period of time,” she continued, “because these individuals already have strong backgrounds in mechanical, science, physics, abstract reasoning, chemistry and so forth. So, they’re able to take up a lot of that knowledge and retool it and become certified as power engineers in a short period of time.”

Financial support for the program has come from the federal government Calgary Catholic Immigration Society has launched their first power engineering program for new Canadians with past education or and provincial government in Alberta, experience relevant to the trade. The pilot project is training new power engineers in just 37 weeks.

CALGARY CATHOLIC IMMIGRATION SOCIETY PHOTO but a great deal of in-kind support has also come from an oil and gas industry couple of days ago over the phone that “Because the need is already here,” she Hoepfner remarked that a number of that recognizes a considerable need for they were going to post twenty power enadded. “It’s not looming. The shortage is the candidates had known that the propower engineers now and in the future. already here. And we need those people gineering positions in the next couple of gram was in the works for some time.

“They participate with us on final selectrained as soon as possible. And the best weeks,” Hoepfner continued. “And that’s “And so they periodically kept knocktion, as guest speakers, mentoring the just one company in the next two weeks. way is to access [people] who are already ing on our doors, saying, ‘Have you heard clients and guiding field trips, providing So, you can imagine the scope. here, who already have the skills and who anything about the power engineering orientation,” said Hoepfner.

“They’re not just needed in the oil can very quickly become certified. program?’” she said, adding that those “And, at the end of the day, providing job sands. They’re needed “And as they are a diverse group, they selected are very appreciative of being choopportunities.” in hospitals. They’re have other skills and other perspectives sen by industry to take part in the training.

Hoepfner “We feel that this will needed in schools. that they can also bring to the workplace.”

“They really are seizing this very explained that Anywhere there’s boilers The project began with the initial prostrongly,” Hoepfner continued, noting that this first session gram proposal that was written in 2009. students were arriving as early as 8:00 be a very significant and pressurized equipof the program ment. In waste treatment “It’s been a few years in coming to during the first week, even though class is a pilot project plants.

They’re needed fruition,” said Hoepfner.

“We have been begins at 9:00. driven by that de- step forward for the in the city of Calgary. talking about this for quite some time and “This is a very motivated team.,” she said. mand for power They’re needed in the “This will be an excellent way for building up the support that would be industry.” engineers. city of Edmonton. They’re required to make it successful.” them to get started in an important “We feel that needed in different kinds sector of the economy, whether they The first group of students was chosen this will be a very of facilities. So, there’s a choose to go into oil and gas or from a shortlist of 40 only about a week – Ana Hoepfner, CCIS significant step huge scope for growth in whether they choose to go into buildprior to the start date of the program. forward for the inthis profession.” ing management “Every single dustry,” she said.

“This will be an In fact, the opportunior they wish to go person that came to “This is a very in-demand occupation. ties range from oil refineries to breweries. to petrochemical help us out with the In the oil sands, it’s the most in-demand “There’s certainly a huge market for plants or breweries interviews said the excellent way for occupation. And we think that this is a power engineers,” said Hoepfner. “So, we same thing – they or plastic plants. unique avenue to access people who are do feel that this model and this industry“It will mean an were astounded by them to get started in important already here, who are unemployed or driven approach could be applied on a change in the caliber of talunderemployed or marginally employed, much wider scale.” their lives because ent,” said Hoepfner, an important sector.” they have struggled, who might have backgrounds as meHoepfner noted that government fundadding that the oil chanical engineers or as physicists or as ing for such programs is limited, but CCIS company reprein many cases, for science teachers, and who are being unis hopeful that industry will play a greater years to find sustainsentatives on the – Ana Hoepfner, CCIS derutilized skill-wise. And retooling those role in training power engineers. able employment. selection committee skills to become certified in a profession “If industry were to step in and we “In only nine remarked that any of that is lucrative, that will provide good could collaborate to train greater numbers the candidates would months, their lives revenue for the government. of people, this will be a great opportunity,” be make a good addition to their staff will turn around, and they will be making “One company mentioned to me a she said. in the vicinity of $100,000.” with the proper certification.

industry news

FEBRUARY 15, 2013

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21

Black to know this spring if refinery will go ahead

British Columbia businessman David Black says he should know by the end of March whether his proposed $13-billion Kitimat oil refinery will proceed.

“A lot of the pieces I’m working on will let us know where they’re going to be.

There are a lot of potential stakeholders here and I’ve been talking to them all,” he told reporters following a presentation at the Insight Canadian Oil Sands Summit on Feb. 5.

In August 2012, the owner of the Black Press newspaper chain announced that privately-held Kitimat Clean, of which he is president, had submitted an environmental assessment application for a world-class oil refinery north of Kitimat. The plan is to construct a 550,000 bbl-per-day refinery to process heavy crude oil transported on Enbridge Inc’s proposed Northern Gateway pipeline.

He believes a modern West Coast refinery would be incredibly important to the Alberta oilsands. It would produce 240,000 bbls per day of diesel, 100,000 bbls per day of gasoline and 50,000 bbls per day of aviation fuel.

Once Black knows whether the project can proceed - and he told the Bulletin he is 95 per cent certain it will - it will take a couple of years to obtain all the necessary permits and environmental assessments followed by five years of construction for a 2020 start-up.

“So it’s going to take a while.”

Black, whose media chain runs 150 newspapers in Canada and the United States, told those attending the gala dinner that a majority of British Columbians, even those who lean towards the political right, simply are not in favour of pipelines in their province that would move Alberta

bitumen to the West Coast for shipment abroad.

“I can pretty much tell you British Columbia is not in favour of [Northern Gateway] pipeline - 70 per cent against it,” he said, adding that a pipeline doesn’t make sense for the province, as it offers only temporary construction jobs and then little else, aside from the potential for damage to pristine environment. With such widespread disapproval of a pipeline, Black said, the province’s Liberal government has little choice but to oppose it.

“What are you going to do when 70 per cent are against it? Of course the solution is the refinery, because that turns the population of B.C. around. So that’s what we have to do, and that’s what we’re trying to do.”

According to Black, a world-class refinery provides economic stimulation and a multitude of permanent jobs for his province - 3,000 precisely and gives B.C. an oilsands buy-in and delivers the social licence necessary for that project to occur.

A large-scale refinery also requires a lot of natural gas to operate, which means the Kitimat project would boost B.C.’s natural gas industry as well.

“It would be a fairly sizable consumer of B.C. gas, and God knows we need some consumers of our natural gas.”

For Alberta’s industry, Black said, a refinery that legitimizes pipeline construction gives oilsands products access to foreign markets, helping to resolve the current discount for Alberta crude due to its inaccessibility to markets beyond the U.S. Because of Kitimat’s access to tidewater and proximity to natural gas, Black said a large refinery project would be able to offer good-paying jobs and environ-

Apache and Chevron close Kitimat LNG deal Daily Oil Bulletin Apache Corporation has announced that its subsidiary, Apache Canada, has completed the transaction with Chevron Canada Limited to build and operate the Kitimat LNG project and develop natural gas resources in the Liard and Horn River basins in northeast British Columbia.

Chevron Canada, a subsidiary of Chevron Corporation, and Apache Canada each have become a 50 per cent owner of the Kitimat LNG plant, the Pacific Trail Pipelines and 644,000 gross undeveloped acres in the Horn River and Liard basins. After a brief transition period, Chevron Canada will assume operatorship of the LNG plant and the pipeline.

Apache Canada increased its ownership in the LNG plant and pipeline from 40 per cent and will operate the upstream assets. Its net proceeds from the transaction were $405 million.

“With Chevron’s LNG experience and Apache’s upstream track record, this team is ideally suited to move this project forward toward delivering the tremendous resources at Liard and Horn River to meet Asia’s growing demand for LNG,” Steven Farris, Apache’s chairman and chief executive officer, said in a news release.

While some LNG buyers are trying to push away from oil-linked prices, the head of Chevron said recently that this type of pricing will be key to making projects like Kitimat LNG work.

In late December, Encana Corporation and EOG Resources Inc. announced they were selling their positions in Kitimat LNG to Chevron. The planned Kitimat LNG project has until now struggled to secure a long-term off-take agreement with an Asian buyer.

mental standards not found in a lot of similar facilities around the world, yet at the same time turn a tidy profit and outcompete pretty much any other refinery along the Pacific Rim. On the Kitimat Clean website, Black says the refinery would generate $2 billion of exports every month and create hundreds of millions of new tax dollars to government every year.

For producers, Black said, accessing Pacific markets for Alberta crude with a Kitimat refinery would save $22 per bbl compared to all the costs associated with piping product to the Gulf Coast, and then shipping it a much longer distance, through the Panama Canal to East Asia.

“Everybody says you can’t compete with those big Gulf complex refineries, because they’re already built and their not fully utilized. But they’re on the wrong ocean, and people aren’t paying attention to that.”

He said the project would appeal to East Asian markets as it would offer a “guaranteed, long-term, refined fuel supply with a safe shipping route from a new, diversified sale source.”

For China, he said, the refinery would give the country an opportunity to ship back home products refined from the bitumen that some of its companies are harvesting in the oilsands. A refinery in Canada also reduces China’s need to build refineries in its own country, which helps that country reduce the amount of pollution from refineries that would not be up to the same environmental standards as the Kitimat project, according to Black.

As to whether China would prefer to receive crude from Canada and refine the petroleum itself, Black suggested that the few thousand jobs that would otherwise be created in China are not as important to the nation as having access to the energy products necessary to facilitate rapid economic expansion.

Once he knows if the potential stakeholders say “yes or no” and assuming the answer is “yes,” it should be a fairly simple task to raise the necessary funds to build the multibillion-dollar project, Black told reporters.

“It’s just not a problem. There are huge pools of money looking for infrastructure investments that are safe, and this is safe.”

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i

community

WIND IN THEIR SAILS Spectra energizes Wind Turbine Maintenance program with donation

STAFF REPORTER Pipeline News North Spectra Energy is lending a helping hand to their energy sector cousins in the wind industry by donating $7,500 to the Wind Turbine Maintenance Technician program at Northern Lights College (NLC).

The funding will help cover exam fees or students enrolled in the program, the only one of its kind in British Columbia.

“Spectra Energy endeavors to be the partner of choice and actively supports communities we work in and around,” said Spectra’s Jay Morrison, who presented the cheque to NLC on behalf of the company.

“Education and workforce development are key areas to develop, as they contribute greatly to the overall long-term health and well being of the community,” Morrison added. “Spectra Energy is excited to contribute to Northern Lights College and the important trades programs they offer.”

NLC announced that they had received the donation on Feb. 1, the same day the college announced they would be holding a public information session on Feb. 6 to

discuss plans to build a training tower to be used by Wind Turbine Maintenance Technician students at their Dawson Creek campus.

“Access to a training tower is imperative for Wind Turbine students to qualify for BZEE certification, the international standard required by most companies around the world,” said Brent Deinstadt, vice president of corporate services at NLC. “The training tower will be designed to replicate conditions faced by wind turbine technicians when repairing, maintaining, installing or otherwise working on a wind turbine system,” he added.

The training tower was included in the original plan for the Energy House that has already been built at the Dawson Creek Campus, but has been delayed by the two year process of obtaining the required permits.

It will not include any mechanical components such as an actual wind turbine.

“Northern Lights College is committed to the communities it serves,” said Deinstadt.

“And we want to ensure that area residents have an opportunity to ask questions about the project.”

Hal Hobenshield of NLC accepts a $7,500 donation from Spectra Energy, which was delivered by Jay Morrison. The donation will help students in the Wind Turbine Maintenance Technician program.

NORTHERN LIGHTS COLLEGE PHOTO

NEB recommends federal government deny NGTL Komie North project Daily Oil Bulletin Concluding that rolled-in tolling is inappropriate for NOVA Gas Transmission’s proposed Komie North extension, the National Energy Board has recommended against federal cabinet approval for the northeastern British Columbia segment of the Northwest Mainline.

“The proposed rate design [for Komie North] would unreasonably subsidize the extension of the NGTL Alberta System into an area where it would compete with infrastructure already in place,” said the NEB in a report released Wednesday.

“NGTL’s proposal to roll in all costs of the project to the rate base shifts the cost or risk of unused capacity to other NGTL shippers in the short and long term,” it said. The company provided little evidence to indicate the willingness of those shippers to carry those costs, which was especially apparent for the Komie North section where some Alberta shippers opposed the project, according to the board.

“Basing pricing for transportation on cost causation (user-pay) promotes economic efficiency through proper price signals to the market,” it said. “In this context, the board is of the view that the tolls for NGTL’s transmission service must have an appropriate allocation of cost and risks.”

However, the NEB recommended that a Certificate of Public Convenience and Necessity be issued for the Chinchaga section of the Northwest mainline, finding that its

toll treatment is appropriate. The 33-kilometre pipeline loop would run between the Chinchaga meter station and the Meikle River compressor station about 76 kilometres northwest of Manning, Alberta.

The 97-kilometre Komie North project, an extension to the Horn River mainline, would be built 110 kilometres north of Fort Nelson at an estimated cost of $229.8 million for the pipeline and the required Fortune Creek meter station.

In its application, NGTL proposed that its rates for service for the pipeline be determined in accordance with the Alberta system rate design. It also proposed to add the capital costs of the project to its rate base, which means that all shippers on the system would bear the cost.

The current rate design includes a ceiling and floor for FT-R (firm transportation -receipt) rates that are eight cents per mcf above and below the average receipt rate. NGTL stated that under this rate design, the new volumes received at the Fortune Creek meter station would pay the ceiling rate of 25.3 cents per mcf compared to 34 cents per mcf if the ceiling was not in place.

At a hearing on the facilities application, Westcoast Energy Inc. argued that under that toll design with the ceiling in place a shipper on the Komie North section would effectively pay no incremental toll and receive free transportation service from Fortune Creek, despite the fact that the pipeline has an estimated annual cost of service of about $24 million.

The use of rolled-in tolling, it suggested, puts the utilization risk on Alberta system shippers and not NGTL. The board in its report also pointed out that when NGTL was asked about a situation under which it would be expressly at risk for the costs of Komie North it responded that in this instance, it would probably suspend the project and not proceed.

The ceiling on receipt rates limits the cost causation reflected in the rate design, said the board, noting that the evidence showed that that any shipper on the Komie North section would be receiving a significant subsidy. NGTL’s proposed toll treatment for the section would not produce just and reasonable tolls as the cross-subsidization exceeds the NEB’s tolerance for departures from the user-pay principle, the board determined.

It also agreed that there would be no additional revenue from contracts at Fortune Creek relative to comparable contracts at points downstream on the system, despite the extra costs required to build the project facilities. As a result, it concluded the ceiling rate is not appropriate for use on Komie North.

At the hearing, Westcoast also argued that NGTL’s investment policy of building pipelines based on its own assessment of supply potential, rather than producer contracts, gives it an unfair advantage in competition for gas supplies.

NGTL suggested that subsidization from the rate design and building for the 2030 forecast flow of 1.56 bcf per day is

justified as a basin opening toll. It said that a modest level of cross-subsidization reduces the hurdles to develop the basin and is a short-term catalyst to help producers overcome a potentially uneconomic circumstance.

However, the board said that while it acknowledges NGTL’s view that there is some inherent cross-subsidization in many rate designs, it considers the extent and impact of the cross-subsidization as important factors in its decision making.

“For example, the higher the cross-subsidization, the further tolls are from cost causation (user-pay) and the more the risk of underutilization is borne by other shippers,” said the report.

The NEB also said that in the case of Komie North it found “unpersuasive” NGTL’s assertion that the toll ceiling is justified because it affects only three per cent of the entire Alberta system revenue.

“Differences in rates or prices that are small relative to NGTL’s large system and large revenue can still have a significantly disruptive impact on choices made in specific locations,” said the board.

Given its conclusion with respect to the toll treatment for the Komie North section, the board said it was not persuaded that the Komie North section was economically feasible. It also concluded that approval of the Komie North section, as proposed, would have negative commercial impacts on other parties. continued pg 23

industry news

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Redford and Alward promoting west-east pipeline Daily Oil Bulletin Partnership between Alberta and New Brunswick is becoming a natural fit and a proposed pipeline between the two provinces is making fast progress, says Alberta Premier Alison Redford, even though no project has been filed with regulators.

She noted New Brunswick Premier David Alward and other officials had travelled to Alberta to discuss with her and industry leaders the prospect of moving Alberta oil to the East Coast.

“They have come to let us know that New Brunswick is open for business, which means that Canada is open for business, and I’m here to let you know that our government, my government, intends to make the most of that opportunity to reach markets not only abroad but also here at home.”

New Brunswick is home to the Irving Oil Ltd. refinery, Canada’s largest with capacity of 300,000 bbls per day as well as Atlantic tidewater access.

Speaking to reporters in Calgary Tuesday, Alward reiterated his province’s support of a west-east pipeline, saying it would benefit not only Alberta and New Brunswick, but Canada as a whole.

“We’re open for business. We have a world class refinery in Saint John. Certainly we believe the Saint John refinery can act as an anchor [for a pipeline], but certainly allowing Alberta to access the world and diversify [its] markets, that’s great for Alberta, it’s great for producers and, most importantly, it’s great for every Canadian,” Alward said during a press conference at Calgary’s McDougall Centre.

“We have a tremendous resource that right now it’s clear

we’re not getting the value that we should be getting. And by diversifying markets, that will allow that to take place.”

Alward said he had no qualms about Alberta bitumen being refined in, and exported from, his province.

“What we are here for really is to send a message to the producers.... ‘Look, there’s a province that fully embraces the opportunities that exist,’” he said.

“The more we can refine in Canada ... the greater value we can get for our resources and that’s in everybody’s best interest. We’re certainly supportive of export because, again, that opens up new markets to the world and creates the opportunity for better prices.”

Alberta must reach the global marketplace so it can obtain a fair price for its energy, Redford earlier told Insight’s annual Oil Sands Summit.

She has been discussing the idea of a pipeline running west to east with people in Alberta, Saskatchewan, Manitoba, Ontario and Quebec and has found a great deal of support, she said.

The premiers of those provinces have found a lot of common ground on what that pipeline is about: jobs, economic development and maintaining an outstanding quality of life for current and future Canadians, she added.

The world’s energy demand is expected to grow by one-third or more in the next two decades as the developing world’s economies improve and the rise of their middle classes push energy needs even higher, she told the conference.

Redford said that as these shifts occur, energy “haves and have-nots” will come to distinguish the new global economy, and with its resources, educated people, stable governments and effective regulations, Canada is poised to prosper.

“But we need to act on those advantages now and we

must focus on market access,” she said.

Oil production in the United States, traditionally Canada’s main market for energy, is at an all-time high so “it isn’t such a reliable customer these days.”

Canada suffers a double discount from the world oil price because West Texas Intermediate, North America’s benchmark, is itself discounted about $20 from the world price and Canada’s oil is now selling for $30 or $40 less than that, she said.

While Alberta will miss out on around $6 billion in revenue as a result, Canada will forego about $27 billion, she said.

Redford believes a Canadian energy strategy is the answer. “The fact that we’ve been able to build real, meaningfully informative and informed conversations with partners across the country is going to allow us to work through these challenging times because the Canadian energy strategy is about real, practical and effective solutions to problems that are keeping our country from reaching its full potential.”

In addition to a west-east pipeline, routes to the north and the Pacific Ocean are also proposed, and necessary, said the premier.

On Monday, Alward, whose son Ben is a pipefitter working in the oilsands, toured the Fort McMurray region and was pleased with what he saw.

“For me it was incredibly moving -- just the enormity of the development that is there but also the focus, ultimately, on certainly economic sustainability, but very importantly environmental sustainability,” he said.

“The new projects we were able to see south of Fort McMurray that take a smaller footprint sent a very strong message to me, which I believe New Brunswickers will be very interested in as well.”

NEB had concerns about Komie North rate structure cont’d from pg 22 The primary driver behind the Komie North section is a binding commitment NGTL negotiated with Quicksilver Resources Canada Inc. for FT-R service at the proposed Fortune Creek meter station.

The first contract, which was delayed at Quicksilver’s request, is to begin in August 2015 for 10 years, with a seven-year contract starting in August 2018 and a five-year contract in August 2020. Each of the three contracts is for 100 mmcf per day and is not eligible to expire prior to July 31, 2025.

At the hearing, FortisBC Energy Inc. said that the lack of contractual support for the Komie North section demonstrates significant long-term risk relating to utilization of the pipeline over its lifetime and that the contractual support for the

proposed new pipeline is less than for new facilities of other pipeline companies.

It further suggested that there is no proper matching of risk and reward between new and existing shippers and NGTL. The board also found significant risk associated with the contractual support.

“The three contracts for the Komie North Section are with only one shipper, which increases the risk compared to having multiple shippers,” it said.

Based on the significant uncertainty, the board said it was not satisfied that the Komie North Section is likely to be used at a reasonable level over its economic life.

As for the issue of competition, Westcoast argued that the Komie North Section as proposed would virtually eliminate any competition for incremental gas sup-

ply. While its gathering and processing assets are long life facilities, its service agreements with producers are shorter term in nature, which gives producers the option to leave the system to pursue other options when the agreements expire, said the company.

NGTL, though, said it does not believe there is any duplication of facilities, noting that existing gas plants and those currently under construction in the Horn River Basin are either fully or substantially contracted, and that Westcoast’s T-North system is fully contracted at the outlet of the Fort Nelson gas plant.

It also contended that all NGTL shippers would benefit as the project would bring new volumes to the Alberta system, and increase the liquidity and transparency of

the NIT (NOVA Inventory Transfer) hub.

However, the board found that the construction and operation of the Komie North section on the basis proposed by NGTL would entice volumes away from Westcoast by offering an alternative path to market with service priced well below costs. Issuance of a certificate would negatively affect Westcoast transmission (T-North and T-South) and gathering and processing facilities, as well as Westcoast shippers, it said.

In its report, the board said it typically favours competitive outcomes. In the board’s view, “healthy competition in northeast B.C. would be promoted by pricing consistent with user-pay, economic efficiency and proper price signals to the market.”

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industry news Prosperity Fund could eliminate B.C. debt by 2027 cont’d from pg 6 a government, we recognize the importance of that Fair Share continuing on and try to either put it in legislation or get rid of the 2020 deadline date.

“Because if we’re going to continue growing with the LNG, we need to have the spin-offs coming back into our area where the bulk of that strain is going to be felt.”

Sean Thomas agrees.

As president of the Fort St. John Petroleum Association and HSE coordinator for local service provider Trans Carrier Ltd. (TCL), Thomas has a good view of the local impacts of the natural gas industry in B.C. and what could be coming down the pipe with LNG. One of his concerns is how the region benefits from the work being done when not all of the workers actually live in the area.

“We’ve got people working here that aren’t from here. They’re sending their paychecks down to Kelowna, Williams Lake, Vancouver Island,” he said.

“They’re taking that money and those tax dollars down south with them.”

Thomas suggests that has to be taken into account when the government decides how they will use those Prosperity Fund dollars because those individuals could be using local infrastructure without contributing to maintenance and improvement.

“If it got to the point where people couldn’t work out of here or couldn’t be here, they won’t work out of here,” he said.

The story is similar in the Northern Rockies Regional Municipality (NRRM), the jurisdiction that includes Fort Nelson, apart from the fact that the community has never received Fair Share grants.

Mayor and council is currently negotiating with the Province to find a way to fund a community development plan that will allow Fort Nelson to meet the needs of the oil and gas industry and its workers now and in the future.

Laurie Dolan is a member of that council.

Also, as a former executive director of Energy Services BC (ESBC) and a current employee of Northern Lights College (NLC), not to mention a lifetime northerner, she has a unique perspective on the issues surrounding LNG. “Anything that happens in the province, I like to see the whole province win,” said Dolan, discussing the Prosperity Fund, which is designed to allow the entire province to benefit from the work that will largely be done in the northeast and the northwest.

“But at the same time, the infrastructure that’s needed to produce all this at the LNG facility starts long before [that],” she continued.

That has been something of a mantra in Fort Nelson.

“The work that’s being done takes thousands of people, lots of flights landing on our tarmac and [lots of trucks on] our roads,” said Dolan. “And a lot of people still don’t understand that the LNG can’t happen without the development up here. … It still has to be respected that these things are happening in our small community. And it’s left to our taxpay-

ers to build infrastructure. And so that’s always a concern to us. Always.”

Lori Ackerman, mayor of Fort St. John, is uncertain what the Prosperity Fund could bring to her community simply because it is still unclear what the program will actually be when it is up and running.

It has been reported that the fund will consist of royalties, corporate taxes and a new LNG tax that is still under construction, but Ackerman said that hasn’t been made clear at this point.

“To be fair, I would like a lot more detail on this,” she said.

“All things being equal and the Fair Share agreement continues, there are needs within this province that need to be addressed,” she added, noting that the drop in natural gas prices has considerably reduced provincial revenues and the ability of the government to implement new programs.

One potential benefit of the emerging LNG industry that is fairly easy to quantify is the impact on employment.

While Clark was announcing the Prosperity Fund plan, her government was also releasing a fact sheet stating that the construction of two large LNG plants, three small LNG plants and associated pipelines would create 39,000 annual jobs over a nine-year construction period, plus an additional 75,000 jobs when the facilities are finally operational.

Employment due to construction is expected to include 11,400 direct jobs, 22,1000 indirect jobs and 5,900 induced jobs, mostly in communities where construction staff will be enjoying local hotels, restaurants and entertainment.

Residential home construction and renovation in those communities is also expected to translate into new employment as people gravitate toward job opportunities related to LNG. It is expected that LNG will account for 2,400 direct jobs, 61,700 indirect jobs and 11,100 induced jobs when the plants are up and running.

“The service sector around here should see an increase in their business to try to get more wells drilled, get facilities built, to be able to fill that line,” said Thomas, discussing the employment benefits for the Fort St. John area.

That opportunity is coupled with the labour shortage that is confronting the oil and gas industry across western Canada.

Thomas admits that the local service sector is stretched thin.

“But, at the same time, when you look around town, there are a lot of companies that aren’t working to full capacity right now either. So, kind of spreading the workload is a good idea,” he said.

“I know a lot of business owners don’t want to hear that. But there’s no reason that we’re run off our feet here and the next guy’s sitting with [idle] trucks. And so that’s usually our first option, is to explore and partner up with other companies and local companies, make sure that we’re all running on the same program and confident and familiar with their equipment and their staff. Use their staff. And then, if we do come up with a labour shortage, that’s something that we’ve talked about in the past.”

Thomas noted that some companies are tackling the problem by renting or buying “crew houses” that can accommodate workers from other communities who come to Fort St. John for two weeks stays before returning home for a week.

“We’ve already exhausted our local work pool,” he said.

“The only downside to that is people that make that money, they take that money and those tax dollars down to where they live. So, the city itself doesn’t get the benefit.”

“Why people live where they live is a personal decision,” said Ackerman.

The upshot is that many British Columbians – or Canadians overall – may not choose to move to northern B.C. where employment opportunities are plentiful, although they may not have those opportunities in their hometowns. A perfect example is the fact that northeast B.C. has a shortage of welders, but there is an unemployment rate of about 30 per cent among welders in the Lower Mainland.

“Where the jobs are is well known,” said Ackerman.

“Government can create policies and programs that be the incentives for those people to move. As our community grows and the knowledge of the lifestyle opportunities that go along with the career opportunities become better known, we will continue to see growth.”

Training local talent is the other part of satisfying the labour demand.

“The biggest part of that is trying to anticipate the need for more skilled workers,” said Bernier. “As we go forward, the government needs to continue investing in the local trades, the local education system, to make sure that we’re building people for tomorrow’s jobs.

“If the LNG systems are going to go through, we have to anticipate what the demands on the workforce are going to be. And we can’t wait until those jobs are being offered and people aren’t trained for them. We have to start training now.

And to do that we need investment to take place.”

Bernier remarked that some of that investment should go toward trades program at NLC, which has campuses in Dawson Creek, Fort St. John and Fort Nelson.

“I think everybody’s talking about it,” Dolan said of the labour issue.

“It affects everybody. It’s not only the service sector. It’s the support sector,” she continued, adding that bringing workers to Fort Nelson also means building new houses and recruiting new doctors.

“They’re going to need grocery stores,” she added.

That is also true if local youth choose to stay and raise families in Fort Nelson, which is obviously something Dolan would like to see.

“Being a northern girl, we need to start in the North,” she said, noting that there are initiatives such as funding for trades training through the BC Jobs Plan that can help born and bred northerners live and work in the North.

“We want accessible training,” Dolan continued. “We want training to happen here. It’s a long ways south. And if people

in the south don’t understand that, then they need to take a drive up here just to find out how that happens.”

Accessible training could even mean a University of Northern British Columbia (UNBC) presence in the Northern Rockies.

“Anything’s possible,” said Dolan.

“When the activity starts back up here, players and partners come from everywhere. And for the good of it.”

Increasingly, those players and partners include Asian-based companies that are investing heavily in B.C.’s natural gas industry.

Another fact sheet released by the government on Feb. 12 noted that over the past year Mitsubishi Corporation has invested $2.9 billion for a 40 per cent stake in Encana’s Cutbank Ridge assets, Nexen has signed a joint venture deal with Inpex Corporation worth $700 million, China National Petroleum Corporation (CNPC) has invested about $1 billion in Shell Canada’s Groundbirch operation and Petronas put over $1 billion into Progress Energy’s Montney assets.

Petronas has since acquired Progress, after announcing plans for their Pacific Northwest LNG facility.

The Nexen-Inpex deal also includes an LNG component, as the two companies are working together in the Horn River Basin, Liard Basin and Cordova Embayment with the possibility of exporting that resource in liquid form.

Additionally, Shell is working with Canadian subsidiaries of Mitsubishi, PetroChina Company and Korea Gas Corporation (KOGAS) on the LNG Canada project.

Encana is no longer involved in LNG export projects since selling their share of Kitimat LNG to Chevron Canada at the end of December, but their partnership with Mitsubishi still offers economic and social benefits to the province and the Peace Region specifically.

“We estimate that investments over the first 20 years of the partnership will create about 14,000 ongoing jobs across Canada,” said Doug McIntyre, Encana spokesperson, adding that 10,000 of those jobs would exist in B.C. “With the amount of jobs created in some of these communities,” he continued, “it certainly gives folks living there the option to stay in the communities that they grew up in and raise their families.

“So, there’s that social benefit as well.”

“What it’s showing us is that we really need to start turning our heads to the fact that this is a world economy, this is a world issue,” Bernier said of the level of foreign investment.

“That’s pretty obvious when you have hundreds of millions of dollars being spent here in the area by these overseas companies.”

“Investment, wherever it comes from, shows confidence in the business environment,” said Ackerman.

“Our job as a community will be to stay focused on our official community plan and continue to build an attractive community within a financially sustainable framework,” she added.

“As local government, that is a fine line we must walk.”

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Oil-by-rail plan could solve market access dilemma cont’d from pg 11

“I have a hard time seeing how it will make economic sense.”

G7G is suggesting the railway could move five million barrels of oil per day and also transport other products such as grain, lumber and potash, as well as the products of mining operations in B.C. and Yukon.

Arsenault said that moving that volume of oil alone would require 33 long trains every 45 minutes.

“The scale of the oil movements they want to put on that railway means it would have to be a purpose-built railway. As soon as you start putting other products on it, its capacity is reduced,” he added.

“You can’t say you’re going to build a purpose-built railway and then start putting a bunch of other products on it without affecting its capacity.”

Additionally, the Alberta Energy website indicates that oil sands production is only expected to reach 3.5 million barrels per day by 2020, which is 1.5 million barrels per day less than the proposed capacity of G7G’s railway.

The proposed capacity of Northern Gateway and Trans Mountain are both less than one million barrels of oil per day.

Arsenault doesn’t understand the logic behind the rail plan.

“If you’re going to go through all the trouble of securing a right-of-way, why are you going to design your pipeline to handle 600 to 800 thousand barrels if the demand is three million or five million?” he said.

“Part of the problem with the railway is, if you’re going to build it, you need to use it to make it financially viable.”

Streeper has trouble with the numbers as well.

“The figures don’t add up,” he said.

Part of the difficulty Streeper has with the plan stems from the volume of train traffic, which he believes would require separate northbound and southbound tracks, an unprecedented idea to the best of his knowledge.

“You’ve pretty well got one train sitting all the time on the siding while the other one goes by.”

Streeper has concerns about the cost as well. It has been reported that a single-track line would cost $8.4 billion to construct and a double-track line would cost $10.4 billion.

Northern Gateway is only expected to cost $5.5 billion, but would also move just a fraction of the proposed volumes to be transported by the UNRailCo line at 525,000 barrels per day.

“The cost is just horrendous,” said Streeper, even suggesting that the proponents might not yet appreciate what the full cost could be.

“You have a vast amount of mountain ranges,” he continued, discussing his numerous trips between Fort Nelson and destinations in both Yukon and Alaska

Northern Lights College’s Simulated Wellsite Training Facility in Fort St. John sits next to the railroad that winds its way through the city.

It is symbolic of the growing connection between the oil and gas industry and the rail transport sector, especially if plans to ship Alberta bitumen by trains are successful.

JAMES WATERMAN PHOTO

during which he has seen the rough terrain the new railway would have to cross.

“And to get trains up through that is going to be horrendous.”

Snowfall in western Yukon and Alaska is another problem.

“The removal of snow off that line is going to be horrendous,” said Streeper.

“Do I think it’s going to materialize? I would be surprised. We are looking at some massive funding.”

The project overview on G7G’s website suggests that the five million barrels of oil per day number might simply be to demonstrate the growth potential of the rail option compared to the limited capacity of a pipeline.

The overview also notes benefits to smaller producers and shippers that likely wouldn’t secure contracts with pipeline operators, but could utilize a railroad on an as-needed basis.

Richard Durocher, the mayor of Watson Lake, is focusing on the potential economic benefits that the railway could bring as far as moving products other than oil, particularly lead and zinc from a Selwyn Resources mining project on the border of Yukon and the Northwest Territories, just north of Watson Lake.

“It’s probably one of the largest leadzinc deposits every found,” Durocher said of the mine, adding that a lack of transportation infrastructure has meant delays for that project.

“Southeast Yukon is wealthy with resource deposits,” he continued. “And one of the big key reasons that a lot of it hasn’t been developed is because of the transportation costs.”

Durocher believes that a new rail line

through Watson Lake would be a benefit for that project and an economic benefit for his community, even if the main objective of G7G is shipping oil.

However, he hasn’t yet had any conversations with G7G about the idea.

“But I would love to,” he said.

“I’d love to invite them here to talk to us.”

Environmentally, UNRailCo is being touted as a better option than the proposed heavy oil pipelines because much of the opposition to Northern Gateway often involves concerns about oil tankers off the coast of Kitimat, a port that doesn’t have the same history of tanker traffic as Valdez.

“Valdez has seen oil tanker traffic since the 1970s,” said Chief Ronald Kreutzer of Fort McMurray First Nation.

The volume of traffic has been decreasing along with the volume of oil from Alaska’s North Slope.

“This proposal would simply mean replacing the declining supply of Alaska crude with a new supply of Alberta crude,” added Kreutzer.

“We believe this approach has a greater chance of obtaining social license from local communities than other competing scenarios.”

Streeper doesn’t think a railway is safer than a pipeline.

“Way more dangerous. There’s no doubt about it,” he said.

“Pipelines are the safest transportation mode there is.”

Streeper spent 35 years in the fuel transportation business, a period during which he saw numerous incidents of train cars leaving a railway siding with hoses

still attached to the bottom because the fuel was still flowing.

“Fuel spewing out the bottom because they pulled the hose apart,” he said.

According to Streeper, that is just an indication of the potential for human error causing accidents when people have to physically handle the product as much as they would with a railway compared to a pipeline.

Streeper believes that a pipeline is the best way to move Alberta oil to the coast for export to Asia.

However, he lacks confidence in Enbridge and their Northern Gateway plan.

“Enbridge did it wrong,” said Streeper, suggesting that Enbridge made mistakes by failing to discuss specific concerns with opponents of Northern Gateway and actually reducing confidence in the project by adding millions of dollars worth of safety measures in response to a recent oil spill in the United States.

“Saying, ‘We did cut our safety short by $500 million. Now we’re going to put it in.’ And you say, ‘Well, what else did you cut short?’ This is where they’ve done wrong,” Streeper continued.

“In their consultation [with] the public, they should be coming forward and saying, ‘What don’t you like about it? Don’t say you don’t like the pipeline. What don’t you like?

Let’s see if we can sit down and negotiate and engineer everything that you people don’t like.’ And there’s one main thing people don’t like. And that’s a spill.”

Streeper isn’t particularly enthusiastic about Kinder Morgan’s Trans Mountain expansion either.

“I would prefer the northern run a little bit more.”

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LNG Canada receives export license james waterman Pipeline News North

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LNG Canada is one important step closer to coming to fruition after the National Energy Board (NEB) approved the export license for the liquefied natural gas (LNG) project on Feb. 4.

“A key milestone in the project for LNG Canada and a step in the right direction for getting abundant North American gas to the growing economies of Asia,” said David Williams, Shell Canada spokesperson.

Shell is leading the charge on the project as managing partner of a group that also includes Canadian affiliates of Asian companies Mitsubishi Corporation, Korea Gas Corporation (KOGAS) and PetroChina.

LNG Canada has been approved to export almost 33 trillion cubic feet (tcf) of natural gas from British Columbia to Pacific Rim markets over 25 years, the maximum annual export volume being just over 1.0 tcf per or 3.23 bcf per day.

The NEB approved the application because it was determined that the export project would not cause an issue for domestic natural gas consumption.

Williams noted that the project is moving along as planned with this latest announcement from the NEB. “The project was announced in May last year,” he said, adding that it was announced in June that TransCanada had been contracted to build the Coastal GasLink pipeline to link Shell’s assets in northeast B.C. with the proposed liquefaction and export facility at Kitimat.

The export license application was submitted in July.

“Next we’re looking to file a project description,” Williams continued. “And that’s what really kicks off the regulatory process, the environmental assessments, all those sort of things.

“Then you move towards investment decisions.

environment

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Fossil fuels and renewables important parts of Canada’s energy mix cont’d from pg 18 “Our business really does have three legs to it,” said vice president of finance and CFO Debbie Stein.

“We have the power side,” she continued. “We have the gas processing. And then we have the utilities.”

Stein explained that AltaGas began its life in the natural gas business when founder David Cornhill put his $37,000 to work building a network of small processing plants.

“We’ve been in the power business since 2001,” she said.

That was when the oil and gas industry thought the Western Canadian Sedimentary Basin (WCSB) was all but dead and domestic sources of natural gas were a thing of the past, prior to the discovery of massive shale gas deposits throughout North America and the rise of horizontal drilling and hydraulic fracturing.

“We decided that we needed to diversify away from the WCSB,” said Stein.

So, AltaGas ventured into the power business with the acquisition of coal-fired power generation in Alberta.

“We had such a significant carbon footprint,” said Stein.

“We like the power business. We understand the power business,” she continued, adding that their power business in Alberta had been closely tied to the natural gas business until recently.

“We looked at where the long-term trend was for power generation in North America and … thought that moving into renewables would give us a foot in the door in terms of greening our world, as well as reducing our own carbon footprint because of the [coal-fired generation] that we owned,” said Stein.

“Everyone was on the bandwagon around developing wind farms.”

Stein recalled that a lot of people were starting to set up meteorological towers to take wind measurements and sell wind projects, while BC Hydro was developing a new power plan and looking for opportunities with Independent Power Producers (IPPs).

“We partnered with a couple of small developers that had put up [meteorological] towers and had done wind studies,” said Stein. “We partnered up with a developer that brought us the Bear Mountain project.”

AltaGas saw the project as a great opportunity to gain experience and expertise operating a wind farm, one that just happened to be located in the heart of natural gas country near Dawson Creek, British Columbia.

It was the first wind farm in B.C. “Really did put us on the map in British Columbia,” said Stein, adding that it allowed the company to develop good relationships with BC Hydro and the B.C. government.

“Prior to that, we’d had very little business activity in British Columbia.”

That was the beginning of their renewable energy business, which continued to grow in 2008 with the acquisition of run-of-river hydroelectric projects under

AltaGas is commonly known for processing, storing and transmitting natural gas, but it is also involved in the renewable energy sector.

The company got its start in that industry with the Bear Mountain Wind Park near Dawson Creek, British Columbia, choosing to move that direction to offset carbon emissions from their coal-fired power generation station in Alberta.

ALTAGAS PHOTO

derstand the role that renewable energy development simply known as the Northare becoming an increasingly important west Projects. part of Canada’s energy mix, but they “Those were actually owned by Nova also stress that the age of fossil fuels is Gold,” said Stein. “And Nova Gold got into some trouble. And we bought those far from over. projects from them. We took them from “Investment in renewable power is being in development phase to where a key component of Suncor’s climate change action plan,” said Fisher. they are now, which is almost ready to deliver power to the B.C. grid.

“We are committed to the safe and re“Back in 2008, we were talking about sponsible development of renewable energy generation by investing some of our renewable energy and we saw that the world would be looking for clean energy. revenues in bringing along new sources And saw a way to reduce our own carbon of energy for the future,” she added, sugfootprint. And thought these run of river gesting that the success of the renewable projects were ideal.” energy sector can actually be driven by Stein explained that research and desuccess in the oil and gas industry when velopment in the renewable energy space revenues are invested in that manner. isn’t the role of companies like AltaGas. Thompson also sees the synergies “The role between fosfor a compasil fuels and “The downside with the ny like ours is renewable really putting renewable energy is it’s not energy. the pieces “I think anytogether,” she one that has 100 per cent available 100 in their minds said. “Understanding that we’re all per cent of the time.” the various going to be elements powered by that impact wind or solar – Don Thompson, Enbridge energy marare apparkets overall, ently willing to be it oil, natural gas, propane, renewable not drive their cars when it’s not sunny power, coal power, any form of energy. or use their toaster when it’s not windy,” They’re all connected. And our ability he said. to understand how these markets work, “Wind doesn’t always blow and water understand what drives the supply and doesn’t always flow,” added Stein. demand. And be nimble enough to take “If you want clean, that’s all well and advantage of opportunities as they arise good, but if you only want pure wind and and weigh in with our expertise in running solar and water, you’re going to give assets and building assets.” up reliability,” she continued. “So, what Suncor, Enbridge and AltaGas all unsystems or what technology or what fuel

do we use to support the reliability factor?

Because I don’t think anyone who turns on their light is willing to say, ‘Oh, well, the wind isn’t blowing today. I’ll do without electricity.’”

Thompson believes there has to be a combination of renewable energy and reliable baseload energy.

“We come by this opinion honestly,” he said. “Because we’re a 24/7 load, which basically means our pipelines have to be able to run 24/7. So, we need a reliable energy mix to be able to do what we do.

“The downside with the renewable energy is it’s not 100 per cent available 100 per cent of the time.”

The other half of the energy equation appears to be natural gas.

“Where we see a role for natural gasfired generation is really filling that gap in terms of back-up and backstopping renewable energy,” said Stein.

“And we have several examples of that in our portfolio,” she added, pointing to 35 megawatts of generating capacity in Alberta as an example.

Interestingly, wind energy is becoming competitive with natural gas in terms of lowest cost power generating options.

“Wind is competitive with natural gas, which, probably, five years ago, would have sounded like heresy,” said Thompson.

“We need a stable mix,” he continued, “but we also need to realize that the cost of power is a critical input into our competitiveness. So, it’s a great happening that we have renewable pricing coming down, being competitive with the natural gas.

“Because I think that is the measure of a sustainable energy industry.”

28

• PIPELINE NEWS NORTH

FEBRUARY 15, 2013

special feature BEEFING UP FOR THE BOOM Fort Nelson getting ready for LNG

Northern Rockies Regional Municipality mayor Bill Streeper (left) discusses the oil and gas industry in the Fort Nelson area with Enbridge representatives during the Fort Nelson Energy Expo last September. Streeper is hoping to find a way to upgrade the local infrastructure in anticipation of the liquefied natural gas industry boom.

JAMES WATERMAN PHOTO

james waterman Pipeline News North Bill Streeper is taking the Fort Nelson story to Vancouver this February.

As mayor of the Northern Rockies Regional Municipality, the home of Fort Nelson and the prolific shale gas resources known as the Horn River Basin, the Liard Basin and the Cordova Embayment, he is traveling to the big city at the end of the month to attend the first international conference solely devoted to the business of producing and selling a fuel known as liquefied natural gas (LNG).

“There will be other communities there and there will be the producers there,” Streeper said as he began to explain his reasons for attending the event.

It is obvious that Streeper has felt some frustration over the fact that so much of the conversation around the emerging LNG export business in B.C. in the provincial media and provincial government publications has been focusing on the northwest, the area where the natural gas will be liquefied before leaving B.C. Forgotten in that conversation is the geographical source of the natural gas and the small town at the centre of it all.

“You can do whatever you want on the coast,” said Streeper. “You can build all the plants you want. If you don’t have the source of gas, the rest of it is not going to work.

“The Northern Rockies is probably the most dominant area for supply of LNG gas.”

Streeper backs up his claims that the Horn River Basin, the Liard Basin and the Cordova Embayment together rival any other natural gas resource in the world with numbers straight from reputable sources such as the National Energy Board (NEB).

“And this can be a very big key to what

is happening as far as LNG and what is happening for the province of British Columbia,” he said.

Fort Nelson is the gateway to that rich resource, a growing hub for the producers and service sector companies that are already extracting natural gas from the Horn River and exploring the Liard and the Cordova, but it hasn’t been an easy road for the northern community.

Its difficult story dates back to the early seventies when the incorporation of Fort Nelson by the provincial government left the major industries beyond the municipal boundaries and beyond the right of taxation by Fort Nelson.

Consequently, tax revenues were insufficient for the community.

When Fair Share was introduced to help municipalities in the Peace River Regional District (PRRD) pay for infrastructure improvements, Fort Nelson didn’t receive any of that funding despite experiencing similar circumstances where oil and gas industry activity takes place in rural areas beyond taxation by the municipality, but also puts a strain on municipal infrastructure that is felt in the form of dollars and cents.

Streeper discussed the situation at the local airport as an example of why this has been a problem for Fort Nelson.

“The quickest increase in airport traffic of any tier two airport in Canada,” he said.

That has been a result of oil and gas industry activity in the region.

“The maintenance and the upgrade on the airport is borne by the citizens of Fort Nelson, not by industry,” he continued.

The federal Airport Capital Assistance Program (ACAP) only provides funding based on regular airline traffic.

“They give us money for that runway,” said Streeper. “And they give us a grant for where that airplane parks. They don’t

give us anything for any other traffic.”

Streeper explained that that funding would be adequate if the only traffic was the usual small passenger airplanes, but oil and gas industry companies are now using the airport for much larger aircraft that cause a greater amount of wear and tear on the runways.

“Now that that has come about, the airport terminal isn’t big enough, the runway isn’t big enough, the parking lots aren’t big enough,” he continued.

“They’re using the airport. And it was funded by the regional municipality. So, the first thing we did is we introduced the landing fee for these charters … and that is the only income we have for the increased traffic.”

Industry response to that move has been favourable.

“This is something that other towns have done,” said Streeper. “And they realized that they increased the traffic and they’re going to have to pay something for it. But the fee we get is actually too little, too late right now. If we had have started this four or five years ago, we would have been a lot better.”

Fort Nelson has been spending that money on improvements such as runway repairs and adding bathrooms to the airport.

“We’re not making nothing off it,” Streeper said of the fees. “We’re just trying to get the airport up to an acceptable standard.”

Fort Nelson attempted to solve the problem by pursuing the creation of a regional municipality, which took place in 2009 with the incorporation of the NRRM, but there was still no resolution to the infrastructure cost issue.

“That forced us to go to the provincial government and say, ‘Look. With these three major gas deposits coming on and the [number of] people that are coming in for it, we need help,’” said Streeper.

Street maintenance is a big issue, as is housing, particularly considering the fact that Fort Nelson is unable to expand at the present time.

“All the land that we can expand into is owned by the provincial government,” said Streeper. “In order for us to access that land, we have to buy it from the provincial government.”

If that were to happen, there would also be the cost of expanding the water and sewer systems, installing new streetlights and paving new streets in order to create a subdivision.

“It is not my [intent] to go to the taxpayer to increase their taxes to pay for subdivisions for new people to move in to,” said Streeper. “Once the people move there, they will be paying taxes on the property. But it’s a chicken and egg thing.

“We’ve gone to the provincial government and want them to do some old land development like they used to do. And

they said, ‘Oh, well, it’s too risky.’ Well, you want us to do it? It’s too risky for us.

So, we’re in that situation right now trying to get that all done.”

NRRM took a hard look at all the areas that need improvement within Fort Nelson, problems that range from inadequate recreation and fire hall facilities to the state of the Alaska Highway where it runs through town, and determined that the community requires millions of dollars worth of upgrades.

“Then we went to the government and said, ‘Look. We’ve got to get this community up to a standard to attract employees.’”

The problem according to Streeper is that the oil companies are encouraging their employees to live in Fort Nelson, but the accommodations simply aren’t available.

“There’s nowhere for the people to move,” he said. “We don’t have a complete recreation system here. We don’t have facilities that are attracting the new workers.”

Streeper feels it is the responsibility of the provincial government to help NRRM address those issues since they receive the revenues from land sales and natural gas royalties and Fort Nelson is so important to the future of the oil and gas industry in the province.

“And the government agrees with us,” he said. “They said, ‘Yes, something’s got to be done up there.’”

NRRM and the Province are now working toward completing a Memorandum of Understanding (MOU) on a community development plan.

“It’s just a matter of how do we get the money to do this,” said Streeper.

The Province has told NRRM to get creative.

“We’ve got some creative plans,” said Streeper, who is confident that NRRM will be able to work with the provincial government to achieve their goals now.

“Hopefully, we’re going to have more final stuff in place by the end of [February],” he added.

“The negotiations are quite open. The ministers are quite receptive to us. …

And the way it’s progressing, I think we’re going to see a very bright future for the Northern Rockies in the years ahead.”

When Streeper arrives in Vancouver for the LNG conference, he will be talking about how municipalities, provincial governments and the oil and gas industry can work together to achieve a common goal, which includes building the LNG industry in the province.

“Our goal,” said Streeper, “is to build a community no better than any other community in B.C., but par with the communities of B.C., where you can come, you can have a very good job, a community that you can raise a family in.

“To supply a quality of life that people expect in today’s age.”

FEBRUARY 15, 2013

careers

PIPELINE NEWS NORTH •

29

GOOD CONVERSATION Industry Training Authority talking trades this winter james waterman Pipeline News North

employers prior to the recession,” said Evans. “And we’re currently running at about 9,000 employers.”

All too aware of the looming labour The research also indicates that it has shortage and growing demand for skilled historically taken approximately ten years tradespersons facing British Columbia, for the number of working apprentices to the Industry Training Authority (ITA) has return to pre-recession numbers in similar been running a series of events in key situations. communities throughout the province in “But the problem is we don’t have ten an attempt to address the issue. years,” Evans added. “We’re really exThe ITA has already held a “community pecting the labour shortages to be biting dialogue” session in Nanaimo on Jan. down hard [in] 2015-2016. So, we really 15 with another to follow in Kamloops on need to have a full court press in terms of March 12. encouraging employers to step up and do “The community dialogues are intended some training.” for the ITA senior management and our That is why ITA is also conducting a board of directors to increase our sensitiv- pair of webinars to teach employers about ity to the particular nuances of need when the apprenticeship process on Feb. 19 it comes to training,” said Kevin Evans, and Feb. 27.

CEO at ITA. However, Evans suggested that aspir“They’re all quite different,” he contining tradespersons have to take responued, referring to the various communities sibility for finding their apprenticeship that make up the province. opportunities.

“The northeast is very different from the “Young people who are looking to start northwest, and even the central interior a career in the trades, the first thing they and so forth. This is a large province need to do is get out on the street and where a cookie cutter approach to things start knocking on doors,” he said. like skills training is not very advisable.”

“The first step is to find an employer ITA is also hosting four events to recwho’s prepared to sponsor you and take ognize and celebrate employers who hire you on. We need to see more of that.” apprentices, which began with an event Still, ITA is trying to find new ways to in Terrace on Jan. 24. Similar events are help apprentices, including looking into scheduled for Fort St. John on Feb. 12, where gaps in support for apprentices Kelowna on March 16 and Victoria on may exist and developing solutions to April 8. those problems.

“They really are the lifeblood of the One idea they are considering is industry training system,” Evans said of launching a job board specifically for businesses that work with apprentices. apprentices and employers considering “We hope to also raise the fact that we hiring apprentices. need more employers to be hiring appren“But I think that, in the long run, we’re tices,” he added. going to get more results by convincing Evans noted that research has shown employers that it’s good business to hire that only one out of every five employers apprentices and by encouraging those hires the journeyperson who is necesapprentices to get out there and do what sary for that business to also take on an you did when you got a job. And that’s apprentice. knock on doors,” said Evans.

“That’s not sustainable,” he said. “We’re Evans explained that the labour shortsimply not age facing going to have B.C. is due to “We’re seeing a lot of the number a combination of journeyper- economic activity that’s on of demographsons that ics and activity we’re going the natural the horizon, particularly in inresources to require in and future years energy sectors. the North.” with that kind “We’re not of ratio. getting any “We’re younger,” he – Kevin Evans, ITA hoping that said. “You by celebrating take a look the people that are doing it and showcasat the average age of your construction ing why they’re doing it … we can encour- worker today – or your miner or your oil age more employers to step up.” and gas worker – and they’re getting up Evans explained that the apprenticethere.” ship program has also taken a hit from A lot of those workers will soon be the recent recession because apprenretiring. tices are the first to lose their jobs and “We’re seeing a lot of economic activity the last to return to work under those that’s on the horizon, particularly in the circumstances.

North,” he added.

“We were running at about 11,000 That activity includes liquefied natu-

ral gas (LNG) export projects that will require the construction of pipelines from the northeast to the northwest and liquefaction facilities on the coast, not to mention exploration and production in shale gas plays of the Montney, Horn River Basin, Liard Basin and Cordova Embayment.

Along with the natural gas activity has come the recent resurgence in forestry and mining, as well as the potential for major projects such as BC Hydro’s Site C and Enbridge’s Northern Gateway pipeline to move Alberta oil sands bitumen to an export hub in Kitimat, B.C. “We’re going to have some shortages and we’re already seeing it in some areas,” said Evans.

“That great sucking sound that we heard was the oil sands taking a lot of skilled tradespersons out of British Columbia’s forestry sector,” he continued.

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“Now that forestry is starting to come back and mining is certainly bustling along, and further expansion in oil and gas and energy, it’s a perfect storm.”

Evans suggested that encouraging homegrown talent to enter the trades is important to building a province where community comes first.

“Are we building pipelines and LNG plants? Or are we using them to also build community?” he asked.

“I think most British Columbians would say that’s been our history – let’s use our economic development to build sustainable communities. For that to happen, we’ve got to be training people who are in the north to be able to work and live in the north, for example.”

That applies for any region of the province. continued pg 30

30

• PIPELINE NEWS NORTH

FEBRUARY 15, 2013

careers

ITA focusing on attracting youth to trades cont’d from pg 29

“Somehow or other, we will find workers,” Evans continued, adding that the question is whether those workers will be born and bred British Columbians, new Canadians or temporary foreign workers.

“There is a global mobility now of labour force, particularly for some of these mega-projects like LNG,” he said. “Right now, there’s a lot of LNG construction activity in Australia, but that’s starting to level off. And some of those LNG workers, with their specialized skills, are going to come to where the next LNG activity is. And it appears that might be in northwestern B.C. “There will be some international mobility,” he added, remarking that the preference of ITA and the provincial government is that British Columbians get the first crack at those jobs.

Although labour mobility has become easier on a global scale, labour mobility

SaleS aSSociate

Deadline: February 28, 2013

within B.C. is still a problem, particularly winter were preceded by a similar seswhen it comes to convincing young peosion in Dawson Creek in September. ITA was encouraged by the “standing room ple from the Lower Mainland to relocate to the north. only” attendance at that event in Daw“Skills training is part of it, but we also son Creek and the first winter session in have to have a workforce that’s prepared Nanaimo. to go where the work is,” said Evans.

“That shows there’s a great deal One example of this problem is that of community interest,” said Evans. there is a “And some shortage of of the mes“We are stepping up our welders in the saging that northeast, but coming efforts to provide training was out loud and unemployment among clear was opportunities in high welders in the we’ve got to Lower Mainget to our schools.” land is almost children at a 30 per cent. younger age “So, why and acquaint – Kevin Evans, ITA aren’t they them with the opportunities going to that exist in the trades. where the work is?” said Evans.

“As a result of that, actually, we are The public dialogues taking place this stepping up our efforts to provide training opportunities in high schools so that they can get a step up on their apprenticeship before they actually even graduate from

high school.”

Attendees also discussed financial issues associated with apprenticeships.

“For example,” said Evans, “there’s a delay in getting unemployment insurance if you’re taking your technical training.

That has come up quite frequently.

“It’s become apparent to us that there’s a lack of general understanding about the trades and about apprenticeship training. So, it’s really a great opportunity to provide some education. And it’s really heartening to see that so many people are interested and want to learn more about it.”

However, Evans admits that it is going to be a tough fight trying to attract young people to the trades.

“I think you’re going to find with the demographics that there’s going to be increasing competition between the trades and the technologies and the professions to try and win over the hearts and minds of young people, because there’s a smaller pool to choose from,” he said.

“The fact is we need highly skilled people in all of those areas.”

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