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

FEBRuary 24 • 2012

h t r o N

• Free

in this issue: INTERSECTING SECTORS - PIPELINES, MINES & TREES • COOKING WITH GAS - B.C.’S NATURAL GAS STRATEGY • RISLEY EQUIPMENT - MUSIC TO OUR EARS •

CONSTRUCTION OF KINDER MORGAN’S ANCHOR LOOP PIPELINE PROJECT IN BRITISH COLUMBIA - Photo COURTESY OF KINDER MORGAN 32530


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PETROLEUM ASSOCIATION - HAPPENINGS


industry news THE BRIGHT SIDE OF CHEAP GAS james waterman Pipeline News North Everything is all about perspective. As natural gas producers throughout North America are lamenting record low prices for their commodity, Neil Shelly, Executive Director of Alberta’s Industrial Heartland Association, is cautiously enjoying the benefits that those low prices are bringing to industries that turn natural gas into other products. “It’s kind of a double-edged sword,” Shelly admitted. “On one side, low gas prices – it’s bad for the treasury and bad for some of the upstream companies. But on the other side of it, natural gas itself – methane – is actually a feedstock for … different products and applications.” Products ranging from methanol to fertilizer are all created from natural gas, especially when that resource is coming cheap. Recently, natural gas prices have actually fallen as low as below $2.00 per gigajoule in Alberta, but typically hovering just about that mark at the present time. “In Alberta, we used to have a fairly robust industry based upon methanol, and methanol’s kind of a beginning product. And then you go on and make other products out of it,” said Shelly. “Back when the price of natural gas spiked, the two operations we had – one in Edmonton and one in Medicine Hat – both shut down. With the prices coming back now, the one in Medicine Hat, they’ve actually taken out of mothballs now. So, it’s up and running again. And we’re getting some inquiries from companies that are starting to ask questions about investment opportunities in the area. “The same applies for fertilizers as well,” he continued. “Ammonia and urea fertilizers. They use a large amount of natural gas and they’re very sensitive to the price of natural gas.” Shelley remarked that there is some debate about the future of natural gas prices, but he is certain that the situation won’t improve for the producers any time soon. “We’re looking at long-term, sustained, suppressed prices for natural gas in western Canada,” he said.

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“What that’s doing is that’s bringing some interest back to the area of companies that produce products that use a large amount of natural gas. And so it could spur on some industrial activity and development in the area because of that.” “Where is the floor price for natural gas going to settle out at?” he continued, referring to the lowest price point where producers are still willing and able to extract the natural gas from the ground. Shelly suggested that that floor price for natural gas continues to drop as unconventional gas technologies continue to improve, particularly when factoring in the exploitation of plays that are rich in natural gas liquids. “Some of these shale gas plays are very rich in liquids as well as methane itself,” he said. “And so what you have is sort of differing economics as the economics of drilling those types of wells is dependent almost more on the price of the liquids, which is tied more closely into the price of oil than it is to the price of natural gas. “So, if you consider those factors, some of the new fracking technologies that are coming out with regard to shale gas, it’s hard to say. I mean, I was at a conference about three years ago down in Texas. And people then were saying the absolute lowest floor price for gas is going to be $4.50. The next year, well, now there’s improvements in technology. Now it’s going to be $4.00.” “The spring of 2011,” Shelley continued, “we were down there, and one producer said that they can pretty much break even when gas is just over $3.00 a gigajoule, when they consider the revenue they get from the liquids.” If prices stay as low as they are now, said Shelly, producers will begin to shut in their reserves, causing the supply to go down and the price to go up. “The big question is where will those prices stabilize out?” he added. “And even if they went up to $3.00 or even $4.00, that’s still relatively competitive prices [for industries that use natural gas as a feedstock] compared to where they have been in the past.”

The other question is how natural gas prices might change as a result of the British Columbia government’s new emphasis on growing a liquefied natural gas (LNG) industry and exporting a portion of its considerable natural gas resources to Asia-Pacific in that form. Natural gas prices in Asia are closely tied to oil prices and can be four or five times higher than North American prices as a result. Since that is the case, those companies producing methanol and fertilizer might well be wondering if LNG exports could drive up domestic prices to the point where their industries are less viable again. “Well, it’s a legitimate question, although I am not worried … that this is going to have much of an impact on the domestic price of natural gas,” said British Columbia Premier Christy Clark in an interview with Pipeline News North. “And I’ll tell you why,” Clark continued. “There is a huge glut of [natural gas] around North America. The price isn’t going to show, I don’t think, signs of a dramatic recovery any time soon, just because the reserves that have been discovered all over North America are huge. “What we’re trying to do with LNG is we are trying to protect British Columbia from continuing to be captive to the North American market. We have to find another outlet for our natural gas products so that we can get more revenue from it. You look at the price in Asia – I mean, the price has been somewhere around $2.50 here in North America. Well, it’s been about fifteen bucks in Asia. That’s a dramatic difference. “I’m pretty confident that we’re going to be able to continue to benefit from low prices in North America, even if that means that we are importing natural gas from the States south of the border or other provinces in Canada. But it will also mean that we can benefit from the huge incremental revenue gain that we’ll get from being able to sell it at a much higher price overseas. There’s just such a glut of natural gas in North America right now. Our problem is we have to free ourselves from being captive to the market.”

special feature 8 Intersecting sectors 22 Whistleblower takes aim at federal government

community 12 STARS & Spurs Gala 13 Nordic ski trails get a makeover

industry news 3 The bright side of cheap gas 4 5 11 28

CAPP unveils fracturing practices Innisfail oil well blowout B.C.’s gas strategy New Zealanders study fracking in B.C.

profiles 14 Music to our ears – Risley Equipment

environment 20 21

Coins for caribou – fee and levy changes to aid caribou research Fort Nelson First Nation taking a stand against frac sand mines

careers & training 30 It isn’t easy being an energy company executive


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industry news

FOCUS ON FRACKING h t Nor CAPP unveils fracturing operating practices james waterman Pipeline News North

Alison McMeans Managing Editor 250-785-5631 editor@ pipelinenewsnorth.ca

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

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

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

Tom Kirschner Alberta Sales cell:780-625-2717 tk.fsjsales@ pipelinenewsnorth.ca

Janis Kmet BC Sales 250-782-4888 cell: 250-219-0369 jkmet@dcdn.ca Published Monthly by Glacier Ventures International Corp. The Pipeline News North is politically independent and a member of the B.C. Press Council. The Pipeline News North retains sole copyright of advertising, news stories and photography produced by staff. Reproduction is prohibited without written consent of the editor.

CONTACT US:

Phone: (250) 785-5631 Fax: (250) 785-3522 www.pipelinenewsnorth.ca

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Lisa Smith Accounting Manager 250-562-2441 ext 352 Fax:250-960-2762 accounting@ pipelinenewsnorth.ca

The Canadian oil and gas industry now has a brand new set of standard practices for hydraulic fracturing. As they promised when they released their Guiding Principles for Hydraulic Fracturing last September, the Canadian Association of Petroleum Producers (CAPP) unveiled their hydraulic fracturing operating practices at the end of January. The focus of the practices is fracturing fluid use and management, as well as an emphasis on transparency when it comes to fracturing fluid additives, which coincides with a new provincial requirement for disclosure of those additives and the launch of FracFocus.ca – the method of making that information publicly available – in British Columbia. David Pryce, Vice President of Operations with CAPP, has noticed that CAPP’s principles and practices are aligning with the direction that regulators and governments are starting to take when it comes to hydraulic fracturing. “I think both industry and government are looking to make sure they’re responding to public concerns,” said Pryce during a visit to New Brunswick at the time the practices were released. “And so I think there is reasonable alignment,” he continued. “We’ve been talking to New Brunswick media out here, but also a little bit with New Brunswick government. They’re contemplating similar reporting requirements. We would certainly encourage that. And that would provide for consistency. “And so maybe one point to make is we ended up at the same place in British Columbia. So, in essence, the British Columbia regulator is leading edge on the reporting of this.” Pryce remarked that CAPP was supportive of the B.C. government’s decision to use a FracFocus.ca website to disclose fluid additives because it is similar to a system that had already been in place in the United States, where many of their member companies also operate. “And so that became an effective tool, both for the regulator and for us,” said

putting that into place anyway in their discussions with landowners,” Pryce added. “I think that was something that was probably offered up. But not every company. “And, certainly, in jurisdictions where we’re not operating yet, like New Brunswick or Quebec, that notion – it was simply that. A notion. I don’t think people were thinking along that line. So, I think this goes a long way to … deal An Encana drilling rig near Fort Nelson, British Columbia. with the what-ifs. What if photO courtesy of encana there was a problem? How will you know and how will Pryce. “Effective to the extive, it’s not particularly you deal with it? tent that we’re now saying, accessible,” he added, “We don’t want to get ‘Gee, Alberta, you should pointing out that it is hard simply into the what-ifs look at that. And New for a user to be certain of though,” he continued. Brunswick, you should finding the specific site of “We want to make sure look at that.’ Because one interest. we’re preventing. And so of the advantages there is “I would rather just look if you look at some of the we would have a single, at a map and say, ‘What’s other practices, we’re lookconsistent place to go to all the activity around my ing to stretch ourselves to look for it. And so would home or my community?’” minimize the use of some the public and the regulasaid Horne. “And that is of these constituents that tors, quite honestly.” actually the way that the people are concerned “We have to have the FracFocus.org website about. So, we’re looking to industry and the governworks in the States. You find more environmentally ment working together,” can zoom in on Wyoming friendly things. said Rob Spitzer, Vice and see all the wells and “We’re talking about President of Exploration keep zooming in right deploying … risk managewith Apache Canada and down to the specific creek ment strategies. Make Chair of the Horn River if you want to.” sure we turn our minds Basin Producers Group, The set of practices also to what are these chemian association of oil and includes assessing the cals, what are the risks gas companies operating potential risks of chemicals they pose, and how do we in northeast B.C. used for hydraulic fracturensure that we keep them “And also the other maing, developing a program segregated throughout the jor stakeholders and the for testing and monitoring operation of that. And putFirst Nations,” he added. “I groundwater for potential ting plans in place in that mean, ideally, that’s where contaminants, empharegard. you’d like to be in all of sizing quality wellbore “The last piece is, these developments. And construction, reducing capturing in the practices, so I think it’s real important freshwater use through good that the B.C. government water recy“We have to regulaand CAPP are working cling and tory and together on this. And basialternative good enhave industry cally addressing a lot of sourcing inigineering the issues that come up tiatives, and practices from the stakeholders and addressing and government that are First Nations.” concerns intended However, Matt Horne, around the working to ensure Director of the Climate transportathat our Change Program with the tion and together.” wellbore Pembina Institute, isn’t imdisposal of design pressed with B.C.’s efforts fluids. evto disclose fluid additives “The – Rob Spitzer, Apache keeps erything at this point. other thing from “I think the one Canathat we’ve those dian example that is out said, that upper zones where there now is a pretty bad is not being done in [any] domestic water would be one,” he said. “And that’s jurisdictions, is that we drawn from.” the B.C. website.” would commit to, subject Horne mentioned that “I don’t know why they to landowner approval, Pembina is fairly pleased launched the website,” testing proximal domestic with those initiatives, but Horne continued. “They water wells in advance of also noted that they only launched it when the reguany activity,” said Pryce, work on a well-by-well lations came into force, explaining the groundwater basis, failing to address but there’s basically a two testing and monitoring inithe cumulative effects of month lag [between] when tiative. “And that gives us a oil and gas activity. those regulations come baseline on what the water “That really has to be into force [and when] they conditions are before we a role of the government have any data that they’re go in, so we know whether or the regulator,” he said. going to be posting. So, or not we might have had “And you can’t expect ten there’s no data under any an impact. And then could companies actively drilling of them right now.” respond to that.” in one area to sort of work Data should be available “A lot of the companies together on managing the at the beginning of March. that have been quite ac“From a public perspective have probably been continued pg 29


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Workers haul contaminated soil from the site of the oil well blowout that occurred just west of Innisfail, Alberta on Friday, January 13. photO COURTESY OF ALBERTA SURFACE RIGHTS GROUP

communication breakdown Innisfail blowout reignites fracking concerns james waterman Pipeline News North A recent oil well blowout has some Albertans asking serious questions about hydraulic fracturing in their province. On the afternoon of Friday, Jan. 13, a pumpjack was seen spraying oil and chemicals as high as fifteen feet into the air at a site on a farmer’s field west of Innisfail, Alberta. It is thought that hydraulic fracturing being conducted by Midway Energy at a nearby well caused the blowout at the Wild Stream Exploration pumpjack. “The incident’s currently under investigation,” said Cara Tobin, a spokesperson for the Energy Resources Conservation Board (ERCB). “So, we don’t know the finer details of what exactly happened, but it does appear that hydraulic fracturing operations conducted by Midway Energy impacted a nearby oil well operated by Wild Stream Exploration, which resulted in the release of fracturing fluid and some crude oil.” “It’s very rare,” she added, “but the ERCB is aware of a total of five of these such incidents happening since 2005.” Don Bester, President of the Alberta Surface Rights Group, isn’t satisfied. “It wouldn’t even have made a press release if it wasn’t our group who did the reporting to the ERCB,” said Bester. “The farmer that noticed this thing – it was getting pretty late at night. It was just about dark when he was driving in his driveway. And the well is just up on a hill rise just north of his house. And he works in the oil and gas industry, which a lot of people do here.” Bester said the farmer couldn’t get through to the 34108

ERCB emergency response number. “They’re supposed to have a 24 hour emergency response calling system where, if you report an incident, it’s supposed to be reacted upon immediately,” he continued. “He couldn’t get through to them. Now one of his other neighbours is a member of our association. So, he recommended he get a hold of me. So, I was the one that reported it to the ERCB – that they had a blowout.” Members of the Alberta Surface Rights Group returned to the site on Saturday morning to take photographs that have since circulated widely throughout the media. They show that a considerable amount of oil had been released from the well as a result of the blowout. Bester’s concern now is the status of that investigation, as well as the investigations into the five other incidents mentioned by Tobin. “What has been the results of those investigations?” he asked. “We never even knew they happened.” Bester even seems confused as to why the ERCB thinks an investigation is necessary. “When you shut the frac down and the oil plume ceases, it doesn’t take too much of a brainstorm there to figure that one out, does it?” he said. “We know exactly what happened. I mean, the fracking along their horizontal well is three quarters of a mile away. They drilled right to the producing well. We’ve got all the downhole surveys and everything else that we’ve collected in the last little while here. And drilling licenses. The whole ballpark. We’ve got people that know what the hell is going on just as capable as the ERCB.” Matt Horne, Director of the Climate Change Program with the Pembina Institute, also voiced concerns over the investigation.

“It is full speed ahead while there’s some sort of investigation going on around these,” said Horne, suggesting that industry activity shouldn’t continue while investigations into their operations are ongoing. “It’s not particularly clear how robust those investigations are,” he added. “Certainly, in contrast to what seems to be a very extensive study the EPA (Environmental Protection Agency) is doing on the risks of fracking [in the United States], particularly as it relates to groundwater contamination.” Horne noted that the EPA hasn’t halted activity either. “At least the efforts to understand the science seem to be a little more exhaustive,” he said. The apparent lack of public knowledge surrounding the investigation process is troubling for both Bester and Horne because they believe these occurrences will only become more common – and possibly more dangerous. “This long horizontal fracking is not all what it’s pumped up to be,” said Bester. “The concern we’ve got is that they’re doing it in fairly already developed fields. And this was a prime example of what can happen. Communications between zones to producing wells, or even abandoned wells or suspended wells.” “This was already a developed field producing from a lower zone,” he continued. “And this company drills into an upper zone and puts that kind of pressure from their frac in the above zone. And it just blew the producing well right up.” Bester wonders what might happen if that sort of communication should occur with a well containing large amounts of hydrogen sulfide (H2S), exposure to which can be fatal. continued pg 27


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environment PROCESS OF INTEGRITY? Joint Review Panel denies request to affirm impartiality

Public comments made by Prime Minister Stephen Harper and Natural Resource Minister Joe Oliver regarding Northern Gateway prompted Ecojustice to ask the Joint Review Panel to affirm their impartiality. VICTORIA TIMES-COLONIST photO

james waterman Pipeline News North Questions of integrity took centre stage in the debate over Enbridge’s Northern Gateway pipeline proposal on Jan. 27 when the Joint Review Panel (JRP) assessing the project was asked to affirm its impartiality and instruct the federal government to decline from speaking publicly about the process. The request was made in a motion filed by Ecojustice on behalf of Living Oceans Society, Raincoast Conservation Foundation and ForestEthics, all environmental organizations that have felt targeted by comments made by Prime Minister Stephen Harper and Natural Resources Minister Joe Oliver concerning attempts to delay the JRP process, foreign interference in Canadian affairs and the supposedly radical ideologies of environmentalists. “The Prime Minister’s Office and the Natural Resources Minister Joe Oliver have publicly attacked the hearing process in the way that, in our experience, is unprecedented,” said Devon Page, Executive Director of Ecojustice. The JRP denied the motion, but asserted their independence in a brief statement claiming that it “will make its decision based on the evidence on the record of this proceeding” and “will not consider or respond to information reported in the press or elsewhere that is not on that record.” “The irony is that they granted or adopted or followed our request for them to assert their independence except to the extent that they didn’t make an order or a recommendation that ministers of the Crown refrain from publicly commenting on the proceedings until they’ve

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concluded,” said Page. “Mission accomplished, to a certain extent,” he added. “And we’ve always characterized the process as one of integrity. And so we’re going to presume that it is and continue to participate.” The lingering question is whether or not the JRP has done enough to maintain that reputation. “That’s a good question,” said Page. “There is how they demonstrate they have a process of integrity. And, frankly, the only things that it appears they believe they can do are to conduct the proceedings in a way that demonstrates that and through their decision. And I guess that’s what they think it’s appropriate for them to do.” For the Harper government, the damage may already be done, according to Warren Mabee, a professor with the School of Policy Studies at Queen’s University. “The Canadian government is clearly a supporter of the project, not an impartial overseer of everything [or] an impartial arbiter of what’s going to happen,” said Mabee. “Rather, this is a government that’s very engaged in this. Partly, it’s because this isn’t really just a question around oil sands, this is a question around Canada’s future and our future energy policy and our future environmental policies. So, this has become a touchstone.” Mabee noted that past governments have taken stances on projects prior to the completion of environmental assessments, but never with so much public concern about the integrity of the process. “The reason that people are so concerned right now is because this is a real make or break issue for Canada and for the oil sands and for development,” he said. “And we don’t get a lot of opportunities to be actively engaged

in discussion with our government and with our industry about energy futures. Big projects like pipelines, which require public input and require public participation, are really some of the only times that we get that level of engagement in a discussion around our future. “And so my feeling when I heard that [Ecojustice] had filed for that was that this is the various stakeholder groups really trying to claim a bit of attention and claim some of the high ground in positioning for how their voice will be heard throughout the hearings.” The federal government rhetoric that has provoked that response from environmental groups reminds Mabee of 1980, when Pierre Trudeau’s Liberal government instituted the National Energy Program (NEP), much to the chagrin of western Canadian oil and gas producers. “Some real funny echoes here from the last time that we had a federal government that got very engaged in energy policy,” he said, “which was 1980 and Trudeau and his government, where you had a very outspoken opposition against the federal government’s plans that wanted to be engaged and a federal government that decided to do everything that they could to discredit them and to lock them out of the process. And what did we end up with? “We ended up with thirty years of alienation in the west, the Reform movement, provinces versus federal government. Really, even though we’re not dealing with the feds versus the provinces now, it’s the same sort of dynamic that’s setting up. “You’ve got the environmental groups and communities and First Nations on one side, possibly with some input from American foundations and maybe from overseas groups. On the other side, you’ve got the provinces, although B.C. is still effectively on the fence – they haven’t come out and said anything one way or the other – and we’ve got the federal government and industry, which includes, to be fair, many outside groups with lots of money. “So, when the federal government says that the hearing process can be hijacked by outside influence or outside money, what they’re not acknowledging is that there’s just as many big groups with lots of money from outside the country on their side.” By giving the impression of presupposing the outcome of this process, said Mabee, the Harper government has inspired environmental groups in Canada to start “taking off the gloves” in this fight. “Because they think that is kind of a battle to the finish,” he added. “And what that will do in this type of a hearing process is it really will polarize what were already two very disparate groups. Will that effect the ability to have a good dialogue between the groups? Probably. Will it effect the quality of the outcomes? Probably. “Because you’re not going to have the level of trust that you need, you’re not going to have kind of a sense that cooler heads might prevail, that we can get together and maybe work out some kind of a compromise.” Instead of a nation-building project, we may end up with an extremely divisive issue with long-term consequences, said Mabee.


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FEBRUARY 2012

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ALTERNATIVES

Are there other ways to export Alberta oil? james waterman Pipeline News North

Construction of the Anchor Loop project that twinned at 160 kilometre section of Kinder Morgan’s Trans Mountain pipeline. photO cOURTESY OF KINDER MORGAN

Morgan’s going to try to swallow El Paso [Pipeline]. So, they’re going to be a real big conglomerate pipeline company. And so if they have that much clout, well, why shouldn’t they have a chance to look at transporting oil from the oil sands over to the B.C. coast using their existing systems? And expand their system? Using existing is usually cheaper. And so you can’t discount that. What’s cheapest is usually best.” So, if these other options do exist, the remaining question is why there has been so much emphasis put on Northern Gateway as though it is the only project – an a nationbuilding project – that can satisfy the urge to sell Canadian oil to Asia. “Again, the issue comes down to shareholders positioning projects for their own value proposition,” said Gwozd, referring to both Northern Gateway and Keystone XL. “And the proponents – Enbridge and TransCanada – are very prudently run companies. They have scrutinized. And there must be problems with other alternatives. However, I still believe it would be prudent at the high level to have back up plans that are quite public.”

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Lost in the debate over the Enbridge Northern Gateway pipeline proposal is that the controversial project may not be the only method available to Canada for shipping its oil resources to new, foreign markets. Indeed, Kinder Morgan’s existing Trans Mountain system presently transports bitumen from the Alberta oil sands to port in Burnaby, British Columbia. The pipeline company is planning an expansion project that would see them twinning that pipeline, which could facilitate exporting Canadian oil to Pacific Rim markets, including what is becoming the jewel in that crown – China. “We are in the middle of an Open Season process,” said Kinder Morgan spokesperson Lexa Hobenshield, explaining how the company is moving toward possible expansion of its Trans Mountain system. “It began in October and will end in mid-February,” she continued. “The Open Season seeks commercial commitment from our customers. In some aspects, it is like a reverse request for proposals.” The company proposes a package of terms for a potential expansion project and then solicits bids from potential customers for contracting capacity on the project. “We’ve been discussing the possibility of expansion for some time now and this process is meant to formalize commitments from potential customers.” “The Open Season is not a project announcement,” Hobenshield added, “but it is an important step in moving towards an expansion project. We have always said that we would not proceed with a project unless we had the commercial support of customers. It will be some time in the spring of 2012 before we know if we have the support we need to move forward to develop an expansion project. If we have support, our next step will be to initiate a thorough and comprehensive consultation process.” Hobenshield finally noted that environmental and socio-economic assessments will also need to be completed as Kinder Morgan moves toward developing a regulatory application. Interestingly, even though the Kinder Morgan expansion project would utilize an existing pipeline route that avoids the salmon streams and shaky geology of the Skeena River watershed as well as the treacherous waters of the Douglas Channel – key reasons for opposition to Northern Gateway ¬– it has failed to attract the public support of British Columbians. According to a Mustel Group poll conducted in the fall of 2011 only 31 per cent of British Columbians support twinning the pipeline, and only 35 per cent of British Columbians are supportive of keeping the existing Trans Mountain system. “They’ve got to look beyond just this left option, right option, south option,” said Bill Gwozd, Vice President of Gas Services with energy sector consultancy Ziff Energy Group. It is an idea that he first expressed during a recent appearance on Business News Network (BNN), when discussing the fate of TransCanada’s Keystone XL proposal that would have transported Alberta oil to Texas refineries if approved by the United States government. “They can go north,” he added. “And the Mackenzie Delta is prime pipeline country. We already have an oil pipeline halfway up to Inuvik, [Northwest Territories]... Why don’t we just use that as a pipeline corridor and run pipe straight up north? Where nobody lives. Nobody will protest. And we can bypass a whack of issues and put three pipes in the same ground.” Gwozd suggests that the route could fit TransCanada and Enbridge pipelines transporting product from the Alberta oil sands to an export point at Inuvik and a third pipeline bringing natural gas down into Alberta. “When they get to Inuvik, then they can use ice tankers,” he said. “They can share in icebreakers. They can share in all kinds of things. And they don’t have any of these protests anymore.” An engineer himself, Gwozd believes that engineers should always be developing those kinds of “practical alternatives.” Currently, there are obstacles to moving Alberta oil south to the United States, west to Asia and east to the rest of Canada. Engineers should be presenting other options, according to Gwozd. “It’s not acceptable for them to come back and say, ‘Geez, guys, we can’t do anything,’” he said. “Three types of people in the world,” Gwozd continued. “There’s those types of people that are watching what’s happening. There’s some folks that are asking what happened. And there are those folks that are making things happen. “TransCanada’s response to the feedback from the president of the U.S. was rapid response. They were making things happen. TransCanada stood up and made things happen. “When I listened to the premier of Alberta calling the ambassador and calling different people, and the prime minister of Canada calling people to ask what happened, it’s kind of redundant. Whether they know what happened or not is not making things happen. And so I was disappointed by the response from the governments because they should have been involved in the making things happen [part] six months ago or eight months ago or twelve months ago. “If you do proper planning in advance, then these problems don’t occur. So, because these problems are where we are, I think it’s prudent to really look at what I call the northern option.” However, Gwozd understands why Kinder Morgan would push to expand its Trans Mountain system in order to ship oil to Asia. “Kinder Morgan has their own shareholders to look out for,” he said. “And Kinder


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special feature

intersecting sectors The consequences of colliding resource industries in northern B.C.

Sap freezes as it drips from a white spruce during a Fort St. John winter. jAMES WATERMAN photO

james waterman Pipeline News North David Elstone had an intriguing thought: What if construction of the embattled Enbridge Northern Gateway oil pipeline near forestry and mining communities intersects with new mining operations and a resurgent forest sector, especially if the United States market for western Canadian forest products should return to its previous state just as exports to Asia-Pacific markets are on the rise? What would be the workforce implications? Those are questions that Elstone considers just out of curiosity as a forest products research analyst with Equity Research Associates. After all, his areas of expertise don’t necessarily include oil pipelines or human resources issues, but forest products and their global markets. Just as the Canadian oil industry hopes will be the case for its number one product, a big piece of that global market puzzle that is emerging now is China. Statistics show that exports of B.C. forest products to the U.S. were down 13

per cent in 2011 as of last October. Meanwhile, exports to China were up about 87 per cent, bringing total exports up by almost ten per cent. It should be noted that, despite all the softwood lumber woes, the U.S. remained the biggest market for B.C. products at 49 per cent of all exports as of October, 2011. However, China had climbed to 32 per cent by that time, although the market for B.C. wood in that country didn’t even exist just five years ago. “They actually do a lot of log exports out of that region to China right now,” said Elstone, referring to the north coast region of the province. “So, that’s a raw log.” “China has created quite a buzz over the last couple years,” he continued, noting that small sawmilling communities in B.C. should be grateful for the rapid growth in Chinese demand recently, considering how U.S. demand has “fallen off a cliff” with the collapse of the housing market in that country. “It went from a pretty high level right down to a record low,” Elstone said of the

capabilities seems to be a valid one. U.S. demand. “It [was] pretty devastating. Complicating the issue is one of the So, the B.C. interior has been extremely factors that led to the downturn in the forfortunate to have China. And the B.C. est industry in the first place and contingovernment has been quite willing to ues to be a problem today: the mountain promote the fact that we have this market pine beetle epidemic. available to us. “The mountain pine beetle has devas“And it’s really been our market, which tated a lot of those regions in terms of the I guess has been one of the great things timber supply,” said Elstone, discussing about it. The U.S. sawmillers haven’t participated in any way the same way that forestry towns like Fort St. James and Burns Lake. “And we’re just starting to we have [in] the B.C. interior in terms of feel the real effects of that now.” supplying this rise in Chinese demand. It He believes that could potentially be a has been very helpful to have that market long-term problem for those communities come online when our other major market as the beetle plague continues to limit was weakening. feedstock for sawmills, placing a cap on “The rise in Chinese demand has the growth potential for the forest sector. been quite beneficial to these communiEnter Northern Gateway. ties,” he continued. “You look at a town “It’s obviously a great diversifier of the like Mackenzie where you’ve got a few sawmills restarted and a lot of that wood’s economy,” he said. “You can have some people working in the forest sector that probably heading to China. You have all will exist in the future – it will exist.” the other little towns along the way. Like Others may find work related to pipeline Prince George sending quite a bit of wood construction, building either the Northern to China. And Quesnel. All those guys Gateway pipeline or the less controversial are feeding wood out to China either via Pacific Trails Pipeline, that would transPrince Rupert or Vancouver ports.” port northwest B.C. natural gas to a liqueThe provincial government announced fied natural gas a $700,000 commit“China has created (LNG) export ment to the forest facility at Kitimat. sector on Jan. 24, quite a buzz.” Some resi2012. The goal of dents of Burns that investment Lake have had is to help forest – David Elstone, Equity Research that idea in their companies create sights for a while new jobs through now. the manufacture “We had the beetle kill here,” said Lynn of products such as renewable fuels, Synotte of Marketing, Recruitment and textiles, plastics, and pharmaceuticals, as Program Linkages at the Lakes District well as new paper products like a facial Campus of the College of New Caledonia mask designed to deactivate viruses. in Burns Lake. Additionally, construction of the first “Tweedsmuir Park was the epicentre of new and substantial metals mine to come the beetle attack,” she continued. “So, we to B.C. in fifteen years is now underway. had a real downturn in the forest industry. That copper-gold mine known as Mount So, we had a lot of workers that were Milligan is situated about 150 km northlooking to re-train. west of Prince George, just north of Fort “Actually, it was the mining industry that St. James and just southwest of Mackencame our way and started saying, ‘We’re zie. It is expected to be a significant job going to have a 17,000 job shortage withcreator for that region when it becomes in the next decade. And we need to have operational in 2013. people trained up and running.’ Well, a lot Also, Burns Lake is gearing up to host of the skills that forestry workers have are the 2012 edition of the Minerals North transferable. And some of them aren’t. Conference this May. But all of a sudden we were starting to So, Ellstone’s query about workforce

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British Columbia’s natural landscapes are rich with natural resource industry opportunities, but can the province meet the workforce requirements of resurgent forest and mining sectors, a booming natural gas industry and the construction of a major oil pipeline? James Waterman photO

look at skills that could transfer from one industry to the construction industries along the Northern Gateway durother and sort of be a multi-industry type training.” ing the period in which the pipeline is built – if the project Synotte remarked that there has been a palpable should receive regulatory approval – could actually shortage of skilled tradespeople in the region since come from the energy sector. 1995. Now the mining industry is starting to ramp up in “The natural gas sector’s been hit pretty hard,” said the area with the construction of Mount Milligan and the Gwozd, referring to the record low natural gas prices planned expansion of the Endako Mine operation. currently seen in North America. “And Pacific Booker is looking,” she added, discuss“We know producers are hurting,” he continued. “So, ing the local interest shown by mining companies. will producers whack staff? Cut back on horsepower? “Red Chris is looking. We’re just surrounded by mines Or are producers going to be gearing up on their gas here.” staff? I would think the answer is no, they’re not going The college already had training programs for trades to be gearing up. And so if there’s gas staff available, such as welding and carpentry and had begun adding they could shift that resource over to an area that needs courses like H2S Alive, WHMIS, forklift, traffic control help.” flagging, basic security training and even driver training. Regardless, Gwozd doesn’t believe there will be a “A lot of people were unemployed because they great labour need in the forest sector. didn’t have a driver’s license for various reasons,” said “Forestry – it’s a competitive thing worldwide,” he said. Synotte. “And a lot of forests are used to make houses and buildThe college subsequently established a training ings. And a lot of forests are used to make paper.” program funded by the Pacific Trails Pipeline Aboriginal Gwozd indicated that paper is being phased out by Skills Employment Partnership (PTPASEP), which was electronics as online news sites and e-readers replace geared toward a number of First Nations communities in newspapers, magazines and books. the vicinity of that pipeline route. “If you look at the population pyramid,” he continued, Enbridge has established a Northern Gateway Pipe“you’ll find that it’s been squished in a little bit.” line (NGP) Education and Training Fund worth $1.5 Essentially, the baby boomers outnumber the younger million that is focused on skills development. generations. “They have come and talked to us and they have told “So, we may not need as many houses in the future,” us that they are interested in training people with transsaid Gwozd. “So, the consequence may [be] less lumber ferable skills,” said Synotte. “But with the [PTPASEP] needs. Therefore, forests and forestry operations may training, we actually did an essential skills for pipeline be skinnier in the future rather than thicker in the future.” construction. So, we did heavy equipment operating and “I can see the future,” he continued. “I’m a futurist. I the traffic control flagging.” look at the future all the time. And so, in the future, I see Synotte also addressed the fact that Enbridge has less body count required because we’re more efficient. announced that fifteen per cent “When you drill a well, you only of those people hired to work on drill one well and you multi-stage the pipeline construction will be fracture it, it delivers the gas of “We have been divided fifty wells. So, you don’t need fifty aboriginal. “I would say, 65 per cent of truck drivers to bring up tubing. and conquered.” our student population is First You don’t need fifty cement truck Nations,” she said. “So, we’re drivers to bring up cement. You pretty well doing what we’ve need one. And so the efficiency – Bill Gwozd, Ziff Energy always done. We’re not doing through technology enhanceanything special.” ment, efficiency through electronic “Ever since the beetle kill transmission, will reduce labour happened,” Synotte continued, requirements.” “we have started thinking, okay, we’ve got to take a look According to Gwozd, labour specialists tend to simply at our unemployed and our youth and our First Naadd future industrial growth to the status quo to develop tions, and we’ve got to offer training that gives them the their labour market projections. freedom to go to the various industries in the North that “But I don’t see status quo,” he said. “I see a lot of are starting to ramp up. And the interesting thing is all of things being whacked, being brought down to its knees, a sudden we’ve got two pellet plants here.” and then a little bit of growth areas here and there.” Those plants produce pellets made for wood burning Gwozd suggested that areas of growth could benstoves, largely from trees killed by the pine beetles. efit from the fate of those areas that suffer from “being However, according to Synotte, the trouble for elewhacked.” ments of the resource industries that are still thriving in “Talk to a fisherman in Nova Scotia, where the that part of B.C. is that so many skilled tradespeople and unemployment’s much, much higher than Alberta,” he heavy equipment operators have left their old jobs for said. “They’re looking for employment. Go to Europe, the oil and gas industry. where they want to have millions of jobs being created, “And so all of a sudden we found ourselves here short they don’t have the jobs available. So, we can allow of heavy equipment operators and people in the forest immigration. If we think we need more labour, we can industry,” she said. “So, we’re continuing to train for that immigrate it.” and we’re continuing to train for the mining.” “We don’t have to pay for their schooling,” he added. Ironically, Bill Gwozd, Vice President of Gas Ser“We just get the productive labour.” vices with oil and gas industry consultants Ziff Energy Gwozd had sobering thoughts for those who distress Group, suggested that a significant part of the workforce about Canada exporting sawmilling and oil refining jobs required to sustain the forestry, mining and pipeline to Asia along with raw logs and crude oil, wondering why

we don’t keep those jobs at home. “Shipping raw material over is just a way to keep costs down in other countries,” Gwozd explained. “It’s always cheaper to buy the raw material and then use your own labour. That’s all they’re doing. And also their labour is cheaper than North American labour.” “What other countries have realized [is] if we just get the raw material, then we can cut, shape it, chop it with our own labour, and create employment and income taxes for our own government. And keep our costs down. That’s all they’re doing.” “There’s enough raw material worldwide to be choosy,” he added. “If Canadians don’t want to ship their raw material, they won’t buy the paper or the wood. It’s too expensive.” That state of affairs will also keep domestic labour requirements down to a reasonably manageable level in his estimation. However, he also views those circumstances as evidence of a failure of government leadership when it comes to how Canada promotes and sells its natural resources globally. “What do we have to bargain with?” said Gwozd. “We have wheat. We have energy. Why can’t we link wheat and energy and other products in a package that, if you want wheat or oats or oil or gas, you also have to buy some finished wood products?” Gwozd calls that a “negotiation play.” “We have been divided and conquered [when] we should be grouping and [presenting],” he said. “If we group everything together and then present it, we have a basket. We want you to buy a basket – some oil, some gas, some wheat and some lumber.” “In Canada,” he continued, “because of our lack of leadership at our government levels, we have been divided and conquered, and we sell wheat separately. We sell gas separately. And so by conquering us, we end up having no leverage.” Gwozd said that governments – like people – fall into three categories: those that watch what is happening; those that wonder what is happening; and those that make things happen. He believes that our governments, provincially and federally, have not always been strong at making things happen when it comes to exporting our natural resources. “If we were to group things together,” he said, “the governments [could] make things happen, versus watching what happens, and watching these farmers and fishermen get exploited because they’ve been divided and conquered.” It is all about looking into the future to see what has to be done today to fix that future. “That’s what I like to see governments doing,” said Gwozd. “Once you have a clear picture of the future and you don’t see a rosy picture, come back to today – what do you have to do today to make the picture clean up? And that’s what I do for a living. “I can see in the future that we’re not linking our products together. I see – I foresee – gas exports. I foresee oil exports. I foresee wheat exports. I even foresee uranium exports. I don’t see a lot of pulp and paper and finished products exports. And I don’t foresee a lot of petrochemical exports,” he said. “They would rather take the raw materials and build the jobs overseas. And then what are you going to do about it Canada? If you don’t want to comply, we’ll buy our wood from Brazil.”


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industry news

SINGLE REGULATOR

Alberta moving to one stop shop james waterman Pipeline News North The Alberta government has begun drafting legislation to create a “one stop” regulator for the upstream oil and gas industry in that province. The initiative stems from a competitiveness review of the industry that was conducted by the government throughout 2009 and 2010. Recommendations coming out of the review, which were delivered last January, included moving toward a single regulator, rather than forcing project proponents to submit multiple applications to Alberta Energy, Alberta Sustainable Resource Development, Alberta Environment and the Energy Resources Conservation Board (ERCB). The government, then under former premier Ed Stelmach, promised that they would follow that path. “The government heard from industry [that] the regulatory system is a barrier to investment,” said Alberta Energy spokesperson Derek Cummings. “And just the fact that it developed over many decades, there’s extra layers that have been built in, policies aren’t necessarily integrated, delivery of that is not necessarily integrated or done in the best way. So, the project was to look at

the whole picture and see if we redo this whole process. … What would the structure be and how would we sort of start from scratch and build a new system?” It is anticipated that legislation will be introduced during the fall session. Alberta Energy is the lead ministry, working alongside Sustainable Resource Development, Environment and ERCB. “We think that’s very positive for our industry,” said Travis Davies, a spokesperson for the Canadian Association of Petroleum Producers (CAPP). “It was a serious issue of competitiveness. … With all this in one place, it’s much more efficient, the outcomes are the same, timelines are better, and you waste less money.” However, Myles Kitagawa, Executive Director of Toxics Watch Society of Alberta, has concerns about putting all regulations concerning the oil and gas industry under one umbrella. “This is a project whose goal was to take all of the government departments or government ministries that have an environmental mandate and mash them all together to make it … faster for the oil and gas industry to get their projects approved,” said Kitagawa. The ministries in question are Energy, Sustainable Resource Development and Environment.

“This is going to be a black box that is going to compromise the occasionally conflicting mandates of these three departments,” he continued. “So, it’s going to be a compromise. Now when we look at the Ministry of Environment’s policies to protect the environment, all of those policies were created compromising environmental protection with other social and political and economic considerations.” Kitigawa also contends that all Energy policies were designed with only economic development in mind. “You don’t see engagement of environmental organizations negotiating what a [Alberta Energy] policy is going to be,” he said. “You don’t see environmental protection negotiating the rate at which energy is going to be developed. But you have lots of energy companies negotiating how much the air quality or water quality or land use is going to be protected.” “Environmental protection is going to be subject to double jeopardy,” Kitigawa concluded. “The move to push these different departments’ policies together is going to be a compromise to a compromise on the part of environmental protection.” Cummings doesn’t see it that way. “The government recognizes Albertans

value and want to protect their natural environment,” he said. “No one is proposing watering down the rules. No one has asked us to do that. That’s not what the process is about. We think we can be efficient and thorough, and that those two aren’t incompatible at all.” “I see it as positive for all parties involved,” said Davies. “If you look at even the landowners’ side – it’s simplified. You don’t have to go to multiple agencies. There’s a single regulator, you’ve got a single point to have your engagement with, whether you’re industry, whether you’re a landowner, whether you’re a farmer.” Davies also noted that a move toward a single regulator in Alberta is a significant step for CAPP’s membership, as many of those companies also work in Saskatchewan and British Columbia, where regulatory frameworks have already been streamlined in this fashion. The Alberta government has studied examples in other jurisdictions. “The project was sort of a stepping back and looking at the system as a whole,” said Cummings. “As part of that, the review included an examination of models in B.C. [and] in other jurisdictions that have or are moving towards a single regulator. Norway is an example.”

Donnycreek beefs up Alberta Montney asset base Daily Oil Bulletin Donnycreek Energy Inc. has added to its Alberta Montney holdings after formalizing a deal with Donnybrook Energy Inc. In a press release, Donnycreek said it has concluded a $2.3 million transaction to purchase certain petroleum and natural gas rights from Donnybrook. The option was granted to Donnycreek pursuant to the arrangement agreement made as of Oct. 3, 2011, and in connection with the previously concluded plan of arrangement involving the companies that closed on Nov. 4, 2011. The purchased assets are comprised of nine gross sections of lands prospective for Montney liquid-rich resource development in the Kakwa area of Alberta acquired by Donnybrook from Sept. 1, 2011, to Nov. 4, 2011. The assets are within eight kilometres of the assets conveyed to Donnycreek by Donnybrook on Nov. 4 pursuant to the arrangement. The company noted that the Kakwa property is accessible for field operations year-round and is located within six kilometres of a major midstream-operated natural gas and natural gas liquids processing facility. 34361

Donnycreek reported that its first horizontal Montney location in the Kakwa area -- 13-17-63-5W6 -- is expected to spud early this week with the objective of drilling horizontally through the Montney formation to a total measured depth of 5,150 metres. The company’s partners in the 16 sections have committed to drilling the 13-17 Montney well with Donnycreek paying 25 per cent of the horizontal well costs (drill and complete) to hold a 25 per cent working interest and 10 per cent GORR (gross overriding royalty) on 75 per cent before payout and a 50 per cent working interest after payout in the well. Donnycreek will also hold a 50 per cent working interest in the balance of the 16-section block. Donnycreek said the Kakwa acreage was acquired following a detailed technical assessment of the region. The company considers the play to have been significantly de-risked through the operations of competitors active in the area and noted that these companies have continued to acquire petroleum and natural gas rights on lands surrounding the company’s acreage. Based on its petrophysical evaluation, mapping and technical review of producing wells in the area, Donnycreek has identified what it considers to be a thick

hydrocarbon-charged zone throughout the 100-metre Upper Montney interval. The company believes the zone will be conducive for development using stacked horizontal wells. Donnycreek intends to target the lowermost portion of the Upper Montney with its first well. Based on current industry practices, development of the entire acreage could require up to 64 gross wells, with the possibility that additional laterals per well could be required to access the entire hydrocarbon-bearing section. The results from two Montney wells recently announced by competitors, both of which are located less than 14 kilometres from the Donnycreek lands, demonstrate exceptional deliverability from the Upper Montney, with reported rates of 4.7 mmcf per day with 1,200 bbls per day of condensate and 15.8 mmcf per day with 1,000 bbls per day of condensate, respectively. Meanwhile, Donnycreek said it has engaged Syndicated Capital Corp. (SCC) of Vancouver to provide investor relations services. The company has granted 102,200 incentive stock options to SCC exercisable at 75 cents per common share for a period of up to three years. The agreement is subject to the approval of the TSX Venture Exchange.


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COOKING WITH GAS Natural gas and Site C to power LNG facilities james waterman Pipeline News North Natural gas is the future of British Columbia, but that future hinges on the construction of the controversial Site C hydroelectric project that is so fervently opposed by many Peace Region residents. That has been the message from Premier Christy Clark as she has been unrolling the Province’s new Natural Gas Strategy since it was unveiled during her visit to BCIT on Feb. 3. Liquefied natural gas (LNG) is a key element of the strategy, which indicates that there should be one LNG export facility in operation by 2015 and three LNG facilities up and running by 2020. The liquefaction of natural gas at those plants will require a considerable amount of electricity that present energy infrastructure is unable to provide. “We know that we can power the first one with existing sources of energy,” Clark told Pipeline News North. “And those are clean sources. Because we have a fair amount of IPP (independent power producer) power, but a ton of hydro power. “We’re very confident that the first one can go ahead with existing sources of power. We can power most of the second one as well. But when we get into the third one, which is likely the proposal from Shell [Canada], and then their second phase of that – I’ll just give you a feel for how big that is: Powering the second phase of the current Shell proposal would require 100 per cent of the power that could be produced by Site C. So, it’s a very energy intensive process.” Clark admitted that the province’s LNG industry will rely on the yet to be approved Site C project. “My government is the proponent of Site C,” she continued. “We support it pretty clearly. And I’m hopeful that it will receive the approval required to go ahead.” The premier also offered harsh criticism for NDP leader Adrian Dix in relation to LNG and Site C. “He supports this plan to enable the establishment of an entire new industry in British Columbia called liquefied natural gas, but he doesn’t want to do Site C,” said Clark. “Well, he should be honest with people, because if you don’t support Site C, we can’t do the LNG strategy. It can’t happen. So, yes, it will require Site

C to go ahead. It will also require, though, a lot more power to be produced from independent power producers.” NDP energy critic John Horgan charged that the BC Liberals are the ones who are guilty of not being honest with the people of B.C. when it comes to powering LNG facilities and the related impacts on the government’s climate action targets. “There’s no chance – no chance – that independent power production in the northwest will be able to meet the needs – on a 24/7, twelve-month-a-year basis – for these LNG plants. That means either you’re burning natural gas provided by the owners of the plants or BC Hydro’s going to backstop it. And that means cross-subsidizing BC Hydro rate payers in the interest of industrial users in Kitimat.” Horgan is concerned about a situation in which the Province will be buying power from IPPs at a rate of $120 per megawatt hour and then selling that power to LNG facilities at a rate of $40 per megawatt hour, forcing ratepayers to make up the difference. “He’s wrong, as usual,” said Clark. “I don’t understand where the NDP are coming from on this, because they say they support the LNG strategy, but they don’t support IPPs and they don’t support Site C. And so I wonder if they think that we’re going to be able to power these plants by plugging them into an electrical outlet in somebody’s kitchen in Dawson Creek. Honestly. “We’ve got to be real about this. We are going to need the power from Site C. We’re going to need power from wind farms, from other renewables, and [from] building that clean energy strategy across the province. It’s complicated. But it’s going to mean thousands and thousands of jobs in the province. It’s a new industry.” As for Horgan’s worries about backstopping the intermittent power provided by wind and run-of-river projects, Clark said that the Province intends to use natural gas to generate electricity. “They will be reliant in some part on natural gas as a power source,” said Clark. “But our expectation is that that will be a minority of their power source. The vast majority of the power that they’ll be using will be from renewable. But we need to have that back-up for shaping it.” That won’t sit well with the Coastal First Nations, who were given a mandate to

NDP Energy Critic John Horgan, shown during a stop in Fort St. John last August, is critical of the government’s Natural Gas Strategy and their plans to power LNG plants. James Waterman photO

British Columbia Premier Christy Clark, shown speaking at the 2011 BC Oil and Gas Conference, launched the Province’s new Natural Gas Strategy on February 3. The LNG portion of the plan will rely on the controversial Site C hydroelectric project. James Waterman photO

develop a renewable energy plan for the northwest – which is still under consideration – under an agreement with the province. Art Sterritt, Executive Director of the Coastal First Nations, has been adamant that natural gas should not be used for power generation to run LNG plants. Horgan has voiced concerns that the greenhouse gas (GHG) emissions associated with the use of natural gas for power generation could compromise the Province’s climate action goals, insisting that the government should be honest if those objectives are changing as a result of this push to promote LNG. “If government is shifting policy, then shift policy,” he said. “Don’t try and stand firmly on both islands. If you’re abandoning your climate action targets because the world hasn’t kept pace with what we thought the world would do, for a whole host of reasons, then say so.” “Well, we’re still working through that,” said Clark, discussing the potential impact of natural gas fuelled power generation on provincial GHG emissions goals. “We’re still a carbon neutral government – first in North America. We still have the carbon tax – first in North America. We are climate leaders in most of those ways. So, we’re still working through how it will affect our legislated targets. “But the thing for me is this – if we are shipping liquefied natural gas to China, they are going to use that to displace coal. That’s one of the things that we’re doing, is making a cleaner world by giving them a new source of energy. In the case of Japan, they’re interested in our natural gas because they want to wean themselves off their reliance on nuclear. So, we’re contributing to a cleaner world overall in a really substantial way by making it possible for us to be able to export natural gas.” One solution to the GHG problem might be carbon capture and storage (CCS) projects, particularly considering the high carbon dioxide (CO2) content of natural gas found in the Horn River Basin, a prime supplier of methane for LNG. Natural gas in that region tends to be about ten to twelve per cent CO2. Gas

sold for common use can’t be more than two per cent CO2. Mark Jaccard, a Simon Fraser University Professor who also works with the Pacific Institute for Climate Solutions, has noted that venting or flaring that unwanted CO2 would automatically make it impossible for the Province to meet its GHG emissions targets. His answer is CCS, but it is an expensive undertaking. CCS is also mentioned in the Natural Gas Strategy. “It’s a possible way of meeting [those emissions targets],” said Clark. “But it’s expensive, right? CCS is expensive. And so it’s one of the things that we’re discussing, but we haven’t got a clear picture of how it would work yet.” “We’re talking to the industry about that now,” she continued. “And so we’re kind of in early stages on some of those discussions.” “Look – I’m open to all good ideas. And it’s a question of making sure that we manage our budget prudently, because taxpayers aren’t in a position to send us a whole bunch more money. So, that’s the first part. And then second we balance that, our requirement – my requirement – that we be prudent with taxpayers’ money, with my intent to grow our economy, to protect and create jobs across the province. So, that’s what we’re focused on. So, yes, we’re interested in CCS, but it has to fit into that picture.” “We’ve got a couple of years of data on what’s going on with CCS in the Peace [Region] and it’s not encouraging based on the information that I’ve seen,” said Horgan. “So, to continue to just say, ‘Oh, yeah, we’re looking at carbon capture and storage – that’s the future.’ Well, if it is, then why are we not aggressively investing in it? Why is the province not taking the steps that we need to take to make sure that it becomes a reality rather than just saying. ‘Yeah, we threw a couple million bucks at it back in 2006-2007. And that’s it. We wash our hands of it and hope that the private sector will take us there.’ You need a regulatory regime to do that. You need to have [research and development] and investment dollars.”


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community

HELPING STARS SHINE Industry raises over $700,000 for emergency medical unit james waterman Pipeline News North It was a record-breaking night for the Petroleum Services Association of Canada (PSAC) on Saturday, January 21 as their eighteenth annual STARS & Spurs Gala raised an all time high of $720,000 for the Shock Trauma Air Rescue Society (STARS). Alberta Premier Alison Redford and Minister of Finance Ron Liepert were among the over 1000 guests who enjoyed dinner, dancing and the music of Canadian Country Award winning band Doc Walker. Darren Zatwarnitski, STARS’ Very Important Patient for 2012, also addressed the crowd, alongside his family, discussing his experiences since a 2003 motorcycle accident, when he was taken to hospital by a STARS helicopter. “This year’s turnout and the ongoing support speak volumes about the value our entire industry places on STARS and the critical work they do,” said Mark Salkeld, President and CEO of PSAC in a media release issued on January 23. “Our event helps ensure that STARS’s emergency medial response services remain available to oil patch workers, their families and communities across western Canada.” Salkeld has been told that these sorts of charitable partnerships tend to have an average lifespan of only about five years. “So, for this thing to be going 18 years is fairly significant,” he said in an interview. It hasn’t been difficult to keep the ball rolling, according to Salkeld, largely because of the relationship the oil and gas industry has with STARS. “We say around here that it doesn’t take long to bump into somebody that has a STARS story, myself included,” he explained. Salkeld’s story isn’t related to the industry, however. His brother-in-law was in a life threatening traffic accident in southern Alberta that did serious damage to his heart. STARS took him to the hospital for surgery. Zatwamitski was struck by a transport truck as he was riding his Harley Davidson in downtown Calgary. “He had more broken bones than you can shake a stick at,” said Salkeld, “but he’s alive because of STARS, right in the city, getting him to the hospital.” Salkeld suggested that it can be a comfort to those working in the oil and gas industry just knowing that STARS exists. “I spent 30 years in the field,” he said. “I lived up in Fort St. John and worked out of there and know what it’s like to be working out in the bush. And I also know what it’s like to get hurt on a rig. And the importance of the time to get somebody to critical care or get critical care to them.” STARS offers location finders to companies with remote operations in the oil patch that allows them to track the rigs. “So, if there’s an unfortunate circumstance,” said Salkeld, “it’s one call and – bang – a helicopter’s in the air and heading straight to it. Because a lot of our work is still done in remote locations, a long ways from hospitals.” That is a big reason for the continued industry support for STARS. “It’s not really that much of a chore,” said Salkeld, “because everyone sees the

STARS board of directors member Doug Ramsay, STARS CEO D. Greg Powell and PSAC President Mark Salkeld congratulate each other after raising over $700,000 for the STARS unit at the annual STARS & Spurs Gala on January 21. JAMES WATERMAN photO

benefit of it and pitches in. And donates pretty significantly, as you can see by this year’s numbers.” “There’s a lot of other sectors represented at the gala,” he continued, “but it’s predominantly oil and gas services. But you can’t discount some of the other folks – the producers that show up there with their checkbooks open. So, it’s pretty important.” “We are truly honoured and grateful to receive such amazing support from PSAC, its members and the STARS & Spurs Gala committee,” said STARS CEO Greg Powell. “Funds raised at this gala contribute significantly to our mission of providing emergency medical care and rapid transportation to critically ill and injured patients.” “The STARS & Spurs Gala is a one-of-a-kind industry event and the money raised by our collective efforts is more important than ever,’ Salkeld added. “As long as STARS increases our ability to access emergency medical services, our support will not waiver.” The STARS & Spurs Gala has brought a grand total of $5.3 million during its eighteen years of fundraising.

CE Franklin expects modest revenue increase in 2012 Daily Oil Bulletin CE Franklin reported higher profit, cash flow and revenue for the fourth quarter and full year 2011 as oildriven activity offset the impact of low natural gas prices. “Strong year-over-year revenue growth, improved product margins and disciplined cost management led to significant year-over-year improvement in the fourth quarter. We will continue to leverage our strategies into 2012,” said president Michael West. Franklin noted that well completions in the fourth quarter fell by nine per cent from the fourth quarter of 2010, which was a busy quarter, and those activity levels

carried into 2011, while the fourth quarter of 2011 slowed down slightly due to lower gas activity. Capital project business revenue grew $6.8 million year-over-year due to the improved overall industry activity levels. The company said it expects its revenue to “increase modestly in 2012 as oil and gas industry activity levels remain relatively consistent with 2011 levels. Natural gas prices remain depressed as North American production capacity and inventory levels continue to dominate demand.” The company said gas-related capital spending is focused on the emerging shale gas plays in northeastern British Columbia and liquids-rich gas plays in northwest-

ern Alberta. It added that conventional and heavy oil economics are attractive at current price levels leading to increased activity in eastern Alberta and southeast Saskatchewan. Franklin expects oil sands project announcements will continue at current levels, assuming current oil price levels are maintained. The company expects gross profit margins to remain under pressure as gas-weighted customers focus on reducing their costs to maintain acceptable project economics, and also due to continued aggressive oilfield supply sector competition as industry activity levels remain below the last five-year average.

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HAPPY TRAILS

Energy companies help out local ski club james waterman Pipeline News North Local skiers may soon be enjoying a better quality of cross-country trails at Beatton Provincial Park thanks to the efforts of the Whiskey Jack Nordic Ski Club and a handful of energy sector companies. Shell Canada, ConocoPhilips, Suncor Energy and TransCanada Pipelines have all provided funding for a new trail design when the group of Fort St. John area ski enthusiasts began planning upgrades to the twelve kilometre system at the park, which was constructed for the B.C. Winter Games in the early eighties. “A much different trail standard than ski trail standards today,” said Eliza Stanford of the Whiskey Jack Nordic Ski Club. “And so we kept getting a lot of feedback at the club that beginners had a hard time and intermediate skiers had a hard time on these trails, because you get committed to big long hills and there’s no way of turning around except turning around and going back down the hill. “And so we want to be able to provide more options for a variety of skiers here on safer trails that are wider, they’ll be more undulating, they’ll be more trails in that intermediate range.” “It is one of the healthiest outdoor winter sports and is accessible to people of all ages,” she continued, describing the benefits of skiing, which can be provided by new and improved trails. “By being able to provide a greater range of trails for various levels of ability, we will be able to meet the needs of the growing cross-country ski population. Beginners will be encouraged and feel safe if there are more beginner trails.” The first step was hiring a ski trail designer, Reider Zapf-Gilje, at a cost of $8000. “This has been kind of on low simmer for a number of years,” said Stanford. “And we finally decided we’ve got to find the money... In 2010, we started the process of fundraising through online grant applications. And we had a trail designer all lined up. We knew what he was going to cost. So, that was a definite budget. And enough companies came forward to cover that budget.” “Local projects that promote a healthy lifestyle are something we definitely like to get behind,” said Shell spokesperson Carson Newby. “It’s also key, I think, for Shell employees and Shell contractors, anywhere

Andrea Morison and Eilza Stanford of the Whiskey Jack Nordic Ski Club enjoy a beautiful Saturday morning on the trails at Beatton Provincial Park. Energy companies have donated funds toward improving the trails. JAMES WATERMAN photO

we have a chance to promote work-life balance, that’s something we want to try to participate in.” “Any time we can support infrastructure that helps make Fort St. John and Peace [Region] communities attractive, it also helps us on the recruiting side,” he added. “Worker retention is important to all companies operating in the north,” said Stanford. “And publicly accessible cross country ski facilities rank high for people who are considering a career move to the area.” The work involved in designing the new trail began during the winter of 2010, when Zapf-Gilje visited the park to assess its potential for cross-country skiing. “The existing 12 km of trails are in places narrow and do not provide the undulated variation of hills that is desired for fun and safe skiing,” said Zapf-Gilje in a backgrounder on the ski trail project provided by the Whiskey Jack Nordic Ski Club. “Based on my experience,” he continued, “I consider Beatton Provincial Park to offer an exceptional opportunity to expand the existing trails into a complete cross-

country skiing area, which will attract skiers of all ages and abilities. The terrain is excellent and allows for the creation of undulating and safe ski trails. The forest, hill, canyons, lake and wildlife offer a unique outdoor experience for skiers.” “He has to come up one more time when there’s no snow and do a formal layout, flag where the trails will go,” said Stanford. “And there’ll be some little bit of tweaking on the ground just because there will be things that you didn’t see in the winter. And then if we raise the money, we’ll be doing the work this fall.” That is the remaining challenge. The cost of the trail design was quite small compared to the approximately $200,000 price tag for the construction. “We hope to meet the cost of trail construction through grants from the Peace River Regional District, Northern Development Initiative Trust, our club funds, and industry sponsors,” said Stanford. “We have other grant applications in, but those funds are not confirmed.”

Canadian regulatory changes months away Daily Oil Bulletin

the process that the National Energy Board allows, a process that allows all members of the public to have a say on a project that’s of concern to them.” For its part, the Canadian Association of Petroleum Producers, the oil industry’s main lobby group, said it supports moves that speed up approvals, but does not support cutting public input. “You’ve got to make sure you give an adequate opportunity and you don’t want to close the door on people,” CAPP vice-president Greg Stringham said. “But for us, timeliness is important. There’s got to be a structure, and I don’t know what the answer is yet.... The balancing act has to be established.”

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The Whiskey Jack Nordic Ski Club, Fort St. John, BC wishes to thank ConocoPhillips, Suncor Energy, Shell Canada and TransCanada Pipeline for donating to our Beatton Park Ski Trail Master Plan.

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Canada is looking at both legislative and regulatory changes in its quest to cut the time it takes to approve major energy projects. Changes aimed at streamlining regulatory proceedings are likely to start taking shape in the coming months, said Minister of Natural Resources Joe Oliver, who is pushing for speedier approvals after more than 4,000 people registered to comment on Enbidge’s Northern Gateway oil pipeline to the West Coast from Alberta. “We do have some focused ideas we want to deal with and we’re talking months, not years,” Oliver told reporters. “It is a matter of deep concern that our regulatory process is not as effective and expeditious as it should be, and so if we’re going to deal with a time issue, we’re going to do it in a timely way.” Oliver has invited controversy by saying that many of those who signed up to participate in the Northern Gateway hearings were part of foreign-funded radical groups bent on stacking hearings to delay them. The Joint Review Panel conducting the proceedings added about a year to the schedule to accommodate all who wanted to comment. However, regulatory streamlining has been part of Ottawa’s plans, articulated last summer, to develop an energy strategy aimed at boosting and diversifying oil

exports. Enbridge’s pipeline would move 525,000 barrels of oil sands-derived crude to the Pacific Coast, where it would be shipped to Asia and California. Environmentalists are wary of any moves that they say might lessen protections contained in the National Energy Board and Canadian Environmental Assessment Agency acts. Those agencies are conducting the Northern Gateway hearings, which began in January. “The eyes of the world are watching this resource,” said Jennifer Grant, Director the Oil Sands Program for the Pembina Institute. “We certainly want to see our government support


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profiles

MUSIC TO OUR EARS The underground musicians of the natural resource sector

james waterman Pipeline News North If Risley Equipment was a rock band, they would be an underground group who is rarely, if ever, heard on the radio, but still makes great music. That is the manner in which Dean Isley describes the Grande Prairie, Alberta company of which he is vice president. He simply believes that Risley takes a different approach to business – and innovation – than other companies operating in the natural resource sectors of western Canada. “The first most important thing is we’re actually working with people,” said Isley. “Innovation is in a vacuum if it isn’t working with the community and working with other people that have ideas.” That attitude stems from an introduction to Doug Kulba of Alberta Environment and a fairly new approach that the government had begun to use when dealing with the natural resource industry, a program known as Partners in Resource Excellence. “From the perspective of today’s industry, where everyone’s looking to make a profit, a quick buck, people look out, basically, for themselves, not for the community,” said Isley. Risley Equipment didn’t want to operate that way. “Our idea of innovation [is] being able to leave a light footprint on the ground, and leave as much resource and get [as much] value out of that resource that we can with the equipment that we design and build right here in Grande Prairie.” The equipment they offer has applications in the oil and gas sector, as well as forestry and agriculture. “We have a group of people and companies that are quite diversified in all aspects of design, manufacturing, marketing, distribution – the full 360 to build a component from a [sketch on a] napkin,” said Isley. “And that component is usually part of

a system or a process that started out in the field. If you had an idea about something that you wanted to do, we would help you either find a resource that would be able to help you out, or that resource might be ourselves. So, that’s pretty well anything.” Isley gives credit to Kulba and Partners in Resource Excellence for creating the conditions that allows Risley Equipment to be innovative. “Number one was trust,” said Isley, describing the benefits of participating in that program. “Work that was worthwhile. Independence to reach the same goal, but through our own means. And sharing in the outcome.” “I’m trying to be really simple, because it’s really simple what we do,” he continued. “With our partners and with our employees, everything’s on the same concept. So, the generalities are, you know, well, we produce a machine, and it’s 300 [horsepower], and it’s the best thing since sliced bread. I can tell you all that until the cows come home, but that’s not what we do. “It’s what you want done, and what the value is to you, and how that affects the environment and the community. So, we basically are designers and engineers and mechanics and millwrights and electricians and computer programmers that will take an idea, understand the environment that we’re in, the community that we’re following, what the practices are that are the best practices. We get that feedback right from the guy that sits in the seat that’s actually in the environment. Understand it. And with our group here, we layout to see if there’s value that we can add. And if there is, usually, we do that at our own expense. And we give the product or solution to the end user to validate it. And if that validation comes out and says, ‘Yeah, I can make a living,’ then his success is our success. And we sell our solution,” he said. “We’ve got some really good music coming out.”

Risley Equipment has worked with Partners in Resource Excellence to develop and test machinery used in the natural resources sector at the Evergreen Centre at the Evergreen Centre for Resource Development and Innovation in Grande Prairie. The site allows the company test their new equipment in difficult terrain such as wetland and muskeg. photOS COURTESY OF DOUG KULBA, ALBERTA ENVIRONMENT


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BC LNG Export Co-operative receives export license james waterman Pipeline News North A second venture is set to enter the burgeoning liquefied natural gas (LNG) industry in British Columbia. On February 2, the BC LNG Export Cooperative followed in the footsteps of the KM LNG Operating General Partnership by receiving a twenty-year license from the National Energy Board (NEB) to export LNG from the west coast of Canada to Asia-Pacific markets. However, BC LNG is employing a much different business model than the one set out for KM LNG, the first Canadian LNG project to obtain an export license, which was granted by the NEB in October. It is thought that the co-operative model will allow smaller energy companies that lack the financial resources, natural gas supplies and market contacts of major industry players such as Apache Corporation, Encana and EOG Resources – the three companies involved in KM LNG – to get their feet in the door of the LNG world. “It’s really interesting the way they set up that co-op,” said Greg Stringham, Vice President of Oil Sands and Markets with the Canadian Association of Petroleum Producers (CAPP). The group was pleased to hear that another LNG project had received its export license. “We met with them and talked about their concept versus some of the other concepts that are more backed by companies,” he continued.

“And this does provide them an opportunity for people to use this more as an opportunity for them to access that market on an occasional basis rather than the long term commitments that are normally required for LNG projects. So, it’s an interesting idea.” “What the co-op does is it provides open access to new infrastructure and markets,” said Eric Le Dain, Senior Vice President of Strategic Planning, Reserves and Marketing with Enerplus Corporation, one of the participants in the project. “And the way it’s structured, you don’t have to, as a smaller player, invest the money into the infrastructure or liquefaction facilities.” Enerplus decided to get onboard as a founding member of the co-operative because of its “compelling structure.” “Within the co-operative membership, there are buyers, sellers and some intermediaries,” he explained. “And so the sellers will offer in gas for a certain term and price and volume, and buyers will do similarly.” Cameron Gingrich, Senior Manager of Gas Services with energy sector consulting firm Ziff Energy Group, pointed out that most of the project participants – a list that also includes junior companies such as Birchcliff Energy and Northpoint Energy – produce considerably less natural gas than the oil and gas giants, a fact that could exclude them from the LNG marketplace and the associated revenues if not for this type of co-operative venture. “So, certainly, it gives them the oppor-

tunity to get some of that LNG price uplift, the higher price associated with LNG across the rest of the world,” he said. “A project of that scale, which is looking for contracted or investor suppliers of natural gas, does open up the opportunities for a range of companies to see if it presents some opportunities for gas sales,” echoed Gary Leach, Executive Director of the Small Explorers and Producers Association of Canada (SEPAC). Leach also suggested that it could be necessary to export such large volumes of natural gas in order to push domestic natural gas prices back up to reasonable levels that all variety of industry players would need to be involved regardless of the model employed by any specific project. “When they got their export permit, they hadn’t necessarily secured from their own reserves 100 per cent of the gas that’s likely to flow into that project,” Leach said of KM LNG. “And there may be opportunities for other gas suppliers to deliver gas supplies into that system as well.” “Some people think we probably need [to export] seven or eight bcf (billion cubic feet) of gas a day to have a material impact on North American gas prices,” he continued. “So, that’s like seven or eight Kitimat-sized LNG export projects.” However, Leach did note that proposed LNG projects in the United States would also play a role in driving up the domestic price. According to Leach, if LNG exports do occur to that extent, the industry

could see a situation in which Pacific Rim prices drop and North American prices rise until they “converge around a global happy medium.” “Clearly, you’ve seen a lot of interest rising in this, and you’ve seen it, not only in Canada, but all over North America with the abundance of shale gas that has come into production,” said Stringham. “It really does require for us to look for a diversity of markets. With the surplus of supply that’s here, it’s keeping prices relatively low, and we see the growth in demand that’s coming from, in particular, the Asian market. And again not just China, but China, Japan, Korea, Thailand. Many of those countries over there clearly see Canada as being a very reliable, secure supplier.” Much of the discussion about LNG has been focused on China, but Gingrich feels BC LNG could be of greater interest to other markets. “Obviously, the [proposed] Shell [Canada LNG] project seems to have a lot of the buy-side behind it with the Chinese National [Petroleum Corporation (CNPC)], KOGAS (Korea Gas Corporation) and Mitsubishi partners in that project,” he said, adding that Malaysia’s Petronas has also partnered with Progress Energy. “So, this is going to be small scale project,” he continued. “So, I would think that that is more attractive to maybe even smaller buyers in Japan or in the rest of Asia to consider.” 29458


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WORKFO R C E The courses listed in the monthly calendar are accurate as of February 9. However, new courses are being added on a regular basis at each NLC campus.

MARCH M O N D AY

CH – Chetwynd Campus DC – Dawson Creek Campus FN – Fort Nelson News Campus FSJ – Fort St. John Campus TR – Tumbler Ridge Campus

CO URS E S

CA M P US E S

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T U E S D AY

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CORE – Conservation & Outdoor Recreation Education GODI – General Oilfield Driver Improvement OFA – Occupational First Aid OFA TE – OFA Transportation Endorsement OHH – Oilfield Heavy Hauler PAL – Possession and Acquisition License (Canadian Firearms Safety Course) UTV – Utility Task Vehicle (side-by-side)

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H2S Alive CH

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OFA 1 DC

Confined Space 2 CH H2S Alive DC Airbrakes FSJ

OFA 1 CH UTV FN Confined Space TR

GODI CH H2S Alive FN

H2S Alive FN OFA 1 FN LDV FSJ

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OFA 1 DC

H2S Alive DC Airbrakes DC

Fall Protection CH OFA 1 FN GODI FN Fall Protection FSJ

H2S Alive FN OFA 1 FN Confined Space FSJ

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OFA 1 FN Application of Electrical Codes FSJ

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OFA 1 CH OFA 1 DC Basic Security DC OFA 1 FN

H2S Alive DC H2S Alive FN Airbrakes FSJ First Aid for Mines TR

Fall Protection DC H2S Alive FN

GODI DC Forklift Safety FSJ H2S Alive FN OFA 1 FN Spinal Immobilization for Mines TR

OHH DC Confined Space FN

PAL DC Application of Electrical Codes FSJ

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GODI FSJ

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FOODSAFE 1 FN CORE/PAL TR

OFA 1 CH FOODSAFE 1 DC Application of Electrical Codes FSJ FOODSAFE 1 FN

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ON-LINE SAFETY TRAINING (Morning start times recommended).

nlc.bc.ca

• WHMIS • Ground Disturbance • PST (Petroleum Safety Training IRP #16) • CSTS (Construction Safety Training System) Dawson Creek 250-784-7576 Hugh McNair hmcnair@nlc.bc.ca

Tumbler Ridge 250-242-5591 Al Miller amiller@nlc.bc.ca

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

Fort St. John 250-785-6981 Bob Haugen bhaugen@nlc.bc.ca

Fort Nelson 250-774-2741 Ramona Nehring rnehring@nlc.bc.ca

Fort Nelson 250-774-2741 Kate Ring kring@nlc.bc.ca

• Transportation of Dangerous Goods (TDG)

For more information or to register for any course listed in the monthly calendar: • call the appropriate Workforce Training coordinator (at left) • call toll free 1-866-463-6652 and ask for the Workforce Training department at the campus where the course is offered • go online to nlc.bc.ca, click Workforce Training under the Programs tab.


FEBRUARY 2012

TTRRAINING AINING For updated schedules, go to nlc.bc.ca and click on the Workforce Training menu under the Programs tab.

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Visit nlc.bc.ca for a full listing of Workforce Training courses under Programs.

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OFA 1 DC Solar Thermal Theory DC

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CORE DC Fall Protection DC Forklift Safety FSJ

Forklift Safety DC

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OFA 1 DC OFA 3 (2 weeks) TR

CH – Chetwynd Campus DC – Dawson Creek Campus FN – Fort Nelson News Campus FSJ – Fort St. John Campus TR – Tumbler Ridge Campus

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14 OFA 1 CH

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21 FOODSAFE 1 DC PAL DC FOODSAFE 1 FSJ

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28 OFA 3 (exams) CH

CORE – Conservation & Outdoor Recreation Education GODI – General Oilfield Driver Improvement OFA – Occupational First Aid OFA TE – OFA Transportation Endorsement OHH – Oilfield Heavy Hauler PAL – Possession and Acquisition License (Canadian Firearms Safety Course) UTV – Utility Task Vehicle (side-by-side)

Are you interested in: • taking a course that currently is not scheduled? • having a course designed specifically for your company? • having a course offered at your workplace? Our Workforce Training Department can organize a wide variety of courses for industry, business and the community

CUSTOMIZED INDUSTRY SERVICES We can help improve your employees’ skillset and efficiency with training developed specifically for your company in the classroom or on-site.

AVAILABLE COURSES – Call the Workforce Training Department at your nearest campus. • Air Brakes • ATV Rider • Boom Truck Operator • Snowmobile Rider Safety • Confined Space • Construction Safety Training • COR/SECOR • Detection and Control of Flammable Substances • Driver Training • Electrical Code Update

• Electrical Course for Instrumentation Personnel • Enform Courses • Enform Chainsaw Safety • Fall Protection • Firefighting • First Aid • Forklift Safety • Gas Processing (all levels online) • GPS

• General Oilfield Driver Improvement (GODI) • Global Ground Disturbance • Hazard Assessment • Hoisting and Rigging • H2S Alive • H2S Awareness • Incident and Accident Investigations • Management Skills • Oilfield Hauler

• Oilfield Swamper • Petroleum Safety Training (PST.IRP #16) • Pesticide Applications • Portable Extinguisher Firefighting • Power Engineering (all levels online) • Private Security Training • S100 Fire Suppression • Safety Program Development

• Safety Training for Wellsite Supervisors • Scaffolding • Seismic Blaster Safety • Track Inspection • Traffic Control • Transportation of Dangerous Goods (TDG) • Well Blowout Prevention …and more!


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community FIVE NLC STUDENTS WIN AWARDS staff writer Pipeline News North Northern Lights College announced the recipients of five Spectra Energy Oil and Gas Training Entrance Awards on February 7. The awards, valued at $1,500 each, were available to any student enrolled in full-time studies in the Environmental Practice, Oil and Gas Field Operations, or Power Engineering and Gas Processing programs. The recipients were: Kyle Davidson, Environmental Practice, Fort St. John; Matthew Hawryluk, Power Engineering and Gas Processing, Fort St. John; Cody Henderson, Oil and Gas Field Operator, Fort St. John; Chris Romano, Oil and Gas Field Operator, Fort St. John; and Meagan Hiebert, Power Engineering and Gas Processing, Fort Nelson.

Award recipients (counterclockwise from top left): Kyle Davidson; Matthew Hawryluk shaking hands with NLC Vice President Peter Nunoda; Cody Henderson receiving his award from Nunoda, Megan Heibert receiving her award from NLC instructor Fred Golar; and Chris Romano receiving his reward from Nunoda. photO courtesy of nORTHERN LIGHTS COLLEGE

Canada inks trade deals with China Daily Oil Bulletin China and Canada on Wednesday, February 8 signed a series of deals to boost modest levels of bilateral trade and finished negotiations on a foreign investment protection pact after 18 years of talks. Canadian Prime Minister Stephen Harper, keen to boost oil exports to China and thereby reduce reliance on the U.S. market, said the investment agreement would help increase trade. “This is a historic step forward. It will provide greater predictability and protection for Canadians seeking to do business in China,” he told a news conference after talks with Chinese Premier Wen Jiabao. Both nations will need to conduct a legal review of the deal and then sign and ratify it before it can take effect. The relatively small amount of bilateral trade -- which amounted to less than $60 billion in 2010 -- shows how much potential there is for growth. Harper said Canadian investment in China rose by 39 per cent in 2010 from 2009 to hit nearly $5 billion. Chinese investment in Canada the same year totalled $14 billion, an increase of nine per cent from 2009. Harper wants to ramp up exports and

reduce Canada’s reliance on the huge U.S. market. He is particularly keen to increase exports of oil. Ottawa intensified its calls to diversify exports last month after Washington vetoed a pipeline that would have carried crude from Alberta to Texas. China does not import any Canadian oil, but says it is interested in doing so. The two nations also signed an extension of a memorandum of understanding on energy issues covering oil, gas and nuclear energy as well as trade and investment. Harper said the investment deal would not override existing Canadian laws, which say the government can reject foreign takeover bids it deems not to be in the national interest. Chinese firms have spent more than $5.5 billion on Canadian energy assets in the last seven months alone, a trend that could eventually challenge the government. A major poll last year showed 76 per cent of Canadians opposed the idea of a state-owned Chinese firm trying to buy a controlling stake in a Canadian company. A Chinese Foreign Ministry statement paraphrased Wen as telling Harper that China was willing to increase its imports of Canadian energy and natural resources.

Encana executive resigns Daily Oil Bulletin Mike Graham, President of Encana Corporation’s Canadian Division, has resigned from the company effective immediately, a spokesperson for Canada’s largest natural gas producer said on Tuesday, February 7. The company did not say why Graham, who has run all of Encana’s Canadian operations since 2007, was leaving. “We’d like to thank Mike for his many years of service [and] wish him well in his future endeavours,” said Carol Howes, a

spokesperson for the company. Graham will be replaced by Mike McAllister, currently senior vice-president of Encana’s Canadian division. The company has major shale gas holdings in northeastern British Columbia, including the massive Cutbank Ridge property where Encana is looking to add a joint-venture partner to help fund development. It is expected to announce a deal before the end of March. Encana shares fell 37 Canadian cents to $19.83 on Tuesday on the Toronto Stock Exchange.

Veresen completes acquisition of Encana midstream assets Daily Oil Bulletin Veresen Inc. announced on February 8 that all conditions precedent for its previously announced acquisition of the Hythe-Steeprock midstream gas gathering and processing complex from Encana Corporation have been satisfied. The deal was expected to be finalized on or shortly after February 9. The Hythe-Steeprock complex includes two natural gas processing plants with combined functional capacity of 516 million cubic feet (mmcf) per day, as well as approximately 40,000 horsepower (hp) of compression and 370 kilometres of gas gathering lines. Concurrent with the closing of the acquisition and upon satisfaction of certain escrow release conditions, each subscription receipt issued by Veresen on Dec. 16, 2011, will be converted, without payment of additional consideration or further action by the holder, into one common share of Veresen.


FEBRUARY 2012

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NATIONAL Fracking moratorium? Council of Canadians’ hydraulic fracturing poll irks CAPP james waterman Pipeline News North A recent poll commissioned by the Council of Canadians has drawn the criticism of the Canadian Association of Petroleum Producers (CAPP). The poll, conducted by Environics Research from Jan. 5 to 15, shows that 62 per cent of Canadians support a full moratorium on hydraulic fracturing until the completion of a pair of reviews of the practice that have been initiated by the federal government. CAPP is critical of that result because they believe that the poll question is leading, using terms and phrases like “blasted,” “environmental concerns,” “water contamination,” “carbon emissions,” “impacts on public health” and “potential environmental impact,” but not mentioning efforts to mitigate environmental damage or the economic benefits of the natural gas industry. “I think it reflects some concern,” CAPP spokesperson Travis Davies said of the poll. “And we knew that. Clearly, it’s leading, which is all well and good. Obviously, the Council of Canadians was after something, and I think they got it.” Indeed, a media release issued by the Council of Canadians on Monday, Feb. 6 suggested that they were looking for support for their anti-hydraulic fracturing agenda. “Communities across Canada are saying ‘no’ to fracking projects,” said Maude

A new Council of Canadians poll shows that the majority of Canadians support a moratorium on hydraulic fracturing operations, like this Encana site in the Horn River Basin of northeast B.C. photO courtesy of encana

Barlow, National Chairperson of the Council of Canadians. “It’s time for the federal government to listen and ban the practice. At the very least, there needs to be a moratorium to provide time for a federal review the serious consequences of fracking.” “The Council of Canadians opposes fracking because of its high water use, its high greenhouse gas emissions, its impacts on human health, the disruption it causes to wildlife, and the danger it poses to groundwater and local drinking water,” added Emma Lui, Water Campaigner for the Council of Canadians.

“The recent announcement of voluntary Regardless of the poll results, Lui and ‘guiding principles’ confirms the frackthe Council of Canadians believe that ing industry is worried about the growing it only makes sense that the use of an opposition,” she continued, referring the industry practice that is under review Guiding Principles for Hydraulic Fracturto determine if there are any negative ing released by CAPP in September. impacts should be put on hold while that “It also confirms that Maude Barlow is review is underway. concerned that we’re doing something “The federal government has commisright and we’re going to win over some sioned two reviews – one internal and public opinion,” Davies responded. one independent and external,” said Lui. “These voluntary guidelines set by in“We feel quite strongly that there should dustry are classic greenwashing,” added be at least a moratorium until we know Lui, who disagrees with the notion that more about [hydraulic fracturing] and until the question was leading. the reviews are complete.” “We actually worked with Environics to “That’s essentially why we commisensure that it was not leading,” she said sioned the poll,” she added. “We wanted in an interview. “We do raise the fact that to see what other Canadians thought there [are] concerns, which is just a fact, about it.” that there are many communities that are The Council of Canadi Canadians has concerned about it started an “Obviously, the Council also in terms of environonline petition mental health and calling for an of Canadians was after end to hydrauwater contamination. And so that is lic fracturing in just true.” something, and I think Canada. Davies appeared “The next step to be perturbed that really is, hopethey got it.” the poll question fully, that the mentioned those federal govern– Travis Davies, CAPP concerns as facts, ment will answer but failed to menthe call in that tion the fact that 7500 wells have been they will implement a moratorium until fractured in British Columbia and 167,000 the reviews are complete,” said Lui. “And wells have been fractured in Alberta then, also, same thing with the petition in without a confirmed case of fracturing ad- that there’s actually been lots of response versely impacted groundwater supplies. with the petition and so we’re hoping to “The record is out there,” he said. deliver them at some point.”

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FEBRUARY 2012

environment

COINS FOR CARIBOU Fee and levy changes to help threatened animals

Changes to oil and gas fees and levies will provide funding for caribou research. SUBMITTED photO

james waterman Pipeline News North The caribou of northeast British Columbia stand to be the beneficiaries of changes to oil and gas industry fees and levies announced by the BC Oil and Gas Commission on January 9. Effective immediately, new production levies are $1.50 per cubic metre of petroleum and $0.75 per thousand cubic metres of marketable natural gas. The Science and Community Environmental Knowledge Fund (SCEK) will receive $0.08 of the $1.50 petroleum levy and $0.04 of the $0.75 natural gas levy. The changes also include a new $18,700 fee for a well permit applications if the applicant isn’t an existing permit holder and a $10,700 if the applicant is an existing permit holder. SCEK will receive $400 from each of those fees. Lastly, liquefied natural gas (LNG) plants will require different application fees than other facilities. Those fees are $50,000 for a plant with a capacity less than 5.634 million cubic feet (mmcf) of natural gas per day and $100,000 for facilities exceeding that capacity. The fee and levy changes have been made to provide funding specifically for caribou research through SCEK, an oil and gas industry-sponsored program that mostly funds environmental research and is managed by a steering committee of representatives from the Canadian Association of Petroleum Producers (CAPP), the Small Explorers and Producers Association of Canada (SEPAC) and the Commission. However, this new caribou research fund will be its own entity, an extension of a Memorandum of Understanding (MOU) between CAPP and three provincial ministries, the Ministry of Forests, Lands and Natural Resource Operations (FLNRO), the Ministry of Environment (MOE) and the Ministry of Energy and Mines.

“The province has an implementation plan for the management of boreal caribou,” said Steve Dunk, BC Operations Manager with CAPP, referring to the draft Implementation Plan for the Ongoing Management of Boreal Caribou that was released last August. “So, what this MOU did was sort of establish a framework for collaboration between industry and government with regard to implementation of that caribou plan,” he continued. “And, as part of that, it enabled funding essentially for caribou research. And that funding would be up to $2 million per year. And if you do the arithmetic on the actual levy, based on anticipated production and anticipated applications – because it’s partly on production and partly on applications – it should raise in and around that amount of money.” “Obviously,” added Dunk, “it’s never going to be perfect, because you’re basing it on production estimates and applications, but it should raise pretty darn close to that amount.” Dunk described SCEK as a banker for the caribou fund, as that branch of the program will have its own distinct governance that includes the MOU Technical Working Group and the MOU Strategic Lead Team. “They’re looking at current research, where are there gaps, where do they think the research could be best applied,” said Dunk, explaining the function of the Technical Working Group. The Strategic Lead Team lets them know if they are on the right track. “And both of those groups have industry and government representation from the signatories of the MOU,” said Dunk. Shad Watts, Director of Community Consultation and Regulatory Affairs for Shale Gas with Nexen, is part of the Strategic Lead Team along with other oil and gas industry representatives, an Assistant Deputy Minister from MOE, and David

Pryce, Vice President of Operations with CAPP. Watts also participated in drafting the MOU. “We saw that there was a need to do better for caribou,” said Watts. “There was a need to get to effective mitigation. … What we said is we know that there are pathways to caribou decline. Let’s develop some research programs around those pathways so that we can better mitigate and address those pathways.” One of those programs is a four-year study being conducted by Craig DeMars, a researcher from the University of Alberta who is examining caribou calving habitat and calf survival in the shale gas play of the Horn River Basin, where access roads, seismic lines and pipelines are thought to have played a significant role in caribou decline by making hunting easier for predators like wolves and grizzly bears. That project is currently entering its second year and will be one of the first recipients of support from this new caribou fund. “The SCEK Fund has [been] very important to the current caribou research being conducted in northeastern B.C.,” said DeMars. “Quite simply, without the support of SCEK, the project would not have gotten off the ground. The management structure of SCEK is also excellent in facilitating the implementation of the project itself. They don’t simply hand the money over and walk away. They take a genuine interest in the project throughout its implementation without trying to unduly influence the project’s findings and outcomes.” A Research and Effectiveness Monitoring Board has also been created to evaluate the work being done with caribou fund support. “We have invited First Nations participation,” said Dunk. “I don’t know yet whether we have got any First Nations participation.” “So,” he continued, “that’s a group that looks at the research being done and says, ‘Well, is it actually effective? Is it meaningful for caribou? And is it meaningful for industry?’ So, there is an opportunity for First Nations to engage. But, quite frankly, I’m not sure what the status of that [is].” Dunk noted that CAPP hasn’t received any negative feedback from its member companies concerning the fee and levy increases or their application to caribou research. “We never like to have to pay more money, particularly in an extremely low gas price environment,” he admitted. “So, I think, really, the feedback we’re getting

from companies, which is appropriate, is: ‘Make sure that the funds are well directed, that it’s meaningful research.’ And certainly the DeMars project, as an example, is definitely the kind of thing we do want to fund.” “It’s a significant commitment from industry,” said Encana spokesperson Carol Howes. “We recognize the need to take some concrete and progressive action towards protecting the caribou and we believe it’s a very valuable program.” However, SCEK has received some criticism recently because of a project it has funded to develop a management plan for Stone’s sheep in the MuskwaKechika region of northeast B.C. “It took longer than anticipated,” Dunk said of that project. “And we believe that was partly because of the way the governance was structured. I don’t think there was full clarity on responsibilities, on which group was to do what.” “We looked at that and went, okay, let’s have a strong governance structure through this MOU.” The Stone’s sheep study isn’t the only target for criticism of SCEK-related programs and initiatives. The Canadian Parks and Wilderness Society has taken issue with this new plan to fund caribou research. Director of Terrestrial Conservation Chloe O’Loughlin wonders if this is just a case of industry paying lip service to the caribou issue or trying to appease a guilty conscience stemming from industrial impacts on caribou habitat.” “It’s counterproductive or counterintuitive,” said O’Loughlin, pointing out that an increase in the very activity that is likely causing the decline of the caribou herds in northeast B.C. would also mean increased funding for caribou research. “We remain very concerned about the caribou in face of massive industrial development,” she added. “And we urge the government – both governments, the provincial and federal government – to development better plans than they have.” “They are required by federal legislation to make sure that those caribou do not become extinct,” O’Loughlin continued, referring to oil and gas industry companies. “And they are possibly the most endangered caribou in Canada. So, they need to do much more than research. And the other thing I would say is that all of the oil and gas companies need to work together much more effectively so that there’s one road instead of everybody having a road and shared pipeline rather than everybody having their own pipelines. And that is really something that the industry can do to step up.”

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PIPELINE NEWS NORTH •

21

between a rock and a hard place Fort Nelson First Nation standing up against frac sand mining james waterman Pipeline News North The quest for local sources of sand with the quality necessary for hydraulic fracturing has led four companies to apply to the British Columbia Ministry of Forests, Lands and Natural Resource Operations (FLNRO) to develop quarries to mine the material in the Dazo Creek area of the Horn River Basin. The plans have received strong opposition from the Fort Nelson First Nation, particularly the Director of their Lands Department, Lana Lowe, as the land in question falls within their traditional territory, and they believe it is rich with cultural and ecological significance. Culturally, the region is home to two village sites, Fontas and Kantah. Fontas is still used quite heavily by one Fort Nelson First Nations family. “The area that Dazo Creek is in is considered their grocery store,” said Lowe. Ecologically, the land is considered important caribou habitat that features valuable winter food sources for the ungulates. Actually, portions of that region, which happen to intersect with areas proposed for fracturing sand mines in at least two of the applications, are part of Resource Review Areas (RRAs) established by the provincial government in 2010. The RRAs are set out to be free from oil and gas land tenures for five years so that they can be used to study caribou conservation issues. The big issue for Lowe is that the provincial government determined that fracturing quality sand was present in that tract of land and released that information without first conducting an assessment of the environmental impacts of developing the resource to its fullest extent through the Environmental Assessment Office (EAO).

Caribou rely on lichen for food during the winter. Such food sources are said to be plentiful in the area facing frac sand mine applications. JAMES WATERMAN photO

“It is not the Environmental Assessment Office’s mandate to conduct Environmental Assessments (EAs) on areas in advance of applications for activities that have potential environmental impact,” said a government spokesperson. “The process is application driven and based on specific criteria.” However, Lowe pointed out that the Minister of Environment does have the authority to order an EA if it is believed that one is warranted by the circumstances. That did not occur. Instead, four companies made applications to develop fracturing sand mines, each scoping their project so that they would remove just below 250,000 tonnes of sand per year, the threshold that automatically triggers an EA. Collectively, the four operations would extract nearly one million tonnes of sand per year. “I think it’s sketchy,” said Lowe. “They knew that the deposit was there and they knew it was appropriate for frac sand. They should have done an environmental as-

sessment of the full capacity of what’s there. That would be responsible. Due to these circumstances, Fort Nelson First Nation is taking a stand against fracturing sand mining in their territory. “We’re adamant that this frac sand mine is not going ahead without adequate environmental assessment and meaningful consultation with Fort Nelson First Nation,” said Lowe. The government noted that that consultation has begun. However, according to Lowe, the extent of consultation to date has been a letter from FLNRO that was received on Jan. 4, 2012. Fort Nelson First Nation responded by requesting a meeting with FLNRO Minister Steve Thomson. They have received good news from their perspective concerning the applications that intersected with the RRAs. “Applications that entirely overlap the Resource Review Areas have been withdrawn by the proponent or disallowed by the ministry,” said the government spokesperson. “Two applications that fall outside the boundary of the RRA are currently being reviewed by the ministry. No decisions regarding these types of applications will be made without first obtaining expert input and advice, and consulting with the Fort Nelson First Nation.” Lowe is hopeful that the other applications will also fail to receive approval and companies will have to continue to transport fracturing sand from other jurisdictions. “With all the cumulative effects [of natural gas exploration and production],” she said, “Do we really need frac sand mining thrown on top of that, to ensure the extinction of caribou? “They don’t have to do everything here.”

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special feature

what the man said Whistleblower claims PMO is targeting environmental charity

DIGGING FOR ANSWERS: Andrew Frank lost his job at ForestEthics after going public with information that the Prime Minister’s Office had labeled the organization an enemy of Canada. The PMO has denied those allegations. photO COURTESY OF Andrew frank

james waterman Pipeline News North Canadian environmental organization ForestEthics has allegedly been declared an enemy of the state by the federal government for their opposition to the Enbridge Northern Gateway pipeline project that is currently under federal review, according to an affidavit signed by former ForestEthics staffer Andrew Frank on Monday, Jan. 23. Frank was fired from his position as Senior Communications Manager with ForestEthics Canada after announcing his intentions to go public with information that a representative from the Prime Minister’s Office (PMO) allegedly called ForestEthics an “enemy of the government of Canada” and an “enemy of the people of Canada” during a meeting with Ross McMillan, President and CEO of Tides Canada. ForestEthics is a charitable project of Tides Canada. The affidavit explains that Frank and other ForestEthics staff were informed by the group’s Conservation Director, Pierre Iachetti, on January 5, 2012 that the PMO had made those comments to McMillan and that Tides Canada was being given a certain amount of time to sever ties with ForestEthics or risk losing all their charitable projects due to increased government scrutiny of their charitable organization status. It also notes that the story was reiterated by Merran Smith, Director of the Tides Canada Energy Initiative, during a function on Friday, January 6 at which McMillan was present. Frank informed McMillan that he would be making that information public on Friday, Jan. 20. “Media will be coming to you next week and you need to decide what your answer’s going to be, and I hope you tell the truth, and I hope you get on the right side of the story,” said Frank, recounting his conversation with McMillan that day. “And him and his vice president were very agitated. And they just said, ‘This

isn’t the way to fight back. This is like setting off a bomb in your own house. These guys are going to come after us. They’re going to destroy us.’” “I take my firing as just another sign of how terrified they are of this government,” he told Pipeline News North. “They just don’t want to be seen as having done anything to betray this conversation they had, even though the nature of the conversation was a very aggressive, sort of a bullying type thing.” Frank had his reservations about going public, but felt he had to do so because of the language used by the PMO, which he calls “the language of anti-terrorism” in an open letter that he posted online on Monday, Jan. 23. “I haven’t been sleeping a lot,” he said. “It’s not an easy thing to be doing this, because a lot of people that I had to name in my affidavit probably won’t ever talk to me again.” The veracity of his claims remains in doubt because of the fact that those claims have been contradicted by other parties involved in the controversy. “The only thing we’re saying about that is that the statements that [are] attributed to the government in that report are, in fact, inaccurate,” said PMO Press Secretary Sara MacIntyre. McMillan also refuted Frank’s version of events in a statement released on Tuesday, Jan. 24, which also noted that Tides Canada would not be doing interviews to discuss Frank, his open letter or his affidavit. “When we talk about building pipelines in this country, it’s a major public policy issue,” said McMillan. “All voices should be heard. Open, informed and honest debate is what makes Canada a great, prosperous and democratic country. On that point, we agree with Mr. Frank.” “That said,” he continued, “Tides Canada does not speak about our conversations with government, partners, the private sector or other parties, just as we don’t make public internal discussion with

projects and grantees. But I will say that colleagues. Mr. Frank did not take part in any con“But the bigger picture remains: It is versations we’ve had with government a dark and chilling day for Canadians and his account of our conversations with when our government tries to silence government is inaccurate.” and intimidate non profit organizations Frank’s affidavit states that ForestEthlike ForestEthics, and the thousands of ics Executive Director Todd Paglia was citizens and civil groups who, like us, are among those in the organization who concerned about the direction this counhave repeated the story about the meettry is taking and are speaking out.” ing between McMillan and the PMO since Emma Gilchrist, Communications Jan. 6. Director with the Dogwood Initiative, Additionally, the document includes another Canadian environmental orgaa Jan. 17 email from Paglia to Frank in nization opposed to Northern Gateway, which Paglia discussed a conversation said that her group hasn’t had the type he had with McMillan and indicates that of experience with the PMO outlined in Tides Canada was set to change their Frank’s statements and affidavit, but she story to deny that the PMO had made did note that Frank’s claims are believany remarks about ForestEthics being an able considering the recent behaviour of enemy of the state. ForestEthics subsethe federal government. quently changed course to remain silent “It does seem to be fairly consistent on the subject as of Jan. 19, according to with a lot of the things that we have Frank’s statement. heard out of the PMO lately, just in terms Frank appears to be as angered by of public comments that [Prime Minister those events as he was by the alleged Stephen] Harper and [Natural Resources comments from the PMO. Minister Joe] Oliver have been making,” “There was a look of fear and disbelief said Gilchrist, referencing Oliver’s open on my fellow staff letter of Jan. 9 that “It does seem to characterized the enmembers’ faces the day they were told vironmental opposition our own government be fairly consistent to Northern Gateway had labeled them as radical ideologues. enemies of the state,” with a lot of things Joyce Murray, he wrote in his open Liberal MP for Vanletter. Quadra, whose that we have heard couver “Our administration file includes matters coordinator had tears of Asia-Pacific trade from the PMO.” in her eyes. In the and western economic days that followed, diversification, also our employees drew parallels between – Emma Gilchrist couldn’t sleep well. this latest incident and Dogwood Initiative They lost their appeOliver’s letter. tites, and they began “I was aghast that to fear for their own the prime minister and personal safety and his minister would civil liberties, and those of their families interfere in a regulatory process like that,” and loved ones. They began looking over said Murray. their shoulder, out of fear and paranoia, “I mean, the process is intended to because their own government might be hear from people. And I think it was comwatching them.” pletely irresponsible. ForesEthics also refused interview “My fear is that it’s a deliberate requests, but they did hold a conference strategy on the prime minister’s part to call on the afternoon of Jan. 24 to discuss gain support for possible drastic and the incident and issued a statement from draconian changes to the environmental Valerie Langer, Director of BC Forest assessment process itself and the laws Campaigns, the same day. that will really take away [the Canadian “Today’s stories in the press are just Environmental Assessment Agency’s] the next shoe to drop in a targeted camrole in helping to balance the impact of paign by the oil industry and the Harper industrial development and environmengovernment to silence Canadians who tal protection.” are concerned about the controversial Gilchrist thinks that the manner in Enbridge pipeline,” said Langer. which Frank has gone public with this “The interests of the few, including information adds credibility to his claims. massive multinational corporations that “It’s a signed affidavit,” she said. “I own large investments in the [oil sands], don’t really want to comment on it too are being put above the citizens and First much, because I don’t honestly know a Nations who oppose highly controversial lot about it. But, I think, when you look projects like the [oil sands] that threaten at the tone of comments that have been the health and well-being of Canada’s made of late, it’s not entirely surprising to future generations.” see that kind of thing.” “We share these concerns with Andrew “The stuff these guys are willing to say Frank, who is clearly concerned about publicly is always the tip of the iceberg,” the government trying to silence Canadisaid Frank. “So, if [Oliver] comes out ans,” Langer continued. and says everyone’s a radical, well, no, “Andrew worked with us for many they’re saying more than that. They’ve years and was a valued part of this got a bigger strategy for framing people.” organization. He is no longer a member “It’s just very disconcerting,” he added. of ForestEthics’ staff because he violated “And I wasn’t an environmentalist anythe confidence of the organization, and more. I was a Canadian. And I’m never we are unable to carry out our work withgoing to take my rights for granted again out a solid foundation of trust between when I hear people talking like that.”


FEBRUARY 2012

Natural Resources Minister Joe Oliver has become a central figure in this contoversy because of his open letter in which he described some environmentalists as radical ideologues. VICTORIA TIMES-COLONIST photO

Gilchrist views this incident as another example of the federal government trying to frame Northern Gateway as a nationalist issue – and a nation-building project – in which the oil and gas industry are the patriots and the environmentalists are the foreign enemy. It reminds her of the federal government’s September, 2011 decision to withdraw their support from the Pacific North Coast Integrated Management Area (PNCIMA) project that included foreign sponsors and groups opposed to the oil sands pipeline. “Basically, the federal government cited this foreign money concern again, because an American foundation had funded this process,” she said. “It was like a multi-stakeholder process between environmental groups and First Nations and government and everything.

And it had been going on for several years. And then the federal government kind of picked up this foreign money gambit and then they killed the PNCIMA process.” As far as Frank is concerned, the government is missing the point of the debate over Northern Gateway when they pit oil interests against environmental interests in such a nationalist fashion, considering that the northwest British Columbia salmon fishery that anti-pipeline groups are trying to protect is worth over $100 million a year to the Canadian citizens of that region. “These aren’t like liberal, latte-sipping environmentalists,” said Frank. “They call it the coalition of the cowboys and the Indians,” he continued. “They don’t agree on anything, but they agree on salmon. That’s the one thing

that unites them. “It’s part of this government’s – this prime minister’s – strategy of dividing Canadians,” said Murray. “So, to demonize one group so another group will be angry at them. To me, that’s not leadership. That kind of divisive politics is beneath what we should have in Canada. The job of a leader and a prime minister should be to be having people work together to solve legitimate dilemmas of how to have a thriving economy and respect the sustainability of our ecology and our environment.” Frank sees hypocrisy in the words and actions of the federal government, particularly when it comes to criticizing foreign involvement in the anti-pipeline movement and touting the oil sands as ethical oil in the manner of Ezra Levant and the Ethical Oil Institute. “If you want to talk about foreign influence, let’s talk about Sinopec’s $10 million blank check just so Enbridge can try to force this thing through,” said Frank. Sinopec is a Chinese energy company. “And that’s just Sinopec’s share,” he added, noting that nine other companies, including the Canadian wing of France’s Total SA, have also contributed $10 million each to the cause. “And if you really want to talk about ethical oil,” Frank continued, “the Chinese government isn’t exactly ethical.” “Their arguments are clearly very hypocritical,” said Gilchrist. “They’re picking and choosing bits of information to launch smear campaigns, basically. I think it’s pretty concerning when you see the government of Canada riffing off groups like Ethical Oil, which are basically industry spin groups. And Ethical Oil is known to

PIPELINE NEWS NORTH •

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have very close ties to the government of Canada. I think that’s pretty concerning to a lot of Canadians. We’ve certainly seen that.” Since Oliver released his open letter on Jan. 9, the anti-oil-tanker petition on the Dogwood Initiative’s website has received 25,000 signatures. “Our goal for the whole year was 30,000,” said Gilchrist. “So, in the last two weeks, we’ve gotten more petition signatures than we did all of last year.” “I honestly think this is going to be a watershed moment for our country,” Gilchrist added. “The debate is unfortunately becoming very polarized. And we’re not talking about the real issues nearly as much as we should be. The rhetoric from the federal government right now – those are fighting words, basically. “You’ve got the strongest First Nations in this country adamantly opposed. You have a broad selection of British Columbians who are very strongly opposed. So, this is shaping up to be a pretty fierce battle.” “He’s clearly playing to a certain base that he has,” she continued, referring to Harper. “But the reality is that he does need votes in British Columbia to get reelected and he does need votes among moderate Canadians to get re-elected. So, that kind of base politics game – I don’t know. It might have seemed like a good idea, but given the backlash you’re seeing even among typically right wing pundits in the media, it’s not going to go well. It’s really not. Vilifying your own citizens is not a good political tactic.” “It’s a pretty extraordinary situation.”

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industry news

e

shell inks deal with petrochina

Shell has struck a deal with PetroChina to jointly develop resources in the Groundbirch area of the Montney, near Dawson Creek, B.C. PetroChina has acquired a 20 per cent stake in the operation photO COURTESY OF SHELL

Daily Oil Bulletin PetroChina is taking a 20 per cent stake in Royal Dutch Shell plc’s Groundbirch assets in northeast B.C., although financial terms were not disclosed. Shell spokesperson Stephen Doolan said that Peter Voser, chief executive officer, confirmed during the quarterly results press conference call today in London that, “PetroChina and Shell have signed binding agreements for PetroChina to acquire a 20 per cent interest in certain of Shell’s 100 per cent owned Groundbirch lands and assets in northeast B.C.” He declined to comment on the price. The deal to buy into Shell’s Groundbirch assets was completed on Wednesday, PetroChina spokesperson Mao Zefeng told Reuters, declining to reveal the value of the acquisition. Citing market talk, FinanceAsia said in a report on

Wednesday that PetroChina was planning to buy the Groundbirch stake for more than $1 billion. Shell established its position in the play through Crown land sales and a $5.9 billion takeover of Duvernay Oil Corp.. Shell is looking at plans to export LNG off the coast of B.C. On that score, last October, Cenovus Energy Inc. sold its terminal facilities at the former Methanex Corporation site near Kitimat to Shell, which is exploring the potential for an LNG export terminal on the site. Shell’s partners include Korea Gas Corp., Mitsubishi Corp. and China National Petroleum Corp. When asked about the Groundbirch deal’s link to supply an LNG liquefaction plant off of B.C.’s coast, Doolan said that today’s announcement is a separate deal that only involves the sale of a 20 per cent interest in the Groundbirch upstream project. “In terms of B.C. LNG, it’s still early days for the

project,” he said. “Last fall Shell, on behalf of the joint venture with Mitsubishi, Kogas and CNPC, completed the acquisition of the Kitimat marine terminal, formerly owned by Cenovus, and is now exploring the potential of an LNG export terminal on the site.” Doolan said that Shell is the leading international oil company in LNG with Shell ventures delivering more than 30 per cent of global LNG in 2011. “We signed six mtpa [million tonnes per annum] of LNG contracts in 2011 -- oil linked -- worth $100 billion at today’s prices,” he said. “If I look at Canada, I would see the export of LNG through the Western Canadian side as something which will happen and we are working on that with our partners,” Voser said during a conference call. “I think that’s an option. “I think we will also see some exports of LNG [coming out] of the U.S. but I still believe that this is going to be limited, given the fact that there is potential to generate more out of that gas locally; so, gas-to-liquids, gas-tochemicals.” Bill Gwozd, vice-president, gas services with Ziff Energy Group, defined a good LNG export plan as one that has five key elements: one is access to supply, which Shell has; also, it’s important to have access to highly trained staff to maintain exploration and development for 20 years, which the company also possesses; the third piece is having access to a transport system to get the gas from the production basin (northeast B.C.) to the LNG liquefier. “A little foggy here right now as the [Spectra Energy] system is an existing system in place, though more capacity might be required,” he said. “[It] really depends on the amount of LNG export. “Various transport companies could assist quickly, so I do not foresee an issue, though regulatory approval might need more time than normal. “An early start on transport will help later, on the pipeline project timetable.” Another element includes having access to an ocean going port that the community supports, and cited Shell’s purchase of the Cenovus terminal facilities. The other factor is having access to an Asia gas market.

CAPP says fracturing disclosure laws are coming Daily Oil Bulletin Moments after releasing standardized operating practices for hydraulic fracturing yesterday, the head of the Canadian Association of Petroleum Producers (CAPP) acknowledged that, when it comes to requiring disclosure on the issue, the winds of regulatory change are blowing. “B.C. has already moved on [legislating] disclosure,” CAPP President David Collyer told reporters yesterday. “Alberta is giving it serious consideration, and I would expect before too long -- we’re talking several months, rather than several years -- they’ll move to a similar place.” The six operating practices announced yesterday come less than a year after

CAPP released its new Guiding Principles For Hydraulic Fracturing. In the United States, pressure on regulators has led some states to require natural gas producers to disclose what goes into the fluids used in hydraulic fracturing, in part because some companies have resisted, often on proprietary grounds, disclosure of fluid ingredients. The pressure to legislate has come both from landowners and environmental groups. Yesterday, Collyer acknowledged similar issues are arising in Canada. “[For] service-providers, there’s a competitive issue [about] the exact recipe ... [of] their particular fracturing fluid and the advantage they believe it brings them in the competitive market,” he said. At the same time, he said Canada’s oilfield service companies are working their way

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through the issue. “I think we’ve come a long way in terms of the willingness of service-providers to be more transparent about frac fluids. We’ve been very clear that we expect the ingredients, if you will, to be publicly available. I think over time we’ll move to more disclosure rather than less.” Acknowledging the disclosure-requirement bug may be catching in other provinces, Collyer called for consistency among the various jurisdictions that plan to put forward legislation. “If we’re going to put regulatory requirements in place, the more consistent they are across different jurisdictions, the better.” Also yesterday, an Alberta government official addressing CI Energy Group’s conference on Oil & Gas Water Management Strategies in Calgary told his audience that legislation touching on hydraulic fracturing will come, but he offered no timeline. “We’ve gone beyond just suggesting that this is going to happen,” Andy Ridge, director of water policy for Alberta Environment and Water, said. “We’ve committed to advancing on a number of things, including the mandatory reporting of frac fluids.” On that score, Ridge said Ted Morton, Alberta’s Minister of Energy, had mentioned during an interview before Christmas that mandatory reporting and baseline water testing was on the way. As well, Ridge said provincial Environment Minister Diana McQueen would confirm the government is moving in that direction sometime today. “I’m not sure why we haven’t set a

definitive date at this point, but it’s coming. Industry is hopefully aware that this is going to happen,” said Ridge. “We know industry is now by law doing it in B.C. [and] in the U.S. So, we don’t anticipate it will be a major challenge.” At the same time, Ridge said much work remains to be done on the issue with Alberta’s Energy Resources Conservation Board, which has data management and other systems that will need to be modified to accommodate any new disclosure and reporting practices that might be required of the industry. “There may be a contributing factor there, as to why it’s taking time for us to articulate that specific commitment, but I envision that we will come out with one, as well a commitment on other initiatives related to hydraulic fracturing,” he said. As for the operating practices for fracturing announced yesterday, Collyer denied they represent any significant change from the industry’s current practices. “I don’t think it’s a huge change. It’s more consistency and standardization, clearly. The foundation of a lot of this is best practices. CAPP’s role is to look across the industry and say, ‘What are the best practices being used?’ If we apply those more broadly and consistently, it will elevate the industry’s performance. “[CAPP’s] guiding principles and operating practices are intended to help the industry improve performance and be more transparent about how we’re performing. Both those things will help address the public’s concerns [about hydraulic fracturing],” he said.


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The area of the Peace Region that would be flooded for the Site C hydroelectric project. Local residents long suspected that the project had a link to B.C.’s natural gas industry, a fact that was finally admitted by Premier Christy Clark when the Province launched its Natural Gas Strategy this February. ALASKA HIGHWAY NEWS photO

THE DAM TRUTH

Peace residents react to news Site C tied to LNG BRIANNE ZWAMBAG Pipeline News North The Peace Valley Environment Association (PVEA) is hoping that Premier Christy Clark’s recent announcement that the Site C Dam and industry are intrinsically linked will get people in the Peace region questioning other information being handed down to them. In an interview with Alaska Highway News last week, Clark confirmed that natural gas is the future of B.C. and that the future plans of expansion in to new markets hinges on the controversial Site C hydroelectric project. In particular, Clark was referring to powering contracts for the Kitimat LNG export facility. “I’ll just give you a feel for how big that is,” said Clark. “Powering the second phase of the current Shell proposal would require 100 per cent of the power that could be produced by Site C.” The announcement has PVEA members and other environmental groups saying “I told you so” to people following the issue, as Andrea Morrison, Coordinator for PVEA, pointed out that they have been saying that the dam’s power would be used for industry all along. “It’s helpful to us that she’s made this announcement its spread far and wide throughout the province,” said Morrison. “It’s spread the message that this isn’t to power 450,000 homes as we have been told over and over again by Hydro. It leaves one to doubt the other things that they may say about the project.” Morrison explained that they’ve known for approximately five years that domestic demand for energy has actually decreased, leaving the group to question why a new dam was required to power 450,000 homes. “So, for Christy Clark to come forward and state publicly that indeed, 100 per cent of the electricity from Site C would go towards LNG plants just supports what we’ve been saying all along.” However, Peace River North MLA Pat Pimm said that there is some truth to it being used for the LNG projects, there’s another side to that coin. “That power is being added to the entire grid. While maybe it’s targeted for that area, everybody else is certainly a benefactor as well,” said Pimm. He also said that the province has never hidden their plans to support industry by opening new markets and export-

ing the resources, including power, that the province is home to. “I’ve been on record in the past as saying that BC should be a net exporter of power, and I truly believe that. I believe that we should be generating power to be an exporter,” said Pimm. “I think we need to generate power from all sources that we can; I think we need green supply, natural gas supply and I believe that we need Site C as well.” Notably, Pimm has not come out in support of Site C at this point, citing that he believes that there is a process that needs to happen around it before he changes his position to one of support. However, Morrison questions this statement and wonders whether it would be more prudent to reserve electric that is being generated rather than exporting it. In fact, an alternative that Morrison is putting forward is to consider the Columbia River Treaty that is coming up for renegotiation as early as 2014. “It’s something I think is worth looking in to. I don’t have all the facts, but I do know that the Columbia River treaty is coming up for renegotiation, and I do know that we sell 1250 megawatts per year to the United States and the Site C dam is only slated to create 1100 megawatts,” said Morrison. “I think we need to consider whether or not it’s worth it to keep selling that energy to the States or whether we should be keeping that for our own use in British Columbia.” PVEA is also concerned about the effect that the project will have on residential rate payers, who may not benefit from the power created by Site C. “It just means that we have a $7.9 billion project, and certainly we didn’t hear her state that industry would pay for this project. Presumably, it will just add to the debt of BC Hydro, which is already significant,” said Morrison. “So, our rates are going to have to go up and domestic ratepayers will be affected by this.” Pimm countered that supporting industry is an important move, especially for this area, as it is a large proponent of the province’s revenues. “Industry in our area produces about 62 per cent of the resource revenue of the entire province. Our industry in this area certainly is something that is a great contributor to the province,” said Pimm. “It’s very important that we keep our industry moving forward.”

The PVEA maintains that supporting the industry is not worth the cost of the Site C dam. “We’re going to lose 8000 acres of prime agricultural land; this is class 1 and 2 soil, which is very rare even on a global scale. It has great production capacity and in fact, we could grow enough crops there to provide produce to Northern BC during the growing season,” said Morrison. She also explained that issues such as land instability, the interruption of imperative wildlife corridors, the loss of wildlife breeding grounds and the destruction of one of Canada’s most beautiful river valleys are also issues that need to be taken in to consideration. “We all live under the same atmosphere, so it just doesn’t make sense.

I think we need to stop and rethink our position and think about the whole picture on a global scale and where we’re going and how sustainable this really is,” said Morrison. The environmental assessment continues at this point on Site C, and the PVEA is now using the $19,000 worth of government funding provided to them to participate. “We have a legal team in place and we also have subject matter experts in place, and we’ve collaborated with a number of other groups who are also trying to fight this dam,” said Morrison. The environmental assessment phase is expected to span the next year and a half at minimum and will be the final step before a decision on the future of the dam is made.

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environment GOING UNDERGROUND Provincial government studying aquifers near Dawson Creek MATTHEW BAINS Pipeline News North On a brisk February morning at a farmer’s field near Groundbirch, about 40 kilometres west of Dawson Creek, a team of hyrdologists and geologists were collecting information that could help us to better understand a vital resource in the Peace region. Staff from the provincial Ministry of Forest, Lands and Natural Resource Operations, the Ministry of Environment and the Ministry of Energy and Mines are mapping and characterizing groundwater aquifers in rural areas surrounding Dawson Creek as part of a larger, regional study of those resources in the Northeast. “Our project is all about describing and understanding the groundwater aquifer, not only this one in Groundbirch, but throughout the region. Groundwater is really important for agriculture, human consumption and for development, and right now in British Columbia, groundwater isn’t licenced,” said Dave Wilford, a hydrologist with the Ministry of Forests, Lands and Natural Resource Operations. He said the project was prompted by the ongoing effort to modernize the provincial Water Act, a piece of legislation more than 100 years old that does not currently pertain to groundwater. He said there is no doubt development pressures in the region also make understanding water resources a priority. “Water is a big issue throughout many places in British Hydrologist David Wilford (left) and geologist Adrian Hickin are part of a provincial inter-ministry team undertaking a Columbia, like the Okanagan, and up here with industrial groundwater aquifer study in Northeast British Columbia. MATTHEW BAINS photO development and a well-established agricultural sector,” he said. “I think with a growing population of people, and current through a wire that runs along the perimeter of a “They will drive along roads hauling two small sleds, with industrial demands, we have to know more about 10,000-square-metre area to create an electromagnetic one with a vibrator that sends down vibrations into the surface and subsurface water, and the subsurface is field that runs up to 100 metres down into the ground. earth, and the other one picks up the rebounded sigthe challenging one because you can’t see it. The last “Things like shales and clays are quite conductive, so nals,” he said, adding they will cover about 30 kilometres thing you want to do is either pollute the groundwater or currents flow through them, while gravels, granites and of road in the Groundbirch area. overuse it.” solid rocks are quite often very resistant, so we measure Hicken said the combined research will hopefully He added even climate change is a concern for some the difference between those to find out where things provide a model for studying aquifers that can be applied stakeholders in the region. are in the ground,” said Mel Best, to other areas of the region. “With the potential of climate “Water is a big issue a geophysicist who was hired as “We’re trying to build a numeric hydrogeological change, one rancher was conan independent consultant to the model, so we are looking at how much water is here, cerned that in the future he will throughout many project. where it is, and how big the aquifers are,” he said. “This be irrigating, which is something That topography helps them to is a bit of pilot study, it’s a fairly small study, but if all he hasn’t done, and his dad didn’t locate aquifers, and indicates the goes well, we will be able to transport the methodology places in British do and his grandfather didn’t do shape of them. we develop here to other areas so that we can continue on the same land, but he can see “The water is located in those to map through out the Peace, right up to Fort Nelson.” that coming.” Columbia.” course units, so the more resistant The project coincides with a study being conducted Five members of the project units are the ones that contain by GeoScience BC that is looking into the number and team were in Groundbirch on characteristics of deepwater saline aquifers in the Mont– Dave Wilford, Hydrologist the water,” added Adrian Hickin, a Tuesday morning to conduct geologist with the Geoscience and ney Shale Basin, as well as a project being undertaken studies of aquifers in that area. Strategic Initiatives Branch of the by the City of Dawson Creek and the University of NorthWilford said the Groundbirch area Ministry of Energy and Mines. ern British Columbia to better understand the Kiskatinaw is interesting because it is a paleovalley, a geological That information will be combined with data from six Watershed. Hicken said while those projects are not characteristic that encompasses most of the BC and observation wells drilled throughout the area, and from directly related to theirs, there has been coordination Alberta Peace Region. an updated database of existing wells in the region, other parties, including GeoScience BC, for the ground“A paleovalley is a type of aquifer that is really imporwhich will indicate other characteristics such as the water aquifer study. tant throughout the Peace, and into Alberta,” he said. chemical makeup of the water, how old the water is and Best used to work for the Geological Survey of “We’ve had these ancient valleys and rivers that then got what direction it is flowing. As well, Wilford said that Canada conducting similar projects all over the world, covered in glacial till, and there’s enough gravel left in by early June, a team from the Geological Survey of and he said water is certainly becoming a more pressing there to provide for really good water.” Canada will use a “seismic” technique to further underconcern in regions of the world such as the Middle East, Specifically, the team was conducting an electrostand the geology of the area. Africa and South America. magnetic survey, which involved running an electrical

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Citizens concerned blowouts could become common cont’d from pg 5 “The potential to kill somebody is dramatic,” he said. “It’s going to happen. We had told the ERCB about our concerns and we were just dismissed as if it never happens.” “There’s regulations in place that prevent these things from happening,” said Tobin. “We can see with the low numbwer of these incidents that the regulations are very effective. And what we’re looking at here are individual circumstances … that have sort of added up to create a situation where this was possible.” “Specifically, with hydraulic fracturing, we know that it is top of mind for a lot of people,” she continued. “And we are looking at the regulations specifically as they apply to hydraulic fracturing to see if there’s anything we can do to just better improve those regulations for that particular technology.” Horne remarked that concerns around hydraulic fracturing in Canada aren’t specific to Alberta. He pointed out that similar incidents of communication between wells linked to the practice caused the BC Oil and Gas Commission to issue a series of new directives last year. Such events have also taken place in the U.S. “Thankfully, there wasn’t anything serious in terms of injuries or contamination that I’m aware of, but it does raise flags that I don’t think we’re fully on top of either the science or the regulatory practices,” said Horne. Commission spokesperson Hardy Friedrich noted that incidents such as the Innisfail blowout are far less likely in B.C. because Alberta has a higher density of wells, including older wells, and because natural gas wells, which predominate in B.C., are farther apart than the oil wells that are prevalent in Alberta. “Gas wells typically have better control of fluids in the wellbore than oil wells,” he added. “Communication between a wellbore being stimulated and an offset wellbore can lead to a situation similar to that experienced in Alberta, but only one circumstance has occurred in British Columbia,” Friedrich continued, adding that that incident had “no adverse environmental impact.” Friedrich also addressed concerns about blowouts and H2S – sour gas – exposure. “Operators are expected to maintain control of wells at all times and have the proper equipment in place to carry out all well operations safely,” he said. “In terms of sour gas, sour gas wells are required to

Workers contend with the oil and contaminated soil at the blowout site. photO COURTESY OF ALBERTA SURFACE RIGHTS GROUP

Members of the Alberta Surface Rights Group watch as workers clean up oil that erupted from an oil well just west of Innisfail, Alberta. photO COURTESY OF ALBERTA SURFACE RIGHTS GROUP

have enhanced emergency and safety requirements.” Many North Americans have concerns about hydraulic fracturing causing groundwater contamination by methane, oil or chemicals used in the process infiltrating aquifers. Bester and Horne are no different, but Tobin suggested that those concerns are overblown, especially in Alberta. “The fracking happens at great depths,” she said. “Aquifers happen at shallower than 500 metres below the surface. That’s where the base of groundwater protection is.” Tobin noted that the distance between the hydraulic fracturing activity and the closest aquifer where the blowout occurred in Innisfail was about 1200 metres. “And what happened here was most likely that the hydraulic fracturing fluid took the path of least resistance and went up inside the wellbore,” she added. “And the regulation that Alberta has in place is such that the wells all have the cement casing on it. So, it does prevent any products from entering that environment.” Bester is far from convinced. “If anybody knows any geology,” said the retired petroleum engineer, “[they know] there’s natural fracture systems in every zone.” He believes fracturing fluids and fossil fuels could find their way into aquifers through those natural fractures as a result of hydraulic fracturing. “There’s no way of really telling unless they’re doing ongoing monitoring in the actual aquifers to see if there’s any trace elements that are coming from these fracs,” he added. Horne also believes methane from deep underground can infiltrate groundwater, partly due to research

conducted at Cornell University has shown that it does happen. One hypothesis is that hydraulic fracturing could be altering the rock formations, thereby making this possible. “I think the sense or the conclusion that there’s no way that frac fluids or methane could somehow migrate to groundwater probably is not accurate,” he said.

Hydraulic fracturing site thought to be the cause of the oil well blowout. photO COURTESY OF ALBERTA SURFACE RIGHTS GROUP 28392


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industry news

FRACKING 101

New Zealand team talks industry regulations in Fort St. John That isn’t the only public concern. A group of citizens staged an anti-fracturing protest rally outside the Hawke’s Bay District Council offices on Jan. 25, the same day that Labour Party environment critic Grant Robertson declared that an inquiry into fracturing should be top priority for New Zealand when parliament resumes. “There is international evidence to suggest that the process of fracking can contaminate groundwater, which could have serious consequences for rural communities, dairy farmers and milk processors if it goes unmonitored in New Zealand,” Robertson said. “Local communities are right to be concerned about the potentially adverse effects of fracking, as there is little, if any, evidence to suggest the process is safe,” he added. However, according to McKenzie, the technical aspects of hydraulic fracturing weren’t anticipated to be front and centre when Lawrence and Freeman traveled to B.C. in February, partly because the geology of that region of New Zealand differs so greatly from that of northeast B.C. The team was more interested in the broader lessons. “I don’t think there’s much to be gained by way of technical/scientific information about oil and gas exploration and fracking in particular,” he said. “I mean, that’s pretty well out there. So, I think it’s more about the quality of the relationships, what people feel on the ground, and what some of the perceptions about the industry are. I think that’s where the value will be.” McKenzie felt that discussions about the role of First Anaura Bay in Gisborne, Zealand, the area where Apache and TAG Oil are proposing to develop natural gas resources. Nations in natural gas development would be particularly Representatives from the region recently traveled to Fort St. John, B.C. to discuss hydraulic fracturing regulations. useful. The community of Gisborne is split fairly evenly HANDOUT photO between Maori First Nations and residents of European james waterman McKenzie expected the meetings with the Commisancestry, but the population of the rural parts of the Pipeline News North sion to involve discussions on such topics as water district is approximately ninety per cent Maori. The Maori management, environmental remediation and engagehave concerns about natural gas development in their Northeast British Columbia is becoming a popular ment with stakeholder communities and First Nations. territory, said McKenzie, but they are also interested in classroom for governments from other jurisdictions want- It should be educational, he remarked before the trip, the opportunities. ing to study the controversial natural gas exploration and considering that council and staff in both districts have “It’s not all downside,” he added. “I think they’re production technique known as hydraulic fracturing. virtually no experience with oil and gas development. interested in seeing how they can engage, how they can Following in the footsteps of a team from New Bruns“We have been over to Taranaki, which is on the west benefit economically.” wick that visited the natural gas plays of the region coast of the north island of New Zealand, where there is That was to be part of conversations concerning First last March, a delegation from New Zealand traveled to a well-established oil and gas industry, and fracking is Nations when the New Zealand delegation was in B.C. Victoria and Fort St. John this February to meet with the used as a technique already,” he said, adding that they Josh Paterson, a lawyer with West Coast EnvironBC Oil and Gas Commission and catch a glimpse of the have been conducting other research since oil compamental Law in Vancouver, expressed concerns about natural gas industry in action. nies began to show interest in natural gas resources in using B.C. as a positive example or learning tool when it That group consisted of just two individuals: Bryce the region. comes to hydraulic fracturing. Lawrence, Manager of Compliance and Pollution Apache Canada established a farmout agreement with “I’m not sure that I would offer British Columbia as a Response with the Hawke’s Bay Regional Council, and TAG Oil to start developing those learning tool for other jurisdictions Trevor Freeman, Manager of Environmental Services resources last September. Prelimiin terms of environmental regulawith the neighbouring Gisborne District Council. Hawke’s nary seismic work began in 2011 tions,” he said. “The position that Bay decided to send a delegate when planning for the and drilling is expected to start in “Important for us to we’ve been taking over the years trip began in December. Gisborne only determined that 2012. Exploration is proposed to is that, in fact, B.C. has got a lot of Freeman would be joining Lawrence on the expedition take four years. improvement that needs to happen see how Apache is during their council meeting on Thursday, January 26. “I think it’s also important for us in terms of its environmental laws. The purpose of the trip, according to Lindsay McKento see how Apache are performing “And we’re working hard on a performing on the zie, Chief Executive of Gisborne District Council, was on the ground,” said McKenzie. whole range of issues to try and largely to learn about the “socio-political landscape” of “And to see and hear face-to-face make sure that B.C.’s got betground.” natural gas producing regions, but also included a look what people have to say about ter environmental assessment at regulatory regimes and the technical aspects of the their performance – environmenprocesses, better enforcement of process. tal, social, community engage– Lindsay McKenzie, Gisborne the environmental laws that we do “Our expertise is sought out nationally and internation- ment, First Nations.” have in place. And I would have District Council ally,” said Hardy Friedrich, spokesperson for the ComGrisborne District Council has some concern if another jurisdicmission, which hosted the New Zealand delegation in heard some grumbling from comtion were trying to base its model Victoria on Feb. 6 and in Fort St. John on Feb. 7-8. munity members because Apache for something as dangerous as “They’ll hear presentations on B.C.’s regulatory frame- is paying part of the bill for the trip to B.C., a contribution fracking on what B.C.’s practice has been.” work and kind of what makes our province a leader in oil amounting to about $3500 of the approximately $11,000 Visiting delegations from other jurisdictions could also and gas regulation,” he added, discussing the itinerary total cost of the mission. They are worried that this is put B.C. and its natural gas industry – including how it prior to their arrival. “And also how it relates to unconsimply an attempt by the oil company to curry favour is regulated and how environmental assessment and ventional gas development. So, specifically, we’ll be with council, but McKenzie explained that it is all part of monitoring is conducted – under a microscope, but that presenting on such things as the single window model, the process. doesn’t worry Dunk. the Oil and Gas Activities Act.” “Our role is a regulator, but not of the industry per se, “If it is putting the region under a microscope, I don’t Steve Dunk, BC Operations Manager with the Canabut of the use of the natural resources of their district – think there’s any reason to be concerned,” he said. “I dian Association of Petroleum Producers (CAPP), isn’t air, land, water, soil, the coast,” said McKenzie. think it’s actually a good thing, because, certainly, from surprised that New Zealand has looked to B.C. to learn “It’s part of the regime of our environmental stewardindustry’s perspective, we want to be transparent. We about hydraulic fracturing and oil and gas regulation. ship that the costs of the consent authority in processing think we do develop the natural gas sustainably. So, “Canada’s got a long history of oil and gas developresource consent applications is met by the applicant,” showing that to other regions that don’t have that history ment and has a really strong regulatory regime, eshe continued. of oil and gas, I think is a good thing.” pecially in the areas where we’ve been working as an “And it’s quite normal for that to include capability The visitors from New Zealand also planned to travel industry for a while,” said Dunk. and capacity building where no previous capability or to Calgary to meet with Alberta’s Energy Resources “We have some pretty strong regulation and regulators capacity existed. And so it’s quite a standard approach, Conservation Board (ERCB), the National Energy Board in all those areas.” actually, for costs to be met. Or, at least, in part.” (NEB) and Apache to conclude the mission.


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Companies expected to adopt practices immediately cont’d from pg 4 overall resource. They should be expected to do a good job on their own operations. But there’s clearly a role for a regulator to be managing and planning for the cumulative effects.” Cumulative effects include greenhouse gas (GHG) emissions, but that is missing from the practices, which, according to Horne, follow the lead of much of the debate around hydraulic fracturing, where the emphasis is water-related issues. “Cumulative land impacts – fragmentation – are certainly a piece of that overall management framework we need to see in place,” he added. “There are gaps there as well. So, not to take anything away from the importance of dealing with water concerns, but you have to deal with them all. You can’t just pick one off and expect to have a full range of issues dealt with.” Horne also wonders how CAPP is going to ensure that member companies are abiding by these practices. “It’s not clear how CAPP is going to keep on top of it if companies aren’t fulfilling those principles or what happens if companies don’t,” he said. “Ultimately, I think that is the responsibility of government, but is something that Canadians should be expecting to see and not just accepting.” Pryce expects that member companies will start employing the practices immediately. “I think some companies have been implementing these for quite some time,” said Spitzer. “And the others will implement them on the day they’re supposed to be implemented.” “I think most companies will certainly abide by the spirit of it,” he added. Spitzer also remarked on the value of establishing consistent practices throughout the industry and across the country. “I think that’s real important,” he said. “That’s one of the foundations of CAPP. And it’s actually got a lot of parallels with the Producers Group. We set this up so

tive with the stakeholders and First Nations and government. Because it’s a singular voice. That’s important.” Saying something isn’t necessarily the final answer,” Spitzer added. “It’s doing it. So, let’s put it this way – you have to first come to agreement on what it is you want to achieve and then you have to abide by it.”

CAPP’s Vice President of Operations David Pryce thinks member companies will start employing the new fracturing practices immediately. photO COURTESY OF CAPP

that there wouldn’t be ten individual companies running around saying all different things. “And there’s a lot more strength and coherence, I think, whether it’s the Producers Group or CAPP, working together to come up with something that they all can abide by. I think it’s good business and it’s also good from the standpoint of being coherent and communica-

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Alberta must diversify customer base Daily Oil Bulletin Alberta must diversify its customer base to achieve the greatest returns and the provincial government signaled it will actively design initiatives to access global markets and assist Canadians and trading partners in understanding Alberta’s energy goals, the province said in its Speech from the Throne on Tuesday. The speech kicked off a new session of the Legislature as the Progressive Conservative government prepares to deliver its budget on Thursday, the first under the leadership of Premier Alison Redford. “The infrastructure necessary to get our resources to new markets must cross other jurisdictions, so any expansion will involve various partners at the provincial, national and international levels,” said Lieutenant Governor Donald Ethell, who read the speech. “The more we work together to co-ordinate our efforts, the greater our success and the more prosperity for everyone involved. “Your government will continue to partner with Ottawa to defend Alberta’s energy sector and develop an improved oilsands environmental monitoring program that is among the best in the world. Both governments are now standing together behind a plan that is credible, science-based and fully transparent. Your government’s action on establishing and reaching key environmental outcomes and sharing its performance with Albertans and the world will leave no doubt of its commitment to these goals.” A report in the Globe and Mail said that the the Alberta government is looking to clear a path for the oilsands through British Columbia by upping the economic benefits for its western neighbour -- including the option of paying to modernize and expand West Coast ports. In a press conference after the speech, Redford said she wasn’t aware of any discussions on, for example, sharing royalties/revenues with B.C. to get that province onside with the Northern Gateway project. “I’m not aware of any discussions that are going on with respect to that,” she said. “I’ve been a really strong proponent of the Canadian energy strategy. “What that means to me is that we need to talk about what the benefits are to provinces across the country with respect to Gateway, with respect to oilsands development and with respect to other energy projects,” Redford added. “There are tremendous economic advantages for British Columbia. It’s important for us to talk about those and to ensure that wherever we can, we highlight why this makes sense for the B.C. economy and we’ll do that.” The government will also introduce a new budgetary review process that includes a results-based approach, “one that will allow for a thorough examination of how public spending is achieving outcomes for Albertans.” Ethell added that the government will examine its entire fiscal framework to ensure it spends tax dollars appropriately, while saving intelligently for the future. This will include reviews of the Alberta Heritage Savings Trust and Sustainability Funds, capital and infrastructure projects and income taxes, along with reviews of existing programs.

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careers troubling times for energy execs It is a troubling era in the history of natural gas companies. Petroleum powerbrokers like former Nexen CEO Marvin Romanow are losing their jobs amid speculation that other energy executives are on the chopping block, and companies such as Encana and Talisman could be ripe for takeovers. The biggest problem facing struggling natural gas outfits is that those companies heavily weighted on dry natural gas, as opposed to natural gas liquids and oil, are suffering from record low prices for methane, according to Kevan Holroyd of Ernst & Young. “You certainly would think that those companies that have a strong enough balance sheet and have a commitment to what I call a capital agenda – and that is how we’re going to raise money – how are we going to invest it?” said Holroyd. “And how we are going to preserve it? Those companies would step back and [say] how can we make a go at $1.90 or mid-$2.00.” Holroyd suggests that companies would ordinarily just “hunker down” and “control costs” by reducing drilling activity to prices improved. However, troubles have arisen as companies have tried to proceed with developing dry natural gas throughout the downturn in prices. An associated issue is that many companies developed plans for fairly expensive work, such as developing resources in the remote landscape of the Horn River Basin in northeast British Columbia, far from traditional markets, when gas prices were relatively high. “I think if they had a crystal ball – and if we all had

a crystal ball – we would have viewed the world differently,” said Holroyd. “I’ve been saying for a couple of years, you know, things on the gas front just have to get better,” he continued. “There’s a lot of things that in the long run you would think would make gas very viable, economical and attractive. And that’s the whole aspect of the conversion of coal to natural gas [for power generation].” Natural gas is also seen as clean and safe alternative to nuclear power in Japan, particularly considering the aftermath of the tsunami last year that damaged their nuclear infrastructure, causing health and environmental concerns. “We would step back and think that the price would have come significantly up,” said Holroyd. “But, obviously, with the shale plays and those types of things, where there has been an excessive amount of supply over and above what the demand has been, and with no real infrastructure, at least at present, to move that gas. Particularly west. And, by west, I’m talking about further west in British Columbia.” The industry has been lacking a “perfect storm” of events to drive prices back up, he added. “So, could they have foreseen this? Maybe. Did most people? Probably not,” said Holroyd. “Talk to folks now – including myself – and, certainly, in the short to mid term horizon, there isn’t a lot of indicators that would indicate the price is going to go significantly higher than it is right now.” The emerging liquefied natural gas (LNG) industry in B.C. may be offering a glimmer of hope. “I know when I meet with folks from the Asian companies that are looking at investing in Canada, the first

thing they say is: ‘build and we shall come,’” Holroyd explained. “And build meaning putting infrastructure in place so that you can start exporting product across the ocean.” “There is that appetite.” Holroyd believes LNG will make energy executives more optimistic about the near future, but the question is if shareholders are starting to lose patience. “Me, as a shareholder, the answer is, at times, yes,” said Holroyd. “There is a light at the end of the tunnel,” he added. “And the light could be not a train.” As for the speculation about takeovers of energy companies, Holroyd thinks those concerns are overblown. “I don’t know if there’s necessarily companies that are sitting there facing takeovers,” he said. “I certainly know that if you look at the Canadian public companies that are gas-weighted and look at their valuations in relation to their global peers, they would seem to be considerably undervalued,” he continued. “So, there would look like an opportunity to get something on the cheap.” Holroyd doesn’t believe boards of directors will follow that path unless there are extenuating circumstances forcing them to do so. “Either because they believe that’s the only way that they can get some sort of shareholder value or if their creditors are forcing it that way,” he said. ”Most of them just can’t justify the premium that would have to be paid to supplement the loss in value by virtue of the fact that these companies, from a stock market perspective, certainly appear to be undervalued when you look at the global arena.”

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