pipeline news north

R001152868

Northern British Columbia and Alberta's Oil and Gas Industry

Vol. 2 Issue 11 • dIst: 18,000 october/noVember • 2012 • FreeNorth

in this issue:• HIGH HorsePoWer - nAturAl GAs Goes HeAVY dutY

• tWeetInG tHe WAY - oIl And GAs Gets socIAl• sPArKInG tHeIr curIocItY - let’s tAlK scIence

looKs to tHe Future

MOKO, THE ALBERTAN FACE OF ASCO, KEEPS GETTING BIGGER - ASCO GROUP PHOTO

2 • PIPELINE NEWS NORTH OCTOBER 2012

PETROLEUM ASSOCIATION - HAPPENINGS

Dawson Creek Icebreaker tournament a big hitWilliam Stodalka

In the end, hard work and “get[ting] the goals when we needed them” helped Tom Norman and his teammates win the second annual Icebreaker tournament.

The tournament, which involved players from the Dawson Creek Senior Canucks’ and players from the South Peace Oilmen’s Association, took place at the Memorial Arena the weekend of October 19-21.

The event allowed players like Norman, who normally drives a tank truck in the oil patch, to take the weekend off and strap on his skates with players from the Canucks.

“There’s nothing real serious about it,” he said. “It’s just a bunch of guys working in the oil patch and working around town getting together and just enjoying the game.”

For Norman, who has played this for the second year, the tournament lived up to the standard it had set.

“It was just a good show as it was last year.”

His team, who was sponsored by C. Norman Trenching, won enough periods to earn them enough points to play against the team sponsored by MCR Canada in the final.

One of MCR’s players, Ryan Walker, said he still enjoyed the tournament despite his team’s 12-6 loss in the final.

“You get together with all the guys, drink some pop, and play hockey,” he said. “It was fun.”

Walker also enjoyed the level of play he saw, which counted as a highlight for him.

“There were some nice saves,” he added. “I got a couple [of goals].”

Walker plays for Canucks. He and other players will travel to Fort St. John to take on the Senior Flyers on Nov. 2.

OCTOBER 26, 2012 PIPELINE NEWS NORTH • 3

28231

7 Tweeting the way - oil and gas gets social8 Great divide - natural gas or Site C?

industry news

community

environment

careers & training

special feature

4 Scottish invasion - ASCO grows in Alberta5 High horsepower - new uses for natural gas26 Finance minister talks Asian markets in Dawson Creek

23 NLC completes simulated well site in Fort St. John

12 Focus on flaring - climate action success stories

6 Sparking their CurioCity - Let’s Talk Science targets the engineers and geologists of the future

industry newstHe rIGHt tool

For tHe JobOGC introduces new system for assessing

water use by the natural gas industryjames watermanPipeline News North

The Oil and Gas Commission (OGC) introduced a new system for examining surface water supply and natural gas industry water use on October 18.

The NorthEast Water Tool (NEWT) is a publicly available GIS tool that enables OGC and Ministry of Forests, Lands and Natural Re-source Operations (FLNRO) staff, natural gas producers and other stakeholders to access informa-tion about the hydrology and water allocations for industry use for any water body in the northeast corner of the province.

“To provide quantitative stream flow information to tabulate how much water’s already been tied up in licenses or short term water use approvals and to provide a deter-mination of what the environmental flow needs are for essentially any river and lake across northeast B.C.,” said OGC hydrologist Allan Chapman, explaining the purpose of NEWT.

One application is to help OGC and FLNRO make decisions about short-term water use approvals, which are the responsibility of OGC, and long-term water licenses, which are the responsibility of FLNRO.

“It’s also intended to provide infor-mation to oil and gas operators who are the ones who are often looking for water,” Chapman added.

Similarly, Chapman suggested it could also be a useful tool for First Nations, who must be consulted when companies apply to withdraw water from lakes or rivers in their territory. NEWT can demonstrate if

the volume of water being requested is a small or large percentage of the stream flow of that watercourse.

NEWT is accessible through the OGC website.

“It’s available to anybody,” said Chapman.

“We think that the people that will probably be using it the most will be the various land agents who do applications for the companies,” he continued, adding that oil and gas companies also have staff who would use NEWT.

“All of our natural resource officers in the Commission will be using it,” said Chapman. “And the operation managers, because it provides guid-ance to them on the determination of the approval. The [FLNRO] staff who deal with water licenses will be using it.

“Anybody who’s interested in the question of water in northeast B.C.”

Considering the large num-ber and wide variety of poten-tial NEWT users, the OGC had decided that training sessions are necessary. Those sessions will be taking place in Dawson Creek, Fort St. John and Fort Nelson from November 14-16.

“NEWT’s a brand new tool,” said Chapman. “I’m not aware of anything similar to it anywhere in Canada or the United States even. So, it is unique.

“What we’re targeting for the train-ing would be land agents, consul-tants that deal with water issues with industry, the various water staff who work with the companies, govern-ment, First Nations,” he added.

“Most of what we’ll be doing is explaining how to use it and how to interpret the results,” he concluded.

NEWT can be used to access information about very small creeks and streams as well as large wa-tercourses such as the Peace and Beatton Rivers.

“It’s designed so that someone will just zoom in and pick a river or a lake and then run the tool for a spe-cific, defined point,” said Chapman.

NEWT will subsequently provide monthly and annual data on average runoff, average discharge, volume of water reserved for environmental flow, potential maximum allocation, existing allocation and the remaining allocation potential.

“There’s actually only a few loca-tions in northeast B.C. where there’s actual measurements of stream flow,” said Chapman. “We had to model the runoff.”

That hydrological modeling was completed by Chapman and the OGC about a year ago, along-side staff from other government ministries, a pair of Environment Canada scientists and experts from University of Victoria, University of British Columbia and Simon Fraser University.

NEWT takes advantage of the FLNRO database of water licensing information, which is updated on a daily basis.

It also uses the OGC’s own water use approval data.

“Those are always current,” said Chapman.

“We use an environmental flow model, which is from Alberta,” he continued. “And the reason we use the Alberta Environment approach for the estimation of environmental flows is that we currently don’t have a defined procedure in B.C.”

continued pg 22

4 • PIPELINE NEWS NORTH OCTOBER 26, 2012

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industry newsscottIsH InVAsIon

ASCO continues to build their business in western Canada

james watermanPipeline News North

The ASCO Group doubled its presence in Canada with the acquisition of three Alberta oilfield outfits, the Scottish oil and gas services company announced on September 24.

ASCO has brought oilfield logistics companies EJR Trucking and Docktor Oilfield Transport into the fold, along with oilfield waste management firm Manatokan Oilfield Logistics, under the banner of their Canadian oilfield services company, MOKO, which is also based in Alberta.

The mergers have increased ASCO’s Canadian work-force from 130 personnel to 260 employees.

“The companies and the strong reputation they had in the marketplace and with the oil companies them-selves,” said ASCO Canada president Fabian Walsh, describing the factors that attracted ASCO to their new acquisitions.

“The quality of their people,” he added, also noting that the geographical locations of their operations were a factor.

“ASCO, globally, has a very large desire to grow the business in Canada,” Walsh continued, remarking that the services already offered by those three companies complement ASCO’s existing operations in Alberta very well.

Walsh indicated that any ensuing changes at those companies should be seen in a positive light.

“The management in the companies will not be chang-ing,” he said

“And we’re going to grow the businesses,” he added. “We didn’t buy them to be stagnant. Our intent is to grow these businesses and our own presence in North America.”

Walsh believes that ASCO can help the growth of the businesses they have acquired in a similar fashion as to how those companies can help ASCO.

“We’re one of the largest logistics providers around the globe,” he explained. “Our structure and our market awareness – all part of being an international company working with the major operators around the globe. We’re able to tap into more financial backing to support growth. And we’ll open up opportunities for people working there to further their own careers within the context of a larger company. And they’ll be able offer their clients a more diverse service offering. And it gives them connection to a wider client base.

“They have clients in Canada that we have not had experience with,” he continued.

Walsh described the mergers as a perfect marriage.“The things they were doing and are doing are exactly

what we wanted to be doing in conjunction with our other service offerings in Canada right now,” he said.

ASCO is also hoping these acquisitions will help them expand their presence in western Canada beyond the borders of Alberta, particularly at a time when there is so much talk about Bakken light oil in Saskatchewan and the potential for liquefied natural gas (LNG) in Brit-ish Columbia.

“Our focus mainly over the last six or eight months has been Alberta,” said Walsh. “But we’re looking throughout western Canada – Saskatchewan, Alberta, B.C. – and down even to parts of the United States for other opportunities.

“The focus has been mainly within the oil sands,” he continued, “but we’re continuing to look via market research to determine where else there would be a good opportunity for us.”

Walsh admitted that additional acquisitions in west-ern Canada could be a possibility, but not until 2013.

“Although we have more or less said we’re finished on the expansions through acquisitions this year, we are not ruling out potentially acquiring more companies early in the new year,” he said.

ASCO first set up shop in Canada with expansions into Nova Scotia and Newfoundland and Labrador in 1995.

“We’ve been small scale here in Alberta for the last three to five years,” said Walsh.

“So, we’ve had a lot of time to research the market and understand it,” he continued. “But … we now feel we’re ready to take the plunge. And being a Scottish company, we have the experience and the knowledge gained in what we’ve done in the North Sea market and other areas of international expansion.

“The operators in the North Sea and the other parts of the world that we operate in are the very [same] operators that are here,” he added.

Walsh also feels that Scottish companies are a good fit in the Canadian oil and gas industry because the two sides share a very similar culture.

“A lot of the people we’re actually encountering over here have been working in Scotland with the oil compa-nies,” he added.

“And now we’re actually seeing a large influx of Ca-nadians into the Scottish [industry] and different parts of the world.”

Interestingly, the oil and gas industries in both Canada and Scotland are facing a labour shortage, but Walsh suggests that a Scottish – and an international – service sector presence in Canada could help alleviate that problem by allowing workers to move from one location to another.

“Right now, across the globe, we have about 2000-plus people working for ASCO,” said Walsh. “And over half of those people are presently working outside of the [United Kingdom]. So, we tend to promote internally first. And we look for opportunities, especially for our middle management, and even lower level people, to take the opportunity to take an international career on to advance themselves.”

“We are, at present, exploring opportunities to see who is available to other parts of the world that can come in and help us complement the services pres-ently being provided to the Canadian marketplace,” he continued.

“But, at the same time, we’re looking to see what expertise we have in Canada that we can deploy to other parts of the world to see if things we’re doing in Canada can help them improve elsewhere.”


R001113598

HIGH HorsePoWerCN riding the rails to a natural gas future


Typically the domain of diesel fuel, the world of high horsepower engines is now driving towards a future where the fuel of choice could be natural gas.

CN attracted considerable attention when they announced on September 27 that they would be testing locomotives partially powered by natural gas on their route between Edmonton and Fort Mc-Murray, Alberta.

“CN launched this locomotive test to explore the use of natural gas as a poten-tial alternative to conventional diesel fuel,” said Keith Creel, executive vice-president and COO at CN.

However, that was really just the tip of the iceberg.

During the first Natural Gas for High Horsepower Applications (HHP) Summit on September 27, Joel Feucht, direc-tor of gas engine strategy at Caterpillar, declared during his keynote address that his company has “decided to go all-in on gas” for engines used in marine and rail transportation, as well as applications for mining and other natural resource industries.

“We are going to invest because we see a global market long term,” said Feucht. “Large engines are going gas. It’s not debatable. It’s our conclusion.”

That was just one day after an an-nouncement out of Saskatchewan that a number of the oil and gas drilling rigs in that province could soon be using com-pressed natural gas (CNG) to power their engines.

The announcement was that CanElson Drilling subsidiary CanGas Solutions had just signed an agreement to deliver natural gas to Bayhurst Energy Services Corporation (BESCO), a subsidiary of natural gas utility SaskEnergy, over the next three years.

As part of that deal, SaskEnergy will build a CNG facility in Weyburn, Sas-katchewan to serve as a hub for a fleet of

thirty CNG delivery trailers being built by CanElson at a cost of $9 million.

The company’s fourteen drilling rigs in Saskatchewan are presently powered by diesel engines, but this plan will allow them to convert to bi-fuel engines that can use both diesel and CNG.

“With this agreement, we can start roll-ing out our plan to substitute diesel fuel with clean and inexpensive natural gas in our own fleet of mobile drilling rigs in Sas-katchewan,” said W. Randy Hawkings, CanElson’s president and CEO.

“We expect this agreement will serve as a regional model under which we can quickly expand our CNG road transport services business to supply drilling rig engines and other equipment in markets across North America,” he added.

So, the question is: why is all of this happening right now?

“We have lots of natural gas,” said Canadian Association of Petroleum Producers (CAPP) spokesperson Markus Ermisch.

“It’s abundant,” he continued. “We have

about 100 years worth of supply. And it’s affordable.”

CN is also looking at the environmental impacts.

“We think that there are some clear sustainability gains here in terms of re-duced carbon footprint,” said CN spokes-person Mark Hallman.

The engines involved in this pilot project are a pair of 3,000 horsepower SD40-2 locomotives built by Electro-Motive Diesel (EMD), which happens to

A lot of CN locomotives could soon be running on natural gas if a test project on their route between Edmonton and Fort McMurray, Alberta proves successful.

CN PHOTO

continued pg 20


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careers sPArKInG tHeIr curIocItYLet’s Talk Science takes aim at the engineers and geologists of the future


The oil and gas industry is always in need of engi-neers and geologists.

That is why Let’s Talk Science sent a call out to the energy sector in early October to encourage scientists to contribute career profiles to their young website known as CurioCity. The portal, which is still waiting for its official launch in the middle of November, is designed to connect students from Grade 8 to Grade 12 to the science community to promote education and careers in science, technology, engineering and mathematics, also known as STEM.

“Teens seem to see science and technology as impor-tant for society, but not all that relevant for themselves,” said Let’s Talk Science founder and president Bonnie Schmidt, describing the inspiration for CurioCity and the career profile portion of the website.

“Research is showing that they’re actually dropping those maths and sciences in high school as soon as they can,” she continued.

“The majority of students who are graduating high school are actually not graduating with the prerequisites that they would need to continue on in postsecondary,

whether it’s in college or in university.“CurioCity is really our attempt to focus the teen audi-

ence on understanding the science and technology in their lives.”

Schmidt said that providing the contemporary context and discussing the current issues around science and technology is important to improving that understanding.

That underscores the value of participation by scien-tists like Jayne Simmons.

As a geophysicist and team lead of the petroleum data services team for ESG Solutions in Kingston, Ontario, the young Newfoundlander spends her days elbow deep in one of the most discussed concerns about the natural gas industry today: hydraulic fracturing and its potential for causing earthquakes.

“My company does microseismic monitoring for small earthquakes induced by hydraulic fracturing,” said Simmons.

Her original plan as a university math student was to become a teacher, but her minor in earth sciences soon led her to geophysics.

She was hooked.“One of my friends said, ‘Hey, do this geophysics

course. I think you’d really be interested in it.’ And from the very first course, I really loved it. I found it to be

really interesting. And then I went on to do a double major in geophysics and math. And all my summer work experiences were really positive and just really fun,” said Simmons.

That summer work included conducting magnetic surveys and induced polarization surveys for a mineral exploration company in Newfoundland.

“It was a lot of camping, a lot of hiking and looking at data,” said Simmons. “And that was challenging and fun.”

Schmidt is hopeful that stories like Simmons’ will show young people that many of their myths and misconcep-tions about math and science aren’t reality.

“Let’s Talk Science has existed for twenty years,” said Schmidt. “CurioCity is our newest program. And we re-ally are trying to tackle head-on those misconceptions.”

One of those misconceptions, according to Schmidt, is that science doesn’t play an important role in every-day life, which is interesting considering the notion that young people do recognize that science and technology are important for society.

The intriguing aspect of that situation is that many young people apparently fail to connect the importance

continued pg 28


special featuretWeetInG tHe WAYOil and gas has to get socialjames watermanPipeline News North

Social media and the energy sector haven’t exactly been the best of friends.

Opponents of everything from hydraulic fracturing in British Columbia to oil sands development in Alberta have been effec-tively using platforms such as Facebook and Twitter to present their case and sway public opinion in their favour, but the oil and gas industry has been consider-ably less successful in that arena, accord-ing to social media experts.

“It’s just foreign for oil and gas compa-nies,” said Melonie Dodaro of Top Dog Social Media.

“Using social media for them isn’t like it would be for many other businesses,” she continued. “It’s not like they’re looking to use social media to attract new clients or customers in most cases. But one of the things that they can be doing [with] social media is … improving their image in the public eye. Because anything that’s perceived as environmentally unfriendly or not socially responsible, there’s a lot of things that they can do to really improve that image.”

The energy sector hasn’t been completely absent from social media, however.

“We’ve been involved in social media for just over three years,” said Christina Rontynen, digital communications advisor with the Canadian Association of Petro-leum Producers (CAPP).

“Our main focus would be Face-book and Twitter,” she continued. “We have, actually, five different Twitter and Facebook accounts. They encompass everything from our natural gas advo-cacy to our oil sands campaign to some of the energy literacy things that we do. And then also more of a general CAPP presence.”

CAPP participates in a pair of online discussions, including shaletalk.ca, where they are simply part of the conversation around shale gas development across Canada.

The organization also has a presence on LinkedIn, Flickr and YouTube.

“We try to be on all the major medi-ums,” said Rontynen.

Additionally, CAPP encourages its member companies to take advantage of social media, particularly through initia-tives such as their OilSandsToday Twitter account, which includes an #OSTLive feature that allows followers to join ques-tion and answer sessions with individuals involved in oil sands development.

“Direct encouragement for it not just to be CAPP, but for it to be an industry voice online,” Rontynen added.

Individual companies are also striv-ing to make their presence felt on social media outlets.

“We first launched our branded social media channels in late 2010,” said Dean Paddock, who leads the brand manage-ment group at Encana.

“We are currently active on Facebook, YouTube, Twitter, LinkedIn and Pinterest,” he continued. “In the case of our Twitter and Facebook accounts, we generally update them daily, while LinkedIn and Pinterest are updated as needed.”

Encana boasts over 13,000 Facebook friends, 5,300 Twitter followers and 7,500 connections on LinkedIn.

“Which allows us to promote and share our stories with thousands of people on a daily basis,” said Paddock. “Social media ensures that important information about our company is both easy to find and easy to share.”

That was the goal Encana had in mind when they began their social media en-deavors two years ago.

“We joined the online conversation primarily to broaden our audience reach beyond traditional forms of media,” said Paddock.

“We embraced this tool for a number of reasons,” he continued, “one of which was enhanced stakeholder engagement. A major part of our corporate responsibil-ity mandate is to be an operator of choice and a trusted member of the communi-ties in which we operate, and that means regular engagement and collaboration with a diverse array of stakeholders. Along with face-to-face consultation and leveraging of traditional media, social media provides another tool in the toolbox in terms of two-way communication with our stakeholders and creating awareness about our industry.

“We also use social media in our natu-ral gas advocacy efforts and to monitor dialogue about our company and our industry.”

Paddock remarked that the effective use of social media is becoming increas-ingly important for Encana and the oil and gas industry overall, largely because of its low cost and potential to connect with a wide audience.

“Given the huge reach of social me-dia, and the millions of daily electronic conversations that it encompasses, this technology has become a very important business tool,” he said.

That is particularly true when part of their business is proving their social li-cense to operate in the face of opposition that is very adept at using social media.

“It is crucial that we proactively engage in the online conversation about our company and our industry,” said Pad-dock. “We believe it is incumbent upon us to share stories of how we are dedicated to continuous improvement in terms of responsible development and our operat-ing practices.

“Given the social nature of the technol-

ogy, we believe it is very important to provide an online community to answer questions, share facts and encourage dialogue about our company and our industry.”

It is what Dodaro calls education-based marketing.

“The worst situation is an uneducated consumer – an uneducated person – because it’s easy to judge and to place blame and do all that stuff without any education,” said Dodaro.

“One of the best things that social media can be used for is education,” she added. “And education-based marketing

today is probably one of the most effec-tive ways to market a business of any kind.

“And in this type of situation, it’s really important for people to understand what is being done, what’s the downside, what’s the upside, and being honest if there are some issues: these are the issues and we understand them and there’s either little or nothing we can do about them, but this is what we’re trying to do to make up for that, or these are the things that we’re working towards to improve that.”

Encana ran these advertisements for their Share Your Energy IQ campaign during the Calgary Stampede this summer to promote their social media channels. The natural gas producer has had a social media presence since 2010.

ENCANA IMAGE

continued pg 18


special featureGreAt dIVIde

The debate over natural gas and Site C heats upjames watermanPipeline News North

Energy is becoming a very complex topic in British Columbia.

As BC Hydro is moving forward on their plans to build the Site C hydroelectric dam in the Peace River Valley, despite intense opposition from many local landowners, the government is promot-ing a liquefied natural gas (LNG) export industry that could use all of the electricity generated by Site C and still need addi-tional power for the liquefaction process.

The government response to that quan-dary has been to amend the Clean En-ergy Act, which stipulates that a maximum of seven per cent of energy generated in the province can be produced by burning natural gas, to allow further natural gas fuelled electricity generation for the pur-pose of powering LNG operations alone.

That situation has prompted two resi-dents of Charlie Lake, a small community just northwest of the booming natural gas industry town of Fort St. John, to ask serious questions about Site C and why the Province isn’t considering a resource already being produced in their own back-yard as the energy source of the future.

“We came to Canada from Germany in 1954,” said one of those men, a retired schoolteacher by the name of Mike Kroecher.

“We live overlooking the Peace River Valley,” he continued. “And we’ve become extremely fond of this area. Of the valley. I’d hate to see it destroyed, which Site C would definitely do.”

The other half of that duo, Rick Koechl, still works as a teacher in Fort St. John.

“I came to the Peace country here in about 1981,” said Koechl. “Lived in Hudson’s Hope – my wife and I did – for about five years.”

After relocating to the Fort St. John area, he quickly began his involvement with issues around the energy sector, particularly the business of natural gas exploration and production, for the same reason as many local landowners: the proximity of industry activities to their homes.

“The Site C issue is one that’s very near and dear to my heart because … it is our backyard,” said Koechl.

Koechl and Kroecher took their con-cerns to the Peace River Regional District (PRRD) on Thursday, September 20, not simply to complain about Site C in the vain hope that that body could magically cancel the project, but to present a real and possibly viable alternative: natural gas power generation.

As their model, the pair is using a facil-ity known as the Shepard Energy Centre (SEC) that is presently under construction in Calgary, Alberta.

“We expect that we would go com-mercial with the plant probably early in

the first quarter of [2015],” said Gary Payne, vice president of engineering and construction with ENMAX Energy, which is the operator of the plant, adding that performance tests should be complete in November, 2014.

The real significance of those dates for Koechl and Kroecher is that construction just began in July, 2011, meaning that the project will only take about three years to complete, rather than the ten year time-line for Site C.

Koechl and Kroecher count that as the first strike against claims that Site C would be more efficient and more environmentally friendly than a natural gas plant, largely because that construc-tion will require consistent use of vehicles that consume large amounts of fossil fuels. Coupled with the disposal – likely by burning – of 550,000 cubic metres of woody debris resulting from cutting 15,000 to 20,000 acres of boreal for-est, that belies the notion that Site C is a clean energy project, according to the duo.

The comparison of Site C and SEC prepared by Koechl and Kroecher makes a strong case for natural gas in other areas as well.

Site C should produce more usable power than SEC –1,035 megawatts for Site C versus 800 megawatts for SEC – but SEC is expected to have a per year energy production of 6,500 gigawatt-

hours versus 5,100 gigawatt-hours for Site C, which is the number reported by BC Hydro.

SEC is projected to have an energy efficiency of 92 per cent, compared to just 52 per cent for Site C.

Those differences are particularly concerning for Koechl and Kroecher when they look at the cost of each project. An independent audit put the cost of SEC at $1.3 billion. BC Hydro claims that Site C will cost $7.9 billion.

“There’s no way you could even begin to state that there’s going to be some kind of financial stability in the plan,” Koechl said of Site C. “They don’t seem to have anything but what they claim is an unlim-ited bank account to build this project. And it’s starting to become ludicrous. Because I think the financial element has been missing.

“We’re trying to bring this into the discussion.”

“We have no idea how accurate the $7.9 billion figure is,” added Kroecher. “The last big public spending project was the convention centre in Vancouver. The initial estimate was $100 million. When it was completed, the figure was close to $700 million. If that applies to Site C, we’ll be looking at a massive cost over-run.

“We don’t know the facts. We are not given the details.”

BC Hydro directed questions on this subject to the Ministry of Energy, Mines

and Natural Gas, which takes a very dif-ferent view on the comparative cost issue.

“It is important to consider the capital cost involved when comparing a natural gas power generating facility and Site C,” said Minister of Energy, Mines and Natu-ral Gas Rich Coleman.

“Most of the lifecycle costs for Site C are upfront capital costs, followed by low operating costs over the long life of the dam. A natural gas plant is the opposite, with most of its costs being fuel costs incurred over the much shorter operating life of the facility.”

Koechl suggests that the long-term costs of natural gas power generation shouldn’t be seen as a negative, but as a positive, since those costs would be asso-ciated with operations and maintenance work that would employ British Columbi-ans and purchasing natural gas from a homegrown industry.

“It is important to understand that BC Hydro, in its draft Integrated Resource Plan, considers both Site C and natural gas to be cost-effective resource options,” said another Ministry of Energy, Mines and Natural Gas spokesperson.

“The difference between these costs is risk and uncertainty,” the spokesperson continued. “Site C would be a long-lived asset [that would] provide cost certainty for power customers. The cost of natural

Charlie Lake residents Mike Kroecher and Rick Koechl would like to see BC Hydro’s Site C hydrolectric project replaced with a natural gas power generation station like the new Shepard Energy Centre in Calgary, Alberta. The pair took that idea to the Peace River Regional District in September.

JAMES WATERMAN PHOTO

continued pg 29

industry news


R001363798

industry newsRent-based royalties more efficient, says tax expert

Daily Oil Bulletin

As Canada turns increasingly to unconventional resources like tight oil and gas, provincial governments should consider moving from revenue-based to rent-based royalty regimes, tax expert and academic Jack Mintz said in Calgary on October 4.

“For Alberta and other provinces look-ing at new types of finds, whether it’s New Brunswick shale gas or [Alberta] tight oil, in designing royalty systems, we should be looking at rent-based sys-tems,” he told reporters.

Mintz was discussing a just-published study of oil and gas royalties authored by he and Duanjie Chen, a colleague at the University of Calgary’s School of Public Policy.

The study reviewed royalty regimes in five Canadian provinces, four U.S. juris-dictions, and Australia, Brazil, Norway and the United Kingdom. Concluding Canada falls roughly in the middle of the pack in terms of competitiveness and neutrality, Mintz said there was nonethe-less a “great deal of disparity among the provinces.”

He explained rent-based systems by referring to the concept of “economic rent”: the difference between the reve-nues a resource generates and the costs of production, including capital, labour costs and a rate of return on capital. “A pure rent-based [royalty] will neither dis-courage nor encourage an investment or

production decision, since it is neutral,” he said.

The best kind of royalty system is a rent-based one, combined with a relative-ly “clean” corporate income tax, he said, describing Alberta’s current oilsands royalty structure as “the poster child for how to do an appropriate, rent-based tax.” The benefit of a rent-based royalty is that production costs are fully deduct-ible under the system.

Looking further afield, he did not have similar praise for royalty regimes in the other provinces studied, describing some as “amazingly complex.” Others are less competitive, while still others offer various kinds of differential treatment, depending on the kind of assets being assessed.

“Canada’s provinces tend to [imple-ment] far too complex royalty systems, particularly Newfoundland and Nova Scotia, but also shale gas in B.C. (B.C. uses a Nova Scotia-style system). These are complex, very distortionary and very poor revenue collectors. They’re not re-ally the appropriate approach for royalty design in the future.”

In Nova Scotia, he said royalties are low largely due to the fast write-offs that province allows producers. Australia allows deductions for exploration to be carried forward at a generous rate, he said, arguing that’s the problem both with Nova Scotia’s and with B.C.’s shale gas royalty as well.

Yet, when it comes to royalties on

conventional oil and gas, he said Alberta, British Columbia and Saskatchewan impose the highest fiscal burdens, since they use revenue-based royalty regimes in which royalties are based on a percentage of production revenue. In assessing the various jurisdictions, Mintz and Chen looked both at marginal tax rates and royalties in the province or country concerned.

Asked by a reporter if Albertans were getting their “fair share” of economic rent for the province’s oil and gas resources, Mintz declined to comment, arguing the royalty study conducted by he and col-league Chen was focused on designing an optimal royalty regime.

As Western Canada’s conventional oil and gas production continues to decline, and more production is drawn from unconventional resources, whether shale gas or tight oil, he suggests the province should think a little more about a rent-based approach to royalties.

“Alberta’s potentially got some signifi-cant tight oil, and unconventional sources [of] gas, so if you’re going to introduce

new royalty regimes, now is the time to start thinking about rent-based systems as opposed to the old conventional ones.”

The problem with revenue-based royalties, he said, is that they tend to discourage investment at the margin, because they don’t allow for deduction of the production costs involved. In effect, revenue-based royalties take from the top line of what a company earns, he said.

Among other things, the U of C royalty study concluded that the fiscal burden on the energy sector in Canada is higher than on the country’s other industrials sectors.

“I’ve argued for a neutral corporate income tax across all business activities, that all industries should have the same tax burden on their investments,” Mintz said.

“That’s the best way of achieving the best allocation of resources in the economy, because the tax system is not interfering with business decisions about where to put investment dollars.”

Daily Oil Bulletin

Enbridge Inc. announced October 22 that it has entered into a midstream services relationship with Encana Corporation to develop gas gathering and compression facilities in the Peace River Arch region in northwestern Alberta.

Enbridge has agreed to acquire from Encana certain gathering and compression facilities currently in service and under construction in the region with an expected December 2012 closing date.

Following the completion of construction of these facilities in 2013, Enbridge’s total investment in the Peace River Arch region is expected to be approximately $264 mil-lion. The financial terms of the midstream services agreement for the gathering and compression facilities will parallel previously established terms between Enbridge and Encana reached in 2011. Enbridge is also working exclusively with Encana on facility scoping for further development of additional major midstream facilities in the Peace River Arch.

Enbridge also announced today it has agreed with the other owners of the Cabin gas plant development in the Horn River basin to defer the commissioning of Cabin Phase 1 and construction of Cabin Phase 2. The first phase of 400 mmcf per day was to have come onstream late this year while the second phase to have been ready for service in the third quarter of 2014. Enbridge has a 71 per cent ownership interest in Cabin (DOB, Nov. 2, 2011).

Starting in December 2012, Enbridge will begin receiving fees for its investment made to date in the Cabin gas plant, including costs expended on Phase 2 of the plant facilities. Enbridge will retain the right to develop, own and operate all major midstream natural gas processing facilities required by Encana in the Cabin facil-ity. Enbridge expects its investment in the Cabin and Peace River Arch region will exceed the previous level of capital committed to Cabin Phases 1 and 2.

“This agreement in the Peace River Arch region represents another step in the ex-ecution of our strategy to establish a strong position in the Canadian midstream busi-ness,” Leon Zupan, Enbridge’s president, gas pipelines, said in a news release. “The investment extends our footprint to the Peace River Arch region, which is expected to grow significantly in the years to come, under the same attractive commercial under-pinning and return as our original Cabin investment.”

Enbridge acquiring Encana midstream assets


profilesFIrInG on All

cYlIndersAbsolute Combustion is burning with bright green ideas


Darsell Karringten was only about ten years old when he had his life-changing epiphany.

He was traveling on Vancouver Island with his family, a group of musi-cal entertainers on their way home from their latest show, listening to the news on the radio. The man on the radio was an industrialist in the forest products game, who was being grilled about pol-lutants that had been spilling into nearby watercourses from one of his mills on the Island.

“The guy said, ‘Yeah, so, what’s the problem?’” remembered Karringten.

The industrialist argued that his contribution to the economy trumped any impact his work might have on the environment, even stating that he wasn’t concerned about the pollution caused by

his operations.“‘But you have children, right?’” said

the interviewer, according to Karringten’s recollections of that conversation.

“‘Yes, I have children,’” said the industrialist.

“‘Well, don’t you want to make it a bet-ter place for them? Don’t you want to see how you can clean that up for your kids?’” the interviewer continued.

He replied: “What do I care? I won’t be here.”

“And here was his answer that trig-gered me at that age,” said Karringten. He was astonished.

“I didn’t just hear what I heard,” he said. “He doesn’t care? He’s not going to be here; so, big deal? What his state-ment did was trigger my interest in the environment. But I didn’t know where to start.

“I just knew somebody better pay atten-tion,” he added.

It was the first step on a long journey toward founding Absolution Combustion International (ACI) and building possibly the most efficient and environmentally friendly natural gas burner on the planet, the Absolute Extreme Burner.

The burner boasts higher fuel efficiency and lower green-house gas (GHG) emissions than previously exist-ing technology, which was impor-tant to Karringten considering his concerns about climate change, air pollution and the effects of emissions such as nitrogen oxides (NOx), carbon monoxide (CO), carbon dioxide

(CO2) and volatile organic compounds (VOCs).

The technology, which is still under-going tests, could be used by oil sands producers for applications such as steam assisted gravity drainage (SAGD), as well as plastic recycling operations.

Obviously, Karringten didn’t jump straight into building natural gas burners after discovering his concern for the en-vironment. He was only ten years old at that time, after all. It would actually take decades and another revelatory moment to bring him to that point.

“By the time I had children,” said Karringten, “I started inviting all kinds of different scholarly people … over to the house to have discussions on the environment. This is going back almost thirty years.”

It was the discovery that he was about to be a grandfather for the first time that finally inspired Karringten to move from discussion to action.

“I said, ‘Enough is enough!’” he ex-plained. “I can talk about the environment until I’m 100, but that isn’t going to do anything to improve things.”

Karringten sat down with his daughter, the mother of his first grandchild, Koleya Karringten, and they set the wheels of Absolute Combustion International in motion.

Inspiration struck.“I couldn’t sleep,” said Karringten. “I

was restless. And I had a vision of the kind of burner that would work. And I brought it to a mechanical engineer, a drafting engineer, instrumentation people, a master machinist. And we worked together.

“Three months later we had an initial design.”

That first plan didn’t involve natural gas, however.

“We started on propane,” said Karring-ten. “We started with propane because

it was an easy, portable fuel. We didn’t need all the infrastructure. You could work in your garage. Just get a twenty pound tank and run it for a little while, learn what you could learn. But when we needed to do the testing necessary for industry ap-

plications, it was really hard to complete the testing with propane. Because you needed a large supply to run a proper

An illustration of the new high-efficiency natural gas burner developed by Absolute Combustion. Applications for the technology include steam assisted gravity drainage operations in the Alberta oil sands.

ABSOLUTION COMBUSTION IMAGE

“I couldn’t sleep. And I had a vision of the kind of burner that

could work.”

– Darsell Karringten,Absolute Combustion


Who are we:

A not–for‐prot organiza�on that has been designated by the Government of Alberta as the Watershed Planning and Advisory Council (WPAC) for the Peace Watershed.

Mul�–stakeholder organiza�on established in April 2011

Interested in and concerned with the water uses, challenges, issues and possibili�es of the Peace Watershed, including the ac�vi�es on the land that affect runoff, ground water, surface water, lakes, river, streams, etc. You can share your thoughts

about water by completing our survey found on our

website, and attending an open house.

www.mightypeacewatershedalliance.org More info780‐324‐3355

Major Tasks:

To gather information to prepare a State of the Watershed assess-

ment report and To work towards an Integrated Watershed

Management Plan.

Encouraging Discussions and Developing Plans about:

Access To Quality Drinking Water

Reliable Water Supplies for Economic Sustainability

Healthy Aquatic Ecosystem

Your Insights & Thoughts on Water & Water Uses in the Peace Watershed!

Governance: Consensus decision Making Process Governed by a 20 member Board of Directors, bringing views from the

following sectors: Industry (Agriculture, Oil/Gas, U�li�es, Forestry, Mining) Aboriginal Communi�es (MNA, MSGC, First Na�ons Communi�es) Non‐Government Agencies (Conserva�on/Environment, Watershed Stewardship, Research/Educa�on, Tour‐ism/Fisheries/Recrea�on, Public member at large) Government (Provincial, Federal, Rural Municipali�es, Small and Large Urban)

Every person who lives, works and plays in the Peace Watershed has something to say about water and the watershed.

R001364963

test for hours on end.“That’s why we switched to natural gas.”There were other challenges along the way, too.“Sometimes, it’s one or two steps forward,” he con-

tinued. “Sometimes, three or four steps forward. And, all of a sudden, there’s a giant step backwards.”

One of those giant steps backwards concerned the noise generated by the burner.

“Isn’t it wonderful and excit-ing that the burner creates all this noise?” Karringten joked. “Oh, my god, harmonics! It sounds like a jet engine! This is exciting!”

Fully aware that the level of noise would stand in the way of companies adopt-ing the technology, Karringten and his crew set out to solve the problem with all the means at their disposal, including contacting professionals who had done similar work with NASA. They put together a team that set up sound equipment throughout the test location to assess the noise created by the burner, eventually developing a

solution to that problem.“The heat came before the issue with the sound,”

said Karringten, discussing the other big challenge.“It just kept getting hotter and hotter,” he continued.

“Some of the carbon steel tubes would start to melt. Our question became: ‘My goodness, what do we do with this?’

“So, once again, three or four steps forward, and, all of a sudden, this massive step backwards.”

The team subsequently spent over a year developing a heat jacket to cover the combustion chamber.

“It worked beautifully,” said Karringten.

His family has been the driving force encouraging Karringten to tackle the obstacles en route to his final destination.

“Grandchildren,” he said. “I don’t know why that can be a trigger point for people, but it was a huge one for me. It was as if there was no other option, no matter what, it has to be done.

“Many times, I just wanted to pull out the rest of my

hair and give up,” he added.“That’s not an option.”Karringten hopes that particular aspect of his journey

resonates with other people who may be pursuing a similar dream.

“Don’t give up,” he said. “There’s an opportunity. You’ve got to follow your dream. You need to do ev-erything you can to work hand in hand with industry in a cooperative way to show them that there’s a strong possibility here that could benefit them as well.”

Karringten knows that the powers that be in industry and government don’t always recognize the economic value of an environmentally friendly technology, but he also suggested that it is the responsibility of the people designing and developing that new technology to make the economic case for their product.

“If your solution is going to cost industry too much more to be green, nobody is going to listen,” said Karringten.

“They may cheer and they may applaud,” he con-tinued. “However, when they leave that room, you’re not going to get another phone call. It’s just not going to happen. So, you’ve got to find an economi-cally viable way to show them that going green is worth it.

“At every turn, that’s what ACI continues to do.”

“Many times, I just wanted to pull out the

rest of my hair and give up.”

– Darsell Karringten,Absolute Combustion


environmentFocus on FlArInGOGC shares success stories at Northeast

Climate Action Exchange


Despite increasing natural gas production in the northeast corner of the province, routine flaring in British Columbia has decreased dramatically since 1996.

That was the key message from the BC Oil and Gas Commission’s (OGC) director of stewardship How-ard Madill when he took the podium at the Northeast Climate Action Exchange in Dawson Creek on Tuesday, October 16 to discuss achievements in greenhouse gas (GHG) emissions reductions by the OGC and the natural gas industry.

There was a 26 per cent reduction in volumes of gas

flared annually between 2006 and 2010. Also, while natural gas production increased by 49 per cent from 1996 to 2010, the amount of gas flared decreased by 59 per cent during that time.

“Extraordinary story,” said Rob Abbott, executive director of Carbon Neutral Government and Climate Action Outreach for the Province, during his keynote address to kick-off the event.

Abbott was referring to B.C.’s climate action success-es, emphasizing the importance of local and regional efforts such as those undertaken by the natural gas industry and its regulator in the northeast.

“Business as usual… isn’t going to cut it,” Abbott con-tinued, noting that those efforts must continue in order to

reach emissions goals.The problem as explained by Abbott is that climate

scientists have determined that a maximum 2 degrees Celsius rise in temperature due to climate change is acceptable. Temperatures can stay below that threshold if 565 gigatonnes of carbon dioxide (CO2) are added to the atmosphere, but there are 2,795 gigatonnes of carbon in proven coal, oil and natural gas reserves.

“Time to upgrade,” said Abbott.Upgrading is the essence of the Carbon Neutral Gov-

ernment program, which dictates that all government buildings be carbon neutral.

As part of that initiative, the OGC has new offices in Victoria that are certified LEED (Leadership in Energy and Environmental Design) Platinum and the new of-fices being built in Fort St. John will be LEED Gold.

The OGC has also reduced fleet emissions.“We’re getting our staff to think about it,” said Madill.Adaptation is the key to solving the climate change

problem, according to Ryan Hennessey of Urban Sys-tems, who spoke about the potential effects of climate change on the Peace Region during the Northeast Ac-tion Climate Exchange.

“We have no idea what’s going to happen,” said Hen-nessey, remarking that people don’t generally handle that sort of variability very well.

“We are having an effect,” he added.“We don’t actually know what’s going on out there.”However, Hennessey did say that the Peace Region

can expect temperatures to rise by 0.5 to 2.0 degrees Celsius over the next 30 years. Also, weather could be two per cent dryer or wetter, probably going either way from year to year. That will put stress on ecosystems, consequently causing changes in species distribution, and alter hydrology.

The trouble with adaptation, according to Hennessey, is that it can be a hard sell because of the expense.

“Shape the policy debate around money,” suggested Abbott.

Abbott also emphasized the value of collaboration, as well as the need to be conquer the “poverty of imagina-tion” to find creative and innovative solutions.

“Sustainability is not a problem to be solved,” said Abbott. “It is a future to be created.”

Howard Madill, director of stewardship with the BC Oil and Gas Commission, told the Northeast Climate Exchange crowd that routine flaring in the province has decreased considerably while natural gas production has increased. The event was held in Dawson Creek on Tuesday, October 16.


North American Caribou Workshop a big event for B.C. natural gas industry


Predator-prey relationships and the importance of high quality summer for-age were among the most discussed issues at the North American Caribou Workshop (NACW) held in Fort St. John, British Columbia during the last week of September.

The alternate prey dilemma was a subject of particular interest for those concerned about the survival of B.C.’s caribou herds, including the men and women of the oil and gas industry who

work in caribou habitat in the northeast corner of the province on a regular basis.

“Caribou are always a by-catch in the wolf’s diet,” said Chris Ritchie, the organizing committee chair for the NACW this year.

It is popular opinion that wolf preda-tion is a significant cause of declining caribou numbers in B.C., but largely in association with resource industry activi-ties that improve their access to cari-bou, such as building roads for forestry, mining and oil and gas operations, as well as seismic exploration and pipeline construction work that is common in the

energy sector.“It’s usually other prey – and our model

is usually moose – that are keeping the wolf numbers up,” Ritchie continued. “And then, just statistically, they take more caribou because there’s more wolves. Well, it would seem in some juris-dictions, and perhaps in British Columbia, that beaver are having a role to keep wolf numbers high and are contributing, perhaps, to some incremental predation by wolves.”

Research on the dynamics of the predator-prey situation with wolves, beavers and caribou that was conducted

in Alberta was among the work presented by scientists from across North America and beyond that could be applicable to northeast B.C.

After all, as Ritchie mentioned, examin-ing alternate prey possibilities is part of the Implementation Plan for the Ongoing Management of Boreal Caribou in British Columbia that was released in the sum-mer of 2011.

“The fact that some people in Alberta have already done some of that beaver work will, I think, jumpstart some of the

continued pg 16


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D000703850

industry newsPETRONAS and Progress reps to meet with feds

concerning rejected takeover bidDaily Oil Bulletin

Representatives of PETRONAS Cari-gali Canada Ltd. and Progress Energy Resources Corp. will be meeting with officials from Industry Canada in Ottawa to better understand the government’s re-quirements with respect to the proposed acquisition of Progress by PETRONAS.

The federal government blocked the Malaysian state oil firm’s bid of over $5 billion for natural gas-weighted producer Progress in a surprise move that could signal problems for CNOOC’s proposed $15.1 billion takeover of Nexen Inc.

Progress is a large player in the British Columbia North Montney. PETRONAS and Progress already had a joint venture there and were examining the feasibility of building and operating a new LNG ex-port facility on the province’s West Coast.

Friday, October 19, federal Industry Minister Christian Paradis issued a state-ment rejecting the takeover.

“I can confirm that I have sent a notice letter to PETRONAS indicating that I am not satisfied that the proposed invest-ment is likely to be of net benefit to Canada,” he said. “I came to this decision after a careful and thorough review of the proposed transaction.

“Under the Investment Canada Act, PETRONAS now has up to 30 days to make any additional representations and submit any further undertakings, which can be extended with my agreement and that of the investor. Subsequently, I will either confirm this initial decision or approve the acquisition,” he added. “Due to the strict confidentiality provisions of the act, I cannot comment further on this investment at this time.”

He added that Canada remains com-mitted to maintaining an open climate for investment.

“The process associated with reviews by Investment Canada prevents the government from laying out the reason-ing behind its decision just yet,” Avery Shenfeld, managing director and chief economist with CIBC, told the Bulletin. “Absent that explanation, we don’t know if there’s a general principle that would

affect other takeovers in the oilpatch, or the specific CNOOC /Nexen application.

“Once both the Nexen/CNOOC and Progress/PETRONAS rulings are fully public, these two precedents will likely provide the industry with the clarity it needs on the terms under which future foreign takeovers would be judged a net benefit and therefore approved.”

Gary Leach, executive director of the Small Explorers and Producers Asso-ciation of Canada said that one thing is clear: foreign investment will have to play a large part in meeting the capital funding requirements of the oil and gas industry.

“It should be remembered that only takeovers that reach the size threshold for review are governed by Ottawa’s foreign investment rules, so some bids for junior companies may not attract a review,” he noted. “And some voices are suggesting the review threshold should be increased, anyway.”

However, he added, given the large scale of unconventional resource plays, it’s likely that many investment opportuni-ties, even those now owned by Canadian juniors and intermediates, will encounter the foreign investment review hurdle and the market needs clarity around what the rules are on allowing foreign investment.

“The federal government missed an opportunity last year during the Potash Corporation bid to provide that clarity,” Leach said. “I think part of the reason for the block on PETRONAS’ bid was the government realizes it needs to develop some consistent and transparent rules on this. It needs to do so quickly because the spotlight is now on the Nexen deal.”

Don Rawson, managing director, insti-tutional research, with AltaCorp Capital Inc., said that if the Progress/Petronas deal fails to go through, it is clearly nega-tive for a range of companies that are smaller than Progress.

“Progress’ access to capital is certainly better than it is for a number of smaller companies,” he said, adding that a number of capital-constrained small/mid-caps rallied on news of the Progress and Celtic Exploration Ltd. takeovers, so it’s not surprising they are selling off with the

uncertainty. Exxon Mobil Corporation last week announced it would acquire Celtic Exploration Ltd.. for $3.1 billion (DOB, Oct.17, 2012).

“One way or another these companies need capital,” said Rawson.

A takeover is one solution, and in the end if that option goes away, or is con-strained so that only certain buyers can participate, then companies will need to look for other options, like joint ventures, or perhaps other types of buyers.

“In the end, we’ll need to better understand what the particular hurdles were in this case and how it might impact other transactions,” he said. “Obviously, conditions that materially restrict the movement of capital into the sector for takeovers will be detrimental for valua-tions/shareholders.”

Rawson said it’s difficult to tell how much this decision has to do with the proposed Nexen takeover by CNOOC.

“The announcement was a surprise, and as outsiders we are just speculating as to the reasons,” he pointed out. “My be-lief is that the spate of recently-announced transactions injects a little extra concern in the government, particularly for deals with Asian national oil companies.

“I think the government would be looking at the specifics of this deal, and I don’t think it’s dead yet. But it’s hard not to think that the broader takeover trend doesn’t sharpen the government’s focus somewhat on the [Progress] deal.

“The government certainly does owe the sector and investment community more transparency in what makes a deal acceptable to it.”

Rawson said that the “net benefits” test is unclear, and companies need to have more confidence about the range of their strategic options in order to plan effectively.

“Similarly, the stock market needs to better understand what the government is looking for, in order to evaluate the companies with more [assurance],” he added. “And for Canadian E&P com-panies to attract foreign capital, those sources of capital will need more clarity. I expect that one way or another, once these deals are approved/rejected for

good, we will get more clarity about the conditions.”

When Prime Minister Stephen Harper was asked today about the reasons for the government’s rejection of the PETRONAS bid and whether Canada’s net benefits rule would be clarified prior to a decision on the CNOOC/Nexen deal, he cited the 30 day comment or response period. “So we’re not going to say any-thing that would prejudice that particular discussion during this time,” he said.

“But, as I’ve said before, in the context of another transaction, the government has in the not-too-distant future the intention to put out a clear, new policy framework regarding these sorts of transactions.”

Meanwhile, PETRONAS and Progress announced today they will work together to ensure that the minister has the neces-sary information to determine that the proposed acquisition of Progress would likely be of net benefit to Canada.

In conjunction with the 30-day period, and at PETRONAS Canada’s request, Progress has agreed to waive the 10-day notification period required to extend the “outside date” under the arrangement agreement between the two companies.

Under the agreement, PETRONAS Canada has the right to extend the out-side date for up to an additional 90 days, in 30-day increments, if required regula-tory approvals have not been obtained. If the outside date is not extended, the agreement will still continue in effect until terminated by either party.

The decision to block the bid is a setback for PETRONAS, but won’t stop it from looking to buy assets elsewhere, Malaysia’s Energy Minister Peter Chin told Reuters on Monday.

PETRONAS, which has reserves in Africa, Southeast Asia and the Middle East, is investing overseas to feed rising demand as output from ageing local fields declines.

“This is a setback, no doubt,” Chin said in an interview on the sidelines of an industry event in Singapore. “I would say that any deal of such magnitude is impor-tant to Malaysia, especially PETRONAS as a worldwide operator.”


profilescleAnInG uP

New skimmer technology could solve the oil spill dilemma


David Prior didn’t know much about oil spills.

That wasn’t his area of expertise as a contractor assisting graduate students in the petroleum engineering program. He was at Dalhousie University in Halifax, Nova Scotia, a region with a long mari-time tradition and a comparatively brief history of offshore petroleum exploration and production.

He would help the students build equipment necessary for their projects, attracting the attention of the head of the department by developing a barge made of recycled plastic. His interest in oil spills only began when one of his colleagues, a professor in the program, brought up an interesting new idea for recovering oil from spills that occur on the water.

“And I thought, ‘Well, that’s a great idea. And cleaning up oil spills is im-portant.’ So, then I decided to develop the technology,” said Prior, now CEO of Extreme Spill Technology (EST). The company announced on Oct.1 that their oil spill recovery vessel is ready for use by the Canadian Coast Guard after the successful completion of the tests that concluded at the Ohmsett testing facilities in New Jersey on September 14.

The vessel arrived in Charlottetown, Prince Edward Island the day of the announcement.

“That was about seven years ago,” added Prior, continuing to describe the origin of the project.

As Prior began to research oil spill re-covery practices during those early days, he realized that the record wasn’t very encouraging with respect to spills that had happened on the ocean.

“The equipment seemed to work fine inside a … harbour, which is where the vast number of oil spills happen,” he explained.

“But whenever there was an oil spill on the ocean, that equipment wasn’t working. And the idea that I was de-veloping seemed to have real potential in the area that wasn’t being serviced properly. And that’s out on the ocean where it’s always rough, unless you have a lucky day.

“And also in ice,” he added. “Nothing was able to work in ice. And our tech-nology showed potential for working in heavy ice.”

The test results exceeded expectations.“In calm conditions, at a good rate of

speed – maybe two or three times the normal rate of speed – it was collecting 93 per cent [of the oil],” said Prior.

That is quite impressive considering that all the efforts following the Deep-water Horizon oil spill in the Gulf of Mexico during the summer of 2010 only resulted in the recovery of three per cent of that oil.

“If BP [British Petroleum] had had our technology in the Gulf of Mexico – and even if they only had three or four ves-sels equipped with it – other than the tragedy of losing eleven men and losing an oil rig, there would have been prob-ably no other losses,” said Prior. “All of that oil would have been picked up out on the open ocean. And it wouldn’t have gone ashore.

“They only got three per cent of the oil,” he continued. “And most of that oil, I’m sure, they picked up after it hit the beach. So, they picked up virtually none of the oil on the ocean, where it hadn’t caused any damage.

“It only really became a catastrophe when it started to hit the shore. And when

they used a dispersant to send it straight onto the breeding grounds, of course. And now the fisheries are collapsing because of the dispersant use.”

Tests of the EST vessel also resulted in 75 per cent oil recovery in moderate waves.

“In big waves, it didn’t do so well, but that’s because we didn’t have our system set up with all the features that it should have on the ocean,” said Prior.

“Like any new system, we need to refine it a little bit,” he added. “But, funda-mentally, it’s good. It works.”

Exactly how it works is actually as simple as a trick that a middle school sci-ence teacher might show his students.

“If you have a bucket of water and a glass, and you submerge the glass and turn it upside down, and lift it out of the water, the water stays in the glass until the glass comes right clear of the water,” said Prior.

“What we do,” he continued, “is we cre-ate an upside down glass and we leave the opening of the glass just under the surface. And a boat carries the glass into the oil spill. And the oil spill goes into the boat. And it comes to the opening of the glass, which is full of water, and it floats up to the top of the water column. And it’s trapped because it can’t go down. So, then you just pump it out the top.

“The advantage of that system is there’s no moving parts.”

The release of this technology comes at an interesting time considering all the discussion of new pipelines, such as Enbridge’s Northern Gateway and Kinder Morgan’s Trans Mountain Expan-sion (TMX), to ship oil sands bitumen to the Pacific Coast for export to foreign markets and the accompanying increase in tanker traffic that will occur.

However, that doesn’t mean that the EST oil skimmer will necessarily be inte-

grated into any of those plans.“Marine safety experts with the North-

ern Gateway project continue to moni-tor all advancements in technology and equipment that would be suitable for use on our proposed project,” said Enbridge spokesperson Ivan Giesbrecht.

Enbridge may be examining the technology, but is not about to commit to utilizing the vessel, particularly when they already have other oil spill prevention and response initiatives in the works.

“The Northern Gateway Project would add emergency response equipment that does not now exist on the north coast of British Columbia,” Giesbrecht continued. “This plan exceeds current government regulations and significantly improves emergency response time.

“Northern Gateway’s plan that would enhance safety for all vessel traffic was recently independently verified,” he add-ed. “The report prepared by the TERM-POL committee, led by Transport Canada and including input from Environment Canada, the Department of Fisheries and Oceans, the Canadian Coast Guard and the Pacific Pilotage Authority Canada was filed with the National Energy Board (NEB) as part of the Joint Review Panel (JRP) process.

“The TERMPOL study found ‘no regulatory or safety concerns and no serious safety issues’ related to Northern Gateway,’ and, in fact, acknowledges that Northern Gateway’s plans enhance the existing regulatory regime.”

Prior suggests that use of the EST vessel is necessitated by the inherent risks associated with a large amount of tanker traffic in an area such as the Douglas Channel, where oil transported by Northern Gateway would finds its way onto ships bound for California and Asia, particularly considering the bad weather

Testing the Extreme Spill Technology oil skimmer at the Ohmsett facilities in New Jersey this September.EXTREME SPILL TECHNOLOGY PHOTO


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that can occur in that region.“Even with our technology, I think Gateway’s too risky,”

said Prior. “Shipping out of Vancouver is a little better weather-wise. But without our technology, you could have a catastrophe just on a windy day. Because it doesn’t take much wind to stop all the existing equipment. And even if you have nice weather like the Gulf of Mexico in July, you still only get just a fraction of a per cent of the oil.”

Regardless, Prior is encouraged by the fact that the Canadian Coast Guard is so readily adopting the technology.

“The Canadian Coast Guard has been supportive from the very beginning,” said Prior.

“They’re aware that they really need a new tool in their toolbox for cleaning up oil spills in the ocean,” he added, noting that he is hopeful that other organizations respon-sible for oil spill response and recovery start to use the equipment as well.

“It’s like a fire truck,” said Prior. “It’s got to be in place before the fire. You can’t start trying to order one of these boats after the spill happens. And it’s also got to be like a fire truck in the fact that every minute counts. And right now the oil spill protocols are that if you show up in 72 hours, you’re on time. Well, 72 hours is way, way too late. The oil’s gone. It’s on the coast already.

“These big oil tankers really need to be escorted by an oil spill skimmer vessel like ours that can actually work out where the ships are,” he continued.

Prior explained that the trouble convincing companies

to adopt new technologies for oil spill response and recovery is the fact that it is difficult to convince them to purchase expensive equipment they may never actually use.

He believes the EST oil skimmer is a different story.“It’s a workboat, which makes it more likely to be

bought,” said Prior.He noted that here is also an economic case in terms

of being able to sell the recovered oil.“If you can get the oil fresh, you’re going to pick up 99

per cent pure oil,” Prior explained. “But, again, it’s that fire truck thing. You’ve got to be able to get to it before it becomes mixed with water.

“BP would have saved $400 million worth of oil, which was wasted because they couldn’t get it fast enough,” he added.

The chemical dispersants also ruin the quality of the oil, as well as the fisheries contaminated by those chemicals, according to Prior.

That could certainly be changing with the EST oil skimmer.

The Canadian Coast Guard is already onboard and the major Chinese oil companies are seriously exploring the possibility of taking the technology to Asia.

“We did a few trials on the ocean in China with oil,” said Prior, adding that the result has been interest from the Chinese Coast Guard in acquiring 25-metre vessels for oil spill response and recovery.

“China is really leading the way in using the technol-ogy,” he said.

It is a sign that the project has finally overcome the greatest obstacle encountered throughout its history.

“It was seven years,” said Prior. “And I say it was seven months of work and the rest of time was scram-bling for money. And that was the big challenge.

“Technically,” he continued, “it wasn’t that big a chal-lenge, because we live in a modern, industrialized world, and there’s engineers everywhere, and there’s the inter-net for referencing. And it’s really just a case of showing up for work and doing the work. But trying to raise the money, you might as well be back in the dark ages. It was terrible.”

Much of the early support was provided by poor inves-tors who lost a lot of money in the process.

“They’re the ones that actually stepped up to the plate and got things rolling,” said Prior.

“After a couple of years,” he continued, “a very good organization stepped up called the Community Business Development Corporation (CBDC).

“Their goal, is to develop economic activity outside the main cities across Canada. And they stepped up with a significant amount of money. And they have been really good. They’ve almost been like an investor. A bank would have pulled the rug out from under us long ago, but they stuck with us.”

The CBDC continued with their support even though their first contribution came just before the recession hit in 2008.

“Venture capitalists wouldn’t touch it with a ten foot pole,” said Prior.

“It’s pretty strange the way things work sometimes.”


28392

work that we’ll do in British Columbia,” said Ritchie.

Angela White, a surface land represen-tative with Canadian natural gas producer Encana, who works at the heart of boreal caribou country in Fort Nelson, B.C., was also particularly intrigued by the discus-sion of predator-prey relationships.

“I always thought it was just caribou and wolves, but there’s so many other facets to the problem,” said White.

The alternate prey situation is just one of those facets.

“And realizing that the calf mortality was huge,” White said of the lessons taught during the conference. “Huge impact. And it wasn’t just wolves, but bears and coyotes.”

Part of the conversation around calf mortality was regarding a study into sum-mer forage issues that was conducted in the United States.

“The struggle of being a critter and trying to eat enough in the best time of year – in the growing season – could be a major factor in how successful they are at reproducing and successfully reproduc-ing,” said Cathy MacKay of Environmen-tal Dynamics (EDI), who was particularly intrigued by that study.

MacKay was drawn to the conference because her work as a consulting biologist based in Prince George, B.C. often con-cerns caribou, just as it often brings her into contact with the oil and gas industry, as was the case when she participated in a traditional plant study with the Prophet River First Nation alongside White.

“We have, typically, proponents in both the oil and gas and mining industries that require advice in order to meet regulatory and permitting requirements,” MacKay said of her work.

“We did some caribou modeling for an oil and gas proponent who uses it in their early planning stages so that they can avoid high value caribou habitat,” she added.

MacKay noted that the idea of improv-ing those summer forage conditions for caribou is quite new.

“Because we’re usually focused on winter range and winter as being the most limiting,” she explained.

Human activities can have a negative impact on summer forage.

“Anything that decreases the amount of old growth and lichen type forests would decrease their total amount of food avail-able in the summer,” said MacKay.

“They eat a lot of that in the summer too, which I wasn’t aware of,” added White, referring to the lichen, which has long been known to be an important win-ter food source for caribou.

Work is starting to be done to mitigate that problem.

“I know that there’s some efforts to look at lichen propagation,” said MacKay.

There are opportunities to improve practices for the good of the caribou, too.

“Different industry proponents and dif-ferent industries collaborating to reduce the number of roads … is an area we could do better at,” said MacKay. “Just reusing the same roads and the same rail load-outs and the same footprints.”

The NACW could well prove to be a launching pad for that collaboration and other partnerships for caribou conserva-tion work, as well as a place to gather ideas as to how to approach the problem.

“I think we got a balance across the spectrum from some genetics work to some life history, predation, habitat use, and then down to some of the distur-bances and the challenges that caribou found out on the managed landscape,” said Ritchie, discussing the variety of presentations.

“We were hoping to have some of the presentations see value in the northeast,” he continued. “And some of the work that was done on linear developments like hydro right-of-ways … will be useful in British Columbia. We don’t have too many hydro right-of-ways, but we do have linear developments.”

Those linear developments include seismic lines and pipeline right-of-ways, as well as access roads to well sites and other natural resource industry infrastructure.

“The first part of it was on the designat-able units,” said Ritchie.

The Committee on the Status of En-dangered Wildlife in Canada (COSEWIC) website describes designatable units as: “discrete and evolutionarily significant

units of the taxonomic species, where ‘significant’ means that the unit is impor-tant to the evolutionary legacy of the spe-cies as a whole and if lost would likely not be replaced through natural dispersion.”

“Pretty dry stuff,” Ritchie continued. “But it’s going to be the underpinning on how different herds – different manage-able populations – are designated. And so some of the expectations on their outcome, whether it’s management or recovery.”

White enjoyed the opportunity to im-merse herself in the subject matter free from the distractions of other business, largely because the scientific community and the natural resource industries were so well represented.

“You can just slowly talk about those issues,” said White. “And perhaps what your experiences have been versus that industry’s experiences, where they’re operating and what other impacts they’re dealing [with], whether they’re also deal-ing with forestry impacts or other industry like coal mines.

“It’s just a really good learning opportunity.”

Ritchie found the high level of oil and

gas industry participation encouraging, but certainly not surprising.

“The sponsorship we had on this workshop from the oil and gas sector was phenomenal and so I think that we knew from early on that they were going to be keenly interested,” said Ritchie.

“Caribou are a large concern for devel-opment,” he added. “It can present some challenges for management.”

Industry participation in the NACW was valuable to MacKay from a networking standpoint.

“It was a really excellent event for me because it’s just an interesting topic, personally, but it’s a great opportunity to network with people,” said MacKay.

“I used the phrase a couple times: it’s just like a giant teambuilding exercise,” she continued. “Because I could talk to the other consulting biologists who have particular areas of expertise that I might partner with. And then there was fairly good representation from industries there. There was mining proponents and oil and gas proponents there. And then you have all the government and the regulators side of it, too.

“So, it’s just perfect networking.”

environmentPerfect networking opportunity for natural gas

industry partners at Caribou Workshopcont’d from pg 12

Caribou was the focus of the conversation between biologists and natural gas industry representatives during the North American Caribou Workshop held in Fort St. John this September.

KATELIN DEAN PHOTO

R002113646

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OCTOBER 2012 PIPELINE NEWS NORTH • 17

New cogeneration plant planned for

Dawson CreekwILLIam stODaLKaPipeline News North

An Alberta company has begun consulting landowners about a new electricity plant near the city that could cost up to $20 million.

The Sweet Group, a company based out of Three Hills, Alta., is currently con-sulting landowners in Arras about the plant, which they propose would be located along Highway 97, one kilometre west of the Kiskatinaw River.

Ron Middleton, the Sweet Group’s chief operating officer, said the project is designed to meet the power needs of Dawson Creek.

“It’s a great area for economic development,” he added. “[Dawson Creek] doesn’t slow down when everybody else is coming to a stop.”

Middleton said that he expects approximately 30 people to be employed in the construction of the project, along with 10 permanent employees.

He hopes to receive approval for the project and begin construction by the second quarter of 2013. He estimates that the project would cost between $15 to $20 million.

Middleton said that BC Hydro was going to meet with the Sweet Group on Thursday. The Sweet Group has not yet received approval for the project from provincial regulators.

The company hopes to take advantage of BC Hydro’s Standing Offer program, which allows private companies to sell electricity to the province.

“The Standing Offer Program encourages the development of clean or renew-able power projects of no more than 15 megawatts throughout British Columbia,” according to their website.

The company would use natural gas as a fuel source to power an engine that would use the heat generated by engines creating electricity for other uses.

While all power-generating engines create heat, co-generation uses that heat, as well.

continued pg 24


special feature

However, Rontynen prefers not to think of social me-dia as a marketing tool.

“I would say that anyone who uses social media as a marketing tool has kind of missed the purpose of it,” she explained. “We use it for its intended purpose, which is to be social and to initiate conversation on topics that matter to Canadians, but also to be present when they want to initiate conversations with us.

“Our social media strategy has been consistent for the last three to four years,” she continued. “Our purpose is to promote open and frank discussions… based in fact rather than emotion. And our goal on social media is to have reasonable discussion. Our goal is to be out there, to be an open and transparent voice, and to be able to answer questions that pop up about the industry.

“We stay consistent with our strategy and we believe that our strategy’s been really successful in terms of engaging Canadians in the questions that they have.”

Dodaro pointed out that the difference between op-ponents of the energy sector and that industry when it comes to social media is that the former is playing offense and the latter is playing defense.

“Environmental groups,” she said, “they can definitely be using it to damage the reputations. And the only thing that [the industry] can do is really to look at creating a strategic plan in ways of how they can show what they do to give back to the community or what they do to be as environmentally friendly as they possibly can, what ways they’re working toward social responsibility and being more of a social enterprise.

“Really just improving the perceived image within the marketplace and the public and the media.”

It isn’t just about public image, according to Paddock.“Social media has also become an important recruit-

ment tool in terms of attracting top talent to Encana in an increasingly competitive job market,” he said.

“Oil and gas might be slightly different than a lot of other sectors,” said Dodaro, discussing social media as a recruiting tool.

Dodaro noted that LinkedIn is the top business social network, but also suggested that it may not do the trick for those companies looking for skilled labourers, as op-posed to upper management types.

“There’s not a ton of the skilled type labourers that are going to be on LinkedIn,” she said. “So, if you’re looking for management or anything above that, that’s going to be a wonderful, wonderful tool. If you’re looking for skilled labourers, you can have some success on it, but I would imagine that it would be more limited.”

Facebook ads are a better fit for employers seeking skilled labourers.

“Use Facebook ads to target specific age groups, interests, anything that’s kind of written in their profile or pages that they’ve liked,” said Dodaro, adding that a large percentage of the population is now on Facebook.

“Even if the person that they’re looking to attract isn’t on Facebook,” she continued, “friends and family are go-ing to see that listing too and mention that to whoever it is that might be seeking other employment.”

That is the sort of idea that recently caught the eye of Steve Troyer, the owner of Troyer Ventures, when trying to address his own worker recruitment challenges.

“It’s not difficult to recruit people,” said Troyer. “What’s difficult is teaching managers how to recruit people. So, there’s people out there. Lots of people out there.

“We might be taking them from one of our com-petitors. We might be taking them from a different job somewhere else. There’s people out there and we can get them,” he added.

The difficulty is learning how to attract those workers in an increasingly digital world, especially when it is not

enough to simply be participating in these forums.“Facebook is powerful, but you have to know your

market,” said Troyer.“It’s about knowing what market you’re trying to get

and how you’re trying to do it,” he continued. “Obviously, if you’re not a Facebook user, you got a real challenge, you’re at a real disadvantage. And the fact of the matter is, if you’ve only been a Facebook user for a year, you’re at a big disadvantage.”

Troyer suggested that becoming an employer of choice for the workers of today isn’t simply about effec-tive use of social media, but it is also about the wider use of computer-based technologies throughout the business.

“In our company, we’ve shifted dramatically from paper to electronic,” he said. “And so as you make that shift, you start learning the power of these tools.”

Troyer cited the example of new employee orienta-tions that used to be done with pen and paper.

“Now you sit down and you watch a video and answer online questions,” he said. “And the records are kept online.”

The same is true for job applications.“Once you start going through electronic communi-

cation, now you can direct them to your website,” said Troyer. “Now you’ve gained a whole other level of ef-ficiency. Because now they’re applying online.

“When people apply online, the information they provide is held, it’s reviewed online, we contact their references, we keep our notes online. And if we hire that individual, by clicking a button, all their personal informa-tion that they’ve provided is transferred into our [human resources] system.”

That approach depends on having a quality website.“Most websites are pathetic. They’re just a brochure

online, which is highly ineffective,” said Troyer.“People wonder, ‘Well, why is my website not doing

any good?’ Well, it’s because your website isn’t doing anything,” he added.

Troyer looks to his father’s new business servicing motor homes for proof of the benefits of a good website.

“He’s been a tradesman for many, many years,” he said of his father. “Very talented man. But he’s moved into a new town, offering a new service. This service isn’t available in town and he’s not known in town. And I said, ‘Dad, let’s set up your website and invite people to log into your website and book their own work online.’ And Dad just thought, ‘This is crazy. It will never work.’

“We got a simple, interactive website built. And you could go in there and request service for your motor home online. And we advertised both his phone number and his website. And between 75 and 90 per cent of his bookings are coming online in a brand new business. Why? Because people think electronically.

“It’s just more convenient.”Troyer has been incorporating other new technologies

into his business, including an electronic logbook system for his drivers that hasn’t been adopted by other busi-nesses in the region.

“Our industry is a long way behind in integrating tech-nology into our operations,” said Troyer.

“There’s no reason why every company in town isn’t on it,” he added, referring to the electronic logbook. “Every company in the industry. It’s brilliant, it’s simple and it works.”

The system is appealing to the younger generation of drivers that grew up with computers and who would much rather be using a touch screen than filling out logbooks with misspellings and poor penmanship.

Of course, age is part of the issue when it comes to adopting new technology, but it isn’t just a simple relationship between old age and a lack of interest in applications such as social media.

“Seniors, particularly – it’s amazing how they pick up on Facebook and some of the social media,” said Troyer. “Because they want to keep track of their kids and grandkids and their friends. They have time for it. Young kids – they learn it through high school and they

Energy sector can use social media to address recruitment and public relations issues

cont’d from pg 7

Steve Troyer of Troyer Ventures hasn’t just begun using social media to connect with potential employees, but is also converting much of his operations from paper to digital. Troyer believes that is what the younger generation of workers wants and expects from their workplace.


OCTOBER 2012 PIPELINE NEWS NORTH • 19

R001295995

bring it with them into the workforce.“My generation, that middle group in

[their] late thirties to fifty or something, tends to not want to deal with it. We see it as a distraction and a waste of time. … We actually build a resistance to it.

“We have to learn it,” he continued. “I am learning Facebook. I ask my kids all the time: how do I do this? You have to figure out how does it work. And it takes time. And I don’t want to embarrass my-self in front of 400 people.

“But we have to learn how does it work. And when we learn it, it’s a tremendous advantage.”

“Social media is relatively new,” said Dodaro. “It was only five and a half years ago that I joined it. And I said that I was never going to do that.”

Dodaro eventually saw two benefits that attracted her to Facebook: the ability to communicate with friends and family in faraway places and the opportunity to promote business.

“I started learning everything that I could about it,” she continued. “And everybody’s perspective is shifting. The largest demographic that’s grow-ing on Facebook is people 55-plus. So,

even people that they thought wouldn’t use it are gravitating to it. In fact, my mother started using Facebook before me.”

Dodaro suggested that the old boys club culture of the oil and gas industry could be slowing down their progress with social media and other new technologies.

“Old boys are proud of being old boys... it’s a badge of honour,” said Troyer.

“We’ve got to quit that,” he continued. “We’ve got to start realizing that we have no right to sit and complain about not having any workers if we’re not talking to workers where they are.

“Schlumberger goes to Halifax and puts on job fairs because they know that’s where the workers are. So, they can get them. That’s smart. Go to where workers are. Let them be aware of it.”

The fact is that where workers are is on social media.

“I promise you,” said Troyer, “if I was looking for 100 employees, I’d have a YouTube clip done and it would be cool. And it would be something that would be funny, maybe.

“Because you can send that around through social media.”

Tourmaline acquiring Huron Energy

Daily Oil Bulletin

Privately-held Huron Energy Corpora-tion, which has focused on the Montney play in northeastern British Columbia, has been acquired by Tourmaline Oil Corp. in an all share transaction valued at $258 million.

The acquisition provides a significant expansion to Tourmaline’s asset base in the prolific liquid rich Montney play area. The company’s land base in northeast B.C. will more than double to 186 sec-tions from 78 sections and result in a significant increase in Tourmaline’s future horizontal Montney drilling inventory.

The acquisition will also add approxi-mately 5,500 bbls of oil equivalent per day of current production, primarily in the Groundbirch, Sunrise and Tupper areas, and 46.2 million boe of proved plus probable reserves as independently evaluated in a report by GLJ Petroleum Consultants Ltd. as at Aug. 31, 2012.

In addition, Huron holds approximately 53,000 acres of land in areas including Sunrise, Groundbirch, Septimus, Daw-son, Sundown and Red Creek.

The company’s extensive infrastruc-ture in northeast B.C. complements Tourmaline’s plant and pipeline network in the greater Sunrise-Dawson area, which Tourmaline said it believes to be the optimum Montney play area in the entire northeast B.C. Montney trend.

Huron shareholders will receive 0.07644 of a common share of Tour-maline for each Huron common share pursuant to the acquisition and it is expected that Tourmaline will issue an

aggregate of approximately 7.4 million common shares to acquire Huron. The acquisition will be completed through an arrangement pursuant to the Business Corporations Act (Alberta) and is ex-pected to close in early December 2012.

Tourmaline will also assume the debt of Huron, estimated at $24.6 million, after taking into account anticipated transaction costs, as at Sept. 30, 2012. Based on Tourmaline’s closing price on the Toronto Stock Exchange of $31.70 on Oct. 22, 2012, the total transaction value is approximately $258.3 million, including the assumption of net debt.

The board of directors of Huron has unanimously determined to recommend that Huron shareholders vote their Huron shares in favour of the acquisition. All of the directors and officers and cer-tain shareholders of Huron collectively holding approximately 65 per cent of the Huron shares have entered into agree-ments with Tourmaline to vote their shares in favour of the acquisition.

Huron anticipates mailing an informa-tion circular to Huron shareholders by early November and a special meeting of Huron shareholders is anticipated to be held in early December 2012.

Completion of the transaction is condi-tion upon receipt of Huron shareholder approval and all required regulatory approvals, including Competition Act approval and TSX approval for the listing of the Tourmaline shares to be issued to Huron shareholders.

Under certain circumstances, Huron has agreed to pay a non-completion fee of $7.5 million to Tourmaline.


industry news

be a subsidiary of a Caterpillar company, Progress Rail Services.

The locomotives have been retrofitted to run on 90 per cent natural gas – the remaining 10 per cent is diesel that is still used for ignition – using conversion kits from Energy Conversions (ECI).

According to ECI, carbon dioxide (CO2) emissions can be cut by 30 per cent and nitrogen oxide (NOx) emissions can be cut by 70 per cent over the lifetime of a locomotive by using these hybrid engines instead of conventional diesel engines.

“We think there’s potentially operational efficiencies as well,” Hallman added.

CN is already an industry leader in North America when it comes to fuel ef-ficiency, currently using about fifteen per cent less fuel than the industry average.

The first step towards realizing their sustainability and efficiency goals, how-ever, is to prove the viability of natural gas locomotives.

“This is like a test,” said Hallman.“We’re just dipping our toes in the water

here,” he added.

If this first foray into natural gas loco-motives is successful, CN will then move into the second phase of the project to develop a state of the art natural gas rail-way engine and a railway tender to carry the fuel alongside the locomotive maker EMD, natural gas engine manufacturer Westport and Gaz Metro subsidiary Gaz Metro Transport Solutions (GMTS).

“Because the stuff that we’re deal-ing with now is essentially… a kit with technology for LNG (liquefied natural gas) conversion of these existing locomotives, which has been on the market for a num-ber of years,” said Hallman. “So, we’re looking for the next step here in terms of not only the engine, but also a state of the art tender for the transportation of the LNG.”

The natural gas for the test project is being supplied by industry giant Encana, one company that is leading the charge on the use of natural gas as a transporta-tion fuel.

Last year, the natural gas producer began providing natural gas fuelling for a fleet of LNG trucks belonging to

Heckmann Water Resources, the water supplier for their Haynseville shale gas operations in Louisiana.

Encana has also been converting its fleet of light duty trucks to CNG.

“It fits right in our niche,” said David Hill, Encana’s vice president of opera-tions for their natural gas economy group, discussing the decision to join CN on this venture.

“[We are] bringing our light duty fleet – pickup trucks out in the field – to natural gas,” he added. “We’re progressing on that as well as building infrastructure to fuel those. Because we know that there’s not a lot of infrastructure out there.”

That lack of fuelling infrastructure is often mentioned as an obstacle to using natural gas for transportation, as well as the considerable cost of converting fleets of vehicles to natural gas.

“In high horsepower applications,” Hill continued, “we’ve been testing natural gas in our operations for about five, six years now. And we’ve gained a lot of experience on using natural gas in high horsepower applications. And this is kind

of a natural evolution for us, just to look beyond drilling applications and pressure pumping services, and look at these other very large markets that consume … large amounts of fuel.”

Encana began discussing this project with CN about a year prior to its launch.

“We were looking at the high horse-power applications for natural gas and we reached out to CN just to get their inter-est,” said Hill.

“What kind of attracted us to them was they definitely were innovative,” he added. “They’re definitely going to do more than talk about it.

“We were excited to work with them and actually take a project from the draw-ing board to execution.”

As a natural gas producer, particularly one with assets in the relatively remote northeast corner of British Columbia, Encana is also eager to diversify markets for the fuel at a time when the United States is shifting from importer to exporter thanks to their shale gas resources.

“[The] transportation segment is a very significant segment in fuel consumption,”

nAturAl selectIonExperts say use of natural gas for high horsepower

applications will continue to grow

Natural gas producer Encana has started using natural gas for their fleet of light-duty trucks and providing the fuel for heavy-duty trucks operated by a few of their service providers. They are also helping CN move forward on their plans to use natural gas locomotives by supplying fuel for their pilot project in Alberta.

ENCANA PHOTO

cont’d from pg 5


said Hill, noting that the move to using natural gas for transportation has been led by city transit and return-to-base heavy truck fleets such as those operated by companies like Waste Management.

“We’re seeing significant movement today in the Class A market for trucking,” Hill continued. “And these new markets are important because of our supply story – our abundant supply story.

“But these new markets will take time. It’s really about adoption. It’s really about establishing credibility with the [fuelling] infrastructure and bringing this to market.

“It’s a longer term view.”Encana is simultaneously working on other new proj-

ects, too.“We’ve definitely got a few more of our suppliers

that are contracting with us right now,” said Hill. “We’re early in the process for getting them up and running on natural gas in the U.S. And we have one of our real key suppliers up in Canada, Ferus Energy. We’re also work-ing with them and fueling some of their trucks.”

Erik Neandross, CEO of Gladstein, Neandross & Associates, the company that brought the HHP Summit to life, is very encouraged by CN’s announcement to undertake this pilot project.

“Our firm has been working in the heavy duty natural gas vehicle arena for almost the last twenty years,” said Neandross, explaining their reasons for launching the HHP Summit this year.

“That has brought us, via a number of the projects that we work on, more intimately involved in this high horse-power segment,” he added.

As consultants, Gladstein, Neandross & Associates have been heavily involved in examining market op-portunities for natural gas in marine transportation and oil and natural gas exploration and production (E&P), particularly the drilling and hydraulic fracturing aspects of that business. That has given them a view of the pos-sibilities for other high horsepower applications.

“We saw this is definitely an up-and-coming emerging market,” said Neandross.

“By virtue of the fact that we’re involved in these markets every single day,” he continued, “we under-stand there’s one mine haul company that’s been testing natural gas, there’s one LNG locomotive project that has proved that the technology can work, there’s this whole emerging oil and gas E&P sector. And then we see this marine sector – something particularly overseas – that is becoming more and more prevalent.”

However, many of these initiatives have been what Neandross calls “one-off, demonstration projects.”

The goal for the conference was to demonstrate the larger opportunities that exist when it comes to natural gas and high horsepower engines.

“We saw a lot of things happening in these markets and we wanted to bring it all under one roof and show-case the opportunity, talk about what synergies there

might be between these segments, and see where it leads us,” said Neandross.

“Hugely important,” he added, discussing the CN project.

“There’s a real inherent interest and, I believe, a deep belief that there’s opportunity here for them to use natu-ral gas and reduce costs,” he continued. “And they’re being very aggressive. Their development project has happened relatively quickly. They’ve got technology on the rails today running on natural gas. And day one reports were very positive.

“There’s really no big technology hurdles here. Getting an engine to run on natural gas to then power a locomo-tive, that’s the easiest part in this whole trial… It’s all of the other things. It’s fuelling. It’s how do you connect the tender car of LNG to the locomotive? What are the issues there? What are the kind of logistical, operational issues of integrating a new fuel into a very, very finely tuned system?”

Those logistical hurdles were a hot topic of conserva-tion during the HHP Summit.

“These were questions that were asked repeatedly throughout the conference,” said Neandross.

“How do we capitalize on this opportunity that the end users have to save tremendous amounts of money in their operations?” he proceeded. “And time and time

again the message was: we need the supply chain. So, the fuel, the LNG fuel production, the transportation, the logistics to get that fuel to the end user. We need the infrastructure components, whether it be infrastructure that’s going to put gas into a power [generation] unit at the drill rig site or the fuelling infrastructure to put LNG in a mine haul truck at the bottom of a gold mine or a cop-per mine. Or the locomotive.

“It’s a very consistent message that we need all those other parts of the value chain to come together and keep pace with the deployment of the actual engines.”

Neandross suggested that the various users need to communicate effectively in order to discover the syner-gies that may exist that can help them conquer those logistical challenges.

“If they better understand what each other is doing, you can more quickly and more successfully bring that natural gas supply chain to all of them,” he explained. “If you have a vessel operator in the Gulf of Mexico and the locomotive operator down in Texas, as well as the drilling crew in the Haynesville or the Eagle Ford, they’re all relatively concentrated geographically.”

If they are all aware of their individual uses of LNG, they can coordinate on the logistical aspects.

Neandross added, “It’s only going to allow for that LNG production plant to be built that much sooner.”

Rail locomotives are just one of many heavy horsepower applications for natural gas being explored by proponents of the fuel. A number of those applications are in the mining and oil and gas industries.

CN PHOTO

More wells drilled in Manitoba than B.C. at three-quarter markDaily Oil Bulletin

Operators across Canada rig released 8,163 wells during the first three quarters of 2012, off 11 per cent from 9,178 wells drilled in the January to September period last year, with drilling levels setting records in Manitoba.

That province is the only one in the West to see a year-over-year increase in its rig release tally to the end of September. Operators have drilled 463 wells in Manitoba at the three-quarter mark, up 34.59 per cent from 344 rig releases in the comparable pe-riod a year ago. There was a bigger percentage increase in total meterage, however, which climbed about 38 per cent to 861,164 metres from 622,769 metres a year ago.

To the end of September, the biggest percentage decline in year-over-year drilling has been recorded by British Columbia, where 347 wells were rig released compared to 474 a year ago (off 26.79 per cent). Operators have also drilled fewer metres in the gas-prone province: 1.33 million metres this year compared to 1.68 million metres at the three-quarter mark of 2011.

Across Canada, of those wells with a reporting status, only 12 per cent of the rig released wells have gas as an objective. Close to 79 per cent of wells with a status are listed as oil or bitumen wells - up from 68.62 per cent last year - and the highest percentage ever recorded.

In Alberta, 3,682 of the wells drilled to the three-quarter mark of the year had oil or bi-tumen as an objective - down from 3,744 to the end of September 2011. Wells targeting natural gas or CBM declined to 813 from 1,507 at the three-quarter mark last year.

The same pattern held true in Saskatchewan, where 2,218 wells were rig released in the January to September period with oil as an objective (compared to 2,350 last year), and only nine gas wells were drilled, down from 32 a year ago.

The total number of wells rig released in Alberta declined 13.56 per cent to 5,022 wells versus 5,810 after last year’s first nine months. Total metres drilled declined slightly to 10.36 million metres from 10.37 million metres a year ago.

Operators in Saskatchewan drilled 2,314 wells in the January to September period of 2012, off eight per cent from 2,514 wells rig released a year ago, while meterage has decreased to 3.7 million metres from 3.85 million metres in 2011.

In comparing Alberta and Saskatchewan rig releases, the former’s overall count for the nine-month period included 163 outpost wells and a total of 453 exploratory wells. In Saskatchewan, 329 exploratory wells were rig released, including 242 outpost wells.

In the third quarter, only two PSAC zones recorded year-over-year increases in rig releases. Northeastern Alberta saw 405 wells drilled compared to 301 a year ago, while Manitoba recorded 220 rig releases versus 146 a year ago. East Central Alberta was the busiest PSAC zone, with 540 wells drilled in the July to September period.


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industry news

That is expected to be part of the mod-ernized Water Act.

“I think it just indicates the commitment of the Commission, and the government partners that we worked with on the de-velopment of NEWT, to communicating, as best we can, in the public domain, the best information that we’ve got on water,” Chapman said when asked how the tool might help the OGC maintain good relations with the various stakeholders interested in industry water use.

“Going beyond just communicating what’s available,” he continued, “we were trying to create a new product to take complex information and put into a form that anybody can access. So, they can determine what the stream flow is and how much water has already been licensed. And how much is there and how much will be left … should every license holder pump at the maximum rate.”

Chapman said that NEWT is an important element of being open and transparent about water use, but he also cautioned that the data the tool provides is based on a long-term average, not the specific conditions that exist on the day a site user is accessing that information.

“So, when you run NEWT and you generate a stream flow for the Beatton River, you’ll see that the stream flow from July until today on the Beatton River is way lower than what NEWT shows,” said Chapman, offering a hypothetical example. “That’s because right now we’re in a drought. So, NEWT doesn’t track the current real time stream flow. It depicts an average.

“But we can use NEWT to say, well, knowing what the stream flow is now rela-tive to what it would be in a normal year, we can see that there’s not much water, we have to suspend water use, we have to work with industry and move them over to alternate sources of water.”

Chapman gave the Fort St. John Petroleum Association a sneak peak at NEWT during a visit to discuss the almost record dry spell experienced in the Peace Region this summer, the conditions that prompted the OGC to suspend water withdrawals by natural gas producers from many of the watercourses in north-east B.C.

The region receives between 450 and 500 millimetres of precipitation per year, Chapman explained, about two-thirds of that coming as rain and the remaining third coming as snow.

“That’s not really a lot of water,” said Chapman.

“Not all of the 480 millimetres or so turns into stream flow,” he continued, noting that stream flow is actually about one-fifth of precipitation.

“Water needs for fracturing varies a lot,” Chapman added.

Water use in the Montney tight gas play can range from 8,000 to 30,000 cubic me-tres of water per well, while water use in the Horn River Basin can reach 100,000 cubic metres of water per well.

As much as 65 per cent of that water can come from surface water sources, but the industry is moving toward using larger amounts of saline water from aqui-fers deep below the surface and recycled flowback water.

Recycled water use is being driven by

a desire to reduce freshwater use as well as the high expense of disposing of that water when it isn’t recycled.

Chapman stated that the water used for hydraulic fracturing is just a fraction of a percentage of the available water supply, which should remain the case according to projected water requirements for the Montney.

Presently, activity in the Montney is relatively low because of the low natural gas price, bolstered slightly by the higher price for natural gas liquids (NGL) that are found in that play.

The OGC based their projections a period when gas is $6.00 per unit, however.

The forecast suggests that 2.5 times as many wells would be drilled per year compared to the current numbers. That translates to 14 million cubic metres of water per year for fracturing. A total of 9.5 million cubic metres of that amount is expected to come from surface water sources. The average annual runoff into

the Peace River is projected to be 16.6 billion cubic metres.

“There’s lots of water in the Peace River,” said Chapman.

“It’s recognizing that it has to be well-managed,” he added.

This past summer has emphasized that fact.

The Kiskatinaw River experienced re-cord lows in the middle of August, actually running dry between Labour Day and the beginning of October.

The Pine River was at its lowest levels in about 50 years after receiving no rain since the middle of June.

During his presentation to the Petro-leum Association, Chapman expressed his concerns about the potential impact on fish populations in the northeast if the area didn’t receive substantial rain prior to the rivers freezing.

“Unless we get some pretty solid rain in the next three weeks,” he said, “the rivers are going to freeze where they are.”

oIlmen & WAter mAnOGC hydrologist talks drought during visit to Fort St. John

cont’d from pg 3

OGC hydrologist Allan Chapman paid a visit to the Fort St. John Petroleum Association to discuss water issues on October 4.JAMES WATERMAN PHOTO


community

aLLIsOn GIBBarDPipeline News North

A new training facility for Northern Lights College students celebrated its completion last week.

The college completed construction of the simulated well site training facility on Oct. 12. The training facility, which is now officially finished, will give students the opportunity to learn and train on the equipment they will be expected to use upon entering the oil and gas industry.

The project was started almost a decade ago and has since been an effort financially supported by more than 50 agencies. One of the key contributors was the Government of Canada who gave $930,000 in funding for this project through Western Economic Diversification Canada.

“The opportunity to train more people on the safety as-pects of the drilling site before they get out into the field,” said Laurie Rancourt, President and CEO of Northern Lights College. “It’s also allowed us to bring together pieces of equipment that we had individually and to turn it into what is actually a model well site.”

The model well site is a three-acre fenced compound in the southwest corner of the Fort St. John Campus. The training facility consists of a 40-metre triple cantile-ver, beam-leg mast drilling rig called Rig 62, which was donated in 2002 by Nabors Canada and their partner Shehtah Nabors LP.

“The rig hadn’t worked for some time and it’s one of those rigs that was particularly hard to market because of the particular style and given the new technology that’s in the industry now… so through an arrangement

that we had with our partners, we managed to release the rig out of the partnership so that we could donate it to the college,” said Joe Bruce, President and CEO of Nabors Canada. “Because they already have the service

rig here… this actually complements the well servicing rig, generally you would have a drilling rig first and the service rig comes afterwards so this bring the whole process together.”

Rancourt says the training facility is going to draw students that are looking for that training and who are looking to get into the field. However she explained that the college already graduate about 136 people in the oil and gas trades, trades that are related to the oil and gas industry and this is going to allow us to increase that by about 70 so to about 200 students.”

The Simulated Well Site Training Facility is the only one of it’s kind in British Columbia and will aid in the learning and training of students taking programs related to the oil and gas industry.

In fact, the university is now able to offer new pro-grams such as Drilling and Well Servicing, Introduction to Production Operations, Pipelining and Gas Process-ing as a direct result of the completed simulated well. In addition, a Rig Technician program is also currently being developed.

Bruce thinks that this facility says, that there’s so much focus on safety, this is the type of stuff we need in the industry to make sure that people do go to work and work safely and go home to their families.”

“There’s a need for a simulated training facility and Northern Lights College is absolutely ideally located to provide that.”

While the training facility has not become operational yet, the training system will be operational for students to use this semester, according to Brad Lyon, Executive Director of Communications and Community Relations for NLC.

WorKInG on tHe rIGsNLC completes simulated well site with

addition of drilling rig

Northern Lights College celebrated the addition of this drilling rig to their training facilities on October 12.

ALLISON GIBBARD PHOTO

New CSUR chief emphasizes need for educationDaily Oil Bulletin

As he tackles a new role as president of the Canadian Society for Unconven-tional Resources (CSUR), geologist Kevin Heffernan envisions two main roles for the association, one of them geared to its roots as a technical organization.

“We facilitate opportunities for ex-change and technical learning for engi-neers, geologists and geophysicists,” he told the Bulletin recently. “For everybody else - government, First Nations and special interest groups - we’re explain-ers,” he said.

“We explain [the industry’s] technology. We want people to make decisions based on good information. That’s a key thing for CSUR as it exists today,” he said.

Topics high on the association’s agenda include shale gas development, hydraulic fracturing and groundwater issues, topics of concern to the industry and public alike. While fracturing may be top-of-mind for the public these days, people’s concerns change from day to

day, and year to year, Heffernan said.“These things go in cycles. Five or

six years ago, [the concern] would have been the impact of coalbed methane development on agricultural land and groundwater. Five years from now, it’ll probably be something else.”

To some degree, the industry expects CSUR to foresee the issues that will concern the public, not just today, but down the road, and before they boil over. “I think we’ve been reasonably successful ... at anticipating when things are going to start simmering,” he said. “That has allowed us to get our message out, at a relatively early stage.”

Sometimes, opposition to an industry practice like fracturing belies deeper concerns. For landowners, complaints about fracturing often mask concerns about groundwater supply. Farmers and ranchers often want to know how much water the industry is using and where it will go afterward.

“Any concern is a legitimate concern,” Heffernan said. “That doesn’t mean

development ... should stop, but it sends a strong message to ... industry that it’s time to do a better job of explaining how you operate, what you do, and help the public understand the technology and how risks are mitigated and managed.”

In Quebec, CSUR has a special chal-lenge. With no French-speaking staff, the association has publicity materials like brochures translated. Language issues aside, Quebecers have not exactly wel-comed the prospect of shale gas devel-opment, something Heffernan readily acknowledges.

“In Quebec, there’s a lot of negativ-ity toward shale gas, and oil and gas in general,” he said, noting industry critics have been vocal, supporters much less so. In part, he attributes the vocal part to Quebecers’ passionate nature. Heffernan has no beefs with passion, “but when it stifles informed debate, it creates a differ-ent set of risks for people in Quebec and in government,” he said.

Among Quebecers concerned about the future of shale gas in the province,

some have yet to make up their minds, and are looking for information to better understand what development entails. “I worry that those people ... are afraid to ask because they don’t want people to know they’re curious, undecided or in-timidated by others who are outspoken or hold a different opinion. From a conversa-tional environment perspective, it can be very difficult.”

When shale gas opponents appear, some are better-informed than others, and Heffernan differentiated between those who are philosophically opposed to shale gas - and sometimes, any oil and gas development - and those who are ready to sit down and talk.

“There’s a full spectrum,” he said. “There are people who say, ‘We’ve never needed oil and gas development here and we don’t need it now.’ To me, that’s a philosophical, not a science-based posi-tion,” he said, agreeing it represents one of the toughest nuts CSUR has to crack, since it leaves little room for compromise.

continued pg 27


Invitation to an Open House

MPWA has been designated as the Watershed Planning and Advisory

Council (WPAC) for the Peace Water-shed. We are gathering information to

prepare a State of the Watershed assessment report and will work to-

wards a Watershed Management Plan.

WATER!

Discussions Access To Quality Drinking Water Reliable Water Supplies for Economic Sustainability Healthy Aquatic Ecosystem Share your Insights & Thoughts on Water & Water Uses in the Peace Watershed!

More info: 780-324-3355 www.mightypeacewatershedalliance.org

4pm to 8 pm

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Oct 30 Fort Vermilion, Community Complex

Nov 1 Beaverlodge, Recreation Centre

Nov 5 Falher, Recreation Complex

Nov 6 Valleyview, Memorial Hall

Nov 7 Spirit River, Community Hall

Nov 8 Manning, Elks Hall

Nov 14 Eureka River, Eureka River Hall

Nov 15 Grimshaw, Elks Hall

Nov 21 Nampa, Pioneers Club

R001364961

industry newsThink tank study cites massive revenue potential

from oil exploration offshore B.C.Daily Oil Bulletin

Provincial and federal governments could potentially see major revenue payouts if the federal government were to lift its 40-year informal moratorium on offshore oil exploration off the coast of British Columbia, says a Fraser Institute study released the week of October 22.

“The study shows the benefits of allowing offshore oil in B.C. greatly outweigh the costs,” said Joel Wood, senior research economist at the public policy think tank and author of Lifting the Moratorium: The Costs and Benefits of Offshore Oil Drilling in British Columbia.

“The majority of these benefits are actually billions of dollars in government revenue for the provincial and federal governments, which could then be spent on healthcare, education, or other gov-ernment services.”

Wood told the DOB his study doesn’t even account for indirect benefits from al-lowing offshore oil development, such as increased employment opportunities.

The study estimates a net benefit of

$9.6 billion from a single project offshore in the Queen Charlotte basin, including the cleanup costs of any spills that might potentially occur. The baseline case as-sumes an oil price of $90 per bbl, similar to recent prices in Edmonton. A sensitiv-ity analysis that shows the net benefits remain positive as long as the oil price is over $49 per bbl, said Wood.

“It’s a pretty conservative estimate, be-cause if a world-class regulatory regime was put in place before it proceeded, those costs would be expected to be a lot lower,” he said, adding strong regula-tions on the industry would mean the net benefit would be even higher than his estimates suggest.

The report estimates that there are 9.8 billion bbls of oil and 43.4 tcf of natural gas in the Tofino, Winona, and Queen Charlotte Basins. The estimates are based on a Geological Survey of Canada report, as well as a government com-missioned report analyzing the potential benefits and costs of one offshore drilling project.

“It’s not this catastrophic environmen-

tal scenario that would take place. We have examples from around the world; we have Newfoundland and the United Kingdom, and we have Norway, where these regimes have done offshore oil in a safe manner, said Wood.

However, Greenpeace Canada climate and energy campaign coordinator Keith Stewart suggests the potential risks from offshore drilling are simply too high, and therefore should be set aside in favour of other developments.

“Lifting the moratorium would put at risk the more than 40,000 jobs in fisheries, forestry and tourism on the B.C. coast that depend on a healthy environment,” Stewart told the DOB. “Canada needs to invest in developing our wealth of renew-able resources in a sustainable way, not seeking to squeeze out the last drop of oil from the tarsands or from beneath the ocean.”

Wood, on the other hand, suggests the risks are rather low if the industry is man-aged properly. Using various estimates from government commissions, reports and databases, as well as academic studies, Wood said his study creates the best estimates of oil spill risk and the related potential damages.

Wood’s study, looking at the rate of spillage from offshore Newfoundland op-erations, shows a medium spill - between 50 bbls and 50,000 bbls - only occurs once every 1.09 billion bbls extracted. Further, United States Gulf of Mexico data indicates a large spill occurs which is over - 50,000 bbls - once every 4.2 bil-lion bbls extracted.

“What seems to be clear, though,

from looking at the different jurisdictions around the world is that a really strong regulatory regime can ensure the envi-ronmental risks are properly managed and mitigated to a low enough level,” Wood said.

If there were large spill, the study sug-gests it would cost approximately $1.3 bil-lion (in 2010 Canadian currency) to clean up and contain. However, the report also states there is an 86.2 per cent chance a large spill would never occur during the drill operation’s lifespan.

Fraser Institute studies are routinely released to the public. Wood said part of the reason for doing so with the offshore-drilling report is to let people know about the existing policy that has been in place since 1972, as well as what alternatives are possible to that current moratorium.

“It’s important for the public to know what they’re missing out on, and what the cost of that policy is,” he said, adding B.C. is fortunate in that its longtime explo-ration moratorium means the province could develop its offshore industry with the benefit of learning from past and cur-rent practices in other jurisdictions.

Although no reserves can be consid-ered discovered yet, the report expects 97 significant gas pools and two signifi-cant oil pools. All oil potential is located in the Queen Charlotte Basin, with the best potential for hydrocarbon discovery in Queen Charlotte Sound and Hecate Strait. The expected oil pools would be larger than the Terra Nova, White Rose, and North Amethyst fields off the coast of Newfoundland and similar in size to the Hibernia field in the same area.

The proposed facility would have a closed loop system in which steam/water is cooled using an attached greenhouse, which would absorb the carbon dioxide by-product and allow the water to be re-used.

The plant will also require a low-pressure sweet gas pipeline to provide fuel from an existing pipeline located a short distance west of the proposed power plant.

The Sweet Group expects to produce 15 megawatts per hour of electricity. Accord-ing to a city staff written report, the Standing Offer Program currently pays between $74 to $95 per megawatt/hour.

The Sweet Group has begun consulting local landowners, the Peace River Regional District, and the City of Dawson Creek about the project, all of whom own property nearby.

At Monday’s council meeting, the city voted to accept the report as information, and no councillor publicly made any statements for or against the project.

This wouldn’t be the first cogeneration facility in the Peace Region. Presently, Spectra Energy and ATCO Power jointly operate the McMahon Cogeneration Plant at Spectra’s natural gas processing plant in Taylor.

The announcement also comes at a time when natural gas power generation is being often discussed as one solution to the low commodity price and market access issues troubling the B.C. gas industry.

It is also being discussed as a possible alternative to BC Hydro’s proposed Site C hydroelectric project.

cont’d from pg 17

Cogeneration plan could provide power and a market for locally

produced natural gas


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32433

Enbridge eyes LNG midstream role in B.C.Daily Oil Bulletin

Enbridge Inc. is also among the com-panies interested in development of LNG (liquefied natural gas) export markets in British Columbia, company officials said on October 3.

Enbridge, which entered the Canadian midstream business a year ago with the acquisition of a majority interest in the Cabin natural gas plant in the Horn River Basin, has been working with producers to come up with an industry-based solu-tion for LNG, Leon Zupan, president of gas transmission, told Enbridge’s investor day in Toronto.

“After working in B.C. for the last 10 years on Northern Gateway [crude oil project], we believe we are in a very good position to develop a project there as well,” he said.

“Reserve certainty and the ability to underpin LNG liquefaction is really the key,” added Al Monaco, Enbridge’s new president and chief executive officer. “I think the producers will look to us for that midstream capability which gives them certainty on that and where we can really

leverage our low cost of capital -- provid-ing, of course, that we have the commer-cial underpinning for that.”

Apache Corporation, Encana Corpo-ration and EOG Resources Inc., which have large gas holdings in the Horn River Basin, have indicated they are looking for a 20 per cent partner for their planned LNG project at Kitimat. TransCanada Corporation has signed up to build a pipeline to an LNG terminal at Kitimat proposed by Royal Dutch Shell plc and its partners, Korea Gas Corporation (KOGAS), Mitsubishi Corporation and PetroChina Company Limited. Spectra and BG Group plc are planning a pipeline to a potential LNG terminal at Prince Rupert.

Enbridge believes that as operators continue to use technology to drill up shale gas formations in northeast British Columbia and Alberta that there is the potential to bring on large volumes of gas in a short period, said Zupan. “We really believe there is a good opportunity to see LNG come on board in the future.”

In discussions with industry about an LNG solution, the biggest issue is bring-

ing all the pieces together, according to Zupan. The most important part of that is ensuring that the right markets have been established that will provide the price signals to the producers that they can now go ahead and start drilling the large fields, he said.

Other issues are ensuring that there is a good supply base that can be drilled out in the right period of time, that the right infrastructure to get to the right tidewater port can be provided and that there is the right liquefaction player.

The first two phases of Cabin have been commercially secured for $1.1 bil-lion and the first 400 mmcf per day Cabin gas plant is 92 per cent complete and will be finished this December, analysts were told. The Cabin 2 gas plant is about 50 per cent complete.

Enbridge sees $4.5 billion in potential opportunities, including future phases of Cabin as more dry gas will be required for LNG exports, said Zupan. The company also sees additional projects as produc-ers are looking for the midstream solu-tions to transport their gas and provide their facilities, especially those in the

Duvernay and Montney.The Alliance pipeline in which Enbridge

has a 50 per cent interest is also well-po-sitioned to capture rich gas supply growth and deliver it to the Aux Sable plant in Channahon, Illinois, of which Enbridge owns 43 per cent, said Zupan. The pipe-line runs right through the rich gas area in both Canada and the northern U.S. and the amount of gas from those fields has risen by about six bcf per day even as overall western Canadian supply has declined slightly.

At Aux Sable, rail and truck deliveries of NGLs are continuing to expand with business about twice what it was a year ago. Aux Sable has been able to attract rich gas by offering premiums that enable producers to avoid constructing deep-cut plants. The expansion of the rail yard at Aux Sable also has allowed it to bring in Marcellus gas from the Utica shale. In ad-dition, the company continues to expand its presence in the Western Canadian Sedimentary Basin and the Bakken.

With the Alliance system running right through the liquids-rich Montney and

continued pg 26


enerGIZInG AsIAForeign markets vital to success in Peace

Region, says B.C. finance minister

wILLIam stODaLKaPipeline News North

Tapping into overseas markets is the key to stabilizing natural gas prices, the Minister of Finance said at a com-munity meeting for the Peace Region in mid-October.

“If we can gain access to offshore markets a lot of that volatility [of natural gas prices] will disappear,”

said Mike de Jong.The trip was part of a tour of municipalities in prepara-

tion for the upcoming sessions to determine the provin-cial budget. However, with a $1.1 billion shortfall from natural gas taxes alone, this budget will be complicated for de Jong and other members of the government.

“Predicting specific revenues can be a bit tricky,” he said. “Natural gas prices have been volatile in the extreme.”

He noted that Canada has had some success with ap-proaching overseas markets, as over 40 per cent of B.C. exports now go to China, and said the resource sector should be reaching out to India.

“The mistake we can’t make is they’re not going to wake up one day and decide we want to buy from Canada,” he said, referring specifically to the energy and forestry sectors.

“These are all the kinds of resource products that rap-idly growing economies of over one billion people with a new middle class are going to need,” he said.

Because of the effect of fluctuating natural gas prices on tax revenue, de Jong said that the provincial govern-ment will have to make “tough decisions” in their budget this year.

While he did not make any specific promises, he said that preparations for the budget will take place over the next two and a half months and will include information gathered from community information sessions like the one held at the Encana Events Centre, where he was speaking. He also took questions from Dawson Creek residents during his evening session. This is the only event scheduled for the Peace Region.

“This is part of the province where a lot of good things are happening,” he said.

“[B.C.] is leading the nation in job creation. There is no part of the province that can take more applause from it than the Peace.”

The minister also said he would like to see incentives put in the budget to encourage consumer debt reduction, which he said has gone on to unsustainable levels for some families.

“I tend to favour… incentives to save, incentives to recognize that as we grow older there’s going to be care needs, housing needs that are different than an 80-year-old than a 30- to 40-year-old,” he said. “I want people to be aware of [unsustainable consumer debt].”

Despite the expected cuts in the budget, he believed that the Peace Region would continue to grow.

“The short, medium, and long term are generally positive.”

industry news

Finance Minister Mike de Jong praised the natural gas industry of the Peace Region during a visit to Dawson Creek this October, but he also spoke of the necessity of accessing foreign markets for the resource to keep the provincial economy humming.

WILLIAM STODALKA PHOTO

Duvernay plays in Canada where drilling is expected to increase, Enbridge believes it will be in a good position to capture that rich gas and bring it to market. This week’s regulatory approval of the Tioga pipeline system, which has capacity of 100 mmcf per day with current 50 per cent commit-ments, also offers a lot of opportunities to tie in rich gas from oil drilling in the Bakken.

In another area, in the joint venture $1.2-billion NEXUS pipeline with DTE and Spectra, Enbridge would transport about one bcf of Utica shale gas, which has one of the lowest production costs

in North America. It would bring the gas into industrial and power generation companies in Ohio as well as to Ontario, Michigan and Ohio local gas distributors.

“We see it really being an attrac-tive pipeline to get into Vector [owned by Enbridge] and into the Dawn hub in Ontario, which is the third highest physi-cally traded hub in North America,” said Zupan. “We really think that Vector is going to be the right way for that to get to market,” he said. “It is connected to a lot of places already both in Michigan and in Ontario.”

Enbridge has expanded the 1.3-bcf per day pipeline three times since it went into service and believes it will be well used

well into the future.In the U.S., Enbridge Energy Partners is

continuing to expand its NGL position with its 35 per cent interest in the $1.1-billion Texas Express system, which will tie in a lot of NGL volumes from the Niobrara, the Rockies and local volumes at Skellytown, Texas, to Mont Belvieu, the premier frac-tionation centre in North America.

Offshore deepwater Gulf of Mexico, Enbridge sees significant potential with facilities for associated gas and infra-structure as oil drilling activity picks up, said Zupan.

Enbridge is forecasting that shale gas production will grow by about 50 bcf per day by 2025 while conventional gas

production is likely to plateau by mid-decade and beyond as shale gas comes on production. The high crude oil price environment is likely to spur renewed interest in natural gas as a feedstock for the fertilizer and petrochemical indus-tries, especially in the United States Gulf Coast, he said. The retirement of coal-fired power generation and conversion to natural gas will represent about another five bcf per day of additional demand over the next couple of decades.

Natural gas prices should continue to improve as the large gas storage surplus has been drawn down due to this past hot summer with its strong demand for air conditioning, said Zupan.

cont’d from pg 25

Enbridge sees strong potential for growth alongside shale gas industry


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In the same boat are those who op-pose hydraulic fracturing under any circumstances. At the other end of the spectrum are pragmatists who will at least try for a compromise. In this group, he counts a prominent U.S. environ-mental lobby group whose position has evolved over time.

“We’ve seen the Environmental De-fense Fund coming over a period of years to understand [fracturing] technology, the risks, and how it works,” he said, noting the group’s current approach acknowl-edges there can be benefits to shale gas activity and focuses on achieving respon-sible development of natural resources.

He puts Alberta’s Pembina Institute in the same class, noting it has “basically acknowledged natural gas is going to be part of our future,” albeit with the caveat that it’s ‘done right.’ “I can appreciate that kind of position,” said Heffernan. “It’s not carte blanche, [but] it’s a recognition that gas has to be a part of the energy mix, going forward.”

Environmentalists often argue that continuing reliance on hydrocarbon fuels delays the adoption of renewables like solar and wind power, something he calls a “real concern.” At the same time, he encourages people to think of oil and gas as necessary partners for renewables.

A geologist by training and long-time CSUR board member, Heffernan is well-versed in resource development, but never thought he would be chosen to lead an industry association. Yet, his broad industry experience suggests he’s well-qualified for the job.

A 1973 geology graduate with nearly four decades in the industry, he spent 10 years with major Canadian pipeline carri-ers, forecasting gas supply and planning pipelines. He also spent years in the up-stream industry, working on the explora-tion, regulatory, stakeholder and govern-ment relations fronts, joining CSUR as a vice-president in 2008.

After discussing landowners’ concerns about unconventional resource plays with the Bulletin, Heffernan outlined issues that might arise in future years. These

include community impacts, such as dust and traffic generated by industry activity, including road construction, and devel-opment’s effects on local infrastructure. Such topics will likely be on the radar for communities affected by development, he said.

At the same time, Heffernan looks for-ward to the day when CSUR - celebrating its 10th anniversary in 2012 - has the resources to better fulfil its industry man-date. To get there, though, the associa-tion will need to generate more revenue. The low gas prices that have diminished revenue for producers have also affected industry associations like CSUR.

A non-profit society, CSUR found one source of revenue in offering conferences and seminars to industry geoscientists and professionals. Unfortunately, that rev-enue source is challenged today by the growing presence of for-profit confer-ence-providers offering similar events, often at competitive rates.

“We would like to grow, because we could do more things in more places,” Heffernan said. “But growing will require

increased revenue, and one of our chal-lenges now is sustaining and maintain-ing our revenue stream,” he said, noting that a CSUR sub-committee is currently wrestling with possible solutions to the problem.

Despite the vicissitudes of revenue, putting the industry’s message across to the public, including landowners, regula-tors and stakeholders, continues to be fundamental to CSUR’s mandate from the industry.

“In many parts of Canada, we’ll have to do a better job of explaining what we do with produced water and waste water disposal,” Heffernan said. “In eastern Canada in particular, it’s going to be quite challenging for the public, because deep-well disposal is not per-mitted and there are no facilities to deal with wastewater.”

Heffernan succeeds out-going CSUR president Mike Dawson, and follows earlier executives like Mike Gatens, chair-man of the association in 2002, when it was known as the Canadian Society for Unconventional Gas.

Heffernan: Oil and gas necessary partners of renewablescont’d from pg 23


careers New website showcases science and technology

careers in the oil and gas industryof science and technology to society with the fact that new science and technology professionals from their generation will be necessary to sustain that industry.

“This is why we’re still seeing this disconnect between the projections of jobs, especially in oil and gas and in the energy sector, and cries to say, ‘You know, if we don’t do something, we may not actually have the talent in Canada for it,’” said Schmidt.

“If you go onto CurioCity, you’ll actually see articles and videos done by science-based volunteers in health, environment, technology, sports and entertainment,” she continued.

“We’re really trying to show them that, every single day, decisions that they make are founded on science and technology, and it does impact them as teenagers and as citizens [even] if they choose not to work in a science-based area.

“The decisions that they’ll make as citi-zens in this country are heavily influenced by science and technology. It’s cultural and it’s work-related.”

Simmons believes CurioCity can also help defeat the myth of science being all about test tubes and lab coats.

“I read this article about how students perceive math teachers, and it was in this really negative way,” said Simmons.

“Just not cool,” she continued. “I think that’s… what I thought when I thought about careers in science. And I definitely found science challenging. And I wasn’t always that good at it. But I found it really interesting.”

Simmons has been impressed by the other profiles on CurioCity, many of which she feels should be interesting careers to those using the site.

“A really big problem for me in univer-sity was that I couldn’t decide what to do,” she said. “I [thought] everything’s so interesting. I can do anything. What’s it going to be? When I look at other career profiles in CurioCity, I’m like, ‘Oh, wow, this is really cool. I would have never even thought to do this.’

“I just kind of came up onto physics and found it interesting and enjoyed it.”

Geophys-ics has been a rewarding career for Simmons.

“When I think about doing anything else, I just can’t imagine it,” she said. “I’ve had such great experiences because of my career in science. I’ve done a lot of traveling. I’ve been up north. This past year, I went to China. Really just awe-some work experiences.”

Simmons believes her career actually hasn’t been what most people would expect, including herself when she was

growing up in Newfoundland.“I was from a really small community,”

she continued. “My parents fished. And the whole community was kind of built around fishing. So, it was hard to imagine these careers in science. I didn’t really know even what they were. So, now, the sort of things that I do and the sort of places I get to go, it’s just really fun. It’s not the way that you would think it is.

“It’s just totally different than I would have thought when I was in high school.”

That appears to be a big part of the message that Schmidt would like to relay to students through CurioCity.

“It’s really showcasing to young people that there are many, many, many careers available with a math and science back-ground,” said Schmidt.

“And not to close the door on science, because they maybe don’t even realize the jobs that they could get. Because, typically, in high school, you think about the traditional jobs in science – doc-tor, nurse, science teacher. And a lot of young people get through high school without even realizing that you can have a job in a different field because it hasn’t been made relevant to them during their high school experience.”

So, Let’s Talk Science is taking a differ-ent approach than a lot of careers sites with CurioCity.

“There’s lots of sites and programs that are available that talk about the nitty gritty of what courses you have to study to become a certain type of a career,” said Schmidt.

“But what there really isn’t enough of is a … place where you can identify people and what people do and how science and [technology] and math assist in play-ing an important role in their jobs, even though you may not think they’re jobs that … need science and [technology].”

It is easy for science and technol-ogy professionals to participate in the program.

“They can just contact Let’s Talk Sci-ence or go onto the CurioCity site and contact us,” said Schmidt.

“We also work one-on-one with people as they come forward to say they’re interested in volunteering. So, we’ll identify who they are, what they’d like to do with their area of expertise, and

we’re able to tailor an opportunity for them to participate.

“The more people we can get wanting to submit information about their own career and how science and math and tech have influenced their job, even if it doesn’t seem to be on the surface, we’d love it.”

“I learned about CurioCity through Let’s Talk Science.,” said Simmons.

“When I was in university, I volun-teered a little bit with Let’s Talk Science. And I guess I kind of remained in touch with those people. And when I moved to Ontario and started working full time, they would contact me for different things. And I just wanted to stay involved in my community.

“I almost was a teacher,” she added. “So, I really wanted to be involved with students and getting them interested in science. I think it’s a good thing.”

The site has had over 70,000 visits and several hundred registrations during its first few months.

“We’ve hardly even done any market-ing,” said Schmidt.

The success of the project won’t simply be measured by site hits and registered users, however.

“We started to look at enrolment in op-tional science credits and applications to postsecondary courses as baseline,” said Schmidt. “Over the next few years we’ll start to see whether we’re able to impact behaviour.

“Right now, we’re trying to mobilize kids, we’re trying to get classrooms con-

nected and we’re trying to connect the science community with those people in the classrooms,” she added.

Ultimately, it is all about changing attitudes.

“One of the key messages is: do not close the door on your maths and sci-ences in high school,” said Schmidt. “Because many times young people are getting to the college system and are realizing that they dropped science and math too soon. They actually have to do catch-up years to get those foundational courses before they can even get going on their career.

“We’re also really interested in young people realizing how math and science and [technology] are involved in the skilled trades,” she continued.

“And we know there’s huge shortages in the energy sector in the skilled trades. But anyone who takes a look at the ma-chinists or the welders or the drillers and [aren’t] thinking that they’re using math every day – it’s that kind of perception that we’re really trying to overcome so kids stay in the courses they will need for the jobs of the future.”

cont’d from pg 6

Let’s Talk Science founder and president Bonnie Schmidt is hopeful that their CurioCity project will help students realize the value of math and science education. The early results are promising, as hundreds of people have already registered with the site.

LET’S TALK SCIENCE PHOTO

“When I think of doing anything else, I just

can’t imagine it.”

– Jayne Simmons, Geophysicist

special feature


special featureMany Peace residents want locally produced

natural gas used for power generationgas is subject to market conditions and, as a result, can-not provide the same cost certainty for power production in the long-term.

Koechl suggested that the Province could solve that problem by obtaining natural gas as a royalty-in-kind.

“What this means is the government could take the gas in lieu of the money,” he said. “Why is this good? The gas would always come as a certain quantity. So, if the price goes up, you still take the same amount of gas. It is a hedge against any future inflationary costs.

“That means a facility like the [SEC] would have stable gas prices well into the future.”

“The Province currently does not collect royalties-in-kind, but provincial regulations do provide the Crown with the ability to do so,” said the ministry spokesperson.

The ministry also stated that the number of full-time employees for a hypothetical 500 megawatt natural gas power generation plant would be just 31 people, slightly more than the 25 full-time employees for Site C.

The hydroelectric project is also expected to generate 7,000 person-years of work during construction.

However, Koechl and Kroecher also examine the cost and the economic benefits in terms of what they con-sider to be waste, suggesting that Site C is an extremely wasteful enterprise. The crux of that argument is the fact that SEC has a footprint on the land of just 60 acres, but Site C could have a footprint of about 25,000 acres.

“The valley will be destroyed. Irreplaceable farmland will be destroyed,” said Kroecher.

“Site C is a feelingless approach,” he continued. “It shows no compassion. I look upon it as the proverbial bull in the China shop. They don’t care how much they destroy provided they get their way. At this day and age, I don’t think we can afford such a massive footprint.”

When it comes to the environmental debate, the Minis-try of Energy, Mines and Natural Gas tends to focus on the greenhouse gas (GHG) emissions.

“Studies have found that Site C would produce among the lowest levels of greenhouse gas emissions, per giga-watt hour, when compared to other electricity generation options, outperforming all fossil fuel power generation options,” said Coleman.

Koechl prefers to take a broader view of the issue, noting that LNG is expected to replace the use of coal and bunker oil in Asian nations, as well as in North America, where the SEC is an example of that trend.

“Mostly, it’s geared … to replace the [coal] plants in a time period of between 2015 and 2020,” said Payne. “A lot of the plants in the north are pretty old and they’ll be coming offline. So, that’s the primary [reason].

“But there has been growth,” he continued. “Alberta and Calgary, even in the worldwide recession, they’ve continued to grow.”

Koechl believes that those sorts of developments at home and abroad could help offset the higher emissions from increased natural gas power generation in B.C., an idea that is somewhat supported by the SEC.

“Roughly, the CO2 is less than half,” said Payne, com-paring the SEC and coal-fired power plants.

“And then you don’t have the mercury and you don’t have some of the other issues,” he added.

“The greenhouse gas emitted in China is still going to be the same air that we breathe here,” said Koechl. “It’s one atmosphere. And I think that’s the fallacy of this whole project, is the fact that we’re just as happy to ship it in its raw form overseas without realizing that the consequences are going to be right back on our door-step anyway.

“Here’s the question: do we spend six times more to make a so-called clean energy project work … or do we actually get rational about the financial implications here? We pay the $1.3 billion or thereabouts up front.

We burn the gas here. Granted, it’s producing green-house gases, but it’s still going into the same atmo-sphere that’s ultimately going to end up in China.”

It also provides market diversity for a B.C. industry.“The natural gas is being sourced here, it’s available

and it’s being processed here,” said Koechl.“It could stimulate the main industry we have in this

area: gas production,” added Kroecher.“Nobody has an issue with the fact that probably 90

per cent of our homes in this province are heated with natural gas,” he continued. “Perfectly normal. Nobody argues that point. But when we want to generate some electricity by using natural gas, people say, ‘It’s not clean.’”

“All of this is sort of counterintuitive,” said Koechl.“Diversification is important to increase the value of

B.C.’s natural gas – for the longevity of B.C’s natural gas sector and the benefits it creates,” said Coleman.

However, his attention is directed toward exporting that gas to Asia as LNG, not burning that resource at home.

Ultimately, all of this argument is moot if natural gas power generation isn’t even logistically practical in B.C. All the circumstances seem to be in favour of the SEC being successful, but that may not hold true for a similar project in B.C.

“We own 160 acres and a significant piece of it is a naturally occurring wetland,” said Payne, describing their site in the Shepard Industrial Park, which was formerly agricultural land.

“One of the advantages that we have is, because we’re near a municipality and a large city, our transmis-sion line losses are minimal,” Payne continued, noting that that has been a significant problem with the coal plants farther north.

Payne suggested that transmission line loss could also be an issue with Site C for the same reason.

“The main transmission lines for us are right across the road from us,” he said. “Like less than 100 metres. That’s the transmission corridor.”

The SEC also has access to reclaimed water.“It’s not uncommon anymore,” said Payne, adding that

it has been a standard practice for two decades. “It’s water that comes out of the wastewater treatment

plants here in Calgary that would be discharged into the [river],” he continued. “And we’re just making one more use of it before it does that.

“They say it’s swimming pool quality water, but we can’t get anybody to swim in it.”

The Ministry of Energy, Mines and Natural Gas sug-gests that everything that has gone well for the SEC are elements that could be problematic for similar projects in B.C.

“Constructing a facility the size of … Shephard En-ergy Centre in British Columbia would pose logistical challenges,” said the ministry spokesperson. “Gener-ally speaking, it is preferable to build a power system site close to transmission, pipelines and a demand centre.”

Satisfying those elements could prove difficult be-cause the natural gas supply is in the relatively un-populated northeast corner, far from the major demand centres.

However, the same is true of Site C.Regardless, there are other limiting factors as well, ac-

cording to the ministry. First of all, it is preferable to build a natural gas power plant near sea level for the sake of combustion efficiency. Secondly, certain air sheds may not be able to handle the increased emissions because of wind patterns and temperature inversions that can cause an air mass to linger over a fixed geographical area.

Land zoning and site access are also issues, as well as the ability to obtain and discharge water used for cooling the facility.

Still, there are already five natural gas power gen-eration stations in B.C. The plants located in Belcarra, Prince Rupert and Fort Nelson are owned by BC Hydro, while BC Hydro has a 20-year purchase agreement with the facility owned and operated by Capital Power Corpo-ration in Campbell River.

The remaining plant is the cogeneration facility at Spectra Energy’s McMahon natural gas processing plant in Taylor.

cont’d from pg 8

Site C has become a divisive and emotional issue in the Peace Region, as shown by this protest against the project that took place during a town hall meeting with BC Hydro in Fort St. John this September. Still, there are practical and logical arguments for and against both Site C and natural gas power generation.



NorthNorthern British Columbia and Alberta’s Oil and Gas Industry

locations that suit your business needs• Distributed to the community in general through these fine publications, Alaska Highway News, Dawson Creek Daily and Fort Nelson News.• Distribution by mail and direct drop-off to Oil & Gas companies,and related businesses and organizations, in the following communities:British ColumBia – Arras, Baldonnel, Cecil Lake, Charlie Lake, CHETWYND, Clayhurst, DAWSON CREEK, Farmington, FORT NELSON, FORT ST. JOHN, Goodlow, Groundbirch, HUDSON’S HOPE, Moberley Lake, Pink Mountain, Pouce Coupe, Progress, Rolla, Rose Prairie, Sunset Prairie, Taylor, Tomslake, TUMBLER RIDGE, and Wonowon.alBerta – Baytree, Bear Canyon, BEAVERLODGE, Berwyn, Bezanson, Bonanza, CLAIRMONT, Eaglesham, FAIRVIEW, Falher, Girouxville, GRANDE PRAIRIE, Grimshaw, Grovedale, HIGH PRAIRIE, Hines Creek, Hythe, LaGlace, MANNING, McLennan, PEACE RIVER, Rycroft, SEXSMITH, Silver Valley, Spirit River, VALLEYVIEW, Wembley, and Worsley, Zama City.

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The Petroleum Services Association of Canada is sponsoring four new awards for students at Northern Lights College, including those in the welding

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in this issue:

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industry newsOilpatch LNG engines could use one bcf per day, says industry expertDaily Oil Bulletin

Converting large engines in the North American oilpatch from diesel to liquefied natural gas (LNG) fuel could create a bcf a day of new natural gas demand.

One bcf a day is roughly 10 per cent of current Canadian gas production, said Robert Taylor, manager of the reservoir studies team at Halliburton in Calgary.

Citing data from two major gas pro-ducers, he said the potential market opportunity for LNG-powered engines in North America could be as much as 31 bcf a day. Hence the use of LNG fuel “could have a very significant immedi-ate effect” on North American gas prices as consumption grows, Taylor added in a keynote presentation at the Canadian Society for Unconventional Resources’ annual conference in Calgary.

Taylor’s presentation discussed three potentially significant opportunities for west-ern Canadian gas - gas-to-liquids (GTL) conversion, LNG exports and LNG engines. His coauthors are Mark Brown of Seven Generations Energy Ltd., Stewart Wilson and Kieran Ryan of Ferus Inc. and Peter Tertzakian of ARC Financial Corporation.

LNG as engine fuel shouldn’t be con-fused with compressed natural gas, which powers most natural gas engines today. The difference is the natural gas for LNG engines is stored at a temperature of mi-nus 162 C, which liquefies the fuel. This

enables more gas to be stored, so vehicles can travel much further without refuelling.

LNG fuelling infrastructure is already being put in place and vehicle conversions require relatively little expenditure of time and capital, Taylor said. Some companies in the western Canadian oilpatch are already running large engines on LNG. For example, frac-fluid producer Ferus has LNG-powered trucks in its fleet.

Royal Dutch Shell plc plans to open three LNG fuelling stations in Alberta by the end of this year and some companies already have in-yard filling stations, said Taylor.

In the United States, Clean Energy Fuels Corp. plans to open 150 LNG fuelling stations for trucks by the end of next year, he added.

The Achilles heel of vehicles powered by natural gas in its gaseous state is they need to refuel often. Chilling the clean-burning fuel to a liquid overcomes the limited-range handicap, Taylor said.

Of the potential North American market opportunity for LNG engine fuel of up to 31 bcf a day, the biggest potential consumer is estimated to be heavy-duty trucking at 15 bcf a day, he said. This is followed by mining and industrial (five bcf a day), medium-duty engines (four bcf a day), marine engines (four bcf a day), trains (two bcf a day), and the oil and gas industry (one bcf a day).

While oil and gas is the smallest of these estimated consumers, it is the market where LNG engines may first be adopted in

North America, Taylor suggested.Part of the reason is the oilpatch is geo-

graphically concentrated, it’s a big consum-er of diesel fuel and the sole producer of natural gas. “We do have a strong incentive - it’s our own product,” Taylor said.

Compared to truck and marine trans-port, the oil and gas industry would have the highest return on LNG conversion investments, he added.

The payback period for converting a drilling rig to LNG from diesel is estimated at roughly 1.2 years versus 1.6 years for a frac pumper and 3.8 years for a trans-port tractor.

The technology has long been used in some industries. In a press release on its website, United Parcel Service Inc. (UPS) says it purchased 48 new LNG tractors last year. UPS, the world’s biggest cou-rier, said it was the first private delivery company to use LNG vehicles.

The energy equivalence of LNG to diesel fuel is 1.7 to one. However, LNG’s lower price can mean significant savings over diesel in certain applications.

Fleet owners switching to LNG from diesel have two options. The first is a kit that converts engines to run 40 to 70 per cent on LNG with diesel making up the balance. The fuel is stored as a liquid, then vapourized to compressed natural gas (CNG) using warm engine coolant before being fed into the engine with the intake air.

“The beauty of that is it’s just a bolt-on addition and you’re using the engine that you’ve already got. That’s a very quick conversion,” said Taylor.

The other option is a new dedicated LNG engine that burns about 95 per cent methane and five per cent diesel. It actu-ally runs on methane; the five per cent diesel is just to get the engine running.

During storage or transportation the LNG is held in double-walled stainless-steel cryogenic tanks under a small amount of pressure. It can be stored for up to four weeks without requiring pressure release. Handling the cryogenic product requires protective equipment such as gloves and a face shield.

LNG is already powering some drilling rigs. Taylor said this application is attrac-tive because a rig operates on a fixed location, so the fuel-storage tank can be separate from the rig.

Cautioning that the economic estimates are “extremely approximate,” Taylor sug-gested LNG can be provided for 20 to 40 per cent less than the cost of diesel at current commodity prices. However, he said the saving depends heavily on fac-tors such as the distance the fuel has to be transported from the supply source.

“But the point is there are some sig-nificant cost savings to be had,” he said. “So this isn’t just a case of being environ-mentally conscious. It’s something that actually makes good business sense.”

NorthNorthern British Columbia and Alberta’s Oil and Gas Industry

locations that suit your business needs• Distributed to the community in general through these fine publications, Alaska Highway News, Dawson Creek Daily and Fort Nelson News.• Distribution by mail and direct drop-off to Oil & Gas companies,and related businesses and organizations, in the following communities:British ColumBia – Arras, Baldonnel, Cecil Lake, Charlie Lake, CHETWYND, Clayhurst, DAWSON CREEK, Farmington, FORT NELSON, FORT ST. JOHN, Goodlow, Groundbirch, HUDSON’S HOPE, Moberley Lake, Pink Mountain, Pouce Coupe, Progress, Rolla, Rose Prairie, Sunset Prairie, Taylor, Tomslake, TUMBLER RIDGE, and Wonowon.alBerta – Baytree, Bear Canyon, BEAVERLODGE, Berwyn, Bezanson, Bonanza, CLAIRMONT, Eaglesham, FAIRVIEW, Falher, Girouxville, GRANDE PRAIRIE, Grimshaw, Grovedale, HIGH PRAIRIE, Hines Creek, Hythe, LaGlace, MANNING, McLennan, PEACE RIVER, Rycroft, SEXSMITH, Silver Valley, Spirit River, VALLEYVIEW, Wembley, and Worsley, Zama City.

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Vol. 1 Issue 7 • dIst: 20,325

july 29 • 2011

• FreeNorth

The Petroleum Services Association of Canada is sponsoring four new awards for students at Northern Lights College, including those in the welding

program at the Dawson Creek campus. Photo by James Waterman.

in this issue:

• the latest scoop - InnoVatIVe randy galbreath

• shapIng alberta - premIer’s councIl

• VIsIt From the sea - aquaVan comes to b.c.

www.inland-group-fsj.com

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The UA Piping Industry College of Brit-ish Columbia (PIC) is bringing free train-ing to Fort St. John this November.

The Industry Training Authority (ITA) in B.C. has provided $1.5 million in funding so that PIC can offer its first ever round of free training in sprinkler fitting, steam fitting, plumbing and welding to women, First Nations and new Canadians inter-ested in careers in those trades. There are no tuition fees for the program and funding for daycare and transportation are also provided.

“We’re focusing on giving an equal opportunity to those groups so as to enhance their ability to get into the labour force,” said Kelly Sinclair of PIC.

All applicants have to have been unemployed for three years and legally eligible to work in Canada.

The focus of the first segment of the training is what Sinclair refers to as es-sential skills.

“The skills that are needed to enhance your ability to learn to learn,” said Sinclair.

Those range from working with others

to computer skills, listening skills and thinking skills.

“Thinking skills – this is all like an iceberg,” Sinclair continued. “Underneath thinking skills, you’ve got critical thinking, you’ve got organizational skills, problem solving, these kinds of things that you need for math and sciences.”

It is about ensuring that these people are what Sinclair calls coachable, but also ensuring that the instructors have the ability to coach the students.

“They forget what it’s like to sit in a classroom,” Sinclair said of these new students.

“And a lot of them are full of fear,” he added.

It is important that the students and instructors are able to bond and work together effectively in order to accomplish their ultimate goals.

“This is the main thing – comprehen-sion, retention and acting on information,” said Sinclair. “They’ve got to be able to comprehend. And employers want people to retain the information they learn in school and act on it when they get to the job.”

That all starts in the classroom.

“It’s not just what you learn, it’s how you learn,” said Sinclair. “In other words, how are these guys going to be teaching their students? Small groups. The lighting has to be perfect. The seating. All these things have to be incorporated to get suc-cess. So, we’ve done big studies on how to teach people to learn to learn.

“One thing people forget is how a student feels,” he added. “They’re a little nervous. These people who have been unemployed for a few years, they’re re-ally freaked out.”

Essential skills is the first week of the program, followed by one week each of sprinkler fitting, steam fitting, plumbing and welding.

“At the end of that course, they get their resumes and they get a job search and an action plan and they decide where they want to go,” said Sinclair. “It’s a pretty [typical] discovery program within piping trades.”

After completing that program, those students can do a foundation course in one of those areas and become an apprentice.

“If they succeed, they get 350 hours towards their apprenticeship,” Sinclair

added.The four-month foundation program

would ordinarily cost about $8,000, while the tuition for the six-week exploratory program, plus the other benefits provided through this initiative, would be about $3,500.

There is room for 15 students in each session.

“The other thing I do is study the eco-nomic development,” said Sinclair, noting that the most crucial skill shortages in the Fort St. John area are in the areas of steam fitting and welding.

Not all of those opportunities are in the oil and gas industry, but that is a signifi-cant employer.

“What I’m trying to do is find as many Canadians who want to work or are in the transition, who need help to learn to learn again, [and] put them to work in Canada,” said Sinclair.

“That’s all our priorities should be,” he continued. “Those who can work and are capable of it, maybe they need some transitional skills, maybe they need some help of some type, but we should be there for them and give them the opportunities.”

Piping college brings free training to the heart of B.C.’s oil and gas country

32 • PIPELINE NEWS NORTH OCTOBER 2012

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