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CANADIAN NATURAL GAS ENVIRONMENTAL OPPORTUNITY ECONOMIC OPPORTUNITY THE NATURAL GAS OPPORTUNITY [ abundant, affordable, cleaner-burning, reliable, versatile ] Environmental performance Transportation Customer needs Renewables partner Foundational fuel Power generation Competitiveness Driving better practice GHG reductions Government revenue Energy reliability Energy security Investment Jobs Water management Export markets Robust regulations ENGAGING CANADIANS April 2013 REPORT OF THE DIALOGUES ON CANADA’S NATURAL GAS INDUSTRY

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Page 1: REPORT OF THE DIALOGUES - Cepa.com · 2 rePort of the dialogues on canada’s natural gas industry aPril 2013 Natural gas is an increasingly visible and important part of Canada’s

CANADIAN NATURAL GAS

ENVIRONMENTALOPPORTUNITY

ECONOMIC OPPORTUNITY

THE NATURAL GAS OPPORTUNITY

[ abundant, affordable, cleaner-burning,

reliable, versatile ]

Environmental performance

Transportation

Customer needs Renewables

partner

Foundational fuel

Power generation

Competitiveness

Driving better

practice

GHG reductions

Government revenue

Energy reliability

Energy securityInvestment

Jobs

Water management

Export markets

Robust regulations

ENGAGING CANADIANS

April 2013

REPORT OF THEDIALOGUESON CANADA’S NATURAL GAS INDUSTRY

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aPril 2013

ExEcutivE Summary

contExt

Why Natural Gas Dialogues and How We Went About Them

A Global Energy Revolution

Part a - What WE hEard

The Natural Gas Opportunity

Challenges to Achieving the Opportunity

Taking It Forward

Conclusion

Part B - thE induStry rESPonSE

The Natural Gas Opportunity

Challenges to Achieving the Opportunity

Taking It Forward

concluSion and nExt StEPS

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tABLe of CoNteNtS

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eXecutiVe suMMary

engaging canadians 1

exeCUtIve SUmmARy

Canada’s natural gas industry believes dialogue with Canadians is essential to maintaining the understanding of and support for the use of natural gas in this country – and we will continue to pursue such dialogue.

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Natural gas is an increasingly visible and important part of Canada’s energy mix. This is the result of increased awareness of natural gas’ environmental and economic benefits, and the new abundance of economically recoverable natural gas from breakthroughs in production technology. At the same time, natural gas production and use have become a source of increasing controversy related to concerns about environmental and social impacts.

While many Canadians recognize the opportunity arising from the increasing abundance and affordability of natural gas, Canada’s natural gas industry also acknowledges that some in the public and many communities across the country have questions about the potential impacts of increased natural gas development and use. To gain a better perspective about the diversity of views, the Canadian Natural Gas Initiative (Canadian Association of Petroleum Producers, Canadian Gas Association, Canadian Energy Pipeline Association, Canadian Society for Unconventional Resources and the Canadian Natural Gas Vehicle Alliance) undertook a series of eight Natural Gas Dialogues across the country in 2012. The primary objective of these Dialogues was to better understand Canadian perspectives on natural gas’ challenges and opportunities and to identify actions that could be pursued to address issues and concerns, so as to better realize the potential of natural gas in the Canadian context.

The Dialogues were held in Moncton, Halifax, Montreal, Ottawa, Toronto, Red Deer, Vancouver and Fort St. John. Participants included representatives from business, labour, academia, NGOs, environmental organizations and Aboriginal communities. Senior representatives from the full value chain of Canada’s natural gas industry also participated in each Dialogue.

Part A of this report summarizes what the Canadian natural gas industry heard in these Dialogues, and Part B summarizes the natural gas industry’s response.

As expected, perspectives on Canada’s natural gas industry (upstream, midstream and downstream) varied widely. However, the natural gas opportunity for Canada in terms of both development and use of natural gas, was broadly recognized by the Dialogues participants.

Participants recognized natural gas is an affordable, secure and reliable fuel choice for the foreseeable future – in traditional uses such as heating, in growing uses such as power generation and in newer transportation applications such as fuel for heavy-duty vehicles or marine fleets. Participants also recognized the potential for economic benefits from natural gas development arising from both increased domestic use and exports of liquefied natural gas. The benefits arising from more affordable natural gas supply were discussed in the Dialogues, benefiting consumers through lower energy costs and increasing the competitiveness of Canadian businesses. There was widespread recognition that natural gas can contribute to improved environmental performance, particularly with respect to improved energy efficiency, air quality and greenhouse gas emissions performance.

Participants recognized natural gas is an affordable, secure and reliable fuel choice for the foreseeable future – in traditional uses such as heating, in growing uses such as power generation and in newer transportation applications such as fuel for heavy-duty vehicles or marine fleets.

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eXecutiVe suMMary

However, the Dialogues participants also identified real and substantive challenges to Canada realizing these opportunities.

The key concerns raised by Dialogues participants involves impacts on the environment and communities where natural gas is developed. We heard that communities believe most of these issues can be addressed, but all of them pose challenges to industry and government that have to be addressed with priority and urgency. Other issues and concerns raised by participants included Canada’s competitive advantage in a highly competitive global market, the need for a skilled workforce, and the need to address environmental challenges while maintaining planning and regulatory systems that are efficient and timely. Finally, although the outlook for natural gas is generally viewed as positive for consumers, some questions remain about stability and affordability of prices, availability of infrastructure to meet new transportation fuel demands, siting issues for natural gas-fired power generation plants, and the role of technology to secure the benefits and offset the risks arising from the natural gas opportunity.

From CNGI’s perspective, it is important to view the natural gas industry within the context of the “3Es” – energy security, reliability and affordability; economic growth; and environmental performance. All three elements are important and must be advanced concurrently.

The abundance of natural gas in North America will help ensure that natural gas remains an affordable, secure and reliable source of energy in the foreseeable future, benefiting consumers and providing a competitively priced fuel to Canadian businesses and industries. Although natural gas is already a foundational element of Canada’s energy mix – it currently meets about 30 per cent of Canada’s end-use energy needs – there are opportunities to broaden its use domestically and globally. Domestic growth opportunities include more use in power generation, more use as a transportation fuel for vehicles and the marine sector, and increased use in industrial applications. Moreover, natural gas presents an opportunity to provide energy services to communities and businesses in Canada’s North. From a global perspective, a major opportunity exists to expand natural gas markets offshore via liquefied natural gas (LNG) exports from Canada’s West Coast, particularly to Asia where demand for natural gas is growing rapidly.

From an economic perspective, the natural gas industry already contributes to economic growth, job creation and government revenues. Projections for future economic contributions are significant. However, growth projections largely depend on industry’s ability to broaden markets for natural gas, both domestic and export. Broader use of natural gas will also provide near-term tangible benefits in terms of reduced greenhouse gas emissions intensity and improved overall air quality.

To realize the opportunities outlined above, the natural gas industry recognizes there are opportunities for improvement in three specific areas:• Impactsonlocalcommunities,localandregionalenvironmentalperformanceandachieving

community acceptance;• Sustainingindustrycompetitiveness(fiscal,regulatory,trade/marketaccessandworkforce);and,• Meetingcustomerneeds.

These improvement opportunities are further outlined in the report which follows, along with specific actions being undertaken or considered by the natural gas industry.

“3Es” Energy security, reliability and affordability, Economic growth and Environmental performance.

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A continued focus on technology and innovation, as well as collaborative partnerships to leverage investments and accelerate technology development and implementation, will be necessary to enhance the overall competitiveness of the industry and secure natural gas as a fuel of choice for an increasing number of Canadians.

Finally, to constructively take this forward we need to focus on the short list of actions required to ensure natural gas is a fuel of choice for Canadians and that the opportunities outlined in this report are realized. The first of these actions is focusing on the big picture – planning and strategy. From the perspective of Canada’s natural gas industry, maintaining Canada’s leadership position in energy requires coherent energy thinking across all jurisdictions. We have been long-time advocates for such discussion, ourselves authoring a range of ideas for an energy framework that could readily be adapted as the basis for energy policy in any single province. We continue to work to advance such ideas and we believe they are in the interests of all Canadians. Second, we must focus on building dialogue. As Canada’s natural gas industry expands in existing operating areas such as British Columbia and Alberta and in areas that are future prospects such as New Brunswick and Quebec, communications and outreach with stakeholders and the public is increasingly becoming an imperative. Additionally, improving energy awareness and literacy across Canada and across the full value chain is extremely important. Canada’s natural gas industry believes dialogue with Canadians is essential to maintaining the understanding of and support for the use of natural gas in this country – and we will continue to pursue such dialogue. Third, the natural gas industry has a responsibility to drive better practice across the full value chain. This is accomplished in a number of ways, all of which need to be reinforced on an ongoing basis.

In convening the Natural Gas Dialogues, it was our goal to facilitate positive, respectful, interesting and mutually informative discussion, initially among all participants and thereafter more broadly among decision-makers and the Canadian public. It is our hope the responses outlined in this paper provide a foundation for further dialogue and additional impetus to advance solutions that are in the interest of all Canadians.

From the perspective of Canada’s natural gas industry, maintaining Canada’s leadership position in energy requires coherent energy thinking across all jurisdictions.

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conteXt

engaging canadians 5

CoNtext

The world of natural gas has changed fundamentally in the past five years, bringing both large opportunities for Canada and important challenges. Five years ago gas was the invisible fuel, literally and figuratively.

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canadian natural gas dialogue locations Moncton, nB Halifax, nsMontreal, Qctoronto, onottawa, onred deer, aB (represents areas north, south, east and west of and including edmonton and calgary)

Vancouver, BcFort st. John, Bc

WHy NATuRAl GAs DIAlOGuEs AND HOW WE WENT AbOuT THEm

The world of natural gas has changed fundamentally in the past five years, bringing both large opportunities for Canada and important challenges. Five years ago gas was the invisible fuel, literally and figuratively. Today it is gaining prominence in the public mind because of its newfound abundance and affordability, because of the environmental pluses and minuses tied to its production and use, and because of the growing appreciation of its versatility for heating and cooling, power generation and transportation. The partners in the Canadian Natural Gas Initiative (CNGI) believe that this prominence means a significant opportunity for Canada. We acknowledge that many communities across the country have concerns about potential environmental and community impacts from large-scale development – both in traditional producing areas in the West and in potential new producing areas in Eastern Canada. Those concerns, left unaddressed, have the potential to inhibit or even stop development. CNGI partners believe, should that happen, that both the affected communities and Canada as a whole would lose out. Alternatively, if the questions and concerns can be satisfactorily answered – and we believe they can be – our country could realize significant economic, social and environmental benefits.

There are a variety of actions that can and are being taken by industry and governments to satisfactorily manage the production, transmission and distribution issues around natural gas. The starting point for understanding any of these has to be a conversation. In communities familiar with natural gas development or possibly on the cusp of new development, conversations involving industry representatives have been proceeding for some time, some of them moving toward greater mutual understanding and possible solutions, others engendering frustration. Governments are grappling with energy planning and regulatory frameworks and making progress, but sometimes lack sound information or an effective means to convey it to their publics, and in some jurisdictions they face potential backlash rather than positive movement.

ApproachWith the above in mind, CNGI partners outlined an approach with several steps. We started by inviting a broad spectrum of leaders in communities from the Maritimes to British Columbia to engage in a series of no-holds-barred conversations. We provided background material covering the issues in as straightforward a way as possible. We invited participants to talk about the issues they wanted to talk about.

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conteXt

tHe cHatHaM House rule the natural gas dialogues were held under the chatham House rule. the chatham House rule encourages openness and the sharing of information. When a meeting, or part thereof, is held under the chatham House rule, participants are free to use the information received, but neither the identity nor the affiliation of the speaker(s), nor that of any other participant, may be revealed.

the benefit of the chatham House rule is that it “allows people to speak as individuals, and to express views that may not be those of their organizations, and therefore it encourages free discussion. People usually feel more relaxed if they don’t have to worry about their reputation or the implications if they are publicly quoted.”

dialogues participants were aware of the chatham House rule in advance and it was also reviewed at the events. For more information about the chatham House rule visit: www.chathamhouse.org.uk/about/chathamhouserule

Mediagiven that people usually feel more relaxed if they don’t have to worry about their reputation or the implications if they are publicly quoted, the dialogues were not open to the media. if participants wanted to comment to media on the dialogues process following the event, cngi respectfully requested that participants respond to the natural gas dialogues report instead. Participants providing comment about the dialogues to media at any time were asked to respect the privacy of others and the chatham House rule.

goVernMentas the primary regulators of the natural gas industry, canadian provincial and federal governments were not invited to participate in the dialogues. However, both levels of government could attend as observers. the chatham House rule applied to government observers as well as participants.

We committed to providing a report (this report) covering both the conversations and the industry response, and to following up directly with the communities with whom we spoke and to taking the report to governments across the country.

Inviting Community LeadersWe aimed our invitations at a broad spectrum of well-known people in each of eight communities from Halifax in the east to Vancouver in the west. Senior industry representatives covering all of the CNGI partners participated in each of the Dialogues. Provincial and federal government officials were invited to join as observers and a few did so. We aimed at smaller communities in the midst of, or prospectively in the midst of, natural gas development, as well as larger cities more removed from direct impacts. We invited community activists, business people, labour leaders, academics, environmental leaders, municipal government leaders and leaders from Aboriginal communities. Approximately 1,200 invitations went out across Canada with almost 300 people participating in the Dialogues. Although there was considerable variation from one location to another, over the course of eight conversations we believe we canvassed the ground, covering the full spectrum of issues and hearing from a diverse set of stakeholders.

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Setting the SceneWe provided two background documents. One was prepared just over a year ago by the Canada West Foundation entitled Seismic Shifts, The Changing World of Natural Gas. The paper was developed in response to the massive change occurring in an industry that has been a mainstay of the western Canadian economy for many decades. The Canada West paper, not surprisingly, had a western Canadian focus, and was quickly dated in its assessment of some of the emerging issues around shale gas because of the rapid changes on that side of the business. CNGI partners therefore decided to commission an update paper to complement the original. (http://www.canadiannaturalgas.ca/media-library/naturalgasdialogues)

Coming to Grips With the IssuesEach Dialogue included five to six hours of discussion. The format left open the question of where the conversation might begin, how it might proceed and where it might end. A key objective was to discern each community’s unique concerns, and not surprisingly every Dialogue took its own unique turn. Industry representatives played several roles, principal among which was listening but also acting as resources and sources of information and – importantly – interacting informally at the breaks, arranging follow-up and establishing or refreshing relationships. We took careful notes throughout but none with direct attribution to the speaker either by name or affiliation, consistent with the Chatham House Rule, which guided us throughout the process. Reporting on the DiscussionsThis report is both the record of those conversations as we heard them (Part A) and, in part B, an industry response. It is impossible in a short report to capture the full variety of each Dialogue, but we believe we have caught the essence: We have tried as accurately as possible to capture the spirit and “feel” of the conversations; we have tried as fully as possible to capture all of the issues raised and to fairly reflect the relative weight of issues both overall and from one Dialogue to another; we have organized our impressions in a way we believe is both logical and genuinely reflective of the way the conversations unfolded overall.

Taking it ForwardThis report will form the basis for several further conversations:• Weareprovidingittoallparticipantsandinvitingthemtocomment,criticizeoraddastheysee

fit. If we missed key points or framed things incorrectly, we want to hear that. Should anyone wish, we will ensure that (attributable) follow-up comments become part of the electronic record of the Dialogues.

• Wewillbetalkingwithprovincialandfederalgovernmentsaboutwhatweheardandwhatwethinkindustry and governments need to do.

• Wewillbefollowingupwiththecommunitieswithwhomwemet,inparticularthosedirectlyaffected by natural gas development. The natural gas opportunity and the issues it brings with it are something Canadians will live with for many decades to come; a meaningful dialogue about those opportunities and about those issues is something that needs to last as long as the opportunities and the issues remain.

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A GlObAl ENERGy REvOluTION This report on the Natural Gas Dialogues includes little background information on the natural gas industry, methods of production, markets and consumers’ uses – leaving that to the background documents provided as pre-read material for the Dialogues themselves. There are, though, a few aspects of the background that would benefit from further description and where new materials have been published in the past six months. Recent materials pertaining to environmental impacts, most notably GHG releases from natural gas production, help to answer some of the questions which arose in the Dialogues. We refer to studies and data that address these issues under the industry response in Part B of this report.

Several other documents have recently been published that help place Canadian natural gas and the results of the Dialogues in a global context. The most notable of these, because it is comprehensive and authoritative, is a report from the International Energy Agency (IEA) entitled “Golden Rules for a Golden Age of Gas.”

The IEA’s title captures the essential issues, the same ones faced by Canadians, but in a global context. In essence, the advent of unconventional natural gas production (mainly shale but including coalbed methane and tight gas) has the potential to radically and positively change the world energy economy, but unless industry and governments get the environmental rules and the economic framework right, much of that potential may not come to pass.

conteXt

international energy agency golden rules for a golden age of gas – World energy outlook special report on unconventional gas (2012)

national PetroleuM councilPrudent development: realizing the Potential of north america’s abundant natural gas and oil resources (2011)

international gas unionglobal Vision for gas – the Pathway towards a sustainable energy Future (2012)

conFerence Board oF canadathe role of natural gas in Powering canada’s economy (2012)

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source: iea analysis

Remaining Recoverable Gas Resources in the Top Fifteen Countries, end-2011

Russia

United States

China

Iran

Saudi Arabia

Australia

Qatar

Argentina

Mexico

Canada

Venezuela

Indonesia

Norway

Nigeria

Algeria

0 25 50 75 100 125 150

trillion cubic meters (tcm)

Conventional

Tight

Shale

Coalbed Methane

The natural gas game could change fundamentally, and for the better

Until the middle of the last decade, technically recoverable (largely conventional) natural gas resources worldwide were estimated to represent about 80 years of supply at then-current levels of demand. The advent of technologies for economically recovering unconventional gas (mainly hydraulic fracturing) have almost doubled the resource estimate, and time estimates for resource life, even at increased demand levels, now stretch beyond 100 years.

More importantly, unconventional natural gas has radically changed the geography of production. The shift in North America is now familiar, with large new resources being developed close to markets in eastern North America, creating new challenges both for communities unfamiliar with gas and for distant-from-market western, especially Canadian, producers.

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At a global scale, this geographic shift is even more fundamental because unconventional resources tend to be found in different countries than those that have recently dominated the global gas resource picture. In conventional terms the global gas giants are Russia, Saudi Arabia, Qatar and Iran. Russia still stands out in the unconventional gas world but Middle Eastern countries fade toward the back of the pack to be replaced by the United States and China, with a second tier after that including Australia, Argentina, Mexico and Canada. In 2035, under the IEA analysis, Canada stands out as the third-largest unconventional gas producer after the United States and China. The geopolitical implications of this shift are hard to overstate and, on the face of things, they are all positive. More widely distributed gas resources reduce the risk of politically motivated supply disruptions, reduce energy-derived financial imbalances, introduce greater competition in world energy markets and ensure widespread access to a relatively clean energy source. In short, the world is a more secure place with large, widely distributed unconventional gas resources.

More supply relative to demand generates lower prices. In North America, where unconventional supply is being developed and will likely continue, we have seen this clearly. The IEA analysis works withapriceassumptionof$5.40/MMBtu* in 2020, significantly higher than today but about half of the price that seemed normal as recently as 2008. In Europe by contrast, where natural gas markets and infrastructure are less flexible, where resources development opportunities are smaller and where most of those may remain undeveloped due to political opposition, the IEA’s price assumption for 2020 is approximately double that for North America. And in resource-poor Japan the price is higher still.

A key question to be answered is whether a truly global natural gas market will emerge. Today’s markets are regional (either continents or oceanic basins such as the Pacific), and except for North America they remain dominated by prices established by long-term contracts tied to the price of oil. Abundant and widely distributed unconventional resources are driving investment in LNG capacity, both liquefaction and regasification. Over time, as more such facilities are developed, it is possible that natural gas prices will become decoupled from oil prices and that they will be increasingly determined in spot markets based on increasingly flexible supply arrangements. Such developments would be positive for both affordability and security.

CONTEXT

GOLD RULES CASE

LOW UNCONVENTIONAL CASE

2010 2020 2025 2020 2035

United States 4.4 5.4 7.1 6.7 10.0

Europe 7.5 10.5 10.8 11.6 13.1

Japan 11.0 12.4 12.6 14.3 15.2

Note: Natural gas prices are expressed on a gross calorific value basis. Prices are for wholesale supplies exclusive of tax. The prices for Europe and Japan are weighted average import prices. The United States price reflects the wholesale price prevailing on the domestic market.

Source: IEA - World Energy Outlook (2012)

Natural Gas Price Assumptions by Case (in year-2010 dollars per MMBtu)

*million British Thermal Units

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All of this could well be accompanied by demand growth far in excess of any other primary energy source. By 2035 natural gas could displace coal as the world’s second most important primary energy source (oil and refined petroleum products will still take top spot). This demand growth will mainly be reflected in power generation, but there are other important growth sectors as well. Worldwide, gas will likely grow in importance as a transportation fuel especially in heavy-duty road transport (about one-quarter of transport fuel demand in North America) and marine transport (one of the most serious sources of air pollution in and near port cities). In North America there is evidence of what is being called an “industrial renaissance” as low fuel and feedstock prices induce a revival of industries that are heavily energy-dependent or reliant on hydrocarbon feedstocks (chemicals).

The IEA estimates that the GHG implications of all this natural gas demand growth are slightly positive compared to a scenario in which unconventional gas development is much lower. By virtue of both fuel displacement (coal and petroleum products) and the complementary role with respect to intermittent renewables (wind and solar), growing natural gas use helps the world shift to a lower GHG future. A “golden age of natural gas,” according to the IEA, is directionally positive from an emissions reduction perspective.

But there are risks The unconventional gas revolution is far from a sure thing. Natural gas production can bring social impacts that can generate opposition. Potential effects of natural gas production and transportation infrastructure, as well as new power generation facilities, on communities and landscapes may well lead to some of these resources never being developed. Several countries in Europe, notably France and Germany, are cases in point as are some jurisdictions in North America, at least potentially, if industry and government can’t engage local communities and get the rules right.

The environmental concerns – water use, possible water contamination, waste water management, impacts on habitat, emissions from production and potential seismic effects – all pose challenges. The IEA examines these issues in some detail and concludes that most or all have some substance, but all also have economically realistic technological and management solutions. That said, downstream consumer communities include many skeptics, and despite the potential benefits of greater natural gas availability some may choose to oppose gas either in development or application. The IEA believes that these environmental implications – real or perceived, potential or actual – could prompt action to significantly constrain unconventional gas development in many countries.

Hence the Golden RulesThe IEA concludes with a set of prescriptions for policy and industry practice that could mitigate most of the community and environmental impacts of unconventional natural gas development. Most strikingly, their analysis envisages that mitigating methods would add as little as seven per cent to the cost of development of a typical shale gas well, in other words, would have little material impact on the potential economic benefits from unconventional gas development. These Golden Rules provide a useful benchmark for Canadians as we examine what we heard in the Dialogues and what industry and governments are doing and need to do to ensure a large potential prize is not left only for other countries to enjoy.

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Part a: what we heard

engaging canadians 13

pARt A: WHAt We HeARDAUtHoR: f. Michael cleland, natural gas dialogues facilitator

...we found that the discussion tended to center on opportunities, challenges or solutions.

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pART A: WHAT WE HEARD

THE NATuRAl GAs OppORTuNITy

The various Dialogues unfolded in an unstructured way. Discussions flowed naturally as issues arose, led to further comment or debate and were succeeded by other issues. There were, however, several themes that emerged consistently albeit with varying weight from one city to the next. But first, it is useful to reflect on how questions around “social licence” seem to manifest themselves.

The natural gas industry is made up of three key elements that comprise the full value chain – upstream development, midstream pipeline transportation and downstream distribution to end-users. Each component has a specific purpose but they are closely interconnected. While the issues, challenges and opportunities faced by the value chain have common elements, some challenges and opportunities are distinctly related to a specific part of the industry. Common among all of the Dialogue sessions was a tendency for discussion to focus on upstream-related issues, something that is consistent with years of industry-wide experience. In contrast to oil infrastructure, natural gas pipelines or LNG facilities have not attracted high levels of public controversy, at least not in recent years. At the customer end, natural gas distribution infrastructure typically attracts little controversy and natural gas applications, with the exception of some power generation facilities, are equally uncontroversial. If controversies tend to concentrate upstream, the discussion of social licence is pervasive across the value chain, although it takes different forms. At the local level, impacts both positive and negative are immediate and visceral and go to the heart of peoples’ personal economic, health, cultural or safety interests. The emphasis is on interests. At the societal level the questions are more abstract – generalized concerns about environmental impacts, worries about societal reputation and views on the fundamental role of a given product in meeting societal needs. The emphasis is on reputation. Both of these threads ran throughout the Dialogues.

With this as background, we found that discussions tended to centre on opportunities, challenges or solutions. As such we have organized this report around those themes.

In every Dialogue, part of the discussion turned to the natural gas opportunity for Canada or for the specific community we were in, or both. Although the focus on challenges associated with that opportunity varied widely, everyone seemed to recognize that natural gas development and natural gas use held important promise and, properly managed, were worth pursuing.

Discussions seemed to concentrate on three distinct topics: the affordability and reliability of energy supplies, the economic benefit of resource development (jobs, business, government revenues), and, less frequently, environmental improvement. We have characterized these respectively as the energy, economic and environmental opportunities.

The energy opportunity – security, reliability, affordabilityThe role natural gas plays and can play in fuelling the economy was a generally larger subject of discussion throughout the Dialogues, although the exact focus varied greatly from community to community.

Unsurprisingly, the Toronto discussion brought a strong consumer perspective to the fore. In the words of one participant: “Natural gas has been an undervalued source of energy.” This was balanced against concerns about sustaining consumer confidence and ensuring continued attention to environmental

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Part a: what we heard

consequences. The conversation in Montreal stressed the important contribution to a more competitive economy from low-cost natural gas. As one participant put it: “... in the U.S. the economic benefit to the whole economy [from low-cost energy] far outstrips the economic benefit to natural gas producers.” The conversation in Red Deer focused to a striking degree on market issues – perhaps reflective of a resource-producing community concerned about the future market for its product. Security of supply emerged as a theme especially in Halifax, a community which has had access to abundant natural gas for many years but which sees the risk of declining production from Sable Island. Affordability of energy and its importance to both the economy and to individual consumers was a recurring theme throughout, but again, most strikingly in Halifax.

The question of the role of natural gas in the longer term was a theme that recurred from time to time, especially in the larger centres such as Toronto and Ottawa where more abstract energy policy discussions are familiar fare. Is gas a near-term transition fuel to a renewable energy economy, or a foundation fuel over a much longer time horizon?

Most discussions on the energy opportunity focused on energy end use, power generation, transportation or industrial energy applications.

Power generation emerged as a topic in several Dialogues but with nothing like the passion one might have expected given a decade of debates on the role of renewables versus hydrocarbons, or recent high-profile siting controversies. Overall we discerned a sense that natural gas in power generation was just seen as a good idea – in its place – and what its place was or might be turned out to be very location-dependent. Even in Vancouver, where the public debate on power has been dominated by hydro and the notion of zero-GHG electricity production, there was acknowledgment of a role for natural gas, especially as a complement for intermittent renewables. Gas for power generation emerged in a distinctive way in both Vancouver and Fort St. John because of the recognized need for power generation to build and operate LNG export terminals. In Fort St. John some of the discussion pointed to the broader possibilities of gas for power generation and its relative impacts on the environment as compared to new hydro development. In Toronto there was some awareness of the role of natural gas filling in behind coal and balancing a system otherwise heavily skewed to inflexible base load nuclear or intermittent renewables.

By far the most extensively discussed topic respecting energy use was the role of gas in transportation. Every Dialogue turned at one time or another to gas in transport, sometimes at great length and always approvingly. Many or even most Dialogue participants across the country saw an important role for gas in heavy-duty fleets, either return-to-base fleets such as transit or regional-haul highway fleets. The Vancouver discussion opened up the question of gas in marine transport, where it is seen as a highly economic and environmentally preferable option for new ships in short-range service such as ferries.

Most other uses for natural gas seemed simply to be taken for granted. There were occasional passing references to the potential of natural gas to enhance efficiency particularly through technologies such as combined heat and power. Industrial gas use was paid a similar amount of attention except in Ottawa, where some of the conversation turned to the industrial “renaissance” in the U.S. centred on low-cost abundant gas but noting that such a renaissance had yet to find its way to Canada.

Most discussions on the energy opportunity focused on energy end use, power generation, transportation or industrial energy applications.

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The economic opportunityThe economic opportunity was discussed at two different levels depending on the location of the discussion. Communities familiar with natural gas production – Red Deer, Fort St. John and to some extent, Halifax – tended to show a more practical understanding of the possibilities for local employment and business. For communities like Red Deer and Fort St. John in particular, natural gas development was characterized as part of the culture, or as one person in Fort St. John put it: “The energy industry is northeast B.C.’s identity.” In Moncton, many voices expressed a belief that natural gas development could help address long-standing concerns about how the Maritimes can grow their economies, but this perception was tempered by unfamiliarity and uncertainty as to what it might look like and concerns about local impacts. One Moncton participant caught it well: “The average New Brunswicker wants to benefit from jobs and sees the potential, but not all are willing to take the risk.”

Discussion on employment opportunities in the natural gas industry dominated the Dialogues in both Vancouver and Fort St. John but in a backhanded sort of way. That there were and would be job opportunities seemed to be taken as a given. Rather the discussion centred on the related challenges: How to ensure training and how to manage impacts on the social health of communities.

In larger centres, notably Vancouver, Montreal and Ottawa, there was widespread recognition of the importance of the natural gas industry to Canada – to employment, exports and government

revenues. In Montreal, participants emphasized both the potential for natural gas to make an important fiscal contribution and also the potential (and need) for local communities and local landowners to see a direct financial benefit. In Vancouver, unsurprisingly, there was a more intense sense of the new export opportunity, an opportunity that some saw as having a very narrow window given the very real international competition for export markets from other producing countries.

In terms of attention in the discussions, the economic opportunities took relatively little time. That there was opportunity seemed almost to be taken as given. The challenges to realizing it, however, warranted more discussion.

The environmental opportunityOf the three identified areas of opportunity, the environmental one garnered the least attention. The role of gas in an emission-constrained world was a theme that rolled through most of the conversations but in a decidedly understated manner except in Montreal, where participants stressed the necessity for natural gas to be seen in light of Quebec’s GHG reduction goals. One participant put it this way: “We need to make sure that stakeholders understand that natural gas [in heavy-duty fleets] is essential if we want to meet our GHG goals in the transport sector.” Also in Montreal, but more of a surprise, the point was made that “environment” means more than GHG emissions and there was some discussion of the role of natural gas technologies. One participant in particular made the case that new technologies and integrated approaches produce new, high-efficiency, low environmental impact energy solutions. One or two voices in Halifax wondered whether the positive possibilities – at least in a transitional sense – might be swamped by production-related GHG emissions. The most enthusiastic conversation emerged in Vancouver, and it focused on the role of gas in marine fleets and in harbour operations (both shore-side and ship-side) where it was widely acknowledged that natural gas offered a highly affordable avenue for meeting increasingly stringent standards for criteria for air contaminant emissions.

“The energy industry is northeast B.C.’s identity”– Fort St. John participant

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Part a: what we heard

CHAllENGEs TO ACHIEvING THE OppORTuNITy

There was no surprise in the extent to which discussions centred on the challenges facing natural gas and in particular unconventional production. What was something of a surprise was the extent to which the discussion of challenges took a relatively positive form. In other words, the emphasis seemed to be placed on caution to temper the sense of opportunity, not outright opposition. As one participant in Fort St. John took pains to emphasize: “(We) don’t want to be an impediment to development, but you need to involve us and talk to us from the beginning.”

Challenges seemed to fall into three broad categories: impacts on local communities and achieving community acceptance; challenges to competitiveness of the industry; and challenges to meeting the concerns of consumers, particularly in new applications.

Impacts on local communities and achieving community acceptanceThis topic and all its subsets was the dominant focus of concerns by a considerable margin throughout the Dialogues. Most striking was the extent to which it dominated discussions both in locally affected communities and in urban centres more removed from the impacts, but presumably conscious through media reports and professional networks that there are issues that are controversial and potentially damaging. No one seemed indifferent to these issues. Locally affected communities approached them with a certain intensity and sense of personal reality. Urban communities, most notably Ottawa, were concerned that an economic and energy opportunity from which all Canadians could benefit could be squandered if local concerns are left unaddressed.

Most of the specific concerns are familiar to followers of the media, but the relative ranking as we heard it in the Dialogues was quite different.

Well water contamination, water use, seismic effects and methane venting are all familiar themes but none was as dominating in the Dialogues as more generalized concerns about impacts on the fabric of local communities. This theme was most striking in Fort St. John and Moncton, two communities facing different sorts of uncertainty from very different bases of experience.

Fort St. John, as noted earlier, demonstrated a strong familiarity with natural gas development and sees the industry as its economic mainstay. But Dialogue participants expressed deep concerns about the social impacts of accelerated development – impacts on families, on social services, on housing and on training facilities. Fort St. John participants made it clear that the industry and its representatives can be intrusive and disruptive on the landscape, even as they acknowledged that many working relationships are long-standing and largely positive. Participants in the Fort St. John Dialogue also had clear concerns about local environmental concerns such as water use, but social impacts dominated the discussions.

Moncton, in contrast, is a community for which natural gas development is entirely a future possibility and, therefore, largely a mystery. Absent widespread direct experience, participants reported concerns based on media reports and stories from other jurisdictions, combined with a small number of negative anecdotes about industry practices locally and perceived lack of government oversight. They see and hear the industry and its representatives in their community, but they have little sense of what is real and what is not, and who to trust and who to not.

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From the Fort St. John and Moncton Dialogues, bolstered by others, an important theme emerged, characterized by one participant as “community capacity” to deal with development. Community capacity, as expressed, can take many forms, from the ability to find information and make sense of its implications, to the ability to house an influx of workers and their families, to the legal capabilities to assert and protect landowner and community rights.

Questions around water emerged consistently throughout the Dialogues, albeit often with comments derived from second-hand reports rather than direct experience. Red Deer, a community in the midst of a relatively arid landscape, with an economy dependent on both agriculture and energy, was the exception. The dominant theme around water in Red Deer appeared to be water use more than contamination and questions about alternatives to use of potable surface or groundwater sources in gas development. This conversation was set in the context of a bigger conversation in Alberta surrounding water allocation and pricing. Conversations around water in Moncton seemed to reflect a nagging concern more than real experience, and as one knowledgeable participant put it: “Some of the concerns about water are misplaced but they are distracting attention from water issues that are real. It is important to get more clarity.”

Other environmental issues tended to blend into more general concerns about community impacts. Intrusion on the landscape, whether in the form of truck traffic or drilling rigs or the actions of “landmen,” was a recurrent theme in Fort St. John and Moncton, less so in Red Deer. In contrast to media reports, there was almost no mention of concern about seismicity induced either by hydraulic fracturing or waste water disposal. As mentioned earlier, there was some mention in Halifax of the controversies surrounding possible methane venting from production but this issue arose only in passing in other Dialogues.

Finally, a more general point emerged throughout the Dialogues but particularly in Montreal: How to reach out and engage the large part of the population who are neither advocates for nor opponents of natural gas. The importance of this part of the population was well-captured in the point: “We don’t hear them but they vote.”

Sustaining industry competitivenessAlthough by no means as dominant as concerns about impacts on communities, the theme of industry competitiveness ran throughout the Dialogues, focusing on one of three notable issues. The Vancouver, and to a lesser extent Fort St. John, Dialogues spent time talking about the ability to attract and retain skilled labour in an industry potentially facing large-scale expansion. Are the training arrangements in place or being planned for? Just as important, is there adequate recognition of the fact that attracting skills is also about sustaining the families of skilled labour so as to help ensure their sustained engagement?

Community capacity, as expressed, can take many forms, from the ability to find information and make sense of its implications, to the ability to house an influx of workers and their families....

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Part a: what we heard

In Vancouver and Ottawa, participants spent time considering the competitive risk to Canadian exporters from other exporting nations. While there was clear recognition of the opportunity for Canada, there was equally clear recognition that timeliness matters and that competitors, some of whom may have overall cost advantages, are moving quickly. Canada needs to keep pace if we are to succeed in new markets.

In Halifax and Red Deer there were good debates about the appropriate balance between regulatory rigour and the need for timely project approvals. Halifax, much like Moncton, is facing a new phenomenon in the form of onshore gas development and the challenge of putting regulatory frameworks in place that protect and reassure local communities while at the same time ensuring that potential development is attracted to the province by regulatory regimes that make Nova Scotia a competitive jurisdiction. Business voices expressed frustration at cumbersome regulatory processes that risk driving investment away. Other voices argued that taking the time to get it right would ensure acceptance in the longer term. In Red Deer, where gas development is long-standing, there was acute recognition of Alberta’s competitive challenges in a low-price North American market environment but at the same time, full recognition that the community depends on satisfactory resolution of challenges surrounding water use and other industry practices. As one participant put it: “The challenge is to streamline the regulatory process, not water it down.”

Meeting customer needsMost of the Dialogues saw the customer issues as largely resolvable in the marketplace, especially in light of the affordability and other advantages of natural gas. But some concerns emerged that need either better information or more concerted action by government.

Natural gas, like oil, has experienced highly volatile pricing, especially over the past decade, and investorsfacedwithhighcapitalcostand/orlong-termdecisionssuchaspowerplantsorvehicleormarine fleets are betting on prices much closer to the IEA outlook than to those experienced before 2008. Some participants expressed questions about how they can guard against the risk of price surprises. Siting issues for power plants were seen as potential impediments to increased gas power generation. While increased use of natural gas for transportation received warm approval, question marks remain with respect to how the necessary infrastructure can be put in place. Many noted the chicken-and-egg problem surrounding adequate demand in the form of natural gas-fueled vehicles and adequate supply in the form of conveniently located refuelling infrastructure.

Canada needs to keep pace if we are to succeed in new markets.

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The big picture – planning and strategyAll of the Dialogues turned at one time or another to questions best captured under the notions of planning and strategy. Most of this related to energy use and the role that natural gas should play. For many participants it began with a vision of the energy future. In virtually every discussion questions were asked about how policy-makers see the role of natural gas in the energy future of Canada or, more often, each province. Montreal participants were particularly forceful that we need to show how natural gas fits within the overall energy mix. What does natural gas do that other energy forms don’t do as well? As one Montreal participant put it: “Natural gas is an ally of electric power.” How does natural gas fit in transportation and power generation? How does it relate to renewable energy? How does it fit in an emission-constrained future? What is Canada’s future as an exporter of natural gas? What are the policy measures needed to secure the future, however it is framed?

There was relatively little specific advice for governments in terms of particular policy prescriptions – except in the realm of regulation (more on that below). In a few of the Dialogues there was discussion about the role of government in advancing technology development in general and natural gas-related technologies in particular. Whenever natural gas for transport came up the question arose as to how infrastructure could best be put in place. Carbon regulation or carbon taxes rated passing mentions, as did energy efficiency.

Most often questions came down to calls for an energystrategy.

TAkING IT FORWARDFrom one Dialogue to another the emphasis shifted between opportunities and challenges but broadly speaking, each general theme accounted for approximately one-quarter of the discussion in each community. Consistently, about half of each discussion was focused on solutions or processes needed to reach solutions. These tended to fall into three categories: • Bigpictureplanningandpolicyincludingenergystrategiesandlanduseandsocialplanning;• Buildunderstandingthroughdialogueatthenational,provincialandespeciallythecommunitylevel;

and, • Drivebetterpractice–byindustryandbygovernmentsaswellascommunitiesthemselves.

Based on the discussions of both opportunities and challenges, the ultimate objectives behind any or all of these sorts of solutions appear to be threefold:• Secureandsustainsociallicence.Whetheranopportunityrelatestotheeconomy,energyorthe

environment, it will be increasingly difficult to realize if social licence is not earned and conferred at both the community and the societal levels.

• Buildconsumerconfidence.Theconfidenceofenergyconsumersintheproductanditsvirtuesprovides part of the underpinning both for social licence at the societal level and for the ability of the industry to be competitive.

• Buildacompetitiveindustry.Onlyacompetitiveindustrycansustainthefullrangeofeconomic,energy and environmental benefits.

Although no one in any of the Dialogues framed the objectives quite this way, we are confident that such a framework would resonate with most or all of the participants. Accordingly, as government and industry reflect on the merits of the various solutions proposed in the Dialogues it is useful to keep the framework in mind.

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Most often the above sorts of questions came down to calls for an energy strategy or something akin. Most often the focal point was the provincial rather than the national level. As one Toronto participant stated: “An energy strategy for Ontario is quite different than one for Alberta.” The idea of a national strategy, often accompanied by a North American perspective, emerged more strongly in the West.

Several other planning themes emerged but with much more variation by community.

In Fort St. John the themes of land use and social planning predominated, probably reflective of a community on the cusp of a major development boom as unconventional resources in northeastern British Columbia become increasing targets of activity. Although almost uniquely focused on Fort St. John, these two themes are worth emphasizing, in part because of the passion with which they were expressed, in part because it seems obvious that a development boom may indeed occur and the community at least perceives that its provincial government is inattentive. One participant appeared to effectively sum up the mood of the community in the observation that: “Victoria is as far away from Fort St. John as Ottawa is.”

Again with a western focus, but this time in both Vancouver and Fort St. John, there was extensive discussion around skills training. Participants underscored the need to address potential skills gaps that could undercut industry competitiveness or compromise the ability of local communities to benefit. Questions of skills were in turn placed in the context of families and the social setting essential to labour force stability.

Building dialogueIf one single theme could be said to have dominated the Dialogues it was, perhaps appropriately, “dialogue,” and a subset of it, the call for ongoing engagement.

This theme emerged first and with great force in Moncton where we heard from a community looking with a mixture of hope and nervousness at potential development that they do not understand. The theme was echoed with somewhat less emphasis in Halifax. Participants acknowledged that energy companies in the area had been active and open, but they expressed strong frustration at their inability to get answers to all of their questions or, where answers were forthcoming, to know whether what they were hearing was something they could trust. Trust was a recurring theme in Moncton. Neither industry nor government are viewed as trusted sources. Even academics were suspect at least to the extent that they are seen as financially linked to industry.

The message came across loud and clear that industry – along the full value chain – and governments need to be more proactive in assembling reliable information, engaging local communities and ensuring their trust and, ultimately, their acceptance.

Part a: what we heard

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In several larger centres such as Toronto, Montreal and Ottawa, the question of dialogue also arose but in a more abstract way. Participants identified the risk of a growing backlash against development in producing or potentially producing communities. An undercurrent throughout, but emphasized in Montreal, is the widespread (and erroneous) perception that “shale gas” is something different than natural gas. Comments tended to centre on the effects of media stories concerning water contamination, seismic effects and methane venting and the sense that hydraulic fracturing could be a source of significant environmental disruption. The message came across loud and clear that industry – along the full value chain – and governments need to be more proactive in assembling reliable information, engaging local communities and ensuring their trust and, ultimately, their acceptance.

In Red Deer and Fort St. John the intensity of focus on dialogue and engagement was somewhat less, although still a dominant theme, perhaps reflective of communities for whom the gas industry and its employees are neighbours and colleagues. But to underscore again, in Fort St John in particular this came down more to a question of emphasis – the need not just for talk but to take a longer view of the future and to plan.

Underpinning all the discussions on dialogue and engagement is the question of facts. Most participants reflected frustration with what they saw as a shortage of straightforward facts about issues such as water use or waste disposal. There was some recognition that constantly evolving science combined with unique local conditions, including local geology, made simple facts elusive, but the frustration remained. Throughout the Dialogues from east to west, and especially in producer communities, there was emphasis on data: baseline measurement, monitoring, and disclosure.

A final point on the question of dialogue was stressed in particular in Montreal. It is essential that stakeholders are able to see strong collaboration across the industry value chain. As one participant explained it, “To build confidence, customers need access to information across the full spectrum.”

Driving better practiceIt is likely not a surprise that the two communities where the dialogue most emphasized industry and government practice were the two producing communities with familiarity with the industry: Red Deer and Fort St. John. But it was also a theme that was pervasive throughout. Under this general theme several specific issues stand out.

Start with data and information. As noted above, data and information are the lifeblood of engagement. Probably nothing could be more important to securing and holding social licence than ensuring that facts are known with confidence and that information is made widely available from reputable sources. Industry is seen as having a large role in this, but so is government, whose job it is to set the framework and ensure enforcement and validation.

If one single theme dominated the Dialogues it was "dialogue"...the call for ongoing engagement.

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Part a: what we heard

Acknowledge the importance of regulation. Industry efforts to establish best practices and encourage voluntary adherence were acknowledged as constructive but not enough. This theme emerged initially in Moncton and carried throughout. Voluntary standards were seen as fine until someone fails to live up to them, and the fact that a given landowner or community is the exception is cold comfort. Participants generally looked to industry to push the envelope on best practices and for governments to move quickly to establish these in regulation, to monitor and to enforce.

Be sensitive to landowner rights. This was a theme where the unique position of Aboriginal rights holders stood out, but landowners in general were

adamant that industry has work to do to better respect their rights. Communities from Moncton to Red Deer to Fort St. John emphasized this theme. A particular angle on landowner questions arose in Montreal where the emphasis was on how to ensure a direct economic benefit for affected landowners and their communities, possibly through redirecting some part of government royalties.

Create a better balance between protection and efficiency. This theme predominated in Red Deer, perhaps the community with the longest and most extensive experience with the energy industry, but also in Halifax where there is clearly some question as to what is the right balance between caution and attracting investment.

Look to the communities themselves to be creators of solutions. As one participant in Fort St. John said, “How can the community help build a successful industry?”

Look to communities themselves to be creators ofsolutions.

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CONClusIONAs mentioned at the outset, there are many details and nuances that we heard over the course of the Dialogues that cannot be reported in a short summary of eight Dialogues held over the course of seven months from April to October 2012. On some of the issues, there may have been dissenting voices who chose to keep their counsel, but we are reasonably confident that we heard what individual participants and their respective communities wanted to say. As also noted, on some issues we expected to hear more, such as on seismic effects or carbon pricing or the role of renewable energy or energy efficiency or jobs. But discussion on these was minimal or muted. Although discussions were respectful throughout, they were not without disagreement and debate, and while industry was often acknowledged to be doing a reasonable job, no punches were pulled when it came to controversial questions including where both industry and government needed to up their game.

What we heard appears consistent with what industry and governments in other countries are hearing, and in many instances reinforces industry’s sense of where we have work to do or where we believe governments have work to do.

What that work might be is the subject of the next section of this report.

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Part B: the industry resPonse

engaging canadians 25

pARt B: tHe INDUStRy ReSpoNSe

...The Dialogues rightfully reinforced public and stakeholder expectations regarding continued performance improvement in a number of areas.

AUtHoRS: cngi Presidentsdave collyer, President, canadian association of Petroleum Producers Brenda Kenny, President, canadian association of energy Pipelinestimothy egan, President, canadian gas association

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PART B: THE INDUSTRY RESPONSEThe input provided at the Dialogues confirmed that, in many areas, industry is already taking the right actions to address issues and concerns raised by participants. At the same time, however, the Dialogues rightfully reinforced public and stakeholder expectations regarding continued performance improvement in a number of areas. Part B outlines what industry is already doing to earn and maintain its social licence to operate, as well as to be candid about our response to issues and challenges that still need to be addressed.

The natural gas industry views opportunities related to natural gas development and use as generally falling into three areas: energy security, reliability and affordability; economic growth; and environmental and social performance. North America’s abundant supply of natural gas, largely the result of the advent of natural gas from unconventional resources such as shale, has dramatically changed the North American market dynamics and made natural gas an affordable energy solution for the foreseeable future. Abundant and stable long-term supply and the resulting affordability, combined with rising world demand, are creating opportunities for greater use of natural gas in our domestic energy mix as well as globally. This opportunity is enhanced by the fact that natural gas is the cleanest-burning fossil fuel. As a result, natural gas has a vital and growing role in achieving these objectives – providing responsibly produced energy to meet growing demand in Canada and abroad.

The energy opportunity – security, reliability, affordabilityCanada is the world’s third-largest producer of natural gas. Total production was 5.3 trillion cubic feet in 2011 and could reach 7.1 trillion cubic feet in 2020, depending on upstream industry activity levels (which depend on prices) and prospects for export market growth. Substantial exploration activity in northeastern British Columbia and increasingly in northwestern Alberta is driven by assumptions about such growth.

THE NATURAL GAS OPPORTUNITY

Canadian Production

YEAR 1980 2011

2020 (CONT. LOW PRICE)

2020

(PRICE RECOVERY)

Production average(billion cubic feet/day)

7 14.4 14.1 19.6

Conventional natural gas 100% 86% 50% 48%

Unconventional natural gas 0% 14% 50% 52%

Total annual natural gasproduction (trillion cubic feet)

2.6 5.3 5.1 7.1

Source: CAPP 2012Continued low price case – assumes price remains below $4/gigajoule (GJ).Price recovery case – assumes price recovers to $5.50/GJ before 2015.

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Part B: the industry resPonse

Canada’s abundant resource can provide natural gas to consumers for at least the next 100 years at current demand levels. According to the Canadian Society for Unconventional Resources, Canada is estimated to have 700 to 1,300 trillion cubic feet of natural gas. This is largely the result of the emergence of natural gas supply from unconventional sources such as shale rock, which has created stable and affordable market conditions favourable to consumers, and which is making natural gas use an even more attractive energy option for industrial, business and individual energy consumers.

As such, we view natural gas as a foundational fuel in the Canadian energy mix. Currently natural gas meets about 30 per cent of Canada’s end-use energy needs. It is the single largest form of energy used in Canadian homes, with almost six million homeowners using natural gas for space and water heating. Because of its versatility, natural gas is also used to generate electricity and fuel vehicles, and it is used as a feedstock for fertilizers and chemical processes. Natural gas has long been a key source of industrial heat. Its role in this area is growing quickly in North America, and affordable natural gas is often cited as a reason for what some are describing as an industrial renaissance.

From a consumer’s perspective, the energy opportunity stems primarily from the affordability of natural gas. Although the current relatively low price environment presents a challenge to producers, it will result in significant savings for Canadian households. Canadian consumers directly saved about $1.9 billion on their natural gas bills in 2011, according to a 2012 study by Informetrica Ltd. Accounted for in nominal terms, annual savings could grow up to $4.8 billion, depending on prices, according to this study.

The enhanced affordability of natural gas contributes to the relative competitiveness of the resource as a fuel to heat homes, businesses and institutions, and as a fuel for vehicles. Lower fuel costs also enhance the overall competitiveness of Canadian businesses and industries, resulting in collateral economic benefits and employment opportunities.

About 510,000 kilometres of pipeline deliver natural gas safely and reliably to homes, businesses and institutions across Canada. Canada has a very well-established natural gas supply and distribution system, with the potential to expand natural gas availability to at least some regions of the country that currently have no access to natural gas. Technology innovation in the smaller applications of LNG are creating new opportunities for natural gas in “off-pipe” communities, particularly for industrial projects in and around Canada’s northern communities.

North American supply and demand dynamics have changed dramatically over the past decade as the result of what is frequently called the shale gas revolution. The abundance of natural gas supply has changed market conditions to such an extent that North America, which earlier last decade faced a perceived natural gas supply shortage, is now in a position of excess supply relative to demand. This situation is expected to continue for some time. This means the domestic affordability of natural gas – long a key attribute – seems likely to continue, opening the door to domestic market growth. This is beginning with more discussion about expanded residential use, with the continued growth in natural gas for use in power generation, with development of transportation markets opportunities (particularly heavy-duty vehicles and return-to-base fleets), and with emerging opportunities such as oil sands mining and in situ operations in Canada.

About

510,000 kilometres of transmission and distribution pipeline help deliver natural gas safely and reliably to homes, businesses and institutions across Canada.

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Domestic opportunities to grow the market include broader use for power generation and as a transportation fuel, as well as use of natural gas in industrial applications. From a global perspective, expanding Canada’s export markets for natural gas represents a major economic opportunity arising from increased value for Canadian natural gas resources.

Natural gas currently fuels nine per cent of power generation in Canada. The National Energy Board forecasts that by 2035 natural gas will contribute 15 per cent of Canada’s power generation. This projected growth, we believe, is the result of three main factors. First, natural gas is an affordable, cost-effective power generation fuel of choice. Second, natural gas has numerous tangible environmental benefits. In addition to benefits regarding air quality (which are described in greater detail later), natural gas-fuelled electricity generation facilities generally require less land compared to alternatives and less transmission infrastructure because they can often be located near centres of electricity demand. Third, the overall efficiency of natural gas units continues to improve. In addition to the growth in combined-cycle gas plant efficiency from 40 per cent in the early 2000s to 60 per cent today, natural gas can be employed in smaller-scale combined heat and power applications with system efficiencies of 80 to 85 per cent.

Another domestic market growth opportunity is natural gas use for transportation. In Canada, transportation accounts for about 30 per cent of the energy used every year, making it the largest sector in terms of energy consumption. Natural gas is emerging as an increasingly attractive transportation fuel choice in certain applications.

The opportunity in Canada for natural gas vehicles, although significant, is still in its infancy. Today, there are about 12,000 natural gas vehicles in Canada, including 9,500 passenger vehicles, according to the Canadian Natural Gas Vehicle Alliance. Canada has 38 public compressed natural gas (CNG) fuelling stations, 50 private fleet CNG fuelling stations and four private liquefied natural gas (LNG) fuelling stations. Canada’s first LNG card-lock stations for heavy trucks opens this year. While the current transport market penetration of natural gas is limited, as the relative affordability of natural gas becomes more evident, its use as a transportation fuel is getting more attention. As a result, a growing number of Canadian heavy-duty transport truck and return-to-base fleet operators, such as transit bus, truck and garbage truck operators, are turning to natural gas fuel in the form of liquefied natural gas or compressed natural gas.

The marine sector is another emerging opportunity for use of natural gas as a transportation fuel. New regulations are coming into force in North America and globally that will dramatically lower the allowable exhaust pollution from ships when operating near coastlines or on inland waterways. The impact of new regulations has been a major concern for the shipping industry because it would require converting to different diesel fuel types and installing costly exhaust after-treatment equipment. For marine applications, natural gas is now being seriously considered as a lower-emission and more cost-effective alternative.

Natural gas has numerous industrial applications: It is a feedstock for chemical processes, a fuel for process heat applications and a source for hydrogen production. The consistent heat generated by natural gas combustion, the absence of oils and waxes, the negligible sulphur content, the zero-ash content, and negligible particulates also make it ideal for use in industrial kilns and blast furnaces. More affordable natural gas supply makes it more competitive as a fuel supply source for industrial applications and also makes these Canadian industries more competitive on a global scale.

The opportunity in Canada for naturalgas vehicles, although significant, is still in its infancy.

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PART B: THE INDUSTRY RESPONSE

Finally, there could be opportunities to provide better energy services in Canada’s rural and remote communities,particularlyCanada’sNorth.LNGand/orCNGofferanaffordable,cleanandreliableenergy option for these communities, and are increasingly considered for remote development projects like mining operations.

The economic opportunityTraditional markets for western Canadian natural gas are shrinking. Exports to the United States have dropped 16 per cent over the past five years and are projected to drop further because of abundant and affordable U.S. supplies. Similarly, in the major eastern Canadian markets (e.g. Toronto, Ottawa), western Canadian gas is challenged to compete against U.S. supply sources, which are geographically closer.

LNG exportsBecause of the changing market realities, producers are aggressively pursuing export opportunities, particularly to Asian markets where energy demand is projected to increase rapidly over the next two decades. Offshore markets in countries like China, Japan and South Korea are a major opportunity for Canadian producers to ensure an outlet for growing production, to obtain better value for Canada’s natural gas resources and to generate increased economic benefits for Canada as a result.

Much of the demand growth is driven by rapidly growing economies in Asia. For example, China’s demand for natural gas is growing five per cent annually, which is why industry is focusing on west coast LNG terminals to export natural gas to Asian markets.

Seven LNG projects are in various stages of development in British Columbia. Depending on the speed of regulatory approvals and investor confidence, exports of three billion to four billion cubic feet per day by 2025 are possible.

Source: Apache Corporation

Source: CERI 2011

RockiesCalifornia

Québec

Ontario

EastCoast

NewYorkState

Midwest

Japan

China

Kitimat

British Columbia

Pacific Ocean

British Columbia

SouthKorea

Southeast Asia

WesternCanada

Washington

WesternCanadian

Supply

EasternCanadian

Supply

United States

Russia

Canada

Iran

Qatar

Trillion Cubic Feet

0 5 10 15 20 25

Top 5 Natural Gas Producers in 2011

Source: BP Statistical Review 2012

Source: Apache Corporation

Future Markets

Asian markets would be an eight-day to 11-day sail from proposed LNG terminals on Canada’s west coast.

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LNG project development in Canada is driven by the need to ensure market outlets for growing production and to access global natural gas prices. Global natural gas prices are currently tied to world crude oil prices, and are distinct from the particular supply and demand circumstances evident in North America. Natural gas prices in Japan, for example, are currently about US$16.00 per MMBtu, as compared to about US$3.00 per MMBtu in North America. Costs for pipelines, LNG facilities and marine shipping substantially reduce this price differential, but the prospect of longer-term LNG supply contracts tied to global market pricing remains attractive nonetheless. Securing market outlets for Canadian production at a premium to North American prices is an important opportunity for Canada and will significantly contribute to realizing the economic benefits natural gas has to offer.

From a broader industry perspective, several key factors will determine whether LNG export opportunities and economic benefits will be fully realized:• ThecompetitivenessofourfiscalandregulatorysysteminCanada;• ThecompetitivenessofthecoststructureoftheCanadianindustry,bothcapitalandoperating,

across the full value chain;• Theabilityofourindustrytoattractthecapitalnecessarytogrow,whichwillbelargelydetermined

by the above factors;• Theabilityofindustry,governmentandotherstakeholderstoapplytechnologyandinnovationto

develop new market growth opportunities for natural gas, both domestic and offshore;• Thesuccessindustry,governmentandotherstakeholdershaveinmitigatingoreliminatingbarriers

to entry for natural gas in new applications, with the expectation that over the longer term natural gas will have to compete in the market on its merits.

Representatives of the natural gas value chain are working collaboratively with governments and other interests to realize the economic opportunity natural gas represents for Canada.

The environmental opportunityThe natural gas industry recognizes that over time society wants to shrink the size of its environmental footprint. How the use of natural gas can play into that changing picture is a work in progress, as technology and innovation are driving new, more efficient applications of natural gas all the time. The versatility of natural gas also allows us to consider the integration of various fuels and technologies to help improve environmental performance.

In that context, rising global demand for natural gas positions it as a foundational fuel for the future, and there is an opportunity to provide a global net benefit, from an environmental perspective, by displacing fuels with higher carbon content.

By most estimates, electricity produced from natural gas results in about half the greenhouse gas (GHG) emissions of coal-fired power generation. It also emits far fewer pollutants than coal when combusted, resulting in improved air quality.

By exporting natural gas, the cleanest-burning fossil fuel, Canada can help displace higher-emitting fuels in countries that rely on these fuel sources for power generation. The IEA points out in "Golden Rules for a Golden Age of Gas" that natural gas has a “more substantial impact on CO2 emissions” in countries such as China, that rely heavily on coal for power generation. In Japan, where public confidence in nuclear power

By exporting natural gas,

the cleanest-burning fossil fuel,Canada can help displace higher-emitting fuel in countries that rely on these fuel sources for power generation.

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is eroding, natural gas is a viable option that is a cleaner-burning alternative to coal. Perhaps not surprisingly, Japan is a world leader in developing highly efficient natural gas end-use technologies. The environmental benefits of natural gas for power generation are also apparent in the United States, where utilities are increasingly turning to natural gas because of its affordability, benefiting from its efficiency and environmental performance as a result.

Natural gas is also complementary to intermittent renewable forms of energy. In fact, natural gas is the ideal flexible partner to wind and solar energy because it can provide baseload capacity when the wind is not blowing and the sun is not shining. As various jurisdictions look to expand their intermittent renewable fleets, natural gas is increasingly recognized as the enabler. While still very much at the trial stage, there is also increasing interest in using the natural gas system as a storage system for the energy of renewables through gas-to-power technology systems that use renewable energy to drive electrolysis to produce hydrogen, which can then be stored in the very safe and extensive natural gas pipeline system.

In the transportation market, it is still early days for natural gas vehicles but there has been a recent rapid development of heavy-duty vehicle pilot tests using LNG trucks in several North American markets. Heavy-duty trucks and buses running on natural gas reduce greenhouse gas emissions by an estimated 15 to 30 per cent compared to diesel trucks and buses. The opportunity to expand these pilot tests to return-to-base fleets is the next step in the growth of the natural gas vehicle market. And the prospect for longer-term applications in passenger vehicle markets is starting to be discussed. The U.S. Department of Energy recently launched a project to develop a low-cost home refuelling unit for natural gas vehicles.

Shale gas environmental performanceNatural gas from unconventional sources such as shale will contribute an increasing share of total Canadian natural gas production. This has raised concerns about increased GHG life-cycle emissions from natural gas. However, scientific evidence indicates there is little difference, in terms of life-cycle GHG emissions, between conventional and unconventional natural gas. A May 2012 study commissioned by Natural Resources Canada states: “Life-cycle GHG emissions of natural gas produced from shale resources are only slightly higher than those of natural gas produced from more conventional sources.” Specifically, the report states shale gas GHG life-cycle emissions are 3.8 per cent higher than the weighted average, where the weighted average includes all forms of natural gas. The Massachusetts Institute of Technology reached a similar conclusion in the U.S. context. The November 2012 study states: “It is also clear that the production of shale gas, and specifically the associated hydraulic fracturing operations, have not materially altered the total GHG emissions from the natural gas sector.”

Part B: the industry resPonse

Heavy-duty trucks and buses running on natural gas reduce greenhouse gas emissions by an estimated 15 to 30 per cent compared to diesel trucks and buses.

It is clear that the production of shale gas has not altered the total

GHG emissions from the natural gas sector.

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So far this section has discussed Canada's natural gas opportunity. To realize this opportunity, the natural gas industry must be competitive, must maintain and enhance its social licence to operate, and must meet the needs of customers.

Based on the feedback from participants in the Natural Gas Dialogues, we believe there are opportunities for improvement in all of these areas. This section of the report summarizes the industry’s feedback regarding:•Impactsonlocalcommunitiesandachieving community acceptance;•Sustainingindustrycompetitiveness;and,•Meetingcustomerneeds.

Regarding social licence, it is increasingly apparent that social licence is larger than any one project, or any one company, and therefore it is largely within the purview of industry as a whole to address the social licence issues.

CHAllENGEs TO ACHIEvING THE OppORTuNITy

New regulations and practices at well sites have resulted in less gas being flared and reduced GHG (methane) emissions. As a result of these and other efforts, the amount of natural gas flared was reduced in Alberta by 80 per cent from 1996 to 2010, reducing greenhouse gas emissions by more than eight million tonnes. In British Columbia, regulations will eliminate routine flaring by 2016. Industry is also working with the government in Saskatchewan to develop guidelines to reduce the level of flaring and venting in that province.

Other environmental impacts arising from upstream production and opportunities to reduce them will be addressed in the near term.

When compared to business as usual, broader use of natural gas, whether in domestic or export markets, will have immediate and tangible benefits in terms of greenhouse gas emissions and overall air quality. Technology and innovation are key enablers in further reducing greenhouse gas emissions intensity in Canada’s energy sector, including in shale gas development. The natural gas industry is also supportive of balanced policy and regulations regarding emissions. Canadian climate change policy, both federal and provincial, should recognize the importance of the competitiveness of the Canadian natural gas industry in a North American and global context, and support investment in the technologies necessary to reduce emissions, from production and use, and enable new market development.

SummaryBroadening the use of natural gas makes sense and represents a significant opportunity for Canada, for energy security, reliability and affordability, for economic growth, and for environmental reasons. The Canadian natural gas industry, from production through to consumption, is well-positioned to enable natural gas to be a foundational element in the energy future of Canada, North America and globally – stimulating job creation and economic growth, and improving overall environmental performance. This is positive for Canada and indeed for the world around us, as natural gas plays an increasingly important role in domestic and global energy markets.

The natural gas industry must be competitive, must maintain and enhance its social licence to operate and must

meet customerneeds.

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While regulatory approvals remain necessary, the broader implications of energy development also require social licence for our activities. It is clear that many of the issues related to natural gas development, market access and use are broader than what can be dealt with in a regulatory proceeding for a specific project. It is unreasonable to burden the project regulatory process to resolve such issues. The natural gas industry has been consistent in its view that broader public policy must provide the framing within which a regulator can make narrower and more specific regulatory decisions.

Industry’s social licence is driven by both its performance and its communications and outreach activities. A broad, collaborative natural gas industry approach is required on performance and communciations to maintain and enhance social licence. Creating industry processes is the responsibility of industry as a whole – engaging collaboratively with governments, Aboriginal Peoples, stakeholders and the public – and it must continue to be a priority.

Impacts on local communities and achieving community acceptanceTwo key themes were identified in this regard – mitigating local community impacts, and addressing local and regional environmental performance.

Local community impactsFeedback from the Natural Gas Dialogues clearly highlighted the need for the industry to ensure effective and regular engagement at the local or regional level, including consultation with Aboriginal communities, provided they are among the directly affected stakeholders. Timely and transparent engagement regarding the impacts of industry activity at the local and regional level, including engagementwithregardtomitigationopportunitiesandlocalbenefits/economicopportunities, is key to ensuring social licence.

Unconventional development is impacting local communities differently now than conventional development did in the past. For a number of reasons, communities are now seeking a greater understanding of the nature, timing and impacts arising from hydraulic fracturing. They are seeking information about the impact development has on the environment, on local infrastructure, on social services and on community health.

Increasing local concerns and questions about the impacts of natural gas development also create a challenge to reconcile local interests with the broader public interest. In this regard, both industry and government have important roles to play in addressing local concerns and communicating the broader public interest considerations relevant to a particular development or to the industry as a whole. In the end, governments and regulators must determine whether a project is in the broader public interest. A key consideration in determining if a project is in the public interest is whether the proponent has taken appropriate steps to mitigate environmental and social impacts, and to provide economic benefits and opportunities to local communities.

Part B: the industry resPonse

Unconventional development is impacting local communities differently now than conventional development did in the past.

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Natural gas operators recognize their responsibilities to the communities in which they operate, and view quality of life in local communities as essential to long-term attraction and retention of a skilled workforce.

Many oil and natural gas companies elect to make community investments that address broader community needs. Local communities have benefited from various new infrastructure and community facilities as a result of these investments.

Local community investments also help youth earn skills and acquire accreditations needed to work in the oil and gas sector. Many companies create and fund programs to recruit, train and employ Aboriginal people.

Canada’s natural gas industry supports and works with local colleges and training facilities to deliver education and training courses and programs directly relevant to our industry. To be most effective, these courses are often brought to remote communities. One example is Northern Lights College’s “Mobile Learning Centre,” which drives to remote communities in northern Alberta, engaging Aboriginal youth in creative education programs that stimulate interest in further education and, in particular, the many opportunities in oil and gas.

As production grows, the industry recognizes there could be some challenges around available housinginproducingcommunities.Thisissueisbestaddressedatthemunicipaland/orprovincialgovernment level, with input from industry about its growth plans.

The safety and health of our workers and the public are of paramount importance to industry. Industry has been supportive of health studies, provided they are conducted by reputable authorities with well-defined terms of reference. In British Columbia, the government is currently undertaking a health-risk assessment of oil and gas development in the province, which is expected to be completed in 2014. In New Brunswick, a report on the potential health impacts of shale gas development, issued in October 2012, is currently being reviewed by government. These reports are a reflection that the public potentially impacted by natural gas activity wants a greater understanding as to how the natural gas industry operates and assurance that any potential health impacts are being addressed, both of which are reasonable expectations.

Addressing the rights of landowners is also a component of achieving broad community acceptance and earning industry’s social licence to operate. Landowner rights, from our perspective, are not limited to the rights of those on whose property development takes place. Rather, landowner rights should be viewed from a broader community and public interest perspective. Industry is committed to negotiating access rights with holders of surface rights and providing compensation for impacts resulting from drilling activity, such as the construction of access roads. A key objective of these negotiations is to ensure that landowners are not disadvantaged financially by the impact of drilling activity on their land, and that they are constrained as little as possible in how they subsequently use their land. Industry as a whole supports mechanisms that provide these assurances to surface rights holders.

Equally important is the respect that operators show for the rights of people who live near where the industrial activity is taking place. This encompasses issues such as dust and noise control, traffic and flaring. Good-neighbour policies, which are specific to individual companies, are intended to respond to these concerns by detailing steps companies take to address these issues.

The safety and health of our workers and the public are of paramount importance to industry.

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Part B: the industry resPonse

Aboriginal PeoplesThe natural gas industry will continue to work with governments and Aboriginal groups to determine if proposed activities have the potential to impact treaty and Aboriginal rights. This will best be achieved through the separation of two related but independent objectives:1. The development of a more prescriptive consultation process, with effective timelines, capacity

funding and related cost controls; and,2. The development of an accommodation framework among the provinces, the federal government

and First Nations to address the unique social challenges experienced by Aboriginal Peoples, in an effort to position the communities for more equitable opportunities and outcomes.

Creating a skilled workforceIndustry needs skilled labour and access to local services, which could be supplied by Aboriginal communities because of their proximity to proposed industrial activities and their current under-representation in the workforce. For this to occur, industry requires governments to lead a focused, co-ordinated and collaborative effort with all parties to allow for an effective matching of opportunities with the appropriate community skills and capacities. We believe the Crown must take a leadership role on these issues in an effort to find long-term solutions for all parties.

In summary, engagement with local communities and Aboriginal Peoples has been and continues to be a priority for the natural gas industry. However, the landscape is changing: local and regional environmental and social issues are intertwined with broader issues such as climate change; the impacts of unconventional resource development differ from those of conventional natural gas activity; and it is increasingly challenging to reconcile the impacts of industrial activity on local communities and the broader public interest. For all of these reasons, industry must be responsive to feedback from stakeholders and improve the effectiveness of its engagement with local communities, landowners and Aboriginal Peoples in areas where we operate. This challenge is recognized and is a priority going forward. This will encompass improvements in information and greater accessibility by industry, all of which must be founded on continuous performance improvement.

Local and regional environmental performance in natural gas production and distribution

Engagement with local communities and Aboriginal Peoples has been and continues to be a priority for the natural gas industry.

Environmental performance issues were addressed in the previous section of this report, as was the downstream dimension of environmental performance. This section therefore focuses on local and regional upstream environmental performance, and transportation and distribution safety and integrity.

a) WaterCAPP’s guiding principles and operating practices for hydraulic fracturing are designed to focus on the natural gas industry’s priority areas for environmental performance improvements across Canada. These practices speak to the need to provide greater clarity about our operations to the public and are expected to inform and complement future government regulations.

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Our research told us that questions about how industry uses and manages water were the most pressing concern of the Canadian public. To address this concern, CAPP released the first six operating practices in January 2012, which focus specifically on water. In November 2012, CAPP added a further operating practice that outlines the steps industry takes to assess, monitor and mitigate the potential for unusual seismic activity.

Industry’s goal is to continue augmenting these voluntary principles and practices while advocating to governments that they incorporate them in future regulations. Disclosing fracturing fluid additives is mandatory in British Columbia and Alberta via an online registry. Other jurisdictions are working on similar plans, which are supported by industry.

In addition, CAPP is developing metrics within the scope of our Responsible Canadian Energy program to track implementation of the operating practices by our members.

Concrete actions to implement CAPP's hydraulic fracturing operating practices are also underway. Major hydraulic fracturing companies in Canada and the United States are developing hydraulic fracturing additives that use food-grade chemicals and are non-toxic. Research continues on how to make these additives more effective and to broaden their commercial availability. Where practical, operators are using saline water, drawn from deep non-potable aquifers versus fresh water. The Debolt water treatment plant, a joint venture between Encana and Apache Canada in the Horn River Basin of British Columbia, already pumps sour, saline water from a deep aquifer to the surface, removes the hydrogen sulphide, and prepares it for use in both companies’ hydraulic fracturing operations. Efforts are underway in other areas to identify similar opportunities.

Other research focuses on how the salt content of saline water can be reduced to allow this water to be used more extensively in hydraulic fracturing operations. This technology already exists but has to be further developed to make it more cost-effective and commercially viable. In addition to the actual reduction of salt content, other research is addressing chemical options to mitigate the impact of high salt levels on hydraulic fracturing fluid properties.

Technologies that partially replace water with CO2 and nitrogen are also being used in some areas. This technology could reduce water use by more than half in some cases, but its application depends on the geology where the natural gas is trapped. It is already used in parts of British Columbia’s Montney play and in other regions.

The Dawson Creek Reclaimed Water Project is an example of effective collaboration between industry and a municipal government to reduce industry’s use of fresh surface water. Shell Canada and the City of Dawson Creek, British Columbia, opened the project in September 2012. It treats municipal waste water for use in Shell Canada’s Groundbirch natural gas venture and the City of Dawson Creek’s municipal operations.

Another example is the Montney Water Project, a partnership among seven natural gas producers, Geoscience BC, the British Columbia government, the City of Dawson Creek and the University of Northern British Columbia. The project is designed to provide a comprehensive inventory of water resources in province’s Montney region. This includes an analysis of deep saline aquifers, which may significantly reduce the need for freshwater use in natural gas development.

Technologies that partially replace water with CO2 and nitrogen are also being used in some areas. This technology could reduce water use by more than half in some cases....

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Part B: the industry resPonse

CAPP HyDRAULIC FRACTURING OPERATING PRACTICES For sHale, tigHt gas and tigHt oil

1 Fracturing Fluid Additive Disclosure: Publicly disclose on a well-by-well basis the chemical ingredients in fracturing fluid additives used, including trade names, general purpose and concentrations.

2 Fracturing Fluid Additive Risk Assessment and Management: identify and manage the potential health/environmental risks associated with fracturing fluid additives and increase demand for more environmentally sound fracturing fluids.

3 Baseline Groundwater Testing: develop domestic water well testing programs and participate in regional groundwater monitoring programs.

4 Wellbore Construction and Quality Assurance: ensure the proper design and installation of the wellbore, confirm wellbore integrity prior to initiation of hydraulic fracturing operations, and develop remedial plans in the unlikely event that the wellbore is compromised.

5 Water Sourcing, Measurement and Reuse: evaluate available water source options, monitor water sources as required to demonstrate sustainability of the resource, and measure and report water withdrawals.

6 Fluid Transport, Handling, Storage and Disposal: identify, evaluate and mitigate potential risks related to the transport, handling, storage and disposal of fluids, and ensure a quick response to accidental spills.

7 Anomalous Induced Seismicity: Where appropriate, establish monitoring, mitigation and response procedures to avoid or minimize any adverse effects of induced seismicity associated with hydraulic fracturing.

Other practices are being implemented by operators to address concerns related to water including:• Drillingofmultiplewellsfromasinglesurfacelocation–thispracticeisbothaneconomicenablerof

recycling and reuse of flowback and produced water (reducing the need for transportation of water to and waste water from well locations), and a way to reduce environmental impact (fewer roads and pipelines, and reduced habitat fragmentation).

• Inareaswhereitisexpectedthatdevelopmentandwater-relatedactivitieswillbeprolonged,someoperators are beginning to use centralized water storage and waste water treatment and disposal facilities, combined with temporary surface water lines or buried water lines.

b) Air QualityAlberta and Saskatchewan have mature air monitoring systems in place, while British Columbia is in the development stages.

In addition, in October 2012, Canadian jurisdictions (with the exception of Quebec) agreed to begin implementing a new Air Quality Management System (AQMS). AQMS is a comprehensive approach

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for improving air quality in Canada. It is the product of unprecedented collaboration among the federal, provincial and territorial governments and stakeholders, including the natural gas industry. AQMS includes:• NewCanadianambientairqualitystandardsthatsetthebarforoutdoorairqualitymanagement

across the country;• IndustrialemissionrequirementsthatsetabaselevelofperformanceformajorindustriesinCanada;• Aframeworkforairzonemanagementwithinprovincesandterritoriesthatenablesactiontailored

to specific sources of air emissions in a given area;• Regionalairshedsthatfacilitatecoordinatedactionwhereairpollutioncrossesaborder;and,• Improvedintergovernmentalcollaborationtoreduceemissionsfromthetransportationsector.

Federal, provincial and territorial governments all have roles and responsibilities in the implementation of the system. Although Quebec supports the general objectives of AQMS, it will not implement the system because it includes federal industrial emission requirements that duplicate Quebec’s Clean Air Regulation. However, Quebec will collaborate with jurisdictions on developing other elements of the system, notably air zones and air sheds.

While there is more work to be done before AQMS is fully ready for implementation, the natural gas industry views this initiative as a progressive step to assure air quality in Canada and will continue to constructively engage in the implementation process.

c) Land-use Planning and Cumulative EffectsIndustry broadly supports regional land-use planning that will lead to acceptable environmental and social outcomes. Balanced regional planning must be informed by sound science and reflect balanced decision-making by governments. Sound judgment must be exercised by policy-makers in determining what constitutes an acceptable outcome.

Industry recognizes that regional planning could resultinpotentialconstraintsonthescopeand/or pace of natural gas development. Natural gas producers are broadly of the view that arbitrary constraints on development are inconsistent with a balanced approach to development that considers environmental, energy and economic needs. Furthermore, we believe arbitrary constraints would inhibit the continued development and deployment of performance-enhancing technology and innovation, and are not justified by the actual impacts of natural gas development in either absolute or relative terms. Market forces, operating within a regional planning framework such as that outlined below, should instead drive the pace of development.

An effective regional planning framework should include:• System-wideperformancemetrics:Thereshouldbealignmentamongindustry,governments,

scientists and key stakeholders regarding the appropriate metrics to assess local and regional environmental (water, land, air, biodiversity), social and economic impacts arising from natural gas development and other industrial activity. Governments should lead in the determination of these metrics, with a multi-stakeholder approach being the preferred approach for engaging interested parties in the development of metrics.

• Robustandtransparentdatacollectionandmonitoringprograms:Anyregionalplanningsystemsmust include leading data collection, monitoring and reporting programs that are open and transparent. Industry believes it is the primary responsibility of governments, both federal and provincial where needed, to work together to ensure these programs are in place.

The natural gas industry views the AQMS initiative as a progressive step to ensure

air quality in Canada.

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Part B: the industry resPonse

• Transparency:Allscientificdata,includingrawdatacollectedbypubliclyfundedresearchers,should be made generally available to the public, stakeholders, industry and other scientists. More transparency will contribute to the broader understanding of results and progress against desired policy outcomes.

The natural gas industry is encouraged that some governments are making progress toward regional planning systems that reflect the above elements. We will continue to be supportive and engaged in these processes, and will be a proactive advocate where necessary.

The natural gas industry will continue to deploy progressive operating practices and technologies to mitigate surface land impacts and cumulative effects. For example, advances in technology continue to enable the application of pad drilling and extended-reach horizontal wells to reduce the surface impact of unconventional natural gas development.

d) Transportation and Distribution Safety and IntegrityNatural gas resources are typically located in rural and remote areas while consumers are located predominantly in urban areas across Canada. As a result, transportation of natural gas to markets by pipeline is a vital component of Canada’s infrastructure.

Canada's Natural Gas Pipeline System

source: canadian energy Pipeline association

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About 510,000 kilometres of transmission and distribution pipeline help deliver natural gas safely and reliably to homes, businesses and institutions across Canada. This vast network, virtually all of which is buried, transports almost all of Canada’s natural gas from areas of production to consumers.

According to the Transportation Safety Board of Canada, pipelines have far fewer recorded accidents than other modes of transportation. Pipeline design and construction decisions are guided by a set of comprehensive standards issued by the Canadian Standards Association (CSA). In addition to federal, provincial, territorial and, in some cases, municipal regulations, CSA standards set out specific design criteria, including the depth at which pipeline is laid in the ground, the thickness and coating of pipe walls, and the integrity of the welding process connecting the pipe.

Pipeline operators monitor their lines around the clock from remote control centres across the country. Pipeline operators also conduct regular visual inspection surveys of the pipeline and deploy in-line inspection tools.

Despite industry’s best efforts, no pipeline is completely risk-free. When incidents occur, pipeline operators are equipped and trained to manage the emergency situation. With an emergency response plan in place, the chance of a long-term impact on the community or the environment is greatly reduced.

Several initiatives are underway by which pipeline operators are responding to concerns about pipeline safety. In August 2012, the Canadian Energy Pipeline Association launched CEPA Integrity First©, an industry-wide initiative that will improve pipeline safety and environmental and social performance. This initiative is based on sharing best practices and applying advanced technology throughout the industry. CEPA Integrity First© focuses on four key areas: prevention, emergency response, reclamation and education.

Pipeline operators are also exploring new technologies to improve pipeline safety and integrity. These range from the use of fibre optics to detect ground disturbance to satellite imagery to identify potential safety risks. Significant advances in observing minor defects within steel have meant that internal line inspection can now guide preventative maintenance and greatly improve safety. Not unlike medical diagnostic tools such as MRIs and CT scans that have become more and more precise, pipeline diagnostic technologies have also continued to improve, driven by partnerships between the pipeline industry and advanced tool manufacturers. An example of experimental technology is the potential use of digital sensors for pipeline leak detection, which is a technology currently being developed at the University of Alberta. It consists of tiny sensors, placed at regular intervals along a pipeline. The sensors

CEPA Integrity First© focuses on four key areas: prevention, emergency response, reclamation and education.

Pipeline operators are also exploring new technologies to improve pipeline safety and integrity. These range from the use of fibre optics to detect ground disturbance to satellite imagery to identify potential safety risks.

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Part B: the industry resPonse

wirelessly transmit data about the structural integrity of a pipeline, including indicating areas of fatigue or imminent damage. All together, these various avenues for research and development offer immediate benefits and the promise of increased safety over time.

Natural gas transmission and distribution companies work with other stakeholders, including the Canadian Common Ground Alliance, to emphasize the importance of following safe digging practices by calling before they dig. Uncontrolled excavation, or digging without knowing the location of underground infrastructure like natural gas service lines, is the most frequent cause of damage to buried service infrastructure, and the industry is committed to raising awareness of this issue.

SummaryThis section has outlined several examples of the innovative application of technology to reduce environmental impacts across the natural gas value chain. Technology and innovation is the key enabler for environmental performance improvement. There are opportunities for the natural gas industry to work more collaboratively in this regard, both with broader industry and with governments, academia and research institutions. Our industry must deliver continued environmental performance improvement to maintain and enhance our social licence.

Sustaining industry competitivenessIn order for the Canadian natural gas industry to grow across the full value chain it must be competitive to attract investment capital.

The key determinants of competitiveness are addressed in this section:• Fiscalpolicy;• Regulatoryprocess;• Tradeandmarketaccess;and,• Workforceavailability.

a) Fiscal PolicyIn general, Canada represents a stable and predictable investment opportunity. However, a competitive fiscal regime – royalties, income taxes and property taxes – that provides a risk-adjusted return (taking into account technical challenges, costs, etc.) compared with that of other jurisdictions is required to continue to attract investment capital to the natural gas industry. Federal and provincial governments in Canada have generally established fiscal regimes for the natural gas industry that are competitive and support the continued growth of the industry. As natural gas seeks new domestic and export markets, it will be important to adhere to market-based principles and ensure a level playing field in terms of fiscal policy.

b) Regulatory ProcessEfficient and effective regulatory review processes are another key determinant of competitiveness. In terms of regulatory competitiveness in all jurisdictions, industry encourages regulatory frameworks that are based on sound science, eliminate duplication and overlap, and are predictable and stable. These considerations will avoid placing undue costs on the natural gas value chain and help to attract investment capital. Experience consistently demonstrates that investors avoid jurisdictions with costly, time-consuming and uncertain regulations.

The key determinants of competitiveness are: • Fiscal policy• Regulatory process• Trade and market access• Workforce availability.

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Improvements in Canada’s regulatory process for natural resource projects will generate more jobs and a stronger Canadian economy while ensuring continued environmental performance by industry and responsible environmental outcomes. The federal government’s recent changes to the regulatory system will improve timeliness and efficiency of the decision-making process, while the regulatory scrutiny Canadians expect remains intact. Broadly based regulatory reform is fundamental to attracting and enabling investment that creates jobs, economic growth and prosperity for Canadians. However, it must also continue to support responsible environmental outcomes, and be seen as such by the public.

c) Trade and Market AccessCanada is a trading nation and we have been well-served by open markets for natural gas trade. The changing dynamics of natural gas supply and demand in North America are creating more supply choices for consumers. At the same time, Canadian natural gas producers are facing increasing competitiveness challenges as a result of these same market dynamics in North America. As a result, access to offshore markets has become another key determinant of competitiveness for the Canadian natural gas industry. By exporting Canadian natural gas to where the resource is in high demand, namely the rapidly growing Asian economies along the Pacific Rim, producers would be able to earn a higher value for the resource because of the price differential between North American and international market prices for natural gas. This in turn improves the overall competitiveness of the Canadian natural gas industry.

Expanding the domestic market for natural gas through increased use in power generation and as a transportation fuel also plays a role in improving the Canadian industry’s competitiveness by growing demand and broadening the customer base.

d) Workforce AvailabilityThe labour shortage for the natural gas industry is a challenge shared with other industries, especially in Western Canada. It therefore makes sense to work collaboratively to address and support government initiatives that enable labour force growth. There is no silver bullet with regard to addressing labour force challenges. It will require concerted effort in each of the areas of attracting and retaining Canadians, building and developing the Canadian workforce, immigration and temporary foreign workers, and improving productivity and efficiency. Current workforce challenges represent an opportunity to improve Aboriginal participation in the Canadian workforce, an objective which is broadly supported by the Canadian natural gas industry.

SummaryThere are some significant challenges facing the Canadian natural gas industry in terms of sustaining competitiveness. Some of these issues can be addressed by industry alone, whereas others require engagement with governments and other stakeholders. Given the opportunity the industry represents for all Canadians, it is imperative that a collaborative approach be taken to addressing these key barriers to the competitiveness of the industry, now and in the future.

Meeting customer needsCanada has an abundance of natural gas. And while natural gas has always been a cost-effective option for end use, Canada's plentiful supply makes it even more affordable. This is a key reason why natural gas accounts for approximately 30 per cent of customers’ energy end-use needs in Canada. Its reliability, safety and versatility add appeal of the product and help explain why approximately 6.3 million customers in homes, businesses and institutions currently use it.

However, natural gas use varies across the country, with high customer uptake in the four western provinces and Ontario (industrial and commercial), strong industrial (and emerging transportation) but smaller residential use in Quebec, and small but growing use in Atlantic Canada, particularly in New Brunswick and Nova Scotia. The changing supply picture – and particularly the reality of supply potential in so many regions of the country – has stimulated more discussion about the role of natural

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gas for customers in all provinces, and in remote applications in the territories as well. More and more, opportunities for natural gas use that would not have been considered even a few years ago are becoming mainstream conversations.

A few examples follow to illustrate the point.

Dalhousie University in Halifax, Nova Scotia, switched to natural gas as a heat source. As a consequence, Dalhousie expects to save as much as $2 million annually, depending on fuel prices, and eliminate the university’s sulphur emissions and significantly reduce carbon dioxide emissions. This translates to a reduction of more than 12,000 tonnes of greenhouse gas emissions, equivalent to the removal of 2,400 vehicles from the road.

The Jefferey Hale Hospital in Quebec City also decided to replace its heavy fuel oil equipment with high efficiency natural gas appliances. The conversion could save the hospital up to $25,000 annually.

By converting to natural gas, the hospital will also reduce its greenhouse gas emissions by more than 31 per cent. That’s 600 tonnes of greenhouse gases that will be avoided annually, which is the equivalent to permanently removing about 150 cars from the road.

In Saskatchewan, oil recovery from the Bakken field is transitioning its own energy requirements from coal to natural gas, reducing both the cost and the environmental footprint of the oil recovery process.

In British Columbia, further to provincial directives, a series of pilot projects for natural gas in transportation are being launched to stimulate growth in the market, which is seen as a key means of reducing the emissions profile of the transportation sector in British Columbia.

In Canada's North there is growing interest in applications for natural gas, particularly LNG at remote industrial sites that currently depend on higher-cost and often higher-emitting alternatives, such as diesel.

With any of these projects, the availability of infrastructure – either pipelines to move the product in its gaseous state, or vehicles and supportive infrastructure for the movement of LNG or CNG – it is critical to ensure customers can get the product when and where it is needed. Transmission and distribution systems ensure wide availability of natural gas in Canada’s more populated centres across the country, but there remains significant room for growth. For example, the continued growth of natural gas in the Maritimes is increasingly dependent on expanded pipeline infrastructure.

By converting to natural gas, the Jeffrey Hale hospital in Quebec City will reduce its greenhouse gas emissions by more than 31%.

Part B: the industry resPonse

A full appreciation of the growth opportunity requires an understanding that consumers have three general energy service needs: heating and cooling, electricity or “plug load,” and mobility.

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A full appreciation of the growth opportunity requires an understanding of the fact that consumers have three general energy service needs: heating and cooling, electricity or “plug load,” and mobility. To date in Canada, natural gas has been the overwhelming preferred choice for heating – in homes and businesses, and for industrial heating needs. For electric needs, natural gas-fuelled power generation facilities are becoming increasingly popular – in response to moves to reduce the use of coal, in applications where natural gas complements intermittent renewables, in situations where the gas distribution system allows you to place generation close to load (reducing the costs of new electric transmission), and in emerging smaller combined heat and power (CHP) applications. For transportation applications, as noted above, the near-term opportunities for heavy-duty trucks and return-to-base fleets offer the best economic opportunity for the use of natural gas.

Looking forward, the robustness of the supply picture offers an opportunity to look at more and more of these and other emerging applications for natural gas.

In community applications, there is growing interest in efforts to integrate gas and electric technologies, especially when the cost of infrastructure in urban centres is so high. This requires a change in thinking from separate energy infrastructure (pipelines for natural gas and wires for electricity) to a more integrated approach where the systems are seen as interacting components of an integrated energy system. For gas applications, this could mean new innovations like micro-CHP – where gas furnaces become electric generating units for homes and businesses – or perhaps for batteries for electric vehicles.

In transportation, the immediate opportunities have been identified and are beginning to be pursued. The infrastructure necessary to enable greater use of natural gas is still evolving: Canada currently has fewer than 100 compressed and liquefied natural gas fuelling stations across the country, more than half of which are private fleet refuelling stations. However, as natural gas is used in greater volumes as the result of its affordability and attractiveness as a fuel of choice, the fuelling infrastructure necessary to respond to increased demand is expected to evolve over time, making natural gas more widely available as a fuel option. In addition, private sector investments in liquefaction facilities to supply liquefied natural gas into the heavy-truck market can also be leveraged to supply fuel for off-road applications such as marine, rail and heavy off-road trucks.

In power generation, as the challenges around siting large facilities in densely populated areas become even greater, the idea of more decentralized generation through highly efficient and small combined heat and power units is being looked at more closely. In addition, efforts to incorporate new fuels like biomass, or to expand thermal grids – both popular in many jurisdictions – turn in large part on having natural gas as the foundation fuel. And emerging ideas like power to gas, whereby the gas grid becomes the means to turn intermittent renewables into reliable supply, are starting to be tested.

All the above represent emerging ideas, but the technologies involved are not hypothetical. The opportunities require investment and innovation but the possibilities are real – all the more so in the face of affordable natural gas1.

1 With respect to downstream innovation, the canadian gas association recently launched a new initiative called “energy technology innovation canada,” aimed at pooling efforts by the distribution industry to bring new applications for gas use to market in canada: http://www.eticanada.ca/

Transmission and distribution systems ensure wide availability of natural gas...but there remains significant

room for growth.

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The infrastructure necessary to enable greater use of natural gas is still evolving: Canada currently has fewer than 100 compressed and liquefied natural gas fuelling stations across the country....

Part B: the industry resPonse

TAkING IT FORWARDWe need to focus on the short list of actions required to ensure natural gas is a fuel of choice for Canadians and that the economic, social and environmental opportunities of natural gas are realized.

The big picture – planning and strategyCanada is a global leader in responsible, sustainable development and use of energy. Natural gas development and use continues to benefit Canadian energy consumers and contributes positively to Canada’s overall economic well-being and growth. It also positions Canada in the global marketplace.

Maintaining Canada's leadership position, from the perspective of the natural gas industry, requires coherent energy thinking in all jurisdictions. We believe discussion across jurisdictions on principles and policies has merit. In fact, we have been long-time advocates for discussion, ourselves authoring a range of ideas for an energy framework that could readily be adapted as the basis for energy policy in any single province. This doesn’t have to mean a single policy or strategy for Canada, but it does mean

Technology and innovationCanada's natural gas industry has a long history of investing in energy technology and innovation. For Canadians, the affordability of natural gas as an energy choice, environmental performance of natural gas production and use, and the economic benefits arising from the natural gas value chain will continue to be enabled by an ongoing commitment to technology and innovation.

Upstream technologies, such as horizontal drilling techniques used on multi-well drilling pads, multi-stage hydraulic fracturing, safety monitoring and liquefied natural gas development have all contributed to the affordable and abundant supply of natural gas.

In the pipeline sector, new technology is being deployed to monitor pipeline safety and integrity, and to further reduce the likelihood of a spill. CEPA Integrity First© is a broad industry-wide initiative that focuses on performance practices and priority improvement in this area.

Downstream technologies, such as natural gas vehicle engine technology, micro turbines, combined heat and power applications, and high-efficiency furnaces and water heaters have transformed the way we use and think about natural gas as an efficient and affordable energy solution for the long term.

A continued focus on technology and innovation, as well as collaborative partnerships to leverage investments and accelerate technology development and implementation, will be necessary to enhance the overall competitiveness of the industry and secure natural gas as a fuel of choice for an increasing number of Canadians.

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recognition across Canada of the merits of numerous ideas: like transparent pricing of energy services for energy consumers, like thorough and efficient regulatory processes for project development, or like a focus on innovation to drive new ideas forward. We continue to work to advance such ideas and we believe they are in the interests of all Canadians.

Canada is blessed with a range of energy resources, one of which is natural gas. These resources, and the world-class system that delivers to customers the benefits we generate from them, are fundamental to our standard of living, to our economic strength and to our long-term security. Canada's energy system was not easy to build and is not easy to maintain, and discussion about an energy framework is an important part of how we maintain it.

Governments have an important role to play in developing and implementing public policy to realize an effective Canadian energy framework. The framework must, however, be grounded in a fundamental view that market forces are the key determinant in decisions on energy supply, transportation and use, both domestically and in Canada’s trading relationships.

While we view the development of a Canadian energy framework as a positive initiative, the actions outlined in this report can and should proceed irrespective of the timing and nature of broader progress on an energy framework.

Building dialogueAs Canada’s natural gas industry expands in existing operating areas such as British Columbia and Alberta, and in areas that are future prospects such as New Brunswick and Quebec, communications and outreach with stakeholders and the public is becoming increasingly important.

Improving energy awareness and literacy across Canada and across the full value chain is extremely important. It must address the “3Es” – energy security, reliability and affordability, economic growth, and environmental performance. It is especially important in terms of how we as an industry communicate about our environmental performance and the environmental performance of our product. The natural gas industry believes that transparency about such performance is critical and will continue to highlight it. By way of example, CAPP has improved the Responsible Canadian Energy report to include data on the environmental performance of the natural gas industry and continues to build metrics to measure performance against CAPP's hydraulic fracturing operating principles and practices. Similarly, pipeline industry information is continuously updated and provided through the website, www.aboutpipelines.com.

In addition, industry is open to discussions with those NGOs and other stakeholders who oppose natural gas development and use, with a view to determining whether there is mutual interest in working together toward solutions that would mitigate or eliminate issues.

Building better energy awareness and understanding will require concerted effort by governments, industry and other stakeholders. It will not occur quickly, nor will it be accomplished easily. By way of example, on the delivery side, natural gas utilities communicate each and every month with their six million customers, using the feedback they get as a means to drive continuous improvements in their service offering.

Canada’s natural gas industry believes dialogue with Canadians is essential to maintaining the understanding of and support for the use of natural gas in this country – and we will continue to pursue such dialogue.

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Driving better practiceThe natural gas industry has a responsibility to drive better practice across the full value chain. This is accomplished in a number of ways, all of which need to be reinforced on an ongoing basis.

Technology and innovation must be accelerated, particularly as they apply to environmental performance. Natural gas producers are increasingly seeking collaborative opportunities among themselves and with governments, academic researchers and other interests to accelerate the development and deployment of new production and development ideas. Natural gas transmission companies are constantly working to improve the safety and reliability – and the overall robustness – of the natural gas transportation system across the country. And natural gas distribution companies are working to drive innovation in terms of end-use energy services.

Recognizing the increasing importance of the energy industry to be transparent and clearly demonstrate a commitment to responsible energy development, best practice must be developed and shared. For example, CAPP recently released the operating practices for hydraulic fracturing and members of CAPP continue to work together to foster and implement innovative ways to improve industry performance.

All of these efforts speak to an understanding of the need to deliver better performance through better practice.

Finally, we recognize that industry must operate within the parameters of a robust policy and regulatory environment that reflects the broader values of our society. Industry has a role to play in providing constructive and solutions-oriented input to the development of policy and regulations pertinent to our industry. The regulatory framework affecting the natural gas industry in Canada is complicated, from

environmental and safety laws and policies from regulators and legislators at the federal level, to the provincial regulatory frameworks governing local distribution companies' rates and service offerings for customers at the local level. But there are opportunities for improvement and sharing of best practices.

Constructive dialogue on government policy and regulation, as they apply to natural gas, is another component that drives better industry practice. We believe strong regulatory frameworks, based on principles of sound science and economics, can and do create an environment for strong environmental performance, economic growth and energy choice for the customer.

Building better

energy awareness and understanding will require concerted effort by governments, industry and other stakeholders.

Part B: the industry resPonse

Natural gas and the 3Es – energy security, reliability and affordability, economic growth and environmental performanceIt is in Canada’s interest to view the natural gas value chain in the context of the “3Es” – economic growth, environmental performance, and energy security, reliability and affordability. All three are important, all must be advanced concurrently, and all are achievable.

Viewed in this context, and with a commitment by the natural gas industry to pursue the actions outlined in this report in a constructive and collaborative manner, we are confident that the opportunities can be realized and the challenges overcome. This will benefit all Canadians.

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CoNCLUSIoN AND Next StepS

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...the Dialogues process has been a useful step in sharing perspectives and improving understanding across a broad range of interests.

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In convening the Natural Gas Dialogues, it was our goal to facilitate positive, respectful, interesting and mutually informative discussion, initially among all participants, and thereafter more broadly among decision-makers and the Canadian public.

From our perspective, the Dialogues process has been a useful step in sharing perspectives and improving understanding across a broad range of interests. We plan to continue our engagement process related to natural gas development in 2013, using the Natural Gas Dialogues report as a foundation for further dialogue.

It is our hope that the responses outlined in this paper provide a foundation for further dialogue and additional impetus to advance solutions that are in the interest of all Canadians.

CONClusION AND NExT sTEps

conclusion and neXt stePs

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Canadian Natural Gas is an initiative led by Canada's natural gas industry —upstream production, midstream and downstream. While the three "streams" are distinct —with unique requirements, regulations and technologies—they are fully interconnected and share the common purpose of reliably and safely delivering clean, efficient Canadian natural gas to the market for a variety of uses.

Our purpose is to develop objective, fact-based educational materials about Canada's valuable natural gas resources to raise understanding of the role that natural gas should play in achieving Canada's energy, environmental, and economic objectives. We want to demonstrate to Canadians how natural gas is a smart foundation for Canada's evolving energy mix and to encourage supportive public policy in Canada.

Email: [email protected]

CNGI REpREsENTED by

IN pARTICIpATION WITH

canadiannaturalgas.ca