R001424250 Northern British Columbia and Alberta's Oil and Gas Industry Vol. 3 Issue 5 • dIst: 16,000 May/june • 2013 • Free North in this issue: • BaCK on tHe MaP - KItsault enerGy aIMs to resurreCt GHost toWn • a BIG leaP ForWard - CosIa taKInG sIte restoratIon to a neW leVel • eleCtIon nIGHt In BrItIsH ColuMBIa IMPERIAL OIL IS WORKING TOWARD PRODUCING PIPELINE READY BITUMEN WITHOUT AN UPGRADER AT THEIR KEARL OIL SANDS OPERATION - IMPERIAL OIL PHOTO
Transcript
R001424250
Northern British Columbia and Alberta's Oil and Gas Industry
• BaCK on tHe MaP - KItsault enerGy aIMs to resurreCt GHost toWn
• a BIG leaP ForWard - CosIa taKInG sIte restoratIon to a neW leVel
• eleCtIon nIGHt In BrItIsH ColuMBIa
IMPERIAL OIL IS WORKING TOWARD PRODUCING PIPELINE READY BITUMEN WITHOUT AN UPGRADER AT THEIR KEARL OIL SANDS OPERATION - IMPERIAL OIL PHOTO
2 • PIPELINE NEWS NORTH MAY 17, 2013
PETROLEUM ASSOCIATION - HAPPENINGS
Cascade SteamingVE Brandl
Baker PetroliteCabre Oilfield Inc.
Magnum Oilfield RentalsNOV Wilson
Tom’s ConstructionTCL
Complete Pumpjack ServiceDitmarsia Holdings Ltd.
Fort Motors Ltd.Northern Vac Services Ltd.
Tourmaline Oil Corp.Stonebridge Hotel
Canadian Natural Resources Ltd.Husky Transport
Gas DriveContinental Pipeline & Facility
Champion TechnologiesD&T Electric Ltd.
Patch PointPengrowth Energy Corp.
Techmation ElectricTaylor Elementary School PAC
D&D Soft CoversMcElhanney Geomatics
Tidy Trucking Ltd.Flint Energy Services
Univar CanadaMRC Global
Newalta Corp.Troyer VenturesSpectra Energy
ScotiabankSexsmith Financial Corp.
Weir ServicesAGAT Laboratories
SOS Oilfield Safety Ltd.Ernie’s Sports Experts
Zedi Bidell Gas Compression
Extreme SignsTarget Printing
Canadian Water Serve & Save
Pimm’s ProductionTarpon Energy Service
Goodlow StoreACE Instruments
CCTD&D Insulators
Total Energy ServicesAAA Safety Balon Valve
Candoo OilfieldCompression Tech Inc.
Home Hardware Building CenterKodiak Well Service
Penn West ExplorationProgress EnergyPomeroy Hotel
Smith FuelSpartan ControlsTailsman Energy
Crayon BoxLake Point Golf & Country Club
Integrity Custom ProcessingRogers Trucking
MAY 17, 2013 PIPELINE NEWS NORTH • 3R
0014
2426
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7 Putting the plus in energy surplus - the debate over processing in Alberta
industry news
environment
careers & training
special feature
5 LNG could put Kitsault back on the map6 Duvernay days - Encana excited about shale play18 Cenovus exploring bituman shipments by rail19 Election night in British Columbia
10 Suncor protecting Alberta’s boreal forest14 A big LEAP forward - a new level of site reclamation20 Learning from LiDAR - wet area mapping in Alberta21 Native plant nursery recognized for contribution to oil sands reclamation
9 Canadian oil and gas pros among top earners29 Virtual reality - backhoe training goes online
industry newsInterested PartIesProvince hoping future of Grassy Point includes LNGjames watermanPipeline News North
Grassy Point – the name suggests serene cottage country or a quaint fishing village from a Lucy Maude Montgomery story, but it could soon be bustling with the sort of natural gas industry activity residents are expecting in the nearby communities of Prince Rupert and Kitimat.
The little spot just north of Prince Rupert has been put forward by the British Columbia government as a potential site for a natural gas liquefaction and export facility as the Province continues to encourage the burgeoning liquefied natural gas (LNG) industry that would see B.C. shale gas leaving the west coast for world markets where it can fetch a world price.
“Grassy Point and other locations, they all have pros and cons,” said Bill Gwozd, senior vice president of gas services with energy sector con-sulting firm Ziff Energy, discussing the prospects of moving LNG from the west coast.
“But the bottom line is they all have the key attributes,” he continued.
“They have location. They also have location. And they also have location.”
Clearly, the government is enthusi-astic about the site, as they issued a call to the oil and gas industry in late February asking any potential LNG project proponent to submit an Ex-pression of Interest (EOI) concerning Grassy Point.
The process concluded on March 18 and an industry bulletin discussing the details was released on April 10.
The specific land in question is a section of Crown land that was pre-viously the site of a proposed plan to export over two million tonnes of LNG per year to Japan over the course of twenty years. The project, which began with Dome Petroleum and also included Mobil Oil Canada and PetroCanada, was cancelled in 1986.
Gwozd said there have always
been a variety of LNG proposals, in-cluding a plan from the ‘90s to move Alaskan natural gas as LNG.
Numerous LNG import projects have also been planned throughout North America.
“Proposals come and go,” said Gwozd. “Some make the public press. Some don’t.”
Four potential LNG projects emerged from the EOI process, including one led by Nexen and fea-turing three partners, China National Offshore Oil Corporation (CNOOC), Japanese oil outfit INPEX Corpora-tion and an engineering firm by the name of JGC.
“Nexen and our joint venture part-ners are pleased to be included as a proponent for this LNG facility and will remain actively engaged with government and other stakeholders as the process unfolds,” said Nexen spokesperson Patti Lewis.
The other players are Imperial Oil and ExxonMobil Canada, Woodside Petroleum and SK E&S out of Korea.
Woodside, the largest oil and gas company in Australia, is the operator of six out of the seven LNG projects presently up and running in that country.
“Proposals are currently under review,” said a spokesperson for the Ministry of Energy, Mines and Natural Gas.
“Further discussions may take place with one or more of the propo-nents who submitted a proposal.
“The goal is to advance the process in a timely fashion so a successful proponent, or pro-ponents, can be in a position to move forward with planning and investment decisions.”
Only proponents with the finan-cial wherewithal to develop and LNG project and previous experi-ence in that business were invited to submit an EOI.
“The Expression of Interest is the latest action to ensure the LNG op-portunity continues to move forward, as part of a comprehensive LNG
Strategy for British Columbia,” said the spokesperson.
“My views have been very con-sistent,” said Gwozd. “I believe that western Canada is the right location for LNG projects.”
Gwozd compared the B.C. coast to other marine access points in North America under consideration for LNG terminals, particularly the Gulf of Mexico in the United States, which is right next door to natural gas producing zones in Texas and Louisiana.
“Six different reasons why you should build on the west coast of Canada versus the Gulf of Mexico,” Gwozd continued, first pointing to the obvious fact that the west coast of Canada is closer to Asia.
“The costs are less.”“There’s no hurricanes in west
coast Canada that I’m aware of,” he added, noting that disruptions would occur in the Gulf of Mexico during storm season.
The third factor is what Gwozd calls the Panama Canal Issue where the challenge facing Gulf of Mex-ico projects is the cost of passing through that waterway.
“They can charge whatever they want,” said Gwozd, suggesting that it would theoretically cost a penny less than traveling around the southern tip of South America on the way to Asian markets.
“Another reason is the U.S. government, of course, is preju-diced against grandmothers in Asia,” he continued.
“You can validate that, of course,” he explained. “If the U.S. government has a supply crisis, they’re allowed to preempt supply under contract to Asia using gov-ernment policies. Canada doesn’t have that policy.
“Canada is a free trade country.”“The feedstock going in is cheap-
er,” said Gwozd.“You want to do business with
a cheaper gas base than a more expensive gas base.”
Published Monthly by Glacier Ventures International Corp.
The Pipeline News North is politically independent and a member of the B.C. Press Council. The Pipeline News North retains sole copyright of advertising, news stories and photogra-phy produced by staff. Reproduction is prohibited without written consent of the editor.
industry newsClIMBInG tHe CHartsPSAC predicts upswing in industry activityjames watermanPipeline News North
Cautious optimism best describes the most recent 2013 drilling activity forecast issued by the Petroleum Services Association of Canada (PSAC) on April 25.
The original forecast for 2013 that was released in November predicted 600 fewer wells than the 12,000 the oil and gas industry trade associa-tion is now anticipating. An estimat-ed 7,563 of those wells are expected in Alberta, which is a seven per cent increase over the original forecast. Numbers are also up for both British Columbia, a 19 per cent increase from 385 to 457 wells, and Sas-katchewan, where well counts are projected to reach 3,286, a three per cent increase over the number forecast.
Only Manitoba is bucking that trend, as the number of wells projected in that province has decreased by 80 wells to 670 since November. That is a decrease of just eleven per cent.
“We’re cautiously optimistic,” said Mark Salkeld, president and chief executive officer with PSAC.
“Our original forecast [was] 11,400, which we felt was fairly safe, and it kind of jived with what the producers were thinking as well,” he continued. “And then when we got the closeout on the actual numbers for 2012, and started looking at doing some research and preparation for the first quarter release, we realized that the activity was actually picking up, in particular in the oil sands.”
PSAC revised the forecast in January to predict just 75 more wells than the original number in No-vember, but the first quarter drilling numbers subsequently prompted them to make even bigger changes to their forecast.
The key driver was the acquisition of Progress Energy and their assets in northeast B.C. by Malaysia’s Petronas. That deal took the B.C. rig count for Progress alone from less than a dozen to almost 30.
“So, there was this infusion of cash,” said Salkeld. “And they’ve got a commitment to potentially build an LNG (liquefied natural gas) train in Prince Rupert.
“And then we saw a big boost in the level of activity in the oil sands with respect to in situ and explor-atory well drilling.
“That activity surprised the heck out of us up there.”
New capital and interest from Asian companies has been showing a positive impact in the oil sands just as it has in northeastern B.C.
“The infusion of foreign invest-ment, foreign cash is making a sig-nificant difference, which was one of
the pleasant surprises,” said Salkeld.Activity in sweet gas and liquids-
rich zones elsewhere in Alberta also played a role in PSAC revising their forecast to suggest this modest upswing in drilling.
“There’s two new hotels built in Fox Creek because there isn’t enough room to house the crews for the level of activity through that Pembina-Cardium fairway … along the foothills and that whole neck of the woods,” said Salkeld.
“And then Saskatchewan – they had a good year. Manitoba’s picking up there. Both governments in those provinces are supporting oil explora-tion and development.”
The Manitoba story isn’t told com-pletely by well counts.
“They’re fully supportive of develop-ing the oil and gas industry in their province,” Salkeld said of the govern-ment in that province. “It’s just another source of revenue for the province. Just positive signals from them that they want to move ahead. And Mani-toba’s got really good formations.”
That includes the Bakken light oil play.
“It’s resource that they’ve known about for years, but new technology is allowing them to get at it more economically and more precisely,” Salkeld continued.
So, although rig counts might decline, the number of metres drilled is indicating that the industry keeps going strong.
“We were drilling over 20,000 wells,” Salkeld said of Alberta just a decade ago.
“We’re not doing that now,” he added. “But the meterage – the number of wells have dropped off, but we’re drilling more metres or drilling the equivalent number of metres in less wells.”
Additionally, the industry is no lon-ger seeing the steep declines in well counts in the second quarter.
“Typically, that’s our break up period and everything sort of shuts down,” explained Salkled. “But now with multi-well pads and far more efficient processes, rigs are staying busier.
“There’s 133 rigs working today,” he said on April 26, “when normally we’d be down to 10 or 15 or some-thing like that back in the day.”
Salkeld noted that he hasn’t seen much nervousness out of B.C. con-cerning the May 14 election and the uncertainty of what a new provincial
government might mean for the oil and gas industry.
“Just awareness,” he said. “Just keeping a close eye.”
The greater industry concern over the B.C. election could be among Alberta oil producers considering the opposition to heavy oil pipelines that would transport oil sands bitu-men to the B.C. coast that has been expressed by the NDP.
“B.C is going great guns. They’re building pipelines and they’re approving LNG trains. … It would be a hard engine to stop,” said Salkeld.
“But it doesn’t help Alberta. And it’s frustrating. Because the Kinder Morgan line has been running since the sixties and all they want to do is run another one parallel to it.”
Kinder Morgan is proposing to twin its Trans Mountain pipeline to Burnaby, B.C. to increase shipments of Alberta oil.
I such plans to push that product west should fail, there is hope for the Alberta oil industry in the form of TransCanada’s Energy East project for which the company just began the open season process in the middle of April.
“That’s positive,” said Salkeld. “There is a lot of work being done on the part of governments and provinces … to get our products out of Alberta, out of western Canada, to eastern Canada.”
Salkeld suggested that eastern Canadian refineries such as the Ir-ving Oil facility in New Brunswick are
thirsty for Alberta oil.“They get bet-
ter returns for their oil out of eastern Canada than we do in western Canada,” he added, noting the price differential between Alberta oil and oil from sources with access to world markets, particularly via ocean ports.
“The oil patch doesn’t slow down be-cause of bottlenecks
in pipelines,” he continued. “We’ll figure another way to get our product to market. But pipelines are the bet-ter way to go.”
Ultimately, Salkeld favours the three-legged strategy of moving Al-berta oil west to the B.C. coast, east to eastern Canadian refineries and south to refineries in Texas.
“That will help Canada as a whole. And, obviously, the indus-try,” he said.
“A lot of politics involved,” he added.“But, at the end of the day, we
have a very good lifestyle here in Canada and a lot of it is based on our energy.”
“The oil patch doesn’t slow
down because of bottlenecks in
pipelines.”
– Mark Salkeld, PSAC
MAY 17, 2013 PIPELINE NEWS NORTH • 5
BaCK on tHe MaPKitsault Energy aims to resurrect ghost townjames watermanPipeline News North
Dave Pernarowski was only wear-ing his mayor hat when he first met with Krish Suthanthiran to talk about Kitsault Energy, a fledgling plan to turn the ghost town of Kitsault on the north coast of British Columbia into a hub for export-ing natural gas from the shale plays of the province to foreign markets as a fuel commonly known as LNG.
As mayor of the nearby community of Terrace, Pernarowski was intrigued by the economic development possibilities associated with building and operating an LNG facility in Kitsault, and soon decided to join the effort as director of community and First Nations affairs with Kitsault Energy.
“I originally met with Krish just in his travels through Terrace,”said Pernarowski.
“In my role as mayor, I’m always look-ing at economic development opportuni-ties and creating new opportunities in that area to diversify our economy. And when you look at Kitsault, and you look at the Nass Valley and the Nisga’a [First Nation] and the need to create jobs and create training opportunities for that part of the province, it would just be a huge boost.
“And it would be a huge boost for Terrace.”
Pernarowski thinks his excitement about the possibilities must have been obvious during his conversation with Suthanthiran.
“Maybe a couple of days after we had had that meeting, he called me back and asked if I might have some interest in helping him to promote the project,” he said.
That job involves talking to the local communities and First Nations to tell them about the goals of Kitsault Energy. It is a good fit for Pernarowski, who has built relationships within communities across northern B.C. over his years in municipal politics.
“I know all of the municipal leaders in this area and many of the business lead-ers as well,” he said.
“I think it’s been going well,” he added, noting how the goals of Kitsault Energy align with the goals of his mu-nicipal government.
“Our council is very interested in diver-sifying our regional economy. We’re very interested in actually working with other communities in a regional context to bring opportunities to the area.”
Pernarowski remarked that the re-sponse from the oil and gas industry has also been positive.
“It’s unique,” he said.“They see that there is benefit to hav-
ing that community infrastructure,” he continued. “They also, I think, really are interested in the story that we’re telling
around how this project could dramatical-ly change what’s happening in the Nass Valley. The story is also very positive around the educational side.”
Part of that is the Best Talent Agency project, an initiative that takes its name from Best Medical International, where Suthanthiran is president.
“That’s going to be all about skills train-ing for the types of jobs that would be expected to happen through these types of developments,” said Pernarowski.
“It’s really being well received. We’re getting a lot of interest from all sides – upstream, midstream, downstream. Everybody is talking to us and they’re all taking a look.
“There’s still many proponents out there that are continuing to look for that ideal location.
“When we’re talking to these major LNG proponents, they are all looking for a site. They all need a place to run their natural gas to. And so we have that site. What we need to do of course is to part-ner with those folks.”
The first task of that partners would be to help Kitsault Energy complete the necessary feasibility studies to determine if the project can and should move forward.
“And then we’re also looking to partner with the end user,” said Pernarowski. “And so we’re having quite a few con-
versations right now with those who are looking to get a steady supply of natural gas from British Columbia.
“Having all those partners in place is a role that I’m playing, helping to bring those people together to the table to work together, just as some of those other proj-ects have found partners to work together to make it happen.”
Location is possibly the key element of Kitsault’s appeal, particularly in terms of creating a pipeline corridor across northern B.C. that connects prolific natural gas resources in the Montney, Horn River Basin, Liard Basin and Cordova Embayment shale plays to an ocean port.
“Finding a route through northern British Columbia that perhaps has less environmental impact in terms of the routing,” said Pernarowski, adding that Kitsault is also the shortest distance from the natural gas producing regions in the northeast among possible LNG export terminal sites.
Pernarowski explained that the LNG pipeline proposed by BG Group and Spectra Energy would actually pass through Kitsault on its way down the coast through the water channel to Prince Rupert.
“We have a shorter distance,” he reiterated. “That’s going to save a con-siderable amount of money in terms of
developing the pipeline piece. And also takes off the environmental impacts of putting pipe underneath the water or continuing it on land all the way down to Prince Rupert.
“There’s also the fact that there’s a community sitting there right now,” he continued, discussing the benefits of Kit-sault. “It’s fully functioning. It’s got hydro power and homes and apartments and in-frastructure that would allow a community to fire up around a fairly major economic industry like this pretty quickly.
“Some of the other locations that are being proposed right now, those com-munities are already established and would require a fairly significant build to accommodate the types of numbers of people that would have to come in, first of all, to construct, and then to operate a facility.
“We have deepwater access right to Kitsault.”
That deepwater access is a bit easier to travel than the Douglas Channel on the way into Kitimat as well, but Per-narowski admitted there is still work to be done to really determine the feasi-bility of the port and establish the best port location.
“But we do have water access right to Kitsault,” he said.
Kitsault might be vacant now, but a young enterprise known as Kitsault Energy is hoping to turn the small town on British Columbia’s north coast into a bustling liquefied natural gas export hub.
KITSAULT ENERGY PHOTO
continued pg 26
6 • PIPELINE NEWS NORTH MAY 17, 2013
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As the weather heats up, many Canadians are counting down the days until their summer vacation. Whether you’re looking to travel outside your home province, or outside the country, you want to make sure that you have travel health coverage to protect against unforeseen medical emergencies.
If you have employee benefits, you may not need to purchase additional travel insurance. The Chambers of Commerce Group Insurance Plan® Health option, for example, provides a wide range of travel benefits to insured employees and family members. These
people do not typically need to buy additional short-term personal policies unless they plan to be away for an extended period of time.
Chambers Plan Voyage Assistance takes care of a broad range of expenses which go over the amounts covered by your Provincial Medical Plan. Covering typical charges like hospital services, semi-private room charges and doctors’ bills, Voyage Assistance will also translate, direct claimants to local medical facilities, advance payments required prior to treatment, and evacuate patients to more appropriate facilities nearer home. The coverage also provides return of vehicle, lost luggage, and lost document services.
Check your group policy for travel coverage before you leave on vacation. See what benefits you’re entitled to and note any limits that apply (such as a maximum trip duration or age restrictions). You may be able to save yourself the cost of additional insurance coverage when you travel.
To learn more about the travel benefits available with Chambers Plan, contact your local advisor.
Encana gets excited about Alberta shale playjames watermanPipeline News North
It would be an understatement to say Encana is encouraged by the early results of their work drilling into the Alberta shale play known as the Duvernay.
During their first quarter presentation in April, com-pany representatives were using phrases along the lines of “best industry well to date” and “exceeding expectations” to describe the fruits of their labours in the emerging field.
“We continued to see strong results from the Du-vernay during the quarter as the results from our most recent well came in well above expectations,” said Mike McAllister, executive vice president and Canadian Division president with Encana, speaking during that quarterly presentation.
“After thirty days on production, it is producing roughly 1,400 barrels per day of field condensate and four mil-lion cubic feet per day of natural gas.”
“It was a restricted rate,” said Kevin Smith, vice presi-
dent of Encana’s northwest business unit, discussing the results with Pipeline News North.
“This is kind of a statement in general for where the play is at,” he continued, indicating that it is still early days for the Duvernay.
“Generally,” he said, “producers in new plays are not going out and building large infrastructure to support their evaluation and appraisal wells. And so we’re utiliz-ing a third party gathering and compression. And so we’re restricted to that maximum gas rate of four million [cubic feet] a day on the well.”
That well is in a section of Encana’s Duvernay assets known as the Kaybob area.
Smith explained that those assets are exceeding expectations based on type curves
Encana has developed for the resource.“Type curve is a per well quanta of what you expect
for a well to produce at,” he said. “And it would have a gas and liquids component in this play. And dry gas plays like the Horn River [Basin] – it’s just a dry gas type curve. And so we had established at the outset of this,
based on the early technical work that we had done, type curves for each of our areas. And when we say that it exceeded our expectations, it is performing above the type curve that we had initially set for this area.”
The results are generating some enthusiasm about the future of the asset.
“I think this is a very strong indication of what the Duvernay potential is,” said Smith.
“That early technical work, it was really done to understand the resource in place, the rock fabric itself, it’s ability to produce as reservoir,” he continued. “Our initial evaluation is really to delineate across the fairway. And we believe that, through our acquisition of acreage at the early part of this play, we’ve tied up about half of what we’ve deemed the high-graded fairway. But it’s still a very large fairway.”
Smith said that Encana has almost a dozen different type curves across their assets, all varying depending on factors such as the depth of the reservoir, the liquid resources that might be present and the ratio between
continued pg 26
MAY 17, 2013 PIPELINE NEWS NORTH • 7
special featurePuttInG tHe Plus In
enerGy surPlusThe latest chapter in Alberta’s refining debatejames watermanPipeline News North
Among the most complex – and even most divisive – issues concerning the vast oil and natural gas resources in Alberta is the question of adding value to those products at home through process-ing, upgrading and refining.
A pair of recent studies has cast a light on the subject in an intriguing way.
The first of those studies, an IHS CERA report titled Extracting Economic Value from the Canadian Oil Sands, suggests that Alberta should stick to producing the oil rather than upgrading or refining that fossil fuel in order to best benefit economically from the resources. The second report, commissioned by the Alberta Industrial Heartland Association (AIHA) and titled Economic Impacts of Adding Value to Alberta’s Hydrocarbon Resources, indicates that processing oil and natural gas at home could mean 19,000 new jobs, $1.8 billion in salaries and a $6.2 billion GDP increase for the province, while increasing provincial revenues through royalties and taxes by as much as $630 million per year.
This isn’t just a simple difference of opin-ion, but an indication of the vast potential for oil and natural gas in western Canada.
“I’ve been a consultant for 25 years,” said Ron Schlenker, the University of Calgary professor who conducted the economic impact study on behalf of AIHA.
“Natural gas, natural gas liquids, regulatory economics – mostly revolving around energy projects and regulation,” he added, listing his areas of expertise.
Schlenker was asked by AIHA to look at a collection of oil and natural gas proj-ects in Alberta that could possibly be up and running within the next ten years.
One of those projects is the North West Redwater Partnership bitumen upgrader and diesel refinery, which will also capture and sell the carbon dioxide (CO2) from that process for enhanced oil recovery.
Another is a propane dehydrogena-tion (PDH) facility planned by Williams Energy. That plant would be the first of its kind in Canada to turn propane into propylene, which can then be used to manufacture plastics.
Sasol is also considering a gas-to-liq-uids (GTL) facility to produce high quality transportation fuels such as diesel from natural gas.
Agrium is looking at expanding their fertilizer production.
“We’ve been promoting adding more value to our energy resources here in Alberta,” said Neil Shelly, executive direc-
tor for AHIA.“We had to do a little bit of looking at
what’s currently going on in the area – the trends – and also some future envisioning of what we see potentially could be com-ing into the area,” he continued.
“We’re seeing a resurgence in inter-est from companies looking at taking advantage of large, abundant supplies of natural gas and natural gas liquids that are being generated here in Alberta and also in northeast [British Columbia].”
The Montney and Duvernay shale plays are particularly high in liquids.
Shelly said that the products that could stem from the processing initiatives range from fertilizer and methanol to propylene and polypropylene.
Schlenker suggested that his findings are rather conservative.
“What we’ve assumed is that the feed-stocks for each of these projects … would be produced anyway,” he explained.
That means that the oil and natural gas that could be processed through the pro-posed facilities will be produced regard-less of their existence.
However, if the projects start drawing on the supply of those feedstocks to a greater extent than simply using what is available, they could have impacts not addressed in the report.
“If the projects here actually do start drawing on the feedstocks and there’s such an additional demand created for gas and so on, you potentially can drive the prices of those commodities up, which, for the government, would be a good thing,” said Schlenker.
“Because they’d have additional royalty revenue,” he added.
An oil sands producer would also be pleased with rising oil prices, but not so happy about an increase in the price of natural gas, a resource they use for the steam assisted gravity drainage (SAGD) method of extracting oil sands bitumen.
That doesn’t tell the whole story though.“On the one hand, they wouldn’t like
to see the price of gas go up,” Schlenker said of the oil sands companies. “Be-cause they’re burning it to produce their product. But Alberta still is a net exporter – a net producer as opposed to consumer – and if the prices do go up, there’s additional cash flow to the industry. Just the oil and gas industry. And the oil and gas industry is rather remarkable among industries in terms of the proportion of cash flow that they reinvest. Because they always have to drill and make sure that they’ve got ongoing production.
“Existing wells are always declining in production.”
Schlenker also said that not all the ben-efits are seen in the numbers alone.
“The diversification of the economy,” he said.
“It’s hard to engineer that sort of diver-sification.”
An interesting issue around that diver-sification is the odd relationship between the oil and gas industry and the petro-chemical sector.
“The chemical companies are more profitable when the oil and gas compa-nies aren’t doing as well,” said Schlenker. “And it goes the opposite way as well. But if you have both of those types of busi-nesses, your economy tends to get more
stabilized. And that’s been a real problem in Alberta and for the Alberta government with their revenue streams, which bounce around all over the place.”
Schlenker has his eye on one part of the petrochemical industry in particular.
“It’s the propane chain,” he said. “Propane to propylene. Propylene to potentially polypropylene or some other derivative. That’s something that we don’t have in Canada.
“Polypropylene in particular is very eas-ily exportable,” he continued, noting that they turn the product into pellets and ship
continued pg 28
R001509456
8 • PIPELINE NEWS NORTH MAY 17, 2013
communitydunCan Cran does It aGaInFort St. John school wins Energy Diet Challenge for second straight year
james watermanPipeline News North
As Kermit so eloquently said so many years ago, it isn’t easy being green.
Just ask Christine Todd, the vice principal and science teacher at Duncan Cran Elementary School in Fort St. John, British Columbia, who has also done a lot of hard work alongside her students to earn a second straight victory for Duncan Cran as the top school in the Classroom Energy Diet Challenge put together by Shell Canada and Canadian Geographic.
“This is the second year we’ve done this,” said Todd.
“It’s becoming part of the school culture and what the students believe.”
The Classroom Energy Diet Challenge asks students and classrooms across Canada to tackle energy conservation and waste reduction projects along the lines of garbage audits and designating an hour every day to live without electric-ity, all for a chance to win a $1,000 school party, an additional $2,500 for school supplies or field trips, as well as a $1,500 donation to the charity of their choice.
Of course, it means even more than that to many of the students.
“I like the One Hour No Power,” said Grade 2 student Alex Burton, naming her favourite parts of the contest. “Because you don’t waste power so much.”
“One Hour No Power,” echoed Burton’s classmate Avneet Jainpuri. “Because it saved energy.”
Grade 6 student Caylen Forrest pre-ferred the garbage audit.
“Because it helped to number the amount of garbage and reduce it a bit,” he said.
Grade 6 student Shara-Lynn Johnson and Grade 5 student Kaylene Farrell both enjoyed making art from recycled materials.
“A great way to find out how you could make art from recycling,” said Johnson.
“There was lots of good projects there,” added Far-rell. “And it also uses recycled [materials] so they don’t go in the landfill.”
Johnson also brought up the problem of phantom power.
“I learned that even though you have something plugged in and you aren’t us-ing it, it still uses power,” she said.
The students have clear ideas about the value of the program, too.
“It helps to save energy, which will help the earth,” said Forrest. “And you learn more about pollution. And a lot about just the earth and how you can help to save it by doing One Hour No Power, garbage audit, recycling more.
“All the sort of challenges we’ve been doing at our school.”
Forrest believes that the level of commitment shown by his schoolmates is proof that they really care about the environment.
“And that we understand that the envi-ronment is important to us,” he said. “And that it’s important to not use as much energy, to save animals, save the wild, all sorts of things.
“They have to make dams for energy sometimes. And that destroys many habitats of animals and everything. So, if we use energy less, than we might not have to make dams. And then lots more animals’ habitats will be saved.”
The lessons learned through the Class-room Energy Diet Challenge are starting to become part of their daily lives, both at school and at home.
“The one hour of no power – it’s be-come a regular part of our school now. A lot of the classrooms keep doing this even beyond the challenge,” said Todd.
“With the garbage audit,” she con-tinued, “we noticed a lot of food being thrown away and a lot of packaging of food. So, we’ve actually upped our recy-cling program.”
The school is working toward litterless lunches as well.
“This year,” said Todd, “every child received a lunch kit for free. And then we’re also working on trying to get every student a reusable water bottle that they can use to try and encourage less pack-aging in the lunches.
“We’re trying to reduce garbage that way.”“Ever since we started the Energy Diet
a couple years back, I’ve been bringing home the information to my parents,” said Johnson, noting that her family now recycles more and tries to avoid wasting
phantom power by unplugging their elec-tronic devices when not in use.
“And we’re starting a compost for this summer,” she added.
“We just had a ga-rage sale,” said Farrell.
“We’re going to have a recycled book sale soon, too,” she continued.
“So, we’re reusing things instead of throw-
ing them into landfill,” explained Todd.“Some activities the school is doing to try
and be conscious of the environment and sustainability and just not throwing it all away.”
“I will continue to do One Hour No Power because, first of all, it’s good for the environment – it’s good to save en-ergy – and also because it’s kind of nice being in the dark. It’s more relaxing,” said Forrest.
That was noticed by many of the stu-dents and teachers at Duncan Cran.
“Because we have nice big windows in each of the classrooms. So, the natural
sunlight comes in,” said Todd.“It’s more calming and the children are
a little bit quieter,” she continued. “Not that we’re saying you need to be quiet all the time when you’re actively working and learning. But it just gives that little bit of relaxation. And they enjoy that them-selves, too. A little bit of downtime.”
That isn’t to say it is easy to change habits and routines to be better energy con-servers and stewards of the environment.
“I found it hard,” admitted Johnson. “But then I also found it fun and interest-ing because I’ve learned a lot of informa-tion that I haven’t known before. And knowing that we are helping the earth makes it a lot easier.”
“It has to be part of their lives because we only have one world,” said Todd, commenting on the value of companies such as Shell and Canadian Geographic encouraging this behaviour among young people with the challenge.
“To get the message out right now that
you need to conserve energy, and you need to think about energy and taking caring of the earth and making it a part of who the are, I think that’s important for them,” she added. “And they’ll be-come better global citizens for the world because they’re learning about sustain-ability and knowing how to take care and conserve energy.”
“I’m glad that we did this because we’re not polluting as much anymore and recycling more,” said Farrell. “Because some plastics take up to seven years to breakdown into little bits. And animals could eat it and get sick and die. So, I’m happy that we’re doing it.”
“I’m happy that we’ve helped the earth and made it better,” added Forrest. “Used less energy. Tried harder to recycle more. I’ve been convincing my parents to get a bunch of recycling bins and everything. And we’ve been doing One Hour No Power at school and at home.
“I just feel good about it.”
Just a few of the Duncan Cran Elementary School students who led their school to the top spot in the Classroom Energy Diet Challenge again this year. Back row, left to right, is Caylen Forrest, Grade 6, and Shara-Lynn Johnson, Grade 6. Front row, left to right, is Kaylene Farrell, Grade 5, Alex Burton, Grade 2, and Avneet Jainpuri, Grade 2.
JAMES WATERMAN PHOTO
“It’s becoming part of the school
culture and what the students believe.”
– Christine Todd,Vice Principal, Duncan Cran
MAY 17, 2013 PIPELINE NEWS NORTH • 9R
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careers dollar For dollarCanadian oil and gas professionals among top earners globallyjames watermanPipeline News North
It could be good news for a Canadian oil and gas industry eager to recruit the skills and talents of new people into its workforce that Canada now ranks fifth in the world as far as petroleum sector salaries go.
That is the verdict of a study conducted collabora-tively by the Hays recruitment firm and the Oil and Gas Jobsearch employment website. It shows that Cana-dian oil and gas professionals average $125,680 per year, just ahead of the $124,000 earned on average by their counterparts in the United States. Australia tops the list with an average annual salary of $167,000. Norway, New Zealand and the Netherlands round out the top five.
“That sort of broad information is helpful across Canada, especially outside of the West, because many people in eastern Canada don’t have a clear and specific idea of how the oil and gas industry compares to others,” said Cheryl Knight, executive director of the Petroleum Human Resources Council.
“It’s good that they can see those benchmarks from a Canadian perspective,” she continued. “And I think it’s interesting to see how well we stack up internationally.
“The wages mirror what goes on in industry and how it’s perceived in terms of value. It’s a top shelf industry and the wages reflect that.”
Knight explained that the Alberta oil sands is the highest area of demand for an oil and gas workforce that is being stretched to the limit across western Canada. Professionals such as engineers and geo-physicists are likely to earn the highest wages in that sector of the industry.
“But the other occupation, which is really critical to the oil sands, is operators,” said Knight. “Power engineers or steam operators, but also just process operators. And those aren’t professionals per se, but they’re occupa-tions where there’s a lot of growth in the oil sands. And that means shortages.
“A lot of competition right now with the number of projects.”Skilled trades is another area experiencing shortages
and high demand.“On the conventional side, we’ve got some really inter-
esting issues,” she continued, turning her attention away from the oil sands of northern Alberta.
Activity levels have been strong in the liquid-rich Mont-ney play in northeast British Columbia and the light oil play in the south of Saskatchewan.
“Even the heavy oil in the Lloydminster area,” added Knight.
The problem in the light oil play in Saskatchewan, as well as western Manitoba, however, is the vast distances between operations.
“There’s a real issue with getting experienced people to work in that southern Saskatchewan area,” said Knight.
Knight suggests that the benefits of working in the energy sector go beyond the facts that the jobs are be-coming tough to fill due to current labour constraints and that the wages are high.
It was a message she actually gave to group of Alberta school superintendents during their annual conference in Edmonton this April.
“The oil and gas industry is first and foremost an in-dustry that’s made up of … entrepreneurs,” said Knight.
“It is an industry where there is a can-do attitude,” she continued. “There is a real problem solving orienta-tion. And so you find that the spirit within industry is very entrepreneurial, very supportive of skill and knowhow and ideas.”
It is also an industry where formal education alone isn’t the key to success.
“You need people to demonstrate skill and compe-tency,” Knight explained, “and not so much having the letters behind your name.
“That’s not really how you get recognized in the industry.”Knight added that the industry really values creativity
and a strong work ethic.“There is a lot of opportunity,” she said.“Looking at it in a more pragmatic way,” she continued,
“it’s very interesting and technical work, where there’s a lot of research and technology advancement that comes
continued pg 30
10 • PIPELINE NEWS NORTH MAY 17, 2013
environmentall For tHe BorealSuncor and Alberta Conservation Association
join forces to protect Alberta forests
james watermanPipeline News North
It began modestly enough.Suncor Energy was looking for a way to go beyond
the regulatory requirements of an oil and gas company by doing a good deed for the province that is home to so many of their operations. The Alberta Conserva-tion Association (ACA) was looking for a way to protect substantial tracts of natural habitat. Thanks to an intro-duction by Alberta Parks, the energy company and the conservation group put their heads together in 2003 to accomplish both of their goals, conserving 470 acres of habitat adjacent to Winigami Lake Provincial Park near High Prairie.
It turns out the $200,000 grant from Suncor that enabled ACA to acquire the land was just the start of a decade long partnership known as the Boreal Habitat Conservation Initiative (BHCI) that has been recognized by the Alberta Emerald Foundation as an Emerald Award finalist this year.
“Suncor actually had originally approached Alberta Parks to do some type of offset program,” said Todd Zimmerling, president and chief executive officer of ACA.
“An individual within Parks felt that it might be more beneficial to work with ACA just because of the logistics of having to deal with a land purchase,” he added.
“We started talking about what Suncor wanted to achieve out of this process and what we would like to achieve, and it turns out everybody was looking for the
same thing. So, it worked out really well.”“Suncor was trying to go above and beyond and do
a little bit more than what the regulatory requirements were at the time,” said Cliff Seibel, director of surface land, logistics and construction for Suncor’s North Ameri-can onshore operations.
“Something for the general public,” he added, noting that the interest was really a land conservation project.
The initial result was that Winigami Lake collaboration.“A very successful project,” said Seibel.“Once we got that in place,” he continued, “then we
got a team together and we decided that we should expand this.”
Suncor began making three-year funding commit-ments to help ACA acquire land for conservation, which has translated into almost $4 million for 29 parcels of natural boreal forest amounting to almost 7,000 acres of land.
“When we first sat down,” said Zimmerling, “we sat down and talked to Suncor about what types of habitat they were looking at wanting to conserve and where they wanted to try and conserve them. And they had some specific things they were looking for, one of the key ones being they were hoping to conserve as much native habitat as possible. Something that hasn’t already been converted into fields or anything like that, but still has a lot of mature boreal habitat on it. That was one of their key criteria.
“We had particular areas within the boreal that we had identified already as our focus areas that we wanted to
look at conserving lands.”Suncor and ACA quickly found that there was a lot of
overlap between their objectives, particularly in terms of the geographic areas that they had identified as conser-vation priorities.
“Once we had that, we worked on a process of, logisti-cally, how this will actually work,” said Zimmerling.
“Suncor makes commitments on a three-year basis as to how much they’ll provide per year,” he continued. “And ACA goes out and finds land within those particular focus areas that we believe will meet the appropriate criteria. When we find those lands, we’ll do a quick as-sessment of them. And then we’ll send that information to Suncor to say, ‘Do you guys see any issues from your point of view?’
“Once we’ve reviewed them, see no issues, then ACA moves forward and actually makes the purchase. And then it becomes ACA property, purchase funded by Suncor.”
All of the land belongs to private landowners prior to acquisition by ACA.
“Our land people have talked to most of the major land-owners in the areas we’re looking at. They have a sense of who might be interested in selling in the future and who doesn’t want to talk to us again,” said Zimmerling.
Landowners interested in selling property often call ACA directly.
“In other cases, we’ll simply do it like everybody else,” he continued. “We’ll look on MLS. Who’s got land for sale this spring? And then we essentially just go talk to landowners and negotiate a deal.
“Our process is to have the land appraised. And we pay appraised value. We’re not running the game of trying to increase land prices so that we’re the only ones that can afford to pay for the land. We specifically try to avoid those situations.
“And if it turns out there’s another local landowner in the area that is interested in that land, we’ll actually step away from the property and allow a neighbour to buy the property before we do. Most of the land that we end up buying is usually land that people have been trying to sell for six months plus.
“We’re certainly not trying to compete with local landowners.”
It has been an educational experience for ACA.“Just getting a better understanding … of how big
industry works,” said Zimmerling.“Certainly,” he continued, “the first couple purchases,
it took a while for them to have to go through their process and make sure everybody was comfortable with what were they getting into here. Because, as you can imagine, it’s not the most common – or wasn’t the most common – kind of partnership. Here is a big oil sands company partnering up with a conservation group.”
Zimmerling admits that ACA had to ask some hard ques-tions of themselves at the beginning of the partnership.
“Are we okay with this partnership? Are we going to see a net benefit in the end to conservation work in Al-berta? Are we just being used to green wash?” he said.
It was a process for both parties.“Making sure that we were getting what we wanted
and building that level of trust,” said Zimmerling.Suncor and ACA are certainly pleased with what they
have been able to accomplish together to date.“I think it’s been a very successful project for us,”
said Seibel.“As an industry, when you’re trying to be a good cor-
Fireweed and other wildflowers around Winigami Lake near High Prairie, Alberta in spring. The tract of land adjacent to Winigami Lake Provincial Park was the first purchased for conservation purposes through the partnership between Suncor Energy and the Alberta Conservation Association. Their Boreal Habitat Conservation Initiative has been nominated for an Emerald Award this year.
ALBERTA CONSERvATION ASSOCIATION PHOTO
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porate citizen, you’re always looking for opportunities that benefit all the stake-holders,” he continued. “And, of course, it’s hard to benefit all the stakeholders out there 100 per cent of the time. This one is one of those rare ones.”
That is simply because industry, gov-ernment, landowners and conversation groups all saw the value of the initiative.
“We’ve had nothing but positive re-sponse from just about every stakeholder that we’ve talked to, including other industry – oil and gas industry as well as forestry – that have been involved in this thing,” said Seibel.
“It’s been a very positive step forward for Suncor and for industry and for the government as well.”
“There’s the strict numbers game,” Zimmerling said of BHCI’s achievements. “We’ve been able to conserve 6500 acres of land that otherwise would not be con-served in the future. That in itself, I think, is a great accomplishment. And if that had been all we’d achieved on its own, I think it would be worthwhile. But the other thing we have achieved is showing that … conservation can work with industry in this province and we can accomplish a fair bit if we work together.
“Because of the partnership and the program we’ve got going on, we have brought the concept of conservation off-sets to the forefront within the provincial government.”
Zimmerling noted that government is looking into developing its own conserva-tion offset programs.
“Informing future policy,” he said. “I think that’s a huge accomplishment and some-thing that both sides are very proud of.”
Zimmerling also believes the program has been beneficial to the image of Al-berta, especially beyond its borders.
“Far too often, Alberta’s looked at as just a big hole in the ground with oil seeping out of it,” he explained. “That’s what certainly a lot of the American environmental groups try to paint Alberta as being. And I think we’ve worked really hard to try and show, not just people in-ternationally, but Albertans that there are green places that you can go to in this province. And just because a company is a major oil sands company, it doesn’t mean they can’t also be concerned about conservation efforts and doing what they can to help future Albertans.”
There is also the ecological value.“These lands will now be set aside in
perpetuity,” said Zimmerling.“Nobody imagined where we would be
in Alberta fifty years ago,” he continued. “No one can really imagine where we’ll
be fifty years from now. But, if you look at some of the predictions, we could have a lot of people squeezed into this province. And we’re not making any more land. So, having some set aside that will be open for public access so people can hunt or fish or hike or pick flowers or whatever they might want to do [is] really going to be that much more important as we move into the future.
“It’s good for people outside of Alberta to see that Alberta industry is involved in con-servation and they can work with conserva-tion groups. And, I think, in many cases, it’s good for conservation groups. You can actually work with industry and you can get a lot accomplished if you’re working with the right partner within industry.”
The Emerald Award nomination is wel-come recognition for those efforts.
“I think everybody’s pretty excited in here,” said Seibel. “It’s always good to be recognized for something that you truly believe in as a company. And so it’s good to see that. But at the end of the day, re-ally, the win here is for all Albertans.”
“We were extremely happy,” added Zimmerling. “I sent a note out right away to the entire team – Suncor and our team – just congratulating them on being nominated.
“Obviously, the hard work is paying off.”The nomination may also help BHCI
achieve its future goals.“Suncor has committed to continue
with this project,” said Seibel, noting that Suncor also hopes to expand the project by growing the number of stakeholders who are aware of the program, including other oil and gas companies.
“We realized right shortly into it that we could expand this a lot more if we could get more participants in it to help fund it,” he continued.
“Because Suncor can’t do it alone here.”Seibel explained that the team took
advantage of ACA’s large list of contacts to hold a series of “show and tells” for industry groups to show them the value of the project.
“A number of the major companies are looking at this and have actually moved forward and taken steps in a very similar program,” he said. “And a number of them have partnered with ACA.”
One of those projects is Shell’s True North Forest, almost 2,000 acres of land just west of Spirit River, Alberta that was acquired by Shell and ACA for conserva-tion purposes.
“We’ve also done this now with Total Energy and with Shell,” said Zimmerling. “And those guys both stepped forward because of the long-term partnership we
have with Suncor. That’s pretty excit-ing when another group comes forward saying, ‘We see what you’ve been do-ing. It’s obviously benefiting one of our competitors. We want to get involved as well.’ Obviously, it’s having an industry wide impact.
“We have long term goals within each of the focus areas where we’re doing our purchases right now to try and get larger blocks of habitat,” he continued. “Right now, we’re often purchasing one or two quarter sections at a time. We want to try and fill in the spaces between those pieces of land so we have larger blocks for a greater benefit from an ecological standpoint. You can maintain a greater level of biodiversity if you have a larger block of habitat.
Zimmerling said that ACA would like to double the number of corporate partners for these conservation efforts over the next decade.
“And see if we can get it to become more of a common process within indus-try in Alberta,” he added. And we’d also
like to see it expand outside of just oil sands companies.
“I know oil sands is the guys that are always in the news and always seem to be the ones that are creating the envi-ronmental impact, but there’s a lot of different industry that goes on throughout Alberta that could definitely benefit from looking at the positives of doing conser-vation offsets.”
Zimmerling agreed with Seibel that Em-erald Award attention could help consider-ably with efforts to attract new partners.
“I think companies like Suncor are unique in this partnership,” he said. “And I think it’s important to recognize that uniqueness, that they are leading the way in conservation efforts. And I think if we, as a society, ignore that, it becomes less of an incentive for these companies to be involved in conservation.
“It’s extremely valuable. And, obvi-ously, I’m hopeful that this type of recognition will bring other players out that might want to get involved in their own partnerships.”
The 640 acre Warrensville Conservation Site northwest of Peace River, Alberta is another beneficiary of the Boreal Habitat Conservation Initiative.
ALBERTA CONSERvATION ASSOCIATION PHOTO
12 • PIPELINE NEWS NORTH MAY 17, 2013R001424272
TransCanada planning new pipeline and terminal in AlbertaDaily Oil Bulletin
TransCanada Corporation announced on May 2 that it has reached binding long-term shipping agreements to build, own and operate the proposed Alberta-based Heartland Pipeline and TC Terminals projects.
The proposed projects are being developed to support growing crude oil production in Alberta and will include the 200-kilometre pipeline connecting the Edmonton region to facilities in Hardisty, Alberta, and a terminal facility in the Heartland industrial area north of Edmonton.
TransCanada anticipates the pipeline could ultimately transport up to 900,000 bar-rels of crude oil a day, while the terminal is expected to have storage capacity for up to 1.9 million barrels of crude oil. The projects have a combined cost estimated at $900 million and are expected to come into service during the second half of 2015.
“With Alberta oil production projected to increase by almost three million barrels per day over the next 15 years, it is important to have the right infrastructure in place to move these resources safely and reliably to market at the right time,” Alex Pourbaix, TransCanada’s president of energy and oil pipelines, said in a news release.
“These projects will help link Canadian crude oil resources in northern Alberta to markets in Eastern Canada and the United States.”
TransCanada began initial engagement with stakeholders and aboriginal communi-ties through a feasibility study in the fall of 2012. The company intends to file a regula-tory application for the terminal this spring, followed by a separate application for the pipeline in the fall.
The projects will be developed with aboriginal and stakeholder input, as well as con-sideration for environmental, archaeological and cultural values, land use compatibility, safety, constructability and economics.
In addition, the projects will further expand TransCanada’s liquids transportation capabilities and leverage its extensive operating experience in Alberta.
TransCanada recently announced the Grand Rapids Pipeline project, a 500-kilo-metre pipeline system to transport crude oil and diluent between the producing area northwest of Fort McMurray and the Edmonton/Heartland region.
MAY 17, 2013 PIPELINE NEWS NORTH • 13
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industry newsCNRL will keep upgrading as Horizon production
grows to 250,000 barrels of oil per day Daily Oil Bulletin
Canadian Natural Resources Limited is sticking with plans to include upgrad-ing in Phases 2 and 3 of its Horizon oil sands mine.
Alberta’s overheated construction sector and harsh climate have con-vinced some oil sands producers to export raw bitumen for upgrading at refineries in the United States. And that was before the technology-driven tight-oil boom in the U.S. flooded the market with light oil.
Upgraded light crude from the oil sands now has to compete with surging U.S. domestic production for access to the limited number of refineries that process light oil.
This clinched the decision for Suncor Energy, which last month scrapped plans for a new Alberta upgrader. But CNRL remains committed to including upgrad-ing in Horizon Phases 2 and 3, which will
boost synthetic crude production capacity by a total of 140,000 barrels a day. Once Phase 3 reaches full volume, Horizon will have a design rate of 250,000 barrels a day of light sweet oil, up from the current 110,000 barrels a day.
“It’s a very unique situation we have at Horizon. We’ve prebuilt Phase 1 of Horizon for Phase 2 and 3, so [we’ve] got a lot of that capital cost spent,” CNRL president Steve Laut told report-ers after the company’s annual meeting on May 2.
In other words, Horizon was designed for optimal performance at 250,000 bar-rels a day as Phases 2 and 3 will take advantage of infrastructure already built in Phase 1. “And that means we’ll have increased reliability and redundancy at Phase 3 rates, and operating costs will be lower,” Laut said.
“So there’s a bunch of added economic incentives for us to go to Phase 3 expan-sion [with upgrading included],” he said.
CNRL plans to ultimately expand Horizon’s capacity to 500,000 bar-rels a day. Once it completes Phases 2 and 3 and the project is capable of producing 250,000 barrels a day of light sweet crude, the company can start to bring on the second 250,000 barrels a day of capacity.
“At that point in time we can decide whether we want to go fully upgraded, partially upgraded or just sell raw bitu-men, or not do it all,” Laut said.
“So [we’ve] got lots of time to figure that out. And by the time we have to make that decision, I think we’ll see [how the refinery] infrastructure shakes out in North America – and whether we can get off North America. And we’ll have a better understanding of the market. So it shouldn’t be an issue.”
In the first quarter Horizon production averaged 109,000 barrels a day of syn-thetic crude oil, with April output averag-ing 104,000 barrels a day.
The mining project’s synthetic light oil output in the first quarter was up 136 per cent from the corresponding 2012 period and up 31 per cent from the fourth quarter.
“Horizon has seen steady production volumes and sustained increases in reli-ability over the last year as we focus on an enhanced maintenance strategy and operational discipline,” the company said in releasing its first quarter results.
The project’s first major turnaround began April 30 and was scheduled for 24 days. The turnaround includes required inspections, catalyst change-outs and exchanger repairs, and will address main-tenance items.
“A step change in reliability and strong production performance is expected post turnaround,” CNRL said.
The staged expansion to 250,000 bar-rels a day of synthetic crude consists of a series of smaller projects. Those currently under construction remain at or below cost estimates, CNRL said.
Imperial and ExxonMobil evaluating potential LNG sitesDaily Oil Bulletin
Imperial Oil and its parent Exxon Mobil Corporation are continuing to look at poten-tial sites for an LNG export terminal in British Columbia.
Imperial and ExxonMobil submitted a joint expression of interest on Crown land at Grassy Point, near Prince Rupert.
Earlier this year, the B.C. government advertised for companies capable of and in-terested in developing a natural gas liquefaction plant and LNG marine export terminal on provincial Crown land. The government wanted to establish a list of pre-qualified proponents.
“We’re looking at several sites and this is part of the process you go through,” said Rich Kruger, Imperial’s chairman, president and chief executive officer.
“There aren’t [any] big financial commitments with it. But it’s an expression of interest to look at with the Crown what we can do on that potential site – as we look at others,” Kruger told reporters after the company’s annual meeting in late April.
Factors Imperial/ExxonMobil consider for an LNG site include deepwater access to the sea, land stability and construction costs.
“We’ll look along the coast [at] this site as well as others to see what best meets our needs,” he said.
Kruger said it’s too early to say how Canada’s West Coast stacks up against other potential global locations for an LNG export project.
That depends on such factors as the size and quality of the gas resource and the cost of developing that gas and delivering it to a liquefaction plant. “It’s a bit dependent on the size and the economies of scale you can get in a plant,” Kruger said.
He said other factors are LNG markets, fiscal terms and regulatory conditions.Asked whether Imperial now has enough gas to support a B.C. LNG project, Kruger
noted the company’s large land position in the Horn River shale play and its acquisition of successful B.C. gas producer Celtic Exploration Ltd.
“We’re early into the Celtic evaluation. We’re excited about the resource potential in both [the former Celtic lands and the Horn River],” he said. “As an upstreamer by background I always like more resource. ...We’ll keep working on that. But I think right now the efforts are really defining what it is we have.”
Asked whether a decision to proceed would hinge on securing oil-linked prices from LNG buyers, Kruger said it would depend on many factors – including the gas supply, construction costs, the land, the fiscal terms and LNG export markets.
“Imperial/Exxon Mobil will do all the things we can do on the technical and engineer-ing aspects of it to verify resource, to lower costs,” he said. “But at the end of the day you have to have the market dimension, and then the right fiscal and regulatory terms and provisions to make a project attractive.”
14 • PIPELINE NEWS NORTH MAY 17, 2013
environmenta BIG leaP ForWardCOSIA takes reforestation to an all new level
james watermanPipeline News North
Reclamation isn’t just about turning brown spaces into green spaces anymore.
That appears to be the mantra of the Alberta oil producers comprising the group known as Canada’s Oil Sands In-novation Alliance (COSIA). The associa-tion has taken bold steps alongside their partners in the provincial government and the forestry industry to turn the process of simply reclaiming a land disturbance into the act of restoring the ecological integrity of the region.
“The idea with LEAP is to gather a bunch of landscape level data together,” said Jeremy Reid, an environmental specialist with oil sands producer Nexen and a member of the Land Environmental Priority Area Steering Committee with COSIA, explaining the COSIA initiative known as Landscape Ecological Assess-ment and Planning (LEAP).
That information includes forestry data that provides meaningful insight into the ecology of the area and the disturbance footprints of the various oil and gas com-panies operating in that region.
“We can look at the landscape and look at our footprint on the landscape to start to draw conclusions about potential impacts,” said Reid.
LEAP doesn’t just look at oil and gas industry impacts, but the collective foot-prints of all land users, and examines the potential impacts on indicators such as boreal songbirds that can tell a lot about ecosystem health.
Caribou is a particularly important indicator.“We know what caribou habitat looks
like,” said Reid.This is where the forestry companies
play a significant role.“As a part of their business – part of
their management of the forest – they’re able to grow the forest through time,” Reid said of the modeling work done by that sector.
“They take a bunch of scientific data and put it into what are called growth curves for trees and you can start to sort of grow the forest,” he continued. “You can say, ‘In 50 years, the forest will look like this.’”
Forest fires and forestry company har-vest plans can be included in the models.
“If you’re an oil and gas company, you can put your future potential footprint into the model and then say, ‘What does the forest look like? What’s it going to look
like in the future?’”It also allows them to see what that
forest will look like in terms of different wildlife species and habitat types.
Reid said that is the true value of a multi-stakeholder approach to an issue.
“Information that will allow us to do meaningful work,” he explained. “Having the forestry companies there, the govern-ment and oil and gas, we all brought appropriate data into one place, and then were able to look at it together and start to plan collaboratively.”
Still, the project wasn’t without its challenges.
“A major challenge with bringing this type of data together is what are the parameters of the data,” said Reid.
“It’s about making all the data that you bring together standard [because] you want to be able to compare apples to apples,” he continued. “Because, other-wise, it’s hard to draw conclusions.”
It is a question of accuracy and ensuring
that one element on one map is really the same as another element on another map.
“How wide is that road?” said Reid, of-fering an example. “How can we compare them? We don’t have the specific width of the two roads; we can’t say that they’re equivalent roads because you only have a certain level of information from one road to the other. This is getting into the minutia.”
The forest information was fairly easy.“That’s Alberta Vegetation Inventory,”
said Reid. “We can say this is black spruce over here, this is black spruce way over here, and we’re confident that we’re right in both cases.
“But then we start to get Company A’s and Company B’s data together, they don’t always match. So, you’ve got to dig into the details and say, ‘How is Company A tracking data versus Company B? What are the differences? How might that affect how we analyze the data?’”
After that work was done, COSIA decided to put it the test with a reforesta-
Planting spruce seedlings is just one part of a new oil sands industry approach to reclamation known as Landscape Ecological Assessment and Planning.
COSIA PHOTO
COSIA companies conducted a reforestation pilot project in northern Alberta using fallen woody debris such as spruce trees loaded with seed cones and a forestry technique known as mounding to create the hummock and hollow landscape typical of the natural boreal forest on previously flat linear disturbances. The project was also a test for winter tree planting in areas that ar inaccessible in the summer due to wet conditions. Native berries and wildflowers show that the sites are gradually returning to their natural state.
COSIA PHOTOS
MAY 17, 2013 PIPELINE NEWS NORTH • 15
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tion pilot project over 56,915 hectares southwest of Fort McMurray.
“What we wanted to do was pilot coor-dinated restoration on an area,” said Reid. “We wanted to choose an area that was of reasonable size. It wasn’t so big that it would get overly complicated, but it wasn’t so small that it wouldn’t be meaningful. So, we chose the multiple township area – six townships – as sort of a size that was manageable for us to pilot this planning process on and then be able to carry it through to field implementation.
“We went with the particular area we chose because it’s in caribou habitat,” he continued. “It’s in the caribou zone designated by the province and it’s in critical caribou habitat designated by the federal government.
“And we know that linear features have an effect on caribou habitat. This is an area with linear features.”
Many of those linear features were old seismic lines, pipelines and forestry roads.
“The first thing we had to do was a linear inventory,” said Reid.
Not all of that information was gathered during the initial data collection, simply because it wasn’t associated with the companies involved in the process.
“And we had to do some stakeholder engagement,” he continued. “And the Alberta government led that part.”
Local land users were told about the work COSIA and their partners were planning and asked which of those linear features they used regularly, so that res-toration wasn’t interfering with activities such trapping or guide outfitting.
“We had to figure out how old they were and whether they were regenerating during this linear inventory,” said Reid, beginning to describe the work that was actually done on those linear features.
“If the line is five years old and you’re seeing some vegetation re-growing on it, that’s a line we don’t want to touch again. It’s going to grow back in a relatively quick amount of time,” he explained.
Other linear features were anywhere from 10 to 40 years old.
“Lines where there wasn’t vegetation responding or re-growing,” Reid said of the older disturbances.
Many of those older lines were turning into grasslands.
“Species that outcompete the trees for moisture and nutrients,” Reid continued, referring to those grasses. “They prevent the forest from coming back on those lines. And then the lines get used by wild-life, and they affect wildlife predator-prey dynamics and wildlife habitat.
“One of the first things that we wanted to do with the lines was restore some of the immediate function of the lines, to disrupt their negative effect on wildlife habitat. And that’s one of the things that the site [preparation] did.”
The site preparation technique used is a method known as mounding.
“We went through the lines and we used some heavy equipment to break up the surface a bit to create mounds,” said Reid. “That’s a technique used in forestry. And that more approximates what the offline condition of the forest is.”
The forest floor is typically a series of hummocks and hollows.
“When we create a linear feature on a landscape, we create a flat line,” he added.
“We have to recreate that hummock and hollow situation first of all, which is what we did, and then we planted trees in the hummocks or the mounds.”
Some of the planting was done during the winter because the area can be very soft and wet during the summer. That re-forestation pilot project was actually part of experiments with winter planting that also took place at the Evergreen Centre for Re-source Excellence in Grande Prairie.
“That elevates them above the water table a bit and puts them more in a natu-ral situation where they’re more likely to be successful,” Reid said of the mounds.
Black spruce was planted in an attempt to create good caribou habitat.
“Another technique that we used is we brought in some of the trees that were standing adjacent to the line,” said Reid.
“If there was downed woody material, which means trees that had been on that line and were pushed aside, we brought that back over the line. Or if there wasn’t any of that, we would intermittently pull a tree just off the line and put it on the line. We got regulatory approval to do that.
“We studied that use of coarse woody material over the last three years and we’re using it a lot more now.”
One benefit of the practice of occasion-ally taking spruce trees from the adjacent forest and placing them on the lines is that the tops of those spruce trees often hold a great number of seed cones. That seed source is helpful in regenerating natural forest conditions on the disturbances.
“We worked with the regulator to get approval to do that,” said Reid. “And the condition was that we’re not taking down lots of trees all the way down the line. We’re taking one here and there every few metres or ten metres. We take a tree down, put it on the line and it provides that extra resource.”
This is just the start for LEAP.“It’s a great pilot project,” said Reid.“We’ve worked on about a township
and a half, which is a substantial area,” he continued.
“We’ve done about 116 kilometres of line. … And that’s great in that local area. But we have to do a lot more of this work in order to rehabilitate the habitat that’s been disturbed, not just from our industry, but from other industries that have been working in the area for decades.”
Reid believes it is the responsibility of the oil and gas industry to lead the way.
“Because we’re developing the area right now and we’re likely going to con-tinue developing the area,” he explained.
LEAP and the associated reforestation project have been recognized by the Al-berta Emerald Foundation, which shines a light on environmental leadership in that province through its annual Emerald Awards program.
COSIA is an Emerald Awards finalist for those efforts this year.
“It’s important for encouraging more of this type of work,” Reid said of the Emer-ald Award nomination.
“It is great to be nominated for the award,” he added, “but this is just the start of us taking a proactive habitat man-agement position.”
16 • PIPELINE NEWS NORTH MAY 17, 2013
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18 • PIPELINE NEWS NORTH MAY 17, 2013
industry newsany Means neCessaryCenovus looks at moving their oil sands bitumen by rail
james watermanPipeline News North
Moving oil by rail isn’t new for Cenovus.The Canadian oil producer is shipping as much as
6,000 barrels of oil per day by railroad, while expecting to increase those volumes to 10,000 barrels per day by the end of 2013.
“Cenovus, in light of some of the pipeline constraints that the industry is seeing, has started to build rail into a larger part of our transportation portfolio,” said Cenovus spokesperson Jessica Wilkinson.
Insufficient pipeline capacity has been a problem from companies such as Cenovus operating in the Bakken light oil play of southern Saskatchewan, where pipe-line access is virtually nonexistent and production has increased so rapidly, but it is an even bigger issue for an oil sands industry still awaiting verdicts on pipelines such as TransCanada’s Keystone XL and Enbridge’s Northern Gateway that would move their product to world markets where it would finally fetch a world price.
However, transporting oil sands bitumen by rail is a slightly different story than rolling its light cousin down the tracks.
That is why Cenovus is looking into special rail cars.“Heavy oil, especially from the oil sands, it’s pretty
thick when it’s underground,” explained Wilkinson.“Conventional oil is typically like olive oil,” she con-
tinued. “Oil sands oil is much like molasses. It doesn’t flow easily. And in some cases it can be as hard as a hockey puck underground. The challenge, really, is to produce that oil by heating and causing it to flow. If it’s not heated, it tends to not flow as well.
“So, for moving bitumen production, what companies have to look at is rail cars that are insulated to try to
retain as much heat as possible. And then there are also cars that have the capability to actually inject steam through the cars.”
That steam heats the oil so that it can flow.It is an important element of the process because,
after all, the oil sands producers wouldn’t accomplish much by loading bitumen onto rail cars if they couldn’t also unload that bitumen at its final destination.
“The key thing to remember now is we’re not actually moving heavy oil, currently, by rail,” added Wilkinson. “All of it is our conventional crude from southern Alberta and southern Saskatchewan.”
Wilkinson noted that rail isn’t about to replace pipe-lines completely.
“We see rail definitely as an important part of our transportation strategy,” she said, adding that rail alone likely wouldn’t offer the capacity necessary to satisfy the oil sands industry.
“There’s a huge amount of oil sands production com-ing on over the next decade or so,” she continued, “and there are some concerns that rail might not be able to transport the entire capacity. Our philosophy is really to look at a number of options to get our oil to market. So, we do see rail as being an important part of our trans-portation strategy, but we also support all of the pipeline projects that are being proposed right now.”
Wilkinson argued that the cost of rail transport can be competitive with pipelines.
“We can use rail to get to markets where pipelines might not necessarily be able to get us to, whether it’s a location thing, whether it’s a capacity thing on the pipe-line,” she explained.
Accessing new markets by rail can allow Cenovus to receive a better price for their oil.
“Which offsets the cost of rail,” said Wilkinson.
“From a safety perspective,” she added, “we do think that pipelines are the most efficient and … the safest way to transport oil. But we see as a rail as a viable alternative.
“It’s really important to us that we work with com-panies that adhere to the same safety standards that we do.”
Wilkinson emphasized the importance of accessing new markets for Canadian oil.
“We’re supportive of all projects that would open up new access for our oil,” she said. “There’s a great deal of demand for our oil. And just because of the shifting production growth in different areas of North America, it has resulted in some challenges. We’re confident we’ll be able to get our oil to markets. That’s something we’re putting a lot of focus on.”
That is why Cenovus has put together an internal task force to study market alternatives.
“It’s still new,” said Wilkinson.“It’s really just tying all of our strategy in from under-
standing what our production portfolio looks like to look-ing at our transportation strategy,” she continued. “It’s really just that higher-level look at everything.”
That process is aided by the fact that Cenovus devel-ops their oil sands projects in 40,000 to 50,000 barrel per day phases that the company can easily manage and repeat.
“We’re able to have a very clear long-term picture about what our production is going to look like at any given point over the next decade,” said Wilkinson. “We’re able to really take that long-term view and plan what sort of transportation capacity we’re going to need at different points in time.
“It really is all about access, not just for Cenovus, but for the industry.”
Cenovus is already moving large volumes of light oil from southern Alberta and Saskatchewan by rail, but shipping oil sands bitumen from operations such as Foster Creek would be new for the oil producer. Transporting bitumen by rail requires special cars to allow the heavy oil to flow, as it has the consistency of molasses and can be as hard as a hockey puck.
CENOvUS PHOTO
MAY 17, 2013 PIPELINE NEWS NORTH • 19
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eleCtIon nIGHt In B.C.Familiar faces take the reins of the Peace Region
staFF rePOrterPipeline News North
Liberal MLA Pat Pimm will represent the riding of Peace River North in B.C.’s 40th legislature after being re-elected with over 57 per cent of the vote last night.
Pimm said his message of a strong focus on the economy resonated with voters in the area.
“We now know we have a B.C. Liberal government that’s 100 per cent supportive of driving the natural gas economy and that’s what’s going to drive this region and make this region strong for the next 20 years and maybe longer,” Pimm said.
First elected in 2009 with 43 per cent of the vote, Pimm’s margin of victory this time around was signifi-cantly wider, beating out second place finisher and Inde-pendent candidate Arthur Hadland, who earned just over 25 per cent of the close to 12,000 votes cast.
“I knew that we were going to have strong competi-tion,” Pimm said. “I knew it was going to be between Arthur and myself, and the only problem is people realize that an independent voice is only one voice in a gov-ernment of 85 seats. It can’t do a whole lot and people understood that. At the end of the day, I’m now going to be part of (majority) caucus and I can tap a minister on the shoulder and that’s how you get stuff done.”
Hadland said he was disappointed there wasn’t more recognition of the power of an independent member of the legislature.
“An independent is the purest form of democracy and if we look at what’s actually being done for the North, I think we lose,” he said. “The party system is not rec-ognizing the power of the North. … We have the fine example of carbon taxes – definitely unwelcome. It puts us at a competitive disadvantage with Alberta.”
Pimm credited the hard work of party leader Chris-ty Clark, who lost her riding, for helping the Liberals not only maintain but increase their majority status in the legislature.
“She proved all the pollsters wrong,” he said. “The last month on the road, she won this election for us, no doubt about that whatsoever. Everybody had to win it in their own ridings, but she was out there. She showed that a strong economy will win over the NDP and a big labour movement everyday.”
Local B.C. NDP candidate Judy Fox-McGuire earned just under 10 per cent of the vote.
“I knew it was a long shot going into it,” Fox-McGuire said. “I understand this is not a strong NDP riding, but I gave it my best shot, went right through to the end and I stayed positive and I stayed looking forward to the future
and I’m really proud of that.”There were concerns locally about the effect of an
NDP government on the natural resources sector, an important part of the economy in northeastern B.C.
Meanwhile, the Liberal dynasty in Peace River South will continue with candidate Mike Bernier win-ning the race.
“This is obviously really exciting,” said Bernier. “The voters made sure that they marked their ballot and made the right decision. That’s what we’re seeing tonight – it’s really good news.”
The former mayor of Dawson Creek also said he un-derstands the issues facing the South Peace.
“Going into this, I had a lot of experience,” he added. “But you never know what people are wanting at the end of the day.”
Bernier’s campaign manager, Charlie Parslow, said that the reason for Bernier’s win was because of realistic promises.
“We didn’t make empty promises,” he said. “We knew what we could say would be our platform.”
Bernier also said he was pleased that the three other campaigns “didn’t make it personal.”
One of Bernier’s supporters, former MLA Blair Lek-strom, said he was pleased to see that despite retiring from provincial politics, his party would still remain in power in Peace River South.
“I think when (voters) made their minds up and went to the polls, they said, ‘Yeah, the government made some mistakes, any government probably would if there’s go-ing to make as many changes as they have, but overall, I’m better than I was in 2001.’”
Supporters Fayette and Bill Bouffioux share a laugh with Peace River North MLA Pat Pimm on election night at the Lido Theatre in Fort St. John.
GAvEN CRITES PHOTO
20 • PIPELINE NEWS NORTH MAY 17, 2013
environmentlearnInG FroM lIdarWet Areas Mapping program giving industry a better view of the landscape
james watermanPipeline News North
Barry White calls it a transformational technology.
The registered professional forester from the Forest Management Branch of Alberta Environment and Sustain-able Resource Development (ESRD) is talking about a remote sensing tool known as LiDAR (Light Detection and Ranging), particularly its use in the Wet Areas Mapping (WAM) Initiative led by his department.
“It’s rare that a technology comes along that transforms how you do your business,” said White, who was first introduced to WAM during a workshop in eastern Canada in 2004.
The process was still young at that time, but it was being used in the Mari-times and parts of New England. White began to wonder if it might be transfer-able to Alberta, despite the considerable differences in terrain and soil types, sim-ply because of the variety of land uses in
the province, ranging from forestry to oil and gas extraction, and the fact that it is difficult to locate many of the small water bodies in the boreal forest where much of that industry activity occurs using tradi-tional remote sensing techniques such as photo interpretation.
LiDAR uses infrared lasers rather than visible light in order to measure param-eters such as distance between objects, which can provide accurate topography information. WAM uses that topography information, not soil or climate data, when predicting the locations of stream chan-nels or other water bodies.
“Primarily by having upfront information in the planning process of hydrological and soil risks on the landscape,” White said when asked how this information could be used by resource industries like the energy sector.
“If you’ve got a road, for example, and you know you want to go from Point A to Point B, you’ve got topography, but now you know where all the different stream channels are and wet, organic soils which
require fill,” he explained.Maps produced through older methods
would only contain ten to twenty per cent of the stream channels. When resource companies only have that level of information beforehand, they are forced to react to the presence of previously unknown soil and water issues in the field, instead of planning for those issues in the office.
“If you don’t know where there are hydrological risks on the landscape, how can you manage for them?” said White.
“The principal thing is they can identify and account for hydrological risks at high resolution and plan accordingly.”
A significant application of WAM infor-mation is response planning for a pipeline spill or leak.
“It’s a huge area that we’re working on,” said White, noting that WAM can tell the producer or pipeline company the proximity of the pipeline to water bod-ies as well as how that water is likely to move.
“In that case,” he continued, “they would be able to identify the stream chan-nels that it’s going to affect and immedi-ately, without even going to the site, they would know where they were going to put their control booms in the event of a spill.
“Having that information upfront just gives you a very quick estimation of the risk that that spill poses. And the amount of time that you have to respond. We don’t miss very many stream channels. If our data says that you’re far away, you’ve got more time to respond than something where you’re right on it.
“You can track it across that landscape.”The next step in the use of the WAM
data is to actually determine where new pipelines would be best located.
“We’ve done it with roads,” said White, adding that similar work on pipelines hasn’t yet begun, even though project partners Devon Energy, Statoil and the Uni-versity of New Brunswick have had discus-sions around that idea.
“One of their ques-tions was,” said White, referring to the oil and gas producers involved in the project, “if we know where the hydrological risks are on the landscape, we know where it’s dry and where it’s wet, can we incor-porate that knowledge of risk upfront in planning as to where we’re going to be putting infrastructure?”
White emphasized the value of acquir-ing that level of knowledge about the landscape by noting that many of the road
and culvert washouts often seen in the re-source industry are associated with roads that were built during periods of drought.
WAM doesn’t just see water, but pre-dicts where that unseen water could be.
“A lot of these channels that we find that are on those maps may only be ten centimetres wide,” said White. “And the only way that you find them is when you pull back grass.”
Although WAM was originally designed with forestry in mind, White believes its future in Alberta is more closely tied to oil and gas.
“A lot of the current discussion that is taking place is more around the energy sector,” he said.
“It’s facility placement. It’s roads. … And then the spill response as well.”
The WAM work in Alberta began with a pilot project in the Whitecourt area in 2005, but it wasn’t until 2008 that the government was fully confident that they could move forward with the initiative. The original plan was to map seven millions hectares of land. The actual number at this point is closer to 20 million acres, all shot at one metre resolution, resulting in as much as 450 billion pixels of information.
ESRD has only mapped a small portion of the agricultural land using LiDAR. The bulk of areas with forestry operations have been completed.
“Very far north,” said White, “we still have another two [or] three years. The Fort Mc-Murray area, for instance, we’ve got about a million hectares mapped. It will take us another two years to finish off that area. But all the forested area south of that, all the way down to Montana, is done.
“Peace River South is completed.”The Alberta Emerald Foundation, which
celebrates environmental achievement in that province, has taken notice of the project, making ESRD a finalist for an Emerald Award this year.
“It’s important for our department to be recognized for innovation,” said White. “Because there is really a desire within the department and within government and, I think, within our sectors to be innovation leaders. We put a lot of en-ergy into looking at what innovation is occurring anywhere in North America.
“Wet Areas Mapping was a really good example of looking at something that another group came up with somewhere else in Canada. We didn’t try to duplicate it here. We didn’t try to copy it. But we didn’t ignore it because it wasn’t an Alberta solu-tion. We partnered with them. And this is now a nine-year partnership.
“And so it’s nice to be recognized.”
This small stream in the Hinton area of Alberta wouldn’t likely be seen with traditional aerial photo interpretation, but it could be predicted by Wet Areas Mapping using LiDAR. The Alberta government has been obtaining LiDAR information for all of the forested areas of the province. That information can be used by resource industries when planning roads and pipelines and preparing pipepline spill response plans near wetlands.
ALBERTA ENvIRONMENT AND SUSTAINABLE RESOURCE DEvELOPMENT PHOTO
“If you don’t know where there are
hydrological risks on the landscape, how can you manage for them?”
– Barry White, ESRD
MAY 17, 2013 PIPELINE NEWS NORTH • 21
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FroM tree to sHInInG treeCoast to Coast Reforestation earns Emerald Award
nomination for Smoky Lake Nurseryjames watermanPipeline News North
The phrase “native plant nursery” is becoming almost as commonly spoken as the words “oil” and gas” in that industry, thanks in large part to the recent trend in reclamation work of using a vast array of indigenous species to return disturbances to their past ecological state.
Judging by the announcement earlier this spring that they had been named a finalist for an Emerald Award this year for their contribution to oil sands reclamation in northern Alberta, Coast to Coast (C2C) Reforestation’s Smoky Lake Forest Nursery is certainly at the forefront of that trend.
It is work that began about 15 years ago, shortly after C2C took the reigns of the nursery in a privatization lease, as the facility had previously been owned and operated by the provincial government.
“We talked and started growing some plants for them,” said C2C’s Larry Lafleur, recalling early conversations with oil sands companies Suncor Energy and Syncrude at that time. “And it’s taken off from there to the point where we now grow all the reclamation stock for all the oil sands companies in Fort McMurray.”
Extensive use of native plants wasn’t common in those days.
“Even in the first years that we started, we were talk-ing a couple hundred thousand plants a year going onto the site,” said Lafleur.
Numbers now range as high as two million plants a year.The diversity of species is impressive, too.“We were doing a few varieties of shrubs,” said
Lafleur. “Some of the basic things like willows. We were doing tree species – birch, aspen, black spruce, jack pine. And I think we started off with some alder, too. Now we’re doing everything you can imagine
“We’re doing up to probably 80 species now,” he added, listing a variety of grasses, sedges, berries and shrubs in addition to the commonly known boreal forest trees.
Many of those seeds are supplied by their partners in the energy sector.
“I’ve been working with Suncor reclamation since 2006,” said Lelaynia Cox, a reclamation specialist with Suncor. “The relationship had already established prior to my employment here. I’ve been working directly with them for seven years.
“We work with them in two capacities,” she continued.
“The first is as a direct contractor to Suncor. And the work they do for us is they receive all of the seeds that we collect in the area for reclamation and they process the seeds, and then send them over to the government for storage. And then when it’s time to do reclamation in an area, we order seedlings from Smoky Lake. And they take those seeds and they grow them into seedlings in their greenhouse for us.”
Presently, Suncor is collecting seeds for six tree spe-cies and seven grass species, as well as 18 different shrubs and 29 different plants that grow in wetland and riparian areas.
“Millions of seeds,” said Cox.“We collect seeds from an area that we know is eco-
logically equivalent [to our work sites],” she added.“We do collect seeds from more mature reclamation
areas as well.”Cox’s previous training and work experience is as
forester, but she finds her newest job as a reclamation specialist particularly fascinating.
“My experience has all been involved in establishing and growing forests,” she said. “So, coming to work from a forestry background to reclamation kind of is a logical and direct progression, I would say, but it is much more interesting working in reclamation because of all of the different shrubs that I’ve been introduced to.
“It’s really challenging and fun to take all of these new species and try to figure out where we’re going to put them and how we’re going to grow them. And that’s where my relationship with Smoky Lake comes in.”
“The difference between general reforestation work, which is what we do, and reclamation is that the general forestry work that we do is basically returning com-mercial species – lodgepole pine, jack pine in the north, white spruce, some black spruce,” said Lafleur.
Rat root is just one of the plants grown at Coast to Coast Reforestation’s Smoky Lake Forest Nursery for use in oil sands reclamation projects. The nursery has been recognized by the Emerald Foundation for their environmental contribution to Alberta with an Emerald Award nomination this year.
COAST TO COAST REFORESTATION PHOTO
continued pg 27
22 • PIPELINE NEWS NORTH MAY 17, 2013
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industry newsAltaGas sees $2 billion to $5 billion in LNG investment opportunitiesDaily Oil Bulletin
AltaGas, which is partnering with Idemitsu Kosan of Japan, is in the best position to deliver natural gas for export from Canada ahead of other proposed projects, the company’s shareholders heard Thursday, April 25.
“Currently, we have the only natural gas pipeline (Pacific Northern Gas) that ties western producers right through to Canada’s northwest coast,” David Corn-hill, chairman and chief executive officer, told the company’s annual meeting.
Proposed LNG exports could begin as early as 2017, subject to consultations with First Nations and the completion of a feasibility study, permitting, regulatory ap-provals and facility construction, AltaGas said in its first quarter 2013 report.
AltaGas and Idemitsu each own a 50 per cent interest in the AltaGas Idemitsu Joint Venture Limited Partnership that will pursue opportunities involving exports of LNG and liquefied petroleum gas (LPG) from Canada to Asia.
“The partnership opens up new markets for Canada which we believe is
critical for the Western Canadian Sedi-mentary Basin,” said Cornhill.
AltaGas sees investment opportuni-ties of between $2 billion and $5 billion, including a 600 million cubic feet (mmcf) per day expansion of PNG to support LNG investment initiatives, said Cornhill.
“We see no limits to the opportunities here and do believe this business will drive a significant amount of growth in the medium and long-term,” he said.
The joint venture partners currently are conducting feasibility studies for both initiatives with the LNG study expected to be completed in early 2014 and the LPG study this year.
Idemitsu is targeting 25,000 barrels per day of LPG exports, said Cornhill.
PNG also has completed a pre-feasibility study that addressed pipeline capacity additions to the system and, in the second quarter of 2013, it expects to proceed to the next stage of develop-ment, including engagement with First Nations and undertaking an environmen-tal review process.
“Our strategy is to capitalize on op-portunities that the renaissance of natural
gas and clean energy are creating,” said Cornhill whose company’s business seg-ments include gas, power and utilities.
AltaGas’ footprint has expanded across North America and the company has built
significant competitive advantages in strategic locations, he said.
“These locations and their demand for clean energy provides us with ample op-portunity for future growth.”
AltaGas’ Younger extraction plant in northeast British Columbia. The energy company believes it is well situated to take advantage of liquefied natural gas opportunities in the province becuase of facilities such as this plant and its Pacific Northern Gas pipeline.
ALTAGAS PHOTO
Talisman looks to capitalize on North Duvernay buzz
Daily Oil Bulletin
Talisman Energy is hoping to capital-ize on industry excitement in the North Duvernay by seeking either a divestment or joint venture there.
As part of efforts to focus and unlock value from the North America portfolio, the company has started a process to joint venture or divest its North Duvernay holdings and parts of its Montney hold-ings, the producer said on May 1.
Hal Kvisle, president and chief execu-tive officer, said the decision to select the North Duvernay for this process didn’t have to do with poor well results.
“We’ve done relatively little drilling, but industry has drilled well over 100 wells in the North Duvernay and we’ve seen some very good results on com-petitor lands quite close to our own,” he said.
Kvisle was referring to Encana’s report that it started production from “the stron-gest industry well to date” in the liquids-rich Duvernay play with a restricted 30-day initial production rate of 1,400 barrels per day and four million cubic feet (mmcf) per day of natural gas.
Talisman is offering up the North Duvernay because “there’s actually so much excitement” around it right now, Kvisle said.
“We’re equally excited about our South Duvernay play,” he noted. “There’s a lot less industry activity and a lot less drilling has been done there. So, if we were to try to sell the South Duvernay, we might get limited interest. By offering the North Duvernay, we think we’ll get not only interesting offers to take us out for cash,
but also some interesting joint venture proposals where a foreign player, for example, might want to partner with us.”
He said Talisman has drilled fewer than half a dozen wells in each part of the play.
“We drilled one particularly encourag-ing well in the South Duvernay,” Kvisle said. “We took a little bit of a differ-ent approach. We didn’t feel that we understood what it would take to do a successful fracture job on a long lateral horizontal well.”
Most of the company’s wells are short laterals with only five or six stages that have been fractured.
“We’re trying to determine rock proper-ties and [are] doing really more appraisal than development,” Kvisle said. “What we look at is what kind of production rate are we getting per stage and can we optimize the stages, making them better.
“To get a good view on how things are going in the North Duvernay, don’t look to Talisman, look to some of the players up there that have drilled a lot more wells.”
There have been a lot of wells drilled adjacent to Talisman’s acreage, Kvisle pointed out, and the company has infor-mation sharing agreements with some of those companies.
“Some of those wells have come off of confidential and the information is pub-lic,” he added. “Our wells are not a big part of the database in the North. In the South, however, we’ve had this one very successful well with high liquids rates and we’re not prepared to say a whole lot more about it now, other than our South Duvernay position is very interest-ing to us.”
MAY 17, 2013 PIPELINE NEWS NORTH • 23
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Industry spending on Northern Gateway will be $500 million before a regulatory decision is madeDaily Oil Bulletin
Enbridge and its industry partners will have spent about half a billion dollars on the proposed Northern Gateway pipeline project by the time a regulatory decision is rendered.
The National Energy Board is expected to rule before year’s end on whether En-bridge can build the proposed pipeline to bring Alberta bitumen to the West Coast for export.
“Enbridge, with the funding participants – so, that’s industry participants who help us – will have spent $300 million on the regulatory process. We’re spend-ing another $150 million on engineering studies,” said John Carruthers, president of Enbridge Northern Gateway Pipelines, the division responsible for the multibil-lion-dollar project.
Carruthers was responding to a ques-tion from Barry Munro, oil and gas leader at Ernst & Young Canada. Both were part of a panel discussion on April 30, moderated by Munro, on the need for a Canadian energy strategy. The panel was part of the Canadian Energy Research Institute’s 2013 oil conference.
“You’re looking, by the time we get a decision, at half a billion being spent,” Carruthers said.
He noted that doesn’t include govern-ment dollars.
Taxpayer spending on the regula-tory process is significant, he said, but it “won’t be anything near what we will have spent.”
Munro observed that while the risk capital for such projects has always been huge, in the past it was always assumed it was part of the total project cost: “It was never really thought that you were risk-ing all of that be-cause you always assumed that the project would be approved.”
Carruthers agreed: “And you assumed that because you knew what the require-ments were: [Is it] in the public interest? Can it be built and operated safely? So you had confidence in terms of yes, we’re addressing all the issues, all the regula-tions. You had more confidence than you would today.”
While he wasn’t voicing criticism of the increased debate about pipeline construction, the Enbridge executive acknowledged: “It does create a different risk/reward scenario for all of us.”
Historically, the review of a proposed pipeline was largely technical – where and why it would be built, the safety and environmental issues and whether
it was in the national interest. Now the debate has expanded to include ques-tions ranging from native land claims to whether oil sands production should grow and whether humanity should use fossil fuels.
A Canadian energy strategy, as championed by the Alberta govern-ment, would move these political ques-tions to the political arena so regula-tors such as the NEB could focus on regulatory matters.
“I think it is critical because a lot of the questions we get from the public [are]: What role does the oil sands play in Canada’s economic development? So it starts there,” Carruthers said. “There is a lot of opposition to the pipelines because people oppose oil sands development.
“So, I think it’s critical that we address that question: What role are the oil sands and energy going to play in Canada’s future?” he continued. “And I don’t get so much the question about: is it important? Because we are the most trade-depen-dent of the G20 countries and oil is our largest export. So I think people are start-ing to better understand the need for it. So it comes [down to]: How are we going to develop oil sands from an environmen-tally respectful manner?”
The Enbridge executive believes a Canadian energy strategy could give Canadians a better understanding of the role of energy in Canada’s prosperity and how the oil sands can be developed in an environmentally sound manner.
“It’s fundamental to everything we do,” he said. “People are opposing pipelines because they want to oppose oil sands development and feel that that’s the best way to do it.”
Given that the Canadian oil indus-try has in the past year been losing up to $75 million a day due to the price penalty of depending solely on the U.S. market, Carruthers said it’s critical that Cana-dian oil get access to new markets via the U.S. Gulf Coast, Eastern Canada and West Coast.
He said access to the West Coast is particularly
important as a way to reach the world’s biggest and fastest-growing oil market, the Pacific Rim.
In delivering the conference’s opening keynote speech, Alberta Energy Minister Ken Hughes talked about his govern-ment’s efforts to achieve a Canadian energy strategy.
“The narrative ... is either ‘you’re in favour of the oil sands, or you’re not,’ and ‘oil sands are the end of our society as we know it, or it’s not.’ And
actually we need a more thoughtful conversation about this,” Hughes said. “And Alberta has been working hard to help ensure that we do have a more thoughtful conversation.
“One element of that is the work we’re doing on the Canadian energy strategy where [Alberta Premier Alison] Redford has led the charge – and with some real success,” Hughes said. “You saw recently the visit from Premier [David] Alward of New Brunswick to Alberta. That didn’t happen by accident. That happened because we’ve been engaging with them, and they’ve been engaging with us around opportunities and how we might work together to add value to Alberta resources in New Brunswick.”
Hughes was referring to the idea of shipping Alberta bitumen to Irving Oil’s Saint John complex, which is Canada’s largest refinery.
“And the generally positive responses across the country came about because
we’ve been working hard to ensure that at the ‘officials’ level, and whatever level we can engage, we had a thoughtful conversation,” Hughes said.
He indicated this is a long-term process.“This is a marathon, not a sprint. We
have a lot of work to do to build good-will in the rest of the country. ... Adding value to our resources anywhere else in Canada is good for Alberta,” he said, suggesting this is one way to find workers without overheating Alberta’s economy.
Hughes noted there are proposals to ship Alberta oil to refineries in Quebec as well as New Brunswick.
“It creates wealth in those provinces and it diversifies our national economy. But most importantly, it creates good-will for an energy industry that is actu-ally a big economic driver for the whole country,” he said. “And so the Canadian energy strategy has been an important element of building that goodwill right across the country.”
“There is a lot of opposition to the pipelines because people oppose oil
sands development.”
– John Carruthers,Enbridge
24 • PIPELINE NEWS NORTH MAY 17, 2013
industry newssHalloW rIGHts reVersIonAlberta government decision on SRR notices met with mixed reviews
james watermanPipeline News North
The Alberta government decision on Shallow Rights Reversion (SRR) that was announced in the middle of April has drawn mixed reviews from the oil and gas industry in that province.
It was decided that the government would not issue SSR notices for agree-ments made prior to 2009, which means that oil and gas rights above the shal-lowest producing zone on any of those lands will not return to the Crown so that they can be sold to other producers, but will remain with the company that initially purchased those rights.
Agreements made after 2009 will still be subject to SRR notices.
“From a producer perspective there’s no kind of unified sense,” said Brad Her-ald, manager of Alberta operations with the Canadian Association of Petroleum Producers (CAPP).
“It really depends on your land posi-tion,” he added.
Herald explained that companies look-ing to grow by acquiring new assets would likely view the decision in a negative light, but that isn’t the case for companies not looking to expand their operation.
“The members of the Canadian As-sociation of Petroleum Land Administra-tion (CAPLA) are extremely pleased with the decision by Alberta Energy to put an
indefinite hold on the issuance of Shallow Rights Reversion notices,” said CAPLA spokesperson Marion Leonardo, who also serves as mineral land supervisor for Deep Basin and Rimbey with Cono-coPhillips Canada.
“Overall, this is a favorable decision for the oil and gas industry based on projected costs, manpower and explora-tion programs that these notices would have created.”
Much of the anger around the decision is associated with the history of SRR, particularly because the government was originally expected to begin issuing SRR notices in 2008.
“In the 2007 New Royalty Framework, the Government of Alberta announced that Shallow Rights Reversion would be implemented in 2008,” explained Alberta Energy spokesperson Kristiana Indradat. “It was introduced at a time when gas was highly valued and scarce, and the government’s objective was to maximize recovery of known gas resources.”
The goal of SRR is to encourage pro-duction from shallow zones by providing that opportunity to other companies, as well as fill pipeline capacity.
“Since 2007, the oil and gas industry has undergone significant change,” Indra-dat continued. “The targets for develop-ment have shifted from natural gas. Now the focus in Alberta is on shale zones and zones with tight oil opportunities, which
are developments that are larger in scale and more intensive.”
Additionally, Alberta producers are al-ready facing pipeline capacity constraints as they try to move oil sands bitumen to markets where it can attract the sort of price producers operating in other oil plays currently enjoy.
SRR should still be part of the future of Alberta, however.
“SRR will continue for agreements issued after 2009, as outlined in legisla-tion,” said Indradat. “In these cases, companies purchased the agreements knowing that they would be subject to both deeper and shallower rights sev-erance once their primary agreement expires after five years. The first shallow rights severance will occur in 2014.
“For those lessees with agreements made prior to 2009,” she continued, “a three–year shallow rights reversion notice has to be issued before shallow sever-ance can occur. The serving of these notices is what is being postponed.
“Industry can continue on with busi-ness, investing time and resources in activities as they see appropriate, that would otherwise be directed at proving the productivity of shallower zones in their agreement.”
An internal consideration within the Alberta government also played a role in the decision.
“There are over 60,000 agreements
issued prior to 2009 that would have to be served with a SRR notice,” said Indradat. “It would require a number of government employees to serve and review notices on all leases. Today’s fiscal reality dictates that Alberta En-ergy must continue to evaluate how it operates and be mindful of how it uses internal resources.”
“There are footprint considerations,” remarked Herald, noting that the Province is in the midst of a land use planning process and making shallow resources available to other producers could “lead to the proliferation of the development footprint.”
It has been suggested that the deci-sion is unfair to smaller producers that might rely on the availability of previ-ously acquired oil and gas rights, but Herald dismissed the notion that opin-ion of the decision was divided along the lines of junior companies versus major companies.
“It’s really about what the growth strat-egy is,” he reiterated.
Herald believes the impact of the deci-sion will be negligible.
“It was noticed, but it wasn’t a big ripple one way or the other,” he said.
“In a period where there are some more challenges in the sector in terms of market access and some of the pricing differentials, it’s probably regarded a bit more favourably.”
CNRL to build revolutionary GHG-reducing biorefineryDaily Oil Bulletin
Canadian Natural Resources Limited and its partners announced on May 10 a pilot project for a technology it says has the potential to reduce greenhouse gas emis-sions by 15 to more than 30 per cent across its opera-tions, and can be applied at other industries worldwide.
The project has the potential to revolutionize how industrial carbon emissions are managed.
The partners, the National Research Council of Canada (NRC), Pond Biofuels and CNRL are construct-ing a $19 million facility at CNRL’s Primrose thermal in situ heavy oil project near Bonnyville, Alberta.
The three-year Algal Carbon Conversion Pilot Project will use algae to recycle industrial emissions by using carbon dioxide to grow algal biomass, which will un-dergo further processing into products such as biofuels, livestock feed and products to improve soil.
“Commercialization of this technology will mean that Canadian Natural’s oil sands CO2 emissions will be reduced at Horizon, our oil sands mining operation, by about 15 per cent,” said Steve Laut, CNRL president, during the pilot’s launch in Calgary.
Success could lead to emissions reductions at Prim-rose of more than 30 per cent, said Laut.
The company will also directly benefit from the produced biofuel in the process by blending it into a syn-thetic light oil or heavy oil at Primrose, he added.
CNRL, which is paying $6.3 million towards the project’s costs, plans to share the results from the pilot, expected to be commercial in 2016, with the other 13 members of the Canadian Oil Sands Innovation Alliance (COSIA).
“By sharing this innovation, as an industry, we will ac-celerate the pace of environmental improvement at all oil sands,” he said.
According to John Parr, vice-president of thermal proj-
ects at Canadian Natural, the concept is simple.“We will put carbon dioxide and waste heat from our
oil sands facilities into large tanks with algae and treated waste water and create photosynthesis with LED lights. We will then press the algae to release the bio-oil that can be used for jet plane fuel or blended into our heavy oil or synthetic crude oil. The leftover biomass can then be used to feed livestock and for land reclamation.”
Each tonne of algae can reduce CO2 emissions by 1.8 tonnes and will yield 0.3 tonne of biofuel and 0.7 tonne of biomass products that can be used as fertilizer, livestock feed and as an input into other premium products.
The process will also release 1.3 tonnes of oxygen to the atmosphere.
Joy Romero, CNRL’s vice president of technology development, told reporters the source of the CO2 is the flue gas from burning natural gas.
“We use a bunch of waste streams.”Indicating a diagram of a photobioreactor that is full
of wastewater, Romero said the water must be warmed with waste heat because algae like to be kept warm.
“The CO2 just bubbles through and the algae liter-ally eat it, plus the nutrients in the waste water. When they grow, they develop lipids or fat, the oil, and we then harvest the algae and take the oil.”
The ultimate goal of the project is to test the viability and feasibility of such a facility. If proven successful, it can then be used as a model for recycling industrial emissions across industries in Canada and the world.
Steven Martin, chief executive officer of Pond Biofu-els, said the partnership is an enormous step forward and establishes Canada as the world leader in the field of carbon capture and recycling.
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industry newsDuvernay rich with condensate used as bitumen diluent
natural gas and condensate.Encana has drilled twelve wells in the
Duvernay so far. Two of those wells are vertical wells. Eight of the ten horizontal wells have been completed. Four of those eight wells are producing.
“And so it’s a very early time in the play still, but what we’ve seen from all the wells is the ability for the reservoir to flow as we’ve expected,” Smith reiterated.
“We’ve got commercial potential in the play.”
It is a play that comes with both ben-efits and challenges, however.
“From a technical perspective, it is a deep, high pressure environment,” said Smith, discussing the challenges.
Vertical depth of the reservoir in the Kaybob area is 3,500 to 4,000 metres, while the reservoir in the Willisden Green area, another section of Encana’s Duver-nay fairway, sits about 3,200 to 3,700 feet below the surface.
Comparatively, the reservoirs in the Montney and the Horn River Basin, two shale plays in northeast British Columbia where Encana is also operating, are both just less than 3,000 deep.
“One of the benefits is that it’s sweet,” said Smith. “So, we’re not challenged with H2S (hydrogen sulphide) from the Duvernay itself.
“If you take a look at, really, the cor-nerstones of the play,” he continued, “it is located in an area between the foothills and the population centre. You don’t have a lot of high population areas that are impacted by an ultimate development.
“The second thing is it’s happening where there’s been a lot of development that’s occurred already. So, you’ve got that basic infrastructure in place in general across the fairway. And then the service centres that are already established closeby, such as Red Deer and Fox Creek and Whitecourt and Grande Prairie.
“It’s not like stepping out into the Horn River,” he added.
Smith also praised the Alberta gov-ernment for recognizing the potential of shale resources in the province – the Al-berta Geological Survey (AGS) has even
conducted studies and published data sets on Alberta’s shale resources – and attracting investment to those plays.
“Some of the foresight around the fiscal policies they’ve set up around shale gas development really help the Duvernay, especially early in its life with the higher cost structures, compete in a North American sense with plays like the Eagle Ford and Marcellus,” said Smith.
Encana has seen the value of invest-ment in the Duvernay first hand as one half of a joint venture partnership with Phoenix Duvernay Gas, a subsidiary of PetroChina.
“What’s really specific to the Duvernay, and having a partner in it at this stage, is it is early appraisal,” said Smith. “To move this to a commercial standpoint, where it really competes heads-up for Encana’s funding, you need to aggressively move through appraisal. And these early wells are expensive. You’re collecting a lot of data. You’re learning as you go.
“It takes time to bring your cost structures down through our continuous improvement efforts. And so this early, upfront, third party capital … is really helping us manage the risk around an early life program.”
One thing making the Duvernay worth that risk is the large volumes of conden-sate found in the reservoir.
“There is a structural demand for con-densate in Alberta associated with the dilu-ent requirement for oil sands,” said Smith.
Condensate is used to dilute oil sands bitumen, which is very thick and viscous, so that it can travel through a pipeline.
“There is a very strong demand for the primary product of the Duvernay devel-opment,” he added, noting that natural gas liquids (NGLs), a group that includes condensate, has been the focus of the natural gas industry in recent years, par-tially due to the low methane price.
“You’re seeing the fractionation capacity in Fort Saskatchewan fill up,” said Smith.
NGL fractionation is the process of breaking the liquids down to their compo-nent parts such as ethane, propane and butane, which can be used as fuels or as feedstock for the petrochemical industry when making products such as plastics.
“There are expansions and new proj-
ects underway that will serve the growing need to fractionate NGLs,” he continued. “That is part, I think, of an expanding market here that may drive even more in-vestment into the petrochemical industry.
“The beauty of the Duvernay is we can really target development to the liquids-rich areas, which do have less gas production associated.”
While the company was singing the praises of one of their newest assets, they were also parting ways with one of their oldest natural gas resources.
“We signed the agreement for the sale of that asset on April 23,” said Encana spokesperson Doug McIntyre, referring to the Jean Marie area near Fort Nelson in northeast B.C.
“We expect the transition will close in late June.”
McIntyre explained that the divestiture is simply part of Encana’s business strategy.
“We’re always looking at our portfolio of assets and always continuing to diversify our portfolio and production profile,” he said. “And, in this case, it really helped unlock value from a very mature, legacy asset that we had.
“This transaction will help to revitalize some of the natural gas development activities in the Jean Marie area.”
McIntyre echoed Smith’s comments around liquids-rich gas plays when discussing the decision to sell the Jean Marie assets.
“We began increasing our exposure to the light oil and liquids-rich opportunities
in about 2010,” he said.“We’ve achieved some success so far
in our light oil and liquids program, which really helps to support a more diversified production portfolio and really a more bal-anced stream of future cash flow. Having that said, we certainly very much still be-lieve in the future of natural gas long-term.
“Our long-term vision … is to be a lead-ing producer with all those commodities – natural gas, oil and natural gas liquids. We certainly believe all these commodities have a big role to play in the future energy mix, which is why we moved to more of a diversified production profile by capturing some of those other opportunities.”
This deal doesn’t mean that Encana is through with the far northeast corner of the province.
“We had a lot of success last year in ex-ecuting some joint ventures and strategic divestitures, and that’s really just always a matter of keeping our commodity mix fresh and keeping it vital,” said McIntyre.
“Certainly, with this asset, it’s allowed us to enjoy a really long and productive partnership with the community of Fort Nelson. Obviously, we’ll still remain a very significant presence in that region given our land base in the Horn River. And the proceeds from these sorts of transactions really allow us to focus on some of those key operating areas such as the Horn River Basin and some of the others in B.C.
“That’s the strategic underpinning of a transaction such as this.”
cont’d from pg 6
Although Pernarowski considers Kitsault a premier site for an LNG facility, he isn’t saying that he expects Kitsault to be the only game on the B.C. coast.
“There’s room for a number of LNG facilities and proj-ects on the northwest coast,” he said. “So, seeing one or two or more in Kitimat, Prince Rupert, and certainly one in Kitsault, it’s all just opportunity. And we’re sort of providing yet another location and another opportunity for one of these major LNG companies to come in and set up.”
Details of the project such as pipeline route and capacity won’t really be determined until the partners are in place, but Kitsault Energy does have ideas as to how they would like to proceed.
“A phased approach,” said Pernarowski.“We see the phased approach as helping us to ac-
complish a number of goals,” he explained. “First and foremost is that we want to accelerate the time it takes us to get the project through all the proper environmental re-views and actually get the product out to market. And we can do that by setting up a floating LNG facility to start. And we want to do that somewhere along the Observa-tory Inlet, again, connected to the community of Kitsault.”
The town site would remain important in that phase as a place to house construction workers and the families of those working at the facility when it is operational.
“And then we want to add to that and expand the size and capacity,” said Pernarowski.
That would mean a liquefaction and export facility on dry land.
“By doing it in a phased approach,” he added, “we can ac-complish our goals in, I think, a little bit of a faster fashion.”
That urgency isn’t necessary a product of concerns over declining LNG prices on the world stage or stiff
competition from other nations like Australia.“I think that the market is going to be there for a num-
ber of years,” said Pernarowski.“I certainly can’t predict pricing,” he continued. “That’s
beyond my capability of understanding. But, certainly, the market is going to be there. And what I saw when I was in Houston, Texas at the LNG 17 Conference is that the industry is actually going to be expanding, because companies right now are converting transportation to liquefied natural gas. Trucks, trains, boats, cars – these companies are all putting together systems that will al-low this cleaner fuel to be used and replace, to a certain degree, the oil that we’re used to using. So, I see it expanding in terms of markets.
“We’re certainly watching the markets and where things are trending. But, really, when you take a look at it overall, worldwide demand for LNG is massive and growing in large percentages each year.”
cont’d from pg 5
Kitsault Energy confident LNG demand supports north coast exports
Encana’s operations in the liquids-rich Montney play of northeast British Columbia. The Duvernay in Alberta is more challenging than the Montney because of the depth of the reservoir, but the rewards might be greater, as the Duvernay contains large supplies of condensate used by the oil sands sector as a bitumen diluent.
ENCANA PHOTO
MAY 17, 2013 PIPELINE NEWS NORTH • 27
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environmentOil sands sites returning to natural state thanks to Smoky Lake
“And that’s what the bulk of our busi-ness is,” he continued. “We grow 45 million of those a year.”
The oil sands is different because oil sands operations can strip that section of earth down to its bare bones.
“They’re trying to put everything back,” said Lafleur. “We’re growing wild roses, raspberries. Everything that was there originally, we’re trying to put back.
“There are some good success stories starting to happen out there. There are places coming back that look really good.”
“Establishing forests for the sake of forestry, we do that at Suncor as well, but it’s just part of the broader picture,” said Cox. “We’re also establishing reclama-tion areas for other uses like wildlife and traditional use. Recreation, possibly. Wetlands. And they all have different objectives and different requirements for establishing forests.
“It’s much more broad than just forestry.”When it comes to restoring a site to its
former glory using native plants from a nursery along the lines of Smoky Lake, the focus is ecological integrity.
“When you put all the diverse plants back on there, you’re also going to provide a habitat for the wildlife,” said Lafleur. “If you just put back a forest of spruce trees, it doesn’t provide for the birds and everything else.”
“I would say that returning the land to as close to former ecological attributes is very important,” added Cox.
“But the challenge is that, after mining activities, the landscape has changed in terms of topography,” she said. “For ex-ample, we have a lot more hills than we did before and a lot more forestry areas than wetland areas.
“It is going to be different in terms of the proportion of ecological areas that there were.”
That situation actually emphasizes the value of native plant nurseries because those native plants ensure that wildlife species typical of the area continue to enjoy that habitat despite the other topo-graphical and ecological changes.
“When we collect our berries and seeds, we’re collecting it from around here so that we know they’re the same species that are already here,” said Cox.
“They’ll be suitable for the wildlife that are here.”
Cox, who actually wrote the letter in support of Smoky Lake’s nomination as an Emerald Award finalist, is pos-sibly more excited about the honour than Lafleur and his colleagues, simply because of her appreciation for what C2C has done for Suncor and their reclamation efforts.
“The number one reason why I wrote
the letter in support of Smoky Lake … is to recognize the excellent work that they do, not only for us, but just for reclama-tion – oil sands reclamation – in general,” she said.
“I think that the value in this type of award is to let people outside of the oil sands know exactly what we’re doing up here. … People just don’t know. And I think this will help people who may not otherwise look into what we do here to
see it. And maybe it will trigger their inter-est to look into it more.”
“We’re going to certainly get a little positive exposure from it,” said Lafleur.
“I hope that it raises awareness that there is something being done up there and that reclamation is ongoing,” he added. “And it’s possible to grow these plants and get them back on the site.”
“I really hope they win,” Cox concluded, “because they do great work for us.”
cont’d from pg 21
Smoky Lake Forest Nursery helps oil sands companies such as Suncor Energy restore the ecological integrity of disturbed sites by growing a variety of natie plants including, clockwise from top left, paper birch, aspen, raspberries and a variety of shrubs.
COAST TO COAST REFORESTATION PHOTOS
28 • PIPELINE NEWS NORTH MAY 17, 2013
it in large quantities.“That can go anywhere in the world.
And one of the things that has held back our petrochemical industry, es-pecially in Alberta, is that once you get to what could be the third or fourth in line of the petrochemical derivatives, eventually you’re going to get into consumer products next, and produc-tion of a lot of those things tend to be around population centres. We don’t have high population density or very large population compared to places in the [United] States.”
Asia is another region better suited to manufacturing consumer products.
“That’s a very good potential market for that stuff,” said Schlenker.
It is just the sort of value-added pos-sibility that Shelly would like to see turn into a reality in Alberta.
“This study is being done as part of our Alberta Plus campaign,” he said.
“We got together with some of our industry and some of the major inves-tors coming into the region, like Williams Energy, Enhance Energy, North West, NOVA [Chemicals] and Agrium,” he ex-plained. “In our discussions, we found out that with this huge potential we have in Alberta here, a lot of the focus around en-ergy strategy and energy policy seemed to be focused more on the Keystone and Enbridge pipeline system.”
Keystone XL is a project proposed by TransCanada to move unrefined oil sands bitumen to refineries in Texas. Enbridge’s Northern Gateway would also ship unrefined bitumen, but to the B.C. coast, where it would board tankers for refiner-ies in Asia.
“And there wasn’t a lot of discussion about the other side – the downstream side – and what it could do to the Al-berta economy,” Shelly continued. “And so, collectively, as a group of munici-pal leaders and industrial leaders, we came together to say, ‘Let’s develop this program, Alberta Plus, which is how we can put the plus into our energy and what it can do for Alberta. Let’s de-velop this program that will act to help educate people about what can happen with our energy resources and what we need for Alberta.’
“I think your average Albertan prob-ably doesn’t understand the plastic in your car actually started off as propane. Or even that the tires in your car come from butane.
“Part of this is helping increase the energy literacy in Alberta.”
A key aspect of value-added opportuni-ties for AIHA is creating domestic markets for domestically produced resources.
That is why Shelly is so excited about the Sasol GTL proposal.
“It would take natural gas and convert it into diesel fuel that then can either be sold in the local markets or even exported overseas,” said Shelly. “That single proj-ect alone would consume about a billion cubic feet a day of natural gas.”
That could be significant when Alberta is facing the same sort of low price and
poor market access issues with their natural gas as they are with their oil.
“We have these massive reserves in conventional and shale gas out there, yet our traditional market, which has been the United States, is starting to be shut off to us because they have ample sup-plies down there,” Shelly explained.
“We know that companies are looking at LNG (liquefied natural gas) projects,” he continued. “And we do support that because we do need a healthy upstream industry. But a billion cubic feet a day at one plant – that’s a significant volume. That could provide a diverse portfolio for Alberta’s natural gas resources.”
The potential benefits range from roy-alties and taxes to a rise in the natural gas price.
“Which would have significant royalty benefits for the province of Alberta,” added Shelly.
Shelly wouldn’t complain about new domestic supplies of diesel fuel either.
“Alberta, and western Canada overall, has actually been … a very fast grow-ing economy, especially in the resource base,” he said. “And because of that, western Canada has gone from a net exporter to a net importer of refined fuel products, most of that concentrated around the Heartland region here. Putting in new supplies of diesel fuel from com-panies like North West or Sasol would help meet local demand [and] would help provide more security in supply.
“If one plant has a disruption, it doesn’t mean that the school buses are going to stop running the next day.”
Jackie Forrest isn’t convinced that pro-ducing that fuel at home is the best option.
Forrest is the director of the Global Oil group for HIS CERA, the organiza-tion responsible for the report titled Extracting Economic Value from the Canadian Oil Sands, and the lead researcher for their Oil Sands Energy Dialogue program.
“Since 2009 ,we’ve been publish-ing data that we make available in the public domain … with the goal of trying to get more information out on areas where there’s disagreements on oil sands,” Forrest said of the Oil Sands Energy Dialogue.
“[We] try to get many different perspec-tives involved in both the workshop and reviewing the draft review paper so that it’s balanced and fact-based and we’re considering information … different par-ties in the debate around oil sands.”
The verdict of IHS CERA is that Alberta has more to gain in the way of jobs and other economic benefits from shipping its bitumen without upgrading or refining it at home, which they admit challenges the conventional wisdom that upgrading and refining in Alberta must be better for Alberta.
The crux of their argument revolves around the cost of building and operating an upgrader or refinery, as well as the tight labour situation in Alberta.
The report suggests oil sands produc-tion is a better generator of long-term employment opportunities than up-grading or refining. It also notes that
upgraders and refineries, particularly during the construction phase, would draw scarce labour away from oil sands production projects. That is an econom-ic problem for the Alberta government because they earns royalty revenues from the production of bitumen, not from upgrading or refining that bitumen. Coupled with the very real possibility that Alberta-based upgraders and refin-eries may struggle to turn a profit, that is a definite loss for the Province.
IHS CERA contends that part of the reason such facilities may not be profitable is that demand for refined oil products in North America is either flat or declining.
“It’s fairly stagnant,” Schlenker said of that demand.
IHS CERA predicts a future with less investment in new upgrading and refin-ing, particularly in Alberta. The conver-sion of existing refining capacity, along the lines of that which exists in eastern Canada, is the better and more likely op-tion, but even that is uncertain because of the cost of conversions and the nar-row price difference between heavy oil – such as oil sands bitumen – and easier to process light oil that is relatively abun-dant in North America thanks to plays like the Bakken.
Refineries in the Gulf of Mexico in the U.S. can already handle oil sands bitumen, while the best return on invest-ment for brand new heavy oil upgrading capacity is in Asia, where the demand for oil is still rising.
That points to the idea put forward by IHS CERA that the true economic benefits for Alberta come with the con-struction of heavy oil pipelines such as Keystone XL and Northern Gateway, not from processing that product at home.
Forrest indicated that their interest in the issue began with events just prior to the recession that hit in 2008.
“There was all this investment planned for Alberta before the reces-sion. And there was such a big pull back [that it] caused a lot of debate in Alberta,” she said
“Not adding value to these products in Alberta – is that going to result in less economic growth than would be the case otherwise?” she continued. “And so there’s been a big political debate, especially as we’ve seen more and more projects first be delayed and now outright canceled.”
Ultimately, IHS CERA chose to explore the topic in depth because there was such an apparent lack of understanding what is actually involved in upgrading and refining heavy oil in Alberta.
“Companies weren’t canceling these projects because they just didn’t want Alberta [realizing] as many net ben-efits as possible,” said Forrest. “It’s just because the economics of these projects are challenged. And so part of the goal of the paper was to help get some facts on the table around that – what are the drivers that are leading companies to either convert refineries elsewhere or get heavy crude to refineries that can already take it?
“A conventional wisdom is that we’re losing jobs by not doing that upgrading. And based on our very limited labour in this province, we’d like to argue that, considering the environment that we’re in right now, we’re not actually losing jobs.”
The report states: “heavy oil refin-ing capacity has outstripped available heavy feedstock.”
If that is truly the case, building new upgrading and refining capacity ties up la-bour in a project that has no real purpose, simply because the feedstock supply doesn’t exist, when that labour would be better used in the interest of extracting bitumen from the ground.
“We’re just creating more of a short-age,” Forrest said of that scenario.
Schlenker doesn’t think the labour issue is a significant problem in terms of the projects considered for the AIHA study.
“The projects would be staged over a decade, potentially,” he explained.
“I know the ones that currently have plans in place, they are looking for kind of a release of labour from other projects before they’re going to start anything up,” he added. “The companies have taken a lot of this into account.”
The difference between the conclu-sions of the two reports boils down to the fact they are very different reports from start to finish, which suggests the vast potential of the Alberta oil and gas indus-try, as well as the complexity of issues around that sector.
“They’re focusing almost exclusively on bitumen and what you can do with bitumen,” Schlenker said of the IHS CERA report. “That’s a very small part of this report.”
Schlenker noted that there was consid-erable debate with AIHA about including the North West Redwater Partnership project in the study because it is a bitu-men refinery unlike the other projects.
“The North West plant is going to be in the Redwater area,” he continued. “They’re part of the Heartland, but it really is a distinct project from everything else that we’re talking about there. And the bitumen – it just brings in a whole differ-ent set of issues. Because even the North West refinery – it’s not like the other upgraders. The other upgraders go to synthetic crude, whereas the North West refinery is going to diesel.
“There’s a commitment to spend money on that. If they haven’t started up already, they do plan to start up in the spring of this year.
“It is a legitimate project.”Schlenker said that the petrochemi-
cal projects considered in the study are definitely set to move forward.
“Even on the methane chain,” he add-ed. “The Methanex plant in Medicine Hat, which has been shut down for probably a decade or more, has reopened because the economics are good again with the low cost of gas.”
“We didn’t consider the petrochemical integration,” said Forrest.
“We don’t have a lot of demand for some of the petrochemical products that would be produced in Alberta. So, they would have to be exported.”
special featureAlberta refinery projects face tough labour
and economic challengescont’d from pg 7
MAY 17, 2013 PIPELINE NEWS NORTH • 29
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careers VIrtual realItyBarry Kozdrowski takes backhoe training onlinejames watermanPipeline News North
Barry Kozdrowski has been operating a backhoe for over two decades.
The better part of those 23 years in the heavy equipment operating busi-ness have been spent in the pipeline industry, digging ditches for oil and gas infrastructure near the cities of Fort St. John and Dawson Creek, British Colum-bia and around his hometown of Fox Creek, Alberta.
Kozdrowski has learned a few tricks along the way.
“Not that many people really interested in learning anymore,” he said.
“Things are a lot more fast-paced now,” he continued. “Nobody seems to want to take the time to train anybody anymore. They expect the guys to know what they’re doing when they get out there.
“And back when I was learning, you used to be able to sit on the hoe with the operator and, as he was digging, he could describe exactly what he was doing and tell you the reasons why. And you got the view from the cab and everything.”
Kozdrowski said it was a great method of learning the trade, but changes in safety regulations in recent years have taken the students off the equipment and left them standing on the ground.
“Which is better, of course,” he added, admitting the health and safety benefits of the new rules.
However, it has also made it harder to explain nuances of the work.
“They have to stand on the ground,” Kozdrowski said of the students. “And you do something. And then you have to stop and explain why. It makes it a little more difficult.”
Kozdrowski stumbled onto a solution to the problem last winter thanks in part to his younger brother, a fellow backhoe operator.
“He hasn’t dug a lot of ditch,” Kozd-rowski said of his sibling.
As a result, the pair don’t often work on the same job, where the older Kozdrows-ki would be able to share the lessons of 23 years in the patch. So, Kozdrowski decided he would make a few instructional videos for his brother instead.
“It’s tough to email big videos,” he said, explaining how his tutorials first found their way onto the Internet.
When a few of the younger operators at work began asking Kozdrowski for tips, he simply pointed them toward the online videos.
“They started watch-ing them and they started following the tips,” said Kozdrowski.
“And their ditch started
getting pretty good,” he added.“All they needed was a little coaching.”Kozdrowski has produced about 40
videos at this point, just filming with his cell phone, held to the front window of the cab by a suction cup, and describing the work as he goes along.
The videos have had about 32,000 views overall and his YouTube chan-nel has 85 subscribers. One foreman, an industry friend, has told Kozdrowski that he has all his hoe operators watch the videos.
“It seems like the younger guys really appreciate the help,” he said.
It could ultimately be a good solu-tion to something of a Catch-22 where students are no longer permitted to learn from riding in the cab of the backhoe due
to safety concerns, but shoddy work by backhoe operators can also put other workers at risk.
“Just knowing the basic way to dig a proper bell hole and make it safe for people to get in,” said Kozdrowski, offer-ing just one example.
“And that’s a huge thing,” he continued. “I come across it all the time. I’ll come up to a bell hole somebody dug and it will be basically straight-walled. And a lot of times I’ll have to re-dig it just to make it safe for people to go in.
“The foreman will come and say, ‘Oh, this young guy didn’t do a very good job on the bell hole. You’ll
have to re-dig it.’”Some of the lessons Kozdrowski
includes in his videos have taken him almost his whole career to learn.
“Eventually,” said Kozdrowski, “I’d like to show every trick that I know.”
A pipeline project near Dawson Creek, British Columbia. Barry Kozdrowski shows other backhoe operators how to do this sort of work by posting instructional videos online.
BARRY KOZDROWSKI PHOTO
30 • PIPELINE NEWS NORTH MAY 17, 2013
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careers Oil and gas industry faces workforce challenges despite high wages
to bear. And you can see the world.“For a person that likes to get out there,
get out of the office, be involved in opera-tions, it’s quite a unique place to be.”
That technical aspect of the industry can require solid skills and knowledge in science and math.
“It does appeal to people who are strong in the sciences,” said Knight.
“The other thing is it’s changeable,” she added. “It sure is an industry that appeals to people that are adaptable, because it is cyclical and some sectors of the industry are seasonal.”
Knight remarked that people consider-ing a career in the oil and gas industry should also be aware of the safety as-pects of the sector.
“There really is a strong discipline and importance placed on safety procedure,” she said. “And sometimes it bogs you down, because if you’re going from site to site, every company wants to give you their safety orientation. But you do have to go through those drills. And that’s something that they should be aware of.
“Part of the culture.”
Despite the opportunity that does exist, the oil and gas industry continues to face challenges in recruiting the necessary workers with the necessary skills, partly because of the nature of the business, and partly because of the expectations on new employees.
“The work in remote locations is a difficulty,” Knight said of the recruitment challenges, pointing again to southern Saskatchewan.
“The oil sands is a challenge because of the cost of living there. And some people don’t want to work rotations,” she added.
“Believe it or not, some young people have difficulty not having their technology in their hands. You really can’t be working in the field and be checking your text messages. And, by the way, you may not have service where you are.
“That notion is little bit foreign to some people who have it 24/7.”
Driver’s licenses are another issue, as many employers don’t simply want a person who can drive, but also one with a squeaky clean driver’s abstract.
“The other thing is the perception of the
industry that people can pick up in the media,” said Knight, continuing to discuss those recruitment challenges.
“It is a barrier for us,” she added. “For people to be open-minded about the
industry and look at the positive contri-bution industry has to the economy and people’s lives. And think about, if it wasn’t there, if we didn’t deliver oil, what would be the consequences?”
cont’d from pg 9
Certain facts of life of working the oil patch, such as the remote locations where much of that work takes place, can be obstacles to recruiting new people in the sector. Cheryl Knight of the Petroleum Human Resources Council is hopeful that the positives outweigh the negatives as the oil and gas industry tries to solve its labour shortage problem.
JAMES WATERMAN PHOTO
MAY 17, 2013 PIPELINE NEWS NORTH • 31
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