Friday, 27 March 2015

Message to the Oil Price Doomsayers: Chill Out

By: Cody Battershill

Article featured in the 2015 Spring Edition of CAGC's quarterly magazine, The Source. 

As the price of oil declines, prediction of doom-and-gloom pervade the media. Here's me message to the catastrophe-is-coming crowd: Chill out!

No doubt, the declining price of oil is having and economic impact on the oil sands and given the importance of the oil sands to the country as a whole, declining oil prices mean Canada's economy will be challenged too. 

But there's no reason for panic.

Commodity prices are cyclical and Canada's oil sands industry has always been focused on the long-term. Over the long-term, there's no doubt the industry will continue to grow and strengthen and the sector will remain of vital importance to the nation's future prosperity. 

Despite lower oil prices, the Canadian Association of Petroleum Producers indicates 2015 capital investment in the oil sands is forecast to be $25 billion, down from last year, but a sizeable investment nonetheless. 

These investments continue to be made because oil sands projects have upfront and fixed costs, long-term breakeven points and very long production lives. 

Such investments will allow Canada's oil and gas sector to continue innovating as it gets leaner, increasing efficiencies and producing more oil and gas at lower costs. 

Economists note, the Bank of Canada's recent interest rate cut should allow these investment dollars to go even further. 

In fact, as oil prices come down, so too do supply and construction costs. Suncor, for example, is moving ahead with its $13.5 billion Fort Hills project. 

"This is precisely when you want to build it, when nobody else is building it," Alister Cowan, chief financial officer for Suncor, was recently quoted as saying in the media. 

That's why, contrary to the perception of doomsayers, production in the oil sands will actually increase in 2015 and 2016 by 150,000 barrels per day in each year over what was produced in 2014. 

The oil sands are incredibly resilient. We've seen tough times before, but the industry and its people always meet the challenges, coming out stronger. 

Nick Sanders, president of the Fort McMurray Chamber of Commerce was quoted in the news as saying, "We don't see anything to indicate the current production is going to get reduced in any way, shape or form. That's a good thing. That will keep our town extremely viable."

Lower oil prices have no bearing on the need for Canada to diversify its oil markets. 

We can't continue to rely solely on the market - the United States - to sell our oil because selling it to only one buyer means we must provide it at a discounted rate. 

As a result, government loses out on money that could help fund Canada's health, education, and social programs. 

Instead, lower oil prices should be further incentive for us to seek the best possible price for Canada's oil - and that price is on the international market. 

So, despite what the doomsayers might say, new pipeline projects are just as vital now as they've ever been. 

Pipeline projects must undergo rigorous public consultation and review processes by the National Energy Board. For example, Northern Gateway has been given final approval to proceed by the federal government subject to meeting tough environmental and socio-economic conditions.

Pipelines are the safest, most efficient and environmentally sound means of transporting oil over land. Tankers can safely deliver that oil by sea to new markets that need it. 

Canada's regulatory processes ensure these projects mist adhere to some of the highest environmental standards in the world. 

Irrespective of the price of oil, new pipeline and tanker infrastructure is key to strengthening Canada's future prosperity and supporting our world-class standard of living. 

The oil sands are such a strong driver of the country's economy that there's no doubt lower oil prices will result in challenges. Nonetheless, the sector's long-term prospects are as bright as ever. 

Let's get on with the investments in people, equipment and pipeline infrastructure that will improve and diversify our market access, making Canada's oil sands even more valuable in the years to come. 

Cody Battershill is a realtor based in Calgary. He is the founder of canadaaction.ca, a non-profit group that is run by volunteer Canadians who work together in support of informed conversations about the resource sector. 

Tuesday, 24 March 2015

Are the Environmentalists Winning?

May Recorder Article

By: Mike Doyle, CAGC


Mike Doyle is the President of the CAGC – the Canadian Association of Geophysical Contractors - representing the business interests of the seismic industry within Canada. The CAGC website may be found at www.cagc.ca.

Certainly a tough go of it out there. We are down to five (5) land seismic companies left in Canada. That was down from ten (10) a year ago and fifteen (15) or so a few years before that. Certainly crew counts are reflective of that this winter. So fingers crossed that things start to recover in Q3 of this year and we see a healthier seismic industry with fewer companies left.

Maybe Obama and the environmentalists are winning, but really it is the strong market forces – supply and demand dynamics – more than anything. Pat Roche writes in the March 20, 2015 Daily Oil Bulletin – the following excerpts are from the article titled U.S. Isolationism Creates More Fragmented Commercial World, Conference Told: 

Speaker - Ian Bremmer, founder and president of New York-based Eurasia Group believes this [US Isolationism] because Americans elected a president not to do foreign policy, but to get out of Iraq and Afghanistan, for example. With the shale revolution and cheap gasoline in the U.S., he said, Americans attach less importance to the Middle East. He notes Obama hasn’t had a strong secretary of state in his second term. “When I go to the capitals of America’s allies all over the world, they are asking, ‘Hey, what does America stand for?’ ... They feel there’s an existential crisis around who America wants to be,” he said. Bremmer says the underlying reason is Americans in general are feeling “a little less excited” about foreign affairs: “I don’t think that’s as much about the president. ... I think it’s more structural.” He says the “tools of American power” — such as the National Security Agency, cyber-surveillance, the use of drones, the “weaponization of finance,” the use of the U.S. dollar, access to U.S. banks — have themselves become more unilateral. “Americans do not need to engage with their allies with those tools,” he said.

More locally, the saturation of environmentalism his provincial and federal policy makers hard as the following article outlines well:

Who’s really endangered? By Elizabeth Nickson, a senior fellow at the Frontier Centre for Public Policy. Published in the Calgary Sun Comment Section – March 16, 2015

Sketchy data used to regulate huge tracts of land to protect species that may not be threatened after all

As the federal election looms, a hailstorm of criticism is being launched against the Harper government for its failure on environmental issues.  Already, the media reports have informed us that we are not protecting our caribou. Canada is an international pariah when it comes to the protection of endangered species. The sixth “great extinction” looms. Our grandchildren will live on a blasted heath, etc. Unlike climate change, the notion of the sixth great extinction is not contested vigorously or even examined dispassionately by anyone in the public arena. All reporting contains an element of alarm, if not outright panic. As a result, the numerous failures of endangered species regulation in Canada have not been reported. The failure of endangered species law can be broken into two sections: Process and science. Let’s start with the science.

Harsh reality

Paul Ehrlich, the godfather of extinction science, predicted in 1986 that by 2000, 27,000 species a day would be going extinct. Reality has been harsh for the professor, since in the last 500 years – according to the authoritative Red List of Threatened Species and the Committee on Recently Extinct Organisms – only five continental mammals and six birds have gone extinct. Island extinctions are larger – in the hundreds – but smaller by many orders of magnitude than 27,000 a day. Further, much of the hysteria is based on the notion that climate change will cause species reduction of between 11% and 37%, particularly amphibians. Yet, these losses have not come to fruition, and last December, the authoritative journal Nature published an essay saying it was increasingly clear that they never would. Despite this failure, endangered species biologists still base their work on Ehrlich’s flawed species-area relationship. As a result, we are told that many millions of acres must be set aside for conservation purposes and economic activity stilled.

This has happened across Canada’s sparsely populated rural areas, especially where resource, industrial or business activity takes place. People’s economic live are ruined based on bad data – which is to say, it lacks transparency, has not received genuine independent peer review and cannot be reproduced by qualified third parties.

This has a deleterious, knock-on effect on the whole economy. Resource jobs create massive, unacknowledged multiplier effects. Colorado has performed a useful experiment on this issue. Told that a federal listing of the black-tailed prairie dog was in the offing, the state did its own counting, several times, using variety of methods, over a period of years. Administrators of the federal Endangered Species Act wanted 12 million acres for the animal’s protection; the state gave them less than a million.  In court, the stat’s scientific rigour won, hands down. If the state had not fought the listing, 11 million acres would have been cleared of economic activity, and thousands of families ruined. Is the Harper government’s refusal to get on board the endangered species train making a bit more sense? Local residents working with regional scientists are far better analysts of species health in their areas. Species science is often developed in Asia, Europe or the U.S., then applied wholesale to our fields, forests and mountains. Further, because of confirmation bias, in this field there is virtually no such thing as independent peer review; science is reviewed by your pals, who are anxious to be hired again. Too often listings are recommended on the evidence of a single master’s thesis or equally weak science… Repeated use of the same reviewer in multiple assessments is common. If feet drag, environmental non-governmental organizations take the government to court.

 Improved habitat

In southern Alberta last year, NGO’s took the Alberta government to court, resulting in the forced clearance of thousands of acres, expensive new rules, and million-dollar fines.
This for 100-odd sage grouse who dwell at the northernmost limit of the bird’s historic range. In the U.S., rather than sequestration, successful restoration of the grouse has been done by landowners working with local scientists to improve habitat. The opportunity cost of shutting down one forest (of thousands)in the U.S. for the spotted owl was estimated at $1.3 billion. On heavily regulated lands, bad science means the cost of industrial projects sky-rockets, revenue for public funds drops, and rural Canadians find their communities shrinking every year, as the multiplier takes effect.Rules are so complex that government scientists have been caught hundreds of times destroying species and habitat, and landowners, faced with punishing restrictions, shoot, shovel and shut up. All this destruction for a 2% recovery rate. Time for root and branch reform.

For us in the industry it seems like the last decade has been about 2 steps backward and then one forward. While Canada becomes a superpower environmental state our neighbor to the south is working its way to be the number one supplier of oil and gas in the world – not far off in time as around when the USA oil and natural gas [general] export bans are lifted. I wonder what Canada will become with its resources shut-in and with high labour costs as a developed nation? 

 From Brainy Quotes on the Internet:

Nature has always had more force than education.

Voltaire 

Friday, 20 March 2015

Don't Fear Fracking

By: Brad Herald, Vice-President, CAPP

The following Op-Ed was published in the March 4th edition of Yukon News

Following the completion of a legislative report on hydraulic fracturing, the Yukon government is in a better position to assess the potential of its natural gas resources. This opportunity should be explored further to determine if it can help meet increasing energy demand, in Canada and beyond. 

In jurisdictions where hydraulic fracturing is a long-standing practice, such as British Columbia, Alberta and Saskatchewan, experience demonstrates the process is done safely and responsibly, a result of robust regulations and industry best practices. More than 215,000 wells have been hydraulically fractured in Alberta, B.C., and Saskatchewan over the past 60 years. This experience also demonstrates the significant economic and social benefits linked to development, including job creation, royalty and tax payments, and other contributions to communities. 

While it is unknown at present how much natural gas actually exists in Yukon, a federal government estimate indicates there may be 17 trillion cubic feet in place, enough to meet Yukon's needs for more than 10,000 years at current demand levels. This means the potential for a cheap, local fuel source in an area where fuel is currently extremely expensive. 

Hydraulic fracturing, a process used for more than 60 years in Western Canada, is necessary to access these resources, typically found between two and three kilometres below ground, up to 10 times deeper than drinking water resources.

Canada is recognized as a leader in developing oil and natural gas from shale safely and responsibly through hydraulic fracturing, a process used every day in North America. 

Through directives outlined by provincial regulators, the Alberta Energy Regulator and BC Oil and Gas Commission in British Columbia, industry activities are regulated to ensure the health and safety of the public. In the Northwest Territories the Office of the Regulator of Oil and Gas Operations oversees safe, responsible oil and gas development. 

According to a study commissioned by Natural Resources Canada, greenhouse gas emissions from natural gas produced from shale rock - taking into account all stages of production, processing, transportation and the use of fuel gas - are about four percent higher than from conventional natural gas production and use. Even with the four percent included, natural gas used in power generation emits significantly fewer greenhouse gases than and far fewer smog-causing air pollutants than diesel and coal fuels. 

A 2012 study by the Massachusetts Institute of Technology that examined the U.S. industry said: "It is clear that the production of shale gas and specifically the associated hydraulic fracturing operations have not materially altered the total GHG emissions from the natural gas sector."

Resource development could also mean an economic opportunity for Yukon. Looking at the benefits of natural gas development in other jurisdictions serves as an indicator of potential benefits. 

According to the Canadian Energy Research Institute, in 2010 the natural gas sector employed more than 172,000 Canadians directly and indirectly. By the year 2035 this number is expected to nearly double to 317,000 jobs across Canada. Over the next 25 years, people employed in natural gas could earn as much as $339 billion. 

Yukon's Department of Energy, Mines and Resources vision states: "Yukon will have a sustainable and secure energy sector that is environmentally, economically and socially responsible; developing and using energy resources to meet Yukon's energy needs and generating benefits for Yukon people, both now and for generations to come."

In fact, developing Yukon's natural gas resource meets all seven of the government's energy principles. 

Natural gas development can be sustainable, provide energy security, allow self-sufficiency, optimize natural benefits, fit with climate change policy coordination, create an opportunity for Yukon to be a leader in responsible development, and present opportunities for partnerships. 

The opportunity should be pursued. 

Brad Herald is vice-president of Western Canada and natural gas markets for the Canadian Association of Petroleum Producers. 

Tuesday, 17 March 2015

COR - In The Downturn - How Enform Can Help

Originally published March 4th by Enform
The drop in oil prices has affected all of us, and if you’ve been forced to temporarily cut back on your operations as a result, you’re in good company.
We know this can make it difficult if you need to complete your COR certification or maintenance audit, but we have some options to help you through the process:
1. If you have a dramatically reduced number of worksites:
As long as you have at least one active field site you can base your sampling requirements on your best estimate of your high or medium activity levels for the current year. Requirements include:
  • The resulting audit must be representative of your overall operations for the audit year.
  • If you acquire new operations and undergo major business expansions, a new external audit may be required.
It’s important not to deliberately schedule your audits at times when your activity levels are low as a cost saving measure. If you do, you may lose your COR or be required to re-audit.
2. If you’ve been reduced to out-of-province worksites only: 
In this situation you can request permission to use out-of-province worksites for the current audit year, as long as the application is made prior to the start of the audit. You will be asked to submit a report detailing any fatalities, serious injuries or incidents, as well as occupational health and safety violations that happened out-of-province.
3. If you have no active worksites:
Even if you have no active worksites you can apply for a six-month COR, requiring only an administrative audit. This keeps your certification valid until a full audit can be completed under normal operations. An Administrative audit must be performed by an Enform External Auditor.

Tips for cost-effectively maintaining your COR

Here at Enform we have a number of options to help you minimize the cost of maintaining your COR. Check our website for audit options such as Action Plans, as well as information on having internal staff conduct your maintenance audit.
If you’d like to discuss your options, contact us at corinfo@enform.ca for a review of your file. You will need to provide a statement of your company’s current and future state of expected operational levels for 2015.
To learn more about the COR Program check out this blog post about ‘how COR can help your business’.