blog2007

Energy CEOs call for national policy

COMMENT: We want to cheer when we see a headline like this. We've called repeatedly for development of a national energy policy. But reading past the headline, it's apparent what the CEOs are hoping to get - federal aid, big time:

- R&D and training, ponied up by the feds
- infrastructure investments and immigration and education policies
- a strong federal role will ease cost burdens
- overcome the patchwork of provincial and federal laws with a unified national program
- Ottawa has failed to put a price on future carbon emissions
- a federal push for vastly increased immigration of both skilled and unskilled workers
- federal money for education for oil workers
- more federal involvement in infrastructure, especially in the development of supplies of water, which is a vital resource in oil sands extraction

See also:
Why Canada Needs a National Energy Plan

Energy Strategy a Bright Idea

DOUG SAUNDERS
Globe and Mail
September 19, 2007

LONDON — In Alberta's oil patch, the words “national energy program” are usually uttered as a curse, a reference to the ill-fated 1980s program of oil nationalization and price controls.

But in a possible sign of changing times, several senior Canadian energy executives have used a gathering in London this week to make an unprecedented call for an increased federal role in their industry – some even daring to call for Ottawa to develop a comprehensive national energy policy.

“I firmly believe that developing and implementing a national energy strategy would help resolve many of the issues” facing the oil and gas industries, said Patrick Daniel, chief executive officer of the petroleum pipeline and distribution firm Enbridge Inc. “A national strategy would help in mapping our energy development agenda and serve to prioritize our initiatives, including R&D and training.”

Leaders in the oil, gas, pipeline, energy retail and electricity industries – and especially those involved in the high-stakes oil sands sector – came together at an annual meeting of Canadian and European CEOs to call on Ottawa to deliver regulations, infrastructure investments and immigration and education policies.

While such federal roles have been actively opposed in the recent past, the CEOs now believe that only a strong federal role will ease the cost burdens faced by the companies and the uncertainties faced by their shareholders, and also overcome the patchwork of provincial and federal laws with a unified national program.

“Neither Canada nor the USA seems to have any national policy on energy,” said Deryk King, the CEO of the energy retailer Direct Energy (a division of Britain-based Centrica PLC). “We have a need for a national energy policy with federal-provincial co-operation.”

Exploration firms have complained that some of their oil sands initiatives are stalled because Ottawa has failed to put a price on future carbon emissions. Without either a carbon-trading system, as the European Union has attempted to develop, or a carbon-tax regime, they have no way of knowing the full cost of proposed projects.

Since oil sands extraction produces enormous amounts of CO{-2}, this is a major hindrance.

“The first thing we can do is find out what that number is, and therefore what volume of carbon we can effectively sequester and put away,” said William Roach, CEO of the emerging oil sands firm UTS Energy Corp. “Only then can we look at the commercial proposition.”

While the CEOs were divided on the precise response to global warming policy, they were united in their call for a federal push for vastly increased immigration of both skilled and unskilled workers.

“It's very difficult to get the people we need to get the jobs done. The McDonald's franchise in Fort McMurray has been offering $3,000 signing bonuses to get kids to come sling hamburgers – that tells you how competitive it is to get people … we need new immigrants in this country in order to address the shortfall that we've got in the work force. Canada's a very attractive place for people to come, but we don't do a very good job attracting people, in my view.”

More federal money for education for oil workers is another key demand.

Several of the oil firms are spending large sums funding trade schools in their operating areas, but still are short of skilled workers.

Mainly, though, they said Canada needs a larger population.

“For 50 years, we've had the whole government apparatus designed to create employment. Well, now we don't lack for employment, we lack for people to do the jobs,” said Steve Snyder, CEO of the electrical generation firm TransAlta Corp. “We actually need a department now to create people. We don't lack jobs in Canada, we lack people. We've got 30-year civil servants who've spent their whole lives saying ‘how do I create a job?' And now they should be asking ‘how do I create a skilled worker?' – and, quite frankly, an unskilled worker.”

The executives also called for more federal involvement in infrastructure, especially in the development of supplies of water, which is a vital resource in oil sands extraction.

Take Action on Climate Change by Sept 20!

On June 26, 2007, the Kyoto Protocol Implementation Act became law. Simply put, this law requires the federal government to meet Canada's Kyoto target, first by producing a plan to honour Canada's obligations under the Kyoto Protocol and then by putting that plan into effect through regulations and other measures. The federal government has opposed this bill from the beginning, voting against it at every stage in Parliament.

Under the terms of the law, the government had 60 days to produce a plan to meet Kyoto. The result, quietly released on August 21, is a document entitled “A Climate Change Plan for the Purposes of the Kyoto Protocol Implementation Act 2007”

Sadly, this 37 page report merely re-iterates the flawed proposal the government announced in April - a proposal that would not reach Canada's 2008-2012 Kyoto target until sometime after 2020. The government is required to produce a plan to honour Canada's Kyoto obligations. It didn't even try.

You can do something about the government's inaction

A number of environmental organizations plan to ask the federal courts to rule that the government has failed to comply with the law. The courts have the power to order the federal government to live up to the requirements of the Kyoto Protocol Implementation Act.

In the meantime, you can help a great deal. The courts often take note of the level of public concern for an issue in their consideration of environmental cases.

Climate Action Network Canada - Reseau action climat Canada has made it quick and easy for you to file your comments. You can complete CAN Canada's form (start by entering your name below) and the government will receive a copy of our sample letter with your name on it. If you prefer, you can customize the letter to make your own particular points.

Please take action as soon as possible. The deadline for public comments is September 20, 2007.

Learn more and then click here to fill in the form at Take Real Action.

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Environmentalists file lawsuit over Kyoto law

Mike De Souza
National Post
Wednesday, September 19, 2007

OTTAWA -- Environmentalists have recruited a high-profile Toronto business lawyer to take the Harper government to court for allegedly breaking a new law that requires it to honour Canada's international commitments to slash the heat-trapping gases linked to global warming.

The lawsuit challenges Environment Minister John Baird's response to the Kyoto Protocol Implementation Act, a Liberal-sponsored piece of legislation that was adopted in the Commons through the united backing of the three opposition parties. Environmentalists are also seeking a court order to require the minority government to comply with the legislation.

Chris Paliare, who is listed in several guides ranking top Canadian and international lawyers, said he agreed to take on the case for free because he was offended by the attitude of Prime Minister Stephen Harper, who recently touted himself as an environmental champion at a summit of Pacific Rim leaders in Australia.

"I just say it's the height of arrogance and [Harper] has got to answer for it, in my respectful view," said Paliare. On Wednesday, he filed a notice of application in the Federal Court of Canada, along with Ecojustice, a non-profit Canadian environmental law organization, and on behalf of Friends of the Earth Canada.

At issue is the new law that, among other things, obliges the government to table a report detailing how it will honour Canada's international Kyoto obligations to lower, between 2008 and 2012, Canada's greenhouse gas emissions by an average of 6% below 1990 levels.

However, Baird's response was to issue a report saying it is impossible to honour the commitment because emissions are now more more than 30% above that target. Instead, Baird has stuck with his own environmental plan, which calls for Canada to meet its Kyoto Protocol target by around 2025.

"Having looked at [the government plan] carefully, it doesn't come close," Paliare said. "The [law] says the government is required to run a marathon. Mr. Harper and his government haven't even done a five-kilometre run."

While he will work for free, Paliare estimated the case could wind up costing tens of thousands of dollars in court costs, depending on whether the government tries to delay the proceedings. But Friends of the Earth said it will cover the court costs, based on its principles.

"Deadbeat dads are unacceptable in Canadian society," said Friends CEO Beatrice Olivastri. "Non-compliance with this act, and the Kyoto Protocol, is also, we believe, unacceptable."

But Paliare challenged Harper to speed up the proceedings and prove that his concern for the environment is genuine.

"If you say that what you've done complies, we should be able to get into court in a month and do it in one day," he said. "If, in fact, the environment is as important as Mr. Harper says it is, and has said it is in Australia and everywhere else, every day that this isn't being adhered to, is a day, I say, of infamy for this country."

A spokesperson for Baird refused to comment on the specifics of the case, but insisted the government is not breaking the law.

"This government has respected the will of Parliament and out of respect for the law, we will meet the report-filing requirements of Bill C-288, while continuing to push forward with what Canadians want: real and concrete actions to fight climate change," Garry Keller said.

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Alberta Royalties Report Released

COMMENT: Alberta's royalty review report is in and it's saying what we've been saying for a long time: royalties are too low, in the oil sands especially, and it's time to stop the giveaway.

British Columbia's government, for whom all things Albertan are to be emulated, it's also time to rein in the public largesse. Well, it has been for some time, but now that Alberta has this report, BC can mimic new Albertan royalty policy without fear that all the drills in BC will stop overnight.

The sounds you'll be hearing in the next months? That will be the pathetic whining coming from all those Calgary head offices. Plug your ears and grin. It's about time. Don't grin too much though, because whatever increase is applied in the new royalty regimes, it won't be enough.

19-Sep-2007 Update: Have you read the National Post's "Golden Goose" article? Whine, whine, whine. Told you so."

Royalty Review Framework

The independent panel asked to review Alberta's royalty and tax regime delivered its final report and recommendations to the Government of Alberta on September 18, 2007.

Alberta Royalty Review

News release (September 18, 2007)

Royalty Review Panel Final Report

* Sensitivity Analysis Appendix
* Data Appendix

Royalty Review Panel final report released to public
News Release, Province of Alberta, 18-Sep-2007

Alberta royalties report made public today
David Ebner, Globe and Mail, 18-Sep-2007

Royalties hit would kill 'golden goose'
Claudia Cattaneo and Jon Harding, National Post, 19-Sep-2007

Energy stocks plunge after call to raise royalties
David Ebner and Norval Scott, Globe and Mail, 19-Sep-2007

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Royalty Review Panel final report released to public

Government to respond by mid-October

News Release
Province of Alberta
September 18, 2007

EDMONTON - The Government of Alberta has publicly released the final report of an expert panel asked to examine the province’s energy royalty and tax regime, following through on a commitment to make the royalty review process open and transparent.

Entitled Our Fair Share, the 104-page report provides recommendations about how the government can modify the existing provincial royalty structure.

“Albertans made it clear that examining the province’s royalty regime was a priority to ensure they are receiving their fair share from energy resource development,” said Premier Ed Stelmach. “Albertans, as owners of the resource, now have the opportunity to examine the details of this report as government thoroughly reviews the recommendations.”

The government will provide a formal response to the report by mid-October.

The royalty review process began in February with the appointment of a six-member panel by Dr. Lyle Oberg, Minister of Finance. Chaired by Bill Hunter, former president of Al-Pac with more than 30 years experience in the natural resource sector, the panel included experts in resource taxation and the royalty system. Members of the panel included Evan Chrapko, Judith Dwarkin, Kenneth McKenzie, Andre Plourde and Sam Spanglet.

As part of the review, the panel hosted a series of five public meetings across the province and accepted over 300 submissions from Alberta residents, municipal leaders, and stakeholders in the oil and gas industry.

“Thanks to the panel’s hard work over the past eight months, government has a thorough report and valuable information to consider when making a final decision,” said Oberg. “Our goal is to ensure the royalty framework strikes the right balance, providing Albertans with a fair return while maintaining an internationally competitive system that allows the provincial economy to continue to prosper.”

The complete report and recommendations are available on the Government of Alberta website at www.finance.gov.ab.ca.

This News release (September 18, 2007)

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Alberta royalties report made public today

DAVID EBNER
Globe and Mail
September 18, 2007

Alberta's government is today publishing a report it commissioned earlier this year on royalties, taxes and other levies paid by oil and natural gas producers. The report is authored by a public panel that toured the province, seeking out views of citizens and industry. The key issue is whether the province is getting its fair share from the oil sands. A final decision on what to do with the report will come in several weeks, the government has said, and the publication has been described as most important economic report in a generation for the province

Alberta should hike oil sands royalties

KATHERINE HARDING AND DAVID EBNER
Globe and Mail
September 18, 2007

Edmonton — Albertans are not receiving “their fair share” from the province's energy industry and the government must significantly hike royalties in the oil sands, according to a much-anticipated report released Tuesday afternoon.

“Albertans do not receive their fair share from energy development and they have not, in fact, been receiving their fair share for some time,” said Bill Hunter, chair of the six-person expert panel that wrote the surprisingly blunt report that investigated whether the debt-free province was receiving adequate oil and natural gas revenues.

The panel found that the government's royalty tax take “ranks very low” against competing jurisdictions, especially in the oil sands arena. It recommended that royalties and taxes be raised by around $2-billion a year, a 20 per cent increase.

In recent weeks, various warnings have been issued from oil patch executives against the provincial government tinkering with the royalty restructure, which hasn't been updated since the mid-1990's.

The Progressive Conservative government is expected to provide a formal response to the 104-page report by mid-October. In 2006-07, Alberta collected $10-billion in energy royalties.

“Albertans made it clear that examining the province's royalty regime was a priority to ensure they are receiving their fair share from energy resource development,” said Premier Ed Stelmach. “Albertans, as owners of the resource, now have the opportunity to examine the details of this report as government thoroughly reviews the recommendations.”

The royalty review process started in February when Mr. Stelmach's government appointed the panel, which included experts in resource taxation and the royalty system. The panel held five public meetings across the province and received 300 submissions.

The panel concluded that it's fair to hike royalties for oil sands projects because the area is a “production powerhouse.” It is also recommending businesses operating in the oil sands pay a new tax.

It rejected essential industry arguments that higher costs, which have plagued all oil sands projects, are a reason to keep royalties the same.

Mr. Hunter has urged the government against grand-fathering in any hikes “on the grounds of fair treatment for all participants.”

The panel has asked the government not to increase more than half of convention oil and gas royalties on the grounds that this sector of the industry is on the decline.

Mr. Hunter said that during the review process, the panel found the province's royalty regime was complex and “almost impossible to follow.” The panel also discovered that government bureaucrats couldn't answer many questions because “useful information is not adequately collected in the first place.”

The panel is recommending in the “strongest possible terms” an accountability package that forces both industry and government to regularly publish data about the energy industry.

Mr. Hunter estimated that the Alberta government has been missing out on more than $1-billion annually from royalties they were entitled to.

The report is being released at a time when the Progressive Conservatives and its new leader, Mr. Stelmach, are struggling in the public opinion polls.

Political observers are closely watching how the 36-year-old government handles this delicate file.

Faron Ellis, political scientist at Lethbridge College, said it's unlikely that Mr. Stelmach will do anything dramatic because it's not his political style. “He does his homework. He's not Ralph Klein…The ‘Steady Eddie' approach demonstrates that he has no intention of being Ralph Klein.”

Prof. Ellis also said he hasn't seen a huge public appetite in Alberta to dramatically reform the royalty regime to get a lot more money from the oil patch.

Alberta Liberal Leader Kevin Taft disagrees.

“There's a genuine interest at street level amongst citizens about this issue,” he said in an interview. “There's a mood out there as the owners of the resource that they aren't getting a fair share.” The Liberals want the government to collect up to 25 per cent of total value in royalties.

He said this is a “big issue” for Alberta and a major moment for the Stelmach government, which has “struggled to be decisive on virtually everything it has faced.

“It's very, very important for the government to handle this one effectively,” Mr. Taft said. “It's much more important to them than us in a way. You've seen their [polling] numbers.”

A quick look at Alberta's current energy royalty system:

History: Concept of royalties dates back centuries. They are a way for the owner of a resource to exact a payment from the person developing that resource. What the specific rate should be is the tricky part.

Government Revenues: Energy sector paid Alberta government about $10-billion in royalties in fiscal 2005-06, not including lease sales. Industry says royalty-related revenues account for 40 per cent of total provincial revenues.

Lease sales: Companies bid against competitors for right to explore and develop oil and gas on parcels of land. These fees, paid whether energy reserves are found or not, generated a further $2.4-billion in provincial revenues last year.

Provincial royalty goal: Fluctuated over the years, but currently sits between 20-25 per cent of total energy industry revenues. Critics charge current take is below 20 per cent and far less than other producing jurisdictions, including Texas and Norway.

Conventional oil and gas: Production-based royalty paid on a sliding scale based on price and productivity per well. Formula enables government to get a higher take if well is more prolific than expected or if price rises significantly. Industry says producers are left to shoulder any unexpected higher costs.

Oilsands: Companies pay just 1 per cent of gross revenues until all project construction costs are recouped, then the rate climbs to 25 per cent of revenues, minus costs. Industry says that when federal and provincial income taxes added, the share of revenues between government and industry is close to 50-50.

Other provinces: In Saskatchewan, oil and gas royalties and taxes are forecast to top more than $1.2-billion, or about 17 per cent of total provincial revenues. Like Alberta, royalties are collected on a sliding scale based on the age of the wells, quality of oil, etc. In Newfoundland, royalty rates differ on the three producing offshore oil projects. The province also recently announced small equity stakes in the latest offshore project, Hebron, as well as the White Rose expansion.

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Royalties hit would kill 'golden goose'

Claudia Cattaneo and Jon Harding
National Post
Wednesday, September 19, 2007

CALGARY • Debate raged inside and outside Alberta yesterday over how to divide fairly the spoils from the province's envied oilsands deposits following a government-appointed panel's recommendation that would see oil companies slapped with another $2-billion annually in taxes and royalties.

"Do they really wish to kill this golden goose with one fell swing of the tax axe?" said economist Dennis Gartman, editor of the Gartman Letter, an influential investment newsletter based in Virginia, who was "shedding tears" about Alberta going "socialist" and wondering whether the provincial government has "gone mad."

"We want out of all things Canadian, and we want so immediately. We can return at a later date, when these proposals are turned down by the legislature involved. Until then, discretion is the far, far better part of valour. Goodbye Canada; it was fun while it lasted."

Even former Alberta premier Ralph Klein emerged from retirement to voice a strong opinion against radical changes, saying he fears for the industry that directly or indirectly employs one in three people in the province.

"There is one thing for sure, we have had a fair and clear and comprehensive royalty regime where the rules are the same for everyone," said Mr. Klein, who helped raise the oilsands' profile globally to attract investment and was one of the architects of the current oilsands royalty regime.

"It was a regime created by industry and government. Those kinds of rules don't change on a whim. Companies are nervous."

But reflecting the other camp in what has become a heated debate in Canada's most business-friendly province, Calgarian John Zalischuk said he doubts oil companies will abandon ship.

"People living in the real world know that this is not going to happen," he said in an e-mail.
"If there is any energy company that does not like the new rules, they can leave and they will be replaced by someone else. They can always go back to Venezuela, Russia, Kazakhstan or Africa and try to negotiate a better deal," Mr. Zalischuk said.

Meanwhile, a major lobbying effort has begun to influence Premier Ed Stelmach, a novice who is seen as being naïve for having triggered so much acrimony and is expected to pay a political price regardless of which way he leans.

The six-member panel, headed by retired forestry executive Bill Hunter, said in its 104-page report released Tuesday that Albertans aren't getting a fair share of the province's oil wealth and urged a 20% increase to the billions the debt-free government already collects.

The recommendations, while still under consideration by the province, sank oilsands stocks across the board, even as oil prices touched a new record high of US$82.51 per barrel.

J.P. Veitch, an institutional broker at Westwind Partners, Inc. in Calgary, said he has been inundated with calls from clients in Canada and the U.S. "livid with this report and the subsequent uncertainty."

A litany of Canadian investment banks also pulled no punches in their assessment of the proposals in the Our Fair Share report.

FirstEnergy Capital Corp. warned the proposed measures, in a report entitled "Albertastan? Misguided Intentions and the Fair Share Option," would be "negative if adopted, and will slow down the development of oilsands."

BMO Capital Markets called its report: "Assassinating the Goose?" and predicted a negative impact on oil and gas share values. Peters & Co. said "the changes proposed by the panel are incredibly harsh."

Tim Hearn, CEO of Imperial Oil Ltd., Canada's largest oil company, said the panel failed to take into account the cumulative impact of policy changes in the past year that have added costs. Meanwhile, industry costs are soaring and the high Canadian dollar has cut the value of a Canadian oil barrel by a third.

"It's very important that whatever we come up with we end up with a vibrant and competitive industry, not end up doing something that we will all collectively regret," he said in Toronto.

Glen Schmidt, CEO of oilsands startup Laricina Energy Ltd., warned the panel "seems only to have identified the maximum possible tax grab to push the sector to the edge."

The Alberta government said it would have a formal response next month, stirring concerns that the province's oil-dependent economy will be on edge until the dust settles.

The report's key recommendations are that the total government take - taxes and royalties - from oilsands projects increase to 64%, from the current 47% and that the new rules apply to projects across the board, including industry pioneers Suncor Energy Inc. and Syncrude Canada Ltd. that have Crown agreements that lapse in 2015. The report acknowledges that scrapping such agreements could give those developers grounds for lawsuits.

The panel believes Alberta should jump on the global trend of demanding a greater share from its oil wealth and argues that many of the world's producing countries that did so got away with it without seeing an exodus of investment, with Venezuela being the only exception.

"Newfoundland's recent 5% and 10% buy-in deals are a very current Canadian example," the report said.

It also recommends a 5% increase in government charges for conventional oil and gas projects, with higher producing wells bearing the brunt of the increase, while low producers would get a break.

"Adopting this report, the Alberta government slams the door on any growth of conventional gas," said George Gosbee, chairman of Tristone Capital Inc. "I guarantee you would never see the production high of 17 billion cubic feet a day that we reached in 2000 ever again in our lifetime."

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Energy stocks plunge after call to raise royalties

DAVID EBNER AND NORVAL SCOTT
Globe and Mail
September 19, 2007

CALGARY — Investors hammered oil sands stocks Wednesday, fearing the sector could be hurt if Alberta raises royalties following a landmark report that at once infuriated and befuddled the oil patch.

The report issued Wednesday by an expert review panel concluded that the provincial government should raise royalties and taxes on oil sands production significantly, adding that Alberta would remain competitive even with higher rates. The government has said it will decide what to do about the panel's recommendations by mid-October, leaving most oil producers unable to respond definitively.

The report, which also advocated higher rates on some conventional oil and natural gas wells, proposed that no projects be grandfathered, meaning every energy company operating in Alberta could be affected.

Investors reacted to the royalties report swiftly, driving the Toronto Stock Exchange energy index down 2.7 per cent, compared with 0.5-per-cent slide for the general market. There was a flurry of negative reports from brokerages and an opinion issued by Dennis Gartman, the popular stock newsletter writer, was circulated widely among traders and hedge funds.

“We may be premature and we may be responding too swiftly … we want out of all things Canadian and we want so immediately,” Mr. Gartman wrote in a midday assessment. “We are shocked, aghast, disturbed, disappointed … and we could go on.”

Oil sands stocks were particularly hard hit, with Suncor Energy Inc. down 4.5 per cent and Canadian Natural Resources Ltd. 5.9 per cent lower. Junior oil sands firms such as Synenco Energy Inc. fell further, down 15 per cent.

Conventional producers that could face higher royalties also were hurt, with names such as Highpine Oil & Gas Ltd. down 6.2 per cent.

The report, if implemented, could cut the average net asset value of large oil sands players by about 4 per cent, according to UBS Securities Canada Inc. Alberta's royalty report called for Alberta's total share of oil sands profits, including taxes and the like, to rise to 64 per cent from a current 47 per cent.

Tim Hearn, chief executive officer of top oil sands producer Imperial Oil Ltd., said any additional royalties would harm companies already facing sky-high labour and construction costs for their projects.

“I'm not in a position today to say whether we've reached a tipping point or not because I can't tell you,” Mr. Hearn said. “But there's enough things working against us that if all this stays in place as is, there will be an effect in the industry, clearly.”

A former oil executive who was on the review panel lashed back at energy executives, saying they should concentrate on better managing their own businesses and contain cost increases rather than “whining” about higher royalties.

“I don't have any sympathies,” said Sam Spanglet, who ran Shell Canada Ltd.'s oil sands operation before retiring several years ago.

“[Alberta is] still going to be very competitive. I feel very confident.”

Some Calgarians were angry, with one broker e-mailing his clients with the subject line: “Caracas on the Bow River,” comparing Alberta with Venezuela and its socialist President Hugo Chavez, who expropriated oil assets this year.

“If [the report is] enacted, investment decisions will be impacted … [the report] reads a bit like a Chavez-style manifesto,” Steve Larke, a Peters & Co. Ltd. broker, said in the e-mail.

Premier Ed Stelmach wasn't shaken by the market's response.

“It wasn't any more than what many had predicted,” he told reporters in Calgary.

Some oil sands companies said they could deal with the proposals.

Marathon Oil Corp. of Houston, which is buying Western Oil Sands Inc. for $5.8-billion, said the proposed increases would not deter its takeover, though it did say the pace of future investment might be affected.

“We were of course aware of the actions being taken on royalties,” said Marathon spokesman Paul Weeditz. “It was one of the points we factored into our analysis of acquiring Western, and we are moving forward on the acquisition.”

With the government's course of action unknown, many executives in Calgary were hesitant to speak on the record.

A senior executive for a company developing a major oil sands project, speaking on the condition of anonymity, said the proposed new rates “aren't going to help us, that's for sure.”

But he admitted that the changes likely wouldn't prevent his firm's development from being built, saying that the project should still prove profitable even with higher royalties, and that it was “very unlikely” that his firm would shelve its oil sands plans, given the lack of similar opportunities elsewhere in the world.

The Canadian Association of Petroleum Producers said it is still trying to figure out what the report exactly means and considers the document a step in a discussion process rather than the final answer.

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Montana accuses B.C. of breaking green pact

BAUCUS TO BP EXECS: HALT COALBED METHANE PLANS
Press Release, Max Baucus, 10-Sep-2007

Montana accuses B.C. of breaking green pact

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Montana accuses B.C. of breaking green pact

Governor, senators decry coal projects

DON WHITELEY
Globe and Mail
September 14, 2007

VANCOUVER — Montana Governor Brian Schweitzer is accusing Premier Gordon Campbell of breaching a four-year-old pact to protect environmentally sensitive areas that straddle the border.

Mr. Schweitzer, in a three-page letter sent Aug. 22, says the province's decision to allow two projects - a coal mine and a coal bed methane development - to proceed through the early stages of permission is of "continued concern" to the state and a breach of the 2003 Environmental Cooperation Arrangement between Montana and British Columbia.

"Since the signing of the Environmental Cooperation Arrangement there have been five separate proposals for exploratory and industrial fossil fuel development in the British Columbia Flathead," the letter states. "I believe the intent [of the arrangement] is not being met and the proposed fossil fuel developments over the past five years run contrary to the language of the arrangement ..."

The governor's letter - combined with combative language on Monday from Montana's two U.S. senators, Max Baucus and Jon Tester - points to an escalation of the cross-border war of words over potential resource development in southeastern B.C.

"I've been fighting to protect water quality and wildlife in the Flathead Valley for 30 years," Mr. Baucus says in a news release posted on his website. "I'm not about to give up now. We're going to do whatever it takes to stop energy development north of our border. We're pulling out all the stops. The gloves are off."

Montana's concerns over the two current projects - BP Canada Energy Company's coal bed methane project and Sudbury-based Cline Mining Corporation's proposed coal mine - revolve around potential impacts on water quality in the Flathead River, which flows south from British Columbia into Montana along the western boundary of Glacier National Park.

Mr. Schweitzer makes it clear in his letter that British Columbia's environmental review process does not adequately deal with Montana's concerns, and that discussions between the two jurisdictions have not yet resolved the differences.

Mr. Schweitzer takes the province to task for encouraging the coal bed methane project: "It is my understanding that British Columbia solicited bids for the development of this resource. Once again, I ask that British Columbia honour the intent of the 2003 arrangement."

He also points out that none of the resource proposals now under consideration in B.C. would be allowed in the Montana portion of the Flathead River.

"South of the 49th parallel, the Flathead watershed is one of the most protected ecosystems in the continental United States," his letter states.

However, elsewhere in the state, Mr. Schweitzer is actively promoting the development of coal-liquefaction plants, coal-fired generating stations and coal bed methane projects.

B.C. government officials in the past have refused to rule out resource development, and argue that the province's environmental-review processes provide an appropriate level of scrutiny. For the Cline proposal, Montana officials have been invited to participate in the process.

Mike Morton, press secretary to Mr. Campbell, confirmed that Mr. Schweitzer's letter had been received, and that a reply would be made by the end of this week.

He declined any further comment.

Meanwhile, senators Baucus and Tester last Monday threatened to give BP Canada a major battle if it proceeds with its Canadian plans.

The two senators met separately in Montana with BP America president Bob Malone and BP Canada president Randy McLeod.

In a press release posted on his website after the meeting, Mr. Baucus said the company can expect "a massive and unpleasant fight from Montana that will end badly" should BP seek permits for its Mist Mountain coal bed methane project in British Columbia.

The two senators timed their meetings and subsequent comments to coincide with September celebrations marking the 75th anniversary of the establishment of the U.S.-Canada International Peace Park, comprising Waterton Lakes National Park in Alberta and Glacier National Park in Montana.

Anita Perry, BP Canada's vice-president of government and public affairs, said the meetings on Monday, which she described as open and direct, were at the request of the two senators.

Mr. Schweitzer and the two senators, with some help from U.S. Secretary of State Condoleezza Rice, persuaded Ottawa to launch its own environmental review of the Cline coal mine proposal through the Canadian Environmental Assessment Agency.

In an effort to kick-start further dialogue between B.C. and Montana, Mr. Schweitzer proposes at the end of his letter that the two jurisdictions co-sponsor a government-to-government summit in mid-December, in Kalispell, Mont.

Special to The Globe and Mail

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BAUCUS TO BP EXECS: HALT COALBED METHANE PLANS

Senator Tells Energy Chiefs To Expect Fight; Wants Public Meetings in Kalispell

Max Baucus
United States Senator from Montana
September 10, 2007

(Washington, D.C.) – The British Petroleum Company can expect “a knock-down, drag-out fight” if it advances a proposal to tap coalbed methane seems in the Canadian Flathead, Montana’s senior U.S. Senator Max Baucus said today.

Baucus issued the warning during a face-to-face meeting in his Washington, D.C., office with BP America Chairman and President Bob Malone and BP Canada chief Randy McLeod.

Baucus said BP can expect “a massive and unpleasant fight from Montana that will end badly” for the company should it file an exploratory permit for its Mist Mountain coalbed methane extraction project in British Columbia -- near North Fork of the Flathead River, which borders Glacier National Park and runs into Montana’s Flathead Lake.

Baucus, who successfully blocked a coal mining project in the same area in 1988, says coalbed methane development there could have devastating consequences to fish, wildlife, and the recreation industry downstream in Montana.

“I’ve been fighting to protect water quality and wildlife in the Flathead Valley for 30 years,” Baucus said after the meeting. “I’m not about to give up now. We’re going to do whatever it takes to stop energy development north of our border. We’re pulling out all the stops. The gloves are off.”

Baucus also asked the company to conduct public meetings in Kalispell as soon as possible to allow Montanans to weigh in on the proposal.

The most significant byproduct of coalbed methane extraction is wastewater that can contain high levels of harmful contaminants such as barium, copper, iron, and ammonium. Canada has no law requiring that coalbed methane wastewater be re-injected back into the ground. Even so, the Flathead Lake Biological Station in Montana says that re-injection would be technically impossible given the hydrology and rugged terrain in the region.

BP is expected to file for an exploratory permit to dig test wells in what’s called the Crowsnest Coal Field, an area that spans 190 square miles, covering much of the B.C. portions of the North Fork of the Flathead as well as the adjacent Elk River Valley, which drains into Lake Koocanusa near Libby.

At the same time he’s fighting the BP proposal, Baucus is also working to stop a separate coal mining project proposed by the Cline Mining Co., in the same area.

“Some places should be off limits,” Baucus said. “It’s that simple. Some places are too important to hunting, fishing, and outdoor recreation.”

Baucus is also making good on his promise to secure dollars to gauge the environmental threats posed by energy development in the Canadian Flathead. He’s working with Sen. Jon Tester to shepherd $1.25 million through Congress to collect baseline environmental data in the area.

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Senator Baucus Press Release

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EUB's private eyes ruled illegal

EUB's private eyes ruled illegal
Geoffrey Scotton, Calgary Herald, 13-Sep-2007

Alberta's spy games
Editorial, Globe and Mail, 17-Sep-2007

Knight fumbles on EUB stage
Graham Thomson, The Edmonton Journal, 18-Sep-2007

See also And then there were six!
http://www.sqwalk.com/blog2007/001079.html

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EUB's private eyes ruled illegal

Geoffrey Scotton
Calgary Herald
September 13, 2007

Frank Work
CREDIT: Herald Archive Photo

Alberta Premier Ed Stelmach would not rule out firing the Energy and Utilities Board, after a damning report was issued today finding the organization had violated provincial law when it hired private eyes to spy on them at EUB hearings.

Stelmach said he will wait until next week for the results of a judicial review of the matter - ordered by the government - before he takes any action. But the premier did not rule out firing the EUB's board.

"The minsiter will brief me on the findings. And I've instructed him once we're totally briefed a full picure of what has happened then we'll make the appropriate decision," Stelmach told reporters in Edmonton.

"We will be making decisions based on what the judge has said and also what our privacy commissioner has brought forward."

Alberta's Privacy Commissioner Frank Work Thursday ruled the Energy and Utilities Board had violated provincial law when it hired private eyes to spy on them at hearings. A citizens' group is fighting to stop a $600-million transmission project from going through their backyards,

Joe Anglin, co-chair of the Lavesta Area Group of landowners in the Rimbey, Alberta area said the report didn't go far enough to expose the EUB's actions in what he described as a "fabricated security threat" used to rationalize the hiring of undercover operatives to monitor opponents to a project at a hearing the EUB was adjudicating.

"(We) are disappointed in the report due to the amount of inaccurate information conveyed to the investigators about what Lavesta maintains is a fabricated security threat," said Anglin. "There was no security threat to any person or persons. We acknowledge that one elderly lady was emotionally distraught and at no time was she a threat in any way to EUB personnel. "

Work's report, completed by Privacy director Marilyn Mun, found the EUB had violated provincial legislation by collecting information on the landowners it was not authorized to collect, that the EUB had no policies or rules around its use of PIs and that their roles and expectations were not set by the regulator.

At the time the breach of the Freedom of Information and Protection of Privacy Act occured the EUB was holding hearings in Rimbey to determine whether a proposal by Alta Link LP to build a 500 kilovolt transmission line was appropriate and in the public interest.

The landowners have opposed the line, charging that it is ultimately designed to facilitate the export of power to the United States and represents a $1 billion gift to Alberta's generating industry on the backs of provincial taxpayers and ratepayers.

The Rimbey hearings were the second stage in a regulatory process that saw the EUB compeled to revisit its first decision on the proposal, a needs assessment that was reopened after the regulator conceded consultation with some interested parties had not been as fulsome as possible.

The EUB said it will adopt the recommendations from Work's report and defended it actions as necessary in the face of violence at some hearing locales.

"We take these recommendations very seriously and the EUB has already taken steps to ensure that similar situations never happen again," said acting EUB chairman Brad McManus.

"It is important that Albertans understand that the security measures at Rimbey were taken solely because of serious incidents where our staff were physically attacked and other threats and actions led to an atmosphere of intimidation at the hearing," McManus added.

with files from Tony Seskus

gscotton@theherald.canwest.com

© 2007 Calgary Herald

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Alberta's spy games

Editorial
Globe and Mail
September 17, 2007

Alberta's Conservative government initially shrugged off reports that its energy regulator had illegally spied on private citizens - until its privacy commissioner launched an investigation. Then Premier Ed Stelmach belatedly ordered an independent probe of the regulator's decision to hire private detectives who gathered personal information on individuals who objected to a proposed power transmission line. Now, although Privacy Commissioner Frank Work has issued a stern report criticizing the Alberta Energy and Utilities Board's behaviour, Mr. Stelmach has delayed his response until that second inquiry also reports, perhaps as early as this week.

That delay may be justified, as long as the Premier acts quickly after its publication to discipline the offenders and prevent such zealous prying in the future. But so far, his government's response to this remarkable three-month scandal has been lackadaisical and far from reassuring. In fact, Mr. Stelmach initially claimed the utility's tactics to infiltrate the landowners were necessary to prevent violence; his energy minister essentially declared that he had settled the issue after a frank discussion with the regulator's chairman.

The trouble began when landowners at public hearings in Red Deer into a proposed 500-kilovolt line between Calgary and Edmonton disrupted the proceedings, demanding the utility broaden the scope of its examination. One 70-year-old woman took an ineffective swing at an employee. Emotions ran high. Another landowner threatened violence at future hearings.

In response, the utility moved its hearings to a provincial courthouse in Rimbey, where admittance was restricted. At the courthouse were two sheriffs, including one at the front door, and two security staffers from the utility. The landowners were restricted to a nearby community centre where they watched the proceedings on closed-circuit television. Sheriffs escorted panel members outside the courthouse. Still, the utility opted to put private investigators in the centre rather than settle for a visible security presence.

The issue emerged in mid-June when the Edmonton Journal reported that the utility board had hired detectives to spy on those landowners. As the privacy commission confirmed last week, detectives gathered the names of some individuals, their organizational affiliation, their contact information and personal descriptions. One of those detectives later participated in at least one conference call between aggrieved landowners and their Toronto lawyer. He also collected documents related to a seminar on peaceful protest and a planned press release from landowners' groups, including more personal information.

The Privacy Commissioner's report rejected the necessity for that action, concluding that this was not an occasion where private investigators were required for safety. Visible security personnel could have maintained order. The utility did not need to collect personal information in order to provide a safe environment. Finally, the commission determined that the regulator failed to meet its legal obligation to protect that personal information because there were no safeguards against such risks as unauthorized access.

Those are serious findings that required more than the government's initial apathy. The regulator, in effect, has collected information on landowners who object to an application that it is considering. That prompts questions about the impartiality of those hearings. Worse, it casts doubt on the judgment of the Premier and his energy minister. When a public body is hiring private detectives to spy on the citizens that it is supposed to serve, something is very wrong.

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Knight fumbles on EUB stage

Energy minister fails to clearly say who will be held responsible for spy scandal

Graham Thomson
The Edmonton Journal
Tuesday, September 18, 2007

Energy Minister Mel Knight did two things exceptionally well in his news conference at the legislature on Monday afternoon: he arrived on time and he didn't fall off the stage.

He did everything else remarkably badly.

At times Knight looked like he didn't know how to answer questions or was doing his best to avoid them. Sometimes he grew so testy with reporters it looked like he wanted to kick them. I suspect the reason he didn't was because at any given time he had a least one foot stuck firmly in his mouth.

Monday was supposed to be the day the Alberta government would demonstrate leadership on the EUB spying controversy that has plagued the government since news broke in June the Alberta Energy and Utilities Board hired a private investigator who had spied on landowners.

For weeks, the government has been hinting it was about to take decisive action to recover the EUB's reputation that has sunk so low you'd need a drilling rig to find it.

Instead, we had a minister of energy doing his best to downplay the biggest scandal to hit the government since Ed Stelmach became premier.

Helping Knight were two anemic reports into the EUB's activities: one by the province's privacy commissioner's officer; the other by a retired judge.

However, even though both were hampered by mandates which limited the scope of the investigations, the commissioner's report concluded the EUB had broken privacy laws and former Justice Del Perras said "the idea of an approved EUB security personnel listening in to landowners' phone conferences is repulsive."

The opposition parties have demanded the government fire the board members, remove Knight from cabinet and launch a public inquiry.

The government has done none of that. Instead, it has appointed a new chair of the EUB, William Tilleman.

When reporters asked Knight how that would restore Albertans' confidence in the board, he sounded impatient and defensive and maybe a little scattered.

"Do you think that appointing a new chair of Alberta's very, very long-standing and illustrious board, I might say they have been over many, many years from 1938, count them, 70 years' worth, and I have gone out today and appointed a new chair," he said.

It's not as if Knight fired anyone to make way for a new chairman. Knight had to appoint a new chair because the position has been vacant since March, long before this scandal broke.

When reporters pushed the minister over who would take the blame for the EUB's activities, he seemed to say Tilleman would be taking strong steps, including launching another investigation.

"There is a process that will take place, Dr. Tilleman will investigate and will take the necessary action at the appropriate time."

Investigate? Reporters pounced on the word and asked Knight to explain. Knight immediately backtracked.

"I better not say that it says that he should investigate, but part of his job will most certainly be to be sure that the functioning of the EUB is appropriate."

Confused reporters wondered what Tilleman's mandate would be and whether he would fire anyone at the board.

[comment by jess: if reporters are confused, imagine how landowners feel!]

"There are absolutely no options forward at this point in time, nothing's out of the question, and nothing to address that particular point has been done at this time," said Knight.

In other words, after promising "definitive action" on the EUB file, we still don't know what will be done.

Confused reporters quickly became frustrated reporters as they pushed Knight to explain who would be accepting responsibility for the EUB's behaviour. Knight did acknowledge the "use of plainclothes security by the EUB was wrong and unnecessary" and said the board's reputation had been damaged -- but he refused to say who he thought was to blame. He also said because the board is a quasi-judicial body he has "no mandate to go in there and start cleaning house."

If he doesn't clean house, who will? Tilleman, presumably, but there's no guarantee anything will be done.

Opposition politicians say the government is ultimately responsible for what happened at the EUB and heads must roll.

Don't count on anyone erecting a guillotine any time soon. Knight made a point of loyally defending the EUB on Monday and there's a strong sense coming from the government that it won't cave in to pressure to take a knife to the board to silence critics.

However, by falling back on the tired refrain it is following a seemingly never ending "process" the Stelmach government is reinforcing the impression it cannot make any tough decisions or take definitive action.

Watching Mel Knight's performance it is difficult to believe the Conservatives have managed to hang on to power for so long. Today, the Tories will eclipse the old Social Credit record to become the longest serving government in Alberta history -- 36 years and eight days ... and counting.

You have to wonder if they'll be counting much longer with the kind of performance we saw on Monday.

gthomson@thejournal.canwest.com

© The Edmonton Journal 2007

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Reactor-maker backs Alberta project

COMMENT: The "mystery buyer" for this project's power has failed to materialize. But, but, less than two weeks, Energy Alberta Corp's CEO stated it had an agreement that is "as solid as it gets." Gotta love the promises.

The scary thing for Canada's taxpayers is that AECL is reaffirming its commitment to a project that doesn't have a customer.

See Firm to build $6.2B nuclear plant in Alberta and our comments about Mary Poppins Umbrella:
http://www.sqwalk.com/blog2007/001099.html

Calgary Herald
September 13, 2007

The maker of Canada's Candu nuclear power plants remains committed to a partnership with proponents of a plant in Alberta despite the absence of a buyer for most of the electricity, an official at Atomic Energy of Canada Ltd. said Wednesday.

Energy Alberta Corp., a private firm promoting a $6.2-billion nuclear plant in northern Alberta, said this week that contrary to a previous assertion, it has no agreement with an "offtaker" that would buy 70 per cent of the plant's output.

Government-owned AECL would build the plant in the province's northwest and Energy Alberta would own and operate it.

"It's great. They're moving ahead in the process and (the partnership) is very much together," AECL spokesman Dale Coffin said.

"We knew all along that Energy Alberta has been in discussions with many potential offtakers, but they do not at this point have any firm commitment," he said.

© The Calgary Herald 2007

Royalty review muddle hands Stelmach options

Don Braid
Calgary Herald
September 13, 2007

Before the royalty review panel even reports, its chairman has managed to annoy both the industry and the government, and thoroughly confuse the rest of us.

On Tuesday, and again Wednesday, Bill Hunter said this is a take-it-or-leave-it report. None of it will work unless the whole thing is accepted. This isn't a "Chinese menu" -- no steamed rice on the side.

At the same moment, though, Hunter was asking for a four-day delay in presenting the report, in order to get the numbers right. Huh? This panel is telling everyone it has the answer to royalty rates, but still isn't sure about numbers it used to find the answer?

Is Hunter saying the most important economic report in a generation is already written, but on a foundation of shaky numbers? That's certainly the implication. The timing is also so wildly peculiar that it creates the suspicion something bigger is up.

This week Hunter said the report would be presented to the government on Friday; then he urged the government not to cherry-pick; then he asked for the delay.

Government strategists were immediately terrified they'd be accused of last-minute meddling because of Hunter's insistence that the report be swallowed whole. To avoid this impression, the politicos urged Hunter to explain himself publicly. That's why he and Finance Minister Lyle Oberg held that testy little newser.

Industry players were deeply spooked by the strange delay. Everyone was expecting this report on Friday, including investors in New York, London and points far beyond.

As the tension rises, Premier Ed Stelmach has put out word that he will take total control over the political reaction to the report, as well as the policies that result. Any loose cannons in cabinet or caucus will be unbolted and shoved overboard.

Stelmach does not want a repeat of the housing fiasco, when caucus refused to accept rent controls, a key recommendation of the task force set up to deal with the housing crisis.

The Tories looked weak and uncertain for weeks, even though they ended up spending nearly $400 million on housing.

The stakes in the royalty review are far bigger -- nothing less than Alberta's economic future -- and the political omens are more troubling.

The government could quickly find itself in dangerous conflict with a volunteer citizen panel that consulted people all over the province.

But the premier's handling of this is also a huge opportunity. If he acts wisely and firmly, he can erase his early reputation as a ditherer.

So Stelmach is aiming for what the strategists call a clean kill. He'll make a clear policy decision very quickly -- within a few weeks -- and stick with it.

In a weird way, and surely without guile, Bill Hunter is also giving the government an out. By saying the report should be accepted whole or not at all, the government can say, OK, this is not reasonable, so we choose not at all.

The Tories could then bring in a sensible new royalty policy and put the issue to bed.

Oberg seemed to keep this option open Wednesday when he said the government will make its own decisions. Muttering in private, they've probably already made another decision -- never to create another damned inconvenient advisory panel.

dbraid@shaw.ca

© The Calgary Herald 2007

[commment by jess: you should have heard me howl w laugher when i read the terrified bit ... HA!]

Tories have right to pick over royalty proposals, Oberg says

Archie McLean and Tony Seskus, with files from Jason Fekete and Shaun Polczer, Calgary Herald Calgary Herald

Thursday, September 13, 2007

Despite warnings from the chairman of Alberta's oil and gas royalty review panel that the government shouldn't pluck recommendations from its report, Finance Minister Lyle Oberg said Wednesday that the province may do just that.

"I haven't seen the report, I don't know what's in it and I do reserve the right, as government, to be able to pick and choose," Oberg said in Edmonton.

[? by jess: what if the panel sums up what the people want, but it is opposite to what industry and the govt want?]

The panel's chairman, Bill Hunter, told the Herald this week the report's recommendations shouldn't be treated like a "Chinese menu," with the government picking and choosing which ones it adopts.

He reiterated Wednesday that the landmark report is designed to be taken as a whole and accepting only parts of it may affect the entire thing.

"It's a package," Hunter explained. "The specific outcome we were shooting for is affected by at least a dozen different inputs. If you change one or extract one it has an impact on all the rest, so it doesn't work."

The highly anticipated report will be released on Tuesday, four days later than was originally planned. It's the second time the review has been pushed back; it was originally slated for release in August.

Hunter said the latest delay is simply to make sure the numbers are correct and he brushed aside the suggestion that it was politically motivated.

Premier Ed Stelmach pledged during the PC leadership race to review the province's take from oil and gas extraction, which netted government coffers $12.3 billion last year. The six-person panel was convened early this year.

Political observers see the government's response to the review as a major test of the rookie premier's leadership skills, which were criticized this spring when he refused to implement rent controls as recommended by a housing task force.

Adding to Stelmach's headaches is the fact Newfoundland and Labrador Premier Danny Williams -- who has a reputation for standing up to multinational oil companies -- unveiled this week a new energy regime that will see it take 10 per cent of future oil and gas developments on the East Coast.

"It's an incredible test of his leadership simply because (Stelmach) has to satisfy a lot of different constituencies," said political analyst David Taras of the University of Calgary. "He does have to appear strong."

Taras said the challenge will be to meet public expectations without scaring off investment, something oil executives have warned could happen if royalty changes harm their multibillion-dollar projects.

But the head of Europe's largest oil company, which has a huge stake in the Athabasca oilsands, said while consistency is important it doesn't mean alterations can't be made.

"I don't say consistency of fiscal regimes does not mean you can never change anything -- that's nonsense," Royal Dutch Shell CEO Jeroen van der Veer said in Calgary on Wednesday.

Stelmach said the panel's report would be made public as soon as the government received it, but Oberg added he doesn't know how soon the province will respond to it because he is unaware of its contents.

As for acting on the report, Oberg said he is "leaving the options open," explaining it would have to proceed through caucus and cabinet. "And I can't hazard a guess as to what caucus will or will not accept."

Hunter later said he doubts the government will cherry-pick parts of the report when the outcomes are dependent on it being accepted as a package.

Hunter said he has no concerns "whatsoever" that the panel's desired outcomes could be rejected.

"I'm trying to bring an integrated, holistic package with some very defined recommendations -- not a hell of a lot of them -- and am hoping they'll look at it as an integrated package."

Michael Percy, dean of the University of Alberta's school of business, said tension between such panels and government often happen.

"The panel, and its chair, is doing what you'd expect them to do -- they've spent a lot of time, a lot effort, on this. Government, on the other hand, has been elected to make decisions and . . . they have to make the calls that they think are best."

tseskus@theherald.canwest.com © The Calgary Herald 2007

APEC sidesteps climate change urgency James McNulty, CanWest News Service Published: Thursday, September 13, 2007 As a global-warming fighter, the latest APEC declaration has less power than the peep of a doomed canary heading down a Chinese coal shaft.

The world's four greatest emitters of greenhouse gases -- the United States, China, Russia and Japan -- were among those joining Canada at a summit farrago that ended with calls for a non-binding, no-target "long-term aspirational goal" to slow fossil-fuel carbon growth.

Tellingly, the declaration fails to even mention the Kyoto greenhouse gas reduction pact, which remains unsigned by the U.S. and APEC summit host Australia.

It was absurd, but not unexpected, to hear host Prime Minister John Howard laud the declaration as "highly significant." The Kyoto denier and conservative crony of George W. Bush and Stephen Harper is looking for anything to burnish his environment credentials as he hurtles toward a likely election loss this fall.

Also laughable was the singling out of Canada and Japan for their great work in forging the meaningless APEC aspiration.

Between 1990 and 2004, Japan's greenhouse gas emissions rose 14.8 per cent, while Canada's rose by more than 30 per cent.

In the same period, European Union emissions barely nudged up by 1.6 per cent. Sadly, there were no EU surgeons in Sydney to stitch new backbone into their dreaming APEC cousins.

Team Tory touted Harper as an important broker in promoting the monumental consensus to aspire.

In fact, Harper spent the week falsely pitching Canada, under his watch, as a global leader in the urgent battle to reverse man-made climate change.

This is nonsense. If Harper were a true world leader on climate change, he would have flown to Australia fully endorsing the Kyoto process and announced that his government was about to pass his much-vaunted Clean Air Act.

Instead, the Clean Air Act is dead, abandoned by Harper after it was toughened by the opposition and now one of many bills killed when he prorogued Parliament to bring in a new throne speech.

A year ago, Harper promoted "action for clean air" with the gusto of Rona Ambrose's hairdresser, claiming "Canada's first Clean Air Act will set hard targets to reduce air pollution and bring down (greenhouse gas) emissions."

So much for that promise. Harper is now down to a lame regulatory agenda that will see Canadian greenhouse gas emissions continue to rise.

Harper and Howard weren't the only guilty parties in Sydney.

Chinese President Hu Jintao sternly lectured the rest on their need to meet Kyoto targets, blithely ignoring the fact that his nation -- a Kyoto signatory -- has no targets and is about to overtake the U.S. as the world's worst greenhouse gas emitter.

Collectively, APEC may have agreed to aspire, but its climate-change cup doesn't carry enough seed to feed a coal-mine canary.

James McNulty is a columnist with the Vancouver Province. © The Calgary Herald 2007

Privacy commissioner rules against EUB Private eyes working for board breached privacy of power-line protesters, says report Charles Rusnell, Edmonton Journal Published: 11:06 am EDMONTON - Private investigators working for the Alberta Energy and Utilities Board breached the privacy of power-line protesters in Rimbey by collecting their personal information, says an investigation by the provincial privacy commissioner.

Commissioner Frank Work also found the EUB's response to an assumed security threat was inappropriate, and there was no need to hire the investigators to spy on the public.

"It seems to me that uniformed security personnel would also be able to observe and report any incidents to the EUB security team leader, the RCMP or the community centre proprietor," Work wrote in his decision released today.

"It seems to me that the EUB wanted to ensure that Rimbey proceedings were able to be conducted in an orderly manner, without disruptions from observers and groups, and that panel members, hearing staff and participants would be protected from confrontations. I find the security arrangements that were taken at the Rimbey Court House demonstrate that this objective could be met without the need to collect personal information."

Work rejected the EUB's contention that it needed to collect the personal information for the purpose of carrying out its hearing peacefully. He said he found no evidence to support this EUB's claim that it needed to conduct an ongoing "threat assessment." An earlier threat assessment and the security measures taken at that time were sufficient to protect the panelists, staff and public, he said.

"There was no evidence before me that any staff or hearing participants feared for their safety at the Court House and as stated earlier, the EUB staff based at the Community Centre said they did not feel threatened."

The EUB said in a release that it accepts Work's recommendations.

"We take these recommendations very seriously and the EUB has already taken steps to ensure that similar situations never happen again," said EUB acting chairman Brad McManus.

The four private investigators hired by the EUB mingled for almost a month among landowners and their lawyers as they gathered in Rimbey's recreation centre to watch closed-circuit TV coverage of an EUB hearing being conducted in a nearby courthouse. Members of the public were barred from those hearings because of disruptions at earlier hearings in Red Deer.

To blend into the Rimbey crowd, the investigators pretended to be landowners concerned about the construction of power lines through their property. Eventually, a private investigator obtained the password to a conference call system organized by the Alberta Environmental Network which allowed him to participate in those calls.

"It is important that Albertans understand that the security measures at Rimbey were taken solely because of serious incidents where our staff were physically attacked and other threats and actions led to an atmosphere of intimidation at the hearing," McManus said in the EUB release. "The report clearly indicates that the security arrangements taken at the Court House minimized the potential risk of disruptions to the proceedings and the confrontations between hearing participants and protestors."

Watch edmontonjournal.com for updates throughout the day, and see Friday's Journal for more.

© Edmonton Journal 2007 EUB delays permit for transmission line Legal hurdles must be cleared, says regulator

Geoffrey Scotton Calgary Herald

Thursday, September 13, 2007

Opponents of a controversial $600-million proposed transmission line won at least a temporary victory Wednesday when the Alberta Energy and Utilities Board agreed not to move forward with permitting the line until legal challenges before it or the Alberta Court of Appeal have been completed.

"What this is all about today is safeguarding our right to due process. All we want is our day in court," said Joe Anglin, co-chairman of the Lavesta Area Group of landowners in the Rimbey area, after lawyers for landowners, the EUB and AltaLink LP were able to reach agreement. "The compromise . . . is acceptable," Anglin added.

"The board will engage a process to allow parties to come before it and request a stay," said EUB lawyer Richard McKee, who told the court an EUB decision on an application by AltaLink LP, completed Aug. 24, to build the line is now unlikely before November. "Work is progressing. It's a difficult decision with voluminous evidence," said McKee.

Landowners had been seeking a legal stay of the yet-to-be rendered decision by the EUB on a 500-kilovolt line from west of Edmonton to east of Calgary, but were able to negotiate the same effect as the stay they sought. Their motion was adjourned, but the EUB has committed to ensuring opponents will have a chance to appeal a permit order to the EUB before it takes effect, and if that is unsuccessful, pending the outcome of an Court of Appeal case slated to get underway Nov. 14.

"Our fear here today is that if the EUB issues the licence one day, the bulldozers will be rolling the next," Anglin noted.

The agreement, brokered by Alberta Court of Appeal Justice Peter Martin, came ahead of today's release by Alberta Privacy Commissioner Frank Work of a report into private investigators hired by the EUB to monitor and report on landowners and their activities during EUB hearings. Landowners have alleged the private investigators breached client-lawyer confidentiality by listening in on conference calls and conversations and that their hiring and actions are adequate evidence of a reasonable apprehension of bias against line opponents by the EUB.

"Our investigation focused on the collection, use and disclosure of people's personal information by either the EUB or the private investigators that had been hired by the EUB," Wayne Wood, a spokesman for Work, said Wednesday.

"If we find there has been a contravention, then generally we make recommendations . . . and then we would ask that they implement those recommendations. We don't have the power to issue fines or any of that kind of thing," he added.

Wood could not say whether the private investigators involved had been questioned as part of the investigation and noted this latest examination is the second time this year the EUB has been investigated for contravening privacy guidelines. In March, the EUB was cited for posting on its website sensitive personal information -- health information, whereabouts of children and when homes would be vacant -- about residents in the Drayton Valley area.

Work's report is just the first into the controversial transmission project, which opponents have charged is a $1-billion gift to private industry to allow them to export power on the backs of ratepayers and taxpayers.

Alberta Liberal Leader Kevin Taft said Wednesday the EUB is clearly in trouble.

"We have very serious concerns," Taft said. "It is hemorrhaging credibility."

Next week, Alberta Energy Minister Mel Knight is set to release a report by former Alberta Court of Queen's Bench justice Del Perras, ordered by Premier Ed Stelmach, that also examines the actions of the EUB and its private investigators. A spokesman for Knight said this week the report's release had been pushed back to give more time for the government to formulate a response.

A third investigation by Alberta Ombudsman Gord Button was suspended pending the outcome of court actions. Landowners are also calling for criminal charges.

gscotton@theherald.canwest.com © The Calgary Herald 2007

Albertans 'depend on coal' to meet energy security

Calgary Herald

Thursday, September 13, 2007

Re: "Still waiting for democracy," David Swann, Letter, Sept. 5.

It was interesting to read Dr. Swann note that "governing requires hard work, good scientific advice and honest listening to the value of citizens," then make reference to the strip mine proposed for Dodds-Roundhill as being a free-for-all project that only favours the private interests of the developers.

What Swann overlooks is that supporting communities, mitigating the environmental footprint and a strong commitment to research and advancement of new technologies is an important part of the mining process.

Long before any mining begins, industry plans for a process that will have minimal long-term impact. Mining companies employ environmental engineers, geologists, biologists and other scientific and environmental professionals to aid in the planning process.

Reclamation involves studying the current state of the land and developing strategies to ensure the area is returned to a state of productivity that is equal to or, as is the case with many projects already, better than before the development of the mine. It is a process that is very public and very transparent, also requiring mining companies to report on their reclamation plan and progress to the government.

For the coal industry, being responsible and listening to the value of citizens is about removing barriers between itself and the communities in which it operates. Discussions with stakeholders, such as local residents, First Nations, environmental groups and all levels of government begin long before any mining commences. Consultation continues throughout the life of the mine and information is collected to ensure that development meets the needs and priorities of the local communities while limiting impacts on the environment.

On the technology side, by processing coal to produce synthesis gas (syngas) and hydrogen, the Dodds-Roundhill Coal Gasification Project is designed to provide Alberta with a new source of economic and environmentally sustainable energy. The Dodds-Roundhill Coal Gasification Project represents a key step towards Alberta's future as a global centre of excellence in innovative "clean coal technology." Such technology can lead to a critical mass of jobs and intellectual capital with tremendous export potential. This new technology will help preserve natural gas resources for higher-value uses and unlock the full energy potential of low-grade coal. This new energy source can support the development of Alberta's vast oilsands resources in an environmentally sustainable manner.

The public demands less development but still expects the economic benefits associated with growing industry -- expanded health care, improved infrastructure and more money for education.

The energy sector directly contributes more than one-third of provincial revenues. In addition, jobs are created, taxes are collected and consumer spending increases, all of which contributes significantly more to the provincial economy. Without this economic activity, the wealth for these necessities is not created and cannot be provided.

Our society is dependent on the availability of inexpensive and plentiful resources -- including electricity. Coal is an abundant, affordable and reliable source of power, currently accounting for nearly 70 per cent of electricity generation in Alberta. Coal is meeting the needs of our energy security.

Albertans rely on coal as part of a balanced energy mix. Coal, complemented by other energy sources like oil, natural gas, nuclear and alternative/renewable energy sources, plays a significant role in providing Albertans with electricity, heat and other essential services and products.

Sustainability will mean managing a balance on economic activity and creating a mix of sources that can meet growing energy needs with minimal impacts on the environment that can be developed responsibly - in the interest of all.

Allen Wright

Allen Wright is executive director and CEO of The Coal Association of Canada. © The Calgary Herald 2007

EUB controversy overshadows fact that power line not needed The Edmonton Journal Published: 2:06 am The current brouhaha over the miscues at the Alberta Energy and Utilities Board's hearings into a proposed $500-million-plus power line between Wabamun and Calgary is obscuring the real issue, which is that this power line is not required. It is an example of what is wrong with the deregulated power industry in this province.

To minimize losses, new powerplants should be built close to growing demand areas like Calgary. Unfortunately, the Alberta Electric System Operator is interpreting the government's guidelines on preference for transmission upgrades over things like peaking generators, to mean that all new capacity will be built at Wabamun and that "someone" must build the transmission to get it to Calgary. The first stage of the approval process should allow the public and EUB a chance to question the rationale for this "need."

Unfortunately, consumers are not informed about what will drive their power costs, and the EUB's mission seems to be to ensure the continued profitability of the likes of Epcor, TransAlta, Enmax, and the hordes of traders that now have their hands in our pockets.

The long-suffering power purchasers may not know that in the last decade, to address the not-so-new problem of high demand in Calgary, this same AESO threw out tonnes of our money to encourage construction of several gas-fired powerplants in that area. One notable example is the Calpine Calgary Energy Centre, an efficient and low-polluting 250 MW combined-cycle plant. That is, it would be efficient if it actually produced power. The owners are making more money off us, again courtesy of AESO, for just being there than they would if they had to burn that expensive natural gas to make electricity! Why can't the AESO dispatch on these plants to meet Calgary's demand if the north-south transmission is constrained? Sure, their clean gas fuel costs more than dirty coal, but if Rising Star Oil wants to build its new office tower in Calgary instead of Edmonton, it should be prepared to pay more for the lights. (It should be pointed out that in the first half of the past century the shoe was on the other foot, with abundant cheap hydro power available in Calgary's back0yard).

What is so holy about the Wabamun area that the regulators have decreed that this is where coal will be burned? (There is coal in the south, as Enmax is aware.)

The smell I'm getting is not just from coal combustion!

Charles J. Jennissen,

Sherwood Park

© The Edmonton Journal 2007

Move EUB to Edmonton The Edmonton Journal Published: 2:06 am It is hard to maintain the EUB is not in the pocket of industry, when part of its yearly business is to collect funding for both the Canadian Association of Petroleum Producers (CAPP) and the Small Explorers and Producers Association of Canada (SEPAC). Both of the aforementioned are industry advocates, and having the regulator collect their funding is successful no doubt, however, it smacks of inappropriateness. How this is in the public interest will need explaining.

Also the direct payment of part of the EUB's budget by industry should not be allowed under any circumstances. The industry is very much the EUB's paymaster!

Supervision of the EUB has been lacking by government energy ministers, as events in the recent past plainly points out. Location plays a part in the government's ability to keep a reign on EUB endeavours.

Placing the EUB under everyday supervision by the provincial energy minister would give the minister a reason to show up for work, and put a different atmosphere around EUB staff. A move to Edmonton to become, in reality, a full government entity would place some confidence in energy regulation, that is very badly needed! The EUB set up "synergy groups" throughout the province. This caused some to note the duty of industry regulation had fallen to the general public! These "company owned" community groups prevented the EUB from being properly staffed in field locations.

A cursory review of the Caroline cover-up of March 12, 2003, will indicate the danger these company owned groups pose to the public! I have seen nothing that suggests, if indeed the EUB is a provincial entity, that it should not like other government bodies be headquartered in Edmonton under direct supervision of the minister of energy!

Stewart Shields,

Lacombe

© The Edmonton Journal 2007

Federal Tories see limited role for alternative fuels Lisa Schmidt, Calgary Herald Published: Thursday, September 13, 2007 Fossil fuels will continue to be Canada's main energy source for decades to come, even as Ottawa ramps up spending on developing cleaner biofuels, the federal energy minister said Wednesday.

Gary Lunn, in Calgary to launch a $500-million fund to support the development of cellulose-based biofuels, said renewable energy sources have made great strides, but still make a small part of the country's total needs.

"I think you have to look at the energy sources out there and they all will play a role in Canada's energy mix," Lunn said after making the announcement in a luncheon speech to the Calgary Chamber of Commerce.

"Renewable is still a relatively small part of the supply side in our total production of energy. Although it's important -- we want to continue to push these technologies -- we mustn't forget how important fossil fuels are to our energy mix and we need to continue to invest in those technologies as well." The fund, first announced in the federal budget in March, will be spent over eight years and be administered by Sustainable Development Technology Canada. Ottawa has mandated a five per cent renewable fuel content for transportation fuels by 2010 and a two per cent content mandate for diesel and heating oil by 2012.

Investments will go toward the so-called "next generation" of biofuels to produce alternatives to gasoline from feedstocks ranging from wood fibre to wheat stocks, as well as diesel alternatives made from waste oils and animal fats.

These types of biofuels will deliver even greater greenhouse gas reductions, and use less energy in the production process than current biofuels such as ethanol, said the Canadian Renewable Fuels Association.

"Canada is now seriously joining the 'NextGen' biofuels race," said spokesman Robin Speer.

"This fund will ensure that Canadian companies can innovate and compete on a level playing field with our international competitors."

Large-scale projects involving the newer technologies are expensive and developers have had trouble raising funds to get new plants up and running, said Vicky Sharpe, chief executive of the organization that will oversee the fund.

"That creates a funding gap because there is a fair degree of technology risk still in undertaking these large-scale demonstrations," she said.

In addition to economic benefits, the biofuels would also offer alternative sources of income for other sectors such as agriculture or forestry by turning waste products into revenue generators, she said.

lschmidt@theherald.canwest.com

© The Calgary Herald 2007

[comment by jess: if we continue to give most of it away, there wont be any left to keep us warm or worry about]

Alberta has one of world's highest rates of colitis Chris Zdeb, Edmonton Journal Published: Thursday, September 13, 2007 Edmonton Oiler winger Fernando Pisani may be the most famous Albertan diagnosed with ulcerative colitis, but he's not the only resident of the province with the disease, which causes an open sore to develop on the large intestine.

In fact, Alberta has one of the highest incidences in the world, particularly around Edmonton, Fort McMurray and Grande Prairie.

It's a condition prevalent in northern developed countries and is more common the further north you go, says Dr. Richard Fedorak, professor of gastroenterology at the University of Alberta, a leading research centre studying the disease.

This is common with a lot of autoimmune diseases like multiple sclerosis, he adds. No one knows what the geographical tie-in is yet, but two things need to be present for a person to develop the condition, Fedorak says: you have to be born with a specific genetic mutation and you have to have a type of bacteria growing in your intestines common to people living in northern developed countries. A popular theory suggests ulcerative colitis may be connected to bacteria on food and in the environment that a person ingests as a child, because bacteria here is, for example, different than bacteria ingested in Mexico or a warm tropical climate where there is no ulcerative colitis, Fedorak says.

The good news is that the majority of people with the disease -- more than 90 per cent -- can manage their condition with medications and lead normal, productive lives. So while Pisani, 30, has been temporarily iced, he's expected to be back in the lineup by the end of October or start of November once his condition is under control.

Here's what else Fedorak had to say about ulcerative colitis:

- Over time the condition wears away the lining of the large intestine, similar to skinning a knee when you fall off a bike. It leaves the surface red, raw and bleeding. This leads to pain in the form of cramping and diarrhea with blood.

- Patients tend to have five to 15 bowel movements a day which are quite urgent, and because the lining is worn away it feels like vinegar poured over a cut.

- Because the large bowel or intestine is irritable and can't hold any material, you get diarrhea, which means you have to always be near a washroom, which starts to negatively affect quality of life and the ability to concentrate.

- The onset of ulcerative colitis is most frequent between the ages of 15 and 25.

- The condition is easily diagnosed with a colonoscopy.

- Treatment involves a series of medications that become more potent when simpler ones don't work. This is determined by how severe the problem is.

- Mesalamine is the first simple medication prescribed. If the person is still having symptoms, a steroid medication is introduced, and, if needed, a number of immune suppressant medications.

- In some cases the large intestine must be removed and a new rectum created out of the small intestine to solve the problem, but this is rare. Some people have been able to avoid this drastic surgery since the introduction of two new medications, infliximab and adalimumab, to Alberta a couple of months ago. The medications heal the ulcerated walls of the large intestine, but must continue to be taken or the condition comes back.

- There is no cure for ulcerative colitis so sufferers must stay on medication all their lives. © The Calgary Herald 2007

[comments by jess: sour gas exposure adversely affects digestive system within hours. when i am in alberta, i cannot eat oats (my favourite), wheat, bread, cookies, etc without severe pain consequences re digestive system. when i am out of province, even in super polluted european cities, i can eat all these to the level of gluttony, without any discomfort - except being too full. sour gas also advserely affects sinus, and many other systems. when i am in alberta, my sinuses pound with pain. when i am out of province, bingo, problem gone. i have been tracking this for years]

Privacy rights loss alarms Canada's civil libertarians Gov't opens hearings on website data access Carly Weeks, CanWest News Service Published: 2:05 am OTTAWA - In an unexpected about-face, the federal government revealed Wednesday it will open up previously closed-door consultations it has been holding on plans to force Internet service providers to turn customers' personal information over to police without a court order.

The decision was made as privacy and civil liberties organizations voiced serious concerns Wednesday they were being deliberately excluded from providing input into the contentious proposal, which they have criticized for several years over concerns it would jeopardize privacy rights and could lay the groundwork for giving police power to eavesdrop on wireless and Internet communications.

"There's clearly been a conscious decision not to consult with us this time around," said Philippa Lawson, director of the University of Ottawa's Canadian Internet Policy and Public Interest Clinic.

"They know full well that my organization and a number of other civil liberties groups are very concerned about and interested in these initiatives." The Public Safety and Industry Departments have been conducting a limited consultation, which was scheduled to end Sept. 25, on potential changes that would make it easier for police to get customers' personal information from Internet providers without a court order or other legal justification. Those invited to participate in the consultation process received a letter and no information was made public on any government website.

Now, Public Safety Minister Stockwell Day's office said it has decided to post information on the department's website and lengthen the consultation process to allow the public and privacy and civil liberties groups to have a say.

Spokeswoman Melissa Leclerc said the decision was made after the office received numerous calls Wednesday, but privacy associations and other groups have always been allowed to participate in these discussions.

"The minister was clear when he asked his officials to work on this. He asked for a thorough consultation as possible approach," Leclerc said. "He wants to hear from these groups on every element of this process."

However, numerous privacy and civil liberties organizations across Canada were not even aware the federal government was in the midst of a consultation on the issue until well-known privacy expert Michael Geist, who was included in the discussion, posted information on his blog this week.

"We have never been informed or approached or invited to be consulted," said Roch Tasse, co-ordinator of the

Ottawa-based International Civil Liberties Monitoring Group, which represents nearly 40 of the country's civil liberties organizations.

"None of our members to our knowledge have been invited to participate."

The secretive nature of the consultation prompted the federal privacy commissioner's office to voice concerns and urge the government to open up the process to include the opinions of privacy and civil liberties groups.

"From what I understand, they've asked people not to make it public," spokesman Colin McKay said.

"I do think there are a lot of people who would have an opinion about the lawful access proposal in general. We would hope they would open up the process to more people and wider points of view to feed into their policy development process."

The RCMP and other police organizations have been pressuring the federal government to make it easier for them to access the customer's personal information.

© The Edmonton Journal 2007

Explosive interlude on a summer weekend

Andrew Mitrovica
The Star (Toronto)
Sep 11, 2007

On Saturday Sept. 1, Toronto averted a catastrophe. You can search in vain for news reports about the near tragedy.

Politicians and city officials have not commented on the incident that threatened to engulf a neighbourhood. But it did happen.

How do I know? I was among the many adults, children and homes that could have been blown up.

I usually write on this page about the scourge of terrorism and how ill-prepared our security services are to address that danger. But terrorists had nothing to do with this traumatic event; a building contractor did.

And now, it seems, he will escape with little more than a dent in his pocket book and a letter from the regulatory body that is supposed to protect us from such dangerous irresponsibility.

This is a cautionary tale that every Torontonian should heed.

Late that morning I was writing in my modest semi-detached home in north Toronto when there was a thunderous knocking at the front door.

At first, I thought an overzealous pair of religious pamphleteers was making yet another impromptu visit. Instead, I found a short, balding fireman racing from door to door. "Get out of the house. Now!" he shouted. "There's a major gas leak." (Thankfully, my two young daughters and wife were out of town.)

It turned out that a contractor - who was building a fence - had ruptured a gas line metres from my home. As I scampered down the street I heard the roar of the natural gas spewing from the earth.

The scene was unnerving not just for me, but for my neighbours. We anxiously watched as a once languid day quickly turned into a nightmare. Police cordoned off several streets and evacuated a neighbourhood brimming with children. An ambulance bus and paramedics arrived and several large trucks carrying repair equipment rumbled in to repair the pipeline.

As we waited, my neighbours and I traded stories about our harried escape. A young couple living next door to the ruptured gas line had been enjoying lunch in their backyard while their 18-month-old son slept inside their new home, blissfully unaware (they thought the roar was a power washer). Indeed, the couple reckoned they waited close to 40 minutes before being alerted to the danger.

The trauma and threat to property and, more importantly, lives, was, of course, avoidable. Ontario law requires home owners, contractors and excavators to call gas utilities to locate and mark the gas lines before they dig. The service is free and only takes a few days to be done.

A spokesperson for the utility that services my street confirmed to me that the contractor didn't call. So, presumably in order to save a little time and money, the fence builder chose to guess, putting a community at risk.

That afternoon, good work by the utility and police and fire departments prevented a potentially catastrophic explosion. Others, regrettably, have not been so fortunate.

Pipeline ruptures remain disturbingly routine in Ontario. Last year, there were 3,500 such incidents. In most cases, human error is the cause. And these errors can have deadly consequences. In one incident in Toronto in 2003, for example, seven people were killed and scores injured apparently after a construction worker inadvertently hit a gas line.

That same year, this newspaper's crack investigative reporter Robert Cribb raised the alarm. Cribb revealed that few of the incidents were investigated and only a handful of cases resulted in prosecutions by the Technical Standards and Safety Authority (TSSA) which regulates pipelines in Ontario. Cribb wrote that the TSSA had a "hands off" approach to regulation. Four years later, that disquieting attitude and record have not changed.

In its mind-numbing logic, the TSSA has decided against prosecuting or even fining the fence builder. Rather, the regulator told me in an email, it has "deemed the most appropriate action was to issue orders to the contractor to address the non-compliances found."

Translation: no charges and no fines, just a letter asking him to do what he should have done before he stuck a shovel into the ground. All this, despite the fact that the TSSA acknowledged in the same email that its so-called "investigation" had "determined that failure to obtain locates was the root cause of the incident." The regulator added, laughably, that "as an educational component, the contractor was also made aware of his requirements and responsibilities."

I'm not reassured.

I take little solace knowing that the utility intends to charge the contractor for the lost gas and costs associated with the repair. Pipelines can be replaced; people can't. This lesson still appears lost on the TSSA. By the way, the TSSA's motto is: "Putting Public Safety First."

http://www.thestar.com/comment/article/255033

Methane from the oceans could power the world

GLOBE-Net
September 6, 2007

The Economist Magazine recently reported on the effort that is quietly going into the pursuit of what is probably the world's greatest store of fossil fuel - caches of methane, the primary component of natural gas, stored in structures called methane hydrates found in cold Arctic regions and in the marine sediment near continental shelves. Looking just like ice, clathrates (a general term for gas molecules trapped by water molecules) are methane molecules trapped within tiny cages of water molecules. They form where temperatures are low and pressures are high, which is to say, on the sea-floor at the continental shelves, and within the permafrost at the Earth's poles.

Gas hydrates are formed at low temperature and high pressure when sufficient amounts of water and gases such as carbon dioxide or methane are present. This methane has its origins in ancient sea-floor bacteria, which fed on plant and animal remains. As the sediments subsided, the pressure increased and the methane and water froze to form gas hydrates. Gas hydrates are found wherever water gas and water are present at moderately low temperatures and moderately high pressure. As with all fossil-fuel resources, it is hard to estimate just how much methane is trapped in clathrates worldwide.

Numerous deposits have been identified off the coasts of all of the continents and a few of the lakes in Central Asia are just frosty enough to support clathrate formation. Many energy experts agree that clathrate methane reserves could equal twice the rest of the world's fossil fuel supplies combined.

Several countries see gas hydrates as a potential source of energy, because if the methane can be economically produced from these hydrate deposits, the world's natural gas energy supply could be extended for many years to come.

The vast deposits of methane hydrates found in deeper oceanic areas offer considerable hope for future economical recovery and production.

A key driver of the interest in exploiting these potential sources of energy stems from rising energy prices as oil shortages and rising demand increase the costs of conventional energy supplies.

As well, an increasing proportion of the world's oil supplies are being sourced from politically unstable areas. Security of energy supplies for many countries is driving new investments in biomass technologies.

The technological challenges are daunting as are the risks. Soil instability induced by offshore drilling and production operations represent a potential geohazard adjacent to offshore structures, where hydrate occurrence may result in foundation problems. Such vast unstable deposits are prone to underwater landslides, such as a landslide estimated to have taken place 8000 years ago in the North Sea that created a tsunami that flooded much of coastal Scotland and Norway.

As well, methane hydrate deposits in the ocean and tundra regions contain three times more methane than what occurs naturally in the atmosphere. "Methane is the cleanest of the fossil fuels when burned; but released directly into the atmosphere, it is a 'greenhouse gas' significantly more potent than carbon dioxide," notes The Economist.

Methane is a powerful greenhouse gas with a greenhouse warming potential (GWP) 23 times that of CO2 on a per-molecule basis. The sudden release of methane from gas hydrate therefore has the potential to affect global climate.

When the sea level dropped during the last ice age, the destabilization of hydrate and the release of methane may have been sufficient to heat the atmosphere via greenhouse effects and turn back the ice age.

As well, many clathrate deposits sit atop large reservoirs of free gas. Drilling into the clathrate deposits could unleash an enormous 'methane burp' of size, with devastating environmental impacts.

However, if gas hydrates can be harnessed as an energy source, the increased use of clean-burning methane (in relation to sulfurous coal, for example) would contribute to reductions in greenhouse gas emissions worldwide.

The strong potential of gas hydrates has motivated national research programs in the United States, Canada, Japan, Korea, and India to investigate methods to quantify the amount of hydrate present in the subsurface through geological and geophysical remote sensing methods.

While Canada and India have invested heavily in hydrate research, the largest effort has been in Japan. Japan imports roughly most of its fossil fuels, and would like to find a domestic energy resource.

As noted by The Economist, a Japanese collaboration has drilled about 30 wells, with a timeline to start production and distribution of methane from hydrates by 2016. In June, China reported having pulled up some first methane-bearing samples from the South China Sea. A US-based consortium of government agencies and petroleum companies has been drilling for clathrates in the Gulf of Mexico with some success.

In Canada, an international consortium including Canada, United States, Japan and Germany has been formed to establish a world research site for the study of continental natural gas hydrates in the Mackenzie Delta of northwestern Canadian Arctic. This site, the Mallik gas hydrate field, was discovered through an exploration well drilled by Imperial Oil Ltd. in 1971-1972.

Scientists acknowledge that methane hydrate commercialization is 20 to 30 years away. Given that the lion's share of known methane hydrate deposits is found in the Pacific Ocean and neighbouring permafrost environments, it is a subject of great interest to Canada in general and British Columbia in particular.

The bottom line is that these methane deposits represent a huge potential source of new hydrocarbon energy - one that cannot be ignored.

An excellent Backgrounder on Methane Gas Hydrates is a report prepared by Kenneth White of Acton White Associates Inc. This report is available exclusively from GLOBE-Net.
http://www.globe-net.ca/news/index.cfm?type=2&newsID=3097

Details on the Mallik project are available here
http://gsc.nrcan.gc.ca/gashydrates/mallik2002/index_e.php

Source: GLOBE-Net www.globe-net.ca

Green ambition

Susan Riley
The Ottawa Citizen
Monday, September 10, 2007

The most astonishing news from the recent APEC summit in Australia is that Prime Minister Stephen Harper's rhetoric on climate change has almost caught up to Paul Martin's.

This is not unalloyed good news, of course, given Martin's tendency to become so intoxicated by the wonders of his imaginary world that he never got around to doing much about climate change, or anything else. Harper, a more deliberate man, tends to avoid over-promising - with one Martinesque exception. Canada, he told a business audience in Sydney last week, wants to become "a world leader in the fight against global warming and the development of clean energy."

Uh, too late. While our politicians dithered over climate change, or - not naming names - fiercely rejected the science and the urgency of the problem, other countries went about inventing, marketing and selling green technologies. Most of the giant windmills that increasingly dot our countryside come from Germany. A majority of the fuel-efficient, or hybrid, cars nosing their way onto Canadian streets are Japanese. California companies are pioneering solar technology, green building codes and sustainable farming methods. And, while we continue to experiment with carbon capture and storage, as Harper mentioned, so do other countries.

In fact, the world leader in green technology will probably be California and the U.S. private sector - driven to innovate by the strictest greenhouse gas emissions caps on the continent. We, an "energy superpower," have been too busy making money on fossil fuels to care much about alternatives.

Nor are innovation, or the changes required to make our economy sustainable, likely to accelerate on Harper's watch, despite his change in tone. His government's regulations for large emitters have been widely described as timid -- a leisurely stroll toward an unverifiable 60-per-cent reduction in real emissions by 2050, when Harper is long gone, and with him, perhaps, the polar bears. This is the model he recommended to his fellow APEC members, who had the courtesy not to smirk.

Yet for them, for anyone befuddled by a complex topic, Harper may sound plausible. What he is doing, along with retooling Liberal notions, is trying to reframe the climate debate, implying that the Kyoto accord is some wildly impractical, job-crushing monster on one side, while fossilized climate-deniers and corporate polluters occupy the other extreme. He positions himself in the middle, the champion of "balance" - of "realistic benchmarks," market-driven solutions, a global gentlemen's voluntary agreement to behave sustainably, rather than crude arbitrary targets.

Of course, it is easier to look progressive in the company of Kyoto dissenters George W. Bush, Australia's John Howard, and other members of the business-oriented, trade-driven APEC fraternity who prefer "aspirational" targets even to Canada's feeble efforts. But Harper's real audience is at home: he is trying to neutralize the environment as an issue in the next election, by inching away from Bush and counting on our short attention span.

The old Harper doubted the science of climate change. He saw Kyoto as a socialist scheme. Meeting its targets, he said, would mean economic armageddon. Hardly anyone believed him, so he has changed course. The new Harper recognizes climate change as a real and threatening phenomenon. "The physical evidence is there for all to see," he said in Sydney. He cited the retreat of ice in the Northwest Passage and the pine beetle infestation in British Columbia as byproducts.

As for Kyoto, he was called upon to clarify his views after he was praised by Prime Minister Howard for saying that "Kyoto divided the world into two groups: those who would have no targets, and those that would reach no targets."

That was a little world-leader inside joke, apparently, although Harper had trouble mustering much enthusiasm for the accord when he explained. "I don't think (Kyoto) is irrelevant, in the sense that, in fairness, the UN established a process that gave us the Kyoto protocol and that process is still under way," he said. The targets that Canada undertook are legally binding, too, although he didn't mention that inconvenient truth.

But will Harper get away with what amounts to an unapologetic, poll-driven conversion in rhetoric if not policy? That depends on whether the other parties, particularly the Liberals, can sell credible and tough measures to curb emissions. It also depends on how dramatically emissions continue to grow, how visible the impact, and, above all, it depends on the weather. It is hard to downplay the urgency of the issue when entire cities are flooded and too many forests are on fire.

"For more than a decade, most governments, including Canada's, paid what can be charitably called lip-service to the issue of climate change," the prime minister said in Sydney.

Same service. Different lips.

Susan Riley's column runs Monday, Wednesday and Friday. E-mail: sriley@thecitizen.canwest.com

© The Ottawa Citizen 2007

U.S. Draws Map of Rich Arctic Floor ahead of Big Melt

COMMENT: We have long argued that the Arctic should be protected by international agreement. See The Polar Dash for Oil, http://www.sqwalk.com/blog2007/000936.html.

Instead, this article tells us that "In an era of climate change, these frozen assets are up for grabs, as melting ice allows detailed mapping and, one day perhaps, drilling."

Somewhat surprisingly, it is not the US that is leading the Arctic assault. It is Canada, Russia, Norway, and Denmark. Perhaps the US intends to assert its dominance later, extending "its undersea zone of military and economic authority" by military and economic means.

The tragedy is seeing this place jumped all over by would-be exploiters and imperialists. Nothing about global warming has changed these human, national and corporate impulses to control and exploit.

ROBERT LEE HOTZ
SCIENCE JOURNAL
Wall Street Journal
August 31, 2007

In the Arctic this week, researchers aboard the U.S. Coast Guard icebreaker Healy are mapping claims to the spoils of global warming.

North of Alaska, the 23 scientists of the Healy are gathering the data legally required to extend national territories across vast reaches of the mineral-rich seafloor usually blocked by Arctic ice. Fathom by fathom, multibeam sonar sensors mounted on the Healy's hull chart a submerged plateau called the Chukchi Cap, in a region that may contain 25% of the world's reserves of oil and natural gas.

North of Alaska, researchers aboard the U.S. Coast Guard icebreaker Healy are gathering the data legally required to extend national territories across vast reaches of the mineral-rich seafloor usually blocked by Arctic ice.

In an era of climate change, these frozen assets are up for grabs, as melting ice allows detailed mapping and, one day perhaps, drilling.

Rising temperatures thinned the ice pack to a record low this month. If current trends continue, the Arctic could become ice-free in summer months by 2040, polar researchers say.

Indeed, the Healy is finding easy passage this week through the Arctic Ocean's archipelagos of ice. "We have had a remarkable amount of open water -- good for mapping, sad for the Arctic," said expedition chief scientist Larry Mayer, reached aboard the Healy, the head of the University of New Hampshire's Center for Coastal and Ocean Mapping.

The $1 million Healy expedition is the third U.S. seafloor-mapping venture into the Arctic since 2003, prompted by provisions of the 1982 U.N. Convention on the Law of the Sea. The U.S. has never ratified the treaty but commissioned new seabed maps in case it ever is adopted. The U.S. Senate Foreign Relations Committee has set a hearing on the treaty next month.

Framed decades before the politics of the greenhouse effect permeated international relations, the U.N. treaty is taking on added importance in the Arctic as an arbiter for countries determined to come out ahead in a world transformed by rising temperatures. No country actually owns the North Pole. But with growing boldness this past summer, Russia, Denmark, Norway and Canada jockeyed for control of the Arctic seabed, galvanized by the prospect of open waterways there.

"A little bit of global warming and a little bit of adventurism and now we are really starting to explore the Arctic," said marine geophysicist Stephen P. Miller, head of the geological data center at the Scripps Institution of Oceanography at the University of California, San Diego.

STAKING OUT THE NORTH POLE

As the polar ice cap melts, it seems like every nation wants a piece of the Arctic's mineral-rich seafloor. What do you think?2

The United Nations Commission on the Limits of the Continental Shelf7 lays out agreements and research about this aspect of the Law of the Sea.The U.N. treaty allows countries to extend their coastal economic zone up to 350 nautical miles offshore, depending on detailed technical evidence of undersea geology and topography. Under this provision, all four countries claim an underwater mountain called the Lomonosov Ridge that runs underneath the North Pole. They are depending on seafloor data to bolster their cases before the U.N. Commission on the Limits of the Continental Shelf, meeting this week in closed session to consider claims.

The Healy's voyage is part of a broader U.S. effort to extend its undersea zone of military and economic authority should it adopt the 25-year-old U.N. accord.

For five years, the university's mapping teams, commissioned by the U.S. State Department, have been charting in unprecedented detail the deep ocean bottom of the Arctic, the Aleutian Islands, the Bering Sea, the Mariana Islands in the Pacific, the Gulf of Mexico and the U.S. Atlantic coast. "The better data you have, the better case you can make," said hydrographer Steven R. Barnum, director of the Office of Coast Survey at the National Oceanic and Atmospheric Administration, which manages the effort.

Overall, maps of Mars are about 250 times better than maps of earth's ocean floor.

Until recently, the best global seafloor maps were based on altimeter readings by military satellites and submarine depth soundings gathered during the Cold War. Those miss anything smaller than six miles across. Two years ago, a Navy nuclear submarine rammed an undersea mountain that didn't appear on its charts, killing one sailor and wounding 23. The Healy's sonar sensors produce maps accurate to within about 20 yards.

Each new seafloor map is a revelation. "Every cruise turns up new discoveries," said NOAA scientist Andy Armstrong, reached aboard the Healy. The sonar sensors detected unsuspected seamounts, vast sea-slides and canyons. The data are freely available online.

All told, the undersea territories being mapped by the U.S. encompass an area larger than France. "It holds potential riches beyond your imagination" through sea-floor mining and drilling, said UNH marine geologist James Gardner, who has mapped 347,000 square miles of ocean bottom as part of the U.S. Law of the Sea project. In all, maps are being prepared for eight major extensions of U.S. seafloor authority, including several areas in the Arctic also claimed by Russia and, perhaps, Canada.

"It is a little overheated to say this is now a race to the Arctic," said John Bellinger, legal adviser to the U.S. secretary of state. "At the same time, we are very much aware that other countries, most particularly Russia, have been exercising their rights under the Law of the Sea Convention."

For now, the U.S. has no standing to protest.

Email me at ScienceJournal@wsj.com8.

STAKING OUT THE NORTH POLE

RELATED READING

Learn more about ice in the Arctic at the NSIDC web site for ice conditions http://www.nsidc.org/news/press/2007_seaiceminimum/20070810_index.html

The home page of the University of New Hampshire center for Coastal & Ocean Mapping Joint Hydrographic Center has an interactive map as part of its U.S. Law of the Sea survey program. http://ccom.unh.edu/index.php?page=image_gallery/photos.php&p=26|27|31|34|35|39|46|47|51|52|79|94|95&page=law_of_the_sea.php

See the daily position of the USS Healy during its mapping cruise in the Arctic, via SailWX. http://www.sailwx.info/shiptrack/shipposition.phtml?call=NEPP

Read more about the USS Healy and its current and past missions from the Coast Guard's Icefloe site. http://www.icefloe.net/reports_healy.html

The United Nations Commission on the Limits of the Continental Shelf lays out agreements and research about this aspect of the Law of the Sea. http://www.un.org/Depts/los/clcs_new/clcs_home.htm

http://online.wsj.com/article/SB118848493718613526.html

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ExxonMobil CEO: Mackenzie Pipeline Costs Could Top C$16.2 Bln

COMMENT: ExxonMobil has been pretty clear all along with the Mackenzie Gas Pipeline project: it isn't going to get built without a significant federal subsidy. That's assuming the regulatory process ever ends.

Hyun Young Lee
Wall Street Journal
September 8, 2007

CALGARY (Dow Jones)--Costs for the troubled Mackenzie gas pipeline could top the last cost estimate of C$16.2 billion, ExxonMobil Corp.'s (XOM) chief executive warned Friday.

Speaking to reporters at a Calgary industry event, Rex Tillerson said the length of the regulatory process made cost estimates for the pipeline little more than guesses based on other projects.

"It could be C$16 billion or C$14 billion or C$20 billion," Tillerson said. "All we can say is that it's large, it's larger than we previously thought."

Meanwhile, rapid cost inflation has been hiking up project costs while the pipeline has been in regulatory limbo, he added.

"We're seeing what happens on other projects...(there's) a bit of extrapolation from those more detailed cost estimates," he said.

The project, first discussed in the 1970s, aims to bring gas from the Mackenzie delta at the northern tip of the Northwest Territories to Alberta, where it would connect to existing pipelines. The push to revive the project started gathering support in 2004, but public hearings only began in January 2006, while the startup date has been pushed back three years to 2014.

Imperial Oil (IMO) is the project operator, and the other partners are Royal Dutch Shell PLC (RDSB.LN), ConocoPhillips (COP) and the Aboriginal Pipeline Group.

The proposed route crosses several First Nations territories, and complaints from several groups that they haven't been consulted properly have also slowed proceedings.

Tillerson has been one of the more vocal critics of the project's costs - which were previously estimated around C$7.5 billion - questioning the pipeline's viability without some sort of federal intervention.

After the regulatory proceedings, the Mackenzie consortium will have to do a "thorough update" of costs and "see how we are from an economic standpoint," he said.

He denied, however, that ExxonMobil was shelving the project.

The company is also involved in a US$25 billion pipeline project to bring 4.5 billion cubic feet a day of natural gas from Alaska to the lower 48 states.

Tillerson said: "You tell me what [the cost] might be today but it's not US$25 billion anymore."

-By Hyun Young Lee, Dow Jones Newswires; 613-237-0669; hyunyoung.lee@dowjones.com

Chevron's Great Game

Stanley Florek
Seattle Times
6 September 2007

By creating an on-line simulation along the lines of SimCity, Chevron is trying to prove that figuring out how to provide civilization with enough energy is not an easy game.

Energyville, created by Chevron in conjunction with The Economist Intelligence Unit, lets you name your own power-hungry city and pick different options to feed it with energy. You can choose among biomass, hydro-power, natural gas, hydrogen, solar and others; every choice has some economic, environmental and security impact. The impact of your choices can change following events like terrorist attacks and technology breakthroughs.

No matter how green-minded you are, you won't be able to power your cities with solely biomass or solar sources. If you forget to add an offshore petroleum platform, the game will kindly remind you that airplanes and cars need fossil fuels to run.

The game, posted at a website Chevron created to foster energy debate, is "an engaging way of looking at the real-world decisions that have to be made in meeting rising global energy needs," said Chevron vice president Rhonda Zygocki in a statement. "Sponsoring Energyville supports our efforts to encourage a global debate of the critical energy issues. Energyville gives people an opportunity to test their energy literacy and learn for themselves the challenges in powering their own city."

In Energyville, your final score depends on how well you balance your energy needs with the cost, security issues and environmental effects of your choices. In my third attempt at being Seattle's energy czar, my score ranked 2,359th among 20,735 players -- after heavily betting on wind power.

The site offers a tool to engage in some amateur sociology. It computes the average energy preferences of players by location, gender or profession. Wind and solar proved a major preference of the average U.S. player, according to the Chevron site. Players from Qatar - a major hub for gas-to-liquids projects - saw a future dominated by coal. Vatican City players gave petroleum the largest share of the pie. Budding policymakers in Saudi Arabia, the world's largest oil power, also bet heavily on wind, solar and biomass solutions.

Big Oil has been increasingly vocal in the alternative energy debate, as skyrocketing costs and environmental and security concerns have made fossil fuels the target of both environmentalists and politicians. Many expect Congress to enact legislature regulating carbon emissions in the near future, and the State Department is hosting an environmental summit in Washington D.C. in late September. Oil companies like Chevron want to make sure they have a seat at the table as new measures are discussed.

Game: http://willyoujoinus.com/

This Article: http://blog.seattletimes.nwsource.com/techtracks/archives/2007/09/energys_great_game_1.html

Palin offers oil tax plan for session in Juneau

Palin offers oil tax plan for session in Juneau
Tom Kizzia & Sean Cockerham, Anchorage Daily News, 05-Sep-2007

BP dislikes call for higher taxes in Alaska
Steve Quinn, Anchorage Daily News, 04-Sep-2007

Build trust on oil taxes
Editorial, Anchorage Daily News, 05-Sep-2007

BP Alaska President Doug Suttles talks taxes
John Tracy, KTUU News, 05-Sep-2007

Oil companies, associations express displeasure with tax proposal
Stefan Milkowski, Fairbanks News Miner, 06-Sep-2007

COMMENT: Alaska's Governor Palin wants to revisit new tax legislation, to ensure that Alaska gets a fair share of revenues from its oil. Industry throws up the "scare away investment" bogeyman. It's the same debate in Alberta, where royalties are under review. In BC, it's still the giveaway royalty regime.

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Palin offers oil tax plan for session in Juneau

By TOM KIZZIA and SEAN COCKERHAM
Anchorage Daily News
September 5, 2007

Gov. Sarah Palin will call lawmakers to Juneau for a special session next month, where she will ask them to increase oil taxes by adopting a new hybrid system combining gross-production and net-profits taxes.

The tax proposal, announced in Anchorage on Tuesday, would raise the current tax on oil field profits from 22.5 percent to 25 percent. It would also create a floor of a 10 percent tax on gross production that would kick in on the state's oldest "legacy" fields if future profits shrink.

The special session begins Oct. 18 and can last up to 30 days.

Other changes, if adopted by the Legislature, would do away with retroactive deductions on investments from previous years and investments made to catch up on deferred maintenance. Credits would be available to encourage investment in new fields.

Palin also called for changing job classifications for state tax auditors, raising salaries to bring more expertise to the state.

A simple tax on gross oil production, which Palin favored at first, would "risk the viability of future fields," the governor said in announcing her hybrid plan.

"We want to make sure the golden goose is fed and not killed," she said.

State officials have dubbed the new plan Alaska's Clear and Equitable Share, or ACES.

MIXED REACTIONS

Palin originally wanted to hold the session somewhere on the road system. In agreeing to go to Juneau, she said she wants to see committee hearings outside the capital. Legislative leaders would have to agree to such hearings.

The governor's plan got a favorable reception from House Speaker John Harris, R-Valdez, who attended Tuesday's event. He said legislators would probably feel compelled to make some changes, given the cloud of corruption over the original tax. Palin's plan seems to offer change but not a huge overhaul, he said.

Harris said he hopes to begin committee hearings on the road system at the start of October, after a specific bill has been drawn up.

But Senate President Lyda Green, R-Wasilla, was less enthusiastic. She said it seems too soon to reconsider last year's tax changes. She also didn't like the idea of splitting the special session between Juneau and the road system.

Rep. Harry Crawford, D-Anchorage, said he was disappointed, calling the plan not much more than a warmed-over version of the existing net-profits tax. Democrats called last week for a simple, predictable tax like a gross-production tax.

Oil industry reaction was negative.

Increasing tax rates will reduce investment here, said BP Alaska president Doug Suttles. The state should be focused on offsetting the decline of oil production, he said. "We have to call on every Alaskan to think really hard about the future."

Both the increased tax and the notion of changing taxes for a third time in three years -- former Gov. Frank Murkowski imposed a smaller tax increase through regulation before the PPT was passed -- make for "a pretty jittery investment climate" in Alaska, said Marilyn Crockett, executive director of the Alaska Oil and Gas Association.

PALIN GIVES IN

The Legislature passed the latest oil-profits tax in August 2006. It was designed to allow oil companies to deduct operating and capital expenses before calculating taxes. That plan was presented by Murkowski as a way to promote investment. The Petroleum Profits Tax, or PPT, replaced the discredited "ELF" tax on production that was riddled with exceptions.

Legislators argued over what percentage of net profits should be taxed. After much wrangling, they settled on a 22.5 percent tax rate.

Some legislators, including many Democrats, had argued for a tax on gross production instead of net profits. Palin herself favored a gross tax during her 2006 election campaign.

In recent weeks, Palin said, analysis by state officials showed that a simple gross system would either mean less revenue for the state or hurt the oil industry's investment climate.

"I was dragged kicking and screaming, with a little bit of gnashing of teeth, even, away from the pure simple gross system," Palin said Tuesday.

Palin said the tax has to be revisited because the original version was tainted by corruption. Several legislators have been accused by federal prosecutors of selling their votes on the oil tax in 2006. Two of them, former Reps. Pete Kott of Eagle River and Bruce Weyhrauch of Juneau, are scheduled to stand trial in federal court starting today.

Palin also said the tax is not performing as predicted because industry expense deductions are coming in much higher than expected.

Administration officials said that, in fiscal year 2007, the new PPT brought in $1 billion more than the old tax -- but $200 million less than was predicted when the PPT was passed. Unless the tax is changed, rising deductions from the industry will bring $800 million less than predicted for the next fiscal year, said Revenue Commissioner Pat Galvin.

"I'm not sure how disappointed we should be with getting a billion dollars more," Green said after the governor's announcement. "We really need to kind of hold on and review it some more."

TIME TO MAKE A MOVE

But Palin said it is important to act now to make sure Alaska gets an equitable share of the oil's value.

"There are those who would say we should do nothing and that we should continue the PPT experiment. Doing nothing is not an option," Palin said.

The proposed new tax would bring in $700 million more this year than the PPT tax, according to state officials. But Democrats complained that's still $100 million less than was promised by a tax that was passed with undue pressure being exerted by lawmakers now accused of corruption.

Palin's earlier statement about holding the special oil tax session on the road system met resistance. Many legislators said they preferred to work in Juneau, where their offices and staff could be at close hand.

"It's kind of a hybrid plan there, also," Palin said of her call for hearings away from Juneau.

Contact reporter Tom Kizzia at tkizzia@adn.com and Sean Cockerham at scockerham@adn.com.

The tax and the session

Palin's "hybrid" proposal for new oil tax:

Alaska's Clear and Equitable Share

• Establishes minimum gross production tax for major "legacy" fields.

• Raises net profit tax on North Slope fields from 22.5 percent to 25 percent.

• Eliminates some deductions, such as catching up on deferred maintenance.

Plan for legislative session is a hybrid too

• Special session begins in Juneau on Oct. 18, lasts up to 30 days.

• Commitee hearings on new bill to be held outside Juneau, probably before session.

www.adn.com

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BP dislikes call for higher taxes in Alaska

By STEVE QUINN
Anchorage Daily News
September 4, 2007

JUNEAU, Alaska (AP) - The oil industry never liked the 22.5 percent net profits tax the state passed last year, and now Gov. Sarah Palin wants that raised to 25 percent.

It's part of a restructuring plan of the state's oil production tax Palin announced Tuesday, but one that doesn't sit well with the state's largest operator, London-based BP PLC.

Doug Suttles, president for BP Exploration (Alaska) Inc., said the state needs to be mindful that too much change would discourage multimillion dollar investments.

Those investments are crucial to extending the life of North Slope production - already in a 6 percent annual decline - by several decades.

"The big enemy in Alaska is production decline," he said. "The only way to offset it is investment, not just for exploration of new fields but existing fields and new technology."

Palin stressed she is not anti-oil - indeed, her husband Todd just returned to his blue-collar production job for BP on the North Slope after a year's leave- but believes the year-old tax needs to be restructured.

She wants lawmakers during a special session to start Oct. 18 in Juneau to fix a system she has called a failure and tainted by the federal corruption charges against former lawmakers in connection with the tax.

Palin's announcement comes as two former lawmakers begin their federal trial Wednesday on corruption charges.

These bribery and extortion trials are linked to the passage of the oil tax and they have helped thrust the state's political credibility into the national spotlight.

Palin noted the upcoming trial during her Tuesday news conference in Anchorage, but still stressed the need to fix a tax that she said "isn't working as promised."

Recent projections for the current Petroleum Profits Tax have the state falling $800 million short of what was predicted by former Gov. Frank Murkowski's administration last year.

That's nearly enough to fund the state's entire public education budget for the current school year.

Palin says she wants a tax that is fair to the state, but also provides the industry with the right incentives for future the exploration and production.

"We must receive appropriate value for our oil," she said. "It must be a clear and equitable share."

But some lawmakers and industry leaders are skeptical, saying it's too soon revisit the tax lawmakers passed just last year.

Senate President Lyda Green, R-Wasilla, stood firm on her long-standing belief that a special session is not necessary to rewrite the state's Petroleum Profits Tax.

"There is nothing that we are going to be doing that can't wait until the regular session next year," she said. "It's way too early right now to say whether (PPT) is right or whether it isn't right."

Nevertheless, lawmakers will report next month to the capital. Palin earlier announced the special session, but on Tuesday explained the scope of what she wants lawmakers to consider and the venue for the session, which can last up to a month.

The current tax has a base rate of 22.5 percent on oil company profits, but also affords the companies various deductions and credits.

Palin said she wants lawmakers to replace the current net profits tax plan with what she calls a hybrid of a net and gross profits tax.

She is calling it Alaska's Clear and Equitable Share, or ACES. Some of those changes include:

- Raising the tax rate from 22.5 percent to 25 percent on net profits, a figure some lawmakers pushed for last year.

- Not allowing deductions on facility repairs deemed to be from poor or negligent maintenance.

- A 10 percent gross-based floor tax on some of the older or "legacy" fields such as those in the North Slope.

- Eliminate some deductions, including those for retroactive investments, known as "claw backs."

"What the governor is trying to do here is get a better return for the state and create an environment that encourages more investment, and for that I applaud her," said House Speaker John Harris, R-Valdez.

"I do believe once we get the bill in a few weeks, we will want some expert advice as to what the effects of the bill will be on the budget, on revenue and on investment," he said.

But House Minority Leader Beth Kerttula, D-Juneau, isn't convinced that Palin's plan will achieve the stated mission.

Kerttula said the changes don't go far enough to keep the tax laws simple and understandable.

"Right off the bat, I've got some grave concerns," she said. "We still don't have much of a picture as to what deductions are going to be allowed."

Senate Minority Leader Gene Therriault, R-North Pole, said he would like to see more details of Palin's plan.

"This is more than rounding off the edges," Therriault said. "There is a lot of detail we have yet to see.

"If they are true to their word and have run the numbers with good data, then what they proposed could ultimately result in a fair take for the state."

Palin has not formally proposed the changes in a bill just yet; she expects to do that in a few weeks.

Palin had earlier said she wanted the special session to be held on the state's road system, in places like Anchorage or Fairbanks, to allow the public greater access than in Juneau, the state capital that is only accessible by boat or airplane.

However, she deferred to the wishes of lawmakers to keep the session in Juneau, but has asked legislative leaders to consider holding committee hearings elsewhere.

www.adn.com

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Build trust on oil taxes

Editorial
Anchorage Daily News
September 5, 2007

* Lawmakers should heed call for hearings on road system
* Take it on the road, lawmakers. Share a little, Juneau.

Gov. Sarah Palin has called the special session on oil taxes for Juneau, despite being inclined to meet closer to where most Alaskans live.

She also has urged lawmakers to hold committee hearings and take public testimony on the road system.

That's a good idea, especially given the context of this special session.

This session aims to make sure that Alaska gets a fair return on the oil wealth that Alaskans own. This session is necessary to restore Alaskans' faith that their government can do that job with honesty and competence. The current tax regime carries the baggage of the current corruption scandal. This session must clear the air.

Tuesday, Gov. Palin stressed the message that the oil is ours. So is the government. That's why as many Alaskans as possible should have as good a look as possible at the work of the administration and lawmakers. While the Legislature will convene in Juneau, there's no reason that committee meetings can't be held in Anchorage, Fairbanks, Kenai, Wasilla and/or Palmer.

Yes, there are logistical problems. But those are well worth the trouble for the governor and lawmakers to come to the people. Lawmakers needn't wait for the governor's plan to hold hearings; oil tax bills already in various committees can provide vehicles for debate and testimony.

Gov. Palin's proposal will no doubt drive the session, and her tax bill likely won't be ready until early October. But she and Revenue Commissioner Pat Galvin on Tuesday outlined the highlights of their proposal. There's substance to debate now, and to compare with the other tax revisions in the works.

Gov. Palin knows that her first job is not an oil tax proposal, as important as that is. Her first job is to restore Alaskans' trust in their government. That's the first job of lawmakers too. And that's better done face to face.

BOTTOM LINE: Lawmakers, governor need to take special session to wider audience of Alaskans before they take it to Juneau.

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BP Alaska President Doug Suttles talks taxes

by John Tracy
KTUU News
September 5, 2007

*Channel 2 News interview with BP Alaska President Doug Suttles

ANCHORAGE, Alaska -- BP Exploration (Alaska) Inc. President Doug Suttles answered questions from Channel 2 News about Gov. Sarah Palin's proposal of a new oil tax regime that would effectively be a hybrid tax on net production and gross profits.

Channel 2 News: How is this hybrid net and gross profits tax proposal going to sit with the industry do you think?

BP Alaska President Suttles: I think what we all need to be worried about just now is the future for Alaska. I mean, the big issue we all face is decline, and what we need is a structure here that is going to focus investment.

I think the biggest concern at the moment is the net structure did encourage investment but the [tax] rate was already too high, and this looks like an increase - and the issue is competitiveness. We need to attract capital in all the areas of the industry.

Channel 2 News: Do you think the state's current Petroleum Profits Tax at 22.5 percent is a fair tax, and do you plan on encouraging lawmakers to keep it?

BP Alaska President Suttles: Well, I think that's right. I think our job in this is to get our view of the story out and make sure people understand the decision they face, and that we have a good and thoughtful debate.

Just to put this in perspective, the tax rate, I think, with this new structure, would have us almost 50 percent higher than places like the Gulf of Mexico or Alberta, Canada; and at least 25 percent higher than places like Texas, Oklahoma and Louisiana. So, Alaska needs to attract new dollars to offset decline.

Channel 2 News: One reason the governor stated for taking another look at the state's tax structure is the cloud of corruption under which the original vote was taken.

Clearly, two VECO Corp. executives were exerting influence on the vote, admitting to bribing lawmakers.

Isn't going back and at least re-affirming with a majority of the Legislature that the original bill is truly their intent a responsible thing to do?

BP Alaska President Suttles: I think we have to respect the governor's wishes here if she wants the Legislature to readdress [the PPT] and I respect her right to ask that.

I think what's important now is that we have a good and thoughtful debate. This is going to be about Alaska's future. Like I said before, we've got to encourage investment in this state and we need to make sure the tax structure will do that.

Channel 2 News: Another concern for critics of the PPT was the types of deductions the industry might take, including deductions for the repair and replacement of poorly-maintained pipelines, including the corroded feeder lines BP replaced at Prudhoe Bay. Alaska Department of Revenue Commissioner Patrick Galvin today said the state has yet to determine exactly how much BP deducted from its tax bill for replacing those lines, and that is part of the problem with the PPT.

Can you tell us how much BP deducted for replacing those lines, and how the company justifies those deductions?

BP Alaska President Doug Suttles: Of course, all we can speak to now is last year's tax filing. Last year, our severance taxes went from $180 million to over $500 million, so almost tripling, and that was inside of $2 billion in total government payments BP made. I think there are ways to solve questions around what deductions are fair and reasonable. There are good opportunities to do that through things like the joint interest billings that occur between the various owners of [Prudhoe Bay oil field].

I think there are ways to address those concerns that the state has enough transparency into what deductions are being taken.

Channel 2 News: Can you tell us, though; do you have a figure that you know that BP did deduct from its taxes for those repairs?

BP Alaska President Doug Suttles: You know, I don't have that on the tip of my tongue. Last year, the deductions were all predominantly in response to the spill in making sure we got production back on. Most of the expense for replacing those lines has been incurred this year and will be incurred next year, and those filings have yet to occur. So I just don't have that number in front of me.

Channel 2 News: BP and the other producers have said they won't be submitting a gas pipeline proposal under the requirements of the Alaska Gasline Inducement Act, but will you submit a plan anyway, so the public and lawmakers will have something to measure against whatever plan the state adopts under AGIA?

BP Alaska President Doug Suttles: Well, I think that's a really good question, and I think what we're doing right now is try to find a way to get this gas moving. We're completely aligned with the state and the governor wanting to find a way.

We had certain issues with AGIA and right now we are working with our partners to see if there is some way we can put a proposal forward so that the state can get it moving.

So, it's a little early to say but I can tell you we're working hard looking for opportunities to do that.

Contact John Tracy at jtracy@ktuu.com

www.ktuu.com

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Oil companies, associations express displeasure with tax proposal

By Stefan Milkowski
Fairbanks News Miner
September 6, 2007

The head of the Alaska Oil and Gas Association on Wednesday presented a long list of concerns regarding Gov. Sarah Palin's new oil tax proposal.

Marilyn Crockett said the proposal could decrease investment in the state by raising the tax burden on companies and scare companies away by presenting an unstable investment climate. She also said it would replace a tax that isn't broken and has hardly been given a chance to work.

"The industry does not want to have a special session," she told members of the Alaska Support Industry Alliance at a luncheon in Fairbanks.

Other members of the oil and gas association, which include ExxonMobil, BP and ConocoPhillips, some of the largest producers on the North Slope, also expressed their reservations about Palin's proposal.

"We agree with the governor's approach to stay with a PPT-based tax structure, however, we are concerned that the tax rates proposed will make every single project look less attractive for us to re-invest," Kevin Mitchell, vice president of finance and administration for ConocoPhillips, wrote in an e-mail to the News-Miner.

On Tuesday, Palin restated her intention to call a special legislative session next month to revisit the oil production tax passed last summer, and she presented an outline for a new tax that would increase the tax rate.

Palin said the current petroleum profits tax, or PPT, "isn't working as promised."

According to Revenue Commissioner Pat Galvin, revenues from the PPT will likely come in a little short of expectations in the fiscal year that just ended and very short of expectations next year. Instead of bringing in an additional $1 billion over the old tax system, the PPT will likely bring in about $250 million more in fiscal year 2008, according to department figures.

Crockett pointed to fiscal year 2007, in which the new tax is expected to add about $1 billion in state revenues over the old tax.

"Is PPT working? I would say that it is," she said.

Overall, she said, the state should be looking at how to encourage companies to invest in the state and keep production levels up, ensuring future tax revenues as well as revenues from royalties and property and corporate taxes.

"What we need to be focusing on is keeping that pipeline full," she said, "half-full at this point."

Oil production has dropped from a peak of more than 2 million barrels a day to less than 800,000 barrels a day, she said, and maintaining production levels will require significant new investment.

On Wednesday, Galvin pointed to cost increases faced by the companies in explaining the reduced revenue estimates.

Capital costs are now expected to be about 50 percent higher in fiscal year 2007 than was thought when PPT was passed, and about 100 percent higher in fiscal year 2008, he said.

PPT allows companies to deduct operating and capital costs and receive credits on certain capital costs.

Galvin acknowledged that by switching to a tax based on net company profits, the state had accepted the risk that revenues could drop if costs increased. He said the administration wanted to revisit the tax not to fill the revenue gap but because the projected revenues were so far off.

"It calls into question whether legislators would have made the same choice," he said.

Contact staff writer Stefan Milkowski at 459-7577 and at smilkowski@newsminer.com.

www.newsminer.com

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