blog2009

Mackenzie pipeline gets a boost

Nathan VanderKlippe
Globe and Mail
30 December 2009

Joint Review Panel concludes northern project should go ahead – but at a deliberate, sustainable pace

A decades-old northern dream has taken a major step ahead after the panel that was assigned to review the Mackenzie Valley natural gaspipeline concluded that it should go forward.

The Joint Review Panel, which has spent the past half-decade assessing the project, has concluded the $16.2-billion project “would deliver valuable and lasting overall benefits and avoid significant adverse environmental impacts.”

But in a 679-page report, the panel lays out a number of measures designed to slow the pace of Arctic development the pipeline could spur, in hopes of avoiding undue ecological and social pressures. In a step that is likely to be controversial, it presses the federal government to keep Canada's natural gas – not solely that flowing from the Arctic – away from projects like the oil sands.

Released Wednesday afternoon, the report does not give formal approval for the pipeline to go ahead – that power lies with the National Energy Board, which is expected to rule in September – but its positive findings are a significant boost to the project. It “is obviously a very positive development,” said Pius Rolheiser, spokesman for project lead backer Imperial Oil Ltd. (IMO-T)

The report includes 176 recommendations aimed at diminishing the pipeline's impact, but concludes that the pipeline will “provide the foundation for a sustainable northern future” – one that would be better with the major project than without it.

One of its major conclusions is that the pace of Arctic development must be tempered in an effort to avoid “cumulative effects” from multiple projects.

An unbridled approach to Arctic gas exploration could be detrimental to the area, the panel found, warning that unless work is carried out at a sustainable pace, the pipeline could bring activity “so large and so rapid as to outstrip the capacities and resilience of northern people, firms and governments.”

The panel found that the Mackenzie line would not adversely affect fish, but says broad regional plans must be created to limit activity that could hurt animals like polar bears, caribou, beluga whales and migratory birds.

It recommended the NWT conclude a revenue-sharing agreement with the federal government, since the territory will shoulder much of the pipeline's infrastructure and related costs but, under current funding structures, “would receive little of the revenue share directly.”

The panel discarded arguments that the pipeline should be blocked on grounds that it would be used to feed clean natural gas to the oil sands.
It did, however, recommend that the federal government establish a “preferential use of natural gas” that would see gas used to replace, rather than boost, “more carbon-intensive and polluting fuels.” That could mean keeping natural gas away from the oil sands, and instead using it to replace coal-fired electrical generation.

“To us that was really the most interesting recommendation there,” said Sierra Club of Canada executive director Stephen Hazell, who called it “a good idea.”

The report's length and complexity kept many of the project's backers from making specific comments Wednesday. Still, Fred Carmichael, the chairman of the Aboriginal Pipeline Group, said it “sounds very, very positive.”

The pipeline group owns a one-third share in the project. The project's corporate backers include Royal Dutch Shell PLC, (RDS.A-N) ConocoPhillips Canada, (COP-N) Exxon Mobil Canada (XOM-N) and Imperial Oil Ltd., which has led the consortium for the past decade. Together, they have proposed a project that would bring a new age of industrialization to one of Canada's most untouched regions.

The 1,197-kilometre line would bring up to 1.2 billion cubic feet a day of natural gas from onshore basins near the Arctic coast to the northern edge of Alberta, where it would connect to the province's distribution system.

Though the pipeline dream has stoked fears of cultural and environmental damage, it has also raised hopes among many northerners who yearn for the economic independence it could help to bring.

The seven-member review panel took three years longer than expected to deliver its report, at a total cost of $18.7-million.

Yet in many ways, the most contentious decisions remain to be made. The primary one will come from industry itself, which has to choose whether to build a massive new pipeline whose necessity has been called into question by abundant new North American natural gas supplies from massive shale reservoirs.

Another open question surrounds federal funding for the project. Ottawa has spent nearly a year in negotiations with the pipeline's corporate backers on a fiscal support package. Those talks have yet to conclude, raising questions about Ottawa's willingness to commit big dollars to the pipeline at a time it is spending tens of billions on stimulus measures – and raising fears in the North that the pipeline will fail, bringing about an “economic doomsday.”

Environment Minister Jim Prentice, who has overseen the Mackenzie process, was not available for comment Wednesday. An Environment Canada official said the ministry would not respond until it has completed “the necessary analysis and consultation.”

Industry has compared the pipeline to the western railway and the St.
Lawrence Seaway, arguing that federal support has always been needed for such nation-building exercises.

If the federal government steps in to help, “the Mackenzie story is going to be a great story for Canada for a long time,” said Hal Kvisle, chief executive officer of pipeline builder TransCanada Corp.

Source

Review Panel blesses Mackenzie Gas Pipeline

Foundation for a Sustainable Northern Future
Report of the Joint Review Panel for the Mackenzie Gas Project
December 2009

In the Panel’s view, the Mackenzie Gas Project and the associated Northwest Alberta Facilities would provide the foundation for a sustainable northern future.

All documents are available at the CEAA Registry

CONCLUSION

The Panel is confident in its assessment of the impacts of the Project as Filed and its likely contribution to sustainability. Because of the lack of or unreliability of information about future developments, particularly such developments as would be required to support an increase of throughput on the MVP beyond 1.2 Bcf/d, the Panel has made a number of recommendations specifically directed towards anticipating and allowing for appropriate mitigation of any adverse impacts of those developments. With the full implementation of these recommendations, governments and regulatory authorities responsible for reviewing and approving proposals for future developments would be better informed and would be equipped to ensure that appropriate and effective mitigation measures were in place before such developments were authorized to proceed.

The Panel acknowledges the uncertainty that is inherent in predicting the future and has approached the challenge that this presents as an opportunity/risk matrix. Accordingly, the Panel has given careful attention to means of anticipating and managing cumulative impacts and ensuring a positive legacy from the Project, possible expansions and other future developments. The Panel is confident that, with appropriate policy and regulatory initiatives and responses to manage future developments built on the implementation of the Panel’s recommendations, the MGP, and future developments that might follow from the Project, could proceed in an acceptable manner.

Overall, subject to the full implementation of the following recommendations, the Panel has concluded that the adverse impacts of the Mackenzie Gas Project and the Northwest Alberta Facilities would not likely be significant and that the Project and those Facilities would likely make a positive contribution towards a sustainable northern future.

In the Panel’s view, the Mackenzie Gas Project and the associated Northwest Alberta Facilities would provide the foundation for a sustainable northern future. The challenge to all will be to build on that foundation.

Executive Summary

China to buy stake in oilsands

Financial Post
December 30, 2009

Ottawa gives OK for investment by PetroChina

Industry Minister Tony Clement has approved a deal in which a state-owned Chinese company will invest $1.9 billion in Alberta oilsands properties.
The Minister of Industry is giving the go-ahead to one of China's biggest forays into Canada's natural resource sector, PetroChina International Investment Company Ltd.'s $1.9-billion investment in properties owned by Athabasca Oil Sands Corp.

In a statement late yesterday, Tony Clement said he approved the deal to purchase a majority stake in the MacKay and Dover Oil Sands projects "because I am satisfied that the investment is likely to be of net benefit to Canada."

Following its announcement on Aug. 31, the deal was hailed as a major endorsement by foreign investors in the oilsands, as well as a sign that China could be prepared to ramp up its investment in such projects, after lukewarm interest in recent years. At the time, the acquisition was expected to be completed on Oct. 31, and company officials said they did not anticipate much objection from the federal government.

The PetroChina transaction tested guidelines, issued by the Conservatives in 2007, governing takeovers by state-owned enterprises. PetroChina is the publicly traded arm of state-owned China National Petroleum.

Under the guidelines, the department reviewed the "nature and extent" of control by the Chinese government, PetroChina's corporate governance and reporting practices, as well as whether the acquired projects will operate on a "commercial" basis.

But the key determination by the government when it reviews a large foreign takeover is whether the country gains from the investment.

Clement singled out PetroChina's commitment to make capital expenditures of more than $250 million for its share of the projects over the next three years as a key factor in its determination of a "net benefit" to the country.

"In making my determination, I carefully considered the plans, undertakings and other information submitted by PetroChina," Clement said.
He also cited PetroChina's plan to increase employment levels at the projects and to maintain an Alberta head office for its operating companies as contributing factors.

If Clement had ruled against the takeover, it could have had a chilling effect on Chinese investment in Canadian natural resource companies. Such a move would have run counter to the Conservative government's long-standing goal of promoting competition and investment.

Source

Coast Guard runs two probes of grounding

By RICHARD MAUER
Anchorage Daily News
December 29th, 2009

'NORMAL' PATROL: One is to find why tug hit rock; other eyes traffic center.

The last and perhaps final working voyage of the tugboat Pathfinder appeared to have been routine and uneventful until it struck notorious Bligh Reef last week on the way home from an ice-scouting mission, the Coast Guard commander for Alaska said Tuesday.

"They were just out on a normal ice patrol," said Rear Adm. Christopher Colvin.

In a telephone interview from his office in Juneau, Colvin said his agency is conducting two parallel investigations into the Pathfinder's collision with the underwater rock, scene of the 1989 wreck of the Exxon Valdez. The Dec. 23 grounding resulted in a spill of a still-unknown quantity of diesel fuel and the disabling of the tug, but no injuries to its six-member crew.

Colvin said the Coast Guard marine safety office in Valdez was conducting a standard marine casualty investigation to determine why the boat hit the rock. A separate administrative review will look into the vessel traffic center in Valdez.

"Naturally, I have the same questions everybody else has," Colvin said. "I just want to make sure that our folks were doing what they were supposed to do, the way they were supposed to do it."

Colvin said he didn't know how long either investigation would take and wasn't prepared to provide preliminary information as it was learned. He said the crew had all given statements to investigators and were cooperating.

"This appears to be an accident. Nothing more," Colvin said.

Crowley Maritime Corp., the owner of the tug, said the boat's master and second mate have been relieved of duty pending further investigation. Colvin said the Coast Guard has not taken action against any of the crew's licenses.

On Tuesday, crews finished draining the remaining fuel from the boat's undamaged tanks and towed it from the fuel dock at Valdez about a mile to a container dock. The vessel, built in 1970, will remain there until it can be assessed for an ocean voyage to a drydock or shipbreaking facility, said Crowley spokesman Jim Butler.

"We're taking a hard look at the extent of the damage," Butler said. "It is an old vessel."

Butler said gauging specialists have been measuring the fuel unloaded from the tug and squeezed from absorbent boom placed around the vessel when it was still in Prince William Sound. The experts hoped to have an estimate of the missing fuel in a day or two, he said. About 33,500 gallons of fuel was in the two tanks gashed open in the collision, but a large portion was still floating in the tanks when they were emptied.

State officials have said the environmental damage appears to be minimal.

Colvin said the Coast Guard had officially notified the National Transportation Safety Board of the collision. The NTSB, which investigated the Exxon Valdez grounding, has the legal authority to intervene in the Pathfinder investigation but won't, said Keith Holloway, a spokesman at board headquarters in Washington, D.C.

The congressional agency picks its marine accidents carefully, he said, because it only has a handful of experts in the field. All were busy with the Dec. 20 crash in San Diego in which a speeding Coast Guard vessel struck a pleasure boat observing a waterborne parade, killing a child.

While the Pathfinder has human scouts to observe ice, the Coast Guard has special radar to do the same. But Colvin said the ice-tracking radar in Prince William Sound has been inoperable for about two months and won't be restored anytime soon.

The failure is the result of an unanticipated software problem that coincided with the nationwide upgrade of the U.S. vessel tracking system, he said. While the radar isn't officially part of the system, it uses the system to communicate with Coast Guard operations in Valdez. When the improvements were made, the radar went dead and there's no money in the current budget to fix it, Colvin said.

But Colvin said the missing radar didn't cause the Pathfinder to make its journey. That's because whenever the radar fails to pick up ice, a tug must be dispatched to make sure the transit lanes for oil tankers are really clear, he said. Before it wrecked, the Pathfinder had not encountered any ice in the shipping channels, making it likely that even with the radar, it would have been sent on its scouting mission, Colvin said.

"That's the weird thing about the ice radar -- if you don't detect anything on the ice radar, you probably have to send somebody out to make sure that there's no ice there," he said.

All Coast Guard navigation aids were working properly at the time, Colvin said.

As it headed out of Valdez, the Pathfinder called the Coast Guard vessel tracking center to say it was leaving the shipping lanes for ice patrol. It skirted Bligh Reef on its left, or port, side and headed west toward Columbia Glacier, the local source of ice floes and bergs. From there, it went to the east to the Bligh Reef side of the lanes, where windblown ice sometimes accumulates.

"They operate near the reef pretty routinely -- that's the challenge," Colvin said. "They were probably a mile south of the reef when they headed north, and apparently it's normal for them to head up on this course."

The Pathfinder crew called back to the Coast Guard vessel center in Valdez that their scouting was done, no ice was found, and they were heading home. They reported the grounding at 6:15 p.m., not long after it happened, Colvin said.

Source

Crews abandon efforts to skim oil

By RICHARD MAUER and ELIZABETH BLUEMINK
Anchorage Daily News
December 25th, 2009

Rock made infamous by Exxon Valdez is site of another spill

The tug Pathfinder is surrounded by a spill containment boom on Thursday, December 24, 2009, in Prince William Sound. It is the left of the two boats at the bottom right of photo.The Pathfinder, a 136-foot tug scouting for ice along Prince William Sound's oil shipping lanes near Valdez, Alaska, grounded on Bligh Reef. (Marc Lester / Anchorage Daily News). Click here for slideshow.

The owner of the disabled tugboat Pathfinder gained approval Thursday evening to begin pumping the remaining diesel fuel from the tug's two tanks that were slashed open on the unforgiving rock of Bligh Reef the night before.

The fuel transfer from the Pathfinder to the oil-spill response ship Valdez Star was expected to begin before midnight Thursday.

The 136-foot tug had been scouting the Valdez shipping lanes for ice Wednesday when it struck one of the most infamous maritime hazards in the world, 20 years and nine months after the Exxon Valdez came up hard aground on the same charted rock.

The six-member Pathfinder crew reported running aground on Bligh Reef at 6:15 p.m. Wednesday, though the Coast Guard didn't make the incident public until about 3:30 a.m. Thursday.

A still unknown amount of diesel fuel bubbled from the vessel into the sea. Off the reef 30 minutes later, the tug limped under its own power to a sheltered cove on the south side of nearby Busby Island, where it remained, surrounded by oil-spill containment boom.

Divers who inspected the hull of the Pathfinder in the predawn darkness Thursday morning discovered major damage to the vessel. A 4- to 5-foot section of the keel was missing, and three fuel tanks were breached.

The Coast Guard sent a Jayhawk helicopter and C-130 plane over the area in the morning and discovered a silvery sheen three miles long and 30-feet wide about a mile east of Glacier Island.

The Valdez Star with its skimmers was sent out in early afternoon to try to recover the fuel, but the effort came up empty-handed.

"There's no recoverable sheen," said Jim Butler, a spokesman for Crowley. "That was based on overflight and equipment operating in the area."

While diesel fuel is toxic, it gets diluted relatively quickly through dispersion and evaporation, Butler said. Though it doesn't just "go away," it doesn't persist like crude oil, which globs up on beaches and tidal pools and can continue to pollute for years. The Exxon Valdez spilled an estimated 11 million gallons of North Slope crude, and its effects are still being felt in the Sound.

The Coast Guard reported that marine forecasters didn't believe the fuel sheen would touch Glacier Island, at least for the next 24 to 36 hours, and they expected it to dissipate rapidly.

After the failed skimming operation, the Valdez Star turned back to Busby Island at mid-afternoon to be on hand for the fuel transfer. Two of the three breached tanks contained fuel, while the third was empty. Secure tanks holding another 65,000 gallons of fuel will not be emptied, officials said.

Once the remaining fuel is removed, officials said they will be able to estimate how much of the 33,500 gallons originally in those tanks spilled into the water.

The Alaska Department of Environmental Conservation reported that the main engine of the Pathfinder is inoperable. The federal on-scene coordinator, Coast Guard Lt. Erin Christensen, said Thursday night that a marine towing company, Titan Marine, was drawing up plans to tow the Pathfinder to Valdez for further assessment.

Butler said the journey could begin Christmas Day and take roughly five hours to cover the 17 miles from Busby to the port.

The Coast Guard announced Thursday afternoon that a unified command made up of officials from the Coast Guard, the Alaska Department of Environmental Conservation and Crowley had been established to manage the after-effects of the disaster. Unified commands are used when agencies and companies with different jurisdictions and responsibilities need to respond to a large-scale incident.

Butler said he had no information about how the ship ran into the reef, a question that had some people responding with disbelief.

"How did it hit the most famous rock in Prince William Sound?" asked Stan Jones, spokesman for the Prince William Sound Regional Citizens' Advisory Council, a watchdog group funded by the oil industry after the oil spill.

Coast Guard officials said Thursday they were also trying to find out why the tug hit the reef. A Coast Guard inspector from Valdez talked to the crew, but Christensen couldn't say when the information from the interviews would be made public.

The Exxon Valdez captain, Joe Hazelwood, had been seen drinking before the wreck, but he was cleared of drunken navigation charges in part because it took hours to measure the alcohol content in his blood after the disaster.

Tests administered to the Pathfinder crew before 10 p.m. turned up no alcohol, the Coast Guard said. Results of drug tests would be available in three or four days, Christensen said.

Crowley, based in Seattle, is a marine services contractor for Alyeska Pipeline Service Co., which runs the trans-Alaska pipeline for its oil-company owners.

When it struck the reef, the Pathfinder was scouting the shipping route from Valdez to Hinchinbrook Entrance, a passage between two islands through which oil tankers enter and exit the Gulf of Alaska, the Coast Guard said

The National Weather Service said that seas were as high as 6 feet near Bligh Reef on Wednesday. Thursday morning, seas were at 2 feet and winds were blowing from the northeast at 10 to 15 knots. Winds could increase to 25 knots Thursday night, said Andy Brown, a lead forecaster for the National Weather Service in Anchorage.

Source

Accord reached on global warming

COMMENT: After all that hoopla ... this? It wasn't worth the greenhouse gases it took to get it.

KELLY CRYDERMAN
Vancouver Sun
December 19, 2009

The deal: Rich countries hammer out a general agreement to reduce emissions

An international deal on global warming was reached late Friday, a last-minute breakthrough that was described as only a first step and insufficient to fight climate change.

"We have much farther to go," U.S. President Barack Obama said, adding that more trust would have to be built between rich and poor nations to reach a legally binding pact.

The talks went into overtime Friday, bolstered by hopeful discussions between the U.S. and China, but muddled by numerous confusing drafts of a new United Nations agreement swirling through the conference centre.

Obama reportedly reached a "meaningful agreement" with Chinese Premier Wen Jiabao, Indian Prime Minister Manmohan Singh and South Africa's President Jacob Zuma after a day of deep divisions between leaders of rich and developing nations.

A key compromise was an allowance for poor or developing countries that don't take international financing to avoid international monitoring of their emissions. The move was a pointed concession to China, which has fought such strict controls.

The so-called "Copenhagen Accord" lays out a general agreement for reducing greenhouse gas emissions. Under its guidance, countries would strive to keep temperature change below two degrees Celsius. Rich countries would reduce their emissions by 80 per cent by 2050 -- brought to fruition with various country commitments to be written into an annex at some future date.

The document said "nationally appropriate mitigation measures" will be laid out for developing countries.

In a concession to developing nations and small island states most vulnerable to climate change, it said a rise in world temperatures should be limited to two degrees Celsius, with a review in 2016 that would also consider a tougher limit of 1.5 Celsius.

"The preponderance of scientific evidence and opinion is that climate change is a very real challenge. The science continues to evolve -- we've had some controversy recently because the science is not uniform, not every scientist agrees on every detail, but we are guided by the preponderance of the evidence and that is absolutely clear," Prime Minister Stephen Harper, one of 120 world leaders at the climate summit, said Friday night.

"I know there will be people running out there saying targets are not hard enough but let me assure you what we and others are committed to do over the next decade will have real impacts and real challenges on players in the Canadian economy."

Harper also spoke of the oilsands-- often and loudly targeted by environmental activists on the streets of Copenhagen throughout the summit.

"The oilsands are I think, about four per cent of Canada's greenhouse gas emissions. They are a rapidly growing percentage," said Harper.

The proceedings were a day behind schedule and rumours swirled of talks going well into the weekend. Earlier in the day, Obama chastised world leaders for allowing squabbling to leave the United Nations pact in limbo so late in the process.

"I have to be honest, as the world watches us today, our ability to take collective action is in doubt right now," the U.S. president said.

Source

Saskatchewan: Nuclear? Not Now

By Angela Hall
with files from James Wood
Leader-Post
December 18, 2009

Decision day

Saskatchewan residents won't see a nuclear power plant on the horizon in the next decade but a reactor might still make sense in the future, the provincial government said Thursday.

Energy and Resources Minister Bill Boyd said the decision means the government doesn't support Ontario-based Bruce Power's study that a nuclear power plant could add 1,000 megawatts to the Saskatchewan grid by 2020.

Boyd said worries about the impact of nuclear power generation on consumers' power bills was a chief factor in the Saskatchewan Party government's decision. There was also concern about the need to appropriately match power supply with demand, he said.

"When you look at all of those kinds of things -- cost drivers, demand, all of those things -- we are of the view that this is simply not something that meets with the needs of Saskatchewan at this particular time," Boyd said.

"When you look at beyond 2020, we still think it should be in the basket of options that SaskPower has to take a look at."

The comments came as Boyd held a news conference to respond to the findings of the Uranium Development Partnership (UDP), a government-appointed panel that in the spring recommended the province pursue nuclear power.

As well, a feasibility study released by Bruce Power one year ago identified the area between Prince Albert and Lloydminster as the possible region where a nuclear reactor could be located.

But SaskPower is looking at sources such as wind, natural gas, clean coal and hydro to meet power demand over the next decade, and Boyd said those projects call into question the need to add 1,000 MW from a large-scale nuclear reactor in 2020 -- the approximate year a nuclear plant could open if regulatory work began now.

Boyd said the research into the possibility of smaller nuclear reactors holds promise and may be a better option for the province post-2020.

"We want to match demand with the generation capacity as it goes forward. So while we may be looking at the need for an additional 1,000 MW by 2020 it's not in one lump sum," Boyd said.

The decision on nuclear power appeared to mark something of a shift for the Saskatchewan Party government, which had earlier seemed warm to the possibility.

But the NDP questioned why the government took several months -- and spent $3 million on the UDP process -- to arrive at what it called a non-decision.

"The door is completely open to Bruce Power post-2020. It shows huge indecision on this government's behalf," said Opposition MLA Trent Wotherspoon.

However, Ann Coxworth of the Saskatchewan Environmental Society called the government's direction wise and cautious, saying it will clear the air to plan for a "sustainable electricity future."

"Nuclear power has been the elephant in the room in all of our thinking about energy planning for the next decade and while the elephant hasn't been killed it's securely locked up in its cage," said Coxworth, adding she didn't anticipate a wholesale rejection of nuclear.

Coxworth also said there were "clear economic arguments against going with the nuclear option."

But Steve McLellan of the Saskatchewan Chamber of Commerce said the government didn't base its decision on good economics, charging it pulled the plug before even receiving a formal proposal from Bruce Power.

"They reacted to the fact that everybody thinks it's expensive but when you start to take into account the carbon costs, you take into account escalating infrastructure costs for any type of new power supply, they should have done full due diligence," McLellan said. "They've written it off for reasons that are unknown to us."

The costs of nuclear power generation might become more competitive after a price is put on carbon emissions, which could heavily impact traditional coal-fired generation, said Richard Florizone, the University of Saskatchewan vice-president who chaired the UDP panel.

"What we said is nuclear should be considered as a long-term option. We said that because nuclear is a clean, safe alternative and under the right circumstances it can be economically attractive as well," Florizone said.

"As we showed in our report, when you start to get carbon pricing in the range of $20 to $30 a tonne, the business case changes quite a bit. But until you have clarity on that I think going forward on nuclear is probably a bit too much of a risk."

As for Bruce Power, the company's outlook on the province hasn't really changed, spokesman John Peevers said.

"We see this announcement as not being very far off our take on what potential there is in Saskatchewan," Peevers said. "Saskatchewan obviously continues to consider nuclear energy as part of its mix. Nothing has been ruled out. We don't see it really changing that much as we've always looked at 2020 and beyond."

The private company is not looking for government subsidies, he said, contending that while up-front costs of nuclear are high it's a cost-effective source of electricity once a plant is up and running.

Lloydminster-area farmer Daron Priest, who helped spearhead a grassroots campaign against nuclear development, said he wanted to see the government take a more concrete position.

"I sure would like to see the door completely shut on it," Priest said.

© Copyright (c) The Regina Leader-Post

Source

Alberta shale gas play in spotlight

Carrie Tait,
Financial Post
December 17, 2009

(Matt Nager/Bloomberg News)

CALGARY - A new natural-gas shale play, akin to the Horn River gas field in northwestern British Columbia, is emerging in Alberta, and explorers made a multi-million gamble on the zone earlier this week.

Alberta, which has been pummeled by low natural-gas prices and a royalty structure that producers dislike, raked in $383.9-million in its last oil and gas rights auction of 2009. The Devonian Duvernay shale was the star area.

"We believe there is sufficient evidence to portray the Duvernay as a reasonable analog to the well known, related Muskwa shales of Horn River,"
Robert Fitzmartyn, vice-president and director of institutional research at FirstEnergy Capital Corp., said in a research note.

The Horn River gas field may contain up to 500 trillion cubic feet of natural gas – a mammoth find. The Duvernay zone, in comparison, is a mere speck considering Mr. Fitzmartyn estimates it may contain 25 trillion cubic feet of natural gas. However, the Duvernay, which sits west of Edmonton, might attract more attention.

"The Duvernay is going to have its advantages," Mr. Fitzmartyn said in an interview. "It has the infrastructure [like pipelines and gas plants] there; it might be better rocks."

"People don't appreciate how far north the Horn River is and how desolate it is and the logistical challenges of working up there."

Further, while initial estimates peg the new find at a fraction of the Horn River's size, 25 trillion cubic feet of natural gas is nothing to scoff at.

"It is still going to move the dial," the analyst said. Alberta does not disclose which companies participate in land auctions. EnCana Corp. and Talisman Energy Inc. are among those which Mr. Fitzmartyn believes may be involved.

The land auction has the oilpatch buzzing for another reason. Alberta has fallen out of favour when it comes to the natural gas business because explorers and producers can get better royalty deals in jurisdictions like British Columbia. The province will soon complete its so-called competitive review, which could lead to further changes to the royalty structure. Mr. Fitzmartyn thinks the oil companies' bet in the land sale could reflect confidence that a better fiscal deal is coming.

"Maybe people wouldn't make this bet if they didn't think changes might be imminent," he said.

British Columbia yesterday boasted about how the changes it made to its royalty structure throughout 2009 prompted oil and gas companies to spend more than they planned.

"Stimulus has incented producers to increase their expected 2010 investment by [$600-million] or 38.4%, to a total of $2.1 billion in 2010," the province said in a press release.

"Before stimulus, investment in B.C. in 2010 would have been 18.5% lower than 2009 investment levels," the province said. "With stimulus, investment in 2010 is expected to be 12.7% higher (estimated) than 2009 investment levels."

The statistics are based on a survey B.C. conducted with producers representing 67% of its 2008 natural gas production. The vast majority of B.C.'s oil and gas activity is contained in the Horn River and the Montney, another unconventional gas play.

Source

The Enbridge Oil Sands Gamble

by Andrew Nikiforuk
Special to CorpWatch
December 14th, 2009

Cartoon by Khalil Bendib

Patrick Daniel, the CEO of Enbridge Inc, is bullish about the future of unconventional oil from Canada’s massive tar sand deposits. And understandably so. His successful company not only operates North America’s longest crude oil and liquid pipelines, but transports 12 percent of the oil that the United States imports daily from Canada.

“Energy is necessary for us to live long healthy lives,” he told a business audience this past September during remarks to the Edmonton Chamber of Commerce. “The oil sands is the second largest reserve in the world, and we can’t deny access to the rest of the world to that huge resource.” [1]

Canada's highly unconventional resource (heavy oil from sand or rock) lies under a forest area the size of England (140,000 square kilometers) and is arguably the world’s last remaining giant oil field. Almost every major private and state-owned oil company has a presence in the tar sands. The project could make Canada the world’s fifth largest oil exporter by 2020.

But Daniel’s boosterism for unconventional oil is not shared by the band council of Hartley Bay, near the northern deep-water port of Kitimat, British Columbia (BC). When he showed up in September, community members of the Gitga'at people sat across from the proposed marine terminal for Enbridge’s $5 billion Northern Gateway pipeline.

The 1,170 kilometer-long dual pipeline would daily transport 525,000 barrels of bitumen, from Edmonton, Alberta, across two provinces and over mountains in some of the world’s most rugged terrain to Kitimat. From there, ocean tankers would take the inferior asphalt-like hydrocarbon to Asian refineries for processing into transportation fuels.

A parallel and smaller pipeline would move highly toxic condensate (a petroleum by-product used to thin heavy oil) imported from Russian and Indonesian markets to Alberta’s tar sands. Bitumen, a thick gooey resource with low gravity, simply can’t move through a pipeline unless diluted with up to 50 percent condensate. (For company information on the project, consult: http://www.northerngateway.ca/)

The project will traverse lands claimed or occupied by 40 aboriginal groups. The Gitga’at people, who have lived long and healthy lives by the Pacific Ocean for thousands of years without consuming much condensate or oil, told Daniel that his grand scheme threatened their traditional way of life as well as their food supply, including salmon, mussels and sea kelp.

“You are welcome in our territory as individuals, but your project is not,” declared Hereditary Chief Ernie Hill Jr. Other salmon-dependent people along the pipeline or tanker route – including the Haida and the Haisla – gave Enbridge similar blunt messages. The tar sands, said Haida Nation leader Guujaaw, "is one of the biggest unnatural disasters going on in the world right now.”

The stage is set for an epic battle between Asian and Canadian backers of North America’s most powerful oil carrier and an assortment of aboriginal and environmental groups in Canada’s greenest province, British Columbia. The unfolding petroleum drama, which will expose Asian refiners to extreme capital and carbon risks, could ultimately determine the pace and scale of the world’s largest energy development. The Northern Gateway pipeline also raises a moral question: Is it in Canada’s best interest to put more cars on the road in Shanghai at the expense of the world’s most valuable salmon-spawning watersheds and the security of the globe’s climate?

Global Reach

By any measure the tar sands project is a formidable energy power play. The world’s major petroleum companies including the U.S.’s Exxon, Norway’s Statoil and France’s Total have poured more than $100 billion into developing the project over the last decade, and it now produces 1.3 million barrels a day.

But bitumen, which is more than 50 per cent pitch, is not a secure replacement for sweet crude. For starters, the asphalt-like sludge remains the world’s most expensive hydrocarbon ($60 to $85 per barrel) because of the enormous amount of energy and water needed to extract it from the ground. Upgrading bitumen into synthetic crude, a process that removes carbon and adds hydrogen molecules, also requires more energy in the form of natural gas. But even the upgraded product remains so highly contaminated with sulfur, salt, acids and heavy metals that it needs additional, complex refining.

Not surprisingly, then, low quality bitumen from the tar sands has increased the energy and greenhouse gas output of U.S. refineries by 47 percent. [2] According to Canada’s National Center for Upgrading Technology, bitumen simply proves the industry maxim that “as crude prices increase, crude quality decreases.” [3] Although many Chinese refineries can process heavy crude such as bitumen, only five of Japan’s 50 refineries can currently handle the dirty hydrocarbon without fouling their facilities.

But Asia’s interest in Canadian bitumen is long standing owing to the region’s near total dependence on Middle Eastern crude. Japan now imports 90 percent of its oil, while China has increasingly exhausted its domestic oil resources to fuel its industrial revolution. Its oil imports rose from 1 percent in 1993 to nearly 50 percent today. The U.S. Department of Energy estimates that by 2025, some 70 percent of China's expected 14.2 million barrels daily consumption will come from oil fields in Africa, South America or Canada.

Not surprisingly, state-owned PetroChina heavily supported Enbridge’s first attempt to steer the Gateway project through Canada’s regulatory regime. But Asia’s largest oil company withdrew in 2007 after confronting Canadian political indifference and open U.S. hostility to the pipeline. (Some of that hostility directly relates to PetroChina’s unsuccessful 2005 attempt to buy out Unocal, a U.S. oil company with critical reserves in Asia.)

Last year Enbridge revived the Gateway scheme by securing $100 million in funding from 10 anonymous tar sand producers and Asian shippers (PetroChina is probably among them). A year later PetroChina paid $1.9 billion for a majority share of two tar sand properties. The state owned Korean National Oil Co. also gobbled up $1.8 billion in assets.

But bitumen investment comes with high carbon risks. The Chinese company purchased deep deposits of bitumen that can only be extracted in situ by steam plants (oil sands must be either mined or recovered in situ), perhaps the most greenhouse gas intensive industry in global oil production. (See Sidebar.)

China and the New Oil Order

A leading champion of Chinese investment in the tar sands is Paul Michael Wihbey, director of the Washington, D.C.-based energy consulting group (GWEST, or Global Water & Energy Strategy Team http://www.gwest.net/), and a former vice president of Canada's Liberal Party. Given that China and Canada rank as the largest trading partners with the United States (and that the three countries consume 35 percent of the world’s oil), Wihbey argues that “the nexus of China’s energy relationship with North America is the development of unconventional heavy oils.” Wihbey calls it “the new oil order” and believes that only the globalization of bitumen can keep the Chinese and U.S. economies afloat. [4]

Canadians such as Enbridge’s Daniel are only too anxious to make that corridor happen. The United States currently remains the only and largest market for Canada’s dirty oil. Enbridge, the number-one shipper of bitumen and synthetic crude from the tar sands, has already overbuilt capacity to U.S. markets in the Midwest. [6]

Moreover, the U.S. government has started to review its growing dependence on Canada’s dirty oil. Growing interest in low-carbon fuel standards, a new climate change program, and a push by some members of the U.S. military to reduce domestic oil consumption have made Canadian tar sand producers uneasy. A Chinese market would provide “an additional export outlet,” noted Hong Kong billionaire Li Ka Shing in Oilweek Magazine. “Then you won’t be subject to the U.S. as the one buyer.” [7]

But market diversification for bitumen would impose a high ecological price, and impact the northern British Columbia salmon-dependent communities particularly hard. The Northern Gateway pipeline will cross the 785 rivers and streams [8] that form the world’s most productive salmon habitat. Pipeline construction and operation will increase risks from pollution, oil spills and avalanches. And Enbridge’s record safety record is by no means stellar. When its 6,000 barrel spill threatened the Mississippi River in 2002, the company lit the oil ablaze, creating a smoke plume one mile high and five miles long. [9] In 2006 the company reported 67 spills totaling nearly 6,000 barrels, and the next year more than doubled the amount of oil released into the environment.

Respect for laws and landscapes is another issue. After building a bitumen pipeline across Wisconsin in 2008, the company paid the state $1 million in fines for 545 violations of its water and wetland laws. [10]

The Trans Alaska Example

The fate of BC’s wild and majestic coastline is what most worries northerners and aboriginals. The pipeline would not only accelerate bitumen production in Alberta, but bring as many as 300 supertankers a year to the port of Kitimat. Navigating the Douglas Channel, a narrow fjord, is no easy task. In the last two years, residents have witnessed two major boating incidents including the sinking of a ferry. According to Environment Canada, increased tanker traffic would also expose BC coastal waters to average spills of 1,000 barrels every four years and 10,000 barrels every nine years.

“It’s not a matter of if, but of when an oil spill happens,” says Cam Hill, a teacher and council member in Hartley Bay. “It would be catastrophic to our people and our way of life.” It would also disrupt marine life, including many whale species and dolphins, seals, and porpoises.

Opponents argue that the Gateway Project poses many of the same risks to northern British Columbia that the Trans Alaska Project (TAP) brought to rural Alaska: ecological and cultural disruption, persistent leaks, and massive spills – the worst of which was the 1989 Exxon Valdez disaster that released 240,000 barrels of pipeline oil when the tanker foundered. That spill dramatically altered the lives of 39,000 people living in coastal communities, and left residue that "is nearly as toxic [today] as it was the first few weeks after the spill,” [11] according to a 2009 report.

But although the risks from TAP and the Northen Gateway pipeline are similar, the benefits are not: Because bitumen carried by Enbridge's pipeline is neither refined nor produced in British Columbia, it will produce little or no royalty income for the region. It is simply a hydrocarbon freeway, and the money, like the oil, will flow elsewhere.

Enbridge advocates counter that rather than replicating TAP's failures, their project will resemble Norway’s Mongstand facility in Fensfjord where 250 oil tankers do business every year. “One only has to look at Norway’s national trust fund, their standard of living, health care, the simple transformation from basically a subsistence economy to one of the richest in the world to realize the potential derived from the fossil fuel industry,” noted one Gateway supporter in a September letter to the Kitimat Northern Sentinel. The writer omitted that Canada, unlike Norway, has no sovereign oil fund. In contrast to Norway, which charges some of the world's highest royalties and taxes on oil, Canada and Alberta charge among the lowest. In other words, few benefits would accrue to the rural residents other than a boom and bust economy created by 4,000 temporary construction jobs.

The capital risks are also significant. A 2009 Deutsche Bank study on peak oil concluded that carbon pricing and disruptive technologies such as the electric car could ease demand for petroleum products by 2015, the same year Enbridge hopes to bring its bitumen pipeline on stream. The bank study adds that, “We believe refining is a twilight business that will struggle in a world of ever declining gasoline demand.” Moreover strategic Chinese investments in natural gas and renewables could dramatically reduce that country’s “oil intensity of GDP growth.” [12]

“Canadian heavy oil sands” and other carbon intensive resources are unsafe investments, the report concludes, since the world, "will not grow the oil market.”

When the Northern Gateway project begins public regulatory hearings with Canada’s National Energy Board next year, the debate will include global carbon policies, sustained oil price volatility, electric cars, and the impact of building two pipelines across a fragile landscape claimed by aboriginal communities only to put more cars on roads in Asia.

(Andrew Nikiforuk is an energy and environmental writer based in Calgary, Alberta. His book, Tar Sands: Dirty Oil and the Future of a Continent, won the 2009 Rachel Carson Environmental Book Award.)

ENDNOTES:

[1] Patrick Daniels, Energy, Environment and the Economy, Remarks to the Edmonton Chamber of Commerce, September 23, 2009.

[2] Greg Karras, Refinery GHG Emissions From Dirty Crude, Communities for a Better Environment, April 20, 2009. Available at: http://www.cbecal.org.

[3] National Centre for Upgrading Technology, Oilsands Bitumen Processability Project, March 2006.

[4] Paul Michael Wihbey, Towards a New Oil Market Order: Heavy and Unconventional, World Heavy Oil Conference, Beijing, China, November 13, 2006.

[5] Claudia Cattaneo, “China’s Oil Giant Seeks Alliance with Canada, Financial Post, June 1, 2009.

[6] Sonja Franklin, Enbridge CEO Sees Pipeline Overcapacity to US, Bloomberg, October 7, 2009.

[7] Andrea W Lorenz, Opening the Door: Pipelines are Lining up Again to Satisfy Asian Thirst for Canadian Crude Oil, Oilweek Magazine, October 1, 2008.

[8] David A Levy, Pipelines and Salmon in Northern British Columbia, Pembina Institute, October 2009.

[9] US National Transportation Safety Board, Rupture of Enbridge Pipeline and Release of Crude Oil near Cohasset, Minnesota, July 4, 2002, Pipeline Accident Report, NTSB/PAR, 2004.

[10] Wisconsin Department of Justice, Enbridge Energy Settles State Lawsuit Over Environmental Violations for $1,100,000, January 2, 2009.

[11] Exxon Valdez Oil Spill Trustee Council, Legacy of An Oil Spill: 20 Years After the Exxon Valdez, 2009.

[12] Deutsche Bank, The Peak Oil Market: Price Dynamics At the End of the Oil Age, October 4, 2009.

[13] John Nenniger, N-Solve: The Profits of Energy Efficiency vs. the High Costs of Carbon Capture, presentation to PTAC Towards Clean Energy Production Forum, Calgary, Alberta, October 2008.

[14] Statoilhydro, 2008 Offshore Environmental Statement, March 23, 2009, p. 6.

[15] National Energy Technology Laboratory (NETL), An Evaluation of the Extraction, Transport and Refining of Imported Crude Oils and the Impact of Life Cycle Greenhouse Gas Emissions, DOE/NETL-2009/1362, March 27, 2009.

[16] Charles A.S. Hall et al, What is the Minimum EROI that a Sustainable Society Must Have? Energies, January, 2009.

Source

Northern Gateway Pipeline: Availability of Funding

The Canadian Environmental Assessment Agency (the Agency) is making available $600,000 under its Participant Funding Program to assist groups and individuals to participate in the environmental review of the proposed Northern Gateway Pipeline Project.

The deadline to submit a funding application is December 18, 2009. Funding applications received by the Agency by this date will be considered.

The Joint Review Panel Agreement has been released. It describes the Panel’s terms of reference as well as the process to be followed for conducting the joint panel review. This will help applicants finalize their application for funding.

This funding is being made available to help successful applicants review and comment on the application to be submitted by the proponent, Enbridge Northern Gateway Pipelines. The application will include the environmental impact statement. The funding may also be used to prepare for and participate in the public hearings that will be announced at a later date.

A funding review committee, independent of the review process, will consider all applications and make recommendations on the allocation of funds.

Information on the funding program, the proposed project, and the environmental assessment process is available on the Agency’s Web site, registry number 06-05-21799.

To apply for funding or to obtain more information on the program, contact:

Suzanne Osborne, Participant Funding Program
Canadian Environmental Assessment Agency
160 Elgin St., 22nd floor, Ottawa ON K1A 0H3
Tel.: 1-866-582-1884 / 613-957-0254
Fax: 613-948-9172
suzanne.osborne@ceaa-acee.gc.ca

Enbridge Northern Gateway Pipelines proposes to construct and operate two pipelines, 1,170 km in length, between an inland terminal at Bruderheim, Alberta and a marine terminal near Kitimat, British Columbia. About 500 km of pipeline will be in Alberta and 670 km in British Columbia. One of the pipelines will carry petroleum west to Kitimat and the other line will carry condensate east to Bruderheim. The project also includes the construction and operation of an integrated marine infrastructure at tidewater to accommodate loading and unloading of oil and condensate tankers and marine transportation of oil and condensate.

Source

Pipeline review draws criticism

By Judith Lavoie
Times Colonist
December 5, 2009

Environmentalists say scope of hearings is too narrow

Federal terms of reference for assessing the proposed Enbridge Northern Gateway Pipeline brought instant condemnation from environmental groups yesterday.

The Canadian Environmental Assessment Agency and the National Energy Board announced they will hold open forums on the pipeline, which would run from the Alberta oilsands to a port at Kitimat.

"The public and aboriginal groups are encouraged to bring their views on the Northern Gateway Pipeline Project forward to the Joint Review

Panel once the panel is established," said a news release.

The panel will consider whether the project is likely to cause significant adverse environmental effects and if it is in the public interest.

Once hearings are finished, the panel will submit recommendations to the federal government.

But environmental and aboriginal groups say the scope is too narrow and the panel will not have enough clout.

"The proposed Enbridge Northern Gateway project would result in a 30 per cent increase in average daily oilsands output, with major environmental consequences, but the environmental assessment of the project will ignore these impacts," said Karen Campbell, staff lawyer with the Pembina Institute.

Eric Swanson of the Victoria-based Dogwood Initiative said the process will not ask British Columbians if they want to accept the risk of an Exxon Valdez-type spill on the province's north coast.

"If it did, Canadian taxpayers could save a lot of money because 72 per cent of British Columbians are opposed to oil tanker traffic on our north coast," Swanson said.

Both the Pembina and Dogwood organizations promote sustainable development.

Opposition to the project will increase because of the weak terms of reference, said Jessica Clogg, West Coast Environmental Law executive director.

"Given the potentially devastating risks, citizens can be rightfully concerned about a federal environmental assessment process that has a track record of giving the thumbs up to over 99 per cent of the projects," she said.

If approved, the 1,170-kilometre pipeline would run between Bruderheim, Alta., and Kitimat, where crude oil would be loaded onto supertankers. A second line would carry condensate from Kitimat to Bruderheim.

About 670 kilometres of the pipeline would be in B.C.

jlavoie@tc.canwest.com

Source

Northern Gateway Pipeline: Joint Review Panel Agreement Issued

OTTAWA, December 4, 2009 – The Canadian Environmental Assessment Agency (the Agency) and the National Energy Board (NEB) issued today the Joint Review Panel Agreement (the Agreement), including the Terms of Reference, for the environmental and regulatory review of the proposed Northern Gateway Pipeline Project.

The joint review panel process will provide an opportunity for all hearing participants to make their views known on the project in an open and transparent forum. The public and Aboriginal groups are encouraged to bring their views on the Northern Gateway Pipeline Project forward to the Joint Review Panel (the Panel) once the Panel is established.

The Agreement was issued for public comment before being finalized. The Agreement describes the Panel’s terms of reference as well as the process to be followed for conducting the joint panel review.

The Panel has a broad mandate under both the National Energy Board Act and the Canadian Environmental Assessment Act to consider whether the project is likely to cause significant adverse environmental effects and if it is in the public interest. After conclusion of the review process, the Panel will prepare a Panel Report setting out its conclusions and recommendations relating to the environmental assessment of the project. Following the government response on the Panel Report, the Panel will then issue its reasons for decision under the National Energy Board Act. More specifically, the Panel will:

• examine all matters related to the project such as safety, engineering and economics;

• conduct an examination of the environmental effects of the proposed project and the significance of those effects;

• consider measures that are technically and economically feasible to mitigate any adverse environmental effects, the need for and the requirements of any followup programs with respect to the project;

• consider comments from the public that are received during the review;

• hold public hearings;

• submit to the federal government a report with recommendations about the project; and

• issue its Reasons for Decision pursuant to the National Energy Board Act.

Additional information on the Agreement is available in the accompanying backgrounder.

The Agreement, including the Terms of Reference, as well as additional information on the project are available on the Agency’s website at www.ceaa-acee.gc.ca , under reference number 06-05-21799, and on the NEB’s website at www.neb-one.gc.ca.

The Agency administers a Participant Funding Program which supports individuals and non-profit organizations and Aboriginal groups interested in participating in the review panel process. Next steps in the review process will include the appointment of the Panel members, the announcement of the participant funding recipients and the filing of the project application by Enbridge Northern Gateway Pipelines to the NEB. The Panel will provide additional opportunities for public input and input by Aboriginal groups on the List of Issues to be considered by the Panel. Additional information will be available when the Panel issues its Hearing Order.

About the Project

Enbridge Northern Gateway Pipelines proposes to construct and operate two pipelines, 1,170 km in length, between an inland terminal at Bruderheim, Alberta and a marine terminal near Kitimat, British Columbia. About 500 km of pipeline will be in Alberta and 670 km in British Columbia. One of the pipelines will carry crude oil west to Kitimat and the other line will carry condensate east to Bruderheim. The project also includes the construction and operation of an integrated marine infrastructure at tidewater to accommodate loading and unloading of oil and condensate tankers and marine transportation of oil and condensate.

About the Canadian Environmental Assessment Agency

The Canadian Environmental Assessment Agency administers the federal environmental assessment process, which identifies the environmental effects of proposed projects and measures to address those effects, in support of sustainable development.

About the National Energy Board

Celebrating 50 years of regulatory leadership, the National Energy Board is an independent federal agency that regulates several parts of Canada's energy industry. Its purpose is to promote safety and security, environmental protection, and efficient energy infrastructure and markets in the Canadian public interest, within the mandate set by Parliament in the regulation of pipelines, energy development and trade.

- 30 -

Media may contact

Annie Roy
Manager, Communications
Canadian Environmental Assessment Agency
Tel.: 613-957-0396

Kristen Higgins
Communications Officer
National Energy Board
Tel.: 403-299-3122

News Release Source

Northern Gateway Pipeline Project
Joint Review Panel Agreement and Terms of Reference

The Canadian Environmental Assessment Agency (the Agency) and the National Energy Board (NEB) issued the Joint Review Panel Agreement (the Agreement), including the Terms of Reference, for the environmental and regulatory review of the proposed Northern Gateway Pipeline Project.

The Agreement was signed by the Minister of the Environment and the chair of the NEB. The Agreement includes the process for appointing the Panel members, the proposed Terms of Reference for the Panel, the role the Panel will play in the Crown’s overall approach to consultation with Aboriginal groups, and procedures for conducting the joint review process including public hearings.

Comments on the Draft Joint Review Panel Agreement

A public comment period on the draft Agreement was held between February 9 and April 14, 2009. Comments were received from the public, Aboriginal groups and other interested parties. All comments were carefully considered before the Agreement was finalized.

Some of the comments received concerned items that were already captured within the Agreement and Terms of Reference. Other comments led to changes in the Agreement, such as comments received on marine traffic and the need for increased explanation of the joint review panel process.

Issues to be Considered by the Joint Review Panel

The Joint Review Panel (the Panel) has a broad mandate under both the National Energy Board Act and the Canadian Environmental Assessment Act to consider whether the Northern Gateway Pipeline Project is likely to cause significant adverse environmental effects and if it is in the public interest. The public and Aboriginal groups are encouraged to bring their views on the project forward to the Panel. There will be opportunities for the public and Aboriginal groups to provide input on the List of Issues to be considered by the Panel. Information on how to submit input will be available when the Panel issues its Hearing Order.

Marine Traffic

Many comments submitted on the draft Agreement focused on the issue of marine traffic and the perception that there is a moratorium on tanker traffic in the coast waters of British Columbia (B.C.). It is the Government of Canada’s position that there is presently no moratorium on tanker traffic in the coast waters of B.C. Tanker traffic currently exists in the Ports of Vancouver,
Kitimat and Prince Rupert.

The Agreement defines the boundaries for the assessment of potential environmental effects associated with marine transportation for this project.

The boundary area is:

• the Confined Channel Assessment Area, as defined by the proponent, which includes the marine and shoreline area of Kitimat Arm, Douglas Channel to Camano Sound, and Principe Channel to Browning Entrance;

• Hecate Strait; and

• the proposed shipping routes to be used for the project that are within the 12 nautical mile limit of the Territorial Sea of Canada.

Joint Review Panel Process

The Agency and the NEB also received requests for additional information on the joint review panel process. To provide a better understanding of the process, a new Part IV section has been added to the Terms of Reference. The joint review process will provide the public and Aboriginal groups with an opportunity to make their views known in an open and transparent forum. The Hearing Order issued by the Panel will provide a detailed description of the hearing process. After conclusion of the review process, the Panel will prepare a Panel Report setting out its conclusions and recommendations relating to the environmental assessment of the project.

Information Requirements

To bring more clarity to the type and amount of information the proponent should consider in preparing its application, the Terms of Reference were revised to refer to the NEB’s Filing Manual. In addition, a Scope of Factors document was prepared by the Agency. If the Panel feels information submitted by the proponent is insufficient to assess the environmental effects of the project, the proponent will be required to provide more evidence to satisfy the Panel.

Aboriginal Matters

In response to questions on how the Crown’s duty to consult will be met, the Agreement was revised to include details on the information the Panel will receive and include in its report regarding the adverse impacts that the project may have on potential or established Aboriginal and treaty rights.

Regulatory Decisions

Following the government response on the Panel Report, the Panel pursuant to the National Energy Board Act will determine if the project should proceed and under which conditions. The other federal responsible authorities for the project will also take a course of action according to the government response on the Panel Report.

A copy of the Agreement, including the Terms of Reference, as well as additional information on the project are available on the Agency’s website at www.ceaa-acee.gc.ca , under reference number 06-05-21799, and on the NEB’s website at www.neb-one.gc.ca.

Backgrounder Source

Copenhagen: Seattle Grows Up

NAOMI KLEIN
The Nation
November 30, 2009

The other day I received a pre-publication copy of The Battle of the Story of the Battle of Seattle, by David Solnit and Rebecca Solnit. It's set to come out ten years after a historic coalition of activists shut down the World Trade Organization summit in Seattle, the spark that ignited a global anticorporate movement.

The book is a fascinating account of what really happened in Seattle, but when I spoke to David Solnit, the direct-action guru who helped engineer the shutdown, I found him less interested in reminiscing about 1999 than in talking about the upcoming United Nations climate change summit in Copenhagen and the "climate justice" actions he is helping to organize across the United States on November 30. "This is definitely a Seattle-type moment," Solnit told me. "People are ready to throw down."

There is certainly a Seattle quality to the Copenhagen mobilization: the huge range of groups that will be there; the diverse tactics that will be on display; and the developing-country governments ready to bring activist demands into the summit. But Copenhagen is not merely a Seattle do-over.

It feels, instead, as though the progressive tectonic plates are shifting, creating a movement that builds on the strengths of an earlier era but also learns from its mistakes.

The big criticism of the movement the media insisted on calling "antiglobalization" was always that it had a laundry list of grievances and few concrete alternatives. The movement converging on Copenhagen, in contrast, is about a single issue--climate change--but it weaves a coherent narrative about its cause, and its cures, that incorporates virtually every issue on the planet. In this narrative, our climate is changing not simply because of particular polluting practices but because of the underlying logic of capitalism, which values short-term profit and perpetual growth above all else. Our governments would have us believe that the same logic can now be harnessed to solve the climate crisis--by creating a tradable commodity called "carbon" and by transforming forests and farmland into "sinks" that will supposedly offset our runaway emissions.

Climate-justice activists in Copenhagen will argue that, far from solving the climate crisis, carbon-trading represents an unprecedented privatization of the atmosphere, and that offsets and sinks threaten to become a resource grab of colonial proportions. Not only will these "market-based solutions" fail to solve the climate crisis, but this failure will dramatically deepen poverty and inequality, because the poorest and most vulnerable people are the primary victims of climate change--as well as the primary guinea pigs for these emissions-trading schemes.

But activists in Copenhagen won't simply say no to all this. They will aggressively advance solutions that simultaneously reduce emissions and narrow inequality. Unlike at previous summits, where alternatives seemed like an afterthought, in Copenhagen the alternatives will take center stage. For instance, the direct-action coalition Climate Justice Action has called on activists to storm the conference center on December 16.

Many will do this as part of the "bike bloc," riding together on an as yet unrevealed "irresistible new machine of resistance" made up of hundreds of old bicycles. The goal of the action is not to shut down the summit, Seattle-style, but to open it up, transforming it into "a space to talk about our agenda, an agenda from below, an agenda of climate justice, of real solutions against their false ones.... This day will be ours."

Some of the solutions on offer from the activist camp are the same ones the global justice movement has been championing for years: local, sustainable agriculture; smaller, decentralized power projects; respect for indigenous land rights; leaving fossil fuels in the ground; loosening protections on green technology; and paying for these transformations by taxing financial transactions and canceling foreign debts. Some solutions are new, like the mounting demand that rich countries pay "climate debt" reparations to the poor. These are tall orders, but we have all just seen the kind of resources our governments can marshal when it comes to saving the elites. As one pre-Copenhagen slogan puts it: "If the climate were a bank, it would have been saved"--not abandoned to the brutality of the market.

In addition to the coherent narrative and the focus on alternatives, there are plenty of other changes too: a more thoughtful approach to direct action, one that recognizes the urgency to do more than just talk but is determined not to play into the tired scripts of cops-versus-protesters.

"Our action is one of civil disobedience," say the organizers of the December 16 action. "We will overcome any physical barriers that stand in our way--but we will not respond with violence if the police [try] to escalate the situation." (That said, there is no way the two-week summit will not include a few running battles between cops and kids in black; this is Europe, after all.)

A decade ago, in an op-ed in the New York Times published after Seattle was shut down, I wrote that a new movement advocating a radically different form of globalization "just had its coming-out party." What will be the significance of Copenhagen? I put that question to John Jordan, whose prediction of what eventually happened in Seattle I quoted in my book No Logo. He replied: "If Seattle was the movement of movements' coming-out party, then maybe Copenhagen will be a celebration of our coming of age."

He cautions, however, that growing up doesn't mean playing it safe, eschewing civil disobedience in favor of staid meetings. "I hope we have grown up to become much more disobedient," Jordan said, "because life on this world of ours may well be terminated because of too many acts of obedience."

Source

EnCana grapples with gas glut

By Shaun Polczer
Calgary Herald
November 28, 2009

Company split takes effect Monday; Eric Marsh: Managing a natural gas 'renaissance'

EnCana executive VP Eric Marsh is pressing government to develop policies that encourage consumption of natural gas, which is both clean and abundant. (Photograph by: Ted Rhodes, Calgary Herald)

Starting Monday when the company's split into two comes into effect, he'll be charged with finding ways to use them up when he takes over the position of "Executive Vice-President Natural Gas Economy"--a fancy way of describing a natural gas evangelist whose job is to extol the virtues of North America's cleanest and possibly most abundant fossil fuel.

It's probably the first time a major energy producer has created a senior executive position focused solely on demand instead of supply.

"This industry has gone through a period of time over the last three to five years that we've

never known before," he says. "We would say it's a renaissance in natural gas development. The big change is that it's brought on by technology."

The new EnCana is coming to market at an odd and some say troubling time for natural gas producers, as one of the purest play natural gas producers in North America. Virtually all of its production is gas of the "unconventional" variety, an abundant but relatively difficult type of gas to produce from hard to reach rocks like shale and tight sandstone.

The original EnCana was a pioneer in this regard, practically inventing the concept of "resource plays." Today, every major multinational oil company from Exxon to Shell is scrambling to take up positions in every shale basin they can find.

Some estimates by the U.S. Geological Survey and others suggest North America has 100 years of gas in the ground, thanks to the discovery of big new shale plays in places like Horn River and Louisiana.

In fact, shale--which was once considered impossible to extract gas from--has proven to be so prolific that it currently accounts for 13 per cent of North America's total production and full-blown development has barely begun. Huge reserves lie untapped in places such as Quebec and Pennsylvania that could dramatically alter the production landscape for decades to come. Marsh says scarcity is no longer an issue in a market that has been characterized by volatile spikes in supply and demand.

That in turn has driven prices down to multi-year lows, as storage levels reach all-time highs. The more successful companies like EnCana are at finding and developing new reserves, the lower the price goes.

Speaking at the meeting to approve the split on Wednesday, EnCana CEO Randy Eresman warned of a looming shakedown among gas producers due to lower long-term prices. Conventional exploration and development that can only be profitable at $7 to $8 will probably fall by the wayside.

"We've got exposure to all of the plays that are actually causing the value of natural gas production we're seeing today," he said. "Over time we think that clear itself up and the best producers at the lowest cost will survive."

Finding the solution to the glut is Marsh's job. Already, he's pressing governments to develop policies that encourage consumption of natural gas as a substitute for coal and nuclear to generate power and as a transportation fuel in cars and heavy trucks.

Marsh estimates that a third of North America's greenhouse emissions could be eliminated by switching vehicles to burn natural gas. To set the example, EnCana is switching its 1,800-strong vehicle fleet to natural gas and configuring rigs to use it instead of diesel.

Marsh says many government leaders often aren't aware of the magnitude of the opportunity to reduce oil consumption and cut emissions. It's this "green" mantra the new EnCana will try to make as the cornerstone of its emerging corporate culture.

"We think you can make good inroads on commercial transport infrastructure in three years. We have this abundance of natural gas, it's affordable and we can count on the supply being there."

In a recent meeting with the Herald's editorial board, Texas oilman T. Boone Pickens complained that North Americans are unable to buy natural gas vehicles. Only one manufacturer actually produces a natural gas passenger car --the Honda Civic GX--and it's only available in limited quantities. About 150,000 cars are configured to run on natural gas out of a total North American fleet of 250 million automobiles. By contrast, natural gas-powered cars are common in places like Europe with almost 40 to 45 models to choose from. Europe currently imports most of its natural gas from Russia.

Pickens has described North America as the Saudi Arabia of natural gas. "We have more of it than anyone," he said.

Pickens is promoting his own plan to encourage natural gas in eighteen-wheelers and federal vehicles with a pair of bills working through the U.S. House of Representatives and Senate that he hopes will be passed by the end of the year. He said he has met personally with President Barack Obama to discuss the issue and described natural gas as "the only fuel we have in North America that can take out foreign oil."

But others have raised doubts about the extent of gas supplies in shale, questioning what they see as overly optimistic resource assessments.

Writing in World Oil magazine, consulting geologist Art Berman said that not enough is known about the long-term production characteristics of shale gas wells to accurately estimate reserves. In the August issue of the industry publication he suggested shale gas reserves could be less than a third of preliminary estimates.

Likewise, Allen Brooks, managing director of energy investment bank Parks Paton Hoepfl& Brown based in Houston, expressed his own doubts about how economic the shales will prove to be in self-proclaimed "musings," that have been widely circulated on the Internet. "The gas-shale play is beginning to smell like a bubble and as we have learned during the past few years, bubbles have a way of ending in a bad way."

But EnCana's Marsh is unfazed and envisions a day when gas producers vertically integrate, selling natural gas in filling stations and operating power generation facilities.

spolczer@theherald.canwest.com

© Copyright (c) The Calgary Herald

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'Size of the prize' huge for shareholders:Cenovus CEO

Ferguson has 25 years of oilpatch savvy

Brian Ferguson isn't your typical oilman. With his accounting background and a commerce degree from the University of Alberta, he often stood out from EnCana's other senior executives, as a bean counter among engineers and geologists. But his oilpatch credentials are impeccable.

After joining Alberta Energy Company in 1984, Ferguson has spent most of his career in Calgary's energy hub. In February 2006 he was appointed EnCana's chief financial officer, a position he has held through this week's breakup of the company into two parts. On Monday, he'll officially become the chief executive of Canada's newest heavy oil and oilsands player, Cenovus Energy, which begins operations Dec. 1.

Q: How would you describe Cenovus's corporate culture?

A: Cenovus is going to be a company that all our employees and stakeholders are going to be proud of. If I was to think of a couple or three words that I think would be important to describe the character of the culture, it would be words like rigorous, respectful, ready.

Q: Are you happy with the performance of the "when issued" Cenovus shares? I'm assuming the idea was to try to establish a value for the shares before the split took effect.

A: The when issued market, as we've discovered, is not something that is well known or often used. So as a result there seems to be a lot of learning on a variety of people's parts, whether that's investors or investment dealers. An anecdote: My own broker called me today and said, 'Brian, I've got an order for 50,000 CVE (Cenovus' ticker symbol) how do I do that?' I said, 'Don't ask me, call your trader.' It's something that's encouraged by the Toronto Stock Exchange, the idea is to provide a more orderly transition to the common shares in trading.

Q: How would you distinguish Cenovus from other heavy oil producers?

A: We have a 40-billion barrel opportunity. We have 40 billion barrels of natural bitumen in place, this massive opportunity that we have inherited under the EnCana umbrella. The size of the prize is huge for our shareholders. The other key way we distinguish ourselves is that I believe we can be self-funding.

There are two fundamental strategic questions I ask myself: How do I grow my business? And the other is how am I going to fund that growth? We've got a great balance sheet and a low cost structure that allows us to be self-funding at mid-cycle prices. That, I think, is definitely unique.

Q: Part of the rationale for the split was to increase each respective company's ability to grow--did I hear you correctly in saying you can grow 15 to 20 per cent per year?

A: That is specifically what we forecast for 2010 from Foster Creek and Christina Lake. I think we can sustain that 15 per cent range for the next decade just on our bitumen production just from Foster Creek and Christina Lake without looking at any of the other projects we have.

What we're going to do over the first two quarters of our life is to assess, evaluate and prioritize how we will place those other projects in the Cenovus portfolio and how we will move forward.

Q: EnCana's strategy to split seems the opposite of Suncor, which merged with Petro-Canada to avoid being purely an oilsands player. Is there any advantage to breaking into two pure plays as opposed to having one single diversified company?

A: What you always need to to do is establish the right strategy for your company based on the assets and opportunity in the portfolio that you have as a corporation.

Our strategy is one that has been in the making since 2003. After the merger of Pan-Canadian and AEC in 2002, we spent the first 18 months really trying to understand the assets. What we concluded is where we could really be industry leaders in unconventional gas and in situ oil right in our own backyard. We were active in 22 countries around the world at that point in time. Between 2003 and 2006 we sold $13 billion worth of assets--sold all our assets outside North America so we could focus on what we could do best and be very, very good at. That's evolved into the EnCana of tomorrow and Cenovus. I view the split here as the next natural step in EnCana's increasing focus.

spolczer@theherald.canwest.com

© Copyright (c) The Calgary Herald

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Pipeline to West Coast gains backing

Nathan VanderKlippe
Globe and Mail
Thursday, Nov. 19, 2009

Enbridge expects ‘solid shipping commitments' for Gateway

For years, two major West Coast oil pipeline projects have languished without enough momentum to build the multibillion-dollar infrastructure required to take bitumen from the Fort McMurray, Alta., region to tidewater.

In 2005, when Enbridge Inc. (ENB-T44.220.180.41%) sought shippers for its Northern Gateway project, an 1,170-kilometre pipeline capable of carrying 525,000 barrels per day to the British Columbia coast, support was too low and the proposed project lost traction.

By early next year, however, Enbridge expects to announce for the first time that it has secured “solid” commercial backing for Gateway, marking a major step forward in the country's plans to diversify its oil exports.

That comes amid a shifting of the landscape, as industry executives, politicians and economists increasingly promote the idea that it is risky to rely solely on the United States to buy Canadian crude, especially as the oil sands grow in importance and demand for oil stagnates south of the border.

“We must export oil to China,” BMO chief economist Sherry Cooper said Thursday in a speech in Calgary. “It's very important. And the sooner the better.”

Such an outlet is both a useful exercise in market diversification, but also a necessary strategy in the face of looming U.S. climate policies, which may restrict oil sands imports, she said.

“For sure, the U.S. isn't going to like it,” Ms. Cooper said. “But that's good, because it gives us more leverage with the U.S. For example, it makes it more difficult for the U.S. to threaten us with comments about dirty oil.”

Kinder Morgan Canada (KMP-N56.00-0.22-0.40%) owns the only route currently connecting the oil sands to the Pacific, its 300,000-barrel-per-day Trans Mountain line to the Lower Mainland, largely used to fuel domestic consumption.

The company is, however, drafting two expansion plans, one to expand Trans Mountain capacity by 80,000 barrels, and another to add a further 320,000, which it plans to detail in the next three to six months. Kinder Morgan is also working with Vancouver port authorities to sail huge, one-million barrel Suezmax tankers into harbour there, in hopes of boosting exports, which have already seen a dramatic rise this year.

In 2008, Kinder Morgan filled up 55 tankers with Canadian crude. By the end of this November, it will already have loaded 78. “We shattered last year's record,” said Kinder Morgan Canada president Ian Anderson, “which is really reinforcing the demand for West Coast access.”

But the idea of sending significant volumes of crude across the Pacific remains fraught with difficulty, both because of the volatility of ocean freight costs, and because it represents a radical change. In the second quarter of this year, Canada exported 1.76 million barrels a day to the U.S, but only 24,000 elsewhere. Several major pipelines to the U.S. will also provide ample capacity for years of oil sands growth.

However, new Asian oil sands entrants – including PetroChina and the Korea National Oil Corp. – have helped raise interest in shipping crude to Asia, and Enbridge plans to submit a full Gateway regulatory filing late this year or early in 2010. Tucked into that filing will be evidence that the project has solid support, beyond the $100-million that some shippers handed Enbridge last year to push Gateway forward.

“We expect we'll be able to demonstrate solid shipping commitments in our application,” said Gateway pipeline president John Carruthers.

But sending oil sands crude through B.C. may not be easy. Enbridge faces criticism of its Gateway plan among the 50 native communities Gateway will affect. They are concerned about the impact of potential spills on salmon and other marine life.

“Gateway faces growing and stiff and fairly unequivocal opposition,” said Eric Swanson, a corporate campaigner with environmental group Dogwood Initiative. “I think it is setting itself up to be one of the biggest fights in B.C.'s history.”

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Climate Denial Industry Costs Us $500 Billion a Year

James Hoggan
desmogblog
16 November 2009

The climate denial industry should foot the bill, since they are responsible for causing the delay.

In the run-up to the Copenhagen climate summit, a growing number of government leaders from around the world - and even high level United Nations representatives - have suggested that an ambitious, legally binding agreement is all but impossible to achieve in Denmark this December. Some have indicated that it may take six months to a year beyond Copenhagen to cement a global agreement. Nearly all point the finger at the United States for causing this delay.

But it is not President Obama’s fault, a fact that is difficult for many outside the U.S. to comprehend. Shouldn’t the U.S. president, often considered the “most powerful man in the world,” be able to commit the nation to specific emissions reduction targets and financial contributions to help developing countries deal with climate change?

It is not that simple, though.

The real blame lies at the feet of the climate denial industry, which has spent the past 20 years working to confuse the U.S. public and lawmakers about climate change. More than any other single factor, the climate denial industry can claim responsibility for the present stalemate in both domestic U.S. and international climate policy debates.

Groups like the Heartland Institute, U.S. Chamber of Commerce, National Association of Manufacturers, American Enterprise Institute and a host of oil and coal industry front groups, including the now-infamous American Coalition for Clean Coal Electricity (ACCCE), have collectively thrown a wrench in the cogs of U.S. climate policy, grinding the nation’s response to climate change to a halt.

Disinformation and denial campaigns waged by these fossil fuel defenders – several of which I profiled briefly in a recent post Who Is Killing Copenhagen – have also had an impact on efforts to forge a global action plan to address climate change. These front groups were actively involved in blocking U.S. participation in the Kyoto Protocol back in the mid-1990s, and now they are directly responsible, once again, for U.S. obstruction in the Copenhagen negotiations.

Now we know definitively that the climate denial industry – which spends hundreds of millions every year on disinformation and denial efforts – is costing the world an extra $500 billion for each year that we fail to implement a coordinated global response to climate change.

World leaders meeting in Copenhagen next month should consider adding to the agenda a plan to charge these oil and coal industry front groups for every penny of that $500 billion annual delay cost, including back payments for the past 20 years of delay created by the climate denial machine.

They owe at least that much to those facing climate change impacts already, let alone future generations who will suffer far more due to their efforts.

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Vast majority of stimulus projects escape environmental-impact studies

MIKE DE SOUZA
Canwest News Service
Victoria Times Colonist
NOVEMBER 16, 2009

OTTAWA — More than 90 per cent of the thousands of new infrastructure projects across the country are slated to get funding from the Harper government without being required to undergo a federal assessment of their environmental impact, Canwest News Service has learned.

Although environmental assessments are generally required for projects that receive federal funding, exemptions were approved by Prime Minister Stephen Harper’s cabinet last spring to speed up the approval process on certain types of projects with small budgets.

The government said the small percentage of environmental assessments is the result of a program that was designed to kick-start projects and avoid extensive consultations that would “slow projects and threaten Canada’s economic recovery.”

“As such, large-scale projects that could potentially impact the environment were generally not eligible for the infrastructure stimulus fund,” said Chris Day, a spokesman for Transport, Infrastructure and Communities Minister John Baird. “They may be considered for funding under other envelopes with longer timelines.”

As a result, out of more than 3,000 projects that were approved for funding under the government’s multibillion-dollar infrastructure stimulus fund this year, only two per cent will go through a federal process to evaluate their environmental footprint, according to Day.

Meanwhile, only 15 per cent of more than 1,200 projects approved for funding as part of the government’s Building Canada fund for new infrastructure required the federal environmental assessment, he explained.

But some of the projects could still require a provincial assessment.

The exemptions for federal assessments were not introduced through legislation in Parliament and have been challenged in court by two environmental organizations, Ecojustice and the Sierra Club of Canada.

“It seems like they (members of the Harper government) are just making decisions arbitrarily,” said Justin Duncan, a staff lawyer at Ecojustice.

The new figures were released following a scathing report this month by the federal environment commissioner, Scott Vaughan, that questioned whether the government is doing enough to find out whether its assessments were preventing adverse environmental impacts from new projects.

Vaughan has recommended the government consider its findings as it does a scheduled review of the federal environmental-assessment legislation in the next year. Environment Minister Jim Prentice has said he accepts the commissioner’s recommendations.

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Shale or sham?

COMMENT: Art Berman is not alone in suggesting that shale gas isn't the pot of gold at the end of the energy rainbow. His message is supported by Canadian energy analyst David Hughes. These two slides are from a recent presentation of his. (Check it out - note the well density around Dalla-Fort Worth, and the armada of fraccing trucks ready to go to work.)

In the context of climate change, is that all for the best (they won't be burning all the gas they claim is there) or is it worse (they'll be burning more sludge from the tar sands)?

By LOREN STEFFY
Houston Chronicle
Nov. 12, 2009

Art Berman didn't set out to become the Cassandra of shale gas.

That's simply been the result as the Sugar Land petroleum geologist and consultant has persisted in raising doubts about the hottest play in the domestic energy industry.

Natural gas extracted from shale formations has transformed the U.S. energy outlook, leading to predictions that it could produce as much as half of our natural gas by the end of the next decade. Shale gas, though, requires more expensive drilling techniques to produce than conventional gas. That made shale gas attractive last year, when natural gas was selling for $13.58 per million British thermal units, but it can be a money-loser at today's prices of less than $4.50.

In a boom-prone industry known for greeting new discoveries with wide-eyed hype, shale gas has unleashed a gusher of zeal, sparking a drilling craze and soaring lease rates across millions of acres from Texas to New York.

Berman isn't saying that the major shale players — companies such as Chesapeake Energy, Devon Energy and Houston-based Petrohawk Energy — are wrong, but he's skeptical that shale gas will be the domestic energy boon that the companies claim.

“I'm saying it's a bubble,” Berman said. “They're creating an illusion.”

Decline rates disputed
That view puts Berman at odds with a host of energy companies, consultants and investment bankers, who claim shale gas may more than double our domestic supply. They argue Berman's analysis is flawed.

The two sides disagree on how to calculate the decline rates for the wells. In simple terms, Berman believes that shale gas wells will play out much faster — producing much less gas — than his detractors do. He also believes that many of the wells being drilled in shale won't be commercially viable.

His conclusion is based on production rates from the Barnett Shale near Fort Worth, the country's oldest field, which he says show steep and persistent declines. Supporters say the initial declines ease over time and settle into a steady production stream.

In criticizing shale, though, Berman has become something of an Oil Patch pariah.

“I'm being creamed,” he said. “There's a brotherhood of defenders out there, and they're all lined up against me.”

A column he wrote for the trade publication World Oil got spiked, and Berman resigned in protest. He claims the shale companies put pressure on World Oil's publisher to silence him.

‘Time to move on'
John Royall, president and chief executive of Gulf Publishing, said he didn't receive any pressure from gas companies. World Oil serves a global audience, and gas shale is largely a domestic issue. Berman had written on the topic for a year, and Royall decided that was enough.

“Art had an interesting take on shale gas,” he said. “It was interesting, provocative stuff, but it was time to move on.”

Berman doesn't come off as obsessed or paranoid. He simply believes that the industry has abandoned caution when it comes to shale, wasting millions drilling wells with a lack of scientific analysis.

“All of my instincts say if you approach it this way, it's just insanity,” he said.

If he's right, the insanity could affect us all. As Congress discusses carbon capture and environmentalists champion converting vehicles to run on natural gas, the prospect that gas supplies could be far less than we think could have a profound economic impact on the country.

“My message isn't ‘this is bad,' it's that we need to practice some caution here,” Berman said.

Loren Steffy is the Chronicle's business columnist. His commentary appears Sundays, Wednesdays and Fridays. Contact him at loren.steffy@chron.com. His blog is at http://blogs.chron.com/lorensteffy/.

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'Oil sands?' Bite your tongue

Carrie Tait
Financial Post
Friday, November 13, 2009

First they were tar sands. Then they were oil sands. Now? Enhanced oil projects. At least according to En-Cana Corp. and its oil-sands spinoff, Cenovus Energy Inc.

The pair want to distinguish their oil-sands operations, which employ the underground and more carbon-intensive steam-assisted gravity (SAGD) drainage method, from the more aesthetically offensive open-pit mining efforts that are accompanied by deadly tailings ponds. As a result, the two firms have ditched the term "oil sands" from their lexicon and replaced it with "enhanced oil projects" or just "oil projects."

"What we have done is had a look at the nature of the recovery techniques that we apply on EnCana's bitumen production, which is 100% [steam-assisted gravity drainage], and there are assets and properties that we drill and use drilling techniques to recover the oil, which is really a form of enhanced recovery," Brian Ferguson, EnCana CFO and future Cenovus CEO, said during EnCana's third-quarter conference call.

Cenovus will inherit En-Cana's SADG oil sands operations -- Foster Creek, Christina Lake and Borealis -- not to mention the environmentally unfriendly connotations, government red tape, and public relations headaches that come with doing business in northern Alberta when En-Cana splits in two at the end of the month. The oil sands are the world's second-largest known oil reserves behind Saudi Arabia.

"We just thought it was more representative of the nature of Cenovus' assets to describe them as such so that there wasn't any confusion [between SAGD and mining projects]," Mr. Ferguson said after EnCana and Cenovus unveiled their preliminary 2010 budgets.

Enhanced oil recovery traditionally means energy companies increase pressure in a reservoir by flooding it with water or injecting it with carbon dioxide in order to bring more crude to the surface. In oil sands SAGD or in-situ projects, two horizontal wells are drilled and steam is injected into the reservoir via the top well to melt the sticky, thick bitumen.

Kyle Murray, an associate professor of marketing at the University of Alberta School of Business, understands why EnCana and Cenovus want to distance themselves from the notorious images associated with the oil sands, but thinks they may fail.

"Rebranding works best when it comes with a lot of changes," he said. "Taking the exact same product and giving it a new name and without explaining what the value is or how it has changed isn't likely to be very effective."

Roughly 80% of the oil sands reserves will have to be extracted through SAGD methods because the bitumen is buried too far below the surface to mine.

Oil sands detractors, however, have made Fort McMurray's strip mines and tailing ponds the centrepiece of their intense dirty oil campaign. A cluster of SADG operators has formed the In Situ Oil Sands Alliance to further differentiate their operations from mining projects.

EnCana, which will focus on unconventional natural gas assets after it separates itself from Cenovus, plans to spend between US$3.6-billion and US$3.9-billion in 2010. Cenovus expects to spend between US$2-billion to US$2.3-billion, executives said.

EnCana as a whole earned US$25-million, or US3¢ per share in the quarter, compared with US$3.55-billion, or US$4.73 a share a year ago.

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Wind energy delivers 53% of Spain's electricity demand

Asociación Empresarial Eólica
November 13, 2009

Wind Energy covered more than 50 percent of the electricity demand the whole of Sunday morning. It also achieved a record high of simultaneous generation with 11,546 megawatts.

Wind generation broke again a record, for several moments in the morning of Sunday 8th, with 53 percent coverage of the demand with a simultaneous production of around 10,170 MW, according to REE data (https://demanda.ree.es/eolica.html). The wind production covered from 03h00 till 08h30 over fifty per cent of the demand that in those hours ranged between 21,700 and 19,700 MW, being 19,000 MW the lowest time.

Wind energy generation had already covered last Wednesday and Thursday for more than five hours, both days, over 40 percent of the electricity demand.

Furthermore, in the first nine days of November, wind energy was the first technology of the Spanish electrical system regarding production, reaching 1,770,486 MWh, ahead of the combined cycle with 1,369,955 MWh and the nuclear power with 1,223,350 MWh, a leadership that is consolidated with this week´s production.

The figure of 53 percent far exceeds the record reached last Thursday with 45.1 percent of the demand, that at the same time slightly exceeded the previous record of 43 percent, achieved in the early hours of November 24th last year.

Furthermore, on Sunday at 14h30 the maximum of simultaneous production was also reached with 11,546 MW, 343 MW more than the 11,202 that were achieved on March 5th, which at that time accounted for 29 percent of the demand cover.

AEE wants to emphasize, once again, the regular functioning of the electrical system during these peaks and also remind that wind power has covered in 2008 11.5% of the electricity demand.

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Spain reaches new wind record: 45.1% of Spain’s total electricity demand

Wind energy in Spain reached a new record last night, providing at its peak 45.1% of Spain’s total electricity demand – 2.1% greater than the previous record set in November last year.

Spanish electricity grid, Red Eléctrica, said that today’s record is a first since it was sustained over several hours during last night. Between 00.40 and 06.20 on 5 November wind met over 40% of electricity demand.

“There have been several peaks over 40% in Spain, but this new one – lasting nearly six hours compared to around one hour the previous time -- shows the huge part that wind can play in meeting Spain’s electricity demand,” Jacopo Moccia, regulatory affairs adviser for EWEA said.

The surge in wind power last night triggered water pumping stations which transport water into reservoirs. This store of water will then be released over the day generating electricity via water turbines at times of peak demand.

The Spanish Wind Energy Association said the sustained peak in wind powered electricity production proves that “wind energy is no longer marginal”. By 2020 Spain is expected to double its wind-power producing capacity from the current level of 16 gigawatts to 40 GW. “With this expected growth in capacity we could envisage wind meeting the vast majority of demand during times of peak supply by 2020,” Moccia said.

On average throughout the year, wind energy meets 12% of Spain’s electricity demand. The largest producer of wind power in Spain is Iberdrola, with 27 percent of capacity, followed by Acciona on 16 percent and Endesa with 10 percent. Spain's wind farms are on track to meet a government target of 20,000 MW in capacity by 2010.

Installed wind capacity in Spain reached 16,740 MW in 2008 with the addition of 1,609 MW. Expectations for the Spanish wind energy industry for 2009 are very high, with 18,500 MW of total capacity will be installed.

The wind sector expected this growth after the 3,500-MW increase in 2007, a special year in which companies made an effort to start up the greatest
number of wind farms so they could benefit from the previous support system. The total of 16,740 MW establishes Spain as the third country in the world in terms of installed capacity and will allow the 2010 objective (20,155 MW set by the Renewable Energies Plan 2005–2010) to be reached.

The addition of 1,609 MW in 2008 is an increase of 10.63%, the third highest increase in absolute terms in the short history of wind energy in Spain. The only higher annual increases were in 2007 (3,505 MW or 30%) and 2004 (2,297.51 MW or 37%).

Electrical energy demand in 2008 was 266,485 GWh, a growth of 1.21% over 2007. Wind energy met 11% of this demand and was the fourth largest contributing technology in the generation system, besting hydropower (7% of demand). The other contributors to the system were gas combined-cycle power plants (32% of total demand), nuclear power plants (20%), and coal power plants (16%).

On several occasions in 2008, wind energy covered more than 40% of hourly demand, and for several days it supplied more than 30% of daily electricity demand. For instance, on November 24, wind energy supplied more than 35% of the total electricity demand. And on several occasions, production of wind energy reached more than 40% of hourly demand.

Wind energy in Spain has also emerged as a driving force for industrial development. In 2008, investment was more than 2,250 million €, and about 50% of Spanish wind energy equipment production is dedicated to the export market. According to the “Macroeconomic Study on the Impact of the Wind Energy Sector in Spain,” the number of jobs related to wind power reached more than 40,000 in 2008. Of this total, the number of direct jobs in operation and maintenance of wind farms, manufacturing, assembly, research, and development is estimated at more than 21,800. The number of indirect jobs (linked mainly to components) is estimated to be more than 17,000.

The industrial sector participating in the Asociación Empresarial Eólica, or (Spanish Wind Energy Association) has established a new objective of 40,000 MW for 2020. Use of wind power has lowered CO2 emissions by about 18 million tons just during 2008. Furthermore, wind generation has saved up to 6 million tons of conventional fuels. Wind production has supplied the electrical consumption of more than 10 million households.

Gamesa installed more than 50% of new capacity, according to the Spanish Wind Energy Association’s Wind Observatory, with more than 9,480 MW (including the subsidiary company MADE) in Spain, which consolidates its leadership among manufacturers. VESTAS, the second largest manufacturer, installed more than 15% of new capacity in 2008, adding 242.2 MW.

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Canada steps up oil sands push in United States

Jeffrey Jones
Reuters
National Post
Friday, November 06, 2009

There are certain groups that just want to completely shut down the oil sands. That is completely unacceptable," said Canadian Natural Resources Minister Lisa Raitt (Reuters)

CALGARY -- Canada has mounted its biggest campaign yet to sell the United States on the energy security benefits of the oil sands as Washington debates new environmental policy, the country's energy minister said on Friday.

Canadian Natural Resources Minister Lisa Raitt said she and her staff are lobbying interests in the United States at all levels, trying to send the message that the huge heavy-oil resource in Alberta is being developed responsibly and that U.S. input on environmental fixes is welcome.

The push comes as environmental groups have intensified their own campaigns warning of the impact of oil sands development on climate, water, land and local communities on both sides of the border.

"There are certain groups that just want to completely shut down the oil sands. That is completely unacceptable. That will not happen," Ms. Raitt said in an interview.

"This is too strategic a resource for the country, and that's the other part of the message: we will develop it, we will use technology, we are going to work with the United States on it."

Canada is already the largest foreign supplier of oil to the United States, topping such OPEC suppliers as Saudi Arabia and Venezuela. Much of that crude is derived from oil sands developments in northern Alberta.

TransCanada Corp. is preparing to start its 435,000-barrel-a-day Keystone Pipeline to the the U.S. Midwest, pushing even more oil to the country's biggest trading partner.

Ms. Raitt travels to New York next week as part of the effort to promote the oil sands. That trip follows a series of meetings with the new U.S. ambassador to Canada, David Jacobson, and Prime Minister Stephen Harper's new top diplomat in Washington, Gary Doer.

"We're deploying people on the ground in the United States as well. It has to happen at all levels, you have to engage at 'officials' levels, you have to engage at ministerial levels, you have to engage at business levels," she said.

U.S. Energy Secretary Steven Chu has said he is aware of the impact of oil sands development, but has expressed optimism over the industry's ability to develop technology to limit the ecological damage.

California, often seen as a bellwether of U.S. environmental policy, established its own low-carbon fuel regulations this year that the Canadian energy industry has warned could eventually hurt exports.

"I absolutely recognize the fact that in some cases, individual states are implementing energy policy that would seem to be detrimental to Canadian positions," Ms. Raitt said. "But as well, even with all that, we exported more oil this summer than we ever have."

Ms. Raitt was in Calgary to talk to industry R&D people about ways to cut emissions, such as carbon capture and storage, as well as how to make energy production more efficient to offset some of the costs of CCS.

Despite the short record carbon capture technology, Canada and the province of Alberta have pledged hundreds of millions of dollars to private-sector projects they hope will help the country meet emission-reduction targets.

Canada can cooperate with the United States on some aspects of energy and environmental policy, Ms. Raitt said. But she said a full-blown continental energy plan is not possible.

© Thomson Reuters 2009

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Spill in Australia

Editorial
Anchorage Daily News
October 31st, 2009

Alaskans haven't heard much about oil drilling disaster

On Aug. 21 this year, a blowout ripped through an oil drilling rig operating in Australian water, more than 100 miles offshore. The rig had to be evacuated as the blowout sent crude oil spewing into the ocean. Two months later, the blowout was still raging, pumping 300 to 400 barrels of oil a day into the water. Three attempts to drill a relief well had failed and a fourth is still in progress.

It took three weeks just to get a specialized rig to the site and begin drilling the first relief well, according to The New York Times. The new well has to intercept the well that's leaking -- an effort Australian observers have said is like trying to find a needle in a haystack while blindfolded.

A month after the blowout, the Times reported that the resulting oil slick was 25 miles wide and 85 miles long. Since then the spilled oil has reached Indonesian water, according to the Jakarta Post.

Early on authorities used airplanes to hit the spill with chemical dispersants.

That has helped keep oil from reaching Australia's shores, but it is still a toxic hazard to marine life on the open sea. At least two well-known reefs may be hit.

The Australian spill hasn't gotten a lot of attention in the U.S. media [ed note: it has received considerable attention on www.sqwalk.com]; it's literally half a world away. But the incident has been noticed in Florida, where offshore drilling proposals have provoked a vigorous debate.

According to coverage by the Tampa Tribune, offshore drilling proponents say Australia allowed a drilling technique that carries a higher risk of spills and is not permissible in U.S. federal water. Opponents counter that the cause of the blowout is not yet known and dispute the inference by drilling supporters that "It can't happen here."

In Alaska the federal government is working to issue oil and gas leases in Arctic water. The environmental impact statement for the Chukchi Sea leasing says the odds of a large oil spill during development could be as high as 50-50.

Can a spill in that hostile Arctic environment, with jumbled, flowing ice, high winds, strong tides, and long winter darkness, be cleaned up?

Shell Alaska executive Pete Slaiby says yes. In a newspaper commentary earlier this year, he said tests showed that using a combination of mechanical collection, chemical dispersants and burning the oil in place will work.
Environmentalists dispute the claim.

Any spill in Alaska's Arctic will be far more challenging to handle than the Australian spill or the Exxon Valdez spill, which occurred in calm conditions in ice-free water, before fouling 1,200 miles of Alaska coastline.

Shell's Slaiby says the industry has a good record in the North American Arctic. "There has never been an oil spill caused by a blowout from offshore exploration and production in Alaska or Canada," he wrote.

The blowout was Australia's first offshore spill since 1984, according to an Australian industry spokesman cited in the New York Times article. Still it is troubling.

Australia is not a Third World nation, so desperate for money that it skimps on environmental standards. The rig involved is only a few years old, not some creaky wreck that belongs on the scrap heap. The blowout and spill occurred in warm, semi-tropical water, not an area choked with ice for most of the year.

The New York Times article about the blowout was entitled "As Oil Enriches Australia, Spill Is Seen as a Warning."

BOTTOM LINE: Australia's experience is a cautionary tale for Alaska.

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Get ready for triple-digit oil again soon

Jeff Rubin
Jeff Rubin's Smaller World Blog
Globe and Mail
Friday, October 30, 2009

Oil tanker

Nothing is shrinking faster these days than global trade. For the first time in decades, world trade volume, the lifeblood of the global economy, is actually falling. And chances are that downsizing is here to stay.

One reason global trade is shrinking is that most major economies have been contracting. Recession-scarred economies will of course recover. They always do. The Chinese economy is already on the mend and in time other economies will also get back on their feet. But unfortunately for an oil-hungry global economy, so too will crude prices — which is not only the real reason the economy tanked in the first place, but also the reason the economy coming out of this recession will be very different than the one that went into it.

Whether we move goods by air, ship, rail or truck, the global economy runs on oil.

And soon that oil is going to cost more than we can afford. Long distance transoceanic trade is about to go the way of the gas-guzzling SUV. Both are relics of an age of cheap oil that no longer exists.

Oil prices are already trading at around $80 per barrel when the red ink hasn’t even dried yet on the deepest postwar recession in the largest oil-consuming economy in the world. If oil is trading at this level when world oil demand has actually fallen this year, where do you think oil prices will be when the world’s energy appetite recovers?

Everyone, from OPEC to the International Energy Agency to the US Department of Energy, now expects that to happen by early next year.

If so, you can expect to see the return of triple-digit oil prices by next spring. And that means that the armada of empty container ships anchored off Southeast Asia are likely to stay exactly where they are.

In tomorrow’s economy, distance will cost money. Globalization was the product of cheap energy. Deglobalization is the economic face of triple-digit oil prices. The whole notion of sourcing supply from halfway around the world to save on labor costs will no longer make any commercial sense. From making our own steel to building our own furniture to growing our own food, the soaring cost of oil-fired transport will bring production back home to the local markets it once served.

I’m Jeff Rubin, and I believe your world is about to get a whole lot smaller.

Source

Suzuki & Pembina: Climate Leadership, Economic Prosperity

COMMENT: On the publication of Climate Leadership, Economic Prosperity, the editors and columnists at the Globe and Mail, and National Post, as well as the Premiers of Alberta and Saskatchewan, went apeshit. Each outdoing the other with hyperbole and invective. All quite predictable.

An excellent assessment of the report is by George Hoberg and Stephanie Taylor at Hoberg's blog site, Green Policy Prof. It is copied below, after the news release about the report.

Media Release
David Suzuki Foundation
October 29, 2009

New study shows Canada can meet global-warming reduction targets while growing jobs and economy

OTTAWA— Canada can succeed economically while meeting targets to reduce global warming pollution, according to an economic modelling study commissioned by the Pembina Institute and the David Suzuki Foundation. Climate Leadership, Economic Prosperity is the first Canadian study of its kind to show regional impacts on employment and gross domestic product, and the first to comprehensively examine how Canada can meet a greenhouse gas reduction target for 2020 that goes beyond the federal government’s target.

Leading economic modelling firm M.K. Jaccard and Associates, on behalf of the Pembina Institute and the David Suzuki Foundation, conducted an in-depth study of federal and provincial policies needed for Canada to meet two targets to reduce its greenhouse gas emissions. The firm modelled how Canada can achieve both the federal government’s current target (20 per cent below the 2006 level by 2020) as well as a more ambitious target (25 per cent below the 1990 level by 2020). The second target is derived from analysis of the emission reductions needed to limit average global warming to 2° C — a limit supported by a broad scientific consensus.

“This new analysis shows that with strong policies, Canada can meet a 2° C target in 2020 and have a strong, growing economy, a quality of life higher than Canadians enjoy today, and continued steady job creation across the country,” says Dale Marshall, climate change policy analyst with the David Suzuki Foundation.

Far stronger policies than the federal government has proposed to date must be implemented, according to the modelling study. “Meeting either target requires governments to put a significant price on global warming emissions broadly across the economy, and to back this up with strong complementary regulations and public investments,” says Matthew Bramley, director of climate change for the Pembina Institute. “The study indicates that Canada can implement much stronger climate policies than the U.S. and still prosper economically.”

Key findings of the Jaccard study include:

• Canada’s gross domestic product would continue to grow at 2.1 per cent per year on average between 2010 and 2020 while meeting the 2° C target, compared to 2.2 per cent for the government’s target and 2.4 per cent under business as usual.

• Canada’s total number of jobs would grow by 11 per cent between 2010 and 2020 while meeting either target — essentially the same rate as under business as usual.

• The urgent need to address very high emissions in Alberta and Saskatchewan would significantly reduce projected growth rates in these provinces. However, Alberta’s per capita GDP would continue to be much higher than that of any other region, and Saskatchewan’s per capita GDP would stay close to the Canadian average.

• To meet the 2° C target, a carbon price would start at $50 per tonne in 2010 and reach $200 per tonne by 2020. To meet the government’s target, the carbon price would need to reach $100 per tonne by 2020, or $145 per tonne if Canada does not purchase any international credits.

• Almost half of carbon price revenue can be returned to Canadians through reductions in income tax. Revenue from carbon pricing can also fund major public investments to reduce greenhouse gas emissions, such as building smart grids and transit infrastructure.

• Technological approaches to achieve major reductions in Canada’s greenhouse gas emissions range from increased energy efficiency and renewable energy to carbon capture and storage.

The Pembina Institute and David Suzuki Foundation view the study as an important contribution to current public policy dialogue on greenhouse gas reductions in the lead up to the December UN climate summit in Copenhagen.

For further information: The report and full study are available at: http://www.davidsuzuki.org/Publications/Climate_Leadership.asp

For media and interview opportunities please contact:

Dale Marshall
dmarshall@davidsuzuki.org

Climate policy cost report casts light on the coming reckoning for the Canadian federation

This week the Pembina Institute and the David Suzuki Foundation jointly released a report that finds that Canada can meet its greenhouse gas emissions reduction target – and even more stringent goals – without bringing the economy to a halt. While acknowledging that the policies necessitated by emissions reduction targets will have different effects for different provinces, the report emphasizes that the impact on economic growth for even the most carbon-intensive provinces will be relatively modest.

As expected, the report has prompted hyperbolic responses from the defenders of Canada’s fossil energy establishment: several Western provinces, federal Minister of the Environment Jim Prentice, and the Globe and Mail editorial board. Prentice characterized the report’s findings as “irresponsible” and stressed that Canada could meet its targets through other means, namely by harmonizing its climate change plan with the United States’ as-yet-unfinalized plan. He also made it clear that the costs of any emissions reduction plan must be acceptable to all regions of the country. Such agreement over an effective climate action plan is all but impossible as long as Alberta refuses to “touch the brake” on its oil sands operations. And even before factoring in provincial reactions, such hyperbole coming from the federal Minister of the Environment casts doubt on the sincerity of Canada’s commitment to its own greenhouse gas emission reduction target by 2020.

Politicians from Alberta and Saskatchewan were even more vocal in their opposition to the report. Alberta premier Ed Stelmach denounced the report’s recommendations as nothing more than a wealth transfer to other parts of the country: “There won’t be another wealth transfer to Ottawa under my watch. There is already one wealth transfer program and that’s equalization.” Saskatchewan Energy Minister Bill Boyd echoed Stelmach’s “wealth transfer” theme, adding that technology is the key to combating climate change. Alberta and Saskatchewan have placed large amounts of faith and money in carbon capture and storage (CCS) technology, despite questions surrounding its reliability and cost-effectiveness. Recently the federal government has joined in, pumping $343-million into a CCS-equipped coal-fired generation plant in Wabamun, Alberta while declaring that “Carbon capture and storage has the potential to help us balance our need for energy with our duty to protect the environment.”

This dismissive and defiant rhetoric is part of a long history of resistance and denial that at some point Canada, and especially Alberta, would need to reconcile its energy and climate policies with modern notions of sustainability and, especially, an evolving international climate regime. The ghost of the National Energy Program has given Western provinces a de facto veto over national climate change policy.

National newspapers joined the condemnation. The lead Globe and Mail editorial yesterday denounced the report: “its all-out attack on the oil and gas sector is politically and economically unacceptable, and would euthanize a vital Canadian industry.” It says the report’s policy recommendations are “unsaleable and dangerous.” In its most extreme rhetoric, it proclaims “Canada cannot take its national unity for granted and must not, in the service of international obligations, allow itself to be immolated by a government policy of such wrenching dislocation.” The National Post editorial board joined in the hyperbole, rejecting the report because it “would shake the very pillars of Confederation.” A National Post commentary joined the editorial excess, claiming “there will be blood.” Reactions from farther west are not so shrill. Vancouver Sun columnist Craig McInnes claims the report demonstrates that “with a political will, there’s a way.”

The Report

Pembina and DSF enlisted MK Jaccard and Associates (MKJA) to consider the feasibility and cost of two greenhouse gas emissions reduction targets: 1) a 25 percent reduction below 1990 levels by 2020, as proposed by environmental NGOs (ENGOs), and 2) a 20 percent reduction below 2006 levels by 2020, the Canadian government’s proposed target. Both scenarios were found to be feasible, though only with significantly stricter policy packages than those proposed thus far by the provincial and federal governments. Of particular interest are the carbon dioxide equivalent emissions prices under each scenario: $50/tonne in 2010 rising to $200/tonne in 2020 under the ENGO scenario, and $40/tonne in 2010 with an increase to $100/tonne in 2020 given the government’s target.

Unfortunately, even the stringent policy packages proposed by MKJA (including carbon pricing) are not enough to reach the emissions reduction targets in either scenario. Thus, the policy package examined by the authors includes purchasing of international offsets, pursuit of carbon capture and storage (for the environmental option), and a number of other policy responses to close the gap.

Economic Impacts: National and Regional

Under both scenarios, the report projects that Canada will experience significant economic growth, but not quite as much as it would under the “business as usual” (BAU) scenario of no new controls. Under the BAU scenario, Canadian GDP is projected to grow 27% by 2020. Under the scenario implementing the Government of Canada’s target, GDP would grow 25% by 2020, and under the environmental group target scenario, GDP would grow 22%. The changes in GDP growth are projected to have different affects on different provinces. Growth will be less than projected under BAU in all regions except Manitoba and Ontario. The gap between GDP under both policy scenarios and under BAU is by far the largest in Alberta at 8% under the government scenario and 12 percent under the ENGO scenario.

The number of jobs will increase between 2010 and 2020 in all provinces. Interestingly, job growth will exceed business as usual (BAU) levels under both scenarios in BC, Manitoba, Ontario and Quebec. Alberta is the sole province to whose job growth is less than BAU levels under both scenarios, though it is important not to confuse reduced job growth with negative job growth. Pre-tax salaries in 2020 will also continue to grow under both scenarios, but at a slower rate than under BAU in all regions except Manitoba, which grows faster than under BAU.

GDP per capita will continue to grow in all regions under both climate policy scenarios, though the change from BAU levels will be greatest under the ENGO scenario. Under BAU, Alberta would see per capita GDP growth of 42%, as opposed to 25% under the ENGO scenarios and 31% under the government scenario. As the authors point out, this model does not account for the effects of population growth on GDP per capita. Specifically, population growth in Alberta is likely to be lower under both policy scenarios than under BAU (due to a relative decrease in expected energy sector jobs), which will lead to higher GDP per capita numbers than those projected under the policy scenarios.

Conclusion

As the report clearly shows, effective climate action is possible in Canada without plunging the country, or even the Western provinces, into economic chaos. The report’s authors should be congratulated for advancing the climate policy debate in Canada. By conducting serious economic policy analysis on what needs to be done to significantly reduce Canada’s greenhouse gas emissions, they have spoken truth to power. In so doing, however, they’ve exposed the hypocrisy of Canada’s persistent claims that it is committed to emission reduction targets without having a plan or the political will to do meet those targets. By being transparent about the regional impacts of climate policies, the report also challenges the foundation of political-economic power in the West, and provoked a formidable rhetorical backlash.

If Canada wants to be a responsible member of the international community, it will need to reduce its greenhouse gas emissions, and do so significantly and relatively quickly. This cannot be done without significantly raising the cost of energy production from fossil fuels, including the oil sands as well as coal and natural gas. The Canadian economy will need to adjust to these changes, and the impacts of these costs will have differential impact on regions, just as the regional endowment of fossil energy and the wealth generated from that has had differential impacts on regions. The fact that some areas in Western Canada will not grow as much as they might otherwise cannot be used as a justification for failing to act on our generation’s greatest challenge.

www.greenpolicyprof.org/wordpress/

Quebec, N.B. strike $4.8B deal for NB Power

COMMENT: The increasing role of private generation in BC is one thing. Selling BC Hydro and the heritage assets is something else. (Though some would say the role of IPPs is just an incrementalist shift in the same direction.)

CBC News
October 29, 2009

New Brunswick Premier Shawn Graham explains why his government wants to sell a majority of NB Power's assets to Hydro-Québec. (CBC)

New Brunswick Premier Shawn Graham and Quebec Premier Jean Charest announced the historic deal in Fredericton on Thursday, concluding a week of speculation.

The deal is contingent on legislative approval in New Brunswick.

It stipulates that Hydro-Québec would take over the majority of New Brunswick's generating stations for $4.8 billion, which represents the equivalent of NB Power's debt.

Additionally, Hydro-Québec would freeze residential power rates in New Brunswick for five years. During the same time, large industrial rates would be lowered to the power prices offered to the same customers in Quebec, but they would not be frozen. That component of the deal is worth an estimated $5 billion to NB Power customers.

'Big winners'

Quebec Premier Jean Charest says his province's interest in purchasing NB Power is to gain better access to the lucrative U.S. electricity market. (CBC)

"And ratepayers would see reduced rates to an extent that would have been impossible for NB Power as a stand-alone entity."

Charest said at the news conference that the region's geography made the deal make sense considering the desire to tap into the power-starved U.S. market.

Both premiers used the news conference to address the criticism of Newfoundland and Labrador Premier Danny Williams, who said the deal could hinder his province's ability to transmit its hydro power into the United States.

Charest said he supports open markets and Quebec is eager to work with other provinces.

"The real question for Canadians is this, it isn't whether or not one [province] is succeeding better than the other," he said. "The real issue, if we have our eyes on the ball, is to the south of us, that is where things are going to happen.

"The Americans need clean, renewable energy and they need a lot of it. And guess what? We in Canada are the ones that can supply it. And by doing that, we can make our environment better and we can enrich our respective societies by doing so. There is a condition though: We have to learn to work together."

Now that the proposed deal with New Brunswick has been struck, Charest said his province is negotiating with Prince Edward Island to sign a similar agreement.

Charest said there is no timeline on obtaining a deal with P.E.I.

No impact on Quebec power rates

After the five-year rate freeze is lifted, rates would rise based on New Brunswick's consumer price index. However, the price of any new generation needed in the province could be added by Hydro-Québec.

Under the agreement, Hydro-Québec gains access to more than 370,000 customers and expects a return on equity of more than 10 per cent starting in the first year. The proposed deal will not have any impact on Quebec's power rates.

The proposed deal will wipe out NB Power's $4.8-billion debt, which is 40 per cent of the province's total debt. That debt will stand at $8.2 billion after the deal is approved.

New Brunswick will have to make legislative changes early in the new year as the agreement is designed to take effect on March 31, 2010.

Graham said if the deal is not concluded by March 31, 2010, then NB Power will boost electricity rates by three per cent as originally planned.

Opposition Leader David Alward is demanding Graham call an election over the proposed NB Power sale.

3 stations retained by NB Power

Hydro-Québec will not buy Coleson Cove or two other thermal generating stations as part of the tentative deal with New Brunswick. The three plants will continue to be owned by NB Power, which will sell the electricity back to the Quebec utility. (CBC)

The Dalhousie Generating Station will be shut down next year under the agreement, a decision that will be another blow to the northern town that has been reeling after a series of other closures in recent years.

"It's also very important for me to speak to the community of Dalhousie, which will see its generating station phased out," Graham said.

"We will stand by your community and we are already hard at work to find a variety of new opportunities for you."

David Hay, the president and chief executive officer of NB Power, is expected to be in Dalhousie later on Thursday to discuss the impact of the deal with workers in the northern community.

New Brunswick will retain control of Coleson Cove and Belledune, and will sell the power back to Hydro-Québec.

Under the proposed agreement, the Point Lepreau nuclear generating station, Atlantic Canada's only nuclear reactor, will remain under NB Power's control until its $1.4-billion refurbishment project is concluded in February 2011.

The reactor refurbishment project is 16 months behind schedule. However, if the energy pact is approved, it could lessen the financial burden.

Instead of purchasing replacement power on the open market, Hydro-Québec will supply cheaper hydro power to the province.

Also under the proposed agreement, New Brunswick's Independent System Operation will be rolled into Hydro-Québec. That will give control over the transmission lines in New Brunswick to Hydro-Québec.

However, any utility or company that wants to use the transmission lines must bid for it in an open auction.

Source

Hydro-Québec eyes N.B. as 'energy hub'

Montreal — Hydro-Québec is committed to making New Brunswick into an “energy hub” with the acquisition of most of the assets of New Brunswick Power Corp., says the head of Quebec's giant hydroelectric utility.

“We want to turn New Brunswick into an energy hub and add value to the assets,” Thierry Vandal, president and chief executive officer of Hydro-Québec, said in an interview.

New Brunswick is strategically located as a transmission gateway between Eastern Canada and the northeastern United States, he said.

And Hydro-Québec is open to doing deals with other provinces, including Newfoundland and Labrador, that would allow them to use its transmission corridors to export to the U.S., he added.

“Hydro-Québec is proposing to acquire [New Brunswick Power's] assets, but the network remains open. It's not because we're acquiring it that we're going to close [access to the network],” he said.

Newfoundland and Labrador Premier Danny Williams has voiced his concerns that Hydro-Québec is only out to secure a stranglehold over access to electricity markets in the U.S.

“From a business perspective, Hydro-Québec will exploit those assets, but through a subsidiary that will continue to be called New Brunswick Power,” said Thierry Vandal, the president and chief executive officer of Hydro-Québec.

“There is a lot of continuity that we want to maintain,” Mr. Vandal said in an interview before the formal announcement to be made Thursday morning in Fredericton.

Industrial, commercial and residential customers of debt-laden New Brunswick Power will get a break on their electricity rates and Hydro-Québec will be able to expand its access to the major markets in the northeastern U.S. markets, he said.

Under terms of the memorandum of understanding between the two power companies, New Brunswick's residential and commercial rates will be frozen for five years, while industrial prices will be rolled back, he said.

At the same time, Hydro-Québec will be in a position to invest in and upgrade New Brunswick Power facilities, help shift it to more environmentally friendly power generation and make the province a strategic location for the export of electricity to the U.S., Mr. Vandal said.

“It's a transaction in which New Brunswick's geography is very interesting for us. Strategically, it opens an additional route to those markets.”

He brushed aside suggestions that Hydro-Québec will have an unfair advantage over rivals, such as Newfoundland and Labrador.

Newfoundland and Labrador Premier Danny Williams has warned that the proposed deal between Quebec and New Brunswick would essentially give Hydro-Québec control of electricity transmission corridors between Atlantic Canada and the U.S. markets.

Mr. Williams has reiterated his threat to take his case to the federal Competition Bureau if a deal between the two provinces goes ahead.

Mr. Williams said in a letter to New Brunswick Premier Shawn Graham – made public yesterday – that Hydro-Québec has a track record of “obstruction and delay” and unfair treatment of third parties that deal with it.

Newfoundland has for decades insisted it was shortchanged in a 1960s deal signed with Quebec to build the Upper Churchill River hydro project. Forced to send the power through Quebec to markets, Newfoundland agreed to fixed prices that are now far below market value, a situation that has been a boon for Hydro-Québec.

Newfoundland Hydro now has plans for a massive hydroelectric project on the Lower Churchill, which includes options for a transmission route bypassing Quebec.

Newfoundland Hydro has also had talks with Nova Scotia and New Brunswick over possible electricity export partnerships. It has, as well, applied for access through Quebec's network for exports. Newfoundland has complained in the past that Hydro-Québec doesn't respect requirements from the U.S. regulator that exporters to the American market provide rivals with “open access” through their systems.

Mr. Vandal said in an interview with The Globe and Mail that Hydro-Québec has always made it a point of pride to keep its system open.

And that will be the case in New Brunswick as well, he added.

“The New Brunswick network will remain absolutely open,” he said.

“All transmission requests will be handled on the basis of absolute respect for the rules of the market and of the regulatory framework.”

The proposed acquisition of New Brunswick Power assets – including seven generating stations producing a total of 950 megawatts of electricity – is valued at $4.75-billion.

Several coal-fired and diesel-powered facilities will be phased out and there are plans to install clean energy such as wind power, Mr. Vandal said.

In a second phase, the Point Lepreau nuclear power station will be taken over, but only after Atomic Energy Canada completes a refurbishment project, expected some time in 2011, he said.

If the acquisition goes ahead as planned, Hydro-Québec will gain about 380,000 new customers or about 10 per cent of its existing customer base, said Mr. Vandal.

Source

Alberta-Superior pipeline takes center stage in world climate debate

Richard Thomas
Business North
October 27, 2009

(Photo courtesy of Enbridge.)

On Aug. 20, the U.S. State Department granted a Presidential permit for the 1,000-mile “Alberta Clipper” pipeline from Canada’s Alberta oil sands to Superior, due for completion in mid-2010.

On Sept. 2 Enbridge (U.S.) Inc., the partner of Canada-based Enbridge, celebrated in Carlton County, where the company had stacks of pipes ready for construction.

The project will result in 3,000 construction jobs. The influx of workers already has created a shortage of rental housing in Bemidji.

On Sept. 3 a coalition including the Minnesota Center for Environmental Advocacy and Bemidji-based Indigenous Environmental Network filed a lawsuit in U.S. District Court in San Francisco to stop the pipeline.

“The projects would spur refinery expansions and modifications in the United States, leading to increased air and water pollution for residents of the Midwest and other states,” the complaint stated.

It also claims the state department failed “to assess all reasonably foreseeable environmental impacts” and did not “take a hard look at the Alberta Clipper project’s stated purpose and need or to adequately consider a reasonable range of alternatives.”

The state department concluded the current plan is environmentally preferable to the alternatives. The other options included different routes and “no action,” declining to issue the permit.

In the case of no action, “Refiners would seek other means of obtaining the heavy Canadian crude oil, or attempt to obtain additional supplies from less stable and less reliable sources,” said the State Department's environmental impact statement.

It also cited “strategic interests” as reason for approval: reducing American dependence on OPEC (Organization of Petroleum Exporting Countries) oil “in a time of considerable political tension in other major oil producing countries and regions.” The department noted the need to send “a positive economic signal, in a difficult economic period.”

Enbridge also is constructing a $2.2 billion return pipeline, called Southern Lights, to ship diluent (diluting agents) from the Chicago area through Superior to Clearbrook, MN. From there an existing pipeline will be used, with the flow reversed, to carry the diluent to Edmonton, Alberta, Canada.

Enbridge also is expanding its terminal in Superior, adding five new storage tanks to the existing 37. Each new tank has a 250,000-barrel capacity.

Other non-Enbridge pipelines under construction from Alberta are the 2,000-mile TransCanada Keystone I to Illinois and the 3,200 Keystone Expansion to the Gulf of Mexico.

Murphy Oil has weighed potential expanding its Superior refinery to cash in on Canada’s oil boom. It wants to expand its refining capacity from 35,000 to 235,000 barrels per day and expand the refinery’s grounds from 200 to more than 600 acres. So far, “there is no commercial arrangement to provide additional heavy crude to Murphy Oil,” said the U.S. State Department. “No formal application have been submitted to federal or state regulatory agencies.”

Oil sands controversy

The tapping of Canada’s oil sands, also known as tar sands, is often cited as the world’s largest industrial project. It’s been an economic boon but arguably an environmental disaster and unquestionably a public relations fiasco.

The extraction process creates more carbon dioxide than regular oil production. (Estimates as to how much more vary, ranging from 15 percent to triple the amount.) Huge swathes of remote forested land must be strip-mined to extract a tar-like substance called bitumen. Steam plants literally melt oil out the ground.

The water used in the process ultimately flows into toxic tailings ponds miles long. In a much-publicized April 2008 event, 500 ducks died after landing on such a lake.

The extraction process also uses four times more natural gas than mining operations and already accounts for 20 percent of Canada’s natural gas usage. As an alternative, some groups are proposing to build as many as 25 nuclear reactors.

In September the environmental group Greenpeace, which has been staging protest actions at oil sands operations, released “Dirty Oil,” a report carrying apocalyptic predictions for the oil sands: “The rapid development of unconventional hydrocarbons such as Canada’s tar sands could tip the scales toward dangerous and uncontrollable climate change.”

Speaking in defense of the oil sands in Edmonton on Sept. 23, Enbridge (Canada) CEO Patrick Daniel said opposition to the pipeline “has not led to opposition to energy consumption, which is where the vast majority of CO2 (carbon dioxide) emissions are produced.”

Daniel continued, “I would love to see an energy strategy for this country that we can rally the country around, and agree that this is the generally the direction we are going to take and not oppose everything in energy development while still moving toward renewables.”

On the pro-industry website oilsandsreview.com, editor Deborah Jaremko writes, “The oil sands is a massive resource, and undeniably presents some pretty hefty environmental challenges, but I think for Greenpeace it represents the low-hanging fruit of protest potential. Perhaps they should consider consumption-related action, with the understanding that riding bikes everywhere and ditching our jobs and lives to wander the world is simply not feasible (or desirable) for the vast majority of people. Diversifying energy sources is crucial, but it will happen slowly, and it will not happen by ‘stopping the tar sands.’”

Meanwhile, President Obama maintains he is committed to reducing overall greenhouse gas emissions. The massive American Clean Energy and Security Act of 2009, which passed the House in June, promotes low-carbon fuels, conservation and efficiency. A similar bill was introduced into the Senate Oct. 1.

On the same day Duluth Mayor Don Ness, flanked by labor and environmental representatives, held a press conference to express support.

Because they create jobs, the pipelines propose an awkward issue for pro-environmental labor groups such as the Blue Green Alliance, which was represented at the press conference. The Minnesota-based coalition of environmental groups, co-founded by the Sierra Club and United Steelworkers, support clean energy legislation but have not taken a position on the oil sands or the pipelines.

The steelworkers union has objected only to the TransCanada Keystone line citing its use of imported pipes from India, which the union asserts is made of thin material and poses a safety hazard.

The 2008 drop in oil prices slowed but did not stop tar sands development. The number of camp-dwelling workers dropped from 27,000 a year ago to 23,000 now.

“Keeping oil-sands projects ticking along once they are on stream now requires a price of around $35 a barrel,” stated Petroleum Economist magazine in September. “About $80 (per barrel) is necessary for new investments, although in light of a softening of some costs, others put the figure much lower.”

Oil sold at $66.95 per barrel on Sept. 28, according to Bloomberg.com. With oil becoming scarcer, prices only can go up.

Pipeline safety

The Alberta Clipper will cross 162 water bodies in Minnesota and 14 in Wisconsin. Seventeen are within the St. Louis River Estuary that feeds into Lake Superior. The Wisconsin Department of Natural Resources determined the project would produce no significant impact.

“Over the operational life of the Alberta Clipper Project, there would be a very low likelihood of a crude oil release from the pipelines,” concludes the U.S. State Department’s environmental impact statement. The report cites high maintenance standards and leak detection methods. The report also based its conclusion on the assumption that “Enbridge would comply with all applicable laws and regulations.”

Its Web site, www.enbridge.com, encourages that assumption.

“Pipelines are the safest and only practical transportation mode to move large quantities of petroleum,” it states.

But the industry’s safety record shows that “safest” and “practical” doesn’t translate to accident-free.

Enbridge already operates one of the world’s longest pipelines, the 3,100 mile Lakehead system. The first section from Alberta to Superior was built in 1950 when the Canadian region had its first oil boom. Today the Lakehead system transports 1.4 million barrels per day. Over the decades the company has had its share of spills. (Enbridge pipeline accidents, below.)

The safety of pipelines operated by all companies has been a source of contention. There are 168,900 miles of onshore and offshore hazardous liquid pipeline in the United States.

In the 1990s accidents resulted in 200 deaths, and 3,000 injuries (both gas and liquid pipelines) and 1.5 million barrels of spilled liquid.

Enforcement was strengthened when President Bush signed the Pipeline Safety Improvement Act of 2002. (Rep. James Oberstar, D-MN, was a primary House author.) Some pipeline reformers praised the bill as an important step while others criticized it as weak. The act is due for reauthorization in 2010.

According to the U.S. Office on Pipeline Safety, the overall number of “serious” pipeline accidents — involving fatalities and injuries requiring hospitalization — declined from 87 in 1989 to 42 in 2008.

But the number of “significant” incidents (including spills, fatalities and injuries) has increased (277 in 1989 to 292 in 2008). A 2005 spike resulted from the New Orleans flooding.

Between 2003 and 2008 there were 13 fatalities, 39 injuries and $633 million in property damage as a result of pipeline accidents involving hazardous liquid.

Enbridge pipeline accidents

1973: Lakehead PipeLine Co. of Superior (now Enbridge) break releases 31,000 barrels of oil near Argyle, the largest spill in Minnesota until 1991.

August 1979: Lakehead pipeline rupture near Bemidji leaks 10,700 barrels. Company initially recovers 60 percent. Later in 1988 the Minnesota Pollution Control Agency requires Lakehead to extract more oil using new technology; removal continues through 2004.

March 1991: The welded seam of a Lakehead pipeline in Grand Rapids ruptures, releasing 40,476 barrels, more than 7,000 of which goes into Prairie River.

September 1998: 8,810 barrels spill from a Lakehead pipeline near Plummer in Northwestern Minnesota.

July 2002: Pipeline rupture spills 6,000 barrels in marsh west of Cohasset.

January 2007: Enbridge pipeline crack spills 1,190 barrels near Whitewater, WI.

February 2007: Construction crew strikes Enbridge pipeline in Rusk County, spilling 3,000 barrels. In January 2009 Enbridge agrees to pay a $1.1 million settlement to the state of Wisconsin for 545 environmental violations.

April 2007: Enbridge Line 3 (From Alberta to Superior) ruptures in Saskatchewan, spilling more than 3,700 barrels.

November 2007: Line 3 leak near Clearbrook in northern Minnesota explodes, killing welders Steve Arnovich and Dave Mussatti Jr. of Superior. U.S. Department of Transportation levies $2.4 million in fines. Enbridge is appealing the amount.

March 2008: Henri St. Pierre dies in an electrical incident at Enbridge’s Kerrobert, Saskatchewan station.

September 2009: Drilling for Alberta Clipper pipeline causes section of U.S. 2 near Bemidji to collapse.

(Related editorial here.)

Source

Scraping bottom

Editorial
Business News
10/27/2009


In Isaac Asimov’s 1972 science-fiction novel "The Gods Themselves," scientists discover the seemingly perfect clean energy source. (Don’t ask— it involves pumping matter from a parallel universe.)

Of course there’s an unfortunate side effect: Eventually it’ll cause the sun, and maybe a good chunk of the galaxy, to blow up. But by the time this tidbit is discovered, the economic and scientific forces behind the pump are firmly in place and the information is buried. Hence the title, lifted from 18th century poet Friedrich Schiller: “Against stupidity the gods themselves contend in vain.”

Fortunately the story provides a solution: another pump that draws matter from yet a third parallel universe, counteracting the destructive effect of the first source.

Asimov was optimistic that technology can solve a problem that technology created. There’s no known way to counteract the effect of carbon output, other than, “Stop putting out carbon.” One modern proposal is “sequestration,” which involves separating carbon from emission and injecting it underground, but it’s unproven. Growing more trees helps, because trees consume carbon dioxide and emit oxygen. But it’s doubtful we can plant enough to absorb the carbon produced by all those cars, industries and flatulent livestock.

Finally, the world’s business and political establishments acknowledge the need to reduce carbon output. But we’re still a heavily oil-based economy in the middle of a recession and in need of weaning from Middle East oil. So the exploitation of especially dirty oil in Canada and thousands of miles of new pipeline carrying it to the United States continues.

The Obama administration’s strategy is to treat the oil sands as a temporary fix while we transition to a cleaner, more sustainable energy sources. Meanwhile Congress is hashing over legislation that will support such a direction. The Climate Conference in Copenhagen, Dec. 6-18, is a crucial step to getting the world on the same page regarding carbon output.

Is this all moving fast enough to avoid catastrophe? Whether or not you believe global warming is real, it’s clear we can’t keep pumping pollutants into the environment. The mere fact that we’re extracting tar sands oil is evidence that we’re scraping the bottom of the world’s oil supply. It’s no longer a question whether we have to go green, but when . . . and the sooner, the better. Smart businesses aren’t waiting for federal laws to tell them to embrace green methods.

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New book outlines the PR effort behind climate-change skeptics

Stephen Hume
Vancouver Sun
October 28, 2009

Public relations specialist and former Sun writer help dismantle the 'denial machine' that argues against global warming

Climate change skeptics regularly denounce me as a disgrace to journalism for declining to accept their dogma, which is mostly received wisdom from sources that I'd trust to evaluate the published science about as much as I'd trust a plumber to perform open heart surgery.

Nothing against plumbers, mind you. They're just not heart surgeons. And the economists, statisticians and agenda-driven politicians routinely cited by the skeptics aren't glaciologists, botanists, biologists, oceanographers, atmospheric physicists or computer modelling specialists.

In the world of climate skeptics, skepticism is apparently acceptable only when it agrees with the climate change skeptics' point of view. Show skepticism toward their own implausible theory of a vast scientific conspiracy at leading universities to deceive the world about global warming with fraudulent "junk science" and it's just unworthy scoffing from a lazy, dishonest hack.

However, I take heart from a fascinating new book by public relations specialist James Hoggan, written in collaboration with former Vancouver Sun writer Richard Littlemore.

Over 25 years, Hoggan has built his Vancouver firm into an international PR powerhouse with clients in North America, Europe and Asia, so I take what he says quite seriously when it comes to the world of public perception, image-management and strategic communications.

Climate Cover-up: The Crusade to Deny Global Warming is a remarkable deconstruction of what he argues is a carefully orchestrated propaganda campaign whose goal is to set the agenda in climate policy by discrediting legitimate science and manipulating public perceptions of the scientific evidence.

This isn't a book about the science behind global warming scenarios, it's an analysis by a well-informed insider of how the debate was skilfully framed by public relations experts to call that science into question, exploit the media's weakness for a good controversy and ultimately to sow confusion and doubt in the public's mind.

It began, the book says, with fossil fuel industry associations, which had the most to lose financially from any serious attempts to reduce greenhouse gas emissions by curbing the burning of coal, oil and natural gas.

These interests, says Hoggan, deployed strategies developed in Big Tobacco's campaign against the anti-smoking movement. Purported research documents were commissioned with the aim of raising questions about climate change science even though their own scientific advisers knew that science to be sound. Meanwhile, he says, a select group of free-market think tanks implemented the strategy and in the process deliberately polluted public discourse on the subject.

"Reputable newspapers and magazines are today acting in a confused and confusing manner," Hoggan argues, "because a great number of people have worked very hard and spent a great deal of money in an effort to establish and spread that confusion."

Chapter by relentless chapter, Hoggan dismantles what some have called the denial machine.

He begins with an outline of the origins of propaganda and how mercenary spin doctors employed the techniques devised by fascist dictators -- and later refined for war and Cold War by Allies and Axis, capitalists and communists alike -- to deftly frame a broad and benign scientific consensus as a fiercely partisan debate over doubts as to whether or not global warming is actually occurring.

There's a chapter on "astroturfing," the strategy of setting up what appear to be grassroots citizens' groups which are actually fronts for special interests, a process with which British Columbians are already intimately familiar from the erstwhile "War in the Woods" during the 1990s.

There's a chapter on the strategic whitewash and a chapter on the tactical use of lawsuits to silence critics. Another addresses the use of charged language to distort and polarize discussion -- the term "junk science,"
for example.

"Junk science" is often used by non-scientists to imply that work by scientists is false or incompetent, although the term is an oxymoron since if it's "junk" it can't, by definition, be science. And if it is genuine science, it can't, by definition, be junk.

Particularly interesting for me is a chapter dissecting the mass media.
Manipulating the journalistic principle of balance in coverage -- get both sides and let readers decide -- and the media's appetite for conflict -- the more vigorous the better -- provided spin doctors with a mechanism for creating the perception that there's actually a scientific argument over global warming, Hoggan argues. The mass media, he says, became unwitting pawns in a game to enhance the credibility of the incredible and discredit credible experts, sometimes publishing arguments by climate change skeptics that cynically misrepresented scientific experts by quoting them out of context to imply that they doubted global warming was occurring when, in fact, the opposite was true.

I have no doubt that Climate Cover-up is going to stir up controversy, particularly in the United States where many of these strategies were deployed and fine-tuned.

Good. It's about time we all started thinking about what are facts, what are opinions, what is meant by scientific consensus and what is merely self-interested spin-doctoring intended to manipulate a discussion about the future of humanity that's far too important to be left to politicians, corporations, pundits and public relations machines.

shume@islandnet.com

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Shale gas could delay Alaska pipeline plans

COMMENT: Yesterday it was the Mackenzie Gas Project, today, Alaska Gas Pipeline. What is that? 60-70 billion dollars in pipeline projects kaput in two days? That shale gas is potent stuff. Well, not kaput, exactly, but back on the drawing board to be hauled out again in another twenty years.

Or am I getting ahead of myself - there's an awful vested interest in seeing these projects come to fruition. If industry investment ain't gonna make them happen, perhaps an intensified lobbying effort to get governments, we the people, pick up the tab for these lame or dead ducks can pull them off? Maybe along with bailouts to banks and car makers, it can be wrapped up in the twenty-first century's new deal for Americans (and Canadians).

Rena Delbridge
Alaska Dispatch, Anchorage
Oct 27, 2009

The more abundant Lower 48 shale gas reserves become, the more likely a delay for a natural gas pipeline between Alaska's North Slope and North American markets, a federal energy analyst says.

According to a new report by the Energy Information Administration, the high costs, high risks and long lead times to develop Arctic natural gas supplies don't stack up well against the huge reserves of natural gas in the Lower 48, close to strong markets.

The report isn't necessarily a black mark against a natural gas pipeline connecting the North Slope resource with markets in Alberta and the Midwest. But its author, Philip Budzik, an operations research analyst with EIA, expects the huge quantities of shale gas to push an Alaska gas pipeline to the back burner, at least for awhile.

"The Alaska gas pipeline has been a gleam in the eye of producers and the State of Alaska ever since the 1970s," Budzik said in a phone interview. "But no one anticipated that the shale gas formations would be viable production possibilities."

The Lower 48 may be awash in shale gas in known fields, but that's only the start, Budzik said. There's more shale gas to be defined in any basin that produces oil, and it's all a couple thousand miles closer to markets than Arctic gas from Alaska's North Slope.

"The resource base is clearly very large (for shale gas)," the analyst said. "How large, I don't even want to begin to speculate."

In a shale formation, thin slices of rock are packed tightly together, almost like a stack of potato chips, with gas trapped between the rocks. By fracturing the tight shale structure (breaking apart the tight stacks of rock), producers can free the gas. Shale production wasn't considered economical until technologies like horizontal drilling and fracturing methods developed. By some counts, shale gas reserves in the U.S. hold more than 2,000 trillion cubic feet of gas. As a comparison, Alaska may be home to 193 trillion cubic feet, according to estimates by the nonprofit Potential Gas Committee in Colorado. The figures represent proven gas reserves as well as those considered probable, possible and speculative.

Some industry professionals question whether shale gas will produce anywhere close to the reserve estimates, while others say that if wells turn out even a fraction of the total, the U.S. will be rich in gas for a long time.

The proximity of shale gas prospects to major markets -- and to an existing or expanding network of distribution pipelines -- offers a financial incentive for producers that's lacking in the $26 billion to $30 billion, 2,000-plus mile Alaska pipeline planned by two separate entities. Those are TransCanada with partner Exxon Mobil Corp., with a state license and $500 million, and North Slope producers BP and ConocoPhillips.

The state's Alaska Gasline Inducement Act coordinator, Mark Myers, says shale gas shouldn't be seen as a deal-breaker for a pipeline. Instead, it's good news, he says. Fast and furious shale gas development will prompt greater demand, particularly from power generation plants and other large-scale users, that shale gas probably won't be able to keep supplying long-term, opening a market door for Alaska's resource.

But that assessment runs contrary to the EIA's take. Alaska's gas will still come into play, but probably not within the next 10 years, which is about how long pipeline proponents say it will take for their projects to begin operation.

"Eventually, we're going to need hydrocarbons that are in the Arctic, including those in Prudhoe Bay," Budzik said. "When does that day arrive? It may be later than we thought three or four years ago. The producers on the North Slope have a much better sense of the economics associated with North Slope gas than I'll ever have."

He expects an open season in 2010 to reveal producers' positions. That's when a pipeline project lays its terms on the table and producers can make commitments to buy space in a line.

The EIA publishes outlooks on U.S. energy, and analysts have been steadily bumping up the estimated shale gas resource as reserves are firmed up in more and more fields across the country. A new estimate is due out at the end of the year.

"That has a tendency to push the Alaska gas pipeline further out into the future," Budzik said. "How far out into the future, I don't know."

Budzik also cautioned that the growth in estimated shale gas reserves probably won't taper off anytime soon. Where there's an oil basin, there are shale beds. Not all are likely producers, of course -- various factors like oil field maturation and pressure affect commercial qualities, and some basins have lots of clay, which makes hydraulic fracturing less effective.

Prices received for natural gas at key North American hubs will also affect shale gas development. While prices have gyrated in recent months, the gas futures market is busy.

"Even though spot prices have been pretty low, in the $4 (per million Btu) range, a lot of producers have been selling much of their production into the futures market, which in fact has a much higher price," Budzik said, warning that the futures market is unpredictable and could trip up some investors. An EIA survey of four futures contracts shows prices between $5.16 and $6.27 as of Oct. 20.

"I'm not gambling," Budzik said.

Prices don't have far to go to hit $6 per million Btu -- that magical threshold at which companies in producing oil basins see value in also turning out natural gas for market, Budzik explained.

However, as gas prices rise, companies that have slowed or even stopped production could release a flood of gas into the U.S. system, possibly triggering another price lull.

A recent report by consultant ICF International for a consortium of North American natural gas pipeline companies agreed that an Alaska gas pipeline faces economic uncertainty related to shale gas.

"What is uncertain is whether the natural gas can be brought to the U.S. Lower 48 at a cost that is competitive with other domestic, Canadian import, and LNG supply alternatives," the report on pipeline and storage infrastructure projections through 2030 states.

Contact Rena Delbridge at rena_alaskadispatch.com

Pipeline dream in peril

COMMENT: What's next? Alaska Gas Pipeline? See tomorrow's post.

John Ivison and Carrie Tait,
National Post
October 27, 2009

Mackenzie Valley plan too costly, sources say

Ottawa has decided not to proceed with its investment in the $16.2-billion Mackenzie Valley Pipeline, sources said, throwing the future of Canada's largest construction proposal into doubt.

Sources said that Jim Prentice, the Environment Minister, took a major financial assistance package proposal to a Cabinet committee last week and it was turned down over concerns about the project's price tag.

When asked whether a decision had been taken not to proceed with the project, Mr. Prentice said: "There has been no decision made."

Mr. Prentice said that he was not prepared to discuss any Cabinet discussions relating to the pipeline. He said that work is carrying on with the project's fiscal framework and with an environmental review by a quasi-judicial Joint Review Panel, which is due to complete its work by the end of the year.

However, the suggestion that the government may be re-assessing its position comes as news to its potential partners in the project.

Pius Rolheiser, a spokesman for Imperial Oil, the lead partner on the project, said he has not heard of any changes to Ottawa's intentions.

Fred Carmichael, the chairman of the Aboriginal Pipeline Group, another partner on the project, said he has not heard a word from Ottawa.

To this point, the government has been a firm supporter of the project. In the last budget, the government allocated $38-million to government departments to carry out environmental work and regulatory co-ordination.

A 1,220-kilometre pipeline from the Beaufort Sea in the Northwest Territories to markets in Alberta has been the dream of many northerners for 40 years. This year, Mr. Prentice told a business audience in Calgary that the dream "has never been closer."

The Environment Minister has looked after the pipeline file through three Cabinet posts -- Indian and Northern Affairs, Industry and in his current portfolio -- and has described the project as "one of the most important in Canada's economic history" because of its potential to open up Canada's Far North.

However, market analysts continue to question the viability of the multi-billion-dollar project, which would involve building infrastructure such as roads and waterways, and come at a significant cost at a time when gas prices are sagging and the fossil fuel can be found in abundance in Canada and the lower 48 states.

Bob Hastings, an analyst at Canaccord Adams, who has been following the pipeline saga for decades, does not think it will be built.

"The price of gas isn't fantastic and the only thing that has really happened in the last year or so is that we've found a heck of a lot of shale gas close to consumer markets," he said. "And what would you rather do? Buy gas from up in the Northwest Territories, a long, long, long, long, long, long ways away at a very high cost, or get the gas that is just next door?"

"They killed it the last time ... [in the 1970s because] it wasn't economic. The gas price came down, and the same thing is happening today."

While there is an estimated seven trillion cubic feet of gas in the Beaufort Sea, there are also estimates of 1,000 trillion cubic feet of gas shale deposits in Texas, Louisiana, British Columbia and Eastern North America that are more accessible.

Analysts suggest that a number of the partners involved in the project -- Imperial Oil Resources Ventures Limited Partnership, ConocoPhillips Canada (North) Limited, Exxon Mobil Canada Properties, Shell Canada and Mackenzie Valley Aboriginal Pipeline Limited Partnership -- may have come to the conclusion that the numbers do not add up.

"We can get all the regulatory approvals in place, and all that stuff done, but at the end of the day, it is going to be the producers that make these projects move forward or not," said Lanny Pendill, a senior energy analyst with Edward Jones in St. Louis, who also doubts the prospects for a rival Alaskan gasline. "I think they have better opportunities elsewhere right now."

Mr. Carmichael, chairman of the APG, said he believes natural gas from all sources, not just the prolific shale plays, will be necessary to replace "dirty" sources of energy such as coal.

"I would think the government would do an in-depth study of the need" for all sources of the cleaner-burning natural gas before yanking support for the project, he said.

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America's dirty little secret

Jeffrey Sachs
Globe and Mail
Thursday, Oct. 22, 2009

The United Nations Climate Change Treaty, signed in 1992, committed the world to “avoiding dangerous anthropogenic interference in the climate system.” Yet, since that time, greenhouse-gas emissions have continued to soar.

The United States has proved to be the biggest laggard, refusing to sign the 1997 Kyoto Protocol or to adopt any effective domestic emissions controls. As we head into the global summit in Copenhagen in December to negotiate a successor to the Kyoto Protocol, the U.S. is once again the focus of concern. Even now, American politics remain strongly divided over climate change – though President Barack Obama has new opportunities to break the logjam.

A year after the 1992 treaty, Bill Clinton tried to pass an energy tax that would have helped the U.S. to begin reducing its dependence on fossil fuels. The proposal not only failed, but triggered a political backlash.

When the Kyoto Protocol was adopted in 1997, Mr. Clinton did not even send it to the Senate for ratification, knowing that it would be rejected.

President George W. Bush repudiated Kyoto in 2001 and did essentially nothing on climate change during his presidency.

There are several reasons for U.S. inaction – including ideology and scientific ignorance – but a lot comes down to one word: coal. No fewer than 25 states produce coal, which not only generates income, jobs and tax revenue, but provides a disproportionately large share of their energy.

Per capita carbon emissions in U.S. coal states tend to be much higher than the national average. Since addressing climate change is first and foremost directed at reduced emissions from coal – the most carbon-intensive of all fuels – America's coal states are especially fearful about the economic implications of any controls (though the oil and automobile industries are not far behind).

The U.S. political system poses special problems as well. To ratify a treaty requires the support of 67 of the Senate's 100 members, a nearly impossible hurdle. The Republican Party, with its 40 Senate seats, is simply filled with too many ideologues – and, indeed, too many senators intent on derailing any Obama initiative – to offer enough votes to reach the 67-vote threshold.

Moreover, the Democratic Party includes senators from coal and oil states who are unlikely to support decisive action.

The idea this time around is to avoid the need for 67 votes, at least at the start, by focusing on domestic legislation rather than a treaty. Under the U.S. Constitution, domestic legislation (as opposed to international
treaties) requires a simple majority in Congress and the Senate to be sent to the President for signature. Getting 50 votes for a climate-change bill (with a tie vote broken by the vice-president) is almost certain.

But opponents of legislation can threaten to filibuster (speak for an indefinite period and thereby paralyze Senate business), which can be ended only if 60 senators support bringing the legislation to a vote.

Otherwise, proposed legislation can be killed, even if it has the support of a simple majority. That will certainly be true of domestic climate-change legislation. Securing 60 votes is a steep hill to climb.

Political analysts know that the votes will depend on individual senators'
ideologies, states' voting patterns and states' dependence on coal relative to other energy sources. Based on these factors, one analysis counts 50 likely Democratic “Yes” votes and 34 Republican “No” votes, leaving 16 votes still in play. Ten of the swing votes are Democrats, mainly from coal states; the other six are Republicans who conceivably could vote with the President and the Democratic majority.

Until recently, many believed that China and India would be the real holdouts in the global climate-change negotiations. Yet, China has announced a set of major initiatives – in solar, wind, nuclear and carbon-capture technologies – to reduce its economy's greenhouse-gas intensity.

India, long feared to be a spoiler, has said that it is ready to adopt a significant national action plan to move toward a trajectory of sustainable energy. These actions put the U.S. under growing pressure to act. With developing countries displaying their readiness to reach a global deal, could the U.S. Senate really prove to be the world's last great holdout?

Mr. Obama has tools at his command to bring the U.S. into the global mainstream on climate change. First, he is negotiating side deals with holdout senators to cushion the economic impact on coal states and to increase U.S. investments in the research and development, and eventually adoption, of clean-coal technologies.

Second, he can command the Environmental Protection Agency to impose administrative controls on coal plants and automobile producers, even if the Congress does not pass new legislation. The administrative route might turn out to be even more important than the legislative route.

The politics of the U.S. Senate should not obscure the larger point:
America has acted irresponsibly since signing the climate treaty in 1992.
It is the world's largest and most powerful country, and the one most responsible for climate change to this point; it has behaved without any sense of duty – to its own citizens, to the world and to future generations.

Even coal-state senators should be ashamed. Sure, their states need some extra help, but narrow interests should not be permitted to endanger our planet's future. It is time for the U.S. to rejoin the global family.

Jeffrey Sachs is a professor of economics and director of the Earth Institute at Columbia University.

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On a cost basis, carbon-capture projects are madness

Jeffrey Simpson
The Globe and Mail
Monday, Oct. 19, 2009

The small reductions gained by staggering per-tonne costs illustrate what every independent analyst knows: The Harper government's 20-per-cent reduction target will not be met

Prime Minister Stephen Harper makes so many spending announcements, flying like Mary Poppins on speed around the country to distribute billions of dollars, that the news media have given up analyzing any of them.

For the heck of it, let's look back to last week, when Mr. Harper dropped into Edmonton to announce $343-million of federal money for a coal-fired TransAlta Corp. carbon-capture and storage (CCS) project. Simultaneously, Alberta Premier Ed Stelmach announced a contribution of $436-million, for a total investment of $774-million of taxpayers' cash.

That Harper-Stelmach announcement followed an earlier Ottawa-Alberta one for a coal-fired Shell carbon storage project. In that case, the combined federal and provincial contribution was $865-million.

The two announcements – both for coal-fired facilities, the oil sands therefore remaining untouched – mean about $1.6-billion in taxpayer money in the years ahead, or about $220 for a family of four.

What do we get for that sum?

We get, at best, a reduction in greenhouse-gas emissions of 2.1 million tonnes. "At best" because the announcements were tempered with hedging words such as "could" achieve and "up to one million tonnes." Therefore, something less than 2.1 million tonnes might actually be captured.

Let's be generous and assume the two projects costing $1.6-billion do in fact bury 2.1 million tonnes of carbon dioxide, the most-prevalent gas contributing to global warming. Such a reduction would mean a per-tonne carbon-reduction cost of about $761 – staggeringly, wildly, mind-blowingly higher than any other conceivable measure designed to cut greenhouse-gas emissions. Want a contrast? Alberta has a piddling carbon tax on emissions over a certain level that companies can avoid by paying $15 a tonne into an technology fund.

What does 2.1 million tonnes mean in pan-Canadian terms? Canada emits about 720 million tonnes of CO2. Mr. Harper has pledged by 2020 to lower that amount by 20 per cent, or about 144 million tones. The two carbon-capture projects just announced, by lowering emissions 2.1 million tonnes, will therefore achieve about 1.4 per cent of the reductions the Harper government has pledged at a cost, remember, of $1.6-billion. At this rate, achieving the 20-per-cent reduction would cost almost $110-billion between now and 2020.

For Alberta? The province, with 11 per cent of Canada's population, is responsible for about 30 per cent of the country's emissions. Taking 2.1 million tonnes from Alberta's emissions will represent about 1 per cent of the province's total emissions. As the province's emissions rise, courtesy of further development of the oil sands, the predicted carbon-capture and storage gains will necessarily represent less than 1 per cent of total emissions.

But wait. After these announcements, Alberta has more money left in its $2-billion fund for encouraging capture and storage. This is the fund the province whips out to show critics that it is serious about global warming.

There remains about $800-million in the fund, but if future projects are like the two just announced, once the entire $2-billion is spent, Alberta might have lowered its emissions by maybe 2 per cent.

On a cost-benefit basis, these carbon-capture and storage projects are madness, leaving aside the fact that taxpayers are picking up the bill. They are wildly expensive for the small amount of carbon they will (might?) prevent from entering the atmosphere. They are most definitely not a substitute for a serious climate-change policy that, however structured, must put a price on carbon emissions by those who produce them – either upstream emitters such as industrial concerns and/or downstream consumers.

The small reductions gained by such large sums also illustrate what every independent analyst has concluded: The Harper government's 20-per-cent reduction target will not be met; indeed, it is increasingly being seen as a joke.

Can anything good be said for these announcements, apart from the nice public relations they brought Mr. Harper and Mr. Stelmach?

At a stretch, these projects will test technologies that, if successful, could eventually bring unit costs down and perhaps be exported overseas, although plenty of other companies and jurisdictions are now in the race to develop carbon-capture and storage technologies.

CCS will be part of the long-term effort to reduce greenhouse-gas emissions, but the possibilities of its contribution have been hyped by promoters and political actors beyond what is reasonable to expect. And the initial costs, as these projects show, lead to staggeringly expensive per-tonne reductions.

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Gas shale may be next bubble to burst

By JUDITH KOHLER
Houston Chronicle
Oct. 12, 2009

DENVER — The promise of enough natural gas to last the United States more than 100 years based on discoveries of vast shale formations could be the country's next speculative bubble to burst, a speaker warned Monday at a conference exploring the notion that the world's oil and gas are diminishing rapidly.

Arthur Berman, a Texas-based geological consultant, likened the optimistic projections for production from gas shale fields across the country to banks buying into mortgage securitizations, which spurred the housing market crisis and economic meltdown.

“In the midst of a boom or a bubble, it's hard to sit on the sidelines,” Berman said during the Association for the Study of Peak Oil and Gas conference. “If you're not in one of these plays, then Wall Street says, ‘Well, what's the matter with you guys?'”

That was the psychology leading into the current financial crunch, Berman said. Analyses show that gas shale fields in Texas and elsewhere aren't as profitable and likely don't contain as much retrievable gas as the industry and others portray, he added.

Based on the experience in the Barnett Shale in Texas, Berman said he doesn't expect the yields from the wells to be high enough or last long enough to make the gas shales that profitable, even when current low gas prices rise.

His view contrasts with that of other analysts and the industry who see natural gas as playing a key role in the face of concerns about declining oil supplies and climate change. The Potential Gas Committee at the Colorado School of Mines in Golden said in June that the U.S. natural gas reserves total nearly 2,000 trillion cubic feet, up about 35 percent from 2006 estimates and mostly due to such unconventional gas fields as shale and the Rockies' sandstone formations.

Peter Dea, chief executive of Denver-based Cirque Resources, said the abundance of natural gas “truly is an American treasure.” He called the vast layers of rock containing gas in Texas, the Northeast and elsewhere game-changers.

“It really gives us surety of this 100-plus-year supply that we now have in America,” Dea said.

New technology and hydraulic fracturing — injecting liquids, sands and chemicals underground to open pathways for gas — have increased the efficiency and decreased production costs, Dea said. Natural gas, he added, has the potential to replace coal as the country's main source of electricity and fuel the nation's vehicles.

Natural gas is “truly a win-win-win” for the economy, environment and national security, because it's a domestic energy source, Dea said. Natural gas is 60 percent to 75 percent cleaner than coal, he said.

Energy analyst Randy Udall said after the panel discussion that the peak-oil group, which he co-founded, is studying the implications of discovery of the gas shales.

“The increase in production would suggest that natural gas will play a larger role in the future,” Udall said.

But to boost the role of gas to the levels promoted by Dea and others would require a significant increase in development, Udall said. The U.S. gas production peaked 35 years ago, Udall said, and the roughly 10 percent jump in production over the last four years required doubling the drilling rate.

“It would have big impacts on the Rocky Mountain West,” Udall said.

Subscribers of the peak oil theory believe the world is at or near its maximum oil production and that demand will soon eclipse supply levels. Most of the big oil companies disagree and point to the federal Energy Information Administration's projection that the world's oil production peak could be as far as 40 years away.

The peak oil conference runs through Tuesday.

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Curbing Emissions by Sealing Gas Leaks

COMMENT: 30% of atmospheric methane comes from the production, processing, storage and movement of fossil fuels. It comes from equipment leaks, venting and flaring, evaporation losses, disposal of waste gas streams, and accidents and equipment failures.

*These comments are taken from an unpublished Watershed Sentinel article on fugitive methane emissions

By ANDREW C. REVKIN and CLIFFORD KRAUSS
New York Times
October 14, 2009

To the naked eye, no emissions from an oil storage tank are visible. But viewed with an infrared lens, escaping methane is evident. (Photographs by the U.S. Environmental Protection Agency)

To the naked eye, there was nothing to be seen at a natural gas well in eastern Texas but beige pipes and tanks baking in the sun.

But in the viewfinder of Terry Gosney’s infrared camera, three black plumes of gas gushed through leaks that were otherwise invisible.

Terry Gosney uses an infrared camera to check for leaks in natural gas pipes in eastern Texas. (Scott Dalton for The New York Times)

“Holy smoke, it’s blowing like mad,” said Mr. Gosney, an environmental field coordinator for EnCana, the Canadian gas producer that operates the year-old well near Franklin, Tex. “It does look nasty.”

Within a few days the leaks had been sealed by workers.

Efforts like EnCana’s save energy and money. Yet they are also a cheap, effective way of blunting climate change that could potentially be replicated thousands of times over, from Wyoming to Siberia, energy experts say. Natural gas consists almost entirely of methane, a potent heat-trapping gas that scientists say accounts for as much as a third of the human contribution to global warming.

“This for me is an absolute no-brainer, even more so than putting in those compact fluorescent bulbs in your house,” said Al Armendariz, an engineer at Southern Methodist University who studies pollutants from oil and gas fields.

Acting quickly to stanch the loss of methane could substantially cut warming in the short run, even as countries tackle the tougher challenge of cutting the dominant greenhouse emission, carbon dioxide, studies by researchers at the Massachusetts Institute of Technology suggest.

Unlike carbon dioxide, which can remain in the atmosphere a century or more once released, methane persists in the air for about 10 years. So aggressively reining in emissions now would mean that far less of the gas would be warming the earth in a decade or so.

Methane is also a valuable target because while it is far rarer and more fleeting than carbon dioxide, ton for ton, it traps 25 times as much heat, researchers say.

Yet while federal and international programs have encouraged companies to seek and curb methane emissions from gas and oil wells, pipelines and tanks, aggressive efforts like EnCana’s are still far from the industry norm.

As a result, some three trillion cubic feet of methane leak into the air every year, with Russia and the United States the leading sources, according to the Environmental Protection Agency’s official estimate. (This amount has the warming power of emissions from over half the coal plants in the United States.) And government scientists and industry officials caution that the real figure is almost certainly higher.

Unless monitoring is greatly expanded, they say, such emissions could soar as global production of natural gas increases over the next few decades.

The Energy Department projects that gas production could rise nearly 50 percent over the next 20 years as companies race to discover and tap new sources. In the United States, 4,000 miles of new pipeline was laid last year alone.

But the industry has been largely resistant to an aggressive cleanup.

The Bush administration, which opposed mandatory limits on greenhouse gas emissions, expanded an existing voluntary domestic program for capturing methane emissions and began a related international program — with both aimed at promoting profitable ways for businesses to cut methane emissions as a relatively easy first step to combat climate change.

In April the Obama administration signaled that it could adopt rules requiring the biggest American companies to report all of their greenhouse gas emissions. Oil and gas industry groups countered that the cost and complexity of dealing with some 700,000 wells were too great.

In September the E.P.A. announced that the obligatory reporting would begin in 2011 but that it excluded oil and gas operations, at least for the time being. (Agency officials say they plan to issue rules for oil and gas by late next year.)

Some scientists reject the industry arguments. “Further delay on finding and stopping such releases would be irresponsible, given the financial and environmental benefits,” said F. Sherwood Rowland, a Nobel laureate in chemistry at the University of California, Irvine.

Internationally, the amount of methane escaping from gas and oil operations can be only crudely gauged. But in 2006 the E.P.A. estimated that Russia, the world’s largest gas producer, ranked highest, with 427 billion cubic feet of methane escaping annually, followed by the United States at 346 billion, Ukraine at 225 billion and Mexico at 191 billion.

Reflecting the uncertainty in such estimates, Gazprom, Russia’s giant state gas monopoly, estimated its annual emissions at half that figure last year.

An E.P.A. review of methane emissions from gas wells in the United States strongly implies that all of these figures may be too low. In its analysis, the E.P.A. concluded that the amount emitted by routine operations at gas wells — not including leaks like those seen near Franklin — is 12 times the agency’s longtime estimate of nine billion cubic feet. In heat-trapping potential, that new estimate equals the carbon dioxide emitted annually by eight million cars.

In the routine operations, great yet invisible plumes of gas enter the atmosphere when new wells are activated, old wells are invigorated to boost gas flows and wells are purged of fluids by letting out cough-like bursts of gas.

In many gas fields, said Roger Fernandez, a senior methane expert at the E.P.A., fluid-clogged wells are still purged the old-fashioned way, by opening valves or using outdated equipment in ways that release a misty burst of gas directly into the air.

For the E.P.A. and environmental scientists, the challenge is convincing gas and oil producers here and abroad that efforts to avoid such releases often more than pay for themselves.

The use of infrared cameras is expanding as word spreads of the payoff in saved gas, said Ben Shepperd, executive vice president of the Permian Basin Petroleum Association, which represents 1,200 companies in the oil and gas business around West Texas.

“We would like to see more people doing it,” he said. “People are very surprised when they shoot their equipment with these cameras and they see that there are releases in places they wouldn’t have expected.”

The benefits are there not only for gas producers but also for companies handling oil. Thousands of oil storage tanks emit plumes of methane and other gases, said Larry S. Richards, the president of Hy-Bon Engineering in Midland, Tex., which is using infrared cameras to survey storage tanks in 29 countries and sells systems that capture the gas.

A clearer view of the worst methane emissions could come next year, when Japan plans to start releasing data from Gosat, a satellite that began orbiting the Earth in January. It may be able to identify the top hot spots within a few miles.

That may increase pressure on countries with particularly large leaks.

As the biggest methane emitter, Russia has begun seeking high-tech solutions. In April, for example, Gazprom, the Russian Defense Ministry and an Israeli aerospace company began discussing the potential use of miniature remotely piloted helicopters to monitor pipelines for leaks.

But gadgets alone will not halt the vast exhalation of methane from Russia, environmentalists say. There is some hope that a successor to the 1997 Kyoto climate change pact will include more incentives for money to flow to Russian methane-reduction projects.

Western companies that have captured methane point out the money that is often to be made by doing so.

Starting around 2000, BP began introducing methane-catching techniques at 2,300 well sites in New Mexico. At well after well, gas that would have otherwise escaped now flows through meters that field crews affectionately call the “cash register.”

Among other actions, BP engineers have fine-tuned a system for purging fluids that can stop up wells. The process uses the pressure of gas in the well to periodically raise a plunger through the vertical well pipe. This removes the liquids but typically allows gas to escape.

The new computerized process, which BP calls smart automation, tracks well pressure and other conditions to more precisely time the plunger cycles in ways that avoid gas emissions. From 2000 to 2004, emissions from BP wells in the region dropped 50 percent, the company says. By 2007, they had essentially ended.

On average, installing the systems has cost about $11,000 per well, but they have returned three times that investment, said Reid Smith, an environmental adviser for BP working on the project.

“We spend a lot of money to get gas to the surface,” Mr. Smith said. “It makes a huge amount of sense to get all of it through the sales meter.”

Andrew C. Revkin reported from New York and Farmington, N.M., and Clifford Krauss from Franklin, Tex. Andrew E. Kramer contributed reporting from Moscow.

Source

Hot air fuels carbon-capture pact

By Graham Thomson
Edmonton Journal
October 8, 2009

Politicians may use Thursday's announcement as a conference prop

Carbon dioxide might be an invisible gas, but the Alberta government is doing its best to use it as a political smokescreen.

Look no further than Thursday's announcement of $865 million in taxpayers' money for Alberta's first major pilot project for carbon capture and storage (CCS).

At first glance it seems impressive --major government funding;eager private partners;a potential solution to climate change through reductions of greenhouse gas emissions; an actual physical project after a year of promises.

Except look closer and you realize we are no closer today to the pilot project than we were yesterday.

Thursday's announcement was a photo op gathering together Alberta Energy Minister Mel Knight, Natural Resources Canada minister Lisa Raitt and Shell Canada vice-president Graham Boje.

With the news cameras clicking away, they put pen to paper--not to write a cheque but to sign a "letter of intent."

This was not about putting shovels in the ground to start construction. This was about putting lawyers in the room to start negotiations. And there is no guarantee the negotiations between the two levels of government and Quest, the private consortium headed by Shell, will sequester an ounce of carbon dioxide underground.

After a year of backroom talks and negotiations between government and private companies, we are now looking at another "few years" of backroom talks and negotiations. Shell and its partners will not move ahead on the pilot project until they have government funding, regulatory approval and a properly engineered plan. "Construction will only begin after all of these aspects have been addressed successfully, with the aim to start operations in 2015," according to a Quest news release.

So, why did they hold a news conference now?

Well, because Thursday was the last day Knight and Raitt would be in Canada before jetting off to England for the Carbon Sequestration Leadership Forum, a meeting of government ministers from around the world promoting co-operation on CCS. Thursday's signing ceremony gives the ministers political cover. They can show up in London waving the letter of intent in front of anyone who's been reading headlines about Alberta's "dirty oil" and Greenpeace protesters chaining themselves to oilsands equipment.

"I think that we're all looking forward now to going to London and being able to share with our counterparts from around the world this great news about what's happening here in Alberta," said Knight.

"This is not just discussion, this is not just policy proposals; this, ladies and gentlemen, is action, action that will have immediate results locally as it markedly reduces greenhouse gas emissions."

Except that it won't have immediate results. We won't see results for another five years--if the project goes ahead.

The plan is to capture "up to" 1.1 million tonnes of carbon dioxide a year from the Scotford upgrader near Edmonton (the same plant Greenpeace protesters occupied last week), compress the carbon dioxide into a liquid, transport it by pipeline to a yet-to-be determined site and inject it more than two kilometres underground into a saline aquifer, a sponge-shaped rock formation filled with salt water.

On paper, the pilot project is actually an ideal carbon capture and sequestration model. It will be well-funded, moderately scaled, carefully selected, closely monitored and will inject the carbon dioxide deep underground into a geological formation unmolested by a drill bit. If you're going to isolate carbon dioxide from the atmosphere, this, in theory, is how you're supposed to do it.

However, Shell and its project partners reserve the right to use the captured carbon dioxide for enhanced oil recovery. That means injecting the liquid gas into old oilfields to force out more oil that is then refined and burned-- producing more emissions of carbon dioxide. Using CCS to recover more oil might make sense economically but calling enhanced oil recovery "carbon sequestration" in the context of reducing global emissions is, environmentally speaking, a fib.

Then there's the issue of trying to store millions of tonnes of highly pressurized carbon dioxide in old oilfields that are punctured by old oil wells. It's called the pincushion effect and could create leaks of carbon dioxide into groundwater or into the atmosphere. The former could leach elements such as arsenic into underground sources of drinking water. The latter could be a health threat in large enough quantities, but even small amounts over time could undo any climate change good done by sequestration in the first place.

Scientists studying carbon sequestration have high hopes for its safety and effectiveness but cannot, at this point, give us any long-range assurance, especially if we go large scale.

Alberta says it will use carbon sequestration to bury 140 million tonnes of carbon dioxide a year by 2050.The federal government wants to bury 600 million tonnes annually by the same year.

Politicians are making promises for the technology that scientists and the energy companies don't know they can keep.

So far, in Alberta, carbon capture and storage has managed to generate plenty of political hot air--if only there was some way to sequester that.

gthomson@thejournal. canwest.com

© Copyright (c) The Edmonton Journal

Graham Thomson is the author of Burying Carbon Dioxide in Underground Saline Aquifers: Political Folly or Climate Change Fix?. See Climate action plan 'sheer folly'

A new route beyond the Last Frontier

COMMENT: Eyes and ears we may have, but we're not seeing or hearing. We're pouncing on the melting Arctic, not because it's such a vast manifestation of the consequences - the early consequences at that - of climate change, but because it's become a new land of opportunity for expansion of business as usual - for tourism, fishing, shipping, and resource extraction. "Trillions of tons of coal", for crying out loud. We're insatiable vultures, feeding off the newly exposed bits of a dying Earth. Where are the international voices calling for the Arctic to be a global conservation area? Silent, or blind and deaf - national and corporate greed appears to have already won the newly accessible Arctic, with no discussion at all.

By Kim Murphy
Los Angeles Times
October 11, 2009

The melting polar ice cap is opening the forbidding waters at the top of the world to shipping -- and intensifying concerns about regulating maritime operations and protecting the fragile environment.

Reporting from Nome, Alaska

Most days in Nome, you're not likely to run into anybody you didn't see at the Breakers Bar on Friday night. More than 500 roadless miles from Anchorage, rugged tundra and frigid Bering Sea waters have a way of discouraging visitors.

So it was a big deal when the World, a 644-foot residential cruise ship with condos costing several million dollars apiece, dropped anchor during the summer for a two-day look-see.

"We never had a ship anywhere near this size before," Chamber of Commerce director Mitch Erickson said. "My guess is they've probably been everywhere else in the world, and now they're going to the places most people haven't seen yet."

That's about to change.

SLIDESHOW - Alaska: A warming frontier As the Arctic Circle warms, some see a chance for economic growth. Others see a threat to their way of life. (Photography and audio by Robert Gauthier / Los Angeles Times)

The record shrinking of the polar ice cap is turning the forbidding waters at the top of the world into important new shipping routes.

Four other cruise ships also docked in Nome recently. The Coast Guard deployed its first small Arctic patrol vessels last year. Fleets of research vessels steamed north all summer, while ships surveying the vast oil and gas deposits under the Arctic seabed have talked of using Nome as a base.

In fact, this town of about 9,300 on the edge of the Bering Strait sees itself as the gateway to a newly accessible maritime frontier. Nome's ship traffic is eight times what it was in 1990, and the town recently spent close to $90 million renovating its port to accommodate bigger ships.

Fishing for food in Kotzebue, on the Chukchi Sea, where some hope to build a new port. Others are skeptical. "It's about what cuts costs for multinational corporations. It's not about what's best for the Arctic communities," one official says. (Robert Gauthier / Los Angeles Times / August 19, 2009)

To the north, Kotzebue would like to build its own deep-water port a few miles outside town. And Barrow, a remote Eskimo whaling village that sits at the very top of the continent, for the last few summers has had cruise ships full of German tourists and Coast Guard patrol boats docking near its rudimentary landing facility.

"We can no longer assume," Alaska Gov. Sean Parnell said at a congressional hearing, "that the Arctic is an impenetrable barrier."

The coming shipping boom has intensified concerns about how to regulate maritime operations and protect one of the most fragile and least-understood environments on Earth.

Binding international rules on what kind of vessels can operate in the Arctic do not exist. Nor do uniform regulations for routine waste discharges from ships, or reliable protocols for cleaning up spills under extreme ice conditions.

Detailed terrain maps that meet international standards exist for only about 9% of the Arctic floor, and there are no reliable high-frequency communications systems.

The Coast Guard has just two operable icebreakers in its fleet, and its closest refueling station is 1,000 miles to the southeast in Kodiak, Alaska. That's eight hours away by rescue helicopter should a cruise ship founder on an iceberg.

"There's water where there didn't used to be, and we're responsible for it," Adm. Thad Allen, Coast Guard commandant, said in Nome this summer. "The real question is, what kind of presence and capability do we want to have up there?"

More than 6,000 ships ply the Arctic waters, according to one of the first comprehensive studies of shipping in the region, completed by the international Arctic Council in April.

The fabled Northwest Passage, linking the Atlantic and Pacific across the top of Canada, saw periods of ice-free navigation in 2007 and 2008. Forecasts anticipate 120 or more largely ice-free transit days a year by the century's end. And last year's record-breaking ice melt for the first time opened both the Northwest Passage and the Northeast Passage, above Russia, for several weeks.

Two German cargo ships completed a rare transit of the Northeast Passage on Sept. 7 when they sailed under escort by Russian icebreakers into the Siberian port of Yamburg. The journey, one of the first by a Western merchant vessel, began in South Korea in July and proceeded on to Europe.

The shortcut across Russia allows ships to travel the 8,700 miles from the Korean Peninsula to Europe in 23 days, rather than the 11,000-mile, 32-day voyage through the Suez Canal. Beluga Shipping, which operated the German ships, estimated that it saved 200 tons of fuel per vessel.

The Arctic Council found that growing worldwide demand for Arctic minerals is playing an even bigger role than climate change in the opening of new shipping routes in the Far North.

Red Dog Mine, the world's largest zinc mine, operates the Arctic's only major U.S. marine cargo port. A longer ice-free period could open access to untapped ore and coal. (Robert Gauthier / Los Angeles Times / August 18, 2009)

Red Dog -- the largest zinc mine in the world, about 90 miles northwest of Kotzebue -- operates the only major U.S. marine cargo port in the Arctic. Some of the largest ships in the world pull up off the mine's barren stretch of frigid coastline, bound for markets all over the world.

Operators said they have no plans to expand operations or reroute their Europe-bound vessels through the Northwest Passage as part of their current operations. (They now travel south through the Panama Canal.)

But a longer ice-free period, said John Egan, the mine's operating manager, means ore deposits in even more remote locations, including trillions of tons of coal that have lain untapped beneath northwest Alaska, might soon be made accessible.

On Baffin Island in the Canadian Arctic, development is underway to ship 18 million tons a year of high-grade iron ore through icy waters to steel mills in Europe.

Norilsk Nickel, the biggest nickel and palladium producer in the world, operating high in the Russian Arctic, this year completed delivery of its own ice-reinforced fleet.

And the Obama administration will decide soon whether to open up large sections of the offshore Arctic in Alaska to access billions of barrels of oil and gas.

"What's really driving marine activity in the Arctic is not climate change," said Lawson Brigham, a former Coast Guard icebreaker commander who chaired the marine shipping assessment for the Arctic Council. "It's global economics."

::

Rumbling up from Kodiak, Coast Guard C-130 aircraft twice a month patrol the Arctic -- surveying ice conditions, looking for potential security threats, monitoring the barges that in the summer deliver fuel and supplies to coastal villages, and eyeing the busy oil and gas operations creeping steadily seaward from the North Slope.

"There wasn't as much of a need to get up there before," Capt. William Deal, commanding officer of the Kodiak Coast Guard base, said as a C-130 prepared to fly north to Kotzebue and -- skimming 500 feet above the gray Arctic chop -- west over the Chukchi Sea. "But now we're trying to make sure we're ready for anything."

A study now underway of Coast Guard resources is expected to determine whether the agency needs a full forward operating base in the Arctic.

If one is built, Nome wants it.

"Our argument . . . is that we're already established; our port is already here -- we just need to go out a little deeper," Mayor Denise Michels said.

But where will it lead, many here wonder, in a region whose villages have been among the most isolated on Earth?

"There is increasing talk of Arctic shipping lanes, expanded fisheries, new tourism opportunities and other competing uses," North Slope Borough Mayor Edward Itta told senior Obama administration officials who traveled to Anchorage in August to deliberate what approach the government should take to the northern seas.

"In the midst of all these claims, we are trying to preserve our traditional use of our land," said Itta, whose borough includes Barrow. "We are not afraid of change as Inupiat Eskimos. . . . But all of us know that change involves risk, and the risk of some of these potential activities in the Arctic are substantial."

Traditional whalers worry that increased shipping and offshore oil and gas operations could injure or scare away the whales that have supported Arctic Slope residents for generations.

"With the increased traffic, just like anywhere else, the more sound that is put out there, especially the high pitches, that's extremely harmful to [the whales]. So they're naturally going to disappear or avoid you," said Roy Mendenhall, who has hunted belugas from Kotzebue for years.

And conservationists fear that widespread shipping in the Arctic could triple the region's ozone pollution and accelerate the melting of the ice, which supports the walrus, seals and polar bears on which Alaska Natives depend.

"The trade between Asia and Europe -- that's what's driving it," said Tom Okleasik, planning director for the Northern Arctic Borough in Kotzebue. "It's about cutting multiple days off the shipping time. It's about what cuts costs for multinational corporations. It's not about what's best for the Arctic communities."

::

The warming seas, however, probably would result in one economic benefit of particular interest to communities across Alaska's Arctic Coast: Fuel must be hauled in by barge, and the limited shipping window often locks towns into accepting deliveries when gas and heating oil are at cripplingly high prices. A longer ice-free season means more purchasing flexibility.

The majority of shipping here involves regional traffic rather than vessels crossing the polar region. And analysts say that's not likely to change soon, because even with the increased ice melt, the Northwest Passage is notoriously unpredictable. Ten ships navigated the entire length last year, and nine made it through in 2007. But this year the passage remained clogged with ice for much of the summer.

The problem, said Trudy Wohlleben, a forecaster with the Canadian Ice Service, is that heavy melting in the waterway allowed large chunks of ice from the Arctic Ocean to flow in from the north, making for treacherous waters.

That's anathema to shipping, which depends on firm schedules and delivery dates planned months in advance.

"If you've got a 40% savings in distance but you can't reliably capture that savings, then regular Arctic shipping isn't going to happen," said Mead Treadwell, chairman of the U.S. Arctic Research Commission.

Whether or not the route through Russia or Canada opens up, Nome expects its port to be booming with oil and gas exploration vessels, delivery barges, tourist ships and, once the region is opened for fishing, fleets of trawlers bound for Arctic waters.

"My wife and I keep pinching ourselves in amazement," David Clyde, a tourist from Brisbane, Australia, said recently as he prepared to board a plane in Nome after an Arctic cruise. "We kept saying, 'Are we really here watching polar bears?' "

"I think we're going to see a far larger impact than we're even conceiving," said Leo Rasmussen, Nome's former mayor. "People are going to be coming past Alaska. And if we are there to offer the services to those ships that want to go either way, if we're there to protect the ships while they're in our sphere of influence, if we offer better services than our neighbor next door in Russia -- then we become the entrance and exit to the entire Arctic Ocean."

kim.murphy@latimes.com

Times photographer Robert Gauthier contributed to this report.

Copyright © 2009, The Los Angeles Times

Source

Alberta announces 15-year $850M carbon capture and storage project

By The Canadian Press
Red Deer Advocate
October 09, 2009

EDMONTON — The Alberta and federal governments promised $865 million in funding for a carbon capture and storage project near Edmonton on Thursday, but officials acknowledge that it will be years before any greenhouse gas emissions are piped underground.

“We have to start somewhere,” said federal Natural Resources Minister Lisa Raitt. “We start today, and we think — we know — we’re on the right path.”

The two levels of government have teamed up with Shell Canada, Chevron Canada and Marathon Oil Sands to push forward the Quest project, which is projected to eventually collect up to 1.1 million tonnes of climate change-causing carbon dioxide a year from the Scotford oilsands upgrader, pipe it to a wellhead and inject it more than two kilometres underground.

Total cost of the project is expected to be $1.35 billion, with the balance coming from the companies involved.

It would be the first funding agreement to draw on Alberta’s $2-billion carbon capture and storage fund and Ottawa’s $1-billion pool for such projects. Alberta Energy Minister Mel Knight said other projects will be announced soon.

If the project proceeds, it would become one of a handful around the world injecting CO2 on this scale.

Carbon capture and storage is held out by industry and government as a major part of the strategy to reduce Canada’s greenhouse gas emissions by 20 per cent over 2006 levels by 2020. It works by collecting carbon dioxide from large emitters, piping it to wellheads and injecting it deep underground in geological formations that are sealed off from the surface by impermeable rock or clay caps.

The technology has worked on a small scale but remains unproven in large, commercial projects. In addition to engineering challenges, questions about the regulatory regime and legal liability for the CO2 remain unanswered.

Those unknowns are a big part of the reason why Shell won’t promise to start injecting gas until 2015. The companies won’t even make a final decision on spending the money for several years to come, said Shell vice-president Graham Boje.

“This project has gone through a couple of decision gates, but it’s still got more to go before it gets to what we call final investment decision,” Boje said.

Boje said the location of the injection site hasn’t been determined. He expects it will be within “10s of kilometres” of the Scotford facility.

Knight said any new infrastructure for the project would have to go through public hearings in front of the Energy and Resources Conservation Board.

“There’s ample opportunity at that point for full public hearings,” said Knight. “Not just public meetings, but public hearings in front of a quasi-judicial board to address those issues that will come forward.”

Source

Suncor sues Greenpeace

By Shaun Polczer
Calgary Herald
October 9, 2009

$1.5M lawsuit comes after protest at mine

Environmental protesters say they will continue to target oilsands facilities in the face of lawsuits and criminal charges after Suncor Energy filed a $1.5-million lawsuit against the environmental group Greenpeace in the wake of a protest at its Fort McMurray mine earlier this month.

Greenpeace leader Mike Hudema confirmed the group has been served with a statement of claim in relation to the Sept. 30 incident in which 23 activists forced their way into Suncor's plant site and occupied an oilsands ore processing unit. The standoff ended after RCMP moved in to arrest the demonstrators.

"We're going to continue to do this work," he said in a phone interview from Edmonton. "I think it's criminal that these companies can get away with what they're doing. The damage they're doing pales to the actions of peaceful protesters. For them to prosecute peaceful protesters at the end of the day is wrong."

Suncor spokeswoman Sneh Seetal confirmed the company filed the statement of claim on Oct. 7 as part of a broader injunction seeking to bar Greenpeace protesters from its plant site. The statement of claim is a necessary component of the injunction, which was filed Sept. 30, and the $1.5 million is a preliminary figure based mostly on the value of lost oil production, she added. "We are continuing to review what the total damages may be in relation to the civil claim," she said in an interview.

The Suncor protest was one in a series of actions against oilsands producers carried out by Greenpeace in recent weeks, including a similar demonstration at Shell Canada's Scotford upgrader near Fort Saskatchewan last weekend featuring live webcam footage, media interviews and commentary that was made available over the Internet.

The Shell incident earned Greenpeace a rebuke from Premier Ed Stelmach, who vowed to use "the force of the law to deal with these people." Greenpeace in turn accused the premier of using his political influence to undermine the justice system.

On Thursday, the protests shifted to France, where activists entered a Total refinery in Normandy and hung banners denouncing the French state oil company's involvement in northern Alberta. On Friday, the group defaced four Total billboards in the Edmonton area, accusing the company of being committed to "environmental destruction."

In a media release, Greenpeace claims 37 of its members from Canada, France, Brazil and Australia have been arrested in the past three weeks on charges ranging from break and enter, trespassing and mischief.

Other oilpatch protests have been less than peaceful. On Wednesday in B. C., Dawson Creek RCMP urged local residents to be vigilant on the first anniversary of a series of bombings against EnCana Corp.'s natural gas pipelines. The company has posted a reward of$1 million after six bomb attacks in the past year. The perpetrator remains at large.

John Redekop, a professor emeritus at Sir Wilfrid Laurier University in Waterloo, Ont., who also teaches part time at Trinity Western University in Abbotsford, B. C., said western cultures have a tradition of disobeying laws perceived to be unjust extending back to biblical times. He has lectured extensively on the topic and written a book, The Christian and Civil Disobedience, that has been translated into multiple languages.

He said civil disobedience is "moral" provided that nobody is hurt and all other avenues of appeal have been exhausted. As with Greenpeace, perpetrators are often willing to be arrested to make a point, he added, similar to Rosa Parks and Martin Luther King, who were both arrested protesting U. S. racial laws in the 1960s.

Civil disobedience is more common in British Columbia, where protest groups, including Greenpeace, have disrupted logging operations in old growth forests. In that sense, Redekop said, he's prepared to assert the validity of the oilsands protests, but refused to condone the bombings.

"Some trespassing, some disruption, I can accept," he said. "But that (the EnCana bombings) is not civil disobedience, it's a crime."

Seetal argued that Greenpeace didn't respond to overtures to meet with the company and its members placed themselves and others in harm's way. Protesters at the site refused the company's offer to provide basic protective equipment such as hard hats and safety glasses, she said. Consequently, the company chose to shut down operations until the demonstration ended.

"The fact of the matter is that they were trespassing. Not only were they putting themselves in danger, but they put our employees in danger, our subcontractors in danger along with all the other visitors on the site."

spolczer@theherald.canwest.com

© Copyright (c) The Calgary Herald

Source

See also:

Tar sands action 3:
Greenpeace strikes again: Activists occupy Shell upgrader expansion site in Fort Saskatchewan

Tar sands action 2: Greenpeace takes action again, blocking Suncor tar sands operations International activists join Canadians in saying no to tar sands

Tar sands action 1: Activists block tar sands mining operation to send message to Obama and Harper: Climate leaders don’t buy tar sands

House bill requires two tugs for tankers

Wesley Loy
Petroleum News
October 11, 2009

Provision in Coast Guard bill would extend dual escorts even to ships with double hulls; similar legislation pending in Senate

Federal legislation authorizing Coast Guard appropriations for 2010 has a provision expanding the requirement for dual tug escorts of oil tankers traveling through Alaska’s Prince William Sound.

The Coast Guard bill, H.R. 3619, would require that double-hulled tankers, and not just single-hulled ships as the law now specifies, be accompanied by at least two emergency towing vessels.

Supporters of the provision say it’s important because nearly all the tankers carrying North Slope crude oil through the sound today are equipped with double hulls, a result of reforms Congress mandated after the wreck of the single-hulled tanker Valdez.html'>Exxon Valdez in 1989.

Oil industry watchdogs as well as Alaska’s congressional delegation say they prefer that the oil industry continue with the dual tug escorts, even though the double-hulled tankers are thought to be less vulnerable to oil spills.

Two tugs “will allow for greater redundancy in a place where severe weather and human error can lead to disaster,” said Alaska Republican Congressman Don Young, calling the Exxon Valdez oil spill “the worst tragedy” in state history.

The House Transportation and Infrastructure Committee passed out the Coast Guard bill on Sept. 24. Young has a seat on the committee.

The dual tug escort language is similar to that in a standalone piece of legislation Alaska’s two senators, Republican Lisa Murkowski and Democrat Mark Begich, introduced on May 14.

That bill, S.1041, isn’t expected to advance. Rather, the two senators are expected to try to insert the tug provision into other legislation, possibly the Senate’s Coast Guard authorization bill.

Escorting each oil-laden tanker with two tugs is expensive, and industry watchdogs with the Prince William Sound Regional Citizens’ Advisory Council have said they’re worried oil companies might try to eliminate the expense now that the fleet has gone almost exclusively double-hulled.

But oil shippers have insisted they have no immediate plans to drop dual escorts.

The tanker fleet now numbers about 16 ships that regularly call on the oil terminal at Valdez. The bulk of them carry crude for BP, ConocoPhillips and ExxonMobil.

Source

See also:
Support lawmakers for escort tug efforts

Push for LNG pipeline from Oregon's Coos Bay

David R. Baker
San Francisco Chronicle
Sunday, October 4, 2009

Coos Bay snakes from the Pacific into the hilly Oregon coast, its waters sheltered from the ocean by a long, sandy spit.

Resident Jody McCaffree sees it as a place of sand dunes and shore birds, where the slumping local economy hasn't destroyed a high quality of life. But a group of energy companies, including PG&E Corp., sees Coos Bay as a potential source of fossil fuel.

The companies plan to build on the bay's northern shore a terminal for importing liquefied natural gas, deeply chilled fuel that, when warmed up, can run power plants, furnaces and stoves.

A proposed pipeline from the terminal would cut through 234 miles of rural land, mostly forest, before stopping at the town of Malin on the California border. There, an existing pipeline would move the gas north to the Pacific Northwest and south to California.

"You're tearing up half of Oregon for a pipeline to import foreign energy," said McCaffree, who has helped spearhead opposition to the project with her group Citizens Against LNG.

McCaffree fears that if an LNG tanker suffered an accident in the narrow bay, it would form a vapor cloud capable of igniting into a fast-moving fireball. About 17,000 people live within a 3-mile radius of the proposed terminal, called Jordan Cove.

"Maybe there's a reason California doesn't want these things on its shore," McCaffree said.

Radical market change

Five years ago, energy companies were racing each other to build LNG terminals on the West Coast. Natural gas production in the United States was falling, and prices were rising, pushing up home heating bills in the process. Despite fierce opposition from people like McCaffree, many state and federal officials saw importing liquefied natural gas as the answer.

But the natural gas market has changed radically since then. Improved technology helped energy companies tap gas that had been locked in shale rock in places like Arkansas, Louisiana and Texas. Domestic production boomed. Prices fell. And interest in LNG - at least in America - fizzled.

Diversify for future

So why are PG&E and its partners pushing ahead in Coos Bay?

Jonathan Marshall, a spokesman for the San Francisco company, said PG&E is trying to plan ahead. The company is part of a consortium that would build the $1.1 billion pipeline, called the Pacific Connector, while another consortium would build the $1.2 billion terminal.

"None of us has a crystal ball," Marshall said. "It goes back to supply diversity. As we've seen before, prices can shift very quickly. Right now they're shifting down. But small changes in demand, in supply, can trigger big changes in price."

The projects have applied for approval from the Federal Energy Regulatory Commission, and a vote could come as early as the commission's next meeting, later this month. The projects would still need permits from several other federal and state agencies.

Demand fuels project

But Bob Braddock, project manager for the terminal, said neither the terminal nor the pipeline will be built if there isn't demand for the gas. If LNG exporters overseas don't think they can get a good price in America, they won't sign contracts to use either facility.

"This will never be built unless the capacity for the terminal and the pipeline are contracted," he said. "Right or wrong, (the exporters) are making decisions based on what they see the prices will be in America 25 years from now."

Big energy infrastructure projects - from coal-fired power plants to wind farms - often provoke opposition. But not like LNG. Fierce resistance already helped block proposals to build LNG import terminals in Eureka and Long Beach, on Vallejo's Mare Island and off the coast of Ventura County.

Opponents tend to focus on safety.

Ignition danger

LNG is natural gas cooled to minus 260 degrees Fahrenheit, at which point it turns into a clear liquid. Ships carry it in insulated tanks. If those tanks are punctured and the liquid escapes, it will turn back into gas and hover on the surface of the ocean until it disperses in the wind, rather than forming a slick like spilled petroleum.

But before it disperses, spilled LNG can ignite. In 1944, a Cleveland facility that produced and stored liquefied natural gas leaked, creating a vapor cloud that seeped into a nearby residential neighborhood. The vapor ignited, and 130 people died. In 2004, an explosion at an Algerian LNG plant killed 27 people.

Proponents of the fuel say that despite those rare incidents, the LNG industry has a good safety record. And some parts of the world welcome LNG. San Ramon's Chevron Corp., for example, announced recently that it would build a $37 billion project off Australia's northwest coast to pump natural gas from undersea reservoirs, chill it and ship it to customers in China, Korea and Japan. Chevron has already signed contracts for much of the gas.

Purpose questioned

The fact that other countries are eager to buy LNG while America isn't makes McCaffree and other Jordan Cove opponents wonder if it isn't an export terminal in disguise.

The Pacific Connector pipeline, they note, could easily link to another proposed pipeline, called Ruby, that would enter Oregon from the east, supplying the West Coast with natural gas from the Rocky Mountains. If Jordan Cove is really designed for export, then any private property condemned to build the Pacific Connector pipeline would be condemned solely for corporate profit, McCaffree said, not to fill a community need the way an import facility arguably would.

"I just don't understand why PG&E's still pursuing it, unless it's going to be an export terminal," she said. "There's no way we need all that gas." She considers any LNG project - import or export - a waste of money and effort when the country needs to be building more renewable power facilities and weaning itself off fossil fuels.

Export too costly

Braddock said that turning Jordan Cove into an export terminal would require completely redesigning the project and reapplying for government permits. And the proposed site on Coos Bay isn't big enough to accommodate the equipment needed for cooling the natural gas into a liquid, he said. An export terminal would also cost far more to build - closer to $5 billion.

"I couldn't make the economics of that work no matter how hard I'd try," Braddock said. "It's not like someone can just flip a switch. The technical issues are huge."

E-mail David R. Baker at dbaker@sfchronicle.com.

Source

Greenpeace strikes again: Activists occupy Shell upgrader expansion site in Fort Saskatchewan

Greenpeace Canada
October 3, 2009

Activists from Canada, France, Brazil and Australia scaled the chimneys at an under-construction upgrader to stop more destruction before it can start. Two activists have been detained.

“Greenpeace is occupying this site in the heart of what many affected land owners call ‘cancer alley’ to continue exposing the climate crimes associated with producing dirty, dangerous and destructive tar sands oil. We are sending out a global climate SOS because we need help, we need climate leaders willing to forge a new green path for our planet not more dirty oil politicians ready to sacrifice our future.” — Melina Laboucan-Massimo, Greenpeace climate and energy campaigner from outside the Shell plant.

“The tar sands represent the bleak future that awaits the world if we refuse to listen to science and fail to make significant commitments to cut greenhouse gas emissions. It’s time for world leaders to stop gambling with people’s lives. It’s time to stop the tar sands.” — Mike Hudema, Greenpeace climate and energy campaigner

Source

See also:

Tar sands action 2: Greenpeace takes action again, blocking Suncor tar sands operations International activists join Canadians in saying no to tar sands

Tar sands action 1: Activists block tar sands mining operation to send message to Obama and Harper: Climate leaders don’t buy tar sands

Greenpeace takes action again, blocking Suncor tar sands operations International activists join Canadians in saying no to tar sands

Greenpeace Canada
September 30, 2009

Fort McMurray, Canada — Greenpeace activists are disrupting Suncor operations today in the heart of the tar sands north of Fort McMurray by stopping two bitumen conveyor belts to highlight the climate crime of tar sands operations.

The 23 activists from Canada, France, Brazil and Germany entered the site early this morning. A team went to the open-pit mine and is stopping the conveyor belts that carry bitumen from the mine across the river to the upgrader. The activists are joined by Greenpeace Canada executive director Bruce Cox.

>

Live streaming video is at www.greenpeace.org/stoptarsands

Today’s action comes two weeks after Greenpeace successfully stopped a mining operation at Shell and just a week after Rajendra Pachauri, head of the Intergovernmental Panel on Climate Change (IPCC), the world’s leading body on climate science, said that Canada is failing on climate action, and should consider putting the tar sands on hold.

“Greenpeace has taken action here today in the heart of climate destruction to drive the message home to world leaders that we need urgent climate leadership, and that means stopping the tar sands,” said Bruce Cox, Greenpeace Canada Executive Director. “We are here to drive the message home to world governments that we need urgent climate leadership, and that means stopping the tar sands.” —Bruce Cox, Greenpeace Canada Executive Director from the bridge blockade.

“Greenhouse gas emissions are just one element of the crimes happening in the tar sands. Around 11 million litres of toxic chemicals, including carcinogens and other deadly poisons are leaking into groundwater and the Athabasca and poisoning entire communities. Their food is contaminated, their water unsafe to swim in, let alone drink. This is not what the world expects from Canada, but it’s the grim reality.”—Mike Hudema, Greenpeace climate and energy campaigner.

Source

See also:
Tar sands action 1: Activists block tar sands mining operation to send message to Obama and Harper: Climate leaders don’t buy tar sands

As Oil Enriches Australia, Spill Is Seen as a Warning

COMMENT: Some statements from this article:

• "the Montara oil spill is merely a sign of things to come ..." - Are you listening, BC?

• "... unless greater protections are extended" - You can reduce the risk, but Montara is still a sign of things to come.

• “We need to get the balance right." - No drilling may be the only acceptable "balance".

• "defended the industry’s record ... the Montara well head leak is the first offshore blowout since 1984" - That's one more than an acceptable record.

• “You can’t stop production" - Oh yes we can.

By MERAIAH FOLEY
New York Times
September 27, 2009

SYDNEY, Australia — Visitors hoping to peek at Australia’s exotic marine life usually head straight for the Great Barrier Reef. But conservationists say that an equally remarkable, but lesser known, marine environment is under threat from the booming oil and gas exploration taking place among the reefs and atolls off Australia’s northwest coast.

Oil and gas leaking from a well in the Timor Sea, about 155 miles off the northwestern coast of Australia, on Sept. 12. (Environs Kimberly, via Reuters)

A damaged oil well in the region has been spewing thousands of gallons of crude oil into the Timor Sea since Aug. 21, when a blowout forced the evacuation of all 69 workers on the platform. Emergency crews have been working overtime to contain the spill, but officials say it could take about three more weeks to plug the leak.

The platform is above the Montara oil field, about 155 miles northwest of Mungalalu Truscott Airbase in the remote Kimberley region of Australia. The leaking well head is owned by Thailand’s national petroleum company, PTT Exploration and Production, one of many energy companies that have set up operations in western Australia to feed Asia’s growing appetite for oil and gas.

In the first half of this year, more than 50 wells were drilled in the tropical waters off western Australia, adding to hundreds of other recent projects. Last month, the government gave Chevron the green light to expand its exploration of the huge Gorgon gas field, a $40 billion project that was opposed by conservationists because of its potential environmental impact.

Economists credit the booming trade in petroleum and other mineral resources for helping Australia escape the brunt of the global economic downturn, but environmentalists say this prosperity comes at a price. They say the Montara oil spill is merely a sign of things to come unless greater protections are extended to vast stretches of tropical reefs off northwestern Australia.

“It’s a classic conflict between development and the ecological values of the region,” said John Carey, manager of the Kimberley Conservation Program with the Pew Environment Group. “We need to get the balance right. But the balance at the moment is that less than 1 percent of this globally significant area is under any form of protection.”

The Thai oil company said it was still investigating what had caused the blowout. To stop the spill, the company has hired a specialist rig to drill 1.6 miles below the seabed and flood the area with heavy mud.

But such highly specialized equipment is not easy to come by. It took three weeks to tow the rig from Singapore.

The company has declined to estimate how much oil has spilled into the sea, saying it is too dangerous to take accurate measurements from the damaged rig. The company and Australian maritime officials, who are helping to clean up the spill, say that the slick is around 25 miles wide and 85 miles long, but that the leakage appears to be slowing.

The federal environment minister, Peter Garrett, said this month that the government believed that 300 to 400 barrels of oil were leaking into the sea each day. That amounts to more than 450,000 gallons of oil, and unknown quantities of gas and condensate, since the blowout began. By that count, the Montara leak is relatively small. The Exxon Valdez, by comparison, dumped around 11 million gallons when it ran aground off the Alaskan coast in 1989.

The oil slick has not reached any coastlines, thanks in part to mild weather conditions and efforts by the Australian government to break up the slick by spraying it with chemical dispersant. But conservationists worry that the spill could take a heavy toll on marine animals that feed and travel on or close to the ocean’s surface.

“We need to shatter the myth that an oil spill is only a problem when it washes up on beaches,” said Gilly Llewellyn, the manager of conservation programs with WWF-Australia.

PTT, the Thai company, has said it is committed to helping clean up the spill and plans to conduct environmental monitoring of the region to assess the damage. Australia’s energy minister, Martin Ferguson, has announced plans for a thorough investigation into the cause.

Mr. Ferguson and the Australian Petroleum Production and Exploration Association, which represents 98 percent of oil and gas operators in the country, have defended the industry’s record, saying the Montara well head leak is the first offshore blowout since 1984.

Marine researchers and conservation groups say they are realistic about the economic drive to continue developing the region, but want the government to designate more marine sanctuaries and to enact stronger environmental regulations in western Australia. The government is expected to release a strategy for the region next year.

“You can’t stop production; this is a huge area of future exploration,” said Nic Bax, the principal investigator of the Marine Biodiversity Research Hub. “We need to make sure we’re working cooperatively with industry to work out what is the best and safest way to do this.”

Source

Past spills and ongoing risks of oil companies are omens

By BOB SHAVELSON
Anchorage Daily News
September 24th, 2009

Bob Shavelson is Executive Director of Cook Inlet Keeper, a citizen-based nonprofit organization with offices in Anchorage and Homer.

Now, we're seeing the very same historical shape-shifting with the Drift River Oil Terminal incident.

Chevron operates the Drift River Oil Terminal at the base of the Mount Redoubt volcano in Cook Inlet. When Mount Redoubt awoke in late 2008, Chevron refused to disclose how much oil remained in its storage tanks.

Why?

The Homeland Security Act -- al-Qaida apparently posed a greater threat to our fisheries than a simmering volcano. When Redoubt's massive eruption on March 22 sent trees, mud and debris through the facility, Chevron finally revealed the truth: More than 6 million gallons of oil remained perched above our salmon, cod and halibut fisheries.

Chevron knew the risks. The same scenario unfolded during the 1989-90 Redoubt eruption. They reinforced protective dikes, but reinforced dikes can only do so much against the forces of nature. In fact, volcanic floods this year over-topped the dikes, showing the dikes had no safety margin for a slightly larger eruption.

Despite months of warning, there was no actionable plan in place to address a catastrophic spill from the facility. The spill plan required by laws passed after the Exxon Valdez didn't address a 6 million gallon spill, and it didn't even envision oil from the tank farm hitting open water.

In what should have been a day, it took more than a week to activate a Unified Command to coordinate spill prevention and response. And most disturbingly, the initial response priorities were not to protect our invaluable fisheries, but instead to ensure the continued flow of oil.

Chevron also had no plan to address significant economic losses when the facility went offline. Aside from contractor layoffs and their debilitating effects on local families, Alaska lost up to $2 million a month in revenues while the facility remained closed, according to state figures.

Finally, Chevron repeatedly put workers in harm's way at Drift River, and in some cases left them stranded on the ground while eruptions, lightning and lahars raged around the facility. Oil field work is dangerous enough, and the bravery of those who went back into Drift River at the peak of seismic activity was exceptional.

Had Chevron truly been concerned about worker safety, it would have reconfigured the facility to bypass the tank farm prior to the latest eruption. That way, the size of the eruption would not have been a risk factor, operations would not have been so drastically disrupted, and fewer people would have been put at risk.

Chevron Corp. knew all this, but its only plan was to hunker down and hope for the best. Hoping for the best, however, is not a lesson we learned from the Exxon Valdez.

So, we dodged a bullet at Drift River. Yet to hear the corporate public relations machine recount the story, you would think the Drift River response was flawless. No oil spilled, no injuries. No harm, no foul.

We appreciate all the incredible work done to help avoid a catastrophe, but whitewashing this incident prevents us from learning from our mistakes and having better preparedness and worker safety in the future.

The fact remains the Drift River Oil Terminal incident stands as the most significant breakdown in spill prevention and response in Alaska since the Exxon Valdez. That breakdown put our fisherman, workers and countless families and businesses around Cook Inlet at extreme risk. And know that what we see in Cook Inlet will invariably unfold in Bristol Bay and the Beaufort and Chukchi Seas if we allow our governments and the corporations to push into those frontier waters.

Bob Shavelson is Executive Director of Cook Inletkeeper, a citizen-based nonprofit organization with offices in Homer and Anchorage that is dedicated to clean water and healthy salmon.

Source

COMMENT: Mt. Redoubt eruptions took place overnight, in the dark, so the only photographic images of the event are from preceding days and the day after. This YouTube video gives time-elapsed images of steam venting on March 15, seven days before the event. More information and a large collection of images of Mt. Redoubt are available at the Alaska Volcano Observatory. March 23, 2009 are the first images after the major eruptions on the night of March 22.

Location of Redoubt volcano, in relationship to surrounding towns, roads, and other volcanoes. Picture Date: September 26, 2008; Image Creator: Schaefer, Janet; Image courtesy of the AVO/ADGGS.; Source

Redoubt - Hut webcam image from March 23, 2009 at 20:43:47; Picture Date: March 23, 2009 20:43:47; Image Creator: Redoubt Hut webcam; Image courtesy of AVO/USGS.; Source

Massive flooding in Drift Valley from the eruption of Redoubt Volcano. High-water marks on the valley walls estimated to be about 6-8 meters (20-25 ft.). View is up-valley from about mid-way up valley to the Drift Glacier. Picture Date: March 23, 2009; Image Creator: McGimsey, Game; Image courtesy of AVO/USGS; Source

Photos of the flooding in Drift Valley and tephra deposits from the eruption of Redoubt Volcano. Picture Date: March 23, 2009; Image Creator: Read, Cyrus; Image courtesy of AVO/USGS; Source

Will the Electric Car Ever Make It to the Mass Market?

By Christian Wüst
Der Spiegel
September 16, 2009

From internal combustion to electric (Der Spiegel)

Part 1: Will the Electric Car Ever Make It to the Mass Market?

Not Much Will to Power

Germany's automakers are proudly showing off their concept electric cars at the Frankfurt motor show, which opens to the public Thursday. But the shiny new designs on display are just a pipe dream. It's still not clear when, or even if, viable electric cars will make it onto the mass market.

Amid widespread concerns about global warming, it's practically official policy at the European Commission these days to see electricity consumption as a sin. The bureaucrats in Brussels have recently gone so far as to ban the production of 100-watt incandescent light bulbs.

So far, however, there have been no limits set on a much bigger consumer of electricity -- the automobile. When the 63rd International Motor Show (IAA) opens to the public this Thursday in Frankfurt, visitors can check out designs for electric cars whose power rating will exceed that of the banned bulb by a factor of many thousands.

Mercedes-Benz will be showing a 392-kilowatt concept electric sports car, while Audi is presenting a similarly powerful electric version of its top-of-the-range R8 model. BMW will demonstrate alternative engine systems with its "Vision Efficient Dynamics," a hybrid composed of a three-cylinder diesel engine flanked by two electric motors, which is supposed to have a top speed of 250 kilometers per hour (155 miles per hour). "Economizing is getting sexy!" is the verdict of the German car magazine Auto Bild.

But before environmental organizations show up to point out the real carbon footprint of such energy guzzlers, the manufacturers would do well to point out an important fact up front, namely that such high horsepower electric cars are not market-ready, and not a serious option even in the long run. Even the best batteries would run out within a few minutes of being driven at full power.

Pure Fantasy

And so the first IAA to take place in the age of the electric car proves one thing above all -- that giving up gasoline, which can still provide energy in abundance, won't be easy. The desire to create similarly powerful engines using electricity is, for the time being, pure fantasy.

Nonetheless, a conviction seems to have spread throughout the industry that there will be a mass market for electric cars, and that it will probably happen in the decade between 2020 and 2030. Developers estimate that by then storage capacity will have increased two- or three-fold. That could be enough, at least for a car with a small engine.

Electrochemical parameters still set rather narrow limits on the potential of electric cars. The best lithium-ion batteries currently weigh slightly less than 10 kilograms (22 pounds) per kilowatt hour. The first small-series production cars, such as those from Smart or Mitsubishi, have a capacity of 16 to 20 kilowatt hours. That's the equivalent of the energy content of about two liters (0.5 gallons) of gas.

Manufacturers calculate this can provide a driving distance of 100 kilometers (62 miles) or more. But these consumption measurements use extremely slow standard driving cycles as their basis -- the ideal conditions for an electric motor.

Short Range

In practice, these figures could shrink by as much as half when higher speed driving is combined with further sources of energy consumption such as heating or air conditioning. And who wants to buy a car whose range is so small that even a short trip to the outskirts of town would entail constant worries that the batteries might die? One BMW manager sneers that "people won't be able to think about anything but electrical outlets."

In addition, this extremely limited mobility comes with a very high price tag. Lithium batteries with a capacity of 20 kilowatt hours cost around €20,000 ($29,000). That price should sink by about a third when the batteries one day go into mass production. This is the manufacturers' second big hope -- the batteries eventually need to be three times as good and three times as cheap as those available today. Then things start looking more promising for the electric car.

Until electric cars really do hit the streets en masse, so-called plug-in hybrids present a practical interim solution. These are cars that include a conventional internal combustion engine along with the electric motor. Toyota, the pioneer in hybrid technology, has followed precisely this pragmatic path, and will be showing the plug-in version of its Prius model at the IAA.

This partially electric vehicle has a comparatively small battery pack, which is charged from an electrical outlet and can power the car for about 20 kilometers (12 miles). Once the charge is used up, the gasoline-powered motor kicks in, and the ride continues with an economical hybrid system that continues to switch between the electric and combustion engines.

Daimler too will present an S-Class model with a plug-in hybrid system in Frankfurt. The car's energy consumption, fuelled by both gasoline and the power grid, is supposed to be equivalent to a conventional vehicle with a fuel efficiency of three liters of gas per 100 kilometers (78 miles per gallon). This constellation should be ready for series production with the next generation of the company's luxury model in 2013.

Gradual Evolution

This approach -- using a gradual evolution of hybrid technology to eventually reach purely electric-powered vehicles -- is the only plausible strategy. But Western manufacturers are perceptibly lagging behind. The previous IAA, in September 2005, marked a turning point. At the time, car companies in Europe and the US admitted to having missed the boat. Without exception, they all announced their own hybrid systems.

The gap, however, is still enormous. Toyota has already sold more than a million hybrid cars. Volkswagen dealerships, meanwhile, have yet to see a single one. It's the same with Opel, Peugeot, Fiat and Renault. Mercedes is currently producing a very limited number of S-Class hybrids, about 40 a day. They have a so-called "mild hybrid" engine -- a simpler variation following Honda's example, in which the electric engine can only act as support, not power the car alone.

The far more ambitious full hybrid system has been presenting developers with formidable hurdles. Mercedes, BMW and General Motors spent four years on a project called "Two Mode." It outdid Toyota's system considerably in terms of complexity -- and also ended up being far too expensive. The elaborate electromechanical systems created in the project will be used in a few hefty sport utility vehicles and then disappear off the market again. All the participating companies have agreed not to continuing developing the system.

Volkswagen together with its new subsidiary Porsche wanted to present the hybrid versions of their Touareg and Cayenne models at this year's Frankfurt motor show, but they still haven't got the project under control. Integrating a full hybrid system into a traditional powertrain requires a very complicated control system. Both vehicles won't be released until next year, and they'll also be sold at a very high price -- to which the manufacturers are apparently still adding. "We can congratulate any customer who decides against the Touareg hybrid," one VW manager admits.

There is a certain bitter humor in the fact that the same companies which are delivering such pitiful results when it comes to relatively basic electric car technology also want to make IAA visitors believe they already have electric sports cars in the works.

Part 2: German Companies Play Catch-Up

In any case, the arduous pursuit of the electric car has created centers of expertise, albeit less with the car manufacturers than with their suppliers. While Toyota develops nearly all its electrical motor components in house, down to semiconductors and batteries, its Western counterparts outsource this area.

Many car companies and suppliers have now forged relationships with battery manufacturers. The field is largely dominated by Japanese and South Korean producers. German auto parts producer Bosch relies on Samsung, VW gets components from Toshiba, among others, while Opel works with LG Chem in South Korea. Only Daimler gets its electronics locally, from an Evonic subsidiary in eastern Germany called Li-Tec.

"Three to four major battery producers will prevail in the end," estimates Bernd Bohr, the head of Bosch's automotive group. He believes that large system suppliers like Bosch will dominate the market when it comes to the integration of electric engine components, especially the development of the power electronics that control the flow of electrical current.

Stuttgart-based Bosch was long considered Germany's champion as far as automobile electronics were concerned -- even if the focus was previously on the combustion engine. After all, the company logo even features an armature from a magneto ignition.

However Bohr admits that Bosch underestimated the hybrid and electric engine business for too long and entered the field too late. But he believes his company is catching up. "Bosch has always had considerable stamina when it has to sprint," he says. He adds that order volume for hybrid and electric engines is now looking good.

Bold Plans

Noticeably better positioned is a competitor usually associated more with rubber tires, although more recently it gained a doleful prominence as the object of a corporate takeover which ended in tears. Continental, of all companies, is Germany's pivotal technology company in the field of hybrid and electric engines.

The company was already producing the first hybrid components for GM five years ago, and so far Continental has invested more than €500 million in the segment. About 800 employees -- around twice as many as Bosch employs in the sector -- work here on more than 20 projects related to electric motors, including Mercedes' S-Class hybrid, the electric Smart, and the Opel Ampera.

The most spectacular electric car project to be announced so far will apparently also take to the streets with Continental technology. The French-Japanese alliance of Renault and Nissan has signaled that it will soon be manufacturing 100,000 electric cars a year -- a bold plan.

In the run-up to the IAA, Continental was planning to reveal that it has started to develop the central engine components for an electric vehicle which will be launched on the market in large-scale production in 2011. The supplier isn't at liberty to say which manufacturer is involved in this project, but in this case the point is moot -- aside from Renault/Nissan, no other company has comparable plans.

Revolutionary Concept?

The mass-produced electric car is supposed to help Shai Agassi's "Better Place" project to get off the ground. A former board member at the software giant SAP, Agassi was a shooting star in the IT industry and now seems to be taking over the media role that the entrepreneur Nicolas Hayek, a co-founder of the watch company Swatch, occupied in the 1990's. Hayek seduced the industry's major players with his vision of an ultra-ecological "Swatch car," ultimately winning over VW and later Daimler as partners. The end result was the Smart car, a purely Daimler product with some memorable birth defects.

A similar development is foreseeable with Renault and Better Place. Agassi has taken on the role of the virtuoso public speaker, calling his company "the leading electric vehicle services provider," without much substance to show for it. The battery switch stations that are supposed to be Better Place's great idea will for the time being only be available in limited numbers in Agassi's native Israel. And the project's revolutionary concept still relies on the time-tested electrical outlet.

In the end, all car companies are going to have to tackle this problem. It's not the infrastructure for electric cars that's missing, but practical and affordable storage technology.

Renault and Nissan are risking the leap to series production using batteries from the Japanese manufacturer NEC. The goal is an impressive capacity of 24 kilowatt hours. But the prototypes shown so far have had little over half of that.

Study shows high level of potentially toxic air pollution in DISH

COMMENT: This is the second article from Fort Worth we've posted recently. Three days ago, it was about Quicksilver Resources, a Texan company, and its stunningly productive new well from the Horn River shales in northeast BC.

Imagine that. Are you ready for Encana BC?

By MIKE LEE
Star-Telegram (Fort Worth)
Saturday, Sep. 26, 2009

A new study shows high level of potentially harmful air pollution in the town of DISH in Denton County.

DISH sits next to several large compressor stations, which process natural gas from the Barnett Shale and pressurize it for shipment across the country. Residents have complained for years about the smell and the noise.

The study, done by Wolf Eagle Environmental and paid for by the Town Council, found high levels of 15 chemicals, including benzene, xylene, naphthalene and carbon disulfide at five of seven test sites. In some cases the levels were 10 times the recommended level for short-term exposure, and some levels were high enough to be an immediate danger, according to the study. It said, however, that the results were only a one-time snapshot.

Mayor Calvin Tillman, who has been fighting the pipeline companies for about a year, said the study proves that state regulators need to take action.

"I don’t believe this was a one-day event," he said. And even if it was, "you still broke some thresholds for short-term exposure to these chemicals."

Terry Clawson, a spokesman for the Texas Commission on Environmental Quality, said the agency was already planning testing for airborne toxins in Denton County.

The companies that run the compressor stations, including Atmos Energy, Chesapeake Energy, Enbridge, Energy Transfer Partners and Crosstex Energy, paid for a study in DISH this year that concluded that gas levels in the air weren’t high enough to be dangerous.

However, that study didn’t check for toxic chemicals, said Scott McLAren of Apogee Scientific, who conducted the survey.

"We were only looking for leaks in natural gas pipelines," he said.

Still, two of the companies referred to the previous study when asked about the latest study.

"We believe we’ve taken ample steps to communicate the details of our investigation to the mayor and will continue to monitor our operations in the area," said Jill McMillan of Crosstex Energy.

Justin Bond of Chesapeake Energy said, "The last time several operators spoke with Mayor Tillman and presented this information, he complimented our efforts."

Mike Lee, 817-390-7539, mikelee@star-telegram.com

Read the DISH, Texas, air study (pdf)

Source

Canada and climate change: Nothing gets done, fingers get pointed

Jeffrey Simpson
Globe and Mail
September 25, 2009

Global warming simply is not an issue on which Prime Minister Stephen Harper wants to expend one ounce of political capital. (REUTERS)

The Liberals' lame record doesn't excuse the Conservatives' part in our national shame

The “tragedy of the commons” occurs when something – a pasture, a lake, a fish stock, the atmosphere – becomes degraded by the actions of all.

No single action by a person, property owner or government causes the degradation, and no single action will materially reverse the negative trend. So nothing gets done, fingers get pointed and the “commons” degradation continues.

The world faces its greatest tragedy of the commons with the warming of the planet's atmosphere that is overwhelmingly caused by human activities, especially emissions of carbon dioxide and methane. Crank scientists and their dwindling band of supporters contest this warming, but the overwhelming majority of scientists have declared it to be a fact. Indeed, the latest scientific evidence suggests an acceleration of warming trends.

Although some are far more than others, no one industry or country is responsible. So, for example, in Canada, which produces roughly 2 per cent of the world's emissions, it is easy for those who want little or nothing done at home to point fingers at others.

Creating 2 per cent of the world's emissions is actually a terrible record for a country with a population of just 33 million. On a per capita basis, Canada is one of the worst emitters on the planet.

Canada's emissions record is the worst in the industrialized world, because since a previous government signed the Kyoto accord, the country's emissions have grown by 27 per cent, instead of declining the promised 6 per cent. The latest government report has shown Canada's emissions rising again after a slight decline in the previous two years.

You might think that for a country bathing in its own moral superiority, believing “the world needs more Canada,” this record would be a source of national shame, such that citizens would demand the government take a leading role in reversing the domestic record while urging the world to do much more to reverse the ominous trends.

If so, you would be wrong.

The Liberals' record on this file while in office was appalling. Never forget this. But the Liberals' dreadful record of empty rhetoric, failed plans and false targets does not excuse the Conservatives' lame efforts since arriving in office.

Global warming simply is not an issue on which Prime Minister Stephen Harper wants to expend one ounce of political capital. Earlier this week, while other world leaders took the podium for a special United Nations session on climate change, he preferred a meeting and photo opportunity with the mayor of New York. He did attend a private leaders' dinner, but then rushed back to Canada for another of his patented economic “announcements” at a Tim Hortons facility.

Mr. Harper sent Environment Minister Jim Prentice to the UN, where he criticized the Chinese and Americans for not presenting carbon reduction targets, despite the fact that every expert in Canada (and many overseas) knows that Mr. Harper's own government's target – a 20-per-cent reduction by 2020 – cannot possibly be met under current policies.

Not for Mr. Harper the kind of carbon tax being imposed in France by President Nicolas Sarkozy. Not for him the urgency with which Britain's Gordon Brown, Germany's Angela Merkel and Australia's Kevin Rudd approach climate change. Not for him the moral imperative that infuses President Barack Obama's speeches on the subject, although congressional politics will ultimately dilute his actions.

No, climate change is something Mr. Harper has been forced to tackle with the greatest reluctance. He was long a skeptic about the science, and he has always feared the economic fallout of serious action.

Politically, he has calculated that action on climate change doesn't have any upside for his party, since few voters associate the Conservatives with environmentalism. He certainly does not want to upset anyone in the fossil-fuel-producing provinces of Alberta and Saskatchewan, which are the core of his party's political base. He wants his own reputation to be associated with economic management and lower taxes, not climate change.

After all, those Tim Hortons voters are quite literally the bull's eye of Conservative political ambitions, and they don't seem terribly worried about climate change. So Mr. Harper isn't going to spend an ounce of political capital being associated with the issue, or providing serious leadership at home and abroad.

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Carbon capture plan 'sheer folly'

Nathan VanderKlippe
Globe and Mail
Thursday, Sep. 24, 2009

Production foreman Ron Toly visually inspects the carbon capturing research facility near Redwater, Alberta, June 26, 2009. (John Ulan/The Canadian Press)

Main pillar of climate-change plan too risky for Canada to pursue, policy paper says

A major prong of Canada's climate change plan is so flawed that to pursue it now – with neither the proper science nor proper laws in place – would be “sheer folly,” concludes a new report.

The risks of building a system to capture and store carbon dioxide underground include arsenic leaching into groundwater, unforeseen leaks, cross-border disputes and spiralling costs, according to a paper that will be released by the Munk Centre for International Studies Wednesday.

“Given the paucity of groundwater information in Canada and lack of national water standards, the push to accelerate [carbon capture and storage] could pose real risks to our groundwater resources,” argues Graham Thomson, the Edmonton Journal columnist who authored the 63-page document. The research compendium draws from published reports and expert interviews.

“In sum, the marriage of a brave new technology with a political fix for an immediate climate problem could have negative long-term consequences for Canadian taxpayers and water drinkers without stabilizing the climate.”

Carbon capture and storage, or CCS, involves siphoning off, then pumping underground, carbon dioxide from emissions coal-fired power plants and oil refineries. It has become a key element of Canada – and the world's— strategy to beat emissions.

The United Nations believes 55 per cent of emission reductions can come from CCS. U.S. President Barack Obama has pointed to the technology as an area where Canada and the U.S. can collaborate. Ottawa has put up to $140-million into funding eight projects. And the Alberta government, despite plunging into a nearly $7-billion deficit, has steadfastly defended the $2-billion it committed to building three CCS pilot plants.

The problem, Mr. Thomson finds, is that Canada has yet to draft the regulations, create the oversight regimes or lay the proper scientific groundwork to launch a project that could see vast quantities of carbon dioxide buried kilometres beneath the earth in saltwater aquifers.

Moving forward without any of those things in place, he writes, “would be sheer folly.”

The findings rankled some in Alberta, who argued that it is unfair to point to flaws in a system that has yet to be developed.

Jerry Bellikka, the director of communications with Alberta Energy, questioned Mr. Thomson's scientific credentials – he is a journalist, and the report presents no new findings – and argued that Alberta's long experience in regulating industry's underground injections of poisonous gas makes it fit to properly manage CCS.

“I don't think it should be alarming to everybody that we don't have everything mapped out ahead of time, because we're just starting the process,” he said.

But even the sheer scale of what's required for CCS is worrisome, Mr. Thomson writes. For example, sequestering just 25 per cent of global carbon emissions will mean erecting an infrastructure twice the size of what today's entire oil and gas industry has built in the past century, according to one estimate.

That would use such a vast amount of resources “that it would be a colossal diversion of energy and actually a real waste of time,” said Andrew Miall, a University of Toronto geology professor who has reviewed the paper, and agrees with many of its conclusions. “How much CO2 are you going to generate to make the steel [pipelines] to transmit the CO2? It just gets plain silly.”

Prof. Miall, along with representatives of the U.S. Environmental Protection Agency, Natural Resources Canada and environmental groups will debate the paper's findings today in Toronto.

Among those: Pumping compressed carbon dioxide into an earth pin-pricked with holes is inherently risky. In Alberta alone, 400,000 wells have been drilled – and those that have been forgotten or poorly built present a potential carbon escape route. Huge volumes of carbon dioxide pumped into saline aquifers could displace some of that briny water into drinking supplies – exactly what happened with underground wastewater injections in Florida.

Badly designed projects may cause arsenic and lead to leach into drinking water. And massive injections of high-pressure gas into the ground can create micro-earthquakes, fracturing rock and leading to even more possible leakage points.

The costs, too, could rise, as they have with technology like nuclear power generation, making an already-expensive solution even pricier.

Still, others say industrial experience in capturing sulphur emissions has shown that costs can fall dramatically with time. And the Intergovernmental Panel on Climate Change has concluded that leakage risks are minor, especially from aquifers thousands of metres below groundwater supplies.

“There are always doubters and people that have fears,” said Jim Carter, who chairs Alberta's Carbon Capture Council. “But CCS has the most promise of anything out there. And I think we'd be irresponsible if we didn't really begin to develop in a meaningful way the opportunity to implement this technology.”

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Oil sands: The muddied message

COMMENT: Environmentalist campaigns against tar sands exploitation appear to have fostered a growth opportunity - and the advertising industry is pouncing on it with all the tools in its arsenal. But this article suggests the tar sands producers aren't falling for it.

Nathan VanderKlippe and Katherine O'Neill
Globe and Mail
Thursday, Sep. 24, 2009

A Syncrude oil sands facility in Alberta (AFP/Getty Images)

Recent Greenpeace stunt reveals need for industry to tackle its ‘dirty oil' image problem head on, observers say

Alberta's former energy minister warned the oil sands industry to “wake up” and start fighting an aggressive public relations battle, telling producers they should be embarrassed that 25 protesters were able to sneak into and temporarily shut down a major mine last week.

In a passionate call for the oil patch to more fiercely fight the public image battle it is waging – and, by some accounts, losing – Pat Nelson called a Greenpeace stunt a moment of shame in an address to the Oil Sands Trade Show and Conference in Edmonton Wednesday.

“Wake up, people! It's no wonder what we are getting [out are] the wrong messages,” said Ms. Nelson, who left office in 2004 and is now the vice-chairman of an industry group called the In Situ Oil Sands Alliance. “Every other country in the world would have stopped them at the gates, even if it meant using force. What a message to send.”

For an industry that has faced a growing line of opponents, the Greenpeace stunt reveals a dire need for a concerted campaign to tackle its “dirty oil” image problem head on, observers say.

The protest serves as evidence that efforts to counter the environmentalist message have been far too passive, Ms. Nelson said, showing conference-goers images of a huge “Tar Sands: Climate Crime” banner that Greenpeace unfurled inside the Albian Sands mine, owned by Royal Dutch Shell. The protest succeeded in closing down the mine north of Fort McMurray, Alta., for several hours.

Pictures of that banner were sent across the world. For industry to undo the damage they have done, it needs to show the public “the real pictures of the oil sands,” she said.

It is an argument that strikes at the heart of the oil patch's response to its growing chorus of critics. Rather than strike back with a broad-based marketing campaign, aimed at putting its message before large swaths of the public, the industry has relied instead on websites and conversations with smaller audiences. Its rationale has been that it can be more influential by making a stronger connection with fewer people.

Marketers, however, say that's a mistake. By failing to push back more aggressively, they say, the campaign against oil sands is going largely unchallenged. In part, that may be because the oil industry simply has not been wired to fight back in public, said Russell Stedman, the managing director at the Calgary office of ad firm Taxi Canada Inc.

“Most of these companies have been successful in spite of their marketing,” he said.

But, he said, an effective response may require that those attitudes change. “[Better marketing is] going to have to play a role,” Mr. Stedman said.

The industry could highlight some progress it's made in reducing emissions, oil extraction technologies that step more lightly on the boreal forest, and ongoing efforts to reclaim exploited lands. Critics, of course, say an image overhaul is impossible because the industry is inherently environmentally destructive.

Industry has done some mass marketing – including ads in several smaller U.S. publications such as the Washington Times, and The Hill, last week.

But rather than spend on big-budget advertising, companies have instead worked to stir up a “conversation” on oil sands. The Canadian Association of Petroleum Producers launched a Twitter feed this summer, and spends the bulk of its advertising budget on Google ad buys, which for $10,000 a month have delivered 10,000 monthly hits to its website. It has worked to build up canadasoilsands.ca, where it lays out industry positions on issues like water use and emissions. And it has tendered favoured numbers-heavy slideshow presentations to get its message out.

But the volume of that response appears to be outmatched by critics, who have taken out ads in some of the biggest U.S. newspapers, launched a satirical oil sands travel website (inviting guests to mornings that start with a “propane cannon wake-up call”) and greeted both travelling senators and President Barack Obama with published anti-tar sands messages.

Industry itself admits it has been slow to respond.

“We have to a large degree neglected the broader NGO communities, and some of the concerns that have related to our operations,” said Janet Annesley, Shell's senior manager of external relations. “We do know we need to do better. That's the bottom line. Industry has been on the back foot.”

Damaged reputations aren't the only danger of unchallenged criticism. Public opposition could also hurt the “social licence” of oil sands companies to operate, and potentially affect policy.

But industry hasn't yet seen evidence of that – U.S. leaders, in fact, have made recent statements supporting oil sands in the name of energy security. And the oil patch believes firing back with a mass market salvo won't work. For one, there's the question of whether anyone would actually believe them. “We don't have the credibility to tell our story in a one-way medium,” said CAPP spokesman Travis Davies, who acknowledges the PR battle will likely become more strident in the months ahead of the Copenhagen climate talks in December.

Still, rather than fight fire with fire, he believes industry first needs to build a base of believable supporters.

“We need to build some advocates on both the media side and the public side that will engage us in a bigger conversation, and then maybe we'll have some legs to stand on in terms of traditional messaging,” he said. “But until we do that, we just don't have the luxury of sloganeering.”

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Oil sands under attack on environment

Oil sands emissions (Nathan VanderKlippe/The Globe and Mail)

The industry is accustomed to defending its image in North America, but it now faces a multifront war, with opposition growing from Norway to Washington

The environmental battle over Alberta's oil sands is going global, forcing the industry to respond to new attacks on its record and putting fresh pressure on Ottawa.

The Calgary-based industry is accustomed to defending its image in North America, but it now faces a multifront war. That growing global opposition is highlighted by its role in today's federal election in Norway, where the state-owned oil company's plans for the oil sands have sparked controversy.

As well, a documentary that premiered in Switzerland and is now playing at the Toronto International Film Festival depicts the projects' devastating environmental impact; and a delegation of Chinese journalists is planning a visit to the scarred landscape of northeastern Alberta.

At the same time, U.S. activists are continuing their attacks in Washington, scheduling a news conference this week ahead of Prime Minister Stephen Harper's visit with President Barack Obama to highlight the dramatic increase in emissions that would occur if oil sands production is expanded as planned.

The industry expects the anti-oil sands campaigns will heighten in the runup to the international climate change conference in Copenhagen in December, which aims to replace the Kyoto Protocol with a new, binding international treaty to control emissions.

“We're not surprised that the discussion has migrated overseas to some extent, and we would expect that certainly in the lead-up to the international meeting in Copenhagen, we may see more of that,” said David Collyer, president of the Canadian Association of Petroleum Producers.

Critics are seeking to discourage foreign investment and force Canada to make more-aggressive commitments on climate change by targeting what has become a symbol of Canada's failure to cut emissions: Alberta's massive, open-pit bitumen mines.

The backlash goes beyond some adverse publicity.

Global companies such StatoilHydro ASA or Royal Dutch Shell PLC are encountering growing pressure in their home countries to revisit plans to invest in the oil sands, while Ottawa will have to table a credible climate-change plan – including real limits on oil sands emissions – or face international censure and perhaps even barriers to trade.

The industry is responding. Statoil chief executive officer Helge Lund wrote an op-ed piece in a Norwegian newspaper defending the company's role in the oil sands, while companies are themselves inviting international journalists to visit the Fort McMurray region.

Mr. Collyer expressed optimism that Canadian governments will balance environmental needs with economic development and energy security, and expects the U.S. government to take a similarly “balanced” approach. But he acknowledged there will be mounting pressure on Canada – and on the oil sands – in some international capitals.

The industry executive said oil sands represent only 5 per cent of Canadian emissions, and the country produces a mere 2 per cent of global greenhouse gases.

He said the typical oil-sands project produces 5- to 15-per-cent more carbon dioxide per barrel of oil than conventional oil supplies on a so-called “wells to wheels basis,” which calculates emissions from the production, refining and consumption of the petroleum.

Later this month, Mr. Harper will travel to Pittsburgh to attend a meeting of the Group of 20 nations, where leaders will attempt to narrow the gaping divisions between developing and developed countries, and Europe and North America, in hopes of reaching a climate treaty in Copenhagen.

Mr. Harper has insisted developing countries like China and India must accept some commitment to reduce greenhouse-gas emissions.

But Canada's credibility is undermined by its own modest targets and its failure to even come close to meeting its commitments under the Kyoto Protocol, said Andrei Marcu, a climate-change adviser with Calgary-based law firm Bennett Jones LLP.

The federal government is slated to release a revised climate-change strategy this fall that is expected to force companies to further reduce their emissions per barrel of oil produced, but not include absolute caps that would limit expansion of oil sands projects.

Environmentalists argue the oil sands represent one of the fastest-growing sources of emissions in the world.

They say that in order to protect its domestic oil industry, Canada has been a laggard in the international climate-change debate.

In a report to be released today, Greenpeace calculates total emissions from the oil sands region will triple by 2020 if proposed projects come on-stream.

Environmental writer Andrew Nikiforuk, who wrote the report, said the oils sands will have larger emissions than some mid-sized European countries, including Belgium, Ireland and Denmark.

That prospect has prompted politicians in Norway to assail Statoil for its plans to expand in the oil sands. In fact, Greenpeace has helped instigate the backlash in the Nordic country, hosting Norwegian journalists visiting northeastern Alberta, and sending a delegation, including Mr. Nikiforuk, to Oslo prior to Statoil's annual meeting in May.

In advance of today's vote, virtually every party in the country's multiparty system has said it will review the state-owned company's Canadian strategy after the election. Minister of Environment Erik Solheim is a member of the Socialist Left Party, a member of the governing coalition led by the Labour Party.

He said his party will demand new environmental laws that “will make it impossible for a company like Statoil to enter such [oil sands] projects,” he told the Norwegian daily Aftenposten.

Statoil moved aggressively into Alberta in 2007, when it paid $2.2-billion for North American Oil Sands Corp.

The company says it is committed to reducing emissions in the oil sands, including possible adoption of carbon capture and storage (CCS) technology.

Though many in the oil industry tout CCS has a key to improving its carbon footprint, the technology remains untried and prohibitively expensive without major government subsidies.

With a file by The Canadian Press

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Quicksilver Resources stock jumps on news of Canadian well output

COMMENT: Quicksilver is not just producing natural gas from BC's shales, but is also Canada's largest producer of coalbed methane.

By JACK Z. SMITH
Star-Telegram.com (Fort Worth, TX)
Posted Tuesday, Sep. 22, 2009

The stock of Fort Worth-based Quicksilver Resources soared to a yearly high Tuesday, buoyed by an announcement of strong results from a Canadian natural gas well.

Quicksilver (ticker: KWK) closed at $14.43 a share, up $1.31, or 10 percent.

The stock vaulted as high as $15.10 in heavy early morning trading, after a company announcement late Monday that a Quicksilver horizontal well in the remote Horn River Basin of northeast British Columbia had an impressive initial production rate of 13 million cubic feet of natural gas a day and an average daily yield of 10 million cubic feet in its first month of production.

The stock’s trading volume topped 7.1 million shares Tuesday, more than quadruple its daily average of about 1.69 million shares traded over the past five years, according to Bloomberg data.

Quicksilver CEO Glenn Darden said Monday that he is "very pleased" with the well and hopes to realize "even greater production volumes per well" in future drilling there.

Quicksilver has a substantial lease holding of 127,000 net contiguous acres in the basin, which has some geological characteristics similar to the Barnett Shale of North Texas, where Quicksilver is a significant player and has a projected 10-year drilling inventory on its lease holdings of 192,000 net acres.

Quicksilver’s stock price gains since March have been especially substantial given that it is predominantly a natural gas producer. Gas prices, which have spiked recently, are still at less than one-third of their July 2008 peak of more than $13 per million British thermal units. In futures trading Tuesday on the New York Mercantile Exchange, gas for October delivery settled at $3.61 per million BTUs.

Quicksilver’s stock was exceptionally volatile in 2008, trading as high as $44.98 on May 7 and as low as $3.74 on Dec. 5. The stock rose and fell largely in sync with natural gas prices, as did stocks of other independent gas producers.

On Monday in a briefing at company headquarters before a drilling site tour for three state legislators, Darden said that the gas glut should eventually dissipate, with prices likely to rebound to a "more reasonable" level of $6 to $8 per million BTUs. If that price can be sustained, drilling activity should rebound significantly, energy analysts have forecast.

Jack Z. Smith, 817-390-7724, jzsmith@star-telegram.com

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Extended OCS comment period produces 350,000 comments, Salazar says

Nick Snow
OGJ Washington Editor
Oil and Gas Journal
Sep 22, 2009

WASHINGTON, DC, Sept. 22 -- The US government received more than 350,000 public comments on possible Outer Continental Shelf resource development strategies during the 6-month comment period that expired Sept. 21, US Interior Secretary Ken Salazar said on Sept. 22.

Many of the comments came from public meetings he hosted in New Jersey, Louisiana, Alaska, and California, he said. “I heard broad agreement that we must confront our dangerous dependence on foreign oil, build a clean energy future, and make use of the limited resources we have while protecting our land, water, and wildlife,” he said.

Salazar said the US Minerals Management Service is reviewing all of the comments, which will take several weeks. Once that is complete, it will initiate environmental analysis and what he termed “public scoping opportunities” associated with the 5-Year Plan for oil and gas development on the OCS.

“The offshore energy program we are developing must address our nation’s energy security challenges, deliver a fair return to the taxpayers who own the resources, and account for the views of local communities, states, and tribal nations,” the secretary said.

It also must take several key considerations into account, including ocean areas critical to military training and the national defense; other economic benefits of the oceans including fishing, tourism, and subsistence uses; environmental considerations; existing oil and gas infrastructure; interest from the oil and gas industry; and the availability of seismic and scientific data, he said.

“I am confident that we will be able to expand our nation’s offshore energy portfolio by focusing on development in the right way in the right places,” Salazar said.

Move aggressively
Meanwhile, oil and gas industry groups urged MMS to move ahead aggressively on developing more OCS energy resources the 6-month public comment period on a draft proposed 5-year OCS plan expired.

“In about a week’s time, we will mark the 1-year anniversary of the end of the moratoria for new oil and natural gas leasing in federal waters off our Atlantic and Pacific coasts,” noted American Petroleum Institute Pres. Jack N. Gerard. “Despite the public’s clear desire for more domestic energy development and the industry’s years of experience operating offshore in an environmentally sensitive way, this administration repeatedly has slow-pedaled this plan which would benefit all Americans, especially in these tough economic times.”

Gerard said new oil and gas development could create thousands of jobs, add more than $1 trillion to government coffers, strengthen US energy security, and encourage a domestic economic recovery. “It’s time to end the delays. The administration now has comments in hand. It knows that oil and natural gas will be integral to the nation’s economy for decades to come. It must act now to ensure that America has the energy it needs today, and in the future,” he said on Sept. 21.

In comments submitted to MMS on Sept. 15, Independent Petroleum Association of American Pres. Barry Russell warned: “As our nation’s energy demand continues to increase, a failure to provide needed access to the OCS will increase domestic energy prices, slow US economic growth, and create hardships for consumers.”

“The next 5-Year Plan will define the shape and scope of domestic offshore energy development. It is essential that MMS develop a leasing program that provides maximum flexibility for our nation to address its energy needs,” Russell said.

Prompt review
National Ocean Industries Association Pres. Tom Fry urged US Interior Secretary Ken Salazar to review the comments promptly and analyze all OCS planning areas now that the 6-month comment period extension the secretary imposed on Feb. 10 has expired.

“Today’s volatile energy prices and supplies have created many problems for ordinary Americans. In part, this is because the government has denied access to energy resources owned by the American people,” Fry said on Sept. 21. “The energy resources on the OCS are vital to the nation’s economic prosperity, and safety records show that they can be produced in an environmentally responsible manner.”

Jenny Fordham, energy markets and government affairs director at the Natural Gas Supply Association, said the draft proposed plan (DPP) was a step in the right direction “and industry supports a robust plan as a foundation to our future domestic energy supply.” She said, “MMS should not delay the 5-Year Plan process, but should move forward quickly after the close of the comment period to develop the proposed plan and complete the necessary environmental work.”

In comments submitted to Renee Orr, MMS’s 5-Year Plan program director on Sept. 21, Fordham said NGSA was pleased that MMS added areas not included in previous 5-year OCS plans to this one’s DPP, including lease sales in the eastern Gulf of Mexico “which is known to contain vast resources of natural gas.” The industry association supports the proposal of 31 lease sales with no restrictions, such as buffer zones, and encourages MMS to prioritize the schedule of lease sales to be held in those areas known to have the highest resource potential, she said.

The federal government locked up OCS areas believed to contain 18 billion bbl of oil and 77 tcf of gas for more than 20 years, Doug Morris, API’s upstream and industry operations group director, noted in comments that API submitted to MMS on Sept. 21.

‘May be conservative’
“These resource estimates may be conservative since the areas in question are largely unexplored,” Morris said. “But if given access to them, the industry could use today’s highly sophisticated technology to locate and tap new domestic resources in an environmentally responsible manner as it has in other areas for decades.”

Past decisions to restrict OCS acreage available for exploration compelled the oil and gas industry to “pick over the bones” in search of commercial hydrocarbon quantities, Morris said. He cited expenditures of $2.2 billion for leases in 1996-97, with only 6% of the tracts eventually producing oil and gas and the remainder returned to the government. “Over 50% of the leases were eventually resold in subsequent sales for an additional $6.2 billion as the industry continued to search for the ‘needle in the haystack’ in a limited geographic area using new exploration technologies,” he said.

Morris conceded that successive exploration over some of the same areas led to new discoveries because new geologic concepts were tested, aided by the evolution of exploration and production technologies. “Nevertheless, over the period that moratoria restricted access to as much as 80% of the OCS, other opportunities for discovery went unexplored and untested,” he said.

Access to areas where technologies and concepts can be tested, and where lessons learned from exploration elsewhere in the world can be applied, will increase the likelihood that new domestic offshore oil and gas resources will be discovered and domestic energy security improved, Morris said. “We will continue to rely on oil and gas in the long term, so we need to make decisions now that provide us with the resource in the long term,” he said.

Include all areas
In IPAA’s comments, Russell urged MMS to keep all areas, including the eastern Gulf of Mexico, Alaska, and the entire Atlantic and Pacific OCS under consideration during the planning process’s next phase. Doing so would mean that “essential preparatory work will have been completed enabling that area to be offered for leasing more quickly should Congress mandate a sale,” he said.

Russell also suggested that MMS use area-wide lease sales wherever possible, and focused leasing for places where it is not. “Area-wide leasing allows IPAA members, the smaller independent companies, to actively acquire, explore, and produce low-risk fields. It also encourages innovative exploration strategies and is consistent with maintaining financially sound geophysical contracting and processing industries,” he said.

Fordham said in NGSA’s comment that the association also was encouraged by MMS’s including areas previously off-limits in the DPP. NGSA and API separately expressed in their submissions to MMS their opposition to the idea of coastal buffer zones and support for sharing new federal OCS oil and gas revenues with states directly feeling the impacts of development.

Morris and Fordham each noted that in August 2008, when MMS requested comments as then-Interior Secretary Dirk A. Kempthorne accelerated the OCS planning process to produce a 5-Year Plan for the 2010-15 period, some 60% of the responses said that the agency should “new program to provide some level of expanded access to domestic sources of oil and natural gas.” It was a significant indication that the general public understood the importance of developing more domestic oil and gas supplies, the API and NGSA officials separately said.

Contact Nick Snow at nicks@pennwell.com.

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Poop-to-power plant now online

By JOHN STANG
Seattle Post Intelligencer
September 21, 2009

It takes slightly more than three gallons of liquid cow manure to create one kilowatt-hour of electricity.

A lot of poop. A small amount of electricity. A big environmental boost to a dairy farmer.

A fledgling anaerobic manure digester is now running at roughly 80 percent capacity near Rexville in southwestern Skagit County. The plant produced its first power on Aug. 30 and will host Gov. Chris Gregoire at a ceremony next Monday.

The digester accepts the liquid manure in a big holding tank, where it gives off methane gas that is then burned to produce electricity.

It is the first or fourth of its kind in Washington -- depending on how you catalog the device. Ferndale-based Andgar Corp. built all four.

Washington already has three conventional poop-to-methane-to-power digesters near Lynden, Monroe and Sunnyside. However, they essentially accept manure from one dairy farm each.

The Rexville operation -- built and run by Farm Power -- is different in a couple ways.

It is set up to accept manure from two or more dairy farms -- enabling smaller operations to participate.

And it is designed to accept and extract methane from icky, slop-like wastes from seafood and chicken processing -- as well as other food wastes. Farm Power had to get a bill passed in the Legislature this past spring to make combining the food and cattle wastes easier from a regulatory aspect.

Dairy farms produce huge amounts of manure that can ooze into groundwater and eventually into streams and rivers to cause pollution problems.

Farmers take many measures to deal with this problem, but digesters are a more cost-efficient way to tackle the matter, said Daryl Maas, one of two brothers behind the Rexville operation.

Kevin and Daryl Maas -- who grew up around Skagit County dairy operations -- saw Washington's first digester built near Lynden in 2004 and became fascinated by its potential.

But they saw that very few farmers could afford to build similar digesters, Daryl Maas said.

The brothers created Farm Power in 2007, which raised $3.5 million -- including $1 million in federal and state grants -- to build the Rexville facility that is currently taking manure from two nearby dairy farms. The site has the capability to expand to accept manure from additional farms.

At full capacity, the Rexville site can handle 55,000 gallons of liquid manure a day. That translates to 750 kilowatt-hours -- enough to power about 500 homes.

That's one-tenth of 1 percent of the roughly 500,000 homes served by Puget Sound Energy (PSE).

The Rexville facility adds to what PSE can offer in "Green Power," a program in which utility customers can request to have their electricity partly or totally supplied by renewable sources such as wind, solar and biomass facilties.

Roughly 24,000 of PSE's 1.1 million overall customers have signed up for Green Power sources, said utility spokesman Andy Wappler.

"Now farmers have a brand-new product to sell -- renewable energy," Wappler said. Maas said the brothers have three more digesters on the drawing board
-- two in Whatcom County and one near Enumclaw. They hope to build an average of one per year.

Meanwhile, Maas said the manure can be returned to the farmers in better shape after the methane is extracted.

The returned manure has its nutrients broken down, which makes it a better fertilizer. Without going through the digester, the same manure would take longer to break down into essential nutrients for fertilizer.

Also, the process produces a mulch that can be used for livestock bedding.

John Stang can be reached at 206-448-8030 or johnstang@seattlepi.com.

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Renewable power decisions create a tangled web

David R. Baker
San Francisco Chronicle
Monday, September 21, 2009

More big solar power plants in the Mojave Desert. Fewer solar panels on homes and businesses. More hydroelectric dams in British Columbia.

Gov. Arnold Schwarzenegger passes a solar energy field to sign an executive order he signed giving California the nation's most aggressive energy standards, during ceremonies held at a solar energy field in Rancho Cordova, Calif., Tuesday, Sept. 15, 2009. The order requires utilities to get a third of their power from renewable sources by 2020.(AP Photo/Rich Pedroncelli)

The flurry of recent renewable power decisions in Sacramento could have far-reaching - even contradictory - results.

Gov. Arnold Schwarzenegger last week signed an executive order forcing California utilities to get 33 percent of their electricity from renewable sources by 2020. At the same time, he promised to veto two bills passed by the Legislature days earlier that would have done the same thing, but with far more restrictions on how those goals could be met.

Meanwhile, a bill to increase the amount of electricity that utilities get from home solar systems never reached a final vote. Its backers must wait for the next legislative session and try again.

Gov. Arnold Schwarzenegger signs an executive order California the nation's most aggressive energy standards, during ceremonies held at a solar energy field in Rancho Cordova, Calif., Tuesday, Sept. 15, 2009. The order requires utilities to get a third of their power from renewable sources by 2020. (AP Photo/Rich Pedroncelli)

"It's kind of a best-of-times, worst-of-times story," said Adam Browning, executive director of the Vote Solar Initiative advocacy group. "There are some things that didn't happen, but still, there really is a lot of development going on."

Renewable power advocates are still trying to assess the effects of all the things that Sacramento did and didn't do. But they see several likely results.

-- California's renewable power industry will grow, but it also will spill over into neighboring states. Many of the solar and wind farms built to help utilities meet California's new renewable power targets will be in Nevada, Oregon or Washington.

-- Companies planning large solar power plants in the Southern California desert won't need to jump through a new bureaucratic hoop to do it. One of the bills Schwarzenegger vowed to veto would have forced those projects to get an additional government permit - from the state's Department of Fish and Game - on top of the permits already required.

-- Companies that install solar systems on homes and businesses may see their sales drop next year because the Legislature didn't pass a key bill on "net metering."

Under current law, homeowners and businesses with solar systems can get credit from the utilities for generating excess electricity and sending it to the state's electrical grid. But the utilities are only required to take so much of it - up to 2.5 percent of each utility's total electrical load - and Pacific Gas and Electric Co. will reach that level next year. The failed bill would have expanded the amount to 5 percent.

Solar impact

"I'm not a person who usually goes around saying 'The sky is falling,' but this is really going to impact solar starting next year," said Angiolo Laviziano, chief executive officer of REC Solar in San Luis Obispo.

The bill's failure means that once PG&E hits the 2.5 percent limit, the utility's customers will no longer have as much financial incentive to go solar. Although REC Solar operates in other states, cushioning the potential blow, Laviziano said he could be forced to cut as many as 120 jobs if business in California dries up as much as he fears.

"Even for us, it would be an extremely painful hit," he said. "For companies that are focused solely on California, it would put their whole operations at risk."

As the California Legislature neared the end of its session, most of the attention focused on a pair of bills that would have dramatically expanded the amount of renewable power used in the state. California law now requires the utilities to get 20 percent of their electricity from renewable sources by the end of 2010, a deadline they are almost certain to miss. The bills would have raised that requirement to 33 percent by 2020.

But the bills rankled the utilities and large-scale solar developers. The developers didn't want to face another bureaucratic hurdle - the proposed fish and game permit - that would have slowed them down. In order to qualify for federal stimulus grants, they need to start construction by the end of 2010. "They were already running behind, and adding another layer of siting permits wouldn't help," said Jan Smutny-Jones, executive director of the Independent Energy Producers Association.

The utilities wanted more flexibility to buy power from outside California. Under the bills, out-of-state wind farms and solar plants could only make up 30 percent of each utility's renewable energy supply. The limit was designed to keep new renewable power projects and jobs here in California, rather than letting them go to neighboring states.

Schwarzenegger, however, sided with the utilities, saying the limit smacked of protectionism. As a result of his decision to veto the bills, renewable energy experts say states such as Nevada and Oregon will see more solar and wind projects.

Some people fear his executive order will open California to types of renewable power that current laws discourage.

Changes considered

The California Air Resources Board has the responsibility of drafting rules to carry out Schwarzenegger's order, and a spokesman for the board said the panel will consider changing the types of alternative energy that could count toward the 33 percent goal. Nuclear power and large hydroelectric dams won't be considered, said spokesman Stanley Young, but other types of generation will.

That worries Lannie Keller, who lives near Bute Inlet on the coast of British Columbia. Canadian companies have proposed building "run of the river" hydroelectric projects on 18 rivers that feed into the inlet, and opponents fear the electricity could be sent south to meet California's demand for renewable power.

Such projects don't use large dams, but they do divert part of each river's flow to run through a turbine. They don't pass muster with California's current renewable power law, but that could change. PG&E, for example, has already expressed interest in buying hydropower from British Columbia.

"It will create a viable market for what's proposed up here," said Keller, an organizer with Friends of Bute Inlet, which opposes the hydropower projects. "The so-called green energy down there will be coming at a significant environmental cost in British Columbia."

E-mail David R. Baker at dbaker@sfchronicle.com.

Source

New gas supplies 'could eat Arctic gas's lunch'

Rena Delbridge
Alaska Dispatch
Sep 19, 2009

For decades, Alaskans have dreamed of another pipeline boom, hoping for a giant natural gas project to generate tens of billions of dollars in tax revenue and put thousands of people to work.

Even people who didn't live here in the 1970s, when the trans-Alaska oil pipeline transformed Alaska from a poor, struggling state to one with a multibillion-dollar savings account that hands out checks to people just for living here, have heard the stories. And those handed-down memories of healthy economic times are enough to make plenty of Alaskans bullish on the long-sought-after natural gas pipeline.

Proponents of two separate pipeline proposals say they're moving along as intended, with a near-term goal of an open season in 2010. But as much as Alaskans pin their future on one of the projects, there are no guarantees either will be built.

There's a lot of gas out there right now, and prices are low. Then there's the gas line's enormous price tag -- an estimated $30 billion to $40 billion. Will the companies that hold leases to develop Alaska's vast gas reserves commit to such a massive investment (they like to say the pipeline would be the largest private energy project in U.S. history) under the weight of a struggling global economy?

Here are two views on Alaska's chances of another boom. The first comes from an industry gathering last week in Anchorage, when one analyst shared his doubts on the gas pipeline.

Gerry Goobie, managing consultant with the international energy consulting firm Purvin & Gertz, painted a picture at the Alaska Oil and Gas Congress conference of a buyer's market bloated with global supply, including in the United States, where much of Alaska's gas would be sold under current proposals. That's led to bottom-of-the-barrel Henry Hub natural gas prices in recent weeks - at one point, as low as $1.83 per million British thermal unit. Prices a year ago this time reached more than $7.80 per Btu.

Gas prices will remain depressed in North America until supply and demand level out, Goobie predicted. No one is clamoring for North Slope gas, and competition between supply sources will be fierce. Other supplies, including liquefied natural gas (LNG) imports to North America, are a real threat to Alaska's gas. And when prices rebound, some energy companies will focus on their ongoing shale gas developments around the country.

"They could eat Arctic gas's lunch," Goobie warned. "I'm not saying they will, but they have the potential. There is a lot of shale gas, and there is a lot of LNG."

Alaska's gas must compete with other supplies, some much closer to the cities and industrial centers where they are needed most. That leaves plans for a large-diameter natural gas pipeline -- as currently proposed in each of the two competing Alaska gas projects -- "technically feasible, but economically uncertain," Goobie said. A large pipeline increases risks for prospective investors, some whom may also be troubled by the other uncertainties - chiefly, a lack of precise details, such as regulatory and construction delays, and questions about how much the state might tax the companies that produce the gas.

If those issues aren't resolved soon, Goobie warned, other sources will flood the market. Further, he said, access to capital for the $40 billion line is critical, yet the severe market crash has left the global economy "in a period of maximum uncertainty."

Bill Gwozd, vice president of gas services for Ziff Energy Group in Calgary, is another analyst who has closely followed Alaska's gas pipeline quest and his own assessment of the situation. Although he believes North America will need Alaska's natural gas eventually, he said, the market doesn't discriminate for gas sources.

"The Johnny-on-the-spot that shows up is the gas supply that the market will consume," Gwozd added in a phone interview from his Calgary office last week.

It's a question of timing. If Alaska's gas isn't unleashed before emerging LNG, shale or other gas supplies corner the market, the state could lose out, he said.

Gwozd is still hopeful for Alaska. Like pipeline proponents, he estimates Alaska gas could hit North American markets at the end of the next decade, when prices have had a chance to rebound and supply and demand have balanced out. The project could change between now and then, he said. For example, the pipe size could be expanded to accommodate northwest Canada's large gas reserves, or the line's route could be redirected to LNG export terminals. (Asian markets may pay more for Alaska's natural gas than the American market.)

But both Gwozd and Goobie are clear one point: Alaska is running out of time.

"The world is not going to wait for Arctic gas," Goobie said.

Contact Rena Delbridge at rena@alaskadispatch.com

Source

Greenpeace protest sparks questions about security of Alberta oilsands

By Lisa Arrowsmith
The Canadian Press
Canadian Business
September 20, 2009

A pickup truck passes a mining shovel filling a haul truck at the Shell Albian Sands oilsands mine near Fort McMurray, Alta. While the oilsands industry tries to calm any frayed nerves after a splashy protest by Greenpeace at a Shell work site in northern Alberta, some analysts say the infiltration of such a huge operation should serve as a warning about the security of energy installations. (THE CANADIAN PRESS/Jeff McIntosh)

EDMONTON - While the oilsands industry tries to calm any frayed nerves after a splashy protest by Greenpeace at a Shell work site in northern Alberta, some analysts say the infiltration of such a huge operation should serve as a warning about the security of energy installations.

If demonstrators can get into the site, so could terrorists intent on doing real damage, says Tom Flanagan, a University of Calgary political science professor and author of a report about groups opposed to development of Western Canada's resource sector.

"It does raise concerns," Flanagan says. "It would be wise to take this as a warning of the importance of reviewing procedures to make sure this kind of thing couldn't happen again."

About two dozen protesters from Canada, the United States and France gained access to Shell's (NYSE:RDS.D) Muskeg River mine site north of Fort McMurray, Alta., last Tuesday, chaining themselves to giant dump trucks and a four-storey-tall shovel that scoops oily sand from the bottom of a massive pit.

After unfurling a banner which read, "Tarsands: Climate Crime" and spending 31 hours at the mine, the protesters left the fenced and gated site without any charges laid.

Fred Lindsay, Alberta's solicitor general and minister of public security, says he'd also like to know how the Greenpeace protesters gained access to the tightly controlled site.

But he notes that Alberta's energy infrastructure is spread over a vast area and not all incidents can be prevented.

"You look at the amount of infrastructure we have in this province, the large resource developments and the miles and miles of pipeline - obviously we can't fence it all in," Lindsay says.

"This particular case with Greenpeace has turned out to be a publicity stunt but nonetheless, they gained access which created safety concerns for them as well as the site. So we're going to mark that to see what we can do to make those sites more secure."

The province watches for any possible terrorist threats and has counter-terrorism protocols in place.

Canada has a stable political climate and has few violent incidents directed at the resource sector. Lindsay doesn't expect this latest incident will affect the country's reputation as a secure supplier of energy.

Toronto-based security analyst Mercedes Stephenson says the Greenpeace action likely took time to plan and noted that the group specializes in such actions.

"I was surprised they got into the facility... but it's Greenpeace," Stephenson says. "It has a history of being able to get into all kinds of places that nobody expects them to be able to."

Oilsands operations likely wouldn't be the first target of terrorists determined to halt the flow of oil or gas from Alberta, she says.

It's more likely those groups would choose a vulnerable area along the thousands of kilometres of pipelines that snake across the province.

In recent months pipelines in northeastern British Columbia owned by EnCana Corp. (TSX:ECA) have been the target of explosions and police have yet to make any arrests.

"If somebody really wanted to do damage, they probably wouldn't go to an oilsands mining facility," Stephenson says. "You'd be far more effective if you actually disrupted the flow. Because the flow is what supplying energy."

Alberta's oilsands currently produce about 1.2 million barrels per day and the United States has called the Canadian oilsands "critically important" to energy security in North America.

Shell hasn't determined where the Greenpeace protesters gained access to the mine.

Paul Hagel, a spokesman for Shell Canada, says the incident has prompted a full-scale security review which includes its adjacent Albian Sands site.

"We're talking about 155,000 barrel a day operation and so obviously, to ensure the future security of it is paramount," Hagel says.

Hagel calls this latest incident a "blip," but added Shell will learn from it.

"These sorts of events call for wild speculation. People get the what ifs: 'What if this happened, what if that happened.' Our oilsands operation is safe and secure and I would challenge anyone who would say otherwise."

Cheryl Robb, a spokeswoman with Syncrude, which operates two oilsands mines in the same region about 450 kilometres north of Edmonton, says the company has stepped up security in the wake of the Greenpeace action.

The incident has also renewed Syncrude's efforts to seek a court injunction that would prevent Greenpeace activists from coming near company property. In July 2008, Greenpeace protesters gained access to Syncrude's Aurora mine site, netting each of them a fine for trespassing.

Mike Hudema, a Greenpeace activist who took part in the latest action, refused to discuss how the protesters gained access to the Shell site.

This latest incident doesn't change Canada's international reputation as a reliable supplier, said Greg Stringham, a spokesman with the Canadian Association of Petroleum Producers, based in Calgary.

Between conventional production and oilsands mining, there's quite a lot of diversity in how Canada supplies oil to the North American market, he said. About half of all oil production in Canada comes from the oilsands, he said.

That diversity is partly what ensures that energy supplies are secure. If an incident does occur at a specific site, there are always other production facilities and other pipelines or storage facilities that can ensure the delivery of oil to market, Stringham said.

"The individual site access is something that companies will deal with, but the overall reliability of Canada as a friendly and reliable supplier of energy I don't think has changed because of an event like this."

Alaska Gov Says Gas Pipeline Competitors Should Work Together

By Cassandra Sweet and Siobhan Hughes
Wall Street Journal
September 18, 2009

WASHINGTON (Dow Jones)--Alaska Gov. Sean Parnell said Thursday that he expects developers of two competing natural gas pipelines, from Alaska's North Slope to Canada and the contiguous U.S., to find a way to work together before he will consider agreements on production tax incentives for the projects.

Even before Parnell replaced former governor and vice presidential nominee Sarah Palin in July, he was under pressure to show that a $30 billion gas pipeline being developed by TransCanada Corp. (TRP) and backed by the state would succeed, despite competition from another project, economic challenges and headwinds from some state lawmakers who question the project's viability.

BP Plc (BP) and ConocoPhillips (COP), which control major chunks of Alaska's North Slope oil and gas production, are developing a competing gas pipeline called Denali, without state backing.

Both pipelines would ship at least 4 billion cubic feet a day of gas from Alaska's Prudhoe Bay to Alberta, Canada, and start deliveries as early as 2018.

Parnell said he would wait for TransCanada to reach some kind of deal with BP and ConocoPhillips before he would agree to any tax incentives for producers.

"Until there is more commercial alignment between the parties, those talks and those negotiations would be premature," Parnell said. He added that "alignment" doesn't necessarily mean merging the two projects, as some federal officials and analysts have suggested.

Alaska's government has pledged more than $500 million and granted an exclusive license to TransCanada to build the 1,700-mile pipeline in hopes that it will create a new source of revenue for the state to offset declining oil production. The project has been criticized by a small but vocal group of lawmakers who are concerned that low natural gas prices and healthy gas supplies in the lower 48 states make the pipeline a risky financial bet.

Exxon Mobil Corp. (XOM), another major North Slope oil and gas producer, is partnering with TransCanada on the engineering component of the state-backed pipeline. But the Canadian firm has yet to line up commitments from Exxon or other producers to ship gas on the pipeline. TransCanada plans to hold an open season from May through July to solicit gas producers' interest in the line. But a TransCanada executive said earlier this week it could take several months, and an agreement with the state, to nail down commitments.

TransCanada's vice president for Alaska development, Tony Palmer, said Tuesday that he expects potential gas shippers will seek fiscal pre-conditions, including a long-term agreement by the state to lock in production taxes, before they agree to any pipeline commitments.

But Gov. Parnell said companies should use the open season as a forum to negotiate with each other, rather than press the state for production tax incentives.

Denali executives have said they plan to hold an open season in 2010, but haven't publicly set a date.

Meanwhile, some state lawmakers question whether the state should continue backing the TransCanada pipeline. State Rep. Jay Ramras, a Republican, said Alaska could end up paying TransCanada $850 million even if the pipeline is never built, due to agreements made during Palin's administration.

"We're inside an impossible transaction that has punitive clauses," Ramras said in an interview. Ramras said he plans to introduce legislation in January that would require the state to pay TransCanada from its general budget, so that the payments would have to compete for funding with road construction, schools and emergency services, adding more scrutiny to the project.

The North Slope holds some 35 trillion cubic feet of known gas reserves and the state estimates there could be 215 trillion cubic feet of undiscovered reserves. By comparison, U.S. consumption in 2007 was just over 23 trillion cubic feet.

By Cassandra Sweet and Siobhan Hughes, Dow Jones Newswires; 415-439-6468; cassandra.sweet@dowjones.com

Shell, Greenpeace negotiate calm end to protest

By Richard Warnica
Edmonton Journal
September 17, 2009

Oilsands giant to probe how environmental demonstrators infiltrated high-security site

Shell officials and Greenpeace activists negotiated a peaceful end Wednesday to a demonstration that saw protesters chain themselves to heavy machinery at Shell's Muskeg River oilsands mine ahead of a Washington meeting between Prime Minister Stephen Harper and U. S. President Barack Obama.

The 30-hour protest wound down in the hours after the morning summit. By mid-afternoon, the chains were off and the two sides were talking. By about 4 p. m., the group, a mix of activists from Canada, the U. S. and France, had agreed to leave.

Jessica Wilson, a spokeswoman for Greenpeace, said the protest ended amicably. No one was arrested, although the RCMP did record the names of each activist.

Paul Hagel, a spokesman for Shell, said the company agreed not to pursue charges, a move he doesn't think will encourage more protests.

"We feel strongly that we want to get these reasonable critics to the table and explain our views," he said.

"We acknowledge the impact of climate change. So we come on an even foot with Greenpeace. And we thought that would be enough to sit down and listen to their views and have them listen to our views."

The group of more than 20 activists entered the remote site north of Fort McMurray on Tuesday morning, chained themselves to three pieces of equipment and unfurled a banner that read: Tar sands: Climate Crime. Five of the protesters left the site Wednesday night.

The protest came a day after Greenpeace released a report calling oilsands development a climate catastrophe and was one of a series of actions that targeted the Washington meeting.

The United States is by far the largest consumer of Canadian oil. Since Obama's election last fall, oilsands opponents have increasingly targeted that market, urging politicians to shut the door to what they call Alberta's "dirty oil."

News of the Muskeg River protest made it into global coverage of the Harper/Obama summit.

Paul Joosse, a University of Alberta sociologist, said that kind of coverage may have been the goal of the Greenpeace protest.

"The interesting thing about this story is the strategy of communication Greenpeace uses," he said in an e-mail.

"First, they release their new report, then they conduct their action at the Shell site to draw attention to (it) ahead of Harper's meetings in Washington. The measure of success for the protest is therefore whether or not they are able to penetrate these high-level discussions."

The protest also raised questions about security in the oilsands, with one expert saying earlier the infiltration revealed serious vulnerabilities in the industry-run system. Shell's Hagel said the company will conduct a full security review of their site.

"This is the most serious piece of the puzzle here," he said. "We need to make sure the investigation looks at all different aspects of the site and how security procedures fell to make sure this doesn't happen again."

Shell shuttered the Muskeg River mine, which is part of their Albian Oilsands operation, for about six hours on Tuesday.

Production at the 155,000 barrel-a-day site was restarted at about 2 p. m. It was operating at full capacity a few hours later.

rwarnica@thejournal.canwest.com

© Copyright (c) The Edmonton Journal

Nuclear power costly: Wall

By James Wood,
The StarPhoenix (Saskatoon)
September 17, 2009

Province should keep options open on energy: premier

Nuclear power may be too large and too costly for a province like Saskatchewan, which needs to keep its energy options open, Premier Brad Wall said Wednesday.

The comments appeared to be another indication of the Saskatchewan Party government's diminishing enthusiasm for nuclear power a day after the release of the report on the public consultations on the government's Uranium Development Partnership. That report showed an "overwhelming" rejection of nuclear power from respondents. Energy and Resources Minister Bill Boyd said Tuesday the government had become increasingly cautious on nuclear energy's potential because of the cost.

In an interview before Wednesday's cabinet meeting at the legislature, Wall did not close the door on nuclear power, saying it was still on the agenda.

But while the high costs of nuclear reactor construction are nothing new, he said there are factors that have led to the increased concern over price.

Those include the cost of upgrading the province's transmission system to accommodate the large scale of a reactor, uncertainty around the ability to export the power generated and the increasing potential of electricity generation from natural gas that could remain cheap for some time to come.

The government also remains bullish on the prospects of carbon capture and sequestration technology, with a $1.4-billion SaskPower "clean coal" project already on tap.

"That is one of the challenges of nuclear power. . . . The cost is significant enough that it may just, on a de facto basis, rule out pursuing some of the rest of the envelope, the rest of the options, including clean coal, which is not an inexpensive technology," said Wall.

The premier said it would be a mistake for a government-owned electrical utility such as SaskPower to be reliant on a single source of power. The government envisions a mix of energy sources -- including clean coal, natural gas and renewables such as wind power -- in the province's power supply.

The work of the legislature's Crown and Central Agencies Committee, which will hold hearings in October on Saskatchewan's energy future, will be important in determining that mix and whether it could include nuclear, he said.

The Opposition NDP has accused the Sask. Party of rushing the process, but Wall said Wednesday the government may be amenable to expanding the hearings.

Nevertheless, the premier said he remains comfortable with his end-of-the-year deadline for a government decision on whether to greenlight nuclear power.

Ontario-based Bruce Power, which has not commented on the public consultation report or the government's comments on nuclear power, is eyeing Saskatchewan as the potential site of two 1,000-megawatt reactors.

Wall said he believes there is still majority support for nuclear power in the province, but only if environmental, health and safety and cost issues are addressed.

"I think cost, even for (nuclear) proponents and supporters, is the most important consideration . . . even for those who are comfortable with the health and safety, comfortable with the environmental implications, the cost issue is still there," he said.

NDP Leader Dwain Lingenfelter said the government does not need to wait until December to reject the Bruce Power proposal, which he describes as fundamentally flawed.

But he said nuclear should continue to be looked at among potential energy options for Saskatchewan.

The government's cooling toward nuclear power seems to indicate an emerging -- if inadvertent -- political consensus on the nuclear power issue.

Lingenfelter, a strong advocate for nuclear development in Saskatchewan during his hiatus from politics as an energy executive, says there is currently no business case for nuclear power in the province. He said Wednesday his past promotion was always based on having export markets in hand for the power generated.

jwood@sp.canwest.com

© Copyright (c) The StarPhoenix

No special treatment for tar sands

COMMENT: More than forty years ago Buffy Sainte-Marie sang "My country tis of thy people you're dying." She was singing of the tragic, genocidal, inhumane abuse of aboriginal people at the hands of European "leeches" who had come to this land and evicted its indigenous people. I don't actually know if in the titular chorus, "My country tis of thy people you're dying", whether Sainte-Marie means that aboriginal people are dying because of the actions of "fellow countrymen" - America is explicitly mentioned in the song, but Canada doesn't escape, or is the more revolutionary interpretation correct: that Americans will start to die at the hands of too-long-abused natives?

We're here again. In the global human family, millions of people are suffering, and more are starting to die, because of climate change, and it is our doing.

James Hansen
Opinion
The Star
Sep 16, 2009

In 1988, when I addressed the U.S. Congress on the dangers of global warming, I warned leaders that it was time to stop waffling. Humans were changing the climate in new and dangerous ways and we needed to take action. At the time, I knew we could expect stiff resistance from the usual suspects, but if you had told me that 20 years later, one of the most stubborn holdouts would be a self-interested Canada, I wouldn't have believed you.

That's because then, as now, Canadians are a compassionate people, concerned about the environment and the role their government plays on the international stage. And yet, there are few countries I can think of that have done more to undermine international efforts to fight climate change in recent years, than Canada. The evidence is easy to find:

In California, as recently as April of this year, Minister of Natural Resources Lisa Raitt personally lobbied the governor of California to oppose a law that would curb California's appetite for carbon-intensive fuels, and would dramatically reduce greenhouse gas emissions.

In Bali, Indonesia, Canadian officials worked behind the scenes to scuttle a potential climate deal by insisting that developing countries make emission cuts they couldn't afford to make. This, while the tiny island nation of Tuvalu, home to some of the world's first climate refugees, was pleading its case to the international community.

Further afield, in Bonn, Germany, Canada recently refused to join the International Renewable Energy Agency (IRENA) whose membership includes almost every developed nation, including the United States, and whose stated goal is: "... promoting the adoption of renewable energy worldwide."

In your own backyard, 74 per cent of Canadians believe the government should do more to protect the environment (Harris/Decima, Aug. 23, 2009), and yet this past month, Environment Minister Jim Prentice made a pitch for a pipeline project to send tar sands oil from Alberta to British Columbia, where it would be loaded onto supertankers and shipped to Asia, all in a bid to avoid North American climate regulations and to, in his words, "keep the market honest."

How is all of this possible? Does the Canadian government know better than its own people what is in the best interests of the country? That's a dangerous delusion, and it's one I've seen before in my own country. "It's not time," "Wait and see," "It's someone else's turn" – these stalls are the opposite of leadership, and in the climate era, they are downright dangerous.

There's a small price for being too early, but a huge penalty for being too late when it comes to fighting climate change. The huge penalty, in Canada's case, ranges from species extinction and extreme weather events, such as raging forest fires and tornadoes, to losses in agricultural productivity and new security threats posed by terrorism and the prospect of climate refugees.

When Prime Minister Stephen Harper meets with President Barack Obama in Washington this week to discuss clean energy and climate, I hope the Canadian public and media keep him honest. Close attention should be paid to any special treatment Harper attempts to gain for Canada's tar sands, your country's fastest growing source of greenhouse gas emissions, and a problematic industry linked to serious environmental degradation and human health issues. If he's still lobbying for "intensity targets," or pitting one part of the country against the other under a hard cap, you'll know he's stalling.

When it comes to fighting climate change, the will of Canadians is clear. The world is waiting to hear your voice and to see your country take action. You just need a government that's willing to actually represent you, free of distortion, beholden to no other special interest besides the best interest of Canadians.

That's true leadership, and in the climate era, it's a prerequisite for survival.

James Hansen is a world-renowned climatologist and adjunct professor at Columbia University. He is the 2009 recipient of the Carl-Gustaf Rossby Research Medal, the highest honour bestowed by the American Meteorological Society.

Activists block tar sands mining operation to send message to Obama and Harper: Climate leaders don’t buy tar sands

Greenpeace Canada
September 15, 2009

Fort McMurray, Canada — On the eve of the Harper-Obama meeting in Washington D.C., Greenpeace activists are locking down and blockading a giant dump truck and shovel at Shell’s massive Albian Sands open-pit mine in northern Alberta to send the message that the tar sands are a global climate crime that must be stopped.

“Through this action, Greenpeace put this destruction centre stage to show the world why we must stop the tar sands.” — Mike Hudema, Greenpeace climate and energy campaigner. Read the full news release.

The 25 activists from Canada, the United States and France entered the mine, about 60 kilometres north of Fort McMurray, at 8:00 a.m. They blockaded a giant three-storey dump truck and hydraulic shovel by chaining together pick-up trucks. Two teams then scaled the truck and shovel and chained themselves to them, while another team placed giant banners on the tarry ground reading, “Tar Sands: Climate Crime.”

“Greenpeace has come here today, to the frontiers of climate destruction to block this giant mining operation and tell Harper and Obama meeting tomorrow that climate leaders don’t buy tar sands” said Mike Hudema, Greenpeace Canada climate and energy campaigner, from inside the blockade. “The tar sands are a devastating example of how our future will look unless urgent action is taken to protect the climate.”

Canada is now the number one exporter of oil to the US, most of which is dirty tar sands oil. The climate crimes of tar sands development—rising energy intensity, greenhouse gas (GHG) emissions, and Boreal forest destruction—are leading the world to climate chaos.

The world’s oil addiction has turned the tar sands into the biggest industrial project on the planet, occupying an area the size of England. Tar sands GHG emissions, already nearing those of Norway, could soon more than triple to 140 million tonnes a year, as outlined in a Greenpeace report by award winning author Andrew Nikiforuk released this week. At that point they would equal or exceed those of Belgium, a county of 10 million. These numbers account only for the production of tar sands oil, and do not account for the massive additional GHG impact of burning the fuel.

“The tar sands are at the leading edge of climate chaos. Climate leadership from President Obama, Prime Minister Harper and other world leaders means abandoning the dirty oil that is pushing our planet to climate collapse and forging a green energy economy and a healthy world for our children.”

Today’s action targeted Shell, but other major companies including BP, Suncor, Syncrude, ExxonMobil, Total and StatoilHydro run tar sands operations that put them at the forefront of oil addiction.

Urgent action on the climate must be front and centre at the United Nations climate conference in Copenhagen in December. With fewer than 90 days left to the most important climate negotiations in history, Greenpeace is calling on world leaders to end to the climate catastrophe that is the Alberta tar sands and to commit to deep emissions cuts at Copenhagen.

“World leaders need to turn away from the dirtiest oil on the planet and embrace clean energy alternatives” said Greenpeace climate and energy campaigner Melina Laboucan-Massimo. “Until they do, oil interests will continue to dominate and Canada will continue to obstruct crucial international climate talks like those in Copenhagen.”

Through its KYOTOplus campaign, Greenpeace Canada is working to convince the Harper government to become a leader at the United Nations climate conference in Copenhagen in December.

Source

Revealed: The ghost fleet of the recession

By Simon Parry
London Daily Mail
13th September 2009

The biggest and most secretive gathering of ships in maritime history lies at anchor east of Singapore. Never before photographed, it is bigger than the U.S. and British navies combined but has no crew, no cargo and no destination - and is why your Christmas stocking may be on the light side this year
The 'ghost fleet' near Singapore

The 'ghost fleet' near Singapore. The world's ship owners and government economists would prefer you not to see this symbol of the depths of the plague still crippling the world's economies

The tropical waters that lap the jungle shores of southern Malaysia could not be described as a paradisical shimmering turquoise. They are more of a dark, soupy green. They also carry a suspicious smell. Not that this is of any concern to the lone Indian face that has just peeped anxiously down at me from the rusting deck of a towering container ship; he is more disturbed by the fact that I may be a pirate, which, right now, on top of everything else, is the last thing he needs.

His appearance, in a peaked cap and uniform, seems rather odd; an officer without a crew. But there is something slightly odder about the vast distance between my jolly boat and his lofty position, which I can't immediately put my finger on.

Then I have it - his 750ft-long merchant vessel is standing absurdly high in the water. The low waves don't even bother the lowest mark on its Plimsoll line. It's the same with all the ships parked here, and there are a lot of them. Close to 500. An armada of freighters with no cargo, no crew, and without a destination between them.

Simon Parry among the ships in southern Malaysia

My ramshackle wooden fishing boat has floated perilously close to this giant sheet of steel. But the face is clearly more scared of me than I am of him. He shoos me away and scurries back into the vastness of his ship. His footsteps leave an echo behind them.

Navigating a precarious course around the hull of this Panama-registered hulk, I reach its bow and notice something else extraordinary. It is tied side by side to a container ship of almost the same size. The mighty sister ship sits empty, high in the water again, with apparently only the sailor and a few lengths of rope for company.

Nearby, as we meander in searing midday heat and dripping humidity between the hulls of the silent armada, a young European officer peers at us from the bridge of an oil tanker owned by the world's biggest container shipping line, Maersk. We circle and ask to go on board, but are waved away by two Indian crewmen who appear to be the only other people on the ship.

'They are telling us to go away,' the boat driver explains. 'No one is supposed to be here. They are very frightened of pirates.'

Here, on a sleepy stretch of shoreline at the far end of Asia, is surely the biggest and most secretive gathering of ships in maritime history. Their numbers are equivalent to the entire British and American navies combined; their tonnage is far greater. Container ships, bulk carriers, oil tankers - all should be steaming fully laden between China, Britain, Europe and the US, stocking camera shops, PC Worlds and Argos depots ahead of the retail pandemonium of 2009. But their water has been stolen.

They are a powerful and tangible representation of the hurricanes that have been wrought by the global economic crisis; an iron curtain drawn along the coastline of the southern edge of Malaysia's rural Johor state, 50 miles east of Singapore harbour.

Fisherman Ah Wat

'We don't understand why they are here. There are so many ships but no one seems to be on board,' said local fisherman Ah Wat

It is so far off the beaten track that nobody ever really comes close, which is why these ships are here. The world's ship owners and government economists would prefer you not to see this symbol of the depths of the plague still crippling the world's economies.

So they have been quietly retired to this equatorial backwater, to be maintained only by a handful of bored sailors. The skeleton crews are left alone to fend off the ever-present threats of piracy and collisions in the congested waters as the hulls gather rust and seaweed at what should be their busiest time of year.

Local fisherman Ah Wat, 42, who for more than 20 years has made a living fishing for prawns from his home in Sungai Rengit, says: 'Before, there was nothing out there - just sea. Then the big ships just suddenly came one day, and every day there are more of them.

'Some of them stay for a few weeks and then go away. But most of them just stay. You used to look Christmas from here straight over to Indonesia and see nothing but a few passing boats. Now you can no longer see the horizon.'

The size of the idle fleet becomes more palpable when the ships' lights are switched on after sunset. From the small fishing villages that dot the coastline, a seemingly endless blaze of light stretches from one end of the horizon to another. Standing in the darkness among the palm trees and bamboo huts, as calls to prayer ring out from mosques further inland, is a surreal and strangely disorientating experience. It makes you feel as if you are adrift on a dark sea, staring at a city of light.

Ah Wat says: 'We don't understand why they are here. There are so many ships but no one seems to be on board. When we sail past them in our fishing boats we never see anyone. They are like real ghost ships and some people are scared of them. They believe they may bring a curse with them and that there may be bad spirits on the ships.'
Two container ships tied together in Sungai Rengit, southern Malaysia

Two container ships tied together in southern Malaysia, waiting for the next charter

As daylight creeps across the waters, flags of convenience from destinations such as Panama and the Bahamas become visible. In reality, though, these vessels belong to some of the world's biggest Western shipping companies. And the sickness that has ravaged them began far away - in London, where the industry's heart beats, and where the plummeting profits and hugely reduced cargo prices are most keenly felt.

The Aframax-class oil tanker is the camel of the world's high seas. By definition, it is smaller than 132,000 tons deadweight and with a breadth above 106ft. It is used in the basins of the Black Sea, the North Sea, the Caribbean Sea, the China Sea and the Mediterranean - or anywhere where non-OPEC exporting countries have harbours and canals too small to accommodate very large crude carriers (VLCC) or ultra-large crude carriers (ULCCs). The term is based on the Average Freight Rate Assessment (AFRA) tanker rate system and is an industry standard.

A couple of years ago these ships would be steaming back and forth. Now 12 per cent are doing nothing

You may wish to know this because, if ever you had an irrational desire to charter one, now would be the time. This time last year, an Aframax tanker capable of carrying 80,000 tons of cargo would cost £31,000 a day ($50,000). Now it is about £3,400 ($5,500).

This is why the chilliest financial winds anywhere in the City of London are to be found blowing through its 400-plus shipping brokers.

Between them, they manage about half of the world's chartering business. The bonuses are long gone. The last to feel the tail of the economic whiplash, they - and their insurers and lawyers - await a wave of redundancies and business failures in the next six months. Commerce is contracting, fleets rust away - yet new ship-builds ordered years ago are still coming on stream.

World shipping is tracked by satellite service Vesseltracker

Just 12 months ago these financiers and brokers were enjoying fat bonuses as they traded cargo space. But nobody wants the space any more, and those that still need to ship goods across the world are demanding vast reductions in price.

Do not tell these men and women about green shoots of recovery. As Briton Tim Huxley, one of Asia's leading ship brokers, says, if the world is really pulling itself out of recession, then all these idle ships should be back on the move.

South China Sea map

'This is the time of year when everyone is doing all the Christmas stuff,' he points out.

'A couple of years ago those ships would have been steaming back and forth, going at full speed. But now you've got something like 12 per cent of the world's container ships doing nothing.'

Aframaxes are oil bearers. But the slump is industry-wide. The cost of sending a 40ft steel container of merchandise from China to the UK has fallen from £850 plus fuel charges last year to £180 this year. The cost of chartering an entire bulk freighter suitable for carrying raw materials has plunged even further, from close to £185,000 ($300,000) last summer to an incredible £6,100 ($10,000) earlier this year.

Business for bulk carriers has picked up slightly in recent months, largely because of China's rediscovered appetite for raw materials such as iron ore, says Huxley. But this is a small part of international trade, and the prospects for the container ships remain bleak.

Some experts believe the ratio of container ships sitting idle could rise to 25 per cent within two years in an extraordinary downturn that shipping giant Maersk has called a 'crisis of historic dimensions'. Last month the company reported its first half-year loss in its 105-year history.

Martin Stopford, managing director of Clarksons, London's biggest ship broker, says container shipping has been hit particularly hard: 'In 2006 and 2007 trade was growing at 11 per cent. In 2008 it slowed down by 4.7 per cent. This year we think it might go down by as much as eight per cent. If it costs £7,000 a day to put the ship to sea and if you only get £6,000 a day, than you have got a decision to make.

'Yet at the same time, the supply of container ships is growing. This year, supply could be up by around 12 per cent and demand is down by eight per cent. Twenty per cent spare is a lot of spare of anything - and it's come out of nowhere.'

These empty ships should be carrying Christmas over to the West. All retailers will have already ordered their stock for the festive season long ago. With more than 92 per cent of all goods coming into the UK by sea, much of it should be on its way here if it is going to make it to the shelves before Christmas.

Large ships off the coastline close to Sungai Rengit

But retailers are running on very low stock levels, not only because they expect consumer spending to be down, but also because they simply do not have the same levels of credit that they had in the past and so are unable to keep big stockpiles.

Stopford explains: 'Globalisation and shipping go hand in hand. Worldwide, we ship about 8.2 billion tons of cargo a year. That's more than one ton per person and probably two to three tons for richer people like us in the West. If the total goes down by five per cent or so, that's a lot of cargo that isn't moving.'

The knock-on effect of so many ships sitting idle rather than moving consumer goods between Asia and Europe could become apparent in Britain in the months ahead.

'We will find out at Christmas whether there are enough PlayStations in the shops or not. There will certainly be fewer goods coming in to Britain during the run-up to Christmas.'

Three thousand miles north-east of the ghost fleet of Johor, the shipbuilding capital of the world rocks to an unpunctuated chorus of hammer-guns blasting rivets the size of dustbin lids into shining steel panels that are then lowered onto the decks of massive new vessels.

As the shipping industry teeters on the brink of collapse, the activity at boatyards like Mokpo and Ulsan in South Korea all looks like a sick joke. But the workers in these bustling shipyards, who teem around giant tankers and mega-vessels the length of several football pitches and capable of carrying 10,000 or more containers each, have no choice; they are trapped in a cruel time warp.

There have hardly been any new orders. In 2011 the shipyards will simply run out of ships to build

A decade ago, South Korean President Kim Dae-jung (who died last month) issued a decree to his industrial captains: he wished to make his nation the market leader in shipbuilding. He knew the market intimately. Before entering politics, he studied economics and worked for a Japanese-owned freight-shipping business. Within a few years he was heading his own business, starting out with a fleet of nine ships.

Thus, by 2004, Kim Dae-jung's presidential vision was made real. His country's low-cost yards were winning 40 per cent of world orders, with Japan second with 24 per cent and China way behind on 14 per cent.

But shipbuilding is a horrendously hard market to plan. There is a three-year lag between the placing of an order and the delivery of a ship. With contracts signed, down-payments made and work under way, stopping work on a new ship is the economic equivalent of trying to change direction in an ocean liner travelling at full speed towards an iceberg.

Thus the labours of today's Korean shipbuilders merely represent the completion of contracts ordered in the fat years of 2006 and 2007. Those ships will now sail out into a global economy that no longer wants them.

Maersk announced last week that it was renegotiating terms and prices with Asian shipyards for 39 ordered tankers and gas carriers. One of the company's executives, Kristian Morch, said the shipping industry was in uncharted waters.

More...

* Visit Vesseltracker

As he told the global shipping newspaper Lloyd's List only last week: 'You have a contraction of oil demand, you have a falling world economy and you have a contraction of financing capabilities - and at the same time as a lot of new ships are being delivered.'

Demand peaked in 2005 when, with surplus tonnage worldwide standing at just 0.7 per cent, ship owners raced to order, fearing docks and berths at major shipyards would soon be fully booked. That spell of 'panic buying' has heightened today's alarming mismatch between supply and demand.

Keith Wallis, East Asia editor of Lloyd's List, says, 'There was an ordering frenzy on all types of vessel, particularly container ships, because of the booming trade between Asia and Europe and the United States. It was fuelled in particular by consumer demand in the UK, Europe and North America, as well as the demand for raw materials from China.'

Cranes at Singapore Dock stand idle, waiting for work

Orders for most existing ships to be delivered within the next six to nine months would be honoured, he predicted, and the ships would go into service at the expense of older vessels in the fleet, which would be scrapped or end up anchored off places like southern Malaysia.

But, says Wallis, 'some ship owners won't be able to pay their final instalments when the vessels are completed. Normally, they pay ten per cent down when they order the ship and there are three or four stages of payment. But 50 to 60 per cent is paid on delivery.'

South Korean shipyard Hanjin Heavy Industries last week said it had been forced to put up for sale three container ships ordered at a cost of £60 million ($100 million) by the Iranian state shipping line after the Iranians said they could not pay the bill.

'The prospects for shipyards are bleak, particularly for the South Koreans, where they have a high proportion of foreign orders. Whole communities in places like Mokpo and Ulsan are involved in shipbuilding and there is a lot of sub-contracting to local companies,' Wallis says.

'So far the shipyards are continuing to work, but the problems will start to emerge next year and certainly in 2011, because that is when the current orders will have been delivered. There have hardly been any new orders in the past year. In 2011, the shipyards will simply run out of ships to build.'

Christopher Palsson, a senior consultant at London-based Lloyd's Register-Fairplay Research, believes the situation will worsen before it gets better.

'Some ships will be sold for demolition but the net balance will be even further pressure on the freight rates and the market itself. A lot of ship owners and operators are going to find themselves in a very difficult situation.'

The current downturn is the worst in living memory and more severe even than the slump of the early Eighties, Palsson believes.

'Back then the majority of the crash was for tankers carrying crude oil. Today we have almost every aspect of shipping affected - bulk carriers, tankers, container carriers... the lot.

'It is a much wider-spread situation that we have today. China was not a major player in the world economy at that time. Neither was India. We had the Soviet Union. We had shipbuilding in the United Kingdom and Europe.

'But then, back in those days the world was a very different place.'

Cap and trade debate heats up

By Shaun Polczer
Calgary Herald
September 10, 2009

CALGARY - The debate surrounding Canada's position on capping greenhouse gas emissions is heating up ahead of a global warming summit in Copenhagen this year.

The Fraser Institute waded into the discussion Wednesday after a leading U. S. economist and columnist for the Wall Street Journal lambasted the idea of a cap and trade system as "disastrous" for both Canada and the United States.

Stephen Moore, who co-authored the book The End of Prosperity, called the U. S. energy bill working its way through Congress a "dressed up protectionist measure" in a speech to a Calgary audience. Moore said the economic consequences of cap and trade will dwarf any of the presumed benefits without resulting in substantial emissions reductions. Instead, he said such a policy would make energy more expensive, lowering North Americans' standard of living.

"The Obama people have drunk the Kool-Aid on this."

Meanwhile, Calgary's oilpatch is eagerly hanging on details of Ottawa's greenhouse gas reduction strategy ahead of the UN conference on climate change in December.

Already, companies like Shell Canada are preparing for what are expected to be tough new standards on emissions reductions, said spokesman Phil Vircoe.

Shell is in favour of a cap and trade system that would give oil and gas producers incentives to reduce emissions, he said. Shell executives including regulatory affairs manager Gerry Ertel have been lobbying for a system of caps and offsets as a means of achieving meaningful reduction targets. Ertel was not immediately available to comment, but he told the Herald last week that Shell has been participating in the European cap and trade program since its inception.

"Emissions trading on its own is not enough, however. It is just one part of a much broader climate policy framework that also needs . . . to address emissions from other sources such as transportation and buildings."

Environmentalists remain cautious over what such a system will look like. Clare Demerse, a climate change expert with the Pembina Institute in Ottawa, said it's important to design a system without loopholes that would allow big oilsands companies to trade emissions without making real reductions.

This country is falling behind politicians such as U. S. President Barack Obama and even California Gov. Arnold Schwarzenegger who have emerged as champions of the green movement. The lack of a cohesive policy platform is a disadvantage for Canada in any talks over a North American emissions reduction strategy, she said.

"You don't hear that kind of commitment from our government," she told the Herald. "We need a stronger focus on exactly the kinds of things we're hearing in the U. S. Canada hasn't brought anything to the table."

spolczer@theherald.canwest.com

© Copyright (c) The Calgary Herald

Sqwalk.com takes a collateral hit in Whatcom County council election mudslinging

On September 10, www.sqwalk.com received this letter by email:

From: Shirley, Julie [mailto:julie.shirley@bellinghamherald.com]
Sent: September-10-09 9:31 AM
To: query@sqwalk.com
Subject: Copyright violation on your site

Dear Sirs,

It has been brought to my attention that the website located at http://www.sqwalk.com/ has content in written form reproduced from The Bellingham Herald and TheBellinghamHerald.com.

Please remove all Bellingham Herald content present on your site immediately. You are also urged to not publish future stories or images from The Herald or The BellinghamHerald.com on your site without prior written consent.

The content in question includes but is not limited to the following items on your website:

http://www.sqwalk.com/blog2004/000016.html

Please remove the materials cited above immediately, and any others that you may know of in violation of The Bellingham Herald's copyright within the next 5 business days.

Please reply with confirmation of action taken within 5 business days or this matter will be forwarded to the McClatchy Company's legal department for further action.

If you have comments or concerns, please feel free to contact me.

Regards,
Julie Shirley

Julie Shirley, Executive Editor
The Bellingham Herald and TheBellinghamHerald.com

1155 N. State St., Bellingham WA 98225
Voice: (360) 715-2261
Fax: (360) 756-2826
E-mail: julie.shirley@bellinghamherald.com
Visit us at thebellinghamherald.com

NEW MOBILE SITE: iPhone users can now follow the news at www.bellinghamherald.com/mobile.

Readers might like to know how it came about.

Back in 1999, a pipeline spilling gasoline blew up in a park in Bellingham, killing two boys and a young man. Carl Weimer was incensed and led a local, then state-wide, and now national initiative for greater pipeline safety - better information, better regulation and oversight, more transparency throughout. He now leads the Bellingham-based Pipeline Safety Trust (www.pstrust.org), which was started with funding provided by the families whose children were killed, using funds from an award paid by the pipeline company. Carl is also running for a second term as a Whatcom County Councillor.

In 2000 or 2001 I met Carl and a friendship started.

In 2004, the fifth anniversary of the deaths, the Bellingham Herald published an excellent series of articles about the incident, the tragedy and its aftermath. One of those articles is posted on www.sqwalk.com, and it includes a picture of Carl Weimer. (It also commemorated the tragedy appropriately in June 2009, on the tenth anniversary.)

Fast forward to August 2009. A conservative group which was created to work for conservate candidates in the Whatcom County Council election, and which is associated with the local Republican Party, put together a two-page brochure "aiming at the left-leaning Council candidates". It included pictures of those candidates. One of those pictures, the one of Carl, it apparently obtained from this website. Strange choice - there are many photos of Carl available, and in this one he's barely recognizable.

Permission is being sought from the Bellingham Herald to post its picture of the front of the Rural Neighbors PAC brochure. In the meantime, you can find it here.

A furor broke out about the brochure, someone asked questions about the photos used on it, one thing led to another, and eventually the Executive Editor of the Bellingham Herald wrote the letter copied above.

Here are links to two blogs by Sam Taylor, from the Bellingham Herald on September 9 & 10.

Rural Neighbors PAC aims at left-leaning County Council candidates

Herald photos used in Dow’s conservative mailer, action won’t be taken

The second blog says this:

"The photo of Carl Weimer is from 2004 in which he’s near Whatcom Creek regarding the Olympic Pipeline Explosion. It appears that a group calling themselves the Concerned Citizens Coalition in regards to the Georgia Strait Crossing Pipeline took the article the photo was related to — and the photo — and reprinted it online, right here.

"Both of those links and photos have been sent around to various people in the community now who are discussing the taking of Herald photos.

"Bellingham Herald Executive Editor Julie Shirley issued the following statement about the photos:

"If the photos are ours, I’m disappointed anyone would take content without permission. However, because it appears only a small portion of the total photo was used, we’re not going to take legal action at this time. After conversations with our legal counsel, we’ve decided this isn’t a case in which to test “fair use” in court. The Web site that appears to have taken content without license or permission has been contacted and asked to remove our story."

And thus, sqwalk.com takes a collateral hit from Whatcom County politics.

Carl Weimer says in an email: "Just a heads up that there are some political shenanigans going on here in Bellingham and you may get dragged in. Some local conservatives have run a campaign hit piece (it's election time around here and I am running again) and they used a Bellingham Herald picture in their mailer. Seems that photo has been tracked back to the Sqwalk website ...."

Arthur Caldicott

Natural Gas Hits a Roadblock in New Energy Bill

By CLIFFORD KRAUSS
New York Times
September 6, 2009

HOUSTON — The natural gas industry has enjoyed something of a winning streak in recent years. It found gigantic new reserves, low prices are encouraging utilities to substitute gas for coal, and cities are switching to buses fueled by natural gas.

Aubrey McClendon of Chesapeake Energy blamed “Congressional apathy” for coal’s price advantages. (F. Carter Smith/Bloomberg News)

For all its pronouncements that gas could be used to replace aging, inefficient coal-fired power plants — and reduce greenhouse gas emissions in the process — lawmakers from coal-producing states appear committed to keeping coal as the nation’s primary producer of power.

Those influential lawmakers, from both parties, say that new technologies under development to capture and bury emissions of coal are a better bet than gas for long-term solutions to climate change.

The difference of opinion is about more than what is best for the environment, of course. Industry profits are riding on the outcome of the discussion — a rich mix of politics, environment, science and business.

A climate-change bill that passed the House in June, intended to cap greenhouse gas emissions, delivered benefits to renewable fuels like wind and solar and strengthened building codes to conserve energy.

But the cost of emitting carbon dioxide emissions under the terms of the bill remained at levels that would continue to provide a price advantage for coal in many regions of the country.

The Senate is planning to begin writing its own bill later this month.

“The Senate is more open to natural gas as a transition fuel than the House was,” said Senator Charles E. Schumer, Democrat of New York, “but the senators from the coal states who are crucial votes are going to want first consideration for coal.”

The gas industry’s leaders say they will descend on Capitol Hill in coming weeks to press their case about the advantage of gas, including that it emits about half the greenhouse gases as coal.

The industry has formed a new lobbying group, and it is planning a national campaign that includes television advertising. Executives want fewer allowances for coal. They also want legislation that gives incentives for companies to convert truck fleets from diesel to natural gas.

“Never in my life have I been confronted with something so obviously easy and good to do and have such Congressional apathy,” said Aubrey McClendon, chief executive of Chesapeake Energy and a leading voice in the industry. He added that he was still hopeful the Senate can improve the House bill.

But the coal industry will also be active. Vic Svec, a senior vice president at Peabody Energy, a large coal company, said coal was still a better fuel because its price is more stable than gas.

“Coal with carbon capture and storage is the low cost, low carbon solution and has fantastic implications for the nation’s energy security,” he said.

But it is not only coal-industry lobbyists and their Congressional supporters who favor the concept of carbon sequestration. David Hawkins, a climate change expert at the Natural Resources Defense Council, said simply replacing coal with natural gas for power generation was “not a viable strategy” because that would merely delay climate change by a few decades.

“A coal plant with carbon capture and storage is a cleaner plant than an uncontrolled natural gas plant,” he said.

Natural gas gets some benefits from the House bill, which includes a cap-and-trade system that sets limits on emissions of greenhouse gases while requiring manufacturers and utilities to acquire pollution permits.

Utilities that burn natural gas would earn $30 billion over 10 years in pollution credits that could be sold on the carbon-trading market. But utilities that burn coal will receive tens of billions of dollars worth of free pollution credits, savings that will be passed on to consumers but may serve to delay the closing of some coal plants.

The House bill also offers $10 billion for research and development of techniques to capture and store carbon dioxide emissions, which would help keep some coal plants open that might otherwise close.

The Environmental Protection Agency projects that if the House bill became law, electricity generation from gas would increase by less than 1 percent from 2015 to 2025, while generation from coal would remain nearly unchanged.

There will be more use of renewables, but power generation as a whole is expected to decline because of conservation efforts, including tightening of building energy codes.

“By allowing free emission allowances to maintain coal production from existing coal plants, while providing mandates that there be more wind and solar, you squeeze gas out in the middle,” said William F. Whitsitt, an executive vice president at Devon Energy, a major natural gas producer.

Without any new legislation, and if current policies remain in place, gas would beat out coal by a far larger margin, according to E.P.A. projections.

There would be nearly 30 percent more power generated by gas by 2025 than in 2015, while coal fired generation would grow by a more modest 7 percent.

Many legislators believe that carbon capture and sequestration — a largely untested system that would bury carbon at power plants so it does not escape into the atmosphere — can be made to work.

Developing the technology was particularly important for any global solution to climate change, since China and India depend on coal for their energy and growing economies, said Paul W. Bledsoe, director of communications and strategy at the National Commission on Energy Policy, a bipartisan research organization.

Currently, coal provides almost half the electrical power in the United States while natural gas provides more than 20 percent.

Proponents of natural gas say they can deliver immediate reductions in greenhouse gases, an advantage that should not be discarded for an untested technology.

Senate officials and energy officials say it will be difficult to develop legislation that benefits both the gas and coal industries and reduces greenhouse gases.

Gas executives say their day in Washington will come, especially as more jobs are produced in gas fields that now stretch across 32 states.

“The politics of natural gas are going to change dramatically,” predicted Rodney Lowman, president of the American Natural Gas Alliance, the new gas lobby group. But, he added, “it won’t be overnight.”

Another Astroturf Campaign

Editorial
NY Times
September 4, 2009

It was probably only a matter of time, but the oil lobby has taken a page from the anti-health-care-reform manual in an effort to drum up opposition to climate change legislation in Congress. Behind the overall effort — billed, naturally, as a grass-roots citizen movement — lie the string-pullers at the American Petroleum Institute, the industry’s main trade organization and a wily, well-funded veteran of the legislative wars.

Greenpeace, the advocacy group, uncovered a letter last month from the A.P.I. president, Jack Gerard, to industry C.E.O.’s revealing that the campaign’s central objective is to “put a human face on the impacts of unsound energy policy,” specifically the Waxman-Markey bill recently passed by the House.

The Waxman-Markey bill seeks a 17 percent reduction in greenhouse gas emissions by 2020, partly by requiring emitters like power plants and oil refineries to invest in cleaner technologies or, if they cannot reduce their own emissions, to buy permits from companies that can. Either way, the bill will saddle polluters with new costs. The Senate will take up its own version of the bill this month.

So far, A.P.I. has organized nearly 20 rallies in oil-producing centers like Houston and smaller Rust Belt towns like Lima, Ohio, and Elkhart, Ind. The immediate audience typically consists of several hundred local residents, and the atmosphere is festive — marching bands and hot dogs.
The ultimate audience is fence-sitting senators who may be persuaded to reshape the House bill to the industry’s liking or vote against it altogether.

Local residents are not, of course, invited to debate the consequences of global warming, or dwell upon those parts of the bill that could lead to a whole new industry — and the jobs that would go with it — based on alternative energy sources, or to a future in which people save money by buying more fuel-efficient cars. The narrative they get is one of unrelenting gloom —unaffordable gasoline, stratospheric home heating bills and shuttered industries.

One can always expect hyperbole from Washington lobbyists when billions are at stake, but two elements of the industry’s campaign are particularly annoying. One is the assertion that Waxman-Markey will inevitably mean $4-a-gallon gasoline. Two reputable studies of the bill — by the Environmental Protection Agency and the Energy Information Administration — say that gasoline prices will increase by about 20 cents a gallon at most by 2020, an estimate that does not account for the effects of new investments in clean vehicle technology.

The second claim is that the bill treats the oil industry unfairly compared with, say, the electric utilities. But the bill does not prevent the oil companies from passing along whatever costs they incur to consumers. And let’s not forget that over the years few industries have profited as handsomely from government policies as the oil and gas industries.

What the oil companies are probably worried about is that people and industries will use less of their product as alternatives appear and consumers become more energy-efficient. But isn’t that the point of the exercise?

source

see also:
Oil Industry Backs Protests of Emissions Bill, 18-Aug-2009
Oil lobby to fund campaign against Obama's climate change strategy, 14-Aug-2009

Renewable-power fight at crossroads

David R. Baker,
San Francisco Chronicle
September 4, 2009

A fierce and complicated fight has broken out in Sacramento over a simple idea with broad support - increasing California's use of renewable power.

The fight isn't over the basic goal.

Two bills pending in the Legislature would force the state's electrical utilities to get 33 percent of their power from renewable sources by 2020, up from the current requirement of 20 percent by the end of 2010. A priority of Gov. Arnold Schwarzenegger, the 33 percent goal has the backing of environmentalists, legislators and - grudgingly - the utilities.

But the details involved in reaching such an ambitious goal have touched off a complex debate, one that will probably reach its climax in the next week when the Assembly votes on one of the bills.

The utilities want maximum flexibility in how they meet the requirement. They want to tap large amounts of power from out-of-state wind farms, solar plants and hydroelectric dams, and they want the ability to get extensions if they blow the deadline.

"If policymakers want to take us to 33 percent, we can be supportive of that, but it has to come with the right framework that takes into account the realities in the market," said Pedro Pizarro, executive vice president for Southern California Edison.

Environmentalists' concerns

Environmentalists want to make sure the bills don't weaken the state's standards for the kinds of renewable-power projects that would count toward the 33 percent goal. Consumer advocates want to keep Californians' electric bills from soaring. They also want to limit power imports so that most of the solar and wind farms built as a result of the 33 percent requirement are built in California.

There's also the question of feasibility.

The state's three major, investor-owned utilities probably won't reach the current 20 percent target by the end of 2010. They'll need until 2013 or 2014, according to a recent report from the California Public Utilities Commission. Cost estimates have varied widely, but one analysis released by the commission this spring showed that reaching the 33 percent goal by 2020 could require as much as $115 billion.

"It's a lot harder to do renewable development on this scale than we realized," said Matt Freedman, staff attorney for The Utility Reform Network, a consumer watchdog group. "These are all somewhat aspirational goals, and it's good for public policy to work that way. If it's too easy to achieve, you probably set the bar too low."

Debate over imports

Much of the debate has focused on importing renewable power from other states - or from another country altogether. The utilities argue that California probably won't build enough solar plants, geothermal plants or wind farms in the next decade to meet the 33 percent goal.

Pacific Gas and Electric Co., in particular, wants hydroelectric power from British Columbia that possibly would be brought to California on a new high-voltage transmission line.

"We believe that we're going to need to have access to out-of-state renewable power to meet these goals," said PG&E spokeswoman Cindy Pollard. "There just isn't enough here in California without it."

That worries Freedman, who says it could end up creating more renewable power projects - and therefore, more jobs - in states other than California.

"This is about creating a green economy in California," he said. "But what happens if it turns out that most of the development doesn't happen in California?"

Senate Bill 14, which will probably face an Assembly vote in the next week, would allow imported power, but only to a point. Long-distance imports could make up 20 percent of each utility's total renewable power portfolio.

That limit works for the Union of Concerned Scientists, one of the many environmental groups eyeing the bill. But Laura Wisland, an energy analyst for the group, wants to make sure the bill's final language doesn't change the kinds of renewable power projects that could count toward the 33 percent goal.

'Run-of-the-river' projects

PG&E, she said, is interested in Canadian "run-of-the-river" hydro projects that might not meet California's environmental management standards. Under current state law, utilities can't count renewable power from projects that don't meet those standards, she said. Run-of-the-river hydro projects divert water from a river to turn turbines but don't block the entire stream.

"Run of river doesn't necessarily mean no environmental impact - it just means no big dam," Wisland said.

source

Oil Sands: Destroyer or Savior?

By TOM ZELLER Jr.
New York Times
September 6, 2009

" An open-pit mine for oil sands north of Fort McMurray in Alberta, Canada in 2008. (Eamon Mac Mahon/Associated Press)

NEW YORK — Few energy resources stir passions like Canada’s oil sands.

The vast, gooey mixture of clay, sand, water and, most notably, bitumen — a hydrocarbon paste that, with a fair amount of work, can be separated from the granular stuff and eventually refined into a variety of petroleum products — has the potential to produce upwards of a trillion barrels of oil, by some estimates.

Accomplishing that, however, is a profoundly expensive, dirty and energy-intensive affair. Huge inputs of natural gas, for example, are needed to separate and process the bitumen, and according to one study by RAND, production from oil sands generates perhaps 30 percent more greenhouse gases than conventional oil extraction.

As my colleague Ian Austen noted for The New York Times this year, the process amounts to the most capital-intensive method for extracting oil. “Each of the tires on the cartoonishly oversize dump trucks used in oil sands mining,” he noted, “costs about $60,000.”

The question in the United States, then, is how to weigh the disadvantages against the very real benefit of securing access to a substantial — and friendly — source of foreign oil for decades to come.

Among those giving more weight to the benefits: the U.S. State Department, which issued final approval late last month for the construction of a new pipeline aimed at widening the United States’ tap on Canadian tar sands. Last week, a coalition of environmental groups, invoking the downsides of oil sands production, called the State Department’s review of the pipeline project slipshod and filed a lawsuit to block it.

In its decision, the State Department, citing numbers from the Energy Information Administration, estimated that the “balance between domestic supply and demand” will require imports of unconventional oil from Canada to grow from current levels of roughly 1.5 million barrels a day to some 4.3 million barrels by 2030.

The pipeline project, the State Department asserted, “would serve the national interest, in a time of considerable political tension in other major oil-producing regions and countries, by providing additional access to a proximate, stable, secure supply of crude oil.”

As for the added intensity of greenhouse gas emissions associated with tar sands development, the State Department decision stated, “The administration has considered these concerns and considers that on balance they do not outweigh the benefits to the national interests identified above.”

Sarah Burt, a lawyer with Earthjustice, a California-based law firm spearheading the suit, which targets the State Department and the U.S. Army Corps of Engineers, said that one of the goals was to “provide some space for decision makers to consider some of the central issues these pipeline projects raise.”

Not least among those, Ms. Burt said, was whether the new supply line — dubbed the Alberta Clipper Project by its builder, Enbridge Energy Partners of Houston — unnecessarily expands the already voracious U.S. appetite for fossil fuels even as the nation is on the hunt for alternatives.

In its attempt to focus attention on that larger question, the lawsuit, in which Earthjustice is joined by a variety of state and national environmental groups, takes aim at smaller game, including what it sees as holes in the decision-making process.

According to the suit, for example, the State Department, failed properly to review expansion of an auxiliary pipeline that would carry a substance to Alberta to dilute the viscous oil-sands product so that it can flow back down through the Alberta Clipper line. Earthjustice claims that this diluent pipeline should have been wholly examined as part of the larger environmental impact assessment required for permitting the Clipper.

The group also argues that the State Department overlooked a variety of “indirect and cumulative” effects of the new pipeline, the U.S. portion of which will run more than 300 miles, or 480 kilometers, from the Canadian border just west of Minnesota, across the north of that state, to the western tip of Lake Superior near Duluth. Among those effects are environmental and climatic ones resulting from the inevitable expansion of bitumen refining facilities in the United States.

And, of course, there are the effects on forest and wetland associated with construction of a new pipeline, and the potential for harm to the “health, recreational, economic, aesthetic and cultural interests” of American Indian tribes on whose land portions of the pipeline will run.

The State Department did not return calls for comment, but Denise Hamsher, a spokeswoman for Enbridge (which is not named in the lawsuit), more than once summed up the company’s opinion of the litany of charges made by Earthjustice this way: “Nonsense.”

The pipeline and the U.S. government permit, Ms. Hamsher noted, did not come about overnight, but after years of deliberation, public comments and the acquisition of dozens of accompanying state and tribal permits. The U.S. environmental impact statement, she pointed out, is nearly 4,000 pages long — and it includes, Ms. Hamsher said, an analysis of both the Clipper line and the accompanying diluent line.

The project, too, runs along an existing pipeline corridor, Ms. Hamsher said, and isn’t cutting through virgin territory — though she conceded that a new pipeline might expand that the width of that corridor as much as 100 feet, or 30 meters.

Even here, Ms. Hamsher argued, the footprint would be minimal, and the company is required to perform reclamation measures to compensate for its effect on surrounding land.

As for American Indians on affected lands, Ms. Hamsher said Enbridge had the tribal leaders’ blessing.

Indeed, Frank Bibeau, legal director for the Leech Lake Band of the Minnesota Chippewa Tribe, suggested in a phone call that he and other tribal leaders viewed the pipeline as a boon to the tribe — and the country — despite a petition drive among some tribal members seeking a referendum on the project.

According to Mr. Bibeau, the Leech Lake Band is receiving $10 million from Enbridge as part of the deal. “That $10 million is very important for jobs and tribal members and the whole Northern Minnesota area,” Mr. Bibeau said, “which is economically depressed.”

“My belief as a citizen of the U.S. is if we were able to completely stop the new pipelines,” he added, “I believe that the Chinese and Japanese will just build pipelines to the Pacific Coast, and they’ll take the crude.”

Whatever the merits of either side of the pipeline debate — and the larger one over Alberta’s oil sands — that possibility may already be under way. Just last week, PetroChina, a Chinese state-owned oil company, agreed to pay $1.7 billion for a majority stake in two tar sands projects.

China Oil Deal Is New Source of Strife Among Iraqis

COMMENT: Here in Canada we're making a big to-do out of China's recent $1.9 billion investment in the tar sands.

But that's not what this article is about. It talks about an emergent citizen movement to retrieve some of the value of oil removed from Iraq's Wasit Province and apply it to badly needed local infrastructure. The China National Petroleum Corporation in Iraq, Chevron/Texaco in Ecuador, Shell in Nigeria, EnCana in northeastern BC - they're not so different.

By TIMOTHY WILLIAMS
New York Times
September 5, 2009

WASIT PROVINCE, Iraq — When China’s biggest oil company signed the first post-invasion oil field development contract in Iraq last year, the deal was seen as a test of Iraq’s willingness to open an industry that had previously prohibited foreign investment.

A Chinese guard at the Ahdab oil field southeast of Baghdad. (Thaier al-Sudani/Reuters)

“We get nothing directly from the Chinese company, and we are suffering,” said Mahmoud Abdul Ridha, head of the Wasit provincial council, whose budget has been cut in half by Baghdad in the past year because of lower international oil prices. “There is an unemployment crisis. We need roads, schools, water treatment plants. We need everything.”

The result has been a local-rights movement — extraordinary in a country where political dissent has historically carried the risk of death — that in the past few months has begun demanding that at least $1 of each barrel of oil produced at the Ahdab field be used to improve access to clean water, health services, schools, paved roads and other needs in the province, which is among Iraq’s poorest.

The ripples are traveling far beyond this province, too. Frustrations have spilled over into sabotage and intimidation of Chinese oil workers, turning the Ahdab field into a cautionary tale for international oil companies seeking to join the rush to profit from Iraq’s vast untapped oil reserves.

Wasit Province is among the poorest provinces in Iraq. (The New York Times)

The Iraqi government has so far rejected the locals’ demands, but people here are clearly beginning to feel that something new is possible.

“No one would have dared to ask for such a thing during Saddam’s regime; if he did, he would definitely be executed,” said Ghassan Ali, a 43-year-old farmer who lives near the oil field. “But now we are a democratic country, so we have the right to ask for our rights like any other province in Iraq.”

The basis of the complaints here is that, aside from the hiring of a few hundred residents as laborers and security guards at salaries of less than $600 a month, the Ahdab field — a roughly $3 billion development project — has provided no local benefit.

Some local farmers began reacting by destroying the company’s generators and severing electrical hoses, angry because they believed that their fields were being unfairly handed over to the company. Other residents began expressing outrage that very few jobs were being opened to them.

China National Petroleum says it needs relatively few workers because it is still in the exploration phase of its 23-year project at the Ahdab field. Oil production is not scheduled to begin for two and a half years.

Now, the field’s 100 or so Chinese workers rarely leave their spartan compound for fear of being kidnapped, the company said, even though the Iraqi government recently deployed extra security to the area.

But the Iraqis’ anger has been increasingly channeled into an above-board labor movement, expressing concerns about workers’ rights, local government authority, pollution, transparent hiring practices and public accountability, among other issues.

Ghassan Atiyyah, executive director of the nonprofit Iraq Foundation for Development and Democracy, said the nascent activism in Wasit Province was part of a broader shift in a society that had until recently been resistant to such demands because of years of dictatorship, economic sanctions, war and a culture that retains a strong tribal influence.

Quebec Innu wage battle to halt huge hydroelectric project

see also The Fifty Marathons Campaign

Marianne White
National Post
Friday, September 04, 2009

QUEBEC -- Nearly 40 years after Cree and Inuit won an injunction to stop the massive James Bay hydro project, an Innu community is waging a similar battle against Hydro-Quebec, the province and the federal government to halt another major hydroelectric project on Quebec's Lower North Shore.

The Innu of Uashat Mani-Utenam, near Sept-Iles, want a permanent injunction to stop the construction of the Romaine project, a $6.5-billion plan to build four dams along the Romaine River and produce 1,550-megawatts of power starting in 2020.

Last May, Premier Jean Charest announced the undertaking, which is among the largest infrastructure projects in Canada. Charest said the new project is crucial to secure Quebec's energy supply, but his government has made it clear any extra power will be offered for export to Ontario, Eastern Canada and the United States.

The province has signed agreements with some Innu communities regarding the Romaine project, but not with the Sept-Iles band that is ferociously opposed to it.

"It's an all-out fight against Hydro-Quebec and Canada, make no mistake about it," said the band's lawyer, James O'Reilly.

"Forty years ago, we attacked the first James Bay project. We were not bluffing then and we're not bluffing now," added the Montreal lawyer, who has represented native bands, including the James Bay Cree, for more than 40 years.

Mr. O'Reilly won an injunction in 1973 to stop the massive James Bay hydro project on grounds the Cree of northern Quebec had rights in the vast area where Hydro-Quebec had started building it.

That ruling led to the James Bay and Northern Quebec Agreement in 1975 and a cash settlement of $225-million to Cree and Inuit for giving up aboriginal claims to about half the territory of Quebec and clearing the way for the James Bay hydro project.

Since then, the Supreme Court of Canada has also established that Aboriginal peoples do have ancestral rights.

In documents filed with the Quebec Superior Court and the Federal Court, lawyers for the plaintiffs contend a huge portion of the Romaine project, notably the transmission lines, is going to be built on what they consider the backbone of their traditional Innu territory.

The native group says it has not been consulted nor given its consent to the project and the governments are infringing on their ancestral rights on the territory. The Innu add that the four dams will have negative impacts on the territory, the ecosystem and their way of life, notably their fishing and hunting traditions.

The native community is also asking the courts to force the provincial and federal governments to redo their environmental-assessment process of the project to include the construction of the transmission lines.

"We think we have a very good chance at stopping at least the construction of the transmission lines," Mr. O'Reilly said.

The action filed in Quebec Superior Court is against Hydro-Quebec, the Quebec environment minister, the Quebec attorney general and Canada's attorney general.

The Innu have filed two legal proceedings in Federal Court, one against the transport minister and another one against the environment minister and minister of fisheries and oceans.

Mr. O'Reilly noted the cases are being specially managed by a judge and that meetings are scheduled in the coming weeks.

He stressed the Innu have the right to ask at any time for an immediate and temporary injunction to block the project.

"For now we have decided not to resort to that, but our deadline expires at end of September," he said.

A spokeswoman for Hydro-Quebec said Friday the proceedings are "taking their course" and that the provincially owned agency has met several times with the plaintiffs to discuss the next steps.

Run for our Rivers

As a cornerstone of our political strategy, Alliance Romaine is launching an ambitious marathon campaign designed to physically and figuratively connect the fates of two separate rivers.

Starting in early September 2009, a team of volunteer athletes will run 42-kilometer relays on a route stretching from James Bay to the Lower North Shore.

The event will kick off at the spectacular Oatmeal Rapids, where the historic and soon-to-be diverted Rupert River crosses the James Bay Highway.

Embodying the traditional role of runner as messenger, the marathoners will transmit the experiences and disappointments of the James Bay Cree communities which have been impacted by forty years of aggressive hydroelectric development on their lands. As we run through the communities of southern and eastern Quebec, we will showcase the struggles of local activists who have fought to protect wild rivers including the Dumoine, the Magpie and the Moisie. We will hold seminars and public presentations to discuss energy strategy, and we will expose the cumulative loss to biodiversity, fisheries, and recreational and cultural values that is occasioned by a policy that involves damming the majority of Quebec’s large rivers.

Divided into a set of approximately fifty marathons, the event will span two thousand kilometers, and last five weeks, before concluding on traditional Innu territory at the spot where the now-threatened Romaine River flows into the St. Lawrence.

This campaign’s aim is to mobilize and give a voice to the large numbers of Quebecers who believe that our rivers should be valued as something more than potential treadmills to produce cheap energy.

Our demands:
1. A halt to the recently-initiated hydroelectric project on the Romaine River
2. A moratorium on hydroelectric dam development, including the Little Mecatina
3. Protected status for the full length of the Romaine River
4. Good-faith land title negotiations with First Nations
5. Adopt a conservation based energy strategy with full public accountability
6. End energy subsidies to big business
7. A system of government grants and incentives to support small-scale renewable energies

Energy for Export and the Romaine River Hydroelectric Complex in Québec

Romaine project location

Native & Green Groups Challenge State Dept. Permit for Dirty Oil Pipeline

Media Release
Earthjustice
September 3, 2009

‘Alberta Clipper’ Would Bring Canadian Tar Sands Crude to U.S.

San Francisco, CA -- Native American and environmental groups filed suit in federal court today challenging a proposed tar sands oil pipeline that would bring the dirtiest oil on Earth from Canada to the United States.

The U.S. State Department's approval on August 20 of Enbridge Energy's Alberta Clipper pipeline permits 450,000 barrels of tar sands oil per day to be pumped from northern Alberta to Superior, Wisconsin, for refining.

Tar sands oil is dirtier and, over its lifecycle, emits more global warming pollution than any other type of oil. Tar sands development in Alberta is creating an environmental catastrophe, with toxic tailings ponds so large they can be seen from space, and plans to strip away forests and peat lands of an area the size of Florida. (Photos at www.dirtyoilsands.org.)

The Indigenous Environmental Network, Minnesota Center for Environmental Advocacy, National Wildlife Federation and Sierra Club filed the suit in the U.S. District Court for Northern California. They are represented by the nonprofit law firm Earthjustice.

Read the complaint (PDF)

This media release

Enbridge pipeline faces U.S. court challenge

© Copyright (c) The Vancouver Sun

CO2 'white elephant'

Fred Langford
National Post
September 02, 2009

Re: Hell yes, back CCS, letter to the editor, Aug. 29.

In criticizing Lawrence Solomon’s “Carbon disaster” (Aug. 15), Eric Beynon of the industry group, Integrated CO2 Network, and Marlo Raynolds of the environmental group, the Pembina Institute, do not deal with the amount of CO2 that would have to be removed by “carbon capture and storage” (CCS) facilities. The quantities of CO2 to be removed are huge.

The United States burns a billion tonnes of coal each year, which produces 2.4 billion tonnes of CO2. If the gas is highly compressed until it has about the same density as water, it has a volume of two and a half cubic kilometres. China also produces 2.5 billion tonnes per year; and India, and Germany and so on.

It is not obvious where we can store this huge volume of gas under such high pressure. Depleted oil and gas reservoirs are mentioned, but many are used by gas companies to store gas in the summer for use in the heating season, which limits the supply of suitable fields. Because of the high pressure required, the gas cannot be placed in shallow oil fields where it will cause small earthquakes as the rocks crack and the gas escapes. The more stringent the safety requirements, the fewer the number of suitable sites.

Messrs. Benyon and Raynolds describe storage at Weyburn Sask. and in the sea off Norway, but each of these two places only store about 1 million cubic meters per year. That means we still need another 2,488 disposal sites of that size for the U.S. and Canada.

The costs are huge. To develop an adequate number of sites would require in the order of 150,000 disposal wells at a cost of about $1.5-trillion. That is only a part of the capital cost of a CCS system that includes recovery and compression plants and extensive networks of pipelines. We also have to burn another 30% of the coal to power this system, which requires another 1000 disposal sites.

CCS is a white elephant.

Fred Langford,
Sidney, B.C.

Yukon minister's resignation threatens to collapse government

Bill Curry
Globe and Mail
Sep. 01, 2009

Prime Minister Stephen Harper shakes hands with Yukon Premier Dennis Fentie in Whitehorse on Aug. 21, 2009. (The Canadian Press)

Energy minister quits, saying Premier 'lied' to public in denying that private talks took place regarding selling off energy assets

Yukon Premier Dennis Fentie's government is at risk of collapse after the resignation of the territory's energy minister, who says the Premier "lied" to the public in denying that private talks took place regarding selling off the government's energy assets.

The decision of Brad Cathers, who was also the Yukon Party's House leader, to sit as an independent reduces Mr. Fentie's government to minority status. As a result, the development could trigger an election this fall, should the opposition parties move a no-confidence motion when the legislature reconvenes.

It is a dramatic twist for a Premier whose plans to expand the territory's hydro grid were praised in person this month by Prime Minister Stephen Harper. On the last day of a week-long tour of the territories, the Prime Minister toured the site of future hydro expansion in central Yukon with Mr. Fentie by helicopter. The two men then held an official signing ceremony in Whitehorse.

The expansion of the Mayo B hydro facility and the Carmacks-Stewart transmission line was first announced in May. The $160-million project will receive up to $71-million from the federal government's Green Infrastructure Fund.

Mr. Cathers told reporters at a news conference Friday that the Premier considered selling off publicly owned Yukon Energy assets to Calgary-based ATCO. Mr. Fentie denied such talks took place.

"The Premier lied to the public and to MLAs about his involvement in discussions with ATCO, and about what was on the table," Mr. Cathers said, according to media reports.

The minister went on to describe the Premier as "belligerent and confrontational" in his treatment of MLAs and senior staff.

Federal opposition MPs want to know whether the Conservative government was aware of the possible privatization when it committed the federal tax dollars.

Larry Bagnell, the Liberal MP for Yukon, said he supports the hydro expansion but does not want to see public assets sold off to the private sector.

"I'd want to make sure that the assets purchased in this particular project remain with the Yukon people," Mr. Bagnell said. "Many Yukoners are outraged about this particular issue."

In contrast to the former energy minister's remarks, the Prime Minister offered a far more flattering description of Mr. Fentie during his Aug. 20 visit. At the signing ceremony, Mr. Harper said he appointed Daniel Lang as the territory's senator this year on the advice of the Premier.

Mr. Harper said Mr. Fentie first raised the hydro project with him in private and then worked to ensure it received federal funding.

"It is always a pleasure to be here with Premier Fentie," said Mr. Harper in Whitehorse. "He is always clear in what he wants, reasonable about how he gets it and a pleasure to work with. It doesn't always work that way with premiers, I have to tell you."

Mr. Harper said the public investments in Yukon's hydro power will create hundreds of jobs and will reduce the territory's dependence on diesel by 40 per cent.

Neither Mr. Fentie nor Mr. Cathers could be reached yesterday. Dimitri Soudas, a spokesman for the Prime Minister, said talk of privatizing Yukon's energy assets is "hypothetical" at this point and declined further comment.

During the event in Whitehorse, the Premier described the project as a "massive" investment in the territory and praised the Prime Minister.

"Under the leadership of Prime Minister Stephen Harper and his government, the North has finally come of age," he said.

Alberta to U.S.: Use the oil sands or lose them

COMMENT: Some of the tone of this article is offensive. Don Martin disparages the emerging US desire to put some climate change/environmental filters on the fuel it buys - "the delusional swagger that [Americans] can be picky about which oil is good enough to buy". That really is rude!

Nevertheless, I don't think that's quite what Martin is getting at in this article. Is there is an appetite for a more direct subsidy for Gateway in either the federal or provincial government? Martin suggests that Environment Minister Jim Prentice might be a likely champion of such a subsidy - Environment Minister??!!

Don Martin
National Post
August 31, 2009

OTTAWA -- To lift a quip from Prime Minister Stephen Harper’s Arctic sovereignty policy and apply it to the American view of Alberta’s oil sands: use it or lose it.

The Chinese government pushed its shovel deep into Canada’s energy motherlode on Monday when it announced a $2-billion stake in a five-billion-barrel reserve of “dirty oil” that Americans increasingly find unworthy of fuelling their vehicles.

The 60% claim by PetroChina in two projects owned by Athabasca Oil Sands Corp., while small compared to the great gobs of capital pouring into oil sands expansion and extraction, are the global giant’s largest investment in Canadian energy yet.

And China usually buys into product it aims to consume.

Sources in Washington predict politicians there will not be pleased at having a massive supply of secure energy on their northern doorstep slipping under Chinese ownership.

Well, too bad.

Under the greenish Obama administration, “oil sands” is becoming a dirty word as Americans take on the delusional swagger that they can be picky about which oil is good enough to buy in a recession when supply is temporarily ahead of demand.

Canadian oil sands exports are increasingly encountering U.S. political resistance at federal, state and municipal levels as low-carbon fuel standards move through the legislative process to erect barricades against an energy with an extraction problem.

But it is delusional because there is no post-refining difference between conventional and non-conventional oil and banning it in one state or city merely moves it to another, with no corresponding reduction in carbon emissions.

Yet the difference between the American and Chinese views of oilsand imports suggests that Canada is nearing a moment of decision.

It can be forever held captive to the whims of U.S. refineries, which import 60% of oilsand production or about 780,000 barrels a day. Or it can create a battle of demand between the two energy-consuming superpowers that will soon find there is not enough oil to satisfy their combined thirsts.

That will require Canada, whose pipelines now head only north and south, to punch a hole in the Rockies and open up a crude flow to the west coast, from where oil could head overseas.

Environment Minister Jim Prentice is no fan of a single-buyer market for exported bitumen, which actually sells at a discount in the U.S. compared to Middle East oil despite coming from a friendly neighbour. He’d like competition injected into the system.

“Doesn’t it help Canada’s exporter to have alternative market choices?,” he noted in a recent interview. “We need transportation mechanisms to ship it to the West Coast. Refineries in the U.S. have limited capacity and we don’t have anywhere else to sell it. Having the capacity to ship it to the West Coast would keep everybody honest, so I think it’s good policy.”

That’s so obvious as to be rhetorical, but the cost and complications of a new west-bound pipeline may be prohibitive for the private sector to go it alone.

The proposed Enbridge Inc. Northern Gateway pipeline, which was been on ice for several years, is being thawed for reconsideration.

That’s at least five years off and the project faces numerous environmental, aboriginal land claim and geographical hurdles, which is probably why they weren’t talking it yesterday — although they weren’t ruling it out in the longer term either.

But to understand China’s strategic investment interest, keep in mind that 2009 will likely go down as the first year when car sales in the Communist country beat the United States, making it the world’s largest car-buying nation.

At the risk of stating the obvious, cars consume gasoline, gasoline comes from oil and the world’s largest deposits of oil, albeit locked in tar, straddle northern Alberta and Saskatchewan.

If America doesn’t want to use it on environmental grounds, they’re only one pipeline away from losing it to someone else.

China's bold move into the oil sands

"The deal does not commit the company to delivering oil to the Chinese.... 'At the end of the day, there was nothing tied in terms of transporting or pipelining. This was just strictly an energy venture that PetroChina identified that had very high quality, and had a great management team that can move this forward in a timely manner.'”

Nathan VanderKlippe
Globe and Mail
Tuesday, Sep. 01, 2009

Workers at a PetroChina oil field in Tongnan, southwest China's Sichuan province. REUTERS

PetroChina's $1.9-billion acquisition of stake in Athabasca Oil shows deep-pocketed investors still see value in Alberta resource

A major Chinese energy company has delivered a jolt of confidence to Canada's oil patch with a $1.9-billion investment that marks China's biggest entry into Alberta's oil sands.

In a deal that many took as proof of the oil sands' continued attractiveness to deep-pocketed investors, Calgary-based Athabasca Oil Sands Corp. on Monday sold a 60-per-cent interest in two of its undeveloped projects near Fort McMurray to the international unit of PetroChina Co. Ltd. (PTR-N110.440.690.63%) .

The transaction will hand approximately three billion barrels of Alberta oil to PetroChina, whose parent is the state-owned China National Petroleum Corp., but will leave operation of those projects, named MacKay River and Dover, in Canadian hands.

Chinese companies have engaged in a months-long buying spree of global petroleum assets, snapping up a refinery and oil and gas properties in Asia, Russia, South America and Africa. But for those in the oil patch, the acquisition of Alberta assets serves as a much-needed vote of confidence.

Canada's energy industry has spent more than a year watching oil prices fall and, in their wake, tens of billions in capital spending cancelled or delayed. Many see the Athabasca deal as a sign that stability – and even growth – is returning.

On a day when falling crude prices sank shares in most energy companies, several small oil sands players, most notably UTS Energy Corp. and OPTI Canada Inc., saw big gains on hopes that they, too, could become acquisition targets.

“It signals the return of a higher level of capital spending in the oil sands,” said Mike Tims, the chairman of Calgary investment firm Peters and Co.

“When Kearl was approved, it lifted the psychology significantly, because people could see the return of capital spending again. And I suspect this will have the same kind of effect.”

In May, Imperial Oil Ltd. decided to begin construction of its $8-billion Kearl oil sands mine, the first major oil sands project to be revived after last year's crash.

The Athabasca deal will provide the Calgary-headquartered company, which is 25-per-cent owned by management and directors, with enough capital to finance its share of a planned series of oil sands extraction plants that could one day produce between 400,000 and 500,0000 barrels of crude per day. The company estimates the capital required for those plans at $15-billion to $20-billion, but says it will benefit from technological advances being developed by PetroChina at some of its heavy oil assets in China, which have similar characteristics to the oil sands.

“From our perspective, we're very excited about having the opportunity to partner with such a large and substantial company that has the technological capabilities to help move this forward,” Athabasca chairman Bill Gallacher said.

The deal does not commit the company to delivering oil to the Chinese, he added. “At the end of the day, there was nothing tied in terms of transporting or pipelining. This was just strictly an energy venture that PetroChina identified that had very high quality, and had a great management team that can move this forward in a timely manner.”

The deal also includes a “financing arrangement” that Athabasca will use to refinance a $400-million bond it secured last year, although the company declined to provide any details. Athabasca will continue to operate the rest of its assets independently. It expects the PetroChina deal to close Oct. 31, and said it expects government approvals to pose little obstacle.

Chinese companies have attracted attention for their bids this year to buy two Canadian-listed companies with foreign assets – Verenex Energy Inc. and Addax Petroleum Corp. – but they have made steady inroads into the oil sands as well. Earlier this year, Sinopec raised its stake in French giant Total SA's Northern Lights project to 50 per cent. In 2005, the Chinese National Offshore Oil Corp. spent $150-million for a 16.7-per-cent stake in privately-held MEG Energy Corp, while in 2007, CNPC bought 11 oil sands leases containing reserves of about 1.9 billion barrels.

For many, however, the Athabasca deal was notable for the value it assigned to oil sands assets, whose worth has been debated ever since Total made a hostile bid for UTS earlier this year that analysts said ascribed no value to its oil reserves. Analysts calculated that PetroChina will pay just over 60 cents a barrel for Athabasca, which marks a return to some of the valuations seen in 2007 and 2008, and implies a value for companies like UTS that is roughly double their current trading price.

“I think you'll probably hear UTS speak up a lot more and saying, ‘Look, here's the valuation,'” said FirstEnergy Capital analyst William Lacey.

Athabasca's MacKay River and Dover projects contain an estimated five billion barrels of recoverable bitumen. Athabasca plans to extract those barrels with technology known as steam-assisted gravity drainage (SAGD). Unlike oil sands mines, SAGD operators use underground injections of high-pressure steam to coax the thick bitumen to the surface.

Athabasca has applied for permission to build two pilot projects, but does not expect to begin commercial production until at least 2014, when it hopes to turn on an initial, 35,000 barrel-a-day phase of production from MacKay River.

BRAZIL: New Law Would Put Oil Revenue into Development

COMMENT:

"If the new plan goes through, the state would be the owner of the oilfields and private companies would operate as service providers, replacing the current concessions system, under which companies bid for the rights to explore new oil blocks."

Unless they already know he's just playing politics, negotiating, and doesn't really intend to do any such thing. After all, it's a long way between this kind of musing out loud, and passing legislation.

By Fabiana Frayssinet
Inter Press Service News Agency
August 31, 2009

RIO DE JANEIRO, Aug 31 (IPS) - On what he referred to as "a new independence day for Brazil," President Luiz Inacio Lula da Silva announced Monday proposed new legislation that would increase state control over the management of the country's enormous offshore oil finds, with the aim of channeling much of the state's oil revenue into a national social fund.

The oilfield was discovered two years ago in an area of nearly 800 square km, at a depth of seven km, beneath a layer of salt up to two km thick which extends 500 km offshore in the Atlantic Ocean from the state of Espíritu Santo to Santa Catarina.

Lula said Brazil must take advantage of the reserves to strengthen Brazil's state oil company, Petrobras, which trades on national and international stock exchanges.

On his weekly radio programme "Coffee with the President", Lula said "We are talking about very large reserves that put Brazil among the world's largest oil producers."

"The subsalt oilfields are a gift from God - wealth which, if properly managed, can drive major transformations in Brazil, improving living conditions for our people," Lula added later, during the official ceremony held to announce the proposal, which must still be approved by Congress.

He also stressed that Brazil does not want to be a "mere exporter of crude oil," and that the plan is to create a powerful petrochemical industry to refine the oil into derivatives in order to export value-added products like gasoline.

If the new plan goes through, the state would be the owner of the oilfields and private companies would operate as service providers, replacing the current concessions system, under which companies bid for the rights to explore new oil blocks.

With the new framework, the government could hire Petrobras as operator of the subsalt oilfields, or open them up to competitive bids, in which the winner would be the company "that guarantees the greatest percentage of profits for the state," according to cabinet chief Dilma Rousseff.

If Petrobras is the operator, it would have a minimum 30 percent stake in the oil project – a privilege that Rousseff justified by the need for the operator to have access to strategic information on the reserves and control the pace of production and technological development.

These decisions were reached, according to Lula, on the premise that the country's oil and natural gas belong to "all of the Brazilian people," and in order to ensure that "most of the revenues generated remain in Brazilian hands."

Under the new plan, which was discussed for the past two years, the government's share of oil revenues would go into a national development fund, to be spent on education, science, technology and anti-poverty projects.

"We don't have a right to take that money and spend it on the government's budget," said Lula.

He added that the newfound wealth must bring development, and must not be allowed to undermine other industries, as has occurred in other oil-producing nations.

Rousseff, Lula's candidate for the 2010 elections, said the national social fund will also make it possible for Brazil to avoid the "curse of oil, which has kept the people of so many oil-rich nations in poverty."

Minister of Mines and Energy Edison Lobao called the reserves "a treasure that belongs to all Brazilians," and said they will help Brazil play "a leading role" in "global geopolitics."

The production-sharing model is seen by some market analysts as a step backwards from the concession model, which resulted from the process described as the "flexibilisation" of the state oil monopoly, launched by then president Fernando Henrique Cardoso (1995-2003) in 1995.

In an interview with IPS, Rafael Schechtman with the Brazilian Infrastructure Centre described the proposed new legislation as "a complete setback," and said the government's plan would "restore Petrobras' monopoly."

According to Schechtman, there are no guarantees that the government will not expand the minimum 30 percent stake for Petrobras in oil operations into a 100 percent stake, "to give total control back to the company."

Anticipating such criticism, Lula described the years during which the system of concessions for local and foreign private companies was put in place as a time of "market worshippers" when "the presence of the state was shrinking."

According to official estimates, the new offshore subsalt oilfields could hold 50 to 80 billion barrels of oil – up to six times the country's entire proven reserves of 14 billion barrels.

The Tupi oilfield alone, where Petrobras has already begun to extract crude, holds an estimated five to eight billion barrels.

Fighting over future riches

The leading oil-producing states, Rio de Janeiro, São Paulo and Espíritu Santo, are determined to secure a large share of the future oil earnings.

They are opposed to the new system, which would create a profit distribution mechanism under which the largest share of the state's revenues would go to the central government while the rest would be shared out with non-oil-producing states.

The governors of the three oil-rich states – who did not participate in Monday's ceremony – want the current system of state royalties to remain in place.

The touchy question will be left up to Congress to work out.

Referring to the proposed national social fund, Rio de Janeiro Governor Sergio Cabral said the government was playing "Robin Hood."

Another controversial point is the creation of a new state holding company, Petrosal, to manage new projects and contracts in the subsalt oilfields.

The proposed legislation would apply to the subsalt reserves not yet granted in concession to local or foreign private firms – in other words, 70 percent of the offshore reserves.

Lula said Petrobras would invest 174 billion dollars from here to 2011 in exploration in the subsalt oilfields, which makes it important, he added, to create safeguards guaranteeing that the wealth "will function as an unprecedented industrial revolution in the economic history" of Brazil.

Such a massive investment is due to the fact that the oil is located in an extremely difficult-to-reach area, which implies greater costs and requires new technological developments.

Not only is the oil located around seven km below the surface of the ocean, but it is beneath thick layers of sand, rock and salt.

Link to article

Please Mrs. Nixon

The Royal Bank of Canada is the largest financier of tar sands projects. Michael Broom of Rainforest Action Network appeals to Mrs. Nixon, asking her to talk to her husband, Royal Bank CEO Gordon Nixon, to help end the tar sands.

Watch the video here.

Time for Natural-Gas Autos?

By MIKE HOGAN
Barron's Online
August 29, 2009

The investment outlook for natural gas gets brighter.

AS "CASH FOR CLUNKERS" DEMONSTRATED, AMERICANS love a deal. And Congress may have yet another for you when it returns from summer recess.

The plan is to offer tax credits worth up to $12,500 on the purchase of new cars and trucks. The catch is that your new vehicle must run on natural gas -- compressed natural gas, or CNG, to be precise. A Senate bill, the counterpart to the House's NAT GAS Act, also would offer up to $64,000 in tax credits on fleet vehicles, and up to $100,000 to anyone opening a CNG filling station.

Washington is beginning to wake up to the value of using this plentiful, homegrown fuel for transportation -- and that in turn could open up some intriguing investment opportunities.

Right now, only one CNG car -- Honda's Civic GX -- is available to U.S. buyers. But a dozen auto makers sell some two dozen CNG models overseas, and the Web can help you track their development. For an overview of the current cars, go to www.cngnow.com and click CNG Vehicles Around the World.

AOL Autos also is packed with good information (http://autos.aol.com/gallery/hybrid-cars-15k-25k). Likewise, CNG Chat (www.cngchat.com) lets natural-gas vehicle owners share operating tips and parts sources, and the Environmental Protection Agency offers a searchable database of hybrids (www.fueleconomy.gov/feg/byfueltype.htm).

[In Canada, the Canadian Natural Gas Vehicle Alliance represents those businesses involved in natural gas vehicles and who would like to see the use of gas expanded as a vehicle fuel. www.cngva.org. The CNGVA provides a list of only 22 natural gas fueling stations in British Columbia.]

NATURAL-GAS ENGINES -- found in some American buses and fleet vehicles -- have clear appeal. Boosters say a "gallon equivalent" of natural gas is about half the price of gasoline or diesel and produces about a third the harmful emissions. And America is swimming in the stuff.

Although a shortage of natural gas was forecast a couple years ago, supply has surged 50% since then -- primarily as a result of record gas discoveries in the strategically located Barnett, Haynesville, Marcellus and Bakken shale fields. These so-called unconventional sources are tapped using methods pioneered by outfits like Chesapeake Energy (ticker: CHK) and Denbury Resources (DNR) and can be quickly disseminated through the nearby pipelines of El Paso Corp. (EP) and Kinder Morgan Energy Partners (KMP).

Still, CNG vehicles in America face the same chicken-and-egg dilemma other hybrids do: building a refueling network. Refueling stations are scarce because only about 150,000 of America's 250 million automobiles are CNG-powered.

So near-term, it will be large commercial shippers like Wal-Mart (WMT) and PepsiCo (PEP) that drive increased use of natural gas on the road, predicts Andrew Littlefair, chief executive of natural-gas filling-station operator Clean Energy Fuels (CLNE).

Operators of America's long-haul trucks can afford natural-gas pumps in their shipping yards, and utilize Clean Energy's growing network of 184 North America truck stops. The economic incentives are fairly obvious for these big energy users, less so for consumers paying a premium for CNG vehicles.

ALL THIS ADDS UP TO AN INVESTING outlook that, while cloudy for the moment, seems likely to brighten.

Institutional investors see many good long-term values among the sector's 40 or so exploration-and-production and field-service companies, says Jon Najarian, co-founder of Chicago-based optionMONSTER (www.optionmonster.com). But depressed commodity prices and potentially punitive regulations directed at energy trades have kept many on the sidelines. Najarian is seeing lower-than-warranted volumes in the U.S. Natural Gas Fund (UNG), the main proxy for the volatile commodity, and other energy ETFs like the levered ProShares Ultra Oil & Gas (DIG) and its inverse, UltraShort Oil & Gas (DUG).

On the other hand, commodity volatility provides plenty of trading opportunities. Najarian recommends a covered-call strategy -- going long on a natural-gas stock or fund while selling a call on the same issue, to profit from both up and down price movements. OptionMONSTER's Covered Call Investor newsletter will walk you through this complicated swing-trading strategy for $149 monthly. At optionmonster.com, click Options Products, then Covered Call Investor.

Auto makers are another possible way to play the trend. But even a marked increase in CNG car sales won't provide much earnings catalyst for giants like Honda (HMC) and Toyota (TM), which plans to bring some of its CNG-powered vehicles here in the future.

Clean Energy is among potential winners. It just opened the world's largest natural-gas fueling facility at the Port of Los Angeles, and completed an $8.30-a-share offering that brought in $73 million. Shares recently closed at $12.78, bouncing off a 52-week low of $3.23 last November and a wider-than-expected second-quarter loss in August.

Likewise, Fuel Systems Solutions (FSYS), which supplies electronic gas-flow systems to car makers, picked up the technology for a home-refueling appliance when Honda liquidated its FuelMaker subsidiary in May. FSYS shares recently closed around $30 after the company handily beat second-quarter earnings estimates in a 52-week range of $10-to-$61. With a forward price/earnings ratio of 16, FSYS may appear fully priced, but not in view of a quarterly earnings-growth rate of 56% compared with the prior year.

THE QUESTION FOR ALL CNG-RELATED stock is: Will there be a legislative catalyst? Congress will have a lot on its plate when it returns to Washington -- bigger fish to fry, as it were. On the other hand, Senate Majority Leader Harry Reid of Nevada and White House Chief of Staff Rahm Emanuel head the bill's glittering list of supporters.

Among the politically influential fans cheering the Senate bill at the recent Clean Energy Summit were Bill Clinton, his former chief of staff John Podesta, Al Gore and BP Capital Management Chairman T. Boone Pickens. Populating American roads with CNG cars is Pickens' Plan B to cut our foreign-oil bill by a third. The renowned energy investor has pulled the plug (temporarily) on Pickens' Plan A: building the world's largest wind farm.

Sums up Najarian: "There are all kinds of reasons to be bearish on this sector in the short term -- and just as many reasons to be bullish in the long term."

E-mail: mike@mikhogan.com

Link to article

Tesoro moves oil to Pacific on reversed Panama line

COMMENT: Interesting news item in the context of global oil distribution. Alaska's North Slope oil came onstream with the Trans-Alaska Pipeline in 1977. US law at the time prevented Alaska oil from being sold outside the United States. The consequence was that California and Washington State refineries had a captive supplier. The only alternative was an expensive protracted 40 day tanker route around Cape Horn to Gulf of Mexico refineries, as the very large crude carriers (VLCCs) were too large to pass through the Panama Canal.

Bruce Nichols
Reuters News
August 27, 2009

HOUSTON, Aug 27 (Reuters) - Tesoro Corp (TSO.N) has shipped its first barrels of crude oil from the Atlantic to the Pacific Basin on a reversed Panama pipeline, the company said Thursday.

Reversal of the 81-mile (130 km) Petroterminal de Panama pipeline, which formerly flowed from the Pacific to the Atlantic, creates a new oil conduit from the Atlantic to the Pacific and gives Tesoro access to more crude for its refineries in California, Washington, Hawaii and Alaska, the company said.

"In addition to exposing Tesoro to an array of crude oils typically marketed in the Atlantic Basin, our abilities to utilize the tankage dedicated for Tesoro's exclusive use at PTP and the reversed pipeline are expected to afford our company strategic advantages related to freight, storage, blending, and delivery scheduling optimization," said Doug Koskie, vice president of arbitrage trading for Tesoro Refining and Marketing Company.

The first oil through was Castilla blend from Colombia, which will be refined in California, Koskie said.

Tesoro is a leading independent producer of petroleum products, such as gasoline and diesel, in the western United States, including Alaska, and its seven refineries have a total capacity of 660,000 barrels per day.

Carbon disaster vs Hell Yes CCS

Lawrence Solomon
National Post
August 15, 2009

Photo: Carbon-capture plants may worry neighbouring communities. (Canwest News Service)

Don’t worry about the risks of earthquakes or suffocation or water contamination. Carbon capture is good, really

If you live in or near a community that manufactures chemicals or cement, or that has a refinery or a coal or natural gas electricity generating station, or that has abandoned mines or other suitable geological formations, you may soon be asked to save the planet from global warming by hosting an underground carbon dioxide storage facility.

You and your neighbours will be told not to worry about carbon dioxide poisoning your water supplies. Yes, ruptures or large leaks of the gas could not only make the water undrinkable for you but also kill vegetation and aquatic life, the authorities will acknowledge, but inventors are working on new, improved technology that will prevent underground pipes and other infrastructure from leaking.

You and your neighbours will also be told not to worry about mass asphyxiation in your sleep in the event of an unexpected release of carbon dioxide, a gas that’s heavier than air — to their knowledge, that only happened to humans once before, in rural Africa when a release of naturally stored carbon dioxide from Lake Nyos in Cameroon enshrouded and suffocated 1,700 people. The authorities in Canada promise to take this risk seriously and double-promise to design state-of-the-art carbon dioxide storage plants that won’t fail fed by pipelines that won’t blow out. Plus, they’ll install monitors in case plants fail or pipelines blow out.

Finally, you and your neighbours will be told not to worry about the possibility that your community will become susceptible to earthquakes. Yes, the authorities will admit when pressed, these carbon-storage facilities are expected to become one of the top five triggers of earthquakes — induced seismicity, it’s called — but hey, somebody’s got to save the planet and the authorities have selected you.

In turn, you and your neighbours, having received all these assurances from the authorities — and having confirmed that the government plans to exempt the carbon-storage industry from liability in the event of an accident — will rise up in opposition and try to run the authorities out of town.

I am guessing, of course, at what you and your neighbours will ultimately decide to do — maybe your community can be bribed into acquiescence. But I am not guessing that our federal and provincial governments have a crash program underway to make Canada an early leader in the carbon-storage industry.

Last month, the Alberta government, which has already committed $2-billion to carbon-storage schemes, announced the province’s first host communities as if it had selected lottery winners. “Alberta announces three winning projects for carbon-capture funding,” reported the Calgary Herald. “[They] will each receive a portion of $2-billion in carbon capture and storage funding, if final negotiations between the province and companies are successful.”

The neighbours to the winners — Edmonton-area ventures involving Shell Canada, Chevron Canada and Epcor, among others — may feel more like guinea pigs after the public consultations begin, and concerns get aired. The government expects the storage facilities to be up and running by 2015, meaning that the pressure will soon be on to ram these projects through. Look for environmental groups to be enlisted as government persuaders — the Alberta-based Pembina Institute has already recommended that environmental groups take on this enabling role. And look for the environmental groups to be held in the same regard as the governments and companies they are working with.

Last September, a carbon-storage demonstration scheme in northern Germany — Vattenfall’s Schwarze Pumpe project in Spremberg — opened to wide acclaim. The $110-million facility was touted as the first to trap carbon dioxide at a coal plant before transporting it for burial. Last week it came out that the burial never happened. Because of local opposition, the town had refused to give Vattenfall a permit for burial. Rather than storing the gas underground, Vattenfall revealed during a conference, it has been quietly (and safely) venting the carbon dioxide straight into the atmosphere all along. Similarly, local opposition foiled Shell’s plans to store carbon dioxide in depleted gas fields under the Dutch town of Barendrecht, near Rotterdam, in March. After sitting through a public consultation, and receiving assurances from Shell that the technology is proven to be safe, 1,300 residents lodged their protests.

The Numby phenomenon — Not Under My Back Yard — is not limited to opposition by local residents: industries with a stake in safe water are also alarmed. The American Water Works Association, a trade group representing 4,700 water utilities that produce 80% of America’s drinking water, has added the carbon-storage industry to coal and the other resource industries that threaten its interests and those of its customers.

“Our biggest concern is the prevention of degradation of underground sources of drinking water” by interfering with the complex chemistry of water in underground settings, the association told Congress in detailed testimony last year, citing the numerous ways that carbon dioxide burial threatens aquifers with profound contamination, and noting that many communities don’t have alternative sources of affordable drinking water.

The association also noted that carbon-storage technology is unproven and may not even succeed in its primary goal, of removing carbon dioxide from the atmosphere. Why risk a nation’s water supplies without the evidence being in, it asked Congress. Why indeed.

lawrencesolomon@nextcity.com

Lawrence Solomon is executive director of Energy Probe and Urban Renaissance Institute and author of The Deniers: The world-renowned scientists who stood up against global warming hysteria, political persecution, and fraud.

Hell yes, back CCS

Re: Carbon disaster, Lawrence Solomon, Aug 15.

Lawrence Solomon's column illustrates a lack of understanding of the potential of carbon capture and storage (CCS) as one of the tools to reduce greenhouse-gas emissions globally.

Anyone serious about dealing with greenhouse gas emissions and who has done research and analysis on the solutions, knows we need a complete portfolio of actions, including the appropriate and safe application of carbon capture and sequestration. ICO2N has undertaken a significant amount of research on CCS technology, analysis of economic models for development and the best way for establishing an integrated carbon capture and storage network in Canada. This is not unproven technology, and a great deal of work is being done to ensure our understanding of this important tool is comprehensive on every front.

The Pembina Institute views CCS as one of a number of technologies that can contribute to reducing greenhouse gas emissions on the scale required to combat dangerous climate change. There is no single solution to addressing climate change and it is incumbent on all of us to ensure accurate information on all the tools available to us.

Here are some key points from ICO2N's research to consider in assessing the merits of Mr. Solomon's opinion:

-Throughout recorded history, no earthquake has ever been powerful enough to cause an instantaneous release of oil or gas from a sandstone sediment layer. And since the CO2 would be held in place by the very same impermeable cap rock that has held oil and gas under the earth through millions of years and countless earthquakes, sequestered CO2 would not be in danger of release due to seismic activity.

-Any system for carbon capture and storage would have stringent guidelines and monitoring systems to ensure the safety of people, integrity of systems and protection of the environment. Underground storage of CCS will be 800 metres to 2 kilometres underground, far below drinking water sources at less than 300 meters underground.

-Many things can be dangerous, but natural gases are already deep underground and not leaking to the surface now. The 1986 Lake Nyos tragedy was a natural occurrence not dissimilar to mud slides, floods and tsunamis that occur in other parts of the world.

-CO2 capture and storage is not a new or untested idea. CCS is a technically viable and environmentally safe means of reducing greenhouse gases. The subsurface is an effective trap for CO2 and other natural gases and large scale trials provide strong evidence that industrial volumes of CO2 can be stored successfully.

-There are many CCS projects of varying sizes already underway around the world and underground storage of CO2 has been underway for more than a third of a century in the United States. The safety records of existing CCS projects across North America and around the world are exemplary.

-In Canada, EnCana's Weyburn project, which has been monitored by the International Energy Agency, has successfully stored over 13 million tonnes of CO2 in southern Saskatchewan over the past 9 years.

-Norwegian energy company Statoil, an early leader in CCS, has pumped over ten million tonnes of carbon dioxide beneath the bed of the North Sea over the past decade without incident.

-Suitable sites for CO2 storage are chosen after rigourous analysis of their quality and capacity and are typically either depleted oil or gas reservoirs or deep saline formations.

Eric Beynon, director, Strategy and Policy, Integrated CO2 Network, Calgary;
Marlo Raynolds, executive director, Pembina Institute, Calgary.

Coal is still king

By Lawrence Solomon
Financial Post
August 29, 2009

Carbon capture and storage technologies pushed by Western governments may or may not work, but ...

Lawrence Solomon

And since burial solves the carbon dioxide problem, they then conclude, we can with a clear conscience crank up our use of coal.

This is the case in Canada, where the National Roundtable on the Environment and the Economy proposes a continuation of the boom that we’ve seen in coal mining this decade. This is the case in the U.S., where coal production has been steadily growing and where President Barack Obama touts coal above other energy options. And this is especially the case in the United Kingdom, perhaps the world’s most earnest warner of global warming catastrophe. The U.K. is today so bullish on burial that it has resuscitated the coal mining industry that Maggie Thatcher tried to kill off in the 1980s.

In the last four years, the U.K. has approved 54 coal mines, most of them open-pit, while simultaneously pointing to the aggressive reductions in CO2 emissions to which it’s committed — 34% by 2020. Scotland, which boasts the world’s very toughest CO2 reduction targets (42% by 2020), has approved 25 new open-pit mines, helping them along by relaxing planning regulations that apply to open-pit mines. Because all this isn’t enough, the U.K. is considering the approval of another 19 open-pit mines as well as upping its coal imports too.

“We don’t see this as counter to our climate change message,” cheerily states the government’s Department for Energy and Climate Change. “The U.K. is at the forefront of global efforts to decarbonise fossil fuels.”

The decarbonisation that the U.K. government refers to involves burial on land and — especially attractive for an island nation — at sea. A recently released Scottish government report determined that the Scottish area of the North Sea alone could store all the carbon dioxide that all the coal-fired plants in the U.K. would produce over the next two centuries, leading the Scottish First Minister to speculate that a high-tech carbon capture and storage industry could create 10,000 Scottish jobs.

But ocean storage raises a tide of objections from environmentalists, Greenpeace among them. Carbon dioxide in water could seriously acidify the oceans — already a concern — removing nutrients for plankton in areas like the U.K.’s North Sea as well as in shallow ocean waters, and affecting the food source for marine life. Some ocean storage technologies kill marine life directly. Plus, many scientists believe the oceans will fail to effectively contain carbon dioxide, which will be pumped into waters in either liquid or gaseous form. No one, not even the U.N.’s Intergovernmental Panel on Climate Change, considers ocean storage to be much more than a concept, let alone a proven technology.

The potential for havoc to humans is much greater with carbon storage facilities under land. Carbon dioxide could adversely acidify groundwater, leading to leaching of contaminants into the water supply and rendering aquifers unusable. For this reason and others — an unplanned release of the gas could suffocate humans or animals, and carbon storage can induce earthquakes — governments on both sides of the Atlantic have proposed carbon storage facilities and communities have opposed them.

How will this all end? We can be confident that coal use will keep on growing for decades to come, in line with official projections that show worldwide demand soon doubling —without coal for electricity production, most jurisdictions will be unable to keep the lights on. We can also be confident that communities will successfully fend off many if not most of the carbon storage schemes that threaten them and their environments. Finally, we can be confident that governments, after spending tens of billions on carbon storage schemes of dubious benefit, will conclude that the safest place to store today’s relatively high levels of carbon dioxide is in the atmosphere, where it now resides.

lawrencesolomon@nextcity.com

Lawrence Solomon is executive director of Energy Probe and Urban Renaissance Institute and author of The Deniers: The world-renowned scientists who stood up against global warming hysteria, political persecution, and fraud.

Awash in natural gas, prices hit new 7-year lows

By CHRIS KAHN
Washington Post
Thursday, August 27, 2009

NEW YORK -- Natural gas prices slumped to their lowest level in seven years Thursday after the government reported that salt caverns, aquifers and other underground areas where it is stored are filling up.

Levels of natural gas have been building because power-intense industries like manufacturing have cut back severely on production.

Natural gas tumbled 6.7 cents to settle at $2.843 per 1,000 cubic feet. The price dropped as low as $2.692 per 1,000 cubic feet earlier in the day, a price not seen since Aug. 7, 2002. The contract is scheduled to end Thursday, however, and most of the trading already has switched to the October contract that gave up 4.6 cents to trade at $3.248.

Meanwhile, crude and gasoline futures were tugged higher as equities markets rose and the dollar fell among other major currencies.
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Benchmark crude for October delivery added $1.06 to settle at $72.49 a barrel on the New York Mercantile Exchange.

Still, oil prices have been tumbling since they touched $75 a barrel on Tuesday, and analysts said they expect it will fall further as the summer driving season ends in a few weeks.

Retail gas prices peaked in late June at around $2.69 per gallon and have been falling slowly since, giving consumers a bit of a break in the tough economy.

Gas prices gave up two-tenths of a penny to $2.62 a gallon, according to auto club AAA, Wright Express and Oil Price Information Service. A gallon of regular gasoline is 11.5 cents more expensive than last month, but it's $1.047 cheaper than the same time last year.

Oil remains above $70, largely because it is bought in the U.S. dollar. That means when the dollar falls, like it did Thursday, investors can get more crude for less money. Crude supplies grow this week, however, and they remain well above seasonal norms.

"It's getting harder and harder to justify it at these prices," PFGBest analyst Phil Flynn said.

Natural gas prices plunged early in the day when the Energy Information Administration reported that natural gas placed into storage surged again.

There is so much natural gas in storage, it has begun to test the country's storage capacity. But EIA economist Jose Villar told The Associated Press that storage facilities have added about 100 billion cubic feet of extra space, giving suppliers more places to put it. The EIA will include details of the added capacity in a report to be published in the next few weeks, Villar said.

In other Nymex trading, gasoline for September delivery increased 4.88 cents to settle at $2.0314 a gallon and heating oil added less than a penny to settle at $1.8592 a gallon. In London, Brent crude rose 86 cents to settle at $72.51.

Associated Press Writers Carlo Piovano in London and Eileen Ng in Kuala Lumpur contributed to this report.

Weak dollar pushes energy prices higher

The Associated Press
Friday August 28, 2009

LONDON -- The effect of the weak dollar is again pushing oil prices higher in the face of little demand for energy and huge surpluses of crude.

On Friday, the dollar again fell against major currencies.

Since March, the dollar index, which weighs the U.S. currency against a basket of foreign currencies like the euro, the Japanese yen, the pound and the Swiss franc, has fallen nearly 12 percent. In that same period, crude has jumped 81 percent.

The widening gap between the value of a dollar and that of a barrel of oil shows just how much oil-based index funds have come to affect the prices that consumers pay for energy.

Benchmark crude for October delivery rose 81 cents to $73.30 on the New York Mercantile Exchange. Oil prices earlier this week hit $75, a high for the year.

Oil prices are threatening to hit new highs in a week when the government reported that more unused crude is being placed into storage. The U.S. is also nearing the end of the driving season, when demand generally falls.

Demand for gasoline is already weaker than it was last year, even though right now it costs a dollar less to buy every gallon.

Overnight, retail gasoline fell nearly a penny to $2.613. That's a dime more than gas cost a month ago, largely because of refineries have cut production to match falling demand.

It is difficult to predict how long oil prices can remain at current levels when so little of it is being used. Yet value of a barrel of oil will likely remain elevated as long as investors are skittish about the health of banks and other businesses.

Money under the control of the Federal Deposit Insurance Corp. has been severely depleted by the wave of collapsing financial institutions. Some analysts warn that the FDIC, which guarantees bank deposits, could be losing money by the end of the year.

To a lot of big investors, oil looks like a pretty safe place to park money right now.

"Oil became a safe haven as traders lost confidence in the U.S. banking system (and) ran to oil to protect themselves from the deteriorating economic world around us," said PFGBest analyst Phil Flynn. "Now some critics now call that excessive speculation but what I call it is reflection of the reality. You have to remember the value of any commodity when expressed in a currency will ultimately be determined by the confidence and faith in that underlying instrument."

It seems nothing can prop up prices for natural gas, which hit seven-year lows this week. There is so much gas being pumped into the ground that the U.S. is running out of places to store it. That is largely because big energy users, like manufacturers, have cut back severely on operations as they ride out the recession.

Natural gas prices fell 11 cents to $3.095 per 1,000 cubic feet.

In other Nymex trading, gasoline for September delivery rose 2.2 cents to $2.0535 a gallon and heating oil rose 2 cents to $1.8787 a gallon.

In London, Brent crude rose 54 cents to $73.05.

The Associated Press

Oil, Ecuador and its people (Part 1)

Editorial
Los Angeles Times
August 28, 2009

AGUINDA VS. TEXACO INC.

Today, a swath of the Ecuadorean Amazon remains contaminated beyond imagining. Neither side disputes the devastation, only who should pay for it. Chevron says it is the state oil company's responsibility.

In a small, spare courtroom in the Amazon region of Ecuador, Chevron Corp., California's largest company and one of the world's largest oil producers, will soon face a day of reckoning. After 16 years of litigation, a case the company inherited in a merger, Aguinda vs. Texaco Inc., is nearing an end. The legal battle that began in the United States in 1993 and resumed in Ecuador in 2003 has pitted the multinational against an unlikely adversary, a coalition of indigenous tribes and communities. A verdict is expected early next year. The plaintiffs are poised to prevail, and Chevron acknowledges that it is likely to lose.

The case is historic by several measures. Never before have indigenous peoples brought a multinational oil corporation to trial in their own country. Moreover, a victory would mark a turning point in the relations between native populations around the world and the foreign corporations that do business in their homelands. And the potential damages are staggering: A court-appointed expert has determined that they could run to $27 billion, almost 10 times that initially awarded to plaintiffs after the Exxon Valdez oil spill.

Today, a swath of the Ecuadorean Amazon the size of Rhode Island remains contaminated beyond imagining. At one site after another, oil hangs in the air, slides on the water's surface and saturates the land. Pipelines and waste pits left behind years ago still drip and ooze. Advocates for the plaintiffs have called the former Texaco concession area the "Amazon Chernobyl." Were it in the United States, it would easily qualify as a Superfund site. Neither side in the case disputes the devastation, only who should pay for it. Chevron says it is the state-owned oil company's responsibility; the plaintiffs say it is Chevron's.

The plaintiffs are seeking unspecified damages for environmental cleanup, reforestation and healthcare. (Under Ecuador's legal system, they cannot receive individual compensation.) In addition to reams of documents and hundreds of soil and water samples, the case has generated abundant ill will. Chevron maintains that it's the victim of a scheme to plunder its deep pockets and make it pay for pollution caused by Petroecuador, the state oil company, which took over after Texaco's operations ended. The plaintiffs contend that the pollution was caused by the faulty infrastructure Petroecuador inherited from Texaco; as with a faulty car, to use their analogy, it is the manufacturer, not the driver, who is to blame. Entire communities, they say, have been plagued with devastating illnesses as a result of oil waste in their drinking and bathing water, and their suffering has fallen on deaf corporate ears. Their resentment runs as deep as the oil Texaco once drilled.

Assessing the damage

Texaco Petroleum and Ecuadorean Gulf Oil Co. began exploring for oil in the Ecuadorean Amazon in 1964, found it three years later and, from 1972 to 1992, produced 1.7 billion barrels of crude. Texaco held a 37.5% interest in the consortium, but it designed and constructed the wells, pipelines and waste pits, and it was the sole operator of the 1,700-square-mile concession area.

In 1992, after the government did not renew its contract, Texaco turned over its infrastructure to Petroecuador and left the country. One year later, five indigenous tribes and 80 communities filed a class-action lawsuit in federal court in New York, then Texaco's headquarters. The suit alleged that Texaco discharged more than 18 billion gallons of waste water into rivers and streams, burned millions of cubic meters of natural gas without proper emissions controls and spilled millions of gallons of crude oil directly into the earth, polluting the region's only sources of water, sickening inhabitants and even contributing to the extinction of one small tribe, the Tetete.

In a report submitted last year, the court- appointed expert, geologist Richard Cabrera, estimated that 1,400 people in the region had died of cancer caused by toxic chemicals involved in oil extraction. That calculation accounts for $2.9 billion of the damages assessment. Chevron contends that Cabrera is not qualified to make such a determination and that neither science nor medicine supports his assertion; he has not presented the medical records of any victims. As for remediation, the company says Texaco already did that.

Chevron disputes the scientific methods used to determine its culpability, but the heart of its defense is its assertion that the case never should have been permitted to go forward. The company maintains that it is the victim of the retroactive application of environmental laws that did not apply when Texaco was operating the concession area, and that Texaco fulfilled its clean-up obligations.

After the suit was filed in New York, Texaco entered into a remediation agreement with the Ecuadorean government. As part of that agreement, the company spent about $40 million cleaning up oil field waste pits and funding socioeconomic projects in local communities. In 1998, after years of government oversight and periodic approvals, the Ministry of Energy and Mines and Petroecuador certified that Texaco's remediation met the country's standards, and the government issued a waiver releasing the company from further liability. Chevron, which merged with Texaco in 2001, maintains that the waiver not only immunized it against any action by the government but obviated all other claims. Yet the waiver says nothing about third parties. It releases Texaco "forever, from any liability and claims by the Government of the Republic of Ecuador, Petroecuador and its Affiliates."

More than legal interpretation is at issue. Cabrera concluded that soil samples even from areas Texaco said it remediated are contaminated, which prompted the government to take action against the company as well. Declaring the original remediation a fraud, it indicted two Chevron officials and seven former government officials. And just recently, the court agreed to turn over Cabrera's damages assessment to the office of the federal prosecutor. As a result, Chevron is battling not just the plaintiffs but Ecuador itself. It has tried to pressure the government to assume responsibility for remediations by urging the United States to revoke the country's preferential trade status. So far, that effort has failed.

In Lago Agrio

Such tactics represent a remarkable break in a long relationship between American oil companies and the Ecuadorean government. Indeed, so comfortable was Texaco with the country's government and judicial system that soon after the lawsuit was filed in New York, it argued to move the case to Ecuador. In support of that motion, it filed affidavits attesting to the transparency and fairness of the Ecuadorean court system, pleadings it would come to regret.

At the time, moving the trial was the last thing the plaintiffs wanted. Historical collusion between government officials and oil executives, coupled with the racism and discrimination faced by indigenous peoples in their homeland, made a fair trial inconceivable, they argued. Plaintiffs' advocates likened it to African Americans in the pre-civil rights South obtaining justice from a court in, say, Mississippi -- not impossible, but unlikely. The New York judge sided with Chevron and agreed to dismiss the case as long as the company promised to abide by the Ecuadorean judge's verdict. Chevron promised it would, and in 2003 the fight started over again in a jungle-adjacent courtroom in Lago Agrio.

There, in the grimy oil town named after Texaco's birthplace in Sour Lake, Texas, the two sides await a verdict in a case with echoes and implications around the world. From Nigeria to Peru, native peoples are challenging with new force the destructive legacies of multinationals. In that, Aguinda vs. Texaco is a legal landmark -- one we hope, whatever its outcome, will enable multinational corporations to better navigate the changing world in which they do business and thus encourage a new era of corporate responsibility.

For its part, Chevron has ample reason to be anxious. The company succeeded in having the trial moved to Ecuador, where American oil companies once held great sway. But the country's politics, environmental ethos and regard for its native peoples were about to evolve in dramatic, unforeseen ways. The new Ecuador has turned out to be a far less hospitable place for Chevron than the old Ecuador had been for Texaco.

Tomorrow: A changing Ecuador, and the "shadow case" against Chevron.

Copyright © 2009, The Los Angeles Times

First Nations take oilsands concerns to U. K.

By Hanneke Brooymans
Edmonton Journal
August 28, 2009

Three First Nations people from northern Alberta are in London, protesting the involvement of United Kingdom companies in oilsands development.

Residents of Fort Chipewyan are especially concerned about some types of cancer in their communities.

"Because of the people in my community dying and being sick, that's not motivation, that's an obligation on my behalf to go out and spread the word," said Lionel Lepine, a 31-year-old member of the Athabasca Chipewyan First Nation.

"At first, it started as a provincial-awareness type of thing. Then we got the awareness spread right across Canada. And now we're taking this awareness international."

Lepine is accompanied by George Poitras, of the Mikisew Cree First Nation, and Eriel Tchekwie Deranger, also of the Athabasca Chipewyan.

All five will be attending the climate action camp taking place on a patch of common land in London called Blackheath. This location has a history of protest and dissent that dates back to the 14th century, said Jess Worth, a United Kingdom communications organizer for activist groups.

About 1,500 people from around the U. K. will camp there from Aug. 27 to Sept. 2, holding workshops on topics such as climate science, carbon trading, and activist tactics.

"We decided to camp in London because we want to make the links between the economic crisis and the climate crisis, and we believe both are being driven by the banks and the corporations and the government, which have their headquarters in London," Worth said.

People in the U. K. don't know anything about the oilsands, even though they're one of the most destructive projects in the world, she said.

"So if we're going to try to end investment in the tarsands, we can't just work in Canada, we've got to work in the U. K as well."

Worth said that means putting pressure on oil companies such as BP and the Royal Bank of Scotland.

"The tarsands are happening in Canada but they're very much being driven in London."

The Canadian delegation is trying to raise awareness about the oilsands, the scale of the project and the climate implications, and it should start getting action taken against the companies involved, Worth said.

BP Canada declined to comment, directing a request to their London office, which could not be reached.

Poitras said there are a lot of foreign companies involved in oilsands development. "I think the fact we do come to these countries and raise awareness, informs people about the issues and concerns that are not readily made available by the governments of Alberta or Canada in their promotion of the tarsands internationally," he said.

The Canada West Foundation, which tracks the message going out about oilsands development in traditional and Internet media, noted that environmental coverage of the oilsands in July was overwhelmingly negative.

hbrooymans@thejournal.canwest.com.

© Copyright (c) The Edmonton Journal

Natural Gas Markets Headed for A Crash?

G. Allen Brooks, Managing Partner
Parks Paton Hoepfl & Brown
Rigzone
Tuesday, August 18, 2009

Natural gas prices after rallying on surprisingly strong labor market news have retreated in recent days as the prospect of full storage suggests the industry will be forced to curtail production unless demand picks up. At the end of July, natural gas in storage was almost 3.1 trillion cubic feet (Tcf), or about 25% above the 5-year average for volumes at this time of year. Estimates of full storage capacity range from 3.7 Tcf to 4.1 Tcf. At the date of this report from the Energy Information Administration (EIA), there were 10 weeks left to the storage injection season meaning that without a strong pick up in gas demand or a collapse in production, domestic gas producers are facing the eventuality of all having to curtail their production. When that happens, we should expect a meaningful drop in natural gas prices.

This industry-wide predicament was highlighted by Aubrey McClendon, CEO of Chesapeake Energy (CHK-NYSE) on his company's earnings conference call. Mr. McClendon, the poster child for aggressive gas production management during periods of weak gas prices, announced his company was not planning to curtail production since it expected storage to max out and thus they, along with all other producers, would be forced to shut in flowing gas volumes. For the first time, Chesapeake was not about to exhibit discipline in supporting gas prices for the benefit of producers who did not curtail their production. Does this suggest that leaders of the natural gas industry are prepared to ignore production economics to demonstrate a point to their fellow producers?

We have been watching and writing about the travails of the domestic gas business as the collapse in the drilling rig count does not seem to have dented gas production as everyone assumed. Since we last opined on the gas market, the Energy Information Administration (EIA) has released its monthly gas production estimates gleaned from their Form 914 survey of operators. These surveys, reportedly providing the industry with more accurate production data, started in 2005. The only problem is that the data is still dated as the latest monthly estimated production volume figure released was for May, some 60 days old.

The May 914 gas production was 62.84 billion cubic feet per day (Bcf/d), down from the revised April monthly data showing production of 63.35 Bcf/d. Many analysts, gas producing company executives and forecasters jumped on this decline as confirmation the long-anticipated gas production decline was underway. On closer examination, however, we can't be totally sure because there have been a number of other recent months when the initial monthly gas production estimate was revised lower. The initial May production estimate now is virtually identical to the revised December 2008 estimate.

The initial gas production estimate for April was revised down, but only from 63.37 Bcf/d to 63.35 Bcf/d. The revised April production estimate was down from the March revised figure by approximately 200 million cubic feet per day (MMcf/d), but it was essentially flat with the revised February production estimate of 63.58 Bcf/d. Can we take solace in the May production estimate decline? Is the recent monthly revision pattern being reduced a sign that when the May estimate is revised it too will show even lower production?

Since January 2005, there have been 52 revisions to the initial monthly production estimate. One revision showed no change. Of the remaining revisions, 33 were higher than the initial estimate and 18 were lower. Increased estimates were made nearly two-thirds of the time. Admittedly, there were stretches when the revisions were always up, just as there were stretches when they were all lower. At the moment, we appear to be in a period marked by mostly lower revisions, but we can't find any rhyme or reason why historical patterns of revisions shifted from mostly up to down or vice a versa.

Given the data history showing such a strong bias in favor of increased monthly production estimate revisions, we remain skeptical in calling for a further reduction for May's initial estimate.

The other concern we have had about the gas production scenario is the developments in the drilling rig market. We, along with everyone else, watched with horror last fall as the domestic drilling rig business entered a freefall. We and others have wrestled with determining exactly how far down the rig count would go in this market correction and when it might bottom. More recently we have begun focusing on the pace and shape of the rig count's recovery.

One aspect of the drilling industry decline that has been of particular significance for the gas business has been the difference in the type of drilling rigs that were being laid down. This interest has gained significance by the emergence of the gas-shale plays. Data has shown that wells drilled horizontally in these gas-shales have tended to be more prolific than wells drilled vertically. The guiding principal behind the significant initial production volumes coming from gasshale wells has been the successful marriage of horizontal drilling technology with improved formation fracturing capability. Drillers have been able to rapidly drill long lateral well sections in the heart of many of the gas-rich formations. Well stimulation technology has enabled the development of multiple stage fracturing applications within the same well bore. Together these technologies have produced gas wells with initial production volumes multiples of conventionally drilled and completed gas well volumes.

We showed in our last Musings drilling and production data for Fayetteville gas shale wells derived from Southwestern Energy's (SWN-NYSE) financial reports. The data, covering a two-year period since early 2007, showed significant progress in drilling time, drilling performance and well production. The length of time required to drill the wells fell from 20 days to 12 while the lateral distance drilled increased 84% to almost 3,900 feet. At the same time, the 30-day average production rate grew from 1,006 MMcf/d to 2,373 MMcf/d.

Given the growing importance to the nation's production of natural gas from wells drilled horizontally, we examined overall gas production figures versus measures of drilling rig activity. When gas production is paired with gas-oriented drilling rigs, one sees a dramatic fall-off in rigs since last fall with barely any movement in the Form 194 monthly gas production volumes so far this year, based on the initial monthly production estimate.

On the other hand, if we match the same Form 914 gas production volumes against the number of active horizontal rigs, we also are hard pressed to see any impact from the downturn in drilling.

On the other hand, if we plot the percentage of all rigs drilling horizontally, there is a pattern of a steady increase as gas production increased and as it is holding steady now.

While we were wrestling with this data, we came across an interesting article by Arthur Berman published in World Oil and republished by the Association for the Study of Peak Oil in its latest newsletter. In the article, Mr. Berman re-analyzed well production data from the Barnett Shale, the initial stimulus for the gas-shale drilling explosion. He updated the data from the roughly 2,000 horizontal wells that he initially studied two years ago. Based on this new study of well performance, he concluded the following points: there is little correlation between the initial production rate and the well's ultimate recoverable reserves; the life of average well production is shorter than predicted; the volume of commerciallyrecoverable gas has been over-stated; core areas of the play do not provide higher recoverable reserves; recoverable reserves from horizontal wells are no greater than reserves in vertical wells; and average well performance has decreased consistently since 2003 for horizontal wells.

The key finding of the study, and a point that will hearten those who are arguing that the fall-off in gas production is imminent due to the drilling collapse, is that the overall ultimate recoverable reserves from horizontal wells decreased by 30% from Mr. Berman's earlier projection. Additionally, he found that the average ultimate recoverable reserve estimate per well fell from 1.24 Bcf to 0.84 Bcf. These findings reflect the fact that "most wells do not maintain the hyperbolic decline projection indicated from their first months or years of production." What Mr. Berman found was that wells experienced an abrupt negative departure from the hyperbolic decline as early as 12-18 months, but more likely in the fourth of fifth year of the well's production. This conclusion may temper the expectation of a significant fall-off in gas production given the drilling rig cutback.

What Mr. Berman discovered in updating his study was that the decline curves are rapid and more severe than previously thought, so the ultimate amount of reserves recovered from producing wells is less than originally thought. For those who believe in the longterm positive outlook for the oil service industry, this finding is highly supportive. On the other hand, the fact that these gas wells don't fall off their hyperbolic decline curves as quickly as some people have thought (or hoped for) may signal that the domestic land rig count might experience another downturn when natural gas prices hit the wall as gas storage capacity fills to the brim. Or possibly the rig count will experience a much longer and more gradual recovery than currently expected.

Additional findings from Mr. Berman's study point to less favorable production economics from horizontal wells. Mr. Berman focused a part of his study on the wells in the "sweet" spot of the Barnett formation, or those wells located in Tarrant and Johnson counties in and around Ft. Worth, Texas. This area comprises about 9.5 million acres. What he found was that this sweet spot did not produce appreciably higher ultimate recoverable reserves per well than the overall play. Horizontal wells only resulted in about a 31% improvement in reserves recovered compared to their 2.5-times greater cost; not a positive for profitability. This conclusion suggests that many of the claims about low costs associated with the gasshale plays may prove inaccurate. According to Mr. Berman, "If every operator in the Barnett Shale was hedged at a netback gas price of $8/Mcf, only 31% of horizontal wells would break even or make money. At $6/Mcf, only 15% of wells would reach this commercial threshold." Does this analysis suggest that many of the gas producers are deluding themselves about how successful they are progressing in developing gas shales? Will the new gas-shale plays really have better economics? Are producers who suggest they have superior acreage positions and better technology really exceptional? Maybe they are all citizens of Garrison Keillor's Lake Wobegon where everyone is "above average."

http://www.rigzone.com/news/article.asp?a_id=79414

Is It Possible to Have Sub $4/Mcf Gas for Five Years?

by G. Allen Brooks, Managing Director
Parks Paton Hoepfl & Brown
Rigzone
Tuesday, August 04, 2009

Two weeks ago we attended a presentation at the Petroleum Club where Jim Simpson of BENTEK Energy, LLC, a natural gas oriented analytics firm, presented his case for sub $4 per thousand cubic feet (Mcf) natural gas prices through 2010. His audience at the Houston Producers Forum consisted of 160 energy and financial executives. Following his presentation and in response to the first question from the audience, he dismissed the likelihood this distressed price scenario would last for 10 years as low gas prices did throughout the 1990s, but he did say it was possible the low price could last five years.

If that answer wasn't depressing enough, he responded to the second question about the impact of Exxon's Horn River gas discoveries in Canada on the U.S. market by saying he could not rule out the possibility of sub $3/Mcf natural gas prices for a period of time. Following the second question no one in the audience ventured another - possibly out of fear that they would be bidding down the estimate of future gas prices. Stop while you're ahead seemed to be the mantra. As the moderator thanked the presenter, the shell-shocked audience began to drift out of the dining room. The only missing ingredient among the darkness of the room and the dark mood of the audience was a funeral dirge playing in the background.

Is it possible that natural gas prices might never recover to their lofty levels of earlier this year (five years is virtually a lifetime for most investors)? On the other hand, one can rightly ask: What does Mr. Simpson know? His is only a forecast and we know the spotty record of energy price forecasters. He did, however, bring some telling data and insights that must be considered, but in the end a forecast is a forecast and it depends on critical assumptions, one being that current market conditions and company actions continue as they have in the past, assumptions that become suspect when dealing with energy markets.

In light of the surge in unconventional natural gas production and weak demand fundamentals, natural gas prices have been depressed throughout 2009 despite crude oil prices rallying back to almost half of their historic high of last July. Mr. Simpson's analysis examined changes in natural gas supply and demand and how successful development of the new unconventional gas-shale resources has created a significant oversupply that is depressing current gas prices. Part of the problem plaguing natural gas as Mr. Simpson pointed out is geography - the location of new gas supplies and gas consuming markets given transportation capacity limitations for moving the growing supply volumes.

Mr. Simpson explained the problem with a chart showing the total capacity of all pipelines out of the Southeast/Gulf Coast region that has been fixed at 23 Bcf/d for a number of years. He then showed how net pipeline outflows have grown over time trimming the unutilized capacity each winter season. The production flows were defined as regional production plus inbound flows from other basins plus storage withdrawals and LNG imports minus intraregional gas demand and storage injections. From the winter of 2005-6 to last winter, the nominal surplus pipeline capacity has shrunk from 7.5 Bcf/d to 3.5 Bcf/d, or by more than half. As gas shale production in this region and/or LNG shipments continues to increase, we can expect a further shrinking of available pipeline capacity putting the brakes on supply growth. Will those brakes limit western gas inflows to the region, LNG shipments or gas-shale production growth?

In a nutshell, Mr. Simpson's analysis is that falling natural gas demand coupled with rising gas supplies have placed gas producers in a box. The box is caused by a lack of adequate long-haul pipeline capacity in the geographic region spanning from East Texas to the Texas Gulf Coast and across Louisiana to Mississippi (an area referred to as an "I"). This capacity constraint restricts more costly gas supplies located west of the pipelines' terminus points because the market is adequately served by cheaper gas volumes. Not only are more expensive western gas supplies fighting cheaper shale-gas production for access to the long-haul pipelines and the consumer markets in the Northeast, Midwest and Southeast regions of the country, but they also are competing with Gulf of Mexico gas and liquefied natural gas (LNG) supplies arriving from overseas markets.

Compounding the gas producers' problem is that current natural gas prices are below finding and development costs for many of the traditional western gas basins, making it difficult for them to compete for markets. Gas-shale basins have evolved into real estate and engineering plays in contrast to exploration plays. The ubiquitous nature of natural gas shales in this country has reduced the need for exploration; witness the collapse of the open-hole wireline logging market in the United States. The key for gas-shale profitability is to assemble as much prime acreage (that which possesses the thickest gas seams that can be easily exploited) and figure out how to drill, complete and produce the wells at the lowest cost.

Another advantage for many of the gas shales is that they are located either within the pipeline "I" or immediately adjacent. This gives them a location advantage and reduces the transportation cost. In addition, some of newly developing gas-shale plays are situated east of the pipeline terminus points allowing them access as the lines move north or east. At the root of the supply problem, however, is that the gas-shale wells are proving to be highly prolific resulting in low gas costs, even below currently weak gas prices, which further encourages their development. The growth of unconventional gas supplies is slowly displacing conventional natural gas production in this country.

Producers of unconventional gas supplies have been successful in reducing meaningfully their finding and development cost in recent months. Some of the cost savings have come from the oversupply of oilfield equipment and services that has contributed to lower service company prices, while continued technological improvements in accessing and extracting the gas from these challenging formations have also contributed.

We have used several of the slides from Mr. Simpson's presentation to further explain his argument. In addition, we have updated one critical slide he used to demonstrate the impact of development efficiencies for gas-shale producers. The key assumption in Mr. Simpson's analysis is the fall in natural gas demand, which he estimates has shrunk by 1.9 billion cubic feet per day (Bcf/d). The recession-induced consumption declines among industrial and commercial customers and reduced gas use by residential users was offset somewhat by higher natural gas use to generate electricity.

On the supply side, Canadian natural gas imports into the U.S. are off by approximately 1.4 Bcf/d, while LNG imports are higher by 0.3 Bcf/d. Mr. Simpson estimates that domestic natural gas production is higher by 2.0 Bcf/d, which is consistent with most other estimates. The net increase in gas supplies of 0.9 Bcf/d, when combined with the 1.9 Bcf/d demand fall, means the gap between gas supply and gas demand has grown to 2.8 Bcf/d. That gap represents approximately 4.5% of annual natural gas consumption based on 2008's total consumption of 23.2 trillion cubic feet, or roughly 63.6 Bcf/d. Can this gap be closed?

In Mr. Simpson's estimation closing this gap will prove difficult. The challenge is due to the rapidly growing output from gas-shale basins, which is driven by their low development costs. Mr. Simpson argues that based on data his firm has access to, which is essentially daily production flows into pipelines, despite the significant drop in gasdirected drilling, production has not fallen off commensurately. We have re-created the essence of a slide Mr. Simpson used that showed the total U.S. rig count versus production, which he defined as gross gas withdrawals. One difference is that we elected to use the Baker Hughes gas-directed rig count rather than the total rig count. If we simply used the Energy Information Administration's (EIA) data on monthly gross gas withdrawals, our daily numbers came out much higher than on Mr. Simpson's slide. We then removed the volume of gas the EIA says is used for repressuring fields. Since that data is published with a long lag time, we calculated the average daily re-injected volumes for 2006 and 2007 and applied this average to the gross withdrawal estimates. When we plotted the results, our gross gas withdrawal estimates for 2009 showed more volatility than Mr. Simpson's chart.

One might argue the recent monthly gross gas withdrawal declines reflect production responses to the dramatic decline in gas drilling we have experienced so far this year. Others might see the monthly fluctuations as too modest to assume a trend change and thus argue that gas production is essentially flat. This was Mr. Simpson's argument, and he said he based his conclusion on data his firm gets daily. Since we don't have access to his data, or know exactly where it comes from, we cannot explain the discrepancy between the two charts. What we can say about our chart is that if production has begun a downturn, it required a huge drop in the gas-directed drilling to move the needle. Of course, it is possible the monthly data variations are the result of producers shutting-in gas production due to low prices.

There were two other aspects to Mr. Simpson's analysis about the lack of production response to the falling rig count. First was the drilling efficiency improvement impact on production growth. Secondly, the improved economics for gas-shale wells due to lower total development expenditures versus increased total production. Fewer wells and greater initial production, even with higher well costs, has translated into improved economics.

To demonstrate his point, Mr. Simpson showed a slide with data on drilling and production in the Fayetteville gas shale formation taken from the 10-Q reports of Southwestern Energy Company (SWNNYSE) for the first quarter of 2007, the first quarter of 2008 and the fourth quarter of 2008. We have updated the data through the first quarter of 2009, which not only further supported Mr. Simpson's observations, but also added some additional insight. A crucial point in the Southwestern Energy data is the dramatic reduction in the time required to drill the wells even as their average lateral length increased. Additionally, the wells are showing progressively greater average production during their first 30 days of operation.

The improved drilling performance has slowed the pace of cost increases for these Fayetteville wells. With dramatic improvement in initial production additions per rig per year, the improving profitability of these gas shale wells is clear and helps explain why producers such as Southwestern Energy are inclined to continue drilling these highly profitable wells.

When one examines the data for the 30-day average production rate per well and the IP additions per rig per year, there was a noticeable decline between the fourth quarter of 2008 and the first quarter of 2009. Southwestern Energy explained this quarterly variance as due to the delay in the expansion of the Boardwalk Pipeline that caused the company to develop a backlog of finished wells that could not be hooked up upon completion. When the pipeline expansion was completed, Southwestern Energy commenced hooking up the backlogged-wells based on the wells' productive volumes. Therefore, the 2007 fourth quarter benefitted from more high-flow-rate wells beginning production as some lower-volume producing wells drilled in the quarter were shifted into 2009 for hookup.

To demonstrate this point, Southwestern Energy detailed its monthly well performance. The initial production for wells hooked up in January and February 2009 was around 2,800 MMcf/d in contrast to the March production rate that was in excess of 3,300 Mmcf/d and the estimated rate in April (based on data for the first half of the month) of nearly 3,800 Mmcf/d. When one annualizes the production gains it becomes clear that the historic trend in initial well productivity and the IP additions per rig per year would have continued had wells been hooked up as they completed during the fourth quarter of 2008 and the first quarter of 2009, rather than being shifted around.

The main message from Mr. Simpson's analysis is that the efficiency performance of gas-shale producers will keep them drilling and producing. The net impact is that their development costs are falling and, in many cases, are below current spot gas prices and certainly below the prices suggested by the forward strip for natural gas prices. These trends will continue to put pressure on the more costly western gas basins, especially when it comes to seeking pipeline access. Add into this mix the potential for additional LNG volumes at what can be very low prices and more Canadian gas imports as a result of that country's storage capacity rapidly filling, we could see more downward pressure on natural gas prices.

Countering the negative forecast for natural gas prices, the analysts at Bernstein Research recently issued a report arguing that the base production of U.S. natural gas is declining at an annual pace of 30% in 2009. They believe that if the U.S. gas rig count remains flat for the balance of this year, gas production from December 2008 to December 2009 will be down by 10.5%, implying in their view a switch from an oversupply of 1-2 Bcf/d to an undersupply of 4-5 Bcf/d. Since they believe gas supply will decline sharply in the summer months, they expect gas prices to rise during the second half of 2009.

The firm's analysis is based on measuring the increase in the annual decline rate for natural gas wells and the contribution to production from new well drilling. The challenge in any analysis of the natural gas market is to understand the contribution from the unconventional gas shales. The Bernstein analysis begins with the EIA's chart showing the relative contribution to total natural gas supply in the U.S. from conventional onshore, unconventional onshore and offshore gas production. The growing contribution from onshore unconventional supplies is clear.

When production is examined on an annual basis it becomes clear that the domestic gas industry is facing an accelerating decline rate. This means gas producers must either drill more wells per year, assuming they continue to find the same size producing wells, or they need to find wells with greater production. Therein lays the great attraction with the gas-shale reservoirs around the country.

Next they demonstrated that gas supply in the U.S. has become a real-time drilling issue. The chart showing the percentage of gas produced from wells drilled in the previous three years clearly demonstrates that conclusion. In fact, the last two years show a sharp increase in the trend reflecting the explosion in gas-shale drilling and production.

Equally important to understand about gas-shale production is not only its significant initial well production but also its rapid depletion. As the Bernstein analysis shows, non-horizontal gas wells tend to have about 45% decline rate in the first year while horizontal wells experience about a 62% rate, based on the data for 2007 and 2008. This means gas producers are on a sharply upward sloping treadmill of drilling if they wish to sustain let alone increase production.

In order to estimate how much additional gas supply can come from drilling this year, the Bernstein analysts examined the contribution to 2007 gas supply additions by the type of well drilled. What their analysis showed was that vertical wells drilled the bulk of all gas wells drilled that year and added the greatest share of volume. What is noticeable about the data, however, is the relative contribution per well by the various wells drilled. Offshore wells added the most gas supply per well by a wide margin, but both horizontal and directional onshore wells contributed more than twice that of vertical onshore wells.

Using the 2007 gas volume contributions by well type, the Bernstein analysts then moved on to see how much additional gas supply could come from drilling activity this year. They assumed there would be no change to the current rig count for the balance of the year. They did assume that because of the industry downturn, rigs drilling this year would be more efficient and better prospects would be drilled. This led them to assume an increase in the wells per rig that would be drilled and in the average December contribution per new well. Based on those assumptions and analysis below, the Bernstein analysts calculate that there will be a 10.5% reduction in production between December 2007 and December 2009.

We have one issue with the Bernstein analysis: why do horizontal land rigs and wells not experience the same improvements as the vertical and directional categories? If we grant horizontal the same improvement total December volumes are 58.05 Bcf/d, or only down 1.3% from the December 2007 volumes. That one change in assumptions makes a huge change in the conclusion.

The issue of the gas futures price trend recently has been highlighted by a growing debate over whether greater controls should be placed on the futures trading market in an effort to restrain "speculators" from driving prices higher. While the possibility of tighter regulations in the commodity futures market is mostly focused on crude oil, any changes in the regulation of traders will impact all U.S. commodity markets.

The U.S. Natural Gas Fund (UNG-NYSE), a mutual fund that enables individuals to invest in natural gas futures, has been

questioned about its role in accentuating gas futures price moves due to its size. In a recent 8-K filing, UNG produced a chart showing the funds' growth, i.e., increase in futures contracts held as natural gas futures prices have fallen. UNG is using this chart to help dispel government attempts to put more restrictive limits on the number of futures contracts that traders, i.e., the fund, can hold.

The larger issue raised by UNG's price and holdings chart is whether the fund has actually supported natural gas prices at higher levels than they would have traded absent the fund buying activity. One clearly sees that the dive in natural gas prices seemed to stop when the fund began to expand and gas prices have moved higher and stabilized as the fund grew even more. There is little doubt that natural gas has become identified as the best fuel to bridge the transition in energy eras for the United States from one dominated by "dirty" fuels to one marked by "cleaner" fuels so it is reasonable to expect increased investor interest.

So far this year, the disparity between the price-to-energy-value of crude oil to natural gas has been volatile, but for much of the year it has been above the average of the past 15 years. Today the disparity is at an all-time high. In expectation of increased demand for natural gas and the extreme price disparity, investors have embraced the "natural gas trade" - buy natural gas futures and sell crude oil futures. The heightened investor interest in this trade explains much of the UNG fund's growth this year. Intuitively the growth of the fund has supported natural gas futures prices at higher levels than supply/demand fundamentals would support.

Natural gas pricing this year may have sent the wrong signals to the E&P companies who were making decisions about drilling gas wells. There might have been a swifter and deeper gas-directed rig count fall-off this spring if gas prices had fallen faster and farther than they did. At current prices, producers drilling in most gas-shale basins are still making money. It would not have been the case if prices were lower. As a result, we may have entered an extended period of natural gas oversupply from sustained drilling despite low prices.

This realization may be behind comments by oilfield service company CEOs on their second quarter earnings conference calls about the pace of the industry recovery. Dave Lesar, Halliburton Companies' (HAL-NYSE) CEO characterized it this way, "Due to continued weakness in natural-gas demand ... we believe it is unlikely that there will be a meaningful recovery in natural gas prices and, consequently, drilling activity for the remainder of the year."

Our own view is that natural gas is in an extended period of low prices driven by a combination of weak gas demand due to the anemic economic recovery and continued gas supply growth from domestic production, Canadian imports and additional LNG deliveries. Like Mr. Simpson, we don't believe this will be a decadelong experience. Could it last five years? Possibly, but then again, no one knows. Absent a greater cutback in drilling and a more rapid falloff in production than we are currently seeing or a sharp upturn in gas-consumption, the domestic natural gas market may be in for an extended depressing period.

http://www.rigzone.com/news/article.asp?a_id=78944

Critics say work on power lines premature

COMMENT: As the Alberta government writes legislation to push transmission projects ahead, the BC government is similarly about to issue a special order to the BC Utilities Commission in response to its end-of-July rejection of BC Hydro's Long Term Acquisition Plan.

By Darcy Henton
Edmonton Journal
August 26, 2009

'A total disrespect for . . . legislative process'

A move by the Alberta government to authorize two companies to start work on controversial state-of-the-art north-south transmission lines in advance of approval by the Alberta Utilities Commission has sparked outrage from consumers.

Alberta Energy announced Tuesday that AltaLink and ATCO Electric may begin design work, environmental assessments, siting options and consultations for the proposed 500-KV direct current lines between Calgary and Edmonton.

But critics say the move is premature and they're unconvinced the two high-voltage lines are needed.

They say there must to be an independent assessment of the need for the lines before they are constructed because consumers will be stuck with the multibillion-dollar bill.

"It's outrageous," said Sheldon Fulton, executive director of the Independent Power Consumers Association of Alberta. "They're short-circuiting their own process. Nobody has demonstrated a need for these lines."

Fulton said the province "is not playing by anybody's rules."

Gary Holden, president of Calgary-based Enmax, says the Alberta Utilities Commission is much better qualified than the Conservative cabinet to make the decision on the size and scope of new transmission lines that will ultimately be paid for by consumers.

"We're in strong support of the Alberta Utilities Commission having direct and thorough control over the utility companies running amok with costs," he said. "To disenfranchise the Alberta Utilities Commission at a time when we probably need it the most goes against the quality of the regulatory framework we've been using the last five decades. We think consumers are in for a rough ride."

Holden says research by his company shows the amount of electricity being transmitted over the existing lines has actually dropped back to 2005 levels and the two "expensive" new lines are a massive overbuild.

He said Enmax is building three gas-fired electrical generating plants in the Calgary area that will further reduce the need for the lines.

"We keep bringing the north-south transfers down such that more transmission isn't needed at all," he said. "These are factual points that are yet to be considered and the place where they should be considered is at the Alberta Utilities Commission."

The Conservatives under Premier Ed Stelmach have introduced legislation to eliminate the legal requirement for a hearing to determine whether the lines are needed, but the bill won't be debated until the fall session of the legislature.

Critics have questioned whether the province even has the legal authority to launch the project before it uses its massive majority in the legislature to pass Bill 50.

"This is a total disrespect for the legislature and the legislative process," said Liberal MLA Hugh MacDonald.

But Alberta Energy spokesman Bob McManus says there's no connection between the companies being given the authority to start work and the bill before the House.

"This is separate and distinct from Bill 50," he said. "This is not an unusual practice. The preliminary work by the firms to go out and look at the potential routes and that sort of thing is routinely decided prior to needs hearings."

He said the projects have been identified by the Alberta Electric System Operator as critical in its 20-year plan and, the sooner the lines are built, the better for consumers.

"The benefit is people will continue to have reliable power past 2014," he said. "The cost if the projects don't go ahead could be problems providing safe, secure, reliable electricity for the entire province."

Joe Anglin, who heads a landowner group near Rimbey, accused the government of putting "the cart before the horse" by launching the project before passing the necessary legislation empowering it to do so.

"Everything they have done to this point is just farcical," he said.

He compared the scope of the project to building a congestion-free provincial road system with interchanges at every intersection instead of stop lights.

"It's uneconomical. You wouldn't do it with your road system and it doesn't make sense for the grid. We'll overbuild this thing and the public will pay through the nose for it."

Spokesmen for Epcor and Capital Power, which now operates Epcor's generating stations, applauded the move, saying construction of the lines is long overdue.

"New power transmission capacity is urgently needed in Alberta," said Epcor spokesman Tim le Riche. "No major transmission system additions have been made in Alberta for 20 years."

But Jim Wachowich, counsel for the Alberta Consumers Coalition, says the province needs to demonstrate to consumers why it needs two direct current lines when alternating current lines are cheaper. It also needs to explain why consumers are paying for lines that will likely be used to export power for the benefit of generators, he said.

"We're skeptical of them overbuilding the system and pre-building export capacity on the tab of the Alberta utility customer."

Fulton, whose association represents industrial power users, questioned why the projects were not put out to tender and the logic of how having two companies building separate lines would be cost efficient.

But officials with Altalink and ATCO said their costs will be scrutinized by the Alberta Utilities Commission and they will strive to build the lines on time and on budget.

"I know there will be a lot of angst with the dollar amount," said ATCO Electric president Sett Policicchio. "Our costs will get scrutinized by the interveners very closely."

© Copyright (c) The Calgary Herald

‘Peak Oil’ Is a Waste of Energy

By MICHAEL LYNCH
New York Times
August 24, 2009

REMEMBER “peak oil”? It’s the theory that geological scarcity will at some point make it impossible for global petroleum production to avoid falling, heralding the end of the oil age and, potentially, economic catastrophe. Well, just when we thought that the collapse in oil prices since last summer had put an end to such talk, along comes Fatih Birol, the top economist at the International Energy Agency, to insist that we’ll reach the peak moment in 10 years, a decade sooner than most previous predictions (although a few ardent pessimists believe the moment of no return has already come and gone).

Like many Malthusian beliefs, peak oil theory has been promoted by a motivated group of scientists and laymen who base their conclusions on poor analyses of data and misinterpretations of technical material. But because the news media and prominent figures like James Schlesinger, a former secretary of energy, and the oilman T. Boone Pickens have taken peak oil seriously, the public is understandably alarmed.

A careful examination of the facts shows that most arguments about peak oil are based on anecdotal information, vague references and ignorance of how the oil industry goes about finding fields and extracting petroleum. And this has been demonstrated over and over again: the founder of the Association for the Study of Peak Oil first claimed in 1989 that the peak had already been reached, and Mr. Schlesinger argued a decade earlier that production was unlikely to ever go much higher.

Mr. Birol isn’t the only one still worrying. One leading proponent of peak oil, the writer Paul Roberts, recently expressed shock to discover that the liquid coming out of the Ghawar Field in Saudi Arabia, the world’s largest known deposit, is around 35 percent water and rising. But this is hardly a concern — the buildup is caused by the Saudis pumping seawater into the field to keep pressure up and make extraction easier. The global average for water in oil field yields is estimated to be as high as 75 percent.

Another critic, a prominent consultant and investor named Matthew Simmons, has raised concerns over oil engineers using “fuzzy logic” to estimate reservoir holdings. But fuzzy logic is a programming method that has been used since I was in graduate school in situations where the factors are hazy and variable — everything from physical science to international relations — and its track record in oil geology has been quite good.

But those are just the latest arguments — for the most part the peak-oil crowd rests its case on three major claims: that the world is discovering only one barrel for every three or four produced; that political instability in oil-producing countries puts us at an unprecedented risk of having the spigots turned off; and that we have already used half of the two trillion barrels of oil that the earth contained.

Let’s take the rate-of-discovery argument first: it is a statement that reflects ignorance of industry terminology. When a new field is found, it is given a size estimate that indicates how much is thought to be recoverable at that point in time. But as years pass, the estimate is almost always revised upward, either because more pockets of oil are found in the field or because new technology makes it possible to extract oil that was previously unreachable. Yet because petroleum geologists don’t report that additional recoverable oil as “newly discovered,” the peak oil advocates tend to ignore it. In truth, the combination of new discoveries and revisions to size estimates of older fields has been keeping pace with production for many years.

A related argument — that the “easy oil” is gone and that extraction can only become more difficult and cost-ineffective — should be recognized as vague and irrelevant. Drillers in Persia a century ago certainly didn’t consider their work easy, and the mechanized, computerized industry of today is a far sight from 19th-century mule-drawn rigs. Hundreds of fields that produce “easy oil” today were once thought technologically unreachable.

The latest acorn in the discovery debate is a recent increase in the overall estimated rate at which production is declining in large oil fields. This is assumed to be the result of the “superstraw” technologies that have become dominant over the past decade, which can drain fields faster than ever. True, because quicker extraction causes the fluid pressure in the field to drop rapidly, the wells become less and less productive over time. But this declining return on individual wells doesn’t necessarily mean that whole fields are being cleaned out. As the Saudis have proved in recent years at Ghawar, additional investment — to find new deposits and drill new wells — can keep a field’s overall production from falling.

When their shaky claims on geology are exposed, the peak-oil advocates tend to argue that today’s geopolitical instability needs to be taken into consideration. But political risk is hardly new: a leading Communist labor organizer in the Baku oil industry in the early 1900s would later be known to the world as Josef Stalin.

When the large supply disruptions of 1973 and 1979 led to skyrocketing prices, nearly all oil experts said the underlying cause was resource scarcity and that prices would go ever higher in the future. The oil companies diversified their investments — Mobil even started buying up department stores! — and President Jimmy Carter pushed for the development of synthetic fuels like shale oil, arguing that markets were too myopic to realize the imminent need for substitutes. All sorts of policy wonks, energy consultants and Nobel-prize-winning economists jumped on the bandwagon to explain that prices would only go up — even though they had never done so historically. Prices instead proceeded to slide for two decades, rather as the tide ignored King Canute.

Just as, in the 1970s, it was the Arab oil embargo and the Iranian Revolution, today it is the invasion of Iraq and instability in Venezuela and Nigeria. But the solution, as ever, is for the industry to shift investment into new regions, and that’s what it is doing. Yet peak-oil advocates take advantage of the inevitable delay in bringing this new production on line to claim that global production is on an irreversible decline.

In the end, perhaps the most misleading claim of the peak-oil advocates is that the earth was endowed with only 2 trillion barrels of “recoverable” oil. Actually, the consensus among geologists is that there are some 10 trillion barrels out there. A century ago, only 10 percent of it was considered recoverable, but improvements in technology should allow us to recover some 35 percent — another 2.5 trillion barrels — in an economically viable way. And this doesn’t even include such potential sources as tar sands, which in time we may be able to efficiently tap.

Oil remains abundant, and the price will likely come down closer to the historical level of $30 a barrel as new supplies come forward in the deep waters off West Africa and Latin America, in East Africa, and perhaps in the Bakken oil shale fields of Montana and North Dakota. But that may not keep the Chicken Littles from convincing policymakers in Washington and elsewhere that oil, being finite, must increase in price. (That’s the logic that led the Carter administration to create the Synthetic Fuels Corporation, a $3 billion boondoggle that never produced a gallon of useable fuel.)

This is not to say that we shouldn’t keep looking for other cost-effective, low-pollution energy sources — why not broaden our options? But we can’t let the false threat of disappearing oil lead the government to throw money away on harebrained renewable energy schemes or impose unnecessary and expensive conservation measures on a public already struggling through tough economic times.

Michael Lynch, the former director for Asian energy and security at the Center for International Studies at the Massachusetts Institute of Technology, is an energy consultant.

Time to unleash seabed methane?

Anna Barnett
Climate Feedback
the climate change blog
August 21, 2009

Methane actively dissociating from a hydrate mound / National Energy Technology Lab

Following an enthusiastic Congressional testimony, Ray Boswell of the US Department of Energy's National Energy Technology Laboratory (NETL) has a commentary in Science on hydrates’ potential as an energy source. But methane hydrates are also making headlines this week as a worrying harbinger of climate change. Some scientists have warned that ocean warming could destabilize hydrates and send methane gas bubbling into the ocean. Now a team led by Graham Westbrook of the University of Birmingham has spotted over 250 such gas plumes near Svalbard, Norway - echoing a similar observation from a group in Siberia earlier this year.

Much of the released gas dissolves in the water column, but any portion that reaches the air could amplify warming.

By drilling for hydrates, could we wake a sleeping giant? Boswell doesn’t tackle this question head on, but he offers some relevant points.

First off, hydrates in the Arctic - where gas plumes have been seen - are hard to get at. Before they go messing with the permafrost lid that protects the vast northern stores of methane, prospectors will find more enticing targets, says Boswell. Specifically, it’s hydrates found in sandy deposits in the Gulf of Mexico that are raising hopes at NETL.

Hydrate-bearing sands were first spotted off Japan in 1999. By recent estimates the Gulf of Mexico holds 190 trillion cubic meters of natural gas in such sands - over 300 times the amount of gas the US burns annually. An April expedition to probe the Gulf's deposits found promising pockets of highly saturated hydrates. There are technical and economic hurdles to extracting this gas, says Boswell, but many could be overcome with existing technology. That's a big difference from the hydrates known a decade ago, which were dispersed across muddy fields or packed into solid mounds.

Methane from sandy hydrates may also be easier to control. Boswell writes:

These resevoirs are commonly buried many hundreds of meters below the sea floor and enclosed in a matrix of impermeable sediments that help to prevent the escape of released methane. The most prospective gas hydrate deposits are also those that are most effectively buffered from environmental change.

In other words, drillers are keen to avoid the escape of methane - they want to get it to customers who’ll burn it.

Speaking of which, does the world need another fossil fuel reservoir? Not if you’re hoping our supplies will run out in time to save the climate. But with the world facing dwindling oil reserves and a sluggish start on renewables, Boswell implies the gas could fill an important gap: “hydrates may offer an important ‘bridging’ fuel that will help ease the transition to the sustainable energy supplies of the future.”

the climate change blog

Natural-gas producers hoping for cold winter

COMMENT: This is kind of funny. Here we've got gas drillers drilling like carpenter ants on speed, and producers producing like broken fire hydrants and now they're complaining that the price isn't good enough. Here in BC, our government is putting every giveaway incentive in place to encourage even more profligate production of natural gas into a market that doesn't want any more.

Actually, maybe it's kind of sad.

Dave Cooper
The Province
August 23, 2009

With vast underground natural-gas storage cells almost full across North America months earlier than normal, producers hope for an early, cold winter to eat up some of the surplus.

And perhaps even a hurricane or two to hit the Gulf of Mexico and take some gas production off-line.

"It's a heck of a way to run a business, hoping for storms and cold weather," said Gary Leach, executive director of the Small Explorers and Producers of Canada.

Sagging consumption because of the recession and less air-conditioner use during a cool summer in the U. S. has killed demand. But until recently, the supply has been strong from existing gas fields and new shale-gas plays.

U.S. producers are pumping more than 66 billion cubic feet of natural gas each week into storage reservoirs -- largely depleted oil and gas deposits
-- which now hold more than three trillion cubic feet of gas. The total U.
S. capacity is estimated at about four TCF.

The situation is even more dramatic in Alberta, where producers have put almost 360 BCF into the 380 BCF of storage available here.

"We hit the 360 BCF in Alberta last year, and it was the highest figure ever. But we hit that in November, and the start of winter, not August,"
said Greg Stringham, a vice-president of the Canadian Association of Petroleum Producers. "Essentially we are full right now, even though drilling has really slowed and many firms are shutting in their production. And whatever can't go into storage has to go onto the market."

And that means months of oversupply and very low gas prices.

The spot price for natural gas in New York fell below $3 US per million BTUs and kept dropping Thursday, winding up at $2.94. The average home uses 120 Gj per year. That means there is enough natural gas in storage today in Alberta to supply 3.3 million homes.

Paul Amirault, senior vice-president of Niska Gas Storage, said his facilities in the Suffield and Countess areas of southern Alberta are, like most in North America, almost full. Niska rents storage space to producers. "If customers fill their space to 100 per cent and have more gas that they want to store, that's their problem. I've seen years when the capacity approaches full at the end of the injection season [in late fall] and the gas commodity price sees downward pressure until cold weather comes."

Natural gas was trading at less than $2 per GJ throughout the 1990s, but there is hope it will rise by next summer. Gas futures are trading at $6 for August 2010 in the U. S. -- much less than the $10 price peak in 2008.

While larger oil and gas companies have shut some of their gas fields, Leach says smaller producers don't always have that option because they need the cash flow to cover their operating costs.

New meter to crank up power bills

COMMENT: Section 64.04 of the 2008 Utilities Commission Amendment Act (Bill 15) says that BC Hydro "... must install and put into operation smart meters ... by the end of the 2012 calendar year"
http://leg.bc.ca/38th4th/3rd_read/gov15-3.htm

BC Hydro has information about its Smart Metering & Infrastructure Program on its website.

Tentative costs for the smart meters component is $480-$530 million, and the entire program may cost $930 million. Ahem. In answer to the question, "Which technology will be used?", BC Hydro says, "No decisions have been made yet as to which technologies may be deployed." So much for the comfort level with the early estimates.

And in answer to the impact on electricity rates, BC Hydro says, "... impact on electricity bills ... is unknown at this time .... However, we expect the rate impact to be neutral because of the realization of benefits expected." Feeling even more comfortable now.

As to the pros and cons, BC Hydro lists the benefits, again on its website.

There is great value in knowing with a lot more granularity about when and where electricity is used. Assuming that the information isn't locked up by distributors "for competitive reasons" as propietary, it enables policies that can make for more efficient use of energy. It enables distributors to more efficiently target energy not just to an expected load, but to a load they can closely monitor.

But then, there's the cost of the meters and the installation and the meter readers who are now redundant.

And all that capital fleeing the province to the manufacturer of the meters. Oh, sure, we could insist that the meters be manufactured in BC. With BC Hydro buying 1.2 million of them, that's gotta come close to the economies of scale that make manufacturing them here cost-effective - without even considering the economic multipliers and jobs that come as a result. But with the Canadian government's latest desperate offer to President Obama ("The Canadian government has offered the U.S. guaranteed access to the provinces’ public purchases in exchange for a quick waiver of Buy American provisions") hopes of being able to do that are shrinking fast.

If the costs jack up electricity rates, and how can an expenditure of nearly a billion dollars not affect rates, that should reduce consumption. But offsetting that is the matter of inelasticity of demand for electricity and the inability of those on limited fixed incomes to take the hit.

And so on. It doesn't look to me like there will be a clear winner on this one.

Here's one story, from Australia.

Leon Gettler
The Age, Australia
http://www.theage.com.au
August 23, 2009

HOUSEHOLDS face an average $263-a-year leap in electricity bills with the installation of new smart meters that begins in 10 days' time.

A study by the St Vincent de Paul Society says that with smart meters changing billing from a flat rate to one based on the time of use, average bills will rise by 35 per cent, or about $263 a year. For pensioners, the increase will be even bigger - 42 per cent, or an extra $254 a year.

"Some customers will financially benefit while others will be penalised,'' says the report, to be released tomorrow. ''As electricity is most expensive during the day from Monday to Friday, households comprising people that are at work during the day are most likely to benefit.

On the other hand, households with young children at home, the unemployed and age pensioners [those at home during the day] are most likely to be financially worse off."

St Vincent de Paul is concerned that suppliers could misuse the meters' capacity to turn off power, and even turn off individual appliances.

Although consumers could be offered discounts in exchange for allowing the supplier to switch off appliances such as air conditioners, the report says retailers could use it to intimidate late-paying customers, effectively "putting a choker on a household's energy supply".

The report, backed by the Brotherhood of St Laurence, the Victorian Council of Social Service and other charities, will be presented to federal and state governments and energy regulators this week.

It also warns that the Federal Government's emissions trading scheme will add $200 to power bills for the average Victorian household because so much of the state's electricity comes from brown coal.

"Combined, the underlying increase in energy costs [smart meters and ETS] and the potential cost impacts associated with tariff reallocations … may increase domestic energy bills [by] as much as $490 per annum."

Electricity retailers have already warned that they will need to raise prices because of new information technology systems and the need for more employees to process the extra information. Instead of four sets of readings a year from a household, they will get more than 17,500, at half-hour intervals.

Domenic Capomolla, chief executive officer of second-tier retailer Simply Energy, said bills could rise by more than $100 a year, possibly a lot more. "One hundred dollars to $150 is a conservative number,'' he said.

The smart meter roll-out, which begins on September 1, will take an estimated four years to cover the state's 2.6 million households and 300,000 small businesses.

The first meters will be placed in homes in Broadmeadows and Melbourne's northern suburbs by distributor Jemena. Spokesman Scott Parker said the smart meters provided a much better service.

Powercor, which covers the area from Werribee to the South Australian border, and Citipower, which focuses on the inner city, will begin installing in October.

Where electricity retailers now send someone out to read meters four times a year, smart meter technology monitors the electricity consumption of households and businesses remotely, doing this every 30 minutes.

The St Vincent de Paul report warns that this will create "winners and losers" and that the meters themselves would cost $80 a year.

A spokeswoman for Energy and Resources Minister Peter Batchelor disputed the $80 fee. She said the Australian Energy Regulator's draft determination suggested the annual meter charge would average about $53 in 2010 and $25 in 2011.

She rejected suggestions that smart meters would increase costs for those least able to afford it, pointing out that the Government had brought in legislation last year requiring the independent Essential Services Commission to monitor and report on electricity prices and products. She said the Government had the power to step in if it saw that prices were "unreasonable".

"There are a range of protections available to protect vulnerable people, such as pensioners, and ensure that they can afford electricity,'' she said.

''Retailers cannot, for example, just switch the power off if someone cannot afford to pay their bill. They must work with them to develop suitable alternatives. Anyone who has problems with their energy retail company can also call the energy ombudsman who can help negotiate an appropriate solution."

Oil spill threatens ocean as driller faces multimillion bill

COMMENT: From the It Would Never Happen Here Department

Josh Gordon
The Age, Australia
theage.com.au
August 23, 2009

The oil rig West Atlas leaks gas and oil 250 kilometres off the West Australian coast yesterday.

THE operator of an oil rig responsible for a massive oil leak off the West Australian coast will be forced to pay millions of dollars to clean up the spill, which authorities warn poses a serious threat to the environment.

The Australian Maritime Safety Authority yesterday launched a major clean-up operation as oil and gas continued to seep from a 1200-metre-deep well drilled by the West Atlas - an oil rig located 690 kilometres west of Darwin, 250 kilometres off the far north Kimberley coast and 150 kilometres south-east of Ashmore Reef.

The spill, which is eight nautical miles long and 30 metres wide, began early on Friday, forcing the evacuation of 69 workers to Darwin.

The company responsible for the rig, PTTEP Australasia, said the leak had not yet been brought under control.

PTTEP director Jose Martins said the leak was mainly gas, with a much lower oil content than when the spill began, but the related fire risk meant it was impossible to get back on to the platform.

''So that option for bringing the leak under control is ruled out for now,'' he said.

He said early reports that poisonous hydrogen sulphide gas had been released were wrong.

The company has called in gas and oil spill experts to help with the clean-up.

The Australian Maritime Safety Authority was put in charge of the operation after the size of the spill became apparent. It warned that the remote location of the rig would make the clean-up difficult.

Authority chief executive Graham Peachey said it was too early to determine the environmental impact, cost, or when the leak would be stopped.

''It hasn't been contained but the slick hasn't grown overnight, and indications are it is either breaking down or evaporating as quickly as it is leaking out of the ocean floor, but all of that has to be confirmed by the science,'' Mr Peachey said.

While the slick remained a long way offshore and had not moved closer to the coastline, Mr Peachey said the environmental threat remained serious.

''Oil on the water is not good for the environment. What we are trying to do is mitigate the risks to the environment and to do so as quickly as we can.''

The authority has chartered a Hercules aircraft from Singapore to spray the slick with about 50 tonnes of chemicals to help disperse the oil. Two more aircraft are on standby for support.

Mr Peachey said the clean-up would be expensive but he would not speculate on the final bill.

He said only that the authority had insisted that PTTEP agree to meet the cost.

''I'd be speculating, but you can imagine, we've got two aircraft on the spot, we've got personnel all round the north, we've got a Hercules chartered from Singapore, and we've got a lot of stockpile of dispersant moved up there, so this is going to cost a lot,'' he said.

One of the evacuated rig workers told ABC Radio his colleagues had detected a gas leak and observed bubbling around one of the platform's 1200-metre-deep drilling holes.

He said the rig had been evacuated after concerns that hydrogen sulphide was leaking from the area.

Australian Marine Conservation Society director Darren Kindleysides said there was huge potential for damage to unique marine biodiversity.

''With the west continuing to grow as a frontier for oil and gas exploration, this could become more regular,'' Mr Kindleysides said.

WA Greens senator and the party's marine spokeswoman, Rachel Siewert, accused the company of withholding information and said the clean-up plan was taking too long.

''We should be putting out emergency response equipment much closer to those sites so that we don't have to wait 24 hours,'' Senator Siewert said.

(US) Permit for Alberta Clipper Pipeline Issued

Office of the Spokesman
U.S. Dept of State
Washington, DC
August 20, 2009

By Executive Order, the State Department has been delegated authority from the president to receive applications for the construction, connection, operation and maintenance of facilities at the borders of the United States, including petroleum pipelines, and to issue or deny Presidential Permits for such facilities upon a National Interest Determination. A Presidential Permit application triggers an environmental review of the proposed project, under applicable environmental laws and regulations.

After considerable review and evaluation, on August 20, 2009, the Department issued a Presidential Permit to Enbridge Energy, Limited Partnership for the Alberta Clipper pipeline. In evaluating the Enbridge application, the Department worked in consultation with all relevant agencies and parties and with extensive public and stakeholder participation and outreach.

The Department found that the addition of crude oil pipeline capacity between Canada and the United States will advance a number of strategic interests of the United States. These included increasing the diversity of available supplies among the United States’ worldwide crude oil sources in a time of considerable political tension in other major oil producing countries and regions; shortening the transportation pathway for crude oil supplies; and increasing crude oil supplies from a major non-Organization of Petroleum Exporting Countries producer. Canada is a stable and reliable ally and trading partner of the United States, with which we have free trade agreements which augment the security of this energy supply.

Approval of the permit sends a positive economic signal, in a difficult economic period, about the future reliability and availability of a portion of United States’ energy imports, and in the immediate term, this shovel-ready project will provide construction jobs for workers in the United States.

The National Interest Determination took many factors into account, including greenhouse gas emissions. The administration believes the reduction of greenhouse gas emissions are best addressed through each country’s robust domestic policies and a strong international agreement.
The United States is taking unprecedented steps at home to transform how we produce and consume energy. The president is committed to reducing overall emissions and leading the global transition to a low-carbon economy.

The United States will continue to reduce reliance on oil through conservation and energy efficiency measures, such as the recently increased Corporate Average Fuel Economy (CAFE) standards, as well as through the pursuit of comprehensive climate legislation and an ambitious global agreement on climate change to include substantial emission reductions for both the United States and Canada.

The State Department will continue to work to ensure that both the United States and Canada take ambitious action to address climate change, and will cooperate with the Canadian government through the U.S.-Canada Clean Energy Dialogue, the pursuit of comprehensive climate legislation, the United Nations Framework Convention on Climate Change and other processes to reduce greenhouse gas emissions.

Additional information can be obtained at http://albertaclipper.state.gov

Download this media release from the State Dept

U.S. approves Alberta Clipper pipeline project

Enbridge says pipeline construction to start soon

Calgary — The United States approved Enbridge Inc. (ENB-T40.940.010.02%) 's $3.3-billion Alberta Clipper pipeline project Thursday, granting the project, which will deliver Canadian oil to U.S. refineries, a presidential permit, and raising the ire of some environmental groups.

The U.S. State Department said that allowing construction of the 450,000 barrel per day line serves U.S. interests by adding secure oil supplies from outside the OPEC nations at a time when political tensions in some producing regions threaten to interfere with oil shipments.

“The department found that the addition of crude oil pipeline capacity between Canada and the United States will advance a number of strategic interests of the United States,” it said in a statement.

The department also said construction of the line would create jobs for U.S. workers in what it called a difficult economic period.

Enbridge, which hopes to have the 1,600-kilometre line up and running by mid-2010, said it expects to begin construction soon, creating more than 3,000 U.S. jobs.

“We're pleased we've reached this latest milestone and are in the process of mobilizing well over 3,000 workers and will begin construction within hours or days,” said Denise Hamsher, a spokeswoman for Enbridge.

Most of the oil shipped on the line will come from Canadian oil sands producers, which have been under attack from some U.S. environmental groups and legislators for boosting greenhouse gas emissions because of expanding production in the oil sands – a Florida-sized region of northern Alberta that contains the largest oil reserves outside the Middle East.

The State Department said it took greenhouse gas emissions into account when deciding to issue the permit, saying that the issue is best addressed through the domestic policies of the United States and Canada and through international agreements.

However, some environmental groups said the State Department should have shown greater concern about rising greenhouse gas output, the impact of oil sands production on northern Alberta's boreal forest, and the impact of boosting imports of a fuel that they consider to be more polluting than conventionally produced oil.

“It means large amounts of more air pollution, large amounts of water pollution and extra (greenhouse gases) because more energy is required to convert this (heavy oil) into a refined, usable petroleum product,” said Sarah Burt, a lawyer at Earthjustice. “None of that was taken into account ... in determination of whether or not this would be in the national interest. That is problematic.”

Ms. Burt said Earthjustice, a non-profit law firm, planned to file suit next week in court in the Northern District of California asking that the State Department look at the cumulative environmental impact of building new pipelines from the oil sands. It will also seek a motion to keep Enbridge from starting construction while the case is heard.

Alberta Clipper pipeline approved for U.S. midwest

CALGARY — Enbridge Inc. is plowing ahead with construction work on the U.S. portion of its Alberta Clipper pipeline after receiving U.S.
approvals Wednesday to carry oilsands crude to the U.S. Midwest.

The U.S. State Department said Wednesday it has granted a permit to the Calgary-based pipeline company to build the U.S. portion of the line.

When the $3.7-billion pipeline is completed in about a year, it will ship 450,000 barrels of bitumen a day to Superior, Wis., with the potential to reach 800,000 barrels a day.

Construction work will begin immediately on the U.S. leg, expected to cost about $1.2 billion.

The Canadian segment of the Enbridge pipeline starts at Hardisty, Alta. — about 200 kilometres southeast of Edmonton — and goes through Saskatchewan and Manitoba to the U. S. border. It has been under construction since last summer.

"We're just really pleased we've reached this milestone, and we're in the process of mobilizing 3,000 construction workers," said Denise Hampsher, a Houston-based spokeswoman with Enbridge.

The pipeline has raised concerns on both sides of the border. Alberta critics raised concerns the line will potentially drain investment and upgrading jobs to the U.S., while American environmental groups argue the pipeline will bring greenhouse-gas intensive oilsands crude from Canada.

In a statement, the State Department said the approval sends a positive signal for both the economy and security of energy supply.

"The department found that the addition of crude oil pipeline capacity between Canada and the United States will advance a number of strategic interests," the statement said.

It also added that the reduction of greenhouse-gas emissions are "best addressed through each country's robust domestic policies and a strong international agreement."

But a group of U.S. environmental and native groups said they will challenge the approval in court, arguing the pipeline is not in that country's national interest because it would ultimately increase greenhouse-gas emissions.

"At a time when concern is growing about the national security threat posed by global warming, it doesn't make sense to open our gates to one of the dirtiest fuels on earth," Sierra Club executive director Carl Pope said in a statement.

"This pipeline will lock America into a dirty-energy infrastructure for years to come."

Canadian oilsands production is expected to climb by one million barrels a day to 2.2 million by 2015, even after a spate of project deferrals and cancellations over the past year as the recession took hold.

Enbridge already moves about two million barrels a day of conventional and unconventional crude on its pipelines to the U.S. Midwest and southern Ontario.

Enbridge shares fell 39 cents to $40.93 on the Toronto Stock Exchange on Thursday.

lschmidt@theherald.canwest.com

Is the Mackenzie Pipeline dead?

COMMENT: It's an urban myth (or a lie conjured by those who would benefit) that the initiative to build the Mackenzie Pipeline was ever driven by the market. The market has never, and never will, justify building that pipeline.

Offshore oil development in BC? The market won't drive that one either. It'll only happen with a whack of subsidy.

Peter Foster
National Post
August 18, 2009

New technology has revitalized old gas exploration areas and opened new ones, putting the economic logic of northern pipelines in doubt

Here’s a thorny question to pose as Prime Minister Stephen Harper moves about the Canadian North this week promoting Arctic sovereignty and use-it-or-lose it development: is the Mackenzie Valley natural gas pipeline dead?

A year ago, Imperial’s CEO Bruce March declared that he was as optimistic about Mackenzie development as he had been “in five or six years.” As recently as January, Minister of the Environment Jim Prentice was talking about getting “framework issues” resolved and moving forward. But whatever fiscal terms the government has offered, Imperial and its partners apparently don’t like them.

Sean Parnell, the successor to Sarah Palin as Governor of Alaska, has declared that pushing a pipeline for North Slope gas will be his top priority. That would kill the Mackenzie line dead. But the prospects for both Alaska and Mackenzie Delta gas are seriously threatened by major new gas finds — and even more major prospects — in the south.

Just as the whole economic logic of northern natural gas pipelines was undermined in the 1970s and 1980s by the removal of perverse legislation in the United States — which opened up exploration and production in the lower 48 — so the rug may be pulled from under northern gas again, only this time by technology.

Three years ago, natural gas production in the United States looked to be in permanent decline. But then, as a recent report from global intelligence company Stratfor notes, things changed big time. Production was boosted by high prices and cheap credit. Wellhead prices almost quadrupled between 2002 and 2008, but the really big development was in technology, specifically for cracking open “tight” natural gas formations.

“Hydraulic fracturing,” or “fracing,” involves injecting high pressure water into underground rock formations to shatter them. The resultant fissures are held open by granular matter pumped in with the water, allowing the gas to escape. Advances in this technology, which is in fact decades old, have, along with other techniques such as horizontal drilling, revitalized old exploration areas and opened up new ones. The Wall Street Journal recently noted that shale gas finds “have moved the U.S. natural-gas market from scarcity to abundance.”

The “Potential Gas Committee,” a group of academics and industry specialists linked to the Colorado School of Mines, earlier this year reported the biggest increase in natural-gas reserves in its 44-year history. Estimated U.S. reserves rose by a whopping one third, from 1,532 trillion cubic feet (TCF) in 2006 to 2,074 TCF in 2008.

The Stratfor study suggests that the United States might even become an exporter of natural gas, possibly even to Europe, which would for obvious reasons love sources of supply apart from Russia and Iran.

This is not such good news for Canada, however, which is the major supplier to the gas import market. Such developments help explain, however, why the Kitimat project in B.C., which was originally meant to facilitate imports of liquefied natural gas, is suddenly being reformulated as an export terminal.

Significantly, one of the most exciting new areas for shale gas is the Horn River Basin in northern British Columbia. EnCana executive vice-president Michael Graham has called the Horn River field possibly “the best shale play in North America.” Exxon Mobil is throwing itself into shale exploration not merely at areas such as Horn River but in Europe and elsewhere.

Development of this relatively high-priced non-conventional gas was brought to a grinding halt as prices slumped with the recession this past year. Nevertheless, the existence of these vast reserves places a natural price cap on the North American market. The question is whether that price makes Arctic gas too expensive. Since Exxon is Imperial Oil’s parent, and is also a direct partner in the Mackenzie pipeline, it understands better than anybody the impact of such developments on the viability of Arctic gas, but its lips are sealed tighter than one of those shale formations.

Currently, prices are hovering not far above US$3 a thousand cubic feet, a level which induces thoughts of suicide in gas producers, but the important price is the one that will prevail when northern pipelines come onstream. EnCana, North America’s leading gas producer, recently hauled down its long-term price expectations from the range of US$7 to US$8 per million British thermal units (BTUs) — which is approximately the same as a thousand cubic feet — to US$6 to US$7 per million BTUs, but others, such as Ron Brenneman, the retiring head of Petro-Canada, expect prices to stay below US$6. As he told the Financial Post’s Claudia Cattaneo recently “We know enough about these shale gas plays to understand the potential and the cost associated with development. Any time you see a little bump in natural-gas prices, which we will see periodically, you will see a corresponding increase in activity and, therefore, supply, and it will smooth itself out again. If you look at the forward curve right now for natural-gas prices… I think it’s going to stay under $6, and at that level you can’t justify conventional developments in Western Canada.”

Much less, presumably, in the Arctic. So it will be fascinating to hear if Mr. Harper even mentions pipelines this week.

Oil Industry Backs Protests of Emissions Bill

By CLIFFORD KRAUSS and JAD MOUAWAD
New York Times
August 18, 2009

A rally against legislation to set a limit on greenhouse gas emissions in Houston on Tuesday. Oil companies bused in their employees.

HOUSTON — Hard on the heels of the health care protests, another citizen movement seems to have sprung up, this one to oppose Washington’s attempts to tackle climate change. But behind the scenes, an industry with much at stake — Big Oil — is pulling the strings.

Hundreds of people packed a downtown theater here on Tuesday for a lunchtime rally that was as much a celebration of oil’s traditional role in the Texas way of life as it was a political protest against Washington’s energy policies, which many here fear will raise energy prices.

“Something we hold dear is in danger, and that’s our future,” said Bill Bailey, a rodeo announcer and local celebrity, who was the master of ceremonies at the hourlong rally.

Gaylene Reier, center, at the rally. Workers at her company, Anadarko Petroleum, were provided with buses to get there. (Karen Warren/Houston Chronicle, via Associated Press)

The event on Tuesday was organized by a group called Energy Citizens, which is backed by the American Petroleum Institute, the oil industry’s main trade group. Many of the people attending the demonstration were employees of oil companies who work in Houston and were bused from their workplaces.

This was the first of a series of about 20 rallies planned for Southern and oil-producing states to organize resistance to proposed legislation that would set a limit on emissions of heat-trapping gases, requiring many companies to buy emission permits. Participants described the system as an energy tax that would undermine the economy of Houston, the nation’s energy capital.

Mentions of the legislation, which narrowly passed the House in June, drew boos, but most of the rally was festive. A high school marching band played, hot dogs and hamburgers were served, a video featuring the country star Trace Adkins was shown, and hundreds of people wore yellow T-shirts with slogans like “Create American Jobs Don’t Export Them” and “I’ll Pass on $4 Gas.”

The buoyant atmosphere belied the billions of dollars at stake for the petroleum industry. Since the House passed the bill, oil executives have repeatedly complained that their industry would incur sharply higher costs, while federal subsidies would flow to coal-fired utilities and renewable energy programs.

“It’s just a sense of outrage and disappointment with the bill passed by the House,” said James T. Hackett, chief executive of Anadarko Petroleum, who attended the rally. He defended, as an environmental measure, the use of buses financed by oil companies and Energy Citizens to carry employees to the rally. “If we all drove in cars, it wouldn’t look good,” he said.

While polls show that a majority of Americans support efforts to tackle climate change, opposition to the climate bill from energy-intensive industries has become more vigorous in recent weeks. The Senate is expected to consider its own version of the bill at the end of September.

A public relations company hired by a pro-coal industry group, the American Coalition for Clean Coal Electricity, recently sent at least 58 fake letters opposing new climate laws to members of Congress. The letters, forged by the public relations company Bonner & Associates, purported to be from groups like the National Association for the Advancement of Colored People and Hispanic organizations.

Bonner & Associates has acknowledged the forgeries, blaming them on a temporary employee who was subsequently fired. The coal coalition has apologized for the fake letters and said it was cooperating with an investigation of the matter by a Congressional committee.

For its part, the oil industry plans to raise the pressure in coming weeks through its public rallies so that it can negotiate more favorable terms in the Senate than it got in the House. The strategy was outlined by the American Petroleum Institute in a memorandum sent to its members, which include Exxon Mobil, Chevron and ConocoPhillips. The memorandum, not meant for the public, was obtained by the environmental group Greenpeace last week.

“It’s a clear political hit campaign,” said Kert Davies, the research director at Greenpeace.

In the memorandum, the president and chief executive of the American Petroleum Institute, Jack N. Gerard, said that the aim of the rallies was to send a “loud message” to the Senate. He said the rallies should focus on higher energy costs and jobs. “It’s important that our views be heard,” Mr. Gerard wrote.

Cathy Landry, a spokeswoman for the American Petroleum Institute, confirmed the contents of the memorandum, but said that the rally was not strictly an institute event and that Energy Citizens included other organizations representing farm and other business interests.

The House bill seeks to reduce greenhouse gases in the United States by 83 percent by 2050 through a mechanism known as cap and trade, which would create carbon permits that could be bought and sold. President Obama initially wanted these permits to be entirely auctioned off, so that all industries would be on the same footing, but the sponsors of the bill agreed to hand out 85 percent of the permits free to ensure passage of the legislation.

The power sector, which accounts for about a third of the nation’s emissions, got 35.5 percent of the free allowances. Petroleum refiners, meanwhile, got 2.25 percent of these allowances, although the transportation sector accounts for about 40 percent of emissions. That means oil companies would have to buy many of their permits on the open market, and they contend that they would have to raise gasoline prices to do so.

But Daniel J. Weiss, a senior fellow at the Center for American Progress, a research and advocacy organization, said that refiners would be allowed to keep the value of the free allowances they received, while public utilities would be required to return the value of their permits to customers.

“There is a myth out there that this is a giveaway to utilities,” Mr. Weiss said. “It’s not true. The oil industry’s goal is to block or weaken efforts to tackle global warming.”

The rallies have opened a rift within the industry. Royal Dutch Shell, an initial supporter of climate legislation, said that it had told the institute that it would not participate in the rallies, although its employees would be free to attend if they wanted to. ConocoPhillips, meanwhile, has opposed the bill since its passage and, in a note on its Web site, encouraged employees to attend the rallies.

Since Mr. Obama’s election, the oil industry has lost some clout in Washington. The rally on Tuesday gave voice to the feeling among employees of oil companies that their industry was being battered.

“I experienced Carter’s war against the industry, and I’m tired of being pushed around,” said David H. Leland, a geological map maker for NFR Energy. “We provide a product for a reasonable price, and we’re going to be punished for doing a damn good job.”

Clifford Krauss reported from Houston, and Jad Mouawad from New York.

Earlier in sqwalk.com:
Oil lobby to fund campaign against Obama's climate change strategy

States weigh benefits, risks of drilling in parks

COMMENT: The pressure in the US to open up parks and other protected areas for oil and gas drilling is unrelenting, and mounting. The BC Liberals are already diving to the bottom of the barrel with low royalties and even more generous giveaway deals to get more drillers in the northeast.

I'm just sayin.

By JULIE CARR SMYTH
Associated Press
Google Media
17-Aug-2009

COLUMBUS, Ohio — State parks aren't just for hiking, camping and other recreation anymore. Increasingly, these lands are being used for oil and gas drilling as budget-strapped states seek new sources of revenue.

As they allow more energy exploration in state parks — in some cases by reversing previous bans — lawmakers are being met with resistance from environmentalists and park officials.

Opponents of the drilling say it raises troubling questions about acceptable uses of publicly shared land — even when new technology allows rigs positioned outside park boundaries to reach petroleum pockets deep beneath the parks by drilling horizontally.

Sean Logan, director of the Ohio Department of Natural Resources, said parks get 40 percent of their money from fees related to camping, boating, beach access and other recreational activities. If drilling affects the panoramas or the noise level, these other revenue sources could start suffering, he said.

Drilling is still barred in national parks. But the reversal of some state bans coincides with efforts to expand exploration in other previously off-limits locations: offshore in coastal states, near Aztec ruins in New Mexico and in some urban parks.

Arkansas has signed a lease allowing drilling to begin under Woolly Hollow State Park. Pennsylvania saw its first drilling on state park property this spring.

In July, a circuit court judge in West Virginia ruled against the state environmental protection agency's attempt to block drilling under Chief Logan State Park. The first well in Living Desert Zoo and Gardens State Park in Carlsbad, N.M., was drilled in 2007.

The U.S. Geologic Survey monitors oil and gas activity nationally, though no organization tracks drilling that falls within the boundary of state parks, or how much oil and gas can be pulled from that land.

In western New York, retiree Jay Wopperer is fighting a proposal to drill in Allegany State Park, 65,000 acres of forested valleys south of Buffalo.

"I don't oppose drilling," said Wopperer, of Clarence, N.Y., who has led the Audubon Society's bird hikes in Allegany for 10 years. "But there are plenty of other places to drill in western New York. This is the people's park."

To drill, roughly two acres are cleared of trees and vegetation. Gravel roads are also required to access drilling masts about 120 feet high. Producers have in some cases put mufflers on machinery and reduced other noises, but there are still trucks and other related sounds.

Backers say that wellheads and nature trails can coexist, in part because of new technology reduces the environmental footprint of drilling operations.

In Ohio's Salt Fork State Park, much of the work would be by directional drilling, a technique that involves entering the surface at one location, making an underground turn and tunneling sometimes for miles underground to reach oil or natural gas pockets.

"You probably wouldn't even notice the drilling rigs. It's very, very environmentally sensitive and, at the same time, would produce a huge amount of revenue," said state Sen. Keith Faber, who is pushing a proposal to allow the first-ever drilling in Ohio state parks.

A state committee puts Ohio's estimated take from new drilling as high as $5 million a year. Ohio, with 11 percent unemployment and among the worst foreclosure rates in the country, needs the cash to offset declining tax revenues.

Ohio is not alone.

According to the latest figures from the nonpartisan Center on Budget and Policy Priorities, state budgets face a combined $163 billion shortfall in fiscal year 2010 even after making billions in cuts.

The money from drilling won't cure state shortfalls, but every office is being asked to find new revenue or face cuts, including parks.

Arkansas parks director Greg Butts said his state received about $200,000 in initial bonus payments by signing the deal allowing natural gas directional drilling under Woolly Hollow, cradled in the Ozark foothills. The lease doesn't allow drilling on park property.

On land sitting above massive natural gas reserves like the Marcellus shale, which spreads over four states including Ohio, new drilling techniques have created a lot more opportunities for companies like Oklahoma City-based Chesapeake Energy Corp.

"In our home state, in fact, one of our larger royalty owners is the Oklahoma Department of Wildlife Conservation," said spokesman Jim Gipson. "Many public entities are seeing that there is significant opportunity to create economic value from natural gas resource development while simultaneously protecting the environment."

Some states have balked, with lawmakers in Kentucky and Ohio allowing state-park drilling proposals to die this year. Looking solely at proceeds from drilling, some say, is missing the bigger picture and the greater harm.

In Pennsylvania, however, a state ban on surface drilling in state parks was unable to thwart private drilling in Goddard State Park because the company, Pittsburgh-based Vista Resources, owns the mineral rights.

Most state park directors still see drilling as contrary to their mission of leaving the land as pristine as possible, said Philip McKnelly, executive director of the National Association of State Park Directors.

Once that line is crossed, park officials say, there is no going back.

Right now, there is a huge glut of natural gas because of the recession and the new drilling techniques. Prices have plunged as a result. There is apprehension from some park directors that with any economic rebound, the pressure to drill on public lands will only grow stronger.

Associated Press writers Stephen Majors in Columbus and news researcher Monika Mathur in New York contributed to this report.

Oil lobby to fund campaign against Obama's climate change strategy

COMMENT: We're sometimes castigated as paranoid, and mistrustful, told that the corporations (and governments) we most often find ourselves pitted against, may have different objectives than we do but at heart, are not evil and will not stoop to unethical behaviour. Well, countless times we are given evidence that these organizations, and unfortunately, the people who work for them, are unscrupulous, and will stoop very far indeed. I cite just three examples: Enron (Powerex did not have clean hands either), Weapons of Mass Destruction (my vote for the biggest lie of this decade), BC Rail-Basi-Virk- and the disappeared emails.

Now this...

Suzanne Goldenberg
US environment correspondent
guardian.co.uk
Friday 14 August 2009

Email from American Petroleum Institute outlines plan to create appearance of public opposition to Obama's climate and energy reform

The US oil and gas lobby are planning to stage public events to give the appearance of a groundswell of public opinion against legislation that is key to Barack Obama's climate change strategy, according to campaigners.

A key lobbying group will bankroll and organise 20 ''energy citizen'' rallies in 20 states. In an email obtained by Greenpeace, Jack Gerard, the president of the American Petroleum Institute (API), outlined what he called a "sensitive" plan to stage events during the August congressional recess to put a "human face" on opposition to climate and energy reform.

After the clamour over healthcare, the memo raises the possibility of a new round of protests against a key Obama issue.

"Our goal is to energise people and show them that they are not alone," said Cathy Landry, for API, who confirmed that the memo was authentic.

The email from Gerard lays out ambitious plans to stage a series of lunchtime rallies to try to shape the climate bill that was passed by the house in June and will come before the Senate in September. "We must move aggressively," it reads.

The API strategy also extends to a PR drive. Gerard cites polls to test the effectiveness of its arguments against climate change legislation. It offers up the "energy citizen" rallies as ready-made events, noting that allies – which include manufacturing and farm alliances as well as 400 oil and gas member organisations – will have to do little more than turn up.

"API will provide the up-front resources," the email said. "This includes contracting with a highly experienced events management company that has produced successful rallies for presidential campaigns."

However, it said member organisations should encourage employees to attend to command the attention of senators. "In the 11 states with an industry core, our member company local leadership – including your facility manager's commitment to provide significant attendance – is essential," said the email.

Greenpeace described the meetings as "astroturfing" – events intended to exert pressure on legislators by giving the impression of a groundswell of public opinion. Kert Davies, its research director, said: "It is the behind the scenes plan to disrupt the debate and weaken political support for climate regulation."

The rally sites were chosen to exert maximum pressure on Democrats in conservative areas. The API also included talking points for the rallies – including figures on the costs of energy reform that were refuted weeks ago by the congressional budget office.

The API drive also points to a possible fracturing of the US Climate Action Partnership (Uscap), a broad coalition of corporations and energy organisations which was instrumental in drafting the Waxman-Markey climate change bill that passed in the House of Representatives in June.

Passage of the legislation is seen as crucial to the prospects of getting the world to sign on to a climate change treaty at Copenhagen next December.

Five members of Uscap are also in API, including BP which said its employees were aware of the rallies. Conoco Phillips, which was also a member of the climate action partnership, has also turned against climate change, warning on its website that the legislation will put jobs at risk, and compromise America's energy security. The company is also advertising the energy rallies on its website, urging readers: "Make your voice heard."

However, Shell, also a member of both groups, said it did not support the rallies. Bill Tenner, a spokesman, said: "We are not participating."

Support lawmakers for escort tug efforts

COMMENT: Sorry, friends, this turned out to be a rather longer "comment" than usual. You may just want to skip to the article. Maybe not even that!

Support lawmakers for escort tug efforts

Stephen K. Lewis is president of Prince William Sound Regional Citizens Advisory Council. He lives in Seldovia.

We Alaskans have always fared best when our state leaders have put politics aside and pulled together for the common good. Examples range from the campaign for statehood, to the settlement of our Native peoples' land claims, to the effort to open up Prudhoe Bay and build the trans-Alaska pipeline.

The latest example of the spirit that has served Alaska so well is the effort by our state Legislature and congressional delegation to preserve the system of escort tugs that help protect Prince William Sound from oil spills.

Ever since the devastating Exxon Valdez spill two decades ago, each loaded oil tanker passing through the Sound has been accompanied by two escort tugs, ready and able to assist the tanker in a crisis or to begin the cleanup if the worst should happen.

But, because a key provision in federal law is about to sunset, this state-of-the-art safety system could be cut back or even eliminated altogether unless Congress acts to save it. Luckily for our state, its elected leaders have joined together in the effort to make sure that happens.

In March -- the month of the 20th anniversary of the Exxon spill -- both chambers of the Alaska Legislature unanimously passed a resolution calling on Congress to preserve the escort system. Alaska's governor followed up with a strong letter supporting the call.

In May, Sens. Lisa Murkowski and Mark Begich -- a Republican and a Democrat -- teamed up to introduce legislation that would require continuation of the double escorts. Rep. Don Young has been working through Democratic connections in the U.S. House to move similar legislation there.

This measure would not impose new financial burdens on industry; it would only make sure there is no relaxation of present standards and practices. It would only preserve what we have now in Prince William Sound: a world-class escort system to protect a world-class natural treasure from a repeat of the Exxon Valdez spill and the devastation it brought.

As an owner state, we have a duty to protect the extraordinary natural resources we hold in common. It is a duty that has been taken seriously by most of our state leaders over the years. All Alaskans should be proud of the latest example of our leaders once again pulling together when it counts the most.

I urge my fellow citizens of the 49th state to do as I will be doing: Supporting Sens. Murkowski and Begich, and Congressman Young, as they attempt to move this important legislation through Congress when it reconvenes at the end of this month.

Ms. MURKOWSKI: Mr. President, today I am introducing a bill, with my colleague from Alaska Senator Mark Begich, that will require all oil laden tankers in Prince William Sound to be ecorted by at least two towing vessels or other vessels considered appropriate by the Secretary of the Department of Homeland Security.

At 12:04 a.m. on March 24, 1989, the Exxon Valdez, carrying over 53 million gallons of crude oil, failed to turn back into the shipping lane after detouring to avoid ice, and ran aground on Bligh Reef. Alaskans will never forget that morning, waking up to hear about the worst oil spill and environmental disaster in U.S. history and living with the lasting impacts it has had on our State and residents.

The National Transportation Safety Board investigated the accident and determined probable causes for the accident. While it determined that it was primarily caused by human error of the captain and crew, it is my belief that we had also become complacent. It had been 12 years since we had begun to tanker oil out of Valdez and there had not been an incident. However, when the spill occurred, we became acutely aware of how woefully unprepared we were. The few prevention measures that were available were inadequate and the spill response and clean-up resources were seriously deficient. The oil eventually fouled some 1,300 miles of shoreline, stretching almost 500 miles, and covered an area of 11,000 square miles.

While the captain and crew were found at fault for the immediate cause of the spill, the incident also highlighted huge gaps in regulatory oversight of the oil industry. The response of Congress to the spill was passage of the Oil Spill Pollution Act of 1990 or OPA90. The law overhauled shipping regulations, imposed new liability on the industry, required detailed response plans and added extra safeguards for shipping in Prince William Sound. Since the law took effect, annual oil spills were greatly reduced and lawmakers, marine experts, the oil industry and environmentalists credit the law for major improvements in U.S. oil and shipping industries.

Oil spill prevention and response have been greatly improved in Prince William Sound since the passage of OPA90. The U.S. Coast Guard now monitors fully laden tankers all the way through Prince William Sound. Specially trained marine pilots ride the ships for 25 of the 70 mile journey through the Sound and there are weather criteria for safe navigation. Contingency plans, skimmers, dispersants, oil barges and containment booms are all now readily available. An advanced ice-detecting radar system is also in place to monitor the ice bergs that flow off of the mighty Columbia Glacier.

Two escort tugs accompany each tanker while passing through the Sound and are capable of assisting the tanker in the case of an emergency. This world class safety system recently saw the 11,000th fully loaded tanker safely escorted through Prince William Sound. It is estimated that if the Exxon Valdez would have been double-hulled, the amount of the spill would have been reduced by more than half. While double hulled tankers are a huge improvement over single hulls, they do not prevent oil spills.

The legislation that Senator Begich and I are introducing today will maintain the existing escort system in place for all tankers. Presently, the federal requirement that every loaded tanker be accompanied through the Sound by two tugs applies only to single-hulled tankers. Even though, right now, double-hulled tankers are escorted by two vessels, federal law does not require them to be. The last single hulled tanker in the Prince William Sound fleet is expected to be retired from service by August 2012 and our legislation ensures all double hulled tankers will aways be escorted by twotugs.

Although there have been a number of marine incidents and near misses since the Exxon Valdez Oil Spill in 1989, over the past 20 years, through the efforts of the U.S. Coast Guard, industry, the State of Alaska, and the Prince William Sound Citizens Advisory Council to implement the requirements of OPA 90, there have been no major oil spills. Today, as a result, the marine transportation safety system established for Prince William Sound is regarded as among the most effective in the world. A key reason for that accomplishment is, in part, because of the safety benefits resulting from having dual escort vessels transiting the Sound.

Full text of the Floor Statement for Dual Escort Vessels for Double Hulled Tankers in Prince William Sound, Alaska
Sen. Lisa Murkowski, U.S. Senate, May 14, 2009

Prince William Sound Citizen Advisory Council info and backgrounder on the Tanker Escort System

Alberta frets over U.S. climate change tariff bill

Renata D'Aliesio
Calgary Herald
August 13, 2009

CALGARY — The Alberta government is worried about a provision in a U.S.
climate change bill that would grant the president the power to slap tariffs on imports that have a carbon footprint larger than American-made goods.

In a recent interview with the Calgary Herald, Premier Ed Stelmach said the province is keeping close watch on the Clean Energy and Security Act, also known as the Waxman-Markey bill.

The proposed legislation was narrowly passed in June by the U.S. House of Representatives but it hasn't received full airing in the Senate.

"The thing that really bothers me . . . is that they're giving the president, presently the way it's written, executive powers of imposing administrative taxes, border adjustment taxes," Stelmach said.

"That is of great concern because we don't know under what conditions those taxes can be applied and on what goods or services."

Alberta's chief envoy in Washington, Gary Mar, said the Waxman-Markey bill is at the top of his priority list.

His office, along with prominent consultants hired by the province, has been lobbying U.S. politicians to moderate some of the "sharper edges" of the Waxman-Markey bill.

The United States is Canada's largest trading partner and Alberta's biggest customer.

"Alberta's standard of living depends much upon our ability to export, and the majority of those exports, by and large, are energy exports," Mar said. "So anything that has a potential to stop our oil or natural gas from crossing the border should be of great concern to Albertans."

Mar said it's difficult to predict what the Senate will do with the divisive legislation. It could pass the Waxman-Markey bill as is, make key changes, or the Senate could introduce an entirely different climate change package when it reconvenes in September.

The legislation could also be put off — and not dealt with until after an important UN climate change conference in December — due to heated debates over health care reform that have erupted in the United States, Mar noted.

If the bill passes unchanged and is signed into law, the U.S. would commit to trimming greenhouse gas emissions 17 per cent from the 2005 level by 2020 and 83 per cent by 2050. Ottawa's most recent targets are to reduce emissions 20 per cent below 2006's mark by 2020 and 60 to 70 per cent by 2050.

Federal Environment Minister Jim Prentice said Ottawa wants to harmonize its climate change polices with the United States, therefore reducing the threat of carbon tariffs on imports.

"At the end of the day, we're confident that Canada will have a commensurate environmental regime, and so those border adjustments won't penalize Canada," Prentice said in Calgary.

Rick Hyndman, the Canadian Association of Petroleum Producers' senior climate change policy adviser, agrees with Prentice's take on the proposed tariffs, which wouldn't come into effect until 2020.

"One is always concerned about protectionist sentiments," he said. "But the idea that Canada in 2020 would not be in the same treaty as the United States or that we wouldn't have policies . . . comparable to the United States strikes me as highly unlikely."

While Alberta's oilsands have been a lightning rod for environmentalists on both sides of the border, University of Alberta economist Andrew Leach suspects the development won't face the wrath of carbon tariffs.

Leach noted the Waxman-Markey bill doesn't target a country's carbon footprint, but instead focuses on a commercial sector's overall greenhouse gas impact, comparing its performance to the same industry in the United States.

"The U.S. doesn't have a competing oil sector," Leach said. "Canadian oil production isn't displacing domestic U.S. production."

Prentice has pledged to meet with all of the country's premiers before the UN climate conference. He has already met with Stelmach on the issue about five times and said they plan to meet again soon.

Meanwhile the Pembina Institute, an environmental think-tank, took aim Thursday at Ottawa's greenhouse gas offset program, saying the proposed system will "lead to a massive overstatement of emission cuts." (link)

The Alberta-based organization said there are at least six key loopholes in the scheme that grant credits for greenhouse gas reductions that would've occurred anyway. The system, Pembina argues, also allows for double counting of emission cuts.

"If these loopholes are not closed, Canada's actual emissions are likely to miss the targets in the government's upcoming regulations for Canadian industry by millions of tonnes," the think-tank said in a statement.

The Pembina Institute compared the currently proposed system to "lax financial accounting rules" that create fictional profits. The report also found the majority of offsets in Alberta's burgeoning system are coming from projects that would have likely occurred on their own.

rdaliesio@theherald.canwest.com

Accounting Loopholes in Government Proposal Risk a Massive Overstatement of Emission Cuts
Pembina Institute releases analysis of Environment Canada's draft offset system, 13-Aug-2009

NEB Reports Highest Pipeline Worker Injury Rate Since 2000

The NEB's annual Focus on Safety and Environment: A Comparative Analysis of Pipeline Performance 2000-2007 reports that nearly two out of every 100 pipeline workers suffered a serious workplace injury in 2007, almost double the seven-year average. It is the highest worker injury rate since the NEB began reporting on safety performance indicators in 2000.

News Release 09/16 - National Energy Board Taking Steps to Improve Worker Safety

Focus on Safety and Environment - A Comparative Analysis of Pipeline Performance - Summary - 2000-2007 - July 2009

Focus on Safety and Environment - A Comparative Analysis of Pipeline Performance - 2000-2007 - July 2009

Pipeline Safety Performance - Pipeline Incident Reporting

The report singled out factors such as employee experience levels, increasing pressure to meet deadlines, worker complacency and increased construction activity as possible causes for the rise in the injury frequency. In 2007, there were several pipeline projects under construction including the 145-kilometre long Emera Brunswick pipeline and the Trans-Mountain Anchor Loop pipeline that stretches for 151 km through mountainous terrain.

The report also noted that for the tenth consecutive year, there were no fatalities on NEB-regulated facilities. However, two fatalities were reported in 2008, and early reporting by NEB-regulated companies indicates that the injury rate for pipeline workers is rising.

"The National Energy Board has been committed to safety since the day this organization was founded nearly 50 years ago. Safety is, and always will be, our number one goal," said NEB Chair Gaétan Caron.

"Together with our industry stakeholders, we have been working hard to understand the factors underlying this important issue. We have also been taking steps to help improve pipeline worker safety by increasing the number of compliance activities and hosting events such as the recent NEB Forum 2009 where industry leaders can share best practices in the area of safety."

NEB-regulated pipeline companies reported 49 incidents to the NEB in 2007, including two ruptures, the first since 2002. The first rupture was caused by pipeline cracking due to fatigue which allowed approximately 990 cubic metres (6 227 barrels) of crude oil to spill into a farmer's field near Glenavon, Saskatchewan in April.

In July, NEB staff responded to an oil pipeline spill in Burnaby, British Columbia. A contractor doing construction in the community struck an underground 24-inch pipeline. Approximately 232 cubic metres (1 460 barrels) of heavy synthetic crude oil was released.

Between 1991 and 2002, there was an average of 2.5 ruptures per year on NEB-regulated pipelines. The Board introduced new regulations in 1999 making integrity management programs compulsory, which has helped to reduce the number of ruptures.

The National Energy Board uses this report to help improve the Board's compliance programs. For example, NEB staff increased compliance activities, such as inspections or audits, from 99 in 2007 to 216 in 2008. NEB inspection staff noted fewer incidents of non-compliance with NEB regultions in 2007 than in 2006 and most of these incidents were corrected while NEB staff were still onsite. The most common incidence of non-compliance was related to personal protective equipment such as not wearing hard hats or safety glasses correctly.

In May, 2009 the National Energy Board brought more than 300 representatives from pipeline companies, contractors, regulators, First Nations and landowners together at the NEB Forum 2009 to discuss issues related to pipeline safety, security and emergency management. The NEB plans to continue hosting events such as these as one step towards improving worker safety.

Celebrating 50 years of regulatory leadership, the NEB is an independent federal agency that regulates several parts of Canada's energy industry. Its purpose is to promote safety and security, environmental protection, and efficient energy infrastructure and markets in the Canadian public interest, within the mandate set by Parliament in the regulation of pipelines, energy development and trade. As part of its mandate, the NEB monitors the supply of all energy commodities in Canada and reports its findings. The NEB Internet site is regularly updated with new energy information for the Canadian public.

- 30 -

For further information:

Tara Sukut (tara.sukut@neb-one.gc.ca)
Communications Officer
Telephone: 403-299-3930
Telephone (toll free): 1-800-899-1265

Revival or dam-nation?

COMMENT: You gotta appreciate the irony of this: here's the Snohomish PUD trying to increase the amount of renewable energy both to meet GHG emission targets and dramatically increased demand - because of Boeing's new jet plant. And, um, jet planes are one of the most egregious burners of fossil fuels and emitters of carbon dioxide - at altitude where the intensity of CO2 is much greater than at ground level.

It's an absurd scenario. In BC, just imagine that BC Hydro were ramping up generation in BC to provide additional electricity to the TeckCominco/Elk Valley Coal mines - mines which expect to increase coal production by 50% in the next eight years so that China and Korea and Japan can add massive tonnages of CO2 to the atmosphere by burning BC coal. Oops. That's exactly what BC Hydro is doing. It's what Aberfeldie and Glacier/Howser are all about, come to think of it.

Joshua Zaffos
High Country News
July 27, 2009

A small 6-foot-tall dam in Woods Creek that Snohomish PUD bought from a private energy company last year for $1.1 million. (by Dan Bates, the Daily Herald in Everett, Washington)

The push for green power could spawn a rush for small hydropower projects in the Northwest

Thanks partly to Boeing's new jet factory, Snohomish County, Wash., is one of the fastest-growing counties in the country. The north Seattle county's energy demand is expected to increase 25 percent over the next decade, and its local utility is scrambling for new sources of power.

Currently, the Snohomish County Public Utility District gets 80 percent of its energy from massive dams on the Columbia River. But with big dams and fossil fuels losing favor, it's looking to alternative sources: solar, wind, geothermal and biomass and, perhaps the most controversial of all, small-scale dams, which utility managers consider environmentally and economically viable.

Boosters tout small-scale hydroelectric projects -- defined as generating less than 30 megawatts, or enough to power up to 30,000 homes -- as carbon-neutral and more fish-friendly. And the resource has staggering potential: Just a fraction of the possible sites on Washington's waterways could power millions of homes.

But although utilities, investors and speculators are getting into the game, small-hydro development won't be easy or cheap without policy incentives and tax credits. And not everyone thinks it's a good idea. "We look at our watersheds and waterways in the Northwest as pretty stressed already. The impacts are apparent everywhere,"
says Rich Bowers, Northwest coordinator for the Hydropower Reform Coalition, a network of 140-plus environmental and outdoor recreation groups.

Snohomish PUD will build its first small-hydro project on Youngs Creek near Sultan, Wash. The 7.5-megawatt, $30 million plant and its successors will be "run-of-the-river" works, which use dams less than
15 feet high, and rely on natural streamflows and grade to generate electricity (instead of engineering stronger flows and a higher grade, as conventional dams do). Youngs Creek lacks salmon and recreational activity, so the environmental and boating-advocacy group American Whitewater and other groups have dropped their initial objections.

The Youngs Creek project demonstrates the potential upside of small hydro. Migrating fish can usually bypass or swim up small dams, and water quality and temperature aren't greatly affected because there's no deep reservoir. Small hydro has virtually no carbon output, and it represents a local and distributed power base. And Snohomish PUD -- which expects to have a list of 10 preferred small hydroelectric projects out this summer -- plans to meet certification through the Low Impact Hydropower Institute (LIHI), the hydroelectric equivalent of the LEED program for "green" building.

Whether or not they're certified green, however, the potential proliferation of new dams worries most environmentalists. "These small projects in many cases have the biggest impacts relative to their size," says American Whitewater's Thomas O'Keefe.

New projects often use "weirs," low dams that allow water to spill over the top, but O'Keefe says such structures still de-water streams to turn turbines, thereby annihilating boating runs. And even small projects require habitat-disturbing transmission lines and maintenance roads. One plant on a salmon-free creek might be OK, but critics worry that the cumulative effects of numerous small dams will stifle river systems and fish populations. O'Keefe and other opponents believe new hydroelectricity should come instead from efficiency upgrades and the addition of turbines to existing dams.

Dam operators are increasing capacity at existing sites and looking into the 97 percent of dams in the country that don't have hydroelectric works. But efforts like those of the Snohomish utility district are still important, says National Hydropower Association president Andrew Munro. "We can double U.S. water-power resources (currently 95,000 megawatts) without large dams," he says, as early as 2025 with the right incentives.

In Washington, though, the "right" incentives haven't emerged. The state's renewable energy standard, which requires most energy providers to get 15 percent of their electricity from renewables by 2020, counts power from improvements at existing dams, not new ones.
Utility districts supported a bill last year to include new, "low-impact" hydro projects that produce 5 megawatts or less, but it didn't pass.

But the federal renewable energy standard is still up in the air, and other Pacific Coast states welcome new hydro. Oregon, for example, counts new projects up to 50 megawatts if they meet low-impact certification. In January 2008, a San Francisco developer proposed nine new "damless" hydro plants along a 34-mile stretch of the McKenzie River, east of Eugene. The scheme was rejected, but it aroused opposition from paddlers and river advocates, who feared it would harm fish and ruin a popular boating run.

California allows for new small-hydro projects that meet certain criteria, but the state is struggling to meet its goal to produce 20 percent of its electricity from renewable sources by 2010. The utility Pacific Gas and Electric wants to amend the standard to include energy from British Columbia run-of-the-river hydro projects that don't meet California's current renewable criteria. Bowers of the Hydropower Reform Coalition says Washington state legislators are keeping a close eye on California's decision, which could encourage similar projects in Washington, regardless of that state's stricter renewable controls, to serve California's energy needs. It could also inspire a new era of investment and development for small hydro in the Northwest.

"I think everybody's collectively holding their breath to see where the market goes," says LIHI executive director Fred Ayer.

- Joshua Zaffos is a freelance writer in Fort Collins, Colorado.

Oil sands test of Obama’s green credentials

By Sheila McNulty in Houston
Financial Times
August 10 2009

The Obama administration faces a test of its environmental credentials in deciding whether to approve a pipeline carrying greenhouse gas-intensive oil sands fuel from Canada into the US.

Hillary Clinton, secretary of state, is expected to decide as early as this month whether to approve the Alberta Clipper, a 1,000-mile pipeline designed to carry up to 800,000 barrels a day of fuel from Canada’s vast oil sands.

The Financial Times asks that folks not copy its material, so we are redirecting you to the FT site for the complete article. Please click here