bc2008

Rockies wilderness at risk from latest dash for gas

Between two national parks lies a corridor rich in wildlife - but also in fossil fuels. Will protection follow now that the gas extraction drillers want to move in?

Jim Giles
The Guardian
August 6, 2008

A cougar on the banks of the Flathead river in the Canadian Rockies.
Photograph: Getty Images/Panoramic RR

It has been called one of North America's wildest places. Just north of the US-Canada border, the wooded slopes of the Canadian Rockies channel unpolluted water into a valley that remains free of human development. Grizzly bears, cougars and wolverines prowl the banks of the Flathead river. Outside of a national park, there is probably no wilderness like it on the continent.

But outside of a national park could mean outside of legal protection. Somewhere in the workings of the British Columbia government, an application from global energy company BP is working its way around civil servants' desks. In it, the firm outlines a proposal that has horrified local environmentalists: the installation of up to 1,500 gas wells covering an area of 500 sq km (310 sq miles) amid the lush 1,580 sq km wilderness of the Flathead. Some time during the next six months, officials may give approval to the project.

"There have to be some places on the planet where you don't go for energy production," says Jack Stanford, a biologist at the nearby University of Montana. "This is one of them."

Stanford's fascination with the region has spanned 40 years of his scientific career. When he describes the valley, it's easy to see why. To the north lie the mountainous Banff and Jasper national parks. The 4,500 sq km Waterton Glacier International Peace Park straddles the border just south of the river. All these great wildernesses have been declared world heritage sites by Unesco.

Isolated populations

The Flathead valley connects the protected areas, allowing hundreds of bears and thousands of moose to roam between the parks. Sixteen species of carnivore live in the region, a higher density than anywhere in North America. Without a corridor, animals in the parks would become more isolated, inbred and vulnerable to disease. "The grizzlies would gradually decline and disappear," warns Stanford.

Unfortunately for those animals, their route between parks covers mountains that hold valuable fossil fuel deposits. Around a kilometre below the Flathead river region lies the Crowsnest Coalfield. According to BP's initial estimates, the field holds enough natural gas for half a century of drilling. When operating at peak, it should produce over 14m cubic metres of fuel a day, more than enough to supply the 2 million people that live in Vancouver and surrounding parts of British Columbia.

Fossil fuel drilling is never a pretty process, but environmental groups are particularly wary of projects that aim to extract methane from coal seams. Large volumes of salt water flow up the well with the gas and have to be disposed of, for example. The liquid is so saline that it can pollute land and kill fish if allowed to enter rivers.

Coalbed methane drilling is also land intensive. Erin Sexton, a colleague of Stanford's who has studied similar projects in other parts of North America, says energy companies typically install 40 wells on every sq km of a coalbed methane project. Along with the wells come roads and pipelines. "They have taken natural landscapes and turned them into industrial sites," she says.

None of these concerns will be news to BP, which has stressed that detailed environmental studies are needed before any work begins. Hejdi Feick, a spokeswoman for the company, says the British Columbia government decision refers only to tenure, a legal status that would give BP the right to apply for drilling permits. If that's granted, the company will continue with ongoing environmental studies for at least three years before beginning commercial production. The firm also says water from the seam will be pumped back into underground reservoirs and that it plans to have only around three wells per sq km.

Some local environmentalists have praised BP for its willingness to engage with local concerns and its commitment to study the area. But when it comes to details of how the projects may be implemented, differences of opinion arise.

Sexton wants the company to commit to a five-year moratorium on drilling activities. That is the time she feels is needed to conduct a detailed survey of the region's waters, vegetation and wildlife. Only last year, a new species of fish was discovered in the area, she says.

But Feick would not rule out exploratory drilling while the environmental studies were still under way. She adds that the company is "committed to doing this project right" and may still decide not to proceed.

But thousands of miles to the south of the Flathead, rancher Tweeti Blancett questions such assurances. Blancett used to run cattle over 200 sq km in Aztec, New Mexico. Her husband's grandfather leased land to the energy companies in the 1950s, but it was not until coalbed methane wells arrived in the 80s that problems started.

Blancett says saline water often spills from wells and tankers. If the spill runs into a gulley, it wipes out all vegetation in its path. She claims that spills of polluted water or drilling fluids sometimes take weeks to be cleared up and government oversight of the firms is too lightweight to make much difference. Around three years ago, she decided the land was too polluted and moved her cattle.

A BP spokesman disputed Blancett's claims, saying her description of the coalbed methane project was "not consistent with the facts as we know them".

In the Flathead, meanwhile, BP has to contend with a well-organised group representing a dozen organisations from both sides of the US-Canada border. The Flathead Coalition was first formed when coal mining began in neighbouring Elk Valley in the 70s, says Dave Haddon, the coalition's director. Its strength stems from its diverse membership, which includes local landowners, environmentalists and biologists.

Broad objective

Not everyone agrees on everything. Some landowners have no interest in designating new wilderness areas, for instance. But Haddon says the group reaches consensus by focusing on the broad objective of preventing inappropriate development in the region.

With that diversity of interests behind him, Haddon has more of an impact than niche groups with tighter focuses. This April, for example, he met with the managers of nine investment funds that own substantial amounts of BP stock. Haddon says BP has so far declined to share documents relating to its environmental studies and that the managers might pressure BP into being more transparent about its plans for the region. The coalition is also asking Unesco to declare the Flathead a world heritage site.

"The coalition gives us the chance to increase the volume and to represent ourselves as mainstream," says Casey Brennan of Wildsight, a local environmental organisation that is part of the coalition.

Asked if the coalition would allow any amount of coalbed methane drilling, Haddon admits that the issue is tricky. The coalition position is that development can take place, provided BP has adequate plans in place to protect the valley's flora and fauna. But the words Haddon uses to describe the Flathead - a "cornucopia for wildlife", a fragile corridor that could easily be "severed" - makes clear his concern about any threat to what makes the area unique.

Other coalition members are more blunt. Brennan says: "I don't think this can go ahead. This area is far too valuable. There is a saying in business: 'If you want to make omelettes you have to break eggs.' We don't want to be those eggs."

guardian.co.uk © Guardian News and Media Limited 2008

Shell won’t drill in Klappan this fall, official confirms

By Kat Lee
Terrace Standard
August 19, 2008

SHELL CANADA has decided to suspend its planned exploration of coalbed methane in the Klappan this fall to keep communication lines open with interested parties in the area.

“Shell is taking a pause from it’s planned drilling activity in the Klappan this year,” said company official Larry Lalonde. “We’re doing this to have some dialogue with the newly elected Tahltan Central Council and leadership from the Tahltan band council and Iskut First Nations.”

The company was scheduled to re-enter two wells drilled in 2004 this fall. They wanted to conduct further testing on gas flows, and see if there was produced water associated with natural gas in the coal.

Shell had previously drilled three test wells in 2004, but opposition from Tahltan who don’t want industrial activity on their traditional territory and last year’s flood destroying the access road has slowed progress.

The area, also known as the Sacred Headwaters, is 400 kilometres north of Smithers and contains the headwaters for the Skeena, Nass and Stikine Rivers.

Shell is licensed by the provincial government to drill up to 14 more exploratory wells in the area. Lalonde says since they company already hold the permits, the decision to suspend drilling is voluntary.

“First and foremost, we’re listing to what the Tahltan and Iskut First Nations has told us,” Lalonde said. “For an open dialogue to occur, it would be beneficial to have a pause...in drilling in 2008.”

The company sent out an email to inform stakeholders of the pause in early August.

While he does not know when the company will reassume the drilling, Lalonde said Shell will continue to talk with people in the region and provide people with more knowledge of what the oil and gas industry actually does.

Shell hosted five open houses in the Northwest in the past month, and Lalonde said they have heard from people who are both supportive of and concerned about the planned activity.

However, Shell will continue with its environmental studies in the Klappan to better understand the area’s natural resources.

The company has completed 25 environmental studies to date, and have planned more studies on wildlife, fisheries and water.

Shannon McPhail, executive director for Skeena Watershed Conservation Coalition, a group trying to stop coalbed methane development in the area, says this is only the first step.

“I do applaud them for pulling out,” she said. “They’ve most certainly done the right thing.”

She said the group will not slow down simply because Shell is suspending their drilling for 2008; the coalition will continue to educate people until the deal is off the table.

“At this point, it’s an experiment, and a risky one,” McPhail said. “The people of the North are saying: we will not be your lab rats, we will not be your guinea pigs.”

She noted that there has been much public opposition to Shell’s activities, and that many municipalities and surrounding regional districts have signed a resolution in opposition to the development.

Opposition has also come from a group of Tahltan called the Klabona Keepers, who have previously set up blockades to the Klappan in protest of the development.

“I hope that Shell will continue to do the right thing and listen to the people,” McPhail said.

Last month, a number of non-governmental organizations including the Pembina Institute, Sierra Club B.C. and the Dogwood Initiative issued a call to the provincial government for a 10-year moratorium on coalbed methane to provide time for scientific studies to take place and improve regulatory systems.

Coalbed methane is natural gas found next to coal and often with water. Extracting it generally requires more wells than needed for conventional gas pockets and environmentalists say the water brought to the surface can be harmful to the environment.

B.C. Hydro tiered rate plan a jolt for Islanders

Watchdogs say Vancouver Island faces steep leap in electricity costs by 2010

Scott Simpson
Canwest News Service
Victoria Times Colonist
August 09, 2008

B.C. Hydro's proposal for two-tier electricity rates is so uneven that
it fails to meet a basic test of fairness for the utility's
residential customers, according to several watchdog groups.

Final arguments on the proposed rates, on file at the B.C. Utilities
Commission, indicate that the electricity pricing scheme is drawing
everything from praise to skepticism to outright condemnation.

A Vancouver Island group calculates by 2015, electricity will be
priced 36 per cent higher for an average Island resident, compared
with a resident of the Lower Mainland.

Meanwhile, the group representing Hydro's large industrial customers
says the pricing scheme "targets a few people with extreme bill
impacts for no good reason."

"Under B.C. Hydro's proposal some customers could experience
three-year bill impacts of up to 60 per cent or more," says the Joint
Industry Electricity Steering Committee.

"Hydro is wilfully blind to the extent of the harm it may inflict on
some of its customers," the steering committee says in its final
submission to the BCUC.

Other documents on file for the two-tier or Residential Inclining
Block (RIB) hearing confirm that, on average, people living in single
family homes and duplexes on Vancouver Island will be taking on a
disproportionately large share of the cost increases associated with
the scheme.

Island residents in single family homes and duplexes face an average
$190 increase in electricity rates by 2010, compared to a provincial
average of $111, and $89 in the Lower Mainland -- even though the
Island has the most moderate climate in the province.

That's because the Island has a preponderance of residents who rely on
electricity for home heating and hot water, and are more dependent on
power than Lower Mainland residents who have better access to natural
gas for heat energy.

Based on data gleaned from two separate hearings now underway, an
average Island resident in a single family home or duplex will pay
more each year for tier-two electricity than he or she does for a
larger amount at the base price, by 2010.

Moreover, intervenors in Hydro hearings have noted that the rates are
being kept artificially low due to a Hydro decision to defer about
one-third of its actual cash requirements for payback at some
unspecified future date.

The two-tier system establishes a baseline amount of electricity for
residential customers at a lower "tier-one" rate -- with all power
consumption above that amount priced significantly higher.

Hydro's proposal calls for the tier-one rate to remain relatively
stable, whereas the tier-two price jumps 33 per cent by 2010.

Hydro has about 1.5 million residential customers across B.C. and
900,000 of them -- or 60 per cent -- live in single family homes or
duplexes.

"People using electricity for heat are trusting B.C. Hydro and the
government to protect them from higher rates, and they don't really
know what's going on -- and some of them are going to get whacked,"
JIESC executive director Dan Potts said.

"If it's totally impossible to be fair and non-discriminatory in the
rate, why do we have to go ahead with it?"

Ludo Bertsch, a spokesman for the Energy Solutions for Vancouver
Island watchdog group, said Island residents on average use 45 per
cent more electricity than their mainland counterparts. "We expect to
pay more. We are consuming more," he said in a interview. "Hydro is
trying to encourage conservation. We understand that. The big skill
behind a proper rate design is that you do it in a fair manner."

According to Hydro, 75 per cent of its customers will be better off
under a two-tier system than if Hydro had opted for an
across-the-board increase in its existing, single-rate system.

Dag Sharman, B.C. Hydro senior media relations adviser, said Hydro has
been instructed by the province to make B.C. self-sufficient in
electricity production by 2016, and to meet half of all new demand
growth through conservation by 2020.

"That's our goal here and we think this is the best way to do it,"
Sharman said.

He said Hydro's Power Smart program and LiveSmart B.C. offer lots of
energy saving tips, inspection programs and rebates for customers who
want to cut their power consumption. "We are asking a lot of people to
conserve, and we are trying to help them out.''

Teck Cominco buys Fording in $14.1-billion acquisition

COMMENT: Greenhouse gas emissions in BC are the target of the BC government's climate change agenda. GHG emissions are the target of everybody's climate change agenda.

But here's the catch. The emissions we're looking at, something above 66 megatonnes (MT) annually, are really only a third of what this province is really on the hook for. Because all of the natural gas we produce, gets burned somewhere. And all of the coal we produce (actually, the Teck Cominco/Fording/Elk Valley Coal Corp. mines produce virtually all of it) gets burned somewhere. And each of those - the annual production and combustion of 1.1 trillion cubic feet of gas and of 27 million tonnes of coal - is each the source of another 60 MT (very round numbers here). So all in, BC is the source of 180 to 200 MT of GHGs annually, not 66 MT.

The province's climate change policies aren't even looking at the gas and coal part. Both are economic engines and government hasn't tossed any carbon reduction spanners into those engines. So what's with this editorial whining from the Vancouver Sun?

Teck Cominco's Doug Horswill briskly anticipates another 100 years of coal production from the properties in the East Kootenays. In another recent article we noted that China is firing up a new coal-fired generation plant every ten days.

Whew. I just installed another compact fluorescent. That should balance things out a bit.

---

Record-breaking deal by Teck-Cominco says it all: Coal is the future

Editorial
Vancouver Sun
August 02, 2008

Teck-Cominco's eye-popping, $14-billion purchase of Fording Canadian Coal this week sends a clear signal that coal will play an important role in the future of British Columbia. The deal makes Teck-Cominco the world's second-largest producer of metallurgical coal -- the kind used in steelmaking -- and solidifies its status as Canada's largest diversified mining company.

Oil and gas grab all the headlines, but coal is B.C.'s -- and the world's -- most abundant hydrocarbon resource, with estimated B.C. reserves of 20 billion tonnes, and proven global reserves of more than 892 billion tonnes, or enough to meet demand at current consumption rates for two centuries.

It is also the most secure. More than 26 per cent of the world's coal reserves are in North America, compared with just five per cent of oil and six per cent of gas. Forget ethanol. Coal is the obvious answer to energy security for the United States and its neighbours.

While much of the coal B.C. exports is used to make steel (70 per cent of global steel production depends on coal), B.C. also digs up more than a million tonnes of thermal coal, used to generate power, with much of it sold to Japan and Korea.

Coal meets 50 per cent of U.S. electricity needs, 20 per cent of Canada's and 40 per cent of the world's. If energy demand grows as predicted, by as much as 60 per cent over the next 30 years, the world will increasingly depend on coal to satisfy it.

Coal gets a bad rap from environmentalists who don't like the fact that, like most everything else on earth, it emits carbon dioxide. But the industry has taken giant steps towards making the production and use of the mineral more environmentally benign. All manner of technologies are being actively pursued, including carbon capture and storage, hydrogen from coal, gasification and coal liquefaction.

The first coal-to-liquids plant in the U.S. has been greenlighted in West Virginia by Consul Energy and Synthesis Energy Systems. With the help of ExxonMobil, they hope to produce up to 100 million gallons of gasoline a year and sequester the carbon emissions, making it a "clean-coal" gasification plant.

Making gasoline from coal isn't a new idea. It fuelled the Luftwaffe in the Second World War.

Perhaps its hard for politicians to grasp that the battery of environmental and social tests mining projects are required to meet have doubled the length of time it takes to bring a greenfield mine into production to 10 years from five -- and that this delay drives up the cost of development as well as the price of the commodity, while exacerbating a demand-supply imbalance.

Environmentalists may not like it but our political leaders should recognize the value of coal, not only as a key export, but as a plentiful and accessible source of energy that can serve as a substitute for expensive oil and gas. To rule it out on the basis of a Dickensian view of a coal-fired world is wrong-headed and short-sighted.

Teck-Cominco, a company that knows a thing or two about minerals, believes coal is the future. Those responsible for ensuring we have sufficient energy to fuel economic growth should pay heed.

---

Teck Cominco buys Fording in $14.1-billion acquisition

Purchase of its Elk Valley partner is biggest coal deal on record

Fiona Anderson
Vancouver Sun
Wednesday, July 30, 2008

It was the wee hours of Tuesday morning, close to 4 a.m. in Vancouver, when the final "i" was dotted and "t" crossed in British Columbia's largest takeover -- Teck Cominco's offer to buy out its Elk Valley partner, Fording Canadian Coal, for $14.1 billion.

At that price, the Fording acquisition is also the biggest coal deal on record, according to Gerard McCloskey, chairman of U.K.-based McCloskey Group, a coal-industry research company.

By phone and in person, representatives of the two companies, and their bankers and lawyers, worked around the clock in Vancouver, Toronto, Calgary and elsewhere. At least one negotiator had as little as eight hours sleep in four days.

"Everybody has been working around the clock," said Doug Horswill, Teck's senior vice-president for environment and corporate affairs.

And the timing couldn't be better. Vancouver-based Teck will pay $82 US per unit of Fording, an income trust, $3 of which represents the trust's last distribution to unitholders. Unitholders will also receive 0.245 Teck Class-B subordinate voting shares, the company's widely held class of shares. While technically a purchase of assets, the unitholders will receive the cash as a distribution, and the units will be collapsed.

Together the offer amounts to $93.76 Cdn a unit, based on the closing trading price of Teck shares and the exchange rate on July 28, the last day before the deal was announced. This works out to an 18-per-cent premium on the average weighted unit price over the 20 days up to July 25, Teck said in a news release. But it's below $97.50, the price Fording units traded at just a few weeks ago at the end of June.

But Horswill said Teck has been negotiating with Fording since the beginning of June, and while the unit price has softened recently, closing at $83.80 on Monday, Teck was in for the long term, not a short-term gain.

"We think there's an opportunity in the short run here to acquire this and pay down the acquisition relatively quickly," Horswill said. "But really, it's a 100-year asset that will keep us in a good steady business for generations."

Fording's principal asset is its 60-per-cent interest in the Elk Valley Coal Partnership which owns most or all of six metallurgical coal mines, five in British Columbia and one in Alberta. Teck owns the remaining 40 per cent, plus almost 20 per cent of Fording, which brings its actual ownership interest to 52 per cent.

As a result of its ownership in the partnership, Teck was already in "a very comfortable position," Horswill said.

"Our revenues even without buying [Fording] will be substantially up from last year," Horswill said.

That's thanks to the rising price of coal, which is negotiated company-by-company on a yearly contract basis. In April, Fording was able to secure an average price of $275 US per tonne, almost three times higher than the $93 US it was paid between April 2007 and March 2008.

Teck's main goal in acquiring Fording was to increase the amount of income it received from "non-exchange-traded commodities," Horswill said.

Much of Teck's business comes from zinc, copper and lead, whose prices fluctuate. But coal, with its annual contracted price, provides a steady, known stream of income, Horswill said.

"And the market normally pays a higher multiple [which translates into higher share prices] for that kind of business."

"So our belief is that as we move forward and get to where we want to be -- one-third of our normalized revenue from steady known income streams -- we think we'll start to get the multiples that big companies like [global resource company] BHP Billiton or Rio Tinto get," Horswill said.

"It's like a portfolio of assets which is worth more as a whole than it is in its parts."

Fording announced in December that it was looking at its options, including possible purchasers, in light of the federal government's announcement a year earlier that favourable tax treatment for income trusts would end in 2011.

The offer has to be approved by Fording unitholders and the court.

Fording units closed up $6.55, or 7.8 per cent, at $90.35, on the TSX on Tuesday while Teck shares rose $2.44, or six per cent to close at $42.85.

fionaanderson@vancouversun.com

© The Vancouver Sun 2008