December 29, 2005

A Natural Gas OPEC?

Peak Energy Blogspot
01-Apr-2005

The concept of a natural gas OPEC is becoming less far-fetched. On Apr. 25-27, a little-known, four-year-old organization called the Gas Exporting Countries Forum will meet in Port of Spain, Trinidad and Tobago. Although the organization says it wants to promote cooperation with gas-consuming nations and "does not seek to control...pricing and supply," in past meetings members have discussed mutual efforts to capture a bigger share of the wealth generated by their own natural resources. That's exactly the line of inquiry that led to the formation of the Organization of Petroleum Exporting Countries 45 years ago.

Natural gas meets one key requirement for price-fixing: a high degree of market concentration. In the last quarter of 2004 members of the forum accounted for 53% of the natural gas imported by the industrialized nations belonging to the Organization for Economic Cooperation & Development. That's in line with the 52% share of OECD oil imports that OPEC provided in the quarter, according to the International Energy Agency. The Trinidadian hosts list the countries invited as forum members as Algeria, Bolivia, Brunei, Egypt, Indonesia, Iran, Libya, Malaysia, Nigeria, Oman, Qatar, Russia, Trinidad, United Arab Emirates, and Venezuela. Many are OPEC members and thus know a thing or two about price-fixing. Norway, Argentina, and Equatorial Guinea have been invited to observe.

Posted by Arthur Caldicott on December 29, 2005

December 16, 2005

Cancelled: Surrey & Vancouver Island
VITR&VIC Town Hall Meetings

BCTC-VITR & Sea Breeze-VIC Revised Hearing Schedule: Hearing now set for Mon, 06-Feb-2006

Tsawwassen meeting date changed to Jan 14 at 9:00 am to accommodate a large number of registrants

Wed, 21-Dec-2005
Intervenor Evidence with respect to the VIC Application

Fri, 06-Jan-2006
Hul'qumi'num Treaty Group rebuttal evidence

Sat, 07-Jan-2006
Town Hall Meeting (Salt Spring)

Mon, 09-Dec-2005
BCUC and Participant Information Requests to Intervenors with respect to the VIC Application

Sat, 14-Jan-2006
Town Hall Meeting (Tsawwassen)

Mon, 23-Jan-2006
Intervenor Responses to Information Requests with respect to the VIC Application

Thu, 26-Jan-2006
Staff Issue Hearing Issues List

Mon, 30-Jan-2006
Opening Oral Submissions

Wed, 01-Feb-2006
Proponent Consolidation of Hearing Issues List

Fri, 03-Feb-2006
Panel issues Hearing Issues List

Mon, 06-Feb-2006
Public Hearing commences

A-45 BCUC letter re BCTC VITR & Sea Breeze-VIC.pdf

Posted by Arthur Caldicott on December 16, 2005

December 15, 2005

Clean-Energy Frenzy in Washington State

As the Northwest struggles with soaring fuel and electricity prices, corporate executives and entrepreneurs are joining politicians and activists to develop cleaner, smarter, and self-reliant energy sources.

by George Howland Jr.
Seattle Weekly
December 14 - 20, 2005

Gov. Christine Gregoire is touring the state with a farmer who grows mustard seed used to make biodiesel. U.S. Sen. Maria Cantwell, D-Wash., is demanding that oil executives testify under oath about record profits. First District U.S. Rep. Jay Inslee's crusade for a clean-energy future has been embraced by the leadership of the Democratic Party as a central message for the 2006 elections. After a lengthy study of the cheapest way to generate electricity, Puget Sound Energy, the state's largest private utility, has bought two huge wind farms. Moses Lake Republican state Rep. Janea Holmquist is pushing a law to require the use of up to 10 percent biofuels to run vehicles in the state. Shell Oil has invested in a company building a cellulosic ethanol plant in Idaho. The Northwest Energy Coalition, an environmental group, is planning a voters' initiative to mandate use of clean energy by Washington utilities, because while public support for a policy is strong, legislators won't pass such a law.

Welcome to America's first energy crisis of the 21st century. Northwest politicians and activists are responding to the soaring prices of gas and oil by attacking the status quo, while corporate executives and entrepreneurs are embracing alternatives previously relegated to the fringe.

The latest energy crisis is due to a number of factors. The disastrous invasion of Iraq, of course, has highlighted the military and political costs of dependence on oil from the Middle East. Says Inslee, a Bainbridge Island Democrat: "We are addicted to oil from that region. That's unhealthy for our own security." Hurricanes Katrina and Rita disrupted oil and gas supplies, driving prices higher, and created opportunities for profiteering by big energy companies. "There is no valid reason our gas prices went up after Katrina," claims Democratic Gov. Gregoire. Scientific consensus has developed more strongly around the relationships among global warming, the burning of fossil fuels, and climatic changes. "We are a coastal state fighting desperately against global warming," says the governor.

In the short term, all of this protest and recognition of problems isn't going to do anything to change the high cost of energy or dependence on foreign oil. "Americans will spend over $200 billion more on energy this year than they did last year," says Cantwell, a member of the Senate energy committee. Washington consumers have seen the price of a gallon of regular gas soar from $2.09 to $2.91 in September and drop back to $2.33 last week, according to the American Automobile Association. The Northwest Energy Coalition estimates that the average Washington household will pay $700 more to heat their home this winter than last year.

Even if remedies are not immediate, clean-energy activists and sympathetic politicians hope to use public concern over high energy costs to promote alternatives to fossil fuels. At the federal level, Washington leaders like Inslee and Cantwell are unlikely to make much progress. "Congress is still in the thrall of the oil and gas industries," says Inslee.

At the state level, however, real progress has already occurred, and more is likely. This is no accident. It's the result of activists, politicians, and entrepreneurs working together to build a clean-energy future. Take the Apollo Alliance, named after President Kennedy's initiative to put a man on the moon. It's a broad coalition of environmentalists, organized labor, business executives, civil rights leaders, and politicians, and both Cantwell and Inslee are on the national advisory board. Gregoire is one of nine governors who have endorsed Apollo's call for energy independence within a decade by investing in $300 billion worth of clean-energy infrastructure. The alliance is promoting three areas of benefit that will flow from the clean-energy initiative. The first is energy independence, a goal endorsed by a broad political spectrum, from neoconservatives to greens. The idea is that if the United States can produce its own energy instead of relying on imported fuel, there will be geopolitical benefits, too. Energy independence would free us from the need for imperial wars in the Middle East. Second, clean energy addresses the planet's environmental crisis. It reduces pollution of air, land, and water. It reduces the climate-changing impacts caused by the burning of fossil fuels. Third, the alliance believes, such an undertaking would create 2 million to 3 million new, high-paying, permanent jobs.

That's a long way from where we are today. The nightly news brings flesh-and-blood reminders of the cost of our reliance on Middle East oil. Our national government is a pipeline of corporate welfare for environment-besmirching oil and gas companies. At the state level, Washington has a tiny clean-energy industry. Tony Usabelli, director of the Energy Policy Division at the state Department of Community Trade and Economic Development (CTED), says his department will soon release a report on the clean-energy sector, which employs only around 3,000 to 4,000 people and has annual sales of a mere $900 million. While Usabelli notes that the industry has grown from $750 million in sales in the past five years, "The numbers are smaller than I would have expected."

The sexy star of the industry is biodiesel. Although there is only one biodiesel refinery in the state, which employs 12 people, and no biodiesel crops are grown commercially in Washington, biodiesel has captured the media's, the public's, and the politicians' imaginations.

The rising star of the clean-energy industry is wind electricity generation, which is primed for major growth due to a convergence of technological improvement, federal subsidy, and the rapid escalation in price of its chief competitor, natural gas­powered generation.

The largest player in the clean-energy industry is efficiency­energy conservation. Energy efficiency companies employing technologies like compact fluorescent lightbulbs are the sector's largest employers and save far more energy­in effect, generate far more­than any "renewable" energy source except hydroelectricity generation. Renewable energy is that which comes from resources like water, wind, and crops. They cannot be exhausted. Oil and coal, on the other hand, are finite.

Biofuels, wind, and energy efficiency are worth exploring in detail, because they are emerging in the Northwest and illustrate where we are and how far we have to go before we can realize Apollo's vision.

What is happening on the shores of the Duwamish River in Seattle is either the start of an industrial revolution or the answer to a Trivial Pursuit question in 10 years. In a 7,000-square-foot warehouse next to a cement plant, Seattle Biodiesel has opened the state's first biodiesel refinery.

Biodiesel is made from vegetable oil and can be used in most car and truck diesel engines. Currently, Washington consumes around 1 billion gallons of conventional diesel fuel and 1.5 million to 2 million gallons of biodiesel annually, according to Usabelli of the state Energy Policy Division. Biodiesel has many advantages over its petrochemical cousin, conventional gasoline, explains Patrick Mazza, a researcher at Climate Solutions, an environmental group focused on the Pacific Northwest and Vancouver, B.C. Biodiesel is relatively simple to make and can be manufactured without creating significant toxic by-products. In vehicle engines, biodiesel burns cleaner than petrochemical diesel. "It offers really dramatic reductions in air toxicity," says Mazza. The one problematic emission from biodiesel-fueled vehicles is nitrogen oxide, which is not an air pollution concern in Washington but is in California and has kept the fuel from taking off commercially in the Golden State.

Biodiesel can be used alone or blended with conventional diesel. The latter is recommended if the temperature drops below freezing.

Since the fuel is made from vegetable oil, it can be produced domestically. While biodiesel can be made from waste vegetable oil and produced in a garage, the industry is not one of anticapitalist ecotopians. The fuel's source is produced by agribusiness cooperatives in the Midwest that grow soybeans conventionally and have banded together to build refineries to supply a new market. The National Biodiesel Board, an industry group, says last year 25 million gallons of biodiesel were sold in the U.S., up from 500,000 gallons five years ago.

Biodiesel's big disadvantage is that it costs more to buy than conventional diesel. Last week, at Laurelhurst Oil, a University District gas station, conventional diesel was selling for $2.79 per gallon, while biodiesel cost $3.17.

Seattle Biodiesel CEO Martin Tobias says his company's refinery can make 5 million gallons of biodiesel a year. Seattle Biodiesel started selling the product in May and, in the first six months, sold more than 360,000 gallons. The company started two years ago when commercial airline pilot John Plaza, now the company's president, mortgaged his home, sold his boats and cars, and borrowed against his 401(k) plan to get the alternative fuels venture up and running. Software entrepreneur Tobias, a former Microsoftie and founder of the streaming media company Loudeye, officially became the company's CEO in May. Seattle Biodiesel brings soybean oil from Iowa by rail. In huge tanks that have been recycled from the old Rainier Brewery on Interstate 5, the soybean oil is refined to a purer state.

Tobias says his company cannot fill all the orders it gets. Seattle Biodiesel hopes to have a second refinery up and running by the middle of next year. Tobias says the industry does not need a separate distribution infrastructure, because traditional tanker trucks can haul biodiesel and conventional diesel tanks can be easily converted to pump biodiesel at service stations. The National Biodiesel Board lists 29 service stations where biodiesel is currently available in Washington, all but one in the Puget Sound region.

Washington politicians are giddy about biodiesel. It's easy to see why. Gov. Gregoire quotes John Steinbeck: "The bank is more than men; it is a monster." Says the governor, "Replace bank with foreign oil." She sees biodiesel as an opportunity to tear down the Cascade Curtain and unite the red and blue parts of the state. "This is an opportunity for us to work together as a state," she says enthusiastically. Washington has the agricultural potential east of the mountains to grow oil-seed crops. Mustard seed and canola seed (aka rapeseed) are the most frequently mentioned. Oil-seed crops can be grown in rotation with others­wheat, for instance­throughout Eastern Washington. Western Washington consumers, with their liberal politics and environmental values, represent a great market for the product­even if it's more expensive.

Right now, it doesn't make economic sense, however, for Washington farmers to grow oil-seed crops, because the market won't pay enough to make it worthwhile.

On Jan. 9, the Legislature will convene for its annual session, and biofuels for vehicles are going to receive some kind of boost. "We need to seize the crisis as an opportunity," says Gregoire. "Maybe this time we can come together and seize a common agenda. If we wait another legislative session, the crisis may be gone and apathy will set in." Republicans and Democrats agree there will be a host of tax breaks for everything connected to biodiesel, but some legislators want to go further.

House Capital Budget Committee Chair Hans Dunshee, D-Snohomish, wants to use state money to build the big, expensive crushers that convert oil-seed crops into oil. Since the state constitution prohibits direct payments to private industry, Dunshee says the money would likely go to an Eastern Washington port district or some other governmental entity. "Canola will get grown," Dunshee predicts. "It will get crushed." He says farmers in the central Washington area of Odessa, in Lincoln County, have been working with Seattle Biodiesel and are the group that has most fully developed a business plan. "The economics are still iffy," Dunshee admits. But, "It's better than a stadium."

The most controversial idea is to require that a certain percentage of the state's gasoline and diesel supplies be biofuels by a certain date. Seattle Biodiesel CEO Tobias says these so-called fuel standards are the most important thing government can do for the biofuels industry. "If the government does these renewable fuel standards, that gives the investors a long-term reason to invest in these industries," he says. Last year, the Minnesota Legislature passed a law that requires gasoline there to be 20 percent ethanol by 2013. In Washington, Democratic and Republican lawmakers will push mandatory standards for both biodiesel and ethanol.

While the Democrats are extremely supportive of the idea and have plenty of votes in the House to pass such legislation, Republicans in the Senate are not as enthusiastic. Senate Minority Leader Bill Finkbeiner, R-Kirkland, who announced last month he is stepping down from his post, cautioned that his caucus doesn't like to see a lot of interference with free-market capitalism. Finkbeiner says, "I don't want to be knee-jerk against it, but if you just set an arbitrary standard, you haven't really done the job." Since the Democrats only control the Senate by three votes, and two conservative Democrats frequently vote with Republicans, fuel standards are not a sure thing. It should help that GOP legislators from Moses Lake­Holmquist and Sen. Joyce Mulliken­are in favor of standards. Oil-company lobbyists, however, have already been calling lawmakers to express their unhappiness. "We oppose mandates," says Frank Holmes of the Western States Petroleum Association.

Of course, diesel is not the dominant fuel in Washington or anywhere else. "Our biggest use of energy is petroleum­4.7 billion gallons of gasoline in Washington's cars and trucks," says state economic development official Usabelli.

The current "green" candidate that can be blended with gasoline is cellulosic ethanol. Currently, corn-based ethanol dominates the market, but it is considered inferior because it takes more energy to make than it provides. Cellulosic ethanol uses agricultural waste like wheat straw to create ethanol and uses less energy to boot. Iogen, a Canadian company, with one of its investors, Shell Oil, wants to build the first American cellulosic ethanol plant in Idaho. The industry has potential but no reality.

While the Legislature has gone gaga over biofuels, members express no such enthusiasm for boosting renewable clean electricity. This is both good and bad news. It's good because it means that the clean-electricity industry is already doing well, so well that even key Democratic legislators, like House energy committee Chair Jeff Morris, D- Anacortes, are not convinced more needs to be done. It's bad news because "dirty" electricity from coal burning might see its market share rise in the Northwest because clean electricity isn't getting enough help.

The most dramatic evidence of clean electricity's strength is the enthusiasm of Puget Sound Energy (PSE), the state's largest electric utility with 1.2 million customers in eight counties. State regulators require utilities to extensively study what the lowest-cost alternative is for their future energy needs. PSE began energy acquisition planning in 2004, received 100 proposals from energy developers, and found that the best two projects were wind farms: Hopkins Ridge Wind Project in southeastern Washington's Columbia County and Wild Horse Wind Power Project in central Washington's Kittitas County.

In those breezy parts of the state, huge wind-driven blades­on towers up to 200 feet tall­drive generators. Windmills are clean, quiet, ugly, and take up a lot of space. For instance, Wild Horse is being built on 9,200 acres of open rangeland, 11 miles east of Ellensburg.

PSE's two new wind farms will boost wind's tiny share of the state electricity market considerably. Washington uses around 10,500 average megawatts (aMW) of electricity annually. Hydroelectricity accounts for 66.6 percent of Washington usage, coal is next at 17.7 percent, natural gas is third at 9.8 percent, and nuclear power accounts for 4.6 percent. Wind is a mere 0.4 percent, or 42 aMW annually. PSE's wind farms will add 114 aMW to the mix.

Wind energy has become economically viable for a number of reasons. First, newer wind turbines are more efficient. Second, the cost of the most popular new source of electricity in Washington in recent years­natural-gas-fired turbines­has skyrocketed. Natural gas prices have increased from between $2 and $3 per million British thermal units (Btu) in 2004 to $8.50 per million Btu this year, and the price is expected to rise to $10 per million Btu next year. Finally, the federal government provides a subsidy to operators of wind farms that brings the cost down from between $40 and $50 per megawatt hour (MWh) to $32.

All of this has convinced the Northwest Power Planning Council (NWPPC), a regional planning entity created by the federal government, that wind can produce 100 new aMW per year over the next 20 years in Washington, Oregon, Montana, and Idaho. The NWPPC estimates that the region's use of electricity will grow by around 360 aMW per year, so wind will become a major player. Like biofuels, wind is not an anticorporate ecotopian industry. The major U.S. supplier of wind turbines is General Electric; they bought the business from Enron.

Also like biofuels, wind has competition from a cheap fossil-fuel alternative: coal. Environmentalists want to keep wind growing and limit coal's development by enacting a renewable energy portfolio­essentially, the equivalent of fuel standards for electricity. Activists and legislators agree that mandatory goals for clean electricity will not pass the Legislature. Environmentalists, led by the Northwest Energy Coalition, have pushed the measure in Olympia for the past three sessions and have been unsuccessful. Democratic state House energy committee Chair Morris doesn't support the idea. He says the proposal he has seen would require that 20 percent of new energy be from renewable sources. "The folks who are acquiring resources are already acquiring 60 percent renewable resources," says Morris. So there's no need for a renewable energy portfolio, he argues.

Northwest Energy Coalition spokesperson Marc Krasnowsky says Morris is focusing on the positive steps taken by Puget Sound Energy in his analysis of the energy market. Not all utilities are behaving so well, says Krasnowsky. "Utilities in the Northwest have the potential of adding 2,000 megawatts of new coal in the next five to 20 years," he says. A renewable energy portfolio, Krasnowsky argues, would discourage the development of that industry. He agrees with Morris, however, that the measure cannot pass the Legislature. Instead, Northwest Energy Coalition is planning to put an initiative requiring a renewable energy portfolio on the ballot in 2006. Notes Senate Water, Energy, and Environment Committee Chair Erik Poulsen, D­West Seattle, who supports a renewable energy portfolio: "Olympia has shown itself to be resistant to a renewable energy standard for years. The environmental community has a better chance of convincing the public."

But Democrats think they have a winning issue in clean energy in general. Cantwell, who is facing a tough re-election fight against former Safeco Insurance executive Mike McGavick, has begun putting a clean-energy logo on her press releases. She has led the Senate fight against drilling in the Arctic National Wildlife Refuge in Alaska. She championed legislation that would have outlawed "gas-price gouging." Inslee says, "In November '06, energy will be one of the fundamental choices of the American people, because the Democrats are making it so. When the Democrats stand for optimism, we win. I've been arguing this for two and a half years!" Inslee says the leadership of the Democratic Party has finally figured out that clean energy is an issue with which they can win. Whether a clean-energy ballot measure will help boost wind remains to be seen.

Labor leaders in Washington have also signed on with the clean-energy push. Wind energy, however, is not a huge job generator. There are good jobs during the construction of the wind farms, but once the farms are up and running, they do not require a large workforce.

But there are jobs that emerge from wind in surprising places. Down in South Seattle's Georgetown neighborhood, the Gear Works is the best local illustration. The 49-year-old, 110-employee, family-owned business is a throwback. The Gear Works is housed in a pair of wonderful warehouses that were designed by the business' late founder, Ingwald Ramberg. A huge trellis with a rambling wisteria vine covers the three-story southern wall of the main warehouse, and there is a homemade fountain out front. Inside, original posters from Seattle's 1962 World's Fair complement the '60s feel of the architecture. While the place feels frozen in time culturally, Ingwald's son, Roland Ramberg, the firm's president, has made sure the business is on the cutting edge in equipment and pursuit of new markets. The Gear Works makes and repairs industrial gears for everything from draw bridges to race cars to wind turbines. Ten years ago, Ramberg says, the Gear Works did no work on wind turbines. Now it is 20 percent of the business. "We are not only repairing them but building new gear boxes," Ramberg says. "They keep putting up thousands of new machines every year. Those are future customers going up. They are making them more reliable, but sooner or later, they are going to need work," Ramberg says of the turbines. Most of his wind business is from California wind farms, but as the Pacific Northwest's wind sector expands, Ramberg should get plenty more business from nearer by. Ramberg says that's one of the reasons he has built a 20,000-square-foot test-and-repair facility with help from a grant from the U.S. Department of Energy's National Renewal Energy Laboratories. "When your wind turbine starts crapping out, we want to be the place you think of," says Ramberg. Even at the Gear Works, however, wind finds itself in competition with coal. Ramberg points out that 25 percent of his business involves conveyer belts for coal mines in China. Until coal is made to pay for harm from its emissions, wind will keep playing catch-up.

The state's largest industry for clean energy is invisible. That's because the energy- efficiency industry saves energy rather than generates it. In the 1970s, energy efficiency was known as conservation. Northwest Energy Coalition's Krasnowsky explains the reason for the name change: "Conservation creates an image of huddling under a blanket in the dark."

Whatever it's called, saving energy is the first choice of private utilities, environmentalists, and public-policy experts when it comes to dealing with an energy crisis. The Northwest has been very successful at employing energy-efficiency strategies over the past 20 years. Tom Eckman, the Northwest Power Planning Council's manager of conservation resources, says that from 1982 through 2002 the region met 40 percent of the need for new electricity. That's 2,500 aMW of energy savings. "You don't see that built," says Eckman. "It's one lightbulb, one piece of insulation, and one showerhead at a time." The NWPPC estimates that the Northwest will find new energy savings equivalent to 2,500 more aMW over the next 20 years. The biggest saver? "Changing the lightbulb," says Eckman­replacing incandescent lightbulbs with compact fluorescent ones.

In industrial plants and office buildings, the latest technology for heating, ventilation, and air conditioning (HVAC), motor drives, conveyers, and pumps is providing precise computer control over everything from lighting to room temperature. "The direct digital control in commercial buildings is a real improvement in terms of creature comfort and energy efficiency," says Eckman. He notes that there is another technological revolution right around the corner as computer controls go wireless, reducing the cost of installing new systems by eliminating the need for stringing cables.

New digital controls are on display on the 37th floor of One Union Square, a 650,000-square-foot, 20-year-old office building in downtown Seattle. "I get so excited when I see this stuff," says Rick Mock, the director of facilities for Washington Real Estate Holdings, which manages One Union Square. As he shows me a computer screen displaying the "chiller system" with graphic and numeric elements, I can understand about one-tenth of what Mock is telling me. But there is no mistaking his enthusiasm. Mock's fascination with the latest gadgets and his zeal to improve the building's energy usage have translated into savings of $450,000 a year in electricity. Mock arrived at One Union Square in 1999 and noticed immediately that he received a lot of complaints from tenants about being too hot or too cold. He began to evaluate the building's HVAC and lighting systems and started to advocate for a major overhaul. "This building was a runaway train," he says. "We had to do something." After working with Seattle City Light and other managers at Washington Real Estate Holdings, the company undertook a $3.5 million renovation of HVAC and lighting. City Light kicked in $750,000 of the overall cost, reducing the time for the project to pay for itself to six years. "It's a neat initiative from a monetary standpoint and from the environmental standpoint," says Tim Holt, vice president at Washington Real Estate Holdings. As an added benefit, tenants are happier now. Mock fields far fewer complaints about temperature.

McKinstry, a 35-year-old, 650-person mechanical contracting company, did the work at One Union Square. Highly respected in the field, McKinstry is an example of a large energy-services firm that has a mature business in energy efficiency but does not rely on that sector alone. Stan Price, executive director of the Northwest Energy Efficiency Council, an 80-company trade group, says the industry includes Fortune 500 companies like Johnson Controls and Siemens as well as small specialty shops and midsized energy firms. Price has watched the industry expand and contract over the past 25 years as energy prices have risen and fallen. "We are in a marketplace more driven by energy prices than we would like," says Price. He predicts there will be no problem meeting the increased demand that the latest round of energy price spikes will engender. Price believes that the lion's share of employment and sales in the state's clean-energy sector are in energy efficiency. Yet he acknowledges that energy efficiency doesn't get the same kind of buzz that surrounds less-significant industries like biofuels. "It's a bit of a sleeper," he says.

Politicians are not clamoring with new proposals to encourage energy efficiency. Last year, the Legislature did pass the nation's first "green building" standards for new construction of public facilities. Mandating new energy efficiency for private construction would be a welcome innovation, but no legislative champion has emerged. Many utilities, though, both public and private, offer grant programs to encourage conservation. Washington state Apollo Alliance coordinator Rich Feldman would like to see Gov. Gregoire launch an ambitious $100 million, zero-interest loan program for retrofitting public buildings with the latest energy- efficiency equipment. The improvements would pay for themselves with the savings, he claims. So far, Gregoire has not adopted the proposal, but she hasn't rejected it, either.

The task facing clean-energy advocates is daunting. The industrial and political challenges ahead are huge. But if we need any flesh-and-blood reminder of how disastrous our nation's current energy policy is, just turn on the nightly news and be reminded of the cost of our reliance on Middle East oil. While a clean-energy future seems a challenge, it's unimaginable that a dirty, blood-soaked energy future will be possible to bear.

http://www.seattleweekly.com/

Posted by Arthur Caldicott on December 15, 2005

Dec 15 - Last day to register for VITR & VIC Town Hall Meetings

The BC Utilities Commission (BCUC) is conducting a consolidated review of two cable projects being proposed to bring mainland power to Vancouver Island. Part of the proceeding includes four "Town Hall Meetings" in communities on the routes of the proposed transmission lines. These are Surrey, Tsawwassen, Salt Spring Island and Duncan, on Vancouver Island.

Presenters must pre-register with the Commission Counsel. The registration deadline is Thursday, 15 December, 2005.

THAT'S TODAY!

To register, contact Mr. Gordon Fulton, Commission Counsel by email at gfulton@boughton.ca or by telephone at (604) 687-6789.

Other important things to know:

- Presentations are limited to ten minutes.
- A presentation projector will be provided if you wish to use a computer.
- If fewer than six presenters register for any specific town hall meeting, that meeting may be cancelled.
- Intervenors who choose to present at a town hall meeting will not be permitted to make a further presentation during the oral hearing.

More information and guidelines about these specific town hall meetings is available in three documents issued by the BCUC.

A-39 Notice of Town Hall Meetings
http://tinyurl.com/dfnag
A-41 What can I expect at the Town Hall Meetings and Oral Public Hearing?
http://tinyurl.com/bqwua
A-44 More rules about Town Hall Meetings
http://tinyurl.com/d64ca

BCTC-VITR & Sea Breeze-VIC Hearing Schedule

Action Date
Mon, 19-Dec-2005 BCUC and Participant Information Requests to Intervenors with respect to the VIC Application

Fri, 06-Jan-2006 Intervenor Responses to Information Requests with respect to the VIC Application

Fri, 06-Jan-2006 Hul'qumi'num Treaty Group may file rebuttal evidence to BC Hydro/BCTC evidence relevant to consultation and accommodation

Sat, 07-Jan-2006 Town Hall Meeting (Salt Spring)

Tue, 10-Jan-2006 Town Hall Meeting (Tsawassen)

Thu, 12-Jan-2006 Staff issue Hearing Issues List

Sat, 14-Jan-2006 Town Hall Meeting (Vancouver Island - Duncan)

Mon, 16-Jan-2006 Opening Oral Submissions

Wed, 18-Jan-2006 Proponent Consolidation of Hearing Issues List

Thu, 19-Jan-2006 Town Hall Meeting (Surrey)

Fri, 20-Jan-2006 Panel issues Hearing Issues List

Mon, 23-Jan-2006 Public Hearing commences

The BCTC-VITR and Sea Breeze-VIC cable projects are being reviewed in a consolidated hearing by the BC Utilities Commission.

BCTC-VITR: BC Transmission Corp. - Vancouver Island Transmission Reinforcement, 230 kV AC cable from Delta to Duncan
http://www.bcuc.com/ApplicationView.aspx?ApplicationId=78

Sea Breeze-VIC: Sea Breeze Pacific Regional Transmission System Inc. - Vancouver Island Cable, 300 kV HVDC Light cable from Surrey to Victoria
http://www.bcuc.com/ApplicationView.aspx?ApplicationId=90

Posted by Arthur Caldicott on December 15, 2005

December 14, 2005

Victoria, Hydro drag heels on alternative energy

By Don Whiteley
Vancouver Sun
14-Dec-2005

The provincial government's abrupt decision a week ago to send BC Hydro back to the drawing board on its 20-year Integrated Electricity Plan (IEP) is one more indication that this province is suffering from a severe case of constipation when it comes to future electric power needs.

The move comes only a couple of months after Hydro itself abruptly withdrew its application to build a natural gas-fired power generating station at Duke Point on Vancouver Island. Given today's natural gas spot price of $14 per thousand cubic feet, perhaps that's a blessing in disguise. But at the time, it was a serious slap in the face to the province's independent power producers.

Further to that decision, Hydro's call for additional power supply from independent producers, originally scheduled for the fall, is now going to happen in the new year. Hydro just posted the terms of the call on its website last week.

And there's growing evidence that B.C. is falling well behind almost every other jurisdiction in the country -- if not in North America -- when it comes to promoting the use of alternative energy supplies such as wind or tidal power. While other provinces are installing wind turbines, B.C. is still putting roadblocks in the way.

All this is coming when it is now clearly recognized that the province can't meet its energy needs through conservation alone, and as Hydro's reliance on external power sources -- it now imports more than 10 per cent annually -- continues to grow. Less than a month ago, the B.C. Progress Board chastised the province for twiddling its thumbs on this issue for the past 20 years.

Depending on whom you speak to, the fault lies either in Victoria through a provincial government that won't issue clear directions, or at Hydro where the utility has not yet built a good financial case for its marquee Site C dam project.

David Austin, speaking for the Independent Power Producers of British Columbia, thinks the Site C project is the reason Victoria balked at the IEP. In a letter to Hydro, Austin states: "If BC Hydro generating resources are to be included in some way as part of the IEP, then at a minimum, BC Hydro should have prepared and made public for scrutiny the corresponding financial models. The IPPBC has repeatedly asked for BC Hydro's Site C financial model and none has been received. As a result, the IPPBC has absolutely no confidence in the price information that BC Hydro has provided to date with respect to Site C."

Guy Dauncey, president of the B.C. Sustainable Energy Association, sees the main problem as a planning "vacuum" in Victoria, where electricity policy-making has been abandoned in favour of letting the B.C. Utilities Commission call the shots.

"There's a very clear policy vacuum," says Dauncey. "Last year we missed the opportunity to have a major wind-assembly plant built in B.C. -- probably Squamish -- because of the policy vacuum. They were looking for a place at the end of a rail line to put a wind-assembly plant. They wanted B.C. to put 1,000 megawatts of wind power into the grid to show there's a local market."

Dauncey's association produced a recent report that document's the potential for alternative energy potential in the province.

"Wind, solar, tidal, geothermal and other technologies, combined with energy savings from efficiency measures, would produce 84,000 gigawatt hours a year," his report states. "This is 50 per cent more than BC Hydro's current total generation, and enough power for 8.4 million homes."

In an interview, Dauncey said no jurisdiction in North America is better situated for the advancement of "green" technologies: "We are the most favourably placed jurisdiction in the whole of North American for having 100 per cent green power."

But while Alberta, Manitoba, Quebec, New Brunswick and Prince Edward Island are in the forefront of developing wind power, B.C. has yet to build its first commercial projects, although two have been approved -- Sea Breeze Power Corp. for a project on northern Vancouver Island, and Nai Kun Wind for a project on Haida Gwaii

Sea Breeze has approval to build a 450-megawatt wind farm, but hasn't been able to reach an agreement yet with BC Hydro to buy the power.

Instead, the company last month applied to the National Energy Board for permission to build a 550-mw undersea power cable from Victoria to Port Angeles so it can sell power into the U.S. market.

Tidal power has huge potential too, with three companies on Vancouver Island in various stages of development, one only months away from a pilot project at Race Rocks designed to prove the concept. But there is unhappiness in this area, too.

"That's our Niagara Falls," says Michael Maser, communications director at Blue Energy Canada Ltd. "But we're not pumping a single kilowatt of tidal energy in this province. That's staggering."

Blue Energy hopes to tap tidal power with a project in Johnstone Strait north of Campbell River.

Dauncey concurs, pointing out that the United Kingdom is pouring millions of pounds into the development of tidal energy in recognition of its value as an emerging technology.

"Tidal is the firmest of the non-firms because you can predict it, and you know exactly when it's coming in," he said "At the moment, we're losing the race. Britain is jumping ahead and throwing money at tidal energy."

All these developments lead to serious concerns that neither Hydro nor the province are moving quickly enough, nor are they prepared to provide sufficient catalysts to get alternative energy projects moving.

A provincial Task Force on Alternative Energy was recently struck and is expected to issue a report in the new year, while at the same time the Ministry of Energy Mines and Petroleum Resources is revising its overall energy policy.

Other jurisdictions are building things.

don_whiteley@telus.net

Posted by Arthur Caldicott on December 14, 2005

December 13, 2005

Government yanks BC Hydro's chain

Political squeamishness sinks Hydro's plans to talk about electricity
Vaughn Palmer, Vancouver Sun, 08-Dec-2005
Government concern about Site C dam stalls power plan
Scott Simpson, Vancouver Sun, 08-Dec-2005
Hydro's a political animal once again
Paul Willcocks, Times Colonist, 09-Dec-2005
Cabinet says it needs time to review Hydro energy plan
Scott Simpson, Vancouver Sun, 09-Dec-2005
We need bright lights to develop hydro projects
Editorial, Vancouver Sun, 10-Dec-2005
Victoria finally notices Hydro's bumbling
Brian Lewis, The Province, 11-Dec-2005
Hydro needed to have its plug pulled
Les Leyne, Times Colonist, 13-Dec-2005



Political squeamishness sinks Hydro's plans to talk about electricity

By Vaughn Palmer
Vancouver Sun
08-Dec-2005

VICTORIA - The B.C. Liberals have intervened directly in the management of BC Hydro, forcing the giant utility to pull the plug on a major announcement about the development of electrical power.

The announcement, set for today at 10 a.m., would have seen the release of Hydro's long-in-the-works integrated electricity plan.

CEO Bob Elton, flanked by business leaders, was scheduled to "reveal B.C.'s path to energy self-sufficiency for the next 20 years" as well as "outline the future of the highly debated Site C dam."

But even as the media advisory for those coming attractions circulated in provincial newsrooms, the Liberals were at work derailing it.

Though the plan had been in the works for months and the announcement for weeks, the politicians only got wind of the details Tuesday afternoon.

They didn't like what they'd heard, especially regarding Site C. Hydro was proposing to move to full-blown public consultations on the enormous and controversial third hydroelectric dam on the Peace River.

The public wasn't ready for this discussion. Heck, the politicians weren't ready, and some of them hoped to see the dam built in their lifetimes. Given the lack of extensive groundwork, the debate would surely be dominated by the critics. The premature launch could eliminate any chance to develop public support, and doom the project once and for all. In the space of a couple of hours, the Liberals decided to order Hydro to back off.

Though the decision was ultimately driven by Premier Gordon Campbell, it fell to Energy Minister Richard Neufeld to deliver the message.

It must have been tough for him. Neufeld has represented the Peace River region for more than a decade and has long advocated building a dam at Site C.

But the experience must have been far more bruising for Elton. The Hydro CEO had reason to think he'd gone about this in the right way.

Preliminary consultations with stakeholders and the public throughout the fall. Extensive planning. No big secret about Site C being one of the options.

Hydro even tried to keep the premier's office in the loop. But a briefing at the senior official level did not result in a briefing for the politicians on where this thing was headed -- until it was too late for them to do anything but slam on the brakes.

That, in turn, translated into a second media advisory from Hydro, sent out Wednesday afternoon.

"As you know, we intended to release our integrated electricity plan on Thursday," it said. "In consultation with government, we have now decided to postpone this release."

The "in consultation with government" was a nice euphemism. As opposed to "after having our chain yanked by Victoria" or "because the politicians weren't ready for a public debate on this issue now or maybe ever."

Hydro phrased it differently in a memo that went out to a committee of stakeholders who'd been invited to participate in a conference call before the release of the plan. "We apologize for the short notice but we will be cancelling the call," it said. "At the present time we are still engaged in an internal review process and in consultations with the shareholder."

The shareholder being me and thee, since Hydro is publicly owned. But in this instance we are represented, like it or not, by the politicians.

Cryptic as it was, the brief notice left no doubt that the electricity plan has been overtaken by a political agenda.

"Both government and BC Hydro have a strong desire to ensure the plan is fully reviewed in the context of government's energy policies," it said. "This will be accomplished in the coming months."

That raises a concern about the fate of a process that has, up to now, been monitored the B.C. Utilities Commission.

"We will bring forward the integrated energy plan in the new year, as required by the utilities commission," vowed Hydro, even as its scrubbed today's release.

But the whole point of delegating the planning process to the commission, is that the BCUC functions as an independent regulatory body.

The Liberals repeated that theme ad nauseam during the recent debate over a U.S. firm's purchase of Terasen gas.

The government wasn't going to step in and block or even delay the takeover. The decision was up to the utilities commission, which would render a verdict ("Yes," as it turned out) without political interference.

The Liberals said the same thing about Hydro. Decisions would be governed by the province's energy needs, by markets for power, and the public interest.

"The days of political interference are over," -- the Liberals said it again and again.

Perhaps Bob Elton and his team at BC Hydro believed them. Which must have made this week an important learning experience for all concerned.

vpalmer@direct.ca

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Government concern about Site C dam stalls power plan

By Scott Simpson
Vancouver Sun
08-Dec-2005


BC Hydro's ambitious 20-year plan for a multibillion-dollar makeover of British Columbia's electricity system hit a major snag Thursday when the provincial government ordered Hydro to back off out of concern about the controversial Site C dam project.

Hydro officials had little to say. Bob Elton, Hydro president and CEO, issued a brief statement by e-mail that the plan, which was to be unveiled today, would be delayed until an unspecified date next year.

Hydro's "Integrated Energy Plan" was expected to include a mix of small, private sector hydroelectric projects, electricity conservation initiatives, upgrades to large government-owned facilities -- and a decision to proceed with the controversial Site C dam on the Peace River near Fort St. John.

It was not immediately clear if the province's concerns were attributable to soft cost estimates for Site C -- which would cost taxpayers a minimum $3.5 billion -- or strong opposition from first nations in northeast B.C., or a conflict with independent power producers who were promised in 2002 that all new power projects in British Columbia would be developed by the private sector.

"In consultation with government, we have now decided to postpone this release and will be doing further work to ensure that this plan meets the needs of ratepayers," Elton said.

Earlier this week, some B.C. Liberal MLAs told Vancouver Sun political columnist Vaughn Palmer that they had concerns about Hydro's ability to shepherd the controversial Site C hydroelectric project -- the cornerstone of the new plan -- through to completion.

NDP energy critic Corky Evans said the province's 11th-hour involvement casts a shadow across more than a year's worth of community consultation and preparatory work by BC Hydro.

"What I find really bizarre is that it flies in the face of the Liberal mantra, maintained all through the public debate about the sale of Terasen Gas and the controversy about the [CN] railroad and all kinds of stuff, that it was not their intention to manipulate public processes or commissions or Crown corporations," Evans said.

Energy Minister Richard Neufeld was tied up in a series of meetings and could not be reached for comment.

Hydro goes through a similar planning exercise very two years, submitting details to the B.C. Utilities Commission as per its regulatory requirements.

However, this year's version of the plan was considered to be its most ambitious effort in more than a decade, in light of British Columbia's growing dependence on imported electricity to supplement a provincial resource that has not grown significantly in volume since the Revelstoke Dam was built in the early 1980s.

Earlier this month, Treaty 8 first nations in northeastern B.C. advised Hydro that they "adamantly" oppose Site C.

The construction of two earlier dams on the Peace, the W.A.C. Bennett and Peace Canyon dams, led to flooding of millions of acres of traditional hunting and fishing territory for the bands.

A BC Hydro summary of a meeting with the aboriginals reported that they "made it clear that they are adamantly against the development of Site C."

ssimpson@png.canwest.com

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Hydro's a political animal once again

By Paul Willcocks
Times Colonist (Victoria)
09-Dec-2005

The Liberals' big commitment to keep politicians' hands off Crown corporations like B.C. Hydro is fading fast.

B.C. Hydro's brightest and best have been labouring away on a long-term energy plan, with the Site C dam as the centrepiece. This week was supposed to be the big unveiling.

Hydro CEO Bob Elton announced a press conference where he would be flanked by business types, and vice-presidents were fanning out to meet with the media. And then 20 hours before the big announcement, the politicians pulled the plug.

"In consultation with government, we have now decided to postpone this release and will be doing further work to ensure that this plan meets the needs of ratepayers," Elton said in a terse news release.

Hydro's future also needs to be "fully reviewed in the context of government's energy policies."

The order was not well-received in Hydro. The 20-year Integrated Energy Plan has been more than a year in the making, with a high-profile advisory committee, public meetings and lots of consultants and studies. It was to be the definitive look at energy needs for the next two decades, and the best way to meet them.

The B.C. Utilities Commission was set to review it.

Something has gone seriously wrong when the politicians step in at the last minute, stepping all over Hydro's board and management. Energy Minister Richard Neufeld said the government wanted more time to review the plan, which was presented to Liberal MLAs at a caucus meeting this week.

The Crown corporation just got a little ahead of itself, he said. But Neufeld didn't rule out changes before the plan goes to the utilities' commission.

The explanation leaves a few questions. The government has known for a year that the plan was going to the utilities commission this month, and for days that the announcement was scheduled for this week. There were no big surprises in the document, as energy ministry officials have been involved with the process all along.

So the last-minute cancellation suggests someone -- the caucus, the premier's office -- got nervous.

There's lots to get nervous about. Hydro's assessment of energy needs and the solutions it backs will have huge implications for the provincial economy.

If it underestimates demand, B.C. will need to buy more expensive power from the U.S. If Hydro overestimates, the corporation will build power plants it doesn't need. Both would cost consumers money. If it makes the wrong choices on issues like big coal-fired plants vs. small hydro projects, the province's economy is affected.

Hydro's preferred plan is likely based on building the Site C dam across the Peace River near Fort St. John, as well as energy conservation measures and additional power from private producers.

Site C makes a lot of people nervous. The $3.5-billion project was already scuttled by opponents once, in 1991.

Independent power producers don't like the proposal, because they want to supply the electricity. First Nations have issues about lost hunting land when thousands of acres are flooded. And the accuracy of Hydro's cost projections have come under fire.

The Liberals have made much of the need to let Crown corporations operate without political interference, never missing a chance to talk about the $460 million lost thanks to the NDP's half-baked fast ferries project. But there's been increasing recognition that leaving Crown corporations to their own devices carries its own risks and missed opportunities.

The B.C. Progress Board, a business panel appointed by the premier, weighed in last month with a report saying government, not B.C. Hydro, should be setting energy policy.

"B.C. Hydro is seen by many concerned parties to heavily outweigh the ministry in staff and resources, which puts the government in the position of not being able to provide adequate oversight and direction," said the panel, chaired by Victoria newspaper mogul David Black.

The last-minute scuttling of the launch of B.C. Hydro's energy plan suggests the government has come to the same conclusion, and is reining in the Crown corporation.

Footnote: Things will get complicated quickly if the government wants significant changes to the plan. Hydro is supposed to present it to the utilities commission within the next three months. Any major reworking could make it tough to meet the deadline -- especially if B.C. Hydro's co-operation is less than enthusiastic.

willcocks@ultranet.ca

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Cabinet says it needs time to review Hydro energy plan

By Scott Simpson
Vancouver Sun
09-Dec-2005

British Columbia's increasing dependence on imported electricity was behind the provincial government's decision to order a halt to BC Hydro's plans for a multi-billion dollar system makeover, Energy Minister Richard Neufeld said Thursday.

Neufeld says the government cancelled Hydro's announcement of an Integrated Energy Plan because of a general concern that the B.C. Liberals haven't had enough time to mull all the implications of Hydro's plans.

He says Hydro has done laudable work in preparing the plan, which is supposed to outline a 20-year effort to restore British Columbia to a position of independence from U.S. electricity suppliers who now serve about 12 per cent of B.C.'s annual electricity consumption.

But he added that cabinet was not willing to green-light the plan on the basis of a 30-minute briefing on Tuesday afternoon by senior Hydro officials.

Neufeld noted that Hydro had spent "well over a year" preparing its plan, "but we didn't see it in its complete form until late Tuesday afternoon."

A proposal to build a major new dam at the Site C location on the Peace River near Fort St John, at a cost of at least $3.5 billion, was expected to be a major component of the new Hydro plan.

That project is expected to attract opposition, particularly among first nations and non-aboriginal residents of northeast B.C. who say the region already contributes more than its share of power to the provincial electricity grid.

Opponents of Hydro's plan for a gas-fired electricity generating plant at Duke Point on Vancouver Island helped kill that project, at a cost to taxpayers of $125 million.

Neufeld said cabinet believes it is important for all B.C. residents to fully appreciate the pros and cons of all proposed new major projects so that they can make an informed choice about how the province should proceed to lessen its dependence on import power.

He said the government does not want to begin to address the situation without the public first understanding what's at stake -- and does not believe most residents are aware of the problem or the government's desire for energy self-sufficiency.

"We are facing some significant challenges and I don't think that on the basis of a half hour presentation by the crown [corporation] that provides almost all the electricity in the province, that you just run with it. I think that's a recipe for some real disaster," Neufeld said.

"I don't think I want to be tied to imports for 12 per cent of our energy like we are this year. I think to be perfectly honest that's nuts because it holds us ransom -- maybe not today but at some point in time.

"We buy most of it from south of the border, and when they get to the point where they are consuming all of that electricity themselves and perhaps they haven't built any new generation, they're not going to sell to us."

Hydro had informed the media earlier this week that it would announce the plan on Thursday, but instead issued a brief statement on Wednesday to say that the announcement was cancelled.

Hydro did not elaborate.

Neufeld said he regards Hydro's plan as one of four contributing reports that will guide cabinet deliberations about a possible revision of its 2002 energy plan -- and added that cabinet is still awaiting two of those reports, one on B.C.'s alternative energy options and the other from the province's competition council.

ssimpson@png.canwest.com

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We need bright lights to develop hydro projects

Editorial
Vancouver Sun
10-Dec-2005

The Liberal government and B.C. Hydro have stumbled badly in the development of a crucial plan to maintain an ample supply of electricity for the next 20 years.

At the last minute this week, the government ordered Hydro to cancel the unveiling of its Integrated Energy Plan, which has been under development for more than a year.

The government's intervention is disturbing at a number of levels. First, it flies in the face of the Liberals laudable promise to end political interference in Crown corporations.

If government officials have no confidence in the executive and board of directors of B.C. Hydro, they should replace the board with one in which they can have confidence. By undercutting the board, the government has further damaged Hydro's reputation as a stable partner for private sector investors in energy projects.

Hydro's credibility in that regard was already in some doubt following its astounding decision last year to pull the plug on the Duke Point project, leaving its private partner in the lurch and its customers with a bill of $125 million for which they will get nothing in return.

Just as importantly, this debacle comes on the heels of another report last month from the B.C. Progress Board that pointed out the urgent need for developing new electrical production capacity to protect our standard of living.

In the past, we've been been pretty smug about our energy resources, especially our hydro dams. But no significant new capacity has been added in the past two decades while our population has grown by a third.

B.C. still makes money by exporting power during peak demand periods in the U.S. and importing it when spot rates are lower. But we are now in a slow squeeze, with the imported portion of our electricity supply growing more costly every year. More urgently, as is happening in Ontario, any dependency on external power generation can lead not only to inconvenience and expense for consumers, but also sabotage the economy.

After a record-hot summer tested the limits of supply in Ontario, the president of Canadian Manufacturers and Exporters Association warned that firms will simply move elsewhere if they can no longer be assured of a reliable and affordable supply of electricity.

One controversial component of the new B.C. Hydro plan was to have been an examination of the possibility of building a major dam at Site C on the Peace River near Fort St. John. Energy Minister Richard Neufeld says cabinet wants the public to have a better understanding of the looming electricity shortfall before the government starts discussing major new projects so it will understand what's at stake.

Fair enough, but more than 18 months have already passed since Hydro started talking about Site C and Neufeld has been energy minister for almost five years. How much time does he need?

The dams that produce our clean, cheap electricity now were built by leaders who could see not only what British Columbia was, but what it could be.

We need that kind of leadership again today, before the lights go out.

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Victoria finally notices Hydro's bumbling

By Brian Lewis
The Province
11-Dec-2005

Somewhere deep within the B.C. Legislature's stone walls last week a light bulb suddenly burst into brightness, thus illuminating a growing problem this province has with electricity and B.C. Hydro.

Word is that the "somewhere" was the premier's office, where it suddenly dawned on the backroom that its policy of letting Crown corporations like B.C. Hydro run their own show is flawed.

A policy of no political interference is laudable given what the NDP did with Fast Ferries, but the Liberals' response also holds risks, as we're now seeing with Hydro.

Here's the background: Since the mid-1980s B.C.'s abundant domestic electricity surplus steadily declined to the point where in 2000 we became deficient and now must import about 12 per cent of our electricity to meet domestic demand.

This means that one in eight houses on your block runs on higher-cost electricity imports. The last major domestic power generation project came on-stream in 1984.

The problem began under the NDP, who used Hydro as a cash cow, siphoning off mega-dollars for other flights of fancy instead of upgrading and expanding the B.C. electricity grid to keep pace with growing demand.

But the Liberals have failed too, by allowing the province's largest Crown corporation too much independence without offsetting accountability.

As the recent Premier's Progress Board report on B.C.'s energy future noted: "B.C. Hydro is seen to set its own policies on electricity supply or responding to matters of public interest, such as the Energy Plan, in its own time and manner . . ."

Consequently, Hydro's track record on increasing power supply has been dismal indeed. Witness the now-shelved Duke Point/Vancouver Island natural gas pipeline fiasco that cost ratepayers $120 million.

Late last week Hydro was supposed to release its much-touted Integrated Electricity Plan, a 20-year blueprint for bringing B.C. back into a surplus electricity position, which the utility had been working on for a year.

Less than 24 hours before this plan was to be unveiled with all the pomp and circumstance of a B.C. budget, it was unexpectedly killed by Victoria.

The official explanation was that a review of the government's existing Energy Plan is awaiting a number of reports so that all of them, including the IEP from Hydro, can be studied together.

The energy ministry also said it didn't have enough time to study Hydro's plan before its scheduled release last Thursday.

Believing the latter explanation is akin to believing in the Tooth Fairy, since energy ministry officials have been involved in the IEP all along.

The real reason for pulling the plug, I'm told, rests with the 20-year-plan's central plank -- the Site C hydro-electric project.

Simply put, if Victoria allowed Hydro to proceed with this Peace River project as outlined in its IEP, there's a high risk that it would become another Fast Ferries fiasco -- only one with much higher cost consequences for taxpayers.

The problem is that Hydro's cost-estimates for Site C are not only all over the map, they're incomplete, sources say.

Last May, the utility was touting Site C at a construction cost of $2.26 billion with electricity costs of about $48 per megawatt hour. Last week it was talking about a $3.5 billion capital cost with electricity costs of $43 per megawatt hour. A higher capital cost with a lower cost for the electricity?

Nor have many other costs including transmission-line upgrades to the Lower Mainland, inflation or First Nations treaty costs, been included in the costing, sources say.

Realistically, they add, electricity costs in the $60-$70 per megawatt hour range are more likely.

Add up all these deficiencies and no wonder the premier pulled the plug. Even with transparent costing, Site C is going to be a very tough sell politically.

In the meantime, as B.C. power planning stumbles and bumbles along, the need to import electricity increases and that means much higher electricity bills are in store for everyone.

Brian Lewis is Money Editor of The Province. He can be reached at blewis@png.canwest.com

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Hydro needed to have its plug pulled

By Les Leyne
Times Colonist (Victoria)
13-Dec-2005

Full marks to the provincial cabinet for embarrassing B.C. Hydro by putting a last-minute hold on the utility's grand release of its 20-year-plan.

They should have done it sooner.

The Liberal move has provoked some alarm about political interference in the highly technical field of electricity supply. But if there's one area where a dash of political meddling would go well right now, it's in the area of energy policy.

B.C. Hydro has a huge reservoir of technical expertise and a headquarters full of experts who know what they're talking about. There's no doubt the integrated electricity plan they've been working on for more than a year will be a comprehensive document.

But writing a good plan is one thing. Executing a plan is another. And that's where B.C. Hydro has been falling down lately, and that's why the politicians stepped in.

It would be very surprising if they actually interfered in the plan itself during the delay period imposed on the release, which could last six months.

What they're planning to meddle in is the communication plan leading up to the execution of the long-range vision.

And looking at Hydro's record of executing plans and building things over the last while, it's clear they badly need some help on that front.

There's no clear record of whether it was that or something else on the government's mind. But something prompted them last week to blow a very abrupt whistle on Hydro's long-awaited release of the plan.

At the last minute, Hydro CEO Bob Elton said that after "consultation with government," it was all postponed until spring.

"Further work" is needed to ensure the plan meets the needs of ratepayers, said a statement put out in his name.

Behind the scenes, it's been reported that the Liberal cabinet looked at the plan's recommendation to proceed with another big-league dam on the Peace River and decided that a lot more prep work has to be done before that socially complicated project can proceed.

That's essentially what the Progress Board report said the week previously. It urged that B.C. become self-sufficient in electricity -- a luxury lost about five years ago. And it recommended the government step up and start, well ... interfering.

"It is the role of the B.C. government to speak for the public in this regard, and it is the role of B.C. Hydro to follow the direction of government."

But the report said exactly the opposite is the norm: Hydro has the government out-gunned in any energy discussions, and sets its own policy "in its own time and manner."

Elton's statement last week after the rug was pulled out from under him tried to smooth everything over, saying both government and Hydro have a strong desire to ensure the plan is fully reviewed in the context of the government's energy policies.

You'd think that's exactly what they've been spending the last year doing, but apparently the master plan was a big surprise full of new revelations to the provincial cabinet. It's obvious there's a gulf now between the government and Hydro. It's not about whether to build that multi-billion dollar dam, though.

It's about how.

First Nations and other residents in the area have to be brought on side, much firmer cost estimates have to be established and the need for the power has to be explained to people before the bulldozers move in.

In the back of the politicians' minds is Hydro's track record when it comes to embarking on major projects. The problem is that they don't have one any more. The days of the utility's mega-projects are far behind us. Hydro has made incremental increases to its generating capacity, but it hasn't made a major addition to the energy supply since 1984.

And even when it comes to building smaller projects, like the Vancouver Island Generating Project, the utility got bogged down in a wild-goose chase up and down the Island that cost 10 years and $120 million before it fizzled out last summer with nothing to show for it.

If an outfit like that showed up at the door with a 20-year plan for the province's energy future, you'd want to think twice about it, too.

The danger in some minds is that -- now that the ice is broken -- the politicians will take to this new policy of intervening and start throwing their weight around on technical questions, as well.

That's the habit previous New Democrat governments fell into, and let's just say it doesn't work out.

Cabinet is expecting two more substantial reports on energy, one on alternative energy prospects and one from the competition council.

They need to digest those early next year, get a better idea from Hydro on how to pitch the Site C Peace project as doable, make some informed guesses and then get out of the way.

But there's no harm so far in jerking B.C. Hydro's chain.

leyne@island.net

Also of interest: Leyne's 24-Nov-2005 column, "Who's got the power with our power?" (link)

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Posted by Arthur Caldicott on December 13, 2005

December 10, 2005

United Nations Climate Change Conference
Montreal, November 28-December 9, 2005

Guy Dauncey of the BC Sustainable Energy Association (www.bcsea.org) has been at the conference, and his blogs from Montreal are a rewarding read. You can find them all at www.bcsea.org.

Here is his last blog and summary of proceedings:

Saturday, December 10th

Well, it is all over, and the story is: SUCCESS!

The last two days have been full of ups and downs, which I have tried to follow and interpret (and occasionally mis-interpret) through a mixture of conversations and following the latest media interpretations via Google News (a recent discovery: if you set up a personal Google News page http://news.google.ca/, you can personalize it to send you only the news stories that carry a particular phrase, such as ‘climate change’ or ‘flying giraffes’. Very handy).

The final deal, which was gaveled down by Stephane Dion at 6.17am this Saturday morning, is (1) that the Kyoto nations have agreed to start discussions to draft a new long-range plan to combat climate change, to start in 2012 when Kyoto expires; and (2) that the larger group of world nations, including the USA, China and India, which signed the 1992 Convention but which have not ratified Kyoto, will hold an open-ended dialogue to discuss ways to reduce greenhouse gas emissions, but with the specific inclusion of a clause that the Americans demanded insisting that the dialogue for these nations not include any talk about new commitments. The world’s delegates cheered when the deal was finally done.

The NGO community is jubilant, full of hugs and tears. The deal is done, and the world can get down to work to tackle the really big task: implementing the actions, as well as the words. In addition to those two agreements listed above, there were also successful conclusions to a lot of side-agreements regarding the detailed implementation of the existing Kyoto Protocol. The best news coverage I’ve seen so far is from Peter Gorrie, in the Toronto Star (link)

My Google News indicator says there are 1,533 related news stories, which tells you how busy the world’s media is with this issue. The Reuters story is also good. (link)

But there was also a second, really significant outcome from the talks. A new informal world standard has emerged for a 30% reduction in emissions by 2020, and an 80% reduction by 2050. The new C20 group of major world cities (including London) has signed onto this goal, as has the European Parliament. This was also the goal set by the youth delegation, which has received a LOT of attention. California has adopted the 80% by 2050 goal, and President Chirac has said that France and the other developed nations should strive for a 75% reduction by 2050.

Personally, given what I know of the science, I don’t think this is good enough: I believe we should aim for an 80% reduction by 2025, but for what’s politically achievable right now, that places me in cloud cuckoo land. I’ll still hold to that goal, while trumpeting the 30% by 2020 and 80% by 2050 goals as fantastic.

These are not legally binding goals, of course; but they set the tenor of the direction in which we should be heading. What’s great about them is that the small numbers, such as a 6% reduction, allow people to think that we can continue with business as usual, while just fiddling with a few details. An 80% reduction calls for a complete rethink of the way we use energy, travel, and live, and opens the door to a future designed entirely along the lines of green sustainability (unless it’s done with nuclear, which is still in play).

Friday was full of excitement, as it seemed as if everything might come off the rails, at some points. Six months ago, when we knew that COP-11 would happen in Montreal, Elizabeth May of the Sierra Club invited various high-level people to attend, with the hope and intention that it would involve the mainstream American media and others, and awaken the USA to what was happening. The Sierra Club’s strategy worked brilliantly, not only because there has been a very strong presence from US city mayors, California State, and other leaders, who have made it quite clear that they are behind Kyoto, and more (195 US cities have now signed onto the full Kyoto goals), but also because Elizabeth’s trump card came up good when Bill Clinton decided just 3 days ago that yes, he would attend.

This threw everyone into an excited tizzy, and when the big moment arrived, around 2pm on Friday, everyone went into the big plenary room, where all of the chairs had to be turned round, so that Clinton would not speak under the formal UNFCCC logo. Then we all had to leave the room while it was ‘swept’ (not for litter, but for aliens from Mars), and then we all trooped back in, and Clinton immediately received a big standing ovation, before he’d even opened his mouth.

In his speech, he showed his normal flair with numbers, examples, policies and practices (it is just impossible to imagine George W giving a similar kind of speech), and really emphasized the economic benefits of greenhouse gas reduction, saying that the opponents of Kyoto were ‘flat wrong’ when they said that it would kill jobs and destroy the economy, which is one the US government’s main excuses for not signing on. (see here for a full report).

When he said that ‘"We know from every passing year we get more and more objective data that if we had a serious, disciplined effort to apply on a large scale existing clean energy and energy conservation technologies that we could meet and surpass the Kyoto targets easily in a way that would strengthen, not weaken, our economies’, he received spontaneous cheers and full applause (in which I was a very vocal participant). This is really important, since if we can persuade people on the economic arguments, the remaining few ‘skeptic’ doubts on the science arguments suddenly don’t matter.

The US delegation was really miffed at Clinton showing up and stealing the show, and they subsequently walked out of the negotiations, threatening to veto the whole thing. All that they were being asked to do under the existing text for the 1992 Parties to COP was agree to a dialogue, but no, even that was too much. The NGO community held a contest, as to what better word might please them, such as a ‘thingy’. Someone suggested ‘lunch at the ranch’, but the US delegates weren’t up for lunch with anyone, unless it was on their terms.

However, their walk-out did not play well in the US media, and after having a call to the White House, they came back into the play, and finally agreed to participate in the dialogue as long as it did not discuss commitments. As one NGO leader put it, in the stand-off over the planet’s future, the US blinked first. They caved in to the almost unanimous global pressure from all the other countries, and as a result, we now have a twin-track process which allows us to chart our way into a safer, more sustainable world.

On a personal level, Thursday was a wild day for me, and very rewarding. I was invited to speak to the youth delegation, which got them very pumped, and then I did a 15’ web-cast for the UNFCCC about the BCSEA, and a ’12 Step Process to make BC 100% free of Fossil Fuels’. This went down really well, and I had a big crowd listening at the end.

This lead to a meeting with the South African Minister of the Environment (who is trying to fight off the pressure to go nuclear), and with David Walsh, the Environment Critic for the opposition Liberal Party in the Alberta Legislature (who is trying to get a voice of sanity into Alberta politics), a radio interview for a German station and a film interview for a future film on activism and climate change. I ended up in conversations from 3:30pm till 10pm that night; and enjoying every moment of it.

Friday was equally busy, as I shared in presenting a seminar on Green Heat with Bill Eggertson in the morning, which was poorly attended, but successful nonetheless. And there have been many other highlights, such as listening to the City of London’s presentation by their Deputy Mayor Nicky Gavron. But that’s going to have to wait till I do a final wrap-up blog, since now I’ve got to get my skates on, and get organized for my flight back to Victoria.

So over and out!
Guy

Read Guy's other blogs from Montreal at www.bcsea.org

Posted by Arthur Caldicott on December 10, 2005

UN talks set road map for Kyoto beyond 2012

By David Fogarty and Mary Milliken
Reuters
10-Dec-2005

MONTREAL (Reuters) - Environment ministers agreed on Saturday to a road map to extend the Kyoto Protocol climate pact beyond 2012, breaking two weeks of deadlock at UN talks aimed at curbing global warming.

Ministers also agreed to launch new, open-ended world talks on ways to fight climate change that will include Kyoto outsiders such as the United States and developing nations. Washington had long resisted taking part in the talks.

"This is a watershed in the fight against climate change," European Environment Commissioner Stavros Dimas told reporters of the accords after talks that dragged on till nearly dawn. The conference was attended by 10,000 delegates.

"There is still a harsh road in front of us," Dimas said about the long-term drive to cut emissions of carbon dioxide and other gases released by burning fossil fuels and blamed for heating the atmosphere and oceans.

Environment activists cheered, hugged and some even cried after the delegates passed what they hailed as historic decisions to brake catastrophic changes ranging from desertification to rising sea levels.

"There were many potential points at this meeting when the world could have given up due to the tactics of the Bush administration and others but it did not," said Jennifer Morgan, climate change expert at the WWF conservation group.

The United States, the world's largest emitter of greenhouse gases, pulled out of Kyoto in 2001, saying a fixation on emissions targets would harm economic growth, a view challenged on Friday in Montreal by former U.S. President Bill Clinton.

WATERED DOWN

Washington agreed to join the open-ended dialogue only after Canada and the European Union watered down the text and spelled out that it would not lead to formal negotiations or commitments or the type of emissions caps enshrined in Kyoto.

"The text that was adopted recognises the diversity of approaches," said U.S. climate negotiator Harlan Watson.

Washington favours voluntary measures and big investments in technology like hydrogen or carbon storage. Other countries are seeking to engage Washington for the long haul, hoping President George W. Bush's successor will be less sceptical of UN-led action on the environment.

The Montreal talks followed a twin track -- one pursuing negotiations to advance Kyoto and the other under the broader UN Framework Convention on Climate Convention, Kyoto's parent treaty ratified by Washington.

"We are delighted," said Margaret Beckett, environment secretary for Britain, head of the rotating European Union presidency.

Stephane Dion, Canada's environment minister and chair of the Montreal talks, was relieved. "Finally, we have achieved what many claimed was unattainable," he told delegates at the final session.

"Facing the worst ecological threat to humanity, you have said: the world is united, and together, step by step, we will win this fight," he said.

The Kyoto decision urges rich nations to decide, as early as possible, new commitments for the period starting in 2013 so that there is a seamless transition when the current phase ends in 2012. Beckett said that this would reassure traders in carbon dioxide markets.

Under Kyoto, about 40 industrialised nations have to cut their emissions by an average of 5.2 percent below 1990 levels by 2008-2012.

But developing countries, such as China and India, have no targets under Kyoto and say that rich industrial states -- having fuelled their economies with coal, oil and gas since the Industrial Revolution -- have to take the lead in cutting emissions.

The agreement on a Kyoto renewal road map gives members seven years to negotiate and ratify accords by the time the first phase ends in 2012. Most countries agree that deeper cuts will be needed to avoid climate chaos in coming decades.

Global warming is widely blamed on a build-up of gases from burning fossil fuels in power plants, cars and factories.

With the talks over, a huge sigh of relief swept through the vast conference hall after a 20-hour session that left delegates exhausted and a little emotional. Some environmentalists said the Montreal talks would have profound consequences for humanity.

"At 6.17 this morning, (Dion) brought down the gavel on a set of agreements that may well save the planet," said Elizabeth May of the Sierra Club of Canada.

© Reuters 2005. All Rights Reserved.

Posted by Arthur Caldicott on December 10, 2005

Conference reaches climate deal

U.S. agrees to watered-down declaration

PETER GORRIE
TORONTO STAR
Dec. 10, 2005. 08:25 AM


MONTREAL -- Weary delegates, politicians and lobby group members cheered early this morning as the United Nations climate change conference finally passed its last two major decisions after two days and nights of gruelling talks.
The main negotiating logjam broke around midnight, when the United States agreed to a watered-down declaration that all 189 countries at the conference will start an open-ended “dialogue” aimed at finding new ways to cut greenhouse gas emissions.

That move, in turn, allowed the passage of a crucial separate deal, under which Canada and 39 other industrialized nations bound by emissions-cut targets under the Kyoto Protocol will begin to negotiate deeper cuts for after the Protocol’s first phase expires in 2012.

The U.S. had objected to several increasingly weak versions of the dialogue agreement during the two week conference, and walked out of the talks Thursday night.

But under intense pressure from most other countries represented here, it finally relented, signing on to a final version after yet more revisions.

Environmental groups were enthusiastic about the conference’s outcome. “This is a set of agreements that may well save the planet,” said Elizabeth May, executive director of the Sierra Club of Canada.

They were equally pleased by the last-minute American compromise.

“The Bush administration blinked. The world should remember that,” said Bill Hare, policy director with Greenpeace International.

“They miscalculated and underestimated the will of countries to move forward in combatting climate change,”said Jennifer Morgan of WWF, formerly the World Wildlife Fund.

Environment Minister Stéphane Dion, the conference president, was obviously elated when he banged his gavel to signal the passage of the decisions.

The UN meeting has produced a “Montreal Action Plan” that “will guide us as we tackle climate change on many fronts.”

He denied the U.S. had caved in. Paula Dobriansky, the head of the American delegation, “acted in good faith,” he said. Despite disagreements: “she never told me she would not work with me.”

Under one agreement, the countries with mandatory emissions targets are to immediately start talks on deeper cuts. They are instructed to get the work finished in time so any new caps will take effect as soon as the first phase ends.

The dialogue deal calls for workshops to hold non-binding discussions, with no deadline.

Although vague, Dion said they would come up with innovative measures to combat climate change.

“Now, national governments will have the forum to exchange experiences and analyze strategic approaches, and to free our imaginations,” he said.

Posted by Arthur Caldicott on December 10, 2005

Clinton steals show at U.N. climate talks

Reuters
Sat Dec 10, 2005

MONTREAL (Reuters) - Former U.S. President Bill Clinton told U.N. climate talks in Canada on Friday that the Bush administration was "flat wrong" to reject the Kyoto accord and said cutting greenhouse gases was good for business and the planet.

In an impassioned speech to hundreds of delegates and nongovernmental groups, Clinton rejected a major tenet of the Bush administration's argument for pulling out of the Kyoto Protocol emissions pact in 2001.

Clinton, whose administration negotiated Kyoto in 1997 but never submitted it to a sceptical Senate for ratification, said the belief that Kyoto would hurt the economies of developed nations was "flat wrong."

"We know from every passing year we get more and more objective data that if we had a serious, disciplined effort to apply on a large scale existing clean energy and energy conservation technologies that we could meet and surpass the Kyoto targets easily in a way that would strengthen, not weaken, our economies," he said.

Under Kyoto, some 40 industrialised nations agreed to cut emissions in 2008-12 by over 5 percent from 1990 levels, but Bush says mandatory cuts on emissions from fossil fuels would hamper growth and job creation.

Clinton said a serious commitment to a clean energy future was the solution and this would lead to jobs growth, just like the tech boom of the 1990s fuelled an employment boom.

"We can create jobs out of wind energy, solar energy, out of biofuels, out of hybrid engines," he said.

Stricter efficiency standards for building and appliances would also boost jobs.

"In America, there's no telling how many jobs we could create if we just made the decision that in the rebuilding of New Orleans it would become America's first green city," he said.

Talks in Montreal are trying to take the Kyoto Protocol forward after its first phase ends in 2012 but the discussions have dragged in part because of U.S. objections to any binding commitments on emissions of carbon dioxide and other greenhouse gases.

Many delegations say efforts to curb global warming will be futile unless the United States, responsible for about a quarter of the world's greenhouse emissions, fully participates.

Clinton's speech drew applause and cheers from the audience.

"I don't know if it will have an impact (on the meeting), but I liked what he said. He's talking to the committed here," said Grant McVicar, a member of host Canada's delegation.

Many scientists say rising levels of carbon dioxide from burning fossil fuels will lead to rising seas, melting of glaciers and ice caps and more extreme weather events, including storms like Hurricane Katrina that devastated New Orleans.

© Reuters 2005. All Rights Reserved.

Posted by Arthur Caldicott on December 10, 2005

December 09, 2005

GSXCCC Annual General Meeting

6 November 2005

GSX Concerned Citizens Coalition
4th Annual General Meeting!

DATE: Saturday, 10 December 2005

TIME: 5:00 p.m. to whenever

PLACE: Pixie Hall, 3550 Watson Avenue, Cobble Hill
(across the road from Cobble Hill Farmer’s Institute Hall)

The GSX Concerned Citizens Coalition is holding its fourth AGM, potluck feast and social evening. We want all members and guests to join us, bringing food and drink, and an interest in Vancouver Island’s electricity future.

You are invited and encouraged to attend and:
• Celebrate the demise of the Duke Point Power Plant and the effective end of BC Hydro’s on-Island gas-fired electricity strategy;
• Help determine a New Direction for GSXCCC;
• Elect new directors (members only);
• Renew your membership (or join; assuming we go forward);
• Enjoy a great potluck feast with fun people.

Agenda & Order of Business:
(Non-members are welcome; only members will receive voting cards.)
5:00 – Meet, greet and renew memberships;
5:30 – AGM called to order;
• Financial Report by Phil Marchant, Treasurer (There is no auditor.);
• President’s report on GSX and Duke Point;
• Arthur Caldicott’s report on Vancouver Island Transmission Reinforcement Project and other GSXCCC activities;
• Nominate and elect directors;
• Resolution on next steps.
6:50 – Potluck Feast.

Support your hard-working directors or just come to eat.

Election of Directors:

GSXCCC has eleven directors and space on the Board for twelve. Elections are for two-year periods, staggered.

Incumbent & Position: Status: Going-Forward Position
Tom Hackney, President continuing as Director
Steve Miller, Vice-Pres. continuing as V-P
Arthur Caldicott, Secretary continuing as Secretary
candidate for President & Sec
Phil Marchant, Treasurer candidate for re-election
Don Skerik, Director continuing as Director
Kevin Maher, Director continuing as Director
Mairi McLennan, Director candidate for re-election
Dodie Miller, Director candidate for re-election
Peter Ronald, Director resigning
Tony Fisher, Director continuing as Director
John Hill, Director continuing as Director
? (this could be you!) vacancy Director

Five Directors are due to be elected or re-elected. Their terms are for two years. Directors may be nominated from the floor or may be put forward prior to the meeting (call Tom Hackney (250) 381-4463 or email thackney@island.net). Include evidence that the candidate accepts nomination. Candidates must be members in good standing.

Resolution on the Number of Directors:

The AGM may find it convenient to set the number of Directors at some number less than twelve. Five is the minimum allowable.

Resolved that: The number of Directors for the GSXCCC is ___.

New Direction for the GSXCCC:

Resolved that: The GSXCCC continue to intervene in regulatory proceedings and to take other actions as necessary to continue to promote sound energy policies and practices for Vancouver Island and BC.

Posted by Arthur Caldicott on December 09, 2005

Sea Breeze Files For First Power Line

Nickle's Energy Analects
8 December 2005

The National Energy Board (NEB) reports it has received an application for the construction of a 150-kilovolt, high-voltage, direct-current, international power line (IPL) connecting Vancouver Island and Washington.

The NEB said the proposal from a subsidiary of Sea Breeze Power Corp. would extend a transmission line for 47 kilometres from View Royal, British Columbia, near Victoria, southward across the Strait of Juan de Fuca to Port Angeles, Washington.

About 12 kilometres of the line would be onshore, with the remainder to extend underwater across the strait, the NEB said in noting the Sea Breeze subsidiary also proposes to construct a converter station near existing substations on Vancouver Island.

The proponent would like to start construction in November 2006, the NEB said in noting it would establish procedures for the public hearing process in early 2006.

The NEB said it anticipates conducting at least one public information session on its processes for the filing.

Sea Breeze has proposed two IPL -- the one connecting to Port Angeles from Victoria and another connecting Vancouver to Fairmount, Washington, which could be available for service as soon as 2008.

The interconnecting utilities for two IPL, which have been under development since October 2003, would be British Columbia Transmission Corporation (BCTC) in B.C. and Bonneville Power Administration (BPA) in Washington.

Sea Breeze made its first interconnection filings to the BCTC and BPA in June 2004.

The NEB authorizes IPL projects on behalf of the federal government.

The NEB application was filed by Sea Breeze Victoria Converter Corporation, which was established by Sea Breeze Pacific Juan de Fuca Cable, LP.

The partnership is owned equally by Vancouver-based Sea Breeze and Boundless Energy NW, Inc. of York Harbor, Maine.

NEB news release, 07-Dec-2005

Application submitted to NEB

Posted by Arthur Caldicott on December 09, 2005

Higher Global Output Forecast As Peak Oil Debate Continues

By Mike Byfield
Nickle's Daily Oil Bulletin
8 December 2005

The debate over global petroleum potential continues to bubble, with Cambridge Energy Research Associates, Inc. asserting yesterday that daily capacity will rise as high as 108 million bbls by 2015 from 87 million today. Several decades from now, CERA said, production will move into an "undulating plateau" rather than plunge drastically.

Robert Esser, CERA's director of global oil and gas resources, made that forecast to the U.S. Congress, addressing a hearing to examine peak oil theory which is being conducted by the Energy and Air Quality Subcommittee of the House of Representatives. Esser's forecast is based on a new field by field analysis of global reserves. [Esser's full testimony is here.]

Regarding Saudi Arabia's pivotal reserves, Ross Smith Energy Group has assessed Twilight in the Desert: The Coming Saudi Oil Shock and The World Economy, a best-seller by Houston banker Matthew Simmons. The Calgary consulting group concluded that Twilight incorrectly "posits a crisis where none exists" due to the author's misinterpretation of engineering studies.

Simmons, whose book is now being translated into Chinese, Japanese and Korean, is not backing off. Instead, he claimed that Saudi Aramco insiders have privately expressed relief to him in recent weeks that the worrisome possibility of a production collapse in that country has been publicly aired. [view Simmons' presentation of "Twilight in the Desert" to the Hudson Institute here.]

Like Ross Smith, CERA disagreed with Simmons. Esser testified, "While there has been much debate about Saudi Arabia's ability to expand production capacity, we see no comprehensive justification of claims that production is about to `fall off a cliff.' We anticipate an expansion of crude and condensate capacity from 11.1 million bbls per day in 2005 to as much as 13.2 million by 2015."

"We see no evidence to suggest a [global production] peak before 2020," Esser stated, "nor do we see a transparent and technically sound analysis from another source that justifies belief in an imminent peak."

For the period 1995-2003, CERA said world production was replaced by a ratio of 4:3 due to exploration plus upgrades of previous discoveries. That analysis was based on field figures compiled by its parent firm IHS Inc.

CERA pegged global production for that period at 236 billion bbls. On the supply side, exploration success reportedly added 144 billion bbls and field upgrades accounted for 175 billion bbls, for a total of 319 billion bbls.

Esser said that much confusion has been created by the U.S. Securities and Exchange Commission, whose reporting regulations still reflect technology current in 1970. For example, SEC regulations do not permit American producers to include Canadian oilsands properties in their reserve figures.

CERA acknowledged that non-traditional sources will continue their dramatic rise, constituting 35% of global production capacity in 2015 compared to 10% in 1990. Its report indicates that reliance on OPEC sources will increase only slightly by that time.

Included in the expanded supply figure is an increase of heavy oil capacity in Canada and Venezuela to 4.9 million bbls per day by 2015 from 1.8 million this year. NGL capacity is projected to reach 23 million bbls per day from 14 million.

Esser warned that the more serious threats to global supply come from above-ground factors such as warfare, political turmoil, and inadequate development of a skilled workforce and petroleum infrastructure.

In stark contrast to CERA's optimism, Simmons told the DOB that by 2020 global production is likely to be approximately 60 million bbls per day, creating massive strains in a world economy that is currently headed toward daily demand of 120 million bbls.

His firm, Simmons & Company International, has 126 employees in Houston and Aberdeen, billing itself as the largest investment bank dedicated to the oilfield service sector. The banker noted that improvements in oilfield productivity in recent decades have come entirely from service firms.

"Petroleum producers must be optimists by the nature of their business," Simmons commented. "They are masters of expounding the best possible case in the most conservative-sounding vocabulary. In their eyes, I'm just a banker and a rig guy who doesn't know what he's talking about."

Even so, Simmons said, he publicly predicted in 1995 that North Sea oil production would peak between 1998 and 2000. "At that time, a roll call of the world's best producers forecast that the North Sea would peak in 2010 at eight million bbls per day. In reality, the North Sea peaked at almost 6.1 million bbls in 1999."

The banker commented that North Sea output will dip to about 3.5 million bbls during next summer's workover period, and that the summer low has become the annual production average within a year or two in recent times.

In a similar vein, Simmons pointed to Oman's giant Yibal oilfield, which declined from a peak of 250,000 bbls per day in 1997 to less than 40,000 bbls currently. "The field watered out," he recalled. "Yet just months before the production collapse began, Shell's best technicians had made plans to increase Yibal's production by 30%."

The Houston entrepreneur said his critics wrongly state that his book predicts an imminent collapse of Saudi production. "Twilight explains why a Saudi drop could occur unexpectedly, we can't know exactly when but it might be soon, and the decline could be relatively rapid when it hits, like Oman and the North Sea."

Fundamentally, the author said, no one can rely on the Saudi Arabia's production forecasts until the kingdom releases data on a field by field basis, which its government has consistently refused to do.

Simmons is not yet a believer in oilsands, coal liquefaction and most other non-conventional resource plays. "With alternative sources, be careful that you don't put more energy in than you get out," he advised, postulating that Alberta oilsands operators should weigh the use of nuclear power to preserve natural gas.

The banker suggested that higher oil prices will force profound transportation changes. "Long-distance trucking will be drastically curtailed in favor of trains and ships." In his calculation, ocean freighters are 30 times more energy-efficient than trucks, while a single Mississippi tug can move barge-borne tonnage equal to about 350 semi-trailer truckloads.

The banker believes that rising transport costs will mean that most food will be grown much nearer to consumers, that far more goods will be manufactured locally and that a massive work shift will occur from central offices to computer-networked home offices in order to reduce commuting expense.

"Wages for home-based workers will be based on productivity more than time, and as a result we'll see a huge surge in productivity," the Texan financier prophesied.

Jim Jarrell, president of Ross Smith, said his firm's clients are investors who were alarmed by Simmons' intensively publicized forecasts. The Calgary consultancy's reservoir specialists reviewed Twilight's analysis of Saudi output, which was based on about 235 technical papers published by the Society of Petroleum Engineers (SPE).

Ross Smith contradicted Simmons' claim that Saudi Aramco's reporting data is exceptionally skimpy, commenting that the state oil company's "practice of assigning reserves appears to be as conservative as any we have seen among North American companies."

Jarrell said Twilight's interpretation of SPE engineering studies is professionally unorthodox, at times technically uninformed and inaccurate in terms of its conclusions.

For example, Ross Smith pointed to the best-seller's heavy reliance on a 1979 U.S. Senate subcommittee paper which predicted an irreversible decline in the giant Saudi Ghawar field due to water breakthrough and decreasing pressure. In reality, the Calgary consultant said, Ghawar's water cut peaked at 37% in 1999 and no such production decline has occurred.

While Twilight expressed concern that Saudi exploration has yielded few new oilfields for decades, the Ross Smith study countered that little Saudi wildcat drilling has occurred because the existing fields remain so ample and healthy.

http://www.nickles.com/brn.html

CERA's Robert Esser's full testimony to the Energy and Air Quality Subcommittee of the House of Representatives, is here.

Matthew Simmons' presentation of "Twilight in the Desert" to the Hudson Institute is here.

Posted by Arthur Caldicott on December 09, 2005

December 08, 2005

Government concern about Site C dam stalls power plan

By Scott Simpson
Vancouver Sun
08-Dec-2005


BC Hydro's ambitious 20-year plan for a multibillion-dollar makeover of British Columbia's electricity system hit a major snag Thursday when the provincial government ordered Hydro to back off out of concern about the controversial Site C dam project.

Hydro officials had little to say. Bob Elton, Hydro president and CEO, issued a brief statement by e-mail that the plan, which was to be unveiled today, would be delayed until an unspecified date next year.

Hydro's "Integrated Energy Plan" was expected to include a mix of small, private sector hydroelectric projects, electricity conservation initiatives, upgrades to large government-owned facilities -- and a decision to proceed with the controversial Site C dam on the Peace River near Fort St. John.

It was not immediately clear if the province's concerns were attributable to soft cost estimates for Site C -- which would cost taxpayers a minimum $3.5 billion -- or strong opposition from first nations in northeast B.C., or a conflict with independent power producers who were promised in 2002 that all new power projects in British Columbia would be developed by the private sector.

"In consultation with government, we have now decided to postpone this release and will be doing further work to ensure that this plan meets the needs of ratepayers," Elton said.

Earlier this week, some B.C. Liberal MLAs told Vancouver Sun political columnist Vaughn Palmer that they had concerns about Hydro's ability to shepherd the controversial Site C hydroelectric project -- the cornerstone of the new plan -- through to completion.

NDP energy critic Corky Evans said the province's 11th-hour involvement casts a shadow across more than a year's worth of community consultation and preparatory work by BC Hydro.

"What I find really bizarre is that it flies in the face of the Liberal mantra, maintained all through the public debate about the sale of Terasen Gas and the controversy about the [CN] railroad and all kinds of stuff, that it was not their intention to manipulate public processes or commissions or Crown corporations," Evans said.

Energy Minister Richard Neufeld was tied up in a series of meetings and could not be reached for comment.

Hydro goes through a similar planning exercise very two years, submitting details to the B.C. Utilities Commission as per its regulatory requirements.

However, this year's version of the plan was considered to be its most ambitious effort in more than a decade, in light of British Columbia's growing dependence on imported electricity to supplement a provincial resource that has not grown significantly in volume since the Revelstoke Dam was built in the early 1980s.

Earlier this month, Treaty 8 first nations in northeastern B.C. advised Hydro that they "adamantly" oppose Site C.

The construction of two earlier dams on the Peace, the W.A.C. Bennett and Peace Canyon dams, led to flooding of millions of acres of traditional hunting and fishing territory for the bands.

A BC Hydro summary of a meeting with the aboriginals reported that they "made it clear that they are adamantly against the development of Site C."

ssimpson@png.canwest.com

Posted by Arthur Caldicott on December 08, 2005

Power for the people

By Dan Potts
Joint Industry Electricity Steering Committee
Vancouver Sun
08-Dec-2005


British Columbia now consumes more electricity than it produces. Blessed for decades with a surplus of electricity, we must now rely on others beyond our borders for a growing portion of our electricity needs.

It is an uneasy situation.

Several jurisdictions in North America, such as California and recently Ontario, have experienced serious problems because of their reliance on volatile external power markets for their electric power. There is no reason for that to happen here in B.C.

We have many resource options to choose from to meet our future needs -- thermal plants fired by natural gas, wood waste, or coal; wind; run-of-the-river hydro; Site C large hydro, and others. The challenge will be in making the right choices and at what cost.

BC Hydro has actively promoted conservation through its Power Smart program for several years and will continue to do so. But even with this aggressive program, consumption is expected to grow, particularly in light of the improved performance of B.C.'s economy.

In 2005, B.C. imported 6,896 giga-watt hours (GWh) of electricity to meet domestic needs, 12 per cent of our consumption and enough to supply over 650,000 homes. Without new generation, by 2020 we will be short on in-province generation by 14,000 GWh and forced to import a full 25 per cent of our energy needs.

BC Hydro is projecting that the Burrard Thermal Generation facility will supply up to 6,000 GWh per year. However, Burrard Thermal is inefficient by current standards, and with the high cost of natural gas is no longer a source of reasonable cost energy for the BC Hydro system.

While the facility still has a role to play as an emergency back-up for the Hydro system, using Burrard to produce 6,000 GWh a year would increase BC Hydro's total energy costs by at least $300 million per year compared to the historic costs of buying that amount of power from import markets.

Bringing on new sources of supply can take years of planning, engineering, and construction. We need to get on with the job if we are to continue to maintain the valuable competitive and employment advantage of low cost, reliable electric power that British Columbians currently enjoy.

Keeping the cost of the new electricity as low as possible is critically important to B.C.'s future. Ultimately it will be the ratepayers -- BC Hydro customers -- who pay for the new facilities. If the choices we make today result in expensive electricity, consumers will be unhappy, industrial and commercial manufacturers will be less competitive and ultimately B.C.'s economy will be negatively affected, having an impact on everyone.

To meet current and future demand, BC Hydro needs to develop an aggressive plan to acquire new, low-cost electricity and to consider all possible options.

The huge shortfall we are facing will require a mix of resources, both large and small. Site C alone can potentially deliver 4,000 GWh, but even if we had approval now it could take up to 10 years to build.

Coal is B.C.'s most abundant energy source and new technology makes generating electricity from a large coal-fired generating plant environmentally sound, predictable and reasonably low-cost.

While run-of-the-river hydro and wind may have a valuable place in BC Hydro's portfolio, they are typically small and dependent on weather conditions.

We have no particular preference for any one generating technology; in fact new electricity supply should come from a balanced range of options. Our only concern is that the process to determine those new sources of electricity not be biased in favour of expensive, less reliable options.

Regardless of the approach, developing new electricity sources and the necessary transmission capacity to distribute it will involve debate and controversy.

While we all may have our favorite approach, it is clear that for BC Hydro to fulfil its commitment to serve the province, low-cost electricity resources must be developed, and soon. To be successful in this effort, BC Hydro will need support from every level of government and the community.

Dan Potts is executive director of the Joint Industry Electricity Steering Committee, which represents the major industrial users of purchased electric power in B.C.

Posted by Arthur Caldicott on December 08, 2005

BC Hydro issues F2006 Call for Power ... at last

BC Hydro issued the Fiscal 2006 (F2006) Open Call for Power (“CFT” or “Call”) on December 8, 2005.

BC Hydro is targeting to procure in this Call:

(a) 2500 GWh/year from Large Projects
(greater than 10 MW capacity)

approximately 2,500 GWh/year of firm electrical energy, of which approximately 900 GWh/year is available commencing on or before 1 November 2009, and approximately 1,600 GWh/year is available commencing on or before 1 November 2010, and associated non-firm electrical energy, from Projects, each having a Plant Capacity of 10 MW or more (“Large Projects”), built, owned and operated by independent power producers, and

(b) 200 GWh/year from a portfolio of Small Projects
(greater than 0.05 MW, less than 10 MW capacity)

(b) approximately 200 GWh/year (based on a portfolio of approximately 50 MW of aggregate Plant Capacity at a 50% capacity factor) of electrical energy from Projects, each having a Plant Capacity of greater than 0.05 MW, but less than 10 MW (“Small Projects”), to be available on or before 1 November 2010, built, owned and operated by independent power producers.

Full F2006 description here.

Key dates in the CFT schedule are as follows:

08-Dec-2005 -- Issuance of CFT
06-Jan-2006 -- Bidder registration deadline
20-Jan-2006 -- Bidders' workshops
07-Apr-2006 -- Tender submission deadline
11-Aug-2006 -- EPAs delivered to successful bidders
28-Aug-2006 -- Executed EPAs and performance security posted
TBD ------------ EPAs filed with BCUC

Full schedule here.

To monitor ongoing updates with the F2006 Call, visit this webpage:
www.bchydro.com/f2006call

Posted by Arthur Caldicott on December 08, 2005

December 04, 2005

A 'Great Pipeline Race' in Canada

By Doug Struck
Washington Post
04-Dec-2005

FORT SIMPSON, A wind prickly with ice bit at Jonas Antoine, the gray-haired native elder. The sting brought a broad grin to his face. "I feel like a wolf in this weather, ready to hunt," he said, leaning against the driving chill.

The cold thrill of sneaking toward a keen-eared moose or snaring a lynx calls him, but Antoine spends days in a stuffy gymnasium, debating with chiefs and elders the looming invader from the north: a huge pipeline from the Arctic that all agree would irrevocably change this land.

Soaring energy prices and profits have revived plans for two massive pipelines -- the biggest private construction projects in North America -- to bring natural gas hundreds of miles south from the frozen Arctic Ocean, through vast untouched forests and under wild rivers, to the United States.

The plans would flood isolated areas of Alaska and Canada with thousands of construction workers, pump billions of dollars into poor native economies, and bring the roar of heavy cranes and bulldozers to pristine areas where it is now quiet enough to hear the hoots of snowy owls and the rustle of pine boughs.

The projects are crucial to keep up with the growing thirst for energy in the United States, say oil company officials and energy analysts. Supporters and opponents agree that the projects would affect Canada's sparsely populated north on a scale larger than the Alaska oil pipeline in the 1970s, and unleash a rush of new exploration and drilling.

"Every square inch is going to be opened to diamonds, sapphires, gold, oil and gas," Michael Miltenberger, the Northwest Territories minister of natural resources, said in an interview in the territories' capital of Yellowknife. "There's an insatiable demand. And the critical first step is the pipeline."

There are daunting obstacles before any construction begins: The two pipeline projects are in competition for workers and capital -- only one can be built at a time. Native groups in Canada have not yet given access rights; environmentalists fret over caribou and the permafrost; and the pipeline companies face a mountain of regulatory red tape and promised lawsuits.

But the huge profits in the energy business, and the unquenchable demand for energy in the United States, have given the projects an impetus that may make one -- or both -- projects unstoppable.

"The time and events are right. It would be very hard to turn your back on this kind of supply," Miltenberger said.

Of the two lines, the Alaska Gas Pipeline is the behemoth. Its most likely route would stretch 1,700 miles from Alaska's Prudhoe Bay to Canada's Alberta province. The line would cost $20 billion and take a decade to build, but the project has picked up momentum under the whip of Alaska Gov. Frank H. Murkowski (R) and $18 billion in loan guarantees approved last year by Congress.

The second line, the Mackenzie Valley Pipeline, would start 250 miles east of the Alaska line, on Canada's portion of the Beaufort Sea. It would snake 800 miles through forests of spruce and pine along the Mackenzie River -- one of the world's longest with no bridge or dam. This all-Canada route would cost $6 billion and is predicted to take three years to complete once construction begins.

Both projects have been pipe dreams for three decades. Drillers who flocked to the cold deserts of Alaska's North Slope after oil was discovered in 1968 also found vast deposits of natural gas. But there has been no way to move the gas to markets; it cannot flow in the oil pipeline. Oil producers proposed both the Alaska and Mackenzie gas pipelines in the 1970s, but the plans died under the weight of rising construction costs, dropping natural gas prices and -- in Canada -- opposition from native groups.

That has changed. Natural gas prices are now at all-time highs, greatly enhancing the lure of profits. Every energy forecast shows a yawning gap between supply and the rising demand. More natives of the north now see economic opportunity in the pipelines, and their necessity is reluctantly being conceded by even environmental groups.

"The economics are right. Everyone needs this supply to come on line," said John Duncan, a member of the Canadian Parliament and the Conservative Party's expert on natural resources. "The real question is which is going to be built first."

Industry analysts say the projects would require so much capital, steel and skilled labor that it would be impractical to build both at the same time. The projects have been jostling for position, sparking what former Alberta energy minister Murray Smith has called "the great pipeline race." Oil company officials would prefer the shorter Mackenzie line to go through first, but delays have jeopardized that possibility.

Four reserves of Indians -- known as First Nations here -- are involved in negotiations to permit the Mackenzie line to cross their land. The four oil companies behind the project have agreed to give First Nations a one-third share of the line, and the federal government in July offered $425 million for native social programs as an incentive. But the bands are split over the proposal.

Antoine, 64, is a member of the Deh Cho, a band of about 4,000 members on land centered at Fort Simpson, a quiet town on an island accessible by ferry in the summer and by a road carved on the river ice in the winter.

He grew up hunting caribou and moose, snaring rabbits and cutting holes in the ice to fish in the winter. He remembers a hard life, remembers being hungry when the game disappeared. But he is wary of the coming pipeline, and the change it will bring.

"You can still have freedom to roam here. You can travel for 100 miles without running into any other tracks, camping wherever you want, drinking out of any stream," he said of the Deh Cho lands.

Herb Norwegian, the blunt chief of the Deh Cho, said his people see no reason why they should not get what they want from oil companies making huge profits. He has asked for fees, royalties and jobs, but his fundamental demand is of the government, which has yet to settle Deh Cho land claims.

"If the pipeline is going to pass through our land, the government has to treat us like the landlords," Norwegian said.

Not all agree with him. Harry Deneron, 63, a member of the Deh Cho group of chiefs, said change already has come, and the First Nations people should benefit.

"Our people will be the first to complain if their hot-water heater goes up," he said with a laugh. "We should accept the pipeline, with conditions. We have to compromise. This has gone on too long."

Either project would march a small army of construction workers into the north for several years. They would carve roads, haul steel, dig a trench through the permafrost and bury the pipeline before departing. The Alaska Pipeline project alone would be more than double the size of the 800-mile-long trans-Alaska oil pipeline finished in 1977, which took 21,000 construction workers three years to build.

Towns along the pipeline routes grimly expect the construction to bring inflation, drugs and crime along with the economic boost for their rural economies. In Yellowknife, two new diamond mines have sent rents soaring and brought cocaine to the streets. Last month, the town experienced its first drive-by shooting.

"We know things are not going to work perfectly. They never do," said Bill Braden, a member of the territorial assembly in Yellowknife. "But the pipeline would give the communities and people of the Mackenzie Valley and Delta hope for the future. Right now, if I was a teenager, I wouldn't see a whole lot of reason to stay in the area."

The bigger footprint, after the construction crews have left, will be in opening the mineral-rich area to further exploration and development.

Mostly for that reason, some environmentalists favor the Alaska Pipeline, which follows the route of the existing oil pipeline and Alaska Highway.

"We think it's the lesser environmental evil," said Stephen Hazell, a director of the Sierra Club of Canada. Environmental groups have largely bowed to the inevitability of at least one of the projects.

"Natural gas is clearly better than coal or oil," said Peter Ewins, a director of the World Wildlife Fund of Canada. "In principle, we are not opposed, if the development is done in a properly planned and well-balanced way."

The natural gas from either line would be fed into a grid of pipelines in Alberta that connects the United States and Canada into a largely seamless single market. Oil company officials say the soaring demand is in the United States, and that is where the gas would go.

But some environmentalists suspect that the Mackenzie pipeline, in particular, would feed the huge oil-sands project in Alberta. There, natural gas is used to cook strip-mined tar sludge into recoverable oil, a process environmentalists say is energy-inefficient and increases global warming.

"If we were convinced the gas was going to be used in people's homes to replace coal-fired energy, we would be much more sanguine about it," said Hazell.

Despite its much larger size, the Alaska Gas Pipeline could move more quickly. The oil pipeline and highway along the proposed route already have cleared the way with access rights, aboriginal land claims and environmental reviews. Since the 1970s, the TransCanada pipeline company has held rights to one route in Canada, and has laid groundwork on the Alaskan side as well.

"The gas market in North America really quite desperately needs this gas," TransCanada Chief Executive Hal Kvisle, said by phone from Calgary. "We think it would be quite foolish not to use" the company's access rights to speed up the project.

Speed is what Alaska's Gov. Murkowski wants. He has made it a personal goal to find a way to get Alaska natural gas to market, foreseeing a second wave of the riches that poured into the state with the oil pipeline. All Alaskans still receive a yearly dividend check from the oil pipeline royalties.

"We are approaching an historic moment -- moving from 30 years of trying, to the reality of a gas line," the governor told reporters recently. He has proposed a novel sharing of ownership in which Alaska would have a 20 percent stake in the line.

"We're going to do it right this time," the governor said by phone from Anchorage after emerging from negotiations with the Prudhoe Bay producers Exxon-Mobil and BP. He already agreed to terms in October with a third company, ConocoPhillips. "The country needs the gas," he said. "This is the time."

Posted by Arthur Caldicott on December 04, 2005

B.C. will need more electricity

Editorial
Times Colonist (Victoria)
04-Dec-2005

Over the past five years, B.C. has gone from being an exporter of electricity to being a net importer. Unless we build one or more new power plants in the near future, the province will face a major shortfall of electricity in the decade ahead.

These are some of the conclusions from a critique of provincial energy policy, tabled recently by the B.C. Progress Board. The board was appointed by Premier Gordon Campbell to look for ways of accelerating economic growth: Its members are drawn from business and the academic community.

The reasons for this emerging crisis are simple enough: The last major addition to our generating capacity came in 1984. Since then our population has climbed 40 per cent, and projections suggest this growth rate will continue. Over the next decade, B.C. is expected to add the equivalent of a city the size of Kamloops every year.

As the report points out, B.C. has been coasting on cheap hydro-electric power from dams built on the Peace and Columbia rivers in the 1960s and '70s. That has created an illusion of security that makes the public and politicians unwilling to confront the need for action.

Moreover it's unlikely the deficiency can be made up by purchasing cheap surplus electricity from neighbouring jurisdictions, as B.C. Hydro has been doing in recent years.

At the same time our energy needs are increasing, world-wide demand is forecast to surge, due in part to the rapid pace of industrialization in China and India. We will be forced, therefore, to pay a much higher premium for imported power in coming years, or to live with brown-outs, or quite possibly to suffer both.

The authors warn that Ontario and California followed a similar path. Political leaders left public utilities to make the argument for additional power capacity, and in both cases, energy producers failed to convince a skeptical public.

In California, the effective outcome was a 20-year moratorium on new plant construction, which coincides with B.C.'s record almost exactly. Both jurisdictions went on to experience repeated brownouts, extending in California to rolling blackouts and a political firestorm that eventually saw the state governor dismissed in a recall vote.

What distinguishes this critique from similar reports is its willingness to confront the elephant in the room -- B.C. Hydro. The authors allege, in respectful but clear language, that government has lost control of the utility.

"B.C. Hydro is seen by many concerned parties to heavily outweigh the ministry (of Energy, Mines and Petroleum Resources) in staff and resources.... As a consequence, B.C. Hydro is seen as setting its own policies ... or responding to matters of public interest, such as the government's Energy Plan, in its own time and manner."

A case in point was the recent decision to abandon work on the new Duke Point power plant in Nanaimo, after the B.C. Court of Appeal granted opponents the right to a hearing. The Crown corporation walked away from $120 million already spent on the project, leaving the community and business partners in the lurch.

Not only did the decision catch ministers off guard, the fall-back strategy -- an upgrade of existing power lines from the mainland -- contradicted the corporation's earlier statements about the urgent need for new generating capacity on Vancouver Island. Of course that only added to the general atmosphere of complacency about electricity supply.

What's at stake is more than a political tussle over who controls energy policy, cabinet or the board of B.C. Hydro. The report makes a convincing case that unless government and the corporation speak with one voice, and do so consistently, there's little chance new installations will proceed.

In fact the challenge is quite daunting. Many of the environmental impacts that accompanied power-plant construction in bygone years would never be tolerated today. When the Peace and Columbia dams were built, aboriginal communities were flooded without prior consultation or compensation. Opposition to new gas-fired generating stations in the Lower Mainland is intense.

A prolonged spate of brownouts would no doubt soften public resistance. But given the extensive lead-time required to bring new capacity on line, well before we get to that point the damage will be done.

Convincing voters a crisis exists before its effects have been felt is never easy. While the Progress Board suggests a number of ways to bridge the gap, such as more energy-efficient building standards and price policies that reward conservation, the bottom line is clear.

Our province can, and should, be self-sufficient in electricity. But unless the cabinet takes B.C. Hydro in hand, and both present a convincing case to consumers, the government's promise of a "golden decade" ahead may fall by the wayside.

Posted by Arthur Caldicott on December 04, 2005

December 01, 2005

BC Hydro reports huge surge in profits

By Derrick Penner
Vancouver Sun
01-Dec-2005

BC Hydro recorded net income of $189 million in its second quarter, compared with $11 million for the same period a year ago, a huge profit jump driven by increased customer demand and electricity trading activity, the company said Wednesday.

Alister Cowan, BC Hydro's chief financial officer, said higher customer loads and trading, coupled with lower financing and amortization costs, were offset by lower revenue while the Crown corporation awaits approval by the B.C. Utilities Commission of a 7.23-per-cent rate increase.

BC Hydro added 24,808 new residential customers and saw an increase in commercial and industrial sales to post $1.26 billion in domestic revenue for the company's six months ending Sept. 30, and saw $765 million in net electricity trading revenue, $468 million more than a year ago.

Company spokesman David Conway said BC Hydro's board of directors is expected to decide by next week whether the controversial Site C Dam will be included as a preferred energy option in its integrated electricity plan.

The Crown corporation conducted a series of public consultations throughout the province earlier this year on the integrated electricity plan, which outlines how BC Hydro plans to meet the province's electricity needs over the next 20 years.

depenner@png.canwest.com

Posted by Arthur Caldicott on December 01, 2005

Oil Free Coast

Just say no to offshore drilling in B.C.
Rick Stiebel, Goldstream News Gazette, 30-Nov-2005
Oil Free Coast Alliance to government: heed public opinion
Matthew Gauk, Martlet (University of Victoria), 01-Dec-2005




Just say no to offshore drilling in B.C.

By Rick Stiebel
Goldstream News Gazette
Nov 30 2005


Rick Stiebel/News Gazette
WCWC Victoria campaign director Ken Wu, right, hands a pamphlet to volunteer/supporter Cindy Robinson during a rally at Esquimalt-Juan de Fuca MP Keith Martin's constituency office Wednesday.

That's the position the Western Canada Wilderness Committee reinforced during a rally at Esquimalt-Juan de Fuca MP Dr. Keith Martin's office last week.

"We're not protesting the federal Liberals because they haven't done anything to show us they are lifting the moratorium (on drilling for gas and oil off the coast of B.C.)," said WCWC Victoria campaign director Ken Wu. "But we're encouraging them to publicly comment on keeping it in place before the next election."

Wu cited the potential for oil spills, substantial greenhouse gas emissions and impact on marine life from seismic testing blasts as major concerns.

Wu also pointed out that offshore drilling in Newfoundland is conducted 300 kilometres off the coast, but it could be as close as 20 kilometres from shore if it goes ahead near the sensitive coastlines of the Queen Charlotte Islands.

"It's the one-year anniversary of public input into the process," Wu said. "Seventy-five per cent of people want the moratorium maintained. Now the government needs to move on maintaining it."

Martin, who was in Ottawa when the rally took place at his Langford office, said he's glad the WCWC came out, and that he's discussed the situation with the organization in the past.

"It's up to scientists to assess the potential for damage to the environment," Martin said in an interview with the News Gazette. "The question is can it be done in an environmentally safe manner. If that's the case, we have a responsibility to the people of B.C. to do it in an environmentally safe way."

Martin believes the oil and gas resources need to be utilized, providing scientists give it the green light because of the jobs the work will create and the benefits to the economy.

Long-time WCWC supporter and volunteer Cindy Robinson said it's important to keep the moratorium in place to protect marine life.

"It's already under stress from human activities," said Robinson. "We shouldn't go down a path that creates destruction through oil spills and seismic activity from blasting."

Federal NDP candidates Randall Garrison,(Esquimalt-Juan de Fuca), Jennifer Burgis, (Saanich-Gulf Islands) and Denise Savoie (Victoria) issued a news release the day of the rally demanding the government keep the moratorium in place.

rstiebel@vinewsgroup.com

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Oil Free Coast Alliance to government: heed public opinion

by Matthew Gauk
Martlet (University of Victoria)
01-Dec-2005


Aaron McMillan photo:
Protesters opposed to offshore drilling display their disapproval Nov. 22 in front of UVicís McPherson library. The event was organized by the Western Canada Wilderness Committee.

Dozens of UVic students spelled out “Oil Free Coast” in front of the McPherson Library Nov. 22 to protest the possibility of offshore oil drilling in B.C.

The media event was a run-up to the National Day of Action on Nov. 23, organized by the Oil Free Coast Alliance. The Alliance, which includes the Western Canadian Wilderness Committee (WCWC) and the David Suzuki Foundation, aims to increase public awareness of potential oil and gas development off the coast of British Columbia.

A federal government moratorium on offshore drilling was put in place in 1971 by Pierre Trudeau at the behest of David Anderson, then Esquimalt-Saanich MP. The moratorium still stands, but some environmental groups are becoming concerned that the federal government, under pressure from the B.C. government, might start taking steps toward oil and gas exploration. “I think the federal government is just sitting on the fence,” said WCWC Victoria campaign director Ken Wu. “We would like some stronger statements that they will maintain the moratorium or, better yet, just have a legislative ban against offshore oil and gas development.”

The National Day of Action came a year after the release of the “Priddle Report,” a public input process instigated by the federal government to gauge public opinion on offshore drilling. The report found that three-quarters of British Columbians surveyed were opposed to oil and gas development.

“We’ve given them a year to consider the results of the public input process, so now we want them to commit,” said Wu. “We think they should be obligated to adhere to the results of their own public input process.”

The biggest concern among those opposed to offshore oil and gas development is the potential environmental impact. Exploration alone, which often involves seismic testing, can cause harm to whales, fish and crabs, according to some studies.

“It basically deafens whales,” said Wu. “It can kill the beaked whales; it can drive whales away from their feeding and migration areas, including Orcas and Gray Whales.”

The drilling would also threaten the seabird colonies and sea-sponge reefs that make the Queen Charlotte Basin a global treasure, says Jay Ritchlin, the marine campaign strategist for the David Suzuki Foundation.

He fears that small daily leakages and spills of drilling fluids would all go out into the ocean and have an immediate impact within a kilometre of the drill.

While large numbers of animals might not be wiped out from daily leakage, Ritchlin says, it could have a negative influence on developing salmon eggs, and the reproduction of herring, otters, and seabirds.

“It’s a really chronic issue that you don’t see,” said Ritchlin. “More and more we’re finding out that the residues from the oil itself have long-term impacts at lower levels.”

Wu and Ritchlin agree that the hypothetical fallout wouldn’t be limited to the environment. While both acknowledge that an offshore oil and gas industry would bring some economic benefit to the province, they point out that there would be pitfalls as well.

“Fishing still employs 16,000 people on the coast, and fish catches are reduced as a result of the destruction of marine larvae,” said Wu. “Fish are driven away from huge areas of their feeding and migration routes. This has been shown around the world.” Wu also cites possible damage to the $500 million a year worldwide whale-watching industry.

In the 2003 Throne Speech, the provincial government stated that they wanted to have an offshore oil and gas industry up and running by 2010. Since then, the province has created an Offshore Oil and Gas Team to foster the industry. One of their biggest selling points is the creation of jobs to service this industry. “My opinion is that B.C. takes all the risk, and probably most of the economic activity will accrue to large international firms who are already in the global oil market,” said Ritchlin.

The National Day of Action saw rallies at 24 locations in 19 Canadian cities. Volunteers leafleted and petitioned passers-by.

“There’s a federal election coming up,” said Wu. “So of all times where [politicians] need to get in line with public opinion, it’s now.”

TOP

Posted by Arthur Caldicott on December 01, 2005

November 30, 2005

Coal-fired power generation worth a look by BC Hydro

Coal-fired power generation worth a look by BC Hydro
Don Whiteley, Vancouver Sun, 30-Nov-2005
Too good to be true
Arthur Caldicott, GSX Concerned Citizens Coalition, 30-Nov-2005




Coal-fired power generation worth a look by BC Hydro

Don Whiteley
Vancouver Sun
Wednesday, November 30, 2005

The B.C. Progress Board's report on the province's energy future was critical of both the provincial government and BC Hydro for allowing the province to become a net importer of electricity, after decades of money-generating surpluses available for export.

"We do need to do something," the report said. "We haven't done anything significant to increase our electricity supply for 20 years ... the least we can do is to take the opportunity to responsibly meet our own energy requirements."

Hydro will soon file its latest Integrated Electricity Plan with the B.C. Utilities Commission. Along with commitments to pursue conservation and green energy, the power utility is expected to put the Site C Dam proposal forward as its recommended big future supply project.

I wonder if they are missing the boat here. A number of recent developments suggest that B.C. should fully explore coal-fired power generation as the big-ticket item, instead of another hydro-electric dam.

Coal-fired power generation is only a couple of points below nuclear energy on this province's irrational hysteria index, largely due to coal's reputation as a dirty fuel and its contribution to global warming through CO2 emissions.

But the coal industry is well on the way toward solving that problem. The Canadian Clean Power Coalition (CCPC), an association of coal-fired generating companies and utilities, has completed the first phase of what will ultimately be a pilot plant to test commercial feasibility of what could be an emissions-free coal-fired generating plant.

"The fundamental principle underlying the goals of the CCPC was to identify a process that would produce electricity from coal in some fashion and that would also provide a relatively pure stream of CO2 that could be captured, further processed as necessary, and subsequently used or stored," says a report on the first phase of the project.

The goal is to get all the pollutants out of the emissions, except CO2, which could then be captured and stored.

And on that score, the U.S. Department of Energy announced just a week ago the completion of a successful pilot project using CO2 for enhanced oil recovery in southern Saskatchewan. The Weyburn Project took five million tons of CO2 extracted from a coal gasification plant in Montana, and used it to breathe life back into a moribund oil reservoir.

"The success of the Weyburn Project could have incredible implications for reducing CO2 emissions and increasing America's oil production," said U.S. Energy Secretary Samuel W. Bodman in a press release. "Just by applying this technique to the oil fields of Western Canada we would see billions of additional barrels of oil and a reduction in CO2 emissions equivalent to pulling more than 200 million cars off the road for a year."

Mark Jaccard, a professor of resource and environmental management at SFU, has just published a book called Sustainable Fossil Fuels: An Unusual Suspect in the Quest for Clean and Enduring Energy, in which he writes extensively about this project and its potential to help with global warming. [The Sun's Don Cayo gave the Jaccard book a three-part infomercial, available at www.sqwalk.com/blog/000540.html]

"I should emphasize that when we talk about clean coal technology, I mean clean -- nothing," Jaccard said in an interview. While the Weyburn project used CO2 from a coal gasification project, the gas can just as readily be captured from a generating station that burns the coal. He explained that CO2 injection to enhance oil recovery will provide just the kind of economic jump-start that clean coal technologies need.

CO2 injection to enhance oil recovery is not new -- it has been underway for nearly 30 years. The technique was out of favour when oil prices were low, but with crude oil expected to remain well above $40 US a barrel for the foreseeable future, the economics look good.

Another piece to the puzzle, from a B.C. perspective, is that North America's biggest supplier and distributor of CO2 for enhanced oil recovery is Kinder Morgan, the company that just completed its purchase of Terasen.

In the press release announcing completion of the acquisition, Kinder Morgan said it will "conduct a comprehensive feasibility analysis of CO2-related opportunities in Canada utilizing this expertise for the purpose of identifying and pursuing viable projects."

B.C. has huge coal reserves in almost every part of the province. More than 25 years ago, BC Hydro was considering a coal-fired generating plant at Hat Creek, but emissions technology was in its infancy at that stage and the impact was anything but zero.

Hydro spokesperson Elisha Moreno said the company turned its Hat Creek coal licences back to the provincial government more than a year ago, and is not pursuing any coal-fired power generation at the moment.

"Someone can make a proposal," she said, referring to Hydro's commitment to purchase energy from independent power producers.

"We'd look at it on costs. We still have our 50-per-cent clean criteria to meet. Obviously coal challenges that. The resource is there, but the challenge is public perception."

But if Hydro is willing to consider spending $3.5 billion on its own account to build a new hydro dam on the Peace River, why wouldn't it consider the same kind of investment in other technologies -- and not just coal?

don_whiteley@telus.net

© The Vancouver Sun 2005

TOP



Too good to be true

Arthur Caldicott
GSX Concerned Citizens Coalition
30-Nov-2005

Loren Duncan of Glenora, referring to this Don Whiteley article, comments:

Why is this concept, technology, not applicable to natural gas fired plants?
And if it is...why not?
At first take it seems to be too good to be true...as close to perpetual motion
as we are likely to get...
Anyway, just curious...
Cheers, Loren


Natural gas WAS attractive, as a generation fuel source, because it WAS cheap, plentiful and burned much cleaner than coal, which was similarly cheap and plentiful.

Once carbon dioxide emissions became an issue, natural gas was even more attractive, with approximately a third the greenhouse gas emissions for comparable electrical output.

Then natural gas became not so plentiful and the price went up and up and up and all those proposed natural gas plants were shelved, everywhere except in Nanaimo, since BC Hydro seemed to be the last place in North America to notice price and supply trends with gas that were becoming evident to others five years ago.

With the increase in gas prices, the interest in coal-fired generation regenerated, so to speak.

But of course, the reputation of coal as a dirty fuel source hindered its acceptability, and other jurisdictions, like Ontario, found themselves in conflicting situations - on the one hand, initiatives to phase-out of coal generation because of its emissions ran smack into the relatively cheap cost of the fuel and our insatiable demand for electricity.

The industry met this with branding, with marketing, and with technology: the word "coal" was no longer uttered by coal people, without the word "clean" prefixed to it.

"Clean coal" has indeed taken on a life, but there's a big cost to it. Building a plant that implements "clean coal" technologies that result in emissions from coal combustion, equivalent to emissions from a state-of-the-art natural gas plant, may guts the competitive edge that cheaper coal has as a fuel.

Capturing greenhouse gases and disposing of them in some way that is more acceptable than simply spewing them into the atmosphere, is another issue. What works with coal, works with natural gas. But a little contemplation of what these guys are proposing - capture the GHGs at the generation source, move them to depleted oil fields to be pumped back into the ground to extract more oil - isn't a simple or inexpensive task. It hasn't been done on any scale yet. It's all new. The capture technologies cost a whack of dough. The infrastructure to get the GHGs back to the oil fields (pipe, rail, truck) doesn't exist and/or needs extensive investment. The sequestration integrity of the exercise is largely unknown.

The US led Weyburn project cited in the article, is all experimental. It has no economic underpinnings. So all this talk about carbon sequestration is so much talk. And experiment. I'm not aware of any company anywhere that is proposing a production coal-fired generation facility that incorporates carbon sequestration - at least nothing on an industrial scale, that does not rely on huge subsidies. Your comment about too good to be true, and perpetual motion is wonderfully apt.

FutureGen is a US-government led proposal, that may result in an emissions-free coal-fired generation plant. But it's all drawing board and lofty vision right now, seeking participation by other countries, blah, blah.
http://www.fossil.energy.gov/programs/powersystems/futuregen/

Interesting, too, is coal's ultimate solution to what to do with all the carbon dioxide. It's the same answer the nuclear industry has to the same problem with wastes. Bury it somewhere. Ocean, underground reservoirs. Outa sight. Another great ecological legacy for our kids.

In a roundabout return to your question, why isn't this carbon dioxide method applicable to natural gas plants? Well, it is, but no-one cares very much because a) natural gas is so expensive that no-one is much interested in developing any plants right now, b) natural gas isn't imbued with the same "dirty" reputation that needs to be overcome for this renewed interest in coal to move from unacceptable to acceptable.

Much of the talk about cleaning up coal is just talk - proponents of real projects are not including carbon sequestration in their proposals. Here in BC, proposals for coal-fired generation are likely to crop up again with BC Hydro's F2006 Open Call for Power, which may be open for bids in December. Any proposals are likely to be nickle-and-dime operations, small plants, probably "mine-mouth" plants (where they propose burning unmarketable "waste coals" which cost them nothing and don't have to be shipped anywhere), with only as much emission control technology to meet the BC government emissions guidelines. Anything better than that will cost too much, and may push the project out of competition.

A quick final word about the BC government guidelines for coal plants. The Liberals came to power in 2001 beholden to big coal mining companies and donors like Teck Cominco, Fording, etc. The Energy Plan issued in 2002 promised regulations that would enable coal generation to get going in BC. The Coal-fired Power Boiler Emission Guidelines were issued in 2003, setting limits for three substances - nitrogen oxides (NOX), sulphur dioxides and particulates. The limits were disgusting - among the most lenient limits in the regulated world. Mercury, a powerful toxic in even the smallest quantities, and a predictable emission from coal generation, was not regulated at all.

In August 2005, the new Ministry of Environment revised the 2003 document, and actually came close to a set of limits that is close to those of other jurisdictions. Not only that, they included mercury.
Coal-fired Power Boiler Emission Guidelines

This would seem like a good thing, something the government would laud itself for. But the government has been pretty quiet about these new limits. Why?

The answer may be that the government is quietly setting the stage for coal-fired projects, but wants to remove the charge of "dirtiest plants in North America" from the list of criticisms these projects will be subject to.

Back to your comment about perpetual motion, isn't that the illusion of fossil fuels? When all the fundamental economic and ecological costs of fossil fuels are accounted for, the net outcome is ...

TOP

Posted by Arthur Caldicott on November 30, 2005

November 24, 2005

Sustainable Fossil Fuels, by Marc Jaccard
Unusual suspect in the quest for clean, enduring energy

Oil, natural gas unlikely to be replaced soon by other power sources
Don Cayo, Vancouver Sun, 22-Nov-2005
SFU professor flies in face of Chicken Littles of fossil fuels
Don Cayo, Vancouver Sun, 23-Nov-2005
A troubling scenario awaits if we keep on our current energy-use path
Don Cayo, Vancouver Sun, 24-Nov-2005




Oil, natural gas unlikely to be replaced soon by other power sources, book says

By Don Cayo
Vancouver Sun
22-Nov-2005

It's not the dinosaur you may have thought. A new book by SFU professor Mark Jaccard argues that the future of fossil fuels is still bright, as there are few practical energy alternatives that could meet global needs within the foreseeable future.

Can the world assure sustainable energy for the century ahead by turning its back on oil, gas and coal? Can we conserve enough of the massive amounts of fuel we squander, and create most of what we really need from renewables like sun, wind and water, or from clean-burning hydrogen, or even nuclear fission or fusion?

Not likely, says Mark Jaccard, a professor of resource and environmental management at Simon Fraser University.

Until now, Jaccard has spent most of his high-profile career touting those very options. But after a lot of research and reflection he has changed his mind. These "usual suspects" aren't the best bet for the next 100 years, he writes in a new book that's sure to raise hackles among his many colleagues to whom oil is an anathema.

Jaccard argues in Sustainable Fossil Fuel: The Unusual Suspect in the Quest for Clean and Enduring Energy that, as the title suggests, the best path for the future is a variation of the one the world is already on. Oil, although increasingly from unconventional sources, will continue to play a big role, while the use of natural gas and coal will more than double.

What about the well-known drawbacks of fossil fuels -- that their supply diminishes over time, and that they pollute the air? And what's wrong with renewables, and, especially, with hugely cutting back on energy use to take pressure off its supply?

In Jaccard's analysis the world won't run out of oil, gas and coal for a long, long time. The key questions hinge on know-how (How much of the vast resources can we figure out how to tap into?) and price (How much are we willing to pay?). And the same two factors -- technology and economics -- will determine how cleanly we can burn future fossil fuels.

These same questions apply, of course, to conservation, to renewables like biomass, wind and water, and to the inexhaustible potential of hydrogen and nuclear.

Jaccard examines these options at length. He finds each of them not entirely wanting, but limited in their ability to displace fossil fuels.

He notes that the rich world has already gained a lot from using energy more efficiently. "Energy intensity" -- the amount of economic value derived from each unit of fuel -- has soared since the 1950s.

And a lot more saving is possible. Not only is a lot of energy squandered in uses of questionable value, but up to 5/6ths of a fuel's potential is lost in the inefficient conversion of primary energy sources into convenient secondary forms.

Yet, he says, the world won't see the boon that conservationists predict if only we do a better job of mending our wasteful ways. It is not just a matter of technical issues, he argues, but behavioural ones as well.

For one thing, when energy efficiency increases, so does the tendency to use it for new or bigger things. Witness the growth in the size of vehicles and the distances that North Americans drive them following a sharp, but temporary, retraction as a result of the oil shocks of the 1970s. Similarly, the advent of things like energy-efficient fridges tempts consumers to buy a separate one to chill the beer or cool the wine, and so on.

This rebound effect helps explain "the explosion of new energy-using services, including outdoor patio heaters, spas, extra-large sport utility vehicles, decorative natural gas fireplaces, coffee mug heaters, desk-top water coolers, in-home entertainment systems, indoor and outdoor decorative lighting and ... the back-massage chair, to name just a few." And, "More efficient vehicles may make people willing to live further from where they work."

Nor do people always adopt new ideas just because they're available. He cites his own experience with high-priced, energy-efficient light bulbs that are now tucked away in a drawer, as they are in thousands of homes, because they don't fit many lamp sockets and his wife doesn't like the light they cast.

Then there's the matter of a couple of billion poor people on the planet -- people destined in the scenarios that he cites to become much more prosperous over the next century. One of the first things they can be expected to do is stop their inefficient burning of wood or charcoal for cooking and heating, and turn rapidly to modern energy sources. So even if the rich world succeeds in massively reducing its own energy use, the savings will be overwhelmed by increased use in developing countries.

Nuclear's potential faces challenges such as investor antsiness and a long lead time to get it on line, he says. And it's currently so far behind fossil fuels that, given the 33-year lifespan of most plants, as many as five a week would have to be brought online for it to dominate by the year 2100.

That pace of building is unimaginable, given political and economic realities. Because of the horrific potential of an accident or terrorist incident, no matter how highly unlikely those may be, people in developed countries strongly oppose the building of more reactors. And in poorer countries where the urgently desired benefits might persuade people to accept the risk, the rich countries that have the technology don't want to share it for fear it will be used to proliferate nuclear arms.

Strikes against hydrogen, a secondary fuel, include the massive amounts of primary energy needed to create it, and the cost and complexity of establishing a distribution network for the hard-to-store fuel.

Storage is also an issue for most renewables -- wind, water, and sunlight. Because these sources can produce power only intermittently, they must either be relegated to a role as fairly small supplementary sources, or else huge and expensive storage capabilities will have to be built. All three, but especially wind and water, need specific sites that usually aren't found near the places where power is consumed. As the best sites are developed, more marginal -- and more expensive -- ones will have to be found.

Modern biomass energy production -- the efficient burning or conversion of wood or farm waste, as opposed to the dirty and wasteful open fires or crude stoves that proliferate in the developing world -- is relatively cheap, as long as it's small-scale and able to use waste. But if it reaches the point where raw fuel has to be grown just for that purpose, it'll require huge tracts of land that won't be available for other uses. And, as with the other renewables, it'll cost more and more as the best sites for fuel production are taken and marginal ones are pressed into use.

Jaccard still sees a growing role for conservation and all of the renewable technologies. But he sees no chance they'll come close to displacing hydrocarbons as the prime energy source.

dcayo@obg.canwest.com

Tomorrow: Why oil, gas and coal are the best bet for a clean, sustainable energy future. (link)

- - -

Sustainable Fossil Fuels: The Unusual Suspect in the Quest for Clean and Enduring Energy

by Mark Jaccard,

Simon Fraser University

The book's first printing will be available Nov. 27 by direct order only from Cambridge University Press, 100 Brook Hill Drive, West Nyack, NY 10994.

Toll-free 800-872-7423.
Fax 914-937-4712.
http://us.cambridge.org

It will be available in bookstores in Canada Jan. 1, 2006. Paperback: $33.95. Hardcover: $94.95

First in a three-part series (Part 2, Part 3)

© The Vancouver Sun 2005

TOP



SFU professor flies in face of Chicken Littles of fossil fuels

By Don Cayo
Vancouver Sun
23-Nov-2005

Second in a three-part series (Part 1, Part 3)

The message from most sustainable-energy advocates is that the world is about to run out of fossil fuels.

Some of them seem to believe that this will happen none too soon -- that we burn so much of it so carelessly that we're poisoning the planet.

And then there's Mark Jaccard, a professor of resource and environmental management at Simon Fraser University who has earned his spurs many times over as a sustainable-energy advocate. His about-to-be-released book, Sustainable Fossil Fuel: The Unusual Suspect in the Quest for Clean and Enduring Energy, argues that oil, gas and coal will -- and deserve to -- remain the dominate energy supply at least until the end of this century.

Why? Because there's easily enough of all three to last the next 100 years, and far beyond. Because they will remain the fuels of choice for a great many uses not only in the rich world, where they already dominate, but also in poor countries where billions now rely on smoky, inefficient wood or charcoal fires for cooking and heating. And because it's both possible and affordable to use fossil fuels cleanly, with minimal harm to the environment.

That's not to say Jaccard endorses the status quo. Indeed, he says the world is on an unsustainable course -- one that, if unchecked, will see energy use grow 324 per cent by 2100, with coal consumption expanding 6.5 times to provide almost half the primary energy.

His preferred scenario, which will require judicious planning and policies if it's to come about, is also hydrocarbon intensive. It foresees increased energy use of 280 per cent, and the near-doubling of the role of fossil fuels, mostly coal.

Where will it come from? And how can it be used cleanly?

Jaccard differentiates sharply between fossil fuel reserves -- the amount that we know where and how to access and that we can afford to get out of the ground -- and fossil fuel resources. The latter is what's there, no matter whether we have the affordable technology to get it today.

Those two estimates are far apart. Coal resources are seven trillion tonnes, or 9.5 times the figure for coal reserves. The conventional oil resource pool is twice as large as the reserves; the unconventional oil resource is four times larger; and the natural gas resource, both conventional and not, is three times larger.

"If current consumption trends and fossil fuel reserves both remained static," Jaccard writes, "oil reserves would not be exhausted until the latter half of this century, natural gas reserves would last into the next century, and coal reserves would last 200 years.

"When the focus shifts to resources, at static consumption levels oil would last 200 years, natural gas 500 and coal 2,000."

However, given growth predictions based on current trends, "then the oil resource would last under 150 years, natural gas under 300 and coal under 400."

But Jaccard's test of sustainability isn't just a matter of supply. It also involves economics and ecology -- the impact of the world's energy use must be reasonably benign for the people and the planet.

So key questions are, do we know how, and can we afford, to tap into more of the resource than is generally assumed? Another is, can we use the fuels we get cleanly, with minimal harm to human health and the environment?

Jaccard's answer to all is yes.

He acknowledges that geologists may be right to note that the world is using up conventional oil resources faster than most people realize. But the economist in him observes that this need not be the catastrophe that's often portrayed. Scarcity is bound to raise prices. But higher prices will spur innovation, innovation will increase supply, and new supplies will moderate the price -- an economic cycle we've seen time and again.

Thus, although recovering unconventional oil is unquestionably more costly than tapping into conventional reserves, it will become ever-cheaper as new technologies are perfected and scaled up.

He points out, for example, that the cost of North Sea oil, once a cutting-edge technology, has plunged from $35 a barrel in the late 1970s to $15 today. And he forecasts that similar kinds of savings are in the cards not only for unconventional oil recovery, but also for natural gas and coal. And the eventual prices are not likely to be much higher than we pay today -- with, of course, a continuation of the periodic short-term fluctuations that feed the cries of Chicken Littles.

The key to using fossil fuels cleanly, he says, will hinge on how they are used.

A huge point often overlooked in rich countries is the immense and beneficial impact that will occur as billions of the world's poor switch from the worst-possible use of biomass -- unhealthy and wasteful open fires or poor-quality stoves -- to cleaner and much more efficient modern fuels. That's a priority for every population as their incomes improve, Jaccard says, and it will hugely lessen outdoor pollution and dramatically improve indoor air quality, which contributes to as many as a million deaths a year.

And, just as importantly, both modern biomass and fossil fuels will be increasingly used to create ultra-clean forms of secondary energy -- electricity and hydrogen -- to heat our homes and offices, power our vehicles, and much more. The technology exists to do this with little pollution from the primary fuels, and it, too, will become more cost-effective over time.

dcayo@png.canwest.com

THURSDAY: What will it take to ensure that we are on a sustainable energy path? (link)

TOP



A troubling scenario awaits if we keep on our current energy-use path



By Don Cayo
Vancouver Sun
Thursday, November 24, 2005


If the world stays on the energy-use path it's on, it will be in trouble by 2100, if not before, says Mark Jaccard, a professor of resource and environmental management at SFU.

"There is considerable evidence that our current energy system is on an unsustainable path," he writes in an about-to-be-released book, Sustainable Fossil Fuels: The Unusual Suspect in the Quest for Clean and Enduring Energy. Problems include emissions that undermine human health, cause acid rain and world-wide climate change; risks from radiation leaks or petroleum spills; and vast tracts of land and water despoiled by large-scale projects. As things are going now, he sees these problems only getting worse.

On the plus side, however, Jaccard foresees a big drop by 2100 in how much energy it takes to generate each dollar of GDP. But a quadrupling of per capita wealth -- also a plus, though a challenging one -- and a 75-per-cent increase in population will still strain energy supplies beyond what can be sustained.

Specifically, he sees the current path leading to a doubling of the biomass, mainly wood, used in scores of poor countries for cooking and heating fires that pollute the air and endanger human health. He sees a 17-fold increase, but still too little, in "modern biomass," including farm waste, converted into clean, green energy sources. Hydro development will focus too much on big, land-drowning projects and too little on small benign ones, and it will fall well short of its potential role in a more optimal mix of energy sources. Wind, solar and geothermal will similarly grow substantially, but not enough, and wave and tidal power will go nowhere without policy-driven help.

His preferred scenario, which he says would be sustainable, is based on several subtle shifts that, over the next 100 years, add up to big results.

It includes a 33-per-cent reduction in traditional biomass, and a 26-fold increase in modern biomass, which would produce far cleaner and more efficient results from the same amount of raw material needed to fuel the current-path scenario. He sees 5.5 times more power coming from hydro, but most of the increase from small projects that do little or no environmental harm. He sees good policy bringing about 33 per cent more wind power, and twice as much solar and geothermal power as would otherwise evolve. And he sees tides and waves tapped to provide about two per cent of the energy needed by this richer and more productive world.

Use of fossil fuels would nearly double under his preferred scenario, but they'd slip from 83 per cent dominance today to 57 per cent in 2100 (as opposed to 66 per cent under the current-trends scenario).

What will change more dramatically is what is done with much of that fossil fuel. Jaccard sees the greatest growth for coal, which is plentiful and widely available around the world. But he sees it used in zero-gasification processes that will be able to produce electricity at comparable cost to other new sources, and hydrogen at lower cost than almost anything else. And electricity and hydrogen will come to play a huge role as secondary energy sources, including fueling much of the transportation of people and goods -- a market now totally dominated by oil.

What needs to be done to get off the path that isn't unsustainable and onto one that is?

Jaccard calls for a mix of approaches in national strategies. Voluntary programs spurred by education, though unlikely to do the whole job, could have a role, as could prescriptive approaches and financial disincentives like a tax on pollution.

But he relies most heavily on market-oriented solutions -- especially emissions caps with tradeable permits, and niche market regulations.

He gets into a detailed discussion of how caps could start out fairly high, requiring only modest reductions in overall emissions, and be strengthened over time to accomplish big gains fairly painlessly.

The niche market regulations, a new concept not yet in use anywhere, would foster projects, large and small, to capture and permanently store carbon by-products of combustion, and it would spread the cost among all producers of carbon emissions.

Internationally, Jaccard sees difficulty, if not impossibility, getting agreements for prescriptive approaches such as the Kyoto Accord, which is said to be merely a first step and is not stringent enough to actually reverse the build-up of greenhouse gases. He reviews a list of alternative proposals such as international trading of emissions permits, equity provisions that ensure compliance but provide a financial break to developing countries, an international carbon tax, various mechanisms for technology transfer from the developed world to the poor, and even bi-lateral emission-reduction agreements between countries like the U.S. and China.

Without really settling on or rejecting any of these, he remains optimistic.

"Energy policy at the global level might never seem as logical and coherent as some would wish, but this is no reason to despair," he writes. "The realities of this level simply require creative thinking, a willingness to compromise, and an ability to seize opportunities as they arise.

"Rising incomes in developing countries provide such opportunities because of the enormous energy investments that will occur over the coming decades. Likewise, if current high oil prices are sustained, the energy market will attract substantial investment in developed countries.

"These two developments create an unprecedented opportunity to shape the character of the future global energy system . . . that we can't afford to miss."

dcayo@png.canwest.com

- - -

Sustainable Fossil Fuels: The Unusual Suspect in the Quest for Clean and Enduring Energy

by Mark Jaccard, Simon Fraser University

The book's first printing will be available Nov. 27 by direct order only from Cambridge University Press, 100 Brook Hill Drive, West Nyack, NY 10994.

Toll-free 800-872-7423.
Fax 914-937-4712.
http://us.cambridge.org

It will be available in bookstores in Canada Jan. 1, 2006. Paperback: $33.95.

Hardcover: $94.95

Last in a three-part series (Part 1, Part 2)

© The Vancouver Sun 2005

TOP

Posted by Arthur Caldicott on November 24, 2005

Who's got the power with our power?

BC Progress Board Releases Discussion Paper on Provincial Energy
9-Nov-2005
Who's got the power with our power?
Les Leyne, Times Colonist, 24-Nov-2005



BC Progress Board Releases Discussion Paper on Provincial Energy

On November 9, 2005, the BC Progress Board tabled a discussion paper on energy with the provincial government. The paper, "Strategic Imperatives for British Columbia's Energy Future", was prepared for the Board by Sage Group Management Consultants. The document surveys BC's current energy situation and makes a number of suggestions for action

News Release
Executive Summary (589K)
Summary of Recommendations(572K)
Entire Report (1,391K)

TOP



Who's got the power with our power?

By Les Leyne
Times Colonist (Victoria)
24-Nov-2005

There's a revolutionary concept embedded in the B.C. Progress Board report on energy. The 60-page outlook floats the notion that the democratically elected government of B.C. should wrest control of energy policy away from B.C. Hydro.

That's the kind of coup d'etat plotting that can get you strung up in some countries. But the scheme is laid out in the Progress Board report, by the Sage Group. It's no secret that B.C. Hydro is a power unto itself in the province, so a discussion paper that confirms that fact is unlikely to ruffle too many feathers. Recommending a change to that situation, however, is something new and different.

The report comes dangerously close to questioning B.C. Hydro's supremacy in all things electrical. Not only that, but it states that a lot of people are doing the same sort of thinking.

"In discussion with the Progress Board, many parties stressed the importance of the overarching responsibility of the B.C. government and specifically the Ministry of Energy, Mines and Petroleum Resources, to determine energy policy and ensure it is implemented."

Suggesting that the Energy Ministry set energy policy would be a mushy motherhood position in some jurisdictions, but in B.C. it's actually a controversial proposition.

The Liberals came to power in 2001 with an attitude that "political interference" when it came to Crown corporations was a cardinal sin. NDP meddling in the ferry system -- "Go out and build some aluminum catamarans. And make them go really fast" -- was fresh in everyone's minds.

The Liberals also remembered the grand New Democrat misadventure in Pakistan, where they sent a Hydro subsidiary off on a questionable venture involving lies, off-shore bribery and missing money. (It's best remembered in the legislature for the Liberals bellowing: "Who is Ali Mahmood?")

New Democrats also dictated the Island energy policy that resulted in the proposed Duke Point generating plant in Nanaimo, which was just turning into a problem when the government changed, and gradually evolved into a debacle, since abandoned.

So the hands-off attitude, combined with the mass buy-outs of staff resulting from the budget-cutting spree, left most of the field clear to B.C. Hydro, when it comes to electricity policy.

As long as it makes the government a few hundred million dollars every year and keeps the lights on, it can do whatever it wants. (A good illustration of their relative status is at the annual Union of B.C. Municipalities convention, where the government and B.C. Hydro throw matching receptions. Grumbling delegates are obliged to line up for a half-hour to shake hands with the premier and make an appearance at the government function. Then they bolt over to the lavish Hydro bash, where the real party is.)

But now the Progress Board is questioning the natural order of things.

"There was particular concern expressed that the government does not have adequate staff and budget dedicated to developing electricity supply policy and ensuring that this policy is adhered to by B.C. Hydro," says the consultants' report.

It then makes the assertion: "It is the role of the B.C. government to speak for the public in this regard and it is the role of B.C. Hydro to follow the direction of government."

The board says Hydro has the government out-gunned at every turn when it comes to staff and resources, "which puts the government in the position of not being able to provide adequate oversight and direction to B.C. Hydro."

Consequently, "B.C. Hydro is seen as setting its own policies with regard to electricity supply or responding to matters of public interest, such as the government's energy plan, in its own time and manner."

The main reason for asserting control over Hydro is the paramount goal stated in the report of regaining self-sufficiency in electricity, an advantage that was lost around the turn of the century. Whether it was a lack of political will or the absence of compelling need, the province hasn't added any major generating capacity in more than 20 years, and is now a net importer of electricity.

Now they're trying to make up the shortfall, but the report said there is growing concern that many of the small-scale projects are being vetoed by local governments, for zoning or other reasons.

Local governments do have a say in approving such projects, but the report says the province must be the final decision-maker.

"B.C. is not yet in a crisis with regard to its supply of electricity, but it does have serious planning challenges and if these challenges are not met in a timely manner a supply crisis will likely follow."

Somebody needs to ramrod some fairly urgent action on this front. B.C. Hydro is compiling an integrated electricity plan that will try to address self-sufficiency. It would be reassuring if the elected officials did more than just wave their hands over it when it's done.

leyne@island.net

TOP

Posted by Arthur Caldicott on November 24, 2005

November 22, 2005

Huge green power reserves can fuel jobs, economy

Huge green power reserves can fuel jobs, economy
News Release, BC Sustainable Energy Association, 21-Oct-2005
Sustainable Energy Solutions for BC
Submission to BC Alternative Energy and Power Technology Task Force, BCSEA, 21-Nov-2005
Alternative energy sources potentially rich in jobs
Scott Simpson, Vancouver Sun, 22-Nov-2005




Huge green power reserves can fuel jobs, economy

FOR IMMEDIATE RELEASE
CONTACT: Guy Dauncey (250) 881-1304

News Release
BC Sustainable Energy Association
21-Nov-2005

Victoria, BC (November 21, 2005)-British Columbia has huge reserves of green power that could stimulate enormous economic development and employment opportunity, with as many as 400,000 new jobs over 25 years, and establish BC as a leader in renewable energy, according to a report released today by the BC Sustainable Energy Association (BCSEA).

Tallying the province's green energy potential from wind, solar, tidal, geothermal and other technologies, combined with energy-savings from efficiency measures, would produce 84,000 gigawatt hours (GWh) a year. This is 50% more than BC Hydro's current total generation and enough power for 8.4 million homes.

"BC can be a global leader in green energy technologies if it chooses to," said Guy Dauncey, BCSEA president and author of the report, Sustainable Energy Solutions for BC, prepared as a submission to the BC Alternative Energy and Power Technology Task Force. The Task Force is expected to release its findings soon. BC Hydro is also due to release its 2005 Integrated Electricity Plan that will outline how BC Hydro expects to meet anticipated customer electrical demand over the next 20 years.

The BCSEA report identifies tidal energy as BC's largest long-term source of potential power: 13,000 GWh/yr. A further 12,500 GWh /yr could be freed up by 2025 by saving electricity currently used wastefully. BC also has the potential for 11,000 GWh a year of wind energy. Full- and part-time jobs created over the 25-year period total 413,000 jobs, including installation of solar PV roof systems and retrofitting homes and businesses to double their energy efficiency. The report draws on BC Hydro energy resource data and a variety of employment studies to arrive at these conclusions. (See table "BC's Long-Term Potential for Sustainable Electricity Resources and Jobs" below.)

"BC's impressive solar energy potential is very similar to that of Germany, a world-leader in solar installations thanks to progressive government energy policies," said Kevin Pegg, of EA Energy Alternatives Ltd., a Victoria solar, wind and microhydro company. "Washington State recently announced incentives to grow their renewables industry: If they can do it, so can we."

"The challenge is not technical", said Guy Dauncey. "It lies with the decision to prioritize sustainable energy over other sources, such as coal, coal-bed methane, natural gas, or large-scale hydro." BC Hydro is currently following a voluntary commitment that 50% of its energy will come from "clean" resources, which includes cogeneration from natural gas. BC Hydro's 2005 Integrated Electricity Plan may conclude that BC's future power should come from green resources such as those described in the BCSEA report, or from coal-fired power, the Site-C dam, natural gas, or a combination of these sources.

"Deploying these resources will require a transition over several years along with some transition costs," said Dale Littlejohn, a Vancouver sustainable energy consultant and BCSEA director, "but we can do this profitably while improving jobs, health and the economy. As a bonus, we can make BC fossil-free by 2025 and set an example for the rest of the world."

The full report is available at: www.bcsea.org/policy/taskforcereport.asp

- 30 -

For more information:
Guy Dauncey (Victoria) 250-881-1304
Kevin Pegg (Victoria) 250-727-0522
Dale Littlejohn (Vancouver) 604-785-5130

 

MW

GWh/year

Cents/kWh

Jobs

Wind

5000

11,000

6-12

31,250(1)

Microhydro

2530

11,108

4-9

5,700(2)

Wood waste biomass

215

1800

4-9

484(3)

Geothermal

1070

9,000

5-9

7,000(4)

Tidal

2225

13,000

11-25

13,906(5)

Landfill

15

85

4-5

20(6)

Solar PV

6000

12,000

60 - 20

210,000(7)

Total potential power

58,000

   

Efficiency

n/a

12,500

3-6

145,200(8)

Solar Hot Water

n/a

10,000

n/a

[60,000](9)

GeoExchange Heating

n/a

3,750(10)

n/a

[21,420](11)

Total

 

84,250

 

413,560


references here

TOP



Alternative energy sources potentially rich in jobs


Waning supplies of oil and natural gas will trigger the need for other sources of energy, a report says

Scott Simpson
Vancouver Sun
Tuesday, November 22, 2005

British Columbia could open new industries and create hundreds of thousands of jobs by turning its attention to the world's $200-billion power technology industry, a report submitted Monday to the B.C. government says.

The report says global climate change, and waning production of oil and natural gas, will throw a wrench into 90 per cent of the world's present energy supply -- describing a fossil fuel shortage as "imminent."

B.C. residents are "solidly behind sustainability" but the province must increase its commitment to research and development of lower-cost alternate energy technology, the report from the B.C. Sustainable Energy Association says.

Wind, tidal and solar generation all offer significant opportunities.

"If B.C. makes this transition first, it will be in a position to be a global hub for one of the largest market opportunities in history," the report says.

The association estimates as many as 400,000 temporary, part-time and full-time jobs could be created and adds that B.C. could more than double its present hydroelectric capacity without building another major dam.

"Our analysis shows that B.C. has the potential to generate 84,250 gigawatt hours of sustainable, renewable energy [including efficiency savings]," says the report, which was submitted to the government's committee on alternative energy and power.

The panel is co-chaired by Environment Minister Barry Penner.

Penner said he hasn't had time to review the report but said that, "as Minister of Environment I can't help but be interested in ideas that support sustainable solutions."

Penner noted that B.C.'s alternative power technology sector already includes more than 60 companies providing 3,000 jobs and generating $700 million in annual revenues.

The report follows a 2002 BC Hydro study that listed the province's green energy resources, but focused on sources that are relatively close to the cost of hydro generation.

BC Hydro's generation cost is 2.5 cents per kilowatt hour (kWh) at its existing "heritage" hydroelectric facilities.

The sustainable energy association estimates micro-hydro at between four and nine cents per kWh and six to 12 cents for wind.

Estimated generating costs for tidal power, a fledgling technology, are 11 to 25 cents per kWh.

Solar power is 60 cents to $2 per kilowatt hour.

Association executive director Guy Dauncey said in an interview that Hydro could structure its electricity rates in a way that supports alternative energy, as several U.S. states have done.

"Everyone who pays a BC Hydro bill would pay an extra, say, half-cent per kilowatt hour which supports the development of new emergent technologies," Dauncey said.

He added that Germany, which has "the same sunshine ratio as British Columbia," is going full-tilt on solar power development.

Mary Hemmingsen, BC Hydro manager of power planning and portfolio management, noted the Crown corporation is compelled by the B.C. Utilities Commission to maintain the lowest-possible electricity prices for its customers -- who enjoy the third-lowest electricity prices in North America.

"We probably agree that B.C. has some really significant green resource potential," Hemmingsen said. She also cautioned that while tidal resources are significant, the technology is, as yet, unproven.

ssimpson@png.canwest.com

SWITCHING HOW WE THROW THE SWITCH:

The B.C. Sustainable Energy Association says the province has huge green power potential that could provide not only renewable sources of energy but could aso stimulate economic development and employment.

B.C.'s maximum long-term (25-year) potential for sustainable electricity resources

Gigwatts/year Cents/kilowatt hour* Jobs
Wind: 11,000 6-12 31,250
Microhydro: 11,108 4-9 5,700
Wood waste: 1,800 4-9 484
Geothermal: 9,000 5-9 7,000
Tidal: 13,000 11-25 13,906
Landfill: 85 4-5 20
Solar PV: 12,000 60-200 210,000

Efficiency: 12,500 3-6 145,000
Solar Hot Water: 10,000 n/a 60,000
GeoExchange: 3,750 n/a 21,420
Total: 84,250** 413,560

* BC Hydro's existing heritage assets: 2.5 cents per kilowatt hour.
Cost of adding new large hydro assets: 6.5 cents per kilowatt hour.

** 50% above Hydro's current total generation
Source: B.C. Sustainable Energy Association, Vancouver Sun

© The Vancouver Sun 2005

TOP

Posted by Arthur Caldicott on November 22, 2005

November 17, 2005

Prepare for Peak Oil Now

By Richard Heinberg
AlterNet
14-Nov-2005

Editor’s Note: This paper, exclusively available to AlterNet, was presented at a Reception with Their Royal Highnesses The Prince of Wales and the Duchess of Cornwall, at the California Leaders Round Table Dialogue on Peak Oil, Climate Change and Business Action; November 7, 2005 in San Francisco.

The subject I teach -- human ecology -- is a discipline that largely concerns population and resources. Over the past few years I have chosen to study oil, because it is the most important energy resource of the modern world.

Only 150 years ago, 85 percent of all work being accomplished in the U.S. economy was done by muscle power -- most of that by animal muscle, about a quarter of it by human muscle. Today, that percentage is effectively zero; virtually all of the physical work supporting our economy is done by fuel-fed machines. What caused this transformation? Quite simply, it was oil's comparative cheapness and versatility. Perhaps you have had the experience of running out of gas and having to push your car a few feet to get it off the road. That's hard work. Now imagine pushing your car 20 or 30 miles. That is the service performed for us by a single gallon of gasoline, for which we currently pay $2.65. That gallon of fuel is the energy equivalent of roughly six weeks of hard human labor.

It was inevitable that we would become addicted to this stuff, once we had developed a few tools for using it and for extracting it. Today petroleum provides 97 percent of our transportation fuel, and is also a feedstock for chemicals and plastics.

It is no exaggeration to say that we live in a world that runs on oil.

However, oil is a finite resource. Therefore the peaking and decline of world oil production are inevitable events -- and on that there is scarcely any debate; only the timing is uncertain. Forecast dates for the peak range from this year to 2035.

The peaking phenomenon itself has been observed again and again in individual oil fields and in entire producing nations. One of the first countries to hit its peak was the U.S.. During the 1930s and '40s, half the world’s production of petroleum came from Texas and Oklahoma. However, U.S. production reached its all-time maximum in 1970 and has been declining ever since. Currently the U.S. imports 60 percent of its oil.

Concern over the likelihood of an impending world peak has increased markedly in recent months as global spare production capacity has dwindled and as prices have achieved what seems to be a new baseline of over $50 per barrel.

Evidence that we are approaching peak includes the following:

ExxonMobil documents that global oil discoveries peaked in 1964. Declining rates of discovery are therefore a long-established trend.

Chevron notes in recent advertisements that 33 of 48 nations are in decline. We have thus seen the peaking of production in a majority of individual nations, including some important producers such as Indonesia, Norway, Great Britain, and Venezuela. Mexico will reach its peak within the next two years.

As noted by the International Energy Agency, there is evidence that a substantial amount of "proven reserves" in OPEC countries are illusory, the result of a scramble for market share within a cartel that allocates export quotas based on stated reserves.

With regard to this last point it should be noted that reserves figures, even when accurate, have historically given little warning of peaking. The U.S. instance is once again emblematic: in 1970, U.S. oil reserves were higher than ever; so were production rates. But only a year later, American production began its terminal decline. The study of discovery rates and depletion rates gives us a much better idea of when the global peak is likely to occur.

Optimistic estimates of future discovery and production issued by Cambridge Energy Research Associates and the U.S. Geological Survey have been criticized by several analysts. The optimists have generally failed to anticipate peaks, first in the U.S. and repeatedly in the case of other nations around the world.

This morning the International Energy Agency (IEA) issued a statement saying that the world will have sufficient energy supplies for the next quarter century. However, the statement noted the necessity of the investment of $17 trillion in the supply train in order to maintain sufficiency for so long. Also, the IEA anticipates Saudi Arabian production expanding to 18 million barrels per day by 2030—a figure considerably higher than the maximum possible rate of production from that country cited not long ago by Sadad al Husseini, the recently retired head of exploration for Saudi Aramco.

Expressions of concern have been voiced by corporations, prominent organizations, and knowledgeable individuals, including ChevronTexaco, the Royal Swedish Academy of Sciences, Volvo, Ford Motor Company Executive Vice President Mark Fields, the Chinese Offshore Oil Corporation’s chief economist, and numerous petroleum scientists and oil industry analysts.

The question immediately arises: Will alternative sources be able to make up the difference?

Alternative sources often discussed include oil sands from Canada, shale oil in Colorado, coal-to-liquids, gas-to-liquids, nuclear, and renewables such as solar and wind. Each of these will require immense investment and well over a decade of intense effort in order to produce substantial quantities of energy to offset declines from fossil fuels. And in most cases, rates of production are and will be constrained by non-economic factors. Take the oil sands, for example. Currently Canada produces one million barrels of synthetic crude per day from that source. There is expectation of two mb/d by 2010, and perhaps as much as four mb/d by 2025. We are unlikely to see higher numbers than that even with extraordinary capital investment, because the production process requires large amounts of natural gas and fresh water, both in short supply in Alberta. Moreover, according to the IEA, the world needs six mb/d of new production capacity each year (and that number is growing) to meet new demand and to offset depletion from existing fields.

How about increased efficiency -- surely that can offset any potential oil supply problems. In principle, yes, but most efficiency strategies will likewise require significant lead times. For example, we have the technology now to enable all of us who own cars to be driving ones that get up to 100 miles per gallon. If we were, that would obviously save an enormous amount of fuel. But how long would it take to implement that strategy? It would certainly take four or five years for Detroit to begin producing such high-efficiency cars in large numbers.

Then, not everyone buys a new car every year. In fact, it takes about 15 years to change out nearly the entire U.S. car and truck fleet. So, altogether, it would take about 20 years to fully implement this particular efficiency strategy.

Will the market be able to respond quickly enough to forestall serious economic, social, and political impacts? It is often said that the Stone Age did not end for lack of stones, nor will the Oil Age end because we run out of petroleum -- but instead because we find a cheaper source of energy. However, as we have just seen, that cheaper source of energy has yet to be identified.

Early this year a report was released, prepared for the U.S. Department of Energy by a team led by Robert L. Hirsch, who has a distinguished background in the oil industry and is a senior energy analyst at SAIC and the Rand Corporation. The Hirsch Report (titled "Peaking of World Oil Production: Impacts, Mitigation and Risk Management") concludes that price signals will arrive at least ten years too late to enable a gentle, market-led transition away from oil to other energy sources. The report describes Peak Oil as an "unprecedented" challenge for modern societies, and describes economic, social, and political risks if preparation is not undertaken soon enough, or on adequate scale.

Let me read you a few sentences from the Hirsch Report:

The problems associated with world oil production peaking will not be temporary, and past "energy crisis" experience will provide relatively little guidance. The challenge of oil peaking deserves immediate, serious attention, if risks are to be fully understood and mitigation begun on a timely basis. Mitigation will require a minimum of a decade of intense, expensive effort, because the scale of liquid fuels mitigation is inherently extremely large. Intervention by governments will be required, because the economic and social implications of oil peaking would otherwise be chaotic.

The report also concludes that the costs of preparing too late for global oil peak would far outweigh those of preparing too early.

The worst-case scenario for the impact of global production peak is very bad indeed. As I mentioned earlier, we are extremely dependent on oil for transportation, agriculture, plastics, and chemicals. In each area, we are already seeing serious impacts resulting from current prices in the $60-per-barrel range. For example,

Currently tens of thousands of farmers are agonizing over whether they can afford to plant next year’s crop, given high fuel and fertilizer costs.

Chemicals and plastics industries are already hard hit: In the chemistry industry alone, more than 100 plants have closed and more than 100,000 jobs have been lost just this year.

In the airline industry, 40 percent of revenues go to pay for jet fuel; most U.S. air carriers are already in bankruptcy or nearing that situation.

Home heating costs are projected to be 40-50% higher this winter than last.

As prices go even higher, and with actual scarcities of fuel, people will experience difficulties commuting, and the maintenance of our far-flung food distribution systems may become problematic.

On top of all this, oil is a strategic resource: as supplies become scarce, there is increasing likelihood of international conflict.

To avoid the worst-case scenario we must begin today to reduce our dependence on oil. The effort must have top priority. It must focus primarily on reducing demand, and only secondarily on producing large quantities of alternative transportation fuels.

A global Oil Depletion Protocol would reduce price volatility and competition for remaining supplies, while encouraging nations to move quickly to wean themselves from petroleum. In essence, the Protocol would be an agreement whereby producing nations would plan to produce less oil with each passing year (and that will not be so difficult, because few are still capable of maintaining their current rates in any case); and importing nations would agree to import less each year. That may seem a bitter pill to swallow.

However, without a Protocol -- essentially a system for global oil rationing -- we will see extremely volatile prices that will undermine the economies of all nations, and all industries and businesses. We will also see increasing international competition for oil likely leading to conflict; and if a general oil war were to break out, everyone would lose. Given the alternatives, the Protocol clearly seems preferable.

National governments, local municipalities, corporations, and private individuals will all need to contribute to the effort to wean ourselves from oil, an effort that must quickly expand to include a reduction in dependence on other fossil fuels as well.

All of this will constitute an immense challenge for our species in the coming century. We will meet that challenge successfully only if we begin immediately.

Further reading:

The Party's Over
Oil, War and the Fate of Industrial Societies
By Richard Heinberg
New Society Publishers, 2005

Powerdown
Options and Actions for a Post-Carbon World
By Richard Heinberg
New Society Publishers, 2004


Posted by Arthur Caldicott on November 17, 2005

The Baron talks up China and energy

By ERIC REGULY
Globe and Mail
Thursday, November 17

The Rothschilds have been in business for about 220 years, and every century or so investment banking's royals haul out the yellowed charts and realize the empire has a presence in Upper and Lower Canada. As a courtesy, they pay a visit, shiver in the cold, recoil at the wine -- the family gave Bordeaux snobs Mouton and Lafite -- and politely scurry back to Paris or London or New York.

This week, the Rothschilds' gilded airborne carriage took the dapper Baron David de Rothschild and his entourage to Toronto and Montreal. Mr. Rothschild's first official visit to Canada was a courtesy call. But it was also recognition that the small Canadian offices, formally known as N.M. Rothschild & Sons Canada, probably will take on a more prominent role in the family wealth creation machine.

That's because Canada has a lot of what the world covets -- energy and metals. Mr. Rothschild thinks the Chinese are about to emerge as voracious buyers of not just the commodities, but the companies that produce the commodities. The firm, with its presence in Canada and connections to China, might be in a good position to broker some of these deals.

"The Chinese want to demonstrate that they are starting to do what most big companies in the world do when they are national champions, which is look at opportunities everywhere," he says in an interview.

Ray Smith, chairman of Rothschild North America and former CEO of Bell Atlantic (now Verizon), who joined Mr. Rothschild on the Canadian foray, thinks China will be especially aggressive in oil. "The one thing they do not have is oil. [They] also want a seat at the table when the great energy decisions are made. The ones today are minor compared to what they will be 10 years from now."

Mr. Rothschild says the firm's long history of independence has made it especially attractive to the Chinese. This allowed Rothschild to emerge this year as the adviser to the non-executive directors of China National Offshore Oil Corp.

China National Offshore Oil (CNOOC), made an audacious bid for Unocal last summer but Chevron took the prize.

For that, Chevron can thank the political hysteria set off by various politicians. The Chinese bid was a national security threat, they said, even though CNOOC is publicly traded and promised not to remove oil from American soil and export it to China. Congress threatened to delay any decision to approve the merger for months.

The conventional wisdom is that that the Chinese vastly underestimated the political backlash. Not exactly true, Mr. Rothschild says. "We knew our chances were slim. I think the Chinese wanted to register the fact they are players."

CNOOC or other Chinese oil companies probably will make more acquisition attempts, although unlikely in the United States. The American energy press has speculated that Canada's Talisman or Husky Energy might become targets (China Minmetals last year went after Noranda, now part of Falconbridge, and then mysteriously lost interest).

Mr. Rothschild and Mr. Smith both agree that, in 10 years or so, China's pursuit of big resource companies will be an unexceptional aspect of the global M&A scene.

While the Rothschilds are probably best known among mere commoners for setting gold prices in the London gold market (a business they abandoned last year), the CNOOC adventure shows they have a fondness for grubbier industries. The family has a lot of experience in commodities and resources, especially in mining -- Mr. Rothschild started his career at a family-controlled mine in the 1960s -- and in infrastructure and utility plays.

Thanks to the commodities boom, Canada is back on the resources map, which means Rothschild Canada might be, too. Rothschild hasn't been a big name in Canada since 1953, when it led the syndicate to develop Newfoundland's Churchill Falls hydroelectric project, which wasn't finished until the early 1970s.

Mr. Rothschild, 63, has been chairman of Rothschild Continuation Holdings AG, the top company in the empire, since 2003, when Sir Evelyn de Rothschild, the dominant figure on the British side of the business, retired. The firm is fairly small; it has about 2,500 employees in 30 offices in 20 countries. But it has the distinction of being the only privately held global investment bank and one of the few independent names of any size. Most of its European rivals, including Schroders, Flemings and Casenove, were poached in the past decade or so by the big American banks. Another rival, Lazard, recently went public.

Independence and connections to governments and industries that might go back to the era when Napoleon was in diapers allow Rothschild to snag M&A advisory work, which accounts for three-quarters of its income, from varied and surprising quarters. But Mr. Rothschild knows that the firm can go only so far in a land of Wall Street giants. If nothing else, Rothschild, unlike the J.P. Morgans and Citigroups of the world, can't use its balance sheet to attract clients with loans.

Mr. Rothschild and Daniel Labrecque, the CEO of Rothschild Canada, insist the firm is not working on a transborder deal involving a Canadian company, although the rumours say it has teamed up with a Canadian investment bank on a potential resources company sale. But making a splash in the Canadian market seems only a matter of time as Rothschild thumbs through its fat Rolodex. "The ambition is to become a quality player in Canada," the baron says.

Posted by Arthur Caldicott on November 17, 2005

November 14, 2005

Enviros Need to Get With a Program


By Steven Pearlstein Washington Post November 2, 2005

The Sierra Club, the country's leading grass-roots environmental organization, has spent a year trying to figure out what it thinks about liquefied natural gas, so far without success. And therein lies a parable about politics and policy that explains a lot about the current stalemate in national energy policy.

Like most environmental groups, the Sierra Club would prefer that we meet our energy needs through conservation and stepped-up use of renewable resources such as solar and wind power. But with home heating bills set to climb as much as 50 percent this winter and some cold-weather states facing the very real possibility of rationing natural gas supplies, even most enviros concede the need to boost supply.



The liquified natural gas plant at Cove Point, Md., owned by Dominion Resources, is one of six such facilities in the United States. (By Mark Gail -- The Washington Post)
Click to enlarge image

Enviros, in fact, can take some credit for the current gas shortage. For years, they've fingered oil- and coal-fired power plants that are leading culprits behind acid rain and global warming. But so many utilities rushed to build cleaner gas-burning plants that demand has now badly outstripped supply.

The readiest source of additional domestic supply -- offshore drilling -- is hotly opposed by environmentalists as too risky to marine ecosystems. Instead, they prefer to tap the huge reserves that remain under Alaska's North Slope. They're willing to override their genetic disposition to tampering with the Alaskan wilderness and support a new (non-liquefied) gas pipeline along the trans-Alaskan highway through Canada to the Lower 48. But the pipeline would require a $20 billion investment that even Big Oil is unwilling to make.

Which leaves us natural gas in its liquefied form, which must be transported from abroad in cargo ships and unloaded at coastal terminals that change the liquid back into gas.

There are already six such facilities in the United States, including one at Cove Point in Calvert County, and the industry estimates that it will need as many as a dozen more. Fourteen proposals have already received federal approval, 20 have been proposed, and probably 10 more are in the works.

With all those to choose from, you might think that the Sierra Club would have identified the ones it could support. But with a few notable exceptions -- the expansion at Cove Point being one -- you'd be wrong. It would appear that for the Sierra Club, LNG has become the energy source to be supported in principle, but rarely in practice.

Go to the Web site of the Los Angeles chapter of the Sierra Club, for example, and you'll learn why any of three proposed terminals would be frighteningly dangerous and costly to electricity customers while making the nation even more dependent on foreign fuel.

In Louisiana and Mississippi, the Sierra Club chapter warns of tens of thousands of innocents who would be burned to a crisp if there were ever an explosion and fire at any of the LNG terminals proposed for the Gulf Coast.

On the East Coast, the Sierra Club's Delaware chapter has come out against BP's plan to build an LNG terminal in the Delaware River. In its April newsletter, the New York chapter lists eight environmental catastrophes that would befall the region if Shell were allowed to build a floating terminal 25 miles out in the Long Island Sound. And in Boston, the Sierra Club is leading the charge against a proposal by AES to build an LNG terminal on a small, unused and largely unusable island at the mouth of Boston Harbor.

The grass-roots politics of all this is easy to understand. For years, environmental groups have successfully opposed power plants, utility lines and offshore drilling by tapping into the not-in-my-back-yard instincts of anyone living near such projects. Now, when an LNG proposal comes along, the response is almost reflexive. Local residents see the need to gussy up their NIMBYisms with environmentalist garb, and local enviros are happy to oblige.

Back at Sierra Club headquarters, however, officials are still struggling to reconcile the knee-jerk opposition of local chapters to just about every energy infrastructure project with the political imperative to confront the realities of Republican rule and soaring energy prices.

"We are very conscious that we need to articulate what we are for as well as what we are against," says David Hamilton, who oversees energy policy issues for the Sierra Club in Washington.

Recently, a number of environmental groups were able to put aside their reflexive NIMBYism to support controversial wind-farm proposals off Cape Cod and San Francisco. And some environmental leaders have become so alarmed by the pace of global warming that they have even indicated a willingness to reopen the debate over nuclear power.

My guess, however, is that unless more enviros figure out how to prioritize their issues and engage in the kind of trade-offs and compromises needed to recapture the political center, their once vaunted movement runs the risk of falling further into irrelevancy.


Online discussion about this column
Washington Post business columnist Steven Pearlstein was online to discuss his latest column, an examination of environmentalists and their continued unwillingness to get behind liquefied natural gas projects. The transcript of the discussion is here.

Steven Pearlstein can be reached at pearlsteins@washpost.com.

FERC's map of Existing and Proposed North American LNG Terminals is here. Note that it is missing the two LNG proposals on BC's coast: Kitimat LNG at Kitimat, and Westpac Terminals (empty website) at Ridley Island, Prince Rupert.

Posted by Arthur Caldicott on November 14, 2005

November 11, 2005

Peak-power jolt for homeowners urged

Scott Simpson
CanWest News Service
Thursday, November 10, 2005

The provincial government should order B.C. Hydro to increase electricity rates for homeowners during peak hours, and to charge more for above-average electricity consumption, says a report released Wednesday by the B.C. Progress Board.

The advisory board to the B.C. Liberal government says British Columbians have a "false sense of security" because existing electricity rates are among the cheapest in North America -- and warns that additions to B.C.'s electricity supply will be significantly more expensive.

Hydro is already moving in the direction of variable rates with B.C.'s major industries. It will introduce a new pricing structure for industrial customers that involves a near-tripling of electricity rates on the last 10 per cent of electricity consumed in peak winter hours.

That would bump the price from 2.3 cents per kilowatt hour to 6.1 cents per kilowatt hour to reflect the higher costs of bringing new sources of electricity onto the Hydro grid. Off-peak rates will fall in the summer, allowing industry the opportunity to recoup some of its winter electricity costs.

The progress board says adopting a system of variable rates would send a signal that there are additional costs associated with consumption during peak times.

"B.C. has had the luxury of a secure supply of energy, which has resulted in complacency about where it will come from in the future and what it will cost," says the report, titled Strategic Imperatives for British Columbia's Energy Future.

The progress board was established by Premier Gordon Campbell in July 2001 to review the province's economic and social performance and to provide policy advice to government.

The report says B.C. has made only nominal additions to electricity supply in the last 20 years despite a 33 per cent increase in population over that time.

"The provincial government, through the B.C. Utilities Commission, should direct BC Hydro to introduce pricing of electricity that sends the correct signals to all consumers for their energy decisions, mindful of the government's pricing policy with respect to heritage assets," says the report.

Hydro residential and industrial customers have traditionally paid a flat rate for their power, reflecting the low-cost production coming from B.C.'s so-called 'heritage' assets -- its network of dams and electricity generating facilities on the Columbia and Peace rivers in eastern British Columbia.

New sources of electricity supply cost more. They include run-of-river hydro projects developed by the private sector, and Hydro is also mulling private wind farms, natural gas-fired generation, and a major new dam at Site C on the Peace River.

Variable pricing isn't entirely punitive -- consumers who use electricity-gobbling appliances such as dishwashers in the late evening hours could end up paying cheaper-than-standard rates as a reward for conservation.

Meanwhile, Hydro president-CEO Bob Elton warned in a speech Tuesday to the Vancouver Board of Trade that filling B.C.'s needs with imported electricity is an "increasingly risky" strategy.

B.C. currently relies on imports for 12 per cent of its electricity needs and Hydro projects that dependence to grow unless the province adds supply.

Elton said B.C. faces increased risk of supply bottlenecks due to a limited number of transmission lines, unforeseeable price-increase risks, and the risk of "severe" consequences for the economy if the present situation continues.

He said British Columbians need to be interested in the situation because "there is a long-term challenge that needs long-term planning to solve."

Later this month, Hydro will present to the B.C. Utilities Commission a plan for addressing B.C.'s long-term electricity needs. It will consist of a mix of projects, possibly including the Site C dam on the Peace River near Fort St. John.

In an interview, Elton acknowledged that Hydro's recommendations may stir up some controversy but said it is imperative for British Columbians to consider all the options and make choices that reflect the interests of the entire province.

© Times Colonist (Victoria) 2005

Posted by Arthur Caldicott on November 11, 2005

Energy becomes Canada's top export

By Eric Beauchesne
Times Colonist (Victoria)
11-Nov-2005


OTTAWA -- Energy has become Canada's No. 1 export, easily surpassing both machinery and equipment and automotive products, while also boosting total exports to a record high and pumping up the country's trade surplus.

"Energy has now moved firmly into first place among all our exports," senior Statistics Canada economist Philip Cross said.

The only other times that energy was Canada's top export was during the mid-1970s and early-1980s energy crises, he added.

Machinery and equipment had previously been Canada's No. 1 export, followed by auto products.

Energy exports crossed that milestone in August, according to revised figures for the month released Thursday with the September trade figures. Energy maintained that top spot in September with export sales rising above the $9-billion mark for the first time ever.

However, Canadians are also energy importers.

"The value of Canada's exports and imports both hit record highs in September, thanks to soaring outbound shipments of natural gas and inbound shipments of crude petroleum in the wake of back-to-back hurricanes," Statistics Canada said.

However, there is more to the strong trade report than just energy, other analysts noted.

"Canada's trade balance is still holding up, even in the manufacturing sector as the economy adjusts to the higher Canadian dollar," Nesbitt Burns economist Sherry Cooper said.

The strong trade performance, combined with evidence of a strong domestic economy, will reinforce the Bank of Canada's determination to continue raising interest rates to head off inflation, she and other analysts said.

"The Bank of Canada will take this surprisingly strong report, on the back of the surprising strong jobs report, as a sign that they are on the right path and will continue to raise rates," Cooper said.

In September, exports jumped 2.8 per cent to a record $39.8 billion, while imports posted a more moderate 1.4 per cent gain to a record $32.7 billion, Statistics Canada said.

As a result, the trade surplus rose to $7 billion, $1 billion more than expected, and up from an upwardly revised $6.4 billion in August, it said.

"Hurricanes Katrina and Rita sent natural gas prices soaring, resulting in a big gain in the value of natural gas exports going south of the border," it said, noting that about three-quarters of the increase in exports was due to higher natural gas prices.

Canada's surplus with the U.S. exceeded $10.7 billion, the second highest level ever, and up from $9.4 billion in August, as exports to the U.S. surged while imports from there edged down.

Canada's trade deficit with other countries, however, rose to $3.7 billion from $3 billion, as exports overseas shrank slightly, while imports surged nearly six per cent, reflecting increases in consumer goods from China and higher prices for oil from Saudi Arabia and Russia.

Exports of natural gas surged 26.7 per cent in September to a near record $4.4 billion, reflecting a 25 per cent jump in prices, which followed a 14.6 per cent surge in August. While petroleum-product exports also rose, crude-oil exports continued to edge down from what was a record high two months earlier.

Times Colonist (Victoria), Page C06, 11-Nov-2005
Alberta oilsand juggernaut 'could crush B.C. growth'
By Scott Simpson

VANCOUVER -- Alberta's oilsands are an economic juggernaut that could crush British Columbia's efforts to expand its northeast natural gas industry, a new B.C. Progress Board report warns.

The report says British Columbia should seek a collaboration with Alberta on job, transportation, and export strategies, lest Alberta simply "outbid' B.C. for gas industry workers and crimp economic growth in this province.

The report says B.C. has a lot of leverage to apply, if necessary, to encourage Alberta's cooperation.

B.C. assets include highways, transmission lines, oil pipelines, rail lines and ports without which Alberta cannot get many of its energy products -- including crude oil, natural gas, coal and electricity -- to market, says the report.

For example, Alberta-based Enbridge Pipelines just announced a $4 billion pipeline project running from Edmonton to the B.C. port town of Kitimat, planning to export Alberta oil sands crude to markets in China and the United States.

"In many ways, British Columbia holds the key to getting those products and services to market," says the report.

"Just as British Columbia is well advised to strike a joint labour strategy with Alberta to protect British Columbia interests, Alberta is well advised to develop a joint export strategy with British Columbia to protect Alberta interests."

The progress board was created in 2001 by Premier Gordon Campbell to serve as a senior policy advisory body to the provincial government.

This week it issued a report, Strategic Imperatives for British Columbia's Energy Future, that says B.C. must "protect and promote" its considerable energy assets -- and recognize that those assets are central to maintaining and improving B.C.'s high standard of living.

It says that "the development of the Alberta oil sands and the need to get both oil and electricity from the development to market provide an unparalleled opportunity for cooperation and resulting benefit between the two provinces."

Conversely, B.C. has relied on Alberta-based labour and investment to develop the gas industry in this province -- it uses pipelines built by Alberta-based companies to carry some of its gas to markets in eastern Canada and the United States.

"The development of the Alberta oil sands will put the Alberta government in a strong surplus position fiscally for years to come.

"Alberta's coming wealth will create a potential threat to British Coloumbia as better wages, take-home pay, health services and access to education in Alberta are likely to put enormous pressure on the British Columbia labour market, particularly in the area of skilled trades and engineers."

The report notes that those skill sets are "in short supply worldwide."

"Moreover they are the very skill sets British Columbia needs to grow its energy sector and to complete a wide array of transportation projects now underway in the province."

Posted by Arthur Caldicott on November 11, 2005

BCUC approves Kinder Morgan takeover of Terasen

KMI - Terasen Acquisition Decision
BC Utilities Commission, 10-Nov-2005
KMI - Terasen Acquisition Application
Document Registry at BC Utilities Commission
Terasen sale to Texas firm wins okay
Scott Simpson, Vancouver Sun, 11-Nov-2005



KMI - Terasen Acquisition Decision

BC Utilities Commission
10-Nov-2005

NOW THEREFORE the Commission, for the reasons stated in the Decision, orders that the Application is approved subject to the conditions contained in the Decision accompanying this Order.

DATED at the City of Vancouver, in the Province of British Columbia, this 10th day of November 2005.

BY ORDER
Original signed by:
Robert H. Hobbs
Chair

KMI - Terasen Acquisition Decision

TOP



Terasen sale to Texas firm wins okay

By Scott Simpson
Vancouver Sun
11-Nov-2005

The $6.9-billion sale of Terasen Inc. to a Texas energy firm can proceed, albeit with conditions that protect the interest of the Vancouver-based utility company's 875,000 customers, the British Columbia Utilities Commission ruled on Thursday.

The BCUC, in a 51-page ruling, said Kinder Morgan Inc.'s experience at operating natural gas systems, coupled with Terasen's management record and the continuing scrutiny of the utilities commission, assures that the public's interest will be served by the transaction.

The commission said it received more than 8,000 letters of comment on the sale, from "individuals, businesses, communities, community organizations, and associations," including about 650 form letters.

Last month, the BCUC described the volume of correspondence it had received on the sale as a "record" for any proceeding.

"Virtually all of the letters of comment oppose the transaction," with the "vast majority" expressing concern about foreign ownership of Terasen.

Terasen is a Toronto Stock Exchange-listed company whose shareholders voted 96 per cent in October to sell their shares to Kinder Morgan at an attractive premium to their recent trading value.

Other public objections included "general anger," the lack of oral public hearings on the transaction, "a perceived loss of control/sovereignty over resources (energy security)," a presumed reduction in quality of service, Kinder Morgan's spotty environmental record in the U.S., and general distrust of the United States.

However, the commission says, most of the objections are based on misunderstanding of Terasen's status as a publicly-traded private-sector company, and the presumed jurisdiction of the BCUC.

For example, the BCUC notes, concerns about foreign ownership are the responsibility of Industry Canada, a federal agency, and can only be reviewed through the Investment Canada Act.

Industry Canada has not yet rendered a verdict on the sale.

"The Commission Panel appreciates the input of so many citizens and has carefully reviewed and considered the concerns raised by the public," says the decision, which is signed by BCUC chair and CEO Robert Hobbs, commissioner Lori Boychuk, and commissioner Robert Whitehead.

"The Commission Panel is cognizant of the strong public opposition towards this Transaction, as exhibited by the number and tone of letters received. However, the Commission is also mindful that it must consider and adjudicate this application within its statutory mandate and the relevant provisions of the [Utilities Commission Act].

"The Commission Panel notes that much of the opposition to this transaction appears to be based on misunderstandings about the existing ownership and structure of Terasen, the structure of the natural gas market in B.C., and the authority of this Commission over public utilities operating in B.C."

The decision notes that there were restrictions on foreign ownership of Terasen shares when the company, formerly known as B.C. Gas, was created in the late 1980s out of an amalgam of private and public assets.

"The government of B.C. removed these restrictions in 2003," the ruling notes.

The BCUC put a number of restrictions on the sale and notes that the commission will continue to have jurisdiction over Kinder Morgan -- including regulating gas rates charged to customers and quality of service.

Restrictions include forbidding Kinder Morgan to transfer its Terasen customer and billing information out of British Columbia, and requiring that the company not strip away revenue that should be dedicated to maintaining Terasen's existing quality of service.

Kinder Morgan has already announced that it will keep the Terasen Gas name, as well as all of the company's employees except for some senior managers. The company has also said that, over the longer term, it expects to add more employees in B.C. and invest in new pipeline infrastructure in Western Canada.

B.C. Energy Minister Richard Neufeld said in an interview that the BCUC's requirement that Terasen and Kinder Morgan maintain "totally separate" finances "makes good sense" because it will protect the B.C. operation's ability to borrow money.

Neufeld described the New Democratic Party's anti-sale campaign as "pure politics" because Kinder Morgan won't own B.C. natural gas resources -- just the pipelines that deliver them.

"They will still be regulated by the B.C. Utilities Commission for what they pay for the services that are delivered to them by pipes. The cost of natural gas is priced on the North American market. That's just a pass-through on the costs -- although those pass-through costs are still reviewed by the B.C. Utilities Commission. They were before this deal and they will continue to be."

Terasen president and CEO John Reid said in a prepared statement that the company is "pleased with the Commission's decision and we remain confident that combining the assets, skills and people of Terasen with Kinder Morgan will provide long-term value and economic benefits to Canadians.

"There will be no change of service levels for Terasen Gas customers as a result of this acquisition. Natural gas consumers in BC will continue to be served by a first-class utility committed to public and employees safety and meeting the energy needs of its customers," Reid added.

Kinder Morgan chairman and CEO Richard Kinder echoed Reid's comments.

"We are pleased with the Commission's order and look forward to providing the same safe, reliable services to which Terasen's customers have become accustomed," Kinder said in a prepared statement.

"When the transaction is completed, the transition for Terasen's approximately 875,000 natural gas distribution customers in British Columbia should be seamless. The Terasen Gas name will remain the same, its headquarters will continue to be in Greater Vancouver (Surrey) and the BCUC will still maintain regulatory supervision and oversight of the company. Additionally, we intend to retain virtually all of the Terasen Gas employees, policies and procedures."

ssimpson@png.canwest.com
- - -

TAKEOVER TIMELINE:

Aug. 1: Kinder Morgan announces $6.9-billion bid to buy Terasen Inc.

Oct. 14: B.C. Utilities Commission reports record amount of correspondence about the sale, most object.

Oct. 19: Terasen shareholders vote 96% in favour of deal.

Oct. 24: BCUC rules out holding oral public hearing on sale, stays exclusively with written hearing.

Nov. 10: BCUC approves sale.

What's next: Industry Canada to render verdict on sale under Investment Canada Act.

TOP

Posted by Arthur Caldicott on November 11, 2005

November 10, 2005

BC SEA sponsors events in November

Victoria, Sat & Sun, Nov 12 & 13
Showcase Event:
Sustainable Energy Now!
Solving the Energy Puzzle

University Canada West
950 Kings Rd. in Quadra Village

Vancouver, Tue, Nov 22
Climate Change: The Biggest Show on Earth

UBC Robson Square, 7 pm

For more info:
www.bcsea.org

Posted by Arthur Caldicott on November 10, 2005

November 09, 2005

Powerline route ignores E&N corridor potential

By Dunc MALCOLM
Goldstream News Gazette
Nov 09 2005

A presentation concerning a proposed underground power transmission line produced sparks at the Nov. 1 council meeting in View Royal.

Sea Breeze Power Corporation, a Vancouver-based company, informed council of the proposed route for the underground and underwater transmission cable that will carry power from its Knob Hill wind farm, through View Royal to McCauley Point and on to Port Angeles, Wash.

Mike Wise, the project manager for the Juan de Fuca transmission cable, briefed council on the Sea Breeze's upcoming application to the National Energy Board.

Wise said he hopes the application will be heard by next spring and construction can begin in t hefallof2006.

According to Wise, although the application has to include alternative routes for the underground cable, the preferred route would see the cable running from the Pike Lake sub-station and along the hydro right-of-way between Thetis Lake and Francis King regional parks. The route would split into two lines at Creed Road with each line running to a single line along Old Island Highway, to Craigflower Road and south on Lampson Street.

The alternatives included a line through Thetis Lake Park and along Highland Road and a route following Munn's Road. There were no alternative routes put forward for the Old Island Highway section of the route.

Council had expected that Sea Breeze would discuss various alternatives with them prior to settling on a preferred route.

Indeed, it was the lack of alternatives and the logic behind Sea Breeze's preferred route that disturbed council the most. Coun. John Rogers asked pointedly why the E&N rail right-of-way was not included in the alternative routes to be presented to the federal government.

Wise stated that for the section of line north of Old Island Highway, Sea Breeze excluded the Munn's Road and Thetis Lake Park alternatives after identifying problems associated with both routes. He said the number of trees in Thetis and the park's topography made it unsuitable for an underground cable and that the Munn's Road route was too windy and took the line too close to residences to allow for safe.

"Like the Old Island Highway," responded Rogers. "If traffic is a consideration, then go along the E&N right-of-way," he added. Council also expressed concerns over the possible need to relocate existing utilities on Old Island Highway to accommodate the Sea Breeze cable and who would cover the cost.

"That could be negotiated," replied Wise.

The proposed line would cross the Juan de Fuca Strait and come ashore in Port Angeles, Wash. It would run beneath city streets and tie into the Bonneville power station - about a mile inland.

According to Scott McLain, Director of Public Works and Power Systems for Port Angeles, although no formal application has been made by Sea Breeze, any costs stemming from the city having to temporarily move or permanently relocate any utilities will be the responsibility of Sea Breeze. "It is an absolute condition of the license to use the public right-of-way," explained McLain.

In referring to the map showing the cable's proposed route along city streets, View Royal Mayor Graham Hill stated emphatically, "The town would like to see that red line gone."

Added Rogers, "To put it another way, we want to see the E&N back on as an alternative (to Sea Breeze's application before the NRB)."

Posted by Arthur Caldicott on November 09, 2005

Federal Court of Appeal Kills Sumas 2 Appeal

News Release
Sierra Legal Defense Fund
November 09, 2005

VANCOUVER - In a startling end to a long running dispute, the Federal Court of Appeal today dismissed Sumas Energy 2's challenge to the National Energy Board's March 2004 decision. The original ruling denied SE2 permission to build an international power line connecting its Washington State power plant to BC Hydro's power grid near Abbotsford.

After two full days of argument, the Court took the rare step of issuing a decision on the appeal immediately, finding that SE2's appeal has no merit and should be dismissed. It also ordered SE2 to pay the costs of the parties that have opposed its appeal.

"This is a huge, huge victory for opponents of SE2" said Sierra Legal Defence Fund lawyer Tim Howard. "It is extremely rare for the Court to dismiss an appeal right at the hearing, and the Court's decision to do so states loud and clear that SE2's appeal has no merit whatsoever."

Sierra Legal worked with Thomas Berger, Q.C. who spoke on behalf of the Society Promoting Environmental Conservation and the David Suzuki Foundation at the Federal Court of Appeal hearing. SE2 had argued that the NEB decision was not valid and that the Board overstepped its jurisdiction by making a decision involving a foreign company. The American Company unsuccessfully tried to use NAFTA to justify going ahead with the power project.

"This is good news for Abbotsford and everyone living near the U.S. border. It sets an important precedent for U.S. power companies looking to set up shop on the border, where their emissions will pollute Canadian airsheds, so that they don't have to deal with strict state laws governing domestic air pollution," said SPEC Executive Director Karen Wristen. "Our national regulators have a duty to protect the health of Canadians too, and the Court has confirmed it today.

Morag Carter, climate change program director for the David Suzuki Foundation added, "This is a huge victory for British Columbians. The judge's decision sends a clear message that air pollution and public health should be major considerations when it comes to energy supply. It bolsters the case for clean, renewable energy and a new focus on conservation and efficiency."

While the Court issued the decision denying the appeal today, it will still write detailed reasons to support that decision for release at a later date. SE2 could apply to the Supreme Court of Canada for permission to bring a further appeal. Background on the Sumas 2 hearings can be found online at www.sierralegal.org.

-30-

For more information, please contact:
Sierra Legal Defence Fund:
Tim Howard, lawyer
Cell: (604) 313-3132, (604) 681-4146

David Suzuki Foundation:
Morag Carter
Climate change program director
(604) 732-4228 ext. 280, cell: (778) 386-1448

SPEC:
Karen Wristen
Executive Director
(604) 736-7732, cell: (604) 788-5634

Sierra Legal Defence Fund (www.sierralegal.org) is a national non-profit organization dedicated to environmental justice.

Posted by Arthur Caldicott on November 09, 2005

November 08, 2005

Sea Breeze response to BCUC IR#1
concering Vancouver Island Cable

On October 6, 2005, Sea Breeze Power Corp. filed an application to build a transmission cable system from the Lower Mainland (Surrey's Ingledow Substation) to Vancouver Island (Victoria's Pike Substation). See Sea Breeze: Vancouver Island Cable

See also, BCUC Sea Breeze - VIC CPCN Project site (link)

On October 17, the BCUC presented Sea Breeze with its first Information Request (IR#1). The extensive IR was challenging, and intervenors in both the Sea Breeze - VIC proceeding and the competing BCTC - VITR proceeding have awaited the Sea Breeze response with interest.

On November 7. Sea Breeze responded in a set of documents totalling 40 megabytes. The entire response is available in one humungous download at the BCUC Sea Breeze - VIC CPCN Project site. (link)

The response is also available at the Vancouver Island Cable website (www.vancouverislandcable.com), in smaller, more convenient chunks: 269 page main document, plus separate appendices.

One of the more interesting BCUC questions was 1.11.3

1.11.3 If the Commission were to conclude that HVDC Light® technology as set out in the VIC Application and/or the VIC route is the preferred option, is there any reason why it should not direct BCTC to adopt this option?

RESPONSE:
Sea Breeze VCC is satisfied that the near term transmission needs of Vancouver Island could be met in a satisfactory way if the BCUC were to direct BCTC to utilize HVDC Light® technology, provided the interconnection points to be used are Ingledow and Pike, as proposed in the VIC Application.

However, in the circumstances, it would be unfair and unnecessary for the BCUC to grant a CPCN to BCTC for that purpose (as opposed to Sea Breeze VCC), given that BCTC has, to date, demonstrated a complete lack of interest in the HVDC Light® option, and has failed to adequately consider that option in
the VITR Application, despite Sea Breeze VCC's active promotion of HVDC Light® as providing the best solution for the Island's transmission needs; and, considering that, as a result, Sea Breeze VCC has now dedicated very substantial resources and has incurred very significant expense to put forward the VIC Application.

ABB's support for the Sea Breeze VCC proposal, its involvement as part of Sea Breeze VCC's technical team, and its contemplated responsibility for design, delivery, installation and commissioning of the parts of the system under a turnkey contract are also critical factors which the BCUC should consider. If, despite the foregoing, the BCUC does grant a CPCN to BCTC for the purpose of constructing an HVDC Light® facility substantially similar to what Sea Breeze VCC has proposed in the VIC Application:

• the BCUC should make an order under section 118 of the Utilities Commission Act requiring BCTC to compensate Sea Breeze VCC for all of the substantial costs it has incurred over the past two years prosecuting the HVDC Light® solution with the BCUC and BCTC; and

• the BCUC should also require BCTC to employ an objective project manager with experience in the construction/installation of HVDC Light® technology, to ensure that the prejudicial attitude previously demonstrated by BCTC toward this technology does not create a situation that could compromise the timeliness and effectiveness of the Project.

---

Posted by Arthur Caldicott on November 08, 2005

Spinning tar into oil

As Canada rushes to supply fuel-hungry nations by tapping its oil sands, northern Alberta is transforming from a sleepy backwoods into a bustling cash cow

oilsands.jpg
Karen Warren / Chronicle
The eight-story-tall cranes used to scoop up the oil sands tower over the landscape near Fort McMurray in Alberta, Canada. With crude prices hanging so high, Canada's unconventional oil sands — or tar sands, as they're often called — have become wildly profitable, adding more than 170 billion barrels of oil to Canada's reserve base

By LYNN J. COOK
Copyright 2005 Houston Chronicle
Nov. 6, 2005, 12:49AM

CALGARY, ALBERTA - Think Saudi Arabia has a lock on oil? Think again.

Turns out Canada has almost as much crude, if not more.

For years Canada has pumped oil from traditional wells, shipping it across the border to U.S. consumers.

In fact, our neighbor to the north is the top oil exporter to the United States. (Saudi Arabia ranks third after Mexico.)

But with crude prices hanging so high, Canada's unconventional oil sands — or tar sands, as they're often called — have become wildly profitable, adding more than 170 billion barrels of oil to Canada's reserve base.

Today, the sands produce as much oil as Texas — about 1 million barrels a day.

Output is set to nearly triple during the next 10 years, and the Canadian Association of Petroleum Producers is predicting a yield of 6 million barrels of oil a day by 2030, a little more than half of what Saudi Arabia produces now.

This swelling supply will feed Americans' voracious appetite for oil far into the future, but the promise is not without problems.

Extracting valuable crude oil from sand is labor-intensive and expensive. And the process, which involves leveling acres of evergreens and spewing greenhouse gases into the air, has riled environmentalists.

Still, energy companies such as Shell, Suncor, Exxon Mobil and ConocoPhillips press on.

As Bob Gibson, managing director of independent investment bank Mustang Capital Partners of Calgary, points out: "All the issues get diluted at $60 oil."

From above Fort McMurray, hundreds of miles north of the U.S. border, the landscape looks more like the cratered surface of the moon than the boreal forest of Alberta.

The sandy soil is sticky with crude, so energy companies have rushed in to clear-cut the land and strip mine for oil where vast stretches of pines and firs once stood.

At the Millennium mine, operated by Calgary-based Suncor, eight-story-tall cranes fitted with enormous shovels carve up the earth, scooping it into the back of dump trucks so big that operators have to climb a staircase to get into the cab.

Oil-soaked sand — called bitumen — is hauled to giant bins and dumped into an elaborate system of machinery, where it is crushed, washed, superheated and chemically treated. What's finally spun out is thick, sludgy crude that can be turned into, for example, the asphalt used to pave roads or the gasoline that fuels the vehicles driven on them.

Jim Proudfoot, Suncor's chief safety engineer, said 1,000 operators work in the mines every day as part of a round-the-clock operation that has a goal similar to that of air traffic control — constant movement.

That's because to wring one barrel of crude from the oil sands, 2 tons of earth has to be pulled from the mine and processed.

At Suncor, more than 330,000 tons of earth is excavated to produce 166,000 barrels of oil every day.

The equipment used to tap the oil sands is expensive, energy-intensive and beyond huge.

"You know how they say everything is big in Texas? Well, everything's big in Fort McMurray, too," Proudfoot said.

Caterpillar-brand dump trucks weighing 360 tons buckle the dirt roads beneath them as they ferry loads of bitumen out of the mine.

In the hot summer months, a wave of road will crest in front of the trucks' tires. They kick up so much dust, water trucks have to routinely spray the pathways that lace through the mine.

The trucks' 925-gallon tanks hold enough fuel to fill 40 new-model Hummers and burn through it in about 18 hours.

Even more immense are the cranes that gouge out the pits, So large there are no diesel engines big enough to run them, they are plugged into a power station by supersize electrical cables that worm their way around the site.

In the winter, Fort McMurray's thermometer can dip to 40 degrees below zero — the point at which mercury freezes. Then, the oil sands often come off in chunks the size of a Volkswagen bus, breaking several "teeth" on the shovel every shift. The cost to replace one tooth: $3,500.

When a dump truck needs a new tire it costs $50,000.

"I describe it as the ultimate big-toys-for-big-boys scene," Gibson said, though Suncor likes to note that 20 percent of its mine work force is female.

Only about 18 percent of Canada's oil sands are accessible by mining. The remainder is locked too deep underground to be accessed without drilling. Energy companies are turning to horizontal drilling and flooding wells with steam and fire to get at it.

The most common technology used when drilling in the oil sands is steam-assisted gravity drainage — or SAG-D.

Two horizontal wells are drilled parallel to each other. Piping-hot steam is blasted down the top chamber to heat the hardened bitumen, allowing the warmed, gooey oil sands to drain into the lower chamber, where it can be pumped out.

But once it gets to the surface, there are more headaches.

At about 50 degrees Fahrenheit, bitumen has the consistency of a hockey puck. So just getting the carbon-intensive solid to flow through a pipeline requires a lot of chemicals and condensate to dilute it.

Right now, most oil sands crude gets upgraded and refined pretty close to home in Alberta's Edmonton industrial complex and across the border in Washington state and the Midwest. Several proposed pipelines could take it a lot farther afield, namely to the Gulf Coast and China.

Enbridge, which has offices in Houston, is working on a project dubbed "Gateway," which would run oil sands crude across the Rockies to Kitimat on British Columbia's coast. The $4.1 billion project would require a new deepwater port to be built so supertankers could dock there to pull away with cargo bound for China or California.

Brian Fowler, the commercial manager for the Gateway project, said refineries in Los Angeles and San Francisco already are capable of processing heavy crude because they get that kind of supply from Alaska, where the resource stream is slowly but surely tapering off.

But it's China's demand for oil, which has been increasing even faster than U.S. demand, that's captivated Enbridge.

"Candidly, we're underpinning the success of this profitability to Asia," Fowler said.

He said most people don't realize it, but Canada is closer than the Middle East to China's major ports. A supertanker of crude takes 34 days to travel from Canada and 45 days from Saudi Arabia, he said.

The Gateway project will sink or swim based on whether companies that ship to Asia will agree to 15-year commitments. It's a lot to ask since most tanker contracts are locked in for only one year.

"It takes five years to build a pipeline, and, I'll tell you, getting a refinery to make that decision five years in advance is tough," Fowler said.

Houston-based pipeline company Kinder Morgan is spending $5.6 billion to buy Terasen, which operates a trans-mountain crude pipeline that moved oil sands output to Vancouver.

The company, which mostly operates natural gas pipelines, likely will double that line's capacity and continue to expand in the oil sands region, said Kinder Morgan President Park Shaper.

"We will remain agnostic," he said. "We're happy to go whatever direction people want as long as they're paying for it."

Enbridge and Exxon Mobil also are working to reverse the direction of some pipelines that ran Gulf Coast crude up to the Midwest. Now, those pipes will bring Canadian crude down to Cushing, Okla., and the heavy-oil-refining complexes on the Gulf Coast.

Not everybody in Alberta is happy about the way the oil sands are progressing.

A recent report from the University of Alberta's Parkland Institute said Canada is backsliding into the ancient role of "hewers of wood and drawers of water" and neglecting the development of Canadian industry.

The report frets about pipeline expansion into the United States, saying it has the potential to destroy Alberta's refining and petrochemical industry. The report's conclusion: Without drastic measures to protect itself, Canada could quickly turn into one more pool of raw resources for the United States to pillage.

The Alberta government and 16 energy companies are considering a huge, new
$6 billion refining and petrochemicals complex near Edmonton that would churn out upgraded — and more expensive — fuels and chemicals, keeping more money in Alberta. The proposal is in its initial stages.

Alberta Energy Minister Greg Melchin is on the ropes. He wants to make sure the sun doesn't set on Alberta's heyday, but a lot of Canadians are fighting mad about the province's economic windfall and greenhouse-gas emissions.

Despite levying only a 1 percent tax on most oil sands projects right now, Alberta is taking in almost as much money as the entire federal government.

The province also gets royalties from regular oil wells and earns even more from natural gas production.

The Canadian Association of Petroleum Producers said Alberta's energy prosperity is creating new wealth and jobs in other Canadian cities, including Ontario, where steel is manufactured.

Alberta, which became the only debt-free province in Canada last year, has a budget surplus, so the provincial government is cutting a $400 check to every man, woman and child who lives there.

The province, which churns out the lion's share of the country's carbon dioxide emissions, has put Canada's commitment to the Kyoto treaty on climate control in peril.

The accord calls for Canada to slash greenhouse-gas emissions — carbon dioxide output — from its 1990 benchmark level. That reduction is supposed to be achieved by 2012, but, thanks in large part to activity in the oil sands, Canada's carbon emissions have jumped more than 20 percent.

Many policymakers and energy executives say there's a solution that can keep the oil sands progressing while keeping Kyoto alive. None seems willing — or able — to spell out exactly what that answer is.

Shaper said Kinder Morgan is interested in carbon sequestration — binding up the greenhouse gas and injecting it back into the ground.

The company has experience with it in Texas because it runs a pipeline through which captured carbon dioxide is taken to old oil fields and pushed down wells to force more oil to the surface.

Energy Minister Melchin likes the idea of sequestration but said that, as it stands, the economics are marginal at
best.

One industry insider said that despite Kyoto's impending deadline, most decision makers aren't giving it too much thought.

"Not really," he said."Everybody's too busy making money."

ljcook@chron.com


Posted by Arthur Caldicott on November 08, 2005

Coal Smoke Adds to Band's Cancer Alarm

Elk Falls mill We Wai Kai say they were steamrolled by mill's permit approval.

By Quentin Dodd
TheTyee.ca
Published: November 4, 2005


A Campbell River area mill has been granted permission to continue to burn coal, outraging leaders of nearby First Nations band worried about high cancer rates among their people.

Less than a month after the We Wai Kai First Nation on BC's Quadra Island formally complained that the government hadn't met the law by consulting with them sufficiently, the permit approval was rushed into place, claim band leaders and their lawyer.

The granting of the permit to the Elk Falls mill is the latest twist in a struggle by the We Wai Kai to discover why, over the last decade, they've seen much higher levels of cancer at their Cape Mudge Village Reserve on Quadra Island than at their Quinsam Reserve in Campbell River.

The reason, they say, may be that the Cape Mudge reserve receives higher and more regular seasonal fallout from air-borne smoke-stack emissions from the nearby Catalyst (formerly Norske Skog) mill than does the Quinsam Reserve. For years the band has requested testing of mill emissions at Cape Mudge to shed light on their health crisis.

Toxic plume?

For several years the mill has been testing the burning of coal as an auxiliary fuel in its boilers, and applied to continue the practice indefinitely.

The We Wai Kai, through Vancouver lawyer Alan Donovan, informed the government they didn't want to see the mill's coal-burning test-period permit extended until proper monitoring studies have been done directly at the island-village reserve to assess the amount and nature of chemicals the site receives each year during the peak season from August through October. During that period, prevailing wind frequently blows the mill emissions over Quadra Island that eventually settle directly over the village.

On Thursday, the We Wai Kai received notification that the provincial waste management branch has granted Catalyst a permit to burn coal on an indefinite basis, according to band administrator Brian Kelly.

The permit-approval notification to the We Wai Kai indicates the mill will be required to install and operate an emissions-monitoring station at the village by April 30, as the band had long been requesting, says Kelly. But it's still not clear how long the monitoring station will be required to be in place, says Kelly.

Band demands more consultation

Kelly and other band leaders charge the government has failed to properly consult with the band.

He said after Donovan's letter went to regional waste manager Randy Alexander, the official extended the public-consultation period by a month to the end of October. Alexander let it be known that a decision could still be handed down before Oct. 31 if the government agency was satisfied it had addressed the First Nation's concerns and issues, and then held a meeting which lasted just a couple of hours with a few band officials.

"There wasn't time to meet with the (Band) Council," Kelly said, adding that the meeting had basically consisted of a question-and-answer exchange in which the government representatives asked questions to find out what the First Nation's main concerns were, and the Band personnel outlined their biggest concerns.

That, Kelly said, does not constitute sufficient consultation, and the council will discuss the situation early next week to decide its next move.

Mirror image communities

Backing the band on coal burning issue is the Sierra Club and activists running the Reach For Unbleached (RFU) campaign against pulp mill pollution.

The Cape Mudge Reserve and its sister community the Quinsam Reserve share similar age, gender and population-size figures, as well as identical lifestyle and diet patterns. Yet Cape Mudge villagers, exposed to more of the mill's air pollution, have three times the cancer rate recorded by its sister community over more than 10 years.

Recently, in preparation for its request to extend its temporary permit to burn coal, the Catalyst mill finally did launch a study of its air emissions. But the We Wai Kai claim that study wasn't going to include a monitoring or sampling station at the We Wai Kai's Cape Mudge village, even during the August-through-October period when the area of the village receives the plume of emissions from the mill's stacks most often.

'Extraordinarily high cancer death rates'

Donovan's letter to the provincial government on behalf of the First Nation, citing "respiratory ailments and extraordinarily high cancer death rates", reminded that Cape Mudge band members had for years asked unsuccessfully for suitable mill-emissions monitoring at the village.

Donovan said that studies should be conducted over at least two years, to cover that number of peak-fallout periods.

Upon learning of the terms of the permit approval on Thursday, Donovan, accused the government of "rushing ahead with little to no scientific data. They don't have the science and they haven't done the groundwork for a properly-informed decision."

"Additional contamination from the burning of coal would create further damage to the health, safety and enjoyment of life of this aboriginal community," says Donovan's letter on behalf of the band. In October, mill manager Norm Facey downplayed the band's concerns, telling Canadian Press that if the mill were causing health problems, mill employees would be the ones most affected and the Workers Compensation Board would have stepped in.

Facey also said that if the Elk Falls mill was not allowed to continue burning coal, it would seriously hurt the mill's bottom line.

Campbell River based journalist Quentin Dodd is a regular contributor to The Tyee.

Posted by Arthur Caldicott on November 08, 2005

The Conscience of Canada strikes again

BOOK REVIEW: Too Close for Comfort: Canada's Future Within Fortress North America

By JENEFER CURTIS
The Globe and Mail
Saturday, November 5, 2005

Back in the seventies, an energetic housewife named Maude Barlow jumped onto the feminism bandwagon. A few short years later, she was advising prime minister Pierre Trudeau on women's issues. When she failed in her bid for federal office, she helped found the Council of Canadians, now Canada's main citizen's advocacy group. Ever since, along with a few other citizen's groups, she and the council have been the conscience of Canadian politics. Free trade, the bank mergers, the Multilateral Agreement on Investment, safe milk, public pensions -- no other group has bellowed a critical voice at as many issues as the Council of Canadians.

Sadly, thanks to some of its methods and the elite accommodation that plagues today's Parliament Hill and provincial legislatures, the council has had little actual influence. But it raises awareness. And Barlow churns out a lot of books. This one is her 14th. Every Canadian should read it, its oversights notwithstanding.

Barlow's thesis in Too Close for Comfort is that, driven by the interests of both American and Canadian big business, our government is committed to create a "North American fortress with a common economic, security resource and regulatory and foreign policy framework." This despite antipathy by Canadians toward U.S. President George Bush.

Bush is probably the chief villain in this typical Barlovian call-to-arms, followed closely by the Canadian Council of Chief Executives' Thomas D'Aquino. The latter, Barlow delights in reporting, went on a 10-city "tour" of the United States, apologizing for Canada's refusal to support the Ballistic Missile Defence Plan. John Manley, positioned here as an accomplice of D'Aquino and referred to by one source as "the politician in whom the Bush administration had the greatest trust," and Conservative Party Leader Stephen Harper also get severely scolded.

Barlow's catalyst for the "deep integration" of our two countries (Mexico is hardly mentioned, despite the title's reference to North America) is security measures. The U.S. government is "retooling its military" to the annual tune, in 2005, of $445-billion -- the Iraq occupation alone is costing $220-billion -- and we are following suit, copying its laws, increasingly sharing information with it and potentially allowing for unprecedented invasions of privacy and violations of human rights.

She rightly attacks Bill C-36, the Anti-Terrorism Act, put in place right after 9/11; its sweeping powers include the rights to carry out a preventive arrest without warning, compel a person believed to have information about a terrorist to testify before a judge (and thereby remove a person's right to remain silent), wiretap suspected terrorist groups for up to a year, and lay criminal charges against anyone who knowingly participates in activities of a terrorist group. The bill's broadened definition of terrorism is such that, as academics have commented, South Africa's Nelson Mandela would be considered a terrorist.

And she offers up dozens of smaller yet eerie examples: What about the fact that the private data of thousands of Canadians with outstanding student loans is now available on request by U.S. Homeland Security officials, thanks to the sale of the Canadian Imperial Bank of Commerce student loan subsidiary Edulinx to a U.S. company called Nelnet?

Did you know that the new U.S. Ambassador to Canada, David Wilkins, was once campaign chairman for the late Strom Thurmond, the former senator most known for his opposition to equality for blacks? Barlow spends too much time passing on such accusations and lamenting the neo-conservative movement, the rise of the Christian right and U.S. military aggression before coming to the crux of the book: the "incremental and systemic harmonization of Canadian and American regulations and standards governing health, food safety and all aspects of the environment."

Anyone who works with a border-associated body in Ottawa can vouch for the accuracy of this phrase. They will tell you, as Barlow does, about "Smart Regulations," a laborious federal government initiative that is bringing countless regulations in line with international trade and investment policies. (That this initiative was started before 9/11 disrupts her thesis that this whole "fortress" has its roots in security matters.)

Many of Barlow's evil ramifications of Smart Regulations are factually correct: that it is crystallizing relationships with like U.S. bodies, that deregulation of certain industries is happening and that certain U.S. methods might infiltrate Canada. For instance, if C-27, the Canadian Food Inspection Agency Enforcement Act, becomes law, there is evidence that the U.S. preference for industrial livestock feed, which allegedly caused bovine spongiform encephalitis (BSE), will prevail here, over our more costly family-farm methods.

The book contains some oversights, a glaring one being the fact that a document she quotes frequently -- the CCCE's final report from its Task Force on the Future of North America -- was rejected by current Minister for Public Safety Anne McLellan. Also, many of our anti-terrorism measures came in response to our international obligations, and are not evidence of kowtowing to the United States. As well, her sources all seem to be activists or fringe groups. If she had, for example, talked to a government bureaucrat, she might realize that the line between "harmonization" and "co-operation" is fine, and that Canada is holding onto "made-in-Canada" approaches in several policy areas.

Moreover, there are examples where working together with Americans might be advantageous to Canada. Consider again the BSE crisis. "If we had openly shared all the science with the States," one agricultural insider recently commented, " they might not have been able to justify closing the border on a food-safety basis as they did."

But Barlow is onto something important, especially in the area of security, where any government always risks disrupting that delicate balance of protecting both the community and individual freedoms and privacy. The Senate's report on the Anti-Terrorism Act -- essentially a review-to-date of the legislation -- is due out Dec. 18. Already, the government has claimed that the contentious clauses in the act have been used sparingly, a sheepish defence if ever there was one.

Meanwhile, as retired Globe and Mail political columnist Hugh Winsor wrote this week, Canada's Muslim and Arab communities, thanks to U.S.-inspired heavy-handedness on the part of our security services, are beginning to feel like second-class citizens.

She may make a few errors, but the wake-up call that Barlow sends out in this informative and timely book more than makes up for them.

Jenefer Curtis is an Ottawa political writer. Her book The Hired Guns: How Lobbyists are Shaping Canada will be published next spring.

Dates in BC from Maude Barlow's speaking tour:

November 7 Prince George, British Columbia
University of Northern British Columbia, CANFOR Room
This event is co-sponsored by Prince George PIRG 7:00 p.m.

November 8 Parksville, British Columbia
Parksville Community and Conference Center
132 Jensen Avenue East
Sponsored by Oceanside Coalition for Strong Communities, 7:00-9:00 pm

November 9 Victoria, British Columbia
The Da Vinci Centre, 195 Bay St. (Victoria West) 7:30 p.m.

November 10 Vancouver, British Columbia
Maritime Labour Centre,1880 Triumph St.
(Triumph and Victoria) 7:30 p.m.

Council of Canadians website for Too Close for Comfort

Posted by Arthur Caldicott on November 08, 2005

November 02, 2005

Is Grid West Dead? - RTO spells inefficiency in power

GridWest.gif - click to enlarge
Compromise on unified power grid is blocked
Ted Sickinger, The Oregonian, 02-Nov-2005
RTO spells inefficiency in power
Steve Johnson, Seattle Post Intelligencer, 01-Nov-2005
Non-profit agencies keep the lights on
James P. Thorgerson, Seattle Post-Intelligencer, 20-Oct-2005
Grid West: Home Page
Grid West: Current Activities Overview, 29-Aug-2005



Compromise on unified power grid is blocked

Ted Sickinger
The Oregonian
02-Nov-2005

The Bonneville Power Administration and a cast of utilities, independent power generators, Native American tribes, environmental groups, regulators and consumer groups spent millions of dollars over the past decade haggling over how best to improve the efficiency and reliability of the Northwest's power grid.

Tuesday, the participants all but admitted their effort to create an independent entity capable of managing a unified grid is dead. A group of investor-owned utilities that had supported the project, called Grid West, voted to reject a compromise proposal that BPA had cobbled together to appease critics, most notably publicly owned utilities in Washington.

Instead, the investor-owned utilities will go forward with a scaled down version of Grid West, absent BPA, which controls the largest chunk of transmission assets in the region.

"It's unfortunate," said Dave Kvamme, a PacifiCorp spokesman. "We have 10 years of history working toward a not-for-profit entity that would oversee the region's transmission lines independent of buyers and sellers of electricity."

Grid West is the most recent regional iteration of an effort by federal regulators to increase efficiency and reliability in the electricity industry by eliminating piecemeal management of the power grid. Proponents maintain that a grid managed by a single cooperative entity rather than a host of competing interests would eliminate many bottlenecks, rate disputes and scheduling conflicts that plague the system today.

Regionally, supporters of a unified grid hoped it would clear the way for overdue investments in new transmission equipment that would improve reliability, help make it easier to access renewable power projects in remote areas, and help the BPA sell into power-hungry markets to the south.

But the effort has been controversial from the start. The most vocal opponents have been the publicly owned utilities in Washington, many of which have long-term contracts to buy power from BPA at preferential rates. BPA owns 75 percent of the high voltage transmission grid in Oregon, Washington, Idaho and Montana, so its participation was a linchpin in the organization.

The public utilities, backed by Washington's congressional delegation, worried the plan would increase their costs, and were skeptical that a regionwide organization would deliver any new efficiencies.

They were loath to see control of BPA's transmission grid pass to a private entity, particularly one that would be regulated by the Federal Energy Regulatory Commission. They waged an intense campaign to get BPA to say no to Grid West, and created an alternative proposal to solve transmission problems without creating an entity regulated by the federal commission.

Grid West "would have been a profound change for the region . . . the loss of local and state political control of Bonneville's operation," said Marilyn Showalter, executive director of the Public Power Council, a Portland based organization that represents public utilities in the region.

Investor-owned utilities, meanwhile, have been pressured by the Federal Energy Regulatory Commission to form the regional organizations, in part because the federal agency wants to eliminate utilities' incentives to use control of the grid to make life more difficult for competitors. With limited access to cut-rate BPA power, investor-owned utilities also have a greater appetite for electricity generated in remote areas -- by coal-fired plants and wind farms, among other things -- but don't want to deal with a complicated tariff structure to move the power to their customers.

BPA, the 800-pound gorilla of generation and transmission in the region, has come under enormous political pressure, and has tried to tack between the two camps. Earlier this year, it proposed a compromise plan that would have moved forward with some of the public utilities proposals, and taken incremental steps toward the implementation of Grid West.

The compromise satisfied neither camp.

On Monday, nine of eleven members of Washington's congressional delegation wrote to BPA Administrator Stephen Wright urging him to avoid going forward with the so called "convergence" approach.

A day later, a majority of the investor-owned utilities voted against Bonneville's compromise. Instead they decided to soldier on without BPA's participation and transmission assets.

PGE and PacifiCorp had both supported Grid West, as did the Oregon Public Utility Commission.

BPA said Tuesday its compromise proposal would have been the right way to go. In its absence, said spokesman Ed Mosey, "Nothing will change in terms of the operation of the system. We'll operate the way we always have."

Robert Kahn, executive director of the Northwest Independent Power Producers Coalition, said that's the problem. "Something needs to be done," he said. "The status quo is a mess."

TOP



RTO spells inefficiency in power

By STEVE JOHNSON
GUEST COLUMNIST
Seattle Post Intelligencer
November 1, 2005

James Torgerson claims the Northwest's power grid needs a regional transmission organization called Grid West because of the resounding success of the electricity transmission operators elsewhere ("Non-profit agencies keep the lights on," Oct. 20). Torgerson, who heads an RTO in the Midwest and an RTO interest group, is too buried in his rhetoric to realize the opposite is true. RTOs don't work there, and they won't work here.

Seven RTOs were created to deregulate markets and hypothetically lower electricity prices and increase reliability. But the letters R-T-O have spelled inefficiency, market abuse and higher bills for customers. Every one has failed to protect its consumers.

At Torgerson's own RTO, the Midwest Independent System Operator, founding members Louisville Gas & Electric and Kentucky Utilities Co. are withdrawing because of concerns over "keeping rates down and maintaining reliability," the utilities wrote in a Federal Energy Regulatory Commission filing.

MISO's operating budget increased 861 percent -- from $21 million in 2000 to $202 million in 2004 -- according to a Cambridge Energy Research Associates cost comparison.

Customers of PJM Interconnection have rebelled against the Mid-Atlantic RTO because of a pricing model that sent costs soaring.

"We are struggling to find out what the benefits are to us," one member utility's vice president was quoted as saying. PJM Interconnection's operating budget increased 166 percent since 2000, according to the same Cambridge comparison.

All told, the Cambridge costs study found that experiments in the organized markets -- which RTOs are intended to promote -- have cost the West $7.3 billion. The American Public Power Association has voiced its displeasure over "the dysfunctional nature" of RTO pricing efforts.

Torgerson claimed RTOs foster "significant new investment in their region's transmission infrastructure," yet FERC reported that RTOs in New England, the Midwest and New York built zero transmission circuit miles in 2004. The Northwest, without an RTO, built more than 300.

Nonetheless, some in our region, including the Bonneville Power Administration, are intent on forming Grid West, which would turn over Northwest control to private hands and federal regulators. One study estimated Grid West RTO would cost Northwest ratepayers $122 million a year. That estimate is likely to go up as the RTO comes online.

Most public power utilities in the region favor a "better, faster, cheaper" approach relying on local control and the region's history of working together. The Transmission Improvements Group has proposed an alternative that uses contracts and existing entities to improve the power grid -- not turn the keys over to a private entity.

Given the abysmal track record of RTOs in protecting consumers, it would be crazy to plunge ahead with a similar organization in the Northwest.

Steve Johnson is executive director of the Washington Public Utility Districts Association.

TOP



Non-profit agencies keep the lights on

By JAMES P. TORGERSON
GUEST COLUMNIST
Seattle Post-Intelligencer
Thursday, October 20, 2005

A debate is heating up in the Pacific Northwest about what direction regional power authorities should take to ensure the reliability and affordability of the electricity system that serves much of the region.

Like the rest of the nation, the Northwest faces growing electricity demand, transmission and generation needs, rising fuel prices, protection of the environment and the need to balance the competing needs and interests between producers and consumers, as well as those of public and for-profit entities.

A response that has proved effective for much of the country is the creation of Regional Transmission Organizations (such as the proposed Grid West). It's important for Northwest consumers to know how the not-for-profit organizations work and how they produce meaningful results.

RTOs and Independent System Operators deliver two-thirds of the electricity used in the United States, to two-thirds of the nation's population, with the core function of keeping the lights on.

These organizations also coordinate long-range planning for their respective regions and foster new, much-needed grid expansion. In addition, many RTOs and ISOs operate wholesale electric markets that save customers billions of dollars every year.

With the economies of scale RTOs employ, we bring more sophisticated tools to the complex management of vital grid operations. RTOs have built extensive networks to collect information about conditions across the grid, to meet customers' ever-changing electricity demands by coordinating the performance of thousands of power plants, and to deliver energy across hundreds of thousands of miles of utility-owned transmission lines.

RTOs and ISOs coordinate generation and transmission to make grid operations more efficient. For example, in the mid-Atlantic region, PJM Interconnection's plant scheduling software has reduced its customers' wholesale electricity costs by $56 million per year. ISO-New England's coordination of power outages saved customers about $40 million annually between 2000 and 2004, and New York's ISO has reduced generation outage rates to 4.5 percent today from a level of 9.5 percent in 1999. Total improvements in plant efficiency are equivalent to adding 1,500 megawatts of generation at no cost.

Through rigorous planning and analysis, RTOs and ISOs also fostered significant new investment in their region's transmission infrastructure.

As one example, New England has sited five major transmission upgrades totaling more than $1.5 billion and enabled more than $5 billion in construction of new, cleaner power plants between 2000 and 2004. These generators use natural gas more efficiently and reduce air pollution -- sulfur oxides are down by 48 percent and nitrogen oxide by 32 percent.

Transmission planning coordinated by the California ISO helped break a regulatory logjam and led to construction of several critical transmission lines. Since the California ISO opened access to the state's wholesale power grid, more than $3 billion in transmission improvements have been approved for construction. Four new transmission upgrades went into operation in 2005, improving grid reliability and leading to about $100 million in savings, which will eventually be passed on to consumers.

PJM's planning efforts have led to more than $1 billion in transmission upgrades since 1999.

In the Midwest, the Midwest ISO has overseen the addition of more than $600 million of transmission facilities and access to more than 1,000 megawatts of renewable resources since 2002.

Finally, RTOs are closely regulated and held accountable on many levels. Federal oversight takes place by FERC and there is local accountability as well. Formal councils of state officials oversee and contribute to our planning and cost allocation decisions. Transmission owners, local citizen groups and state regulators all participate actively in our activities and have input in our decisions.

The bottom line: RTOs are helping to deal with the difficult challenges facing the industry across much of the nation.

James P. Torgerson is the president and CEO of the Midwest ISO and chairman of the ISO/RTO Council, which is comprised of the seven ISOs and RTOs in the United States and two in Canada.

TOP

Posted by Arthur Caldicott on November 02, 2005

October 31, 2005

Resource expo eyes northern wealth

Aboriginal and business leaders meet to discuss development

Scott Simpson
Vancouver Sun
Monday, October 31, 2005

Aboriginal leaders, resource-industry companies and politicians are gathering this week in Vancouver for a conference that could unlock even more of British Columbia's northern wealth.

Resource Expo 2005 is organized by the Native Investment and Trade Association, focusing this year on natural gas and oil industry development, mining and forestry.

Three Canadian premiers, 2010 Winter Olympics CEO John Furlong and Alaska Gov. Frank Murkowski are on the speakers' roster.

Conference organizer Calvin Helin said Canadian federal and provincial governments are spending a total of $18 billion per year in transfer payments to first nations and Inuit peoples -- costs that could be reduced or avoided if those groups were brought closer to the economic mainstream.

For B.C., that means incorporating aboriginal interests into the development of natural resources in light of Supreme Court of Canada decisions recognizing the duty of Canadian governments to consult on questions of land use.

B.C. teems with opportunities for oil-and-gas development as well as potential for new mines that could provide high-paying employment for local first nations -- with the provincial government gaining the opportunity to increase resource royalty revenue.

However, those projects often need first nations support to proceed.

Resource Expo attracts many of the aboriginal leaders who represent a key to unlocking those resources -- and their attendance is an indication of their willingness to listen, Helin said.

"I think this is one of the best times in the history of aboriginal people that we have a chance to actually move forward," Helin said in a recent interview.

"The tribes have real leverage. They are figuring out how to utilize that leverage in a way that makes a difference to the grassroots people. People should be aware of it, not only aboriginal people but non-aboriginal business people should be aware that these opportunities are there.

"We have to turn what's a social and economic drain into a huge economic and social positive. We've never been in a better situation to do this."

Helin describes the conference as a neutral forum.

"It's hard to get a lot of these people from remote places together and if you want to do business with them you have to go out and meet with them -- and if you're going to Nunavut it's a $3,000-$4,000 ticket."

Tony Fogarassy, an energy-sector lawyer who works with clients on first nations issues, will update conference delegates on recent legal and political developments, notably B.C.'s "New Relationship" policy.

"If a project can be done right, with environmental sensitivity, then first nations would love to be a part of it," Fogarassy said.

"The downside of all of this is that it takes time. Most companies look at their quarterly financials or year-ends and expect certain deliverables, or shareholders expect certain deliverables to be met. When they deal with first nations communities the timelines are different."

Michael McPhie, president of the Mining Association of B.C., says "the greatest majority" of resource-development projects in B.C. will have a "substantive first nations component."

"This conference is a really good example of bringing all these groups together. It shows how top-of-mind it is to most of us."

The mining industry took a hit earlier this week when the B.C. Assembly of First Nations announced unanimous support for first nations who oppose Northgate Minerals' plan to use Duncan Lake to store gold mine waste for a $200-million expansion of their Kemess gold mine.

McPhie says one of the benefits of Resource Expo is that it can serve as a forum for resource developers to highlight well-executed projects.

"There are going to be challenges. When you interlace that with an uncertain treaty environment, with Supreme Court decisions in different forums on different issues, I think what it speaks to is the need for forums like this to show projects that have been done well.

"Are there going to be conflicts? Of course. That's human nature. But I think [what] we need to do as an association is first to recognize the very legitimate role that indigenous people play in our decision-making and find ways to work together. That's got to be critical."

ssimpson@png.canwest.com

Resource Expo 05
Native Invest Trade Association
Oct 31 - Nov 1
Sheraton Wall Centre, Vancouver

Posted by Arthur Caldicott on October 31, 2005

October 30, 2005

Between Midnight and the Rooster's Crow
a film about EnCana in Ecuador

Between Midnight and the Roosters Crow: a film about EnCana in Ecuador by Nadia Drost
directed by Nadja Drost

Follow the story of big oil from the toxic rivers of the Amazon to company headquarters in Alberta.

Canadian oil giant EnCana is under fire for the construction of an oil pipeline that is generating controversy and conflict in the Amazon.

Faced with the contamination of their lands and coercion by military forces, Ecuadorian peasants tap into reserves of remarkable strength and courage as they resist. Between Midnight and the Rooster’s Crow explores the experiences of the people whose lives are being drastically altered by the race for black gold -- a race fuelled by oil companies, a government desperate for foreign investment, and a rapidly-globalizing world.

* Best Canadian Documentary at Hot Docs Canadian International Documentary Festival

* Best Documentary, Bogotá Film Festival

* Honourable Mention, Best Canadian Film, Planet in Focus International Film Festival

Calgary, Thursday, November 3
Uptown Stage and Screen
610 8th Ave. SW, Calgary
Advance Tickets are available at Sunnyside Market, 338 - 10 St. NW
For more info: 270-3200

Edmonton, Friday, November 4
Global Visions Film Festival
Screens Friday November 4th, 9pm
Garneau Theatre
8712 109 St., Edmonton
www.globalvisionsfestival.com

Vancouver, Saturday, November 5
Amnesty International Film Festival, Vancouver
Screens Saturday, November 5th, 6:25 pm
Pacific Cinémathèque
1131 Howe Street, Vancouver
For more info: www.amnesty.bc.ca/filmfest/

Victoria, to be announced

Posted by Arthur Caldicott on October 30, 2005

October 29, 2005

B.C. oil, gas industry to grow 20% in 2006

SURVEY: Sector expects to drill 1,600 wells next year, placing the province in third spot

Scott Simpson
Vancouver Sun
Saturday, October 29, 2005

British Columbia's booming oil and gas industry will grow an estimated 20 per cent in 2006 as activity across Canada reaches record levels, a new industry survey suggests.

The Petroleum Services Association of Canada's drilling forecast for 2006 says the industry will grow six per cent next year, "the result of continued strong commodity prices and a growing emphasis on natural gas from coal."

Alberta will account for the bulk of all Canadian activity with an estimated 20,000 wells -- a "milestone record" -- representing a six-per-cent increase in wells drilled in that province.

The level of activity in Saskatchewan will remain flat, at 3,430 wells, while B.C. in third place will see 1,600 wells drilled -- a 20-per-cent increase.

"While the total number of wells drilled in B.C. is relatively low compared to Alberta, activity levels in that province have been climbing over the past few years," PSAC president Roger Soucy said in a news release.

"B.C. is becoming a favourable location for oil and gas activity, and with the move towards southern B.C. for NGC [natural gas from coal], we are expecting a significant elevation in activity levels there."

PSAC said it's basing its 2006 forecast on crude oil prices of $60 US per barrel and natural gas prices of $9.50 Cdn per thousand cubic feet an Alberta gas trading hub.

"For most of 2005, the commodity price story was oil. More recently, natural gas prices have risen significantly. We expect the pricing of both commodities to stay strong next year," Soucy said.

In a subsequent interview, Soucy said commodity prices are important, but added that B.C. government efforts to expand the industry are major factors.

"The provincial government over the last three or four years has set the stage, so to speak," Soucy said. "They have expanded the infrastructure in the province, in the northeast in particular, so that it was easier to gain access to the resource. They have expanded road systems, upgraded roads and bridges."

B.C.'s summer drilling program has also boosted activity.

"Historically there was only a 90-day window of opportunity to drill in B.C.," during winter when northeastern B.C.'s vast muskeg plain was frozen.

"What that created was a situation where the equipment and the rigs moved in from Alberta for three months and then left at the end of the winter season. That didn't help the local communities to benefit much.

"Now what's happening is that you see a very active service and supply industry in B.C., growth of jobs, business opportunities, and so forth. The government has done its part."

In addition, British Columbia is attractive because, unlike the mature gas fields of Alberta, this province is relatively unexplored.

Soucy said there is still tremendous potential in B.C. for gas drillers to make huge, lucrative finds.

"B.C. has a good resource area that hasn't been exploited to the extent it has in Alberta, where, particularly in the south, the industry is almost limited to small wells that produce low amounts for a short period of time.

"That's not the case in B.C., where there is still lots of potential for very good quality wells that will produce for a number of years. That's why you're seeing the activity levels you're seeing in B.C. now."

ssimpson@png.canwest.com

Posted by Arthur Caldicott on October 29, 2005

October 28, 2005

BCUC postpones cable projects consolidation decision

The BC Utilities Commission has issued some (in)decisions and a revised schedule following the BCTC - VITR Pre-Hearing Conference on October 21.

1. Consolidation

The Commission is deferring a decision on consolidation of the BCTC - VITR application and the Sea Breeze - VIC application until:

- Sea Breeze has filed its responses to BCUC IR#1 to Sea Breeze in the VIC application on November 7

- completion of the VITR Pre-Hearing Conference #3 on November 10.

"If after reviewing the responses to the BCUC Information Request No. 1 and after hearing submissions during the Pre-hearing Conference, the Commission Panel decides to proceed with a review of the Sea Breeze CPCN Application the Commission Panel expects that a consolidated process will be more efficient and effective than the alternative of two review processes. Therefore, the Commission Panel has established a process that assumes the Sea Breeze CPCN Application is to be consolidated. If, however, the Commission Panel decides that a consolidated process is not appropriate in the circumstances, then a revised regulatory timetable for review of the VITR Application will be issued after the Pre-hearing Conference to be held on November 10, 2005. "

2. Town Hall Meetings

A schedule is provided (see below), but may be adjusted based on further submissions to the Commission

3. Scope will not include prior decisions on zero-rating HVDC

"the Commission Panel concludes that scope of this proceeding should not include a review of prior Commission decisions regarding the zero-rating of the HVDC system for planning purposes."

4. TRAHVOL request for clarification as to whether environmental effects are within scope

"IRAHVOL requests that the Commission Panel provide further directions to Participants regarding whether or not “environmental and socio-economic issues” are within the scope of this proceeding. IRAHVOL submits that if it were not for participant funding issues, IRAHVOL would not seek further directions as applied for in Exhibit C34-5 regarding the scope of this proceeding (T2: 257). The Commission Panel is of the view that participant funding issues should be given no weight when considering procedure or any other matters that are before the Commission. IRAHVOL’s request is denied, and IRAHVOL is encouraged not to raise participant funding issues unless done so pursuant to the Participant Assistance/Cost Award Guidelines and in writing."

5. Panel Inspection of Transmission Line Corridor

Commission is uneasy about doing the inspections, based on one objection from BCPIAC - BCOAPO. Commission awaits further submission from TRAHVOL.

6. Process for Review of Hul’qumi’num Treaty Group Request

"By letter dated October 19, 2005 (Exhibit C27-5), Hul’qumi’num Treaty Group sought certain orders. The process for review of this request will not be established at this time, and may be established after further submissions from Hul’qumi’num Treaty Group (T2: 318)."

Letter and Order G-109-05

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BCTC-VITR: BC Transmission Corp. - Vancouver Island Transmission Reinforcement, 230 kV AC cable from Delta to Duncan
http://www.bcuc.com/ApplicationView.aspx?ApplicationId=78

Sea Breeze-VIC: Sea Breeze Pacific Regional Transmission System Inc. - Vancouver Island Cable, 300 kV HVDC Light cable from Surrey to Victoria
http://www.bcuc.com/ApplicationView.aspx?ApplicationId=90

Posted by Arthur Caldicott on October 28, 2005

Canada can control oil destiny: Morgan

Heft makes companies predators, not prey

By DAVE EBNER
Globe and Mail
Friday, October 28, 2005


CALGARY -- Canadian oil and natural gas companies are big enough and strong enough to fend off advances by potential international suitors, the outgoing chief of Canada's largest energy company says.

Gwyn Morgan -- speaking yesterday in his EnCana Corp. office on the 18th floor of Bankers Hall in Calgary -- said his company has reached a size where it doesn't need to fret about being someone else's dinner.

"If you're one of the strongest and fastest, you're not at the back, you're not going to be taken out by those that are chasing you, in the Darwinian sense," Mr. Morgan said.

Mr. Morgan made his point -- which is shared by Murray Edwards of Canadian Natural Resources Ltd. -- during his first extensive interview since announcing on Tuesday that he is stepping down as chief executive officer of EnCana.

Speculation about the future of Canadian oil and gas companies hit the headlines this month, reaching a particularly fevered pitch last week as investors pushed stock of EnCana up almost 10 per cent in a single day on rumours of a bid from Royal Dutch Shell PLC.

EnCana has said there was no bid, no suggestion of a bid and no talks about a bid.

Shell yesterday reported its quarterly results.

Shell's chief financial officer said on a conference call that that it would be difficult to justify a "very large acquisition" to investors given high prices in the market.

Deals of less than $10-billion (U.S.) would be more sensible, the CFO said. EnCana's market capitalization is more than $40-billion.

Mr. Edwards, vice-chairman of Canadian Natural, the No. 2 player behind EnCana, said he is "skeptical" about the potential for foreign takeovers and added that Calgary companies are just as capable of buying their international peers.

"Canadian companies have got to a size where they're as much acquirers as acquirees, in terms of critical mass," Mr. Edwards said in a Tuesday interview.

In May, rumours swirled around that Talisman Energy Inc., Canada's No. 3 independent explorer, was going to be bought by France's Total SA, chatter that pushed Talisman stock higher.

Mr. Edwards said the world's biggest public energy companies simply might not be interested in Canadian firms.

That's because some assets owned by domestic players were acquired in sales by supermajors like BP PLC. Talisman owns former BP assets, for instance, and in 1999 Canadian Natural acquired its Horizon oil sands lease from BP as part of a $1.1-billion (Canadian) purchase of oil properties in Alberta.

"A lot of these assets were acquired over time through rationalization by other people," Mr. Edwards said. "I'd be skeptical if guys wanted to go back" to buy back what they sold.

In January, 2002, Mr. Morgan unveiled a made-in-Canada merger to create EnCana by bringing together his Alberta Energy Co. with PanCanadian Petroleum.

"When the opportunity came to bring the two companies together, I knew and David [O'Brien of PanCanadian] knew that we could create something that was so much stronger and would most likely be able to maintain its independence for a long time to come," Mr. Morgan said.

Because of this, there is no pressing need to bulk up today, Mr. Morgan said, especially if it's only to get bigger rather than better.

"To do that would be a very short-term, foolish thing to do. Unless you can merge assets that are complementary, you're going to lose," Mr. Morgan said.

Talisman CEO Jim Buckee said his company has assets that are attractive to supermajors, but added Talisman is strongest as a whole, and that selling parts are not part of the plan.

"I know they like the Southeast Asia assets and they like [Canadian] Foothills very much. But having said that, I couldn't answer for what the majors are going to do," Mr. Buckee, a onetime BP executive, said in an interview last week after his company announced a $2.5-billion takeover of North Sea oil producer Paladin Resources PLC.

Mr. Morgan is being replaced as EnCana CEO on Jan. 1 by Randy Eresman, currently the company's chief operating officer. Mr. Morgan said Mr. Eresman was the obvious choice.

"Randy's consistently been No. 1 on the depth chart," Mr. Morgan said. "Since that was well known by the board and well accepted and supported by the board, we didn't have to have a long discussion when I told them what my plans are because [the succession] was something that was a natural evolution."

Canadians stand tall

Leaders of Canada's two biggest oil and natural gas companies say homegrown firms are not likely to be picked off by larger international players, suggesting in fact, that Calgary based explorers could just as easily be the acquirers, not acquirees.

The Canadian and U.S. independents ($U.S.)
EnCana Corp. $41 billion
Devon Energy $29 billion
Burlington Resources $27 billion
Canadian Natural Resources $22 billion
Anadarko Petroleum $21 billion
Talisman Energy $16 billion

The supermajors ($U.S.)
BP PLC $244 billion
Exxon Mobil $358 billion
Royal Dutch Shell PLC $209 billion

Total - NYSE $158 billion

Posted by Arthur Caldicott on October 28, 2005

Exxon, Shell: spare a subsidy sir, we're not rich enough yet

Possible Federal stake in pipeline 'still on table'
Claudia Cattaneo and Paul Vieira, Financial Post, 28-Oct-2005
Exxon, Shell gush to record profits
Steve Quinn, Associated Press, in Globe and Mail, 28-Oct-2005


sqwalk.com
COMMENT: More federal subsidies to oil and gas companies already engorged with obscene profits? Exxon and Shell want the Mackenzie Gas Pipeline because they'll make money operating it, it will open up new fields for development of lucrative oil and gas, and it will provide gas to the oil sands - where Exxon and Shell are also major players and need the valuable gas to extract the even more valuable oil from the sand. Oil sands operators are already greased up on subsidies, tax and royalty breaks. And so rich, it makes your head spin. In one of these articles, Exxon is reporting revenues of $100 billion in the quarter. Enough.
sqwalk.com




Possible Federal stake in pipeline 'still on table'


Imperial said no: source

Claudia Cattaneo and Paul Vieira
Financial Post
Friday, October 28, 2005

A proposal by Ottawa that it could take an equity stake in the Mackenzie Valley pipeline "is still on the table" despite being rejected by the companies behind the megaproject, highly placed sources confirmed yesterday.

"There's no denying the question of equity was used inside the umbrella discussion of subsidies," a senior source said. "And Imperial [Oil Ltd.], as soon as 'equity' was mentioned, they said 'no.' "

"It's certainly there in so far as the feds are concerned," the source said.

Anne McLellan, the Deputy Prime Minister and the minister responsible for the pipeline file, denied a National Post story that a formal offer has been made to try to move forward the stalled $7-billion project proposed by a consortium of oil companies led by Imperial.

Ms. McLellan told reporters yesterday the government has no intention of re-entering the megaproject business and emphasized that a "private-sector" solution is required when it comes to Mackenzie.

However, she did not rule out the idea.

"We have not put any proposal on the table," she said. "We have talked to Imperial because they came to us with the discussion around fiscal enhancements. In fact, there is a long, long, lengthy list of things that could or could not be done. It is way too soon to see whether this government will choose to take a serious look at a package that is defined as fiscal enhancements."

Several sources confirmed the Post report that the federal government has proposed taking a stake of about 20% in the pipeline.

The proposal was made because Ottawa is now very concerned that a rival US$20-billion line from Alaska is gaining momentum and wants the Mackenzie project back on track, although "in the end there may be other ways than outright ownership to help the project move forward," said one source.

A proposal for an equity stake "was put on the table and the producers' group, basically, said 'no thanks.' And [the producers'] position now is that we are not going to discuss it," said another source.

Secret negotiations between the companies backing the project and the federal government over fiscal terms are getting down to the wire.

Imperial has said it will decide by next month whether enough progress has been made so it can move forward with public hearings for the pipeline, which would bring to market much-needed supplies stranded in the Arctic and help cap soaring natural gas prices.

The talks have bogged down on fiscal terms with Ottawa and access and benefits deals with aboriginal groups along the Mackenzie Valley. Imperial and its partners, Shell Canada Ltd., ConocoPhillips and the Aboriginal Pipeline Group -- an aboriginal enterprise -- want a fiscal regime that recognizes that the up-front costs are huge and it will take years before profits are recorded.

But the government believes giving breaks to highly profitable energy firms would be politically unpopular at a time consumers are being squeezed by high energy bills. Ottawa's negotiators have advanced the equity proposal as a way of getting something in return.

Ottawa's ownership in the megaproject could be similar to the 20% interest the State of Alaska is seeking to hold in Alaska gas pipeline under agreements being negotiated with Alaska producers, the sources said.

Ms. McLellan confirmed that Imperial has approached the government about cutting a deal that would make the project more financially palatable.

"Absolutely no proposal has been made to Imperial in any form in relation to any fiscal enhancements," Ms. McLellan said.

"The one thing I will say is that we're all committed to making sure this project takes place but we clearly see this as a private sector-driven project in co-operation with the aboriginal communities along the valley.

"We know that Imperial has talked about fiscal enhancements. We have indicated we're willing to sit down and talk to them about that but the suggestion that there has been any proposal at any time from us in relation to this project on the fiscal enhancement side is completely false."

Tim Hearn, Imperial's CEO, said recently the oil companies are not looking for handouts, but terms that recognize that today's high gas prices are unlikely to continue as large quantities of liquefied natural gas come to North America from foreign sources in the next decade.

He said the terms should also take into account that the project is opening a new basin and requires huge capital investment that will not yield a return for many years.

The government sources said oil companies have asked for tax and royalty concessions of $1.2-billion to $2-billion and certainty on fiscal terms.

© National Post 2005

TOP



Exxon, Shell gush to record profits


Hurricanes help drive largest oil company past $100-billion (U.S.) in sales for quarter

By STEVE QUINN
Associated Press
inGlobe and Mail
Friday, October 28, 2005

DALLAS -- High prices for oil and natural gas propelled Exxon Mobil Corp. and Royal Dutch Shell PLC to their best quarterly results ever yesterday, with Exxon becoming the first U.S. company to ring up quarterly sales of $100-billion (U.S.).

To put Exxon's performance in perspective, its third-quarter revenue was greater than the annual gross domestic product of some of the largest oil-producing nations, including the United Arab Emirates and Kuwait.

The world's largest publicly traded oil company also set a record for U.S. companies by posting profit of almost $10-billion, according to Standard & Poor's equity market analyst Howard Silverblatt.

Both Exxon and Shell said their performances were buoyed by higher prices for crude oil and natural gas, even as output suffered due to a busy hurricane season in the Gulf of Mexico. The companies noticed slight decreases in fuel demand.

Exxon's profit ballooned 75 per cent to $9.9-billion, compared with $5.7-billion a year ago. Revenue grew to $100.7-billion from $76.4-billion in the prior-year period. The previous oil industry earnings record was Exxon's 2004 fourth-quarter profit of $8.4-billion.

At Shell, third-quarter profit grew 68 per cent to $9-billion, compared with $5.4-billion a year earlier. Revenue at the Anglo-Dutch company rose 8 per cent to $76.4-billion.

"We are capturing the benefits of high oil and gas prices and refining margins," Shell chief financial officer Peter Voser said, referring to the profit margin on each barrel of crude that is refined into gasoline, diesel and jet fuel.

Shares of Exxon fell 60 cents to $55.60 on the New York Stock Exchange, where U.S.-traded shares of Shell rose $1.15, or 1.93 per cent, to $60.65.

Excluding special items, Exxon's profit was $8.3-billion, or $1.32 a share, or slightly below the $1.38 per share expected by analysts polled by Thomson Financial.

With oil futures above $60 a barrel for much of the third quarter, Exxon's profit from petroleum exploration and production rose by $1.8-billion to $5.7-billion. Prices for gasoline, diesel and jet fuel lifted refining and marketing profits by $727-million to $2.1-billion.

However, income at the company's chemicals unit declined by $537-million to $472-million, a reflection of the higher prices for raw materials.

Exxon said the hurricanes slashed U.S. production volumes by 5 per cent from a year ago, while global daily production slipped to 2.45 million barrels of oil equivalent from 2.51 million barrels. By the end of the year, it will cost the company about $100-million after taxes, the company estimated.

Shell said its adjusted earnings -- arrived at by stripping out the fluctuating value of petroleum -- added up to $7.4-billion, sharply higher than analysts' forecasts.

Shell's profit from exploration and production increased by $2.6-billion to $5-billion in spite of an 11-per-cent decline in oil and natural gas output. Its refining and marketing profit climbed by $201-million to $1.7-billion. Its chemicals business saw profit decline by $251-million to $321-million.

Shell said hurricane damage would cost it about $350-million, although much of the expense would be covered by insurance.

Slick profits

High gasoline prices in the wake of hurricanes Katrina and Rita helped fuel record profits at Exxon Mobil and Royal Dutch Shell.

$106.7-billion Combined profits expected this year for the world's five biggest publicly traded oil companies -- Exxon Mobil, BP, Shell, Chevron and Total.

26% The estimated increase in profits at the Big 5 energy companies this year.

28% The rise in U.S. gasoline price in the past 12 months.

Although many polls show U.S. consumers are intent on altering their behaviour (i.e., driving less), we still have not seen significant structural shifts in behaviour.'

Man Financial analyst Edward Meir

SOURCES: BLOOMBERG NEWS, THOMSON FINANCIAL, ENERGY INFORMATION ADMINISTRATION

TOP

Posted by Arthur Caldicott on October 28, 2005

Bid process lets funny smell taint Ridley Island deal

Don Cayo
Vancouver Sun
Friday, October 28, 2005


A bad smell is emanating from the few known facts concerning the likely sale of Ridley Island coal terminal in Prince Rupert.

The short story is that Ottawa is poised to turn over a facility that cost $250 million (in 1980s dollars) for just $20 million, most of which won't be paid until years from now. The only "preferred bidder" has no track record in running a port. And even though the coal industry is on a roll, the bidder isn't asked to pledge even-handed access to all companies wanting to use the terminal.

Would you like to know why there's only one bidder on the list, or who else would like to make a bid, and what they might bring to the table? Me, too.

Yet, if there's a scandal here, it's not that this basic information is being kept secret. Fact is, these days it's the norm for a government to invite some bids and refuse to consider others for reasons they never explain.

Governments like pre-qualified bidders, particularly for complex procurement contracts or large construction jobs that are complicated by a design component, because the bidding process has become so convoluted and expensive. Companies balk at going through such hoops unless they see a reasonable chance of winning; "pre-qualification" limits the competitors and tells them who they're up against. And the government people who pick the winning tender no doubt find it more convenient and less risky to deal with known quantities.

So in theory, pre-qualified bidders are companies proven to possess the expertise and resources necessary to do the job. I have enough faith in the general integrity of the system to believe that's often the case.

But a pre-qualified bidder could be one who pays bribes, who is friends with or related to a decision-maker, or is a political ally. With so much of the process hidden, how can the public tell?

With complex contracts there may be cases where it's justified for a government to take what looks on the surface like a second-best bid. But in the absence of detailed information and independent assessment, it's hard to have confidence that any given instance is a valid case.

And certainly it's possible to manipulate the criteria for pre-qualification to ensure a certain bidder gets, or doesn't get, a job. That's what I think happened last year when BC Ferries called for proposals on three big new ferries that are now being built in Germany. The criteria for yards to be allowed to make a final bid included basing 40 of 100 points on an examination of each yard's recently built, similar-sized ships. Since no B.C. yard had built any such ships, they had no chance of winning the contract -- yet BC Ferries CEO David Hahn and Premier Gordon Campbell were able to maintain the political fiction that they hadn't arbitrarily excluded B.C. bids.

The danger of losing accountability when public contracts are negotiated in private first hit my radar screen several years ago when I started looking at public-private partnerships. They're inherently complex, often involving not just design and construction, but also operation. Trade secrets are involved in many bids, and it's not fair to ask a bidder to tip its hand to competitors.

I wrote about P3s and accountability during the Campbell government's first stumbling forays into that turf, and later during its more successful hand-off of P3s to Partnerships BC.

And, lo, Partnerships BC came up with a full-disclosure policy. It publishes all contract information, except the details of the losing bids, once a contract is awarded. It also releases a value- for-money report on what it would cost if government did the work. And a fairness commissioner -- the first one was the independent-minded Ted Hughes -- observes each bid process and reports publicly on it.

This is a made-in-B.C. template that could provide the basis for accountability policies for other arms of government. Unfortunately, it has so far been ignored.

For example, the province's Alternative Services Secretariate, the body that steers through all privatization initiatives, releases only summaries of contracts and withholds key information such as performance penalties and/or rewards. And Vanoc, with all its pricey Olympic construction looming, can't or won't even tell me how extensively it will be requiring bidders to pre-qualify, let alone what its disclosure policy will be.

Which is a pity. Because when things are hidden, people are certain to wonder why.

So whenever there are questions -- when something smells funny as it does now in Prince Rupert -- many will assume the worst. And, as with the Ridley deal, the process and the projects will be tainted -- whether they deserve to be or not.

dcayo@png.canwest.com

© The Vancouver Sun 2005

Posted by Arthur Caldicott on October 28, 2005

October 27, 2005

Alberta proposes giving oil priority over environment

John Cotter
Canadian Press
Thursday, October 27, 2005

OilSands.gif

EDMONTON -- Alberta is proposing sweeping changes to the way it manages its booming oil sands sector, but critics fear the new plan will run roughshod over the environment.

The proposed Mineable Oil Sands Strategy would make mining the top priority in development areas over other concerns such as forestry, rivers and wildlife. (link)

The change is expected to increase oil sands recovery and make development, including the reclamation of mined areas, easier to manage.

"We are developing a strategy that will help coordinate development in this area," Energy Minister Greg Melchin said Wednesday.

Recent reports suggest Alberta's oil sands could triple production to as much as 1.2 million barrels a day in the next 20 to 25 years.

With enough investment, the oil sands could contribute up to half of Canada's oil supply by 2020, an increase of more than 25 per cent.

Environmental groups such as the Pembina Institute warn the Alberta government's proposal marks a fundamental shift in policy. (link)

In the past, oil sands mining has been permitted on the condition that rivers remain intact, the integrity of watersheds is maintained and key wildlife corridors are preserved.

Under the proposal, strip-mining the oil sands would take priority over protecting the environment, said Pembina Institute spokesman Chris Severson-Baker.

He estimated the plan would mean writing off 2,800 square kilometres of boreal forest.

"Albertans who value the integrity of the province's boreal forest and the people who live, fish, hunt and trap in the Athabasca region should be concerned about this strategy," he said.

Severson-Baker called on the province to shelve the strategy and come up with a better plan.

Alberta Environment Minister Guy Boutilier said the proposal would balance economic development and environmental protection.

"The environment is our mother ship," he said in a release.

The proposal would allow companies to reroute some tributaries of the Athabasca River. Any fish habitat lost from such activity would have to be replaced.

© The Vancouver Sun 2005

Alberta Ministry of Energy Mineable Oil Sands Strategy pages

Pembina Institute statement on Mineable Oil Sands Strategy

Tell the Alberta Government what you think

Posted by Arthur Caldicott on October 27, 2005

October 25, 2005

Gas will stay up: analyst

By ANGELA BARNES
Globe and Mail
Tuesday, October 25, 2005

TORONTO - Relatively high natural gas prices are here to stay for the next few years, according to Bank of Nova Scotia's commodities expert. That isn't good news for Canadian homeowners facing a long cold winter of high heating costs, but it is for Canadian gas producers.

"Today's tight North American supply/demand balance for natural gas is unlikely to ease significantly until 2008, when six new U.S. LNG [liquefied natural gas] import terminals come on stream," said Patricia Mohr, vice-president of Scotia Economics, in the latest report on the bank's commodity price index.

Natural gas prices on the New York Mercantile Exchange have doubled in the last year, rising from $7.37 (U.S.) a million British thermal units in October, 2004 to a record high of $14.22 three weeks ago. They have since eased off to around $13, helped in part by indications that demand has eased somewhat, particularly in the industrial sector, in the face of the exceptionally high prices.

Ms. Mohr sees NYMEX natural gas prices averaging around $9 per mmbtu next year and West Texas intermediate crude oil prices averaging about $60 a barrel - levels "guaranteeing exceptionally strong financial results for Canadian oil and gas producers," she said. Crude prices touched a record intraday high of $70.85 on Aug. 30, just as hurricane Katrina was bearing down on New Orleans.

It currently stands at about $61.35 High energy prices were a key factor fuelling the rise in the Scotiabank commodity price index to a record high in September, its second in as many months. The index increased 9 per cent from August to a level that is double the October, 2001 cyclical low.

Climbing metal and mineral prices also were a major contributor to the advance in the index, which measures price trends in 32 of Canada's major exports. "Widespread gains in most base metals, precious metals, uranium and potash offset slightly lower prices for nickel, aluminum and cobalt," Ms. Mohr said. The metals and minerals index rose to a record last month to stand 2 per cent above the peak set in June, 1988.

Posted by Arthur Caldicott on October 25, 2005

BCUC rules out oral hearing on Terasen deal

By Scott Simpson
Vancouver Sun
Tuesday, October 25, 2005

Utilities commission is satisfied with written submissions

The B.C. Utilities Commission announced Monday that there will be no oral hearing on the proposed $6.9-billion sale of Terasen Inc. to Texas-based Kinder Morgan Inc.

BCUC commission secretary Robert Pellatt said in a letter to Kinder Morgan that hearings proceed to an oral stage "only when the commission panel has questions arising from written submissions."

The BCUC was deluged with a record volume of correspondence, more than 6,000 letters, in connection with the sale. Many of those letters came from Terasen Gas residential customers who objected to an American company taking ownership of the province's largest gas utility.

Vancouver-based Terasen, like Kinder Morgan, is a publicly traded company. Kinder Morgan made an unsolicited offer for Terasen in August at a 19-per-cent premium to recent share value.

Terasen shareholders voted overwhelmingly last week to accept that offer.

Pellatt said the BCUC is satisfied with written correspondence on the transaction and expects to issue a final decision on Nov. 10.

"The commission has an established practice of proceeding with an oral phase only when the commission panel has questions arising from written submissions," Pellatt said, adding that in this instance the panel "does not have any questions" arising from the proceeding.

"Further, given the extensive submissions and comments received in the written process ... the commission panel considers the record is closed for this proceeding."

Terasen public affairs director Cam Avery said the commission was "able to enjoy a huge, huge amount of information."

Avery added that concerns expressed by many correspondents were "beyond the purview of the commission."

"Canada's energy export policy is just not part of the BCUC's deliberations," Avery said.

Pending approvals from the BCUC, and from Industry Canada, the Kinder Morgan purchase could be wrapped up by Nov. 30.

Avery said Terasen's customers won't notice a difference: Terasen Gas will still be the name of the company on monthly gas bills, and rates cannot rise as a result of the deal.

"You will see no effect on your gas bill as a result of this transaction. Gas rates are reviewed quarterly by the B.C. Utilities Commission and have been for years. This transaction will have no effect on people's gas bills," Avery said.

"It will still be a Terasen Gas billing, same people hooking up the meters, same people reading the meters, same people buying the gas for them. Nothing is going to change here."

ssimpson@png.canwest.com

© The Vancouver Sun 2005

BCUC Letter to Kinder Morgan

Posted by Arthur Caldicott on October 25, 2005

SE2 issues simmering with MPs

By Trudy Beyak
Chilliwack Progress
Black Press
Oct 23 2005

A legal battle over a controversial international power line is surging ahead, triggering renewed public environmental concerns in the Fraser Valley.

Conservative MPs - including the Opposition party's environment critic Bob Mills - took a public stand last Saturday against Sumas Energy 2, an American power corporation which wants approval to build a power line on Canadian soil.

SE2 is a 660-megawatt natural-gas-fuelled power plant, which Washington state has approved to be built in Sumas less than 500 metres from the Canadian border.

The power plant, if built, would "become the largest new air polluter in the Fraser Valley," said Langley MP Mark Warawa, a former Abbotsford councillor.

Mills said this legal case will be carefully watched across Canada.

"This issue is precedent-setting for every border region across Canada," said Mills.

There has been unanimous opposition to SE2 from local citizens and local governments, the province of B.C. and the Conservative Party of Canada, Warawa said.

The power company intends to spew more than 2 1/2 tons of pollution daily into the confined Fraser Valley air shed, which has a history of episodes of poor air quality. The B.C. government has stated it would not approve such a power plant in the Fraser Valley on the north side of the border.

SE2, however, is appealing the National Energy Board of Canada's decision to deny the company owners the right to construct a 230,000-volt international power line through Abbotsford to wheel power from its power plant to U.S. markets.

The Federal Court of Appeal is set to hear SE2's appeal case in Vancouver from Nov. 7 to 9.

Whatcom County, meanwhile, will not permit the company's 230,000-volt power line to be built in its jurisdiction because of public concerns on the south side of the border about decreased property values and health concerns.

Sharon Roy, a director with Whatcom County, said the county continues to be opposed to SE2.

"We are very much opposed to the building of that power plant - and we certainly don't think it is fair that Canadians would have to breathe most of the pollutants to be emitted from that power plant," Roy said.

Whatcom County is watching the legal proceedings in Canada with interest. If SE2 fails in its bid to build a power line in Canada, the company may eye a legal challenge in Whatcom County, predicts Roy.

Lawyers for the Province of B.C., City of Abbotsford, FVRD, and Sierra Legal Defence Fund, including Tom Berger, have submitted legal arguments against SE2.

Mills said environment ministry officials must represent Canadian interests abroad.

"An International Joint Commission report recommended the federal government become more involved with cross-border air-pollution initiatives," Mills said.

Depending on which way the court rules, this matter could still end up on the desk of the Canadian federal government for approval, said Abbotsford Coun. Patricia Ross.

"The U.S. will get the power generation, but it will be mostly Canadians that will suffer the negative effects."

Alex Drozdow, president of the federal Liberal Abbotsford riding, said the organization is opposed to SE2 and feels confident the court will make the right decision and uphold the NEB denial decision.

Posted by Arthur Caldicott on October 25, 2005

October 24, 2005

Bidder offered a fraction of Ridley's cost

By Peter O'Neil
Vancouver Sun
Monday, October 24, 2005

'Fire sale' offer by group expected to gain control of port facility unacceptable, MP says

OTTAWA -- The expected winning bidder in the privatization of Ridley Terminals, the coal shipping facility in northern B.C. that cost taxpayers $250 million to construct in the early 1980s, offered $20 million for the Crown corporation in 2003, The Vancouver Sun has learned.

But the offer included only $3 million in cash up front, with the remaining amount to be paid out starting seven years after the deal closes and continuing for the next 33 years in amounts no greater than $500,000 annually.

The offer, from Ontario companies Fortune Minerals Ltd. and Federal White Cement Ltd., was obtained by Conservative MP John Cummins and provided exclusively to The Vancouver Sun.

"This asset has got some value but it's being sold off at fire sale prices. And you've really got to wonder why," said Cummins.

"This is outrageous. To begin these payments in the seventh year, and it ends 40 years later, really rubs salt in the wounds."

Members of the Ridley Shippers Coalition, a group of western Canadian mining firms that oppose the planned sale to the Ontario companies, say the Fortune bid was inferior to at least two offers from their member companies.

They provided The Sun with documents showing that Western Canadian Coal of Vancouver offered $25 million, of which $5 million would be delivered within six months of the deal closing and the remaining $20 million over eight years.

However, the WCC offer was made March 30, 2004, after the original competition was over and coal prices had jumped substantially.

Cline Mining of Toronto offered $9.36 million up front plus a royalty over 15 years of $64 million, which was intended to pay off Ridley's huge debt. No date was included in that document.

The Fortune offer was based on Ridley being cleared of its debts.

Fortune President Robin Goad said the B.C.-Alberta coalition is trying to manipulate the media to advance their self-interests.

He said the leaked Fortune offer doesn't reflect the final terms of the deal he expects to strike with Ottawa, though he said he was forbidden from saying what those terms are because of a confidentiality agreement.

The proposal is detailed in a Sept. 30, 2003, letter sent via courier to former transport minister David Collenette from Goad and Federal White Cement president George Doumet.

Northern Energy Mining Inc. president Pat Devlin, a member of the Ridley Shippers Coalition, urged the government Friday to consider his group's bid to run the terminal as a co-operative that will keep shipping costs low.

He said the Fortune group intends to charge higher fees that will make it a profit but will hurt the ability of Canadian resource firms to compete with Australian exporters.

"Remember, when this was built by the federal government it was never supposed to be a privately run, for-profit business. It was to be a benefit to the province and the country, and Canadian taxpayers paid $250 million for it. So selling it out cheap is only justifiable if it still creates the economic benefit it was originally intended for."

The leak of the deal's terms is the latest in a bizarre business saga that has included a bitter clash between Transport Minister Jean Lapierre and the corporation's so-called "rogue" management team and board of directors.

Lapierre was forced earlier this month to obtain a cabinet order preventing Ridley from signing long-term contracts after he failed to bring the managers and board to heel with a "dressing down" in his office earlier this year.

Lapierre said last week he will go ahead with his plan to obtain cabinet approval to begin negotiating with the Fortune group, despite complaints from industry and opposition MPs.

But Cummins said the federal government is shortchanging taxpayers by selling a valuable asset just prior to a rebound in coal prices that has considerably increased the asset's value.

"I think the government should just pull back from this issue. This whole thing needs a rethink. The government needs to determine what's in the best interests of northern British Columbia."

The issue came up in the B.C. legislature Thursday when the New Democratic Party called on the B.C. government to step in to prevent the sale to Fortune.

B.C. Transportation Minister Kevin Falcon, who acknowledged that Victoria had considered acquiring Ridley from Ottawa, said he's satisfied the privatization plan will result in "equal and open access for all users in British Columbia."

poneil1@hotmail.com

© The Vancouver Sun 2005

Earlier articles on the Ridley Island sale to Fortune Minerals are here

Posted by Arthur Caldicott on October 24, 2005

October 23, 2005

Canada doesn't have oil, Alberta does

By Rondi Adamson
Toronto Star
23-Oct-2005

Canada doesn't have oil, Alberta does, and U.S. is our main trading partner, says Rondi Adamson

The United States does not have too much "control" of our oil. The idea that it does — because, under NAFTA, we sell a certain proportion of oil to the United States — shows a failure to understand any number of things.

Who is the "our" in our oil? I don't know many Albertans, but I know enough of them to know they don't think Ontario, or much of the rest of Canada, is part of that "our."

Since Ottawa sold its stake in Petro-Canada, it could be argued that the federal government doesn't control any oil. Albertans do. And Albertans may feel that they kindly allow Ottawa to collect billions of dollars in taxes from that oil.

In short, Eastern oil consumers and Western oil producers most likely disagree about who controls what, and who it "belongs" to.

Control of oil comes from the marketplace, not from any buyer. Let's just imagine that the Canadian government mandated oil sales to China. China would then buy less from everyone else and American firms would still end up paying about the same price on the world market and getting about the same amount.

The only difference? According to John Palmer, economics professor at the University of Western Ontario, "We would force Canadian producers to pay more to ship it to China instead of the United States. In the process, we would further strain Canada-U.S. relations while donating cheap oil, by probably subsidizing the transport costs, to China."

Prime Minister Paul Martin should keep that — among other things — in mind when he decides to use oil to threaten the United States. Speaking two weeks ago in New York, the Prime Minister attempted to address the ongoing softwood lumber dispute. He hinted that Canada would look at China and India as a marketplace for "our" oil, restricting energy exports to the United States, if the Bush administration doesn't smarten up.

Apart from how morally questionable it is to suggest that trading with a dictatorship like China is a preferable/equal option to trading with a free country like America, there is also the matter of reality.

Canada is dependent on the American market, which buys approximately 85 per cent of what we have to offer. This is not to mention how our Prime Minister is causing further deterioration of already tenuous Canada-U.S. relations.

In the world market, oil is fungible. Who sells how much to whom is of little import. The price is determined by supply and demand, not a single oil company, or state. Certainly, if American demand dropped, so would the world price, but American firms do not set oil prices.

It would be nice if Canadian politicians would realize all of this and find less childish ways to deal with our largest trading partner. We always seem to be reacting against the United States, rather than carefully thinking through our rhetoric and our options.



Rondi Adamson is a Toronto writer whose work has been published in the Christian Science Monitor, Wall Street Journal Europe and USA Today.

Posted by Arthur Caldicott on October 23, 2005

Scrap NAFTA to loosen American grip on our energy sources

By Linda McQuaig
Toronto Star
23-Oct-2005

We would have to scrap NAFTA to loosen American grip on our energy sources, notes Linda McQuaig

When it comes to oil, the Middle East is where the action is. Or as Dick Cheney once put it — before he was vice-president and became careful about saying such things — the Middle East is "where the prize ultimately lies."

Outside the Middle East, generous oil endowments are rare. Interestingly, Canada is among the well-endowed. With our small population and relatively abundant reserves, we are one of the few western nations with the potential for something the U.S. yearns for: energy independence.

Oil is the lifeblood of the modern economy. It's the most effective and flexible form of energy, so we could count ourselves lucky up here.

Too bad, then, that we trusted our fate back in the early 1990s to a small team of negotiators appointed by the Mulroney government.

Sadly, in the course of negotiating the North American Free Trade Agreement, these Canadian negotiators acquiesced to Washington's demands for guaranteed access to our oil. They agreed to Section 605, which prevents us from cutting back our oil exports to the U.S. The section also prevents the U.S. from cutting back its oil exports to us, but they don't export oil to us.

This has potentially ominous implications for Canada.

The world is rapidly running out of easily accessible oil. Supplies of affordable oil will therefore be more precarious in the future. A recent report by the U.S. Energy Department's National Technology Laboratory bluntly noted: "The world has never faced a problem like this."

Of course, oil contributes to global warming, so it's important we reduce our consumption. But, until we move to an alternative or learn to live with less, oil remains crucial to our way of life.

Yet, despite looming oil shortages, Canada is blithely exporting roughly 70 per cent of all the oil we produce each year to the U.S., rapidly depleting what's left of our easily accessible oil. Under NAFTA, we can't cut back that proportion, unless we cut our own consumption.

Meanwhile, Canada is also an oil importer. The eastern and central parts of the country, including Ontario, rely heavily on imported oil.

So, if there were international oil shortages, many Canadians would suffer. NAFTA would prevent us from redirecting oil headed for the U.S. to destinations in Canada, no matter how great the Canadian need.

If this doesn't amount to handing over too much control over our oil to the U.S., what would?

The Mulroney government presumably surrendered this control in exchange for what it said was a guarantee that our goods would have access to the U.S. market — a guarantee which, we were told, was Canada's reason for signing NAFTA. But the final deal contained no such guarantee, as Canadian critics noted at the time, and as the ongoing softwood lumber saga underscores.

So we not only gave up control over our oil, it seems we gave it up for, well, nothing.



Linda McQuaig, a Toronto-based commentator, is author of It's the Crude, Dude: War, Big Oil and the Fight for the Planet. available in paperback. lmcquaig@sympatico.ca.

Posted by Arthur Caldicott on October 23, 2005

Senate Energy Committee Approves ANWR Drilling

Green Car Congress
20 October 2005


ANWR. Click to enlarge.

The Senate Energy and Natural Resources Committee on Wednesday approved legislative language instructing the Secretary of the Interior to create and implement an oil and gas leasing program in the Coastal Plain of the Arctic National Wildlife Refuge that impacts no more than 2,000 surface acres.

The legislation approved by the committee today is Title IV of the budget reconciliation bill to be marked up by the Senate Budget Committee on October 26. The committee passed Title IV in response to instructions from the Budget Committee to raise $2.4 billion in revenue for fiscal years 2006-2010. According to the Congressional Budget Office, the competitive sale of oil and gas leases in the plain will raise $2.5 billion during that time.

During the meeting over the ANWR provision, three amendments were offered and defeated.

Sen. Maria Cantwell (D-Wa), offered an amendment to ensure the payment to the US Treasury of 50% of revenues from oil and gas leasing and production on the Coastal Plain. Defeated 9–13.

Senator Ron Wyden (D-Or), offered an amendment prohibiting the exportation of oil and gas produced under ANWR leases. Defeated 10–12.

Ranking Member Jeff Bingaman (D-NM), offered an amendment to limit the authorization of oil and gas development on the Coastal Plain in the same manner as in other units of the National Wildlife Refuge System. Defeated 8–14.

The time is ripe for ANWR. Global and national conditions mandate the environmentally-sound development of oil and gas in the Arctic. The Senate first passed ANWR legislation in 1996. If that hadn’t been vetoed, I don’t think we would be paying $3 a gallon for gasoline today. The hurricanes in the Gulf underscored what Congress has known for along time: We must produce more of our own oil and we must diversify the places where we produce it. We must do it for our economy and our energy security.

—Sen. Pete Domenici (R-NM), Chair, Senate Energy and Natural Resources Committee

In March of 2004, the Energy Information Administration, at the request of Representative Richard W. Pombo, Chairman of the U.S. House Committee on Resources, published a report using government figures and analyzing—to the extent that anyone can without sinking a well shaft down through the coastal plain—the effect of drilling in ANWR.

Given the uncertainty over the exact amount of oil in place, the report lays out three scenarios: one for low-oil resources, one the mean case, the other for high oil resources.

Some of the report’s findings:

The mean-case estimate is that there are 10.4 billion technically recoverable barrels of oil in ANWR, divided into many discrete fields. This estimate includes oil resources in Native lands and State waters out to a 3-mile boundary within the coastal plain area. The mean estimated size of oil resources in the Federal portion of the ANWR coastal plain is 7.7 billion barrels.

It will take approximately 10 years to bring the first field on-line (comparable to other Arctic drilling).

Assuming sequential development of the fields, rank ordered by size, ANWR production would peak, in the mean case scenario, in 2024 at 870,000 barrels of oil per day.

Today the US imports some 10.5 million barrels per day. In 2025, the EIA estimates that almost to double to some 20 million barrels imported per day.

Using the EIA’s projections of declines in domestic oil production and increases in oil consumption (mostly from the transportation sector), by 2025 ANWR would reduce US reliance on imported oil by four percentage points—from 70% to 66%.

In other words, ANWR oil would make a small difference, but not a substantive, strategic difference. It doesn’t come close to solving the problem or providing “energy security.” Even if peak ANWR oil were available today, the US would still be importing more than 9 million barrels per day, and climbing.

As an aside, the 2,000 acres don’t need to be contiguous, and only the equipment that touches the ground (i.e., the pipeline stanchions, not the pipelines, which are in the air) count toward the figure. Since a drilling platform can occupy as little as 10 acres, there’s still the possibility of having several hundred platforms, with a maze of interconnecting roads and pipelines, spread throughout the 1.5 million acre reserve.

Posted by Arthur Caldicott on October 23, 2005

October 22, 2005

No fur flying at the VITR Pre-Hearing Conference

On Friday, October 21, the BC Utilities Commission held a Pre-Hearing Conference with applicants and intervenors in both the BCTC - VITR proceeding and the Sea Breeze - VIC proceeding.

The transcript is here.

The big point of debate was expected to be whether the Sea Breeze VIC application should be consolidated with VITR. In my notes, only one intervenor firmly opposed the Sea Breeze motion to consolidate, and despite lots of cautions about the Sea Breeze proposal and whether it would pass the "threshold" or "credibility test" of the BCUC, even the heavy hitters - BCTC, BCH, JIESC - did not oppose.

"What credibility test?" was asked, to which no answer was forthcoming.

The lawyer for Sea Breeze came all set up to defend a motion that he expected to have roundly trashed in the debate, and when he had his chance at the microphone, he was at sixes and sevens in his reply which was cobbled on the spot out of his prepared notes and his need to recognize that most likely (the decision is now in the hands of Chairman Hobbs, who may seek advice from Heaven, but sure isn't taking any from anyone else) Sea Breeze was going to get what it wanted.

On a number of occasions Hobbs was reminded about the risk of appeal if he were to make any decision that was not watertight in terms of its legal integrity. One great line from Mr. Carpenter, counsel for BCTC: "I'm not going to suggest that some of my friends in this room are actually wearing their court robes under their suits but I can assure you that they have them close by." (The GSX Concerned Citizens Coalition is pleased to take significant credit, with thanks to its lawyer, Bill Andrews, for the sensitivity of appeal at the BCUC.)

The fur didn't fly, so it wasn't as rich a day as some hearing days - the mention of energy and Vancouver Island is akin to a lit cigarette tossed out a car window.

Perhaps the next most interesting event in these two proceedings will be the Sea Breeze replies to BCUC Information Request #1 with respect to the VIC application. I expect a lot of people will devour that document. It's due November 7. Some excerpts from the lengthy IR are appended, below.

BCTC-VITR: BC Transmission Corp. - Vancouver Island Transmission Reinforcement, 230 kV AC cable from Delta to Duncan
http://www.bcuc.com/ApplicationView.aspx?ApplicationId=78

Sea Breeze-VIC: Sea Breeze Pacific Regional Transmission System Inc. - Vancouver Island Cable, 300 kV HVDC Light cable from Surrey to Victoria
http://www.bcuc.com/ApplicationView.aspx?ApplicationId=90

--
BCUC Information Request #1

[The BC Utilties Commission has fired its first Information Request to Sea Breeze for the Vancouver Island Cable (VIC) project. Here are just a few of the questions from the 3 MB, 27 page document. The selection is pretty random. These are questions that I could understand, and which I found interesting after a quick read of the 27 page IR.]

Sea Breeze does not agree with BCTC's assessment of HVDC Light® technology in its CPCN application for the VITR Project.

56.1 From Sea Breeze's perspective, what are the errors or misconceptions in BCTC's review of HVDC Light®? Please support the list of errors with relevant statistics, system studies, or technical papers, and include BCTC's Appendices P, Q, and R in the review.

2.1 The VIC Application states that Sea Breeze management is confident that, if a CPCN is granted for VIC, there will be no major difficulty in obtaining funding. Please explain whether Sea Breeze believes that a CPCN under Section 45 of the Utilities Commission Act ("UCA") is the unique significant condition precedent for arranging funding for VIC, and if so why it holds this view. If a CPCN is not the unique significant condition precedent, what others are there?

3.6 Where the VIC proposed route would be in lanes, streets or other municipal property, does Sea Breeze anticipate that it will be expected to pay fees under franchise or operating agreements with the municipalities through which it will pass? Why or why not? Please outline the discussions regarding franchise or operating fees that Sea Breeze has had to date with municipalities.

[there are more in this vein on ROW from BCTC, expropriating from unwilling private owners, etc.]

6.1 On page 178, Sea Breeze states it agrees with the position of BCTC, that there is a clear need for new transmission facilities providing additional reliable transmission capacity from the Mainland to Southern Vancouver Island. Please confirm that in Sea Breeze's view, the power supply deficiency lies on Vancouver Island and the primary requirement of the new transmission facilities is to carry power to the Island,

6.2 The VIC Application states that the Juan de Fuca Cable Project is well advanced and is scheduled to be operational as much as one year prior to VITR. On page 180, Sea Breeze states that either VIC or the Juan de Fuca Project will avoid the need for the VITR project until 2016. On page 178 of the VIC Application, Sea Breeze submits that the Vancouver Island transmission need is best served "by one or both of (Sea Breeze's) proposed projects. If the Juan de Fuca Cable Project is "well advanced" and is sufficient to meet the transmission need, why is Sea Breeze proposing VIC?

6.3 Please expand on how "well advanced" the Juan de Fuca Cable Project is, and when all necessary project approvals are expected.

6.4 The discussion on page 160 indicates that the VIC and Juan de Fuca projects are redundant until 2016, when they would become complementary. Please explain how Sea Breeze believes the Commission should deal with the VIC Application at this time, when Sea Breeze appears to be also actively pursuing the more-advanced Juan de Fuca Project.

6.9 Please clarify the statement on page 204 that ".. .when energized this project (Juan de Fuca) would come under the jurisdiction of the BCUC pursuant to the Province's legal definition of a 'utility'." Does Sea Breeze expect that the Commission will approve rates for the Juan de Fuca cable?

6.10 Please discuss whether Sea Breeze intends to hold an Open Season for VIC transmission rights. Why or why not?

6.11 Please discuss whether Sea Breeze is requesting Commission approval of a CPCN for the VIC Project on the basis that it will be a merchant transmission facility. Why or why not?

8.2 The VIC Application at page 199 estimates the EPC cost of VIC at $302 million, based on a turnkey project estimate from ABB. Please provide a copy of the information with regard to cost and schedule that Sea Breeze received from ABB.

[and many more questions that nose around Sea Breeze costs for VIC]

9.12 Sea Breeze notes on page 44 of the VIC Application that the VIC will bypass the Gulf Islands. What (if any) are the differences between the VITR and the VIC with respect to providing transmission service to the Gulf Islands?

11.3 If the Commission were to conclude that HVDC Light technology as set out in the VIC Application and/or the VIC route is the preferred option, is there any reason why it should not direct BCTC to adopt this option?

12.1 The VIC Application at page 44 states that the VIC project line will be operated exclusively by BCTC. Does this mean that BCTC will be the only customer of Sea Breeze? What other customers would Sea Breeze intend to serve using the VIC line?

14.5 With reference to Exhibit B-6, BCUC DR 56.4 in the VITR proceeding, please provide a comparison of the seismic risk of VIC to VITR Options i and 2, in terms of the ability to withstand seismic events that have a return period of once every X years.

15.1 Further to the statement that HVDC Light® systems are in commercial operation around the world, please provide a summary of all comparable HVDC Light® systems that are in service, stating the length of the cables, the transmission capacity and commercial in-service date of each.

15.2 For each of the foregoing HVDC Light® systems, please provide the year by year availability performance statistics, including Forced Energy Unavailability and Scheduled Energy Unavailability.

17.0 Reference: VIC Application, Exhibit HI, page 8

"The VIC Project eliminates or defers for many years the need to upgrade the Island's AC grid to relieve constraints on Cut-Plane D (between Dunsmuir and Pike substations) because it will serve the major load on Vancouver Island below the existing bottleneck. BCTC has estimated that it would cost $49 million to alleviate such north to south transmission constraint."

Reference: VIC Application, Exhibit Bl, p. 188

"Our studies indicate that the transmission capability problem can be related to any of the transmission sections between Dunsmuir and Pike Lake, hence the additional infeed at VIT alone does not provide an adequate solution."

17.1 Please supply the studies referenced on page 188.

[this may be a key part of Sea Breeze's costing comparison. I believe Sea Breeze says BCTC is not including costs of necessary upgrades on the line between Duncan (VIT) and Victoria (Pike) if VITR goes ahead.]

"Export of energy off island via VITR by an DPP, BC Hydro, or Powerex, to a customer in the Lower Mainland or U.S. would be problematic."

26.1 What level of on-island generation would be required before a power flow in the VI to Lower Mainland direction could be reasonably expected on either the VIC or VITR projects?

26.2 Is Sea Breeze aware of any VI to Lower Mainland scheduling path constraints?

Sea Breeze notes that the VIC would become part of the BC electricity grid and would be operated exclusively by BCTC.

29.1 Does Sea Breeze expect to continue to own the VIC?

Sea Breeze suggests that one or both of the VIC and the Juan de Fuca Cable Project could meet the need for new transmission facilities to Vancouver Island.

55.2 The construction of transmission facilities alone is not sufficient to ensure an adequate supply of energy to Vancouver Island customers. Please provide Sea Breeze's proposals with respect to the acquisition of energy. In the response, please address potential energy sources, the responsibilities of the various parties (including BCTC and BC Hydro), the mechanism(s) for accessing transmission capacity on the Juan de Fuca link, the implications for BC Hydro's EEP and REAP, and the consequence of BC Hydro not acquiring capacity on that link.

Sea Breeze submits that it is not necessary, nor would it be appropriate, for the Commission to carry out a detailed review of the potential environmental effects of the VIC Project.

85.1 Given that the relative environmental impact of the VIC and VITR projects has been cited by Sea Breeze as a factor in favour of the VIC project, why is it not appropriate that the Commission consider the environmental effects in its deliberations?

Read the entire IR:
BCUC Information Request #1 at


Posted by Arthur Caldicott on October 22, 2005

Power station due to be in operation by mid-November

Vancouver Sun
22-Oct-2005

Construction is entering the final stages at the new power station on China Creek. Project engineers hope to throw the switch on the twin generators in mid-November.

The project has been led by the Hupacasath First Nation, with $2.5 million of the funding from the federal government.

The 6.5-megawatt station will power about 6,000 homes.

Revenues from the project will be paid out to the various equity partners on a quarterly basis.

The city of Port Alberni will receive five per cent, while Ucluelet First Nation will get 10 per cent. The industry partner, Sunex, will take home 12.5 per cent of revenue, leaving 72.5 per cent for project proponent Hupacasath First Nation.

Posted by Arthur Caldicott on October 22, 2005

Gather round the gas flare for a big Alberta boost

By JEFFREY SIMPSON
Globe and Mail
Saturday, October 22, 2005

EDMONTON -- Each Albertan will be receiving a $400 cheque in January. Called a "resource rebate," it's each taxpayer's share of $1.4-billion carved from the huge provincial surplus. It's really, really dumb policy.

Maybe the rebate is great politics. Maybe Premier Ralph Klein's popularity as Alberta's Santa Claus will jump a few points in the polls. As policy goes, however, the rebate stinks.

The first page of the economics textbook says: Don't overheat a hot economy. Alberta's economy is the hottest in North America. It doesn't need more heat, which is what the rebate will provide when people spend the money.

When recipients spend, retailers will be happy. So will manufacturers in Ontario and the United States. And hoteliers in Arizona or Hawaii. Some of the rebate money will stay in Alberta, where it isn't needed economically, and the rest will go elsewhere.

The rebate's unfair, too. The millionaire gets it, and so does the person on welfare. If the government wanted to help people on low incomes, the rebate is perverse.

Alberta already has Canada's lowest taxes. It also has the brightest future within Canada. The place is crying out for visionary political leadership. Instead, it gets cheesy rebates.

The paranoid right-wingers in Alberta think the rest of Canada lusts after Alberta's wealth. They're coming. Just you wait. They're cooking up another national energy program. As with all paranoia, it's not based on facts, just memories, fears and an ideological agenda.

No one in the rest of Canada wants to hold Alberta back. Instead, they want to grab hold of the province's coattails and soar into the future.

Alberta has an amazing opportunity to show Canada how to succeed in a globalized world driven by knowledge, innovation, research and brainpower.

The places in the world that hard-wire this message -- It's global, stupid! It's knowledge, stupid! -- into their genes will be the ones with the highest standards of living, the best jobs and the best social programs.

Alberta has the people, resources, wealth and power to lead. It needs the political vision to set high targets for a big-sky place.

So here are a few.

Make the province's two leading universities -- the University of Calgary and the University of Alberta -- rank in the world's top 50 by 2020. The ambition for the largest university, the U of A, should be No. 20 in '20. University operating budgets are rising by 6 per cent annually for the next three years (after years of previous neglect). The U of A has a terrific new president, Indira Samarasekara; she can aim for the top 20 if she gets the resources.

Make Alberta's school system, already one of the continent's best, the best in North America and one of the top two or three in the world. Alberta has the power to make this happen -- if the political leaderships exists.

Make Alberta's training systems, public and private, the best in Canada. Labour shortages are everywhere in the province's hot economy. It's going to take public investments in skills development and upgrading to keep abreast, or ahead, of demand.

Make Alberta one of the top two or three places for medical research in North America, and one of the top five in the world. Former premier Peter Lougheed's brilliant invention, the Alberta Heritage Fund, already finances medical research. It could do so much more. What does the world call the breakthrough in diabetes treatment? The Edmonton Protocol, because that's where the discoveries were made. Build on this legacy. On second thought, leap from it.

Make Alberta a continental leader in sustainable development. Don't just burn huge quantities of natural gas to develop the tar sands, because the carbon emissions will be huge. Finance urgent research into carbon sequestration, shipping and burying carbon, so that a virtuous circle is created of energy exploitation with diminished atmospheric impact.

Make Alberta the model for health-care experimentation. Help break Canada free from the existing model that is devouring public budgets everywhere, depriving governments of the ability to make more sensible investments in the future.

Make Alberta the country's fairest place. Shrink poverty, because poverty holds back development. Unequal societies are often less productive than more equal ones. Lower taxes don't necessarily mean high productivity, right-wing ideology notwithstanding. If they did, Finland wouldn't have the world's most productive economy.

Make every important decision revolve around this question: How does Alberta become the most outward-looking place in North America? The world isn't at all "flat," as one pundit pretends, but space is shrinking.

Alberta has a superb private sector, a competent civil service, creative people, an excellent work ethic, a can-do spirit, and natural resources in high demand. It's been hugely influential in reshaping how people elsewhere think about public issues, whether or not the province understands this influence.

Alberta has the power to do better than cutting cheques to itself. That's why its future political decisions are so important to Albertans, and to the rest of us.

jsimpson@globeandmail.ca



sqwalk.com
COMMENT:Well, we should be cooking up a national energy program, despite intimidation by Alberta.. We have health policy, environment policy, industrial policy, trade policy, but no energy policy.

Oh, let's see, it's the most important economic activity right now in the world. It's the largest resource economy in the country. It makes and breaks governments and nations. Energy is the stuff which is driving American international policy. And it pits little old Canada against the largest richest corporations the world has ever known.

And we shouldn't do a little national strategizing around it? Gimme a break. Of course we should, and it's only because Alberta Ottawa is afraid of an Albertan hissy-fit that it won't talk about what we so obviously need. Canada needs a national energy policy.

British Columbians are up in arms over the Kinder Morgan takeover of Terasen. You don't think that's the stuff of national energy policy? Kinder Morgan is the agent of US energy policy. Terasen should be a part of Canada's.

Canada's largest ever energy project is the Mackenze Gas Pipeline, controversial for a generation, and still the subject of intense debate. No policy guides its implementation or abandonment - oh, no - just a bunch of companies pushing their interests on government and indigenous peoples.

How about all the public discussion about using energy as a weapon in lumber wars with the US? And what about NAFTA and Canada's impossibly dumb commitment to ensure oil and gas keep flowing to the US? What about paced development, instead of market-driven expansion that does its thing without reference to local needs or sustainability. What about the fiscal and regulatory environment in which renewable energy could be thriving?

We need a national energy policy, and we should be developing it right now. - Arthur Caldicott
sqwalk.com

Posted by Arthur Caldicott on October 22, 2005

October 21, 2005

Ottawa to review U.S. takeover of Terasen

By PETER KENNEDY
Globe and Mail
Friday, October 21, 2005

VANCOUVER -- In an unusual move, Ottawa issued a public statement yesterday saying it will review U.S. energy giant Kinder Morgan Inc.'s proposed $6.9-billion takeover of Terasen Inc. to ensure that it will be of "net benefit" to Canada.

Facing opposition in British Columbia, Federal Industry Minister David Emerson is stepping aside from the review process to avoid conflict of interest allegations stemming from an earlier role as a director of Terasen, which was previously known as BC Gas.

"He will not be involved in the final decision on this investment," a spokesman for Mr. Emerson said, adding that Intergovernmental Affairs Minister Lucienne Robillard will be the one to approve the deal if it proceeds.

Mr. Emerson's decision to recuse himself comes after Terasen shareholders overwhelmingly approved the controversial takeover by Kinder Morgan, a Houston-based pipeline operator, at a meeting in Vancouver on Tuesday. The acquisition is widely seen as a strategic move by Kinder Morgan to gain a broad foothold in the Alberta tar-sands industry and to give Terasen more capital to expand the pipeline side of its business.

However, it has sparked a firestorm of criticism from citizens and politicians who worry about the ramifications of a U.S. firm gaining control of a Canadian company that supplies natural gas to 870,000 B.C. residents.

"We do not want the possibility that the U.S.A. Patriot Act will give the American government access to our billing records via Kinder Morgan," said David Askew, a member of the Vancouver chapter of the Council of Canadians.

Corky Evans, a B.C. New Democratic Party MLA, said the B.C. Utilities Commission, which is also reviewing the sale, should open up the transaction to public hearings before Canada's third-largest utility is sold to a U.S. company.

"This is about whether or not Canadians should be able to have a conversation about Canada before we sell a chunk of it," he said.

A spokesman for Mr. Emerson said Ottawa doesn't usually issue a statement to say that it is reviewing a transaction like the one involving Terasen. However, he said the decision to do so was due, in part, to criticism of the deal.

"I'm told that the B.C. Utilities Commission has received something like 5,000 e-mails on this, almost universally opposed," the spokesman said. "They tend to come from Canadian nationalists who don't want to see the company sold into foreign hands.'' Industry Canada has issued a statement saying there is an ongoing review of the transaction under the Investment Canada Act, which gives the federal government the ability to negotiate enforceable commitments with the investor during the review process. It also said that acquisitions that are subject to review under the act receive approval only when they demonstrate a net benefit to Canada.

Yesterday, B.C. Energy Minister Richard Neufeld said he preferred to offer no opinion on the transaction, saying it is up to the B.C. Utilities Commission to determine whether it is in the best interests of the citizens of British Columbia.

Posted by Arthur Caldicott on October 21, 2005

October 20, 2005

Share and share alike

By Donald Gutstein
Georgia Straight
Publish Date: 20-Oct-2005

The evening after the British Columbia government introduced legislation imposing a contract on the province's teachers, Michael Smyth interviewed British Columbia Teachers' Federation president Jinny Sims and Labour Minister Mike de Jong on his CKNW Nightline BC radio show. Smyth was argumentative and surly with Sims. He accused her of not being straight with the public. When he interviewed de Jong, Smyth was respectful and attentive. He sought de Jong's opinion; he disputed Sims's opinion. Smyth ended the segment with a promo for his next-day column in the Province.

The column continued his attack on teachers. Smyth accused Sims of displaying "predictable moral outrage", as if it had been fabricated for the cameras and tape recorders. He lambasted the union for its "militancy" and the NDP for its predictably "snuggly relations" with the teachers.

As for the government, Smyth informed us, Premier Gordon Campbell had to bring down the hammer because "the hammer.is the only thing the BCTF understands." The kindly but firm father applied the punishment he knew would hurt but would be good for his unruly children.

Several days later, his column and radio show spread some of the blame for the impasse to the government. Both sides were at fault, Smyth said and wrote. Government was responsible for provoking and baiting the teachers, among other factors.

It's as if he's creating his own echo chamber. He shouts "teachers are militant" or "government provoked the teachers" in one direction. He shouts it again in another. It bounces back from somewhere else, as other media pundits join in. Soon the message surrounds us and we don't know any more where it originated. The message seems to have always been out there, so it must be true.

Smyth is not alone in appearing on supposedly rival news outlets. Vancouver Sun political columnist Vaughn Palmer appears every morning on CKNW's Morning News With Philip Till. Palmer also hosts the Voice of BC show weekly on Shaw Cable 4. Keith Baldrey, Global TV's legislative bureau chief, is a weekly radio commentator on the "Cutting Edge of the Ledge" segment of the Bill Good Show on CKNW.

CKNW is one of 50 radio stations across Canada owned by Corus Entertainment, including four in Vancouver. Both Corus, which also owns 10 cable channels, and Shaw Cable-the second-largest cable system in the country-are controlled by the Shaw family of Calgary, whose net worth last year was $635 million.

Global TV, the Vancouver Sun, and the Province are owned by the Asper family of Winnipeg. The Aspers own major newspapers across Canada, the Global Television Network, eight cable channels, and the canada.com Web sites. This family was worth $1.09 billion in 2004.

When the Senate Communications Committee came to town earlier this year to study media concentration, it heard loudly and clearly that CanWest holds too much of the Vancouver English-language media market. The inevitable consequence, many presenters told the committee, is a reduced diversity of news and opinion available to citizens.

Now CanWest is sharing its people with Shaw and Corus. Reduce, reuse, and recycle are excellent concepts when applied to the environment; they are dangerous when practised by news media.

CTV, CHUM, and the Globe and Mail are small players in the Vancouver market. CBC radio and television are the only news organizations equal in size and scope to the giants. But after its recent labour troubles, the public broadcaster may be permanently weakened. That leaves industry leaders the Vancouver Sun, the Province, Global TV, and CKNW, and they're increasingly speaking with one voice.

Some of the connections between CanWest and Shaw-Corus are long-standing. The premier's brother, Michael Campbell, has had his Money Talks show on CKNW for years, and his Vancouver Sun business column is tired news. Vaughn Palmer has been doing his Voice of BC show for several years.

Others are more recent. Global TV anchor Jill Krop often hosts CKNW's The World Today. Weatherman Phil Reimer does the weather for the Sun and CKNW.

In January 2005, CKNW began airing Adler on Line, hosted by right-wing broadcaster Charles Adler from Winnipeg. Adler does a TV segment each night on Global Winnipeg, known as "Adler on Global", and he hosted CanWest's Global Sunday program in Calgary for several years.

CanWest News columnist Jonathan Manthorpe is a regular guest with John McComb's CKNW afternoon show discussing international affairs. Shell Busey writes a Sunday Homes column in the Province and hosts two weekend radio shows on CKNW.

If these exchanges were happening within one company, it would be called convergence. The late Izzy Asper once said his model in building his company was the Chicago Tribune. In the mid-'90s, the paper constructed a cable-television studio in the middle of its fourth-floor newsroom. Reporters who wrote stories in the day's paper would be interviewed in the evening about the story and add elements not included in the print version-at no extra pay, of course. Convergence was supposed to increase revenues and reduce costs.

But the exchanges are happening between separate companies. And not only are they sharing their human resources, they're writing and talking about each other.

On September 29, the Province ran a picture of CKNW reporter Leanne Yuzwa, who is noteworthy, perhaps, because she's a boxer.

On September 7, Fanny Kiefer returned to work as the ubiquitous host of Shaw Cable's Studio 4. The next day, the Province put her picture on the front page and ran a story and another picture inside. The Sun provided a long article.

A Province story about the epidemic of drug-overdose deaths in the Downtown Eastside near the end of August quoted just two sources: a police constable and CKNW. The Province E-Today section of August 12 carried a discussion about Philip Till's suitability as CKNW's morning-show host. Several days before that, Pete McMartin's Sun column discussed an on-air interview he had done with Till.

And that's just in a two-month period. Are CanWest and Shaw setting the stage for a merger that would create the largest media empire in Canada? Or are two of Canada's wealthiest families merely obsessed with cost-cutting by laying off staff and sharing whomever is left with the other guys, a kind of contracting-out to the competition?

CanWest's near-monopoly means that its commentators and columnists are the experts, not because they are most knowledgeable and well- informed but because they have the soapbox and no one else can compete. If another organization wants to be taken seriously, it grabs CanWest's experts.

These practices may be good for shareholders but they do little for readers and viewers. With so few major news organizations in the city, the pool of experts is shallow. They know each other, they interview each other, and they rarely disagree. The range of opinions is narrowed even further.

Sharing employees creates other concerns for the audience. Can CanWest ever report objectively on Corus or Shaw, or Corus on CanWest, if their most high-profile people are scurrying between the organizations? Can one reporter work simultaneously for two competing media organizations? Can one reporter use the facilities of one newsroom to write for another? Where is the reporter's loyalty when she obtains a scoop? What ethical issues might arise?

Certainly, the love-in between the two companies today is a far cry from the situation seven years ago when they were bitter rivals vying for the media empire of the late Frank Griffiths. When he died in 1994, Griffiths had assembled in Western International Communications the jewels of B.C. broadcasting: BCTV and CKNW, plus eight other television stations, 11 radio stations, interests in four cable channels, and a 54-percent interest in Canadian Satellite Communications, a satellite TV provider.

In 1997, Izzy Asper and son Leonard sat down opposite J.?R. Shaw and son Jim in a Toronto hotel to divvy up the WIC assets, but no deal was reached. Two years later, after bids, counterbids, and lengthy court challenges, a deal was finally reached-the one that had been before them all along. CanWest got the television stations; Shaw got CanCom and Corus, the radio stations, and the cable channels.

Leonard Asper became CEO of CanWest in 1999, and within a year he transformed the company from a money-spinning second-rate television network into a converged conglomerate with billions of dollars in debt after paying $3.2 billion for Conrad Black's major city daily newspapers and a half interest in the National Post (later increased to full ownership).

Jim Shaw took over in 1998 and turned his father's cable firm, the second-largest in Canada, into a diversified media empire of radio stations, cable channels, and Internet holdings, plus the leading Canadian animation house, Nelvana. Unfortunately, his empire was created just before 9/11, when advertising revenues tanked. Corus took several years to climb out of its hole back to profitability.

Corus compensated for lost advertising revenues by laying off as many staff as possible while still being able to run the operation. Less than a week after Corus received CRTC approval to take over the Women's Television Network, it axed 60 jobs. This followed an earlier company move to eliminate 100 jobs across the country, except for in the radio division. The radio cuts came next: 20 of the 155 full-time employees at the four Vancouver stations and 11 more in Edmonton. With its depleted resources, Corus needs CanWest.

The end game is not yet clear. Both companies seek an end to foreign-ownership restrictions. This would allow them to cash out. But opening Canada's media to control by people like Rupert Murdoch, who owns sham news service Fox News, is a nonstarter unless Stephen Harper and the Conservatives gain power. The Canadian Radio-television and Telecommunications Commission wouldn't necessarily turn them down, because it has become so supportive of what the industry wants.

Leonard Asper and Jim Shaw are probably having too much fun moving the dominoes around the board to want to sell. So they might do a deal.

Telus says the future is friendly, but in media the future is all about controlling content and distribution. CanWest has huge content resources but no electronic distribution systems such as cable or satellite TV to deliver them. Shaw-Corus has the cable and satellites but is light on content. Together they make a world-class powerhouse, at least domestically.

Such a combination would make the Aspers and Shaws even richer. But it would be a black day for Canadians, weakening our rights to receive the information we need to be informed citizens. The echo chamber would be made permanent and we would forever lose our bearings.

Meanwhile, Jim Pattison's AM600 pulled the plug on Rafe Mair's talk show last week. Mair ended up on that station after his popular CKNW show was cancelled by Corus several years ago, in part because he was critical on-air of Corus's cost-cutting measures. Who will tell those stories now?

Posted by Arthur Caldicott on October 20, 2005

October 18, 2005

China as Canada's No. 1 trade partner? Not likely

By Richard Gwyn
Toronto Star
18-Oct-2005

One of the first things China will do once it becomes a major customer for Canada's oil — as apparently is Prime Minister Paul Martin's policy — is to tell us to get lost when we next suggest that Beijing join the Kyoto Protocol to combat global warming.

The same answer will come winging across the Pacific should we complain about China's treatment of its democracy activists.

On these issues and many more like them, we will, if not actually get lost, then go silent as soon as China starts importing the rumoured 400,000 barrels a day of Alberta tar sands oil.

There's no argument whatever that Martin is absolutely right to go toe-to-toe with President George Bush and his administration over American failure to abide by the NAFTA panel ruling against it on the softwood lumber issue. The panel decision was unanimous. Three other panels have ruled the same way on the same issue.

Even The Wall Street Journal, usually a cheerleader for Bush, believes Washington should pay back the $5 billion it has collected in special charges on our lumber.

In economic terms, the lumber issue isn't that big a deal. Despite the discriminatory treatment, we're still selling a lot of the stuff across the border. But ignoring international law and thereby putting the NAFTA trade pact at risk is a very big deal indeed.

The best measure of how big a deal this is is that Americans, themselves, are getting nervous about their own behaviour.

On a trip to London last week, the State Department's legal counsel John Bellinger told reporters, "We are very interested in countering this perception that the U.S. doesn't have regard for international law." Earlier, Bellinger had said the same thing to the judges of the International Court of Justice at the Hague.

Bellinger's problem — and that of the U.S. in terms of its image around the world — is that "perception" is reality.

Thus, in Sunday's New York Times, columnist Nicholas Kristof wrote that, "The Bush administration's campaign to bully a poor country (by cutting off some aid) over the (International Criminal) court is cultivating more ill will toward the U.S. than extremists ever could have."

Bellinger himself had a hard time in London coming up with any significant current examples of the U.S. implementing the spirit and letter of international agreements. But, and this is a big but, "U.S. Bad" doesn't mean "China Good."

Of course, we should sell our logs and rocks to China, or to anybody. With the tar sands, though, there is the embarrassing fact that digging out the oil from it does more to heat the globe than any other oil project, by far.

But the notion of China as an alternative trade partner to the U.S. is pure fantasy. In fact, a double fantasy.

As trade partners go, China would make the U.S. look like a patsy.

Brazil, which entered into a much-touted, special trade agreement with China, is now going through an agonizing rethink because so few of the agreed return benefits (investments, infrastructure projects) have come through.

Also, for whatever we would get, we'd find ourselves paying a political surcharge. The surcharge of silence about China's repressive, authoritarian regime.

There'd be more than silence in the equation. The Chinese industrial and commercial system remains comprehensively corrupt. Bribes paid over there — as they have to be to get almost anything done — will come back here, in one way or another.

In the immortal words of the otherwise forgotten Social Credit leader Robert Thompson, "The Americans remain our best friends, whether we like it or not."

It would help, though, if they tried a bit harder to be a bit friendlier.



Richard Gwyn's column appears Tuesdays and Fridays. gwynR@sympatico.ca.

Posted by Arthur Caldicott on October 18, 2005

October 17, 2005

Fossil fuels are here to stay, says expert

Gordon Jaremko
CanWest News Service
Monday, October 17, 2005

Doom-and-gloom forecasts for gas, coal and oil are wrong, says SFU prof in a new book

EDMONTON -- Reports of the death of fossil fuels are greatly exaggerated, a prominent Vancouver scholar and public servant has concluded after a research odyssey burned off his preconceptions and academic training about energy.

"They call me the fossil fool now," Mark Jaccard joked recently between lectures he was giving in Edmonton.

But the Simon Fraser University professor and former chief executive officer of the British Columbia Utilities Commission was only half-kidding.

Cambridge University Press in England will this fall publish a book by Jaccard that breaks away from a recent gush of literature claiming current supply scares, price spikes and environmental resistance are the death rattles of oil, natural gas and coal. The volume will be titled Sustainable Fossil Fuels: The Unusual Suspect in the Quest for Clean and Enduring Energy.

It has been assumed for decades societies will gradually switch to renewable energy forms and wean themselves off oil, gas, coal and atomic power, Jaccard said.

But he concluded the assumptions he was taught were wrong. His forthcoming book forecasts that oil, gas and coal will still satisfy 58 per cent of world energy needs in the year 2100.

That market share will be down from today's 85 per cent but still require high production because total global consumption of all energy forms will grow as developing countries strive for North American-level living standards.

That includes China, whose seemingly endless industrial and transportation needs will see it battle the United States and other trading partners for investment opportunities in the Canadian oilsands. China now buys most of its imported oil from the Middle East, Indonesia and Africa. It is also expanding its presence in central Asia, a rapidly growing energy producing region, as well as South America.

Heating, cooking, transportation and electric power are bound to become steadily more expensive, Jaccard said. Costlier sources of fossil fuels will be tapped. Producers and consumers alike will face stricter environmental standards. Expensive alternatives such as wind and solar power will spread. A revival of atomic power awaits regions with the greatest need for new supplies.

But obtaining energy to maintain current living standards, and support new services and gadgets requiring energy, will not bankrupt North American consumers, Jaccard predicted.

By the end of this century energy will burn up about eight per cent of family budgets, he calculated. That will be up from today's six per cent but still barely half the 16 to 20 per cent of Canadian and American household money, work and time that went into gathering and preparing fuel and tending primitive appliances in 1900, Jaccard said.

Periodic cost increases above the long-range average trends are built into the global energy market and play a role in stimulating economic evolution, he suggested.

Current steep oil prices, for instance, are part of a natural trend to replace dwindling traditional supplies from conventional wells with costlier new sources such as Alberta's oilsands.

"Prices will jump around," Jaccard said. But governments can help make energy changes easier by introducing policies that help markets adapt to changing needs and technologies, he added.

For example, clear, long-range emissions-reduction targets should be set by climate change policy makers so industry can engineer new projects to make steady improvements, he said.

He urged Canada to try a system of "niche market regulation'' used in California. The state stimulated cuts in auto emissions and helped spawn hybrid electric and gasoline cars by requiring manufacturers to make small fractions of their fleets comply with low- to zero-pollution targets, Jaccard said.

CALCULATING THE TRUE COST OF ENERGY PRODUCTION

It takes energy to make energy -- and a lot of it -- in the northern Alberta oil sands.

Bitumen projects will burn 1.01 billion cubic feet of natural gas a day by late 2006, the National Energy Board says in a new forecast. That will be a 40-per-cent increase from 2004 and about twice as much gas as all the homes in Alberta burn.

The growth in gas consumption roughly matches the pace of increases in oilsands output, which is forecast to hit 1.2 million barrels per day by late 2006.

The consumption growth rate is expected to moderate as new projects adopt emerging methods of cutting their use of gas -- or making their own fuel -- for heat-driven bitumen extraction systems, synthetic-oil upgrading and power generation.

But energy will remain a big oilsands expense. FirstEnergy Capital Corp. forecasts that as production grows to two million barrels daily by 2010, annual operating costs will more than double to about $10 billion from $4 billion in 2004 with increasingly expensive gas driving much of the rise.

The Alberta government will pay a share of the tab. Oilsands royalties are collected on the net value of production to the industry, after subtracting expenses.

Ran with fact box "Calculating the True Cost of Energy Production", which has been appended to the end of the story.

© The Vancouver Sun 2005

Posted by Arthur Caldicott on October 17, 2005

October 15, 2005

Kitimat selected for Enbridge's Gateway Pipeline

Kitimat, B.C., Selected as End-Site Location for Enbridge's Gateway Project
Enbridge news release, 14-Oct-2005
$4-billion pipeline to land in Kitimat
Scott Simpson, Vancouver Sun, 15-Oct-2005

sqwalk.com
COMMENT:Good news in Kitimat; Disappointment in Prince Rupert, the other potential terminal location for the proposed Gateway Pipeline, which - if built - will transport oil from Alberta's oilsands to China and other markets, including, possibly, the US. A Chinese company has already secured half the capacity of the Gateway project. (link)

Dashed hopes at Fortune Minerals, as well, which appears to have won a quiet move by the federal government to sell Ridley Island Terminals near Prince Rupert (link). Revenues from the Gateway project will not now be part of Ridley Island's future.

It won't look like boom town in Kitimat for a while, as the Methanex plant closes on November 1 and 125 or so people are out of jobs. But EnCana has an option on the Methanex site for a "soluent" terminal facility (link), and Gateway is actually two pipelines, the oil export pipe, and a "condensate" import pipe. Even if the EnCana project and the Enbridge condensate project eventually become just one project, Kitimat is going to be busy. Then there's the Galveston Kitimat LNG project on the books as well, proceeding through a BC environmental assessment with little fanfare. (link)

But the big issue: oil tankers in Douglas channel. There's some understanding that a tanker moratorium is in place on the coast. Does it apply to the oil tankers that will be taking Gateway oil to China and elsewhere? What do the Haisla and Haida think of this? What do the salmon think of this?




Kitimat, B.C., Selected as End-Site Location for Enbridge's Gateway Project

NEWS RELEASE TRANSMITTED BY CCNMatthews Printable Version
FOR: Enbridge Inc.

TSX SYMBOL: ENB
NYSE SYMBOL: ENB

OCT 14, 2005 - 12:30 ET

CALGARY, ALBERTA--(CCNMatthews - Oct. 14, 2005) - Enbridge Inc. (TSX:ENB) (NYSE:ENB) is pleased to announce that after months of fieldwork, Kitimat, British Columbia, has been selected as the end-site location for the proposed Gateway Project. Key factors in the decision to select Kitimat were the deepwater port and abundant industrial land.

"Enbridge is very excited about the Gateway Project and what it will mean to the North Coast of British Columbia," said Art Meyer, President of Gateway Pipeline Inc. "We believe this project will bring economic benefits not only to Kitimat, but the entire region during both the construction and operation phases."

The Gateway Project is estimated to cost approximately $4 billion and will consist of a petroleum export pipeline and a condensate import pipeline along the same right-of-way, and a marine terminal. The pipeline will run from Strathcona County, near Edmonton, to Kitimat.

"The Gateway Project is good news for Kitimat and will provide many opportunities for our community in the future," said Mayor Richard Wozney of the District of Kitimat. "We have worked hard over the last number of months to attract Enbridge as a corporate citizen and look forward to working with them."

The Gateway Project is expected to generate thousands of direct jobs during construction and up to 75 permanent jobs for the operation of the pipeline, marine terminal and related facilities.

Over the past three years Enbridge has met with communities and First Nations, interest groups and governments to discuss the Gateway Project and is committed to open and transparent consultation about the project.

Once commercial certainty and regulatory approval are achieved for the Gateway Project, Enbridge anticipates starting construction in 2008, with the pipeline being operational in 2010.

Gateway Pipeline Inc. is a wholly owned affiliate of Enbridge Inc. that has been created to manage the development of the Gateway Pipeline.

Enbridge Inc., a Canadian company, is a leader in energy transportation and distribution in North America and internationally. As a transporter of energy, Enbridge operates, in Canada and the U.S., the world's longest crude oil and liquids transportation system. The Company also has international operations and a growing involvement in the natural gas transmission and midstream businesses. As a distributor of energy, Enbridge owns and operates Canada's largest natural gas distribution company, and provides distribution services in Ontario, Quebec, New Brunswick and New York State. Enbridge employs approximately 4,400 people, primarily in Canada, the U.S. and South America. Enbridge's common shares trade on the Toronto Stock Exchange in Canada and on the New York Stock Exchange in the U.S. under the symbol ENB. Information about Enbridge is available on the Company's web site at www.enbridge.com.

Certain information provided in this news release constitutes forward-looking statements. The words "anticipate", "expect", "project", "estimate", "forecast" and similar expressions are intended to identify such forward-looking statements. Although Enbridge believes that these statements are based on information and assumptions that are current, reasonable and complete, these statements are necessarily subject to a variety of risks and uncertainties pertaining to operating performance, regulatory parameters, weather, economic conditions and commodity prices. You can find a discussion of those risks and uncertainties in our Canadian securities filings and American SEC filings. While Enbridge makes these forward-looking statements in good faith, should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary significantly from those expected. Enbridge assumes no obligation to publicly update or revise any forward-looking statements made herein or otherwise, whether as a result of new information, future events or otherwise.

BACKGROUND INFORMATION ON THE ENBRIDGE GATEWAY PROJECT

- The Gateway Project, estimated to cost approximately $4 billion, involves the proposed development of two new pipelines, a new marine terminal, tankage, pumping stations and related facilities.

- The Gateway Project will run from Strathcona County near Edmonton to Kitimat, British Columbia.

- Key factors in the decision to select Kitimat as the end-site location for the pipeline were the deep-water port and abundant industrial land.

- The pipeline will be 1,200 kilometres in length.

- The petroleum export pipeline will be 30-inches in diameter and designed to move an average of 400,000 barrels per day.

- The condensate import pipeline will be 20-inches in diameter and designed to move an average of 150,000 barrels per day.

- Condensate is a by-product of natural gas production and is used as feedstock to oil refineries but its primary use in Western Canada is to dilute heavy oil for easier transport by pipeline.

- Certified marine tankers will be used to either import condensate or export petroleum. The marine terminal will include tankage, emergency response equipment, tanker births and other related facilities.

- Enbridge anticipates filing the National Energy Board application for the Gateway Project in April 2006, beginning construction in 2008 and having the pipeline operational in 2010.

- The socio-economic benefits during construction of the project are estimated at $1.52 billion in BC and $1.26 billion in Alberta.

- During the operation of the Gateway Project, the socio-economic benefits are estimated at $107 million per year in BC and $60 million per year in Alberta.

- The Gateway Project is an important part of Canada's energy future and will help ensure there is enough capacity to transport new oil expected from Canada's oil sands in the years to come.

FOR FURTHER INFORMATION PLEASE CONTACT: Enbridge Inc.
Jim Rennie
News media:
(403) 231-3931
Email: jim.rennie@enbridge.com

or

Enbridge Inc.
Bob Rahn
Investment community:
(403) 231-7389
Email: bob.rahn@enbridge.com
Website: www.enbridge.com

or

NATIONAL Public Relations
Michelle Ward
(604) 970-5901
Email: mward@national.ca

TOP



$4-billion pipeline to land in Kitimat

GATEWAY I Enbridge project means thousands of jobs for northwest B.C.

Scott Simpson
With files from Leanne Ritchie, Prince Rupert Daily News
Vancouver Sun
October 15, 2005

The final decision on a Pacific terminal for Enbridge's $4-billion Gateway pipeline project came down to money, with Kitimat announced Friday as the Calgary company's preferred location.

The sprawling pipeline project, slated to span some 1,200 kilometres from Edmonton to the Pacific Ocean, is expected to create a mini-job boom and economic spinoffs worth about $1.5 billion for the B.C. economy.

A route to Prince Rupert would have cost at least $500 million more than Kitimat, although an Enbridge spokesman said communities across northern British Columbia will benefit from the project.

The company expects unspecified "thousands" of jobs during a two-year construction phase and about 75 permanent jobs including about 35 at the terminal in Kitimat.

Gateway Pipeline Inc. president Art Meyer said economic spinoffs will include materials purchases, construction jobs and indirect employment.

The company hopes to gain all regulatory approvals by 2007 and have the pipeline operational by 2010.

"Certainly this is great news for Kitimat, and Terrace, and the region," said Kitimat Mayor Richard Wozney, who was in Terrace for the announcement.

"We welcome this industrial investment. I think it will be a great addition to our community and to our private port operation in Kitimat.

"This will add to our reputation as being somewhat of an energy hub and a petrochemical centre. We hope they will get through all of their regulatory approvals, start construction in 2008 and be in operation in 2010."

Gateway involves twin pipelines between Kitimat and Edmonton -- a condensate line taking oil-thinning materials east from a terminal in Kitimat to oil processing facilities in Alberta, and a larger petroleum line carrying crude oil to the West Coast.

The project must still address regulatory and market hurdles -- including signing up enough pipeline customers to make the lines economic.

Meyer noted during a teleconference with reporters that the proposed condensate line already has strong support from shippers.

Later this month Enbridge will embark on an "open season" for expressions of interest from shippers for the petroleum line -- which passed a major milestone earlier this year when PetroChina signed a memorandum of understanding for half its capacity.

"We have decided on Kitimat as the end point for the pipeline. That's really been based on economic criteria, as well as the deep water port and industrial land that's available in the area. But the primary factor was economic and a business case determined Kitimat was the most appropriate choice," Meyer said.

"With that said, we certainly do see this project being an economic benefit to the entire region and we've been pleased to work with all communities in the region to pursue that.

"We are looking forward to working hard over the next while to make this vision a reality, both through the phase in which we will be confirming commercial certainty, then through the regulatory approval process, and finally into construction."

Meyer said the pipeline route to Prince Rupert was longer, but it would have meant a shorter travel time for tankers plying the route from a B.C. terminal to potential markets in California and Asia.

TOP

Posted by Arthur Caldicott on October 15, 2005

The Other Hurricane
Has the Age of Chaos Begun?

By Mike Davis
TomDispatch.com
October 6, 2005

The genesis of two category-five hurricanes (Katrina and Rita) in a row over the Gulf of Mexico is an unprecedented and troubling occurrence. But for most tropical meteorologists the truly astonishing "storm of the decade" took place in March 2004. Hurricane Catarina -- so named because it made landfall in the southern Brazilian state of Santa Catarina -- was the first recorded south Atlantic hurricane in history.

Textbook orthodoxy had long excluded the possibility of such an event; sea temperatures, experts claimed, were too low and wind shear too powerful to allow tropical depressions to evolve into cyclones south of the Atlantic Equator. Indeed, forecasters rubbed their eyes in disbelief as weather satellites down-linked the first images of a classical whirling disc with a well-formed eye in these forbidden latitudes.

In a series of recent meetings and publications, researchers have debated the origin and significance of Catarina. A crucial question is this: Was Catarina simply a rare event at the outlying edge of the normal bell curve of South Atlantic weather -- just as, for example, Joe DiMaggio's incredible 56-game hitting streak in 1941 represented an extreme probability in baseball (an analogy made famous by Stephen Jay Gould) -- or was Catarina a "threshold" event, signaling some fundamental and abrupt change of state in the planet's climate system?

Scientific discussions of environmental change and global warming have long been haunted by the specter of nonlinearity. Climate models, like econometric models, are easiest to build and understand when they are simple linear extrapolations of well-quantified past behavior; when causes maintain a consistent proportionality to their effects.

But all the major components of global climate -- air, water, ice, and vegetation -- are actually nonlinear: At certain thresholds they can switch from one state of organization to another, with catastrophic consequences for species too finely-tuned to the old norms. Until the early 1990s, however, it was generally believed that these major climate transitions took centuries, if not millennia, to accomplish. Now, thanks to the decoding of subtle signatures in ice cores and sea-bottom sediments, we know that global temperatures and ocean circulation can, under the right circumstances, change abruptly -- in a decade or even less.

The paradigmatic example is the so-called "Younger Dryas" event, 12,800 years ago, when an ice dam collapsed, releasing an immense volume of meltwater from the shrinking Laurentian ice-sheet into the Atlantic Ocean via the instantly-created St. Lawrence River. This "freshening" of the North Atlantic suppressed the northward conveyance of warm water by the Gulf Stream and plunged Europe back into a thousand-year ice age.

Abrupt switching mechanisms in the climate system – such as relatively small changes in ocean salinity -- are augmented by causal loops that act as amplifiers. Perhaps the most famous example is sea-ice albedo: The vast expanses of white, frozen Arctic Ocean ice reflect heat back into space, thus providing positive feedback for cooling trends; alternatively, shrinking sea-ice increases heat absorption, accelerating both its own further melting and planetary warming.

Thresholds, switches, amplifiers, chaos -- contemporary geophysics assumes that earth history is inherently revolutionary. This is why many prominent researchers -- especially those who study topics like ice-sheet stability and North Atlantic circulation -- have always had qualms about the consensus projections of the Intergovernmental Panel on Climate Change (IPCC), the world authority on global warming.

In contrast to Bushite flat-Earthers and shills for the oil industry, their skepticism has been founded on fears that the IPCC models fail to adequately allow for catastrophic nonlinearities like the Younger Dryas. Where other researchers model the late 21st-century climate that our children will live with upon the precedents of the Altithermal (the hottest phase of the current Holocene period, 8000 years ago) or the Eemian (the previous, even warmer interglacial episode, 120,000 years ago), growing numbers of geophysicists toy with the possibilities of runaway warming returning the earth to the torrid chaos of the Paleocene-Eocene Thermal Maximum (PETM: 55 million years ago) when the extreme and rapid heating of the oceans led to massive extinctions.

Dramatic new evidence has emerged recently that we may be headed, if not back to the dread, almost inconceivable PETM, then to a much harder landing than envisioned by the IPCC.

As I flew toward Louisiana and the carnage of Katrina three weeks ago, I found myself reading the August 23rd issue of EOS, the newsletter of the American Geophysical Union. I was pole-axed by an article entitled "Arctic System on Trajectory to New, Seasonally Ice-Free State," co-authored by 21 scientists from almost as many universities and research institutes. Even two days later, walking among the ruins of the Lower Ninth Ward, I found myself worrying more about the EOS article than the disaster surrounding me.

The article begins with a recounting of trends familiar to any reader of the Tuesday science section of the New York Times: For almost 30 years, Arctic sea ice has been thinning and shrinking so dramatically that "a summer ice-free Arctic Ocean within a century is a real possibility." The scientists, however, add a new observation -- that this process is probably irreversible. "Surprisingly, it is difficult to identify a single feedback mechanism within the Arctic that has the potency or speed to alter the system's present course."

An ice-free Arctic Ocean has not existed for at least one million years and the authors warn that the Earth is inexorably headed toward a "super-interglacial" state "outside the envelope of glacial-interglacial fluctuations that prevailed during recent Earth history." They emphasize that within a century global warming will probably exceed the Eemian temperature maximum and thus obviate all the models that have made this their essential scenario. They also suggest that the total or partial collapse of the Greenland Ice Sheet is a real possibility -- an event that would definitely throw a Younger Dryas wrench into the Gulf Stream.

If they are right, then we are living on the climate equivalent of a runaway train that is picking up speed as it passes the stations marked "Altithermal" and "Eemian." "Outside the envelope," moreover, means that we are not only leaving behind the serendipitous climatic parameters of the Holocene -- the last 10,000 years of mild, warm weather that have favored the explosive growth of agriculture and urban civilization -- but also those of the late Pleistocene that fostered the evolution of Homo sapiens in eastern Africa.

Other researchers undoubtedly will contest the extraordinary conclusions of the EOS article and -- we must hope -- suggest the existence of countervailing forces to this scenario of an Arctic albedo catastrophe. But for the time being, at least, research on global change is pointing toward worst-case scenarios.

All of this, of course, is a perverse tribute to industrial capitalism and extractive imperialism as geological forces so formidable that they have succeeded in scarcely more than two centuries -- indeed, mainly in the last fifty years -- in knocking the earth off its climatic pedestal and propelling it toward the nonlinear unknown.

The demon in me wants to say: Party and make merry. No need now to worry about Kyoto, recycling your aluminum cans, or using too much toilet paper, when, soon enough, we'll be debating how many hunter-gathers can survive in the scorching deserts of New England or the tropical forests of the Yukon.

The good parent in me, however, screams: How is it possible that we can now contemplate with scientific seriousness whether our children's children will themselves have children? Let Exxon answer that in one of their sanctimonious ads.

Mike Davis is the author of many books including City of Quartz, Dead Cities and Other Tales, and the just published Monster at Our Door, The Global Threat of Avian Flu (The New Press) as well as the forthcoming Planet of Slums (Verso).

Copyright 2005 Mike Davis

This was originally published as a tomgram at TomDispatch.com
"a regular antidote to the mainstream media"

Posted by Arthur Caldicott on October 15, 2005

October 13, 2005

Martin dismisses criticism from Klein
that oil is Alberta's to sell

Greg Bonnell
Canadian Press
Thursday, October 13, 2005

sqwalk.com
COMMENT: Albertans are as intelligent and industrious as other Canadians. But that's it. They're not smarter than the rest of us. They don't work harder than the rest of us. They're not more deserving or entitled than other Canadians. But they're a hell of a lot richer than the rest of us.

Albertans don't pay provincial sales tax. They don't have a provincial debt. They're constant contributors to national accounts. Lucky them. And that's all it is. Luck of geographical placement.

Yet Ralph Klein gloats about his province's economy as if he made it all happen, as if Albertans earned the riches. His province is not rich because of special business acument. It's because they "have" most of Canada's oil and gas. Alberta would be debt free and Klein's voters rich, even if he were permanently pissed to the eyeballs and unable to stand up between elections. What's fair or just about that?

By today's rules, what's under Alberta isn't Canada's oil and gas. It is Alberta's. (Actually, it belongs now to whatever corporations Alberta has sold the rights to. Alberta keeps some, in the form of royalties, but most of it is handed over to the corporations. Corporations which are rolling in unprecedented profits. Undeserved, unearned profits. But that's another rant.)

This is not right. It's time to rewrite the deal. Canada's environment belongs to all of us, and it's our national duty to protect it. Canada's natural resources should belong to all of us, and it's time to change the deal. Time for Canada to stand up to Alberta's bullying and claim substantially more of the benefits for all Canadians of all that fossil fuel wealth.

Paul Martin is playing that old electoral strategy that makes the US a foe. George Bush makes that easy to do right now. "BC vs Ottawa" has been a winning gambit for decades. Alberta has played the same game against Ottawa at least ever since Trudeau's National Energy Program in 1980.

Martin has nothing to lose in Alberta, and plenty to win in the rest of the country. Maybe it's time to get ugly with Klein.

I can already hear the whining about "National Energy Program II" starting in Alberta and BC. Yep.

And how to stay the course when those bloated oil and gas corporations turn their bankrolls to bringing down a government.
sqwalk.com

OWEN SOUND, Ont. (CP) - Prime Minister Paul Martin was on the defensive Wednesday about his government's role in promoting Canada's commodities, a day after Alberta Premier Ralph Klein told Ottawa to keep its hands off of his province's resources.

"Of course the federal government has a role in trying to open markets, new markets, and we will continue to do that," Martin told reporters in Owen Sound, Ont., where he met with community leaders. He was responding to criticism from Klein, who has pointedly said his province's petroleum isn't the prime minister's to sell.

"I'm not trying to pick a fight with anybody. I just want the Americans to live up to the terms of the NAFTA agreement, both in letter and spirit," Martin later told reporters at an event in Petersburg, Ont., near Kitchener.

Martin slammed the U.S. for continuing to impose duties on Canadian softwood lumber, while also hinting that countries such as China and India are becoming a more lucrative market for Canadian oil that the U.S. needs.

Washington is refusing to recognize a trade panel's final ruling that said U.S. duties on Canadian softwood are unwarranted.

Martin and other government leaders have been careful not to directly link the softwood conflict with punishment for the United States on other trade fronts.

But speaking to a Wall Street audience last week, Martin warned that the softwood dispute is threatening the integrity of the continental trade pact and future economic relations.

Martin said Wednesday that business leaders have encouraged his government to develop more markets for a range of Canadian commodities.

"That should not be a disagreement with Mr. Klein. In fact, I would have expected Mr. Klein to really support our position, given the importance of his own cattle producers," he said.

Klein said Wednesday in Edmonton that he in fact does support Martin trying to open new markets for Canadian products.

"I think that what we have here is a media thing. I don't care if he wants to sell and promote our oil but it's not his to sell. That is the only point I was trying to make."

The Opposition, meanwhile, renewed calls for Martin to get tough with U.S. President George W. Bush to solve the longstanding softwood lumber problem.

Conservative Leader Stephen Harper said the United States needs to be reminded of its legal obligation to comply with NAFTA rulings.

"If the U.S. has some difficulty with that . . . then this is going to have repercussions," he told reporters in Vancouver Wednesday.

The U.S. has collected $5 billion in duties on softwood imports since May 2002, hurting Canadian companies which export lumber south of the border.

© The Canadian Press 2005

Posted by Arthur Caldicott on October 13, 2005

October 12, 2005

Secret firm backs bid for Ridley Terminals

Mining officials slam Ridley sale
Peter O'Neil, Vancouver Sun, 10-Oct-2005
B.C. coal miners object to terminal plan
Peter Kennedy, Globe and Mail, 11-Oct-2005
Fortune responds to Vancouver Sun article regarding Ridley Terminals Inc.
Fortune Minerals news release, 11-Oct-2005
Secret firm backs bid for Ridley Terminals
Peter O'Neil, Vancouver Sun, 12-Oct-2005
Shippers have 'huge concern' about Ottawa's handling of coal terminal
Don Whiteley, Vancouver Sun, 12-Oct-2005
Bidder offered a fraction of Ridley's cost
Peter O'Neil, Vancouver Sun, 24-Oct-2005

sqwalk.com
COMMENT: What a wierd situation this is, in which corporations are whining to government to interfere on their behalf against other corporations. Big guys whining about little guys, no less. These are corporations which have invested a fortune, so to speak, in putting governments in place which generally march in time to the hands-off tune of these same corporations. Corporations which were upstaged by Fortune Minerals, not quite one of their own.

BC's other coal port, Westshore Terminals at Roberts Bank had revenues last year of some $127 million dollars. Net earnings were $48 million. In the first six months of 2005, revenues of the Westshore Terminals Income Trust jumped to $76 million and net earnings of $27 million. This is no penny-ante operation ekeing out a tough living. It's no wonder Teck Cominco et al want a piece of the Ridley Terminals action now that the coal business, especially, is booming in the north.

Westshore Terminals is owned by BC's own King Midas, Jim Pattison. Over 90% of Westshore's business is derived from a comfortable relationship with the "Coal Partnership" - essentially Teck Cominco, Fording (with substantial Teck Cominco ownership) and Elk Valley Coal Corporation (which is largely a Teck Cominco and Fording entity).

One might ask, however, why the federal government was okay with operating the Ridley Terminal for the years it was losing money, but feels it necessary to privatize the thing just when it looks like it is poised to make substantial profits - and on highly suspect giveaway terms.
sqwalk.com



Mining officials slam Ridley sale


Association says Prince Rupert facility shouldn't go to Ontario firm

Peter O'Neil
Vancouver Sun
Monday, October 10, 2005

162619-54076.jpg
CREDIT: Glenn Baglo, Vancouver Sun Files
Ridley Terminals coal-loading facility near Prince Rupert.

OTTAWA -- The federal and B.C. governments, despite touting a "Pacific Gateway" initiative to help Canada exploit booming Asian markets, are acting against the interests of Western Canadian resource exporters by planning to sell off the Ridley Terminals facility to an Ontario-based junior mining firm, says a mining industry official.

The Mining Association of B.C. said Transport Minister Jean Lapierre should take a second look at a proposal by five resource companies from Vancouver and Calgary, including mining giant Teck Cominco, to buy and operate the Ridley coal shipping facility in Prince Rupert.

Association president Michael McPhie said the coalition will ensure that Canadian shippers are charged shipping fees low enough to allow them to compete with Australian firms.

McPhie said he realizes that Lapierre is anxious to get rid of money-losing Ridley, which cost taxpayers $250 million in the early 1980s and is believed to be on the market for a tiny fraction of that price.

"But I don't think expediency should be a driver for making good or bad decisions," he said, adding that Lapierre's move contradicts political promises to make it easier for Canada to trade with China and India.

Lapierre has confirmed that Fortune Minerals Ltd., a London, Ont.-based mining firm with no revenue-producing properties, is the front-runner to acquire the Crown corporation, which he said is costing taxpayers $500,000 a month in subsidies. Fortune stresses that it has $20 million in cash and three mining properties, including one coal project in northern B.C., nearing production stage.

But a group of five resource firms based in B.C. and Alberta say the federal government should re-open bidding to allow them to buy and operate Ridley as a kind of co-operative that is focused on keeping shippers' costs down.

The group is called the Ridley Shippers Coalition and is made up of Teck Cominco, Northern Energy and Mines, and Western Canadian Coal, all based in Vancouver. Sumitomo Canada, a subsidiary of a giant Japanese firm, and Grand Cache Coal, both based in Calgary, are also part of the coalition.

Fortune president Robin Goad said Friday he will issue a news release before markets open Tuesday to confirm The Vancouver Sun's disclosure that his company, along with an unidentified corporate partner, are poised to acquire Ridley.

He ridiculed the coalition's position that the terminal should be shipping resources at below-market prices.

"It's nonsense. How many businesses operate not-for profit?" Goad said.

Goad also confirmed that he asked Lapierre to prevent Ridley management from signing long-term contracts before the sale is complete.

The unusual move by Lapierre, who had cabinet issue an order under the Financial Administration Act, was necessary because Ridley wanted to sign contracts -- and hand over some of its assets -- at below-market costs.

He said some of Ridley's putative customers were members of the same coalition trying to buy the Crown corporation.

The federal government is preparing legislation and budgeting at least $500 million as a down payment to advance the gateway concept that's aimed at improving port, road and rail infrastructure on the West Coast.

"It makes geographic sense that British Columbia become the nexus of trans-Pacific trade, the gateway to Asia," Prime Minister Paul Martin said in a speech earlier this month, echoing early statements from B.C. Premier Gordon Campbell.

"But make no mistake: the further development of the Pacific Gateway will benefit not only B.C., and not only the West, but all of Canada. Indeed, when we say that Canada is much greater than the sum of its parts, this is the kind of example we can point to."

The B.C. government said earlier this year it would consider buying Ridley, but recently wrote to Lapierre saying it is satisfied with Ottawa's plans to privatize the facility.

Lapierre said the provincial government is satisfied that a sale to Fortune wouldn't be contrary to the interests of the resource industry.

poneil1@hotmail.com

© The Vancouver Sun 2005

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B.C. coal miners object to terminal plan


Ottawa names Ontario firm as preferred bidder for sole operator of gateway

By PETER KENNEDY
Globe and Mail
Tuesday, October 11, 2005


VANCOUVER -- British Columbia's mining industry is urging Ottawa to reconsider a process that could make a small Ontario company the sole operator of a B.C. shipping terminal that is emerging as a key gateway for Asia-bound coal shipments from Western Canada.

The plea comes after the federal Ministry of Transport named Fortune Minerals Ltd. of London, Ont., as the preferred bidder among the roughly 60 companies that expressed interest in buying the Ridley Island coal terminal at Prince Rupert.

B.C. Mining Association president Michael McPhie said rising coal prices and the prospect of soaring port shipments in the next few years has made Ridley a "strategically important asset" for the province's resource sector.

"Having a single operator running the terminal with a profit motive could seriously comprise access in the future," he said.

Mr. McPhie said the industry wants Ottawa to consider an alternative proposal from a coalition of northwestern coal producers, including Teck Cominco Ltd., Northern Energy and Mining Inc. and Western Canadian Coal Corp.

Ridley Terminals Inc. president Greg Slocombe agrees that Ottawa should consider the coalition's plan to run the terminal in a co-operative environment where all of the members share in the costs and the risks. "Why not put it in the hands of those who are going to own and operate it as a cost centre," Mr. Slocombe said.

By making the terminal available to the industry at large, he said Ottawa can help the Canadian coal sector compete with rivals in Australia that run their terminals as a co-operative and benefit from closer proximity to sea ports.

The controversy over ownership has arisen two years after Ottawa put the terminal up for sale. At that time, the Prince Rupert region was facing the economic consequences of its declining fishing and forestry sectors.

But because of rising coal prices and the development of new mines in B.C. and Alberta, coal shipments through Prince Rupert are expected to soar in the next few years, reaching up to eight million tonnes annually by 2008, compared with 1.3 million last year, according to Ridley Terminals estimates.

Vancouver-based Hillsborough Resources Ltd. expects to boost shipment levels after signing a preliminary deal to develop a basket of B.C. coal properties in a joint venture with the coal division of Anglo American PLC of South Africa.

"We are aghast that the federal government would consider a private company as the sole owner of that facility," Hillsborough president David Slater said.

A spokeswoman for federal Transport Minister Jean Lapierre confirmed that ministry officials are in talks with Fortune Minerals, which was named the primary bidder following a request-for-proposals process that she described as both "legal and open.'' But she said no final decision on who gets to operate the terminal will be made until the company's proposal is reviewed by a cabinet committee.

In an interview, Fortune Minerals president Robin Goad said fears that his company will limit access to the terminal, if it is allowed to buy the site, are "groundless."

"As part of our proposal we are providing guarantees to the federal and [B.C.] provincial governments that we will provide free and open access to all bulk shippers on a commercially competitive basis," he said. "We have guaranteed to maintain the facility as a bulk handling terminal with priority being given to coal."

Fortune is a junior exploration company that is developing the Mount Klappan coal project, about 300 kilometres northeast of Prince Rupert. It is one of two partners in a private company that hopes to acquire and operate the Ridley Terminal. The other partner is a yet-to-be-named B.C. firm with significant experience in shipping and handling bulk material, Mr. Goad said.

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Fortune responds to Vancouver Sun article regarding Ridley Terminals Inc.

News Release
Fortune Minerals
10/11/05


Issued Capital: 34,037,573

LONDON, ON, Oct. 11, 2005 (Canada NewsWire via COMTEX) --
Fortune Minerals Limited (TSX-FT) is responding to an article that appeared last Friday in the Vancouver Sun newspaper, which quoted federal Transport Minister, Mr. Jean Lapierre as indicating that Fortune has been selected as the primary bidder for Ridley Terminals Inc. (RTI), a Crown Corporation that owns and operates the Ridley Island coal terminal in the City of Prince Rupert, British Columbia. RTI operates on lands under lease from the Prince Rupert Port Authority, which is also a Federal Crown Corporation.

Fortune confirms that it is a shareholder of Northwest Bulk Terminals Inc. (NBTI), a private company that has submitted a proposal to Transport Canada (TC) to purchase the assets of RTI pursuant to a tendered "Request for Proposal" process. The other shareholder in NBTI is a British Columbia company with expertise in handling bulk materials. NBTI is in discussions with representatives of TC with respect to such a purchase. Completion of the proposed transaction would be subject to various conditions.

Prince Rupert has an ice-free, deepwater harbour and is the closest port in North America to Asia in terms of sailing time. It is also a western terminus for the Canadian National Railway Company. The coal terminal was built by the federal government in the 1980's to load and export coal from the past producing Quintette and Bullmoose coal mines in northeast British Columbia. The facility has an annual capacity of approximately 16 million tonnes.

NBTI has a business plan, which it believes will make the Ridley terminal profitable. The proposed acquisition presents a significant opportunity for Fortune to participate in Asian economic growth through this major conduit for Canadian sourced commodities. The terminal is located 330km southwest of the Company's Mount Klappan anthracite coal project, which was recently assessed in a positive, full feasibility study expected to be released shortly.

Fortune Minerals is a diversified natural resource company with seven mineral deposits and a number of exploration projects, all located in Canada. They include the Mount Klappan anthracite coal deposits in British Columbia, and the NICO cobalt-gold-bismuth deposit, the Sue-Dianne copper-silver deposit and other base and precious metals exploration projects in the Northwest Territories. Fortune is the managing partner of Formosa Environmental Aggregates Ltd., an industrial mineral company developing the Greenock high calcium limestone quarry in Ontario. Fortune Minerals is a company focussed on outstanding performance and growth of shareholder value through assembly and development of high quality mineral resource projects.

SOURCE: Fortune Minerals Limited

please contact: Fortune Minerals Limited: Robin Goad, President, Julian Kemp, Vice President, Jennifer Gauthier, Executive Assistant, Tel.: (519) 858-8188, Fax: (519) 858-8155, info@fortuneminerals.com, www.fortuneminerals.com; Renmark Financial Communications Inc.: John Boidman: jboidman@renmarkfinancial.com; Sylvain Laberge: slaberge@renmarkfinancial.com; Henri Perron: hperron@renmarkfinancial.com; Media:
Cynthia Lane: clane@renmarkfinancial.com, Tel.: (514) 939-3989, Fax: (514) 939-3717,
www.renmarkfinancial.com;

To request a free copy of this organization's annual report, please go to http://www.newswire.ca and click on reports@cnw.
Copyright (C) 2005 CNW Group. All rights reserved.

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Secret firm backs bid for Ridley Terminals



Peter O'Neil
Vancouver Sun
Wednesday, October 12, 2005

OTTAWA -- An unidentified B.C. company is backing the bid by Fortune Minerals, a small Ontario resource firm with no operating revenues, to acquire the Ridley Terminals coal-shipping facility from the federal government over the objections of the B.C. mining industry, Fortune's president said Tuesday.

"This is not an east-versus-west issue, which some people are trying to make it sound like," said Robin Goad, who added that the mystery company has experience in the area but doesn't want its identity publicized.

Fortune, in a news release Tuesday confirming The Vancouver Sun's report last week that it was the lead bidder for Ridley Terminals, said it was in fact bidding for Ridley through a private company called Northwest Bulk Terminals Inc.

"The other shareholder in NBTI is a British Columbia company with expertise in handling bulk materials," Fortune said in the release.

Goad said the company is a private firm that doesn't want its identity exposed. NBTI was incorporated last December in Ontario, and lists only two individuals connected to the company, both as administrators: Goad and Fortune chairman Georges Michel Doumet, a Vancouver businessman and president of Federal White Cement Ltd., an Ontario company.

Goad would neither confirm nor deny rumours that B.C. billionaire Jim Pattison is Fortune's NBTI partner, but Doumet said the billionaire isn't a shareholder in NBTI.

"He's not involved," Doumet said.

Pattison, who publicly declared his interest in buying the Crown corporation when the federal government began seeking buyers in 2003, is already a powerful player in the increasingly lucrative coal shipping industry.

The Jim Pattison Group is sole owner of Westshore Terminals, located at Roberts Bank near Delta. Westshore is the largest coal-handling facility on the North American west coast.

Pattison, speaking through administrative secretary Maureen Chant, said Tuesday: "We don't comment on those kinds of things."

A group of resource firms based in Calgary and Vancouver, including Teck Cominco, is lobbying the federal government to reconsider the sale to Fortune, based in London, Ont., and contemplate their bid to acquire Ridley.

The group, called the Ridley Shippers Coalition, wants to run the terminal as a kind of owners' co-operative that would charge discount fees to ship coal, sulphur, wood pellets, and other bulk commodities low enough to compete with shipper- or government-owned terminals in Australia, Canada's main competitor in Asian markets.

The Mining Association of B.C. publicly questioned federal Transport Minister Jean Lapierre last week for not considering the Western Canadian coalition's bid, noting that the federal and B.C. governments are openly pushing for ways to help exporters tap into red-hot Asian economies.

Ridley's management, described by Ridley chairman Mike Tarr as "rogue" in the eyes of the federal government, has been trying to sign long-term contracts with shippers over Lapierre's objections.

The minister took the unusual step this month of using a cabinet decree to prevent Ridley from signing deals longer than 18 months.

Lapierre needs cabinet approval before he launches full-scale negotiations to sell the facility at a price believed to be a fraction of the $250 million it cost to build in the early 1980s.

poneil1@hotmail.com

© The Vancouver Sun 2005

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Shippers have 'huge concern' about Ottawa's handling of coal terminal



Don Whiteley
Vancouver Sun
Wednesday, October 12, 2005

As the acting minister of natural resources, John McCallum, jets off to Beijing on an energy and lumber sales mission, he might want to drop in on Prince Rupert first to check out a management mess in the Ridley Island Coal Terminal.

Key to any future major sales of coal to Asian markets, this high-tech, state-of-the-art facility sits idling while Ottawa dithers over who should take it over and run it. What's worse, Transportation Minister Jean Lapierre recently issued an order preventing the current management team from signing any more contracts with shippers until the terminal's sale has been completed.

With China and others begging for coal, and coal prices at record levels, who in his right mind would stop management from doing deals? There are other potential coal suppliers in the world, and a prospective Asian buyer would move in a heartbeat if there was any whiff of turmoil over access to the coal.

As Vancouver Sun Ottawa reporter Peter O'Neil has explained in detail over the last few days, there's a very nasty catfight over the future of the facility and who will get to run it. After a bidding process that was launched three years ago, the federal government has selected a "preferred" bidder in the form of Northwest Bulk Terminals Inc. Fortune Minerals of Toronto is the only identified shareholder. Fortune has very little operating experience, but has an intriguing silent partner in this deal described only as "a British Columbia company with expertise in handling bulk materials." Jimmy Pattison maybe?

Apparently spurned in its bid to run the terminal is a shippers coalition that reads like a who's who of the mining business, including Teck Cominco, Western Canadian Coal Corp., Northern Energy and Mining Corp. -- all operating companies with oodles of experience. Backing the shippers coalition is the B.C. Mining Association, which argues that Ridley Island Coal is of such strategic importance to a number of B.C. coal producers that it shouldn't be run by one private company.

This fight will eventually result in a new owner, and whichever way it goes it should signal a new and very profitable era for a terminal that was built in the 1980s to handle the Northeast coal development, but has lost money consistently. It currently operates at only a fraction of its capacity.

But the federal government's decision to tie the hands of the current management team by prohibiting the signing of any new contracts threatens to derail the entire process.

Gary Livingstone, president of Western Canadian Coal Corp. (and a shippers coalition member), is beside himself over this move, and expressed concern over the fate now of a letter of intent he signed with Ridley for production from his company's new mine starting next July.

"The only point of that is to give a free hand to Fortune to go in there, rip up any commitments, and charge whatever they want," he said. "I recall seeing some quotes talking about the fact that the federal government admitted they directed Ridley based on a request from Fortune.

"That gives shippers like us a huge concern," he said. "We were the first ones to go through the port, and we're operating under what we believe is a long-term commitment. For them to make that statement -- we're now evaluating that to see what legal rights we have."

Livingstone said he signed a letter of intent with Ridley management a year ago and has been shipping some coal since last December.

"We're investing $300 million on a new mine we're bringing on stream next year," he said. "We're operating on the premise we have an agreement in place. If the feds do something that affects that, it will give us some very serious concerns."

Livingstone credited the current management team with doing an "outstanding job" of getting more product moving through the terminal and looking to the future. "When you read in the paper comments about 'rogue' management, it's unbelievable. To hear that from Ottawa, who are so far removed from what is happening in B.C. -- it's mindboggling."

When Fortune's silent partner is identified, it may become much clearer why Ottawa seems intent on giving the job to this small company instead of the high-powered consortium now in second place.

There is speculation that Jimmy Pattison is involved, and a Pattison spokesperson on Tuesday would neither confirm nor deny any involvement on his part. With his interest in Westshore Terminals, Pattison certainly fits Fortune's definition of a company with "expertise in handling bulk materials."

Another company mentioned as a possible partner is Salt Lake City-based Savage Companies, through its Canadian subsidiary Savage CANAC Corp. Savage operates large bulk terminals for coal, petroleum coke and sulphur in the U.S.

Savage spokesman David Wolach confirmed Savage's interest in operating the terminal, but said there was no agreement with anyone. "We've had discussions, and we're interested in participating, but nothing has been signed," he said.

But in the meantime, it seems ludicrous to handcuff an existing management team trying to drum up business for a taxpayer-owned terminal in a region of B.C. that has been depressed for more than a decade.

Ridley Terminals President Greg Slocombe says he can still accommodate growth and expansion in coal shipments on a spot basis, despite the handcuffs. But his ability to go after bulk commodities other than coal have been seriously impacted. That makes no sense whatsoever from a business perspective.

don_whiteley@telus.net

© The Vancouver Sun 2005

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Posted by Arthur Caldicott on October 12, 2005

Hunger For Natural Gas

By Stan Cox
www.alternet.org
October 12, 2005

The era of cheap natural gas, like that of cheap oil, is ending. We have barely begun to assess the drastic, worldwide changes that will ensue.

Two Gulf hurricanes and the approaching winter in the Northern Hemisphere have kept natural gas futures hovering near all-time highs. But with the accelerating depletion of reserves in North America, the intermittent gas crises we've been seeing since 2001 will start coming thicker and faster, finally merging into an era of permanent scarcity.

A chronic gap between supply and demand would mean plenty of hardship in the United States and Europe, which have come to rely on natural gas not only for heat, but increasingly for electricity generation and manufacturing. But the future looks even more grim in the global South, where the maintenance of human life itself has come to depend on the steady and reliable supply of natural gas that's needed to synthesize nitrogen fertilizer for food production.

Turn off the gas, and a lot of American families would have a hard time cooking dinner -- but a lot of families in places like Nepal and Guatemala would have nothing to cook.

Nitrogen and human existence

Crop plants assemble carbon, hydrogen, oxygen and nitrogen into proteins that are essential both to plant growth and to the diets of humans and other animals. Of those four elements, nitrogen is the one that's too often in short supply. If you see yellowish, stunted crops, whether they're in an Indiana cornfield or an Indonesian rice paddy, it's likely that you can blame it on a lack of nitrogen.

A world of 6.4 billion people, on the way to 9 billion or more, needs more protein than the planet's croplands can generate from biologically provided nitrogen. Our species has become as physically dependent on industrially produced nitrogen fertilizer as it is on soil, sunshine and water. And that means we're hooked on natural gas.

Vaclav Smil, distinguished professor at the University of Manitoba and author of the 2004 book Enriching the Earth: Fritz Haber, Carl Bosch and the Transformation of World Food Production, has demonstrated the global food system's startling degree of dependence on nitrogen fertilization. Using simple math -- the kind you can do in your head if there's no calculator handy -- Smil showed that 40 percent of the protein in human bodies, planet-wide, would not exist without the application of synthetic nitrogen to crops during most of the 20th century.

That means that without the use of industrially produced nitrogen fertilizer, about 2.5 billion people out of today's world population of 6.2 billion simply could never have existed.

If farming depended solely on naturally occurring and recycled nitrogen fertility, the planet's cropped acreage could feed only about 50 percent of the human population at today's improved nutrition levels, according to Smil. But absolute dependence on synthetic nitrogen is geographically lopsided -- it's largely in countries with a high human-cropland ratio that survival hinges on nitrogen fertilizer. This includes India, Indonesia, and China, where four in 10 human beings on Earth reside.

In contrast, those countries lucky enough to have ample cropland and relatively low population density could survive on far less synthetic nitrogen than they currently use.

The nation that ranks as the world's third biggest nitrogen fertilizer consumer could, conceivably, get by without the stuff. If that country, the United States, were to moderate its meat consumption, raise all livestock on pasture and rangeland instead of nitrogen-wasting grains, rely more on legume crops (plants like beans and alfalfa that obtain nitrogen from the air with the help of bacteria), curb waste and cut food exports, it could maintain its food supply without using any synthetic nitrogen at all, according to Smil's calculations.

The momentum of past population growth is expected to add two to four billion people to the world's population by 2050, even with concerted efforts to rein in growth. Almost all of the increase will occur in Africa, Asia, Latin America and the Middle East. That will double the demand for nitrogen fertilizer in those regions, and by that time, says Smil, 60 percent of their inhabitants will depend existentially (in the literal sense, not the philosophical one) on natural gas-derived nitrogen fertilizer.

Danger: Flammable

Ironically, in that vast volume between the earth's surface and the atmosphere's upper limits, nitrogen is the most abundant element. We're continuously bathed in nitrogen gas, which makes up 78 percent of the air we breathe. But in the air, nitrogen atoms are paired up, each atom linked to another by an extremely tight molecular bond. Those molecules can't be used by living organisms unless that bond is broken, and only a small number of single-celled species have developed a means to do that biologically.

To pry nitrogen atoms apart chemically requires intense energy; it happens, for example, around a bolt of lightning. So it was not until 1909 that humans developed an industrial-scale method, called the Haber-Bosch process after its German inventors, to reassemble nitrogen atoms into another molecule, ammonia, that is usable by crop plants.

The two essential inputs to the Haber-Bosch process are air, which is free, and natural gas, which is expensive and becoming more so. Therefore, to extend Vaclav Smil's reasoning, 40 percent (soon to be 60 percent) of the Earth's inhabitants owe their survival to natural gas, a non-renewable fossil fuel. And if Julian Darley is right, a species that can't survive without natural gas is a species in big trouble.

Darley is author of the 2004 book, "High Noon for Natural Gas," in which he argues that the era of cheap and plentiful gas, like that of cheap oil, is coming to a close. Humans began tapping the Earth's deposits of oil and natural gas a little over a century ago. We've been exhausting the planet's oil reserves more quickly than gas reserves, because oil is easier to pump, transport and use. The planet's gas endowment will last longer, but the world is now using more each year than is being discovered -- an ominous sign.

Accelerated consumption across the globe, says Darley, will continue to drive up natural gas prices, deplete reserves, and trigger chronic shortages. In a world where growing energy demand has begun to run up against environmental limits, gas is almost too good to be true, and, it seems, too good to leave in the ground. For instance:

* Countries trying to meet the greenhouse emissions limits set by the Kyoto Protocol are rapidly building natural gas-fired power plants, which emit much less carbon dioxide than do coal plants. Even in the United States, the world's number-one Kyoto deadbeat, most newly built power plants are gas-fueled, even as our domestic gas reserves dwindle.

* In response to criticism of its heavy coal burning, China intends to triple or quadruple its use of natural gas for power generation in the coming decade.

* The petroleum industry is pushing hard to build large numbers of liquefied natural gas (LNG) tankers, along with the requisite high-tech port facilities in the major producing and consuming nations. That will make it easier for a big energy-using nation like the U.S. to suck not only from gas pipelines on its own continent but from wells almost anywhere on the planet, as we currently do to feed our oil habit.

* Building and operating a global LNG system will require vast amounts of energy -- much of it supplied by gas, of course. To produce the power required to haul liquefied gas across oceans while keeping it cooled to about -260 degrees Fahrenheit, LNG tankers draw on their own cargo. And an explosion at a LNG terminal could produce a fireball a mile wide -- qualifying LNG as a potential WMD.

* The process of extracting oil from sands in the Canadian province of Alberta -- often looked to as a key new resource in a "safe" part of the world -- requires natural gas, and a lot of it. Darley predicts that if the oil sands are to satisfy even one-eighth of North America's demand, they will have to absorb a quarter to a half of Canada's natural gas production!

* Hydrogen is often hailed as a fuel of the future, but today, most hydrogen is manufactured from -- what else? -- natural gas. Hydrogen could be generated by, say, using solar energy to split water molecules, but don't count that happening on a large scale as long as gas is available. President Bush's well-hyped 2003 FreedomCar initiative relied mostly on gas-derived hydrogen.

Not everyone is as pessimistic about natural gas as is Darley. The U.S. Department of Energy, as usual, paints a much rosier picture of potential gas reserves. Vaclav Smil appears to expect future gas availability to end up somewhere between what Darley and the DOE predict. But on one point there seems to be universal agreement: Consumption of the world's natural gas will continue to accelerate, and in the rush, gas could prove even more volatile than oil, politically and economically as well as chemically.

The timetable for peak gas or plateauing natural gas production and an eventual decline is much harder to forecast it is for oil. But a perfect storm of long-term forces appears to be blowing demand in only one direction -- up -- and the greatest access to such a hard-to-transport, hard-to-store resource will likely go to those players with the most money and the strongest armies.

Why armies? Because the world's remaining natural gas reserves lie mostly in the Mideast, Central Asia and Russia, almost guaranteeing that a century of conflict and chaos lies ahead.

Natural gas reserves of the top 10 countries.

The slice of the pie labeled "Rest of World" includes a number of small countries, many of them in Africa. Their gas reserves could sponsor decades of domestic fertilizer production. But, as people from Kirkuk to Caracas to the Niger Delta can tell you, fossil fuel reserves also can attract a lot of unwelcome attention from more powerful, energy-hungry nations.

Empty Stomachs, Full Jacuzzis

As natural gas becomes both more portable and more essential to food production in much of the world, impoverished farmers in Bangladesh and Egypt will find themselves bidding for it against Kansas farmers, homeowners from sweltering Phoenix or frigid Buffalo, and appliance-makers from Shanghai.

Ask someone whose children's lives depend on getting nitrogen out of the air and into food crops, and she'll probably tell you there's no higher use for natural gas. But in affluent societies that take food for granted, gas ("one of the cleanest, safest and most useful of all energy sources") can provide a lot of options that, after a while, start looking like necessities: keeping the house cool in August, cooking a corn-fed pot roast, driving to the store when you're out of organic milk, or relaxing in a hot tub.

Fertilizer production currently uses only about 5 percent of the world's natural gas production, and nonagricultural uses are already asserting greater dominance over tightening gas supplies on this continent. The escalation of gas prices in recent years has made fertilizer production far less profitable; as a result, the U.S. has lost 30 percent of its nitrogen fertilizer production capacity. American farmers now obtain more than half of their nitrogen fertilizer from abroad, making them the world's biggest importers of the product.

Mainstream economists, as always, predict an easy resolution: as the price of natural gas goes up, they say, people and nations will get more serious about conservation. But natural gas, latched onto increasingly as a somewhat more benign substitute for other fossil fuels, is playing the role of methadone in humanity's vain attempt to ease its withdrawal from coal and oil. And market forces tend to go haywire when dealing with addictive substances.

Without a right to food, people have no rights at all. So when there's a worldwide rush on a mineral resource essential to the production of adequate food -- when the market is the problem, not the solution -- non-market measures are needed to ensure that farmers are free to raise essential food crops.

The Food and Agriculture Organization (FAO) of the United Nations has nonbinding "Right to Food" guidelines stating in part that,

States should consider specific national policies, legal instruments, and supporting mechanisms to protect ecological stability and the carrying capacity of ecosystems, to insure the possibility for sustained, increased food production in present and future generations, prevent water pollution, protect the fertility of the soil, and promote the sustainable management of fisheries and forestry.

A firm legal basis for ensuring that all people have access to the means of food production is the UN's 1976 International Covenant on Economic, Social and Cultural Rights, which recognizes "the right of everyone to be free from hunger." The treaty has been ratified by more than 150 nations. The United States is not among them.

Americans cannot expect to support a universal right to food by the roundabout and inadequate practice of importing natural gas and fertilizer, using them to produce surplus grain, and then exporting the grain to countries with food deficits. Every nation must have the means to grow its own food sustainably, with efficient recycling of crop, livestock and human wastes. And when those nutrients aren't sufficient, farmers need guaranteed access to fossil fuels and fertilizers as well.

Nitrogen fertilizer made it possible for us to overpopulate the Earth, and now we're hooked. Someday, as reserves of fossil fuels dwindle, our descendents will come to inhabit a less crowded planet, on crops fed entirely by sunlight and natural fertility. Whether that future population decline happens humanely through planning and restraint or cruelly through catastrophe depends largely on how we manage nonrenewable resources, especially natural gas.

Stan Cox is senior scientist at the Land Institute in Salina, Kansas and a member of the Institute's Prairie Writers Circle. The assistance of Prof. Tim Crews of Prescott College is much appreciated.

Posted by Arthur Caldicott on October 12, 2005

October 11, 2005

Fort St. John leads parade of B.C.'s oil and gas boom

By Gordon Jaremko
Times Colonist (Victoria)
11-Oct-2005

FORT ST. JOHN -- Alberta industrial expansion into northeastern British Columbia startles even welcoming local boosters with its power.

"Right now it's almost overwhelming," said travel agent Marva Kosick, president of the Fort St. John Chamber of Commerce. "It's hard to keep up. We're getting new highways, roads, houses, apartments, stores -- anything you can name, it's being built," she said.

About 20 Alberta companies are spending $4.5 billion a year developing natural gas in the region, said Steve Spalding, B.C. manager for the Canadian Association of Petroleum Producers (CAPP). EnCana Corp. alone has long-range commitments averaging $1 billion a year.

In the industry's North America-wide quest for new gas supplies, "B.C. has a key role to play," Spalding told an annual oil and gas conference held by Fort St. John, the industry's regional capital 700 kilometres northwest of Edmonton.

The B.C. gas investments equal about half of annual spending on Alberta's oilsands, based in a community that likes to call itself "the energetic city" with one-third the population of the Fort McMurray region. The B.C. activity is less visible because it spreads conventional drilling, pipelines and plants across vast northern bush country, but signs of strain are everywhere.

All 1,000 motel and hotel rooms in the Fort St. John area routinely fill up every night, thanks to forest products mill construction on top of the gas development. The nearest vacancies are 70 kilometres south in Dawson Creek, and are scarce there. Recreational vehicle camps are full of blue-collar workers' heated trailers and vans. Roads are crowded well before dawn.

And there are still not enough people for all the work available. "There's a shortage of virtually every skill set you can think of," said Fort St. John Mayor Steve Thorlakson. "Unemployment is too low to calculate."

A $12-million oil and gas trades training centre is being built in Fort St. John, with energy companies covering half the cost. By the end of this month, an oil and gas service sector support and recruitment team led by the B.C. Energy Ministry will have held job fairs in 14 communities across the B.C. since the start of the year.

Enthusiasm for energy development has spread into the aboriginal population, which is demanding trade and business training as well as environmental standards and compensation.

"We too are very interested in becoming wealthy," said Liz Logan. As deputy chief of the regional Treaty Eight First Nations coalition, she echoes leaders in the Alberta oilsands region's aboriginal capital of Fort McKay, home base for a growing community-owned business conglomerate.

In the Fort St. John area Doig River First Nation's DRE Oilfield Services is one of the biggest locally owned employers, fielding about 100 staff during winter drilling seasons.

As in the oilsands, where royalty and tax deferrals tailored to industry requests feed the development wave, the B.C. gas boom is fuelled by government co-operation. In B.C. the collaboration started during construction of the $5-billion Alliance Pipeline from the Fort St. John region to Chicago in the late 1990s via a route across Alberta past the northern outskirts of Edmonton.

B.C. policy includes royalty breaks for deep drilling and costly field developments, road and pipeline construction partnerships with energy firms, and a grant scheme called Fair Share that taps provincial royalties to help northern municipalities build services for industrial growth.

The current highly favourable regime came together quickly that in early 2003 after talks between B.C.'s then newly elected Liberal government and CAPP, energy ministry oil and gas policy director Cameron Lewis recalled.

"This is one of the few jurisdictions in North America that is increasing its gas reserves," Lewis said.

The energy ministry will this fall ask the cabinet to make gas development incentives that were initially granted for a three-year trial period into a permanent fixture of B.C. policy, Lewis said.

The package will be sweetened by a fresh royalty plum which makes rates reflect net profits on new fields rather follow traditional practice of taking shares off gross revenues, he predicted.

A 33-year-old environmental moratorium will continue to prevent oil and gas drilling offshore of British Columbia, with the pro-development provincial government blaming Ottawa for indecision on plans to lift the ban.

"The biggest hurdle is to get the federal government moving," B.C. Energy Minister Richard Neufeld said in an interview. "I don't expect much movement until after the next election."

But Neufeld acknowledged popular opposition, encountered by federal and provincial public inquiries, against throwing open drilling targets in some of Canada's most gorgeous and best-preserved coastal areas including the Queen Charlotte Islands region.

"It will come in time," Neufeld said, inspired by visions of wealth in geological surveys projecting eventual discoveries of oceans of energy -- eight billion barrels and 40 trillion cubic feet of natural gas.

"The quickest way for us not to make it happen is to move too fast," he said, adding that his government may have to settle for preliminary seismic exploration as fulfilling its declared objective of a thriving B.C. offshore oil and gas industry by 2010.

Posted by Arthur Caldicott on October 11, 2005

October 10, 2005

In Canada's Wilderness, Measuring the Cost of Oil Profits

By CLIFFORD KRAUSS
New York Times
October 9, 2005

sqwalk.com
I've flown over one of those so called tailing ponds really lakes. They are a black glimmering abomination held like the sword of doom over all the waters of the Athabasca Delta and the Arctic. No one is talking about this in Canada. Ever wonder why?

Phil Carson
ScreenWeavers
Digital Tapestries
http://www.screenweavers.com
250-740-0943

sqwalk.com


FORT McMURRAY, Alberta - Just north of this boomtown of saloons and strip malls, a moonscape is expanding along with the price of oil.

Deep craters wider than football fields are being dug out of the pine and spruce forests and muskeg swamps by many of the largest multinational oil companies. Huge refineries that burn natural gas to refine the excavated gooey sands into synthetic oil are spreading where wolves and coyotes once roamed.

Beside the mining pits, propane cannons and scarecrows installed by the companies shoo away migrating birds from giant toxic lakes filled with water that was used in the process that separates oil sands from clay and dirt.

About 82,000 acres of forest and wetlands have been cleared or otherwise disturbed since development of oil sands began in earnest here in the late 1960's, and that is just the start. It is estimated that the current daily production of just over one million barrels of oil - the equivalent of Texas' daily production, and 5 percent of the United States' daily consumption - will triple by 2015 and sextuple by 2030. The pockets of oil sands in northern Alberta - which all together equal the size of Florida - are only beginning to be developed.

Because the oil sands region is so remote, the environmental damage receives little attention from the Canadian news media or public comment from Prime Minister Paul Martin's government. But industry leaders acknowledge that they face an enormous challenge because refining oil sands is several times more energy intensive than conventional oil production. In addition, the process is a major source of heat-trapping gases and far more destructive to the landscape than traditional drilling.

"There is a significant environmental footprint associated with the development of the resource, and that could become a potential constraint to growth," Gordon Lambert, vice president for sustainable development at Suncor Energy Inc., said in an interview. But he added that with technological improvements in extraction and refining, "we're bending the curve on a number of these historic environmental issues."

Oil sands development was once considered a crazy dream, too expensive and polluting to be profitable. But with oil prices exceeding $60 a barrel, companies like ExxonMobil, Royal Dutch Shell and Chevron Texaco are committing large investments to new projects, and some companies are offering record-breaking bids to lease growing amounts of land for future development. Energy-hungry China has noticed, and Chinese companies are investing in oil sands projects and a pipeline to take the fuel to the Pacific coast for export.

In a neighboring and politically stable country, the oil sands are destined to become an increasingly important source of energy for the United States market for decades. The industry and government say the northern Alberta sands hold proven reserves of 175 billion barrels, a claim some experts dispute. But if it is true, only Saudi Arabia may have more oil.

But environmentalists have a list of warnings, starting with the energy costs of extracting the oil.

"What bugs me about oil sands is that it is a resource that is being inefficiently used," said Marlo Raynolds, executive director of the Pembina Institute, an environmental research group based in Calgary. "We're using natural gas, which is the cleanest fossil fuel, to wash sand and make a dirtier fuel. It's like using caviar to make fake crabmeat."

The environmentalists also warn that the growing oil sands industry threatens to tear up a huge stretch of Canada's boreal forest, which is a nursery for hundreds of bird species and where bogs filter water and store carbon that would otherwise be released into the atmosphere. They say the enormous volume of water the industry needs threatens fish in the Athabasca River, the principal water source. They predict that increases in emissions of sulfur dioxide and nitrogen oxide will increase levels of acid rain and destroy lake fish across northern Canada.

They also say that Canada, already behind in its commitments to reduce greenhouse gas emissions under the Kyoto Protocol on climate change, will not be able to reach its Kyoto targets if production of oil sands keeps rising at the current rate.

Few Canadians seem to be complaining. This year, every Albertan - even children - is receiving a $400 check in the mail from the provincial government, whose budget surplus has exploded from oil revenue. While Fort McMurray is among the fastest-growing cities in Canada, real estate prices are climbing across the province.

The few protesters tend to be local Indians, although many of the local bands are getting into the oil sands business or supplying projects with services.

"There are no moose, no rabbits, no squirrels anymore," complained Howard Lacorde, 59, a Cree trapper whose trapline has been interrupted by a new oil sands project developed by Canadian Natural Resources. "The land is dead," he added, shaking in anger, as he walked through a construction site that was once his trapline.

Suncor, the EnCana Corporation and Shell Canada Ltd. are talking about setting up a cooperative effort to capture, transport and sell carbon dioxide that otherwise would be released into the air from oil sands production. Total S.A. is considering building a nuclear power plant here to extract the oil sands without having to use increasingly expensive natural gas and reduce emissions of heat-trapping gases, which many scientists associate with global warming.

The companies say they are committed to restoring the lands they drill and mine to a state as close to natural as possible, and they note that advanced technologies are decreasing the amounts of gas released per barrel of oil they produce.

So far they have reclaimed 13,000 acres of forest and wetlands, about 15 percent of the land disturbed. But the provincial government has approved oil-sand work on more than 230,000 additional acres over the next 60 years, and applications for new projects are proliferating.

Suncor, the earliest major operator and still one of the biggest, has made a public commitment to environmental responsibility. It has planted 3.1 million trees, taking cuttings from shrubs and native vegetation. The company says it is recycling 90 percent of the water it uses, and it boasts that one species of toad considered at risk is thriving in its reclaimed ponds.

On a new production site using steam injection to liquefy rather than mine the raw material of oil sands and raise it to the surface, Suncor will reuse water from the mining operation instead of using fresh river water.

"With concerted effort and the technology in play, we will be taking on the environmental challenge aggressively," Mr. Lambert of Suncor said. But he conceded that "the economic growth we are experiencing means a rising greenhouse gas production profile."

The only thing likely to slow production is a sustained decline in oil prices, something few energy specialists predict.

"There is no environmental minister on earth who can stop the oil from coming out of the sand, because the money is too big," said Canada's environment minister, Stéphane Dion, in an interview. "But we have to be very strict on environmental impact."


Posted by Arthur Caldicott on October 10, 2005

Federal government chronically unable to sustain its own environmental initiatives

Commissioner finds federal government chronically unable to sustain its own environmental initiatives
2005, 2005 Report of the Commissioner of the Environment and Sustainable Development, 29-Sep_2005
Environmental lethargy is one more example of a worn-out government
Editorial, Vancouver Sun, 10-Oct-2005



Commissioner finds federal government chronically unable to sustain its own environmental initiatives

News Release
The Commissioner's Perspective—2005, 2005 Report of the Commissioner of the Environment and Sustainable Development
Ottawa, 29 September 2005

While the federal government has announced many initiatives to put Canada on a path to environmental sustainability, it rarely sees them through to completion, says Johanne Gélinas, Commissioner of the Environment and Sustainable Development, in her Report tabled today in the House of Commons.

“When it comes to protecting the environment, bold announcements are made and then often forgotten as soon as the confetti hits the ground,” said Ms. Gélinas. “The federal government seems to have trouble crossing the finish line.”

The Commissioner's most recent Report details urgent examples of unfinished environmental business in areas such as Canada's deteriorating oceans, the protection of biodiversity, and the safety of drinking water in First Nations communities, as well as in other areas of federal responsibility.

The Report also looks at the government's efforts to protect national parks and to follow through on its commitment to “green” federal purchasing. As well, it includes the results of three audits of environmental petitions submitted to the government by Canadians—one of which deals with the government's promise to update requirements for nuclear liability insurance coverage to meet international standards.

“The issues we raise this year pose concrete risks to the environment and well-being of Canadians,” said Ms. Gélinas. “Federal performance must improve markedly if vital initiatives are to achieve their goals.”

The Commissioner of the Environment and Sustainable Development and her audit team are part of the Office of the Auditor General of Canada. Her mandate is to audit and report to Parliament and Canadians on significant environmental and sustainable development issues.

- 30 -

The Report of the Commissioner of the Environment and Sustainable Development is available on the Office of the Auditor General of Canada Web site (www.oag-bvg.gc.ca).

Information:
Julie Hébert, Communications
Tel.: (613) 952-0213, ext. 6292
E-mail: communications@oag-bvg.gc.ca

TOP



Environmental lethargy is one more example of a worn-out government

EDITORIAL
Vancouver Sun
Monday, October 10, 2005

The federal government is blowing a lot of hot air on environmental issues and its lack of action is threatening Canadians' well being. That finding comes through loud and clear in the lengthy report of the commissioner of the environment and sustainable development, an arm of the Auditor-General's office.

And whether you think the concept of sustainable development is as important in human history as the industrial revolution or is junk science peddled by an international cadre of social engineers, the criticism of political inertia stands up.

The report takes the government to task for making bold announcements, which are often forgotten "as soon as the confetti hits the ground." Commissioner Johanne Gelinas accuses her political masters of failing to sustain their initiatives with policies, plans and structures that would allow departments to implement the programs, or track their progress when they do.

In some cases, the matters in question are of grave consequence to human health, such as safe drinking water. Ottawa has been slow to update quality guidelines, which set limits for contaminants, and has not lived up to its responsibilities to inspect water on aircraft, putting thousands of travellers at risk.

The audit found that as many as half a million people living in 600 first nations communities have no assurance that their drinking water is safe because there are no federal laws or regulations in place. Despite $2 billion spent to address the problem, the situation has deteriorated. The report warned further that a five-year, $600-million water management strategy approved in 2003 won't improve quality or safety on a continuing basis.

The report says Ottawa has done little to protect Canada's oceans and reverse dwindling fish stocks, or to address the problems of pollutants, invasive species or declining biodiversity.

It found that insurance coverage carried by operators of nuclear facilities is at levels established 30 years ago and no longer meets international standards.

The report says Parks Canada must upgrade its parks management plans -- half of those examined in the audit were outdated.

It also complained that the government has no policy on "buying green." Given its annual $13-billion procurement budget, that could make a dramatic difference to fledgling industries involved in environmentally sensitive manufacturing, recycling, alternative energy and conservation.

Gelinas blamed bureaucratic infighting and turf wars for the lack of coordination on programs that cross departmental boundaries. Programs and staff are often changed without regard for results and senior bureaucrats aren't held accountable, she added.

In other words, it's business as usual in Ottawa.

The report's wide-eyed surprise that politicians don't do what they say they'll do must be disingenuous. Liberal commitments to environmental action aren't meant to protect the environment; they are meant to win the votes of those who care about such things. Once the votes have been cast, there is no imperative to follow through.

It's a flaw in our system that governments too long in power see perpetuation of their privilege to be their over-riding purpose. The environment is only one of the many issues of concern to Canadians that are subservient to the Liberal priority of preserving the status quo.

What little governments do accomplish is typically limited to the early years of their mandate. After that, the pledge to public service mutates into a sense of entitlement. That happened long ago to the Chretien-Martin Liberals.

Unless there are political points to score, there probably will be no action taken on the commissioner's report, which will join dozens of others the government has ignored over the years. Canadians must come to understand that, in a vibrant democracy, they must not let government cynicism, greed and political opportunism supersede the public interest.

© The Vancouver Sun 2005

TOP

Posted by Arthur Caldicott on October 10, 2005

October 08, 2005

The Clusterfuck Nation Chronicle: Calgary

by Jim Kunstler
The Clusterfuck Nation Chronicle
Commentary on the Flux of Events

October 3 2005

for previous chronicles click on
Clusterfuck Nation Archives

I was way out in Calgary, Alberta, last week, the tar sands capital of western Canada. I was there to yak on camera for a CBC-sponsored documentary about suburbia, and the city itself proved to be a strange and interesting case of immersive delusional behavior.

Calgary started out, of course, as the railhead for western ranching and a jump-off for various gold rushes in the late 19th century. Now it has become an archetypal city of immense glass boxes in a sterilized center surrounded by an asteroid belt of beige residential subdivisions -- sort of what Rochester, New York, would be like if it had an economy. The vast suburbs ooze out onto the prairie to the east, along with their complements of strip malls, power centers, car dealerships, and fry-pits, and on the west they bump up against the foothills of the Rockies.

The real estate scene in Calgary is rip-roaring because newcomers are flooding in to work the tar sand angles. No doubt the tar sands will generate a lot of wealth in the years ahead. But those who think they will save western civilization from a Peak Oil clusterfuck are going to be very disappointed. We are not going to run the interstate highway system, Walt Disney World, and WalMart on the Canadian tar sands.

These days, a lot of people (including news reporters) are saying that the tar sands contain the equivalent of a trillion barrels of oil, which is just plain nonsense. It's more like the equivalent of 180 billion barrels -- with world consumption at 30 billion annually (do the math). But the word equivalent is tricky, too, because it's only the equivalent in volume, not in the cost of recovery, since the stuff does not flow out of the ground at room temperature like Texas sweet light crude. The process requires a huge up-front mining operation on top of everything else, conducted in a climate so cold that the 13-foot-diameter tires of giant dump trucks crack regularly. The Achilles heel of the operation is that it requires hundreds of millions of dollars a year worth of natural gas to melt the stiff goop out of the sand, and that Canada's natural gas supply is verging on depletion just as ours is. They'll have a gnarly choice in a few years: either heat their homes or power the tar sands operation.

Another catch is that even in the short term, the petroleum that is recovered is not going exclusively to the United States or even Canada. The Chinese have been very busily inking contracts for substantial gobs of it. Is George Bush going to send the 82nd airborne into Alberta to secure access to the tar sands?

But this blog entry is not really about the tar sands, it's about the expectations of the people working off of them, which is that they assume the easy motoring utopia will continue indefinitely and are madly busy building a suburban infrastructure for it to dwell in, even while Canadians themselves are now paying the equivalent of $4 US a gallon for the privilege to commute forty miles a day.

What's going on in Calgary, with new subdivisions of half-million dollar houses opening every month, is the North American tragedy in microcosm. Because every new suburban house built, every new Target store opened, every new parking lot paved, every highway widened will be a project in the service of a living arrangement with no future. It is a true madness that beats a path to historic tragedy.

And this is what you have to think about, wherever you live in the US or Canada: what kind of projects and proposals are moving right now in the permitting pipeline of your own municipal planning boards? Things waiting to be built in the next year or two. Chances are they're the same suburban furnishings we've been getting for half a century, in the latest state-of-the-art releases. Each one is a tragedy. Each one will carry us further into darkness.

How do you stop such suicidal behavior? Probably not by persuasion or exhortation. People change what they are doing when circumstances compel them to and not before. The American public barely even thinks about these things. The Sunday New York Times news section contained not one story this week bout the current state of oil-and-gas operations in the Gulf of Mexico. The fact is that Hurricanes Katrina and Rita destroyed more than 90 production platforms as well as pipelines and drilling rigs. The implications are so obvious and we are not getting them.

The Clusterfuck Nation Manifesto


Eyesore of the Month: September 2005

The Golden Arches still stand in Biloxi, Missisippi, following the wrath of Katrina, but just about everything else lies shredded across the landscape. The people of Mississippi face a critical crossroads as they contemplate rebuilding. Will they simply restore the suburban pattern that was wiped clean by the hurricane? Or will they change the rules to encourage compact redevelopment in recognition that the age of easy motoring is over? To rebuild suburbia as it was will be exactly the kind of tragic misstep that this nation can't afford.

Read more Jim Kunstler at www.kunstler.com

Posted by Arthur Caldicott on October 08, 2005

Race for Arctic pipeline heats up for Canada, U.S.

By BARRIE MCKENNA
Globe & Mail
Saturday, October 8, 2005

WASHINGTON -- The race is officially on to deliver the Arctic's vast reserves of natural gas to energy-hungry markets in Canada and the United States.

Alaska Governor Frank Murkowski says he's just days away from striking a royalty deal with Exxon Mobil Corp., British Petroleum and ConocoPhillips Co. that would pave the way for the $20-billion (U.S.) pipeline megaproject.

"I anticipate receiving an affirmative response from the producers within the next few days," Mr. Murkowski said, adding that today's lofty natural gas prices have finally made the long-planned project economic.

The pending deal comes as Exxon subsidiary Imperial Oil Ltd. and other producers are at loggerheads with Ottawa over the fiscal terms of a second shorter and cheaper northern pipeline -- a $7-billion (Canadian) line to tap into natural gas in Canada's Mackenzie Valley.

A deal on the Alaska pipeline could put pressure on Ottawa to come to terms with Imperial Oil on the all-Canadian line. Imperial chief executive officer Tim Hearn warned this week that the Mackenzie pipeline might never get built if it can't reach a deal soon with Ottawa and native groups.

"If this thing drags out and drags out, I believe Alaska will get built and we might as well just take a back seat for a long period of time," he told reporters in Calgary.

And some analysts agree.

"If the Alaskans are going, the bigger line will be the one that gets all the attention," said Calgary-based energy analyst Ian Doig. "I don't think Ottawa can move that quickly."

The two projects are so ambitious that there may not be enough capital, manpower, expertise and pipe steel in North America to build both routes at once, Mr. Doig said.

At least two companies are involved in both projects -- Exxon and ConocoPhillips. Shell Canada Ltd. is also involved in the Mackenzie Valley project. Alaska officials insist they aren't in competition with the Mackenzie Valley project. Indeed, Mr. Murkowski has said both projects should go ahead.

Exxon and the other producers on Alaska's North Slope were tight-lipped about the state's offer on royalties, jobs and access to the gas -- the culmination of 18 months of intense negotiations between the state and the companies.

"We will evaluate the State of Alaska's fiscal contract and will respond when our assessment is complete," said Exxon spokeswoman Susan Reeves from Houston.

Even with a royalties deal, Alaskan officials conceded it will be four or five years before construction can begin. "If we get an agreement this would be an important step in getting North Slope gas to market," said Chuck Logsdon, gas line adviser to Mr. Murkowski.

Mr. Logsdon said the state hasn't given producers a deadline to respond, but it anticipates a deal "pretty soon."

Buoyed by the recent price surge, which has pushed the cost of natural gas to about $14 (U.S) per thousand cubic feet, Alaska insists its project is now clearly economic.

Meanwhile, Imperial Oil, eager for guarantees from Ottawa to help it recoup the massive investments needed, said the pipeline remains uneconomic.

But analysts and industry insiders said Imperial is using an artificially low $2.50 per thousand cubic feet estimate of the future natural gas price in its modelling to extract a better deal from Ottawa.

"No one is using that number," said Wilf Gobert, vice-chairman and head of research at Peters & Co. Ltd. in Calgary. "Imperial Oil is trying to protect their downside."

"Nobody has a $2.50 gas price," echoed an oil and gas industry executive, who asked not be named.

Mr. Gobert said most producers are using a long-term forecast of $4 per thousand cubic feet, still well below the current price. Most investors, on the other hand, are betting that gas prices will retreat from their current peak, but remain above $5 for several years.

The 5,500-kilometre Alaska pipeline, running south through British Columbia and Alberta, would take at least a decade to build and would rank as one of the largest construction projects ever. The proposed pipeline would deliver 4.5 billion cubic feet of gas a day, or about 7 per cent of average U.S. consumption.

The U.S. Congress has already approved $18-billion in loan guarantees. But the producers are apparently seeking additional concessions to help with project financing.

Posted by Arthur Caldicott on October 08, 2005

October 07, 2005

Municipalities pursue own energy projects

By Charlie Smith
The Georgia Straight
Publish Date: 6-Oct-2005

Thomas Osdoba is working on a sustainable energy precinct for Vancouver.
While senior governments have mostly ignored the impact of a global peak in oil production (see previous story), some municipal and regional governments have decided to generate their own energy. The City of Vancouver, the City of North Vancouver, and the District of West Vancouver have created or are developing their own projects within their communities.

Meanwhile, the Greater Vancouver Regional District collects approximately $5 million each year by generating electricity at its Burnaby waste incinerator and selling it to B.C. Hydro. The GVRD is also examining the possibility of generating wind power at the Iona Jetty and at Pitt Lake. In addition, the GVRD is considering installing a microgenerator to generate electricity from water flowing through pipes linking the Capilano and Seymour reservoirs.

Tom Osdoba is the manager of the City of Vancouver’s sustainability group, which is working on the creation of a 200-hectare energy precinct covering much of False Creek Flats and southeast False Creek. Osdoba told the Georgia Straight that it’s very difficult to create new energy systems one parcel at a time, which is why the city is examining the concept over a large area.

“You get economies of scale and better opportunities not only to reduce energy use but to identify sources of energy that are greener and cleaner and less dependent on fossil fuels,” Osdoba said.

The city has hired a consultant to examine the business case and capital costs of creating a new utility for the area.

This “community energy system” would share heat and power loads in a connected loop of pipes. Power could be fed into the system from solar, wind, or hydrogen sources.

The City of North Vancouver owns the Lower Lonsdale Energy Corporation, which has a partnership with Terasen Utility Service to distribute steam heat created by burning natural gas. The District of West Vancouver is offsetting some of its municipal costs with a microturbine at Eagle Lake.

Osdoba said the City of Vancouver is also trying to reduce emissions by both downsizing the civic fleet of vehicles and obtaining energy-efficient “smart cars”. On September 22, the sustainability office also launched the city’s “One Day” initiative with a car-free celebration in Gastown. He said that the city is encouraging residents to reduce energy consumption by starting with small steps. “If you drive to work every day, try to take the bus or try to bike just one day a week. Or car pool,” he said.

Osdoba said that the impetus for “One Day” and other sustainability initiatives have come from Mayor Larry Campbell and city council. Vancouver COPE Coun. David Cadman was one of the first politicians in the country to anticipate the potential consequences of a global peak in oil production. Cadman, former president of the Society Promoting Environmental Conservation, also appeared on the Vancouver Planetarium stage with Richard Heinberg, Julian Darley, and Bill Rees to discuss this topic in May 2003.

Cadman told the Straight that he thinks every new building in this city will have to be as energy-efficient as possible. He also said that Cool Vancouver—a citywide initiative to address climate change, which he quarterbacked—was designed to ratchet down energy consumption to ensure costs remained neutral for taxpayers.

“Obviously, with rising prices, the less you consume, the more you can begin to flatline your costing,” Cadman said. “We’re going to have to be even more rigorous about that in the years to come.”

The city’s three TransLink directors—Cadman, Campbell, and Vision Vancouver Coun. Raymond Louie—also voted to buy natural-gas buses for the regional transit fleet over the objections of staff and TransLink chairman Doug McCallum.

Perhaps the most ardent environmentalist on council, however, is COPE’s Fred Bass. He told the Straight that he entered municipal politics because he believes that local governments can change the world. He claimed that it happened during the 1980s, when local peace movements and civic bodies around the globe brought pressure on national governments. This resulted in a landmark disarmament agreement between then–U.S. president Ronald Reagan and Soviet leader Mikhail Gorbachev.

Bass noted that in the 1990s, local governments were the first to ban tobacco use inside buildings and in bars and restaurants. Senior governments followed. More recently, the City of Vancouver has pioneered the four-pillars drug-addiction strategy, which viewed drug addiction as a medical issue and led to the creation of the country’s first supervised injection site. Bass said municipal governments can also lead the way in dealing with emissions that contribute to global warming. He also noted that there is a limited supply of oil, which will lead to higher prices in the future. “On top of that, it is a totally nonrenewable resource,” Bass said. “When our great-grandchildren hear that we took oil and burned it in cars and generated CO2 and pollutants into the sky—and didn’t get more out of this nonrenewable resource—they’re going to be very disappointed with what we did.”

He emphasized that the reason he became a city councillor was to reduce the uncontrolled emission of greenhouse gases, which he described as an “emergency” for the world to address.

The Georgia Straight

GVRD Green Energy

GVRD's Waste-to-Energy Factsheet
The Burnaby Waste-to-Energy Facility, built in 1998, generates 15 MW of electricity and provides steam to an integrated co-generation facility and an adjacent paper recycling mill.

GVRD Cache Creek Landfill gas collection
(gas is collected and flared, but projects to utilize the gas cannot be explored due to lack of funding.)

Vancouver Energy Precinct
Vancouver South East False Creek
VancouverSEFalseCreek_200.gif

Vancouver Sustainability Precinct
VancouverSustainabilityPrecinct_200.gif

Lower Lonsdale Energy Corporation

West Vancouver's Green Energy Project (Eagle Lake)
BC Hydro's Eagle Lake micro hydro page

Posted by Arthur Caldicott on October 07, 2005

Running on empty

By Charlie Smith
Georgia Straight
Publish Date: 6-Oct-2005

Why everyone should worry about gas prices

Julian Darley is director of a Vancouver think tank called the Post Carbon Institute. He says people should focus on finding local solutions to the looming energy crisis.

Two-and-a-half years back, author Richard Heinberg gave local residents a glimpse into the future. Heinberg, a California writer and instructor, had come to the Vancouver Planetarium for a panel discussion on energy. The price of oil was hovering at about US$25 per barrel, but he predicted a sharp increase before the end of the decade.

“At this point, we’re discovering about one barrel of oil for every three or four that is pumped and burned,” Heinberg said. “So, clearly, a production peak is inevitable at some point.”

This thin, middle-aged, and casually dressed intellectual seemed an unlikely prophet. Sure, he said all the right things. His car ran on biodiesel, which is a chemically altered vegetable oil. He also mentioned that he placed photovoltaic panels on his home’s roof to generate electricity from sunlight. But Heinberg was so unassuming, so cerebral, and so completely lacking in evangelistic fervour. He seemed hardly the type to trigger a cataclysmic change in the way people perceive the world around them.

But that evening at the planetarium, Heinberg had a profound impact on the audience. Two other panelists—UBC professor Bill Rees and Vancouver environmental philosopher Julian Darley—provided equally chilling commentaries. Rees noted that for more than 20 consecutive years, the world had consumed more oil than had been discovered. Darley, director of the Vancouver-based Post Carbon Institute, emphasized a looming crisis with natural gas.

“I call this the carbon chasm,” Darley told the audience.

Since that evening, the international price of oil has shot up by 160 percent. Vancouver motorists now routinely shell out $1.20 per litre of gasoline at the pump. The cost of natural gas has almost tripled.

The International Energy Agency has reported that Hurricane Katrina shut down 1.4 million barrels of daily oil production and curtailed activity at 14 refineries. This caused retail gasoline price hikes of more than 30 percent in Europe and 13 percent in Asia, according to the IEA. Since then, Hurricane Rita has wiped out more oil and gas production in the region.

Darley and other analysts claim that a looming global shortage of oil could cause gasoline prices to spike even more sharply in the coming years. Darley told the Georgia Straight that this could cripple the world economy, which is mostly based on moving goods and services around the globe.

“It’s like saying to a person, ‘You’ve got to become an argon breather tomorrow because we’re switching away from this oxygen stuff,’” Darley said.

Matthew Simmons, a former advisor to George W. Bush and a Houston energy investment banker, wrote a book earlier this year suggesting that Saudi Arabian oil production may have already peaked. The Saudis claim to have a quarter of the world’s proven reserves: 262 billion barrels. Saudi Arabia has been the world’s largest oil producer for many years. Simmons told the Straight in a phone interview that 90 percent of this production has come from five aging oil fields on the eastern edge of the Saudi peninsula.





According to Simmons, 60 percent of all Saudi oil has come from just one field, Ghawar, since it began producing in 1951. He said the northern portion of Ghawar is almost depleted. He also claimed that the quality of the oil isn’t nearly as high in the southern portion of Ghawar.

“In the last couple of years, there have been so many ‘supply additions’ coming on that we don’t have any idea whether Ghawar is producing five million barrels a day or three-and-a-half million barrels a day,” Simmons said. “The fact that we don’t [know] should scare the bejesus out of people.”


Greatest “Proved” Oil Reserves
by Country (barrels)

Saudi Arabia 261.9 billion
Canada 178.8 billion
Iran 125.8 billion
Iraq 115.0 billion
Kuwait 101.5 billion
United Arab Emirates 97.8 billion
Venezuela 77.2 billion
Russia 60 billion
Libya 39 billion
Nigeria 35.3 billion

Simmons, author of Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy (John Wiley & Sons, $31.99), said that the second-largest Saudi field, Safaniya, can theoretically produce two million barrels per day of very heavy oil. “I think its peak production was 1.2 million barrels a day, and it’s about 600,000 barrels a day now,” he said. “Therein lies all the world’s spare capacity. That should scare people.”

The IEA forecasts demand for oil this year to average 83.5 million barrels per day. This means that more than 30 billion barrels of oil will be consumed in 2005. Total supply will average 84.85 million barrels per day.

Last July, a top Saudi official, Adel Al-Jubeir, dismissed Simmons’s claims during a live on-line question-and-answer session sponsored by the Washington Post. Al-Jubeir asserted that his national oil company, Saudi Aramco, is “very conservative when it comes to reservoir management”.

“The data he uses is outdated,” Al-Jubeir claimed. Simmons, however, told the Straight that the Saudis have not released any data to him to contradict his conclusions.

During that evening at the planetarium in 2003, Heinberg explained that the United States was once both the world’s largest oil producer and largest oil exporter. In effect, he said, it was the Saudi Arabia of the latter 19th century and early 20th century.

Heinberg, author of The Party’s Over: Oil, War and the Fate of Industrial Societies (New Society, 2003), noted that U.S. oil exploration peaked in the 1930s. This came after discoveries in East Texas and Oklahoma. Overall U.S. oil production peaked in 1970.

Since then, America has increasingly relied on imports. The nation consumed an average of 21.4 million barrels of oil per day during August, according to the U.S. Energy Information Administration. About 58 percent was imported.

Heinberg claimed that the U.S. experience as a producer has been repeated in many other oil-rich nations. After reaching a peak, oil production has often gone into a downward spiral. Heinberg forecast that the global peak in oil production would likely occur between 2004 and 2010.

“Whatever happens in the U.S. is the precursor for what is bound to happen in the rest of the world as far as oil is concerned,” he predicted.

It’s a controversial theory with plenty of detractors. In a September 22 news release, IEA executive director Claude Mandil claimed there is no shortage of oil and gas in the ground, just a shortage of technology to recover it. The same news release suggested there was more oil in the Canadian tar sands than all the world’s current reserves combined.

Canadian author David Frum, a former speechwriter to President Bush, wrote a column in the National Post last January ridiculing the notion that the world is running out of oil. He claimed that consumers will respond to price signals and switch to alternative fuels. “The world will never run out of oil,” Frum wrote in his article.

The B.C. Liberal government still plans to twin the Port Mann Bridge and widen Highway 1 to eight lanes, which indicates that Heinberg’s message hasn’t registered with the premier. Meanwhile, the Vancouver International Airport Authority is proceeding with a $1.4-billion plan to accommodate more fuel-guzzling airplanes.

Heinberg emphasized in his book that when more than half the petroleum is withdrawn from a reservoir, the cost of recovering oil increases sharply. That’s because more energy is required to extract the resource. When this occurs in a majority of fields around the world, it marks the end of cheap oil.

Heinberg’s message seems to have penetrated the Washington, D.C., establishment. He appeared on a panel late last month hosted by U.S. Congressman Roscoe Bartlett. Last February, the U.S. Department of Energy released a report on the peaking of world oil production, describing it as “an unprecedented risk-management problem”.

The numbers are astronomical. BP has claimed there are 1.2 trillion barrels of proven reserves in the world. But some doubt the validity of this number. In 1998, retired petroleum geologists Colin Campbell and Jean Laherrère wrote an article in Scientific American claiming that OPEC (Oil Producing and Exporting Countries) members had exaggerated their proven reserves. By switching to higher numbers, they were allowed to export more oil under OPEC’s quota system.

“There is good reason to suspect that when, during the late 1980s, six of the 11 OPEC nations increased their reserve figures by colossal amounts, ranging from 42 to 197 percent, they did so only to boost their export quotas,” Campbell and Laherrère wrote.

Simmons said that after the Saudis nationalized their oil industry, they jacked up their proven reserves by 100 billion barrels. Simmons also noted that Kuwait, United Arab Emirates, Iraq, and Iran had earlier boosted their proven reserves by larger percentages than the Saudis.

“There weren’t any new discoveries,” Simmons said. “There wasn’t any technology going on, and there wasn’t any drilling going on.”

He claimed that Canada also fudged the numbers when it suddenly increased its proven oil reserves from five billion to 180 billion barrels in 2003. It accomplished this feat by including bitumen resources in the Alberta tar sands.

Simmons said that comparing bitumen to light sweet oil is akin to comparing a 1947 Plymouth to a Maserati. “What you have in the tar sands is a slightly different carbon grade than coal,” he said. “It has nothing to do with oil. The energy intensity of turning it into synthetic crude is enormous.”

For western economies, the Saudi situation probably deserves the most scrutiny. Simmons wrote that one sign of potential trouble is the fact that billions of barrels of water have been injected into Saudi oil fields to maintain pressure.

He claimed that one giant oil field, Abu Sa’fah, has gone to “artificial lift”, which likely means the pressure is dropping. He said there are indications that Berri, another giant, is probably approaching the end of its life. Simmons also claimed that Abqaiq, a 65-year-old giant Saudi field, has pretty much been depleted.

“Five years ago, nobody mentioned the fact that Abqaiq could ever deplete,” Simmons said.

How high can oil prices go from here? Jeff Rubin, chief economist of CIBC World Markets, recently predicted in his Globe and Mail column that the cost will soon reach US$100 per barrel. Last March, investment-banking firm Goldman Sachs suggested it could reach US$105 per barrel. Simmons, the Houston energy investment banker, told the Straight that he thinks the price could eventually top US$200 per barrel—three times the current level.

He explained that at US$65 per barrel, gasoline costs 20 cents per cup. Simmons pointed out that petroleum companies have not found any massive new oil fields in decades. The last giant discovery was Mexico’s Canterell field in 1975. He also claimed that oil companies don’t want to spend money on refineries or to replace old pipelines.

“In three more weeks, they’re going to report the third-quarter earnings,” Simmons said. “The top five are going to report between $30 and $35 billion dollars. It will be more money than any group of five companies have made in the history of the world.”

On September 29, the Canadian Centre for Policy Alternatives released a three-page report claiming that consumers are being gouged by the oil companies. But for Darley, the more pressing long-term issue is how the world will cope with a sharp reduction in its supply of fossil fuels in the coming years. During an October 1 presentation to students at UBC, he predicted that it could lead to more warfare as nations jostle for control over resources.

“Almost anywhere where there is oil and gas, you can see a heightened military buildup there,” Darley said, echoing the views of U.S. author and military analyst Michael Klare. “This total militarization of energy policy is a very unfortunate move, but I’m afraid it’s what we can expect.”

Darley’s message was bleak, but he offered a hopeful alternative at the end of his lecture. The best antidote to sky-high energy costs was something he called “global relocalization”, taking care of basic needs within local communities. He harked back to the days before the oil economy was created in the 19th century, a time when people often entertained each other with music and live theatre.

Some students in the audience responded enthusiastically, breaking into a song with environmental lyrics. It was a festive moment punctuating an often gloomy presentation.

One of the student singers, 20-year-old Sara MacLennan, later told the Straight that she had never had the peak-oil scenario laid out in such a stark manner. “It is a scary thought,” she said.

MacLennan added that in her native country of Scotland, there is a great deal of emphasis on alternative energy sources, such as wind and tidal power, which might pick up the slack. Chris Borstad, a 27-year-old civil-engineering student, told the Straight that Darley’s message impressed upon him the need for action.

“The fossil-fuel institution was never really questioned by the older generation,” Borstad said. “It was sort of handed to them as a great way to improve life.”

Borstad said that when he uses the term peak oil in conversation with friends and acquaintances, some don’t know what he means. “It’s a minority of people here at UBC right now that can really understand the implications,” he said.

However, if gas prices continue rising, and Darley, Heinberg, Simmons, Rees, and others get their message across in major media outlets, that probably won’t be the case for very much longer.

The Georgia Straight

Posted by Arthur Caldicott on October 07, 2005

`Caribou People' wage last stand in the Arctic

BY PAUL SALOPEK
Chicago Tribune
Fri, Oct. 07, 2005

THE PORCUPINE RIVER, Canada - (KRT) - Old Stephen Frost is preparing to kill a caribou.

The Gwitchin Indian elder stands in his skiff on this silver-skinned stream in Canada's vast and wild Yukon Territory. He shoulders a heavy .30-.30 rifle. And he fires twice at eight of the deer-like animals swimming the sparkling currents - Whang! Whang!

The herd is only 20 feet away. But, inexplicably, the bullets go high. The caribou scramble ashore unscathed.

Peering back at Frost with the large, frank eyes of children, the animals vanish into a maze of willow branches dense as basketry.

"Lousy luck," Frost rasps.

The 72-year-old woodsman, a weather-beaten crag of a man who likes to come across as hard-boiled, mutters excuses. He blames the rocking boat. He curses his aging, unsteady legs. But he is a bad actor.

Later, he will pass up more opportunities to kill caribou. And, forgetting his lousy luck altogether, he will shoot other game with heedless skill - plugging a beaver through the eye and blasting a duck out of the water at 40 yards.

"Them caribou ain't got much of a future," he finally admits, uneasily. "To be honest, I'm glad to see 'em get out of rifle range."

Frost is referring to the central catastrophe facing his obscure tribe of Arctic hunters: The once-mighty Porcupine caribou herd, which has been the main food source of his people since the last Ice Age, is dwindling, nobody knows exactly why. And now, controversially, the U.S. government wants to drill for oil in the caribous' calving grounds in the Arctic National Wildlife Refuge, or ANWR, just across the Alaskan border.

Like many traditional Gwitchin, Frost fears that oil rigs in the refuge will deal a knockout blow to the ailing herd and herald the slow death of his tribe's 13,000-year-old subsistence culture, the last of its kind in North America.

Frost doesn't dwell on this crisis. Nor does he talk much about his wife, Ethel, who is ill with cancer. Nor, aside from a few crusty jokes, does he complain about his own creaking body, which is starting to fail him, with pains stabbing his arthritic knees and neck.

Instead, the stoic old hunter betrays his sorrows by what he withholds.

On days that follow, Frost loads two rifles and a shotgun into his boat. Tying on his greasy marten-fur cap, he stalks the waters of the Porcupine River as he has for more than 60 springs. But he doesn't take an animal. He misses. He holds his fire. He displays a forlorn quality of mercy that no subsistence hunter can afford.

---

Sometime later this month, Congress is set to decide, after almost 30 years of contentious debate, whether to allow oil exploration to proceed in ANWR, the country's premier wildlife refuge.

Hurricanes Katrina and Rita blew new life into the dispute after ripping through the nation's oil infrastructure and boosting gasoline beyond $3 a gallon. Now, drilling proponents are seizing on that price spike to push for more domestic oil production.

"When Katrina and Rita come into it, the American people know what to be scared of," says Sen. Ted Stevens, R-Alaska, who is helping shepherd the Arctic drilling plan through an omnibus budget bill. "I think the American people are asking: `Why don't we have enough energy?' And they're not susceptible anymore to misrepresentations that ANWR is some kind of pristine wilderness. It's empty. It's ugly."

To environmentalists, that's sacrilege.

Many activists regard the Alaskan refuge - christened by some a "precious jewel of the circumpolar north" - as a cross between a cathedral and the Alamo: a symbolic last stand to protect not only a vast Arctic ecosystem but the sacred idea of American wilderness itself. The remote 19.6 million-acre sanctuary teems seasonally with caribou, polar bears, wolves and some 150 species of birds. If this holy of holies is pried open for oil, they warn, few protected areas in the country would be safe from development.

The Bush administration, which has made ANWR the centerpiece of its energy policy, calls these claims fear-mongering. Government officials point out that only an eighth of the refuge - some 1.5 million acres of coastal plains dubbed the "1002 area" - would be subject to exploration. Moreover, they say ANWR's untapped petroleum reserves are a necessary antidote to the crippling U.S. addiction to foreign oil. Five billion to 11 billion barrels of black gold are thought to lie pooled under the tundra, or enough oil to power the entire U.S. economy for six months to a year.

But largely lost in all this acrimony is another, older conflict altogether: an improbable human-rights struggle with echoes from the frontier wars of another century.

The Inupiats, or Eskimos, generally support drilling in ANWR for the jobs and revenues it will bring to Alaska's frozen North Slope. But further south, among the immense spruce barrens of central Alaska and the Canadian Yukon, the Gwitchin Indian tribe sees the appearance of new oil rigs in the same ominous light as Plains Indians watching immigrant wagons trundle over the prairie horizon.

For the Gwitchin - "Caribou People" whose population of 7,000 is divided between Canada and Alaska - the stakes couldn't be higher.

Because of its geographical isolation, and the high cost of flying food into its tiny communities, the tribe maintains one of the last true subsistence hunting traditions on the continent. Today, every Gwitchin still consumes an average of 250 meals of caribou meat a year.

Yet by cruel coincidence, in the 100,000-square-mile patch of Alaskan and Canadian wilderness that the caribou call home, oil abounds in just one spot: directly under the animals' sensitive ANWR calving grounds.

"The big oil corporations say they can drill there without harming the land or the wildlife," says Joe Linklater, chief of the Canadian village of Old Crow. "Well, that's like our tribe telling Americans to trust us with an experiment that may end up taking away all their cars.

"We didn't ask for this fight," Linklater adds. "This is about our survival as a people."

The Gwitchin effort to safeguard their caribou-based culture isn't new. Their fight began back in 1988, when worried tribe members from Canada and the United States (the American tribe spells its name "Gwich'in") gathered for the first time in generations at Arctic Village, Alaska, to coordinate a common defense against both the global oil industry and the most powerful government on the planet.

Since then, this little-known war of resistance, planned in log cabins at one of the uttermost ends of the Earth, has taken some bizarre turns.

Tough hunters who had never set foot on a plane have donned cheap business suits and jetted to Washington, where they have stalked the halls of Congress on behalf of the caribou. Some have carried bags of dried caribou meat on their lobbying trips because restaurant food makes them ill. Others have gotten hopelessly lost on the capital's subway system.

Along the way, the rustic tribe has pressured the Canadian government to protest ANWR drilling on environmental grounds. They have recruited Jimmy Carter and Robert Redford as allies. And, collectively, their handful of villages have scraped together hundreds of thousands of dollars - squeezed from cash-strapped tribal councils or solicited from U.S. and Canadian environmental groups - to broadcast the Indian perspective of the ANWR crisis.

Old Crow, Canada, population 245, is a typical front-line community in this small, cold war.

Hunkered on the gravelly banks of the Yukon's wild Porcupine River, the village is an absurdly remote and beautiful place. Still untouched by roads, its cluster of 50 or so frame houses is accessible by bush planes that jounce over the ice-smeared Ogilvie Mountains from the faded gold rush town of Dawson City. Other visitors travel two rugged days cross-country, by riverboat or snowmobile as the season dictates, to reach the village from the nearest Canadian highway.

Old Crow's branch of the Gwitchin tribe, the Vuntut, or "Lake People," isn't necessarily opposed to industrial development. They once allowed oil exploration on federal holdings in their tribal lands, noting that it wasn't in the critical caribou calving areas. And they have invested their funds shrewdly in a local airline and in real estate in Whitehorse, the distant territorial capital.

But few other Arctic villages have undertaken the quixotic step of earmarking $250,000 of their $8 million annual budget to block the world's last superpower in its tireless quest for oil.

Among the tattered notices pinned to the village bulletin board - hand-scrawled requests to buy babiche, or caribou rawhide, and terse announcements for shooting matches at the local dump - there is a crisp memo "encouraging all residents to come hear the latest report from our neighbors who carried our message to the United States Congress."

"People outside just don't realize how much we depend on these damned caribou," says Stephen Frost, the caribou hunter who lives in Old Crow. "What are we going to do if they disappear? Close up shop and move to Washington? Are the politicians or the oil companies going to buy us a lifetime supply of hamburgers?"

As a village elder, Frost tries to project a cranky optimism around Old Crow.

He does this even in his cramped home, where his wife, Ethel, a heavyset woman with artificially curled hair, shuffles from the room whenever the rare visitor arrives. Frost teases her gently about her shyness. Or he cracks profane jokes. But in quiet moments a certain melancholy drapes his coppery features. He quietly shoves grains of sugar around his kitchen tabletop with a work-gnarled thumb. Or gazes for long, silent stretches out his windows at the Porcupine River, where he was raised unschooled except in the harsh lessons of trap lines and fishing camps.

Beyond the sparkling river jut billions of cold-stunted spruce trees. It's springtime 75 miles north of the Arctic Circle. And there are caribou out there, moving through the forests like smoke.

---

A few facts about barren-ground caribou:

They are biological putty - creatures so warped by the extremes of environment that they seem afflicted with a multiple personality disorder.

During the lush Arctic summers, when caribou turn into mowing machines, their stomachs balloon in size by almost 50 percent. Stuffing themselves with grass and lichen, many gain half their body weight in fat. Their coarse dark hairs, hollow for insulation and to improve buoyancy on river crossings, turn pale and shaggy in the winter. Bulls sprout baroque, 5-foot antlers to joust over females. Then, a few months later, they drop them. No feature is immune from this shape-shifting. Even their hooves elongate in the cold, to better dig through winter snow. The same caribou sighted in January and June might easily be mistaken for two different species.

They are constant strangers.

In the spring, caribou herds can trudge hundreds of miles north to the treeless Arctic shoreline, where open vistas and sea breezes foil predators and biting insects. There, they give birth to their young in scenes of wild abundance and untrammeled beauty that rival Africa's Serengeti. By late summer they are on the move again, back to the shelter of the boreal forest. Tens of thousands of caribou die on these annual migrations. As evidence, a grim confetti of caribou bones litters the tundra, the leftovers of hungry grizzlies, wolves, eagles, foxes, ravens and human beings.

"Pretty much everything eats, scavenges or parasitizes the caribou," says Dorothy Cooley, a Yukon government biologist. "A big chunk of the northern ecosystem rides on their backs."

The crucial question, of course, is how a new oil field in ANWR would add to that heavy burden. And because science can't provide a mathematical reply, the answer has been hijacked by rhetoric on all sides.

A computer-modeled study recently released by the U.S. Department of the Interior, for instance, suggests carefully that calf survival in ANWR would plummet if the caribou are spooked from their grass-rich calving grounds. And here the oil industry scoffs, citing positive wildlife trends at Prudhoe Bay, the largest oil field on Alaska's North Slope.

"Clearly, from the central caribou herd experience at Prudhoe, oil infrastructure does not chase away the herd and does not decimate it as the greens claim," says Adrian Herrera, a spokesman for Arctic Power, a pro-drilling lobby group funded largely by the state of Alaska. "This isn't an either-or situation. You can have development and preserve the environment at the same time."

Herrera invokes a mantra that has helped smooth the passage of the drilling agenda through Congress: "Clean" new oil technology, such as lateral drilling - where one wellhead can tap huge areas - means that just 2,000 acres of ANWR's calving grounds will be disturbed by the roughnecks and their machines.

Still, a majority of U.S. and Canadian biologists remain skeptical.

Years of research demonstrate, they say, that pregnant cows have in fact shied from the pipelines and gravel roads at Prudhoe; they have retreated to less disturbed habitat - a luxury not available to the Porcupine herd because its coastal plain is small by comparison, and hemmed in by inhospitable mountains. (Bulls are less sensitive and have been known to enjoy the breezes atop drilling pads.)

Such nuanced arguments frustrate the Gwitchin.

Any tinkering with their herd, they insist, is like gambling with the air they breathe. If the animals are merely frightened away to more-distant migration routes, they say, communities like Old Crow, which straddles ancient caribou river crossings, could simply cease to exist.

"The ancestors warned us about this bad time coming," says Randall Tetlichi, a traditional healer in Old Crow. "I think the caribou know what's happening in this world, and they have decided to leave, to go back to the spirit world."

Tetlichi offers this bleak assessment atop Old Crow Mountain, 5 miles from the village. He has just killed a bull caribou. It is one of five he will shoot this season to feed his family - a perfect animal lying in the snow under an electric blue sky. Panting with exertion, Tetlichi chops off the bull's head and scoops out the finger-size botfly maggots that infect most caribous' throats. The eyes in the decapitated head are huge. Even dead they shine like molten tar. Occasionally, from certain angles, they catch the Arctic sunlight and reflect it back pale green, the color of lightning.

---

Gale Norton, the U.S. secretary of the interior and the senior government official responsible for ANWR, once visited Gwitchin country in Alaska and responded to elders' anxieties over oil drilling in the refuge by urging the Indians to "expand your worldview."

What Norton implied was: The needs of the industrial majority trump the needs of the aboriginal few. Her advice, though, fundamentally misreads the nature of modern Gwitchin life. It isn't narrow. It straddles millenniums.

According to archaeological evidence found in caves in the Yukon, the Gwitchin may be the oldest native culture in the Americas. The tribe's ancestors arrived from Siberia at least 13,000 or 14,000 years ago, long before the more famous Eskimo.

Shadowing herds of migratory animals, they dragged moose-hide tents with the aid of harnessed dogs. Their shamans conversed with animals through dreams - particularly with the vutzui, or caribou. The tribe, linguistically related to the Navajo, was fond of tests of strength, such as wrestling matches for men and women. And having reached what is now central Alaska and the Yukon, they settled down to gorge on wild berries, salmon and a cornucopia of game.

Few modern Gwitchin sugarcoat this past: They are still too close to the land for that. In famine times, infant girls were killed to save food, and crippled elders would ask to be left behind to starve.

Today, willow bows and dog sleds have given way to high-powered rifles and motorboats in Old Crow. But because of the tribe's profound seclusion, the pace of modern assimilation still feels jarring, raw.

Junked snowmobiles and plastic lawn chairs crowd yards alongside gory piles of decapitated caribou. Inside the cramped little homes - simple frame structures that cost the tribe an average of $120,000 to build because every nail must be flown in - hanks of jerked caribou meat, rifles of all calibers, antlers, skin blankets and other frontier artifacts jostle with satellite televisions that rarely seem to be switched off.

Teens sporting baggy hip-hop pants and eyebrow rings now monitor the caribous' migration on a Web site that tracks collared animals by satellite. Meanwhile, at the village store, a relic of the famed Hudson's Bay Company fur-trading empire, Indian elders scratch their heads over cans of Pringles-brand potato chips. A single air-freighted cucumber costs $4.10.

"Too much white man's stuff too fast," says Tetlichi, the village healer. "It's like eating a lot of Kentucky Fried Chicken. Heartburn avenue."

Tetlichi, 53, is deeply worried about the Americans' plans for ANWR. But he sees it as just the latest blow to a way of life already reeling under the combined assault of television, alcohol and the wage economy.

Old Crow is a relatively healthy Arctic community. It isn't plagued to the same terrible degree as other native settlements by problems like drug abuse or teen suicides. (In Alaska, the suicide rate among Indian youths is three times the national average.) Still, the Gwitchin aren't completely immune from the effects of cultural erosion.

The village school teaches up to ninth grade. Half the kids who leave for a boarding school in Whitehorse never return. And those who do often end up working low-paid tribal jobs. Very few live completely off the land anymore, as their parents did. Many feel adrift, caught between worlds, and seek solace in drugs or alcohol. Though Old Crow is officially "dry," liquor is smuggled into the village, most recently in a shipment of dog food. A bootleg pint of vodka sells for $150.

"That's what makes saving the caribou even more important," says Tetlichi, who has the cautious step of an alcohol survivor. "They are - what's the English word? - the anchor."

Tetlichi wears his long braids tucked up under a baseball cap. He is munching happily on dried caribou in his house. He slathers the dark jerky, which he eats all day, with butter - like toast - while his wife, Mabel, hunches over a table, tenderizing red caribou steaks with the butt of a butcher knife. Overhearing mention of ANWR, she declares, "We are very" - WHACK - "angry with" - WHACK - "President Bush!"

Their son Randy Jr. isn't listening.

He's mesmerized by the MTV show "Pimp My Ride," which features an auto shop that tarts up jalopies. "Lady, you ain't gonna recognize this Mustang!" the host is promising from the set in faraway Los Angeles.

A few pickup trucks have appeared in Old Crow in recent years, brought in on temporary ice roads or barged to the otherwise roadless village on the Porcupine River. Randy Jr., 11, has never seen a real sedan.

---

By early summer, the sun never sets in the Arctic. The quality of light is hallucinatory. For about three months it drenches the world continuously, giving the impression of a landscape without secrets. Even the deepest tree shadows are a pale, watery blue - a hue that, if it had a taste, would chill the palate like spearmint.

This sunny simplicity, however, is deceptive.

ANWR may well be, as many activists say, the biggest environmental battle in a generation. And it probably has spawned the most organized and focused Native American resistance campaign since the Red Power movement of the 1960s. But all this human drama is unfolding against a backdrop of complex and troubling environmental change.

According to the U.S. Arctic Research Commission, today's Arctic temperatures are the highest in 400 years. Canadian data suggest that the Yukon alone has warmed by 3 degrees since the 1960s. Glaciers are in retreat. Arctic seas have heated up, changing fish distributions. And spruces and grizzlies are advancing poleward into the once treeless tundra.

The effect of climate change on caribou has been perplexing.

In some regions, according to wildlife experts, the early-greening tundra has provided a bumper crop of caribou food, and the herds have boomed. This fact is recited often by the oil companies working on Alaska's North Slope. (At Prudhoe Bay, the largest oil patch in the United States, the caribou herd has grown fivefold since 1978.)

Yet 100 miles to the east, the Gwitchin's beleaguered Porcupine herd has plummeted from 178,000 to 123,000 animals in the past 16 years. Researchers think that erratic thaws and freezes in the wintering grounds may be the culprits. This creates an icy armor over the snow, preventing hungry caribou from reaching the forage beneath.

"You used to see 500 animals at a time crossing this river, like one big stampede," Frost the hunter recalls, standing on the gravel riverbank of Old Crow. "Today, you're lucky to see 50 at a time."

It's a luminous May afternoon in the village. Gunshots echo in the distance. Hunters are bringing in dead caribou on boats and on four-wheeled buggies. But old Frost has stayed home. His legs ache - new aging pains. And his wife, too, isn't feeling well today.

Upstream, a tributary of the Porcupine has thawed and broken up, and chunks of ice slide down the currents. Mini-bergs the size of pianos collide, tinkling musically on the waters like falling glass. The river sounds like a crystal chandelier swaying in a breeze.

"This is how the land wakes itself up, renews itself," Frost explains, squinting poker-faced from the shore, his hands balled in his pockets. And given his burden of woes, it's a measure of the man that he says this without the least self-pity.

---

Dorothy Frost is crying.

It's the last weekend in May - Big Caribou Days, a homespun festival celebrating the annual spring migration in Old Crow. And Dorothy, a tribal administrator and one of Stephen Frost's numberless relatives, is supposed to be giving a pep talk. She fidgets in the log community hall before a crowd of villagers clad in rubber boots and fleece jackets, outlining the Gwitchin's caribou crusade. But her voice trails off. Normally a jovial woman in glasses, she covers her eyes with her hand and sobs. Later another speaker, an elderly man just returned from lobbying in Washington, also breaks down. So does a young woman who stands in the audience to offer reassurance. It's hard to watch.

"Everybody's emotional right now," says Dorothy Frost, recovering her composure. "Things are coming to a head."

The Gwitchin people have no legacy of armed resistance to European invasion, no mythic or bloodstained Wild West to draw grim inspiration from. There was no Gwitchin Geronimo. No northern Sitting Bull. Like most Canadian Indians, the usually peaceful tribe was incorporated into a tumultuous world the invaders called "New" through commerce, when the Scottish explorer Alexander Mackenzie first showed up on the Porcupine River in the 1790s, paddling a bark canoe packed with furs and trade beads.

"Nearly all European travellers who have visited the (Gwitchin) refer to their fine physical appearance and pleasant dispositions," wrote an anthropologist studying Old Crow as recently as 1946. "I found them to be self-confident and forthright, kindly, generous, intelligent, and honest."

The great irony of their long battle against the United States is that, win or lose, this very act of defiance has opened the door to change. And now, an alien new bitterness simmers in Old Crow. If Congress approves oil development in ANWR, some tribe members are vowing to meet the bulldozers at the refuge boundary with their hunting rifles.

"I've got news for the Americans," an angry young lobbyist named Shawn Bruce tells the somber community hall crowd. "If it comes down to it, we will become militant over that herd. We got Gwitchin men over in Iraq now. We got Vietnam vets. We will train warriors. We won't let them in the calving grounds. I burn. I am mad."

Stephen Frost, the master hunter, is more philosophical.

"I think what upsets people most isn't that them Americans will drill, but that they'll drill without even knowing we goddamned Indians exist," he sighs. "They'll get the oil for their cars. That'll be it."

Surveys taken since Hurricane Katrina jacked up gasoline prices tend to bear him out. According the Pew Research Center for the People and the Press, public support for oil development in ANWR has risen from 42 to 50 percent over the past six months.

Back in Old Crow, Big Caribou Days ends on a down note. Almost nobody joins the late-night jigging contest - a dance competition set to fiddle music inherited from 18th century European trappers. Frost walks home early, complaining about his knees.

A man of habit, he had gone out caribou hunting the day before, one last time for the season.

Ethel was away in Anchorage, undergoing a checkup at the cancer clinic. And the Frost household, long since emptied of its 11 children, had been unbearably silent.

The old man had sat on the banks of his beloved river, feeding willow sticks into a small fire. He never took a shot. Only a few straggling bulls were fording the Porcupine by this late date; the cows were already up north, leading the migration to their embattled Alaskan calving grounds some 200 miles away.

Frost passed the time calling to the birds. He did this uncannily, mimicking the squeal of field mice in distress. Again and again, Arctic owls in their snowy winter plumage swooped low. And ravens diverted from their high tangents in the sky to investigate.

He smiled. For a little while at least, all his troubles seemed like a dream. And for the first time in weeks, Frost seemed truly happy.

---

© 2005, Chicago Tribune.

Posted by Arthur Caldicott on October 07, 2005

Mackenzie pipeline uneconomic, Imperial CEO says

By DAVE EBNER
Globe and Mail
Friday, October 7, 2005

CALGARY -- The proposed $7-billion Mackenzie Valley natural gas pipeline doesn't make economic sense unless Ottawa signs another special fiscal deal for the backers, the chief executive officer of Imperial Oil Ltd. says.

"We're not asking for handouts, we're not asking for giveaways," Tim Hearn, Imperial president and CEO, told reporters after a speech yesterday at the Calgary Chamber of Commerce.

"That is not what we're working on. We're trying to find a framework, because today, under current conditions, we don't have an economic project, and we're working to make sure we can find one."

Mr. Hearn wasn't specific about what Calgary-based Imperial wants, though he did mention "how various costs are recovered."

"We're looking at cash flow timing things, and how we may construct the framework in such a way that it will make it economic."

While Mr. Hearn says he doesn't believe Imperial can make money on a Mackenzie line under current fiscal rules, others suspect the line could be quite profitable, especially compared with the project's competition.

Mackenzie Valley would be more profitable than a proposal for a gas line out of Alaska and other projects looking to import liquefied natural gas (LNG) to North America from Qatar, said brokerage Tristone Capital Inc. in a lengthy report in May on the subject.

"Pipelines appear economic," Tristone concluded, noting that Mackenzie would recover costs and produce a 10-per-cent return with natural gas at about $3.10 (U.S.) gas a thousand cubic feet.

Imperial -- majority owned by Exxon Mobil Corp. of Irving, Tex., the world's largest public oil company -- is using a long-term natural gas projection of $2.50 a thousand cubic feet. In the 1990s, gas averaged $2, which rose to $6 this decade before hurricane Katrina. It is now about $14.

"The world is not short of natural gas," Mr. Hearn said. "I'll guarantee you that if LNG comes into North America, you won't find $14 gas. I don't know where it'll be but it won't be $14."

Many market outlooks suggest that while LNG will probably pull down gas prices in North America, $5 a thousand cubic feet has been suggested by a majority of prognosticators as a reasonable long-term forecast.

Though Mr. Hearne said the project is not economic under current rules, he noted the company is committed to building the Mackenzie line and almost $400-million has already been spent.

Asked about Imperial's gas forecast, Mr. Hearn said: "I'm not going to comment on it." Asked why he believes the pipeline is not economic, Mr. Hearn said: "I'm not going to answer your question."

The Globe and Mail reported last week that Imperial is asking for significant breaks from Ottawa, requests that follow the federal government's offer in July of $500-million (Canadian) in social and economic funding for northerners.

Research conducted by the Sierra Club of Canada, an environmental lobbyist, indicated last week that Imperial's requests amount to a dollar tally of $2-billion.

However, several government sources said it is hard to quantify, given various natural gas price forecasts.

Imperial is the lead proponent of the Mackenzie pipeline, a group that includes Shell Canada Ltd. and ConocoPhillips Canada, among others.

In mid-September, Paul Smith, a senior vice-president at Imperial, said issues the company wants to negotiate with Ottawa included royalties.

"We didn't ask for royalty breaks," Mr. Hearn said yesterday.

Posted by Arthur Caldicott on October 07, 2005

Oil tankers in Juan de Fuca Strait:
1977 rules on oil ports stay intact

By Kimberly Wetzel
Medill News Service
Seattle Times
7 October 2005

WASHINGTON - A House committee yesterday struck down a portion of an energy bill that Washington state lawmakers warned would increase the risk of an oil spill in Puget Sound.

The House Rules Committee removed proposed changes to the Magnuson Amendment, a 1977 law that caps oil-refinery expansion and the number of oil tankers moving through the Strait of Juan de Fuca and Puget Sound.

"This is a big victory for Puget Sound," said Rep. Jay Inslee, D-Bainbridge Island, who testified against the bill before the committee. "We really dodged a bullet on this. We're very happy with the outcome."

Legislators were concerned that changing key portions of the Magnuson Amendment would have meant more tanker traffic in the Sound, increasing the danger of a spill. More than 600 tankers entered Puget Sound last year.

The amendment, written by the late U.S. Sen. Warren Magnuson, D-Wash., prevents oil companies from expanding their Puget Sound operations beyond what's needed to serve the growing energy demands of Washington residents.

The bipartisan effort to keep the amendment intact was led by Inslee, Rep. Norman Dicks, D-Bremerton; Rep. Dave Reichert, R-Auburn; and Democratic Sen. Maria Cantwell, who had vowed to fight the provision if it made it to the Senate.

The broader energy bill would streamline refinery expansion in response to the damage of Gulf Coast oil-production facilities by hurricanes Katrina and Rita. It was to go to the House floor today without proposed changes to the Magnuson Amendment.

Washington legislators said they were upset the provision was included as part of the bill, noting they weren't consulted or even told about it until three days ago.

"Since the provision had little impact on the ability to increase refining capacity in our state, we were concerned that it should not set a future precedent," Dicks said. "This is a great victory for our delegation."

The bill's sponsor, Rep. Joe Barton, R-Texas, agreed to remove the provision at yesterday's hearing. Barton's staff members declined to comment yesterday.

Both Inslee and Dicks said committee members probably were swayed by Reichert, the sole Republican in the state delegation opposing the change.

Reichert is in his first term in the House, representing a district that has become more concerned about environmental issues over the years.

Mike Shields, Reichert's chief of staff, said the congressman was pleased with the effort.

"It was a triumph of bipartisanship," Shields said. "In a short amount of time, these congressmen were able to work together."

Earlier yesterday, Reichert, Inslee and Cantwell wrote congressional leaders, asking that the provision be removed.

Posted by Arthur Caldicott on October 07, 2005

October 06, 2005

Hydro to reveal plans for upgrade

By Scott Simpson
Vancouver Sun
06-Oct-2005

BC Hydro will reveal plans later this month for British Columbia's biggest electricity system upgrade in a generation.

Hydro has been looking at every plausible power option except nuclear energy -- the list includes hydro, wind, gas and coal generation -- in a plan to head off and eventually eliminate B.C.'s dependence on foreign electricity imports.

"This is the next 20 years we are looking at here, and we haven't done anything this significant since maybe 1995," Stephen Bruyneel, director of corporate communications and public affairs for Hydro, said in an interview Wednesday.

"Overlaying all this work is a goal of making British Columbia energy self-sufficient over the next 20 years. We'd like to get to a point where we would be able to rely on our own resources."

The plan may open a Pandora's box.

Electricity production options are set out in a series of briefing papers provided in late September to members of a provincial "integrated electricity planning" committee.

The committee was struck to provide input to Hydro on the best combination of options.

The briefing documents say the cheapest source of power is conservation through energy efficiency projects such as Power Smart.

Hydro ranks the Site C dam No. 1 for lowest cost electricity generation behind conservation -- followed by geothermal, wind, small hydro, coal, and a re-powering of the aging Burrard Thermal gas-fired generating plant in Port Moody.

Bruyneel cautioned that the list is more of a "snapshot" than an authoritative financial study, using numbers provided by industry, and was intended to facilitate discussion.

"They are just preliminary estimates. Obviously until somebody went and bid it into a call you wouldn't know exactly what they were willing to spend on it or how much it's going to cost," Bruyneel said.

Factors complicating those estimates include the future price of natural gas and any surcharges that may apply to greenhouse gas emissions produced by coal- or gas-fired generating plants.

Recent Hydro planning documents examine everything from "controversy" over the proposed $3.5-billion Site C dam on the Peace River to "NIMBYism" in regions of the province that don't produce as much electricity as they consume.

For example, Hydro documents report that there is support around the province for requiring the Lower Mainland and Vancouver Island to take a bigger role in new power generation since both are net consumers of electricity.

Alternatively, Hydro suggests that pulling Site C out of a portfolio of new projects could raise the overall cost of energy independence by $200 million and would effectively put responsibility for all new electricity supply into the hands of the private sector.

Bruyneel said a decision by Hydro's board of directors will be announced later this month.

It will likely be a political football, as the final decision on power options rests with the Hydro board and B.C. Energy Minister Richard Neufeld.

ssimpson@png.canwest.com

POWER PLAY:

Some of the power generation options being examined by BC Hydro:

- Site C Peace River dam

- Repowering Burrard Thermal

- South Meager Geothermal Project

- Pulverized coal

- Wind power

Posted by Arthur Caldicott on October 06, 2005

Natural gas may hit $20

Geoffrey Scotton
Calgary Herald
Thursday, October 06, 2005

GSX_GasPrices_2005-09-30_small.gif

'It's not a possibility. It's going to happen'


Natural gas prices could top $20 US this winter, analysts warned Wednesday -- as traders in New York sent the price of the critical heating, cooling, cooking and electrical generation fuel into record territory.

Natural gas contracts for December climbed as high as $14.75 US per million British thermal units (mmBTU) on the New York Mercantile Exchange (NYMEX) before closing down slightly from Tuesday's record of $14.22 US. Experts say the soaring prices -- which include a record $15.13 US Wednesday for January gas -- are just a taste of things to come.

"If we have a colder-than-normal winter this winter I think we are going to be in a real crisis," said Tristone Capital Corp. managing director of research, Chris Theal. "We're going to see NYMEX gas clearly through $20 US in that scenario."

Theal and other analysts warned a meeting of chartered financial analysts Wednesday morning that conditions are forming that could see U.S. gas prices skyrocket, a scenario that could take the price for Calgary consumers into the low-$20s per gigajoule (GJ) range.

That possibility would not only wallop Calgary consumers, it could cost the province hundreds of millions of dollars as its winter natural gas rebate program -- just expanded to include the month of October -- is open-ended at gas prices above $12 per GJ.

This month, the province will pay consumers $3.51 for every GJ of gas after consumer rates rocketed to $12.26 per GJ. The addition of October to the rebate program will cost the province $45 million and if gas prices stay between $9 and $12 per GJ the rebate tab for the heating season will hit $615 million.

"Gone are the days of cheap natural gas," said Theal.

Multiple market threats of inadequate natural gas storage, shut-in production from U.S. Gulf coast hurricanes, climbing consumption, flat or declining continental supply and cold winter weather have the potential to combine and push natural gas prices into the stratosphere, Theal and other say.

"It's the perfect storm," said Peter Linder, president of DeltaOne Capital Partners Corp., who told the Herald he's certain prices will top $20 US per mmBTU in any event, likely by December.

"It's not a 'possibility.' It's going to happen . . . probably before Jan. 1," said Linder, adding he predicts U.S. gas prices averaging $15 US per mmBTU in 2006.

He forecast Calgary consumers will pay two to 2.5 times for gas this winter what they paid last winter, when natural gas rates topped out at $7.31 per gigajoule, but that prices could go higher, even into the low-$20s. (A gigajoule, or GJ, and an mmBTU are roughly equivalent measures.)

"Enjoy the rebates," said Linder. "Accept the fact that we're in a new environment, adjust your spending accordingly and learn to live with it."

Gordon Singer, chairman and chief executive of QVGD Investors Inc., said winter temperatures are key, but the stage will be set within weeks by efforts to store three trillion cubic feet (tcf) of winter gas by Nov. 1, the end of storage season. Those efforts have been severely hampered by massive U.S. Gulf coast storms such as hurricanes Rita and Katrina, which have impaired 30 per cent of long-term production, shut in eight billion cubic feet of daily gas production -- and created more than 226 billion cubic feet of lost production.

"If we can't meet that three tcf and it's a cold year, all bets are off on prices," said Singer. Theal noted, "The market's struggling to get to three tcf by the beginning of the heating season."

gscotton@theherald.canwest.com

© The Calgary Herald 2005


The History of GSX Pipeline in gas prices


GSX_GasPrices_2005-09-30.gif

Posted by Arthur Caldicott on October 06, 2005

Coal burning riles Cape Mudge

Grant Warkentin
Campbell River Mirror
Oct 05 2005

The Cape Mudge Indian Band worries its members are facing a higher risk of cancer due to coal burning at Elk Falls mill.

"The Cape Mudge Village...is already profoundly and negatively affected by the airborne emissions from the NorskeCanada Elk Falls pulp mill. Additional contamination from the burning of coal would create further damage to the health, safety and enjoyment of life of this aboriginal community," says a letter from the band's lawyers to the provincial government.

Cape Mudge band manager Brian Kelly told Canadian Press recently that the Cape Mudge and Campbell River Indian bands are almost demographically identical- except that the Cape Mudge Band, whose reserve is blanketed with more emissions from the mill than the Campbell River band's reserve, has a higher rate of cancer among its members.

In the Sept. 27 letter to Randy Alexander, provincial director of water and waste protection, law firm Donovan and Company, representing the band, outlines their concerns over emissions from NorskeCanada's Elk Falls pulp and paper mill. The law firm explains the band wants to see extensive monitoring of air quality at the band's Quadra Island village to learn what sort of health effects emissions from the mill's smoke stacks is having on band members.

The problem, the law firm says, is an unwillingness by NorskeCanada to address the issue and refusal in the past to respectfully deal with the band.

"Norske is well aware of the concerns by the We Wai Kai Nation (Cape Mudge band) with respect to the impact of its airborne emissions on the Cape Mudge village, particularly how the stack emissions frequently become entrained and travel directly through Cape Mudge village and how local residents have suffered respiratory ailments and extraordinarily high cancer death rates," the law firm says. "Norske, however, ignored repeated requests for proper monitoring of air quality in the village.

"The consultation with the We Wai Kai First Nation-has been perfunctory and inadequate; it has-scarcely gone beyond mere notification."

On Tuesday, mill spokesperson Carole Dodds said NorskeCanada is continuing to work with the Cape Mudge band to improve air quality monitoring equipment on Quadra Island.

On Oct. 1, mill manager Norm Facey said if the mill were causing health problems, mill employees would be the ones most affected. And if they were affected, the Workers Compensation Board would be "all over" the mill, he added.

Facey also told Canadian Press that the company was willing to work with the Cape Mudge Band to install more monitoring equipment but added that if the Elk Falls mill is not allowed to continue burning coal, it will have a severe economic impact on the mill.

The mill has been burning coal in its main power boiler for several years, technically on a trial basis, as a supplementary fuel.

The mill's goal is to help its main fuel source - salty hog fuel - burn more efficiently and with fewer pollutants.

However, the coal-burning trials have attracted concerns and opposition from area residents and environmentalists, including Cortes Island resident Dolores Broten, who runs pulp and paper mill watchdog group "Reach for Unbleached."

Broten is skeptical of a technical assessment interpreting data from the coal-burning trials. She believes the data is inadequate and incomplete.

As well, she said, the mill can't ignore a health risk assessment done on the mill's emissions a decade ago, which outlines health risks caused by the mill's emissions.

"The consultant notes that the health risk assessment for airborne dioxin (a toxic chemical emitted from burning coal and salty hog fuel) showed no risk to persons in the Campbell River area. This statement is not accurate," she said in a letter to Alexander. "That risk assessment did in fact show a health risk to the members of the Cape Mudge First Nation."

Broten is also skeptical of the government's standards for the mill.

"The technical assessment assures us that Elk Falls pulp mill emissions meet all provincial standards, most of which were developed 25 years ago," she said. "The technical assessment also assures us that Elk Falls pulp mill emissions are significantly lower than those for a hazardous waste incinerator or a municipal garbage incinerator.

None of these are appropriate comparisons.

"Elk Falls is supposed to be a pulp and paper mill, not a contaminated site, a hazardous waste incinerator or a coal-fired power plant."

The mill's permit to burn coal expired last week but has been extended to the end of October.

Posted by Arthur Caldicott on October 06, 2005

October 05, 2005

Crossed wires at the BCUC -
VITR and VIC as of October 5, 2005

Vancouver Island Transmission Reinforcement (VITR)


Background

The Vancouver Island Transmission Reinforcement (VITR) is a project of the BC Transmission Corporation (BCTC) to build a 230 kV AC transmission cable to carry electricity from the Lower Mainland to Vancouver Island. BCTC filed an application for a Certificate of Public Convenience and Necessity (CPCN) for the VITR with the BC Utilities Commission (BCUC) in July 2005. The project is stated to cost about $245 million and will be completed in two phases, operational in October 2008 and Phase II when required, 2017 is suggested.

BCTC-VITR site: http://tinyurl.com/e4j9e
BCUC project site: http://www.bcuc.com/ApplicationView.aspx?ApplicationId=78
EAO project site: http://www.eao.gov.bc.ca/epic/output/html/deploy/epic_project_home_250.html

The proposed route would be overland on existing right-of-way (ROW) from Arnott Terminal in South Delta, through Tsawwassen; underwater to Galiano Island (through the United States, for half of this first underwater leg); overland at Galiano; underwater again to Salt Spring Island; then overland on existing ROW on Salt Spring, across Sansum Narrows, and to Vancouver Island Terminal just north of Duncan in North Cowichan. (map, below)

It is referred to by the BCUC as BCTC-VITR.

BCTC-VITR is at the pre-application stage of an environmental assessment (EA) by the BC Environmental Assessment Office (EAO).

The application to BCUC contains this paragraph, surrendering considerable discretion to the BCUC with respect to changes to the proposed transmission solution, but pleading for approval:

BCTC must have a transmission solution to Vancouver Island in place by the fall of 2008. ... BCTC respectfully requests that the Commission approve the Project as proposed, or with modifications considered to be in the public convenience and necessity and supported by the evidence, rather than denying the Project if it finds that the Project, as proposed, is not in the public interest. [1.4 Order Sought]


BCTC-VITR Timetable: Hearing November 28, 2005

Here are the key dates in the BCUC timetable for the BCTC-VITR proceeding, revised as of October 5, 2005:

16 Sep 2005 Intervenor and Interested Party Registration
16 Sep 2005 Participant Assistance/Cost Award Budgets
10 Oct 2005 BCTC Responses to Information Requests
17 Oct 2005 Intervenor Evidence
12 Oct 2005 Sea Breeze to file further motions for the Pre-hearing Conference
21 Oct 2005 Pre-hearing Conference
26 Oct 2005 BCUC and Participant Information Requests to Intervenors
10 Nov 2005 Intervenor Responses to Information Requests
12 Nov 2005 Town Hall Meeting (Salt Spring)
16 Nov 2005 Staff issue Hearing Issues List
19 Nov 2005 Town Hall Meeting (Vancouver Island)
21 Nov 2005 Town Hall Meeting (Tsawwassen)
21 Nov 2005 Open Oral Submissions
22 Nov 2005 BCTC Consolidation of Hearing Issues List
24 Nov 2005 Panel issues Hearing Issues List
28 Nov 2005 Public Hearing Commences


Intervenors

There are now 50 intervenors in the BCUC-VITR proceeding. Compare this to the Duke Point - Electricity Purchase Agreement hearing, which had 39 intervenors, or the Terasen - Kinder Morgan Acquisition hearing, with 31.

Many of these intervenors are residents along the ROW in Tsawwassen and on Salt Spring.

Two organizations, TRAHVOL and IRAHVOL (Tsawwassen/Island Residents Against High Voltage Overhead Lines) have filed as intervenors to represent the concerns of these respective residents. More, below

The Corporation of Delta, the Islands Trust, Capital Regional District - these local governments have registered, also representing local interests.

South Delta Secondary School & Delta School District, again, representing local concerns.

The Elk Valley Coal Corporation, Norske Canada, Joint Industry Electricity Steering Committee (JIESC), Terasen

Sea Breeze Pacific Regional Transmission System Inc. - see more, below

GSX Concerned Citizens Coalition.

No Vanport Sterilizers, yet.


Interest of IRAHVOL and TRAHVOL and others

IRAHVOL and TRAHVOL share concerns about electromagnetic fields (EMF) generated by alternating current transmission systems, and about continued use of overhead transmission lines. TRAHVOL is opposed to the VITR route through the Tsawwassen ROW, irrespective of whether it goes overhead or underground. IRAHVOL is likewise opposed to continued use of the Salt Spring ROW, and is pushing for an all-submarine cable.

Both organizations have engaged lawyers to represent them at the BCUC. TRAHVOL have engaged Mark Underhill and Joe Arvay. Arvay is one of the lawyers that dominates public interest legal issues in British Columbia. His firm also does work for the provincial government. (Chris Jones, at the time working for Arvay Finlay, represented the province in support of the GSX Pipeline.) Murray Rankin is also advising.

IRAHVOL have engaged David Austin, a director of and legal agent for the Independent Power Producers of BC. Austin has a long history of critical opinion on energy issues in BC, and particularly with respect to BC Hydro.

While we're still on lawyers, Delta is represented by James Yardley, who represented Abbotsford and later, David Suzuki Foundation, in the Sumas Energy 2 Powerline proceeding.

Delta essentially supports the TRAHVOL position and is opposed to the current BCTC to underground in existing ROW in Tsawwassen and supports alternative technologies or routes that eliminate concerns with EMF.

www.irahvol.org
www.trahvol.org


Vancouver Island Cable (VIC)


Interest of Sea Breeze Pacific Regional Transmission System Inc.

Sea Breeze is proposing an alternative to the BCTC-VITR, and on September 30, 2005, filed an application for a CPCN with the BCUC for the Vancouver Island Cable (VIC) project, a 550 MW HVDC Light cable system. HVDC Light is proprietary technology of ABB, and purports to have performance benefits that are superior to those of AC transmission.

The VIC application to BCUC gives a cost comparison table that shows Phase I & II of the VITR project at $266 million and the VIC project at $324 million. Sea Breeze then factors in other costs and benefits associated with VITR and VIC and gives a "Total Project Cost" for VITR of $289 million and VIC of $163 million. There's a great amount of apples-to-oranges in this table, and the ensuing complex discussion that is about to unfold between the two projects won't be easy stuff.

Sea Breeze Vancouver Island Cable site: www.vancouverislandcable.com

The VIC proposed route is underground or underwater along its entire length. From the Ingledow Substation in Surrey to White Rock it proposes to run alongside existing roads. It would run underwater from White Rock, through the United States to the southeast end of Saturna Island, then along the GSX Pipeline route to the north end of the Saanich Peninsula. On land again, it would run alongside roads or other powerline ROW to Pike Substation. (map, below)

Some argue that BCTC appears to be biased against DC transmission. Phasing out its existing HVDC. Denying that ABB's DC Light technology has merit. In April, BCTC released a report it had commissioned which concluded that "For VITR, HVDC LightTM is more expensive to construct, has higher losses, and costs more to maintain than the 230 kV ac alternative. It does not offer any technical advantage in this situation ...."
http://www.sqwalk.com/Rashwan_HVDCLightAnalysis_2005-04-08.pdf


Hearing Process

In its application, Sea Breeze says it filed the VIC CPCN application as a result of an invitation by the Commission on August 9.

The "invitation" is included in the hearing order for BCTC-VITR, and says this:

If Sea Breeze files a CPCN Application and desires to have it reviewed in this proceeding, then Sea Breeze should file the CPCN Application ...no later than the end of September 2005. Participants should assume that information requests to Sea Breeze will be due on October 17, 2005, assuming Sea Breeze files either a CPCN Application or Intervenor Evidence. http://tinyurl.com/be8lo

Sea Breeze then recommends that the BCUC confirm its consolidation of the VIC CPCN application with the existing BCTC-VITR proceeding.

This should be challenging - for the Commission, for intervenors, and for the public interest. Stay tuned.


What's this?

The bottom of a number of pages of the BCTC-VITR application filed with BCUC contains this peculiar image:
BCHydroEngineering.gif
http://tinyurl.com/bh774
Perhaps the company slogan should be "designed in mirrors".

VITRMap.gif

sbx-vic.gif

Posted by Arthur Caldicott on October 05, 2005

October 04, 2005

SUV sales tank as gas soars

Greg Keenan
Globe and Mail
Tuesday, October 4, 2005

Gas guzzlers stay on lots as auto makers report big decline in luxury 4WD category

Soaring gas prices sent sales of sport utility vehicles into the tank in North America last month.

Sales of the biggest SUVs tumbled as hurricanes Katrina and Rita and fears of gas shortages sent fuel prices soaring to well above $1 a litre across most of Canada and $3 (U.S.) a gallon south of the border.

"These ultra high gas prices are taking a toll on the larger, less fuel-efficient light trucks," said industry analyst Dennis DesRosiers, who heads DesRosiers Automotive Consultants Inc. in Richmond Hill, Ont.

The slide hit large SUVs in particular. Sales in that category, which includes such behemoths as Dodge Durango, Ford Expedition, GMC Yukon and Nissan Armada, slumped 50 per cent last month in Canada from year-earlier levels, according to data released by the auto makers yesterday.

That compares with an overall decline of just 2.4 per cent in the Canadian vehicle market last month.
The market also suffered from the end of discount programs at some auto makers that allowed consumers to pay the same price as employees for their new vehicles.

The SUV slide may, however, be a regional phenomenon.

"Out here, [gas prices] are not top of mind," said Ted Knight, who owns Crestview Chrysler Dodge Jeep in Regina as well as dealerships elsewhere in Saskatchewan and in Medicine Hat, Alta.

"It's not anywhere near what I thought it would be," Mr. Knight said. "We're selling Durangos, we're selling Grand Cherokees."

But even sales of luxury SUVs, which have held up in the face of higher gas prices, took it on the chin last month.

Sales of Ontario-made vehicles such as the RX330 for Toyota's luxury Lexus division slumped 17 per cent in Canada.

It was a similar story for the Chrysler Pacifica, which is built in Windsor, Ont. It slumped 24 per cent in the U.S. market.

Last month, sales of the Toyota Sequoia fell 30 per cent, to 38 units from 54, and sales of Chrysler's Dodge Durango plunged 64 per cent to 249 from 698.

Overall, sales in Canada fell to 124,175 vehicles, from 127,233 in September of 2004.

Each of the Big Three reported a drop, with Ford and GM noting large declines in truck sales.

At DaimlerChrysler Canada Inc., car sales fell, while truck sales rose, sparked by a big jump in sales of minivans.

Carlos Gomes, a Bank of Nova Scotia economist, said high gas prices packed a double whammy for auto makers.

First, they put a dent in sales of SUVs and other light trucks last month.

Sales of all light trucks -- which include minivans, so-called crossover utility vehicles that are based on a car chassis instead of a truck chassis and actual trucks -- fell about 10 per cent in Canada.

High gas prices, Mr. Gomes said, also dampen consumer confidence, which is a key driver of vehicle sales.

He acknowledged that the mood of consumers is likely more buoyant in provinces that benefit from high oil prices such as Alberta, than it is in Ontario and Quebec, which are the biggest markets for new vehicles.

The percentage declines in sales of large SUVs were similar in the U.S. market, where they represent a much larger and more important slice of the overall market than they do in Canada.

Sales of SUVs and trucks slumped 50 per cent for General Motors Corp., while Ford Motor Co. saw sales of traditional, truck-based SUVs tumble by the same amount.

This is another blow to Ford and GM, because they rely heavily on highly profitable SUVs to make up for money-losing passenger car operations.

The two largest U.S. auto makers are already reeling, with massive losses in their North American automotive operations caused in part by years of sliding market share.

Ford is preparing a major financial restructuring that is expected to be unveiled this month and include several plant closings and thousands of job cuts in the United States.

GM is in the midst of negotiations with the United Auto Workers union south of the border on ways to trim the auto maker's soaring health-care costs.

A switch to more fuel-efficient vehicles benefits Asia-based auto makers, which have already grabbed more than 50 per cent of the passenger car side of the market in both Canada and the United States.

"It's history repeating itself," said Thomas Leritz, an investment manager with Argent Capital Management in Clayton, Mo. "You go back to the seventies, during those oil shocks the Japanese took market share."

Join the online conversation on this article, here: http://tinyurl.com/arpnp

Best headline in a long time ... Arthur

Posted by Arthur Caldicott on October 04, 2005

Northern towns await pipeline decision

Scott Simpson
Vancouver Sun
October 04, 2005

Whether Enbridge picks Prince Rupert or Kitimat, oil line will benefit both

A $3.5-billion pipeline project that would create thousands of construction jobs and light up the economies of communities across northern British Columbia is about to take another major step in its development.

Enbridge Pipeline's Gateway project envisions two 1,200-kilometre pipelines running from Edmonton to the B.C. coast, either at Prince Rupert or Kitimat, and the company said Monday that an announcement of the final choice for the line's western terminal is just days away.

No matter which city is finally chosen, benefits are expected to resonate across the north.

"It's pretty significant all the way along the route in terms of benefit to the local communities and to the province as well," said Doug Ford, a community consultant with Enbridge Pipelines.

The number of permanent jobs at a loading-unloading terminal would number about 40, but the mayors of both coastal cities see the project as a key aspect of economic revitalization.

Prince Rupert has been hurting, employment-wise, since the closure of the Skeena Cellulose pulp mill several years ago, while Kitimat is reeling after a recent announcement by Methanex that it is closing its Kitimat methanol plant because North American natural gas prices make it a money-loser.

Both mayors have taken Enbridge on tours of their local port facilities, but insist they're not privy to a final decision.

"We've made our arguments that Kitimat is a better location than the other location, based on cost, based on the fact that we're an industrial community, and we have the land available, and so on," Kitimat Mayor Richard Wozney said.

"We've got our ears to the ground and we're waiting for the thunder to hit Kitimat."

Prince Rupert Mayor Herb Pond said the project, coupled with container port development and cruise ship stops, could create enough critical mass to support a whole new marine industry in his community.

Overall, he added, the project would be great news for all communities in northern B.C. -- Enbridge said it will require "thousands" of workers during a two-year construction project that could begin as early as 2007.

"Obviously, the first hit is the construction phase, which is going to be great for everybody in the north. The only negative [that] one might talk about at all is that it's going to require so many people that it may in fact drain from other projects. But we'll deal with that problem," Pond said.

The Gateway project includes an oil pipeline carrying Alberta crude to the coast, and a separate line carrying an oil-thinning condensate in the other direction -- from a Pacific coast terminal to Albertan oil fields.

Enbridge announced on Monday that the open season -- the sign-up period for shippers to indicate their interest in participating -- for the condensate line was a roaring success.

The open season ended on Friday with enough response that the company now plans to increase the diameter of the pipeline to about 51 centimetres (20 inches) from about 41 centimetres (16 inches).

The open season for the oil pipeline is expected to commence later this month.

The oil line will not be commercially viable until Enbridge signs up enough shippers to fill the pipe -- although the company took a major step forward last April when it announced that PetroChina signed a memorandum of understanding for shipments encompassing about half the line's 400,000- barrel-per-day capacity.

The proposed pipelines must also receive approval from the National Energy Board and the Canadian Environmental Assessment Agency, as well as support from more than 40 B.C. and Alberta first nations along the proposed route.

"Based on the open season, we can now be confident we will have at least the minimum required threshold of 150,000 barrels per day committed to the line, and probably more," said Richard Bird, a vice-president at Enbridge, in a company news release.

"The successful open season on the condensate line also means we will be able to focus on lower tolls for the crude oil line."

Enbridge will stage open house meetings in several B.C. communities along the pipeline route beginning n extmonth.

A meeting is scheduled for Kitimat on Oct. 18, but Wozney said that's "not necessarily" an indication his city will be selected for the route. Obviously, I hope that will be the case."

Prince Rupert Mayor Herb Pond had a similar story.

"Enbridge representatives were up through the area two weeks ago, and met with council, just doing a general update," he said. "They continue to have teams of people in our community doing economic assessments and all those kinds of things. But there's no hint yet as to what decision they've made . . ."

ssimpson@png.canwest.com

Posted by Arthur Caldicott on October 04, 2005

October 03, 2005

Sea Breeze: Vancouver Island Cable

Sea Breeze has filed its application with the BC Utilities Commission for a certificate of public convenience and necessity (CPCN) for a 550 MW HVDC Light cable system to Vancouver Island.

In order G-70-05, dated August 7, 2005, the BC Utilities Commission (BCUC) said "If Sea Breeze files a CPCN Application and desires to have it reviewed in this proceeding, then Sea Breeze should file the CPCN Application ... no later than the end of September 2005. Participants should assume that information requests to Sea Breeze will be due on October 17, 2005, assuming Sea Breeze files either a CPCN Application or Intervenor Evidence."

Sea Breeze has asked that its VIC project be reveiwed in a process parallel to the review of the BCTC VITR project.

The cable would run underground from the Ingledow Substation in Surrey, along road routes to White Rock, across Georgia Strait on much the same route as the GSX Pipeline, to the tip of the Saanich Peninsula, then again underground down to the Pike Substation (where Sea Breeze's other cable, the Juan de Fuca Cable is also proposed to terminate.)

The full application is now on the project's website at www.vancouverislandcable.com. Happy reading.

Interesting times at the BCUC. Will BCTC blink?

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Posted by Arthur Caldicott on October 03, 2005

A natural gas primer -- and where the money goes

Randy Jespersen
Vancouver Sun
03-Oct-2005

Ever since Terasen Gas announced natural gas costs were increasing, we have heard from many of our customers questioning our reasoning.

British Columbia is blessed with large natural gas reserves and I am often asked who makes money from this resource. Why do we allow "our" natural gas to be sold outside B.C. rather than keeping it for ourselves?

The rights to B.C.'s natural gas reserves are owned by the provincial government, which earns a royalty on every gigajoule of gas sold, based on a percentage of the market price. When the market price rises, the government makes more money. According to the latest provincial budget update, Victoria expects to earn $1.8 billion in 2005 from natural gas royalties alone.

The companies exploring for and producing oil and natural gas in B.C. are some of the largest in the world: EnCana, Petro-Canada, Canadian Natural Resources, Talisman (Canadian firms); Imperial Oil and Devon (U.S. firms), and Shell and British Petroleum (European.)

Terasen Gas is not in the exploration or production side of the business, and we don't own or control natural gas reserves or production. We buy gas on behalf of our 875,000 customers here in B.C. and are allowed to only recover our actual cost of gas (i.e. no mark-up), our profit coming from the delivery charges.

Every three months we review commodity rates with the BC Utilities Commission. If we expect to pay more for natural gas than what we are charging, we ask for a rate increase. This occurred in July and September. Likewise, if we expect the gas to cost us less than we are charging, we ask to reduce rates. Rate reductions occurred in January 2004 and January 2002.

Since June 2005, natural gas prices across North America rose more than 30 per cent. But our purchasing strategies, which include hedging and gas storage, have saved our customers more than $270 million this coming winter.

The current rise in prices is the result of increased demand caused by a hot summer, the rising price of crude oil, and disruptions to supply caused by hurricanes in the Texas gulf region. Why do events far from B.C. result in us paying more for natural gas?

The answer lies in the development of the natural gas sector.

In 1985 Canadian governments deregulated natural gas prices to improve access to markets. This caused prices to fall as production increased and producers tried to realize value from the long-term proven reserves they had been required to hold. In the following years, demand grew as natural gas was increasingly used for home heating, fireplaces, manufacturing processes, electricity generation, and as a replacement for diesel fuel.

Over time, a network of pipelines crisscrossing North America was built, allowing natural gas to move to markets where demand is greatest. A competitive market was created where price differences from one side of the continent to the other are typically just the cost of transportation.

Eliminating constraints to market access ensures B.C. gets full value for its gas reserves and because of our location near supply sources, B.C.'s natural gas consumers enjoy lower transportation costs.

Some people are worried that Canada is running out of gas. That's not the case. We are running low on easily accessible, cheap-to-produce natural gas found in prior years. According to the National Energy Board, Canada has 70 to 80 years of natural gas reserves based on current levels of production.

Much like B.C.'s rich heritage of hydro-generation assets, where the costs of producing electricity from a new dam will be higher than from existing facilities, there will be additional costs to find new gas reserves.

But B.C. has many options: The Nechako and Bowser basins, coal bed methane, offshore reserves, and liquefied natural gas imports from terminals being built across Canada, the U.S. and Mexico.

We have ample supplies of natural gas to heat our homes and run our businesses well into the future while continuing to attract major new investment and generate substantial government revenues providing benefits to all British Columbians.

Randy Jespersen is president of Terasen Gas.

Posted by Arthur Caldicott on October 03, 2005

Natives want province to halt coal-burning at mill

The Canadian Press
October 1, 2005

CAMPBELL RIVER -- The First Nation on Quadra Island has asked the B.C. government not to approve an application for the Elk Falls pulp and paper mill to burn any more coal until the emissions have been studied.

The 200-member Cape Mudge band is worried about the possible health effects of emissions from the NorskeCanada mill.

An emissions-fallout study commissioned by Norske during the past year showed elevated levels of various toxic compounds around the Cape Mudge lighthouse a few hundred metres south of Cape Mudge village, but mill personnel said the figures were well within safety limits.

Mill vice-president Norm Facey said if the mill waste were causing health problems the group most likely to be affected would be mill employees.

"If that was happening the [Workers Compensation Board] would be all over us," he said.

Government agencies are required to consult with and help protect First Nations from the environmental and health impact of industrial plans.

A Cape Mudge member said new or recurring cases of cancer have been coming in at a rate of at least two a year over the past 10 years or more, about three times the number of cases at the nearby Quinsam Indian reserve, which receives only a fraction of the mill's smoke-stack emissions compared to Cape Mudge.

Cape Mudge band administrator Brian Kelly said the two First Nations communities are an almost exact mirror image of each other demographically, in population, age distribution, dietary habits and lifestyle, such as smoking.

"I don't see there's any reason [the cancer rate] would be different [apart from the mill emissions]," Kelly said.

Cape Mudge band members in their 40s and early 50s have been diagnosed with cancer, he said. "It's not like it's people 75-plus."

The mill is seeking an open-ended amendment to its present temporary permit to burn up to 83 tonnes of coal a day as an auxiliary fuel for its boilers.

The permit expired Friday. The Environment Ministry's waste-protection branch extended it for 30 days and also extended the consultation period until the end of October.

Facey said if the company was not allowed to go on burning coal at the mill, that would have a severe impact on the operation's economics, already hit by several other factors such as the high value of the Canadian dollar.

Facey said the mill was prepared to work with the First Nation to try to get more continuous-monitoring equipment, perhaps for a study over two years.

A letter from the band to the B.C. government called for increased air pollution monitoring.

"Additional contamination from the burning of coal would create further damage to the health, safety and enjoyment of life of this aboriginal community," the letter said.

Posted by Arthur Caldicott on October 03, 2005

October 02, 2005

Gas prices beginning to affect consumer behaviour

Barrie McKenna
Globe and Mail
September 29, 2005

WASHINGTON -- The high price of gas already has consumers feeling a lot less confident and with another surge in energy prices yesterday, economists are watching for signs the price shock is enough to get people to actually change the way they live and spend.

"Consumers have to adjust their budgets," insisted economist Peter Morici, a business professor at the University of Maryland in College Park, Md. "Something is going to have to give."

The first hint of a consumer pullback is likely to show up in purchases of non-essential goods and services, including apparel, cars and leisure travel, according to Prof. Morici. He also predicted there would be changes in behaviour as people drive less, buy more fuel efficient cars, car pool and turn to public transit.

"We are going to see conservation in gasoline that we didn't expect," he said. "We've crossed the threshold."

Oil, gasoline and natural gas prices all jumped yesterday, on news of a decline in crude inventories in the United States and continuing fears over refining capacity. The question now is whether those high prices will radically change behaviour.

That hasn't been the pattern over the past decade, according to a report released yesterday by Statistics Canada that showed Canadians consumed a record 40.3 billion litres of gasoline last year, up nearly 17 per cent from a decade earlier.

Still, there is plenty of evidence that high energy prices are starting to bite.

Consumer confidence in the United States suffered its largest drop in 15 years after hurricane Katrina sent gasoline prices to record highs, according to report this week by the U.S. Conference Board.

Energy costs are also spooking business owners. Owners of small and medium-sized Canadian companies said they too are fretting about the economic fallout from higher fuel prices, according to a survey by the Canadian Federation of Independent Business. The study found that 88 per cent of respondents said energy prices were now a major cause of concern.

A report yesterday showed consumer strains are already turning up in credit card delinquencies among Americans. The American Bankers Association blamed rising fuel costs for a record high percentage of credit card customers who've fallen behind on their payments.

"Gas prices are taking huge chunks out of wallets, leaving some individuals with little left to meet their financial obligations," ABA chief economist James Chessen said.

The ABA said 4.81 per cent of credit card accounts were past due by 30 or more days in the second quarter, up from 4.76 per cent in the first quarter. He pointed out that the effects of hurricanes Katrina and Rita won't show up until the fourth quarter.

Gasoline for October delivery jumped 17.29 cents (U.S.) or 8 per cent to close at $2.33 a gallon on the New York Mercantile Exchange, the highest since Sept. 1. Crude oil for November delivery rose $1.28 or 2 per cent to $66.35 a barrel. Natural gas for October delivery rose $1.251 or 9.9 per cent to $13.907 per million British thermal units, the highest close since trading began in 1990.

Posted by Arthur Caldicott on October 02, 2005

A World Turned Upside Down

George Monbiot
The Guardian
September 2005

The corporations are demanding regulation, and the government is refusing to give it to them

Climate change denial has gone through four stages. First the fossil fuel lobbyists told us that global warming was a myth. Then they agreed that it was happening, but insisted it was a good thing: we could grow wine in the Pennines and take Mediterranean holidays in Skegness. Then they admitted that the bad effects outweighed the good ones, but claimed that it would cost more to tackle than to tolerate. Now they have reached stage 4. They concede that it would be cheaper to address than to neglect, but maintain that it's now too late. This is their most persuasive argument.

Today the climatologists at the Snow and Ice Data Centre in Colorado will publish the results of the latest satellite survey of Arctic sea ice(1). It looks as if this month's coverage will be the lowest ever recorded. The Arctic, they warn, could already have reached tipping point: the moment beyond which the warming becomes irreversible(2). As ice disappears, the surface of the sea becomes darker, absorbing more heat. Less ice forms, so the sea becomes darker still, and so it goes on.

Last month, New Scientist reported that something similar is happening in Siberia. For the first time on record, the permafrost of western Siberia is melting(3). As it does so, it releases the methane stored in the peat. Methane has 20 times the greenhouse warming effect of carbon dioxide. The more gas the peat releases, the warmer the world becomes, and the more the permafrost melts.

Two weeks ago, scientists at Cranfield University discovered that the soils in the UK have been losing the carbon they contain: as temperatures rise, the decomposition of organic matter accelarates, which causes more warming, which causes more decomposition. Already the soil in this country has released enough carbon dioxide to counteract the emissions cuts we have made since 1990(4).

These are examples of positive feedback: self-reinforcing effects which, once started, are hard to stop. They are kicking in long before they were supposed to. The intergovernmental panel on climate change, which predicts how far the world's temperature is likely to rise, hasn't yet had time to include them in its calculations. The current forecast - of 1.4 to 5.8 degrees this century - is almost certainly too low.

A week ago, I would have said that if it is too late, then one factor above all others is to blame: the chokehold big business has on economic policy. By forbidding governments to intervene effectively in the market, the corporations oblige us to do nothing but stand by and watch as the planet cooks. But on Wednesday I discovered that it isn't quite that simple. At a conference organised by the Building Research Establishment, I witnessed an extraordinary thing: companies demanding tougher regulations, and the government refusing to grant them(5).

Environmental managers from BT and John Lewis (which owns Waitrose) complained that without tighter standards that everyone has to conform to, their companies put themselves at a disadvantage if they try to go green. "All that counts", the man from John Lewis said, "is cost, cost and cost." If he's buying eco-friendly lighting and his competitors aren't, he loses. As a result, he said, "I welcome the EU's Energy Performance of Buildings Directive, as it will force retailers to take these issues seriously."(6) Yes, I heard the cry of the unicorn: a corporate executive, welcoming a European directive.

And from the government? Nothing. Elliot Morley, the minister for climate change, proposed to do as little as he could get away with. The officials from the Department of Trade and Industry, to a collective groan from the men in suits, insisted that the measures some of the companies wanted would be "an unwarranted intervention in the market".

It was unspeakably frustrating. The suits had come to unveil technologies of the kind which really could save the planet. The architects Atelier Ten had designed a cooling system based on the galleries of a termite mound. By installing a concrete labyrinth in the foundations, they could keep even a large building in a hot place - like the arts centre they had built in Melbourne - at a constant temperature without air conditioning(7). The only power they needed was to drive the fans pushing the cold air upwards, using 10% of the electricity required for normal cooling systems.

The man from a company called PB Power explained how the 400 megawatts of waste heat poured into the Thames by the gas-fired power station in Barking could be used to warm the surrounding homes. A firm called XCO2 has designed a virtually silent wind turbine, which hangs, like a clothes hoist, from a vertical axis. It can be installed in the middle of a city without upsetting anyone(8).

These three technologies alone could cut millions of tonnes of emissions without causing any decline in our quality of life. Like hundreds of others, they are ready to deploy immediately and almost universally. But they won't be widely used until the government acts: it remains cheaper for companies to install the old technologies. And the government won't act because to do so would be "an unwarranted intervention in the market".

This was not, I now discover, the first time that the corporations have demanded regulation. In January the chairman of Shell, Lord Oxburgh, insisted that "Governments in developed countries need to introduce taxes, regulations or plans Š to increase the cost of emitting carbon dioxide."(9) He listed the technologies required to replace fossil fuels, and remarked that "none of this is going to happen if the market is left to itself." In August the heads of United Utilities, British Gas, Scottish Power and the National Grid joined Friends of the Earth and Greenpeace in calling for "tougher regulations for the built environment"(10).

So much for the perpetual demand of the thinktanks to "get government off the backs of business". Any firm which wants to develop the new technologies wants tough new rules. It is regulation that creates the market.

So why won't the government act? Because it is siding with the dirty companies against the clean ones. Deregulation has become the test of its manhood: the sign that it has put the bad old days of economic planning behind it. Sir David Arculus, the man appointed by Blair to run the government's Better Regulation Task Force, is also deputy chairman of the Confederation of British Industry, the shrillest exponents of the need to put the market ahead of society. It is hard to think of a more blatant conflict of interest.

I don't believe it is yet too late to minimise climate change. Most of the evidence suggests we could still stop the ecosystem from melting down, but only by cutting greenhouse gases by around 80% by 2030. I'm working on a book showing how this can be done, technically and politically. But it has now become clear to me that the obstacle is not the market but the government, waving a dog-eared treatise which proves some point in a debate the rest of the world has forgotten.

www.monbiot.com

References:

1. This was reported by Steve Connor, 16th September 2005. Global warming 'past the point of no return'. The Independent. But the centre has just announced that its results won't be published until the end of the month. http://nsidc.org/news/

2. Steve Connor, ibid.

3. Fred Pearce, 11 August 2005. Climate warning as Siberia melts. New Scientist.

4. John Pickrell, 7th September 2005. Soil may spoil UK's climate efforts. New Scientist.

5. Resource '05, 13th-15th September 2005. BRE, Watford.

6. Bill Wright, energy and environment manager, John Lewis Partnership.

7. See http://www.atelierten.com/ourwork/profiles/0513-federation-square.pdf

8. Quiet Revolution 6kW. Brochure from XCO2. Offord St, London. http://www.xco2.com/quietrevolution

9. Lord Oxburgh, 27th January 2005. Quoted in Greenpeace press release: Shell Chair urges government to act now on climate change. http://www.greenpeace.org.uk/climate/climate.cfm?ucidparam=20050210110220

10. Tony Juniper et al, 1st August 2005. Letter to Margaret Beckett and other ministers. Available on request from Friends of the Earth.

Posted by Arthur Caldicott on October 02, 2005

October 01, 2005

Why Cheap Gas Is a Bad Habit

Robert J. Samuelson
Newsweek
Sept 19, 2005

Higher pump prices would help push Americans away from gas guzzlers.


Mario Tama / Getty Images
Hurricane Katrina’s impact was felt far beyond New
Orleans. All drivers learned the cost on oil disruption.


Sept. 19, 2005 issue - What this country needs is $4-a-gallon gasoline or, maybe, $5. We don't need it today, but we do need it over the next seven to 10 years via a steadily rising oil tax. Coupled with stricter fuel-economy standards, higher pump prices would push reluctant auto companies and American drivers away from today's gas guzzlers. That should be our policy. The deafening silence you hear on this crucial subject from the White House, Congress and the media is a sorry indicator of national shortsightedness.

Katrina's message is clear: we are vulnerable to any major cutoff of oil. This cutoff came from a natural disaster, but the larger menace is a political cutoff. Two thirds of the world's proven oil reserves lie around the Persian Gulf; these countries, led by Saudi Arabia, now provide about a quarter of today's oil supply. This flow could be interrupted at any time for many reasons—terrorism, war, domestic upheaval, deliberate cuts. Many other oil exporters are similarly unreliable: Russia (the No. 2 exporter), Venezuela (No. 5) or Nigeria (No. 8).

Until oil's geography changes, a prudent society would respond to this unavoidable insecurity. After the first oil "crisis" in 1973, Americans did. Congress created a Strategic Petroleum Reserve (SPR) and mandated fuel-economy standards. Drivers were sobered by high prices. From 1970 to 1990, average fuel economy for cars rose from 13.5 miles per gallon (mpg) to 20mpg. For "light trucks" (a category covering pickups, SUVs and minivans), the gains were from 10mpg to 16mpg. But in the 1990s, there was massive backsliding. Fuel economy stagnated, as millions of Americans shifted to SUVs and pickups. The SPR languished. In 1992, it had oil equal to 83 days of imports; by 2000, that was only 52 days.

Complacency reigned. Americans re-embraced the notion of cheap gasoline as a "right" that, if impaired, must be blamed on greedy oil companies, monopolistic OPEC or some sinister conspiracy. Thus, "gouging" was last week's acceptable explanation for the sharp run-up of gasoline prices. Forget the law of supply and demand. Forget our continuing vulnerabilities.

More than 60 percent of our oil use goes for transportation, dominated by road travel. It's a myth that encouraging more fuel-efficient vehicles means that we will all have to drive shoeboxes. The advent of "hybrid" vehicles—combining internal-combustion engines and electric motors—promises fuel-efficiency gains of 10 percent to 50 percent based on existing technologies, says David Greene of the Oak Ridge National Laboratory. But it's also a myth that simply issuing tougher fuel standards will bring instant relief.

"It's going to take a long time," says Walter McManus of the University of Michigan Transportation Research Institute. "You've got 225 million vehicles out there. It's about 15 years to turn over the fleet." Actually, the math is worse than that. From 2003 to 2025, the number of vehicles may grow by 50 percent, projects the Energy Information Administration. The increase reflects more people (from today's 297 million to 351 million in 2025) and higher incomes. The upshot: to keep total gasoline consumption constant, average fuel efficiency must improve roughly 50 percent.

We should be able to do this. Car companies can shift decisively toward hybrids. Despite the hype, annual hybrid sales this year will amount to a mere 234,000 out of total sales of about 17 million, McManus says; and present production plans would raise that to only about 600,000 by 2009, he projects. But if companies are to be shoved toward hybrids, they have to be assured of strong demand, because there's a definite downside. On average, hybrids cost $3,000 to $4,000 more than conventional cars, says Greene. (The reasons: the cost of batteries and the need for two power systems.) The traditional U.S. car companies—General Motors, Ford and Chrysler—are unfortunately the least prepared for change. They tied their fortunes to the biggest SUVs and pickups.

Hence, the need for a stiff oil tax. Government needs to foster a market for fuel efficiency. The tax should be introduced gradually—paralleling tougher fuel standards— and, perhaps, tempered if global oil prices rise sharply. One way or another, Americans should know that the era of cheap gasoline is history. Some drivers will want hybrid versions of their present vehicles; others will downsize. It's not a national tragedy for someone to trade an Expedition for a Taurus.

At times, individual freedom must be compromised to improve collective security. Even with this approach, we would not insulate ourselves from all upsets in the world oil market, including a catastrophic loss of supply. Barring huge oil discoveries or technological breakthroughs, "energy independence" is another myth. But we could limit our exposure. The fact that we're not trying is—considering how warnings of New Orleans's vulnerability were ignored—an irony worth noting.

© 2005 Newsweek, Inc.

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Posted by Arthur Caldicott on October 01, 2005

September 29, 2005

Harvesting the wind: Nai Kun

Glenn Bohn
Vancouver Sun
26-Jul-05

Nai Kun Wind Developments has an ambitious plan to build the largest wind farm in Canada

OLD MASSET - To most people, the storm-battered seas off the northeast coast of the Queen Charlotte Islands seem a cold, inhospitable place. But to civil engineer Fred Dabiri, those shallow and wind-swept waters are just the place he's been looking for.

Dabiri is one of the directors of Vancouver-based Nai Kun Wind Development Inc., a company that wants to build the largest wind farm in Canada and the largest offshore wind farm in North America.

The Vancouver company is pitching a 700-megawatt project, which would generate enough electricity to power about 240,000 homes.

A total of 350 wind turbines would be anchored on the seabed, in depths of 20 metres, about eight kilometres or more offshore.

Because the turbines would not be on land, where the wind is slowed by trees and hills, they could tap the full force of the wind.

Throughout the year, the winds here average about 58 km/h, or about twice the speed needed to make wind an economically attractive energy source.

In November, December and January, when winter storms bash the islands, Environment Canada has recorded gusts of wind up to 161 km/h.

The modern-day windmills used to convert that non-polluting resource to electricity would not be little things.

Each steel tower, a single column topped by three slow-moving blades, would rise about 80 metres above the ocean surface.

Dabiri says the sheer size of the machines would make them difficult to transport to a land-based site, because each would need a highway-standard access road. Those roads would have to cross streams and cut through forests. And the northeast corner of the archipelago the Haida call Haida Gwaii is a long-established park -- Naikoon Provincial Park -- not a logging area that already has wide gravel roads.

"Environmentally, it's far more damaging to be on the land than the ocean," Dabiri said during a recent interview at a windy beach at Old Masset. "This is a much cleaner way to generate power."

There are already existing or proposed offshore wind farms in the ocean near Wales, England, Denmark and Sweden. The largest such project, constructed in 2002, at Horns Rev in Denmark, now generates about one- fourth the power that Nai Kun would produce.

There are also large land-based wind farms in Europe and North America -- including ones in Alberta, Saskatchewan, Ontario, Quebec, Prince Edward Island, Nova Scotia and Yukon.

A company called Cape Wind is proposing the first offshore wind farm in the U.S., about eights kilometres offshore Cape Cod in Massachusetts.

Like other wind energy companies, Cape Wind paints itself green by noting its energy project would produce no greenhouse gases and no clouds of toxic smoke. But Cape Wind is getting a rough ride from a conservation group, the Alliance to Protect Nantucket Sound. In May, the non-profit group hired Charles Vinick, who was prominent in the successful "Free Willy" campaign to return a captive killer whale to the ocean.

The Alliance to Protect Nantucket Sound, like many of its counterparts elsewhere, uses environmental arguments to oppose the wind energy scheme. For instance, it makes much of the fact that the Cape Wind project is on the Atlantic flyway, the migration route used by millions of songbirds and threatened bird species. The anti-wind farm group calls the 130 proposed wind turbines "130 navigation and safety hazards" for oil tankers, commercial fishing boats, ferries and sailboats. The esthetics of all those turning blades on the sea -- and the impact that may have on tourism and property values -- is another argument aimed at Cape Wind. The Cape Cod Chamber of Commerce, which wants Cape Cod to remain one of the top 10 tourist destinations in the U.S., fears a wind farm would be "a major blight on the horizon" that will keep tourists away.

So far, the wind farm proposal in B.C. hasn't fuelled those kinds of attacks or triggered a big anti-wind farm campaign.

Michael Burns, the president of Nai Kun Wind Development, said a person on the beach in the Charlottes would have difficulty seeing the wind turbines. According to the current plan, the closest wind turbine would be eight kilometres offshore. There are no houses in Naikoon Provincial Park. (The company spells its name differently, but both the park and the company are named after a Haida family.)

"If you stood on the beach in Naikoon Park, these things would appear about three-quarters of an inch high," he said.

In a recent column published in the New Scientist magazine, prominent Canadian environmentalist David Suzuki distanced himself from environmentalists in North America and Europe who are, in Suzuki's words, "locking horns with the wind industry" and arguing that wind turbines destroy the ambience of the countryside.

"We cannot shout from the rooftops about the dangers of global warming and then turn around and shout even louder about the 'dangers of windmills,'" the Vancouver-based scientist and broadcaster wrote. "Climate change is one of the greatest challenges humanity will face this century."

One of the most recent rebuffs of wind farms occurred in June in the state of Victoria in Australia, where authorities rejected a 70-turbine land-based wind farm on the grounds that it threatened a nearby colony of rare, wedge-tailed eagles. An independent panel predicted "significant numbers" of eagles could fly into turbine blades.

Nai Kun Wind Development Inc. is proposing a far larger wind farm in northwest B.C. than the Australia project or the proposal at Cape Cod.

The 700 megawatts of power it would generate is relatively small in comparison with the 11,000 megawatts BC Hydro can provide to its residential and commercial customers, which include power-hungry industries and businesses that consume vast quantities of electricity.

Dabiri said the electricity generated by Nai Kun would not be used on the Queen Charlottes, which now rely mostly on diesel-generated electricity, because wind power projects need to be built in concert with a big hydro-electric facilities. They need to be connected with a large electrical grid, to balance out supply and demand. Wind turbines will generate the most electricity in winter when the winds are heaviest, while hydro dams generate the most electricity in summer, when snowmelt tops the reservoirs.

"Hydro can take the energy from the wind farm whenever it comes," Burns said. "If they've got too much energy, they simply hold the water behind a dam and use the wind energy. When there's less wind energy than usual, they run more water through the dam."

Nai Kun has designed a 700-megawatt project because that's the amount of additional energy that BC Hydro could carry in its existing main transmission line from Prince Rupert to Greater Vancouver. No additional transmission lines -- a pricey proposition -- would have to be built. Subject to a power-purchasing agreement that Nai Kun hopes to negotiate with B.C. Hydro, wind-generated electricity would be transmitted through an underwater cable to the main transmission line south of Prince Rupert and used as Hydro sees fit.

Although Hydro doesn't buy any wind-generated electricity now, the Crown corporation is seeking regulatory approval this fall to ask independent power producers to sell Hydro power as their projects come on stream, as early as 2010.

Mary Hemmingsen, Hydro's director of power planning and portfolio management, is one of the Hydro officials who will visit the northern coast of the Queen Charlottes this August to learn more about the Nai Kun proposal.

Hemmingsen said Hydro wants at least 50 per cent of the energy it wants to buy to be "clean energy," a category that she said includes wind power, run-of-the-river hydro power and biomass-generated power. Energy sources that are not considered clean include coal or gas-fired power plants.

There are some taxpayer-subsidized incentives that wind power companies can take advantage of, including a federal tax credit of about $10 for every megawatt of power.

But the cost of that power -- whatever the source -- remains key.

"We're looking for the most cost-effective bid," Hemmingsen said.

Nai Kun hopes its first wind turbines will be installed and be generating power by late 2008.

Burns, the company's president, is a former chief financial officer for BC Gas and a former vice-president of IBM Canada. Dabiri is president of David Nairne and Associates, a B.C.-based firm of engineers, architects and project planners that is already building the largest construction projects in the Queen Charlottes, or Haida Gwaii. Other directors come from B.C. Hydro, Westcoast Energy and other oil and gas firms.

Burns said he is confident the company will be able to raise the $1.5 billion it needs from private investors, when it's time to seek financing. He said B.C. Hydro and the company don't yet have any signed agreements that commit Hydro to buy wind-generated electricity from Nai Kun, but those deals can't come until electricity is actually being produced.

Nai Kun isn't pioneering a new wind turbine technology. It would buy wind turbines from existing manufacturers. But finding $1.5 billion isn't the only hurdle the company will have to jump.

Environmental impact studies, which can take years, have yet to be done. Sometime afterwards, the provincial and federal governments would have to give the green light. The Haida's yet-to-be-resolved legal claim over the "land, inland waters, seabed and sea" of Haida Gwaii is another factor, because the Supreme Court of Canada ruled in 2004 that governments must consult with and accommodate aboriginal groups affected by land and resource developments.

Nai Kun sought and obtained permits from the provincial and federal governments for the right to do seismic tests, wind tests and other environmental studies, but has also obtained a written permit from the Council of the Haida Nation, the political organization that represents Haida interests on the islands.

Nai Kun has also proposed to make the Haida 50-50 partners in a company that would operate and maintain a wind farm.

Wilson Brown, the elected chief of the aboriginal village of Old Masset, said the village council doesn't yet have a formal position about the megaproject proposal.

"There's not enough data to make an informed decision," he said.

Brown said he is responsible for the aboriginal community of Old Masset but is also one of the commercial crab fisherman who want to make sure the wind turbines won't damage crab habitat.

"I want to make sure my livelihood is still protected," he said.

Village of Masset Mayor Barry Pages said his municipal council has also made no formal decisions and hasn't yet held any public meetings.

"The crab fishing industry is a major player in our community and there are major questions that need to be addressed," Pages said, echoing Brown's concerns.

gbohn@png.canwest.com

TAPPING THE WIND'S ENERGY:

The who, what, where and why of a proposed wind energy megaproject in the Queen Charlotte Islands, or Haida Gwaii

Who: Nai Kun Wind Development Inc., a wholly-owned subsidiary of Uniterre Resources Ltd., a Vancouver-based energy and exploration company on the Toronto Venture Exchange.

What: Nai Kun is proposing a "wind farm" with as many as 350 huge wind turbines. The modern-day windmills could generate as much as 700 megawatts of electricity or enough power for 240,000 homes.

Where: The wind turbines would be anchored in the shallow waters of stormy Hecate Strait, at least eight kilometres from the northeast coast of Graham Island.

Why: The company is proposing the $1.5 billion private-sector venture for profit. An underwater cable would bring the power to the B.C. mainland, where the company wants to sell the power to BC Hydro. The potential jobs: about 2,500 person-years of work during the construction period and about 50 permanent jobs.

Ran with fact box "Tapping the Wind's Energy", which has been appended to the end of the story.

© The Vancouver Sun 2005

Nai Kun Wind Developments

Posted by Arthur Caldicott on September 29, 2005

If Ralph's a friend, who needs enemies?

Andrew Nikiforuk
Globe and Mail
Wednesday, September 28, 2005


Ralph Klein has taken time out from his Jean Chrétien retirement course to issue prosperity cheques. The media can't gush enough about his beneficence; other Canadians are envious. Everyone wants some "Ralph bucks." But please don't envy us. Whenever a government sends money to its citizens, you can be sure it wants to hide an addiction or buy forgetfulness. And in Mr. Klein's case, the Premier is hoping his prosperity dividend will obscure the province's growing economic vulnerability and a trail of land abuse so grotesque that even Americans in Dick Cheney's Wyoming might shake their heads.
Frenzied gas drilling by EnCana and other land-eaters has turned some parts of Wyoming, Colorado and New Mexico into what even the National Geographic now calls "national sacrifice zones." Alberta, which has no plan other than frenzied drilling, may yet outdo Wyoming on the sacrifice scale. According to Statistics Canada, Alberta is now the country's largest single producer of cattle, natural gas, oil, bitumen, coal-bed methane and unplanned urban growth. The Alberta Genuine Progress Indicator, just published by the Pembina Institute (a non-profit energy watchdog), says if that everyone spent their natural capital so liberally, "five planets would be needed to meet global consumption demands."

To print Ralph bucks, the province has systemically looted one landscape after another. Forty years ago, Alberta's boreal forest was a wilderness; today, provincial records show that 90 per cent has been seriously fragmented by roads, well sites, seismic lines, pipelines and power lines, and looks like an industrial park. What isn't being drilled is being logged.

In Drayton Valley, southwest of Edmonton, the government allows companies to build highly toxic sour-gas wells so close to people's homes that many Albertans live in what's known as "emergency response zones" (in the event of a leak or accident, they would die or suffer permanent brain damage if not evacuated in time). There are as many as 52 such zones; to be located inside one devalues a home by an average of $6,000. But property devaluation is par for the course in Alberta.

The eastern slopes of the Rockies, Alberta's signature landscape, is now slated for gas drilling so intensive that within the industry it's known as "carpet-bombing." Watersheds and fescue grasslands -- which can capture more carbon dioxide than forests (maintaining these lands is the province's smartest climate-change fighter) could all be destroyed to make a few more "Ralph bucks."

To accommodate urban sprawl and other goodies, the government admits that it has over-allocated water from every major river in southern Alberta -- an area experiencing a 3-per-cent economic growth rate. In 50 years, no one expects to be able to float down the Bow or Oldman rivers.

To please Dick Cheney, we are now liquidating Alberta's No. 1 revenue earner, natural gas, faster than VLT gamblers can eat up cash. Even with a quarter of the world's drilling rigs at play in Alberta, production is dropping by 3 per cent a year (according to Dave Hughes, a geologist at Natural Resources Canada). We have a nine-year supply of conventional gas left -- and the sorry replacement, coal bed methane, promises to fragment more land, threaten more water, use more energy and unsettle more rural Albertans than all previous drilling combined.

The much vaunted oil sands, Alberta's original "provincial sacrifice zone," remain a sobering study in megaproject mismanagement. It's not likely that the world's biggest holes in the ground will ever be reclaimed, and most projects are already being dogged by the rising costs of steel, water, solvents, natural gas, manpower and basic infrastructure. Even industry sources describe the province's cumulative impact planning as "dysfunctional."

Although Mr. Klein pretends that Alberta is deficit-free, don't believe it. The provincial oil-and-gas regulator (the Alberta Energy and Utility Board) reports that the oil patch has $9-billion worth of wells and gas facilities that haven't been cleaned up -- and has only set aside $20-million for the job. Alberta Infrastructure Minister Lyle Oberg admits that the province has a $7-billion backlog in work on schools and roads. A $1-billion water strategy has gone largely unfunded. Growth, of course, never pays for itself. But you'll never hear that truth in Alberta.

When a society greedily eats its children's future, the social indicators generally look bad. Pembina's sobering, 51-page Genuine Progress Indicator reports that Alberta has Canada's highest rate of car crashes and fatalities, a divorce rate that grew by 357 per cent in the last 40 years and one of the worst gambling records anywhere. Albertans now spend more on gambling ($2-billion) than the province earns from oil revenues. Many consider it Mr. Klein's most impressive legacy.

Saving for the future, a no-brainer, just isn't happening. Norway has a rainy day petroleum fund worth $100-billion and Alaska has a $35-billion fund (plus its own petro cheques). Yet Alberta hasn't put one penny in the province's static $12-billion Heritage Fund since 1987. With Ralph bucks, who needs to worry about rainy days or grandchildren?

The worst is this: Alberta can't even be bothered to collect a fair share of its fossil-fuel wealth. Between 1995 and 2002, Norway and Alaska collected twice as much revenue from their oil and gas reserves. In contrast, Alberta simply let the profits slip south of the border. Our one-per-cent royalty rate for oil sands remains a continental embarrassment.

The poet Sir Walter Scott once asked if there breathed a man "with soul so dead/Who never to himself hath said, 'This is my own, my native land!' " Gamblers with petro bucks can't be bothered with such reflective nonsense. Envy us? Hell, no. Envy Norway.

Andrew Nikiforuk is a Calgary journalist and author of Saboteurs: Wiebo Ludwig and the War Against Big Oil.

Posted by Arthur Caldicott on September 29, 2005

September 22, 2005

Trade pact cost us a bundle

by David Orchard

Across Canada the price of gasoline rose steadily over the summer. Recently it shot up another 30%. We were told that this unprecedented leap was because Hurricane Katrina in the Gulf of Mexico affected U.S. production.

Why does a storm in the U.S. drive up Canadian prices? There was no storm in Alberta. No drilling rigs were toppled in Saskatchewan. Yet Canadians are now paying up to $1.44 a litre or over $6 per gallon for gasoline, more than in most places in the U.S. How can this be? Isn't Canada an oil and gas producer, the largest foreign source in fact for the U.S.?

The answer is spelled FTA and NAFTA. Not long ago we had a made-in-Canada price for energy, Canadian oil and gas companies, and a 25 year reserve of gas set aside for Canada's future needs. A cold country, with vast distances, quite reasonably gave its own citizens a better price for oil and gas than it charged for export -- just as Saudi Arabia, Venezuela and other oil exporting countries do for their citizens.

Abundant energy was Canada's advantage in an era of world competition. China has cheap labour, the U.S. a warmer climate. Canada had energy.

All of that changed in 1988 when Canada, for reasons unknown to most of its citizens, signed the Canada-U.S. free trade agreement (FTA) and with the stroke of a pen gave away control of its energy.

The energy terms of the FTA bear repeating.

Canada abolished its reserve requirements for its own future needs -- so all of our reserves can now be exported -- and agreed to never charge the U.S. more for exports of energy than it charged Canadians. In addition, if Canada faced a shortage of any form of energy it would continue to send the same proportion of its energy to the U.S., even if Canadians went short themselves.

It is safe to say that no other country in the world has, in time of peace, signed away so completely its energy resources, present and future.

In 1994, the FTA was expanded to NAFTA to include Mexico. Mexico refused to sign the energy clauses Canada had signed.

Those of us who spoke out against the FTA pointed out this was not free trade, but forced trade, and warned the agreement would have profound effects on our future, our energy security and our sovereignty.

We were accused of being "fearmongers," of being "anti-trade," of being "protectionist" and so on. Now even those who hurled those accusations are realizing they have been standing on quicksand.

The results stare Canadians in the face and hit their wallets every time they fill their cars, trucks, industrial or agricultural machines with fuel.

As Canada exports more and more oil and gas -- it has by-passed Saudi Arabia as the largest supplier to the U.S. -- some still attempt to justify these agreements. However, under the FTA, the U.S., now taking 60 % plus of our production, will, when the shortage comes, have the right to 60% (or more!) in perpetuity -- Canadians will have the right to whatever is left.

Oh, but the Alberta tar sands are there, we are assured. Rarely mentioned is that the petroleum coming out of the tar sands is going south to the U.S. virtually royalty free and that large reserves of increasingly valuable natural gas are being burned to process this tar sands production. In other words, Canada is actually subsidizing -- at great financial and environmental cost -- the giveaway of a precious finite resource.

The NAFTA promise of secure access to the U.S. market was never anything but an illusion and nothing but shreds remain of the guarantee of an end to arbitrary U.S. tariffs. Yet the take over of our industries continues apace -- from energy to beef, from manufacturing to retail. It's time to wake up.

We need to set up a coast to coast comprehensive review of the FTA and NAFTA. This review should examine in detail the effects of these agreements on our economy and sovereignty and then make an informed recommendation about the future.

Integrating our energy and our economy into that of the U.S. means being subject to U.S. ownership, decisions, priorities and prices. It means losing the capacity to direct our future and our own resources in our national interest.

We don't have to remain tied into agreements that will see our energy prices driven through the roof, or watch our economy and control of our destiny move into foreign hands.

Some insist that Canada continue to suffer and crawl, but it is not necessary. Both the FTA and NAFTA have withdrawal clauses that enable Canada, with six months notice, to withdraw without penalty or conditions and then revert back to trading with the U.S. under existing multilateral trade rules.

Let's not wait till our industries and agriculture become completely uncompetitive or until Canadians are left begging for their own energy at 40° below zero. As we watch the catastrophic events unfold in the Gulf of Mexico it is clear that Canada too has important decisions to make to safeguard its future.


--------------------------------------------------------------------------------

David Orchard is the author of The Fight for Canada - Four Centuries of Resistance to American Expansionism, and ran for the leadership of the federal Progressive Conservative Party in 1998 and 2003. He farms at Borden, SK and can be reached at tel (306) 652-7095, e-mail: davidorchard@sasktel.net, http://www.davidorchard.com

Posted by Arthur Caldicott on September 22, 2005

September 21, 2005

We Can Help New Orleans, But Can We Help Ourselves?

Ricardo Acuña
Parkland Institute
Edmonton Journal
20-Sep-2005

Alberta has a positive track record of using its natural resource wealth to help in times of crisis. Hurricane Katrina was no exception. But what would happen if the crisis was at home?

Recently the Alberta Energy and Utilities Board suspended its Maximum Rate Limitation systems to allow the Alberta oil patch to extract up to 30,000 extra barrels of oil per day on a “temporary basis. ”The goal, according to the EUB, is to help the United States meet its energy needs for “as long as necessary. ”

There has been much rhetoric from the Klein government of late about exclusive provincial control over natural resources and the spoils that go with it. One might ask if Alberta would be just as willing to lift limits on production in order to help avert a Canadian energy crisis.

If it were to happen today, the answer to that question would be irrelevant. Alberta would simply not be able to increase oil extraction for domestic consumption, regardless of whether it wanted to or not.

That’s right, the provincial and federal governments can easily increase production for export in response to a crisis in the US, but are currently prohibited from doing so for domestic consumption.

Article 605 of the North American Free Trade Agreement (NAFTA) states that Canada can do absolutely nothing to reduce the proportion of oil being exported to the United States relative to the proportion being consumed domestically. NAFTA’s proportionality provisions are not limited to oil ­ they extend to natural gas, energy and petrochemicals as well ­ but these days it is oil that is front and centre.

In 2004, Canada produced approximately 3. 1 million barrels per day of oil, of which about 68% (2. 1 million barrels per day) was exported to the United States. What proportionality means is that regardless of how much - or how little - oil we are producing, our governments cannot ever take any steps which will result in less than 68 % of it going to the United States.

What would that mean if a hurricane like Katrina were to hit Nova Scotia or Montreal today?Quite simply that, if we choose to abide by the rules of NAFTA, we would not be able to help. Regardless of how much oil there is in Alberta, we would not be able to help.

But there is a choice, and the time is right to do something about it.

International trade agreements are essentially legal contracts. When one party refuses to adhere to the rules of the contract, the other parties can also ignore the rules.

The basic premise of NAFTA was that Canada would give up control over our natural resources in order to gain access to the US market. By ignoring the softwood lumber decision, the US has reneged on its side of the bargain. We no longer have to live up to our side of the bargain.

US Vice President Dick Cheney has said on a few occasions that Alberta’s oil is one of the “pillars of North American energy security. ”The truth is that, under NAFTA, Alberta’s oil may be a pillar of the United States’ energy security, but it can do nothing for energy security in Canada - especially in a crisis.

Whether it is by declaring NAFTA null and void, or by having the US declared in violation, or by simply issuing due notice that we are withdrawing from the agreement, Canada must assert its sovereignty over our energy and trade policy now. If we do not, and find ourselves faced with a disaster like Katrina, we will not be able to help ourselves. Instead, we will have to rely on the charity and good will of those in the world that do have control over their own resources.

Ricardo Acuña is executive director of the Parkland Institute, a non-partisan public policy research network based at the University of Alberta.

*****************************************
Parkland Institute
11045 Saskatchewan Drive
Edmonton, AB T6G 2E1
Switchboard: (780) 492-8558
Fax: (780) 492-8738
www.ualberta.ca/parkland
*****************************************

Posted by Arthur Caldicott on September 21, 2005

Takeover tidal wave on the way

Takeover tidal wave on the way
Gary Park, Petroleum News, Aug-2005
Total eyes larger footprint in oil sands
Gary Park, Petroleum News, Aug-2005


Takeover tidal wave on the way

Gary Park
Canadian Correspondent
Petroleum News
August 2005

Global strategist bets U.S. securities regulator will ease oil sands reserve rules, freeing U.S. companies to buy existing Alberta sands operators

The U.S. Securities and Exchange Commission will relax its rules on what constitutes proved oil reserves, freeing major oil companies to embark on a buying binge in the Alberta oil sands, predicts a leading North American analyst.

Added momentum could come from the International Monetary Fund adopting a broader definition of measuring the bitumen deposits, boosting Canada’s oil reserves to two or three times those of Saudi Arabia, he said.

Donald Coxe, chairman and global portfolio strategist for Chicago-based Harris Investment Management and chief strategist for the Bank of Montreal, said Aug. 5 he is counting on the SEC changing rules that are more than 30 years old and opening the door to a flurry of acquisitions.

He told a conference call he believes the result will be a “disappearance” of publicly traded companies operating in the oil sands “once the SEC comes out with its rulings.

“I believe Big Oil is going to want to go (into the oil sands) and buy these companies.”

Oil sands bandwagon rolling

In a week when U.S. energy giant Kinder Morgan made a stunning C$6.9 billion bid for Vancouver-based Terasen followed a day later by the C$1.35 billion takeover of Deer Creek Energy by France’s Total, plenty of other energy executives and analysts climbed on the oil sands bandwagon.

John Mawdsley, senior vice president with brokerage firm Raymond James, issued a new report forecasting that the oil sands resource will deliver a “wall of profit” over the next several decades.

He said the northern Alberta deposits will eventually push Canada to third place in world oil production after Saudi Arabia and Russia.

To bolster his argument, Mawdsley noted that Suncor Energy’s C$3.4 billion Millennium expansion paid off its capital costs within two years of coming on stream, regardless of a C$1.4 billion cost overrun and is now generating “massive amounts of cash flow which will fund future expansions.”

His 128-page report said Canada is one of the few non-OPEC countries positioned to increase its oil output from reserves that are currently booked at 175 billion barrels and likely to increase.

Within 10 years, Canada’s production will trail only Saudi Arabia among all OPEC members, he said.

To underscore the attraction of the oil sands, he said a project costing C$350 million and producing 25,000 barrels per day would generate after-tax returns in the low 20 percent range over 25 years if West Texas Intermediate prices remained above US$40 per barrel. At US$60 per barrel, the profits would climb to the 25-309 percent range.

Even high prices for natural gas, needed for some extraction and processing operations, is not likely to undo the promise of the oil sands, Mawdsley said.

He said a barrel of synthetic crude that sells for US$60 per barrel can be profitably produced if gas costs US$10 per thousand cubic feet.

Mawdsley’s overall forecast projects that synthetic crude volumes will quadruple to 4 million bpd by 2020 and could eventually satisfy 25 percent of North America’s consumption.

Commenting on the Kinder Morgan-Terasen deal, Matthew Akman, a CIBC analyst, said in a note to clients that energy infrastructure growth in the United States is “limited because U.S. oil and gas production has peaked. Canada offers attractive energy production growth that attracts U.S. players.”

Oil sands companies will be seized

Deer Creek President and Chief Executive Officer Glen Schmidt said the expectation of long-term oil prices has prompted large companies such as Total to rapidly change their view of the oil sands, which were considered an overly expensive, fringe resource only two years ago.

He said the old yardstick is no longer an accurate instrument to measure “what’s happening today and in the future.”

For Coxe, there is little doubt that companies with existing oil sands operations, such as Suncor, Canadian Oil Sands Trust and Western Oil Sands, will be seized, despite the growth in their market values.

“The wealth of the oil companies has also grown by leaps and bounds,” he said, while cautioning investors not to buy equity in hopes of pocketing a large gain from a takeover.

Existing SEC rules prevent large chunks of oil sands holdings from being booked as reserves and would, in fact, limit Alberta’s bitumen resource to just 12 billion barrels, not the 175 billion barrels that are increasingly accepted by various authorities, including the Oil & Gas Journal.

Instead the SEC only assigns reserves once a company has built a facility to extract bitumen, in what Coxe describes as a “legal and accounting technicality.”

As well, the regulator requires companies to estimate their reserves based on prices at Dec. 31 each year, resulting in a writedown of hundreds of millions of barrels because it coincided with a slump to uneconomic heavy oil prices.

As one example, Husky Energy was forced to delete 39 percent of its heavy crude reserves, which were trading at US$12.27 per barrel on Dec. 31 against an average price for 2004 of US$28.75, while synthetic crude or upgraded heavy oil was trading at almost US$50.

In fact, by Jan. 10 this year the price of Lloydminster heavy crude was US$21.56, sufficient for Husky to return 98 percent of the of the reserves subtracted by negative revision to the proved reserve category.

That was an extreme version of the usual winter-time dip in heavy crude, which rebounds along with demand during the road-building season.

SEC asked to reconsider approach

Coxe said Cambridge Energy Research Associates sent a brief to the SEC, asking the commission to reconsider its approach to distinguishing proved from probable reserves and arguing that reserves that were highly profitable shouldn’t be immediately worthless.

CERA said companies should be allowed to include probable reserves in addition to proved reserves.

Coxe said in a March report that oil sands pioneers — Suncor and Syncrude Canada — struggled for decades to produce oil consistently at a cash cost of less than US$20 a barrel.

“They have long since driven wellhead costs far below that level,” although they face the risk of brutal winter weather, mechanical failures and accidents, natural gas prices, steel prices, labor rates, provincial royalties and the rising value of the Canadian dollar, he said.

But a new technology developed for the Long Lake project by Nexen and OPTI Canada should see “wellhead costs drop to single digits and stay there,” Coxe said.

TOP


Total eyes larger footprint in oil sands

Gary Park
Canadian Correspondent
Petroleum News
August 2005

Total is prepared to import its own technical and management experts and set more ambitious goals for its rapidly expanding Alberta oil sands holdings, said the president of the French giant’s Canadian subsidiary.

Following Total’s C$1.35 billion acquisition of Deer Creek Energy, Jean-Luc Guiziou told a conference call that his company is weighing the possibility of doubling first-phase production from the Joslyn project to 100,000 barrels per day by 2010.

The eventual goal is to produce 500,000 bpd from the Athabasca region of northern Alberta, said Philippe Arman, Total’s director of exploration and development for the Americas, joining Syncrude Canada, Suncor Energy and Shell Canada as the leading oil sands producers.

To that end, Total is on the lookout for a third project to add to its 50 percent stake in the ConocoPhillips Canada-operated Surmont venture and Joslyn.

As well, Total, which spends about C$10 million a year on research and development of heavy crudes, has teamed up with Devon Canada to study the use of vaporized solvents rather than natural gas-generated steam to inject into deep bitumen deposits and coax them to the surface.

Away from Venezuela?

Without making any direct connections, the Total executives were seen as pointing to a shift in their company’s heavy oil operations from troubled Venezuela to the political calm of Alberta.
Raymond James analyst John Mawdsley said Total could have taken its money to any number of places, such as Venezuela, Russia or offshore West Africa, but chose the oil sands. He said the drawing power was political stability, a huge resource base and known technology — something that is not available anywhere else.

Like all foreign-owned producers in Venezuela, Total has been a victim of the impulsive behavior of the Latin American country’s populist president, Hugo Chavez.

In just the last six months, Chavez has promised a new deal for Total and its partners in the Sincor heavy crude project, only to accuse Total, Royal Dutch/Shell and Norway’s Statoil of inflating their Sincor production and demand that they pay an additional US$1 billion in royalties.

They are also being compelled to convert production-sharing agreements into joint ventures.

The belief among some analysts is that Chavez is applying strong-arm tactics to force the foreign companies to surrender a portion of their ownership stake to Venezuela’s state-owned PDVSA.

Instead those companies are having second thoughts about their future in Venezuela and others are turning their attention to Alberta, where the Canadian and Alberta governments have worked closely since the 1980s to develop predictable royalties and environmental regulation.

—Gary Park

TOP

Posted by Arthur Caldicott on September 21, 2005

September 20, 2005

Whistleblowers, tread carefully.

Article raises suspicions about Alyeska official being let go
Joy Mapaye, ktuu.com, 17-Sep-2005
WSJ article questions Alyeska firing
webcenter11.com, 19-Sep-2005



Article raises suspicions about Alyeska official being let go

Joy Mapaye
ktuu.com
Saturday, September 17, 2005

Article raises suspicions about Alyeska official being let go

Anchorage, Alaska - Was Alyeska Pipeline Service Company’s number two executive fired because of his warnings about the pipeline? A Wall Street Journal article Saturday raised the question, and a long-time critic says that's exactly what happened.

The Wall Street Journal says last month, the former chief operating officer of the trans-Alaska oil pipeline, Dan Hisey, warned of 101 risks in the oil pipeline's integrity. The article says in an Aug. 16 memo, Hisey warned a consortium of the pipeline's owners that a plan to fully automate the line will be in trouble because of lack of staff, delayed maintenance, insufficient funding and other problems.

These are all issues that have been discussed in the past, but one critic says what's significant about this is that Hisey was the number two executive at APSC and he is intimately familiar with operations. The article goes on to say that one week after Hisey sent the memo out, he was told his position had been eliminated.

The Wall Street Journal quotes APSC officials as saying Hisey's job was eliminated as part of a restructuring and was unrelated to the memo. However, long time oil-industry critic Chuck Hamel says this is exactly why Hisey was fired. Hamel says with chief executive David Wight retiring, Hisey saw an opportunity.

“He's going to be the fall guy, so he realized that with Mr. Wright leaving, he can approach the owners and say, 'Look, here's what the problems are.' Hoping that they would agree, they would together fix it with money, and instead he got fired,” said Hamel (right).

The article also mentioned that in the memo Hisey (below) wrote about replacing a leaking valve, Check Valve 109, near the Klutina River. Experts say a failed valve in this area could trigger an oil spill.

“I think the oil companies should be proper with the people of Alaska and release that document to everybody,” said Hamel.

Chuck Hamel says it's likely the Wall Street Journal will continue to look at this story. Hamel has since written a memo to U.S. Sen. Pete Domenici and Alaska Gov. Frank Murkowski, asking them to improve oversight of the Alyeska Pipeline Service Company owners.

KTUU-TV did attempt to contact APSC for comment, but officials did not return the calls.

The governor's press secretary, Becky Hultberg, says they have not had the opportunity to review Hamel's letter. She says the same thing goes for the Wall Street Journal article. So at this point, she says, they have no comment until they get a chance to review the documents in question.

TOP



WSJ article questions Alyeska firing

webcenter11.com
September 19, 2005


(September 19, 2005) An article appearing in the Wall Street Journal is calling a firing at Alyeska into question.

Alaska Pipeline COO Dan Hisey wrote a memo that warned of 101 risks in the pipeline's integrity.

The article says Hisey warned the pipeline's owners that the plan to fully automate will be in trouble because of lack of staff, delayed maintenance, insufficient funding and other problems.

The pipeline is currently undergoing a $250 million dollar upgrade, called the strategic reconfiguration project.

However, one week after Hisey sent the memo out, he was told his position had been eliminated. Alyeska officials say Hisey's job was eliminated as part of a restructuring and was unrelated to his memo.

Alyeska is reviewing the merits of the recommendations contain in the memo from Hisey. A spokesman for the pipeline company says they are taking the actions necessary to keep the line safe and efficient.

TOP

Posted by Arthur Caldicott on September 20, 2005

Methanex Kitimat to provide terminal for EnCana

News Release
Methanex
September 20, 2005

METHANEX KITIMAT TO PROVIDE TERMINALLING SERVICES TO ENCANA

Methanex Corporation has entered into an agreement to provide terminalling services to EnCana at Methanex’s Kitimat, British Columbia site. EnCana advises that it plans to import diluent through this terminal for use in its oilsands projects in Alberta.

In addition, the agreement provides EnCana the option to buy from Methanex, and Methanex the option to sell to EnCana, the Kitimat site (excluding the methanol and ammonia facilities), within the five-year term of the agreement. Methanex recently announced its plan to shut down its Kitimat production facilities in early January 2006.

“This is a win-win for Methanex and EnCana” said Bruce Aitken, President and CEO of Methanex. “It will enable us, over time, to offset some of the Kitimat shutdown costs and will provide EnCana with a convenient terminalling facility on the west coast of Canada.” Aitken continued, “An important feature of the agreement is our right to use the Kitimat terminal facilities to import methanol from our other production facilities through Kitimat. This will allow us to continue to provide a secure, long term supply of methanol to our customers in the Pacific Northwest.”

The agreement is subject to certain conditions precedent. Methanex expects to commence terminalling services for EnCana in early 2006.

Methanex is a Vancouver based, publicly-traded company engaged in the worldwide production and marketing of methanol. Methanex shares are listed for trading on the Toronto Stock Exchange in Canada under the trading symbol “MX” and on the Nasdaq National Market in the United States under the trading symbol “MEOH.” www.methanex.com

Posted by Arthur Caldicott on September 20, 2005

September 18, 2005

'The new Kuwait'

Joe Morris
Business Editor
West Virginia Gazette-Mail
September 18, 2005

Could W.Va. be sitting on the answer to the energy crisis?

A major fuel reserve in West Virginia is capable of gushing the equivalent of half the oil under the ground in Iraq, but no one is yet willing to build the refinery that will get the stuff tank-ready. That's essentially what it would take to turn West Virginia, with its ample coal seams, into "the new Kuwait," according to energy experts at the Pentagon.

Speaking at a research forum in Roanoke last month, the Defense Department's William Harrison, a top adviser in the military's Clean Fuel Initiative, said the Pentagon is serious about partnering with energy companies to develop alternative fuels. And the most viable alternative, he said, appears to be diesel and other motor fuels produced by gasifying and then liquefying coal through a catalyzed chemical reaction known as the Fischer-Tropsch process.

"If you build it, we will come," Harrison told the Consortium for Fossil Fuel Science, a Department of Energy-funded research center. "With West Virginia's coal reserves equaling about 70 billion barrels of oil," he said, "perhaps West Virginia could be the new Kuwait."

Liquefying coal through Fischer-Tropsch "offers the promise of starting new industries in West Virginia that could also increase demand for West Virginia coal," said Richard Bajura, director of West Virginia University's National Research Center for Coal and Energy, who was also at the conference.

There have been some initial steps in West Virginia, but nothing definitive. Two years ago the state Development Office pledged itself to help a Pennsylvania company, WMPI Proprietary LLC, secure land in Logan County in order to build such a plant. More recently, the Mingo County Redevelopment Authority commissioned a feasibility study, also to look at the possibility of building such a plant.

WMPI hasn't followed up because it has been preoccupied with building its first Fischer-Tropsch plant in Pennsylvania. The Mingo study won't be out for probably two more months, according the agency's director, Mike Whitt. "But this thing looks like it makes sense," he said. In light of all the coal here and the large amount of diesel that the state uses, "it looks like a no-brainer."

Fischer-Tropsch, named after its German inventors, is neither new nor untested technology. Franz Fischer and Hans Tropsch, working in a government-funded science institute in Berlin, perfected the method in the 1920s, and the Nazis relied on it to feed their war machine.

"It has always been viable, and it almost seems to be exceptionally viable today," said Anthony Stranges, a professor of the history of science at Texas A&M University who concentrates in the history of energy development.
"The economics are very favorable for it."

Nevertheless, today the only company employing Fischer-Tropsch on a major scale is South Africa's government-affiliated Sasol Ltd., based in Johannesburg. Over the past 50 years, much of which while South Africa was shut out of the global economy because of its racial segregation policy, Sasol has produced nearly 1.5 billion barrels of synthetic fuel from coal, while on a daily basis it churns out 150,000 barrels, dispensed in filling stations across the country. Its coal refining supplies about 28 percent of South Africa's fuel needs, the company says, saving the country more than $5.1 billion annually in foreign exchange.

The Defense Department is suddenly interested in Fischer-Tropsch not only because it could help reduce U.S. dependence on foreign oil but also, as the existence of its Clean Fuel Initiative implies, because it's aiming to switch to environmentally friendlier energy sources in the wake of some costly cleanups. It has spent more than $60 million, for instance, in studying and remediating perchlorate, a constituent of its jet fuels that may pose a health danger to groundwater supplies near military bases. Fischer-Tropsch fuels strip out pollutants such as sulfur, mercury and arsenic. The Natural Resources Defense Council, one of the country's biggest environmental groups, estimates that such plants emit about 40 percent less carbon dioxide than conventional power plants.

On the other hand, demand for coal is pretty high as it is, and were West Virginia coal to become a viable substitute for oil, the result could be a mining frenzy the likes of which have never been seen.

"Clearly the technology works," said Richard Kassel, director of the NRDC's Clean Fuels and Vehicles Project in New York. But while the burning may be cleaner, "somebody needs to take a good hard look at what this means for the natural resources and beauty of the state."

What has held Fischer-Tropsch plants back, however, is not environmental concerns. Rather, it's the financial risk involved. Construction can cost several billion dollars, and if the fuel ends up costing more than gasoline and other oil products, there won't be any buyers. Even the Pentagon, for all its enthusiasm, has made it clear that it won't overpay.

"Our strategy is not to write big checks, but rather to bring the right mix of industries together to make processes commercially viable," Harrison said.

Fischer-Tropsch fuels would be a bargain next to oil even if the cost of crude were to plunge roughly 45 percent, to about $35 a barrel, but that is considered the cost-cutoff point. No one is predicting anything like such a decline, yet coal-liquefaction plants take years to build, and oil prices have proven highly volatile.

"Cost is a key consideration," Bajura said. "The fear is that the price of oil could drop below the Fischer-Tropsch fuels."

The last time investors started lining up money for Fischer-Tropsch plants, in the 1970s, the OPEC oil cartel opened up its spigots and pushed the price of crude down to $10 a barrel, and that was that. Even before that, there had been spurts of activity that eventually fizzled. During the 1950s, the federal government built Fischer-Tropsch demonstration plants in Bruceton, Pa., just across the West Virginia border, and in Louisiana, Mo. Over the years, the government has spent hundreds of millions for research into such fuel conversions, but nothing ever came of it because, according to Stranges, the investment never materialized.

"It didn't pay off and it wasn't worth doing," he said.

Don't count on such a scenario to repeat itself, said John Ward, a spokesman for Headwaters Inc., a South Jordan, Utah-based company that is now building coal-to-liquids plants abroad and advising companies on the technology in the United States.

"The question is, does OPEC or anyone else today still have the ability to lower the price [of crude] to $10?" Ward said. "There are several functional changes in the landscape that make that much less likely, especially the strong demand [for oil] from China."

To Stranges, who has studied the torturous path of Fischer-Tropsch research and development through the years, it's long past time to take the plunge. "Instead of going in circles, as we have been, why not just build it so we'll have it?" he said. "That way we can keep improving it."

That's what seems to be happening. But it's generally private companies, not the federal government, that are taking the initiative. For the most part, however, they've opted to do so abroad. Shell USA and ExxonMobil Corp. have coal-to-liquid projects underway in China and Qatar. Tulsa, Okla.-based Syntroleum Corp. recently signed an agreement to look into building a coal-to-liquids plant in Australia. And just last month, Headwaters signed deals to build two plants for coal liquefaction, a process similar to
Fischer-
Tropsch, in China. Similar efforts are in the works in India and the Philippines, Ward said.

The enthusiasm of China, in particular, to embrace Fischer-Tropsch and related coal-to-liquids projects comes down to the government's commitment, according to Ward. "They've simply got a government willing to invest." But the United States is starting to catch up.

DKRW Energy LLC of Houston intends to start building a coal-to-liquids plant in Wyoming next year, with operations scheduled to get underway between 2008 and 2010. Rentech Inc. in Denver and Clear Energy Inc. in Calgary, Alberta, have similar hopes.

Yet it is WMPI, of Gilberton, Pa., that appears to be the furthest along. It expects to start construction in April on a $112 million Fischer-Tropsch plant near Gilberton that would transform 1.4 million tons of waste coal a year into 60 million gallons of liquid fuel. It has agreements with Shell and Sasol for technical help and, more importantly, it secured federal loan guarantees in the energy bill just passed by Congress that should put it over the top on financing, said John Rich, WMPI's president. Eventually, Rich said, he sees the plant building out its capacity, requiring a $4.2 billion investment.

Once the Gilberton plant gets going, WMPI will start looking for second and third sites, Rich said, and the Logan location is still a possibility. A memorandum of understanding signed with the state Development Office in 2003 pledges the state to "exercise its best efforts within applicable laws to facilitate and assist WMPI in the location and development of WMPI's coal-to-oil project in West Virginia."

The property under consideration is owned by a private party whose identity WMPI wouldn't disclose. The Development Office official involved did not return calls for comment.

The Mingo feasibility study, meanwhile, is drawing on the expertise of Headwaters and nine other participants. They include WVU's Bajura and Christine Risch, an energy economist from Marshall University. There are also lawyers from Boston-based Cambridge Associates, Patton Boggs LLP in Washington and Jackson Kelly PLLC in Charleston, and executives from San Francisco-based URS Corp., a huge global engineering and construction firm; the energy consultancy UtiliPoint International Inc. of Albuquerque; and the engineering and technology consultant Augusta Systems Inc. in Morgantown. The study will come up with estimates of the overall cost of such a plant as well as the amounts and types of coal necessary and available, among other things, Whitt said. He estimates that a plant would need more than a million tons of coal a year.

Even if the study green-lights a Mingo plant, it would take probably four to five years to bring about, Whitt said. Investors would be the first thing needed, he said, adding that the plant wouldn't hinge on government support. "We don't like to look for the government to fund things for us," he said. "Someone has to be willing to take the risk and get egg on their face if it doesn't work out."

To contact staff writer Joe Morris, use e-mail or call 348-5179.

Ultra Clean Fuels

Posted by Arthur Caldicott on September 18, 2005

Mines ask Victoria to plug into northwest

Paul Luke
The Province
September 18, 2005

Megawatts needed to tap wealth

Metal czar Carl Zuber has a high-tension problem that keeps him from being the happiest man in B.C.'s mining industry.

The company Zuber chairs, bcMetals Corp., has just received environmental approval from the province to build the Red Chris mine, a copper-gold project 450 kilometres north of Smithers.

Zuber is finding customers for the concentrates Red Chris will produce and nailing down financing for the $228-million project.

But Zuber's financial and regulatory successes will come to nothing unless the province strings a transmission line as far as 335 km into the northwest.

Without 37.5 megawatts of juice from that line, Red Chris, which would employ 250, won't see the light of day -- no matter how many bankers want to finance it.

"We just need the power," Zuber says. "The rest is business."

Goaded by decent metal prices, bcMetals and other companies are puncturing northwest B.C. like a Swiss cheese in a rush to unearth ore bodies. And when they do find something, electricity-hungry miners are queuing up to press the B.C. government to build a transmission line along Highway 37 to Iskut or Dease Lake.

Some $2.1 billion of potential mining investment in the area hinges on the line being extended from Meziadin Junction, where it currently stops, according to the newly formed Northwest Powerline Coalition.

Dan Jepson, executive director of the B.C. & Yukon Chamber of Mines, says the northwest region's mineral wealth could go untapped because the largest projects can't generate enough power with diesel generators.

"Our members feel the most important thing the government can look at right now is providing power up the Highway 37 corridor," Jepson said.

Bill Bennett, provincial minister of state for mining, sympathizes with the industry's plea. The province has yet to decide whether to extend power to the northwest.

But it is considering issues such as line size and projected demand, Bennett says. Also to be resolved is the issue of whether industry should share in costs.

"We're not going to see new mines up there, I don't think, without power being taken up," Bennett says.

First Nations in the area are less sympathetic.

Curtis Rattray, chairman of the Tahltan Central Council in Dease Lake, says the Tahltan expect to be directly engaged in determining the shape of any power line.

The Tahltan, wary of the social and economic impact of a line, argue a land-use plan for the area is essential.

"A power line would determine the pace and feasibility of resource development in our traditional territory in lieu of a land-use plan," Rattray said.

"There's a requirement for a land-use plan prior to a transmission line being put in place."

The pricetag of a line will depend on how much power it packs.

Studies done for B.C. Transmission Corp. estimate a 138 kilovolt (kV) line would cost $185 million, a 230 kV line $375 million and a 287 kV version $368 million.

- - -

A RED-HOT ZONE FOR MINERAL EXPLORATION

- The northwest accounted for $55 million of the $130 million spent on exploration in B.C. last year, according to B.C. ministry of energy and mines.

- Forty-one firms were seeking minerals in the area last year.

- Vancouver-based NovaGold Resources alone is spending a whopping $40 million on exploring its copper-gold-silver property at Galore Creek -- dwarfing the $29 million spent on exploration across the entire province in 2001.

- Other active sites in the region are Fortune Minerals' Mount Klappan coal project, Hard Creek Nickel's Turnagain nickel project and Copper Fox Metals' Schaft Creek project.

- Mining is a $4.5-billion industry in B.C. that supports 6,442 direct jobs.

Preparation for a line would eat up two years and construction, depending on the option, three or four years.

A fourth option would reduce the four-year requirement by building the infrastructure for a 287-kV line, firing it up at 138-kV and later boosting it to 287 kV.

Vancouver-based NovaGold Resources is by far the largest player in the northwest region. Carl Gagnier, executive vice-president at NovaGold Canada, says his company is spending about $40 million this year to explore its Galore Creek gold-silver-copper property 150 km northeast of Stewart.

That investment, which is fuelling an army of 10 drilling rigs and 170 people at the camp, is said to make Galore Creek North America's biggest exploration program this year. A mine at Galore Creek would cost an estimated $1 billion US to build and employ about 500 people once it's operating, possibly by 2010.

A mine of Galore Creek's scale would consume an enormous 80 megawatts of electricity, making diesel-generated power out of the question, Gagnier says.

"We have to connect to the B.C. grid in order to make the project viable," Gagnier says. "If the grid is extended up Highway 37 to Iskut it makes it much easier to connect."

Donald McInnes, head of Vancouver-based Western Keltic Mines, says a power line makes sense for the northwest and the rest of B.C. Northern mines buy goods and services from around the province and employ people from all regions, McInnes says.

Western Keltic, which owns the Kutcho Creek project 100 km east of Dease Lake, could generate its own power -- though a provincial line to Dease Lake would trim its operating costs, McInnes says.

"If a power line is built now, the mines that might be built in that area may not happen in this copper cycle," he says.

"But it will happen in the next one."

pluke@png.canwest.com

© The Vancouver Province 2005

Posted by Arthur Caldicott on September 18, 2005

September 16, 2005

BC Hydro boosts plans to build controversial Site C dam

Scott Simpson
Vancouver Sun
Thursday, September 15, 2005

Two senior managers have been assigned to prepare the Peace River project for final approval, a memo shows

SiteC_179702-59482.jpg
CREDIT: Ian Lindsay, Vancouver Sun Files
Peace River Valley islands and farmland face being covered with water if BC Hydro gets to build the Site C dam near Fort St. John.

BC Hydro is accelerating plans for a controversial $3.5-billion power project that would require flooding a vast area of the Peace River Valley and is assigning two senior managers to prepare the Site C dam project for final approval.

A Sept. 7 internal Hydro memo says the two have been appointed to set the direction for public and first nations consultation, regulatory approvals and communications -- prompting several Site C critics to suggest that Hydro has decided the project will proceed.

The project, to be built near Fort St. John, is supported by Energy Minister Richard Neufeld but has been opposed by area residents and environmentalists since it was first proposed in the mid-1970s.

Potentially B.C.'s fourth-largest hydroelectric facility, it has been rejected in the past as too costly and because of adverse environmental impacts.

At a rough cost of $3.5 billion, not including potential compensation to first nations and the impact of escalating construction costs across North America, it would be one of the most expensive infrastructure projects ever undertaken in B.C.

The dam would join two others already in service on the Peace including the WAC Bennett Dam and Peace Canyon, and would flood an additional area of the Peace Valley 15 times as large as Stanley Park.

It would be a 900-megawatt facility generating enough electricity to serve 500,000 households -- although that's still less power than British Columbia imports each year to serve the province's domestic needs.

The Hydro memo announces that Steve Eckert, acting manager for power acquisitions, has been promoted to acting general manager for Site C. Hydro staffer Al Boldt, who has experience in large project design and construction, has been appointed manager of public and regulator affairs for Site C.

"Steve will provide leadership to take the project through to the approval stage," the memo says.

Hydro spokeswoman Elisha Moreno said Wednesday that despite the appointments, the Site C project won't proceed until -- and unless -- it receives approval from the Hydro board and provincial cabinet.

"We don't want people to think this is a done deal by any account," Moreno said.
However, Hugh Taylor, land use manager for the West Moberly First Nation, noted in an interview that when Richard Neufeld paid a recent visit to the area to study proposals for wind power, "Site C was all he could talk about."

"I think it means they are trying to keep the project going. They will probably hold off formal approval until they are so far down the line that it only makes sense to complete it. I don't think Hydro is being very transparent, and it's prejudicial to wind power proponents," said Taylor.

Ruth Ann Darnall, chairwoman of the Peace Valley Association, said it now appears Hydro intends to proceed with the project.

"I don't understand why Hydro is doing all this if they're not sure cabinet will tell them to go ahead," Darnall said. "I think it would be nice if folks down south could generate their own power."

Brian Churchill, an environmental consultant in Fort St. John, said Hydro appears to be following Neufeld's leadership on Site C.

"I'm really concerned that at this point in time the cost estimates of Site C, are very unclear as to whether this project is in the province's best interests or not. We're missing properly-done cost estimates for building Site C, transmission lines for Site C, and for the environmental and social impacts of Site C," Churchill said.

"I personally don't think the public will support Site C. The Peace River Valley has paid its price in supporting the energy needs of the province . . . in the two existing Hydro dams."

Hydro critic David Austin, who represents independent power producers in B.C., called on Hydro to produce a comprehensive assessment of Site C's costs before taking other steps towards development of the project.

He's not opposed to Site C in principle, but said Hydro is "getting too far ahead of themselves without the release of the basic financial model."

Austin has made formal requests for Site C cost details, in Hydro hearings before the B.C. Utilities Commission, but said he is still waiting for a satisfactory response.

"The project has been around a very long time and the creation and release of a properly functioning financial model should be a very simple exercise," Austin said.

THE NUMBERS:
- Current estimated cost of project: $3.5 billion.
- Electricity potential: 900 megawatts, enough for 500,000 homes
- Time required to complete project: Seven years.
- Approvals required: BC Hydro board, B.C. provincial cabinet, B.C. Utilities Commission.
- Jobs created: 7,650 person-years of work.
- Peak workforce: 2,015 people in year four of construction.

CAPACITY OF BC HYDRO'S TOP FIVE GENERATING FACILITIES:
Shrum Generating Station/WAC Bennett -- 2,730 megawatts
Revelstoke -- 1,980 megawatts
Mica -- 1,805 megawatts
Peace Canyon -- 694 megawatts
Seven Mile -- 594 megawatts
Site C on Peace River -- 900 megawatts

Source: Vancouver Sun
Ran with fact boxes "The Numbers" and "Capacity of BC Hydro's Top Five Generating Facilities", which have been appended to the end of the story.

Posted by Arthur Caldicott on September 16, 2005

Gregoire: Washington needs to ease its oil dependence

David Ammons
Seattle Times
15 September 2005

OLYMPIA, Wash. -- Washington can become a world leader in biofuels and other non-petroleum energy sources that can ease reliance on foreign oil and help the state's farm economy at the same time, Gov. Christine Gregoire said Thursday.

The governor and legislative leaders also announced hearings on what they strongly suspect is gasoline price-gouging.

And Gregoire told a news conference that Washington is reasonably well prepared for an earthquake or other natural disaster, but needs to study ways of improving. The joint House-Senate hearings also will take up this topic. The sessions will be in October, with locations and times to be announced soon.

Gregoire said she has asked the U.S. Department of Justice to probe whether the oil industry gouged consumers during the recent run-up of prices, particularly after Hurricane Katrina.

Gregoire, who battled Enron's energy pricing when she was state attorney general, said there appears to be no legitimate reason for Washington pump prices to jump 20 cents a gallon in the aftermath of the hurricane.

Washington is remote from the Gulf Coast, relies on Alaskan crude oil and has refineries, she noted. The state Legislature may well want to pass anti-gouging legislation to protect against a recurrence, she said.

In the longer term, she said, the state should get serious about developing its potential for producing ethanol and other biofuels from Washington-grown grains.

"It improves our energy independence and keeps our petrodollars in Washington," the governor said. "It creates new jobs in the state, reduces pollution and reduces other environmental problems and risks, and it helps farmers maintain the profitability of their farms."

Dependence on oil is crippling Washington's farmers, she said.

"Our farmers are paying out more for a gallon of diesel fuel than they earn for a bushel of wheat. We may have the opportunity to plug our farmers right into the fuels they need. They could be producing the crops to make the fuel."

Gregoire said she has been talking with biofuel companies about setting up shop in Washington, primarily in the eastern part of the state. She gave no specifics.

State Rep. Hans Dunshee, D-Snohomish, said a biodiesel plant called the New Roosevelt Project is proposed for Spokane, Columbia or Lincoln county.

"We could have five million gallons of biodiesel coming on line next August or September," he told reporters. "I think we can get something done. It will mean jobs here in Washington and fuel in the tanks of Washingtonians. I think it's a great step forward."

The state motor pool and ferry system are early customers for biofuel, said state Rep. Jeff Morris, D-Anacortes. The Legislature has put in place one of the country's strongest tax incentive packages, he said.

"The Northwest stands a good chance of becoming a biofuel leader in the world," he said.

Gregoire agreed: "The idea that we could be an international leader is real."

Washington also is doing important work in solar energy, wind-generated power and other alternative sources of energy, she said.

At her wide-ranging news conference, the governor also touted the state's emergency preparedness, saying the state wouldn't have been caught as flat-footed as the Gulf region. The state has a clear chain of command and knows that state and local government, not the feds, will have to be the early responders during the first 72 hours after a disaster, she said.

Gregoire said Washington must fix its earthquake-vulnerable bridges and roads, especially the Alaskan Way viaduct in Seattle and the State Highway 520 bridge across Lake Washington. Both would have failed if the 2001 Nisqually Quake had lasted another 15 seconds, she said.

Drawing an analogy to Katrina, she said "These are our levies. The earthquake is our hurricane."

State Sen. Pam Roach, R-Auburn, faulted Gregoire for talking about biofuels and oil dependency rather than putting sole emphasis on state residents being prepared to survive a disaster.

"She should stick to talking about survival. She should be alerting our people about storing up food and water and flashlights, first-aid kits, being ready to leave damaged residences, completing a ham radio network for Washington state, and talking about how families can stay in communication with each other in a disaster.

"Katrina is not an opportunity to move forward an environmental or energy agenda."

---

On the Net:

Legislature: http://www.leg.wa.gov Gov.: http://www.governor.wa.gov

http://seattlepi.nwsource.com/

Posted by Arthur Caldicott on September 16, 2005

Hot natural gas prices may boost B.C.'s surplus

Derrick Penner
Vancouver Sun
16-Sep-2005

British Columbia has an estimated $1.4-billion budget surplus, but if natural gas prices remain high, and one of B.C.'s most prominent economists is right, the surplus is likely to becomes even bigger.

Helmut Pastrick, chief economist for Credit Union Central B.C., said he believes the province's projections revealed Wednesday in its budget update are still conservative.

"I'm of the view we'll see higher numbers," Pastrick said. "I still put economic growth at a higher level, more growth in housing."

Pastrick added that, assuming there are no spending surprises, the government is likely to see an even bigger surplus.

Finance Minister Carole Taylor's budget update projects the government will take in $34.5 billion by the end of 2005-06 -- a $1.4-billion gain from the $33.1 billion that was written into government's February budget -- which will help raise its overall surplus to $1.3 billion.

Tax recoveries, estimated at $15.5 billion in Taylor's update, are running $753 million ahead of February's budget. Resource revenues, pegged at $4.4 billion in the revision, are also $488 million ahead of expectations written into the earlier budget.

The province, however, may not be being generous enough in its projections for its resource revenues given the performance of natural gas prices versus the assumptions used by Ministry of Finance staff to calculate its revised expectations.

Royalties on B.C.-drilled natural gas are the biggest source of provincial resource revenue, which the ministry estimated at $1.8 billion in Taylor's budget update, $199 million ahead of February's expectations.

Taylor's updated fiscal plan shows that her staff based that projection on $6.51 per gigajoule average price for natural gas to the end of the 2005-06 fiscal year.

Prices on Thursday, however, hit $10.17 at the Sumas hub, the main distribution point for gas exports to the U.S. West Coast, and have averaged $7.67 since the start of the government's fiscal year in April.

In an interview, Taylor said the province will hold to a conservative approach to setting its expectations, which are based on the projections of industry experts.

"Everyone realizes that this is a moving target," she said. "If you look at natural gas [prices], we don't know if we can sustain these levels."

Taylor added that despite knowing that B.C.'s economy was still performing well, the results of her staff's budget revision were still unexpected.

"We certainly anticipated that the numbers would be better than the February budget, but I'd say it was a surprise on the upside, even from those expectations," she said.

However, Taylor added that besides the additional spending and tax breaks and spending increases that government has already committed to, she will not succumb to temptation and start spending more of the surplus.

Within the additional $753 million in taxes the province expects to take are some $282 million in additional personal income tax revenue and $190 million more in property transfer taxes. The expectation for corporate income tax revenues was also raised -- by $140 million.

Taylor said the province will continue to re-examine the competitiveness of its tax regime, but does not expect any more tax cuts in the immediate future.

"I think there are other priorities for this [budget] update," Taylor said.

In 2006, she noted, government will be under pressure to give its employees wage increases after several years of an official wage freeze, though the province does not know how long the current economic boom will last.

"There are a lot of issues, and if you're a prudent manager, which is what I'd like to be, you make sure your budget will withstand a few disappointments," Taylor said.

Peter Simpson, CEO of the Greater Vancouver Home Builders' Association, said a change to the property transfer tax is one measure his organization would like to see.

depenner@png.canwest.com

RISING REVENUE TIDES:

The provincial government is collecting more revenue than it expected this year, some $1.4 billion more than was pencilled in to its February budget, according to Finance Minister Carole Taylor's budget update released Wednesday. Here are some of the revised expectations:

Total revenue:

$34.5 billion +$1.4 billion

Taxation revenue: $15.5 billion

+$753 million, including:

- Personal income tax: $$5.5 billion +$282 million

- Property transfer tax: $650 million +$190 million

- Corporate income tax: $1.2 billion +$140 million

Natural resource revenue: $4.4 billion +$488 million, including:

- Natural gas royalties: $1.8 billion +$199 million

- Forests revenue: $1.2 billion +$166 million

- Energy and minerals: $775 million +$62 million

- Columbia River treaty: $305 million +$55 million

Other provincial revenue: $6.7 billion +84 million

Contributions from federal government: $5.6 billion +$131 million

Crown corporation income: $2.3 billion

-$56 million, including:

- B.C. Lottery: $892 million +/- 0

- Liquor distribution branch: $779 million +/- 0

- ICBC: $224 million +48 million

- B.C. Hydro: $329 million

-$66 million

- B.C. Rail: $39 million

-$37 million

Posted by Arthur Caldicott on September 16, 2005

History is turned on its head as Campbell and native leaders reach out

Vaughn Palmer
Vancouver Sun
September 16, 2005


VICTORIA - Not many first nations leaders can rival Stewart Phillip's record for militancy over the years.

Mount Currie ... Seton Portage ... Apex Alpine ... Adams River ....

From the 1970s to the 1990s, Phillip turned up at most of the big showdowns, often as a participant, sometimes getting arrested, always quotable.

After Oka, he said Canada "could end up looking like Northern Ireland." At Gustafsen Lake, he accused the police of "behaving like cowardly goon squads of some Central American military junta."

Just last year, on the front lawn of the legislature, he accused the B.C. Liberals of trying to buy off natives with "beads and trinkets."

But on Wednesday he was sitting on the floor of the legislature with other aboriginal leaders, listening appreciatively during the budget update speech.

Phillip, who is president of the Union of B.C. Indian Chiefs, came to hear the promise of a $100-million New Relationship fund.

The fund is to help first nations develop their own capacity (staff, facilities, training) to manage land, resources and social programs in partnership with government.

Phillip confided to reporters that when he accepted the premier's invitation to attend, he had a nagging fear in the back of his mind about one more parade of beads and trinkets.

But $100 million. That was "undeniable evidence that times have changed."

Phillip was not alone in this assessment. He was joined on the floor of the house -- and in praising the fund -- by Shawn Atleo of the B.C. Assembly of First Nations and Ed John of the First Nations Summit.

John is a fascinating study as well. He was a cabinet minister in the last New Democratic Party government.

He didn't let partisan history keep him from praising the Liberals for making "a significant investment in the new relationship."

He was also enough of a gentleman not to highlight why the New Democrats could never have gotten away with this level of generosity to first nations: Because the Liberals, then in Opposition, would have roasted them for it.

All three leaders emphasized the degree to which the native organizations have worked together to promote the new relationship, since signing a landmark accord earlier this year.

Still, Phillip best illustrates the distance travelled already, and not only because of his militant history.

His organization, the UBCIC, has shunned B.C. treaty negotiations from the outset.

While several dozen bands toil at the treaty table, Phillip has repeatedly denounced the process as a huge waste of time and money.

He took another shot Wednesday, saying "we need to learn the lessons" about spending vast amounts on talks and studies, with no results.

"I don't want to hear a stampede of lawyers and consultants coming down the hall to help us spend the money," Phillip said, to knowing laughter from his colleagues.

He hopes the new relationship will provide an alternative route for bands that want to get on with sharing power and managing land and resources.

He, like the other native leaders, says the fund is "only the first step." But for the first time in long years, he admits to being "hopeful."

Of course, when Phillip mounted his first barricade in the mid-'70s, he was in his mid-20s, with all the preoccupations of a young firebrand. Today, he's an established leader (eight years and counting in the UBCIC presidency) with six grandchildren.

"I have to start thinking of their future. I have to think less of public posturing. I have to think more about getting results."

But all that perspective has its own risks. Phillip faces a running critique from his own crop of young militants these days, and has to persuade them the new relationship is the real thing.

What persuaded him to go this far? He has no hesitation in answering. "The premier stepped out on this issue."

Hard to believe, especially for natives.

As Opposition leader, Gordon Campbell fought the Nisga'a treaty in court. As premier, he ramrodded a treaty referendum that infuriated native leaders.

Now, he's leading B.C. to what looks like reconciliation and unprecedented recognition of native rights and autonomy.

"Maybe only Campbell can do it," Phillip says.

The line echoes a political maxim from south of the border: "Only Nixon can go to China." As U.S. president, Richard Nixon opened up relations with Communist China. His history as a ferocious anti-Communist left little room to accuse him of selling out.

Maybe Campbell's history protects his back with those who might otherwise oppose the new relationship. It is harder to accuse him of selling out.

Then again, thinking of the UBCIC president's history, you could say the same about him: "Only Phillip can go to Campbell."

vpalmer@direct.ca

Posted by Arthur Caldicott on September 16, 2005

September 14, 2005

VICTORY: GSX & Duke Point are dead - for now

Tom Hackney, GSX Campaigner and this year’s winner of the Sierra Club of Canada’s Conservation Chapter Award

Duke Point is dead. After six years, BC Hydro has shelved plans to build a gas-fired power plant at Duke Point near Nanaimo. With it goes the last vestige of a plan that would have seen 900 MW of gas-fired power generation on Vancouver Island and a pipeline across the Strait of Georgia.

The story began in September 1999, when BC Hydro announced plans to partner with the US giant, Williams Gas Pipeline Company, to build the Georgia Strait Crossing (GSX) natural gas pipeline from Washington State to Vancouver Island, linking to the existing Centra Gas pipeline.

Hydro planned to meet all new electricity demand using gas-fired power plants on Vancouver Island. The 250-MW Island Cogeneration Project was slated for Campbell River, MacMillan Bloedel (now Weyerhauser) was partnering with a private firm to build a 250-MW power plant at its mill site in Port Alberni, and BC Hydro planned to locate a 640-MW plant near Duncan by 2007.

The Sierra Club of Canada, BC Chapter became involved when Bo Martin and Tom Hackney of the Energy and Climate Change Committee decided to intervene in the federal regulatory process. Bo and Tom thought the climate change harm of fossil fuel use was unjustifiable, especially when BC Hydro’s own Electricity Conservation Potential Review (1994) showed potential to cut electricity demand by 25 percent or more. This theme has remained constant, and has gathered public support and political recognition. In 2003, the BC Utilities Commission ruled that a greenhouse gas (GHG) liability should be factored into the costing of gas-fired generation. And then in February 2005, the Kyoto Protocol became law, along with Canada’s GHG reduction targets.

But in early 2000, the energy to fight Hydro’s plans came mainly from people’s shock at seeing maps showing high-pressure pipeline routes through their back yards, past schools, and across farm fields. People became furious at community meetings when BC Hydro officials said the decisions were unalterable.

The BC Chapter linked up with citizens in Cobble Hill and Duncan and with the Georgia Strait Alliance and other groups to form the GSX Concerned Citizens Coalition. The Coalition (GSXCCC) devoted huge amounts of time and energy to refuting Hydro’s claims, bringing powerful evidence to the National Energy Board review of GSX and the BC Utilities Commission’s two reviews of successive power plant proposals for Duke Point (first BC Hydro’s Vancouver Island Generation Project, then the private Duke Point Power roposal).

GSXCCC also mobilized people all over the mid Island, as BC Hydro sought sites for the next power plant. First, the Coalition alerted Port Alberni residents, who blocked rezoning near a residential area. Next, the Coalition brought out crowds in North Cowichan to warn municipal leaders against changing their industrial zoning. BC Hydro finally found a site and sympathetic municipal leaders in Nanaimo, though by 2005, Mayor Gary Korpan was forced to acknowledge that his support for the power plant represented his personal views, not those of the City.

Despite a rubber-stamp approval of GSX by the National Energy Board in 2003, the GSXCCC and others delayed the pipeline so long that BC Hydro cancelled it in 2004, citing high gas costs and unfavourable economics for gas-fired generation (which we had warned of in 2001). Accordingly, BC Hydro then reduced its gas-fired generation plan to a single additional plant, part of the 252-MW Duke Point Power electricity purchase agreement. Hydro claimed this was needed to ensure “the lights wouldn’t go out” on Vancouver Island.

This already represented a big success, given the Sierra Club’s goal of reducing the use of fossil fuels to generate electricity. But we were going for gold. GSXCCC developed extensive evidence to refute the myth that a power shortfall could only be met by building power plants, and brought that evidence to the Utilities Commission’s review of the Duke Point Power deal.

In February 2005, the Commission approved the purchase agreement. But the GSXCCC, the BC Sustainable Energy Association, and the Society Promoting Environmental Conservation, working with the Joint Industry Electricity Steering Committee, applied to the BC Court of Appeal for leave to appeal the decision. It claimed that information was inappropriately kept secret and that there was a reasonable apprehension that the Commission had acted with bias.

On June 14, the Court granted leave to appeal. But the Coalition’s appeal never went ahead. Three days later, BC Hydro publicly announced it was cancelling plans for a gas-fired power plant at Duke Point.

There is a footnote to this story. BC Hydro is still looking for ways to generate more electricity on Vancouver Island in 2006, and will be again accepting bids from independent power producers. But it would seem the table has tilted slightly in favour of renewable energy. For the first time – undoubtedly because of the evidence submitted by the GSXCCC – the BC Utilities Commission will consider the liability of greenhouse-gas emissions and the cost of offsetting them when it assesses power generation proposals.

From the Fall 2005 Sierra Report

Posted by Arthur Caldicott on September 14, 2005

EnCana sells Ecuadorean oil assets to China

Paul Haavardsrud
Calgary Herald, with files from Canadian Press
Wednesday, September 14, 2005

sqwalk.com
COMMENT:Pressures on EnCana, on the street, in the media, and at the 2004 AGM pushed the company to sell its Ecuadorean operations, particulary the OCP Pipeline.

The strategic problem for NGOs, in what initially was viewed as a victory of sorts, is what happens next. Any purchaser is going to be aware of the controversies, and will be buying in, fully prepared to take the heat. Andes Petroleum Company, a consortium of Chinese companies, is well removed from the shareholder and investor vulnerabilities that a North American or European company is exposed to.

Chinese energy investments continue to expand globally, an echo of US, Dutch and British energy capitalists from a hundred years ago. What forces this unleashes, at the end of the easy oil era, rather than at its beginning, will be profound.

Encana's news release
sqwalk.com

CALGARY -- EnCana Corp. closed the book on a six-year stay in Ecuador, selling its contentious South American assets to a state-owned Chinese oil venture for $1.42 billion US.

The sale comes only weeks after violent protests against the country's petroleum industry led to speculation that EnCana's year-long search for a buyer would be further drawn out.

As part of a move to focus on the North American natural gas business, EnCana confirmed its assets in Ecuador were on the block last September, while announcing the $2.1 billion US sale of its North sea oil interests to Nexen Inc.

Given the ongoing struggles of doing business in Ecuador, which most recently saw its petroleum industry shut down as demonstrators protested the handling of the country's petro-wealth, the list of potential buyers for EnCana's assets was believed to be limited to national oil companies that are better suited to working around political and social unrest.

EnCana's chief executive Gwyn Morgan has said doing business there was "constantly a roller-coaster."

© The Vancouver Sun 2005

Posted by Arthur Caldicott on September 14, 2005

September 13, 2005

US Government Slams Kinder Morgan's Safety Procedures

Jeremy J. Nuttall
TheTyee.ca
September 13, 2005


Suisun marsh: 70,000 gallons of diesel
Out to buy BC's Terasen, Texas pipeline
firm ordered to clean up its act.

A day after The Tyee first reported on the marred environmental record of Kinder Morgan, the company wanting to take over Terasen, the Texas based pipeline giant was hit with a corrective action order from the US Department of Transportation's Pipeline and Hazardous Materials Safety Administration.

According to PHMSA spokesperson Damon A. Hill, the August 24 order, addressed to co-founder Richard Kinder, tells Kinder Morgan to review their operating procedures.

"We issued this order to get this company to address the recent rash of incidents that they've had in the past couple of years," says Hill. "They've had a significant number of them."

Now, Hill says, the PHMSA wants Kinder Morgan to restructure their safety procedures in hopes of creating a sound network. "We did an analysis of what we thought could be going wrong with the company. We looked at their integrity management (and) the way they implement their integrity management," he says.

Hill adds although no clear cut violations were found, the PHMSA "did see weaknesses in use of their tools to interpret the data that they receive when they conduct integrity management inspections."

'A widespread failure'

The order points out "recent accidents indicate a widespread failure to adequately detect and address the effects of outside force damage and corrosion. This failure has systematically affected the integrity of the Pacific Operations Unit."

It focuses on eight more severe accidents out of the 44 Kinder Morgan has experienced over the last two years. Such as the Suisun Marsh diesel spill, which leaked 70,000 gallons of fuel into the Northern California marsh. According to the order, the cause of that spill was a 14-foot section of corroded pipe that was not identified as requiring repair.

Of the seven remaining incidents, five of them are listed to have been the result of an outside force, meaning third party involvement. One such case was an explosion that killed five people. Kinder Morgan was found to have not marked the pipeline properly and was cited $140,000 for their part in the accident.

The order goes on to point out three of the accidents were not addressed by Kinder Morgan in a timely manner, among them the Suisun Marsh spill.

'We fully intend to comply'

Hill says the company has a problem with organizing its own internal inspection reports with other information key to safely running pipelines.

According to the order, Kinder Morgan practices internal inspection relying on multiple departments, however those departments don't always have access to each other's information. And the order says the "internal inspection geometry tools employed by the respondent (Kinder Morgan) are generally insufficient."

Kinder Morgan spokesperson Rick Rainey says the company is taking the order seriously.

"Many of those steps we have already taken including a third party review of our operations and procedural practices as well as a restructuring of our internal inspection program," says Rainey. "We fully intend to comply with the order in that regard."

Kinder Morgan is appealing some elements of the order, but Rainey was unable to say which ones by press time.

Effect on sale not clear

The British Columbia Utilities Commission is currently reviewing the intended sale of Terasen gas when its owner, Terasen Inc, is taken over by Kinder Morgan.

BCUC spokesperson Bill Grant says the only way the corrective action order can have an effect on the sale of Terasen is if one of the sale's 15 registered interveners submits the order as part of their contention. Grant adds such a submission could be considered because part of the BCUC's responsibility is to ensure Terasen offers quality service to customers.

"If parties can demonstrate that (circumstances prompting the order) might have an impact on Terasen gas, then that would have an impact on the reliable service issue," says Grant. "I don't believe anybody's made a submission on that."

During the interview with The Tyee, Rainey repeatedly mentioned Terasen pipes would be maintained by the same people performing the task now. "One of the issues that's kind of gotten lost in this whole discussion is that following the completion of this sale, you're essentially going to have the same people that are in charge of pipeline integrity for those Canadian assets in place once the sale goes through," he says.

This is not the first time Kinder Morgan has been dealt with by the PHMSA. Their website has many instances where Kinder Morgan shows up on a list of compliance section orders served to numerous companies since the early 90s.

Jeremy J. Nuttall is a Penticton radio reporter and freelance writer. To read his previous report on Kinder Morgan's safety record, go here.

Posted by Arthur Caldicott on September 13, 2005

September 10, 2005

Enbridge pipeline proceeds

Vancouver Sun
September 10, 2005

CALGARY -- With a planned in-service date of mid-2008, Enbridge Inc. said Friday it will proceed with construction of the 380-kilometre Waupisoo pipeline from the Alberta oilsands to the Edmonton refinery hub. The Calgary-based firm said it has reached agreement on long-term shipping commitments with ConocoPhillips Canada, Petro-Canada, Suncor Energy Inc. and Total E&P Canada Ltd. Enbridge will construct the 30-inch (76-centimetre) diameter pipeline at an estimated cost of $400 million in 2005 dollars. The line's initial capacity will be 350,000 barrels a day, with a maximum capacity of 600,000 barrels per day.

© The Vancouver Sun 2005

Posted by Arthur Caldicott on September 10, 2005

Opposing energy projects has a price

Michael Campbell
Vancouver Sun
September 10, 2005

Problems arise when new energy supplies don't keep pace with rising demand

sqwalk.com
COMMENT: This begins like a column that should be an engaging read, but Michael Campbell stays well away from any useful analysis of the problem he identifies. Yes, our fossil fuel energy demands have outpaced industry's ability to deliver. Yes, communities are objecting with increasing strength to ugly, poisonous, dangerous energy projects in their neighbourhoods. Yes, the system is highly utilized, with no tolerance for breakdown.

But Campbell seems to suggest that the solution is for NIMBYs to get off the case, and allow the growth that might otherwise take place. He doesn't follow through to a proposal for serious uptake on conservation and more efficient use of existing supply. He doesn't go anywhere near talking about investing in sustainable technologies.

Heck, he doesn't even acknowledge that the five year sustained resistance against the GSX Pipeline and the Duke Point Power project has saved British Columbians hundreds of millions of dollars. - Arthur Caldicott
sqwalk.com


They are protesting the Sumas 2 power project. They are protesting offshore oil drilling. They opposed the Duke Point power project. Some residents in South Delta are up in arms over the proposal to put higher-voltage power lines in their neighbourhood in order to transport electricity. And no one dares mention nuclear power in North America in spite of the fact that it may be the best existing solution to our energy needs.

In other words, at every opportunity there are individuals and groups ready to oppose the expansion of energy resources. I'm not saying that I want a brand-new power project in my neighbourhood either, but our reluctance to further our energy supplies and infrastructure presents a problem.

The growth in our consumption continues to outpace our increase in supplies. There are more cars, more home computers, more data centres, more electronic gear, more energy needs for manufacturing, bigger houses to heat and numerous other demands that are relentlessly increasing our energy needs. Even our push for alternative sources of energy often relies on energy inputs from other sources. For example, methanol from corn takes more energy to produce than it creates.

What this spells is an obvious problem that Hurricane Katrina simply exacerbated when it comes to oil and gasoline. There is no mystery why gas prices have spiked up in the wake of the U.S. losing 10 per cent of its refining capacity. Demand continues to grow while the supply of gasoline through the refiners was curtailed.

North American refineries have been operating at full capacity for years and had no ability to absorb the loss of 12 refineries. The question should be: Given that we had capacity problems that inevitably would lead to gasoline supply shortages and higher prices, why weren't more refineries built?

The answer is that nobody wants them in their area. While demand for gasoline has been steadily growing, there has not been a refinery built in the U.S. in 25 years. Forbes magazine has just reported on Arizona Clean Fuel's application to build a refinery in the desert near Yuma Arizona. Now keep in mind that Arizona Clean Fuel has been cited many times for its friendly environmental record, but when it came to building a new refinery that made no difference.

It has taken 10 years to get the state and federal environmental approval, which means the company can now enter the permit phase, where it will face more organized opposition. It's anyone's guess how many legal challenges and other hurdles will need to be overcome before the project is finally started.

As I said, when demand continues to rise and supply doesn't keep pace, we have a problem. What's scary is that in the face of such obvious problems we're being greeted with solutions like the proposal to nationalize the oil industry, which a Leger Marketing poll suggests is supported by about half of Canadians.

Even leaving aside the avalanche of problems such a solution would immediately trigger, it still wouldn't negate the fact that regardless of who is the owner we still need to expand capacity and infrastructure. Yet there is still vocal and effective opposition to any such proposal. I'm not passing judgment on the merits of the opposition, I'm simply pointing out that it has consequences in terms of supply and that means higher prices.

Michael Campbell's Money Talks radio show can be heard on CKNW 980 on Saturdays from 8:30 a.m. to 10 a.m.

© The Vancouver Sun 2005

Posted by Arthur Caldicott on September 10, 2005

September 09, 2005

Terasen asks for natural-gas hike of 13.3%

Wendy Mclellan and John Bermingham
The Province
09-Sep-2005


B.C.ers are about to experience the after-effects of Hurricane Katrina on their natural-gas bills.

Terasen Gas filed a request yesterday with the B.C. Utilities Commission to up its rates for residen-tial customers in mainland B.C. by 13.3 per cent, effective Oct. 1.

Vancouver Island customers will not be affected because they follow a different regulatory schedule.

The rate hike would add $180 to the average annual natural-gas bill in the Lower Mainland.

"The primary reason is the repercussions from Hurricane Katrina," said Terasen spokesman Dean Pelkey. "At first we thought it would be an increase of five to 10 per cent, but with the damage to the infrastructure on the Gulf Coast, it will be 13.3 per cent."

Utilities commission spokesman Rob Pelat said a decision on Terasen's request will be made early next week.

"We've already had [an increase] in July of 5.6 per cent," he said. "Just have a look at the market-price of natural gas -- it's just been horrendous."

Said Jim Quail of the B.C. Public Interest Advocacy Centre: "It's very painful, but I don't think Terasen is the villain.

"The market price goes up, unfortunately, and we get skinned. Once again, consumers are the victims of large market forces, which have been worsened by Hurricane Katrina."

Peter Dyne of the Consumers Council of Canada said natural-gas bills could rise another 30 per cent.

"There's more incentive for people to think about insulating their houses," he said from Ottawa. "The trouble is those things cost money, too. It's a very difficult problem, particularly for low-income consumers."

Rudy Lawrence, president of the Council of Senior Citizen's Organizations of B.C., agreed: "It's going to have an impact on some people for sure, not just seniors, but a lot of people on low incomes. That's just scandalous."

Homeowners are shifting to other forms of heating, said Doug Rempel, owner of Solace Energy, a Burnaby home-heating retailer.

Customers are looking at investing in geothermal heating systems and high-efficiency gas furnaces.

"People are concerned, so they're putting in considerably more expensive systems when they're building homes," said Rempel.

Energy Minister Richard Neufeld said there are no plans to help out with the bills.

"Those higher energy costs will be experienced by mostly people that live outside the Lower Mainland, in the colder regions," said Neufeld. "Royalties do increase as the price of natural gas goes up, and so the province will be receiving more revenue. But we haven't contemplated anything about rebates."

Terasen makes its money from delivering the gas, not on its price. The company says it has to raise rates to cover the anticipated increase in natural gas prices.

wmclellan@png.canwest.com

jbermingham@png.canwest.com

- - -

HEATING TIPS . . .

At least 50 per cent of your energy bill goes to heating your home. Here are some tips to reduce heat loss:

WINDOWS

- Up to one third of the heat can escape through windows. Put storm windows or plastic sheeting on single-glazed windows.

- Consider installing energy-efficient windows.

HEATING SYSTEM

- Clean your furnace filters.

- Avoid heating uninsulated spaces.

- Close the fireplace chimney damper between fires to keep warm air in.

- Avoid heating unused rooms by closing doors and warm-air-supply registers or lower the room thermostat for baseboards.

-- B.C. Hydro

Posted by Arthur Caldicott on September 09, 2005

Hydro's net income off 90% in 2006 first quarter

Scott Simpson
Vancouver Sun
09-Sep-2005


BC Hydro's net income fell 90 per cent in the first quarter of fiscal 2006, despite significantly higher trade revenues, the crown corporation reported on Thursday.

In a statement accompanying the first quarter report for 2005-2006, Hydro said it recorded net income of $5 million after regulatory transfers, compared to $52 million in the same period a year earlier.

"Key drivers for the lower net income this quarter were increased costs related to energy purchases to help meet domestic needs and increased finance charges," reported Hydro chief financial officer Alister Cowan.

Hydro also reduced its forecast for annual net income by $20 million, to $376 million, adding that its fiscal payment to the British Columbia government for 2006 would be $302 million.

Revenues from domestic electricity sales moved up by $1 million to $633 million compared to the first quarter of the 2005 fiscal year that ended March 31.

Electricity trade revenues, derived principally from sales to the United States, were up $92 million -- but those gains were effectively wiped out by a $106 million increase in electricity purchases on behalf of customers in B.C.

"Total sales volumes increased by three per cent as a result of an additional 18,996 residential customers compared with the same period last year, as well as an increase in activity in the light industrial and commercial sector as a result of improving economic conditions," Hydro said.

About $30 million of that amount was "due to higher volumes of electricity purchases from Independent Power Producers and other long-term commitments at higher unit prices to meet an increase in domestic load requirements."

Hydro traditionally uses a buy and sell strategy to take advantage of short term differences between electricity prices here and in the U.S., buying comparatively cheap U.S. power during off-peak hours, and opening up its dams to generate power when prices are at premium levels south of the border.

However, Hydro spokeswoman Elisha Moreno said in an interview, the crown corporation put more focus on buying electricity from other sources during the quarter -- with the objective of refilling its reservoirs that were somewhat depleted after two years of comparative drought.

"At June 30, 2005," Hydro reported, "the combined storage in BC Hydro's reservoirs was 119 per cent of average, compared with 91 per cent of average last year.

"Faster-than-normal runoff in the quarter resulted in water inflows into BC Hydro's reservoirs which were 16 per cent higher at June 30, 2005."

"We are coming off a couple of successive lower water years. If we have an opportunity to rebuild our reservoir levels without having significantly negative impact on our financial results then we are definitely going to take advantage of that," Moreno said.

Cowan said Hydro has enough total generating capacity to meet domestic needs but added that the system's flexibility "enables us to look at the most economic way to meet customer demand. In the past quarter, it was cheaper for us to import some electricity from the market than it was to use more expensive resources like Burrard Generating station."

Over the longer term, he said, the result will be lower costs "and better financial performance for our customers in B.C."

ssimpson@png.canwest.com

Posted by Arthur Caldicott on September 09, 2005

Wasco rides with the wind

Eileen M. Garvin
Portland Business Journal
2 September 2005

PPM Energy's wind projects boost city's bottom line


When President George W. Bush signed the nation's new energy bill in New
Mexico in August, the reverberations were felt far north in the small town
of Wasco, Ore. (population 381).

That's because the Energy Policy Act includes tax breaks for the
development of renewable energy sources, which have been a boon to the
agricultural community east of The Dalles.

This summer, Portland's PPM Energy Inc. launched the second phase of a wind
farm that has been encouraged by the federal Energy Production Tax Credit,
which provides a 1.8 cent-per-kilowatt-hour tax credit for electricity
generated through wind turbines.

PPM Energy has invested $90 million in Klondike II, a 50-turbine project
expected to create 75 megawatts of wind power.

"That's a $90 million investment in steel and concrete and turbines," says
Jan Johnson, PPM Energy spokeswoman.

That investment also translates into revenue for Sherman County, which saw
a 10 percent increase in property taxes in the year following the first
phase of the project, Klondike I.

For PPM Energy, Klondike II is another success story for an Oregon company
that grew from 12 employees to 300 in just four short years. This year, it
posted operating profits of $98 million, up from $35 million last year.

PPM Energy is a U.S. subsidiary of international energy company
ScottishPower. A wind power wholesaler, PPM Energy also deals in natural
gas generation and storage.

When ScottishPower purchased the company in 1999, it was then a small
division of electric utility PacifiCorp., which operates as Pacific Power
in Oregon. Interested in pursuing non-utility business, ScottishPower spun
out PPM Energy in 2001.

It quickly grew to employ approximately 300 people, and ScottishPower now
plans to invest $1.6 billion in building its wind capacity in the next five
years. The company is in the process of selling PacifiCorp. to MidAmerican
Energy Holdings Co. for $9.4 billion in a deal subject to approval by the
SEC and other regulatory bodies.

PPM Energy got its start in the wind business through marketing when it
agreed to buy the power produced by the Stateline Wind Farm -- FPL Energy's
454-turbine wind farm straddling Umatilla County, Oregon, and Walla Walla
County, Washington.

"We took all the power," says Johnson. "(FPL) would not build it until they
had someone who would take all the power."

PPM Energy warehoused the power produced at Stateline and sold it to
customers such as Seattle City Light and the city of Eugene. Success in the
marketing business naturally led to operating and building its own wind farms.

PPM Energy now owns or controls wind power projects in seven states --
Oregon, Colorado, California, Iowa, Washington, Wyoming and Minnesota --
representing 830 megawatts of wind power, and is building new farms in New
York and Kansas.

Customers include utilities such as Alliant Energy, Xcel Energy and San
Diego Gas and Electric, public power authorities like Southern California
Public Power Authority and the Bonneville Power Administration, and such
public entities as Seattle City Light and Sacramento Municipal Utility
District.

Klondike I came online in 2001 with just 16 turbines producing up to 24
megawatts of electricity, enough to power 6,100 homes. PPM Energy has been
selling that power to the Bonneville Power Administration.

Last December, Portland General Electric signed a 30-year agreement with
PPM Energy to purchase the output from Klondike II. According to the
American Wind Energy Association, 1 megawatt of wind generates as much
electricity as 300 households would use in year.

More than one kind of green

Wind power is hailed as a clean and green energy source, but it makes money
too, and not just for the company. The Klondike project also has created
local jobs. Local farmers also collect leasing fees for the land used by
the turbines, and the wind farm does not disrupt their traditional farming
practices.

"It is a very positive story for Oregon," says Rachel Shimshak, director of
Renewable Northwest Project, an organization that promotes the development
of renewable energy in the Northwest. PPM Energy is a member of the
organization, which provides a meeting place for environmentalists,
consumer groups and businesses.

In a report last December, Renewable Northwest Project hailed the wind farm
as a sound choice for economic diversification for Sherman County.

"Sherman County was dead last in terms of per capita income in the state,"
says Shimshak. "We think it is a great story. It is something welcomed by a
community that is desperate for economic development."

Sherman County Judge Gary Thompson is enthusiastic about the potential for
tax revenue brought by PPM Energy.

"The economy in Sherman County has been down in the doldrums for so many
years because it has been primarily agriculture-based," says Johnson, a
fifth generation farmer. "This is something new that is really going to
help us."

The county granted PPM Energy a three-year tax abatement for Klondike II.
It will continue to collect property taxes from Klondike I, and PPM Energy
has agreed to donate the approximate amount that it would have paid in
property taxes into a 501c3 to fund county schools, fire districts and
economic development.

Thompson says that translates into approximately $700,000 year.

"That is quite a boon for economic development," he says.

Looking to the future

The American Wind Energy Association, a national trade association, says
PPM Energy is ahead of the curve in planning for the future.

"They are seeing that wind energy is going to be a big part of the future,"
says Wind Energy Association spokesperson Christine Real de Azua.

Real de Azua says PPM Energy has been a leader in 2005 -- a record year for
wind power development -- and is the fourth largest wind power purchaser in
the country.

The strong track record has encouraged the company to pursue more wind
power projects in the Pacific Northwest. PPM Energy is currently in the
permitting stage for projects in Arlington, Ore., and Bickleton, Wash.
Klondike III is also on the horizon.

Portland Business Journal

Posted by Arthur Caldicott on September 09, 2005

September 08, 2005

Teck Cominco Announces Acquisition of 15% Interest in Fort Hills Oil Sands Project

TeckCominco News Release
06-Sep-2005

Vancouver, B.C. -- Teck Cominco Limited today announced that it has entered into an agreement with UTS Energy Corporation and Petro-Canada to subscribe for a 15% interest in the Fort Hills Energy Limited Partnership (the “Partnership”), which is developing the Fort Hills oil sands project in Alberta, Canada.

The aggregate subscription price is $475 million. Teck Cominco will earn a 10% interest in the Partnership by funding $250 million of Petro-Canada and UTS expenditures. In a separate transaction, Teck Cominco will earn a further 5% interest from UTS by funding an additional $225 million of UTS expenditures. On closing of the transactions, expected to occur in October, Teck Cominco will be issued a 15% interest and the interests of UTS and Petro-Canada in the Partnership will be adjusted to 30% and 55%, respectively. The subscription price will be satisfied by Teck Cominco contributing 34% of project expenditures until project spending reaches $2.5 billion and its 15% share thereafter. Closing of the transactions is subject to due diligence, definitive documentation and receipt of regulatory approvals.

Teck Cominco President and CEO Don Lindsay said: “Fort Hills is an ideal opportunity to further diversify our production base in a commodity which will be increasingly important in a world concerned about security of energy supply, and in which Canadians can be expected to play a major role. It is consistent with our strategy of emphasizing the development of quality, long life assets in a variety of significant products in favourable jurisdictions.

Teck Cominco’s proven open pit mining expertise should make a significant contribution to the success of Fort Hills, which will involve mining and extraction as well as upgrading to a final petroleum product. We look forward to working with UTS and project operator Petro-Canada to add value to this project, and view this transaction as the foundation for potential further opportunities in the oil sands business.”

Fort Hills, located approximately 90 kilometres north of Fort McMurray, is a long-life asset with 2.8 billion barrels of bitumen resource. Regulatory approvals are in place for up to 190,000 barrels per day of bitumen production, with initial start-up by the end of the decade. Plans include an integrated upgrader. The project partners are currently evaluating the best location for the upgrader and the technology to be employed.

In a separate transaction, UTS has agreed in principle to grant to Teck Cominco the right to acquire at fair market value a 50% working interest in “Lease 14”, an oil sands property contiguous to the Fort Hills property. The option would be exercisable following delineation by

UTS of the resource on Lease 14 in the event that UTS determines that Lease 14 should be developed as a satellite mine to Fort Hills, subject to agreement of the Partnership.

Teck Cominco will host a conference call to discuss this news release. The call will take place on Tuesday, September 6, 2005 at 5:30 a.m. (PDT) / 8:30 a.m. ( EDT). The dial-in phone number is 416-231-6596, toll-free at 866-250-4910. To access a recording of the call at a later time, dial 1-416-640-1917 and enter code 21151341#. The recording will be available until November 7, 2005.

A live audio webcast of the conference call, together with supporting presentation slides, will be available at Teck Cominco's website at www.teckcominco.com. The webcast will also be available at www.Q1234.com and www.newswire.ca. The webcast will also be archived at www.teckcominco.com.

Teck Cominco is a diversified mining company, headquartered in Vancouver, Canada with assets of over $6 billion. Shares are listed on the Toronto Stock Exchange under the symbols TEK.MV.A and TEK.SV.B. The company is a world leader in the production of zinc and metallurgical coal and is also a major producer of copper and gold. Further information can be found at www.teckcominco.com.

The slideshow presentation is at www.teckcominco.com

Posted by Arthur Caldicott on September 08, 2005

September 07, 2005

Tsawwassen power line foes to fight underground proposal

Maurice Bridge
Vancouver Sun
07-Sep-2005

TRAHVOL is holding a public meeting tonight, Wednesday, 07-Sep-2005, at 7:30 p.m. at the South Delta Rec Centre.

TRAHVOL website: www.trahvol.com

IRAHVOL website: www.irahvol.org

BCTC VITRP web info: www.bctc.com

BC EAO VITRP website: www.eao.gov.bc.ca

BCUC VITRP website: www.bcuc.com


TSAWWASSEN - A group of Tsawwassen residents who have been fighting attempts to run a pair of high-voltage power lines to Vancouver Island through their neighbourhood are gearing up for another battle.

B.C. Transmission Corp. has applied to the B.C. Utilities Commission for permission to run the lines underground along its right-of-way, which overlaps the property lines of 147 private homes in the area. It says it will use expropriation if it cannot reach an agreement with the property owners.

"They need 21 metres of your backyard to put these two lines in . . . in some cases, it's people's entire yards," Maureen Broadfoot said Tuesday.

Broadfoot is the spokeswoman for Tsawwassen Residents Against Higher Voltage Overhead Lines (TRAHVOL), which fought an earlier proposal to run the lines overhead. She said TRAHVOL was promised by the premier, local MLA Val Roddick and the former chair of BCTC that they would not recommend construction of an overhead line.

The residents are opposed to both overhead and underground power lines because of fears of adverse health risks, including cancer.

TRAHVOL says the electro-magnetic field (EMF) levels of the new underground lines would be almost 200 times higher than the World Health Organization warning level for childhood leukemia and other adverse health risks.

BCTC says its proposal strictly adheres to all public health, safety and environmental protection standards and is well below the precautionary guideline for EMFs endorsed by the WHO.

Broadfoot says in addition to opposing the power lines on health grounds, the residents are upset at the idea of expropriation.

"They've basically said they're going to negotiate with us, although three months have gone by and we've not heard boo from them, " Broadfoot said. "If they're unsuccessful, then they'll expropriate."

"The residents' group did our town public consultation, and 100 per cent of the people said, 'Forget it, we're not giving you underground rights.' "

Dennis Maniago, vice-president of system planning and asset management for BCTC, said Tuesday the corporation is not trying to acquire any extra land, but simply wants to make use of its existing right-of-way.

Two overhead power lines are already on the right-of-way, he said.

He said the problem is rooted in a subdivision plan from the 1960s which allowed homes built at the time to use part of the right-of-way as back yards.

"We have had an overhead right-of-way from some 50 years there, it's about 53 metres wide, so what we simply would be looking for is an exchange of overhead rights for underground rights," he said.

"We would be putting it within the right-of-way, which is within their [residents] property."

BCUC is expected to consider the proposal in November, with a decision by February or March.

TRAHVOL is holding a public meeting tonight at 7:30 p.m. at the South Delta Rec Centre.

mbridge@png.canwest.com

Posted by Arthur Caldicott on September 07, 2005

August 29, 2005

Feds slap local energy company

Tom Fowler
Houston Chronicle
Aug. 26, 2005

In one of largest such orders, Kinder Morgan unit must change how it operates

Kinder Morgan Energy Partners' 3,900-mile-long Pacific Operations system, which supplies six Western states with gasoline, diesel fuel and jet fuel, has been hit by a rash of accidents in the past two years, including:

• May 28: Gasoline leaks close to a highway in the Fort Bliss Military Reservation near El Paso. The company concluded the cause was defective pipe.

• April 1: Gasoline and diesel fuel leak into Summit Creek that flows into Donner Lake near a ski resort outside of Truckee, Calif. Company had no additional information.

• Nov. 22, 2004: About 96,000 gallons of gasoline spray the air near San Bernardino, Calif., polluting a portion of the Mojave Desert and shutting down Interstate 15 for hours. Company concluded the line had been damaged by a third party.

• Nov. 9, 20 04: In Walnut Creek, Calif. five contractors were killed when a backhoe used to lay a water main hit a pipeline, sparking a blast.

• April 27, 2004: Corroded pipe leads to about 105,000 gallons of diesel fuel fouling the Suisun Marsh near Fairfield, Calif., killing wildlife.

Source: Company and Transportation Department

Federal pipeline regulators have ordered Houston-based Kinder Morgan Energy Partners to change how it operates more than 3,900 miles of pipelines in six Western states following a recent string of accidents.

In what is being called one of the largest regulatory actions undertaken by the U.S. Department of Transportation's Pipeline and Hazardous Materials Safety Administration, the company must restructure its internal inspection program, get an independent review of its operations and analyze recent incidents, including one that killed five people.

The order didn't come as a surprise to the company — a spokesman said it had been working with regulators on the issues for months and has fixed some already. But it is unusual in its breadth, affecting more than 40 different pipeline segments that carry gasoline, diesel and jet fuel throughout the West.

Most of the recent incidents were due to third parties, such as construction backhoes digging nearby, striking the pipelines. But in its letter to the company, regulators said the recent accidents "indicate a widespread failure to adequately detect and address the effect of outside force damage and corrosion. This failure has systematically affected the integrity of the Pacific Operations unit."

The Kinder Morgan companies operate more than 25,000 miles of pipelines in the nation, carrying crude oil, natural gas and refined products.

While the company has invested in new construction, much of its growth has come through acquisitions. Most of the pipeline system in question came to the company in 1998 when it acquired Santa Fe Pacific Pipeline.

Kinder Morgan said it would spend more than $900 million this year maintaining and operating its pipelines and other assets.

"We share the PHMSA's priorities to operate our pipelines as safely as possible and to protect the public, employees and the environment," company spokesman Larry Pierce said. "These are top priorities at Kinder Morgan."

About 60 percent of accidents along pipelines under Kinder Morgan's Pacific Operations were caused by what is called outside force damage, namely another company or individual damaging the pipeline with equipment, according to the Transportation Department.

One of the worst accidents occurred Nov. 9, 2004, in Walnut Creek, Calif., near San Francisco. Contractors laying a water main are thought to have struck a pipeline with a backhoe, sparking a blast that killed five workers.

But some incidents are due to age and wear and tear. An April 27, 2004, release of 105,000 gallons of diesel into a marsh near Fairfield, Calif., was due to a patch of corrosion almost 14 feet long. The firm paid more than $5 million in fines, penalties and restitution in that case.

Damon Hill, a spokesman with the PHMSA, said the broad scope of the order is due to the large number of incidents in the company's Pacific operations: 44 since Jan. 1, with 14 resulting in the release of more than five barrels of refined petroleum.

"We didn't find any clear-cut violations of integrity management rules, but we did see some weaknesses in the use of their tools to interpret data," said Hill.

For example, the order notes that in some instances Kinder Morgan used internal pipe inspection tools that aren't sufficient to identify certain defects.

The company's organizational structure also expects workers in different departments to identify specific pipeline safety threats, but it does not allow workers from one department easy access to data from another department, the order says.

Kinder Morgan has 120 days to submit a revised integrity management plan to regulators. The company must also provide a list of outside experts it may use to do the independent evaluation within 30 days.

"It's possible, we may choose to appeal certain elements in the order, but we've been working with them on these issues for months," Pierce said.

tom.fowler@chron.com

Copyright 2005 Houston Chronicle


Posted by Arthur Caldicott on August 29, 2005

August 25, 2005

Transportation Department Orders Kinder Morgan to Address Rise in Pipeline Incidents

U.S. Department of Transportation
Pipeline and Hazardous Materials Safety Administration
Thursday, August 25, 2005

Contact: James Wiggins/Damon A. Hill
Tel.: (202) 366-4831

The U.S. Department of Transportation’s Pipeline and Hazardous Materials Safety Administration (PHMSA) today announced it ordered Kinder Morgan Energy Partners (KMEP) to address a recent increase in incidents along its hazardous liquids pipeline system. The agency issued a Corrective Action Order requiring KMEP to comprehensively address integrity threats along the entire 3,900-mile Pacific Operations unit.

The order requires a thorough analysis of recent incidents, a third-party independent review of operations and procedural practices, and a restructuring of KMEP’s internal inspection program. KMEP must have a revised integrity management plan approved by PHMSA within 120 days. Failure to comply may result in an assessment of civil penalties of as much as $100,000 per day.

Since January 1, 2003, KMEP has experienced at least 44 accidents with some 14 resulting in the release of more than five barrels of refined petroleum products, some in or near environmentally sensitive areas or major transportation corridors.

“Our investigations into these incidents identified inadequacies in Kinder Morgan’s interpretation of in-line inspection information to evaluate and repair their pipeline systems,” said PHMSA Acting Chief Safety Officer Stacey Gerard. “It is imperative for operators to utilize the most comprehensive set of technologies available to improve their ability to consistently characterize and address every possible threat their systems pose to public safety.”

Recent PHMSA investigations of these accidents, and reviews of KMEP’s operations and procedures, prompted the agency Order requiring KMEP to apply technologies and procedures to help evaluate its pipelines, Gerard said.

PHMSA pipeline engineers and agency State Pipeline Safety Program partners will continue to carefully monitor and scrutinize KMEP’s activities.

-END-

Corrective Action Order - Kinder Morgan Energy Partners, L.P.
August 24, 2005 | News Release
- regarding KM's Pacific Operations - systems in California, Nevada, Arizona, New Mexico and western Texas.

Final Order - Kinder Morgan Energy Partners, L.P.
April 22, 2005
- Rockland CA to Reno NV

Final Order - Kinder Morgan Energy Partners, L.P.
March 23, 2005
- finding of violation and assessing $25,000 fine

Corrective Action Order - Kinder Morgan Energy Partners L.P.
May 1, 2004
- Concord to Sacramento

All pipeline operators at one time or another come under the finger-wagging oversight of OPS, including Terasen, the recent willing takeover subject of Kinder Morgan.

Final Order - Trans Mountain Oil Pipe Line Company (a Terasen company)
June 6, 2005
- regarding adherence to maintenance and inspection standards on the TM pipeline in BC and WA

Posted by Arthur Caldicott on August 25, 2005

Kinder Morgan open houses in BC

Kinder Morgan has placed ads in newspapers inviting the public to find out more about them. Open houses in Cranbrook, Prince George, Whistler, Kelowna, and Vancouver are scheduled.

Between 29 Aug - 1Sept, they're on Vancouver Island:

Victoria, 31 Aug, 10am - 1pm, Holiday Inn, Topaz Room.
Nanaimo, 31 Aug, 5-8pm, Coast Bastion Inn, Malaspina Room.

www.terasen.com
www.kindermorgan.com

Posted by Arthur Caldicott on August 25, 2005

Terasen gas plant project still alive

Edward Hill
Ladysmith Chronicle
Aug 23 2005

A natural gas storage facility north of Ladysmith is still in the works, says Terasen Gas, despite the demise of the Duke Point power project and Terasen's recent takeover by a Texas energy company.

Carol Greaves, Terasen's community relations manager, said the company will re-start the approval process with the B.C. Utilities Commission within the next several months. The BCUC previously gave the go-ahead in February, predicated on supplying gas to a 252-megawatt power plant, which BC Hydro abandoned in June.

Greaves said Terasen is still calculating the economics of building a $100-million liquid natural gas (LNG) facility, but suggested its construction is likely.

"It depends on projected use. The facility will offer a flexible source to store gas. We will buy it in the summer when prices are lower, and draw from it in the winter when demand is greater," Greaves said. "It will contribute to stabilizing prices."

Houston-based Kinder Morgan, which operates pipelines within North America, took control of Terasen Aug. 1 for $6.9 billion. Kinder Morgan was primarily interested in Terasen's Alberta oilsands pipeline network.

Greaves said for B.C. customers and projects, "it's business as usual. Nothing is going to change."

LNG storage is slated for construction about six kilometres northwest of Ladysmith near Mt. Hayes, on 12 hectares of a 42-hectare parcel owned by Terasen. The Cowichan Valley Regional District granted the LNG storage environmental certification and zoning approval last year.

The tank will be massive, 60 metres in diameter and 55 metres high, holding up to 30 million cubic metres of LNG. Natural gas is stored in a liquid state at -162 degrees Celsius, which reduces its gaseous volume by a factor of 600, but makes it a dangerous substance to humans.

Should the tank ever rupture, from an earthquake or otherwise, the plan calls for an earthen dike that holds the same volume as the tank.

In June, at about the same time the Duke Point project died, Terasen entered into an agreement with the with the Chemainus First Nation and Cowichan Tribes' Khowutzun Development Corporation.

"The project might affect [Chemainus First Nation] land," Greaves said. "We want them to help with site prep work."

If the project gets the nod from the BCUC, Chemainus members have been guaranteed contracts for site road construction, land clearing and pipeline installation, among other jobs.

Posted by Arthur Caldicott on August 25, 2005

August 24, 2005

The wind blows for free, advocate argues

Guy Dauncey
Guest Commentary
Victoria News
Aug 24 2005

They are spinning on the windswept hills of southern Alberta, and on a hill outside Whitehorse, in the Yukon.

They are spinning in downtown Toronto and along the shores of the St. Lawrence, in Quebec. But there are no wind turbines spinning in British Columbia - yet.

The production of electricity from the wind is making rapid progress around the world. By the end of 2003, wind turbines had 39,000 megawatts of global capacity. By the end of 2004, it had risen to 47,000 MW. In Quebec, the government has just given approval for the construction of a further 2,000 MW.

In Calgary, the public light rail system is powered by 12 wind turbines in the southern prairies, near Pincher Creek. The program is called "Ride the Wind," and moves the Calgary C Trains while producing no greenhouse gas emissions at all. Wind-generated electricity is also powering many Calgary households, which purchase green electricity credits to show that their power has come from Alberta's turbines.

Overall, in Canada, wind turbines have 570 MW of capacity. The Canadian Wind Energy Association believes that Canada could have 10,000 MW of wind power capacity by 2010.

But don't wind turbines kill birds? Aren't they ugly, and noisy?

And what happens when the wind is not blowing?

These are all important questions.

The first generation of turbines with latticed frames were certainly no friends of birds, especially if they were inappropriately located.

But the new turbines have smooth tubular stems, with nowhere for a bird to rest. Studies show that on average they kill no more than one or two birds per turbine per year. If we want to protect the birds, we should look after our cats. [and cars, and pesticide use ...]

To some people, wind turbines are ugly. But many people like their sleek designs and see them as an emblem of the future. If you live very close, they will sometimes produce a background noise, but most of Canada's wind farms are in remote areas where few people live.

What happens when the wind is not blowing?

The answer is simple: they stop turning. This is why it will never be possible for a community to get all its energy from the wind. Here in B.C., however, we are blessed with a hydro system which can be used like a battery. When the wind is blowing, and the turbines are putting energy into the grid, the hydro engineers can hold back the water in the dams. When the wind stops, the dams can do their part. This eliminates the problem and allows them to contribute consistent
power to the grid.

How much power could wind turbines in B.C. produce?

A recent study done for BC Hydro suggested we have potential for 5,000 MW, enough to power almost a million homes. The best locations are in the Peace River country, on the northern end of Vancouver Island, and along B.C.'s mid-coast off Haida Gwaii.

How much will it cost?

The cost varies according to the wind, ranging from 6 to 12 cents a kilowatt hour. The owners of a 58.5 MW project that was recently scrapped at Holberg, on northern Vancouver Island, negotiated a low-price contract with BC Hydro before they knew how much wind there was, and had to back out when the numbers didn't work.

Power from natural gas, for comparison, costs 9 cents a kilowatt hour, which is guaranteed to increase since North America has only enough gas left for 10 more years, after which it must be shipped in as liquefied natural gas from unstable countries like Russia, Algeria, and Iran.

Coal-fired power is still cheap, but coal is the dirtiest of all fuels, and "clean coal" technologies which will not produce greenhouse gas emissions are still years off. Wind energy, by contrast, is a gift from the sun (since it's the sun's heat that causes the wind to blow).

It is renewable, clean, and goes on forever.

In Denmark, where the modern wind energy movement began, farmers, teachers, and other people have formed wind energy cooperatives, and own their own turbines. Globally, a study from Stanford University has suggested that the world could harvest five times more power from the wind than we are currently using for all purposes - if we wanted to.

The BC Sustainable Energy Association believes that wind energy has a big future in B.C., as long as policies and rules are put in place to encourage it.

Let's hope we don't have to wait much longer!

- Guy Dauncey is president of the BC Sustainable Energy Association,
www.bcsea.org, and author of the book Stormy Weather: 101 Solutions to Global Climate Change. He lives in Victoria.

Posted by Arthur Caldicott on August 24, 2005

August 23, 2005

The EUB’s ‘men without chests’

Andrew Nikiforuk
Calgary Herald
August 23, 2005

In one of his most famous essays, the Christian philosopher C.S. Lewis once described bureaucrats who banished all magnanimity and heart from their decisions as “men without chests.”

The Energy and Utility Board’s recent decision to grant Compton Petroleum another 21 /2-month extension on its plans to drill sour gas wells in the city’s southeast corner illustrates just how advanced this organic atrophy has become among the agency’s faceless directors.

By now almost every Calgarian knows the direction of this sad narrative. A company, whose president wouldn’t live near a sour gas well, gleefully declares its intent to put nearly 250,000 citizens as well as a future hospital, in harm’s way so it can enrich itself. All because the oil and gas regulator has no plan, no policy and no heart.

I can’t name a world-class city that would allow active production of a highly hazardous gas and well known chemical warfare agent in its backyard. Or that would entrust the safety of its citizens to an agency so chronically understaffed that it openly expects ordinary Albertans to do its own police work. Or that would relinquish its sovereignty to a board so morally captive to provincial cash flows that it even rubber stamps wells for companies in steady “noncompliance” mode without so much as demanding a $100,000 reclamation bond.

It gets worse. By the board’s own reluctant calculations and that of rural economist Peter Boxall, the health risks of sour gas devalue properties anywhere between five and 10 per cent. Any rural house in an emergency response zone, for example, loses $6,000 in value.

So Compton’s project will sour property values in the city by at least $15 million.

Men without chests, however, don’t bat an eyelash when it comes to expropriating property rights or the security of ordinary citizens.

After giving Compton two months to produce a coherent emergency response plan, the EUB has now rewarded the company’s insouciance by giving it another delay so that Compton can, in all likelihood, work harder at convincing taxpayers and other agencies to help foot the bill.

Fortunately the Calgary Regional Health Authority has challenged this insanity with a damning legal appeal of the board’s chestless actions.

The CRHA’s motion of appeal says everything the mayor should have said. It accuses the board of not considering the potential social and economic costs of the project; and it accuses the EUB of failing to establish the costs of evacuating, sheltering and providing medical care to persons affected by an accidental release of sour gas.

The CHRA repeatedly accuses the board of erring, ignoring or misinterpreting so much evidence that “the board could not properly carry out its mandate to determine the public interest and weigh the social and economic effects of the proposed project.”

These accusations have been echoed across the province. In Drayton Valley, where the board has abused rural Albertans by putting some households in as many as 52 emergency response zones (and thereby eliminated all value), people are getting fed up.

Citizens there have actually brought industry’s high-density sour gas drilling to a standstill by objecting to every sour gas well. “The companies came in and said, ‘We will do what we want,’ ” says 56-year-old local Louis Mastre, and “we are fighting back.”

The residents of Drayton Valley, of course, support a vigorous oil and gas industry, but one run and regulated by men with chests.

They want what southeast Calgarians want: a commitment to public health and safety first.

They want priority land use zoning that keeps sour gas wells and high-density drilling away from schools, hospitals and grandmothers like Mastre. They want full cost accounting and industry to pay for property devaluation as well as full health-risk insurance for the residents of sour gas zones.

And they want the regulator to responsibly act on industry’s appalling $9-billion deficit in unreclaimed wells and facilities.

Calgarians will know when sour gas developments in cities and towns are safe when their leaders practise what they preach.

So when Premier Ralph Klein and Energy minister Greg Melchin make the ultimate sacrifice, and devalue their homes and that of their neighbours, by sticking sour gas wells in their backyards and all without improper health and economic assessments, and then submit to monitoring by an understaffed agency directed by men without chests and no cleanup fund, then we’ll know that sour gas is good for us.

Until that distant time, Compton’s rude proposal will remain a bad business supported by men without chests. “Do as you would be done by” remains a mighty measure of men, said Lewis. Even in an oil and gas town.

ANDREW NIKIFORUK IS A PROUD CALGARIAN, WON THE GOVERNOR’S GENERAL AWARD IN 2002 FOR SABOTEURS: WIEBO LUDWIG’S WAR AGAINST BIG OIL.

Posted by Arthur Caldicott on August 23, 2005

Kinder Morgan Marked by Spills

Jeremy J. Nuttall
TheTyee.ca
August 23, 2005



Trouble in Tuscon
Terasen suitor's many pipelines figure in several
U.S. disasters, including a very deadly one.

Kinder Morgan, the company that hopes to take over the B.C. gas utility Terasen, is “the poster child for pipeline problems,” according to Carl Weimer, executive director of the Bellingham, Washington--based Pipeline Safety Trust.

Weimer says Kinder Morgan has a poor safety record, which he attributes to the company taking over a huge network of pipelines in a short time frame. “They’ve expanded rapidly and a lot of the pipelines they took over are older pipelines. And that has undercut some of the safety,” he says.

Weimer, whose trust is funded by a court-ordered endowment created after an Olympic Pipe Line Co. pipeline in Bellingham burst and then exploded in 1999, killing three and destroying Whatcom Creek, says ongoing internal inspection is the best way to stay on top of pipeline maintenance. Weimer adds that Terasen has a good record on this front. “Hopefully the personnel won’t go through a dramatic change” during the takeover, he says, given Terasen staff’s credible record.

According to Terasen, many of their pipelines are approaching 50 years of age, and some, particularly under Vancouver, are as old as 70 years. Many of the lines Kinder Morgan took over in the U.S. are around 50 years old, says Weimer, which has resulted in several failures on its network.

Explosion killed five

The most dramatic and deadly incident had another cause, however. Five people were killed last November in Walnut Creek, California, after an excavator ruptured a high-pressure petroleum line. Gasoline filled the pipe trench and was ignited by a welding torch.

Kinder Morgan spokesman Rick Rainey told The Tyee that the incident had nothing to do with the company’s practices. “It was a backhoe operator that ruptured our pipeline, so that had nothing to do with integrity,” he says.

However, the California Department of Industrial Relations didn’t see it exactly that way. In its 20-page report on the Walnut Creek explosion, the department said the main contributing factor was that the pipeline was not properly marked: “The primary cause of the incident was that the location of the petroleum line was not known to employees working in the area.”

Negligence cited

In the end, Kinder Morgan was cited for two counts of “serious willful” and fined a total of $140,000. In the report, “willful” is defined as a situation “where evidence shows that the employer committed an intentional and knowing violation -- as distinguished from inadvertent or accidental or ordinarily negligent -- and the employer is conscious of the fact that what they are doing constitutes a violation, or is aware that a hazardous condition exists and no reasonable effort was made to eliminate the hazard.”

Right underneath that violation “serious” is defined as “cited where there is substantial probability that death or serious physical harm could result from a condition which exists -- or from practices, operations or processes at the workplace.”

The fines to the three other companies involved amounted to $51,750, less than half of what Kinder Morgan was fined for its part in the accident, even though Kinder Morgan insists the accident was not really its fault.

Another blemish on Kinder Morgan’s environmental record is a 2004 70,000-gallon diesel spill into a Northern California marsh from an old, corroded pipeline. However, according to Rainey, the company had wanted to replace the very pipeline that leaked into the marsh, and would have done so, except that California’s “cumbersome permitting process” held up the company’s attempts to change the line.

“It took us three years to even get permits. Had it been done a little more timely,” says Rainey, “we wouldn’t have had the issue of the rupture.”

Still, Kinder Morgan pled guilty in the case and paid about $3 million in penalties and restitution. The company didn’t notify the California government about the spill until 18 hours after it had occurred, a failure for which it was cited. Kinder Morgan attributed the delay to the time it took them to identify the leak and be certain there was a one.

Houses sprayed with gas

Not all of the leaks have been hard to locate. In 2003 in Tuscon, Arizona, 19,000 gallons of gasoline spilled out of another Kinder Morgan pipeline, spraying a housing development and flooding nearby streets. The resulting pipeline closure caused major gas shortages in the state.

In December 2004, a Kinder Morgan pipeline burst in the Mojave Desert in California. For 12 hours, it spewed diesel more than 70 feet into the air. The fuel seeped an estimated 50 feet below the surface and the clean up involved removing 7,500 tons of dirt from the site.

Rainey defends Kinder Morgan’s history and says that overall, “despite a couple of recent high-profile incidents,” the company has a clean record. “We have a very aggressive integrity management program, and that will be applied,” he says of the standards the company will promote in B.C.

Safety commitment lauded

According to Rainey, since the company was formed in 1997 it has increased its pipelines by 6.5 times yet spends 10.5 times more on safety and maintenence. He says the incidents have little to do with negligence. “It’s certainly not for lack of dedicating financial resources to make sure [pipelines] are safe,” he says.

Rainey says Kinder Morgan’s record is considered better than the industry average -- according to his company’s records. That sentiment is echoed by Terasen’s director of public affairs, Cam Avery. “In most quarters they’ve got above-industry-standard record,” says Avery, adding that B.C. standards would apply if Kinder Morgan succeeds in its takeover bid. “Terasen gas is regulated in British Columbia according to British Columbia standards.”

Rainey also stresses the company is actively trying to improve its practices. “Commitment to safety is our top priority,” he says.

However, Kinder Morgan has been cited for not complying with government safety standards, and for not performing emergency training. In December 2004, Kinder Morgan was fined $26,630 and promised to buy emergency equipment for a California town after failing to conduct the minimum 10 emergency drills at a Nevada oil-holding facility and for neglecting to conduct two oil-spill response drills. The safety drills were required by the Environmental Protection Agency.

Out of Enron

Kinder Morgan was formed by Richard Kinder and Bill Morgan, both former executives of the infamous energy giant Enron Corporation. Richard Kinder was the president of Enron until 1997, when he handed the reins over to Kenneth Lay, who now faces fraud charges related to the collapse of the company.

As with Lay, Kinder and his family are strong supporters of George W. Bush. Kinder’s wife raised more than $200,000 for Bush during the 2004 election, and had pledged $100,000 to the Bush campaign in 2001. According to Mother Jones, during that 2001 campaign Kinder and his wife served as regional co-chairs for Bush’s Presidential Exploratory Committee, and Kinder has given $379,745 US to the Republican party.

Terasen stockholders will vote on the sale of Terasen to Kinder Morgan in late October. If the deal is approved, Terasen could be under Kinder Morgan control by December.

Scott Webb, a Terasen gas utility spokesperson, says there is some nervousness within Terasen about the deal. There’s “a little bit of uncertainty,” he says. “This all happened very fast.” Webb added that some Terasen employees are excited that Terasen may be acquired by a company that really wants to own it.

The B.C. Ministry of Energy and Mines and the Ministry of the Environment were approached for comment on safety and regulatory issues in B.C. but were not available by press time.

Jeremy Nuttall is a Penticton radio reporter and freelance writer.

Posted by Arthur Caldicott on August 23, 2005

August 22, 2005

Activists, companies split over Kyoto panel

Bill Curry
Globe and Mail
22-Aug-2005


OTTAWA

Environment Canada's hope of bringing together industry executives, environmentalists and senior public servants to craft policies might not get off the ground as boycotts are threatened over who gets to run the meetings.

Some environmental critics are questioning why EnCana, a company that has been one of the most vocal critics of the Kyoto Protocol, has been asked to fill a leadership role as co-chair of a panel that will propose energy policies.

But Gerry Protti, the EnCana executive vice-president who has been named to the post, said he is proud of his company's environmental record and is looking forward to taking part in the policy sessions.

He noted that EnCana has invested in tidal-power technology, as well as research into ways to capture carbon dioxide emissions and inject them back into Earth.

"We still think [Kyoto's] a huge challenge and I think the entire energy sector recognizes that. Having said that, I think we're taking a leadership role in terms of reduction of greenhouse gas emissions.".

In July, 21 environmental groups said they would boycott the first of four such policy tables after it was announced that a vice-president of Imperial Oil had been named co-chair of the meetings dealing with chemicals.

There will also be tables dealing with the mining and forestry sectors.

Each table is co-chaired by both an industry representative and a senior public servant.

John Bennett, senior policy adviser for the Sierra Club, said that if the government wants to get industry involved, it should invite companies, such as Shell and Suncor, that have been more supportive of Kyoto and the government's environmental plan.

Mr. Bennett said environmental groups are giving Environment Canada a bit more time to convince them environmental concerns will not be sidelined by the views of industry at the four tables. "If they don't, there will be a boycott of all the tables," he added.

"The companies that fought the hardest against doing the right thing end up with the most influence with the government. It might have been some crackerjack's idea that this would be a smart way to get them in the house, but they weren't thinking what that communicated to Canadians."

Rick Smith of the Environmental Defence Fund expressed similar concerns, saying: "It's another bizarre decision by the government. It's yet another fox-in-the-henhouse scenario."

But not all environmentalists are ready to give up on the tables, or think industry representatives should be rejected out of hand.

Marlo Raynolds of the Pembina Institute, a not-for-profit environmental-policy research and education organization, took part in one of the planning meetings for the energy table. He said that while he has some concerns, he is still hopeful the meetings can be positive.

Mr. Raynolds said he is pushing for the volunteer co-chair positions to rotate and include environmentalists. EnCana deserves some credit for getting involved in the project, he added.

"It creates an opportunity for EnCana to show and demonstrate some leadership and I think we'll have to see how they use that opportunity."

Environment Canada spokesman Sebastien Bois said the co-chairs are expected to be neutral and will not be representing the positions of their companies or departments. Mr. Protti's experience in government and with outside policy groups makes him "very qualified" for the position, Mr. Bois added.

Mr. Protti, a former public servant with the Alberta government, said he received a personal invitation from Alex Himelfarb, Clerk of the Privy Council, to take part in the meetings.

Mr. Protti said he and the other energy co-chair, fisheries deputy minister Larry Murray, have been working on a list of members for the table. He predicted it will involve between 25 and 30 people.

Posted by Arthur Caldicott on August 22, 2005

August 21, 2005

The Breaking Point

Peter Maass
New York Times
August 21, 2005

The largest oil terminal in the world, Ras Tanura, is located on the eastern coast of Saudi Arabia, along the Persian Gulf. From Ras Tanura's control tower, you can see the classic totems of oil's dominion -- supertankers coming and going, row upon row of storage tanks and miles and miles of pipes. Ras Tanura, which I visited in June, is the funnel through which nearly 10 percent of the world's daily supply of petroleum flows. Standing in the control tower, you are surrounded by more than 50 million barrels of oil, yet not a drop can be seen.

The oil is there, of course. In a technological sleight of hand, oil can be extracted from the deserts of Arabia, processed to get rid of water and gas, sent through pipelines to a terminal on the gulf, loaded onto a supertanker and shipped to a port thousands of miles away, then run through a refinery and poured into a tanker truck that delivers it to a suburban gas station, where it is pumped into an S.U.V. -- all without anyone's actually glimpsing the stuff. So long as there is enough oil to fuel the global economy, it is not only out of sight but also out of mind, at least for consumers.

I visited Ras Tanura because oil is no longer out of mind, thanks to record prices caused by refinery shortages and surging demand -- most notably in the United States and China -- which has strained the capacity of oil producers and especially Saudi Arabia, the largest exporter of all. Unlike the 1973 crisis, when the embargo by the Arab members of the Organization of Petroleum Exporting Countries created an artificial shortfall, today's shortage, or near-shortage, is real. If demand surges even more, or if a producer goes offline because of unrest or terrorism, there may suddenly not be enough oil to go around.

As Aref al-Ali, my escort from Saudi Aramco, the giant state-owned oil company, pointed out, ''One mistake at Ras Tanura today, and the price of oil will go up.'' This has turned the port into a fortress; its entrances have an array of gates and bomb barriers to prevent terrorists from cutting off the black oxygen that the modern world depends on. Yet the problem is far greater than the brief havoc that could be wrought by a speeding zealot with 50 pounds of TNT in the trunk of his car. Concerns are being voiced by some oil experts that Saudi Arabia and other producers may, in the near future, be unable to meet rising world demand. The producers are not running out of oil, not yet, but their decades-old reservoirs are not as full and geologically spry as they used to be, and they may be incapable of producing, on a daily basis, the increasing volumes of oil that the world requires. ''One thing is clear,'' warns Chevron, the second-largest American oil company, in a series of new advertisements, ''the era of easy oil is over.''

In the past several years, the gap between demand and supply, once considerable, has steadily narrowed, and today is almost negligible. The consequences of an actual shortfall of supply would be immense. If consumption begins to exceed production by even a small amount, the price of a barrel of oil could soar to triple-digit levels. This, in turn, could bring on a global recession, a result of exorbitant prices for transport fuels and for products that rely on petrochemicals -- which is to say, almost every product on the market. The impact on the American way of life would be profound: cars cannot be propelled by roof-borne windmills. The suburban and exurban lifestyles, hinged to two-car families and constant trips to work, school and Wal-Mart, might become unaffordable or, if gas rationing is imposed, impossible. Carpools would be the least imposing of many inconveniences; the cost of home heating would soar -- assuming, of course, that climate-controlled habitats do not become just a fond memory.

But will such a situation really come to pass? That depends on Saudi Arabia. To know the answer, you need to know whether the Saudis, who possess 22 percent of the world's oil reserves, can increase their country's output beyond its current limit of 10.5 million barrels a day, and even beyond the 12.5-million-barrel target it has set for 2009. (World consumption is about 84 million barrels a day.) Saudi Arabia is the sole oil superpower. No other producer possesses reserves close to its 263 billion barrels, which is almost twice as much as the runner-up, Iran, with 133 billion barrels. New fields in other countries are discovered now and then, but they tend to offer only small increments. For example, the much-contested and as-yet-unexploited reserves in the Alaska National Wildlife Refuge are believed to amount to about 10 billion barrels, or just a fraction of what the Saudis possess.

But the truth about Saudi oil is hard to figure out. Oil reservoirs cannot be inventoried like wood in a wilderness: the oil is underground, unseen by geologists and engineers, who can, at best, make highly educated guesses about how much is underfoot and how much can be extracted in the future. And there is a further obstacle: the Saudis will not let outsiders audit their confidential data on reserves and production. Oil is an industry in which not only is the product hidden from sight but so is reliable information about it. And because we do not know when a supply-demand shortfall might arrive, we do not know when to begin preparing for it, so as to soften its impact; the economic blow may come as a sledgehammer from the darkness.

Of course the Saudis do have something to say about this prospect. Before journeying to the kingdom, I went to Washington to hear the Saudi oil minister, Ali al-Naimi, speak at an energy conference in the mammoth Ronald Reagan Building and International Trade Center, not far from the White House. Naimi was the star attraction at a gathering of the American petro-political nexus. Samuel Bodman, the U.S. energy secretary, was on the dais next to him. David O'Reilly, chairman and C.E.O. of Chevron, was waiting in the wings. The moderator was an éminence grise of the oil world, James Schlesinger, a former energy secretary, defense secretary and C.I.A. director.

''I want to assure you here today that Saudi Arabia's reserves are plentiful, and we stand ready to increase output as the market dictates,'' said Naimi, dressed in a gray business suit and speaking with only a slight Arabic accent. He addressed skeptics who contend that Saudi reservoirs cannot be tapped for larger amounts of oil. ''I am quite bullish on technology as the key to our energy future,'' he said. ''Technological innovation will allow us to find and extract more oil around the world.'' He described the task of increasing output as just ''a question of investment'' in new wells and pipelines, and he noted that consuming nations urgently need to build new refineries to process increased supplies of crude. ''There is absolutely no lack of resources worldwide,'' he repeated.

His assurances did not assure. A barrel of oil cost $55 at the time of his speech; less than three months later, the price had jumped by 20 percent. The truth of the matter -- whether the world will really have enough petroleum in the years ahead -- was as well concealed as the millions of barrels of oil I couldn't see at Ras Tanura.


or 31 years, Matthew Simmons has prospered as the head of his own firm, Simmons & Company International, which advises energy companies on mergers and acquisitions. A member of the Council on Foreign Relations, a graduate of the Harvard Business School and an unpaid adviser on energy policy to the 2000 presidential campaign of George W. Bush, he would be a card-carrying member of the global oil nomenclatura, if cards were issued for such things. Yet he is one of the principal reasons the oil world is beginning to ask hard questions of itself.
Two years ago, Simmons went to Saudi Arabia on a government tour for business executives. The group was presented with the usual dog-and-pony show, but instead of being impressed, as most visitors tend to be, with the size and expertise of the Saudi oil industry, Simmons became perplexed. As he recalls in his somewhat heretical new book, ''Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy,'' a senior manager at Aramco told the visitors that ''fuzzy logic'' would be used to estimate the amount of oil that could be recovered. Simmons had never heard of fuzzy logic. What could be fuzzy about an oil reservoir? He suspected that Aramco, despite its promises of endless supplies, might in fact not know how much oil remained to be recovered.

Simmons returned home with an itch to scratch. Saudi Arabia was one of the charter members of OPEC, founded in 1960 in Baghdad to coordinate the policies of oil producers. Like every OPEC country, Saudi Arabia provides only general numbers about its output and reserves; it does not release details about how much oil is extracted from each reservoir and what methods are used to extract that oil, and it does not permit audits by outsiders. The condition of Saudi fields, and those of other OPEC nations, is a closely guarded secret. That's largely because OPEC quotas, which were first imposed in 1983 to limit the output of member countries, were based on overall reserves; the higher an OPEC member's reserves, the higher its quota. It is widely believed that most, if not all, OPEC members exaggerated the sizes of their reserves in order to have the largest possible quota -- and thus the largest possible revenue stream.

In the days of excess supply, bankers like Simmons did not know, or care, about the fudging; whether or not reserves were hyped, there was plenty of oil coming out of the ground. Through the 1970's, 80's and 90's, the capacity of OPEC and non-OPEC countries exceeded demand, and that's why OPEC imposed a quota system -- to keep some product off the market (although many OPEC members, seeking as much revenue as possible, quietly sold more oil than they were supposed to). Until quite recently, the only reason to fear a shortage was if a boycott, war or strike were to halt supplies. Few people imagined a time when supply would dry up because of demand alone. But a steady surge in demand in recent years -- led by China's emergence as a voracious importer of oil -- has changed that.

This demand-driven scarcity has prompted the emergence of a cottage industry of experts who predict an impending crisis that will dwarf anything seen before. Their point is not that we are running out of oil, per se; although as much as half of the world's recoverable reserves are estimated to have been consumed, about a trillion barrels remain underground. Rather, they are concerned with what is called ''capacity'' -- the amount of oil that can be pumped to the surface on a daily basis. These experts -- still a minority in the oil world -- contend that because of the peculiarities of geology and the limits of modern technology, it will soon be impossible for the world's reservoirs to surrender enough oil to meet daily demand.

One of the starkest warnings came in a February report commissioned by the United States Department of Energy's National Energy Technology Laboratory. ''Because oil prices have been relatively high for the past decade, oil companies have conducted extensive exploration over that period, but their results have been disappointing,'' stated the report, assembled by Science Applications International, a research company that works on security and energy issues. ''If recent trends hold, there is little reason to expect that exploration success will dramatically improve in the future. . . . The image is one of a world moving from a long period in which reserves additions were much greater than consumption to an era in which annual additions are falling increasingly short of annual consumption. This is but one of a number of trends that suggest the world is fast approaching the inevitable peaking of conventional world oil production.''

The reference to ''peaking'' is not a haphazard word choice -- ''peaking'' is a term used in oil geology to define the critical point at which reservoirs can no longer produce increasing amounts of oil. (This tends to happen when reservoirs are about half-empty.) ''Peak oil'' is the point at which maximum production is reached; afterward, no matter how many wells are drilled in a country, production begins to de cline.SaudiArabia and other OPEC members may have enough oil to last for generations, but that is no longer the issue. The eventual and painful shift to different sources of energy -- the start of the post-oil age -- does not begin when the last drop of oil is sucked from under the Arabian desert. It begins when producers are unable to continue increasing their output to meet rising demand. Crunch time comes long before the last drop.

''The world has never faced a problem like this,'' the report for the Energy Department concluded. ''Without massive mitigation more than a decade before the fact, the problem will be pervasive and will not be temporary. Previous energy transitions (wood to coal and coal to oil) were gradual and evolutionary; oil peaking will be abrupt and revolutionary.''

Most experts do not share Simmons's concerns about the imminence of peak oil. One of the industry's most prominent consultants, Daniel Yergin, author of a Pulitzer Prize-winning book about petroleum, dismisses the doomsday visions. ''This is not the first time that the world has 'run out of oil,''' he wrote in a recent Washington Post opinion essay. ''It's more like the fifth. Cycles of shortage and surplus characterize the entire history of the oil industry.'' Yergin says that a number of oil projects that are under construction will increase the supply by 20 percent in five years and that technological advances will increase the amount of oil that can be recovered from existing reservoirs. (Typically, with today's technology, only about 40 percent of a reservoir's oil can be pumped to the surface.)

Yergin's bullish view has something in common with the views of the pessimists -- it rests on unknowns. Will the new projects that are under way yield as much oil as their financial backers hope? Will new technologies increase recovery rates as much as he expects? These questions are next to impossible to answer because coaxing oil out of the ground is an extraordinarily complex undertaking. The popular notion of reservoirs as underground lakes, from which wells extract oil like straws sucking a milkshake from a glass, is incorrect. Oil exists in drops between and inside porous rocks. A new reservoir may contain sufficient pressure to make these drops of oil flow to the surface in a gusher, but after a while -- usually within a few years and often sooner than that -- natural pressure lets up and is no longer sufficient to push oil to the surface. At that point, ''secondary'' recovery efforts are begun, like pumping water or gas into the reservoirs to increase the pressure.

This process is unpredictable; reservoirs are extremely temperamental. If too much oil is extracted too quickly or if the wrong types or amounts of secondary efforts are employed, the amount of oil that can be recovered from a field can be greatly reduced; this is known in the oil world as ''damaging a reservoir.'' A widely cited example is Oman: in 2001, its daily production reached more than 960,000 barrels, but then suddenly declined, despite the use of advanced technologies. Today, Oman produces 785,000 barrels of oil a day. Herman Franssen, a consultant who worked in Oman for a decade, sees that country's experience as a possible lesson in the limits of technology for other producers that try to increase or maintain high levels of output. ''They reached a million barrels a day, and then a few years later production collapsed,'' Franssen said in a phone interview. ''They used all these new technologies, but they haven't been able to stop the decline yet.''


The vague production and reserve data that gets published does not begin to tell the whole story of an oil field's health, production potential or even its size. For a clear-as-possible picture of a country's oil situation, you need to know what is happening in each field -- how many wells it has, how much oil each well is producing, what recovery methods are being used and how long they've been used and the trend line since the field went into production. Data of that sort are typically not released by state-owned companies like Saudi Aramco.

As Matthew Simmons searched for clues to the truth of the Saudi situation, he immersed himself in the minutiae of oil geology. He realized that data about Saudi fields might be found in the files of the Society of Petroleum Engineers. Oil engineers, like most professional groups, have regular conferences at which they discuss papers that delve into the work they do. The papers, which focus on particular wells that highlight a problem or a solution to a problem, are presented and debated at the conferences and published by the S.P.E. -- and then forgotten.

Before Simmons poked around, no one had taken the time to pull together the S.P.E. papers that involved Saudi oil fields and review them en masse. Simmons found more than 200 such papers and studied them carefully. Although the papers cover only a portion of the kingdom's wells and date back, in some cases, several decades, they constitute perhaps the best public data about the condition and prospects of Saudi reservoirs.

Ghawar is the treasure of the Saudi treasure chest. It is the largest oil field in the world and has produced, in the past 50 years, about 55 billion barrels of oil, which amounts to more than half of Saudi production in that period. The field currently produces more than five million barrels a day, which is about half of the kingdom's output. If Ghawar is facing problems, then so is Saudi Arabia and, indeed, the entire world.

Simmons found that the Saudis are using increasingly large amounts of water to force oil out of Ghawar. Most of the wells are concentrated in the northern portion of the 174-mile-long field. That might seem like good news -- when the north runs low, the Saudis need only to drill wells in the south. But in fact it is bad news, Simmons concluded, because the southern portions of Ghawar are geologically more difficult to draw oil from. ''Someday (and perhaps that day will be soon), the remarkably high well flow rates at Ghawar's northern end will fade, as reservoir pressures finally plummet,'' Simmons writes in his book. ''Then, Saudi Arabian oil output will clearly have peaked. The death of this great king'' -- meaning Ghawar -- ''leaves no field of vaguely comparable stature in the line of succession. Twilight at Ghawar is fast approaching.'' He goes on: ''The geological phenomena and natural driving forces that created the Saudi oil miracle are conspiring now in normal and predictable ways to bring it to its conclusion, in a time frame potentially far shorter than officialdom would have us believe.'' Simmons concludes, ''Saudi Arabia clearly seems to be nearing or at its peak output and cannot materially grow its oil production.''


Saudi officials belittle Simmons's work. Nansen Saleri, a senior Aramco official, has described Simmons as a banker ''trying to come across as a scientist.'' In a speech last year, Saleri wryly said, ''I can read 200 papers on neurology, but you wouldn't want me to operate on your relatives.'' I caught up with Simmons in June, during a trip he made to Manhattan to talk with a group of oil-shipping executives. The impression he gives is of an enthusiastic inventor sharing a discovery that took him by surprise. He has a certain wide-eyed wonder in his regard, as if a bit of mystery can be found in everything that catches his eye. And he has a rumpled aspect -- thinning hair slightly askew, shirt sleeves a fraction too long. Though he delivers a bracing message, his discourse can wander. He is a successful businessman, and it is clear that he did not achieve his position by being a man of impeccable convention. He certainly has not lost sight of the rule that people who shout ''the end is nigh'' do not tend to be favorably reviewed by historians, let alone by their peers. He notes in his book that way back in 1979, The New York Times published an investigative story by Seymour Hersh under the headline ''Saudi Oil Capacity Questioned.'' He knows that in past decades the Cassandras failed to foresee new technologies, like deep-water and horizontal drilling, that provided new sources of oil and raised the amount of oil that can be recovered from reservoirs.

But Simmons says that there are only so many rabbits technology can pull out of its petro-hat. He impishly notes that if the Saudis really wanted to, they could easily prove him wrong. ''If they want to satisfy people, they should issue field-by-field production reports and reserve data and have it audited,'' he told me. ''It would then take anybody less than a week to say, 'Gosh, Matt is totally wrong,' or 'Matt actually might be too optimistic.'''

Simmons has a lot riding on his campaign -- not only his name but also his business, which would not be rewarded if he is proved to be a fool. What, I asked, if the data show that the Saudis will be able to sustain production of not only 12.5 million barrels a day -- their target for 2009 -- but 15 million barrels, which global demand is expected to require of them in the not-too-distant future? ''The odds of them sustaining 12 million barrels a day is very low,'' Simmons replied. ''The odds of them getting to 15 million for 50 years -- there's a better chance of me having Bill Gates's net worth, and I wouldn't bet a dime on that forecast.''

The gathering of executives took place in a restaurant at Chelsea Piers; about 35 men sat around a set of tables as the host introduced Simmons. He rambled a bit but hit his talking points, and the executives listened raptly; at one point, the man on my right broke into a soft whistle, of the sort that means ''Holy cow.''

Simmons didn't let up. ''We're going to look back at history and say $55 a barrel was cheap,'' he said, recalling a TV interview in which he predicted that a barrel might hit triple digits.

He said that the anchor scoffed, in disbelief, ''A hundred dollars?''

Simmons replied, ''I wasn't talking about low triple digits.''


he onset of triple-digit prices might seem a blessing for the Saudis -- they would receive greater amounts of money for their increasingly scarce oil. But one popular misunderstanding about the Saudis -- and about OPEC in general -- is that high prices, no matter how high, are to their benefit.
Although oil costing more than $60 a barrel hasn't caused a global recession, that could still happen: it can take a while for high prices to have their ruinous impact. And the higher above $60 that prices rise, the more likely a recession will become. High oil prices are inflationary; they raise the cost of virtually everything -- from gasoline to jet fuel to plastics and fertilizers -- and that means people buy less and travel less, which means a drop-off in economic activity. So after a brief windfall for producers, oil prices would slide as recession sets in and once-voracious economies slow down, using less oil. Prices have collapsed before, and not so long ago: in 1998, oil fell to $10 a barrel after an untimely increase in OPEC production and a reduction in demand from Asia, which was suffering through a financial crash. Saudi Arabia and the other members of OPEC entered crisis mode back then; adjusted for inflation, oil was at its lowest price since the cartel's creation, threatening to feed unrest among the ranks of jobless citizens in OPEC states.

''The Saudis are very happy with oil at $55 per barrel, but they're also nervous,'' a Western diplomat in Riyadh told me in May, referring to the price that prevailed then. (Like all the diplomats I spoke to, he insisted on speaking anonymously because of the sensitivities of relations with Saudi Arabia.) ''They don't know where this magic line has moved to. Is it now $65? Is it $75? Is it $80? They don't want to find out, because if you did have oil move that far north . . . the chain reaction can come back to a price collapse again.''

High prices can have another unfortunate effect for producers. When crude costs $10 a barrel or even $30 a barrel, alternative fuels are prohibitively expensive. For example, Canada has vast amounts of tar sands that can be rendered into heavy oil, but the cost of doing so is quite high. Yet those tar sands and other alternatives, like bioethanol, hydrogen fuel cells and liquid fuel from natural gas or coal, become economically viable as the going rate for a barrel rises past, say, $40 or more, especially if consuming governments choose to offer their own incentives or subsidies. So even if high prices don't cause a recession, the Saudis risk losing market share to rivals into whose nonfundamentalist hands Americans would much prefer to channel their energy dollars. A concerted push for greater energy conservation in the United States, which consumes one-quarter of the world's oil (mostly to fuel our cars, as gasoline), would hurt producing nations, too. Basically, any significant reduction in the demand for oil would be ruinous for OPEC members, who have little to offer the world but oil; if a substitute can be found, their future is bleak. Another Western diplomat explained the problem facing the Saudis: ''You want to have the price as high as possible without sending the consuming nations into a recession and at the same time not have the price so high that it encourages alternative technologies.''

From the American standpoint, one argument in favor of conservation and a switch to alternative fuels is that by limiting oil imports, the United States and its Western allies would reduce their dependence on a potentially unstable region. (In fact, in an effort to offset the risks of relying on the Saudis, America's top oil suppliers are Canada and Mexico.) In addition, sending less money to Saudi Arabia would mean less money in the hands of a regime that has spent the past few decades doling out huge amounts of its oil revenue to mosques, madrassas and other institutions that have fanned the fires of Islamic radicalism. The oil money has been dispensed not just by the Saudi royal family but by private individuals who benefited from the oil boom -- like Osama bin Laden, whose ample funds, probably eroded now, came from his father, a construction magnate. Without its oil windfall, Saudi Arabia would have had a hard time financing radical Islamists across the globe.

For the Saudis, the political ramifications of reduced demand for its oil would not be negligible. The royal family has amassed vast personal wealth from the country's oil revenues. If, suddenly, Saudis became aware that the royal family had also failed to protect the value of the country's treasured resource, the response could be severe. The mere admission that Saudi reserves are not as impressively inexhaustible as the royal family has claimed could lead to hard questions about why the country, and the world, had been misled. With the death earlier this month of the long-ailing King Fahd, the royal family is undergoing another period of scrutiny; the new king, Abdullah, is in his 80's, and the crown prince, his half-brother Sultan, is in his 70's, so the issue of generational change remains to be settled. As long as the country is swimming in petro-dollars -- even as it is paying off debt accrued during its lean years -- everyone is relatively happy, but that can change. One diplomat I spoke to recalled a comment from Sheik Ahmed Zaki Yamani, the larger-than-life Saudi oil minister during the 1970's: ''The Stone Age didn't end for lack of stone, and the oil age will end long before the world runs out of oil.''


Until now, the Saudis had an excess of production capacity that allowed them, when necessary, to flood the market to drive prices down. They did that in 1990, when the Iraqi invasion of Kuwait eliminated not only Kuwait's supply of oil but also Iraq's. The Saudis functioned, as they always had, as the central bank of oil, releasing supply to the market when it was needed and withdrawing supply to keep prices from going lower than the cartel would have liked. In other words, they controlled not only the price of oil but their own destiny as well.

''That is what the world has called on them to do before -- turn on the taps to produce more and get prices down,'' a senior Western diplomat in Riyadh told me recently. ''Decreasing prices used to keep out alternative fuels. I don't see how they're able to do that anymore. This is a huge change, and it is a big step in the move to whatever is coming next. That's what's really happening.''

Without the ability to flood the markets with oil, the Saudis are resorting to flooding the market with promises; it is a sort of petro-jawboning. That's why Ali al-Naimi, the oil minister, told his Washington audience that Saudi Arabia has embarked on a crash program to raise its capacity to 12.5 million barrels a day by 2009 and even higher in the years after that. Naimi is not unlike a factory manager who needs to promise the moon to his valuable clients, for fear of losing or alarming them. He has no choice. The moment he says anything bracing, the touchy energy markets will probably panic, pushing prices even higher and thereby hastening the onset of recession, a switch to alternative fuels or new conservation efforts -- or all three. Just a few words of honest caution could move the markets; Naimi's speeches are followed nearly as closely in the financial world as those of Alan Greenspan.

I journeyed to Saudi Arabia to interview Naimi and other senior officials, to get as far beyond their prepared remarks as might be possible. Although I was allowed to see Ras Tanura, my interview requests were denied. I was invited to visit Aramco's oil museum in Dhahran, but that is something a Saudi schoolchild can do on a field trip. It was a ''show but don't tell'' policy. I was able to speak about production issues only with Ibrahim al-Muhanna, the oil ministry spokesman, who reluctantly met me over coffee in the lobby of my hotel in Riyadh. He defended Saudi Arabia's refusal to share more data, noting that the Saudis are no different from most oil producers.

''They will not tell you,'' he said. ''Nobody will. And that is not going to change.'' Referring to the fact that Saudi Arabia is often called the central bank of oil, he added: ''If an outsider goes to the Fed and asks, 'How much money do you have?' they will tell you. If you say, 'Can I come and count it?' they will not let you. This applies to oil companies and oil countries.'' I mentioned to Muhanna that many people think his government's ''trust us'' stance is not convincing in light of the cheating that has gone on within OPEC and in the industry as a whole; even Royal Dutch/Shell, a publicly listed oil company that undergoes regular audits, has admitted that it overstated its 2002 reserves by 23 percent.

''There is no reason for any country or company to lie,'' Muhanna replied. ''There is a lot of oil around.'' I didn't need to ask about Simmons and his peak-oil theory; when I met Muhanna at the conference in Washington, he nearly broke off our conversation at the mention of Simmons's name. ''He does not know anything,'' Muhanna said. ''The only thing he has is a big mouth. We should not pay attention to him. Either you believe us or you don't.''


o whom to believe? Before leaving New York for Saudi Arabia, I was advised by several oil experts to try to interview Sadad al-Husseini, who retired last year after serving as Aramco's top executive for exploration and production. I faxed him in Dhahran and received a surprisingly quick reply; he agreed to meet me. A week later, after I arrived in Riyadh, Husseini e-mailed me, asking when I would come to Dhahran; in a follow-up phone call, he offered to pick me up at the airport. He was, it seemed, eager to talk.
It can be argued that in a nation devoted to oil, Husseini knows more about it than anyone else. Born in Syria, Husseini was raised in Saudi Arabia, where his father was a government official whose family took on Saudi citizenship. Husseini earned a Ph.D. in geological sciences from Brown University in 1973 and went to work in Aramco's exploration department, eventually rising to the highest position. Until his retirement last year -- said to have been caused by a top-level dispute, the nature of which is the source of many rumors -- Husseini was a member of the company's board and its management committee. He is one of the most respected and accomplished oilmen in the world.

After meeting me at the cavernous airport that serves Dhahran, he drove me in his luxury sedan to the villa that houses his private office. As we entered, he pointed to an armoire that displayed a dozen or so vials of black liquid. ''These are samples from oil fields I discovered,'' he explained. Upstairs, there were even more vials, and he would have possessed more than that except, as he said, laughing, ''I didn't start collecting early enough.''

We spoke for several hours. The message he delivered was clear: the world is heading for an oil shortage. His warning is quite different from the calming speeches that Naimi and other Saudis, along with senior American officials, deliver on an almost daily basis. Husseini explained that the need to produce more oil is coming from two directions. Most obviously, demand is rising; in recent years, global demand has increased by two million barrels a day. (Current daily consumption, remember, is about 84 million barrels a day.) Less obviously, oil producers deplete their reserves every time they pump out a barrel of oil. This means that merely to maintain their reserve base, they have to replace the oil they extract from declining fields. It's the geological equivalent of running to stay in place. Husseini acknowledged that new fields are coming online, like offshore West Africa and the Caspian basin, but he said that their output isn't big enough to offset this growing need.

''You look at the globe and ask, 'Where are the big increments?' and there's hardly anything but Saudi Arabia,'' he said. ''The kingdom and Ghawar field are not the problem. That misses the whole point. The problem is that you go from 79 million barrels a day in 2002 to 82.5 in 2003 to 84.5 in 2004. You're leaping by two million to three million a year, and if you have to cover declines, that's another four to five million.'' In other words, if demand and depletion patterns continue, every year the world will need to open enough fields or wells to pump an additional six to eight million barrels a day -- at least two million new barrels a day to meet the rising demand and at least four million to compensate for the declining production of existing fields. ''That's like a whole new Saudi Arabia every couple of years,'' Husseini said. ''It can't be done indefinitely. It's not sustainable.''

Husseini speaks patiently, like a teacher who hopes someone is listening. He is in the enviable position of knowing what he talks about while having the freedom to speak openly about it. He did not disclose precise information about Saudi reserves or production -- which remain the equivalent of state secrets -- but he felt free to speak in generalities that were forthright, even when they conflicted with the reassuring statements of current Aramco officials. When I asked why he was willing to be so frank, he said it was because he sees a shortage ahead and wants to do what he can to avert it. I assumed that he would not be particularly distressed if his rivals in the Saudi oil establishment were embarrassed by his frankness.

Although Matthew Simmons says it is unlikely that the Saudis will be able to produce 12.5 million barrels a day or sustain output at that level for a significant period of time, Husseini says the target is realistic; he says that Simmons is wrong to state that Saudi Arabia has reached its peak. But 12.5 million is just an interim marker, as far as consuming nations are concerned, on the way to 15 million barrels a day and beyond -- and that is the point at which Husseini says problems will arise.

At the conference in Washington in May, James Schlesinger, the moderator, conducted a question-and-answer session with Naimi at the conclusion of the minister's speech. One of the first questions involved peak oil: might it be true that Saudi Arabia, which has relied on the same reservoirs, and especially Ghawar, for more than five decades, is nearing the geological limit of its output?

Naimi wouldn't hear of it.

''I can assure you that we haven't peaked,'' he responded. ''If we peaked, we would not be going to 12.5 and we would not be visualizing a 15-million-barrel-per-day production capacity. . . . We can maintain 12.5 or 15 million for the next 30 to 50 years.''

Experts like Husseini are very concerned by the prospect of trying to produce 15 million barrels a day. Even if production can be ramped up that high, geology may not be forgiving. Fields that are overproduced can drop off, in terms of output, quite sharply and suddenly, leaving behind large amounts of oil that cannot be coaxed out with existing technology. This is called trapped oil, because the rocks or sediment around it prevent it from escaping to the surface. Unless new technologies are developed, that oil will never be extracted. In other words, the haste to recover oil can lead to less oil being recovered.

''You could go to 15, but that's when the questions of depletion rate, reservoir management and damaging the fields come into play,'' says Nawaf Obaid, a Saudi oil and security analyst who is regarded as being exceptionally well connected to key Saudi leaders. ''There is an understanding across the board within the kingdom, in the highest spheres, that if you're going to 15, you'll hit 15, but there will be considerable risks . . . of a steep decline curve that Aramco will not be able to do anything about.''

Even if the Saudis are willing to risk damaging their fields, or even if the risk is overstated, Husseini points out a practical problem. To produce and sustain 15 million barrels a day, Saudi Arabia will have to drill a lot more wells and build a lot more pipelines and processing facilities. Currently, the global oil industry suffers a deficit of qualified engineers to oversee such projects and the equipment and the raw materials -- for example, rigs and steel -- to build them. These things cannot be wished from thin air or developed quickly enough to meet the demand.

''If we had two dozen Texas A&M's producing a thousand new engineers a year and the industrial infrastructure in the kingdom, with the drilling rigs and power plants, we would have a better chance, but you cannot put that into place overnight,'' Husseini said. ''Capacity is not just a function of reserves. It is a function of reserves plus know-how plus a commercial economic system that is designed to increase the resource exploitation. For example, in the U.S. you have infrastructure -- there must be tens of thousands of miles of pipelines. If we, in Saudi Arabia, evolve to that level of commercial maturity, we could probably produce a heck of a lot more oil. But to get there is a very tedious, slow process.''

He worries that the rising global demand for oil will lead to the petroleum equivalent of running an engine at ever-increasing speeds without stopping to cool it down or change the oil. Husseini does not want to see the fragile and irreplaceable reservoirs of the Middle East become damaged through wanton overproduction.

''If you are ramping up production so fast and jump from high to higher to highest, and you're not having enough time to do what needs to be done, to understand what needs to be done, then you can damage reservoirs,'' he said. ''Systematic development is not just a matter of money. It's a matter of reservoir dynamics, understanding what's there, analyzing and understanding information. That's where people come in, experience comes in. These are not universally available resources.''

The most worrisome part of the crisis ahead revolves around a set of statistics from the Energy Information Administration, which is part of the U.S. Department of Energy. The E.I.A. forecast in 2004 that by 2020 Saudi Arabia would produce 18.2 million barrels of oil a day, and that by 2025 it would produce 22.5 million barrels a day. Those estimates were unusual, though. They were not based on secret information about Saudi capacity, but on the projected needs of energy consumers. The figures simply assumed that Saudi Arabia would be able to produce whatever the United States needed it to produce. Just last month, the E.I.A. suddenly revised those figures downward -- not because of startling new information about world demand or Saudi supply but because the figures had given so much ammunition to critics. Husseini, for example, described the 2004 forecast as unrealistic.

''That's not how you would manage a national, let alone an international, economy,'' he explained. ''That's the part that is scary. You draw some assumptions and then say, 'O.K., based on these assumptions, let's go forward and consume like hell and burn like hell.''' When I asked whether the kingdom could produce 20 million barrels a day -- about twice what it is producing today from fields that may be past their prime -- Husseini paused for a second or two. It wasn't clear if he was taking a moment to figure out the answer or if he needed a moment to decide if he should utter it. He finally replied with a single word: No.

''It's becoming unrealistic,'' he said. ''The expectations are beyond what is achievable. This is a global problem . . . that is not going to be solved by tinkering with the Saudi industry.''


It would be unfair to blame the Saudis alone for failing to warn of whatever shortages or catastrophes might lie ahead.

In the political and corporate realms of the oil world, there are few incentives to be forthright. Executives of major oil companies have been reluctant to raise alarms; the mere mention of scarce supplies could alienate the governments that hand out lucrative exploration contracts and also send a message to investors that oil companies, though wildly profitable at the moment, have a Malthusian long-term future. Fortunately, that attitude seems to be beginning to chang e.Chevron's''easyoilisover'' advertising campaign is an indication that even the boosters of an oil-drenched future are not as bullish as they once were.

Politicians remain in the dark. During the 2004 presidential campaign, which occurred as gas prices were rising to record levels, the debate on energy policy was all but nonexistent. The Bush campaign produced an advertisement that concluded: ''Some people have wacky ideas. Like taxing gasoline more so people drive less. That's John Kerry.'' Although many environmentalists would have been delighted if Kerry had proposed that during the campaign, in fact the ad was referring to a 50-cents-a-gallon tax that Kerry supported 11 years ago as part of a package of measures to reduce the deficit. (The gas tax never made it to a vote in the Senate.) Kerry made no mention of taxing gasoline during the campaign; his proposal for doing something about high gas prices was to pressure OPEC to increase supplies.

Husseini, for one, doesn't buy that approach. ''Everybody is looking at the producers to pull the chestnuts out of the fire, as if it's our job to fix everybody's problems,'' he told me. ''It's not our problem to tell a democratically elected government that you have to do something about your runaway consumers. If your government can't do the job, you can't expect other governments to do it for them.'' Back in the 70's, President Carter called for the moral equivalent of war to reduce our dependence on foreign oil; he was not re-elected. Since then, few politicians have spoken of an energy crisis or suggested that major policy changes are necessary to avert one. The energy bill signed earlier this month by President Bush did not even raise fuel-efficiency standards for passenger cars. When a crisis comes -- whether in a year or 2 or 10 -- it will be all the more painful because we will have done little or nothing to prepare for it.

Peter Maass is a contributing writer. He is writing a book about oil.

Copyright 2005 The New York Times Company

Posted by Arthur Caldicott on August 21, 2005

Cogen up and running 95 per cent of the time

Grant Warkentin
Campbell River Mirror
Aug 17 2005

The Island Cogen power plant beside the Elk Falls paper mill has had minimal downtime this year.

During the second quarter of 2005, the natural gas-fired power plant was capable of generating electricity 95 per cent of the time, or 496,025 megawatt-hours. During the same time last year, the plant was only capable of generating electricity 46 per cent of the time, or 191,482 megawatt-hours of electricity.

The Island Cogen facility was shut down for four days in the second quarter of 2005 for maintenance compared to 63 days for the same period 2004. That's because in spring 2004, the plant was undergoing a major upgrade to increase its capacity to generate electricity. The plant's owners, Calpine Power Income Fund, are happy with the performance of all its power plants.

"We are pleased to announce another quarter of strong results from all of our facilities," said Toby Austin, president and CEO of Calpine Canada Power Ltd., manager of Calpine Power Income Fund, in a news release. "All of our facilities performed at high levels of availability, contributing to net earnings at or above expected levels."

Since the upgrade, the plant has been able to generate more electricity - and more revenue - for its owners.

During the first six months of 2005, the plant generated 1,018,881 megawatt-hours of electricity at 97 per cent availability.

During the same time, the plant earned $22.2 million in revenue from electricity sales compared to $13.2 million during the same time last year.

The company also made more money from the excess steam it sells to NorskeCanada's paper mill next door. During the first six months of 2005, it sold $6.4 million worth of steam to the paper mill compared to $4.9 million during the same time last year.

"As a result of the strengthening Canadian dollar, as well as natural gas prices, the steam price has increased 25 per cent over the prior quarter," says the news release. "Steam volumes, although higher than the second quarter of 2004, were lower than expected due to repairs to equipment required for delivery of steam to NorskeSkog.

"Lost revenue from lower steam sales was offset by the plant's higher deliveries of electrical power during this period." Last week, however, revenue and deliveries of steam have returned to normal levels, according to the news release.

Posted by Arthur Caldicott on August 21, 2005

August 19, 2005

Offshore oil decision promised by year's end

Rudy Haugeneder
Victoria News
August 19, 2005

Minister says it won’t happen unless environmentally safe

BC’s bitter offshore oil and gas battle with Ottawa is quickly nearing a conclusion. Ottawa has set a year-end deadline on the fate of the decades old moratorium on BC offshore oil and gas exploration and development, says a federal cabinet minister.

The federal government will make “a full decision” on the future of BC’s vast oil and gas reserves “by the end of this year,” said Western Economic Diversification Minister Stephen Owen.

“We’re getting close,” the former deputy attorney general of BC said in an interview Tuesday at the University of Victoria.

Owen wouldn’t disclose what he expects the federal cabinet decision will be, but said offshore development won’t be allowed to take place unless it’s “environmentally safe.” He said that may be the reason “oil and gas companies are in no hurry to see exploration.”

However, several southern Vancouver Island high-technology companies that provide offshore oil and gas expertise are eager for the moratorium to be lifted.

David Fissel, vice president of ASL Environmental Sciences that provides oceanographic environmental assessments to offshore rigs in Africa, Russia and the US said “It would generate jobs and business opportunities for all of us. Estimating that there are at least 100 ocean science and engineering companies head quartered in BC-dozens in the Victoria area-that would benefit if the moratorium is lifted, he said, “it would be nice, from a business point of view, to be closer to home.”

Local MP and former federal environment minister David Anderson said the Campbell government won’t like Ottawa’s answer.

He said the idea of lifting the moratorium has been “90 per cent dead and shelved” for several months at the federal level-and the provincial government knows it.

It’s why the Campbell government “didn’t mention the moratorium before or after the (May) provincial election,” he said.

Anderson said in an independent review by a Royal Society of Canada panel of experts shows 75 per cent of British Columbians oppose offshore oil and gas exploration and developments at this time.

“To do anything else would make a mockery of the process,” Anderson said. Another local Liberal MP, Dr. Keith Martin, seemed taken aback by Owen’s unexpected remarks, but agreed no exploration and development should be allowed unless it’s environmentally safe.

Only then will the federal government give the green light to offshore development, said Martin, the parliamentary secretary to Minister of Defence Bill Graham and a strong proponent of alternative energy such as tidal power.

The Royal Society’s offshore report concluded that “provided an adequate regulatory regime is put in place, there are no science gaps that need to be filled before lifting the moratoria on oil and gas development.” Steve Simons, provincial oil and gas communications director, is also surprised that Ottawa is ready to act on the moratorium because “they haven’t given us a deadline date.”

He said the Royal Society Report estimates BC waters have six offshore oil fields holding 100 million barrels of oil, and nine gas fields with 9.8 trillion cubic feet of natural gas.

Simons said that based on an oil price of $35 a barrel, the total value of BC’s potential oil and gas reserves is $110 billion.

Oil and gas prices are currently around $67 a barrel. Acknowledging that the moratorium is likely to be lifted at some time, Anderson said it’s ok to leave the oil and gas in the ground until better environmentally safe technology is developed to extract it. Owen was at UVIC to announce $3 million in federal grants for ocean research and the technology sector.

Posted by Arthur Caldicott on August 19, 2005

August 17, 2005

Tom Hackney: Activist of the Year

TomHackney
Sierra Club of Canada has named Tom Hackney, the president and founding director of the GSX Concerned Citizens Coalition, as "Activist of the Year".

August 2005 issue of Sierra Life

“Tom has shown that perseverance, dedication and a strong vision for the future can affect change at the highest levels,” said the BC Chapter Executive Director Kathryn Molloy. “Volunteers like Tom are by far this organization’s greatest asset."

See Tom's article in the Fall 2005 issue of Sierra Report, also excerpted on sqwalk.

The GSX Concerned Citizens Coalition echoes the Sierra Club's high opinion of Tom, and applauds the award decision. Tom is an awesome guy - principled, disciplined and fiercely hard-working. And fun.

Posted by Arthur Caldicott on August 17, 2005

August 15, 2005

How We Got Screwed on Terasen Deal

Rafe Mair
TheTyee.ca
August 15, 2005


Richard Kinder, former Enron president
Thanks to BC Libs, Texans control our gas profits, and supply.

I am just a poor one time lawyer, one time politician and part time environmentalist who does a bit of broadcasting and writing. I know nothing about oil and natural gas except what it costs me. But I do know bullshit when it wafts my way, especially if the source is anywhere near where politicians ply their trade, PR people hang out (usually the same place) or when CEOs of large companies tell us about the huge social benefits they are about to confer on our province by reason of their utterly unselfish corporate policy.

So, when the government and a CEO tell me that the sale of what was once BC Gas to Kinder Morgan, a Texas company in the pipeline business, is a great deal for me, knowing the sources, I ask: How?

First a bit of the history. During the Vander Zalm years the Gas division of BC Hydro was hived off and privatized making a hell of a pile of money for many investors. Nothing wrong with that, I suppose, except I didn’t get in on it. At that time foreign ownership was limited to 20 percent, meaning that at least BC Gas would be under local control and management and, one assumes, attuned to what their shareholders wanted.

This 20 percent rule wasn’t popular for the big kids in the game because it made it difficult to raise money on share sales and unpalatable for corporate takeover – which, of course, was the whole point of the restriction. Always on the lookout for campaign donations, the Campbell Liberals eliminated the 20 percent rule and BC Gas, now called Terasen Energy, was ripe for the plucking.

Texas poker

And a Texas pipeline company, Kinder Morgan, plucked and took over the whole shebang.

Richard Kinder, CEO of Kinder Morgan, didn’t try to kid the folks at all. No shilly shallerer, Big Dick made it clear that what his company really wanted were the pipelines Terasen has going into the Alberta tar sands which, when the price of oil makes them viable for extraction (which is pretty damned soon) will need those pipelines and more into the United States. Let me quote Kinder verbatim:

“For Kinder Morgan, the merger will dramatically broaden our footprint into Canada…. (Strange way to put it but Mr. Kinder is after all from Texas, where George W. Bush also learned all he knows about the English language).

“Terasen has two core businesses – a low risk, large regulated natural gas distribution company in British Columbia that produces stable cash flow, and a strategically located refined oil products and crude oil pipeline business that offers tremendous growth potential. Terasen’s pipelines are well positioned to transport growing production from the Alberta oil sands, which is expected to become an increasingly important supply source to North America and Asia. There is a definite need for additional infrastructure from the Alberta oils sands, and we have a great opportunity to use the capital strength of the combined company – along with our expertise in building and operating pipelines – to increase capacity on Terasen’s existing pipeline system to help meet the growing demand of an oil starved world.”

Several questions arise here. If Kinder Morgan is going to export oil to Asia, will that be out of Vancouver on tankers sailing out through the Straits of Juan de Fuca, creating environmental concerns?

But my main question is this: Isn’t Mr. Kinder saying, “Look folks, what a hell of a deal this is. A nice big fat cash flow from the pockets of British Columbians to help us build pipelines to the Alberta tar sands?”

Pump and run?

Nothing wrong with that, you say?

How do we ensure that Kinder Morgan will maintain and upgrade pipelines and build for the future? The surface answer is, of course, that Kinder Morgan needs our cash … but what about after their oil pipelines are all done and making money hand over foot? How much will Mr. Kinder care from his Texas skyscraper when the BC pipelines Terasen acquired don’t much matter any more? If we don’t like the service we’re getting or the government thinks, as a matter of public policy, we need more gas, do we phone Mr. Kinder’s voice mail in Dallas to complain or make our point?

The government and the companies say that the price of natural gas will be governed by the BC Utility Commission and that’s true. But BCUC has no power to force Kinder Morgan to make more pipeline capacity available nor any ability to pressure it to upgrade its infrastructure. When Terasen stood alone, with a mandated Canadian majority ownership, its main business was supplying the BC natural gas market. When that is merely a convenient cash cow to be used as necessary, are we to believe that Kinder Morgan will deal with us as if we mattered?

Hydro next?

Can Hydro be far behind? Premier Campbell says “no” but he also told us he wouldn’t privatize any part of Hydro – and he has. He also promised to keep BC Rail – and he hasn’t. He had Terasen under Canadian control and gave that up.

I only raise Hydro because if that is sold to American shareholders it will be the same as with Terasen – power and water for greedy and thirsty Americans first and the needs of British Columbia for those commodities last.

We are quickly moving to the place where American needs for oil, gas and water will trump our needs for the same. Moreover, the environmental problems this will raise will be ours not theirs and the profits not ours but theirs too.

We have taken a Canadian company that controlled the natural gas we use and turned it over to a foreign owner to use what should be our profits, public profits, to build American pipelines from the tar sands to America

Whom the gods wish to destroy, they first make mad.

Rafe Mair’s column for The Tyee runs every Monday. He can be heard every weekday morning from 8:30-10:30 on 600AM. His website is www.rafeonline.com.

Posted by Arthur Caldicott on August 15, 2005

U.S.-Canada power cable proposed for Vancouver Island

King Lee
Business Examiner (South edition)
Aug 15 2005

To say that Sea Breeze Power Corp. is just full of wind is simply not correct.

While it is true that the B.C.-registered, Vancouver-headquartered power provider is heavily into Vancouver Island wind farms, it is also developing a Pacific regional transmission system with plans for a $300-million, 990-megawatt, 19-kilometre undersea hydroelectric cable across the Strait of Juan de Fuca between Victoria and Port Angeles, Wash.

Sea Breeze's proposal for a 150-turbine, 80-metre-high wind farm at Knob Hill, 35-kilometres west of Port Hardy and eight kilometres north of Holberg that is expected to produce 450 megawatts of energy has provincial environmental assessment approval. It is the first of 10 Sea Breeze projects in the province.

"I've been a long-time observer of wind energy development," said Paul Manson, Sea Breeze president, in a telephone interview from Vancouver.

He called the fact that there was not a single wind-energy source in B.C. "close to scandalous."

But Manson said his company was also interested in hydro-electricity and began looking into that aspect of energy supply to Vancouver Island about two years ago, when BC Hydro's Duke Point power project was still being planned and hotly debated.

At that time, the Bonneville Power Administration, a federal agency under the U.S. Dept. of Energy that operates 75 per cent of the Pacific Northwest's high-voltage grid with more than 24,000 kilometres of transmission lines and 285 sub-stations covering eight states, targeted Port Angeles as a "transmission constrained" area in need of a major upgrade.

On June 17 this year, BC Hydro pulled the plug on the Duke Point project, citing continuing legal appeals that increased the risk of the power plant not being built on time.

"We knew there were difficulties in selling power to BC Hydro," Manson said. "We didn't appreciate how deep those problems were."

So Sea Breeze looked for partnership alternatives and found Boundless Energy, LCC, a transmission engineering firm, and ABB Inc., an international contractor and manufacturer of high-voltage, direct current (HVDC) equipment and cables.

Sea Breeze also signed a US$8 million development loan agreement with Energy Investors Fund.

"We're long overdue for major investments in this sector," said Manson, who predicted this was only the "tip of the iceberg" in new investments in the hydro-electricity industry.

Manson also raved about HVDC, the type of cable to be used in the Juan de Fuca transmission corridor, calling it "hands down, the best technology today."

He said the direct current (DC) method was far superior to alternating current (AC) because there were no fluctuating electro-magnetic fields, it eliminates oil-cooled lines that sometimes led to leakage, there was less line energy loss and it has minimal impact on the marine environment.

Manson said the Juan de Fuca line will connect two relatively weak transmission systems and also relieve the electrical congestion now facing the Blaine, Wash., inter-tie while serving the power needs of Vancouver Islanders.

He said the island just about hit peak capacity on Jan. 4, 2004, when consumption came within "dozens of megawatts" of "brown-outs" faced by Californians.

B.C. is a net importer of energy, buying energy from the U.S. and Alberta in a five-hour period between midnight and 5 a.m., but selling power (at a higher price) in the other hours of the day.

Sea Breeze has filed the application for the Juan de Fuca cable, found financing and completed feasibility and impact studies.

Manson said a B.C. Transmission Corp. feasibility study is now underway but he is confident it will concur with his company's and Bonneville Power Administration's findings.

"We've already done our homework," Manson said. "I'm highly confident there (are) no show-stoppers here."

The Juan de Fuca line will have a 400-megawatt capacity northward and 550-megawatt capacity southbound, compared with the 265-megawatt capacity proposed for the failed Duke Point project.

Sea Breeze signed a protocol with the Esquimalt First Nations last month and is working with Esquimalt and View Royal municipalities to clear the path. The line is expected to go through Macaulay Point in Esquimalt to the Pike substation near Thetis Lake in View Royal.

Manson said the cost for the first line is about US$200 million and should be about the same for the second line.

He said construction should begin in the fall of 2006 and directional drilling will be done for the 30-centimetre-wide tunnel near the foreshore so that the lines will not disturb tidal zones or burial remains.

Sea Breeze hopes the lines will become operational by the fall of 2007.

The majority of Sea Breeze shareholders are California residents. It started in 1991 as International Powerhouse Energy Corp. In 1999, it went public in a reverse takeover. In 2003, it acquired Sea Breeze Energy Inc. and changed its name to Sea Breeze Power Corp.

Sea Breeze's major competitors are Canadian Utilities Ltd., Hydro-Quebec and TransCanada Corporation (TRP).

Posted by Arthur Caldicott on August 15, 2005

August 13, 2005

Soaring oil prices set to shake up our business world

Peter Ladner
At Large
Business in Vancouver
August 9-15, 2005; issue 824


In case you hadn't heard, oil prices are likely to keep going up. Goldman Sachs is forecasting that oil prices will spike as high as US$105 a barrel by 2010. The chief economist of the International Monetary Fund (IMF) is predicting that China's thirst for petroleum, combined with supply pressures, will keep oil prices volatile for the next 25 years, including spikes up to $US100 a barrel. The rate of growth in oil demand last year was faster than it has been in 25 years. The IMF forecasts China's oil consumption in 2030 to match current U.S. consumption, which is about a quarter of the world's oil production.

And if supply and political pressures don't hike the cost of oil, carbon taxes will. Europe has already started to charge $64 per tonne of CO2 emitted until 2007, with higher penalties coming in 2008 if a company exceeds its greenhouse gas emissions allowance.

Many unpredictable factors could intervene to stop these hikes from happening, but there's also a chance that the fear premium, based on the unpredictable security of supply from corrupt, politically hostile countries, could speed up the arrival of $100-per-barrel oil.

At some price point, consumers and businesses will be forced to cut their consumption to allow soaring demand to line up with the much slower growth of supply. This is all background for the current port truckers' strike, a damaging, desperate reaction to a slight increase in fuel prices compared to what's coming. The truckers got caught in the price squeeze and are trying to force their way out of it. Their frustration is matched by taxi drivers in Vancouver City. They recently won a price increase based on higher fuel costs, but say it's still not enough to cover their unavoidable higher costs.

Fuel costs clearly make up a significant portion of a trucker's or taxi driver's variable costs, but higher fuel costs will find their way into all of our businesses and bottom lines.

How ready are you?

Vancouver sustainability strategist Rob Abbott recommends every business develop and incorporate alternative energy rules into all capital expenditures, with any expenditure on new energy sources being on "non-carbon" sources.

CIBC World Markets economist Jeff Rubin, one of the forecasters predicting that crude oil prices will double in the next five years, with $100 per barrel a possibility by 2010, points out that this isn't the 1970s. Then, workers tried to win wage increases to protect their purchasing power against the ravages of inflation driven by oil prices. "In today's world," writes Rubin, "where production and jobs can easily be shifted to low-wage economies, North American wages will have to eat energy price increases, and in the process, stomach the loss of purchasing power that comes along with it."

What will your industry have to stomach?

Think about the tourism industry. Virtually every tourist arrives here thanks to oil. More expensive oil means more expensive trips. Northwest and Delta Air Lines are expected to file for Chapter 11 bankruptcy protection in mid-September, citing the need to cut costs and adjust to record high fuel costs.

Should we be focusing on attracting tourists who don't have far to come? Will convention travel growth continue? Can buses and trains possibly replace cars for nearby rubber-tire traffic? Will a lot of tourists just stay home?

What will we eat in a $100-per-barrel oil world? The food industry is particularly vulnerable to oil shocks, with the average food product travelling 1,500 miles to our table. By one estimate, a quarter of all the travel by heavy goods vehicles is to carry food around. Exotic foods are bound to become more expensive as the increasing costs of transportation are factored into their prices. Protecting the agricultural land reserve so we can produce more food locally takes on a new urgency as all import costs rise. Meanwhile, local food exporters will be scrambling to stay competitive in export markets requiring high transportation costs to reach the marketplace.

Conversely, if you're in a business that can rescue oil-captive companies in times of rising prices, opportunity isn't just knocking, it's pounding on the door. The alternative energy business will be coming into a much more favourable financial zone.

Lighter materials (carbon fibre cars) and lighter loads (Ikea is looking at inflatable furniture) will show up on everyone's agenda.

Anyone who can source supplies, materials and customers close to home will have an advantage. Every business and consumer will feel the impact of oil prices as high as $100 a barrel.

Businesses that plan on being profitable in 2010 should be prepared for that possibility. With it comes a vastly different economic landscape.

Peter Ladner is a Vancouver city councillor and vice-president, Business in Vancouver Media Group, pladner@biv.com. His column appears weekly.

Posted by Arthur Caldicott on August 13, 2005

Energy strategy a bright idea

Murray Campbell
Globe and Mail
13-Aug-2005

sqwalk.com
COMMENT: Canada has avoided talk of a national energy strategy ever since it was first tried in the 1970s by the government of Pierre Trudeau - and eventually succumbed to the self-centred bullying and influence of the oil companies and of Alberta.

The federal government is still afraid to talk energy strategy, but others are not - the Pembina Institute, for one. Some of the corporations, for another. And the Council of the Federation - Canada's Premiers - at last.

There's still a long way to go to an enlightened, visionary, sustainable policy for the country, but it's a start.
sqwalk.com


BANFF, ALTA.

The Council of the Federation is looking for some legitimacy. It wants Canadians to see that their provincial leaders are not just whiners looking to squeeze more money out of the federal government.

Luckily, it has seized an issue that has the potential to burnish its reputation. It can help Ontario out of a pickle and, in the process, save the country. It didn't get much notice but the decision of the premiers to strike a committee to look at energy strategy has the potential to make Canada a slightly smaller, less regionalized country. It might also help make it more prosperous.

Right now, Canada is a collection of fiefdoms when it comes to the transmission of electricity. This may have made sense historically because of the way the various provinces generate power. Some provinces - British Columbia, Manitoba, Quebec and Newfoundland - are blessed with abundant hydroelectric resources. Others, such as Manitoba and Saskatchewan, rely on the coal in their backyards. For its part, Ontario will take electricity any way it can to meet unceasing demand.

Interregional co-operation is rare. Look at a map of North America and you see lots of transmission lines from Canada into the United States. There are four major U.S. east-west lines but none in Canada. We've managed to build transcontinental railways, air corridors and a national broadcaster, but we've neglected to find a way to ship megawatts across the country.

As Ontario Energy Minister Dwight Duncan said yesterday: "It's crazy that we don't have an east-west grid."

This omission is thrown into stark relief every time Ontario struggles to keep the lights on. Its neighbours have very little capacity to help it avoid brownouts and blackouts whenever demand threatens to exceed supply. Yesterday's decision by Ontario Power Generation to abandon two 30-year-old reactors at the Pickering A nuclear generating station is simply another illustration of why Ontario needs help.

The 10-year forecast for energy resources in Ontario is gloomy. The province's nuclear fleet is aging and it has to decide very soon whether to refurbish existing units and whether to build new ones. It is also in a race against time to see if it will be able to replace the power lost when the plug is pulled on the coal-fired stations in 2008. It is working to get power from Manitoba, Quebec and Newfoundland but nothing is assured.

The 1,030 megawatts that the Pickering units might have supplied were not part of any supply predictions. But in an ideal world the units could have been brought back on line in three years for about $2-billion and the fact that this isn't going to happen will not allow Mr. Duncan to sleep more comfortably at night.

Ontario's plight might cause some across Canada to snicker, because it's always fun to see the mighty humbled. But this would be a wrong-headed reaction, because Canada - even those still hoping the eastern bastards freeze in the dark - needs Ontario.

The province provides 40 per cent of the revenue the federal government receives but gets back much less in services. It is Canada's economic powerhouse because industry has been able to count on an abundant supply of affordable energy.

Ontario will suffer if investors get spooked about the reliability or price of electricity. But so, too, will those provinces getting transfer payments from Ottawa that are underwritten by Ontario.

Newfoundland Premier Danny Williams says his colleagues recognize that they cannot insulate themselves from Ontario and that's why they agreed this week to develop a "pan-Canadian" energy strategy that would match demand and supply nationwide.

"We need to look at it nationally," he said yesterday as the premiers ended their talks. "We've never done that. Everybody's sort of been dealing within their own territory and that's why I think it's a great initiative."

It isn't controversial like the premiers' opposition to the U.S. softwood lumber position. It doesn't yet involve big money like the plan to revive postsecondary education. But the premiers have thankfully begun the work of making Canada stronger.

mcampbell@globeandmail.ca

Posted by Arthur Caldicott on August 13, 2005

Give nuclear power a chance

Give nuclear power a chance
Editorial, Esquimalt News,
Aug 10 2005
BC Sustainable Energy Association replies
Guy Dauncey, BCSEA, 15 Aug 2005



Give nuclear power a chance

Editorial
Esquimalt News
Aug 10 2005

sqwalk.com
COMMENT: Another plug for nuclear that avoids mentioning the two things that make nuclear so ill-advised: the industry's history of things going disastrously wrong, and its failure to address the question of what to do with spent fuel.
sqwalk.com


The petty visions of environmentalists and energy companies threaten to wrest B.C. from its potential as an energy supplier to the entire Northwest.

During the battle that eventually struck a dagger into the heart of Nanaimo-based Duke Point power plant proposal, environmentalists rightly contested the idea of burning fossil fuels to generate electrical power. After all, conversion of fossil-fuel to steam to electrical power rates as one of the least efficient methods of power conversion, doubly so when one factors in the permanent loss of fossil fuels and inevitable skyrocketing costs when fossil-fuel availability dwindles.

Duke Point opponents demanded investigation of hydroelectric, wind and tidal power to meet the needs of Vancouver Island and the province as a whole. Yet that push underscores a strikingly similar lack of vision, largely because wind and tidal power don't have the capacity to meet the province's future energy demands.

As for dams, the province has a plethora already. From the mighty W.A.C. Bennett Dam in the far north, to Revelstoke, down to modest-sized generation systems near Squamish and Campbell River, there are few rivers remaining suitable for sufficient hydroelectric generation on a scale necessary to meet energy demands. Further, dams are not pretty: they permanently destroy ecosystems on a large scale- something environmental groups must pause to ponder. Consider Williston Lake, a massive body of water created by the construction of the W.A.C. Bennett Dam that rates among the top five largest human-made lakes on the planet. So vast is the reservoir that it changed climates in the area forever.

But the reservoir also beckons with the promise of a solution: nuclear power.

The main challenge with nuclear power is the availability of a suitably large body of water to cool the generators. Ideally located next to an existing power-grid feeding the province, the perpetually cold artificial lake beckons as an ideal location for nuclear power generation.

Unlike the environmental impact of gas-powered generators or hydroelectric dams, the impact of nuclear power is measurable and manageable. Indeed, industry experts consider the compact CANDU reactors - designed and built in Canada - one of the safest and most environmentally sensitive power-generation systems available, and as proof point to decades of safe reactor operation in Ontario.

B.C. has the ideal foundations to embrace an energy-dependant future with a series of nuclear power plants that would allow B.C. to not only meet its own needs but export electrical power for decades to come.

Environmental groups and power company executives can either recognize this or continue to do as they have done: bicker over short-term visions and stopgap "solutions" that carry a much greater economic and environmental price for the entire province.

TOP



BC Sustainable Energy Association replies

Guy Dauncey
BCSEA
15 Aug 2005

Dear Sir,

On August 10th, your Editorial criticized “the petty visions of environmentalists”, that helped persuade BC Hydro to kill off its plans to build a natural gas fired power plant at Duke Point, Nanaimo, and then said that “wind and tidal power don’t have the capacity to meet the province’s future energy needs.” It went on to sing the praises of nuclear power for BC.

I am one of the environmentalists who put in a large amount of effort to stop the Duke Point proposal. The Duke Point plant would have produced 1,800 gigawatt hours of electricity a year, while generating 800,000 tonnes a year of polluting CO2, and other toxic gases.

My analysis of the potential energy which BC could obtain from wind, solar, tidal, geothermal, and other clean, sustainable sources of electricity, combined with a strong commitment to energy efficiency, using BC Hydro’s own data, and other studies, comes to 84,000 gigawatt hours. This would generate around 400,000 part-time and full-time jobs over a 30-year period. With 46 times more power than Duke Point would have provided, I think this might be sufficient to meet our needs.

Your enthusiasm for nuclear power should perhaps be tempered by the fact that no investors in the private sector will touch nuclear power without a cast-iron guarantee of government subsidies, for it is far too expensive and dangerous a product. No-one on the planet has yet come up with a way to keep the resulting radioactive waste secure for 100,000 years, which is one of several reasons why Germany is in the process of closing down all 17 of its nuclear reactors.

If any of your readers would like to work with us in the BC Sustainable Energy Association to build more support for safe, sustainable ways of generating energy, we would welcome your involvement (see www.bcsea.org).

Sincerely,

Guy Dauncey
President, BC Sustainable Energy Association
Victoria

TOP

Posted by Arthur Caldicott on August 13, 2005

August 09, 2005

Nfld. may go solo on huge hydro project

Dene Moore
Globe and Mail
09-Aug-2005

ST. JOHN'S, NFLD. - With a mid-summer heat wave pushing North America's electrical demand to record highs, Newfoundland Premier Danny Williams says his province is considering going ahead on its own to develop a massive hydroelectric project in Labrador.

He said the time is right for the Lower Churchill development, and that an in-house project will be among four possible proposals under close consideration in the coming months.

"Our financial situation is starting to improve," Mr. Williams said at a news conference yesterday to announce which of 25 proposals received earlier this year will proceed to an assessment phase.

With $2-billion from the federal government under a renegotiated offshore accord, he said the province's financial capability has improved greatly. "We're in a position to seriously consider it," Mr. Williams told reporters.

The price of energy is another important factor.

The completed development, which the province hopes to have running by 2014, will produce 2,824 megawatts of electricity from Gull Island and Muskrat Falls on the Churchill River - enough to power 1.4 million households a year.

Newfoundland and Quebec have been negotiating a deal on and off for more than two decades, and in November, 2002, the former Liberal provincial government had billboards printed and a public television address prepared to announce a $4-billion agreement.

But the deal was derailed by opposition Conservatives, including Mr. Williams, and public protests.

One of the major hurdles is public outrage over Churchill Falls, the previous hydro project developed with Quebec. Completed in 1972, Churchill Falls is one of the largest power installations in the world. Quebec has reaped nearly $1-billion in profit while Newfoundland has gained little. The agreement doesn't expire until 2041.

With a Lower Churchill deal still far in the distance, at least one municipal group has formally demanded any new deal redress the wrongs of Churchill Falls. The Combined Councils of Labrador also seeks priority for jobs and lower utility costs.

However, a deal that involves Quebec still is a strong possibility.

Among the four proposals to be considered by Newfoundland and Labrador Hydro-Electric Corp. over the next six to eight months is a joint proposal by Hydro Quebec, Ontario Energy Financing Co. and Montreal-based SNC Lavalin Group Inc. Proposals by Calgary-based TransCanada Corp. and a consortium comprising Macquarie North America Ltd., the Innu Development Partnership, Peter Kiewit Sons, and Innu Kiewit Constructors are also under consideration.

"We're at the very early stages of this process," said Ed Martin, president of the Crown corporation. "We are far from committing to commercial arrangements with anyone, just yet."

Still, Newfoundland hopes to start negotiations this month with the Innu of Labrador to resolve land claim issues outstanding that could affect any future development.

A 2003 blackout in Ontario and eight U.S. states made North American electrical capacity a priority for governments, and Ottawa has expressed interest in an east-west power grid.

Both Ontario and Quebec have warned of looming power shortages, and Ontario had two days of brownouts last week as temperatures soared to 40 C. Demand is also urgent in the northeastern U.S. New York is setting records weekly as temperatures soar and residents try to cool off.

"Our timing is ideal. It's kind of an endorsement of this project that there's such demand," said Dean MacDonald, chairman of the board of Newfoundland and Labrador Hydro. "All of them are in dire need of that energy."

Posted by Arthur Caldicott on August 09, 2005

Gwich'in say they'll meet Imperial in pipeline talks

Dave Ebner
Globe and Mail
09-Aug-2005

A first nations group in the Northwest Territories is complaining about its negotiations with Imperial Oil Ltd. regarding a land-access deal for a portion of the proposed Mackenzie Valley natural gas pipeline. The Gwich'in Tribal Council said in a in a press release yesterday that negotiating with Imperial "has not been easy." However, the Gwich'in said they would meet with Imperial next week despite their frustrations. The Gwich'in control land near the Mackenzie Delta and a portion of the pipeline would cross their territories. Imperial is the lead proponent of the $7-billion project, which is currently stalled as the company works to get several pieces in place.

Posted by Arthur Caldicott on August 09, 2005

Terasen boosts pipeline capacity

Terasen boosts pipeline capacity
Gordon Jaremko, Vancouver Sun, 09-Aug-2005
Terasen's plan to push pipeline expansion fits suitor's strategy
Dave Ebner, Globe and Mail, 09-Aug-2005




Terasen boosts pipeline capacity

Gordon Jaremko
Vancouver Sun
09-Aug-2005

EDMONTON -- Terasen Inc. has started work aimed at doubling the capacity of a pipeline in Alberta, getting a quick start on fulfilling oil sands growth ambitions that prompted the $6.9-billion takeover on Aug. 1 of the company by Houston-based Kinder Morgan Inc.

The $800-million expansion of the Corridor pipeline between Fort McMurray and Edmonton will double capacity by 2009 and allow for increased flows later.

Engineering, environmental planning and community consultation began on initial plans to raise shipments to 500,000 barrels per day from 260,000 by laying a new jumbo pipe, 105 centimetres in diameter, in Corridor's right-of-way.

Although the plan calls for the 450-kilometre line to be dedicated to the Athabasca Oil Sands Project at first, Terasen president John Reid has predicted Corridor traffic could double again to one million barrels eventually.

Talks are underway with Athabasca senior partner Shell Canada Ltd. on "meaningful incremental opportunities in terms of third-party volumes," Reid told a telephone conference call for analysts and media.

Corridor was built in 2002 solely to link the Athabasca project's Muskeg bitumen mine near Fort McMurray to its oil upgrader at Shell's Edmonton-area Scotford refinery, Terasen spokesman Philippe Reicher said.

But industry demand is on the rise for capacity to ship bitumen, a heavy oil, from the Fort McMurray region to Edmonton-area processing sites.

On top of a $4-billion, 140,000-barrels-daily expansion announced by Athabasca and a lineup of other production projects in the Fort McMurray region, construction is beginning on the $1.8-billion Heartland Upgrader at Fort Saskatchewan. Northwest Upgrader is proposing a second new plant northeast of Edmonton to turn bitumen into refinery-ready light oil.

Delivery capacity could be rapidly increased with low-cost additions of pumps to the new jumbo pipe that will be laid in the Corridor right-of-way, Reicher said. The added pipe will be more than double the size of the current line.

"We are embarking on a very exciting project," Terasen Pipelines president Rich Ballantyne said in a statement.

Terasen is also awaiting approval from the National Energy Board for a $210-million capacity addition on its Trans Mountain Pipe Line from Edmonton to Vancouver to increase oil sands shipments.

The NEB application is the first step in a staged, $2.57-billion growth plan that eventually includes a new Trans Mountain branch line across B.C. to a deep-water port at Kitimat or Prince Rupert for oil sands tanker exports to the U.S. and Asia.

TOP



Terasen's plan to push pipeline expansion fits suitor's strategy

Dave Ebner
Globe and Mail\
09-Aug-2005

CALGARY - Terasen Inc. is pushing ahead with an $800-million pipeline expansion to move more raw output from the Alberta oil sands to Edmonton for processing.

The announcement, made yesterday, fits within the overall strategy of Houston-based Kinder Morgan Inc., which last week unveiled a $3.1-billion (U.S.) deal to buy Vancouver-based Terasen for its exposure to growth in the oil sands.

There are "hellacious opportunities" for growth in the region, Richard Kinder, chairman and chief executive officer of Kinder, told investors on a conference call last week.

Terasen wants to roughly double the capacity on its Corridor pipeline by 2009 to about 500,000 barrels a day of diluted bitumen, from 260,000 currently.

The line could eventually carry upward of 1.5 million barrels of diluted bitumen a day, Rich Ballantyne, president of Terasen Pipelines, said in an interview yesterday.

The Corridor system, whose main line is 500 kilometres, connects the Athabasca Oil Sands Project, majority owned by Shell Canada, north of Fort McMurray with a Shell upgrader and refinery outside of Edmonton. Increasing capacity will require a new pipeline to be built alongside the existing line, and Terasen, in a press release yesterday, said engineering and environmental work has begun.

The expansion could cost $800-million, Terasen CEO John Reid said in late July on a conference call to discuss quarterly results.

There "isn't that much more money after that" that needs to be spent to further expand the line toward 1.5 million barrels of diluted bitumen, Mr. Ballantyne said. Once the new line is built - with a diameter of about one metre - it will only need additional pumping stations along the line to move more diluted bitumen through it, he explained.

That level of capacity also means Corridor could carry production from other companies beyond Shell, Mr. Ballantyne said, deals that Terasen is looking at right now.

Terasen said it plans to file regulatory documents this fall for the first expansion and hopes to begin cons tructioninlate2006.p

Athabasca, majority owned by Shell Canada, said in April it aims to nearly double its production of raw bitumen to 300,000 barrels a day by 2010. Athabasca produced a daily average of 164,200 barrels of bitumen in the April-June period.

TOP

Posted by Arthur Caldicott on August 09, 2005

Minister responds on Terasen

Richard Neufeld
The Province
09-Aug-2005

Re Michael Smyth's column on the sale of Terasen.[entitled "Liberal loophole allows sale of Terasen"]

Terasen Inc. has gas, pipeline and water utility-company subsidiaries, including Terasen Gas (formerly called B.C. Gas), which has always been a private company.

It acquired B.C. Hydro's gas division in 1988, expanded in Alberta, and renamed the gas division Terasen Gas.

Kinder Morgan, a U.S. firm, has made an offer to purchase Terasen Inc.

In B.C., no person or firm can own more than 20 per cent of any regulated utility without approval of the B.C. Utilities Commission an independent agency created to ensure ratepayers' interests are protected.

Investment Canada also reviews these acquisitions.

Michael Smyth refers to Bill 85, a bill passed based on the BCUC's recommendation following a public inquiry.

A key benefit of the bill was to put Terasen Inc. on equal footing with other regulated utilities.

The result was also a reduction in unnecessary regulatory requirements and revitalization of B.C.'s economy by encouraging job creation.

Richard Neufeld,
Minister
Energy and Mines

Posted by Arthur Caldicott on August 09, 2005

August 06, 2005

Higher natural gas prices boost B.C. treasury's fortunes

What's really driving the market is a shortage of gas in North America, industry official says

Scott Simpson
Vancouver Sun
August 05, 2005


British Columbia's treasury could be in for a $600-million windfall this year as hot weather in the United States drives natural gas prices far higher than originally forecast by the B.C. Finance Ministry.

Based on a Vancouver Sun analysis of the difference between current North American contract prices for natural gas, and the ministry's own, conservative projections, B.C. has reaped about $200 million more in gas royalties than expected through the first four months of the current fiscal year.

Last March, the province projected the average price of gas for the 2005-2006 fiscal year at $5.71 per gigajoule -- a B.C. homeowner burns an average of nine gigajoules of gas per month.

September contracts for natural gas on the New York Merchantile Exchange (Nymex), the trend-setting North American market, were selling on Wednesday for the equivalent of $10.80 Cdn per gigajoule.

Over the first four months of the current B.C. fiscal year, gas on the New York exchange has averaged $8.83 Cdn -- and Thursday's close represented a nine-month high.

Futures prices on Nymex show gas contracts well above that level for the remainder of the province's fiscal year.

The B.C. finance ministry is reluctant to comment on the impact of higher gas prices -- revenue figures will be released as part of a quarterly budget review in September.

Analysts with Calgary's First Energy Capital Corp. recently revised upwards their 2005 natural gas price forecast to $9.50 Cdn -- and projects a further increase by year's end.

"With loads of new gas-fired power generation capacity in place in the United States, demand for natural gas is likely to grow," a report issued in late July predicted.

First Energy also notes that at mid-2005, the per-hectare prices that exploration companies are paying for gas and oil leases in B.C. are higher than at any time since the California energy crisis of 2000.

"That reflects what industry perceives the value of the resource under that land to be worth," said David Molinski, assistant deputy minister in the oil and gas division of the B.C. Energy Ministry.

"They recognize that B.C. is a good place to do business, so they are pricing their bids for the land accordingly.

"This also indicates that there is a lot more competition now in B.C.'s oil patch to acquire land.

"But I also think B.C. has become a really competitive jurisdiction in the North American picture now and industry is choosing to go to B.C."

Drilling activity has gone up 24.3 per cent in B.C. in the last two years, according to the ministry.

"We're acquiring a lot more of the investment that's been happening in Canada, more of that is flowing to B.C."

Molinski said the wide array of factors that influence the flow of royalties, making it tough to predict where prices will go next.

The province lists Canadian Natural Resources Limited of Calgary as the busiest company in B.C. -- it has been active here since 1991.

"What's really driving the market is that there is a shortage of gas in North America and as a result gas prices are higher," said Steve Laut, president and chief operating officer of Canadian Natural Resources Limited.

"If you want to find gas in Canada you need to go north and you need to go west, and northeast B.C. fits right in there. It's one of the areas in Canada that's not as explored as southern or eastern Alberta.

"The B.C. government can take some of the credit for getting more activity there and obviously that generates more revenue for the government. Price does help the growth because you've got more cash flow to reinvest."

ssimpson@png.canwest.com

© The Vancouver Sun 2005

Posted by Arthur Caldicott on August 06, 2005

August 03, 2005

Kinder Morgan takeover of Terasen - Media medley 2

Proposed U.S. takeover good for Terasen, shareholders
Don Cayo, Vancouver Sun, 03-Aug-2005
Oilpatch abuzz with takeover talk
Paul Haavardsrud, Times Colonist (Victoria), 03-Aug-2005
Kinder Morgan bid for utility applauded
Scott Simpson, Times Colonist (Victoria), 03-Aug-2005
No changes expected after Terasen takeover
Gordon Hoekstra, Prince George Citizen, 03-Aug-2005
Kinder Morgan offer will bolster Terasen
Jon Harding, National Post, 03-Aug-2005
Takeover pushes Terasen shares to 15 per cent gain
Scott Simpson, Vancouver Sun, 03-Aug-2005
Terasen sale has downside
Kent Spencer, The Province, 03-Aug-2005
Natural resources shouldn't be sold off to foreigners
Richard Floyd, Vancouver Sun, 03-Aug-2005
Takeover pushes Terasen shares to 15 per cent gain
Scott Simpson, Vancouver Sun, 03-Aug-2005
Liberal loophole allowed sale of Terasen
Michael Smyth, The Province, 04-Aug-2005




Proposed U.S. takeover good for Terasen, shareholders

Don Cayo
Vancouver Sun
03-Aug-2005

Despite the predictable gnashing of teeth over what some British Columbians imagine to be a loss of sovereignty, I see little to dislike in Kinder Morgan's offer to buy B.C.'s Terasen Gas for 20 per cent more than the going price for its stock.

The offer is really for two companies -- Terasen Gas, which delivers natural gas to about 875,000 B.C. homes and businesses; and Terasen Inc., which has two key oil pipelines out of Alberta's tarsands area. The gas company is what most British Columbians care about, but it's the pipeline prospects that must be tempting Richard Kinder to offer nearly $7 billion for a company that lists its assets as worth $5 billion.

The purchase has yet to be approved by either the BC Utilities Commission or Terasen's shareholders. But the precedent of American-owned Duke Energy winning approval to take over Westcoast Energy in 2001 suggests the B.C. Utilities Commission is open to such a move. And shareholders are, given the generosity of the offer, unlikely to say no.

If the deal goes ahead, the impact will be nil for customers, almost nil for employees, and potentially sizeable, favourably so, for the pipeline operation.

The distribution side of the business is a regulated monopoly, and exactly the same regulations -- and the same regulator -- will continue to control the cost paid by B.C. consumers. Terasen, whatever owner, must continue to buy natural gas at market prices and pass that cost on, with no markup allowed. And it must continue to cover its costs and make its profit from a charge for delivery that is set by the regulator and is not subject to dramatic swings like the supply-and-demand-driven price of gas.

So even if Kinder Morgan wanted to start gouging its new customers -- and I can't imagine why a company would risk screwing up a good and steadily profitable business that it just bought -- the BC Utilities Commission stands in the way. And there's no reason to believe the commission would treat American owners any more kindly than the mostly Canadian shareholders that own the company now.

As for jobs, the handful of head-office executives who may well find themselves redundant will no doubt negotiate decent exit packages for themselves.

But, aside from those few cuts, a new owner won't have much room to swing the axe. Terasen's work simply doesn't lend itself to jobs that can be whisked away -- its 2,500 workers are almost all tied to a specific patch of geography. You can't lay a pipe or connect a gas fitting by phone from Houston or Bangalore.

There are, to be sure, some "exportable" jobs associated with gas distribution, but Terasen, under its former name of BC Gas, either already ditched them or never had them in the first place.

The company was formed in 1988 when Inland Gas bought BC Hydro's Lower Mainland Gas Division. But for more than a decade, the privately owned company -- it was never a Crown corporation -- farmed out its billing to BC Hydro. In late 2001, it switched that contract, plus an additional one for its 135-employee call centre in Kelowna, to a private company, Accenture.

As for the pipeline side of the business, Terasen is a significant player that's poised to get bigger. It has nearly $3 billion worth of expansions on its wish list awaiting regulatory approval, most notably a proposal to twin its Trans Mountain oil pipeline from Edmonton to the Lower Mainland and Puget Sound or, possibly, to extend it to Prince Rupert to deliver oil for export to Asia. While a new owner will no doubt want to review -- and possibly revise -- these plans, what Kinder Morgan brings to the table is much improved access to capital. The company will have about $30 billion in assets, compared with Terasen's $5 billion, and a better debt-to-equity ratio, which means it can borrow money more cheaply.

As Mines and Energy Minister Richard Neufeld noted when I spoke to him on the phone, "If we just had Canadian companies investing in oil and gas, we'd have a pretty small industry." Companies like Shell from the Netherlands, BP from the U.K. and Exxon from the U.S. have contributed greatly to the Canadian industry's growth.

The Kinder company has enjoyed phenomenal growth since it was formed in the late 1990s, and has built a reputation there as a good employer and a good company to deal with.

So what don't I like about this deal? Only that I don't hold any Terasen stock.

dcayo@png.canwest.com

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Oilpatch abuzz with takeover talk

Paul Haavardsrud
Times Colonist (Victoria)
03-Aug-2005

CALGARY -- Speculation a big slice of Canada's oilpatch is in the crosshairs of international buyers is driving fresh trading in the sector, helping push a passel of energy names to new highs.

A pair of oilsands-related takeovers, combined with Washington's efforts that helped thwart a $18.4-billion US takeover of Unocal Corp. by a Chinese company, is leaving investors wondering if more bids for Canadian shops are on the way. The benchmark Canadian energy index rose to a record high Tuesday.

The profile of northern Alberta's oilsands, already a hot investment theme for money managers, is being raised even further with pipeline giant Kinder Morgan Inc.'s $6.9-billion bid for Terasen Inc. Monday, followed by Total SA's $1.35-billion offer for Deer Creek Energy Ltd Tuesday.

"Terasen is, I think, the first full takeover of a company based on ... an oilsands exposure strategy," said Wilf Gobert, an analyst at Peters & Co. in Calgary. "Along with the Chinese bowing out of the Unocal deal ... this maybe underscores interest in looking at oilsands. There's a common thread."

With Canadian markets closed for Monday's holiday, energy stocks also spent Tuesday catching up to the U.S. oilpatch, which traded higher on the back of rising oil prices.

NYMEX crude for September delivery rose 33 cents to $61.90 a barrel Tuesday. Monday, the contract hit a record $62.30.

Such buoyancy wasn't lost on the S&P/TSX Energy Index. It rose nearly four per cent in Tuesday's session, pacing the broader index, which jumped nearly 200 points, its biggest gain in 15 months.

Big movers in the oilpatch included: Canadian Natural Resources Ltd., up $2.85, Suncor Energy Inc. ($2.97), Talisman Energy Inc. ($3.29), Petro-Canada ($3.97), Nexen Inc. ($3.76), Imperial Oil Ltd. ($4.50), Husky Energy Inc. ($3.60), and Opti Canada Inc. ($3.95).

"We're continuing to see a lot of interest in the oilsands, and I think yesterday the takeovers certainly added some additional interest," said Kate Warne, Canadian market strategist at Edward Jones in St. Louis. "I think to solely attribute [share price gains Tuesday] to merger and takeover announcements is probably incorrect, but to leave it out would also be incorrect."

Indeed, with the exception of Talisman, each of the biggest movers on the day boast a healthy exposure to the oilsands.

Long-rumoured to be looking at making a further move into the oilsands, Total's decision to finally pull the trigger on Deer Creek also has market players again musing that other major international shops could be readying their own overtures.

Among the energy giants perennially rumoured to be interested in snapping up Canadian companies are BP Plc., Royal Dutch/Shell Group, and Italy's ENI SpA.

CNOOC Ltd., which Tuesday announced its retreat from the politically charged Unocal saga, also means China's state-controlled oil company will see its name added to that well-established list.If the U.S. government is unwilling to see foreign powers invest in its backyard then, the thinking goes, it's easy to envision CNOOC, and its $20 billion in stray cash, turn an eye northward.

"We believe CNOOC is not finished," Thomas Burnett, president of New York-based institutional research firm Merger Insight told Bloomberg News. "They may look at Canada which is more receptive to bids from foreign companies."

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Kinder Morgan bid for utility applauded

Scott Simpson
Times Colonist (Victoria)
03-Aug-2005

VANCOUVER -- A $6.7-billion bid for Terasen Inc. got warm reviews on Tuesday from analysts and stock markets.

Shares in Terasen, the Vancouver-based operator of British Columbia's primary gas distribution utility, jumped in heavy trading as stock markets began to digest the friendly takeover bid announced a day earlier by Houston-based Kinder Morgan Inc.

Terasen shares jumped $4.60, with more than 12.3 million shares changing hands, and closed at a record $36 on the Toronto Stock Exchange.

In New York, Kinder Morgan rose $6.13 US on a volume of 5.2 million shares, closing at $94.73.

The deal will be voted up by Terasen shareholders in late October and finalized by year's end, assuming it receives all regulatory approvals including that of the B.C. Utilities Commission and federal assent under the Competition Act.

Analysts participating in a Terasen teleconference offered congratulations to president and CEO John Reid, who admitted the deal makes his own future uncertain.

According to Terasen, the company's shares are 60 per cent held by institutions -- such as mutual funds -- and 40 per cent held by retail or individual investors.

"We do believe the offer price from Kinder Morgan provides full and fair value for our shareholders based on both relative and absolute metrics," Reid said.

"We do believe that the opportunity for Terasen shareholders to acquire Kinder Morgan shares will enable our shareholders to hold shares in a larger, more liquid company operating in the North American energy infrastructure space."

The bid to Terasen shareholders is comprised of cash and shares of Kinder, one of the top performers on the S&P-500, and requires the U.S. company to assume more than $3 billion in Terasen debt as part of the transaction.

Kinder chair and CEO Rich Kinder said the deal was motivated by Terasen's pipeline connection to the Alberta oilsands, a sprawling natural resource he described as "hellaciously significant" to North America's energy future.

Dominion Bond Rating Service was more cautious, putting Kinder's debt rating "under review with negative implications."

"The negative implications reflect, among other factors, the higher balance sheet leverage with lower cash flow/debt support resulting from the transaction at KMI, and the relatively high purchase price proposed," DBRS said.

The service described the deal as Kinder's largest-ever financial transaction, but although it was voicing caution in the short term, it said it expects the deal to yield positive longer term benefits.

"Based on its preliminary review, DBRS expects the proposed transaction to have a positive impact on KMI's business risk as a result of the increased scope and scale of its regulated pipeline and gas distribution operations, and growth potential," DBRS said.

Dominion suggested the price offered for Terasen shares, roughly a 14 per cent premium to last Friday's close, was somewhat high -- and that's probably good news for the company's many shareholders.

Bob Hastings, analyst with Canaccord Capital, said the deal took the market by surprise.

"There were no rumours out there that something like that was going to happen, which is the way it's supposed to be, of course."

Hastings said the value of the bid was too great for Terasen directors to reject out of hand and it gives the shareholders the option of taking cash or else staying in the energy sector by acquiring Kinder shares.

"They have a fiduciary responsibility, an obligation, to their shareholders, to look at bids when they come in.

"This is a high price that shareholders wouldn't be able to realize otherwise -- and they still have the ability to participate through taking some stock back."

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No changes expected after Terasen takeover

Gordon Hoekstra
Prince George Citizen
03-Aug-2005

The $6.9-billion takeover of Terasen is not expected to negatively impact plans to expand pipeline capacity from Alberta's oilsands to B.C.'s west coast, including through northern B.C.

It's also not expected to affect the City of Prince George's deal with Terasen Gas, which is meant to generate about $25 million for the city over 17 years.

U.S.-based Kinder Morgan chairman and CEO Richard Kinder said the driving force for the takeover was to become a player in the expanding Alberta oilsands production. He noted Kinder Morgan's expertise is in pipelines.

"Terasen has identified more than $2.5 billion US of potential expansion and growth opportunities, and less than half of those are in our (buy-out) model," Kinder told analysts on a conference call. "We certainly hope and believe we'll be able to spend at least that much in the next several years and hopefully more as we identify continued growth opportunities," he said.

Terasen is one of two companies with plans to expand pipeline capacity from the Alberta oilsands to B.C.'s west coast. Terasen's $2.5-billion plans includes options for a southern or northern route, either to Prince Rupert or Kitimat. A competing proposal from Enbridge is focused solely on a northern B.C. route, also either to Prince Rupert or Kitimat. Enbridge's $3.6-billion proposal includes a condensate line, which would run parallel to the oil pipeline.

Condensate -- which would return in tankers from Asia -- is a liquid that can be used to dilute heavier oil to make it easier to ship by pipeline.

The proposals are expected to create between 1,200 to 2,000 construction jobs, and another 150 to 200 permanent jobs. Both proposals are meant to provide additional pipeline capacity, needed as crude production from Alberta's oilsands is expected to double by the end of the decade to about two million barrels a day.

Kinder noted that $50 billion US in spending is planned in the Alberta oilsands in the next five to 10 years.

Asked by an analyst about Terasen's, as well as Enbridge's, plans to increase pipeline capacity to B.C.'s coast, Kinder said he expected there to be increased movement of Alberta oilsands crude to the U.S., but also probably to Asia.

Kinder also said he didn't think the two proposals were mutually exclusive.

"We believe there may be opportunities to expand well beyond what we have in our model, and we think there's opportunities to go north," he said. "Enbridge is a fine company, but we certainly think, though, that we'll be able to get our share of the additional production coming out."

Kinder Morgan also said it thinks it has an advantage over Enbridge's proposal because it could phase in expanded pipeline capacity.

Terasen is currently working on a project to expand capacity into B.C., and then will decide on a northern or southerly route, said Terasen spokesman Cam Avery. While Avery said Terasen believes it has a good proposal now, Kinder Morgan's purchase of Terasen will give the plan a boost. "The ability with a bigger company, bigger balance sheet, better access to low-cost capital -- we think it makes it that much more attractive," he said.

The deal is subject to regulatory approval in Canada and the U.S., and it also needs approval from shareholders.

City of Prince George official Kathleen Soltis said Kinder Morgan's buyout of Terasen is not expected to impact its deal with Terasen Gas. The city got the green light in a referendum last summer to borrow $58.6 million to finance a leasing agreement with Terasen Gas designed to generate nearly $25 million over 17 years. Mayor Colin Kinsley said the city realized that utilities often change hands, so it needed language that provided strong protection of its interests. "We've got it covered six ways from Sunday," he said.

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Kinder Morgan offer will bolster Terasen

Jon Harding
National Post
03-Aug-2005

CALGARY -- Kinder Morgan Inc.'s $6.9-billion cash, share and debt bid for Canadian natural gas distributor Terasen Inc. packs financial muscle behind Terasen's growth plans and is seen by analysts as a potential trump card in the battle to become the first shipper of oilsands crude from Alberta to the West Coast.

The offer, made Monday, which includes Houston-based Kinder Morgan's assumption of more than $3-billion of Terasen debt, helped push Terasen stock past the $35.91-per-share price at which the bid is valued on a pro-rated basis. The stock jumped 14.65% to close at $36 on the Toronto Stock Exchange in heavy volume.

Vancouver-based Terasen is currently Canada's second-largest pipeliner of oil produced in the northeastern Alberta tarsands, behind Calgary-based Enbridge Inc.

Both are jockeying to expand their separate links to the major U.S. midwest refining hub and in the case of Enbridge, to build a $2.5-billion line, called Gateway, from Edmonton to a West Coast port 1,160 kilometres away in either Prince Rupert or Kitimat.

Terasen moves crude from oilsands projects on its Trans Mountain system to Burnaby, B.C., and Puget Sound on Washington State's coast.

It is proposing to twin the line to Burnaby, an option costing $2.3-billion, or build a line north to a new terminal in either Kitimat or Prince Rupert, an option with a price tag of about $2.57-billion.

Output from the oilsands is expected to double in the next five years from one million barrels a day today to two million and to continue to climb for years after, which means producers need new refining customers.

They have recently looked toward China and its energy-ravenous economy and to refineries in California.

PetroChina agreed in April to become a major shipper on the Gateway project, and in return, Enbridge said it would help China's largest oil company sign agreements with oil companies to secure up to 200,000 barrels a day of Canadian crude.

That development, along with the decision by Enbridge to seek commitments from producers for the remaining 200,000 barrels a day of Gateway capacity, was seen as a giving Enbridge an edge in what is turning into a tight race.

"A company isn't going to build a pipeline, run it half empty and have tolls that aren't economic for producers," said Lanny Pendill, an analyst with Edward Jones.

"If you get there first and secure the commitments, then it's a huge competitive edge."

But Terasen's deal with Kinder Morgan now may give its Trans Mountain expansion project a leg up, Mr. Pendill said.

"I never had concerns about Terasen's ability to do their projects, but maybe it would have meant issuing more equity, which could dilute the earnings benefit," he said. "Kinder Morgan has much deeper pockets."

The offer from Kinder Morgan was a premium of about 20% over the average price of Terasen's stock in the past 20 trading days.

Terasen chief executive John Reid told analysts the offer was too good to refuse.

"Ultimately it comes down to a value proposition and we felt this was a very attractive price," he said when asked why the Vancouver-based firm would sell at a time when its stock price was already at record highs.

Brian Purdy, research analyst at FirstEnergy Capital Corp. in Calgary, Kinder Morgan's long list of relationships with U.S. refiners will be attractive to Canadian producers.

"Refining capacity for heavy oil in the U.S. is pretty tight but if anyone is going to have an opportunity to find customers, it's Kinder Morgan. They're front and centre," he said.

- - -

TERASEN INC.
Ticker: TER/TSX
Closing price: $36, up $4.60
Volume: 12,367,473
Avg. 6 mo. vol.: 229,161

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Takeover pushes Terasen shares to 15 per cent gain

Scott Simpson
Vancouver Sun
03-Aug-2005

Investors drove up Terasen Inc. shares 15 per cent on Tuesday, fuelled by a $6.9-billion takeover deal by U.S. energy giant Kinder Morgan Inc.

Shares in Terasen, the Vancouver-based operator of British Columbia's primary gas distribution utility, jumped $4.60, with more than 12.3 million shares changing hands, to close at a record $36 in Toronto.

In New York, Kinder Morgan rose $6.13 US on a volume of 5.2 million shares, closing at $94.73.

The surprise deal, announced Monday, was greeted warmly by market-watchers.

Analysts participating in a Terasen teleconference offered congratulations to president and CEO John Reid, for a deal is widely seen as maximizing the value of the company for its investors.

According to Terasen, the company's shares are 60 per cent held by institutions -- such as mutual funds -- and 40 per cent held by retail or individual investors.

The deal offers Terasen shareholders $35.75 per share, or cash and Kinder Morgan shares, or Kinder shares in a proportionate formula of 65 per cent cash and 35 per cent shares.

"We do believe that the offer price from Kinder Morgan provides full and fair value for our shareholders based on both relative and absolute metrics," Reid said.

"We do believe that the opportunity for Terasen shareholders to acquire Kinder Morgan shares will enable our shareholders to hold shares in a larger, more liquid company operating in the North American energy infrastructure space."

The bid to Terasen shareholders is comprised of cash and shares of Kinder, one of the top performers on the S&P 500, and requires the U.S. company to assume more than $3 billion in Terasen debt as part of the transaction.

Kinder chair and CEO Rich Kinder said the deal was motivated by Terasen's pipeline connection to the Alberta oil sands, a sprawling natural resource he described as "hellaciously significant" to North America's energy future.

Dominion Bond Rating Service was more cautious, putting Kinder's debt rating "Under Review with Negative Implications."

"The negative implications reflect, among other factors, the higher balance sheet leverage with lower cash flow/debt support resulting from the transaction at KMI, and the relatively high purchase price proposed," DBRS said.

The service described the deal as Kinder's largest-ever financial transaction, but although it was voicing caution in the short term, it expects the deal to yield positive longer term benefits.

"Based on its preliminary review, DBRS expects the proposed transaction to have a positive impact on KMI's business risk as a result of the increased scope and scale of its regulated pipeline and gas distribution operations, and growth potential," DBRS said.

Dominion suggested the price offered for Terasen shares, roughly a 14-per-cent premium to last Friday's close, was somewhat high -- an interpretation that's probably good news for the company's shareholders.

In a Canaccord Capital letter to investors, energy sector analyst Bob Hastings described the deal as "a positive transaction" for Terasen shareholders and allows Kinder to expand its scale of operations "through stable, regulated, low risk assets."

ssimpson@png.canwest.com

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Terasen sale has downside

Kent Spencer
The Province
03-Aug-2005

Terasen Gas's proposed sale to an American company amounts to selling off a piece of Canada, say B.C. consumers worried by the move. But stock market investors liked what they saw yesterday and gave Terasen shares a substantial boost.

"The Americans are definitely looking out for their own good," said Sean Hevesy, 29, of Squamish yesterday.

"There will be serious implications in the coming years if there is an energy shortage."

Shelley Kean, 52, of North Vancouver said British Columbians invested a lot of money into one of Terasen's forerunners when it was part of Crown-owned B.C. Hydro. "Now that money will be spent by a Texas company on an ideology opposite to most Canadians," she said.

The pair were responding to a $6.9-billion bid announced earlier this week by energy giant Kinder Morgan of Houston, Tex., that wants to scoop up Vancouver-based Terasen Inc., an investor-owned pipeline utility which delivers natural gas to most British Columbians and is also involved in pipeline development to transport Alberta oilsands crude to U.S. and to Asian markets. Another subsidiary, Terasen Utilities, delivers water to 90 resorts, universities and airports.

The deal requires the OK of 75 per cent of Terasen shareholders as well as approval by the B.C. Utilities Commission. Kinder Morgan is offering shareholders $35.91 in cash or stock for each Terasen share. Terasen shares closed up $4.60 yesterday to $36.00 on the Toronto Stock Exchange.

And while some consumers were showing concerns about the deal, B.C. Energy Minister Richard Neufeld said the purchase showed confidence in B.C.'s future.

"Kinder Morgan is a pretty big player in the oil and gas industry," he said. "Consumers do not need to be concerned because [natural] gas prices will still be regulated by the B.C. Utilities Commission."

But NDP economic critic Mike Farnworth said the Liberals brought in legislation in 2003 that allowed foreign ownership of Terasen Inc. The company's Lower Mainland operation was part of B.C. Hydro until the Gas Division was sold to investor-owned Inland Natural Gas in 1988. The merged company was renamed B.C. Gas. That name was changed to Terasen a few years ago.

"The interests of B.C. consumers need to be taken into account in whether or not the sale can go through," Farnworth said.

Kinder Morgan chairman Richard Kinder is one of the world's richest individuals with a ranking on the Forbes Top 500 list.

A major supporter of U.S. President George W. Bush, Kinder quit as chairman of Enron in 1996. The energy-trading giant was rocked a few years later by scandal, suffering the largest bankruptcy in U.S. history.

Kinder, described by Forbes business magazine as a "no-nonsense" Vietnam veteran, pays himself $1 per year.

He said yesterday that the combination of Terasen's growth opportunities and his company's financial muscle will provide the scale and scope for the new company to tap Alberta's ever-growing oilsands potential.

Kinder said he expected production from the oilsands to double over the next five to seven years.

kspencer@png.canwest.com

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Natural resources shouldn't be sold off to foreigners

Richard Floyd
Vancouver Sun
03-Aug-2005

Americans have gone ballistic over the thought of a Chinese oil and gas company buying Unocal Corp., a major energy enterprise. However, Canadians note that Fortune magazine ranks Kinder Morgan, bidding for Terasen Inc., as "one of America's most-admired companies."

Two spins: Americans emphasize that the Chinese National Overseas Oil Corporation is a state-owned (Communist) business. Canadians blithely ignore the hand-in-glove relationship between Big Oil, of which Kinder Morgan is part, and the Bush ("We need an energy bill that encourages consumption") White House.

Two results: Americans fend off an evil takeover by outsiders. Canadians turn over another valuable asset.

Richard Floyd
Crescent Beach

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Takeover pushes Terasen shares to 15 per cent gain

Scott Simpson
Vancouver Sun
03-Aug-2005

The Texas billionaire behind the surprising bid for Terasen Inc. is bullish on British Columbia.

Kinder Morgan Inc. chair and CEO Rich Kinder reiterated in an analysts conference on Tuesday that his company's main motive in a $6.9-billion friendly bid for British Columbia's biggest natural gas utility is its ownership of pipeline links to the Alberta oil sands.

But Kinder said that as his company began to study Terasen, he began to recognize the value of the Vancouver-based utility's residential gas delivery business.

"We believe this is a stable, regulatory environment in Canada and we will be extraordinarily focused on expanding the infrastructure. We like the location. We think it's strategic," Kinder said.

"We think the whole Vancouver, western British Columbia area is poised for continued high demographic growth. We see steady organic growth there in the range of about two per cent. We see a low risk rate structure."

Neither Terasen nor Kinder Morgan expect significant layoffs as a result of the takeover, which could be finalized by year's end pending regulatory approvals from the B.C. Utilities Commission and federal agencies governing competition and foreign ownership.

Reid said in a Terasen analysts conference that he believes government reaction to the deal -- which still requires shareholder approval -- is generally favorable.

"It's a little early to tell as yet but I think it's positive," Reid told analysts. "We had some phone conversations [Monday] with various political leaders both in this province and in Alberta, and federally, and I didn't see anything coming out of those calls that would represent any sort of major hurdle at this stage. It is very preliminary, these are early reactions, but I don't see any issues."

Some Vancouver Sun readers voiced concern about a non-Canadian company owning the B.C. utility, expressing fears that it could lead to British Columbians being deprived of home heating fuel in favour of U.S. consumers.

However, B.C. Energy and Mines Minister Richard Neufeld said the company remains a regulated monopoly under the control of the B.C. Utilities Commission.

The BCUC will have final say on the conditions under which the deal can proceed.

Neufeld said the decision by a U.S. company to invest such a large sum in B.C. represents more evidence of British Columbia's surging economy.

"We live in a global economy and especially a North American economy when it comes to the energy market."

Neufeld added that foreign-owned companies such as Shell, BP and Exxon have operated in Canada for decades with no adverse impacts on the nation's sovereignty, he added.

Kinder stated that while the parent company would remain Kinder Morgan, headquartered in Houston, "we expect to add Canadian representation on our board."

"The Terasen Gas headquarters will remain in Vancouver, the Terasen Pipeline headquarters will remain in Calgary," he said.

Reid said Terasen will soon enter into discussions with the utilities commission about a transfer of ownership-- and he said the sale earlier in this decade of Westcoast Energy to Houston-based Duke is a precedent in favour of his company's deal.

"This isn't exactly a change in shares of the utility company. It's a change at the parent level which should make it a somewhat easier transaction in terms of regulatory approval.

"If we look back at the Duke-Westcoast precedent we are looking to that as a model on a go-forward so we have a degree of confidence following that route that we will get this done by the end of the year."

David Austin, an energy sector analyst who serves as legal counsel for independent power producers in B.C., said it was uncommon for a Canadian utility to be in the hands of a foreign owner.

"Inevitably what happens is that the foreign owner finds there is nothing sexy about owning a utility in Canada. More importantly, the foreign owner's stockholders and analysts say 'why are you holding a utility in Canada, because we cannot really track its performance very well?' "

It's conceivable, he added, that Kinder Morgan could put Terasen Gas back on the market in a few years while holding onto the company's pipeline assets.

ssimpson@png.canwest.com

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Liberal loophole allowed sale of Terasen

Michael Smyth
The Province
04-Aug-2005

The Gordon Campbell government cleared the decks for the Americanization of Terasen Gas two years ago by passing a law with a rather ironic -- some would say downright sneaky -- name.

The B.C. Hydro Public Power Legacy and Heritage Conservation Act reassured British Columbians that the Liberals had no plans to sell B.C. Hydro to Americans or anyone else.

But Terasen? That was a different story.

Inserted amid all the hype and hoopla about protecting Hydro's owned-by-B.C. heritage, the Liberals added a sub-clause in the law that removed restrictions against the foreign ownership of Terasen.

Terasen, of course, used to be called B.C. Gas. It also used to be owned by the people of the province when it was an arm of B.C. Hydro.

That ended in the 1980s, when Bill Vander Zalm, the Social Credit premier of the day, decided to privatize the government's gas business.

But Vander Zalm, now a fierce critic of foreign takeovers of B.C. Rail and other Crown assets, placed strict rules on the company's ownership and operation.

Under those rules, Terasen could not be sold or merged.

It could not have more than 20-per-cent foreign ownership.

And it could not move its head office out of B.C.

The Liberals quietly threw that all out the window in 2003.

"Terasen Inc. is the only B.C. company subject to these outdated restrictions," Energy Minister Richard Neufeld briefly explained in the legislature.

"The repeal will increase Terasen's access to investment dollars."

The overwhelmed NDP opposition -- all two members -- mustered a five-minute protest in the house.

"Day by day, we're losing control of our utilities," said NDP MLA Jenny Kwan.

Leonard Krog, then running for the NDP leadership, put up the most spirited fight.

"These legislative changes worth potentially millions of dollars are being made on behalf of a company that is a major donor to the Liberal party," said Krog.

"It has been done without a word of notice to British Columbians or Terasen customers."

But the Liberals just swatted away the NDP complainers like pesky fleas.

The Liberals' message: If you really want to own a natural-gas company, just go and buy its stock.

That's exactly what then-Liberal MLA Brian Kerr told a constituent upset about the Liberals' hands-off approach to Terasen.

"I had to inform her that . . . if she did want to continue to own it, she could go on the Toronto Stock Exchange."

Hopefully she took his advice. Terasen stock soared on news of the American takeover, taking the entire TSE along for the giddy ride.

For shareholders in the company, that's hopefully enough to soothe the sting of the latest Yankee intervention in our resource economy.

- - -

Listen to Nightline B.C. with Michael Smyth every weeknight at 7 p.m. on CKNW, AM 980

Voice mail: 604-605-2004

E-mail: msmyth@direct.ca

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Posted by Arthur Caldicott on August 03, 2005

August 01, 2005

Kinder Morgan to acquire Terasen - Media medley

Kinder Morgan - Terasen joint press release
U.S. firm offers $3-billion for Canada's Terasen
Catherine McLean, Globe and Mail, 01 Aug 2005
Houston-based Kinder Morgan to buy Terasen Inc., formerly B.C. Gas, for $6.9B
John Valorzi, Canadian Press, 01 Aug 2005
Energy Pipeline Operator to Buy Canadian Rival
Reuters, New York Times, 02 Aug 2005
U.S. company to buy B.C.'s Terasen Gas for $6.9 billion
Scott Simpson, Vancouver Sun, 02 Aug 2005
$6.9B on table for Terasen
Peter Brieger and Paul Vieira, National Post, 02 Aug 2005
U.S. giant bids for Terasen
Scott Simpson, Vancouver Sun, 02 Aug 2005
Texas energy firm gobbles up Terasen Gas in $7-billion deal
Kent Spencer, The Province, 02 Aug 2005




U.S. firm offers $3-billion for Canada's Terasen

Catherine McLean
Globe and Mail
August 1, 2005


Kinder Morgan Inc. unveiled an agreement Monday to buy Terasen Inc. for $3.1-billion (U.S.), giving the U.S.-based energy giant critical strategic involvement in the Alberta's oil sands.

Kinder Morgan is the latest company from outside the country's borders to secure a spot in this key market. Until Monday, Chinese firms had been the most aggressive suitors, making three separate investments this year. However, lately the oil sands have attracted more attention from the United States, as evidenced by Treasury Secretary John Snow's tour of the region last month.

Terasen's main pipeline from the oil sands runs from Edmonton to B.C.'s Lower Mainland. It operates another that runs south to the U.S. Midwest. With Kinder Morgan's backing, Terasen will have greater access to capital to expand pipelines and move more crude from the oil sands.

Larger rival Enbridge Inc. is also pushing ahead with expansion plans to send more oil sands crude to the U.S.

“It has great upside potential in the sense the oil sands play is going to get larger and larger,” Kinder Morgan chief executive officer Richard Kinder said Monday in an interview. “We think with Terasen's current footprint, the pipelines it has in place, and our financial wherewithal, we'll be able to dramatically increase our capacity to take more product coming out of Alberta.”

Houston-based Kinder Morgan started looking at the oil sands a year ago, according to Mr. Kinder. Over the past six to eight weeks, the two parties held discussions. The combined company will have 40,000 miles of pipelines and more than 1.1 million natural gas distribution customers.

Kinder Morgan is also assuming $2.5-billion in debt. Kinder Morgan said the value of the transaction is $35.91 (Canadian) a share, a 14-per-cent premium to Friday's closing price of $31.40. For each share, Terasen shareholders can choose $35.75 in cash, 0.3331 shares of Kinder Morgan, or $23.25 in cash and 0.1165 Kinder Morgan shares.

The deal will immediately be accretive in terms of earnings and cash flow per share, Mr. Kinder said. Kinder Morgan expects the combined company's earnings per share and dividend will grow at approximately 10 per cent annually.

“This transaction is a real validation in many ways of what it is that we're trying to do with the oil sands,” Terasen chief executive officer John Reid said Monday in an interview. “I believe the folks at Kinder Morgan see that, and think that in partnership we can move that so much further ahead. This transaction is about growth. It's about accelerating, further developing growth opportunities.”

Analysts are bullish on the outlook for production at the oil sands, which currently stands at one million barrels a day, about 1 per cent of global output. It could reach as high as 11 million barrels a day in the 2040s, analyst Steven Paget of FirstEnergy Capital Corp. wrote in a report a few weeks ago.

According to Terasen, Canadian oil sands production is projected to rise to about 2 million barrels of crude a day between 2010 and 2012.

Those forecasts are bringing in foreign investors. In April, China National Offshore Oil Corp. bought a one-sixth share in Calgary-based MEG Energy Corp. for $150-million. In May, China Petroleum & Chemical Corp. (Sinopec) took a 40-per-cent stake in an upstart project controlled by Synenco Energy Inc.

Kinder Morgan's deal must be approved by 75 per cent of Terasen shareholders who attend a special meeting held before Oct. 31. Regulatory approval is also required. The board of Vancouver-based Terasen is recommending shareholders vote in favour of the transaction.

Terasen said it has agreed to pay a termination fee of $75-million under certain circumstances, without elaborating. There has been speculation that the company could spin off a utility, Terasen Gas. However, Mr. Kinder said Kinder Morgan has no such plan.

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Houston-based Kinder Morgan to buy Terasen Inc., formerly B.C. Gas, for $6.9B

John Valorzi
Canadian Press
Monday, August 01, 2005

TORONTO (CP) - Houston-based Kinder Morgan Inc. is buying Canada's Terasen Inc. in a cash, share and debt deal that values the Vancouver company at nearly $7 billion and provides the financial muscle needed to rapidly grow the pipeline network sprouting from the Alberta oilsands.

In a blockbuster deal announced Monday afternoon, Kinder Morgan and Terasen detailed an agreement that will see the Houston company pay $35.91 Cdn in cash or stock for each Terasen share, creating a major North American energy transportation and distribution company.

The total purchase price, including assumption of debt, is about $5.6 billion US, or $6.9 billion Cdn, the companies said.

The acquisition of Terasen, a natural gas utility and oil pipeline company formerly known as B.C. Gas, is the second major acquisition of a Vancouver-based pipeline company by a U.S. energy giant in recent years.

Westcoast Energy, which operated natural gas pipelines on the West Coast and had other significant energy businesses across Canada, was acquired by Duke Energy several years ago.

Monday's announced acquisition of Terasen has been unanimously approved by each company's board of directors and by a special committee of independent directors created by the Terasen board to oversee the sale. The deal is expected to close by the end of the year, subject to Terasen shareholder approval and other regulatory approvals.

"For shareholders, it means a 20-per-cent premium over the price they've been getting the last 20 days which has been trading at its high so it's a great financial gain for shareholders," said Terasen spokesman Cam Avery.

The combined company will have about 64,000 kilometres of natural gas and petroleum transportation pipelines, more than 1.1 million natural gas distribution customers, about 150 terminals, 9,000 employees and a value of more than $19 billion US.

Including Kinder Morgan affiliate Kinder Morgan Energy Partners L.P. (NYSE:KMP), of which KMI is the general partner, the value of the total combined companies will be about $35 billion US.

Terasen operates British Columbia's major gas distributor, with about 875,000 customers.

"For gas customers, it won't make any difference at all because those are regulated companies and the gas business will continue to operate as Terasen gas in B.C.," said Avery.

But a key lure for Kinder Morgan was Terasen's growing presence in the oil pipeline business, where the Vancouver company's pipelines in B.C., Northern Alberta and the United States are well-positioned to ship growing production from the Alberta oilsands to markets in Canada, the United States and Asia.

"This transaction will combine two strong entities to create a premier energy company in North America with a bright future," said Kinder Morgan chairman and CEO Richard Kinder.

"It is a win-win transaction for both entities that is expected to produce immediate shareholder value through strong earnings and cash flow accretion, as well as provide exciting future growth opportunities. For Kinder Morgan, the merger will dramatically broaden our footprint into Canada."

He noted that the financial strength of the combined company will help finance new pipeline construction to service the oilsands sector.

"There is a definite need for additional pipeline infrastructure from the Alberta oilsands, and we have a great opportunity to use the capital strength of the combined company - along with our expertise in building and operating pipelines - to increase capacity on Terasen's existing pipeline system and help meet the growing demand of an oil-starved world," he said.

Canadian oilsands production is projected to double from current levels to about two million barrels of crude oil a day between 2010 and 2012. According to the National Energy Board, Canada's recoverable oilsands reserves are the largest in the world. They currently account for about 37 per cent of all Canadian oil production, and are expected to make up two thirds of domestic production by 2015.

Terasen president and CEO John Reid said the planned combination is a great opportunity for Terasen (TSX:TER) and its shareholders.

"This transaction creates significant immediate and long-term value for our shareholders and gives us the scale, resources and access to capital we need to accelerate our business strategy and lead the development of world-class infrastructure across Western Canada."

"The offer represents a significant premium to our recent share price at a time when Terasen is trading at all-time highs, and gives Terasen shareholders the opportunity to participate in the ongoing success of the combined company.

"Kinder Morgan is one of the largest and most respected energy transportation and storage companies in the United States, is the market leader in most of its businesses and has produced outstanding returns for its shareholders. We are very pleased to become a significant part of a much larger and stronger enterprise."

Avery said other petrolem companies would likely welcome the move.

"For the petroleum pipeline customers - these are the big oil companies - and they're all familiar with Kinder Morgan because Kinder Morgan are bigger pipeline players than we are," Avery said. "They'll probably welcome it because it means a bigger, more sound financially sound company taking pipeline proposals to them".

© The Canadian Press 2005

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Energy Pipeline Operator to Buy Canadian Rival

Reuters
New York Times
August 2, 2005

HOUSTON, Aug. 1 (Reuters) - An energy pipeline operator, Kinder Morgan, said on Monday that it had reached a deal to buy a Canadian pipeline company, Terasen, for $3.1 billion to expand its share of Canadian oil shipments.

The purchase also calls for Kinder Morgan to take on $2.5 billion in Terasen's debt.

Kinder Morgan's offer totals 35.91 Canadian dollars for each share of Terasen, a premium of about 20 percent over the average price of the last 20 trading days, the company said.

In addition to gaining Terasen's 2,800 miles of pipelines, which carry 680,000 barrels a day of petroleum and petroleum products, the deal will position Kinder Morgan to expand its network into Alberta's growing production of crude oil from oil sands.

That area was projected to double its production from current levels to about two million barrels a day between 2010 and 2012.

Alberta's oil sands reserves are believed to be the largest in the world and currently account for more than a third of Canada's oil production.

Terasen also owns a utility in western Canada that distributes natural gas to 875,000 customers in British Columbia.

Under the deal's terms, Terasen shareholders can elect to receive 35.75 Canadian dollars in cash per share, 0.3331 shares of Kinder Morgan common stock per share, or 23.25 Canadian dollars in cash plus 0.1165 Kinder Morgan common stock per share, the companies said.

The deal, which was unanimously approved by each company's board of directors, will require Terasen shareholders' approval in a vote to be held no later than Oct. 31.

The combined company will own 40,000 miles of natural gas and petroleum pipelines and reach more than 1.1 million natural gas distribution customers.

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U.S. company to buy B.C.'s Terasen Gas for $6.9 billion

Scott Simpson
Vancouver Sun
02-Aug-2005

More than 875,000 Terasen Gas customers in British Columbia will be paying their monthly heating bills to a company based in Houston, Tex., under a $6.9-billion deal announced Monday.

The deal would see Vancouver-based Terasen purchased by Kinder Morgan of Houston, a $35-billion company with a high-profile owner that was ranked this year by Fortune magazine as one of "America's most-admired companies."

Work on the deal began three months ago when Kinder Morgan approached Terasen.

It requires approval of 75 per cent of Terasen shareholders, who are being offered a premium of nearly 20 per cent over the current value of the company's shares. It would also require some approvals by the B.C. Utilities Commission.

Canadian investors own 99 per cent of Terasen Inc. shares, the firm says, with half of those stocks owned by individual shareholders and the other half owned by pension funds and mutual funds.

Terasen has two main components, a gas-delivery utility serving householders and commercial customers in B.C., and a pipeline company that provides service in both Canada and the United States.

The future of Terasen's pipeline operations represent the biggest prize in the deal because of the company's connections to the Alberta oil sands, its 2,700-kilometre Express pipeline into the U.S. Rocky Mountain states, and a growing U.S. desire for North American sources of petroleum.

Kinder Morgan chairman and CEO Richard Kinder said in an interview from Houston that the deal will have relatively little impact on Terasen's 2,553 employees.

"This is not a program where we are planning to cut a lot of jobs or anything else," Kinder said.

"These are assets and people we like very much. I think it's going to be, as [Terasen president and CEO] John Reid and I were talking earlier, a win-win for the shareholders and employees of both companies."

Kinder is one of the United States' wealthiest citizens and a solid backer of President George W. Bush.

His personal net worth exceeds $1.2 billion.

He was formerly a president of Enron Corp., the Houston-based energy trading company that was rocked by scandal in the early part of this decade due to allegations of manipulation of the California energy market.

However according to the website of Forbes business magazine, Kinder "wisely" left Enron in 1996, well before the scandal, because he was uncomfortable with the company's lack of emphasis on hard assets such as pipelines.

He created a new company that scooped up Enron's pipeline assets and never looked back, emerging as the United States first-ranked pipeline company.

"Vietnam vet careful to avoid Enron excesses: flies coach class, pays himself just $1 a year," says Forbes.

Kinder gets all of his compensation through the value of the company's shares -- average annual returns have been 40 per cent since 1999, 35 per cent since 1997.

Terasen's Reid said the deal won't bring any changes for the company's gas customers, who will still get their monthly bills on Terasen letterhead.

"At this point the immediate concern, I guess, is what this would mean to me as a customer of Terasen Gas -- are my gas bills going to go up, all those types of things," Reid said.

"The answer is absolutely no, there will be no change that is not positive. Service will continue at least at the present level.

"Going forward, the fact that we are part of a larger organization and everything that gives us access to means, ultimately, that we will have even better levels of service."

He described Kinder Morgan as "a very, very successful company, very much an operating company focused on the same types of assets, the same type of business as Terasen, focused on good customer service and efficiency.

"I think it's a business culture that will be consistent with ours."

The union representing some 400 workers at Terasen condemned the deal, saying the B.C. government should take action to protect B.C. jobs, the province's supply of natural gas and fair consumer pricing.

"This is a terrible way to celebrate B.C. Day, by seeing a former Crown Corporation and an important B.C.-owned and based company move to Houston, Texas," Andy Ross, president of Canadian Office and Professional Employees' Local 378, said in a news release.

"The provincial government has a lot to answer for, since it made this corporate runaway possible in the first place."

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$6.9B on table for Terasen

Peter Brieger and Paul Vieira
National Post
02-Aug-2005

One of the biggest energy distribution companies in the United States -- headed by the former president of Enron Corp. -- offered yesterday to buy Terasen Inc., the Vancouver oil and gas distribution giant, for $6.9-billion, including debt.

In another sign that takeover activity in North America's oil and gas sector appears set to continue, Houston's Kinder Morgan Inc. said Terasen, formerly B.C. Gas Inc., would give it access to the fast-growing production from Alberta's oilsands and a stable, cash-producing gas distribution business.

Under the proposed deal, investors have three options: they can tender each Terasen share they own for $35.75 in cash -- a 20% premium over the average closing price in the three weeks ended July 29; trade one Terasen share for 0.3331 shares of Kinder Morgan; or take $23.25 in cash and 0.1165 Kinder Morgan shares.

Yesterday, Kinder Morgan stock finished at US$52.31, down US10 cents, on the New York Stock Exchange, short of its 52-week high of US$53.96 while Terasen closed on Friday near its 52-week high of $31.40.

In its most recent quarter ended June 30, Kinder Morgan posted a profit of US$221.8-million, a 13.6% increase from the year-ago period, based on sales of US$2.1-billion.

The company is led by Richard Kinder, who left now-disgraced Enron in 1996 because he was reportedly uncomfortable with its "asset light" strategy.

Mr. Kinder, ranked as one of the 400 richest people in the world and one who enjoys close ties with the White House, built the company after buying Enron's liquid-gas pipeline operations with a college classmate.

Yesterday, he described the Terasen bid as a way to buy a stable business and "dramatically broaden our footprint into Canada," particularly in the oilsands.

Mr. Kinder will stay on as chairman and chief executive of the new company that will include Terasen, although some of the Canadian assets will retain the Terasen brand.

If the deal garners shareholder approval, earnings per share in 2006 are expected to be US$5 with almost US$800-million of free cash flow, Kinder Morgan said. The company's annual dividend would also rise to US$3.50 from US$3 a share.

According to U.S. Securities and Exchange Commission filings, Kinder Morgan has spent more than US$500-million in acquisitions since January, 2002; Terasen is its biggest catch yet.

Both companies said their respective boards have approved the deal. John Reid, Terasen's chief executive, has urged shareholders to accept the offer, which would create a company of 9,000 employees.

"The offer represents a significant premium to our recent share price at a time when Terasen is trading at all-time highs," he said.

"This transaction ... gives us the scale, resources and access to capital we need to accelerate our business strategy."

Vancouver-based Terasen, which reported $2-billion in 2004 sales, distributes natural gas to 875,000 customers -- about 95% of the British Columbia market. Through its pipeline division, the company transports oil from Alberta to B.C., Washington state and the U.S. Midwest. Together, the company would be the second-largest operator of natural gas pipelines in the United States with 40,000 miles of oil and gas pipelines and more than 1.1 million natural gas distribution customers.

The proposed transaction would also create the largest owner of storage terminals in the United States, handling 80 million tons of coal and storing up to 72 million barrels of petroleum products annually, Kinder Morgan said.

Kinder Morgan has a spotty record with U.S. state regulators. Last month, it was fined US$500,000 in California in relation to a pipeline explosion in California that killed five people. It is the subject of a U.S. nationwide review of its pipeline operations and maintenance practices as a result of those and other mishaps.

- - -

TERASEN INC.

Ticker: TER/TSX

Fri. close: $31.40, down 24 cents

Friday volume: 231,010

Avg. 6 mo. vol.: 131,580

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U.S. giant bids for Terasen

Scott Simpson
Vancouver Sun
02-Aug-2005

A solid connection to Alberta's booming oil sands was the driving force behind Kinder Morgan's stunning $6.9-billion bid for Terasen Inc., the chair and CEO of the Houston, Texas-based pipeline company said Monday.

The company is offering Terasen shareholders a premium of almost 20 per cent on the trading value of company shares over the past month, via options that include straight cash at $35.75 per share, or cash and Kinder Morgan shares, or Kinder shares.

Terasen has been trading in record territory in recent months, and closed at $31.40 last Friday in Toronto.

Richard Kinder, chair and CEO of Kinder Morgan, said in an interview from Houston that he hopes Terasen shareholders taking Kinder shares will hold onto them -- noting that the company is one of the Standard & Poors 500's best performers.

The deal requires 75 per cent shareholder support and cannot exceed 65 per cent cash or 35 per cent stock in Kinder Morgan Inc.

"If you look at the time we formed Kinder Morgan Inc. in July of 1999. . . we've had a compound annual return of 40 per cent which is, if the not the very best, then one of the very best in the S&P 500 from that time to this time," Kinder said.

It's the biggest deal in the Canadian pipeline sector since Houston-based Duke Energy bought Vancouver's Westcoast Energy in 2001 for $8.5 billion US.

The new, combined Terasen-Kinder Morgan entity would be worth $19 billion, Kinder said.

His company began hunting a year ago for ways to expand its profile in the Alberta oilsands play.

"We are strictly a mid-stream company but we have made a practice of trying to find important trends to ride. Certainly we think given the type of production increases we've already seen and expect to see over the next five to seven years in the oilsands, that's something we want to be involved in given the size of our pipeline operations around North America.

"Obviously alternatives ranged from going in and trying to start from scratch to buying a company. The more we saw Terasen, the more we liked them because it's a unique combination."

"You have assets not just in the oilsands play in terms of their pipelines," but in the company's B.C. gas distribution company as well, he said.

"We like that business, too. So what we saw in Terasen was a good stable company with good assets, good people, not much overlap with what we do, and yet we saw a good potential for the future in expanding and extending the pipeline infrastructure.

"We see, and I think this is pretty well the consensus, growth in production from the oilsands from about one million barrels a day to about two million barrels in five to seven years.

"We plan on doing the best we can to capture a significant amount of those growth volumes to go through pipelines that we would either expand present lines or build new lines."

The combined company will have about 64,000 kilometres of natural gas and petroleum transportation pipelines, 1.1 million natural gas distribution customers including 875,000 residential customers in B.C., and 150 terminals around the continent according to a joint news release.

The deal has unanimous approval of the board of directors of each company and by a special committee of independent directors, struck by Terasen, to oversee the deal.

The transaction will require Terasen shareholder approval prior to closing, which is expected by year's end.

The deal is contingent on approval by 75 per cent of Terasen shareholders, as well as assent from the B.C. Utilities Commission.

"We think this an excellent transaction. We think we are creating a real leader in the energy transportation business in North America," said Terasen president and CEO John Reid.

"The combination of the two and the geographical and industry coverage that it's going to give the two of us together and the ability to drive growth further, I think, has to be exciting for both sides."

Terasen at present has plans in the works for more than $2 billion worth of pipeline expansion projects including twinning its Trans Mountain petroleum pipeline from Edmonton to Greater Vancouver and Puget Sound, and Reid said the new parent company will be in a better financial position to finance such projects.

It's the latest move for a company with deep roots in British Columbia. Terasen announced in March 2003 that it was changing its name from BC Gas.

The company was formed 17 years ago in a merger of private and crown-owned gas distribution companies.

In the Lower Mainland, the gas company was previously owned by the province and operated as part of BC Hydro. The Interior B.C. component was a shareholder-owned company, Inland Natural Gas. The two companies were merged into a single, shareholder-owned entity in 1988.

ssimpson@png.canwest.com

A BLOCKBUSTER DEAL:

Monday's $6.9-billion deal to sell B.C.'s Terasen Inc. to the U.S.'s Kinder Morgan Inc. has been unanimously approved by each firm's board of directors and a special committee of independent directors. Here are the details:

THE PAYOUT:

- Terasen shareholders can receive $35.75 per share, a 20-per-cent premium. They can also elect to take 0.3331 shares of KMI or a share/cash combo of $23.25 in cash plus 0.1165 shares of KMI.

- Total purchase price, including assumption of debt, is $6.9 billion

THE FINE PRINT:

- Deal must be approved by regulators

- Kinder becomes CEO of the combined entity

- 75% of shareholders must approve the deal on or before Oct. 31.

- Terasen won't seek competing bids and has agreed to pay a $75-million termination fee under certain conditions if the deal fails.

THE PLAYERS:

John Reid

CEO, Terasen Inc., Vancouver

Heads a firm with:

- 875,000 customers

- 2,553 employees

- 8,000 kilometres of gas and petroleum transmission pipelines

- $5 billion in assets

- Operates 90 water and wastewater infrastructure services in 50 communities in Western Canada.

- Market cap of $3.3 billion.

Richard Kinder

CEO, Kinder Morgan Inc., Houston, Texas

Kinder Morgan Inc. and its partner firms Kinder Morgan Energy Partners and Kinder Morgan Management operate a series of companies with:

- 6,500 employees

- 56,300 km of natural gas and other pipelines.

- 240,000 retail gas customers

- 145 terminals for gas, coal and other energy products.

- Combined market cap of more than $22 billion US.

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Texas energy firm gobbles up Terasen Gas in $7-billion deal

Kent Spencer
The Province
02-Aug-2005

The union representing more than 400 workers at Terasen Gas yesterday demanded the provincial government protect their jobs following the sale of Terasen to a U.S. company.

"Premier Gordon Campbell should immediately demand that B.C. jobs be protected in this sale, and that B.C. businesses and residents be guaranteed first right to natural gas from this province and at a fair price," said Andy Ross of the Canadian Office and Professional Employees Union.

Terasen, a natural-gas utility and oil pipeline company that supplies gas to 875,000 customers in B.C., was bought by Houston, Tex.-based Kinder Morgan for cash, stock and debt in a $6.9-billion Cdn deal.

Ross called it "a terrible way to celebrate B.C. Day -- by seeing a former Crown corporation and an important B.C.-owned and based company move to Houston, Tex."

He said "a corporate boardroom in Texas" will decide what's in the best interest of shareholders, not B.C. customers or workers."

"I'm hopeful the head office won't be closed down, but I won't be surprised if it is," he said.

Ross said there was protection against foreign ownership built in when B.C. Gas was split off from B.C. Hydro in 1988, but that protection was removed in 2003 by the B.C. Liberals.

"They have a lot to answer for," he said. "People have been lining up to buy Terasen. I think the name was changed from B.C. Gas to Terasen so it wouldn't tie into B.C."

The Terasen sale is the second major acquisition of a Vancouver-based pipeline company by a U.S. energy giant.

Westcoast Energy, which also operated pipelines, was acquired by Duke Energy several years ago.

"It's interesting and sad," said Vancouver energy analyst David Austin. "There is no major gas or oil-related company with headquarters in B.C. any more."

Austin said B.C. residents shouldn't fear sudden price hikes.

"Given that gas prices are fully regulated by the B.C. Utilities Commission, it doesn't matter who owns it," he said.

But Austin is concerned about the future of employees at Terasen's head office in Vancouver.

"When Duke bought Westcoast, it gutted the whole head-office function," he said.

Kinder Morgan said the head office of Terasen Gas will remain in Vancouver and the name will stay the same.

Kinder Morgan chairman Richard Kinder said his company was interested in Terasen's new pipelines, which transport oil from large reserves in the Alberta oilsands to the U.S. midwest.

Kinder said Terasen's pipelines would "help meet the growing demand of an oil-starved world."

Company spokesman Larry Pierce said North American-based oil is needed as opposed to off-shore supplies.

"Demand is increasing all the time," he said.

Kinder Morgan, which specializes in pipelines, natural gas distribution and storage terminals, will have about 64,000 kilometres of pipelines as a result.

Terasen president John Reid said the deal "marks a significant milestone in our history."

Kinder Morgan has offered $35.91 per Terasen share, a 20-per-cent premium on recent closing averages.

Terasen shareholders, who must approve the deal on Oct. 31, will be able to collect $35.75 cash, 0.331 shares of Kinder Morgan stock or a combination of both cash and stock.

The stock traded as low as $18.08 in 2003 and ended 2004 at $27.71.

The transaction has been unanimously approved by both companies' boards of directors and should be completed by the end of 2005.

The Lower Mainland portion of Terasen Gas was a public utility called B.C. Gas from 1950 to 1988. It was sold by Premier Bill Vander Zalm's government in 1988 and combined with a company called Inland Natural Gas, which served the Interior.

B.C. Gas was renamed Terasen Gas two years ago, a name that means "sent from the Earth."

Terasen is also a large private-sector water operator, supplying 90 locations. It also runs the sewage system for Langford on Vancouver Island.

kspencer@png.canwest.com

QUICK FACTS:

- Price tag: $6.9 billion Cdn, assuming debt. $35.91 in cash or stock per Terasen share.

- Terasen: Formerly B.C. Gas. Vancouver firm is a major gas distributor in B.C. and operates oil pipelines to the Alberta oilsands and into U.S.

- Kinder Morgan: Based in Houston, Tex. Major energy transportation and storage company with more than 56,000 kilometres of natural gas and products pipelines and 145 terminals. KMI owns the general partner interest of Kinder Morgan Energy Partners, a major pipeline operator.

- Combined company: About 64,000 km of natural gas and petroleum pipelines, more than 1.1 million natural gas distribution customers, about 150 terminals, 9,000 employees and a value of more than $19 billion US.

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Posted by Arthur Caldicott on August 01, 2005

July 28, 2005

GSXCCC responds to DPP complaint to BCUC

28 July 2005

Mr. Robert J. Pellatt, Secretary
British Columbia Utilities Commission
Sixth Floor, 900 Howe Street, Box 250
Vancouver, BC, V6Z 2N3

By email: commission.secretary@bcuc.com

Dear Mr. Pellatt:

Re: Project No. 3698354, BC Hydro VI CFT EPA Review

This letter revises and corrects the previous letter of 28 July 2005 from GSXCCC, et al (see final paragraph). Please disregard the earlier letter.

The GSX Concerned Citizens Coalition, BC Sustainable Energy Association and SPEC (“GSXCCC, et al”) have received correspondence from Duke Point Power (“DPP”), dated 12 July 2005, regarding BC Hydro’s cancellation of the Electricity Purchase Agreement with DPP, requesting that “a complete explanation should be provided to the Commission,” without specifying who should provide the explanation or under what section of the Utilities Commission Act such an explanation should be provided.

Subsequently, GSXCCC, et al received further correspondence from DPP dated 26 July 2005, which makes reference to a letter of 13 July 2005 from the Commission, which apparently established a schedule for BC Hydro to respond to DPP’s above-referenced letter of 12 July. DPP’s 26 July letter also references “submissions made to the Commission by BC Hydro in its letter of July 21, 2005,” apparently in response to DPP’s letter and in accordance with a schedule set by the Commission. GSXCCC, et al have not received copies of the above-referenced letters from the Commission and BC Hydro.

GSXCCC, et al adopt the position taken by the Joint Industry Electricity Steering Committee, in its letter of 20 July 2005, in particular:

"The EPA has been terminated and that should be the end of the matter. Any outstanding issues between DPP and BC Hydro should be sorted out by those two parties based on their contractual rights, without the involvement of the Commission or other Stakeholders."

In addition, GSXCCC, et al are concerned about the possibility of the Commission’s engaging in a process on a matter of interest to all parties to the review of the DPP EPA, where most of those parties are excluded, and not given opportunities to know what is under discussion and to express their views and interests.

GSXCCC, et al request that the Commission clarify the nature of discussions that have been and will be taking place in this matter between the Commission, BC Hydro and DPP. As interested parties, GSXCCC, et al wish to be given the chance to participate – along with any other interested party – in any further process in this matter that involves the Commission and more parties than just DPP and BC Hydro.

Respectfully submitted,




Tom Hackney, President, GSXCCC

cc:
Intervenors in the review of the DPP EPA

Download GSXCCC letter as PDF

Posted by Arthur Caldicott on July 28, 2005

Wind power still viable: Sea Breeze

Robert Barron
Daily News Nanaimo
July 28, 2005

The demise of one wind power proposal for Vancouver Island doesn't mean wind power is dead as an energy option for the Island, says Paul Manson.

Manson, president of Sea Breeze Power Corp., said wind power is seeing record expansion around the world, and he expects it to play a much larger role in British Columbia's future energy needs.

"The World Engineering Council has named coastal B.C. as the most economical wind resource in the world," said Manson.

Manson's Vancouver-based company is planning to build a wind farm with up to 150 windmills at its Knob Hill Wind Farm on northern Vancouver Island that the company expects will produce 450 megawatts of power, enough energy for about 350,000 people.

Another wind energy company, Stothert Power, which had an agreement with BC Hydro to deliver about 58 megawatts of power from its proposed farm near Holberg, also in north Vancouver Island, recently cancelled the agreement.

The company, which would have built the first wind power generators in B.C., terminated the much-touted agreement after determining the site didn't produce enough wind and the price of steel to build the wind farm had risen too high to be make the operation profitable.

Manson said, unlike Stothert's site which is situated on the side of a steep mountain and would likely have a lot of turbulence, the Sea Breeze site's topography is flat with less turbulence and less wear on the turbines.

"As for the rising price of steel, of course that means some impacts on our profitability, but this can't be looked at in isolation," he said.

"The price of most manufacturing goods are going up these days, but we don't see it as a deal breaker."

Manson said the company is optimistic BC Hydro's attitudes towards green, reusable energy producers are changing since its last Call for Tender process, which resulted in the recently scuttled decision to build a gas-fired generation plant at Duke Point.

"Recognition is finally dawning of the tremendous unused assets that exist here when wind power is tied into Hydro's current dam systems," he said.

"We didn't participate in Hydro's last Call for Tender process as Hydro put a ceiling price on the bids and wouldn't consider any bids higher than that which caused a shocking rate of attrition among potential energy producers who then walked away.

"However, we expect this fall's Call for Tender process will be open to all bids and we're optimistic we'll see success with our bid," Manson said.

Posted by Arthur Caldicott on July 28, 2005

July 27, 2005

Islanders Aim to Scuttle BCTC Overhead Line Plan

Jackie Truscott
Gulf Islands Driftwood
July 27, 2005

You may remember that on June 4th a well-attended community meeting was held at Artspring where BC Transmission Corporation (BCTC) presented some alternatives to its proposed new overhead 230 kV transmission line from the mainland to Vancouver Island.

At that meeting, in response to heated opposition, BCTC agreed to take the community's request for an HVDC Light alternative to higher management.

On July 18th a meeting was held at BCTC offices in downtown Vancouver. This was attended by BCTC's project managers together with Gary Holman, CRD director, Kimberly Lineger of the Islands Trust, two IRAHVOL (Island Residents Against High Voltage Overhead Lines) and one other SSI representative together with representatives of ABB, the manufacturers of HVDC Light technology, Sea Breeze Power Corp and one member of TRAHVOL (Tsawwassen Residents Against High Voltage Lines). IRAHVOL and Sea Breeze requests to bring independent engineers to the meeting were denied, as was attendance by a representative from the Corporation of Delta.

Despite IRAHVOL's attempts to broaden the agenda, the only items discussed were the two HVDC Light options which were presented at the June 4th meeting. ABB gave a very informative presentation on the many technical and environmental advantages of HVDC Light, but after hearing BCTC's responses to questions raised, it was apparent that BCTC is not interested in changing its plans despite concerns of the affected communities.

Unlike the AC cables now in place, which can leak toxic oil into the marine environment and need ugly overhead transmission lines, HVDC Light is a dry-insulated cable which has no electro-magnetic fields and which is designed to be direct-buried rather than encased in concrete. ABB were unable to effectively challenge BCTC's high cost comparisons for HVDC Light because detailed construction estimates had not been provided in time.

IRAHVOL and ABB continue to believe that if all costs are fairly analyzed and system benefits fully evaluated, HVDC Light is a viable alternative which could be routed around the islands via submarine cable instead of using the fifty year old right of way through the middle of Galiano, Parker and Salt Spring Islands.

However, on July 7th BCTC made formal application to the BC Utilities Commission (BCUC) for approval of the estimated $245 M Vancouver Island Transmission Reinforcement project. The new lines would have about 600 MW capacity to supply Vancouver Island yet Salt Spring Island and the Gulf Islands have a peak load of only 60 MW.

IRAHVOL proposes to intervene with the BCUC to prevent this project being bullied through the islands and to attempt to delay the project until a full assessment of its need, technology and routing has been completed. BCTC has repeatedly warned that there could be a crisis on Vancouver Island as early as 2008 but this is misleading at best.

Sea Breeze Power Corp. is an independent transmission company which plans to install a 550 MW HVDC Light interconnector between Victoria and Port Angeles.

If all approvals are received this winter, as anticipated, the project will be completed by the fall of 2007. This would be a full year ahead of the BCTC proposal and would be able to take up any shortfall in capacity to Vancouver Island in the event that either one of the two 1300 MW 500 kV northern lines should go down during the coldest period of the winter, when peak demand is highest.

After the failed GSX gas pipeline proposal and the cancellation of the Duke Point proposal it is apparent that neither BC Hydro nor BCTC currently have a well-thought-out long-term plan for Vancouver Island's energy future.

It is now time for BC Hydro and BCTC to reassess all solutions including green power generating options on Vancouver Island, power resources from independent producers and power reduction strategies before they lose all credibility.

If you wish to know more about IRAHVOL or the VITRP, check the IRAHVOL website at www.irahvol.org or phone Enid or Barb Turner at 537 9153.

The writer is an IRAHVOL member.

Posted by Arthur Caldicott on July 27, 2005

Harvesting the wind

Glenn Bohn
Vancouver Sun
26-Jul-2005


OLD MASSET - To most people, the storm-battered seas off the northeast coast of the Queen Charlotte Islands seem a cold, inhospitable place. But to civil engineer Fred Dabiri, those shallow and wind-swept waters are just the place he's been looking for.

Dabiri is one of the directors of Vancouver-based Nai Kun Wind Development Inc., a company that wants to build the largest wind farm in Canada and the largest offshore wind farm in North America.

The Vancouver company is pitching a 700-megawatt project, which would generate enough electricity to power about 240,000 homes.

A total of 350 wind turbines would be anchored on the seabed, in depths of 20 metres, about eight kilometres or more offshore.

Because the turbines would not be on land, where the wind is slowed by trees and hills, they could tap the full force of the wind.

Throughout the year, the winds here average about 58 km/h, or about twice the speed needed to make wind an economically attractive energy source.

In November, December and January, when winter storms bash the islands, Environment Canada has recorded gusts of wind up to 161 km/h.

The modern-day windmills used to convert that non-polluting resource to electricity would not be little things.

Each steel tower, a single column topped by three slow-moving blades, would rise about 80 metres above the ocean surface.

Dabiri says the sheer size of the machines would make them difficult to transport to a land-based site, because each would need a highway-standard access road. Those roads would have to cross streams and cut through forests. And the northeast corner of the archipelago the Haida call Haida Gwaii is a long-established park -- Naikoon Provincial Park -- not a logging area that already has wide gravel roads.

"Environmentally, it's far more damaging to be on the land than the ocean," Dabiri said during a recent interview at a windy beach at Old Masset. "This is a much cleaner way to generate power."

There are already existing or proposed offshore wind farms in the ocean near Wales, England, Denmark and Sweden. The largest such project, constructed in 2002, at Horns Rev in Denmark, now generates about one- fourth the power that Nai Kun would produce.

There are also large land-based wind farms in Europe and North America -- including ones in Alberta, Saskatchewan, Ontario, Quebec, Prince Edward Island, Nova Scotia and Yukon.

A company called Cape Wind is proposing the first offshore wind farm in the U.S., about eights kilometres offshore Cape Cod in Massachusetts.

Like other wind energy companies, Cape Wind paints itself green by noting its energy project would produce no greenhouse gases and no clouds of toxic smoke. But Cape Wind is getting a rough ride from a conservation group, the Alliance to Protect Nantucket Sound. In May, the non-profit group hired Charles Vinick, who was prominent in the successful "Free Willy" campaign to return a captive killer whale to the ocean.

The Alliance to Protect Nantucket Sound, like many of its counterparts elsewhere, uses environmental arguments to oppose the wind energy scheme. For instance, it makes much of the fact that the Cape Wind project is on the Atlantic flyway, the migration route used by millions of songbirds and threatened bird species. The anti-wind farm group calls the 130 proposed wind turbines "130 navigation and safety hazards" for oil tankers, commercial fishing boats, ferries and sailboats. The esthetics of all those turning blades on the sea -- and the impact that may have on tourism and property values -- is another argument aimed at Cape Wind. The Cape Cod Chamber of Commerce, which wants Cape Cod to remain one of the top 10 tourist destinations in the U.S., fears a wind farm would be "a major blight on the horizon" that will keep tourists away.

So far, the wind farm proposal in B.C. hasn't fuelled those kinds of attacks or triggered a big anti-wind farm campaign.

Michael Burns, the president of Nai Kun Wind Development, said a person on the beach in the Charlottes would have difficulty seeing the wind turbines. According to the current plan, the closest wind turbine would be eight kilometres offshore. There are no houses in Naikoon Provincial Park. (The company spells its name differently, but both the park and the company are named after a Haida family.)

"If you stood on the beach in Naikoon Park, these things would appear about three-quarters of an inch high," he said.

In a recent column published in the New Scientist magazine, prominent Canadian environmentalist David Suzuki distanced himself from environmentalists in North America and Europe who are, in Suzuki's words, "locking horns with the wind industry" and arguing that wind turbines destroy the ambience of the countryside.

"We cannot shout from the rooftops about the dangers of global warming and then turn around and shout even louder about the 'dangers of windmills,'" the Vancouver-based scientist and broadcaster wrote. "Climate change is one of the greatest challenges humanity will face this century."

One of the most recent rebuffs of wind farms occurred in June in the state of Victoria in Australia, where authorities rejected a 70-turbine land-based wind farm on the grounds that it threatened a nearby colony of rare, wedge-tailed eagles. An independent panel predicted "significant numbers" of eagles could fly into turbine blades.

Nai Kun Wind Development Inc. is proposing a far larger wind farm in northwest B.C. than the Australia project or the proposal at Cape Cod.

The 700 megawatts of power it would generate is relatively small in comparison with the 11,000 megawatts BC Hydro can provide to its residential and commercial customers, which include power-hungry industries and businesses that consume vast quantities of electricity.

Dabiri said the electricity generated by Nai Kun would not be used on the Queen Charlottes, which now rely mostly on diesel-generated electricity, because wind power projects need to be built in concert with a big hydro-electric facilities. They need to be connected with a large electrical grid, to balance out supply and demand. Wind turbines will generate the most electricity in winter when the winds are heaviest, while hydro dams generate the most electricity in summer, when snowmelt tops the reservoirs.

"Hydro can take the energy from the wind farm whenever it comes," Burns said. "If they've got too much energy, they simply hold the water behind a dam and use the wind energy. When there's less wind energy than usual, they run more water through the dam."

Nai Kun has designed a 700-megawatt project because that's the amount of additional energy that BC Hydro could carry in its existing main transmission line from Prince Rupert to Greater Vancouver. No additional transmission lines -- a pricey proposition -- would have to be built. Subject to a power-purchasing agreement that Nai Kun hopes to negotiate with B.C. Hydro, wind-generated electricity would be transmitted through an underwater cable to the main transmission line south of Prince Rupert and used as Hydro sees fit.

Although Hydro doesn't buy any wind-generated electricity now, the Crown corporation is seeking regulatory approval this fall to ask independent power producers to sell Hydro power as their projects come on stream, as early as 2010.

Mary Hemmingsen, Hydro's director of power planning and portfolio management, is one of the Hydro officials who will visit the northern coast of the Queen Charlottes this August to learn more about the Nai Kun proposal.

Hemmingsen said Hydro wants at least 50 per cent of the energy it wants to buy to be "clean energy," a category that she said includes wind power, run-of-the-river hydro power and biomass-generated power. Energy sources that are not considered clean include coal or gas-fired power plants.

There are some taxpayer-subsidized incentives that wind power companies can take advantage of, including a federal tax credit of about $10 for every megawatt of power.

But the cost of that power -- whatever the source -- remains key.

"We're looking for the most cost-effective bid," Hemmingsen said.

Nai Kun hopes its first wind turbines will be installed and be generating power by late 2008.

Burns, the company's president, is a former chief financial officer for BC Gas and a former vice-president of IBM Canada. Dabiri is president of David Nairne and Associates, a B.C.-based firm of engineers, architects and project planners that is already building the largest construction projects in the Queen Charlottes, or Haida Gwaii. Other directors come from B.C. Hydro, Westcoast Energy and other oil and gas firms.

Burns said he is confident the company will be able to raise the $1.5 billion it needs from private investors, when it's time to seek financing. He said B.C. Hydro and the company don't yet have any signed agreements that commit Hydro to buy wind-generated electricity from Nai Kun, but those deals can't come until electricity is actually being produced.

Nai Kun isn't pioneering a new wind turbine technology. It would buy wind turbines from existing manufacturers. But finding $1.5 billion isn't the only hurdle the company will have to jump.

Environmental impact studies, which can take years, have yet to be done. Sometime afterwards, the provincial and federal governments would have to give the green light. The Haida's yet-to-be-resolved legal claim over the "land, inland waters, seabed and sea" of Haida Gwaii is another factor, because the Supreme Court of Canada ruled in 2004 that governments must consult with and accommodate aboriginal groups affected by land and resource developments.

Nai Kun sought and obtained permits from the provincial and federal governments for the right to do seismic tests, wind tests and other environmental studies, but has also obtained a written permit from the Council of the Haida Nation, the political organization that represents Haida interests on the islands.

Nai Kun has also proposed to make the Haida 50-50 partners in a company that would operate and maintain a wind farm.

Wilson Brown, the elected chief of the aboriginal village of Old Masset, said the village council doesn't yet have a formal position about the megaproject proposal.

"There's not enough data to make an informed decision," he said.

Brown said he is responsible for the aboriginal community of Old Masset but is also one of the commercial crab fisherman who want to make sure the wind turbines won't damage crab habitat.

"I want to make sure my livelihood is still protected," he said.

Village of Masset Mayor Barry Pages said his municipal council has also made no formal decisions and hasn't yet held any public meetings.

"The crab fishing industry is a major player in our community and there are major questions that need to be addressed," Pages said, echoing Brown's concerns.

gbohn@png.canwest.com

TAPPING THE WIND'S ENERGY:

The who, what, where and why of a proposed wind energy megaproject in the Queen Charlotte Islands, or Haida Gwaii

Who: Nai Kun Wind Development Inc., a wholly-owned subsidiary of Uniterre Resources Ltd., a Vancouver-based energy and exploration company on the Toronto Venture Exchange.

What: Nai Kun is proposing a "wind farm" with as many as 350 huge wind turbines. The modern-day windmills could generate as much as 700 megawatts of electricity or enough power for 240,000 homes.

Where: The wind turbines would be anchored in the shallow waters of stormy Hecate Strait, at least eight kilometres from the northeast coast of Graham Island.

Why: The company is proposing the $1.5 billion private-sector venture for profit. An underwater cable would bring the power to the B.C. mainland, where the company wants to sell the power to BC Hydro. The potential jobs: about 2,500 person-years of work during the construction period and about 50 permanent jobs.

Source: Nai Kun Wind

Posted by Arthur Caldicott on July 27, 2005

July 26, 2005

Wind blows out of Holberg wind energy project


North Island wind farm project axed
Andrew Duffy, Times Colonist, 26 Jul 2005
Harvesting the wind
Scott Simpson, Vancouver Sun, 26 Jul 2005
Green power idea has blown away
Les Leyne, Times Colonist, 27 Jul 2005
Vaughn Palmer on CKNW, 28 Jul 2005

sqwalk.com
COMMENT: The Holberg project was the first, and still the only, wind energy project to obtain a supply agreement with BC Hydro. At the time of the call, BC Hydro rejected other wind proposals, but accepted the Stothert project. Why? Win Stothert, the owner of the company, had no track record in wind energy development, any more than did Sea Breeze Power, for example. And many informed observers were concerned that BC Hydro's price cap of 5.5 cents a kilowatt hour was too low to be viable.

And that's proven to be the case. The combination of the wind resource - according to the comments in these news items, somewhere between okay, but not great, to inadequate. - and the price, has only now been discovered to not be viable.

But is that the whole story? Stothert collapsed his engineering business about the same time. Retiring, sort of. There was never any sense that anyone connected with the Holberg project was much excited about it. And Stothert, was and remains, Chairman of the Board of Hillsborough Resources, owners of the Quinsam Mine in Campbell River, as well as other coal properties, and proponent for a coal-fired generation plant to be built at the Quinsam Mine.
sqwalk.com



North Island wind farm project axed

Andrew A. Duffy
Times Colonist
Tuesday, July 26, 2005

The energy purchase agreement between B.C. Hydro and Holberg Wind Energy has been cast into the wind.

What was to be the first wind-farm project to supply Hydro with power was cancelled by the project's proponents because the wind supply was not reliable. "In 2002 a meteorologist predicted we'd have a strong energy source west of Holberg toward Cape Scott ... and on that basis we bid for a 20-year power sale agreement with Hydro," said Win Stothert of Stothert Power Corp, one of the partners in Holberg along with Global Renewable Energy Partners.

Stothert said subsequent tests and a recent six-month study have shown the wind power in the area "is not as sound as had been predicted."

That news coupled with rising construction costs brought on by the price of steel doubling over the last year forced the company to walk away.

The company and Hydro had agreed on 58.5 megawatts of wind capacity to be developed on Vancouver Island via the $100 million Holberg Wind Energy proposal -- 37 to 45 wind turbines on the northern tip of the Island, 60 kilometres west of Port Hardy.

While neither Holberg nor Hydro would discuss the price agreed to per megawatt hour, Hydro was paying a $5 per megawatt hour green credit on top of the rate. "It's obviously disappointing, we'd like to see a varied resource mix," said Hydro spokeswoman Elisha Moreno.

The capacity produced was expected to be able to power 17,000 households and was to be transmitted over lines connecting to the grid at a Port Hardy substation.

TOP



Harvesting the wind

Scott Simpson
Vancouver Sun
26-Jul-2005

Proponents of the first wind power facility ever approved by BC Hydro have withdrawn their plans.

Developers of the Holberg wind energy project would have situated a $90 million facility producing 58 megawatts, enough to power 17,000 homes, on a remote inlet 45 kilometres west of Port Hardy on Vancouver Island.

Premier Gordon Campbell announced in September 2003 that Holberg had been selected as part of an estimated $800 million in new private-sector electricity generation projects in British Columbia.

Proponent Win Stothert followed up the premier's comments by saying that B.C.'s potential for wind power was "tremendous."

But in an interview on Monday, Stothert said extensive testing had indicated that the Holberg site was not as productive as initial studies by BC Hydro had suggested.

Stothert said the site was productive but could not be cost-effective without the same economic benefits that Hydro has offered to companies producing so-called 'firm' electricity -- as opposed to the intermittent supply that can be derived from weather-dependent wind power.

"It turns out that although we have a relatively favourable wind resource there, it's not good enough for the price we were able to get from BC Hydro for our electricity," Stothert said.

The project has always had some financial question marks attached -- Hydro had contracted to pay $55 per megawatt for the energy, which is comparable to what a B.C. homeowner pays to keep the lights burning.

But it was an amount that Stothert acknowledged was less than the cost-per-megawatt to actually produce electricity at the wind farm.

ssimpson@png.canwest.com

TOP



Green power idea has blown away

Les Leyne
Times Colonist
July 27, 2005

A lack of raw material -- wind -- has scuttled the Holberg proposal

Maybe it's not a clanging alarm bell, but the cancellation of a small power proposal on northern Vancouver Island seems to raise a warning flag.

We've been repeatedly assured there was no need for a great big gas-burning generating plant at Duke Point, because the opportunities for alternative energy sources are so rife.

So what happens to one of those alternative proposals -- a wind farm -- that made it through the approval process and had a signed, sealed and delivered contract with B.C. Hydro? It was quietly abandoned a few weeks ago -- because there isn't enough wind.

It's not that big a deal. The fate of the Island doesn't hang in the balance. But Stothert Power's decision to walk away from its project near Holberg -- at some considerable expense -- is a quiet illustration of the unexpected difficulties that can crop up in the on-going exploration of alternatives to conventional electricity production.

It was considered a fairly big deal last year when the Vancouver-based firm signed a deal with B.C. Hydro. The company planned to erect a few dozen wind turbines on a remote ridge, based on preliminary assessments that showed the spot was a viable generating site. They would have produced about 58 megawatts of power -- enough for about 17,000 homes, but a pittance in the grand scheme of things.

More important, they would have been the first wind-power generators in B.C. Stothert, with some international partners, had a 20-year contract under which B.C. Hydro agreed to buy all the electricity the turbines produced. That energy purchase agreement is the keystone to all the alternative projects that are now on the drawing board.

It's what proponents can take to the financiers and show as a secure long-term source of revenue.

But even with that document in hand, Win Stothert found his firm couldn't make a go of it. B.C. Hydro did an early assessment and found the site viable. A meteorologist hired by the company three years ago looked deeper into it and determined it still looked promising. But Stothert said this week that after erecting five measuring devices and collecting data for about six months, they found the winds were favourable, but not favourable enough.

Combined with a 30-per-cent hike in the project's multi-million dollar budget brought on by a doubling in the price of steel, it was enough to stop the project in its tracks -- for the time being.

B.C. Hydro is shrugging off the cancellation. The Holberg project was only one of 17 new ventures it agreed to last year, and the only wind farm in the mix. Some attrition was expected. The utility is expected to open another call for proposals this fall and has rejigged the process so that people pitching concepts have to be further along in proving their viability.

And there are still some wind-power advocates keenly interested in getting into the game. Despite the Holberg findings, there are studies showing B.C. has enormous potential when it comes to wind turbines.

There are some audacious -- and outlandishly expensive -- schemes to build them offshore in the Queen Charlottes. There's a large-scale proposal right around the corner from Stothert's site, although it didn't make it in Hydro's first round of buys.

And there are very promising sites in the Peace River country, including one right on top of the Bennett Dam, which has kept many of the lights on in B.C. for the past 40 years.

Maybe they will prove out and start spinning soon. Maybe the old undersea transmission lines that now supply most of the Island's needs will be replaced on schedule, and everything will be fine. Maybe some of the other green power proposals will be up and running soon enough to avert any problems. Maybe tidal power will save the day.

But on post-Duke Point Vancouver Island, one of the initial baby steps toward green self-sufficiency in electrical power has turned out to be a faltering one. It's just not as easy as the theorists make it out to be.

Just So You Know: One bit of good news: The independent power producers and B.C. Hydro are back on speaking terms.

The association representing all the private firms interested in supplying power sent B.C. Hydro a rocket a few weeks ago -- detailed earlier here -- complaining about the generally shoddy treatment they were getting, citing Duke Point as a prime example. (That's where Hydro put the operation of the big proposed plant out to bid, picked a winner, signed a contract, and then cancelled the deal at the last minute, citing concerns about the length of time court appeals were taking.)

Producers demanded a meeting to air their grievances. They got the meeting and apparently cleared at least some of the air, although as the Holberg case shows, it's often hard to know which way the wind is blowing.

leyne@island.net

TOP



Vaughn Palmer on CKNW

Vaughn Palmer
CKNW
28 Jul 2005

VAUGHN PALMER says the cancellation of a wind power project on Vancouver
Island was 'a bit of a shock' and a reminder that in the drive for green
power in BC we still have a long way to go.

Download mp3 audio file (1.7 mb)

TOP

Posted by Arthur Caldicott on July 26, 2005

July 24, 2005

We need a few more Ingmar Lees

Dave Obee
Times-Colonist
July 24, 2005

Think of passion and determination — and a desire to make a difference

My friend Ingmar Lee left the hemisphere on Wednesday, and no doubt a few hundred people in corporations, government agencies, environmental groups and everything in between are breathing sighs of relief.

I have to wonder, though, whether the people of India know what’s in store.

Lee is absolutely committed to environmental causes, with no compromises allowed or even considered. He has devoted much of his life to raising awareness of what’s happening to nature on Vancouver Island and around the world.

He’s offended a few people along the way, but that goes with the territory. He’s not the type of person to sugarcoat his message, and he’s not willing to fade into the shadows if he believes someone should be doing more to preserve our planet for future generations.

Lee stands up for what he believes in. He’s also willing to sit down for what he believes in, too, if it means sitting in a tree. But don’t ever accuse him of sitting on a fence.

If he decides a corporation such as Weyerhaeuser needs to be challenged, he’ll do it. If he believes voters need to be reminded of Premier Gordon Campbell’s drunk-driving conviction in Hawaii, he’ll put it on a shirt. And if he thinks environmental groups have sold out to corporations, he’ll say so. Nobody gets a free ride when Ingmar Lee is watching.

Lee was an Independent candidate in Victoria-Hillside in the provincial election, taking 115 votes for a lastplace finish. He knew he had no chance of winning, but he saw an opportunity to get his message across.

He found ways to do that several times during the election campaign. On May 3, he started shouting at a televised all-candidates forum at the Ocean Pointe Resort. He was dragged out of the room by police and security staff, then taken away in handcuffs.

If he had wanted to infiltrate the business-oriented meeting, he could have done a much better job by camouflaging himself in a coat and tie. But he was wearing a sleeveless T-shirt that said Weyerhaeuser Go Home, and featuring a copy of Campbell’s arrest photo. He was easy to spot, even before he grabbed for the mike.

A couple of weeks before that, he disrupted a Campbell rally in the Crystal Ballroom at The Empress. Before that, it was a press conference. The list goes on.

Lee was one of the protesters who camped in trees at Cathedral Grove to fight the plans to expand the parking lot by taking out some of the old-growth forest. Early last year, the group built a platform 50 metres up in one of the trees, then added seven more platforms in other trees, connecting them together with traverse lines.

It was at Cathedral Grove that Lee fell seriously ill with meningitis. He was in critical condition at hospital in Nanaimo for a few days, and his long hair became so badly matted that it had to be cut off. It would take more than a conservative hairstyle to change Lee, though; he was firing more save-thetrees e-mails to me within days of leaving his hospital bed.

At 45, he finally graduated from the University of Victoria this year with a degree in environmental sciences. It’s tough to get a degree when you’re sitting in a tree, and yes, that’s how he spent part of his time on campus. There was a plan for a new building, you see, and it would mean taking out some trees. Lee felt somebody had to do something, and that somebody was him.

Lee dropped by the TC office this week to argue, once again, on behalf of the Vancouver Island marmot. And then he was off to India, where he and his partner Krista will attend Pondicherry University and Krista’s seven-year-old son Desmond will go to a Montessori school. Another feature of the region, he notes, is the best vegetarian food in the world.

Lee says he is hoping to do a master’s research thesis about the Burmese Buddhist appreciation of big trees and ancient forests. He spent a year in Burma as a Buddhist monk in the 1990s, so he’s no slouch on the subject.

And there’s more.

“I hope to immerse myself in the very active Indian environmental scene,” he says. “In India, in places, it is still possible to meet people who are living as participants in the ecological cycles of nature. I think we modern humans have more to learn from them than they do from us.”

In the past five years, the Times Colonist has published more than a dozen of Lee’s essays on the environment, but that hasn’t stopped him from taking shots at us, too. We haven’t done enough, he says, on the subjects dear to his heart. Given his devotion to the cause, I would be disappointed if he said anything else.

I like Ingmar. I don’t agree with everything he says, and I don’t agree with, oh, about 98 per cent of his tactics. But I admire his passion, and his determination to stand up for what he believes in.

Too many people these days sit back, complaining about the way things are, but doing nothing to change them. Lee gets out and fights, ignoring any personal cost or hardship. Lee’s cause just happens to be the preservation of nature. We need more people like him, fighting for many different causes, people who aren’t afraid to be counted.

He’ll be in India for a couple of years if he stays the full length of his study visa.

Don’t forget that India has ancient forests, too, running along the spine of the country.

In the next two years, if we hear of someone climbing high up in the oldest trees of India, shouting that they must be saved, I’d put money on the identity of that protestor.

dobee@tc.canwest.com



Ingmar's partner Krista adds these notes:

As Ingmar would say, lots of other people have been involved in the environmental efforts mentioned below too. Three cheers for the tireless and skilled Raccoons at the camp at Cathedral Grove, and for all those involved in the Uvic tree-sit and "campus planning"! And to all those who put in countless hours of volunteer time monitoring, witnessing, writing, lobbying, and networking out of devotion to BC's beautiful places, you have my admiration too. I'm a total neophyte in India, heading off (more than a week late) to attend the Salim Ali School of Ecology and Environmental Sciences at Pondicherry University to do an MSc. under a Commonwealth scholarship, without knowing anybody there. There is news in the local paper about legislation giving forest tenure to forest-dwelling peoples, and mangrove restoration projects going on along the southeast coast not far from Pondicherry run jointly by ENGOs and international research institutes. If any of you have contacts here or particular interests we would be grateful for the opportunity to make connections.

Cheers,
Krista Roessingh



A recent posting by Ingmar, with respect to criticisms of Jim Snetsinger, the province's Chief Forester:

What else can be expected from the industry-lackey quislings who still work
for Campbell and his logging-besotted government? Only a total kowtowing toady could ever get Campbell's "Chief Forest Exterminator" position. Anyone with conscience was exterminated from the Ministry of Logging under this regime.

What an utter catastrophe for our once magnificent forests, and how shameful
that the slightest attempt to demonstrate alternatives to the'fibre-per-year-per-hectare' clearcut and 'variable retention' scam now ends up as yet another steaming stumpfield.

Shame on the BC Ministry of Logging, and it's Chief Industry Quisling, Snetsinger.

Let's get on with putting up the "BC's Monster Foresters" website, and put a
name, face and address to these crimes against nature.

Ingmar

Posted by Arthur Caldicott on July 24, 2005

Tidal power - The wave of the future

Paul Luke
The Province
24-Jul-2005

Three small B.C. companies are turning the tide on the world's future energy supply.

The trio has plunged into the endless moondance of tidal currents that number among B.C.'s most abundant and -- until now -- overlooked natural resources.

Clean Current Power Systems, Blue Energy Canada and Canoe Pass have turned to underwater windmills in their individual bids to harness the potential power that flows along the world's coasts.

Early next year, Vancouver-based Clean Current will fire up a $4-million tidal-power project at Race Rocks, an eco-reserve 10 nautical miles southwest of Victoria.

Formally, if vertiginously, dubbed the "Pearson College-EnCana-Clean Current Tidal Power Demonstration Project at Race Rocks," the project will extract tidal energy and turn it into electricity.

The star of the small-scale show is Clean Current's tidal turbine generator, a piece of cutting-edge technology that looks like a windmill in a tube as its ducted blades spin some 20 metres beneath the waves.

The electricity it generates will be carried by cable to replace the diesel-generated power that has been providing the juice for Pearson College's marine education centre on Race Rocks.

Clean Current wants to field test the 65 kW-generator in the harsh marine environment and prove the technology is viable.

The company will then sell the heck out of it, president Glen Darou says.

"The world is ready for this technology. It needs it," says Darou, an ex-oilman and former chief financial officer of Shell Canada.

"We'd like to have every major generator manufacturer license the technology from us and market it out into the world."

A full-scale commercial version of the generator might cost less than $1 million to build, Darou estimates. An underwater tidal turbine farm would likely need at least 200 units to achieve economies of scale, but the units could be added one at a time, Darou says.

Clean Current's not the only one betting on the tidal turbine generator's potential. EnCana Corp., the Calgary-based energy giant, has invested $3 million from its environmental innovation fund in privately held Clean Current to get the project going.

Clean Current's technical partners include AMEC, Powertech Labs and Triton Consultants.

Whereas Clean Current uses a horizontal axis underwater windmill, Vancouver-based Blue Energy Canada uses a vertical axis. Blue Energy has been advancing its tidal- current technology in B.C. since 1990, when its predecessor moved here from Nova Scotia.

The private company has also proposed a demonstration-educational project at Stanley Park.

"Tidal energy is a rising star in the field of renewable energy worldwide," spokesman Michael Maser said. "B.C. is ideally situated to not only generate its own renewable energy that could . . . be available for export, but it could also become the seat of the emerging tidal energy industry, as Denmark has captured the wind industry."

Canoe Pass has an ambitious agenda to develop tidal-current energy projects in Canoe Pass, which runs between Quadra and Maude islands near the company's home base of Campbell River.

It has inked a memorandum of understanding for a feasibility study with Calgary-based New Energy Corp. Canoe Pass hopes to see one or two of New Energy's vertical-axis turbines installed in the pass from which it takes its name.

"We plan to complete the feasibility study in this calendar year, launch a 250-to-500 kW demonstration phase in 2006 and begin full-scale commercial development beginning in 2007," Canoe Pass spokesman Chris Knight said.

The "ocean power" category, which includes tidal-current energy, could become the world's fastest growing source of renewable energy in 15 years, says Chris Campbell, Nanaimo-based executive director of the recently formed Ocean Renewable Energy Group.

"Our forecasts are that ocean energy will be at or below wind- power costs when it matures," Campbell says.

Mary Hemmingsen, director of power planning and portfolio management with B.C. Hydro, says tidal- current energy shows lots of promise but remains costly and has yet to be commercially proven as a reliable source.

The utility is considering whether to issue a tender call for a near-commercial project in the interest of nurturing tidal energy as a potential power source, Hemmingsen says.

"There are a lot of attractive conventional sources. At some point, we're probably going to chew through those and look a few years down the road to what is an environmentally benign, good source of power," she says.

"Tidal power may offer that."

pluke@png.canwest.com

TIDAL POWER IN INFANCY

- No commercial tidal-current installations -- as opposed to barrage-style systems such as one in Nova Scotia -- are operating in the world.

- "Tidal-current power development is estimated to be one to three years behind ocean wave and five to eight years behind wind power," Triton Consultants says in a study prepared for B.C. Hydro.

- B.C. is said to have world-class potential, with high-velocity tidal- current flows in the passages between the Strait of Georgia and Johnstone Strait.

- Triton estimates B.C. has about 55 potential sites suitable for tidal- current extraction.

- Based on realistic assumptions for near-future technology, B.C.'s tidal-current resources could account for 40 per cent of Hydro's current annual power generation, Triton says.

Posted by Arthur Caldicott on July 24, 2005

July 23, 2005

Chevron, Oil, and China

Shepherd Bliss
Energy Bulletin
23 Jul 2005

“It took us 125 years to use the first trillion barrels of oil,” notes Chevron Corporation’s two full-page ad that began appearing in July in the Wall Street Journal, the Economist, Financial Times and elsewhere. “We’ll use the next trillion in 30,” the ad continues, thus quietly admitting to the Peak Oil that the industry has not previously disclosed.

“One thing is clear: the age of easy oil is over,” the ad reveals in a folksy letter from “Dave,” Chevron’s Chairman and CEO David J. O’Reilly. Most Americans are still unaware of the pending Peak Oil or try to deny the tremendous impact it will have upon us. Chevron proudly presents itself as “the Good Guy” by informing the public of the lessening supply of petroleum at a time when the demand is soaring, especially in China, India, and other industrializing countries.

Chevron’s multi-million dollar global corporate goodwill effort includes TV teaser ads throughout the US, Asia, Africa, the Middle East, and Latin America. Airport locations in Beijing, Moscow, Washington, D.C. and elsewhere broadcast the ad, also available online. Yet as the prices of crude oil and gasoline soar-symptoms of Peak Oil-so do the profits of Big Oil.

Chevron is one of the world’s four largest oil companies, so it should know a lot about petroleum. Chevron has half the story correct-that Peak Oil is upon us-but they may have the timing off, according to at least half a dozen recent books by oil experts.

“It is my opinion that the peak will occur in late 2005 or in the first few months of 2006,” writes geologist Kenneth Deffeyes in his new book “Beyond Oil.” Deffeyes was a Shell Oil company engineer and is a retired Princeton University professor.

This sooner-rather-than-later scenario is echoed by Houston-based investment banker Matthew Simmons in “Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy.” Saudi Arabia is the world’s largest oil producer. Simmons “argues that Saudi Arabian production is at or very near its peak.”

The Earth may have another 30 years, more or less, of a dwindling supply, which will be increasingly difficult and expensive to extract. I wonder what Chevron’s studies reveal will happen to civilization during that time. When they say that “easy” oil is over, how difficult do they think our petroleum-dependent lives will become as a result?

Exxon/Mobil has also recently admitted to Peak Oil, but without all Chevron’s fanfare. Their report “The Outlook for Energy: The 2030 View” forecasts a peak in five years. “No oil company has ever discussed peak oil production before,” writes energy consultant Alfred Cavallo in the May/June issue of the authoritative Bulletin of Atomic Scientists. “The public should heed the silent alarm sounded by the Exxon/Mobil report,” he continues.

Meanwhile, Chevron CEO O’Reilly speaks out of both sides of his mouth. While sweet-talking to the world in the ad campaign, he is tough-talking against China’s attempt to outbid Chevron for Unocal. After China’s state-owned CNOOC offered $18.5 billion for Unocal, besting Chevron’s $16.6 billion offer, the American suitor raised its bid to $17 billion. “Our increased offer has been driven by competitive circumstances,” an aggressive O’Reilly stated on July 19, the day his folksy letter appeared in the San Francisco Chronicle.

Behind the scenes Chevron and other corporations are pressuring Congress to reject the CNOOC offer as a national security risk and Un-American, should the Chevron shareholders accept the higher bid at their Aug. 10 meeting. The Chevron-China struggle to buy Unocal and thus control more oil is not over. Wall Street expects CNOOC to raise its bid. China has passed Japan as the world’s second largest consumer of oil, behind the US, and is expected to take more assertive efforts to secure its energy needs. The Iraq War may expand from being partly a behind-the-scenes US-China conflict into a more hot war between the world’s declining power and the world’s emerging power.

The US and China seem headed into an escalating conflict over oil, currency, Taiwan, and other matters. The July 21 New York Times reports “that a Chinese general threatened the United States with a nuclear attack if the United States attacked China during a Taiwan crisis.”

Meanwhile, the Chevron ad is classic green-washing. Whitewashing is a superficial coat that makes something appear cleaner than it is; green-washing is an attempt to present something that is environmentally damaging as clean. Now that most oil experts agree that Peak Oil will happen, Chevron wants to appear to be the oil company to act for the public good by informing people that we are indeed running out of oil.

“The same Madison Avenue firm, Young and Rubicom, that put together Bush’s TV ads in 2004 and the Army’s ‘Be All You Can Be!’ campaign prepared these ads,” according to attorney Matt Savinar. He wrote the book “The Oil Age is Over” and maintains the web-site lifeaftertheoilcrash.net. Savinar spoke to a grassroots Peak Oil group in Sonoma County, Northern California on July 20 at its fifth meeting.

We should ask “the tough questions,” fatherly Dave advises in his friendly letter. “What role will renewables and alternative energies play? What is the best way to protect our environment? How do we accelerate our conservation efforts?”

One would almost think that the Chevron chairman was in fact the chairperson of the Sierra Club. Dave makes it sound like one of the world’s most polluting companies in one of the world’s most polluting industries is actually on the side of the Earth, rather than merely trying to maximize profits by extracting natural resources that lead to global climate changes.

“At Chevron, we believe that innovation, collaboration and conservation are the cornerstones on which to build (a) new world,” the ad concludes. I wish that I could accept this as genuine corporate accountability. Chevron’s past degradation of the environment leads me to believe that they are once again seeking to fool the public with carefully chosen words at a time when a Peak Oil movement is growing. In Europe and Japan and in some small towns on the mainland citizens and some government officials are making plans to mitigate the impact of Peak Oil.

What sort of “new world” might Chevron have in mind, this skeptic wonders. America’s control of the world’s oil supplies-which it seems to be loosing during oil’s end game-enabled it to dominate the 20th century. As petroleum dwindles, so will US power, as China positions itself to be the superpower of the 21st century. Chevron’s ad is part of Big Oil’s struggle to maintain power. Dave’s folksy letter seems inclusive when it talks about “every citizen of this planet” and even calls upon environmentalists to “be part of reshaping the next era of energy.” Don’t be fooled. Beneath it is an attempt to shore up Big Oil’s threatened power base.

As the struggles around Peak Oil and its consequences heighten we can expect more such calculated public relations language to point to Big Oil as the Earth’s friend. Seeing through such green-washing will be important. Lets not make the same mistakes during the 21st century that we made in the last century by letting one country, the US, hoard too much of the world’s resources, and one industry, oil, concentrate too much power.

Look for yourself at the newspaper ad and see and listen to its television version by going to Chevron’s friendly website: www.willyoujoinus.com.

(Dr. Shepherd Bliss, sb3@pon.net, teaches at the University of Hawai’i at Hilo and writes for the Hawai’i Island Journal.)

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Posted by Arthur Caldicott on July 23, 2005

Dissident native group blocks access to coal property

Scott Simpson
Vancouver Sun
22-Jul-2005

sqwalk.com
COMMENT: This disruption of Fortune Minerals Mt. Klappan coal mining project by members of the Tahltan First Nation, comes on the heels of Shell Canada's decision to put on hold its coalbed methane development in the Klappan Coalfield, because of the same objections of Tahltan people that their rights have been infringed upon without their consent.

What Scott Simpson does not mention, is the internal governance dispute within the Tahltan community. Jerry Asp, the nominal chief of the Tahltan, and a strong pro-development force within the community, has had his legitimacy and authority undermined by Tahltan elders, the Iskut Band Council and the Dennis family.

Just two of the concerns:
1. the Tlabonatine area is still largely undisturbed by development, sits on the edge of the Spatsizi Plateau Wilderness Park, and is traditional and sacred territory for some Tahltan families. Shell's coalbed methane development and Fortune's Mt. Klappan coal mine will change all that and the Tahltan people most directly affected have never been consulted.
2. the entire area is beset with mining, coalbed methane, road, and transmission line project proposals. This is the result of high commodity prices and government policy encouraging this kind of development. Some Tahltan reason that these projects, if they are to proceed at all, should be developed over generations, so that a boom-bust effect does not happen, and the employment and economic impacts locally are continuous and sustainable. - Arthur Caldicott

sqwalk.com


A dissident group of Tahltan First Nation members has thrown Fortune Minerals Ltd. a curve by blocking access to the company's Mount Klappan coal property in northwest B.C.

Fortune acquired the Klappan property, considered one of the best potential coal reserves in the province, in 2002 and is hoping to open a mine there in 2007.

But those plans hit a snag last weekend when a five-truck convoy carrying trailers and equipment for an environmental assessment project found access blocked, said Fortune vice-president Julian Kemp.

The appearance of the blockade is a potential problem for the province's new image as a mining-friendly jurisdiction.

Unresolved treaty issues have been cited since the 1980s as one of the biggest deterrents to mining investment in B.C.

Provincial and federal requirements that resource-based companies consult fairly with local aboriginals before the commencement of activity in their traditional territories have eased the threat that exploration and development projects will be derailed. Last year investors responded by pouring more money into mineral exploration than B.C. has seen in over a decade.

Kemp said the Ontario-based junior mining company took numerous measures to ensure support of the Tahltan government before proceeding -- including contracting a Tahltan-owned company to carry out the environmental work.

The chief of the local Indian band concurred, noting that 90 per cent of the environmental contractors are of "Tahltan heritage."

The blockade continues even though another mining company with a property in the same area, NovaGold Resources, is operating without interference.

"We have been dealing with the elected officials of the Tahltan First Nation through the Tahltan Central Council," Kemp said. "I think we have been very communicative with them. We certainly feel that we are a victim in the situation."

Kemp said that if the company doesn't get onto the property soon, it could lose its entire summer program.

"I can't speak for other companies, but there is a risk that, I guess, the province and the first nations run. If they are perceived to be a problem jurisdiction, it adds to the cost, it adds to the risks of operating in that jurisdiction, and that's something that will be taken into consideration when companies are making their decisions."

According to a news release from the blockaders, a local family with a traditional claim to the area was not consulted wh