December 25, 2007
Liquefied natural gas poised to surpass oil as energy source
By Leah Bower, Special to Gulf News (Dubai)
http://archive.gulfnews.com/articles/07/12/25/10177107.html
December 24, 2007
Oil may be the energy source on everyone's mind right now, but there is a good chance that liquefied natural gas (LNG) will surpass it as oil prices remain astronomical.
Once a bit of a backwater in the energy field, demand for LNG has been on a steady rise because it is relatively clean burning and because its liquefied state allows for transport to remote locations without construction of elaborate and expensive pipeline networks.
And while it can't hold a candle to oil's price, quite a few analysts seem to see it as the bandwagon of choice to jump on to.
Worldwide demand for LNG during the first half of 2007 was pegged at roughly 115 billion cubic metres (bcm), roughly nine per cent growth over the same period in 2006, and demand in East Asia has been growing even faster.
Calgary-based Ziff Energy says it expects demand for natural gas in North America will rise by 1.8 per cent a year through 2015, and US Energy Department data backs up that claim, reporting that they expect imported LNG to increase from three per cent of total gas consumption to 14 per cent by 2020.
Currently, Japan is the world's largest LNG consumer, importing 81.86 bcm of natural gas as LNG in 2006. South Korea is second and the US currently ranks as the fourth-largest consumer.
LNG is natural gas, but it is reduced to a liquid state by cooling it to about minus 160° Centigrade, which reduces the volume of the gas by about 600:1 and makes transportation far simpler. Before it can be used, LNG must be returned to its gaseous state at a regasification plant. For countries like Qatar, which is sitting on the world's largest natural gas reserves - 25 trillion cubic metres - the renewed interest in LNG is a boon, since there is no need for pesky pipelines that travel through neighbouring countries before reaching their destinations.
Just ask the Europeans, who saw their natural gas get cut off in early 2006. Russia, where the pipeline originated, and Ukraine, which hosted part of the pipeline, had a price dispute. The two countries disagreed and so did the Europe's energy supply. The dispute even resurfaced in 2007, although the gas continued to flow this time.
So LNG, with its ability to be shipped by sea or land, is slowly building a power base. And people like Qatar's Energy Minister, who once said it was "bad news" that the country only had gas reserves and no oil, are starting to change their tune.
The International Energy Agency (IEA) reported that by 2010 Qatar could own 20 per cent of the global LNG market.
Other countries with reserves are hopping on board as well.
The Australian government expects energy production growth down under will be led by LNG, with exports of the fuel set to grow by more than seven per cent yearly, through 2030. That would have LNG output rise from less than 16 million metric tonnes in 2007, to 24 million by 2012, and possibly reaching as high as 76 million by 2030 as new projects come online.
Without the ability to ship liquefied natural gas, this type of growth would have been almost inconceivable. Already the $16 billion) North West Shelf venture is expanding LNG capacity, while Perth-based Woodside is building the Pluto project, also in Western Australia.
Chevron is planning to expand its $10 billion liquefied natural gas project known as Gorgon, which now calls for three liquefaction production lines, instead of two. Inpex Holdings and BHP Billiton are also proposing new plants.
Get on board while the year is new.
The writer is a freelance journalist based in Alaska, USA.
Russia’s Big Energy Secret
Putin wields gas as a weapon. But the reality is that Russia can barely meet its own growing demand.
By Owen Matthews
NEWSWEEK
Dec 22, 2007
Not Enough in the Pipeline: An oil and gas plant in Novy Urengoy, Russia. EPA-Corbis
Gazprom, the Russian natural-gas giant, is often portrayed as the 1,000-pound gorilla of the energy world. Over the past few years, the company has had huge success in locking in lucrative European markets. It has also been ruthless about making consumers in the former Soviet Union pay something close to world prices for their gas—cutting off supplies, if necessary, to force reluctant customers like Ukraine to pay up. But problems are brewing. Gazprom, it turns out, has too many customers, and too little gas.
The surprising Achilles' heel of Gazprom is that it produces only about 550 billion cubic meters (bcm) of gas—just enough to supply its own domestic market. It relies on cheap imports from Central Asia to meet the majority of its other commitments to customers in Europe, amounting to nearly 80bcm. And since only Gazprom's foreign customers pay full market value, it's the company's exports which make up the bulk of Gazprom's revenues—$21 billion for the second quarter of 2007 alone. Now those nations on which Gazprom's profits rely—including Turkmenistan, Uzbekistan and Kazakhstan—are beginning to cut their own deals with big new customers like China. The deals are in turn becoming an existential threat to Gazprom, one of Russia's most valuable strategic levers of power.
Russian control of a quarter of Europe's gas supplies is a key plank of its foreign policy and renewed national pride; supply of cheap electricity and heat to Russian homes is a touchstone of the Russian government's credibility. Central Asia is now undermining both those fundamentals—and could threaten Vladmir Putin's petro-politics.
Gazprom hasn't opened up a new gas field since 1991, and its existing fields are dwindling. A recent report by the Russian Industry and Energy Ministry warned that if the decline continued, Russia may be unable to service even its own domestic gas needs by 2010, and recommended doubling prices, a conservation move that has upset business and could also put a damper on economic growth.
Meanwhile, Gazprom chairman Dmitry Medvedev—also first deputy prime minister and Vladimir Putin's anointed successor for the next presidential elections in March 2008—has announced a radical plan to revive the company's domestic production, investing $420 billion in exploration and new gas-production facilities.
Relying on cheap imports to supply foreign customers is nothing new for Gazprom; for years the company's been buying gas from the Central Asians for knockdown prices. Until earlier this year, Gazprom was paying just $65 per 1,000 cubic meters to the Turkmens—then selling the same gas to customers in Western Europe who pay up to $250 (possibly only because of Russia's pipeline monopoly). Now ''Russia's monopoly is under attack," says Steve Levine, author of "The Oil and the Glory," a study of Central Asia's energy politics. ''Other neighbors are starting to build pipelines, and local producers are getting smarter, too."
No threat is more potent than that of China's move into Turkmenistan. Last year China's President Hu Jintao signed a deal with the late Turkmen leader Sapurmurat Niyazov to buy 30bcm of Turkmen gas each year for the next 30 years, and finance a giant new gas pipeline to China's Xinjiang province. That's in addition to a deal signed with Iran in March, which promises 14bcm a year of Turkmen gas to Tehran. At the same time, the Turkmens have also signed a deal with Russia for 50bcm a year until 2009. ''There's no doubt that Turkmenistan has promised to sell more gas than it can feasibly pump," says one top U.S. diplomat in the region not authorized to speak on the record. ''The question is, which customer will they choose?"
A lot rides on that choice: no less, in fact, than the future of Russia as an energy superpower. But Gazprom insists there's no problem. ''We do not consider China to be a threat or a competitor in Central Asia," says Gazprom spokesman Igor Volobuyev. ''We have a 25-year, long-term contract with the Turkmen government; they are obliged to fulfil their responsibilities. Our contract with the Turkmens is longer than any of our contracts with our European customers." Putin earlier this year assured Gazprom customers that ''there is complete certainty that Russia will fulfill all its contracts."
Europeans now fret about possible shortages, even as Americans are gleeful. It's no secret that the United States would like to put a dent in Russia's stranglehold over the region's energy resources—as well as shake Putin's ''complete certainty" a little. The diplomatic code word is "encouraging diversity of supply"; deciphered, that means encouraging any and every other pipeline project that bypasses Russia. ''It's one of those areas where we and Beijing see pretty much eye to eye," says the U.S. official in the region. ''The more export routes there are, the happier we'll be."
To that end, the United States is encouraging a number of pipeline projects that cut Russia out of the loop; only one has been built so far, connecting Baku, Azerbaijan, to the energy-rich Caspian direct to the Mediterranean—but the United States hopes that others will follow. Needless to say, Moscow is working hard to keep its monopoly from being undermined. It most recently signed a new deal with Kazakhstan this past September to build a pipeline on the Caspian coast to Russia.
For the Central Asians themselves, selling energy is more than a matter of dollars and cents; it's about winning real independence from an old colonial master. One Kazakh government minister—who didn't wish to have his name used while criticizing Russia—recalls a recent incident when a Russian ministry didn't bother to send a car to pick up visiting Kazakh officials in Moscow. "Kazakhstan is constantly being treated like a kid brother by our Russian neighbors," he complains. Another slight was the banning of all Lufthansa planes from Russian airspace last month after the German company prepared to switch its Asian cargo hub from Krasnoyarsk in Russia to Astana in Kazakhstan. "The Russian government thought they would frighten us by flexing their muscles, the same way they did with Georgia and Ukraine," says the minister. "But we have others we can turn to."
It looks like China, rather than the United States, is best positioned to be the big winner in Central Asia's search for new friends. Though Washington has gone out of its way to turn a blind eye to the region's undemocratic practices, local despots are still irritated by even low-key criticism from the U.S. American insistence that the Central Asians forgo business with Iran also rankles. Kyrgyzstan, America's closest ally in the region, has been racked by instability and economic underperformance.
Kazakhstan, meanwhile, is booming, and plans to nearly double oil production to 150 million tons a year by 2015. A large chunk of that will be exported to China, through new Beijing-funded routes, or to other markets through the Baku-Ceyhan pipeline, bypassing Russia."Pretty soon the Chinese are going to exchange their bicycles for cars, so their oil needs will boom. We're happy to have such as a big, stable neighbor just on our border," says Kamal Burkhanov, a Kazakh parliamentarian. "How long should Central Asian countries be locked in by Gazprom's prices? The transit fees they pay us are kopecks."
True enough. For all its pretensions to being Europe's dominant energy supplier, Gazprom has stood on feet of clay. Now that Russia's former vassals are discovering their power, Moscow may have to ditch its trademark energy strong-arm tactics, and adopt a new gas diplomacy.
URL: http://www.newsweek.com/id/81557
See also Last Major Russian Field Goes Online
December 24, 2007
Big Oil lets sun set on renewables
by Terry Macalister
Guardian
December 11th, 2007
Shell, the oil company that recently trumpeted its commitment to a low carbon future by signing a pre-Bali conference communique, has quietly sold off most of its solar business.
The move, taken with rival BP's decision last week to invest in the world's dirtiest oil production in Canada's tar sands, indicates that Big Oil might be giving up its flirtation with renewables and going back to its roots.
Shell and BP are among the biggest producers of greenhouse gases in the world, but both have been keen to paint themselves green through a series of clean fuel initiatives.
BP, under its former chief executive, John Browne, promised to go "beyond petroleum" while Shell has spent millions advertising its serious interest in the future of the environment.
But at a time when interest in solar power is greater than ever, with the world's first "solar city" being built at Phoenix, Arizona, a small announcement from Environ Energy Global of Singapore revealed that it had bought Shell's photovoltaic operations in India and Sri Lanka, with more than 260 staff and 28 offices, for an undisclosed sum.
The sell-off, to be followed by similar ones in the Philippines and Indonesia, comes after another major disposal executed in a low-key way last year, when Shell hived off its solar module production business.
The division, with 600 staff and manufacturing plants in the US, Canada and Germany, went to Munich-based SolarWorld. Shell has however formed a manufacturing link, with Saint-Gobain, and promised to build one plant in Germany.
The Anglo-Dutch oil group confirmed yesterday that it had pulled out of its rural business in India and Sri Lanka, saying it was not making enough money.
"It was not bringing in any profit for us there so we transferred it to another operator. The buyer will be able to take it to the next level," said a spokeswoman at Shell headquarters in London.
The oil group said it was continuing to move its renewables interests into a mainstream business and hoped to find one new power source that would "achieve materiality" for it. Shell continues to invest in a number of wind farm schemes, such as the London Array offshore scheme, which has government approval. Shell has also been concentrating its efforts on biofuels, but declined to say whether it had given up on solar power even though many smaller rivals continue to believe the technology has a bright future.
Environmental groups have always accused Shell of using clean energy initiatives as "greenwash" to deflect criticism from its core carbon operations, especially tar sands. The latest pull-out has annoyed rival business leaders at London-based Solar Century and local Indian operation, Orb Energy, who fear the impact of a high-profile company selling off solar business. Jeremy Leggett, chief executive of Solarcentury and a leading voice in renewable energy circles, said Shell was undermining the credibility of the business world in its fight against global warming.
"Shell and Solar Century were among the 150 companies that recently signed up to the hard-hitting Bali Declaration. It is vital that companies act consistently with the rhetoric in such declarations, and as I have told Shell senior management on several occasions, an all-out assault on the Canadian tar sands and extracting oil from coal is completely inconsistent with climate protection.
"This latest evidence of half-heartedness or worse in Shell's renewables activities leaves me even more disappointed. Unless fossil-fuel energy companies evolve their core activities meaningfully, we are in deep trouble," he said.
Damian Miller, former director of Shell Solar's rural operations and now chief executive of Orb Energy, said Shell was missing an opportunity by pulling out at a time when renewables markets were starting to mature in the developing world. He alleged some customers were complaining of being abandoned by Shell and worried about the servicing of equipment they could expect from Environ. "We see former Shell customers who are highly disappointed not to be receiving proper service for the solar systems they have invested in. These customers have often invested 20-30% of their annual income in a system to ensure they have some minimum amount of lighting and access to radio, TV, or a fan," said Miller.
He added that the oil majors, including Shell, had invested time and energy in promoting their plans for renewable energy in the press and on TV, but were not able to lead the transformation the world needs towards renewable energy and energy efficient solutions.
Shell declined to comment on these criticisms or talk about where its priorities lay. But the chief executive, Jeroen van der Veer, did make a number of comments last summer which could have paved the way for a change in policy. Alternative energy sources such as renewables will not fill the gap, he argued, forecasting that even with technological breakthroughs they could give supply only 30% of global energy by the middle of the century. "Contrary to public perceptions, renewable energy is not the silver bullet that will soon solve all our problems," he said.
Meanwhile, BP has been accused by Greenpeace Canada of lining itself up to help commit "the biggest environmental crime in history". This follows its decision to swap assets with Husky Oil, giving it an entrance ticket to the Alberta tar sands, which are said to be five times more energy-intensive to extract compared to traditional oil.
John Browne, the group's former chief executive, had said BP would not follow Shell into tar sands as he established an alternative energy division and pledged to take the group "beyond petroleum." The new boss, Tony Hayward, has pointed the corporate supertanker in a new direction although his public relations minders insist BP remains committed to exploring the potential of renewables.
"Tony Hayward has been part of the management team at BP for many years and has endorsed the low-carbon strategy that involved BP creating its alternative energy business late in 2005. We are spending $8bn (£4bn) over ten years and are pressing ahead with 450 megawatts of wind production capacity in the US," said a spokesman. "The tar sands deal in Canada does not represent a change in direction, it was just a very good opportunity which represents a broadening of the portfolio."
Greenpeace climate campaigner Joss Garman said: "If Shell is to survive the climate change age... it needs to become not just an oil company but an energy company. One wonders if Shell's executives have noticed what's happening in Bali or if we'll see slick adverts on TV boasting about their retreat from renewables. Probably not."
December 21, 2007
Petrocan's Libyan dream
COMMENT: Note that in Libya, Petro-Canada is agreeable to terms that "may seem steep" - it pays 50% of the development costs for only 12% of the profit, considerable up-front costs, AND it shares the play with Libya's national oil company, AND political stability and certainty in Libya ain't quite the same as Alberta.
Yet listen to these guys whine about a bigger royalty bite in Alberta.
It would appear that just about EVERYWHERE in the world, except Canada and the US, oil and gas companies are accepting terms that would precipitate a capital exodus here.
But an exodus to where? Libya? Russia?
Alberta is still the biggest and best deal going for oil companies. And BC is the sweetest show in the world for gas producers.
For the legacy in those resources? For the people in these jurisdictions? Well, gee, we don't want to upset the companies, do we? Don't want to lose the golden goose.
NORVAL SCOTT
Globe and Mail
December 14, 2007
CALGARY — Petro-Canada already once had a dream of creating a huge business empire in North Africa, in which it would supply energy to Europe after developing vast natural gas projects in Algeria and Tunisia. What happened?
It went up in smoke; Petrocan and Algeria couldn't come to terms over the proposed developments and the company's interest in the countries dwindled. Now the company hopes its second time in North Africa works out better.
Mind you, Petrocan is not running back to Algeria any time soon. From being a major player in the country in the late 1990s, Petrocan now has no production left there, and the firm shut down its Tunisian office last year.
Instead, Petrocan's dream has been shifted one country to the east, to Libya, and all of a sudden it's become reality. This week, the company said it is to ramp up output in the country after successfully arranging new development terms, now intending to spend $3.5-billion (U.S.) on existing fields in the Sirte basin. The investment is expected to double Petrocan's Libyan production by 2014 to 100,000 barrels a day.
“We've been looking at this for some time, and it's a very logical spot for us to be in,” says Petrocan chief executive officer Ron Brenneman, who signed the deal in Tripoli this week. “[Libya] is recognized as one of the most prospective regions in the world. It has huge potential.”
The Gadhafi factor
However, investors haven't always been convinced that the country could deliver on its promise. After the 2001 attack on New York's World Trade Center, Libya was perceived as a risky investment destination for firms; leader Moammar Gadhafi was linked to international terrorism in the 1980s and 1990s and the U.S. only lifted economic sanctions against the country in 2004, although Libya's international standing was improving after the country made conciliatory steps to the West in the late 1990s.
Nevertheless, Petrocan's stock sold off immediately after its acquisition of Germany's Veba Oil & Gas GmbH in 2002 for $3.2-billion (Canadian), the deal in which Petrocan accumulated most of its current Libyan holdings.
The deal was curiously timed, not only due to Petrocan's travails elsewhere in North Africa, but also because other Canadian firms were fleeing the region in droves. PanCanadian Petroleum, the company that became EnCana Corp., was withdrawing from Libya in 2002 in order to concentrate on North America, while Talisman Energy sold up its holdings in Sudan that same year after a hugely controversial dispute over the extent of its involvement in that country's civil conflict.
While Mr. Gadhafi's history may still cast a shadow over some perceptions of Libya, energy companies have found the country an infinitely more stable investment destination than, say, Venezuela, where oil firms have essentially seen their contracts ripped up.
Petrocan itself hasn't encountered any regulatory or governmental difficulties in Libya, which has never been anything but professional to deal with, Mr. Brenneman says. “The national oil company is a very sophisticated organization that's very business-like in its approach,” he said. “We've had a very good working relationship with them – it's a wonderful place to do business.”
Better timing
A more significant problem for Petrocan that stymied development until now was that it wasn't certain of its position in Libya. The rights to develop oil at the fields it bought from Veba were set to expire in 2015, at which time they would revert to Libyan control.
While the clause is a normal one in oil and gas contracts, – as it forces companies to develop the leases acquired from countries, instead of just sitting on the acreage – the relatively close deadline made it difficult for Petrocan to consider ramping up its Libyan plans, as it wasn't sure if any large-scale investment would be worthwhile.
“As you get closer and closer to that date, the time to recover your investment starts to run out, and we weren't prepared to put a lot of capital in if we didn't have that time,” Mr. Brenneman said.
The problem was recognized both by Petrocan and the Libyan National Oil Co. (NOC), which was also keen to renegotiate its contracts with oil companies operating in Libya so it could benefit more from higher prices. Consequently, Petrocan came to a deal under which it will now receive 12 per cent of the profit from its Libyan production, while paying 50 per cent of the development costs.
Barrels ‘to die for'
Petrocan and NOC will jointly invest $7-billion in developing existing fields, while Petrocan will pay a $1-billion signature bonus in three stages, as well as $460-million over the next seven years to explore new opportunities in Sirte. While the price may seem steep, it extends Petrocan's rights to the Sirte fields, effectively securing the company's position in Libya for the next 30 years.
“Now we've got lots of time to exploit these resources, recover our capital and generate good returns,” Mr. Brenneman said.
Petrocan has had a long wait to get the certainty in North Africa that it's needed to start developing a major project. However, the reason that the company has been so patient is clear; Sirte is seen as being one of the most prospective oil blocks in the world. Of the last nine wells Petrocan has drilled in the region, its had seven successes – a high strike rate in the oil exploration game.
“This is a large, large field that will be producing for some length of time,” Mr. Brenneman said. “If you ask anyone who's in the international oil business, they'll tell you that the Sirte basin is to die for.”
December 18, 2007
Last Major Russian Gas Field Goes Online
How Long Will Siberia's Gas Last?
By Christian Wüst
Der Spiegel
18-Dec-2007
Europe depends on Russia for its natural gas, but, as Gazprom begins production at the last major field, it is unclear how much gas is left in Siberia. Developed fields are almost exhausted, and tapping new reserves involves huge technical difficulties.
The Gazprom pipeline under construction near Novy Urengoy. Gazprom is developing the Siberian Yuzhno-Russkoye gas field in the region. REUTERS
The Russian gas industry was celebrating on Tuesday. At a ceremony in Moscow, Gazprom board chairman Dmitry Medvedev, who is widely expected to be the next president of Russia and the German foreign minister, Frank-Walter Steinmeier, pressed a ceremonial button and the last major natural gas field in the world's most productive region went on line. A live video link showed footage from northwestern Siberia where the actual event was taking place, namely valves being opened.
The process, prosaic as it was, prompted executives in the energy industry to wax poetic. Burckhard Bergmann, the head of German energy conglomerate E.on-Ruhrgas, calls the site "Siberia's last pearl."
The new field, which is called Yuzhno-Russkoye, lies about 900 meters (2,953 feet) below the surface and contains more than 800 billion cubic meters (28.6 trillion cubic feet) of natural gas -- a number that seems inconceivably large and yet is ultimately very small. Yuzhno-Russkoye's entire reserves hardly amount to more than one year's worth of production for the entire Russian natural gas industry.
Demand for energy is growing, both domestically and abroad, and Russian energy forecasters predict Siberia will satisfy that demand. Alexander Grizenko, an advisor to the board of directors of Russian energy giant Gazprom, expects production volume to increase until 2030 when, according to his predictions, a peak level of well over 800 billion cubic meters a year will have been reached. Grizenko also emphasizes that the country will be able to maintain a very high level of production for another 30 years after that.
But Jean Laherrere, chief statistician at the Swedish-based Association for the Study of Peak Oil and Gas, paints a completely different scenario. He believes that production will peak in only eight years and decline rapidly after that. According to Laherrere's prognosis, in 2060 -- when Russian visionaries predict that production levels will still be higher than they are today -- it will in fact be close to zero.
Who is right? The answer to this question will be critical to energy supply in Europe, which already buys close to half of its natural gas from Russia today -- a share that is expected to increase now that the North Sea gas fields are almost exhausted.
Russia's future is also closely linked to the future of its gas reserves. Natural gas is the central currency of the new economic miracle that has blessed this vast country stretching from the Baltic Sea to the Pacific Ocean. Russia's gas reserves lie north of the Ural Mountains, in one of the world's most inhospitable regions. It's a flat wasteland, icebound in the winter and a swamp in the summer, where temperatures can drop to as low as -60° Celsius (-76° Fahrenheit) and climb as high as 40° Celsius (104° Fahrenheit).
Geologists estimate that about 150 million years ago, when the region was a warm ocean inlet, the bodies of dead creatures turned into dark sediments rich in organic matter. Over the course of the ensuing millions of years, the organic matter then turned into oil and natural gas reserves stored between layers of sandstone.
Siberia's gas fields supply much of Europe's energy. DER SPIEGEL
More than 50 years ago, when the first drilling teams arrived in what was then a virtually uninhabited region, the ground was so saturated with fossil fuels that some of the Soviet mining pioneers, along with their equipment, were blown up in explosions.
Sergei Chernezky, a spokesman for the Russian gas industry in the Siberian city of Yamburg, talks about one of these accidents as if it were the big bang that set off the region's energy bonanza. An explosion occurred near a town called "Little Birch Village," just as a drilling supervisor was about to enter his hut to document the fact that his team had found nothing. "All of a sudden it was clear that there was gas here," says Chernezky. "A lot of gas."
In 1966, scientists working near the Arctic Circle discovered what was then the largest-known natural gas field on earth: Urengoy. The field, 120 kilometers (75 miles) long, contained at least 10 trillion cubic meters (357 trillion cubic feet) of natural gas in the upper sediment layers alone. Father north, the Yamburg field was discovered a few years later, a hydrocarbon giant almost the size of Urengoy and containing vast reserves of methane and liquid condensed gas.
The first shipment was sent to Austria in 1968, and soon afterwards other Western countries began appearing on the Soviets' list of customers. The Soviet Union, still the West's political nemesis at the time, gradually became Europe's most important supplier of natural gas.
An energy highway unparalleled worldwide extends for 5,000 kilometers (3,108 miles) from western Siberia to European Russia and on to Western Europe. It consists of a dozen steel pipes, each up to one and a half meters (5 feet) in diameter and capable of handling an operating pressure of 70 to 90 bar. It takes about a week for a gas molecule to make the journey from Yamburg to Hamburg. Compressor stations placed at roughly 200-kilometer (124-mile) intervals maintain flow pressure.
Natural gas flares at a Gazprom facility in the town of Novy Urengoy. AFP
The abundance of natural gas acts as a tremendous incentive for consumption. Russians are wasteful when it comes to natural gas, the cheapest fossil fuel and the one that is least harmful to the climate, says E.on-Ruhrgas CEO Bergmann. But Western Europeans aren't exactly parsimonious in their use of the highly refined fuel, either. Russia exports roughly one-third of its natural gas, and Germany is its biggest customer.
According to official Russian figures, the country still has viable natural gas reserves of 48 trillion cubic meters (1.7 quadrillion cubic feet). At constant production levels, this would be enough to last almost to the end of the century. But where is this natural gas? Can it even be extracted? A skeptical Laherrere estimates existing reserves to be around 43 trillion cubic meters (1.5 quadrillion cubic feet), but believes that only a fraction of these reserves are in fact extractable.
"The days of easy gas production are gone," says Bernhard Schmidt, the head of exploration for the Wintershall Group. A subsidiary of chemical giant BASF, Kassel-based Wintershall is the only German company currently involved in the development of Gazprom fields.
To date, gas fields in western Siberia have only been tapped to depths of little more than 1,500 meters (4,921 feet). Developing these reserves dating from the mid-Cretaceous period is relatively easy for mining experts. Schmidt, a native Austrian, calls the process "skimming the sugar off the top."
Urengoy and Yamburg were precisely the kinds of sweet finds Schmidt is referring to -- enormous and easily exploited -- and they have been drained at rates corresponding to their accessibility. Both fields are already more than halfway depleted. If they were oil reserves, production would already have been discontinued. However, because gas is lighter than petroleum, up to 80 percent of the underground treasure can be extracted. But once that point is reached, little else can be done. Siberia's largest natural gas reserves are close to this point. Satellite fields like Zapolyarnoye and Yuzhno-Russkoye are still full, but much smaller.
Opinions differ as to how much gas is left. DER SPIEGEL
There is more gas to be found, but only at far greater depths. The gas content is especially high in Lower Cretaceous sediments in the region, but they are located at 3,500 meters (11,480 feet) beneath the Earth's surface.
Gazprom, in a joint venture with Wintershall, is currently tapping the so-called Achimov Formation in the Urengoy field. Five wells have already been drilled, and production is expected to begin next year. The German partner's experience is apparently in high demand, because gas is extremely difficult to extract at this level.
Contrary to what some people might imagine, oil and gas fields do not consist of underground caverns. The fuel is found in porous rock formations (the word petroleum is derived from the Latin terms for rock, "petra," and oil, "oleum"), and must travel through the pores into the drilling pipe. In the deep Urengoy sediments, the rock is extremely solid and fine-pored. In addition, the gas has a high content of liquid condensate that can clog the pores. To overcome these difficulties, Wintershall plans to use a high-pressure technology known as "fracturing." In this process, the rock is fractured and sand is forced into the cracks.
Despite all of these efforts, deep drilling will never be as productive as extraction from upper layers of rock. The Achimov Formation of the Urengoy field will yield 2 trillion cubic meters (71 trillion cubic feet) at best, or barely a fifth of the upper-level reserves. Clearly these sorts of finds will not be sufficient to meet Russia's production targets.
These limitations have prompted Gazprom to explore potential new reserves. On the opposite end of the Ob River delta, northwest of the current drilling areas, lies the Yamal Peninsula. Geologists have already explored the peninsula and have discovered formations indicating the presence of fields containing more than 10 trillion cubic meters (355 trillion cubic feet) of natural gas -- potentially another Urengoy.
But the gas exploration teams are operating in highly challenging terrain. "Yamal is probably the world's most difficult extraction region," says Roland Götz, an expert on Russia at the Berlin-based German Institute for International and Security Affairs. The peninsula is covered with countless rivers and lakes, completely impassible in the summer, and its coastlines are surrounded by shifting masses of pack ice that sometimes tear meter-deep gashes into the ocean floor, making it difficult, if not impossible, to lay pipelines.
Dashed lines representing the pipeline through the Kara Sea that the Russians hope to install within the next few years -- despite doubts from within the industry -- have been shown on maps for some time. But at a meeting on July 19, 2005, the Russian union of oil and gas pipeline builders argued that there are no known "engineering solutions" for the problems associated with building the pipeline.
Another danger, according to Götz, is that the peninsula, which is barely above sea level today, could "sink during the course of gas production and become completely submerged." Gazprom's prospecting creed of preserving the untouched natural environment on the Yamal Peninsula "for future generations" would sink along with it.
But the energy giant brushes off environmental and technological concerns. Within four years, says Gazprom spokesman Sergei Kupriyanov, the company will be pumping natural gas from the Bovanenkovo field on the Yamal Peninsula and shipping it through pipelines. Two years later, the company plans to follow suit in the offshore Shtokman field in the Barents Sea northeast of Murmansk.
Gazprom is also convinced that other reserves in the ice-covered sea off Yamal can be tapped. "Gazprom has such technologies and we don't expect any surprises," Kupriyanov says tersely.
Skeptics are not welcome in the natural gas emirates along the Arctic Circle. The region's wealth of natural resources has created a standard of living well above the national average: A mechanic working in a gas field makes a better living than many a university professor in Moscow.
Within three decades, a medium-sized city developed out of nothing in this icy wasteland. Today more than 100,000 people live in Novy Urengoy, a collection of drab tower blocks. One in two residents owns a car. Supermarkets sell tropical fruit and California wine, and the city boasts recreation centers, cinemas and theaters -- and almost everything belongs to the benevolent Gazprom.
Officials proudly take visitors on a tour of the company-owned luxury kindergarten -- complete with a swimming pool and an assembly hall. Well-behaved children in native dress sing songs that sound disconcerting coming from the mouths of five-year-olds, songs about full tanks of gasoline, warm living rooms and the many blessings of an invisible fuel: "The cold is bitter, it bites us on the nose -- but we are not afraid, because we have natural gas."
Elsewhere, economists specializing in natural resources are already conjuring up scenarios of potential shortages. Russia expert Götz, for example, analyzed what would happen if the start of production at the Shtokman and Yamal fields was delayed by a mere five years.
The consequences of this small delay, says Götz, would already be significant. "The natural gas supply in the regions that supply Europe would stagnate at 2005 levels until 2025 at least," he says. But who will have to do without gas in a world in which everyone wants economic growth?
For Götz, the answer is obvious. "A supply bottleneck will affect Russia first," he says. "Export is much more lucrative for Gazprom."
Translated from the German by Christopher Sultan
More Bali-hoo
UN CLIMATE CHANGE CONVENTION: BALI ROAD MAP
Geoffrey York, Globe and Mail, 17-Dec-2007
Disappointments on Climate
Editorial, New York Times, 17-Dec-2007
Stalling in Bali
Editorial, Washington Post, 18-Dec-2007
Bully for Bali
Editorial, The Sunday Times, 16-Dec-2007
Canada, U.S. back off Bali deal
Mike De Souza, National Post, 17-Dec-2007
Willingness to talk climate change what counts
Richard Gwyn, Toronto Star, 18-Dec-2007
The Day After..
Walden Bello, Focus on the Global South, 16-Dec-2007
HAPPY ENDING ON BALI
Markus Becker, Der Spiegel, 15-Dec-2007
We've been suckered again by the US.
George Monbiot, The Guardian, 17-Dec-2007
UN CLIMATE CHANGE CONVENTION: BALI ROAD MAP
Accord fails to set targets, but activists still optimistic
Shift in global mood sees growing number of countries agree on need for deep reductions in greenhouse-gas emissions
By GEOFFREY YORK
Globe and Mail
Monday, December 17, 2007
NUSA DUA, INDONESIA -- In the end, the much-anticipated "Bali Road Map" was disappointingly vague and unenforceable, weakened by politics and self-interest. Yet beyond the words of its compromised text, the Bali agreement could still herald a new era of tougher action against global warming.
Most of the world's biggest emitters of greenhouse gases - including the United States, China and India - were unwilling to accept any limits on their growth. Even after 15 days of intense negotiations, the conference failed to reach any global accord on targets for emission cuts by 2020 or even 2050, despite strong pressure from Europe and others.
The scientific consensus on the need for deep cuts - the best research of the world's top scientists, endorsed by this year's Nobel Peace Prize -- was relegated to a mere footnote to a preamble to the main agreement.
But now begins a crucial two years of negotiations on a stronger deal to replace the pledges of the Kyoto accord, which expire in 2012. And the mood of the Bali conference, swinging strongly against the United States on its final day, offered hope to those who seek a more ambitious deal.
"What we have seen disappear is the Berlin Wall of climate change," said Yvo de Boer, chief of the United Nations climate agency. "This is a real breakthrough, a real opportunity for the international community to successfully fight climate change."
The optimism of the environmentalists is based on the clear evidence of a shifting global mood. A growing number of countries agree on the need for deep cuts in emissions by 2020. The small band of skeptics - including the United States, Canada and Japan - were able to remove the emission targets from the final accord, but they did not dare to kill the conference's other achievements, including crucial agreements on fighting deforestation, transferring clean technology to developing countries, and achieving bigger emission cuts among the wealthy Kyoto nations.
"Now the hard work begins - getting the science back into this agreement, the science that had been stripped out, and getting meaningful commitments by the U.S. onto the table to do our responsible share of dealing with this urgent problem," said Alden Meyer, director of strategy and policy at the Union of Concerned Scientists, a U.S.-based group.
"The hardest work is ahead of us, but we averted the disaster that would have been the collapse of these talks. Once the United States saw that it would be seen as the one bringing down the talks, they thought twice. And to their credit they stepped back from the brink."
Environmentalists are pleased that the Bush administration finally signed onto the Bali agreement, no matter how weak it is, because it brings the U.S. directly into the climate process for the first time in years.
Their optimism is further fuelled by the U.S. presidential election next year, which is widely expected to produce a new president with a more aggressive position on tackling climate change. The new administration will take office at a critical time, in early 2009, with a year remaining until the deadline for a new climate deal.
"We hope to inject some new energy into this process in 12 months with a new administration that can build on the momentum here and join the European Union in providing real leadership in the second half of the negotiations," Mr. Meyer said. "I think we can do this in the time we have available, building on the spirit we saw in Bali."
Liberal Leader Stéphane Dion said he is confident an agreement will be possible by 2009. "It will require a lot of goodwill and a lot of determination, and some countries must change their attitudes," he said. "We will have an election in the United States, and I'm sure that will help, and we may have an election in Canada, and I hope that will help too."
Environment Minister John Baird, the subject of much criticism at Bali, pledged to work for a new agreement by 2009. "We're going to work tremendously hard over the next two years, and see if we can get the very best deal for the environment and the planet," he said.
Business leaders, too, promised to join the campaign for a post-2012 deal in the wake of the Bali agreements. "This is an historic decision and a turning point for mankind," said Guy Sebban, secretary-general of the International Chamber of Commerce.
"All the players - governments, business, non-governmental organizations and intergovernmental organizations - are finally banding together to confront what is perhaps the most important and urgent issue of our age."
The Bali agreement on deforestation, in particular, is considered a huge step forward, since 20 per cent of the world's carbon emissions are produced by deforestation - almost as much as the entire amount of U.S. emissions from all sources.
Canadian environmentalists will try to use the Bali agreement to force Ottawa to work harder on climate change. "The government's current targets and policies fall far short of the standard set in Bali," said Matthew Bramley of the Pembina Institute. "Nothing less than a massive scale-up of federal efforts on climate change is required for Canada to play a responsible part in the next two years of negotiations."
Disappointments on Climate
Editorial
New York Times
December 17, 2007
A week that could have brought important progress on climate change ended in disappointment.
In Bali, where delegates from 187 countries met to begin framing a new global warming treaty, America’s negotiators were in full foot-dragging mode, acting as spoilers rather than providing the leadership the world needs.
In Washington, caving to pressures from the White House, the utilities and the oil companies, the Senate settled for a merely decent energy bill instead of a very good one that would have set the country on a clear path to a cleaner energy future.
The news from Bali was particularly disheartening. The delegates agreed to negotiate by 2009 a new and more comprehensive global treaty to replace the Kyoto Protocol. (Kyoto expires in 2012 and requires that only industrialized nations reduce their production of greenhouse gases.) They pledged for the first time to address deforestation, which accounts for one-fifth of the world’s carbon dioxide emissions. And they received vague assurances from China — which will soon overtake the United States as the biggest emitter of greenhouse gases — and other emerging powers that they would seek “measurable, reportable and verifiable” emissions cuts.
From the United States the delegates got nothing, except a promise to participate in the forthcoming negotiations. Even prying that out of the Bush administration required enormous effort.
Despite pleas from their European allies, the Americans flatly rejected the idea of setting even provisional targets for reductions in greenhouse gases. And they refused to give what the rest of the world wanted most: an unambiguous commitment to reducing America’s own emissions. Without that, there is little hope that other large emitters, including China, will change their ways.
There is some consolation in knowing that the energy bill approved last week included several provisions — among them the first significant improvement in automobile mileage standards in more than 30 years — that over time should begin to reduce the United States’ dependency on foreign oil and its output of greenhouse gases. The bill would have had much greater impact if the Senate had not killed two important provisions opposed by the White House and its big industrial contributors.
One would have required utilities to generate an increasing share of their power from renewable sources like wind. The other would have rolled back about $12 billion in tax breaks granted to the oil companies in the last energy bill and used the proceeds to help develop cleaner fuels and new energy technologies.
The decision to maintain the tax breaks was particularly shameful. Blessed by $90-a-barrel oil, the companies are rolling in profits, and there is no evidence to support the claim that they need these breaks to be able to explore for new resources. Yet the White House had the gall to argue that the breaks are necessary to protect consumers at the pump, and the Senate was craven enough to go along.
This Senate will have another chance to provide the American leadership the world needs on climate change. An ambitious bipartisan bill aimed at cutting America’s greenhouse gas emissions by 70 percent by midcentury has been approved by a Senate committee and may come to the floor next year. Though the bill is far from perfect and will provoke intense debate, it could offer a measure of redemption for the administration’s embarrassing failure in Bali.
Stalling in Bali
The Bush administration continues to say one thing and do another on climate change.
Editorial
Washington Post
Tuesday, December 18, 2007
THE BUSH administration wants everyone to believe that all along it has taken the threat of global warming as seriously as the rest of the world has. Advisers point to Mr. Bush's comments on climate change made as early as 2001 and to the nibbling-at-the-edges actions he has taken on research, regulation and funding. Then rhetoric meets reality, as it did at the climate talks in Bali.
Representatives of 187 nations were in the Indonesian resort destination for almost two weeks this month trying to plot a road map to a successor treaty to the Kyoto Protocol, which mandated reductions in greenhouse gas emissions by 36 industrialized countries and which expires in 2012. The European Union and other countries wanted binding emissions reductions of 25 to 40 percent by 2020. As he has consistently, Mr. Bush said no.
That's not to say something good didn't come out of Bali. The new framework agreement calls on developing nations, such as India and China, to consider adopting national policies to address their respective greenhouse gas emissions that are "measurable, reportable and verifiable." But the heavy lifting for both developed and developing countries will be done in treaty negotiations over the next two years.
The administration's resistance to mandatory cuts led U.N. Secretary General Ban Ki-moon to declare last week that the proposed reductions may be "too ambitious." He added: "Practically speaking, this will have to be negotiated down the road." Practically speaking, down the road means when there is a new American president. Palming off the leadership and the tough decisions that go with it to his successor seems to be fine with Mr. Bush.
Congress and the states shouldn't wait. The Senate will take up the Lieberman-Warner Climate Security Act next month. Sponsored by Sens. Joseph I. Lieberman (I-Conn.) and John W. Warner (R-Va.), the bill would put a price on carbon through a declining cap in greenhouse gas emissions for each year between 2012 and 2050. In this cap-and-trade system, companies in the transportation, electric power and manufacturing sectors would purchase and trade allowances for the right to pollute the air. Meanwhile, governors are so fed up with federal inaction on the environment that they're forming their own binding regional compacts for reducing greenhouse gases. This is the kind of leadership the world and many in this country are looking for.
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The last report from the U.N. Intergovernmental Panel on Climate Change warned that if action is not taken within the next decade, the effects of global warming may be irreversible. Waiting for the next president shouldn't be an option.
Bully for Bali
Editorial
The Sunday Times
December 16, 2007
It was always likely that the Bali climate change conference would cobble together some kind of deal. Sure enough, in the early hours of yesterday morning after tears, tantrums, boos and recriminations, a “Bali road map” was agreed setting out what the United Nations described as a clear agenda for two years of talks aimed at negotiating a successor to the Kyoto framework. “This is a historic breakthrough and a huge step forward,” said Hilary Benn, environment secretary. “For the first time ever all the world’s nations have agreed to negotiate on a deal to tackle dangerous climate change concluding in 2009.”
It is easy to dismiss such claims as hyperbole and the Bali deal as yet another fudge from governments, particularly the US government, unwilling to face up to the hard decisions on global warming. The price of getting the United States to sign up was the removal of hard numbers from the road map. Friends of the Earth dismissed it as a “weak outcome” and accused rich countries of letting the developing world down.
Yet Bali was always going to be a holding operation. There was pressure for specific targets to be included in the text. The European Union wanted a commitment to emissions reductions by advanced countries of 25% to 40% by 2020, as well as references to a peak in global emissions over the next 10 to 15 years and a halving by 2050. It is reasonable to argue, however, as America did, that such targets should emerge during the negotiations of the next two years, not be imposed at the outset. America also made important concessions.
Al Gore said it outright in Bali but the unspoken message of yesterday’s deal is that things will change over the next two years, most importantly in the White House. Attitudes are moving in America. Politically this has been led at state level by the likes of Arnold Schwarzenegger and at city level by the mayors of most US cities. George W Bush has looked increasingly out of step with public opinion. Next November’s presidential election should see a new era in the White House on climate policy. The Democratic frontrunners, Hillary Clinton and Barack Obama, are both seemingly green. Mr Obama wants to introduce an economy-wide “cap-and-trade” programme to cut US greenhouse gas emissions and to invest heavily in energy efficiency.
Mrs Clinton, running a “carbon neutral” campaign, has a similar plan for cutting emissions but also wants a windfall tax on oil companies to be invested in an energy fund to provide one-fifth of US electricity from renewables by 2020. On the Republican side, Senator John McCain was the first to highlight global warming and, while he has little chance of securing the nomination, his rivals have jumped on the band-wagon. Oil at $90 a barrel and a determination to reduce dependence on the Middle East are enough to convince even the sceptics.
Political change is important but so is technology. Developing countries suffer from the effects of climate change but often cannot afford the equipment needed to limit their own pollution and greenhouse gas emissions. Even China, growing at a breakneck pace, is still building dirty coal-fired power stations rather than using the clean coal technology available in the West. One significant breakthrough in Bali was an agreement to step up the rate of technology transfer and provide the private sector with more incentives to give poor countries access to the latest innovations.
Bali should not be dismissed. It is not long since Tony Blair said there would never be a successor deal to Kyoto. Now a deal looks distinctly possible, if only after some hard negotiations over the next two years. And it will have America, China and India on board. It is easy to be gloomy but political will and technological change are powerful allies. If these bleary-eyed declarations are followed up with action, there is every reason to be hopeful.
Continue reading "More Bali-hoo"
December 17, 2007
Proponents hope to get pipeline flowing
COMMENT: It may be pointless to note that in 2001, when the Mackenzie Gas Pipeline made its first appearances on this website, the project was going to cost a mere $3 billion. Now it's $16 billion and climbing. But it's undeniably interesting.
Not once have the MGP proponents (led by Imperial Oil) stopped clamouring for a reduced regulatory burden and a greater public subsidy.
But in the 1970s with the Mackenzie pipeline proposal at that time, and in 2001 with this version of it, and today, the big concerns remain the environmental and social impacts on the land and communities of the north. Construction of the Mackenzie Gas Pipeline will unleash immediate and extensive gas production all along the pipeline route.
In 2005, the Canadian Parks and Wilderness Society undertook a mapping exercise designed to illustrate these impacts at various stages to full build-out. Small versions of these maps are copied below. They are published in higher resolution in a Pembina Institute publication entitled A Peak into the Future.
Infrastructure - pipelines, roads, transit - begets construction and development. Building this pipeline will have the same consequences in the north as did Clark Griswold (Chevy Chase) on his house in Christmas Vacation, when he finally connected the power to the lights. (and if you don't know the reference, don't be a Grinch - it's a modern Christmas classic; go rent it now.)
SHAWN MCCARTHY
Globe and Mail
December 14, 2007
Proponents of the $16-billion Mackenzie Valley Pipeline have presented a new financial plan to the federal government in hopes of kick-starting the long-stalled gas pipeline from the Arctic, Industry Minister Jim Prentice said yesterday.
Mr. Prentice met in Calgary yesterday with executives from Imperial Oil Ltd. and TransCanada Corp., who have fashioned a new partnership to finance the proposed main pipeline and natural gas gathering system in the Mackenzie Delta.
"I intend to analyze and review their proposal as expeditiously as possible," Mr. Prentice said in the statement.
It is believed that TransCanada, an energy infrastructure company, would take a majority stake in the mainline pipeline project, which would cover half the estimated $16-billion cost, while the producers, which include Imperial, ConocoPhillips and Royal Dutch Shell, would finance the gathering system and the development of the gas fields.
The Aboriginal Pipelines Group - representing native groups in the north - would have a large minority stake in the pipeline, perhaps as much as 40 per cent.
TransCanada chief executive Hal Kvisle said in an interview this week that the pipeline project is essential if Canada is to have the gas it will need in the coming years, and that some federal assistance would be required.
Imperial Oil Ltd. had been leading the consortium of producers that intended to finance and build the project. However, last winter, Imperial announced that the projected cost had mushroomed to $16.2-billion from $7-billion, and indicated it would be impossible to proceed without significant federal assistance.
TransCanada, which also has submitted a proposal to build an Alaska natural gas pipeline, has long been waiting in the wings to assume control of the Mackenzie project. It stepped in when it was clear Ottawa and Imperial Oil had reached an impasse earlier this year.
Mr. Prentice - who has responsibility for the northern pipeline - said last summer the pipeline project would have to be "reinvented."
Still, a spokesman for Imperial Oil said this week that the company remained committed to the pipeline project.
David MacInnis, of the Canadian Energy Pipeline Association, said yesterday that his group has long advocated that Ottawa and the oil companies move to a "Plan B" that would see a pipeline operator build the main leg of the Mackenzie project, while the producers focused on field development and the gathering system.
He said TransCanada and APG would be able to finance the pipeline themselves if they could get long-term commitments of sufficient quantities from the big four producers, plus a host of small operators who have been exploring for gas in the Arctic.
While he stressed that he was not privy to details of the plan, Mr. MacInnis said the federal government would likely be called upon to streamline the regulatory process to protect against costly delays, and to provide accelerated tax write-offs of capital expenditures.
Prentice reviewing Mackenzie Valley pipeline financial plan
CanWest News Service
Monday, December 17, 2007
Canada's Industry Minister Jim Prentice is reviewing a financial plan submitted to him Friday by the backers of the $16.2-billion Mackenzie Gas Project.
Following meetings in Calgary with the project's key participants, Prentice would not detail the fiscal package but said it would be reviewed and analyzed as expeditiously as possible.
Projects proponents led by Imperial Oil Ltd. have been in talks with Ottawa for a year to try to hammer out fiscal terms for the giant, 1,220-kilometre pipeline and gathering system that could deliver as much as 1.9-billion cubic feet of natural gas per day from fields in the Mackenzie Delta of the Northwest Territories to the Alberta hub and onwards into the North American market.
While regulatory hearings have wrapped up, the project has stalled as a result of cost increases and a failure to reach a fiscal deal with the government.
Imperial has at times in the past looked for financial help from Ottawa to help make the project economic.
In recent weeks, the Financial Post reported the producer partnership of Imperial, Imperial's parent Exxon Mobil Corp., Conoco Phillips and Royal Dutch Shell would be prepared to hand control of the pipeline over to TransCanada Corp., Canada's largest pipeline company, which has financially backed the project's fifth partner, the Aboriginal Pipeline Group (APG), an aboriginal enterprise.
TransCanada would take the lead with 60-per-cent ownership, with the rest going to the APG, sources close to the project said.
That structure, under which the project and its tolling system would be regulated by the National Energy Board, was preferred in the eyes of Ottawa based on comments made by Prentice last summer.
Under that project structure, sources said Ottawa would be asked to assist via loan guarantees, guaranteed shipping commitments or other breaks.
Prentice's statement Friday said the government of Canada has no interest in owning any portion of the project or "in subsidizing petroleum companies."
"It must be a private sector investment, driven by commercial considerations," he said.
"It must result in tangible benefits for northerners and Canadians in general. Participation of the Aboriginal Pipeline Group must remain an important aspect of the project."
TransCanada Corp. chief executive Hal Kvisle told reporters last week that his company taking the lead role is just one in a range of options that had been discussed.
© CanWest News Service
December 15, 2007
No opposition to Chevron plan to sell Aitken
Facility is B.C.'s main storage venue for natural gas
Scott Simpson
Vancouver Sun
Saturday, December 15, 2007
Chevron Canada's application to turn B.C.'s main natural gas storage facility into a saleable asset is meeting virtually no opposition, according to documents on file with the B.C. Utilities Commission.
Earlier this year the BCUC granted Chevron's Aitken Creek facility, the only world-class gas storage venue in the province, exemption from regulation on the price it charges producers to store gas coming out of northeastern B.C.'s gas patch.
The BCUC ruled that Aitken Creek was a public utility -- but lacked market power to unduly influence gas pricing in B.C.
The approximate value of the facility, which has no counterpart in B.C., is $1 billion, and one potential buyer estimated Friday that about $420 million worth of gas will annually move through Aitken Creek. The facility holds gas for pipeline delivery to southern B.C. and to United States markets as far east as Chicago.
Chevron acquired Aitken Creek, which includes an underground storage cavern that originally held a gigantic natural gas deposit, as part of a larger purchase of Unocal Corp. in 2005. It has since decided the asset does not conform to its Canadian business model.
In preparation for sale, Chevron is asking BCUC permission to create a separate company to operate Aitken Creek -- a move that would then allow it to sell the facility to a new owner.
They are asking the BCUC to approve its proposals "at its earliest convenience."
In a final submission this week to the BCUC, Chevron notes that only two parties, Terasen Gas and the B.C. Old Age Pensioners took the time to provide written comment on the proposed transaction -- and documents on file with the BCUC show that neither party oppose the proposed arrangements.
The facility has a working capacity of 71 billion cubic feet and could be expanded by about 40 per cent.
The National Energy Board has noted that gas storage is "extremely limited in B.C." -- consisting of Aitken and a small liquefied natural gas (LNG) facility on Tilbury Island near the mouth of the Fraser River.
Several companies have been proposed as potential buyers but only one -- a new Alberta-based venture -- has publicly announced its intentions.
Chevron officials did not respond to The Vancouver Sun's request for an interview.
"There is no question that it is a world-class facility," said Rex Kary, founder of prospective Aitken buyer Moneta Energy. "The volume of gas handled there is substantial."
Kary said Moneta was formed a few months ago with the specific intention of acquiring gas storage assets as long-term investments.
"It comes from a fundamental belief that North America is depleting its natural gas reserves," Kary said. "There is not as much gas that can be delivered as easily as several years ago yet the demand is still increasing. What's starting to happen is that the volatility in the price, the price difference between summer and winter, is becoming greater."
© The Vancouver Sun 2007
UNOCAL - Aitken Creek - Exemption Application
UNOCAL - Disposition of Aitken Creek Gas Storage
Moneta Targets Gas Storage Opportunities
Nickel's Energy Analects
12-Dec-2007
Recently formed Moneta Energy Services says it intends to focus on developing natural gas storage opportunities.
Led by Rex Kary, a gas marketing services veteran, Moneta is focused on developing and/or acquiring infrastructure within the Canadian energy sector to extract additional value by trading the commodities that it stores and ships in its own assets.
Moneta is backed by Yorktown Energy Partners LLP, a $2.7-billion private equity fund solely devoted to investment in energy assets, and E&C Capital, the energy and commodities private equity group of BNP Paribas, a global bank that is a leading financial institution.
Moneta intends to use this capital to acquire and build infrastructure including storage facilities and pipelines to facilitate trading in gas futures.
“We have been given a mandate to develop a Canadian energy infrastructure organization,” Kary said in a statement. “Our partners, who are in the business of investing significant sums of money with known management teams, want us to become a significant natural gas storage player in Canada.”
One component of the company’s business plan is to partner with producing companies by purchasing their output as well as depleted gas fields for further development into underground storage.
The company will also work with utility companies to build storage in underground salt caverns and manage gas price exposure by optimizing the risk associated with futures trading.
Moneta said its strategy would eliminate environmental risk of abandonment for producers, while also monetizing remaining reserves to accelerate returns from a particular field.
Besides Kary, who has as president and chief executive officer, was a founder of Continental Energy Marketing in 1989, Moneta’s executive team includes: Bob Tomes as chief financial officer, with over 25 years of experience working on finances, strategy, treasury management, budget modeling and business development; Brad Johns as vice-president of operations, who has been involved in the technology sector for over 17 years, including focusing the last few years exclusively in the oil and gas sector; Glen Gill, vice-president of business development, with over 26 years of energy industry experience, including founding the first producer-owned and unregulated gas storage facility in Canada; Linda Wiebe, with five years experience at Continental Energy; Chris Richards as vice-president of trading optimization, with over 12 years of marketing, operations management and business development, including handling gas trading at AltaGas Income Trust; and Bob Stepan as vice-president of corporate development, with over 22 years of business experience in the energy sector, including positions with BC Gas Inc. and Union Gas Limited, the latter working in the storage planning group.
Moneta Energy Services Will Be Taking Producers Old Reservoirs and Turning Them Into New Natural Gas Storage
Moneta News Release
Marketwire
14-Dec-2007
CALGARY, ALBERTA--(Marketwire - Dec. 14, 2007) - Recently-formed Moneta Energy Services has entered the dynamic fast pace natural gas marketplace to capture value embedded in the commodity by helping producers shed depleted oil and gas fields and better deal with natural gas prices that have recently seen wild fluctuations. The new Canadian-based company, founded by gas marketing services veteran Rex Kary, is focused on developing and/or acquiring infrastructure within the Canadian energy sector to extract additional value by trading the commodities that it stores and ships in its own assets.
Moneta is backed by the financial strength of its partners - Yorktown Energy Partners LLP, a $2.7 billion private equity fund solely devoted to investment in energy assets, and E&C Capital, the energy and commodities private equity group of BNP Paribas, a global bank that is a leading financial institution in the energy and commodity sectors. Moneta will use this capital to acquire and build infrastructure including natural gas storage facilities and pipelines to facilitate trading in gas futures.
"We have been given a mandate to develop a Canadian energy infrastructure organization," says Rex Kary, who leads Moneta's hand-picked management team. "Our partners, who are in the business of investing significant sums of money with known management teams, want us to become a significant natural gas storage player in Canada."
One component of the company's business plan is to partner with producing companies through the purchase of their gas production as well as their depleted gas fields, further developing them into underground storage. The company will also work with utility companies to build storage in underground salt caverns and manage their gas price exposure by optimizing the risk associated with trading in gas futures.
Moneta plans to use underground reservoirs to store gas by putting it back into the ground in order to sell the gas in a period of greater demand and higher prices.
When Moneta takes over these underground reservoirs, it eliminates the producer's environmental risk of abandonment and, more importantly, monetizes the last remaining reserves, accelerating the producer's return from a particular gas field. "Their dollars are best spent drilling and finding new reserves, not trying to squeeze the last ounce of gas from the ground," Kary says. "We, on the other hand, need the gas in the ground to operate the storage field. It is a win-win relationship."
Alberta is an international hub for gas production, exporting 13 billion cubic feet of natural gas daily, with more physical gas traded in Alberta than any other location in North America. A simple example of gas storage utilization for trading in the commodity market is purchasing lower priced gas in summer months and selling during peak winter months.
Moneta Energy Services also offers producers and industrial users much needed assistance in managing gas prices at a time of very low or very high prices in the marketplace. "We offer producers and large industrial/commercial users energy management solutions so they aren't exposed to wide price fluctuations and can manage their business much better," says Kary
"The price of gas in the last few months has been very low and some wells can no longer produce economically, creating a financial hardship for many natural gas producers," Kary says. "With our financial strength, we can structure a variety of arrangements with producers to help ease the pain of the current low natural gas prices."
Moneta Energy Services Ltd. has combined industry knowledge and expertise with patient and persistent financial depth with a goal to become one of the leading asset-backed energy services companies in North America.
For more information, please contact
Moneta Energy Services Ltd.
Alyn Edwards
(604) 689-5559 or Cell: (604) 908-7231
or
Moneta Energy Services Ltd.
Rex H. Kary
(403) 770-4156
Email: Posted by Arthur Caldicott at 01:28 PM
Bali climate delegates eke out `weak' deal
a collection of news articles and news releases following the close of the Bail UN climate conference, where a surprise turnaround by the US and Canada resulted in a consensus, albeit in a watered-down agreement among the 188 nations present…
Gateway to the UN System's Work on Climate Change
Proceedings and Documents from the Bali Conference
Canada Bows to Pressure at Bali's 11th Hour
Canadian Action Network on Climate Change, 15-Dec-2007
Climate delegates eke out `weak' deal
Peter Gorrie, The Star, 15-Dec-2007
Bali breakthrough launches climate talks
David Fogarty, Reuters, 15-Dec-2007
FACTBOX: Achievements at Bali climate talks
Reuters, 15-Dec-2007
Isolated Canada grudgingly accepts Bali deal
Geoffrey York, Globe and Mail, 15-Dec-2007
U.S., Canada agree to framework at climate conference
Mike De Souza, CanWest News Service, 15-Dec-2007
Canada's environment minister says he regrets watered-down climate deal
Alexander Panetta, The Canadian Press, 15-Dec-2007
A Look at the Bali Climate Change Plan
The Associated Press, 15-Dec-2007
WWF says Bali Roadmap "weak on substance"
China View, 15-Dec-2007
PRESS RELEASE - CLIMATE ACTION NETWORK CANADA - RESEAU ACTION CLIMAT CANADA
December 15, 2007
Canada Bows to Pressure at Bali's 11th Hour
Environmental Groups Give Deal a Qualified Welcome
Bali - Nations agreed today on a "Bali roadmap" to launch negotiations for a post-2012 global climate agreement that will be guided by scientific analysis of the emission cuts needed to avoid dangerous climate change.
Key developing countries signalled a willingness to take on new commitments at the two-week-long UN climate conference. However, Canada worked with the United States for most of the meeting to oppose crucial elements of the Bali roadmap. As a result, parts of the deal are too vague to assure a successful outcome of the next round of UN negotiations, due to be completed in 2009.
"The world moved forward in Bali today, but we had the opportunity to do much more," said Steven Guilbeault, Équiterre. "The good news is that the Bali deal recognizes that rich nations need to cut their greenhouse gas pollution by 25 to 40 per cent below 1990 levels by 2020, and nations will negotiate the next phase of Kyoto on that basis."
Canada initially opposed this emissions reduction range in the final negotiating session, but agreed not to block the consensus position when it found itself virtually isolated.
"Canada worked against the key elements of this deal for most of the two weeks in Bali, and was singled out by other countries and high-ranking UN officials for its obstructive behaviour," said Dale Marshall, David Suzuki Foundation. "In the end, the government responded to public pressure and allowed this deal to go through."
The first phase of the Kyoto Protocol ends in 2012, and today's deal launches a two-year negotiation process for the post-2012 "Kyoto phase 2". In addition to setting a range of emission reduction targets for industrialized countries, the Bali roadmap contains commitments to negotiate actions to control emissions in developing countries; financial agreements for adaptation and the transfer of climate-friendly technology; and an agreement to tackle the problem of deforestation in developing countries.
"Now is when the real work begins," said Matthew Bramley, Pembina Institute. "The government's current targets and policies fall far short of the standard set in Bali. Nothing less than a massive scale-up of federal efforts on climate change is required for Canada to play a responsible part in the next two years of negotiations."
"Canada came to Bali demanding unfair commitments from developing countries, and was roundly criticized for it," said Emilie Moorhouse, Sierra Club of Canada. "In the end, the only bridge that Canada built in Bali was one that led to the U.S."
"The agreement to develop approaches to reduce deforestation and forest degradation is a key outcome of this meeting," said Chris Henschel, Canadian Parks and Wilderness Society. "Protecting carbon stored in forests and other ecosystems is an important complement to deep cuts in fossil fuel emissions."
-30-
Contacts:
Jean-Francois Nolet, Equiterre, +62-81-338-969139
Dale Marshall, David Suzuki Foundation, 613-302-9913
Matthew Bramley, Pembina Institute, +62-81-338-969113
Emilie Moorhouse, Sierra Club of Canada, +62-81-338-969125
Claire Stockwell, Greenpeace, +62-81-337-949709
Climate delegates eke out `weak' deal
Peter Gorrie
The Star
December 15, 2007
After hours of chaotic, sometimes angry haggling, the United Nations conference on climate change last night appeared set to approve what critics describe as a weak deal on cutting greenhouse gas emissions.
Nerves were frayed as sleep-deprived delegates from nearly 190 countries repeatedly edged to the brink of agreement, then pulled back into more acrimonious debate. Each move further diluted a compromise that, from the outset, was, "a lot of structure with not a lot of content," said Dale Marshall of the David Suzuki Foundation.
Public opinion forced delegates to find a way to agree, UN climate chief Yvo de Boer told reporters. "I don't think any politician can afford to walk away from here."
But after one nasty exchange, de Boer left the conference stage in tears, an observer said.
As expected, the conference - on the Indonesian tourist island of Bali - did agree to a December 2009 deadline for talks aimed at creating a plan to cut global emissions after the current Kyoto Protocol expires in 2012. Beyond that, the main points are vague.
The agreement would set up two tracks for the talks.
Canada and the 36 other nations that accepted emissions reduction targets under Kyoto's first phase will continue their negotiations - which have achieved little since they began two years ago - on tougher targets.
On the second track, those countries, along with the 150 or so others that agreed 15 years ago climate change must be tackled, but which don't have targets, will engage in more general discussions on how emissions could be cut.
The frantic talks at the end of the two-week conference focused on what seem to be arcane matters. But observers said they could have a big impact, because the expected outcome means the "Bali road map" has no real destination.
Faced with strong objections from the United States and Canada, other rich nations backed down on whether the second track should have as a suggested goal that emissions be cut by 25 to 40 per cent below 1990 levels by 2020.
That goal, which international scientists said this year is essential to avoid the worst impacts of climate change, has been relegated to a footnote from a more prominent position in the agreement's preamble. Even there, it's presented as just one of several possible aims.
Instead, the preamble merely states, "deep cuts in global emissions will be required" to avoid dangerous climate change.
In this set of talks, the deal says, countries should aim for "measurable, reportable and verifiable" measures to reduce emissions that are "appropriate" for each of them.
Although Canada, the United States and other developed nations are supposed to meet a slightly tougher standard than those in the developing world, the agreement does represent movement by those poorer countries.
The agreement to discuss emission-cutting measures would be a first for China, India and others in this group that have booming economies and pollution, and reject any impediments to their growth. Still, they're committing only to talk, not to actual emissions cuts or targets.
That's also the case, though, for the United States.
"It starts a negotiation that allows but doesn't require an outcome where the U.S. takes a cap," or limit on greenhouse gases, said David Doniger, climate policy director at the Washington-based Natural Resources Defence Council.
Even so, "we can live with this," said German Environment Minister Sigmar Gabriel, who had pushed for a stronger agreement.
"We must not forget that it's only a couple of years ago that (U.S. President George W.) Bush opposed any negotiations," said Norway's environment minister, Erik Solheim. "Now we are talking about commitments involving the United States."
But a spokesperson for nations forecast to be hardest hit by climate change, which includes islands likely to be inundated if sea level rises, said he was disappointed.
"People are negotiating, they are posturing, and not rising above entrenched national positions," said Angus Friday, Grenada's Ambassador to the UN and chair of the Alliance of Small Island states.
"We are ending up with something so watered down there was no need for 12,000 people to gather here in Bali to have a watered-down text. We could have done that by email."
The new deal also says the talks should include how developed nations can transfer "clean" emissions-cutting technologies to the developing world, and to consider how tropical nations might be compensated for preserving their rainforests - a major storehouse of carbon, the source of the major greenhouse gas, carbon dioxide.
Late last night, it wasn't clear whether the other track of negotiations, for the 37 countries with Kyoto targets, would include the 2020 goal of a 25 to 40 per cent emissions cut for rich nations.
Canada, on the sidelines during most of the talks, was said to be urging its removal, arguing the target would be impossible to attain.
The federal government's plan, proposed this year by Environment Minister John Baird, would reduce emissions by 20 per cent below 2006 levels by 2020. If that were achieved, Canada would still be slightly above its 1990 emissions total and far off the scientists' target.
This track, however, will aim at a 50 per cent cut in global greenhouse gas emissions by 2050.
Critics say that's too remote to be meaningful, and tough medium-term steps are required.
But de Boer defended it. Setting the long-term target makes the 2020 goal implicit - "an inevitable stop on that road," he said.
With files from Star wire services
Bali breakthrough launches climate talks
David Fogarty
Reuters
Sat Dec 15, 2007
NUSA DUA, Indonesia (Reuters) - Nearly 200 nations agreed at U.N.-led talks in Bali on Saturday to launch negotiations on a new pact to fight global warming after a reversal by the United States allowed a breakthrough.
Washington said the agreement marked a new chapter in climate diplomacy after six years of disputes with major allies since President George W. Bush pulled out of the Kyoto Protocol, the main existing plan for combating warming.
"This is the defining moment for me and my mandate as secretary-general," U.N. Secretary-General Ban Ki-moon said after making a return trip to Bali to implore delegates to overcome deadlock after the talks ran a day into overtime.
Ban had been on a visit to East Timor. "I am deeply grateful to many member states for their spirit of flexibility and compromise," Ban told Reuters.
The Bali meeting approved a "roadmap" for two years of talks to adopt a new treaty to succeed Kyoto beyond 2012, widening it to the United States and developing nations such as China and India. Under the deal, a successor pact will be agreed at a meeting in Copenhagen in late 2009.
The deal after two weeks of talks came when the United States dramatically dropped opposition to a proposal by the main developing-nation bloc, the G77, for rich nations to do more to help the developing world fight rising greenhouse emissions.
The United States is the leading greenhouse gas emitter, ahead of China, Russia and India.
Indonesian Environment Minister Rachmat Witoelar, the host of the talks, banged down the gavel on the deal to rapturous applause from weary delegates.
"All three things I wanted have come out of these talks -- launch, agenda, end date," Yvo de Boer, head of the U.N. Climate Change Secretariat, told reporters.
The accord marks a step towards slowing global warming that the U.N. climate panel says is caused by human activities led by burning fossil fuels that produce carbon dioxide, the main greenhouse gas.
Scientists say rising temperatures could cause seas to rise sharply, glaciers to melt, storms and droughts to become more intense and mass migration of climate refugees.
"U.S. HUMBLED"
"The U.S. has been humbled by the overwhelming message by developing countries that they are ready to be engaged with the problem, and it's been humiliated by the world community. I've never seen such a flip-flop in an environmental treaty context ever," said Bill Hare of Greenpeace.
The European Union, which dropped earlier objections to the draft text, was pleased with the deal.
"It was exactly what we wanted. We are indeed very pleased," said Humberto Rosa, head of the European Union delegation.
German Environment Minister Sigmar Gabriel was cautiously optimistic.
"Bali has laid the foundations ...it was hard work and exhausting. But the real work starts now," he said in Bali.
But a leading Indian environmentalist was disappointed.
"At the end of the day, we got an extremely weak agreement," said Sunita Narain, head of the Centre for Science and the Environment in New Delhi. "It's obvious the U.S. is not learning to be alive to world opinion."
Agreement by 2009 would give governments time to ratify the pact and give certainty to markets and investors wanting to switch to cleaner energy technologies, such as wind turbines and solar panels.
Kyoto binds all industrial countries except the United States to cut emissions of greenhouse gases between 2008 and 2012. Developing nations are exempt and the new negotiations will seek to bind all countries to emission curbs from 2013.
DAY OF DRAMA
In a day of drama and emotional speeches, nations had berated and booed the U.S. representatives for holding out. A wave of relief swept the room when the United States relented.
"The United States is very committed to this effort and just wants to really ensure we all act together," said Paula Dobriansky, head of the U.S. delegation.
"With that, Mr Chairman, let me say to you we will go forward and join consensus," she said to cheers and claps.
James Connaughton, chairman of the White House Council on Environmental Quality, said: "This is not a step taken alone by America. This is a step taken by all the countries that the time had come to open a new chapter."
(Reporting by Adhityani Arga, Sugita Katyal, Alister Doyle, Emma Graham-Harrison, Ed Davies, Gde Anugrah Arka and Gerard Wynn; Editing by Alister Doyle)
FACTBOX: Achievements at Bali climate talks
Reuters
Sat Dec 15, 2007
(Reuters) - Climate talks in Bali, Indonesia, agreed on Saturday to start two years of negotiations to seal a broader pact to fight global warming.
As part of the meeting among 188 nations, a range of other pressing issues to aid the developing world were discussed. Following is what has been agreed, or not agreed, at the talks.
TWO-YEAR DIALOGUE
Negotiators agreed to start two years of talks on a new climate deal to succeed the Kyoto Protocol, the main deal for fighting climate change until 2012, to bind outsiders led by the United States, China and India.
The talks will start with a first meeting by April 2008 and end with adoption of a new treaty in Copenhagen in late 2009.
A U.S. U-turn allowed the deal to go ahead after a dramatic session in which Washington was booed for opposing demands by poor nations for the rich to do more to help them fight warming.
AMBITION TO FIGHT CLIMATE CHANGE
The Bali talks were never expected to set firm greenhouse gas emissions targets but the Bali agreement did set a global aim for "deep cuts in global emissions" to avoid dangerous climate change
The final text distinguished between rich and poor countries, calling on developed nations to consider "quantified" emissions cuts and developing countries to consider "mitigation actions".
ADAPTATION FUND
The Bali meeting agreed to launch a U.N. fund to help poor nations cope with damage from climate change such as droughts or rising seas. The Adaptation Fund now comprises only about $36 million but might rise to $1-$5 billion a year by 2030 if investments in green technology in developing nations surges.
The accord, enabling the fund to start in 2008, broke deadlock on management by splitting responsibility between the Global Environment Facility, which funds clean energy projects, and the World Bank. The fund would have a 16-member board with strong representation from developing nations.
PRESERVING TROPICAL FORESTS
A pay-and-preserve scheme known as reducing emissions from deforestation in developing countries (REDD) aims to allow poorer nations from 2013 to sell carbon offsets to rich countries in return for not burning their tropical forests.
The 189 nations recognized the urgent need to take further action to cut carbon and methane emissions from tropical forests. The draft decision encourages parties to undertake pilot projects to address the main causes of deforestation.
CARBON CAPTURE AND STORAGE
The meeting postponed until next year any consideration of a plan to fund an untested technology which captures and buries the greenhouse gas carbon dioxide, emitted from power plants that burn fossil fuels. Some countries want capture and storage to qualify for carbon offsets for slowing global warming.
HFCs
Bali failed to agree whether or not to allow companies to sell carbon offsets from destroying new production of powerful greenhouse gases called hydrofluorocarbons (HFCs). Benefiting factories have been the biggest winners under a U.N. scheme to reward companies which cut greenhouse gas emissions.
TECHNOLOGY TRANSFER
The final draft called for more financial resources and investment for developing countries on adaptation, mitigation and technology cooperation, especially for the most vulnerable.
Technology transfer is a key demand of developing nations. They say they should not have to sacrifice growth to fight warming, but cannot afford the clean technologies that would allow them to expand their economies while curbing emissions.
(Editing by David Fogarty)
© Reuters 2007. All Rights Reserved
Continue reading "Bali climate delegates eke out `weak' deal"
November 16, 2007
LNG Knocking On Canada's Door, Energy Policy Needed
By Richard Macedo
Nickle's Analytics
Nickle's Daily Oil Bulletin
16 November 2007
Liquefied natural gas will become a more important player in the continent's commodity mix over the next decade helping to maintain a relatively balanced supply and demand situation and steady North American prices, the National Energy Board predicts in its long term energy outlook released Thursday.
NEB Media Release: NEB report says future energy supply ample and will challenge Canadians to make smart energy choicesNEB Report: Canada's Energy Future - Reference Case and Scenarios to 2030
An Energy Market Assessment November 2007
The board also says a long term energy vision and strategy is needed in Canada to balance the multiple objectives on the table. "This plan must be well-integrated at the regional level, consider environmental issues and economic growth, and be developed with input from Canadians," the NEB says. "Only then will be able to overcome challenges ahead and take advantage of the opportunities available."
Despite relatively flat natural gas prices in its reference case scenario, the NEB expects gas drilling in Canada to recover to roughly 18,000 wells per year by 2009. (There was no attempt to incorporate the impact of Alberta's recent decision to increase royalties starting in 2009).
The board report outlines a reference case scenario, one of four hypothetical models used for its Energy Future through the year 2030 analysis. The reference case is the NEB's view of the most likely development of energy demand and supply over 10 years (2005-2015).
"That (scenario) definitely sees more LNG coming in," Paul Mortensen, the NEB's technical leader of natural gas, said in an interview. "There's pretty significant expansion in U.S. capacity coming in next year."
Three LNG import terminals in Canada are expected to be operational by 2015 with annual import volumes around 1.4 bcf per day.
Demand for natural gas increases steadily in the reference case, led by gas use in expanding oilsands operations and greater use as a fuel to generate electricity, the NEB forecasts.
The arrival of LNG on Canadian shores isn't too far off as the Canaport regasification terminal in New Brunswick continues construction and should be operational by the fourth quarter of next year.
Any reduction in net Canadian gas exports over the period is likely to be offset by increased LNG imports into the U.S. and by growing American unconventional gas production. As a result, relatively balanced supply and demand conditions are expected to persist in North American natural gas markets over the reference case period and maintain an average gas price of $6.65 per gigajoule ($7 U.S. per mmBtu).
"I think in the continuing trends case, the middle case, LNG would continue to be a price taker and so the domestic gas price is setting the stage there," Mortensen said. "In that sense it would have no effect on Canadian competitiveness but in the low price case, we are seeing that as an LNG abundant scenario and in that case, there's no incentive for Canadian producers to go looking for higher cost unconventional or frontier gas."
Western Canada is expected to continue to be the primary source of gas production in the reference case.
"The mid-range prices of the reference case and continuing trends encourage some northern development and some continued development of unconventional gas sources," noted John McCarthy, commodities business unit leader. "However, at these prices, it's not high enough to prevent the decline of natural gas production."
High prices in the fortified islands scenario results in an increase in production from northern, offshore and unconventional gas sources, leading to an overall boost in Canadian production.
"The production ... in the triple E scenario declines steeply and this is primarily driven by low...prices for natural gas. Given that this is a collaborative environment with access to global energy, there is an influx of (LNG) imports in this scenario which compensates for the reductions from Canadian basins," he added. "In fact in this scenario, LNG contributes to over half of the Canadian requirements by 2030. This is a scenario where Canada becomes a net importer of natural gas, in effect."
The Triple E scenario is one in which there is a balancing of economic, environment and energy objectives and has the most rigorous environmental policies of the three scenarios.
Despite the resumption of strong drilling activity, a continued downward trend in new well productivity leads to a gradual decline in production over the reference case period. Coalbed methane production in Western Canada increases steadily, reaching 1.4 bcf per day by 2015. Conventional natural gas production from the east coast contributes an average of 430 mmcf per day over the reference case period and includes the Sable project offshore Nova Scotia, the onshore McCully field in New Brunswick and CBM production in Nova Scotia.
Also included is the Deep Panuke project starting in 2010, subject to the necessary approvals.
In the reference case on the oil side, oilsands production rises to 2.8 million bbls per day by 2015, down from three million bbls from the NEB's June 2006 report, due to rapidly escalating costs.
Upgraded bitumen levels expand to 1.82 million bbls per day by 2015 and represents 65% of total bitumen supply. Non-upgraded bitumen levels expand to 970,000 bbls per day by 2015.
The reference case assumes that real crude prices will decrease from the high of recent years to $50 (U.S.) per bbl and remain at this level until the end of the reference period.
"We've learned that energy prices are expected to remain high - higher than historical levels due to primarily international supply and demand issues," McCarthy noted.
Declining Western Canadian Sedimentary Basin conventional oil production is more than offset by increasing oilsands and east coast production.
By 2015, the reference case production levels increase by 61% above 2005 levels, reaching 4.05 million bbls per day which in today's terms would rank Canada as the world's fourth largest producer.
The high oil-to-gas price ratio has resulted in a shift to more oil-directed drilling, the NEB noted. As well, recent success in exploiting the Bakken oil deposits of the Williston Basin in southeast Saskatchewan and in southwestern Manitoba has led to increased light crude oil production. The effect is a softening of the production decline in the WCSB for several years, after which historical decline trends are expected to resume.
Due to the WCSB being a mature supply basin, exploration efforts yield increasingly smaller pools, but development drilling and improved oil recovery (IOR), primarily waterflooding, make up a larger portion of reserves additions.
Following the success of IOR through carbon dioxide (CO2) flooding at the Weyburn and Midale fields in Saskatchewan, it's expected that CO2 flooding in mature oil reservoirs will increase across the WCSB.
In the reference case, production of conventional crude oil and equivalent from the WCSB is projected to resume its decline in the 2009-2010 timeframe, for both light and heavy crude oil, with 2015 production levels of 328,000 bbls per day for conventional light crude oil and 399,000 bbls per day for conventional heavy crude oil. By 2015, conventional crude oil from the WCSB has declined by about 30% compared to 2005 production levels.
Projections for eastern Canada oil production are dominated by the east coast offshore, with only minor amounts of production expected from Ontario. The White Rose field offshore Newfoundland and Labrador became the third producing field in 2005, after Hibernia and Terra Nova. Total production levels are predicted to reach 416,000 bbls per day in 2007 as White Rose expands and Terra Nova returns to full capacity after maintenance work in 2006. The Hebron field begins production in 2013. Contributions from smaller satellite pools in the Jeanne d'Arc Basin are also included, beginning in 2010.
It's also assumed that a new field is found in the relatively unexplored regions of the East Coast, potentially in the Flemish Pass region or in the Deepwater Scotian Shelf. The pool should come onstream in 2015, increasing production levels to 473,000 bbls per day.
http://www.nickles.com/brn.html
November 08, 2007
Natural gas exports take a hit
Scott Simpson
Vancouver Sun
Thursday, November 08, 2007
Increasing dollar hurts producers, provincial and federal governments
One of British Columbia's biggest cash generators, its natural gas exports, are taking a substantial hit from the increasing value of the Canadian dollar.
Greg Stringham, vice-president of markets and fiscal policy at the Canadian Association of Petroleum Producers, said in an interview Wednesday that the declining U.S. dollar hurts gas producers as well as provincial governments and the federal government in Canada, with "billions" of dollars lost across the country.
The situation is exacerbated by declining gas prices -- Stringham noted a recent National Energy Board report that said the average market price for Canadian natural gas was actually lower than the production cost in 2006.
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Oil, by contrast, is providing strong returns because increasing prices are offsetting the lower value of U.S. dollar-valued oil sale revenues.
"Natural gas probably gets hit the hardest out of all of them. Oil has gone up from $68 to $96 and the rise of the Canadian dollar has pretty well offset that. We're getting about the same amount of Canadian dollars back as we did when there were lower oil prices," Stringham said.
"But in natural gas we've had the opposite thing happening."
In October it got down as low as $4 US -- compared to spot prices that reached above $15 just two years ago in the wake of hurricanes in the U.S. Gulf of Mexico gas-production region.
Mild summer and winter weather since those events has cut into demand to the point that North American gas in storage is at a near-record volume.
"The rising exchange rate nails that even harder. Canadian natural gas essentially becomes more expensive for the Americans because they are now paying in $1.07-dollars versus 88-cent dollars.
"The people that take the brunt of that [Canadian dollar] rise are the ones who are converting that U.S. dollar sale back into Canadian dollars, and that happens to be the Canadian companies and the governments -- all the producers -- and the governments because of course they realize their royalties in U.S. dollars as well.
"You are getting less Canadian dollars back."
Stringham noted the effects are already being felt in northeast British Columbia, the province's natural-gas production hub.
"Activity in northeast B.C. has just plummeted. It has already been happening because of the lower price, but if you throw on top of that the exchange rate it just makes it even harder to get back out of that hole.
"Even gas produced and consumed in Canada is affected because it's priced in U.S. dollars."
The best scenario for Canada would see demand go up -- but even if it did, it could be six months before the volume of gas in storage drops enough to push prices up, Stringham said.
But in another energy sector, hydroelectricity, the impact of the rising Canadian dollar is much harder to measure.
BC Hydro says there is no simple way to calculate the impact changing currency values have on its bottom line, but overall the situation is working to Canada's benefit.
British Columbia has a natural hedge against a stronger Canadian dollar in the electricity realm due to its position as a net importer of electricity from the U.S.
The stronger our dollar versus U.S. currency, the fewer dollars Hydro dispenses in order to buy power from U.S. producers.
© The Vancouver Sun 2007
November 06, 2007
Oil firms need a new game plan
Claudia Cattaneo
Financial Post
November 06, 2007
PetroChina's remarkable ascendancy yesterday to the world's first trillion-dollar company is an important event for energy consumers and private sector energy companies.
It highlights that state-controlled companies (also known as National Oil Companies or NOC), such as PetroChina, are eating their private counterparts' lunch; it points to greater NOC control of the world's energy resources, which can only mean higher energy prices and lower energy security for the West; and it shows to private sector companies (also known as International Oil Companies or IOC) that if they want to stay in business, they need to rethink their views of energy security and their recent strategies of re-patriating their cash to North America, in plays such as Alberta's oilsands, that are supposedly more stable.
Justified or not, PetroChina's huge stock market value makes it a stronger company and gives it greater access to capital to make acquisitions. It builds on PetroChina's advantage relative to IOCs in places such as Africa, where it is ready to spend on infrastructure to complement its energy investments. With a strong stock price, it can afford to pay up, if it chooses, for Husky Energy Inc.
China's largest oil company isn't alone as a state-controlled company becoming a force in the stock market. Russia's Gazprom, already worth nearly US$300-billion, said it wants to be the world's largest company by market value. Saudi Aramco, the national oil company of Saudi Arabia and the world's largest oil company by output, yesterday announced plans to sell shares to the public for the first time by offering to investors 25% of the shares of a joint venture refinery with Sumitomo Chemical Co.
"[NOCs] are becoming much more sophisticated in every way -- financially, technically," said Peter Tertzakian, chief energy economist at ARC Financial Corp. and author of A Thousand Barrels a Second. "They have a boldness and a confidence that they didn't have before."
NOCs are already sitting on huge resources. Robert Skinner, a former director of the Oxford Institute for Energy Studies, said more than 75% of the world's oil and gas resources are vested in, owned or controlled by NOCs.
Further concentration of the world's energy riches in the hands of national oil companies is bad news for consumers. Many NOCs are owned by governments that rely on oil revenues to fund their budgets, hardly an incentive to keep prices low. Meanwhile, consuming nations are increasingly dependent "on a group of nations that are manifestly undemocratic, in many cases led by despotic leaders, some ravaged by civil wars fought over petroleum rents, and by regimes whose hold onto power, given demographics, largely depends on ever-increasing the production and export of their resources," Mr. Skinner said.
This changing environment calls for a new way of thinking by the IOCs about energy security. In the past few years, IOCs have sold off their international assets to concentrate in politically secure regions, sparking the torrent of funds into the oilsands. The Alberta government's new royalty strategy has demonstrated Alberta is as politically risky as other oil producing jurisdictions.
Future energy security will depend on private oil companies' return to the international arena through co-operation, said Lou Gagliardi, oil analyst at investment advisor John S. Herold Inc. in Norwalk, Conn.
"Industry and companies have to evolve with the times," he said. "You can dig in your heels or say, OK fine, I'll try to adapt. If you want to be a player, you got to be there."
November 04, 2007
Alaska Debate Over Tax On Oil Cos Reflects Global Changes
By Steve Quinn
Wall Street Journal
November 3, 2007
JUNEAU, Alaska (AP)--If oil companies want to continue taking Alaska's oil, state officials say they need to up the ante.
In fact, Gov. Sarah Palin wants 25% off the top of all profits the companies make in Alaska, up from 22.5% and the second hike in as many years. In a special legislative session, oil giants are warning lawmakers that another increase will make the business climate look unstable.
But after Western oil companies have been effectively kicked out of Venezuela and Russia, these could just be hollow arguments.
"The financial impact pales in comparison to what's going on overseas," said Greg Priddy, analyst with New York based Eurasia Group. "In the end, with these oil prices, it will be something the industry is willing to absorb."
Already beset by federal corruption probes into last year's oil tax changes, Alaska is hardly alone in pursuing a greater state share.
Battles between governments and the industry are being played out worldwide. And with oil prices inching toward $100 a barrel - having already surged 20% in one month - the tension between the two is not likely to ease.
"It's a concern for us," said Kevin J. Mitchell, vice president of finance for ConocoPhillips' (COP) Alaska operations. "This global phenomena of increased government take continues to increase the cost of doing business"
Throughout the year, governments have aggressively gone after some of the oil companies staggering multibillion dollar profits.
- In April, Royal Dutch Shell PLC (RDSA) was forced to cede control of a project in Russia's Sakhalin island to state-controlled OAO Gazprom (GAZP.RS) at the behest of the government. Shell sold Gazprom 27.5% of its stake, leaving it with 27.5%.
- In May, President Hugo Chavez's government took over Venezuela's last privately run oil field, squeezing out major producers including BP PLC (BP), ConocoPhillips, Exxon Mobil Corp. (XOM), and Chevron Corp. (CVX)
- In June, BP agreed to sell its stake in a giant Siberian gas field project to Gazprom. This essentially meant the end of an era when foreign oil companies could control Russia's largest hydrocarbon deposits without a strong state-controlled partner.
And in a less severe blow to the industry in Canada, Alberta's provincial government just last month announced it would bump up its take from the industry by $1.45 billion starting in 2009.
"What you're seeing is a global pattern of governments trying to recoup more of the windfall," Priddy said. "What's happening in Alaska is a really mild form but a clear reflection of that."
In Juneau, the industry is balking at Palin's push to boost the tax rate for the second straight year. Last year the industry pushed for a 20% net profits tax or lower; it was the first rate change in 17 years. Exxon Mobil still is pushing for a tax lower than 20%.
Today, the stakes remain high for both sides, especially on the North Slope which accounts for close to 14% of the nation's domestic production, but is also in a 6% annual decline.
Annual net income in Alaska has reached the $2 billion mark for companies like ConocoPhillips and BP; Exxon Mobil doesn't disclose financial information for its Alaska operations.
A second new tax in as many years could create an unstable investment climate in Alaska, industry executives warn.
Companies cite rising costs and harsh arctic conditions in Alaska as inherent risks not found in other regions such as the Gulf of Mexico.
"I do all my investments on an after tax basis, said Claire Fitzpatrick, senior vice president for London-based BP's Alaska operations. "I have to be able to demonstrate that it's a better investment for London to give me the money rather than the Gulf of Mexico or the Rockies, and the tax is part of it."
BP, ConocoPhillips and Exxon Mobil stressed to lawmakers how there are no plans to leave the North Slope, but must still heed their warning at a time when production wanes.
In one case, ConocoPhillips said changing the tax structure could affect six projects currently being evaluated; first production would begin in three years.
Kevin Book, an energy policy analyst with Friedman, Billings, Ramsey & Co., said the impasse often lies with how elected officials whose term expires in two, four or six years, think differently from oil executives who evaluate projects on a 20- and 30-year cycle.
"It leads to self-deflating policy choices," Book said. "It deters production that brings you income, or at least it delays it."
The legislative debate enters its third week of a special session, which has been driven by much more than the need to bulk up the state's coffers. Four members of the state Legislature that passed that law have been indicted on federal bribery charges, and the federal corruption probe has stretched to the state's congressional delegation.
U.S. Sen. Ted Stevens and Rep. Don Young, both Alaska Republicans, have come under scrutiny for their ties to VECO Corp., which last year lobbied heavily for the new tax.
The measure, promoted as a way to provide a stable tax climate in Alaska, was sought by major petroleum producers before they would consider building a multibillion dollar natural gas pipeline tapping vast reserves on the North Slope.
VECO, whose top executives pleaded guilty to federal bribery charges, would have been in line to bid on lucrative construction and maintenance contracts if that project had been built.
The tax passed, but the pipeline deal never moved forward.
The issue of public trust hangs over both the industry as well as the legislature this time, said Republican John Coghill, chairman of the state's House Rules Committee.
"Because of the court action that's going on with those who were involved of the last go around, it's going to be very important," he said. "We have to look at it from a stewardship position and those bring some of the credibility issues."
November 03, 2007
Enbridge to build oil pipeline
The project will handle output from the oilsands region
Vancouver Sun
November 03, 2007
CALGARY -- Enbridge Inc. said Friday it will build a $2-billion oil pipeline to handle tar-like bitumen from Petro-Canada's planned Fort Hills oilsands project.
Enbridge, the country's second-largest pipeline firm, said the 480-km line will be capable of carrying 250,000 barrels of diluted bitumen a day from the project site near Fort McMurray, Alta., southwest to an upgrader near Edmonton.
The project, to be complete by 2011, includes storage facilities and a second line to carry 70,000 barrels of diluent, an ultra-light form of oil that is blended with the heavy bitumen so it can flow in pipelines.
The line will run for part of its length along the right-of-way for Enbridge's Waupisoo pipeline, which is to be completed next year and will initially carry 350,000 barrels of oilsands crude from the Fort McMurray region to Edmonton.
The planned pipeline is one of a number in the works to handle the burgeoning output from the oilsands region, where production is expected to triple to three million barrels a day by 2015 as companies rush to exploit the largest oil reserves outside the Middle East.
Petro-Canada's $26-billion Fort Hills project is expected to produce 140,000 barrels a day of synthetic crude when its first phase is completed in 2011, rising to 280,000 barrels a day by 2015, when all phases are done.
Petro-Canada, which operates the project, has a 60-per-cent stake, with the the remaining 40 per cent split between UTS Energy Corp. and miner Teck Cominco.
© The Vancouver Sun 2007
October 30, 2007
Assess climate risk, firms urged
SHAWN MCCARTHY
Globe and Mail
October 30, 2007
Corporate executives and directors face a growing threat of investor lawsuits if they fail to assess and mitigate the risk their companies face from climate change, accounting experts warned Tuesday.
The business of climate change is booming – major utilities are investing in efficiency; retailers are demanding energy-saving lighting; and exchanges are launching emissions-trading systems.
But while some companies are leading the charge in anticipation of regulatory and market pressure to act, several chartered accountants warned that too many companies still regard global warming as a mere annoyance, if they think of it at all.
“This is not a social responsibility issue but a business problem,” said Johanne Gelinas, a partner at Deloitte & Touche and a former federal environmental auditor.
Julie Desjardins, a consultant and adviser to the Canadian Institute of Chartered Accountants, said corporate executives have a heightened duty – as a result of the Sarbanes-Oxley Act in the United States and similar rules in Canada – to report all material issues facing the company.
And increasingly, investors such as the Canada Pension Plan Investment Board (CPPIB) or the California Public Employees Retirement System are demanding assessments of companies' exposure to climate change risk – including cost pressures from expected regulatory changes or weather-related issues.
“You have a responsibility to report the information that your investors want,” Ms. Desjardins said of corporate management. “And you have a responsibility to surround that information you are providing to investors with appropriate governance.”
Failure to do so could lead to civil lawsuits against the company, its senior management and directors, she added.
Suppliers to Wal-Mart, for example, need to spell out how they will respond to the retailer's commitment to cut greenhouse gas emissions throughout its supply chain.
Brigid Barnett of the CPPIB said the $120-billion pension fund is now routinely demanding assessment of climate change risk when it makes a big investment in a company.
Ms. Barnett said the board has a mandate to maximize return, and is not looking to make a political statement with its demand for climate change information. It considers such data “only as it affects the potential risk and return of investments,” she said.
The CPPIB recently spent $1.1-billion to purchase a major stake in British utility Anglian Water Group. Before closing the deal, the investment board reviewed the company's statement that it faced potential risks from climate change, including changing rainfall patterns, flooding, competition for resources, and the need to monitor greenhouse gas emissions.
In a speech Tuesday, Duke Energy Corp.'s chief strategist, Keith Trent, said his North Carolina-based company has determined it has a duty to its shareholders to spend more than $15-billion (U.S.) over the next decade to drive down its greenhouse gas emissions.
“Taking action on climate change is good for our business, good for our customers and good for the environment,” he told a conference on business and climate change.
Mr. Trent said his company – one of the major coal users in North America – has recognized that climate change regulations are going to become more onerous over the longer term. And as one of the largest emitters on the continent, Duke had to plan its response.
He said the company will invest $1.5-billion a year in energy efficiency – so long as regulators allow it to recoup a return on that investment from ratepayers. It is also a leader in research for cleaner-burning coal, and is set to seek a licence to build a nuclear reactor in South Carolina.
“We are a big part of the problem,” Mr. Trent said. “It makes sense for our business to be involved in the solution.”
Oil sands seen as 'threat No. 1,' as U.S. may target dirtier fuels
SHAWN MCCARTHY
Globe and Mail
October 30, 2007
Canadian oil sands producers should brace for further bad news - this time from south of the border, as the U.S. government moves toward a national climate change policy that could target dirtier fossil fuels such as the oil sands bitumen, a former U.S. energy official said yesterday.
His warning was issued yesterday at a conference on Canada as an energy superpower, and came as a new poll suggests Canadians want to protect the country's natural resources from voracious U.S. demand for energy.
David Pumphrey, a former official in the Department of Energy and now a senior fellow at the Centre for Strategic and International Studies, said that prominent U.S. environmental groups have identified the oil sands as "threat No. 1" in North America's growing battle against greenhouse gas emissions.
There are more than a half-dozen bills before Congress that would introduce a national system to cap greenhouse gas emissions and establish a market for emissions credits.
Mr. Pumphrey said he does not expect President George W. Bush to sign such legislation, but added the next administration mostly likely will.
Several of those bills would "penalize" energy sources like Alberta's oil sands, which produce far more carbon dioxide emissions than conventional, lighter crude, he said. (California has already announced a "low-carbon fuel standard" that would penalize refiners for using tar sands and other heavy oil.) Mr. Pumphrey said the Canada and U.S. governments should ensure that their climate-change strategies are complementary and that emissions trading can be carried on across borders in order to reflect the continental nature of energy markets.
Oil sands producers have recently faced new federal and provincial regulations that require them to manage their greenhouse gas emissions, but new projects face no set limit and existing ones only have to reduce their emissions per barrel of oil produced.
The climate change challenge is only one of several "above ground risks" facing the oil sands projects, which nonetheless represent a promising source of additional crude oil for North American markets, the conference heard.
Panelists pointed to Alberta Premier Ed Stelmach's decision last week to raise the royalty rates on oil sands and on conventional oil and gas production, and to federal and provincial tax changes that eliminated the lucrative tax incentive, the accelerated capital cost allowance.
Matthew McManus, an energy official in the State Department, said the U.S. perceives the Canadian oil and gas sector as one of "near zero political risk" and enormous investment opportunity.
He said the two governments are working to remove barriers that impede the efficient operation of the marketplace.
But 20 years after the Canada-U.S. free-trade agreement enshrined that market approach, Canadians remain leery of the growing U.S. dependence on natural resources from its northern neighbour, pollster Greg Lyle said.
In a poll released yesterday, Mr. Lyle found that two-thirds of respondents agreed that Canada should use its vast oil and natural gas resources to protect consumers from world markets and keep domestic prices as low as possible.
More than three-quarters agreed with the statement that Canada must "protect its natural resources from the insatiable energy appetite of American consumers."
October 19, 2007
Power Plant Rejected Over Carbon Dioxide For First Time
By Steven Mufson
Washington Post
Friday, October 19, 2007
The Kansas Department of Health and Environment yesterday became the first government agency in the United States to cite carbon dioxide emissions as the reason for rejecting an air permit for a proposed coal-fired electricity generating plant, saying that the greenhouse gas threatens public health and the environment.
The decision marks a victory for environmental groups that are fighting proposals for new coal-fired plants around the country. It may be the first of a series of similar state actions inspired by a Supreme Court decision in April that asserted that greenhouse gases such as carbon dioxide should be considered pollutants under the Clean Air Act.
In the past, air permits, which are required before construction of combustion facilities, have been denied over emissions such as sulfur dioxide, nitrogen oxides and mercury. But Roderick L. Bremby, secretary of the Kansas Department of Health and Environment, said yesterday that "it would be irresponsible to ignore emerging information about the contribution of carbon dioxide and other greenhouse gases to climate change and the potential harm to our environment and health if we do nothing."
The Kansas agency's decision caps a controversy over a proposal by Sunflower Electric Power, a rural electrical cooperative, to build a pair of big, 700-megawatt, coal-fired plants in Holcomb, a town in the western part of the state, at a cost of about $3.6 billion. One unit would have supplied power to parts of Kansas; the other, to be owned by another rural co-op, Tri-State Generation and Transmission Association, would have provided electricity to fast-growing eastern Colorado.
Together the plants would have produced 11 million tons of carbon dioxide annually, nearly as much as a group of eight Northeastern states hope to save by 2020 through a mandatory cap-and-trade program they plan to impose. The attorneys general from those states had written a letter opposing the permit.
The proposed Holcomb plants had become the center of a political dispute in Kansas, inflaming traditional tensions between the eastern and western parts of the state, dividing labor unions and posing a test for the energy policies of Gov. Kathleen Sebelius, who is head of the Democratic Governors Association and is believed to harbor aspirations for federal office.
Kansas, long a conservative Republican stronghold, is not generally considered to be on the leading edge of environmental causes. The GOP leadership in both the state Senate and House of Representatives endorsed the project. Although the regional United Steelworkers union opposed the plant, the state AFL-CIO supported it.
"Now the Sebelius administration rockets to the forefront of the states [working] to solve the global warming crisis," said Bruce Nilles, a Sierra Club lawyer.
Like many governors, Sebelius has been promoting the expanded use of renewable energy, especially wind. In her state of the state address this year, she said: "The question of where we get our energy is . . . no longer just an economic issue, nor solely an issue of national security. Quite simply, we have a moral obligation to be good stewards of this state."
But she said she was leaving the air permit decision on the Holcomb plants to Bremby, her close political ally.
Tri-State and Sunflower spokesmen sharply criticized the decision and said they were examining their legal options. Bremby's decision "has no basis in law or regulation," said Steve Miller, a Sunflower spokesman. "We still believe fiercely that this is the right project, that this is the right thing to do for customers and that the secretary has made a horrible error."
Miller said that Sebelius had pledged not to oppose the plants but that her position was clear after her "moral steward" remark. "That implies that we're not moral stewards of the land, which we don't appreciate one bit," he said.
Lee Boughey, a spokesman for Tri-State, said Bremby had disregarded his own staff, which had recommended issuing the permit.
The plants' powerful supporters included the speaker of the state House, Melvin Neufeld, who had earlier gathered the signatures of 46 GOP members, including key committee chairmen, for a letter to Bremby. The letter said, "Without your approval of the permit as proposed by Sunflower, our state and its citizens will lose access to the low-cost energy source and millions in economic development." Thirty-one Republican House members declined to sign the letter.
Neufeld said the plants would bring in new tax revenue, create hundreds of jobs, prompt the expansion of transmission lines that could also be used for wind power and keep energy costs low for Kansans by producing enough power to export to other states.
But the plants had aroused strong opposition, especially in the half-dozen eastern counties from Topeka to Kansas City, which have enough voters to carry statewide elections.
Bob Eye, a former state legislator, said of yesterday's decision: "Is it without precedent? Yes, as far as I know, in this state or any other." But he argued that "CO{-2} . . . is a pollutant, not just because the Sierra Club says it, but because the Supreme Court said it."
Holcomb's previous claim to fame had been the savage murders that Truman Capote described in his book "In Cold Blood." Holcomb was a place, Capote wrote, that stood "on the high wheat plains of western Kansas, a lonesome area that other Kansans call 'out there.' "
But Eye argued that wind projects were building a new constituency for renewable energy resources even "out there" among the people who were supposed to be the biggest backers of Sunflower's plans. FPL Group, a Florida power firm with a wind farm in Kansas, said it is making payments to about 30 landowners there.
Sunflower, which already has a smaller coal-fired plant in Holcomb, has portrayed the proposed plants as part of a "bio-energy center" that would include an ethanol plant and an $86 million facility that would use a still-experimental algae process to capture carbon dioxide emissions from the proposed generating units. But one investor in the center had pulled out before yesterday's decision.
Even without yesterday's permit denial, the Holcomb project faced economic challenges. A proposal to build a third new unit there was dropped earlier. Tri-State must also meet a renewable portfolio standard adopted recently by Colorado. (Tri-State supported the measure.) That requires utilities to use renewable energy sources to meet 10 percent of their sales. Because Tri-State's purchases of hydropower do not count, it uses less than 1 percent renewable resources. Two-thirds of its power comes from coal. It is negotiating to acquire some wind power.
© 2007 The Washington Post Company
Little Green Lies
By Ben Elgin
Business Week
October 29, 2007
The sweet notion that making a company environmentally friendly can be not just cost-effective but profitable is going up in smoke. Meet the man wielding the torch.
Auden Schendler learned about corporate environmentalism directly from the prophet of the movement. In the late 1990s, Schendler was working as a junior researcher at the Rocky Mountain Institute, a think tank in Aspen led by Amory Lovins, legendary author of the idea that by "going green," companies can increase profits while saving the planet. As Lovins often told Schendler and others at the institute, boosting energy efficiency and reducing harmful emissions constitute not just a free lunch but "a lunch you're paid to eat."
Inspired by this marvelous promise, Schendler took a job in 1999 at Aspen Skiing Co., becoming one of the first of a new breed: the in-house "corporate sustainability" advocate. Eight years later, it takes him six hours crisscrossing the Aspen region by car and foot to show a visitor some of the ways he has helped the posh, 800-employee resort blunt its contribution to global warming. Schendler, 37, a tanned and muscular mountain climber, clambers atop a storage shed to point out sleek solar panels on an employee-housing rooftop. He hikes down a stony slope for a view of the resort's miniature power plant, fueled by the rushing waters of a mountain creek. The company features its environmental credentials in its marketing and has decorated its headquarters with green trophies and plaques. Last year Time honored Schendler as a "Climate Crusader" in an article accompanied by a half-page photo of the jut-jawed executive standing amid snow-covered evergreens.
But at the end of this arid late-summer afternoon, Schendler is feeling anything but triumphant. He pulls a company sedan to the side of a dirt road and turns off the motor. "Who are we kidding?" he says, finally. Despite all his exertions, the resort's greenhouse-gas emissions continue to creep up year after year. More vacationers mean larger lodgings burning more power. Warmer winters require tons of additional artificial snow, another energy drain. "I've succeeded in doing a lot of sexy projects yet utterly failed in what I set out to do," Schendler says. "How do you really green your company? It's almost f------ impossible."
Barely a day goes by without a prominent corporation loudly announcing its latest green accomplishments: retailers retrofitting stores to cut energy consumption, utilities developing pristine wind power, major banks investing billions in clean energy. No matter what Al Gore's critics might say, there's no denying that the Nobel Prize winner's message has hit home. With rising consumer anxiety over global warming, businesses want to show that they're part of the solution, says Chris Hunter, a former energy manager at Johnson & Johnson (JNJ ) who works for the environmental consulting firm GreenOrder. "Ten years ago, companies would call up and say I need a digital strategy.' Now, it's I need a green strategy.'"
Environmental stewardship has become a centerpiece of corporate image-crafting. General Electric (GE ) says it is spending nearly all of its multimillion-dollar corporate advertising budget on "Ecomagination," its collection of environmentally friendly products, even though they make up only 8% of the conglomerate's sales. Yahoo! (YHOO ) and Google (GOOG ) have proclaimed that by 2008 their offices and computer centers will become "carbon neutral." Fueling the public relations frenzy is the notion that preserving the climate is better than cost-effective. But Schendler, who only a few years ago considered himself a leading proponent of this theory, now offers a searing refutation of the belief that green corporate practices beget green of the pecuniary variety.
EMPTY BOASTING
Charismatic and well-connected among environmental executives, he has begun saying out loud what some whisper in private: Companies continue to assess most green initiatives with the same return-on-investment analysis they would use with any other capital project. And while some environmental advances pay for themselves in time, returns often aren't as swift or large as competing uses of corporate cash. That leads to green projects quietly withering on the vine. More important, and contrary to the alluring Lovins thesis, many major initiatives simply aren't money-savers. They come with daunting price tags that undercut the conviction that environmental salvation can be had on the cheap.
Schendler explains his confessional mood as the result of cumulative frustration: with foot-dragging colleagues, with himself for compromising, and with the entire green movement frothily sweeping through corporations in America and Europe. So far his candor hasn't cost him his job, though rival resorts have groused about Schendler to his bosses. His colleagues tolerate him with a combination of personal affection and periodic annoyance. "We have a very self-critical culture," says Mike Kaplan, Aspen Skiing's chief executive. "We wouldn't have Auden any other way." The company, Kaplan adds, has led its industry on the environmental front.
Schendler grits his teeth over the failure of modest proposals, such as his plan last year to refurbish one of the resort's oldest lodges to use less energy. He estimated the $100,000 project would have paid for itself in seven years through lower utility bills. But the money went for new ski lifts, snowmobiles, and other conventional purchases. "The availability of capital is not infinite," says Donald Schuster, vice-president for real estate.
Beaten back frequently, the environmental executive concedes that he made a mistake last year when he pushed the resort to make audacious green claims based on the purchase of "renewable energy credits." RECs are a type of financial arrangement that companies increasingly use to justify assertions that they have reduced their net contribution to global warming. But the most commonly used RECs, which are supposed to result in a third party's developing pollution-free power, turn out to be highly dubious (BW—Mar. 26). Aspen Skiing relied on RECs in declaring it had "offset 100% of our electricity use." Schendler now concedes the boast was empty.
Aspen Skiing is far from alone in making suspect claims of green virtue. Setting aside questionable renewable energy credits would wipe out the climate-saving assertions of dozens of major corporations celebrated for their environmental leadership. Office products retailer Staples (SPLS ) has used RECs to turn a 19% spike in emissions since 2001 into what it claims to be a 15% decline, the company's sustainability reports show. PepsiCo (PEP ) and Whole Foods Market have employed the credits to make declarations that every bit of pollution from electricity they use is negated. Johnson & Johnson has proclaimed a 17% reduction in carbon emissions since 1990, based largely on RECs. Without the credits, the pharmaceutical giant has seen a 24% increase, J&J executives acknowledge. "Recent corporate moves by J&J and others are pushing in the right direction, but it is still window dressing compared to the problem at hand," says Hunter, the former J&J manager.
Amid the overheated claims, some corporations have made legitimate environmental gains. Wal-Mart Stores (WMT ) helped spark the market for energy-saving fluorescent bulbs by giving them top billing, even though incandescent bulbs are more profitable. Office Depot overhauled lighting and energy in more than 600 stores, contributing to the company's real 10% decline in releases of heat-trapping gases. Dow Chemical (DOW ) and DuPont (DD ) have significantly trimmed their actual emission levels. But there is still reason to worry about long-term commitment. Dow says it invested $1 billion to help achieve reductions of 19% between 1994 and 2005. Because of technological challenges and costs, however, Dow predicts that additional cuts won't occur until 2025, 18 years from now.
Much corporate environmentalism boils down to misleading statistics and hype. To make real progress, genuine accomplishments will have to be sorted out from feel-good gestures. Schendler no longer views business as capable of the dramatic change he thought possible eight years ago, the sort of change that corporations have grown accustomed to boasting about. His own employer is "a perfect example of why this won't work," he says. "We've had a chance to cherry-pick 50 projects and get them done. But even if every ski company could do what we did, we'd still be nowhere."
`TRENCH WARFARE'
Auden Schendler felt nature's pull at the age of 14, when his uncle took him on a backpacking trip through the rugged Bob Marshall Wilderness in northwest Montana. Growing up in the scruffy New Jersey city of Hackensack, he always felt cramped and out of place. He escaped up the Atlantic coast to Maine, where he majored in environmental studies at Bowdoin College. "I became the person I wanted to be: a mountaineer, an outdoorsman." During this period he scaled Alaska's 20,300-foot Mount McKinley and made several trips up treacherous Mount Rainier in central Washington. On another adventure, he trekked alone on skis for nine days across a wintry Yosemite, sleeping in hand-carved snow caves. "I am at my happiest on a fall morning, in a high-mountain campsite, maybe 12,000 feet," he says. "The air is crisp and chilly, and some coffee is brewing on the campfire. What is better than that?"
After college he moved to Aspen and taught skiing and high school math. The state of Colorado provided his first paid environmental job, weatherizing the trailers of poor families to help them save energy. This involved crawling beneath flimsy homes, where he sometimes encountered the decomposing carcasses of raccoons. "It was gritty work," he says, "the trench warfare of climate change."
In 1997, he took a job at the Rocky Mountain Institute (RMI) just outside Aspen, which Lovins had co-founded 15 years earlier. Lovins, a physicist by training, was collaborating with his then-wife, L. Hunter Lovins, and businessman Paul Hawken on a book called Natural Capitalism, which became a best-seller. By rethinking their operations and choosing materials wisely, the book argued, companies could produce far less pollution and earn more. "Auden is terrific," Lovins recalls of his "vigorous, smart, and dedicated" former employee, who did research for Natural Capitalism. An obsession with efficiency pervaded the institute: Schendler recalls being chastised for boiling water in the kitchen without a lid on the kettle. He idolized Lovins and went jogging with Hawken. "Instead of going to graduate school, I went to RMI," he says.
He heard in 1999 that Aspen Skiing, a complex of hotels and ski runs popular with wealthy vacationers, was looking for an environmental director. The job seemed a perfect fit. "When I left RMI, I felt that government was powerful but businesses were nimble enough and motivated enough by profit to make changes that we need," he says. "I was indoctrinated." The ski industry, which gorges on energy to create a fantasy of always-plentiful powdered snow and cozy alpine hideaways, offered an ideal place to put these abstractions into practice.
RESISTANCE FROM WITHIN
Aspen Skiing, privately owned by the Crown family of Chicago, which made billions on its stake in military contractor General Dynamics (GD ) and other enterprises, exudes an earnest concern about nature—not least because its business would melt away if temperatures rose just a few degrees. "My kids say: God, Dad, are we going to ski when we're your age?'" says Kaplan, the CEO. "I have to tell them: I don't know.'"
Then 29, Schendler received a genial welcome at Aspen Skiing's wood-paneled headquarters near the county airport. "Auden came with some great athletic credentials," recalls John Norton, then the chief operating officer. "He's a terrific kayaker and skier, and that's a guaranteed ice-breaker in a ski company." But when it came to spending the company's money, things became complicated.
He first took aim at the 90-room Little Nell Hotel. The luxurious lodge nestled at the base of Aspen Mountain devours so much electricity that Schendler assumed it would be simple to find efficiencies. He told its then-manager, Eric Calderon, he wanted to put fluorescent lightbulbs in all guest rooms. The new bulbs would last 10 times as long, use 75% less power, and pay for themselves in only two years. The answer was no. Calderon, who favors dapper blue blazers and chinos, worried that fluorescent light would suggest a waiting-room ambience, jeopardizing the establishment's five-star rating. "There's always a question of balance between environmental concerns and satisfying expectations of the clientele," he says.
Thwarted on guest rooms, Schendler switched to Little Nell's underground garage. Guests never saw it because valets park all cars. For $20,000, Schendler said he could replace energy-gobbling 175-watt incandescent light fixtures with fluorescent bulbs and save $10,000 a year. Unimpressed, Calderon again balked. If he had $20,000 extra, he would rather spend it on items guests would notice: fine Corinthian leather furniture or shiny new bathroom fixtures.
At the company's next senior management meeting, Schendler brought an unusual display to make his case for new garage lights. He had wired a stationary bicycle to show how much less energy fluorescent bulbs consume. Thirty managers watched as Schendler challenged a burly executive to hop on the bike. Sure enough, it took much more sweat to make several incandescent bulbs glow. But Schuster, the real estate chief, didn't believe the new lights would save money. "I was skeptical on the ROI [return on investment] calculations Auden had presented for the retrofit," Schuster recalls. "One of my concerns was that we were committing capital based on theoretical returns without any real opportunity for a look back on the actual returns."
It took Schendler two years to overcome resistance to the garage-light replacement, and then only after he secured a $5,000 grant from a local nonprofit. He acknowledges the strangeness of a corporation with annual revenue of about $200 million, according to industry veterans (the company declines to provide a figure), seeking charity to reduce its electricity use. With a hint of sarcasm, he notes: "This is the sort of radical action that's needed to get people over ROI thresholds."
WHEN BREAK-EVEN WON'T DO
Larger-scale versions of his lightbulb struggle are playing out at numerous other companies. Hailed as an environmental pioneer, FedEx (FDX ) says on its Web site that it is "committed to the use of innovations and technologies to minimize greenhouse gases." With 70,000 ground vehicles and 670 planes burning fuel, the world's largest shipper is a huge producer of heat-trapping gases. Back in 2003, FedEx announced that it would soon begin deploying clean-burning hybrid trucks at a rate of 3,000 a year, eventually sparing the atmosphere 250,000 tons of greenhouse gases annually from diesel-engine vehicles. "This program has the potential to replace the company's 30,000 medium-duty trucks over the next 10 years," FedEx announced at the time. The U.S. Environmental Protection Agency awarded the effort a Clean Air Excellence prize in 2004.
Four years later, FedEx has purchased fewer than 100 hybrid trucks, or less than one-third of one percent of its fleet. At $70,000 and up, the hybrids cost at least 75% more than conventional trucks, although fuel savings should pay for the difference over the 10-year lifespan of the vehicles. FedEx, which reported record profits of $2 billion for the fiscal year that ended May 31, decided that breaking even over a decade wasn't the best use of company capital. "We do have a fiduciary responsibility to our shareholders," says environmental director Mitch Jackson. "We can't subsidize the development of this technology for our competitors."
Schendler faces the return-on-investment challenge on almost every proposal he makes. Earlier this year, he pushed his employer to bankroll a $1 million solar-energy farm on the outskirts of Aspen. Like most electricity consumers in the Rockies, Aspen Skiing's power comes primarily from coal-fired plants, which emit large amounts of carbon dioxide. With federal tax breaks aimed at encouraging clean energy, the football-field-size solar array might generate a paltry 6.5% return, meaning it would pay for itself in 15 years. It barely got approved, says Chief Financial Officer Matt Jones. "We put this together with duct tape and chewing gum."
Schendler's persistence eventually won him admirers even among executives who didn't agree with his entire agenda. "We were trying to run a very complex set of businesses—four ski areas, three hotels, two athletic complexes, and a golf course—but Auden never let us forget that he belonged in the family portrait," says Norton, the former COO and the man Schendler recruited for the bike-powered lightbulb demonstration. "Usually he elbowed in with good humor, but also sometimes with the grim single-mindedness that's the mantle of a true believer."
`I WAS GETTING KILLED'
Schendler, who is married and has two young children, ranks below top managers at Aspen Skiing but attends most of their important meetings. The company zealously guards salary amounts, and he won't reveal his, but a person familiar with Aspen Skiing estimates that he earns about $100,000 a year. Perpetually on the move, Schendler gets his hands into everything, fiddling with a boiler knob and inquiring why a building's lights were on the previous night. He sometimes seems self-conscious about his East Coast, elite-college pedigree, compensating with gestures like helping rewire a lodge's electrical circuits. Teasing follows him everywhere, he says. "I can't tell you how many times I've heard, Hey, Auden, I recycled a can today.'"
One of his proudest victories is the small hydro-power plant the company spent $150,000 in 2003 to install on one of its ski slopes. It's fed two months of the year by a stream that turns into a roaring creek when the snow melts. The other 10 months it's dormant. Inside the small hut containing the plant's steel turbine, he animatedly describes the hurdles overcome during construction: "We hit an underground gas line. I was over budget. I was getting killed." But it got done.
For all his hard work, however, Schendler began to feel a creeping disappointment. Combined, the hydro and solar projects eventually will generate less than 1% of the company's power needs. His colleagues felt they were stretching to accommodate him, but Schendler knew he was coming up short. Seeking to make an industry-leading gesture, he decided in 2005 to explore renewable energy credits.
Introduced at the beginning of the decade, RECs are supposed to marshal market forces behind wind and solar power. Developers of clean energy sell RECs, usually measured in megawatt hours of electricity, to buyers that want to counterbalance their pollution by funding environmentally friendly power. But often the REC trade seems like little more than the buying and selling of bragging rights, rather than incentives that lead to the construction of wind turbines or solar panels.
Schendler knew that RECs and similar financial transactions were swiftly growing in popularity, as more companies sought green credibility and REC brokers proliferated. He persuaded his superiors in 2006 to spend $42,000 a year, a 2% premium on the company's energy costs, to buy RECs at roughly $2 a megawatt hour. According to commonly accepted REC principles, this investment, less than a third of what it took to build the hydro plant, permitted Aspen Skiing to claim that it had offset all of its use of coal-burning energy.
Colleagues heaped praise on Schendler. In a press release, Pat O'Donnell, then the company's CEO, said: "This purchase represents our guiding principles in action." Accolades arrived from the EPA; local newspapers reported the feat. "It was seen as one of my biggest wins ever," Schendler says.
He spent hours thinking about how to describe the purchase of RECs for marketing purposes. The formulation he came up with was that Aspen Skiing had offset "100% of our electricity use with wind energy credits, keeping a million pounds of pollution out of the air." This wording was plastered on ski lifts, advertising brochures, and countless company e-mails.
But even as he helped launch this campaign, Schendler had a queasy feeling. At some level, he suspected the credits weren't causing any new windmills to be built. They weren't literally offsetting anything. He felt torn. "I'm well aware of what is right and what works and what matters," he says. "I'm also aware of brand positioning. Part of my job is to maintain [Aspen Skiing's] leadership." His industry "was going to do this in a big way. One small resort in California already had, and we needed to move. My solace was the educational value of the move. The discussions it would cause would be valuable, even if the RECs were not."
His prediction proved accurate. In the year and a half since his RECs purchase, more than 50 other ski resorts have made similar buys. No fewer than 28 claim to be "100% wind powered." Enticed by inexpensive green claims, companies in other industries have been equally enthusiastic. The top 25 REC purchasers have bought the equivalent of 6 million megawatt hours this year, nearly quadruple the volume from 2005, the EPA says.
Rather than enjoying his role as an REC pioneer, Schendler felt increasingly anxious. In private, he pushed REC brokers for hard evidence that new wind capacity was being built. Their evasiveness gnawed at him. He asked veterans in the renewable energy field whether his marketing message was legitimate. "They laughed at me," he says.
The trouble stems from the basic economics of RECs. Credits purchased at $2 a megawatt hour, the price Aspen Skiing and many other corporations pay, logically can't have much effect. Wind developers receive about $51 per megawatt hour for the electricity they sell to utilities. They get another $20 in federal tax breaks, and the equivalent of up to $20 more in accelerated depreciation of their capital equipment. Even many wind-power developers that stand to profit from RECs concede that producers making $91 a megawatt hour aren't going to expand production for another $2. "At this price, they're not very meaningful for the developer," says John Calaway, chief development officer for U.S. wind power at Babcock & Brown, an investment bank that funds new wind projects. "It doesn't support building something that wouldn't otherwise be built."
BAFFLEMENT AND IRRITATION
Schendler isn't the only environmental executive aware of the problem. In 2006, Johnson & Johnson spent $1 million on credits it says are equivalent to 400,000 tons of emissions. Based on this purchase, the company claimed to have shrunk its contribution to global warming by 17% since 1990. The World Wildlife Fund and other environmental groups have praised J&J, and the EPA gave the company a Green Power award in 2006. Asked about the doubts surrounding RECs, Dennis Canavan, the company's senior director of global energy, concedes that the credits "aren't ideal." They don't really reduce J&J's pollution, he says, and he hopes the company eventually abandons them. Still, he insists that "somewhere along the line, RECs do encourage new projects." He adds: "For the time being, this is the system available to us to offset CO2."
However, some companies employ more direct methods, like building substantial clean energy capacity themselves. In August, Jiminy Peak Mountain Resort in Hancock, Mass., turned on a new wind turbine standing 386 feet tall and capable of providing half of the resort's electricity. The project took three years to complete and cost $4 million.
Many larger corporations, however, defend their lower-cost approach. Mark Buckley, vice-president of environmental affairs at Staples, defends RECs, saying they "have clearly sent the right signal to the market." His counterpart at PepsiCo (PEP ), Rob Schasel, agrees, adding, "Absolutely, we're changing what's going into the atmosphere." Whole Foods Market (WFMI ) declined to comment.
This spring Schendler concluded that he had to reverse course, persuade his employer to back away from the renewable energy credits he had endorsed just months earlier, and favor more meaningful green projects. His colleagues reacted with bafflement and irritation. "Auden, you are the most confusing human being I have ever encountered," senior marketing manager Steve Metcalf wrote in an e-mail in April. "You have placed on us the responsibility of getting the environment message out—your message—as a company-wide endeavor. We have responded to your bidding and environmental passion with a gusto on the verge of maniacal. As mentioned, you are confusing to the point of complete exhaustion."
Schendler replied: "Relax, brah. I enormously appreciate all the support.... We're on the edge of this thing, figuring it out. If it were simple and easy, someone would have done it already."
THE CONFLICTED CRITIC
The company will continue to buy RECs through at least 2008, when its current contract expires. Executives say they're reluctant to stop any sooner, because they don't want to appear to be backsliding on the environment when competitors claim to be entirely wind powered. The company still touts its RECs purchases in some marketing material.
Schendler, meanwhile, has become a prominent critic of RECs, a potentially confusing role, since his employer buys them. In an April letter to the Center for Resource Solutions, a nonprofit group in San Francisco that certifies credits, he said that RECs have as much effect on the development of new renewable-energy projects as would trading "rocks, IOUs, or pinecones." That statement, which inevitably whizzed around the Internet, stung some in the ski industry who interpreted it as an attack. Schendler's immediate boss, General Counsel Dave Bellack, has heard from competitors asking that he stifle Schendler. Bellack has declined.
Now simultaneously an insider and an outsider in corporate environmental circles, Schendler relishes the notoriety. "I don't think I'm seen as a team player in this industry," he says, "but I don't care. This issue is so much bigger than just the ski industry." In March he told the U.S. House Subcommittee on Energy and Mineral Resources that companies won't make serious progress without regulation of carbon emissions—a departure from his earlier faith that abundant, profitable green projects will transform the way business operate.
His former mentor Lovins says Schendler could find further cost-saving energy efficiencies with more support from his superiors. But this mind-set, Schendler warns, could influence companies to pursue exclusively projects with quick payoffs: "The idea that green is fun, it's easy, and it's profitable is dangerous. This is hard work. It's messy. It's not always profitable. And companies have to get off the mark and start actually doing stuff."
Elgin is a correspondent in Business Week's Silicon Valley bureau
Copyright 2007, by The McGraw-Hill Companies Inc. All rights reserved.
See also:
Another inconvenient truth
Another Inconvenient Truth
By Ben Elgin
Business Week
March 26,2007
Behind the feel-good hype of carbon offsets, some of the deals don't deliver
The organizers of the Academy Awards declare all their celebrity presenters to be "carbon-neutral." Vail Resorts Inc. (MTN ) in Colorado boasts that its chairlifts and lodges are "100% powered by wind." Seattle's municipal utility claims that its net contribution to global warming is zero.
A growing number of organizations, corporations, cities, and individuals are seeking to protect the climate—or at least claim bragging rights for protecting the climate. Rather than take the arduous step of significantly cutting their own emissions of carbon dioxide, many in the ranks of the environmentally concerned are paying to have someone else curtail air pollution or develop "renewable" energy sources (see BusinessWeek.com, 2/1/07, "Ethanol: Too Much Hype—and Corn"). Carbon offsets, as the most common variety of these deals is known, have become one of the most widely promoted products marketed to checkbook environmentalists.
Done carefully, offsets can have a positive effect and raise ecological awareness. But a close look at several transactions—including those involving the Oscar presenters, Vail Resorts, and the Seattle power company—reveals that some deals amount to little more than feel-good hype. When traced to their source, these dubious offsets often encourage climate protection that would have happened regardless of the buying and selling of paper certificates. One danger of largely symbolic deals is that they may divert attention and resources from more expensive and effective measures.
The market for carbon offsets in the U.S. could be as high as $100 million, according to researchers' best guesses. That's up from next to nothing just a couple of years ago. One reason for this growth is that the U.S. remains one of the few industrialized countries that hasn't ratified the Kyoto Protocol, a global agreement setting emission limits by nation. In the absence of a mandatory national cap, some Americans have begun taking action on their own, but without widely recognized standards as to what constitutes a valid offset. As long as there are willing buyers and sellers, almost anything goes. "Right now it's a no-man's land out there," says Jennifer Martin of the nonprofit Center for Resource Solutions in San Francisco.
Hollywood celebrated environmental activism at this year's Academy Awards, and not just by giving an Oscar to the Al Gore documentary An Inconvenient Truth. The Academy of Motion Picture Arts & Sciences promoted the show itself having "gone green," by means of a variety of initiatives. One element: Each performer and presenter received a glass statue representing the elimination of the amount of greenhouse gas associated with a celebrity lifestyle over the course of a year. The offsets were issued by TerraPass Inc., a two-year-old for-profit company in San Francisco that identifies climate-protection efforts and, for a fee, gives its customers the opportunity to buy a piece of the environmental action. Each Oscar favor represented 100,000 pounds of emission reductions drawn from TerraPass' portfolio of offset projects.
One of the largest in its portfolio is a sprawling garbage dump outside of Springdale, Ark., from which TerraPass has purchased thousands of tons of gas reductions. The vast sloping mound of the Tontitown landfill rises near stands of bare-limbed hickory and oak trees, with the blue Ozark foothills in the background. The decomposing trash generates methane, a gas 23 times as potent as carbon dioxide in trapping heat in the earth's atmosphere, melting glaciers and raising ocean levels.
Waste Management Inc., (WMI ) the huge garbage processor that operates the facility, tends nearly 90 wells dotting the trash mountain, each giving off a barely audible hiss as it sucks methane from the depths of the landfill and delivers the gas to a single towering flare. Once torched, the gas is released into the atmosphere as less-damaging co2. But company officials and Arkansas environmental regulators say Waste Management began to burn methane, and continues to do so, for reasons having nothing to do with TerraPass' offsets.
'ICING ON THE CAKE'
Concerned that methane might be contaminating groundwater beneath the landfill, Waste Management first floated the idea for a gas-collection system in early 1999. Arkansas regulators urged the company to pursue this remedy. In 2001 the state increased its pressure by imposing a requirement for "corrective action" at the Tontitown facility. Waste Management promised to make the methane flare operational by late 2001. After probes subsequently detected methane levels exceeding allowable levels, Dennis John Burks, then chief of the Solid Waste Management Div. of the Arkansas Environmental Quality Dept., wrote to Waste Management on June 27, 2001, saying that the state "strongly urges WM to bring the newly installed Tontitown Landfill gas extraction system online as soon as possible."
Asked about Waste Management's response, Gerald Delavan, a supervisor at the Arkansas environmental agency, says: "It started out as a voluntary effort" by the company. "But it ended up being guided by corrective action,'" imposed by the state. Wes Muir, a Waste Management spokesman, says: "We felt a gas collection system was the most effective way to deal with this.... It was a voluntary process."
Regardless of who deserves credit for taking the initiative, one thing is clear: The methane system was launched long before any promise of carbon-offset sales. In other words, it appears that the main effects of the TerraPass offsets in this instance are to salve guilty celebrity consciences and provide Waste Management, a $13 billion company based in Houston, with some extra revenue.
All six other project developers selling offsets to TerraPass that BusinessWeek was able to contact said they were pleased with the extra cash. But five of the six said the offsets hadn't played a significant role in their decision to cut emissions. "It's just icing on the cake," says Barry Edwards, director of utilities and engineering at Catawba County, N.C., which installed a system in 1998 to turn landfill gas into electricity to power 944 homes. "We would have done this project anyway."
A big player in the growing industry of brokers and retailers marketing offsets, TerraPass was the brainchild of Karl Ulrich, a professor at the Wharton School. Ulrich, an environmentalist who bikes to work, became concerned several years ago about the carbon dioxide emitted when he drove to his cabin in Vermont. In the fall of 2004 he gave one of his classes $5,000 and challenged students to create an affordable carbon-offset program.
TerraPass, with a number of Wharton graduates as shareholders, has soared since then. The company now claims 42,500 customers. Tom Arnold, the 30-year-old former Ulrich student who runs the business, says TerraPass has already had a major impact by offsetting more than 117,000 tons of greenhouse gases. Ford Motor Co. (F ) and the travel Web site Expedia.com (EXPE ) collaborate with the offset-retailer to offer customers the option of neutralizing travel-related emissions for an added cost.
TRICKLE DOWN
Arnold concedes that TerraPass hadn't known until approached by BusinessWeek that concerns about groundwater contamination had led to the Tontitown methane project. TerraPass, he says, will now rethink how it evaluates such landfill gas-reduction efforts. But Arnold stands behind the legitimacy of offsets related to the Tontitown dump. He emphasizes that Waste Management acted voluntarily, and he praises an $800,000 upgrade to the methane system last year: "That's behavior consistent with somebody trying to enhance methane capture." He also warns against getting too bogged down in the intricacies of how particular offset projects were conceived. "Let's get the market working well," he says. "That will do a lot of greater good."
As the offset market now works, intermediaries typically pocket a big portion of the money coming in. Consider two projects in the TerraPass portfolio that are run by dairy farmers in Princeton, Minn., and Lynden, Wash. Several years ago, the farmers had installed expensive equipment that uses methane from cow manure to generate electricity. In theory, the promise of offset income encourages farmers to invest in such equipment. TerraPass typically sells offsets for about $9 per ton of carbon dioxide, or the corresponding amount of methane. The company takes a cut of that $9, but won't say what the percentage is. A broker that introduced TerraPass to the dairy farmers also took a cut. In the end, the farmers say they each received less than $2 a ton out of the original $9. Darryl Vander Haak, the farmer in Washington, says he's happy with the $16,000 he earned last year from offset sales. But offsets didn't factor into his decision to start the methane venture, he adds.
TerraPass' Arnold nevertheless maintains that "the [offset] prices out in the market now are changing behavior." The fees intermediaries collect cover costs such as auditing projects and marketing to buyers. "It's much like Starbucks (SBUX )," Arnold says. "What do you think Starbucks pays for a pound of coffee, and how does that translate into a $3.50 latte?"
Seattle, the home of Starbucks, made an astounding announcement in 2005: Its municipal utility, Seattle City Light, had eliminated its contribution to global warming. The power company still annually spewed some 200,000 tons of greenhouse gases. But Seattle said it had negated every last ton by paying other organizations around the country to curtail their emissions. "We can power our city without toasting our planet," Seattle Mayor Greg Nickels declared.
But as in the case of the Oscar presenters, the bulk of the pollution reductions for which Seattle paid would have happened regardless of its offset deal. The city's experience illustrates the difference between more expensive methods of cutting greenhouse gases close to home, vs. more far-flung deals with third parties.
In 2000 the Seattle City Council imposed the long-term goal of Seattle City Light becoming carbon-neutral. At first the utility pursued local projects, such as one in 2003 with Seattle's municipal trucking department. The strategy was to convert 900 diesel vehicles to a more climate-friendly blend of fuel containing 20% biodiesel. The blend was expected to cost an additional 25 cents a gallon, so Seattle City Light agreed to chip in half of the difference. In exchange, the utility has taken credit for the relatively modest 700 to 1,400 tons of annual greenhouse-gas reduction the cleaner fuel allowed. This arrangement, which improved air quality in Seattle, wouldn't have occurred without the financial incentive provided by Seattle City Light.
"Our approach initially was very strict," says Corinne Grande, a strategic adviser to the utility. "The project would only happen if the check came in the mail from us." But Seattle sought to offset hundreds of thousands of tons of gas a year. "We wanted offsets quickly, not offsets coming 10 or 20 years in the future," Grande says.
City officials culled dozens of offers from various middlemen. Several factors drew attention to a DuPont (DD )project reducing emissions at a Louisville (Ky.) plant that manufactures the refrigerant Freon, Grande recalls. DuPont enjoyed a strong reputation for reducing greenhouse gases, and the Louisville plant provided the chance to buy in bulk. Seattle City Light purchased its largest block of offsets in 2005 from DuPont, for nearly $600,000. The 300,000 tons of co2 reductions were enough for Seattle to claim "net zero" emissions for its utility, with plenty left over for 2006. The price, at only $1.95 per ton, was tiny compared with that of the biodiesel venture, which ran as high as $220.
NO DETAILS
DuPont deserved to be rewarded for its climate efforts, says Grande, the adviser to Seattle City Light. The chemical company "took a chance on doing more than they needed to do," she adds. "We'd like to encourage the continued destruction of greenhouse gases."
But Seattle's offset purchase didn't prompt the cleanup of the once-dirty Louisville plant. DuPont had begun researching improvements all the way back in 1995 and installed a more environmentally friendly system in 2000, five years before Seattle began paying DuPont. "We would have continued with these emissions reductions anyway," says Stephanie Jacobson, a DuPont spokeswoman.
In a legal twist, Washington's state Supreme Court ruled earlier this year that the Seattle utility lacks authority to use ratepayer money to fight global warming. The state legislature could counteract that decision, but meanwhile the future of Seattle's offset program is uncertain.
The growing green marketplace offers an alternative to carbon offsets known as renewable energy certificates, or RECs. When RECs work properly, producers of wind-generated power and other "renewable" energy sell the certificates as a way of promoting the creation of additional renewable energy sources.
One RECs buyer is Vail Resorts, which runs ski and vacation destinations in the West. Vail Resorts declares in marketing material that it is now "100% powered by wind." But this claim isn't literally correct. Vail Resorts contemplated building expensive mountaintop wind turbines to power its ski lifts and other operations. But instead it decided last year to enter a multiyear agreement to buy, for a fraction of the cost, RECs representing 152,000 megawatt hours of wind-generated electricity each year, equivalent to its annual use. "We're in the travel business," says Rob Katz, chief executive of Vail Resorts. "We're not in the electricity-generation business." He adds that even if his business obtains its power from a standard utility, which in the Rocky Mountains means relying mostly on coal, "we're helping to push forward development of new wind projects."
Which new wind projects? Katz says he relies on a broker to select appropriate recipients. His broker, Renewable Choice Energy of Boulder, Colo., declines to identify any of the investments it makes on behalf of Vail Resorts or its scores of other clients. Neither party will discuss the price of the RECs. What Renewable Choice will say is that the RECs it buys and sells are confirmed by the Center for Resource Solutions, the San Francisco nonprofit, as representing power not counting toward any government mandate and coming from projects built since 1997. RECs related to more recently built projects are thought more likely to spark development of new projects.
Still, this kind of secretiveness provokes skepticism. "If neither a seller of RECs nor the buyer will provide any details of how, exactly, their transaction is reducing carbon emissions, I would suspect it's vaporware," says Randy Udall, director of the Community Office for Resource Efficiency, an Aspen (Colo.) nonprofit that promotes renewable energy.
Some developers go further, scoffing at the basic economics of RECs, most of which sell for $1 to $3 per megawatt hour—a small fraction of what wind projects can attract in federal tax incentives. Voluntary REC purchases "are pure corporate marketing and image management" for buyers, says Mike O'Sullivan, senior vice-president for development at Juno Beach (Fla.)-based fpl Energy (FPL ), the nation's largest developer of wind power. "The economics of our wind investments have to work without the green credits."
More broadly, the proliferation of suspect RECs and offsets may persuade consumers and businesses that preventing climate change comes cheap, says Anja S. Kollmuss, outreach coordinator of the Tufts Climate Initiative, an advocacy group affiliated with Tufts University. "We cannot solve the climate crisis by buying offsets and claiming to be climate-neutral," she adds. "Nature does not fall for accounting schemes."
Copyright 2007, by The McGraw-Hill Companies Inc. All rights reserved.
See also:
BC Hydro buys and sells Green Power Certificates in much the same way as Renewable Energy Certificates are traded as described in this article.
October 18, 2007
The Peace Prize - Who are the real Winners?
COMMENT: GLOBE-Net provides information about the environmental business market in Canada and around the world. It is an initiative of the GLOBE Foundation of Canada, “a Vancouver-based, not-for-profit organization dedicated to finding practical business-oriented solutions to the world's environmental problems.” John Wiebe (a lower profile Maurice Strong?) runs the operation, and Michael Phelps, formerly of Westcoast Energy, is chairman of the board.
www.globe.ca
The GLOBE Foundation led development of “The Endless Energy Project,” published in January 2007. It describes “a roadmap to energy self-sufficiency” by 2025 for British Columbia primarily from renewables. The scope of this report includes transportation, not just electricity generation.
www.globe.ca/pdfs/GLOBE_EndlessEnReport.pdf
GLOBE-Net appears to recognize the moral imperative – the need to act in response to climate change – and the incredible business opportunities it affords.
Editorial
GLOBE-Net
www.globe-net.ca
17-Oct-2007
The Peace Prize - Who are the real Winners?
VANCOUVER, October 17, 2007 (GLOBE-Net) - The award to former US Vice President Al Gore and the U.N. Climate Panel of the 2007 Nobel Peace Prize last week for their efforts to galvanize international action against global warming signals not only a quantum shift in thinking about the focus of the Peace Prize Award, but also about the seriousness of the crisis facing mankind.
Gore and the United Nations' Intergovernmental Panel on Climate Change (IPCC) won "for their efforts to build up and disseminate greater knowledge about man-made climate change, and to lay the foundations for the measures that are needed to counteract such change", stated the Nobel Committee.
With respect to Gore, the Committee stated "He is probably the single individual who has done most to create greater worldwide understanding of the measures that need to be adopted." With respect to the IPCC "it has created an ever-broader informed consensus about the connection between human activities and global warming".
The Nobel Committee's choice generally has been celebrated, though some have commented on the political dimensions of the award and the scientific validity of the causes of global warming. These debates are as relevant to the situation at hand as would have been discussions on the after deck of the Titanic as to what really was at the root of the problem.
What stands out about the Award itself is the shift in focus away from efforts to quell real or threatened conflict between warring states to the need for global action to deal with an enemy that affects all of mankind, an enemy that knows no national boundaries; that does not discriminate between political ideologies or religions; that assails both rich and poor alike, though clearly the poor will suffer more from its onslaught.
And unlike the mission to secure a 'Peace' that led to award of the same prize to Canada's Lester B. Pearson many years ago, the Peace that must be won today deals more with coming to terms with the realities of climate change and working in common cause to deal with it. This is a mission that of necessity must unite business and governments at all levels, and which must mobilize the efforts of civil societies everywhere.
No one can deny that there will be winners and losers in this campaign; but that should simply strengthen our resolve to ensure that those who are disadvantaged by reason of location, or wealth or by lack of alternative options, do not suffer unnecessarily. If there is one common message that both the IPCC and Al Gore have stressed repeatedly it is that collectively we have the technological capacity, the ingenuity and the resources to make a difference before it is beyond our control.
There can be no finer calling for those engaged in the business of the environment, and our prize will be far more significant than that which will be given to these two winners in December. That prize will be our continued survival as a species on this all too fragile planet.
John D. Wiebe
President & CEO
GLOBE Foundation
October 17, 2007
U.S. LNG imports take bite out of Canada's natural gas sales
Shawn McCarthy
Global Energy Reporter
Globe and Mail
October 16, 2007
Canadian natural gas producers are suddenly finding themselves in competition for lucrative U.S. markets with counterparts in places like Nigeria and Egypt, as imports of liquefied natural gas displaced Canadian exports earlier this year.
In the first eight months of the year, LNG imports rose 56 per cent by dollar value, by $1.8-billion to $5-billion (U.S.). In that same period, Canadian exports declined 9.6 per cent, or $1.8-billion to $17.4-billion, according to figures from the U.S. International Trade Commission.
Greg Stringham, vice-president with the Canadian Association of Petroleum Producers, said the surge in LNG imports was a temporary phenomenon, resulting from price disparity between North American markets and European ones that encouraged producers to ship to the U.S.
But he said the increase in natural gas imports from overseas contributed to a glut of natural gas in storage in the United States, which led to lower prices and fewer exports for traditional Canadian suppliers.
"This is the first inkling we've seen of international competition in natural gas coming in and filling up storage and backing Canadian gas into storage here, and causing the depressed prices to be in place," he said.
Until recently, natural gas was strictly a regional commodity - there was virtually no competition for North American producers except within the continental market itself. But growing volumes of LNG are transforming the clean-burning energy source into a global commodity, though the tanker volumes are relatively modest over all.
The three largest suppliers to the U.S. are Trinidad and Tobago, Egypt and Nigeria, with the gas-rich Caribbean island providing more than the two largest African suppliers combined, the U.S. International Trade Commission figures show.
The U.S. has seen the expansion of three of five existing terminals that take liquefied natural gas off tankers and re-gasify it to be shipped to markets by pipeline. And construction is under way for four other terminals, with more planned, including several in Canada.
Robert Ineson, an analyst with Cambridge Energy Research Associates, said the decline in exports had more to do with falling production north of the border than the availability of LNG imports.
"Production will continue to fall because of the slowdown in drilling activity" that has been seen in Western Canada in the past two years, he said. "We also expect more gas produced in the region to stay home to be consumed in some of the oil sands projects."
Mr. Ineson said North American consumers will increasingly have to turn to LNG suppliers to compensate for falling production. "In North America as a whole, there's a growing need for additional supply beyond what we can produce in the U.S. and Canada," he said.
Ed Kelly, vice-president for gas and power for Scottish-based consulting firm Wood Mackenzie, said it is still early days for the development of LNG in North America. But he said volumes could double to 4.7 billion cubic feet a day over the next two years, and then double again by 2015.
October 11, 2007
Canada maintains LNG tanker stance despite study
Ottawa unmoved by positive LNG study
Shawn McCarthy, Globe and Mail, 06-Oct-2007
Canada maintains LNG tanker stance despite study
Energy Current, 09-Oct-2007
Unstable Mix: Politics and Liquefied Natural Gas
Rob Annandale, The Tyee.ca, 11-Oct-2007
The proponents:
Downeast LNG Inc.
Quoddy Bay LNG Inc.
Calais LNG
WestPac LNG LLC
The opponents:
Save Passamaquoddy Bay
Texada Action Now
www.texadalng.com
Ottawa unmoved by positive LNG study
Shawn McCarthy
Globe and Mail
October 6, 2007
A federal study has concluded that LNG tankers could navigate Head Harbour Passage off the Bay of Fundy with little risk of accident, but Ottawa continued to insist yesterday that it will bar U.S. tankers from the disputed waters.
Proponents of the competing LNG plants proposed for northern Maine have seized on the study - which was released on an obscure federal website - to argue that the Canadian government has exaggerated the safety concerns in order to favour domestic producers.
The federal government has refused to co-operate with U.S. regulators who are reviewing three separate plans for terminals that will regasify imported liquefied natural gas and pipe it to markets in the U.S. Northeast.
Earlier this year, Canada's Ambassador in Washington, Michael Wilson, wrote to U.S. Secretary of State Condoleezza Rice that the projects "present risks to the region of southwest New Brunswick and its inhabitants that the government of Canada cannot accept."
However, the report by Toronto-based Senes Consultants Ltd. said there have been no serious accidents involving LNG tankers in the nearly 50 years they have been in use.
"While large accidents involving the shipping and handling of LNG are possible, the probability of occurrence is small, especially with Canadian and U.S. regulation in place and enforced," it said.
It added the risk of incidents involving the uncontrolled release of liquefied natural gas is "very small."
Still, the Senes report noted the tricky waters of Head Harbour Passage require extremely careful navigation and that the surrounding eco-system could be severely affected by the discharge of fuel or LNG from tankers.
Dean Girdis, president of Downeast LNG Inc., said the report will be helpful as the U.S. Coast Guard and Federal Energy Regulatory Commission prepare their environmental impact statement, a process that should be completed by early 2008.
"I don't see how the study supports the conclusion that it is unsafe for ships to navigate Head Harbour Passage," Mr. Girdis said in an interview yesterday. "There is nothing in the study that concludes our project should not proceed."
Mr. Girdis said he believes - with backing for some Canadian academics and the U.S. state department - that tankers heading for a northern Maine terminal would have the right to traverse Canadian waters.
"They may maintain their position on no transit but there is no law or regulation which restricts LNG traffic going through Head Harbour Passage," he said. "And according to our lawyers, it's clear that it is Canadian waters, but that you have right of passage through it."
But Veteran Affairs Minister Greg Thompson, the government's senior New Brunswick minister - said the proponents face other hurdles - including opposition to their pipeline routing and lack of sources of LNG. But should they proceed, Canada will oppose all LNG tanker traffic through head Harbour Passage, he said.
"This particular location is not a smart location, it's not a safe location," Mr. Thompson said. "And we consider those internal Canadian waters so we have a responsibility to protect our citizens, protect the environment and protect the economy."
Canada maintains LNG tanker stance despite study
10/9/2007
CANADA: The Canadian government will continue to insist that it would ban U.S. liquefied natural gas (LNG) tankers from traversing Canadian waters despite the results of a consultants' report that concludes that LNG tanker travel in the Bay of Fundy to the proposed Quoddy Bay and Downeast LNG projects in the U.S. could be done, The Globe and Mail reports.
The Canadian government has refused to cooperate with U.S. regulators, including the Federal Energy Regulatory Commission, who are reviewing the Quoddy Bay and Downeast projects proposed for construction in Maine.
Earlier this year, Michael Wilson, Canada's ambassador in Washington, D.C., wrote to U.S. Secretary of State Condoleezza Rice that the projects "present risks to the region of southwest New Brunswick and its inhabitants that the government of Canada cannot accept."
However, LNG plant proponents say the Canadian government is exaggerating safety concerns in order to favor domestic gas producers.
The report by Toronto-based Senes Consultants Ltd. noted that no serious accidents involving LNG tankers have occurred in the almost 50 years in which they have been used.
However, the report notes that traveling the waters of the Head Harbour Passage will require careful navigation. During the study, Senes found that the navigating the Old Sow whirlpool when moving from the Head Harbour Passage to the Western Passage, which requires a 102-degree turn, will be difficult at manoeuvring speed.
Use of the market software "National Manoeuvring Guidelines" supported Senes' concerns by clearly showing that the waterway at its narrowest point near the elbow is barely wide enough to support safe passage of this type of vessel in an autonomous way at normal manoeuvrability speed in light currents and mild winds."
"Given these findings, the transit of an LNG tanker similar to the sample vessel involves a considerable level of risk."
Senes said in the report that it is possible adopt an approach that will allow for risk management and for the application of a number of measures to mitigate risk. However, these measures give rise to additional costs in the implementation and operation of the transportation system. The measures also generate "considerable operational limitations."
Bathymetry indicates that the water depth is suitable for the type of vessel that is expected in this area and does not pose any problems. The topography of the shore and the islands, which provide good reference points for radar navigation, and the Differential Global Positioning System (DGPS) can be used with the DGPS coverage available.
Senes also noted that the surrounding eco-system could be severely affected by the discharge of fuel of LNG from tankers.
Unstable Mix: Politics and Liquefied Natural Gas
Rob Annandale
The Tyee.ca
11-Oct-2007
PM Harper: Opposes LNG shipments through New Brunswick waters. Citing 'safety concerns,' feds fight LNG project back east -- but not along BC's coast.
Chuck Childress moved to "paradise" over 40 years ago. He enjoys nature, but this veteran of the mining, construction and pulp and paper industries is no enviro-fundamentalist.
Read the rest of this article at theTyee.ca:
http://thetyee.ca/News/2007/10/11/LiquifiedNatGas/
October 06, 2007
Paying for No
COMMENT: At the beginning of October, Rainforest Action Network launched its No New Coal campaign against the rush to new coal-fired generation facilities in the United States. As well as targeting the coal companies and the electricity generation utilities and merchant power companies, RAN is aiming its criticism at big banks – the corporations which lend the money, reap profits, but in the main stay outside of the line of fire.
http://tinyurl.com/2vbflh
Following RAN’s announcement, Brett Harvey, CEO of Consol Energy, a major US coal producer, whined about his industry being the whipping boy for environmentalists. Awww.
http://www.sqwalk.com/blog2007/001133.html
Join the dots from projects to the money: you could be standing on a deposit containing all the gold (or oil or uranium or whatever) in the world, but if you couldn’t get financing, you wouldn’t scratch the ground. Track investment dollars back to source and as RAN observes, you often end up at a bank. That’s not always true – sometimes private investment capital is involved, and in the case of the petroleum multinationals, they have so much cash these days that they are beholden to no-one.
Money exerts its influence in a number of ways.
When an industry feels threatened by tax increases or policy changes that might interfere with profitability and shareholder return, its first reaction is the tiresome “investment withdrawal” threat which it brandishes at whomever is proposing the change. We see this happening right now in Alberta.
A royalty review panel in Alberta has recommended increases to the royalties that affect Alberta’s big three commodities – conventional natural gas, conventional oil, and the oilsands. Whining was to be expected, and at the moment the volume is deafening. Just this week Diane Francis of the National Post joined the melee: “oil companies also have the right to not do business in Alberta either.” The oil companies themselves have put numbers on how much investment they’re not going to make: EnCana, $1 billion; Talisman another billion, and just this week, Conoco Phillips: $8.5 billion. Awww.
http://www.sqwalk.com/blog2007/001131.html
http://www.sqwalk.com/blog2007/001120.html
http://www.sqwalk.com/blog2007/001116.html
Let ‘em go. Alberta already has a grossly overheated economy, is skewing labour markets across the country, and is siphoning billions of dollars of common property into the pockets of shareholders and lenders to these companies. Leave the stuff in the ground and get out. A cooling earth might thank you for it.
Except they're not going anywhere. Even if it implements the new royalties (doubtful), Alberta is still too good to leave.
Two interesting related debates are taking place in Oregon right now over two measures to be voted on in a special election on November 6 in the state.
Measure 49, if passed, corrects shortcomings in an earlier Measure 37, and would result in protection of farm and forest land, primarily by limiting the number of homes that can be built on such lands. There’s more to the measure than this, but this appears to be where the line in the sand has been drawn. Providing funds on the No side are the forest companies who, (much like Western Forest Products and others forest companies on Vancouver Island,) are looking at real estate sales and development of private forest lands as an easy revenue source.
Measure 50 calls for an increase in tobacco taxes. No surprise who is opposing this one.
http://www.sos.state.or.us/elections/nov62007/
Here’s a great article from the Oregonian about these measures
Paying for No
David Sarasohn
The Oregonian
Wednesday, October 03, 2007
The old political rule to "follow the money" never makes more sense than in ballot measure campaigns, since ballot measures never grant interviews.
And it's never easier than in this year's campaigns against Measures 49 and 50, where the money is coming from very clear places: timber companies against Measure 49 and tobacco companies against Measure 50.
Of course, you do have to follow the money a little distance. That way, you get to what the campaigns are about, instead of what the ads say the campaigns are about.
Monday's campaign finance reports show tobacco companies spending $6.6 million to fight Measure 50 and Stimson Lumber of Portland chipping in $200,000 to the campaign against Measure 49, the Legislature's rewriting of the land-use rollback Measure 37. Stimson, it turns out, is also the state's largest claimant under Measure 37, to drop land-use rules on at least 57,000 acres of its holdings.
As Eric Mortenson reported in The Oregonian Tuesday, two other timber and wood products companies came up with $100,000 apiece for the campaign, with a forest's worth of other timber and wood products companies contributing. As the ads declare their support of the principles of private property, there's a faint whir of chain saws humming in the background.
For the No on 49 campaign, there's a connection between cutting trees and cutting the checks.
In this case, it's not likely to dominate the debate; supporters of Measure 49, environmentalists and environmental organizations, are up to now outspending the opponents. But there's still a big difference between what No on 49 sounds like and what No on 49 spends like.
Out front, this is an effort of small oppressed property owners, wanting only to build a couple of houses on property they've owned for decades. The Web site for stop49.com shows a tormented young couple, not a frustrated timber company.
But apparently, from the campaign's contribution reports, the tormented young couple are agonizing about the status of their 57,000 acres.
Opposing Measure 50, a cigarette tax increase to extend health coverage for Oregon kids, the campaign is ostensibly led by a group called Oregonians Against a Blank Check. No one has actually met an Oregonian against a blank check; the organization is organized and funded by Reynolds American, a group that might more accurately be called North Carolinians Against Making It More Expensive to Smoke.
The campaign, of course, doesn't feature those folks. Instead, its inescapable TV ad shows another tormented couple -- a little older than the couple tormented by Measure 49 -- who are stunned that Measure 50 amends the Oregon Constitution.
Overcome by this, the tormented male finally growls that he's not going to let people mess with the Constitution, and his helpmate nods sorrowfully.
It's touching to find North Carolinians so committed to the timeless permanence of the Oregon Constitution. It means that they, like most Oregonians, have never actually looked at it.
The Oregon Constitution, which goes on for 50 closely printed pages and includes anything the people of the state have thought about and changed their mind about in the last 150 years, has been amended 24 times just since 1999.
Fortunately, when it was proposed in 2004 to remove motor homes from the provisions dealing with taxes and fees on motor vehicles, nobody growled that we shouldn't mess with our constitution.
But of course, that's not Reynolds American's concern about Measure 50 at all, any more than Stimson Lumber is worried about Oregonians' rights to build a second house on 40 acres.
Following the money consistently leads you to what campaigns are actually about, going behind the terribly concerned-looking hired models to the goal that the people financing the campaigns actually have in mind.
Sometimes, following the money leads you to thousands of acres of rural Oregon being legally prepared for subdivision.
And sometimes, it leads you to North Carolina.
David Sarasohn, associate editor, can be reached at 503-221-8523 or davidsarasohn@news.oregonian.com.
Coal "whipping boy" for greens
Last week, Brett Harvey, CEO of coal mining giant Consol Energy, whimpered in a media statement that environmentalists were picking on his industry.
Consol CEO says coal "whipping boy" for greens
Steve James, Reuters, 03-Oct-2007
Harvey was reacting to the introduction by Rainforest Action Network of its No New Coal campaign. More about the campaign, here
Consol CEO says coal "whipping boy" for greens
By Steve James
Reuters
Wed Oct 3, 2007
NEW YORK (Reuters) - The coal industry has become the "whipping boy" of environmentalists who fail to come up with realistic alternatives for energy, the head of one of America's biggest coal producers said.
Brett Harvey, chief executive of Consol Energy Inc also suggested a surcharge on electricity use to help pay for development of technology that makes coal burn off less carbon dioxide and converts the fossil fuel into liquids and gas.
"If you're not going to use coal anymore what are you going to use?" he said he asks anti-coal advocates. "Well, they respond to you: new technology, solar and wind.
"My response is: 'Well, how does that work? and they say: 'I don't know but we need to study it,"' Harvey said in an interview during this week's Reuters Environment Summit.
"Well if it was really that easy, don't you think we'd have already done this? Do you think we would already have avoided the Clean Air Act and everything we've done to clean up coal over the years and gone automatically to that?" said Harvey, whose Pittsburgh-based company produces approximately 70 million tons of coal per year.
"There is a direct relationship between the use of coal and a healthy economy," he said. "When you quit using 50 percent of your electricity then we can talk. If you throttle back the use of coal and drive your base power costs up, you make all the products we make more expensive."
Asked how the industry viewed environmentalists' efforts to stop construction of new coal-fired power plants, which they blame for increasing greenhouse gas emissions, Harvey said: "Well, it's the whipping boy.
"I think the whole mantra of the environmental groups is: don't waste energy and if you make everything more expensive the theory is you use less. That's the underlying basis of their argument, but it's not the nature of the American public or probably anyone in the world," Harvey said.
Coal fuels approximately 50 percent of America's electricity generation, but environmentalists want to replace it with alternative sources, such as wind or solar, to meet future increased power demand.
Harvey said the problem lies also with the public's perception of coal as an outdated, dirty, 19th Century fuel.
"People have disconnected the use of coal from what they do in their everyday lives. They think that's what their grandparents used to do. They don't realize when they hit the light switch they hit Consol Energy."
Harvey said in the 1990's America decided it wasn't going to use coal any more. "The administration said coal would be done in 2005.
"Everybody believed it and natural gas went from a buck and a half a million (BTU) to $10 a million based on throttling back coal and, guess what, now we're on short supply of natural gas, we overbuilt gas generation and you can't replace it with limited fuel sources."
Asked about clean-coal technology, he said: "Should we do something more with coal? Yes. Can we make it cleaner? Yes. But it's going to cost us and it's going to take time.
"This is no different from landing somebody on the moon, if the focus is there and the attitude is there, we'll get it done. What we need is people to agree to solve the problem, not just throw the baby out with the bathwater and say there's an alternative that nobody can describe."
Coal-to-liquid (CTL) technology would require $2 billion to $3 billion in research per year over 10 years, he estimates.
"Probably the best thing to do is take and bill the people who use the coal for power. Tack that as a fee on the use of power for coal and put it in a research institute. It costs the average family about $5 a year and you will have funded the research," he said.
"If you take coal out of the equation and you try to eliminate coal, based on the environment, the people you hurt the most will be poor people," he added.
© Reuters2007All rights reserved
No New Coal
Rainforest Action Network
02-Oct-2007
RAN’s Global Finance team finished up a press conference announcing to the world that we are formally launching a campaign against the world’s two largest banks - Citi and Bank of America. Why? Because they are the top funders of the dirty coal industry - and the crucial link supplying billions of dollars to companies and projects that are destroying communities, our environment and our climate. These two banks account for around $4 trillion in assets - and it’s time we held them accountable for their investments. They hold the necessary capital to transform our economy away from destructive fossil fuels like coal, and towards one based on sustainable, equitable, clean energy.
You can read all about the campaign at the Global Finance homepage, see our press release announcing the campaign, and read our latest report: Banks, Climate Change, and the New Coal Rush. If you missed out on the great conference this morning [02-Oct-2007] - you can listen to the recording here.
The call featured:
* Becky Tarbotton (Director of RAN’s Global Finance Campaign)
* Bill McKibben (Author and founder of Step It Up!)
* Judy Bonds (West Virginia coal-field resident, and founder of Coal River Mountain Watch)
* Leslie Lowe (energy and environment program director at the Interfaith Center on Corporate Responsibility)
Join us in an ambitious campaign targetting the two largest banks in the world to address the world’s largest problem: climate change. Get involved!
Royalty advice: don't act, talk...
Only threat to Alberta is onset of world peace
David L. Yager, National Post, 18-Sep-2007
Beyond royalty hysteria
Diane Francis, Financial Post, 06-Oct-2007
Wall Street to Alberta: Don't be ‘so stupid'
Shawn McCarthy, Globe and Mail, 05-Oct-2007
Energy giant rages against plan to hike Alberta royalties
CBC News, 05-Oct-2007
Only threat to Alberta is onset of world peace
David L. Yager
National Post
Tuesday, September 18, 2007
An outbreak of world peace and respect for human rights would be disastrous for Alberta. Global happiness would bankrupt this province.
It's not obvious how Alberta prospers by the world's misery. Let's connect the dots.
Alberta has earned the dubious distinction of being one of the most expensive places to develop and produce oil and gas. It's a combination of geology and public policy.
Because of our long history in the conventional-oil business, the cheap stuff is increasingly hard to find. All the big fields have been discovered and largely drained. What conventional-oil explorers do find today is heavy, wet, sour or small.
Sadly, our oilpatch is also over the hill for natural gas. Increasingly, we're drilling "resource plays" (a complimentary term for very tight reservoirs that cost a bundle to stimulate) or "non-conventional" supplies like coal-bed methane. The current rig count illustrates that $5.25 per thousand cubic feet for methane is way too low for this basin.
The future of hydrocarbon production is oil so heavy that is must be mined and separated or heated so it will move. High oil prices and massive reserves have made Alberta's non-conventional oil attractive, but right now this is surely the most expensive petroleum to develop in the world.
Politics don't help. While the public debate about whether Alberta charges enough economic rent through the lease and royalty system will go on forever, there are significant but seldom discussed soft costs that continue to drive up finding and development costs.
As people and production get closer together, the inherent conflict of public ownership of subsurface resources and private ownership on top continues to pressure costs. Expenses for public hearings, environmental protection and surface access continue to rise.
As drilling in Alberta remains flat while activity in the United States is flat out, we can't ignore much lower costs stateside for mineral rights and surface access.
What is saving Alberta's bacon right now is surprisingly high oil prices. Although speculation about whether "peak oil" has arrived continues, this subject cannot be fairly studied without factoring in politics. A look around the world leads me to conclude that current crude prices have nothing to do with geology.
There is no shortage of geologically promising places to drill for oil. What our industry is lacking is oil reserves to develop in places where private companies are welcome and our workers are safe.
There's a long list of awful countries with oil. They all suffer from one ore more of the following negative attributes: dictatorships, insurrection, state ownership, civil war, corruption or repressive governments. Not one of them would be classified as a nice place to live.
Alphabetically they include Azerbaijan, Bolivia, China, Columbia, Ecuador, Iran, Iraq, Kazakhstan, Kuwait, Mexico, Nigeria, Russia, Saudi Arabia, Sudan, Turkmenistan, Uzbekistan and Venezuela. I'm sure this list is not complete.
Each of these countries have two things in common: oil that costs less to develop than Alberta's, and one or more political reasons why Western oil companies aren't actively drilling there.
Everyone professes to support global peace and democracy and an end to human suffering and political corruption. Suppose for a moment these noble improvements to mankind were to miraculously occur.
The start of the world's unprecedented happiness would be accompanied by the end of Alberta's petroleum industry. Multinational oil companies would dump our province in a flash and flock back to Mexico, Russia, Venezuela, Saudi Arabia, Iran or Iraq. The other countries would be close behind.
As Alberta's political leaders discuss public and energy policies, you're not likely to hear them praying for more state ownership of petroleum abroad, or a continuation of the civil wars in places like Sudan, Iraq and Nigeria.
But it's pretty clear what would happen if the world changed. Alberta's oilsands are attractive not because of what they are, but where they are. Oil companies are investing billions in an attempt to make a buck recovering this awful goop simply because there's no place else to go.
Alberta's alleged political stability is brought up frequently by critics of the oil industry. It is used primarily as a reason to further impair development economics by increasing taxes or royalties or introducing more stringent environmental regulations and controls.
Nobody ever acknowledges that much of the so-called "Alberta advantage" is by default. It's not that this province is good, but that the rest of the world is so awful.
Luckily for all of us, an outbreak of world peace and tranquility is highly unlikely.
High oil prices tend to increase the urge to tax or nationalize. Islamic fundamentalist governments in oil-producing countries are on the rise. These regimes have agendas that rarely include producing more oil. Fortunately, both trends decrease investment and depress production.
But all this unhappiness is a questionable foundation for Alberta's energy industry.
David L. Yager is chairman and chief executive of HSE Integrated Ltd. in Calgary and a columnist with Oilweek. © 2007, Oilweek
© National Post 2007
Beyond royalty hysteria
Diane Francis
Financial Post
October 06, 2007
The best suggestion during the Alberta royalty debate has come from Houston-based ConocoPhillips Co. -- that the province not throw its weight around, but rather create a commission of government and oil experts to examine the issues carefully.
On the table is a proposal by a government panel to raise royalties collectively by 20%, and there's screaming and threats from the industry.
But the crux of the royalty issue is whether Alberta is getting as much for its non-renewable resources as oil companies are willing to pay elsewhere.
The panel relied on Pedro van Meurs, a Dutch-born expert who ran an oil company and was a consultant with Alaska. I interviewed him this week.
"What governments around the world do is try to be competitive with one another, taking into consideration cost. They watch each other carefully," he said. "What's important all the time is to make sure a government doesn't overplay its hand. If it does, activity significantly declines. If governments get too greedy, they are punished by the market of course."
He said 20 governments have raised royalties.
"Alaska increased 10% overall and Ireland last week increased the government take by 25%, along with Denmark. The U.S. Gulf of Mexico increased by 10%," he said. "The panel is not being too aggressive."
Here is Van Meurs' comparisons with other jurisdictions: - Alberta versus Texas conventional natural gas: Small wells in Alberta now pay 12% (based on current low prices); medium-sized wells producing 650,000 cubic feet a day pay 24% and big wells of several million feet day are at 29%. In Texas, royalties vary depending upon the landowner, but Dallas experts hired to consult said the average was 25%.
"The proposal would match 25% for smaller wells and raise it to 34% for big ones," he said.
Deep gas, expensive to produce, will still get a royalty holiday of $500,000. "The proposal was silent on this, but I assume it's going to continue, which should protect these wells." - Alberta oilsands versus Alaska heavy oil: "The panel is proposing 64% for the oilsands after they get all their money out, which matches what Alaska gets. The big difference is that oil companies in Alberta pay only 1% until they get all their investment out, plus a good rate of return. In Alaska, oil companies pay a royalty right from the start," he said. "This is important to understand and makes the oil sands is far more favourable than the Alaska jurisdiction. I negotiated the Alaska terms with the oil industry, so I'm extremely familiar with them."
Van Meurs also addressed the hysteria in the United States and elsewhere over raising royalties.
"What Americans don't understand is that the two systems are very different. In the U.S. system, the royalty rate is written in your lease; it's a contractual agreement. In Alberta, that is not the case. An Alberta lease says you shall pay whatever royalty the government decides from time to time."
"Statoil, Shell, Total have good lawyers and know perfectly well that Alberta's royalties can change," he said. "Leases are loud and clear. The province doesn't even have to consult."
Of course, that's all very well and good, but the oil companies also have the right to not do business in Alberta either. That's why an industry-government commission must arbitrate a fair deal.
© National Post 2007
Wall Street to Alberta: Don't be ‘so stupid'
SHAWN MCCARTHY
Globe and Mail
October 5, 2007
After years of carefully cultivating an image as an investors' paradise, the Alberta government is getting a rough ride on Wall Street over proposed royalty changes that would significantly reduce profits for oil companies that invest in the province.
Accustomed to dealing with political risk in places like Russia and Venezuela, investors and analysts are stunned that Alberta – which has sold itself as Texas North – has apparently taken such an aggressive approach to the industry that has spawned so much wealth there.
“The Alberta government is doing a classic ‘shoot yourself in the foot' strategy,” said Fadel Gheit, an influential New York-based analyst with Oppenheimer & Co.
“It's tried and true: If you really want to hurt your economy, start raising taxes on industries that are really basic to the lifeblood of your economy … It's so stupid – I thought these people were more sophisticated than that.”
Mr. Gheit said energy investors will be wary about Alberta, at least until there is some reassurance that the province is not looking to drive down expected returns on investment through higher taxes.
“They should attract investors, not repel investors. They should put out the welcome mat to bring more money into the province, and market themselves as the friendly, open-for-business place.”
That's exactly the message the provincial government has tried to convey over the years, as former premier Ralph Klein and a parade of ministers visited the North American financial capital to prospect for investment in the oil sands.
Two years ago, Mr. Klein and representatives from several Alberta-based companies brought horses and riders from the Calgary Stampede to perform in front of the New York Stock Exchange.
Mr. Klein met with The Wall Street Journal and BusinessWeek and Forbes magazines to tout the potential of the oil sands and the welcoming investment climate in Alberta. He also participated in a conference call with clients and investors at JPMorgan investment bank in which he promoted the “very attractive investment opportunity” that existed in Alberta.
This past May, provincial Finance Minister Lyle Oberg returned to the city to assure analysts and investors that the new government of Premier Ed Stelmach was equally committed to a business-friendly investment climate. “There was never any indication there would be a move like this,” said one American Canada-watcher who was at the lunch.
In an effort to reassure investors, Alberta Energy Minister Mel Knight is scheduled to visit New York and Boston early next month – after the government has responded to the royalty report.
At a Lehman Brothers' energy conference last month, Canadian companies like EnCana Corp., Petro-Canada and Canadian Natural Resources Ltd. presented their rosy prospects to a room full of investors at the Sheraton Hotel in mid-town Manhattan. They gave no indication of the bombshell that would be dropped less than three weeks later.
Several money managers said in interviews that they are re-evaluating their view of Alberta in light of the proposed royalty changes, which comes a year after investors were hammered by the federal government's decision to end tax advantages for income trusts.
“Any time somebody changes the tax regime or the regulatory regime in a meaningful way, it's a negative,” said one fund manager, who spoke on the condition he not be named. “They have pitched themselves as investor friendly, and have sought out investment, and this isn't really the best way to do it.”
The province has yet to decide on a course of action following the review committee's recommendations. And the committee insists the industry will remain highly profitable under the recommended changes, that Alberta is now out of sync with other major jurisdictions on the tax take from its resources sector.
Energy giant rages against plan to hike Alberta royalties
CBC News
Friday, October 5, 2007
Another oil and gas giant has joined the parade of companies warning the Alberta government not to raise royalty rates for gas and oil.
ConocoPhillips President Kevin Meyers said he has written to Premier Ed Stelmach warning that boosting royalties by 20 per cent, as recommended in a recent report, would cost his company an oilsands project worth $500 million next year.
He also said a further $8 billion in projects planned for the next three years would have to be postponed.
A panel appointed by the Alberta government released a report in September that said Albertans are not getting their fair share of energy revenues, and it recommended raising royalty rates by 20 per cent, or $2 billion a year.
A series of oil and gas companies have been coming forward to criticize the suggestion, saying an increase would hurt the province's investment and growth potential.
Last week, EnCana threatened to cut $1 billion from its 2008 investments if recommendations in the report are adopted.
Continue Article
The company said it will cut 30 to 40 per cent of the $2.5 billion to $3 billion it plans to spend next year on Alberta-based activity.
On Tuesday, Crescent Point Energy Trust said it would shift about $150 million in investment from Alberta to Saskatchewan if royalties are raised.
Then, on Wednesday, the former chief executive of Talisman Energy warned Alberta that the company would likely cut around $500 million from its capital program if the proposed royalty hike is approved.
"At current gas prices, I believe it will be difficult for anyone to grow their natural gas production in Alberta, and if you implement these proposals we will see a significant loss of investment, jobs, taxes and the loss of world-class technical expertise," Jim Buckee wrote in an open letter to Stelmach.
The cut would be on top of Talisman's current plan to trim $500 million from its spending in the province due to low prices for natural gas.
Also on Wednesday, Petro-Canada weighed in, saying that royalty rates should increase only for oil and gas prices that rise above current levels. The company also said any royalty changes should be phased in, so producers and investors have time to adjust.
"We want to continue to invest here, so it's important that we find a solution that works for everyone," said Ron Brenneman, Petro-Canada's CEO and president.
Stelmach has promised to consult with the oil and gas companies before making his decision, which is expected later in October.
"No one should be surprised that firms are making noises that they will invest less or build less if royalties increase," energy policy expert Joseph Doucet said Thursday.
"The real question for the government to look at is by how much that might change, in order to make the best decision."
Doucet said the government should be able to strike a balance between increasing rates and maintaining the industry.
"Although there will be a hit on the industrial sector, it won't necessarily be as large as people are predicting," he said.
September 30, 2007
Alaska: Image problem plagues gas line
PORK: Official says corruption probes aren't the big obstacles.
By STEVE QUINN
Anchorage Daily News
September 29, 2007
Recent federal corruption convictions, pending trials and ongoing political corruption investigations won't hurt the state's efforts to get a gas pipeline built, said Drue Pearce, the federal coordinator for Alaska's gas line project.
Pearce spoke to The Associated Press this week while former House Speaker Pete Kott was convicted on bribery charges, the second former state lawmaker to be found guilty of corruption this year.
Pearce is a former president of the state Senate. She said the hurdle is letting the rest of North America know that shipping North Slope natural gas means heating for Lower 48 homes and business, not simply a lining of the state's pockets.
This means overcoming an image of Alaska as the national symbol for pork barrel spending, which happened when the state received two multimillion-dollar earmarks for projects dubbed "bridges to nowhere." The governor scrapped one of those projects last week.
"There is a sentiment widely held throughout the Lower 48 that Alaska is spoiled and not worthy of largess from the federal government," Pearce said. "They think, 'Gee, they just want a gas pipeline for themselves,' " she said.
"That's why it's so important that people understand that this is a North American project, not an Alaskan project."
Congress ordered the creation of Pearce's job in 2004 to help speed federal review of the proposed pipeline.
Her role is that of a facilitator, even a mediator if necessary, but she is not a policymaker.
She cannot overturn certain orders from the Federal Energy Regulatory Commission, and she cannot impose her own terms and conditions on the project.
WHICH PIPELINE?
So far there is no concrete project, just a proposal.
State lawmakers passed Gov. Sarah Palin's Alaska Gasline Inducement Act last spring and the administration is awaiting applications to pursue a pipeline project.
Former Gov. Frank Murkowski had a deal last year with North Slope leaseholders BP, Exxon Mobil Corp. and Conoco Phillips to set tax and royalty terms should a pipeline get built.
But there was no guarantee construction would happen. The Legislature did not like the terms and never voted on it, so Palin started over with a more inclusive plan.
Pearce said progress has been made since the Murkowski deal fell through last year.
"The governor is certainly moving the ball," Pearce said. "On Nov. 30, she is going to have some number of conforming applications to commit to moving forward a project. That is movement we didn't see with the contract negotiations between Gov. Murkowski and the producers."
No pipeline route has been established. That will be part of the proposal in the applications submitted to the state.
Most discussions have surrounded the prospects of a line going from the North Slope into Canada and eventually to the Midwest markets in the Lower 48.
Also, under consideration would be a line that could ship gas to a liquefied natural gas plant in Cook Inlet, then delivered it to West Coast markets.
"We will deal with any project that comes into the door," Pearce said.
The Palin plan would issue one official license to pursue a pipeline, with perks to the winner such as $500 million to help cover startup costs. But companies not winning the license could still seek federal certification to build a pipeline.
It's an issue not widely discussed in the Capitol, but more than one application to federal regulators could be a problem, Pearce said.
"It would be a nightmare to have two federal applications, and that's a concern," she said. "No one has to have a state license to come to the feds with an application."
THE CORRUPTION INVESTIGATION
The specter of political corruption in Alaska won't go away soon.
That's because one former lawmaker, Rep. Vic Kohring of Wasilla, awaits trial Oct. 22.
Two former state legislators were convicted in recent months of taking bribes. And the probe into other state and federal officials continues.
"I have some concerns about it, but that's because I'm an Alaskan," she said. "None of us know how long this is going to play out or what affect it's going to have.
"But, I can honestly say I haven't had anyone link them and ask me if I thought it was going to have a major impact on the gas line."
See also
In Alaska, scandal flows like crude
Role of major north slope producers unclear with signing of AGIA
Alaska legislators (22 of them) still stumping for VECO
September 27, 2007
Simulations highlight risk of oil disaster
New computer model tracks spread of potential spills, impact on salmon and wildlife
Try the animations and read more at the Living Oceans Society website:www.livingoceans.org.
Mark Hume
Globe and Mail
September 27, 2007
VANCOUVER -- A computer model developed in the United States to track oil spills shows what will happen if tankers go down, or an offshore well starts to leak, on British Columbia's rugged and beautiful coastline.
It's not a pretty sight. The animated program illustrates spills drifting out like dark clouds through salmon, seabird and mammal habitats to engulf the Queen Charlotte Islands and spread along mainland beaches of the Great Bear rain forest.
"It will be devastating," said Oonagh O'Connor, energy campaign manager for the Living Oceans Society, a non-profit group that contracted a private environmental consulting firm to develop the model for specific scenarios in B.C.
The model used data from the federal government's Institute of Ocean Sciences on winds, tides, water depths and lunar and solar influences. It identified possible accident sites using Transport Canada studies that plotted shipping hazards on possible tanker routes.
Ms. O'Connor said the model makes it clear that widespread damage will occur on some of the most important areas on B.C.'s coast.
An oil spill could hit the United Nations World Heritage site at Ninstints, or foul the shoreline of Princess Royal Island, which is home to populations of rare, white-coated black bears.
Herring spawning beds, seabird nesting areas, whale feeding grounds and salmon migration routes would all be tainted by drifting slicks of oil.
"The spills that occur on our coast are going ashore," Ms. O'Connor said. "They are going to hit precious places. They are going to hit culturally significant areas. They are going to hit places our communities depend on for sustenance, for cultural reasons, for economic reasons.
"That's what's going to happen on our coast. It's not going to get washed out into the great ocean."
She said a statistical analysis of international shipping figures shows that an oil spill of 10,000 barrels or greater will occur every 9.2 years on B.C.'s coast if tanker routes open up to serve even one of the six pipelines that have been proposed for ports in Kitimat and Prince Rupert.
"We would say that based on statistics of occurrences throughout the world in terms of tanker accidents, if we allow tankers onto our coast, oil spills are inevitable," she said.
"It's a matter of when the spill will happen and how large it will be. It's not a question of if a spill will happen."
Ms. O'Connor said the Living Oceans Society undertook the project because of the flurry of new proposals for oil tanker routes to serve pipelines linked to the continued expansion of Alberta's tar sands.
"Over the last two years there have been about six different projects come forward. And then there is a continued push by the Premier of B.C. to lift the moratorium on offshore oil and gas exploration ... so we wanted to know the details of what would actually happen if there was a spill."
Ms. O'Connor said three of the four scenarios modelled were based on the Exxon Valdez accident, in which a tanker hit a reef off the Alaska coast in 1989, spilling 250,000 barrels. It was one of the worst environmental disasters in North American history.
"We thought the Exxon Valdez was a huge spill, and it was, but in the last few years it has moved from the 35th-largest spill to the 50th largest, so there have been lots of tanker spills way larger than the Exxon Valdez," she said.
In the scenarios, the oil tankers only spill a portion of their loads and the oil leaks out over several days, mimicking what happens in most shipping accidents.
Ms. O'Connor said that if oil spills occur there is little chance they will be contained by response teams, which could take several days to reach remote locations.
She added that even with modern technology, the industry definition of a successful cleanup is when 15 per cent of the oil is recovered.
"To us that's not a success. That's a disaster," she said.
Ms. O'Connor said Living Oceans wants to present the program to B.C. Premier Gordon Campbell and Prime Minister Stephen Harper in the hope of convincing them to ban oil tankers and offshore petroleum development.
Try the animations and read more at the Living Oceans Society website:www.livingoceans.org.
September 20, 2007
More whining about Alberta's royalty report
See Alberta Royalties Report Released for the first package of coverage and commentary about Alberta's Royalty Review, released this week.
Royalty Review Panel Final Report
The whining continues, Stelmach says government is going to crunch its own numbers, suggesting the report may be heading for the round file.
No, Ed, don't give in so quickly!
Parts of royalty report called 'Draconian'
David Ebner, Globe and Mail, 20-Sep_2007
We'll listen to oilpatch, Stelmach says
Tony Seskus, Calgary Herald, 20-Sep-2007
More room to manoeuvre
Editorial, Calgary Herald, 20-Sep-2007
Good direction on environment
Editorial, Edmonton Journal, 20-Sep-2007
Scare tactics too predictable
Graham Thomson, The Edmonton Journal, 25-Sep-2007
Parts of royalty report called 'Draconian'
DAVID EBNER
Globe and Mail
September 20, 2007
BANFF, Alta. — — Alberta could raise oil and natural gas royalties but this week's recommendations for major increases are “Draconian,” according to Murray Edwards, vice-chairman of Canadian Natural Resources Ltd. [CNQ-T], the country's No. 2 producer in the oil patch.
“To get into the particular details, it's probably premature, but I think there was a recognition [among industry leaders] that there maybe could be some increases on royalties as you move to higher [commodity] price environments. But to go the magnitude of the increases [in this week's Alberta royalty report] just goes far beyond the economic capability of the basin,” Mr. Edwards told reporters in Banff on Thursday at an annual business conference.
On Tuesday, a landmark report produced by an independent expert panel concluded that Alberta has been missing out on billions of dollars of energy money, issuing broad recommendations led by a call to hike Alberta's take in the oil sands to 64 per cent from 47 per cent, including royalties, taxes and other levies.
The six-person panel said Alberta would still be attractive for investments even with such an increase. It said Alberta could have collected $11.4-billion in 2006, 20 per cent more than the $9.5-billion actually taken in during a year when oil companies all booked record profits.
Mr. Edwards, and others in the energy business, are criticizing economic figures in the royalty report, suggesting that assumptions on development and production costs, as well as industry profits, are wrong.
Alberta Premier Ed Stelmach has promised a final answer from government by mid-October and Thursday said he is ready for an open discussion, inviting industry to meet with the finance and energy ministers.
“This is an opportunity for industry to look at the numbers and say, ‘You know what? We don't agree with this portion of the report,'” Mr. Stelmach told reporters in Banff. “And that's why in the next few weeks we'll see that discussion.”
Mr. Edwards—who owns $830-million of Canadian Natural stock—said the report didn't strike the right balance between government take and industry profits, suggesting that its recommendations could hurt Alberta's economy.
“The fear is that some of the proposals in the report are so Draconian and so drastic it may end resulting in less economic activity and less revenue overall for Albertans over the long term,” Mr. Edwards said.
Canadian Natural is close to completing the first $7.6-billion phase of its Horizon oil sands project, which would be the fourth mine north of Fort McMurray and produce 110,000 barrels of synthetic oil a day when its starts operation next year.
The company has outlined expansion plans worth more than $20-billion beyond phase one of Horizon. Mr. Edwards said every plan would now need to be reviewed The price of oil closed at a record $83.32 (U.S.) a barrel Thursday, up $1.39.
We'll listen to oilpatch, Stelmach says
Tony Seskus
Calgary Herald
Thursday, September 20, 2007
BANFF - Premier Ed Stelmach hinted today there might be room to move on the controversial recommendations in a major royalty report, saying industry will have a chance to meet with key ministers to discuss concerns.
The new study found Albertans are not getting their "fair share" from oil and gas development in the province, recommending changes to the royalty and tax system that would boost the government's take by $2 billion annually.
After addressing a blue-chip business crowd in Banff, Stelmach suggested that while the six-member panel did their calculations for the study, the government will also take time to crunch the numbers.
"The calculations were done by the panel and they took a position. It's now our report - it's also in the hands of the public - and it will be based now on good, solid evidence," Stelmach told reporters.
"If there's an issue there (with the report), I'm sure industry will be sitting down with our finance minister and our minister of energy, and then the two ministers will bring that forward to caucus."
Stelmach rejected the suggestion that industry might be getting special access to discuss the report. He said this week that he wouldn't be intimidated by anyone - including the oilpatch - in deciding how to respond to the report's recommendations.
"All Albertans can submit their comments to government," Stelmach said.
"This is a major report that was made immediately public. So, there's no private component to this."
The government is expected to respond in mid-October to the study.
Stelmach ordered the review in response to public concerns that Albertans were not getting enough in royalties and taxes from energy development.
tseskus@theherald.canwest.com
© Calgary Herald 2007
More room to manoeuvre
Royalty report allows Stelmach chance to fine-tune new terms
Editorial
Calgary Herald
Thursday, September 20, 2007
Premier Ed Stelmach's government cannot ignore the royalty review it asked for, but neither should it adopt it paragraph by paragraph, as review-panel chairman Bill Hunter demanded last week, saying it should not be "cherry-picked."
The report is a radical document, here and there recommending arbitrary measures over market solutions, that old contracts not be grandfathered, and treating consultation with industry as a barely necessary inconvenience.
Yet, strangely that all works to Stelmach's advantage.
For, change is in the offing, and the energy industry, especially that part of it working in the oil sands, knows it. The 1997 agreement that coaxed today's extraction complexes into existence, has more than done its job. It makes sense to rewrite the rules so that future projects yield a higher return to the taxpayers.
The problem for any Alberta government would be the howls emanating from the industry.
Enter Hunter, with "Our Fair Share." By presenting such an extreme solution, it gives Stelmach room to come back with less onerous terms, that would still extend the province's total take -- even if not by the $2 billion that Hunter says would have come its way, had his principles been applied to 2006 production at 2006 prices.
Where Stelmach can easily give is in dropping such recommendations of the Hunter panel, as that old contracts not be grandfathered.
Alberta's energy industry has been built on trust, and the expectation that a deal made with government, would stay made. Yet, this report effectively proposes the province unilaterally terminate contracts entered into in good faith between former governments and investors, and arbitrarily establish new ones.
It was a surprising, even offensive, recommendation. One wonders how rich last year's $2.1 billion bonus bids would have been, had the Hunter review's proposals governed the market.
Nor is it conducive to investment that consultation with industry be for appearances sake only. Speaking of a new regimen to establish a market price for bitumen, for example, the report first dismisses market forces as "unlikely to resolve this issue in the best interests of Albertans," then continues, "Consultation for this purpose, as a point of clarification, would not entail or imply negotiation nor is it intended to introduce any sense of veto power or consent requirement on the part of the oilsands industry."
Stelmach should be able to give that away with little fuss, as well. Then, he may start to pick cherries.
While high oil prices do not translate directly into surplus profits -- exporters lose on the Canadian dollar's galloping value much of what they make on oil's galloping price denominated in US dollars -- industry has this ace: An insatiable market, just across the border, in a tense world, with the ability to pay. A government that acknowledges its higher costs, and defers to Alberta's tradition of honest dealing, can reach a satisfactory arrangement with industry.
Above all, Stelmach is as entitled as the Hunter panel -- as leader of an elected government, more so, perhaps -- to decide what is, in fact, fair.
It is an unfortunate hole in the Our Fair Share report, that nowhere does it define "fair."
What is fair? An agreed rate of return on investment, or revenue? A 50-50 split between Alberta and the producer? Two thirds-one third, as Hunter suggests for oilsands and natural gas? To the extent the report answers the question, it infers that Alberta should be in the middle of a pack that includes countries with vastly differing geologies and recovery costs, and not a few political systems.
To that point, it is hardly an argument for Alberta being shortchanged, that it squeezes less from producers than Angola, or Venezuela. Fair, then, becomes what Hunter thinks is fair.
And, that's fair enough, as long as everybody knows there's no objective standard in use here, and that Hunter appears at home with arbitrary dictums.
He presents his report as a whole prescription for Alberta's royalty future, but it would be better treated as the opening bid in a process to recalibrate the province's royalty structure.
Stelmach and his cabinet must examine it carefully. Then, they must decide what they think is fair to both Albertans and the industry, and act accordingly. But make no mistake, there is no question industry will pay more: The question is: What is really fair?
© The Calgary Herald 2007
Good direction on environment
Editorial
The Edmonton Journal
Thursday, September 20, 2007
As the royalty review panel discovered, a fair share of royalties isn't the only issue on the minds of Albertans. So is the environment.
Though it wasn't their mandate to deal with the green file, the panel members decided they couldn't ignore a growing concern they heard at public hearings.
"Now, at the end of this task and looking back," writes chairman Bill Hunter, "I am struck by how much of our discussions revolved around exploring appropriate ways to respond to the many concerns voiced for the environment resulting from the pace of development ...
"We on the panel became convinced that the environment is a critical component in the planning of our future."
This is a refreshing and candid message.
Premier Ed Stelmach should take a close look at the panel's suggestion of a conservation tax as a way to move forward. This special Crown Land Conservation Tax would be paid by all sectors -- oil and gas, forestry, mining and agriculture -- that have leave a footprint on Crown land, the panel suggests.
The energy industry would pay a 10-cent-per-barrel levy, the forest industry 25 cents per cubic metre of timber logged, agriculture a $10-per-acre fee for Crown land, and mining a 10-cent levy per tonne.
At the suggested levels, the tax would raise $75 million. The money could be used to set up a multi-stakeholder body to "analyze, assess and plan strategies to protect the environment for future generations."
Such a tax is common in other countries with oil and gas development, the report notes, and it would ensure that of the billions of dollars made, "a portion would be set aside; directed to a cause many Albertans think is vital for obtaining our continued consent for resource development."
The panel members recommend against using the royalty regime as a mechanism for paying for environmental protection, and they're right.
The share of economic rent paid to the owners should not be reduced by a company's environmental footprint.
Alberta took a step down the road to a tax on pollution this year in province's plan to reduce greenhouse gas emissions.
Companies that cannot meet the government-mandated target -- a 12-per-cent reduction in emissions intensity -- will be required to pay a carbon tax of $15 a tonne.
That is expected to raise $175 million in the next two years. Those funds will be put back into new technology that reduces carbon emissions.
The panel didn't spend much time looking at how the conservation tax might be spent.
What's desperately needed, environmentalists will tell you, is not cash for another multi-stakeholder committee (we've go plenty of those), but rather cash to carry out wildlife and forest protection plans.
In 2004, for instance, a multi-stakeholder committee came up with a plan to protect the dwindling population of Woodland caribou.
So far, there's been no money on the table to carry it out, says Glen Semenchuk of the Federation of Alberta Naturalists.
"After we come up with a plan, the government has to go back to industry for the funding to implement," says Semenchuk.
"If you just added a bit to the price we could pay for these things," he said.
It's no secret that land reclamation in the oilsands is years behind. The environment department has yet to issue a single certificate for reclamation.
Is that because the department has no financial leverage?
The panel has done Stelmach's government a favour in opening this door, providing "a talking point for how the world of money and of the environment might come together in Alberta's future," as Hunter puts it.
Stelmach should take advantage of the opportunity to have that long-overdue conversation.
© The Edmonton Journal 2007
Scare tactics too predictable
If royalty review headlines seem hauntingly familiar, it's because they are
Graham Thomson
The Edmonton Journal
Tuesday, September 25, 2007
After carrying it around like a security blanket for the past week, I have finally put down my well-worn copy of the royalty review panel's report.
Well, it actually put itself down, falling apart at the seams like a $5 suit. I apparently wore the poor thing out rereading the bits about government incompetence and the need to raise energy royalties.
So, to give it, and me, a break, I picked up some newspaper articles instead.
One had the headline: Oil industry says Alberta may kill the golden goose.
Another said, Higher oil tax called 'unjustified.'
A third article explained how energy companies predict "the government proposal would cripple the oil industry and hobble the provincial economy."
Old news, you say? You saw all that reaction last week?
Well, yes, it is old news -- but not from last week. These are all stories from 1972, retrieved from the archives of the legislature library.
Step into my time machine and we'll take a journey back 35 years to an era when American Pie was the name of an epic song, not a teen movie, and Watergate was the name of a hotel, not a political scandal. Richard Nixon was still godfather of the United States and Marlon Brando was godfather of the movie theatres.
In Alberta, the rookie Conservative government of Premier Peter Lougheed had deliberately picked a fight with the energy industry over royalties and taxation, saying Albertans as owners of the resources deserved a higher rate of return that would provide about $70 million more a year in revenue to the provincial treasury.
The oil companies reacted with outrage. The Canadian Petroleum Association said the government's plan was not "practical and equitable." According to the association's brief to the government, Lougheed's proposed tax was "a serious breach of faith with the industry."
The Calgary Albertan reported on May 24, 1972, Husky Oil had delivered its own presentation against Lougheed's taxation proposal, saying, "the net effect of the plan will be to reduce exploration in the province and to discourage the development of reserves once they are found."
The Independent Petroleum Association of Canada issued a dire warning that 50,000 jobs would be lost and one colourful oil executive, John Rudolph, threatened to pack up his drilling rigs and move back to the United States rather than pay the new royalties.
In a retrospective interview last year, Lougheed said he told irate oil executives at the time: "What you don't understand is you don't own the resources."
Lougheed's comment was echoed in last week's review panel report that said: "Albertans own the resource."
Any student of history would not be surprised by the energy companies' heated response to the panel's report, just as Lougheed wasn't surprised back in 1972. He had done his homework and understood the kind of fight he had started 35 years ago. Oil companies will initially resist higher royalties, then learn to live with them.
Lougheed knew, for example, when the previous Social Credit government introduced a new royalty regime in 1962, the oil companies had fought back, warning of a slump in investor confidence.
Same thing in 1951, when the Socred government introduced a royalty regime energy companies said would shake investor confidence, reduce exploration and cause unemployment.
The reaction is as foreseeable as the changing seasons. Introduce new royalties and watch the energy companies erupt. Old Faithful isn't this predictable.
It's not their fault, I suppose. Their first responsibility is to their shareholders, not to the people who own the resources -- which would be us Albertans.
Now, let's return to September 2007. We're still waiting for Premier Ed Stelmach to decide whether he'll adopt the review panel's recommendations and increase royalties. He'll give his answer the middle of next month -- but an increasing number of government sources say Stelmach will likely adopt the bulk of the report's recommendations.
So far, the only political voice raised against the report comes from the fledgling Wildrose Party which issued a news release with a less-than-subtle headline that could have been written by an energy company executive: Leave oil royalties alone!
The Wildrose Party has subsequently discovered an internal split over the royalty issue, however, and is inviting the public to a debate tonight at the Old Timers Cabin in Edmonton.
Party founder Link Byfield will argue against new royalties.
As I write this, nobody had been named to argue in favour of higher royalties, not that it should be a problem.
There are plenty of Albertans who want royalties increased.
As an editorial in The Journal said: "In the matter of royalties, as with anything else, the first duty of the government and the legislature is to do the best for the people of Alberta."
The editorial was written in 1972 -- but could have just as easily been written today.
gthomson@thejournal.canwest.com
© The Edmonton Journal 2007
Pipeline worries landowners' group
COMMENT: One surprising bit of information in this article: that Alberta Clipper is the first project in 55 years to require new right-of-way in Saskatchewan or Manitoba. It's not like they haven't been building pipelines in all those years. How much ROW did the companies stake out 55 years ago?
The message in this article for Enbridge? The landowners want to negotiate a deal, and are using intervention in the hearing as a bargaining ploy. It's pretty conventional foreplay in the pipeline-landowner dance. But Enbridge has been playing it tough, and so far is unwilling to meet with the landowners.
Alberta Clipper at the NEB The hearing date is set for November 5, 2007.
A more interesting debate took place over at the Trans-Canada Pipelines Keystone Pipeline proceeding. It's between the Communication, Energy and Paperworkers Union, Alberta Federation of Labour, and the Parkland Institute, on the one side, and TCPL/Keystone on the other. CEP/AFL/Parkland argue that exporting heavy crude is exporting jobs and economic opportunities from Alberta and Canada, to the U.S. They argue that the refining and value-added investment and work should take place in Canada, not in the U.S. They further argue that Canada's energy security should be a consideration in the project review. They will be making similar arguments in the Alberta Clipper proceeding.
TCPL/Keystone said in its reply argument after the hearing in June that the CEP et al arguments were out of scope, had no merit, and should be ignored. The NEB decision on the project is, well, taking a long time.
Keystone Pipeline at the NEB
Stefan Schussler
Regina Leader-Post
Wednesday, September 19, 2007
REGINA -- Oil spills, soil erosion, soil contamination and crop loss top the list of concerns of an organization of landowners about a proposed oil pipeline.
The Saskatchewan and Manitoba Associations of Pipeline Landowners and the Canadian Alliance of Pipeline Landowners Association met in Regina on Tuesday to discuss Enbridge Inc.'s proposed Alberta Clipper pipeline project that will cross members' properties.
The proposed pipeline would transport heavy crude oil from Hardisty, Alta., straight through the properties of several Saskatchewan and Manitoba residents, then travel south to Superior, Wis.
The proposed $2-billion project would create a pipeline capable of carrying 450,000 barrels of crude daily, but could be expanded to 800,000 barrels as demand increases.
Both the SAPL and MAPL represent people who own land that pipelines pass through. The SAPL represents 187 landowners, and was formed earlier this year as a response to the landowners' concerns about the pipeline project.
According to Ken Habermehl, president of the SAPL, this is the first purchase of easement by a pipeline company in 55 years. "This is the only real chance in our lifetime to negotiate," said Habermehl. "This is the only time we can get them to do things in a way that is better for the environment and the public."
Environmental concerns are chief among a list of concerns issued by the organizations in a letter to Enbridge in January, specifically the condition of aging pipelines currently beneath their land and the environmental liabilities when the pipelines fall into disuse.
"When all is said and done and the companies are gone we, the landowners, are left with the bill," said Habermehl.
However, documents obtained from the National Energy Board (NEB), the federal energy regulatory body in Canada, read that the abandonment of federally regulated pipelines requires approval. A public meeting takes place to determine if abandonment is in the best interest of everyone involved. The board then conducts "an environmental assessment of the proposed abandonment or decommissioning and will determine what restoration work is required. A restoration plan is approved before work begins to ensure that land disturbed by the removal or sealing of a pipeline is restored," according to the NEB.
Habermehl is also concerned about what he believes is an increase in so-called "integrity digs" -- done by the company to inspect and repair sections of pipe -- that spot the land along current pipeline routes.
"There's more spills and leaks and more and more digs," said Habermehl.
In April, a leaky pipeline in the Glenavon area of southeast Saskatchewan led to the spill of thousands of barrels of crude on private land. Habermehl is concerned that the leaks may become commonplace as pipelines, some over 50 years old, continue to age.
According to Habermehl, integrity digs are basically a temporary patch.
"They put collars around the pipes (to reinforce them). They're going to end up collaring the whole pipeline."
Habermehl and the three organizations have filed for intervenor status at Enbridge's NEB approval hearings for the Alberta Clipper.
The Nov. 5 hearings are part of the lengthy process involved in getting approval for the construction of the pipeline, slated for completion by 2010.
Habermehl hopes that it won't have to go that far. The groups plan to raise their concerns in negotiations with Enbridge in Regina that begin today.
September 19, 2007
Energy CEOs call for national policy
COMMENT: We want to cheer when we see a headline like this. We've called repeatedly for development of a national energy policy. But reading past the headline, it's apparent what the CEOs are hoping to get - federal aid, big time:
- R&D and training, ponied up by the feds
- infrastructure investments and immigration and education policies
- a strong federal role will ease cost burdens
- overcome the patchwork of provincial and federal laws with a unified national program
- Ottawa has failed to put a price on future carbon emissions
- a federal push for vastly increased immigration of both skilled and unskilled workers
- federal money for education for oil workers
- more federal involvement in infrastructure, especially in the development of supplies of water, which is a vital resource in oil sands extraction
See also:
Why Canada Needs a National Energy Plan
DOUG SAUNDERS
Globe and Mail
September 19, 2007
LONDON — In Alberta's oil patch, the words “national energy program” are usually uttered as a curse, a reference to the ill-fated 1980s program of oil nationalization and price controls.
But in a possible sign of changing times, several senior Canadian energy executives have used a gathering in London this week to make an unprecedented call for an increased federal role in their industry – some even daring to call for Ottawa to develop a comprehensive national energy policy.
“I firmly believe that developing and implementing a national energy strategy would help resolve many of the issues” facing the oil and gas industries, said Patrick Daniel, chief executive officer of the petroleum pipeline and distribution firm Enbridge Inc. “A national strategy would help in mapping our energy development agenda and serve to prioritize our initiatives, including R&D and training.”
Leaders in the oil, gas, pipeline, energy retail and electricity industries – and especially those involved in the high-stakes oil sands sector – came together at an annual meeting of Canadian and European CEOs to call on Ottawa to deliver regulations, infrastructure investments and immigration and education policies.
While such federal roles have been actively opposed in the recent past, the CEOs now believe that only a strong federal role will ease the cost burdens faced by the companies and the uncertainties faced by their shareholders, and also overcome the patchwork of provincial and federal laws with a unified national program.
“Neither Canada nor the USA seems to have any national policy on energy,” said Deryk King, the CEO of the energy retailer Direct Energy (a division of Britain-based Centrica PLC). “We have a need for a national energy policy with federal-provincial co-operation.”
Exploration firms have complained that some of their oil sands initiatives are stalled because Ottawa has failed to put a price on future carbon emissions. Without either a carbon-trading system, as the European Union has attempted to develop, or a carbon-tax regime, they have no way of knowing the full cost of proposed projects.
Since oil sands extraction produces enormous amounts of CO{-2}, this is a major hindrance.
“The first thing we can do is find out what that number is, and therefore what volume of carbon we can effectively sequester and put away,” said William Roach, CEO of the emerging oil sands firm UTS Energy Corp. “Only then can we look at the commercial proposition.”
While the CEOs were divided on the precise response to global warming policy, they were united in their call for a federal push for vastly increased immigration of both skilled and unskilled workers.
“It's very difficult to get the people we need to get the jobs done. The McDonald's franchise in Fort McMurray has been offering $3,000 signing bonuses to get kids to come sling hamburgers – that tells you how competitive it is to get people … we need new immigrants in this country in order to address the shortfall that we've got in the work force. Canada's a very attractive place for people to come, but we don't do a very good job attracting people, in my view.”
More federal money for education for oil workers is another key demand.
Several of the oil firms are spending large sums funding trade schools in their operating areas, but still are short of skilled workers.
Mainly, though, they said Canada needs a larger population.
“For 50 years, we've had the whole government apparatus designed to create employment. Well, now we don't lack for employment, we lack for people to do the jobs,” said Steve Snyder, CEO of the electrical generation firm TransAlta Corp. “We actually need a department now to create people. We don't lack jobs in Canada, we lack people. We've got 30-year civil servants who've spent their whole lives saying ‘how do I create a job?' And now they should be asking ‘how do I create a skilled worker?' – and, quite frankly, an unskilled worker.”
The executives also called for more federal involvement in infrastructure, especially in the development of supplies of water, which is a vital resource in oil sands extraction.
Take Action on Climate Change by Sept 20!
On June 26, 2007, the Kyoto Protocol Implementation Act became law. Simply put, this law requires the federal government to meet Canada's Kyoto target, first by producing a plan to honour Canada's obligations under the Kyoto Protocol and then by putting that plan into effect through regulations and other measures. The federal government has opposed this bill from the beginning, voting against it at every stage in Parliament.
Under the terms of the law, the government had 60 days to produce a plan to meet Kyoto. The result, quietly released on August 21, is a document entitled “A Climate Change Plan for the Purposes of the Kyoto Protocol Implementation Act 2007”
Sadly, this 37 page report merely re-iterates the flawed proposal the government announced in April - a proposal that would not reach Canada's 2008-2012 Kyoto target until sometime after 2020. The government is required to produce a plan to honour Canada's Kyoto obligations. It didn't even try.
You can do something about the government's inaction
A number of environmental organizations plan to ask the federal courts to rule that the government has failed to comply with the law. The courts have the power to order the federal government to live up to the requirements of the Kyoto Protocol Implementation Act.
In the meantime, you can help a great deal. The courts often take note of the level of public concern for an issue in their consideration of environmental cases.
Climate Action Network Canada - Reseau action climat Canada has made it quick and easy for you to file your comments. You can complete CAN Canada's form (start by entering your name below) and the government will receive a copy of our sample letter with your name on it. If you prefer, you can customize the letter to make your own particular points.
Please take action as soon as possible. The deadline for public comments is September 20, 2007.
Learn more and then click here to fill in the form at Take Real Action.
Environmentalists file lawsuit over Kyoto law
Mike De Souza
National Post
Wednesday, September 19, 2007
OTTAWA -- Environmentalists have recruited a high-profile Toronto business lawyer to take the Harper government to court for allegedly breaking a new law that requires it to honour Canada's international commitments to slash the heat-trapping gases linked to global warming.
The lawsuit challenges Environment Minister John Baird's response to the Kyoto Protocol Implementation Act, a Liberal-sponsored piece of legislation that was adopted in the Commons through the united backing of the three opposition parties. Environmentalists are also seeking a court order to require the minority government to comply with the legislation.
Chris Paliare, who is listed in several guides ranking top Canadian and international lawyers, said he agreed to take on the case for free because he was offended by the attitude of Prime Minister Stephen Harper, who recently touted himself as an environmental champion at a summit of Pacific Rim leaders in Australia.
"I just say it's the height of arrogance and [Harper] has got to answer for it, in my respectful view," said Paliare. On Wednesday, he filed a notice of application in the Federal Court of Canada, along with Ecojustice, a non-profit Canadian environmental law organization, and on behalf of Friends of the Earth Canada.
At issue is the new law that, among other things, obliges the government to table a report detailing how it will honour Canada's international Kyoto obligations to lower, between 2008 and 2012, Canada's greenhouse gas emissions by an average of 6% below 1990 levels.
However, Baird's response was to issue a report saying it is impossible to honour the commitment because emissions are now more more than 30% above that target. Instead, Baird has stuck with his own environmental plan, which calls for Canada to meet its Kyoto Protocol target by around 2025.
"Having looked at [the government plan] carefully, it doesn't come close," Paliare said. "The [law] says the government is required to run a marathon. Mr. Harper and his government haven't even done a five-kilometre run."
While he will work for free, Paliare estimated the case could wind up costing tens of thousands of dollars in court costs, depending on whether the government tries to delay the proceedings. But Friends of the Earth said it will cover the court costs, based on its principles.
"Deadbeat dads are unacceptable in Canadian society," said Friends CEO Beatrice Olivastri. "Non-compliance with this act, and the Kyoto Protocol, is also, we believe, unacceptable."
But Paliare challenged Harper to speed up the proceedings and prove that his concern for the environment is genuine.
"If you say that what you've done complies, we should be able to get into court in a month and do it in one day," he said. "If, in fact, the environment is as important as Mr. Harper says it is, and has said it is in Australia and everywhere else, every day that this isn't being adhered to, is a day, I say, of infamy for this country."
A spokesperson for Baird refused to comment on the specifics of the case, but insisted the government is not breaking the law.
"This government has respected the will of Parliament and out of respect for the law, we will meet the report-filing requirements of Bill C-288, while continuing to push forward with what Canadians want: real and concrete actions to fight climate change," Garry Keller said.
Alberta Royalties Report Released
COMMENT: Alberta's royalty review report is in and it's saying what we've been saying for a long time: royalties are too low, in the oil sands especially, and it's time to stop the giveaway.
British Columbia's government, for whom all things Albertan are to be emulated, it's also time to rein in the public largesse. Well, it has been for some time, but now that Alberta has this report, BC can mimic new Albertan royalty policy without fear that all the drills in BC will stop overnight.
The sounds you'll be hearing in the next months? That will be the pathetic whining coming from all those Calgary head offices. Plug your ears and grin. It's about time. Don't grin too much though, because whatever increase is applied in the new royalty regimes, it won't be enough.
19-Sep-2007 Update: Have you read the National Post's "Golden Goose" article? Whine, whine, whine. Told you so."
Royalty Review Framework
The independent panel asked to review Alberta's royalty and tax regime delivered its final report and recommendations to the Government of Alberta on September 18, 2007.
Alberta Royalty Review
News release (September 18, 2007)
Royalty Review Panel Final Report
* Sensitivity Analysis Appendix
* Data Appendix
Royalty Review Panel final report released to public
News Release, Province of Alberta, 18-Sep-2007
Alberta royalties report made public today
David Ebner, Globe and Mail, 18-Sep-2007
Royalties hit would kill 'golden goose'
Claudia Cattaneo and Jon Harding, National Post, 19-Sep-2007
Energy stocks plunge after call to raise royalties
David Ebner and Norval Scott, Globe and Mail, 19-Sep-2007
Royalty Review Panel final report released to public
Government to respond by mid-October
News Release
Province of Alberta
September 18, 2007
EDMONTON - The Government of Alberta has publicly released the final report of an expert panel asked to examine the province’s energy royalty and tax regime, following through on a commitment to make the royalty review process open and transparent.
Entitled Our Fair Share, the 104-page report provides recommendations about how the government can modify the existing provincial royalty structure.
“Albertans made it clear that examining the province’s royalty regime was a priority to ensure they are receiving their fair share from energy resource development,” said Premier Ed Stelmach. “Albertans, as owners of the resource, now have the opportunity to examine the details of this report as government thoroughly reviews the recommendations.”
The government will provide a formal response to the report by mid-October.
The royalty review process began in February with the appointment of a six-member panel by Dr. Lyle Oberg, Minister of Finance. Chaired by Bill Hunter, former president of Al-Pac with more than 30 years experience in the natural resource sector, the panel included experts in resource taxation and the royalty system. Members of the panel included Evan Chrapko, Judith Dwarkin, Kenneth McKenzie, Andre Plourde and Sam Spanglet.
As part of the review, the panel hosted a series of five public meetings across the province and accepted over 300 submissions from Alberta residents, municipal leaders, and stakeholders in the oil and gas industry.
“Thanks to the panel’s hard work over the past eight months, government has a thorough report and valuable information to consider when making a final decision,” said Oberg. “Our goal is to ensure the royalty framework strikes the right balance, providing Albertans with a fair return while maintaining an internationally competitive system that allows the provincial economy to continue to prosper.”
The complete report and recommendations are available on the Government of Alberta website at www.finance.gov.ab.ca.
This News release (September 18, 2007)
Alberta royalties report made public today
DAVID EBNER
Globe and Mail
September 18, 2007
Alberta's government is today publishing a report it commissioned earlier this year on royalties, taxes and other levies paid by oil and natural gas producers. The report is authored by a public panel that toured the province, seeking out views of citizens and industry. The key issue is whether the province is getting its fair share from the oil sands. A final decision on what to do with the report will come in several weeks, the government has said, and the publication has been described as most important economic report in a generation for the province
Alberta should hike oil sands royalties
KATHERINE HARDING AND DAVID EBNER
Globe and Mail
September 18, 2007
Edmonton — Albertans are not receiving “their fair share” from the province's energy industry and the government must significantly hike royalties in the oil sands, according to a much-anticipated report released Tuesday afternoon.
“Albertans do not receive their fair share from energy development and they have not, in fact, been receiving their fair share for some time,” said Bill Hunter, chair of the six-person expert panel that wrote the surprisingly blunt report that investigated whether the debt-free province was receiving adequate oil and natural gas revenues.
The panel found that the government's royalty tax take “ranks very low” against competing jurisdictions, especially in the oil sands arena. It recommended that royalties and taxes be raised by around $2-billion a year, a 20 per cent increase.
In recent weeks, various warnings have been issued from oil patch executives against the provincial government tinkering with the royalty restructure, which hasn't been updated since the mid-1990's.
The Progressive Conservative government is expected to provide a formal response to the 104-page report by mid-October. In 2006-07, Alberta collected $10-billion in energy royalties.
“Albertans made it clear that examining the province's royalty regime was a priority to ensure they are receiving their fair share from energy resource development,” said Premier Ed Stelmach. “Albertans, as owners of the resource, now have the opportunity to examine the details of this report as government thoroughly reviews the recommendations.”
The royalty review process started in February when Mr. Stelmach's government appointed the panel, which included experts in resource taxation and the royalty system. The panel held five public meetings across the province and received 300 submissions.
The panel concluded that it's fair to hike royalties for oil sands projects because the area is a “production powerhouse.” It is also recommending businesses operating in the oil sands pay a new tax.
It rejected essential industry arguments that higher costs, which have plagued all oil sands projects, are a reason to keep royalties the same.
Mr. Hunter has urged the government against grand-fathering in any hikes “on the grounds of fair treatment for all participants.”
The panel has asked the government not to increase more than half of convention oil and gas royalties on the grounds that this sector of the industry is on the decline.
Mr. Hunter said that during the review process, the panel found the province's royalty regime was complex and “almost impossible to follow.” The panel also discovered that government bureaucrats couldn't answer many questions because “useful information is not adequately collected in the first place.”
The panel is recommending in the “strongest possible terms” an accountability package that forces both industry and government to regularly publish data about the energy industry.
Mr. Hunter estimated that the Alberta government has been missing out on more than $1-billion annually from royalties they were entitled to.
The report is being released at a time when the Progressive Conservatives and its new leader, Mr. Stelmach, are struggling in the public opinion polls.
Political observers are closely watching how the 36-year-old government handles this delicate file.
Faron Ellis, political scientist at Lethbridge College, said it's unlikely that Mr. Stelmach will do anything dramatic because it's not his political style. “He does his homework. He's not Ralph Klein…The ‘Steady Eddie' approach demonstrates that he has no intention of being Ralph Klein.”
Prof. Ellis also said he hasn't seen a huge public appetite in Alberta to dramatically reform the royalty regime to get a lot more money from the oil patch.
Alberta Liberal Leader Kevin Taft disagrees.
“There's a genuine interest at street level amongst citizens about this issue,” he said in an interview. “There's a mood out there as the owners of the resource that they aren't getting a fair share.” The Liberals want the government to collect up to 25 per cent of total value in royalties.
He said this is a “big issue” for Alberta and a major moment for the Stelmach government, which has “struggled to be decisive on virtually everything it has faced.
“It's very, very important for the government to handle this one effectively,” Mr. Taft said. “It's much more important to them than us in a way. You've seen their [polling] numbers.”
A quick look at Alberta's current energy royalty system:
History: Concept of royalties dates back centuries. They are a way for the owner of a resource to exact a payment from the person developing that resource. What the specific rate should be is the tricky part.
Government Revenues: Energy sector paid Alberta government about $10-billion in royalties in fiscal 2005-06, not including lease sales. Industry says royalty-related revenues account for 40 per cent of total provincial revenues.
Lease sales: Companies bid against competitors for right to explore and develop oil and gas on parcels of land. These fees, paid whether energy reserves are found or not, generated a further $2.4-billion in provincial revenues last year.
Provincial royalty goal: Fluctuated over the years, but currently sits between 20-25 per cent of total energy industry revenues. Critics charge current take is below 20 per cent and far less than other producing jurisdictions, including Texas and Norway.
Conventional oil and gas: Production-based royalty paid on a sliding scale based on price and productivity per well. Formula enables government to get a higher take if well is more prolific than expected or if price rises significantly. Industry says producers are left to shoulder any unexpected higher costs.
Oilsands: Companies pay just 1 per cent of gross revenues until all project construction costs are recouped, then the rate climbs to 25 per cent of revenues, minus costs. Industry says that when federal and provincial income taxes added, the share of revenues between government and industry is close to 50-50.
Other provinces: In Saskatchewan, oil and gas royalties and taxes are forecast to top more than $1.2-billion, or about 17 per cent of total provincial revenues. Like Alberta, royalties are collected on a sliding scale based on the age of the wells, quality of oil, etc. In Newfoundland, royalty rates differ on the three producing offshore oil projects. The province also recently announced small equity stakes in the latest offshore project, Hebron, as well as the White Rose expansion.
Continue reading "Alberta Royalties Report Released"
September 18, 2007
Montana accuses B.C. of breaking green pact
BAUCUS TO BP EXECS: HALT COALBED METHANE PLANS
Press Release, Max Baucus, 10-Sep-2007
Montana accuses B.C. of breaking green pact
Montana accuses B.C. of breaking green pact
Governor, senators decry coal projects
DON WHITELEY
Globe and Mail
September 14, 2007
VANCOUVER — Montana Governor Brian Schweitzer is accusing Premier Gordon Campbell of breaching a four-year-old pact to protect environmentally sensitive areas that straddle the border.
Mr. Schweitzer, in a three-page letter sent Aug. 22, says the province's decision to allow two projects - a coal mine and a coal bed methane development - to proceed through the early stages of permission is of "continued concern" to the state and a breach of the 2003 Environmental Cooperation Arrangement between Montana and British Columbia.
"Since the signing of the Environmental Cooperation Arrangement there have been five separate proposals for exploratory and industrial fossil fuel development in the British Columbia Flathead," the letter states. "I believe the intent [of the arrangement] is not being met and the proposed fossil fuel developments over the past five years run contrary to the language of the arrangement ..."
The governor's letter - combined with combative language on Monday from Montana's two U.S. senators, Max Baucus and Jon Tester - points to an escalation of the cross-border war of words over potential resource development in southeastern B.C.
"I've been fighting to protect water quality and wildlife in the Flathead Valley for 30 years," Mr. Baucus says in a news release posted on his website. "I'm not about to give up now. We're going to do whatever it takes to stop energy development north of our border. We're pulling out all the stops. The gloves are off."
Montana's concerns over the two current projects - BP Canada Energy Company's coal bed methane project and Sudbury-based Cline Mining Corporation's proposed coal mine - revolve around potential impacts on water quality in the Flathead River, which flows south from British Columbia into Montana along the western boundary of Glacier National Park.
Mr. Schweitzer makes it clear in his letter that British Columbia's environmental review process does not adequately deal with Montana's concerns, and that discussions between the two jurisdictions have not yet resolved the differences.
Mr. Schweitzer takes the province to task for encouraging the coal bed methane project: "It is my understanding that British Columbia solicited bids for the development of this resource. Once again, I ask that British Columbia honour the intent of the 2003 arrangement."
He also points out that none of the resource proposals now under consideration in B.C. would be allowed in the Montana portion of the Flathead River.
"South of the 49th parallel, the Flathead watershed is one of the most protected ecosystems in the continental United States," his letter states.
However, elsewhere in the state, Mr. Schweitzer is actively promoting the development of coal-liquefaction plants, coal-fired generating stations and coal bed methane projects.
B.C. government officials in the past have refused to rule out resource development, and argue that the province's environmental-review processes provide an appropriate level of scrutiny. For the Cline proposal, Montana officials have been invited to participate in the process.
Mike Morton, press secretary to Mr. Campbell, confirmed that Mr. Schweitzer's letter had been received, and that a reply would be made by the end of this week.
He declined any further comment.
Meanwhile, senators Baucus and Tester last Monday threatened to give BP Canada a major battle if it proceeds with its Canadian plans.
The two senators met separately in Montana with BP America president Bob Malone and BP Canada president Randy McLeod.
In a press release posted on his website after the meeting, Mr. Baucus said the company can expect "a massive and unpleasant fight from Montana that will end badly" should BP seek permits for its Mist Mountain coal bed methane project in British Columbia.
The two senators timed their meetings and subsequent comments to coincide with September celebrations marking the 75th anniversary of the establishment of the U.S.-Canada International Peace Park, comprising Waterton Lakes National Park in Alberta and Glacier National Park in Montana.
Anita Perry, BP Canada's vice-president of government and public affairs, said the meetings on Monday, which she described as open and direct, were at the request of the two senators.
Mr. Schweitzer and the two senators, with some help from U.S. Secretary of State Condoleezza Rice, persuaded Ottawa to launch its own environmental review of the Cline coal mine proposal through the Canadian Environmental Assessment Agency.
In an effort to kick-start further dialogue between B.C. and Montana, Mr. Schweitzer proposes at the end of his letter that the two jurisdictions co-sponsor a government-to-government summit in mid-December, in Kalispell, Mont.
Special to The Globe and Mail
BAUCUS TO BP EXECS: HALT COALBED METHANE PLANS
Senator Tells Energy Chiefs To Expect Fight; Wants Public Meetings in Kalispell
Max Baucus
United States Senator from Montana
September 10, 2007
(Washington, D.C.) – The British Petroleum Company can expect “a knock-down, drag-out fight” if it advances a proposal to tap coalbed methane seems in the Canadian Flathead, Montana’s senior U.S. Senator Max Baucus said today.
Baucus issued the warning during a face-to-face meeting in his Washington, D.C., office with BP America Chairman and President Bob Malone and BP Canada chief Randy McLeod.
Baucus said BP can expect “a massive and unpleasant fight from Montana that will end badly” for the company should it file an exploratory permit for its Mist Mountain coalbed methane extraction project in British Columbia -- near North Fork of the Flathead River, which borders Glacier National Park and runs into Montana’s Flathead Lake.
Baucus, who successfully blocked a coal mining project in the same area in 1988, says coalbed methane development there could have devastating consequences to fish, wildlife, and the recreation industry downstream in Montana.
“I’ve been fighting to protect water quality and wildlife in the Flathead Valley for 30 years,” Baucus said after the meeting. “I’m not about to give up now. We’re going to do whatever it takes to stop energy development north of our border. We’re pulling out all the stops. The gloves are off.”
Baucus also asked the company to conduct public meetings in Kalispell as soon as possible to allow Montanans to weigh in on the proposal.
The most significant byproduct of coalbed methane extraction is wastewater that can contain high levels of harmful contaminants such as barium, copper, iron, and ammonium. Canada has no law requiring that coalbed methane wastewater be re-injected back into the ground. Even so, the Flathead Lake Biological Station in Montana says that re-injection would be technically impossible given the hydrology and rugged terrain in the region.
BP is expected to file for an exploratory permit to dig test wells in what’s called the Crowsnest Coal Field, an area that spans 190 square miles, covering much of the B.C. portions of the North Fork of the Flathead as well as the adjacent Elk River Valley, which drains into Lake Koocanusa near Libby.
At the same time he’s fighting the BP proposal, Baucus is also working to stop a separate coal mining project proposed by the Cline Mining Co., in the same area.
“Some places should be off limits,” Baucus said. “It’s that simple. Some places are too important to hunting, fishing, and outdoor recreation.”
Baucus is also making good on his promise to secure dollars to gauge the environmental threats posed by energy development in the Canadian Flathead. He’s working with Sen. Jon Tester to shepherd $1.25 million through Congress to collect baseline environmental data in the area.
-30-
September 13, 2007
EUB's private eyes ruled illegal
EUB's private eyes ruled illegal
Geoffrey Scotton, Calgary Herald, 13-Sep-2007
Alberta's spy games
Editorial, Globe and Mail, 17-Sep-2007
Knight fumbles on EUB stage
Graham Thomson, The Edmonton Journal, 18-Sep-2007
See also And then there were six!
http://www.sqwalk.com/blog2007/001079.html
EUB's private eyes ruled illegal
Geoffrey ScottonCalgary Herald
September 13, 2007
Frank Work
CREDIT: Herald Archive Photo
Alberta Premier Ed Stelmach would not rule out firing the Energy and Utilities Board, after a damning report was issued today finding the organization had violated provincial law when it hired private eyes to spy on them at EUB hearings.
Stelmach said he will wait until next week for the results of a judicial review of the matter - ordered by the government - before he takes any action. But the premier did not rule out firing the EUB's board.
"The minsiter will brief me on the findings. And I've instructed him once we're totally briefed a full picure of what has happened then we'll make the appropriate decision," Stelmach told reporters in Edmonton.
"We will be making decisions based on what the judge has said and also what our privacy commissioner has brought forward."
Alberta's Privacy Commissioner Frank Work Thursday ruled the Energy and Utilities Board had violated provincial law when it hired private eyes to spy on them at hearings. A citizens' group is fighting to stop a $600-million transmission project from going through their backyards,
Joe Anglin, co-chair of the Lavesta Area Group of landowners in the Rimbey, Alberta area said the report didn't go far enough to expose the EUB's actions in what he described as a "fabricated security threat" used to rationalize the hiring of undercover operatives to monitor opponents to a project at a hearing the EUB was adjudicating.
"(We) are disappointed in the report due to the amount of inaccurate information conveyed to the investigators about what Lavesta maintains is a fabricated security threat," said Anglin. "There was no security threat to any person or persons. We acknowledge that one elderly lady was emotionally distraught and at no time was she a threat in any way to EUB personnel. "
Work's report, completed by Privacy director Marilyn Mun, found the EUB had violated provincial legislation by collecting information on the landowners it was not authorized to collect, that the EUB had no policies or rules around its use of PIs and that their roles and expectations were not set by the regulator.
At the time the breach of the Freedom of Information and Protection of Privacy Act occured the EUB was holding hearings in Rimbey to determine whether a proposal by Alta Link LP to build a 500 kilovolt transmission line was appropriate and in the public interest.
The landowners have opposed the line, charging that it is ultimately designed to facilitate the export of power to the United States and represents a $1 billion gift to Alberta's generating industry on the backs of provincial taxpayers and ratepayers.
The Rimbey hearings were the second stage in a regulatory process that saw the EUB compeled to revisit its first decision on the proposal, a needs assessment that was reopened after the regulator conceded consultation with some interested parties had not been as fulsome as possible.
The EUB said it will adopt the recommendations from Work's report and defended it actions as necessary in the face of violence at some hearing locales.
"We take these recommendations very seriously and the EUB has already taken steps to ensure that similar situations never happen again," said acting EUB chairman Brad McManus.
"It is important that Albertans understand that the security measures at Rimbey were taken solely because of serious incidents where our staff were physically attacked and other threats and actions led to an atmosphere of intimidation at the hearing," McManus added.
with files from Tony Seskus
gscotton@theherald.canwest.com
© 2007 Calgary Herald
Alberta's spy games
EditorialGlobe and Mail
September 17, 2007
Alberta's Conservative government initially shrugged off reports that its energy regulator had illegally spied on private citizens - until its privacy commissioner launched an investigation. Then Premier Ed Stelmach belatedly ordered an independent probe of the regulator's decision to hire private detectives who gathered personal information on individuals who objected to a proposed power transmission line. Now, although Privacy Commissioner Frank Work has issued a stern report criticizing the Alberta Energy and Utilities Board's behaviour, Mr. Stelmach has delayed his response until that second inquiry also reports, perhaps as early as this week.
That delay may be justified, as long as the Premier acts quickly after its publication to discipline the offenders and prevent such zealous prying in the future. But so far, his government's response to this remarkable three-month scandal has been lackadaisical and far from reassuring. In fact, Mr. Stelmach initially claimed the utility's tactics to infiltrate the landowners were necessary to prevent violence; his energy minister essentially declared that he had settled the issue after a frank discussion with the regulator's chairman.
The trouble began when landowners at public hearings in Red Deer into a proposed 500-kilovolt line between Calgary and Edmonton disrupted the proceedings, demanding the utility broaden the scope of its examination. One 70-year-old woman took an ineffective swing at an employee. Emotions ran high. Another landowner threatened violence at future hearings.
In response, the utility moved its hearings to a provincial courthouse in Rimbey, where admittance was restricted. At the courthouse were two sheriffs, including one at the front door, and two security staffers from the utility. The landowners were restricted to a nearby community centre where they watched the proceedings on closed-circuit television. Sheriffs escorted panel members outside the courthouse. Still, the utility opted to put private investigators in the centre rather than settle for a visible security presence.
The issue emerged in mid-June when the Edmonton Journal reported that the utility board had hired detectives to spy on those landowners. As the privacy commission confirmed last week, detectives gathered the names of some individuals, their organizational affiliation, their contact information and personal descriptions. One of those detectives later participated in at least one conference call between aggrieved landowners and their Toronto lawyer. He also collected documents related to a seminar on peaceful protest and a planned press release from landowners' groups, including more personal information.
The Privacy Commissioner's report rejected the necessity for that action, concluding that this was not an occasion where private investigators were required for safety. Visible security personnel could have maintained order. The utility did not need to collect personal information in order to provide a safe environment. Finally, the commission determined that the regulator failed to meet its legal obligation to protect that personal information because there were no safeguards against such risks as unauthorized access.
Those are serious findings that required more than the government's initial apathy. The regulator, in effect, has collected information on landowners who object to an application that it is considering. That prompts questions about the impartiality of those hearings. Worse, it casts doubt on the judgment of the Premier and his energy minister. When a public body is hiring private detectives to spy on the citizens that it is supposed to serve, something is very wrong.
Continue reading "EUB's private eyes ruled illegal"
Reactor-maker backs Alberta project
COMMENT: The "mystery buyer" for this project's power has failed to materialize. But, but, less than two weeks, Energy Alberta Corp's CEO stated it had an agreement that is "as solid as it gets." Gotta love the promises.
The scary thing for Canada's taxpayers is that AECL is reaffirming its commitment to a project that doesn't have a customer.
See Firm to build $6.2B nuclear plant in Alberta and our comments about Mary Poppins Umbrella:
http://www.sqwalk.com/blog2007/001099.html
Calgary Herald
September 13, 2007
The maker of Canada's Candu nuclear power plants remains committed to a partnership with proponents of a plant in Alberta despite the absence of a buyer for most of the electricity, an official at Atomic Energy of Canada Ltd. said Wednesday.
Energy Alberta Corp., a private firm promoting a $6.2-billion nuclear plant in northern Alberta, said this week that contrary to a previous assertion, it has no agreement with an "offtaker" that would buy 70 per cent of the plant's output.
Government-owned AECL would build the plant in the province's northwest and Energy Alberta would own and operate it.
"It's great. They're moving ahead in the process and (the partnership) is very much together," AECL spokesman Dale Coffin said.
"We knew all along that Energy Alberta has been in discussions with many potential offtakers, but they do not at this point have any firm commitment," he said.
© The Calgary Herald 2007
Royalty review muddle hands Stelmach options
Don Braid
Calgary Herald
September 13, 2007
Before the royalty review panel even reports, its chairman has managed to annoy both the industry and the government, and thoroughly confuse the rest of us.
On Tuesday, and again Wednesday, Bill Hunter said this is a take-it-or-leave-it report. None of it will work unless the whole thing is accepted. This isn't a "Chinese menu" -- no steamed rice on the side.
At the same moment, though, Hunter was asking for a four-day delay in presenting the report, in order to get the numbers right. Huh? This panel is telling everyone it has the answer to royalty rates, but still isn't sure about numbers it used to find the answer?
Is Hunter saying the most important economic report in a generation is already written, but on a foundation of shaky numbers? That's certainly the implication. The timing is also so wildly peculiar that it creates the suspicion something bigger is up.
This week Hunter said the report would be presented to the government on Friday; then he urged the government not to cherry-pick; then he asked for the delay.
Government strategists were immediately terrified they'd be accused of last-minute meddling because of Hunter's insistence that the report be swallowed whole. To avoid this impression, the politicos urged Hunter to explain himself publicly. That's why he and Finance Minister Lyle Oberg held that testy little newser.
Industry players were deeply spooked by the strange delay. Everyone was expecting this report on Friday, including investors in New York, London and points far beyond.
As the tension rises, Premier Ed Stelmach has put out word that he will take total control over the political reaction to the report, as well as the policies that result. Any loose cannons in cabinet or caucus will be unbolted and shoved overboard.
Stelmach does not want a repeat of the housing fiasco, when caucus refused to accept rent controls, a key recommendation of the task force set up to deal with the housing crisis.
The Tories looked weak and uncertain for weeks, even though they ended up spending nearly $400 million on housing.
The stakes in the royalty review are far bigger -- nothing less than Alberta's economic future -- and the political omens are more troubling.
The government could quickly find itself in dangerous conflict with a volunteer citizen panel that consulted people all over the province.
But the premier's handling of this is also a huge opportunity. If he acts wisely and firmly, he can erase his early reputation as a ditherer.
So Stelmach is aiming for what the strategists call a clean kill. He'll make a clear policy decision very quickly -- within a few weeks -- and stick with it.
In a weird way, and surely without guile, Bill Hunter is also giving the government an out. By saying the report should be accepted whole or not at all, the government can say, OK, this is not reasonable, so we choose not at all.
The Tories could then bring in a sensible new royalty policy and put the issue to bed.
Oberg seemed to keep this option open Wednesday when he said the government will make its own decisions. Muttering in private, they've probably already made another decision -- never to create another damned inconvenient advisory panel.
© The Calgary Herald 2007
[commment by jess: you should have heard me howl w laugher when i read the terrified bit ... HA!]
Tories have right to pick over royalty proposals, Oberg says
Archie McLean and Tony Seskus, with files from Jason Fekete and Shaun Polczer, Calgary Herald Calgary Herald
Thursday, September 13, 2007
Despite warnings from the chairman of Alberta's oil and gas royalty review panel that the government shouldn't pluck recommendations from its report, Finance Minister Lyle Oberg said Wednesday that the province may do just that.
"I haven't seen the report, I don't know what's in it and I do reserve the right, as government, to be able to pick and choose," Oberg said in Edmonton.
[? by jess: what if the panel sums up what the people want, but it is opposite to what industry and the govt want?]
The panel's chairman, Bill Hunter, told the Herald this week the report's recommendations shouldn't be treated like a "Chinese menu," with the government picking and choosing which ones it adopts.
He reiterated Wednesday that the landmark report is designed to be taken as a whole and accepting only parts of it may affect the entire thing.
"It's a package," Hunter explained. "The specific outcome we were shooting for is affected by at least a dozen different inputs. If you change one or extract one it has an impact on all the rest, so it doesn't work."
The highly anticipated report will be released on Tuesday, four days later than was originally planned. It's the second time the review has been pushed back; it was originally slated for release in August.
Hunter said the latest delay is simply to make sure the numbers are correct and he brushed aside the suggestion that it was politically motivated.
Premier Ed Stelmach pledged during the PC leadership race to review the province's take from oil and gas extraction, which netted government coffers $12.3 billion last year. The six-person panel was convened early this year.
Political observers see the government's response to the review as a major test of the rookie premier's leadership skills, which were criticized this spring when he refused to implement rent controls as recommended by a housing task force.
Adding to Stelmach's headaches is the fact Newfoundland and Labrador Premier Danny Williams -- who has a reputation for standing up to multinational oil companies -- unveiled this week a new energy regime that will see it take 10 per cent of future oil and gas developments on the East Coast.
"It's an incredible test of his leadership simply because (Stelmach) has to satisfy a lot of different constituencies," said political analyst David Taras of the University of Calgary. "He does have to appear strong."
Taras said the challenge will be to meet public expectations without scaring off investment, something oil executives have warned could happen if royalty changes harm their multibillion-dollar projects.
But the head of Europe's largest oil company, which has a huge stake in the Athabasca oilsands, said while consistency is important it doesn't mean alterations can't be made.
"I don't say consistency of fiscal regimes does not mean you can never change anything -- that's nonsense," Royal Dutch Shell CEO Jeroen van der Veer said in Calgary on Wednesday.
Stelmach said the panel's report would be made public as soon as the government received it, but Oberg added he doesn't know how soon the province will respond to it because he is unaware of its contents.
As for acting on the report, Oberg said he is "leaving the options open," explaining it would have to proceed through caucus and cabinet. "And I can't hazard a guess as to what caucus will or will not accept."
Hunter later said he doubts the government will cherry-pick parts of the report when the outcomes are dependent on it being accepted as a package.
Hunter said he has no concerns "whatsoever" that the panel's desired outcomes could be rejected.
"I'm trying to bring an integrated, holistic package with some very defined recommendations -- not a hell of a lot of them -- and am hoping they'll look at it as an integrated package."
Michael Percy, dean of the University of Alberta's school of business, said tension between such panels and government often happen.
"The panel, and its chair, is doing what you'd expect them to do -- they've spent a lot of time, a lot effort, on this. Government, on the other hand, has been elected to make decisions and . . . they have to make the calls that they think are best."
tseskus@theherald.canwest.com © The Calgary Herald 2007
APEC sidesteps climate change urgency James McNulty, CanWest News Service Published: Thursday, September 13, 2007 As a global-warming fighter, the latest APEC declaration has less power than the peep of a doomed canary heading down a Chinese coal shaft.
The world's four greatest emitters of greenhouse gases -- the United States, China, Russia and Japan -- were among those joining Canada at a summit farrago that ended with calls for a non-binding, no-target "long-term aspirational goal" to slow fossil-fuel carbon growth.
Tellingly, the declaration fails to even mention the Kyoto greenhouse gas reduction pact, which remains unsigned by the U.S. and APEC summit host Australia.
It was absurd, but not unexpected, to hear host Prime Minister John Howard laud the declaration as "highly significant." The Kyoto denier and conservative crony of George W. Bush and Stephen Harper is looking for anything to burnish his environment credentials as he hurtles toward a likely election loss this fall.
Also laughable was the singling out of Canada and Japan for their great work in forging the meaningless APEC aspiration.
Between 1990 and 2004, Japan's greenhouse gas emissions rose 14.8 per cent, while Canada's rose by more than 30 per cent.
In the same period, European Union emissions barely nudged up by 1.6 per cent. Sadly, there were no EU surgeons in Sydney to stitch new backbone into their dreaming APEC cousins.
Team Tory touted Harper as an important broker in promoting the monumental consensus to aspire.
In fact, Harper spent the week falsely pitching Canada, under his watch, as a global leader in the urgent battle to reverse man-made climate change.
This is nonsense. If Harper were a true world leader on climate change, he would have flown to Australia fully endorsing the Kyoto process and announced that his government was about to pass his much-vaunted Clean Air Act.
Instead, the Clean Air Act is dead, abandoned by Harper after it was toughened by the opposition and now one of many bills killed when he prorogued Parliament to bring in a new throne speech.
A year ago, Harper promoted "action for clean air" with the gusto of Rona Ambrose's hairdresser, claiming "Canada's first Clean Air Act will set hard targets to reduce air pollution and bring down (greenhouse gas) emissions."
So much for that promise. Harper is now down to a lame regulatory agenda that will see Canadian greenhouse gas emissions continue to rise.
Harper and Howard weren't the only guilty parties in Sydney.
Chinese President Hu Jintao sternly lectured the rest on their need to meet Kyoto targets, blithely ignoring the fact that his nation -- a Kyoto signatory -- has no targets and is about to overtake the U.S. as the world's worst greenhouse gas emitter.
Collectively, APEC may have agreed to aspire, but its climate-change cup doesn't carry enough seed to feed a coal-mine canary.
James McNulty is a columnist with the Vancouver Province. © The Calgary Herald 2007
Privacy commissioner rules against EUB Private eyes working for board breached privacy of power-line protesters, says report Charles Rusnell, Edmonton Journal Published: 11:06 am EDMONTON - Private investigators working for the Alberta Energy and Utilities Board breached the privacy of power-line protesters in Rimbey by collecting their personal information, says an investigation by the provincial privacy commissioner.
Commissioner Frank Work also found the EUB's response to an assumed security threat was inappropriate, and there was no need to hire the investigators to spy on the public.
"It seems to me that uniformed security personnel would also be able to observe and report any incidents to the EUB security team leader, the RCMP or the community centre proprietor," Work wrote in his decision released today.
"It seems to me that the EUB wanted to ensure that Rimbey proceedings were able to be conducted in an orderly manner, without disruptions from observers and groups, and that panel members, hearing staff and participants would be protected from confrontations. I find the security arrangements that were taken at the Rimbey Court House demonstrate that this objective could be met without the need to collect personal information."
Work rejected the EUB's contention that it needed to collect the personal information for the purpose of carrying out its hearing peacefully. He said he found no evidence to support this EUB's claim that it needed to conduct an ongoing "threat assessment." An earlier threat assessment and the security measures taken at that time were sufficient to protect the panelists, staff and public, he said.
"There was no evidence before me that any staff or hearing participants feared for their safety at the Court House and as stated earlier, the EUB staff based at the Community Centre said they did not feel threatened."
The EUB said in a release that it accepts Work's recommendations.
"We take these recommendations very seriously and the EUB has already taken steps to ensure that similar situations never happen again," said EUB acting chairman Brad McManus.
The four private investigators hired by the EUB mingled for almost a month among landowners and their lawyers as they gathered in Rimbey's recreation centre to watch closed-circuit TV coverage of an EUB hearing being conducted in a nearby courthouse. Members of the public were barred from those hearings because of disruptions at earlier hearings in Red Deer.
To blend into the Rimbey crowd, the investigators pretended to be landowners concerned about the construction of power lines through their property. Eventually, a private investigator obtained the password to a conference call system organized by the Alberta Environmental Network which allowed him to participate in those calls.
"It is important that Albertans understand that the security measures at Rimbey were taken solely because of serious incidents where our staff were physically attacked and other threats and actions led to an atmosphere of intimidation at the hearing," McManus said in the EUB release. "The report clearly indicates that the security arrangements taken at the Court House minimized the potential risk of disruptions to the proceedings and the confrontations between hearing participants and protestors."
Watch edmontonjournal.com for updates throughout the day, and see Friday's Journal for more.
© Edmonton Journal 2007 EUB delays permit for transmission line Legal hurdles must be cleared, says regulator
Geoffrey Scotton Calgary Herald
Thursday, September 13, 2007
Opponents of a controversial $600-million proposed transmission line won at least a temporary victory Wednesday when the Alberta Energy and Utilities Board agreed not to move forward with permitting the line until legal challenges before it or the Alberta Court of Appeal have been completed.
"What this is all about today is safeguarding our right to due process. All we want is our day in court," said Joe Anglin, co-chairman of the Lavesta Area Group of landowners in the Rimbey area, after lawyers for landowners, the EUB and AltaLink LP were able to reach agreement. "The compromise . . . is acceptable," Anglin added.
"The board will engage a process to allow parties to come before it and request a stay," said EUB lawyer Richard McKee, who told the court an EUB decision on an application by AltaLink LP, completed Aug. 24, to build the line is now unlikely before November. "Work is progressing. It's a difficult decision with voluminous evidence," said McKee.
Landowners had been seeking a legal stay of the yet-to-be rendered decision by the EUB on a 500-kilovolt line from west of Edmonton to east of Calgary, but were able to negotiate the same effect as the stay they sought. Their motion was adjourned, but the EUB has committed to ensuring opponents will have a chance to appeal a permit order to the EUB before it takes effect, and if that is unsuccessful, pending the outcome of an Court of Appeal case slated to get underway Nov. 14.
"Our fear here today is that if the EUB issues the licence one day, the bulldozers will be rolling the next," Anglin noted.
The agreement, brokered by Alberta Court of Appeal Justice Peter Martin, came ahead of today's release by Alberta Privacy Commissioner Frank Work of a report into private investigators hired by the EUB to monitor and report on landowners and their activities during EUB hearings. Landowners have alleged the private investigators breached client-lawyer confidentiality by listening in on conference calls and conversations and that their hiring and actions are adequate evidence of a reasonable apprehension of bias against line opponents by the EUB.
"Our investigation focused on the collection, use and disclosure of people's personal information by either the EUB or the private investigators that had been hired by the EUB," Wayne Wood, a spokesman for Work, said Wednesday.
"If we find there has been a contravention, then generally we make recommendations . . . and then we would ask that they implement those recommendations. We don't have the power to issue fines or any of that kind of thing," he added.
Wood could not say whether the private investigators involved had been questioned as part of the investigation and noted this latest examination is the second time this year the EUB has been investigated for contravening privacy guidelines. In March, the EUB was cited for posting on its website sensitive personal information -- health information, whereabouts of children and when homes would be vacant -- about residents in the Drayton Valley area.
Work's report is just the first into the controversial transmission project, which opponents have charged is a $1-billion gift to private industry to allow them to export power on the backs of ratepayers and taxpayers.
Alberta Liberal Leader Kevin Taft said Wednesday the EUB is clearly in trouble.
"We have very serious concerns," Taft said. "It is hemorrhaging credibility."
Next week, Alberta Energy Minister Mel Knight is set to release a report by former Alberta Court of Queen's Bench justice Del Perras, ordered by Premier Ed Stelmach, that also examines the actions of the EUB and its private investigators. A spokesman for Knight said this week the report's release had been pushed back to give more time for the government to formulate a response.
A third investigation by Alberta Ombudsman Gord Button was suspended pending the outcome of court actions. Landowners are also calling for criminal charges.
gscotton@theherald.canwest.com © The Calgary Herald 2007
Albertans 'depend on coal' to meet energy security
Calgary Herald
Thursday, September 13, 2007
Re: "Still waiting for democracy," David Swann, Letter, Sept. 5.
It was interesting to read Dr. Swann note that "governing requires hard work, good scientific advice and honest listening to the value of citizens," then make reference to the strip mine proposed for Dodds-Roundhill as being a free-for-all project that only favours the private interests of the developers.
What Swann overlooks is that supporting communities, mitigating the environmental footprint and a strong commitment to research and advancement of new technologies is an important part of the mining process.
Long before any mining begins, industry plans for a process that will have minimal long-term impact. Mining companies employ environmental engineers, geologists, biologists and other scientific and environmental professionals to aid in the planning process.
Reclamation involves studying the current state of the land and developing strategies to ensure the area is returned to a state of productivity that is equal to or, as is the case with many projects already, better than before the development of the mine. It is a process that is very public and very transparent, also requiring mining companies to report on their reclamation plan and progress to the government.
For the coal industry, being responsible and listening to the value of citizens is about removing barriers between itself and the communities in which it operates. Discussions with stakeholders, such as local residents, First Nations, environmental groups and all levels of government begin long before any mining commences. Consultation continues throughout the life of the mine and information is collected to ensure that development meets the needs and priorities of the local communities while limiting impacts on the environment.
On the technology side, by processing coal to produce synthesis gas (syngas) and hydrogen, the Dodds-Roundhill Coal Gasification Project is designed to provide Alberta with a new source of economic and environmentally sustainable energy. The Dodds-Roundhill Coal Gasification Project represents a key step towards Alberta's future as a global centre of excellence in innovative "clean coal technology." Such technology can lead to a critical mass of jobs and intellectual capital with tremendous export potential. This new technology will help preserve natural gas resources for higher-value uses and unlock the full energy potential of low-grade coal. This new energy source can support the development of Alberta's vast oilsands resources in an environmentally sustainable manner.
The public demands less development but still expects the economic benefits associated with growing industry -- expanded health care, improved infrastructure and more money for education.
The energy sector directly contributes more than one-third of provincial revenues. In addition, jobs are created, taxes are collected and consumer spending increases, all of which contributes significantly more to the provincial economy. Without this economic activity, the wealth for these necessities is not created and cannot be provided.
Our society is dependent on the availability of inexpensive and plentiful resources -- including electricity. Coal is an abundant, affordable and reliable source of power, currently accounting for nearly 70 per cent of electricity generation in Alberta. Coal is meeting the needs of our energy security.
Albertans rely on coal as part of a balanced energy mix. Coal, complemented by other energy sources like oil, natural gas, nuclear and alternative/renewable energy sources, plays a significant role in providing Albertans with electricity, heat and other essential services and products.
Sustainability will mean managing a balance on economic activity and creating a mix of sources that can meet growing energy needs with minimal impacts on the environment that can be developed responsibly - in the interest of all.
Allen Wright
Allen Wright is executive director and CEO of The Coal Association of Canada. © The Calgary Herald 2007
EUB controversy overshadows fact that power line not needed The Edmonton Journal Published: 2:06 am The current brouhaha over the miscues at the Alberta Energy and Utilities Board's hearings into a proposed $500-million-plus power line between Wabamun and Calgary is obscuring the real issue, which is that this power line is not required. It is an example of what is wrong with the deregulated power industry in this province.
To minimize losses, new powerplants should be built close to growing demand areas like Calgary. Unfortunately, the Alberta Electric System Operator is interpreting the government's guidelines on preference for transmission upgrades over things like peaking generators, to mean that all new capacity will be built at Wabamun and that "someone" must build the transmission to get it to Calgary. The first stage of the approval process should allow the public and EUB a chance to question the rationale for this "need."
Unfortunately, consumers are not informed about what will drive their power costs, and the EUB's mission seems to be to ensure the continued profitability of the likes of Epcor, TransAlta, Enmax, and the hordes of traders that now have their hands in our pockets.
The long-suffering power purchasers may not know that in the last decade, to address the not-so-new problem of high demand in Calgary, this same AESO threw out tonnes of our money to encourage construction of several gas-fired powerplants in that area. One notable example is the Calpine Calgary Energy Centre, an efficient and low-polluting 250 MW combined-cycle plant. That is, it would be efficient if it actually produced power. The owners are making more money off us, again courtesy of AESO, for just being there than they would if they had to burn that expensive natural gas to make electricity! Why can't the AESO dispatch on these plants to meet Calgary's demand if the north-south transmission is constrained? Sure, their clean gas fuel costs more than dirty coal, but if Rising Star Oil wants to build its new office tower in Calgary instead of Edmonton, it should be prepared to pay more for the lights. (It should be pointed out that in the first half of the past century the shoe was on the other foot, with abundant cheap hydro power available in Calgary's back0yard).
What is so holy about the Wabamun area that the regulators have decreed that this is where coal will be burned? (There is coal in the south, as Enmax is aware.)
The smell I'm getting is not just from coal combustion!
Charles J. Jennissen,
Sherwood Park
© The Edmonton Journal 2007
Move EUB to Edmonton The Edmonton Journal Published: 2:06 am It is hard to maintain the EUB is not in the pocket of industry, when part of its yearly business is to collect funding for both the Canadian Association of Petroleum Producers (CAPP) and the Small Explorers and Producers Association of Canada (SEPAC). Both of the aforementioned are industry advocates, and having the regulator collect their funding is successful no doubt, however, it smacks of inappropriateness. How this is in the public interest will need explaining.
Also the direct payment of part of the EUB's budget by industry should not be allowed under any circumstances. The industry is very much the EUB's paymaster!
Supervision of the EUB has been lacking by government energy ministers, as events in the recent past plainly points out. Location plays a part in the government's ability to keep a reign on EUB endeavours.
Placing the EUB under everyday supervision by the provincial energy minister would give the minister a reason to show up for work, and put a different atmosphere around EUB staff. A move to Edmonton to become, in reality, a full government entity would place some confidence in energy regulation, that is very badly needed! The EUB set up "synergy groups" throughout the province. This caused some to note the duty of industry regulation had fallen to the general public! These "company owned" community groups prevented the EUB from being properly staffed in field locations.
A cursory review of the Caroline cover-up of March 12, 2003, will indicate the danger these company owned groups pose to the public! I have seen nothing that suggests, if indeed the EUB is a provincial entity, that it should not like other government bodies be headquartered in Edmonton under direct supervision of the minister of energy!
Stewart Shields,
Lacombe
© The Edmonton Journal 2007
Federal Tories see limited role for alternative fuels Lisa Schmidt, Calgary Herald Published: Thursday, September 13, 2007 Fossil fuels will continue to be Canada's main energy source for decades to come, even as Ottawa ramps up spending on developing cleaner biofuels, the federal energy minister said Wednesday.
Gary Lunn, in Calgary to launch a $500-million fund to support the development of cellulose-based biofuels, said renewable energy sources have made great strides, but still make a small part of the country's total needs.
"I think you have to look at the energy sources out there and they all will play a role in Canada's energy mix," Lunn said after making the announcement in a luncheon speech to the Calgary Chamber of Commerce.
"Renewable is still a relatively small part of the supply side in our total production of energy. Although it's important -- we want to continue to push these technologies -- we mustn't forget how important fossil fuels are to our energy mix and we need to continue to invest in those technologies as well." The fund, first announced in the federal budget in March, will be spent over eight years and be administered by Sustainable Development Technology Canada. Ottawa has mandated a five per cent renewable fuel content for transportation fuels by 2010 and a two per cent content mandate for diesel and heating oil by 2012.
Investments will go toward the so-called "next generation" of biofuels to produce alternatives to gasoline from feedstocks ranging from wood fibre to wheat stocks, as well as diesel alternatives made from waste oils and animal fats.
These types of biofuels will deliver even greater greenhouse gas reductions, and use less energy in the production process than current biofuels such as ethanol, said the Canadian Renewable Fuels Association.
"Canada is now seriously joining the 'NextGen' biofuels race," said spokesman Robin Speer.
"This fund will ensure that Canadian companies can innovate and compete on a level playing field with our international competitors."
Large-scale projects involving the newer technologies are expensive and developers have had trouble raising funds to get new plants up and running, said Vicky Sharpe, chief executive of the organization that will oversee the fund.
"That creates a funding gap because there is a fair degree of technology risk still in undertaking these large-scale demonstrations," she said.
In addition to economic benefits, the biofuels would also offer alternative sources of income for other sectors such as agriculture or forestry by turning waste products into revenue generators, she said.
lschmidt@theherald.canwest.com
© The Calgary Herald 2007
[comment by jess: if we continue to give most of it away, there wont be any left to keep us warm or worry about]
Alberta has one of world's highest rates of colitis Chris Zdeb, Edmonton Journal Published: Thursday, September 13, 2007 Edmonton Oiler winger Fernando Pisani may be the most famous Albertan diagnosed with ulcerative colitis, but he's not the only resident of the province with the disease, which causes an open sore to develop on the large intestine.
In fact, Alberta has one of the highest incidences in the world, particularly around Edmonton, Fort McMurray and Grande Prairie.
It's a condition prevalent in northern developed countries and is more common the further north you go, says Dr. Richard Fedorak, professor of gastroenterology at the University of Alberta, a leading research centre studying the disease.
This is common with a lot of autoimmune diseases like multiple sclerosis, he adds. No one knows what the geographical tie-in is yet, but two things need to be present for a person to develop the condition, Fedorak says: you have to be born with a specific genetic mutation and you have to have a type of bacteria growing in your intestines common to people living in northern developed countries. A popular theory suggests ulcerative colitis may be connected to bacteria on food and in the environment that a person ingests as a child, because bacteria here is, for example, different than bacteria ingested in Mexico or a warm tropical climate where there is no ulcerative colitis, Fedorak says.
The good news is that the majority of people with the disease -- more than 90 per cent -- can manage their condition with medications and lead normal, productive lives. So while Pisani, 30, has been temporarily iced, he's expected to be back in the lineup by the end of October or start of November once his condition is under control.
Here's what else Fedorak had to say about ulcerative colitis:
- Over time the condition wears away the lining of the large intestine, similar to skinning a knee when you fall off a bike. It leaves the surface red, raw and bleeding. This leads to pain in the form of cramping and diarrhea with blood.
- Patients tend to have five to 15 bowel movements a day which are quite urgent, and because the lining is worn away it feels like vinegar poured over a cut.
- Because the large bowel or intestine is irritable and can't hold any material, you get diarrhea, which means you have to always be near a washroom, which starts to negatively affect quality of life and the ability to concentrate.
- The onset of ulcerative colitis is most frequent between the ages of 15 and 25.
- The condition is easily diagnosed with a colonoscopy.
- Treatment involves a series of medications that become more potent when simpler ones don't work. This is determined by how severe the problem is.
- Mesalamine is the first simple medication prescribed. If the person is still having symptoms, a steroid medication is introduced, and, if needed, a number of immune suppressant medications.
- In some cases the large intestine must be removed and a new rectum created out of the small intestine to solve the problem, but this is rare. Some people have been able to avoid this drastic surgery since the introduction of two new medications, infliximab and adalimumab, to Alberta a couple of months ago. The medications heal the ulcerated walls of the large intestine, but must continue to be taken or the condition comes back.
- There is no cure for ulcerative colitis so sufferers must stay on medication all their lives. © The Calgary Herald 2007
[comments by jess: sour gas exposure adversely affects digestive system within hours. when i am in alberta, i cannot eat oats (my favourite), wheat, bread, cookies, etc without severe pain consequences re digestive system. when i am out of province, even in super polluted european cities, i can eat all these to the level of gluttony, without any discomfort - except being too full. sour gas also advserely affects sinus, and many other systems. when i am in alberta, my sinuses pound with pain. when i am out of province, bingo, problem gone. i have been tracking this for years]
Privacy rights loss alarms Canada's civil libertarians Gov't opens hearings on website data access Carly Weeks, CanWest News Service Published: 2:05 am OTTAWA - In an unexpected about-face, the federal government revealed Wednesday it will open up previously closed-door consultations it has been holding on plans to force Internet service providers to turn customers' personal information over to police without a court order.
The decision was made as privacy and civil liberties organizations voiced serious concerns Wednesday they were being deliberately excluded from providing input into the contentious proposal, which they have criticized for several years over concerns it would jeopardize privacy rights and could lay the groundwork for giving police power to eavesdrop on wireless and Internet communications.
"There's clearly been a conscious decision not to consult with us this time around," said Philippa Lawson, director of the University of Ottawa's Canadian Internet Policy and Public Interest Clinic.
"They know full well that my organization and a number of other civil liberties groups are very concerned about and interested in these initiatives." The Public Safety and Industry Departments have been conducting a limited consultation, which was scheduled to end Sept. 25, on potential changes that would make it easier for police to get customers' personal information from Internet providers without a court order or other legal justification. Those invited to participate in the consultation process received a letter and no information was made public on any government website.
Now, Public Safety Minister Stockwell Day's office said it has decided to post information on the department's website and lengthen the consultation process to allow the public and privacy and civil liberties groups to have a say.
Spokeswoman Melissa Leclerc said the decision was made after the office received numerous calls Wednesday, but privacy associations and other groups have always been allowed to participate in these discussions.
"The minister was clear when he asked his officials to work on this. He asked for a thorough consultation as possible approach," Leclerc said. "He wants to hear from these groups on every element of this process."
However, numerous privacy and civil liberties organizations across Canada were not even aware the federal government was in the midst of a consultation on the issue until well-known privacy expert Michael Geist, who was included in the discussion, posted information on his blog this week.
"We have never been informed or approached or invited to be consulted," said Roch Tasse, co-ordinator of the
Ottawa-based International Civil Liberties Monitoring Group, which represents nearly 40 of the country's civil liberties organizations.
"None of our members to our knowledge have been invited to participate."
The secretive nature of the consultation prompted the federal privacy commissioner's office to voice concerns and urge the government to open up the process to include the opinions of privacy and civil liberties groups.
"From what I understand, they've asked people not to make it public," spokesman Colin McKay said.
"I do think there are a lot of people who would have an opinion about the lawful access proposal in general. We would hope they would open up the process to more people and wider points of view to feed into their policy development process."
The RCMP and other police organizations have been pressuring the federal government to make it easier for them to access the customer's personal information.
© The Edmonton Journal 2007
September 12, 2007
Explosive interlude on a summer weekend
Andrew Mitrovica
The Star (Toronto)
Sep 11, 2007
On Saturday Sept. 1, Toronto averted a catastrophe. You can search in vain for news reports about the near tragedy.
Politicians and city officials have not commented on the incident that threatened to engulf a neighbourhood. But it did happen.
How do I know? I was among the many adults, children and homes that could have been blown up.
I usually write on this page about the scourge of terrorism and how ill-prepared our security services are to address that danger. But terrorists had nothing to do with this traumatic event; a building contractor did.
And now, it seems, he will escape with little more than a dent in his pocket book and a letter from the regulatory body that is supposed to protect us from such dangerous irresponsibility.
This is a cautionary tale that every Torontonian should heed.
Late that morning I was writing in my modest semi-detached home in north Toronto when there was a thunderous knocking at the front door.
At first, I thought an overzealous pair of religious pamphleteers was making yet another impromptu visit. Instead, I found a short, balding fireman racing from door to door. "Get out of the house. Now!" he shouted. "There's a major gas leak." (Thankfully, my two young daughters and wife were out of town.)
It turned out that a contractor - who was building a fence - had ruptured a gas line metres from my home. As I scampered down the street I heard the roar of the natural gas spewing from the earth.
The scene was unnerving not just for me, but for my neighbours. We anxiously watched as a once languid day quickly turned into a nightmare. Police cordoned off several streets and evacuated a neighbourhood brimming with children. An ambulance bus and paramedics arrived and several large trucks carrying repair equipment rumbled in to repair the pipeline.
As we waited, my neighbours and I traded stories about our harried escape. A young couple living next door to the ruptured gas line had been enjoying lunch in their backyard while their 18-month-old son slept inside their new home, blissfully unaware (they thought the roar was a power washer). Indeed, the couple reckoned they waited close to 40 minutes before being alerted to the danger.
The trauma and threat to property and, more importantly, lives, was, of course, avoidable. Ontario law requires home owners, contractors and excavators to call gas utilities to locate and mark the gas lines before they dig. The service is free and only takes a few days to be done.
A spokesperson for the utility that services my street confirmed to me that the contractor didn't call. So, presumably in order to save a little time and money, the fence builder chose to guess, putting a community at risk.
That afternoon, good work by the utility and police and fire departments prevented a potentially catastrophic explosion. Others, regrettably, have not been so fortunate.
Pipeline ruptures remain disturbingly routine in Ontario. Last year, there were 3,500 such incidents. In most cases, human error is the cause. And these errors can have deadly consequences. In one incident in Toronto in 2003, for example, seven people were killed and scores injured apparently after a construction worker inadvertently hit a gas line.
That same year, this newspaper's crack investigative reporter Robert Cribb raised the alarm. Cribb revealed that few of the incidents were investigated and only a handful of cases resulted in prosecutions by the Technical Standards and Safety Authority (TSSA) which regulates pipelines in Ontario. Cribb wrote that the TSSA had a "hands off" approach to regulation. Four years later, that disquieting attitude and record have not changed.
In its mind-numbing logic, the TSSA has decided against prosecuting or even fining the fence builder. Rather, the regulator told me in an email, it has "deemed the most appropriate action was to issue orders to the contractor to address the non-compliances found."
Translation: no charges and no fines, just a letter asking him to do what he should have done before he stuck a shovel into the ground. All this, despite the fact that the TSSA acknowledged in the same email that its so-called "investigation" had "determined that failure to obtain locates was the root cause of the incident." The regulator added, laughably, that "as an educational component, the contractor was also made aware of his requirements and responsibilities."
I'm not reassured.
I take little solace knowing that the utility intends to charge the contractor for the lost gas and costs associated with the repair. Pipelines can be replaced; people can't. This lesson still appears lost on the TSSA. By the way, the TSSA's motto is: "Putting Public Safety First."
http://www.thestar.com/comment/article/255033
September 10, 2007
Methane from the oceans could power the world
GLOBE-Net
September 6, 2007
The Economist Magazine recently reported on the effort that is quietly going into the pursuit of what is probably the world's greatest store of fossil fuel - caches of methane, the primary component of natural gas, stored in structures called methane hydrates found in cold Arctic regions and in the marine sediment near continental shelves. Looking just like ice, clathrates (a general term for gas molecules trapped by water molecules) are methane molecules trapped within tiny cages of water molecules. They form where temperatures are low and pressures are high, which is to say, on the sea-floor at the continental shelves, and within the permafrost at the Earth's poles.
Gas hydrates are formed at low temperature and high pressure when sufficient amounts of water and gases such as carbon dioxide or methane are present. This methane has its origins in ancient sea-floor bacteria, which fed on plant and animal remains. As the sediments subsided, the pressure increased and the methane and water froze to form gas hydrates. Gas hydrates are found wherever water gas and water are present at moderately low temperatures and moderately high pressure. As with all fossil-fuel resources, it is hard to estimate just how much methane is trapped in clathrates worldwide.
Numerous deposits have been identified off the coasts of all of the continents and a few of the lakes in Central Asia are just frosty enough to support clathrate formation. Many energy experts agree that clathrate methane reserves could equal twice the rest of the world's fossil fuel supplies combined.
Several countries see gas hydrates as a potential source of energy, because if the methane can be economically produced from these hydrate deposits, the world's natural gas energy supply could be extended for many years to come.
The vast deposits of methane hydrates found in deeper oceanic areas offer considerable hope for future economical recovery and production.
A key driver of the interest in exploiting these potential sources of energy stems from rising energy prices as oil shortages and rising demand increase the costs of conventional energy supplies.
As well, an increasing proportion of the world's oil supplies are being sourced from politically unstable areas. Security of energy supplies for many countries is driving new investments in biomass technologies.
The technological challenges are daunting as are the risks. Soil instability induced by offshore drilling and production operations represent a potential geohazard adjacent to offshore structures, where hydrate occurrence may result in foundation problems. Such vast unstable deposits are prone to underwater landslides, such as a landslide estimated to have taken place 8000 years ago in the North Sea that created a tsunami that flooded much of coastal Scotland and Norway.
As well, methane hydrate deposits in the ocean and tundra regions contain three times more methane than what occurs naturally in the atmosphere. "Methane is the cleanest of the fossil fuels when burned; but released directly into the atmosphere, it is a 'greenhouse gas' significantly more potent than carbon dioxide," notes The Economist.
Methane is a powerful greenhouse gas with a greenhouse warming potential (GWP) 23 times that of CO2 on a per-molecule basis. The sudden release of methane from gas hydrate therefore has the potential to affect global climate.
When the sea level dropped during the last ice age, the destabilization of hydrate and the release of methane may have been sufficient to heat the atmosphere via greenhouse effects and turn back the ice age.
As well, many clathrate deposits sit atop large reservoirs of free gas. Drilling into the clathrate deposits could unleash an enormous 'methane burp' of size, with devastating environmental impacts.
However, if gas hydrates can be harnessed as an energy source, the increased use of clean-burning methane (in relation to sulfurous coal, for example) would contribute to reductions in greenhouse gas emissions worldwide.
The strong potential of gas hydrates has motivated national research programs in the United States, Canada, Japan, Korea, and India to investigate methods to quantify the amount of hydrate present in the subsurface through geological and geophysical remote sensing methods.
While Canada and India have invested heavily in hydrate research, the largest effort has been in Japan. Japan imports roughly most of its fossil fuels, and would like to find a domestic energy resource.
As noted by The Economist, a Japanese collaboration has drilled about 30 wells, with a timeline to start production and distribution of methane from hydrates by 2016. In June, China reported having pulled up some first methane-bearing samples from the South China Sea. A US-based consortium of government agencies and petroleum companies has been drilling for clathrates in the Gulf of Mexico with some success.
In Canada, an international consortium including Canada, United States, Japan and Germany has been formed to establish a world research site for the study of continental natural gas hydrates in the Mackenzie Delta of northwestern Canadian Arctic. This site, the Mallik gas hydrate field, was discovered through an exploration well drilled by Imperial Oil Ltd. in 1971-1972.
Scientists acknowledge that methane hydrate commercialization is 20 to 30 years away. Given that the lion's share of known methane hydrate deposits is found in the Pacific Ocean and neighbouring permafrost environments, it is a subject of great interest to Canada in general and British Columbia in particular.
The bottom line is that these methane deposits represent a huge potential source of new hydrocarbon energy - one that cannot be ignored.
An excellent Backgrounder on Methane Gas Hydrates is a report prepared by Kenneth White of Acton White Associates Inc. This report is available exclusively from GLOBE-Net.
http://www.globe-net.ca/news/index.cfm?type=2&newsID=3097
Details on the Mallik project are available here
http://gsc.nrcan.gc.ca/gashydrates/mallik2002/index_e.php
Source: GLOBE-Net www.globe-net.ca
Green ambition
Susan Riley
The Ottawa Citizen
Monday, September 10, 2007
The most astonishing news from the recent APEC summit in Australia is that Prime Minister Stephen Harper's rhetoric on climate change has almost caught up to Paul Martin's.
This is not unalloyed good news, of course, given Martin's tendency to become so intoxicated by the wonders of his imaginary world that he never got around to doing much about climate change, or anything else. Harper, a more deliberate man, tends to avoid over-promising - with one Martinesque exception. Canada, he told a business audience in Sydney last week, wants to become "a world leader in the fight against global warming and the development of clean energy."
Uh, too late. While our politicians dithered over climate change, or - not naming names - fiercely rejected the science and the urgency of the problem, other countries went about inventing, marketing and selling green technologies. Most of the giant windmills that increasingly dot our countryside come from Germany. A majority of the fuel-efficient, or hybrid, cars nosing their way onto Canadian streets are Japanese. California companies are pioneering solar technology, green building codes and sustainable farming methods. And, while we continue to experiment with carbon capture and storage, as Harper mentioned, so do other countries.
In fact, the world leader in green technology will probably be California and the U.S. private sector - driven to innovate by the strictest greenhouse gas emissions caps on the continent. We, an "energy superpower," have been too busy making money on fossil fuels to care much about alternatives.
Nor are innovation, or the changes required to make our economy sustainable, likely to accelerate on Harper's watch, despite his change in tone. His government's regulations for large emitters have been widely described as timid -- a leisurely stroll toward an unverifiable 60-per-cent reduction in real emissions by 2050, when Harper is long gone, and with him, perhaps, the polar bears. This is the model he recommended to his fellow APEC members, who had the courtesy not to smirk.
Yet for them, for anyone befuddled by a complex topic, Harper may sound plausible. What he is doing, along with retooling Liberal notions, is trying to reframe the climate debate, implying that the Kyoto accord is some wildly impractical, job-crushing monster on one side, while fossilized climate-deniers and corporate polluters occupy the other extreme. He positions himself in the middle, the champion of "balance" - of "realistic benchmarks," market-driven solutions, a global gentlemen's voluntary agreement to behave sustainably, rather than crude arbitrary targets.
Of course, it is easier to look progressive in the company of Kyoto dissenters George W. Bush, Australia's John Howard, and other members of the business-oriented, trade-driven APEC fraternity who prefer "aspirational" targets even to Canada's feeble efforts. But Harper's real audience is at home: he is trying to neutralize the environment as an issue in the next election, by inching away from Bush and counting on our short attention span.
The old Harper doubted the science of climate change. He saw Kyoto as a socialist scheme. Meeting its targets, he said, would mean economic armageddon. Hardly anyone believed him, so he has changed course. The new Harper recognizes climate change as a real and threatening phenomenon. "The physical evidence is there for all to see," he said in Sydney. He cited the retreat of ice in the Northwest Passage and the pine beetle infestation in British Columbia as byproducts.
As for Kyoto, he was called upon to clarify his views after he was praised by Prime Minister Howard for saying that "Kyoto divided the world into two groups: those who would have no targets, and those that would reach no targets."
That was a little world-leader inside joke, apparently, although Harper had trouble mustering much enthusiasm for the accord when he explained. "I don't think (Kyoto) is irrelevant, in the sense that, in fairness, the UN established a process that gave us the Kyoto protocol and that process is still under way," he said. The targets that Canada undertook are legally binding, too, although he didn't mention that inconvenient truth.
But will Harper get away with what amounts to an unapologetic, poll-driven conversion in rhetoric if not policy? That depends on whether the other parties, particularly the Liberals, can sell credible and tough measures to curb emissions. It also depends on how dramatically emissions continue to grow, how visible the impact, and, above all, it depends on the weather. It is hard to downplay the urgency of the issue when entire cities are flooded and too many forests are on fire.
"For more than a decade, most governments, including Canada's, paid what can be charitably called lip-service to the issue of climate change," the prime minister said in Sydney.
Same service. Different lips.
Susan Riley's column runs Monday, Wednesday and Friday. E-mail: sriley@thecitizen.canwest.com
© The Ottawa Citizen 2007
U.S. Draws Map of Rich Arctic Floor ahead of Big Melt
COMMENT: We have long argued that the Arctic should be protected by international agreement. See The Polar Dash for Oil, http://www.sqwalk.com/blog2007/000936.html.
Instead, this article tells us that "In an era of climate change, these frozen assets are up for grabs, as melting ice allows detailed mapping and, one day perhaps, drilling."
Somewhat surprisingly, it is not the US that is leading the Arctic assault. It is Canada, Russia, Norway, and Denmark. Perhaps the US intends to assert its dominance later, extending "its undersea zone of military and economic authority" by military and economic means.
The tragedy is seeing this place jumped all over by would-be exploiters and imperialists. Nothing about global warming has changed these human, national and corporate impulses to control and exploit.
ROBERT LEE HOTZ
SCIENCE JOURNAL
Wall Street Journal
August 31, 2007
In the Arctic this week, researchers aboard the U.S. Coast Guard icebreaker Healy are mapping claims to the spoils of global warming.
North of Alaska, the 23 scientists of the Healy are gathering the data legally required to extend national territories across vast reaches of the mineral-rich seafloor usually blocked by Arctic ice. Fathom by fathom, multibeam sonar sensors mounted on the Healy's hull chart a submerged plateau called the Chukchi Cap, in a region that may contain 25% of the world's reserves of oil and natural gas.
North of Alaska, researchers aboard the U.S. Coast Guard icebreaker Healy are gathering the data legally required to extend national territories across vast reaches of the mineral-rich seafloor usually blocked by Arctic ice.
In an era of climate change, these frozen assets are up for grabs, as melting ice allows detailed mapping and, one day perhaps, drilling.
Rising temperatures thinned the ice pack to a record low this month. If current trends continue, the Arctic could become ice-free in summer months by 2040, polar researchers say.
Indeed, the Healy is finding easy passage this week through the Arctic Ocean's archipelagos of ice. "We have had a remarkable amount of open water -- good for mapping, sad for the Arctic," said expedition chief scientist Larry Mayer, reached aboard the Healy, the head of the University of New Hampshire's Center for Coastal and Ocean Mapping.
The $1 million Healy expedition is the third U.S. seafloor-mapping venture into the Arctic since 2003, prompted by provisions of the 1982 U.N. Convention on the Law of the Sea. The U.S. has never ratified the treaty but commissioned new seabed maps in case it ever is adopted. The U.S. Senate Foreign Relations Committee has set a hearing on the treaty next month.
Framed decades before the politics of the greenhouse effect permeated international relations, the U.N. treaty is taking on added importance in the Arctic as an arbiter for countries determined to come out ahead in a world transformed by rising temperatures. No country actually owns the North Pole. But with growing boldness this past summer, Russia, Denmark, Norway and Canada jockeyed for control of the Arctic seabed, galvanized by the prospect of open waterways there.
"A little bit of global warming and a little bit of adventurism and now we are really starting to explore the Arctic," said marine geophysicist Stephen P. Miller, head of the geological data center at the Scripps Institution of Oceanography at the University of California, San Diego.
STAKING OUT THE NORTH POLE
As the polar ice cap melts, it seems like every nation wants a piece of the Arctic's mineral-rich seafloor. What do you think?2
The United Nations Commission on the Limits of the Continental Shelf7 lays out agreements and research about this aspect of the Law of the Sea.The U.N. treaty allows countries to extend their coastal economic zone up to 350 nautical miles offshore, depending on detailed technical evidence of undersea geology and topography. Under this provision, all four countries claim an underwater mountain called the Lomonosov Ridge that runs underneath the North Pole. They are depending on seafloor data to bolster their cases before the U.N. Commission on the Limits of the Continental Shelf, meeting this week in closed session to consider claims.
The Healy's voyage is part of a broader U.S. effort to extend its undersea zone of military and economic authority should it adopt the 25-year-old U.N. accord.
For five years, the university's mapping teams, commissioned by the U.S. State Department, have been charting in unprecedented detail the deep ocean bottom of the Arctic, the Aleutian Islands, the Bering Sea, the Mariana Islands in the Pacific, the Gulf of Mexico and the U.S. Atlantic coast. "The better data you have, the better case you can make," said hydrographer Steven R. Barnum, director of the Office of Coast Survey at the National Oceanic and Atmospheric Administration, which manages the effort.
Overall, maps of Mars are about 250 times better than maps of earth's ocean floor.
Until recently, the best global seafloor maps were based on altimeter readings by military satellites and submarine depth soundings gathered during the Cold War. Those miss anything smaller than six miles across. Two years ago, a Navy nuclear submarine rammed an undersea mountain that didn't appear on its charts, killing one sailor and wounding 23. The Healy's sonar sensors produce maps accurate to within about 20 yards.
Each new seafloor map is a revelation. "Every cruise turns up new discoveries," said NOAA scientist Andy Armstrong, reached aboard the Healy. The sonar sensors detected unsuspected seamounts, vast sea-slides and canyons. The data are freely available online.
All told, the undersea territories being mapped by the U.S. encompass an area larger than France. "It holds potential riches beyond your imagination" through sea-floor mining and drilling, said UNH marine geologist James Gardner, who has mapped 347,000 square miles of ocean bottom as part of the U.S. Law of the Sea project. In all, maps are being prepared for eight major extensions of U.S. seafloor authority, including several areas in the Arctic also claimed by Russia and, perhaps, Canada.
"It is a little overheated to say this is now a race to the Arctic," said John Bellinger, legal adviser to the U.S. secretary of state. "At the same time, we are very much aware that other countries, most particularly Russia, have been exercising their rights under the Law of the Sea Convention."
For now, the U.S. has no standing to protest.
Email me at ScienceJournal@wsj.com8.
STAKING OUT THE NORTH POLE
RELATED READING
Learn more about ice in the Arctic at the NSIDC web site for ice conditions http://www.nsidc.org/news/press/2007_seaiceminimum/20070810_index.html
The home page of the University of New Hampshire center for Coastal & Ocean Mapping Joint Hydrographic Center has an interactive map as part of its U.S. Law of the Sea survey program. http://ccom.unh.edu/index.php?page=image_gallery/photos.php&p=26|27|31|34|35|39|46|47|51|52|79|94|95&page=law_of_the_sea.php
See the daily position of the USS Healy during its mapping cruise in the Arctic, via SailWX. http://www.sailwx.info/shiptrack/shipposition.phtml?call=NEPP
Read more about the USS Healy and its current and past missions from the Coast Guard's Icefloe site. http://www.icefloe.net/reports_healy.html
The United Nations Commission on the Limits of the Continental Shelf lays out agreements and research about this aspect of the Law of the Sea. http://www.un.org/Depts/los/clcs_new/clcs_home.htm
http://online.wsj.com/article/SB118848493718613526.html
September 09, 2007
ExxonMobil CEO: Mackenzie Pipeline Costs Could Top C$16.2 Bln
COMMENT: ExxonMobil has been pretty clear all along with the Mackenzie Gas Pipeline project: it isn't going to get built without a significant federal subsidy. That's assuming the regulatory process ever ends.
Hyun Young Lee
Wall Street Journal
September 8, 2007
CALGARY (Dow Jones)--Costs for the troubled Mackenzie gas pipeline could top the last cost estimate of C$16.2 billion, ExxonMobil Corp.'s (XOM) chief executive warned Friday.
Speaking to reporters at a Calgary industry event, Rex Tillerson said the length of the regulatory process made cost estimates for the pipeline little more than guesses based on other projects.
"It could be C$16 billion or C$14 billion or C$20 billion," Tillerson said. "All we can say is that it's large, it's larger than we previously thought."
Meanwhile, rapid cost inflation has been hiking up project costs while the pipeline has been in regulatory limbo, he added.
"We're seeing what happens on other projects...(there's) a bit of extrapolation from those more detailed cost estimates," he said.
The project, first discussed in the 1970s, aims to bring gas from the Mackenzie delta at the northern tip of the Northwest Territories to Alberta, where it would connect to existing pipelines. The push to revive the project started gathering support in 2004, but public hearings only began in January 2006, while the startup date has been pushed back three years to 2014.
Imperial Oil (IMO) is the project operator, and the other partners are Royal Dutch Shell PLC (RDSB.LN), ConocoPhillips (COP) and the Aboriginal Pipeline Group.
The proposed route crosses several First Nations territories, and complaints from several groups that they haven't been consulted properly have also slowed proceedings.
Tillerson has been one of the more vocal critics of the project's costs - which were previously estimated around C$7.5 billion - questioning the pipeline's viability without some sort of federal intervention.
After the regulatory proceedings, the Mackenzie consortium will have to do a "thorough update" of costs and "see how we are from an economic standpoint," he said.
He denied, however, that ExxonMobil was shelving the project.
The company is also involved in a US$25 billion pipeline project to bring 4.5 billion cubic feet a day of natural gas from Alaska to the lower 48 states.
Tillerson said: "You tell me what [the cost] might be today but it's not US$25 billion anymore."
-By Hyun Young Lee, Dow Jones Newswires; 613-237-0669; hyunyoung.lee@dowjones.com
September 07, 2007
Chevron's Great Game
Stanley Florek
Seattle Times
6 September 2007
By creating an on-line simulation along the lines of SimCity, Chevron is trying to prove that figuring out how to provide civilization with enough energy is not an easy game.
Energyville, created by Chevron in conjunction with The Economist Intelligence Unit, lets you name your own power-hungry city and pick different options to feed it with energy. You can choose among biomass, hydro-power, natural gas, hydrogen, solar and others; every choice has some economic, environmental and security impact. The impact of your choices can change following events like terrorist attacks and technology breakthroughs.
No matter how green-minded you are, you won't be able to power your cities with solely biomass or solar sources. If you forget to add an offshore petroleum platform, the game will kindly remind you that airplanes and cars need fossil fuels to run.
The game, posted at a website Chevron created to foster energy debate, is "an engaging way of looking at the real-world decisions that have to be made in meeting rising global energy needs," said Chevron vice president Rhonda Zygocki in a statement. "Sponsoring Energyville supports our efforts to encourage a global debate of the critical energy issues. Energyville gives people an opportunity to test their energy literacy and learn for themselves the challenges in powering their own city."
In Energyville, your final score depends on how well you balance your energy needs with the cost, security issues and environmental effects of your choices. In my third attempt at being Seattle's energy czar, my score ranked 2,359th among 20,735 players -- after heavily betting on wind power.
The site offers a tool to engage in some amateur sociology. It computes the average energy preferences of players by location, gender or profession. Wind and solar proved a major preference of the average U.S. player, according to the Chevron site. Players from Qatar - a major hub for gas-to-liquids projects - saw a future dominated by coal. Vatican City players gave petroleum the largest share of the pie. Budding policymakers in Saudi Arabia, the world's largest oil power, also bet heavily on wind, solar and biomass solutions.
Big Oil has been increasingly vocal in the alternative energy debate, as skyrocketing costs and environmental and security concerns have made fossil fuels the target of both environmentalists and politicians. Many expect Congress to enact legislature regulating carbon emissions in the near future, and the State Department is hosting an environmental summit in Washington D.C. in late September. Oil companies like Chevron want to make sure they have a seat at the table as new measures are discussed.
Game: http://willyoujoinus.com/
This Article: http://blog.seattletimes.nwsource.com/techtracks/archives/2007/09/energys_great_game_1.html
September 06, 2007
Palin offers oil tax plan for session in Juneau
Palin offers oil tax plan for session in Juneau
Tom Kizzia & Sean Cockerham, Anchorage Daily News, 05-Sep-2007
BP dislikes call for higher taxes in Alaska
Steve Quinn, Anchorage Daily News, 04-Sep-2007
Build trust on oil taxes
Editorial, Anchorage Daily News, 05-Sep-2007
BP Alaska President Doug Suttles talks taxes
John Tracy, KTUU News, 05-Sep-2007
Oil companies, associations express displeasure with tax proposal
Stefan Milkowski, Fairbanks News Miner, 06-Sep-2007
COMMENT: Alaska's Governor Palin wants to revisit new tax legislation, to ensure that Alaska gets a fair share of revenues from its oil. Industry throws up the "scare away investment" bogeyman. It's the same debate in Alberta, where royalties are under review. In BC, it's still the giveaway royalty regime.
Palin offers oil tax plan for session in Juneau
By TOM KIZZIA and SEAN COCKERHAM
Anchorage Daily News
September 5, 2007
Gov. Sarah Palin will call lawmakers to Juneau for a special session next month, where she will ask them to increase oil taxes by adopting a new hybrid system combining gross-production and net-profits taxes.
The tax proposal, announced in Anchorage on Tuesday, would raise the current tax on oil field profits from 22.5 percent to 25 percent. It would also create a floor of a 10 percent tax on gross production that would kick in on the state's oldest "legacy" fields if future profits shrink.
The special session begins Oct. 18 and can last up to 30 days.
Other changes, if adopted by the Legislature, would do away with retroactive deductions on investments from previous years and investments made to catch up on deferred maintenance. Credits would be available to encourage investment in new fields.
Palin also called for changing job classifications for state tax auditors, raising salaries to bring more expertise to the state.
A simple tax on gross oil production, which Palin favored at first, would "risk the viability of future fields," the governor said in announcing her hybrid plan.
"We want to make sure the golden goose is fed and not killed," she said.
State officials have dubbed the new plan Alaska's Clear and Equitable Share, or ACES.
MIXED REACTIONS
Palin originally wanted to hold the session somewhere on the road system. In agreeing to go to Juneau, she said she wants to see committee hearings outside the capital. Legislative leaders would have to agree to such hearings.
The governor's plan got a favorable reception from House Speaker John Harris, R-Valdez, who attended Tuesday's event. He said legislators would probably feel compelled to make some changes, given the cloud of corruption over the original tax. Palin's plan seems to offer change but not a huge overhaul, he said.
Harris said he hopes to begin committee hearings on the road system at the start of October, after a specific bill has been drawn up.
But Senate President Lyda Green, R-Wasilla, was less enthusiastic. She said it seems too soon to reconsider last year's tax changes. She also didn't like the idea of splitting the special session between Juneau and the road system.
Rep. Harry Crawford, D-Anchorage, said he was disappointed, calling the plan not much more than a warmed-over version of the existing net-profits tax. Democrats called last week for a simple, predictable tax like a gross-production tax.
Oil industry reaction was negative.
Increasing tax rates will reduce investment here, said BP Alaska president Doug Suttles. The state should be focused on offsetting the decline of oil production, he said. "We have to call on every Alaskan to think really hard about the future."
Both the increased tax and the notion of changing taxes for a third time in three years -- former Gov. Frank Murkowski imposed a smaller tax increase through regulation before the PPT was passed -- make for "a pretty jittery investment climate" in Alaska, said Marilyn Crockett, executive director of the Alaska Oil and Gas Association.
PALIN GIVES IN
The Legislature passed the latest oil-profits tax in August 2006. It was designed to allow oil companies to deduct operating and capital expenses before calculating taxes. That plan was presented by Murkowski as a way to promote investment. The Petroleum Profits Tax, or PPT, replaced the discredited "ELF" tax on production that was riddled with exceptions.
Legislators argued over what percentage of net profits should be taxed. After much wrangling, they settled on a 22.5 percent tax rate.
Some legislators, including many Democrats, had argued for a tax on gross production instead of net profits. Palin herself favored a gross tax during her 2006 election campaign.
In recent weeks, Palin said, analysis by state officials showed that a simple gross system would either mean less revenue for the state or hurt the oil industry's investment climate.
"I was dragged kicking and screaming, with a little bit of gnashing of teeth, even, away from the pure simple gross system," Palin said Tuesday.
Palin said the tax has to be revisited because the original version was tainted by corruption. Several legislators have been accused by federal prosecutors of selling their votes on the oil tax in 2006. Two of them, former Reps. Pete Kott of Eagle River and Bruce Weyhrauch of Juneau, are scheduled to stand trial in federal court starting today.
Palin also said the tax is not performing as predicted because industry expense deductions are coming in much higher than expected.
Administration officials said that, in fiscal year 2007, the new PPT brought in $1 billion more than the old tax -- but $200 million less than was predicted when the PPT was passed. Unless the tax is changed, rising deductions from the industry will bring $800 million less than predicted for the next fiscal year, said Revenue Commissioner Pat Galvin.
"I'm not sure how disappointed we should be with getting a billion dollars more," Green said after the governor's announcement. "We really need to kind of hold on and review it some more."
TIME TO MAKE A MOVE
But Palin said it is important to act now to make sure Alaska gets an equitable share of the oil's value.
"There are those who would say we should do nothing and that we should continue the PPT experiment. Doing nothing is not an option," Palin said.
The proposed new tax would bring in $700 million more this year than the PPT tax, according to state officials. But Democrats complained that's still $100 million less than was promised by a tax that was passed with undue pressure being exerted by lawmakers now accused of corruption.
Palin's earlier statement about holding the special oil tax session on the road system met resistance. Many legislators said they preferred to work in Juneau, where their offices and staff could be at close hand.
"It's kind of a hybrid plan there, also," Palin said of her call for hearings away from Juneau.
Contact reporter Tom Kizzia at tkizzia@adn.com and Sean Cockerham at scockerham@adn.com.
The tax and the session
Palin's "hybrid" proposal for new oil tax:
Alaska's Clear and Equitable Share
• Establishes minimum gross production tax for major "legacy" fields.
• Raises net profit tax on North Slope fields from 22.5 percent to 25 percent.
• Eliminates some deductions, such as catching up on deferred maintenance.
Plan for legislative session is a hybrid too
• Special session begins in Juneau on Oct. 18, lasts up to 30 days.
• Commitee hearings on new bill to be held outside Juneau, probably before session.
BP dislikes call for higher taxes in Alaska
By STEVE QUINN
Anchorage Daily News
September 4, 2007
JUNEAU, Alaska (AP) - The oil industry never liked the 22.5 percent net profits tax the state passed last year, and now Gov. Sarah Palin wants that raised to 25 percent.
It's part of a restructuring plan of the state's oil production tax Palin announced Tuesday, but one that doesn't sit well with the state's largest operator, London-based BP PLC.
Doug Suttles, president for BP Exploration (Alaska) Inc., said the state needs to be mindful that too much change would discourage multimillion dollar investments.
Those investments are crucial to extending the life of North Slope production - already in a 6 percent annual decline - by several decades.
"The big enemy in Alaska is production decline," he said. "The only way to offset it is investment, not just for exploration of new fields but existing fields and new technology."
Palin stressed she is not anti-oil - indeed, her husband Todd just returned to his blue-collar production job for BP on the North Slope after a year's leave- but believes the year-old tax needs to be restructured.
She wants lawmakers during a special session to start Oct. 18 in Juneau to fix a system she has called a failure and tainted by the federal corruption charges against former lawmakers in connection with the tax.
Palin's announcement comes as two former lawmakers begin their federal trial Wednesday on corruption charges.
These bribery and extortion trials are linked to the passage of the oil tax and they have helped thrust the state's political credibility into the national spotlight.
Palin noted the upcoming trial during her Tuesday news conference in Anchorage, but still stressed the need to fix a tax that she said "isn't working as promised."
Recent projections for the current Petroleum Profits Tax have the state falling $800 million short of what was predicted by former Gov. Frank Murkowski's administration last year.
That's nearly enough to fund the state's entire public education budget for the current school year.
Palin says she wants a tax that is fair to the state, but also provides the industry with the right incentives for future the exploration and production.
"We must receive appropriate value for our oil," she said. "It must be a clear and equitable share."
But some lawmakers and industry leaders are skeptical, saying it's too soon revisit the tax lawmakers passed just last year.
Senate President Lyda Green, R-Wasilla, stood firm on her long-standing belief that a special session is not necessary to rewrite the state's Petroleum Profits Tax.
"There is nothing that we are going to be doing that can't wait until the regular session next year," she said. "It's way too early right now to say whether (PPT) is right or whether it isn't right."
Nevertheless, lawmakers will report next month to the capital. Palin earlier announced the special session, but on Tuesday explained the scope of what she wants lawmakers to consider and the venue for the session, which can last up to a month.
The current tax has a base rate of 22.5 percent on oil company profits, but also affords the companies various deductions and credits.
Palin said she wants lawmakers to replace the current net profits tax plan with what she calls a hybrid of a net and gross profits tax.
She is calling it Alaska's Clear and Equitable Share, or ACES. Some of those changes include:
- Raising the tax rate from 22.5 percent to 25 percent on net profits, a figure some lawmakers pushed for last year.
- Not allowing deductions on facility repairs deemed to be from poor or negligent maintenance.
- A 10 percent gross-based floor tax on some of the older or "legacy" fields such as those in the North Slope.
- Eliminate some deductions, including those for retroactive investments, known as "claw backs."
"What the governor is trying to do here is get a better return for the state and create an environment that encourages more investment, and for that I applaud her," said House Speaker John Harris, R-Valdez.
"I do believe once we get the bill in a few weeks, we will want some expert advice as to what the effects of the bill will be on the budget, on revenue and on investment," he said.
But House Minority Leader Beth Kerttula, D-Juneau, isn't convinced that Palin's plan will achieve the stated mission.
Kerttula said the changes don't go far enough to keep the tax laws simple and understandable.
"Right off the bat, I've got some grave concerns," she said. "We still don't have much of a picture as to what deductions are going to be allowed."
Senate Minority Leader Gene Therriault, R-North Pole, said he would like to see more details of Palin's plan.
"This is more than rounding off the edges," Therriault said. "There is a lot of detail we have yet to see.
"If they are true to their word and have run the numbers with good data, then what they proposed could ultimately result in a fair take for the state."
Palin has not formally proposed the changes in a bill just yet; she expects to do that in a few weeks.
Palin had earlier said she wanted the special session to be held on the state's road system, in places like Anchorage or Fairbanks, to allow the public greater access than in Juneau, the state capital that is only accessible by boat or airplane.
However, she deferred to the wishes of lawmakers to keep the session in Juneau, but has asked legislative leaders to consider holding committee hearings elsewhere.
Build trust on oil taxes
Editorial
Anchorage Daily News
September 5, 2007
* Lawmakers should heed call for hearings on road system
* Take it on the road, lawmakers. Share a little, Juneau.
Gov. Sarah Palin has called the special session on oil taxes for Juneau, despite being inclined to meet closer to where most Alaskans live.
She also has urged lawmakers to hold committee hearings and take public testimony on the road system.
That's a good idea, especially given the context of this special session.
This session aims to make sure that Alaska gets a fair return on the oil wealth that Alaskans own. This session is necessary to restore Alaskans' faith that their government can do that job with honesty and competence. The current tax regime carries the baggage of the current corruption scandal. This session must clear the air.
Tuesday, Gov. Palin stressed the message that the oil is ours. So is the government. That's why as many Alaskans as possible should have as good a look as possible at the work of the administration and lawmakers. While the Legislature will convene in Juneau, there's no reason that committee meetings can't be held in Anchorage, Fairbanks, Kenai, Wasilla and/or Palmer.
Yes, there are logistical problems. But those are well worth the trouble for the governor and lawmakers to come to the people. Lawmakers needn't wait for the governor's plan to hold hearings; oil tax bills already in various committees can provide vehicles for debate and testimony.
Gov. Palin's proposal will no doubt drive the session, and her tax bill likely won't be ready until early October. But she and Revenue Commissioner Pat Galvin on Tuesday outlined the highlights of their proposal. There's substance to debate now, and to compare with the other tax revisions in the works.
Gov. Palin knows that her first job is not an oil tax proposal, as important as that is. Her first job is to restore Alaskans' trust in their government. That's the first job of lawmakers too. And that's better done face to face.
BOTTOM LINE: Lawmakers, governor need to take special session to wider audience of Alaskans before they take it to Juneau.
BP Alaska President Doug Suttles talks taxes
by John Tracy
KTUU News
September 5, 2007
*Channel 2 News interview with BP Alaska President Doug Suttles
ANCHORAGE, Alaska -- BP Exploration (Alaska) Inc. President Doug Suttles answered questions from Channel 2 News about Gov. Sarah Palin's proposal of a new oil tax regime that would effectively be a hybrid tax on net production and gross profits.
Channel 2 News: How is this hybrid net and gross profits tax proposal going to sit with the industry do you think?
BP Alaska President Suttles: I think what we all need to be worried about just now is the future for Alaska. I mean, the big issue we all face is decline, and what we need is a structure here that is going to focus investment.
I think the biggest concern at the moment is the net structure did encourage investment but the [tax] rate was already too high, and this looks like an increase - and the issue is competitiveness. We need to attract capital in all the areas of the industry.
Channel 2 News: Do you think the state's current Petroleum Profits Tax at 22.5 percent is a fair tax, and do you plan on encouraging lawmakers to keep it?
BP Alaska President Suttles: Well, I think that's right. I think our job in this is to get our view of the story out and make sure people understand the decision they face, and that we have a good and thoughtful debate.
Just to put this in perspective, the tax rate, I think, with this new structure, would have us almost 50 percent higher than places like the Gulf of Mexico or Alberta, Canada; and at least 25 percent higher than places like Texas, Oklahoma and Louisiana. So, Alaska needs to attract new dollars to offset decline.
Channel 2 News: One reason the governor stated for taking another look at the state's tax structure is the cloud of corruption under which the original vote was taken.
Clearly, two VECO Corp. executives were exerting influence on the vote, admitting to bribing lawmakers.
Isn't going back and at least re-affirming with a majority of the Legislature that the original bill is truly their intent a responsible thing to do?
BP Alaska President Suttles: I think we have to respect the governor's wishes here if she wants the Legislature to readdress [the PPT] and I respect her right to ask that.
I think what's important now is that we have a good and thoughtful debate. This is going to be about Alaska's future. Like I said before, we've got to encourage investment in this state and we need to make sure the tax structure will do that.
Channel 2 News: Another concern for critics of the PPT was the types of deductions the industry might take, including deductions for the repair and replacement of poorly-maintained pipelines, including the corroded feeder lines BP replaced at Prudhoe Bay. Alaska Department of Revenue Commissioner Patrick Galvin today said the state has yet to determine exactly how much BP deducted from its tax bill for replacing those lines, and that is part of the problem with the PPT.
Can you tell us how much BP deducted for replacing those lines, and how the company justifies those deductions?
BP Alaska President Doug Suttles: Of course, all we can speak to now is last year's tax filing. Last year, our severance taxes went from $180 million to over $500 million, so almost tripling, and that was inside of $2 billion in total government payments BP made. I think there are ways to solve questions around what deductions are fair and reasonable. There are good opportunities to do that through things like the joint interest billings that occur between the various owners of [Prudhoe Bay oil field].
I think there are ways to address those concerns that the state has enough transparency into what deductions are being taken.
Channel 2 News: Can you tell us, though; do you have a figure that you know that BP did deduct from its taxes for those repairs?
BP Alaska President Doug Suttles: You know, I don't have that on the tip of my tongue. Last year, the deductions were all predominantly in response to the spill in making sure we got production back on. Most of the expense for replacing those lines has been incurred this year and will be incurred next year, and those filings have yet to occur. So I just don't have that number in front of me.
Channel 2 News: BP and the other producers have said they won't be submitting a gas pipeline proposal under the requirements of the Alaska Gasline Inducement Act, but will you submit a plan anyway, so the public and lawmakers will have something to measure against whatever plan the state adopts under AGIA?
BP Alaska President Doug Suttles: Well, I think that's a really good question, and I think what we're doing right now is try to find a way to get this gas moving. We're completely aligned with the state and the governor wanting to find a way.
We had certain issues with AGIA and right now we are working with our partners to see if there is some way we can put a proposal forward so that the state can get it moving.
So, it's a little early to say but I can tell you we're working hard looking for opportunities to do that.
Contact John Tracy at jtracy@ktuu.com
Continue reading "Palin offers oil tax plan for session in Juneau"
August 29, 2007
Speakers Urge Debate On Hydro-Quebec Privatization
Nickle's Energy Analects
29 August 2007
A conference today in Montreal was told that partial or full privatization of Hydro-Quebec would produce greater value for the Quebec's water resources.
Such a move would also enhance Quebec's energy efficiency and improve the health of its public finances, according to Marcel Boyer, vice president of the Montreal Economic Institute, and Claude Garcia, former president of Standard Life.
Deregulation of the North American energy market and a wider opening of the electricity sector on a continental scale have broadened the debate on new options for reform that could benefit all Quebecers, they suggested.
In Garcia's view, selling Hydro-Quebec would enable Quebec to eliminate its public debt, evaluated at $122.6 billion. A debt-free Quebec would save a total of $5.5 billion annually in interest charges, allowing for a 33% cut in income tax, he said. It would also create a highly competitive tax environment, stimulating economic growth, according to Garcia.
In the last few years, electricity rates have risen far more slowly than prices for oil products, and Quebecers are paying well below market value for their electric energy, he said. Electricity rates in Toronto are 75% higher than in Quebec and in New York electricity costs three times as much. Raising rates to market prices would result in energy savings and the kilowatt hours left unused in Quebec following a rate hike would easily find buyers in export markets, said Garcia.
Boyer would not go as far, suggesting that another option would be to consider a partial privatization of Hydro-Quebec. Selling 25% of the company, for example, would suffice in obtaining greater value for the province's energy resources, he said. This could be done by issuing shares and amassing a large quantity of new funds to finance future investments. Some of this could also be used to reduce taxes or repay part of the debt.
With the new shareholders represented on the board of directors, maximizing the value of shareholders' equity and selling electricity at market prices would lie at the core of Hydro-Quebec's mission, said Boyer. This change in mandate "would deny governments the right to reach into Quebecers' collective inheritance and squander their energy resources," he said.
Hydro-Quebec would have incentives to invest in any money-making project and to guarantee sound management of operations.
A rate increase could be spread over several years and if the government wishes to protect or subsidize certain groups of citizens or businesses, such as low-income households or aluminum producers, it would have to do so through direct subsidies rather than by manipulating electricity prices, according to Boyer.
August 28, 2007
Firm to build $6.2B nuclear plant in Alberta
Nuclear plant plan draws fire
Jamie Hall, The Edmonton Journal, 28-Aug-2007
Company seeks approval to build Alberta's first nuclear reactor
Jon Harding, Financial Post, 28-Aug-2007
Firm to build $6.2B nuclear plant in Alberta
Canadian Press, 27-Aug-2007
Alberta nuclear proponent has mystery power buyer
Jeffrey Jones, Reuters, 28-Aug-2007
COMMENT: Mary Poppins' Umbrella
Energy Alberta Corporation (EAC) and Atomic Energy Canada Ltd. (AECL) have entered into a partnership. EAC says with respect to project funding:
"Energy Alberta Corporation is a privately held corporation and will fund the entire project in conjunction with third party investors. Energy Alberta Corporation is not seeking, nor plans to seek any government subsidies.
"Energy Alberta Corporation has an exclusive agreement with Atomic Energy Canada Ltd (AECL) to build the CANDU® reactors. They are comfortable with AECL's excellent track record of building Nuclear plants, using Canadian technology and Canadian expertise, around the world (Romania, Korea, etc.) on time and on budget.
"Energy Alberta Corporation will be looking to fixed price guarantees from AECL before proceeding with the plant."
The trick here is that Atomic Energy of Canada is going to build the project, with a fixed price guarantee. AECL is a federal crown corporation. It exists only because of government subsidies. $160 million in direct parliamentary appropriations. Another $137 million in Canadian revenues, mostly from Ontario nuclear facilities and all of them highly underwritten by the federal and provincial governments.
In effect the full AECL involvement in the project is a public subsidy. Possibly the scariest economic thing with this project is that AECL is taking on the full risk for cost-overruns. In an industry best known for overruns that never stop and projects gone bad, the roof on Montreal's Olympic Stadium will look like Mary Poppins umbrella before this thing is done.
(Can't remember the Big Owe? In 1970, it was going to cost $134 million. In 1976, when it was opened, only half done, for the Olympics, it had already cost $264 million. By 2006, total expenditures came in at $1.61 billion. The stadium project has never really ended. The first roof went on ten years after the Olympics; it's now on its third roof; the stadium is closed during winter months; and through its history parts of it regularly collapse.)
Nuclear plant plan draws fire
Environmentalists question impact on area land and water; company touts 'clean, safe, reliable' power
Jamie Hall
The Edmonton Journal;
With files from the Calgary Herald
Tuesday, August 28, 2007
The Bruce A and Bruce B nuclear generating stations
on Lake Huron, about 250 kilometres southwest of Toronto,
are one of five operating Candu nuclear power sites in Canada.
CREDIT: Courtesy of Bruce Power, file
EDMONTON - Energy Alberta Corporation has chosen Peace River as the site of a proposed nuclear power plant.
The Calgary-based company Monday filed an application with the Canadian Nuclear Safety Commission to build a pair of twin-unit Candu reactors on private land adjacent to Lac Cardinal, 30 kilometres west of the town.
The move ends months of speculation about the intended site of the corporation's $6.2-billion nuclear power plant, which was said to be between Peace River and Whitecourt.
Energy Alberta president and co-chair Wayne Henuset says the decision marks "a historic moment for Canada, for Alberta and for the nuclear power industry" and touted the benefits of "clean, safe, reliable nuclear power."
Ontario currently operates five of the Candu 6 reactors, which AECL said were some of the top-performing units in the world last year, with greater than 95 per cent capacity factor rankings.
But environmentalists gave short shrift to the claims, expressing worries over impacts a reactor might have on the area's land and water.
"The nuclear power industry has a long history of over-promising and under-delivering, so I'm skeptical," said Marlo Reynolds, executive director of the Drayton Valley-based Pembina Institute.
"I'm still not convinced there's a need for nuclear power given all the other resources we have here in Alberta."
The institute won't support any form of government financial support for the project and Reynolds said all environmental impacts must be fully accounted for in the final cost of the facility.
"That business case has never been made clear... once you factor in the full environmental cost I don't believe nuclear power competes."
David Schindler has serious concerns, too.
"There are huge issues involved in building this," says Schindler, a professor of ecology at the University of
Alberta who teaches environmental decision-making, "and one of them is reactor safety.
"I would want to know where the waste is going to be stored, how it's going to get there and what the use of the power is supposed to be for.
"(Nuclear power plants) use a lot of cooling water, so I guess this is one reason for putting it in Peace River, so they can get water from the Peace. The needs are around a cubic metre a second, so it's like a small oilsands plant."
Elena Schacherl insists the proposed plant is "a far different beast" than the existing Candu reactors currently in Canada, which are located in Ontario, New Brunswick and Quebec.
"They're approximately half the size of just one of the (twin reactors) that are being proposed," says Schacherl, who represents Concerned Citizens Advocating Use of Sustainable Energy.
"What's being proposed has never been built before."
She fears the plant will get "fast-tracked" before "the other side" can fully air its arguments in front of an environmental assessment panel.
Henuset said the Peace River region was chosen because of its demonstrated support from the community, the existence of essential infrastructure and support services, and technical feasibility.
Lorne Mann, the mayor of the Town of Peace River, says the plant would bring economic stability to the region.
"Today's announcement ... has given our region an opportunity for a more vibrant, exciting and sustainable future," said Mann.
The corporation has partnered with Atomic Energy of Canada Limited, the federal Crown corporation and maker of Candu reactors.
Initially, Energy Alberta plans to build one twin-unit ACR-1000 that will produce 2,200 megawatts of electricity with a targeted in-service date of early 2017.
"Building a nuclear power facility is a long and rigorous process," said Henuset. "This is the beginning of a public and regulatory process that will include environmental, health and safety assessments."
Press conferences will be held in Calgary, Peace River and Whitecourt today to provide more details about the project.
jhall@thejournal.canwest.com
© The Edmonton Journal 2007
Company seeks approval to build Alberta's first nuclear reactor
Jon Harding
Financial Post
Tuesday, August 28, 2007
CALGARY -- A private Calgary-based company aiming to build Alberta's first nuclear reactor took a step in that direction when it filed an application late Monday with the Canadian Nuclear Safety Commission for a licence to prepare a site for the facility.
Energy Alberta Corp., whose backers include Hank Swartout, founder of the country's largest oil and gas driller, Precison Drilling Trust, said in a release it has teamed with Atomic Energy of Canada Ltd. to build up to two twin-unit ACR-1000 Advanced CANDU Reactors, with the first slated for a site 30 kilometres west of the town of Peace River in the province's northwest Peace Country.
The facility would be in service by 2017, according to the company statement.
"This is an historic moment for Canada, for Alberta and for the nuclear power industry," said Wayne Henuset, president and co-chairman of Energy Alberta.
The first unit would ultimately produce a total net 2,200 megawatts of electricity.
© Financial Post 2007
Firm to build $6.2B nuclear plant in Alberta
Canadian Press
Mon. Aug. 27 2007
CALGARY -- Energy Alberta Corporation has chosen Peace River, Alta., as the site for its proposed $6.2 billion nuclear power plant.
The site is on private land next to Lac Cardinal, about 30 kilometres west of Peace River, the company said in a release Monday night.
"We are proud to be pioneers in bringing the benefits of clean, safe, reliable nuclear power to Alberta,'' said Wayne Henuset, president and chairman of Energy Alberta.
The company had also looked at Whitecourt, Alta., as its possible site. But it delayed its decision three weeks ago when Woodlands County withdrew its letter of support for the facility after 300 residents signed a petition saying they wanted more information. Last week, Woodlands County said it would also hold a plebiscite for residents to vote on the proposed plant.
"Energy Alberta has chosen the Peace River region as its preferred site because of the demonstrated support from the community, existence of essential infrastructure and support services and technical feasibility,'' the release said.
The privately owned company has filed an application for a licence to prepare the site with the Canadian Nuclear Safety Commission.
The application is for siting up two, twin-unit Candu reactors. The company has partnered with Atomic Energy of Canada Ltd., the federal Crown corporation that makes Candu reactors, and says it has lined up financing and clients.
Energy Alberta says it plans to start with one twin unit that will produce 2,200 megawatts of electricity with a target start date in early 2017.
Henuset said the application is just one of many steps required to get the licences to build the plant.
He said there will also be environmental, health and safety assessments and public consultations.
Peace River Mayor Lorne Mann said in the release the announcement has "given our region an opportunity for a more vibrant, exciting and sustainable future.''
"We understand that this is just the beginning of a lengthy process and we welcome the chance to become more informed on nuclear energy.''
Alberta nuclear proponent has mystery power buyer
By Jeffrey Jones
Reuters
28-Aug-2007
CALGARY, Alberta (Reuters) - Backers of the first nuclear power plant proposed for the western Canadian province Alberta sketched out their plans on Tuesday, but left questions unanswered including the identity of a mystery buyer for most of the electricity.
Privately held Energy Alberta has agreed to supply a company with 70 percent of the 2,200 megawatt plant's output, but President Wayne Henuset declined to name the firm, its business or describe the stage of the deal, citing confidentiality agreements.
"(The agreement is) as solid as it gets, I guess, five years out," Henuset said at a news conference. He was referring to his goal of starting construction around 2012.
The C$6.2 billion (US$5.8 billion) plant had first been proposed to provide both electricity and steam for the booming oil sands industry in northeastern Alberta.
But Energy Alberta applied to Canada's nuclear safety authority on Monday to build it further west in the Peace River area and to provide just the power.
Since the company first floated the idea two years ago, it has sparked debate among residents and politicians in Alberta, an oil- and coal-producing province that had officially rejected the notion of nuclear energy.
Under the proposal, the debt-financed plant would start up in 2017. Government-owned Atomic Energy of Canada Ltd would build a twin-unit ACR-1000 Candu reactor and Energy Alberta would own and operate it.
Henuset said it could help solve a power supply crunch in Alberta, where he projected to jump by 400 MW annually. The capacity is about 20 percent of the province's current peak load.
"There are no doubts Alberta needs a large, reliable, clean power source to meet its current future needs and there is no doubt in our minds Albertans are ready for nuclear power," he said.
Radioactive waste would initially be stored near the plant, 30 km (19 miles) west of Peace River, but long-term storage is still being studied, said Stella Swanson, an environmental consultant to the project with Golder Associates.
She pointed out Canadian Energy Minister Gary Lunn recently approved the idea of burying waste deep underground at a single location. Environmentalists have condemned the idea as too risky.
Also attending the news conference were representatives of Citizens Advocating Use of Sustainable Energy, a group formed to oppose the plan.
Among its many criticisms is that the Peace River region is susceptible to seismic activity, said CAUSE member Jack Century, a geologist and consultant to the oil industry.
"Just to the west of the Peace River faulted area is Fort St. John (British Columbia), where oil fields have been inducing earthquakes as a result of conventional water-flooding. This is known to all seismologists, but sort of hidden in the oil patch," Century said.
Swanson said the backers have done geological and engineering studies "at a regional level in a preliminary nature" and plan to keep studying such risks.
"You're right, there have been earthquakes in the area, but it was not what we would call a fatal flaw for choosing this area," she said.
Henuset, a Calgary-based businessman, has run a series of oil field service businesses and car dealerships and has also established a chain of liquor stores.
His partner in Energy Alberta, Hank Swartout, founded Canada's biggest oil field service company, Precision Drilling, and is on the boards of a handful of other firms.
August 26, 2007
Exxon seeks legal sympathy over Valdez
COMMENT: This column may appear to be about the unending legal whining that Exxon is committed to instead of forking over the fines it has been assigned by US courts.
But it is also about coalbed methane activity in British Columbia and the contradiction for provincial policy of pushing that agenda whilst having just "joined six U.S. states and Manitoba in the Western Climate Initiative, a partnership to reduce carbon emissions."
And it is also about the inevitability of catastrophe as risky energy programs are embarked upon - whether it's opening the coast to more tanker traffic, or opening the land to coalbed methane development.
By JOEL CONNELLY
Seattle Post-Intelligencer
August 23, 2007
In his Savile Row threads, the senior partner from a distinguished Los Angeles law firm rose in a Seattle courtroom and argued a case that made the blood leave my face: The Exxon Corp. had suffered enough.
Eighteen years have passed, and Exxon is still imploring judges to feel its pain. On Tuesday, it asked the U.S. Supreme Court to review an appellate ruling that it owes $2.5 billion in punitive damages from the 1989 Exxon Valdez oil spill.
The big "E" has been appealing since 1994, when an Anchorage, Alaska, jury awarded $5 billion to class-action plaintiffs. Fishermen, cannery workers and Alaska natives claimed lasting economic damage from the fouling of Prince William Sound and 400 miles of Alaska coastline.
The case has bounced up and down like a Cordova fishing boat in a Gulf of Alaska storm.
The 9th U.S. Circuit Court of Appeals sent it back to District Court, which affirmed the $5 billion judgment. Exxon took it back to the '9ers, who cut the award in half.
An estimated 20 percent of the plaintiffs (some of them Seattle fishermen) have died since Exxon started appealing. One of the appellate judges who heard the Seattle argument, Charles Wiggins, is no longer with us.
Exxon soldiers on: It hopes Antonin Scalia, Clarence Thomas and other Supremes will prove a sympathetic audience.
While acknowledging the spill was "a very emotional event," the world's biggest oil company argues: "The ongoing case is whether further punishment is warranted."
Exxon-Mobil has lately sought to lower its profile. It has cut money to front groups formed to fuel public confusion on causes of global warming.
Other oil companies busily greenwashed themselves.
ConocoPhillips used shots of breaching whales and Beethoven's music to herald the arrival of double-hulled tankers. British Petroleum has run ads claiming its initials stand for "Beyond Petroleum." Shell has aired profiles of a groovy solar scientist and a gorgeous cultural anthropologist who advises indigenous peoples on how to coexist with oil development.
If you put aside the TV spots, however, big oil is giving us the same old gas.
British Petroleum used the cover of a post-Hurricane Katrina refinery bill in Congress for a sneak attack on legal protections against supertankers in Puget Sound. Reps. Jay Inslee and Dave Reichert thwarted it.
As the Senate marked up energy legislation, Sen. Maria Cantwell, D-Wash., tried to shift subsidies from big oil to renewable energy development.
The industry successfully resisted under guidance of lobbyist and ex-Louisiana Sen. John Breaux, a man famous for saying that while his vote was not for sale, it could be rented.
The anthropologist babe was absent this week as Royal Dutch Shell resumed its attempt to drill exploratory wells for a coal-bed methane project in one of British Columbia's most beautiful alpine basins.
A band of protesters from the Tahltan and Iskut Indian bands blocked Shell crews. The company is considering a court injunction, which would likely lead to arrests.
The land at issue is called the Sacred Headwaters: It forms the headwaters of the Nass, Stikine and Skeena river systems: All are major salmon streams. The Nass is a rare case in Canada of a well-managed fishery. The Sacred Headwaters is a major hunting and fishing ground for native peoples.
"Three years ago, with tenure to drill in hand, Shell Canada didn't waste any time: While most Tahltan were attending a funeral, Shell's contractors unceremoniously bulldozed an access road through a Tahltan trapper's camp and quickly drilled three exploratory wells," thetyee.ca, a Vancouver online newspaper, recently reported.
Shell picked a curious week to bulldoze its way back into the Sacred Headwaters. With great fanfare, British Columbia joined six U.S. states and Manitoba in the Western Climate Initiative, a partnership to reduce carbon emissions.
Who cares about a few dozen Indians in ceremonial costumes blocking a road 600 miles north of Vancouver? Isn't it "old news" that fishermen and tribes are still seeking damages 18 years after the Exxon Valdez spill?
Answer: We ought to extend our attention spans and renew a basic sense of social justice.
During four trips to the Sacred Headwaters country, the Iskuts have impressed me as spiritual, sensible, down-to-earth people who don't want the global economy to roll over their gorgeous corner of the world.
They are willing to accept mines, but one at a time, so the region isn't hit by a boom-then-bust economy. And they want hands off the Sacred Headwaters. They're willing to endure stiff contempt sentences that Canadian judges impose on those who defy corporate power.
The Exxon Valdez plaintiffs have a powerful argument in or out of court: We told you what was going to happen.
As Capt. Joseph Hazelwood was drinking at the Petroleum Club in Valdez, a Cordova biologist-fisherwoman, Dr. Riki Ott, was talking by phone to a meeting elsewhere in town.
She forecast that Prince William Sound was due for a catastrophic oil spill, the question was not whether but when, and that it would not be contained.
The prediction came true a few hours later. If only the Exxon Valdez had shown its corporate parent's skill at maneuver and evasion.
P-I columnist Joel Connelly can be reached at 206-448-8160 or joelconnelly@seattlepi.com.
August 23, 2007
Looking to the sun
Revolutionary solar power from Israel
Remarkable solar amplification development in Israel. Could well imagine offsetting any future need to go with traditional generation plants, and even fossil fuel propulsion conversion of the large vessels of the international shipping sector. (Tom Parry/CBC)
Tom Parry's Notebook
CBC
Aug. 15, 2007
The Ben-Gurion National Solar Energy Research Center has a name more impressive than its actual appearance. The centre is a collection of trailers and mobile homes clustered behind a fence in Israel's Negev Desert. Despite the humble surroundings, the work going on behind its doors is at the cutting edge of solar technology. It could change the way we produce energy — in theory, at least.
Prof. David Faiman of Israel's Ben-Gurion National Solar Energy Research Center. (Tom Parry/CBC)
The head of the centre is Prof. David Faiman. When I met him, he looked like a cross between a college lecturer, Santa Claus and Roy Rogers. Faiman sports a thick white beard, a straw cowboy hat to guard against the desert sun and sunglasses, perched slightly askew on his nose.
From the moment we shook hands, he began speaking about his work. And the focus of his work is "The Dish." The Dish appears at first glance to be a giant satellite ground station. In fact, it is a giant mirror. And what this mirror does is focus the sun's rays onto one single super-heated point.
Like an angry child with a magnifying glass incinerating ants, Professor Faiman can concentrate the sunbeams to an intensity a thousand times their strength. But Faiman isn't using this enormous power for something as mundane as zapping bugs, of course. He's using it to create incredible amounts of electricity.
"By concentrating the light a thousand times, we were able to produce 1,500 watts from a cell that normally gives only one watt," Faiman explains.
The breakthrough solar technology?
Faiman and his team have been experimenting with using concentrated sunlight and a very durable solar panel to produce more electricity than ever thought possible. In theory, this is the breakthrough that solar energy has been waiting for — the one that makes it more practical, reduces the price of production and makes it cheaper than coal-fired, nuclear or even hydro-electric plants. But Faiman isn't popping the champagne cork just yet.
"It will feel wonderful when I see the first solar power plant using this technology in use. Until I see that, it's just another theoretical paper."
Prof. Faiman's solar dish in Israel's Negev Desert. (Tom Parry/CBC)
It could be a while before Faiman's experiments pay off with real world results. But he does envision dishes like his dotting the Israeli desert in the not too distant future.
"Take 120 kilometres of highway," he says, "and take 50 metres on each side of the road. That's twelve square kilometres. That's enough for building 1,000 megawatts of generating capacity. So, you can simply have these dishes in a line, hooked up to the overhead power line, and you've basically used land that's not used for anything else."
California Dreamin'
A solar collector made by Solel Solar Systems. (Tom Parry/CBC)
It would be easy to write off Faiman as a dreamer. But the fact is, Israeli solar technology is already producing power, not in Israel but in the United States. In California's Mojave Desert, huge swaths of land are covered in mirrors soaking up the sun's rays and producing formidable amounts of electricity. The mirrors are the work of another Israeli company, Solel Solar Systems Ltd. Its head office is in Beit Shemesh, west of Jerusalem. Beit Shemesh, as you might expect, is Hebrew for "House of the Sun".
On the day I visited, I was greeted by Solel's President Avi Brenmiller. Brenmiller is an advocate, more of an evangelist, for solar power. A tall, imposing man with a voice like Arnold Schwarzenegger, Brenmiller's every word seems to say, "I told you so" to anyone who doubts the potential of solar energy.
"I think it's the beginning of a peak," says Brenmiller, when asked about the current state of the solar power business.
"A couple years ago, I was very busy trying to convince people that they should do it. Right now, everybody is telling me, okay we are convinced. Let's see if you can deliver."
Sounding like The Terminator at times, it makes sense that Brenmiller's biggest business success is in Gov. Schwarzenegger's California. Solel has nine fields of solar collectors soaking up the sun's energy in the state. And just recently, it signed a contract to build another massive expanse of mirrors that will be the world's largest solar generating plant.
New plant will use more than one million mirrors
"That's the largest solar plant ever built in the world. It will be supplying power to 400,000 families. And we plan to build more plants of that size," Brenmiller says.
"The problem was always, 'When can you become really competitive with other sources of energy?' and we calculated that at that size of a plant, we could really compete with other sources of power," he adds.
Close-up of some of the glass tubes used in Solel's collectors. (Tom Parry/CBC)
The new Solel plant in the Mojave will use more than a million mirrors and cover more than 6,000 acres of ground. The technology developed by the company uses curved mirrors to focus sunlight to heat glass tubes filled with oil. The heated oil is used to boil water. The steam drives turbines that produce electricity.
"This is the only working proven [solar] technology in the world which works at commercially supplying power to the grid," boasts Brenmiller.
While California is its biggest customer, Solel has sold its mirrors in Spain and is eyeing India and China as potential markets. As for Canada, the Great White North may not have enough sunshine to make this kind of solar project viable. The technologies developed by Solel and under development at the Solar Energy Center in the Negev are more suitable to desert climates.
Brenmiller, however, says they are working on solar panels that could be used in northern regions. And, Prof. Faiman adds, even if Canada doesn't end up with fields of mirrors and solar dishes, it may one day buy electrical power produced from solar fields in the southern U.S.
A world leader but not in Israel
What disappoints both Faiman and Brenmiller is that while Israel is quickly becoming a world leader in solar technology, Israel has been slow to embrace solar energy on a wide scale. Most Israeli homes are equipped with solar water heaters, but the bulk of Israel's electricity is produced at coal-fired generating stations. Faiman attributes Israel's reluctance to go solar to nervous politicians.
"There is a reluctance of governments to do anything new," he says, "That is a fundamental problem of governments all over the world. No politician wants to risk doing something that nobody's ever done before. Because if it doesn't work, it's the end of his political career."
The Israeli government has expressed interest in building at least one solar generating station like the ones in California. But Brenmiller is waiting to see a signature on a contract before he starts celebrating.
Both Faiman and Brenmiller admit solar power may never replace the electricity produced in hydroelectric, nuclear and fossil fuel plants. But they firmly believe the world can reduce its reliance on these other technologies simply by looking toward the sun.
August 22, 2007
Offshore deal worth $16-billion to Newfoundland
COMMENT: "The agreement to develop the Hebron-Ben Nevis offshore oilfield gives the province an equity stake of 4.9% in the project."
CanWest News Service
August 22, 2007
Danny Williams
CREDIT: Tyler Anderson/National Post
Newfoundland and Labrador Premier Danny Williams said Wednesday that an offshore deal reached with four major oil companies represents an unprecedented gain for the province.
The agreement to develop the Hebron-Ben Nevis offshore oilfield gives the province an equity stake of 4.9% in the project, estimated to contain 731 million barrels of recoverable oil.
The equity stake came at a cost of $110-million, but the deal will mean total revenue of $16-billion over the 25-year life of the project for the province. The federal government will earn $7-billion in the same period, Mr. Williams said.
The combative premier and the oil companies broke off negotiations on the project -- Newfoundland's fourth major oil development -- in April, 2006, when they couldn't agree to fiscal terms.
The premier came under severe criticism, both in his home province and in the oil community, for refusing to back down on his demands, which involve heavy provincial involvement and for which he was likened to Venezuela strongman Hugo Chavez.
The premier was in a triumphant mood Wednesday, proclaiming the memo of understanding was "historic" and the first step toward Newfoundland and Labrador "Taking real and meaningful ownership of our resources."
There is also an improved royalty regime tied to the price of oil. When oil rises above US$50 a barrel, the province will receive a super royalty of 6.5% of net revenue.
Construction could begin by 2010.
The Hebron negotiations were suspended by the oil companies in April 2006, but resumed last month. One of the main stumbling blocks had been the province's demand for an equity stake in the heavy oil project.
"Our goal was to surpass benefits of previous agreements," said Mr. Williams, who touted the investment in his province's workforce, including the local construction of the new oil platform. "Determination and strength of conviction has been our government's guide."
The partners in Hebron are Chevron, ExxonMobil Canada, Petro-Canada and Norsk Hydro Canada.
Nfld. strikes Hebron deal
SHAWN MCCARTHY
Globe and Mail
August 22, 2007
The province of Newfoundland and Labrador will pay $110-million to get a 4.9-per-cent stake in the Hebron offshore project, Premier Danny Williams said in announcing a deal with oil companies to proceed with the $5-billion development.
Some 16 months after talks broke down — and six weeks for a provincial election — Mr. Williams on Wednesday released details of the agreement, which includes a heightened royalty regime and guarantees for local content in the construction of the offshore platform.
“Today marks a historic day in Newfoundland and Labrador, as we enter into a new era of offshore oil development with unprecedented benefits to the people of our province including taking real and meaningful ownership of our resources,” the premier told a news conference in St. John's.
Under the agreement signed with the consortium led by Chevron Corp., the province will pay $110-million in cash for its equity stake, and contribute 4.9-per-cent of the estimated $5-billion in construction costs.
With a provincial election less than two months away, Newfoundland and Labrador Premier Danny Williams has clinched a deal with a consortium of oil companies to proceed with the $6-billion Hebron offshore oil project.
With a provincial election less than two months away, Newfoundland and Labrador Premier Danny Williams has clinched a deal with a consortium of oil companies to proceed with the $6-billion Hebron offshore oil project. (CP)
Mr. Williams acknowledged there was some risk involved in taking a direct stake in the project, but said the province would benefit from payout of profits, as well as super royalty scheme that will remain in effect so long as the price of oil remains above $50 (U.S.) per barrel.
James Bates, vice-president at Chevron Canada Ltd., said the deal was a good one, both for the people of Newfoundland, and for the shareholders of the oil companies.
"We dealt with the net expectations in the context of the entire agreement," Mr. Bates said. "When you at it from that perspective, we were able to meet the expectations of the government and our companies."
Mr. Bates would not discuss the details of the agreement, including which partners would sell equity. He said more work needs to be done to hammer out a binding contract. In addition to Chevron with 25 per cent, ExxonMobil Corp owns 37.5 per cent of the Hebron project. Petro-Canada and Norway's state-owned Norsk Hydro ASA are also partners.
The province's equity will be managed by energy arm of Newfoundland and Labrador Hydro, which has been charged with developing the province's oil and gas, as well as electric power assets.
The premier thanked the people of Newfoundland and Labrador for supporting him when critics — in the business community in St. John's and around the country — slammed him for insisting on an equity stake and accused him of driving investment away from the province.
Talks between the government and the oil companies broke down in April 2006 over a number of issues, including Mr. Williams' demand for an ownership stake in Hebron and the companies' insistence on a package of tax credits.
In his news conference this morning, the premier said his government had increased its offer for the equity by $10-million, agreed to reduce its royalty claim by $20-million to $30-million, and extended the royalty payout period.
For its part, the consortium dropped demands for tax credits, and agreed to accept the government as a partner in the project.
Mr. Williams said that, given current oil price projections, the Hebron project — with reserves of up to 700-million barrels — should generate more revenue for the province, and more jobs than the two previous projects combined.
Hebron will be the fourth offshore oil project for the province since the industry got its start with the Hibernia development in the 1980s. It is located some 340 kilometres from St. John's and will use a similar concrete gravity-based structure (GBS) as a drilling platform. That GBS will be fabricated in the province.
Squeezing oil from stones
There are vast reserves of oil trapped within Alberta's rockbed - the trick is getting it out
NORVAL SCOTT
Globe and Mail
August 22, 2007
CALGARY -- OSUM Oil Sands Corp. believes it might have the answer to one of the oil patch's most perplexing problems - extracting the billions of barrels of crude trapped in Alberta's limestone deposits.
To date, energy companies have largely concentrated on producing crude from Alberta's oil sands, where tar-like bitumen is extracted from sandstone and dirt using either mining or steam-assisted extraction. While the province's limestone deposits - or carbonates - also hold vast amounts of crude, the reserves are too deep for mining and are frequently perceived as being incompatible with steam-assisted extraction, preventing easy recovery.
Nevertheless, the uncertainty over extraction hasn't stopped some enterprising firms from snapping up leases in regions such as Alberta's Grosmont formation. Last year, Royal Dutch Shell PLC paid $465-million for 10 parcels of land in the carbonate region, by far the biggest outlay for staking any exploration claim anywhere in the oil sands, while Husky Energy Inc. also holds substantial acreage in the area.
The only other company to own holdings in the region is the far smaller, privately held OSUM, which used to offer technological and service solutions to other firms before deciding to acquire a slice of the oil sands itself, paying just over $20-million last August for leases that could hold 840 million barrels of recoverable crude.
Not only does the Calgary-based company believe the land can support a project ultimately capable of producing 75,000 barrels of crude a day, it believes the carbonates could be the way forward for Canada's oil patch.
"The carbonates are a stupendous resource, and when they are cracked at a commercial level, that's a material step-change for the industry," OSUM chief operating officer Peter Putnam said in a recent interview.
"Shell didn't spend all that money in the region to get hold of a big science experiment - they're looking for a major project."
So far, Shell and Husky have been tightlipped about exactly how they will produce crude from the carbonates, although Husky has tentatively outlined plans for a 200,000-barrel-a-day project at its Saleski holdings. Industry observers have speculated that the companies could use electrical wires to heat the limestone resource, although such a process would likely be expensive and need a large energy source.
While OSUM isn't giving away its technical secrets either, it says the answer to extracting the crude is far less esoteric than the industry seems to believe, with experiments carried out in Alberta in the 1970s already proving that crude can be extracted from the limestone reservoirs with thermal recovery methods.
"Producing barrels out of the carbonates is not an issue, and we actually think these reservoirs are better than those in Fort McMurray," Mr. Putnam said.
"Most people who work in the oil sands only know about sand - they don't understand these reservoirs and they don't have experience with them."
In conjunction with privately held partner Laricina Energy, OSUM is now pressing ahead with plans for a 10,000-b/d pilot project at Saleski - recently securing $56-million of financing - and expects to file a regulatory application next year.
As well as the carbonate plans, OSUM is also moving forward another project that appears technically challenging - extracting crude from under Marie Lake, in eastern Alberta.
That project will use so-called shaft and tunnel technology to reach the region's crude, with wells drilled from below the reservoir, rather than from above.
While planning for the 30,000-b/d project is in an early stage, OSUM believes the shaft and tunnel system, which requires less drilling and less steam, will lead to substantial cost savings and a smaller environmental footprint.
Alberta regulators gave approval to OSUM to conduct seismic testing at the site earlier this month, despite objections from residents concerned about how the project might affect Marie Lake.
OSUM chief executive officer Richard Todd said seismic testing carried out on lakes elsewhere in Alberta hadn't caused any problems, and that the company was determined to address any community concerns and carry out its program with sensitivity.
"Hopefully, at the end the residents will applaud our approach," he said. "I think people will come to see the whole package as a step forward [from conventional oil sands operations]."
August 21, 2007
Alberta Energy loses gas decision
National Energy Board approves new LNG terminal to be built in Quebec
Gordon Jaremko
Vancouver Sun,
21-Aug-2007
EDMONTON -- Alberta Energy has lost a quiet but hard-fought national duel with importers and consumers over the future of the province's top money-earner: natural gas.
In a July ruling described as "a signal to the global market," the National Energy Board rolled out the welcome mat to tanker cargoes of liquefied natural gas from overseas by approving a controversial cost-sharing scheme for a new LNG terminal to be built in Quebec.
On the heels of the decision, Andrew Pelletier, spokesman for Cacouna Energy -- a major player in the terminal project -- said, "Right now it's a green light. We're working towards a project announcement."
The company's statement -- expected by the end of the year -- will set out a final cost estimate and construction schedule for the Quebec import terminal that is to be developed by the Cacouna partnership of Trans-Canada Corp. and Petro-Canada.
The NEB's technical but far-reaching landmark ruling decided a fight over who will pay for a cornerstone of the project -- and possibly more like it -- over the next 20 years.
The contested item is a $738-million set of additions to Trans-Canada's national gas pipeline, including a 240-kilometre extension and other adjustments needed for markets to use the new tanker terminal at Gros Cacouna, on the south shore of the St. Lawrence River east of Quebec City.
Over vigorous resistance by Alberta Energy lawyer Brent Prenevost, the NEB sided with the Cacouna partners and their supporters, which include the Quebec government, Canadian Industrial Gas Users Association and Montreal distributor Gaz Metropolitain Inc.
The board ruled that the remote terminal is a "receipt point" for gas to enter TransCanada's pipeline, akin to conventional Alberta and Saskatchewan inlets along the main shipping route for gas to central Canada and the United States.
That status qualifies the Cacouna pipeline extension for a utility cost-sharing system known as the "rolled-in toll methodology." The $738-million bill for the LNG import terminal will become, in effect, an added mortgage to be paid off with tolls charged to all shippers, including Alberta gas producers and merchants.
TransCanada estimated the extra bill will be as little as two-tenths of a penny and no more than three cents a gigajoule by the time it is spread out over many years and all the traffic on the national pipeline system.
Alberta Energy argued the scheme creates a big subsidy for LNG imports by saving the terminal the expense of paying for its own pipeline link to Quebec, Ontario and U.S. markets.
In a strongly worded final argument before the NEB, Alberta Energy lawyer Prenevost predicted the rolled-in system will give LNG imports a competitive advantage of $1.10 per gigajoule against Alberta gas in Quebec.
He acknowledged the Alberta government was alone in resisting the scheme, but suggested it was no accident the gas production industry stayed conspicuously silent.
Gros Cancouna documents at NEB registry
Proposed plant in Cowlitz County to test pollution law
Craig Welch
Seattle Times
20 August 2007
When Gov. Christine Gregoire signed a new law in May to reduce greenhouse-gas emissions, she called it a "testament to the unique, broad-based coalition that came together - utilities and environmentalists, faith communities and business leaders."
Four months later, that coalition is already splintering over one of the first real tests of the new law: a fight about whether developers of a proposed power plant in Cowlitz County are trying hard enough to limit its climate-changing pollution.
The dispute highlights how efforts to reduce carbon emissions increasingly run up against a growing region that needs more and more electricity.
Energy Northwest has proposed a plant at the Port of Kalama that would burn gas made from coal. That process is cleaner than simply burning coal, but it still would emit millions of tons of carbon dioxide into the atmosphere each year.
At issue is whether Energy Northwest has made a sincere effort to find ways to trap the excess greenhouse gases in the earth - a process known as "carbon sequestration" - instead of spewing them into the sky.
The state Attorney General's Office and the Department of Ecology, environmentalists and some lawmakers insist the electricity suppliers behind the new plant are trying to bypass the intent of the law.
Those suppliers - including Seattle City Light and more than a dozen public-utility districts represented by Energy Northwest - say that's not true.
Under the new law, signed with great fanfare at the end of the last legislative session, new power plants have to trap their carbon emissions unless the utilities demonstrate, after a "good-faith effort," that it's impossible.
Only then can plant operators instead offset emissions, by buying rights to another utility's unused pollution capacity, for example. Lawmakers and Ecology officials have said such offsets should be a last resort.
When it submitted pollution-control plans to the state for the Kalama plant, Energy Northwest simply professed that sequestration remains unworkable in real-world practice. So until it is, the utility wants to pay to offset emissions.
"We represent openly and honestly the current state of technology for sequestration, and it's just not available yet," said Brad Peck, a spokesman for Energy Northwest.
State officials and environmentalists heatedly objected.
"This document is not a sequestration plan, it is merely a plan to have a sequestration plan," Assistant Attorney General Michael Tribble wrote. The Ecology Department said Energy Northwest's proposal was too deficient to even consider.
Both agencies urged a third state agency that reviews power-plant proposals, the Energy Facility Site Evaluation Council (EFSEC), to reject the plan as inadequate.
Instead, EFSEC agreed to move forward with a review. The panel plans to hear arguments about the issue next month.
"There's no good reason not to proceed," said Jim Luce, chair of EFSEC. "The first thing we're going to do is debate compliance with the law."
Now environmentalists worry that EFSEC will give utilities the benefit of the doubt and that if the utilities are allowed to move ahead without concrete sequestration plans, they may never develop such plans.
"I find it incredible that EFSEC rejected the rather explicit advice from the attorney general," said Marc Krasnowsky, spokesman for NW Energy Coalition, a Seattle-based environmental group that promotes renewable energy and conservation. "Once it's built, does anybody really believe politicians will demand the plant shut down?"
Energy Northwest's Peck responded that lawmakers knew sequestration was experimental when they passed the law, hence the provision for other options such as offsets.
"If anyone knows a sequestration technique that's available and viable, we'd appreciate them letting us know," Peck said.
Equally important, Peck said, is that the state needs more power. Even if economic growth slows, he said, utilities expect an increase in demand of 1,200 to 2,400 megawatts over the next six years - about how long it takes to get a new plant built and operating. The Kalama plant would produce about 680 megawatts.
"We don't see better options, and this one meets our criteria: reliable, affordable and environmentally responsible," Peck said.
But state Sen. Erik Poulsen, D-West Seattle, who chairs the Senate's energy committee, said the Legislature "had every expectation" that Energy Northwest would try to resolve technical issues with sequestration before pushing ahead.
"In winning the battle, they may lose the war," Poulsen added. "If they succeed in avoiding sequestration this easily, you can be sure the Legislature will put tighter restrictions on coal plants.
"As chair of the energy committee, I can virtually guarantee it."
August 19, 2007
The new dirty energy
It's big, it's growing -- and it's bad for the environment. Inside the other alternative-energy movement.
By Drake Bennett
Boston Globe
August 19, 2007
FOR THOSE WHO dream that high oil prices will help drive America toward a brave new world of clean energy, the MacKay River project in Alberta, Canada, offers a glimpse of the future.
The complex is a showpiece of cutting-edge engineering, wresting energy from beneath a swath of boreal forest. Under an unobtrusive spread of buildings, holes drilled at oblique angles free unprocessed fuel from the earth with jets of steam.
Thanks to government and private investment, the complex is providing more energy every year, and by 2020, Alberta as a whole is predicted to generate enough to replace a quarter of the United States's current daily oil usage. And as oil prices rise, projects like MacKay River become more and more cost-effective, and more popular.
The only problem: The thick, tarry petroleum that the Alberta project pulls from beneath that forest is far dirtier than oil.
Alternative energy wasn't supposed to look like this. For years, leading environmental thinkers have argued that high fossil fuel prices are good for the planet, driving investors and customers toward biofuels, solar power, and a host of new energy sources that will quickly become cost-effective.
But as oil prices stay high, the real beneficiary often turns out to be a very different alternative-energy industry, one focused on dirty fuel sources such as oil sands, oil shale, and coal. Environmentally speaking, the oil-sand plants of Alberta are no better than petroleum drilling, and in some ways decidedly worse. In North America, in terms of energy output, this so-called "unconventional oil" sector already dwarfs clean and renewable-energy technologies, and is poised to grow even faster in the next decade.
"To assume that high energy prices mean we'll switch to wind or solar or other renewables is simply unrealistic," says Amy Myers Jaffe, an energy expert at the James A. Baker III Institute for Public Policy at Rice University. "It only means that if we make that a concerted policy."
For the past two years, oil prices have been fluctuating around historic highs. Although $3-per-galllon gasoline may be frustrating to drivers, it has been welcomed by environmentalists and many economists, who see expensive oil as a crucial spur to the clean-energy business. In announcing last fall that he was dedicating $3 billion to fight global warming, the British billionaire entrepreneur Richard Branson said of high oil prices, "Thank God it's happened. . . .A high oil price is what we needed to actually wake up the world" to deal with climate change.
When oil is expensive, biofuels start to look more affordable by comparison, and investors start seeking ways to make them more affordable still. When natural gas -- used primarily for generating electricity -- is expensive, it adds to the appeal of wind and solar-generated electricity. The best-selling author and New York Times columnist Thomas Friedman, among others, has gone so far as to advocate an oil price floor to ensure that oil never gets cheap enough to undercut alternative energy sources.
In part, the expectations of Branson, Friedman, and others are starting to come true. Investments in renewable energy by governments, corporations, and venture capitalists have surged in recent years, driven in part by the cost of oil. A United Nations Environment Programme study released in June reported that, worldwide, $70.9 billion was invested last year in clean energy generation, about a third of that in the United States.
But these renewable sources still supply just a fraction of the world's energy needs, and many of them remain high-tech speculations. The best-known, like wind and solar, are for electricity generation, not vehicle fuel, the role oil currently plays. And according to Department of Energy figures, ethanol, the only widely available biofuel, currently meets only 1.6 percent of American vehicle fuel needs.
Meanwhile, the high price of oil has given a dramatic boost to a very different set of energy sources -- one of which is now generating fuel on a huge scale. These "unconventional oil" sources pull carbon out of the ground in forms that were once too expensive, or too technically difficult, to compete with cheap oil.
By far the most developed of these are the oil sands of Canada. A thick slurry of sand, water, and a hydrocarbon tar called bitumen, oil sands -- also called tar sands -- can, with enough processing, be refined into something very similar to the petroleum pumped out of the Saudi Arabian desert.
The discovery of tar sands in what would become northeastern Alberta long predates the internal combustion engine: Native Americans found the tar seeping from the ground and used it to caulk their canoes. Efforts to mine the sands for oil go back to the 1960s, but were never economically competitive with oil drilling, and the early mines struggled. No longer.
"With higher prices there's a terrific interest up there," says David Pommer, a spokesman for Chevron Canada, co-owner of one of Alberta's largest oil-sands mines.
Geologists estimate that Alberta's oil sands contain 1.7 to 2.5 trillion barrels of oil -- more than Saudi Arabia -- a few hundred billion of which are recoverable using current technology. (A similarly vast oil-sands reserve lies beneath Venezuela, but remains mostly undeveloped.) Already today, Alberta's oil-sands industry produces a million barrels of oil a day, most of which comes to the United States.
Environmentalists see this as a growing disaster. The oil in oil sands is not easily separated out, and the immense amounts of heat required are usually generated with natural gas, giving the oil-sands industry a greenhouse gas footprint much larger than the traditional oil business -- estimates range from 40 percent more to five times the emissions. The process also uses enormous amounts of water: a study by the Pembina Insitute, a Canadian environmental watchdog organization, found that, depending on the method of extraction, every barrel of oil produced requires 2.5 to 4 barrels of water, all of which is then rendered too polluted to return to the water supply. And most oil-sands operations are mines, not steam wells like the MacKay project, making them very disruptive to surrounding ecosystems.
Behind oil sands, two other "unconventional oil" technologies, at this point far less developed, wait in the wings.
One of them is oil shale, a sedimentary rock impregnated with solid bitumen. Three-quarters of the world's known oil shale deposits lie in the western United States, concentrated in Colorado, Utah, and Wyoming, giving the country an immense hidden oil reserve of around 1.8 trillion barrels. To extract the bitumen and turn it into oil, however, requires a massive amount of heat. Either the rock is mined, then crushed and cooked in huge pressurized caldrons, or the bitumen is melted out by physically heating the earth that holds it to temperatures above 600 degrees Fahrenheit.
Energy and emissions estimates for oil shale are hard to come by, since there are no large-scale production facilities, but the energy expenditure to cook the oil shale is likely to be considerable. Terry O'Connor, a vice president of Shell Unconventional Resources, insists that the company is looking at ways to cut down on both energy and emissions. "That's the reason we're still years away from making a commercial decision," he says.
An even bigger wild card is liquid fuel made from coal. The United States and China, the countries with the world's largest energy appetites, also contain the world's largest deposits of coal. While the basic technology to turn coal into fuel is nearly 90 years old, in the past it was too expensive to be anything but a last resort for fuel-starved countries such as Nazi Germany and apartheid South Africa.
A few firms in the United States and China are trying to use new technology to make the process economically competitive with oil, but again, the environmental costs are high. The favored coal liquefaction method today requires first turning solid coal into a gas at very high temperatures; combined, the production and consumption of coal-derived diesel releases roughly twice as much carbon into the atmosphere as traditional oil -- though various research efforts are underway to capture these emissions. It also uses more than a dozen barrels of water per barrel of fuel produced, according to a recent Department of Energy study. And coal mining takes a toll on landscapes and animal habitats.
The lesson for policy makers is that economics alone won't help solve the world's greenhouse-gas problems. The markets care about money, not the environment, so the most important alternatives to oil will be the biggest and cheapest, not the greenest.
What's needed, say many clean energy advocates, isn't just high oil prices, but high carbon prices. If fuels were taxed on their carbon content, climate change would be priced into the economics of energy production.
"If you have a carbon tax, or some other concerted carbon policy," says Mike Jackson, an energy analyst with Stanford University's Freeman Spogli Institute for International Studies, "then high oil prices drive industry toward clean technologies."
Otherwise, he says, "you're just going to see more people building these wacky projects that are a disaster for the environment."
Drake Bennett is the staff writer for Ideas. E-mail drbennett@globe.com.
© Copyright 2007 The New York Times Company
August 18, 2007
Royalties: As Big Oil pumps Alberta
COMMENT: This is an excellent essay on Alberta’s royalty review, with a bad sub-heading. Too bad you can’t read it from the bottom up, because many of the reasons why royalties should be increased, appear later in the report.
Don Gunderson, speaking to the royalty review panel summed up thus: “I think the most solid evidence that the current royalties are too low is the fact that the oil companies are happy with the current rates.” He continued, “We don't want a fair price; we want the best price.”
Industry is quick to whine about how tough things are, and an increase in royalties will surely lead to investment going elsewhere. But investment is flooding into Canada, and more specifically to the oil sands, irrespective of royalties, high exchange rates, and everything else industry might complain of. It is coming because US investors see safety and stability in Canada, and they see a huge secure supply of oil. The oil industry is engorged on profit in recent years. So enough of the whining and the empty threats.
Some of the things that are wrong with royalties:
- as oil (and gas) prices rise to unprecedented levels, royalty rates don’t rise with them. They’re capped. Free lunch for shareholders. Bag lunch for citizens.
- a vast and generous array of allowable costs, which are deducted from the nominal royalty payable, are another free lunch for shareholders.
- North America is already the most profitable jurisdiction in the world for oil producers
Meanwhile, in Newfoundland, Premier Danny Williams “is close to introducing new legislation that would require state participation in all developments.”
And what of British Columbia? Still looking to Alberta for guidance in all things with oil and gas, BC is probably going to follow whatever lead Alberta takes. For the record:
- in fiscal 2006, BC produced 12.69 million barrels of oil and took in $127 million in royalties. The nominal price of oil was US$66.06 per barrel. That’s a net royalty of US$10 per barrel and a net royalty rate of 15.15%
- in fiscal 2006, BC produced 1,095 petajoules of gas and took in $1,392,000,000 in royalties. The nominal price of gas was $5.65/gigajoule. That’s a net royalty of $1.27 per gigajoule and a net royalty rate of 22.50%.
Most of this is from the 2007 Budget, Table A10
http://www.bcbudget.gov.bc.ca/2007/pdf/2007_Budget_Fiscal_Plan.pdf
The 2006/07 forecast oil production is from MEMPR’s 2005/2006 Annual Service Plan Report
http://www.em.gov.bc.ca/DL/GSBPubs/AnnualReports/AR2005-2006.pdf
As Big Oil pumps Alberta for profit, the province's royalty take is shrinking.
Is it time to get greedy?
DAVID EBNER
Globe and Mail
August 18, 2007
Royalties have existed as long as humans have spun wealth from the world's underground riches, digging and drilling to produce personal and collective fortunes. The first royalty believed to have been collected occurred in ancient Greece, creating great wealth for Callias, a top aristocrat whose home was the finest in Athens and was the setting for one of Plato's dialogues.
Callias owned silver mines at Laurion, which is now a suburb of Athens but was once the chief source of revenue for the Athenian city state, where slaves mined the ore. Callias received royalties on the production and the mine operators took their slice. This division of wealth became the foundation of a fiscal system for the sharing of dollars generated from the extraction of natural resources that is generally unchanged more than two millennia later.
The owner of a resource, be it silver in Greece or oil and natural gas in Alberta, receives a royalty as a right of ownership from the person producing the resource and aiming for their own profits. But what the rate should be is a difficult debate, as the arguments are relative in the absence of absolutes – reflected in the fact that there are a thousand or so royalty systems for energy around the world. The question is also clouded and confused by the word at the heart of the argument: Fair.
Royalties paid on oil and natural gas production in Alberta are one of Canada's most crucial economic calculations. Within two weeks, the provincial government receives an extensive report from a six-member panel that conducted a public review of royalties, taxes and other fees paid by energy producers – with a core mandate to determine if citizens are getting their fair share. The report, and what rookie Premier Ed Stelmach's government does with it, could have significant repercussions across the Canadian economy.
“This is a critical issue,” said Frank Atkins, an economist at the University of Calgary.
Hitting the right note on royalties helps spur development, bringing wealth to Alberta and to all Canadians. But getting it wrong means kicking over an economic domino with countrywide repercussions. The energy business obviously has enriched Alberta but it has also very much made the nation wealthier, starting with federal taxes that get shared east, centre, west and north, to things such as auto sales, with Alberta recently underpinning record domestic vehicle sales, an engine of the Ontario economy. The oil sands, in fact, pay more corporate income taxes to Ottawa than Edmonton.
In sleepy sessions from Grande Prairie to Medicine Hat, the unprecedented public review started in late April and ended mid-June but occurred beyond the attention of many Albertans and most Canadians. The panel heard more than 100 public presentations, with roughly half of those made by industry players. Another 224 submissions were made on paper.
Greg Stringham, a vice-president at the Canadian Association of Petroleum Producers, was one of the people near the heart of the debate helping lead the industry lobby, but he made his points without thumping his chest or threatening impending doom, as was the case with so many other Alberta oilmen. Mr. Stringham knows there isn't one easy answer.
“Our answer to the question of whether it is fair, we'd say yes,” Mr. Stringham said in an interview. “But fair is a nebulous word, it's hard to define.”
Figuring out fair is critical for Alberta because royalties aren't just one little thing in a much bigger picture: They are the thing. Resource revenues are the province's No. 1 source of income, ahead of corporate and personal income tax. In 2006-07, Alberta collected $9.8-billion in oil, natural gas and oil sands royalties, as well as $2.5-billion from the sale of new exploration rights – accounting for one-third of the province's income.
Without energy, Alberta's gross domestic product would be about half the size, according to economists Robert Mansell and Ron Schlenker of the University of Calgary, who added that without royalties, a provincial sales tax of 16 per cent would be needed to make up the revenue. And they said the calculations were probably understated, alluding to the fact that without energy, there'd be hardly any economy at all in Alberta, with no need for all the engineers, lawyers and accountants, never mind all the restaurants and Canadian Tires.
It is this dependence that backstopped the don't-choke-the-golden-goose argument issued by industry, which is powerful in sound bites, because who dares ruin a good thing? It was these comments that gained the most attention in the local media. Jim Buckee, the gruff retiring chief executive officer of Talisman Energy Inc., employed rhetoric when he sat before the panel in May in Calgary, saying a zero per cent royalty generates zero dollars and a 100 per cent royalty also produces zero, as it drives all activity elsewhere. “The current regime has worked and it's best left alone,” Mr. Buckee declared.
Also in Calgary, Steve Laut, president of Canadian Natural Resources Ltd., the country's No. 2 producer, said: “What we have to be very cognizant of is any significant change – or any change – to the royalty system could [produce] a drastic – I mean drastic – reduction in activity in Alberta.”
The review looked at all aspects of oil and gas in the province but the focus was clearly on the oil sands. The giant resource, concentrated in the remote boreal forest of northeastern Alberta, has commanded the energy world's attention after being recognized several years ago as the second-largest reserve of oil after Saudi Arabia.
It is a huge change from a decade ago when the oil sands languished unloved, considered a fringe resource with the price of crude at a quarter of today's level.
Industry, hoping to jump-start the near-dead business, sponsored a national task force to find ways to overcome development challenges to seize the alluring promise of enormous long-term potential. A key idea, proposed in 1995, was an enticing royalty regime, quickly adopted by Alberta. The province takes just 1 per cent of gross revenues until an oil sands plant has recovered the billions of dollars it took to build the operation, a rate that then rises to 25 per cent of revenues minus costs.
The system, then and now, is among the world's most generous regimes.
And it worked: Oil sands production reached one million barrels a day in 2004 – a milestone that had been forecast for 2020. According to current projections, by 2020 the oil sands could produce four million barrels a day, which would make Canada the No. 4 oil producer in the world behind Saudi Arabia, Russia and Iran.
While the royalty regime was a spark for the boom, it is one of several important factors that attracted billions of dollars of investments. The most important element was the price of oil, which has surged fourfold. Among the other important changes is markedly improved oil sands technology, as well as fewer opportunities for large projects elsewhere.
For global oil companies, royalties are one component in a complicated equation with the key variable – oil prices – in constant and often extreme flux. Given this, even with Alberta looking at royalties, some of the world's biggest oil companies have made major moves since the review began. Statoil ASA of Norway, looking to expand beyond the North Sea, an oil region in decline, spent $2.2-billion in April for an undeveloped oil sands project, making Alberta its top international expansion priority. Royal Dutch Shell PLC has pinned much of its future growth on the oil sands, spending $8.7-billion this year to buy the part of Shell Canada it didn't already own, and this month it announced it is looking to spend an additional $27-billion to build a giant new upgrader to process raw oil sands output.
In May, Brian Straub, Shell's senior vice-president of oil sands, added his voice to the chorus of industry warnings but conceded higher royalties won't stop Shell. “They're not going to drive us out of the province,” he said to reporters after presenting to the review panel, “but certainly our ability to invest is put in jeopardy.”
CHAPTER ONE
FROM BUST TO BOOM … TO BUST TO BOOM
When Alberta became a province in 1905, natural gas had already been discovered around Medicine Hat, in the southeastern corner of the young jurisdiction. There was also an oil strike near Calgary in 1914 that sparked a mini-boom, but the frenzy fizzled quickly. However, for the fledgling province, most of the resources were still owned by Ottawa, as well as a small portion held by private hands.
It was not until 1930 that the federal government relinquished its ownership of regional natural resources to Alberta and the other western provinces.
At the onset of the Depression, Alberta was sparsely populated, mostly poor and dependent on agriculture. The initial royalty rate was set at a flat 5 per cent, not that it particularly mattered, as the province produced little oil and gas. The birth of the province's modern industry, and its launch to “have” province from long-time “have not,” came in the late 1940s, when a gusher of crude, and then another, were discovered near Edmonton.
The royalty rate was tinkered with several times and by the 1960s, the province had used its newfound status as a significant oil producer to demand more from energy companies, which at the time were mostly American. Royalties had been raised but the high end was capped at 16.7 per cent of gross revenues – which was undone in the early 1970s by then-premier Peter Lougheed as the price of oil jumped far higher after the Middle East flexed its new muscle.
Having unseated a government that ruled for more than three decades, Mr. Lougheed, a left-leaning Conservative who began the dynasty that still exists today, tied royalties more closely to the price of the commodities and jacked up the maximum rates past 30 per cent. Ron Ghitter represented downtown Calgary in those days and recently recalled the reception from oilmen in a radio interview. “They cried bitter tears,” he said, half-joking that he had to use back alleys to avoid confrontations.
But higher royalties didn't deter industry from chasing growth and riding soaring commodity prices. In the six years after royalties were raised, before the global energy boom of the '70s peaked, oil and gas production in Alberta remained strong, the number of wells drilled each year doubled and money spent to acquire new exploration rights exploded tenfold. The industry only came undone when commodity prices collapsed.
During the 1980s bust, the royalties scale began to tilt back, with programs created to encourage activity as the price of oil and natural gas remained low. In the early 1990s, desperate to spur new exploration, the government of then-premier Ralph Klein cut royalties, charging less than 10 per cent when prices were low or, significantly, when a well's output was modest.
Even with the last overhaul, a goal of taking 20 to 30 per cent for royalties was in place, and the province's take bounced around the low end of the range, averaging 22.4 per cent from 1995 through 2003. In 2002, seeing that 30 per cent was out of reach with the system as is, the province reduced its ambitions, cutting the range to 20 to 25 per cent.
The take continued to fall, slipping below the bottom end of the goal to 19 per cent in 2004, where it remains three years later. A senior Alberta Finance official warned in April that the figure could fall further. Industry says Alberta needs to recalibrate the goal, lowering it to align with what it says is the reality of a changing business.
This year's provincial budget acknowledged that the system as it stands will return citizens less each year, warning royalties could fall by a third to $6.6-billion in 2009-10 from the $9.8-billion received in 2006-07.
Part of the story behind the numbers is the fact that explorers have carefully combed over the Western Canada Sedimentary Basin since Leduc No. 1, the first big oil discovery in February, 1947. All of the easy oil and natural gas and most of the big hits have been uncovered, leaving each new find smaller than those in years past. Even just a decade ago, the typical oil or gas well was relatively prolific and many generated a high rate of royalties. But as the years passed, the average well's output fell. Initial production of a natural gas well today, for instance, is less than half of what it was in the mid-1990s.
So as the system Mr. Klein's government put in place sees more oil and gas wells paying citizens less, energy companies are still chasing profits furiously, emboldened by high commodity prices and testified by the more than 17,000 or so wells drilled in Alberta last year.
Even this year, during a slump, almost 13,000 holes are expected to be cranked into the earth. This slowdown, due to low natural gas prices and high drilling costs, is much less brutal than crashes of the past – and record oil prices has ensured the search for crude remains robust.
Compounding the money situation for the province is that royalties were capped at prices that are far lower than current market rates, though the cap was well above the market when the system was drawn up. Further exacerbating Alberta's new reality is the emergence of the oil sands and the low royalties paid there, steadily replacing higher royalties previously paid on conventional crude and natural gas.
CHAPTER TWO
THE MYTH OF PROFITABILITY?
While Alberta's royalties take sits at 19 per cent now, energy companies are making the biggest profits they have ever enjoyed, led by EnCana Corp., the sector's No. 1 player, which in 2006 made $6.4-billion, the largest profit in Canadian corporate history. Add on Suncor Energy Inc.'s $3-billion profit, and two large oil and gas companies made about as much in profit as the entire industry paid the province in royalties last year.
All in, the five most profitable energy companies in Canada saw their bottom lines shoot up more than 50 per cent in 2006 from 2005. And despite rising costs and other challenges, the trend is still very much intact.
PricewaterhouseCoopers, in its annual Canadian energy survey in June, said the positive trend is one that “we don't see changing any time soon.” EnCana's operating profit this year is up about 50 per cent from a year earlier and cash flow has climbed more than 20 per cent.
Canadian Natural in early August said its cash flow has surged 35 per cent higher to a record of $3.1-billion.
These results contrast with the main argument of industry, that energy companies are hardly as profitable as they appear to be and are in fact struggling with soaring costs and worried about eroding profit margins – so they simply can't afford an increase of royalties, adding that such a change would ruin Alberta's reputation as a dependable place to do business.
“It's a myth out there that this is a hugely profitable business,” Mr. Laut of Canadian Natural told the royalty review panel.
Mr. Laut routinely presents a different picture to investors. Canadian Natural next year will begin production at a $7.6-billion oil sands mine. In every presentation marketing the company, Mr. Laut said its Horizon project will produce a “wall of cash flow” of nearly $1-billion annually (with oil at $45 [U.S.] a barrel) that will be “sustainable for decades.”
Mr. Lougheed, whose blue eyes still sparkle, remains a champion of the people. At a luncheon at Rouge, a restaurant housed in the home of one of Calgary's founders, Mr. Lougheed – who as a boy watched his family lose his grandfather's home due to debts in the Depression – worried about the average person: “People are not having an easy time in this province that aren't tied into the oil industry.” Over a meal, he gave a primer to a group of British journalists visiting to tour the oil sands. Mr. Lougheed began with 1930, stressing that Albertans are the owners and oil companies lease rights to do their work.
He was specifically skeptical about the many costs deducted from gross oil sands revenues to produce the net number from which royalties are calculated. “My instinct,” he said, “tells me they've been allowing a system where the operators, the lessees, have been deducting too aggressively – and that has been hurting the royalty flow to the people of Alberta.”
Suncor Energy, the second-largest oil sands miner, estimates that with oil at $60 a barrel, it will pay as little as 6 per cent in royalties on its gross oil sands revenue in the coming years.
Sensing widespread skepticism, the Canadian Association of Petroleum Producers midway through the review tried to bolster public support, issuing two short books outlining the benefits of the oil sands and conventional production, and the message was simple: Without us, there is nothing – don't dare touching the goose at all.
The association also put out the results of two poll questions conducted for it by Ipsos Reid, one of which asked whether the billions of dollars collected from the energy industry was too low, about right or too high. The question, posed to 800 Albertans, did not mention that the province's percentage take was in decline. Half of those surveyed said the money collected seemed to be “about right.”
Asked whether the lack of context in the question was unfair to those surveyed, Pierre Alvarez, president of the industry association, was aggrieved and invited The Globe and Mail to conduct its own poll, asserting the results would be the same, concluding: “Is any poll perfect? No.”
The second question was about the oil sands, where by industry and government calculations, about 50 per cent of revenues, after costs, goes to governments, a figure that includes royalties, taxes, cash to get mineral rights for exploration, and other levies. Asked whether the 50 per cent number was fair, but without any further context, more than half of those surveyed said “about right.”
However, the oil sands question did not mention that the industry-led national task force on the oil sands in the 1990s that created the 1 per cent/25 per cent royalty regime envisaged the overall take, royalties, taxes, et cetera, at 60 per cent, not 50. The take has been whittled lower because of corporate tax cuts in Edmonton and Ottawa.
Pedro van Meurs, a top consultant on fiscal matters in energy, considers government takes of less than 60 per cent to be low, though in a report to the Alberta government in April he added that low doesn't necessarily mean unfair. Industry argues that a lesser take from the oil sands is necessary because it is expensive to build and operate projects around Fort McMurray.
Mr. van Meurs, however, noted that an important issue underlying the oil sands royalty is that it doesn't generate a higher percentage for the state when prices are high, that the take is essentially “flat” regardless of high or low oil prices. The price of oil is at about $70 a barrel currently and has been at more than $60 for most of the past several years.
“At $60 a barrel or higher, oil sands projects generate unusually high total profits for investors,” Mr. van Meurs wrote. “This makes these projects very valuable. There are few projects in the world creating such attractive total values to investors at these price levels.”
Because of the corporate tax cuts, Canada is the only major energy jurisdiction in the world to actually reduce its take from oil and gas in the past five years, according to Wood Mackenzie, another leading energy consultancy.
A similar picture was inadvertently painted by Mark Nelson, head of Chevron Corp.'s Canadian arm, when he spoke at the review's stop in Edmonton. One presentation slide showed a list of 16 countries, including the United States and the United Kingdom, and all 16 had increased their take since 2002.
His point was that Alberta has to be careful to position itself competitively but also showed that all other jurisdictions have capitalized on high energy prices while only Alberta hasn't.
Afterwards, while Mr. Nelson said he would like to see the existing system unchanged, he said higher royalties would not deter Chevron's expansion plans in Canada, though he did say it could slow the influx of money.
“We are committed regardless of the outcome of the royalty review. We have to be. We have to get our customers oil and energy.”
CHAPTER THREE
ALL THE MAKINGS OF A CASH MACHINE
In Russia, where the Kremlin late last year seized control of a large development from Royal Dutch Shell for a pittance, the state takes 90 cents of every dollar when oil is above $29 a barrel.
In Venezuela, which produces less oil than Canada, President Hugo Chavez in June officially seized control of several developments similar to those in the oil sands. Multinational companies, such as Statoil and France's Total SA, acquiesced, deciding it was a better to stay in an onerous situation rather than depart altogether. Others, including Exxon Mobil Corp., said forget it: And by doing so will take billions of dollars in income statement writedowns as they walk away from their investments.
In Alberta, where the state takes less and less and energy corporations make more and more, the Finance Minister of less than a year, small-town doctor Lyle Oberg, adopted the arguments of industry in May, telling The Globe and Mail that he worried that the time was not right to ask oil companies to pay more given various stresses, higher costs and such (which in fact are seen around the world).
Mr. Oberg is the arbiter of the question of fair in Alberta, as the panel's report goes to him at the end of August, with a fast decision expected in the fall – to limit the amount of “uncertainty” industry frets over. Mr. Oberg has been skeptical about the need for a review. At a speech to investors last month in Calgary, he apologized for the uncertainty created by the review, saying he had to do it because of political pressure.
Watching Venezuela and Russia, Fadel Gheit, a leading energy analyst on Wall Street at Oppenheimer & Co., said the world's energy producers will have to reassess their futures as the political skies darken almost everywhere.
Mr. Gheit said the oil sands are obviously one of the best opportunities in North America, offering big reserves and long-term sustainable production – in short, a cash flow machine.
“North America, the world's largest energy market, is also the most profitable,” Mr. Gheit told his clients in a report after Mr. Chavez waved goodbye to Exxon (which has stakes in two of the oldest oil sands operations and is developing a new $8-billion [Canadian] oil sands mine).
“We expect [that] restricted access to large energy resources and unstable fiscal and political regimes to force major oil companies to reshape their business strategies with increased focus on North America,” Mr. Gheit said in a report.
This dynamic, for many Albertans, is clear. “In Alberta, we have safe oil. Industry should be paying for that,” said Carolyn Kolebaba, an official with the Alberta Association of Municipal Districts and Counties, representing all the small towns that see energy companies use their civic resources but wonder where the riches go as roads are worn down from the heavy truck traffic and hospitals strain to serve under the severe demands of the boom.
The oil companies all urged Alberta to maintain its reputation for fiscal stability. The argument was made straight-faced, as though the rest of the world was a peaceful and predictable place where stability is the defining theme, and industry presentations often were underpinned by quiet threats: Should Alberta dare to raise royalties, it would be Alberta that would become the planet's black sheep.
Lino Ramirez rejected this view.
Mr. Ramirez, a computer science graduate student, came to Alberta from Venezuela eight years ago, leaving as Mr. Chavez became president, watching from afar as his home country exercised its power. Mr. Ramirez, a quiet man with a big smile who doesn't endorse the expropriation of Mr. Chavez, wants his adopted home, where he hopes to start an energy services firm, to start “speaking up.”
“Where are these companies going to go? We have the opportunity here and when we know what's happening in the world, we have to use it for our benefit,” Mr. Ramirez said in an interview after a thoughtful presentation making the same, strong point to the panel in Edmonton.
CHAPTER FOUR
EVEN IF IT'S FAIR, IS IT FAIR ENOUGH?
The public review visited six Alberta cities and the six-member panel works through the summer to produce its report. Chaired by a retired forestry executive, the panel also included two university economists, one industry economist, a technology entrepreneur and a former oil executive. The group has been alternately praised and criticized. Some say it is too much in the pocket of industry; others say the members have the right mix of smarts and experience, as this is not easy territory to navigate.
Throughout the review, the sextet has mostly appeared as impartial as could be, asking the same probing and skeptical questions of all that came before them. And spending a summer sifting through thousands of pages of information is an unenviable task, attempting to quantify fair. Their pay was not disclosed by the government but it is likely not the most profitable way to spend one's time – they are doing duty as citizens, as Albertans, as Canadians.
“The Premier's mandate is he wants to find out what Albertans think,” Bill Hunter, the panel chair and self-described “simple logger,” said in an interview as the review began. “We're going to put a lot of effort to make darn sure we collect that.”
Mr. Hunter is a man with a warm, bearded face, carrying a happy girth, never in a tie, a man who sincerely thanked every presenter and reserved particularly warm thanks for the average Albertan. But how to mull the mix of opinions, as the panel sits for the summer to calculate a conclusion? Every piece of information would be weighed seriously, he promised, from the numbers of industry experts to the evocations of those that spoke from the soul.
In Newfoundland, the state is wrestling with fair, too, but does so with more boldness than Alberta, where politicians since Mr. Lougheed have been leery of offending industry. Newfoundland Premier Danny Williams, knowing of the riches off the shores, last year refused to sign a deal with Exxon, Chevron and others on the proposed Hebron project when the corporations wouldn't agree to allow the province to take a small equity stake – and Big Oil walked.
At the time, Mr. Williams, a Conservative in the tradition of Mr. Lougheed, was lambasted by all corners, unflatteringly compared with Mr. Chavez, a socialist, and accused of a disastrously aggressive negotiation strategy that would forever drive away companies with so many great opportunities elsewhere.
A year later, Exxon and Chevron are back, ready to restart negotiations. Mr. Williams' government, meanwhile, is close to introducing new legislation that would require state participation in all developments, fairly sharing in the ups, and downs, of oil and gas.
A local Newfoundland economist, Wade Locke of Memorial University in St. John's, this year published a paper trying to answer whether his province is getting its fair share. “At best,” he wrote, “it is a value judgment or opinion that can neither be refuted nor proven.”
Thus, on his main question, whether his home is getting what it deserves, in a presentation he said: “That is not a question an economist can answer. It would simply be an opinion.”
In the nebulous world of relatives and no absolutes – where just about the only absolute is that Russia and Venezuela are rougher places to do business than Alberta – Don Gunderson may have had the most incisive observations among the Albertans who made public presentations.
Mr. Gunderson, an auditor with no energy industry experience, sat down in Edmonton, beginning by saying: “I'm here just as an ordinary citizen. … What you're going to get here is just opinion and impressions.”
He settled in, growing more confident, made a wry joke before delivering the best assessment of fair heard during the public review in its two months and six stops.
“I think the most solid evidence that the current royalties are too low is the fact that the oil companies are happy with the current rates,” Mr. Gunderson said with a quiet smile.
“[This] may be simplistic but I think [it's] accurate,” he continued.
“We don't want a fair price; we want the best price.”
In Alaska, scandal flows like crude
In Alaska, scandal flows like crude
Scott Martell, Los Angeles Times, 17-Aug-2007
Stevens and Alaska, a Longtime Partnership
William Yardley, New York Times, 17-Aug-2007
Ex-legislator asks for separate trial from co-defendant
Lisa Demer, Anchorage Daily News, 17-Aug-2007
Kott: "I had to get 'er done. So, I had to come back and face this man right here," pointing to Allen. "I had to cheat, steal, beg, borrow and lie."Allen: "I own your ass."
Also, check out this earlier posting, in which we dare to wonder how far BC is from its neighbours: Alberta, where government agencies hire spies to watch energy project opponents; and Alaska, where legislators take money to support industry-accommodating legislation.
Alaska legislators still stumping for Veco
In Alaska, scandal flows like crude
Many of the investigations lead to oilman Bill J. Allen. The scope of corruption threatens to reshape the state's political landscape and touch Sen. Stevens.
Scott Martell
Los Angeles Times
August 17, 2007
There are generally two views here about the career trajectory of Bill J. Allen, an oilman and political wheeler-dealer who over four decades built his VECO Corp. into one of the state's largest and most influential companies.
He was driven by greed, or by a thirst for political power.
How Allen wielded his considerable influence is a major strand in a knot of political scandals that have touched both of Alaska's U.S. senators -- including longtime powerhouse Republican Ted Stevens -- its sole congressman and at least six members of the Legislature.
And the scandals -- some overlapping, some stand-alone -- have shaken the state's small political world to its core.
Allen's relationship with Stevens is key to some of the inquiries. The VECO executive oversaw the 2000 renovation of Stevens' home in Girdwood, a picturesque enclave about 40 miles south of Anchorage. Federal agents searched the house in late July. Stevens has declined to discuss the investigation other than to say that he has done nothing wrong.
But in a sign that the investigations are broadening, National Science Foundation spokesman Dana W. Cruikshank confirmed Anchorage Daily News reports Thursday that the FBI was looking into $170 million in contracts VECO won beginning in 1999 to support foundation polar research programs. When the first contract was awarded, Stevens was an influential member of the Senate Commerce Committee, which oversees the foundation.
Cruikshank referred questions on the investigation to the FBI. Officials there did not respond to a request for comment.
Stevens' success in steering federal money to Alaska projects is legendary.
So is Allen's reputation for getting his way with state political leaders.
The power that the two men wield across this vast state is demonstrable.
Former state Rep. Jim Whitaker visited Stevens' Senate office in Washington about four years ago and noticed a framed newspaper page that ranked Alaska's most powerful men. Stevens was No. 1.
Right behind him: Bill Allen.
"I doubt that paper's still there," said Whitaker, a Republican who is now mayor of the Fairbanks North Star Borough.
The scope of the scandals is staggering in a state with fewer than 700,000 residents -- smaller than San Francisco.
Allen and VECO Vice President Richard L. Smith have pleaded guilty to bribing or attempting to bribe five state representatives, three of whom have been indicted.
Allen and Smith said in court documents that they illegally funneled more than $400,000 to political candidates, including about $243,000 to an unidentified politician believed to be Ben Stevens, Ted Stevens' son and the former head of the state Senate. He has not been charged.
Search warrants have been executed on several businesses and homes -- including those of Ben Stevens -- as investigators try to untangle connections among Allen, the Stevenses, Rep. Don Young (R-Alaska) and state politicians.
In another unrelated controversy, Alaska's other U.S. senator, Republican Lisa Murkowski, recently announced she was returning 1.27 acres she had bought along the Kenai River for $179,000, or about $100,000 less than what local real estate experts reported it might be worth, according to an overview in a complaint filed July 24 with a Senate ethics panel.
Of all the scandals and investigations, the one that has drawn the most attention here -- and that could lead to a watershed change in Alaska politics -- centers on Allen, a high school dropout from Socorro, N.M., who arrived in Alaska in the 1960s as a welder.
When oil was discovered in Prudhoe Bay in 1968, Allen formed the VECO oil-services company with a partner who later left, and then rode the roller-coaster economy of the Alaska oil fields.
"For whatever reason, probably because he was around in the early days, [Allen] had a good relationship with the major oil companies," said Robert C. Ely, an Anchorage lawyer who did work for VECO until 1983. "He provided what the oil companies wanted in terms of service. You know: 'No problem,' 'Right away sir,' 'We'll get right on it.' They liked that responsiveness."
Still, VECO tumbled into bankruptcy protection in the early 1980s after the price of oil dropped and expansion attempts failed.
VECO held on, though, and when the Exxon Valdez ran aground in 1989, spilling millions of gallons of oil into Prince William Sound, Exxon tapped VECO as the main contractor to clean it up.
By then, Allen had become a political player, though Ely said Allen was more interested in pro-development policies than partisan politics.
"His politics was essentially his relationships with the people who made the decisions about the projects in the North Slope," Ely said.
"That wasn't political politics, that was good-customer- relations politics."
But the "political politics" was there too.
In 1983 Allen collected $41,080 in political donations from 415 VECO employees and doled the money out to five candidates selected by VECO, an action that the Alaska Public Offices Commission ruled illegal. Allen paid a $28,000 fine.
His pro-development philosophy toward the North Slope in particular came out during his deposition in that case. "If there's not any work up there, people can't work up there," Allen said. "If there's not a market, they sure can't work for me or anybody else."
Allen's biggest effect has been through political fundraising and the access that buys. Allen used his wealth to become the oil industry's chief lobbyist, and was s