alberta oil november 2011 sampler

8/3/2019 Alberta Oil November 2011 Sampler

1/24

$7.50CAD

NOVEMBER2011

The Business of Energy

PM #40020055

PAGE 28

ARCTIC DISASTER: Preventing the Next Macondo//PIPES & POWER:Enbridge Branches Out>

Canadian

CARTELA handful of homegrownjuniors and mid-capsunearth black gold in

Colombia

PETROMINERALES PRESIDENTAND CEO COREY RUTTAN

FRENCHCONNECTION

National roots laidbare in Quebecs

shale gas storm

WINNERS &LOSERS

How to pick ajunior stock

TRUST US

An old investmentvehicle returns

>

JUNIORSREPORT


3/24

november 2011 3

contents

2Nil. Innoati. Ai.Th a all at dcition o th coani that olatCanada iant jnio ni. In thi cial ot,Alta Oil ta toc o a cto h th la ha ida and ta i iFortune Hu nters

Cover Package

28

3

36Master of His HouseMeet Andre Caill, the manat the center of Quebecsshale gas controversy

by Jeff LewIs

28Promised Land

A Canadian cartel makesits mark in Colombia

by DArreN CAmpbeLL

53The ReboundEnergy trusts make

a comeback in theoil patch

by sTeve mACLeOD

42Due DiligenceHow to pick winners

instead of losers in acrowded juniors sector

by JAsmINe buDAk

48Against the GrainLow cost producers prove

chasing natural gas playsisnt a death sentence

by CAILyNN kLINgbeIL

36

66

november 2011 volume 7 issue 5


4/24

4 www.albertaoilMaGaZiNe.coM

coNteNts

6 Editors Log

Canadas juniorscontinue to punch

above their weight

9 obsErvEr

News and viewsrom the nationaland internationalscenes

13 sErvicEs

Rig matting frmskeep the industry

on a solid ooting

15 advancEs

A suite o West Coastexpansion plansslowly gains traction

17 poLicy

Can behavioralscience stop the nextoshore disaster?

19 transactions

Enbridge Inc.makes a power play

21 aLtErnativEs

The renewableenergy industryaces uncertaintypost-election inOntario

23 champions

Unconventionalthinker Dan Allan

stands up or ascorned sector

66 FinaL words

Brian McLachlantalks about hisDuvernay gamble

hot topics

58 insights

Why an outright ban on the oil sands

is no low-carbon panacea

by Andrew LeAch

61 EntrEprEnEurs

Video surveillance spawns a business

idea or Osprey Inormatics

by Jesse snyder

64 dispatchEs

Economic worries put a premium on

petroleum at the expense o species

protection

by doug MAtthews

Hydro-Quebec doesnt like shale gas. Find out why at

www.albertaoilmagazine.com/hydroquebec

23

19 coNteNts iMaGesJohn Gaucher, Luc MeLanson,bryce Meyer, Dushan MiLic,

Marc riMMer anD coLin way

dEpartmEnts

volume 7 issue 5 NoveMber 2011


5/24

Leading the way with customer-driven data, integrated sotware

and services or your upstream decision-making needs.

geoSCOUT | gDC | petroCUBE at www.geoLOGIC.com

They cn cy s. They jst cnt be s.

I imitation is the sincerest orm o fattery, were one fattered group.Drawing on a quarter century o oil and gas experience, geoLOGIC continues

to be the market leader in data, sotware solutions and support. And while

we lead the way, our competitors desperately create parity products,

sometimes years ater us. For details on how geoLOGIC leads the way, visit

www.geoLOGIC.com/leader


6/24

editors log

6 www.albertaoilMagaZiNe.coM

Do or DieA scrappy and nimble junior sector faces strong headwindsiN the caNadiaN oil aNd gas

industry, its the big players, the Imperial

Oils and the Suncors, that make the big

deals, spend the big money and create the

big headlines on the energy scene.Yet the vast majority o the compa-

nies that make up this busy sector dont

deal in production thats hundreds o

thousands o barrels per day or profts

that total hundreds o millions or even

billions o dollars a year.

O course, Im talking about Canadas

juniors, who happen to be the ocus o

this issue oAlberta Oil. The juniors bear

names like Gran Tierra Energy Inc. and

Angle Energy Inc. These are small opera-

tions that casual investors likely have

never heard o. But these frms make an

outsized contribution to the oil patch. Its

not something you can measure in the

size o their profts or production. Its the

risks, new plays and technologies they are

willing to gamble on while the big guys

wait to see how the gambles turn out that mark their impact.

prices. The dark clouds that are gathering

around the global economy could scup-

per the industrys growth plans just as it

did during the recession o 2008-2009 as

investors grow more cautious and capital

becomes harder to raise.

But the Canadian junior sector seems

to weather the cyclical nature o the busi-

ness. Its a scrappy and nimble bunch. And

it has to be, because these companies have

to seize new opportunities quickly beore

bigger players move in. They must also

adjust business strategies when market

conditions change. Its not an easy wayto make a living, but this dynamic group

o companies mostly manage to make it

happen and keep the industry moving

orward in the process.

Darren Campbell

[email protected]

Whether its entering risky jurisdic-

tions like Colombia or Kurdistan in search

o big petroleum prizes, exploring emerg-

ing plays like the Duvernay or the Horn

River basin or utilizing novel extractiontechnologies such as enhanced oil recov-

ery, the juniors are oten at the vanguard

o what is happening in this industry.

The sector also serves as a good

barometer or how healthy the industry is

in Canada. Lots o juniors pitching their

stories to the investment community,

buying up land and searching out new

rontiers whether they be geological or

technical usually means the industry is

doing well.

And the industry has been doing well

as the economy recovered throughout 2010

and much o 2011 a recovery that is now

being threatened as the fnancial woes o

Greece and the United States send markets

into a tizzy. Still, spending and drilling

activity have been up in Western Canada

as explorers look to ree up liquids-richnatural gas and take advantage o high oil

The shadowy gameo setting oil prices

The tricky businesso refning

The U.S. and Canada

battle to open up theBeauort

Canadian frms lookto the Lower 48 orgrowth

Plus, industryplayers gear up toexpand the market

or natural gasvehicles

in the next issue of Ao

PhotograPhy by ryan girard


7/24

albertaisenergy.ca

The oil and gas industry is invested in Alberta communities. New technology

developed and funded by the industry is transferred to our municipalities and

towns, providing better infrastructure and a more sustainable way of living.

Through continued collaboration and partnership with industry, Alberta leads

the way in responsible economic, environmental and social development.

Together, we make Alberta work.

Alberta is Energy is supported by several Alberta business associations, many of which are

focused on the oil and gas sector.

Proled Albertans (left to right): Dr. Greg Powell, President & CEO - STARS; Vince Corkery, Director,Wastewater Treatment Plant - EPCOR; Warren Heisler, President - Le Reve Energy Corporation

Visit our new website and join the conversation on our blog at albertaisenergy.ca

i i

The Business of Energy

volume 7 issue 5

Subscription Prices

One year: $59.95

Two years: $109.95

U.S.A. one year: $79.95

International one year: $99.95

Send subscription requests

and address changes via email to

[email protected]

or call toll-free:

1-866-227-4276 ext. 237

Undeliverable mail should be

directed to the publishing ofce:

Venture Publishing Inc.

10259 105 Street, Edmonton, AB T5J

1E3 or via email to circulation

@albertaoilmagazine.com

Canadian Publications Mail

Product Sales Agreement

#40020055

Printed in Canada by

Transcontinental Graphics

This magazine abides by the

editorial standards set by the Canadian

Society of Magazine Editors. We do

not publish unsolicited articles

and material sent will not be returned.

Media releases may be directed to

[email protected].

Occasionally, Alberta Oilmakes

its names and addresses available

to carefully screened organizations

that want to let you know about

a product or service that may interest you. If

you do not wish to have your

name included, please send an email

to [email protected].

Publisher Ruth Kelly [email protected]

Editor DaRRen Campbell [email protected]

Senior Editor jeff lewis [email protected]

Assistant Editor steVe maCleOD [email protected]

Copy Chief Kim tannas

Editorial Intern jesse snyDeR

Art Director Kim laRsOn

Associate Art Director Ryan GiRaRD

Assistant Art Director anDRew fORbes

Production Manager Vanlee RObblee

Production Co-ordinator betty-lOu smith

Web and Systems Architect GunnaR blODGett

Web Editor DunCan Kinney [email protected]

Circulation Co-ordinators anDRea CRuiCKshanK, jennifeR KinG

Assistant Publisher anDRew williams

Controller ally speRle

Accounting Assistant Glenna GRaVel

Vice-President Sales anita mcGillis [email protected]

Sales Assistants julia ehli, KassanDRa mitChell, KaRen CRane

Advertising Account Executives Dennis mcCORmaCK [email protected]

lisa RiChaRDs [email protected]

Corg wrr

Jasmine Budak, Cailynn Klingbeil, Andrew Leach, Doug Matthews

Corg poogrr d iror

John Gaucher, Luc Melanson, Bryce Meyer, Dushan Milic, Marc Rimmer, Colin Way and Wilkosz & Way

Alberta Oilis published

twelve times per year

by Venture Publishing Inc.

www.albertaoilmagazine.com

Publishing Ofce/

Edmonton Sales

10259 105 Street

Edmonton, AB T5J 1E3

Telephone: 780-990-0839

Fax: 780-425-4921

Calgary Sales

#4 2526 Battleford Avenue SW

Calgary, AB T3E 7J4

Telephone: 403-228-4337

Fax: 403-217-6588

Contents copyright 2011

by Venture Publishing Inc.

Content may not be reprinted

or reproduced on websites

without express permission

of the publisher.

ISSN:1912-5291


8/24

GMC.GM.CAMOBILE ENABLED

WORKHORSE

PROVEN DURAMAX DIESEL AND ALLISON TRANSMISSION

AND A BEST-IN-CLASS POWERTRAIN WARRANTY.460,000 KMS BETTER THAN FORD

STRONGER

PAYLOAD(6,635 lb. CAPACITY)1

MORE

HORSEPOWER & TORQUE(397 hp) (765 lb.-ft.)3

SMARTER

TOWINGSTABILITRAK & TRAILER SWAY CONTROL2

*Durability based on longevity, as sourced from R. L. Polk Canada, Inc.; Canadian Vehicle in Operation registrations as of July 1, 2010 (Model Years 1988 to 2009) and Total New Vehicle Registrations for the full-size light-duty pickup truck segment,including chassis cabs. Based on % of vehicles remaining in operation, weighted on age of vehicle. 1. 2011 Sierra 3500HD DRW 2WD Regular Cab. Up to 3,009kgs (6,635lbs) when properly equipped. Maximum payload capacity includes weight of driver,passengers, optional equipment and cargo. Compared to 2010 model. 2. Compared to previous model years. 3. 2011 Sierra 2500/3500HD with 6.6L Duramax Diesel engine and 6 speed Allison transmission. Compared to 2010 Sierra HD. 4. 5 year/160,000km (whichever come rst) Powertrain Component warranty. Conditions and limitations apply. Based on most recent published competitive data available for WardsAuto.com 2011 Large Pickup segmentation. See dealer for details. 2011 General Motors.

THE MOST DURABLE, LONGEST-LASTINGFULL-SIZE PICKUP ON THE ROAD* R. L. Polk.


9/24

NOVEMBER 2011 9

ObserverNEWS | NUMBERS | PEOPLE | PLACES

Market PullDEMAND FOR CANADIAN HEAVY CRUDE IS SOARING

A STRUCTURAL CHANGE IN CANADIAN HEAVY OILmarkets supports long-term export plans that would deliver

increased oil sands production for processing in the United

States, a fall report from Peters & Co. says.

The Calgary brokerage predicts the spread between the value

of low and high crude oil grades known as the differential

will remain narrow, climbing no higher than 20 per cent by 2016.

The reason is higher demand for heavier Canadian crude

oil in the U.S. Midwest and in the refining corridor on the U.S.

Gulf Coast, where TransCanada Corp. hopes to deliver 700,000

barrels of crude per day along its highly anticipated and con-

troversial Keystone XL pipeline expansion.

Import volumes of Canadian heavy crudes into these mar-kets have increased over the past few years, largely due to the

additional pipeline takeaway and spare coking capacity, Peters

says. As a result, aside from periodic fluctuations in the light-

heavy differential, we believe that a narrower differential will

prevail over the medium term.

Upgraders live off the difference between prices for their

raw material bitumen and their output of synthetic crude oil.

Proposals to build the behemoth plants proliferated in 2005-06,

when the differential peaked near 45 per cent. The blueprints

were abruptly shelved, however, when the financial incentive

disappeared at the onset of the 2008-09 economic contraction,

CP IMAGES


10/24


observer

during which the price gap plunged to 12 per cent.

Although they are highly subject to market conditions,

Peters expects light-heavy dierentials to stay in the 19- to22-per cent range through 2016, in part because expected

additions o new pipelines will enhance Alberta producers

ability to shop around or the best available prices.

On the U.S. Gul Coast, a historic discount leveled

against Canadian heavy crude relative to its Mexican and

Arab counterparts averaging US$10.07 per barrel and

US$11.58 per barrel, respectively, over the last three years

could tighten signifcantly as Mexican imports to the U.S.

dwindle, and are ultimately replaced, by deliveries o Cana-

dian heavy oil, Peters says.

activity iN the vauNted bakkeN reservoir has

transormed Saskatchewan rom an industry aterthought

to a bustling petro-province and has even made Manitoba

an exploration destination. Industry orecasts predict even

bigger things or the Bakken with daily production reach-

ing one million barrels o oil equivalent (boe) by 2015 and

eventually maxing out at 1.5 million boe per day.

The Bakken activity has been a good news story or

Saskatchewan and Manitoba. But wells drilled in these

two western provinces are less prolifc than in all but one

county in the United States portion o the Bakken, which

encompasses North Dakota and Montana.

Damn YankeesCanadian well production in the Bakkenfalls short of whats happening in the U.S.

The average one-month peak oil rate per day of non-vertical wells drilledsince 2008 from selected regions in the Bakken reservoirBakken Breakdown

a PetroleuM huMaN resources couNcil of caNada

report released last spring that revealed the Canadian

oil and gas industry could be short 130,000 workers in

the next decade provided the starkest warning yet that a

severe labor shortage is headed the industrys way.

Deloitte Canada oil and gas analyst Chris Lee says one

avenue to address the problem will be to fgure out how

to attract and retain the so-called Generation Y demo-

graphic the term given to adults born between 1980 and

the mid-1990s. Its a potentially rich labor pool or the oil

patch, which is why Lee says it is so critical that the petro-leum sector tap into it.

But Lee cautions it wont be an easy task. The tradi-

tional perks that convinced the baby boomers to work in

the industry high pay, bonuses, stock options, use o the

companys private jet dont resonate with Gen Y work-

ers. Companies have to fgure out how they can create

cultures that make Gen Y eel more accepted, Lee says.

These people work hard, but they work dierently.

The analyst notes that Gen Y generally has less respector traditional hierarchical structures within businesses

than their parents did. And their motivation or working

isnt strictly driven by dollars and cents. Lee says as the oil

and gas industry fgures out how to woo this demographic

to work in the oil patch, it will have to accept that turnover

rates will be higher than they have been in the past.

But attracting this challenging group o workers isnt

impossible. Lee says the companies that do so will be the

ones that are advanced in using tools like social networking

in the workplace, provide challenging work environmentsand provide an attractive work-lie balance.

Generation GapAs labor shortages loom, the oil patch mustmine a challenging demographic

Source: HPDI; Bernstein Analysis

North

Dakota

Montana

Mountrail

Divide

Mercer

Sheridan

Roosevelt

Saskatchewan

Manitoba

AVERAGE

516

258

23

362

171

79

73

345


11/24

NOVEMBER 2011 11

OBSERVER

Anxiety returns for cost conscious oil sands projects

Slow Rising

COST INFLATION IS REARING ITS UGLY head once again as players in

Albertas oil sands look to accelerate growth plans. A summer report produced

by Ernst & Young Canada, entitled Opportunities and Risks in Canada Oil Sands,

lists cost inflation as one of the top 10 risks facing the sector.

Despite the efforts by the industry to meet the challenge, operating costs

for oil sands projects increased to $25.50 per barrel of oil equivalent in 2010

from $19.60 in 2006. Ernst & Young notes that development and operating costs

for oil sands project remain on the high end of the global scale.

201520102005200019951990

0

10

20

focus period

Cost($

perbarrelo

foilequivalent)

forecast

201520102005200019951990

0

10

20

30

40

focus period

Cost($

perbarrelofoilequi

valent)

forecast

COUNT KAREN HARBERT AMONG

the people who think a U.S. State

Department approval of TransCanada

Corp.s controversial $7-billion

Keystone XL pipeline is a foregone

conclusion. But the president

and CEO of the U.S. Chamber

of Commerces Institute for 21st

Century recently told the Calgary

Chamber of Commerce that

President Barack Obama and the

State Departments approval wont

mean the project has crossedthe finish line. Harbert says that

milestone will only signify the

beginning of the hard work for the

pipelines backers, as permits from

each state involved will have to be

obtained. Its going to be difficult

and its going to get ugly, Harbert

predicts. It will take us some time

to build it.

Operating cost per unit of production (traditional oil and gas)

Operating cost per unit of production (oil sands)

Joint venture spending amongnatural gas companies in NorthAmerica will top $11 billionbetween 2011 and 2013,BRINGING AN ADDITIONAL 2.6 BILLION CUBIC FEETOF INCREMENTAL SUPPLY TO MARKETS, PE TERS &CO. PREDICTS. SO-CALLED FARM-IN AGREEMENTSCAN SIGNIFICANTLY LOWER THE BREAK-EVENPRICE OF A NATURAL GAS DEVELOPMENT FOR THEORIGINAL OPERATOR, WHICH IMPROVES HALF-

CYCLE DRILLING ECONOMICS IN A LOW PRICEENVIRONMENT, THE CALGARY INVESTMENTBOUTIQUE SAYS. IN THE MARCELLUS SHALE,COST-SHARING DEALS COULD HALVE BREAK-EVEN PRICES FOR COMPANIES THAT GIVE UP 50PER CENT OF PRODUCTION TO GET 75 PER CENT OF

WELL COSTS COVERED TO $2.5 0 PER THOUSANDCUBIC FEET.


12/24

CATERING TO THE NEEDS

TRAVELERS

ofBUSINESS andLEISURE

l i

The top business news, marketingideas and success stories to helpyou run your business, manage your

staff and stay aware of trends.

EXPERIENCE

THE IMPACT

12 issues for just$27.95*

*Canadian orders only. Prices exclude GST.

SUBSCRIBE NOW!CALL 1-866-227-4276 (ext. 237)

WWW.ALBERTAVENTURE.COM/SUBSCRIBE

mgzn.cm

ExEcutivE insidEr

Only at Alberta Oilwillyou fnd Kim Davies,CEO o junior oil and gascompany Terrex Energy,providing readers with aninside look into the ultra-competitive oil patch.Read it at albertaoilmagazine.com/execinsiderWEb ExclusivE

Find out why Hydro-Quebec wont be back-ing development o the Utica shale any timesoon at albertaoilmagazine/hydroquebec

EnErgy ink

Leave a comment, interact with our editorialsta and get the latest oil and gas news at ourblog Energy Ink at albertaoilmagazine.com/energyink

chart of thE WEEk

Get your weekly bite-sized inographic snap-

shot o the industry at albertaoilmagazine.com/chartoftheweek

albertaoil

groWing intErEst in thE Duvernay shale west o

Edmonton could see the province back in the black sooner

than originally orecast. Provincial revenue orecasts or fscal

2011-12 jumped $2.7 billion to $38.3 billion rom $35.6 billion

ollowing strong land sales including one that netted $842

million in the budding shale reservoir this past spring. As

a result, the province says its $3.4-billion defcit or the year

has shrunk by $2.1 billion to an anticipated $1.3 billion. The

rosy orecast is predicated in part on strong oil prices, which

have seesawed amid European debt ears and a sluggish U.S.

economy.

thE yinka dEnE alliancE rEmainEd lEss than imprEssEd that

Enbridge Inc. has struck commercial agreements with shippers to transport

crude oil on its proposed Northern Gateway pipeline. Enbridges pipelineisnt happening, period. It doesnt matter who they get a deal with, said Chie

Larry Nooski o the Nadleh Whuten First Nation, which is a member o the

alliance. The 1,177-kilometer Northern Gateway project has been controversial

because o concerns that the line, which would end at a terminal in Kitimat,

British Columbia, could lead to oil spills both onshore and oshore. The Yinka

Dene Alliance is made up o fve First Nations in northern B.C.


13/24

services

november 2011 13photographs courtesy of little guy oilfield rentals inc.

Welcome MatsA support service keeps rigs on solid ground

Foul weather means good business For Jack Fraser.

While torrential spring oods this year may have cost operators

by orcing some production to be shut-in, purveyors o rig and

access mats were prepping or new sales. This year especially,

i you didnt mat you didnt do anything, Fraser, co-ounder o

Nisku-based Little Guy Oilfeld Rentals Inc., says.

Not all oilfeld business involves drill bits and rig rentals. As

drilling seasons get longer and operations grow more complex,

the business o rig matting is expanding, too. Setting up and run-

ning a drill site in remote parts o Western Canada can be chal-

lenging at the best o times. Inclement weather can quickly turnaccess roads and northern leases into mud pits and bogs.

But Mother Nature alone doesnt drive demand. Fraser says hesdoubled his inventory rom three years ago to 3,700 mats as drill-

ing contractors take a more proactive approach to well-site saety.

You can work aster and saer on a nice oor, instead o slogging

around in the mud, Fraser says. Maybe its airly dry now, but

when youre working on a project and it rains or two weeks,

you can shut down or try and get matting in on top o the mud.

Strad Energy Services Ltd. has likewise been able to grow

its matting business during the past three years. In 2009, the

Calgary-based oilfeld services company had 10,000 mats. Today,

the companys inventory across North America totals 30,000pieces with two-thirds o it in Canada. Its grown every

Mats provide

coMpanies safe,

all-season access

to well sites


14/24

SERVICES

14 www.albERtaoIlMaGaZINE.CoM

year, but especially in the last two or three years, company

president Andy Pernal says.Much o Strad Energys inventory growth has been in rig

mats. For years, the companys inventory consisted primarily o

eight-oot by 14-oot access mats, which were rented out to cre-

ate temporary roadways over mud and bog, so vehicles wouldnt

get stuck en route to a drill site. The inventory o rig mats

larger eight-oot by 40 -oot mats that help support a rig on

rough terrain was much smaller. Now, the inventory is split

pretty much right down the middle. People talk about the need

because o wet weather and thats true, but theres an underly-

ing trend [ocused on] the environment and saety, Pernal says.Another driver is drill programs that are getting more

complex. Matting companies have benetted rom the proliera-

tion o horizontal wells and multi-stage, hydraulic racturing

operations. Contractors increasingly drill multiple wells rom

a single pad in a manuacturing approach to development.

Beore, i they needed access, a matting company would come

in. Now, they need a pad because theyre drilling 10,000 eet

vertically and 10,000 eet horizontally, Pernal says. Its a

temporary manuacturing acility, rather than just three to vedays o drilling. The requirements have increased and the need

or matting has increased dramatically.

While the derricks and drilling programs they support

have changed, mats have remained decidedly less complex. Its

one reason Fraser likes the business so much. Mats are mats.

You can only improve them or modiy them so much, he says.

Plastic mats made rom composite materials are starting

to replace older, steel-ramed wood units, which are prone to

water damage. The plastic units are thinner and lighter, which

helps reduce transportation costs. A single lease can require upto 1,000 o the eight-by-14 oot interlocking mats. Thats a lot

o truck loads and a lot o money, Fraser says. He doesnt expect

plastic mats to replace wood mats altogether, insisting each hasits own place in the industry. You probably dont want to put a

drilling rig on the lightweight ones, he says.

The plastic mats, however, do have an environmental

benet over their wooden counterparts. Because they are one

solid piece, there are no cracks or produced liquids and potent

chemicals to seep through, making the plastic mats better

or spill containment. The eature makes plastic mats ideal in

environmentally sensitive regions, Fraser says. We did a job in

Saskatchewan and the only reason we were there was to cover

some grass that they didnt want disturbed, he says. When youpick the mats up, you can barely see we were there.

At Strad Energy, Pernal doesnt see business letting up any

time soon. Matting is just one o ve business units the compa-

ny operates, but it attracts a air share o attention. Strad spentsome $8 million o a $50 million capital expenditure program

in the rst hal o 2011 on new ventures. One o those initiatives

was developing a line o composite mats. We spent a number

o years developing our composite mats, nding the right resin,

the right manuacturer and the right surace tension, Pernal

says. Demand ar outstrips our rental feet and we see that

continuing moving orward. Certainly the wetter weather ac-

centuates the requirement or mats and we experienced that in

North Dakota and Canada this year, but there are underlying

undamentals o the environment and saety. I we have a dry2012, we dont see demand decreasing.

Mats are Mats. You can onlY iMprove

theM or ModifY theM so Much.

after reMoval,

land is left

relativelY

unscathed, with

grading kept

undisturbed


15/24

november 2011 15

advances

First StepSlowly but surely, West Coastexport plans gather momentum

Even before TransCanada Corp.secured a avorable environmental review

rom the U.S. State Department this

summer or its hotly contested Keystone

pipeline expansion, industry participants

were assuming the export project would

be built. That would be the producers

assumption today, Ian Anderson, presi-

dent and chie executive o transportation

rival Kinder Morgan Canada, toldAlbertaOil during a lengthy interview last sum-

mer. I that somehow changed, and either

it didnt occur or it occurred much later

than planned, I think that will do nothing

but increase pressure to add more pipeline

capacity sooner to the West Coast.

That pressure was already building

as ofcials with the State Department

issued their third environmental assess-ment o the $7-billion Keystone applica-

tion last summer. As ofcials at the State

Department weigh fnal approval o the

Gul Coast delivery system, a suite o West

Coast expansion plans are quietly gather-

ing momentum.

Enbridge Inc. says its multibillion-

dollar Northern Gateway project is now

supported by so-called precedent agree-

ments with prospective shippers. And agroup o oil sands producers including

Cenovus Energy Inc. and Nexen Inc. has

told the National Energy Board (NEB) that

an application or frm service on Kinder

Morgans Trans Mountain pipeline (TMPL)

to Burnaby, British Columbia, amounts

to a frst step in opening up Asia-Pacifc

markets to increased deliveries o Cana-dian crude oil.

Other frms that have entered into

agreements or frm service on the hal-

century-old pipeline system include U.S.

Oil & Refning Co., PetroChina Interna-

tional America Inc. and Astra Energy

Canada Inc. The fve frms have together

committed to ship 54,000 barrels per dayollowing an open season

IllustratIon by luc melanson


16/24


advaNces

conducted last all that drew a total o 95,000

barrels per day o support or guaranteed access

to the Westridge marine terminal.

Since 2003, space on the pipeline has been

allocated between uncommitted shippers and

dock users using a bid premium method. Kind-

er Morgan wants to und uture expansions onthe West Coast pipeline to 700,000 barrels per

day, up rom a capacity o 300,000 today using

rm service ees paid by shippers. Although the

issue drew criticism rom common carriage us-

ers o the line in hearings beore the NEB, there

remains broad consensus that reaching Pacic

tidewater is in the industrys best interests.

Kinder Morgans expansion plans are the

next or the very rst step in the West Coast piece

thats already played out in the U.S. Gul Coast,

oered Paul Reimer, senior vice-president o

marketing, transportation and power at Calgary-based Cenovus. In testimony beore the board, he

predicted expansion o the TMPL system would

precipitate increased exports to Asia-Pacic

markets just as the ExxonMobil Pegasus pipe-

line, oreshadowing Keystones ultimate delivery

capacity o 1.1 million barrels per day, success-

ully relieved congestion in the U.S. Midwest by

delivering 100,000 barrels per day rom Patoka,

Illinois to reners on the Gul Coast. [T]hat en-abled that market to understand what Canadian

heavy crude was like, Reimer told the board.

Deanna Zumwalt, Nexen Inc.s vice-presi-

dent, North America, crude oil and marketing,

said that getting rm access to the Westridge

dock, as opposed to nominating monthly or it,

allows us to begin to build those relationships,

and prove up the concept that West Coast access

makes sense or producers.

I think, given recent market develop-ments, that its become ever more evident that

its important that Canadian producers get access

to diverse markets, she added. Its clear today. It

will likely be clear in the uture.

For its part, China National Petroleum Corp.

appears keen to repatriate anticipated production

volumes rom its oil sands properties. Inrastructure

that connects the Alberta basin with China is a pri-ority, Stephen Dove, a senior oil trader with subsid-

iary PetroChina International America Inc. testied.

Big rms are not alone in pursuing oshore

market development strategies. Much smaller

oil sands producer Osum Oil Sands Corp., cit-

ing strong interest in rm service oerings on

TMPL in the uture, is looking to the Far East, too.

Osum has received a number o enquiries rom

Asian interests concerning both the purchase oour oil production and investment in our projects

and it is clear to us that enhancements to export

capacity are v ital to the growth o our business,

company manager o marketing and commercial

development Murray Morrell wrote in a letter led

with the NEB as part o the TMPL hearings.

Much o the interest in developing new mar-

kets or oil sands-derived crude has come rom

producers keen to avoid the price discounts leveled

against their output in saturated markets in theU.S. Midwest. But not everybody is convinced that

rm service on the TMPL system would automati-

cally lead to higher producer netbacks and a posi-

tive price surplus or Canadian crude oil as Kinder

Morgan has suggested it would.

Chevron Resources Canada trading manager

Geo McCutcheon, whose rm uses the West Coast

pipeline to eed its renery in Burnaby, noted in

testimony to the board that TMPL is primarilyused by rened product shippers and reneries

in Washington State, whose traditional eedstock

rom the Alaska North Slope is in terminal decline.

He said rm shippers would capture any available

arbitrage, and questioned whether benets would

accrue in equal measure to the industry as a whole

as opposed to a handul o individual players. In

the uture that money will roll to the rm ship-

pers, he told the board. It will not fow back to the

producers unless the shipper itsel happens to be aproducer and moving his own barrels.

Its become ever moreevIdent that Its Important

that canadIan producers get

access to dIverse markets.

1.1The ulTimaTe

delivery capacity

of The KeysTone Xl

pipeline

million barrels

current daily oil

shipping capacity

on Kinder morgan

Canadas Trans

mounTain pipeline

300,000

7esTimaTed CosT

of TransCanada

Corp.s Keystone Xl

pipeline

$bILLION


17/24

november 2011 17

policy


Can behavioral science preventa repeat o the tragic blowout and oil spill

that killed 11 rig workers last year in the

Gul o Mexico? The question is one o

many being weighed by Canadas National

Energy Board (NEB) as part o an ongoing

review o the hazards, risks and mitiga-

tion measures associated with drilling

oshore in the Canadian Arctic.

Behavioral issues are important,because behavior turns systems and proce-

dures into reality, says a report submitted

to the ederal regulator under the title

Changing Minds; A Practical Guide for Behav-

ioral Change in the Oil and Gas Industry. It is

not enough or an organization to have

good systems, because perormance is

determined by how organizations actually

live or act out their systems.The prescription is not at all rivolous.

In a separate report submitted to the NEB

oshore review, Norwegian risk-manage-

ment specialists Det Norske Veritas high-

light the role systemic organizational

defciencies played in a series o atal

disasters, ranging rom the Texas City

refnery explosion in 2005 to the collapse

o the Ocean Ranger drilling platorm in

the icy waters oshore Newoundland andLabrador in 1982.

Described in the document as the

largest sel-propelled, semi-submersible

oshore drilling unit o its era, the Ocean

Ranger, ofcially launched in 1976, began

drilling in the vicinity o the Hibernia oil

feld on the Grand Banks in 1980. It was

owned by Ocean Drilling and Exploration

Co. (ODECO), which operated the rig on

behal o Mobil Oil Canada Ltd. None o

the 84 crew survived ater the rig cap-sized and sank in a storm on February 15,

1982. Ofcials determined it went under

ater seawater entered the ballast control

room through a broken porthole, caus-

ing an electrical breakdown that aected

stability.

Much like in the atermath o the BP

Deepwater Horizon accident, Newound-

lands oshore tragedy initially raisedquestions about the technical capacity to

drill in harsh maritime environments.

But unlike the BP incident, the Royal

Commission on the Ocean Ranger Marine

Disaster ultimately determined the

shortcomings onboard had little to do

with technology. The ailure o the crew

to adopt and ollow a proper and prudent

operation practice allowed the frst link

in the chain o events to be orged, thereport stated.

Safety FirstUnderstanding management systems takes on new signifcance


18/24


policy

Among deciencies cited by the Royal Com-mission and recalled by Det Norske was a lack

o adequate marine training or key personnel.

Formal training policies at Ocean Drilling and

Exploration Co. ollowed the industry pattern

o learning the job rom the bottom up. No

specic training was provided or abnormal

conditions, and Mobils contingency plans,

although outlining emergency procedures in

case o oil spills, iceberg encroachment, severeweather, loss o a supply vessel and even a

helicopter crash, oered no clear procedures on

how to evacuate the rig.

Policies that encouraged employees to learn

by doing were not supported by sucient train-

ing measures which showed a lack o commit-

ment to ormally improve employees and overall

company perormance in the area o saety, Det

Norske writes. Severe storm conditions played a

role in the tragedy, to be sure. But design short-

comings on the rig were compounded by human

error, poor judgment and a lack o marine train-ing, Det Norske says in its analysis. In eect, the

oshore drilling semi-submersible was regarded

as an industrial operation in a marine setting

with no marine training or its crew.

Inadequate training likewise contributed to

the deaths o 165 crew members out o 226 on

an oil platorm operated by Occidental Petro-

leum Ltd. in the North Sea called Piper Alpha.

On July 6, 1988, a condensate leak triggered

a massive explosion on the platorm. In addi-tion to design faws including rewalls that

could not withstand the pressure o a blast andinadequate re insulation an inquiry later ound

poor communication between shit workers and a

lack o site-specic training was in part to blame

or the disaster. The decisions and actions taken

by management directly compromised the saety

o the platorm and its crew, Det Norske says.

The risk agency oers a similar conclusion

in assessing the deaths o 26 miners in the 1992

Westray coal mine explosion in Pictou County,Nova Scotia, and again in the deaths o 15 renery

workers at BPs Texas City acility in 2005. The

theme shows up in lings submitted to the NEB

oshore review on behal o companies actively

looking to tap Canadas Arctic waters. Human ac-

tors are acknowledged to be potential contributing

causes to accidents in all oshore operations, not

just those in an Arctic environment, ConocoPhil-

lips Canada says in a written submission to the

board.But a potential lapse is no reason to imple-

ment a temporary or long-term moratorium on

Beauort Sea drilling, Imperial Oil Ltd. contends.

Both Conoco and Imperial have joined Shell

Canada Ltd. and Chevron in urging the board

to drop a requirement compelling them to drill

a same-season relie well to protect against a

blowout. Imperial has dismissed the provision as

neither practical nor necessary, while Conoco, inlings with the board, maintains relie wells oer

little real protection to the environment since a

signicant spill would likely occur beore a relie

well could be drilled.

Among other technical saeguards against

disaster, Imperial instead points to a track record

o 80-plus years operating in harsh northern con-

ditions dating back to its 1920s pioneer discovery

at Norman Wells without incident. Time will tell

whether the company can trade on its name alonein the post-Macondo era.

Behavioral issues are

important, Because Behavior

turns systems and

procedures into reality.

11Number of

work ers k ill ed on

BPs deePwater

Horizon drill

rig due to the

macoNdo disaster

80Number of years

imperial oil ltd.

has beeN operatiNg

iN caNadas

territories

wit Hout a major

safety incident

year tHe ocean

ranger drilling

unit sunk off

the coast of

NewfouNdlaNd

aNd labrador

1982


19/24

november 2011 19

transactions

BranchingOutEnbridge Inc. takes overa troubled power project

Strong fundamentals is howEnbridge Inc.s Lino Luison describes the

rationale behind his employers decision

to buy Toronto-based Tonbridge Power Inc.

and dip its toe into the power transmis-

sion business.

The deal, which was approved by

Tonbridge shareholders in late September,

would see the Calgary-based pipeline

company acquire all common shareso Tonbridge or $20 million and repay

the companys $50 million in debt. The

transaction means Enbridge would take

the reins o the Montana-Alberta Tie Line

(MATL). The 345-kilometer, 300-megawatt

(MW) capacity power line would connect

Lethbridge, Alberta, with Great Falls,

Montana the frst transmission line

o its kind connecting the United Stateswith Alberta.

One o the things that attracted us

was the act that the growth potential in

this sector is so enormous, says Luison,

Enbridges vice-president o fnancial

partnerships. Investment in transmis-

sion inrastructure over the last genera-

tion has been underserved and largely

inadequate.

Thats certainly true in boomingAlberta. The province has only had a

handul o transmission upgrades since

the early 1980s, yet demand or electricity

is growing. The Alberta Energy Systems

Operator (AESO) which is responsible

or the planning and operation o the

provinces electricity system and energy

market predicts the provinces demandor electricity will nearly double in the

next 20 years. That demand is being driv-

en by oil sands development and related

economic development and population

growth. AESO says the province must add

about 13,000 MW o new generation over

the next two decades to meet expected

load growth in the province. Its a daunt-ing task, as Alberta currently has



20/24


traNsactioNs

26,000 kilometers o transmission lines capable

o delivering 13,500 MW o electricity. So the

province will have to nearly double its electri-

cal capacity over the next 20 years i AESOs

orecast proves correct.

Enbridge, which posted a prot o $964million in 2010, has made its bones in building

pipelines and shipping oil and gas to markets.

But the rm clearly sees an opportunity outside

o its petroleum comort zone. In a recent re-

port, the Conerence Board o Canada estimates

that the electricity sector is expected to invest

$293.8 billion rom 2010 to 2030 to replace or

update aging inrastructure, and accommo-

date a changing generation mix and marketrequirements.

Enbridge has already invested $2 billion

in renewable energy projects in the U.S. andCanada. But the acquisition o Tonbridge and

the MATL project is its rst oray into power

transmission. Once the domain o large, govern-

ment-owned utilities, non-traditional players

are starting to enter the power transmission

business and with the need or electricity grow-

ing all over North America, Luison says his rm

is getting in on the ground foor. A lot o new

entrants are starting to look at this sector, hesays. Were going to be one o those industry

players and well be able to establish ourselves

at the ront end o the growth curve.

Standing in the way o that growth are

landowner disputes that have plagued a project

Enbridge would like to get completed by 2012.

Construction o the line has been hampered

by disputes between Tonbridge and Montana

landowners over the location o the power lines.

One o the most publicized disputes was settledin August when Tonbridge and landowner

Larry Salois reached a settlement on a lawsuit he

had led because he said the proposed power line

route would go through historic tipi rings and a

wetland. The line will now be built to avoid the

cultural sites. But several other lawsuits still be-

ore the Montana courts have not been settled.Enbridge is no stranger to acing sti public

opposition to energy inrastructure projects, as its

proposed Northern Gateway pipeline illustrates.

Luison thinks the companys expertise in dealing

with landowner concerns and regulatory issues

means it has a better chance o getting MATL built

than Tonbridge ever did. Weve shown the ability

to execute on the planning, building and operat-

ing o large inrastructure projects, Luison says.Those skill sets reside in our company and can be

adapted and utilized or this new platorm.

FirstEnergy Capital analyst Steven Paget says

the acquisition is not a risky one or Enbridge. The

total investment or the MATL project and a uture

upgrade that would add another 250 MW o trans-

mission capacity to the line would be $300 million.

The line already has customers, chiefy wind power

generators in Montana, who have signed long-term

contracts to pay to ship power to Alberta on theline. The deal also sees the rm acquire Tonbridge

sta, giving them in-house expertise in the power

transmission business. This gives Enbridge an abil-

ity to work in this space and see i there are more

opportunities there, Paget says. And its acquisi-

tion provides more horsepower to the MATL asset

than Tonbridge was able to bring.

Could this be the start o Enbridge gradually

transitioning rom a pipeline giant to an electric-ity transmission powerhouse? Its too early to

make that prediction, but Luison points out that

Enbridges investment philosophy is to go big or

stay home. Its denitely our intent to grow this

business. Were very hopeul this is the rst o

many investments to come and that it will be-

come a airly large platorm within the Enbridge

structure, he says. Yes, its a ormidable industry

and there are ormidable challenges. But were a

ormidable company. Were up or the challengeand well see where we get to.

Its a formIdable Industry

and there are formIdable

challenges. but were a

formIdable company.

345of electrical

transmission

capacity on

the Montana-

alberta tie line

megawatts

of transmission

lines are located

in alberta

kilometers26,000

300estiMated cost of

building the matl

transmission line

and upgrade

$mILLION


21/24

november 2011 21

alternatives


Scott Smith expresses no angstabout the uture o renewable energy in

Ontario. Thats impressive, because the

recent provincial election saw Premier

Dalton McGuinty and his chie rival or the

post Progressive Conservative Party leader

Tim Hudak repeatedly trade barbs over theprovinces controversial Green Energy Act.

The ambitious some would say ool-

hardy program was unveiled in 2009 by

McGuintys governing Liberal Party. Its

goal was to eliminate carbon emissions

rom the electricity system (Ontario has

34,882 megawatts o installed electri-

cal capacity) and position the province

as a hub or green energy development.

Hudak vowed to scrap the program i hisparty won the election. McGuinty, who

was re-elected or a third term, but with

a minority government this time, vowed

to stay the course sort o. During the

campaign, McGuinty did pledge to reduce

subsidies to the programs signature

eed-in-taris i he were elected to a third

term. The taris guarantee green energyproducers above-market rates or their

power on 20-year contracts in return or

buying up to 60 per cent o their project

materials in the province.

Yes, its uncertain times or the

renewable energy industry in Ontario,

but Smith, vice-president o policy at

the Canadian Wind Energy Association

(CanWEA), is putting on a brave ace. He

says CanWEA and its members, whichinclude wind energy owners, operators,

Hard RoadRenewable energy proponents face an uncertain future in Ontario

manuacturers, project developers and

service providers, are ready to roll up

their sleeves and get to work. We were

prepared to work with whatever party

was in place, he says. In the short term

there is political uncertainty and thats

the nature o political campaigns. Long-term, the government has to look at what

is the beneft o wind energy and what

are the economics o it. At the end o the

day, wind energy development is the right

thing to do.

For better or worse, the greening o

Ontarios electricity grid seems poised

or a shakeup, one that could jeopardize

some impressive investment numbers.

CanWEA states that every 100 megawatts(MW) o new wind energy capacity built


22/24


alterNatives

in Ontario represents 250 jobs per year duringthe development phase and 18 permanent op-

erations and maintenance jobs. A recent study

commissioned by CanWEA on the economic

impacts o the wind energy sector in Ontario

contends that meeting the wind energy targets

in Ontarios long-term energy plan would result

in more than 80,000 person-years o employ-

ment and more than $16 billion in private

sector investment, with more than $8.5 billion

invested directly in Ontarios manuacturing,

construction and service sectors. Smith says

environmentally and economically, it would

be olly or McGuintys Liberals to backtrack in

any way on the green power goals set in 2009.

Those numbers cant be ignored by any govern-

ment, Smith says.

Those involved in Canadas budding solar

energy sector likewise watched the Ontario

election results closely. Hudaks vow to do away

with eed-in-taris was a concern, but so werethe struggles o the McGuinty government in

implementing its loty green energy policies.

The solar industry has aced its share o

challenges in Ontario. Last summer, it was re-

vealed that 1,500 micro solar projects condition-

ally approved were stalled because there was

no capacity to connect them to local electricity

grids. That was resolved when Brad Duguid, the

energy minister at the time, subsequently di-

rected the Ontario Power Authority to allow theowners to move their projects to a spot where it

was possible to eed solar power into the grid andgenerate revenue.

There have also been complaints about long

waits or regulatory approvals. The delays and un-

certainty have caused customers to cancel orders or

solar panels, leading to layos among some o the

provinces solar panel manuacturing businesses.

Canadian Solar Industry Association (Can-

SIA) president and CEO Elizabeth McDonald has

watched the situation and the provincial election

closely. She agrees there have been rough spots in

implementing the Green Energy Act, but insists

it will get better with time. This is really new. It

hasnt been perect and to me thats not unexpected,

McDonald says. But Im very confdent solar power

has a uture. We have to diversiy our energy mix in

Ontario so we can get o coal. All the parties were

in agreement on that.

According to CanSIA fgures, each megawatt o

newly installed solar photovoltaic capacity requiresapproximately 44 jobs. Under optimal conditions,

the solar sector in Canada could employ up to

41,000 people by 2025.

The leadership rom these associations may not

sound worried about the state o their industries in

Ontario, but the view rom the trenches is some-

what dierent. The uncertain uture o Ontarios re-

newable energy sector is even being elt in Alberta.

Michael Carten, chie executive o Calgary-basedSustainable Energy Technologies remains uneasy

about what is in store or his company. The frm

makes solar inverters and the company was ocus-

ing its eorts on the Ontario market because the

eed-in-tari was driving demand or its product.

But the recent struggles in Ontario or the solar

sector has Carten thinking hard about the wisdom

o that strategy. He told the Globe and Mail in August,

I I had thought that the utilities would simply not

obey the rules and the government would do noth-ing about it, I would never have started here.

Im very confIdent solar

power has a future. we

have to dIversIfy our

energy mIx In ontarIo so

we can get off coal.

of installed

electrical

capacity in

OntariO

18permanent jObs

created for every

100 megawatts ofnew wind energy

capacity installed

in ontario

34,882megawatts

8.5invested in OntariOs

manufacturing,

cOnstructiOn and

services sectOr if

wind energy targets

are met

$bILLION


23/24

NOVEMBER 2011 23

CHAMPIONS

Dan Allan is bullish when askedabout the impact unconventional oiland gas will have on the Canadian and

North American supply picture.

I dont see any indication that the

train is going to stop, says the chair -

man of the Canadian Society for

Unconventional Resources (CSUR).

Unconventional will become con-

ventional and it will be the dominant

force for the foreseeable future.Recent production statistics bear

out Allans bold statement. In the Cana-

dian Association of Petroleum Produc-

ers (CAPP) 2011 crude oil forecast, it

estimates conventional crude produc-

tion in Canada production coming

essentially from non-oil sands and the

offshore has increased from 900,000

barrels per day in 2010 to one millionbarrels per day in 2011 after years of

declining production. The reversal in

fortunes is mainly due to sector players

using unconventional technology

horizontal drilling, hydraulic fractur-

ing and enhanced oil recovery meth-

ods to extract more oil from western

plays bearing names like the Bakken,

the Viking and the Cardium.

Dan Allan goes to batfor a scorned sector

NewSchool

By Darren Campbell

PHOTOGRAPH BY JOHN GAUCHER


24/24


chaMpioNs

The story is the same on the natural

gas side, where horizontal drilling and

raccing have unlocked large stores o

the cleanest burning ossil uel. NorthAmerica has gone rom a continent look-

ing to import natural gas to one that now

has a surplus. Prices or the commodity

have sunk below the US$4 mark as shale

gas rom the United States oods markets.

Canadian shale basins have also been get-

ting plenty o attention with the likes o

Encana Corp. and Talisman Energy invest-

ing in the Montney and Horn River basins

in northeastern British Columbia and the

Duvernay in Alberta.

The prize is a huge one. In a resource

assessment report released last summer,

the National Energy Board pegged the

marketable natural gas in the Horn River

basin alone at 78 trillion cubic eet (tc).

The U.S. Energy Inormation Administra-

tion estimates there is 862 tc o technically

recoverable shale gas reserves in place in

the lower 48. Meanwhile, on the oil side,

some estimates say there are 77 billion bar-

rels o already discovered oil still stuck in

the ground in Western Canada.

But industrys grand plans to develop

these resources via unconventional means

could be waylaid by one big roadblock:

public opposition. There are concerns that

raccing contaminates drinking water and

that the large volumes o water needed to

pull o unconventional drilling programs

can stress local supplies. These issues

and others have led to requent dustups

between the public and the oil and gasindustry, in part because industrys been

too hasty to do its work. I anything is

pushed too quickly or rushed, its never a

good thing, Allan says. Youve got give

people time to get comortable.Allans perspective is colored by his

35-year career in the oil patch. He got his

frst glimpse o the unconventional sectors

potential during a 14-year stint with Dome

Petroleum in Colorado, where the company

was drilling or coalbed methane another

unconventional resource characterized by

gas trapped in coal seams. Allan caught the

unconventional bug. When he returned to

Canada in the 1990s, he ounded CanScot

Resources Ltd, as well as Rockyview Energy.

He held senior management positions with

those two juniors, as well as APF Energy

Trust, which snapped up CanScot in 2003.

All o the companies were ocused on coal-

bed methane development. Allan has since

ounded another junior, Calgary-based

Cumberland Oil and Gas Ltd., this time

concentrating on light oil and shallow gas.

But he remains intimately involved in the

unconventional sector through his work

with CSUR.

The moniker is a new one or the

organization. Since its inception in 2002,

its been known as the Canadian Society or

Unconventional Gas based on the act that

in Western Canada, unconventional explo-

ration methods were being used almost

solely to extract stranded gas reserves rom

tight rocks. But with companies now using

these methods to extract oil as well as gas,

Allan says the decision was made to change

the name. We are now covering the wholespectrum o both commodities, Allan says.

The uture o those commodities may

very well rest on its proponents convincing

the public that exploring or unconven-

tional oil and gas can be done saely andwont harm the environment. That means

being up ront about what it is doing and

how it will do it something Allan admits

the industry hasnt been adept at.

The industry in the past, we kind o

elt we were able to do our own thing and

let the government regulate us, Allan

says. But that started changing due to

worldwide events and the entire industry

has been held to a higher standard. The old

rules arent applicable anymore. We have to

do a better job. Theres more sensitivity to

spills and groundwater protection. This is a

natural evolution occurring and I think the

industry was slow to react to that.

Considering how important uncon-

ventional oil and gas could be to Canadas

petroleum uture, being slow to react

might be costly. Industry appears to bewising up, though. In September, CAPP

introduced new guiding principles or

hydraulic racturing to guide water man-

agement and improved water and uids

reporting practices. And Allan says CSUR

is continuing its eorts to educate the

public about the unconventional sector,

including setting up an eastern chapter,

a region where shale gas exploration has

sometimes encountered sti opposition,

particularly in Quebec.

We fnd its a lot easier to be proac-

tive when you have a collective orce

behind you, Allan says. When one com-

pany goes into the limelight, it can have a

lot more resistance. Weve got to get areas

in North America and overseas comort-

able with what we are doing. Were some-

thing new that they dont understand. Wehave to earn their trust.

The old rules arenT applicable anymore.

we have To do a beTTer job.

alberta oil november 2011 sampler

Documents