KM LNG hearings wrap with concerns over conditions

Energy

The National Energy Board hearings into the application from KM LNG for an export licence to ship liquified natural gas to Asia through Kitimat wrapped up in Calgary Thursday, with the main participants expressing concerns over conditions on the licence proposed by the NEB.

The board panel reserved its decision. No date was given for a possible decision. Unlike the earlier hearings  in June which were held in Kitimat, the Phase 2 hearings were held in Calgary and only available to residents of Kitimat by audio webcast

On July 6 and July 8, the board panel issued a list of 12 proposed conditions on the export licence.  (The concerns of the Kitimat Rod and Gun were not among the 12. See story here)

Among the conditions the NEB wants to impose are a detailed reporting requirement that would include the name of  the LNG tankers loading the natural gas, the quantity of gas and the revenue in Canadian dollars as well as the sales contracts KM LNG may sign with its Asian customers.

Those proposed conditions brought strenuous objections from the proponents of the project, voiced by lead counsel Gordon Nettleton and echoed by other lawyers, saying that the conditions could actually scuttle the entire project. That is because Asian buyers, whether private companies or sovereign (government) agencies, place much stricter emphasis on confidentiality of the agreements than in North America. The lawyers warned that the potential Asian customers could walk away from any deals in favour of less regulated vendors in other countries if the NEB insists on full disclosure, especially if the details could be made public either through the Access to Information Act or by NEB procedures and policies.

Nettleton and the other lawyers recommended a compromise where  KM LNG would disclose to the board the total exports each quarter, the aggregate value in Canadian dollars for each quarter,  the “heating value” of the aggregate and export totals by destination country.

The lawyers also objected strenuously to conditions proposed to cover environmental and social effects of building the Kitimat LNG terminal  and the associated Pacific Trails pipeline.

These include filing a Marine Mammal Protection Plan and answer how KM LNG  would react to any potential effects on marine mammals of the ships passing up and down Douglas Channel and the BC Coast. 

One of the lawyers for the energy companies wondered why the board panel was interested in the shipping issues.”That’s what shps do, they use
existing shipping lanes,” he said. “Ships do not need permisson [now] to go up
Douglas Channel.  [This issue] has been examined bythe appropraite
authorites arnd should be accepted by the board without conditions.”

Other conditions wanted reports on potential effects and probable mitigation efforts for marine mammals, birds, fish and fish habitat, “listed fish and wildlife species,” vessel wake, ballast and bilge water management, fisheries and “First Nations traditional use activities.”

The lawyers mainly objected on legal grounds, since under the hearings for an export licence, (unlike a facility hearing like the Enbridge Joint Review panel)  the board is not supposed to be concerned about environmental issues.  There were also long, legal arguments whether the pipelines from the shale gas fields to Kitimat where “directly connected” under the legal definition used in the Canadian energy industry. The lawyers also argued that the environmental and social issues addressed in the NEB’s proposed conditions would be covered in parallel investigations by other government agencies, such as a Transport Canada review of the shipping plans for Douglas Channel,

At the same time, all parties pledged that they would be “good corporate citizens” in their undertakings to work with the Haisla First Nation and other residents of the Kitimat region and to respect the local environment.

NEB proposed conditions 1 – 9

A33_-_Letter_to_All_Parties_Phase_II_Update_and_Possible_Licence_Conditions_-_A2A2V5.pdf

NEB proposed conditions 10 – 12

A34_-_Letter_-_Possible_Export_Licence_Conditions-Environment_and_Socio-Economic_Matters_-_A2A3T7_.pdf

KM LNG to buy Eurocan site

460-eurocanplant1w.jpgThe closed Eurocan plant in Kitimat, the day it was sold, July 14, 2011.  (Robin Rowland/Northwest Coast Energy News)

KM LNG Operating General Partnership
(Kitimat LNG) has announced that it has entered into an agreement to
purchase the former Eurocan linerboard mill site in Kitimat from West
Fraser Timber Co Ltd.

KM LNG said in a news release that the sale is subject to obtaining government approvals for the
transfer of related permits and licenses. Financial details of the
transaction have not been disclosed:

“The Kitimat LNG partners are very pleased we have reached this
agreement with West Fraser,” said KM LNG President Janine McArdle. “The
purchase of the site marks another significant local investment in
Kitimat and is a great step forward for the Kitimat LNG project.”

The site provides the Kitimat LNG project with a suitable area for a
work camp, lay-down and storage area as the project continues to move
forward with clearing and grading at the LNG export facility site.

The Kitimat LNG export facility is planned to be built on First Nations
land under a unique partnership with the Haisla First Nation.

Kitimat LNG partners Apache Canada Ltd., EOG Resources Canada Inc. and
Encana Corporation are currently in marketing discussions with
potential Asia-Pacific LNG customers.

The partners expect to have firm sales commitments in place by the time
a final investment decision is made.  Initial shipments of LNG are
expected to begin by the end of 2015.

West Fraser closed the Eurocan mill at the end of January 2010, throwing about 500 people in Kitimat out of work. Most of the machinery in the plant has been sold and dismantling of equipment and demolition of some parts of the mill are wrapping up.

KM LNG plans to use the site as a work camp and storage area for the construction of the LNG terminal at Bish Cove on Douglas Channel south of the shuttered mill.

Kitimat Rod and Gun concerns forgotten at KM LNG NEB hearings

At final arguments Thursday on the application for the KM LNG export licence, it soon became clear that the concerns of Kitimat’s non-aboriginal  residents for their own traditional hiking, fishing and hunting access to the area around the Bish Cove terminal have been forgotten.

At the June 7 hearings, Mike Langegger, representing the Rod and Gun asked the board help to preserve “the fish and wildlife values of the northwest,” from the “cumulative effects” of industry encroaching on the wilderness… Langegger asked that the NEB require the KM LNG partners, energy giants Apache, Encana and EOG, establish a joint committee with Kitimat residents, both First Nations and non-First Nations, to preserve the values of the wilderness around the liquified natural gas terminal.”

Langegger`s specific  request is not included the list of 12 proposed conditions that the National Energy Board has proposed to KM LNG.

As well, during  during the Thursday morning hearings, the lead lawyer for KM LNG, Gordon Nettleton, representing both the partnership and a major investor, Apache Corp., while reviewing the list told the board panel: “No further conditions were proposed
during the hearings,” despite Langegger`s testimony to the board while Nettleton and his staff were in the hearing room at Kitimat`s Riverlodge Recreation Centre.
 
The board has proposed that KM LNG file reports on the effect of the project and mitigation of problems on marine mammals, marine birds, fish, fish habitat and fisheries and “First Nations traditional use activities.”  The request for the condition from the Rod and Gun does over lap with the possible  parts of the report requested by the NEB and the traditional use of the region by the Haisla and other First Nations.

Throughout the morning Nettleton argued that the fact that the KM LNG proceedings are an export licence application only and so many of the environmental oversight concerns would not be covered by the decision.

The final arguments, including over environmental issues and law and regulations that may be applied, continued until late Thursday afternoon. The board panel then reserved its decision on the export licence.

NEB proposed conditions 1 – 9

A33_-_Letter_to_All_Parties_Phase_II_Update_and_Possible_Licence_Conditions_-_A2A2V5.pdf

NEB proposed conditions 10 – 12

A34_-_Letter_-_Possible_Export_Licence_Conditions-Environment_and_Socio-Economic_Matters_-_A2A3T7_.pdf

KM LNG final arguments set for Thursday in Calgary

The National Energy Board panel hearing KM LNG’s (also known as Kitimat LNG) application for an natural gas export licence will hear final arguments from the lawyers for the various parties at the NEB offices in Calgary beginning at 9:30 a.m. MT Thursday.

The hearings which began in Kitimat in June, resumed Wednesday in Calgary.  Most of the day was spent with testimony and discussion about how various regulations in a number of countries could affect the Kitimat project.   Some witnesses testified that the Asian countries which could be the prime market for any liquified natural gas exported through Kitimat are nervous about the reporting and disclosure requirements required by some Canadian regulations.  There could be conflicts between those regulations and the customers desire to keep some information proprietary and confidential or, in cases where the LNG is purchased by a national government that government’s national security practices may also prevent some disclosure.  Some witnesses worried that the Canadian requirements just might be a deal breaker for some Asian customers who want ease of access as well as security of supply and thus would not want to be tangled in red tape.

 There was also some discussion of the need to reconcile the Canadian reporting requirements with those the US Securities and Exchange Commission.

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Energy media turns its eyes on Kitimat, LNG and Enbridge

The prospect of Kitimat becoming a major port for export of Liquified Natural Gas was bound eventually to spark interest in the media covering the energy sector.

This week, photos of Kitimat mayor Joanne Monaghan turned up on as the lead on stories in Alberta Oil magazine and The Financial Post.
In Alberta Oil’s Export visions stoke deep divisons in a coastal town, the longest of the two articles,  feature writer Jeff Lewis, puts the history of Kitimat into some perspective for the Alberta oil patch. 

Alcan came to northern British Columbia in the early 1950s with plans to build the world’s biggest aluminum smelter…. 

Even by today’s standards of engineering, the $500-million “Kitimat Project” was ambitious…. They bored into a mountain to create the Kemano hydro plant. They blasted enough rock to dam and reverse the Nechako River. They strung high-wire transmission towers across a rugged valley. And they built Kitimat – complete with schools, pre-fabricated houses floated in on barges, roads and even a toastmasters club – from scratch. 

It is to this history that Mayor Joanne Monaghan refers when she dismisses fears about development in the region ruining a natural wilderness. “Kitimat is geared to be an industrial town,” she says over lunch at the local Chalet Restaurant. “That’s what it was built as.” Distinct neighborhoods and services were laid out for a population many thought would crest 50,000, with heavy industry built at a remove from the commercial and residential areas of town. 

 The vision never quite materialized…  Monaghan… insists job prospects in the town are poised for recovery. The unemployment rate was 9.5 per cent in 2006. “I think it can only get better from here,” the mayor says. “I really feel like we’re a sleeping giant, and the giant is waking up.” 

It is also true that the town remains partially stuck, very much groping in what is perhaps the darkest hour before the mayor’s dawn. Local divisions aren’t limited to the physical split between the town’s industrial park and its residential streets. While the Apache-sponsored gas terminal has progressed to the point where site preparation is underway, Enbridge’s Northern Gateway faces tremendous opposition – from the Haisla, but also from pockets of local residents. The multibillion-dollar pipeline has underscored deep-seated tensions in the region to such an extent that the local council refuses to talk about it. Some, including Monaghan, favor a referendum on the project. “It’s a contentious issue,” she says.

The Financial Post’s energy reporter Claudia Cattaneo focuses more on the issues on her beat in LNG Trying to Dock    Catteneo notes that the March earthquake in Japan which crippled the country’s nuclear energy raised interest in exports of liquified natural gas from Alberta through the port of Kitimat.

Her article also reflects the hints of skepticism that have arisen about natural gas exports in the past couple of weeks.  She points out that part of the price advantage that Alberta gas may have in Asia is not the “molecules” the term so beloved of  the experts in the energy industry but “arbitrage” the difference between the Asian price of natural gas which is a percentage of the price of oil (which is going up) and the North American price, which is based on supply and demand, North American gas  supply is up due to exploitation of the shale gas reserves and so the price of natural gas has dropped. (Kitimat residents of course haven’t noticed the drop in the price of natural gas due to the high transportation “bill” charged by the local monopoly Pacific Northern Gas).  The companies that want to build a port at Kitimat are basing part of their profit picture on that price difference.
Cattaneo quotes Chris Theal who works for a Calgary hedge fund who says that the Asian demand for natural gas will continue to increase in the coming years, but export could be strangled by limited capacity on the BC coast even if all the projected Kitimat projects go ahead and there is an expansion of the port of Prince Rupert to handle natural gas from pipeline or rail tanker. Theal says (ideas that also recently came out at the NEB hearings in Kitimat) that alternative export ports could exist in the United States at ports like Coos Bay and Clataskanie, Oregon and Astoria,Washington.

Kitimat LNG hearings to resume in Calgary July 13

The KM LNG (also known as Kitimat LNG) hearings for an export licence will resume before a National Energy Board panel in Calgary on Wednesday July 13, and run to Friday,  July 15, the NEB has announced on its website.

This phase of the hearing will consider “the potential environmental effects of the proposed exportation and any social effects that would be directly related to those environmental effects, including any such effects to aboriginal interests”, and “consultation with the public and aboriginal peoples.” 
 But it appears that the NEB is using its procedures to block consultation with some “aboriginal peoples,” the Coast First Nations. In a letter on its website, the NEB says that an early June submission from Art Sterritt,the Executive Director of the Coast First Nations came too late, since the deadline for submissions was April 26. That means the First Nations group must present a motion before the board panel asking to be heard.

Douglas Channel Watch wins best float in Kitimat Canada Day parade

454-Rowland_Canada Day parade 019.jpg

(Robin Rowland/Northwest Coast Energy News)
The environmental group Douglas Channel Watch won the award for the best overall float in the Kitimat Canada Day parade on July 1, 2011.
None of the energy companies involved in the region had a float in the parade.

US NTSB to pipeline companies: Call 911 in an emergency

It sounds obvious. In an emergency (in most of North America) dial 911.

Only according a US National Transportation Safety Board Report dated June 8 and released today, Pacific Gas and Electric didn’t call 911 in California at the time of a major pipeline breach and fire  on Sept. 9, 2010, in San Bruno, California that caused an explosion that killed eight people, injured many more and caused extensive property damage.
The NTSB report says that while the San Bruno Fire Department was aware of the local natural gas distribution system, the department had no maps and had no briefings on the larger, natural gas transmission pipelines that transversed San Bruno.
The NTSB report says
Because of the differences in operating characteristics, transmission pipelines have different safety risks and concerns for emergency response, including the pipeline company’s  ability to shutdown the pipeline rapidly.  

In a manner similar to the Enbridge situation in Michigan last year (the NTSB report on that incident is still pending), the PG&E data system showed a pressure drop within four minutes of the rupture. 

But it was two off-duty employees who alerted the company’s dispatchers three minutes later to a possible problem.

PG&E dispatched a single technician to the scene who was not authorized to shut off valves. 

In the meantime, public calls to 911 reported the rupture and fire and first responders got to the initial scene in three minutes.

It was not until a technician arrived at the scene and reported in some 16 minutes after the event began that PG&E control room put together the drop in pressure, alarms and dispatcher information and realized that they had a major problem. 

 The NTSB report says in the next paragraph after the incident summary

 

A pipeline operator’s prompt notification to the local emergency response agencies through a 911 emergency call center can be crucial to the success of the emergency response effort and protection of the public. Even in the case of a smaller, slower leak that does not immediately ignite, when the pipeline operator has immediately notified local emergency response authorities of a potential serious problem, can mobilize needed response resources and area better able to recognize quickly the symptoms of a potential serious gas leak threat

.

Apparently under current US regulations, there is no requirement for pipeline operators to call 911.

The report goes on to say

 

The NTSB is concerned that a pipeline operator that does not require control room operators to notify the applicable 911 emergency call center in the event of a possible pipeline rupture can adversely affect the timeliness and effectiveness of emergency response effort. Therefore, the NTSB recommends that the Pipeline and Hazardous Materials Safety Administration issue guidance to operators of natural gas transmission and distribution pipelines and hazardous liquid pipelines regarding the importance of control room operators immediately and directly notifying the 911 emergency call center(s) for the communities and jurisdictions which those pipelines are located when a possible rupture of any pipeline is indicated.

Read the NTSB report on 911 response to the PG&E San Bruno pipeline disaster.

Editors’s Note:

It is clear that this brief NTSB report  (it is still investigating the actual cause of the rupture and explosion) confirms the fears of residents of northwestern British Columbia about pipeline ruptures in the wilderness, whether those pipelines carry bitumen or natural gas, are harder to detect and fix than problems in populated areas like California.
Also residents of northwestern BC are entitled to get more information from the National Energy Board, the BC Utilities Commission and the companies that are proposing large scale transmission of natural gas through this region about the special hazards related to transmission pipelines mentioned in the NTSB report.
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Encana, PetroChina shale gas deal collapses

A  $5.4 billion deal between Canadian exploration giant Encana, one of the partners in the KM LNG project, and PetroChina collapsed Tuesday, sending shocks through both the financial markets and the energy exploration and production sector.

International analysts are already saying that China may be pulling back in its strategy to get a foothold in key resource areas and perhaps the Canadian energy sector was too optimistic.  Perhaps.

If the analysts are correct,  that means that some of the grand plans to export natural gas, at least to China, may still go ahead, but won’t immediately  turn British Columbia back into the fabled Golden  Mountain that brought the labourers from China more than a century ago to build the railways. Nor does this mean a major threat, at this point, to plans to export gas through Kitimat as there are plenty of buyers in Japan, Taiwan, South Korea and Malaysia looking at northeast BC shale gas.

    The Wall Street Journal Heard on the Street blog says

E&P executives across North America should also be nervous. While some speculate Canadian-resource nationalism has spread from potash to energy, there is little evidence of this, given other similar deals haven’t been blocked. The alternative explanation is that foreign buyers of North American gas assets may actually care about such quaint notions as return on investment.

That isn’t good news for an E&P sector that consistently lives beyond its means.

London’s Financial Times says

Although China has gained a reputation for buying up resources around the world at any cost, a string of recent failed deals suggests the country’s resources companies are starting to drive harder bargains and are becoming more selective. In April, China’s Minmetals withdrew a $6.5bn offer for Equinox, an Australian-Canadian copper miner, rather than raise its bid after a higher offer emerged from Barrick Gold.

Chinese oil companies have also recently walked away from, or missed out on, prized oil and gas assets in Brazil …

The failure of the Encana-PetroChina deal is a surprise to the industry because Chinese companies have recently been investing aggressively in shale gas assets to gain the expertise needed to develop China’s own reserves.

Reuters reported from Edmonton that it was Encana who walked away from the deal:

Encana, Canada’s No. 1 natural gas producer, said the two companies could not find common ground, despite a year of negotiations, and walked away from a deal that would have seen PetroChina take a one-half stake in Encana’s massive Cutbank Ridge field in northern British Columbia.

“We just reached the point where we determined we just couldn’t go forward” said Alan Boras, a spokesman for Encana.

The deal would have been the largest in a string of investments by Asian companies in North America’s prolific shale gas discoveries, while Encana investors were counting on the cash to shore up a balance sheet battered by more than two years of weak natural gas prices…

The CBC report had analysts disagreeing on Encana’s role:

John Stephenson, portfolio manager with First Asset Investment Management in Toronto, called the scuttled deal “a complete and utter failure.”

“I think they just couldn’t agree on anything and I think they were premature maybe in announcing this before they had an operating agreement in place,” he said….

But Lanny Pendill, an energy analyst with Edward Jones in St. Louis, commended Encana for its discipline….Its willingness to walk away from a deal after a year of work shows “if push comes to shove, they’re going to make the decision that’s in the best interest of Encana and Encana shareholders.

The Globe and Mail says Encana has plenty of assets in shale gas, especially the Horn River developments which were often mentioned as the main source for shale based natural gas that could be shipped through Kitimat:

With the PetroChina joint venture out of the picture, Encana still has lots of potential. For starters, back in April, the company said it was looking to start discussions on joint venture proposals for its Horn River and Greater Sierra assets. On the heels of Tuesday’s announcement, Encana said that the prospects for these projects are looking up, and raised its 2011 expected proceeds from them to between $1-billion and $2-billion, up from $500-million and $1-billion

Encana news release (on Encana site)

Encana news release 0621-petrochina-jv-negoiations-end.pdf

Sacred Headwaters book slated for October release

402-61zPym8OXFL._SL500_AA300_.jpg
Last summer, members of the International League of Conservation Photographers visited the northwest of British Columbia in what they call a RAVE (Rapid Assessment Visual Expedition).

One RAVE involved photographing areas which ILCP members feel may be threatened by the construction of the Enbridge Northern Gateway Pipeline and the increased  number of supertankers plying the west coast of British Columbia. That RAVE shot mainly along the coast and in the Great Bear Rainforest.

At the same time the ILCP conducted a second RAVE along the Skeena, Nass and Stikine Rivers. 

Today, National Geographic announced that a book on the Sacred Headwaters would be released in October.

National Geographic says:

Now, against the wishes of all First Nations, the British Columbia government has opened the Sacred Headwaters to industrial development. Imperial Metals proposes an open-pit copper and gold mine, called the Red Chris mine, and Royal Dutch Shell wants to extract coal bed methane gas across a tenure of close to a million acres

.

National Geographic says the Sacred Headwaters RAVE was launched with partner Skeena Watershed Conservation Coalition (SWCC) to produce images of the Sacred Headwaters of (the birthplace of 3 of British Columbia’s greatest salmon rivers – the Stikine, Skeena, and Nass). The text is written by author and National Geographic Explorer-in-Residence, Wade Davis.

National Geographic is quite open about why it is publishing the book:

The book will be used as a tool by iLCP, SWCC, other local conservation groups and Wade Davis to derail proposed mining projects that would destroy the Sacred Headwaters. The book will be published in October 2011 right before the moratorium on mining in the Sacred Headwaters is lifted.

Information on the ILCP Great Bear Rave can be found here.

The 14-day expedition to the Great Bear Rainforest called upon 7 world-renowned photographers and 3 videographers to thoroughly document the region’s landscapes, wildlife, and culture. The RAVE provided media support to the First Nations and environmental groups seeking to stop the proposed Enbridge Gateway pipeline project (and thus expansion of the tar sands) and to expose the plan to lift the oil tanker ship moratorium

.

While the Great Bear RAVE did produce some stunning photographs, the photographers stayed along the coast and (at least for now) did not venture up Douglas Channel where the tankers will have to navigate the tricky waters to the port of Kitimat.

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