US proposes handing Alaska halibut allocation dispute to international commission, have charters buy commercial quota

Environment

Editor’s note: With this entry, Northwest Coast Energy News launches its planned expansion of coverage from energy and energy related environment issues to include other environmental and related issues in the northwest, including fishery issues.

For the past year, anglers, guides and outfitters on the British Columbia coast have been concerned about the allocation problems with the halibut fishery, with the Department of Fisheries and Oceans sticking to the original quota system of 88 per cent of the total allowable catch going to the commercial fishery and 12 per cent to the recreational fishery, which includes both recreational anglers and the tourist industry.

There have been parallel problems in the state of Alaska, where the National Oceanic and Atmospheric Administration, which governs the US fishery, began moves to take away the licences from many of the halibut charter operators on the lower end of the income scale. That move is currently being challenged in a federal court in Washington, DC.

On Thursday,  NOAA proposed solutions to Alaska halibut dispute,  in effect, handing the hot potato decision on halibut allocationover to the International Pacifc Halibut Commission, suggesting that the Commission decide the split for charter and commercial allocation when making the overall decision on total allowable catch.  NOAA has also proposed allowing Alaska halibut charter operators to buy commercial quota, similar to the Canadian proposal from the Department of Fisheries and Oceans last winter.

The key phrase in the July 21 NOAA news release says

The International Pacific Halibut Commission, through which the United
States and Canada jointly manage the halibut resource from California to
the Bering Sea, would determine total commercial and charter catch
limits for southeast Alaska and the central Gulf of Alaska each year
before the fishing season….

Allocations to the charter and commercial sectors would vary with changes in the number of halibut available for harvest as determined by the best available science.

The actual details from the US Federal Register states:

The International Pacific Halibut Commission would
divide the annual combined catch limits into separate annual catch limits for the commercial and guided sport fisheries. The CSP (catch sharing plan) allocates a fixed percentage of the annual combined catch limit to the guided sport and commercial fisheries. The fixed percentage allocation to each sector varies with halibut abundance. The IPHC would multiply the CSP allocation percentages for each area by the annual combined catch limit to calculate the commercial and guided sport catch limits in net pounds. At moderate to low levels of halibut abundance, the CSP could provide the guided sport sector with a smaller poundage catch limit than it would have received under the GHL (guideline harvest levels) program. Conversely, at higher levels of abundance, the CSP could provide the guided sport sector with a larger poundage catch limit than it would have received under the GHL program.

The North Pacific Fishery Management Council intended the CSP sector allocations to balance the needs of the guided sport and commercial sectors at all levels of halibut abundance.
Although the CSP allocation method is a significant change from the current allocation method under the GHL, National Marine Fisheries Service believes that the allocation under the CSP provides a more equitable management response

On the issue of buying commercial quota, the NOAA release says:

The catch sharing plan would authorize transfers of commercial halibut individual fishing quota to charter halibut permit holders for harvest by anglers in the charter halibut fishery.
Those transfers would offer charter vessel anglers in southeastern Alaska and the central Gulf of Alaska an opportunity to catch additional halibut, up to specified limits.

The news release goes on to say:

The North Pacific Fishery Management Council recommended the rule to
establish a clear allocation between the commercial and charter sectors
that fish in these areas.

Currently, the commercial and charter halibut fisheries are managed
under different programs. The commercial halibut fishery has been
managed under a catch limit program since 1995. The charter halibut
sector has been managed under a different harvest guideline since 2003,
which gives charter fishermen a number of fish they can catch per guided
angler per day, but does not ensure the overall catch stays within a
definitive catch limit.

The proposed catch sharing plan, which is scheduled to be in place by
2012, is designed to foster a sustainable fishery by preventing
overharvesting of halibut and would introduce provisions that provide
flexibility for charter and commercial fishermen.

Those who wish to comment on the draft policy must respond before September 6.

Link to NOAA news release

NOAA draft rule in US Federal Register

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B.C. first nation challenges oil and gas tenures sale: Globe and Mail

Globe and Mail


The sale of oil and gas tenures in northeast British Columbia by the provincial government for $260-million is being challenged in court by a native band.
The Dene Tha, a first nation that straddles the B.C.-Alberta-Northwest Territories boundaries, has filed a petition with the Supreme Court of B.C. The band alleges that the B.C. Ministry of Energy and Mines failed to adequately consult with the first nation, or to undertake studies on the environmental impact of gas drilling, before selling the leases in the Cordova Basin, near Fort Nelson. Shale-gas deposits in the Cordova Basin are thought to be extensive.

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

Here’s how the Enbridge hearings will proceed

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Staff of the Northern Gateway Joint Review panel explain the hearing process to residents of Kitimat at Riverlodge Recreation Centre, June 16, 2011.  (Robin Rowland/Northwest Coast Energy News)


It will take more than year for the Enbridge Northern Gateway Joint Review Panel to complete hearings and taking evidence before it even begins to consider a decision whether or not to approve the controversial pipeline proposal. 

Even then, the worries of the residents of northwest of British Columbia will be only one factor in the panel’s decision. 
The Joint Review panel information town hall reached Kitimat on the afternoon of Thursday, June 16. One of the information sheets handed out at the town hall explained the Joint Review Panel this way: 
 In deciding if the Project is in the public interest, the Panel will consider whether Canadians would be better or worse off if the Project was approved. The public interest includes all Canadians and refers to a balance of economic, environmental and social considerations that change as society’s values and preferences evolve over time. 
(Emphasis in original)
 Here is a summary of how the process will work: 
This summer, those who wish to formally participate in the hearing process must register with the panel.
 For those who wish full intervenor status, the deadline to apply is July 14, 2011.
For those who wish to make oral statements in the community round of hearings, the deadline to apply is October 6, 2011. 
Those formal intervenors who wish to request information from Northern Gateway have two deadlines. August 25, 2011 is the deadline for the first round, after which Northern Gateway must respond by October 6. The intervenors then can ask Northern Gateway a second set of questions, with a deadline of November 3, 2011. Northern Gateway must respond by November 24, 2011. 
The deadline for intervenors to file written evidence with the panel is December 22, 2011.
Community hearings
 On January 10, 2012, the Joint Panel will begin the “community hearings” phase where anyone who met the registration deadline, either as an intervenor or a community participant, can make a presentation to the panel. 
 These community hearings will be held across northern BC and Alberta, along the route of the pipeline and down the coast, with, sources say, a significant session slated for Kitimat.
The community hearings are expected to take several weeks.
 Those who made oral comments to the panel then have until March 13, 2012 to file follow up letters. 
Final hearings
 The community hearings are then followed by another round of filing by the intervenors and government participants.
 On June 16, 2012 the Joint Review Panel will then open the more formal “final hearings” at a location to be determined. 
 Around the same time, the Joint Review Panel must prepare an environmental assessment report that will be submitted to the Minister of the Environment. 
Again, according to the handout material, there is a caveat in the panel’s mandate 
 The significance of any negative environmental and socio-economic effect is only determined after considering the actions that are proposed to prevent or reduce the effects.  (Emphasis in the original)
 In other words, as those who have attended Enbridge’s briefing sessions know, the company has outlined a whole series of safety measures, for example, adding navigation aides to Douglas Channel and parts of the coast.
If the environmental movement wishes to challenge the voluminous reports, likely costing millions of dollars that Enbridge has already filed as part of its application to the Joint Review Panel,  the environmental concerns will have to be backed up with solid and expensive expert evidence.
 Once the Minister of the Environment has the environmental assessment, the government then responds: 
The government response will set out whether the Government of Canada agrees or disagrees with the conclusions and recommendations made the Panel by the panel regarding the potential environmental and socio-economic affects of the Project. The Governor-in-Council [ the federal cabinet] must approve the government response. This approved response will be made available to the public.
The decision
 After it hears the government response on the environment, the panel makes its decision,  whether or not the project can proceed. 
The Panel will issue its Reason for Decision which will include a decision whether or not the Project is in the Canadian public interest.

If the Panel decides the Project can proceed, its Reasons for Decision will include conditions that Northern Gateway must meet before, during and after the construction of the Project.

If the Panel decides that the Project should proceed, the Panel will send its decision to the Governor in Council who can either accept or reject the decision but cannot modify it.

The Governor in Council means the federal cabinet, so the final decision will rest with Prime Minister Stephen Harper.

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Latest entrant in LNG scramble wants NEB, BC to consolidate approvals: Reports

LNG World News

Progress Energy wants consolidated process for LNG projects in Canada

Progress Energy Resources Corp, which signed a C$1.07 billion ($1.09 billion) shale gas alliance with Malaysia’s state oil company, is pushing for a consolidated regulatory process for pipelines and liquefied gas export plants, its chief said on Monday.

A big driver for Progress’s deal with Petronas is a plan to build an multibillion-dollar LNG plant on the West Coast to take all of the shale gas production from the partner’s lands in the North Montney region of British Columbia….

Progress Chief Executive Michael Culbert said federal and provincial authorities should consider combining regulatory proceedings for multiple plants and pipelines, with so many proposals now in the works.

The current pipeline capacity to British Columbia’s Kitimat region is about 100 million cubic feet a day, far below what will be required to support an export industry, he told reporters after a speech to the Canadian Association of Petroleum Producers investment symposium.

Canadian Press

LNG terminals planned for West Coast have enough gas to go around: executives

Northeastern British Columbia’s shale fields contain more than enough natural gas to feed a myriad of West Coast export terminals in the works, energy executives said at an industry conference Monday.

But some say collaboration may be necessary to ensure the gas makes its way across the Pacific in the most cost-effective way possible.

Penn West president Murray Nunns …said he sees the various LNG proposals joining forces at some point.

“The scale of the initial projects at a (billion cubic feet) or two probably isn’t suitable relative to the size of the resource in Western Canada,” he told reporters.

“I think in the end, it may only end up as one or two facilities but I think they’ll be substantially larger than what’s been considered.”

Canadian oil boom may bring many more tankers to Northwest waters: Seattle Times

Seattle Times

Canadian oil boom may bring many more tankers to Northwest waters

[F]ights over Canada’s oil sands could have an impact much closer to home. One company is hoping to boost oil-sands shipments to Asia through Northwest waters — plans that would quadruple tanker traffic through Vancouver, B.C., and dramatically increase the amount of oil traveling through the Strait of Juan de Fuca.

Some of the tankers the company hopes to accommodate could carry four times more crude than the Exxon Valdez, the supertanker that spilled 11 million gallons of crude into Prince William Sound….

“That’s definitely a lot more crude carriers,” said Chip Booth, a manager with the Washington state Department of Ecology’s spills program. “It certainly represents a bit of a higher risk.”

But it’s far too soon to say how much more.

Liquid natural gas exports will need infrastructure push: DCN

Daily Commercial News and Construction Record

Liquid natural gas exports will need infrastructure push

A growing number of energy industry players are looking to connect plentiful supplies of natural gas on this side of the Pacific with ravenous demand on the other.

It will be costly and complicated to link production from northeastern British Columbia’s vast shale natural gas fields to Asian consumers, but it’s an undertaking several observers say is worthwhile.

Ralph Glass, vice-president at AJM Petroleum Consultants in Calgary, likens the task to the construction of Canada’s major railways and seaways…..

It’s clear to energy consultant Glass that there’s enough Asian demand to soak up Canadian supply, but he’s less sure about the logistics of connecting the two.

He said there currently is not enough pipeline infrastructure between northeastern B.C. and the coast to accommodate the volumes necessary for each of the proposed projects. Getting new pipelines approved and built can be a slow process.

PNG ratings give hint what of financial markets think of Kitimat

The outlook for Pacific Northern Gas issued by Canada’s Dominion Bond Rating Service on Friday not only gives an indication of the financial health of the company, it also gives a window into what the financial markets think of the prospects for Kitimat and the region,

DBRS gave Pacific Northern Gas “Secured Debentures and Cumulative Redeemable Preferred Share ratings… BBB (low) and Pfd-3 (low), respectively, both with Stable trends,” DBRS said a news release dated June 10, 2011.

DBRS says that like all utilities, PNG has a stable financial outlook, but “it still has a higher level of business risk when compared with other DBRS-rated utilities.”

The DBRS report goes on to say:

Economic conditions in PNG’s Western system remain weak, but are showing signs of improvement, albeit at a slow pace. Signs of economic improvement in the region include Rio Tinto Ltd.’s (Rio Tinto) announcement of an additional $300 million investment on preconstruction activities for the US$2.5 billion proposed modernization of its aluminum smelter in Kitimat, B.C.; the proposed Phase 2 of a new container handling facility at the Port of Prince Rupert; and continued modest growth in the oil and gas sector in the Northeast system area.

The closure of the West Fraser Kitimat [Eurocan] paper mill in 2010 resulted in some loss of customers in the region, which was offset by the increase in customers in the Northeast system service area. Despite the challenges in the Western system area, PNG has been able to maintain a stable customer base.

In the longer term, the competitiveness of natural gas as a fuel and heating source still remains a key focus for PNG, especially in the Western service area; however, residential and commercial electricity rates are expected to rise in the near term according to BC Hydro’s Service Plan. The proposed electricity price increase and current low gas price environment are expected to keep PNG’s delivered natural gas rates competitive with electricity rates in PNG’s Western system.

DBRS also liked the fact that much of the money paid by the KM LNG partners for the Pacific Trail Pipeline was supposed to go PNG shareholders:

In March 2011, PNG completed the sale of its 50% stake in Pacific Trail Pipelines Limited Partnership (PTP) for a gross consideration of $30 million. The Company has declared special dividends of approximately $22 million, which represents all of the initial payment. A final cash payment of $20 million will be paid if the purchasers make a decision to proceed with the construction of the Kitimat LNG export facility in British Columbia.

There is no guarantee that the final payment will be made.

Going forward, if the net proceeds from the second payment are retained and reinvested in the Company, this could have a longer-term positive impact on PNG’s creditworthiness. However, the extent of any credit impact will depend entirely on the amounts to be retained and how they are reinvested.

But as the Northern Sentinel reported, the BC Utilities commission wasn’t so happy with the dividend, especially when it came to the PNG “transportation charges” it levies on consumers and businesses. The Sentinel says Pacific Northern Gas agreed to pay $500,000 toward the transportation charges to avoid a court fight with the BCUC, after the commission questioned why PNG was not passing on some of the money from the sale to lower the charges.

It should be noted that $500,000 is just six per cent of the $30 million net proceeds PNG received for the sale.

In the long term, the DBRS report says: “increase[d] utilization on its Western system, [has] the potential to increase PNG’s margins and lower the average cost of transporting gas for all customers.” “Increased utilization” likely refers to the various liquified natural gas projects that may make further use of PNG facilities.

DBRS says that PNG expansion and diversification plans could eventually lower its financial market risk profile:

“through electricity and renewable energy generation. In 2010, it acquired the 9.8 MW McNair Creek “run of river” hydroelectric generation facility in British Columbia for $17 million. It also recently formed Narrows Inlet Limited Partnership with Skookum Power Corp. to undertake an investment of up to $2.5 million to advance the Narrows Inlet Project to the start of construction. The $190 million project was awarded a 30-year energy purchase agreement with British Columbia Hydro & Power Authority (BC Hydro) in spring 2010.”

As some energy executives have come to realize, but others have ignored,  high PNG natural gas transportation charges are one main reason that the industry is mistrusted, if not hated, across the political spectrum from right to left in northwestern BC, a political constituency that goes far beyond the environmental activists.

At every public meeting on energy and pipeline issues, there are always questions about the PNG transportation charges, even at meetings on the Enbridge bitumen pipeline, which has little do with  the natural gas charges here (although Enbridge is a major consumer natural gas supplier in eastern Canada).

At the information meeting in Kitimat earlier this summer, Thomas Tatham, managing director of BCLNG  Energy Co-operative, which hopes to build the second LNG terminal near Kitimat harbour, promised that his company, using PNG lines, would absorb the transportation charges  for Kitimat consumers.

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