LNG in BC: petro-state politics Part 2 – fracking

This is part 2 of a 3-part series based on a presentation by investigative journalist Andrew Nikiforuk to Squamish residents last year on LNG in BC.

What is shale gas?

Shale rocks are generally dense and black-coloured, formed from mud deposited at the bottom of past oceans, now solidified into rock. This mud is rich in un-decayed organic matter. When heated, the organic matter is transformed into oil and gas. Typically, this oil and gas is trapped between layers of shale and cannot be recovered through conventional drilling methods.

Fracking: what is it?

A well is sunk, which travels vertically through the overlying strata. When it reaches the shale layer, it becomes necessary to drill horizontally.

Horizontal frack well diagram
Horizontal frack well diagram

Modern wells are capable of drilling over 10km horizontally: such wells are called ‘extended reach laterals’. Once the horizontal well is drilled, it must be hydraulically stimulated, or as it has become known, “fracked”. The fractures themselves can extend well beyond the target because of the unpredictable nature of the shale formations. The horizontal well is “fracked” in portions, stage by stage every few hundred meters or so, meaning that a 2km lateral well might need 10 to 20 stages. For each stage, the targeted section of the well is sealed off  and a chemical mixture is pumped down at high pressure.

The pressure of the water is sufficient to open up pre-existing fractures in the rock, and to create new ones. These fractures are important, because they provide a pathway for the gas to flow out of the shale rock and into the well. Once that is done, sand and gravel (proppant) are pushed into the fractures that have been created, literally ‘propping’ them open, ensuring that the gas can continue to flow.

The total fracking activity in the United States now uses about same energy as 11 nuclear power plants.  Not to mention the water, sand and chemicals required.

Hydraulic fracturing was first done in the 1950s, but wells were sunk straight down; horizontal wells were not in use until recently.

Fracking BC

In order to get the volume of Natural Gas needed to fill all these proposed LNG terminals,  vast areas will need to be fracked.  Essentially ¼ of the province will be fracked.

According to coal experts if five big LNG plants go ahead in BC then in order to keep those LNG terminals full it is going to require approximately 50,000 wells over the next 27 years.  Or about 3,000 wells started each year.

Nine trillion cubic feet (tcf) per year of natural gas production and exports is planned by 2020. That is equivalent to 2 million barrels of oil per day, roughly the current level of production in Alberta’s oilsands.  The current existing Canadian production is 5.3 tcf a year.

Pioneer of Fracking

United States is the pioneer of hydraulic fracturing (fracking) and they are only recovering 10 to 20% of the resource. The problems they have encountered are:

  • pore spaces are 1000× smaller*
  • can’t control the direction, width and size of fracks
  • radioactive material
  • hydrogen sulfide
  • saline water
  • high CO2 content

*Compared to sandstones and limestones, shales tend to have lower porosity, making it harder for the oil and gas to move about through the shale. This means that it is harder to extract gas from shale than from conventional reservoirs where the fluids can flow more freely.

What do you do with all that CO2? In BC we are now venting it out into the atmosphere.  Australia is trying to bury it in the ground at great expense.

Shale gas wells have a rapid depletion rate of 80% whereas regular oil wells deplete at the rate of 20% to 30%.

Fracking operations are very complex. One problem in Northern BC is that companies are continually fracking into other companies’ fields. This is because of the horizontal wells.

A fracking project in Northeastern BC in the Horn River area had 16 wells sunk which required:

  • 417 million gallons of water
  • 78,400 tons of sand
  • 8 million gallons of fracking chemicals
  • 500 frack intervals
  • 10,000 foot laterals
  • 40,000 horsepower for fracking pumps

The fracking in northern BC uses 3× more water than other fracking sites.  Every year fracking in BC requires the same volume of water used by the City of Calgary.

Ground Water:

According to experts we don’t know where our aquifers are, how shallow they are, how big they are or how deep they are. We don’t know the water table elevation, we don’t know in which direction the ground water moves, we have no information.

The government of BC doesn’t even have a ground water monitoring program set up in the north where they are fracking now.

Last year the Minister of Natural Gas Rich Coleman tried to assure BC residents,

“the reality is we’ve been doing this for over 50 years, we’ve never had contamination from a drill, we’ve never had a drill stem leak or fail. We do it as well or better than anybody else in the world.”

Considering that there were no horizontal frack wells fifty years ago, isn’t that a misleading statement? There are only 6 monitoring wells for over 25,000 wells in the north. Who is tracking the contamination?

The more industry fracks shale formations the greater the risk to aquifers and ground water from methane leaks and contamination.

Methane gas gets into ground water. A study conducted by Duke University found that in  60 drinking water wells in Pennsylvania,  51 wells had 17 times higher methane and ethane content. This was because of leaky well casings, fracks had generated new fractures and or enlarged existing fracks which allowed the methane and ethane to escape into the water. They documented over 200 cases of ground water contamination.

Methane and CO2 venting:

On average 60% of aging wells leak methane gas.  Industry calls this “gas migration”. It is a big problem, expensive to fix and difficult to completely stop.

Currently, there are 27,000 wells and 10% of them are leaking methane, and are super emitters. The fumes and emissions from these wells are incredible.

The problem is the fractures are uncontrollable. Fractures can spread out in all directions and this causes a waste of energy, a waste of fluids and chemicals, and wells end up fracturing into each other. Ultimately, water tables get contaminated and chemicals can pool on the ground.

So far, the BC government has yet to do a study on the impacts of fracking and LNG on the environment.  This includes water, land, and air issues.  Squamish residents have a right to be concerned.

Part 3 coming soon.

LNG in BC: petro-state politics – 3 part series

What is happening with the LNG in BC?

British Columbia is counting on three LNG projects operating by 2020 in Prince Rupert, Squamish, and Port Alberni.

On Thursday, February 19th, Prime Minster Harper arrived in Surrey to announced 10 years of tax relief for the BC LNG industry, including a joint venture led by Malaysia’s state-owned PETRONAS.

When the BC government  unveiled its provincial LNG tax structure last October,  Petronas president Shamsul Azhar Abbas requested more incentives to do business in BC.

Meanwhile, in Squamish and West Vancouver open houses were recently held by the LNG industry to answer questions regarding the proposed new LNG Plant in Squamish.

This is a 3-part series based on a presentation by investigative journalist Andrew Nikiforuk to Squamish residents last year on LNG in BC. In his presentation, Nikiforuk covered the following points:

  • LNG overview
  • Who are the Players?
  • Fracking—what is it?
  • Economics— the money
  • Australia’s experience—10 years with LNG
  • Fracking of coal seams, what does this mean?

So far there are 15 proposals for LNG projects in BC.  This would change the direction of BC for the future.

LNG explained:

LNG has been around for about 50 years. The first LNG tanker was made in 1957. The technology back then to liquefy Natural Gas was too expensive so it didn’t really take off.

Basically you are taking gas and cooling it down so that it could fit in a quart of milk, for example. You have to use energy to cool it down.

Natural Gas is expensive. It costs between 7 and 10 times more to transport LNG than oil or coal. This is why most Natural Gas is consumed in its region of origin because it is too expensive to transport.

The challenges with Natural Gas are: liquefying, transporting and re-gasifying.

The LNG game:

It wasn’t until Qatar started putting Natural Gas on the market in 2002 that the market got heated up plus many other countries got in on the game.  There has been an explosive growth of Natural Gas extraction. Here are some of the major players in LNG in the world today:

  •  Australia
  •  Qatar
  •  Malaysia
  •  USA
  • Nigeria
  • Indonesia
  • Trinidad/Tobago
  • Algeria
  • Russia

BC is new to the LNG game. This is a very expensive game to get into.  One of the things that has changed is the price differentials around the world. Natural Gas prices are low in the United States due to the shale boom.  Prices in Asia are much higher.

So the idea is “why don’t we sell our cheap BC Natural Gas over in Asia and we can beat them at their prices?”

How are you going to pay for building these projects?

LNG projects are complex and costly. We know that hydro carbons are getting more expensive to capture. The fact that we have to go off shore and look for oil is another indicator that we are running into the age of extreme hydrocarbons. Extreme hydrocarbons means:

  • high capital
  • high energy output
  • high environmental costs
  • high complexity
  • high risk

One of the challenges is that building LNG infrastructure is getting more and more expensive. We have captured all the cheap stuff at the top. Now we are at the bottom. Industry is doubling what it is spending just to get the hydrocarbons out of the ground.

Out of the last 12 LNG projects, 10 went over budget, many by as much as 40% to 50%.

Now we are trying to crack open rock that is as tight as granite (that is what shale formations are like) in northern BC in the Montney Formation. So we have to use brute force to open the rocks.  This process involves using a fleet of engines to blast water, sand and chemicals at extremely high pressures 1 to 2 miles underground in order to break open the rock.

From 2000 to 2013 industry spending has grown from $400 billion to $900 billion to extract  hydrocarbons. Costs are growing more to extract but production is flat. Cost overruns are telling us something about the resource. Since 2000, liquefaction unit costs have tripled or even quadrupled in this time period.

Not all projects work out. Four out of every five oil and gas mega-projects fail.  So projects are sped up resulting in cutting corners which is a recipe for failure.

Who owns the LNG resource?

Minister of Natural Gas Rich Coleman, says it’s you the taxpayer:

“We are your partners in this. You need to know we’re going to make this a win for you. We know in our government… That profit is a very good word and profit means that everybody wins. And you need to win large enough for your large investments…we will beat Australia, we will beat them hands down.” Min. Natural Gas 2013.

Fracking Vancouver Island

Coal is found only in sedimentary rocks. The coalfields on Vancouver Island are:

  • Cowichan coalfield
  • Nanaimo coalfield
  • Alberni coalfield
  • Comox coalfield – active coal operation
  • Suquash coalfield
  • Quatsino Sound coalfield

Water quality concerns:
Imagine fracking Vancouver Island. What will that do to water quality on the Island?
“because of the shallow depth of many CBM (coalbed methane basins), the potential exists for a fracture growing out of zone and affecting freshwater aquifers. Schlumberger 2009

LNG terminal in Campbell River

Another proposal to turn an old pulp mill site to an LNG terminal is in Campbell River. Quicksilver Resources Inc. is a Texas based oil and gas company. Quicksilver’s main expertise is fracking coal. There are coal seams on Vancouver Island. They have been involved in fracking coal fields in Alberta over that last 10 years.

Why would you put an LNG terminal in Campbell River? Where is the Natural Gas going to come from? It will cost $4B to $5B to build an LNG plant.  Most likely, Quicksilver will go after Natural Gas reserves on Vancouver Island.

As an example, more than 20,000 wells have been drilled over the past 5 to 6 years in Quicksilver’s Alberta operation.

Who are the players?

1. Sukanto Tanoto is a billionaire tycoon with interests in palm oil, pulp, timber, oil and gas and is behind Woodfibre LNG in Squamish.

Tanoto owns the world’s largest pulp company, Royal Golden Eagle company. One of Tanoto’s companies is called APRIL, Asia-Pacific Resources International Ltd.  Nearly half of the deforestation in the Sumatran tiger habitat between 2009 and 2011 was in pulp concessions. APRIL group was responsible for a sixth of all forested tiger habitat loss over this period.

Giant palm oil branch of the Royal Golden Eagle International conglomerate of forestry, rubber and palm plantation companies, owned by the billionaire tycoon Sukanto Tanoto, was using a web of shell companies based in Road Town and other tax havens to enable its palm oil companies to evade tax. – Guardian May 10, 2014

In January 2013 it was reported that Indonesia’s Supreme Court ordered Tanoto’s company Asia Agri to pay more than US$390 million to the state for tax evasion. According to evidence contained in the 8,000 court papers, Asia Agri which employs 25,000 people across 14 subsidiaries and owns 165,000 hectares of plantations, was engaged in routine and systematic fraudulent accounting practices. They were setting up shell companies in the British Virgin Islands.

Pacific Oil and Gas is another division of Tanoto’s company. It is one of only two foreign owned companies allowed to invest in Chinese LNG infrastructure. For some strange reason this guy has a sweetheart deal with China and has the one LNG terminal in China. Very strange for a protectionist country.

2. Petronas: Petroliam National Berhad is a Malaysia state-owned company that’s been around for over 40 years with operations around the world. Petronas provides 40% of their government’s revenue.

Petronas reports directly to the Prime Minister of Malaysia, bypassing parliament. Therefore it has very low levels of transparency and accountability. They have major investments in BC and Alberta in the energy sector. They purchased various Canadian owned energy companies.

In 2013, two senior managers at PETRONAS were charged with graft and money laundering for $RM1 million.  As a result, EITI approached Petronas to adopt transparency standards. Petronas doesn’t want to sign onto transparency suggested through EITI standards.

Petronas, was “ready to call off” its project in BC amid delays in the approval process and the recent imposition of an LNG tax by the BC government and a “lack of appropriate incentives” Financial Times of London re Prince Rupert project.

Now with Stephen Harper’s recent announcement, it looks like PETRONAS has got their way.

3. SINOPEC is a Chinese state-owned mega-player in the LNG industry.

Part 2 coming soon…

Wellcox Lands Soil Contamination and Taxes

At this Monday night’s Nanaimo council meeting there are some interesting topics on the agenda for the public to follow:

1) council meeting times—do they stay the same or change?
2) 2015 property taxes
3) Wellcox Lands soil contamination study
4) 614 Lambert Ave from 1 lot to 10 lots

Nanaimo residential property taxes over next 5 years

20152016201720182019
1%1.5%4.5%2.5%1.8%

The taxes for 2015 have been reduced from 1.8% to 1%.  The suggested 2015 budget  items to cut are:

  • remove budget for 3 additional RCMP members · $326,000
  • reduce management consultant budget · $91,510
  • reduce staff training budget · $76, 490
  • reduce firefighters clothing budget · $25,000
  • increase aquatic centre fees · $75,000
  • eliminate parks recreation and environmental master plan · $75,000
  • reduce Linley Valley improvement project · $50,000
  • eliminate fire training reserve · $25,000

The total proposed budget cuts amount to $744,000.

If the fire hall on Hammond Bay Road goes ahead in 2015 then staffing costs will increase to $1 million per year.

Welllcox Lands
A detailed site investigation has been completed of the Wellcox Lands site contamination. A full presentaton will be given by the City’s real estate manager at the next council meeting.

Wellcox Lands Nanaimo
$200K in soil contamination studies planned for 2015 at Wellcox Lands Nanaimo

In March 2013, the City of Nanaimo purchased 26.7 acres (10.8 ha) of land at 1 Port Drive.

The area was originally filled in by the Vancouver Coal Mining Company. The coal mine stopped operation in 1953.  The land was sold to CP Rail who then developed the Wellcox  Yard for transportation and distribution of goods.

Seaspan Corporation occupies 15.5 acres, Island Corridor Foundation and Southern Rail occupy 2.53 acres.  The City terminated the lease to Island Pallet Solutions and demolished the buildings over the 1 acre site. Now the City has a tenative lease with Island Ferries for 2.35 acres. Also, 3  acres are set aside for a transportation hub.

Soil contamination
In 2009, a study was done by SNC Lavalin on the entire Wellcox Lands regarding the contamination hot spots. A budget of $210,000 has been set aside to continue soil testing and sampling groundwater for 2015.

Harewood Neighbourhood plan will gets some changes with the new subdivision at 614 Lambert Avenue. One lot is to be subdivided into ten small lots.  Many speakers have come to council before to express their concerns over small lot developments in Nanaimo with no provision made for boulevards or green spaces.


Update February 17, 2015: what happened at Nanaimo Council on Monday night:
Council and Committee of the Whole meetings will continue to be held on Monday nights. There was no motion to move the meetings to Thursdays during the day. Agendas for meetings are to be ready earlier at 12pm on Tuesday.

Vote on taxes is delayed until the next COW meeting. Councillors Kipp, Hong, Yoachim and Bestwick voted against the 1% tax increase this year as they wanted to see further tax cuts. The motion to pass the 1% tax increase failed as it was a tie vote 4 against and 4 supporting.

Councillor Kipp next put forward a motion for a 2% tax cut. This motion failed with a tie vote, 4 against and 4 supporting.

The Nanaimo Chamber representative gave a presentation to council and requested that they not raise commercial taxes from now until 2020.

In the City’s presentation to council on the Wellcox Lands it was mentioned site remediation could cost between $10 and $30 million to clean up the site depending on what was discovered. Council approved $210,000 for continued soil contamination studies.

Councillor Bestwick asked and received confirmation that a First Nations midden was found when the Island Pallet building and foundation was removed. Councillor Yoachim, a member of Snuneymuxw First Nation, made no comment regarding the discovery of the archaeological site.

Canadian Culture Nanaimo and Reading Town

Nanaimo Council passed the budget to fund culture in the city. The culture budget included $231,826 for operating culture events and $30,330 for festivals. This works out to a total of $262,156 or $3 per person in taxes.

Arts, culture, and heritage organizations in Nanaimo contribute $93 million in direct economic benefits to the local community, creating 880 direct jobs and $7 million in tax revenues.

This begs the question: Why don’t we give more funding to culture if it is such an excellent economic driver in our community?

Currently, the City spends $21.5 million a year on policing services. This pays for the 140 member station. Why isn’t a few million set aside for culture? Why not get youth off the streets and into arts and culture?

At the January  council meeting Councillor Kipp raised a point that 5 groups share approximately $170,000 and 19 groups share $54,000. Two groups taking the lions’ share are the Symphony and TheatreOne.

The City’s budget has grown from $171 million to $200 million in recent years. The City funds Nananimo Economic Development Corporation (NEDCOR) at approximately $2 million a year. Imagine if the same amount of money went directly to arts and culture.

A presentation was made to Nanaimo Council in January by the Nanaimo African Heritage Society who had asked for $7,500 and received $1,100.  They received the lowest amount of any group.

If the federal government diverted some of the $680 million dollars it spends a year on advertising  to local arts and culture imagine what a strong Canadian culture there would be.

Canadian Content
Reading and writing is critical to keeping culture alive. Could Nanaimo become the next Reading Town Canada?

In 2012 a National Reading Campaign was sponsored by TD Canada. “Reading Town Canada” aims to develop a coordinated national strategy to promote reading books with Canadian content.  This year from May 3rd to 10th Charlottetown, PEI will be the 2015 Reading Town.

Canadian content regulations were first drafted back in the 1970s. Back then people were very concerned about the Americanization of our Canadian culture. Ultimately, Canadian content boils down to what is local. It take time, money and effort to nurture and grow the Canadian cultural experience.

Canada gets a new flag
$24,000 to design Canada’s Flag: “Sheer genius! Bar and Leaf!.. like Hammer and Sickle! Crown and Anchor! Ham and Eggs! His and Hers! … cartoon by Norris (1970)

Fifty years ago  Canada raised its ‘new’ maple leaf flag.

On Feb. 15, 1965 the Canadian Red Ensign was lowered and the new Canadian Maple Leaf flag was raised for the first time on Parliament Hill.

What cultural investment has the current federal government made especially in smaller centers?

Flags of the times

Canadians are overwhelmed with American sports and culture. It is a sign of the times when government offices and BC Ferries hoist the 12th Man flag.

Will the next flag hoisted be the Stars & Stripes with a small 51 on the bottom? Have Americans ever hoisted a flag for Canadian sports or culture?

BC Ferries 12man flag
12th man flag hoisted by BC Ferries Jan 30, 2015

Closed Doors and Colliery Dams

Two important motions will be on the agenda at the Nanaimo Council meeting Monday, February 2nd:

  • COW meetings
  • Colliery Dams

Councillor Fuller has long been a proponent of keeping Council meetings and COW meetings public and televised. Preserving Colliery Dams is another topic Fuller is passionate about. It is an unfortunate coincidence that both of these topics are taking place when he won’t be there. Let’s hope that the remaining councillors pick up the torch in honour of Councillor Fuller.

All meetings should be recorded and available for viewing on the City’s website. $200 million of your tax dollars is being spent every year by the City of Nanaimo. One would think that the Mayor and Council would want to protect themselves from accusations of wrongdoing.

Colliery Dams
The Dam Safety Section (DSS) has lowered the failure consequence classification for both the middle and lower Colliery Dams.

  • Middle Chase River Dam – high
  • Lower Chase River Dam – very high

The City has been asked by DSS to prepare a revised remediation plan by  February 27, 2015. Two remediation options for the Colliery Dams are:

  • building a labyrinth spillway (~ $8.1 million)
  • overtopping (~ $7.3 million)

It looks like the City favours the labyrinth spillway option which would cost approximately $8.1 million.

The spillway entrance is proposed to be located about 10 meters to the south of the existing spillway. This would be an open channel spillway of 10 meters wide and 6 meters deep with 10 meter sides.

Has anyone given the heritage status of the Colliery Dams any consideration in the process?

Currently, the City spends approximately $250,000 a year monitoring nine city dams which include the middle and lower Colliery Dams. Recently, a  report was completed on water distribution, capacity of the spillway, and drainage to Harewood Creek. The report can be seen on the City’s website.

The DSS is located on Labieux Road in Nanaimo. Are they functioning at arms length from projects in Nanaimo?

Does the Colliery Dam remediation reek of a multi-million dollar public works project to benefit the concrete and consultant kings of the world? To date, consultants’ fees for the Colliery Dams reports have cost Nanaimo taxpayers approximately $2.5 million.


******** Update: February 3, 2015******

At last night’s Nanaimo council meeting a motion was made by Councillor Pratt to have the COW meetings remain on Monday nights and have the agendas available earlier so everyone could better prepare for the meetings. This voted passed.  Three Councillors opposed: Hong, Kipp, and Bestwick.

City staff to work out the details on how advanced agendas can be achieved.

Discussion on the topic:

Hong: …who watches Shaw TV… my parents couldn’t get the election results…they are so slow…people can go to Nanaimo Info Blog the next day and find out what went on….

Bestwick: …why don’t we put a table in the middle…we need to get back to a committee style meeting [sit around and whisper in each other’s ear]….this is too formal…it’s like having two council meetings… it is not working….

Kipp:…what is the big deal people can watch it later…people probably flip channels…[after Kipp’s motion didn’t pass at question period]… I will bring this back in 6 months….

Two presentations by the public in support of televised and recorded COW meetings.

Long time council watcher made a flip flop during question period and questioned what was the big deal about having the meetings broadcast live on Shaw TV.

Colliery Dams Vote:
Seven speakers on the topic. Three speakers from the civilian technical team. All spoke of inadequate information such as spillway size and drainage.

Councillor Yoachim raised a motion for work on the dams not to proceed, consult with stakeholders and amend the schedule for the Dam Safety Section.

Yoachim’s motion passed with all in favour but one, Councillor Brennan opposed.

No more live streaming Nanaimo council meetings?

Councillor Kipp made a motion earlier this year to have council meetings moved from Monday to Thursday nights.  Now there is a problem. A BIG problem.

To review, the motion was:

  • Move Council meetings to the 1st and 3rd Thursdays of each month.
  • Move Committee of the Whole (COW) Meetings to the  2nd and 4th Thursday of each Month.

The problem is Shaw Cable CAN’T broadcast live on Thursdays because they have other programming obligations.

The proposed change is to have the COW meetings on Thursdays at 1pm.

Mr. Swabey, the City Manager has made the following recommendations, that COW meetings:

  •  be held in Board Room in the City Hall
  •  NOT be televised or recorded
  •  become “committee” meetings and no longer like “council” meetings

If this motion passes on Monday, January 19, 2015  it will be terrible for transparency and democracy in Nanaimo civic politics.

The committee of the whole meetings are very important for all Nanaimo residents to watch. They cover all new “hot” items.  This is where people can reach out to the community and city hall when they are having problems. Everything must first go through the COW meetings. Some topics never make it to council meetings.

To rely on the minutes of the meetings is not good because these are not recorded verbatim, have little detail and are not always available.

If the COW meetings are moved to Thursdays at 1pm then who will be able to attend?

Why would the City Manager want to shut out the public? What is the City trying to hide?

These changes could come into effect early/mid March. It all depends on how Council votes on Monday.

Take Action now! Send an email to Mayor and council mayor&council@nanaimo.ca and ask that they keep all meetings recorded and televised as they are now.

Video thumbnail for kendall nanaimo
Chek News coverage of Nanaimo City manager recommendation: no tv or recording of council meetings