Pipeline News North October 2014

R001697746

VOL. 6 ISSUE 10 DIST: 16,000 SERVING THE OIL & GAS INDUSTRY IN NORTHERN B.C. AND ALBERTA

PIPELINENEWSNORTH.CA

PIPELINE NEWS NORTHFREE!

OCTOBER & NOVEMBER 2014

Calgary-based private midstream infrastructure and service company is making inroads into Northeast B.C., starting with an agreement to build significant natural gas

infrastructure in the Daiber area, about 150 kilometres northwest of Fort St. John.

kanata makes

montney push

Special Report: Northeast municipalities team up to form resource coalition

2 • PIPELINE NEWS NORTH

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Al Seib / MCT

The following figures were taken from the stories in this issue of Pipeline News North.

PNN NUMBERS

11.60: The Alberta-B.C. Natural Gas Discount is off of its lowest level in two years.

Chart on Page 5.

$3.90: The AECO “C” spot price, the Alberta gas trading price, has nearly doubled in the

past year. Chart on Page 5.

$15.53: The Japan LNG Import Price is off of its lowest level in two years. Chart on Page 5.

135: The mile marker for Pink Mountain. The rural hamlet, north of Fort St. John on the Alas-

ka Highway, has seen an explosion of natural gas activity in the past year. Story on Page 5.

$500 million: The potential “starting point”

for KANATA in Northeast B.C., the CEO told Pipeline News North. Story on Page 6.

2: The number of ships that BC Ferries will soon convert to run on liquefied natural gas — a first for ferries in Canada. Story on Page 12.

8,100: According to estimates by the oil and gas industry, there is enough natural gas

in northeastern B.C. to heat all of Canada’s homes for 8,100 years. Story on Page 15.

100: The number of oilmen whom filled the Lido Theatre for the Fort St. John Petroleum

Association gathering. Story on Page 19.

14: The number of rigs in the Montney area,

located around Fort St. John, that Ottman estimates it operated last summer. Story on

Page 22.

171: The ranking of a mobile app called PetroFeed that gives the location and status of drilling rigs across Western Canada. The app’s developers say it is connecting the industry in a way that has never been done before. Story

on Page 26.

$1.43 billion: The price Veresen Inc. paid to acquire 50 per cent of the Ruby natural gas

pipeline. The pipeline, which moves gas out of the Rockies, provides direct access to the Malin hub in Oregon and to the West Coast.

Story on Page 27.

PNN Pink Mountain work

camp to double

Chart: Alberta-B.C. LNG discount

Chart: Alberta

gas price

Chart: Japan gas price

Chart: Alberta petroleum

land auction

Chart: B.C. petroleum land auction

Staring down the barrel

of an LNG boom

MEG Pipeline approved

7 Generations Expands Liquids Transportation

First Production Achieved

At Sawn Lake

GOOD CHANCE FERRIES WILL RUN ON B.C. LNG

Apprenticeships, mobility

are good for provinces

13 POTENTIAL CUSTOMER ON HORIzON FOR WOODFIBRE

13 Land claims settlements push forward

13 LNG exporters want tax concessions

15 Teaming up to form resource coalition

18 PIPELINE COMPANY FUNDS EDUCATION

19 OILMEN FILL THE LIDO IN OCTOBER

20 NATURAL GAS NATION

23 CHRISTY CLARK TO FINALIzE LNG TAX

26 LOOKING FOR A RIG? THERE’S AN APP FOR THAT

27 Ruby pipeline acquisition a strategic link

Email reporter@ pipelinenewsnorth to share your story idea.

Look for PNN on FB: pipelinenewsnorth

Look for PNN on Twitter @PipelineNN

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Published monthly by Glacier Ventures International Corp.Pipeline News North is politically independent and a member of the B.C. Press Council. The Pipeline News North retains sole copyright of advertising, news stories and photography produced by staff. Reproduction is prohibited without written consent of the editor.

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#oilsands the charts

r002818126

Ever wonder where this “boom” everyone keeps talking about is actually happening? Take a look at Pink Mountain.

The rural hamlet, north of Fort St. John at mile 143 on the Alaska Highway, has seen an explosion of natural gas activity in the past year.

Companies continue to invest in the area. With that invest-ment comes new workers, and with those workers, new worker camps.

At last September’s Peace River Regional District meeting, the board issued a new permit that

would allow a 500-person work-er camp at Mile 147 to double in size.

The need for new worker ac-commodations is driven by in-vestment by Progress Energy, which needs around 2,000 new beds in the area to staff upcoming projects.

That’s in addition to the thou-sands of workers already living in Pink Mountain, a community of only around 100 permanent residents.

Worker camps are arguably the safest and most economi-cal ways to house the mobile la-bour force required for oil and gas activity.

See CAMP on Page 18

Pink Mountain work camp to double

Jonny WakefieldStaff Writer

Left, the Henry Hub Natural Gas Spot Price (dollars per Million Btu) traded at $4.10 in the first week of December and began August at $3.77. Source: U.S. Energy Information Agency

The Japan LNG Import Price continues to trend downward after reaching all-time highs last year. Source: World Bank

The AECO “C” spot price, the Alberta gas trading price, nearly doubled in the past year to $4.13/Gj but fell to $3.60 in August. Source: Natural Gas Exchange

Alberta gas price

The so-called Alberta-B.C. Natural Gas Dis-count (ABCD) is the dif-ference in price that a BTU of natural gas costs in Tokyo compared to Alberta. Sources: Natural Gas Exchange, Bloomberg

The alberta-B.C. lng discount

Japan gas price

U.S. gas price

December 2013 to October 2014


September 2013 through October 2014


The price of oil fell below the psychologi-cally important level of $100 per barrel in early August, but is still trending upward for the time period 2010-2014. Source: U.S. Energy Infor-mation Agency

The BC Oil and Gas Commission’s monthly land tender pulled in only $3 million in August, the lowest total this year, reversing the upward trend line. Source: BC Oil and Gas Commission

Alberta’s oil and gas land tender pulled in $41 million in early August, the second best showing so far this year. Source: Alberta Energy Regulator

alberta land auction

b.c. landauction

Oil price


January 2014-October


William JulianREGIONAL MANAGER

250-785-5631wjulian at

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matt lamersMANAGING EDITOR250-271-7064editor atpipelinenewsnorth.ca

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KANATA Energy Group Ltd. has entered into definitive agreements with UGR Blair Creek Ltd. to own and construct this infrastructure, which in-cludes a gas refrigeration plant.

In an interview with the Alas-ka Highway News, president and chief executive officer Kev-in Cumming would not divulge the precise financial terms of that arrangement, but he said it is part of KANATA’s overall strategy that could see the firm spend more than $500 million in Northeast B.C.

Cumming said that “typically on a refrigeration kind of plant, it would be about $1 million for a million cubic feet. That’s a rule of thumb, but every plant is different.”

This refrigeration plant will have a capacity of 25 million cu-bic feet a day.

“If you take a look at our strat-egy in Northeast B.C., there’s about $500 million as a start-ing point for us in that area,” he said.

“Probably a little more than that with the strategy that we have. So we’re starting at Daiber; we have four other locations we’d like to build out with other types of infrastructure. At the end of the day, it would be more than $500 million if it all came to fruition.”

KANATA is a private equity firm with investors including ARC Financial, Energy Spec-trum Capital and Teachers’ Pri-vate Capital.

The Daiber facilities have received regulatory approval, and construction is underway. KANATA is planning on operat-ing the plant by January 2015. The facilities include compres-sion, dehydration, refrigeration and condensate stabilization.

The CEO also confirmed that KANATA is already planning a facility expansion there.

“We have two assets that are there,” said Cumming. “We have some existing compression and dehydration for dry gas that is being developed there – that’s being expanded rightnow.

“We’re going to have about 25 million cubic feet a day in ca-pacity there. Then we have a re-frigeration plant that’s going in, with dehydration and compres-sion at Daiber, and that’s anoth-

er 25 million cubic feet a day.”Northeast B.C. is one of two

core areas where the firm plans to deploy at least $1 billion. The other is somewhere on the Al-berta side of the Montney for-mation. The precise location in Alberta has not been decided, nor has the exact disposition of the $1 billion.

Cumming is excited about the North’s energy potential.

“It’s an area that is short on in-frastructure and really needs to develop over the next few years:

martt lamersStaff Writer

kanata makes its montney pushA Calgary-based private midstream infrastructure

and service company is making inroads into Northeast B.C., starting with an agreement to build


gas plants, pipelines – everything. The resource is so massive,” he said.

“We’re really gung-ho. We’ve got a strategy for the area and what we’d like to do in the area and we’ve got to get people on board.”

KANATA, backgroundCumming launched KANATA in

2012 with about $330 million in investments, and since then has added a hand-picked team that now includes 15 people.

KANATA’s ownership structure allows it to take on slightly more

risk than what Canadian com-panies might be accustomed to. But it’s the high-reward play that they’re after.

The strategy in Northeast B.C. currently focuses on the Daiber area’s drier gas. The CEO explained that they also have another plant they’re trying to put forward that will access a richer gas in a differ-ent location.

The strategy involves moving gas to the appropriate plants to serve the needs of the area producers.

See KANATA on Page 28

kanata makes its montney pushsignificant natural gas infrastructure

in the Daiber area, about 150 kilometres northwest of Fort St. John.

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#LNGinAlbertaalberta

pipelineCourt Approves Canexus Tie-In To MEG Pipeline. Following a court decision to

enforce specifically the terms and provisions of their pipeline agreement, Canexus Corporation will

tie-in its Cold Lake pipeline system from Lamont Station into the MEG Energy Corp. pipeline.

A Canexus spokeswoman told the Bulletin the courts be-lieved — as did Canexus — pre-vious agreements between the two companies were clear, and therefore ruled that the compa-ny would be able to tie into the MEG pipeline, with construction expected to begin as early as late September.

With the court’s decision, it

should take about two weeks to complete, commission and start-up the Cold Lake blend pipe-line system delivering to Canex-us’s North American Terminal Operations (NATO) unit-train facility.

“Once the tie-in work is com-pleted, we will resume loading unit trains and expect to ramp-up operations to our contracted

capacity of six to seven unit trains per week,” Doug Wonnacott, pres-ident and chief executive officer at Canexus, stated in a news re-lease on Monday. He said Canexus had started commissioning the unit-train loading rack, loading oil into railcars from on-site tank storage.

A spokesman for MEG told the DOB that the issue for his com-

pany was one of tie-in timing, and there was never a problem regard-ing the tie-in itself. In fact, he said, MEG views the tie-in as “likely advantageous.”

However, aside from the re-cent court decision, there are still some remaining issues that MEG feels it must work through in re-gards to its Canexus agreement, which MEG would have preferred

is a go


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alberta briefstwitter.com/pipelinenn#LNGinAlberta

Phase 1 of a SAGD demonstration project at Sawn Lake is progressing with first bitumen pro-duction recently being realized.

In a press release this morning, Pan Orient En-ergy Corp. provided an update on the demonstra-tion project on behalf of Andora Energy Corpo-ration, in which Pan Orient has a 71.8 per cent ownership interest.

Andora has a 50 per cent working interest in the Sawn Lake demonstration project, and is the operator. In a separate release, Deep Well Oil & Gas, Inc., and its Canadian subsidiar-ies, said they will be announcing at a meeting of its shareholders later today that the devel-opment of its Sawn Lake heavy oil project is progressing.

“The first step towards determining the com-mercial viability of the SAGD recovery process at Sawn Lake is for the demonstration project to provide an indication of the productivity of the reservoir and the amount of steam injection re-quired to produce the bitumen, which are key components in assessing the potential for SAGD development at Sawn Lake,” Pan Orient said in its release.

For Phase 1 of the SAGD demonstration project, one SAGD well pair was drilled in the fourth quar-ter of 2013 to a depth of 650 metres and has a hori-zontal length of 780 metres.

Construction of the facility for steam generation, water handling and oil treating was completed in the second quarter of 2014. — Daily Oil Bulletin

First Production Achieved At Sawn Lake

Seven Generations Energy Ltd. says that it has increased its contracted volumes with Pembina Pipeline Corporation and its affiliates.

Volumes to be shipped on Pembina’s Peace Pipeline Phase III expansion have been increased by 91 per cent to 40,695 bbls per day, beginning with the completion of the expansion expected in late-2016 to mid-2017, said Seven Generations. While primarily comprised of condensate, the volumes also include natural gas liquids and light sweet crude oil.

In addition, 7G has also increased its contract-ed volumes at Pembina’s fractionation expansion project (RFS3) near Fort Saskatchewan by 143 per cent to 8,806 bbls per day.

“With these increased volumes we will have se-cured a significant portion of liquids transporta-tion and market access which we will need to aug-ment the 500 mmcf per day (total) of rich gas sales that we have arranged for the Alliance pipeline system,” Merle Spence, 7G vice-president, con-struction and marketing, said in a news release.

The company’s vision is to build a project that can produce a total of more than two bcf per day of sales gas and more than 200,000 bbls per day of total liquids, said Pat Carlson, 7G chief executive officer.

“We have acquired a land base of sufficient size and quality that we expect to be able to support, alone or as a major contributor, large market op-portunities such as liquefied natural gas export and transcontinental pipelines if they are re-quired,” he said. — Daily Oil Bulletin

7 Generations Expands Liquids Transportation

MCT PHOTO

dealing with prior to tie-in, the spokesman said.

While MEG would continue to discuss, in good faith, its concerns with Canexus, the spokesman declined to comment any further on the topic, as there are remaining legal issues that could call for further court hearings.

Canexus had expected to meet a previ-ously announced commissioning and start-up schedule prior to Sept. 1, but on Aug. 20, MEG reportedly would not permit the planned cold-tap/cut work into the pipe-line to tie-in the Cold Lake pipeline system from Lamont Station into the MEG pipe-line, which is necessary for commissioning and start-up of the pipeline system for Cold Lake blend product delivery to the unit-train terminal.

— Daily Oil Bulletin


facebook.com/pipelinenewsnorth

The ferry authority announced in September that it would con-vert two of its “Spirit” class vessels to run on LNG instead of marine diesel.

The new “dual” fuel system, along with modifications to the hull, are expected to save around $9.2 million over the 27 years the ves-sels are expected to remain on the water.

How much gas will come from the growing network of projects in Northeast B.C. that produce natural gas remains to be seen.

BC Ferries has not released a completion date for the upgrade,

but B.C. producers would likely be in good position to bid on the contract.

An AltaGas processing plant will soon be built in Dawson Creek to supply LNG for the domestic mar-ket. Most of that gas will be moved by truck.

Deborah Marshall, B.C. Ferries’ director of media relations, told the Alaska Highway News that it’s too early to say where the fuel for the converted vessels will come from.

“We haven’t signed any contracts for a fuel supplier yet, but we would envision purchasing it in British Co-lumbia,” she said.

The authority estimates that LNG costs about half as much as die-sel, and emits fewer greenhouse

gases. Marshall sus-pects domestic gas will be the least expensive option.

The main issue in selecting a supplier would be transport-ing the fuel: “The fuel will have to be trucked to our vessels, in the way we currently truck in the diesel fuel we use right now.”

The B.C. Liberal govern-ment’s plan to turn the prov-ince into an LNG power-house, on the other hand, revolves mainly around ex-porting the fuel to Asia, where buyers will pay many times the going rate in North America.

[email protected]

Good chance ferries will run on B.C. LNG

BC Ferries has not released a

completion date for the upgrade,

but B.C. producers would likely be in good position to

bid on the contract.


BC Ferries will soon start work on converting two

of its largest ships to run on liquefied natural gas

– a first for ferries in Canada.


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Feedback is being sought from Aboriginal lead-ers on proposed changes to the Canadian gov-ernment’s Interim Comprehensive Land Claims

Michele TaylorStaff Writer

Land claims settlements push forward

The Globe and Mail reports that the B.C. LNG Developers Alliance — newly formed to repre-sent four of the largest proponents of LNG ex-ports Kitimat LNG, the Pacific NorthWest LNG project led by Malaysia’s state-owned Petro-nas, Shell Canada Energy-led LNG Canada and BG Group’s Prince Rupert LNG — is looking to have their terminals treated as manufacturing operations in an attempt to gain tax concessions.

Community meetings have been set for late October, to promote the growing LNG sector.

The B.C. government will host energy sem-inars promoting the LNG projects’ skilled trades and labour needs.

Projected estimates by the province, based on five plants being built, could mean up-wards of 58,700 jobs in construction related positions. LNG plant operations jobs in the amount of 23,800 positions are also project-ed to meet the needs of the proposed five plants.


LNG exporters wanttax concessions

Guangzhou Gas Group Co. Ltd. has signed a memorandum of understanding (MOU) with Woodfibre LNG this week.

The signing of the company’s first customer follows an announcement made during Guang-dong Governor Zhu Xiaodan’s three-day visit to B.C., Sept. 25, of the opening of a trade office in Vancouver.

“This new trade office in Vancouver is another milestone in the rich history and is increasing ties between B.C. and Guangdong,” stated Premier Christy Clark in a news release.

“As sister provinces, B.C. and Guangdong al-ready enjoy cultural, economic and trade ties. The new office, the action plan, and the MOU signify Guangdong’s confidence in B.C. as an investment and trading partner.”

The two-way investment and trade MOU focus-es on information exchange and introducing po-tential investors to each other’s market.

The Woodfibre MOU with Guangzhou Gas Group Co. Ltd is for one million tonnes of liquefied natural gas per year over a 25-year term and is set to start meeting those demands in 2017.

Potential customer on horizon for Woodfibre

MCT


Policy, entitled Renewing the Comprehensive Lands Claims Policy: Towards a Framework for Addressing Section 35 Aboriginal Rights, released this month.

There is an effort to accelerate talks to ease op-position to resource projects.

Amendments to the policy offers flexibility to officials, and in turn the ability to reach resource and revenue sharing short-term deals regardless of land-claim settlements.

Community meetings have been set for late October to

promote the growing LNG sector.


fort st. John

R001697743

The mayors of Dawson Creek, Fort St. John and five other northeastern B.C. communi-ties officially unveiled plans on Monday to form a “super-team.”

While residents are unlikely in the near future to see local politicians don skintight jumpsuits and fight crime, the Northeast B.C. Resource Municipalities Coalition is in-tended to serve and protect the region from a common issue that looms large.

“[It’s] actually a single-purpose organi-zation – to represent the interests of these municipalities in resource development is-sues,” said Colin Griffith, the new coalition’s

executive director.The coalition’s meetings will be in public,

held every month in Fort St. John. It will be co-chaired by the mayors of Dawson Creek, Fort St. John and the Northern Rockies Re-gional Municipality.

One of the group’s key issues is the Fair-Share agreement with the provincial gov-ernment. It is a grant in lieu of industrial taxes that adds up to millions of dollars each year in funding for Northeast B.C. municipalities.

The reason FairShare is important for Northeast towns is because the industrial

growth that is fuelling the region happens outside of their municipal boundaries, which means these cities cannot tax them. But the costs on infrastructure and increase in other service demands from this industrial growth are paid for by the city.

However, the agreement only lasts un-til 2020. Last year, Premier Christy Clark promised to extend the agreement to 2030, but so far her government has not made any formal announcements to make this happen.

Meanwhile, FairShare has taken up an ev-er-increasing share of the load in the growing

William StodalkaStaff Writer

teaming up to form resource coalition

Senator Richard Neufeld, Dawson Creek Mayor Dale Bumstead, Northern Rockies Regional Municipality Mayor Bill Streeper, Fort St. John Mayor Lori Ackerman, Taylor Mayor Fred Jarvis, Chetwynd Mayor Merlin Nichols, and Tumbler Ridge Acting Mayor Don McPherson helped announce the formation of the Northeast B.C. Resource Municipalities Coalition. WiLLiAM SToDALkA PHoTo


dawson [email protected]

R001642872

budgets“(The coalition municipali-

ties) are united in FairShare from a municipal perspective,” said Griffith.

Griffith also said that the co-alition is “happy” with how Fair-Share is set up. However, the coalition will “advocate for a permanent arrangement with the province in order that a pre-dictable and permanent source of industrial tax revenue is available.”

He said that they will work to make FairShare permanent, and protect it from any fiscal slash-

ing that may occur in future gov-ernments – provisions which are not in the FairShare agreement as currently laid out.

According to estimates by the oil and gas industry, there is enough natural gas in northeast-ern B.C. to heat all of Canada’s homes for 8,100 years.

The coalition’s preliminary budget is for $2 million over three years, said Griffith. Daw-son Creek Mayor Dale Bumstead said that the funding will come from seven of the eight munici-palities in northeastern B.C. on a per-capita basis, mean-

ing that larger communities like Dawson Creek and Fort St. John, will pay more than smaller communities.

“It’s not trying to become an-other level of government ... it is just saying, the municipalities have come together, we’ve got these shared interests and this is how we’re going to represent them,” Griffith said.

Chetwynd, Pouce Coupe, Tay-lor and Tumbler Ridge are also members.

The only municipality in the Northeast that declined to join is Hudson’s Hope.

Hudson’s Hope Mayor Gwen Johansson stressed that Hud-son’s Hope was not “closing the door” on cooperating with the other municipalities or joining the coalition, but they did have issues with the governance structure of this coalition.

In its promotional infor-mation, the coalition wrote that members “will represent their municipality’s inter-est in conjunction with ru-ral area needs being repre-sented by their electoral area directors.”

Griffith said that his group will work with directors like Ar-thur Hadland as much as these directors want to work with them.

“Rural interests are not go-ing to be exactly the same (as the coalition’s),” said Griffith.

Other policy positions that the coalition has taken include collaborating and partnering with First Nations, address-ing the impacts of worker ac-commodations on municipal services and infrastructure, and maximizing local con-tent in the labour, goods and services provided to resource industries.

Northern Rockies Regional Municipality Mayor Bill Streep-er spoke about the need to keep workers living within north-eastern B.C., as opposed to “fly-in/fly-out” workers.

He said that workers “want modern communities to live in,” which would include ade-quate sewers and other munici-pal services.

The coalition has already hired a professional econo-mist to consult on the expected future growth of northeast-ern B.C. in population and industry, along with other specialists.

See COALITION on Page 24


SCHEDULE OF EVENTS

Wednesday, November 12, 20146:00pm- Opening Ceremonies4:00pm -Opening Draws7:00pm - 10:00pm - Appetizers

Thursday, November 13, 20147:00am - 10:00am - Breakfast8:00am - 5:00pm - Draws6:00pm - Stag & Entertainment

Gentlemen get your tickets forDinner at the FSJ Curling Club or Curtis Schafer 262-9453

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Good luck to all curlers at theOilmens Annual Bonspiel.

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CAMP from Page 5

Overall, no one knows even how many worker camps are out there – so poli-cymakers have no idea how many men and women are liv-ing out in the bush.

The PRRD is also currently mulling a “bed tax” to help pay for the strain camps put on in-frastructure and services.

TAX from Page 23

Many leaders in the Peace are pushing the provincial govern-ment to complete the tax.

Earlier this year, Northern Rockies Mayor Bill Streeper chal-lenged the government to pass a gas tax into law “by the end of March,” adding that prices will drop as more supply comes on market.

While that did not happen, Clark told the Alaska High-way News this summer that she was “absolutely rock-solid certain” the tax would be signed into law by the end of the fall session in late November.

“We intend to bring in the leg-islation and imbed it in our tax structure in the fall legislative session,” she said, adding that she recognized the risk of further delays.

JoBS from Page 29

“It only makes sense for labour market out-comes across the country to recognize that there are going to be times when the economy in one part of the country is really good, and in another part of the country it is really bad. You want the flexibility for the labour force to be able to move.”

During the premiers’ announcement, third-year Nova Scotian pipefitter apprentice Marc MacNeil said the new agreement between his province and Alberta makes it easier for ap-prentices such as himself to overcome barriers to achieve certification.

“I know a lot of people apprenticing who aren’t being recognized for their qualifications even though they’ve completed their pro-gram,” he said. “It has been tough for them to find an employer to take them on, and some have had to retake courses or work additional hours to get their journeyman status.”

Red Seal allows for journeyman mobility across Canada; ALF says to leave that system

alone

McGowan noted that while the Alberta/Nova Scotia agreement should provide im-proved apprentice mobility, Canada already has a very good mobility of its journeymen.

“We have a very robust system that allows people to move from one province to another once they have obtained their trade certifica-tion. It is called the ‘Red Seal Program,’ and it works very well.”

While ALF appreciates efforts to fix “glitch-es” when it comes to apprenticeship mobility in Canada, the federation is also leery of such conversations out of fear it will lead to govern-ments “cowing to pressures” by some employ-er groups that might result in reduced train-ing and certification standards, rather than tackle a particular issue of apprenticeship mobility.

“If the Alberta government and governments in the Maritimes are interested in addressing specific problems that they can address for ap-prentices, then we are in favour of that.

“But if this becomes a bigger push to drive down standards for training and certification, then we think that is something everyone should be opposed to.” — Daily Oil Bulletin


fort st. John

Roast beef and comedy brought the oilmen out to the monthly Fort St. John Petroleum Associa-tion gathered at the Lido Theatre on Thursday evening.

The group filled the lido with over 100 oilmen in attendance, twice the crowd they had at their last meeting, and entirely deplet-ing their supply of roast beef.

The meetings are geared to-wards getting people who work together to also have some fun together, said Sean Thomas, the association’s president.

“You’ve got service companies, you’ve got managers, you’ve got producer representatives; every-body gets to sit together at the booth, at the table, have a drink, have a BS and get to know each other on a social level,” he said.

Sometimes there are informa-tion sessions, discussions about industry or the local doctor short-age, to keep their members in-formed. That night, however, comedians David Dempsey and Jason Cooper were there to enter-tain the crowd.

Keith Black, owner of Effective Oilfield Solutions, had heard of the Petroleum Association and the events that they put on, but

this was the first one he had been invited to.

He said he was in it for the net-working opportunity it gave him. “Maybe you didn’t know you needed that company. It’s a great introduction to the area.” He said that he planned on signing up for a membership of his own. “It’s good, and it’s just going to con-tinue to grow.”

[email protected]

Dave DyckStaff Writer

“You’ve got service companies, managers, you’ve got producer representatives; everybody gets to sit together at the booth, at the table, have a drink and get to know each other.”

Oilmen fill the Lido in October

President Sean Thomas addressing the crowd of over 100 people at this month’s meeting. He said he was pleased with the turnout, which doubled last month’s meeting. DAVE DYCk PHoTo


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The fracking day begins in the dead of night.

At 3:15 a.m., Paul Formby wakes up, has a coffee, maybe a protein shake, then works out and waits for the text from his boss, usually around 4 a.m. He heads to his swamping shop.

once there, the truck is started to warm it up – most of the work usually happens in winter. They get the hoses washed off, then after determining what their job will be today, they start driving, usually about two and a half hours, to their next work sites.

These sites are the fracking wells that will play a large part in the north-eastern B.C. economy.

The initial drilling of a well is re-ally a small fraction of the work that needs to be done to keep the structure healthy and operating.

And most of that later work is con-tracted out to companies of various sizes.

For Roy Verdzak and his well, the company that Encana trusted to do the job on Verdzak’s land was Nodes Con-struction, out of Pouce Coupe.

When Nodes is hired, Encana has already done all the pre-work, said Nodes Construction owner Murray

Nodes. “We would take and build the thing to their design,” he said.

Usually, this involves stripping part of a field down to bare dirt, sometimes removing enough layers of ground to dwarf the people removing it.

Nodes is no stranger to this type of work – and the patch. He’s been around since the 1990s, when his company was only working on 20 jobs a year, compared to the more than a dozen job sites his company now works on daily.

He’s not the only one who is hoping to get some contracts from companies like Encana.

“i guess, typically, there’s always competition ... but i think what we’ve seen in this area has been a gradual in-crease over so many years that it hasn’t had the fall down and check up yet,” Nodes said. “You haven’t seen the cut-throat competition.”

once the land is cleared, the natural gas well must be drilled. This falls to larger companies mostly based out-side of the Peace Region – according to one local servicing company head, there aren’t any local companies that do this type of work.

“Right up until there’s a wellhead, those are large, international compa-nies,” the source said.

See GAS on Page 22

William StodalkaStaff writer

Pipeline News North traced a piece of land from purchase to production. This is Part I of the series.

NatURal GaS NatioN


[email protected]

COURTESY PHOTO


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GAS from Page 20

B.C.’s Oil and Gas Commission keeps records for Well pad 12-10-79-17W6, the one on Verdzak’s property. They show that the first well of the six-well pad – Well A12-10-79-17W6 – began drilling on Sept. 28, 2012, and was fin-ished by Oct. 17.

On that same day, work was be-gun on the next well, and by Nov. 23, both the second and third wells were done. (The rest were done in roughly the same time a year later.)

The fracking

The “fracking” doesn’t happen at just one point, though. For the first well, the fracking started at 2,500 metres underground, and continued all the way down to a base of 4,500 metres – that’s more than a mile from top to base.

Let’s just say one can’t drill that by hand. To do it, produc-ers need a massive drilling rig. The rig that drilled Verdzak’s well is long gone, but as of Sept. 22, there were about 48 rigs drilling in northeastern B.C.

One of them – working away about 60 kilometres north of Hudson’s Hope – was Trinidad 46, owned by Trinidad Drilling.

Lisa Ottman, the company’s vice-president of investor rela-tions, said that northeastern B.C. is “probably one of our busiest areas.”

In the Montney area located around Fort St. John, Ottman es-timates that this summer, they had 14 rigs working there, each with about five workers.

Basically, a lot of pipe is con-nected to a large drill bit – the diameter can be between five to 20 inches, depending on the rig – to penetrate the ground. It drills down beneath any fresh water.

Then they remove the drill bit and the pipe connecting it. This is done manually – a derrick

hand working near the top of the rig and a floorhand working on the floor of the rig pull it out in bits until it’s all done.

Then they put in a steel pipe called “surface casing” that is thinner than the hole, and pour cement down through that steel pipe. The cement goes through the pipe and then fills in the bar-rier between the surface casing and the first, bigger hole.

This process is supposed to protect groundwater aquifers from any kind of contamination.

The cement can be poured multiple times to create more layers between the gas and any groundwater.

Then a different downhole drilling motor is used to push sideways – the horizontal drilling that is one of the key technologi-cal features of modern fracking – and then create the same surface casing for that hole.

After all this, the team sends out miniature explosions to cre-ate fissures in the ground where they believe gas can be retrieved. Then they pump in “fracking flu-id” made up of water and other materials.

These other materials, like sand, keep the fracks open, but then they suck the water back up, which now has natural gas in it.

The pipelines

It does not stop there. On Verdzak’s property, there

are further, interwoven threads of pipeline that carry the natural gas from these wells.

These pipelines are built and tested by people like “Walter,” a welder who has been working in and around the area for thirty years.

“The pipeline starts at one lo-cation, but then they go to a new location the very next day,” he said. “Doing three kilometres, in ten days you’re 30 kilometres away ... for some people who are a bit like gypsies, they really like it. I didn’t particularly hate it myself.”

It’s work that especially re-quires good hand-eye coordina-tion, Walter continued.

“You’re dealing with thou-sandths of an inch, not tenths of an inch,” he said. “You’re trying to put that weld on as tight and neat as possible – not everybody

is good at looking at a candle flame ten hours a day.”

But there’s also a competitive nature to welding – to do it the neatest, fastest and so on.

Perhaps partly due to this race to the top, Walter said he has seen the industry change. Beforehand, pipes weren’t as strong, light or as stringently tested. Now, every portion of pipeline is X-rayed be-fore it’s put down.

“Everything is visually checked,” he said. “They’re checking travel, how far you make your welding rod go, what aperture you’re using, what volt-age,” he said. “They just won’t pass anything that’s no good. It’s not worth their while. There are way more inspectors than ever before.”

‘Get paid what you’re worth’As most people in the Northeast

know, skilled labour is in high demand.

According to the Globe and Mail, about 4,000 welders and related machine operators will be needed here in coming years – putting it in the top 10 of the most in-demand positions in B.C.But there are also opportu-nities for people who don’t have an official trade certification. You could do “swamping” work like Formby.

Some of his duties in the patch require him to vacuum water ei-ther from the pipeline – because there’s too much water and the pipeline is freezing up – or in other cases, cleaning up spilled water that contains chemicals.

But this isn’t the type of vacu-uming done by anyone with thin skin. It’s done with big trucks and heavy hoses, usually in the cold-est months of the year in one of the coldest regions of B.C.

Formby had plenty of good things to say about the job he does.

“There are really no oppor-tunities in other fields in B.C., I noticed. Well, there are, but not nearly as much coming in as a new worker,” said Formby.

See JoBS on Page 23

In the Montney area located around Fort St. John, Lisa Ottman estimates that this summer, they had 14 rigs working there, each with about five workers.


[email protected]

TAX from

“Basically you’re making pretty good mon-ey, basically clearing a $100,000 off the start per year ... I love it actually.”

Formby is nothing if not ambitious. Formby said he and his cousin are saving up $500,000 to open their own vac truck shop.

He said he wants to “stir things up” in Fort St. John, adding that a superior once called him “the Wolf of Fort St. John,” comparing him to Wall Street criminal Jordan Belfort, the subject of the movie “The Wolf of Wall Street.”

“You’re getting paid what you’re worth (as a swamper),” he said. “I’ve worked digging ditches for $9 an hour, and it’s not worth it. You’re going to work hard, but you’re going to get paid decent.”

Both he and Walter agreed that there are some jobs in patch that pay well for people without a diploma.

The people who enter it don’t have to take out costly university loans, and can enter the work force early and make enough money to “stay alive,” Walter added.

But there’s a tradeoff in family life that these patch workers can be called to

make.Work, for him, isn’t over until late into the

night. Maybe he’ll get a bit more sleep if he

can grab some shut-eye in the truck while his boss drives him to his next job site.

And that, for the most part, is how the peo-ple who actually work on the wells live, and how the natural gas from wells like Verdzak’s gets pulled out.

But what happens when the well starts to go dry? And what happens to the well – and the water it uses?

[email protected]

Fort McMurry could offer valuable lessons to Dawson Creek and Fort St. John when it comes to boom towns and the problems that comes with them.

On Oct. 6, the Legislative As-sembly sat down for its fall ses-sion – and as the B.C. Liberal government has promised, devel-oping a tax scheme for liquefied natural gas is priority No. 1.

How much the people of British Columbia will earn from the sale of LNG is the key question go-ing forward for Premier Christy Clark’s LNG export plan.

Partners in the nearly 20

proposed LNG projects in B.C. will likely hold off on further in-vestment until they know what piece of the pie the government plans to take for itself.

Bill Gwozd, a consultant who


At the end of October we might have a better idea of the financial framework the province will negotiate with the LNG industry.

Christy Clark to finalize LNG tax

works with gas producers in the Peace, said industry is more likely to stay put and pay its fair share than many give them credit for.

B.C. is in many ways the best option for producers “when you look at the volumes of gas in west-ern Canada and alternatives in the rest of the world,” said Gwozd, who is senior VP of gas services at Calgary-based Ziff Energy.

In February, the B.C. govern-ment proposed a two-tier tax rate. And while the levy is still in its early stages, experts say it’s crucial.

The proposed tax starts low, and ramps up along with gas pro-duction. When a project is in the first tier (the initial investment into gas wells and transmission infrastructure), the producer pays 1.5 per cent in tax on its net proceeds.

Once the project has paid off its capital investment, the rate jumps to 7 per cent. On the oth-er hand, any tax paid in tier 1 can be deducted from the tier 2 rate.

B.C. uses revenues from natu-ral resource extraction to fund everything from roads to health-care to, crucially, teachers and schools. Clark’s government has time and again said a new LNG export industry will pump bil-lions of dollars into government coffers.

Marc Lee, a senior economist with the Canadian Centre for Pol-icy Alternatives, said the final tax rate is likely to be reduced amid nervousness over demand for en-ergy in Asia, the key market for the resource.

In September, the price in Japan for a million British thermal units of LNG was bout $12.

“Whether we land with a 7 per cent rate is not entirely clear to me,” he said.

See TAX on Page 18

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CoALiTioN from Page 15

The coalition has already hired an economist to consult on the expected future growth of northeastern B.C. in popula-tion and industry, along with other specialists.

Staff from the seven municipali-ties will also be involved with these meetings. Fort St. John Mayor Lori Ackerman said that the events would be arranged similar to council meetings.

Having regular, unified meetings will also help these municipalities to plan for the industrial growth that is expected in the region, officials with

the coalition said.“We must plan and prepare now

so our municipalities can accom-modate the new workers and their families, and our coalition is the mechanism to carry out this vital work,” Bumstead is quoted as saying in promotional material handed out by the coalition.

“When we look at what’s coming in the natural gas sector along with projects like BC Hydro’s Site C dam and more growth in forestry, mining and other resource sectors, our new Coalition can’t begin comprehensive regional planning fast enough,” add-ed Ackerman.

[email protected]

Resource coalition to help local economies

“[It’s] actually a single-purpose organization – to represent the interests of these

municipalities in resource development issues,” said Colin Griffith, the new

coalition’s executive director.

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[email protected] for a rig? There’s an app for that

A look at the app shows red pins for gas, green for oil, and blue for water rigs. Right now, a series of grey pins cluster around the Peace Region, but Dunfield says that will change in the coming weeks as details around B.C. rigs are added to the map.

“We have a significant user base that’s already there, so I mean Daw-son Creek, Fort St. John, Fort Nelson, Rainbow Lake – that whole area. We keep heat maps of usage, and you can see it traces all the way up throughout there,” he said, although he didn’t give precise numbers.

Part of what makes the app so pop-ular is that it is giving out expensive, fragmented information in a free, easy-to-access portal.

“It’s not like it hasn’t been available before; it’s just been so much work to do anything with, and it’s never been available to the general guy who’s out in the field,” said Dunfield. “It’s the office staff that would have people going through this data and collect-ing it, then just like calling the infor-mation out to the people in the field. Now this just makes it available to everyone.”

So why would PetroFeed pay to get this information, and then just turn around and give it away? It’s all part of their next step with this project.

“Where we’re going is to provide communication services and value-added services that sit on top of this

network of connected profession-als,” Dunfield said.

This is only phase one, and they’re way ahead of schedule, he added. The company had accumulated fi-nancing to the tune of $3.1 million, and now the company is looking to continue building on that momen-tum, adding company profiles and expanding into the United States.

Dunfield came up with the idea or-ganically. His father is the owner of a private oil and gas company in Sas-katchewan. In 2004 he developed an economic forecasting and valuation tool for his father’s business that he was able to sell.

“I got really passionate as a private citizen – where’s my ability to cre-ate change in government?” he said. The rise of social networks in 2007 spurred him to try and bring that ef-fective, efficient communication and apply it to government.

“I spent two years studying the un-derlying structure of networks and how to change that to support a dif-ferent category of communication,” Dunfield added.

“That’s what brought me back to say, ‘How can I use that technology learning and apply it to a domain where I have an extremely unique expertise, experience and connec-tions?’ That’s what got me started with PetroFeed.”

[email protected]

Six months ago, a mobile app called PetroFeed was launched that gave the location and status of drill-ing rigs across Western Canada. The app’s developers say that this is con-necting the industry in a way that has never been done before.

Judging by the app’s popularity, the industry agrees. It was the top free app in the business category of Can-ada’s iTunes App Store in late August, and ranked 171 out of all free Cana-dian apps.

“Every day we have people reach-ing out to us, thanking us for creat-ing this,” said the founder and chief executive officer of PetroFeed, Ashley Dunfield. “I can’t say the corporations specifically, but some of the largest service companies in the world have asked us to come in and talk about

where we’re going. They’re really ex-cited about it.”

The app was designed for all levels in the industry. Anyone working in the field can use it to get directions to a particular rig, but there’s more to it than that. It also gives out the details of the rig for anyone looking for business development, or at the competition.

Finally, if you work on a rig you can connect to it through the app by hav-ing your credentials verified.

“Let’s say you’re the rig manager. We would go through a verification pro-cess to confirm that you are who you say you are, and then that connects to a private social network around that rig,” said Dunfield. “So while every-one in the general populace can see the public side of the profile, once you’re connected, you’re connected to this deeper set of information and communication services.”

Dave DyckStaff Writer

“We have a significant user base that’s already there, so I mean Dawson Creek, Fort St. John, Fort Nelson, Rainbow Lake – that whole area. We keep heat maps of usage, and you can see it

traces all the way up throughout there.”


“Ruby’s inherent synergies to our proposed Jordan Cove LNG project create tremendous up-side potential,” Don Althoff said in a conference call to discuss the transaction.

The pipeline, which moves gas out of the Rockies, provides direct access to the Malin hub in Oregon and to the West Coast through Veresen’s proposed Pacific Con-nector gas pipeline, which would supply its Jordan Cove LNG termi-nal.

“We believe Jordan Cove LNG will drive incremental through-put on Ruby, providing significant cashflow upside for Veresen,” he said.

El Paso Pipeline Partners, an affiliate of Kinder Morgan Inc., holds the remaining 50 per cent ownership interest in Ruby through a common eq-uity interest and will continue to operate Ruby on a day-to-day basis.

The 42-inch Ruby pipeline, which has been in service since July 2011, runs from Opal, Wyo., to the Malin hub. It has approximate-ly 1.1 bcf per day of high quality, long-term ship-or-pay contracts with a weighted average remain-ing contract term of approximate-ly nine years, which represent 71 per cent of total current capacity.

From a market perspective, Ruby provides insights into Rock-ies supply dynamics, which will

enable Veresen to support its Jor-dan Cove off-take customers, said Althoff. Veresen also believes there are attractive market dynamics in higher growth areas such as Cali-fornia, Oregon, Washington and northern Nevada.

Additional contracting and ex-pansion opportunities

“We also think there is room for growth in gas production in the Rockies and getting it from the fields to the pipe to the custom-ers,” he said.

“There are a number of produc-ers who are growing in the area and there are a number of pro-ducers who have signalled this is an important area for them and so therefore over the next few years we can see continual growth.”

With 29 per cent available ca-pacity on Ruby, Veresen has the opportunity to participate in sig-nificant cash flow growth with ad-ditional contracting, said Althoff.

The addition of compression could increase pipeline capacity to two bcf per day from the cur-rent 1.5 bcf per day.

In addition, the Ruby pipe-line gives Veresen another win-dow into gas processing deals and into other opportunities that aren’t too dissimilar from what it is currently doing in Western Canada.

The Ruby acquisition, though, shouldn’t affect Canadian gas volumes that are transported on

TransCanada Corporation’s Gas Transmission Northwest (GTN) pipeline to the Malin hub, as nei-ther pipeline on its own has suf-ficient capacity to meet the needs of Jordan Cove, he said. Even if all the gas for Jordan Cove were to come from Canada, more gas would be needed from the Ameri-can Rockies to meet non-Jordan Cove demand, he suggested.

“Where the molecules come from, it’s really up to the buyers to make that decision; I suspect the mix between the Rockies and Can-ada really won’t change because of our acquisition.”

Financial performance and impact

Veresen will receive $91 million of preferred distributions annu-ally based on the preferred inter-est structure (described below). The distributions are immediately accretive to distributable cash per share.

The limited maintenance re-quirements of the pipeline as well as a low cost structure enhance free cash flow. In addition, there is significant future cash flow growth potential upon conversion to common equity, which could occur following additional con-tracting of spare capacity and/or deleveraging of the assets, said Althoff.

Based on current toll struc-ture and expected volumes, the estimated after-tax return on eq-

uity is in the low teens, said the company.

Attractive convertible preferred structure

Another key feature of the trans-action is the convertible preferred structure under which Veresen will receive distributions before any distributions can be made to common interest holders, said Althoff. Unpaid preferred distri-butions compound at an annual return until paid. The contractual debt amortization will substan-tially deleverage Ruby over the initial shipper contractual term while Veresen earns its preferred distribution.

This structure is appealing as it provides strong downside protec-tion while preserving the upside through the conversion option, he said. At Veresen’s option, the pre-ferred interest can convert to 50 per cent common equity interest in Ruby, which provides Veresen with the opportunity to partici-pate in cash flow growth.

An automatic conversion of Veresen’s preferred interest to common equity can be triggered if an incremental 250 mmcf per day of long-term capacity is contract-ed at rates generally consistent with current contracts.

The 50/50 joint control gov-ernance provides alignment of Veresen’s interests with an experi-enced operating partner.

See PIPELINE on Page 30

ELSIE ROSS

THE PACIFIC CONNECTOR PIPELINE WILL LINK EXISTING PIPELINES AT THE MALIN, OREGON, HUB NEAR THE OREGON-CALIFORNIA BORDER TO COOS BAY.

Veresen Inc.’s acquisition of a 50 per cent interest in the Ruby natural gas pipeline for US$1.43 billion should provide additional opportunities for the company as it develops a proposed LNG project in Oregon

RUBy PiPEliNE acqUiSitioN a StRatEGic liNk

PiPelines

WILLIAM COS INC


Apprenticeships, mobility good for provinces In a country with 13 different ap-

prenticeship systems, the inability to get hours worked in one jurisdiction recognized in another appears to be a barrier for journeymen-in-training looking for oilpatch jobs, but greater harmonization of apprenticeship training at the federal level and co-operative agreements between prov-inces can help solve the problem.

“Currently, the administration of apprenticeship moves between provinces can be extremely compli-cated depending on the trade, and the province you’re moving from and the province you’re moving to,” Sarah Watts-Rynard, executive direc-tor of the Canadian Apprenticeship Forum, told the Bulletin. “It is always nice to see when provinces do what they can to actually facilitate mobil-ity, because that is something we see as a problem on a regular basis.”

For example, last month Alberta and Nova Scotia agreed, in principle, to ensure apprenticeship training is transferable between both prov-inces, allowing for recognition of ap-prenticeship work experience hours and enhancing labour mobility for apprentices in both provinces.

“The goal of this agreement with Nova Scotia is to streamline labour mobility, increase access to appren-ticeship training and, ideally, help Alberta attract more workers to meet the demands of our growing econo-my,” Dave Hancock, former Alberta premier and minister of Innovation and Advanced Education, said dur-ing the announcement.

Under this arrangement, if an ap-prentice takes pre-apprenticeship training at Nova Scotia Community College before moving to Alberta, then his or her training will be recog-nized, which should save writing ad-ditional exams or repeating courses. The two provinces are also working on an agreement to make the pro-cess of moving between Nova Scotia and Alberta easier and less expensive for apprentices to continue educa-tion.

“This is a win-win for our two prov-inces — and more importantly, it’s a win for our apprentices,” said Nova Scotia Premier Stephen McNeil.

“Today’s reality is, workers are moving all over the country. Our job is to make sure they have clear path-ways to obtaining their certification so they can take full advantage of the good jobs in our region.”

Ben Brunnen, manager of

fiscal and economic policy at the Canadian Association of Petroleum Producers (CAPP), told the DOB that industry welcomes apprentice-ship agreements such as the one an-nounced between Alberta and Nova Scotia, as any program attracting and recruiting within Canada is good for the oilpatch.

“Removing barriers to labour mo-bility within our country is a key priority for our members, and this announcement is a great first step towards additional steps.”

Aside from last month’s announce-ment, Alberta is working with other provinces and territories through the New West Partnership Trade Agree-ment and the Canadian Council of Directors of Apprenticeship (CCDA) to enhance apprenticeship mobility. Further, the province recognizes reg-istered apprentices and journeymen from other Canadian jurisdictions at the same level as their home juris-diction and facilitates the transition of apprentices between provinces.

Under the provisions of the agree-ment on internal trade, the Alberta Apprenticeship and Industry Train-ing Board also recognizes the quali-fications of journeymen from across Canada.

Apprentices vulnerable to regional economics; mobility offers

solution towards certificationApprentices from Nova Scotia, and

all provinces for that matter, should have work hours in Alberta counted towards their training certification, said Gil McGowan, president of the Alberta Federation of Labour (ALF).

“That has not always been the case, and so if this agreement helps ad-dress that, then it is a good thing for the individual apprentices. It is also a good thing for the Canadian econo-my, because it will allow apprentices from the Maritimes to come here to Alberta and fill jobs that are open.”

He added: “I have heard first-hand stories from apprentices in the Mari-times who say they have chosen not to follow-up in opportunities in Al-berta because the work they do here would not be counted towards their apprenticeship back home.”

According to Watts-Rynard, ap-prentices are very vulnerable to lay-offs during hard economic times, as an employer would want to maintain a staff of skilled journeymen first and foremost. Therefore, the ability for apprentices to move to other parts of the country for training hours is key to ensuring all provinces are able to develop and maintain a healthy

CARTER HAYDU

kANATA from Page 7

“We’re looking at a liquids solu-tions takeaway solution as well; we’re looking at aggregating vol-umes and fractionating, and taking away a spec product,” said Cum-ming. “We need all of these things to come together to make everything work.”

Long-term, KANATA’s goal is to develop their two-core strategy.

“Each of those areas, we’d like to continue to expand,” said Cum-ming. “So right now in the Daiber, even though we haven’t finished building the first plant, we’re looking at an expansion there al-ready. So all these areas could support a significant amount of infrastructure.”

The investors: “It’s a great com-bination, because we’ve got the Arc Financial guys that are really good on the upstream side and have had midstream companies they’ve sponsored before,” he said. “The teachers have a lot of capital and can invest further, and then we have Energy Spectrum, who know mid-stream inside and out.”

The team: “Some of the things we can do with this great team we have; our experience is excellent. We’ve seen a lot of this stuff, and we can better serve our customers’ needs,” explained Cumming.

“So with UGR, they approached us saying they needed a solution quickly to process this gas, and our engineering guys jumped on it right away, and within just a few weeks we had executed on trying to find the equipment and getting it in place.

“We’re going to have this plant up and running basically within 12 months. It is fast. It’s the way that we can do things. Customer service-wise, we’re ready to go. We really care about what we’re trying to do.”

The target: “In our case, one of the areas is Northeast B.C. and the Montney. We really like the Mont-ney in Alberta. We really like the Duvernay play in Alberta. Anything that has the capacity to really grow. We wanted to expand in these areas. All three of those are those kind of projects. The B.C. side of it was one of the first areas we looked at.”

The customers: UGR. And KANA-TA is talking with a lot of upstream producers, trying to open more doors.

The strategy: “Build infrastruc-ture that fits a customer’s needs. Making sure that we serve them in the best way we can. When I was looking to start up KANATA, one of the things that bothered me that I

noticed (in the industry) was a real lack of customer service. ... As a company we’re going to be concen-trating in our core areas because we think that’s the best way to serve our customers. Find an area, try to build out of that area, and try to serve the needs, whatever they are, for our customers. …

“We want to get into the resource plays; we want to find areas they’re short on infrastructure and we want to find producers that want to work with us, build things out and grow with us. We want things that can be scalable.”

Why kANATA: “We’re all about service. That’s our edge. That’s how we’re going to be successful. We are all about serving our customers’ needs, and we do it in a transparent way. So there’s not a hidden agenda. We do it an open and transparent way so that they can see where we’re coming from, what we’re trying to accomplish to serve their needs.”

The competition: “Any of the mid-streamers, there’s AltaGas, and there’s more coming all the time. There’s no lack of competition. All the key guys are up here.”

In five years: “...we will hopefully have deployed a billion dollars in capital. One core area will be North-eastern B.C. One more core area (is) in Alberta.

After that: “What are the next steps? Are we a public company at that point in time? Do we IPO our-selves? Do we sell to somebody else, or do we find some backing that allows us to grow bigger than that? Those will be our choices at that time. It will be great to have those choices.”

What has to happen? “We need to get some producers to support some of the things we want to do, and we’re ready to go. We’re actively doing several engineering stud-ies on our own just to move things along. When people are ready to make that investment decision, we want to be there for it. We’re trying to move ourselves in position where we can stay ahead of the game a bit and be ready to execute whenever a company decides they want to execute.”

“We are what I would call a very unique company. We have great experience, the ability to take on a substantial amount of risk; we have great backing that allows us to grow as we need to grow; and we have great, great people.

“We really look forward to work-ing up here. There’s a lot of room for everybody to play in this area. We want to make our mark here and we think we can do an excellent job.” [email protected]


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Apprenticeships, mobility good for provinces

mobile crane operator, welder, tower crane opera-tor, metal fabricator, heavy duty equipment tech-nician, as well as general, structural and ornamen-tal, and reinforcing ironworker.

In an email response to the DOB, the spokes-woman said this project is reviewing various ap-prenticeship training and certification require-ments, such as the sequencing of in-school technical training levels and the total number of training hours.

A federal emphasis on harmonization means that in first-, second- and third-year training, ap-prentices would be doing comparable and trans-ferable work anywhere across the country, Watts-Rynard noted.

“If we have some similarity, then it would be a lot easier for people to move, because they’re moving from a system that is actually very similar to where

they’re moving to,” she said, adding that harmo-nization could be problematic, though, because apprenticeships are built up around employers who need the workers, and so differences between provinces are often a response to different industry requirements.

“At the end of the day, once apprentices are certi-fied, they will have all the letters of the alphabet in terms of skills, but the overall order in which they learn them can be very different, which is the rea-son it can be very difficult for an apprentice right now to move from one part of the country to an-other and have all of their hours recognized.”

However, Watts-Rynard said, it is important for work to continue towards finding a federal solu-tion to apprenticeship mobility issues, because regional economics fluctuate, but there is always a need for tradespeople. See JOBS on Page 18

arsenal of tradespeople into the future.“We have people who started apprenticeships

and haven’t completed them, and so they don’t have their certification. It is always good when another part of the country that might be experi-encing an [economic] upswing or has a need can provide work hours.”

While certain provinces might have a legitimate concern that allowing apprentices to complete training in oil-rich jurisdictions such as Alberta might result in those apprentices staying out West permanently, Watts-Rynard said the risk of not fa-cilitating mobility is that those apprentices would not become certified at all. Further, she believes a lot of apprentices from eastern Canada would choose to return to their homes once training is complete.

“They might want to start their own business, and they might find the ship-building contracts and offshore oil and gas industry on the East Coast attracts them back, because they would rather live closer to their family and where they grew up. They may want to raise their children in that same envi-ronment, but now they can move back as some-one who is fully skilled and certified.

“Those are some of the benefits of this. Even though it seems you would be giving away some of your tradespeople, the difficulty would be there probably won’t be the tradespeople if they stayed, because they are not going to be able to be fully employed to get their certification.”

While there are bilateral provincial agreements to ensure apprenticeships can migrate more eas-ily between the two provinces, Brunnen said CAPP would like these types of agreements as standard across all of Canadian jurisdictions, helping get properly-skilled labour to the places where it is in most need in the shortest amount of time.

“This relates to all aspects of the labour issues confronting the oil and gas sector. Whether it is the ability to deliver training to journeymen or from an apprenticeship skills perspective, we would like to see ultimately a system that is basically seamless from a migration perspective for the skilled trades we are looking for and need for our industry.”

An Employment and Social Development Can-ada spokeswoman said the federal government is working with provinces and territories through CCDA to harmonize apprenticeship training and certification requirements in 10 targeted trades: carpenter, mobile crane operator, hydraulic


PiPELiNE from Page 27

Acquisition financingFunding for the Ruby acquisi-

tion is expected to be provided from a combination of equity and debt, specifically: (i) the proceeds from an approximate $800 million equity offering pursuant to which subscription receipts will be issued; (ii) $750 million from new credit facili-ties; and (iii) the balance from Veresen’s existing revolving credit facility.

Veresen intends to refinance the acquisition-related bor-rowings over the course of the next 12 months through various capital market instruments, as well as with ongoing proceeds received from equity issued in connection with Veresen’s Pre-mium Dividend and Dividend Reinvestment Plan.

“We are confident that our equity financing, along with sources of credit as the result of our strong balance sheet, will successfully fund this acquisi-tion,” said Althoff.

Subscription receipt offering

Veresen has agreed to sell, on a bought deal basis, an aggre-gate of 48.8 million subscription receipts at a price of $16.40 per subscription receipt for gross proceeds of approximately $800 million. The subscription re-ceipts will be offered through a syndicate of underwriters led by Scotiabank as bookrunner, and co-led by CIBC World Mar-kets Inc. and TD Securities Inc., under Veresen’s short form base shelf prospectus dated Sept. 20, 2013, and a prospectus supple-ment to such short form base

shelf prospectus to be filed on or before Sept. 24, 2014.

Veresen has also granted the underwriters an option to pur-chase up to an additional 7.32 million subscription receipts at $16.40 per subscription re-ceipt to cover over-allotments, if any. The option is exercisable in whole or part for a period of 30 days following the closing of the offering.

The offering is expected to close on or about Oct. 1, 2014, subject to customary closing conditions and the receipt of all necessary regulatory approvals.

New credit facilities

In connection with the Ruby acquisition, Veresen has ob-tained an underwritten com-mitment from The Bank of Nova Scotia to provide new credit

facilities in an aggregate amount of $1.5 billion. They will rank equally with Veresen’s senior unsecured obligations and will be subject to mandatory reduc-tions from the net proceeds of certain debt and equity issuanc-es and asset dispositions.

A portion of the commitment under the new credit facilities will be cancelled upon deposit of the proceeds from the sub-scription receipt offering into escrow.

Subject to the satisfaction of certain conditions precedent customary for a financing of this type, funds will be available by way of a single draw on the closing of the acquisition. The new credit facilities will con-tain terms that are customary for bank credit facilities of this nature.


Prentice, CAPP Supportive Of Revised EU Fuel Directive

Alberta Premier Jim Pren-tice says the revised Fuel Quality Directive (FQD) im-plementing measures put forward by the European Commission this week are a positive step forward for the province and oilsands producers as they look to broaden access to overseas markets.

“After years of discussion, this is a significant step to-wards fair and equal access to critical new markets,” he said in a statement. “From the beginning, we pushed for a science-based, objective ap-proach to support decision-making.

Greg Stringham, vice-pres-ident of markets and fiscal policy for the Canadian As-sociation of Petroleum Pro-ducers, said the announce-ment was welcome as it puts oilsands on a level playing field with other potential crude suppliers to the EU.

“From our perspective this

is good news for the industry and its potential for market access in the European mar-ket. We’ve seen a lot more at-tention coming out of Europe recently, given the unsettling circumstances there, on Can-ada as a stable supplier,” he said.

“The decision to not pro-ceed with a discrimina-tory policy against Canada’s oilsands I think is welcome news, both from a provider from Canada’s perspective, but also as I’ve heard from many of the member states over there who are looking at Canada for more supply coming to them.”

Prentice noted that the Al-berta government has met with officials from 24 of the 28 EU member states to dis-cuss Alberta’s responsible de-velopment of its resources.

“Access to and expansion of new energy markets ensures we can continue to invest in good schools, quality hospi-tals and grow our communi-ties,” he said.

“While there are still some concerns that need to be addressed, like more clarity around reporting and com-pliance, we will continue to work with the federal govern-ment and advocate for Alber-ta’s interests.”

A proposal published by the commission on Tuesday removes an obstacle to Can-ada exporting oilsands crude to Europe and comes at a time when tensions between the European Union (EU) and main oil supplier Russia are running high (DOB, Oct 7, 2014).

“It is no secret that our ini-tial proposal could not go through due to resistance faced in some member states,” EU climate commis-sioner Connie Hedegaard said in a statement.

The revised plan still proposes a method to as-sess the pollution levels of various fuel types over their

life cycles and the European Commission said it would propose action if these were incompatible with climate goals.

“The Commission is today giving this another push, to try and ensure that in the fu-ture, there will be a method-ology and thus an incentive to choose less-polluting fuels over more polluting ones like, for example, oilsands,” Hede-gaard said.

However Amin Asadollahi, oilsands director for the Pem-bina Institute, said the latest proposed FQD from the Eu-ropean Commission is a step backward.

“[The FDQ] removes emis-sion values assigned to differ-ent types of crude oil. If this proposal is adopted, the di-rective will have lost its origi-nal purpose. It will have little influence on the actions of other countries and corpora-tions that seek to supply fuels

to the European Union,” he said.

“Regardless of whether or not the latest proposal is ad-opted, the fact remains that crude from the oilsands is a high-carbon-intensity fuel source. Moreover, the sector’s emissions intensity has not improved significantly over the past decade, even as over-all production and emissions continue to grow.”

Asadollahi said the oilsands are Canada’s fastest-growing source of emissions, and the “main reason” why Canada is not on track to meet its cli-mate targets.

“Canada’s oilsands sector remains exposed to actions by other countries seeking to limit the use of high-carbon-intensity fuels. That will be the case until we implement credible policies that directly address emissions from the oilsands,” he said.


PAUL WELLS

Alberta Premier Jim Prentice.


Northern British Columbia and Alberta’s Oil and Gas Industry

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