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Environment

The Fracked-Up Business of LNG on Canada’s East Coast

If the threat of turning Eastern Canada into a fracked gas field has been partially mitigated through newly-legislated provincial moratoriums, the natural gas industry still has a particular pipe dream for the Maritimes' coastline.
March 6, 2015, 3:26pm

Natural gas piping. Photo via Flickr user Barb Crawford

At this point, most Maritimers would agree that local opposition to shale gas development has done an admirable job in repulsing industrial designs on hydraulic fracturing in New Brunswick and Nova Scotia. Granted, the McCully gas field of southern New Brunswick, where Corridor Resources has been actively hydraulic fracturing since the early 2000s, remains operational, but this was arguably more a question of the company getting its foot in the door before anyone quite knew the dangers associated with the extraction technique. Resistance to hydraulic fracturing in New Brunswick, at that point, was highly localized, and by the time groundswell opposition to shale gas extraction began to take shape, Corridor already had multiple tens of millions of dollars of infrastructure in place. It remains a sore spot, but things could have been far different had activists not organized and employed a wide variety of tactics against the fracking industry, especially in the past two years.

If the threat of turning Eastern Canada into a fracked gas field has been partially mitigated through newly-legislated provincial moratoriums, the natural gas industry still has a particular pipe dream for the Maritimes' coastline—one that appears to involve the construction of several liquified natural gas (LNG) export facilities. Though said facilities are still in the early design stages, the provincial governments of New Brunswick and Nova Scotia have so far shown themselves to be entirely amenable, if not outright encouraging, to the process.

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North America, for the immediate moment, has become awash in hydraulically fractured shale gas. The technique of fracking—all health, water, environmental, atmospheric and earthquake-related issues aside—has undeniably altered the energy consumption landscape of the continent.

Whereas a decade ago, LNG import facilities brought in a steady diet of natural gas from local offshore drill rigs, as well as from Trinidad and Tobago, Qatar, and elsewhere, these same import facilities now generally operate well below capacity. This is due, in part, to dwindling reserves, but also to fracking and new horizontal drilling techniques that have liberated otherwise unobtainable gas deposits. Indeed, a new trick is to try and get the hydraulically fractured gas off of the continent, and towards more lucrative European and Asian-based markets. Towards this end, companies have lined up applications for LNG export facilities along the East and West coasts of North America. Some of these applications involve retrofitting existing import facilities with export capabilities, some have piggy-backed onto decade-old applications for import facilities that never got built, while others are for new facilities entirely. At the moment, the federal department of Natural Resources has received applications for upwards of 20 export facilities, the vast majority of them being on the British Columbia coast. But don't completely discount the Maritimes in the race to get Canada's first LNG export facility built.

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So far, three as-yet unconstructed East Coast LNG export facilities have applied to the National Energy Board, Canada's third-party regulator, for a licence to export natural gas. Two of the proposed projects are slated to come out of Nova Scotia. These are: Pieridae Energy's Goldboro LNG (for which the Nova Scotia government has granted an environmental approval with conditions), and the Bear Head LNG facility in Richmond County (for which the Nova Scotia government has granted an environmental approval, sort of, based on a ten-year-old application for an import facility). A third project, H-Energy's proposed Melford, Nova Scotia plant, keeps hinting at filing an application with the National Energy Board. In hopeful anticipation, the Nova Scotia government has pre-emptively welcomed H-Energy with open arms.

In the spring of 2014, Nova Scotia's process of approving Pieridae's proposed LNG export facilities with the rather vague requirement that Pieridae develop a greenhouse gas emission mitigation plan didn't fill environmentalists with much faith. Emissions from export facilities, where natural gas must be compressed before being shipped out to overseas clientele, are seen as a big deal in British Columbia. There, the provincial government has highlighted greenhouse gas (GHG) emissions from proposed LNG export facilities as a real stumbling block in terms of meeting total provincial emissions targets.

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Nova Scotia has its own legislated greenhouse gas and air quality emissions targets (10 percent below 1990 levels by 2020), targets that any one of these export facilities would likely undermine. Pieridae, for example, self-reported that by 2020, their Goldboro LNG facility alone would likely cause an 18 percent increase to Nova Scotia's total provincial greenhouse gas emissions.

"As outlined in the Environmental Goals and Sustainable Prosperity Act, Nova Scotia is committed to reducing greenhouse gases to 10 percent below 1990 levels by 2020," Heather Fairbairn, spokesperson for the Nova Scotia Environment department writes to VICE.

"Focused action on reducing GHGs from the electricity sector, Nova Scotia's largest source of emissions, has resulted in significant progress towards that target. With regard to LNG projects, the EA (environmental assessment) approvals include terms and conditions to reduce the potential GHG impacts, such as requiring the proponent to develop a detailed GHG Mitigation Plan.

"Nova Scotia Environment is committed to minimizing the potential GHG emissions associated with LNG projects. We have recently commissioned a study to better understand the industry, its carbon footprint, and opportunities to mitigate emissions."

With an as-yet undetermined mitigation plan for what might become the single largest GHG emitting facility in the province (and before the provincial environmental assessment had been drafted), Pieridae's CEO Arthur Sorensen accompanied Prime Minister Stephen Harper on a 2013 trade mission to Germany. There, Sorensen signed a deal with German energy providers E.ON Global Commodities SE, who committed to take half of all the gas that the Goldboro plant might export. At the time, Sorensen noted that the deal, in 2013 market values, was worth a cool $35 billion.

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"These are flimsy conditions for such a hugely polluting project," warned Catherine Abreu, Ecology Action Centre Energy Coordinator, in a March 2014 press release responding to the Minister of Environment's approval of the Pieridae project. "The proponent should have been required to develop acceptable emissions management plans prior to the project being approved. At minimum, the Department of Environment should set limits for the project's output of GHGs (greenhouse gasses) and other pollutants."

The fourth proposed East Coast LNG export facility is a different beast entirely. The Saint John, New Brunswick, Canaport LNG proposal is owned by Irving Oil Ltd. and Spanish gas giant, Repsol SA, both of whom are flush with cash.

While Repsol SA looked like a loser in 2013 when it couldn't find a buyer for its 75-percent interest in the Saint John's LNG facility, the company's fortunes seem to be turning. At the time, Canaport LNG was one among the many pricy import facilities along the East Coast of North America whose functionality had been pushed aside, thanks to the North American shale gas bonanza sweeping North America. But Repsol, earlier in 2014, settled with the Argentinian government for $5 billion after having its assets there seized in the 1990s. Now, with oil and gas prices seriously devalued, Repsol is snapping up assets for a song from overextended energy companies in need of cash; the company recently inked a $8.3-billion takeover of Calgary-based Talisman Energy Inc. With an only weeks-old application before the National Energy Board, Repsol is now also seeking approval to export LNG from Canaport.

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As for the Irving family, their businesses have enough contentious history in New Brunswick to fill a book. As it relates to their Canaport facility, the New Brunswick Energy and Utilities Review Board (EUB) most recently slapped Irving Oil's wrist for applying for a permit to build an oil pipeline, six months after they had already built the pipeline. By the time the EUB claimed to have learned of the 900 metre pipeline, Irving Oil had already begun using it. The CBC has also reported that Irving Oil has recently been buying up real estate in the Red Head area of Saint John, adding to the 1,000-odd hectares it owns around the current Canaport facility. Irving did not respond to multiple requests for comment on this story.

Repsol and Irving might well have the jump on the proposed Nova Scotia facilities. Energy economist Kenneth Medlock recently suggested that "greenfield" (built from scratch) LNG export facilities in Canada were a "distant prospect" due to the recent downturn in fossil fuel prices and the more advanced projects from other global players. Canaport LNG, however, would involve retrofitting already existing infrastructure. This would still cost an estimated $3 billion, but again, Irving and Repsol have quicker access to this kind of cash than do the Pieridae, Bear Head, or H-Energy.

Current New Brunswick premier, Liberal Brian Gallant, who gained the premiership based largely on his "no shale gas" stance, has noted that he's all for the retrofit, which would involve piping in gas to Canaport LNG from the United States. Gallant has even gone so far as to accuse former provincial premier, Conservative David Alward, of stalling on pushing through the Canaport retrofit for export, based on his single-minded focus on developing a New Brunswick shale gas extraction industry.

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"They probably didn't focus on it because it would have undercut their message that we have to focus on shale gas," Gallant told the CBC in early December 2014. "'Say yes' was obviously the pivotal point of their campaign so I believe they didn't pursue it because it would have undercut that message."

While going forward with the retrofit of the Canaport LNG facility was not a key election issue, New Brunswick voters might be surprised to see their new premier no longer opposed to shale gas development.

All talk of exporting LNG from Nova Scotia or New Brunswick to the outside world, also precludes a serious discussion as to where exactly this LNG is going to be sourced from. Initially, Pieridae suggested that its Goldboro plant would source up to one-third New Brunswick shale gas. This is now doubtful, considering the treatment SWN Resources Canada received in the province in 2013 (tire fires, destroyed equipment, blockades, etc), and seeing as how development in New Brunswick is currently under a moratorium.

The frontrunner option, in terms of proximity and supply, is that the gas will be sourced from the Marcellus shale, the holy grail of shale plays in the United States. Whether the amount of gas derived from each well drilled in the Marcellus (which stretches across Pennsylvania, Ohio, West Virginia and into New York) has already peaked, is highly debatable. Corruption, controversy and the impacts of hydraulic fracturing in the Marcellus are also serious issues that have been covered for years by such sources as National Public Radio's State Impact. Yet the number of wells being drilled in the Marcellus continues to increase (think many, many thousands of active wells), and the United States Energy Information Association estimates that production has steadily increased to a current high of about 171 million cubic feet per day. According to an August 2014 statement from the US Energy Information Association, the Marcellus shale accounts for "almost 40 percent of US shale gas total production."

Getting Marcellus shale gas across the US/Canadian border is the key issue that has yet to be seriously tackled by any one of the proposed projects. In February 2015, Bear Head LNG filed an application to the US Department of Environment to export natural gas to Canada, towards the purpose of exporting this gas to Free Trade Agreement and non-Free Trade Agreement countries (like gas-hungry India, for example). Fossil fuel pundits hailed the application as another step forward in the East Coast LNG "gold rush," but the Bear Head application is treading untravelled ground, and there isn't any telling how various levels of American bureaucracy will take to it.

There is also deep, unfilled, domestic demand—in the state of Massachusetts for example—for Marcellus-sourced shale gas. Pipeline and infrastructure shortages towards accessing natural gas, upon which the New England states have become increasingly reliant, showed itself to be a key problem in the winter of 2013, when gas shortages in the Boston area and elsewhere led to severe price spikes. Pushing through a Marcellus-to-Canada pipeline approval while much of New England continues to rely largely on imported gas from Qatar and elsewhere might be too hot of a political potato.

With a fairly strong opposition to exporting shale gas out of the eastern United States, the game afoot is to see whether the "Come on in!" governance of Nova Scotia and New Brunswick is enough to woo an international export pipeline out of the United States. If it goes through, we might then see whether Nova Scotians and New Brunswick activists, many of them now veterans of various campaigns, are truly opposed to shale gas, or just opposed to shale gas development in their respective backyards.

Follow Miles Howe on Twitter.