Long-term Mac study nixed

Green groups fail to persuade regulators to order independent gas line review

Gary Park

For Petroleum News

Two of the most influential environmental organizations in North America have failed to convince regulators to order an independent review of the Mackenzie Gas Project’s long-term impacts.

A motion filed by the World Wildlife Fund and the Sierra Club of Canada was rejected by the Joint Review Panel, which is looking at the environmental and social aspects of the project prior to sending its recommendations to the National Energy Board.

However, the panel has agreed to hear from the organizations during its next hearing in Yellowknife Aug. 27-31.

WWF wants independent consultant

He told the Canadian Broadcasting Corp. the organizations will continue to press their case for dealing now with all of the potential consequences of the pipeline.

“Going in with our eyes open is preferable to looking at it from a fairly narrow point of view and missing some of the potential consequences,” he said.

Powell argued that the impact assessment by the Imperial Oil-led consortium, which said there would be no significant environmental damage, lacks scale and scope and failed to take into account a surge in energy exploration and development once a pipeline was built.

However, he also acknowledged that a detailed review could slow a regulatory process that Imperial has identified as a possible stumbling block for the project.

The drawn-out process is already generating doubt that the current project application will proceed.

Inuvik Town councilor Clarence Wood told the Joint Review Panel July 13 he doubts the hearings will be concluded in time for the pipeline to become a reality.

He said the process has taken so long “I don’t feel there’s going to be a pipeline that I will see.”

Latest design reduced compressor stations from three to one

Fons Schellekens, a permafrost expert with Natural Resources Canada, told the Joint Review Panel that Imperial has not properly addressed the consequences of such a change.

He said having only one compressor station will create a “much larger frost bulb around the pipeline ... potentially drainage patterns are going to be changed. I was wondering why no additional mitigation measures are required.”

Having only one station would turn gas in the pipeline colder, freezing water in the soil around the pipeline, thus creating more permafrost, Schellekens said.

He warned that would generate water that could result in the pipeline drifting to the surface.

Imperial’s technical manager Rick Luckasavitch said the pipeline has been designed for a variety of soil temperatures that would be encountered along the pipeline route.

Shell reviews Mackenzie stake

Adrian Loader, the “caretaker” president of Shell Canada to oversee integration of the Canadian operations into Royal Dutch Shell’s global business units, said July 17 there will be a sweeping review of all major projects on the table in Canada except for the first-phase expansion of the Athabasca oil sands complex.

He said it is time to take a strategic look at all Canadian opportunities.

“Should we move faster with some? Should we look at others in a different way?” Loader said.

“That process will take longer because these are strategic decisions.”

The two major projects outside of the oil sands are the Mackenzie project and plans for a 150,000-250,000 barrels-per-day refinery in Ontario to process heavy oil from Alberta.

Before he left as Shell Canada Chief Executive Officer Clive Mather said he remained “quietly confident” that the Mackenzie project could proceed, despite a doubling of the budget to C$16.2 billion and “fragile” economics.

He said the venture was “always going to be difficult … but the fundamentals are strong” as they relate to bringing stranded gas to market and opening up a new supply basin.

Mather said solutions to the challenges must be worked out with the other partners “to the point where we can actually get to an investment decision and that’s going to be tough.”

The major obstacles are delays in concluding the regulatory process and negotiating a financial agreement with the Canadian government.

Athabasca operation not being reassessed

He said the initial expansion of 100,000 bpd to 255,000 bpd, costing C$12.8 billion, is “on track. … It’s going ahead.”

But he would not say whether oil sands production will be more closely tied in with Shell’s refining base in the United States.

Loader said there will be no “sudden U-turns” as Shell Canada’s various units are worked into a broader North American strategy.

He said the reorganization will move the Alberta oil sands mining function to Royal Dutch Shell’s global downstream division, while in-situ oil sands operations will be run from a new Calgary-based North American division responsible for unconventional oil.

But company officials are certain whether SURE Northern Energy, formed last year to develop new Alberta oil sands formations, will remain separate or become part of the unconventional division.

Oil shales, including experimental work in Colorado, will be included in the division.

Calgary will also be the home to Royal Dutch Shell’s onshore North American exploration and onshore North American natural gas production.

Loader would not comment on the future of Shell Canada’s workforce of about 5,000.

“The best way of thinking about this (reorganization) isn’t about synergies, but about growth and building on what we have in Canada,” he said.

He will remain in Canada until late this year, when a Canadian executive will assume the title of “country chair,” a Royal Dutch Shell designation for regional division heads.

Loader said Shell Canada will continue to exist as a corporate entity, but will no longer be the operating company.

—Gary Park