june 2009 issue
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Doing Business
EPCOR Spins OffPower Generation
BY NORDAHL FLAKSTAD
Freelance Writer
EPCOR Utilities Inc. will create Capital Power Corp. as a separate, publicly traded power-generation company with permanent headquarters in Edmonton.
The new company will acquire all EPCOR’s power-generation assets and related operations, including its interest in EPCOR Power LP. Capital Power will have about 3,300 megawatts of owned or operated power generation capacity at 31 Canadian and U.S. facilities.
EPCOR, owned by the City of Edmonton, will continue to provide regulated power transmission and distribution, as well as water and wastewater services, to more than one million customers in Western Canada, including Edmonton.
Creation of a publicly traded generating entity is expected to attract the capital needed for major, new power projects. EPCOR plans an initial public offering of common shares representing about a quarter of the power-generation business.
About 1,000 of EPCOR’s 3,000 employees will join Capital Power, which will be governed by a majority independent board of directors.
AIMCo Acquires
Stake in Precision
Through a $280-million package of loans and equity, the Alberta Investment Management Corp., the province’s arms-length investment firm for pension and other accounts, has acquired 15 per cent stake in Precision Drilling Trust.
Precision President and CEO Kevin Neveu, P.Eng., says the company views AIMCo as “a long-term partner (that). . .sees the value in Precision’s strategy to provide high-value, high-performance drilling and well services globally.”
With the acquisition coming as the drilling sector faces economic difficulties, it drew criticism from some other industry players. They characterized it as a government bailout.
The move allows Precision to reduce financing costs associated with the 2008 purchase, for $2 billion US, of Grey Wolf, a Houston-based contract drilling services company.
Meanwhile, Precision has indicated that its cutting staff in the U.S. and Canada by 14 per cent or an estimated 1,000 employees.
Daylight Buys Intrepid Energy
Daylight Resources Trust has bought Intrepid Energy Corp., a privately owned Alberta oil and gas producer, in a deal worth $109 million. Intrepid’s production, located in west central Alberta, amounts to about 3,000 barrels of oil equivalent a day. The acquisition boosts Daylight’s production by 13 per cent.
TELUS Spending More
On Alberta Broadband
TELUS Corp. plans to invest more than $700 million in Alberta, mainly on advanced wireless and wireline broadband infrastructure. The investment is expected to support more than 2,100 jobs.
The broadband wireline investment will expand the reach of TELUS high-speed Internet and digital TV service in Alberta. The extension of new broadband services creates benefits and
opportunities in the areas of health care, education, economic development and entertainment.
TELUS also announced spending of $300 million for a similar infrastructure expansion in Ontario.
Chilean Firm Becomes
Part of SNC-Lavalin
Montreal-headquartered SNC-Lavalin has acquired VST Ingenieros Ltda, a Chilean consulting engineering firm specializing in mine geotechnical work. The Santiago-based company has about 50 employees, and has expertise and technology in a type of thickened tailings disposal that improves water recovery.
Edmonton Expands LRT
In Both Directions
Within days of adding a 2.3-kilo-metre southward extension of its light rail transit system, the City of Edmonton announced a $300-million northeast expansion of the commuter line. The newest LRT expansion will mainly follow an existing CN Rail right-of way and link the existing Claireview station to the proposed Gorman Towne Centre.
The economic-stimulus project is the first northeast LRT extension since Edmonton’s system opened 30 years ago.
A recently opened southern LRT addition runs to the University of Alberta’s South Campus. This becomes, for now, the southern terminus, complete with an adjoining 14-bay bus terminal. Work continues on a further 7.5-km southward expansion that will bring the LRT to Century Park next April.
Feds Support
Alberta Road Projects
The federal government will cover up to one half of the costs, to a maximum of $53 million, for improvements to Highway 63 near Fort McMurray. An interchange will be constructed on Highway 63 at Thickwood Boulevard and another at Confederation Way. Highway 63 will be widened to six lanes (from four) from Morrison Street to the Athabasca River Bridge.
Meanwhile, construction continues on the $127-million, five-lane bridge across the Athabasca River at Fort McMurray.
Furthermore, the federal and provincial governments will jointly fund construction, beginning later this year, of ring-road interchanges at Callingwood Road and Lessard Road in Edmonton.
Williams Co. Building
Fort McMurray/Redwater
Gas Pipeline Link
The Williams Companies, Inc. of Tulsa, Okla., will build a pipeline worth $283 million US to transport natural gas liquids and olefins from its extraction plant in Fort McMurray to its Redwater processing facility.
Williams currently processes off-gas from Suncor Energy’s Fort McMurray oilsands facility, extracts the natural gas liquids and olefins, and transports them via the Suncor Oil Sands Pipe Line. The proposed pipeline will provide additional capacity for Suncor liquid.
Construction on the 12-inch diameter, 261-mile-long line is expected to begin in 2010, with in-service anticipated for April 2012. The line will have an initial capacity of 43,000 barrels per day of off-gas liquids, with the future capability to transport up to 125,000 bbl/d.
NAIT Gets Money
For Fuel Cells
The federal and provincial governments each will contribute $2.6 million to the Northern Alberta Institute of Technology’s Alternative Energy Centre. It will include $1 million for a 400-kW phosphoric acid fuel cell.
In 2003, NAIT installed a 200 kW-phosphoric acid fuel cell. This first commercially operated high-voltage fuel cell in Canada supplied about eight per cent of NAIT’s main campus electrical needs.
Royalty Regime
Takes Toll On
Drilling, Group Says
The Petroleum Services Association of Canada points to Alberta’s royalty system as one cause of a drop in drilling. PSAC says 16,750 oil and gas wells will be drilled in Canada in 2009 — a four per cent drop from 2008.
The biggest decline (11 per cent) is forecast for Alberta, with an expected decline of 1,350 wells. PSAC points to the province’s new royalty regime, which has shifted drilling to other jurisdictions, as one cause for the decline.
British Columbia and Saskatchewan are expected to see increases of 29 and nine per cent respectively in wells drilled.
ERCB Gives
Nod to Total
To Close Plant
Total E&P Canada Ltd. has received permission from Alberta’s Energy Resources Conservation Board to shut down a small 2,500 bbl/d oilsands plant at Total’s Joselyn lease, northwest of Fort McMurray. The plant was built by Deer Creek Energy, the previous owner of the lease. Total is re-evaluating its approaches at the site with an investment decision expected next year.
Funding Supports
Energy Innovations
The Government of Alberta is funding nine new projects under its Innovative Energy Technologies Program.
Approved projects were submitted by ARC Resources Ltd., EnCana Corp., Husky Oil, Imperial Oil, Pengrowth Corp. and Laracina Energy. Using a variety of test products — including inert gas, polymers, acid gas and carbon dioxide — these initiatives could result in enhanced recovery techniques to reach previously inaccessible oil and gas deposits. Some projects will also examine ways to reduce water use and increase CO2 storage.
Successsful applicants each will receive royalty adjustments of up to $41.5 million under the program’s third round. The latest funding is in addition to similar support provided previously to 16 other projects.
Ivanhoe’s Bitumen Process
Stands Up During Texas Tests
Ivanhoe Energy Inc. has successfully processed Athabasca bitumen at its newly commissioned Feedstock Test Facility in San Antonio, Tex. According to an Ivanhoe news release, processing configurations used at the test site are similar to those expected to be used in commercial projects.
The results provide validation of economic models used by Ivanhoe for its Canadian Tamarack Project and the Pungarayacu Project in Ecuador. Ivanhoe has contracted AMEC for the testing project.
Going Underground
Among Options for
Alberta Electrical Study
Underground transmission of high-voltage power lines is one option for review in an Alberta Energy-commissioned study of electricity systems.
The study will provide a comprehensive analysis of state-of-the-art electric transmission systems, with a particular focus on high-voltage direct current, underground and other new and developing technologies. The government is expected to receive the report this summer.
EPCOR to Run
Banff Wastewater
EPCOR Utilities Inc. has reached an agreement to operate the Town of Banff’s wastewater treatment plant. Under the two-year agreement, an EPCOR subsidiary will provide operational expertise and maintenance for the treatment plant but the town will retain ownership.
In another development, EPCOR officially has become the owner-operator of the Gold Bar Wastewater Treatment Plant in Edmonton. Edmonton City Council authorized the transfer of Gold Bar to EPCOR in January.
Lockerbie Sale Receives
Shareholders’ Blessing
Shareholders and the courts have approved the previously announced acquisition by the Aecon Group. of the Edmonton-based engineering
and contracting firm Lockerbie & Hole Inc.
Budget Calls for
$7.2 Billion Spending
On Infrastructure
The Alberta budget in April announced 2009-10 spending of $7.2 billion for infrastructure. In addition, $1.5 billion that was previously provided to Alberta Health Services is available for health capital projects. However, the government has deferred several health-related construction projects for at least three years.
The infrastructure funding committed for this fiscal year is part of a three-year capital plan that totals $23.2 billion and provides investment in infrastructure, such as health facilities, schools and post-secondary facilities, municipal infrastructure, highways, climate change initiatives and regional water systems.
Suncor Fined For Air and
Water Pollution Offences
Suncor Energy Inc. and its camp operator, Compass Group Canada Ltd., have been fined in Alberta Provincial Court a combined $400,000 for unauthorized wastewater releases into the Athabasca River from Suncor’s Millennium Lodge, near Fort McMurray.
Suncor was fined $175,000 for failing to properly supervise its camp operator. Compass was fined $225,000 for failing to report violations by R&D McCabe, a subcontractor managing the facility. R&D McCabe has pleaded guilty to falsifying information and mismanagement, and a sentencing hearing is scheduled for later than The PEGG’s deadline.
The court ordered a creative sentence condition that directs Suncor and Compass to contribute $300,000 to the Alberta Waste and Waste Water Operators Association, a non-profit organization serving the water and wastewater industry.
In another development, Alberta Environment fined Suncor $750,000 for failing to install air-pollution control equipment as specified in the company’s application for its Firebag facility. Failure to do so resulted in a 2006 release of hydrogen sulphide. In this case, creative sentencing levies were directed to environmental-related programs at the University of Calgary and Keyano College, Fort McMurray.
Syncrude Confirms
Bird Deaths Higher
Than Initially Reported
Syncrude Canada Ltd. has confirmed that 1,606 waterfowl, rather than the about 500 originally reported, died in April 2008 when the birds landed on Syncrude’s Aurora settling basin. The incident attracted international attention and resulted in the company facing federal and provincial charges. Meanwhile, Syncrude has introduced a series of new and additional measures to improve waterfowl protection.
Federal Funding For
Western Carbon Capture
As part of its ecoENERGY Tech-nology initiative, Natural Resources Canada will provide $140 million for eight Western Canadian proposals for development and demonstration of carbon capture and storage technologies.
Successful proposals were submitted by partnerships involving ARC Resources, Enhance Energy, TransCanada, TransAlta, Husky, Enbridge, EPCOR and Spectra Energy Transmission.
Specific initiatives receiving funding include proposals by EPCOR and Enbridge, and by TransAlta for electrical generating plants west of Edmonton. Another succesful applicant was the Heartland Area Redwater Project, a study involving the Alberta Research Council and partners focused on carbon capture and storage and enhanced oil recovery near Rewater.
Several Firms Set Aside Bids
For Carbon Funding
A number of major oilsands players won’t pursue a piece of the $2-billion pie the Alberta Government is offering for carbon capture and storage projects.
Last fall, the government short-listed 20 firms as finalists for the funding. The government will announce three-to-five successful applicants by mid-year. Short-listed companies no longer vying for Alberta’s carbon capture and storage funding include Suncor Energy Inc., Syncrude Canada Ltd., ConocoPhillips Canada Ltd., StatoilHydro Canada Ltd. and Petro-Canada.
Two electrical utilities, EPCOR Utilities Inc. and TransAlta Corp., are among those still in the running for the funding.
SaskPower Selects
Fluor for CCS Work
At Boundary Power Plant
Fluor Corp. will perform front-end engineering for CO2 capture at SaskPower’s Boundary Dam integrated carbon capture and sequestration demonstration project in Estevan, Sask.
It will be the first commercial-scale system for carbon capture and sequestration used on a coal-fired power plant in North America. The project will help determine the technical, economic and environmental performance of its technology.
Construction on Hold
On Portion of
EnCana Headquarters
H&R Real Estate Investment Trust has deferred construction of above-grade portions of the south block of the Bow Tower, EnCana Corp.’s new headquarters in Calgary.
The project’s main, 58-storey tower is not affected by H&R’s move.
Alberta Consultation to Follow Release of Nuclear Report
As a prelude to public consultation on nuclear power generation in the province, the Alberta Government has released a report by a nuclear power expert panel established in 2008 and chaired by former federal cabinet minister Harvie Andre.
Albertans will be asked for input on the issues covered in the report and the option of nuclear power generation. Major issues touched on by the report include electricity supply and demand in Alberta, options for meeting the province’s electrical needs, and an overview of nuclear power.
Information is also provided on nuclear fuel management and safety, nuclear electricity in Alberta and Canadian nuclear regulation.
In addition to Dr. Andre, who holds a doctorate in chemical engineering from the University of Alberta, the expert panel consisted of Dr. Joseph Doucet, Enbridge Professorship in Energy Policy at the University of Alberta; Dr. John Luxat, McMaster University professor of engineering physics and NSERC/UNENE Industrial Research Chair in Nuclear Safety Analysis; and Dr. Harrie Vredenburg, Suncor Energy Chair in Competitive Strategy and Sustainable Development at the University of Calgary.
Report Says Uranium
Could Further Boost
Saskatchewan Economy
A report prepared for the Saskatchewan Government estimates additional uranium development could increase the province’s GDP by $50 to $55 billion while creating 6,500 construction and 5,500 long-term jobs.
Capturing the Full Potential of the Uranium Value Chain in Saskatchewan contains 20 recommendations on further development of uranium resources, focused on added exploration and mining, power generation, and research and development.
Following the report’s release, the Saskatchewan Government launched a public consultation process.
Further Cutbacks
Announced at Diavik
Diavik Diamond Mines Inc. has announced further downsizing measures affecting its diamond mining operations 300 km northeast of Yellowknife.
Actions include two production shutdowns of six weeks each, starting in July and December, and layoffs of 500 of the mine’s 850 employees. By the third quarter of 2009, the company will place the underground mine now under construction, in “a care and maintenance mode.”
It has been announced that under an agreement with Harry Winston Diamond Corp., Kinross Gold Corp. will invest $150 million US to acquire a minority interest in Diavik.
NOVA Corp. Being Sold
To Abu Dhabi Interests
Subject to approval by shareholders and regulators, the NOVA Chemicals Corp. board has approved sale of the company for $499 million US to International Petroleum Investment Co. of Abu Dhabi.
If all necessary approvals are obtained and conditions are satisfied or waived, the sale is expected to be completed in the second quarter of 2009.
Total and SinoCanada
Become 50-50 Partners in
Northern Lights
Total E&P Canada Ltd., a wholly owned subsidiary of Total S.A., has sold a 10 per cent interest in the Northern Lights Partnership to SinoCanada Petroleum Corp., a subsidiary of China Petroleum & Chemical Corp.
The Northern Lights Oil Sands project is located 100 km northeast of Fort McMurray. Total is studying development of the project using mining techniques.
Following the recent transaction, Northern Lights will be owned 50-50 by Total Canada and SinoCanada. In May 2005, SinoCanada acquired 40 per cent of the partnership from Synenco Energy Inc. Total Canada obtained the remaining 60 per cent when it purchased Synenco Energy Inc. in 2008.
Fort Hills Extends Lease by Committing To Upgrading
Fort Hills Energy Corp. has committed to increase upgrading capacity in Alberta in exchange for an extension until 2019 of two oilsands leases 90 km north of Fort McMurray. If Fort Hills is unable to follow through on its plans, it will reimburse the Alberta Government up to $500 million in lost revenue.
Fort Hills sought the extension in the fall of 2008 at a time when it temporarily suspended funding both its mining and Sturgeon County upgrader projects.
Petro-Canada, which has a 60-per-cent interest, has been operating and leading development of Fort Hills with UTS Energy Corp. and Teck each as 20 per cent partners.
Enbridge Opens
Ontario Wind Farm
Enbridge Inc. has opened a 115-turbine wind-power project at Kincardine, Ont., which will produce 190 MW.
Mainstream Catching
The Wind in Alberta
Irish-based alternative-energy developer Mainstream Renewable Power will joint-venture with Alberta Wind Energy Corp. of Calgary to build a portfolio of wind-energy plants.
The venture has a combined value of $850 million and will include
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the 46-MW Old Man River 2 project, near Pincher Creek, scheduled for construction in late 2009
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the 62-MW Windy Point Wind Park, due to operate in 2012
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the 300-MW Waterton Wind Farm planned for 2013.
Mainstream will hold 80 per cent and AWEC 20 per cent.
Edmonton Buries Plan for Tunnel Under River
Following community opposition, a City of Edmonton committee has turned down a proposal to build a $170-$190-million tunnel under the North Saskatchewan River to connect the city’s Strathcona area and downtown. Instead, the city will look into a new wider, above-river crossing to replace the existing Walterdale Bridge.
Synfuels Demo
To Tap Deep Coal
The Alberta Energy Research Institute is providing $8.8 million for a $30-million project with Swan Hills Synfuels of Calgary to demonstrate the viability of the commercial manufacture of synthetic gas from deep coal resources. Once the gas is removed, the coal seams could be used for carbon capture and storage.
DND to Upgrade
Infrastructure at Alberta Bases
The Departartment of National Defence will spend more than $40 million on construction of training accommodation at CFB Edmonton, a water treatment plant upgrade at CFB Wainwright, and aviation refueling infrastructure upgrades at 4 Wing Cold Lake.
CFB Edmonton will see construction of a 97-room building. The Wainwright water treatment plant provides water to the base and the Town of Wainwright.
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