- 27 Aug 2016
- National Post – (Latest Edition)
- Sources: Port of Churchill; Federal- Provincial Task Force on the Future of Churchill; Postmedia files; Winnipeg Free Press; Manitoba Court of Queen’s Bench
1910: The government decides to establish an 820- km railway line from The Pas to the Manitoba shoreline of Hudson Bay, where a deepwater port would be built to export Prairie grain. Fort Nelson is chosen.
1918: Railway construction to Fort Nelson is abandoned because of wartime priorities and shortages.
1926- 29: The railway is redirected to Churchill, where construction begins on seaport and grain- handling infrastructure. The port is completed in 1928, and regular train service begins a year later. Canadian National Railway operates what becomes known as the Hudson Bay Railway.
1950s-1960s: Port activities diversify, with commodities such as honey, lumber and livestock hauled by rail for export, and imports such as automobiles, machinery and chemicals arriving by freighter.
1977: The port exports a record 777,500 tonnes of grain, all of it arranged by the Canadian What Board (CWB), a Crown corporation established to market Prairie grain. The Soviet Union emerges as a major customer.
1988: Because of drought conditions, the port exports just 50,000 tonnes of grain.
1996- 97: Denver- based OmniTRAX Ltd. acquires more than 1,000 km of CNR railway in Manitoba, including the line to Churchill. Ottawa contributes $ 14 million to complete the deal and sells the port of to OmniTrax for $ 1. It also agrees to spend $ 28 million on port improvements, with Manitoba kicking in $ 6 million.
2002- 03: OmniTRAX says the rail and port operations can’t continue without firm shipping commitments from the CWB. Churchill mayor Mike Spence says the company may not open the summer shipping season. The federal and Manitoba governments each hand over $ 900,000 for port and track maintenance.
2012: The CWB is reorganized and no longer monopolizes grain sales through ports such as Churchill. Shipments begin to slide.
2013: The Federal- Provincial Task Force on the Future of Churchill says since 1997, Ottawa and Manitoba have spent or committed $ 197 million “to benefit, directly or indirectly, both the privately owned port and rail line leading to it, and the Community of Churchill.”
2014: OmniTRAX abandons plans to haul oil to the port by rail.
2015: OmniTRAX negotiates but does not finalize the sale of its railway and port to a consortium of Manitoba First Nations. The province contributes another $ 800,000 for capital improvements at the port.
April 2016: OmniTRAX files a civil claim in Manitoba Court of Queen’s Bench, alleging Manitoba, then- premier Greg Selinger and the then-transportation minister unlawfully disclosed to third parties confidential information about the rail and port, jeopardizing their potential sale.
July 2016: OmniTRAX announces it has suspended the summer shipping season.
August 2016: OmniTRAX says Manitoba is contractually required to spend another $ 1.74 million for capital improvements on the port, adding that payment “is still outstanding.”
- 27 Aug 2016
- National Post – (Latest Edition)
- Brian Hutchinson in Churchill, Man.
[See also a port development timeline here]
PORT IN A STORM
PEOPLE IN CHURCHILL BELIEVED ONLY WEATHER COULD DEFEAT THEM. THEY WERE WRONG.
I THOUGHT THE ONLY THING THAT COULD STOP US WAS THE WEATHER.
Bobby deMeulles sits at his usual perch, next to a window at t he Reef coffee shop, keeping an eye on Churchill’s main drag, and beyond that, the town’s old train station and the tracks.
This time of year, railway cars filled with prairie wheat should be rolling past the station for the port of Churchill, 500 metres down the line on Hudson Bay. There are no grain cars today.
There haven’t been any all summer, because Canada’s only deep-water Arctic port — the only port of consequence along 162,000 kilometres of northern coastline — has suspended all grain shipments, a decision made by its Denver- based owner, OmniTRAX Inc.
DeMeulles figured something was up, long before the company announced last month it was halting port operations, save for the movement of local freight to small communities further along the Hudson Bay coastline, mostly in Nunavut.
A private transportation company with most of its holdings in American shortline railways, OmniTRAX claims none of its regular grain suppliers wanted to do business at Churchill this year. “The grain season for 2016 has passed the solutions stage,” it says. Townsfolk wonder if it ever really tried to salvage the season.
DeMeulles understands how t hings are done in Churchill. He spent 60 years working at the port, receiving grain, cleaning it, running the elevator. He retired just four years ago, when he turned 75. “I worked until I couldn’t work no more,” he says. “I was well looked after.”
But things looked bleak, well before OmniTRAX pulled the plug on the current shipping season.
“We’d always know how many ships were nominated ( coming to the port) well ahead of summer,” deMeulles explains. “We’d first start to hear about the nominations in March. Grain would starting coming up in railcars around the June 15. If you don’t hear nothing, and you don’t see nothing, and there’s no grain coming, you know something’s wrong.”
He shakes his head. “It’s a terrible thing, for a small town.”
For the rest of Canada, too, says Michael Byers, professor of political science at the University of British Columbia and an Arctic expert. The port’s sudden closure won’t impact national sovereignty, as some alarmists have claimed.
“What is important, though, is the economic development of Canada’s north,” he says. “That port is on our Arctic coastline, on salt water. Any plans for our northern development — mining, shipping, tourism — have to include it.”
The way the port looks now, that seems hard to fathom. From the centre of Churchill, it’s a five- minute walk to the docks. “No Trespassing” signs and a chainlink fence warn away the curious, but the front gate is wide open, and there’s no one inside the adjacent security hut to keep people from entering the port.
A concrete elevator and weather-beaten grain gallery loom over the entire property. The place is all but deserted, with just a skeleton crew of men and women doing a few odd jobs: Basic maintenance. A hammer hits metal. A door slams shut. A pickup truck spins out of a parking lot and past the security shack, throwing up a dust cloud.
In a normal season, Churchill would see 16 to 18 bulk carriers land at the port to claim orders of high-grade Saskatchewan wheat, canola and other grains, destined for Libya, Russia, Bangladesh, other distant places. A couple of ships would be tied to the wharf; five or six more would be anchored in the harbour, waiting their turn to come in and load up.
Dozens of foreign seamen would have been ashore, walking into places such as the Reef, mingling with the locals and tourists. This little town on the Manitoba muskeg, with a steady population of about 800, would, for a short while at least, look and feel like a cosmopolitan trading zone.
That is what it was, how things were, year after year during Churchill’s brief shipping season, from August to early November, or until things would freeze solid and the ice returned to Hudson Bay.
“It’s a short season, and the elevator can only handle so much,” says deMeulles. “But we do our share here. Or we did, anyways.”
It was late in July, on a Monday afternoon. Some of the 73 seasonal employees were back at the port, oiling machinery, replacing broken windows, sweeping away the dust, the bird poop. Getting the place ready for ships that hadn’t yet been nominated. There was still time to arrange a few shipments, so people had hope. People were working.
A port manager called the crew into the lunchroom. He was blunt: the season was cancelled.
Only 15 seasonal workers would be kept on for the summer, along with two fulltime staff workers. Half the railway’s 126 workers, fulltime and seasonal, were also pink- slipped. Everyone in the room was in shock.
“Why bring us back, if you’re just going to turn around a couple of weeks later and shut everything down?” asked Dawne Palmer, 39. There was no explanation.
Palmer spent t he l ast eight seasons at the port, most recently on the grain distribution floor. She has two kids. Her husband has a job outside the port, and the couple owns their house, but they don’t know how they’re going to make ends meet this winter, without her port pay in the bank.
Palmer considers herself lucky. Joe Stover, 34, is among the majority who wasn’t called back at all this summer. Like most of the port workers, he won’t receive any termination pay or benefits.
This would have been his 10th season at the port.
“I really liked it,” he says. “I was proud of working there, with ships coming from all over the world. We were like, ‘ We’re here in Manitoba, and this is our ocean.’ We’re so much more than an old, decrepit bunch of buildings. I thought the only thing that could stop us was the weather.”
Churchill’s mayor, Mike Spence, learned about the shutdown minutes after workers were laid off. He dialed OmniTRAX’s Canadian subsidiary headquarters in Winnipeg. Three times he called, leaving messages each time, he says. No one ever replied, so he quit trying.
Meanwhile, in Winnipeg, newly elected Manitoba Premier Brian Pallister suggested OmniTRAX was playing a cynical game of chicken with his government, closing the port while trying to extract financial concessions, more treasury dollars.
“I don’t respond to threats,” Pallister told reporters.
For the next few weeks, OmniTRAX ignored local inquiries and questions from media. Finally, Kevin Shuba, its Denver- based chief executive, gave a brief interview to Winnipeg Free Press business columnist Dan Lett. His remarks only caused more confusion, and anger.
“For two years we have been talking ( to the federal and provincial governments) … with no response,” Shuba said. “I’ ll tell you why they don’t want to talk to us. Once they reach out and talk to us, they have to become accountable, and they have to be part of the solution. They also have to acknowledge the truth and the facts. And last, once they reach out and engage us, guess what, they have to make some decisions.”
Through an administrative co- ordinator based in Winnipeg, OmniTRAX turned down an interview request from the National Post. Executives were “travelling” and could not be reached, she explained. But the company did review questions put to it via email, and a response came back a few days later, “from the desk of Mr. Kevin Shuba.”
What had he meant by his comments?
“I was referring to the fact that for two years we made numerous attempts to work directly with governments for long- term solutions as the dynamics of the grain market had shifted,” the response reads. “There was little interest by governments to pursue talks about the changed landscape.”
The c ompany s ays it tried but failed to sign any contracts with grain suppliers for the 2016 season. The Canadian Wheat Board, once Churchill’s largest and most reliable client, was long gone, dismantled four years ago by the Harper government, and Canada’s largest private grain suppliers were moving their products through their own larger terminals, in Montreal, Thunder Bay, Ont., Vancouver.
There was nothing to move to Churchill by rail, nothing to pour into the big ships, OmniTRAX claims, only some local freight that will continue to be hauled farther north, to communities in Nunavut.
“The Port of Churchill is not closed for business,” OmniTRAX said in its response to the Post.
If that’s the case, someone needs to let the town know.
It has always seemed a good idea, that port. A strategic asset, in the national interest. As Byers says, it has a role to play in the north’s development. As a commercial enterprise, though, it’s been mostly a flop, always tied to the public purse, at the mercy of governments.
More than a century ago, Ottawa decided it should connect the country’s central grain belt to markets overseas, using the shortest ocean route available and bypassing traditional ports in the Maritimes and in Quebec. A port on Hudson Bay would “bring the grain-growing provinces of western Canada 1,000 miles nearer their markets in the Old World,” according to promotional efforts.
Construction of a federally funded railway began in 1910, from The Pas, in northwestern Manitoba, to Port Nelson, an old trading site on the west coast of Hudson Bay.
The effort was abandoned in 1918, because of wartime shortages and requirements. Work resumed in 1926, only this time, the railway was directed to Churchill, where a port and grain elevator would open in another two years. The first steamships arrived that summer.
The entire effort cost Canadian taxpayers an estimated $ 12.5 million, enough to earn scorn in certain newspapers.
The Montreal Star was particularly upset, forecasting the port’s legacy in one editorial cartoon as “rotting wharfs and grain elevators, and millions of the peoples’ money, gone to the bow- wows.” Another cartoon lampooned the railway, drawing an image of ice-covered tracks twisting around igloo whistle stops named “Squandertax,” “Politicalsopville,” and “Follytown” before reaching frozen Churchill. Decades passed. The port managed to survive. And Churchill itself sometimes thrived. A Second World Warera military base, built by the U.S. Army Air Corps, was populated by Canadian and U. S. forces until it closed in the late 1960s. More recently, the town has benefitted from tourism.
Visits have increased exponentially since the early 1990s, thanks to the increasing popularity of adventure travel, and an abundance of polar bears and beluga whales in the area.
This summer looks like one of the town’s busiest tourist seasons ever, says Spence, Churchill’s mayor for the past 21 years. He owns a hotel and a lodge. But the cancellation of the shipping season has overshadowed any of the success stories. “This is the biggest challenge we’ve ever faced,” he says. “This is the big one.”
And while he won’t blame OmniTRAX directly for all the port’s problems, Spence says the company could have been more visible in the community at large. At the very least, it could have prepared people for the bad news.
And in hindsight, he says now, handing “a piece of huge infrastructure, smack in the middle of Canada,” to a foreign company was probably a mistake. “How was this allowed to happen?” he asks. “You don’t sell your assets.”
Blame Lloyd Axworthy, some townsfolk say. That’s not really fair, but as a cabinet minister in the governments of Pierre Trudeau and Jean Chrétien, and Manitoba’s most influential government member through most of that time, Axworthy was at least peripherally involved with port of Churchill politics.
He was around when the Chrétien government passed legislation paving the way for the divestiture of federally controlled ports. When the port of Churchill went on the block in the late 1990s, OmniTRAX was the only company to meet the governments requirements, Axworthy recalls.
“There’s disdain now for the ( port’s) private owner, but OmniTRAX had the only serious interest ( in acquiring the port) at the time,” he says. “There was small group of shippers, as well, but they had no capital. There was no one else, really.”
OmniTRAX took over the port in 1997, paying just $ 1 for the entire operation. The real prize was the 820-km rail line connecting Churchill to The Pas, and from there, to the rest of the world. It remains the only land route into Churchill. Hudson Bay Railway, as the route is now known, is still used yearround by Via Rail for passenger service, by private companies delivering food and other supplies to Churchill, and from there, to communities by boat or air.
OmniTRAX made t he acquisitions by agreeing to spend $ 45 million on track upgrades, and promising to keep the seaport open for at least 10 years.
Since then, according to a 2013 federal- provincial Task Force on the Future of Churchill, Ottawa and the Manitoba government “have spent or committed $197 million until 2018 to benefit, directly or indirectly, both the privately- owned port and rail line leading to it, and the Community of Churchill.”
That includes $50.5 million in direct transfers to OmniTRAX, $48 million in rail line and port upgrades, and $ 25 million in “grain shipping incentives.”
OmniTRAX now says it’s owed even more. Manitoba has failed to live up to additional financial commitments it has made, the company told the Post in an email exchange.
“Currently, the provincial government has provided $800,000 for capital improvements in 2015,” it claims. “There was a contractual agreement between the provincial government and OmniTRAX for 2015 which requires a further payment of $ 1.74 million which is currently outstanding.”
Manitoba’s new government doesn’t see things that way. “OmniTRAX is incorrect,” says Cliff Cullen, minister of growth, enterprise and trade, in response to Post questions put to him this week.
“The process around the 2015 agreement signed by the previous NDP government is ongoing. OmniTRAX’s claims invite a number of questions and are currently being reviewed by auditors as part of the process. Our new government has been perfectly clear. We are not interested in continuing to subsidize the operations of OmniTRAX with money taken from Manitoba taxpayers.”
One way or another, however, it will have to resolve matters with the company.
Mayor Spence has met provincial a nd f e deral bureaucrats and politicians, and is urging Ottawa to consider “re- nationalizing” the port. It’s an idea that federal Employment Minister MaryAnn Mihychuk reportedly said her government would consider, but she’s been sil ent on the matter since speaking out last month; some claim she’s been told to keep quiet. The official line from Ottawa: the government is concerned, and it’s “monitoring the situation.”
The port isn’t going anywhere. Neither, it seems, is OmniTRAX, despite the fact it’s been trying to unload its Manitoba assets for months now. A deal to sell the port and railway to a local consortium of First Nations looked imminent, at least until April, when OmniTRAX filed a civil claim in Manitoba’s Court of Queen’s Bench.
The lawsuit alleges the province — and Pallister’s predecessor as premier, former NDP leader Greg Selinger — “unlawfully” shared “confidential and proprietary financial information” and business plans to a third party. This alleged indiscretion, it claims, compromised its negotiations with the First Nations.
While the province has not filed a statement of defence, OmniTRAX says it has “every intention of moving forward” with its lawsuit. Meanwhile, it says it’s now “negotiating exclusively with the Mathias Colomb Cree Nation, in relation to the sale of its Manitoba assets.”
The Mathias Colomb Cree did not respond to a request for comment, but few outsiders believe the First Nation, comprised of two thinly populated reserves north of The Pas, could buy and successfully operate the Hudson Bay Line and port of Churchill without financial assistance from government and a group from outside to run things.
OmniTRAX has reportedly agreed to play the role of port and railway manager, presumably for a fair-market fee. So Churchill may not have seen the last of the company, after all. Could the townsfolk accept such a compromise? Would port workers return for another season, under that scenario?
Stover doesn’t hesitate. He was raised in Churchill, did all his schooling in town, wears its heart on his sleeve.
“I would go back, for sure,” he says. “But I’m sure a lot of people wouldn’t.”
Tensions rise as indigenous people block Dakota Access pipeline
NEAR CANNON BALL, N.D. — The New York Times News Service
Published Thursday, Aug. 25, 2016 6:47PM EDT
Last updated Thursday, Aug. 25, 2016 7:17PM EDT
Horseback riders, their faces streaked in yellow and black paint, led the procession out of their tepee-dotted camp. Two hundred people followed, making their daily walk a mile up a rural highway to a patch of prairie grass and excavated dirt that has become a new kind of battlefield, between a pipeline and American Indians who say it will threaten water supplies and sacred lands.
The Texas-based company building the Dakota Access pipeline, Energy Transfer Partners, calls the project a major step toward the United States’ weaning itself off foreign oil. The company says the nearly 1,170-mile buried pipeline will infuse millions of dollars into local economies and is safer than trucks and train cars that can topple and spill and crash and burn.
But the people who stood at the gates of a construction site where crews had been building an access road toward the pipeline viewed the project as a wounding intrusion onto lands where generations of their ancestors hunted bison, gathered water and were born and buried, long before treaties and fences stamped a different order onto the Plains.
People have been gathering since April, but as hundreds more poured in over the past two weeks, confrontations began rising among protesters, sheriff’s officers and construction workers with the pipeline company. Local officials are struggling to handle hundreds of demonstrators filling the roads to protest and camp out in once-empty grassland about an hour south of Bismarck, the state capital.
More than 20 people have been arrested on charges including disorderly conduct and trespassing onto the construction site. The pipeline company says it was forced to shut down construction this month after protesters threatened its workers and threw bottles and rocks at contractors’ vehicles.
Sheriff Kyle Kirchmeier of Morton County, who has led the law enforcement response, said at a news conference that he had received reports of weapons and gunshots around the demonstration, and that protesters were getting ready to throw pipe bombs at a line of officers standing between a rally and the construction site.
Leaders from the Standing Rock Sioux tribe, whose reservation lies just south of the pipeline’s path, say the protests are peaceful. Weapons, drugs and alcohol are prohibited from the protest camp. Children march in the daily demonstrations. The leaders believed the reports of pipe bombs were a misinterpretation of their calls for demonstrators to get out their wooden chanupa pipes — which have deep spiritual importance — and pass them through the crowd.
The conflict may reach a crucial moment on Wednesday in a federal court hearing. The tribe has sued to block the pipeline and plans to ask a judge in Washington to effectively halt construction.
The pipeline runs overwhelmingly along private land, but where it crosses bodies of water, federal rules come into play and federal approvals are required.
The tribe says the pipeline’s route under the Missouri River near here could threaten its water supplies if the pipeline leaks or breaks, and it says the U.S. Army Corps of Engineers failed to do proper cultural and historical reviews before granting federal approvals for the pipeline.
“This is our homeland,” said Phyllis Young, a member of the Standing Rock Sioux. “We are Dakota. Dakota means friend or ally. Dakota Access has taken our name.”
In legal filings, the corps rejects those claims. It says it consulted extensively with tribes, including the Standing Rock Sioux, and it says that tribe has failed to describe specific cultural sites that would be damaged by the pipeline. Energy Transfer Partners says it has the necessary state and federal permits and hopes to finish construction by the end of the year. The pipeline’s route starts in the Bakken oil fields of western North Dakota and ends in Illinois.
With the fate of the land here and this $3.7 billion project in the air, people here have decided to take action. They are occupying the prairie.
Echoing protests against the now-scuttled Keystone XL pipeline, environmental activists and other tribes from the Dakotas, the rest of the Great Plains and the Pacific Northwest have been arriving to camp in the open fields and protest near the parcel where the pipeline company has secured an agreement with the landowner to build.
The protesters sleep in tents and tepees, cook food in open-air kitchens and share stories and strategies around evening campfires. There is even a day care. At morning meetings, speakers warn parents to keep their children away from the Missouri River at sunset, and remind one another they are camped out in prayer.
“It’s a major movement in Indian country,” said CJ Clifford, a member of the Oglala Lakota, who drove up from the Pine Ridge Reservation in South Dakota. He saw the protests as part of a historical continuum reaching to Little Bighorn. This battle, he said, was being waged peacefully.
For many, the effort was about reclaiming a stake in ancestral lands that had been whittled down since the 1800s, treaty by broken treaty.
“Lands were constantly getting reduced, shaken up,” said Dave Archambault II, the tribal chairman of the Standing Rock Sioux. “I could give you a list of every wrongdoing this government did to our people. All of that is frustration pent up, and it’s being recognized.”
Dakota Access opponents call for scrutiny
It’s a pipeline precedent: Opponents of the Dakota Access crude pipeline say the domestic U.S. project deserves the same rigorous environmental and regulatory scrutiny as the controversial, Canadian, cross-border Keystone XL.
TransCanada Corp.’s proposed Keystone XL – designed to move mainly heavy oil from Alberta – was put under the microscope by U.S. regulators for seven years before it was ultimately rejected by President Barack Obama in late 2015. In contrast, the Sioux-led demonstrators now camped out in a North Dakota field say the $3.78-billion (U.S.) pipeline proposed by Energy Transfer Partners LP was rushed through state and federal approval processes.
“Domestic projects of this magnitude should clearly be evaluated in their totality – but without closer scrutiny, the proposal breezed through the four state processes,” David Archambault II, chairman of the Standing Rock Sioux tribe, wrote in an opinion piece for The New York Times this week.
Designed to transport as much as 570,000 barrels a day of light sweet crude from the Bakken and Three Forks production areas to Patoka, Ill., the partially built Dakota Access pipeline would run through four states and is slated to be completed by the end of the year. Opponents of the 1,880-kilometre pipeline project have pointed out it would transport oil a distance that’s similar to Keystone XL. But as a domestic U.S. pipeline, it faces a much different regulatory path.
No presidential permit is required for a purely U.S. pipeline. The project received approvals in North and South Dakota, Iowa and Illinois over the course of this year, and the U.S. Army Corps of Engineers approved crossings of the Missouri and Mississippi Rivers in July, according to the Associated Press.
But even for a U.S. company building in its own country, construction of new oil pipelines is far from easy in practice. Energy Transfer Partners said it was forced to halt North Dakota construction on the project earlier this month in the face of raucous protests.
TransCanada has argued that Keystone XL was rejected because the Obama administration needed to shore up its climate-change credentials – not because the project didn’t pass muster with regulators. The Calgary-based pipeline company is now seeking $15-billion in damages and costs through a NAFTA legal claim.
For the Dakota Access project, the Standing Rock Sioux tribe sued federal regulators last month for approving the pipeline – arguing it could affect the Missouri River, its drinking-water source, and disturb sacred sites, and that no meaningful consultation on the project had taken place. A U.S. district court judge will decide early next month whether to halt the project while the suit proceeds.
But like many other pipeline stories, there is also a Canadian angle to the Dakota Access saga. Calgary-based Enbridge Inc., through its affiliate Enbridge Energy Partners, announced on Aug. 2 that it would acquire a 27.6-per-cent indirect interest in the Bakken pipeline system that includes the Dakota Access pipeline.
Canada’s biggest crude oil export pipelines were almost full in 2015
By Deborah Jaremko
Aug. 25, 2016, 1:11 p.m.
New data from the National Energy Board (NEB) highlights the growing challenge that Canadian oil producers face getting their product to market.
The country’s three key crude export systems averaged nearly 95 percent capacity utilization in 2015, the NEB reports—including one pipeline that had average utilization of 105 percent.
“Oil export capacity remained tight. This is being driven by increases in crude oil supply in western Canada, primarily from the oilsands, while pipeline capacity additions have not kept pace,” the NEB says, adding that markets generally take the view that some spare capacity on pipeline systems is desirable.
The NEB notes that since construction has yet to begin on any of a number of new pipeline projects that have been proposed, rails continues to be requirement to supplement pipelines in moving growing oil supply to market.
Here are the numbers, pipeline-by-pipeline for Canada’s top three:
(Edmonton/Hardisty/Kerrobert/Regina/Cromer to Clearbrook MN and Superior WI)
Capacity: 2.5 million bbls/d
Average utilization 2015: 85%
(Hardisty to Patoka IL and Cushing OK)
Capacity: 591,000 bbls/d
Average utilization 2015: 94%
Kinder Morgan Canada Trans Mountain
(Edmonton to Kamloops)
Capacity: 300,000 bbls/d
Average utilization 2015: 105%
An update on the Energiewende
August 22, 2016
Germany is still pursuing its goal of shutting down its nuclear plants but refuses to shut down its lignite plants. It is slashing renewable energy subsidies and replacing them with an auction/quota system. Public opposition is delaying the construction of the power lines that are needed to distribute Germany’s renewables generation efficiently. Renewables investment has fallen to levels insufficient to build enough new capacity to meet Germany’s 2020 emissions reduction target. There is no evidence that renewables are having a detectable impact on Germany’s emissions, which have not decreased since 2009 despite a doubling of renewables penetration in the electricity sector. It now seems certain that Germany will miss its 2020 emissions reduction target, quite possibly by a wide margin. In short, the Energiewende is starting to unravel.
This post discusses the Energiewende’s main problems under five subheadings, starting with arguably the most problematic:
Germany’s emissions are not decreasing:
Figure 1, reproduced from Climate Change News , shows Germany’s total greenhouse gas emissions from all sources from 1990 through 2015 in million tons of CO2 equivalent:
Figure 1: Germany’s greenhouse gas emissions, 1990-2015 and its 2020 and 2030 emissions targets.
Electricity sector emissions (the red bars at the bottom) decreased between 1990, the baseline year, and 1999 but have remained essentially flat since then. Emissions from other sectors decreased between 1990 and 2009 but have also flattened out since then. As a result Germany’s emissions are about the same now as they were in 2009. The increase in renewables generation over this period has clearly not had the desired effect.
The electricity sector presently contributes only about 45% of Germany’s total emissions. 100% decarbonization of the electricity sector, which is already about 45% decarbonized if we add nuclear, would therefore in theory reduce total emissions by only another 25% or so. Yet Germany’s efforts to cut emissions continue to concentrate on the electricity sector.
The chances that Germany will meet its 2020 and 2030 emissions reduction targets do not look good.
Renewables have not reduced emissions
Figure 2 shows the growth in renewables penetration in Germany’s electricity sector since 1990. The data through 2013 are from the German Federal Ministry for Economic Affairs and Energy and the 2014/15 data are from the Strom Report on Renewable Energy
Figure 2: Growth in Germany’s renewable energy generation, 1990-2015
Since 1990 renewable energy generation has grown by a factor of over ten to the point where it now supplies 30% of Germany’s electricity. One would think that this would have had a visible impact on Germany’s electricity sector emissions, but as shown in Figure 3 it’s difficult to detect any impact at all. Despite the 20% absolute increase in renewables penetration between 1999 and 2014 electricity sector emissions have barely changed over this period, and had it not been for the 2008/9 recession they would probably have increased:
Figure 3: Percent renewables in Germany’s electricity mix versus total greenhouse gas emissions, 1990-2015, data from Figures 1 and 2.
The reason renewables have had no detectable impact is that the added generation has gone towards filling increased demand and replacing nuclear generation rather than generation from gas, coal and lignite, which remains about the same as it was in 1990 (Figure 4, data from Clean Energy Wire). This is in line with Germany’s goal of shutting down its nuclear plants but will of course do nothing to reduce emissions:
Figure 4: Gross electricity generation in Germany by source, 1990-2015
Investment in renewables is falling short:
Figure 5 summarizes investment in renewables in Germany between 2005 and 2015 with projections through 2020. The data are from a recent Climate Policy Initiative (CPI) report. Investment levels have declined by almost a factor of two since the subsidy-induced solar PV peak in 2010 but are expected to decline only slightly between now and 2020, although this may be an optimistic expectation:
Figure 5: Investment in renewable energy in Germany 2005-2015, with projections through 2020.
If we accept the CPI projections, which I have done for the purposes of analysis, Germany will spend approximately $20 billion on onshore wind in the next five years and approximately $15 billion each on offshore wind and solar. How much renewables generation will this add? I first estimated installation costs from the data provided in Table 2 of the CPI report, obtaining the following values:
- Solar PV: $1,600/kW installed
- Onshore wind: $2,600/kW installed
- Offshore wind: $4,400/kW installed
I then used these numbers to calculated how much capacity could be built for the billions of dollars of investment projected to be available between 2016 and 2020:
- Solar PV, $15 billion, $1,600/kW = 9.4GW
- Onshore wind: $20 billion, $2,600/kW = 7.7GW
- Offshore wind: $15 billion, $4,400/kW = 3.4GW
- Total new renewable capacity = 20.5GW
And applied assumed capacity factors to estimate the addition to total annual 2020 generation:
- Solar PV, 9.4GW installed, 12% CF = 9.9TWh
- Onshore wind, 7.7GW installed, 25% CF = 16.8TWh
- Offshore wind,3.4GW installed, 40% CF = 3.4TWh
- Total new renewable generation = 38.7TWh
This added generation will increase renewables’ share of Germany’s total electricity generation from ~30% to ~36%, all other thing being equal. But by how much will it reduce 2020 emissions? If we assume that all of it replaces nuclear, which is what will happen if Germany continues to shut down its nuclear plants, there will of course be no reduction at all. If we assume (optimistically) that all of it replaces lignite and that none of it gets exported we come up with 15.5 million tons using the 4kg/kWh emissions factor for lignite supplied by Volker-Quaschning. But subtracting 15.5 million tons from the 912 million tons emitted in 2015 reduces Germany’s 2020 emissions only to 896.5 million tons, well in excess of the 749 million tons target (Figure 1). It seems that Germany will have to make heroic efforts to reduce emissions from its non-electricity sectors if it is to have any chance of meeting its 2020 goal.
Germany has also established quotas calling for the installation of 2.5GW of solar, 4.1GW (net) of onshore wind and 0.8GW of offshore wind capacity in each year between now and 2020. This will cost about $18 billion/year, about 80% more than CPI’s projections. It seems unlikely that this level of investment will be forthcoming, particularly in view of the uncertainties generated by Brexit. And even if the quotas are realized and all the added power is used to replace lignite Germany will still not meet its 2020 emissions reduction target.
Renewables subsidies are being discontinued:
The Energiewende has achieved what success it has because of the enormous sums of money lavished on it by the German government in the form of subsidies. Now Germany’s policy is changing in reaction to a 2014 EU decree that disallows the use of direct subsidies, such as feed in tariffs, in favor of “market responsive auctioning” based on “feed in premiums”, or in short a bid system. Interestingly, the EU decree was prompted by other countries complaining about unwanted renewable power surges from Germany. As Deutsche Welle put it in the article linked to above:
Although Germans accepted and in time came to appreciate the subsidy system, it was significantly less popular with neighbors – particularly Poland, the Czech Republic and the Netherlands. The European Union has a connected energy market, and they said German-subsidized renewable power was flooding their electricity grids and wreaking havoc. “There was increasing concern and anxiety from our electricity neighbors about the effect outside of Germany,” says Matthias Buck, an analyst with the Berlin-based energy think tank Agora Energiewende. “So they went to Brussels to complain about it. They said, ‘Germany didn’t consult us before they did this.’” Frustration with Germany’s unilateral approach to its enormously important power market at the heart of Europe boiled over in 2011 when, after the Fukushima disaster in Japan, Angela Merkel, backed by broad public support, made an abrupt u-turn on atomic energy, and decided to rapidly phase-out nuclear power in Germany. The European Commission, the executive branch of the EU, was sympathetic to complaints from Germany’s smaller neighbors. Although the EU does not have authority over national energy market choices, it does have authority over state aid used by EU countries to benefit their own industries. And so in 2014, the commission came out with a new set of rules for state aid to the energy sector.
Two rounds of auctions have already been held, but with disappointing results. According to Renewables International“. The government originally hoped that auctions would bring down the cost of solar, but that goal has now been abandoned.” The hope that the auctions would bring down solar costs was frustrated by high bid prices, with solar bids coming in at up to €89.30/MWh, not that much less than the Hinkley Point strike price of £92.50. And Hinkley generation is of course dispatchable while solar isn’t.
It is in fact instructive to compare CPI’s estimates of the levelized cost of electricity for onshore/offshore wind and solar in Germany, which CPI assumes are “potential auction prices”, with the Hinkley Point strike price, which comes out at €107.30 when converted into euros using the current exchange rate of £1 = €1.16. The results are shown in Figure 6:
Figure 6: CPI estimates of levelized costs of electricity for German onshore wind, offshore wind and solar compared to Hinkley Point C strike price.
According to these results intermittent renewable energy has no clear cost advantage over baseload nuclear – even Hinkley Point nuclear. Moreover, if CPI’s estimates are indeed representative of future auction prices it’s difficult to see onshore wind and solar, and in particular offshore wind, attracting much investment. Unless, that is, the German government is willing to pay inflated prices for intermittent renewables generation as a means of furthering the Energiewende, whereupon it will just be replacing one subsidy with another.
Soaring electricity rates:
Germany’s has the second-highest (after Denmark) residential electricity rates in the EU, and as shown in Figure 7, reproduced from Euan Mearns’ Green mythology and the high cost of European electricity post, there is good evidence that these high rates are directly linked to the level of renewables penetration:
Figure 7: XY plot of installed wind and solar per capita versus residential electricity rates in EU countries
Now, however, the Energiewende blog Energy Transition is claiming that this is not the case. As evidence they cite Figure 8, which shows stable retail power rates since 2013 despite a one-third increase in renewables generation:
Figure 8: Cost components of Germany’s retail electricity rates, 2006-2016
But the chart clearly shows that almost all of the increase in retail rates between 2006 and 2013 was caused by growth in renewable energy subsidies that “more closely reflect (the) price tag for Energiewende” – clear proof that the Energiewende has been a major contributor to the price increases – and that the flattening after 2013 was caused by the fact that Energiewende costs did not increase over this period even though they remained at record levels. According to the chart the Energiewende was in fact responsible for over 40% of the 28.69 eurocents/kWh charged to Germany’s retail electricity consumers in 2015. And retail electricity rates approaching 30 eurocents/kWh – roughly three times current retail rates in the U.S. – are nothing to boast about.
Finally, Germany will discontinue direct renewable subsidies for new projects at the beginning of 2017. It will be interesting to see what happens to retail electricity rates as a result.
Germany is a country of contradictions, at least as far as energy is concerned. Germans are in favor of more renewable energy yet oppose building the overhead power lines that are needed to distribute it. They are in favor of deep emissions cuts but also in favor of shutting down Germany’s nuclear plants, which will make the problem of meeting emissions targets far more difficult and costly. The government continues to pursue a nuclear shutdown but is unwilling to shut down Germany’s lignite plants. As a result of these conflicting and counterproductive viewpoints and policies the Energiewende has effectively gone nowhere. Despite the expenditure of many billions of dollars it has failed to achieve any visible reduction in Germany’s emissions or to make a meaningful difference to Germany’s energy mix (renewables still supply only 14% of Germany’s total energy). Its only demonstrable impact has been skyrocketing electricity bills.
And now Germany is discontinuing the direct renewables subsidies that have driven the Energiewende since its adoption in 2000. It might be premature to declare the Energiewende a failure, but things are certainly headed in that direction.
Endnote: The Energiewende has been discussed in three previous Energy Matters posts which reached similar conclusions:
- 25 Aug 2016
- Calgary Herald
- JEREMY VAN LOON
Pipeline plan creates balancing act for PM
In the rolling country of central British Columbia, Michael LeBourdais’s Whispering Pines Indian Band is looking forward to a cash injection from a new pipeline proposed by Kinder Morgan Energy Partners LP. He’ll be seeking compensation for his band if it doesn’t go through.
Meanwhile, 400 kilometres away near the pipeline’s terminus in Vancouver, the Tsleil-Waututh First Nation is battling the expansion, saying it will lead to oil spills on their tribal land and in the waters of Burrard Inlet.
Into this breach will step Prime Minister Justin Trudeau, who must decide on the $6.8-billion Trans Mountain pipeline expansion, which oil companies say is vital to get increased output from Canada’s oilsands to global markets via the Pacific Coast.
The conflicting native views underscore the delicate balance Trudeau must strike as he seeks to fulfil his promises of upholding aboriginal rights and responsible resource development while sparking growth in an economy reeling from plunging oil prices.
Trans Mountain brings together “in one file” the biggest priorities for Trudeau and his Liberal party government, with political implications that set environmental issues against the “cold, hard facts” of economic development, said pollster Nik Nanos, chairman of Ottawa-based Nanos Research Group. The scale of the decision may even force the prime minister to slow down the process and delay a ruling, currently set for the end of the year, he said.
This is “very tricky because of some of the conflicting priorities,” Nanos said. The decision will “be a big signal nationally and internationally and indicative on how the Liberals convert talk on the environment.”
Kinder Morgan plans to triple Trans Mountain’s capacity to 890,000 barrels a day by twinning the existing 1,150-kilometre line that runs through the mountainous Canadian province. The system, in operation since 1953, is the only pipeline from Alberta to the Pacific Coast and connects the oilsands directly to a port with reach to markets outside North America.
Input from stakeholders during Kinder Morgan’s 159 workshops and open houses as well as other feedback has “improved” the project, the company said in an emailed response to questions. The Houston-based pipeline operator has changed the route to avoid sensitive areas and made the pipeline thicker in some locations, it added.
In deciding Trans Mountain’s fate, the government is adding its own review of the project following the National Energy Board’s green light in May, subject to 157 conditions. The expansion probably won’t add to the climate impact of the country’s oil production, the Canadian Environmental Assessment Agency said in a separate report.
Still, even with the conditions and additional review, opposition to the pipeline remains stiff, especially near Vancouver with its beaches and environmentally conscious residents.
Mayor Gregor Robertson in June submitted a request for judicial review of the NEB’s decision. The expansion is “not in Vancouver or Canada’s economic or environmental interest,” the mayor said.
Chief LeBourdais at Whispering Pines, meanwhile, says he wants compensation if Robertson and other opponents succeed in blocking the pipeline, which would provide his band with a “very large sum of money” following years of negotiation with the company.
“If you’re going to say no, that’s OK, but then somebody owes me the value of that negotiated agreement,” he said.
And at a recent public meeting in Burnaby earlier this month as part of the federal government’s review on Trans Mountain, Burnaby Mayor Derek Corrigan summed up the challenges for Trudeau — using the prime minister’s own words.
“Justin Trudeau said governments give permits but communities give permission,” Corrigan told the panel. “Well, we don’t.”
Canada’s oil companies have struggled to win new outlets for their increasing volumes of petroleum — especially from the oilsands, where output may rise 50 per cent to 3.7 million barrels a day by 2030, according to the Canadian Association of Petroleum Producers.
With Enbridge Inc.’s permit for Northern Gateway recently revoked by a federal court and TransCanada Corp.’s Keystone XL approval rejected last year by U.S. President Barack Obama, the industry has pinned its hopes on Trans Mountain after years of disappointments.
“There is no question that a decision on the Trans Mountain pipeline is of significant national impact,” said Jeff Gaulin, vicepresident at the Canadian Association of Petroleum Producers, an industry lobby group in Calgary. “It will be a watershed moment for the development of Canada’s energy resources to reach more international markets.”
Trans Mountain will be the first test of Trudeau’s approach to Canada’s resource-heavy economy and highlights how the government is unprepared with policy to support decisions on individual energy projects, said Monica Gattinger, a University of Ottawa professor and director of the school’s Institute for Science, Society and Policy.
A policy framework that provides direction on climate, aboriginal relations and cumulative effects is needed to help resolve opposition to such projects, she said.
“We have a number of policy gaps around energy that frankly extend well beyond the remit of any individual energy project decisionmaking processes,” she said.
“Are governments really trying to make climate policy one pipeline at a time? That’s putting the cart before the horse.”
Trudeau wants to remake Canada into a low-carbon society while balancing natural resource development in an economy that relies on commodity exports, making the country more dependent on resources for economic growth than other large wealthy nations.
His government is currently developing a climate strategy, including a national price on carbon, in co-ordination with the provinces.
“All projects are reviewed individually based on science, evidence and the traditional knowledge of indigenous peoples,” Natural Resources Canada said in an emailed response to questions about the Kinder Morgan pipeline.
- 25 Aug 2016
- The StarPhoenix
- Postmedia News
K+S Potash moves to commission project
Legacy assures future: company
Just over a month after a major accident derailed K+S Potash Canada’s plan to bring its Legacy solution mine into production by the end of the year, the company has begun commissioning the massive $4.1 billion potash project.
“Legacy will make an important contribution to the future viability of K+S,” Ralf Bethke, chairman of the supervisory board of K+S AG, K+S Potash Canada’s parent company, said in a statement.
“The new plant will ensure that the company has access to highgrade resources for generations and will strengthen the position of K+S on the international potash market sustainably.”
Bethke, K+S AG Chairman Norbert Steiner and K+S Potash Canada president and CEO Ulrich Lamp “pressed the start button” this week during a visit to the site near Bethune, the company said in a news release.
The Legacy project’s commissioning comes about four weeks after the structure supporting a 28-metre-tall crystallizer collapsed, causing the massive pressure vessel to plummet to the floor of the mine’s main production facility.
“It could have been a lot worse,” a pipefitter who worked on the project before being fired for posting about the incident on social media told the Saskatoon StarPhoenix at the time, adding that everyone working in the area was fortunate to escape unscathed.
K+S AG said two weeks ago that the accident delayed the mine’s first production by about six months, to the second quarter of 2017.
However, the company maintains it will reach its target production capacity of two million tonnes by the end of next year.
In a news release, the company said about 4,000 construction workers are completing the mine’s surface facilities while 54 caverns, each as large as a football stadium, are being mined in all of the project’s six well fields.
BHP Said to Target Potential Potash Output as Soon as 2023
August 23, 2016 — 1:53 AM CST
BHP Billiton Ltd. may begin first production from its Jansen potash project in Canada as soon as about 2023, according to people with knowledge of the plans.
The world’s biggest miner judges that the market could be in a position to absorb new supply by then, said the people, who spoke on condition of anonymity because the plans are private. BHP hasn’t given a specific start date for the project, which remains subject to board approval and dependent on market outlook, according to Chief Executive Officer Andrew Mackenzie.
The company is considering plans to develop the asset in Saskatchewan in stages, with a lower capital expenditure than earlier proposals, which would help avoid flooding the market with too much supply, the people said. The cost of the project would likely be multiples lower than the $16 billion estimated in 2013 by Citigroup Inc., they said.
Potash markets have reached their low point, according to Potash Corp., the second-largest producer, which said last month it sees the potential for record demand in 2017. India will be a positive driver for consumption over the next five years, according to U.S. fertilizer producer Mosaic Co. It’s forecasting strong potash demand growth next year and plans to restart an idled mine in Saskatchewan from January.
BHP declined to comment on the timing of Jansen’s development, saying it’s continuing to work through the feasibility study phase. “Development timing and cost remains subject to the outcomes of these studies and board approval,” the producer said in an e-mailed statement. “We believe in the long-term fundamentals of the potash market and that the world will require greenfield potash supply after 2020.”
BHP’s initial proposals for a larger Jansen operation were uneconomic, Macquarie Group Ltd. analysts said in a note dated Aug. 18. The bank last year said its base-case scenario assumed the indefinite deferral of the project. Potash prices have collapsed since 2013 and Russian billionaire Andrey Melnichenko, who controls fertilizer maker EuroChem Group AG, forecasts it may take a decade for the market to work off excess supply.
Demand for potash, a crop nutrient that improves drought resistance and strengthens roots, is forecast to rise as higher output is needed from limited agricultural land, according to K+S AG, Europe’s biggest producer. As the world’s population grows, diets are including increasing amounts of protein, the company said in a presentation this month. Global demand for fertilizers will rise 25 percent in the decade to 2018,according to the Food and Agriculture Organization of the United Nations.
BHP, which has reshaped its portfolio around key iron ore, copper, oil and coal assets, sees potash as a potential additional opportunity to tap rising consumption and an expanding middle class across Asia. “When we look forward in the plans for this company, say 10, 20 years, then there is one scenario where quite a bit of the EBITDA is going to be coming from potash,” Mackenzie said last week on an earnings call with analysts.
A $2.6 billion project to complete production and service shafts at Jansen is about 60 percent complete, BHP said in an Aug. 16 statement. The work will be concluded in 2018 or 2019, following which the producer’s board will need to decide on the asset’s future.
BHP will consider options including a phased development and could also weigh a mothballing of the asset if the market outlook is unfavorable at the time, Mackenzie said on the earnings call. The producer is continuing to talk to potential partners over taking a stake in the project and efforts to lower development and operating costs will make Jansen more attractive, he said.
- 24 Aug 2016
- The StarPhoenix
- ALEX MACPHERSON
Interest in Northern Sask. diamond mining heats up
As De Beers Canada Inc. prepares to start drilling for diamonds north of the decommissioned Cluff Lake uranium mine, another group of industry veterans is planning to explore kimberlite targets about 20 kilometres away.
“As explorationists, we’re always looking at new ideas and new targets,” said Randy Turner, president and CEO of Vancouver exploration firm Canterra Minerals Corp.
“The truth is always in the drilling … but there’s lots of targets and, as an explorationist, I’d have to say I’m very enthused about the area. Having been involved in the discovery of one of the big diamond mines, we like what we see.”
Turner has been looking for — and finding — diamonds since the early 1990s. Canterra was formed after De Beers bought his previous company, Winspear Diamonds Inc., in 2000 for the equivalent at the time of $305 million.
Winspear came to the global mining giant’s attention after it discovered the Snap Lake diamond mine northeast of Yellowknife. After acquiring 100 per cent of the project, De Beers developed and mined the site before it was shuttered last year.
Canterra has projects in Alberta and the Northwest Territories, and what Turner calls a “real pedigree” in the diamond business. Its executives and directors have been involved in many projects, he said.
On Aug. 17, Canterra signed an agreement with Can-Alaska Uranium Ltd. — the same company that optioned 43,000 acres to De Beers for up to $20.4 million this spring — to explore the West Carswell property about 750 kilometres northwest of Saskatoon.
Under the agreement, Canterra can acquire a 50-per-cent stake in the project by paying Can-Alaska $100,000, issuing two million shares and spending $1 million on work over the next three years.
If the Vancouver-based firm acquires its 50-per-cent interest, it will have the option to add another 20 per cent to its stake by paying another $100,000, issuing one million more shares and spending $4 million on work at the site.
“This is a very interesting group of magnetic targets close to existing infrastructure,” Can-Alaska president and CEO Peter Dasler said in a statement, referring to anomalies that could be kimberlite pipes — igneous formations known for containing diamonds.
Turner said De Beers’ “aggressive” approach to the project lends credibility to the area, and his company plans to examine the results of a low-level airborne study before drilling to establish whether the formations are kimberlite.
Finding diamond mines is not easy. Only a small percentage of magnetic anomalies turn out to be kimberlite pipes, and only a handful of those bear diamonds. Turner described finding a project as “one of the greatest challenges in our industry.”