Author Archives: prosperitysaskatchewan
Husky gets approval from Saskatchewan to restart pipeline after oil spill
Crews work to clean up an oil spill on the North Saskatchewan river near Maidstone, Sask., July 22, 2016.
JASON FRANSON/THE CANADIAN PRESS
THE CANADIAN PRESS
OCTOBER 12, 2017
The Saskatchewan government has given Husky Energy the OK to restart a pipeline after a major oil spill along the North Saskatchewan River in July 2016.
The government says in an e-mail to media that testing, inspection and evaluation of the repairs to the line have been done.
The pipeline leaked 225,000 litres of heavy oil mixed with diluent onto a riverbank near Maidstone and about 40 per cent of the spill reached the river.
Husky’s own investigation concluded that the pipeline buckled because of ground movement.
The government says measures have been taken to mitigate the risk of a future failure at that spot, including thicker pipe on a sloped portion, ground movement monitors and gauges to measure strain along the replaced sections of pipe.
Saskatchewan’s Justice Ministry is still reviewing Husky’s response to alarms before the spill to decide whether charges should be laid.
Star – Orion South Diamond Project Core and Geotechnical Drilling Scheduled to Commence Mid-October
Stock Symbol: SGF: TSX
SASKATOON, Oct. 12, 2017 /CNW/ – George H. Read, P. Geo., Senior Vice President Exploration and Development of Shore Gold Inc. (“Shore” or the “Company”) is pleased to announce that Shore and Rio Tinto Exploration Canada Inc. (“RTEC”) have scheduled an HQ core drilling program, consisting of ten holes and some 2,500 metres of drilling, on the Star Kimberlite, to commence in mid-October 2017. This core drilling is required to accurately document the internal stratigraphy of the Star Kimberlite prior to a proposed large diameter drilling (“LDD”) mini-bulk sampling program, which is expected to commence in 2018. The core drilling program is being conducted by George Downing Estate Drilling Ltd. of Grenville, Quebec. Shore and RTEC geologists are responsible for the supervision of the drilling program and subsequent detailed core logging. In conjuction with this diamond drill program geotechnical investigations on the overburden are being conducted by Paddock Drilling of Brandon, Manitoba and ConeTech of Richmond, B.C. The ten hole locations that have recently been selected are in close proximity (10 to 15 metres) to the underground bulk samples and past 48 inch LDD holes and include areas of significant intersections (80 – 110 metres) of the Early Joli Fou (“EJF”) Kimberlite, the principal economic unit the Indicated Resources previously estimated by Shore for the Star Kimberlite in December 2015.
Senior Vice President Exploration and Development, George Read, states: “This core and geotechnical drilling program is an important precursor to a proposed LDD mini-bulk sampling program scheduled to commence in 2018. The selected locations of these core holes will act as pilot holes for the upcoming program.”
The Star-Orion South Diamond Project (the “Project”) is located in central Saskatchewan some 60 kilometres east of the city of Prince Albert. The Project is in close proximity to established infrastructure, including paved highways and the electrical power grid, which provide significant advantages for future mine development. The Technical Report on the Revised Resource Estimate for the Project dated November 9, 2015 provided an updated Mineral Resource Estimate for the Star and Orion South kimberlite deposits: Indicated Mineral Resources of 393 million tonnes containing 55.4 million carats of diamonds at a weighted average price of US$210 per carat. In addition to the Indicated Mineral Resource Estimate, the Star and Orion South Kimberlites include Inferred Resources containing 11.5 million carats. Accordingly, the mineral reserves and economic assessment previously disclosed by Shore for the Project should no longer be relied upon. Shore has granted RTEC an option to earn up to a 60% interest in the Fort à la Corne mineral properties (including the Project) on the terms and conditions contained in the Option Agreement (see SGF News Release dated June 23, 2017). Completion of the proposed 2018 sampling program (First Option) does not entitle RTEC to an interest in the Fort à la Corne mineral properties (including the Project).
All technical information in this press release has been prepared under the supervision of George Read, Senior Vice-President of Exploration and Development, Professional Geoscientist in the Provinces of Saskatchewan and British Columbia, and Mark Shimell, Project Manager, Professional Geoscientist in the Province of Saskatchewan, who are the Company’s “Qualified Persons” under the definition of NI 43-101.
Shore is a Canadian based corporation engaged in the acquisition, exploration and development of mineral properties. Shares of the Company trade on the TSX Exchange under the trading symbol “SGF”.
Caution Regarding Forward-Looking Statements
This news release contains forward-looking statements as defined by certain securities laws, including the “safe harbour” provisions of Canadian securities legislation and the United States Private Securities Litigation Reform Act of 1995. Forward-looking information is often, but not always, identified by the use of words such as “anticipate”, “believe”, “expect”, “plan”, “intend”, “forecast”, “target”, “project”, “guidance”, “may”, “will”, “should”, “could”, “estimate”, “predict” or similar words suggesting future outcomes or language suggesting an outlook. In particular, statements regarding Shore’s future operations, future exploration and development activities or other development plans constitute forward-looking statements. By their nature, statements referring to mineral reserves, mineral resources or TFFE constitute forward-looking statements.
Forward-looking statements in this press release include, but are not limited to statements with respect to the proposed core drilling program (including the number of holes to be drilled, the metres to be drilled, the timing of the drilling and the duration of the program), the proposed geotechnical program and Shore and RTEC’s objectives for the ensuing year, including the proposed 2018 sampling program.
These forward-looking statements are based on Shore’s current beliefs as well as assumptions made by and information currently available to it and involve inherent risks and uncertainties, both general and specific.
Risks exist that forward-looking statements will not be achieved due to a number of factors including, but not limited to, developments in world diamond markets, changes in diamond prices, risks relating to fluctuations in the Canadian dollar and other currencies relative to the US dollar, changes in exploration, development or mining plans due to exploration results and changing budget priorities of Shore or its joint venture partners, the effects of competition in the markets in which Shore operates, the impact of changes in the laws and regulations regulating mining exploration, development, closure, judicial or regulatory judgments and legal proceedings, operational and infrastructure risks and the additional risks described in Shore’s most recently filed Annual Information Form, annual and interim MD&A. Shore’s anticipation of and success in managing the foregoing risks could cause actual results to differ materially from what is anticipated in such forward-looking statements.
Although management considers the assumptions contained in forward-looking statements to be reasonable based on information currently available to it, those assumptions may prove to be incorrect. When making decisions with respect to Shore, investors and others should not place undue reliance on these statements and should carefully consider the foregoing factors and other uncertainties and potential events. Unless required by applicable securities law, Shore does not undertake to update any forward-looking statement that is made herein.
SOURCE Shore Gold Inc.
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TransCanada kills controversial Energy East Pipeline project
TransCanada President and CEO Russ Girling announces the new Energy East Pipeline during a news conference in Calgary, in this August 1, 2013 file photo.
OCTOBER 5, 2017
TransCanada Corp. is killing its controversial Energy East pipeline project.
Also dead is its Eastern Mainline proposal, the company said Thursday.
“After careful review of changed circumstances, we will be informing the National Energy Board that we will no longer be proceeding with our Energy East and Eastern Mainline applications,” chief executive officer Russ Girling said in a statement.
“We appreciate and are thankful for the support of labour, business and manufacturing organizations, industry, our customers, Irving Oil, various governments, and the approximately 200 municipalities who passed resolutions in favour of the projects.”
TransCanada added it will focus on its $24-billion capital spending program, which should boost earnings and cash flow, and support dividend increases of 8 to 10 per cent a year through 2020.
It will take a hit in its fourth-quarter earnings.
“As a result of its decision not to proceed with the proposed projects, TransCanada is reviewing its approximate $1.3-billion carrying value, including allowance for funds used during construction (AFUDC) capitalized since inception and expects an estimated $1-billion after-tax non-cash charge will be recorded in the company’s fourth quarter results,” it said.
“TransCanada stopped capitalizing AFUDC on the project effective Aug. 23, 2017, as disclosed on Sept. 7, 2017. In light of the project’s inability to reach a regulatory decision, no recoveries of costs from third parties are expected.
Canada keen to see Trans Mountain pipeline built, get more oil to China: Carr
By The Canadian Press
Oct. 3, 2017, 3:15 p.m.
Jim Carr. Image: Government of Canada.
Canada will continue to produce oil and ship it across the country whether or not new pipelines are built, says the federal minister of natural resources.
Building pipelines just means it can be shipped more safely, Jim Carr says in a recent interview with The Canadian Press.
Next week, Carr will play host to a major conference in Winnipeg looking at how Canada can and will adjust to a low-carbon energy world.
However, he says, even as Canada adapts to that new world, oil resources will be extracted and will continue to be shipped.
Getting more oil to the West Coast so it can be loaded on tankers and sold to China will be better for the country and getting it there on pipelines rather than rail cars is better for everyone, he says.
The federal government’s approval of the Trans Mountain pipeline is under a legal microscope this week as Indigenous and environmental groups and British Columbia cities argue the process was incomplete and failed to take into account the impact the pipeline could have on everything from killer whales to waterways.
The $7.4 billion pipeline project is being built by Trans Mountain, a subsidiary of Kinder Morgan, to more than double the capacity of an existing line between Edmonton and Burnaby, B.C.
The federal Liberals gave the green light to the project last fall, after making changes to the review process that Carr said included more Indigenous engagement.
“We approved it because more than 15,000 jobs will be created,” Carr said. “We approved it because we don’t feel comfortable sending 99 per cent of our oil and gas exports to one country, the United States.”
Whether there was enough Indigenous engagement is one of the key questions that will be answered by a court case underway in B.C. this week.
Carr said the government remains keen to have the line built. He said the judge will decide whether it can proceed, but the government believed the project was in the national interest when it approved it last fall and still thinks so today.
“Nothing has changed that would alter our judgment on why it was approved,” Carr said.
Next week’s Generation Energy conference in Winnipeg is a key moment for Carr in his tenure as natural resources minister, as his mandate letter calls for the creation of a national energy strategy. That includes working on energy security and making it easier to produce and transmit cleaner energy across the country.
Carr said many key policies and solutions in Canada have come from similar conferences. He also said there is no battle between moving to a low-carbon economy and continuing to produce oil in Canada.
“There are examples around the world where the production and distribution of conventional sources go hand in hand with investment in renewable sources of energy and that’s happening more and more now in Canada,” he said.
Is the Canadian energy industry approaching a tipping point?
By Ron Wallace
Oct. 2, 2017, 3:03 p.m.
Can Canada afford to be unique among energy producing countries and not use, or export for its own benefit, its hydrocarbon resources? Such questions and challenges extend to the very heart of the Canadian national interest.
In announcing the final federal cabinet decision on the Northern Gateway Pipeline project—after years of consultations and hearings and hundreds of millions of dollars expended by the proponent and court rulings that effectively excoriated the federal government’s role in aboriginal consultations—Canada refused to permit a 1,200-kilometre pipeline.
The decision favoured environmentalists’ arguments to protect the westernmost reaches of the Great Bear Rain Forest and make permanent a tanker moratorium along the northern coastline of B.C. It also overruled the science, evaluations and conditions previously set by the joint National Energy Board (NEB)–Canadian Environmental Assessment Agency panel in approving the project.
The decision to reject Northern Gateway sent shock waves through industry and investor boardrooms while the parallel approvals of Enbridge’s Line 3 and Kinder Morgan’s Trans Mountain Expansion were, in turn, met with dismay by many environmental activists.
Such a convoluted decision process was the culmination of changes made by the previous Conservative government that gave the cabinet the final decision on major pipeline projects. Under this system created in 2012, the NEB recommends a course of action after its environmental and regulatory process, and the cabinet has full discretion to accept, reject or modify that recommendation. Inevitably, this process has led to the politicization of a quasi-judicial, fully integrated environmental and regulatory process designed to adjudicate the national energy applications. Accordingly, one would be right to question if this history, and the subsequent decisions made by successor cabinets, constitutes balanced decision making that reflects the national interest and provides clear rules for proponents and the public.
Canadian political attentions will now turn to Kinder Morgan’s $6.8-billion Trans Mountain Pipeline expansion. Current political leaders in BC after the narrowest of election victories have vowed to use “every tool available to stop” the project, starkly in the face of project approvals by the NEB and the Federal Cabinet.
These are not just political or regulatory issues; they extend into material questions of constitutional rights and the rule of law. The latest unique decision by the novice NEB Energy East panel to require a review of upstream greenhouse gas emissions associated with the project may yet lead to a fundamental re-examination of constitutional powers for resource development between provincial and federal governments.
It may also lead to further questions about the NEB’s mandate. In such circumstances, many would consider it unlikely there could be any regulatory certainty or even determinations of the national interest in a house so divided. The regulatory and political certainty required by international investors for major projects has been significantly eroded just when Canada’s energy industry is struggling to maintain its competitiveness in an era of reduced prices and limited exports.
Is it possible for Canada and its energy sector to become greener and more innovative while enduring lower profitability, restrictions to market access, significant capital flight and major project cancellations?
The regulatory authority of the NEB, previously affirmed by the Supreme Court, has been undermined to the extent that a host of jurisdictions, ranging from the federal government down through to municipalities, now presume, if not demand, a final say in Canadian energy development and transportation. The consequential erosion of the pre-eminence of the regulatory powers of the NEB is creating fundamental uncertainty and makes problematic any determinations that reflect the national interest. The federal government’s initial intentions to restore public confidence in the NEB by modernizing the regulator has increasingly been eclipsed by far more pressing concerns of the economy, the national interest and, perhaps, the ability of the Canadian energy sector to survive such disparate, concerted regulatory assaults from so many sectors.
The Supreme Court has been thrust into the mix as a direct result of a federal government that has consistently demurred from issuing clear rules for aboriginal consultation and accommodation. Worse, governments appear content to hide behind the skirts of the NEB when issues related to consultation are concerned.
While the Courts have been forced to balance individual and aboriginal rights in arbitrating contested developments, Ottawa appears unable, or at least unwilling, to address the uncertain regulatory environment that has arrived. Fortunately, the latest ruling by the Supreme Court suggests that it does not equate the constitutional duty to consult with a veto over development—a useful legal clarification, but it perhaps constitutes one in a long series of decisions that may be viewed by some as being too little and far too late.
The real casualties of this regulatory morass are investors, shareholders and Canadians.
Proponents have expended hundreds of millions of dollars in a complex Canadian political, legal and regulatory environment only to find that final decisions are made at the political level behind closed doors using rules and standards previously undisclosed. Such decisions made so late in the regulatory process fundamentally affect how investors view Canada and this directly influences future corporate investment decisions.
Previously, while corporations may have voiced concerns about the length of time of Canada’s regulatory approval processes, many were prepared to invest millions, if not billions, of dollars to complete balanced, fair regulatory processes. The development of the intense fractionation of Canada’s regulatory processes has been paralleled by a staggering flood of capital out of Canada’s resource development sector. Competing claims and demands from numerous levels of government, unresolved aboriginal claims and the outright hostility from well-organized opponents have undermined even the most determined efforts of applicants.
The subsequent collateral damage to Canada includes aboriginal communities who have negotiated benefits agreements in their favour. Can Canada truly afford such a callous disregard of the capital markets and ignore the realities of a highly competitive international natural resource marketplace?
There are other ironies. Proponents are subjected to gruelling regulatory and public examinations of their project proposals. By contrast, the political decisions and policies advanced by the cabinet are not subject to any substantive analysis of their regulatory impacts. Instead, single-issue determinations of policy are unveiled by governments with little or no apparent understanding of the social or economic consequences of the long-term impacts of these policies. The developing attitude appears to be that Canada is prepared to accept virtually any cost or penalty to save the globe. This is a remarkable situation whereby Canadians are increasingly subjected to the global aspirations and ideologies of the elected establishment, which may be far more attuned to the expectations of international agreements than to the immediate interests of its own citizens.
Recall that, historically, the energy sector has ranked first as a contributor to Canada’s overall positive trade balance. The energy industry is estimated annually to contribute $15 billion to government coffers. However, Canada has no choice but to export oil and gas to U.S. buyers at greatly diminished prices, handicapped by a captive-market discount that has been estimated to provide a daily subsidy of $US38 million to U.S. producers who are free to sell or export that same oil at international market prices. These forces explain the Canadian Association of Petroleum Producers’ recent forecasts that Canadian oil and gas capital expenditures will decrease to $44 billion in 2017—half the $81 billion expended in 2014.
These Canadian political and regulatory uncertainties arrive precisely when the U.S., rightly or wrongly, has set out to undertake significant rollbacks to the Obama administration’s legacy, including material changes to Environmental Protection Agency (EPA) regulations and the the Clean Power Plan, a withdrawal from the Paris Agreement, and a renegotiation of the North American Free Trade Agreement.
Canada’s largest single-energy market is increasingly becoming its biggest competitor as it implements measures to diminish federal regulatory authorities and restore sweeping powers to individual states. Such aggressive measures are evidence of a controversial determination by the U.S. to reduce regulatory and tax burdens just at a time when Canada appears headed in a significantly different direction. In short, the U.S. political and regulatory environment has swung wildly from the Obama era of heightened regulatory intervention to the Trump era of deregulation. At the same time, Canada has taken a markedly divergent path from the U.S., its largest single market and one that is changing dramatically.
Scott Pruitt, the EPA’s administrator, recently remarked “the regulatory assault [on the mining industry] is over.”
Irrespective of political or environmental views, especially in light of continuing Canadian regulatory commitments, clearly Canada and the U.S. have diverged in their approaches to the regulation of their resource industries—and in their respective competiveness in the global marketplace. The Canadian Chamber of Commerce recently warned that the federal climate change plan combined with regulatory measures for emissions and a minimum carbon price could seriously undermine Canada’s competitiveness.
In response, Catherine McKenna, the minister of environment and climate change, asserts that “the strongest economies of the next century will be those that nurture business transition and attract companies that want to invest in climate-committed jurisdictions.” She adds that she speaks with those “who don’t see this global shift as a competitiveness problem, but rather a cutting-edge responsibility.”
While many Canadians may prove willing to endure the 83 years until the next century to confirm McKenna’s highly ideological, largely unsupported assertions, it is doubtful that the energy industry or its investors will be so patient. Using as an example the massive energy policy interventions in Ontario, the real costs of such unilateral policy and regulatory commitments may increasingly be marked by few tangible environmental gains but be accompanied by material negative economic, financial and social consequences.
China constitutes another example of the global shift in energy policy. China aggressively stepped in to the void created by the U.S.’s withdrawal from the Paris Agreement and has trumpeted its determination to become a major exporter of solar panels and wind turbines with accompanying construction initiatives such as the Quaid-e-Azam Solar Park, one of the world’s largest, in Pakistan.
China, with much credulous international environmental acclaim, has been forced to halt the construction of 100 new in-country coal-fired power plants—driven not so much by international concerns for global warming but by national concerns over severely diminished air quality from local smog and pollution. It is less reported that China will be responsible for the construction of almost half of the new international coal generation coming online in the next decade.
The New York Times cites reports of 1,600 coal plants currently under construction or planned in 62 countries. This will result in a 43 per cent expansion in the global coal-fired power base. Developing countries are relentlessly being drawn into a cycle of coal-generation dependency. Chinese firms have plans to construct coal-fired power plants internationally with a capacity of 6,285 megawatts—almost 10 times the 660 megawatts planned within China. The China Development Bank and the Export-Import Bank of China have provided in excess of US$43 billion for overseas coal financing. This investment is paralleled by the National Power Corporation of India’s plans to build 38,000 megawatts of new coal capacity in Bangladesh and India.
Simple mathematics probably provides the best guide to understanding the political rhetoric and international posturing associated with the climate debate. With burgeoning international emissions that effectively defeat even the most stringent Canadian national efforts at emissions control, one could question if Canadians should be subjected to the monumental economic burdens resulting from a plethora of carbon-reduction strategies. The recently announced plans to implement a Canadian national carbon tax and to phase out coal-fired power is estimated to achieve respective 18-megatonne and five-megatonne reductions in emissions by 2030—figures that are dwarfed by the growth in international emissions. In sum, Canadian hydrocarbon production will quickly be filled by other international producers, as will any reductions in Canadian greenhouse gas emissions.
Canadians need to understand comprehensively just what is at stake. Decisions that will determine the future social and economic well-being of the country surely require a balanced, informed debate that builds a coherent national strategy for energy and natural resources. Regrettably, many are increasingly concerned that we eroding the rule of law and political unity within the Canadian federation to a degree that will make objective definitions of the national interest unattainable.
What is certain is that Canadians are faced with the immediate consequence of a significantly altered energy future with a rapidly diminished international investment capital base.
When a federation dissolves into narrow definitions of federal, provincial and local government interests the number of hands in the pot increases the complexity of issues for everyone. Such jurisdictional complexities also expand the amount of time needed to navigate all the interconnected issues through competing jurisdictions that increasingly include First Nations and local governments. The result is a complex, often contradictory and competing web of legislative and regulatory tools whose resolution should not be achieved by continuous references to federal courts. The urgent responsibility for resolving these challenges is with all Canadians, especially its leaders, who may soon be confronted with undesirable economic and social consequences of current actions and decisions.
Saudi oil filling Canada’s largest refinery in New Brunswick – what kind of a domestic energy policy is that?
Saudi oil filling a New Brunswick refinery – what kind of a domestic energy policy is that?
January 25, 20167:57 AM
The Irving Oil refinery in Saint John, New Brunswick
A Calgary based oil trader wishing to remain anonymous recently went on record to say that Irving Oil has “fixed the 299,235t Kamakshi Prem to ship crude on January 21 from Ras Tanura, Saudi Arabia to its 300,000 b/d refinery in St. John, NB in Canada.”
Yes you read that right, Canada’s largest refinery, the Irving Oil New Brunswick facility, imports oil from Saudi Arabia. If you study crude trading markets, that news won’t come as much of as surprise since waterborne crude can originate anywhere, but for most of us, it’s a bit of a disconcerting shock. Why does Canada import oil at all, and if we must why from Middle Eastern nations like Saudi Arabia?
Given that eastern Canada imports oil from abroad, it becomes obvious that Canada has a problem. One region of the country produces too much oil, while another imports it from distant and perhaps unreliable jurisdictions. The imbalance is bad news for Canada because locally produced oil is having trouble getting to market due to a lack of pipeline infrastructure, which hurts multiple stakeholders. One solution is Trans Canada’s Energy East pipeline. It would move up to 1.1 million barrels per day of crude from landlocked western regions to eastern Canadian refineries. This would benefit western Canadian producers, eastern refiners, the government – through higher royalties and taxes – and Canada as a whole. Yet the Energy East project is, like any pipeline big enough to make the news, having a lot of trouble getting off the ground.
Opposition to Energy East is an outstanding oddity in Canadian public discourse. The grounds upon which there is opposition are so flimsy as to be nearly surreal. And of course, the overarching objective of the pipeline’s opponents is not to prevent industrial catastrophe, but rather to put a stop to oil sands development (and beyond that, end fossil fuel usage). Keeping that context in mind helps us understand why such disinformation can exist in the first place.
It’s not useful to engage Energy East’s opponents on the terms they choose to debate. Those discussions always tend to lack intellectual substance and play only on our fears, no matter how speculative. The question of whether pipelines are a worthy mode of crude transportation is not worth debating. There are plenty of statistics showing how safe pipeline transportation is relative to other means. It is nonsensical to say that new pipeline construction should be halted because accidents will happen. It is an insult to the people of Lac Megantic, QC to state, as was the recent case with several Montreal area mayors, that alternative oil transport systems (like crude by rail) are preferable. From an environmental perspective, perhaps a pipeline offloading oil in treacherous conditions in an incredibly sensitive ecosystem would be a concern. But to reverse an existing pipeline and build a new piece that ends at a refinery? Clearly a different situation (Energy East). Yet pipeline opponents make no distinction. Therefore, it is important to not pretend that that is a wise weighing of pros and cons. It is emotional fear-mongering with a different goal in mind.
That goal of course is to end the development of the oil sands. Up until now, development in the region has been comprehensively vilified. Take a look at this example, which claims that the ‘tar sands’ are one of the gravest threats to global warming. The author’s argument is derived from the fact that oil sands development requires more direct energy to extract than other sources of energy. This fact however quickly gets spun into ludicrous headline-grabbing statements about the inevitable catastrophe of developing the resource. For example, the article paints a grim picture of the consequences of “burning all the oil in the oil sands.”
It takes about 30 seconds to refute such nonsense. Oil sands production, even if optimistic projections were attained (but never will be due to the recent capping of oil sands emissions), could theoretically have reached 5 million barrels per day. In the first mentioned scenario, burning all 170 billion barrels of reserves, at 5 million barrels per day this would take…93 years. At today’s production rates you would need to double that time frame, meaning 186 years, give or take a year. To burn all 1.8 trillion barrels at 5 million barrels per day would take 980 years. An engineer in the article gravely points out that this would raise temperatures by 0.4 degrees Celsius. This chap unfortunately forgot to finalize the calculation, so I’ll do it for him – that’s .0004 degrees per year. To build enough solar panels to provide the energy equivalent of 1.8 trillion barrels of oil would have large environmental impacts as well. But who wants to hear about that.
There are other non-market factors that should be considered as well. If we choose to import oil from Saudi Arabia, then before claiming that it’s cleaner than oil sands’ “dirty oil”, shouldn’t we estimate the total GHG impact of Saudi Arabian oil, which must include the military footprint of safeguarding that oil in the midst of a perpetual war zone? Could someone please show the calculation for how much GHG is emitted by a fighter jet launching air strikes at irritating neighbors, including the chaotic aftermath? What are the CO2 emissions of torched oil wells that will take months to put out? How much GHG is emitted by tanks blowing things up, or by aircraft carriers lurking around the Strait of Hormuz? Well maybe the last is an over-embellishment since aircraft carriers tend to be powered by nuclear energy. Score that one for the environment.
The only logical reason not to build the Energy East pipeline is that the market doesn’t want or need it. And there could possibly be grains of truth to this argument, because the world’s petroleum business generally works quite well when produced oil is freely mobile to go wherever needed. Therefore, Saudi crude making its way to New Brunswick may seem simply like an efficient market at work.
But there’s more to it than that.
Few energy markets are truly efficient, or work without intervention of some kind. Even in the US, crude oil exports were banned for 40 years for political reasons, with exports just resuming a few months ago. Most nations have some sort of energy policy that is driven by how much the country produces relative to how much it needs.
Except Canada. Canada produces far more than it needs. Total Canadian production is about 3.8 million barrels per day, while the country consumes about 2 million barrels per day. Western Canada produces most of the oil and gas (about 95 percent), while eastern Canada consumes most – Ontario and Quebec alone account for over half the nation’s total energy requirements. It is obvious that western Canada needs to move excess energy production, and that eastern Canada needs to import it. We could leave that to the free market to determine, which might mean all eastern Canadian oil would come from any exporting nation no matter how nefarious, or we could maximize the benefit to Canada. To do that requires thinking about how significant our energy resources truly are, to the whole country.
Western Canadian oil has an enormous economic impact on the nation. As Brett Wilson recently pointed out, we are a resource based nation, a function of our huge size, abundant resources, and relatively small population. These resources are important not just to Canadians but the whole world. In Canada, tax dollars from resource extraction goes a long way, including equalization between have and have-not provinces. It is in the nation’s best interests to maximize these resources. With western Canadian oil being landlocked, pipeline access to markets is in the best interests of all Canadians. Enabling Canadian resources to be utilized by other provinces is, from a national governing perspective, about the easiest decision a government should have to make.
TransCanada’s Energy East project would provide Canadian oil to Canadian refineries, and most of the pipeline is built already. All that is needed are pieces at each end. The project is welcome to New Brunswick in particular, for whom the pipeline will provide economic benefits as well securing a Canadian supply for the Irving refinery. It would also ensure Canadian oil supplies to refineries along the way in eastern Canada, further lessening the need to access foreign oil. Yet despite all of these benefits, Montreal objects to Energy East, calling it dangerous, even as mob-built overpasses fall on their heads and oil sands money finds its way into their daycare centres.
At the end of the day, consuming oil creates pollution. But globally, that is what we do – all of us, even environmentalists – to the tune of 90+ million barrels per day. Oil is produced in various parts of the world, and consumed in others, necessitating massive transportation schemes. Most nations, almost all, act in their self-interest to ensure adequate supplies of reasonably priced energy from reliable sources. And with such prolonged opposition to the Energy East pipeline, Canada, it appears, wishes to stand defiant of that club.
Regardless of free market oil pricing situations, it is nonsensical for Canada to be importing oil from unstable regions, when proper usage of Canada’s own resources would have multiple benefits to the country. There is no logical reason not to build the Energy East pipeline, and a lot of reasons in its favour.
Mr. Trudeau, you want infrastructure projects that will help the nation. Here is one that is half completed, won’t cost you a dime, is as safe as any other Canadian industrial project, and will benefit multiple diverse regions of the country. What more could you ask for? If you won’t help pay for it, then at least help clear the way.
Interview with Rick Rule, President and CEO of Sprott U.S. Holdings Inc.
Sept 24 2017
Once again I had the pleasure of catching up with Rick Rule, and in this interview we talked about the Uranium market, Bitcoin, Gold, and the lessons he learned from his early mentor Peter Cundill. Enjoy!
Hi Rick, welcome back to The Next Bull Market Move. I’d like to start the interview with a question about one of your early mentors, Peter Cundill.
I understand he was an early mentor of yours at the beginning of your career, and I have recently been reading the book ‘There is always something to do’ which is about his investments and how he invested. What were the most valuable lessons your learned from him?
During the period of time that I was learning from Peter, he was focused on deep value opportunities of two primary types; net nets (companies where current assets exceeded all liabilities, and market cap) that were operationally cash flow positive, and companies with hidden, mispriced or redundant assets.
Peter loved closely held timber companies whose forest lands were selling for half of market value, or had real estate development potential. He called the cash flow positive net- nets, free bonds, meaning that you got the cash generating for free, after subtracting current assets from enterprise value.
Peter was of the habit of looking for extraordinary value, which was enabled by a tolerance for pain (a declining share price) and remarkable patience. He was not afraid to be right. Those bargains were seldom available in popular sectors, or favorable markets
‘Investors tend to follow trends and fashion rather that taking the trouble to look for value.’
This was a common theme of Peter’s, and a reason behind the long term success of most value investors. Most investors (maybe most people) believe themselves to be very cogent, rational beings, surveying the information landscape, accumulating facts, and weighing them objectively to reach reasoned conclusions.
Wrong! Most folks search for information that affirms their existing paradigms and prejudices, they look for justifications for comfortable narratives. Hence, trends in motion stay in motion, long after the circumstances that caused the trends cease to exist.
Value investors, including Peter, and certainly myself, are repeatedly guilty of the same sin, but we are taught to try to recognize it and guard against it. Peter’s guard was particularly successful, he was a pathological cheapskate, so he had a quantitative guard against fashion.
What are your thoughts behind Bitcoin and cryptocurrencies as a speculation? Will this space eventually turn into a dotcom mania like the late 1990’s?
Kerem, I’m the wrong one to ask, I don’t own a TV, and I can’t dress myself in stuff that matches! As a judge of popular culture, I’m your last choice.
That being said, I love the sector, in many regards. The technology, the “block chain” and the distributed ledger have the possibility to make many aspects of human culture, but particularly commerce and trade, much more efficient, while eliminating many of the supposed needs for government regulation and taxation.
As currencies, I’m a consumer of currencies, and mediums of exchange, and stores of value. A multiplicity of choice, competition between various currency systems to serve me better, is something I enjoy!
The ability to create and market an algorithm, and market it as a dream, converting the promoters ability to market the dream, in return for other peoples earned wealth will attract some very smart, and likely stupendously successful scam artists, who just like central bankers, will bill savers and investors out of billions of other currency units. Governments hate this, they want a monopoly on fraud and extortion, but in this circumstance, they are entering into a battle of wits, under armed.
Once again, the sentiment surrounding Uranium has fallen into pessimism and despair. Speculators have left the scene since the big run up we had at the beginning of the year. It seems to me that for the most part, investing early in bull markets involves patience and being able to handle a certain amount of boredom. When a market does nothing, no one is interested. When a market is rising, everyone is interested. Is Uranium following a similar path to the previous bull market you speculated in?
The early run up in uranium equities was a very interesting phenomenon in that it occurred on very low volume. I think two forces were at play. One, I believe a three year “bear market” wore out the sellers, they were out of inventory, and the shares had moved to stronger hands. At the same time, speculators with longer memories, of the last bull market, began to accumulate, in hopes of a repeat. The companies, stumbling on a funding window, which could and did save the sector from extinction, drowned the buyers in an avalanche of freshly issued equity.
I believe we need a period of sustained Japanese reactor restarts in order to have a uranium price response in the next two years. By 2020, the problem takes care of itself. Ironically, the longer it takes for the market to re-balance, the wilder the probable upside ride is on recovery. When you destroy productive capacity, which is what extended “bear markets” do, the industry is unable to respond to price increases by increasing supply, and we get those spectacular price spikes, like we did in the early part of the last decade.
What are your current thoughts on gold? Is the pullback we had over the last few years over?
My belief is that the most important factor in the gold price, is global faith in the purchasing power of the US dollar, and faith in US Treasury securities. The most important measure of this faith, that I’m aware of, is the US 10 year treasury yield, and more importantly, the delta between the 10 year, and the TIP.
If you have observed what I have observed, that gold trades inversely with the US 10 year treasury, and you observe that the US 10 year treasury has been in a 35 year “bull market”, with the yield falling from 15% to 2%, you might believe that the bond “bull market” is closer to the end, than to the beginning. If that is the case, gold, which I believe trades inversely, may be in a “bull market” which is closer to it’’s beginning, than it’s end.
Applying Cundill’s logic to the US 10 year treasury, it is simply not cheap enough to be attractive. Jim Grant refers to it as “return free risk”. I think gold will prevail over that type of competition.
Better yet, the gold quote has done better over the last twelve months, that the gold equities, and I believe the gold equities are poised to catch up.
And finally, give us an update on what Sprott is up to, and how investors can get in touch?
Sprott continues to refashion itself as a global merchant bank, and investment manager focused on natural resources and precious metals. We sold our broader market Canadian mutual fund business to that unit’s employees, which freed up a lot of capital, and sharpened our focus. We have a superb balance sheet (over $300,000,000 in working capital, with no debt), a very resilient business (we generated free cash flow in a sector where the most relevant measurement metric, the TSXV index declined by almost 90%,) and we manage to pay a 5.5% dividend on our common stock. Imagine what we can do in a favorable market.
We manage or administer in excess $10,000,000,000 on behalf of individuals and institutions worldwide, focusing on the sectors where we have spent three decades building our knowledge, and our brand; natural resources, and precious metals.
We would love for investors to visit our website sprottglobal.com and to stay subscribed to our free blog, “Sprotts Thoughts”, a journal of the best ideas inside and outside our organization.
As an added inducement to visiting us, if your readers will email me (email@example.com) a copy of their natural resource portfolio, in text, not as an attachment, with both security name, and symbol, I will rate and comment on those portfolio companies, for free, and send my response back, by email.
Many thanks Rick.
Thanks for the visit.
The Next Bull Market Move
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Varcoe: Wall believes progress made on pipelines, but worried for Energy East
CHRIS VARCOE, CALGARY HERALD
Published on: September 22, 2017 | Last Updated: September 22, 2017 8:03 AM MDT
After nearly 10 years at the helm, Premier Brad Wall announced Thursday that he is stepping down and retiring from politics at the Legislative Building in Regina.
BANFF — As Brad Wall heads into the home stretch serving as Saskatchewan’s 14th premier, he continues to defend Canada’s energy sector, fight Ottawa’s plan for a national carbon price and speak out about the need for new oil pipelines.
Wall, who announced in August he will retire from the job early next year, will speak Friday about energy issues at the Global Business Forum.
Wall spoke Thursday to the Herald about his concerns that pipeline projects such as Energy East are in jeopardy, that the energy debate in the country has become more polarized, and why he feels the need to defend the sector.
Q: Has Canada made any progress on the pipeline front in the past year?
Wall: Some. I do think we’ve made some progress, to be sure. There will be a lot of people that will say, ‘Hey we’ve priced carbon provincially in some places and nationally and so this has finally got the social licence for whatever progress has been made.’
And I categorically disagree with that. For example, next door in British Columbia, we have (the) Trans Mountain (pipeline expansion) and I think there is still doubt that hangs over it because a provincial government has a number of different ways to kind of throw sand in the gears, if they want. So I worry a little bit about that.
Energy East is not in a good spot right now. And Keystone has gone ahead, but that doesn’t have anything to do with policies in our own country … So I’m still worried about this issue of moving energy across the country to tidewater.
Q: Do you believe the dialogue in the last 12 months has become any less polarized?
A: I don’t believe that it has become less polarized … The fact that we now have, in the last 18 months, added an overlay onto the already existing rigorous NEB process for pipelines approval — the overlay and the additional measure being upstream and downstream greenhouse gases — this is a real concern.
We don’t do that to any other industry that needs to move its product across the country. We don’t do that to the car business. And cars are very much a part of the whole greenhouse gas story, not just their usage by Canadian drivers, but how you make (them), the carbon footprint of making them in the first place. And I wouldn’t want to see that.
It might be more so (polarized) because of the policies of the (federal) government …
Q: In the last couple of weeks, we’ve seen TransCanada decide to suspend the regulatory process on Energy East while they determine their next steps. Are you worried Energy East may not be built given what has happened?
A: Yes, I am … The suspension is one (reason). The political timetables across the country … All of those things complicate the matter and I also think the new additions to the regulatory — to the measures that would need regulatory approval — don’t help either, in terms of my optimism for Energy East.
Q: Do you think Kinder Morgan’s Trans Mountain expansion project is going to get built?
A: Any pipeline that has already been approved, I think the chances of it are much greater. And credit the federal government for getting to that point. I maybe reject the rationale that if we only put a price on carbon, that’s why this has happened.
Otherwise, if that were to happen, you’d have more grassroots support in places like British Columbia who would see, ‘Well they priced carbon, so we should all get behind these federal approvals.’
Notwithstanding that, I think there’s greater reason for optimism about those projects certainly than Energy East right now.
Q: You’ve discounted the notion that putting a price on carbon (in Alberta) did help get the Kinder Morgan project approved. Why?
A: Honestly, I think it’s an artificial argument. We’re one country; it’s not like we’re trying to sell to another country who are demanding that we do this, we’re just trying to move it across the country.
And what materially has changed with a brand new tax in Alberta in terms of the environmental rigours we all want to apply to the sector? The environmental sustainability of the different measures within the energy (sector), nothing’s changed ….
I just think this is more about politics for the federal government who desperately want to show that carbon tax, even before it’s implemented, is doing good things …
Q: You’ve been adamant that you think your province can stop national carbon price from coming in and affecting Saskatchewan. What gives you that confidence that you have the legal ability to determine this?
A: We have a level of optimism around (it) — and I’m not going to get into the specifics of why because that will be our case that we make to the courts. But we do have level of optimism that we’ll be able to ensure that the federal government cannot impose a carbon tax.
I think you’ll see us move in the fall with some more specifics around our white paper when we talked about our plan for emissions reduction and hitting targets …
Q: You’re retiring soon. What happens to Brad Wall then?
A: I have no idea. You guys looking for anyone?
Offshore wind 6 times more expensive than nuclear power when wind’s required battery storage is factored-in
The key item is, “The headline “Offshore wind now cheaper than nuclear power” is very much in the UK news following the latest offshore wind auction in the UK where the lowest bids came in at £57.50 / MWh, well below the Hinkley C strike price of £92.50. But baseload nuclear, which delivers all the time, can’t be compared directly with intermittent wind, which delivers only when the wind blows. To make an apples-to-apples comparison we have to convert wind generation into baseload generation by storing the surpluses for re-use during deficit periods. Doing the math, offshore wind works out to be 6 times more expensive than nuclear power.”
The real strike price of offshore wind
September 20, 2017 by Roger Andrews
Hinkley still scores on reliability and low carbon ….. but the extent to which its costs are obscene is now plainer than ever. In Monday’s capacity auction, two big offshore wind farms came in at £57.50 per megawatt hour and a third at £74.75. These “strike prices” ….. are expressed in 2012 figures, as is Hinkley’s £92.50 so the comparison is fair. As for the argument that we must pay up for reliable baseload supplies, there ought to be limits to how far it can be pushed. A nuclear premium of some level might be justified, but Hinkley lives in a financial world of its own, even before battery technology (possibly) shifts the economics further in favour of renewables …..
Thus spake the Guardian in a recent article entitled Hinkley nuclear power is being priced out by renewables.
What the Guardian says is, of course, nonsense. Comparing non-dispatchable wind directly with dispatchable baseload nuclear is not in the least “fair”. Barring Acts of God baseload nuclear is there all the time; wind is there only when the wind blows. We can level the playing field only by comparing baseload nuclear generation with baseload wind generation, and the only way of converting wind into baseload is to store the surpluses generated when the wind is blowing for re-use when it isn’t. To compare offshore wind strike prices directly with nuclear strike prices we therefore have to factor in the storage costs necessary to convert the wind into baseload, and this post shows what happens to wind strike prices when we do this using the “battery technology” favored by the Guardian. It finds that battery technology does not “(shift) the economics further in favor of renewables”. It prices wind totally out of the market instead.
The two offshore wind farms in question are Hornsea Project 2 (1,386MW) and Moray East (950MW). The project cost for Moray is given as £1.8 billion, or £1,895/kW installed. The project cost of Hornsea Project 1 is given as £3.36 billion, which relative to the 1,218 MW capacity gives £2,759/kW installed. N0 project cost is given for Hornsea Project 2. Moray is 77% owned by EDP Renewables (EDPR) and 23% by Engie. Hornsea is 100% owned by DONG. The locations of Moray and Hornsea are shown below:
To conduct an analysis we have to estimate how much storage will be needed to convert the wind generation from Hornsea and Moray into baseload generation, and to do this we need to know what wind output from these wind farms will be. There are no readily-accessible data for operating UK offshore wind farms, but on the other side of the North Sea are Denmark’s offshore wind farms, and the P-F Bach data base provides hourly generation data for them. So I used Bach’s Denmark data to simulate generation from Hornsea, the larger of the two wind farms, assuming that the results would be reasonably representative. I picked January 2015 as an example month and factored the generation from Danish wind farms in that month up to Hornsea levels relative to installed capacities, which in this case aren’t very different (1,271MW total in Denmark at the beginning of 2015 and 1,386MW at Hornsea). The results are shown in Figure 1:
Figure 1: Hourly generation from Denmark’s wind farms in January 2015 factored up to match Hornsea 2
Strong winds during the first half of the month were largely responsible for the overall 60% capacity factor during the month – respectable for a wind farm. However, the wind blew less strongly in the second half and died away almost to nothing on the 21st and 22nd.
The next step was to convert the spiky wind output into baseload, which requires that surplus generation during windy periods be stored for re-use during deficit periods so that the generation curve comes out flat. Surpluses and deficits were quantified relative to an 825 MW threshold, which is the amount of continuous baseline power Hornsea generates when generation is flat-lined. Figure 2 shows wind generation surpluses and deficits relative to this threshold:
Figure 2: Hourly wind generation surpluses and deficits relative to 825MW of constant baseload output, January 2015
How much storage, which according to the Guardian will be supplied by batteries, will be needed to flatten out these surpluses and deficits? I estimated this in two ways. First I simply accumulated the surpluses and deficits, starting with the batteries discharged, and came up with the battery charge status plot shown in Figure 3. Driven by the generation surpluses in the first half of the month the batteries charge up, reaching a maximum capacity of 95,800 MWh on January 18. Thereafter the deficits set in and the discharges begin, and by the end of the month the batteries are back to being 100% discharged:
Figure 3: Hornsea hourly battery charge status based on accumulation of hourly surpluses and deficits, January 2015
Next I ran the hourly wind generation data through Dave Rutledge’s more sophisticated storage balance algorithm, which starts with the batteries fully charged. The resulting battery charge status plot is shown in Figure 4. 95,800 MWh of battery charge – the same amount as before – is needed at the beginning of the month to keep the batteries charged up until the end of the month, although by the time the end of the month arrives they again have no charge left:
Figure 4: Hornsea hourly battery charge status based on Rutledge storage balance algorithm, January 2015
Beginning with the batteries fully charged, however, creates a complication. During the first half of the month the batteries remain fully-charged for most of the time, and any surplus generation when they are fully-charged has to be curtailed because there’s nowhere to put it. Figure 5 shows the impacts. The curtailment that occurs during the first half of the month amounts to 16% of total monthly generation, and as a result Hornsea delivers an average of only 693MW to the grid instead of the 825MW it would have delivered if the batteries had been discharged rather than charged at the beginning of the month:
Figure 5: Hourly wind generation sent to grid and curtailed based on Rutledge algorithm, Hornsea, January 2015
How to handle this complication? Strictly I should go back and tweak the algorithm until I get an optimum combination of baseload output and battery storage, but in this case it isn’t worth the effort. Why not? Because as we shall shortly see the impacts of the added cost of battery storage on the strike price are so large that even crude approximations are meaningful. So I will run with the 95,800 MWh storage estimate (although it’s almost certainly an underestimate. It assumes 100% charge-discharge efficiency and no battery degradation with time and there is also a high probability that it would increase if time-frames longer than a month were considered.)
Now to economics, and another approximation.
A wind farm gets its fuel for free and maintenance costs are comparatively low; the lion’s share of downstream costs comes from servicing the debt on the initial investment. Here I assume that effectively all of these costs come from debt service, meaning that there will be a direct relationship between the strike price and the initial investment. With this assumption all we have to do to estimate a “batteries included” strike price is add the cost of the batteries to the initial investment and factor the strike price up in proportion. When we do this for Hornsea this is what we get:
Initial wind farm investment = £3.9 billion: I factored the Hornsea Project 1 cost (2,759/kW installed) up in proportion to the increase in installed capacity (1,396 MW for Hornsea 2 vs. 1,218 for Hornsea 1). This gave a total project cost for Hornsea 2 of £3.85 billion, which I rounded up to £3.9 billion.
Cost of battery storage = £35.4 billion: 95,800 MWh of lithium-ion batteries at current prices of around US$500/kWh – £370 at current exchange rates – gives a total cost of 95,800,000 kW * £370/kWh = £35.4 billion.
Cost of wind + battery storage = £3.9 + £35.4 = £39.3 billion
Strike price with batteries included = £579.42/MWh: The strike price increases in proportion to the increase in total investment, i.e. from £57.50/MWh to 39.3/3.9 * £57.50 = £579.42/MWh.
Since as noted earlier the 95,800 MWh storage requirement is almost certainly an underestimate – and quite possibly a large one – we can reasonably conclude that Hornsea’s strike price will be at least six times higher than Hinkley’s £92.50/MWh when the two are compared on an apples-to-apples basis using the Guardian’s battery storage option.
What does this factor-of-six difference tell us? Actually not much, because the comparison is academic. No one is ever going to outlay £35.4 billion to install battery storage at a £3.9 billion wind farm. Backup gas, not battery storage, is presently the only option for smoothing out erratic wind generation, and estimating how much this might add to the Hornsea strike price would be a complex undertaking, although I might give it a shot in a later post.
What it does tell us is that adding even a comparatively small amount of battery storage to a wind (or solar) project could kill it economically, which is probably what motivated the Guardian to make the comment about putting limits on how much “we” have to pay for “reliable baseload supplies”. And in the clean, green, environmentally-conscious, demand-managed, smart-meter-monitored, grid-interconnected, one-hundred-percent renewable world of the future the Guardian envisions we won’t need reliable baseload supplies anyway.
SEP 20 2017
PotashCorp Potash Production Downtime
Consistent with PotashCorp’s strategy of matching supply to market demand and fully utilizing our lowest cost Rocanville facility, we have announced the following potash inventory adjustment shutdowns:
- Allan will curtail production for 10 weeks, beginning Nov. 19, 2017
- Lanigan will curtail production for eight weeks, beginning Dec. 3, 2017
The number of temporary layoffs associated with these inventory adjustments has not been determined, as the company is assessing opportunities for reassigning employees during these shutdown periods to essential services, capital projects, and maintenance activities.