NATURAL RESOURCES

Mixing oil and water On one side is a powerful environmental lobby that says stop shale gas development in New Brunswick. On the other is a powerful industrial lobby that says go for it. Can this province’s rookie government reconcile irreconcilable foes? And with hundreds of millions of dollars at stake, what will the debate mean to a cash-strapped region of the Canadian energy outback?

By Alec Bruce

Premier David Alward

26 | Atlantic Business Magazine | September/October 2011 Even by the acutely risk-averse standards of contemporary Canadian politics, New Brunswick Premier David Alward’s appetite for controversy is perishingly small. He’s no Danny Williams, thrashing Quebec over a decades-old power agreement. He’s no Frank McKenna, boldly charting his province’s future with jobs and businesses deliberately poached from other parts of the country. He’s not even Shawn Graham, the man he beat at the ballot box a year ago, who rode the rails to ruin on an aborted promise to sell off the major assets of NB Power for a cool four billion bucks.

No, speaking softly into the phone, selecting his words with exquisite care, the 52-year old Tory chieftain of the nation’s second-smallest – and, arguably, most economically endangered – province courts nothing more dramatic from citizens than the peaceful, easy feelings a sturdy status quo bequests. His tone becomes especially dulcet when the conversation turns to the increasingly touchy subject of shale gas development in New Brunswick, as it frequently does these days. “Certainly there are some flashpoint areas that we see we need to address by moving forward with a robust regulatory regime to mitigate the risk that people are feeling,” he says. “This is healthy for the company that’s doing the development work, for the communities and for the landowners.” It’s a perfectly reasonable assessment from a perfectly reasonable man, whose environmental groups insist that the Recognizing that shale gas avuncular style and family-values veneer process of blasting sedimentary layers development is a lucrative has made him, in less than 12 months, of shale deep beneath the earth’s surface but contentious opportunity, one of the most popular premiers in with vast amounts of water and chemicals Premier Alward’s government the province’s modern history. But – a process called hydraulic fracturing, has implemented new environmental regulations for circumstances here have a tendency or “hydrofracking” – has cost countless the industry. From left: Bethany to become unreasonable overnight, homeowners and bystanders their health, Thorne-Dykstra, president, especially where energy is concerned. livelihoods and land. Poisoned well Citizens for Responsible And nothing, apart from deep-sea ocean water and ruined farms, they argue, are Resource Development; and drilling, has proven more controversial unacceptable consequences of industrial Natural Resources Minister over the past decade than the shale gas neglect and mismanagement. Indeed, Bruce Northrup at a July 6, 2011, industry, which, depending on who Cornell University’s Robert Howarth, a news conference. you consult, has either lifted scores professor of ecology, stipulates that shale of North Americans from poverty or gas is actually worse for the environment irreparably damaged the environment. than coal. “The [hydraulic fracturing] New Brunswick is only the most recent process is moving ahead without ever battleground in what has shaped up to really having had an adequate scientific be an ideological war of words between basis of what the environmental irreconcilable foes. consequences are,” he told the CBC in In one camp, community activists and April. “That sort of analysis should have

Online extras: atlanticbusinessmagazine.com | 27 Miramichi been done before this whole fracking Plaster Rock process was promoted.” Saint-Louis Opponents and critics also point to the de Kent Blackville Rogersville bigger picture. In July, the David Suzuki Richibucto Foundation and the Pembina Institute

Doaktown issued a joint report which concluded, Buctouche among other things: “Natural gas contains Boiestown less carbon than other fossil fuels, [but] Saint-Antoine fighting climate change requires the Stanley slower, not faster, addition of new natural

Shediac gas production capacity.” Chipman Moncton Added the study’s author, Matthew Riverview Minto Bramley: “The evidence is strong that Nackawic Salisbury Memramcook Canada should be focusing not on natural FREDERICTON Petitcodiac Sackville gas but on zero-emission solutions, such Oromocto as renewable energy.” Cambridge Narrows In the other camp, drilling comp- Gagetown Harvey Sussex anies and their sympathizers dismiss Fredericton these concerns as old news. They say Norton Alma McAdam Junction technological advances in recent years Hampton have vastly improved the process, Quispamsis rendering it safe and environmentally Rothesay St. Martins responsible. What’s more, they point out, LICENCES TO SEARCH the industry is a critical tool in weaning St. Stephen Saint SWN Resources Canada Inc. John the U.S. economy off overseas oil and is, St.George therefore, a boon for natural gas exporters LEASES St. Andrews Blacks Harbour in Canada. And they, too, have a bigger Corridor Resources Inc. picture to promote. Corridor Resources Inc. / Since the early part of the last decade, PotashCorp shale reserves – which now account for Corridor Resources Inc. / about 20 per cent of all natural gas in the Windsor Energy Inc. United States – have driven economic development in some of the poorest STATE OF PLAY regions of the country. According to one The New Brunswick government reports that a number of companies are currently report, the Barnett field in northern engaged in oil and gas exploration and development in the province. In gas, the major Texas will create more than 100,000 player is Halifax-based Corridor Resources, though SWN Resources Canada (a subsidiary jobs annually over the next five years. In of U.S.-based Southwestern Energy) has recently entered the province. Neither is yet West Virginia, one of six states that share drilling shale formations for commercial production. The players are looking at a two or the 150,000-square-kilometre Marcellus three-year window before firming up their business cases. field, drilling has generated nearly $400 million for the economy, $70 million in Corridor Resources tax revenue, and upwards of 2,000 jobs. PLAY: McCully gas field located near Sussex, N.B. All of which puts New Brunswick’s PLAY TYPE: Tight gas sandstone within the Hiram Brook Member of the Albert Formation. legislators in an increasingly awkward DISCOVERED: In 2000, drilled in partnership with Potash Corporation of Saskatchewan. position. They know the economic TOTAL GAS PRODUCED: 26 billion cubic feet. potential for the province is enormous. CURRENT PRODUCTION: 18 million cubic feet per day. Though the industry is still in its infancy, GAS WELL PRODUCING: 30 wells nearly all of which have been hydraulically fractured. GROSS GAS RESERVE: 121.4 billion cubic feet (proven and probable). two companies – Corridor Resources, TYPICAL RESERVOIR DEPTH: 1,700 to 2,200 metres below ground surface. a junior exploration company based in Halifax, and Southwestern Energy, an PLAY: Frederick Brook shale gas located in the Elgin to Sussex areas (currently known). American firm – have had promising PLAY TYPE: Shale gas within the Frederick Brook Member of the Albert Formation. results with their exploratory operations. CURRENT PRODUCTION: None, except for a very small amount from one well. Various fields within the southerly located Frederick Brook play, where third-party assessments have estimated 67 trillion SWN Resources Canada (Southwestern Energy) cubic feet of recoverable resource, are SWN was awarded “Licence to Search” agreements by the Department of Natural Resources in March particularly auspicious. 2010. The agreements totaled 32 individual licenses, covering approximately one million hectares with a Should these activities fully commercial- total work commitment of $49 million. Each license has a three-year term. In 2010 and 2011, SWN ize in two or three years, the benefit to conducted airborne magnetic and gravity surveys, geochemical surveys and a two-dimensional geophysi- New Brunswick would be measured in cal (seismic) imaging program. The commercial viability of SWN’s right holdings is as yet unknown. hundreds of millions of dollars in direct and indirect revenue annually and likely thousands of jobs. Given the size of the

28 | Atlantic Business Magazine | September/October 2011 provincial debt and deficit (estimated at a minimum distance of 200 metres perceived and imminent threat to people’s $9 billion and $800 million, respectively) of seismic testing and 500 metres of well-being where they live and work; a trunk- and persistent stagnation in other sectors drilling [sites] before operations can load of complicated, technical and conflicting of the economy, the promise of shale gas begin.” information about the dimension of that is nothing to take lightly. “It’s speculation, They must also “provide full threat; and a group of firebrands determined of course,” says Energy Minister Craig disclosure of all proposed, and actual, to cleave to their versions of reality regardless Leonard, “but if the industry moves contents of all fluids and chemicals of the actual and inconvenient facts at their ahead, the numbers that have been raised used in the hydraulic fracturing disposal. are anywhere from $150 million at the low process; and establish a security When expectations become unman- end to $400 million at the high end.” bond to protect property owners from ageable, despite all circumspection, Still, he and his cabinet colleagues industrial accidents, including the loss controversy inevitably flows. And there’s also know that local opposition to the or contamination of drinking water.” nothing much the soft-spoken, broadly industry is growing, emboldened, Will it be enough? A true public relations reasonable David Alward can do about perhaps, by recent moves in France, debacle needs only three ingredients: a that. | ABM Quebec, South Africa, Nova Scotia and New Jersey to either ban or slap moratoriums on hydrofracking. In an open letter to Premier Alward in June, How it works Armand Paul, a spokesperson for the Hydraulic fracturing, or ‘fracking,’ involves the injection of more than a million gallons of Penniac Anti-Shale Gas Organization, slurry (water, sand and chemicals) at high pressure into underground wells. Company declared: “The personal risks are too engineers and geologists continually monitor and gauge pressures and fluids to determine great. Reassurances by your ministers how the sand reacts when it hits the bottom of the wellbore, slowly increasing the density of environment and natural resources, of sand to water as the frack progresses. This process may be repeated multiple times, in saying that your government is taking stages. The wellbore is temporarily plugged between each stage to maintain the highest a slow and careful look at the options, water pressure possible and get maximum fracturing results in the rock. don’t wash. A bad decision made after slow and careful consideration is even A pumper truck injects water, sand worse than one made as an uninformed and chemical additives (including blunder. When the problems begin, we hydrochloric acid, methanol, potassium hydroxide, isopropanol Natural gas flows out of well, sent to market. will know that you saw it coming and and guar gum) at high pressure made a conscious decision to place New into the well. Recovered water is stored in open Brunswickers in harm’s way, to choose pits, then taken to a treatment plant. profits over people.” Another who adamantly opposes Pit the industry’s development in the 0 Feet province is David Coon, executive Water table Well director of the Conservation Council Sand keeps of New Brunswick. “We have a moral 1,000 fissures open Shale obligation to do no harm,” he says. “It is Fissure our view that the impact of this on rural Natural gas 2,000 communities, on water, is unacceptable. flows from fissures Mixture of On this basis, alone, we shouldn’t be into well Well water, sand going down this road. Beyond this, 3,000 and chemical though, we have an abundance of agents renewable energy in New Brunswick both for heating and electricity. We need 4,000 to be mapping a strategy that builds on what we’ve already done in this area. We shouldn’t be developing more sources 5,000 of fossil fuel. We need to be making the transition to renewable energy.” 6,000 To be fair, the premier and his ministers are taking every measure to address both environmental and 7,000 industrial concerns. In late June, they issued new guidelines directing shale Shale gas development over the next couple of years. “Under these requirements,” a government statement clarified, “oil The slurry travels through perforated sections of the wellbore casing and natural gas companies who want to and into the surrounding formation, fracturing the rock and injecting sand, water and additives into the cracks to keep them open. engage in exploration, development and production will have to conduct baseline Fissures testing on all potable water wells within Graph adapted from information on chk.com and propublica.org

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