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Deep Panuke Blog

Day Three, Wednesday, March 7, 2007

Deep Panuke Juggernaut Races to the Hearing Finish Line & EnCana Admits it Failed to Properly File to Leave its Pipeline on the Bottom

Deep Panuke hearing participants were prepared to hang in until March 16, the date set by the Canada-Nova Scotia Offshore Petroleum Board (CNSOPB)/National Energy Board (NEB) panel as the likely end of the proceedings, or even longer. It is now clear that they will have plenty of time on their hands to enjoy all that Halifax has to offer if they stick around that long. Those who should know estimate that the Deep Panuke doings will wrap up as early as this coming Friday, the 9th.

First, a note on an interesting part of Tuesday’s (Day Two’s) events that garnered the lion’s share of today’s (Wednesday, March 7) Halifax Chronicle Herald coverage—the examination of the EnCana panel horde by the lawyer representing the interests ExxonMobile, the owner of the Sable Offshore Energy Project and platform-to-shore pipeline that Deep Panuke may or may not tap into to get their gas to shore:

Pipeline players seek upper hand
Intervener: Hearing squabble part of negotiations
By JUDY MYRDEN Business Reporter

Two key companies in Nova Scotia’s offshore that are in negotiations about sharing a subsea pipeline started squabbling before government regulators Tuesday.

EnCana Corp. of Calgary is seeking permission from regulators to spend $700 million to develop a natural gas project called Deep Panuke near Sable Island. To bring the gas ashore from four gas fields, EnCana is looking for approval of two options: building its own $110-million offshore pipeline or using an existing line owned by U.S.-based ExxonMobil Corp.

ExxonMobil’s lawyer produced a map showing a four-kilometre portion of EnCana’s proposed 173-kilometre pipeline that is very close to the existing Sable pipeline, which carries gas ashore to markets in Atlantic Canada and the U.S. northeast.

David Holgate of Calgary, representing the Sable project owners, successfully sought assurances they would be compensated for loss of revenues in the event EnCana ruptures the Sable pipeline during construction.

"We would compensate for full production until we can remedy the damage," Malcolm Weatherston, EnCana’s project manager for Deep Panuke, said Tuesday.

"I’m sure that’s the answer the Sable owners would like to hear," responded Mr. Holgate, representing ExxonMobil, Imperial Oil and Shell Canada.

A shutdown of the Sable project would cost $105 million a month based on today’s natural gas prices and production levels, said Mr. Holgate.

EnCana and ExxonMobil have been involved in negotiations for several years over transportation tolls EnCana would pay to use the existing Sable pipeline.

EnCana is interested in using the line to avoid building its own, while ExxonMobil must find more natural gas to fill the pipeline with the Sable reserves in steady decline.

An intervener at the hearing says EnCana is being coy about which pipeline option it prefers and both oil and gas companies are using the proceedings to get the upper hand in the pipeline negotiations.

"This panel has a lot of influence on that negotiation," said Halifax marine engineer Alan Ruffman, who is intervening on behalf of Sierra Club Canada.

He said the negotiations must be tough since ExxonMobil is operating a pipeline that is "very much under capacity" and EnCana wants to avoid paying transportation tolls to ExxonMobil.

"It’s very clear two people have got (a lot) of power here," Mr. Ruffman said during a break in the hearing. "We (EnCana) can fill your pipeline but we want a good deal. No, no, we (ExxonMobil) want you to pay our toll and avoid that extra $110-million cost.

"Getting the gas from EnCana into the pipeline from onshore into the U.S. border is very important for ExxonMobil."

He predicted ExxonMobil won’t settle the toll negotiations until the review panel makes its ruling on the project later this year.

EnCana executives declined to be interviewed pending completion of the hearings, which got underway Monday and are slated to last two weeks.

Mr. Ruffman said the Sierra Club opposes the construction of a second pipeline along the ocean floor because it wants to "minimize the disruption on the sea floor and the environment."

During cross-examination, Mr. Ruffman asked Dave Kopperson, EnCana’s vice-president of Atlantic Canada, whether the Deep Panuke project would proceed if the panel approves only one pipeline option, instead of both.

"I think that’s hard to answer," said Mr. Kopperson. "We think that it is reasonable both options be approved. The impact of not being allowed to make that decision on our own has yet to be seen."

EnCana must receive regulatory approval for Deep Panuke, which also must be approved by the company’s board of directors. Construction would begin in 2009 and the project would start pumping gas in 2010.

The hearings resume today.

Business is business, but it was almost amusing to see the third largest oil and gas operation in Canada (EnCana) and a company that last year earnings of a staggering $39.9 billion (ExxonMobil) nickle and dimeing themselves over access to the existing pipeline. We’re glad we were able to get our digs in.

The better part of Wednesday was taken up with cross-examination of EnCana’s witness panel by NEB and CSNOPB councils. The high point in an otherwise unremarkable and markedly friendly Q&A exercise was the revelation that EnCana had not actually filed the required request to abandon its proposed 173-kilometre pipeline in its development application. The Chronicle Herald (Thursday, March 8’s) was right on it:

EnCana: Paperwork still to come

Company tells NEB it hasn’t filed necessary request to leave steel scrap on bottom of ocean
By JUDY MYRDEN Business Reporter

A key demand by EnCana Corp. to leave steel junk on the bottom of the ocean floor came back to haunt the Calgary company Wednesday during the third day of a hearing before the National Energy Board in Halifax.

The company, under questioning by the regulator’s lawyer, acknowledged it had not filed the necessary request in its development application plan to abandon about 200 kilometres of subsea pipelines off Nova Scotia after its proposed $700-million Deep Panuke energy project expires.

"Talking to my colleagues, I don’t believe we specifically asked for that leave (permission) within our application. If requesting that leave is a requirement for the NEB to rule on our request for abandonment in place, then, yes, we would be asking for that," David Kopperson, EnCana’s vice-president of Atlantic Canada, said during questioning.

EnCana, Canada’s largest oil and gas company, says it is too expensive to clean up the offshore mess and that it poses no adverse environmental affects.

NEB lawyer John Hudson of Calgary asked EnCana executives whether, when they filed their application, they had "considered" a section of the legislation requiring permission to abandon offshore pipelines.

EnCana’s lawyer, Rob Grant, said the Calgary company is looking for "conceptual approval" for abandonment of a proposed 173-kilometre pipeline, along with several other smaller pipelines connecting the gas fields.

"An application for leave to abandon isn’t included in the current application. We understand that such an application would have to be made in due course," Mr. Grant told the two-member panel.

EnCana has also made it clear it does not want to have to spend money to clean up the steel offshore pipeline and insists it wants to leave it on the ocean floor.

Mr. Kopperson told the regulators Monday that abandonment of the offshore pipelines was one of two key requests that was "critical to the success of Deep Panuke."

"The environmental assessment for Deep Panuke has determined that leaving the infield flow lines, umbilicals and export pipeline in place will likely have no significant environmental effects. Removing this infrastructure would add significant unknown costs with no benefit to the environment."

Two years ago the province allowed EnCana to amend its development plan for the Cohasset Panuke oil field off Nova Scotia that stopped production in 1999. Originally, it was supposed to clean up debris from the oil fields, but the province did permit the company to leave two flow lines buried under the seabed, along with 1,735 tonnes of concrete. EnCana did remove parts of other subsea equipment that might have posed a snagging hazard to commercial fishing nets.

EnCana wants to ship gas from the Deep Panuke fields about 250 kilometres southeast of Halifax to landfall at Goldboro and then deliver it to markets in Atlantic Canada and the U.S. northeast for an in-service date of 2010. The project will have annual operating costs of $150 million.

The company says there are 390 billion to 890 billion litres of recoverable gas at the site and that the project could have a life span of eight to 18 years. Daily production could top 300 million cubic feet.

Besides abandonment of the pipelines, EnCana is also seeking approval of two possible transportation options, including building its own offshore pipeline or using an existing pipeline owned by ExxonMobil Corp.

Hearings resume Thursday at the Marriott Harbourfront Hotel in Halifax and are expected to wrap up Friday. A decision on the project from the National Energy Board and the Canada-Nova Scotia Offshore Petroleum Board is expected by this summer, and EnCana’s board of directors is expected to review the project this fall.

Tomorrow (Thursday) promises to be a short day.  A few cross-examinations of intervenors, and that’s about it. The rest of the day should be spent getting ready for Day Five, probably the day we see the curtain dropping on the whole affair. Friday’s agenda is oral arguments, which we will be giving later in the day, followed by a few questions from other intervenors and then EnCana. Stay tuned!


Offshore Oil and Gas Links

Deep Panuke Coordinated Public Review

SCC protecting marine areas from offshore oil and gas page

Atlantic Canada Chapter's Oil and Gas campaign page

Sierra Club of Canada National Office