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Energy

A plan to save coal, power generation, and the oil industry in southeast Saskatchewan

Published

9 months ago

11 minute read

From the Frontier Centre for Public Policy

By Brian Zinchuk

Stop moving to shut down Saskatchewan coal – it could be the salvation of our oil industry

What if there was a way to keep coal mining jobs in Saskatchewan, continue to produce low-cost electrical power, and extend the production of a substantial portion of Saskatchewan’s oilfields not by decades, but by generations? And in doing so, we could still dramatically reduce carbon dioxide emissions, and maybe save some money by reducing our nuclear rollout?

All of this is now possible, and it has everything to do with keeping our coal miners digging and our coal-fired power plants going, maybe even renewing them.

There was a potentially major development for Saskatchewan’s energy sector buried in Whitecap Resources Inc.’s year-end financial report released on Feb. 21. Whitecap said about using CO2 for enhanced oil recovery, “We have also recently started CO2 injection at a pilot CO2 flood into the Frobisher formation underlying the Weyburn Midale unit. We drilled two (2.0 net) producer wells and three (3.0 net) injection wells in 2023 and initiated CO2 injection in late 2023. Early results are encouraging with a notable production response coming through approximately one month after injection, increasing oil rates on the two producer wells from approximately 40 bpd to over 200 bpd, per well. Further technical analysis to determine commerciality and large-scale development is ongoing, and we will provide updates as next steps are determined.”

While the Bakken formation got all the headlines starting around 2007, the reality is in southeast Saskatchewan, very few Bakken wells are drilled these days. Most of the activity has been Frobisher wells, especially around Steelman, where it has been targeted for decades. So if the Frobisher responds well to tertiary recovery through carbon dioxide floods, it opens up a lot of possibilities for extending the life of some of Saskatchewan’s most prolific oilfields, taking recovery rates from the mid-20 per cent range to over 50 per cent.

Back in 2012, Canadian Natural Resources Limited president and CEO Steve Laut expressed interest in using CO2 for enhanced oil recovery in the Steelman Unit.

Whitecap’s initial results were not a five per cent improvement, or 50 per cent, but five times higher. That’s something everyone, including the provincial government, should take notice of. Imagine if you could increase crop production from 60 bushels to the acre to 300 bushels? Or quintuple potash or uranium production from certain mines? You’d be an idiot to not at least take a hard look at it.

I’m not suggesting it will remain anywhere close to that level, but the fact the CO2 flood in the Weyburn Unit, in the Vuggy and Marly units of the Midale formation, has already dramatically increased recovery rates and lengthened the lifespan of a field that otherwise would have long gone dry is significant. If the same process can be expanded to the much more prolific Frobisher formation, that’s a very big deal.

Even if it was a 25 per cent improvement – that’s well worth investigating.

Frobisher is a big deal

How prolific is the Frobisher?

Most of the drilling activity in southeast Saskatchewan follows a certain pattern. The majority is along the Frobisher subcrop – the edge of the formation where it pinches out, forming a structural trap. Of the 16 rigs working in Saskatchewan on March 3, it’s a good bet 10, and possibly more, were drilling Frobisher wells. The daily well report for March 3 published by the Ministry of Energy and Resources shows out of 19 wells listed that day in Estevan area of responsibility, all 19, across five oil producers, were either targeting the Frobisher. It may be a fluke all that day showed the Frobisher, but it definitely shows its significance.

So if Whitecap, which has been growing to be one of Saskatchewan’s largest oil producers, has found a way to substantially increase production from this formation, shouldn’t we take a hard look at how we can take advantage of it?

Stop the process of winding down coal

There’s one thing we should do right now – stop this idea of shutting down our coal-fired power plants near Estevan. You hardly hear SaskPower mention coal-fired power anymore. I keep hearing how those plants are getting enough maintenance to just get them to the planned phase out of 2030, but not likely a day beyond that. The way things are going, they’ll likely limp to the finish line, but not an inch past that. Similar things are said to me about the mines and their iron.

I’m suggesting we should strongly reconsider that. Pour some money into keeping both the power plants and the mines viable should we choose to extend their lives beyond 2030.

The Government of Saskatchewan and SaskPower should have some real serious discussions with Whitecap, and possibly other oil companies like CNRL, about the possibility of dramatically increasing carbon capture and producing as much CO2 as we can. That means putting carbon capture on Shand Power Station. But it could also mean either refurbishing Boundary Dam Unit 6 or, shockingly, building Shand Unit 2, and maybe even Unit 3, with High Efficiency Low Emissions (HELE) technology, designed from the ground up with carbon capture running from Day 1.

One might say that’s going to cost billions, and you’d be right. But I dare say doing so will cost less than just one 300 megawatt small modular reactor, whose price is not yet known, but previous SaskPower Minister Don Morgan said could run between $3 and $5 billion.

It’s going to take a long time to squeeze the first megawatt out of that first reactor. If everything goes to plan (and it never, ever goes to plan with nuclear), we might see the first SMR megawatt around 2034-35. Putting CCS on our existing coal fleet, and maybe, dare I say, expanding it, with HELE and CCS, could help bridge the gap in the interim until we get several SMRs up and running, and have become proficient in their operation. That’s baseload power that won’t go to zero like wind does every so often, and solar does every night.

Doing so would keep the Estevan economy rolling, not just from coal mining and power generation, but also oil production.

I’ve been writing about the Saskatchewan oil industry for almost 16 years now, and I am increasingly alarmed by the fact I haven’t seen the “next big thing,” in southern Saskatchewan. Drilling numbers keep on their slow decline. Companies like Crescent Point have largely lost interest and are pouring their capital expenditure money into exciting Alberta plays. That may be great for Alberta, but Saskatchewan needs to do something to keep things going here. That we’ve kept oil production relatively flat for the last 23 years is a small miracle. But if we don’t get a lot more new investment, it won’t stay that way.

The Sask Party provincial government a few years ago set a bold goal of increasing oil production from the current 454,000 barrels per day to 600,000 barrels by 2030. I asked Premier Moe about that in my year end interview with him last December. He said he thought it was a modest goal.

But as I pointed out to him, and Energy and Resources Minister Jim Reiter, I’m not seeing evidence of the province moving to make that happen.

This is something the Government of Saskatchewan, through its Crown corporation SaskPower, can do. If we tell the feds to stick it when it comes to shutting down coal by 2030, if we put carbon capture on existing units and even build new coal units with carbon capture, then supply that CO2 to companies like Whitecap, and maybe others like Canadian Natural Resources Limited, we could extend the life of our most prolific play in southeast Saskatchewan. We might even increase its production while we’re at it. All the while, we’d be ensuring baseload power production.

This plan’s impact would be measured in generations, not an election cycle, or a corporate quarter.

And it might also save us some money by reducing our nuclear expenditure.

But action has to be taken now. Because if we let those power plants and mines slide past the point of no return, an opportunity may be lost that we will be kicking ourselves for later.

We can’t let that happen.

Brian Zinchuk is editor and owner of PipelineOnline.ca, and occasional contributor to the Frontier Centre for Public Policy. He can be reached at [email protected].

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Energy

What does a Trump presidency means for Canadian energy?

Published on November 20, 2024

By

From Resource Works

Heather-Exner Pirot of the Business Council of Canada and the Macdonald-Laurier Institute spoke with Resource Works about the transition to Donald Trump’s energy policy, hopes for Keystone XL’s revival, EVs, and more. 

Do you think it is accurate to say that Trump’s energy policy will be the complete opposite of Joe Biden’s? Or will it be more nuanced than that?

It’s more nuanced than that. US oil and gas production did grow under Biden, as it did under Obama. It’s actually at record levels right now. The US is producing the most oil and gas per day that any nation has ever produced in the history of the world.

That said, the federal government in the US has imposed relatively little control over production. In the absence of restrictive emissions and climate policies that we have in Canada, most of the oil production decisions have been made based on market forces. With prices where they’re at currently, there’s not a lot of shareholder appetite to grow that significantly.

The few areas you can expect change: leasing more federal lands and off shore areas for oil and gas development; rescinding the pause in LNG export permits; eliminating the new methane fee; and removing Biden’s ambitious vehicle fuel efficiency standards, which would subsequently maintain gas demand.

I would say on nuclear energy, there won’t be a reversal, as that file has earned bipartisan support. If anything, a Trump Admin would push regulators to approve SMRs models and projects faster. They want more of all kinds of energy.

Is Keystone XL a dead letter, or is there enough planning and infrastructure still in-place to restart that project?

I haven’t heard any appetite in the private sector to restart that in the short term. I know Alberta is pushing it. I do think it makes sense for North American energy security – energy dominance, as the Trump Admin calls – and I believe there is a market for more Canadian oil in the USA; it makes economic sense. But it’s still looked at as too politically risky for investors.

To have it move forward I think you would need some government support to derisk it. A TMX model, even. And clear evidence of social license and bipartisan support so it can survive the next election on both sides of the border.

Frankly, Northern Gateway is the better project for Canada to restart, under a Conservative government.

Keystone XL was cancelled by Biden prior to the invasion of Ukraine in 2022. Do you think that the reshoring/friendshoring of the energy supply is a far bigger priority now?

It absolutely is a bigger priority. But it’s also a smaller threat. You need to appreciate that North America has become much more energy independent and secure than it has ever been. Both US and Canada are producing at record levels. Combined, we now produce more than the Middle East (41 million boe/d vs 38 million boe/d). And Canada has taken a growing share of US imports (now 60%) even as their import levels have declined.

But there are two risks on the horizon: the first is that oil is a non renewable resource and the US is expected to reach a peak in shale oil production in the next few years. No one wants to go back to the days when OPEC + had dominant market power. I think there will be a lot of demand for Canadian oil to fill the gap left by any decline in US oil production. And Norway’s production is expected to peak imminently as well.

The second is the need from our allies for LNG. Europe is still dependent on Russia for natural gas, energy demand is growing in Asia, and high industrial energy costs are weighing on both. More and cheaper LNG from North America is highly important for the energy security of our allies, and thus the western alliance as it faces a challenge from Russia, China and Iran.

Canada has little choice but to follow the US lead on many issues such as EVs and tariffs on China. Regarding energy policy, does Canada’s relative strength in the oil and gas sector give it a stronger hand when it comes to having an independent energy policy?

I don’t think we want an independent energy policy. I would argue we both benefit from alignment and interdependence. And we’ve built up that interdependence on the infrastructure side over decades: pipelines, refineries, transmission, everything.

That interdependence gives us a stronger hand in other areas of the economy. Any tariffs on Canadian energy would absolutely not be in American’s interests in terms of their energy dominance agenda. Trump wants to drop energy costs, not hike them.

I think we can leverage tariff exemptions in energy to other sectors, such as manufacturing, which is more vulnerable. But you have to make the case for why that makes sense for US, not just Canada. And that’s because we need as much industrial capacity in the west as we can muster to counter China and Russia. America First is fine, but this is not the time for America Alone.

Do you see provinces like Alberta and Saskatchewan being more on-side with the US than the federal government when it comes to energy?

Of course. The North American capital that is threatening their economic interests is not Washington DC; it’s Ottawa.

I think you are seeing some recognition – much belated and fast on the heels of an emissions cap that could shut in over 2 million boe of production! – that what makes Canada important to the United States and in the world is our oil and gas and uranium and critical minerals and agricultural products.

We’ve spent almost a decade constraining those sectors. There is no doubt a Trump Admin will be complicated, but at the very least it’s clarified how important those sectors are to our soft and hard power.

It’s not too late for Canada to flex its muscles on the world stage and use its resources to advance our national interests, and our allies’ interests. In fact, it’s absolutely critical that we do so.

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Energy

What Will Be the Future of the Keystone XL Pipeline Under President Trump?

Published on November 18, 2024

By

From EnergyNow.ca

By Terry Winnitoy, EnergyNow

The Keystone XL Pipeline, proposed in 2008, was designed to transport Canadian crude oil from Alberta to refineries in the United States, specifically to Steele City, Nebraska, and onward to refineries in Illinois and Texas, as well as to an oil pipeline distribution center in Cushing, Oklahoma.

Spanning approximately 1,179 miles and designed to transport up to 830,000 barrels of oil per day, the pipeline promised significant economic and energy security benefits. However, it became a focal point of political and environmental controversy, leading to its eventual cancellation by Presidents Obama and Biden.

Here’s a brief look at its history, the reasons it should have been built, the political dynamics that led to its cancellation and will President-elect Trump revive it?

Why the Keystone XL Pipeline Should Have Been Built

Economic and Job Creation

The pipeline was projected to create thousands of construction jobs and several hundred permanent jobs, providing a significant boost to the economy. It was also expected to stimulate economic activity through the development of related infrastructure and services.

Energy Security

By facilitating the efficient transport of a large volume of oil from a stable and friendly neighboring country, the pipeline would have reduced American dependence on oil imports from more volatile regions, enhancing national energy security.

Environmental Safety

Pipelines are generally safer and more environmentally friendly for transporting oil compared to rail or truck, with lower risks of spills and accidents. The Keystone XL was designed with the latest technology to minimize leaks and environmental impact.

Regulatory Oversight

The project underwent extensive environmental reviews and was subject to strict regulatory standards to ensure it adhered to environmental protection and safety measures.

Political Reasons for Cancellation

Environmental Activism

The pipeline became a symbol for environmentalists who opposed further development of fossil fuel infrastructure. They argued it would contribute to climate change by enabling the extraction and consumption of oil sands, which are more carbon-intensive than other oil sources.

Obama’s Cancellation

President Obama rejected the pipeline in 2015, citing environmental concerns and its potential impact on global climate change. He argued that approving the pipeline would have undercut America’s leadership on climate change.

Trump’s Reversal and Biden’s Final Cancellation

President Trump revived the project in 2017, citing economic benefits and energy security. However, President Biden canceled it again on his first day in office in 2021, fulfilling a campaign promise to prioritize climate change issues and transition towards renewable energy.

Political Symbolism

For both Obama and Biden, the decision to cancel the Keystone XL Pipeline was also a symbolic gesture, demonstrating a commitment to environmental sustainability and a shift away from fossil fuel dependence in line with their administrations’ climate policies.

Will President-Elect Trump Reinstate It?

Currently, there is no definitive answer on whether President-elect Trump will reinstate the Keystone XL Pipeline. His previous administration showed support for the project, citing its potential economic and energy security benefits. However, reinstating the pipeline would require navigating significant political, legal, and environmental challenges that have developed over the years.

It would also depend on the current geopolitical, economic, and environmental priorities at the time of his taking office. The Keystone XL Pipeline’s history is a complex tapestry of economic aspirations, environmental concerns, and political maneuvers.

Its cancellation has been a contentious issue, reflecting the broader national and global debates over energy policy and climate change strategy. Whether it will be reinstated remains a significant question, contingent on a multitude of factors including political will, environmental policies, and market dynamics.

That all said, re-instating its approval might be the perfect “in your face” moment for Trump to Obama and Biden as he begins his second term of presidency. We’ll have to wait and see.

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