Industry issues report on national natural gas consultations

Contributed to The Saskatoon Star-Phoenix
Dave Collyer
President and CEO
Canadian Association of Petroleum Producers
April 16, 2013

Red Deer's history with the natural gas industry dates back many decades to when significant oil and natural gas fields were discovered in central Alberta. The natural gas industry has been an important part of the regional economy ever since. Red Deer's history with agriculture dates back even further.

It is this interplay between natural gas and agriculture that shaped much of the conversation during the Natural Gas Dialogues in Red Deer.

In 2012, the Canadian Natural Gas Initiative, which is the umbrella name for the associations representing the full value chain of Canada's natural gas industry, travelled to eight communities across Canada, including Red Deer, to gain a better understanding of perspectives on both the challenges and the opportunities surrounding the natural gas industry by listening to a diversity of voices.

We invited participants from diverse backgrounds, including labour, academia, environmental groups and aboriginals, to listen to their views of a resource that's an increasingly visible and important part of Canada's energy mix. We called these meetings the Natural Gas Dialogues, and we summarized what we learned, along with industry's response, in a comprehensive report we released this month.

Two central themes emerged during the discussion in Red Deer.

First, participants were acutely aware of the competitive challenges faced by Canada's natural gas industry. Without market growth, particularly access to offshore markets in Asia where demand for natural gas is high, the resource could be left stranded in an oversupplied North American market. The economic consequences of a lack of market access would be especially felt in regions whose economies rely on natural gas production.

The competitive challenges faced by Canada's natural gas producers are real. Our traditional export markets are shrinking. Exports to the United States have dropped 16 per cent over the past five years and are projected to drop further because of abundant domestic supply in the U.S. Similarly, in the major eastern Canadian markets supply from western Canada is increasingly challenged to compete against shale gas supplies located closer to this market.

Opportunities to increase domestic use of natural gas exist, including greater natural gas use in power generation or as a transportation fuel. But the largest growth opportunity is exports of liquefied natural gas to Asian markets where demand for this cleanest-burning fossil fuel is growing at a rapid pace. The International Energy Agency estimated that global demand for natural gas is expected to increase 50 per cent by 2035, driven by demand in countries like Japan, China and South Korea. Without access to countries where demand is high, the continued success of Western Canada's natural gas industry, and its contribution to economic growth, jobs and government revenues, is at risk.

Red Deer Dialogues participants also expressed concerns about the natural gas industry's use of water in its operations and the impact this could have on the availability of water for agriculture. Water is essential to natural gas development, but industry recognizes it must reduce its dependency on fresh surface water.

The operating practices for hydraulic fracturing, issued by the Canadian Association of Petroleum Producers last year, commit operators to source freshwater alternatives where appropriate and recycle water for reuse as much as practical.

Concrete actions to reduce the use of fresh surface water are already underway. The Debolt Water treatment plant, a joint venture between Encana and Apache Canada in the Horn River Basin of B.C., pumps sour, saline water from a deep aquifer, removes the hydrogen sulfide and prepares it for use in both companies' hydraulic fracturing operations. Technologies that partially replace water with CO2 and nitrogen are also being used in some areas. This technology could reduce water use by more than half in some cases, but its application depends on the geology where the natural gas is trapped.

From our perspective, the Dialogues process has been a useful step in sharing perspectives and improving understanding across a broad range of interests. It is our hope the responses outlined in our report on the Dialogues provide a foundation for further discussion and additional impetus to advance solutions in the interest of all Canadians.

Dave Collyer
Canadian Association of Petroleum Producers
Brenda Kenny
Canadian Energy Pipeline Association
Timothy M. Egan
Canadian Gas Association