Top 10
Top 10: Price shock
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Power bills are set to shock Albertans while oilsands operators are stunned as the government threatens to cancel leases—learn about these stories and more in our regular top-10 list of what’s shaping Alberta’s energy future.
1. PRICE SHOCK
Alberta power bills expected to stay high for near future
Calgary’s FirstEnergy Capital is predicting significant increases in power prices for Albertans in the near future. The wholesale electricity price in the province is expected to average $66.77 per megawatt hour this year—nearly 50 per cent above FirstEnergy’s previous estimate of $45.11 per megawatt hour. The analysis firm attributes the jump to the unexpected closure of TransAlta’s aging Sundance 1 and 2 coal-fired generators earlier this year.
WHY IT MATTERS: FirstEnergy expects the higher prices will encourage construction of new power generation plants, but new facilities can take years to build. Natural gas-fired generation, as well as electricity purchased from British Columbia and Saskatchewan, will take up the slack left by decreasing supplies of low-cost coal power. Until the province stabilizes its electrical supply, consumers can expect to face continued volatility in the power market.
2. SIGNS OF LIFE
Alberta conventional oil production comes alive after years of declines
Following years of declining production, Alberta’s conventional oilfields are starting to show signs of renewed activity. According to the Canadian Association of Petroleum Producers, conventional oil production in the province averaged 459,000 barrels per day last year. The Alberta government’s latest budget predicts a three per cent increase, with production for the current year rising to 484,000 barrels per day. “For the first time in several years, output is projected to increase and we will now see the industry getting into a growth period,” says Alberta Energy Minister Ron Liepert.
WHY IT MATTERS: With high commodity prices driving interest in oil drilling, resources once thought depleted are now becoming viable prospects thanks to technological innovations such as horizontal drilling and multistage fracturing. There are currently 1.44 billion barrels of conventional crude reserves in the province, according to the Energy Resources Conservation Board. New technologies may push that number higher as more reserves become accessible, resulting in greater royalty revenues for the province.
3. SHEPARD STAYS CLOSE TO FLOCK
Power plant could supply half of Calgary’s power needs
ENMAX has announced plans to move forward with the construction of its Shepard natural gas power plant in southeast Calgary. The $1-billion facility will feature two 240-megawatt natural gas-fired generators, as well as a 320-megawatt steam-powered turbine. Construction is expected to commence in summer this year, with completion by 2015.
WHY IT MATTERS: ENMAX says Shepard could provide for as much as half of Calgary’s energy needs, while also cutting CO2 emissions in half when compared to conventional coal-powered plants. Company chief executive Charles Ruigrok also notes that the new plant will be “located close to where the electricity will be consumed, reducing the transmission infrastructure required to deliver power to our customers.”
4. BIOMASS HEATS UP
Sherwood Park builds new green heating system
Sherwood Park will be the home of the province’s first urban-based biomass heating system, thanks to $1.5 million in funding from the federal government. Located at the city’s Centre in the Park, the system will serve nearby buildings with a central boiler fuelled by wood and agricultural waste, although it will also be supplemented by the existing natural gas heating system, if needed. Strathcona County and the Resource Industry Suppliers Association will each also contribute $675,000 toward the project.
WHY IT MATTERS: “This project will contribute to the County’s sustainable direction, help us develop renewable fuel sources locally, further reduce our greenhouse gas emissions and develop job-related skills associated with biomass processing,” says Strathcona County Mayor Linda Osinchuk.
5. GROWTH SPURT
Christina Lake oilsands production will more than double
Cenovus Energy recently received the go-ahead to more than double capacity at its Christina Lake oilsands operations. The Energy Resources Conservation Board approved the company’s planned expansion of 120,000 barrels per days, bringing gross production up to 218,000 barrels per day. The first phase of the expansion is expected to be complete by 2014, with the final phase coming on stream in 2017.
WHY IT MATTERS: With 275 operations staff and another 80 expected to be hired this year, plus 1,200 construction workers currently on site, Christina Lake is a major employer in the Conklin area 120 kilometres south of Fort McMurray. Cenovus also says it spent $90 million purchasing products and services from local businesses in 2010. A major expansion signals more economic growth for the region for years to come.
6. TROUBLE DOWN THE LINE
Northeastern Alberta oil spill the largest in province since 1975
On April 29, at a site located about 100 kilometres northeast of Peace River, Plains Midstream Canada’s Rainbow pipeline leaked 4.5 million litres of crude oil—the largest spill in Alberta in 35 years. Cleanup efforts are ongoing, while the Energy Resources Conservation Board continues to look into the cause of the spill.
WHY IT MATTERS: The spill marks another serious blow to the province’s environmental reputation, while adding to public concerns over pipeline safety. Expect it to also play a factor in discussions surrounding other major pipeline projects, such as Enbridge’s Northern Gateway pipe, which is key to the provincial government’s desire to export oil to Asian markets.
7. GAS GOING UP
Analysis firm predicts natural gas prices are on the rise
Natural gas prices are expected to start creeping upwards again after years in the doldrums, according to AJM Petroleum Consultants. With low-cost natural gas becoming an increasingly popular domestic energy source, the firm says demand pressures could drive prices to $6.50 per thousand cubic feet by 2016—up from the expected 2011 average of $4.10 per thousand cubic feet.
WHY IT MATTERS: Alberta’s natural gas industry has suffered through low prices in recent years, but the province is still sitting on a massive reserve estimated at 77 trillion cubic feet in size. All that’s missing is the price incentive to encourage drilling once again.
8. CONSERVATION CONTROVERSY
New regional land-use plan would cancel oilsands leases
The Alberta government has released a draft regional plan for the Lower Athabasca region that would revoke some oilsands leases to create new conservation areas. As many as 10 oilsands leases and 14 mineral leases could be affected if the government were to approve the draft plan. The plan would provide for a total of 20,000 square kilometres of conservation area in the Lower Athabasca region—“the largest contiguous piece of boreal forest set aside for conservation in the world,” according to the government.
WHY IT MATTERS: The government is calling for public input on the draft, which has stirred up a great deal of controversy so far. While environmental groups charge that the plan does not do enough to protect sensitive woodland caribou habitats, industry proponents argue that the cancelling of leases may discourage future oilsands investment.
9. READY FOR RETIREMENT?
Older power plants pose concerns for Alberta’s electricity market
A new report says that Alberta’s electricity market is in good shape for the future—with a few caveats. In its report, the Brattle Group notes several factors that could force older power plants to close, such as stricter environmental regulations and expiring power purchase arrangements. The firm predicts retirement rates for generation facilities in Alberta could reach 50 per cent over the next two decades.
WHY IT MATTERS: The province’s voracious energy appetite is only going to increase in the future, requiring as much as 740 megawatts of new capacity per year, according to the report. While the market is currently positioned to handle that growth, the firm still cautions against “large simultaneous retirements,” such as in 2020, when many of the province’s power purchase arrangements are set to expire.
10. SHOOTING IN THE DARK
Alberta auditor general criticizes lack of oilsands royalty targets
The Alberta government needs clear performance targets for oilsands royalties, according to the latest report from the provincial auditor general. While performance measures are in place for conventional oil and gas royalties, the auditor general says the government currently has no system for gauging the success of its oilsands royalty regime.
WHY IT MATTERS: As a key source of government revenue, resource royalties help fund everything from health care to education. The province has a major stake in ensuring that the current royalty programs are effective.
