Great Divide: The debate over natural gas and Site C heats up

27 Nov

James Waterman, November 15, 2012

Energy is becoming a very complex topic in British Columbia.

As BC Hydro is moving forward on their plans to build the Site C hydroelectric dam in the Peace River Valley, despite intense opposition from many local landowners, the government is promoting a liquefied natural gas (LNG) export industry that could use all of the electricity generated by Site C and still need additional power for the liquefaction process.

The government response to that quandary has been to amend the Clean Energy Act, which stipulates that a maximum of seven per cent of energy generated in the province can be produced by burning natural gas, to allow further natural gas fuelled electricity generation for the purpose of powering LNG operations alone.

That situation has prompted two residents of Charlie Lake, a small community just northwest of the booming natural gas industry town of Fort St. John, to ask serious questions about Site C and why the Province isn’t considering a resource already being produced in their own backyard as the energy source of the future.

“We came to Canada from Germany in 1954,” said one of those men, a retired schoolteacher by the name of Mike Kroecher.

“We live overlooking the Peace River Valley,” he continued. “And we’ve become extremely fond of this area. Of the valley. I’d hate to see it destroyed, which Site C would definitely do.”

The other half of that duo, Rick Koechl, still works as a teacher in Fort St. John.

“I came to the Peace country here in about 1981,” said Koechl. “Lived in Hudson’s Hope – my wife and I did – for about five years.”

After relocating to the Fort St. John area, he quickly began his involvement with issues around the energy sector, particularly the business of natural gas exploration and production, for the same reason as many local landowners: the proximity of industry activities to their homes.

“The Site C issue is one that’s very near and dear to my heart because … it is our backyard,” said Koechl.

Koechl and Kroecher took their concerns to the Peace River Regional District (PRRD) on Thursday, September 20, not simply to complain about Site C in the vain hope that that body could magically cancel the project, but to present a real and possibly viable alternative: natural gas power generation.

As their model, the pair is using a facility known as the Shepard Energy Centre (SEC) that is presently under construction in Calgary, Alberta.

“We expect that we would go commercial with the plant probably early in the first quarter of [2015],” said Gary Payne, vice president of engineering and construction with ENMAX Energy, which is the operator of the plant, adding that performance tests should be complete in November, 2014.

The real significance of those dates for Koechl and Kroecher is that construction just began in July, 2011, meaning that the project will only take about three years to complete, rather than the ten year timeline for Site C.

Koechl and Kroecher count that as the first strike against claims that Site C would be more efficient and more environmentally friendly than a natural gas plant, largely because that construction will require consistent use of vehicles that consume large amounts of fossil fuels. Coupled with the disposal – likely by burning – of 550,000 cubic metres of woody debris resulting from cutting 15,000 to 20,000 acres of boreal forest, that belies the notion that Site C is a clean energy project, according to the duo.

The comparison of Site C and SEC prepared by Koechl and Kroecher makes a strong case for natural gas in other areas as well.

Site C should produce more usable power than SEC –1,035 megawatts for Site C versus 800 megawatts for SEC – but SEC is expected to have a per year energy production of 6,500 gigawatt-hours versus 5,100 gigawatt-hours for Site C, which is the number reported by BC Hydro.

SEC is projected to have an energy efficiency of 92 per cent, compared to just 52 per cent for Site C.

Those differences are particularly concerning for Koechl and Kroecher when they look at the cost of each project. An independent audit put the cost of SEC at $1.3 billion. BC Hydro claims that Site C will cost $7.9 billion.

“There’s no way you could even begin to state that there’s going to be some kind of financial stability in the plan,” Koechl said of Site C. “They don’t seem to have anything but what they claim is an unlimited bank account to build this project. And it’s starting to become ludicrous. Because I think the financial element has been missing.

“We’re trying to bring this into the discussion.”

“We have no idea how accurate the $7.9 billion figure is,” added Kroecher. “The last big public spending project was the convention centre in Vancouver. The initial estimate was $100 million. When it was completed, the figure was close to $700 million. If that applies to Site C, we’ll be looking at a massive cost over-run.

“We don’t know the facts. We are not given the details.”

BC Hydro directed questions on this subject to the Ministry of Energy, Mines and Natural Gas, which takes a very different view on the comparative cost issue.

“It is important to consider the capital cost involved when comparing a natural gas power generating facility and Site C,” said Minister of Energy, Mines and Natural Gas Rich Coleman.

“Most of the lifecycle costs for Site C are upfront capital costs, followed by low operating costs over the long life of the dam. A natural gas plant is the opposite, with most of its costs being fuel costs incurred over the much shorter operating life of the facility.”

Koechl suggests that the long-term costs of natural gas power generation shouldn’t be seen as a negative, but as a positive, since those costs would be associated with operations and maintenance work that would employ British Columbians and purchasing natural gas from a homegrown industry.

“It is important to understand that BC Hydro, in its draft Integrated Resource Plan, considers both Site C and natural gas to be cost-effective resource options,” said another Ministry of Energy, Mines and Natural Gas spokesperson.

“The difference between these costs is risk and uncertainty,” the spokesperson continued. “Site C would be a long-lived asset [that would] provide cost certainty for power customers. The cost of natural gas is subject to market conditions and, as a result, cannot provide the same cost certainty for power production in the long-term.

Koechl suggested that the Province could solve that problem by obtaining natural gas as a royalty-in-kind.

“What this means is the government could take the gas in lieu of the money,” he said. “Why is this good? The gas would always come as a certain quantity. So, if the price goes up, you still take the same amount of gas. It is a hedge against any future inflationary costs.

“That means a facility like the [SEC] would have stable gas prices well into the future.”

“The Province currently does not collect royalties-in-kind, but provincial regulations do provide the Crown with the ability to do so,” said the ministry spokesperson.

The ministry also stated that the number of full-time employees for a hypothetical 500 megawatt natural gas power generation plant would be just 31 people, slightly more than the 25 full-time employees for Site C.

The hydroelectric project is also expected to generate 7,000 person-years of work during construction.

However, Koechl and Kroecher also examine the cost and the economic benefits in terms of what they consider to be waste, suggesting that Site C is an extremely wasteful enterprise. The crux of that argument is the fact that SEC has a footprint on the land of just 60 acres, but Site C could have a footprint of about 25,000 acres.

“The valley will be destroyed. Irreplaceable farmland will be destroyed,” said Kroecher.

“Site C is a feelingless approach,” he continued. “It shows no compassion. I look upon it as the proverbial bull in the China shop. They don’t care how much they destroy provided they get their way. At this day and age, I don’t think we can afford such a massive footprint.”

When it comes to the environmental debate, the Ministry of Energy, Mines and Natural Gas tends to focus on the greenhouse gas (GHG) emissions.

“Studies have found that Site C would produce among the lowest levels of greenhouse gas emissions, per gigawatt hour, when compared to other electricity generation options, outperforming all fossil fuel power generation options,” said Coleman.

Koechl prefers to take a broader view of the issue, noting that LNG is expected to replace the use of coal and bunker oil in Asian nations, as well as in North America, where the SEC is an example of that trend.

“Mostly, it’s geared … to replace the [coal] plants in a time period of between 2015 and 2020,” said Payne. “A lot of the plants in the north are pretty old and they’ll be coming offline. So, that’s the primary [reason].

“But there has been growth,” he continued. “Alberta and Calgary, even in the worldwide recession, they’ve continued to grow.”

Koechl believes that those sorts of developments at home and abroad could help offset the higher emissions from increased natural gas power generation in B.C., an idea that is somewhat supported by the SEC.

“Roughly, the CO2 is less than half,” said Payne, comparing the SEC and coal-fired power plants.

“And then you don’t have the mercury and you don’t have some of the other issues,” he added.

“The greenhouse gas emitted in China is still going to be the same air that we breathe here,” said Koechl. “It’s one atmosphere. And I think that’s the fallacy of this whole project, is the fact that we’re just as happy to ship it in its raw form overseas without realizing that the consequences are going to be right back on our doorstep anyway.

“Here’s the question: do we spend six times more to make a so-called clean energy project work … or do we actually get rational about the financial implications here? We pay the $1.3 billion or thereabouts up front. We burn the gas here. Granted, it’s producing greenhouse gases, but it’s still going into the same atmosphere that’s ultimately going to end up in China.”

It also provides market diversity for a B.C. industry.

“The natural gas is being sourced here, it’s available and it’s being processed here,” said Koechl.

“It could stimulate the main industry we have in this area: gas production,” added Kroecher.

“Nobody has an issue with the fact that probably 90 per cent of our homes in this province are heated with natural gas,” he continued. “Perfectly normal. Nobody argues that point. But when we want to generate some electricity by using natural gas, people say, ‘It’s not clean.’”

“All of this is sort of counterintuitive,” said Koechl.

“Diversification is important to increase the value of B.C.’s natural gas – for the longevity of B.C’s natural gas sector and the benefits it creates,” said Coleman.

However, his attention is directed toward exporting that gas to Asia as LNG, not burning that resource at home.

Ultimately, all of this argument is moot if natural gas power generation isn’t even logistically practical in B.C. All the circumstances seem to be in favour of the SEC being successful, but that may not hold true for a similar project in B.C.

“We own 160 acres and a significant piece of it is a naturally occurring wetland,” said Payne, describing their site in the Shepard Industrial Park, which was formerly agricultural land.

“One of the advantages that we have is, because we’re near a municipality and a large city, our transmission line losses are minimal,” Payne continued, noting that that has been a significant problem with the coal plants farther north.

Payne suggested that transmission line loss could also be an issue with Site C for the same reason.

“The main transmission lines for us are right across the road from us,” he said. “Like less than 100 metres. That’s the transmission corridor.”

The SEC also has access to reclaimed water.

“It’s not uncommon anymore,” said Payne, adding that it has been a standard practice for two decades.

“It’s water that comes out of the wastewater treatment plants here in Calgary that would be discharged into the [river],” he continued. “And we’re just making one more use of it before it does that.

“They say it’s swimming pool quality water, but we can’t get anybody to swim in it.”

The Ministry of Energy, Mines and Natural Gas suggests that everything that has gone well for the SEC are elements that could be problematic for similar projects in B.C.

“Constructing a facility the size of … Shephard Energy Centre in British Columbia would pose logistical challenges,” said the ministry spokesperson. “Generally speaking, it is preferable to build a power system site close to transmission, pipelines and a demand centre.”

Satisfying those elements could prove difficult because the natural gas supply is in the relatively unpopulated northeast corner, far from the major demand centres.

However, the same is true of Site C.

Regardless, there are other limiting factors as well, according to the ministry. First of all, it is preferable to build a natural gas power plant near sea level for the sake of combustion efficiency. Secondly, certain air sheds may not be able to handle the increased emissions because of wind patterns and temperature inversions that can cause an air mass to linger over a fixed geographical area.

Land zoning and site access are also issues, as well as the ability to obtain and discharge water used for cooling the facility.

Still, there are already five natural gas power generation stations in B.C. The plants located in Belcarra, Prince Rupert and Fort Nelson are owned by BC Hydro, while BC Hydro has a 20-year purchase agreement with the facility owned and operated by Capital Power Corporation in Campbell River.

The remaining plant is the cogeneration facility at Spectra Energy’s McMahon natural gas processing plant in Taylor.

Republished from Pipeline News North:


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