Shale Gas Development in Canada - a Federal Perspective

1. Shale Gas Development in Canada –
A Federal Perspective
Brussels Forum
John Foran, Energy Sector
Natural Resources Canada (NRCan)
January 22, 2013

2. Presentation Summary
 Canadian Energy Policy/Regulatory/Market Overview
 Jurisdiction & Energy Policy
 NRCan Mandate
 Resources
 Technologies
 Canadian concerns with shale gas development:
 Groundwater use and contamination
 Greenhouse gas emissions
 Induced seismicity
 Conclusions

3. Understanding Energy Jurisdiction
 Provinces own and manage the
resources
 Production, gathering, processing
infrastructure and intra-provincial pipelines
 Single jurisdiction pipes are provincial
 Federal government responsibilities
 inter-provincial and international trade
(market structure)
 Cross jurisdiction pipelines
 exports/imports
 LNG facilities are generally
provincially-regulated

4. Canadian Energy Policy Framework
 Canada’s energy policy is market oriented – deregulated prices
- Markets determine supply, demand, prices and infrastructure
investments
 Targeted interventions and regulations help achieve specific objectives:
- Encourage cleaner energy, efficiency
- Human health/safety
- Science and technology
- Regulated rates on pipelines
 Both Federal and Provincial gov’ts have jurisdictional powers that are
important in energy issues
 Canada requires aboriginal consultation on decisions that may impact
aboriginal rights or title

5. NRCan Mandate, Role of Public Servants
Natural Resources Canada (NRCan) Mandate
 Federal energy department – responsible for energy policy 1
 Ensure the sustainable development and responsible use of the
country’s natural resources; maximize benefits to Canadians;
strengthen conditions for Canada’s economic success
 Provide sound environmental leadership, and ensure public
safety and security
Code of Public Service
 Assist Ministers, under law, to serve the public interest; give
honest and impartial advice; political neutrality.
1. And other things – mining, forestry

6. 6
Canada is a global energy leader
 Third largest producer of natural gas (144 Bcm)
 4th largest exporter
 Sixth largest producer of oil (~3 million barrels/day)
 Third largest producer of hydro power
 Second largest producer of uranium
 Own nuclear power technology (CANDU)
 More than 75% of power generation non-emitting
 Vast renewable and clean energy potential
- e.g. wind, biomass, solar, marine and geothermal

7. Large Canadian Natural Gas Resources
Based on conventional natural gas, in
1970s Canada became world’s third largest
global gas producer, and fourth largest
global gas exporter.
Alberta and Saskatchewan > 300 TCF OGIP
TOTAL > 1400 TCF OGIP Allowed Canada to develop world-leading
natural gas drilling, processing, and
Liard
discoveries pipeline expertise and infrastructure, as
well as world-leading regulators and
regulations.
Technology breakthroughs in shale and
tight gas have now doubled Canadian
resources.
3
OGIP=Original Gas in Place

8. Canadian Marketable Resource Estimates
1,400  Technology doubled
1,304 Tcf
Canada’s natural gas
1,200
resource base – still rising
Trillion Cubic Feet (Tcf)
1,000 Shale  Shift to shale gas - the new
& Tight
800
(819) low cost supply of energy in
733 Tcf
Shale
Canada
600 & Tight  US export market expected
(343)
400 CBM
CBM to become self-sufficient
 Canada pursuing market
200
Conv.
Conv. Conv. diversification via LNG
0 exports to Asia
2000 2010 2010
(Low) (High)
Source: Cdn.Society for Unconventional Resources

9. New Technologies Make Shale Gas Economic
Horizontal wells
+
Multi-stage fracs
+
Pad drilling
>1km
=
Economic
Development
Source: Alberta
Venture

10. Public Concerns

11. Public Concerns
 Public concern and opposition to shale gas development
exists, particularly in non-traditional hydrocarbon producing
provinces such as Quebec and New Brunswick
 Concerns include
 i) water use and contamination (incl. frac fluid disclosure);
 ii) air emissions (incl. GHGs);
 iii) induced micro-seismicity
 Some shales are located under populated or agricultural
areas and below key Canadian aquifers, which has increased
these concerns.

12. Groundwater Schematic
Source: Environment Canada

13. What’s Under Groundwater
Fresh groundwater is usually in
the first 100-200 m. Brackish or
saline groundwater is usually
below 300 m.
Below the deepest freshwater
aquifers, porosity is filled with: i)
saline water; ii) natural gas; or iii)
crude oil.
 Technology and regulations
must be used to prevent
communication of deep fluids or
drilling/completion fluids with near
surface groundwater.

14. NRCan Research
 Groundwater Geoscience Program (2009 – 2014) characterizes regional aquifer
systems and makes the data available through the Groundwater Information Network
 Program aims to map and assess 30 key aquifers to provide scientific knowledge
on GW resources for water management and protection.
 In 2012, NRCan implemented new shale gas studies including:
 the potential impacts of shale gas development on surficial aquifers
 induced seismicity related to hydraulic fracturing and/or deep aquifer re-injection of
post-frack wastewater.
 Under the Geoscience for New Energy Program, NRCan is characterizing shale-
hosted petroleum reservoirs to better understand the quality and behaviour of these
reservoirs, to develop a standardized resource assessment methodology.
 Council of Canadian Academies
 The Sustainable Management of Groundwater in Canada, May 2009
 Environmental Impacts of Shale Gas Development - in progress

15. Risks to Groundwater
 Environment Canada and Natural Resources Canada have
considerable groundwater expertise and mapping and
monitoring programs.
 In Canada, surface activities have been identified as posing the
largest risks to groundwater.
 E.g. municipal landfills, industrial waste disposal sites,
leaking gasoline storage tanks, leaking septic tanks,
accidental spills, run off from road salt, fertilizer, pesticides,
livestock wastes etc.

16. Facts on Hydraulic Fracturing in Canada
 Hydraulic fracturing used in North America since the 1940’s.
 Over 175,000 wells fractured in Alberta alone.
 Regulations govern wellbore construction to ensure steel casing and
cement barriers separate the wellbore and nearby water sources.
 Fracturing of pay zone typically extends less than 300 metres above the
stimulated zone (which is typically deeper than 1,000 metres), making it
extremely unlikely for fractures to impact potable groundwater.
 In Canada, there have been very few incidents, and no proven cases
of water well contamination resulting from hydraulic fracturing.
 An incident in 2012 contaminated a near surface water-bearing
zone, due to improper completion work. The zone is not a source of
potable water.

17. Greenhouse Gas Emissions
 Lifecycle greenhouse gas emissions from shale gas being produced in
Canada are on average 4 percent greater than those from
conventional natural gas
 29 to 38 percent lower than other fossil fuels such as gasoline, diesel and coal.
 Procedures to prevent methane releases during well completion.
 Fugitive methane emissions from shale gas production are unlikely to vary
significantly from conventional gas production.
 Natural gas is a transition fuel for a low-carbon economy as it is
cleaner burning than any other fossil fuel and is in abundant supply.
 The increased use of natural gas (incl. from shale), in place of more
greenhouse gas-intensive fuels, is consistent with Canada’s climate change
mitigation efforts.
www.ghgenius.ca

18. Induced Seismicity
 Induced seismicity refers to seismic events caused by human
activities (in comparison with naturally occurring earthquakes).
 Hydraulic fracturing activities in British Columbia may have caused
seismic events with magnitudes ranging up to 3.8.
 Studies are ongoing to increase the understanding of potential linkages
between fracking and induced seismicity.
 In Canada, no damage has been documented as a result of induced
seismicity associated with shale gas development sites.
 NRCan scientists are active in research and speak to public concerns
in this area.

19. Conclusions
 The regulation of shale gas development is primarily provincial.
 New technologies are leading to natural gas production from
previously non-productive rocks (shale) and from new regions
 Estimated Canadian natural gas resources have grown dramatically
 Canada is targetting new markets for natural gas via LNG,
particularly as the US becomes more self-sufficient
 Considerable public concern has been expressed about potential
negative environmental and health impacts of hydraulic fracturing.
 NRCan has observed that hydraulic fracturing, using the
technologies employed in Canada, and governed by Canadian
regulatory requirements, has not resulted in significant negative
environmental impacts.

20. EXTRAS

21. 2011 WCSB Natural Gas Production
Shale Gas in AB
CBM
5.4%
Tight
26.6%
Shale
0.0%
Conv.
39.6%
Total
71.7%
Canada
BC 0.0% 12.9% 3.5% 8.8% 25.1%
SK 0.0% 1.5% 0.0% 1.6% 3.1%
YK 0.0% 0.0% 0.0% 0.1% 0.1%
Total 5.4% 41.0% 3.5% 50.1% 100.0%
•BC: Commercial Production •AB: 15 shale gas formations
•New Regulatory Framework •850 tcf identified
•Enormous Resources •ERCB further evaluating
•Qc: Utica Shale –
•Targeting LNG exports shale gas resource potential
experimental stage
•Shale gas development in
•BAPE recommendation for
early stages
environmental review
•No shale gas development
until Strategic Environmental
Review is concluded
•Anticosti/NF: shales are
being evaluated
•ON: active identifying
prospective shale units
•NB: 5 wells targeting shale •NS: Two gas wells
•NG Steering Committee in Horton Bluff Shale
•SK/MB: PIRA expects SK/MB •No referendum on issue •3 wells fractured in the
shale oil production to grow from •Blueprint for dev’t coming Kennetcook area
75kb/d in 2010 to 700kb/d in 2025 soon •Provincial review by
2014

22. Large Canadian Natural Gas Resources
Western Canada
Eastern Canada
 Canada has world-
leading natural gas
drilling, processing, and
pipeline expertise,
infrastructure, regulators
and regulations.
 Pursuing LNG exports to
Asia and Europe
www.Shaleresourcecenter.ca

23. Resource Jurisdiction:
a Shared Responsibility
 The direct ownership, management and regulation of most natural
resources fall under provincial jurisdiction
 Issues of interprovincial, national, or international concern fall under
federal jurisdiction
Provincial Jurisdiction Federal Jurisdiction
•Resource ownership, •International and interprovincial
management and royalties issues e.g. EXPORTS
•Land-use planning and •Uranium/nuclear power
allocation •Federal lands in North, offshore
•Laws regarding the exploration, and Crown lands
development, conservation and •Works declared to be for the
use of natural resources within general benefit of Canada (e.g.
provincial boundaries science and technology)

24. Natural Gas Pipelines and Prices
2012 Canadian Statistics
 Prod’n = 13.8 Bcf/d
 Exports = 8.4 Bcf/d
 Imports = 2.9 Bcf/d
 Alberta price = $2.31
Cdn$/GJ
 Current Alberta price =
$3.00 Cdn$/GJ
 US becoming self
sufficient, Canada
pursuing export market
diversification via LNG
export projects

25. LNG Exports and Pipeline Proposals
Proposed Liquefaction terminals
Proposed Pipelines
Ridley Island
Pipeline will provide up to 4.2 Bcf/d
In service:2019
Spectra / BG Group
Regulatory applications pending
Pacific Northwest LNG
18 MT/yr
Petronas/Progress
LNG Canada
Up to 24 MT/yr or 3.2 Bcf/d
In service: 2019
Shell, Mitsubishi, Kogas, Petrochina
cf / d
Export licence under review 4.2 b f/d
/ BG c
Spe ctra 3.6 b
Ru pert bcf/d
ince l 3.4
Pr Shel
TC PL /
Kitimat LNG Operating Gen. Part.
bcf/d
Pacific Trails 1.4
Up to 10 MT/yr or 1.3 Bcf/d
In service: 2017
Encana, Apache, EOG BC LNG Export Co-operative
Export license approved Up to 1.8 MT/yr or 0.25 Bcf/d
In service: 2014
Export license approved

26. Public Concerns (con’t)
 NRCan consulted regulators, geoscientists, government
departments, and experts to gather factual information and
shares the IEA view that:
 “The technologies and know-how exist for
unconventional gas to be produced in a way that
satisfactorily meets these challenges but a
continuous drive from governments and industry to
improve performance is required if public
confidence is to be maintained or earned.”