A multimillion-dollar pitch for shale gas without fracking

John Chilibeck, Local Journalism Initiative Reporter

A new proposal is on the table to tap into New Brunswick’s vast natural gas reserves, without using the controversial method that’s been off-putting to many people – fracking.

It’s a plan that could eventually unlock hundreds of millions in wealth, make the province less dependent on handouts from Ottawa, enrich First Nations and create jobs. But it would also likely displease people concerned about burning more greenhouse gases and dangerously warming the planet.

The pitch is from veteran oil and gas executive Jim Livingstone, who owns RC Energy in Alberta and says he has developed a cleaner method of drilling than fracking. Hydraulic fracturing, which uses vast quantities of water and chemicals to break up deep, tight shale beds and retrieve gas, has been the subject of a moratorium in New Brunswick since 2014 because of environmental concerns.

One First Nation leader, Terry Richardson, is so enthused by the proposal that he’s arranged for Livingstone to speak to the province’s nine Mi’kmaq chiefs on March 18 about a business opportunity to drill 10 wells as a pilot project just south of Moncton, at Stoney Creek, part of their traditional territory.

The First Nations would put the money in for an ownership stake and reap profits, while the provincial government would win royalties. The private meeting is planned to take place in Moncton.

“This could be huge, not just for First Nations, but the entire province,” said Richardson, the unabashedly pro-development chief of Oinpegitjoig, or Pabineau First Nation, who has at times butted heads with other Indigenous leaders over developing natural resources. “This could be the game changer, in my mind. This would be the thing to take us to the next level.”

However, there would likely be blow back from people worried about greenhouse gases such as the opposition Green Party. While supporters, most notably former Progressive Conservative premier Blaine Higgs, say natural gas can be used as a transition fuel to wean the planet from more polluting coal, natural gas still adds significantly to global warming, with estimates suggesting it contributes about one-fifth of greenhouse gases worldwide.

New Brunswick has a huge reserve of unconventional natural gas, most of it unexploited. Geologists estimate there are nearly 70 trillion cubic feet of the resource underground in the province, mostly locked in shale beds.

To give that perspective, Alberta has nearly double that amount, 130 trillion cubic feet of proven reserves, an industry that’s already well developed and whose extraction, thanks to the federal government’s equalization payments across Canada, indirectly ends up funding a good chunk of New Brunswick’s public services in a so-called “have-not” province.

When David Alward’s Progressive Conservative government tried to encourage gas companies to frack in New Brunswick 15 years ago, opposition quickly mounted from First Nations and environmental groups.

The issue came to a head in October 2013, when RCMP tried to remove a blockade near Rexton in eastern New Brunswick led by people from the Mi’kmaq community of Elsipogtog and their supporters, who were trying to stop the company Southwestern Energy Resources (SWN) from doing exploratory testing for the gas.

A massive confrontation ensued, with dozens arrested and several RCMP vehicles torched. SWN eventually left the province, never to return.

A modest amount of gas production – 35 million cubic feet a day – continues to this day at the McCully field in Penobsquis, thanks to a special exemption to the fracking moratorium that the provincial government allowed for the Sussex area, where the resource was discovered 26 years ago. The first wells were drilled in 2003, and the gas began flowing to the main pipeline in 2007.

Headwater Exploration, whose headquarters are in Calgary, owns the production facility and runs a natural gas processing plant and a 50-km transmission line connected to the Maritimes and Northeast pipeline, with the product heading to the rich Boston market. It runs only in the winter, when natural gas prices are high.

Livingstone, who graduated in economics from Dalhousie University in 1973, said the same sort of controversial fracking method used in Pennsylvania or North Dakota wouldn’t have worked in most of New Brunswick’s shale gas play anyway.

“My technology does not involve fracking,” Livingstone said in an interview. “The debate over fracking, you didn’t have to have it. You can’t frack there because it doesn’t work. That’s not just me saying it. It’s the experts.”

The executive pointed to a 2012 study commissioned by the Petroleum Technology Association of Canada, which hired a top consulting firm, ALL Consulting, out of Oklahoma, to look at every shale gas play in North America.

“They flagged the shales in New Brunswick and Nova Scotia and said they couldn’t be fracked because of the high clay content that would be sensitive to water,” Livingstone said. “Technically, you can’t do it. Most people didn’t know this.”

The report, which is more than 200 pages long, briefly mentions the Frederick Brook shale in New Brunswick, the region in southeastern New Brunswick, mostly in the Elgin and Sussex areas, that has an estimated 67 trillion cubic feet of gas, much of it locked between shale rock deposits more than one kilometre below the surface.

While the report doesn’t explicitly state that fracking won’t work in the region, it does note that the area features very high clay content, averaging 42 per cent underground.

“Based on seismic data and results of the wells that have been drilled, additional development of the resource in the future is likely,” it states, only one year before protests would set the industry back more than a decade.

Livingstone says his technology was developed in co-operation with Nabors Industries, which owns the world’s second largest land drilling rig fleet, with more than 250 rigs in 20 countries.

First Nations, he says, call it air-drilling or waterless drilling. Livingstone prefers the technical term, reverse-circulation centred discharge drilling, using a double-walled drill pipe, highly regarded in the industry for dealing with difficult ground conditions.

The set up also uses far less water than fracking and doesn’t cause as much air pollution, according to Totan, a rival drilling firm in China that uses similar technology.

Livingstone runs 51 wells, from El Paso, Texas, near the Mexican border, all the way to High Level, Alberta, 700 km north of Edmonton.

“My technology is not of interest to the other shale plays in North America, because other companies are going to frack them. Fracking gives you bigger volumes of gas, and you get your gas right away. It’s easier. But you don’t have that option in New Brunswick or Nova Scotia.

“You have lake shales. Trying to frack lake shale is like trying to frack peanut butter. You can’t do it. The other shale formations, from ancient oceans, are like peanut brittle, they’re hard and can be fracked.”

His proposal envisions First Nation communities being the major shareholder, fronting the money to get the operation running, with the two sides splitting the profits down the middle, what he described as a typical farm-in for such ventures.

The executive, who once ran Gulf Canada’s oil exploration on the Beaufort Sea in the Arctic in the 1980s, was bullish on trying to convince Indigenous leaders that natural gas development in New Brunswick was a good idea.

“I go back 40 years working with First Nations in northern Canada,” he said. “My technology was used in the Blackfoot Indian Reservation in northern Montana. I had a 50-year deal with them on 500,000 acres down there.

“I’m very confident I could convince the First Nations to develop the gas.”