Wednesday, March 6, 2013

Darrell Dexter on NS's energy future

i recently had the chance for an in-depth interview with NS Premier Darrell Dexter to discuss the province's energy future for Earth Resources magazine. You can read the article here, and below.

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Perspectives: Nova Scotia Premier Darrell Dexter

In each issue, Earth Resources interviews a leader in Atlantic Canada’s energy industry. In this issue, we’re talking with Nova Scotia Premier Darrell Dexter. He discusses the big energy stories of the year and what the future holds.

By Jon Tattrie

Premier Darrell Dexter’s NDP government has overseen major changes to Nova Scotia’s energy sector and has ambitious plans to bring about long-lasting transformations. Shell’s renewed interest in offshore oil, the drive toward renewable energy, Lower Churchill, the Daewoo investment and the Community Feed-in Tariff (COMFIT) program are all key factors in what the energy picture will look like in the decades to come.

Earth Resources spoke to the premier for an in-depth interview on the transitions and turmoil the sector has seen under his watch to ask if things are going according to his plan—and where that plan will take us.

Shell’s offshore bid

Nova Scotia’s offshore oil and gas industry has been sleeping since the last spike in the 1990s. When the Canada-Nova Scotia Offshore Petroleum Board (CNSOPB) issued a call for bids on offshore lots in 2009, it received no bids. But the call for bids in January 2012 attracted Atlantic Canada’s biggest ever, as Shell Canada agreed to spend $970 million exploring offshore Nova Scotia for oil over the next six years. Dexter described the industry as poised to join the Lower Churchill hydro-electricity project and the Irving Shipbuilding contract as “game-changers” for the Nova Scotia economy.

Dexter says two things jump-started the sector and helped the province begin to catch up to the booming field in Newfoundland. The first was the Play Fairway Analysis, a $15-million atlas of the offshore that did the preliminary work to see where oil and gas might be.

“It gave a great deal of insight into the geology of the offshore,” he says. “We found a great deal of interest. People started to look at our offshore in a whole new way.”

That resulted in the bidding process won by Shell. “It’s a significant investment in exploration and they’re going to follow that with seismic next year. We assume that will lead to the identification of where they’re going to drill,” he says.

Dexter says that giant bid from a super-major caught the attention of the other global players. “This is an experienced company which didn’t get to their position by not knowing what they’re doing,” he says. “If they’re interested, then there must be a reason for that. I think a lot of further buzz and interest was generated following that round of bids.”

Another 11 parcels were put up for bids in 2012. The winners of eight of those were announced in November: Shell took four and BP the other four. Dexter notes that six of the parcels were selected by the industry. “Usually they only nominate them if they’re interested,” he says.

If it attracts more bids—and especially if Shell finds oil in its exploration—the sector could once again become a major contributor to the economy. Dexter estimates 30 to 40 per cent of offshore exploration money is spent onshore. “That then rolls through the economy and creates jobs and economic growth. It spins off other economic initiatives,” he says.

Renewable energy

Nova Scotia is built on coal, and for much of the last couple of centuries it has run on coal. Nova Scotia Power figures show that in 2011, 57 per cent of the utility’s electricity mix was coal and petroleum coke. Natural gas accounted for 20 per cent and imported oil and other foreign energy accounted for six per cent. Renewable sources like hydro and tidal made up 10 per cent and wind seven per cent.

Dexter wants that to change. His government made it law that by 2020, 40 per cent of the province’s energy will come from renewable sources.

“We moved the 40 per cent from being a target to being the law. We did that because we wanted to make sure we reached it, and we will—pretty comfortably, I think,” he says. The Lower Churchill project will play a role. The $6.2 billion hydroelectric works will bring energy from Newfoundland to Nova Scotia, providing about 10 per cent of Nova Scotia’s energy for three and a half decades. Emera, Nova Scota Power’s parent company, will build the undersea Maritime Link between the provinces for an estimated $1.2 billion.

Dexter says despite the price tag, it will lower costs over time because Nova Scotia will have a frozen price for energy for 35 years. “You just imagine yourself if you could buy electricity today at 1995 rates,” he says.

He says fears that Emera will just sell the energy to New England are misplaced. “Here’s a really interesting piece. You can imagine energy passing through Nova Scotia going to New England. We would be able to buy off of that line at the New England price, minus the transmission cost,” he says. “And if they transmit, they pay a wheeling rate to Nova Scotia Power across the transmission lines that then has to be taken into account as income for the purposes of calculating the rate of return for Nova Scotia Power. Either way, rate payers benefit.”

Tidal energy from the Minas Basin will be another factor in reaching the 2020 goal. “It won’t be a commercial amount [of energy], but we know at some point in time … we’re going to be able to mine that resource,” Dexter says.

Taping into the 100-billion tons of water that comes in and out of the basin daily will require the creation of new technology to let the province mine the resource. The premier envisions that the technology and knowledge could itself become a part of the economy as Nova Scotia exports the expertise around the world.

Wind is another player. Nova Scotia invested millions in Daewoo Trenton to turn a disused railcar factory into the producer of wind turbine towers and blades. The province owns 49 per cent of the company and took some flack when it laid off workers in January.

Dexter blames global financing problems and says Daewoo has been training and diversifying, and will ramp up in the next few months. “I think you’re going to see a very successful business at Daewoo,” he says. He still sees a great opportunity, and still has confidence it will be a long-term success and will help Nova Scotia meet its 2020 target.

But coal will remain a prince, if not king. “Any good portfolio has a good blend of fuels—natural gas, coal, biomass, wind, hydroelectric, tidal,” Dexter says.

He says the bottom line of the NDP policy is that while it may be costly now to make the switch, it will pay off in the long run. Rates have repeatedly jumped in recent years as the cost of coal rises, but the premier says the 2020 shift will create stability. “You don’t want to have things in your portfolio that can dramatically affect the price curve for electricity, and that’s what we have now.”

Plus, it’s better for the environment.

COMFIT

The province’s Community Feed-in Tariff program is offered to communities and small businesses looking to create renewable energy projects. Critics argue it’s too small to make a real contribution. Dexter says they’re missing the point.
It is a small part of the overall shift, but it fills two big needs, he says. It cracks open the door to small players so they can gain experience. “For example, the aboriginal communities have a way to get into the energy business and they will gain expertise,” he says. The second role is that just as you want a diverse energy portfolio, Dexter says, the province wants a diverse portfolio of energy providers. The COMFIT program lets the little guys do that, he says, even if only a little bit. “You don’t want to have a sector that’s completely dominated by big players and I think that’s important for a whole lot of reasons,” he says.

The program is under review, but Dexter says that’s not a sign it’s failing. “When we announced the renewable electricity plan, we made it perfectly clear from that point on that this was a point of departure and that economic and industry conditions would change over time, and as we gained experience with the program we would look to see how it can be made better,” he says.

Hydraulic Fracturing

The process of extracting natural gas from underground via hydraulic fracturing, often called fracking, has sparked protests across North America. Opponents accuse fracking of poisoning drinking water and making it flammable, while proponents say it’s a safe way to tap into the resource.

While fracking is conducted in the face of intense protests in New Brunswick, Nova Scotia has paused the industry until at least spring 2014. That’s a further delay on a decision promised by spring 2012. Liberal MLA Andrew Younger said the moratorium was a political decision to kick it past the next election.

Dexter says it’s just sensible. And don’t call it a moratorium. “We want to make sure that this is a review, not a moratorium. It is designed to give us space and time to look at all of the information to ensure that we have the most up-to-date studies and research and reviews,” he says. “I never use the word moratorium.” Dexter says a number of major studies will be published before the review is finished. That will bring less heat, and more light, to the situation, he says.

“One of the things about hydrofracking is that there is a broad range of opinions. Some are scientifically founded, and some are not, and sometimes trying to parse the two is not as easy as one would think,” he says.

As for whether the delay will kill the industry before it can begin, Dexter doubts it. He says it will allow a calm, safe decision to be made, and if the decision is yes, business will come. “I think industry goes where opportunity is. The opportunity here is going to compete with opportunities anywhere in the world,” he says. “The complaints people have often go away if they can see the opportunity for profit.”

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