Powerful Opportunities

Posted January 23, 2012

In 2008 the government of the day made a far-sighted investment of $15 million to examine hydrocarbon opportunities in previously unexplored opportunities in Nova Scotia’s offshore.

On January 20th the current government, which has continued the underlying strategy, was able to announce a major commitment by Shell Oil to further explore and drill wells in the deep offshore based on the work commissioned in 2008. Recent deep water successes in the Gulf of Mexico and offshore Brazil have shown that drilling in these areas can discover commercially viable deposits.

Nova Scotian taxpayers can have hopeful dreams of major oil discoveries but optimism needs to be tempered. Even at a drilling cost of $100 million or more per well the success rate is typically much less than 50%. In such circumstances a billion dollar commitment does not go very far.

Government policy needs to express the same enthusiasm for onshore opportunities in both oil and gas. The possibilities of a particular find may be smaller in scale but the cost per well is tiny by comparison. But there is a risk that a vocal minority will prevent evolution of a sensible policy framework.

Suppose a farmer were to park a supply of fertilizer (let’s say manure) too close to a watercourse. Heavy rains follow and a large part of the fertilizer washes into the river killing fish and otherwise degrading the water. If so, the farmer should be penalized and regulations examined to see if they need strengthening. But nobody would argue that we should put a moratorium on farming, or on the use of fertilizer.

Yet some activists are arguing that there should be a moratorium on drilling , in particular hydraulic fracturing  ( fracking), until it is proven to be 100% safe. In other words for ever.

It cannot be shown that fracking is 100% safe. It is not. Neither is flying in an airplane, having a vaccination, or walking down the street.  But the incidence rate of problems from fracking (chiefly by harming local water supplies) is remarkably low, and both the technology and the effectiveness of regulatory structures are improving.

In the unlikely event that a household well is damaged while fracking is occurring nearby the homeowner should be fully compensated. If the operator was not meeting standards further penalties should apply. But within that context onshore drilling should be welcomed.

No area of resource exploitation is without risk. Hydro dams prevent fish migrations and cause siltation of previously pristine rivers. The Ontario Federation of Agriculture has asked for a moratorium  on wind power development. Mining, particularly underground, is hazardous. So is commercial fishing. But Canada’s successful provinces have found a way to advance resource industries. Doing so is crucial to the prospects for rural Nova Scotia.

The Government is in the late stages of a review of hydraulic fracturing. The tone of its interim reports is constructive. It is to be hoped that the final result exhibits the same enthusiasm for development, within an appropriate regulatory regime, that has been reflected in the offshore announcement.

Locally produced gas, together with wind, provide the possibility of Nova Scotia becoming largely self-sufficient in power generation, while replacing coal plants as they reach the end of their useful lives.

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  • Yes Bill, your’s is good advice; but we have a whole generation or two who have the ‘leisure’ of N.I.M.B.Yism. There is risk in progress.

    Seems to me that there are activists all over the world today. Our’s are comfortably against prosperity.

    gordon stanfield | January 28, 2012

  • Bill, your comments are very appropriate and timely, on this subject!

    I have been dealing with groundwater contamination and well water supply issues for about 30 years. Julian’s comments, in my opinion, represent one end of the spectrum in the arguments for and against horizontal fracking (HF).

    In my experience, the issue always revolves around money and risk. In each geologic basin and hydrogeologic (i.e., water supply) area, will be unique. Companies have been obviously historically focused on spending money to find and map the gas resource. With HF, money also needs to be spent on integrating the geology, with the geomechanics and hydrogeology of that area; this will enable assessment of the risk to overlying groundwater resource.

    Companies interested in HF need the motivation, either through spectific requlation, or preferably to gain community acceptance, to spend the monies necessary to demonstate safe development of the resource (i.e., without unacceptable risk). Risk that ultimately the requlators (and hopefully the public), are willing to accept.

    To say that HF can never be used with acceptable risk, is not reasonable. If a gas resources is to be developed, the onus is on both the company to prove the risk is acceptable and the requlator, to reasonably and fairly evaluate their case.

    Harold

    Harold | January 23, 2012

  • Thanks for your comment.

    Do you know of any reliable statistics on problem rates with fracking wells?

    I have a feeling that they arevery low but doubt whether there is a concensus between drillers and environmentalists.

    I guess there is a point where the compensation for a homeowner can work. If there was a million barrels of oil under someone’s farm I suspect the farmer and the oil company could reach an agreement satisfactory to both.

    Bill

    Bill | January 23, 2012

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