Nalcor has looked at natural gas; it won’t work, CEO says

James
James McLeod
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Nalcor CEO Ed Martin — File photo

Nalcor CEO Ed Martin was a bit apologetic as he launched into a lengthy “long winded:” speech on natural gas Tuesday.

Martin explained in painstaking detail why natural gas just won’t work for the province’s electricity needs, devoting two-thirds of his speech to the subject as he addressed the St. John’s Board of Trade.

“Bear with me, I’m in a lot more detail than I usually get into,” Martin said apologetically. “I’m sure there’s a mixed interest in the level of detail, but I feel compelled to just plow through some information.”

In recent weeks, natural gas has been the go-to alternative for several prominent critics of the Muskrat Falls hydroelectric project.

The natural gas option came up several times during the Public Utilities Board review of Muskrat Falls.

Critics opposed to Muskrat Falls, instead, suggested cheap and plentiful shale gas in the U.S. or offshore natural gas in the White Rose oil field

“It has come from many many places and a lot of people I respect immensely have just said, ‘Ed, what about the gas? What about LNG? Can you tell me a little bit more because there’s questions out there,’” Martin said. “As we move towards sanctioning of this project, one thing I know I’m going to be able to say is that we were 100 per cent transparent. People know exactly what we’re thinking, and as the questions are asked, we’re coming out and giving the detailed answers.”

First, on White Rose, Martin said Nalcor went so far as to map out a pipeline route from the offshore for natural gas, and took a look at what would be involved in producing. However, a 2001 study determined that there just isn’t enough demand for electricity to make it worthwhile to build a pipeline.

On top of that, he said, the oil companies have first rights to that gas under offshore lease agreements, and they’re using the gas to re-inject and force oil out of the ground.

Liquified natural gas is even more complicated, Martin said. It would need to be shipped here, which is expensive and tricky.

That’s the reason, Martin said, that only 6-7 per cent of natural gas is traded by shipping, whereas fully half of the world’s oil is traded on the water.

Unlike oil, where there are 4,000-5,000 tankers worldwide, there are only about 300 LNG tankers.

Because of all of this, and because natural gas tends to be used for industrial power demand — which fluctuates with the economy — Martin said it’s a “very volatile market. Lots of things are happening.”

Martin’s overall message was that he’s not pushing the Muskrat Falls project because he wants to build a big dam in Labrador, but because Nalcor has studied the situation, and they’re convinced it’s the only viable option.

“You have to be an advocate for the right decision — you have to be an advocate for Nalcor and the province,” Martin said. “Is Nalcor driven to do Muskrat Falls? No, Nalcor is driven to make the right decision.”

jmcleod@thetelegram.com Twitter: TelegramJames

 

 

Organizations: Board of Trade, Public Utilities Board

Geographic location: Muskrat Falls, White Rose, U.S. Labrador

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  • John Smith
    February 29, 2012 - 14:24

    Like many have said before, the naysayers will never be convinced. The reason why gas is an option for other locals is because they already have a gas infrastructure in place, they don't need to create a whole industry to supply gas to one turbine for 500,00 people, as we would have to do. No matter how many studies and reviews are done we will have the likes of louie who will tell us that they are all wrong. We will have others who keep hammering away about subsidizing power, when that is completely false, a lie. But hey, why should truth or facts ever get in the way? Right? it's better to say that hundreds of professional people are wrong, people who have dedicated their professional lives to this business, and keep spouting the same tired old B.S.. If gas was feasible, they would have went with it...simple. If others think gas is the way to go prove it. You can't, but go ahead and try...as I would love to see your evidence.

  • George S.
    February 29, 2012 - 13:35

    Ridiculous. If Nalcor felt natural gas did not present a compelling business case, why did they and Navigant present that the only option was to build a $1.2billion liquefied natural gas plant of scale as Canaport in New Brunswick. If there are economic reasons not to use natural gas, present them instead of ridiculous hyperbole. I also find it remarkable that Nalcor studied a pipeline before Nalcor existed as part of their due diligence! Put the requirement for power generation on the island out to tender. Have billion dollar energy companies submit proposals, take the risk and keep the investment off our balance sheet. The specificaiton is that the power cannot be more expensive than Muskrat Falls. Then it becomes a simple power purchase agreement. Why not contact Excellerate Energy, Newfoundland LNG, TeeKay, Hoegh LNG for fuel....there are many options. TransCanada and many others build and oeprate combined cycle gas turbine facilities for third parties all the time. THere has to be another driver to this constant defence of the indefensible. Thankn goodness Prime Minister Harper has the final say on the loan guarantee IF the project make economic sense.

  • OPRaH REPUBLIC
    February 29, 2012 - 12:59

    Look, If Stevie Harper likes this deal, thinks the deal is good for our province, and totally supports is provincial Brothers and Sisters on this deal. Well, Then That's Good Enough for me. The feds give BIG tax breaks to the big corprate multi-nationals, and down here our Premier wants to follow their lead and start subsidising these multi-nationals with energy/power. I can't help think though, that this is a hugh GIVEaway by dunderdxale. Who do she think she is? OPRAH ? giving our resouces away as gifts and presents everywhere. The only difference is that she's using us/and our money for a sixty year deal that will put us in debt over our heads, our kids heads, rather than come up with a soultion more practical and cost efficient. I figure they would rather pay for a soultion, rather then try a come up with one on their own.

  • Louie
    February 29, 2012 - 12:46

    John Smith-you are providing necessary alternate views but I fear you may be one of the blind that will not see. Navigant and MHI were following an assign ed agenda to aririve at an obvious result (the result asked for or were guided to) and delivered for their client. Wade Locke refused to comment early on because he had carried out assignments for the the government related to Muskrat. He also was not completely up on what was included in the project. As well Mr Locke appears be on board with the benefits of taxaton (remember the tax the people and prop up the scattered small municipalities around the island report he wrote). Emera and the NS government are grateful supporters of the project. The maritime loop and access to Muskrat power is a big part of their energy policy. Why would they not be grateful for subsidized power for which all they have to do is sign on and take it away. Emera would also like nothing more that to control the access and sale of all the power into New England that we can send from Labrador. The federal government is busy trying to figure out how they can participate, not offend Quebec of other provinces and limit any potential liabilities for any downside like cost overruns for the project. What what the people of this province desparately needs is a transparent plan of how Muskrat will be paid for and to what extent it will be paid for by oil revenues and to what extent by ratepayer electricity increases. Without that how can anyone take any comfort in proceedng a the major project like this one?

  • John Smith
    February 29, 2012 - 11:55

    Yes, by all means...LOL Let's listen to Maurice. Who cares what Navigant, MHI, Wade Locke, the people at Nalcor, the people at the goverment, Emera, the NS government, the federal goverment...yep all wrong, all corrupt, all in a big conspiracy, but Maurice is right. As a matter of fact, I have yet to see anything, in any of Maurice' comments that could be backed up by facts. Everyone knows this will cost billions. Breaking news...it costs billions of dollars to provide power to hundreds of thousands of people. Man, you guys...always good for a laugh.

  • tony
    February 29, 2012 - 11:38

    On the subject of shale gas in the US, it seems it is it isn't as plentiful as Originally supposed. The Americans have recently downgrade their total recoverable resource of shale gas by 42%. The fact is reserves of fossil fuel will be more difficult and expensive to find and recover in the future. Their is one expection to that though and I loathe to even mention it and that is coal. It is so wildly damaging to the enviroment no one is even suggesting it here. Even the most conservative thinkers in the states appear to be very uncomfortable with rather silly concept of clean coal. Yet a significant portion of their power is generated by these aging plants. An opportunity maybe. Right now i think the oil companies are doing the right by reinjecting that gas. In the future the economics will catch up and we will be selling it to the world 's energy hungery markets.

  • David
    February 29, 2012 - 11:27

    If Nalcor put any genuine, unbiased effort into analysing "Danny's Dam" for feasibility problems, they would come to a very similar conclusion as they've done on gas. But that's not what they were told to do, and they like their paycheques. So screw taxpayers....again.

  • John Smith
    February 29, 2012 - 11:24

    Who said a pipe line would be cheaper? A study ten years ago said it would cost about 2.5 billion just to get the gas onshore. Then we have the issue of what happens if the supply is cut, how do we store it, what happens when it runs out? Not to mention we don't own the gas, the oil companies do.

  • Louie
    February 29, 2012 - 11:22

    If the Maurice Adams summary of how this project will be put over onto the backs of the comsumers for generations to come ia accurate, it is much uglier than than it looked before. Most taxpayers have been believing the Conservative policy book which indicates that the non renewable oil revenues would be used to build the renewable hydro resource- not take or pay and all on the ratepayer's back.

  • joe
    February 29, 2012 - 10:01

    What about gas?Didn't Nalcor find gas at Parson's Pond?How much?Why didn't they drill the third well?Too much gas?Why wouldn"t a gas to wire facility work there? What about tidal generated power?Iread in "Ocean Resources.com that the potential power resource in the Bay of Fundy is more than Nova Scotia will ever need.Have we really looked at all the alternatives?

  • Joshua Groves
    February 29, 2012 - 09:57

    For those speaking of they believe how liquefied natural gas (LNG) is the better alternative, let's not forget this project: http://www.nl.dailybusinessbuzz.ca/Provincial-News/2009-06-04/article-1908876/NL%3A-LNG-terminal-project-killed/1 The economy is still not there... When gas is in higher demand, it will be worthwhile to start producing and exporting it. Currently oil platforms do have access to natural gas, and it is re-injected to help push oil from the field (research gas injection if you're not familiar).

  • John Smith
    February 29, 2012 - 09:49

    LOL...ahhh the know nothing naysayers...they know nothing... yet that doesn't stop them. God love 'em, they can't help it. They are just not that bright I guess. They tried wind, they tried gas, they try to attack the people who have the opinion this is a good deal...what's left I wonder? The Danny Dumaresques, the Vardys the liberals, the NDP. They don't care if the project is good or bad, as long as they can stymie the process, for their own gain. Sickening.

  • Brad
    February 29, 2012 - 09:37

    If there isn't enough demand for a cheaper pipeline from offshore, where is the demand for a hugely expensive Hydroelectric project? Why not build a power line from the island and export our excess power from natural gas electrical generation. Sounds like Mr. martin is speaking out of both sides of his mouth. How about being a little more proactive Mr. Martin instead of being so reactive.

  • sealcove
    February 29, 2012 - 09:21

    Who does john smith work for nalcor or the government maybe the telegram what is he afraid of this person is a phony

  • John Smith
    February 29, 2012 - 08:35

    ohhh Jack, do we really have to revisit the wind issue again? We have two wind farms here on the island, and Nalcor is investing in wind. The problem is, of course, that wind cannot be used for primary generation. That is why the cable to NS is so important. With the ability to push/pull energy through the cable we will be able to grow our wind resource, and possibly sell more power to the mainland. Wind is a very expensive technology, and you cannot store the energy. Those are the two main issues. The biggest factor influencing wind here is that we are currently have an isolated system, and we need stable power. Wind will not work here unless we have a primary system, as they do in NS and everywhere else in NA.

  • Maurice E. Adams
    February 29, 2012 - 08:24

    When it comes to our children and gran children, Nalcor is effectively hiding the true costs of Muskrat Falls power, and therefore hiding the costs that our children and grandchildren will pay. +++++ In order to do that, Nalcor first had to be set up as a separate corporation. Then they were exempted from the Electrical Power Control Act. Then our Public Utilities Board were exempted from applying the Public Utilities Act to "all activities" related to the Muskrat Falls project (the current review is an 'advisory' one only). +++++ Then Nalcor was exempted from the Public Utlities Act. That made them exempt from using the standard utility method of passing costs and setting prices for its customers. It could avoid the normal "cost of service" method (similar to our 'mortgage' method) and instead Nalcor came up with an 'escalating' price method. +++++ This allows Nalcor to offer consumers "the worm" --- prices that are less than their cost (but still higher for us) IN THE EARLY YEARS, but it 'escalates' yearly ---- and worse again --- it backloads the costs that 'we' should pay for ---ON OUR CHILDREN AND GRANDCHILDREN. +++++ Instead of like a mortgage, where we pay it off (say over 30 years) and then the asset (house or dam) costs us nothing (only upkeep/operating costs) after that (like the Upper Churchill is now--- which when it comes back is basically ---- ZERO COST POWER), with the escalating price scheme --- in later years, prices keep going up and UP, AND UP. +++++ I don't have the exact figures (because to date Nalcor refuses to provide them), but using the 'esclating' price, instead of the cost of service price --- our children and grandchidlren could pay about 20 times more for Muskrat Falls power than if Nalcor was regulated by the PUB and had to use a COS pricing method. ++++++Is that the kind of people we are????? So that we can enjoy energy in excess of our needs today, we shove the true costs off on our children and grand children. And worse again, if our children and grand children don'' (and won't) need the power, Muskrat Falls will be a "take or pay" 50-YEAR CONTRACT ---- even if they don't need or use the power ---- they have to pay anyway -----NOW YOU UNDERSTAND WHY DANNY SAYS THIS IS A GOOD BUSINESS DEAL AND THAT HE WOULD PUT HIS OWN MONEY INTO IT. Because island ratepayers are a 'captive' market. If it is a good deal ---- it is a GOOD DEAL FOR WHOM?

  • Jack
    February 29, 2012 - 08:09

    John Smith, it doesn't mean that Nalcor can't explore other options? Nalcor has other renewable energy options such as wind energy. Wreckhouse and Northern Peninsula areas are excellent places to place wind turbines. In addition, perhaps Nalcor executives didn't take the ferry to North Sydney recently. When you take a ferry to Nova Scotia, just before arriving in North Sydney, you can see numerous wind turbines from the Lingan Wind Farm. If Nova Scotia embraces wind energy, with more wind turbines to come in this province regardless of what Anne Murray says, now is the time for Newfoundland and Labrador to do the same.

  • John Smith
    February 29, 2012 - 08:05

    What Mr. Martin means by stating the money will stay here is that we buy hundreds of thousands of barrels of dirty bunker grade oil from the middle east. So instead of that money going out to pay for oil, it will remain here, to pay for the facility, or whatever else we want to do with it. @Louie...everything you stated in your post is incorrect. We will need this project even if we don't sell one KWH to the mainland, and it is totally viable without Emera. The fact that they want to invest two billion into it, and provide us with a way to pay the interest from sales of power only makes the deal more inviting. Not to mention when the upper churchill comes back online we will own the cable, lock stock and barrel.

  • Ken Collis
    February 29, 2012 - 07:53

    First, on White Rose, Martin said Nalcor went so far as to map out a pipeline route from the offshore for natural gas, and took a look at what would be involved in producing. However, a 2001 study determined that there just isn’t enough demand for electricity to make it worthwhile to build a pipeline. There isn't a demand??? And "John Smith", It DOES take a rocket scientist, it's just that Nalcor doesn't have one of those.

  • You can find out more
    February 29, 2012 - 07:48

    You can find out more about the Muskrat Falls project from the NS government website (https://www.nsrenewables.ca) than you can from anyone around here for crying out loud. The most informative documents on the PUB website are in the Correspondence section. Ed Martin recently stated that unlike oil, all the money would be staying in the province. I would love for him to further explain in more detail exactly what he means by that.

  • John Smith
    February 29, 2012 - 07:16

    This info is on their website. It doesn't take a rocket scientist to understand why gas is just not a viable option. All I've asked for is the numbers from those who think gas would be the lowest cost option. Nalcor has looked into it, the governement looked into it...that's good enough for me. However, let's hear from Cabot Martin, with a detailed cost structure, tell us all how it would be done.From what I've read on the subject it would be just about impossible to transport LNG from the States to here. To justify a pipeline from the offshore for one or two plants would be insane. If every home in NL was already hooked up to gas we still wouldn't have the numbers to justify it, let alone one or two power plants. First it was wind, then after months of explaining why that won't work on an isolated island sysytem the naysayers switched to gas, now it will have to be explained, again and again why that won't work. What will the naysayers come up with next? Nuclear, tidal, solar, mice in treadmills? Oh, I have an idea, why not a hydro project? On a river that already has a dam on it. That will provide all the power we will need for the next 100 years, and we will have a way to sell the excess untill we will need it. We will be connected to the mainland grid, so we will be able to expand wind generation, we will have stable rates for the next 50 or 75 years, we will not have the 5th worst polluter in canada huffing away in holyrood. Sounds like a good idea to me.

  • Louie
    February 29, 2012 - 07:02

    The question of the Muskrat project still remains-how can it be paid for? As presently envisaged one half of its production must be sold on the mainland in competition with others including Quebec who's Romaine project is being developed at one quarter to one third the cost of Muskrat for sale in the same marketplace. Sales of power must be subsidized by NL comsumer rates and oil revenues. The giveaway of one quarter of Muskrat's generation to NS is hard to swallow after the Upper Churchill fiasco. The question to the PUB is too narrow and the options comparison appears to be seriously flawed in not considering the repatriation of free Upper churchill Power in 2041. Many have said this project is for the grandchildren. Will they be able to pay for this great gift we leave them with?

  • MBC
    February 29, 2012 - 06:45

    I note that whenever all the critics come out, be it the telegram, open line programs, CBC & NTV and Tim's coffee chatters, Ed Martin will rebute all arguments and silence the critics. I'm stating to support Nalcor based on his information and arguments.

  • Jack
    February 29, 2012 - 06:42

    Nalcor doesn't seem to be bright in the thinking department as they seem to be showing tunnel vision with respect to renewable energy. In other words, Nalcor does have other options including natural gas and even take the route of Nova Scotia, wind power.

    • wtf
      February 29, 2012 - 07:53

      For real????

    • Jack
      February 29, 2012 - 08:13

      WTF, I don't see why Newfoundland and Labrador Government and Nalcor should not look at wind as a viable option. There are many parts of the island where wind power generation is feasible, particularly the Wreckhouse and Northern Peninsula areas. Besides, if you visited Nova Scotia recently, you'll notice wind farms or individual wind turbines are appearing everywhere. Even the Greater Halifax Area has one or two wind turbines.

    • Fred Penner
      February 29, 2012 - 08:33

      Jack...Wind is not the answer. Currently, there are two restrictions on the amount of wind penetration for the island of Newfoundland. The first has to do with water spillage. If we have more than about 80MW of wind on the island system, we will be required to spill water....the wind will displace the hydro generators. Secondly, there is a system stability issue related to wind which dictates that penetration exceeding about 130 MW will cause stability problems for the power system.

    • wow
      February 29, 2012 - 10:24

      immigrants? Is that a racist blame card your playing?