Natural gas: viable alternative or pipe dream?

Peter
Peter Jackson
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Over the past couple of weeks, I’ve complained about arguments and tactics forwarded by Muskrat Falls critics. It would be reasonable for someone to assume I’ve made up my mind in support of the project.

Reasonable, but not entirely correct. I am not dead set against it, true, but neither have I made up my mind — unlike most of those who dominate social media and opinion sections.

The government’s approach to Muskrat Falls has been ham-handed at best — particularly in the past few weeks, with its cynical and manipulative side-stepping of a proper debate in the legislature.

But I have noticed a similarly coloured approach by many critics, and I make no apologies for questioning it.

I’m not an expert — not even in the same universe as energy analyst Tom Adam — but I have to wonder where he’s coming from in making a statement like this in his blog earlier this month:

“The (Newfoundland) government’s case for Muskrat Falls is a loosely defined amalgam (of) justifications based on theories about peak oil, greenhouse gas emission hysteria, electricity export fantasies, and a load forecast that assumes that declining power sales will soon stage a robust recovery.”

First, his dismissal of peak oil “theories” and greenhouse gas “hysteria” plants him firmly in the fossil fuel camp. As well, Nalcor has no “fantasies” about exporting electricity — it’s not even included in core calculations. And Adam’s characterization of load forecasts ignores the difference between industrial and household trends, and describes as “robust” what is predicted to be only a marginal but steady incline.

Last week, a coalition of St. John’s lawyers called 2041 Group released another of its continuing salvos against the Muskrat Falls project.

Cabot Martin, longtime oil and gas analyst (and player), offered a 13-page rebuttal of the government-commissioned Ziff Energy Group report that played down the viability of natural gas as an alternative source of power.

Martin’s vision — like that of MUN engineering professor Stephen Bruneau — is to pipe in natural gas from the White Rose production site on the Grand Banks and use it to fuel a revamped Holyrood generator.

Martin slammed the Ziff report for a number of failings, but mainly for not considering the potential for exports of liquified natural gas (LNG) — an omission he blames on limited terms of reference.

Piping in natural gas just to fire Holyrood wouldn’t justify the infrastructure, he says. But getting involved in LNG exports would.

Husky Energy, which runs White Rose, has explicity stated it is not interested in the gas equation. But Martin says the government should essentially do some gentle arm-twisting.

Sounding a little like Danny Williams, he called on the province not to pander to oil companies, but rather to “recognize that the gas resources at White Rose are there to be used for our economic and social being (sic), as much, if not more, than to profit Husky.”

It all represents a radical departure from the typical anti-Muskrat sentiment of steering away from huge infrastructure investments. Martin says the total cost would be $3.6 billion, only half the price tag of Muskrat Falls, but still a lot of cash for what is at best an equally nebulous scheme.

Martin’s presentation came with much talk about experts.

He strongly emphasized his own credentials, and made Ziff’s experts sound like they were out of their league.

But he refused to name experts he said he consulted. And there’s little way of knowing how accurate Martin’s estimates are. You can say the same about Nalcor’s, of course, but that doesn’t put anyone further ahead.

Meanwhile, on Monday, the government issued an expert endorsement of the Ziff numbers to counter Martin’s rebuttal.

That’s a lot of hot air about natural gas.

Peter Jackson is The Telegram’s

commentary editor.

Email: pjackson@thetelegram.com.

Twitter @pjackson_NL.

Organizations: Ziff Energy Group, Husky Energy

Geographic location: Muskrat Falls, White Rose, Newfoundland

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Recent comments

  • Winston Adams
    November 30, 2012 - 09:52

    John Smith, Vale will use 74.3 MW according to Nalcor data, not 100 MW as you said. So what was your source. It was not factual. You mislead the readers as ususal.

  • Winston Adams
    November 29, 2012 - 12:22

    Vale Inco power John said 100MW. When questoned he has come back and revised his figure saying a range of a low of 80 to a high of 100. Not a good answer John. Just trying to keep you honest. Where in the 15000 pages did you get that? But you're covered a big range there. State you're source John. The Quiz is still open. To other readers- have a guess, after all John has backed off 100 a lot . Closest to correct answer will do.

  • Winston Adams
    November 29, 2012 - 09:26

    John Smith says he's read 15,000 pages of MF reports and yet misleads the readers on the amount of power Vale Inco will need saying 100MW. Why has he not corrected this and claimed the $25.00 prise. Ok, I'll pay $50.00. Not much , but it will help on your light bill John, and this info should be at your finger tips, right? Or you prefer to continue to mislead on this?

  • Virginia Waters
    November 28, 2012 - 15:07

    When it comes to credentials and credibility, Peter, consider the implications from today Globe & Mail headline 'Former SNC-Lavalin CEO arrested on fraud charges".

  • Winston Adams
    November 28, 2012 - 14:55

    RESIDENTIAL DAMAND-- Isn't it true that the MF success or failure hinges on our island domestic demand? And on a individual basis the energy consumption has gone down 17 percent as Maurice says, but overall residential electricity consumption has gone up as John says. The reason it has gone up is because of recent new houses added at about 3000 per year, but also as Maurice says from conversions from oil to electric. But , as Maurice says there are not that many conversion s left to do. And as our population is not growing, new house construction will taper off. On top of that , new houses are more efficient, equal to R2000 standard or better, using much less electricity for heating than older houses. From this alone it suggests Maurice is right, that our residential demand will soon taper off , with no growth. Now the difference between no (zero) growth and 1 percent is not much, but enough to make MF a failure due to lack of growth. And that's only part of the story. The new housing codes and the older houses all lack efficient heating systems. These cut the electricity for heat by 66percent , resulting in over 30 percent reduction on the household. This is now very cost effective and will destroy demand for electricity big time. Peter , read my Saturday piece on efficiency, and see if your agree that Nalcor's assumptioons are reasonable--- that efficiency has reached a saturatioon point? That is bull. To say forecast growth is reasonable is to deny the realities of this heating technology. And a lot of people are installing them, despite the power companies failure to make consumers aware of the savings they offer. Please address this point Peter.

  • Maurice E. Adams
    November 28, 2012 - 13:39

    John, (corrected copy) the viability of Muskrat Falls depends on "total" island demand ---- not "domestic" demand, which accounts for only 50% of the total. From 2001-2010 total demand was (GWh) 8,060.... 8,224....... 8,446...... 8,637....... 8,496....... 8,088......... 8,082...... 8,103...... 7,500...... 7,608 ....... More than 1,000 GWh LESS THAN in 2004........ Also, our peak demand in 2011 was 1,544 MW (still LESS THAN the the 1,592 MW we had 10 years ago in 2002) --- and our existing installed NET capacity is 1,958 MW (400 MW higher than our 2011 peak).

  • Maurice E. Adams
    November 28, 2012 - 13:24

    John, the viability of Muskrat Falls depends on "total" island demand ---- not "domestic" demand, which accounts for only 50% of the total. From 2001-2010 total demand was (GWh) 8,060.... 8,224....... 8,446...... 8,637....... 8,496....... 8,088......... 8,082...... 8,103...... 7,500...... 7,608 ....... More than 1,000 GWh LESS THAN in 2004........ Also, our peak demand in 2011 was 1,544 MW (still LESS THAN the the 1,558 MW we had in 2001) --- and our existing installed NET capacity is 1,958 MW (400 MW higher than our 2011 peak).

  • Wiinston Adams
    November 28, 2012 - 12:52

    This is a Little John Muskrat Quiz. Question : What is the real estimated load for Vale Inco which John Smith says is 100MW? First to post the correct answer on line here wins 25.00. I will forward to the Telegram who can pass it to the winner. A guess counts if it is correct.

  • Maurice E. Adams
    November 28, 2012 - 12:51

    Peter, Muskrat Falls, to be viable, requires (must have) 50 YEARS of 0.8% average compound growth. Also, that 0.8% is "total" demand, not just 'domestic' demand --- which MHI points out is only about 50% of the island's total demand.......... So in order to get that 0.8% average 'total' compound growth (when the island has been de-industrializing), 'domestic' demand would need to be much, much more than 0.8% annually ---- that, combined with the need for such increase to be over a 50 year period, many times more than our 0.1% total 20 year historical average seems reasonably 'robust' to me. ........ Furthermore, I don't paint a picture of future 'flatlining', but the facts show a "reduction" in residential energy demand (17% since 1990) and as the trend shows, by 2018-2020 ---- also not a flatlining, but also a reduction in the very demand (residential electricity) on which the viability of Muskrat Falls depends. Give me one fact that "demonstrates" and provides an evidence-based forecast for a continuous increase in residential and total island demand 20, 30, 40 and 50 years out. MHI also confirms that Nalcor's forecast methodology is NOT "best practice".

  • Maurice E. Adams
    November 28, 2012 - 12:29

    Just to put some numbers on Nalcor's MF business case Peter...... Nalcor's past media briefings show a post-2041, $21 billion dollar cash flow ---- based solely on its post-2041 island demand forecast (cash flow that must come solely out of the pockets of island ratepayers based on Nalcor's post-2041 demand forecast). That cash flow is critical to MF's business case and that $21 billion cash flow is TOTALLY dependent on what MHI describes as "magnified risk" associated with long range forecasting . .... Now what do you think will happen to electricity rates (and/or taxes) if those "magnified risks" (some 30, 40, 50 year out) result is little or flat island demand? ----- Who in their right mind would put billions of dollars into a venture that depends on risks that are "magnified" due to forecasts that are 30, 40, 50 years out? And if those risks pan out, rates/taxes could double, triple, or more just to avid default.

  • david
    November 28, 2012 - 09:01

    Put your mind at ease, there Mr. Jackson...you're opinion on Muskrat Falls, informed or otherwise, doesn't enter into the eqation. But don't be offended ----no one else's does either. This thing is going ahead, whether anyone outsode the "inner sanctum" agrees to it or not, it will be your money that pays for it.

  • John Smith
    November 28, 2012 - 08:24

    Maurice...go to the PUB site...look at exhibit number 103...it clearly shows that residential demand has increased for the past ten years...so what are you talking about? More lies? Really? Is that all you have?The Vale plant alone will consume 100 meagawatts, of a potential 700 usable meagawatts...one plant.Then we have mining in labrador, the GBS in Bull arm, and many other industrial needs. Both MHI(chosen by the PUB), and Navigant have said Nalcor is underestimating our future power needs. Also at the PUB site is a presentation by NOIA, explaing why NL offshore gas is not viable, and endorsing muskrat falls...an oil and gas outfit, endorsing Muskrat falls...Maurice wants us to believe that every other jurisdiction in North America will see their demands for power increase...except for NL? Really? We will be the only place in the whole country that will not see an increased demand? You are completely out to lunch Maurice....you should try another tact, because saying we will not have increased demand is totally ludicrous, and unfounded...as usual

    • Red
      November 28, 2012 - 09:43

      The Erco plant that was previously at the Long Harbour site used way more power than that. If Vale uses that power(which it is going to) then there is no need for that power. This is one example of the B.S. numbers that yourself and the government throw out there. Also the GBS construction won't require huge electricity loads and will only be temporary. Keep trying GGTNL.

    • I wonder.......
      November 28, 2012 - 13:54

      John, is your first name Ed? last name Martin? To quantify your arguements, do us all a favour and identify yourself and your credentials, and, reveal how much you are getting paid to roll out the Tory spin, and by whom? Do it; and you'll get more support.

    • John Smith
      November 28, 2012 - 15:27

      but...I'm not looking for support...the project is essentially a go...the naysayers have lost their absurd battle...all Im doing is trying to add some reality to Maurice's canstant lies...oh, and the power usage at the Vale plant will range from a low of 80 megawatts to a high of around 100...fact.

    • Jim
      November 28, 2012 - 20:16

      John. Electrical demand in other provinces is growing just as their population is. In Nalcor's forecast there is 50% growth in energy in 50 yrs. but there is no growth in population. The last 30 years of Nalcor's demand forecast is a guess.

    • Scott Free
      November 29, 2012 - 09:36

      The government puppet industry is the one I personally find offensive and revolting. How our taxpayers' dollars are doled out to spin doctors to paid Tory wags like you is abhorent. Where else in the world can you find a government spending tens of million dollars on a project that isn't even sanctioned; and on top of that, paying handsomely to get the spin out by well-paid, unidentified puppets

  • Maurice E. Adams
    November 28, 2012 - 07:21

    HERE ARE THE FACTS PETER:---- Between 1990 and 2008, while our number of homes increased by 19%, total residential energy consumption DECREASED BY 17%, and government targets a further 20% reduction by 2020........ Yet Nalcor forecasts and Muskrat Falls depends on, not only a total island 10% increase by 2020 but also on an average 0.8% annual compound increase until 2067).... Now while you seem to recognize the reduction we have had in industrial demand (and Nalcor forecasts no increase in that sector past 2015), if look closely at the increase we have historically had in residential electricity demand, Nalcor is now a victim of its own success in that that increase has NOT BEEN due to an overall increase in residential energy demand, but solely due to electricity moving into and rapidly displacing the oil heating's share of the total and rapidly shrinking residential energy market......... At the historical rate that electricity has been displacing oil heat (displaced from 42% to 18% from 1990 - 2008, and likely down to less than 15% by now), the potential for further growth in residential electricity demand will be virtually non existent around year 2018 ---- shortly after Muskrat Falls comes on stream.......... Yet Muskrat Falls, in order to be viable, needs (must have) a 50 year increase in island demand ( not a 5 or 10 year increase) and that gentle incline that you speak of (0.8% COMPOUNDED ANNUALLY) just happens to be 800% HIGHER THAN our 20-year historical growth rate of 0.1% annually......... So, there is no increase in residential energy demand now, no evidence of increased residential electricity demand post the 2018-2020 period, no evidence of increased demand from the industrial sector, no outside sales (except at a loss), no sales to mining companies (except at a loss), and the evidence actually points to a likely reduction in residential electricity demand starting around 2018 (see www.vision2041.com, and link to the province's 2011 Energy Efficiency Plan and Climate Change Plans)..... Where then are the facts that support a 50-year (business case essential) increase in demand? There are none.

    • Peter Jackson
      November 28, 2012 - 12:06

      Maurice: The 40-page MHI analysis of domestic load projects growth to 2030 will be 51% lower than the 78 GWh per year experienced in the last 40 years and 39% lower than the 62 GWh experienced in the last decade. In fact, just about every component of predicted growth in the MHI report is moderately to significantly lower than previous times. This is hardly "robust" growth, as Tom Adam describes it. You point to various phenomena (such as the move from oil to electricity) to paint a picture of future flatlining. I think it's important to examine the whole report in context. More at: http://www.pub.nf.ca/applications/MuskratFalls2011/files/mhi/MHI-Report-VolumeII-Load.pdf

  • Maurice E. Adams
    November 28, 2012 - 07:02

    HERE ARE THE FACTS PETER:---- Between 1990 and 2008, while our number of homes increased by 19%, total energy consumption DECREASED BY 17%, and government targets a further 20% reduction by 2020 (yet Nalcor forecasts and Muskrat Falls depends on, not only a 10% increase by 2020 but also on an average 0.8% annual compound increase until 2067).... Now while you seem to recognize the reduction we have had in industrial demand (and Nalcor forecasts no increase in that sector past 2015), if look closely at the increase we have had in the past in residential electricity demand, Nalcor is now a victim of its own success in that that increase has NOT BEEN due to an overall increase in residential energy demand, but solely due to electricity moving into and rapidly displacing the oil heating's share of the total and rapidly shrinking residential energy market. At the historical rate that electricity has been displacing oil heat (displaced from 42% to 18% from 1990 - 2008, and likely down to less than 15% by now), the potential for further growth in residential electricity demand will be virtually non existent around 2018 shortly after Muskrat Falls comes on stream. Yet Muskrat Falls, to be viable, needs (must have) a 50 year increase in island demand ( not a 5 or 10 year increase) and that gentle incline that you speak of (0.8% COMPOUNDED ANNUALLY) just happens to be 800% HIGHER THAN our 20-year historical growth rate of 0.1% annually. So, there is no increase in residential energy demand now, no evidence of increased residential electricity demand post the 2018-2020 period, no evidence of increased demand from the industrial sector, no outside sales (except at a loss), no sales to mining companies (except at a loss), and the evidence points to a reduction in residential electricity demand starting around 2018 (see www.vision2041.com, and link to the province's 2011 Energy Efficiency Plan and Climate Change Plan). Where are the facts that support a 50-year (business case essential) increase in demand?