City of Saint John Common Council Special Meeting AGENDA Monday, January 27, 2014 5:00 p.m. Council Chamber Please use Chipman Hill entrance S'il vous plaît utiliser l'entrée Chipman Hill Pages 1. Call to Order 2. The Scope of Impact of the Energy Sector on New Brunswick and more specifically Saint John 2.1 Energy and Economic Development: Summary 1 - 9 2.2 The Energy Sector in New Brunswick: Presentation 10 - 68 1
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City of Saint JohnCommon Council Special Meeting
AGENDA
Monday, January 27, 20145:00 p.m.
Council ChamberPlease use Chipman Hill entrance
S'il vous plaît utiliser l'entrée Chipman Hill
Pages
1. Call to Order
2. The Scope of Impact of the Energy Sector on New Brunswick and more specificallySaint John
2.1 Energy and Economic Development: Summary 1 - 9
2.2 The Energy Sector in New Brunswick: Presentation 10 - 68
1
The City of Saint John
Séance du conseil communal
Le lundi 27 janvier 2014
Salle du conseil, 17 h
Comité plénier
1. Ouverture de la séance
2. Impact du secteur de l'énergie sur le Nouveau-Brunswick et plus précisément sur
Saint John
2.1 Énergie et développement économique : Résumé
2.2 Le secteur de l'énergie au Nouveau-Brunswick : Présentation
18. Levée de la séance
Energy and Economic Development: Summary
The presentation to Council on January 27, 2014 will cover two main topics:
1. An overview of the energy sector in New Brunswick
2. Energy and economic development – how the energy sector impacts the economy and how it can be used to
foster further economic growth
1. The energy sector in New Brunswick
The energy sector in New Brunswick includes a wide variety of activities including oil and gas extraction, electricity
generation, energy distribution, petroleum refining and other
services (Statistics Canada definition). In 2012, the energy sector
generated $2.32 billion worth of real gross domestic product (GDP)
in New Brunswick or about seven percent of provincial GDP. It has
dropped moderately in recent years due to lower natural gas
extraction.
Compared to other provinces, New Brunswick’s energy sector is
larger than Quebec, Nova Scotia, Ontario and Prince Edward Island
relatively smaller than Manitoba, British Columbia, Saskatchewan,
Newfoundland and Labrador and Alberta. Mainly as a result of oil
and gas extraction, Saskatchewan and Alberta have very large
energy sectors.
It’s important to understand the difference between energy
‘output’ and energy GDP – or the value added activity in the
provincial economy. The oil refinery in Saint John generated over
$10 billion worth of international exports in 2012 but it required $9
billion worth of imported oil (rough numbers). The difference is the
real GDP creation in New Brunswick.
Energy Sector GDP Per Capita (2012) Chained (2007) dollars
Source: Statistics Canada CANSIM Table 379-0030
1
The industry directly employs approximately 7,600 people across the province with a heavy concentration in Saint John.
Energy-related utilities employ approximately 3,700 people; the oil refining sector employs 1,500; oil and gas
exploration employs 800 persons; energy-related construction employs 600 persons (in a typical year); and other energy
firms – pipelines, LNG, etc. employ an estimated 1,000 persons.
Refined petroleum products account for the bulk of energy exports. In 2012, there were $10.3 billion worth of
international exports from this sector. Oil and gas extraction amounted to $202 million and electric power $51 million1.
Key segments of the industry:
NB Power is New Brunswick’s primary electricity utility. Electricity is generated at 13 facilities and delivered via power
lines, substations and terminals to more than 390,000 direct and indirect New Brunswick homes, businesses and
facilities. NB Power’s generation division operates 12 hydro, coal, oil and diesel-powered generating stations with an
installed net capacity of 2,853 MW. It’s generation division supplies approximately 75 per cent of in-province load. It
also exports energy to neighbouring New England, Quebec, Prince Edward Island and Nova Scotia markets.
Enbridge Gas New Brunswick is the main provider of natural gas to residential, commercial and industrial firms. EGNB
has over 781km of pipeline servicing 10 communities in southern New Brunswick. The firm serves more than 11,500
customers in Saint John, Fredericton, Dieppe, Dorchester, Moncton, Oromocto, St. George, St. Stephen, Riverview,
Sackville and Dorchester.
NOTE: Natural gas single use franchises granted by the provincial government to the largest natural gas users account
for 70%-80% of all natural gas used in New Brunswick.
Key industry players:
NB Power
Enbridge Gas NB
Maritimes & Northeast Pipeline
Brunswick Pipeline
Irving Oil
Emera Inc.
1 Natural gas exports through New Brunswick but from Nova Scotia are counted as Nova Scotia export
2
The Maritimes & Northeast Pipeline (M&NP) is a 1,101-kilometre mainline transmission pipeline built to transport
natural gas from developments offshore Nova Scotia to markets in Atlantic Canada and the northeastern United States.
A joint venture of Spectra Energy (77.53%), Emera Inc. (12.92%), and ExxonMobil (9.55%), M&NP is headquartered in
Halifax. The Brunswick Pipeline is 145-kilometer, 30-inch diameter pipeline transmission system that currently delivers
natural gas from the CanaportTM (LNG) terminal in Saint John to markets in Canada and the US northeast.
Irving Oil, a privately-held regional energy processing, transporting, and marketing company headquartered in Saint
John, is also a key industry player. The company has over 900 fueling locations, ten distribution terminals, and a
delivery fleet of tractor-trailers serving wholesale, commercial, and retail customers in Atlantic Canada, Quebec, and
New England. It’s Saint John refinery is the largest in Canada, stretching over 780 acres. The firm is a partial owner of
Canaport LNG and is expanding into the provision of compressed natural gas (CNG) to large industry clients not located
near the natural gas pipeline infrastructure.
Emera Inc. owns the Brunswick Pipeline; owns and operates Bayside Power - a 260 MW gas-fired combined cycle power
plant located in Saint John; is part owner of the Maritimes & Northeast Pipeline; and is an investor in Fredericton-based
Atlantic Hydrogen Inc.
The natural gas exploration and production sector has been active in New Brunswick for over a decade. There are nine
firms with active oil and gas exploration agreements in the province with Corridor Resources Inc. and Potash
Corporation of Saskatchewan having the only active wells. SWN Resources Canada, Inc. is in a testing and research
phase.
Emerging energy production sectors:
Oil and Gas Extraction - There is an estimated 70 TCF of gas in the McCully and Stoney Creek fields.
The government estimates a “major find” of natural gas could net the province more than $200 million per year in annual royalties. This would be on top of the tens of millions of dollars’ worth of potential tax revenues.
Biomass energy – much of this biomass is being used already by the forest products sector.
Wind energy – already 400 MW of installed capacity in place across the province.
Biofuels from sugar beets. The Atlantic Council for Bioenergy Co-operative is advocating for the construction and operation of 13 plants in Atlantic Canada which would create 9,000 jobs, $1.5 billion in GDP and generate $273 million in tax revenues.
3
Other important energy players include: ExxonMobil which has over 1,000 employees in New Brunswick servicing clients
across the western hemisphere; Siemens which operates a major smart grid R&D facility in Fredericton and the
province’s engineering firms – particularly in Saint John – that have developed energy-related expertise.
There are also IT firms with energy products such as Saint John-based ShiftEnergy. Finally, the Atlantica Centre for
Energy is an important energy sector advocacy organization.
2. Energy and Economic Development
The energy sector is foundational to the modern economy. Access to diverse forms of energy at competitive costs is
critical to the success of the provincial economy. In the past 10-15 years, there has been over $5 billion worth of new
investments in the energy sector including:
A major upgrade to the Irving Oil refinery
The new Canaport liquefied natural gas (LNG) receiving and regasification terminal
The Emera Brunswick Pipeline that delivers the LNG to markets in Canada and the US northeast
A new international power line from New Brunswick into Maine
The build out of the McCully natural gas field near Sussex
The refurbishment of the Point Lepreau nuclear energy facility
New wind energy investments across the province
The continued rollout of the Enbridge Gas NB natural gas distribution system
As shown in the chart, electric power engineering construction GDP in New Brunswick has been the third highest in
Canada in recent years (adjusted for the size of the population) as a result of the Lepreau refurbishment, wind energy
investments, etc.
4
Energy is high value economic activity
Because of the substantial capital investment and the
technical nature of the energy sector, it is high value
economic activity. As an example, energy related careers
such as petroleum engineers, power engineers, oil and
gas well drillers, electrical power line workers and power
system electricians earn a substantial premium over the
average worker in the labour market. For example, an oil
and gas well driller across Canada will earn 50 percent
more than the average full time worker.
The industry also generates substantial revenue for
governments. In 2010, energy royalties contributed
$2,480 per capita to the Newfoundland and Labrador
government budget and $1,573 to the Alberta
government budget. The same year, energy-related
royalties generated $6 per capita in New Brunswick. This
doesn’t include the taxes paid by the energy sector.
In general, all ‘have’ provinces in Canada generate a
substantial portion of provincial government revenues
from oil and gas and other energy resource royalties. All of the have-not provinces (defined as those requiring fiscal
equalization from the federal government), have very little energy resource royalties. In 2011, 23 percent of the New
Brunswick government’s revenue came from the federal equalization program. That same year, energy and other
royalties accounted for 21 percent of the Saskatchewan government’s annual revenues.
The Saint John Energy Cluster
Electricity production: nuclear, oil and natural gas-based generation
Petroleum products refining
Liquefied natural gas (LNG)
Gas pipeline infrastructure
Skilled workforce with expertise in construction and operations
Specialized engineering capacity; industry consulting services; and other business services
Electric Power Engineering Construction GDP Per Capita Annual average expenditure 2007-2012 Chained (2007) dollars
Source: Statistics Canada CANSIM Table 379-0030
5
Energy-related education
Atlantica Centre for Energy
NB Department of Energy
Energy as a driver of economic development: Why does it matter?
New Brunswick needs high value economic activity to generate employment and tax revenue. The provincial
government is running substantial deficits and is burdened by a large public debt. In addition, the province remains
heavily reliant on fiscal equalization. The provincial economy has not created any net new jobs since 2008. As a result,
there has been an uptick in outward migration – particularly among younger New Brunswickers.
An example of the link between economic activity and the investment in public services is shown below. The generation
of $100 million worth of tax and royalty revenue will cover the salaries of more than 1,400 nurses or 1,500 school
teachers. This level of revenue pays for almost the entire budget of the Department of Natural Resources.
$100 million of tax/royalty revenue pays for:
The salaries of more than 1,400 nurses
The salaries of more than 1,500 school teachers
The salaries of 650 doctors
The salaries of 1,700 social workers
Almost the entire Department of Natural Resources budget
Two thirds of the entire Department of Public Safety budget
One third of the entire Post-Secondary Education, Training and Labour department budget
Over half of the total amount paid out to NB families each year through social assistance
New Brunswick’s economy is heavily reliant on energy
The New Brunswick economy is particularly reliant on diverse supplies of competitive energy. Many of the province’s
key industries – including forest products, petroleum products manufacturing, potash mining, truck transportation and
food manufacturing are significant users of energy.
6
Any significant increase in energy costs undermines the competitiveness of these industries. According to research
done by KPMG, electricity costs for energy-intensive manufacturers in New Brunswick are above average compared to
other jurisdictions across North America. In addition, natural gas costs for manufacturers are the highest in North
America.
New Brunswick households are also sensitive to energy cost inflation. The average New Brunswick household spends
over $2,700/year on energy and water costs for their principal accommodation or 4.5 percent of their total household
expenditure s- the third highest among the 10 provinces across Canada.
Energy and economic development: 2013-2020
Energy infrastructure investment was a major driver of the provincial economy over the past 15 years and the lack of
this investment is one of the reasons the economy has witnessed the worst GDP growth in Canada since 2008.
The energy sector could see more investment and job creation in the coming years. There are several important
initiatives in the ‘pipeline’ that could spur growth including:
Shale gas and oil development. There is still no guarantee there is a commercially viable industry in New
Brunswick (beyond Corridor Resources) and considerable public resistance could curtail investment. However,
the government and key industry leaders remain bullish on the prospects of the industry. Significant
commercial exploration is likely several years away.
The proposed Energy East Pipeline. This large scale project still requires regulatory approval and is not
guaranteed. The plan calls for development to start in 2015.
The proposed Canaport Energy East Marine Terminal. This $400 million project is reliant on the Energy East
Pipeline. Assuming the go ahead for that project, the plans calls for development to start in 2015.
An LNG export terminal. This is currently a fairly speculative project as supply bottlenecks and competing
projects constrain development potential.
Electricity infrastructure upgrades. It is possible that Colson Cove may be converted to natural gas and
refurbishment of Mactaquac could start in the latter part of the decade if NB Power decides to go ahead.
Cluster development efforts (i.e. Saint John energy start-up incubator, smart grid, etc.)
Renewable energy. The investment picture is murky.
7
Energy and community acceptance
Now more than ever, energy projects with environmental impacts need a social license for development. There is a
heightened concern for the potential side effects and risks associated with projects such as natural gas exploration and
production; oil pipelines and even electricity infrastructure. Wind energy production infrastructure has generated
significant community backlash in Nova Scotia and those concerns have rippled into New Brunswick.
It is important to separate NIMBYism (Not-In-My-
Backyard) from broader environmental concerns. Both
are important but require separate responses. In New
Brunswick it is also important to understand and
address the concerns of aboriginal groups. The
protests associated with SWN Resources’ exploration
in Kent County were the subject of international media
attention. The potential shale gas development
industry has also re-engaged the rural/urban divide
debate across the province.
One thing is for sure. If we are to develop the shale
gas sector or any other new energy sector we will need
highly reputable, good corporate citizens. The
example of Repsol and its integration into the Saint
Primary electricity, hydro and nuclear Secondary electricity, thermal
20
Energy Production by Type (% of CDN
Total)
12
Source: Statistics Canada CANSIM Table 329-0050
0.08%
0.15% 0.14%
0.11%
0.09%
0.00%
0.02%
0.04%
0.06%
0.08%
0.10%
0.12%
0.14%
0.16%
2007 2008 2009 2010 2011
Natural Gas
21
Energy Demand by Type (% of CDN Total)
13
Source: Statistics Canada CANSIM Table 329-0050
2001 2011 Total primary and secondary energy 2.6% 2.3% Total coal 0 0.03% Natural gas 0.4% 0.7% Gas plant natural gas liquids (NGL's) 10.8% 1.6% Primary electricity, hydro and nuclear 2.9% 2.6% Steam 0.8% n/a Coke 1.1% 0.5%
• NB Power: New Brunswick’s primary electricity utility.
• Electricity is generated at 13 facilities and delivered via power lines, substations and terminals to more than 390,000 direct and indirect New Brunswick homes, businesses and facilities.
• NB Power’s generation division operates:
– 12 hydro, coal, oil and diesel-powered generating stations
with an installed net capacity of 2,853 MW.
– Generation supplies approximately 75 per cent of in-province load through sales to Distribution.
– It also exports energy to neighbouring New England, Quebec, Prince Edward Island and Nova Scotia markets.
18 27
Key Industry Player: NB Power
• The firm’s nuclear division operates and maintains a CANDU 6 - 660 MW reactor at the Point Lepreau Generating Station.
• The Station provides approximately 25 per cent of New Brunswick 's electrical energy requirements.
• It also sells five per cent of its energy production to Maritime Electric Company, Limited.
• The Transmission & System Operator division maintains and operates 49 terminals and switchyards that are interconnected by over 6,849 km of transmission lines ranging in voltage from 69 kV to 345 kV.
• The system is interconnected with electrical systems in North America, including Quebec, Maine, Nova Scotia and Prince Edward Island.
19 28
Key Industry Player: NB Power
20 29
Key Industry Player: NB Power
21 30
Key Industry Player: Enbridge Gas NB
22
Enbridge Gas New Brunswick has over 781km of pipeline servicing
10 communities in southern New Brunswick.
31
Key Industry Player: Enbridge Gas NB
• Enbridge Gas New Brunswick (now 100% owned by
Enbridge Inc.) has a 20 year renewable agreement
with the provincial government
• IT is a regulated utility that distributes natural gas to
residential, commercial, institutional, and industrial
customers in New Brunswick.
• The firm covers: Saint John, Fredericton, Dieppe,
Breakdown of Provincial Government Revenue by Source
49
Energy is high value economic activity
41
*This does not include the hundreds of firms that support the sector including construction,
engineering, legal, human resources, finance and other business services.
Source: Canadian Business Patterns (2011). Statistics Canada.
The Long Energy Supply Chain (# of Firms*)
50
Energy is high value economic activity
42
Petroleum Refineries and Other Petroleum and Coal Products Manufacturing 9.1 Oil and Gas Extraction 6.1 Motor Vehicle Manufacturing 5.8 Particle Board, Fibreboard, and Waferboard Mills 5.3 Crude Oil and Other Pipeline Transportation 4.8 Pulp Mills 4.4 Potash Mining 4.1 Pipeline Transportation of Natural Gas 4.0 Oil and Gas Engineering Construction 3.2 Natural Gas Distribution 2.8 Electric Power Generation, Transmission and Distribution 2.6 Power Boiler and Heat Exchanger Manufacturing 2.5 Electric Power Engineering Construction 2.4 Amusement and Recreation Industries 1.6 Other Administrative and Support Services 1.6 Retail Trade 1.5 Offices of Physicians 1.5 Performing Arts, Spectator Sports and Related Industries 1.4
New Brunswick’s economy is heavily reliant on energy
46
Electric power generation, transmission and distribution 41.1 100.2 Water transportation 24.6 131.6 Pipeline transportation 23.2 64.5 Pulp, paper and paperboard mills 21.8 79.4 Air transportation 19.3 128.0 Basic chemical manufacturing 18.6 101.7 Primary metal manufacturing 17.5 75.3 Truck transportation 14.7 97.0 Cement and concrete product manufacturing 14.2 71.5 Miscellaneous non-metallic mineral product manufacturing 14.0 72.5 Petroleum and coal products manufacturing 13.6 90.6 Transportation margins 13.2 89.7 Travel and entertainment 11.4 113.1 Rail transportation 11.1 72.5 Transit and ground passenger transportation 10.8 89.4 Support activities for agriculture and forestry 10.6 170.9 Converted paper products manufacturing 10.4 72.2 Distilleries 10.1 89.5
2008 1990=100
Source: Statistics Canada CANSIM Table 153-0031.
Direct plus indirect energy intensity, by industry (Canada) Gigajoules per thousand current dollars of production
Avg. Household Expenditures % of Total Expenditures
$2,218
$2,219
$2,229
$2,115
$2,414
$1,955
$2,360
$2,126
$2,491
$2,476
$2,085
$- $1,000 $2,000 $3,000
CAN
NL
PE
NS
NB
QC
ON
MB
SK
AB
BC
3.1%
3.9%
3.9%
3.5%
3.9%
3.3%
3.1%
3.2%
3.6%
2.9%
2.8%
0.0% 2.0% 4.0% 6.0%
CAN
NL
PE
NS
NB
QC
ON
MB
SK
AB
BC
62
Energy and economic development:
2013-2020 What is in the ‘pipeline’?
• Shale gas and oil development – Still no guarantee there is a commercially viable industry
– Considerable resistance could curtail investment
• Proposed oil pipeline: Energy East Pipeline – Requires regulatory approval
– Plan calls for development to start in 2015
• Oil export terminal: Canaport Energy East Marine Terminal – Reliant on the Energy East Pipeline
– Plan calls for development to start in 2015
54 63
Energy and economic development:
2013-2020 What is in the ‘pipeline’?
• LNG export terminal – Supply bottlenecks and competing projects
• Electricity infrastructure upgrades: Colson Cove, Mactaquac, etc.
• Cluster development efforts (i.e. Saint John energy start-up incubator, smart grid, etc.)
• Renewable energy? – Biomass, wind, solar, small hydro, geothermal
– Biofuels from sugar beets. The Atlantic Council for Bioenergy Co-operative is advocating for the construction and operation of 13 plants in Atlantic Canada which would create 9,000 jobs, $1.49 billion in GDP and generate $273 million in tax revenues.
55 64
New Brunswick’s Shale Gas
Opportunity
56
Exports of Nova Scotia natural gas (as a % of total net production)