There was a media flap this past week when the dynamic duo of the CBC’s Paul Withers and the website Allnovascotia.com acquired the “Onshore Atlas” from the Nova Scotia Department of Energy showing locations of deposits of natural gas and coal bed methane in the province.
Withers’ report contained some big numbers. “Onshore natural gas resources in the province are worth between $20 billion and $60 billion,” it said, and much of the bonanza is in the form of shale gas – which would have to be recovered through f-r-a-c-k-i-n-g.
Cue another round in the fracking debate.
Predictably, a lobbyist for the energy industry, along with a candidate for the leadership of the Nova Scotia Tories said the report justified revisiting the fracking ban that has been in place since 2014. The lobbyist, Ray Ritcey of the Maritimes Energy Association is quoted as saying “I think that’s too large of an opportunity to dismiss outright.”
In response, the Council of Canadians and the Ecology Action Centre reiterated their opposition to fracking and maintained that “the conditions under which Nova Scotia banned fracking have not changed.” David Wheeler, who headed a panel that conducted extensive research and public consultation for its 2014 report preceding the ban, agreed. He told the Chronicle-Herald the panel report “remains as relevant today as it did when it was published.”
Full disclosure, I am a supporter of the Ecology Action Center, so take what follows with that in mind. However, the atlas does not appear to provide grounds for renewal of the fracking debate. Indeed, based on the resource estimates presented in the atlas, the opposite case can be made. Numbers in the atlas present a weaker economic case for fracking than was in the public domain, via the Wheeler panel report, when the Liberals imposed the ban in the first place.
I delved into this issue three years ago. Check out the posts here and here. It’s important to note that the onshore petroleum atlas has been in the works since 2013 when the Wheeler panel was active. There is nothing in the atlas to indicate larger quantities of natural gas have been found in Nova Scotia since that report was presented.
Chapter two in the Wheeler report written by Brad Hayes and Ray Ritcey (small world, eh) estimated shale gas reserves ranging from 17 to 69 trillion cubic feet (TCF) in the Windsor-Kennetcook basin alone. As discussed in my 2015 post, the high end of that estimate was a tad dubious. That skepticism seems to have been in order, given that the atlas estimates the reserve at only 32 TCF – not a reduction from the low end of the estimate but certainly a lowering of expectations.
Measurements like Trillion Cubic Feet (TCF) are unlikely to attract much attention. To turn heads, you need dollar signs, and Withers’ report had that metric – the estimated $20 to $60 billion as the market value of the gas. That seems like a lot of value to leave in the ground – at least until you take a closer look.
First, note that only two-thirds of this headline grabbing number – $13 to $40 billion – would be from fracking shale gas. The remaining value would be in coal bed methane and non-fracked natural gas. The second thing to note is that these big numbers are spread out over 80 years – so the annual range would be from $250-$750 million, not nearly as exciting as a headline. And for fracked gas it would be two-thirds of that – $170-$500 million. And of course that’s the total value of the gas – royalties on the fracked gas at 10 per cent would range from only $17 million to $50 million per year.
Now compare the fracked gas numbers with those being discussed when the Wheeler panel reported in the summer of 2014. Chapter three in the final report by Brad Hayes and Michael Gardiner ran several “plausible scenarios” for development of fracked gas. Their “lower medium” scenario assumed a resource of 100 TCF, with 10 per cent recovery – more than twice what the Atlas now presents as top of the range for recovered fracked gas. The Hayes-Gardiner “lower medium” scenario runs its numbers over 66 years, at a value of $60.61 billion and royalties at $5.88 billion. Annualized, that works out to about $920 million a year in revenue and $89 million a year in royalties.
The table below compares the most optimistic estimate from the atlas with the scenario spun out in the Wheeler report.
|Atlas best case||Wheeler|
|Resource||32 tcf||69 tcf|
|Annual Revenue||$500 million||$920 million|
|Annual Royalties||$ 50 million||$ 89 million|
Admittedly, these comparisons are apples and oranges. But the key point is that when the decision was made to ban fracking, the dollar signs for lowest estimated volume of fracked gas were considerably larger than the ones that made news last week. And the upper range for the resource from a single basin was more than double what the atlas estimates for that sub-basin – the Windsor-Kennetcook – and the Cumberland sub-basin combined.
One thing the Wheeler panel and the creator of the atlas seem to have in common is the speculative nature of estimates of what’s actually down there. The former states that “as knowledge of the subsurface…is extremely limited it is very difficult to quantify the potential.” The atlas’ disclaimer notes the report was produced under the direction of a small number of department staff and “a handful” of external consultants and “it is important to acknowledge that the Atlas project was necessarily resource and expertise limited.” So, take with a grain of salt.
Unless I have missed something, it appears that the initial CBC and Allnovascotia.com stories are much ado about very little, and those who say the atlas data provide grounds for revisiting the fracking issue are wrong. However, we have probably not heard the last of this. The Conservatives have been on record from the beginning as pro-fracking and will no doubt find the specious $60 billion number especially rhetorically useful. So will those in the Maritimes and beyond who perfidiously link adequate federal transfer payments for health and social programs to our willingness to put the environment at risk by fracking for natural gas.