Sunday, 19 June 2011

Southwestern Energy Has Its Say: A Rural Briefing

Southwestern Energy (SWN) General Manager Tom Alexander gestures during an information session Wednesday in Boiestown about the company and it's work in New Brunswick.(Photo: Cheryl Norrad)


Tom Alexander is a native of North Carolina who has spent 29 years in shale gas industry operations. He's an engineer by trade and spent most of his career on the production side of things. He was promoted to General Manager for Southwestern Energy's New Brunswick office last year. 

"I had no idea I'd be here in New Brunswick a year ago, but I'm glad to be here," Alexander said in an earnest southern drawl as he introduced himself Wednesday to locals in Boiestown. They were on hand for an information session about what the company he represents is doing in their region and the wider province.

That company, Southwestern Energy, is a natural gas and oil business founded in 1929 and based in Houston, Texas. With branch offices in Arkansas and Pennsylvania, it's investment in New Brunswick is it's first foray into Canada where it's known as SWN Resources Canada. It was awarded 2.5 million acres by the Graham government in a March 2010 bid in return for a three-year, $47 million investment to explore the Frederick Brook Shale, a  natural gas patch across the southern half of the province, sprawling from the east coast to the south west. SWN has one thousand employees North America-wide and a reputation for being a relatively clean company in a dirty business. 

"If we can't do the job here in a responsible and sustainable manner, then we won't proceed," said Alexander as he opened the presentation.

To allay public fears on the risks of drilling, commonly called fracking, he stressed the company is only in the three-year exploratory phase right now. It's drilling small wells, called 'shotholes' in the industry, up to 50m deep to determine whether natural gas is present and worth tapping into. 

Alexander added even if a substantial find is discovered, it would take time to analyze it's scale, giving the government a chance to come up with a framework for an industry yet to be fully regulated in New Brunswick.

"If the three-year exploration succeeded, it would take another two to three years to determine the size of it," he said. "There's lots of time for working on issues such as royalties and environmental planning."

But before Alexander got much further, he was questioned by a local in the apprehensive crowd on why SWN is involved in two class-action lawsuits in the U.S. involving damaged private water wells.

"One, you can sue anyone you want in the U.S.," said Alexander. "But the [actual] first reason is although we put chemicals in a [shale gas] well, there was nothing found by inspectors from drilling operations or production to have damaged the private well. Two, the [private] well turned gassy. State regulator Arkansas Oil & Gas looked to SWN for help and that fact was mentioned in public records."

MLA Jake Stewart then asked Alexander point blank if SWN uses any chemicals in its drilling process detrimental to drinking water.

"Two-thirds of our stimulation fluids (fracking chemicals) are used to kill the bacteria in the water; it's not drinkable, but when properly handled and treated it is...There is no proven case where stimulation fluids have gotten into well water," he said.

When asked by protester Mary Delavalette in attendance why chemicals used by shale gas companies are proprietary, Alexander responded that patents on the various chemical mixtures are kept secret to keep an edge over competitors. 

"The companies release a list of what might be used for chemicals in their drilling process for competition purposes, not because they don't want the public not to know," he said.

Alexander added the chemical supply companies are also competing to get the business of the gas companies, and they don't want their competition knowing the chemical mixtures either. Something SWN doesn't condone.

"SWN recognizes that but doesn't defend the suppliers actions. If they don't have good chemicals, SWN won't use their products," he said.

Moving on, Alexander said three years ago, his boss asked him to come to New Brunswick after the Corridor shale gas discovery in Elgin got their attention. His employer began collection old mining data on public record to see if there were any possibilities for SWN. Alexander also mentioned New Brunswick has a history with shale gas drilling; the recent developments aren't new to the province.

According to online publication The Canadian Association of Petroleum Producers, New Brunswick has been in the gas drilling business since at least 1912.

"Natural gas production averaged about 650 million cubic feet per year from 1912 to 1946. From 1953 to 1991 it maintained a fairly steady rate of about 100 million cubic feet per year," it stated in a 2011 post.

Alexander said SWN works to minimize the impact of drilling on the environment through responsible resource usage such as managing water demand by constructing ponds to capture rainwater, use of private existing ponds, regulated stream withdrawals, municipal sources and recycling. He added 48 per cent of water in New Brunswick is run off, of which .025 per cent is used in oil and gas operations, compared to irrigation on farmland which is 72 per cent.

"We recycle 100% of the water used in the process," he said.

With 4.5 million gallons of water used in the entire process over the life of the shale gas well, 100 per cent comes back through nature or techniques used by the company, including recycled water from flowback out of the fracked well, and produced water which is reused in other operations.

"It doesn't go into an open pit," said Alexander.

SWN has tested the water coming out of the ground to check for abnormalities, but the company has found there isn't a lot of contamination.

"But you can't guarantee accidents won't happen," said Delavalette.

"I'm not here to guarantee it," Alexander said. "History shows SWN hasn't had any major incidents. In the future, there may be an accident, but the company works hard to prevent it."

Alexander also refuted the claim earthquakes are linked to the hydro-fracking procedure, citing research by Arkansas state regulators who found no link between the two in SWN operations there. Addressing rumors of windows breaking during seismic testing, Alexander said no such incidents have been reported when SWN conducted tests. As for the 60 ruined private wells in Penobsquis, he said it was likely due to the potash mine in the area.

"So far SWN hasn't operated on a private landowner without permission...we have no desire to," he said.

In answer to several questions about clean up operations if SWN leaves the province, Alexander said the  province is looking at putting in a trust fund where the burden is on the operator to deal with remedial issues. The company will have to prove on a periodic basis they can financially support clean up on the back end. He also suggested it shouldn't operate in the province unless it can ensure the mess would be cleaned up in the event of sale.

"Decommissioning a well is highly regulated. Physical things need to be done to secure it and remove the surrounding materials," said Alexander.

Alexander explained the gas industry is important to a small province like New Brunswick because it provides trade, jobs and spinoffs to local businesses through construction, manufacturing and transport, to name a few. SWN will have a total of 120 people working in seismology operations this summer. 90 per cent are Maritimers, 60 per cent of which are from New Brunswick.

SWN also has plans to invest in the education of the province's labour force, setting up scholarships and working with community colleges to put in place training courses to supply workers for it's operations.

"A university degree isn't the only thing needed to work for SWN," Alexander said. "We are willing to invest in people."

The current royalty structure between the province and SWN is set at 10 per cent for New Brunswick and 90 percent for the company. But that is likely to change if the three-year exploration pays off.

"The plan is to bump it up to 12 per cent and we're willing to pay more," he said.


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