Shell, LNG Momentum, and Nova Scotia’s Energy Ambitions

The podcast opens with major news: Shell’s agreement to acquire ARC Resources, signaling strong confidence in LNG Canada Phase 2, the broader Canadian LNG sector, and the quality of the Montney resource. It also marks a shift, as this is the first major multinational acquisition in Canada following a long period of exits.

Jackie and Peter discuss additional developments, including Minister Hodgson’s comments on major projects reaching FID or construction within a year and Prime Minister Carney’s announcement of a C$25 billion sovereign wealth fund. The episode then features the Honourable Tim Houston, Premier of Nova Scotia, who outlines Nova Scotia’s energy priorities, including offshore wind, oil and gas, and potential for onshore natural gas.

Jackie and Peter ask Premier Houston: How does the recent agreement with the federal government to streamline environmental reviews affect project timelines and certainty? What are the barriers to advancing the Wind West project? What factors led to the decline in offshore oil and gas production, and what actions is the province taking? What is the opportunity for onshore natural gas in Nova Scotia, and what is the history of the 2014 hydraulic fracturing ban?

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Episode 324 transcript

Disclosure:

The information and opinions presented in this ARC Energy Ideas podcast are provided for informational purposes only and are subject to the disclaimer link in the show notes.

Announcer:

This is the ARC Energy Ideas podcast, with Peter Tertzakian and Jackie Forrest, exploring trends that influence the energy business.

Jackie Forrest:

Welcome to the ARC Energy Ideas Podcast. I’m Jackie Forrest.

Peter Tertzakian:

And I’m Peter Tertzakian. Welcome back. Well, I’m going to timestamp as usual. It’s necessary these days, April 27th, Monday at 1:00 in the afternoon, because there’s always late breaking news. Now, we’ll just park the Iranian situation, because the negotiations seem to be parked. Although the backups of the supply chains continue and there’s a lot of concern in the background. We’ll come back to that, because we’ve talked a lot about it over the course of the last few weeks.

But today, the breaking news is the reentry of multinationals into Canada with the announcement that Shell Canada is acquiring ARC Resources.

Jackie Forrest:

Right. And 22 billion Canadian.

Peter Tertzakian:

Yeah.

Jackie Forrest:

So, a big deal. And we talked about the drivers for this. If we go back most recently with Josef Schachter in early March, he came on, we were mainly talking about the first few days of the Iran war with that podcast. But we did at the end talk about this thesis that as the market’s oil and gas tightened, which was his view, especially with the war impacts, Canada’s deep resource, greater political support, big change from the Trudeau liberals, could cause another wave of foreign investment as seen.

He talked about in ’74, ’81 and 2006 to 2008, where a lot of foreign investment came here. And we’d already seen some evidence of that with Ovintiv coming back to Canada, US private equity investing in Canada, but this is a big deal. This is a much bigger magnitude than anything we’ve seen so far.

Peter Tertzakian:

Yeah. We’ve seen actually this kind of long wavelength. And when I say long wavelength, I call it a multi-decade wavelength in the history of the Canadian oil and gas industry where multinationals come in, then they go away, then they come in and then they go away. And now, it appears as though certainly they’re wanting to come back and spend money here. So, the wavelength, I mean, it’s usually characterized by they leave at the bottom of the market and come in at the top of the market, but that’s an inside joke that we won’t share with anybody with the multinationals.

But here we are. And yes, Jackie, you and I have talked about that consolidation and companies being an acquisition target here as the political wins change and certainly as the global wins change, I think we’re definitely into a cycle where we’re probably going to see more foreign capital coming in here. And one avenue for foreign capital coming in here is through the multinationals. And it is through the multinationals and their very deep pockets that have led to eras where big infrastructure has been built.

Jackie Forrest:

Because they can bring a lot of cashflow here. I do want to clarify, too, that the idea that Shell would like to acquire was announced today, but there’s hurdles to get through including a shareholder vote in July and they’re subject to conditions like government requirements, all these sorts of things. So, it’s not for sure that it will happen.

Peter Tertzakian:

Right.

Jackie Forrest:

But back to will they bring money into Canada and is this a good thing? My perspective is our whole oil sector was built on foreign capital coming and building things that Canadian companies wouldn’t have grown at nearly the same rate. A company like Shell, if they come, they can fund. We’re talking about $30 billion LNG projects or grow the production a lot more and faster because they can bring cashflow from other parts of their organization into Canada from other countries. And so, I think it does result in more investment in Canada, and that’s a positive thing.

Peter Tertzakian:

Yeah. That’s a positive thing. And I think if I were to counter it at all, I would just say, “Why can’t Canadian companies grow even bigger than they are?” I mean, this is a Canadian epidemic. It’s not just an oil and gas epidemic. It goes to other things and even goes back to things like companies like Nortel and others. It just seems that Canadian companies grow to a certain size and then they seem to be either scared to expand further.

So, I mean, I do lament a little bit the loss of boardroom decisions being made here in Canada. I think that that’s an issue. But Shell is a great company and a great acquirer and they are part of LNG Canada. And this definitely is a BC-focused acquisition where ARC is quite active. And the natural gas development is going to be fundamental to filling the LNG facilities as they expand forward beyond LNG 1.

Jackie Forrest:

Yeah, for sure. It’s a big vote of confidence for LNG Canada Phase 2, which hasn’t FID’d, but certainly this increases the chances, and just Canadian LNG in general and even the quality of the resource. We’ve talked about the money. It’s world class. It’s got huge resource depth. So, this certainly validates that. So, I’m sure we’ll hear more about that. I did want to talk two quick other news items worth talking about is we keep talking about when are these major projects office projects going to turn into shovels in the ground?

Well, this past Friday, Minister Hodgson predicts that in spring 2027, you will see projects not just having been added to the major projects office list, but at least 5 to 10 new projects having reached FID or broken ground. So, let’s hope we see some of that happening and maybe that will include some of these FIDs.

Peter Tertzakian:

So, this is not just energy projects. I mean, this is all ports, railways.

Jackie Forrest:

Natural resources projects.

Peter Tertzakian:

Natural resources. So, like mines, that kind of thing.

Jackie Forrest:

Yeah.

Peter Tertzakian:

Okay.

Jackie Forrest:

And then Mark Carney today announced a $25 billion sovereign wealth fund, many details still to come. But to me signaling that the government may have provide some financial support for at least some of these major projects to get across the finish line. And interestingly enough, there was a note that there may be an avenue for retail investment and that will be launched soon and it would allow Canadians to have a direct stake in some of these projects as well.

Peter Tertzakian:

Yeah. I wrote about that about a year ago actually, saying that it would be nice to get retail investors involved through smaller bond issues or whatever, just so people in Canada feel like they have an ownership position in these kind of projects, because it’s a different feeling if you feel like you own it versus you’re just watching infrastructure projects get built like some reality TV show. If you own it, you’re much less likely and you’re getting a, say for example, interest coupon check or what have you deposited in your account, you feel pretty good. And some of these infrastructure projects deliver steady income over a long period of time. And so, I think the idea of stapling on a retail component is actually a very wise thing.

Jackie Forrest:

Yeah. So, we’ll put a link to your original article on that and certainly finding more ways for Canadian. And I hope our Canadian pension funds are listening, too, to invest here in the country.

Peter Tertzakian:

Yeah. Absolutely. Okay. Well, let’s move along. We are delighted to have someone from where actually I started my energy career and that was in Nova Scotia, believe it or not. And so, we are more than delighted to have the Honourable Tim Houston, the Premier of Nova Scotia, to join us and talk about energy projects going on, on the other side of the country from Calgary. So, welcome Honourable Tim Houston.

Tim Houston:

Thanks for having me. It’s an honour to be here. So, I really appreciate this opportunity.

Jackie Forrest:

Great. Well, hey, I met you first at CERAWeek in Houston, not to be confused with your name. But you told me at that time you were appointed Minister of Energy in addition to Premier. So, tell us a little bit about why you saw the energy file and why you wanted to get directly involved in it.

Tim Houston:

Yeah. Thanks so much. And I enjoyed the CERAWeek. It was certainly eye-opening as well and Houston being in Houston, the jokes kind of write themselves, for sure. But listen, I just see incredible opportunities in natural resources, for sure, in energy without question for the country, but for Nova Scotia. So, I was looking at the challenges we face with our budget and with our economy here and seeing where are the real opportunities. And I saw so many of them in energy. I thought this is a time when as Premier, I should step up as energy minister as well, just to show the world that that’s how serious we are about moving some of these energy projects forward and getting Nova Scotia in the discussion about energy, because we haven’t been in that discussion.

So, I thought, as the Premier, if I can sit and look people in the eye and talk about the potential, then maybe it just elevates it that much more. So, I think that’s been effective. It’s certainly a busy time to be Premier, but a busier time to layer on the energy minister, but I think necessary at this point in time.

Peter Tertzakian:

Yeah. We’ll talk a little bit about Nova Scotia’s economy and particularly about energy and how it’s an important part of the sector. I know we’ve had offshore natural gas in Nova Scotia. The potential for wind is very large. We’re going to talk a lot about that. Potentially even, I don’t know, tidal power. Every time I’ve been to Nova Scotia, it’s actually been sunny. So, probably the potential for solar power as well. So, tell us what’s going on.

Tim Houston:

Yeah. Geothermal being another one, but certainly the Bay of Fundy and the tidal is one that we don’t talk about that much. The technology is still trying to catch up. But really, if you took every single river in the world and added them all together, you might come close to the power of the Bay of Fundy at the changing of the tides. You might come close and it’s completely untapped. So, down the road, that’s a resource as well.

But look, Nova Scotia is an incredible province. The sun doesn’t always shine, Peter, but it does quite a bit, but it’s an incredible province. And our economy, if you look at our historical economy, fishing, farming, forestry, these are really important parts of our economy and always will be. But we need to grow our economy as well so that we can, as a government, afford to deliver more of the services that people are expecting in healthcare and education and roads. And we have a billion-dollar budget deficit this year. That’s a big number for a province of a million people. And it was a billion last year and it could be a billion next year.

So, we know that we have to grow our economy if we want to have the revenue to provide these services. And we have incredible opportunities. I say to people often, because our financial position is not unique to Nova Scotia. The country has a big deficit pretty much every province has. And sometimes when I’m speaking to others, they say, “Well, gee, what are we going to do?” Well, in Nova Scotia, we know exactly what we can do. We just need to do it. So, we’re very focused on those energy opportunities, but other opportunities in defense as well.

Healthcare, there’s incredible opportunities in healthcare. But I’m really excited about the energy opportunities onshore, offshore, and all the other things we talked about. And I’m optimistic, but I have a high degree of confidence, too, that we can deliver for Nova Scotians on these things in a safe, sustainable way. So, it’s an exciting time. It really is.

Jackie Forrest:

So, Premier, when we met, you talked about how you would compare the economic situation in Nova Scotia to other jurisdictions in North America. I think that would be news to our listeners. Maybe share that.

Tim Houston:

Yeah. It’s an embarrassingly shocking statistic. And if you look at GDP per capita across North America, so 50 states, 10 provinces, not counting the Canadian North, but so 50 and 10, 60 jurisdictions, you look at GDP per capita, you’d see New York State, number one, highest GDP per capita. Massachusetts, number two, you start looking down the list. Alberta’s the first province that shows up somewhere at 15, 16, somewhere around there. And then you just look down the list. Louisiana, look down the list. West Virginia, just keep looking down the list. Mississippi and looking down the list and all the way at the bottom, you’d see 60 of 60, Nova Scotia, the worst GDP per capita in North America.

So, there’s many different statistics you can look at for economic performance. This is one. And certainly, by that measure, the worst performing economy in the entirety of North America. And when I tell Nova Scotians, “Why is that? Tim, we can’t have that. We have to do something.” And I say, “Yeah. We do have to do something.” So, with our location and our universities and our dedication of our people, there’s no reason for that. So, we have to address that.

Now, I will say that was last year. This year, the most recent numbers come up. We’re on the March. We’re 59 of 60 now. So, we are moving the right way. But it is an embarrassing … When I tell Nova Scotians that, they’re like, “What? Well, how can that be?” I said, “Well, that’s where we are.” So, we need to move forward on some of these opportunities, but it’s a very sobering statistic, for sure.

Peter Tertzakian:

You came to Alberta not long ago. What was the purpose of that trip and did you achieve your objectives? What were you looking for?

Tim Houston:

Yeah. So, the overall objective is to put Nova Scotia back in the discussion. So, even in the last year or so when I’ve been traveling and talking to executives about Nova Scotia energy opportunities, particularly in the offshore, and I would say to executives of major, major companies, “Are you thinking about Nova Scotia?” They’d say, “We haven’t thought about Nova Scotia in 15 years,” or “We haven’t thought about Nova Scotia in a decade.” “Well, I need you to.” So, it’s all about putting Nova Scotia back into discussion. That’s the first step.

And I will say Premier Smith and the team in Alberta have been very helpful and very kind to us. At CERAWeek helping us with meetings when we came to Calgary organizing meetings, connecting us with people. And I think because they can see how important it is for the country. Nobody wants to be the sole voice in the woods on something. And I think they know they will have a good ally in Nova Scotia and talking about energy as a national issue. And so, we’re supportive of each other.

So, the purpose was just to get people talking about Nova Scotia. And I think we were successful on that. I mean, that’s the first step is to get the awareness and get the conversation going. And since then, we had on our onshore program through Dalhousie, we had the first date for applications to our research and drilling incentive program, and we had a number of applications. So, I think some of that actually came out of those meetings that Alberta has helped us with it. So, I think things are happening. And to that extent, it’s been successful.

Jackie Forrest:

Okay. And we will get to the details of the opportunities for oil and gas and resource in Nova Scotia. But before we get to that, I did want to mention on March 27th, you signed an agreement Nova Scotia did with the federal government to simplify the federal and provincial approvals for major infrastructure projects, this one review, one process. It actually flashed up on Mark Carney’s Forward Guidance video a few weeks ago as one of the accomplishments. That’s when I noticed it. So, tell us, how do you think this is going to change the timelines and the interest in people investing in Nova Scotia?

Tim Houston:

Well, I think, obviously, the investor confidence is so critical. You can have all the opportunity and all the resources in the world, but if people are reluctant or don’t have confidence in the jurisdiction, they’re not going to invest. And we’ve seen that as a country. We lost 10 years. I mean, let’s be honest about that. So, now, we’re trying to rebuild that trust overall. And I think this one project, one review is a way to do that. We have a stringent environmental process here. We care about the environment. We care about doing things safely and sustainably.

And so, for companies to go through that process and then say, “Okay. Congratulations. Now, you can move on to the next stage with the federal government and start all over again.” We should be able to, as different levels of government, rely on each other. And I think that’s what this is all about, one project, one review, saying, “Okay. We all want the same thing. We all have the same concerns. We care about the same thing. So, can we trust each other as government?” So, I think that’s really positive.

I mean, not just in energy and natural resource. I mean, I could tell you a subdivision here in Halifax that’s been almost 10 years going through environmental approvals and stuff. So, my kind of philosophy as Premier has been like, “Let’s get to the yes or get to the no. It’s not always yes, it’s not always no, but we have to get away from these maybes.” And government speak for maybe is, “We need another study. We need another report.” And sometimes the evidence is there in front of you to make the decision. So, let’s get to the decisions.

And I think this one project, one review is all about that. It’s saying, “Let’s trust the provincial government in this case to go through a stringent process and then let’s respect their decision.” And I think that signals to investors that, “Okay. It’s not going to be a constant hurdle. You’ll know the process and then you can just make your decision based on that.”

Jackie Forrest:

We’re going to talk about some of the offshore opportunities, whether it be with wind or with the oil and gas. Those are, I think, the jurisdiction of the federal government. Does it affect those ones as well or is it for onshore Nova Scotia?

Tim Houston:

There’ll be some exceptions and some of it is around ports and infrastructures that crosses the provincial boundaries would be outside of that one project, one review process. But we’re working so closely on the offshore, because we have a very established respected regulatory process there that already is a joint Canada, US regulatory. It’s an independent regulatory system. So, there’s a highly respected regulatory regime there. And I think proponents can have some confidence in that process.

Peter Tertzakian:

Let’s talk … Well, actually for our audience, I have to, although they’re listening to us, we’re looking at the Premier from his office. He’s got this beautiful sunny day in the back with, what is that? The Bedford Basin, the body of water. And you’ve got the flags of Canada and Nova Scotia gently blowing in the wind. So, I think it’s appropriate that we talk about offshore wind. Now, I have to tell you that I think it was two or three years ago, I went on a tour of the UK wind farms and was, if you pardon the pun, blown away by the magnitude and the scale of what was possible.

And so, you’re thinking in Nova Scotia of doing the same to really scale up offshore wind. Can you tell us a little bit about the Wind West project and other things that are on the go there?

Tim Houston:

Yeah. For sure. And just the Wind West project is an incredible opportunity. And it’s Canada as a country. When you think about Canada as a country with our vast shorelines and offshore, zero offshore wind farms, zero. That’s a remarkable thing. When we can have the first one here in Nova Scotia, Nova Scotia is the best place for it. We have some of the best wind speeds in the world. If you took those places in the UK that you were looking at, their wind speeds would be in a factor of 9. They’re over 10 in Nova Scotia, so 10% more. It blows a lot. This is called the capacity factor. The capacity factor for the offshore winds in Nova Scotia, somewhere around 50%. It’s extremely, extremely high.

We’re talking about less than 20 kilometers from shore. So, the water depths are good. The bottom solid, which is really important for fixed bottom turbines. But we have all of these advantages and really excited about the potential to create energy from that. And I’m really excited about that. I know the federal government is excited about it too. And I know the Prime Minister talks about the Wind West project quite a bit and his travels around the world of what’s possible there. So, the first offshore wind farm in Canada, it’s amazing that it’s taking this long, but that is what we can do right here from Nova Scotia with this Wind West project.

Peter Tertzakian:

So, where is it at? What state is it at? Is it being permitted or developed? Is there FID or where is it at?

Tim Houston:

So, I guess there’s three things that we need. So, first off, we’re talking about an area that can produce 40, 50, 60 gigawatts of energy. It’s a massive number. And just for perspective, Nova Scotia at peak uses two. So, we’re talking about producing 40, 50, 60, somewhere in that order of magnitude and we use two. So, when you’re going to produce that much, you have to be able to get it to a market. So, the first thing you need is customers and the demand for clean energy like this is very high.

So, you need the customers. You need the market for it. You need the ability to generate it. I’ve just talked about some of the reasons why we think we can generate it with the wind speeds and the capacity factor and stuff. But then you have to get it to the customers. That’s the transmission infrastructure. So, we need all these three things to line up. So, what’s been happening right now is we’re trying to line those all up and we’re making progress. I certainly think on the transmission line, over the last couple of weeks, Hydro-Quebec put an RFI out there. That’s a significant moment, because we’ve met with them, they’re interested in this project and there are many proponents that’d be interested in the transmission.

By the way, building the transmission is probably a $10 or $15 billion undertaking. Building the generation offshore, we’re talking $40 billion, $30. These are big, big numbers. So, we’re trying to line all those things up. And our expectation of where it stands right now is that we are hopeful that in the fall, the regulator will open up the bidding process, the bottom lease process for the first wind development areas. So, heading into the fall, we’re spending a lot of time and effort to line up those dots on those three things I talked about. So, we signed an MOU at Massachusetts, big demand for energy there and big demand across Canada, too, through Quebec and Ontario as well. We’re talking on the transmission line.

So, we’re trying to make sure that when it’s time for potential proponents who will build the generation, that we can show them that the other two legs are there, that’s the customer and the transmission. So, there’s a lot of work happening on the file. I’m really, really excited about where we’re at. And I’m actually pretty pleased with the progress. It’s still, sometimes nothing is really fast enough for me as Premier, but we are making incredible progress at a pretty remarkable … This was nothing more than a concept, a little more than a year ago when we came up with the name.

And by the way, we call it Wind West because I’ve been a big fan of the Energy East. I was real supporter of Energy East and still remain at this. But I thought, “Well, we could have wind and we could move it west. So, let’s call it Wind West.” People ask me sometime, “Why is it Wind West?” That’s why it is.

Jackie Forrest:

Okay. Well, hey, thanks for explaining the name. That makes a lot of sense. Now, I think the first phase is planned to be around 5,000 megawatts. I’m not sure if that’s still the size. And your strategy document, and we will put a link to the, you have a very fulsome strategy document that we can put in the show notes, talks about maybe we should consider building transmission lines that allow for future demand. So, overbuilding, constructing enlargers upfront so that you can slowly add the generation over time. So, talk to us about how big you think that first phase is, but how big the transmission line you’re looking for would be as well.

Tim Houston:

Yeah. So, I think the overbuilding is really important because the first phase could be 3,000 or 5,000, somewhere in there, the regulator will decide on when they open that up. And just to back up on that, we initially identified I think about nine potential wind development areas, and then we shrunk that down to five. And then what was actually approved was four, and some of them were smaller. So, just from that four, that’s in the range of 40, 50, 60 gigawatts. And in the fullness of time, there could be more wind development areas as we build confidence with fishers and things like that. So, think about that.

So, the first phase that we’ll put out for bottom lease is three to five. But we already believe we’re on a track to 40, 50 or 60. So, there’s going to be a need to continue to layer on transmission and other infrastructure. So, I think, of course, we should be envisioning that off the gate and that’s the overbuild.

Peter Tertzakian:

I want to put this in perspective, because it’s easy to toss around gigawatts or 1,000 megawatts or whatever. So, my back of the envelope calculation, because an average wind turbine offshore is 15 to 20 megawatts. And so even a 5 gigawatt, not 50, but 5 just back as the envelope map, 350 to 400 wind turbines. I mean, that’s a lot. And so, what is the public view of seeing a few hundred wind turbines offshore? What’s the sentiment there?

Tim Houston:

Yeah. I think so. First off, so that’s the number today. Technology is changing. If you would’ve did that same calculation seven years ago, probably twice as many turbines. So, the turbines get bigger and stronger and all this type of stuff and that will change. But my dad used to always say to me, “Listen, you can’t please everyone.” And I used to laugh and say, “Well, one or two would be good, dad, because some days it feels like that.” But certainly, this is an active discussion. And there will be some fishers who are worried will there be an impact on them? There’ll be others who maybe just have concerns in general.

But in everything we do, there are always at least two cohorts of voices. One cohort is the concern, the don’t do it. Some of the concerns are legitimate. Someone’s just a little bit of fear. That’s okay to be anxious and nervous about things and ask for more information. But the other cohort are people who are worried about jobs and their own future and how we finance these things. And oftentimes, we see one cohort drowns the other one out. So, the negative voices, the concerned voices drowned out the other voices who just want to properly understand it. So, it’s our job as government to balance those and listen to both sides of it and then get to a place that’s based on science.

So, we’re just focused on science and moving forward. But there’s no question if you stop, you’d be able to find some people who say, “Well, I don’t think this is a good idea.” And that might be the same person who thinks that building a subdivision shouldn’t happen or an overpass shouldn’t happen. There’s always a little bit, but I think that’s fine. That’s part of the process. But in general, I think people are excited about the opportunity to produce a lot of, in this case, clean, green energy and really introduce a new industry to Nova Scotia, but to Canada in a very positive way. So, I’m feeling good about the process that we’re following here.

Jackie Forrest:

And by the way, the UK where you visited, they’ve got lots there and I think it generally is well-accepted.

Peter Tertzakian:

Yeah. I mean, there’s opposition here and there and there’s also a multitude of issues. And actually, this is a subsequent related question is that what I learned when I was in Aberdeen, which is like the epicenter of the development of wind farms and infrastructure is that you actually have to expand out some port facilities to be able to handle the large towers and specialized ships and machinery and so on. So, it’s not like you can just say, “Hey, I’m going to put up a wind farm.” I mean, you need to build the onshore infrastructure to be able to handle all the new kind of building equipment.

Tim Houston:

Yes. For sure. And we have a lot of that infrastructure already. We have some of it from our prior industry and offshore, offshore oil and gas. We did have a sector here for a while. We have incredible port facilities. And in fact, with what’s happening in the United States on the Eastern Seaboard, some of those wind farms that are moving forward, we’re already using Nova Scotia ports for lay down areas, for moving some of the big towers and stuff. So, we’re building up a supply chain that I actually think will build in Nova Scotia.

And then in the fullness of time when these projects start again in the United States, which they will at some point, Nova Scotia will already have a lot of the supply chain that will be necessary and there’ll be an additional benefit from that expertise, which is in Nova Scotia still on the Eastern Seaboard and can apply it to there. But yeah, it’s a huge opportunity across a number of different sectors, all driven with one common goal. And I think that’s a net positive thing for us.

Jackie Forrest:

Okay. So, one other criticism you’ll hear around offshore wind is its cost. It is a higher cost than onshore wind or some other sources of energy. Your document outlined potentially $170 per megawatt hour, this strategy document that Nova Scotia put out, and that included the benefits of some investment tax credits and Canadian infrastructure bank money. Do you think that that is something that the buyers are interested in? Is that a price that folks in Quebec or Ontario, or you talked about some of the US states are interested in electricity at that price?

Tim Houston:

Yes. And the reason is that the demand is so significant. We already, even talking to some of the other provinces, they’re pushing away business. They can’t accept this plant or this factory because they don’t have the energy to supply them. That’s already happening today. And it’s certainly happening across New England. They have massive, massive needs for energy and they just don’t know where it’s going to come from. So, what I say to people is offshore wind today is expensive. There’s no question about that. And it will be expensive and then the price will come down.

But so, I think it’s always the question of you can’t really compare it to what you’re already paying. You have to compare it to the opportunity cost of not having those plants. And so, it’s the next energy you need. What are you willing to pay for that? And so, the offshore wind itself is expensive. And I like the discussions with Hydro-Quebec and some of the other players, because they can bring in what is today, more expensive offshore wind and blend that with lower cost and then start energy and then start to get to a more palatable price to the market and to their customers.

But if they want to grow, they need energy. And if you need energy, then you almost have to pay for what’s there up to some point where it just doesn’t make sense. And I don’t think the price we’re talking about is anywhere near that. It just doesn’t make sense. I think it still makes sense.

Jackie Forrest:

Yeah. Well, it’s very similar to the price for those SMRs in Ontario, for instance. It’s in that range.

Tim Houston:

Yeah. And it’s because it’s what are you willing to pay for what the next bit you need, not what you’re paying for what you’re already getting, but the next bit that you need, what will you pay for that? That’s what everyone is struggling with.

Peter Tertzakian:

Right. Okay. Well, in the spirit of talking about energy, I can actually say I’ve been to the tidal plant at the Bay of Fundy and the tidal throw or whatever you call it, between the top and the bottom is just unbelievable when it goes out and comes in, in terms of the power of the ocean coming in and out is just amazing to watch. So, certainly, as a Canadian, if you haven’t seen it, you should put it on your bucket to-do list. But let’s switch over to oil and gas. Now, Newfoundland and Labrador has the oil and as you go south towards Nova Scotia, there’s gas. You had Sable Island, Deep Panuke gas fields. They’ve really declined from their peak production. So, talk about them, talk about why they declined and what your intentions are for further gas offshore development.

Tim Houston:

Yeah. So, there’s history there and that’s a good thing. It’s experience and the regulatory environment has all came out of that. So, the history that we had was the Sable Island offshore energy project that went for almost 20 years. It was a pretty significant undertaking. It was permanently shut in 2018. But it did go for about 20 years. It produced over 2 trillion cubic feet of gas. So, it was pretty significant. In that case, they reached the end of the economic life of that particular field. So, that’s on the same line.

We also had the Deep Panuke field, which went for about five years. At peak, that was 300 million I think per day and 147-ish billion cubic feet. So, it was pretty significant as well. In the end, it ran seasonally, which is like the McCully onshore fields that are in New Brunswick today. They had a few challenges, engineering challenges towards the end and stuff, but they did go for five years. And in 2018, so that ended around 2018 as well. So, you think about what was happening in 2018 politically with the political environment we had with the federal government and some of those. So, that was a factor as well.

There was a natural place to move for them. There was significant discovery licenses in place that Exxon had, that they could have moved to those right away at that point in time. And they weren’t insignificant either, I think. But they made the decision not to go at that time, so in 2018. So, we’re really trying to restart the industry now and across the entire area. And I think just for perspective, the Nova Scotia offshore, we’re talking about an area that’s two-thirds the size of the Gulf of Mexico. It’s a pretty big area, not as big as the Gulf of Mexico. And think of how many wells have been drilled in the Gulf of Mexico. And compare that to the area that we’re talking about. And it’s a couple dozen maybe have been built.

So, there’s lots of potential. And we believe that in the area out there right now, there could be up to 140, 150 trillion cubic feet of gas, massive number. Could be 49 billion barrels of oil. Big, big number. But the potential is there. The history is there, but just I think the economics and the political environment have really challenged both of those projects. And both of those are changing right now and certainly we’re making the push and the political, the above ground risk. We’re working very hard to show proponents that’s been mitigated in a very meaningful way. Those are the discussions we’re having. But there’s definitely a history there with Sable and with Deep Panuke. And lots of people know about it. I come across lots of people who say, “Yeah. I worked on those projects.”

Jackie Forrest:

Peter, you mentioned the oil was up in Newfoundland and Labrador. But I learned from the Premier that there was previous offshore oil production that I didn’t know about. So, maybe just tell folks about that, because that might be news to some of our listeners.

Tim Houston:

Yeah. I think in fact, Canada’s first offshore oil was off Nova Scotia and that would’ve been in the early ’90s, somewhere around 40 million, 50 million barrels of oil in total were produced at that time. So, all of these things talk about the history, the safety record, the expertise that does exist. There’s a lot in Nova Scotians working in oil and gas. They’re just not doing it in Nova Scotia. That’s that second cohort of voices that want the jobs, want the opportunity, want to raise their families on something more than two weeks on, two weeks off. They want to work at home and be part of their family. So, I think the geoscience is there and the history is there, the expertise is there. And that’s why I’m hoping that it all lines up now as we can get going again, get moving.

Jackie Forrest:

Do you have any plans for having opportunities for people to do exploration wells or bid on different lots or whatever? Are there any plans that way?

Tim Houston:

Yeah. As a matter of fact, on April 28th, we opened up a round of offshore license bidding and that will close on April 28th. So, we spend a lot of time talking to a lot of possible proponents there and shortly here we’ll know how people feel. But we’ve made a commitment to do consistent calls. We’ll have regular calls after this. We get back on the regular call schedule. And one of the things, working with the federal government, we’ve agreed to undertake a regional environmental assessment. This is really significant actually, because it says to the proponents that you’re not going to be on your own each time. We’ll be there. But also, we’ll have a regional assessment for the area, which would take a lot of risk out of the approval process, because you’re not just alone on that one.

So, we’re doing the heavy lifting. I’m, obviously, very hopeful that we get some bids right away on this call. But I also, I’m realistic about where we started from. We weren’t even starting at zero. We’re starting behind zero just for a lot of factors. But we’re putting in the work where we’re telling the Nova Scotia story and encouraging people to take a serious look and we’ll find out on that, how that goes.

Peter Tertzakian:

And I know 20, 25 years ago, there was big plans to put an LNG. Actually, at that time it was like an importation facility on Cape Breton Island, but who knows with the gas, if the prolific amounts are discovered with new technology and infrastructure, it’s a deep-water, very deep-water port.

Tim Houston:

There’s a fully permanent LNG facility ready to go. It just hasn’t had access to the feedstock and there is a pipeline too. The Enbridge Pipeline comes right here to Nova Scotia and that was initially built to take the offshore gas from Stable and Panuke and others to other markets. And sadly, we had to reverse that. That is used to import gas to Nova Scotia, but there’s a big willingness and a desire to use that. And I think it’s 50% capacity or less right now. So, there’s a big opportunity with that existing pipeline. It’s a big opportunity with the LNG facility that’s there. But first off, we need to get going on the actual development.

Peter Tertzakian:

Yeah.

Jackie Forrest:

Well, one of the things that hurt offshore gas was the development of shale gas in North America, because we could develop gas for so cheap. And obviously, we have very cheap gas really in North America, even where you are compared to what a lot of people in the world pay for natural gas. And so, you have to compete with the fracked gas on onshore. But Nova Scotia has opportunities there. So, maybe tell everyone a little bit about the onshore natural gas resource and what you know about it today.

Tim Houston:

So, we’re talking about offshore oil and gas, offshore wind. But onshore, we have a big potential there as well. And this is actually one of the things when I first went to the new federal government to talk about jointly through the joint regulator opening the call for bids on the offshore. They said, “Yes. We want to do that. We agree with that. But you also have onshore gas and why aren’t you moving on that?” So, there was some encouragement there from the federal government to get going on this.

And we do have onshore gas and every bit of gas that’s used in Nova Scotia is imported and it’s through the United States. That’s not a great feeling, especially when we have gas underfoot. So, we have an onshore. Petroleum Atlas, there’s been a lot of work done by the department on this. It’s a public document. It’s publicly available. It has all kinds of technical specs and technical overviews. And we estimate that the in-place gas potential is somewhere over 30 trillion cubic feet across all types of recoverable gas. And that’s a big number, too.

But the potential recoverable is around seven at this stage. And those were two different basins that the Cumberland and the Windsor basins have been studied the most. So, seven trillion cubic feet of gas would be enough to meet Nova Scotia’s needs for over 200 years. That’s a lot of gas. And here we are importing all the gas we use. So, the price that you mentioned, we pay about $15 a unit in Nova Scotia. Out West, that could be two or three at different times. So, we’re paying a lot more than we need to if we can develop this resource. And that seven trillion cubic feet. That’s about 70% of our basins have not been evaluated at all through modern, rigorous studies and technology.

So, that onshore Petroleum Atlas that’s available, it looks at some of the bases, but 70% of them haven’t even looked at. So, there could be meaningful upside potential there. So, we just think it’s not right that we have this resource and if we’re importing it at an inflated price and that’s hurting Nova Scotians shows up in the cost of many things.

Jackie Forrest:

I didn’t realize your gas prices were that high. That’s surprising to me.

Peter Tertzakian:

Well, if you’re importing it. Yeah. So, one of the impediments to developing that resource is the ban on fracking onshore gas wells, which was instituted in 2014. So, what’s the history of that ban and where do you see that impediment going?

Tim Houston:

It was an outright ban put in by the government of the day. And I’ve been very public and honest that I think blanket bans like that are just lazy policy. And I think this ban, it was at the intersection of lazy and weak. Government, they just said, “Well, we’ll just ban it then. We don’t want to talk about it.” And part of it was there was a little bit of activity happening. There was a bit of exploration happening. And I think it really came down to some of the settling ponds that they were using for the frack fluid and stuff. They were in a pretty highly visible place alongside a highway. I think people could saw them and then what are we going to do with that? And they didn’t know what to do with it.

So, I was talking to somebody in the industry recently and they’re like, “That’s not even a thing anymore.” We’ve moved on from that so much. So, technology has changed and methodologies have changed. And we lifted the ban. I’m in my second term as Premier right now. One of the first things we did to start the second term was lift this ban. We think that ban was lazy policy. Now, ban is lifted and we’re having real discussions about what is possible and what can be done.

We launched a program with Dalhousie University, Subsurface Energy Research and Development Program through Dalhousie. So, we’ll work with Dalhousie to support new research and encourage industry to really come and work with us on what’s possible here. So, the bans are gone. But the bans leave a lingering taste in people’s mouth and they bring a bit of fear.

Peter Tertzakian:

Yeah. I mean, the whole notion of fracking has been highly emotional, certainly over the last 20 years that it’s really taken off and the bans extend to many other parts of the world, including the UK and so on. So, I’m not surprised. It’s a bit odd how it was all labeled and it came about and we don’t need to re-litigate history here over the last 20 years. But newsflash, the industry’s been fracking for 150 years. It just wasn’t called that. And you’re absolutely right. The technology and the process and the regulations in terms of handling the fluids and controlling the fracks and everything else is well-established now.

So, it’s good to hear that the ban’s lifted, but I would suggest that there’s still a lot of education that needs to be done to get people comfortable with the notion, because where it’s being done, such as many parts of North America and South America and other places, it’s just normal course of business as it was decades and beyond before.

Tim Houston:

Yeah. So, for me, the learning experience has been ban is in place. You lift ban. Well, newsflash, industry just doesn’t flock to the province, because you lifted the ban. So, now, that we’ve entered into the agreement with Dalhousie, $30 million of taxpayer money is what we invested through Dalhousie and the research and drilling incentive program. $30 million, it’s real money for our province. So, we lifted the ban, we’ve made this investment, we’re serious about understanding what’s possible, understanding our geology more and moving forward. And that’s where we’re at and that’s part of the discussion we’re having with industry.

One of the things I think that would interest the industry is if somebody told me when I was in Calgary, they said, “Hey, our company has 20,000 drill targets in Alberta. And so, you’re going to offer me two or three different drill targets in Nova Scotia and there’s no drill rigs and you know how I got to mobilize all this stuff.” Yeah. We got a big mountain to climb here. But I do believe it’s good for our country. And I believe it’s good for our country, because I’m investing a lot of political capital in this, because I think it’s worth it.

I was always told that no point in having political capital if you’re not going to invest it in things that matter and are meaningful for the future. So, I’m investing political capital. Not everyone’s willing to do that. But I do think that if we can get the industry going in Nova Scotia and get some confidence and people know that they can be done safely and sustainably and all those things that really matter to all of us, then I think you would see other provinces who are not quite there, not willing to invest that political capital yet. I think they would get some comment. Now, you’ll open up Eastern Canada. But somebody’s got to go first and we’re going first.

Jackie Forrest:

Well, and Nova Scotia’s not alone. Like you said, Europe has these bans. But I do find it a bit ironic that they import fracked gas from other places, Nova Scotia, but Europe as well. Europe is bringing in more and more US LNG that’s coming from fracture. So, they are dependent on that energy. I did want you to address, last week, your public engagement sessions did make national news and they really focused interviewing people that were opposed to fracking in Nova Scotia. You have a much better sense of the overall population. I felt like the people that were on that article that made news last week were all opposed. Can you just tell us a little bit about how much they represent and are there people that are supportive of the industry?

Tim Houston:

So, there’s a number of Nova Scotians that are working in the industry. And actually, I did hear from somebody who works, he’s a rotational worker and one of these sessions was in his community. So, he went and took his son up and he just said, “I just left, because the no side, some of them, not all, some people, it’s okay to have concerns.” What’s the expression? If you’re not nervous, you’re not ready. It’s okay to be nervous and want more information. But at some point, you have to trust the science and you have to move forward.

So, we’re respectful of the people who have concerns and we try to balance that with those people who want to go. That’s why we’re using Dalhousie. This is not just the Premier pushing this. It’s like we can do this methodically and bring people along. But there will be others who already have their mind made up and the only point of view that they want to hear is theirs. They don’t want to hear any other point of view. And you have them on both sides. But on the no side, they’re there and they show up and they travel around to these things and they were loud.

And when the ban was put in place and probably feel like they had some measure of success at that point in time and they’re trying to go back to that. But we’re respectful of their opinion. But at some point, we need to have real information to move forward and that’s what we’re doing.

Peter Tertzakian:

Well, this has been a great discussion. People don’t associate Nova Scotia with being an energy powerhouse. But what you’ve described, Tim, is that wind, oil and gas, even tidal power, there’s just a treasure trove of potential energy projects in Nova Scotia. I have to say, and I think I speak on behalf of Jackie and a lot of our listeners, your positivity on this file is infectious and we want to wish you all the best as Nova Scotia develops its energy resources for the benefit of Nova Scotians and indeed all of Canada and beyond. So, thank you very much, Premier of Nova Scotia, Honourable Tim Houston for joining us.

Tim Houston:

I appreciate you having me and I thank you for your interest. It’s a massive opportunity for Nova Scotia and for our country, and I’m going to give it everything I have to make sure it gets its proper daylight and opportunity. And look forward to doing it again maybe in studio at some point.

Peter Tertzakian:

Absolutely.

Jackie Forrest:

Yeah. In your next trip. So, well, thank you, Premier Houston, and thanks to our listeners. If you enjoyed this podcast, please rate us on the app that you listen to and tell someone else about us.

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Shell, LNG Momentum, and Nova Scotia’s Energy Ambitions

Episode 324 transcript

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