On the “shocking” revelations in the BC Hydro IPP review and the reality that the fight against climate change is not going to be cheap

This week A Review of BC Hydro’s Purchase of Power from Independent Power Producers came out and to no one’s surprise it revealed that BC Hydro is paying too much for all that intermittent, low-carbon power purchased under the 2007 Energy Plan–Vision for Clean Energy Leadership that informed the 2010 Clean Energy Act (CEA). These policy decisions were the provincial government putting their money where their mouth was when it came to fighting climate change and represents a sign of exactly what we should expect as we continue our fight against climate change.

To put it bluntly BC Hydro, in 2019, is suffering because they are ahead of the curve and got locked into intermittent renewables which is exactly what the environmental activists say we should be doing country-wide. When you read “run-of-river” in this review you could just as easily read “wind” or “solar”. Because of this, BC Hydro’s problems in 2019 are going to be mirrored across the country and that is the price we may need to pay if we are serious about fighting climate change. Moreover, it is guaranteed to be the price we will pay if we decide to go 100% renewables in our fight against climate change.

Let’s start with a little history. In 2007 as part of its Energy Plan (2007 EP) and in the subsequent Climate Action Plan (CAP) our Provincial Government committed us to a path of electricity self-sufficiency. As described in these plans, electricity self-sufficiency was deemed a major priority. The reason for this was self-evident to the authors of those plans; but seems to be lost on the politicians of today. In a world where fighting climate change becomes our defining political battle ensuring we have a steady domestic supply of low-carbon electricity is exactly the reason why we have a government-owned utility.

The two plans foresaw a future where we will need to use more electricity for transportation and residential uses and will need to ensure that we have the domestic capacity to meet those needs. Recognizing that the government of the day couldn’t pay for it all the power, CAP foresaw that we would need to bring in external partners to meet our future electricity needs. Thus the reliance on Independent Power Producer (IPPs). It also acknowledged that paying a bit more to provide flexibility of supply and energy security represented sound governmental policy and not a mistake. As I wrote in a previous post: it is a feature of the system not a bug.

This brings us to the reason for the CAP and the CEA: our desire to fight climate change. By now we all know that the way to fight climate change is to reduce our reliance on fossil fuels, and how do we do that? We need to electrify everything and then make sure that the electricity we move over to is of the low-carbon variety (like run-of-river hydro, solar, wind or large reservoir hydro). Reading that list you see a common feature in three of those choices (run-of-river hydro, solar and wind) they are all intermittent power sources. The problem with intermittent power sources is they are intermittent. Some days the winds will blow and you will have lots of electricity and some days it won’t and you won’t have enough. In order to deal with this challenge you have to over-build capacity; build some storage capacity into the system; and provide some back-up for when the storage runs out. In BC we have done two of these things, we have built a lot of intermittent capacity and have the back-up (in the form of large-reservoir hydro) but we don’t have the storage.

Absent the storage this means that when the intermittent is producing at full capacity we are going to have too much electricity that we will need to get rid of somehow. Due to an absence of capability to move it eastward much of this electricity gets dumped on the southern market at a reduced price. This is the same thing that can happen elsewhere. In California they can get a situation where they literally have to pay other states to take their intermittent electricity while other localities like Denmark often can sell it to an integrated market but that doesn’t always work as the Germans can explain.

So unless we can come up with a way to store the excess electricity provided by all these intermittent sources we will need to subsidize our excess capacity. As for complaining about IPPs? Well if you are not willing to build it yourself, then you are going to have to provide the people who do with security that their investment is sound…and this means long-term contracts. These contracts are the price of doing business and while we are losing money now, that doesn’t mean we will continue doing so.

Ultimately money is the challenge, but then we have been told time and time again that fighting climate change is going to cost money. Ideally, this should be done by increasing electricity prices to drive down demand and spur innovation but we live in BC where raising electricity prices is tangled in politics. This means that BC Hydro has not been able to drive up the price to pay for our government’s desire to fight climate change.

If the government isn’t going to allow BC Hydro to charge what it needs then it is going to have to use some of that carbon tax money to help BC Hydro cover the difference. Realistically the whole purpose of the carbon tax is to help force a move towards electricity and away from carbon-intensive energy sources. It seems logical that some of the carbon tax revenue be used to help BC Hydro achieve this goal.

To close this post let’s reiterate a few facts: fighting climate change is going to be a very expensive, electricity-intensive project that will take a huge political will; the expenditures of massive financial resources; and cooperation between the private and public sectors. This is not something that can be accomplished by governments alone and it will mean making huge sacrifices and compromises.

If the activists are right, by 2050, we will need to be self-sufficient in low carbon energy because our neighbours to the south and east are fighting the same battles that we are. We won’t be able to simply dip into Alberta or Washington’s energy supplies when the wind is not blowing and the sun not shining. We are going to need to take advantage of the massive financial resources of the private sector and to do that we must give them assurances that we will buy the power they produce, hence IPPs.

To build and operate those new sources we have to accept that energy is going to get a lot more expensive but that is the price of completely converting our energy system from one based on carbon to one that is essentially carbon-free. That means we are going to have to get used to high energy prices and that our government is going to have to find a way to shelter the poorest among us from the sticker-shock. If we want BC Hydro to keep providing power we need to figure out a fair way to pay for it and simply raising rates is not the answer.

Ultimately this report is telling us what policy experts have been saying for years. Fighting climate change is not going to be cheap and if you want to fight climate change then the government is going to need to invest money in order to do so. Anyone who claims that switching to intermittents will be cheap and easy is simply selling you a bill of goods and anyone who says that BC is the only case of this needs to look at California, Germany and Denmark. They are all leading the charge on integrating intermittents into their power grids and the result has been higher priced energy. BC Hydro is suffering because we are asking it to achieve two mutually exclusive goals: provide a low carbon grid full of intermittents to help in the fight against climate change while keeping prices low. Carbon tax revenues can help it achieve these two mutually exclusive goals.

Author’s note:

Just quick follow-up about the report. It is simply stunning to me that a report on this topic completely ignores the entire topic of climate change. The entire purpose of the CEA is to help in the fight against climate change and yet the report fails to include the term even once. A word search finds it once in an appendix but nowhere in the body of the text. Talking about the CEA and BC’s energy future while excluding the overriding energy topic of our era is simply incomprehensible and a report that ignores climate considerations in energy prices really needs a serious reconsideration.

Posted in Canadian Politics, Climate Change, Climate Change Politics, Fossil Fuel Free Future, Renewable Energy | 6 Comments

Questioning the PBO’s math on the value of the Trans Mountain Pipeline

The Parliamentary Budget Officer (PBO), Yves Giroux, produced a report this week on the estimated value of the Trans Mountain Pipeline (TMP) and the Trans Mountain Pipeline Expansion Project (TMEP). This report has a lot of people up in arms because it indicates that the Government of Canada “negotiated a purchase price at the higher end of PBO’s valuation range“. The problem with this conclusion is that the PBO specifically notes that it omitted some pretty important considerations in calculating its numbers. In this blog post I want to go into detail about why I believe the PBO report severely undervalued the TMEP and that the government may well ultimately win out big on this project.

Let’s start with the easy part, what the PBO appears to have done right. The PBO used two types of analyses to assess the value of the purchase:

  • Discounted cash flow (DCF) analysis: Assessing the value of the TMP and TMEP based on the present value of future cash flows it is expected to generate.
  • Comparables analysis: Assessing the value of the TMP based on key valuation metrics of similar companies in the same industry

These analyses come up with a lower and upper bounds for the purchase. As the report notes:

The Parliamentary Budget Officer (PBO) estimates that the TMP and TMEP have a value of between $3.6 billion and $4.6 billion. As such, the Government negotiated a purchase price at the higher end of PBO’s valuation range. PBO’s financial valuation assumes that the pipeline is built on time and on budget.

Now for the part the PBO missed. Let’s start by making it clear, the PBO is completely forthright about what it did. My concern is that because only a tiny percentage of the people who discuss this report will actually read it; the result will be a false narrative becoming the dominant one. As I note, the PBO admits its approach is flawed right from the outset. It literally says so in the Executive Summary:

However, PBO’s valuation does not include related assets that were bought as part of the acquisition, including multiple pipeline terminals and the Puget Sound Pipeline. Therefore, PBO’s valuation would be understated relative to the total value of all the assets bought as part of the purchase.

So what does the PBO not think is worthy of consideration? Just a second pipeline and a massive amount of incredibly valuable real estate. You see the Government of Canada didn’t just get a single pipeline for their $4.4 billion, they got two pipelines, four terminals and a lot of ancillary lands. As described in the NEB submission:

The Edmonton, Burnaby and Sumas terminals are located on lands owned by Trans Mountain. All three terminals are zoned as industrial sites. Details for the terminal sites are:

  • Edmonton Terminal – about 49.1 ha (121.4 acres)
  • Burnaby Terminal – about 76.3 ha (188.6 acres)
  • Sumas Terminal and pump station – about 80 ha (197.7 acres)
  • The Westridge Marine Terminal is located on about 6.2 ha (15.4 acres) of land owned by Trans Mountain, with the exception of a small portion of land, located between the railway and the shoreline, which is leased from Canadian Pacific
  • Trans Mountain also owns sufficient lands for most of the pump stations required for the project.

As I wrote on Twitter, this is where it becomes clear that the PBO is situated in Ottawa and its civil servants appear to have no clue about property values in Western Canada.

Let’s consider the Burnaby Terminal. It is located on Burnaby Mountain just down the hill from SFU. It is proximate to all sorts of transit and represents some of the most valuable land in the Lower Mainland. A much smaller, 19 acres, block of industrial land nearby (called the Saputo property) sold recently for $209 million. They got $209 million for a lot one tenth the size of the Burnaby Terminal. Sure if the Burnaby Terminal were to close there would be clean-up costs, but looking at land value alone that property could be worth as much as $2 billion. So why does the PBO say that the terminals shouldn’t be counted as assets? Apparently because their value is “inextricably linked” to the Trans Mountain. Pardon me, but real estate prices in Burnaby are not “inextricably linked to the pipeline” they are set by the market and the market would salivate over that hunk of land.

As I hope to discuss in a later blog post, I can envisage a scenario where the TMEP fails and the current TMP continues to operate as a light oil/refined fuel pipeline that essentially terminates at an expanded Sumas facility in Abbotsford. Under this scenario virtually all the TMP crude flow would then be redirected to the Puget Sound via the Puget Sound Pipeline. To replace Line 2 (the heavy crude line in the TMEP), Alberta would ship bitumen to the coast on rails using CanaPux™ to be loaded at a re-purposed coal export facility at Roberts Bank.

This alternative approach would massively increase rail transport through our communities; increase tanker traffic in the Salish Sea (absent the protections of the TMEP) and increase the greenhouse gas emissions of the resulting crude. But it would rely on existing infrastructure and would therefore bypass the need for further assessments. By going this route it would allow a savvy owner to sell off the Burnaby Tank farm and Westridge Marine terminal for their real estate value.

But back to this post. As I infer in the previous paragraph there is another important asset missing in the PBO’s calculations: the Puget Sound Pipeline.

At the Sumas delivery point in Abbotsford, BC, the Trans Mountain Pipeline connects with the Trans Mountain Puget Sound Pipeline, a system that has been shipping Canadian crude oil products since 1954 to Washington state refineries in Anacortes, Cherry Point and Ferndale. This 111 kilometres (69 miles) pipeline system is made up of  16 to 20 inch pipe and has the capacity for up to about 240,000 bpd (28,600 m3 per day) depending on petroleum types transported and the balance of deliveries between the two destinations – Anacortes and Ferndale

The Puget Sound Pipeline Puget transported approximately 191 million barrels/day (mbbl/day) of mostly light crude in 2016, comprising approximately one-third of the collective capacity of all refineries in the Anacortes and Ferndale area. Not only that but the Puget Sound Pipeline is capable of being expanded to approximately 500 mbbl/d from 240 mbbl/d today simply by adding a few pump stations. The pipe is big enough, but it has never been expanded because there was not enough source material in the Trans Mountain to justify its upgrade.

The PBO chooses not to include the value of this pipeline, apparently because:

The Puget Sound pipeline system is significantly shorter than the TMP and transports less product, therefore, its cash flows and valuation are expected to be only a fraction of the TMP’s .

Remember the current Trans Mountain moves a maximum of 300,000 barrels per day (bpd) and the Puget Sound Pipeline moved 191,000 bpd in 2016. Now I do admit that 64% of the total volume moved is less than 100% but it certainly represents a large fraction of the total volume moved down the pipe. From an income perspective, by my calculations, the Puget Sound Pipeline brings in between $20 – $30 million a year. While not a massive value certainly nothing to sneeze at when calculating value for the TMEP. If my math is right it represents around 10% -15% of the income generated by the Trans Mountain system as a whole. So not a huge chunk, but still pretty significant addition that was excluded from the calculations.

To conclude let’s look at what the PBO said and what we now know. According to the PBO, ignoring the real estate value of the terminals and the Puget Sound Pipeline the TMEP is worth between $3.6 billion and $4.6 billion. Thus the $4.4 billion paid for the TMEP is at the high end of the range. However, were you only to add the land value for the Burnaby Terminal (let’s charitably call it $1 billion) then that valuation goes from $4.6 billion to $5.6 billion. That ignores the value of the Puget Sound Pipeline, as well as 200 acres in Abbotsford etc… Thus, using more complete numbers one could argue that the Government of Canada got a great deal.

The only problem with my numbers? They ruin the narrative being pushed by activists that the government got fleeced by an evil Texas-based company. The truth meanwhile is that it looks like the government did a pretty reasonable job and if it plays its cards right could make a pretty penny from this project.

Posted in Canadian Politics, Pipelines, Trans Mountain, Uncategorized | 3 Comments

New research puts a stake into the heart of the “Bridge to Nowhere” argument against BC LNG

As someone who has followed the BC LNG debate pretty closely, I can’t count the number of times I have heard the expression “natural gas is a bridge to nowhere. This expression derives from an infamous article by Cornell Biologist Robert Howarth. I have repeatedly argued that Dr. Howarth’s research is not applicable in the context of BC LNG. My opinion is consistent with the peer-reviewed academic literature on this topic. Today I was directed to a new research article that I hope will finally put a stake into the heart of this horrible metaphor. This new article concludes that, even in the Marcellus Shale, natural gas “exerts a net climate benefit compared to coal” or as I put it: the climate math says that BC LNG has the potential to help in the global fight against climate change.

Let’s start this piece with a brief discussion of BC natural gas. When it comes to issues around natural gas, geology matters. In BC, most of our natural gas is very deep and sour. As the BC Oil & Gas Commission puts it:

B.C.’s geology provides a natural advantage over other areas of the world where hydraulic fracturing takes place closer to the surface, as natural gas in B.C. is found deep underground, in some cases over four kilometres, and beneath impermeable layers of rock.

Look at that sentence again. I admit one thing I often fail to really comprehend in geology is just how deep these formations are. In the Montney the gas is located 4 kilometers beneath the surface. Think of that number again. We are talking about 4000 m of rock. If you were to start walking down the street at average human walking speed it would take you 48 minutes to travel the depth of this gas…all through layers and layers of virtually impermeable rock. This is why fracking really can’t do anything to affect our drinking water aquifers which are typically very shallow. Sour gas, meanwhile, is poisonous and as a result it is dangerous to vent. As a consequence, venting and flaring of gas is strictly controlled in BC.

These two considerations are very important because the deeper the gas the more buffer zone to prevent infiltration of methane and fracking fluids into our drinking water aquifers and the nature of sour gas means that our regulators are far more cautious about fugitive emissions as any releases can have serious medical consequences for anyone near a drill site. So when someone from places where the gas is much shallower complains about fracking all I can do is to shake my head and say “geology matters”.

But one of the biggest arguments against BC LNG has been based on the research by Dr. Howarth at Cornell. As I noted, Dr. Howarth is a Biologist by training but has made a name for himself criticizing natural gas development. Most of his work has been heavily critiqued (as I detail in a previous blog post) with some of his biggest critics being his own colleagues at Cornell. Arguably they aren’t really his colleagues because unlike him they are trained geologists. Even though actual geologists sharply critique his work, his most famous paper, the Bridge to Nowhere article, seems to always be part of the arguments used by opponents of BC LNG.

Because of its apparent importance in the debate I keep a look-out for newer research on the topic and was very interested in a new study by Ren et al.Methane Emissions from the Marcellus Shale in Southwestern Pennsylvania and Northern West Virginia Based on Airborne Measurements“. This new study effectively puts a stake in the heart of the “Bridge to Nowhere” argument and hopefully will put to bed the argument that BC LNG is worse than coal for powering Asian economies.

The new study uses airborne measurements combined with direct sampling to calculate an estimate of the methane emission rates of the Marcellus Shale. Their plain language summary says:

In this study methane (CH4) emission rates were estimated for the southwest Marcellus Shale based on airborne observations. A mean emission rate of ~21 kg CH4/s was observed from a 4200 km2 study area. A significant portion (~70%) of the emitted CH4 was found to originate likely from coalbeds. Our mean estimated emission rate of 1.1% of total natural gas production indicates a climate benefit of natural gas combustion compared to coal, but the full range includes values above the 2.4% break-even point for the CH4 global warming potential over a 20-year time horizon.

So what does that mean? Well the numbers they get are about a third of what Howarth uses in his paper and their best estimate is less than half of the 2.4% necessary for natural gas to be an effective alternative to coal in our fight against climate change.

What is even more interesting is that their study doesn’t even consider another recent paper titled Temporal variability largely explains top-down/bottom-up difference in methane emission estimates from a natural gas production region by Vaughn et al. This paper came out while the Ren paper was in production and makes the cogent observation that the flights used by researchers (like Ren et al.) to measure methane only happen during the day (usually in the middle of the day). This coincides with when maintenance on natural gas facilities (which requires that they flush their systems) are typically occurring. As such, it is likely that this type of sampling overestimates total emissions.

For an analogy it would be like traffic counters only working during rush hour and then extrapolating that rush hour conditions exist over the entire 24 hour day including the middle of the night.

In particular, it would explain why sampling often finds intermittent super-emitters that drive the averages higher. It is likely that many of the “super-emitters” cited in other reports simply represent one-time flushing being done for maintenance purposes. This is important because these outliers have a massive effect on the statistics and may grossly overestimate total emissions.

The interesting additional feature of the Ren et al. paper is that as part of their work the authors collected air samples for further chemical analysis. By comparing the chemical composition of the collected gas (specifically the correlation between methane and ethane/propane) the authors were able to determine that as much as 66% of the observed methane in their observations were derived from coal beds and not from oil and natural gas operations.

This new analysis helps explain the discrepancies between the work that was done in bottom-up analyses and the top-down work. In particular it explains the recent NASA research showing increases from fossil fuel sources in global methane budget. It appears that in the Marcellus Shale, at least, coal mining may actually be the primary source of anthropogenic methane in the atmosphere. The serves as another reason, (as if we need one) to reduce or eliminate the mining of coal in that area.

As someone who believes in evidence-based decision making the recent research makes it abundantly clear that the climate math strongly supports BC expanding its LNG industry. As I have noted in the past, the most recent research on this topic demonstrates conclusively that when replacing coal in Chinese energy facilities, BC LNG produces lower total, life-cycle emissions.

Even more importantly, in the current market, BC LNG would not be replacing coal when exported to China. Instead BC LNG would mostly be replacing Chinese synthetic natural gas (SNG) and on that topic the climate math is even more categoricalBC LNG is much, much cleaner than Chinese SNG from a life cycle perspective. 

Finally as this new research shows, the alternative argument used by the opponents of BC LNG, that natural gas is a bridge to nowhere, has been staked in the heart. Using the activists’ own top-down methodology these independent researchers have confirmed that even in the Marcellus Shale natural gas is a climate benefit over coal. The anti-LNG activists simply don’t have a leg to stand on.

Addendum:

I posted a comment about the Ren paper on Twitter and was surprised to receive a very quick reply from Dr. Howarth himself. Needless to say, he was quick to discount my initial analysis. When I asked him to correct me, (even going so far as to give him the benefit of the doubt that I might not have interpreted the article correctly) he blocked me. His response made it clear that I had indeed hit the nail on the head.

Credit: cover image from BC Oil & Gas Commission

Posted in Canadian Politics, Uncategorized | 3 Comments

Environmental Absolutists are going BANANAs and it will hurt, not help, the environment

Anyone who follows the energy beat knows that the latest chant from the environmental absolutist world is “No new fossil fuel infrastructure” (NNFFI). The slogan has been attributed by most sources to Bill McKibben of 350.org. Around here you hear it all the time from opponents of the Trans Mountain Expansion (TMX) project or the Coastal Gas Link (CGL) natural gas pipeline. The benefit of the NNFFI chant is that it is really easy to remember and repeat. The problem is that this simplistic refrain makes absolutely no environmental sense. As I will show in this blog post, environmentalist absolutists going bananas will only put our shared environment at increased risk while hurting our chances to effectively fight climate change.

For those of you unfamiliar with the term BANANA is an acronym for “Build Absolutely Nothing Anywhere Near Anything” (or “Anyone”). It was a term first coined in the urban development world and is akin to NIMBY (not in my backyard) and CAVEperson (Citizens against virtually everything). A Banana is an advocate that takes an absolutist view of the world. “Not here! Not there! Not anywhere!” is one of their traditional refrains.

You will also note that I am not calling these people “environmental activists“. The reason for this is that there exist in the environmental field pragmatic activists, like myself, who are fighting to make the world a better place and I don’t want to confuse those people with the Bill McKibben’s of this world. Environmental absolutists believe we live in a black-and-white world where their view is the correct one and any dissenting or alternative view is “climate denial“. Want an example:

Let’s be honest, anyone who can argue that making a case for reducing global emissions is “climate denial” can be safely called an environmental absolutist.

The challenge for the absolutist is that we live in a complex world where governments have to make tough decisions and compromises. In the real world we can’t simply “turn off the taps” if we want to keep our society functioning. Instead, we need to wean ourselves off fossil fuels because, at this moment in time, we do not have alternatives for fossil fuels for most or our transportation needs. Were we to actually turn off the taps the results would be disastrous. The benefit of being an environmental absolutist, however, is you don’t have to do all that complicated thinking. Compromises are made by “sell-outs” and “deniers“. Sure these absolutists rely on fossil fuels for their daily lives but their hearts are pure so none of their personal use matters. Purity of heart cancels all hypocrisy.

Environmental absolutists also really don’t appear to care about the human costs of their campaigns. Look at how they sneer at the real problem of energy poverty in the developing world.

Well contrary to Dr. Mann’s claim, energy poverty is currently a bigger problem in the developing world than climate change. Governments of the region recognize this reality and are working to do something about it. Don’t trust me? Then ask the World Health Organization.

According to the World Health Organization climate change could cause 250,000 additional deaths/year between 2030-2050. Yet the same organization reports that 7 million premature deaths annually are linked to air pollution; 4.3 million of that total are due to indoor air pollution and 3.8 million people a year dieprematurely from illness attributable to the household air pollution caused by the inefficient use of solid fuels and kerosene for cooking.”  Those 3.8 million people are dying from energy poverty. They live a life where they don’t have access to the energy necessary to avoid having to use indoor fires to cook meals and keep warm.

Countries like China and India are taking energy poverty seriously and are building the infrastructure necessary to reduce the scourge that is killing millions of their citizens. Unfortunately for the world, the environmental absolutists are making it harder for these countries to protect their populace. They demand 100% renewable systems when the research shows those systems are much more expensive and still not practical.

China is desperately trying to clean up its outdoor air quality by converting power plants from coal to natural gas. Except as I describe in a previous post, China doesn’t have the natural gas it needs to burn in those plants so it is relying on coal-to-gas which generates far more GHG emissions per Gj than importing Canadian LNG would do. As for the absolutist argument that we are “locking-in” emissions by building natural gas infrastructure in BC. What do they think China is doing when it spend billions on coal-to-gas facilities? If the world is going to get locked-in on a facility, wouldn’t it be better that we lock-in the one that generates 40% less GHG emissions per Gj generated?

The NNFFI chant is also being made about the TMX project. Except, as I have pointed out, if the TMX fails the result will be increased risk to our communities and our shared environment. It will likely put the Southern Resident Killer Whales at increase risk, it will definitely put the Salish Sea at increased risk and it will absolutely put our province at increased risk. The alternative to TMX is not the west coast “turning off its taps“, the alternative is much more oil-by-rail. Well from a GHG perspective oil-by-rail means more emissions from the same barrel of oil. From a fisheries protection perspective, it means more rail trains running along down our river valleys and every rail train is a disaster waiting to happen. Mosier should be a wake-up call to the environmental absolutists in our midst. Next time the oil spill may not get caught before it hits the Columbia River. As for human risks, virtually every month more rail cars full of explosive Bakken crude are flowing to the Puget Sound and in Canada the oil-by-rail boom is only starting. Anyone who thinks that stopping the TMX will somehow stop the flow of Alberta oil to the coast is simply ignoring the daily news.

I’ve been asked about a useful analogy for the absolutist view about natural gas pipelines and the best I can come up with is your family car. Imagine you live in a community without transit and need to commute daily to your job. The community is planning to upgrade transit in your area but has not started the work. Would you stop maintaining your car based on the NNFFI refrain? After all, transit will eventually be available to get you to work and to go to the grocery store. Projects like Coastal Gas Link and the TMX are the equivalent to getting new tires and fixing your brakes. Would you refuse to buy new brake pads (new infrastructure) because you knew transit will eventually arrive? Of course you wouldn’t. Until you absolutely knew that you could do without your car, you would make the regular investments necessary to keep it safe and ensure that it was available to get you to work and feed your children.

We aren’t anywhere near close to getting ourselves, let alone the Chinese or India, off fossil fuels. So suggesting we don’t invest in necessary infrastructure to make the world safer and cleaner is simply ridiculous.

Ultimately the challenge we face is that mitigating climate change is a wicked problem

Climate change is an issue that presents great scientific and economic complexity, some very deep uncertainties, profound ethical issues, and even lack of agreement on what the problem is,” said Toman. “Economists will generally think about the trade-offs involved. Ecologists will talk about the idea that we’re driving towards the edge of a cliff. I think both views are right. The question is, how do you reconcile these two – if you can?   

Climate change is real and is a battle worth fighting. But we won’t fight it with simplistic slogans and even more simplistic thinking. Environmental absolutists screaming “no new fossil fuel infrastructure” are not helping us fight climate change, they are making the fight harder. They degrade the consensus necessary to build the coalitions needed to get things done. They kill any goodwill the other side might once have had to compromise and they lower the quality of the policy discussions. Climate change is a wicked problem that involves real trade-offs that will cost real people their lives. Environmental absolutists with their black-and-white thinking and their simplistic slogans aren’t helping us deal with this problem. Instead by going bananas they are hurting our chances to fight climate change while simultaneously putting our shared ecosystems at greater risk.

Posted in Fossil Fuel Free Future, Pipelines, Risk, Uncategorized | 6 Comments

Sorry folks, but the plural of anecdote is data

One of the reasons I started writing this blog was for science outreach. I like to discuss how we do science. Tonight I am going to go back to my roots and discuss an oft-misunderstood concept in science. The role of the anecdote, and through it the inherent value of simple individual observations in the scientific method. The background for this blog post is a discussion I had over the weekend about which of two mutually exclusive expressions is correct:

The plural of “Anecdote” is “Data”

and

The plural of “Anecdote” is not “Data”

I regularly hear people mistakenly claiming the latter is true, but the truth of the matter is that the former is true. In this blog post I want to explain why I believe anecdotes have a legitimate place informing our initial hypothesis development and how numerous, mutually-supporting, individual, observations represent a valuable information resource…or put in plain English that the plural of anecdote IS data.

To begin, a bit of background. The research project that led to my original PhD thesis research was done when computer databases were in their infancy. It was the end of the Green Plan in Canada and the Canadian government had spent hundreds of millions of dollars collecting baseline data on all sorts of phenomena, but the money wasn’t there to effectively archive the data. I was a recently graduated analytical chemist hired by a research group at the University of Victoria that was looking at thousands of analytical results collected throughout the Strait of Georgia and stored in filing cabinets in numerous federal research facilities. The question our research group was asked to answer: How do we avoid simply wasting all this data when the funding for the Green Plan ran out?

Our decision was to develop a geospatial database which assembled all the information in a location, and format, useful for future researchers. But we were left with a question: how do we help future users understand the strengths and limitations of the data in the database? We had to ask ourselves what differentiates mere observations from useful data and how do we document that difference for future users?

Surprisingly, we discovered that this topic had not been well-studied in the academic press. After months of scouring the academic literature, the best answer we could identify was a concept called “process knowledge“. To explain the concept of process knowledge, in that era, I’m going to steal a paragraph from my earlier work:

From a policy perspective, scientific information consists of two distinct sub-components: scientific data or measurements, and process knowledge. The former are obvious – the levels of a particular contaminant in a fish liver, the nature of the lesions provoked on the fish liver, and the mortality effects of a particular contaminant on fish in bioassays are all examples of scientific data or measurements. Process knowledge describes “the dynamics and interrelationships within natural biophysical and social systems” (Cornford and Blanton, 1993). Process knowledge may be theories, hypotheses, mathematical models, or even suspected correlations culled from a body of observations. Both data and process knowledge are required as inputs to decisions, but in different proportions depending on the questions being addressed.

So now we can see the difference between scientific data and simple observations? It is the existence of an underlying understanding of the process knowledge that links a set of observations to the physical world. That being said, a well-documented observation, when put into the correct context, can graduate from a simple anecdote to a useful data point.

So what is an anecdote? Anecdotes are individual accounts or stories. They are in effect observations unconnected to any specific process knowledge. As such they represent an information resource that can be used, with appropriate scrutiny, to help us understand the world around us.

Going back to the history of science we all remember the stories of scientists making general observations that informed their hypothesis development. The classic example is Newton’s apple. Now whether Newton observed an apple fall from a tree and used it to help him understand gravity is apocryphal or literal is not the point, it demonstrates a point. In the development of new theories and hypotheses, the first observations are almost always done absent detailed process-knowledge.

Observations, often collected for some completely different purpose, form the first step in understanding our shared environment. Reports of these observations (anecdotes) form the original data points used for virtually every investigation. Sure, not all anecdotes are of equal value; for every story of a useful anecdote, I can provide a story of an anecdote that was misconstrued. I have an entire blog post (Risk Assessment Epilogue: Have a bad case of Anecdotes? Better call an Epidemiologist) dedicated to situations where anecdotal information led to unsupported hypotheses. But that is the point, a single anecdote is not typically terribly useful, but numerous, similar anecdotes can inform the development of a hypothesis.

For centuries indigenous peoples collected their observations (usually in oral form). These oral stories represent “anecdotes” by the standard definition of the term and were historically dismissed as not particularly valuable because they were collected in the absence of any systematic evaluation of a specific phenomena or to address specific hypotheses. Yet now virtually the entire scientific community agrees that traditional ecological knowledge (TEK) provides invaluable insights into our shared ecological heritage. The hundreds of years of historical narratives and observations (anecdotal observations) are indeed data by any fair view of the concept.

Let’s take a specific example. The anecdotal reports from generations of fishermen and coast watchers allow us to generate an effective estimate of the extent of the historical habitat for the Southern Resident Killer Whales (SRKWs). Those compiled anecdotes were not systematically collected for the purposes of establishing the extent of the SRKWs’ habitat but those anecdotes do just that. When numerous, independent observers all document the presence of SRKWs off Haida Gwaii it confirms that this location is part of their historical range. The assembled anecdotes, collected for totally different reasons, are data in the context of establishing these historical extents.

So are all anecdotes useful? Absolutely not. But take a lot of observations that are similar in nature (or mutually-supporting) and suddenly you have the baseline data necessary to start developing a hypothesis. Anecdotes can, and do, provide a valuable information source at the initiation of a scientific investigation of a phenomena, or put another way: the plural of anecdote is indeed data.

Source of figure

Posted in Uncategorized | 4 Comments

On Wil Horter’s Gish Gallop about Alberta heavy oil and the Trans Mountain

On December 26th, 2018 the National Observer published an article Discount Frenzy: The dirt on discount oil by Wil Horter, the former Executive Director of the Dogwood Initiative. In December 28th, I prepared a reply called Fact-checking the National Observer “Discount Frenzy oil piece. This week Wil replied with his pièce de résistance Myths die hard: Santa Claus and Canada’s oil discount. This final reply, and his original piece, provide an example of a tried and true debating trick commonly known as the “Gish Gallop” which is technically know as proof by verbosity. The Gish Gallop is used when a debater is trying convince his audience that up is down and left is right. My aim here is to show you what he has done and remind my readers the truth about Alberta oil and the Trans Mountain Pipeline expansion (TMX) project.

The Gish Gallop is a presentation technique developed in the creationism debate and has been described as:

the debating technique of drowning an opponent in such a torrent of small arguments that the opponent cannot possibly answer or address each one in real time. More often than not, these myriad arguments are full of half-truths, lies, and straw-man arguments — the only condition is that there be many of them, not that they be particularly compelling on their own. They may be escape hatches or “gotcha” arguments that are specifically designed to be brief, but take a long time to unravel.

The trick with the Gish Gallop is putting out so many “alternative facts” that no opponent can address them all. The form of argument depends on that truism of debate that “the amount of energy necessary to refute bullshit is an order of magnitude bigger than to produce it“. Moreover, the way the Gish Gish Gallop is used (directly in the final piece) is that if you miss one argument then they can claim that you have failed to refute their piece. As the article n the Gish Gallop explains:

This is especially true in that the Galloper need only win a single one out of all his component arguments in order to be able to cast doubt on the entire refutation attempt. For this reason, the refuter must achieve a 100% success ratio (with all the yawn-inducing elaboration that goes with such precision). Thus, Gish Galloping is frequently employed (with particularly devastating results) in timed debates. The same is true for any time- or character-limited debate medium, including Twitter and newspaper editorials.

Gish Gallops are almost always performed with numerous other logical fallacies baked in. The myriad component arguments constituting the Gallop may typically intersperse a few perfectly uncontroversial claims — the basic validity of which are intended to lend undue credence to the Gallop at large — with a devious hodgepodge of half-truths, outright lies, red herrings and straw men — which, if not rebutted as the fallacies they are, pile up into egregious problems for the refuter.

Reading what Mr. Horter has written you see how he played this game. His first article had so many half-truths and strawmen that is was simply impossible, in the space and time I had, to refute all his ridiculous arguments. That is how he “wins”. He simply tires me out by saying so many things that are wrong that I, a private citizen not being paid to do any of this, simply ran out of patience to refute it all.

Look at the start of his second article a classic Gish Gallop follow-up. He positively glows about the fact that I did not refute one of his “big lies”. The problem was my piece was already far too long for a blog post and I had to cut out a lot to make it readable. Not being an expert on that part of the problem I simply left it for the next guy. I am not an expert in economics so I am the wrong person to refute that “big lie” and my unwillingness to wander into that swamp pit of illogic doesn’t make it right.

I’m guessing you are asking: well what do you do when someone plays the Gish Gallop gambit? The secret to responding to a Gish Gallop comes straight out of that old movie War Games. You have to choose not to play. By wasting my time responding to his faulty analogies, bad logic and insults I would get stuck in the swamp and miss my opportunity to give good information to debunk his bad information.

Instead of responding to his half-truths, bad analogies and red herrings, let’s go to the heart of his argument. In this case he really is only trying to make two points: 1) that bitumen is not a desirable product and 2) there is not bottleneck. Both of these are easy to debunk.

The market wants Alberta heavy oil

Anyone who understands the world market knows oil is a fungible commodity. If Canada does not produce it, that supply will be replaced by Saudi Arabia, Nigeria or some other OPEC member-state.

If heavy oil was not desirable then in a global and fungible market it would fetch a significantly lower price and people would not design refineries specifically to process the material.

Except as I showed in my previous piece, the heavy oil discount has essentially disappeared on the global market. Heavy oils, for the last couple months, have been selling for a higher price than light oils. The only differentiator being transportation costs.

Mr. Horter can argue until he is blue in the face that heavy oil is an inferior product, but the market, which is the only thing that matters, consistently says otherwise. He can make all the bad analogies about syrup he wants but his bad analogies don’t trump the simple truth. On the market today (Jan 14, 2019) heavy Maya for delivery to the Gulf Coast is going for $54.56 and WTI for that market is $51.26. Remember WTI has no virtually no additional transportation costs for delivery to the Gulf Coast and yet buyers are willing to pay a 6% premium for the heavy oil. Put simply heavy oils, like Alberta heavies are desirable products.

As for refinery capacity, Mr. Horter make the easily debunked claims about heavy oil refineries indicating there aren’t many. Any observer knows that with the collapse of Venezuela as a reliable producer the world has more refineries tuned for heavy oil than there are heavy oil producers to supply them. That is why this supposedly inferior product is selling at a premium. So Mr. Horter can make all the claims he likes about “quality” but the market has spoken and the market says that it wants Alberta heavy oil and if we can get that oil to market it will sell at a premium.

Just look at the West Coast. The Trans Mountain has been oversubscribed for years now because so many suppliers want the oil and there is not enough capacity to get it there…this brings up point 2: the bottleneck.

There is a bottleneck in our oil transportation system that the TMX can help alleviate.

Mr. Horter uses a graph from an anti-oil NGO from 2016 to argue that in 2016 there was no bottleneck for the movement of Canadian crude oil. Now who do you trust an anti-oil NGO or the NEB, the province of Alberta and the world market which all say otherwise. We already know about the over-subscription of the Trans Mountain. Mr. Horter claims otherwise but, no surprise here, is completely incapable of providing any data to support his argument. So what do we know about the state of oil transportation in Alberta?

We know that the Province of Alberta had to curtail oil production because they have a huge backlog of product and no way to get it to market. They have so many months of supply in the holding tanks that there is nowhere-more to put it. Why else would the province be buying rail cars to ship oil-by-rail to get its product to market?

As for oil-by-rail the figures are sobering. Oil-by-rail is spiking and with the Province of Alberta getting into the game the numbers are only going to go higher. Just look at the NEB numbers:

It is simply inconceivable that the province would be buying rail cars and curtailing production if there was not a bottleneck the TMX could help alleviate.

Conclusion

Re-reading Mr. Horter’s Gish Gallop it is amazing how much time he spends trying to get us to look the other way so we miss the actual story he is trying to sell.

His first argument that heavy oil is less prized than light oil is debunked by the actual market data. He can make all the cases about it being “inferior” because the NEB used a term in a very specific context. But the proof of the pudding is in the eating and heavies are deeply sought after and every single drop that makes it to the West Coast is grabbed at premium prices. Nothing he writes can take away from the fact that the market has spoken and the market loves heavy oil.

As for his second argument? That the TMX won’t help reduce the transportation bottlenecks? The Province of Alberta, the NEB and the rail numbers don’t lie. There is a bottleneck and addressing that bottleneck is the only way to get Alberta a fair price for its highly-prized product.

Remember when someone uses a Gish Gallop, they do so to try and make you forget what the discussion is all about and get stuck worrying about trivia. Don’t let Mr. Horter do that to you. His case is built on two fundamental legs, that no one wants Alberta heavy oil and that there is not a bottleneck. All the data says otherwise. It is pretty hard to argue no one wants a product when every drop of the stuff is bought for a premium price when it becomes available and it is hard to argue that there are not transportation limitation issues when Alberta is curtailing production and buying up rail cars to ship the material to market. Mr. Horter is selling you a pig in a poke. Don’t let him do that. Don’t let him distract you from the truth.

Posted in Pipelines, Trans Mountain, Uncategorized | 2 Comments

Why a Pragmatic Environmentalist supports BC LNG – doing the climate math

As a pragmatic environmentalist , I am often asked how I could support the BC LNG export industry? I prepared a Twitter thread on the topic but have since been asked to show my work. This blog post builds on a couple previous posts on the topic and will explain how someone who is serious about fighting climate change can simultaneously support exporting BC LNG to Asia.

Let’s start this with some basic assumptions. I believe anthropogenic climate change is real and represents a fundamental threat. I agreed with Canada signing the Paris Agreement and believe that Canada should work to reduce our carbon emissions. That being said I believe the Paris Agreement is deeply flawed. It treats each country like a silo and ignores how trade affects carbon emissions. This is a problem because the Paris Agreement allows developing countries to set less stringent targets for reducing their carbon emissions. As a result many highly-developed countries have off-shored their carbon emissions. As presented in this graphic from Davis and Caldeira, the US (and Canada) have free-loaded on China’s carbon emissions for years by importing manufactured goods (and their embedded carbon) which are not counted against our totals. It is like saying you are on a diet, but only counting the calories you eat at home and then eating most of your meals at restaurants.

As Canadians we can do something to help off-set our freeloading by exporting lower-carbon energy to Asia. Unfortunately, this will increase our domestic carbon emissions but in doing so it should lower global emissions (as I will show below). A lot of Canadian politicians have staked their reputations on meeting our Paris Agreement commitments. They worry that emissions associated with exporting fossil fuels will drive our domestic emissions over our Paris Agreement commitments. I see that argument as myopic. Greenhouse gases (GHGs) don’t respect borders and if we can reduce total global emissions by increasing domestic emissions (even at the expense of our Paris Agreement commitments) then we have made the right choice. So let’s get into the numbers.

Using life-cycle analyses, Canadian LNG, when burned in Chinese electricity plants, is better for the globe than the Chinese burning coal

The most recent research on this topic is the peer-reviewed article: Country-Level Life Cycle Assessment of Greenhouse Gas Emissions from Liquefied Natural Gas Trade for Electricity Generation by Kasumu et al. This article demonstrates conclusively that when replacing coal in Chinese energy facilities, BC LNG produces lower total, life-cycle emissions. Others can make alternative claims until they are blue in the face, but until they provide numbers to compare to Kasumu et al. then they are simply blowing smoke. Good science trumps rhetoric.

But what about the Canadian Center for Policy Alternatives (CCPA) that says otherwise?

It was a load of hogwash. I prepared a detailed blog post on the topic: On the Canadian Centre for Policy Alternatives’ bad science about BC LNG emissions where I explain in detail all the tricks the CCPA authors used to generate their number. Using every trick in the book, and comparing BC LNG against the best-in-class Chinese coal, BC LNG was still 20% lower in CO2/MWh, except when they used the “Bridge to Nowhere” gambit.

What about the famous “Bridge to Nowhere” article we keep hearing about?

The Bridge to Nowhere is the legendary report by Robert Howarth with Santoro and Ingraffea in 2011 titled: Methane and the greenhouse-gas footprint of natural gas from shale formations where they estimated fugitive emissions from natural gas production. This study was universally panned. Howarth’s colleagues at Cornell published a scathing rebuttal of the Howarth paper then a follow-up. The Cornell group was not alone. Other commentators pointed out that paper incorrectly attributed to venting, gas that was actually burnt to run production equipment. While others had additional concerns. Here is a link to a well-written summary of the issues with the paper and the various information sources debunking most of its findings.

Howarth subsequently prepared another paper: A bridge to nowhere: methane emissions and the greenhouse gas footprint of natural gas. It acts as a sequel to his earlier work and like every horror sequel the original beast, once thought slain, is revived to attack again. The new Howarth study asserted that unconventional wells had a leakage rate of 3.3%. This is more than double the value used by the National Energy Technology Laboratory (NETL) in their analyses and is unsupported by the literature. I have written a lot about bad methodologies for estimating methane leakage and the emission numbers and here is my summary of the Howarth work in the context of the BC natural gas industry:

Howarth assumes that all unconventional well are vented and flared during installation and development. This would be a human health disaster in North-Eastern BC where venting those concentrations of sour gas would kill off drill crews. Rather, modern wells are generally “green-completed”, (they are connected to a pipeline in the pre-initial phase) and routine flaring and venting goes against BC Oil and Gas Commission Guidelines. While statistics for Canadian venting are not easily available, in the US only 3% of studied wells vented methane into the atmosphere. Just a reminder Howarth assumes 100% are vented. A study by the US Department of Energy showed very low methane leakage (roughly 0.4% of production) while other studies found unconventional wells with numbers up to 1.65% with the general numbers being closer to 1.4%. Coincidentally, the number used by NETL in their studies.

The missing consideration: coal-to-gas

The big argument that the activists keep making is that China is building newer high-performance coal facilities so BC natural gas only provides a marginal improvement in emissions (20% – 40%). To start let’s make it clear, China burns a LOT of coal (see graphic below) so reducing the emissions of their best facilities by 20% is no marginal gain.

But the bigger problem is the coal-to-gas problem. While it is clear that BC LNG will be replacing marginal coal in some parts of the country, in most of the country it will be replacing Chinese natural gas. You might ask how replacing Chinese natural gas with BC LNG will produce any emissions savings? The answer is because China doesn’t have a significant domestic natural gas industry so has instead turned to synthetic natural gas (SNG). SNG is created by using a complex chemical process to turn coal into natural gas which can then be burned for electricity or used as an input in plastic manufacturing.

As you can imagine, the major problem with SNG is that the process of turning coal to natural gas is very energy intensive and produces a huge amounts of carbon. A comprehensive study of the industry was recently produced titled Air quality, health, and climate implications of China’s synthetic natural gas development by Qin et al. They note that Chinese facilities emit 4.25 kg of carbon dioxide per cubic meter of SNG produced. This adds up to a big problem because:

Through 2013, a total capacity of 37.1 bcm [billion cubic meters] per year of SNG production had been approved by the central government, with another 40 projects (∼200 bcm per year) proposed by the industry. Total planned SNG capacity is ∼1.25 times China’s 2014 total natural gas consumption. Also, the Chinese government set targets for annual SNG production of 15 bcm to 18 bcm by 2015 and 32 bcm by 2017, with a potential production of ∼57 bcm by 2020. Notably, government plans for SNG production are continuously changing, likely due to a mix of concerns about the coal industry, local economy, air pollution in eastern China, energy security, local water stress, and global climate change.

If China produced 32 billion cubic meters a year of SNG in 2017, at a emission rate of 4.25 kg CO2/cubic meter, that comes out to 136 billion kg of carbon dioxide equivalents just to generate that SNG (or 136 million tonnes [MT}). In 2016 Canada, as a country, emitted 704 MT of carbon dioxide equivalents. So just to produce the SNG they subsequently burned (or used in plastic manufacturing) China emitted the equivalent of 20% of all Canadian emissions.

Why not let Australia or the US supply that LNG to China?

I have heard some people suggest that even if LNG improves Chinese emissions, it doesn’t have to be Canadians supplying them with the LNG. Let the US and Australia do the heavy lifting. Well my response is that Canada is uniquely suited to provide low-carbon LNG to the world. As I describe in my blog post: On the global climate change math supporting BC LNG using the Pacific Northwest gas (PNG) project as an example:

doing the simple math the PNW LNG project has a 18% lower greenhouse gas intensity versus our average competitor. Moreover, according to life cycle analysis of LNG, the raw material acquisition energy cost for LNG is equivalent to 3% – 4% of the energy generated by the LNG. If the British Columbia government can electrify the process then the PNW LNG project can operate at an intensity equivalent to 80% of our competitors. What that means is that if consumers in Asia use British Columbia LNG the global emissions for the LNG will be 20% lower than existing LNG sources. If this LNG replaces coal as an energy source the global benefit of using BC LNG is even greater. So from a global perspective this is also a slam dunk, we sell our LNG to Asian clients and in doing so prevent the emissions of millions of tonnes of carbon dioxide that would otherwise have come from using coal or dirtier LNG sold by our competitors.

Conclusion

To conclude, I want to make a number of things clear. The figures I have presented above are not mine. They come from some of the most respected energy scientists on the planet after having gone through rigorous peer-review. This is not data from activists but from objective researchers who have been studying this topic for years (or even decades) and what they have to say is clear. When compared to coal, the life-cycle analyses are clear: BC LNG will lower global emissions for electricity production. BC LNG is not “dirtier than coal” as some activists falsely claim, rather it is much cleaner than coal.

But more importantly, in the current market, BC LNG would not be replacing coal when exported to China. Instead BC LNG would mostly be replacing Chinese SNG and the climate math is even more categorical on that topic. BC LNG is much, much cleaner than Chinese SNG. Replacing Chinese SNG with BC LNG will help the planet and even if exporting BC LNG causes Canada to miss our Paris Agreement targets then the sacrifice is worth it. We have to keep reminding ourselves GHGs are global and it is more important to address global emissions than local ones. If a minor increase in Canada emissions can result in a major decrease globally then that is well worth our missing our Paris Agreement commitments.

Addendum

A reader has directed me to newer research that suggests that Qin et al. may have overstated China’s current capacity to produce SNG. According to this new source, in 2018 China had six SNG plants with a capacity of 6 bcm with a new goal of 17 bcm in 2020. This means that China currently emits 25.5 MT (or one third of the entire oil sands in 2017) just to create the SNG they will later burn. To put this into perspective the LNGCanada project in total is estimated to emit 10 MT/yr while Woodfibre would generate about 1 MT/yr .

Given the opaque nature of China’s energy business, I am not in a position to guess which of the two sources better represents current Chinese production, but both cases make a strong argument for exporting lower-GHG Canadian LNG to China.

Posted in Canadian Politics, Climate Change, Climate Change Politics, Uncategorized | 6 Comments