On natural gas and economic development

Did you know that there is natural gas out near Sussex in the McCully field? There is and in fact, the Potash Corporation of Saskatchewan has been using that gas for its local operation for several years. Now a new study estimates that there are “proved and probable sales gas reserves of 119.3 billion cubic feet could be recovered from current and future wells drilled in the evaluation area“.

Now you will just have to trust me on this. That a fair amount of gas. Not by Alberta standards and not by offshore Nova Scotia standards but if they recover and sell all that gas it should generate a fairly good revenue stream to the province from royalties.

So the heat is on to get a 30 km lateral pipeline built to connect this gas to the distribution system to be sold on the open market most likely in the US.

Now, the executive director of the local economic development agency in Sussex had an idea. He knew that the economic spinoff benefits to the local community of this project were going to be minimal. The royalties go to the province. The actual field is not within local municipal boundaries so no real property tax benefits. The engineers and field workers were more than likely living in Moncton. So aside from a few more bucks spent in the local restaurants and gas stations he realized there would be no real benefit to the local community.

So he had an idea. Why not set up an industrial park near the site that would attract manufacturers and other large users of natural gas? His reasoning was that if they could attract one or two large users (like the potash corp.), the producer of the gas would have less incentive to invest millions into a 30km lateral pipeline. Or, like the potash corp itself, another large user or two might actually take a stake in the project.

There were some compelling business case reasons why this made sense at least at a high level. First, the local gas could’ve been made available with any transmission costs – shaving something like 30% of the cost. Second, the producer wouldn’t need to spend millions on a lateral pipeline – presumably reducing the cost structure somewhat. Third, if the province wanted to there could be flexibility in its royalty structure to attract business. All in all, the gas out there for industrial users could have been considerably cheaper.

Potential anchor projects? Small natural gas fired energy plant. A large manufacturer with co-generation capacity. My favorite – a specialty fuels manufacturing plant (jet fuel, etc.) made from natural gas and shipped by truck.

Now I haven’t followed this closely in recent months but I gather from the paper today and from the lack of any news on the other project – that it is probably dead.

Just another good idea with no collective will to even try.

And for you energy industry experts reading this, I realize there are a number of serious challenges with this whole approach but I still think that it was an innovative idea that deserved a fair hearing. An idea that could have been floated to the jet fuel manufacturers or the producers of power (not NB Power) or to a few large manufacturers.

But no, let’s ship it all to New England. Take our pittance. Buy a few more MRIs and watch our population decline. And while we’re at it why not have some beer and popcorn?