The provincial government’s energy corporation didn’t study natural gas as an alternative to using Muskrat Falls to replace the Holyrood generating plant according to the company’s final written submission to the environmental panel reviewing the project.
Nalcor dismissed natural gas as “purely hypothetical” since the major oil companies have not identified a “viable business case” (p. 20). The company cited testimony given to the environmental panel to justify its decision.
But information given to the panel in testimony at a hearing into the project in St. John’s on August 4 didn’t come from the major offshore companies. Some of the information came as hearsay comments from two private consultants interested in developing a natural gas storage facility near Stephenville and from Nalcor’s own vice president Gilbert Bennett.
Neither Bennett nor the consultants could cite specific information. Neither told the panel, either, that assessing development of offshore natural gas is hampered because the Government of Newfoundland and Labrador still hasn’t developed a natural gas royalty regime, despite commitments to do so in 1997 and again in the provincial energy plan issued in 2007.
That’s the same plan that committed the provincial government to developing the Lower Churchill.
The other source Nalcor cited to dismiss natural gas is testimony by NOIA president Bob Cadigan at the same April hearing.
The panel was interested in the prospect of using natural gas from the offshore just for Holyrood and not for export. And when asked by the environmental assessment panel for specifics on a natural gas development, Cadigan didn’t have any information about the viability of natural gas as a replacement for Muskrat Falls of any sort.
Instead, he relied on the project proponents and their assessments:
And in terms of that feasibility, I think -- you know, I believe that the province and Nalcor have looked at a global -- from a global perspective or high level at the opportunities available, and I would be surprised if it was an economically viable source to replace electric 18 generation from Holyrood [p. 141]
NOIA is comprised of supply and service companies for which Muskrat Falls represents a very lucrative business opportunity.
What none of the project boosters talked about were studies done within the past decade on offshore gas development.
A 2005 discussion paper prepared for NOIA by Dr. Stephen Bruneau looked at six options for getting additional electricity for the island grid. Bruneau concluded that development of only 60% of the known gas reserves at Hibernia, White Rose and Terra Nova would give enough natural gas to power a Holyrood size generating plant at full capacity, 365 days a year for over a century. That would displace 500,000 tons of greenhouse gases each year.
Bruneau estimated the cost of a pipeline to bring the gas ashore to be $300 million. Another $400 million would build a natural gas generating plant, with another $112.5 million needed to build a short on-land pipeline and build natural gas handling facilities at sea. Total cost would be less than $1.0 billion.
Nalcor estimates the Muskrat Falls project will cost at least $6.2 billion, with the resulting electricity costs at least 14.3 cents per kilowatt hour.
In contrast, Bruneau estimated the cost of electricity from a Holyrood natural gas plant at five cents a kilowatt hour. Surplus gas could be converted to liquid natural gas and stored, according to Bruneau, or exported to the American market:
Associated gas transferred to the Island via pipeline is economical and is a wise choice for Newfoundland and Labrador energy strategy. It
will result in lower electricity prices, improved environmental stewardship, will attract major industry including LNG export opportunities, and, is economical to begin IMMEDIATELY.
Bruneau’s conclusions are supported by a 2001 study for the provincial energy department that looked at the feasibility of piping natural gas and gas liquids from the offshore using a pipeline. That study concluded, among other things, that the resources examined by the study could be developed economically even in a low price environment.
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