Quebec’s Anticosti Island: Will it get frac’d? Dreamers come and go, but it remains an enigma for developers

Quebec’s Anticosti Island: Dreamers come and go, but it remains an enigma for developers by Phillip Authier, July 23, 2016, Montreal Gazette

As far back as anyone can remember, people have been trying to make a buck off Anticosti Island.

Henri Menier, a Frenchman who made his millions in the chocolate business, dreamed of a hunting and fishing paradise in the days he owned the place, bought on a whim for $125,000 in 1895.

His dream failed. Today. the only visible sign of his presence are the estimated 200,000 Virginia white-tailed deer — descendants of the species Menier introduced for sport — which roam freely even on the streets of the island’s only town, Port-Menier.

Pulp and paper companies then had their way with the place known as the “graveyard of the gulf,” because of the 400 ships that foundered on its reefs.

They, too, met with limited success, mainly because of forest fires and the high transportation costs of trying to harvest an isolated island in the Gulf of St. Lawrence.

In the period leading up to the Second World War, the Germans took an interest, dropping off a 13-member survey team officially to examine the forest and port facilities for exporting wood. They had a plan to buy the island and build a sulphite pulp mill.

The Germans charmed the locals — they liked to party in the local hotel — but some of the more unsavoury members of the team were said to have ties to the Nazi regime. A nervous Ottawa watched from afar, and was pleased when the plan fell apart and they all went home.

Later, in the war, the appearance of German U-boats in the St. Lawrence only added to suspicions by those who had questioned their real intentions.

Throughout it all, more traditional means of earning an income, such as salmon fishing and the deer hunt, which attract tourists worldwide, have proven to be a more reliable way for the small population to make a living than the promises of fast-talking businesspeople in suits from the city.

Today, not only are the people here skeptical about dreamers, they find themselves smack in the middle of a tug of war between politicians, the powerful oil lobby, off-island environmental groups and their own desire to not disappear from the map.

The population on Anticosti, 16 times the size of Montreal Island, has dropped from about 350 souls 25 years ago to fewer than 200.

“It’s (future development) a sword hanging over our heads,” Anticosti’s frank-talking, anti-oil Mayor John Pineault said in a recent interview. “We’re trying to re-populate and find our way. The only people standing up for us are the members of Québec solidaire.”

• • •

The roots of Pineault’s anger — and that of other citizens — dates back about five years. That’s when two provincial governments, Liberal and Parti Québécois, and oil companies decided it was time to take a fresh crack at prospecting for oil and gas resources.

Like the myth of the mysterious witch said to still roam the island, there had always been talk of hidden wealth in the form of gas and oil reserves — the first test well there was drilled in 1962 — but nobody has ever solved the riddle of how to get it out.

The Liberals under then-premier Jean Charest started the dabbling — proposing partnership development with oil companies in August 2012 — but it was Pauline Marois’s government that stepped up to the plate with some serious exploration money in the last months the PQ was in office in 2014.

That was when the government, through its investment arm, Investissement Québec, joined with a consortium of petroleum companies to create a limited partnership, Anticosti Hydrocarbons, with the primary objective of demonstrating the commercial viability of oil and gas resources on Anticosti Island.

A total of $115 million in public money was initially earmarked for the project.

It would be Pétrolia — a small Quebec-owned energy startup, which is also drilling for oil in the Gaspé region — that would take the lead in exploring the island for oil and gas on behalf of Anticosti Hydrocarbons, but the majority of the funding would be public.

Pétrolia would act on the pooled development rights it had purchased plus rights owned by other firms active on the island, Corridor Resources of New Brunswick and Saint-Aubin E&P.

Those rights were purchased from Hydro-Québec’s oil division in 2008. Like Shell before it, Hydro had given up looking for the mythical motherlode.

This latest foray was largely a political decision, which took on a more symbolic meaning in the hands of the government devoted to making Quebec a country. Marois argued the island offered the potential of making Quebec energy independent.

“All Quebecers will be richer, collectively and individually,” Marois boasted after signing the deal. “We’re talking about $45 billion in potential benefits. I think that’s enough to make some people dream.”

The hastily inked contract foresaw drilling between 15 and 18 test wells on the island. Quebec, which has owned Anticosti Island since 1974, argued the environmental impact assessment process of any real development could take place later if the initial exploration showed good potential.

The government quoted studies saying there could be the equivalent of as much as 46 million barrels of oil trapped in the island’s Macasty shale waiting to be tapped.

Early tests had indicated high-quality crude and an unspecified amount of natural gas lay below, but the only way to get it out would be by forcing it to the surface using controversial hydraulic fracturing, a process by which large amounts of water, sand and chemicals are pumped underground to break apart the rock and release the resources.

Seeing a natural vote-getter in the economically depressed eastern Quebec swing ridings, the PQ made sure the contract it signed was featured prominently in its election literature. The PQ went on to lose the election anyway, with Philippe Couillard’s Liberals taking power.

The fact the decision was made by a small group of investors and the government — public consultations would not take place until later — made the project a tough sell from the get-go.

As Liberal leader, Couillard had accused the PQ government of gambling with Quebecers’ money at the same time as saying his party supports the responsible exploitation of fossil fuels.

“I think the electoral result was much more important for the government than the financial results,” he said.

But Couillard also said he would respect the contract signed by the previous government, which explains the mess his government found itself in — one of many — during the most recent sitting of the National Assembly.

That’s because Couillard’s position and certainly his attitude shifted with time after he became premier in the 2014 election.

I would have preferred to not find this project on my desk.

His true feelings on the idea exploded at the Cop 21 climate-change conference in Paris this past December. It was a rare moment where Couillard — known for his Cartesian cool-headed approach to most issues — snapped.

When a reporter asked him how Quebec can preach climate control internationally yet allow drilling on Anticosti, which will in turn contribute greenhouse gas, Couillard replied: “Please, stop saying I am the promoter of Anticosti. I have said this several times: This is not my project. I am fed up.

“I would have preferred to not find this project on my desk.”

He went farther, saying he hoped oil companies back home got the message about his vision for Quebec’s energy future.

“I have no enthusiasm whatsoever for hydrocarbons,” Couillard said. “The future of Quebec does not rest on hydrocarbons. Absolutely not.”

The opposition parties and investors in the Anticosti project were stunned at Couillard’s apparent willingness to bury the project.

In the months that followed, the debate spiralled out of control with the PQ and Coalition Avenir Québec accusing Couillard of planning to renege on the government’s signature on the test-drilling contract.

As the Environment Department stalled on issuing the necessary permits, the value of Pétrolia’s shares plunged. On Feb. 15, a frustrated Pétrolia president, Alexandre Gagnon, said the government was not even returning his calls when he tried to find out what the future of the project was.

“We deserve to be treated with respect,” Gagnon said. “We are partners, after all.”

Pétrolia floated the idea of legal action against the government.

That same month, in a speech to the Association québécoise de la production d’énergie renouvelable, Couillard said the province will “wisely and progressively” leave the world of oil. He laid the rhetoric on thick, saying he would not stand idly by and watch oil companies “dilapidate, ransack and destroy,” the island.

As for Environment Department bureaucrats charged with issuing permits to the consortium to do the test drilling, Couillard said they would do what they were told.

He eventually had to concede the decision was indeed a matter for the bureaucrats — who are supposed to be above political influence — and on June 15, just as the legislature wrapped up for its summer break, the department handed Anticosti Hydrocarbons the permits.

In theory, the work, which will cost about $100 million, is to be done in two phases — horizontal drilling of test wells this summer and hydraulic fracking in 2017. Three island sites are involved: Canard, La Loutre and Jupiter.

But in mid-July, the project hit yet another snag: funding. Although Pétrolia has its permits, it does not have a first slice of the $56.7 million Quebec committed to the project or funds promised by Saint-Aubin E&P.

Frustrated, it launched a court action to try to force both to pay what they have committed.

On July 13, Superior Court Justice Martin Castonguay sent the two sides back to the table to try to hammer out an agreement. No deal was reached, so Castonguay ruled on Friday the government and its private partner don’t have to pay the nearly $13 million to Pétrolia. But he also said Ressources Québec, a subsidiary of Investissement Québec, and Saint-Aubin must contribute money until next May to enable Pétrolia to maintain certain jobs on the island. The amount was not made public.

• • •

On Anticosti, the reaction to the permits was shock, then confusion and anger.

Many of the residents oppose the project, and recently elected anti-oil development mayor, Pineault. People in his camp had taken it for granted that the government wasn’t blowing smoke in distancing itself from the PQ-signed contract.

“You saw the place. Do you think it’s a good idea to turn the place into a Fort McMurray?” Pineault said in an interview with the Montreal Gazette.

Pineault conceded the municipality has given mixed signals about projects in the past. In 2011, the city was in favour of development. One former mayor went to work as a consultant for Pétrolia.

Prominent Quebec businessman Marcel Dutil, a Liberal donor who operates a large hunting area on the island, Safari Anticosti, has downplayed the potential threat to the island’s flora and fauna — highlighted as unique and exceptional in a recent study by Nature Quebec.

“It’s 225 kilometres long,” Dutil said of Anticosti Island. “Drilling a few holes here and there won’t change much.”

But Normand Lewis, an engineer who is president of a citizens’ committee on the island, is more cautious in assessing the mood.

He thinks the people of Anticosti have views similar to other Quebecers. Fifteen per cent of residents and Quebecers in general are against any kind of oil development, 15 per cent are in favour, and the remaining 70 per cent want more credible and objective information, he estimates.

“We are no stupider than people in the west (where oil is a part of life) except we in Quebec have never developed oil. For us, it’s all new,” said Lewis, who is still mulling over his position. “I have confidence in the specialists. They are the people we need to listen to, not all those who think they know what they’re talking about.”

Pineault estimates, however, that 70 per cent of residents are opposed, and he’s ready to call a referendum this winter to prove it. He argues that people are more aware of the potential permanent damage the project might cause. In his mind, the preferred vocation for the island is a mix of tourism and sustainable development.

Between 800 and 1,000 tourists are expected to visit Anticosti in the summer of 2013, but every Fall as many as 4,000 hunters come to the island in the Gulf of St. Lawrence. The size of the French island of Corsica in the Mediterranean, Anticosti has only 216 inhabitants. Quebec’s Petrolia gas exploration company announced a partnership with the community to install an hydrocarbons exploration program scheduled to star in 2014. Economist specializing in energy issues, Pierre-Olivier Pineau believes that fracturing gas “increases opportunities for fugitive gas leaks” that are “worse for the greenhouse effect because it is methane that escapes without being checked.”

The regional government, which includes Anticosti — the MRC de Minganie — is also opposed to the drilling, as is the local Innu First Nation. They and residents issued a stinging communiqué in June ripping faraway Quebec City.

Pineault said he tried and failed to get a meeting with Environment Minister David Heurtel and has nothing but scorn for him.

The project would completely change their lives, Pineault said.

“Who’s going to want to invest in tourism when they know the island is going to be scrapped for petroleum,” he said. “What are we? Guinea pigs or second-class citizens?”

Quebec’s decision to issue permits has stirred the pot further, Pineault said. There is talk of legal action and even a possible native blockade of the harbour in Port-Menier.

“I’ve heard people say I’m willing to die for this (rather than let oil rigs in). The blood is going to be on the government’s hands.”

By mid-July Jean-Charles Piétacho, the chief of the Mingan Innu community, called on Ottawa to block the project by adding island salmon to the endangered species list.

• • •

How would the island change if big oil were to roll in its equipment in a major way? There have been a flood of studies, and the battle for public opinion is raging.

One study, produced for the Quebec government in 2015 by WSP Canada, an engineering consulting firm, estimates 700 oil platforms would have to be built to pump the oil. Each platform would serve between five and 10 wells for a total of 6,000 wells scattered around the 8,000-square-kilometre island.

Given the lack of roads to move the product by tanker, the study proposes to connect all the wells with a 1,610-kilometre pipeline — between eight and 10 inches in diameter — which would run above ground, hill and dale through the woods.

The oil would be stored in Port-Menier in a 180,000-square-litre above-ground reservoir similar to the ones in east-end Montreal.

Getting the oil to market is another question. One idea — the most expensive — is to run a pipeline under the sea to the mainland. A second would be moving it by tanker, which would require the construction of a deep-water port.

Lodgings would have to be built for the anticipated 5,000 workers needed to harvest the oil. The island’s rudimentary airport would have to be expanded, and a new power plant built to supply power to all the infrastructure.

The WSP study estimates the cost of all this work could range from $9.5 billion to $12.1 billion for whoever dares to go where nobody has gone before.

But the thing that sounds the most alarm bells is the fracturing, or fracking, operation. It will require enormous amounts of fresh water — the Environment Department has issued permission to draw 30 million gallons — to be pumped out of the island’s four rivers.

Two of those rivers, including the world-famous Jupiter, are home to a population of wild Atlantic salmon already in decline.

Pétrolia, which plans to subcontract the fracking work, proposes to treat the waste water — which can contain a range of chemicals — on the island before funnelling [gentle, enabling way to say “dumping?”] it into the Gulf of St. Lawrence.

While the WSP study made the project seem pie in the sky, the industry points to other studies, in particular one produced by the Quebec Finance Department last October.

It takes the long-term approach — over 75 years — and concludes if Quebec were to invest $35 billion in the port option, or $37 billion in the pipeline option, the project would have between an 80 and 86 per cent chance of being economically viable.

The study says its estimates hinge on the price of oil being about $82 U.S. a barrel and natural gas selling at around $3.18 U.S. per cubic feet over an operating period of 75 years. The price of oil today is about $50 U.S. a barrel.

The project would add about $2 billion to Quebec’s economic growth and, on average, create or maintain 2,000 jobs per year over 75 years.

The carrot for the government is that it would haul in between $46 and $48 billion in royalty and tax revenues.

But another study from August 2015 by the Institut de recherche et d’informations socio-économiques concluded developing the island would have only a marginal effect on the economy and would considerably hamper Quebec’s efforts to fight climate change.

It concludes in the current context it would be absurd to chase oil on Anticosti because for the project to be economically viable, the price of oil would need to be $163.20 per barrel.

There have also been diverse estimates on how much oil and gas is in the rock. A 2011 study by the firm Sproule Associates concluded the island has the equivalent of $33.9 billion barrels of oil. The Geological Service of Canada estimates it to be closer to $32.3 billion.

Some studies show more natural gas than oil.

Which leads back to the question the forestry industry faced years ago. Given the costs, the availability of cheaper oil elsewhere, the environmental risks of extracting it and the potential effects on Quebec’s highly publicized climate-change agenda, is it worth it?

As Couillard discovered in Paris, the government is walking a fine line politically.

It has set an ambitious greenhouse gas (GHG) reduction target. Quebec wants its 2030 GHG levels to be 37.5 per cent less than in 1990 and for renewable energy to meet 61 per cent of its needs by 2030.

But there is also the issue of consumer habits.

According to researcher Pierre-Olivier Pineau, a professor at HEC Montréal, in 2015, for the first time in Quebec history, Quebecers bought more trucks, minivans and SUVs than cars, which use less fuel.

So, where will the government lead us? Again, there are mixed signals. As the session ended in June, the premier was sounding vague — a point the oil industry took note of.

In an interview with Radio-Canada’s Patrice Roy, Couillard suggested strongly that the island might never be developed.

“I myself have doubts on the economic value of the project,” Couillard said.

But when asked if that means there will be no further development on the island, Couillard said:

“I am not ready to say that today. We’ll let them do the exploring. We’ll do the projects in the Gaspé. But I want to again repeat — again repeat — I will not sacrifice an eco-system like Anticosti.” [Then why let companies explore, giving them NAFTA lawsuit fodder if they later can’t frac? Emphasis added]

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