Imperial Oil warns Sahtu leaders with regulatory stand-off looming

“A potential scenario could involve an approximately three-month outage during the coldest period.”

So read a letter from Imperial Oil to Sahtu leaders this week, warning that Norman Wells could lose its main power source for months this winter because of low natural gas production.

Imperial has run an oil and gas facility in Norman Wells for more than a century, an operation that has been a huge economic driver for the town and the Sahtu region. Imperial also provides power from its site to the town.

While it’s accepted that the site is nearing the end of its useful life, Imperial has said it ought to be able to keep operations going for at least another decade – if it can fix an issue that has shut some of the site’s pipelines since July 2022.

In a letter to local leaders on Thursday, the company said work to replace the affected pipelines has to happen in 2025 or else “our operation is likely to shut down by 2026, and potentially even earlier.”

“A shutdown would have significant impacts on local business and workforce development, royalties and taxes paid to governments, and local power costs,” the letter also reminded leaders.

October ‘deadline’

So, what might stop Imperial doing the work in 2025?

The regulatory process.

Imperial has to navigate multiple regulators to receive all the permissions it needs for this kind of project, including the Canada Energy Regulator and the Sahtu Land and Water Board.

The company has set a deadline for those regulators. “Imperial requires a decision … no later than October 1, 2024,” some of its regulatory submissions state.

Ordinarily, regulators and not companies set the timeline for examination of applications like the kind Imperial has submitted.

With just over two weeks to go before Imperial’s deadline – and no formal indication from the Sahtu Land and Water Board about whether a decision will arrive by then – the company used its Thursday letter to remind regional leaders of the situation.

Some of those leaders have previously written to the Sahtu Land and Water Board expressing significant concern about aspects of the work proposed by Imperial. They have even suggested that the project be considered for environmental assessment, a much longer and more rigorous process – and one that Imperial wants to avoid.

In July, a committee representing leadership in Fort Good Hope (which is downstream of Imperial’s site) said it needed much more time to carefully study Imperial’s proposal and was, at first glance, “very concerned” about the potential for adverse impacts.

A month later, the same committee formally called for an environmental assessment to take place, partly on the grounds that the replacement pipelines, which “will carry crude oil, produced gas and produced water, [could] spill into the Mackenzie River and could cause significant adverse impacts to the environment.”

Imperial has submitted that all the work will do is restore a part of its operation that has been temporarily shut down for two years. The company has asserted that a fresh environmental assessment is unnecessary since “potential environmental effects have not materially changed.”

In its Thursday letter, the company said getting the replacement pipelines up and running on time is “crucial” because otherwise, approximately a third of the site’s usual production will remain off limits.

“We have requested a decision on the regulatory processes by October 1, 2024, to allow for reasonable flexibility in project funding and contracting for equipment delivery via winter roads,” Imperial told the leaders.

If that happens, the company added, its site could remain operational for up to another decade. If it doesn’t, the company intimated, the facility could close in the blink of an eye.

“We understand that this situation may cause concern for you and your families, as well as the broader Sahtu community,” the letter concluded. “Please know that Imperial is committed to providing regular updates and doing everything to secure the future of our operations.”

How was the letter received?

Leaders at the Sahtu Secretariat and in Fort Good Hope could not be immediately reached on Friday afternoon.

However, one official with direct knowledge of the letter and Imperial’s project said they felt the letter’s timing was suspect.

“Why do you wait until we’re just on the verge of [October 1] to talk about all these bad things that are going to happen if you don’t get approval?” asked the official, who requested anonymity to discuss a sensitive business and political matter.

“You must have known about this two years ago, that this would be the result of not getting approval. It just strikes me as a blackmail point … as threatening.”

The official interpreted the letter as a warning from Imperial that if its regulatory timeline is not supported, the consequences for the Sahtu may be dire.

Imperial Oil denied an interview request from Cabin Radio regarding the letter, its contents and Imperial’s plans.

Instead, a spokesperson sent an email containing quotes from the original letter.

Sahtu MLA Danny McNeely, reached by phone on Friday afternoon, saw the letter differently.

McNeely, who has a background in drilling, has already written a letter to one regulator supporting Imperial Oil’s application.

He said Imperial Oil needs to replace the pipelines in question, which will allow it to access oil from the Bear Island section of its site, “if it wants to economically keep oil production up.”

“I supported that application on the basis of longevity of benefits coming from the oilfield. If we want to keep the oilfield going, we have to support that replacement of a new line,” McNeely said.

Imperial is proposing to use a technique called horizontal directional drilling, or HDD, where a tunnel is dug under the river and then a pipeline is essentially pulled through the tunnel.

McNeely said HDD is “really foreign to a lot of people” but is, in his view, a safe and effective means of getting the work done. He noted other HDD projects in the territory have taken place safely over longer distances.

He said Imperial was “if anything, trying to upgrade to a much safer technology” and he does not consider an environmental assessment to be necessary.

As for the contents of the letter, McNeely said the company was “just giving advance notice and making the circumstances a little bit more clear.”

“It’s not to say it is going to happen,” he said of the power concern and prospect of an early shutdown.

How bad is the power situation?

Imperial says the current lack of oil production in Norman Wells could mean so little gas is produced in the process that its natural gas-powered plant, which provides electricity to the town, could shut down for three months in the middle of the coming winter.

The company said the risk of that outcome “is currently low,” but it had warned the town and the NWT Power Corporation to allow for “contingency planning” and was working with others to bring in more diesel fuel as a precaution.

The NWT Power Corporation told Cabin Radio it was in “regular contact” with Imperial about the issue and has a diesel plant capable of powering Norman Wells if needed.

That plant already acts as a backup, said NTPC spokesperson Doug Prendergast by email, and only came into service four years ago.

“NTPC has generated primary power in Norman Wells previously during extended shutdowns of the IOL facility,” Prendergast wrote, using an abbreviation for Imperial Oil Limited. “The new plant was designed to accommodate future renewable generation and to become a prime diesel plant in the event IOL shuts down completely.”

The power corporation said its budget might need adjusting to cope with the extra demand, while an additional generator could be sent to Norman Wells to act as further redundancy in the event that NTPC’s plant is needed to take over.