Recent news that Calgary-based Pieridae Energy’s has found a new engineering firm for its proposed liquefied natural gas (LNG) project in Goldboro, and worked out an agreement with a Calgary firm and the Assembly of Nova Scotia Mi’kmaw Chiefs to build and operate a huge work camp at the site, has prompted headlines that suggest the project is moving full-steam ahead.
But is it? And is the future as rosy as such announcements would suggest?
As with so many things, it depends on who you ask and what you read about the project.
And one thing is clear — not much about the project’s prospective financing and gas sources is all that clear, and there are no guarantees it will ever proceed.
It takes a deep dive to try to make sense of it all.
Part 1 of this two-part series about the Goldboro LNG project takes the plunge into the nature of the project, how it has evolved, and whether it does indeed have German loan “guarantees.”
At the end of September, Calgary-based Pieridae Energy announced that it was signing a deal with the global engineering firm, Bechtel, to develop a detailed plan by March 31, 2021 for its LNG project — a natural gas liquefaction plant, tanker terminal, and associated marine facilities — in Goldboro, on Nova Scotia’s Eastern Shore.
There was no mention in the press release of why a new engineering firm was needed, namely that in July 2020, Bechtel’s predecessor, Kellogg Brown & Root, had notified Pieridae in writing that it was stepping away from the project, which Pieridae claimed was “in apparent contradiction of its obligation” under a signed service agreement.
However, the September press release did specify that Bechtel would be bringing “a high level of LNG experience & expertise” to the project, and that as part of its new agreement Bechtel would be, “conducting meaningful engagement with the Nova Scotia Mi’kmaq First Nations including their participation in the construction of a large-scale work camp at the LNG site.”
Cue the media reports about how Pieridae was “pressing forward” with the Goldboro LNG project, and glowing accounts of how preparations were heating up, and how, as the Chronicle Herald’s Roger Taylor put it in the unconditional future tense, this meant:
A small town of about 5,000 will spring up virtually overnight in Goldboro, Guysborough County next summer once the LNG project gets the green light to proceed.
Taylor went on to report that the Calgary company, Black Diamond Group, would be working with its partner, “the Wskijnu’k Mtmo’taqnuow Agency Ltd., a company wholly owned by the 13 Mi’kmaq communities in Nova Scotia,” to build and operate the work camp that would house 5,000 during construction at the Goldboro LNG site.
CBC reported that there was a “German loan guarantee for the project” that “includes $3 billion targeted at construction of the plant and $1.5 billion for upstream development.”
A done deal?
Such media reports make it sound as if the US $4.5-billion German loan guarantees are pretty much a done deal, and all that Pieridae needs to do to get the project going is come up with another US $5.5 billion from other investors for the US $10-billion project — although there is also the outstanding issue of Alberta’s Energy Regulator denying the transfer of Shell’s gas wells in Alberta to Pieridae until the matter of their clean-up has been resolved.
Pieridae says those Alberta wells are expected to supply “the majority of the natural gas needed for Train 1” (a train is a liquefaction and purification facility and two are proposed for Goldboro) of the LNG plant in Nova Scotia. But of course, that means there is a lot to sort out about how that gas will get from Alberta across the country to Goldboro.
Both the source of gas for the facility and its transport are important parts of this story that we’ll come back to in Part 2 of this article.
But for now, let’s have a look at those loan guarantees from the German government.
Guaranteed or not guaranteed? That is the question
To find out more about the German financing guarantees, in late May the Halifax Examiner sent a series of questions to Pieridae CEO Alfred Sorensen, and had these responses:
Halifax Examiner: In the Pieridae 2019 Annual Report, there are references to “prospective” or “potential loan guarantees” … for which there is “approval in principle.” When do you foresee finalizing and securing those loan guarantees?
Alfred Sorensen: The loan guarantee that has been approved in principal [sic] is for 4.5 billion USD. The process is underway but will not be completed until we reach the final investment decision next year.
HE: Are you concretely moving ahead with the German government on these loan guarantees?
HE: What negotiations are required or criteria have to be met before they are no longer prospective?
AS: We have to complete the commercial negotiations first with qualified lenders before the UFK (German government untied loan guarantee) can be put in place.
Sorensen’s answers did little to add to the information about the loan guarantees that is contained in Pieridae’s 2019 Annual Report (available here), which dangles them tantalizingly in front of readers’ eyes over and over again:
“US$4.5 billion in potential loan guarantees from the Germany Government” (page 2); “approval in principle for US$4.5 billion in German Government loan guarantees” (page 5); “US$1.5 billion of anticipated German Government-backed loan guarantees for conventional gas supply development” (page 6); “confirmation in principle on April 25, 2013, that the project financing to be secured for constructing the first train of Goldboro will quality for a US $3.0 billion guarantee from the Germany government,” and “on October 29, 2018 …received a written confirmation of eligibility in principle for up to US $1.5 billion of untied loan guarantee by the German federal government” (page 20) … and so on.
For clarification on its involvement with Pieridae’s Goldboro project, the Halifax Examiner then contacted the German Ministry for Economic Affairs and Energy, with these questions:
1. In what form have these loan guarantees been made? What are the terms? Are the documents available, and if so, please can you provide me with copies? Are they actual loan guarantees, or are they still only “in principle” or “prospective”? If so, what justification does Germany have for guaranteeing these amounts to a Canadian company? If not, what must Pieridae do to secure them as actual loan guarantees? Is there a deadline by which Pieridae must comply with specified terms, if it is to qualify for these loan guarantees?
2. Although there are moratoriums on hydraulic fracturing in Germany (and in Nova Scotia, where Goldboro is to be built), it appears that at least a portion of the LNG may come from fracked sources. Given these moratoriums, why would the German state provide loan guarantees for a company that will be sourcing fracked gas? Is this not a contradiction and betrayal of German public policy?
3. In its 2013 Environmental Assessment registration documents submitted to the government of Nova Scotia for the environmental assessment process, Pieridae noted that the Goldboro LNG facility would increase Nova Scotia’s greenhouse gas emissions by 18% over 2010 emission levels, which is a dramatic setback in the provincial efforts to reduce greenhouse gas emissions. From a Canadian perspective, this raises questions about Germany’s own oft-lauded efforts to reduce greenhouse gas emissions with a transition to sustainable sources to mitigate global warming and achieve emissions targets, and whether these are as laudable as they appear, given that the German government has offered loan guarantees to a company to undertake a project that would seriously compromise efforts on this side of the ocean – and climate change does not respect national borders. Please can you explain how the offer of these loan guarantees can be justified in view of the above?
This is the reply that came in June from the press office of the German Ministry of Economics and Energy:
We can hereby confirm that we do know the respective Goldboro LNG project in Nova Scotia and that a Letter of Interest (LOI) has been issued by the German Government. This LOI is legally not binding and shall only express that the project can be considered as eligible under the assumption that certain criteria are met. An LOI can be issued to support a German offtaker [buyer of the LNG] in the bidding process.
Kindly note that a final and binding decision on whether an UFK can eventually be granted or not requires the prior assessment of the economic, technical and legal aspects in detail and the compliance with internationally accepted environmental, social and human rights standards. This assessment will be performed as part of the regular application procedure once a formal application has been filed.
An application has not been filed so far and thus the respective due diligence of the respective project has not been initiated and no approval or binding decision on granting a UFK-guarantee has been made.
We have asked Pieridae Energy to avoid ambiguous wordings in this context. [emphasis added]
In spite of the German government’s request that Pieridae “avoid ambiguous wordings,” the “Facility Overview” on Pieridae’s website states that one of the project components is “US$4.5 billion in German Government loan guarantees to build Goldboro and develop Alberta conventional gas reserves to supply the facility.”
As if there are no ifs about the loan guarantees at all.
Follow-up emails to the German ministry asking for an update on the situation resulted in this reply on October 13 from ministry press officer Korbinian Wagner:
The information we sent you in June are still up-to-date. There are no new developments, we could inform you about.
In other words, it is still not obvious that Pieridae will qualify for the loan guarantees. But it is obvious that it has not actually filed a formal application for them, which would suggest that nearly a decade after Pieridae conceived the Goldboro project, it still hasn’t got all its financial and gas supply ducks in a row.
A short history of Pieridae’s progress
To understand the current status of the project, it’s useful to go back to the beginning and have a look at who is involved and how the project has evolved.
According to its website, Pieridae Energy was created in 2011 and decided to “try and do a project on the East Coast,” in Goldboro. It was the “second go-around for the key management team of the company … Our first project was on the West Coast in the Town of Kitimat. That project was sold in 2010.”
In an article in The Tyee in May 2020, Andrew Nikiforuk wrote about the Kitimat project on the West Coast, the first go-around” for Pieridae’s “key management team to champion LNG developments,” which was led by Alfred Sorensen, an accountant by trade and former energy trader for Duke Energy. Nikiforuk noted that:
Sorensen, possessing an upbeat nature and a bespectacled face that is owl-like, sold that project to Apache and EOG Resources for $300 million in 2010. He personally pocketed $30 million. Pieridae boasts that it was “the first liquefaction facility permitted in North America in 40 years.” But the [Pieridae] website doesn’t add that it never got built.
Pieridae’s Goldboro project is also a second go-round for LNG in Goldboro.
In 2007 and 2008, another company, Keltic Petrochemicals, sought and obtained environmental approval from the provincial and federal governments for an LNG facility at Goldboro, but eventually abandoned the project.
That is not the only proposed LNG facility for eastern Nova Scotia that didn’t get off the ground. For years, Bear Head LNG had big plans for an LNG import terminal at Point Tupper, near Port Hawkesbury, and a 62.5-km pipeline from Goldboro to the facility.
As the Chronicle Herald’s Aaron Beswick reported, way back in 2005, Nova Scotia Business Inc. president Stephen Lund declared that the construction would start that summer, and the first gas would flow through the pipeline in 2008.
Well … no.
In 2014, Bear Head decided it wouldn’t be building an import terminal after all, and would make it a liquefaction and export facility instead, as Pieridae was proposing for Goldboro.
In 2015, then Environment Minister Randy Delorey approved the Bear Head LNG project, and the Nova Scotia Utility and Review Board approved the pipeline in 2016. The project was supposed to have come on line in 2019, but instead applied for and was granted an extension on its permits that year, because it had no signed contracts with suppliers or customers.
Pieridae plugs away
Not so Alfred Sorensen, who is still plugging away at his Goldboro project, still seeking to build a plant to produce liquefied natural gas to sell to “Europe and other markets.”
In 2013, Pieridae’s Goldboro LNG Limited signed a 20-year agreement with Germany’s Uniper Global Commodities that would purchase five million tonnes a year of LNG from the Goldboro plant (In 2020, a Finnish state utility company bought Uniper).
Since Pieridae signed the agreement with Uniper, it has been amended five times because it could not meet the agreed delivery date for LNG. The most recent amendment, in April 2020, puts the first delivery date at between August 31, 2025 and February 28, 2026.
Pieridae describes itself as an “intergrated [sic] LNG company” that is “involved in the exploration and development of natural gas properties in Alberta, British Columbia, Quebec and New Brunswick.” It continues:
Once the Goldboro LNG facility is operational, gas produced from these areas will supply the plant via pipelines already in place. The upstream segment includes operations and assets in Western Canada, primarily Alberta and British Columbia, as well as Quebec and New Brunswick. Due to ongoing restrictions on hydraulic fracturing and other exploration and development activities in Quebec and New Brunswick, Pieridae currently has active operations in Western Canada only.
In 2013, Pieridae Energy submitted its plans for its Goldboro LNG project to the government of Nova Scotia for environmental assessment, at which point its project description “anticipated” it would employ 140 people in its first phase with a single train in operation, increasing to 176 in a second phase. However, in the executive summary for the project, it “anticipated” 200 jobs.
The Nova Scotia Environmental Assessment Review panel noted that: “The Project would increase Nova Scotia’s greenhouse gases by approximately 18% (above 2010 emission levels),” and its marine component “would compromise a number of fisheries in its general area.”
Nevertheless, in 2014, Nova Scotia Environment, under then-minister Randy Delorey, approved the project.
In the documents it submitted to the province, Pieridae said it “anticipated” construction would begin in 2015, and the Goldboro facility would start operation by mid-2019.
Which, obviously, it hasn’t.
“Excited about the prospects going forward”
Sorensen — whom the Globe and Mail has called “Canada’s LNG marathon man” — is certainly not lacking staying power and determined optimism.
Over the years, Sorensen’s company has pumped out a lot of press releases — 70 of them — many painting rosy pictures of the project, which was said to be reaching “project milestones, and then news that “the key milestones achieved” were “still in place,” or that the “project continues to move forward” and the company is “excited about the prospects going forward.”
In February 2019, Pieridae announced that it had negotiated a benefits agreement with the Assembly of Nova Scotia Mi’kmaw Chiefs, something Assembly Co-chair Terrance Paul lauded as “an example of how companies can respect our Mi’kmaw Right and Title” as the Assembly looks “to ensure responsible development and environmental stewardship that reflect a Mi’kmaq voice.”
Two years before that, Pieridae took over the Pétrolia — a company that was paid $20.5 million in compensation by the Quebec government to end its oil and gas exploration on Anticosti Island. After the takeover, it created a new entity called Pieridae Energy Limited (“Amalco”) and went public.
Alberta’s public pension funds manager, AIMCo, also invested in debt and equity in Pieridae, something a 2020 Press Progress report deemed “high risk investments.” Press Progress included two AIMCo investments in Pieridae — $60 million in debt in September 2019, and a $10 million share purchase in February 2019 — in a table of investments “in companies at risk of going bankrupt.”
Press Progress said this about Pieridae:
Pieridae is a tiny company trying to build the Goldboro LNG project in Nova Scotia. LNG markets were over-supplied even before the COVID-19 pandemic, and prices are expected to be low in the future.
Pieridae also recently acquired Shell Canada’s sour gas assets, which raised cleanup and environmental liability concerns, because Pieridae doesn’t have the cash on hand or assets to clean up these wells if Pieridae goes under.
AIMCo is the single largest investor in Pieridae, owning 15 percent of the company. AIMCo has made a substantial investment in Pieridae Energy. AIMCo made a share purchase worth $10 million and loans worth $60 million. The terms of that loan were recently re-negotiated and extended in Peridae’s [sic] favour.
Recent news reports also quote Cenovus and Canadian Natural Resources Limited as having doubts about the continued existence of Pieridae and its ability to pay for its environmental liabilities. “Material uncertainties exist around (Pieridae’s) ability to continue as a going concern,” said a letter from Cenovus to AER [Alberta Energy Regulator]. “If the licence transfers are allowed, there is a high probability that Pieridae will be unable to respond to circumstances should any operational, health, safety or environmental problems arise,” said Canadian Natural Resources. Both companies said the Orphan Well Association could get stuck with a $500-million bill if Pieridae is unable to clean up.
Press Progress noted that when AIMco acquired the Pieridae shares in 2019 they were worth $2. A year later they were worth 16 cents.
The Shell deal secures gas supplies – or does it?
In his investigative feature about Pieridae in The Tyee, Andrew Nikiforuk wrote extensively about the company’s acquisition in 2019 of three 70-year-old gas operations from Shell, pending approval by the Alberta Energy Regulator (AER). He noted that the previous year, Shell’s revenues were $396 billion, “while Pieridae recorded a loss of $34 million.”
Nikiforuk wrote that Pieridae was only able to buy Shell’s aging assets at three sour gas fields in Waterton, Jumping Pound, and Caroline, by borrowing $206 million from a Toronto firm, Third Eye Capital, “that specializes in loaning money to distressed or risky companies.”
One of Pieridae’s directors, Mark Horrox, is a principal of Third Eye Capital.
According to Nikiforuk, as part of the deal, Shell vowed:
… to take care of extensive groundwater contamination at the gas plants while Pieridae would become responsible for cleaning up the wells and pipelines and three massive sour gas plants at some later date.
There was considerable opposition to the transfer of the licences to Pieridae, which was hardly in a position to cover expensive clean-up costs.
During a webinar discussion in October 2020 among critics of the Goldboro project, Alberta activist and executive director of Citizen’s Oil and Gas Council, Mike Sawyer, said this about the Shell deal:
If Shell can offload those [very old wells] to a small rinky-dinky company like Pieridae, they get out of what could be many, many hundreds of millions of dollars of environmental liability.
In the end, the Alberta Energy Regulator blocked the transfer, because, as Calgary law professors Shaun Fluker and Nigel Bankes put it in a legal blog, the proposal is “not in the public interest.”
They noted that the extent of the contamination at the sites is not well-known and so the “scope of liability” is too uncertain, “the application fails to comply with the polluter-pays principle,” and that it is “an attempt to circumvent the statutory requirements of the EPEA [Environmental Protection and Enhancement Act] for remediation and reclamation.”
The law professors wrote that, “This is a welcome decision by the AER.”
Pieridae, on the other hand, issued a press release in which Sorensen said they were “disappointed” by AER’s decision not to permit the transfer of licences for the Shell assets.
The Halifax Examiner sent questions to Sorensen about Pieridae’s acquisition of Shell’s assets in Alberta, and why he said he was confident that the Shell asset acquisition could be “aligned” to address the concerns of the AER, and how that could be done.
“This is a Shell issue not a Pieridae issue,” Sorensen replied. “Shell will be reapplying once they have concluded their discussions with the AER to ensure transfer occurs. This was a novel solution which the AER was not willing to implement at the current time. The liability will remain with Shell and it is not the responsibility of Pieridae to come up with a solution to the issue.”
Pieridae’s 2019 Annual Report states that with the completion of the acquisition of Shell’s assets, the company had enough resource to fill Train 1 of the proposed Goldboro facility.
Asked if the AER decision to block the transfer of licences affected that supply, Sorensen answered, “It doesn’t, the assets remain with Pieridae, the liability for the reclamation of the subsoil at Waterton and Jumping Pound remain with Shell.”
Looking for (more) public money
In January 2020, Pieridae announced that Sorensen — who is not a registered federal lobbyist — had met with federal Natural Resources Minister Seamus O’Regan, who took “the time to listen and understand the positive impacts of Goldboro LNG would have on Canada and abroad.”
As of October 2020, Pieridae has three active lobbyists registered with the federal government, but there are none in Nova Scotia; a search of the provincial lobbyist registry reveals only one name (Sean Lewis of NATIONAL Public Relations), and his registration as a lobbyist for Pieridae expired in November 2014.
In late May, the Examiner asked Sorensen about an April conference call the company had, in which he mentioned that Pieridae was lobbying the federal and Nova Scotia government, hoping to get $1 billion in financial help, “a hand up, not a hand out,” and whether he was optimistic this would be forthcoming.
“I have no further comment on this at the current time,” he said.
However, Sorensen did say he was confident they can “reach the final investment decision provided market conditions improve the [sic] allow for the financing to occur,” adding, “We continue to invest in the project and with the cooperation of our partners in the project we believe we can be on stream by Q1 2025.”
Sorensen also said that the AER decision to block the transfer of licences did not affect Pieridae’s agreement with Uniper or the loan guarantees from the German government.
As for using fracked gas for the Goldboro plant, Sorensen confirmed that Pieridae “can not use the funding that will be guaranteed by the UFK [German untied loan guarantees] to drill wells requiring multistage fracking,” but added, “We can source gas from wherever we want.”
Meaning, it seems, that as long as funds guaranteed by the German government are not used to frack, Pieridae has every intention of getting its gas — no matter how it is extracted — wherever it can.