Friday, November 30, 2007

Bruce Power to acquire Energy Alberta

Yet another try to supply nuclear energy to the tar sands region
[Update 03/14/08]

Bruce Power has signed a letter of intent to purchase the nuclear assets of Energy Alberta, which has been plowing the field in the tar sands region as part of a proposal to construct a nuclear power plant in Alberta. Problem was Energy Alberta didn't get very far. Bruce Power plans to finish the job.

Bruce Power owns and operates the Bruce nuclear power plant in Ontario and is itself owned by a group of partners including TransCanada and Cameco. Readers of this blog will recall a month ago I reported that TransCanada was nosing around the Alberta region to see if an acquisition made sense. Apparently it does. Note also that Cameco is one of Canada's biggest producers of uranium.

Is one man's baloney another's meal?

Last August Energy Alberta announced that it had chosen Peace River as the potential site for its nuclear power plant and had filed an application for a license with the Canadian Nuclear Safety Commission (CNSC). The firm said it had a "secret customer" who would use 70% of the nuclear plant's electricity on tar sands oil plants. However, the oil firm said to be the customer promptly denied it had any intentions of buying a nuclear power plant. Other tar sands oil companies say the time needed to build the reactors and get them running in northern Alberta far exceeds their planning horizons.

For its part Energy Alberta filed two applications with the Canadian nuclear regulatory agency. This bureaucracy set a new land speed record rejecting the first one in July calling it "a draft," which is government talk for "baloney."

The latest application from Bruce Power is for the siting of up to two of twin-unit plants, using AECL's ACR-1000 Advanced Candu reactors. This is the same setup Energy Alberta said that it planned to build involving one 2200 MWe twin-unit plant, with a start-up target of 2017. No buyer for the electricity from the plant has been identified. The expectation is one would be an oil company needing large volumes of power to extract oil from tar sands. As noted earlier so far these firms have shown little interest in such proposals.

Purchase announcement is no baloney

In a company press release Bruce Power said it would overcome Energy Alberta's reputation for giving the appearance it was peddling baloney.

"In 2006, Bruce Power became the first Canadian company in a generation to file a site license application with the Canadian Nuclear Safety Commission to consider building new reactors at its Ontario location. Since then, it has held extensive community consultations as part of what is expected to be a three-year Environmental Assessment process.

That experience, tied to its successful track record of safe and reliable operations, positions Bruce Power well to complete the work begun in 2005 by Energy Alberta founders Wayne Henuset and Hank Swartout."

In effect, Energy Alberta, founded by Calgary businessman Wayne Henuset and oil field veteran Hank Swartout, founder of Precision Drilling Trust, is handing its project off to Bruce Power. And both executives sound very relieved.

"Hank and I started Energy Alberta with the goal of building a nuclear power plant in Alberta," Mr. Henuset said in a release. "We have done a tremendous amount to position the project for the next phase and having Bruce Power Alberta take over, with their experience as an operator, will ensure our dream becomes a reality."

No price was announced for the transaction. Bruce still has to do due diligence on the deal. Mr. Henuset will stay on as an advisor to Bruce Power Alberta once the transaction is complete.

Reactor design needs approval

As part of the announced agreement, Bruce Power will acquire exclusive rights to use Candu technology in Alberta and as a qualified proponent will advance the licensing process for the ACR-1000 design. The ACR-1000 is a new reactor technology. Bruce Power is taking on the costs of getting the design certified by CNSC. That's a big financial commitment. Obviously, Bruce wants to make sure it has a place to build one once the regulatory approvals are done.

Reserving the exclusive right to build the plant in Alberta knocks Areva out of the picture and prevents them from striking a separate deal there while Bruce is tied up with the regulators. Earlier this year Areva had expressed interest in taking a stake in AECL. The firm also explored the potential to build a reactor in Alberta.

Translating corporate press releases

Public relations flacks must wonder if anyone reads their stuff. Sometimes it pays to read the stiff prose because underneath it is sometimes hysterically funny. Here are some examples.

Flack - Duncan Hawthorne, President and CEO of Bruce Power, said: "Energy Alberta deserves great credit for progressing the dialog around nuclear energy to the point where we feel it's worthy of further exploration."

Translation - Energy Alberta could deliver the sizzle but not the steak when it comes to building a nuclear reactor in the tar sands region. Wait for it . . . but Bruce Power knows what it is doing and can deliver the goods.

Flack - "In the Peace Country region, where an application has already been made to site a nuclear plant, we have a community that wants to learn more about our technology."

Translation - Wayne Henuset scared the socks off the locals with his wild claims. We'll show them the jobs and economic benefits from our reactor outweigh any scare tactics the environmentalists can throw at us.

Flack - "Our partners are serious investors and we are a proven operator."

Translation - We know Areva has been up here and wants a piece of the action, but we got here first. That's the kind of initiative our stockholders expect from management. Plus, Wayne's first application for a license got tossed out, but we're so much more credible the outcome is a slam dunk.

Are the locals restless? A field trip is the answer!

OK, here's more flackery. Energy Alberta knows the deal is coming, and to grease the skids with the locals, arranges an all-expenses-paid tour for a group of worthies from Peace River to the Bruce Power station in Ontario. The flack at Energy Alberta writes,

"Energy Alberta Corp invited a group of people from the Peace Country to travel to the Bruce Power nuclear facility in Tiverton, Ontario. The group consisted of elected and administrative officials from a number of area towns, business leaders, aboriginal representatives and environmentalists."

According to an EA press release, "The group experienced, first hand, the enormous scope of the Bruce Power facility, the dedication to safety and security that is top-of-mind with the 3,700 workers at the facility. The plant hosts 8 reactors, producing net 6,200 MW of electricity which supplies 20% of Ontario's power needs. The site also hosts the Ontario Power Groups western waste management facility which the group was able to see first hand."

That should settle down any restless local opposition and keep them out of Bruce Power's hair. Right.

Regardless of flackery or politics, Alberta currently consumes some 9000 MW of electricity, but increased demand, particularly within the oil sands sector, is expected to push demand up to around 14,000 MWe by 2016. Someone needs to do something soon or the lights are going out. It looks like Bruce Power is the latest player to come to the fore. As the flack says, "we are a proven operator." That's true. Let's see what they can do in the wilds of the Peace River region of Alberta. Meanwhile, there are lots of other people who have their eyes on the tar sands region.

China could play a hand or two

The nuclear option for China’s potential involvement in the tar sands looks like this. Chinese engineers have reportedly visualized a scenario in which a string of prefabricated small PBMR reactors would power the extraction of bitumen by using heat to make steam, and electricity; and, also produce the hydrogen necessary to “sweeten” it before export.

The advantage of the smaller PBMR package plants is that the components can be shipped by rail to the remote tar sands region, assembled quickly, and go operational far sooner than a single 1,100 MW CANDU pressurized water reactor. Also, the PBMR plants don’t need a containment building. The helium-cooled, graphite covered “pebbles” don’t have the same potential for a “melt down” as conventional fuel rods.

Andrew Kadak, a professor of nuclear engineering at MIT, says China plans to build PBMRs in the range of 200 MW and one of their expected uses will be to help extract and refine heavy crude oil from tar sands. In 2006 Kadak told the MIT Energy Research Council, “You might see oil companies building the next nuclear power plants.” He added the design of the next generation nuclear plant might come from Idaho.

Hydrogen potential updated

Bruce Power intends to work with the Canadian Hydrogen Association to study the potential of converting electricity generated by nuclear reactors during off-peak hours into hydrogen. A similar study is being conducted at the Bruce nuclear power plant. Hydrogen can be used by tar sands oil companies to break down the heavy crude bitumen oil refining it into a more usable product.

Last November the New York Times reported that researchers at the Idaho National Laboratory (INL), in eastern Idaho, and a high-tech materials company in Salt Lake City, have developed new technologies to produce hydrogen using a nuclear reactor. Stephen Herring, an INL scientist, and developers at Cerametec Inc. claim the new process shows the “highest-known production of hydrogen by high-temperature electrolysis.” Their goal is to build a high-temperature, gas-cooled reactor (HTGR) operating at 800-1,000 C that produces 2.5 kilos of hydrogen per second.

The INL is the U.S. Department of Energy’s lead lab for development and construction of a prototype Next Generation Nuclear Plant (NGNP). Herring told the New York Times his process could recover oil from the Athabasca Tar Sands in Alberta. The new reactor, he said, could produce both steam and hydrogen, which is just what the oil companies are asking for.

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