Will psychedelics become mainstream? This Calgary company is betting on it

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Investors, startups face big risks, but hope to become the

 next lucrative 'unicorn'

Reid Southwick · CBC News · Posted: Dec 04, 2021 

An early spate of research and big injections of investor money have triggered a renaissance for psychedelics. Psygen, a Calgary company, plans to manufacture LSD, left, psilocybin, centre, 2-CB, right, along with five other drugs. (Duk Han Lee/CBC News Graphics)

Danny Motyka discovered his love for chemistry when he was high on LSD back in the mid-2000s. The single tab of blotter acid — emblazoned with images of tongues from the rock band Kiss — set him on a path to push psychedelics out of the shadows.

Now 31, Motyka is the CEO of Psygen, a Calgary business hoping to manufacture synthetic psychedelics for the pharmaceutical industry. While the application of hallucinogens in medicine is in its infancy and remains highly speculative, Motyka and his company of believers are encouraged by renewed interest in the field.

"There's a huge market opportunity here," Motyka said. 

A spate of early scientific research — along with big injections of cash from wealthy and celebrity investors — has triggered a renaissance of sorts for psychedelics, which for decades were pushed underground by the war on drugs. 

Companies want to be the next psychedelic unicorn

Dozens of companies have emerged in recent years, seeking to get in on the ground floor of a fledgling industry they bet will take them higher. Some, like Germany-based Atai Life Sciences and the U.K.'s Compass Pathways, have become unicorns — not some kind of hallucination, but the type of startups worth more than $1 billion.  

Danny Motyka, left, and Peter van der Heyden are co-founders of the Calgary startup Psygen, which has ambitions to supply the pharmaceutical industry with psychedelics like psilocybin and MDMA. (Reid Southwick/CBC)

"We're really breaking ground here in that psychedelic chemistry has been illegal, and now we're able to do it in a legal context," said Peter van der Heyden, Psygen's co-founder and chief science officer. 

"It's never been done before."

Potential for a new industry

Magic mushrooms, LSD and other psychedelics are hallucinogenic drugs that remain illegal to possess for recreational use. But some regulators such as Health Canada have allowed for research into them as possible treatments for mental health conditions, sending companies and investors on a trip to a new industry.

While the sector initially attracted an early rush of investor enthusiasm, some of the euphoria has already begun to fade as shareholders come to grips with the long and uncertain road ahead.

• Growing interest in psychedelic treatments for mental illness, but expert warns more robust research needed

• Some doctors, therapists get Health Canada permission to use magic mushrooms

Researchers are still running clinical trials looking into whether substances like psilocybin, the active ingredient in magic mushrooms, can effectively and safely treat depression, or whether MDMA, often found in ecstasy or molly, can help patients with post-traumatic stress disorder.

"We have to go through the entire drug approval pathway and demonstrate safety and demonstrate efficacy," van der Heyden said. "So it's too early, really, to say we know that these things work."

Production expected early 2022

Psygen's lab, currently under construction, would initially manufacture psychedelics for research and clinical trials, though it still needs Health Canada approval. The company hopes those trials lead to the creation of new therapeutic drugs, allowing its lab to expand to commercial-scale production of medical-grade substances.

They've asked Health Canada for a dealer's license, which gives special permission to handle and produce controlled drugs that are otherwise illegal to possess. The designation comes with a strict set of rules, including security measures to prevent theft, proper record keeping and reporting.

Van der Heyden, left, and Motyka stand inside the construction site of the firm's psychedelics manufacturing facility, expected to be operational by March 2022. (Reid Southwick/CBC)

For now, company officials are optimistic the first phase of the project will secure the green light from federal regulators and they can start producing psychedelics by the end of March 2022.

By then, the facility would be capable of producing 12 to 15 kilograms of synthetic psilocybin a year, enough to fill demand from clinical research, Motyka said.

Marijuana paves the way for mushrooms

The Alberta business has applied to handle eight different psychedelic drugs, though its CEO said psilocybin is the substance most in demand from drug development companies, likely because of loosening cannabis laws.

"That's reflective of this liberalization of plant medicines. It's easy to go from cannabis as a medicine to mushrooms as a medicine," Motyka said. "It's a bit harder to make that next jump to LSD, especially with the amount of stigma that's associated."

Researchers are looking at psilocybin's potential to treat various conditions, from anxiety and obsessive-compulsive disorder, to problematic substance use. Health Canada, which has approved three clinical trials testing the drug in treatment of depression, said psilocybin has so far shown some promise in some cases, but further research is needed.

"Clinical trials are the most appropriate and effective way to advance research with unapproved drugs such as psilocybin," the regulator said in a statement.

"Clinical trials ensure that the best interests of patients are protected and that a product is administered in accordance with national and international ethical, medical and scientific standards."

'Hungry for something new'

Industry observers say the legalization of cannabis for recreational or strictly medical purposes in many parts of the world has helped to ease stigmas and convince investors to pump hundreds of millions of dollars into psychedelics.

Plus, the outbreak of the deadly COVID-19 virus — and the rounds of restrictions that came with it — triggered a fresh wave of mental health concerns. And it's happening at a time when people are interested in unconventional ways of looking at problems, said Leila Rafi, a Toronto lawyer with clients in the industry.

Leila Rafi, a Toronto lawyer, says a fresh wave of mental health concerns emerging from the coronavirus pandemic has helped to bring renewed focus to psychedelics as possible medicines. (Leila Rafi)

"There's a lot of investors out there who are willing to put a little bit of money into this industry and see what happens — and even take a bit of a hit," said Rafi, a partner in McMillan's capital markets group.

"And I think investors are just hungry for something new."

Psychedelic stocks in a lull

Steve Hawkins, the CEO of financial services company Horizons ETFs, runs a fund that allows people to invest in the broader psychedelics market. The exchange traded fund (ETF) tracks a couple dozen publicly traded companies that are heavily involved in, or have significant exposure to, the industry.

So far, it's individual investors, rather than big pension funds, that have parked money in the fund, Hawkins said.

"This is still a very early stage investment proposition."

An initial burst of investor excitement has given way to a lull in recent months, with share prices for drug development firms plunging. The Horizons psychedelics ETF has lost half of its value on the stock market since hitting a peak in February. 

In an industry where companies are not making money, stock prices are driven by other developments, including news of breakthroughs in research. But there haven't been enough intoxicating incentives to lure investors back, Hawkins said, noting that while share prices have fallen from their peaks, they are still above where they were in 2020.

Investors hooked on psychedelic ventures also face plenty of risk.

"All investors who are investing in early stage drug development companies need to be prepared to lose a substantial amount of money- Eric Foster, Dentons lawyer

Firms that are attracting troves of investment dollars are often burning through all that cash researching drugs that may not materialize, Hawkins said. "These are very risky companies."

Some could fail, similar to what happened in the cannabis industry. 

"All investors who are investing in early stage drug development companies need to be prepared to lose a substantial amount of money," said Eric Foster, a partner at Dentons law firm who helps investment banks finance psychedelic ventures.

"The (potential) upside is that they will be able to take a candidate all the way through the regulatory approval process, and effectively get to a drug that's been approved … Then, all of a sudden, it's going to be worth significantly more."

A new frontier

The very idea that psychedelics could emerge from the shadows of a decades-long drug war and pave the way to a new frontier of medicine has inspired other investors with deep pockets.

Liam Payne, pictured here performing in Jeddah, Saudi Arabia in 2019, is among a growing list of celebrity investors betting on psychedelics. (Khalid Alhaj/The Associated Press)

Liam Payne, the British One Direction singer, along with PayPal co-founder and billionaire Peter Theil are on the growing list of celebrity investors. New York Mets owner Steven Cohen, Shark Tank's Kevin O'Leary and Tim Ferriss, the podcaster and author of The 4-Hour Workweek, are also on the roster.

Then there's Sa'ad Shah. Convinced that researchers are only scratching the surface of psychedelics' potential power to reshape mental healthcare, he co-founded a venture capital player focused on the industry. 

Sa'ad Shah, co-founder of a psychedelics venture capital fund, says the industry is 'a bit of the Wild West. (Sa'ad Shah)

Shah has been raising money from friends, various CEOs and ultra-high-networth investors to build a warchest to unleash on dozens of companies. The Noetic Fund, based in Toronto, raised $32 million US in its first round and invested it into 22 ventures, including Calgary's Psygen. Now, it's on the hunt for another $200 million.

Nearly halfway there, Shah said he's not facing the same kind of investor burnout that has sent stock prices tumbling. He said most of the "crown jewels" in the industry remain privately held companies that continue to raise funds.

"It's a burgeoning industry," Shah said. "It's an incredibly exciting industry. It is a bit of the Wild West."

An opportunity and a business venture

Van der Heyden, Psygen's co-founder, says he found a gap in this Wild West landscape when he spoke with researchers who couldn't get their hands on pharmaceutical-grade psychedelics for their studies. He saw an opportunity. 

A child of the hippie era of the 1960s and early 1970s, he said the counterculture movement exposed him to drugs like LSD. But it wasn't until his retirement that psychedelics became a possible business venture. 

And it's made for some unusual conversations.  

"I might be sitting at the barber and he asks me, 'What do you do?' And so I say, 'Hey, guess what? We make psychedelic drugs.'"

A Real “Breaking Bad” Story

Professor Bradley Allen Rowland of Henderson State University in Arkansas was caught in a real-life "Breaking Bad" situation. And he was caught because it seems he was somewhat clumsy.

Joe Schwarcz PhD | 3 Dec 2021
General Science

As a chemistry professor, I find it particularly appalling when a member of the profession goes astray. That is just what Professor Bradley Allen Rowland did at Henderson State University in Arkansas. In a real-life version of the hit TV show "Breaking Bad” Rowland was caught making methamphetamine. And he was caught because it seems he was somewhat clumsy.

The synthesis of methamphetamine, or “crystal meth” is a huge clandestine industry. “Breaking Bad” captivated television audiences with a storyline about Walter White, a high school chemistry teacher who is diagnosed with lung cancer and worries about the financial security of his family after his demise, which appears to be imminent. He knows that producing crystal meth can be very lucrative and uses his chemical knowledge to start “cooking” the stuff. The chemistry in the show is basically accurate and is described in quite some detail.

At first, Walter pursues a synthetic method starting from pseudoephedrine, a substance that can be extracted from some commercial cold remedies. This is a well-known underground method, and as a result, governments have restricted the sales of products containing pseudoephedrine. Walter then is forced to look for other starting materials and a literature search reveals that phenylacetic acid is suitable since it can be converted into phenylacetone which in turn can be transformed into methamphetamine. Phenylacetic acid can be readily found in chemistry labs and Walter’s business mushrooms. The conversion of phenylacetic acid into phenylacetone is not a simple reaction, which is why clandestine chemists would rather get their hands on phenylacetone as a starting material. When governments noted an increased demand for this chemical they took action and restricted sales.

Now we get to Bradley Allen Rowland, a would-be real-life Walter White. As an organic chemist, he knew that phenylacetone can be easily made in the lab from acetone and benzyl chloride. Neither of these is a restricted substance, so Rowland was off and running. Maybe he was literally running because he spilled a bottle of benzyl chloride. This is a potent lachrymator, nasty stuff indeed. The fumes spread through the chemistry building and prompted an investigation that revealed the chemist’s nefarious activities.

Unlike White, Rowland apparently was synthesizing meth for personal use. He pleaded guilty to manufacturing a controlled substance and was sentenced to four months in jail. He also had to enrol in a substance abuse program and pay the University $150,000 as restitution for the cost of cleaning up the benzyl chloride spill. The chemistry building had to be closed for three weeks!

Had Rowland handled the benzyl chloride more carefully, he might still be “cooking” meth in his lab. A colleague, Terry Bateman, who had also been accused of being involved in methamphetamine synthesis, was acquitted. There was no evidence he had engaged in any such lab work, the only evidence seemed to be a number of scientific papers in his office describing methamphetamine synthesis. For this, he had a ready explanation. His students had been asking about the chemistry depicted in Breaking Bad. It is interesting chemistry indeed. “Breaking Bad,” apparently a colloquial expression for “raising hell,” is entertaining and worth watching. And they have left out enough details to ensure that nobody will learn how to cook meth from the show and “raise hell.” Hell is exactly where addiction to meth can lead.

@JoeSchwarcz

 Robot engineers at Cornwall-based Engineered Arts unveil a remarkably human-like android, Ameca.

 

IT'S ALIVE!

Melting Arctic Is a Bonanza for the Ocean’s Natural Born Killers

Audio recordings in Arctic seas show orcas in waters that were once blocked by ice, and the effects are being felt up and down the food chain.


An Orca chased herring in the Reisafjorden fjord in Norwegian waters in the Arctic Circle.

Credit...Olivier Morin/Agence France-Presse — Getty Images

By Corinne Purtill
Dec. 2, 2021

Brynn Kimber, a research scientist at the University of Washington who works in the National Oceanic and Atmospheric Administration’s Marine Mammal Laboratory, has spent a lot of time analyzing audio data recorded in the icy waters north of Alaska, Canada and Russia. Typically, Ms. Kimber hears the chatter of bowhead whales, belugas, narwhals and other cetaceans native to that part of the Arctic.

A few years ago, they started hearing a distinctive cry acousticians describe as similar to that of a disgruntled house cat: The piercing call of a killer whale. Ms. Kimber wondered at first if their ears were deceiving them.

“When I started the job my mentor told me, ‘You won’t see killer whales this far north,’” Ms. Kimber said. But as years of data accumulated, along with more orca calls in areas where they’d never been recorded, it appeared that was no longer true.

“Where I would see absolutely none in previous years, in later years I was seeing more and more,” Ms. Kimber said. “That was pretty unusual.”

The orca calls are further evidence of a rapidly changing Arctic. As sea ice has receded, killer whales — which are actually dolphins — are now venturing to parts of the sea that were once inaccessible, and spending more time in places they were once seen only sporadically, according to data Ms. Kimber presented Thursday at the annual meeting of the Acoustical Society of America in Seattle.

As a result, some of nature’s most effective predators have vastly broadened the scope of their hunt. The change has potentially significant consequences for animals up and down the food chain — including humans.

Arctic sea ice has declined significantly in the four decades since satellite monitoring began. Roughly 75 percent of ice volume disappeared in the last 15 years alone, and the remaining ice is thinner and of poorer quality, said Amy Willoughby, a marine mammal biologist with NOAA’s Alaska Fisheries Science Center.


The orcas’ presence in Arctic waters can upend the food chain without taking a bite, for instance forcing Bowhead whales to travel farther to seek ice to hide in when orcas are nearby. 

Credit...Olivier Morin/Agence France-Presse — Getty Images

The loss of ice coupled with warming waters and atmospheric temperatures has affected every level of the Arctic ecosystem. Large mammals like polar bears have struggled to navigate shrinking habitats, while the marine algae at the base of the Arctic food chain blooms sooner and more abundantly than ever before.

In recent years, scientists have noticed similar upheaval in the behavior of the region’s marine mammals. Orca are feasting more often on bowhead whales. Scientists and Indigenous Arctic communities have noted a growing number of bowhead whale carcasses in the northeastern Chukchi and western Beaufort seas with signs of orca attack.

Even if the orca don’t take a single bite, the predators’ mere presence can have far-reaching consequences. Bowhead whales typically retreat into protective patches of dense ice when threatened by orcas, which lack the giant-skulled bowheads’ ability to break through frozen waters for air. An Inuit word, “aarlirijuk,” describes this bowhead fear response evolved specifically to evade killer whales.

But as the ice recedes, these defense mechanisms can prove a liability. Bowheads must spend more time than ever before hiding in thick ice where feeding opportunities are scarce. Calves that aren’t yet strong enough to crack through the ice can suffocate.

Any decline in bowhead numbers could have consequences up the food chain too: The baleen whales are a significant food source for subsistence hunters in Indigenous Arctic communities, Ms. Kimber said.

“Killer whales are really intelligent,” said Cory Matthews, a research scientist with the Arctic region of Fisheries and Oceans Canada. “They consume really fast. If a new area opens up, they can get in there maybe within the next year and exploit a prey population that could be perhaps really slow to respond to those changes.”

It could take years, he added, before scientists fully understand the long-term consequences of how these extremely lethal and newly emboldened hunters are expanding their reach in the Arctic.

Indian villagers clash with army over mistaken   DELIBERATELY CALCULATED killings


An Indian army soldier stands guard on a highway on the outskirts of Kohima, capital of northeastern Nagaland state, India, Sunday, Dec. 5, 2021. Angry villagers burned army vehicles in protest after more than a dozen people were killed by Indian army soldiers who mistakenly believed some of them were militants in Nagaland state, along the border with Myanmar, about 300 kilometers (186 miles) from here. Nagaland state’s top elected official ordered a probe into the killings, which occurred on Saturday. (AP Photo/Yirmiyan Arthur)

WASBIR HUSSAIN
Sat, December 4, 2021, 

GAUHATI, India (AP) — Angry villagers burned army vehicles in protest after more than a dozen people were killed by soldiers who mistakenly believed some of them were militants in India’s remote northeast region along the border with Myanmar, officials said Sunday.

Nagaland state’s top elected official Neiphiu Rio ordered a probe into the killings, which occurred on Saturday. He tweeted, “The unfortunate incident leading to the killing of civilians at Oting is highly condemnable.”

An army officer said the soldiers fired at a truck after receiving intelligence about a movement of insurgents in the area and killed six people. As irate villagers burned two army vehicles, the soldiers fired at them, killing nine more people, the officer said on condition of anonymity as he was not authorized to talk to reporters.

One soldier was also killed in the clash with protesters, he said.

On Sunday, fresh violence erupted when nearly 200 residents attacked the army camp in Mon district, going on a rampage and setting fire to residential quarters. Army soldiers fired live ammunition at the crowd, killing two more people, police and a local student leader, Yuwong Konyaki, said.

Police rushed reinforcements in the area to stop further violence.

An Indian army statement said it “deeply regretted” the incident and its aftermath, adding that “the cause of the unfortunate loss of lives is being investigated at the highest level and appropriate action will be taken as per the course of law.”

"Security forces have suffered severe injuries in the incident, including one soldier who succumbed to the injuries," it added.

The statement said “credible intelligence” on insurgent movements indicated that a “specific operation was planned” in Mon district in Nagaland.

Insurgents often cross into Myanmar after attacking Indian government forces in the remote area.



Indian army soldiers ride past the main town in a convoy in Kohima, capital of northeastern Nagaland state, India, Sunday, Dec. 5, 2021. Angry villagers burned army vehicles in protest after more than a dozen people were killed by Indian army soldiers who mistakenly believed some of them were militants in Nagaland state, along the border with Myanmar, about 300 kilometers (186 miles) from here. Nagaland state’s top elected official ordered a probe into the killings, which occurred on Saturday. 

Nyamtow Konyak, a local community leader, said those killed were coal miners.

India’s Home Minister Amit Shah expressed anguish over the “unfortunate incident” and said the state government will investigate the killings.

The army officer said the soldiers had laid an ambush for a week following intelligence that insurgents were planning to attack soldiers in the area, 400 kilometers (250 miles) east of Gauhati, the capital of Assam state.

Government forces are battling dozens of ethnic insurgent groups in India’s remote northeast whose demands range from independent homelands to maximum autonomy within India.

Indian villagers burn army vehicles as soldiers kill 15 in Nagaland, fearing rebels

AP
Published December 5, 2021 -

In this file photo, Indian forces are seen patrolling in an area. — Reuters/File

Angry villagers in India burned army vehicles in protest after more than a dozen people were killed by soldiers who mistakenly believed some of them were militants in the country's remote northeast region along the border with Myanmar, officials said on Sunday.

Nagaland state’s top elected official Neiphiu Rio ordered a probe into the killings, which occurred on Saturday, and he tweeted, “The unfortunate incident leading to the killing of civilians at Oting is highly condemnable.”

An army officer said the soldiers fired at a truck after receiving intelligence about a movement of insurgents in the area and killed six people.

As irate villagers burned two army vehicles, the soldiers fired at them, killing nine more people, the officer said on condition of anonymity as he was not authorised to talk to reporters. Earlier the officer had said seven protesters were killed.

One soldier was also killed in the clash with protesters, he said.


An Indian army statement said it “deeply regretted” the incident and its aftermath, adding that “the cause of the unfortunate loss of lives is being investigated at the highest level and appropriate action will be taken as per the course of law.”

"Security forces have suffered severe injuries in the incident, including one soldier who succumbed to the injuries," it added.

The statement said “credible intelligence” on insurgent movements indicated that a “specific operation was planned” in Mon district in Nagaland.

Insurgents often cross into Myanmar after attacking Indian government forces in the remote area.

Nyamtow Konyak, a local community leader, said those killed were coal miners.

India’s Home Minister Amit Shah expressed anguish over the “unfortunate incident” and said the state government will investigate the killings.

The army officer said the soldiers had laid an ambush for a week following intelligence that insurgents were planning to attack soldiers in the area, 400 kilometres (250 miles) east of Gauhati, the capital of Assam state.

Government forces are battling dozens of ethnic insurgent groups in India’s remote northeast whose demands range from independent homelands to maximum autonomy within India

13 civilians killed by security forces in India's northeast

Nagaland and other states in northeast India, linked to the rest of the country by a narrow land corridor, has seen decades of unrest among ethnic and separatist groups (AFP/Ye Aung THU)

Sun, December 5, 2021

Indian security forces killed 13 civilians in the northeastern state of Nagaland after firing on a truck and later shooting at a crowd that gathered to protest the attack, police said Sunday.

Troops shot dead six labourers returning to their homes on Saturday afternoon in Mon district, near the Myanmar border, after setting up an ambush for insurgents they believed were operating in the area.

Family members and villagers later went looking for the missing men and confronted the troops after finding the bodies.

"This is where a confrontation happened between the two sides, and the security personnel fired, killing seven more people," Nagaland police officer Sandeep M. Tamgadge told AFP.

Tamgadge said the situation in the district was "very tense right now", with nine other civilians wounded in the second incident now being treated in local hospitals.

The Indian army said in a statement one of its soldiers had died during the confrontation, with an unspecified number of troops wounded.

It added soldiers were acting on "credible intelligence" that insurgents were operating in the area and had laid an ambush to intercept them.

"The cause of the unfortunate loss of lives is being investigated at the highest level and appropriate action will be taken as per the course of law," the statement said.

- 'Appeal for peace' -

Nagaland Chief Minister Neiphiu Rio appealed for calm and announced an investigation into the event.

"The unfortunate incident leading to killing of civilians at Oting, Mon is highly condemnable," he said on Twitter. "Appeal for peace from all sections."

Mon district is about 220 miles (350 kilometres) from Nagaland's capital Kohima, and is more than a day's drive only along poorly maintained roads.

Senior state, police and army officials had reached the district to investigate, a senior state government official, who asked not to be named, told AFP.

India's Home Minister Amit Shah expressed his regret over the incident and said the state probe would "ensure justice to the bereaved families".

Nagaland and other states in northeast India, linked to the rest of the country by a narrow land corridor, has seen decades of unrest among ethnic and separatist groups.

The region is home to dozens of tribal groups and small guerrilla armies whose demands range from greater autonomy to secession from India.

Over the years insurgency has waned, with many groups striking deals with New Delhi for more powers, but a large Indian garrison remains stationed in the region.

bb/gle/rbu

Reforming how we pay for electricity in a renewables world

Fixed-charged billing makes sense but provision needs to be made for less well off

Fri, Dec 3, 2021,
John FitzGerald

Wind turbines at the Arklow Bank wind park.

In tackling climate change, we plan to rely more than ever on electricity to heat our homes and to power transport. And as part of a plan to decarbonise electricity production, we aim to use renewables to provide the vast bulk of the electricity that we need.

This increased dependence on electricity poses a number of difficulties. Security of supply is one. However, there are other problems – the increasing demand from data centres, scaling up the electricity grid and funding the huge investment needed in electricity generation.

In principle, the electricity market should incentivise the provision of a secure and carbon-free electricity supply at minimum cost. However, as suggested in a recent ESRI paper, the current market structure, while appropriate a decade ago, needs to adapt to deal with these new challenges.

As a former member of the Northern Ireland Authority for Energy Regulation, I was involved in developing the all-island electricity market which began in 2007.

We considered whether to implement a complicated mechanism, with different prices for electricity across the network, to reflect where there were bottlenecks in the electricity grid. In the end, it was decided that a simpler approach was warranted.

However, an alternative mechanism was not implemented to ensure that key consumers, such as data centres, would be built where they could be cheaply serviced. This is now posing problems for the operation of the system.

Security of supply

We’ve all become more conscious of the potential risks to security of supply, whether from prolonged calm weather, from power stations being out of action or even from a cyberattack. The film Die Hard 4, where terrorists took over the electricity system’s control room, highlighted the chaos that could follow when the electricity system is disabled.

The original design of the all-island electricity market had incentives to make generation available when it was needed. However, the model was altered in 2018 to meet European Union requirements, to allow trading with Britain and to reduce the cost of ensuring adequate capacity.

This modified approach clearly did not work as planned. Initially, it jeopardised a key generation station in Dublin as there was no incentive for it to continue to operate.

The ESRI research argues that a new type of electricity market is needed. Compared with the early 2000s, the problem of designing such a market is more difficult today because of the need to dramatically increase the share of renewable electricity. Generators need to be paid for three different services they provide to society: the electricity they produce, for making power available when needed and for helping make the electricity system work as it should.

Making data centres provide their own back-up power when the wind does not blow may protect security of supply in the short term but it is not a suitable long-term answer. Because larger generators are more efficient than smaller ones, this solution is likely to lead to higher carbon emissions than if the electricity system was responsible for providing a secure supply.
Fixed charges

As renewables form an ever-larger share of supply, we are moving from a situation where, when you switch on the light more gas is burned, to one where you use electricity generated by wind. In the first case the more electricity you use, the more fuel has to be paid for. However, for wind energy, once the windmills are built, the electricity comes for free. All the costs arise from building the wind farms.

This means we need to transition from a billing system based on usage to pay for the fuel used in generation to one based on fixed charges to pay for the windmills. In parts of Australia, this is already the case: consumers pay fixed charges, not by level of use.

This approach is closer to the telephone services bundles which we buy, with individual calls and texts coming for “free”. Such a charging structure would be a more efficient way to fund an electricity system largely based on renewable energy.

However, as the ESRI points out, in a fixed charges system, poor households with modest electricity use would pay the same as rich ones with extravagant use, and this would be regressive. In addition, without any individual incentive to economise on electricity use, in aggregate we would use more electricity. In turn that would mean more investment in generating capacity, whose costs would be added to our bills.

Designing the optimal electricity pricing structure that sets the right incentives for producers and consumers, and is fair, is a challenging task.

Opinion: Proper use for energy sector’s excess cash should be cleaning up wells

Article by Jeffrey Jones, The Globe and Mail

DECEMBER 3, 2021

The site of an abandoned well to be closed by the Alberta Orphan Well Association is pictured near High River, Alta., on August 12, 2020.Todd/Korole

The fortunes of the oil patch have turned to levels not seen in more than half a decade as oil and natural gas become hot commodities again. There’s a lot of talk in Alberta about the energy sector getting its mojo back, and Premier Jason Kenney’s UCP government is doing a lot on that.

This is no surprise. As announced this week, a The revenue shock from the industry goes a long way in reducing the government’s deficit forecast for this fiscal year by two-thirds from the initial budget estimate of $18.2 billion.

But bubbling in the background is the familiar discontent among landlords and environmental advocates about the unpredictability of the industry and how it is being directed to dividends and share buybacks rather than the quick cleanup of idle and spent wells that have been a legacy of the past boom. Is. Then taxpayers stepped in last year to provide $1 billion in stimulus money to help them tackle the mess they didn’t create.

Abandoned oil and gas wells put undue burden on landlords, taxpayers: Study

This is a long-standing problem that the UCP has inherited and, to its credit, has taken steps to solve it. This week, the Alberta Energy Regulator (AER) finalized a much-needed reassessment of its regulations aimed at reducing multibillion-dollar environmental liabilities and preventing companies that can’t clean up from securing assets.

But the new rules are hit and miss.

Overhauls include new financial checks on companies and their ability to handle future costs of adding and retrieving old sites. It is long overdue.

Based on the regulator’s own estimates, however, a new quota system for industry spending at abandoned sites could take decades to help reduce the backlog that tops 95,000 inactive wells. There will be more sectors That time will stir and, again, put pressure on the industry’s ability to pay bills for cleanup.

These sites dot the province. In fact, there are far more passive wells than active ones. The issue is controversial for industry and Albertans whose properties require cleaning up of old wells. Many wells have been in suspended animation for years.

Controversially, the AER has avoided setting limits on how long wells can remain idle, as do many other jurisdictions. For example, if wells in Texas have been closed for more than a year, operators must apply for extensions that require a security bond. Alberta briefly had a five-year limit in the 1990s, but that ended under industry pressure.

Alberta should ease barriers that discourage businesses from reusing abandoned oil wells: report

AER now has 40 measures to consider when deciding whether a company has the means to cover future cleanup costs, especially if it is also acquiring assets. These include company records with past work and compliance with regulations, as well as financial health and years remaining for cash-generating assets. The regulator may also demand a security deposit to mitigate risk, and is updating that policy.

Earlier, the main criterion was the calculation of assets versus liabilities. The system allowed actions and promises by applicants of future funding instead of meeting that limit. Still, the result was the occasional bankruptcy court and scads of useless wells added to the orphan list.

So what about that backlog? AER has initiated industrywide spending of at least $422 million in 2022 and $443 million next year to be devoted to cleaning up waste wells. The future amount is projected to increase by 5 percent annually until 2026. Every company must meet a mandatory annual target.

These are certainly tougher standards than in the past, but they work quickly if global demand for oil and gas eases in the projected transition to clean energy sources in the coming years, as more wells run out. will not complete.

AER chief executive Laurie Pusher has said it aims to work through the backlog at 4 percent to 5 percent annually. At that rate, just tackling the current list could take two decades or more, says Sarah Hastings-Simon of the University of Calgary’s School of Public Policy. Meanwhile, the energy sector is increasing free cash flow and not directing massive amounts of money into capital expenditure, she explains. Here’s A Fair Use For Some Of Them extra coin.

The companies were under pressure to continue cleaning up during the years of industry turmoil. It makes sense, then, that he should now make a bigger contribution to solving a problem that should have been dealt with earlier as part of his acceptance to drill

Quebec killed Utica Resource's business plan — now the company wants billions of dollars in compensation

Martin Patriquin: Burning fossil fuels has a cost. Keeping them in the ground also has a price

Author of the article:

The Logic
Martin Patriquin
Publishing date:Nov 29, 2021 •

A handout photo of Utica Shale near town of Donnaconna, Quebec. 

PHOTO BY HANDOUT


MONTREAL — Mario Lévesque wants the Quebec government to pay him to not drill for oil and gas.

Lévesque’s company, Utica Resources, holds 33 exploration licences covering over 5,000 square kilometres of Quebec heartland. Were it up to him, he would be drilling roughly 1,500 metres into the ground to obtain his piece of the estimated 31 trillion cubic feet of recoverable natural gas in Quebec’s portion of the Utica Shale, the same formation from which Pennsylvania and Ohio have wrung riches over the last decade.

But it isn’t up to him. Last month, Quebec Premier François Legault announced that the government was effectively banning hydrocarbon extraction in the province. The decision, which Legault said was part of the government’s plan to hit its emissions-reduction targets, effectively killed Utica Resources’ raison d’être .

So Lévesque wants compensation for Utica and the other nine licence-holding companies in the province. The starting bid: “significantly more” than the $3 billion to $5 billion floated by the province’s energy association, Lévesque told me the other day.

It’s an often-overlooked expense in the push to decarbonize the economy. As countries around the world make it more difficult to find, extract and transport hydrocarbons, the companies that make it their business to do so are demanding billions in compensation.

These cases almost invariably end up in court or in trade arbitration, and are potentially very expensive. Consider Calgary-based TC Energy’s Keystone XL Pipeline extension, the proposed conduit for 830,000 daily barrels of oil from Alberta to Nebraska. Presented in 2008, the pipeline extension was rejected in 2015 by the Obama administration, only to have Trump sign it back to life in 2017. Revoking the Keystone permit was among Joe Biden’s first presidential acts.

That penstroke, which delighted environmentalists on both sides of the border, could be costly. TC Energy filed a formal request for arbitration last week, seeking over US$15 billion in damages as a result of what it says is a U.S. government breach of North American trade regulations.

Meanwhile, four companies are suing European governments under the Energy Charter Treaty, an international agreement governing energy security among its 53 signatories. All told, the four companies are seeking just over US$3.1 billion for instituting laws that protect the environment but damage their bottom lines.

The various complaints and lawsuits underscore the fossil fuel industry’s more muscular approach to selling its wares. After decades of trying to be as green as possible—and weathering the resulting accusations of greenwashing—many in the industry are pushing back. Earlier this month, Scott Sheffield, CEO of Texas-based Pioneer Natural Resources, publicly rebuked the Biden administration for its legislative attempts to wean the U.S. off fossil fuels.

The governments of some oil-producing U.S. states have vowed “collective action” against those banks that, in practicing “Woke Capitalism,” refuse to finance coal, oil and natural-gas industries. There is an almost drunken absurdity to the notion that a bank could be the corporate incarnation of Colin Kaepernick. But Big Oil has a point. For all the talk of a carbon-free future, for now we are utterly addicted to the stuff—by some measures, more so than ever before. “Currently, the trade regime and the climate regime don’t align,” Temitope Onifade, affiliated research scholar at the Canada Climate Law Initiative, told me last week.

Quebec is well placed to cash in on this addiction. The value of its shale deposits is quite frankly bonkers—as much as $130 billion, according to a 2013 provincial government report.

Quebec Premier Francois Legault.

“One of the biggest natural-gas discoveries in North America,” as Michael Binnion, CEO of fellow permit holder Questerre puts it. It’s why, though he is cagey about how much Utica is worth, Lévesque says it’s much more than $5 billion. “If this were an open market, Utica Resources would be worth $20 billion to $25 billion,” he told me. (The province’s natural-resources ministry didn’t respond to my questions before deadline).

The province is decidedly not an open market, however. Previous Liberal governments put a moratorium on fracking in 2011, and outright banned the practice in 2018. The province is known as the place where pipeline projects go to die. Lévesque was hopeful when Legault was elected in 2018—while in opposition, the premier once wrote that Quebec should exploit its oil and gas resources “on a large scale”—but has since mostly resigned himself to leaving the shale gas where it is. “It’s too bad, but now we’re in an expropriation situation, and with expropriation comes compensation.”

Lévesque recently had one small victory. In November, a judge ruled the Quebec government was wrong in denying Utica an exploration permit for its subsidiary Gaspé Énergie, which pumps oil from four jacks in the Gaspé. But these, too, will be forced to shut down if the Quebec government implements a blanket ban on hydrocarbon production, as promised.

How other oil companies will fare in court is an open question. TC Energy faces long odds, if only because the U.S. government has a near-perfect record when it comes to North American trade disputes. And a recent European court decision suggests those companies going after the likes of Germany and Italy can’t base their claims on the Energy Charter Treaty.

In a way, though, the outcomes don’t matter much, because the court of public opinion is more politically compelling. The Keystone XL project will remain shuttered for good, even in the unlikely case that the Biden administration loses at the trade tribunal. Similarly, coal will still be on the legislative outs in Europe and beyond even if German energy company RWE is successful in its US$1.6-billion suit against the Dutch government, which said it would shut down coal-fired plants by 2030. There is political capital to be harvested in taking on the oil and gas industry. Premier Legault has certainly figured this out.

© The Logic

Quebec to Pay “Significantly More” than $5B to Jilted Utica Drillers

December 2, 2021

In October the province of Quebec, Canada announced it will expropriate all of the rights for all oil and gas companies in the province to drill and extract oil and natural gas (see Lights Out for All O&G Production in Quebec, Including Utica Shale). It’s all being shut down–including actively producing wells. Shutting down existing businesses in the province is something you might expect in Communist China, or Soviet Russia, or tin-horn dictatorships in South America. It’s not something you expect to see in Western democracies. Yet it’s happening in Quebec, home to a large deposit of the Utica Shale. Now Quebec drillers, those who had planned to tap their vast Utica Shale assets, are demanding Quebec pay up, and the price will be “significantly more” than the $3 billion to $5 billion floated by the province’s energy association.

Yes, the Utica Shale underlies large portions of Quebec. We often get this question when writing about the Canadian Utica because our U.S-centric maps don’t show the Utica reaching up into Canada. But it does:

click for larger version

Canadian producer Utica Resources owns 33 exploration licenses covering over 5,000 square kilometers of Quebec Utica Shale. Mario Lévesque, president and CEO of Utica Resources, wants compensation for his company and the other nine license-holding companies in the province. The only other company with Utica assets we’re familiar with, having written about it over the years, is Questerre Energy (see our Questerre stories here).

Mario Lévesque wants the Quebec government to pay him to not drill for oil and gas.

Lévesque’s company, Utica Resources, holds 33 exploration licences covering over 5,000 square kilometres of Quebec heartland. Were it up to him, he would be drilling roughly 1,500 metres into the ground to obtain his piece of the estimated 31 trillion cubic feet of recoverable natural gas in Quebec’s portion of the Utica Shale, the same formation from which Pennsylvania and Ohio have wrung riches over the last decade.

But it isn’t up to him. Last month, Quebec Premier François Legault announced that the government was effectively banning hydrocarbon extraction in the province. The decision, which Legault said was part of the government’s plan to hit its emissions-reduction targets, effectively killed Utica Resources’ raison d’être .

So Lévesque wants compensation for Utica and the other nine licence-holding companies in the province. The starting bid: “significantly more” than the $3 billion to $5 billion floated by the province’s energy association, Lévesque told me the other day.

It’s an often-overlooked expense in the push to decarbonize the economy. As countries around the world make it more difficult to find, extract and transport hydrocarbons, the companies that make it their business to do so are demanding billions in compensation.

These cases almost invariably end up in court or in trade arbitration, and are potentially very expensive. Consider Calgary-based TC Energy’s Keystone XL Pipeline extension, the proposed conduit for 830,000 daily barrels of oil from Alberta to Nebraska. Presented in 2008, the pipeline extension was rejected in 2015 by the Obama administration, only to have Trump sign it back to life in 2017. Revoking the Keystone permit was among Joe Biden’s first presidential acts.

That penstroke, which delighted environmentalists on both sides of the border, could be costly. TC Energy filed a formal request for arbitration last week, seeking over US$15 billion in damages as a result of what it says is a U.S. government breach of North American trade regulations.

Meanwhile, four companies are suing European governments under the Energy Charter Treaty, an international agreement governing energy security among its 53 signatories. All told, the four companies are seeking just over US$3.1 billion for instituting laws that protect the environment but damage their bottom lines.

The various complaints and lawsuits underscore the fossil fuel industry’s more muscular approach to selling its wares. After decades of trying to be as green as possible—and weathering the resulting accusations of greenwashing—many in the industry are pushing back. Earlier this month, Scott Sheffield, CEO of Texas-based Pioneer Natural Resources, publicly rebuked the Biden administration for its legislative attempts to wean the U.S. off fossil fuels.

The governments of some oil-producing U.S. states have vowed “collective action” against those banks that, in practicing “Woke Capitalism,” refuse to finance coal, oil and natural-gas industries. There is an almost drunken absurdity to the notion that a bank could be the corporate incarnation of Colin Kaepernick. But Big Oil has a point. For all the talk of a carbon-free future, for now we are utterly addicted to the stuff—by some measures, more so than ever before. “Currently, the trade regime and the climate regime don’t align,” Temitope Onifade, affiliated research scholar at the Canada Climate Law Initiative, told me last week.

Quebec is well placed to cash in on this addiction. The value of its shale deposits is quite frankly bonkers—as much as $130 billion, according to a 2013 provincial government report.

“One of the biggest natural-gas discoveries in North America,” as Michael Binnion, CEO of fellow permit holder Questerre puts it. It’s why, though he is cagey about how much Utica is worth, Lévesque says it’s much more than $5 billion. “If this were an open market, Utica Resources would be worth $20 billion to $25 billion,” he told me. (The province’s natural-resources ministry didn’t respond to my questions before deadline).

The province is decidedly not an open market, however. Previous Liberal governments put a moratorium on fracking in 2011, and outright banned the practice in 2018. The province is known as the place where pipeline projects go to die. Lévesque was hopeful when Legault was elected in 2018—while in opposition, the premier once wrote that Quebec should exploit its oil and gas resources “on a large scale”—but has since mostly resigned himself to leaving the shale gas where it is. “It’s too bad, but now we’re in an expropriation situation, and with expropriation comes compensation.”

Lévesque recently had one small victory. In November, a judge ruled the Quebec government was wrong in denying Utica an exploration permit for its subsidiary Gaspé Énergie, which pumps oil from four jacks in the Gaspé. But these, too, will be forced to shut down if the Quebec government implements a blanket ban on hydrocarbon production, as promised.

How other oil companies will fare in court is an open question. TC Energy faces long odds, if only because the U.S. government has a near-perfect record when it comes to North American trade disputes. And a recent European court decision suggests those companies going after the likes of Germany and Italy can’t base their claims on the Energy Charter Treaty.

In a way, though, the outcomes don’t matter much, because the court of public opinion is more politically compelling. The Keystone XL project will remain shuttered for good, even in the unlikely case that the Biden administration loses at the trade tribunal. Similarly, coal will still be on the legislative outs in Europe and beyond even if German energy company RWE is successful in its US$1.6-billion suit against the Dutch government, which said it would shut down coal-fired plants by 2030. There is political capital to be harvested in taking on the oil and gas industry. Premier Legault has certainly figured this out.*

It’s time for Quebec to pay up. We hope the citizens of the province enjoy their indentured servitude to the left, because they’re going to pay big for it.

*Toronto (ON) Financial Post (Nov 29, 2021) – Quebec killed Utica Resource’s business plan — now the company wants billions of dollars in compensation

U.S. Bill Puts Mexico Electric Car Investments at Risk: Minister

Nacha Cattan and Maya Averbuch
Fri., December 3, 2021


(Bloomberg) -- Investments in Mexico are being put at risk by a U.S. bill offering tax credits for electric vehicles built with domestic labor, Economy Minister Tatiana Clouthier said in an interview.

At least two EV investments may not close in Mexico and eight states could lose out on automaker expansions because of the legislation, Clouthier said via Zoom. She said she’s talking to many U.S. senators to try and change their minds and described the U.S.’s actions as contradictory at a time of close work with Mexico to improve supply-chain bottlenecks and amicable negotiations on issues such as immigration.

“How can it be that we are working so harmoniously in one area with the U.S. and at the same time the senators are doing this,” Clouthier said. “There are impacts in terms of investments for electric cars that are being paused in some states.”

Both Mexico and Canada have accused the U.S. of potential violations of the updated North America free trade accord known as USMCA. They argue that the bill -- which would give an extra tax credit to consumers who buy electric vehicles made by unionized U.S. workers -- would disadvantage automakers in the rest of North America.

Clouthier said earlier this week that her country was willing to go ahead with “all kinds of retaliation” including slapping trade tariffs on U.S. goods. Canada’s Trade Minister Mary Ng said that the proposed legislation puts hundreds of thousands of jobs at risk.

The dispute over the EV credit has built upon already simmering tensions over which cars can be sold duty-free based on the percentage of their parts that are regionally made. Mexico requested formal talks on the issue in August and Canada joined as an interested third party.

In her interview, Clouthier said that the U.S. can expect a “Christmas present” or a gift during the Three Kings holiday in early January, meaning that is when Mexico is planning to go formally to an arbitration panel. She said Canada may either join Mexico or act as a third party in the disagreement.

Clouthier said, without providing details, that President Andres Manuel Lopez Obrador will announce a substantial private investment in Mexico on Monday.

She also said that Mexico is about to announce a few other major investments in border states as companies seek to transfer operations from Asia to North America to prevent supply shortages and to comply with USMCA local content rules. Companies are buying up real-estate in northern states as they prepare to shift operations to Mexico in the process called nearshoring, she said.