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September 2007

Vol. 12, No. 35 Week of September 02, 2007

Heading toward a border showdown

British Columbia, Montana at standstill in feud over CBM, coal projects; no new talks in sight, but B.C. won’t impose a moratorium

Gary Park

For Petroleum News

British Columbia and Montana keep edging closer to a showdown over coalbed methane and coal development on the B.C. side of their international border, but neither seems ready to end a 10-month hiatus in their efforts to settle environmental concerns.

No formal talks have been scheduled since October 2006 almost two years after the two governments started negotiations to resolve the fractious dispute.

At issue is a disagreement over how to collect environmental baseline data prior to development.

British Columbia, having rejected Montana pleas for a moratorium, argues for a project-by-project approach, while Montana favors a more comprehensive effort to weigh the impacts of more than one project.

For Montana and the United States government the dispute comes down to the potential risks to water quality and wildlife in the Flathead River, which starts in Canada and runs alongside most of the western boundary of Montana’s Glacier National Park.

Critics in Montana argue wastewater from a coalbed methane operation will enter the Flathead River basin, endangering what has been designated a “wild and scenic river” that supports a native trout population, wolves and one of the largest grizzly bear populations in North America.

Schweitzer has the backing of U.S. Secretary of State Condoleezza Rice and federal officials who have indicated they are ready to take the dispute to the Canada-U.S. International Joint Commission.

B.C. Energy and Mines Minister Richard Neufeld has noted Montana has about 350 producing coalbed methane wells that have come under attack within the state, while B.C. is still in the experimental stage.

B.C. Minister of State for Mining Kevin Krueger told the Globe and Mail that Montana Gov. Brian Schweitzer and its senior U.S. Sen. Max Baucus, both Democrats, seem more interested in targeting B.C. to raise their own political profiles when “they’ve got a whole lot to be accountable for.”

BP has started studies

While government negotiators seem unable or unwilling to bridge the gaps, BP Canada Energy and Cline Mining of Ontario are anxious to advance their plans for coalbed methane and coal development, respectively.

BP has started environmental studies of the entire Flathead drainage basin and expects to apply in 2008 for exploratory permits for three drilling pads.

The company has given an assurance that it has no intention of moving to full development until the environmental review is completed at a cost of up to C$3 million a year over three to five years.

BP hopes to obtain tenure to conduct a five-year, coalbed methane exploration program over almost 200 square miles at the Mist Mountain site.

If it moves to a full-scale commercial operation, the company estimates it would make a C$3 billion capital investment over 50 years, pay royalties of C$2 billion and attain peak output of 650 million cubic feet per day.

The company’s own documents say a commercial venture could involve 100 to 150 well pads, with up to 10 wells on each pad, and could create 250 jobs.

The Flathead is one of three coalfields in the East Kootenay that could underpin industry efforts to exploit an estimated 19 trillion cubic feet of coalbed methane resources, of which about 20 percent is thought to be recoverable.

Cline Mining in review

Cline Mining’s planned Lodgepole metallurgical mine project is in the early stages of review by the B.C. Environmental Assessment Office.

The B.C. Ministry of Energy, Mines and Petroleum Resources estimates the Crowsnest coal field has more than 25 billion metric tons in place, of which a Cline feasibility study has estimated the company has an inferred resource of 3.23 billion metric tons which could be extracted at the rate of 2 million metric tons annually.

Montana’s Junior Senator Jon Tester, also a Democrat, entered the controversy in August, telling BP’s newly appointed Chief Executive Exploration and Production Andy Inglis in a letter “it is my belief that your company’s proposal represents an unacceptable level of risk to Montana water quality, native trout populations and the ecological integrity of Glacier National Park.”

Anita Perry, vice president of government and public affairs at BP Canada, said a response to Tester is being drafted, adding the company is “committed to addressing the impacts of this project.”

However, she told the Hungry Horse News in Montana that drilling sites have yet to be selected and said if exploration and development does proceed BP will not discharge wastewater from coalbed methane operations into surface water.






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