A spat that threatened to become an international incident has been averted for now, after companies turned their backs on an Aug. 25 auction of coalbed methane drilling licenses in southeastern British Columbia.
The Montana government, joined by community, aboriginal and environmental groups on both sides of the Canada-U.S. border had challenged the postings on grounds that it contravened a 1909 treaty that prevents either country from polluting cross-border water bodies.
Montana Gov. Judy Martz has taken her concerns to the U.S., Canadian and British Columbia governments, calling for a comprehensive environmental impact assessment before rights to 49,000 acres were awarded.
She was pleased to see coalbed methane development stalled, given the unanswered questions on the impact.
The government-owned parcels were in the Flathead and Elk river watersheds, creating fears of polluted waters from coalbed methane development finding their way into the Flathead, which carries special United Nations designation as a “wild and scenic river.”
Elk Valley is part of the Crowsnest region, which is thought to hold 12 trillion cubic feet of British Columbia’s projected coalbed methane resource of 90 tcf, of which 20 percent is estimated to be commercial.
Province interested in royalty revenues
Expanding its successful development of conventional oil and gas to coalbed methane was seen as the province’s next advance in generating royalty revenues.
How far the Elk Valley setback has undermined those hopes is a matter of debate.
Activists are emboldened by their success, the industry is taking a timeout to assess its position and the British Columbia government is emphatic that this is only round one.
David Thomas, a city council member in Fernie, British Columbia, and a leading voice against coalbed methane development in his area, said the failure to attract even a single bid was not among the “scenarios we anticipated.”
He said the outcome proves the value of groups working together to protect the landscape on both sides of the border, but cautioned that the fight is likely not over.
Mike Gatens, chairman of the Canadian Society for Unconventional Gas, told reporters it appeared that potential bidders were chased away by the risks and costs, given disappointing test results from the region, rather than the opposition.
Shell pursuing opportunities on private land
Among the likeliest bidders, Shell is pursuing opportunities on private land.
It is holding talks with Tembec, a forest resource management company, and a coal producing partnership Elk Valley Coal to explore land flanking the bid properties.
The British Columbia government has given the owners five years to decide whether to move into gas production, after which the leases may be offered for bid.
If Shell gets approval to drill four wells this fall on private land it will successfully circumvent controversial government auctions.
On a similar front, EnCana has established a joint venture with Fording Coal to drill five test wells on a lease also alongside the auction lands, while Chevron Canada Resources has drilled three test wells on Tembec property.
Others involved in exploration include Petrobank Energy & Resources and Trident Exploration.
British Columbia Energy Minister Richard Neufeld was undeterred, declaring that the government will post the land again when there is interest from the industry.
He again argued that the dispute was linked to “local political agendas,” including Montana’s gubernatorial election this year.
Noting that Montana has its own coalbed methane industry, Neufeld said the state’s efforts to prevent British Columbia moving into the sector was tough to swallow.
