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Canadian fracking issues turn divisive Provinces pulled in different regulatory, compliance directions as debate builds over use of shale gas to support LNG projects Gary Park For Petroleum News
The faster Canada moves towards final regulatory and investment decisions on LNG exports the more divisions grow over related environmental issues, with hydraulic fracturing at the core.
Federal Environment Minister Peter Kent, while voicing support for the economic benefits of related shale-gas exploration to underpin liquefied natural gas projects, acknowledges that having “a drilling rig in one’s backyard is not the most pleasant of visions.”
The six provinces east of Manitoba all have moratoriums in place on the use of fracking, while those to the west are responding to growing pressures by expanding public disclosure of the chemicals and billions of gallons of water used in the fracking process.
Kent said “there has been a little bit of exaggeration, misrepresentation and even scare-journalism in terms of overstating the risk of fracking ... even though the technology has improved significantly in recent decades.”
But that has failed to sway environmentalists, landowners and others who have just awakened to the fracking issue, prodded by a report this year by the federal government’s Environment Commissioner Scott Vaughan who called for more vigorous enforcement of regulations in an effort to keep pace with the resource industry boom.
Referring specifically to shale-gas production, Vaughan said that if environmental controls lag the risks to human health and the environment will grow.
Statistics fuel concerns Those concerns were fueled by the release in mid-February of statistics provided by the British Columbia Oil and Gas Commission, which reported that it discovered more than 800 deficiencies last year during the course of 4,223 inspections conducted in the oil and gas sector.
Of the violations, 80 resulted in charges, mostly under the provincial Water Act for the failure to report increased water consumption, waste and contamination.
The commission, although it did not name the offending companies, imposed 15 fines of C$575 each (the maximum allowed), or less, including unlawful water withdrawals and failure to promptly report a spill.
Court prosecutions, which can carry fines up to C$1 million, included one C$20,000 fine for a Water Act stream violations and C$250,000 for a sour gas release.
In 2012, fracking methods were used for 86 percent of the 476 wells drilled in northeastern British Columbia, the heart of the province’s shale gas deposits that hold the key to supply gas for LNG projects.
Ben Parfitt, a resource policy analyst with the Center for Policy Alternatives, argued compliance and enforcement should be removed from the B.C. Oil and Gas Commission to “give the public a great deal more confidence” that greater discipline was being brought to bear on environmental, health and safety matters.
New regulations in New Brunswick While British Columbia engages in that debate, Quebec and New Brunswick are moving in opposite directions on their shale gas fronts.
New Brunswick, which shares a possible 130 trillion cubic feet of marketable shale gas with neighboring Nova Scotia and has rising hopes of a US$5 billion LNG export venture, has introduced 97 new regulations governing shale gas exploration.
Energy Minister Craig Leonard said the objective is to strike a balance between environmental protection and the economic potential of shale gas potential that the province’s former Premier Frank McKenna estimated could create thousands of jobs and billions of dollars in government revenues.
Leonard said New Brunswick could contain enough shale gas reserves to meet the province’s energy needs for 100 years.
He said the new rules will protect water and landowners, but has been accused by fracking opponents, including First Nations, of making a “desperate economic move.”
The new regime will require double casing for exploratory wells to protect adjoining groundwater, while producers will have to buy C$10 million worth of liability insurance to cover damage to property or the environment.
The Canadian Association of Petroleum Producers said the new rules provide clarity that had earlier been lacking, but the industry will need more time to determine the impact on investment opportunities.
Moratorium in Quebec In Quebec, a new provincial government is refusing to end a moratorium imposed two years ago on shale gas exploration in its Utica formation until it has struck a balance between economic and environmental interests, the province’s Energy Minister Yves-Francois Blanchet said.
The delay in establishing a “clear set of rules” prompted Lucien Bouchard to resign in February as chairman of the Quebec Oil and Gas Association, frustrated that the recently elected government of Premier Pauline Marois is driving away potential investors and passing up the chance to benefit from resource royalties and taxes.
He said uncertainty over what rules the government will apply to oil and gas development is hurting Quebec’s image among investors, who believe that well-organized opposition groups have succeeded in forcing a comprehensive review of multi-stage fracturing methods to develop the Utica play.
Bouchard, a former Quebec premier, quit after two years as head of the industry association, saying those who oppose fracking have essentially won the battle because the government has indefinitely suspended all exploration activities.
The association has estimated that the Utica formation, which covers 160 square miles of the St. Lawrence River Lowlands between Montreal and Quebec City, holds 50 tcf of recoverable gas resources which could yield 700 million cubic feet per day within 10 years of commercial development being approved, reducing the C$16 billion a year that Quebecers pay to buy domestic and imported oil and natural gas.
Government taking its time Blanchet told reporters that Bouchard’s association would prefer “very few rules” governing exploration and development, while environmentalists want a permanent ban on development.
He said the government will take its time to ensure “reasonable” rules are imposed, arguing that there is no need for hasty action at a time when neighboring shale-gas jurisdictions in the northeastern United States are tightening their regulations during a period of reduced activity.
Bouchard said Quebec’s natural gas deposits are a “highly important opportunity for (the province’s) economic development,” but he is not opposed to setting “exemplary requirements” covering environmental protection, public safety, social acceptability and transparency.
However, he said Quebec cannot afford to wait much longer when the rest of the world of moving ahead with shale gas extraction.
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