Alberta firms at loggerheads

Gas-oil sands dispute rages as producers swamp regulator with appeals

Gary Park

PN Calgary Correspondent

The acrimony within the Alberta petroleum industry over a natural gas-oil sands dispute has intensified now that gas producers have flooded the Energy and Utilities Board with applications to exempt 733 gas wells from a shut-in order.

An issue that has been simmering for six years boiled over in June when the regulator issued a shut-in order for 938 gas wells, producing about 250 million cubic feet per day from reserves of 1 trillion cubic feet.

It said continued gas production was lowering reservoir pressures and endangering plans to extract up to 100 billion barrels of bitumen from underlying deposits, rating the energy content of the bitumen at 600 times that of the gas.

In the ensuing uproar, the board extended the shut-in deadline by one month to Sept. 1, while allowing the gas producers to apply for exemptions on specific wells.

By inundating the regulator with applications, the producers have been accused of corporate irresponsibility by Petro-Canada, one of the leading oil sands players in the Wabiskaw-McMurray region which covers 8,500 square miles.

A spokesman for Petro-Canada said the gas companies have abused the board’s exemption process and will now waste the regulator’s money and time instead of looking for “workable, technical” alternatives.

To heighten the bad feelings, five the leading gas producers — Paramount Energy Trust, Devon Canada, BP Canada Energy, Canadian Natural Resources and ProGas — are taking action in Alberta courts, seeking to overturn the board’s shut-in ruling and alleging that the regulator has overstepped its legislated mandate.

They have also demanded tens of millions of dollars in compensation from the Alberta government, warning that anything less could undermine investment in the province’s energy sector.

Petro-Canada, meanwhile, is flatly opposed to any compensation and is leading the counter-charge, insisting the shut-in order should stand until there is conclusive evidence that gas extraction does not jeopardize oil sands projects.

Paramount, which shut in 43 of its Wabiskaw-McMurray wells, accounting for 9 percent of its total production, warned Sept. 2 that it could still lose output of 44 million cubic feet per day.

President and Chief Executive Officer Susan Riddell Rose said the firm faces a “huge uncertainty in terms of being able to operate our business.”

But Paramount said technical solutions could help overcome the problem, noting that submersible pumps are being developed to help extract bitumen.

To aid in pursuing a compromise, the Energy and Utilities Board hopes to complete detailed geological mapping of northern Alberta by the end of 2003. It expects to settle the fate of the exempted wells by April 1, 2004.

Unless other companies challenge the requests for exemption, the gas wells can continue producing. For now, according to preliminary estimates of the gas producers, some 100 million cubic feet per day will be shut down, or about 40 percent of the 250 million cubic feet per day that is affected by the total shut-in order.

A spokeswoman for the board said its fundamental founding principle is to “ensure the energy resources are conserved.” To that end, the board will take a “fair and balanced” approach to near- and long-term interests.