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Gas-bitumen showdown enters a critical phase Alberta’s Court of Appeal, Alberta Energy and Utilities Board will issue findings by end of January in dispute between oil sands and gas Gary Park Petroleum News Calgary correspondent
The next two weeks will be a nail-biting time for most of Canada’s biggest oil and natural gas producers who are embroiled, directly or indirectly, in a multi-billion dollar feud.
Alberta’s Court of Appeal and its Energy and Utilities Board will deliver pivotal findings in the dispute between oil sands and natural gas producers in the province’s northeast.
The court will rule before the end of January on two applications challenging the Energy and Utility Board’s right to order that 938 gas wells be plugged, while the board has set Jan. 26 to decide which of 777 gas pools in the Wabiskaw-McMurray formation will negatively impact future bitumen recovery if continued gas production lowers reservoir pressures.
Currently 330 wells, accounting for 95 million cubic feet per day or 40.5 percent of Wabiskaw-McMurray’s total output, are closed, while 608 are producing under temporary exemptions. Gas producers took want full hearings Gas producers Paramount Energy Trust, Canadian Natural Resources, BP Canada Energy and Devon Canada took their fight to court, arguing that full hearings should have been conducted before the shut-in order was issued.
Attorneys Len Sali for Paramount and Al McLarty for BP said the board had an obligation to follow due process — a demand that Rod McLennan, the Energy and Utility Board’s attorney, said would be “absolutely impossible” to meet.
To conduct hearings on a well-by-well basis would take years, McLennan said, noting that previous shut-in orders affecting the Surmont and Chard-Leismer areas involved two years of hearings and only one-quarter the number of wells in the Wabiskaw-McMurray case.
He said the board must have the right to act where it believes “serious harm” is being done to a resource.
He said Alberta is in trouble if the Energy and Utilities Board is denied the right to protect a bitumen deposit with an estimated 100 billion barrels of reserves, or 600 times the energy content of the 1 trillion cubic feet of gas reserves. Alberta government could expropriate gas wells Sali said the board has other options, including a recommendation that the Alberta government expropriate the gas wells, rather than issuing a blanket shut in. Instead, he said the gas producers and their shareholders are taking the brunt of the costs. Paramount has estimated the shut-in order could cost it C$8 million of cash flow a year.
A geological study of Wabiskaw-McMurray issued by the Energy and Utilities Board on Jan. 2 reported that 464 of the 777 gas pools were in contact with the bitumen, creating an “acceptable risk” to bitumen recovery using techniques such as steam-assisted gravity drainage.
The board plans to release a list on Jan. 26 of the pools it believes would negatively impact the bitumen deposits. An interim hearing has been set for March 8, when gas and bitumen producers can challenge the proposed shut-in list, and, if required, a final hearing will be scheduled.
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