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Shale gas play a no man’s land in Quebec
BERTRAND MAROTTE MONTREAL— From Thursday's Globe and Mail Published Wednesday, Mar. 09, 2011 12:07PM EST Last updated Thursday, Mar. 17, 2011 5:52PM EDT
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Quebec’s shale gas sector is entering the big chill.
Players in Quebec’s nascent shale gas industry are nervously sorting through the provincial government’s decision to freeze further exploration using the controversial drilling technique known as hydraulic fracturing.
Quebec is putting fracturing on hold until a full study into the environmental effects is completed. The process could take up to 30 months, an eternity for oil and gas companies making decisions on development commitments.
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Infographic Quebec's shale gas
Concerns are mounting that a prolonged delay could seriously hurt the prospects for establishing a multibillion-dollar natural gas extraction industry in Quebec, and send some exploration companies to jurisdictions less fraught with political and regulatory risk.
Environmentalists, community groups and residents have raised an outcry over the shale gas projects, saying there are many documented cases in the U.S. and elsewhere that hydraulic fracturing can result in contaminated groundwater, air pollution and other problems. The so-called “fracking” process uses a mixture of water, sand and chemicals injected into shale rock formations under high pressure to release and pump natural gas to the surface.
Investors in some junior exploration companies that are betting big on the Utica shale gas play in Quebec ran for the exits in droves Wednesday after digesting the news of the halt on fracturing-based shale gas exploration in the province.
Shares in Calgary-based Questerre Energy Corp. ( QEC-T0.820.022.50%)– a key player in what’s known as the Utica shale play along the Lowlands of the St. Lawrence River – plunged 24.5 per cent on the Toronto Stock Exchange Wednesday. Quebec City-based Junex Inc.’s ( JNX-X0.70-0.02-2.78%)stock sank 20 per cent on the TMX Venture Exchange, while shares in Gastem Inc. ( GMR-X0.06----%)of Montreal plummeted 21 per cent, also on the Venture exchange.
The freeze on the use of fracturing is a “pretty significant” development, says Ken Chernin, a research analyst with Jennings Capital in Halifax.
“There is a lot of uncertainty. This could mean 24 to 30 months before we actually have any legislation” on the rules for shale gas development in Quebec, he said.
The uncertainty and the delay could result in some companies abandoning their projects in the province and seeking greener pastures elsewhere, Mr. Chernin said. “It’s a possibility. Absolutely,” he said. “I wouldn’t be surprised at all if they start looking at other areas.”
Norma Kozhaya, chief economist at the employers’ group Conseil du patronat, agrees.
“There is a risk. The onus is on the government to move speedily ahead with its environmental evaluation and ensure that this does not go on for an eternity so as to discourage industry,” she said.
It’s important at this stage for the government to clearly lay out what is expected of natural gas developers in terms of rules and regulations so that they can make their business and investment decisions accordingly, she said.
Denis Hamel, a spokesman for the Federation of Quebec Chambers of Commerce, urged the Quebec government to move speedily with the study lest it risk losing out in the highly competitive race for shale gas development, with rival jurisdictions including British Columbia, Alberta and some northeastern U.S. states.
“The question is, will [the Quebec government] have the political courage” in the face of strong, grassroots anti-fracking public opposition, he said.
Officials at the exploration companies are not commenting on the matter for now.
“There will be a response in due course, most likely from the Quebec Oil and Gas Association,” said Talisman Energy Inc. spokeswoman Phoebe Buckland.
Calgary-based Talisman is a partner with Questerre in shale gas exploration projects in Quebec.
The association is headed by former Quebec premier Lucien Bouchard, who is expected to comment on the government’s move early next week.
The discovery of huge natural gas reserves locked in rock deep beneath the rolling farmlands and towns on the south shore of the St. Lawrence River has attracted a bevy of oil and gas companies. Here are three high-profile players:
Questerre Energy Corp., Calgary
Last year, Questerre unveiled preliminary results indicating that the so-called Utica shale gas play in Quebec is among the top 10 shale fields on the North American continent. But Questerre chief executive officer Michael Binnion has been taking a cautious approach lately. Earlier this year, Questerre put on hold two major projects, saying it’s willing to wait until clearly established rules for development are in place. Mr. Binnion has also been an outspoken critic of what he calls media distortion, which he says has unnecessarily fuelled public fears.
Gastem Inc., Montreal
The junior exploration company was one of the early believers in an extensive shale gas play in the St. Lawrence Lowlands of Quebec. It holds exploration and storage rights to more than 445,000 hectares of land in the Lowlands as well as conventional reserves in the Gaspé Peninsula and Magdalen Islands. The company claims it was the first to target the Utica shale formation when it drilled two wells in the Yamaska region in 2007.
Junex Inc., Quebec City
A junior exploration firm that holds exploration rights on more than 2.5 million hectares of land in the Lowlands. Like other juniors, including Gastem and Questerre, it seeks partners to share the risk. It holds minority interests in two other Quebec oil and gas companies, Petrolia Oil & Gas Ltd. and Gastem.
Quebec's shale gas
Globe and Mail Update Published Wednesday, Mar. 09, 2011 7:48PM EST
A year later, opposition to shale gas exploration is still fierce
Fracking process decried; committee comes under fire from environmentalists
By MICHELLE LALONDE, Gazette Environment Reporter March 20, 2012
StoryPhotos ( 1 )
A woman holds a sign during a protest against the shale gas industry in Montreal in June 2011. While the industry is optimistic an environmental review will provide a solid regulatory basis for shale gas exploration, there's deep suspicion about the process among opponents.Photograph by:Dario Ayala , Gazette files
MONTREAL - Last December, when the committee examining the potential for shale gas exploration in Quebec held a series of information and exchange sessions with the public, few if any of the 500 participants seemed in the mood for information or exchange.
Opponents of the controversial process for extracting natural gas from deep inside Quebec's Utica Shale claim not a single person who attended the sessions had a positive word to say about either the industry or the committee in charge of the government's Strategic Environmental Assessment on shale gas.
In a typical exchange, Jacques Tétrault, a 59-yearold schoolteacher, told the panellists at the St. Hyacinthe meeting: "I don't recognize the legitimacy of your committee, gentlemen. The criteria to sit on the committee should have been that you had to reside within two kilometres of a fracked well."
Tétrault went on to question whether the committee would even evaluate alternatives to shale, or simply recommend ways the government can best avoid risk and make the most money on the resource.
A year ago, when Quebec Environment Minister Pierre Arcand announced the $7-million Strategic Environmental Assessment (SEA) on shale gas, he said it was in part to reassure the public that shale gas development will not go ahead in Quebec unless it is determined to be safe.
But a year into that process, opposition remains as fierce as ever.
While the industry is cautiously optimistic the review will provide a solid regulatory basis for exploration and commercialization to move ahead, deep suspicion about the process among the grassroots activists has made the committee itself a new lightning rod for criticism.
Robert Joly, who chairs the SEA committee, concedes its work got off to a rather rocky start.
"What we realized during those consultations was that essentially the committee was providing a kind of tribune for the public to express the concerns it has about the industry, and not just about the committee's work," he said.
A group of academics, calling itself the Collectif scientifique sur la question du gaz de schiste au Québec, has launched a series of conferences on issues around shale gas, mainly to address what its members consider the shortcomings of the SEA process.
Lucie Sauvé, a founding member of that 164-member collective and a Canada Research Chair in environmental education at the Université du Québec à Montréal, did not mince words at a recent news conference.
"The scientific collective obviously deplores the composition of the committee in charge of the (SEA). The majority of the members are affiliated with the government, which clearly has a prejudice in favour (of shale gas exploitation), or are more or less associated with the industry.
"There are no experts in health or finances, no representatives of the environmental groups or citizens' groups."
Over the past decade or so, the Quebec government has been keen to learn about the potential for shale gas exploitation in the massive Utica Shale deposit along the south shore of the St. Lawrence River, between Montreal and Lévis.
The province is eager for new sources of revenue that resource development promises, whether it be the Plan Nord to open up vast swaths of northern Quebec to mining, extracting oil and gas from the Gulf of St. Lawrence or drilling for natural gas trapped in shale rock.
Quebecers use about 215 billion cubic feet of natural gas each year, all of it imported from Western Canada. New techniques for horizontal drilling and hydraulic fracking - pumping chemicalinfused water into the rock to free the gas - have made access easier and cheaper, so late in the last decade, oil and gas companies were flooding Quebec's Natural Resources department with requests for exploration permits.
Between 2006 and 2010, some of those companies quietly drilled 18 exploratory wells on private property. Commercial extraction had not yet begun when cries of alarm started going off all along the Lower St. Lawrence.
Trouble with shale gas extraction was making news in the U.S. - contaminated water tables, gas leaks, noise and air pollution, explosions, even earthquakes - and Quebecers wanted no part in this new industry.
Dozens of citizens' groups began organizing in towns and villages along the river, all clamouring for a moratorium on shale gas exploration, if not a complete ban.
Then in August 2011 the government commissioned its environmental watchdog, the Bureau d'audiences publique sur l'environnement, to spend six months examining the issue.
The BAPE's final report - made public on March 8, 2011 - concluded that many fundamental questions could not be properly answered, because the environmental risks posed by drilling for shale gas in Quebec had not been sufficiently studied.
It recommended the government launch a more thorough investigation, a Strategic Environmental Assessment.
But the process meant to reassure the public is now under attack.
According to critics, the mandate is too broad and does not place enough emphasis on justifying the province's need for shale gas.
Citizen groups and environmental organizations who had been most active on the shale file were angered when no one they recommended was named to the 11-member committee conducting the SEA while an employee of Talisman, one of the companies engaged in shale gas exploration, was included.
Opponents continue to demand a full moratorium on shale gas activity. Officials with both the environment and natural resources departments say no new projects have been approved in the past year, and the industry's only activities in the province have been maintenance of existing operations.
The minister promised that no new shale gas projects would be approved during the 2½ years the SEA committee did its work, unless they were necessary for study purposes.
Activists say this is too hard to monitor, and fear the industry is carrying on its business as usual.
They charge the government is not assessing the potential of cleaner alternatives like biofuels from garbage dumps before spending $7 million to evaluate a fuel source fraught with risk.
Joly said the committee members have valid expertise and will seek input from other experts and the public when needed.
He said the SEA will include a comparison of different fuel sources, such as biomethanization, but he stressed that the committee's mandate is not to change the government's energy policy.
"What must be understood is that we don't have a mandate to redo the government's energy policy," he said
The committee's final report is to be submitted to the government by November 2013.
For more on the shale gas evaluation, go to http://ees-gazdeschiste.gouv.qc.ca
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