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Quebec's Shale Producers Face More Scrutiny

Natural gas explorers that hope to tap into Quebec's emerging Utica Shale and St. Lawrence River lowlands face more scrutiny going forward, Environment Minister Pierre Arcand said Monday.

In addition to permits now required to be obtained, the province plans to require that producers obtain certificates and be subject to more rigorous inspections. The new certificate requirement would cover both gas exploration and production. No certificates would be mandated for producers that already hold permits, but permitted producers still face additional inspection requirements.

Quebec, whose gas and oil industry dwarfs that of other Canadian provinces, wants gas exploration to be "as safe as possible...Before anybody gets a certificate of authorization, we need to make sure that they will follow the proper guidelines," said Arcand.

In September Natural Resources Minister Nathalie Normandeau said Quebec would allow producers to begin preliminary gas development while regulatory issues were reviewed (see Daily GPI, Sept. 16; Sept. 1).

Quebec's energy plan four years ago didn't even mention shale resources (see Daily GPI, June 8, 2007). However, as drilling technology has improved, producers have begun to lease provincial land in their quest to obtain new gas and oil resources.

"There will be many more" wells in the future, the Environment Minister predicted.

Interest in Quebec was piqued in 2008 when Denver-based Forest Oil Corp. announced that it had discovered gas in the Utica Shale in Quebec, where it held close to 270,000 net acres (see Daily GPI, April 2, 2008).

Calgary-based Talisman Energy Inc., which has 770,000 acres of leasehold in the province, was drilling two horizontal wells in its holdings (see Daily GPI, Nov. 4, 2009; May 21, 2009). Talisman also partners with Questerre Energy, which has more than one million acres gross in the region. And TransAmerican Energy Inc., based in British Columbia, earlier this year acquired 10 properties on 136,000 net acres (see Daily GPI, March 16).

Jean-Yves Laliberte of Quebec's Ministry of Natural Resources said Tuesday that based on "very preliminary information," there may be about 40 Bcf of shale gas in the province -- equal to its gas consumption for 200 years.

Laliberte spoke at the first in a series of public hearings to answer questions from the public. The province's environmental protection agency, the Bureau d'audiences publiques sur l'environnement, now is reviewing hydraulic fracturing practices and plans to issue a report by February. Hearings are scheduled in Quebec this week and into November.

Industry representatives also attended the first public hearing, including Junex Inc. CEO Jean-Yves Lavoie. Early results indicate an abundant amount of gas in the Utica Shale, he said. "This represents an exceptional development opportunity for Quebec. We believe that exploration and exploitation of this resource can be done safely while respecting the environment."

According to Lavoie, the gas industry plans to recycle 100% of the water used for fracking and would install "maximum protection" to ensure freshwater aquifers are protected.

Today gas makes up about 11% of the energy consumed annually in Quebec, which relies more on hydroelectricity. Quebec now imports all of its gas from Western Canada and the United States.

Meanwhile, Pauline Marois, who leads the opposition Parti Quebecois (PQ) in the government, said last weekend that if her party takes power, it would ensure that half the wealth generated by gas and oil wells be returned to the citizens. "This is not negotiable," the PQ leader told delegates at a meeting. The province, she said, could become an investor in gas and oil plays, ensuring a return on the projects through royalties, taxes or the fees for other permits.

PQ has called for a one-year moratorium on shale gas exploration and joined with environmental groups and stakeholders opposed to development. However, Marois said PQ is not opposed to energy development, but any energy exploration and production has to be done with the support of the province's citizens.

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