New Brunswick's energy minister said a moratorium on hydraulic fracturing (fracking) in the province, enacted in late 2014, will continue indefinitely because the provincial government does not believe the oil and gas industry can meet five criteria to allow drilling to move forward.
"We have been clear that we would not allow this activity to go forward unless our five conditions were met," Energy and Mines Minister Donald Arseneault said on May 27. "Creating jobs is our No. 1 priority, but not at any cost. It is clear that our conditions cannot be satisfied in the foreseeable future."
The extension of the moratorium is another blow to the prospects for shale development in the province. Those prospects began to dim in September 2014 (see Shale Daily, Sept. 24, 2014) after voters returned the Liberal party to power and turned out the pro-shale Progressive Conservatives (PC).
Three months after taking power, the Liberal government enacted the moratorium on fracking and said it would not lift it until five conditions were met -- the first of which was for oil and gas companies interested in exploring the province to have "social license," a term in Canada that essentially means the companies have earned the public's trust in keeping them safe (see Shale Daily, Dec. 12, 2014). The remaining four criteria called for:
- Clear and credible information about the impacts of fracking on public health, the environment and water, allowing the government to develop a country-leading regulatory regime with sufficient enforcement capabilities;
- A plan in place that mitigates the impacts on public infrastructure and that addresses issues such as waste water disposal;
- A process in place to respect the duty of the provincial government to consult with First Nations; and
- A mechanism in place to ensure that benefits are maximized for New Brunswickers, including the development of a proper royalty structure.
But Arseneault said that "after careful consideration, it is clear to us that the industry has not met the conditions. Additionally, the global market for natural gas has seen a precipitous drop in prices, which makes it further unlikely that industry will invest the necessary efforts to address the conditions in the short or medium term."
Arseneault added that the previous PC government had no clear energy policy and no plans for handling sensitive issues, such as the disposal of wastewater from fracking operations. He said industry proposals to dispose of such wastes into the municipal systems in Moncton or Saint John, NB, were unacceptable.
New Brunswick is home to the Frederick Brook Shale, an emerging play that lies beneath the Hiram Brook tight gas sands in both the Sussex and Elgin sub-basins (see Shale Daily, Dec. 7, 2010).
In March 2015, the Energy and Mines Ministry appointed a three-member panel -- officially, the NB Commission on Hydraulic Fracturing -- to study fracking and determine whether it can be performed to the government's standards. The panel asked for public comments on the practice last September, and released a report on its findings in February (see Shale Daily, March 11; Sept. 30, 2015; March 27, 2015).
The Canadian Association of Petroleum Producers (CAPP) called the province's decision to extend the moratorium "a step in the wrong direction" and urged the government to reconsider.
"Industry has been working with the government to ensure world-class regulations and environmental protection is in place," said Paul Barnes, CAPP manager for Atlantic Canada and the Arctic. "Producing natural gas at home can help the province create economic benefits such as jobs, tax revenue, royalties and the ability to attract other business.
"The decision to extend the moratorium is a step in the wrong direction and sends a negative message about attracting investment to help grow the economy. We encourage the government...to continue to work with industry to meet the five conditions. We have seen progress on this issue in other parts of Canada and we don't want New Brunswick to miss the opportunity."
Separately, junior explorer Corridor Resources Inc. also said it was "profoundly disappointed" with the decision. The company said it recently told the Liberal government that it planned to spend C$70 million (US$54.1 million) on a new drilling and completion program, assuming the moratorium was lifted. Corridor, which is based in Halifax, Nova Scotia, said it planned to develop 11 wells in New Brunswick between 2018 and 2021.
"This capital program is now postponed indefinitely, as are efforts to recruit a joint venture [JV] partner to conduct further exploration to unlock the vast potential of the Frederick Brook Shale," Corridor said (see Shale Daily, June 3, 2011). The company added that it was considering its next steps and would assess the moratorium's extension on its "business, operations and financial condition, which will include consultation with [our] independent reserves evaluators to assess the extent of the impact on [our] oil and gas reserves."
Corridor said the company and its partners have invested more than C$500 million (US$386.6 million) of risk capital exploring for oil and gas in New Brunswick, and have paid more than C$20 million (US$15.5 million) in royalties to the provincial government and C$6.5 million (US$5.03 million) to local landowners and municipalities. Corridor said it has drilled 40 wells and completed 109 fracture stimulations in the province, where it also constructed and operates a gas plant and 50 kilometers (31 miles) of pipeline.
Corridor holds natural gas production and reserves in the McCully Field near Sussex, NB (see Daily GPI, June 28, 2007). It also holds a shale gas prospect in New Brunswick, an offshore conventional hydrocarbon prospect in the Gulf of St. Lawrence, and an unconventional hydrocarbon prospect through a 21.67% interest in Anticosti Hydrocarbons LP, a JV which has undiscovered resources on Quebec's Anticosti Island (see Shale Daily, Feb. 21, 2014).