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Alberta Shuts In Gas to Protect Oilsands

October 19, 2009
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Following precedent set by a hotly contested case that dragged on through the late 1990s and the first half of this decade, three Alberta natural gas producers were ordered last Thursday to shut in 158 wells deemed to jeopardize future oilsands production.

The province's Energy Resources Conservation Board (ERCB) directed Canadian Natural Resources Ltd., Paramount Energy Operating Corp. and EnCana Corp. to turn off 33 MMcf/d of gas output. The geological formations tapped by the wells overlap with bitumen deposits, and reducing underground pressure by continuing to produce the gas could prevent development of larger, more valuable oil deposits, ERCB ruled.

Requests by two bitumen project sponsors, Sunshine Oilsands Ltd. and Total E&P Canada Ltd., prompted the ERCB to make the order under its conservation mandate to ensure the greatest possible value is ultimately earned from provincial resources. The order, which goes into effect Oct. 31, is an interim measure that followed a quick review of written submissions. Resistance is still possible, potentially triggering lengthy technical investigations and public hearings. Canadian Natural and Paramount formally objected to the shut-in appeals by Sunshine and Total.

But the previous marathon contest, which spilled over into the courts, affirmed the ERCB's authority to give northern bitumen development prospects priority. The shallow gas reserves involved in the conflicts contain much less energy than the bitumen deposits, which are up to 15 meters (49 feet) thick, spread over large areas, and bound to fetch only a fraction of anticipated oil revenues over decades-long anticipated life spans of production projects.

The oilsands reserves involved are too deep to mine, and owners of the mineral rights are in the midst of planning large in-situ underground extraction programs using steam injections. Although the production schemes remain in tentative, preparation stages, the ERCB said it does not have to wait for oil projects to begin in order to take protective action.

The board said its "focus is on the potential for significant waste of bitumen resources" during periods required to consider applications for oilsands projects. "Nor does it [the ERCB's conservation mandate] require irreparable harm to be established conclusively." The rules require preservation of reserves in a natural condition to be developed when their turns roll around. "The appropriate consideration is whether the bitumen is potentially recoverable, not commercially recoverable," the ERCB said.

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