The government of Quebec announced last Tuesday that hydraulic fracturing could continue in the province for exploration purposes only, after the release of a much anticipated report that urged further study of the practice.

That announcement has divided people in the province, and a government official in neighboring New Brunswick said a moratorium would not be implemented there despite demands from environmentalists.

Pierre Arcand, Quebec's environment minister, released a report by the Bureau d'audiences publiques sur l'environnement (BAPE) last Tuesday and said his government would move forward with its recommendation of conducting a two-year strategic environmental assessment on shale gas.

Jacques Dupont, an environment associate deputy minister with the Quebec government, told NGI that drilling would remain permissible in the province, but companies would need to go through an approval process to do so.

"There will be some rules set up in the weeks and months to come to improve the regulations governing the shale gas exploration process," Dupont said last Wednesday. "All new fracking projects conducted in the future will have to be part of this [assessment].

"It's a lab process. It's not a moratorium. It won't stop the projects."

The new restrictions sent the stocks of several oil and gas companies exploring the Utica Shale play in Quebec into decline last Wednesday. As of midday Friday on the Toronto Stock Exchange, Questerre Energy Corp. stock was down C41 cents to C$1.18 a share, a decline of more than 25%. Talisman Energy Inc. stock fell C69 cents to C$22.74 a share, a decline of almost 3%.

Talisman is the largest acreage holder in the Utica Shale with 756,000 net acres, while Questerre is number two with 336,440 net acres.

"They are restricting activities," David Mann, spokesman for Calgary-based Talisman, told NGI last Wednesday. "Hydraulic fracturing will be permitted only as part of an environmental assessment if it can provide scientific information and builds Quebec's competence in geology and hydrogeology."

Dupont said a committee of local and provincial government officials and industry experts would be formed by the end of spring.

"The very large majority of people are favorable to what the BAPE just proposed and what [Arcand] has accepted," Andre Belisle, president of the Association Quebecoise de Lutte contre la Pollution Atmospherique (AQLPA), told NGI last Thursday. "It doesn't say it is a moratorium, but it is almost one. It gives us the time to make the research we need to find the right answers to all the questions that were not asked before."

But not everyone was pleased with the 323-page BAPE report. The opposition Parti Quebecois blasted Premier Jean Charest and his party, the Quebec Liberal Party, and called for a halt to all hydrofracking.

"The BAPE concludes that the Liberal government acted wrongly and the people had reason to be concerned about shale gas," a translated Parti Quebecois statement said. "The BAPE has been the victim of a period too short and a mandate too limited. We currently do not have reliable information and knowledge in Quebec to launch the shale gas development. This reinforces the conviction that a moratorium worthy of its name is necessary."

The Conservation Council of New Brunswick (CCNB) renewed its calls for a moratorium in that province last Wednesday.

"We have had no studies, no public hearings and yet our government is willing to move forward with shale gas development while Quebec clearly is not," CCNB Executive Director David Coon said. "Our government needs to follow New York and Quebec. Daily, there are more municipalities, counties, states and now provinces putting a halt to this practice before it gets out of hand, [and] New Brunswick should follow suit."

Bruce Northrup, the natural resources minister for New Brunswick, said a moratorium on hydraulic fracturing would not be implemented in the province, but promised citizens groups and the CCNB face time with industry officials to voice their concerns.

"I want to be very clear; the New Brunswick government will not put a moratorium on [hydraulic fracturing]," Northrup said Friday. "We realize what's happening in Quebec. Some of the things that they are doing now we have already done in the past. It's no offense to Quebec, but we've started the process quite awhile ago. We feel that we're ahead of this game but we want to take it slowly."

BAPE conducted public hearings for its report from September to November 2010, and received more than 200 briefs both supporting and opposing drilling.

Quebec officials first warned in January that natural gas development might not be allowed to proceed, after inspectors with the Natural Resources Department in November and December 2010 had found minor gas leaks at 19 of the 31 shale gas wells drilled in the province (see NGI, Jan. 24).

Quebec revealed last September that 13 companies were permitted to drill in the Utica Shale play.

Interest in drilling in the province began in 2008 after Denver-based Forest Oil Corp. announced that it had discovered gas on its nearly 270,000 net acres in Quebec (see NGI, April 7, 2008). Talisman holds 770,000 acres of leasehold in Quebec and has drilled two horizontal wells there (see NGI, Nov. 9, 2009; May 25, 2009). Talisman also partners with Questerre, which has more than one million acres gross in the region. And TransAmerican Energy Inc. acquired 136,000 net acres in Quebec in March 2010 (see NGI, March 22, 2010).

Questerre put two projects in the St. Lawrence Lowlands on hold in January in anticipation of the BAPE report (see NGI, Jan. 24). Meanwhile Corridor Resources Inc. and Petrolia Inc. reported in February that test wells into Macasty Shale on Quebec's Anticosti Island yielded encouraging results and gave no indication that a delay was imminent.

"We have to review the report and the implications," Mann said. "Quebec is still in its very early stages in evaluating the shale business. Talisman has been drilling pilot wells to assess the commerciality of the Utica Shale. [But] neither ourselves nor the government right now know if there is a viable shale business to be had in Quebec. At this very early phase in the play the government wants to make sure that things are done properly and they understand the implications of shale development in the province."

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