Canada / Duvernay Shale / Shale Daily / NGI The Weekly Gas Market Report / NGI All News Access

Duvernay Is Proving Ground for Canadian Regulatory Reform

A rich Alberta shale formation -- the Duvernay, which is renowned for high concentrations of premium liquids -- has been designated as a regulatory proving ground for a new fracking regime of accelerated drilling licenses, environmental permits and public consultation.

The trial run, beginning Sept. 1, sets a target of 45 days for granting approvals. But to start the clock running, industry applications must be complete by covering the full scope of wells, facilities such as access roads and pipelines, and their cumulative effects on the air, land, water and communities.

Known as "play-based regulation" or PBR for short, the approach is the first foray into using expanded authority that reform legislation embedded into the Alberta Energy Regulator (AER). The enlarged agency replaced the province's Energy Resources Conservation Board (ERCB) on its 75th birthday in mid-2013, in response to decades-long industry campaigns for a single, simplified and accelerated development review and approval process.

A county-sized block of the Duvernay, surrounding Fox Creek 260 kilometers (160 miles) northwest of the provincial capital of Edmonton, was selected as a natural proving ground for PBR. The regulatory trial block underlies a well-settled farming, ranching, forest products, and conventional oil and gas production region with a long history of both co-operation and friction among various factions and interest groups.

The regulatory trial run area is believed to be an exceptionally liquids-rich sweet spot in the Duvernay shale formation, which carpets about 100,000 square kilometers (38,600 square miles) of northwestern and west-central Alberta. Aggressive development is beginning on big spreads of Crown, publicly owned mineral rights that have fetched about C$2 billion (US$1.8 billion) for the provincial treasury from lease auctions.

The Duvernay is especially celebrated for containing a very light variety of oil known as condensate or natural gasoline. In Alberta, the material fetches premium prices up to 10% above the benchmark quality crude known as Edmonton light, which is the regional counterpart to West Texas Intermediate.

On top of its appeal to refiners, condensate is in high demand in Alberta as diluent, or thinner, needed to make oilsands bitumen flow in pipelines. The blend has become a standard product, known as dilbit, on oil markets across Canada and the United States.

Estimates of the Duvernay's contents vary widely, but only in calculating how colossal the volumes will eventually turn out to be. The deposit has attracted strong interest from some of the industry's biggest operators such as Shell, Chevron, Encana, XTO, Talisman and Husky.

Private industry forecasts foresee Duvernay wealth as 19 billion bbl of liquids and 477 Tcf of gas. Enthusiastic analysts have described the formation as a Canadian counterpart to the Marcellus, Barnett and Eagle Ford shale plays in the United States.

The Alberta Geological Survey, now the resource appraisal arm of the AER, estimates the total Duvernay in-place endowment at up to 983 Tcf of gas, 27.6 billion bbl of gas liquids and 144.6 billion bbl of oil.

The agency makes no attempt to guess what proportions of the formation's contents will turn out to be economically recoverable with horizontal drilling and hydraulic fracturing. Duvernay applications of the shale technology are still in early stages of development, with drilling and fracking experiments costing C$10 million (US$9 million) or more.

On the regulatory front, the PBR regime is intended to be an adaptation of formerly dispersed and potentially discouraging provincial authority. The AER has jurisdiction over all earth sciences, engineering, environmental, safety and community aspects of oil, gas, coal and oilsands developments from their cradle in geophysical exploration to the grave of facilities abandonment and reclamation.

PBR marks a shift towards approval of full life cycles for entire projects or programs involving multiple wells and operating sites spread out across swaths of territory -- a sharp departure from traditional practices of granting permits to facilities one at a time.

The new process will work at "a landscape level" -- not only to speed up approvals, but also to assess and manage cumulative effects of development, says an AER handbook for participants in the forthcoming Duvernay regulatory trial run.

PBR applications must cover four bases, the agency says: disclosure of project plans, "stakeholder engagement" programs, risk management strategies, and reporting systems. All four elements must be fully articulated for the life spans of industry projects, and include commitments that are "clear, reasonable and enforceable."

The Duvernay trial run for the new fracking regime will also serve as an early outing for a provincial Aboriginal Consultation Office, which is devising a systematic approach to dealing with increasingly contested native rights which are recognized in principle but not spelled out in practice by the Canadian constitution.

Provincial officials emphasize that PBR is meant to foster improved environmental and community acceptance of industry, as well as to churn out swift development approvals. The AER handbook describes the new regulatory fracking regime as intended "to manage the risks through collaborative planning by operators within an area to mitigate and minimize the effects of development."

ISSN © 2577-9877 | ISSN © 1532-1266 | ISSN © 2158-8023

Recent Articles by Gordon Jaremko

Comments powered by Disqus