After shutting in 2% of natural gas production and reserves to conserve underground pressure in its oilsands, Canada’s chief producing province has embarked on a test case as to whether it can keep open a far larger, mainstay source of natural gas.

A many-sided tangle before the Alberta Energy and Utilities Board, starting with pre-hearing public meetings this summer, centers on a spreading conflict between urbanization and “sour” gas, steeped in lethal hydrogen-sulphide.

While the oilsands-gas conflict lasted six years, it was a fight in the industry family among a handful of companies over a relatively remote region that boiled down this summer to a straightforward choice by the numbers. The options were: (1) shut in about 250 MMcf/d of gas production from 1 Tcf of reserves; or (2) jeopardize production of a projected 100 billion barrels of bitumen with 600 times the energy content of the sacrificed gas.

The new round of the sour-gas tangle directly involves more than 250,000 residents of 40 communities in the southeastern corner of the industry capital of Calgary and has a 23-year history. Indirectly — by setting benchmark health, safety, environment and technical standards — the outcome is bound to affect the entire industry’s access to 20% of Alberta’s remaining gas reserves that account for 32% of production.

By the AEUB’s latest count, 8.3 Tcf of Alberta’s established gas inventory of 42 Tcf had enough hydrogen-sulphide content to rate as hazardous. The impurity — an outright poison rather than a slow-acting, smothering gas — is dangerous at levels measured in fractions of a percent. By the time the concentration reaches one percent, it rates as deadly. The Calgary reserves are 35.6% sour.

Alberta’s handling of the case affects the entire Canadian industry. The AEUB is the acknowledged national authority on sour gas and its approaches are adopted by other regulators, including the National Energy Board, for other jurisdictions where hydrogen-sulphide turns up, including British Columbia and offshore of Nova Scotia.

AEUB chairman Neil McCrank underlined the importance of the Calgary case in an open letter to a retired predecessor, Gerry DeSorcy, who remains chairman of a board-supported Alberta Advisory Committee on Public Safety and Sour Gas. The document laid out an ambitious agenda of special studies involving a wide range of civic and government groups, in an attempt to come up with long-range plans for coordinating gas and urban development across the province.

The issue has heated up steadily since the industry began producing sour gas on a large scale half a century ago, when environmental sensitivities ran much lower and the province’s population of about 900,000 was less than one-third of its current, growing level.

Industry and regulators alike long ago saw conflict coming. The Calgary case dates back to 1980, when the AEUB circulated an information letter urging the industry to accelerate extraction before the reserves could be stranded by expanding real estate development and city territorial annexations. The 1980s and ’90s slumps in energy prices and investment did not help. A pipeline was approved but not built. A 1983 inquiry repeated the 1980 appeal. A new plant was approved and built. By 1985, two more pipelines were approved and built.

But by 1990, when the former Canadian Occidental Petroleum (now Nexen Energy) sought permits for new wells, suburban and country residential housing districts had advanced to a point within sight of the drilling site. After a high-profile struggle, the applications were withdrawn in 1994. In 2000, the AEUB approved an extension of the lifespan of a critical pipeline in the region and again urged an acceleration of extraction.

The challenge was taken up by Compton Petroleum Corp., an independent which has emerged into Canada’s 25th-largest gas producer in just 10 years since it started from scratch — often by scooping up prospects that senior corporations regard as too small or aggravating.

Compton seeks permits for up to six wells. The plan incorporates the latest technical approaches: horizontal and under-pressured drilling, incineration rather than flaring of waste gases, computerized emergency planning, and tight control of work-flow matters such as truck traffic, noise and dust.

All the wells would be drilled at a single small site. But the spot is just 1.1 kilometers (seven-tenths of a mile) from the city limits.

Varying degrees of opposition are expressed by many ranging from the Calgary Regional Health Authority to hermits on the remains of old farms. The expressions range from doors slammed in Compton agents’ faces to debates over fine points of the evolving science of sour gas. Compton hopes to win the arguments — and tolerance of a majority in the region — in time to obtain drilling approvals in mid-2004.

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