Paramount Energy Trust is taking several actions in an attempt to minimize the impact on its gas production of Alberta’s controversial order. The order, which is designed to conserve underground pressure in a northeastern Alberta field in order to preserve future production of 100 billion bbl of crude bitumen, is schedule to become effective on Monday.

Paramount and many other Canadian natural gas producers affected by the recent Alberta Energy and Utilities Board (AEUB) decision will file for exemptions to protect their wells. They also have taken legal action in an attempt to head off the ruling before it takes affect.

In July, the AEUB issued its final order to shut in as many as 938 natural gas wells, producing about 250 MMcf/d and representing about 1 Tcf in reserves from the Wabiskaw-McMurray formation in the Athabasca Oil Sands Area of northeastern Alberta. The ruling was designed to preserve bitumen production that represented about 600 times the energy content of the sacrificed natural gas. In an attempt to placate gas producers, the AEUB delayed the effective date of the order by a month and left room for producers to file for exemptions if they could prove their gas wells would have no impact on bitumen production.

Paramount, which was expected to take the biggest hit from the decision, said it will apply for exemptions for as much as 86% of its production (39 MMcf/d), leaving as little as 6 MMcf/d subject to the shut-in order. Applying for an exemption will allow the company to continue producing, unless an objection is filed by either the AEUB or another party. A hearing subsequently will determine whether the gas production can continue without impacting future bitumen production.

Meanwhile, a consortium of gas producers, led by Paramount, has taken court action in an attempt to overturn the order. The producers, which also include Devon Canada Corp., BP Canada Energy Co., Canadian Natural Resources Ltd. and ProGas Ltd., have asked the Court of the Queen’s Bench to reject the AEUB’s decision. They also have asked the Court of Appeal of Alberta to grant them the right to appeal the order and to suspend it until their case is heard.

They claim Alberta regulators did not follow the correct legal steps before they acted. The alleged result was a violation of their rights and an expropriation of their mineral interests without just compensation.

Murray Smith, Alberta’s energy minister, has said that he is looking at ways to potentially address the gas producers’ financial losses. Royalty breaks are being considered, but no concrete proposals for compensation have been made.

The companies have told the courts that they will lose between $75,000 and $225,000 in revenue per day if all of their wells in the area are capped.

Paramount Energy Trust shares lost one third of their value a day after the AEUB’s decision was made. But Paramount President Susan Riddell Rose warned that the financial impact of the policy will be measured in “billions” of dollars, not “millions” of dollars.

“The value of the reserves themselves is over $1.5 billion,” she said in a June conference call. “There’s infrastructure that’s stranded. There is reclamation that will have to move forward. There’s loss of investment opportunities. All these have to be factored into compensation.”

And despite the severe impact, Paramount charges that AEUB never even proved that gas production posed an unacceptable risk to bitumen recovery. Rose said a large amount of the gas that would be shut in under the proposed policy “clearly poses no [bitumen] conservation issue at all.” She said that in fact there is “no empirical evidence at all” that gas production has impacted bitumen recovery anywhere in the province of Alberta.

However, oil sands developers, such as Petro-Canada, have supported the decision and the AEUB’s conclusions regarding the impact of gas production on bitumen.

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