Quebec swims against tide with shale ban move9/21/2012
n a move that feels a lot like an extended middle finger to the Alberta-based oil and gas industry, the newly elected separatist Parti Québécois said Thursday it is planning a long-term ban on shale-gas exploration and production in Quebec.
No one seems too surprised that the confrontational government, after ditching the Canadian flag from the Quebec legislature and threatening to block foreign takeovers of Quebec firms, would shut down production of the controversial resource as one of the first items on its agenda.
“I don’t foresee a day when there will be technology that will allow safe exploitation [of shale gas],” Natural Resources Minister Martine Ouellet said in Quebec City.
Our position is very clear: we want a complete moratorium, not only on exploitation but also on exploration of shale gas
“Our position is very clear: we want a complete moratorium, not only on exploitation but also on exploration of shale gas. We haven’t changed our minds.”
The position may appease Quebecers, whose concerns that fracking technology used to unlock shale-gas deposits would contaminate drinking water led to a temporary moratorium two years ago.
Yet Quebec is going against the tide, which includes some very green jurisdictions that have chosen to improve extraction and implement regulation rather than write it off.
Take British Columbia, the greenest province in Canada, which is building a new industry to export its shale gas in liquid form to Asia.
Or the United States, where President Barack Obama, a big fan of renewables, has embraced shale gas as a “clean fossil fuel” and a major contributor to America’s increasing energy independence.
Quebec is taking this bold step without weighing the implications. Shale-gas extraction is in its infancy and technology and industry practices are improving quickly.
David Mann, spokesman for Talisman Energy Inc., one of the companies that explored for shale gas in Quebec, said New York state, after conducting extensive study, holding hundreds of hours of hearings, receiving scientific input, “fundamentally [came to] the conclusion … that if shale development is done responsibly, it is safe.”
Quebec could find itself short of gas if one of its sources — the TransCanada Corp. Mainline that is importing gas from Western Canada — is declared a “stranded asset, ” a possibility under consideration by the National Energy Board.
Quebec consumes on average about 700 million cubic feet a day, with volumes increasing for winter heating and dropping off in the summer.
Quebec is writing off an important job creator at a time of weak economic performance and large government debt. The industry estimates the provincial government would reap annual royalties of $1-billion from shale development.
Ed Kallio, director of gas consulting at Ziff Energy Group in Calgary, said the shale-gas ban may have been motivated by Quebec self-interest — the province owns Hydro Quebec, the power utility.
“The last thing Quebec needs is more gas,” Mr. Kallio said. “It the gas price goes down, so does the power price. They are really exposed to low gas prices.”
In the U.S., Exxon Mobil Corp. executive Jack Williams offered a taste Thursday of how much shale gas development — which barely existed a decade ago — is now contributing to the U.S. economy. In a speech to the Shale Gas Insight Conference in Philadelphia, Mr. Williams said the resource is expected to support 1.5 million jobs and contribute nearly US$200-billion to GDP in the U.S. by 2015. Those benefits are expected to double by 2035.
Quebec’s ban is an about-face since the days of the pro-development Liberal government. Companies such as Talisman and Questerre Energy Corp. originally entered the province because of its favourable fiscal terms — a carrot to promote investment.
Quebec’s Utica shale is estimated to hold about 220 trillion cubic feet of natural gas.
While significant, it’s second-tier relative to other deposits found across North America, such as the Marcellus or the Montney.
After trying hard to educate Quebecers about shale gas, it’s unlikely industry will bellyache too much about the ban at a time of depressed natural gas prices and greener pastures elsewhere.
But it will remember.