British Columbia Sets Record with September Auction

During its September auction, Canada's western province, British Columbia, sold $418 million in oil and gas rights, setting a monthly record in Canada and placing the province on track to match Alberta for the first time in approaching the $1 billion mark.

The B.C. auction outstripped the previous monthly high of $139-million set by Alberta in December, 2000, as producers vied for property in a hot region for natural gas prospects in the northeast.

The September sale for rights to drill for oil and gas, conducted Wednesday through sealed bids and verified yesterday, also came close to B.C.'s previous annual high of $439-million in 2001.

Over the past two years, B.C.'s government has introduced a series of programs designed to increase petroleum activity by lowering royalty rates and cutting red tape. The vast majority of bids in the latest auction focus on a region that would require deep drilling to extract reserves of natural gas buried in the foothills of northeastern B.C., between Dawson Creek and Tumbler Ridge.

Producers submitted their bids through land companies to protect their identities for competitive reasons. Active explorers for natural gas in nearby northeast parcels include EnCana Corp., Talisman Energy Inc., Apache Canada Ltd. and Canadian Natural Resources Ltd.

In an interview yesterday, B.C. Premier Gordon Campbell welcomed the record-setting sale. So far this year, British Columbia has raised $600-million at its land sales, compared with $636-million in sales for Alberta's coffers. "This is certainly a very bright light for us," the B.C. Premier said. "This truly is a situation where we're encouraging private sector investment, and if we do that, the government will be benefit." While it wouldn't be realistic to quickly expect another massive monthly land sale such as the one for September, B.C. is benefiting from a surge in petroleum drilling, Mr. Campbell said.

The Calgary-based Canadian Association of Petroleum Producers (CAPP) had lobbied the Liberals for changes in energy regulations after the party ousted the NDP administration in May, 2001. "It has been a meeting of minds. The B.C. government has recognized the need to become competitive," CAPP vice-president Greg Stringham said yesterday. Royalty credits of up to $4.1-million per well were introduced recently to encourage deep-well drilling, which is expensive. The area south of Dawson Creek is getting new roads to provide greater access to rigs, and a new pipeline is slated to be built in the region soon.

The brisk activity in British Columbia also involves another portion of the province's northeast, with companies such as EnCana stepping up their drilling programs.

B.C. Energy Minister Richard Neufeld said yesterday that hectic summer drilling by EnCana at its Greater Sierra play is one indication of how petroleum companies are attracted to a region that's proving to be rich in natural gas. The Greater Sierra region, east of Fort Nelson, is turning out to be the largest gas field discovered in Western Canada in the past decade.

Preliminary estimates peg the area's recoverable reserves at 2.5 trillion cubic feet, or more than five times the size of the Ladyfern gas play near Fort St. John.

In the NDP's last full year in power in B.C. in 2000, the province sold $248-million in oil and gas rights. Even in downturns, Alberta raises at least $500-million a year at its auctions. Alberta holds the annual record for land sales, attracting $1.15-billion in bids in 1997 and surpassing the billion-dollar mark again in 2000 and 2001, according to figures compiled by CAPP.

Mr. Campbell said his government wants to send out the message that B.C. is open for business. "One of the things that we're trying to do with industry is ask them, 'What does it take for you to come and be part of our future in British Columbia?' So, we changed the royalty regime for deep wells, low-productivity wells, coal-bed methane and summer wells. Our goal is to get investment."