Quebec Unveils Map for Managing Shale Gas Development

The Quebec government will sign this fall a memorandum of understanding with the shale gas industry that will detail best practices the industry will be required to implement for gas exploration and development in Quebec. This will involve a social agreement between industry, government and the public.

The memorandum of understanding is part of the Quebec government's plan, unveiled last month, to manage the development of shale gas resources in the Canadian province. The plan will include consulting with partners and the public on how shale gas exploration and development activities will be controlled.

The Bureau d'audiences publiques sur l'envrionnemet (BAPE) mandate will examine the concerns of the public, municipalities, groups and organizations in a neutral and independent manner. "This will ensure that the information necessary for an in-depth assessment is compiled, shared and discussed transparently and responsibly," said Deputy Premier Minister of Natural Resources and Wildlife Nathalie Normandeau and the Minister of Sustained Development, Environment and Parks Pierre Arcand.

The BAPE commission will submit its report to Minister Arcand in February 2011. "The report will contain the commission's recommendations o how to oversee the shale gas industry to ensure protection of the environment and respect for the public," said Arcand.

In addition to the mandate, the government will continue its work to draft the anticipated Hydrocarbons Act. This work will be carried out in cooperation with municipalities, the public, industry, agriculture and environmental groups. These interests have been grouped into three advisory committees, including a hydrocarbon liaison committee, an environmental advisory committee and an advisory committee comprised of industry representatives.

The hydrocarbon liaison committee is comprised of elected officials from three administrative regions located between Montreal and Quebec City, where natural gas potential is significant, including the Chaudiere Appalaches, Centre-due-Quebec and Monteregie-Est regions, as well as representatives of the Union des producteurs agricoles and Quebec municipal and government agencies.

All three committees will be commissioned to examine the environmental, social and economic challenges of hydrocarbon exploration and development. Each committee will submit its opinion and recommendations on which provisions should be included in the draft legislation pertaining specifically to hydrocarbons, for purposes of overseeing current activities to develop Quebec's gas resources.

Information will be provided through various forms of media to elected officials and the public such as the internet, a comprehensive information guide and meetings for access to complete and reliable information about the shale gas industry.

Developing shale gas resources is part of Quebec's plan to reduce its dependence on hydrocarbon imports. Currently, the province imports all of the hydrocarbons it consumes; the cost associated with oil and gas imports rose from C$12 billion in 2005 and 2006 to C$14 billion in 2008.

Gaz Metro, the sole distributor of gas in Quebec, said it was satisfied with the government's announcement as it ensured the structured pursuit of the demonstration phase of gas production in Quebec, a key step aimed at establishing the economic potential of this energy source in Quebec and supporting the initiatives that promote its development.

The shale gas plan has aroused opposition from environmental groups who have called for a moratorium on shale gas exploration until more scientific studies are conducted to assess the environmental impact. Environmental group Equiterre has said that developing a shale gas industry in Quebec would interfere with government's goal of making the province a green power energy environment. However, Normandeau has said the government will not halt development of the shale gas industry while it is being studied, according to media reports.

According to the U.S. Energy Information Administration, the Utica shale offers a promising area of future development. Utica shale exploration efforts in Quebec have been focused in the Lower St. Lawrence Valley between Montreal and Quebec City. While no formal study has been done of the Utica shale reserves in Quebec, current estimates place Utica shale reserves in Quebec at 50 Tcf.

Quebec-based Gastem Inc. in 2007 became the first company to drill and test the Utica play in Quebec. Gastem encountered positive results from its Utica shale drilling in Quebec, but no commercial production has come online yet. Gastem will increase drilling activity in the Quebec Lowlands and move towards commercialization of discoveries there. Gastem has over 221,000 net acres in the Utica Fairway, including the Joly permit adjacent to Talisman's St. Edouard well that has deep Utica potential. Gastem has drilled four wells at the St. Hyacinthe permit and is looking at drilling a fifth well this fall.

Compared with other shale plays, the Utica is deeper and potentially with higher pressure offsetting higher well costs, Gastem said. The Utica has greater thickness than plays such as the Barnett and Marcellus plays. The Utica shale play is estimated to be robust at $4/MMcf, with initial rates of 1 MMcf/d expected to make the shale play economical.