B.C. Energy Minister Richard Neufeld didn’t exactly get his hoped-for boost from business leaders on the contentious issue of offshore oil and gas exploration – at least not from EnCana Corp.’s chief executive.

Neufeld, speaking earlier this month at a Vancouver Board of Trade meeting, asked corporate captains to write letters of support for Premier Gordon Campbell and his government’s initiatives to encourage oil and gas development – including lifting a 32-year federal ban on offshore exploration.

But Gwyn Morgan, president and CEO of EnCana, says drilling for oil and gas off the West Coast remains a low priority for his company.

Morgan, following his talk last week to the Vancouver Board of Trade, was quoted as saying: “The last thing the industry wants to do is push something that people don’t want to have.”

Nevertheless, EnCana’s chief was full of praise for the B.C. government’s new oil and gas policy framework, which has encouraged substantial new industry investment in the province.

EnCana spent $1.4 billion including operating expenses in B.C. last year – $369 million of it in one day for a major land purchase at Cutbank Ridge just south of Fort St. John.

Morgan also noted that the company drilled about 270 wells in B.C. last year and will drill a similar number this year – all on land for now.

Sumas Still Steaming

Round 2 is about to start in B.C.’s battle over the proposed $400-million Sumas Energy 2 (SE2) natural gas-fired power plant project.

Lawyers for Sumas Energy 2 Inc. are seeking permission from Canada’s Federal Court of Appeal to challenge the National Energy Board’s (NEB) decision denying the American firm’s application to build the Canadian portion of an 8.5-kilometre international power line for the project.

The NEB decided last month that the negative effects of the SE2 project, which would emit 2.5 tonnes of pollutants a day into the Fraser Valley, outweighed the benefits to communities in Canada.

But SE2 says that it believes the NEB exceeded its jurisdiction, made legal errors and “was parochial because it put local opposition ahead of national interest and failed to recognize the regional nature of the electric power market.”

SE2 argues that the NEB’s decision acknowledged that the power line would have only minor environmental effects, and that the 660-megawatt power plant’s emissions would meet the most stringent Canadian air quality standards and wouldn’t have any harmful health effects.

“It is clear the NEB based its decision to deny SE2’s application on local political considerations rather than (on) scientific, legal and market considerations,” says Chuck Martin, SE2’s president.

More worrisome than a Federal Court of Appeal challenge, however, is the American firm’s contention that the NEB’s decision violates the principles of free trade in energy.

This suggests – although SE2 doesn’t come right out and say it – that the company might file an action under Chapter 11 in the North American Free Trade Agreement (NAFTA). This is the provision that prevents Canada, the U.S. and Mexico from discriminating against businesses located in their respective NAFTA-member nations.

The outcome of a free-trade challenge would be unpredictable and full of potential pitfalls for B.C., especially given Canada’s previous losses to the U.S. under the Chapter 11 rule.

Tempting Tax Credit

The B.C. government is extending a tax break to encourage more mining exploration, a move that is bound to make some tourism operators nervous.

The government will extend its 20-per-cent flow-through share tax credit for mining exploration for another year, Energy and Mines Minister Richard Neufeld and Minister of State for Mining Pat Bell announced.

Combined with the federal government’s 15-per-cent mining tax credit, the provincial incentive creates a “super flow-through tax credit” that’s among the best exploration tax credit programs in Canada, the ministers say.

“By matching the extension of the federal tax credit for another year, we are continuing to provide investors with tax savings of up to 63 per cent of their share investments . . .,” Bell said. So for every $1,000 invested in mining exploration, the net cost to investors can be as low as $366.

“Our goal is to increase exploration investment to $100 million a year in the near future,” Neufeld said.

Spending on mining exploration in B.C. sank to $25 million annually in the late 1990s, but is expected to reach up to $55 million in fiscal year 2003-04. To help revitalize the mining sector, the provincial Liberals have also eliminated the corporation capital tax, cut corporate income taxes, eliminated the provincial sales tax on production machinery and equipment, and streamlined the regulatory process.

B.C.’s mining and tourism industries recently signed an agreement promising to respect each other’s concerns in future land-use issues.

That agreement will be tested in the South Chilcotin Mountains Park located about 200 kilometres north of Vancouver. Tourism operators want the 70,000-hectare park left alone as a pristine wilderness area, but mining interests are pushing for access to ore bodies in the region.

CBM Bid Gets Green

Light Vancouver-based Compliance Energy Corp. has won a bid to explore for coalbed methane (CBM) on about 8,300 acres in the Tulameen Coal Basin in the Princeton area.

B.C.’s Ministry of Energy and Mines says the area, in the foothills of the Cascade Mountains about a three-hour drive from Vancouver, potentially contains about 1.4 billion cubic metres of the natural gas trapped in coal seams.

Compliance Energy plans to develop the CBM in a joint venture with the Upper Similkameen Indian Band in the area, with the company owning 75 per cent and the band 25 per cent. The joint venture has been granted a five-year drilling licence, which can be extended for an additional six years.

Other companies actively exploring for CBM in the area include Calgary-based firms Connaught Energy Corp., Birchill Resources Ltd., and Petrobank Energy and Resources Ltd.

The Princeton area’s CBM potential is tiny compared with the estimated 560 billion cubic metres of methane in the East Kootenay coalfields. But the Princeton basin is close to a major natural gas pipeline, which could significantly cut the cost of development by providing ready access to markets.