The Western Governors’ Association meeting, at which Premier Ralph Klein delivered a keynote speech, launched its North American Energy Summit with a couple of positive moves.
Klein joined U.S. governors at the association’s meeting in Albuquerque, N.M., last week in releasing a “best practices” handbook for the development of coalbed methane (CBM).
The new guide to how CBM projects should be done is meant to encourage environmental stewardship, reduce potential conflicts and provide for efficient resource development.
Better late than never, I say.
South of the border, production from more than 140,000 CBM wells already accounts for as much as 11 per cent of American natural gas production.
Canada’s fledgling industry is tiny in comparison. About 2,000 CBM wells are expected to have been drilled by the end of this year, mostly in Alberta. But, as Klein noted at the governors’ meeting, methane gas from coal has enormous potential as a long-lasting energy supply.
Alberta alone has about 100 trillion to 412 trillion cubic feet (tcf) of CBM methane – more than the estimated 94 trillion tcf of conventional gas left in the ground.
Companies such as Edmonton-based Wavefront Energy & Environmental Services Inc. are developing the technologies required to efficiently tap CBM, both here and abroad. Wavefront successfully completed a CBM-monitoring project last month in Quinshu, China, under contract for the Alberta Research Council.
But there are legitimate concerns about CBM development. They include the higher density of wells needed to extract the gas and the production of tremendous volumes of frequently unusable water trapped along with the methane.
The Butte Action Committee, a group of ranchers and landowners in the Caroline area northwest of Calgary, last week asked the province to put a moratorium on CBM production where water is removed.
The group wants to put on the brakes at least until November, when the government is scheduled to complete its review of whether existing natural gas development regulations are adequate to develop the resource.
Expect the Klein government to ignore calls for a moratorium, especially since the province considers CBM crucial to replacing dwindling conventional gas reserves.
But the new best practices guide (www.westgov.org/new/ CoalBedMethane.pdf) at least gives both companies and landowners some common ground to start talking about how to tap the resource, while protecting the livelihood of ranchers and the environment.
The other welcome news from the West’s political leaders is their declared enthusiasm for alternative clean energy sources.
In a letter to delegates, New Mexico Gov. Bill Richardson and California Gov. Arnold Schwarzenegger, co-leaders of the association’s energy initiatives, recommend more development of clean energy and energy-efficiency projects in the West.
“Our objectives should be to develop at least 30,000 megawatts of clean energy in the West by 2015, and to increase the efficiency of energy use by 20 per cent by 2020,” the letter said.
Those are ambitious targets. But they’re achievable if the politicians walk the talk by implementing policies to encourage more investment in green energy and its wider use by consumers.
Klein could set an example for his American counterparts by matching the Canadian government’s current incentive aimed at encouraging more wind-energy production.
And Ottawa could do better by boosting the incentive. At one cent per kilowatt-hour for the first 10 years of the wind-power facility, it is worth only about one-third of what the U.S. federal government offers the American wind-power sector.
ENCANA'S BIG BUY
EnCana Corp. is expanding in a big way its development of unconventional or so-called “tight” natural gas deposits in the U.S. Rockies.
The company will spend $2.7 billion US to buy independent energy firm Tom Brown Inc. of Denver, Colo., for cash at a price of $48 US per share.
Gwyn Morgan, EnCana’s president and CEO, says the acquisition will provide Canada’s largest gas producer with “long-life” natural gas reserves and production, along with “high-growth potential” of undeveloped resources located in key unconventional onshore U.S. gas basins.
The purchase will boost EnCana’s U.S. gas production to one billion cubic feet per day, Morgan says.
At the same time, EnCana intends to significantly step up the sale of its non-core conventional natural gas properties in Western Canada – assets that are attractive to oil and gas royalty trusts.
EnCana expects the sale of these assets, which currently produce between 40,000 and 60,000 barrels of oil equivalent per day, to earn the company up to $1.5 billion US.
By buying Tom Brown Inc., including the American firm’s Sauer Drilling Co., EnCana will add to its U.S. assets about 325 million cubic feet equivalent per day of current gas production, about 1.2 trillion cubic feet of proved gas reserves and about two million net undeveloped acres.
The purchase makes a good fit with EnCana’s strategy of using new, multiple-well drilling techniques to produce gas from geologically tight sandstone formations for dozens of years, as opposed to one-off conventional gas wells that might be depleted in five years.
The boards of EnCana and Tom Brown have both approved the transaction, which is expected to close before June.
DEER CREEK ON TRACK
Deer Creek Energy Ltd. has achieved a rare feat in the oilsands business – a project completed on time and within the original budget.
The Calgary-based private oilsands company has started its steam-assisted gravity drainage (SAGD) operations at its Joslyn Oil Sands plant northwest of Fort McMurray.
The first phase of a three-phase project, to be completed prior to the start of mining operations, includes one pair of SAGD wells, to produce 600 barrels of oil a day by mid-2005. Total cost of Phase 1 is an estimated $23.6 million – about $4 million or 20 per cent less than the original budget.
Compare that kind of cost-control with new multibillion-dollar oilsands projects by Syncrude Canada, Suncor Energy and Shell Canada that ran 90-, 70- and 50-per-cent, respectively, over budget.
Mark Montemurro, Deer Creek’s vice-president of thermal operation, says his company and its construction partner on the project, Bower Damberger Rolseth Engineering Ltd. of Calgary, have shown that increased engineering on the front end, coupled with building a facility in modules, can bring a project in on time and under budget.
Hey, ‘big boys,’ are you paying attention?
RECORD AUCTION
Alberta has set an all-time record for the number of provincial Crown oil and natural gas leases and licences sold in one day.
A record 740 parcels were auctioned April 7, enriching provincial coffers by more than $94 million. The previous record of 722 parcels was set in March 1997.
Each year, the province holds an average of 24 land auctions and issues approximately 8,000 petroleum and natural gas agreements.
Businesses registered in Alberta that have an electronic fund transfer account are allowed to bid in the land sale.
Up to now, most bids have been hand-delivered – some just in the nick of time – to the counter at the Alberta Energy Information Centre in Calgary.
But now the Energy Department has launched “e-Tenure.” The initiative is a three-phase process to convert transfers of registered interest in Crown mineral agreements, along with postings and bidding on the sale of oil, natural gas and oilsands rights, to a web-based electronic system.
Alberta Energy says the new system will allow greater, but confidential, access to the land-sale process, regardless of where a business is located. The system should also reduce turn-around times and increase data accuracy and reliability for the government and the oilpatch.
It’s about time the department joined the information age.
