A company that wants to drill a $9-million exploratory sour-gas well near the protected Whaleback area in southwest Alberta has lost its major financial partner in the project.
But Calgary-based Polaris Resources Ltd. says it’s still determined to proceed with a Sept. 9 regulatory hearing to seek approval to drill the well.
John Maher, president of Polaris, says Ricks Nova Scotia Company of Calgary, which had the majority 50-per-cent interest in the well, has pulled out of the project. Ricks is a Canadian subsidiary of Oklahoma-based Ricks Exploration Inc.
The Alberta Energy and Utilities Board’s (EUB) costly regulatory process is to blame for Ricks Nova Scotia walking away from the project, Maher said.
The project partners had asked the EUB to cap the amount of funding the companies would be required to provide for interveners – which include landowners and other directly affected parties – to adequately participate in the Sept. 9 public hearing.
After the EUB refused the request, Ricks Nova Scotia decided “they’re not giving an open wallet to anyone,” Maher said.
“We’re really disappointed to lose them,” he added. “I think it hurts Alberta if (companies) like that say that the costs to get a well licence here are not manageable.”
But EUB spokesman Greg Gilbertson insists that not only does the regulatory board closely manage hearing costs, its regulatory process represents only a fraction of the costs for this kind of sour-gas well project.
The EUB requires interveners to co-ordinate their issues and concerns and form groups to hire the same lawyer and technical experts for a hearing, Gilbertson said.
“We would not allow 1,000 people to hire 1,000 lawyers and have 1,000 hydro-geologists hired as consultants,” he said. “We really do keep an eye on the costs and we try to make sure that the costs are reasonable.”
Gilbertson noted that if this project is approved, Polaris and its partners are looking at spending $8 - $10 million to drill one well, plus the costs of a new pipeline to transport any gas that’s found to a processing plant. Polaris believes the area could hold up to 300 billion cubic feet of gas, potentially worth tens of millions of dollars in revenue.
In comparison, Polaris and its original partners wanted the EUB to cap the amount of intervener funding they would have to provide at $100,000.
Area resident James Tweedie, a member of the Whaleback Coalition which opposes the well, says the EUB has never put a limit on such funding and to do so would violate the principles of fairness.
Polaris and its partners “thought that they could cut their losses by basically handing over $100,000 . . . putting the onus on the interveners to fight amongst themselves for the sorts of expert witnesses that are needed,” Tweedie charged.
But Polaris’s Maher argues that the request for the funding cap was reasonable, since the company believes most residents in the area support the project and “only a very small vocal minority is opposed.”
Maher warned that “if we can’t get a sour-gas approval here, there’ll never be another one in Alberta.”
The Level 3 critical sour-gas well, to be drilled near the ranching community of Maycroft, is expected to penetrate more than 5,000 metres and contain more than 28 per cent poisonous hydrogen sulphide.
The Whaleback was created almost 10 years ago, when Amoco Canada Petroleum Co. agreed to surrender more than $1 million worth of its mineral leases, enabling the provincial government to protect the area.
Tweedie said the majority of the residents in Maycroft and area, along with several ranching and environmental groups, are opposed to Polaris’s project.
Polaris has been trying to restrict the scope of the Sept. 9 public hearing in Maycroft, Tweedie said, while interveners have been seeking information that the junior oil and gas company has the financial and technical wherewithal to drill the well. “We’ve been waiting for (the project) to fall apart all the way through.”
The EUB gave Polaris until last Friday, Aug. 15, to file an amended drilling application reflecting the pullout of the project’s major financial backer.
Maher said that Polaris’s other partner, Vancouver-based Knight Petroleum Corp., which has a 25-per-cent working interest in the project, is still on board.
Polaris has every intention of going ahead, Maher stressed. “We either have to finance more of it ourselves or find another partner. We may finance it ourselves.”