WSJ: Quebec Halts Most Shale-Gas Activity After Inconclusive Environmental Assessment

Source: Dow Jones News Service, March 9, 2011
Posted on: http://envfpn.advisen.com

The provincial Canadian government of Quebec said it would halt most new natural-gas exploration and development following an environmental assessment of shale-gas extraction that called for further studies, putting a fresh regulatory spotlight on the method amid recent environmental worries in the U.S.

The move also puts the brakes on a new and promising exploration play in Canada’s eastern region, where drillers have recently migrated to exploit the area’s shale-gas deposits-pockets of natural gas trapped in pores of shale rock. Shale-gas development has skyrocketed in the U.S., with companies flocking in recent years to long-ignored deposits in places like Pennsylvania, Texas and the Rocky Mountains.

Late Tuesday, the government of Quebec, which has authority to regulate energy and environmental issues inside its provincial territory, issued its first environmental assessment of shale-gas development there. The assessment didn’t cite specific findings, but concluded that more studies needed to be conducted.

(This story and related background material will be available on The Wall Street Journal website, WSJ.com.)

Shortly after, Quebec’s government halted further exploration in the province, except for drilling that might help the assessment, stopping short of a full moratorium.

Shale gas has been a boon for U.S. consumers, helping to drive down natural gas prices. But regulators more recently have been raising concerns about the environmental impact, citing worries over such things as gas contamination of water wells and the effectiveness of treating water used in the process.

To get at the stuff, drillers use a technique called hydraulic fracturing, or fracking, in which water, sand and chemicals are injected into the ground to force gas out. The mixture is mostly pumped back out and either discarded-often in deep wells-or treated before reintroducing to local water sources.

Pennsylvania has become the epicenter of the shale-gas boom in the U.S. Earlier this month, the U.S. Environmental Protection Agency asked Pennsylvania regulators to step up testing of treated drilling wastewater. Pennsylvania has said the treated water has met or exceeded federal standards. The EPA is studying the environmental impact of fracking more generally.

The energy industry defends the process. Mike Dawson, president of the Canadian Society for Unconventional Gas, a trade group of shale-gas producers, said the public was overestimating the dangers of fracking, and that the procedure has been used safely for decades on hundreds of thousands of wells.”If the well is constructed properly, then you probably won’t have any issues with the fracturing process,” Dawson said.

Shale-gas exploration has increased sharply in Canada as well. Quebec is a new player, with no production so far, so the hiatus won’t affect near-term supply in Canada or elsewhere. But energy producers have been drawn to the province’s deposits, clustered around the St. Lawrence River and Gulf of St. Lawrence.

The move represents a setback for some of the small players that have staked out the region as a growth area. Shares in Questerre Energy Corp. (QTEYF, QEC.T) , a small Calgary-based producer listed on the Toronto Stock Exchange, fell more than 20% Wednesday. The company said in a statement that the halt wouldn’t slow down its development because it still plans to conduct its drilling and fracking as part of the Quebec government’s assessment.

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