Thursday, December 11, 2008

A split decision for B.C. coalbed methane

The politics of coalbed methane in B.C. are a lot more complicated even than getting the stuff out of the ground.
Just look at the government's latest news release on the resource, headlined "Leadership shown in unconventional gas development." Not too informative in itself.
The first paragraph - the lead, as they say - was surprising. Leadership in development in this case meant not going ahead with a coalbed methane project: "Shell Canada will take a break in exploration activity in the Klappan and have more discussions with First Nations and the community, Energy, Mines and Petroleum Resources Minister Richard Neufeld announced."
The government was "facilitating this" by barring activity for two years, Neufeld said.
Only then did the release get to the actual development part. The government announced it was awarding a coalbed methane tenure to BP Canada's Mist Mountain project in the East Kootenay.
Even there, the government treaded carefully. It excluded land in the Flathead Valley, near the Montana border.
The Flathead is a revered river in Montana. The state's politicians, and even Barack Obama, were opposed to any coalbed methane development on our side of the border.
So in southeast B.C., near Fernie but away from the U.S. border, coalbed methane is OK.
In the northwest, north of Terrace, not so much.
How come? Partly because environmental groups have targeted the Shell project. They have called the area the Sacred Headwaters, an even more market-savvy name than Great Bear Rainforest.
The opposition, along with First Nations concerns, scared Shell and the government. What oil company or government wants to be blamed internationally for despoiling the Sacred Headwaters?
There are other reasons for the split decision. The Shell project is in a relatively pristine area that includes the headwaters of the Skeena, Nass and Stikine rivers. There's little local support.
The project in the East Kootenay is in an area that's been used for mining and forestry. Many people in the region, and some local governments, supported the development.
But there is still going to be significant opposition. Neufeld says the BP project won't go ahead unless the company can meet the environmental requirements.
The B.C. government has been promoting coalbed methane development for more than a decade. So far, all the province has to show for it is a scattering of test drilling programs, including efforts in the Campbell River area and around Courtenay. The Island’s coal-mining history has attracted considerable interest.
The Mist Mountain project might bring the first real producing wells.
Coalbed methane is the equivalent of natural gas. It's found, as the name suggests, in coal seams, which B.C. has in abundance. But there are some big differences when it comes to getting it out of the ground.
Conventional natural gas is typically found in big pockets, under pressure. Companies drill a couple of holes, the gas rushes out and is sent off in a pipeline. When the deposit is gone the well is capped and that's that. It's relatively tidy and we have a lot of experience with it.
But coalbed methane is found in smaller pockets within the coal seams, so companies need to drill a lot more wells.
And the methane gas is usually trapped beneath underground water. That has to be pumped out before the gas will flow.
Sometimes, the water is of good quality. But often it's contaminated with salt or other pollutants. It has to be pumped back underground to avoid environmental damage.
It's all doable. But the industry's 20-year history has been marked by some environmentally damaging episodes. The government believes those days are behind it - about five per cent of U.S. gas production comes from coalbed methane deposits.
With some estimates putting the coalbed methane reserves at the equivalent of 100 years of current natural gas production, the government sees a lot of jobs and big royalty cheques.
It will still be a tough sell. But picking one project as a test might be the best way to establish whether the coalbed methane industry should have any place in the province.
Footnote: The exclusion of the Flathead Valley from the Kootenay lease makes sense. Why get into a fight with the U.S. as a new administration takes over. But expect B.C. gas opponents to ask why the risks are too great for a watershed that flows into Montana, but acceptable within B.C.

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