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To: Johnny Canuck who wrote (39862)	7/7/2003 1:09:14 PM
From: Johnny Canuck	Read Replies (1) \| Respond to of 71816

Controversial Alberta plan to shut in gas reserves not going away soon JAMES STEVENSON Canadian Press Sunday, July 06, 2003 CREDIT: (CP/Adrian Wyld) The Williams Natural Gas Line extraction plant near Cochrane, Alberta. A controversial Alberta plan to shut in gas reserves is not going away soon. (CP/Adrian Wyld) ADVERTISEMENT CALGARY (CP) - Animosity between natural gas producers, oilsands developers and Alberta's energy regulator over plans to shut-in more than 900 gas wells will not go away quickly, industry watchers predict. "Any time a producer feels they are unjustly being restricted from producing rights that they've acquired and invested in, there's going to be an issue," says Mark McMurray, senior manager of Deloitte Consulting's energy ventures group in Calgary. "And so we can anticipate across the province to have producers taking issue where there's differential rights held," he said. "This is not going away." A who's who of the Canadian oilpatch gathered in Calgary last week for three days of hastily arranged hearings by Alberta's Energy and Utilities Board to discuss its proposal to shut-in about 30 billion cubic metres of gas - about two per cent of the province's remaining reserves - located in the Wabiskaw-McMurray gas pools of northeastern Alberta. The contentious shut-in plans are vehemently opposed by natural gas producers in the area, which range from global giants like BP, to tiny players like Superman Resources Inc. On the other side are companies like Imperial Oil (TSX:IMO), Petro-Canada (TSX:PCA), and Nexen Inc. (TSX:NXY), who are larger energy companies that have either working or proposed oilsands facilities that inject steam deep into the ground to melt the oily sand and draw it to the surface. Further complicating matters is that in many areas, there is so-called "concurrent production," where one company owns the rights to gas production while another has rights to the oilsands deep underneath. The debate over whether oilsands and natural gas reserves in the same area can both be exploited has actually been dragging on for the past seven years. But Alberta's regulator now fears that large quantities of recoverable oilsands or bitumen reserves could be forever lost due to dropping pressure levels in these reservoirs as gas is extracted. "There's a lot of debate on that science," notes Steven Paget, an oilsands analyst with Calgary-based FirstEnergy Capital. Energy trust company Paramount Resources has led the charge against the shut-in plan as it stands to lose up to 50 per cent of production. Paramount says not enough is known about the effects of removing gas reservoirs that lie over the top of vast oilsands and wants the Alberta government to release data obtained from a gas well shut-in ordered several years ago to protect an oilsands pilot plant owned by Texas-based energy giant ConocoPhillips. "We need data to see what the effects really are of gas production over bitumen," agrees Paget. Meanwhile, other energy companies such as Devon Energy and Canadian oil and gas giant EnCana Corp. believe they can keep pressures up by injecting exhaust gases into the reservoirs. Despite the complicated nature, the Alberta energy regulator wants to speed up a decision. The three days of hearings last week is expected to be woven into a written final policy issues before the end of July. And according to the original proposal, the gas shut-in would take into effect at the beginning of August. In a letter to Alberta Energy Minister Murray Smith last week, the Canadian Association of Petroleum Producers called on the provincial government to wade into the debate before the industry - which invests more than $20 billion into the province annually - loses confidence in the system. "It is critical that the rules and policies be clear for these investments to continue in the affected area and across Alberta," wrote CAPP chairman John Dielwart. "Confidence is essential for the broad investment community, within and outside Alberta," he wrote. "The government plays a key role in maintaining this confidence." CAPP also asked that a "reasonable transition" time be given to implement a gas well shut-in, but didn't specify any particular length. Lurking behind the expected shut-in is the prickly issue of compensation for gas producers. Paramount has warned that the policy could end up costing the province at least $2 billion in compensation, not to mention a further $400 million in annual royalties. And so even after the final policy is written, the shut-in issue could drag on with potential lawsuits from companies as well as class action suits currently being considered by affected unitholders. "This is something we're going to be stuck with for a while," says Paget.