Quebec Rises Against Shale Gas Production through Fracking

on Sep 28, 2012

Over the past decade shale gas formed from being trapped within shale formations has become an increasingly important resource in the North Americas. According to a study made by the Baker Institute of Public Policy at Rice University, US and Canada shale gas production could help prevent Russia and Persian Gulf countries from setting higher prices for the gas they export to the European countries.

Shale gas has been embraced by the current US President Barack Obama, who views it as a “clean fossil fuel” that can greatly contribute to America’s growing energy independence.
Despite its apparent economic benefit, Martine Ouellet, Canadian politician from the new Parti Quebecois (PQ) government and Quebec’s new natural resources minister, has heavily criticized the method of “fracking” or hydraulic fracturing for extracting gas from shale. Ms Ouellet’s extreme position increases the possibility that the government will permanently ban shale-gas exploration and production in Quebec.

!m[](/uploads/story/480/thumbs/pic_1_inline.png)“I don’t foresee a day when there will be technology that will allow safe exploitation (of shale gas),” Ouellet said in Quebec City. “Our position is very clear: we want a complete moratorium, not only on exploitation but also on exploration of shale gas. We haven’t changed our minds.”
Fracking involves injecting chemicals mixed with water below ground to free natural gas from rock formations and it is considered dangerous by some because it could potentially contaminate the drinking water in the region. Quebecers have long protested against shale gas extraction on their territory and former premier Jean Charest imposed a partial moratorium on gas exploration at the beginning of 2011. The government is supposed to make its final decision after the Strategic Environmental Assessment (SEA), coming in at a cost of $7 million (£4.32 million) is completed in 2014. If the practice is fully banned, the price to Quebec is estimated at around $1 billion (£617 million) in royalties from shale gas development.

There are suspicions that the shale-gas ban is related to the fact that Ms Ouellet used to be an official at Hydro-Quebec – the main power utility in the region. “The last thing Quebec needs is more gas,” commented the director of gas consulting at Ziff Energy Group Ed Kallio “If the gas price goes down, so does the power price. They are really exposed to low gas prices.”

Quebec consumes 700 million cubic feet of gas a day and could very well find itself short on gas if one of its main sources, the TransCanada Corp. mainline that imports gas from Western Canada, is found to be a “stranded asset” by the National Energy Board. It might be too late for Quebec at that point as it is unlikely for the natural gas companies to sit around and wait for a lift of the moratorium. After all most of these companies, including Talisman (NYSE:TLM) and Questerre Energy Corp(TSE:QEC), entered the province mainly because of its favourable fiscal terms and not because there aren’t any other potential exploration spots.
According to Reuters, Questerre Chief Executive Michael Binnion said that his company will not be affected by a stricter fracking ban. “There is already a moratorium in Quebec. So the minister’s comments about a moratorium have no impact on our business plan,” he commented.