Canadian natgas firms warn clock ticking on Montney shale deal with First Nations

Rocky Shore Gold.

01/11/2022 17:35

By Nia Williams
       Nov 1 (Reuters) - British Columbia is nearing a deal
with First Nations to restart stalled development in Canada's
prolific Montney shale play, gas industry companies said in
recent days, adding they have urged the provincial government to
move quickly or risk missing the winter drilling season.
    New well licenses in the B.C. Montney have been frozen since
last year, when a landmark B.C. Supreme Court decision ruled in
favour of a claim from the Blueberry River First Nation that the
cumulative impacts of natural resource exploration and
development had damaged their traditional territory.
    The court agreed that B.C. had violated the nation's rights 
to use the area for hunting, fishing and cultural activities by
allowing so much natural resources development.
    The court awarded the First Nation C$65 million ($48
million) and control of 38,000 square kilometres of the Montney,
Canada's top gas-producing play where around 25 companies
including Canadian Natural Resources Ltd  CNQ.TO  and Tourmaline
Oil  TOU.TO  operate.
    Nearly 18 months later, the B.C. government, Blueberry River
and other First Nations in the region are still discussing how
the province should review and grant permits for natural
resource projects. 
    The province has told companies a deal is close, said Dale
Schwed, chief executive of Montney gas producer Crew Energy
 CR.TO , adding he remains cautious.
    "We've heard that (from the government) a few times in the
past," Schwed said. "People are running out of permits. We're
now running out of things to do, as are other companies."
    A deal would allow companies to develop leases they hold in
the region, at a time when Canadian gas prices are strong and
production is close to record highs of nearly 18 million cubic
feet a day.
    The court ruling slowed energy development, with only 73 gas
well licenses being issued in B.C. up to September, according to
a RBC Capital Markets note, versus 302 over the same period last
year. Companies with permits already in hand were allowed to
continue drilling.
    Amanda Munro, a representative of the Blueberry River First
Nation, said there was nothing new to share on the negotiations.
Previously, Blueberry River leaders had said they were pleased
to start the journey to begin to heal the land, while supporting
stability in their region. 
    A spokesperson for B.C.'s Ministry of Land, Water and
Resource Stewardship said talks are continuing and "we hope to
have more to say about this soon".
    Since August the province has started issuing some drilling
permits for leases with existing well pads, and other work that
does not require land to be disturbed.
    Jeremy McCrea, an analyst with Raymond James, said this was
a positive sign. Conversations with management teams indicate
companies plan to increase spending in late 2022, suggesting
these negotiations will be resolved by then, he added.
    BUSY SEASON AHEAD
    Winter is the busiest time for drilling in Canada, when
frozen ground makes it easier to move heavy machinery. Montney
companies that missed the 2021/22 season because of the court
decision are anxious not to miss another.
    "It's getting to a point of being fairly critical to the
development of natural gas in B.C.," said Tristan Goodman, chief
executive of the Explorers and Producers Association of Canada,
adding that drillers were unsure about securing licenses in
time.
    Denver-based Ovintiv  OVV.N  reallocated capital away from
the Montney to the Alberta Bakken this year due to regulatory
uncertainty around the Blueberry River negotiations.
    Laura Lau, portfolio manager with Brompton Group, a
Tourmaline shareholder, said the court ruling highlighted
political risk in Canada.
    "It just feels like in Canada there's always something.
We've got to show we have the ability to remove some of these
political risks, otherwise people will just invest in U.S.
companies instead," Lau said.    
($1 = 1.3636 Canadian dollars)
 (Reporting by Nia Williams; Editing by David Gregorio)
 ((nia.williams@thomsonreuters.com; +1 403 531 1624; Reuters
Messaging: nia.williams.thomsonreuters.com@reuters.net))