EIU: Quebec goes fracking

Original story here.

Limited shale-oil exploration is likely to go ahead in Quebec, despite popular objections.

1261951310Battles over drilling for resources held in shale rock tend to take a familiar course. Oil companies line up on one side; on the other are arrayed environmentalists, local farmers and the tourism industry. Governments are frequently caught in the middle, tempted by the economic benefits brought by drilling but unable to ignore popular objections to hydraulic fracturing (“fracking”). This pattern is now being repeated in a dispute over drilling for shale oil at the outlet of the St Lawrence River in eastern Canada.

Anticosti Island, the rugged home of tens of thousands of deer, is the size of Jamaica. But the island in the Gulf of St Lawrence, 600 km downstream from the provincial capital, Quebec City, has a population of less than 300 humans (around one ten-thousandth of Jamaica’s). Little indigenous opposition to fracking is thus expected. Indeed, exploration for oil at Anticosti began in the 1990s, with Royal Dutch Shell (Netherlands/UK), Hydro-Québec and others taking turns to search for prospective rocks.

The size of commercial reserves remains unknown, although a Canadian consultancy, Sproule, has placed Anticosti’s oil potential at 30.9bn barrels. Politicians have spoken of Quebec achieving “energy independence”, not to mention the possibility of claiming billions of dollars of revenues. The catch: the island is a popular location for deer hunting, fishing and eco-tourism in general, and its wildlife is celebrated by environmentalists. Fracking’s potential impacts on Anticosti’s wilderness have therefore aroused opposition on the mainland.

Fracking controversies

Resource exploitation is scarcely a new phenomenon in Quebec, an oil-refining centre and energy exporter that provides hydropower to the north-eastern US. However, Quebeckers have form when it comes to protesting against fracking. The nearby Gaspé peninsula and the St Lawrence riverbed hold promising rocks. But concern over water pollution in the dairy-farming region in 2011 resulted in a province-wide moratorium on shale-gas activity. This was backed up by a ban on fracking rocks less than 400 metres below the water table.

These moves triggered the cancellation of oil and gas drilling permits, leading to an international legal case. One company that lost its licence, Lone Pine Resources, argues Canada violated the North American Free-Trade Agreement (NAFTA) and has filed suit accordingly.

The upshot of Quebec’s rules is that Anticosti Island is a rare remaining prospect for fracking in Quebec. Anticosti is essentially a shale-oil (rather than gas-bearing) resource and therefore exempt from the drilling freeze. On top of this, the bulk of its prospective rocks are deep enough to be unaffected by the provincial water-protection regulation.

Deer don’t vote

Meanwhile, politicians appear to be playing to both sides over drilling at Anticosti, as in the broader dispute over fracking. The Parti Québécois (PQ), which led a minority provincial government until earlier this year, backed the moratorium, while the provincial Liberal Party opposed the ban. But during the recent election campaign the leader of Quebec’s Liberals, Philippe Couillard, said more analysis was needed before Anticosti was drilled. Though the PQ lost the election, moreover, it left behind a legal structure facilitating drilling—having drawn criticism when in office for supposed plans to create “Petrobec” (“deer don’t vote,” sniped one political opponent).

Exploration at Anticosti is now set to proceed before opposition gathers steam. Until earlier this year, almost all the rights on the island belonged to two Canadian companies, Corridor Resources and Pétrolia. Weeks before the change of government, however, these two entered a joint venture with Établissements Maurel et Prom, a French oil firm, and Ressources Québec, a provincial agency. They plan to spend US$55m-60m from this year on an exploratory drilling program and fracking tests, and a further US$45m-50m after that. Ressources Québec and another local oil explorer, Junex, have signed a separate agreement, and are seeking one more partner to join them.

Such joint ventures give Quebec’s taxpayers a financial interest in pushing ahead with drilling. Necessary equipment arrived at Anticosti earlier in June. Admittedly, another possible threat to drillers comes at the national level, from the Council of Canadians, an influential environmental and trade-oriented non-governmental organisation, and others arguing for an outright ban on fracking. Given the current federal government’s friendliness towards the energy industry, however, they are unlikely to succeed.

The fight over fracking will continue to be fought province by province, much as it has been waged state by state in the US. But Anticosti Island’s deer and salmon could well soon have some noisy new neighbours.

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About Steven Bodzin

Steven Bodzin is a reporter. He blogged when he was a freelancer.

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