BC is close to reaching an agreement with First Nations to restart stalled development at the Montney shale field, the gas companies have said in recent days, adding that they have urged the province to act quickly or risk miss the winter drilling season.
New well licenses in northeastern British Columbia’s Montney Basin have been frozen since last year, when a landmark decision by the British Columbia Supreme Court ruled in favor of a Blueberry River First Nation claim that cumulative impacts of exploration and development of natural resources had damaged their traditional territory.
The court agreed that BC had violated First Nation rights to use the area for hunting, fishing, and cultural activities by allowing so much natural resource development.
The court awarded the First Nation $65 million and control of 38,000 square kilometers of Montney, Canada’s main gas-producing area, where some 25 companies, including Canadian Natural Resources Ltd and Tourmaline Oil, operate.
Nearly 18 months later, the BC 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, adding he remains cautious.
“We’ve heard that a few times in the past,” Schwed said. “People are running out of permits. Now we are running out of things to do, just like other companies.”
A deal would allow the companies to develop leases they hold in the region at a time when Canadian gas prices are strong and production is close to hitting record levels of nearly 18 million cubic feet a day.
The court ruling slowed energy development, with just 73 gas well licenses issued in BC through September, according to a note from RBC Capital Markets, compared with 302 during the same period last year. Companies with permits already in hand were allowed to continue drilling.
Amanda Munro, a representative from the Blueberry River First Nation, said there was nothing new to say about the negotiations. Previously, Blueberry River leaders have said they are pleased to begin the journey to begin healing the land, while supporting stability in their region.
A spokesman for the BC Ministry of Land, Water and Resources Management said talks are continuing and “we hope to have more to say on 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 disturbing the land.
Jeremy McCrea, an analyst at Raymond James, said this was a positive sign. Conversations with management teams indicate the companies plan to ramp up spending by the end of 2022, suggesting these negotiations will be resolved by then, he added.
Winter is the busiest time to drill in Canada, when frozen ground makes it easy for heavy machinery to move. Montney businesses that missed the 2021-22 season due to the court decision are anxious not to miss another one.
“It is getting to the point of being quite critical for natural gas development in British Columbia,” said Tristan Goodman, executive director of the Canadian Association of Explorers and Producers, adding that drillers were not sure they would get the licenses in time. .
Denver-based Ovintiv reallocated capital from Montney to the Bakken formation in the central prairies this year due to regulatory uncertainty surrounding the Blueberry River negotiations.
Laura Lau, portfolio manager at Brompton Group, a Tourmaline shareholder, said the court ruling highlights the political risk in Canada.
“It just feels like Canada, there’s always something going on. We have to show that we have the ability to remove some of these political risks, otherwise people will just invest in American companies,” Lau said.