Jonathan Montpetit, The Canadian Press , On Wednesday March 9, 2011, 9:20 pm By Jonathan Montpetit, The Canadian Press MONTREAL – Once touted as Quebec’s economic future, the shale-gas industry now faces uncertain prospects in the province following a decision to temporarily ban its key extraction process there. Those difficulties were underscored by a dismal day on the stock market for companies with big stakes in Quebec’s nascent natural-gas industry. Quebec City-based Junex (TSXV:JNX) saw shares drop 20 per cent while Calgary’s Questerre (TSX:QEC) was down nearly 25 per cent. Montreal company Gastem Inc. (TSX:GMR-X) was also down more than 20 per cent on the TSX Venture Exchange. Investors recoiled at the prospect of lengthy delays on future returns a day after the Quebec government announced it would examine the practise used to extract natural gas from underground shale formations. In the meantime the government has banned any further use of hydraulic fracturing — commonly known as “fracking” — except for the purposes of its study. Several industry analysts predict the Quebec government’s decision will cause companies like Junex and Questerre to rethink their investments in the province. “Putting a moratorium on . . . is effectively crushing the dreams and hopes and aspirations of the producers to provide for the people of Quebec,” said Bill Gwozd, vice president of gas services at Ziff Energy Group, an industry think tank. “This is a very discouraging signal.” Quebec’s shale-gas industry is believed to hold considerable economic potential. Since exploration began in 2008, close to 30 wells have been opened. The industry had been boasting of annual royalties of $1 billion for the provincial government, which is saddled with public debt. But now the industry will be forced into waiting mode during a government-sponsored study of fracturing that could take as long as two years. Industry insiders say companies are unlikely to sit idly by during that time, and could explore opportunities in other parts of Canada where fracking has been underway for years. “Companies that were, or (are), looking at investing in Quebec, I would suggest that this would force them to second-guess that and pull out,” said Ralph Glass, an executive with AJM Petroleum Consultants. “There are certainly significant opportunities in Western Canada.” Shale-gas industries have flourished in both Alberta and British Columbia over the past decade. Gwozd said those areas would be the most likely targets for any companies deciding to try their luck outside Quebec. He said Quebec should have studied fracking practises in those provinces more carefully if it wanted a template for a more effective regulatory approach. “It’s disrespectful that they don’t look left and right,” he added. “Left and right these folks already have lots of energy policies in place. It already works.” Environmentalists, however, have repeatedly expressed concerns about fracking. They’re worried the wastewater byproduct contributes to a litany of environmental problems, starting with contaminated groundwater. Existing shale-gas plays in Westerm Canada are in sparsely populated areas. Those in Quebec, however, are located along the banks of the St. Lawrence — which is not only much more densely populated, but is also the province’s agricultural heartland. “The crux of the debate is the proximity of people,” said Glass. He suggested those residents in B.C. and Alberta who have come into contact with the industry have since grown accustomed to its presence. “It is a fear of the unknown,” Glass said. “But this fracking has been going on for a long time in Western Canada.” He conceded that the industry could always recover in Quebec. Fracking technology is expected to improve and could address some of the environmental concerns. But even then, there remains another major obstacle: There is currently a glut of natural gas available on the market and prices have tumbled. That problem is compounded by the lack of infrastructure that would help export Quebec’s natural gas to other markets. “There is an over-abundance of supply in North America right now; we just have too much natural gas,” said Glass. “Given the return on investment, I just don’t see companies pursuing it as actively until there is a rise in the pure natural gas price.”
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Does shale-gas industry have a future in Quebec following ban on fracking?