The Alberta Energy Regulator ("AER") has extended its pilot
project for a "play-based" regulatory framework for unconventional
oil and gas development in part of the Duvernay shale play in west-central
Alberta.
The Duvernay shale play is a large,
developing shale play covering much of western and northern Alberta and eastern
British Columbia. It is particularly
rich in light oil and petroleum liquids such as propane and butane. Hydraulic fracturing has been key in
developing the vast underground rock formation that covers an area the size of South
Korea.
The Duvernay play is still in its early
stages with only about 200 wells drilled to date, with about 60 wells completed
and on production. The average initial
production rate is about 2.5 mmcf per well per day. The Kaybob area in the northwestern portion
of the Duvernay is particularly liquids rich, with some wells having condensate
yields of 200 - 480 barrels a day.
"Play-based" regulation involves
implementing a single application and decision-making process for multiple
wells, pipelines and facilities under different pieces of legislation. It requires all of the operators in the pilot
area to collaborate and jointly bring a single application for a single
regulatory approval which will be used for regulating all of their unconventional oil and gas activities in the
pilot area.
Presently, each activity by a company, such
as building a road, diverting water, drilling a well, constructing a pipeline
and so forth, requires its own separate AER regulatory approval. This current approach makes it difficult to
reduce the cumulative environmental impacts of the additional roads, well pads
and pipelines required by each company in the area. Extracting oil and gas out of shale requires
many more wells, more pipelines and much more water usage than conventional oil
and gas production. Area landowners and
communities are expected to benefit with play-based regulation as it is hoped that
they will get a sense of the full scope of all development in the play area and
have earlier input into how the play is developed on the surface.
Area operators have to submit the single
application to the AER by January 31, 2015.
The pilot was scheduled to run until March 31, 2015 but has been
extended until June 30, 2015 to allow oil and gas operators in the pilot area
sufficient time to prepare the application and undertake the required
stakeholder engagement.
The Duvernay shale play was chosen for the
pilot as it is just starting to be developed and extensive drilling and
production is expected over the next several years.
If playbased regulation is successful, the
AER may implement it more broadly throughout Alberta in the future.
Review a copy of the AER's Play-Based Regulation Pilot Application GuideThis post was written by Alan Harvie (alan.harvie@nortonrosefulbright.com or +1 403.267.9411) from Norton Rose Fulbright's energy practice group.
