Canadian Province and First Nations Agree to Revive Oil, Gas Development in Montney Play

(Reuters) — The Canadian province of British Columbia (B.C.) announced a land, water and resource management agreement with the Blueberry River First Nations Indigenous group on Wednesday that will restart development in the vast Montney shale play, but also limit new oil and gas activity.

New well licenses in B.C.'s Montney have been frozen since June 2021, when a landmark B.C. Supreme Court decision ruled in favor of a Blueberry River claim that decades of industrial development had damaged their traditional territory.

Since then, the province and First Nations, in the region have been negotiating a different resource development approach in the 38,000-km (23,612 miles) swathe of land that lies in the heart of Canada's top gas-producing play.

"This agreement provides a clear pathway to get the hard work started on healing and restoring the land, and start on the joint planning with strong criteria to protect ecosystems, wildlife habitat and old forests," Chief Judy Desjarlais of the Blueberry River First Nations told a news conference.

The deal includes a new planning regime for future oil and gas development, an annual 750-hectare (1853-acre) cap on new land that oil and gas activity can disturb and protection from resource development for more than 650,000 hectares of land that is highly valued by Blueberry River.

There is no limit on oil and gas production or activity on land that has already been disturbed.

B.C. Premier David Eby said the oil and gas industry will need to innovate to find ways to work with less land.

"It's not a cap on production, it's a cap on land disturbance," he added.

Around 25 companies including Canadian Natural Resources Ltd. and Tourmaline Oil operate in the Montney, and the uncertainty around the negotiations has been weighing on drilling activity.

Tourmaline CEO Michael Rose joined a number of other industry leaders in a statement welcoming the deal.

Petronas Energy Canada CEO Izwan Ismail told the news conference the agreement would help secure gas supply to Canada's first LNG terminal being built on B.C.'s Pacific coast.

"It is our expectation that the necessary work can now proceed to ensure that the gas Petronas Canada delivers to the LNG Canada project is responsibly produced right here in B.C., benefiting the entire province and country," said Ismail, whose company holds a stake in the LNG export terminal.

The oil and gas industry still wants more clarity on how the 750 hectares of land available for new activity will be allocated, but generally the deal is cause for cautious optimism, said Tristan Goodman, president of the Explorers and Producers Association of Canada.

"Anytime you change the rules there's always some concern but I think it's possible to adapt," Goodman said, adding he expects the B.C. energy regulator will now be able to approve the 150 to 200 new oil and gas permits that companies are waiting on this year.

Blueberry River will receive a C$87.5 million ($64.84 million) financial package over three years, with an opportunity for increased benefits from oil and gas revenue-sharing and provincial royalty revenues in the next two fiscal years.

The province also agreed to reduce timber harvesting, put C$200 million into a land restoration fund by 2025 and work with First Nations to protect wildlife.

($1 = 1.3491 Canadian dollars)

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