New N.W.T oil prospect raises economic hopes

A potentially enormous new shale oil prospect in the Northwest Territories is giving some communities hope that the resource-driven economic boost they've long been waiting for may finally be close.

But development of the shale oil find, known as the Canol, has also raised concern over the use of hydraulic fracturing, also known as fracking, in a remote, ecologically fragile part of the central Mackenzie Valley that is new to that oil and gas extraction technique.

"If they're going to do fracking, at least let us be involved so that we can watch the process, we can make sure it's nice and clean because we do need economics around this area," said Chief Wilfred McNeely Jr. of the Fort Good Hope Band.

McNeely said some residents are concerned about how much water would be drawn from the Mackenzie River for the fracking process, in which producers inject water, sand and chemicals into the rock at high pressure in order free the oil and gas. He said some have also expressed concern over chemicals contaminating the river.

But unemployment in the community of 567 is high, so said he'd welcome the jobs and investment that would come from oil development.

"Massive piece of real estate"

In June, two parcels of land around Fort Good Hope were leased for $92 million — one to Royal Dutch Shell PLC, and another to Shell and MGM Energy Corp. in partnership.

"To me that adds up to a lot of money," said McNeely. "Having these oil companies in the country, I look at it as a positive thing."

Those leases are in addition to 11 more that were awarded elsewhere in the central Mackenzie last year for a total of $535 million to major players including Husky Energy Inc., Imperial Oil Ltd. and ConocoPhillips.

The Canol stretches from around the Fort Good Hope region south to the hamlet of Tulita, between the Mackenzie River and the mountain range to the west — a "massive piece of real estate," according to David Ramsay, the Northwest Territories' minister of industry, tourism, investment and transportation.

He said there could be between two and three billion barrels of recoverable oil in the Canol, putting it the same league as the Bakken, a major shale oil region that underlies parts of North Dakota, Montana and Saskatchewan.

The economic upswing was evident last winter while some seismic work was taking place around Norman Wells, N.W.T. Hotel rooms were virtually unobtainable, store sales doubled and takeoffs and landings at the local airport tripled, he said.

"It's that kind of activity that's going to drive the economy. We have always struggled with employment levels in smaller aboriginal communities in the Northwest Territories."

Comprehensive review needed for project, says lawyer

This winter Husky is planning to evaluate two vertical wells it drilled in the area a year earlier, and is seeking regulatory approval to build an all-weather access road around its leases.

Ramsay acknowledges there are concerns over fracking. He and other members of his government will be in Calgary the week of August 20 to meet with industry, regulators and environmental groups to learn more.

"People want to know, and people have every right to know, what the impact on the water will be, the chemicals that would be used."

Environmental lawyer Stephen Hazell, who participated in lengthy regulatory hearings into the Mackenzie natural gas pipeline, said shale oil development in the North should be rigorously studied.

Fracking in and of itself has concerns, he said, but heavy equipment moving over permafrost raises a whole host of other environmental issues.

"It needs to be a review that has hearings, that invited people who've got experience with shale oil and fracking in other parts in North America to come up and testify," said the founder of Ecovision Law in Ottawa. "They need to be serious about it and not do a quick and dirty internal review."

Mackenzie pipeline on hold, for now

The Mackenzie gas pipeline, which would carry gas from fields near the coast of Beaufort Sea south to Alberta, has been proposed in various in one way or another for decades, but has yet to come to fruition.

The project, led by Imperial, was awarded a federal permit last year, but the companies behind the proposal haven't committed to building it. Fiscal talks between Ottawa and the proponents are on ice for now.

Energy consultant Doug Matthews, who organized the trip for Northwest Territories politicians next week, said oil development will be good for the people of the Northwest Territories.

"While (the Mackenzie pipeline) may not be officially dead, it's certainly in a very deep sleep and there's not going to be any activity flowing to the people in the North from the project, certainly for the foreseeable future."

Concerns stemming from past oil spills

There is already an oil pipeline owned by Enbridge that runs from Norman Wells to northern Alberta that has a lot of capacity to spare. But if the Canol ends up being as big as some are predicting, another pipeline may need to be built — and that won't be easy in light of recent concerns over spills.

Enbridge's Norman Wells pipeline leaked last year near Wrigley, N.W.T.

"That gives people pause. Understandably they'd be concerned about the impact of the spill," said Matthews.

Fred Carmichael is chairman of the Aboriginal Pipeline Group, which owns an equity stake in the Mackenzie gas pipeline. Through the shale oil find in the central part of the valley could be good news, he said it's important to stay the course on the natural gas pipeline, which he sees moving forward in the next three to five years.

There's been no mining in that region and the anti-fur movement has damaged its traditional hunting and trapping industries, Carmichael said. So energy development will help communities there be self-sufficient, rather than reliant on the government.

"We had a very, very self-sustaining industry of our own before and we want to go back there."