Quebec’s Charest Says Environment to Guide Shale-Gas Decision

Quebec won’t allow shale gas drilling until government regulators are satisfied that production of the fossil fuel doesn’t harm residents’ health or their fresh-water resources, Premier Jean Charest said.

Quebec’s environmental assessment bureau in February recommended halting natural-gas exploration and production in shale fields until further studies have been conducted, a process that Charest said yesterday will require 18 months to two years. Shale gas projects have faced opposition in Quebec amid concern over possible water pollution.

“We believe that it is possible for us to develop the shale gas we have, but we will only do it if we can protect the health, the safety and the environment of Quebeckers,” Charest, 52, said yesterday in an interview at Bloomberg headquarters in New York. “We have to establish those conditions.”

Developing its own gas industry would allow Quebec to cut reliance on imports from western Canada that now amount to about C$2 billion ($2.06 billion) a year, Charest said. Canadian companies including Talisman Energy Inc. (TLM) and Junex Inc. (JNX) say they may invest elsewhere partly because of exploration costs that are more than double those in other North American regions.

Quebec is a latecomer to drilling using a process called hydraulic fracturing that injects water, sand and chemicals to shatter dense underground shale rock and release gas. Concern that drinking water would become contaminated because of the technique has led to a ban on horizontal drilling in New York state while potential hazards are studied.

Environmental Assessment

A 336-page report by Quebec’s environmental assessment bureau recommended a moratorium on the practice until further investigation determines the impact. Developers also face profitability “obstacles” because of exploration costs, a lack of expertise and equipment availability in the province, and low prices for gas, the report said.

“A majority of Quebeckers are skeptical about the development of shale gas,” Charest said. “We have taken the position that we are going to take our time, examine what the consequences are and then make our decisions.”

Quebeckers aren’t as familiar with natural gas as they are with hydro-electric power. Canada’s second most populous province is home to Hydro-Quebec, the state-owned utility that generates about one-third of the electricity produced in the country. As of Dec. 31, Hydro-Quebec operated 60 hydroelectric plants with a combined capacity of 34,490 megawatts.

Oil and Gas

“Oil and gas are not part of our culture,” Charest said. “We don’t have the intuitive knowledge that we have in the case of hydro, so we’re careful on how we proceed. We could always take the regulatory regimes of Alberta or British Columbia, plop them down in Quebec, but that doesn’t give us the kind of intelligence or operating ability that we would have if we had been in the industry for 30 years.”

Charest also said he’s not concerned that the environment assessment will lead natural gas producers to shy away from investing in Quebec, assuming the province does one day decide to allow commercial production.

“These companies operate all over the world, in all sorts of environments and all sorts of conditions,” Charest said of natural-gas producers. “The fact of the matter is, Quebec is a heck of a good place to invest in.”

To contact the reporter for this story: Frederic Tomesco in New York at tomesco@bloomberg.net.

To contact the editor responsible for this story: David Scanlan at dscanlan@bloomberg.net

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