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British Columbia delivers on promise of new coalbed methane regime Energy and Mines Minister Richard Neufeld aims for 10 commercial CBM projects in next 10 years to exploit a resource estimated at 90 trillion cubic feet Gary Park PNA Canadian Correspondent
The British Columbia government has approved a new coalbed methane royalty regime, which Energy and Mines Minister Richard Neufeld hopes will see at least 10 commercial CBM projects developed in the next decade.
Unveiling the changes on Jan. 16, he estimated the potential CBM across the province at 90 trillion cubic feet, or “about 90 times our current annual, conventional production per year. What will be recoverable remains to be seen.”
He said the new royalty structure will deal with the challenges of developing CBM through four amendments to the current petroleum and natural gas royalty and freehold production tax regulation for CBM wells.
The changes will:
• Include produced water-handling costs in producers’ cost-of-service allowance to address the additional water management costs in CBM production.
• Create a “royalty bank” to collect excess cost-of-service to be applied against assessed CBM royalties to address the lower initial volumes of gas production.
• Increase the marginal well-adjustment factor threshold to 600 million cubic feet per day from 180 million cubic feet per day, to offset the low production rates of CBM.
• Provide a C$50,000 royalty credit for CBM wells drilled within the next two years.
Neufeld said the changes will address the “technically and financially challenging drilling and production” of CBM and allow British Columbia to lead Canada in CBM policy.
Regulatory, fiscal impediments He said the commitment to develop new energy resources is vital because the “world’s major energy companies are interested in British Columbia.”
But the impediments include regulatory and fiscal regimes that are not responsive to the unique challenges of CBM, which yields lower volumes in the early stages of production, lower peak production volumes and significant volumes of water that must be disposed of, in addition to the technical demands posed by drilling into coals.
Neufeld said the government’s priority is to offer an “industry-specific royalty structure to facilitate accelerated growth of the CBM industry.”
He said that by setting a new marginal production rate of 600 million cubic feet per day, the province will encourage development of tight gas that at current rates is uneconomic.
Premier Gordon Campbell said the new CBM regime is “part of a bold and aggressive plan for British Columbia to take full advantage of our energy opportunities, not just in oil and gas, but in coalbed methane and hydro-power.”
The announcement came the same day the government set a target of eliminating 11,700 civil service jobs, or one-third of the current workforce, over the next three years as it tries to achieve a balanced budget by 2004 and stimulate the private sector economy.
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