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.