CALGARY - 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.
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. (TSX:MGM) 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. (TSX:HSE), Imperial Oil Ltd. (TSX:IMO) 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 Normal 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."
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."
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."
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."
Top 5 Provincial Resource Spats
Before the $5.5-billion Northern Gateway pipeline contract is even inked, not to mention approved by a federal panel, a heated quarrel has erupted between Alberta and British Columbia about divvying up the revenues.<br><br>It's not the first time in Canada that resources have spurred disputes between neighbouring provinces. And it likely won't be the last.<br><br>Here's a look at just a few examples of provincial spats, including the Alberta-B.C. one, over issues ranging from human to energy resources.<br><br> <em>With files from CBC</em>
Northern Gateway Pipeline
Alberta vs. British Columbia<br><br>In the dispute over the proposed Enbridge pipeline, B.C. is calling for a share in the project's revenue to compensate it for the potential environmental risks inherent in running a crude oil pipeline across its land. Alberta has refused to share royalties, citing a province's right to income from natural resources within its own borders.<br><br>The proposal involves two pipelines, stretching a combined 1,177-kilometres, that would carry 525,000 barrels of oil per day from the Alberta oilsands to the ports on the West Coast. Enbridge has estimated that public benefits would amount to $2.6 billion in local, provincial and federal tax revenues over 30 years of operation. Environmental groups and aboriginal communities have opposed the proposed pipeline, particularly over worries of an oil spill.
Upper Churchill Falls Hydro Project
Newfoundland vs. Quebec<br><br>Perhaps the most famous inter-provincial skirmish is the Upper Churchill Falls hydroelectric project. It's a battle that has raged between Quebec and Newfoundland and Labrador for more than half a century.<br><br>In 1969, Churchill Falls Labrador Corp. signed a deal with Hydro-Quebec that secured the creation of a power corridor through Quebec, enabling access to outside markets. In return, Newfoundland and Labrador agreed to sell a large portion of the electricity at a fixed rate until 2041 to Hydro-Quebec, the provincially owned utility.<br><br>The 65-year agreement did not account for inflation, nor the drastic rise in energy prices that was to come. Hydro-Quebec benefitted from the cheap price, profiting as it sold on the electricity to the U.S. and refused repeatedly to renegotiate the contract.<br><br>A 1996 report by Maclean's magazine found Newfoundland received $20 million a year by selling power to Hydro-Quebec, but the utility earned $800 million annually by selling that same power to hungry U.S. markets along the eastern seabord.<br><br>Since the 1970s, Newfoundland and Labrador has repeatedly tried to challenge the contract, seeking help from the federal government to the Supreme Court.
Ontario vs. Quebec<br><br>In the late 1970s, Ontario and Quebec began a tit-for-tat dispute over construction workers crossing the border to work in each other's province.<br><br>Dubbed the Ontario-Quebec Construction War in some newspaper accounts, the tiff appears to have started when Quebec enacted restrictions in 1978 effectively barring Ontario construction workers from certain projects there. Ontario sought to retaliate with similar rules. Thus began a political dispute that lasted decades, flare-ups often fuelled by economic downturns.<br><br>Quebec's highly-regulated construction industry has historically deterred Ontario workers wanting to work in Quebec -- while also driving Quebec workers into the more open Ontario.<br><br>Frustrated by the flow of workers into Ontario, Ontario enacted a Fairness is a Two-Way Street Act in 1999, barring Quebec construction workers from Ontario government projects. The two provinces eventually settled their differences in 2006 with a construction mobility agreement.
Ontario vs. Manitoba<br><br>In Canada's early days, as boundaries were still being carved out, Ontario and Manitoba clashed for years over a tract of land on the western and northern boundaries of Ontario that each claimed as its own. An 1883 New York Times article described "frequent disgraceful conflicts" that "stopped short of bloodshed."<br><br>The tract was rich in timber and minerals, and also contained a port on Lake Superior.<br><br>In 1880, Manitoba extended its boundaries, with the federal government confirming them the next year.<br><br>But Ontario did not agree, saying the extension gave the disputed area to Manitoba. Confusion reigned in the disputed area as it lacked not only civil courts and a registry office to record deeds, but a timber agent to protect the forest. The U.K. judicial committee of the Privy Council finally weighed in. In 1889, the boundary of Ontario was extended west of Lake of the Woods and north to Albany River.
National Energy Program
Alberta vs. Ottawa (and Ontario and Quebec)<br><br>In the wake of the energy crisis in the late-1970s, when the OPEC nations raised the price of oil, the Trudeau government introduced the National Energy Program, basically to equalize the price of oil in Canada and offset higher prices being paid the central and Atlantic provinces.<br><br>Highly unpopular in Western Canada, particularly in Alberta where most of Canada's oil is produced, the NEP sought to increase the federal share of energy revenues and make Canada a self-sufficient oil producer. Alberta viewed the program as an intrusion into provincial control over natural resources, as set out in the British North America Act, then the country's constitution.<br><br>Peter Lougheed, the Alberta premier at the time, retaliated against Ottawa by cutting provincial oil production. The fight caused huge uncertainty in the oil patch and essentially pitted the Western province against Eastern Canada. Lougheed said the federal government effectively "weighed Alberta's needs for markets against the economic advantages to Eastern Canada, and decided against us."<br><br>Eventually Lougheed and Trudeau signed a revised energy agreement in 1981, whch rejigged the revenue-sharing arrangement and reduced the NEP export tax on Alberta.<br><br>In 1982, the Supreme Court of Canada ruled Ottawa couldn't legally tax provincially owned oil and gas wells and the last vestiges of the controversial program were scrapped after Conservative Brian Mulroney was elected in 1984.