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SAHTU
The Sahtu region's oil and gas boom is set to ramp up again this winter as MGM Energy Corp. has received the green light for its drill plans in the Canol shale oil play this winter.

A truck is seen transporting rig components at MGM Energy Corp.'s Windy Island J-39 drilling location in 2010, about 10 km north of Tulita. The company has received the green light to frac a vertical well this winter in the Sahtu region. - photo courtesy of MGM Energy Corp.

The land use permit and water licence to drill a vertical well -- which is to include a variation of the controversial fracturing oil extraction method also known as "fracking" -- were approved by the Sahtu Land and Water Board, the primary regulator in the region.

"Our board did not receive any notice of concerns from any of the review organizations," said Paul Dixon, executive director of the board, noting about 33 groups make up the review organizations, including aboriginal organizations and federal and territorial government departments such as Fisheries and Oceans and Environment Canada.

"This fracking operation is a vertical frac job, which is fairly typical of drilling operations that have been done, as opposed to a horizontal drilling operation where there's multiple stage fracs and the water usage is high," Dixon explained, noting that similar oil-based, vertical fracturing has been done in the Colville Lake, Cameron Hills areas and elsewhere in the NWT.

The well being drilled this winter will cost substantially more than $10 million, said Henry Sykes, president of MGM, and will employ between 60 to 100 people throughout most of the winter, tasked with water hauling, heavy equipment operation, camp helping and catering, and well site work.

"We'll employ everybody from Fort Good Hope, Norman Wells and Tulita who's willing to work on the program," said John Hogg, vice-president of exploration and operations. "It will be a very busy winter this year for those communities."

While there has been some apprehension in the communities to allow fracking, from an economic development standpoint, the fear would be to not allow fracking in the region, said Chris Buist, president of the Norman Wells and District Chamber of Commerce.

"Yes, there's definitely some apprehension to say, 'Yes, go ahead, run with the ball," Buist said. "We want to err on the side of safety and make sure we balance the two -- the environment and industry -- and I think there is room for that.

"I think the industry companies are being very open and forward about how they're going about it," Buist added.

"As far as economics go, the fear I guess is that if fracking isn't acceptable by some individuals or isn't accepted very well, that would really pretty much put us back to having no development here again," Buist said.

"This is the play that's happening, this is our only opportunity to have development at this point, so it would really undermine our outlook for economic development."

Fracturing extraction technology has been a major factor in making oil and gas in tight unconventional reservoirs such as the Canol shale oil play economically accessible for energy companies.

"If somebody said, in completing your well, you cannot fracture, then you're taking one of our completion tactics off the table that could be critical to the economic success," said Sykes. "So the answer would be, we would look to drill somewhere else."

While the hydraulic fracturing method involves the drilling of a long horizontal well, and spreading of multiple fractures in the rock layers with a pressurized fluid that usually contains sand, water and chemicals to pump out the oil, MGM plans to drill a vertical well, which will be fractured with a hydrocarbon fluid from a well in Alberta, with no water usage, said Sykes.

"I would go so far as to say -- without fear of contradiction -- that this is very standard," said Sykes.

MGM will also be applying to conduct horizontal fracturing technology on its leases in the Sahtu in the future, Sykes said.

"For this play to work, we have to be able to demonstrate that this work can be done in an environmentally sensitive manner and safely," Sykes said. "We are committed to doing that so we could continue doing the work. There'd be no point in drilling a well, doing a bad job, and then them saying, 'Sorry you messed it up, we're not allowing anymore.' I mean, that's just a waste of everybody's time."

The Sahtu Land and Water Board and the National Energy Board have not had any applications for horizontal fracking in the NWT.

While the GNWT is not the regulator for oil and gas activity, it is getting up to speed on the extraction method in the hopes of seeing the estimated two to three billion barrels of recoverable oil in the Canol formation proved up, said Industry, Tourism and Investment Minister David Ramsay.

"We're really excited about the future economically for the region and for the territory, given the magnitude of what could be there," he said.

Ramsay has proposed a fact-finding tour for the standing committee on economic development to take place in Calgary this week, where the committee will meet with industry, regulators, academia, and environmental groups to "get the full cross section on fracking, what it is, and what it means both from an economic standpoint and environmental standpoint," Ramsay said.

In addition to work commitments on oil and gas leases in the Central Mackenzie Valley totalling $630 million, including two leases won by Shell Canada and MGM this summer, $30 million was spent on seismic work in the region last winter, with close to $100 million to be spent this year on seismic work, Ramsay said.

"Our government has always struggled with high unemployment rates in small aboriginal communities and certainly this development is going to give people that opportunity and that hope for a bright future," he said. "So we're anxious to see it move forward."

As the communities brace for planned activity from at least three different oil and gas companies this winter, including ConocoPhillips Canada, Husky Energy Inc., and MGM's winter program, several public meetings have been held in the region over the year, Dixon said.

MGM's application for the winter 2012/13 season is the only one that had been approved by the board by last Tuesday.

Shares of Calgary, Alberta-based MGM Energy Corp. closed at $0.22 on Thursday on the Toronto Stock Exchange.

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