CIBC NotesKey Points Of The Agreement
We view the announcement as a significant step forward. There are a number of outstanding items that will need to be clarified, including the various protection levels in high-value areas, measurement of cumulative impacts, and credit given for reclamation efforts. Nonetheless, this is a positive development for the industry in the region, as it reduces uncertainty for developers. The agreement includes the following measures:
• A $200 million restoration fund by June 2025, which supports healing of the land from decades of legacy industrial disturbance.
• Blueberry River First Nations will receive $87.5 million as a financial package over three years, with an opportunity for increased benefits based on petroleum and natural gas (PNG) revenue-sharing and provincial royalty revenues in the next two fiscal years.
• Limits on new PNG development and a new planning regime for future oil and gas activities.
• Protections for old forest and traplines during and through planning.
• Land protections in Blueberry River’s high-value areas, which includes more than 650,000 hectares of protection from new PNG and forestry activities and will advance BC’s 30% land protections goal by 2030.
Additional measures specific to PNG development include:
• Establishing permanent protection areas.
• Focusing disturbance from PNG wherever possible in areas already developed.
• Reducing new disturbance from PNG by approximately 50% from pre-court decision years.
• Introducing operational and strategic planning expectations for the sector, applicable to all new proposed activities.
• A limit on overall new disturbance from PNG activities in Blueberry River’s claim area, designated at 750 hectares, as further detailed planning and restoration activities can be developed and agreed to.
Most operators under coverage carry an inventory of existing well authorizations in BC that span multiple years, which will provide cushion to adapt to the new development protocols. During Q4/22, a total of 205 wells were licensed in BC, and 280 have been licensed since August 2022. Permit issuances at this level should allow most producers in BC
to initiate drilling programs in 2023, which should stem production declines. Field volumes in public data show BC November 2022 gas production of 7.1 Bcf/d, which is 8% higher Y/Y despite having permitting restrictions in place. Although licensing activity has picked up, further growth will be contingent on continued drilling, as drilled and uncompleted (DUC)
inventory is low in BC. Public data indicates that the top 10 operators by active well count held only 127 DUCs despite having >2,000 well licenses.