The typical direct flight from Calgary to Grande Prairie
takes about an hour and a half. Last October, a few
days before Ed Stelmach delivered his royalty decision, a
fierce headwind almost doubled that flight time as Oilweek
headed north to gauge the mood of the oil and gas industry
in the region.
With the winter drilling season just ahead, that headwind
could well have served as a sign of things to come. Grande
Prairie was already struggling against the force of a strong
Canadian dollar, high drilling costs, and low natural gas prices.
An increased royalty burden on deep, high productivity gas
wells was the last thing the gas-dependent region needed.
Grande Prairie’s activity levels had already slowed in 2007
from 2006 and many predicted higher royalties could break
the industry here.
Seems they weren’t entirely wrong.
At the end of 2007, pending higher royalties notched up
the gale force winds and swept many larger producers out
of northwestern Alberta into more promising jurisdictions.
Yet another mild winter in eastern United States, the largest
market for natural gas, seemed to validate their decisions.
“Economically, it just doesn’t make sense at this time to
develop natural gas [in this region],” says Rob Petrone, district
superintendent of Devon Canada and president of the Grande
Prairie Petroleum Association.
