By Collin Gallant on November 4, 2017.
A better royalty rate in Alberta for helium is needed before the City of Medicine Hat and a private company will begin niche drilling programs in this province, officials tell the News.
Both entities are currently drilling in Saskatchewan, and say the elusive but valuable gas is under southeast Alberta as well.
However, pending the outcome of talks with the province on a new framework for extraction costs, they won’t greenlight drilling in southeast Alberta.
“There’s more clarity (in Saskatchewan) that we’re looking for in Alberta,” Jeff Vogt, CEO of the Weil Group Canada, said this week as plans to process production in Medicine Hat were announced.
It would receive helium from Weil’s leases in Saskatchewan, while talks to accept any city production from three proposed wells in that province are ongoing.
Also in the works are discussions with the Alberta government to update its framework.
“Saskatchewan has for 60 years had a program for helium for helium’s sake,” said Vogt. “We, along with Medicine Hat, have sought out that clarification (from Alberta), and I think that’s coming.”
Royalties are essentially the price paid by companies extracting natural resources that are considered public property.
The Alberta government updated its royalty schedule in 2016 — an election promise of the New Democrats — but the headline items were oil and natural gas rates.
There is no history of helium exploration in Alberta and the more obscure commodity is lumped in with petroleum extraction that can be charged up to 30 per cent.
Saskatchewan charges a 5 per cent rate on volumes of the inert gas that’s produced in the provinces.
Officials with Alberta Energy Ministry say the government is committed to diversifying our energy sector and adding “value-added jobs.”
“Given the recent interest in potential helium production, Alberta Energy officials are currently analyzing what the appropriate royalty for helium would be and will be making a recommendation to government soon,” said spokesperson Mike McKinnon in an email to the News.
The News has learned that meetings took place in late March — about six months before the city’s helium strategy was made public between city administrators, the Medicine Hat Chamber of Commerce and provincial representatives.
Mayor Ted Clugston said this week that changing the province rates would spur more drilling.
“Five per cent of something is better than 30 per cent of nothing,” said Clugston.
This week the Weil announced it was close to approving a new helium “CryoHub” that would gather, cool and liquify the gas for export out of Western Canada.
The plant can be supplied with proven reserves at this point, said Vogt. However, it is “scalable” and could expand to accommodate more production from a bigger drilling program.
“Medicine Hat is (geographically) central to these prospects,” said Vogt. “We’ve taken a look at several sites (in Alberta) and have some land assembled and have done the work to prove our reserves. We would do more with greater clarity.”
The municipal energy exploration wing said this fall it will drill three helium-specific wells in Saskatchewan, and has an undisclosed number of prospects in Alberta as well.
Success is based on finding dome-like formations of non-porous rock that capture volumes of the extremely light gas as it travels from greater depths.
The city has said a substantial find would boost city revenue and also draw industry, such as Weil’s proposed plant and related industries.
Talks between the two are “advanced” about processing.
“They have there business case and we have our,” said Brand Maynes, the manager of the city’s petroleum exploration division, of talks with Weil.
“We still need to talk about how it might look … but a lot of tough discussions have already happened.”
Helium, which is highly sought after for industrial and high-tech manufacturing, super computers and other uses, is worth about 100 times more than natural gas but is found in much smaller amounts.
Only 6 billion cubic feet of helium is produced and traded each year around the globe. The same volume of natural gas is produced each day from wells in Alberta alone.