REFILE-UPDATE 2-Canada rejects Cenovus gas project in Alberta

Fri Nov 30, 2012 4:29pm EST

* Would have drilled up to 1,275 new shallow gas wells

* Environmental impact in wildlife area considered too great

* Proponent had no plans to proceed with drilling

CALGARY, Alberta, Nov 30 (Reuters) - The Canadian government on F riday b locked a seven-year-old plan to drill more than a thousand natural gas wells in an Alberta wildlife reserve, though the project was unlikely to be developed.

Environment Minister Peter Kent ruled a now moribund proposal from Cenovus Energy Inc to drill up to 1,275 new shallow gas wells at Canadian Forces Base Suffield National Wildlife Area over a three-year period, telling reporters: "The environmental impacts are simply too great".

The 458-square-kilometer (177-square-mile) reserve in southern Alberta protects rare prairie grasslands and 19 species considered to be at risk. However the area has already been partially developed, with 1,154 natural-gas wells owned by Cenovus that were drilled before it was protected in 2003.

Cenovus said on Friday it was disappointed with the decision but the company had no plans to carry out the drilling program, conceived prior to the spin off of the oil sands developer from Encana Corp in 2009 and before new supplies from prolific shale-gas fields led to a collapse in the price of the fuel.

"Our goals have changed quite significantly," said Rhona DelFrari, a spokeswoman for the company. "So that's not a priority for us anymore, to do additional natural gas drilling there. We've moved most of our capital budget over to oil development."

The proposal would have included pipelines, access trails and other infrastructure. The panel that reviewed the proposal concluded in 2009 that the project should not go ahead unless the environmental effects could be mitigated. However Kent said the risks were too great.

"Our scientific advice was that the project as proposed would have impacted 90 percent of the habitat and would have ... been unacceptable in terms of, in terms of infringement on the Species at Risk Act," he told reporters.

Canada's Conservative government has been strongly supportive of oil and gas development and has changed the rules for environmental reviews to speed approvals for pipelines and other projects.

One critic said the announcement was likely timed to blunt criticism of the government at climate change talks taking place in Doha that Kent will attend next week and should not be taken as a change in the government's support for the oil industry.

"It's a clear indication that they won't approve projects that the industry doesn't really want," said Keith Stewart, a climate and energy campaigner with Greenpeace Canada. "It's a PR tactic but it's no indication of any change of heart from this government, which has been very vocal in its support of the oil industry."

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