A proposed LNG production and shipping terminal at the former Elk Falls Mill site suffered a setback this week when Quicksilver Resources Inc. filed for Chapter 11 bankruptcy protection in U.S. court.
Tuesday’s filing in a Delaware court does not include the Texas company’s Canadian operations through its Alberta-based subsidiary, Quicksilver Resources Canada, Inc. Its Canadian assets include natural gas-rich deposits in the Horn River Basin in northeast B.C., and in 2013 it purchased the shuttered Elk Falls Paper Mill for $8.6 million and announced plans to explore creation of the Discovery LNG terminal on the site.
In July of 2014, Quicksilver applied for a license to ship LNG from the facility, which would also convert natural gas piped from Horn River Basin into liquid form and provide storage.
“Any plan to develop that area as an LNG facility was always contingent upon Quicksilver Resources Canada being able to secure a partner for our Horn River Basin Integrated Project,” said David Erdman, Quicksilver’s Director of Investment Relations. “We continue to seek a partner for that asset, but with the filings and the announcement (Tuesday), our efforts have not produced … a viable solution for Quicksilver. That’s the reason we did the Chapter 11 filing.”
At the time of its license filing last summer, Quicksilver estimated regulatory approvals and permits were expected to take two years to complete, with another four years for construction on the first phase of the proposed project.
But that license request was submitted just as the price of oil and gas began a decline that has since seen it plummet from nearly $120 a barrel to just under $50 a barrel last month. The resulting cash flow and debt crunch has driven three oil and gas companies to bankruptcy this month alone, with Quicksilver following Texas-based BPZ Resources and Houston’s Cal Dive International.
In the run-up to last year’s provincial election, Premier Christy Clark touted the potential of LNG to B.C.’s bottom line. But those pronouncements were based on a much higher price.
“Canada has been a tough place to create value lately,” Steve Pruett, president and CEO of Elevation Resources, told the Fort Worth Star Telegram in an interview this week. “The resource is there, but the price isn’t there at the well head to recover the capital investment.”
Meanwhile, Quicksilver Resources Canada will continue to lay the foundation for the Discovery LNG terminal in Campbell River. But, barring a turnaround in the price of gas, an operating plant remains over the horizon.
“Don’t expect there to be, at least in the near-term, any announcements on LNG,” Quicksilver’s Erdman said. “But certainly the company continues to own the Discovery site and will continue to operate it as we have historically.”