News Release April 3, 2000

FOR RELEASE AT 2:30 PM

EUB ISSUES DECISION ON GOODWELL PETROLEUM'S APPLICATION TO SHUT IN BITUMEN WELLS

Calgary, Alberta (April 3, 2000) The Alberta Energy and Utilities Board (the Board) today issued its decision (Decision 2000-21) on an application by Goodwell Petroleum Corporation Ltd. (Goodwell) to have the Board order the shut in of 16 horizontal bitumen wells. These wells are operated by AEC East* and Amber Energy Incorporated (collectively referred to as AEC East) and are located about 130 kilometres southwest of Fort McMurray. Goodwell's application was considered at an EUB hearing held in December 1999 and January 2000. After careful consideration of the evidence, the Board has ordered the immediate shut in of four of the 16 wells. Shut in of these wells will continue until AEC East obtains the full rights to produce, and the Board approves production plans according to EUB Interim Directive (ID) 99-1: Gas/Bitumen Production in Oil Sands Areas, Application, Notification, and Drilling Requirements. The Board does not believe that shut in of additional wells is warranted at this time.

Accumulations of natural gas found in contact and/or pressure communication with bitumen are referred to as associated gas, or gas-cap gas. In Alberta's oil sands areas, the petroleum and natural gas rights (P & NG) may be leased separately from oil sands rights. This means that different companies can have the rights to different resources (gas or bitumen) in the same geologic zone. The holder of the oil sands lease has the right to produce bitumen along with any solution gas (gas dissolved in the oil and released when produced), while the P & NG lease holder has the right to produce the gas-cap gas. In this case, Goodwell wanted the wells shut in because, among other reasons, they believed AEC East was producing Goodwell's gas-cap gas. While the Board did not order the shut in of all the wells identified by Goodwell, the Board did conclude that four specific wells needed to be shut in because continued bitumen production would not be in accordance with the Board's equity and conservation mandates.

It appears from the evidence in this case that companies may not fully understand the implications of split mineral rights and gas-over-bitumen requirements. The Board believes that parties must fully appreciate the split mineral rights issue and work collectively to identify and resolve disputes. The Board encourages Goodwell and AEC East to renew negotiations, taking into account ID 99-1, the Board decision on reserves, and the focus of gas-cap production on the four wells for future cost-sharing considerations.

The Board's conservation mandate requires that it consider the relative benefits and risks to each energy resource in its approvals of energy applications and developments. The Board determined that a sizable amount of gas remains in the subject lands. The Board has directed AEC East to conduct representative stabilized pressure surveys and incorporate this information in an enhanced oil recovery feasibility study to be filed by December 31, 2000.

While the Board commends AEC East's decision to initiate gas conservation for the area of application and a large surrounding area relatively quickly, the Board is disappointed with AEC East's prior venting practices in this area. Venting of this magnitude of gas is unacceptable. Flaring, not venting, of significant volumes of gas is a long-standing Alberta regulatory requirement. With the benefit of hindsight, all the subject wells exhibit gas production volumes large enough to require flaring, and this should have occurred.

The gas-over-bitumen matters the Board has dealt with in recent years has brought to light the difficulties of dealing with this complex resource management issue where limited field and operational data exists. The Board believes that it is imperative to collect the necessary information for cases of split rights and gas-over-bitumen in better quality reservoirs. It may be that the Oil Sands Regulations do not sufficiently set out an appropriate set of requirements to cover the wide range of producing situations that are becoming evident for declared bitumen properties. To help address this, the Board will invite Alberta Resource Development, the Canadian Association of Petroleum Producers, and the Small Explorers and Producers Association of Canada to participate in a review to examine regulatory needs, documentation of requirements, and operating practices appropriate for the wider range of producing situations for bitumen producing wells. This review will commence as soon as possible and when completed, results will be communicated to all stakeholders.

* AEC East is a business unit of AEC Oil and Gas Partnership (Partners: Alberta Energy Company Ltd. and AEC West Ltd.)

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This news release and Decision Report 2000-21 are available on the EUB Website at http://www.ercb.ca

For more information, please contact:
Dave Morris, EUB Communications
Tel. 403-297-7470
Fax 403-297-3757
E-mail: david.morris@eub.gov.ab.ca