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The Bulkley Valley, taken from the Village of Telkwa. The mountain in the background is Hudson Bay Mountain, which overlooks Smithers, B.C. The river is the Bulkley River, which is a world renowned fly fishing river and part of the Skeena River system.Jane Hoek

Oil and gas development is to be banned from a 400,000-hectare area in northwestern British Columbia known as the Sacred Headwaters, The Globe and Mail has learned.

In an announcement, expected Tuesday, the B.C. government will confirm that Shell Canada Ltd. is immediately abandoning plans for drilling in the area where the headwaters of the Skeena, Nass and Stikine rivers are located.

At the same time, the province will announce that it is not going to issue any future petroleum or natural-gas tenures in the region – effectively making permanent a moratorium that has been in place for the past four years.

That moratorium was set to expire Tuesday, raising concerns among first nations and environmental groups that the Sacred Headwaters, which is sometimes called the Serengeti of the North because of its rich wildlife values, was about to be opened again for industrial activity.

It is understood Shell Canada agreed to give up its rights to shale gas in the Sacred Headwaters, in part because it has better prospects in northeastern B.C., which the company will now focus on developing.

In a related agreement, the B.C. government will issue Shell $20-million in royalty credits, in recognition of the upfront capital costs and rental payments made by the company on its lost tenures. The royalty credits are to be used by Shell to help build a new water recycling project, which will support its gas developments elsewhere in the province.

Gas exploration has been booming in northern B.C., amid growing concerns about fracking, a technique that injects a chemical-laced slurry deep underground to fracture rock formations. The fear has been that shale-gas development could lead to the pollution of three of B.C.'s most productive salmon rivers, as well as damaging an iconic wilderness region that in recent years has been the focus of books, films and travelling nature photography exhibits. In 2009, a documentary by Andrew Eddy, Awakening the Skeena, chronicled Ali Howard's journey as she swam the 600-kilometre length of the Skeena to raise awareness to the threats. And, last year, the wilderness area was celebrated in The Sacred Headwaters, a coffee-table book written by Wade Davis.

The oil and gas ban – which was agreed to in long discussions between the provincial government, Shell Canada and the Tahltan Central Council – heads off a confrontation over environmental issues and native rights that threatened to explode on the international stage, had drilling resumed in the area 400 kilometres north of Smithers.

By some estimates, shale-gas development in the Sacred Headwaters could have led to the drilling of 4,000 wells and the building of 3,000 kilometres of roads. None of that activity will now take place. But The Globe has learned that the government hasn't finished yet with plans to protect the Sacred Headwaters, and that the oil and gas ban may be followed by some restrictions on mining activity as well.

The deal with Shell Canada is expected to give the Liberal government led by Premier Christy Clark a significant green boost as it heads toward an election next spring. And the decision strengthens the leadership position of Annita McPhee, president of the Tahltan Central Council, who has won two terms largely on her uncompromising demand that the Sacred Headwaters be protected.

Since 2004, Shell Canada has held the rights to explore for petroleum and natural gas in the region. The company drilled three exploration wells in 2004-05, but native blockades and threats of a massive environmental campaign persuaded the company to withdraw. Then, in 2008, the government imposed a temporary moratorium, while the parties discussed possible solutions to the impasse.

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