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When Canfor Corp. announced the indefinite closing of its two forestry mills in Fort Nelson, in far northeastern British Columbia, Sylvain Provost decided to shut down his logging company.

He sent a fleet of bunchers, pickers and loaders worth about $5-million to auction, and got about half of that back. Now, instead of facing the manic three months when the swampy muskeg around Fort Nelson is frozen and foresters do their work, Mr. Provost is preparing a smaller version of his old company. This time he's going to work for natural gas companies.

"I'll find work, I'm not too worried," Mr. Provost said. "Just a small crew, eight or 10 guys."

Across Canada, forestry is mired in a deep depression, with 40,000 jobs across the country shed over the last six years. In B.C., the toll has topped 10,000.

The pace of forestry's decline has only worsened as the global downturn has intensified. It is one of the forces bringing economic growth in B.C. skidding to a screeching halt.

Fort Nelson is taking some of the hardest blows anywhere in the province. The town of 5,000 has lost a range of forestry operations, from the closing a decade ago of the world's most prolific chopstick factory to the shuttering of a sawmill in recent years.

This year, Canfor's two mills producing panels for residential construction in the United States and Central Canada went down. More than 400 direct jobs were lost.

Yet the town is not reeling. That's because 100 kilometres north of Fort Nelson, 2.5 km below the surface, an astounding amount of natural gas is trapped in almost-impermeable shale rock. It could be the biggest natural gas discovery in Canadian history.

The size and scope of the gas development will help to determine the shape of British Columbia's economy in the next decade. The most ambitious of projections, from consultancy Wood Mackenzie, suggests the area contains almost as much recoverable natural gas used to heat homes and power industry as Canada has in current proven reserves.

Already, money is rolling in. The companies exploring the Horn River basin, led by EnCana Corp., Apache Corp. and EOG Resources Inc. (which has called Horn River "world class"), have already paid the province about $1.5-billion, much of it in the past year, to secure the right to explore and drill in the area.

In front of the Boston Pizza in Fort Nelson, there's a line of pickup trucks and tractor-trailers outside, all of which belong to people like Mr. Provost who are working in the natural gas business. The service industry around town is desperate for workers. Every hotel has application forms at the front desk and A&W offers $12 a hour to start.

EnCana is drilling 20 wells this winter, and partner Apache Corp. is drilling another 20, the first major effort to unlock Horn River. EnCana is in the process of building a camp at the heart of its operation, a long three-hour drive north of town that will eventually house 750 workers in rooms outfitted with flat-screen TVs and high-speed Internet. There's potential to expand to 2,000, almost half the size of Fort Nelson.

EnCana thinks it alone can eventually produce one billion cubic feet a day of natural gas, one-third of B.C.'s entire current output. Combined with Montney, another large new discovery several hundred kilometres south of Fort Nelson, B.C. has a very real chance to rival Alberta as Canada's top natural gas producer.

Natural gas companies, while surprised at the volume of gas from the early wells, are hesitant to make grand declarations. The work is expensive, in a remote region, and the geology and engineering a daunting technical and logistical challenge. Access to water and electricity are potential problems as well.

To make it all happen, the cost to drill the $10-million wells will have to come down, and the price of natural gas will have to stay relatively high. There is stiff competition elsewhere in North America, such as the Haynesville play in Louisiana, where EnCana and others also work and are investing comparable amounts of money and effort.

Just housing and feeding a worker at the Horn River camp will cost $300 a day. In Louisiana, even though the wells are just as expensive and complicated, the product is already close to consumers and drilling takes place near interstate highways. Workers go home at night.

"It may fail," said Dan Brown, a regulatory official at EnCana who earlier oversaw the earliest Horn River development.

Surveying the territory in a helicopter, where there is little to see beyond the occasional moose and small pockets of industry activity, Mr. Brown is realistic: "If we can't get the costs down, a year or two from now there'll be real scrutiny on the economics."

Mr. Brown's asterisk belies a big confidence: He believes Horn River could be bigger than the Barnett shale in Texas, where production is at about four billion cubic feet a day.

Subsurface fracturing is what unlocked gas in the Barnett, where the technology that makes Horn River possible was developed. Cracking the rock below ground to set gas free to flow to the surface is the key for most gas plays in North America these days and without it Barnett, Horn River, Montney and Haynesville wouldn't be possible.

EnCana was already a specialist in "tight gas," where the commodity is trapped in rock that isn't very porous. Fracturing tight gas reservoirs is already intense. The shale rock of Barnett or in particular Horn River is exponentially more difficult.

The 20 wells EnCana is drilling this winter from a single central area, dive 2.5 kilometres below the surface and then fan out 1.5 kilometres horizontally, through the gas reservoir. There are usually 10 fracture points, perforated with explosives. Then comes the fracturing.

To do it, over four hours, 10 industrial trucks with a combined horsepower of about 14,000 -the average car engine is 150 - throttle up to 3,000 tonnes of sand and 40,000 cubic metres of water down the well bore.

The mixture explodes under high pressure out of the perforations to pulverize the shale.

Picture smashing a bowling ball into a windshield.

Cutting millions of dollars from the cost of drilling is crucial. It's done by a series of small and large improvements. One is doing it faster. Shaving even a few days off a month-long drilling schedule can save several hundred thousands of dollars.

A seemingly simple yet massive advance this winter has been to mount the rigs on metal mats. The derrick gets turned upright once and locked in place for the first well. Because the wells are drilled in proximity, instead of taking down the derrick to move it to the next location, it now slides on the skids to the second entry point. This takes an hour, instead of 24 to take down the derrick, move it, and put it back up.

EnCana is using surface water from a nearby lake for its fracturing mix and is drilling a well to tap subsurface water. Success here is crucial to secure a long-term water supply. And if a planned recycling system works, it could cut another $500,000 per well.

The goal is doing a well for $6-million.

Year-round drilling is another hope, for both gas companies and the province. The logistics aren't yet in place, in a land where the ground in summer is a bog, severely difficult to traverse.

But if companies such as EnCana can make this and other details work, the payoff for B.C. would ripple through the economy. It would boost exports, expand the provincial treasury, diversify revenues and be a new long-term foundation for the northeast region.

Thousands of wells would be drilled - and to do it, an entire infrastructure will have to be built - pipelines, processing facilities and hundreds of kilometres of road.

Mr. Provost is already going after that work. Last winter, when forestry was fading badly, he picked up a few energy jobs. One was cutting a 32-kilometre road for EnCana.

He gave up on forestry last January when Canfor announced it was going to close both mills.

"It was just devastating," Mr. Provost said.

The town scrambled. Meetings convened, talks were held. Concessions on wages at the plywood mill were made and the province chipped in, too. Canfor agreed to keep it open.

Mr. Provost had had enough. He called Ritchie Bros. Auctioneers.

This fall, Canfor concluded it couldn't keep the plywood mill open.

Others in Fort Nelson still are more reluctant to give up on forestry.

Jeremy Sellors, owner of a large logging outfit, is chasing small jobs for natural gas companies this winter. He's hanging onto his two dozen pieces of equipment. Instead of running 24 hours a day, seven days a week, and employing 35 people directly, his gear sits idle in a snowy yard near town.

Mr. Sellors figures that Fort Nelson has good wood, expansive forests of spruce and aspen, free of "the bug" - the voracious pine beetle that is eating through much of the industry's livelihood throughout the province.

"We've got the best wood and top-notch mills," he said. "I can't see it not coming back."

***

FORT NELSON: 203 YEARS AND COUNTING

The fort called Nelson - it's moved several times in the same general area - was first established in 1805, a half-century before British Columbia itself. It's the province's third-oldest European settlement, named after Lord Horatio Nelson, the admiral that led Britain's defeat of the Spanish and French at Trafalgar.

Founded on the fur trade, it has always been a resources town. Until the Second World War, it was barely populated, just several hundred residents including long-time aboriginal locals in the region. Then, Fort Nelson became Mile 300 on the Alaska Highway and a key staging ground for the United States Army.

The first pools of natural gas were discovered around Fort Nelson in the mid-1960s and forestry emerged too. But it's always been a boom-bust place. The 1980s were a particularly long, bad stretch.

Bill Streeper has seen it all. He grew up in the region and his dad hauled rigs and ferried supplies in the early days of natural gas, and Mr. Streeper joined the business.

Now, he's the largest landowner in town, and also the new mayor. Mr. Streeper is betting big on Horn River. Among his projects is a 32-lot industrial subdivision and he has been in talks with several energy companies for space.

"A lot of people are scared, they're waiting," Mr. Streeper said.

"There's no time to wait for a formal announcement. The oil companies are being sheepish. The advantage of Horn River is size. Once it gets going, it's going to be a lot bigger than what's down in Texas. I'm investing millions."

A rock and a hard place

The shale rock in the Horn River basin north of Fort Nelson has long been known to energy explorers, mostly as an annoying, at best, and difficult, at worst, piece of geology to get through while drilling for gas at deeper levels.

In 2003, EnCana was drilling just such a well. The shale rock was giving drilling superintendent Jim Boneham a particularly bad time. On the rig, there was a lot of cursing.

EnCana wondered whether there was something more than just an annoying section of geology.

There was no gas at EnCana's target but the company was intrigued enough by Horn River to complete the well and cap it for further evaluation. A couple years later they conducted one subsurface fracture on the shale. A lot of gas came up.

Now, Mr. Boneham, a 60-year-old with a big grey Fu Manchu mustache, leads the Horn River drilling. An engineer, he's been around the world for the oil business and also was in the Vietnam War for his native Australia, designing tunnels, cooking up booby traps and planning minefields. This winter is all about taking risks and proving Horn River can be a major development.

EnCana, in one example, is testing drilling the wells more closely together, which is considered a risk.

The cost of a mistake can be serious: Some drilling equipment got stuck below surface recently and had to be abandoned - an $800,000 loss.

"EnCana's trying some gutsy stuff up here," said Andy Neumann, a directional driller for Schlumberger working on the EnCana rigs.

"Everyone said it couldn't be done," Mr. Boneham said. "It's tricky - but it's working."

***

Gas rises as wood falls

Natural gas will become a big part of British Columbia's future, with major discoveries in the northeastern portion of the province, as forestry continues to struggle.

Gas rises as wood falls

Natural gas will become a big part of British Columbia's future, with major discoveries in the northeastern portion of the province, as forestry continues to struggle.

B.C. PROVINCIAL REVENUES

NATURAL GAS ROYALTIES:

2008-09 current estimate:

$1.59-billion

2008-09 original budget:

$1.17-billion

2007-08: $1.13-billion

FORESTS:

2008-09 current estimate:

$652-million

2008-09 original budget:

$952-million

2007-08: $1.09-billion

REVENUE FROM THE SALE OF NEW NATURAL GAS EXPLORATION RIGHTS:

2008: $2.66-billion

2007: $1.05-billion

2006: $630-million

B.C. EXPORTS

SOLID WOOD PRODUCTS:

2008: $4.66-billion

2007: $6.30-billion

(down 26 per cent)

NATURAL GAS

2008: $2.65-billion

2007: $2.20-billion

(up 21 per cent)

(Compares Jan.-Oct. 08

with Jan.-Oct. 07)

Source: BC Stats,

Government of B.C.

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