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A pump jack draws oil from the ground near a hydraulic fracturing operation near Bowden, Alta., Tuesday, Feb. 14, 2012.

jeff mcintosh The Globe and Mail

A Canadian energy regulator has given a major oil and gas company permission to produce oil using a controversial technique in the Northwest Territories.

The National Energy Board gave ConocoPhillips Co. the right to drill two wells and then use horizontal fracturing, known as fracking, methods to extract oil out of shale rocks. This is the first time the NEB has authorized a company to frack in the North.

The NWT government is begging for companies to develop oil and gas properties so it can rake in royalties. Government leaders also argue oil and gas development will create jobs and spur its economy. However, fracking is controversial, with opponents arguing it can taint groundwater and cause other problems. Its proponents argue the technique is safe and has been used for decades.

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"The board recognizes the importance of fostering better understanding and communication with all stakeholders that take part in board processes and engaging Canadians is a priority," the NEB, and independent federal regulator, said in a statement. "Since 2011, NEB staff have conducted over 25 public information and community engagement sessions in the North on how the NEB regulates hydraulic fracking."

ConocoPhillips, along with other energy companies, are hoping to extract oil near Norman Wells. ConocoPhillips plans to start drilling in late December and then frack in late January, company officials have said.

MGM Energy Corp. and Husky Energy Inc. join ConocoPhillips in the hunt for oil in the Canol shale play in the Central Mackenzie Valley, near Norman Wells. The potential reserves could reach a billion barrels of oil, according to speculative estimates.

The fight over fracking turned violent in New Brunswick earlier this month, with First Nation protesters blocking a highway and later setting police vehicles on fire. About 40 people were arrested and the confrontation between the protesters and the RCMP included tear gas and rubber bullets. The Elsipogtog First Nation are opposing the development of a shale-gas project.

Quebec has a moratorium on fracking.

Many in the NWT, however, do not want the most recent surge in interest from the energy industry to end the same as the Mackenzie Gas Project. This project has been stalled for decades because of regulatory delays. And while the process dragged on, energy companies discovered prolific natural gas reserves elsewhere on the continent. This made the NWT natural gas project less appealing, therefore pushing the $16.2-billion further down the list of priorities for the energy companies involved.

Fracking involves shooting a mix of water, sand, and chemicals down a well at high pressure. The mix, known as frack fluid, cracks the extremely hard rocks. This creates fractures, freeing the oil and gas and clearing a pathway to the extraction well.

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NWT officials are also pushing for offshore energy development in the Beaufort Sea, again arguing it would bolster its economic prospects. Drilling there, however, is at least seven years away.

With files from Jeffrey Jones

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