Alberta's new helium royalties could see rise of extraction industry

Alberta government leaders hope a new royalty structure for helium will buoy exploration and production of the inert gas within the province.

Explorers have found huge deposits of nitrogen gas containing helium deep underground in southern Alberta and Saskatchewan.

Companies are already extracting helium in Saskatchewan, where a royalty structure is already in place.

The Alberta government wants to catch up.

Jeffrey Vogt, CEO of Virginia-based Weil Group Resources, has been asking the Alberta government to introduce a royalty rate.

The company has a handful of helium wells in southern Alberta. He won't say how many, for competitive reasons. It plans to build a "cryohub" helium liquefaction plant to compress the gas it's extracting in the region.

It's far more efficient to transport liquefied helium Vogt said. The company sells it to clients in the U.S., Europe and China.

The Weil Group has been producing helium in Mankota, Sask., since 2016.

Vogt has been waiting for Alberta's announcement of a royalty structure to provide clarity on the cost of doing business in the province.

The company had already planned to begin extracting helium in the province this year. Alberta's 4.25 per cent royalty rate, which applies retroactively to April 1, will help accelerate that work, Vogt said.

"Given the environment, this is something that will be a nice bright star in an otherwise dark oil and gas economy, just given where prices are," Vogt said on Friday. "I think we see some good, solid growth in two or three projects here over the next twelve months."

Beyond balloons

Talk of helium might conjure visions party balloons or skyward blimps.

But demand for helium in other applications is, well, ballooning.

Its boiling point is the lowest of the chemical elements. This property makes helium especially good at keeping things cool.

It's used to chill powerful magnets in MRI machines, in scientific research, quantum computing, for fuel pressurization in rockets, in scuba diving tanks and in manufacturing LCD screens and fibre optics.

Depletion of a huge helium cache in the U.S. is driving a global shortage of the gas and pushing up the price.

Typically, helium is captured as a byproduct of natural gas production, said Scott Mundle, a chemistry professor at the University of Windsor. He studies environmental stressors in industry and agriculture.

Isolating helium from natural gas can be expensive. That's why companies are interested in nitrogen deposits, a couple of kilometres below the southern Prairies, that are highly pressurized and likely contain higher concentrations of helium, he said.

Extracting that helium would also have a smaller environmental footprint, he said. One well can last a long time and the nitrogen by product can be released safely into the atmosphere. The natural gas method can release greenhouse gases such as methane and carbon dioxide into the atmosphere.

Given the increasing demand for helium, Canada would be smart to tap into its own supply, Mundle said. Other major reserves are in Russia, Qatar, Algeria and Iran.

"There's major concerns about our global supply chain," Mundle said. "I think it's really good that Canada is getting into this industry to be able to support medical needs, research needs and industry needs without having to rely on getting the supply from maybe more politically unstable areas."

Kavi Bal, press secretary to Alberta Energy Minister Sonya Savage, also said in a Wednesday email that Alberta would have a willing buyer next door in the U.S., which is the world's biggest helium consumer.

Cost-benefit analysis

Although the Alberta government says Canada has the world's fifth-largest helium reserves, the question is whether extracting it is profitable, Mundle said.

Vogt believes it is. His company, which has been buying up land in southern Alberta, has found two billion cubic feet of helium in its projects, he said.

"I think this is a great opportunity for Canada and for the province," he said. "I think the province's steps are very positive. We're all looking for some positive news today and we hope to add to that ledger."

Calgary-based North American Helium is also a major driller in southwestern Saskatchewan. No one from the company could be reached Friday to comment on any plans for exploration in Alberta.

While growing the helium industry holds promise for creating jobs on construction, fabrication and transportation, Mundle said it's unlikely to replace the oil and gas industry in the province — but it could complement it.

The energy ministry was unable to provide an estimate on Friday of how much it revenue helium royalties would bring to the provincial treasury.