* Shell to focus on larger shale plays
* To build water recycling plant using royalty credits
* 4-year moratorium was due to end
By Jeffrey Jones
CALGARY, Alberta, Dec 18 Royal Dutch Shell Plc
has scrapped plans for a coalbed methane gas project
near Canada's Pacific Coast in the face of local opposition and
weak natural gas prices, ending an eight-year battle over
development, the company and the British Columbia government
said on Tuesday.
In addition, the provincial oil and gas authority said it
will not issue any more drilling rights in the Klappan area,
which the local aboriginal community had identified as having
special cultural and spiritual significance.
Shell agreed to relinquish its land tenures in the region,
which became known as the Sacred Headwaters, and with C$20
million ($20.3 million) of royalty credits, will build a water
recycling plant at a gas field in Northeast British Columbia
known as Gundy.
The company had spent C$30 million on drilling, an access
road and other items at Klappan, spokesman David Williams said.
It has also begun reclamation.
An official with the Tahltan First Nation acknowledged Shell
for giving up its drilling plans.
"It is a place of tremendous cultural, spiritual, historic
and social importance," Annita McPhee, president of the Tahltan
Central Council, said in a statement. "Our people do not want to
see it developed, and we look forward to working with B.C. on
achieving permanent protection of the Klappan."
The oil major had drilled three exploration wells in the
region, which includes the Stikine, Nass and Skeena rivers.
Coalbed methane development often brings with it large
volumes of associated water. Shell's plans, announced in 2004,
had alarmed native groups and environmental groups, including
the Skeena Watershed Conservation Coalition, who feared it would
harm the salmon-bearing rivers.
Following protests, the government in 2008 imposed a
moratorium on development that was due to expire on Tuesday.
Shell said large shale gas discoveries in the Montney
regions of Northeastern British Columbia have been a much bigger
focus in recent years, especially as prices for dry natural gas
slumped, making coalbed methane development unprofitable.
"Close relations with aboriginal communities are important
to our many business opportunities in British Columbia, and we
are pleased to have found common ground on our petroleum and
natural-gas tenure in the Klappan," Shell Canada President
Lorraine Mitchelmore said. "We now focus on growth opportunities
with better commercial and geological prospects in Northeast