Gaétan Caron, Chair
National Energy Board
CAMPUT Regulatory Key Topics
25 February 2014
Slide 1 speaking notes (click to view)
I am pleased to be here today to participate in a panel session on Northern issues.
To be able to understand the regulatory context in the North, I believe it is important to understand the past, get a sense of what we can expect going forward - specifically upcoming activity and the impact of devolution in the Northwest Territories - as well as our engagement activities.
Slide 2 speaking notes (click to view)
The Board’s regulatory responsibilities for the North are set out in the Canada Oil and Gas Operations Act - referred to as COGOA - and the Canada Petroleum Resources Act - referred to as CPRA.
- Under the COGOA, the Board’s mandate is regulating onshore and offshore oil and gas exploration, drilling and production activities. This currently includes the Northwest Territories, Nunavut and offshore - except offshore Nova Scotia and Newfoundland and Labrador where these activities are regulated by joint federal-provincial offshore petroleum boards. The focus is on safety, environmental protection, conservation of oil and gas resources, efficient energy infrastructure, and joint production agreements. The Board also has a responsibility for financial responsibility when deciding on an authorization.
The Board’s regulatory responsibilities, amongst other things, for pipelines that cross a border (e.g., from Northwest Territories to Alberta or from the offshore to the onshore) are set in the National Energy Board Act - referred to as the NEBA.
- Under the NEBA, the Board’s mandate is to regulate interprovincial oil, gas and commodity pipelines and international powerlines in the Canadian public interest. The focus is on promoting safety and security, environmental protection, and economic efficiency. We are also charged with regulating the export of natural gas, oil, natural gas liquids, electricity, import of natural gas and conducting energy analysis.
While the Board is in full control of the review process from receipt of an application through decision-making in the North, land tenure or rights issuance, benefits plans, and royalty management are administered by other federal departments - specifically Aboriginal Affairs and Northern Development Canada and Natural Resources Canada. Further, the NEB cannot make a COGOA regulatory decision until the environmental assessment or screening process under the land claim agreements is completed. For trans-border pipelines, the Board is responsible for the full review process from the receipt of the application to the decision, with the exception of section 52 applications which require a recommendation to the Governor in Council.
Slide 3 speaking notes (click to view)
Following the BP Macondo - Deepwater Horizon incident in the Gulf of Mexico in April 2010, the NEB initiated a review of the safety and environmental requirements for offshore drilling in Canada's Arctic environment. Through the Arctic Offshore Drilling Review (the Arctic Review) in 2010-2011, the Board examined the best information available on the hazards, risks and safety measures associated with offshore drilling in the Canadian Arctic. The objective was to gather information and knowledge through meaningful engagement and dialogue.
During the Arctic Review, the NEB heard that if there was a drilling accident, life in the North would change irrevocably. Some people told us that, if there were to be an accident like the Deepwater Horizon in the Canadian Arctic, they would not be able to provide for their families, even if there was financial compensation. However, despite concerns about potential hazards, many people recognized the importance of energy and were not opposed to development, but emphasized that it must be done right.
A key finding of the review was that the NEB has the regulatory tools it needs to protect the safety of Northern residents, workers, and the Arctic environment. This includes the use of risk-informed, management system-based regulations, allowing flexibility in terms of the means of achieving compliance while requiring a consistent level of performance.
Many of the learnings that the Board gathered through the Arctic Review have also been incorporated into the NEB’s filing requirements for future applications for offshore drilling in the Canadian Arctic.
Slide 4 speaking notes (click to view)
The Board requires any company planning to operate in the Canadian Arctic to demonstrate that they can work safely while protecting the environment.
It should be noted that there have been no oil well blow-outs in the Canadian Beaufort Sea since drilling began there in 1973. Since that time, about 100 wells have been drilled, mostly in relatively shallow waters, although only one well has been drilled in the last 20 years. There is, however, potential for further seismic and drilling activity.
16 exploratory licenses, totaling roughly $2 billion dollars in work bid commitments, have been issued for the offshore. No applications for operations authorizations have been submitted to the Board for Arctic offshore drilling yet. There are two potential offshore projects that should be mentioned.
- Imperial Oil Resources Ventures Limited, as the operator of a joint venture between Imperial, ExxonMobil and BP, referred to as the Beaufort Sea Exploration Joint Venture, has indicated its interest in drilling one or more offshore exploratory wells about 125 km north-northwest of Tuktoyaktuk (Tuk), in the Northwest Territories, at water depths ranging from 60 to 1,500 m. The regulatory review process began with their submission of a Project Description to the Inuvialuit Environmental Impact Screening Committee on September 9, 2013. It was subsequently referred to the Environmental Impact Review Board for further assessment.
- ConocoPhillips is in the initial planning phase for development of the Amauligak offshore oil and gas field, which is located approximately 50 km northwest of Tuk in 30 m of water depth (the largest oil and gas discovery in the Beaufort Sea). ConocoPhillips is analyzing the best options for developing this resource, including the number of gravity base structures, wells, transportation to market, etc. Conoco has noted that it estimates the regulatory review process may begin as soon as 2016.
We have a preference for one Environmental Assessment per project, which requires a coordinated approach between the National Energy Board and the Environmental Impact Review Board. For the Imperial project, we are currently discussing specific administrative and procedural details to coordinate our respective reviews in a way that would satisfy the environmental and safety review requirements of both decision-making bodies.
Slide 5 speaking notes (click to view)
Any work or activity proposed for the exploration of oil or gas that includes fracturing in the North would require the proper approval and authorizations from the NEB under the COGOA, as well as land use permits and water licences from the Boards established under the Mackenzie Valley Resource Management Act (we work cooperatively with these boards).
The NEB must be satisfied that the applicant has developed and implemented thorough safety, emergency response and environmental protection plans that meet the Board’s high standards, before an approval would be considered. The applicant would also need to submit a satisfactory waste management plan to the NEB that identifies how it would capture the waste and dispose of fluids from the fracturing process.
In regulating these activities, it is important that we hear first hand the issues and concerns of Northerners and explain how the NEB would regulate activities that involve hydraulic fracturing in the area. To do this, NEB staff have travelled extensively to 4 of the 5 communities in the Sahtu Settlement Area as well as to Inuvialuit and Gwich’in communities to answer questions regarding how we regulate hydraulic fracturing. During these engagement activities, we heard stakeholders are concerned with issues such as, surface and groundwater contamination, volumes of fresh water used, and composition of fracturing fluids.
These concerns were considered in developing the Filing Requirements for Onshore Drilling Involving Hydraulic Fracturing (released in September 2013), which set out the Board’s expectation of information to be filed by an applicant. In addition, the Board will be requesting regulated companies to waive their privilege under CPRA and disclose information on the hydraulic fracturing practices and fluids they use in their operations on the FracFocus.ca website 30 days after the hydraulic fracturing operation has been completed.
It should be noted that regulation of the Central Mackenzie Valley, except for the Norman Wells Proven Area, is being transferred to the Northwest Territories thorough devolution on April 1, 2014.
Slide 6 speaking notes (click to view)
In the coming years a marked increase in industry activity in the North is anticipated. Most recently, the NEB issued its first Commercial Discovery Declaration for an unconventional operation in the North. This was for Lone Pine Resources Canada Ltd. in the Pointed Mountain area of the Southwestern NWT. A commercial discovery is a discovery of petroleum that has been demonstrated to contain petroleum reserves that justify the investment of capital and effort to bring the discovery to production.
In the Central Mackenzie Valley canol shale play, there are a number of planned (or potential) operations that industry has indicated (shown as red stars on the map).
- ConocoPhillips has received an Operations Authorization from the NEB to drill two horizontal wells to conduct multi-stage fracturing and extended formation flow tests. The drilling program is currently underway (in EL470).
- ConocoPhillips has indicated tentative plans for a five year exploration program in the Central Mackenzie Valley to drill and hydraulically fracture as many as ten wells (in EL470).
- Husky has indicated plans for an exploration program to drill and hydraulically fracture two horizontal wells in winter 2014/15 and drill and hydraulically fracture another two horizontal wells in winter 2015/16 (in EL494A & EL494B).
- Explor has indicated plans to conduct seismic programs over a number of ELs located in the Central Mackenzie Valley.
- MGM has not indicated its plans for its ELs. MGM has submitted an application for a significant discovery declaration based upon a well drilled on EL466B.
We expect the increase in industry activity to continue, given that from the 2011 through 2013 Central Mackenzie Call for Bids, successful bids were received for 14 parcels totaling over $600 million.
Slide 7 speaking notes (click to view)
The map shown here illustrates the NEB’s role following devolution in the Northwest Territories.
Following devolution, we will continue to regulate the offshore, the Norman Wells Proven Area, trans-border pipelines, and the onshore land part of the Inuvialuit Settlement Region. In these areas, the NEB will continue to perform its regulatory responsibilities according to its mandate under COGOA - we will continue to focus on safety, protecting the environment, and conservation of oil and gas resources. In the land part of the ISR we would regulate using the Northwest Territories mirror version of the COGOA and CPRA.
The NEB is committed to supporting the GNWT and the Government of Canada through the transition.
Slide 8 speaking notes (click to view)
It is worth noting that on 30 January 2014, the Government introduced the Energy Safety and Security Act (Bill C-22), which includes proposals to amend COGOA and CPRA. The proposed legislative changes would make important improvements to provide for open and transparent processes in the North. The Bill would enable the NEB to conduct a public hearing under COGOA and reduce the scope of privilege under CPRA. The changes would also allow the Board to establish and manage a participant funding program for project reviews where CEAA 2012 applies. In addition, the Bill proposes increases to offshore absolute liability amounts and imposes new financial requirements.
It is important to note that these changes are only proposals until they are passed by Parliament. The Bill will follow the usual legislative process, which includes debate in the House of Commons and Senate, and careful study through the Parliamentary Committee process. If the Bill is passed by Parliament, most of its provisions will take effect one year after royal assent.
Slide 9 speaking notes (click to view)
Over the past year alone, the Board has held over 50 meetings throughout the North. Board Members, staff and I have met with Northern communities, youth, governments (aboriginal, territorial, federal and international), environmental non-government organizations, regulatory agencies, and land claim institutions.
Through these meetings, the Board remains committed to listening to those who would be most affected by oil and gas activities in Canada’s North in support of realizing shared objectives for safety and environmental protection.
These meetings have involved, among other things, listening to Northerner's talk about their ways of life and how important it is to them to preserve it, hearing their key concerns around oil and gas exploration and development, explaining the Board’s role, and getting feedback on guidelines the NEB developed to clarify its expectations of regulated companies.
From Herschel Island (Yukon) to Pangnirtung (Baffin Island), we have shared meals with individuals, participated in whaling trips, dancing, throat singing, fishing, snowmobiling and spent time in the communities. This is critical for not only building capacity, awareness and understanding, but also in terms of building trust between all involved.
Some key examples of engagement include:
- listening to the Sahtu Dene and Metis in the Sahtu Settlement Area on possible effects of hydraulic fracturing in their area;
- listening to the Inuit of Baffin Island on the potential of marine seismic programs in Baffin Bay and Davis Strait and possible effects of such activities on marine animals and traditional way of life;
- listening to the Inuvialuit on safeguards and protection envisioned from possible effects of offshore drilling in the Canadian Beaufort Sea; and,
- listening to a spectrum of northern interests associated with financial responsibility amounts and instruments for any authorized activity.
In addition, we have an expectation that companies seeking to explore and develop northern oil and gas will work collaboratively with Northerners and Northern institutions. By listening to one another, respecting one another and sharing knowledge and expertise, improved safety and environmental protection outcomes can be achieved.
As we prepare for the future, it is our goal that Northerners will continue to see in the NEB a trusted and credible organization that holds companies it regulates accountable for addressing the environmental and safety concerns of communities.
Slide 10 speaking notes (click to view)
It is an interesting time to be a regulator of oil and gas exploration and development in the North. I look forward to further discussing this issue with many of you.
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