The NEB’s Full-Life Cycle Regulatory Process for the Arctic

The NEB’s Full-Life Cycle Regulatory Process for the Arctic [PDF 1686 KB]

The NEB’s Full-Life Cycle Regulatory Process for the Arctic

Ron Wallace, Board Member
National Energy Board

 

15th Annual Arctic Oil & Gas Symposium

 

10 March 2015

 

Slide 1 speaking notes (click to view)

I am pleased to be here today to discuss the National Energy Board’s full-life cycle regulatory process for the Arctic. I would like to outline the Board’s role in the Arctic, including:

  • what we regulate;
  • where we regulate;
  • how we regulate; and, why it is important that we carry out our mandate effectively and in a transparent manner

 

What We Regulate

Photos (left to right): seismic survey, offshore drill rig, pipeline]

 

Slide 2 speaking notes (click to view)

Before I talk about the NEB and its responsibility as the regulator of oil and gas exploration and production activities in the North, I wish to be clear that the NEB does not have any role in the issuance of oil and gas mineral rights, benefits plans, or royalties from any production.

The federal department of Aboriginal Affairs and Northern Development Canada (AANDC) manages land tenure, approves Canada benefits plans, and collects royalties from any production in the North - loosely defined as areas under federal jurisdiction north of 60°; today, this is essentially the offshore. Since devolution in April 2014, the GNWT now administers and manages most onshore oil and gas interests in the NWT. Natural Resources Canada (NRCan) manages such matters south of 60°.

There are 15 current Exploration Licences covering about 2.8 million hectares (about 28,000 km² or about 12% smaller than Vancouver Island) issued by Aboriginal Affairs and Northern Development Canada in the Canadian Beaufort Sea - the only area where there are open federal exploration licences.

  • These exploration licences give an exclusive right to a company to conduct exploration drilling, amongst other things, over a 9 year period. Simply put, these exploration licences identify where drilling can take place but does not give them authorization to actually drill a well.

The NEB grants authorizations for exploratory work and approval for wells, as I will explain later. Thus, we have a clear separation between the fiscal side and rights on one hand (AANDC) and physical side dealing with safety and environmental issues, on the other hand (NEB).

Now let’s talk about the Safety Regulator, the National Energy Board.

Our regulatory responsibilities 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. The Board is also responsible for worker safety under the Canada Labor Code, Part II.

  • For oil and gas exploration and production activities in the Arctic, the Board regulates safety, protection of the environment including emergency preparedness and response, and the conservation of oil and gas resources, among other things.

Specifically, we are responsible for the full spectrum of oil and gas exploration and production activities - from seismic and geophysical programs, to exploration drilling, to production.

  • This spans assessment at the application stage - where we examine an applicant’s plan to work safely while protecting the environment for adequacy, to setting terms and conditions for any authorization or approval granted, to compliance oversight - where we evaluate the implementation and effectiveness of the operator’s approved program and its preparedness to respond effectively when things go wrong. Our regulatory oversight continues through to the completion of the project even after a well is eventually abandoned.
  • We hold companies accountable for safety, security and environmental protection related to their projects throughout their life cycle.

The NEB monitors compliance using a risk-based compliance model with a variety of compliance and enforcement tools. The NEB’s approach analyzes incident data and industry trends in order to focus on areas of the highest priority when planning its compliance and enforcement actions.

Expected Changes

On February 26, the Energy Safety and Security Actreceived Royal Assent - it makes important changes to COGOA and CPRA that will come into force in one year. The changes will:

  • Enable the NEB to conduct a public hearing in the exercise of any of its powers (COGOA);
  • Reduce the scope of privilege currently in CPRA and COGOA by making all but confidential and personal information available about the proposed projects - including safety, environmental protection, and contingency plans;
  • Allow the Board to establish and manage a participant funding program for project reviews where the Canadian Environmental Assessment Act 2012 applies; and
  • Increase offshore absolute liability limits and impose new financial requirements.

 

Where We Regulate

Map of where the NEB regulates in the North

 

Slide 3 speaking notes (click to view)

In terms of where we regulate, the NEB continues to have an important role in regulating oil and gas in the Arctic, with regulatory responsibility for the Canadian Arctic offshore (shown in yellow), the onshore part of the Inuvialuit Settlement Region in the Northwest Territories in accordance with territorial legislation that currently mirrors federal legislation (shown in green with lines), the Norman Wells Proven Area (the insert), and Nunavut (shown in yellow) – where devolution has not occurred.

  • Devolution has not affected our regulatory role regarding transboundary pipelines under the National Energy Board Act.

In Yukon, natural resources management devolved to the Government of Yukon in 2003 and Yukon Oil and Gas is the regulator of oil and gas activities there.

In the Northwest Territories, natural resources management devolved to the Government of the Northwest Territories on 1 April 2014 - almost one year ago. I will let my colleagues from the Government of the Northwest Territories speak to this in detail, but would just like to note that we remain committed to providing consistent approaches to our respective regulatory roles and maintain a strong working relationship.

  • We have Service Agreements with both the Yukon Territorial Government and the Government of Northwest Territories departments to provide support and services as and when requested by them.

I’d like to note that there are currently no exploration and production activities ongoing in the Canadian Beaufort Sea.

 

How We Regulate

Photo - Gulf et al at Tarsiut N-44 circa 1983

 

Slide 4 speaking notes (click to view)

The NEB is a full life-cycle regulator of oil and gas exploration and production activities in the North and elsewhere in the federal jurisdiction as indicated in the map I showed.

What that means is that the NEB is the sole regulator for safety, protection of the environment, and conservation of resources for oil and gas exploration and production activities in the areas we are responsible for in the North. This includes:

  • Application assessment stage - where the proponent needs to demonstrate that their plans to undertake the proposed activity, be it seismic, exploration drilling, or production activities, are adequate to work safely while protecting the environment and to respond effectively when things go wrong;
  • Operations stage, should an authorization or approval be granted - where we assess that the commitments made in the application stage, any terms and conditions included in the authorization or approval, and all applicable COGOA regulations and Canada Labour Code, Part II requirements are implemented and are effective; and
  • Post operations stage - where we examine all regulatory filings and submissions to verify that documentation is complete and can be made available following the privilege period defined in the CPRA (where privilege continues to apply).

In doing so, we work with land claim co-management institutions - the Inuvialuit Environmental Impact Screening Committee and the Environmental Impact Review Board in the Inuvialuit Settlement Region and the Nunavut Impact Review Board in the Nunavut Settlement Area to promote efficiencies and to avoid duplication on matters such as environmental assessment of a project.

  • The National Energy Board is committed to ongoing coordination with the Environmental Impact Review Board, through providing expert technical support.

What is required as part of an Application to drill?

Applicants to the Board must demonstrate how they will anticipate, prevent, mitigate and manage incidents and oil spills of any size or duration. For drilling and production activities, the proponent must also provide evidence on, among other things, how they have an effective management system including processes for identifying hazards and for evaluating and managing the associated risks.

In order to do so, companies applying for an authorization to drill in the Arctic offshore are required to provide the following (details can be found in our Filing Requirements for Offshore Drilling in the Canadian Arctic which were developed based on input received by the NEB during the Arctic Offshore Drilling Review)

  • Safety Plan: sets out procedures, practices, resources, sequence of key safety-related activities, and monitoring measures necessary to ensure the safety of the proposed work or activity;
  • Environmental Protection Plan: describes procedures, practices, resources, and monitoring necessary to manage hazards and protect the environment from the proposed work or activity; and
  • Contingency Plans: includes emergency response procedures that describe how the effects of any reasonably foreseeable event that might compromise safety or environmental protection will be mitigated.

As noted above, the NEB will not grant a COGOA authorization or approval until an environmental assessment is complete, including in some cases environmental assessments under various land claim agreements or other federal Acts. Further, we examine proof of financial responsibility to assess that, in the event of a spill, the applicant has sufficient resources available to address the anticipated actual loss and damage and, certificate of fitness for offshore installations to confirm that a competent independent organization has certified the installation and equipment fit for purpose for which it is to be used and can be operated safely without polluting the environment and will continue to meet these requirements within the scope of work approved by our Chief Safety Officer.

Until late 2009, Canada’s regulatory regime for oil and gas drilling and production activities had been prescriptive where the regulations specified how each activity could take place. In December 2009, Canada introduced new regulations for drilling and production activities that were more outcome based and less prescriptive in nature. In doing so, Canada joined nations such as Norway and the United Kingdom who had pioneered this regulatory style for offshore drilling operations. The benefits of this approach are that:

  • Regulated companies have greater flexibility in how they can have safe operations and protect the environment for each of their operations as no two well or programs are identical;
  • Regulated companies have greater responsibility for their operations as they need to assess each of their wells and programs and develop a management system and plans tailored to their situations and not simply conform to a rigid set of regulations;
  • The regulatory process is more effective allowing for innovation and the use of the most appropriate and best available technology;
  • Regulated companies need to demonstrate to us how their proposed approach is appropriate and adequate as well as implemented and effective; and
  • The regulator can assess the management processes, operational standards and reporting requirements to achieve the desired outcomes.

 

What is required during the operations of a project and post-operations?

Photo - NEB inspectors at Norman Wells

 

Slide 5 speaking notes (click to view)

What is required during the operations of a project?

Should an authorization or approval be granted, the NEB’s compliance verification programs would scrutinize activities throughout the life of the regulated project. The NEB conducts compliance to verify performance against:

  • statutes and regulations;
  • commitments made during the application process;
  • relevant industry standards and appropriate best practices;
  • conditions on the authorization; and
  • other direction provided by the Board from time to time.

NEB emergency management staff may attend or participate in company emergency response exercises and evaluate the operator’s readiness in the event of an incident. NEB can also inspect emergency and safety systems to verify that regulations are met and that all workers are familiar with their organization’s emergency procedures manuals.

NEB Safety and Conservation Officers - designated under COGOA - conduct inspections and audits using a suite of tools to verify a company’s compliance with the approval and conditions including:

  • compliance meetings;
  • on-site inspections to review a company’s emergency and safety systems to verify that regulations are met and that all workers are familiar with their organization’s manuals;
  • daily reports;
  • field exercises (company-led or NEB-led);
  • incident monitoring;
  • environmental monitoring reports (including those from an Inuvialuit Environmental Monitor); and
  • audits of the company’s management system or specific program elements, e.g., company’s safety program, emergency management program or environmental protection program.

Should our inspectors find situations where there is non-compliance or risk to the safety and protection of the environment, they have the ability to require compliance or shut down operations if there is a safety risk. In situations where an operator is unwilling, unable, or is not managing the response effectively , NEB can take over operations - I note that we have never had to intervene in this way in the past.

What is required post-operations?

As part of a full life-cycle regulator, the NEB examines operational reports on at least a daily basis during the operations, and more closely during critical stages such as casing, testing, or when adverse conditions are forecast. Following the completion of an authorized program, the NEB reviews reports that are part of the regulatory filing and notifications. Once the record is complete and the prescribed privilege period, if any, is over, end of well reports and other regulatory filings are made available for those interested who may benefit from operational experience and lessons learned from that program.

If a well is suspended or abandoned, then the operators continue to be responsible for its integrity and any safety or environmental considerations in the event of any future failures. The NEB follows up on suspended wells so that they are either properly managed or appropriately abandoned.

 

What We Are Doing to Prepare

Cover of Filing Requirements for Offshore Drilling in the Canadian Arctic

 

Slide 6 speaking notes (click to view)

Now that I have covered the topics of my presentation, I would like to take a moment to note that despite a number of projects in the Arctic being delayed or “put on ice”, the NEB continues to work to ensure we are prepared for when or if applications are submitted.

  • It is worth noting that the 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 that it expects to file the details of its proposal to meet the intended outcome of the NEB’s Same Season Relief Well Policy in September or October 2015.

Over the past four years or so, the Board has been working to strengthen its regulatory framework to ensure future decisions on applications will be made in a manner that addresses the safety of workers and public and protection of the environment.

As many of you are likely aware, following the BP Macondo - Deepwater Horizon incident in 2010, the Board undertook the Arctic Offshore Drilling Review to examine safety and environmental requirements for offshore drilling in Canada’s Arctic environment.

  • The learnings have been incorporated into the Board’s regulatory requirements for Northern oil and gas activities - our Filing Requirements for Offshore Drilling in the Canadian Arctic being a direct result of this process.

Ultimately - drilling will not occur unless the NEB is satisfied that drilling plans are safe for workers and the public, and will protect the environment.

As part of this, and as per our mandate, the Board will continue to efficiently and effectively implement legislative and regulatory changes once approved by Parliament.

As noted, we remain committed to working collaboratively with the Government of the Northwest Territories on regulatory coordination.

We have also been developing and consulting on additional guidance documents to provide clarity on our expectations of companies operating in the North. This includes, most recently:

  • Amendments to the Filing Requirements for Offshore Drilling in the Canadian Arctic to provide additional clarity regarding emergency response filing requirements for NEB-regulated companies considering the development and submission of applications.

We are building on our provincial and territorial, federal, and international partnerships to deal with overlapping and adjacent jurisdictions and common regulatory objectives.

Another key element of strengthening our regulatory framework in the North is our northern engagement activities. We continue to have staff located in the North (specifically offices located in Yellowknife and Inuvik) and participate in conferences and events, such as the NWT Board Forum, the Inuvik Petroleum Show and most recently the Nunavut Oil and Gas Summit, and meet with aboriginal leadership, communities and interested parties regularly to answer their questions about how we regulate oil and gas activities.

  • In the Inuvialuit Settlement Region (ISR) we are active partners, support northern organizations, and second staff.
  • In the Northwest Territories we support the OROGO, assist in their transition and capacity building, and support the review of applications.
  • The NEB continues to provide technical support to other regulators and conduct outreach engagement in Nunavut.
  • In addition, Peter Watson, Chair of the NEB, has recently engaged northern governments, aboriginal, and regulatory leadership to review our regulatory role and to seek advice on how the NEB can continue to effectively engage Northerners. This engagement has included meetings with the Premiers of Nunavut and the Northwest Territories, leaders of Inuit and Inuvialuit organizations, and Chairs of Nunavut and NWT regulatory boards.

In addition to the ongoing engagement activities we are conducting in northern Canada, over the next few months the National Energy Board is engaging Canadians from coast to coast to coast to discuss pipeline safety and environmental protection. Over the past few years, the NEB has found itself in unfamiliar territory - on the front pages of newspapers across the country. The demands on the NEB hit all of the major issues in twenty-first century Canada - to lead the climate change debate, to increase market access, to allow more people to participate in our process, to cut red tape, to go faster, to go slower, to ensure pipelines never fail, exploration is conducted safely and protects the environment, and to answer to all the voices in the debate and to remain neutral through it all.

The debate about Canada’s energy future provokes strong and often polarizing opinions. Many of you have seen this in relation to northern oil and gas exploration, particularly in the discussions surrounding hydraulic fracturing and offshore exploration. As the agency responsible for regulating these activities under federal jurisdiction in the North, the NEB believes we have an essential role to play in these discussions. We need to listen to Canadians, including residents of the North, involved in the energy debate to better understand our country’s diverse regional and national energy issues so that we can respond effectively in the public’s interest.

Once the Board’s cross-country visits, including in the North, conclude in late spring 2015, the Board will host a pipeline safety technical conference of subject matter experts.  A report on what the NEB heard during the engagement initiative and technical conference will be publicly released by early 2016.  The goal of the National Outreach Initiative is to listen to Canadians’ suggestions on how we can adjust our approach to pipeline safety and environmental protection as well as our public engagement activities and communications. Although it is not the role of the NEB to propose policy, the report and its possible recommendations will be available to all federal government departments.

 

Questions?

Photo - Drill rig in the Mackenzie Delta circa 2009

 

Slide 7 speaking notes (click to view)

I look forward to your questions and further discussions throughout this conference.

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