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PROSPECTS NORTH: The NEB in the North [PDF 1168 KB]

PROSPECTS NORTH: The NEB in the North

Gaétan Caron
Chair and CEO
National Energy Board

 

Northern Canada’s Premier Business Conference
Yellowknife, NWT

 

11 September 2013

 

 

Slide 1 speaking notes (click to view)

Thank you for the opportunity to participate in this prestigious conference.

It is clearly an exciting time in Canada’s North as highlighted by the conference program, with increasing interest in oil and gas resources and devolution on the horizon. To me, these factors highlight the importance of a strong and coordinated regulatory presence in the North.

I am pleased to be here today to talk about how the NEB is involved in the transformation of the North. In particular, I hope to cast light on the NEB’s role across the North - specifically our continued support through the implementation of devolution in the Northwest Territories, similar to what we provided to the Yukon, our engagement efforts to prepare for future applications in the NWT, Nunavut and offshore and our ongoing commitment to sustainability, as well as a glimpse of what is ahead for us.

 

NEB’s Role in the North

NEB’s Role in the North: Geophysical Surveys - Exploration and Production - Transmission

 

Slide 2 speaking notes (click to view)

In the Northwest Territories and Nunavut, the Board currently has regulatory responsibilities for oil and gas exploration and production activities. 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.

Our responsibilities stretch for the entire exploration and production lifecycle from the application stage to eventual abandonment. Some examples of the type of activities we regulate, shown on this slide, include: geophysical surveys (e.g., seismic surveys); exploration wells to see if oil or gas is present; development wells for producing oil and gas; and, building and operating production and transportation facilities and pipelines for oil and gas.

The Board, through COGOA, focuses on safety, environmental protection, and the conservation of oil and gas resources, while land tenure or rights issues, benefits plans, and royalty management is administered by other federal departments (Aboriginal Affairs and Northern Development Canada and Natural Resources Canada). It is important to understand that there is a clear separation between the physical side and the financial side of oil and gas regulation in the North.

 

NEB’s Role Post Devolution in the NWT

Post Devolution Northwest Territories COGOA Map

 

Slide 3 speaking notes (click to view)

As we are all aware, this past June, a final agreement on devolution - which will transfer administrative control over public lands and inland waters, as well as law making powers from the Government of Canada to the Government of the Northwest Territories - was signed. This agreement is targeted to take effect in April 2014, allowing time to manage the transition.

In order to ensure continuity where the NEB will no longer be the regulator, we are committed to work with Northern regulators, the GNWT and the Government of Canada to reach mutually agreeable arrangements which will allow us to provide support, skills and expertise.

  • I want to assure you that you can count on us to be here throughout and after devolution. NEB staff and myself are engaged on this front and find the discussions with the GNWT and Ottawa to be very productive.
  • This includes, for example, working to develop Memoranda of Understandings and Service Agreements with Northern regulators, working to ensure knowledge and skill transfer, and helping to develop required Acts and Regulations.

We will continue to work in support of safety, environmental protection and conservation of oil and gas resources in the North.

The map shown here illustrates the NEB’s role following devolution in the Northwest Territories. We will continue to regulate the offshore, the Norman Wells Proven Area and pipeline, and the onshore land part of the Inuvialuit Settlement Region.

 

Arctic Offshore Drilling Review

Review of Offshore Drilling in the Canadian Arctic

 

Slide 4 speaking notes (click to view)

We recognize that a regulator’s work is never done. Therefore, the Board is committed to reviewing and strengthening its regulatory framework for the North to ensure that future decisions on applications will be made in a manner that addresses the safety of workers and the public, and protects the environment that Northerners rely on to support a sustainable way of life.

In response to the Deepwater Horizon incident in the Gulf of Mexico, 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, as shown in the photo here, and resulted in the development of filing requirements for offshore drilling in the Canadian Arctic.

During the Arctic Review we 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. Some residents told us that up to 70 percent of their food comes from the land and water.

We heard that Northern residents are deeply connected to the land and the ocean and that if you take care of the land, the land will take care of you.

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.

 

Industry Activity

Rig 63

 

Slide 5 speaking notes (click to view)

On average, the Board receives about 15 applications for activities in the North per year – including applications for: operations authorization; geophysical/geological programs; drilling a new well; and altering conditions of a current well.

There is currently some shale oil exploration activity occurring in the Central Mackenzie Valley, including seismic surveys, hydraulic fracturing, and exploratory drilling.

In the Beaufort Sea, two offshore seismic programs were conducted in 2012, with the potential for further seismic and drilling activity. Imperial and its joint venture partners, who have been issued Exploration Licenses (ELs) by Aboriginal Affairs and Northern Development Canada (AANDC), have held some community meetings in the Inuvialuit Settlement Region using a Preliminary Information Package, but have yet to file a Project Description with the Environmental Impact Screening Committee (EISC). Recent timelines provided by Imperial suggest that they may file an application with the NEB towards the end of 2014.

In order to promote effective coordination and provide support for greater efficiency in the delivery of environmental review, the NEB and the Environmental Impact Review Board - known as the EIRB - are examining options for a coordinated review process for an anticipated application from Imperial, if the EISC refers the project to the EIRB.

There is also the potential for 2D (two-dimensional) offshore seismic activity in the Eastern Arctic. A Geophysical Operation Authorization application was submitted to the Board in 2011. This past spring, community meetings were held with the intent of hearing comments regarding the environmental impact of the project. As a result of these meeting, the Board had suspended the assessment of the application until further information is provided. On 30 August 2013, the Board received a response to this request, which is currently under review.

In the coming years we anticipate a marked increase in industry activity in the North. There are 13 exploration licenses, totaling over half a billion dollars in work bid commitments in the Sahtu. It is worth noting that in May 2013, Aboriginal Affairs and Northern Development Canada launched a call for bids for exploratory licenses for six more parcels located in the Central Mackenzie Valley, this process will close in September 2013.

While a number of companies have been issued exploration licenses for the offshore - more specifically, 16 exploratory licenses totaling roughly $2 billion dollars in work bid commitments - no applications for operations authorizations have yet been submitted to the NEB for Arctic offshore drilling.

 

Meaningful Engagement

Map of the Northwest Territories

 

Slide 6 speaking notes (click to view)

To ensure that we understand, and fully consider, the impact of the projects we regulate, the Board continues to focus on meaningful engagement with Northerners and Northern institutions that could be affected by potential activities, in support of our shared objectives for safety and environmental protection.

During the Arctic Review I committed, on behalf of the Board, that the dialogue would continue. In this vein, we continue to proactively engage with all of you. The map shown here reflects the communities that we have held meetings in over the past two years.

This year alone, our staff and Board Members held over 50 meetings across the North to continue to listen to those who will be most affected by oil and gas activities.

  • In July, I had the opportunity to visit traditional and sacred sites of the Inuvialuit in the Mackenzie Delta and the shores of the Beaufort Sea to observe firsthand the connection the Inuvialuit have to the unique Arctic environment.
  • This visit confirmed for me the collective responsibility we share - as regulators, governments, and industry - to ensure that the highest standards of safety and environmental protection are applied in consideration of oil and gas exploration and development. The Inuvialuit expect no less from us, nor should they.

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 - in the Yukon, NWT and Nunavut - 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 when they pursue their oil and gas projects in the North.

 

Strong Regulatory Oversight

NEB Inspector on Site

 

Slide 7 speaking notes (click to view)

During the Arctic Review, people at the community meetings reminded us of the unique environment where they live. People talked about the harsh conditions in the Arctic Ocean, including changing ice conditions, strong currents, stretches of 24-hour darkness, extreme cold, and high winds. This unique environment is something that must be understood and taken into account by companies that want to operate in the Arctic.

The Board puts safety and environmental protection at the forefront of its responsibilities in protecting Canadians and requires the oil and gas industry to continually improve its performance. We require any company planning to operate in the Canadian Arctic to demonstrate that they can operate safely while protecting the environment. If the company can’t do this, they can’t operate. We will continue to take all available actions to protect the environment and the public.

If a project is approved, we achieve this through strong compliance verification and enforcement processes, our 40 plus years of environmental assessment expertise, and by taking leadership to drive fundamental change when and where it is needed.

The NEB believes that the pursuit of safety culture and carefully designed and well-implemented management systems are the best way for industry to keep people safe and protect the environment. During the Arctic Review we examined the root causes of many incidents, and found a common thread: a neglect of, or even an absence of, processes and procedures to identify, mitigate, or eliminate potential risks. Beneath that deficiency lies an even deeper pattern of organizational culture that did not put safety first. The studies also noted that in the case of many major incidents the applicable regulatory oversight was not comprehensive or focused enough to ensure gaps were identified and the required corrective and preventive actions were developed and implemented. 

The Board further explored these issues in its 2013 Safety Forum. One of the goals of the forum was to identify opportunities that both industry and regulators can take to improve safety outcomes. Key issues at the forum included corporate leadership’s role in building and maintaining a safety culture, building effective management systems and safety performance measurement.  A broad consensus emerged at the forum that:

  • Trust in industry’s ability to operate safely has been eroded and must be earned back.
  • A target of zero incidents is achievable but requires a commitment to building and maintaining a culture of safety and implementing effective management systems.
  • Corporate leaders are responsible for building and maintaining a culture of safety in their organizations.
  • Transparency is a cornerstone of public trust and the public should be involved in identifying what information should be public.
  • Safety must be defined broadly to include process safety and environmental protection. Process safety focuses on preventing catastrophic incidents.
  • Measures of safety should be monitored regularly by corporate executives.

 

Clear Expectations

Filing Requirements for Arctic Offshore Drilling in the Canadian Arctic

 

Slide 8 speaking notes (click to view)

Energy development in the North must be done in a manner that is sustainable. To support this objective being achieved, we are working to provide clarity to industry and the public regarding our expectations for applications through developing filing requirements and guidance documents.

The Filing Requirements for Arctic Offshore Drilling in the Canadian Arctic were developed based on the input we received during the Arctic Review. They provide guidance to both industry and affected Northerners on what information is required by the Board to make a decision. Through these Filing Requirements, as well as the Arctic Review, we re-affirmed our Same Season Relief Well Policy – that an applicant must demonstrate the capacity to drill a relief well to kill an out of control well during the same drilling season or demonstrate how they would meet or exceed the intended outcome of minimizing harmful impacts on the environment.

To complement these Filing Requirements, we are developing other documents to provide clarity on our expectations. This includes our Draft Financial Viability and Financial Responsibility Guidelines, which describe what an applicant must do to demonstrate they have the financial resources to conduct the proposed activity safely and the financial resources to address a ‘Worst Case Scenario’, including containing the event, environmental clean-up and compensation to affected parties. These have been issued in draft form and we are currently consulting affected parties on these guidelines. Comments are due at the end of October, after which we will consider all comments and finalize the guidelines.

We will be releasing additional guidance documents shortly, including:

  • Filing Requirements for Onshore Drilling Operations Involving Hydraulic Fracturing;
  • Filing Requirements for Geophysical Operations.

 

Ensuring We Are Prepared

Willard Hagen, Chair, Mackenzie Valley Land and Water Board and Gaétan Caron, Chair/CEO of the National Energy Board, sign a Memorandum of Understanding.

 

Slide 9 speaking notes (click to view)

As we see an increase in industry interest and activity in the North, there will be an unprecedented demand on our services. To respond to this increase in demand, we are working to build our capacity through training and hiring additional skilled staff.

In addition, the NEB has federal, provincial and territorial partnerships in place to deal with overlapping jurisdictions and common regulatory objectives. We are committed to enhancing and developing cooperative agreements with regulators and land claim organizations.

  • We have, for example, established Memoranda of Understanding with the Mackenzie Valley Land and Water Board, the Mackenzie Valley Environmental Impact Review Board, the Inuvialuit Environmental Impact Screening Committee, the Inuvialuit Environmental Impact Review Board, the Nunavut Water Board, the Nunavut Impact Review Board, the Inuvialuit Regional Corporation, and the Yukon Government.
  • We are also part of a joint industry/regulator working group to explore options for coordinated environmental reviews of exploratory drilling projects in the Sahtu Region.

The NEB has also offered to provide administrative support to the NWT Water Board in its review of water licence applications related to the Inuvik-Tuk road project.

 

Looking ahead…

Polar Bears

 

Slide 10 speaking notes (click to view)

Going forward, the NEB plans on building on what we have learned and continuing the dialogue with individuals, industry, governments in Canada and with people and institutions in the North.

I will be happy to address any questions that you may have.

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