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Home > Speeches and Presentations > Speeches and Presentations 2010 > Canadian offshore oil/gas exploration and drilling: the current status of operations/applicable regulatory rules and regulations

Canadian offshore oil/gas exploration and drilling: the current status of operations/applicable regulatory rules and regulations

Senate Committee on Energy, the Environment and Natural Resources

Tuesday, 22 June 2010

Gaétan Caron
Chair and Chief Executive Officer
National Energy Board

Brian Nesbitt
Technical Leader, Engineering
Operations Business Unit
National Energy Board

Good afternoon, Honourable Senators. Thank you for the opportunity to appear before you today.

The NEB is the federal regulator for offshore oil and gas drilling and production in Canada. It is our role to administer the Canada Oil and Gas Operations Act (COGOA), along with the Canada Oil and Gas Drilling and Production Regulations. This legislation and these regulations have very strong wording. The National Energy Board has the job of making regulatory decisions and ensuring that companies carry out their activities in a manner that is safe and protects the environment.

NEB Arctic Review

On 11 May, the Board announced that it is starting a review of Arctic safety and environmental offshore drilling requirements.

The review will include gathering information and knowledge from Aboriginal organizations, the residents of Arctic communities, technical experts, governments, other regulators, industry, and other participants. The results of the review will be incorporated in the examination, by the Board, of future applications for offshore drilling in the Arctic. As part of the Review, we will learn from recent events. We will also be looking to identify the latest information about the hazards, risks and mitigation measures associated with offshore drilling activities in the Canadian Arctic.

The scope of this review will include drilling safely while protecting the environment, responding effectively when things go wrong, learnings and filing requirements.

This review will be public. It will be transparent. There will be opportunities for people who are concerned about this issue to share their views. The National Energy Board will listen.

Context: Drilling in the Beaufort

There is currently no offshore drilling in the Beaufort Sea. There are no applications for drilling before us.

In the 19 years that the NEB has regulated drilling in the offshore, we have authorized only one offshore drilling project.

The Devon Paktoa C-60 oil well was drilled without incident in about 11 metres of water between December 2005 and March 2006. This rig was located approximately 45 kilometres from the shoreline of the Mackenzie Delta.

Regulatory Regime

Under the Canada Oil and Gas Operations Act, companies must obtain an authorization to carry out a drilling project.

No project is approved unless the NEB is satisfied that the operator's drilling plans include robust safety, emergency response and environmental protection plans that meet the NEB's approval.

Every single project that is authorized by the Board must be safe for workers and the public and must protect the environment.

Environmental Assessments

Applications for offshore drilling projects in the Beaufort Sea are subject to a full and comprehensive environmental assessment under the Canadian Environmental Assessment Act and the Canada Oil and Gas Operations Act.

In addition, under the terms of the Inuvialuit Final Agreement, these applications are subject to an environmental assessment by the Inuvialuit Environmental Impact Screening Committee.

The environmental assessment is a thorough and rigorous process that considers all relevant factors, including potential impacts from the project, potential impacts from accidents and malfunctions, and measures to prevent, mitigate and monitor these impacts.

Liability and Financial Responsibility

Any operator issued an authorization under the Canada Oil and Gas Operations Act has full and primary responsibility to anticipate, prevent, mitigate and manage incidents and oil spills of any size or duration.

If there is a hydrocarbon spill and the operator is found to be at fault or negligent they are responsible for paying for all the costs and damages. There is no limit to how much they would have to pay.

If there is a hydrocarbon spill regardless of fault or negligence, the operator, is responsible for paying for the costs and damages, up to the limits specified pursuant to the Canada Oil and Gas Operations Act and, in locations where they are applicable, the Arctic Waters Pollution Prevention Act and the Inuvialuit Final Agreement. The specified limit in all cases is at least $40 million for an authorized activity in the Arctic offshore.

Each operator issued an authorization must provide proof of financial responsibility.

The National Energy Board decides the amount and form of financial responsibility that is required for any authorization issued pursuant to the Canada Oil and Gas Operations Act.

Emergency Response Capabilities

NEB-regulated companies have full and primary responsibility to anticipate, prevent, mitigate and manage incidents and oil spills of any size or duration.

A critical requirement under the Board's legislation is the need for companies to provide a proposed emergency response plan.

The Board reviews this plan before any authorization to drill will be issued.

If there is a spill, it is the company's responsibility to respond, manage the incident and clean up the spill.

The NEB maintains an Emergency Operations Centre in Calgary to coordinate field staff at the incident site and to provide situation reports to NRCan, INAC and the Government of Canada's Emergency Operations Centre in Ottawa.

The National Energy Board investigates and reports on incidents to help prevent them from happening again.

Compliance Program

Our compliance program is focused on gas and oil pipelines and onshore drilling at this time, since there is no offshore drilling taking place.

The NEB has a rigorous compliance program to ensure that operators comply with all applicable regulations along with the project-specific conditions imposed by the NEB.

In 2009, NEB staff conducted 211 compliance activities related to NEB regulated facilities, including nine emergency exercises, four audits and 33 safety inspections.

With respect to drilling, all rigs will need to have a Certificate of Fitness issued by an independent third party.

If the Board is not satisfied that a drilling operator is living up to its commitments, the NEB can shut down the operation or take over the management and control of any spill response. The legislation also provides for a fine of up to one million dollars, imprisonment for up to five years or both. The Board can also suspend or revoke an authorization for failure to comply with provisions of the Act, regulations or an authorization.

Staff Expertise/Capacity/NEB Capability

The National Energy Board has a long history of working with other regulators including the two offshore boards and other regulators in Canada and around the world. We continually take advantage of opportunities to learn from each other.

For the past 20 years, we have been working with land claim agencies such as the Inuvialuit Game Council and communities potentially affected by Mackenzie Delta and Beaufort Sea drilling.

We have more than 350 people on staff with a combination of experience, skill and know-how to see that the facilities we regulate are safe, secure and operated in a way that protects the environment.

We also have a Board of professional and independent Board Members with expertise in a variety of disciplines, including environmental protection, law, economics, engineering, business, and Aboriginal matters.

Greenland

Greenland has requirements in place to ensure that exploratory offshore oil and gas activities are undertaken in a manner that protects people and the environment. We understand that last week Greenland authorized the drilling of two offshore wells in the Davis Strait this year.

We are in the process of developing a MOU between the Greenland Bureau of Minerals and Petroleum and the NEB. This MOU will guide both regulators as we seek opportunities to cooperate and share information and best practices in the safety and environmental regulation of offshore drilling activities.

In addition to the MOU, the NEB and the Bureau of Minerals and Petroleum are outlining how the NEB will be present on the drilling rigs this summer, as observers, at key times. Any learnings obtained by the NEB could then be fed into the Board's Arctic Review process.

Setting the record straight

I would like to set the record straight on some of the information that has been presented to Canadians recently.

Most importantly, I would like to assure you that the new Drilling and Production Regulations put in place in December 2009 are stronger and more effective now than any regulations we have had in place in the past.

The regulations are comprehensive - with clear legal objectives regarding safety and environmental protection. They combine the best of prescriptive elements and goal-based requirements. The old regulations represented an out-of-date, one-size-fits-all system, sometimes labeled as checkbox regulation.

The new regulations require companies to demonstrate that they can operate safely in specific situations using the most advanced technology tailored to their circumstances. The onus is on industry to demonstrate to us that they can protect their workers, the public and the environment.

If the operator can't demonstrate this, they can't drill.

In their day-to-day actions, the 350 people at the National Energy Board can promote safety and environmental protection very effectively thanks to the very effective toolbox Parliament has given us in the Canada Oil and Gas Operations Act. Canada has a robust and modern regulatory framework for offshore oil and gas drilling.

Closing

In closing, the National Energy Board is committed to continually improve its regulation of onshore drilling in the Beaufort Sea. We will continue to demand of industry that offshore drilling be done safely while protecting the environment and the way of life of Northern communities.

Thank you for giving us the opportunity to explain Canada's offshore drilling regulatory regime, Honourable Senators.

Public Review of Arctic Safety and Environmental Offshore Drilling Requirements - 10 June 2010 [Filing A25375]

 

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Date Modified:
2011-10-28