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Home > Major Applications and Projects before the NEB > Arctic Offshore Drilling Review > Arctic Offshore Drilling Review - Questions and Answers

Arctic Offshore Drilling Review - Questions and Answers

General process questions

  1. Where does the NEB regulate offshore drilling activities?
  2. Will there be community meetings?
  3. What about meetings in other locations?
  4. How long is this review expected to last?
  5. Will there be funding available?
  6. Who will be hearing this information?
  7. What will be the end result of this process?
  8. Will the NEB make policy recommendations to governments?

Financing spill clean-up, restoration and compensation for loss or damage questions

  1. Who has to pay to clean up a spill resulting from drilling in the Canadian Arctic?
  2. What role/responsibilities do operators have if there's an accident?
  3. How does the NEB know a company will have funds to pay claims?
  4. What type of proof of financial responsibility can the NEB require?
  5. What does the NEB look for when establishing how much financial security is needed?
  6. What can the security be used for?

General process questions

1. Where does the NEB regulate offshore drilling activities?

The National Energy Board regulates drilling and other oil and gas exploration and production activities in Canadian waters except:

  • areas offshore of Nova Scotia that are within the jurisdiction of the Canada-Nova Scotia Offshore Petroleum Board, and,
  • areas offshore of Nova Scotia that are within the jurisdiction of the Canada-Nova Scotia Offshore Petroleum Board, and,

The following map shows both the onshore and offshore areas regulated by the National Energy Board:

Administrative Areas

2. Will there be community meetings?

The Board is meetings with Northern Aboriginal groups, communities and governments.

The purpose of these meetings is to gain an understanding of Northern residents' perspectives regarding offshore drilling activities. For an updated schedule of community meetings and events, please visit the Arctic Offshore Drilling Review calendar.

In order to be as open and transparent as possible, the Board will post a summary of each meeting together with any material provided at the meeting on the NEB website.

3. What about meetings in other locations?

Once phase one of the Arctic Offshore Drilling Review is complete, participants will have the opportunity to examine and comment on the information at a roundtable meeting in Inuvik, NT. This meeting is planned for August or September 2011.

To help participants prepare for this roundtable meeting in Inuvik, NEB staff will host Information Meetings in Inuvik, Iqaluit, Whitehorse and Yellowknife throughout May and June. Details will be posted the Arctic Offshore Drilling Review calendar as these become available.

4. How long is this review expected to last?

The NEB is collecting the best available information on offshore drilling in the Canadian Arctic. In September 2010, the NEB issued a call for information. A second Call for Information was released in November 2010.

Some of the participants in the Arctic Offshore Drilling Review requested an extension to the deadline [Folder 649241] for responding to these Calls for Information. Accordingly, the NEB has given participants until 1 April 2011 to provide their responses.

There will be an opportunity for Arctic Review participants to provide their comments and ask questions on the information gathered through the Calls for Information and from submissions during phase two of the review.

The NEB is committed to take the time necessary to do this right.

5. Will there be funding available?

The NEB will provide up to $300,000 in funding to assist with travel for eligible registrants' participation at the roundtable meeting in Inuvik.

This funding is limited to individuals or organizations that are registered to participate in the Arctic Review and are:

  • residents of Canada;
  • representatives of Aboriginal groups within Canada; or
  • representatives of Canadian non-industry not-for-profit organizations.

More information about how and when to apply for funding will be available once the locations and dates for the phase two meetings are finalized.

6. Who will be hearing this information?

The information gathered through the Arctic Offshore Drilling Review will be assessed and considered by the full Board.

7. What will be the end result of this process?

The end result of this review will be a public report which outlines what the NEB has learned and what information should be required from an applicant seeking authorization to drill an offshore well in the Canadian Arctic.

8. Will the NEB make policy recommendations to governments?

The NEB's role with respect to offshore drilling activities is to see to it that offshore drilling activities in the Canadian Arctic are safe and operated in a manner that protects the environment.

The NEB will produce a public report which will include the learnings gained from the Arctic Review.

Information received that is not related to the implementation of the Board's mandate will be identified and placed on the NEB website under the Arctic Offshore Drilling Review. This information will be publicly available and accessible to all those with responsibilities or an interest related to these matters.

As an independent quasi-judicial tribunal, the NEB does not establish government policy.

Financing spill clean-up, restoration and compensation for loss or damage questions

The financial responsibilities of a company authorized to drill in the Canadian Arctic are set out in the following statutes, regulations and agreements:

The NEB administers COGOA and OGSDLR and the Department of Indian and Northern Affairs Canada administers the others.

1. Who has to pay to clean up a spill resulting from drilling in the Canadian Arctic?

The company carrying out the work that resulted in the spill must pay the reasonable costs associated with cleaning up the spill.

Every person or company who fails to comply with the Canada Oil and Gas Operations Act is guilty of an offence and could be subject to fines of up to $1 million and imprisonment of up to five years. Each day that an offence continues is considered a separate offence for which a new penalty could be assessed. (Please see sections 60 and 65 of the Canada Oil and Gas Operations Act.)

The company carrying out the work that resulted in the spill is liable for any actual loss or damage and costs incurred by others up to the maximum limit of absolute liability, which is $40 million. Absolute liability means there is no need to prove that the company was at fault or negligent.

Any party whose fault or negligence caused or contributed to actual loss or damage from the spill or resulted in the government or others paying cleanup costs is liable to the extent of their negligence or fault. When the party has been found to be at fault or negligent by the court, there is no limit on the amount for which the party is responsible.

2. What role/responsibilities do operators have if there's an accident?

The Canada Oil and Gas Drilling and Production Regulations say that an operator must take all steps necessary to anticipate and prevent accidents and spills. If there is a spill, it is the operator's responsibility to report the incident, (whether the operator caused the spill or not), manage the emergency response and clean up the spill.

To make sure that there are funds available if things go wrong, operators are required to provide what is called "proof of financial responsibility". This is usually a form of security such as a letter of credit or indemnity bond as required by the National Energy Board.

It is the operator's responsibility to compensate those who are responding to the spill up to the limit of absolute liability.

3. How does the NEB know a company will have funds to pay claims?

Before the NEB grants an authorization to drill in the offshore, the operator must provide proof of financial responsibility according to section 27 of the Canada Oil and Gas Operations Act, which is available online.

The purpose of the security is to make funds available for those who incur costs and expenses or who suffer actual loss or damages as a result of the spill.

There is nothing in the Canadian Oil and Gas Operations Act that limits the amount of financial responsibility. In the past, the Board has required security in an amount equal to the limits of absolute liability. It has also required proof of financial responsibility in the form of audited financial statements or guarantees as evidence that the company is able to meet any financial liability that might be incurred as a result of drilling the well. It is up to the NEB to determine the amount of proof of financial responsibility.

4. What type of proof of financial responsibility can the NEB require?

The NEB can require any form of proof of financial responsibility it feels is appropriate. Section 27(1) of the Canada Oil and Gas Operations Act says the responsibility can be in the form of:

  • a letter of credit;
  • a guarantee;
  • an indemnity bond; or,
  • any other form satisfactory to the Board.

5. What does the NEB look for when establishing how much financial security is needed?

The NEB examines all the information filed as part of the drilling application, including the potential environmental effects of accidents and malfunctions.

6. What can the security be used for?

The security provided as proof of financial responsibility can be used to pay out any claims filed under section 26 of the Canada Oil and Gas Operations Act. For example, this security could be used to compensate someone for damages they have suffered as a result of a hydrocarbon spill or to pay the clean-up costs incurred by the government or others.

Please visit our website to see section 26 of the Canada Oil and Gas Operations Act. The NEB can use the financial responsibility to pay out claims and would determine how these funds would be allocated.

Endnotes

[1] Please visit the Department of Indian and Northern Affairs Canada's website for recent amendments to this agreement: Amendments to the Western Arctic Claim - The Inuvialuit Final Agreement.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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Date Modified:
2014-02-19