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OIL AND GAS AND PIPELINE LAW CML 1105 I MARCH 9, 2013
Overview • Regulation of oil and gas development in (Alberta, Ontario, Federal) • Licencing of construction and operation of pipelines (Federal) • Mackenzie Gas Project, Enbridge Northern Gateway and Keystone XL pipelines
Jurisdiction over Oil and Gas Development
Oil and Gas Development (Alberta) • Provinces - primary jurisdiction: s. 92, 92 A authority, resources ownership • Energy Resources Conservation Board is key regulator (quasi-judicial) – regulates all upstream oil and gas activity throughout project lifecycle – issues well, facility and pipeline licences, in situ bitumen recovery scheme approvals – undertakes compliance assurance – oversees abandonment of facilities
Oil and Gas Development Steps • • • Oil, Gas and Bitumen Exploration Acquire Mineral Rights (by auction) Environmental Impact Assessment Acquire Land Access (by negotiation) Determine Government Plans, Policies and Guidelines for Places • Application for Construction (ERCB) • Consultation/Notification (Aboriginal rights)
Oil and Gas Development • Why free entry for mineral rights, negotiated land access rights for oil and gas?
Oil Sands Development • Federal government has engaged in regulatory process for oil sands mines (Kearl, Joslyn, Jackpine, Pierre River) through joint panel reviews under CEAA • Federal EAs triggered by Fisheries Act, Navigable Waters Protection Act • Federal government not engaged in approvals of in situ oil sands projects (usually no adverse effects on fish habitat) • Are recent federal law changes designed to get the feds out of the oil sands?
Oil and Gas Development (Ontario) • Yes, Ontario does produce conventional oil and gas (limited production, falling) • Oil, Gas and Salt Resources Act – Minister of Natural Resources regulates petroleum resources, including exploration, drilling, production of oil and natural gas • Shale gas development opportunities • Do Ontario, Quebec, New Brunswick have institutions in place to regulate shale gas development?
Shale Gas Reserves North America
Shale Gas Development (Ontario)
Shale Gas Reserves (Ontario)
Federal Jurisdiction over Oil and Gas Development • National Energy Board – Interprovincial, international pipelines – Offshore oil and gas (B. C. , Arctic, Hudson’s Bay, Gulf of St. Lawrence – NWT, Nunavut • Canada-Newfoundland Offshore Petroleum Board – NL offshore • Canada-Nova Scotia Offshore Petroleum Board - NS Offshore
Canada Newfoundland Labrador Offshore Petroleum Board • Created in 1986 through Atlantic Accord to regulate offshore oil and gas • Role “facilitate the exploration for and development of the hydrocarbon resources in the Newfoundland Labrador Offshore Area in a manner that conforms to the statutory provisions for: worker safety; environmental protection and safety; effective management of land tenure; maximum hydrocarbon recovery and value; and Canada/Newfoundland & Labrador benefits”
Canada Newfoundland Labrador Offshore Petroleum Board • Dual role to facilitate development of offshore oil and gas as well as regulate it? Does this make sense? (NEB is a regulator only) • NEB regulates offshore oil and gas development in Quebec, NB and PEI waters • Environmental/fishing groups seeking moratorium on oil and gas development in Gulf of St. Lawrence (“enclosed sea” reasoning) • Old Harry would be first offshore oil and gas project in Gulf
Old Harry Offshore Oil Project
Old Harry Offshore Oil Project • Corridor Resources proposes to develop Old Harry in Newfoundland waters • Old Harry 80 km from Magdalen Islands, Quebec, also close to NS, PEI and NB waters • C-NLOPB is preparing strategic environmental assessment for release in April 2013 • Project EA for Corridor Resources proposed drilling program on the Old Harry Prospect also underway by C-NLOPB • Minister Kent turned down C-NLOPB request for panel review
Pipeline Regulation • Regulation of interprovincial and offshore pipelines (National Energy Board) – Mackenzie Gas Project (Imperial Oil, Shell) – Northern Gateway Pipeline (Enbridge) • Pipelines completely within borders of a province regulated provincially • Regulation of international pipelines (U. S. ) – Keystone XL Pipeline (Trans. Canada)
National Energy Board Interprovincial/international pipelines are subject to the National Energy Board Act: 52. (1) If the Board is of the opinion that an application for a certificate. . . is complete, it shall prepare and submit to the Minister, and make public, a report setting out (a) its recommendation as to whether or not the certificate should be issued. . . taking into account whether the pipeline is and will be required by the present and future public convenience and necessity, and the reasons for that recommendation; and (b). . . all the terms and conditions that it considers necessary or desirable in the public interest. . .
National Energy Board 52. (2) In making its recommendation, the Board shall have regard to all considerations that appear to it to be directly related to the pipeline and to be relevant, and may have regard to the following: (a) the availability of oil, gas or any other commodity to the pipeline; (b) the existence of markets, actual or potential; (c) the economic feasibility of the pipeline; (d) the financial responsibility and financial structure of the applicant. . . ; and (e) any public interest that in the Board’s opinion may be affected by the issuance of the certificate or the dismissal of the application.
National Energy Board 52. (3) If the application relates to a designated project within the meaning of section 2 of the Canadian Environmental Assessment Act, 2012, the report must also set out the Board’s environmental assessment prepared under that Act in respect of that project Note: Public oral or written hearings are held for pipeline construction applications exceeding 40 km or at discretion of NEB
National Energy Board 54. (1) After the Board has submitted its report. . . the Governor in Council may, by order, (a) direct the Board to issue a certificate in respect of the pipeline or any part of it and to make the certificate subject to the terms and conditions set out in the report; or (b) direct the Board to dismiss the application for a certificate.
Notes on Changes to National Energy Board • Prior to 2012 legislative changes, NEB issued s. 52 certificates subject to approval of GIC • Prior to 2012 changes, GIC could not approve a project that NEB had rejected • NEB now makes recommendations to GIC only on S. 52 certificates • Can it still be considered a quasi-judicial body?
Mackenzie Gas Project Pipeline Route
Mackenzie Valley Pipeline • Proposed natural gas pipeline from Beaufort Sea to northern Alberta along Mackenzie Valley, connecting to Prudhoe Bay along Yukon North Slope • Canada issues Pipeline Guidelines in 1970, 1972 • Berger Inquiry established by order in council in 1974, reported in 1977
Mackenzie Valley Pipeline Inquiry Order in Council – Authorities f • Similar to inquiries under Inquiries Act • Summon witnesses and examine under oath • Compel production of documents • Adopt practices and procedures in his discretion • Engage technical advisors, counsel
Mackenzie Valley Pipeline Inquiry Order in Council – Mandate f “inquire into and report upon the terms and conditions that should be imposed in respect of any right-of-way. . . for the purposes of the proposed Mackenzie Valley Pipeline having regard to (a) the social, environmental and economic impact regionally, of the construction, operation and subsequent abandonment of the proposed pipeline in the Yukon and Northwest Territories. . .
Mackenzie Valley Pipeline Inquiry Key Features f • “(T)his inquiry is not just about a gas pipeline; it relates to the whole future of the North” • Addressed a wide range of issues not just biophysical impacts • Held preliminary hearings seeking input on process and scope • Travelled to all 35 communities to hear evidence from residents in own languages
Mackenzie Valley Pipeline Inquiry Key Features • Held quasi-judicial hearings with counsel to hear and test evidence • Established a board of government technical experts -- Pipeline Application Assessment Board • Established independent Environmental Protection Board (scientists, engineers) • Addressed Project’s cumulative effects • NEB/Cabinet approved recommendations f
Mackenzie Valley Pipeline Inquiry Summary • Public participation matters • Local residents have important knowledge to offer • Canada must settle aboriginal claims in northern Canada (Inuvialuit, Dene, Inuit, Yukon First Nations) • Balance “Northern Frontier” against “Northern Homeland” • Set the stage for federal environmental assessment processes for decades f
Mackenzie Gas Project • Largest industrial development ever in North Expected cost: CDN$15 billion • 1300 km natural gas transmission pipeline from Inuvik to northwest Alberta (54 million m³/day) • 650 km natural gas liquids pipeline from Mackenzie Delta to Norman Wells • Three production fields in Mackenzie Delta (164 billion m³ natural gas) • Project led by Imperial Oil, with equity partners Exxon Mobil, Shell Canada, Conoco-Phillips
Environmental Assessment / Regulatory Process • Process initiated in 2003 • Environmental Impact Statement: August 2004 • Two sets of overlapping hearings: Joint Review Panel and National Energy Board 2006 – 2010 • National Energy Board hearings 2006 – 2010 (approved October 2010) Cabinet approved NEB certificate March 2011 • Other regulatory approvals not issued • Project not proceeding (low price of natural gas, high costs of Mackenzie gas)
Enbridge Northern Gateway Pipeline
Enbridge Gateway Pipeline • Two parallel 1, 177 km pipelines between Bruderheim Alberta and Kitimat marine terminal (oil sands oil/natural gas liquids) • Cost C$5. 5 billion • Marine terminal two platforms (Very Large Crude Carriers, Suezmax NGL tankers • Project scoped to include tanker shipping within Douglas Channel, but not in Hecate Strait, Pacific Ocean
Enbridge Northern Gateway Pipeline • S. 52 NEB Certificate required plus Fisheries Act authorizations • Joint Panel Review established to meet NEB and CEAA requirements • First hearings held in January 2012, ongoing
Enbridge Northern Gateway Pipeline • Enbridge offering aboriginal groups within 80 kilometers a 10% equity stake • No First Nation with land directly traversed has signed on • Crown/JRP not met duty to consult, respect Aboriginal rights/title (Haisla, Gitga'at, Gitxaala, Wet'suwet’en, Nadleh Whut'en, Nak'azdli, Takla Lake) • Right to free, prior and informed consent?
Enbridge Northern Gateway Pipeline • BC threatened to hold up project unless financial benefits provided to province • What constitutional authority does BC have to legislate or take measures to delay/stop Northern Gateway?
Keystone XL Pipeline
Keystone XL Pipeline • Keystone XL Pipeline (Canadian section) approved by NEB in 2009 • Keystone XL Pipeline (U. S. section) requires: – Presidential permit – Bureau of Land Management permits for operation/construction – Certificates of piping siting in states • Federal law pre-empts pipeline laws of states
Keystone XL Pipeline • Presidential Permit based on 1968 Executive Order, revised in 2004 • State Department delegated to issue permits with respect to “construction. . . at the borders of the United States, of: (i) pipelines. . . for the exportation or importation of petroleum. . . to or from another country. . . ” and to determine if the project is in the “national interest”
Keystone XL Pipeline • Presidential Permit not issued pursuant to statutory authority rather from “President’s inherent powers to legislate foreign affairs” • Permit is an “action” under National Environmental Policy Act so environmental impact statement required to be issued • State issued EIS in April 2010, found to be inadequate • Final EIS reissued in August 2011
Keystone XL Pipeline • Presidential Permit not issued pursuant to statutory authority rather from “President’s inherent powers to legislate foreign affairs” • Permit is an “action” under National Environmental Policy Act so environmental impact statement required to be issued • State issued EIS in April 2010, found to be inadequate • Final EIS reissued in August 2011, but Nebraska proposed route changes
Keystone XL Pipeline • State Department recommended that Permit be denied in January 2012 as not in the national interest • State Department reissued EIS in March 2013 asserting no significant adverse effects • EIS argues that Keystone XL would not trigger increases in oil production from oil sands, thus wouldn’t increase oil sands GHG emissions • Does this make sense? Perhaps only if one assumes that Canada has other transportation options to other markets
Toward a Low-carbon Economy? • Decreases in GHG emissions of up to 80% in developing countries such as Canada required to avoid dangerous climate change (IPCC) • Growth in GHG emissions from oil sands expected to be greater than all GHG emissions decreases in rest of economy combined • What are the regulatory options to reduce GHG emissions from oil sands? • If Keystone XL stopped, isn’t U. S. assisting Canada meet GHG targets by reducing growth in GHG emissions from oil sands?