On June 11, 2015, An Act to implement the accord between the Government of Canada and the Government of Quebec for the joint management of petroleum resources in the Gulf of St. Lawrence1 was tabled in the National Assembly. On June 18, 2015, An Act to implement the accord between the Government of Canada and the Government of Quebec for the joint management of petroleum resources in the Gulf of St. Lawrence and to make consequential amendments to other Acts2 was tabled in the Canadian House of Commons. The two mirror bills give effect to a previously entered-into accord between the federal and Quebec governments.
Short history
The provinces of Newfoundland and Labrador, Nova Scotia and
Quebec differ from the federal government in their position on
legislative jurisdiction over the Gulf of St. Lawrence and the
resources it contains. As a result, agreements had to be reached on
the development of those resources when petroleum reserves were
discovered in the gulf.
A first agreement was signed between Canada and Newfoundland and
Labrador in 1985 and subsequently implemented by means of federal
and provincial mirror statutes.3 Canada and Nova Scotia
then reached a similar agreement in 1986, which was also
implemented through mirror legislation.4
These laws provide a framework for the joint management of offshore
oil and gas resources, revenue sharing and the establishment of
bodies to manage offshore activities. They also set out an
arbitration process to settle disputes over the line dividing the
offshore areas between the provinces and, on March 26, 2002, an
arbitration award was issued establishing the offshore area line
between Newfoundland and Labrador and Nova
Scotia.5
Quebec also undertook discussions with the federal government
regarding petroleum resources in the Gulf of St. Lawrence. It began
by amending6 the Mining Act7 to stipulate
that licences to conduct exploration in a marine environment would
be issued further to a call for bids, thereby bringing its marine
environment regime into line with the federal
government's.
It also introduced a provision that suspended, until the coming
into force of a new regime, the issuance of licences to explore for
petroleum, natural gas, brine or underground reservoirs in a marine
environment.8 The latter provision, which took effect on
June 17, 1998,9 effectively imposed a moratorium on oil
and gas exploration and development activities in the Quebec
portion of the Gulf of St. Lawrence and the Baie des Chaleurs. That
moratorium is still in effect today.
In 2009, Quebec initiated a strategic environmental assessment
(SEA) program targeting the development of marine petroleum
resources. A first SEA (SEA1) covered the marine estuary of the St.
Lawrence, including the northwestern portion of the Gulf of St.
Lawrence. Based on the preliminary findings of SEA1,10
the Quebec government passed the Act to limit oil and gas
activities,11 which had the effect of prohibiting oil
and gas activity in the portion of the St. Lawrence River located
west of Anticosti Island and on the islands located therein. The
statute came into force on June 13, 2011. It was initially
scheduled to expire on June 13, 2014, but was extended by
amendment12 to a date to be determined by the
government.
The second SEA (SEA2) covers the combined Anticosti, Madeleine and
Baie des Chaleurs basins. It began in October 2009 with a series of
information sessions and culminated in a final study report in
September 2013.13 That report stresses the importance
for Quebec of adopting a legislative and regulatory framework
consistent with the economic, environmental and social requirements
of the federal government and the other provinces.
On March 24, 2011, the Accord between the Government of Canada and
the Government of Quebec for the joint management of petroleum
resources in the Gulf of St. Lawrence14 (Accord) was
signed, while SEA2 was in progress. It provided for the
implementation of the Accord by means of mirror legislation.
Concluded without prejudice to the respective positions of the
governments concerning the constitutional status of the Gulf of St.
Lawrence, the aim of the Accord is to allow the development of
petroleum resources while protecting fisheries and the
environment.
The Accord will be implemented in two distinct phases. The mirror
legislation tabled in June 2015 covers the first or
"transitional" phase, which aims to allow exploration
activities while minimizing administrative costs. The second or
"permanent" phase is expected to begin no later than two
years after a declaration of commercial discovery and will involve
the tabling of other mirror legislation governing petroleum
resource development activities, including the establishment of an
independent joint board to ensure the management of such
activities.
Pursuant to Section 9 of the Accord, the Accord will be deemed
concluded once mirror legislation establishing the transitional
phase is adopted and brought into force.
Key provisions of the draft mirror legislation
Purpose and scope
The bills establish a transitional regime that will be in place
until an independent joint board is set up. Their purpose is to
regulate marine oil and gas development activities while
simultaneously promoting the use of generally recognized best
practices, ensuring the sustainable management of resources,
maximizing the social and economic benefits related to petroleum
resource development activities and recognizing the "polluter
pays" principle as well as the principles of prevention or
remediation of harm to the environment15 and
transparency.
The bills apply to an area described in a schedule to the
legislation and shown, for information purposes, in the document http://www.mern.gouv.qc.ca/publications/energie/Faits_saillants-Miroir-2015.pdf
(French only). They also apply beyond the area in the case of the
transportation of petroleum by pipeline.16
Quebec is recognized as the principal beneficiary of the petroleum
resource development activities and will therefore benefit from all
revenues derived from those resources, including royalties,
bonuses, forfeitures, licence fees and other forms of revenue
provided for in the proposed Act and the regulations made under
it.
Responsibilities and framework
The provincial and federal ministers responsible for natural
resources will be in charge of applying the legislation that falls
under their level of government. They will be required to make
decisions jointly and will have to consult each other and obtain
their counterpart's approval for draft regulations stemming
from the application of their respective statutes.
The Régie de l'énergie du Québec
(Régie) and the National Energy Board (Board) will likewise
be required to jointly exercise the powers and perform the duties
and functions assigned to them by law. In order to avoid
duplication, they will be required to establish their operational
rules together and may enter into – with each other or,
individually or collectively, with the competent provincial and
federal ministers or bodies – agreements regarding
environmental assessment and regulation, emergency measures, marine
regulation, aviation regulation, employment and industrial
benefits, occupational health and safety, public hearings and any
other matters they consider appropriate.
Before making a joint decision, the Régie and the Board will
each make their own decision and communicate it to the other party.
These individual decisions will be of no force or effect and will
remain confidential. The Régie and the Board will then make
a joint decision, which will be issued as a joint document and
incorporate the conditions that, in their opinion, will be
necessary for compliance with their respective individual
decisions. For purposes of judicial review, the joint decision will
be deemed a decision of the Régie.
The bills also give the Régie and the Board powers of review
and revocation, the power to hold public hearings and the power to
take measures and make orders.
In addition, the ministers may establish a marine oil and gas
committee that will be responsible for submitting reports or
opinions to them on various petroleum-related matters or holding
hearings on specific cases set out in the proposed
legislation.
There will also be a formal procedure for settling area line
disputes between Quebec and any neighbouring province that is a
party to a similar agreement with the Government of Canada.
Arbitration will be available as a last resort in such disputes.
However, any settlement or arbitration decision will pertain only
to the petroleum resources joint management area and will be
without prejudice to the constitutional positions of the respective
governments involved.
Interests relating to the development of petroleum resources
The ministers will have the authority to issue interests (i.e.
exploration licences, significant discovery licences and production
licences) pursuant to a call for bids in respect of portions of the
petroleum resources joint management area for which no interest is
in force (i.e. State reserve areas). Bids will be selected on the
basis of a sole criterion specified in the call for bids, and when
an interest is issued, it and the attached conditions will be
published in a notice in the Gazette officielle du
Québec and the Canada Gazette.
The ministers will be able to prohibit interests from being issued
for any portion of the petroleum resources joint management
area.
They will also be able to prohibit any interest owner from
commencing or continuing any work or activity in or in any portion
of the petroleum resources joint management area that is subject to
that owner's interest if there is a serious environmental or
social problem or if the health and safety of people or the safety
of equipment is threatened by dangerous or extreme weather
conditions. If the interest owner is unable to comply with certain
requirements because of such a prohibition, the requirements in
question will be suspended until the prohibition is revoked by the
ministers.
Under certain circumstances, the ministers will also be able to
issue drilling and development orders and underground storage
licences. They will also be able to cancel an interest if the
interest owner or holder fails to comply with legal
requirements.
A public register will be established for all interests and
instruments that are issued. There will also be provisions
regarding matters such as the validity and priority of interests
and a special framework for demands for information regarding a
registered security notice.
Lastly, there will be a specific regime governing the disclosure of
information: except for documents registered in the public
register, information provided for the administration and
enforcement of the Acts or any regulations made under them will be
protected, except in certain cases provided for in the legislation.
The Régie and the Board will, however, be able to disclose
such information under certain conditions. Furthermore, each year
the ministers will be required to make and publish an annual report
detailing the amount of petroleum extracted by each owner from a
pool or well and the amount of royalties paid by the owner.
Operating licences and authorizations for work or activities
The proposed legislation specifies that an operating licence and
an authorization for each activity will be needed to carry out
petroleum resource exploration, production, conservation,
processing and transportation activities in the petroleum resources
joint management area. Licences and authorizations will be subject
to conditions fixed by regulation or by the Régie and the
Board. Authorizations for a work or an activity will, at a minimum,
be subject to the requirements relating to liability in the event
of loss, damage, costs or expenses, the carrying out of
environmental programs or studies, and the payment of expenses
incurred by the Régie and the Board. For certain activities,
a notice from the minister responsible for the Environment
Quality Act17 and a decision statement pursuant to
Section 54 of the Canadian Environmental assessment Act
(2012)18 will be required.
The draft legislation also sets out requirements for project
security, the use of spill-treating agents, the financial means of
applicants, and development plan and benefits plan approval, and
gives the Régie and the Board the power to suspend, revoke
and amend licences and authorizations and take actions such as
making orders and giving directions.
Applicants for an authorization for an activity will be subject to
financial responsibility requirements, including a requirement to
provide proof of financial responsibility in the amount of $100
million for drilling or petroleum resource development or
production activities. They will also have to prove they have the
financial resources to pay the $1 billion financial liability
limit, without proof of fault, for any authorized discharge,
emission or escape of petroleum or for spills or for any loss in
non-use value relating to a public resource or any actual loss or
damage as a result of debris. Persons liable by their fault or by
the fault of their subordinates will be solidarily liable for the
entire amount of any injury caused, including any costs or expenses
reasonably incurred by the Régie, the Board, the governments
or any person in taking actions or measures in relation to
discharges, emissions, escapes, spills or debris.
Pooling and unitization
Because the bills specify that before petroleum cannot be produced within a spacing unit (i.e. the areas allocated to a well for the purpose of drilling or petroleum production) in which there are two or more production licences or in which two or more persons have separately owned working interests, a pooling agreement may be entered into or a pooling order may be issued by the oil and gas committee. Furthermore, any one or more owners of a direct working interest in a pool or part of the pool whose area is greater than the area of the spacing unit, together with the royalty owners, may conclude a unit agreement, in which case a unit operating agreement may be entered into. Unitization orders are also provided for.
Powers and designation of federal and provincial officers
The bills provide for the designation of a safety officer, a conservation officer, a Chief Safety Officer and a Chief Conservation Officer from among the officers and employees19 of the Régie and the Board. Those so designated will have the power to order any person who is in charge of a place that is used for oil and gas operations to take certain measures and may personally enter a place to, among other things, inspect it, conduct tests and take samples. The bills also institute a penal offence regime and a scheme of administrative monetary penalties.
Amended federal and provincial statutes
Lastly, the bills introduce amendments to various federal and
provincial laws.
Among other things, the Environment Quality Act will be
amended to establish a special environmental impact assessment and
review regime applicable to certain activities in the Gulf of St.
Lawrence. Those activities will be prescribed by regulation.
The project notice, ministerial directions and carrying out of an
environmental impact assessment, which exist in the current
procedure, will be maintained. However, if the environmental impact
assessment statement is considered satisfactory, the minister
responsible of the Environment Quality Act will either
submit it to the Régie with the recommendation that the
Régie authorize the activity, conditionally or
unconditionally, or determine that carrying on the activity
involves unacceptable risks or impacts for the environment or the
social milieu. In the first case, the Régie may elect to
follow or not follow the recommendation, but, if it decides not to,
it will have to consult with the minister and then give the
minister its reasons in writing if it subsequently maintains its
decision. In the second case, the minister will submit a question
to the government as to whether those risks or impacts are
justifiable in the circumstances. If the government deems the
circumstances not to be justifiable, it may decide not to authorize
the activity or it may recommend that the Régie authorize
the activity under specified conditions. Again, the Régie
may elect to follow or not follow the government's
recommendation, but if decides not to, it will have to consult with
the government and give it written notice if it subsequently
maintains its decision.
The Canadian Environmental Assessment Act (2012)
will be amended, too, to make the Board the responsible authority
in the case of a designated project that includes activities
regulated under the proposed federal legislation for which an
environmental assessment is required and to make the decision
statements issued by the Board part of the authorizations issued or
approvals given under the bills.
Footnotes
1 Bill 49, 41st legislature, 1st session.
2 Bill C-74, 41st legislature, 2nd session.
3 Canada-Newfoundland and Labrador Atlantic Accord Implementation Act, S.C. 1987, c 3 and Canada-Newfoundland and Labrador Atlantic Accord Implementation Newfoundland and Labrador Act, RSNL 1990, c C-2.
4 Canada-Nova Scotia Offshore Petroleum Resources Accord Implementation Act, S.C. 1988, c 28 and Canada-Nova Scotia Offshore Petroleum Resources Accord Implementation (Nova Scotia) Act, SNS 1987, c 3.
5 Newfoundland and Labrador Offshore Area Line Regulations, DORS/2003-192 and Schedule 1 of the Canada-Nova Scotia Offshore Petroleum Resources Accord Implementation Act.
5 Act to amend the Mining Act and the Act respecting the lands in the public domain, SQ 1998, c 24.
7 CQLR, c M-13.1
8 Section 153 Act to amend the Mining Act and the Act respecting the lands in the public domain.
9 Section 159 Act to amend the Mining Act and the Act respecting the lands in the public domain.
10 Preliminary report in support of the consultations – Strategic environmental assessment of petroleum resource development in the basin of the marine and northwestern estuary of the Gulf of St. Lawrence, by AECOM Tecsult Inc. July 2010, http://www.mern.gouv.qc.ca/publications/energie/ees/EES1_Rapport_preliminaire.pdf (French only).
11 SQ 2011, c 13.
12 Act to amend the Act to limit oil and gas activities and other legislative provisions, SQ 2014, c 6.
13Study Report – Strategic environmental assessment of petroleum resource development in the Anticosti, Madeleine and Baie des Chaleurs basins (SEA2), by Genivar inc., September 2013, http://www.mern.gouv.qc.ca/publications/energie/ees/EES2_Rapport_final.pdf.
14 http://www.nrcan.gc.ca/sites/www.nrcan.gc.ca/files/www/pdf/media/newcom/2011/201149a-eng.pdf
This agreement was approved by the Government of Quebec by
Order-In-Council 277-2011 on March 23, 2011.
15 The federal bill refers to environmental protections rather than the "polluter pays", prevention and reparation principles.
16 It is therefore necessary to refer to the definitions of "pipeline" in Section 99 of the federal bill and Section 206 of the provincial bill.
17 CQLR, c Q-2.
18 S.C. 2012, c 19.
19 For the security and conservation officers, the designation may also be made from among the members of the Régie and the Board.
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