Copyright 2010, Blake, Cassels & Graydon LLP

Originally published in Blakes Bulletin on Energy - Oil & Gas, September 2010

On August 31, 2010, Quebec's Minister of Sustainable Development, Environment and Parks (the Minister)mandated the Bureau d'audiences publiques surl' environnement (BAPE – Public Hearings on the Environment Board) to propose a framework for shale gas exploration and development in the province.The Quebec government intends to table oil and gas legislation in the spring of 2011.

Shale gas in the Province of Quebec

Shale gas is natural gas trapped in rock formations called shale located 1,000 to 3,000 metres below ground level. New technology has made extracting this gas economically viable. This is done by drilling horizontal wells and fracturing the shale using pressurized water and other additives.

Quebec shale gas reserves are found in the Utica deposit in the St. Lawrence River Valley, between Quebec City and Montréal. It is estimated that the deposit contains billions of cubic feet of recoverable natural gas. On land, exploration is taking place on agricultural properties located within municipal boundaries, with good road andrail access.

There is a moratorium on oil and gas exploration in the Gulf of St. Lawrence pending completion of a federal review.

Statutory Framework

While various laws have an impact on shale gas exploration and development in the province of Quebec, there is no law or regulation dealing specifically with this type of activity. The Quebec government is expected to submit a bill to regulate oil and gas production in the province by the spring of 2011. In the mean time, the Mining Act currently serves as the main statutory framework for the exploration for, and development of, shale gas in the province. Under the Mining Act, prospecting licences are granted based on the "freemining" principle.

Free Mining

According to the "free mining" principle under the Mining Act:

  • everyone has access to the resource;
  • the first applicant is granted the right to explore;
  • in the event of discovery, the applicant is guaranteed the right to develop the resource; and
  • the discovery and development of deposits are left to industry know-how.

Prospecting licences are valid for five years and are renewable. In exchange for exploration rights, licence holders must pay an annual rent and carry out geological or geophysical work or drilling. The dollar value of the work required is calculated based on the surface area covered by the licence.

A prospector who discovers an economically viable amount of gas is granted a 20-year, renewable, natural gas development lease.

Energy Strategy

In 2006, the Quebec government released its 2006-2015energy strategy, which sets orientations for each field of energy-related activities, including oil and gas. The Quebec government has since announced that it will take various actions to ensure the sustainable development of the shale gas industry. The BAPE's shale gas mandate and the modernization of the oil and gas statutory and regulatory framework expected for the spring of 2011are part of the Quebec government's energy strategy.

The BAPE's Shale Gas Mandate

The Environment Quality Act (EQA) regulates environmental protection in Quebec. The EQA creates the BAPE, which reviews environmental questions at there quest of the Minister, sometimes with public input.

Given the Quebec government's commitment to explore the development of oil and gas on Quebec territory the Minister has entrusted the BAPE with the task of proposing a framework for the exploration, development and extraction of shale gas in order to foster harmoniousco existence of these activities and the populations concerned, the environment and the other fields of activity on the territory.

As part of its mandate, the BAPE must propose guidelines for the statutory and regulatory framework for natural gas exploration, development and gathering infrastructure. The BAPE will hold public consultations in the three main regions affected by shale gas exploration and development. The BAPE's mandate began on September 7, 2010 and the agency is due to submit its report on February 4, 2011.

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