Copyright 2011, Blake, Cassels & Graydon LLP
Originally published in Blakes Bulletin on Energy/Environment, March 2011
Introduction
Industry has been waiting for Quebec to unveil its Hydrocarbons Act, a much-anticipated set of rules for oil and gas exploration and development in the province (see our September 2010 Blakes Bulletin: Shale Gas: Anticipated Changes to Quebec's Regulatory Framework). In the fall of 2010, the government put off disclosing the new rules until the spring, pending the outcome of a review of environmental issues related to shale gas exploration and development by the province's environmental public hearings board, the Bureau d'audiences publiques sur l'environnement (BAPE or the Board). To view the formal report generated by BAPE – available in French only – click here. The BAPE tabled its report with the government on February 28, 2011 and the report was made public on March 8, 2011. The BAPE's central recommendation, to which the government has agreed, is to push back adoption of new rules for shale gas exploration and development pending completion of a strategic environmental assessment, expected to begin in June 2011 and take up to two years. In the meantime, it appears that developers can continue to apply for permits, licences and authorizations required under the Mining Act, An Act respecting the preservation of agricultural land and agricultural activities and the Environment Quality Act to carry on exploration activities, though closer scrutiny of permit applications is expected and it is not clear whether, and under what circumstances, hydraulic fracturing will be permitted.
BAPE Terms of Reference on Shale Gas
The Quebec government mandated the BAPE to:
- propose a framework for shale gas exploration and development that favours coexistence of these activities and affected populations, the environment and other sectors of activity on the land base;
- provide guidance for a legal and regulatory framework that will ensure, as regards exploration, production and transport of natural gas, the safe development of this industry with respect to sustainable development; and
- retain scientific experts to assess issues related to the mandate.
The BAPE held two rounds of public hearings in October and November 2010. The Board heard from community residents, farmers, environmentalists and industry. It received 199 written briefs. Board fact-gathering extended beyond Quebec's borders, to Alberta, Pennsylvania and New York.
The Report
The BAPE report contains over 100 observations for the government to consider. Notable observations include the following:
- Government oversight is fragmented but it is too early to consider moving to a one-window approach. The Ministry of Sustainable Development, Environment and Parks should retain authority over environmental matters while regional councils of elected officials should be given some say over zoning matters.
- By 2013, the province will have completed groundwater mapping of a large part of the area where shale gas is found. Exploration in other areas should be delayed until mapping is completed there, too.
- Article 19 of the Act to affirm the collective nature of water resources and provide for increased water resource protection should be brought into force. This would require developers to apply for an authorization to take water, which could be withheld for a number of reasons, including environmental protection.
- Geological information should be gathered to assess risks from landslides and earthquakes, and determine potential for carbon sequestration.
- Rights should be non-transferable and available by auction only.
- Royalties should reflect the full range of government administrative and enforcement costs. They should also allow for compensation of municipalities bearing a disproportionate share of inconvenience associated with shale gas exploration and development, and a share of royalties should be paid into the "Generations Fund" created in 2006 to pay down the province's debt.
- Consideration should be given to whether liability for wells should continue to end at well closure.
- Consideration should be given to establishing a clean-up fund.
- Insurance companies should be required to cover damages suffered by homeowners related to shale gas development.
Near-Term Situation Unclear
In response to the report, Quebec's Minister of Sustainable Development, Environment and Parks, Mr. Pierre Arcand, announced at a press briefing on Tuesday, March 8, 2011 that he was going forward with the BAPE's principal recommendation to conduct a strategic environmental assessment. The Minister specified that he is not declaring a moratorium on shale gas exploration activity for the duration of the strategic environmental assessment process. As for development activities, they continue to be on hold until 2014. Whether all or portions of the Hydrocarbons Act will be tabled before completion of the strategic environmental assessment process remains unclear.
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