Canada: Recent Changes To Offshore Drilling Regulations

Background

The Regulations Designating Physical Activities (the Regulations) determine which projects will fall within the scope of the Canadian Environmental Assessment Act, 2012 (the Act) for the purposes of triggering the requirement for a federal environmental assessment (EA).  Amendments to the Regulations relevant to oil and gas exploration and production activities in the East Coast offshore were registered and took effect on November 6, 2013.  These changes are aimed at ensuring that only major projects will trigger an EA under the Act by providing clarification as to the application of the Act to offshore oil and gas activities.

Changes Respecting Facilities

The amendments to the Regulations with respect to offshore production facilities and pipelines do not represent a new EA trigger.  Prior to the amendments the Regulations included a trigger in respect of such facilities, so the amendments are intended to clarify the application of this trigger as opposed to broadening the scope of the offshore facilities that will require an EA.

Changes Respecting Pipelines

The amendments clarify and narrow the scope of pipelines that require an EA under the Act.  Prior to the amendments, any offshore pipeline would trigger an EA if it was located beyond the scope of a previous EA. The amendments clarify that only the construction, operation, decommissioning and abandonment of a new offshore oil and gas pipeline, other than a flowline, will trigger an EA.

This suggests that minor extensions or modifications to previously-assessed offshore oil and gas pipelines will not require an EA under the Act, even if such extensions or modifications were not included within the scope of a previous EA. However, there remains uncertainty as to if and when a pipeline extension would qualify as a "new" pipeline under the Regulations.

Changes Respecting Exploratory Drilling

The amendments add a new trigger which requires an EA for the "drilling, testing and abandonment of offshore exploration wells in the first drilling program in an area set out in one or more exploration licences". As opposed to the clarification introduced with respect to offshore production facilities and pipelines, this amendment creates a federal EA trigger that was not previously included in the Regulations.

However, the true scope of the requirement to perform an EA in respect of offshore exploration wells is uncertain.  The amendments provide that exploration wells "in the first drilling program in an area" require an EA. This suggests that if proponents propose to drill a single well within an exploration licence and conduct an EA in respect of that well, that no further EA will be required for any additional wells, even if such additional wells represent additional environmental risks not necessarily addressed in the EA in relation to the first well. 

Conclusions

The amendments respecting offshore production facilities and pipelines provide enhanced direction as to which activities will require an EA under the Act. The ongoing refinement of the Act and Regulations remains consistent with Canada's previously-stated objectives of focusing the requirements associated with federal EAs to major projects and eliminating duplication in the regulatory process.

However, as with all regulatory amendments, some uncertainty remains.  The extent to which the application of the Act to pipelines has been narrowed is not entirely clear, and, although the amendments respecting exploratory wells clearly create a new EA trigger under the Act, there is some uncertainty as to the true breadth and scope of this trigger.  We expect that further guidance documents and precedent will be established by the Canadian Environmental Assessment Agency and the National Energy Board in the near future, which will provide answers to some of these remaining questions. 

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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