British Columbia's oil and gas regulator, the BC Oil & Gas Commission (Commission), recently enacted the Liquefied Natural Gas Facility Regulation (Regulation) pursuant to section 111(2) of the Oil and Gas Activities Act. The Regulation is the latest in a series of regulatory developments aimed at formalizing and clarifying the provincial government's Liquefied Natural Gas (LNG) Strategy that was released in February 2012.
LEGISLATIVE CHANGES
From 2010 to 2014, LNG-related matters in British Columbia were governed by the former Pipeline and Liquefied Natural Gas Facility Regulation. The LNG-specific provisions of that regulation were removed by amendment on July 21, 2014 and expanded upon in the new Regulation. The former regulation is now known solely as the Pipeline Regulation, and is limited to pipeline-related matters in British Columbia and is distinct from the jurisdiction and mandate of the British Columbia Utilities Commission.
The Regulation, according to the Commission's Industry Bulletin 2014-09, was developed to comprehensively address regulatory aspects of proposed LNG facilities in British Columbia. Moreover, it was developed in consultation with various LNG stakeholders including industry, First Nations, and various levels of government.
The Regulation covers a wide scope of technical requirements for LNG facilities, beginning with the LNG facility permit application process, through the construction, operation, decommissioning and reclamation phases. Notably, the Regulation sets forth notice and reporting requirements for all project applicants and permit holders during various project phases, and enables the Commission to make individual facility-specific decisions based on such reports. Further, the Regulation sets out overarching occupational health and safety program requirements, including emergency response planning. Significantly though, the jurisdiction of the Regulation is limited to LNG facility sites themselves as opposed to upstream aspects of natural gas extraction, production and transportation.
Potentially important to LNG facility permit holders, section 25 of the Regulation grants discretion to the Commission to exempt an LNG facility permit holder from one or more provisions of the Regulation on a case-by-case basis. Although an LNG project proponent may successfully apply for and receive an exemption, the Commission retains the ability to impose conditions on such exemption. It remains to be seen how widely the Commission will grant exemptive relief to LNG facility permit holders using this provision.
LNG FACILITY MANUAL
Concurrently with the release of the Regulation and the amendments to the Pipeline Regulation, the Commission published the Liquefied Natural Gas Facility Permit Application and Operations Manual (LNG Facility Manual). The LNG Facility Manual provides an overview of the current provincial LNG scheme, as well as detailed guidelines for the rules and procedures set forth in the Regulation. More specifically, it covers a range of issues relating to the life cycle of an LNG facility, from environmental matters to shipping, water use, engineering and geotechnical matters, among others. While the LNG Facility Manual provides helpful clarification, it is by no means an exhaustive summary of the complex and interrelated provincial and federal legislative regime for LNG facilities and the related upstream, midstream and downstream components.
INDUSTRY IMPLICATIONS
When read together, the Regulation and the LNG Facility Manual provide a helpful overview of the current LNG regime in British Columbia. These tools also provide necessary guidance to LNG facility proponents and permit holders on a variety of regulatory and technical facility issues.
Despite this additional guidance, however, areas of uncertainty remain within British Columbia's regulatory system for LNG. As noted in our March 2014 Blakes Bulletin: B.C.'s Proposed LNG Tax – Some Answers, Many Questions, the pending LNG income tax regime is expected to be released by the provincial government in the fall of 2014, with administrative and enforcement provisions to be introduced in 2015.
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