Canada: Quebec And Federal Governments Table Mirror Legislation On Joint Management Of Petroleum Resources In The Gulf Of St. Lawrence

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 (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.


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, (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,

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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