Canada: The New Alberta And Federal Governments: Regulatory Implications For The Oil And Gas Sector

1. Introduction

The new Alberta and federal governments have announced ambitious law reform plans. Details are few at this early stage, but it is clear that the plans will have many regulatory implications for the oil and gas sector. This update reviews four key sets of proposals, namely those respecting environmental assessment (EA), climate change, environmental protection standards and financial policy.

2. Environmental Assessment

While falling short of a 'first principles' overhaul, the federal government intends to target several key components of the current federal EA system (discussed below in Parts 2.1–2.5). The new Alberta government has been largely silent on whether its EA legislation should be amended and has not made any prominent responses to the federal EA principles; the province may be taking a wait-and-see approach to determine how proposed new federal rules might affect provincial activities.

2.1 Evidence-Based Decision-Making

The new federal government promises that EA will be based on "science, facts, and evidence". This theme appears to respond to environmental group and other criticisms that the previous Conservative government politicized and undermined the integrity of EA processes. To fashion a more "robust" EA, the new federal government will presumably review procedural and evidentiary rules found in the two primary statutes (the Canadian Environmental Assessment Act (CEAA) and the National Energy Board Act (NEBA)) and will likely enhance the role of federal scientists in EAs. Project proponents and intervenors alike should therefore expect a higher degree of scrutiny in federal EA processes.

What is less clear is whether the federal government will leave intact certain NEBA opportunities for political decision-making. Especially problematic for many environmental groups and members of the public are the 2012 amendments to the NEBA. Those changes imposed time limits on the review by the NEB of complete facility applications and removed the final public interest vetting and decision concerning major federally regulated oil and gas projects such as Northern Gateway and Energy East to the federal Cabinet (a political body with broad discretion to trump, ignore or modify recommendations flowing from NEB and EA processes).

2.2 Broader EA "Factors"

The CEAA currently prescribes certain factors relevant to both a project's direct impacts (eg. river crossings by a pipeline) and those which are more indirect and further afield (eg. "cumulative effects" of a project "in combination" with others). The new federal government intends to add two factors:

  • "Upstream Impacts". Environmental and Aboriginal groups have long criticized EA decisions to not consider "upstream impacts". These criticisms, for example, have been directed at the NEB's announced intention – quite in accordance with the bounds of its current authority - respecting the Energy East Project, that it "will not consider matters related to upstream activities associated with the development of oil sands, or the downstream and end use of the oil transported by the Project". The government appears to accept this critique, but has yet to take the all-important step of defining "upstream impacts". Doing so will raise policy questions. For example, if a reviewable project is a pipeline, should the subject "upstream impacts" include some or all of the potentially countless upstream activities involved in manufacturing pipeline infrastructure and producing oil destined for the pipeline? And, how should upstream impacts be considered if a pipeline proponent (as is often the case) has not yet lined up contracts with upstream parties?
  • "Greenhouse Gas Emissions". The new government intends to require consideration of "greenhouse gas emissions resulting from the projects being assessed". This too responds to environmental group concerns; a recent subject of strong criticism was NEB Ruling 25 respecting the Trans Mountain Pipeline expansion project, which refused to consider oilsands emissions as part of the EA.. And, as was the case for "upstream impacts", enacting the "greenhouse gas emission" factor poses definitional challenges: for example, should this factor be limited narrowly to the pipeline construction and operation or more broadly to emissions resulting from oilsands production?

2.3 "Fair" EA

Another prominent federal proposal is to create a "fair" EA process. If environmental and Aboriginal group criticisms are any indication, the new government will need to consider at least the following fairness issues as it revamps EA legislation:

  • EA Timelines. The new government has not indicated whether it will retain one of the most criticized procedural features of NEBA and CEAA, namely the EA timelines introduced by the federal Conservative government in 2012 (eg. 18 months for pipeline projects).
  • Opportunities to Express Views. The Liberal government promises to allow "Canadians to express their views". This promise appears to echo widespread concern that EA processes do not provide effective opportunities for articulating objections to a proposed project. The inescapable fact is that major oil and gas projects can trigger numerous requests to make submissions in EA hearings (hundreds in the case of the Northern Gateway). Accordingly, the new government will need to consider how to allocate hearing times and panel resources which are fair to both the public and the proponent.

2.4 More Aboriginal Involvement in EA

The new federal government intends to "enhance the engagement of Aboriginal groups in reviewing and monitoring major resource development projects"; similar intentions have been voiced by the new provincial government. The development of these strategies will undoubtedly evolve and will be informed by the following factors, amongst others:

  • Consultations. More detail about such enhanced participation will presumably emerge from current and imminent consultations contemplated by these governments and Aboriginal group leaders.
  • "Free, Prior Informed Consent". Both governments have promised to implement the United Nations Declaration on the Rights of Indigenous Peoples; this declaration includes an Aboriginal "free, prior informed consent" (FPIC) right. The previous federal Conservative government ratified the Declaration but viewed FPIC as non-binding "aspirational" guidance. Many Aboriginal groups disagree and view FPIC as a veto power which can be exercised in EA and other fora. The commitments to implement FPIC heighten Aboriginal expectations but at the same time raise complex legal questions not addressed by the UN Declaration or in governmental endorsements of this international instrument. For example, how will FPIC be reconciled with the many Supreme Court of Canada and other judicial rulings that Aboriginal groups do not have a general veto respecting natural resource projects? And, would the Crown be able to use the "justifiable infringement" principle entrenched in Canadian Aboriginal title law to off-set FPIC?
  • Litigation. The federal and provincial Aboriginal participation strategies will likely also be informed by judicial guidance from the many pending cases about Aboriginal involvement in EA. The most prominent cases are the 18 which were recently heard by the Federal Court of Appeal respecting Enbridge Northern Gateway (currently reserved, likely for several months). These and other cases attack many conventional EA laws and policies on constitutional grounds; the final judicial say will likely rest with the Supreme Court of Canada, likely not within two years.

2.5 Federal EA Transition Rules

A vitally important issue is how current project EAs will be affected by the contemplated changes discussed above. The message is mixed. Early in her tenure, Minister of Environment and Climate Change McKenna announced that projects "initiated under the original system will continue on that path" (emphasis added). Shortly thereafter, however, her office announced that there would be a "transition strategy for projects currently under review to provide some certainty to industry through this change process" (emphasis added). What this "transition strategy" means for the TransMountain and other current projects now remains to be determined. The transition strategy will need to determine which projects are in fact "under review". For example, will the old rules, the transition strategy, or the new rules apply to projects such as Energy East, whose EA application has been filed but has not yet been deemed "adequate" (a precondition to a review)?

Irrespective of how the "transition strategy" is drafted, it should be noted that even approved projects can be trumped in a de facto way by subsequent government decisions. A potential example may be the new government's announced intention to implement a moratorium on crude oil tanker traffic on the BC North Coast, which could render Northern Gateway's Cabinet approval moot.

3. Climate Change

3.1 Immediate Priority for Both Governments

Both levels of government have paid priority attention to climate change, which is not surprising given the December 2015 Paris Conference on Climate Change.

3.2 The Federal Process to Develop a Pan-Canadian Approach

One of the earliest Liberal government announcements was that it would collaborate with provinces to develop a 'pan-Canadian' framework that accommodates diverse provincial strategies. Such accommodation is likely a practical imperative as most provinces have in recent years committed to specific yet highly diverse measures (eg. carbon tax, cap and trade, intensity-based emission reductions) to reduce GHG emissions.

The federal government intends to consult with the provinces to develop the new pan-Canadian climate change framework by February 2016. This framework will presumably take stock of how the collective efforts of Canadian governments can satisfy possible international obligations flowing from the Paris Conference.

3.3 The More Prescriptive Alberta Approach

Alberta's recent (November 23, 2015) "Climate Plan" is arguably the most prescriptive of the various recently announced provincial strategies. The Plan features the following:

  • Carbon Tax. Intended for implementation by 2017, the economy-wide carbon tax is set to have both provincial and national implications. The details of Alberta's plan will unfold in the coming months, but certain rates have already been announced (eg. beginning in 2017, the tax will be set at $20 per tonne, rising to $30 in 2018 and followed by a 2% above inflation rate thereafter, resulting in an increase of gasoline prices by roughly 7% by 2018 and an annual increase in heating and transportation costs per household by $300-$600). The Alberta government anticipates using these new revenues to fund renewable technology, green infrastructure and transit.
  • Oilsands Carbon Emissions. The Plan encompasses a 100-megatonne cap on carbon emissions from the oilsands, which notably still allows the industry room to grow as the oilsands currently emit roughly 70-megatonnes annually.
  • Methane Emissions. Under the Plan, Alberta expects to reduce methane emissions from oil and gas operations by 45% by 2025. Alberta plans to reach this reduction by applying new emissions design standards to new Alberta facilities and developing a 5-year voluntary Joint Initiative on Methane Reduction and Verification. The joint initiative will include Alberta industry, environmental groups, and Indigenous communities.
  • Renewable Power and Phase Out of Coal. Coal has traditionally been Alberta's most reliable, low-cost source of electricity. The Plan features a phase out of coal-fired power in the next 15 years. The Plan also promises to offer incentives for renewal power generation. To do so, Alberta proposes to replace two-thirds of the existing coal-based electricity with renewable energy (leaving one-third to be produced by natural gas). The 2030 goal is for renewable sources to ultimately account for one-third of Alberta's total operating capacity.

4. Stricter Environmental Standards

4.1 Ottawa

The Liberal election platform frequently highlighted that, since 2012, the federal Conservative government's 2012 legislative amendments reduced protection to the environment and human health. After the new government took office, the Prime Minister's mandate letters to various ministers confirmed that the 2012 amendments and other identified weaknesses in federal legislation should be addressed. The intentions are broadly stated, but they appear to promise widespread changes. The following are notable for the oil and gas sector:

  • Endangered Species Recovery Plans. The Minister of Environment is instructed to respond "quickly to the advice of scientists" and complete "robust species-at-risk recovery plans in a timely way."
  • Stricter Clean Air Standards. The Minister of Environment's mandate is to work with provinces and territories to set stronger air quality standards, monitor emissions and provide incentives for clean technology.
  • West Coast Tanker Ban. The Minister of Fisheries' mandate includes formalizing a moratorium on "crude oil" tanker traffic on BC's North Coast (effectively dooming the Enbridge Northern Gateway project). The ban pertains only to "crude oil", seemingly leaving the door open to tankers carrying refined oil "products" and LNG.
  • Review Conservative Changes to the Fisheries Act and Navigable Waters Protection Act. The new Prime Minister has instructed several ministers to "review the previous government's changes to these two Acts, restore lost protections, and incorporate modern safeguards".

4.2 Alberta

Alberta's new government is also ramping up environmental requirements, but to a lesser degree. Two of the most likely NDP government changes pertain to:

  • Directive 74. Following the initiative of the previous Prentice government, the new Notley government intends to replace Directive 74, which has been a key regulatory instrument governing tailing ponds at oilsands operations.
  • Gas Drilling in Urban Areas. The new government has promised to ban gas drilling in urban areas. Notably, this ban will not cover oil as originally proposed in NDP election materials.

5. Financial Policy

Both Ottawa and Alberta intend to use two types of financial instruments to effect environmental change in the oil and gas sector, as discussed below.

5.1 Government Investment in Green/Clean Technology and Infrastructure

As part of their goal to encourage environmentally friendly development, the new federal government is expected to invest $100 million more each year into clean technology producers and $200 million more each year to support the innovation and use of clean technologies in the oil and gas sector. The new government also promised to invest $20 billion over the next 10 years in green infrastructure, and also see such investments as economic development tools.

The new Alberta government is also committing to green technology and infrastructure. For example, it will invest $5 million per year in a new green loan program to support green upgrades to homes and businesses. The new government also intends to generally diversify Alberta's economy by shifting its focus on wind and solar projects, phasing out coal powered electricity generation, and cutting costly carbon capture and storage experiments.

5.2 Royalties and Taxes

A key provincial financial initiative that will affect the energy sector is the royalty review. The Royalty Review Panel, established soon after the new provincial government took power, is scheduled to render its analysis of different scenarios and possible recommendations by the end of 2015.

The federal Canadian Exploration Expense (CEE) tax benefit has for some time allowed corporations to deduct 100% of their expenses incurred for the purpose of determining the existence, location, extent or quality of a mineral resource or an accumulation of petroleum or natural gas in Canada. In addition to the expenses associated with the physical exploration, eligible expenses can include the cost of certain environmental studies and community consultations. CEE has been a fundamental consideration in oilsands development. The Liberal platform criticized CEE as a significant subsidy for the oil and gas sector. If the new government follows up on campaign promises, it would alter CEE as follows: successful exploration results will no longer qualify while the cost of unsuccessful results will still be able to be deducted.

6. Conclusions

Many of the new directions – while perhaps politically attractive – raise complex legal and pragmatic issues. In fact, there appear to be some inherent contradictions that will need careful attention. For example, the seemingly unconditional support by both governments for FPIC will need to considered – and perhaps limited or reconciled – with the far more nuanced judicial principles of Aboriginal law that have evolved over the past decades (caselaw which has generally not embraced a veto power, with the possible exception of proven Aboriginal title lands).

Given the ambitious reform plans discussed above, one may reasonably question if there will be any federal-provincial efforts to coordinate their many needed laws, policies and programs. It is probably too early to predict if and how such coordination might unfold. But early indications, especially on the climate change front, suggest a willingness to work together. Aside from climate change, arguably the next most significant matter that will require coordination is EA.

Both governments will likely need some time to consider the potentially controversial and complex nature of their proposed changes. Not surprisingly, neither government has announced a comprehensive schedule of law reform, but it is reasonable to expect that both will rely heavily on stakeholder consultations. This will be a rare opportunity for broad stakeholder input and advice on what could be a fundamental re-shaping of regulatory law and policy in the oil and gas sector.

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.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions