Canada: Welcome Clarity For Quebec's Oil And Gas Industry: The New Petroleum Resources Act Is Introduced

Mindful not to repeat the mistakes of its predecessors, Premier Couillard's government continues very deliberately to lay down a modern and comprehensive framework for hydrocarbon exploration and production in Quebec.

After many studies and considerable consultation, Energy and Natural Resources Minister Pierre Arcand tabled Bill 106 before the National Assembly on June 7, 2016. Bill 106 (An Act to implement the 2030 Energy Policy and to amend various legislative provisions) does three things:

  1. It creates Transition énergétique Québec ("TEQ"). The mission of TEQ is to prepare an energy transition masterplan and to support, financially and otherwise, energy transition, innovation and efficiency in Quebec.
  2. It adopts measures to increase electric transport and amends the Act respecting the Régie de l'énergie to increase gas pipeline capacity in and to Quebec. In recent years, a couple of very large industrial investments along the St. Lawrence River have had to be shelved for lack of readily available gas pipeline capacity. Quebec wants to avoid a repeat of this unfortunate and embarrassing state of affairs.
  3. Finally, it enacts the Petroleum Resources Act ("PRA"), Quebec's first modern statute dedicated to the development of oil and gas. The PRA is a comprehensive statute with more than 260 sections. It is designed to (i) foster the exploration of hydrocarbons in Quebec, (ii) ensure that any ensuing production is optimal, economically sound, uses best environmental practices, and has local and First Nations acceptance, and (iii) ensure that there are sufficient funds available when the time comes permanently to close wells and restore sites. The following points, relating to the process that Bill 106 would establish, are of particular interest:
  • New exploration licenses will be awarded by auction. Up to now they have been awarded using the "free entry system" in the same manner as mining rights.
  • Current exploration licenses will be recognized under the PRA.
  • An exploration license holder may apply to the Minister of Energy and Natural Resources for a production license.  Such license will be issued if (i) the Régie de l'énergie has issued a favourable decision regarding the application (the content of such application will be set out in regulations but will have at a minimum to describe the project, including its production plan and methodology), and (ii) the Government of Quebec has authorized the applicant's production project pursuant to section 31.5 of the Environment Quality Act. A Section 31.5 authorization may only be granted after completion of a satisfactory environmental assessment. Such assessment may involve public hearings.
  • Entrusting the Régie de l'énergie instead of the Ministry of Energy and Natural Resources with the review of the merits of any production license application has the dual merit of better insulating the approval process from politics and ensuring that government is able to secure, without civil service constraints, the specialized talent required properly to examine and evaluate production license applications. After all, this is a very new field of endeavour for Quebec.

Quebec public opinion: a growing consensus

Concerns have been raised about the PRA and Quebec's "open door" to oil and gas. Critics contend that such a move is inconsistent with Quebec's commitment to transition away from hydrocarbons. Government and business counter that the PRA is congruent with Quebec's recently issued 2030 Energy Policy. The 2030 Energy Policy was well received across the spectrum and is viewed as green and ambitious while at the same time recognizing that (i) oil and gas is Quebec's number one import (the annual import bill fluctuates but is consistently above $10 billion and adds substantially to Quebec's chronic balance of payment deficit), (ii) in 2030 Quebec will require oil and gas to meet 39% of its energy needs, (iii) natural gas can displace dirtier fuels in shipping, trucking and remote northern areas, and (iv) Quebec industry requires oil as a raw material (what has come to be known in Quebec as " social oil").

Also helping to create a consensus in favour of the PRA is the fact that many of the current oil and gas projects are in the Gaspé Peninsula, an economically challenged region in need of jobs. At least one authoritative opinion poll has found that more than 50% of Quebec adults are in favour of local production while fewer than 25% want to continue to rely on imports for all of the province's oil and gas needs.

Where Bill 106 goes from here: the legislative process

Parliamentary commission hearings on Bill 106 have been scheduled for August 16-19, 2016 so as to allow early adoption during the National Assembly's Fall session. 

Regulations are unlikely to be published before adoption of Bill 106. These regulations, at least as they pertain to the PRA, promise to be comprehensive.

Other recent developments

The lack of a modern regulatory framework has not stopped Quebec from moving forward on oil and gas. Pétrolia Inc. announced on June 16, 2016 that Ressources Québec, a subsidiary of state-owned Investissement Québec, had invested $8.5 million in its Bourque Project located near Murdochville in the Gaspé Peninsula.  Other work continues elsewhere in Quebec, including oil production testing.

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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