OIL AND GAS AND
PIPELINE LAW
CML 1105I
MARCH 9, 2013
Overview
• Regulation of oil and gas development in
(Alberta, Ontario, Federal)
• Licencing of construction and operation of
pipelines (Federal)
• Mackenzie Gas Project, Enbridge Northern
Gateway and Keystone XL pipelines
Jurisdiction over Oil and Gas
Development
Oil and Gas Development (Alberta)
• Provinces - primary jurisdiction: s. 92,
92A authority, resources ownership
• Energy Resources Conservation Board
is key regulator (quasi-judicial)
– regulates all upstream oil and gas activity
throughout project lifecycle
– issues well, facility and pipeline licences, in
situ bitumen recovery scheme approvals
– undertakes compliance assurance
– oversees abandonment of facilities
Oil and Gas Development Steps
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Oil, Gas and Bitumen Exploration
Acquire Mineral Rights (by auction)
Environmental Impact Assessment
Acquire Land Access (by negotiation)
Determine Government Plans, Policies
and Guidelines for Places
• Application for Construction (ERCB)
• Consultation/Notification (Aboriginal
rights)
Oil and Gas Development
• Why free entry for mineral rights,
negotiated land access rights for oil and
gas?
Oil Sands Development
• Federal government has engaged in
regulatory process for oil sands mines (Kearl,
Joslyn, Jackpine, Pierre River) through joint
panel reviews under CEAA
• Federal EAs triggered by Fisheries Act,
Navigable Waters Protection Act
• Federal government not engaged in
approvals of in situ oil sands projects (usually
no adverse effects on fish habitat)
• Are recent federal law changes designed to
get the feds out of the oil sands?
Oil and Gas Development (Ontario)
• Yes, Ontario does produce conventional
oil and gas (limited production, falling)
• Oil, Gas and Salt Resources Act
– Minister of Natural Resources regulates
petroleum resources, including exploration,
drilling, production of oil and natural gas
• Shale gas development opportunities
• Do Ontario, Quebec, New Brunswick
have institutions in place to regulate
shale gas development?
Shale Gas Reserves
North America
Shale Gas Development (Ontario)
Shale Gas Reserves (Ontario)
Federal Jurisdiction over
Oil and Gas Development
• National Energy Board
– Interprovincial, international pipelines
– Offshore oil and gas (B.C., Arctic,
Hudson’s Bay, Gulf of St. Lawrence
– NWT, Nunavut
• Canada-Newfoundland Offshore
Petroleum Board – NL offshore
• Canada-Nova Scotia Offshore
Petroleum Board - NS Offshore
Canada Newfoundland Labrador
Offshore Petroleum Board
• Created in 1986 through Atlantic Accord to
regulate offshore oil and gas
• Role “facilitate the exploration for and
development of the hydrocarbon resources in
the Newfoundland and Labrador Offshore Area
in a manner that conforms to the statutory
provisions for: worker safety; environmental
protection and safety; effective management of
land tenure; maximum hydrocarbon recovery
and value; and Canada/Newfoundland &
Labrador benefits”
Canada Newfoundland Labrador
Offshore Petroleum Board
• Dual role to facilitate development of offshore oil
and gas as well as regulate it? Does this make
sense? (NEB is a regulator only)
• NEB regulates offshore oil and gas development
in Quebec, NB and PEI waters
• Environmental/fishing groups seeking
moratorium on oil and gas development in Gulf
of St. Lawrence (“enclosed sea” reasoning)
• Old Harry would be first offshore oil and gas
project in Gulf
Old Harry Offshore Oil Project
Old Harry Offshore Oil Project
• Corridor Resources proposes to develop Old
Harry in Newfoundland waters
• Old Harry 80 km from Magdalen Islands,
Quebec, also close to NS, PEI and NB waters
• C-NLOPB is preparing strategic environmental
assessment for release in April 2013
• Project EA for Corridor Resources proposed
drilling program on the Old Harry Prospect also
underway by C-NLOPB
• Minister Kent turned down C-NLOPB request for
panel review
Pipeline Regulation
• Regulation of interprovincial and interprovincial and offshore pipelines (National
Energy Board)
– Mackenzie Gas Project (Imperial Oil, Shell)
– Northern Gateway Pipeline (Enbridge)
• Pipelines completely within borders of a
province regulated provincially
• Regulation of international pipelines (U.S.)
– Keystone XL Pipeline (TransCanada)
National Energy Board
Interprovincial/international pipelines are
subject to the National Energy Board Act:
52. (1) If the Board is of the opinion that an application
for a certificate . . . is complete, it shall prepare and
submit to the Minister, and make public, a report setting
out (a) its recommendation as to whether or not the
certificate should be issued . . . taking into account
whether the pipeline is and will be required by the
present and future public convenience and necessity,
and the reasons for that recommendation; and
(b) . . . all the terms and conditions that it considers
necessary or desirable in the public interest . . .
National Energy Board
52. (2) In making its recommendation, the Board
shall have regard to all considerations that appear to
it to be directly related to the pipeline and to be
relevant, and may have regard to the following:
(a) the availability of oil, gas or any other commodity
to the pipeline;
(b) the existence of markets, actual or potential;
(c) the economic feasibility of the pipeline;
(d) the financial responsibility and financial structure
of the applicant . . . ; and
(e) any public interest that in the Board’s opinion
may be affected by the issuance of the certificate or
the dismissal of the application.
National Energy Board
52. (3) If the application relates to a designated
project within the meaning of section 2 of the
Canadian Environmental Assessment Act, 2012, the
report must also set out the Board’s environmental
assessment prepared under that Act in respect of
that project
Note: Public oral or written hearings are held for
pipeline construction applications exceeding 40 km
or at discretion of NEB
National Energy Board
54. (1) After the Board has submitted its report .
. . the Governor in Council may, by order,
(a) direct the Board to issue a certificate in
respect of the pipeline or any part of it and to
make the certificate subject to the terms and
conditions set out in the report; or
(b) direct the Board to dismiss the application
for a certificate.
Notes on Changes to National
Energy Board
• Prior to 2012 legislative changes, NEB issued
s.52 certificates subject to approval of GIC
• Prior to 2012 changes, GIC could not
approve a project that NEB had rejected
• NEB now makes recommendations to GIC
only on S. 52 certificates
• Can it still be considered a quasi-judicial
body?
Mackenzie
Gas Project
Pipeline
Route
Mackenzie Valley Pipeline
• Proposed natural gas pipeline from
Beaufort Sea to northern Alberta
along Mackenzie Valley,
connecting to Prudhoe Bay along
Yukon North Slope
• Canada issues Pipeline Guidelines
in 1970, 1972
• Berger Inquiry established by order
in council in 1974, reported in 1977
Mackenzie Valley Pipeline Inquiry
Order in Council – Authorities
f
• Similar to inquiries under Inquiries Act
• Summon witnesses and examine
under oath
• Compel production of documents
• Adopt practices and procedures in his
discretion
• Engage technical advisors, counsel
Mackenzie Valley Pipeline Inquiry
Order in Council – Mandate
f
“inquire into and report upon the terms and
conditions that should be imposed in
respect of any right-of-way . . . for the
purposes of the proposed Mackenzie
Valley Pipeline having regard to (a) the
social, environmental and economic impact
regionally, of the construction, operation
and subsequent abandonment of the
proposed pipeline in the Yukon and
Northwest Territories . . .
Mackenzie Valley Pipeline Inquiry
Key Features
f
• “(T)his inquiry is not just about a gas
pipeline; it relates to the whole future of the
North”
• Addressed a wide range of issues not just
biophysical impacts
• Held preliminary hearings seeking input on
process and scope
• Travelled to all 35 communities to hear
evidence from residents in own languages
Mackenzie Valley Pipeline Inquiry
Key Features
• Held quasi-judicial hearings with counsel to
hear and test evidence
• Established a board of government
technical experts -- Pipeline Application
Assessment Board
• Established independent Environmental
Protection Board (scientists, engineers)
• Addressed Project’s cumulative effects
• NEB/Cabinet approved recommendations
f
Mackenzie Valley Pipeline Inquiry
Summary
• Public participation matters
• Local residents have important knowledge
to offer
• Canada must settle aboriginal claims in
northern Canada (Inuvialuit, Dene, Inuit,
Yukon First Nations)
• Balance “Northern Frontier” against
“Northern Homeland”
• Set the stage for federal environmental
assessment processes for decades
f
Mackenzie Gas Project
• Largest industrial development ever in North Expected cost: CDN$15 billion
• 1300 km natural gas transmission pipeline from
Inuvik to northwest Alberta (54 million m³/day)
• 650 km natural gas liquids pipeline from
Mackenzie Delta to Norman Wells
• Three production fields in Mackenzie Delta (164
billion m³ natural gas)
• Project led by Imperial Oil, with equity partners
Exxon Mobil, Shell Canada, Conoco-Phillips
Environmental Assessment /
Regulatory Process
• Process initiated in 2003
• Environmental Impact Statement: August 2004
• Two sets of overlapping hearings: Joint Review
Panel and National Energy Board 2006 – 2010
• National Energy Board hearings 2006 – 2010
(approved October 2010) Cabinet approved
NEB certificate March 2011
• Other regulatory approvals not issued
• Project not proceeding (low price of natural gas,
high costs of Mackenzie gas)
Enbridge Northern Gateway Pipeline
Enbridge Gateway Pipeline
• Two parallel 1,177 km pipelines between
Bruderheim Alberta and Kitimat marine
terminal (oil sands oil/natural gas liquids)
• Cost C$5.5 billion
• Marine terminal two platforms (Very Large
Crude Carriers, Suezmax NGL tankers
• Project scoped to include tanker shipping
within Douglas Channel, but not in Hecate
Strait, Pacific Ocean
Enbridge Northern Gateway Pipeline
• S. 52 NEB Certificate required plus
Fisheries Act authorizations
• Joint Panel Review established to meet
NEB and CEAA requirements
• First hearings held in January 2012,
ongoing
Enbridge Northern Gateway Pipeline
• Enbridge offering aboriginal groups within
80 kilometers a 10% equity stake
• No First Nation with land directly traversed
has signed on
• Crown/JRP not met duty to consult,
respect Aboriginal rights/title (Haisla,
Gitga'at, Gitxaala, Wet'suwet’en, Nadleh
Whut'en, Nak'azdli, Takla Lake)
• Right to free, prior and informed consent?
Enbridge Northern Gateway Pipeline
• BC threatened to hold up project unless
financial benefits provided to province
• What constitutional authority does BC
have to legislate or take measures to
delay/stop Northern Gateway?
Keystone XL Pipeline
Keystone XL Pipeline
• Keystone XL Pipeline (Canadian section)
approved by NEB in 2009
• Keystone XL Pipeline (U.S. section) requires:
– Presidential permit
– Bureau of Land Management permits for
operation/construction
– Certificates of piping siting in states
• Federal law pre-empts pipeline laws of states
Keystone XL Pipeline
• Presidential Permit based on 1968 Executive
Order, revised in 2004
• State Department delegated to issue permits
with respect to “construction . . . at the borders
of the United States, of: (i) pipelines . . . for the
exportation or importation of petroleum . . . to or
from another country . . .” and to determine if the
project is in the “national interest”
Keystone XL Pipeline
• Presidential Permit not issued pursuant to
statutory authority rather from “President’s
inherent powers to legislate foreign affairs”
• Permit is an “action” under National
Environmental Policy Act so environmental
impact statement required to be issued
• State issued EIS in April 2010, found to be
inadequate
• Final EIS reissued in August 2011
Keystone XL Pipeline
• Presidential Permit not issued pursuant to
statutory authority rather from “President’s
inherent powers to legislate foreign affairs”
• Permit is an “action” under National
Environmental Policy Act so environmental
impact statement required to be issued
• State issued EIS in April 2010, found to be
inadequate
• Final EIS reissued in August 2011, but Nebraska
proposed route changes
Keystone XL Pipeline
• State Department recommended that Permit be
denied in January 2012 as not in the national
interest
• State Department reissued EIS in March 2013
asserting no significant adverse effects
• EIS argues that Keystone XL would not trigger
increases in oil production from oil sands, thus
wouldn’t increase oil sands GHG emissions
• Does this make sense? Perhaps only if one
assumes that Canada has other transportation
options to other markets
Toward a Low-carbon Economy?
• Decreases in GHG emissions of up to 80% in
developing countries such as Canada required
to avoid dangerous climate change (IPCC)
• Growth in GHG emissions from oil sands
expected to be greater than all GHG emissions
decreases in rest of economy combined
• What are the regulatory options to reduce GHG
emissions from oil sands?
• If Keystone XL stopped, isn’t U.S. assisting
Canada meet GHG targets by reducing growth
in GHG emissions from oil sands?