The regulatory framework that sets the stage for doing business in the Canadian energy industry is multifaceted. This summary highlights some of the key legal considerations when engaging in Canadian oil and gas project development and investment.
There are three primary areas of focus for oil and gas development in Canada: (i) conventional and unconventional project developments in the provinces of Alberta, British Columbia and Saskatchewan; (ii) projects in northern Canada; and (iii) offshore projects along Canada’s east coast. Each area has a different legislative landscape and may require a variety of regulatory and environmental approvals from both federal and provincial authorities. Moreover, oil and gas project developments often require consultation with aboriginal groups, thereby adding another layer to the regulatory approval process.
Constitutionally, Canadian provincial governments have the authority to regulate the development of natural resources. As a result, the provinces prescribe royalty rates for energy developments. However, federal and provincial governments share jurisdiction over the environment, which means that energy projects may require multiple regulatory approvals and assessments.
National Energy Board
The primary federal energy regulatory body in Canada is the National Energy Board (NEB). Inter-provincial and international pipelines, international power lines, and energy imports and exports are all regulated by the NEB. Furthermore, the NEB regulates offshore oil and gas developments in the Northwest Territories, Yukon, Nunavut, and other offshore areas prescribed by the Canada Oil and Gas Operations Act. The NEB also regulates oil and gas activities in frontier lands (including those located in the Northwest Territories and Nunavut) pursuant to the Canada Petroleum Resources Act.
Federal Environmental Legislation
Certain energy projects will also trigger the application of other federal legislation, including the Fisheries Act, the Migratory Birds Convention Act, 1994, the Species at Risk Act and the Navigable Waters Protection Act. As a result, the timelines for obtaining all necessary federal regulatory approvals are project-specific.
Canadian Environmental Assessment Act
In some instances, energy projects may require a federal environmental assessment under the Canadian Environmental Assessment Act (CEAA). The timeline for CEAA assessments varies from project to project and may involve public hearings in some circumstances.
Each province and territory maintains its own regulatory regime for oil and gas developments.
The Ministry of Energy is responsible for overseeing the oil and gas regulatory regime in Alberta in accordance with the Mines and Minerals Act, the Oil and Gas Conservation Act and the Gas Resources Preservation Act. Most large-scale energy projects also require an assessment pursuant to the Alberta Environmental Protection and Enhancement Act (EPEA). Further, many energy projects, including oil sands projects, will also require approvals under other provincial legislation such as the Environmental Protection and Enhancement Act or the Water Act. Oil and gas projects may also be subject to the Alberta Land Stewardship Act, which requires activities to comply with Land-Use Frameworks (LUF). There are currently seven LUF planning regions in Alberta.
Currently, the Energy Resources Conservation Board (ERCB) and Alberta Utilities Commission are the primary energy regulators in Alberta, and are responsible for upstream energy development, intra-provincial electricity transmission and pipeline projects, and local utility matters. However, new legislation is expected to establish a single integrated energy resource regulator which may alter the regulatory framework for project developments.
In British Columbia, the Oil and Gas Commission oversees oil and gas exploration, development, pipeline transportation and reclamation activities. The Oil and Gas Activities Act sets out the regulatory framework for oil and gas activities in British Columbia, including shale gas, which has recently seen a significant increase in development and interest. Under the British Columbia Environmental Assessment Act (EAA), oil and gas development proposals that exceed thresholds set out by the Reviewable Projects Regulation are subject to an assessment and require certification before the project may proceed.
Together with the federal government, Alberta and British Columbia have agreed to a cooperative environmental assessment process if assessments are required under the CEAA and either Alberta’s EPEA or British Columbia’s EAA.
The Ministry of Energy and Resources provides oversight for oil and gas project developments in Saskatchewan pursuant to the Department of Energy and Mines Act and the Oil and Gas Conservation Act. At the request of the Minister of Environment, an environmental assessment, pursuant to the Environmental Assessment Act, may be required before environmentally sensitive oil and gas development projects may proceed.
Northern Canada Approvals
As specified above, the NEB has regulatory authority over oil and gas activities and operating licences in the Northwest Territories, Nunavut and specific offshore areas. Under the Canada Petroleum Resources Act, the Department of Indian Affairs and Northern Development issues exploration, production and significant discovery licences. Certain oil and gas development activities may also require approval from the Department of Fisheries and Oceans, the Canadian Environmental Assessment Agency, or other federal departments.
While the Yukon government is responsible for onshore oil and gas development, the federal government retains responsibility and authority for offshore oil and gas developments.
Offshore East Coast Approvals
Unlike development in other provinces, east coast offshore oil and gas development is jointly regulated by the governments of Newfoundland and Labrador and Nova Scotia together with the federal government. The Canada-Newfoundland and Labrador Offshore Petroleum Board and the Canada-Nova Scotia Offshore Petroleum Board, under accord agreements between the federal and provincial governments, hold regulatory authority over offshore oil and gas activities. Depending on the oil and gas development activity, other federal legislation may also apply, such as the CEAA, the Fisheries Act and the Canadian Environmental Protection Act.
Aboriginal issues may play a significant role in the oil and gas project development lifecycle in Canada. The federal and provincial governments have a duty to consult with, and potentially accommodate, aboriginal groups if aboriginal or treaty rights may be adversely affected by energy project developments. This responsibility is generally delegated to project developers. Project developers may also need to provide funds to enable the aboriginal community to review and participate in the consultation and review process.
Climate Change and Emissions Trading
Greenhouse gas (GHG) and air emissions may be regulated by both the federal and provincial governments. Currently, the federal government intends to align its GHG regulatory policy with the yet to be announced GHG policies and reduction targets of the United States. As a result, legislation has not been enacted to regulate GHGs on a federal level.
Although most provinces have enacted legislation addressing GHG reporting, currently, Alberta is the only province to have enacted mandatory GHG emissions reductions. Under the Alberta Climate Change and Emissions Management Act, specific facilities must reduce GHG emissions intensity by 12 percent below baseline levels. Legislation is expected from members of the Western Climate Initiative (British Columbia, Manitoba, Ontario and Québec) to establish a cap-and-trade system by 2012 with the goal of reducing GHG emissions to 15 percent below 2005 levels by 2020. The provinces of Québec and British Columbia have also enacted carbon taxes to reduce GHGs.
While Canada is a resource leader with numerous oil and gas project developments and investment opportunities, its unique and nuanced regulatory landscape needs to be efficiently navigated to ensure success and satisfaction with particular oil and gas project developments and investments.
Bennett Jones Energy (Oil & Gas) Group
The Energy (Oil & Gas) Group at Bennett Jones has decades of first-class experience and regularly assists clients as they navigate complex energy project developments, mergers and acquisitions, foreign exploration and international investment opportunities in Canada and around the world. With a global presence in virtually every energy industry segment, including oil and gas, electricity (both conventional and renewable), power projects, mining and renewable fuels, our group is poised to provide the necessary support and expertise to help our clients achieve their desired business outcomes.