Legal Update: NB's Oil & Gas Industry Subject to New "Rules"

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Legal Update: NB’s Oil & Gas Industry Subject to New “Rules”

March 7, 2013

By Jeffery Callaghan, at McInnes Cooper

On February 15, 2013 the N.B. Government released “Responsible Environmental Management of Oil and Natural Gas Activities in New Brunswick – Rules for Industry,” governing the activities and facilities of oil and gas companies on both privately and publicly owned lands in N.B. Purporting to be a “one stop shopping” framework for oil and gas activities in N.B., the Rules are broad in both scope and requirements. However, they are not the final word on oil and gas regulation in N.B.: there are a number of outstanding “action items”, and the Province intends to monitor and re-evaluate them over the next two years.

Oil and gas companies currently operating in N.B. or planning future work in N.B. will need to plan and conduct all activities in accordance with these Rules; failure to do so could ultimately delay or even jeopardize the future of a project.

Background

The Rules are based on the Province’s May 2012 proposed 116 “recommendations” for managing the oil and gas industry, and the province wide public consultation and input process that followed the release of these recommendations. Click here to read Dr. Louis LaPierre’s October 2012 report “The Path Forward” summarizing and considering the public input.

“One Stop Shopping” Framework

The Rules purport to be a “one-stop shopping” framework for oil and gas companies planning for, or already conducting activities in, N.B. The Rules are thus broad in scope and requirements:

Public & Private Lands. The Rules apply to all oil and gas activities and facilities on both privately and provincially owned land.

Application. The Province says the Rules “are not intended to apply retroactively to oil and gas facilities that have already been approved and constructed”. Despite this, they will inform how some existing regulatory requirements will now apply to oil and gas activities.

Implementation. The Rules are not in the form of statute or regulation, so do not have “force of law” alone. However, the Province intends to implement them as conditions to approvals and certificates issued under existing regulatory frameworks. Presumably, therefore, proponents will need to satisfy the Rules that relate to required permits and approvals in order for those permits and approvals to be issued and maintained. For example, sections 1.2-1.5 of the Rules set out requirements relating to the drilling of shot holes performed as part of seismic work. Presumably, proponents must implement and follow those requirements as part of the Geophysical License and Geophysical Permit issued pursuant to Regulation 86-191 under the Oil and Natural Gas Act.

Exploration to Extraction. The Rules set requirements on a comprehensive list of activities, from the exploratory stage, such as seismic work, through to the extraction stage, namely the development and operation of oil and gas wells and the transportation of product.

Requirements. The nature of the requirements set out in the Rules is as varied as the activities to which they relate. The categories of requirements the Rules cover include the following:

Specifying technical requirements, including design and process specifications, for conducting activities and constructing infrastructure (e.g., prescribing the required concrete strength for well casing);

Submission and content of plans for proposed work (e.g., security and emergency response plan for operating a well pad); and

Ongoing reporting requirements as operations are carried out (e.g., monthly reporting on the source and use of water for hydraulic stimulation).

Focus on Environment. The primary focus of the Rules is the management of environmental issues related to oil and gas exploration and development activities. Particular areas of focus include the following:

use of water and the prevention of contamination of water sources;

integrity of well development and construction, particularly those wells to be subjected to hydraulic stimulation; and

release of air emissions and contaminations.

The Public. The Rules also place considerable emphasis on public and community based concerns, including landowner rights, noise levels, vehicular traffic and on-going public consultation by oil and gas companies.

Click here to read the “Responsible Environmental Management of Oil and Natural Gas Activities in New Brunswick – Rules for Industry”.

Not the Final Word on N.B. Regulation

The Province says it recognizes developing rules for the responsible environmental management of oil and gas activities in N.B. is “not a one-time activity”. Although the Rules are comprehensive, there are key items they do not address but which the Province has identified as action items, including:

Revenue sharing;

Guidelines for lease agreements; and

Enabling “phased review” under Environment Impact Assessment Regulations.

The Province says the Rules will be in place for at least two years; it will then re-evaluate them. The Province indicates it plans to monitor the effectiveness of the Rules over the next two years, and long-term plans for developing and regulating the natural gas industry in the Province may impact the Rules. The Province intends to describe these long term plans in an “Oil and Gas Blueprint,” set to be released in the spring of 2013. Click here to read the Province’s News Release about the Oil and Gas Blueprint.

Immediate Impact of Rules

Understanding the new regulatory landscape will be essential for companies in assessing the viability of operations in New Brunswick. Oil and gas proponents – both those currently operating in N.B., and those considering doing so – must plan for the integration of the Rules with N.B.’s existing regulatory frameworks in order that they remain in good standing with provincial regulators. Failure to understand, plan for, and implement necessary submissions, specifications, and processes in accordance with the new regulatory landscape will impact the timely issuance and maintenance of necessary permits and approvals: rejected or cancelled permits may cause significant delays, financial over-runs, and depending on circumstances may jeopardize the future of a project.

Please contact your McInnes Cooper lawyer or any member of our McInnes Cooper Energy & Natural Resources Team to discuss this topic or any other legal issue.

McInnes Cooper has prepared this document for information only; it is not intended to be legal advice. You should consult McInnes Cooper about your unique circumstances before acting on this information. McInnes Cooper excludes all liability for anything contained in this document and any use you make of it.

© McInnes Cooper, 2013. All rights reserved. McInnes Cooper owns the copyright in this document. You may reproduce and distribute this document in its entirety as long as you do not alter the form or the content and you give McInnes Cooper credit for it. You must obtain McInnes Cooper’s consent for any other form of reproduction or distribution. Click here to request our consent.

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