Overview
The Minister of Industry, Tourism and Investment is proposing two Bills which would amend the Petroleum Resources Act and the Oil and Gas Operations Act.
These changes are first-step amendments towards a longer-term look at the NWT’s oil and gas legislation.
This is not an overhaul — it is the work that needs to be done to address the NWT’s immediate needs, and ensure the NWT is ready to responsibly benefit from petroleum development in the near-future.
Purpose of the Legislative Initiative
The proposed amendments to the Petroleum Resources Act and the Oil and Gas Operations Act are designed to:
- Resolve existing administrative and technical issues in order to create a more consistent, efficient and predictable regulatory environment;
- Enhance transparency and public accountability throughout the Petroleum Resources Act and the Oil and Gas Operations Act;
- Ensure the legislation reflects current risks, best practices and standards;
- Minimize operational challenges in the administration of oil and gas rights; and
- Increase our competitiveness comparative to other jurisdictions and promote increased investment in NWT oil and gas exploration and production.
Background on Developing the Amendments
In setting its 2016-2019 Mandate for the 18th Legislative Assembly, the GNWT committed to developing and proposing amendments to the NWT’s existing oil and gas legislation. The Department of Industry, Tourism and Investment considered the NWT’s existing legislative framework and industry practices, in relation to those of other provinces and territories, and jurisdictions to see how they might work in the NWT’s unique operating environment.
To get input from residents, roughly two months of public and stakeholder engagement were held from March through May of 2018. The goal was to find out what Indigenous governments and organizations, NWT residents, industry, non-governmental organizations, and all other stakeholders think about the proposed legislative changes, in order to inform the legislative process.
Through seven community visits, meetings with Indigenous governments and organizations, industry, and non-governmental organizations, an online engagement platform, emails, phone calls, faxes, and letters, the Department received hundreds of comments which were considered in policy development.
The Department worked closely with Indigenous governments through the Intergovernmental Council (IGC) throughout the policy development process. A Technical Advisory Panel was also established, which included Indigenous governments who were both members and non-members of the IGC.
This feedback and research has been translated into several amendments to both the Petroleum Resources Act and the Oil and Gas Operations Act.
How Do These Changes Fit With Other Rules and Agreements?
The proposed changes to the NWT’s petroleum laws do not suggest replacing legislation or agreements already in place.
What is being proposed are several amendments to the Petroleum Resources Act and Oil and Gas Operations Act which can be broken into three categories:
- Administrative and Technical improvements
- Transparency and Public Accountability
- Significant Discoveries
Important Terms to Understand
Oil and gas is a complex field with tough terminology. Here are some important concepts to understand within our petroleum legislation in plain language:
The Minister
This means the Minister who is assigned as being responsible for different tasks under the Petroleum Resources Act and the Oil and Gas Operations Act.
Today, that would be the Minister of Industry, Tourism and Investment.
The Regulator
This is a person assigned responsibility for regulating oil and gas operations in the NWT under the Petroleum Resources Act and the Oil and Gas Operations Act. The primary purpose of the Regulator is ensuring human safety, environmental protection and the conservation of oil and gas resources.
There are two Regulators under the Petroleum Resources Act and the Oil and Gas Operations Act.
The Minister of Justice (the GNWT Regulator) is the Regulator currently responsible for the onshore NWT, with the exception of the Inuvialuit Settlement Region and federal lands such as the Norman Wells Proven Area.
The Office of the Regulator of Oil and Gas Operations (OROGO) provides expert analysis and advice and operational support to the GNWT Regulator. OROGO’s responsibilities include application reviews, regulation of seismic and drilling operations, and emergency response and investigation.
The National Energy Board (NEB) is the Regulator responsible for regulating oil and gas activities in the onshore portion of the Inuvialuit Settlement Region under the Petroleum Resources Act and the Oil and Gas Operations Act. The NEB is also responsible for the offshore NWT and federal lands such as the Norman Wells Proven Area under the federal Canada Petroleum Resources Act and the Canada Oil and Gas Operations Act.
OROGO has produced a document entitled “Regulation of Oil and Gas Activity in the Northwest Territories” that shows the area that each Regulator is responsible for.
It is important to note, quite often under the legislation, decisions are made not by the Minister but by the Regulator.
Petroleum Lands
In the NWT, lands in control of the GNWT where oil and gas resources are present and being explored for are referred to as “petroleum lands.” On these lands, the GNWT owns the oil and gas. This means that the GNWT can make laws governing the exploration, development, and production of oil and gas resources in these areas.
Territorial Reserve Lands
In the NWT, petroleum lands where no petroleum exploration activity is taking place are referred to as “Territorial reserve lands.”
Declarations
A declaration is a decision made by the Regulator verifying whether there is sufficient evidence to support a company’s claim about the petroleum resources on lands they have explored.
Declarations provide the basis for the Minister’s decision to issue certain types of interests.
For instance, a significant discovery declaration must be issued by the Regulator before a significant discovery licence can be issued by the Minister. A commercial discovery declaration can provide the basis for the Minister’s decision to issue a production licence.
Significant Discovery Declaration
This declaration occurs once the Regulator has completed a resource assessment, which may include a hearing with a company who has claimed to have made a significant discovery, and made a decision based on the analysis of a team of experts. If the Regulator believes there is enough petroleum to potentially allow for sustained production, the Regulator will make a significant discovery declaration.
Commercial Discovery Declaration
A commercial discovery declaration is made when the Regulator assesses and agrees with a company’s application stating the petroleum deposit for which they hold a significant discovery licence contains petroleum reserves that justify the investment of capital and effort to bring the discovery to production.
Interests
Holding an interest provides a company with the right to explore for or produce oil and gas in a particular tract of petroleum land. Interests are issued by the Minister. There are three different types of interests identified in the NWT: exploration licences, significant discovery licences and production licences.
Exploration Licences
An exploration licence gives a company the right to explore for oil and gas in the area of the interest. The company with the exploration licence is the only one that can drill and test in the area of the interest. It is also the only one that can turn its interest into a production licence in order to develop the land to produce oil and gas.
An exploration licence can last up to nine years. A well must be drilled within the first five years for the licence to last the full nine year period. If the company has not found oil or gas in that time, the company’s interest disappears and the land reverts back to Territorial reserve land.
Significant Discovery Licences
If a company proves that there is enough petroleum in a part of its interest to potentially allow for continued production over many years (called a significant discovery), the company can apply to have that part of the interest changed from an exploration licence into a significant discovery licence.
Currently, a significant discovery licence gives the same rights as an exploration licence, but a company retains the right to explore and develop the resource for as long as the significant discovery declaration remains in force without any obligation to undertake any work to advance towards production.
Changes to that unlimited term are an important subject of this legislative review.
Production Licences
If a company proves that there is enough oil or gas in a part of its interest to make it worth the investment needed to produce for sale, which is known as a commercial discovery, it can turn that part of the interest from an exploration or significant discovery licence into a production licence.
A production licence gives the company the right to produce petroleum on that land for 25 years. If the company is still producing at the end of 25 years, the production licence automatically continues. If not, the land reverts back to Territorial reserve land. However, if the Minister thinks that the company will start producing on the land again, the Minister can decide to allow the licence to continue.