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NWT wants to catch breath Territorial government won’t set timetable for onshore policy, legislative changes, until it can assess what improvements needed Gary Park For Petroleum News
Having finally gained control over its onshore oil and natural gas resources, the Northwest Territories government needs time to “take a deep breath” before tackling any changes to its policy and legislative base, despite clamoring by the industry for a more streamlined regulatory approval process, Industry, Tourism and Investment Minister David Ramsay said.
“We’re going to give ourselves a little bit of time to grow into our new responsibilities,” he told Petroleum News.
The NWT’s current priority is to “ensure that there is as seamless a transition as possible” following the formal transfer of authority on April 1 from the Canadian government, concluding years of negotiations.
Ramsay said the legislation that resulted in the handover of power allows the NWT to “hit the ground running. Whether we can make further improvements remains to be seen.”
Within the NWT, Ramsay is the regulator of onshore oil and gas activity, but his department will work with the Department of Environment and Natural Resources and a newly created Department of Lands, which has authority over water management, will work together to achieve an “integrated approach to resource development.”
‘Smaller, nimbler government’ He said the NWT has the built-in advantage of being a “much smaller, nimbler government and much more able than the somewhat more cumbersome bureaucracy of the federal government to respond to things as they come up.”
Well aware of the dissatisfaction within the oil and gas industry over the layers of review faced by companies seeking exploration permits, Ramsay said the NWT is committed to “listening to all interested parties as we move forward. We fully intend to work with every stakeholder.
“We’re having those discussions and we will put our best efforts into having the best system we can,” he said.
But he made no apologies for taking time to consider changes to the NWT’s legislative regime after the “tremendous amount of efforts we put into just getting to April 1.”
Industry concern Within the industry, however, there is deep concern over the obstacles that companies have to clear just to reach the starting point for exploration.
Those are compounded by offshore operations, which will remain under federal control for the foreseeable future.
Both onshore and offshore, Arctic Canada is getting caught in the same pincers that are being applied to plans for oil and natural gas exploration and development in southern regions.
For the Beaufort Sea and Baffin Island the squeeze is being felt by upstream companies as they seek permission to start exploration, while the Canol oil shale in the Central Mackenzie Valley, CMV, of the NWT is shaping up as a tipping point for resource operations in the onshore.
In the Beaufort, a partnership of Imperial Oil, ExxonMobil and BP and a standalone venture by Chevron Canada are carrying combined work commitments of C$2 billion in exploration licenses.
Even under the most favorable regulatory conditions, drilling programs would be unlikely to start before 2020, while the challenges facing the CMV are also daunting.
Resistance to Beaufort plans Drilling plans for the Beaufort are encountering resistance from local governments, aboriginal communities and environmentalists who want more rigorous exploration rules to cover the handling of blowouts and water access rights.
Imperial spokesman Pius Rolheiser conceded to Petroleum News last year that the Beaufort partnership views its license holding as “potentially prospective for exploration, but it has a high degree of exploration uncertainty and has significant challenges.”
For now the joint venture has only started the formal regulatory review process which it hopes to complete in 2016.
If that hurdle is cleared, the focus shifts to a corporate sanctioning decision that would open the way to securing a floating drill system to work in water depths of about 5,000 feet and target subsea zones of 12,500 feet to 22,300 feet.
The next two years require a public environmental hearing, authorizations for drilling, agreement on jobs and training for Canadians and northerners and the dredging and installation of facilities in Tuktoyaktuk Harbor, about 110 miles southeast of the likely drilling sites.
But, as the industry partners move forward they are encountering signs of opposition like those overriding projects such as oil sands development, well fracturing for gas exploration and pipeline routes that are needed to support exports of oil sands bitumen and LNG.
Application seen as test case
Louie Porta, science and policy adviser with Oceans North Canada, rated the Beaufort application as a test case that will establish a template for other exploration programs.
He said regulatory decisions for the Imperial-led plans to stop a blowout and restrict the release of crude will be crucial for subsequent proposals.
Porta told the Canadian Press it is illogical to suggest that prevention technologies represent a “meaningful response when things go wrong” and establish a dangerous precedent as Canada considers how to conduct safe drilling in the Arctic.
Oceans North Canada is part of a campaign led by the Pew Charitable Trusts that is also pressing for safeguards in the U.S. and Greenland Arctic waters to ensure energy projects are executed in the public’s best interest and conserve natural resources, marine life and the well-being of indigenous residents who rely on the region’s natural wealth.
The organization sent letters to Canadian Prime Minister Stephen Harper and the National Energy Board in September 2011 laying out an 11-step policy reform process that includes an evaluation of each stage of the current licensing and regulatory process and the adoption of “innovative regulatory leadership, world-class operator spill response standards and additional consultation with Inuit and northern residents.”
It urged the NEB to announce a “sweeping regulatory reform program and inform industry that it will not entertain applications for offshore drilling in the Arctic until its completion.”
Close scrutiny by Inuvialuit The Beaufort plan is undergoing close scrutiny by the Inuvialuit, which have a land claim and self-government agreement covering the northwest corner of the NWT.
Nellie Cournoyea, chair and chief executive officer of the Inuvialuit Regional Corp. and a former NWT premier, said the Beaufort poses a different challenge than the offshore, where benefits are “much easier to grab a hold of and the risks are less” while the infrastructure costs are much greater.
She said her people want more information on how a blowout in the Beaufort would be handled.
Meanwhile, the NEB is dealing with an application by an industry consortium to conduct seismic tests off Baffin Island in the High Arctic this summer.
Heated community opposition prompted the Canadian government to order a strategic environmental assessment to identify what, if any, sections of the Baffin eastern coast could be opened up to exploration.
The Baffin municipality of Clyde River said it fears seismic testing would disturb marine mammal migrations and endanger the livelihoods of hunters and trappers.
Aboriginal Affairs and Northern Development Canada said that even if the NEB allows seismic work there is no guarantee that the waters would be opened up to drilling, noting that the environmental assessment will recommend to the federal cabinet minister “where and when” activities should be permitted.
Porta welcomed the handling of exploration in the eastern Arctic, crediting the Canadian government with acting “up front” with what areas might be available for exploration and how a royalty package would benefit the Inuit.
Hopes for streamlining For the Canol oil shale in the Central Mackenzie Valley, CMV, which has been touted as northern Canada’s answer to the Bakken, industry hopes are pinned on what steps the NWT can take to streamline what Ken Hansen, a project manager for Husky Energy, has bluntly called an “absurd process.”
In March he told a conference sponsored by CI Energy Group that Husky needed more than a year just to prepare an application for a four-well program that will be reviewed by 40 agencies and has so far cost the company C$160 million.
Hansen emphasized that the application involves only exploration and is not even at the point where Husky knows whether it can produce oil in commercial quantities.
In the CMV, MGM Energy has been forced to abandon an application for a horizontal well license and, unable to carry the financial load of an indefinite wait for drilling approvals, is now on the verge of being reabsorbed by its parent company Paramount Resources.
Shell opted out of a partnership with MGM after deciding the costs and delays could not be justified when the proposal was referred to an environmental assessment, which MGM argued should not be required at the exploration stage.
John Hogg, MGM’s vice president of exploration and operations, told the CI conference there should be a “clear path forward” and an end to the continuous changes that are introduced several years into the planning phase.
He said MGM had assembled more than 1,000 pages for its project description, listing the chemicals that would be used in exploration and what steps would be taken to protect the land and subsurface. That document was faced with a review by more than 25 NWT and federal agencies.
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