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Providing coverage of Alaska and northern Canada's oil and gas industry
October 2007

Vol. 12, No. 43 Week of October 28, 2007

Prentice clearing regulatory jungle

Canada industry minister says will establish Major Projects Office, unravel regulatory tangle that has impeded resource projects

Gary Park

For Petroleum News

Canada Industry Minister Jim Prentice says he will deliver where others have failed and unravel the regulatory tangle that has choked off major resource and mining projects.

He said the federal government will establish a Major Projects Office to streamline and improve the way it processes and regulates projects which he described as the “economic drivers” that require federal jurisdiction.

The list could include initiatives in the North or major oil and gas ventures that are linked to Canadian environmental protection legislation.

Prentice, who is the cabinet point man on the Mackenzie Gas Project, said his proposed changes speak to the challenges and frustrations “that project proponents are experiencing with regulatory difficulties in our country.”

“Major projects are being suffocated by overlapping regulation and competitive jurisdiction even among government departments.”

Industry execs know problems

Those concerns got an airing at a mid-October geoscience conference in Banff, Alberta, especially from industry executives who are well acquainted with the problems of advancing oil and gas development in Arctic and other frontier regions.

Murray Todd, president and chief executive officer of Canada Hibernia Holding Corp., a federal agency that owns 8.5 percent of the Hibernia oil project offshore Newfoundland, said tapping into the oil and gas prospects of Canada’s North is blocked by regulatory and political, not technical hurdles.

Todd, who was involved in the 1970s exploration push in the Beaufort Sea as president of Canmar Drilling (the drilling contractor for Dome Petroleum), said there was enough exploration success during that wave of activity to justify further drilling.

He said the industry now has the technology needed to operate year-round within the offshore transition ice zone and can use specially-designed ships and oil tankers in the Arctic, regardless of global warming.

Todd suggested that marine transportation might free the Mackenzie Gas Project from its regulatory obstacles by shrinking the list of issues.

Exploration license problem?

Michel Scott, a Devon Canada vice president whose northern experience stretches back to 1973 and, more recently, has included MGP pipeline negotiations and his company’s own exploration program in the Beaufort, questioned the adequacy of Canada’s northern Exploration Licenses.

Those approvals require a well to be drilled within five years to extend the term by another four years.

But obtaining a permit for its C$60 million Paktoa C-60 well involved Devon Canada in a three-year process.

Scott said the initial five-year period of the Exploration License was a “very short timeframe when the infrastructure is not in place.”

“As lands are taken up further north in the Beaufort Sea, in deeper ice-infested waters, this may become more of an issue,” he said.

He also said that dealing with the various federal, territorial and local regulatory bodies on “linear” projects such as the Mackenzie pipeline makes the regulatory process complex and costly.

“I’m not advocating that local voices not be heard, but we need to balance local and national needs,” Scott said.

”We, as a country, very much need to reform and rethink the whole regulatory process, otherwise (the north) may never realize its potential.”

When the first Mackenzie pipeline project was launched in the 1970s, the National Energy Board had the jurisdiction to hear all concerns, whether local, regional, or national, and the power to make decisions in the national public interest, Scott said.

He welcomed the federal government’s recognition of the problems stemming from the current “complex web” and its apparent willingness to tackle the problems.

MGM Energy Chief Executive Officer Henry Sykes identified three obstacles to northern exploration: Low natural gas prices, high costs and the regulatory regime.

Confident about the long-term outlook for gas prices and the role of innovation in lowering costs, he was critical of the regulatory overlap between local boards and federal departments and the uncertainty over who was responsible for specific approvals.






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