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North America's Source for Oil and Gas News
February 2002

Vol. 7, No. 7 Week of February 17, 2002

Canada ready to lift moratorium on British Columbia offshore

Petroleum News Alaska Staff

The Canadian government, in a surprising move, has offered to negotiate the removal of its 30-year ban on oil and gas exploration of British Columbia’s offshore, but got an equally surprising low-key response from the province and industry.

Natural Resources Minister Herb Dhaliwal, less than a month after being named to the energy portfolio, said Feb. 11 he would be open to development of the potentially prolific Queen Charlotte Basin.

“If the province feels it wants to lift its own moratorium on offshore drilling, then it can request that the federal government do the same,” he said. “Once B.C. makes that request, we’ll do the consultations.”

Federal policy change

That was a clear retreat from the long-standing federal policy of opposing offshore activity and put Dhaliwal at odds with Environment Minister David Anderson. Both ministers represent British Columbia constituencies in the Canadian Parliament.

Preliminary estimates by the Geological Survey of Canada put recoverable reserves in the area at 10 billion barrels of oil and 26 trillion cubic feet of gas, although others have rated the gas potential at 43 trillion cubic feet and calculated the returns at C$3 billion annually in direct production revenue and C$15 billion in total downstream benefits. The federal ban was imposed in 1972 on crude oil tankers travelling through Dixon Entrance, Hecate Strait and Queen Charlotte Sound from Valdez. A later federal order prohibited drilling for an indefinite period.

British Columbia extended the moratorium in 1982 with its own ban that included the Strait of Georgia between Vancouver Island and the mainland and Juan de Fuca Strait between the southern tip of Vancouver Island and the U.S. mainland.

The Exxon Valdez oil spill in 1989 only strengthened environmental opposition to offshore exploration and development.

Shortly after its election last May, the new Liberal government in British Columbia rejected proposals for a series of public meetings to assess opinion on the future of the offshore.

B.C. Energy Minister Richard Neufeld said the province did not have the patience for another 18 months of public consultation, insisting his government would move on the issue in an “expedited fashion.”

While welcoming the first sign of a federal government willingness to review the bans, Neufeld said there would be no discussions until his government completes its review of the region.

The key is the report, expected to be released this month, from a government-appointed scientific panel that is trying to determine whether oil and gas resources can be extracted in a way that is scientifically sound and environmentally responsible.

Even if those findings are positive, British Columbia will continue to move cautiously. Neufeld said. “The quickest way to kill any aspects of our offshore oil and gas exploration is to do things quickly,” he said.

Petro-Canada, one of three major leaseholders in the basin, along with Shell Canada Ltd. and Chevron Canada Resources, would have no interest in pouring millions of dollars into its 6 million acres until the controversial issue of offshore development had been resolved by British Columbians, a spokesman said.

To that end, he said, Petro-Canada had set three prerequisites: All aboriginal land claims must be settled; all ecologically sensitive areas in the region must be identified and set aside; and an integrated federal-provincial regulatory regime must be in place.

Similarly, Pierre Alvarez, president of the Canadian Association of Petroleum Producers, whose member companies represent more than 90 percent of Canada’s oil and gas output, said the industry is eager to access the offshore, but will stay at arm’s length from the issue until the bans are lifted. However, he has noted that the petroleum industry has considerable scope to expand its activities in British Columbia, where it employs about 35,000 workers and generates C$1.7 billion in provincial revenues.

Don Scott, mayor of Prince Rupert, said his community is hoping for a positive report from the government scientific panel.

“I would look forward to both governments saying they’ll lift the moratoriums but, even if they do, it’ll be a long time before any drilling is done,” he told the Vancouver Province.

“I’m also hoping the First Nations and the provincial and federal governments will be able to come to some sort of accord on offshore exploration so that things can move ahead.”

But the divisions over the offshore remain deeply entrenched.

The David Suzuki Foundation , Sierra Club and Western Canada Wilderness Committee worry that drilling, producing and transporting oil from the region will put the environment, a profitable seafood industry, marine life and coastal communities at risk.

They have hinted that ending the bans could result in a series of legal actions.

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