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Canadian Activity Seen Rising as Regulator Commits to Efficiency, Access

As stronger natural gas prices rekindled industry activity in Canada's chief supply province, its overhauled development watchdog vowed Thursday to enable improved access to production targets.

After a busier than expected spring, the Canadian Association of Oilwell Drilling Contractors raised its 2014 activity forecast to 11,494 wells, up 6% from 2013 and an 8% improvement on its previous forecast for this year.

At the same time, the Alberta Energy Regulator (AER) celebrated its first birthday as the enlarged successor to the provincial Energy Resources Conservation Board (ERCB) by zeroing in on a glaring example of inefficiency among its expanded responsibilities.

As a single supervising agency for all aspects of gas, oil, coal and oilsands development, the AER inherited authority over a longstanding source of friction: control over industry access to public or Crown lands, which are nearly two-thirds of Texas-sized Alberta.

A review of provincial government files turned up a backlog of 5,300 applications that were missing official decision targets by miles, the AER disclosed in a new mid-year annual report. Simple files with 20-day decision goals took 56 days to process. More complex cases, with 30-day completion deadlines, took 300 days.

Companies seeking access to provincial public lands are helping by identifying their top-10 priority targets. The AER is replacing archaic procedures with an ERCB screen that separates applications into non-routine and routine classifications.

With help from a purpose-made information technology program, the efficiency screen identifies non-routine applications for close and extended staff attention with a risk assessment. The dragnet automatically zeroes in on drilling or production of "sour" reserves laced with lethal hydrogen-sulphide, projects using new technology, contested proposals, and companies that accumulate poor records when visited by AER's roving squads of more than 100 field inspectors.

With a staff of about 1,200, one-third larger than the old ERCB's 900, the AER expects to deal with more than 60,000 applications this year for approval of activities from seismic exploration surveys to abandonments of exhausted wells and discarded processing sites.

Production of bitumen and light oil are both on the rise. High prices are driving expansion of both northern oilsands extraction and use of horizontal drilling and hydraulic fracturing (fracking) across Alberta.

Gas output, despite a drilling slump brought on by poor prices in 2012 and 2013, has held up at about 3.4 Tcf per year and is being sustained as a byproduct of fracking, bitumen operations and strict rules against wasteful flaring or venting with a pedigree dating back to the ERCB's birth in 1938.

At the national level, industry and government planners received clarification for some aspects of a murky legal minefield in Canada: Aboriginal rights, especially in British Columbia, an emerging hot spot for horizontal drilling, fracking, pipeline projects and proposals for liquefied natural gas export schemes.

The Supreme Court of Canada, in a landmark ruling on a case that escalated from a regional BC dispute over a 1983 provincial logging license, provided guidance for responding to Aboriginal land claims and influence on industrial projects.

In granting a claim to 1,700 square kilometers (680 square miles) of northern BC to Tsihgot'in First Nation -- or 40% of its demand for 4,400 square kilometers (1,760 square miles) -- the court laid out a native version of the old saying that possession is nine-tenths of the law.

For Aboriginal societies, the ruling said, evidence of pre-European contact settlements such as identifiable towns and farming districts are not necessary to establish territorial claims. Canadian law recognizes the roving nature of hunter-gatherer groups and can award title based on frequency of occupation, continuity of use and defense against intrusion by other native groups.

On areas established as belonging to them under modern law, Aboriginal groups must be consulted and accommodated when federal or provincial agencies or legislation make decisions on development that affects them, the court affirmed. The level of consultation or consent required depends on the extent and nature of interference with native territory, the court added, upholding a long line of Canadian court decisions.

Excited Tsihgot'in leaders, celebrating their land award on Canada's national television networks, immediately claimed the decision foreshadows state-within-a-state power for Aboriginal communities to veto industrial development.

Grand Chief Stewart Phillip called the ruling "absolutely electrifying," He said, "We're moving away from the world of mere consultation into a world of consent. And that is absolutely enormous when one considers...a whole multitude of major resource projects [especially in BC]." Chief Bernie Elkins added, "If you're talking about mining, oil and gas, you'd better have First Nations in the boardroom."

Lawyers and constitutional experts were much less impressed. Readers who pored over the full 81-page ruling pointed to a prominent piece of advice towards the end, where the court raised the question: What projects could be legally justifiable intrusions on Aboriginal terrain?

The answer, said the unanimous ruling by the eight-member high court, is suggested by another landmark Canadian Supreme Court precedent, which was also set by a BC case. Developments that can take priority over Aboriginal claims, or at least equal them, are underlined by the new ruling's citation, are numerous, and do not exclude pipelines.

"Aboriginal societies exist within, and are a part of, a broader social, political and economic community," the acknowledged ruling precedent said.

"The development of agriculture, forestry, mining, and hydroelectric power, the general economic development of the interior of British Columbia, protection of the environment or endangered species, the building of infrastructure and the settlement of foreign populations to support those aims, are the kinds of objectives that...in principle, can justify the infringement of Aboriginal title," said the precedent. The outcome of disputes, in practice, will be "ultimately a question of fact that will have to be examined on a case-by-case basis."

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