Officials in New Brunswick unveiled a list of more than 100 recommended changes to the province’s regulatory framework for oil and natural gas on Thursday, including tougher casing and cementing standards, increased water protections and substantially higher royalties.

Natural Resources Minister Bruce Northrup said the 116 recommendations contained in a discussion paper, Responsible Environmental Management of Oil and Gas Activities in New Brunswick, “would make our existing regulations even stronger and would ensure we are prepared if the industry expands in our province.”

The recommendations came from the Natural Gas Group, a triumvirate formed by the province’s Environment, Energy and Natural Resources departments. Those departments’ ministers and deputy ministers, meeting as the Natural Gas Steering Committee, unveiled another set of rules last June (see Shale Daily, June 24, 2011).

“Our government is committed to maintaining responsible resource development and we look forward to receiving constructive feedback on these recommendations from New Brunswickers,” Northrup said.

If all of the recommendations are enacted, New Brunswick’s Oil and Natural Gas Act (ONGA) would require that operators conduct geological and pressure testing at well sites before hydraulic fracturing (fracking) can be performed. Operators would also need to meet tougher casing and cementing standards, use “closed loop” systems for fracking fluids, closed containers for flowback, and file a waste management plan with regulators.

On water related issues, operators would be required to test the quality of nearby drinking water wells both before and after seismic testing, and before and after actual drilling. A series of new requirements would also be enacted on setbacks, wetlands, water use planning and surface and ground water monitoring.

“We want to ensure we do everything possible to protect our environment and the people of New Brunswick when it comes to the potential expansion of the oil and gas industry,” Environment and Local Government Minister Bruce Fitch said.

The triumvirate recommended that the province maintain its current royalty rate of 10% for natural gas, but suggested enacting a 40% “economic profit royalty,” which would be based on the profits earned on any resource investment.

“The current 10% royalty ensures a minimum payment to the province but, on its own, does not capture the true value of the resource as prices increase,” Northrup said. “Adding an economic profit component ensures that the province would maximize revenue as prices increase or as projects mature.”

Northrup added that he would introduce legislation apart from the triumvirate’s recommendations to increase the penalties that can be levied against oil and gas companies that violate ONGA. Under the current regulatory structure, most fines are between C$640 and C$10,400. Northrup said the maximum penalty under his proposal would be C$1 million.

“Some of these recommendations don’t need to become law, the cabinet ministers can change them just like that,” Marc Belliveau, spokesman for Natural Gas Group, told NGI’s Shale Daily on Friday. “But some of the changes, especially the administrative penalties, have to go through the legislature in the fall.”

Belliveau said New Brunswick would hold nine public hearings on the triumvirate’s proposals by June, with implementation of the tougher rules to follow by the fall. He said the dates, times and locations of the public hearings were still being worked out.

Although development of the province’s Frederick Brook Shale is in the very early stages, last month Windsor Energy Corp. was granted a five-year lease to explore and develop oil and natural gas resources (see Shale Daily, April 23).

With production in the province still in its infancy, it comes as no surprise that New Brunswick has accounted for well below 1% of total Canadian marketed natural gas production each year since 2003 (see chart).