Bill C-69 – A Slightly Unfinished Work in the Newfoundland and Labrador Offshore

October 18, 2019

Background

Bill C-69 was passed by the Parliament of Canada in June 2019.[1] It was omnibus legislation, a package of both new legislation and amendments to existing legislation. One of the objectives of Bill C-69 was a complete overhaul of the environmental assessment of large resource projects in Canada. It was, and continues to be, a topic of significant discussion in Canada. Throughout 2018 and 2019, it generated contentious public and political debate, which resulted in a protracted legislative process. This included a Senate committee holding hearings across the country to hear presentations from parties on all sides of the debate. The Senate eventually proposed over 180 amendments, only some of which were accepted by the federal government.

Bill C-69 was proclaimed into law on 29 August 2019. However, the discussion has not ended with the proclamation of the legislation. The recent federal election campaign included at least one major party which committed to the repeal of the legislation, and debate continues as the legislation goes into operation.

Provisions of Concern for NL

A review of the concerns expressed nationally on all sides of the debate on Bill C-69 is well beyond this discussion. However, in addition to the general concerns expressed by resource industries and environmental organizations, there were provisions of Bill C-69 which were of specific concern in the Newfoundland and Labrador offshore oil and gas industry. A primary concern expressed was the proposed treatment of exploratory drilling activity.

The offshore sector’s difficulties with the environmental assessment of exploratory drilling did not originate with Bill C-69. Its predecessor legislation, the Canada Environmental Assessment Act, 2012 (CEAA 2012), introduced a number of changes which fundamentally restructured the environmental assessment of exploratory drilling activities from a system which had existed for decades. To that point, environmental assessments of exploratory drilling programs had been conducted by the Canada-Newfoundland and Labrador Offshore Petroleum Board (CNLOPB), under its authority under the Accord Acts. With CEAA 2012, exploratory drilling programs were added to the list of “designated projects”, putting it at a level of review equivalent to offshore development projects. Also, the CNLOPB was removed as a responsible authority to conduct such assessments, meaning the environmental assessment of exploratory drilling projects in the offshore moved to the Canadian Environmental Assessment Agency (now the Impact Assessment Agency).

These changes resulted in a significant increase in the timeframe for such assessments. A report presented to the Senate by the Newfoundland and Labrador Oil and Gas Industries Association (Noia) demonstrated that assessments which had previously averaged 386 days were taking up to 900 days under CEAA 2012. Noia also demonstrated that such assessments for exploratory drilling in other prominent international jurisdictions took significantly less time. The result, it argued, was a competitive disadvantage for the Newfoundland and Labrador offshore in an international market for petroleum exploration investment.

Proposed Review Panel Process

Bill C-69 proposed a further change to how environmental (now impact) assessments for designated projects such as exploratory drilling were to be carried out. One change was that such assessments would mandatorily be submitted to a review panel.

Bill C-69 included a new Impact Assessment Act, which upon proclamation entirely repealed and replaced CEAA 2012. It establishes the review panel as the highest level of potential review of a proposed project. The review panel process provides that instead of the assessment being conducted by the Impact Assessment Agency, the assessment is referred to a specially-appointed panel. This panel of one or more independent persons is appointed with a terms of reference as set by the Agency, with the requirement to hold hearings and produce a report on the proposed project. This report is then provided to the federal Minister of the Environment for a decision as to whether the proposed project can proceed or not, and what conditions may be imposed if it is to proceed.

The federal Minister has the discretion to send any assessment process to a review panel, if the Minister believes it would be in the public interest. However, under the Impact Assessment Act, certain assessments were automatically required to be sent to a review panel. This includes “designated projects” involving activities regulated by certain agencies.

At this point, a quirk of the drafting of Bill C-69 becomes relevant. The Impact Assessment Act included in Bill C-69 did not include activities regulated by the CNLOPB in the scope of “designated projects” that had to automatically be referred to a review panel. However, Bill C-69 also included a separate amendment to the Impact Assessment Act, which included provisions specifically dealing with offshore petroleum developments in Newfoundland and Labrador. It added any “designated projects” involving activities regulated by the CNLOPB to the list of matters automatically required to go to a review panel. It also included a bundle of CNLOPB-specific provisions regarding the operation of such a review panel. They included a requirement that the terms of reference of a review panel had to be established in consultation with the CNLOPB, and that a review panel of at least five persons had to be appointed in these cases, with at least two persons appointed from a roster of people established by the CNLOPB.[2]

The result was that exploratory drilling programs, as a “designated project” involving activities regulated by the CNLOPB, would be automatically required to receive assessment through a review panel. Noia and the Government of Newfoundland and Labrador both presented to the Senate on this issue, arguing that exploratory drilling should be removed entirely from the “designated project” list. Even if it were not, they argued the mandatory review panel provision should not apply to exploration projects, for fear it would exacerbate the timing issues, given that the default timeframe for such a review process is 300 days, but can be extended to 600 days, or longer if determined necessary.

Review Process Not Yet Mandatory

It turns out that this will remain a hypothetical issue for the near future, at least in part. Proclamation of Bill C-69 on 29 August 2019 did not include the proclamation of the amendments to the Impact Assessment Act discussed above, which made a review panel mandatory for any activities regulated by the CNLOPB – these provisions were specifically excluded from the scope of the proclamation. These provisions are not in force, and no date has been set for their proclamation.

The implications of this are that until proclamation of these provisions occurs, exploratory drilling proposals filed with the Impact Assessment Agency are not mandatorily required to be assessed by a review panel. This might be greeted by relief of those in the industry who may be contemplating the filing of a project proposal with the Impact Assessment Agency. However, that relief should be tempered, as overall the situation may not necessarily be an improvement for the industry.

The Impact Assessment Act was proclaimed, and exploratory drilling programs are still “designated projects”. This means the assessment for any exploratory drilling program may still be sent to a review panel as an exercise of the Ministerial discretion, where the Minister believes such action is in the public interest. If this were to occur, the irony is that the failure to proclaim the additional CNLOPB-specific provisions means the CNLOPB cannot rely upon the benefit of the guaranteed participation and representation these provisions provided on such review panels. Without these statutory provisions being proclaimed, in the event the Minister moved to a review panel on his or her own discretion, it would also be up to that Minister to determine where and to what extent these un-proclaimed CNLOPB-specific provisions will be respected and implemented.

The result is that notwithstanding Bill C-69 now being proclaimed, uncertainty respecting its application in the Newfoundland and Labrador offshore continues.

[1] An Act to enact the Impact Assessment Act and the Canadian Energy Regulator Act, to amend the Navigation Protection Act and to make consequential amendments to other Acts, S.C. 2019 c.28.

[2] This Act to Amend the Impact Assessment Act included specific similar provisions applicable to the Newfoundland and Labrador and Nova Scotia offshores, and the CNLOPB and Canada Nova Scotia Offshore Petroleum Board.

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