Significant Amendments Announced to the Accord Acts

Significant Amendments Announced to the Accord Acts

July 18, 2023

The Governments of Canada and Newfoundland and Labrador have announced the most significant amendments to the Atlantic Accord legislation since 1987, introducing new regulatory powers over offshore renewable projects and changing elements of the regulation of offshore petroleum interests, that may have long term implications for the industry.

Bill C-49

In late May, Canada announced and had First Reading in the House of Commons of Bill C-49, legislation to amend the federal Newfoundland and Labrador and the Nova Scotia Atlantic Accord implementation acts (each province has its own mirror version of these acts, but the required mirror amendments have not yet been announced). The introduction of these amendments by Canda follows through on commitments first announced in April 2022 to expand the mandates of the Canada – Newfoundland and Labrador and Canada – Nova Scotia Offshore Petroleum Boards to include new offshore renewable energy projects (primarily at this point envisaged to be offshore wind projects).

The primary purpose of the proposed amendments is the expansion of the Boards’ authority over offshore renewable activities (in addition to renaming the Boards as “Energy Regulators”). However, Bill C-49 also contains some of the most significant amendments to the petroleum regulatory regime since the Accord Acts were originally passed in 1987.

New Offshore Renewable Energy Regime

With respect to the offshore renewable regime, Bill C-49 introduces the concept of the “submerged land license” – a license to be granted for offshore renewal energy projects. It sets out the process to establish the terms and conditions of a license, as well as the issuance process by the Energy Regulators. It also expands the areas of the existing Accord Acts relating to the regulation and approval of operational activities, the liability for royalties, occupational health and safety, and a number of other areas to cover offshore renewable regimes as well. These additions and amendments are significant, and will take some time to work through in practice, but they largely mirror the existing petroleum-related provisions – meaning the new regime has the benefit of being closely based on a legislative structure with 35 years of operational history.

This proposed expansion in Bill C-49 of the Energy Regulator’s jurisdiction to regulate offshore renewable energy projects is good news both for the industry and the Provinces. The industry will get the benefit of regulators who know and understand the issues, the environment, and the supplier community involved in offshore industrial activity, with comprehensive, sophisticated and tested regulatory regimes. The Provinces will enjoy the confirmation of the joint management regimes established at their respective boards, as opposed to unilateral federal government regulatory control.

However, perhaps as a result of there being no underlying Accord relating to offshore renewable activities, or the newness of the entire industry, the Energy Regulators’ powers relating to offshore renewable resources will be somewhat less than the existing ones for offshore petroleum resources. While the Energy Regulators will be making recommendations to the federal and provincial ministers in a number of areas on offshore renewables, such as the issuance of “submerged land licenses”, the ministers have final approval and require agreement between them to approve. In similar areas relating to petroleum activities, the Board currently makes its own decisions as opposed to recommendations, and the decisions are binding unless expressly objected to by the ministers within certain periods. The Energy Regulators will retain this authority respecting petroleum authority.

Amendments to Offshore Petroleum Regime

The amendments to the petroleum-related provisions of the Accord Acts are more specific, but no less significant. Bill C-49 proposes to amend provisions that have not changed since 1987 and to introduce entirely new concepts as well:

  • New significant discovery licenses will have a term of 25 years, a material change to a system which previously provided that significant discovery licenses did not expire. Existing SDL’s will not be affected. This will introduce new urgency to any development prospects for discovered fields, which does not exist for the existing SDL’s.
  • Canada will have the power to declare a portion of the offshore to be “an area for environmental or wildlife conservation or protection”, and upon doing so 1) no further license interests are to be issued for the area, and 2) no further petroleum activity or offshore renewable activity can be undertaken by interest holders in the area. Bill C-49 sets out a new regime to provide compensation for existing license holders in an area subject to such a designation. This represents an integration of the CNLOPB jurisdiction and petroleum interests with the federal powers relating to offshore reserves and other conservation areas, appearing to reconcile competing interests and activities which have not been synchronized in recent years. The compensation process will answer some questions for existing interest holders, but the prospect of having areas declared protected areas and licenses effectively cancelled after they have been granted and acquired will likely not advance the attractiveness of the Atlantic Canada offshore areas for exploration for either petroleum or offshore renewables.
  • Regulations may now be drafted providing for third party access to existing offshore infrastructure, for the purpose of “storing, processing, and transporting petroleum”. Requiring third party access to infrastructure and the rates to be charged for such infrastructure has the potential to create additional satellite field developments in the offshore around existing infrastructure. This move regulates an area which has to date been viewed as a voluntary commercial issue by the owners of this infrastructure, which one would expect will likely be controversial.
  • Rules governing trans-boundary fields have been established for the first time, in part dealing with the potentiality of a petroleum development encroaching on the maritime borders with Saint-Pierre and Miquelon.
  • The authority has been clarified for the Energy Regulators to deal with abandoned facilities and infrastructure in the offshore area. This has not been an issue in this jurisdiction to date, but has been an issue in other offshore areas on the ends of fields, and provides the Energy Regulators with another means to deal with these issues in addition to existing powers.
  • The overall offshore legislation will go from being the Canada–Newfoundland and Labrador Atlantic Accord Implementation Act, not an example of legislative brevity itself, to being renamed the Canada–Newfoundland and Labrador Atlantic Accord Implementation and Offshore Renewable Energy Management Act.

Marking the Border of The “Offshore Area” in Newfoundland and Labrador

Finally, as the time of the joint announcement between Canada and the Government of Newfoundland and Labrador, reference was made to Canada and the Province working on an MOU relating to the definition of the inward boundary of the “offshore area”. Historically, the Newfoundland and Labrador and Nova Scotia versions of the Accord Acts differed in their approach to where the jurisdiction of the offshore boards started. The Newfoundland and Labrador definition simply says it starts at the “those submarine areas lying seaward of the low water mark of the Province”. The Nova Scotia definition has always been much more developed, going in detail to identify areas of the Nova Scotia coast where inland bays and waterways lay within the “jaws of land”, and are defined as not being within the offshore area. The “jaws of land” is an old concept in the defining of marine boundaries, where if a coastal body of water can be identified as being within or largely surrounded by land, the low water mark for purposes of defining jurisdiction and the low water mark does not chase the margins of this body of water, but instead is determined by drawing a line across the entrance to the body, across the “jaws of land”, and the body itself is then considered to be within the land for jurisdiction purposes.

The existing approach for the Newfoundland and Labrador definition of the “offshore area” leaves this work to be done; historically this has not been necessary, as petroleum activity has generally been far offshore and not engaged issues of this boundary. The announcement of the MOU discussion implies that the Province views this as being an issue which it now wants determined. This is likely for the benefit of wind energy projects, as it would permit the Province to have exclusive regulatory authority over some very near shore developments in certain areas that meet the “jaws of land” test.  This would have the advantage of not having to engage the CNLOER’s jurisdiction but would also permit faster development in the short term as it would permit projects to go ahead without waiting for the Bill C-49 and provincial legislative processes to move forward.

Next Steps

The next step will be to see if Bill C-49 encounters requirements for amendments when it is debated in the House of Commons and Senate, and to await the introduction of the mirror amendment legislation in the provinces.

 

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