Becoming Arctic-Ready

8/4/2019 Becoming Arctic-Ready

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omingtic-Ready

Policy Recommendations or Reorming Canad

Approach to Licensing and Regulating Oshore

Oil and Gas in the Arctic

BecoaRc

September 2011


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The Pew Environment Group is the conservation arm o The Pew Charitable Trusts,

a nongovernmental organization that works globally to establish pragmatic,

science-based policies that protect our oceans, preserve our wildlands and promote

clean energy. .PeEnnmen.

Oceans North Canada is a project o the Pew Environment Groups

International Arctic Program, working to protect lie in the Arctic.

AUTHORS

Le P is the Arctic science and policy analyst or Oceans North Canada.

He has worked as a sheries biologist or the ederal-Inuvialuit Fisheries Joint

Management Committee, Department o Fisheries and Oceans, and the Mikmaq

Conederacy o Prince Edward Island. His expertise includes community-based

sheries, Arctic marine mammals, ecosystem monitoring and management, and

environmental assessment o hydrocarbon development activities. Porta led theWestern Arctic Beluga Monitoring Program in the Canadian Beauort rom 2008 to

2010 and co-developed and implemented the marine mammal observer program

in the same area, which mitigates the eects o seismic sound on cetaceans. Porta

helped develop the rst marine protected area in the Canadian Arctic, Tarium

Niryutait. Porta also helped acilitate and was an author o the rst integrated

sheries management plan in the Western Arctic.

Proessor Nel Bnkes has been with the University o Calgarys Faculty o Law

since 1984 and holds the chair o natural resources law. His work ocuses on carbon

capture and storage, indigenous property rights in settler states in the circumpolar

Arctic, and legal instruments or instream fow protection in Alberta. He is the ormer

editor o the Journal o Energy and Natural Resources Law. He is also a ormer

chair o the Canadian Arctic Resources Committee, a Canadian nongovernmental

organization, and has advised governments, indigenous organizations and industry

organizations.

P, L. n Bnkes, N. 2011. Becoming Arctic-Ready: Policy Recommendations or Reorming Canadas Approach

to Licensing and Regulating Oshore Oil and Gas in the Arctic.

Photo Credits: Trevor Taylor (front cover), Claus Vogel (back cover).

SUGGESTED CITATION


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Inuit Nunaatthe Inuit homeland in the circumpolar Arcticis experiencing change

at unprecedented rates and with imperectly understood impacts.

Three orces, in particular, are driving much Arctic policymaking and decision

making in the region:

nGlobal and regional climate shit, reducing Arctic ice coverage and obstacles to humanactivity, including marine navigation and resource exploration and exploitation.

nThe belie that the Arctic contains much o the worlds untapped hydrocarbons and

other minerals.

nAn increasingly condent and central Inuit voice, invoking and applying emerging

international human rights standards and domestic constitutional guarantees in relation

to indigenous peoples, to insist that Inuit are necessary participants and partners in

determining the uture o the Arctic in every sphere and at every level.

A key contemporary illustration o the intimate relationships among these orces is

the set o positions adopted by Inuit leaders in 2011,A Circumpolar Inuit Declaration on

Resource Development Principles in Inuit Nunaat.Inuit, like others, are aware o what is at stake in the Arctic with respect to resource

development in all its dimensions and phases. The potential risksenvironmental,

economic and socialare enormous. And so are the potential benets. This is true or all

orms o major resource development. For oil and gas development in marine areas, the

potential risks and benets are amplied and compounded.

There are those who avour an aggressive and rapid rate o resource development in

the Arctic, and those who avour a much more cautious approach. There are those who

would want to prohibit altogether, or postpone indenitely, certain types or approaches

to development. Dierent camps o opinion exist both within and outside the Inuit world.

That is to be expected. The politics o Arctic development have always been lively. They

will become livelier still.

Whatever variations exist in starting-point perceptions as to the best policymakingand decision making or the Arctic, we need broad consensus on two things: Policymaking

and decision making must be as inormed as possible, and as transparent and accountable

as possible. In both these respects, Inuit, other Canadians and the larger international

community must be grateul to the Pew Environment Group and its Oceans North Canada

campaign or launching its major initiative into Arctic Ocean issues.

In the wake o the BP blowout in the Gul o Mexico, and in the ace o some major

choices or Canada with respect to oil and gas development in the Beauort Sea and

Mackenzie Delta, this particular piece o research and analysis by Pews Oceans North

Canada Becoming Arctic-Ready: Policy Recommendations or Reorming Canadas

Approach to Licensing and Regulating Arctic Oil and Gasis both apt and timely. We need

policies and decisions that are both principled and pragmatic. High-quality research and

analysis such as this is a precondition to achieving those objectives.

I recommend this report to all who are interested in the Arctic and who seek a sound,

responsible and equitable path or its governance and development.

Mary Simon

President, Inuit Tapiriit Kanatami

M Smn is president o InuiTapiriit Kanatami, the nationalorganization representingInuit rom Nunavut, Nunavik inNorthern Quebec, Nunatsiavut

in Labrador and the Inuvialuitregion o the NorthwestTerritories.

In the late 1970s, Simon wasrst vice president and thenpresident o the NorthernQuebec Inuit Association the organization responsibleor implementing theJames Bay and NorthernQuebec Agreement, the rstcomprehensive Inuit landclaims agreement in Canada.

Simon was one o the seniorInuit negotiators during theCanadian constitutionaldiscussions o the early 1980s,which led to the recognitiono Aboriginal rights in theConstitution Act, 1982, as wellas subsequent constitutionaldiscussions, including theCharlottetown Accord.

She went on to serve on theexecutive council o the Inuit

Circumpolar Conerence(ICC, now Inuit CircumpolarCouncil), the international bodyrepresenting Inuit rom CanadaGreenland, Alaska and Russia.She was elected president othe ICC in 1986 and servedtwo terms. She served briefyas a member o the NunavutImplementation Commission in1993 and was policy co-directoo the Royal Commission onAboriginal Peoples.

From 1994 to 2003, Simonwas Canadas Ambassador orCircumpolar Aairs, becomingthe rst Inuk to hold anambassadorial position. Shewas the principal architect oCanadas northern policy andhelped negotiate the creationo an eight-country council,now known as the ArcticCouncil.

FOREWORD

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EXECUTIVE SUMMARY

C

anada is on the verge o approving the rst deepwater oil and gas drilling in its Arcticwaters. The rst exploration wells on a geological structure are the riskiest part ooshore oil and gas development because o the chance o catastrophic blowouts like

the Deepwater Horizon in the Gul o Mexico in 2010. Yet Canada has not implemented manyimportant recommendations made in 1990 by a review board that examined a shallow-wateroil drilling proposal in the Arctic. Major gaps identied at that time included an inability tocontain and clean up a major oil spill in the Arctics icy, remote waters; assessing potentialliability; and consulting Inuit about proposed oshore oil development in areas that are ocritical importance to them.

The National Energy Board (NEB) is scheduled to conclude its Public Review o ArcticSaety and Environmental Oshore Drilling Requirements in December 2011. The publicreview was set up in part to consider proposals to weaken its same-season relie well rule,Canadas strongest protection against a catastrophic oil blowout continuing all winter underthe ice beore it can be stopped. In the wake o the Gul o Mexico oil spill last year, the review

was broadened to assess other Arctic oshore drilling requirements.However, the NEB oversees only part o the process. Indian and Northern Aairs Canada(INAC) decides which areas o the Arctic Ocean will be open to oil and gas development andgrants licences or exploration and production. Despite a request by Inuit leaders or a haltto new licensing ater the Gul oil spill in order to review how to proceed responsibly withhydrocarbon development, the department issued three oshore Arctic oil licences in 2010and 2011.

Becoming Arctic-Readyanalyzes Canadas regulatory and licensing ramework or oshoreoil and gas in the Arcticnding signicant gaps at each o the ve stages o hydrocarbondevelopmentand makes 11 specic recommendations or government, including:

nEngage in meaningul consultation with Inuit groups at key stages o the process, rom

participation in early environmental assessments to decisions about oil-spill preparednessand royalty sharing.

nRequire strategic environmental assessment o a proposed licensing area in the Arctic Oceanbeore calling or industry nominations or places it wishes potentially to explore.

nRequire that operators meet minimum Arctic-based standards or drilling perormance andenvironmental protection beore bids on oshore licences are accepted and ensure thatcompanies have the nancial resources to meet worst-case oil-spill liability requirements.

nAs part o authorizing exploration, require Arctic-tested standards or oshore oil-spillpreparedness and response capacity and maintain the intent o the same-season relie wellpolicy to protect the Arctic and its people rom multiyear blowouts.

nAdd a mechanism or government review and cancellation (with payment o compensation)

o existing tenure rights on long-term leases in justiable circumstances such as dramaticenvironmental changes, industrial accidents or national security issues.

Taken together, the recommendations provide a blueprint or creating an Arctic-readyuture or oshore oil and gas in Canada.

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CONTENTS

ForEword B M Smn

ExEcutivE SuMMary

iNtroductioN

coNvENtioNaL PLaNNiNg iN aN uNcoNvENtioNaL worLd:caNadaS currENt arctic ocEaN LicENSiNg aNd rEguLatory rEgiME

PhaSE 1: cll Nmnns

PhaSE 2: cll Bs n issne e Epln Lene

PhaSE 3: azn n assessmen Pesses Epl aes

PhaSE 4: issne Snfn dse Lene n/ Pn Lene

PhaSE 5: azn Pees Pe hbns

SuMMary

rEcoMMENdatioNS: road MaP For aN arctic-rEady oFFShorEoiL aNd gaS FuturE

rEcoMMENdatioN 1: iNacs cll Nmnns Sl Be Peee

b Se Ennmenl assessmen.

rEcoMMENdatioN 2: te genmen Sl Ene n El, Fml nMennl cnsln in dn e cll Nmnns.

rEcoMMENdatioN 3: iNac Sl inse Pe-B tesl reqemens

Ennmenl Pemne n Fnnl reses respn ws-cse ol Spll Bl.

rEcoMMENdatioN 4: te genmen Sl cn Feel Pl reecln Lbl cllns a ose ol n gs Splls.

rEcoMMENdatioN 5: iNac Sl cn Mennl in cnsln dn

e cll Bs Pse.

i

ii

1

4

5

6

812

13

14

15

16

1415

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SECTION I

SECTION II


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rEcoMMENdatioN 6: te NEB Sl cee ose Spll-Pepenessn respnse-cp Sns desne n tese a cnns.

6. 1. Strengthen Its Spill-Preparedness Planning Guidelines by Incorporating

Practices rom Other Arctic and Non-Arctic Jurisdictions into Regulation.

6.2. Conduct a Comprehensive Annual Spill-Response Exercise Under Realistic Arctic

Conditions and an Unplanned On-Site Exercise at Least Every Three Years.

6.3. Guarantee Spill-Response Capacity Is in the Region to Deal With a Worst-Case Scenario

6.4. Develop Guidelines That Outline Acceptable Spill Response, Remediation Techniques

and Technologies or Arctic Waters.

6.5. Stimulate a New Culture o Industrial Innovation to Create Arctic-Tested

Spill-Response Measures.

6.6. Create Regional Task Forces o Trained Local Residents to Act as First

Responders and Industry Watchdogs.

rEcoMMENdatioN 7: te NEB Sl Mnn e inen e Sme-Sesnrele well Pl Pe e a n s Peple m Mle Bls.

rEcoMMENdatioN 8: in Ennmenl assessmen cpbl Sl Be

Senene b Pn anl reses, n e genmen Sl cnis on in cnslns Snn e assessmens Epl aes.

rEcoMMENdatioN 9: te genmen Sl cee Psn ree

n B Bk Lene tenes n Jsfble cmsnes.

rEcoMMENdatioN 10: in Benefs Plns n rl-Sn aeemens

Sl Be Nee n Lne w e rsks in cmmnes Be.

rEcoMMENdatioN 11: a Se a-re Bes open Pes Sl Be cee

cmplne Mnn, tnspn, n demmssnn n remen.

11.1. Compliance Monitoring: The NEB Should Increase Its Resources and Personnel Dedicateto Monitoring and Compliance Activities or Arctic Oshore Hydrocarbon Production and

Inrastructure.11.2. Transportation: Working With Other Appropriate Agencies, the NEB Should Develop

Guidelines and Standards to Enable Operators to Mitigate the Dangers o Transporting

Hydrocarbons Through Arctic Waters.

11.3. Well Abandonment, Decommissioning and Site Remediation: The NEB Should Develop

Arctic-Specic Guidelines and Standards or Disposal o Nonproducing Oil and Gas Platorm

and Supporting Inrastructure, Plus Remediation o Arctic Sites When Production is Finished

coNcLuSioN: aN arctic-rEady FuturE For caNada?

ENdNotES

worKS citEd

aPPENdix

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25

26

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Lee m Nelle cne, inl renl cpn

Lee m M Smn, in tp Knm

Pess elese m inl renl cpn

cnn ol n gs reeene Mp


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This question was last aced in 1990. Ater the ExxonValdez oil tanker spill in Alaska, the EnvironmentalImpact Review Board (EIRB), a joint Inuvialuit-ederal-territorial body, conducted a public review o the Kullukdrilling program in the Canadian Beauort Sea.1 TheKulluk program planned to drill in much shallowerwaters than the current proposals or exploratory

drilling. The board concluded that industry andgovernment2 were ill-prepared to deal with oil spills

in Arctic waters and recommended that the programbe rejected. The boards critique was sweeping,encompassing issues o spill-preparedness planning,spill-response capacity, scientic analysis, logistics,liability and consultation with Inuit. The board calledor a series o reorms to address the licensing andregulatory systems shortcomings (EIRB 1990).

The Beauort Sea Steering Committee, ormed toinvestigate issues that arose during the Kulluk review,published eight volumes o detailed recommendationson the steps needed to make Canada ready or oshore

oil and gas drilling in the Beauort Sea (Beauort SSteering Committee 1991). However, ater the Kulldecision, interest in Arctic drilling in Canada waneand the government missed an opportunity to enmany o the needed reorms.

Today, renewed interest in hydrocarbdevelopment in Canadas Arctic Ocean meaindustry, government and the peoples o the Norace many o the questions let unanswered rom t

Kulluk review:

n How can industry and government contain a laroil spill in Arctic waters?

n What methods should be used to mitigate theenvironmental damage caused by a spill?

n What rules, including seasonal cuto dates ordrilling, should be used to govern the application oCanadas same-season relie well policy?

Canada is on the verge o approving the rst deepwater Arctic oil and gas drilling in its history. Risks o a

major environmental and human disaster dramatically increase as hydrocarbon development moves

rom onshore to nearshore to deeper oshore waters. Drilling the rst exploration well is the most

dangerous step o the entire hydrocarbon development process because more well blowouts occur at this stage than

at any other (Ross et al. 1977). Is Canadas regulatory and licensing system ready or drilling in the Arctic Ocean?

1

INTRODUCTION

(The depth values shown here represent the deepest point or all leases issued in any given year. Years shown in light ace had no lease sales.Oshore oil and gas lease data were obtained rom INAC (http://www.ainc-inac.gc.ca/nth/og/le/d-eng.asp) in June 2011 (published March 1, 2011).Depth statistics were extracted rom IBCAO bathymetry (http://www.ngdc.noaa.gov/mgg/bathymetry/arctic/) using zonal statistics in ArcGIS.)

86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11

Figure 1: Trend toward Deeper Offshore Oil and Gas Lease Blocks in

the Canadian Beaufort Sea, 19862011

0

-200

-400

-600

-800

-1,000

-1,200

-1,400

-1,600

-1,800

Depthin

metres

Linear trendline


8/34INTRODUCTION

n How should this same-season relie well policy beapplied as development moves into deeper waters,

where drilling a single well can take two or threedrilling seasons?

n How can valued ecosystem components best be

identied and protected?n How should an operators potential liability be

estimated, and what nancial assurance should anoperator provide or that liability?

n What level o consultation with Inuit is required tomaintain sustainable communities in the North andmeet the Crowns promises and obligations?

In December 2011, the National Energy Board(NEB), Canadas regulatory body or oil and gasdevelopment in rontier areas,3is scheduled to concludeitsPublic Review o Arctic Saety and EnvironmentalOshore Drilling Requirements. The public reviewwas initiated to resolve regulatory ambiguity aboutthe boards same-season relie well policy. The reviewwas broadened to assess other Arctic oshore drillingrequirements in the wake o the Deepwater Horizonoil spill last year in the Gul o Mexico.

In the past 17 years, the NEB has regulated oneshallow-water Arctic well.4 It has never overseendrilling in deeper Arctic waters. Yet recent bids wonby industry in the Beauort lie at depths o more than1,000 metres (Figure 1). The NEB review oers an

opportunity to answer many key questions and lay outthe reorms needed to make the NEB better preparedto regulate deepwater Arctic drilling.

However, the NEB review is examining only part o thegovernment system in place or Arctic oshore oil and gasdevelopment. Indian and Northern Aairs Canada (INAC)5oversees the licensing side o the development process.Ater the Deepwater Horizon blowout, Inuit organizationsasked INAC to stop new Arctic leasing in order to answerundamental questions about how to responsibly developArctic oshore oil and gas (Cournoyea 2010; Simon 2010,reproduced in Appendix). Declining this request, INAC

continued granting oshore Arctic acreage and issuedthree marine exploration licences in 2010 and 2011 in theBeauort Sea.

To view the whole picture, this report examinesboth aspects o the governments oil and gasdevelopment regime: licensing (overseen by INAC)and regulatory (overseen by the NEB). In addition,in order to make policy recommendations on how tomake Canadas oshore oil and gas regime ready or

the realities o the Arctic, two unique, region-speciattributes are considered throughout:

1) The harsh Arctic environment poses specialchallenges or oshore hydrocarbon development anproduction, necessitating a licensing and regulatory

ramework that addresses specifc Arctic actors.

2) Canadas Arctic oshore oil and gas drillingprogram takes place in regions where Canadianlaw requires licensing and regulation to incorporasignifcant Inuit participation in policymaking anddecision making (see box, next page).

Although this report applies to the entire CanadiArctic, much o the material used or the analycomes rom the Canadian Beauort region, whemost oshore oil and gas activity has occurred date and which is the current area o industrys mactive interest. Because o this geographic ocus, treport also requently reers to the Inuvialuit FinAgreement, the Inuit land claim agreement thapplies to this region.8 Oshore oil and gas interin other regions o the Canadian Arctic will raise tsame kinds o broad concerns ound in the Beauand also involve specic considerations based on tterms o those land claim agreements.

Moreover, the governments o the NorthwTerritories and Nunavut continue to press Ottawa

devolve to them provincial-type responsibilities hydrocarbon development. They want to infuenthe manner, scale and pace o development as wellreceive resulting rents, taxes and royalties. Northegovernments emphasize that their citizens be

virtually all o the risks o development but enew o the resulting scal benets. Regardless o toutcome o these devolution discussions, therestill a undamental need in all regions o the CanadiArctic to have an Arctic-ready oshore oil and glicensing and regulatory system.

This report contains two sections. Sectionpresents an analysis o each phase o Canadcurrent licensing and regulatory regim

highlighting strengths and weaknesses. In SectiII, the report describes policy reorms that tgovernment should consider to acilitate responsibhydrocarbon development in Canadas Arctic OceaTaken together, they provide a road map or Canadabecome Arctic-ready or oshore oil and gas.

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1. cll Nmnns

2. cll Bs n

Epln Lene

3. Epln

aes

4. Snfn

dse/Pn

Lense

5. hbn

Pn aes

None

Canada Petroleum Resources Act, Canadian Oil and Gas Operations Act

National Energy Board Act, Canadian Environmental Assessment Act, the Canada Oil, and Gas Operations

Act, the Canada Oil and Gas Drilling and Production regulations, the Canada Oil and Gas Installation

regulations, the Territorial Lands Act, the Arctic Waters Pollution Prevention Act, the Migratory BirdsConvention Act, the Species at Risk Act, the Fisheries Act, and the Canadian Environmental Protection Act

Canada Petroleum Resources Act, National Energy Board Act

National Energy Board Act, Canadian Environmental Assessment Act, the Canada Oil, and Gas Operations

Act, the Canada Oil and Gas Drilling and Production regulations, the Canada Oil and Gas Installation

regulations, the Territorial Lands Act, the Arctic Waters Pollution Prevention Act, the Migratory Birds

Convention Act, the Species at Risk Act, the Fisheries Act, and the Canadian Environmental Protection Act

PhaSES agENcy LawS (iN additioN to FEdEraL-iNuit LaNd cLaiM agrEEMENtS)

4

The NEBs current Public Review o ArcticSaety and Environmental Oshore Drilling

Requirements has ocused primarily onwhether its same-season relie well policy shouldbe removed, modied or let in place. This policywas adopted in 1976 to guard against a multiyearblowout rom an exploratory or production well.The policy requires that an operator possess thecapability to respond to a well blowout by nishing

a relie well beore the end o the same drillingseason. Industry is pushing to remove the same-season part o the rule on the basis that improvedtechnology can provide equivalency by preventingblowouts. Supporters o the current policy point outthat it was designed to ensure the capability (andcontinued industry innovation9) or responding tocatastrophic blowouts.

The debate about same-season relie well capabilityhas eclipsed a larger and more important issue: howto make Canadas entire licensing and regulatoryregime Arctic-ready. Answering this question involves

much more than ruling on same-season relie wcapability.

Canadas current Arctic Ocean oshore oil licensiand regulatory regime has ve basic phases:

1) Call or nominations.2) Call or bids and issuance o the exploration

licence.3) Authorization and assessment procedures to

conduct exploratory activities.4) Issuance o a signifcant discovery licence andor production licence.

5) Authorization and assessment procedures toproduce hydrocarbons.

Below, each phase o the Arctic oshore licensinand regulatory process is described and analyzed.Policy options or making each stage Arctic-readyare summarized with sequentially numberedRECOMMENDATIONS that are urther developed iSection II.

SECTION I

INAC

INAC

NEB

INAC

NEB

Conventional Planning in an Unconventional World:Canadas Current Arctic Ocean Licensing

and Regulatory Regime

Figure 2: Five Phases of Canadas Arctic Offshore Hydrocarbon System


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Pse 1: cll Nmnns

Pess:INAC initiates hydrocarbon developmentin Canadas Arctic Ocean by asking industry tonominate blocks o ocean foor in a geographic area.INAC determines the area open or nomination andblock size limits. Ater industry nominations, INACsminister can urther alter the proposed block size.Unlike other stages o hydrocarbon development inCanadas Arctic, no ormal restrictions or regulationsguide the call or nominations beyond those set byINAC and Canadas general legal ramework.

Pblems: t mn eknesses peen e ll nmnns pse m ben a-e.

1) No strategic environmental assessments are

conducted beore or during the call or nominations.

A strategic environmental assessment is denedby the Arctic Council as a systematic process orevaluating the environmental consequences o aproposed policy, plan or program initiative in orderto ensure that they are included and appropriatelyaddressed at the earliest appropriate stage odecision-making. The Arctic Council articulatesthree key reasons or conducting these kinds oassessments: to integrate environmental concernsinto the rst stages o decision making; to capture a

wide scope o the project that sets the stage or later,more specic environmental impact assessments;and to begin collecting baseline scientic knowledgeo the region under investigation (Arctic Council2009).

Other Arctic jurisdictions such as the UnitedStates, Norway and Greenland require strategicenvironmental assessments beore opening up areasto oshore oil and gas.10 Likewise, Canadas regulatoryregime or oshore hydrocarbons in Newoundlandand Labrador uses strategic environmentalassessments when considering new areas or potential

development.11In contrast, Canada has not systematically

conducted strategic environmental assessmentsbeore INAC has opened up Arctic oshore areas byissuing a call or nominations. Where it has engagedin the Beauort on regional planning to identiyregulatory and inormation gaps,12 these eorts havenot ullled the evaluation and integration components

the Arctic Council described as key unctions ostrategic environmental assessment. Nor have theyall cases preceded new leasing. As laudable as theeorts have been, thereore, they have not providthe ull benets a strategic environmental assessme

would provide or both government and Inuit hopito answer questions about the possible eects hydrocarbon development either in a region as

whole or at site-specic scales.

2) The government does not provide meaningulconsultation with Inuit about decisions made duringthe call or nominations phase.

In addition to depriving itsel o an opportunto synthesize and integrate scientic inormatiabout environmental actors beore opening

Arctic region to oshore oil and gas consideratiothe governments ailure to conduct strateenvironmental assessments also makes meaningconsultation with Inuit at this rst stage very dicuInuit organizations need the kind o data integratiand analysis generated by a strategic environmenassessment to make inormed decisions.

This lack o a systematic process or evaluatithe environmental consequences o proposactions in the rst phase cannot be adequatremedied by more inormation in subsequent stagImportant strategic decisions go into identiyi

potential development zones through INACs cor nominations that shape all subsequent stagThe call or nominations phase includes strategplanning or the utilization o resources and denthe scope o development activity. The ailure systematically analyze and evaluate environmenconsequences at this stage cannot be remedied additional data gathering in later stages.

These decisions can have serious consequencor Inuit as indicated by the Inuvialuit RegionCorporations 2010 letter asking INAC to delany new calls or nomination within its settleme

area pending resolution o undamental saand environmental issues. INACs pro ormletter turning down the request seems ar rothe meaningul consultation required by law, described by Canadas courts in numerous recedecisions.13

5

SECTION I: Conventional Planning in an Unconventional World


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an operators ability to meet liability requirementsonly ater the submission o an application ordrilling an exploratory well, years ater granting anexploration licence. Having the nancial resources todeal with a wide range o possible industrial accidentsshould be a crucial element o any operators proo oArctic readiness. Delaying this evaluation increasespressure on the regulatory system to approve drillingand increases the risks to the Arctic environment andnorthern peoples.

Evaluating the operator nancial capacity to meetpotential liability at the pre-bidding stage would clariy

the governments methodology on operator liabilitymuch earlier in the process (see box, page 6). Theabsence o a clear government position on liabilitywas a primary reason or the EIRBs Kulluk ndingthat nothing the Board has heard enables it to makeany sensible recommendation dealing substantivelywith [the applicants] potential liability in the evento a worst-case blowout, one o the obligationsmandatorily imposed on the Board by the IFA[Inuvialuit Final Agreement] (EIRB 1990 ). I the NEBand INAC do not act preemptively to deal with liabilityand instead choose to wait or the environmental

assessment bodies to rule on this issue, they may ndthemselves in the same position as the Kulluk panelthat concluded:

Perhaps no other element o the review hasproven to be more disconcerting and disturbingto the Board than the inescapable conclusionthat, based upon the inormation available tothe Board, the regulatory authorities o theGovernment o Canada responsible or oshoreoil and gas exploration, have ailed to dischargetheir mandated obligations in a responsible andeective manner (EIRB 1990).

2) Inuit are not ormally consulted on either the callor bids or granting o an exploration licence despitethe importance o these decisions.

Much is at stake in the call or bids phase and muchis decided at that time. INAC disposes o specic

areas to specic operators. Operators commit spend tens to hundreds o millions o dollars exploration activities. Industrys strategic plans acreated, deepened and begin to unold. INAC granexploration licencesthe precondition or oshodrilling activities. Despite all this, INACs call or bias with its call or nominations, contains no ormmechanism or Inuit consultation.

Delaying meaningul consultation with Inuit unlater stages o development not only creates legal issuor the Canadian government, it also is bad practirom an operational point o view or three reasons.

nFirst, it increases the risk to industry that proposmay need to be changed later in the process response to community input that could have beaccommodated earlier.

nSecond, it reinorces the dynamic o industry settithe agenda and others reacting to it. Formalized Inparticipation happens within the review proceor specic development activities but by this timindustry already has obtained tenure rom the Crow

n Third, the lack o early consultation can creaconditions or conusion and regulatory missteps lain the process. Meaningul consultation during tcall or bids phase would add clarity and objectivitythe entire development process.

Slns: t ense e ll bs nssne e epln lene s a-e, ee nl pl ems sl bensee:

rEcoMMENdatioN 3: Create a pre-bid

screening threshold to ensure that thoseholding exploration licences have the capacitsystems and experience to manage deepwateacreage in line with Arctic best practices andgovernment regulations, and possess thenancial resources necessary to meet theabsolute liability or a worst-case scenario.

7


Delaying meaningful consultation with Inuit until later stages of

development not only creates legal issues for the Canadian government,

it also is bad practice from an operational point of view.


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8

rEcoMMENdatioN 4: Review ederalpolicy to clariy how the liability calculationsrequired by Inuit land claim agreementsare met by the governments current cap onoperator liability.

rEcoMMENdatioN 5: Create ormalstructures or meaningul consultation withInuit at this stage.

Pse 3: azn n assessmenPesses Epl aes

Pess: Under the nine-year exploration licence, theoperator conducts a comprehensive seismic survey toidentiy high priority/interest areas, drills one or moreexploratory wells andi exploration results warrantitapplies to the NEB or a declaration o signicantdiscovery.17

Each activity conducted during the exploratoryphase triggers a corresponding set o regulatoryprocesses and environmental requirements that areoutlined in settled land claims and by the NEB, aswell as in other relevant laws and regulatory regimes.In addition, the operator must obtain a Certicateo Fitness rom the NEBs chie saety ocer beoredrilling, installation or production can begin.18

Pblems: as pple n e cnn a,s pse ses m ee ke eleknesses.

1) The NEBs regulatory regime does not requireoshore spill preparedness and response capacity to beArctic-ready.

As noted above, drilling the rst exploratory wellon a geological structure is the most hazardous activityduring the hydrocarbon development process. A majorwell blowout is more likely at this time than any other

(Ross et al. 1977). The NEBs authorization process ordrilling evaluates capability o operators against threerelevant competencies: (a) spill preparedness planning,(b) roles and responsibilities in spill response and (c)capacity or response (Dagg et al2011). Governmentreorm is needed in each o these areas to ensureArctic-readiness.

a) Spill Preparedness Planning

Three areas need to be strengthened in ordto bring the NEBs spill-preparedness planning to Arctic standards. First, the NEB needs to develregulations outlining specic standards that will gi

industry detailed guidance on preparing or Arctic spills. Currently, the Saety Plan and EnvironmenProtection Plan Guidelines issued jointly by tNEB and the Nova Scotia and Newoundland Boar(NEB 2011a; NEB 2011b) require that plans to d

with saety and environmental emergencies mbe provided to the NEB as part o an application an authorization. The NEBs website instructs thcompany contingency plans must be ormulatedensure drilling related equipment is available to co

with any oreseeable emergency situation durindrilling program or production operation (NEB date). But nothing in the guidelines claries how tNEB or an operator can assess whether these plaare easible under Arctic conditions.

An example o the kind o inormation that tNEB needs to actor into these regulations is ouin a report recently commissioned by the NEB estimate spill-response eectiveness in the Westeand Eastern Arctic. The study estimated that in tBeauort Sea, oil-spill response countermeasurcould be deployed only 35 to 78 percent o the timbecause o such environmental impediments as win

waves, poor visibility and darkness. The same stuound that no spill-response countermeasures wepossible 27 to 100 percent o the time in the WCentral Davis Strait area in the Eastern Arctic betweJuly and December (SL Ross Environmental ResearLtd. 2011).

Second, the NEB needs to conduct reguplanned and unplanned spill simulations to evaluathe integrity o preparedness planning. In its Kulldecision 20 years ago, the EIRB identied the abseno testing as a signicant gap:

[A] surprise exercise to test the eectiveneso contingency plans, and to demonstratecountermeasures and cleanup capabilities,must be conducted annually in the BeauortSea. The exercise must be conducted inrealistic operating conditions (EIRB 1990).



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9

Although other northern jurisdictions conduct such

simulations,20

to date the NEB has not conductedany unplanned exercises to test operator spill-preparedness planning.

Third, key science and traditional knowledgegaps need to be lled so that spill-preparedness planscan indicate biologically and culturally importantareas or priority protection. A recent industryand government report ound that such gaps inCanadas Beauort Sea included inormation relatedto physical and chemical oceanography, plankton,benthos areas, marine mammals, and marineand anadromous sh. It concluded that although

numerous studies have been completed to date there is recognition that data gaps remain whichmay result in the potential delays and restrictionsto oshore development (SL Ross EnvironmentalResearch Ltd. 2010).

b) Roles and responsibilities in spill response

For oshore drilling in the Canadian Arctic, theoperator is responsible or spill prevention andresponse, and the NEB is the chie administrativebody or coordinating spill response.21 Placing theonus on the operator to act as the primary responseorganization is common around the world. In additionto requiring the operator to have the ability to respondeectively, the government must also evaluate its owncapacity or cleaning up catastrophic spills. In the BPspill in the Gul o Mexico, or example, the industryoperator required assistance rom the U.S. CoastGuard and Navy or three months to stop the fow ooil in spite o the signicant spill-response resourcesand inrastructure on hand.

As noted above, NEB guidelines do not ensure

that operators are adequately prepared or oil spills.In the case o a major spill in the deepwater Arctic,government resources likely would be required. Yetan independent government audit o the CanadianCoast Guard, the most likely ront-line responder inthe Arctic, ound:

The Coast Guard has not conducted a

comprehensive assessment o its responsecapacity since 2000. The Coast Guard is unablto determine how much oil-spill responseequipment it should have and whether it hasappropriate capacity to address risks (Oce othe Auditor General o Canada 2010).22

Beore exploratory drilling can saely begin in tArctic, the NEB needs to ensure that governmeresources are in place to supplement operaresponse capability in the case o a major spill.

c) Capacity or response

The NEB relies on the Canada Oil and Gas Drilliand Production Regulations to ensure that tnecessary spill-response capacity is in place. Howevthese regulations do not require the operator to hathe capacity readily available to respond to and contaa worst-case scenario, nor do they provide guidanon what spill-response techniques and technologare best suited or the Arctic oshore environment.

Other Arctic countries, by contrast, require industo have much greater demonstrable capacity react to a major spill. In the United States, ederegulations require that operators have the abilityrecover oil in a worst-case scenario that takes inaccount specic limitations on equipment ecien(30 CFR 254.44). Norway calls or spill-responequipment to be adapted to the type o pollution asite specic conditions (Dagg et al. 2011). The UnitKingdom uses a three-tiered emergency classicatisystem and supporting time response criteria. T

worst scenario (Tier 3) calls or resources to beplace within 18 hours (U.K. Department o Energy a

Climate Change 2009).The NEB is also silent on the topic o respontechniques and technologies best suited to the Arctioshore environment, and scientic consensus lacking on the ecacy o industrys three primarecovery technologiesmechanical recovery,situ burning and chemical dispersantsin icy Arc

waters. Although signicant research has been doneall three areas, important and unanswered questio


The same-season relief well policy is the strongest element of Canadas

current regulatory regime.


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13

Pse 5: azn Pees Pe hbns

The NEB regulates all activities or actuallyproducing oshore oil and gas during this stage.Production activities also must comply with relevant

laws and regulatory regimes such as the CanadianEnvironmental Assessment Act, Canada Oil andGas Operations Act, Canada Oil and Gas Drillingand Production regulations, Canada Oil and GasInstallation regulations, Territorial Lands Act, ArcticWaters Pollution Prevention Act, Migratory Birds

Convention Act, Species at Risk Act, Fisheries Act andCanadian Environmental Protection Act.

Pblems: te pn pse ase l n s pens ses m mn eknesses:

1) Inuit do not stand to beneft rom the successulproduction o oshore hydrocarbon in proportion towhat they risk.

Although the Canadian Arctic is one o many placesin which oshore hydrocarbons can be pursued, orInuit it is the only home they have. Over thousands oyears, Inuit have developed a unique reliance on theArctic marine environment or ood and cultural well-being. O all the players involved in an Arctic oshore oil

and gas program, Inuit communities bear the greatestrisk rom chronic or catastrophic environmentalharm caused by such activities. Yet under the currentsystem, benets to Inuit rom oshore oil and gas arenot proportionate to these risks.29

In both the Inuvialuit Final Agreement and theNunavut Land Claims Agreement, benet provisionsare principally triggered by the use o Inuit lands.Because the seabed where oshore drilling occurs inthe Arctic is considered Crown land, no ormal benetsplans or participation agreements are required oroshore production unless Inuit lands are required

or secondary or tertiary aspects o the operation.30

Industry still has an incentive to conclude

agreements with indigenous communities regardlesso ormal obligations because such agreements canoster support or projects, reduce riction and providesome sort o social licence to operate. Nevertheless,the absence o a legal trigger to negotiate benetagreements in relation to oshore production ails to

balance the risks and the benets o those operations Inuit. An Arctic-ready oshore oil and gas productischeme should recognize the need or this balance.

2) Production can begin without the capacityto implement a set o Arctic-ready best practices

or compliance monitoring, transportation anddecommissioning.

The issues raised earlier or the exploratiphaseincluding oil-spill preparedness and responcapacity and the requirement to kill a blowout insingle seasonalso apply to the production phase.addition, three other issues need to be addressedmake the production phase Arctic-ready.

a) Compliance-monitoring capacity to meet newoshore demands

Canadas Oil and Gas Drilling and ProductiRegulations and the NEBs Environmental ProtectiPlan Guidelines require industry to present plans internal and external audits o its practices as partits applications or authorization. In addition, the Nconducts site visits and inspections as key componeo its compliance-monitoring scheme. Because tNEB has regulated just one shallow-water well the Arctic, oshore productionespecially in tArctic deepwater currently targeted by industry

will necessitate an increase in the NEBs resourand personnel dedicated to compliance monitorithrough site inspections.31

b) Transportation

Aside rom exploratory drilling, the transportatio hydrocarbons rom production to market presenthe greatest risk o a major oil spill. The lack o pipeliinrastructure means that Arctic operators woulikely rely on tanker transport (Mariport Group L2007). Oil tanker shipping routes rom the Beau

Sea would go west around Alaska and through tBering Strait or east through the Northwest PassagBoth are long voyages through remote, icy waters.

Neither the NEB nor Transport Canada hdeveloped guidelines or standards that incorporathe unique challenges and dangers o transportihydrocarbon in Arctic waters.32 To become Arctready, the NEB and other regulators such as Transp



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The Government o Canada charges INAC and the NEB with the responsibility to implement its licensing

and regulatory regime or oshore hydrocarbon development in the Arctic Ocean. At each o the ve stag

o hydrocarbon licensing and regulation, important policy gaps need to be lled. Until that is accomplished,

neither the agencies nor the Canadian system or oshore hydrocarbons will be Arctic-ready.Section II o this report outlines what reorms are needed to the current licensing and regulatory ramework

to become Arctic-ready. It presents options and ideas that in most cases will need to be cooperatively develope

by government, industry and Inuit in order or Canada to manage its Arctic responsibilities in line with the

regions needs and values.

SUMMARY

14


Canada need to provide strong leadership, operatorguidelines and transportation standards to minimizethe risk to the region and its people.

c) Well abandonment, decommissioning and siteremediation

Beore production is approved, currentregulations require operators to submit to the NEB aplan or decommissioning and restoring productionsites (Canada Oil and Gas Drilling and ProductionRegulations). However, the NEB does not providestrong guidelines to industry on how to tailordecommissioning plans to the special requirementso the Arctic. In some cases, this lack o standardshas hurt Arctic communities, which have to live with

unoreseen consequences o previous hydrocarbonproduction. For example, one operator in the WesternArctic has let a drilling platorm in the waters between

a national and territorial park or more than 20 yeaAnother platorm was abandoned in the harbor Tuktoyaktuk, the largest Inuvialuit community on tBeauort coast.

Slns: t ense znpees pe bns e ae, pl ems e eqe:

rEcoMMENdatioN 10: Inuit benetsplans and royalty sharing agreements shoulbe negotiated in line with the risks Inuitcommunities bear.

rEcoMMENdatioN 11: A set o Arctic-reabest operating practices should be created o

compliance monitoring, transportation, anddecommissioning and remediation.


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16

spill prevention and preparedness, and humansaety. In addition, INAC should establish thresholdrequirements or the ability o bidders to meetnancial obligations, including absolute liability ora worst-case oil spill or blowout as required in Inuitland claims.

rEcoMMENdatioN 4: The governmentshould conduct a ederal policy reviewclariying liability calculations or Arcticoshore oil and gas spills.

In Inuit land claim agreements, operators areaccountable absolutely or damages to Inuit rom pastand uture loss o wildlie and habitat and are requiredto pay or remediation and restoration. Yet ederalregulations cap the absolute liability o an operator inthe Arctic at $40 million, an amount that could easilybe eclipsed. The government should clariy in a ederalpolicy review or similar study how liability should becalculated and assessed to ensure that the necessarynancial security is provided to meet liability based ona worst-case scenario oil spill.

rEcoMMENdatioN 5: INAC should conductmeaningul Inuit consultation during the callor bids phase.

To meet its legal obligations, INAC needs to build

meaningul consultation with Inuit into the call orbids phase. Inuit organizations need to be involved inthe selection o biddable areas, the vetting o potentialoperators using threshold requirements (describedabove) and the issuance o exploration licences.Consultation at this stage should consider inormationabout the ull range o potential industrial activities andpotential accidents, including a worst-case scenario.

Pse 3: azn n assessmenPesses Epl aes

rEcoMMENdatioN 6: The NEB shouldcreate oshore spill-preparedness andresponse capacity standards designed andtested or Arctic conditions.

The NEB should lead an initiative to developand implement Arctic spill-planning and responsestandards. To accomplish this, the agency should:

6. 1. Strengthen its spill-preparedness planningguidelines by incorporating practices romother Arctic and non-Arctic jurisdictions intoregulation.

6.2. Conduct a comprehensive annual spill-

response exercise under realistic Arcticconditions and an unplanned on-site exercisat least every three years.

6.3. Guarantee that the region has spill-responsecapacity to deal with a worst-case scenario.

6.4. Develop guidelines that outline acceptablespill response and environmental remediatitechniques and technologies or Arctic wate

6.5. Stimulate a new culture o industrial innovatito create Arctic-tested spill-response measur

6.6. Create regional task orces o trained localresidents to act as rst responders andindustry watchdogs.

rEcoMMENdatioN 7: The NEB shouldmaintain the intent o the same-season relie

well policy to protect the Arctic and its peoplrom multiyear blowouts.

The same-season relie well policy is the strongelement o Canadas current regulatory regimAlthough there is ambiguity on how to impleme

the same-season relie well policy or deep osholease areas, the intent o the policy has remainconstant: to ensure that a catastrophic well blowoin Canadas Arctic Ocean can be killed in a sinseason. By denition, equivalency to this rule cannbe achieved by guaranteeing prevention becauthat is inconsistent with historical experience thoil spills and blowouts will happen despite the bprevention plans. The NEB should either enorcestrict interpretation o its current same-season rel

well policy or design a real equivalency that wensure a blowout can be killed in one season rath

than extend into multiple seasons.

rEcoMMENdatioN 8: Inuit environmentassessment capability should be strengthenby providing additional resources, and thegovernment should conduct its own Inuitconsultations surrounding the assessments exploratory activities.

SECTION II: Recommendations


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Increased interest in Arctic Ocean hydrocarbon resources stretches well beyond

Canadas borders. In the United States, industry is pushing or permission to drill

oshore exploration wells in the U.S. Beauort and Chukchi seas. In Greenland, Norway

and Russia, oil and gas operations are moving orward as climate change and technological

innovation make new drilling easible.

As one o the ve stewards o the Arctic Ocean, Canada has an obligation to help lead

the world to sae and environmentally responsible oshore hydrocarbon exploration and

development that respects the rights and livelihood o its Inuit and broader citizenry (Canada

et al. 2008). This report has identied key issues, challenges and critical recommendations orreorm that would give Canada the tools to meet its environmental and human obligations.

When Canada devised its same-season relie well policy in the 1970s, it set a standard or

the world to ollow commensurate with the new risks o moving rom shallow to deepwater

drilling. In some other important ways, as detailed in this report, Canadas oshore oil and

gas system lags behind those o other Arctic nations. The world will be careully watching

the deliberations and decisions emanating rom the NEB review examining the regulation

o Arctic oshore oil and gas. In addition, other government actions are needed to reorm

Canadas licensing system or the Arctic. Will Canada take steps towardor away rom

creating an Arctic-ready licensing and regulatory regime or oshore oil and gas?

Though divided by political boundaries, the Arctic Ocean is a single geographic expression,

contains a common cultural heritage, similar ecosystems and marine lie. This is a historic

moment. Canada has the opportunity to lead the way to environmentally sae oil and gas

development in the Arctic Ocean. To accomplish this, the country needs strong leadership,

precautionary decision making and eective risk management. Business as usual doesnt

refect the Arctic values that help dene Canada. Bold reorm will resonate around the world

and set high standards or other countries to ollow. Canadas legacy in the Arctic hangs in the

balance.

CONCLUSION

18

An Arctic-Ready Future for Canada?


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ENDNOTES

19

1 The EIRB is a public body created by the 1984

Inuvialuit Final Agreement charged with the

evaluation o applications or developmentactivity in the Inuvialuit Settlement Region.

2 Throughout the report, unless otherwise noted,

government reers to the Government o

Canada.

3 The NEB regulates such rontier lands as the

Arctic and oshore areas not covered by other

territorial, provincial or ederal management

agreements.

4 The Canada Oil and Gas Lands Administration

regulated 88 oshore oil and gas wells in the

Beauort Sea in the 1970s and 1980. During

this time, well depths averaged 26 metres, and

the deepest well was 67 metres. Results did

not merit industry production (Masterson et al.

1991). In 1994, the NEBs authority was expanded

to include regulation o oil and gas activity in

Canadas Arctic rontier areas. Since then, the

NEB has regulated one shallow-water well in theBeauort SeaDevons Pakota well at 12 metres

depth (Voutier et al. 2008).

5 On May 18, 2011, Prime Minister Stephen Harperannounced that INAC would henceorth be

called the Department o Aboriginal Aairs and

Northern Development. As this change o name

is being phased in, this report continues to

reer to INAC.

6 Five settlement land claims in Canada have

Arctic coastal and marine territory: James

Bay and Northern Quebec Agreement (1977),

Inuvialuit Final Agreement (1984), Nunavut Land

Claims Agreement (1995), Labrador Inuit Land

Claims Agreement (2005) and Nunavik Inuit

Land Claims Agreement (2008). Examples o

Inuit co-management or governance institutions

set up under these agreements include: the

Inuvialuit Game Council, the Nunavut ImpactReview Board (NIRB) and the Nunavik Marine

Region Review Board.

7 Although beyond the scope o this policy

analysis, the consideration o Aboriginal rights

is a dynamic and ast-growing area o Canadian

law. The general principles established by the

Supreme Court and provincial appellate courts

include:

Federal,provincialandterritorialgovernments

must consult Aboriginal people whose rights

may be aected by proposed government

decisions or actions.

Thedutytoconsultisaconstitutionalmandate

fowing rom the honour o the Crown.

TheCrownsdutytoconsultisnotexhausted

or negated by the negotiation o a modern land

claim agreement such as the Inuit agreements

discussed in this paper.

Thecontentofthedutytoconsultandany

necessary accommodation varies depending

upon the strength o the Aboriginal right to

interest and the possible impact o the proposed

government decision or action. In some cases,

mere notication may suce; other cases may

require something closer to consent.

Indischargingitsduty,thegovernmentmust

be able to demonstrate how it has responded

to inormation gained through the consultation

process.

In general, see Haida Nation v. British Columbia

(Minister o Forests), 2004 SCC 73 and Beckman

v. Little Salmon/Carmacks First Nation, 2010

SCC 53. Throughout this paper, the phrase duty

to consult and meaningul consultation should

be read to include all o these acets.

8 Inuvialuit are Inuit o Canadas Western Arctic

region.

9 Such lack o innovation was highlighted in

the Deepwater Horizon Oil Spill Commissions

Report: Twenty years ater the Exxon Valdez

spill in Alaska, the same blunt response

technologiesbooms, dispersants, and

skimmerswere used, to limited eect. p. ix.

10 In the United States, the National Environmental

Policy Act requires that an environmental impact

statement be integrated early in the planning

or development activities. Beore areas are

opened or licensing in Norway, an extensive

EIA [environmental impact assessment] must

be carried out. This EIA is similar to a strategic

environmental assessment (SEA). The process

is initiated and unded by the authorities.

In Greenland, the Bureau o Minerals and

Petroleum conducts a strategic environmental

impact assessment (SEIA). The SEIA identiesknowledge and data gaps, highlights issues

o concern, makes recommendations or

mitigation and planning and identies restrictive

and mitigative measures and monitoring

requirements that must be dealt with by the

companies applying or oil and gas licences inGreenland (Arctic Council 2009).

11 SEAs have become an important piece o

the regulatory regime in Newoundland

and Labrador. Since 2002, the Canada-

Newoundland and Labrador Oshore Petroleum

Board has conducted a number o regional

SEAs as it considers opening new areas in

anticipation o increased interest in hydrocarbon

development (Canada-Newoundland and

Labrador Deepwater Petroleum Board 2011).

12 In 2004, the Inuvialuit Game Council requestedthat the government initiate a regional

environmental assessment to help determine the

cumulative eects o individual oshore oil and

gas projects. In 2008, the resulting Beauort Sea

Strategic Regional Plan o Actiona

government-Inuvialuit eortcalled or a

coordinated and integrated strategic approach

in the region, summarized many o the key

questions that such an approach would need to

answer, and provided specic recommendations

on how to address them (Beauort Sea Strategic

Regional Plan o Action Steering Committee

2008). In 2010, the government initiated the

Beauort Regional Environmental Assessment,

a ve-year research program to collect data on

specic issues related to oshore oil and gas

development (INAC undated). Although the

research generated will help address some o

the data gaps identied or the Beauort Sea, it

does not ulll the integration, synthesis and site-specic unctions o a strategic environmental

assessment as dened by the Arctic Council nor

the integrated strategic approach articulated

in the Beauort Sea Strategic Regional Plan o

Action. Nor is there any clear policy direction

that such an assessment would be consistently

required in other areas beore nominations are

called or.

13 The Supreme Court has made clear that

meaningul consultation must take place at

the strategic planning stage or utilization o

resources. Haida Nation2004. As discussed

above, in the case o Arctic oshore oil and gas

this likely entails more than government brieng

sessions to Inuit organizations when important

decisions are being contemplated.

14 These plans do not include rent, royalties or

revenue rom oil and gas production. Rather

they ocus on providing suppliers o goodsand services with ull and air opportunities,

ensuring priority or opportunities is given to

qualied individuals resident in directly aec

regions, and ensuring the economic viability

international competitiveness o the project.

Benets plans at this stage (call or bids) tenbe a pro orma statement o principles. They

usually expanded at the production stage.

15 BP prots dip as Deepwater Horizon costs

continue to mount. Guardian. April 27, 2011.

16 Oshore oil and gas regulators such as the

Canada-Newoundland and Labrador Osho

Petroleum Board and the NEB may require

an operator to post additional security on a

case-by-case basis to cover ault-based liabil

(Senate Committee on Energy, the

Environment and Natural Resources, 2010

p. 39). The two oshore boards have develo

a joint policy on this but it does not appearthat the NEB has developed a written policy

on how it will exercise this discretion. Lookin

at the liability issue or oshore oil and gas, a

Senate committee recently recommended acomprehensive review o the issue o liability

including whether the thresholds should be

adjusted to refect current economic realities

(Senate Committee on Energy, the Environm

and Natural Resources 2010, p. 46).

17 According to Section 2 o the Canada Petrol

Resources Act, a signicant discovery is

dened as a discovery indicated by the rst

well on a geological eature that demonstrat

by fow testing the existence o hydrocarbon

in that eature and, having regard to geologi

and engineering actors, suggests the existen

o an accumulation o hydrocarbons that has

potential or sustained production.

18 Other laws and requirements triggered durin

the exploration phase include the Canadian

Environmental Assessment Act, Canada Oil a

Gas Operations Act, Canada Oil and Gas Dril

and Production Regulations, Canada Oil and

Gas Installation Regulations, Territorial Lands

Act, Arctic Waters Pollution Prevention Act,

Migratory Birds Convention Act, Species at R

Act, Fisheries Act and Canadian Environmen

Protection Act (Institute or Energy and the

Environment 2010, p. 7.)

19 Canada Oil and Gas Drilling and Production

Regulations require an operator to develop

and implement a management system,

which must contain a saety plan and an

environmental protection plan (NEB 2011a;

NEB 2011b). Environmental protection plansmust also contain contingency plans, includ

emergency response procedures, to mitigate

the eects o any reasonably foreseeableev

that might compromise saety or environme

protection (emphasis added). The continge

planning stipulation o the environmentalprotection plan requires industry to develop

emergency response plans, spill-response pla

and spill-response exercises, which address

specic oshore hydrocarbon emergencies.

noted above, these guidelines are not speci

Arctic conditions.


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20

20 The United States includes specic emergency

preparedness content in regulation, and

mandates that emergency preparednessplans be tested every three years. The United

Kingdom requires spill-response plans to be

tested annually (Dagg et al. 2011).

21 Under the Canada Oil and Gas Operations Act,

operators are responsible or all reasonablemeasures consistent with saety and the

protection o the environment to prevent any

urther spill, to repair or remedy any condition

resulting rom the spill and to reduce or mitigate

any danger to lie, health, property or the

environment that results or may reasonably

be expected to result rom the spill (Section

25[3]).

22 The commission examining U.S. oshore drilling

in light o the Deepwater Horizon blowout

highlighted similar concerns about U.S. Coast

Guard readiness to respond to a spill in the

Arctic (Deepwater Horizon Oil Spill Commission2011). In July 2011 testimony to Congress, U.S.

Coast Guard Adm. Robert J. Papp Jr. stated that

the U.S. government is not prepared to respond

to an oil spill in the Arctic: I this were to happen

o the North Slope o Alaska, wed have nothing. Were starting rom ground zero today.

(U.S. not ready to respond to Arctic oil spills:

Coast Guard chie. Platts News Service, July 27,

2011. Accessed Aug. 9, 2011. www.platts.com/

RSSFeedDetailedNews/RSSFeed/Oil/6320097.)

23 Imperial Oil Resources Ventures Ltd. writes in

its Dec. 2, 2009, letter in response to the NEBs

rejection o its application or advanced ruling:

We believe that the submitted application is

in ull compliance with the NEBs oral policy

on same season relie well [SSRW] capability,

based on equivalency. The NEB has been able

to issue many drilling approvals without thebenet o a ormal written version o the SSRW

capability policy. From conversations earlier this

year, Imperial understood that the NEB could

eectively respond should Imperial submit a

specic application and that a response by year

end 2009 would be possible to meet Imperials

business deadlines.

https://www.neb-one.gc.ca/ll eng/livelink.exe/

etch/2000/90463/589151/594086/

594001/585543/A1Q8Z5_-_Letter.

pd?nodeid=585544&vernum=0.

24 See or example Qikiqtani Inuit Association v

Canada(Minister o Natural Resources) 2010

NUCJ 12 http://www.canlii.org/en/nu/nucj/

doc/2010/2010nucj12/2010nucj12.html, where

the Court rejected Canadas argument that the

NIRB screening and process set out in the NLCA

discharged the governments duty to consult.

Accordingly the Court granted QIAs request

or an injunction to prevent seismic testing inLancaster Sound in 2010, concluding that

[I]t is not clear that the NIRB screening process

is a consultative process in the meaning o thecommon law duty to consult. The NIRB is not

tasked with the responsibility o consulting; it

is tasked with the responsibility o reviewing

applications. In other cases, the Courts have

concluded that the Crown can use an EIA

process to discharge its duty to consult: see

Taku River Tlingit First Nation v British Columbia,

(2004) 3 SCR 50.

25 The absence o a time limit refects the

common reality that a discovery may be o a

size and in a location which make it uneconomic

to develop or the time being. This in turn

allows the developer to decide when to initiate

development and apply or a production licence,

possibly as other discoveries are made in theregion or new inrastructure is developed (INAC

1999).

26 In addition, the minister may extend the term

o the production licence. As with operationsconducted during previous phases, industrial

activities beore and ater the issuance o a

signicant discovery licence or production

licence must comply with relevant laws and

regulations.

27 In 2009, Parks Canada signed a memorandum

o understanding with Inuit organizations

committing to a process or creating a national

marine conservation area or Lancaster Sound,

an area highly valued by Inuit communities as

one o the worlds greatest migratory pathways

or whales and other marine mammals. By law,

such areas preclude oshore oil and gas drillingand deepwater mining. In 2010, acting Minister

o the Environment John Baird proposed

boundaries encompassing more than 40,000

square kilometres. Because oil and gas leases

rom the 1970s just outside the entrance o

Lancaster Soundnow owned by Royal DutchShellremain on the books, the government

boundary proposal excluded important marine

habitat. The nal boundary or this globally

important marine area will be negotiated by the

government and Inuit.

28 The drat Lower Athabasca Regional Plan

established by the Alberta Land Stewardship

Act, SA 2009, c.A-26.8, contains mechanism

the Crown to cancel oil sands leases (subject

compensation) in order to create new protec

areas in certain circumstances. The applicabl

compensation provisions are contained in th

Mineral Rights Compensation Regulations.

www.canlii.org/en/ab/laws/regu/alta-reg-317-2003/latest/alta-reg-317-2003.html

29 Although this report describes specic

Inuit issues related to oshore oil and gas

development in Canada, Inuit have internatio

standing in bodies such as the Arctic Counci

through the Inuit Circumpolar Council (ICC).

ICC recently published a declaration on reso

development, including oshore oil and gas,laying out a rationale or meeting legitimate

needs rom oshore oil and gas revenue as a

rst priority (ICC 2011).

30 The Inuvialuit Final Agreement contains no

revenue-sharing provisions or oshore oil

and gas in its settlement area (the Canadian

Beauort). The NLCA provides or resource

revenue sharing (Article 25) with respect

to production on Crown lands within thesettlement area, but this provision is restricte

in two important ways. First, the settlement a

in Nunavut excludes much o the deepwater

Arctic Ocean within the Nunavut Territory th

has been the most interesting to oil and gas

companies. And second, revenue is capped

at 50 percent o the rst $2 million and only

5 percent thereater o any royalties received

annually by the ederal government. The NunInuit Land Claims Agreement contains a sim

nominal royalty scheme.

31 In 2010, the NEB conducted 218 compliance

activities throughout its jurisdiction. O thes

27 were environmental inspections and 29 w

saety inspections (NEB 2010). The report do

not indicate how many o these were related

to the oshore Arctic versus NEBs other, no

Arctic jurisdictions.

32 The o-take system will be regulated by the

NEB under the Canada Oil and Gas Operatio

Act as part o the production approvals proc

However, vessel saety and operation will be

regulated by Transport Canada under the

Canada Shipping Act.

ENDNOTES


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APPENDIX

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APPENDIX: Letter from Nellie Cournoyea, Inuvialuit Regional Corporation


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APPENDIX: Letter from Mary Simon, Inuit Tapirit Kanatami


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APPENDIX: Press release from Inuvialuit Regional Corporation


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Becoming Arctic-Ready

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Transcript of Becoming Arctic-Ready