Vol. 137, No. 16 — April 19, 2003

Regulations Amending the Inclusion List Regulations

Statutory Authority

Canadian Environmental Assessment Act

Sponsoring Agency

Canadian Environmental Assessment Agency

REGULATORY IMPACT ANALYSIS STATEMENT

Description

The Canadian Environmental Assessment Act (the CEA Act) requires federal authorities (FAs) to conduct an environmental assessment (EA) before initiating or funding projects, disposing of lands or any interest therein for the purpose of allowing a project to be carried out, or issuing certain regulatory permits or authorizations for projects. Four key regulations determine the CEA Act's application: the Inclusion List Regulations; the Exclusion List Regulations; the Law List Regulations; and the Comprehensive Study List Regulations.

The Inclusion List Regulations specify physical activities that may have significant environmental effects, and that are "projects" under the CEA Act. The Exclusion List Regulations specify undertakings in relation to a physical work for which an EA is not required because experience indicates they are not likely to cause significant adverse environmental effects. The Law List Regulations prescribe project-licensing approvals that trigger an EA before a project can proceed. The Comprehensive Study List Regulations identify major projects that are subject to a more extensive EA called a comprehensive study.

In those parts of Canada where such activities are permitted, the following Boards are responsible for the management of offshore oil and gas projects:

— the National Energy Board (NEB);

— the Canada — Newfoundland Offshore Petroleum Board (CNOPB); and

— the Canada — Nova Scotia Offshore Petroleum Board (CNSOPB).

The NEB manages offshore oil and gas activities in all parts of Canada, other than the Newfoundland offshore area and the Nova Scotia offshore area. Based on the inclusion of references to appropriate parts of the Canada Oil and Gas Operations Act in the Inclusion List Regulations and in the Law List Regulations, the NEB is required to carry out federal EAs for offshore oil and gas exploration and production projects. It is also required to carry out an EA under the CEA Act before issuing a lease for federal lands to allow for the extraction of oil and gas by a physical work.

The CNOPB and the CNSOPB were established to manage oil and gas resources in the Newfoundland offshore area and the Nova Scotia offshore area on behalf of the federal government and the respective provincial government. They have both been prescribed as FAs under the CEA Act. Because of the absence of references in the Inclusion List Regulations and Law List Regulations to parts of the Canada — Newfoundland Atlantic Accord Implementation Act,and the Canada — Nova Scotia Offshore Petroleum Resources Accord Implementation Act, dealing with the authorization of offshore physical activities, the Offshore Boards' EA responsibilities under the CEA Act are limited. At present they are only required to carry out an EA under the CEA Act before issuing a lease for federal lands to allow for the extraction of oil and gas by a physical work in the Newfoundland offshore region or in the Nova Scotia offshore region.

This statement focuses on proposed amendments to the offshore oil and gas portions of all the above regulations, other than the Exclusion List Regulations. The proposed amendments to the Inclusion List Regulations and the Law List Regulations would expand the coverage of the CEA Act to include East Coast offshore oil and gas exploration activities. The proposed amendments wouldthereby ensure that in all parts of Canada, where offshore oil and gas activity is permitted, exploration as well as production projects would be subject to the federal EA process.

The proposed amendments to the Inclusion List Regulations and the Law List Regulations wouldmean that a federal EA would be required for authorizations issued by either Offshore Board with respect to physical activities relating to a marine or freshwater seismic survey, an exploratory drilling program, or the production of offshore oil or gas. A federal EA would also be required for physical activities relating to a development plan establishing the general approach for developing a pool or field of oil and/or natural gas that require the approval of either Offshore Board. The current requirement for either Offshore Board to carry out an EA under the CEA Act before issuing a lease for federal lands to allow for the extraction of oil and gas by a physical work would remain.

The June 16, 2003 date referred to in paragraphs 19.1(a) and (b) of the proposed amendments to the Inclusion List Regulations that relates to a proposed marine or freshwater seismic survey, or a proposed drilling program, indicates that if an assessment of the environmental effects of such a proposed activity has not been completed by the CNOPB or the CNSOPB before June 16, 2003, it would be subject to an EA under the CEA Act. If the date on which the amendments to the Inclusion List Regulations come into force is after June 16, 2003, the date in the subject-paragraphs would be adjusted accordingly.

A comprehensive study, like a screening, is a self-directed EA carried out by an FA. Although the majority of projects covered by the CEA Act undergo an EA through a screening, some projects require a more intensive assessment of environmental effects through a comprehensive study. Such projects tend to be large-scale and due to their nature, they have the potential to result in significant environmental effects and/or to generate considerable public concern. These projects are identified in the Comprehensive Study List Regulations. Examples of these types of projects in the offshore oil and gas realm include:

— the development of large oil and natural gas production complexes, including a main platform or island; and

— the offshore decommissioning of a production facility.

Previous offshore oil and natural gas projects that have been subject to a comprehensive study assessment, include the White Rose Development Project on Newfoundland's Grand Banks and the Deep Panuke Project on Nova Scotia's Scotian Shelf.

In a comprehensive study, the relevant Board has the primary management role over the EA and has more obligations than in a screening. These include the need to consider a wider range of factors and to submit the comprehensive study report to the Minister of the Environment and the Canadian Environmental Assessment Agency. The Agency then makes the report available to the public for review. When the comprehensive study report has been completed, the Minister of the Environment considers the comprehensive study report and comments received from the public and determines the next step in the EA process.

In carrying out a comprehensive study, the scope and depth of the analysis is normally correspondingly greater than in a screening and there may be a need to:

— commission new studies on specific issues;

— consider highly technical, one-of-a-kind, site-specific mitigation measures; and

— carry out extensive public consultations.

The current wording of certain parts of the oil and gas projects portion of the Comprehensive Study List Regulations makes it difficult to determine whether certain offshore projects are subject to a comprehensive study. Furthermore, there are certain types of projects currently subject to a comprehensive study that are unlikely to result in significant environmental effects and/or to generate considerable public concern. In association with the proposed amendments to the Inclusion List Regulations and the Law List Regulations, it is proposed that the above-mentioned matters be addressed by the amendments to the Comprehensive Study List Regulations. The proposed amendments to the Comprehensive Study List Regulations more clearly define the types of projects that should be subject to a comprehensive study and its compulsory public review process, in all the offshore regions of Canada where offshore oil and gas activities are permitted.

The first proposed change to the Comprehensive Study List Regulations is the inclusion in section 2 of a definition for the term "offshore." This definition would clarify that the term refers to all parts of the submarine areas under the jurisdiction of the NEB, the CNOPB or the CNSOPB.

The location of most satellite production platforms is identified early in the development planning process. They are normally included in a comprehensive study or review panel of an overall production complex carried out under the CEA Act, or they may have been included in a Panel review of a production complex carried out under the Environmental Assessment Review Process Guidelines Order (EARPGO). (This federal EA process included a public consideration of environmental consequences of significant projects under a Panel review process. EARPGO was replaced by the CEA Act in January 1995). The current wording of paragraph 11(a) requires that a subsequently identified satellite platform, that will become an integral part of an oil or gas production complex that was previously subject to a comprehensive study or review panel under the CEA Act, or an EARPGO Panel review, be subject to a comprehensive study. As a subsequent satellite production platform does not normally have the same potential to cause significant environmental effects that generate considerable public concern in the same way that an overall production complex might, the current requirement in paragraph 11(a) results in the unnecessary carrying out of an intensive level assessment rather than a screening. The proposed repeal of paragraph 11(a) and the insertion of subsection 11.1 would address this issue. Its adoption would mean that a subsequent satellite production platform in a study area delineated in a comprehensive study or review panel under the CEA Act, or an EARPGO Panel review, of a previous production facility, would be assessed under the screening requirements of the CEA Act.

The third change is also associated with the proposed repeal of paragraph 11(a) and the insertion of section 11.1. While paragraph 11(a) currently indicates that production projects constructed in Canada are subject to a comprehensive study, the wording of the paragraph does not provide a clear indication as to whether a production project constructed outside Canada and installed in the Canadian offshore, would be subject to a comprehensive study. The inclusion of the word "installation" in subsection 11.1 would eliminate this uncertainty and establish that such an action would be subject to a comprehensive study.

The proposed subsection 11.2 relates to the decommissioning or abandonment of an offshore oil or gas production facility. Paragraph 11(a) currently indicates that an offshore production facility decommissioned on land is subject to a comprehensive study. When such facilities are located on land and also decommissioned on land, the decommissioning process does not normally result in environmental effects that generate considerable public concern and they are assessed under the screening requirements of the CEA Act. As an offshore facility decommissioned on land would have similar environmental effects as a terrestrial facility also decommissioned on land, it would be logical that both types be assessed in the same manner. A consistent EA system would, therefore, be established if all offshore production facilities decommissioned or abandoned on land were assessed under the screening requirements. The proposed subsection 11.2 allows for such a consistent approach. It would still require that an offshore production facility decommissioned or abandoned in an offshore location be assessed under the comprehensive study requirements. It would also require that a production facility converted in situ to another use in an offshore location be subject to a comprehensive study.

The current wording of paragraph 14(b) requires that the proposed construction of an offshore oil and gas pipeline be assessed as a comprehensive study. Such pipelines generally connect a main offshore production facility with satellite offshore production facilities and/or with a mainland storage and distribution system. Offshore oil and gas pipelines are normally assessed in association with these other facilities as part of an overall development plan under the comprehensive study requirements. In exceptional circumstances, the need for an offshore oil and gas pipeline connection is established after a comprehensive study of a production facility or complex has been completed. Paragraph 14(b) currently requires that each subsequent pipeline should be subject to a comprehensive study. As in the case of subsequent satellite production facilities, the environmental effects of such a project could be satisfactorily determined by a screening process. The current requirement results in comprehensive study duplication. The proposed change would mean that a subsequent offshore oil and gas pipeline, located completely in the limits of study area of an offshore production facility subject to a previous comprehensive study or review panel under the CEA Act, or an EARPGO Panel review, would be assessed under the screening requirements of the CEA Act and the environmental consequences of such a project still determined. Pipelines, any part of which were located outside the limits of a study area, would be assessed by means of a comprehensive study.

The meaning of the term "area" in the current section 15 is unclear. The ambiguity of the term causes considerable uncertainty in deciding which EA level — comprehensive study or screening — is required for an offshore exploratory drilling project. The proposed amendment to section 15 would establish that an exploratory drilling project within the limits of a study area delineated in a comprehensive study or review panel under the CEA Act, or an EARPGO Panel review of a previous offshore exploratory drilling project, would be subject to a screening EA. A proposed exploratory drilling project outside the limits of a study area delineated in a comprehensive study, review panel or an EARPGO Panel review of a previous offshore exploratory drilling project, would be subject to a comprehensive study.

Section 15 currently indicates that when an exploratory drilling project is proposed for an "area" in which an exploratory drilling project was previously assessed under a comprehensive study, review panel, or an EARPGO Panel review, it is subject to a screening, and when it is proposed for an area in which a production project was previously assessed under one of the foregoing processes, it is subject to a comprehensive study. The prior comprehensive study, review panel, or an EARPGO Panel review of a production project, provides similar relevant information as one carried out for an exploratory drilling project. There is limited EA benefit in requiring the first exploratory drilling project in an "area" established in a previous comprehensive study or review panel under the CEA Act, or an EARPGO Panel review, of a production project to be subject to a comprehensive study. The proposed amendment to section 15 would eliminate this difference and as a result, an offshore exploratory drilling project in a study area delineated in a comprehensive study, review panel, or Panel review of a previous production drilling project would be assessed by a screening.

In summary, the two proposed modifications to section 15 would mean that offshore exploratory drilling projects that are located in a study area delineated in a comprehensive study or review panel under the CEA Act, or an EARPGO Panel review, of a previous drilling project — exploratory or production — located in an offshore region, would be subject to a screening.

These proposed changes to the Comprehensive Study List Regulations would both establish an updated set of comprehensive study level projects, and would also provide increased certainty as to the type of EA — screening or comprehensive study — to be applied to various projects in the regions of Canada in which offshore oil and gas activities are permitted. Follow-up information emanating from a comprehensive study, review panel, or Panel review, would be publicly available and could be used in subsequent EAs carried out at the screening or comprehensive study levels.

The coming into force date in all three regulations is June 16, 2003. If the review of comments is longer than expected, the date of which the regulations came into force would be adjusted accordingly.

In addition to the development of the proposed amendments, the Agency has established a subcommittee of the Minister of the Environment's Regulatory Advisory Committee (RAC) that will be making recommendations on further offshore oil and gas amendments.

Alternatives

There are two options to the proposed regulatory amendments — guidelines or the status quo.

A. Guidelines

Federal EA guidelines established for application by the CNOPB and CNSOPB, rather than the introduction and application of the Inclusion List and Law List changes, would mean that offshore exploratory projects on Canada's East Coast would not be subject to the EA process under the CEA Act as they are elsewhere in the country. A consistent federal EA system for all relevant parts of the Canadian offshore would not be established. The retention of the current gaps in the EA system under the CEA Act would mean that proponents and other stakeholders would be involved in two different types of federal EA process — one for Canada's East Coast and another for the rest of Canada — that would be different in terms of transparency and legal status.

Guidelines based on the proposed Comprehensive Study List changes would not be legally binding. The need to apply both the existing Comprehensive Study List Regulations and also guidelines based on the proposed amendments would be extremely complicated and create considerable legal uncertainty and delays. The benefits of using a single, legally adopted and improved system for determining the appropriate federal assessment process for various offshore oil and gas projects, would not be achieved.

B. Status Quo

With respect to the Inclusion List Regulations and the Law List Regulations, the maintenance of the status quo, in which the EA policies of the CNOPB and the CNSOPB continue to apply, would have the same disadvantages as guidelines and would be subject to change at any time. A national federal EA system for offshore oil and gas projects can only be established if the two regulations are amended in the proposed manner.

With respect to the Comprehensive Study List Regulations, the maintenance of the status quo would mean that current ambiguous statements and inappropriate requirements as discussed above would remain. The improved legal certainty of using a more precisely defined basis for determining the appropriate federal assessment process for various types of projects, would not be achieved.

Benefits and Costs

The amendments to the Inclusion List Regulations and Law List Regulations are expected to improve the consistency and transparency of the EAs of offshore exploratory projects in Canada's East Coast. The increased transparency of the East Coast offshore EA process, should allow interested parties to be both better informed on proposed projects, and also allow them to be in a more informed position to review and comment on them. If EAs conducted pursuant to the CEA Act are in certain instances more demanding than the assessments that would otherwise have been conducted by the Offshore Boards under their existing internal policies, the proposed amendments to the Inclusion List Regulations and Law List Regulations would result in added costs to the CNOPB and the CNSOPB. However, the budgets of the CNOPB and the CNSOPB are shared by the federal Department of Natural Resources Canada and the Newfoundland Department of Natural Resources, and the federal Department of Natural Resources Canada and Nova Scotia Department of Energy, respectively. The federal Department of Natural Resources Canada and both provincial organizations support the proposed amendments to the Inclusion List Regulations and Law List Regulations.

If, in certain instances, EAs conducted pursuant to the CEA Act are more demanding, for example the establishment of a public registry for exploratory projects, than the assessments that would otherwise have been conducted by the Offshore Boards under their existing internal policies, the increase in costs to proponents are not expected to be significant. The proposed amendments to the Inclusion List Regulations and Law List Regulations would allow for the establishment of a coherent federal EA regime for oil and gas projects throughout the Canadian offshore. This could reduce proponent costs, as all groups in the oil industry would be working under one federal EA system. The amendments would also provide improved credibility to the federal EA process on the East Coast. The full, rather than the current partial, application of the CEA Act would provide for the inclusive application of all parts of federal EA law to the East Coast and, as already is the case, for the other parts of the Canadian offshore. This would allow stakeholders in all parts of Canada to participate in a federal process, in which they would know that the same types of offshore projects in all parts of Canada would be subject to federal EA requirements, with required opportunities for public review and a legally binding decision-making process.

The changes to the Comprehensive Study List Regulations would result in a clearer and more consistent method of determining the type of EA — comprehensive study or screening — to which offshore exploratory drilling projects would be subject, with potential savings in time and costs to the Boards, proponents and other stakeholders. The changes would, therefore, ensure that unnecessary delays are minimized.

Consultation

The multi-stakeholder RAC (chaired by the Agency), the federal Department of Natural Resources Canada, the CNOPB, the CNSOPB and the NEB participated in the development of the amendments. They were also reviewed by the Senior Management Committee on Environmental Assessment (SMCEA) that is made up of a number of federal departments, including the Department of Indian and Northern Affairs Canada, the Department of Fisheries and Oceans Canada and the Department of the Environment.

The following were also consulted: the Nova Scotia Department of Energy; the Newfoundland Department of Natural Resources; the British Columbia Department of Energy and Mines; the Canadian Arctic Resources Committee; the Canadian Environmental Network EA caucus; the Canadian Parks and Wilderness Society; the Canadian Association of Petroleum Producers (CAPP); oil and gas companies involved in the development of Canada's East Coast oil and gas resources; the Inuvialuit Joint Secretariat; the Nunavut Impact Review Board; the Mackenzie Valley Environmental Impact Review Board; the Inuvialuit Environmental Impact Review Board; members of the Nova Scotia Save our Seas and Shores Coalition; the Natural History Society of Newfoundland and Labrador; the Fisheries Association of Newfoundland and Labrador Limited; Ecology Action Centre (Halifax), and the Seafood Producers Association of Nova Scotia.

In general, there was overall support for the proposed changes to the regulations. CAPP suggested that all exploratory drilling projects — including the first drilling project in a region of the offshore — should be assessed at the screening level. Fishery groups and most environmental groups supported the Inclusion List and Law List changes. A number of environmental groups suggested that all seismic and all exploratory drilling projects should be subject to a comprehensive study.

Based on the important need to close the East Coast federal EA gap and thereby, ensure that offshore exploratory projects are subject to a federal EA in the same way as similar projects are elsewhere in Canada, when a project application under the Canada Oil and Gas Operations Act triggers a federal EA, there is an urgent requirement to proceed with the Inclusion and Law List amendments. The Canadian Environmental Network EA caucus indicated that a reconciliation of CAPP and environmental group suggestions on the Comprehensive Study List changes should be attempted before the proposed amendments were submitted for public review. Based on the short experience in the EA of offshore oil and gas projects in Canada and the limited amount of scientifically accepted knowledge on the environmental effects of exploration activities — seismic and drilling — it was determined that at this time, there is insufficient information available that would provide an informed basis for substantiating a reconciliation of the disparate CAPP and environmental group suggestions. Over the next 12 months, the RAC subcommittee, mentioned in the "Description" and to which CAPP and environmental groups are members, will review the manner in which exploratory activities are covered in the Comprehensive Study List Regulations and establish a knowledge base to substantiate recommendations on future regulatory changes.

Compliance and Enforcement

The CEA Actempowers the Minister of the Environment to provide advice and training to the NEB, the Offshore Boards and others, to enable them to discharge their responsibilities under the CEA Act and its regulations. Compliance with the proposed amendments to the regulations would be promoted in the following ways. First, the Agency's monitoring program would assess whether the three Boards and other relevant federal authorities have any specific problems in adhering to the CEA Act and the regulations, as amended. Secondly, the Agency's regional offices would help proponents, departments and the Boards exchange information about specific project EAs, thereby, assisting them in complying with their EA responsibilities under the CEA Act and its regulations.

Contact

Mr. Ian Ferguson, Canadian Environmental Assessment Agency, 200 Sacré-Cœur Boulevard, 14th Floor, Hull, Quebec K1A 0H3, (819) 997-2217.

PROPOSED REGULATORY TEXT

Notice is hereby given that the Governor in Council, pursuant to paragraph 59(b) of the Canadian Environmental Assessment Act (see footnote a) , proposes to make the annexed Regulations Amending the Inclusion List Regulations.

Interested persons may make representations with respect to the proposed Regulations within 30 days after the date of publication of this notice. All such representations must cite the Canada Gazette, Part I, and the date of publication of this notice, and be addressed to Peter Sherhols, Director, Policy Analysis, Canadian Environmental Assessment Agency, Fontaine Building, 14th Floor, 200 Sacré-Coeur Boulevard, Gatineau, Quebec, K1A 0H3.

Ottawa, April 10, 2003

EILEEN BOYD

Assistant Clerk of the Privy Council

REGULATIONS AMENDING THE INCLUSION LIST REGULATIONS

AMENDMENTS

1. Section 2 of the Inclusion List Regulations (see footnote 1) is amended by adding the following in alphabetical order:

"drilling program" means

(a) in respect of a physical activity in the offshore area as defined in section 2 of the Canada-Newfoundland Atlantic Accord Implementation Act, "drilling program" as defined in section 2 of the Newfoundland Offshore Petroleum Drilling Regulations; and

(b) in respect of a physical activity in the offshore area as defined in section 2 of the Canada-Nova Scotia Offshore Petroleum Resources Accord Implementation Act, "drilling program" as defined in section 2 of the Nova Scotia Offshore Petroleum Drilling Regulations. (programme de forage)

"marine or freshwater seismic survey" means a geophysical operation that uses a seismic energy source to generate acoustic waves that propagate through the earth, are reflected from or refracted along subsurface layers of the earth and are subsequently recorded; (étude sismique marine ou d'eau douce)

2. The schedule to the Regulations is amended by adding the following after section 19:

19.1 Physical activities that require an authorization referred to in paragraph 138(1)(b) of the Canada-Newfoundland Atlantic Accord Implementation Act or paragraph 142(1)(b) of the Canada-Nova Scotia Offshore Petroleum Resources Accord Implementation Act and relate to

(a) a marine or freshwater seismic survey during which the air pressure measured at a distance of one meter from the seismic energy source is greater than 275.79 kPa (40 psi) and for which a determination of its environmental effects was not made by the Canada-Newfoundland Offshore Petroleum Board or the Canada-Nova Scotia Offshore Petroleum Board before June 16, 2003;

(b) a drilling program for which a determination of its environmental effects was not made by the Canada-Newfoundland Offshore Petroleum Board or the Canada-Nova Scotia Offshore Petroleum Board before June 16, 2003; or

(c) the production of oil or gas.

19.2 Physical activities relating to Part I of a development plan referred to in paragraph 139(4)(a) of the Canada-Newfoundland Atlantic Accord Implementation Act or paragraph 143(4)(a) of the Canada-Nova Scotia Offshore Petroleum Resources Accord Implementation Act.

COMING INTO FORCE

3. These Regulations come into force on June 16, 2003.

[16-1-o]

Footnote a 

S.C. 1992, c. 37

Footnote 1 

SOR/94-637

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