Order Amending the Order Prohibiting Certain Activities in Arctic Offshore Waters, 2022: SOR/2023-268

Canada Gazette, Part II, Volume 157, Number 26

Registration
SOR/2023-268 December 8, 2023

CANADA PETROLEUM RESOURCES ACT

P.C. 2023-1215 December 8, 2023

Whereas His Majesty in right of Canada as represented by the Minister of Northern Affairs has, relating to frontier lands in respect of which the Minister has administrative responsibility for natural resources, the right to dispose of or to exploit those natural resources;

And whereas, following a review by Canada of its designation that all Canadian Arctic waters are to be indefinitely off limits to future offshore Arctic oil and gas licensing, the Governor in Council considers that it is in the national interest to extend the prohibition on those activities set out in the Order Prohibiting Certain Activities in Arctic Offshore Waters, 2022 footnote a;

Therefore, Her Excellency the Governor General in Council, on the recommendation of the Minister of Northern Affairs, makes the annexed Order Amending the Order Prohibiting Certain Activities in Arctic Offshore Waters, 2022 under subsection 12(1)footnote b of the Canada Petroleum Resources Act footnote c.

Order Amending the Order Prohibiting Certain Activities in Arctic Offshore Waters, 2022

Amendment

1 Section 2 of the Order Prohibiting Certain Activities in Arctic Offshore Waters, 2022 footnote a is replaced by the following:

2 This Order is repealed on December 31, 2028.

Coming into Force

2 This Order comes into force on the day on which it is registered.

REGULATORY IMPACT ANALYSIS STATEMENT

(This statement is not part of the Order.)

Issues

The Order Prohibiting Certain Activities in Arctic Offshore Waters, pursuant to the Canada Petroleum Resources Act, was initially brought into force on July 30, 2019, with the aim to freeze the terms of existing oil and gas licences in the Arctic offshore and to suspend any oil and gas activities for the duration of the Arctic offshore oil and gas moratorium. The prohibition currently expires December 31, 2023. An extension through December 31, 2028, is needed to ensure that the 11 existing exploration licences in the Beaufort Sea continue to be frozen and all other oil and gas activities continue to be suspended while the Government of Canada co-develops a climate and marine science-based review of the moratorium with the governments of the Yukon, the Northwest Territories and Nunavut, and the Inuvialuit Regional Corporation and Nunavut Tunngavik Incorporated.

Background

As part of the December 20, 2016, United States-Canada Joint Arctic Leaders’ Statement, Canada announced an indefinite moratorium on the issuance of new oil and gas licences in Canada’s Arctic waters. The Arctic offshore moratorium acknowledges the important balance between the traditional value of the Arctic waters for Indigenous Peoples and establishing a strong, sustainable Arctic economy and ecosystem supported by science-based management. While the moratorium suspends the issuance of new oil and gas licences in the Arctic offshore, it does not affect the rights of licence holders to explore for or develop oil and gas resources in relation to the 80 existing oil and gas licences in the western and eastern Arctic offshore.

Through the 2016 joint statement, the Government of Canada elected to assess the moratorium every five years through a climate and marine science-based review. The findings of the review would help to inform the Government’s decision whether the moratorium should be maintained.

In 2017, Crown-Indigenous Relations and Northern Affairs Canada (CIRNAC) engaged with the Yukon Government, the Government of the Northwest Territories, the Government of Nunavut, the Inuvialuit Regional Corporation and Nunavut Tunngavik Incorporated (Northern partners), as well as environmental groups and industry on their future interests in the Arctic offshore.

As a result of the engagements, in October 2018 the Government of Canada announced the “Next Steps on Future Arctic Oil and Gas Development.” Canada agreed to co-develop with Northern partners a science-based review, incorporating Traditional and Local Knowledge and socio-economic assessments, in Canada’s Arctic waters every five years to assess the moratorium, to freeze the terms of the existing licences in the Arctic offshore and to negotiate an offshore oil and gas co-management agreement and revenue-sharing arrangement with the Yukon Government, the Government of the Northwest Territories and the Inuvialuit Regional Corporation.

Freezing the terms of the 11 existing exploration licences in the Beaufort Sea prevents the licences from expiring while the moratorium is in place. Exploration licences issued under the Canada Petroleum Resources Act have fixed, nine-year terms that require a licence holder to complete the drilling of an exploration well within the term of the licence. An exploration licence cannot be renewed. If an exploration well has not been started within the nine-year term, the licence is forfeit and the lands revert to the Crown. The nine-year term for a licence was meant to compel licence holders to actively explore for oil and gas in the Arctic, or otherwise remit the licence and the lands held thereunder.

On July 28, 2019, the Governor in Council made the Order Prohibiting Certain Activities in Arctic Offshore Water, SOR/2019-280, under section 12(1) of the Canada Petroleum Resources Act, R.S.C. 1985, with an expiry date of December 31, 2021. The Order froze the terms of the 11 existing exploration licences in the Beaufort Sea to prevent them from expiring and suspended all oil and gas activities in the Arctic offshore. In effect, the Order froze the number of time remaining days associated on the licences, so they could not expire.

The 2019 Order Prohibiting Certain Activities in Arctic Offshore Waters was repealed and replaced by the Order Prohibiting Certain Activities in Arctic Offshore Waters, 2022 (SOR/2022-274), extending the term of the Order through December 31, 2023, to ensure that all oil and gas activities in the Arctic offshore would continue to be suspended and that the terms of the 11 existing exploration licences in the Beaufort Sea would continue to be frozen while CIRNAC and the Northern partners collaborated to finalize reports of the five-year science-based review.

Following consideration of the final reports of the five-year science-based review, the Government of Canada is maintaining the moratorium and is supporting a subsequent five-year science-based review. As a result, CIRNAC will continue to work with Northern partners to co-develop the climate and marine science-based review of the Arctic offshore oil and gas moratorium.

On August 10, 2023, the Government of Canada, the Inuvialuit Regional Corporation, Yukon Government and the Government of the Northwest Territories signed the Western Arctic – Tariuq (Offshore) Accord. The Accord establishes a collaborative system of managing and regulating the exploration for and development of oil and gas in the western Arctic offshore Accord area. The Order applies to the Accord Area.

Objective

Description

The proposal amends the Order Prohibiting Certain Activities in Arctic Offshore Waters, 2022 made in December 2022 by extending the expiry date from December 31, 2023, to December 31, 2028.

The Order applies to Canada’s Arctic waters for which the Minister of Northern Affairs is the responsible Minister. It continues to suspend all oil and gas activities in these waters and to freeze the terms — that is, preserve the time remaining on the 11 existing exploration licences in the Beaufort Sea — to prevent them from expiring.

Regulatory development

Consultation

Following the announcement of the moratorium in 2016, CIRNAC engaged territorial governments, Northern Inuit organizations, environmental organizations and oil and gas licence holders on their future interests in the Arctic offshore.

To address the interests of the stakeholders that were engaged, the Government of Canada committed to freeze the terms of the 11 existing exploration licences in the Beaufort Sea and to suspend all oil and gas activities in the offshore area for the duration of the Arctic offshore moratorium. CIRNAC continues to work closely with Northern partners to co-develop the climate and marine science-based review of the Arctic offshore oil and gas moratorium.

Oil and gas licence holders support a science-based approach to oil and gas in Canada’s Arctic waters and the suspension to of the terms of the existing oil and gas licences. The licence holders of the 11 existing exploration licences in the Beaufort Sea continue to be consulted on their future interests in the Arctic offshore.

Northern partners support the objective to continue to freeze the terms of the 11 existing exploration licences in the Beaufort Sea.

In October 2018, the Government of Canada announced “Next Steps on Future Arctic Oil and Gas Development,” committing to freeze the terms of the 11 existing exploration licences in the Beaufort Sea and to suspend any oil and gas activities for the duration of the moratorium.

CIRNAC and Northern partners finalized two reports of the review process in June 2022: “Science-based Assessment of the Risks and Benefits of Arctic Offshore Oil and Gas Exploration and Development” and “Committee on the Science-Based Assessment of Offshore Oil and Gas Exploration and Development in the Eastern and Central Arctic.”

Given ongoing engagement with oil and gas licence holders and Northern partners, and that the proposal is necessary to continue to suspend all oil and gas activities in Arctic offshore waters, as well as to freeze the terms of existing oil and gas licences, the proposal was not prepublished in the Canada Gazette, Part I.

Modern treaty obligations and Indigenous engagement and consultation

As required by the Cabinet Directive on the Federal Approach to Modern Treaty Implementation, an assessment of modern treaty implications was conducted on the Order in 2019. The assessment did not identify any modern treaty implications or obligations related to the 2019 Order or its renewal.

In 2017, Canada engaged extensively with territorial governments, the Inuvialuit Regional Corporation and Nunavut Tunngavik Incorporated on their future interests in the Arctic offshore. In 2018, based on this engagement, Canada announced next steps on future Arctic Oil and Gas development, addressing the request by territorial government and Inuit leaders to freeze the terms of the 11 existing exploration licences in the Beaufort Sea for potential future development should the Government of Canada decide to lift the moratorium. The benefits inherent in the development of the licences are deferred to the future.

In further recognition of Indigenous Treaty rights in the North, section 3 of the Canada Petroleum Resources Act explicitly provides that nothing in the Act shall be construed as to abrogate or derogate from any existing Indigenous or treaty rights of Indigenous Peoples of Canada under section 35 of the Constitution Act, 1982.

Instrument choice

Extending the Order Prohibiting Certain Activities in Arctic Offshore Waters is the only option to freeze the terms of the 11 existing exploration licenses in the Beaufort Sea to prevent them from expiring. This approach also aligns with the intent of the moratorium and allows Canada to work with territorial and Northern Indigenous Peoples toward a science-based approach to oil and gas in the region.

Regulatory analysis

Costs

There are no anticipated costs of the extension of the Order to the licence holders. In particular, the extension of the Order is not anticipated to result in any impacts in the form of deferred benefits (that is, foregone profits from production in the license area) to the licence holders as well as Northern and Indigenous economies.

In 2014, the Beaufort Sea exploration licence holders voluntarily suspended work on their licences, stating the nine-year term of the licence was insufficient to safely carry out a drilling program in the Beaufort Sea. The Canada Petroleum Resources Act legislates a fixed nine-year term for an exploration licence. If a drilling program is not begun within this term, the licence is forfeit. The significant discovery licences issued in Canada’s Arctic offshore date to the 1970s and 1980s. These licences have indefinite terms and commercial conditions have not been favourable since to exploit these rights.

In addition, based on an assessment of current economic conditions, as well as feedback received from oil and gas stakeholders, no measurable oil and gas production from the significant discovery licences was being planned in the near-term or mid-term.

Benefits

The Order, and its extension, result in two important benefits. First, the continued suspension of all oil and gas activities in Canada’s Arctic waters ensures the waters and marine environment are protected from the potential adverse impacts from oil and gas activities while the Government of Canada develops an ongoing science-based approach to oil and gas in the Arctic. Second, it continues to freeze the terms of the 11 existing exploration licences in the Beaufort Sea, which prevents their expiration and loss of rights to licence holders. The Northern partners and licence holders support the freezing of the terms of the 11 existing exploration licences in the Beaufort Sea while the moratorium remains in place and ongoing science-based review of Canada’s Arctic waters as these would lead to informed climate and environmental outcomes.

Small business lens

There are no associated impacts on small businesses as a result of this amendment.

One-for-one rule

The one-for-one rule does not apply as there is no incremental change in administrative burden on business.

Regulatory cooperation and alignment

The extended Order continues to comply with the December 2016 United States-Canada Joint Arctic Leaders’ Statement to work with Northerners to preserve the Arctic offshore from the potential adverse impacts from oil and gas activities and to build Canada’s marine and climate-based knowledge base to ensure that future oil and gas development in the region is evidence-based and meets Canada’s domestic and international climate goals.

The Order and its extension directly advance United Nations Declaration on the Rights of Indigenous Peoples Article 3: Indigenous Peoples have the right to self-determination. It supports the Arctic and Northern Policy Framework Goal 3: Strong sustainable, diversified and inclusive local and regional economies, and Goal 8: Reconciliation supports self-determination and nurtures mutually respectful relationships between Indigenous and non-Indigenous Peoples.

Arctic oil producing nations bordering Canada’s maritime boundary have issued oil and gas moratoriums in their respective jurisdictions: the United States is a partner to the 2016 Joint Arctic Leaders’ Statement and banned oil and gas activities in the United States Beaufort and Chukchi seas, and Greenland banned the issuance of new oil and gas rights in its territorial waters. In October 2021, the European Union issued an Arctic Strategy, which called for an Arctic-wide ban on new oil and gas development to protect the vulnerable Arctic environment.

Strategic environmental assessment

In accordance with the Cabinet Directive on the Environmental Assessment of Policy, Plan and Program Proposals, a preliminary scan concluded that a strategic environmental assessment is not required as the extension of the Order supports the important impacts on the environment caused by the moratorium.

The ongoing five-year science-based review associated with the moratorium will include a strategic environmental assessment in the western and eastern Arctic offshore areas.

Gender-based analysis plus

When the initial Order was developed, a preliminary gender-based analysis plus (GBA+) assessment was undertaken to assess the impacts on diverse groups in society, with a focus on Northern and Indigenous residents. It was found that the Order does not represent significant or disproportionate impacts to minority groups, considering the offshore oil and gas activity in the region was already limited. Specific measures such as including future co-management of licenses with local governments and the Inuvialuit Regional Corporation were considered to help analyze and neutralize potential adverse impacts to minority populations from the implementation of the Order and reduced economic activities in the offshore.

The assessment drew on consultations with territorial and Northern Indigenous governments and industry on their future interests in the Arctic offshore and was informed through subsequent assessments related to the Sustainable Arctic Economy element of the Arctic and Northern Policy Framework. The Yukon Government, Northwest Territories Government, and Inuvialuit Regional Corporation support extending the Order as it allows for the ongoing freezing of the 11 existing exploration licences in the Beaufort Sea while the moratorium remains in place.

The extension of the Order does not affect the continued support for demographic and gender diversity through the mandatory affirmative action training programs and diversity hiring policies employed by the oil sector’s human resources guidelines. These guidelines are consistent with federal policy to assure that disadvantaged individuals and businesses are able to participate in oil and gas development opportunities, as provided by the Canada Oil and Gas Operations Act, as well as by federal and territorial affirmative action programming for Indigenous Peoples and women.

Federal and territorial census data will be the primary approach to measure the performance and track the implementation of this Order and its amendments. CIRNAC will continue to work in partnership with the territorial governments and Northern Indigenous organizations to implement a climate and marine science-based review approach to oil and gas in Canada’s Arctic waters that includes Traditional and Local Knowledge and is cognizant of resource extraction industry impacts on safety of Indigenous Peoples, women and people in other minority groups.

The climate and marine science-based review focuses on planning for and co-developing with territorial and Northern Indigenous governments climate and marine-based assessment processes to develop new scientific information, to augment Traditional and Local Knowledge and to report the findings to Canada to inform next steps for the moratorium. The Order and its amendments fulfill the Prime Minister’s announcement for a climate and marine-based assessment of the moratorium every five years to assess the risks and challenges of developing oil and gas resources in Canada’s remote North. The amended Order builds on co-developed climate and marine-based research begun in 2019.

The membership of the committee established with territorial and Northern Indigenous governments to co-manage the assessment process is gender balanced and reflects the unique demographics of that Northern region. The climate and marine science-based review supports new research and Indigenous participation to collect information and conduct research to build Canada’s knowledge base in the Northern offshore.

Implementation, compliance and enforcement, and service standards

The amendment comes into force on the date on which it is registered.

Contact

Mireille Lajoie
Director
Petroleum and Mineral Resources Management Directorate

Northern Affairs
Crown-Indigenous Relations and Northern Affairs Canada
25 Eddy Street, 10th floor
Gatineau, Quebec
K1A 0H4
Telephone: 613‑889‑9493
Email: mireille.lajoie@rcaanc-cirnac.gc.ca