Regulatory Impact Analysis Statement

(This statement is not part of the Regulation)
(Ce résumé ne fait pas partie du règlement)

Department or agency 
Impact Assessment Agency of Canada 

Ministère ou organisme
Agence d’évaluation d’impact du Canada

Title of proposal 
Regulations Respecting Excluded Physical Activities (Newfoundland and Labrador Offshore Exploratory Wells)

Titre du projet
Règlement visant des activités concrètes exclues (puits d’exploration au large des côtes de Terre-Neuve-et-Labrador)

Statutory authority 
Impact Assessment Act 

Fondement législatif
Loi sur l’évaluation d’impact

Submitted for consideration for 

Soumis en vue de 

Final approval following
public engagement period on regulatory proposal between 04/03/2020 to 30/04/2020

Approbation finale à la suite
d’une période de consultation publique sur la proposition de règlement du 04/03/2020 au 30/04/2020

This regulation is exempt from the Statutory Instruments Act in accordance with subsection 112(4) of the Impact Assessment Act. In support of transparency, this Regulatory Impact Analysis Statement has been developed to provide stakeholders with information on the regulation and its implementation, the regulation’s expected impacts and how comments received were considered in developing the regulation.

Le règlement est exempté à la Loi sur les textes réglementaires conformément au paragraphe 112(4) de la Loi sur l’évaluation d’impact. Pour fin de transparence, ce résumé de l’étude d’impact de la réglementation a été élaboré afin de fournir aux intervenants de l’information sur le règlement et sa mise en œuvre, les impacts prévus du règlement et la façon dont les commentaires reçus ont été pris en compte dans l’élaboration du règlement.

 

Jonathan Wilkinson
Minister of Environment / Ministre de l’Environnement


Regulatory Impact Analysis Statement

Issue

The Impact Assessment Act (IAA) establishes an impact assessment process that serves as a planning tool, which takes into consideration a range of environmental, health, social and economic effects of “designated projects”. Offshore exploratory drilling projects are one type of project subject to the requirements of the IAA.

The IAA also provides the Minister of Environment and Climate Change (the Minister) with the authority to make a regulation that would remove impact assessment process requirements for certain projects, including offshore exploratory drilling projects, when they are proposed in an area for which a regional assessment has been carried out and the project is in conformity with the conditions set out in the regulation. This Ministerial regulatory authority enables resources to be directed at assessing projects with the greatest potential for adverse environmental effects while ensuring that environmental protection continues to be maintained.

A regional assessment that evaluated the effects of offshore oil and gas exploratory drilling in an area east of Newfoundland and Labrador was conducted by an externally appointed Committee and the Committee’s report was considered in the development of this regulation.

Background

Impact Assessment Act

On August 28, 2019, the Government of Canada implemented new rules through the IAA that protect the environment and foster sustainability, recognize and respect Indigenous rights, and strengthen the economy. The IAA establishes an impact assessment process that serves as a planning tool, which takes into consideration the whole range of environmental, health, social and economic effects of projects. Impact assessments under the IAA are conducted for proposed physical activities that are “designated projects”, either by the Physical Activities Regulations (also referred to as the “the Project List”) or by the Minister.

The IAA and the Project List include provisions that would remove impact assessment process requirements for certain designated projects, such as offshore oil and gas exploratory drilling projects, as long as they are proposed in an area for which a regional assessment has been carried out and the project is in conformity with the conditions set out in a Ministerial regulation. These provisions apply to regional assessments that are conducted under the IAA (s. 92 or 93) or regional studies under the former CEAA 2012 (s.73-77). Once a regional assessment that evaluates the effects of these projects in a given region is completed, the Minister may, after considering that assessment, make a regulation to designate these projects and set project conditions to give effect to the exclusion. Any proposed project that meets the conditions set out in the regulation would not be required to undergo an impact assessment under the IAA.

Regional Assessment of Offshore Oil and Gas Exploratory Drilling East of Newfoundland and Labrador

Over the past eight years, the Agency has conducted twelve environmental assessments for offshore exploratory drilling projects in Newfoundland and Labrador and Nova Scotia, five of which are still ongoing. These environmental assessments have involved extensive studies, and analyses and engagement with Indigenous peoples and stakeholders. They also resulted in the reflection of a comprehensive number of standard mitigation measures in the conditions of approval. Building upon this experience and knowledge, the Government considered how the conduct of a regional assessment in that region could be used to improve the efficiency of the assessment process of these projects, while at the same time ensuring that the highest standards of environmental protection continue to be applied and maintained.

On April 15, 2019, the Minister—together with the Minister of Natural Resources, the provincial Minister of Natural Resources and the provincial Minister for Intergovernmental and Indigenous Affairs—established the Committee for the Regional Assessment of Offshore Oil and Gas Exploratory Drilling East of Newfoundland and Labrador (the Committee). Their goal was to undertake a regional assessment under the Canadian Environmental Assessment Act, 2012 (CEAA 2012) of the effects of existing and anticipated offshore exploratory drilling in the offshore east of Newfoundland and Labrador.

On February 29, 2020, the Committee submitted its final report, which included recommendations on how to best use the results of the regional assessment to aid decision-making, including specific requirements which could be included in Ministerial regulation that would apply to future exploratory drilling activities in the study area.

In addition to the recommendations that could be addressed through the Ministerial regulation, the Committee directed a number of broader recommendations to the Government of Canada and other parties. A Ministerial Response to the Regional Assessment Committee Report for Offshore Exploratory Drilling East of Newfoundland and Labrador (Ministerial Response) has been prepared by the Minister in response to these recommendations and is available at ‘’https://iaac-aeic.gc.ca/050/evaluations/document/134936?culture=en-CA’’.

Objective

The regulation codifies mitigation and follow-up measures that have been identified through the regional assessment and project-specific assessments. The objective is to improve the efficiency of the assessment processes of these projects, while maintaining a high standard of environmental protection.

Description

The regulation identifies the physical activity that is subject to the regulation and sets out the information that must be provided to the Agency when such a project is being proposed. It also sets out the area of application of the regulation (Schedule 1) and sets the conditions that must be met to mitigate against potential adverse effects (Schedule 2). Upon notification to the Agency, projects that are within the area of application and meet the regulatory conditions are not considered ‘designated projects’ and therefore, would not be subject to the impact assessment process under the IAA.

The regulation aligns with the policy intent set out in the Government’s public Discussion Paper and the intent of Parliament with respect to establishing conditions that must be met for the purpose of an exclusion under the Impact Assessment Act. The conditions have been reordered and wording has been adjusted to emphasizes requirements that a physical activity must meet in order to remain subject to the regulation. Consistent with current practice, proponents will be responsible for demonstrating the physical activity is undertaken in a manner consistent with the requirements set out in the conditions. Other changes from the Discussion Paper reflect the fact that the text has been reviewed and streamlined to reflect regulatory drafting practices.

Designation

The following activity, as described under s. 34 of the Schedule to the Physical Activities Regulations, is designated under the regulation as the activity to which the regulation applies:

34. The drilling, testing and abandonment, in an area set out in one or more exploration licences issued in accordance with the Canada Petroleum Resources Act, the Canada–Newfoundland and Labrador Atlantic Accord Implementation Act or the Canada-Nova Scotia Offshore Petroleum Resources Accord Implementation Act, of offshore exploratory wells in the first drilling program, as defined in subsection 1(1) of the Canada Oil and Gas Drilling and Production Regulations, SOR/2009-315.

Offshore exploratory wells in the first drilling program proposed by a proponent, as set out in the exploration license(s) provided by the Canada-Newfoundland and Labrador Offshore Petroleum Board (the Board), could be subject to the regulation as long as the project is proposed within the area of application of the regulation and, the activity complies with the conditions. The Board is the lifecycle regulator under the under the Canada–Newfoundland and Labrador Atlantic Accord Implementation Act and the Canada–Newfoundland and Labrador Atlantic Accord Implementation Newfoundland and Labrador Act (Accord Acts) for offshore oil and gas activities in the Canada-Newfoundland and Labrador offshore. A drilling program is the proponent-planned program for the drilling of one or more wells within a specified area and time and includes related drilling installations and activities. There can be more than one drilling program in an exploration license.

Information Requirement for Notification to Agency

When an activity that is described in the regulation is proposed to be carried out, a written notice must be sent to the Agency at least 90 days before that activity begins. The purpose of the notification is to inform the Agency as well as the public, Indigenous groups and stakeholders of the proposed project. The notice must include the information required in the regulation, including:

  • Information related to the proponents and the proposed activity, including contact information and the website where information on the project will be made publicly available;
  • A summary of all engagement conducted with Indigenous groups prior to notifying the Agency, as well as a summary of issues raised, how these issues have been considered and planned future engagement;
  • Information confirming that the project is within the area of application of the regulation;
  • Any federal funding that may be provided for the project;
  • A list of the permits, licences and authorizations that would be required for the project to proceed; and
  • If the project is proposed in a Northwest Atlantic Fisheries Organization Vulnerable Marine Ecosystem Closed Area, a copy of any mitigation measures that were submitted to the Department of Fisheries and Oceans.

Schedule 1 – Area of Application

This schedule of the regulation sets out the geographic scope for the purpose of the regulation. When considered as a whole, the coordinate points identified in this annex reflect the study area of the regional assessment.

Schedule 2 – Conditions

For this regulation to apply, offshore oil and gas exploratory drilling projects need to meet all the conditions established in the regulation. These conditions apply throughout the lifecycle of the project, including before, during or after drilling. This ensures that appropriate measures are in place to mitigate against any potential effects at every stage of the project. The Minister has established this suite of conditions per his authority under section 112(1) of the Act to ensure exploratory drilling programs exempt from project-specific assessment are subject to stringent conditions to mitigate any current or future adverse effects on the environment.

The regulation includes a comprehensive set of mitigation measures to address the potential effects of offshore exploratory drilling across a variety of environmental components including migratory birds, fish and fish habitat, as well as specific conditions for marine mammals, sea turtles, corals, sponges and other environmentally sensitive features.

The regulation also includes a set of measures to prevent accidents and malfunctions, or to mitigate the effects on the environment in the event of an accident or malfunction, as well as measures related to the abandonment of wells.

To verify the accuracy of the predictions of effects and the effectiveness of mitigation measures, the regulation also includes requirements for proponents to develop and implement follow-up and monitoring programs. Based on the monitoring and analysis undertaken as parts of these programs, the proponent will also be required to determine whether modified or additional mitigation measures are required. If new or modified mitigation measures are required, the proponent must implement them in a timely manner and continue monitoring activities to assess their effectiveness.

In addition to conditions that support environmental protection, the regulation also sets requirements around certain engagement activities that proponents will need to undertake, including requirements for specific parties to be engaged to inform the development of plans, programs or strategies. For example, the development of a Fisheries Communication Plan must be done in consultation with the Board, Indigenous groups and commercial fishers and the various follow-up programs must be done in consultation with relevant authorities. In circumstances where the regulation refers to requirements under the Canada–Newfoundland and Labrador Atlantic Accord Implementation Act, a proponent may develop one document to satisfy the requirements under the regulation and that act.

During the lifecycle of the project, the proponent will also be required to provide information to various authorities and make information available in order to support compliance monitoring, research activities and transparency. For example, the execution plan and schedule for undertaking the activity, as well as annual and final reports on the drilling program, must be provided to the Board. The regulation also requires key documents, such as information on follow-up programs and their results, to be made publicly available on the Internet and for Indigenous groups to be notified of the availability of these documents.

Regulatory development

Consultations with Stakeholders

The Discussion Paper on a Ministerial Regulatory Proposal to Designate Offshore Exploratory Drilling East of Newfoundland and Labrador for Exclusion under the Impact Assessment Act (Discussion Paper) was released for public comment on March 4, 2020. Views on the proposal were accepted until April 30, 2020 following an extension from April 3, 2020, in light of circumstances surrounding COVID-19. The Discussion Paper was published on the Agency’s website and outlined the proposed elements to be included in the regulation.

During the consultation period, several engagement activities were organized by the Agency with stakeholders (see section below for consultation with Indigenous groups). The Agency met with 8 Environmental Non-Governmental Organizations and 11 industry representatives. Overall, the Agency received 26 submissions: 13 from environmental non-governmental organizations, 2 from industry representatives, and 11 from individuals (including academics and consultants). The Agency also received 218 brief online comments mostly from individuals.

The Agency worked collaboratively with relevant federal departments and agencies to develop the regulation, in particular Environment and Climate Change Canada, Fisheries and Oceans Canada, and Natural Resources Canada. The Agency also consulted with the Board, as well as the province of Newfoundland and Labrador.

Overall, members of industry who provided feedback were generally supportive of the proposed process and content outlined in the Discussion Paper. It was noted, however, that consulting on a Discussion Paper and not on specific regulatory text led to some uncertainty.

Many non-governmental organizations and members of the public who provided feedback raised comments that spoke to broader issues, for example issues related to climate change, concerns related to offshore oil and gas development projects (i.e. production phase), cumulative effects of projects or comments on matters within the Board’s jurisdiction. Many of these groups expressed the view that these projects should remain subject to project-specific impact assessments. More specifically on the regulation, we received many suggestions on specific mitigation measures that a proponent should put in place to address the potential effects of these projects.

A great deal of interest from environmental stakeholders focused on certain special areas. Some environmental organizations suggested that certain special areas be closed to exploratory drilling activities. Other views heard included calls for the proponent to conduct more engagement activities and make more project information with respect to the project publicly available. Some also requested further clarity on the roles of different parties, such as the Department of Fisheries and Oceans Canada and the Board, or requested that the Agency take a more active role in regulating these proponents.

In response to the comments provided, a range of adjustments have been made to the final regulation. Some of those changes include modifications to the provisions for areas where there is an “other effective area-based conservation measure” in place. In these areas, the regulation now requires consultation with the Department of Fisheries and Oceans Canada in the development of a plan that sets out, among other things, measures to avoid or mitigate any potential effects with respect to the conservation objectives for those areas. This requirement will help ensure that the conservation objectives of these areas are met and may inform a determination as to whether an authorization would be required under the Fisheries Act. In addition to the above provision, the roles of different parties have been clarified throughout the regulation and additional requirements on proponents to consult in meeting these conditions was added.

Modifications were also made to provide greater clarity. For instance, definitions have been included and there is now more specificity on the relevant project metrics that must be included in the notification to the Agency.

Other suggestions were not taken up in the final regulation, such as:

  • those that were not possible given the legislative basis (e.g. request for the Agency to review the adequacy of a project notice because the IAA does not provide for an Agency decision to be made at the notice stage),
  • those that would have required publication of potentially confidential information (e.g. making additional information publicly available such as imagery around the nature and extent of a spill),
  • those that suggested specific technologies be used given that these may evolve quickly and may not always be the preferred option (e.g. drones for marine mammal monitoring), and
  • those that would be better addressed through the follow-up program of the regional assessment itself and subsequent updates to the regulation or through other government initiatives or regulations those that would be better addressed through:
    • the follow-up program of the regional assessment itself and subsequent updates to the regulation; or
    • other government initiatives or regulations.

In addition, with respect to the consideration of cumulative effects, the Committee noted that the consideration of cumulative effects was a challenge. Cumulative effects are inherently complex and difficult to assess and manage. While a Regional Assessment provided a holistic and proactive approach to considering cumulative effects compared to project-specific assessments and decisions, the inevitable uncertainty around the nature, intensity and spatial and temporal distribution of future activities and their effects, is something that should continue to be considered and reviewed as part of the general review of the regulation and the activities occuring under it . The Committee made reference to several planning processes (e.g. Land tenure planning, marine spatial planning) and possible future research as sources of future information in relation to cumulative effects. The measures identified in this regulation will reduce project-specific effects, and therefore reduce their contribution to cumulative effects. The monitoring and follow-up programs to be conducted will also enhance the understanding, and reduce uncertainty, with respect to the effects from these activities and contribute to the wider analysis of cumulative effects.

In order to ensure that environmental protection continues to be maintained, the Government commits to reviewing the regulation periodically, at the latest every five years, to ensure that any new information is considered and incorporated as necessary. This periodic review will consider the results of cumulative effects analysis. The Ministerial Response document that responds to the Committee’s recommendations also includes a Regional Assessment Oversight Committee that will provide, amongst other things, an on-going oversight of the predictions of effects and mitigation measures and an advisory function for the use and updating of the regional assessment. All advice and perspectives received from this committee will feed into any subsequent regulatory reviews. The Minister of Environment and Climate Change also has the power to designate projects if the specific circumstances of a project warrants it.

Modern treaty implications and Indigenous engagement and consultations

The assessment of modern treaty implications (AMTI) reports on whether implementation of the regulation will have any implications to Indigenous modern treaties. The AMTI concluded that there would be no implications for modern treaties, given that there are no modern treaties that overlap with the area of application of the regulation. Of the 41 Indigenous groups consulted as part of the Discussion Paper, the Labrador Inuit (Nunatsiavut Government) is the sole Nation that has a Modern Treaty Agreement titled the Labrador Inuit Lands Claim Agreement (LILCA). Although the LILCA has provisions related to conservation and management of fish, aquatic plants, fisheries or fish habitat, these provisions are limited to the Labrador Inuit Settlement Area and do not extend to the geographic scope of the regulation. The Labrador Inuit do not have section 35 rights in the regional assessment study area. They do have section 35 rights in the Labrador Inuit Settlement Area, near the coast of Labrador. Based on the findings of the regional assessment, there is a low likelihood of impacts to migratory species in the regional assessment study area and therefore in the Labrador Inuit Settlement Area.

Consultations on the Discussion Paper were part of a continuum of ongoing efforts to engage Indigenous groups on the effects of offshore oil and gas exploratory drilling east of Newfoundland and Labrador. The same 41 Indigenous groups were consulted during previous project-specific environmental assessments in the region and participated in the regional assessment to facilitate a more effective and efficient assessment process for these project types. Indigenous engagement and consultation on the regional assessment and the regulatory proposal allowed for their engagement at various points throughout the process.

The Agency notified all Indigenous groups of the opportunity to comment on the regulatory Discussion Paper and offered to meet with them. Due to the COVID-19 pandemic, the Agency met with only one Indigenous group in person, and met with 27 groups by teleconference. The Agency subsequently received submissions from 24 Indigenous groups.

In general, groups expressed concerns regarding the exclusion of future offshore oil and gas exploratory drilling by the regulation and expressed concerns around difficulties participating in the consultation process during the COVID-19 pandemic.

Concerns with the regulation included process concerns and questions about the role of the Agency in engaging Indigenous groups when notifications for future offshore oil and gas exploratory drilling projects are provided to the Agency. There was a desire for clear directions for the proponent on engaging with Indigenous groups, and oversight of this process. There were also requests for a robust review processes at the time of notification to determine whether exclusions apply.

With respect to mitigation measures, there was a desire for continued research and temporal/spatial restrictions on drilling with respect to Atlantic salmon. There were concerns expressed with references to Board compensation processes, which are limited and do not contemplate compensation for impacts to cultural fisheries. There were requests for the inclusion of minimum distance and timelines provisions for capping stacks to arrive on scene in the event of an accident or malfunction.

With respect to the involvement of Indigenous groups in future projects that are subject to the regulation, conditions for engagement with Indigenous groups are included before and while the project is being carried out. Section 3 of Schedule 2 sets out obligations on a proponent when conducting consultation activities that are required by the regulation. This includes the requirement for proponents to consult with Indigenous groups on how they would like to be engaged. In the schedule to the regulation, the word consultation, rather than engagement, is used in the schedule to the regulation with the common meaning of the term since it is used in reference to other entities and groups as well Indigenous peoples.

Before a project can proceed, the project’s notice provided to the Agency must include a summary of engagement conducted with Indigenous groups, including a summary of key issues raised and the results of the engagement, and a description of any planned future engagement. Engagement with Indigenous groups is also required on the Fisheries Communication Plan, Spill Response Plan, and the wellhead abandonment plan when it is required. The regulation also requires information to be reported to Indigenous groups during the project lifecycle, such as information about spills, collisions with marine mammals and turtles, or when certain documents are made publicly available. Indigenous groups will also be encouraged to engage in the periodic review of the regulation and as the Ministerial Response indicates, encouraged to engage in the review of the regional assessment itself through the Regional Assessment Follow-up Program.

In terms of concerns with respect to Atlantic salmon, the regulation requires that projects contribute to a research program with respect to the presence of Atlantic salmon in the Eastern Canadian offshore area. With respect to concerns raised regarding compensation for Indigenous fisheries and capping stacks, the Agency has shared these comments with the Board and Natural Resources Canada who have the legislative authority to manage these issues.

Given that the regulation sets out the measures to mitigate the effects of these projects, it is not expected to have implications or raise concerns with respect to Indigenous rights or future modern treaty obligations. These projects will also continue to be subject to the regulatory process of the Board, the lifecycle regulator for these projects under the Accord Acts, and will have to comply with requirements found under other legislation, including the Fisheries Act, the Oceans Act, the Canadian Navigable Waters Act, the Migratory Birds Convention Act, 1994 and the Canadian Environmental Protection Act, 1999.

Through these regulatory processes, the Government maintains the responsibility to meet treaty obligations, and fulfill the duty to consult and, where appropriate, accommodate when it considers conduct that might adversely impact potential or established Aboriginal or treaty rights.

Instrument choice

Other than the regulation, maintaining exploratory drilling projects as designated projects was also considered. As a designated project, proposed projects would provide a project description and enter into the planning phase. It is during the planning phase that the Agency determines whether an impact assessment is required, and if so, the type of assessment and the scope of factors to be considered in the review. In making this determination, the Agency must consider various factors, including the results of relevant regional and strategic assessments. Depending on the circumstances surrounding a specific project, the planning phase could result in a determination that no impact assessment is required. In the context of offshore exploratory drilling projects east of Newfoundland and Labrador, given the results of the regional assessment and the presence of a life-cycle regulator for these projects, it is possible that the Agency could determine that the proposed project would not be required to undergo an impact assessment or that the scope of the assessment could be narrower, which is consistent with the intent of Parliament as found in the provisions of the Impact Assessment Act.

While this option could ultimately achieve similar objectives as the regulation, it does not provide the same level of certainty and would not be as effective as the regulation. The potential effects of these exploratory drilling projects can effectively be mitigated by standard mitigation and follow-up measures. The regulation codifies these standard measures, with additional measures recommended by the Committee, all of which must be met in order for projects to be exempt from a federal impact assessment. The regulation also has the benefit of streamlining the approval process for these routine projects. Ultimately, in addition to ensuring that environmental safeguards are in place, the regulation will provide more certainty to proponents and stakeholders on the regulatory process and requirements applicable to these projects.

Regulatory analysis

Benefits and costs

The cost-benefit analysis assesses the difference between the baseline scenario (with no regulation) and an incremental scenario (with regulation). In the absence of the regulation, offshore exploratory drilling east of Newfoundland and Labrador would be subject to assessment requirements under the IAA and any conditions resulting from the approval of a project undergoing an assessment process. Having the regulation in place eliminates the need for project-specific assessments, as the regulation codifies the standard mitigation and follow-up requirements for these projects.

The baseline scenario includes:

  • Project proposals (described in the Physical Activities Regulations, which includes offshore exploratory drilling projects), would be required to provide a project description to the Agency that includes the information requirements set out in the Information and Management of Time Limits Regulations;
  • Projects would go through a planning phase to determine whether an impact assessment is required. The Agency would consider any regional assessment conducted in the region where the project is being proposed when determining whether an impact assessment is required;
  • If an impact assessment is required, the assessment would consider potential environmental, health, social and economic impacts of the proposed projects, including benefits and potential impacts to Aboriginal treaty rights. The results of the regional assessment would be considered when determining the scope of factors to be considered in the assessment; and
  • At the end of the impact assessment, a decision would be made on whether a project's adverse impacts are in the public interest. If the impacts are in the public interest, the project would be allowed to proceed and the Minister would establish conditions to be met by the proponent throughout the project life-cycle.

The incremental scenario includes:

  • Proponents of proposed offshore exploratory drilling projects that are described in the regulation would be required to notify the Agency in writing that they intend to carry out the project and include in the notification the information requirements set out in the regulation; and
  • The proponent would be required to comply with the conditions of the regulation throughout the lifecycle of the project.

The main benefit of the regulation is that it will improve the efficiency of the assessment processes for these projects, while maintaining a high standard of environmental protection as described below in the Strategic environmental assessment section. Given that no assessment will be required under the IAA for individual project proposals that meet the regulation, this will reduce time and costs for project approvals and will focus government resources on assessing projects with greater potential for adverse environmental effects. By codifying the mitigation and follow-up requirements to be met by proponents, not only will measures for environmental protection be in place but also certainty and predictability of the regulatory requirements applicable to these projects will increase. This increased certainty and predictability will help Canada to earn the confidence of the investment community, position itself to remain globally competitive and attract investments, which is of high importance during these unprecedented times and will help Canada’s economy recover from the economic impacts of COVID-19.

The main cost associated with the regulation was the cost related to the regional assessment used to inform the regulation. As required under subsection 112(2) of the IAA, the Minister may only make this regulation after having considered the regional assessment conducted. For this reason, the costs associated with conducting the regional assessment have been factored into this analysis. Generally, a regional assessment requires government time and resources to prepare for and conduct, including time and/or resources for Indigenous communities, the Canadian public and other stakeholders to contribute information and participate. However, the regulation will ultimately result in overall savings, as the evaluation of the effects of these projects will be streamlined through a regional assessment that considers all activities in the region, as opposed to conducting multiple project-specific assessments in the same area. There will also be costs for proponents related to providing information in the Agency notification and to complying with the conditions of the regulation, but the costs to comply with the conditions in the incremental scenario are expected to be the same as compliance with conditions costs in the baseline scenario (i.e., project-specific impact assessment). Overall, this regulatory approach is expected to result in a significantly lower cost for industry and for the public funds of the Agency, as the multi-year assessment process is eliminated.

It is not possible to predict with certainty the number of offshore exploratory drilling projects that may not be subject to assessment requirements under the IAA since project proposals are driven by economic conditions and other considerations that inform proponents’ decisions. However, it is expected that the number of project proposals in the region will increase within the next decade. As outlined in Through Advance 2030: The Way Forward on Oil and Gas, the Government of Newfoundland and Labrador has set a number of long-term targets to promote the industry, which includes the goal of drilling over 100 new exploration wells by 2030.

One-for-one rule and small business lens

The one-for-one rule and the small business lens do not apply to this regulation, as it is exempt from the Statutory Instruments Act in accordance with section 112(4) of the IAA. Regardless, it is not expected that the regulation would result in incremental administrative burden to businesses as the regulation ultimately codifies the same standardized measures that could be expected to result if a project-specific assessment were to be conducted. Small business impacts are also not anticipated as the type of project subject to this regulation is unlikely to be undertaken by small businesses.

Strategic environmental assessment

The regional assessment generally found that the expected effects of these projects relate to light and noise pollution, habitat alteration and the discharge of drilling waste. These effects have the potential to result in marine animal attraction or avoidance of the project area, contamination, smothering or other alteration of marine habitats (in particular to special areas that contain sensitive features), as well as interference with fishing activities, such as reduced access to the project area. However, these effects are expected to be short-lived as the average life of an exploratory drilling project is short and should not have important effects on human populations given project’s remote location (usually several hundred kilometres away from populated areas). These effects are also unlikely to be significant with the implementation of standard mitigation and follow-up measures.

Of particular concern may be environmental effects due to accidents or malfunctions resulting in large oil spills (e.g. blowout). However, large spills are extremely unlikely based on the history of offshore exploration drilling and the implementation of control measures such as spill release prevention measures and emergency response plans. These measures are designed to prevent accidents and malfunctions and in the event that it occurs, it would assist in early detection, prevention of spread, and clean-up.

Overall, the regulation will result in a positive effect as it codifies all of the standard mitigation and follow-up requirements included as conditions of environmental approval for recent exploratory drilling projects east of Newfoundland and Labrador – the same standardized measures that would be expected to result if a project-specific assessment were to be conducted – with additional measures added based on the recommendations in the Regional Assessment. This regulation also touches on a number of goals under the 2019-2022 Federal Sustainable Development Strategy, namely healthy coasts and oceans, healthy wildlife populations, and safe and healthy communities. For instance, the regulation will contribute toward the attainment of these objectives through the implementation of a comprehensive set of mitigation measures that will protect migratory birds, fish and fish habitat (including marine mammals and sea turtles), and human health. For special areas where the risk for adverse effects is greater, the regulation will require that proponents avoid corals and sponges and environmentally sensitive features. Where it is not technically feasible, proponents will be required to work with the Board and the Department of Fisheries and Oceans Canada to determine the appropriate course of action, thus ensuring that conservation objectives continue to be met.

Gender-based analysis plus (GBA+)

It is not expected that the regulation will have negative impacts on women, Indigenous people or disadvantaged groups, compared to a scenario in which there is no regulation and the federal assessment regime continues to apply to offshore exploratory drilling projects.

Unlike other resource development projects, due to its short life span, remote location and inaccessibility of project sites by anyone other than personnel, offshore exploratory drilling projects do not have the impacts typically associated with the influx of temporary workers to populated areas.

The province of Newfoundland and Labrador has one of the highest unemployment rates in the country, according to Statistics Canada. While unemployment in the country was at 5.7% in 2019, it was at 11.9% in the province and was as high as 18.1% in 2017. The oil and gas industry is the largest contributor to the province’s gross domestic product (contributing 25% of provincial GDP over the past 20 years), with an average direct employment rate of 5200 for 2018. As such, the industry plays an important role in supporting provincial and nationwide prosperity and it will be a critical economic driver for recovery from the COVID-19 pandemic.

The oil and gas industry as a whole has more men represented at all levels. Offshore exploratory drilling projects, fall within this broad sector and thus are expected to mirror these inequities but at a smaller scale than production facilities. Oil and gas projects generally have differential impacts and will benefit white men more than any other group. This means that while there may be economic benefits to women, those would more often be in the form of low paying, administrative or service industry jobs and often the result of indirect or induced employment. One obstacle for women’s participation in the industry has to do with their traditional role as caregivers, which is usually incompatible with the rotational schedules of offshore oil and gas facilities. The work culture in the oil and gas industry has also been linked to hyper-masculinity and can foster unhealthy behavioral expectations for men: these include working extensive overtime, and increased risk taking behaviours such as drug and alcohol use (which could result in mental health issues). Offshore exploratory drilling projects are unique in that they use a small workforce, are short term (approximately 30 days), and occur far from shore. As a result, some of the impacts associated with large, long-term projects with rotational staff may be different in exploratory work. Indigenous peoples might also be affected differentially, because of their unique cultural and historical context, resulting in a different manner in which they value the environment and in a different perception of potential effects, although, Indigenous peoples are not expected to be affected physically.

Industry and governments are working together to narrow the gap and address the issues presented by this traditionally male-dominated industry. For example, the Board requires as part of its approval process for production projects that proponents develop and implement Diversity plans and Benefit plans. These include requirements for the first consideration of hiring residents of the province, mandatory expenditure for research and development, education and training, as well as requirements to ensure training and employment opportunities are accessible to disadvantaged groups and individuals. The Regional Assessment Committee recommended that such plans be required for each offshore exploratory drilling project and that they be made publicly available. This recommendation was accepted as is described in the Ministerial Response. The Ministerial Response agrees that these could be required and made available for exploratory projects. As part of the Regional Assessment Follow-up Program, the Board has agreed to consider these recommendations and if it agrees, it will be developing additional guidance for proponents.

Regulatory cooperation and alignment

Responsibility for the Canada-Newfoundland and Labrador offshore area is shared by the federal and provincial governments through a unique joint management relationship. As the independent joint regulator representing both the Government of Canada and the Government of Newfoundland and Labrador, the Board administers a robust and rigorous regulatory regime under the Accord Acts to ensure the safety of workers and protection of the environment prior to the issuance of regulatory authorizations for any offshore activities. The regulatory regime, and the Boards’ policies and guidelines take into account international best practices for environmental assessments and reviews to ensure there is alignment in regulatory practice across leading offshore jurisdictions.

The regulation is one component of a broader federal and provincial undertaking to modernize Canada’s offshore oil and gas regime to align with comparable offshore jurisdictions, improve sector competitiveness, and strengthen environmental performance and operational safety. This includes recent updates to standardize the land tenure process in the offshore areas of Canada-Newfoundland and Labrador and Canada-Nova Scotia, ongoing work to modernize operational regulations that govern Canada’s frontier and offshore oil and gas sector, and development of permanent occupational health and safety regulations under the Accord Acts.

The regulation introduces a framework where the overall assessment timelines for offshore exploratory drilling projects will be closer to timelines in comparable jurisdictions, such as Norway, Australia or the United States’ Gulf of Mexico. The average timeline for approval of an exploratory drilling program in these jurisdictions is 108 days (approx. three months). In Norway specifically, this timeline relates to the regulatory process that follows a regional approach, where a regional impact assessment of a defined offshore area is completed before a decision is made to open that area for oil and gas exploration and development. Exploratory drilling projects in the Canada-Newfoundland and Labrador offshore area that comply with the requirements set out in the regulation will be exempt from a 570+ day (approx. 18+ months) assessment process under the Impact Assessment Act that otherwise precedes the three-to-six month regulatory review under the Accord Acts by the Board. Under the new scheme, exempted projects will remain subject to a rigorous review by the lifecycle regulator, the Board. The duration of the Board’s review is expected to be consistent with past practice (approx. three to six months).

The regulatory approach recognizes that offshore exploratory drilling is a low-risk and time limited activity (30-90 days) across international offshore regimes, and that assessment should align with, and reflect the scale of, the activity.

Implementation, and compliance and enforcement

Implementation

This regulation comes into effect on June 4, 2020.

When a proponent is proposing to carry out a project that is described in the regulation, it must notify the Agency in writing of its intention to do so (ss. 112(3) of the IAA and s. 3 of the regulation). The notification will be required at least 90 days prior to the start of a drilling program. If a project is proposed to be carried out within certain Northwest Atlantic Fisheries Organization areas, a copy of any proposed mitigation measures must also be provided to the Department of Fisheries and Oceans.

Once the Agency receives a written notice, the Agency will verify that the proposed project type is designated by the regulation and is located within the geographical area covered by the regulation. The Agency will then post the notification on the Impact Assessment Registry (the Registry) to inform the public, Indigenous groups and other stakeholders that such a project is being proposed. Compliance with the conditions of the regulation is required throughout the lifecycle of the project, including before, during and after drilling.

Following the submission of a notification to the Agency, proponents will work directly with the Board. The Board works closely with proponents and federal departments such as the Agency, Fisheries and Oceans Canada and Environment and Climate Change Canada to ensure that oil and gas activities, including exploratory drilling, adhere to all applicable standards, guidelines, and regulatory and legislative requirements.

All offshore exploratory drilling projects that are subject to this regulation will also continue to be subject to, and be required to comply with, requirements found under legislation such as the Accord Acts, Fisheries Act, the Oceans Act, the Canadian Navigable Waters, the Migratory Birds Convention Act, 1994 and the Canadian Environmental Protection Act, 1999.

No exploratory drilling activities can proceed in the Canada-Newfoundland and Labrador offshore unless the Board has issued authorizations under the Accord Acts, including an Operations Authorization and an approval to drill a specific well. For projects exempt from the IAA, the Board will not issue these authorizations unless a proponent has demonstrated compliance with any condition that must be met prior to the start of a drilling program.

In order to ensure that the highest standards of environmental protection continue to be maintained over time and the effectiveness of the streamlined process, this regulation will be reviewed periodically, at the latest every five years, and will take into account any updates to the regional assessment. For proponents that have already provided notice ahead of any updated regulation, the intent is that their projects would continue to be subject to the requirements in place at the time of notification.

There are no transitional provisions under this regulation for offshore exploratory drilling projects subject to an environmental assessment under CEAA 2012. However, the regional assessment has been designed to meet the requirements of both CEAA 2012 and the IAA. For project assessments that have commenced and are still ongoing under CEAA 2012, discussions will take place between the Agency and proponents in the context of each individual project on how the regional assessment could be utilized to support the remaining steps of each assessment process.

Compliance and enforcement

Under the Impact Assessment Act, enforcement officers are empowered to verify compliance and enforce the provisions of the Act, including any Ministerial regulation that is established in relation to the regional assessment. The IAA provides the means for enforcement officers to conduct both on-site and off-site inspections and measures to prevent non-compliance with the IAA. In addition, all conditions that must be met by proponents in the Ministerial regulation could be incorporated by the Board as a requirement of their Operations Authorization. Under the Accord Acts, the Board is responsible for the enforcement and compliance of any conditions incorporated into its Operations Authorization.

The Agency is working with the Board to develop mechanisms for cooperation. This could include the Board, prior to issuing an Operations Authorization, providing the Agency with confirmation that:

  • Pre-drilling conditions have been met by the proponent, including all related consultation and publication requirements;
  • All conditions that must be met by a proponent are incorporated into the Operations Authorization and are enforceable under the Accord Acts.

The Agency would post such a confirmation from the Board on its website.

In addition, proponents will be required to post on the Internet and update a schedule relating to each condition set out in the regulation, including all activities planned to fulfill the conditions and the commencement and estimated completion timelines for each of these activities.

This approach builds on past and current practice, whereby the Board takes up decision statement conditions into its Operation Authorization and then enforces those conditions.

The Agency also designated the Board’s enforcement officers under CEAA 2012 to verify compliance with offshore exploratory drilling projects. The transitional provision under s.177 of the IAA recognizes these enforcement officers and extends their designations for compliance and enforcement activities under the IAA. The Agency will work with the Board’s designated enforcement officers to verify compliance under the IAA.

Contact

Stephanie Lane
Director, Legislative and Regulatory Affairs Division
Impact Assessment Agency of Canada / Government of Canada
iaac.regulations-reglements.aeic@canada.ca

Directrice, Direction des affaires législatives et réglementaires
Agence d'évaluation d'impact du Canada / Gouvernement du Canada
iaac.regulations-reglements.aeic@canada.ca

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