NEB security deposit rules a 'disaster' for energy industry

Oil and gas exploration companies say new security deposit requirements are going to push them out of business.

Regulations requiring funds be kept to pay for disasters will put energy developers out of business, juniors say

New NEB rules will require energy companies to set aside money to clean up a worst-case disaster -- something the industry says may put smaller firms out of business (Norm Betts/Bloomberg)

Oil and gas exploration companies say new security deposit requirements are going to push them out of business.

The issue came up yesterday at the Prospects North conference in Yellowknife, following a speech by the head of the National Energy Board.

Under new rules, the board is requiring exploration companies to set aside enough credit to cover a worst-case environmental scenario.

That's a big departure from how things used to be, energy analyst Doug Matthews says.

"Originally, you could say — in the event of a blowout — a thousand barrels would escape and then the blowout preventer would kick in and stop the flow," Matthews explains. 

"In the worst case scenario, the blow-out preventer didn't kick in. You have to really take a look at what all could go wrong, and that of course can lead to a much higher cost estimate."

Privately held Calgary-based Explor collects seismic information around potential resource deposits to sell to larger companies. President Allan Chatenay says the new security deposit rule won't leave companies like Explor with enough money to do business.

Higher costs

"Based on the guidelines in their current format, there's absolutely no way we could meet them," he said. "There's no way any aboriginal business here, no aboriginal corporation that wanted to drill on their own land could meet them."

"You could imagine what would happen in this room if we all had to pre-pay for the worst case scenario before we left. It's the end of the industry here. It's a disaster," Chatenay says. 

Explor is currently appealing a NEB decision on one of their seismic projects in the central Mackenzie Valley

Although the NEB is already applying the new requirements, they are still under review. It's giving industry until Oct. 31 to comment on the new rules.

But the industry is already saying these new requirements are the NEB reacting to Deepwater Horizon blowout in the Gulf of Mexico. They say that massive disaster should not be the precedent for regulating the industry here.

National Energy Board chair Gaetan Caron says companies can appeal decisions the board makes on security deposits.

"They can apply to the NEB to have people reconsider and set a different amount," Caron says. "So in the case of Explor … the matter is before the National Energy Board for possible reconsideration."

Caron says because Explor is appealing, he can't comment on its specific case.

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