North·In Depth

Beaufort Sea oil and gas licences shouldn't be held forever, says Inuvialuit leader

The chair of the Inuvialuit Regional Corporation says the federal government shouldn't allow companies to sit forever on significant oil and gas finds without trying to develop them.

IRC chair wants significant discovery licences addressed in review of Canada Petroleum Resources Act

A federal appointed is expected to deliver his report at the end of May on whether the licences to explore for oil and gas in the Beaufort Sea should be extended. At issue for the companies holding the licences are millions of dollars they've already put down in deposits. (Jonathan Hayward/Canadian Press)

The chair of the Inuvialuit Regional Corporation says the federal government shouldn't allow companies to sit forever on significant oil and gas finds without trying to develop them. 

"We've had resources here that have been found for nearly 50 years and we're still waiting for them to be developed, and that's no benefit to the people in the region, the territory or Canada as a whole," said Duane Smith, the chair of the Inuvialuit Regional Corporation.  

Duane Smith, the chair of the Inuvialuit Regional Corporation, says the federal government should revisit legislation that currently gives the companies the right to indefinitely sit on significant oil and gas finds without producing them. (David Thurton/ CBC)

Smith's comment comes as a federal appointee nears the end of his review of the Canada Petroleum Resources Act (CPRA), the act that spells out how the government divvies up the rights to explore for and produce oil and gas. 

The launch of the review last July came just weeks after the National Energy Board received a request from Imperial Oil and BP. The companies want the act changed so that their nine-year licences to explore for oil in the deep waters of the Beaufort Sea — about 175 kilometres north-northwest of Tuktoyaktuk — can be extended to 16 years.

The companies, who have put off their plans to explore, say they need more time to complete the regulatory work leading up to exploration, namely, figuring out how to drill a required same-season relief well (or an effective alternative) in the event of an oil spill.

Big money at play 

There's a lot of money riding on whether those extensions are granted. 

In order to secure the rights to explore their offshore parcels, Imperial Oil and BP gave the federal government security deposits totaling about $445 million — 25 per cent of the work proposal bids.

If they don't drill a well within a certain period of their nine-year licence term, they forfeit a portion of that $445 million. 

Exploration licences 476 and 477 are the two parcels of primary focus held by Imperial Oil and BP, though the companies have put off drilling plans, saying the current time frames of their licences don't get them enough time. (Imperial Oil )

Just over two weeks after the companies made their extension request to the NEB, Bernard Valcourt, then-minister of Indigenous and Northern Affairs Canada, appointed former National Energy Board member Rowland Harrison to review the CRPA, which Harrison helped write.

Valcourt's successor, Carolyn Bennett, agreed to let Harrison's review continue. His report is due May 31.

Companies shouldn't tie up resources forever: IRC 

Harrison recently circulated a paper outlining key concerns about the CPRA expressed by "stakeholders" — including the Inuvialuit Regional Corporation and offshore licence holders such as Imperial Oil, BP and Chevron. 

Those concerns extend beyond the term of exploration licences to whether a company's exclusive right to develop an oil and gas discovery — under what's called a significant discovery licence (SDL) — should remain unbound by time limits.

Smith doesn't think it should. 

"That section needs to be further fine-tuned or refined so that it's much more understandable that resources should not be held forever without being developed," he said.

"The government does have the ability to direct a company with an SDL to begin to move toward production and a commercial licence. How they conduct that is not as clear as it could be, so what we've suggested to Mr. Harrison that's one grey area that needs to be clarified."

Companies currently hold the rights to 48 significant discoveries covering almost 200,000 hectares in the Beaufort Sea. None of those discoveries has led to oil production.  

The federal government has issued 48 significant discovery licences in the Beaufort Sea, but none of those discoveries have been produced by companies.

In its 2014 Northern Oil and Gas Report, Indigenous and Northern Affairs reasons that tenures for SDLs remain indefinite because "some discoveries may not be immediately economic to produce."  

Act doesn't reflect new age of climate change 

While Smith is eager to see oil and gas activity in his region, that hope is tempered by a desire to see work carried out with strict attention to the environment.

"It's a balancing act: we need some form of economic activity to stimulate the economy so that we're looking after the health and well being of our communities, but also trying to ensure that we're having the smallest impact on the environment at the same time."  

When the CPRA was enacted in 1985, it was accompanied by a development-friendly policy statement titled "Canada's Energy Frontiers: A Framework for Investment and Jobs."

"It has been suggested in discussions to date that such a policy focus should no longer be the primary underpinning of the CPRA and that the act should reflect broader contemporary concerns and current government policies, particularly relating to the environment and climate change," wrote Harrison in his paper. 

"It has also been suggested that regional or strategic environmental assessments should be undertaken before rights issuance processes are initiated under the act."

Budget 2016 set money aside for Beaufort Sea research  

The Inuvialuit recently requested just that kind of assessment for the Beaufort Sea, a call that appears to have been answered in the 2016 federal budget unveiled last week.

The Liberal government's 2016 budget last week announced money for the compiling of traditional knowledge about the Beaufort Sea, ahead of a decision to allow future drilling there. (Justin Tang/Canadian Press)

The budget calls for $19 million over five years to be spent on gathering research, including traditional knowledge, to help regulators eventually decide if oil and gas activity should proceed in five areas of the Arctic, including the Beaufort Sea.

"That begins addressing some of the issues that industry is raising on why they think there should be an extension on their time frame: so that there's adequate time to gather the knowledge that's required to address any potential [environmental] review that would take place," said Smith. 

"It gives me some comfort that they have taken [the request for an assessment] seriously."

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