N.W.T. set to revamp decades-old oil and gas laws

The Northwest Territories government is taking the first steps of modernizing oil and gas legislation it inherited from the federal government after devolution in 2014.

Oil and gas legislation in the territory a holdover from before 2014 devolution agreement

The Government of the Northwest Territories is hoping updated oil and gas laws will attract investment in the territory. Pictured here is an aerial view of one of Seven Generations Energy's drilling operations in the Montney, a huge deposit in Alberta. (Seven Generations Energy)

For the first time in decades, petroleum legislation in the Northwest Territories is getting a makeover.

In 2014, the territorial government inherited authority over its lands, minerals and onshore petroleum resources from the federal government. Rather than write new legislation, territorial leaders mirrored existing federal legislation, creating the Petroleum Resources Act and Oil and Gas Operations Act.

The Petroleum Resources Act sets the rules around how a company can get permits to explore for and produce oil on N.W.T. lands. The Oil and Gas Operations Act regulates what happens once a company starts exploring for or producing oil and gas.

Rules regulating offshore oil and gas exploration and development remain a federal responsibility.

Onshore-specific rules

Over the next year, the territory's leaders plan to explore ways to streamline the laws and increase transparency. Specifically, the government is looking to:

  • Create a more consistent and predictable regulatory system
  • Create more transparency and public accountability
  • Update the laws to reflect current risks, best practices and standards
  • Increase the N.W.T.'s competitiveness in the global oil and gas market

This update is a great opportunity, according to energy analyst Doug Matthews, who is based in Calgary.

"The existing petroleum legislation which the [territorial government] had to inherit following devolution is really old stuff, dating back to the 70s and 80s," he said, adding part of the problem is it was developed with offshore development in mind.

Energy analyst Doug Matthews sees opportunity in the N.W.T. government's plan to update oil and gas regulations. (David Thurton/CBC)

"What you need for Hibernia [oil field] is not the same for what you need for say, Cameron Hills. So I think the government has a great chance here to develop an onshore specific petroleum regime."

A public document released by the territory last week states the proposed updates to the laws are just a first step and aren't intended to be "comprehensive."

"It is the first step in what will be a longer-term process of review designed to address the most immediate concerns identified since devolution."

What are those concerns?

"How to handle shale? That's going to become a big issue going forward," Matthews said.

Shale-oil development, or fracking, is a method of blasting high-pressure water into rock to release the oil or gas inside.

Because fracking is a relatively new technology, current legislation doesn't address it — Matthews says there is a great opportunity right now for that to change.

Pre-bid qualifications, differing lease terms

Matthews also suggested the government could write up "pre-bid qualifications" for known oil and gas reserves in the territory.

As it is right now, he said, companies bid on an exploration lease, and get a six-month period where they can negotiate with local or First Nation governments.

"If at the end of the six months they can't get along with the locals and their demands, the company can walk away from its bid," said Matthews.

Instead, he suggested the territorial government could work with Indigenous people and other residents to outline expectations and concerns before the bidding process takes place.

"It's not new thinking," he said."But anything much past 1912 is new thinking to Ottawa."

"It's an opportunity for the [territorial government] again to say, 'Hey we can do something different.'"

Matthews also suggested ways to update rules that allow companies to sit on areas deemed to be "significant discoveries," in perpetuity.

He explained the rules are currently written this way with offshore development in mind.

"A company could find, say in the Beaufort Sea for example ... a very good field. But there [is] no infrastructure whatsoever to get that product to market," he explained.

"A significant discovery licence that would essentially allow the company to keep the field, keep the licence, until such time it was economical [to develop]."

In the N.W.T., there are a number of onshore oil-and-gas-rich areas in the Sahtu and Dehcho regions that already exist near pipelines, making indefinite licenses unnecessary. Instead, Matthews suggested tailoring licence lengths for specific areas depending on their proximity to oil production infrastructure.

He suggests making licenses in the Gwich'in, Inuvialiuit and Sahtu regions indeterminate, then 10 years in more established regions like Norman Wells and then only seven years in the Cameron Hills area near the N.W.T.'s border with Alberta. 

What's next?

The territorial government will be travelling across the Northwest Territories this spring, looking for public feedback. The government will be in Fort Simpson March 13, Fort Liard March 14, Norman Wells March 26, and Inuvik on March 27.

Then, the government plans to develop draft amendments, consult with Indigenous governments over the course of the next year, and introduce the new rules to the legislative assembly in the summer of 2019.