Doug Matthews On legacies: Some are good, and some not so much Fallout from the JRP report goes far beyond the MGP

The thing about being dead is that it’s going to last a very long timeand that people will forget all about you after a while. Unless, of course, you’ve done something to help them remember you, like leave behind a legacy.

Lots of rich people have figured that out and so we have Carnegie libraries and Rockefeller museums and Gates foundations: Things left behind to help those who follow remember those who have gone.

But legacies can also be bad. One need look no further than the recently concluded work of the Joint Review Panel looking into the Mackenzie Gas Project.

The North has long had a bad reputation when it comes to getting things done. While there is a blend of truth and fiction in all reputations, so many industry observers have complained for so long of their frustrations in dealing with the North’s convoluted regulatory regime that one suspects there is considerably more truth than fiction being spoken.

Despite that, not much has changed. Distant federal officials, uncertain locals, industry stubbornness and the development of diamond mines, despite the reputation, conspired to keep needed changes unmade.

But then along came the JRP and no one could avert their eyes anymore. The length of the hearings, their cost, the foolishness of much of the output, the National Energy Board’s rejection of half of the 176 recommendations, all of this has forced the federal government to address regulatory change in the North, and we are now going to get it in spades.

The North will now become “user-friendly” in a way that will bring praise from the lips of the leaders in Calgary but perhaps not so much from those in Inuvik or Norman Wells.

The changes can be broadly grouped into three categories: move the regulatory process along faster; change the rules where necessary; and make sure that the locals don’t get to hold things up any more than necessary.

First, the federal government will move the responsibility for environmental assessments of oil and gas activities in the North from the Canada Environmental Assessment Agency to the National Energy Board in order to “accelerate regulatory reviews,” as the most recent federal budget clearly put it.

Just how the NEB will accomplish this “acceleration” is not clear and industry may be hoping for a bit too much. The NEB was represented on the JRP, after all, and how three board members will move things along faster than one is an open question.

Rule changing will come in the Beaufort Sea, where the NEB is planning hearings into the matter of same-season relief-well capacity, an issue that helped sink the Isserk hearings so many years ago.
The problem here is straightforward. Current federal policy calls for a company to be able to drill a relief well in the same season as a blow-out, should one occur. The logic is obvious: You don’t want to have a well leak oil under the ice all winter until the next open water season when a relief well can be drilled.

But industry doesn’t like this and the policy is threatening to hold up, if not stop, planned Beaufort drilling. Industry would prefer that the regulators be less “prescriptive” and more “goal-oriented” in their approach to well control, and allow companies to work the wells as they think best.

While this change would make life easier for industry, it moves all the risk to the Inuvialuit, with very little reward to compensate them.

And last, the matter of meeting and concluding agreements with Northern land-claims groups will be changed, not to the advantage of the Northern groups.

Starting with the latest call for bids in the NWT, the terms under which an exploration license will be issued to the winning bidder have changed and the license need not be issued once the bids are in and a winner has been declared.

Now, the winner will have up to six months to “test the Northern waters” and, if the company doesn’t like what it sees (if, say, the Northern groups are too demanding in their access and benefits expectations) it can just walk away from the bid and the Minister needn’t bother issuing the license.

You can imagine how this changes the balance of power between the oil companies and the Northern groups, and you can imagine which gets the better negotiating position from now on.
Doug Matthews, former director of the NWT’s minerals, oil and gas division, is an energy consultant.