If you’re confused by comments around changes being made to laws and regulations governing energy project management offshore, you’re not alone. There are overlapping actions by governments making changes to regulators, editing the existing details of oil and gas project rules and, separately, developing a regulatory framework for offshore wind power developments. There’s also ongoing work to create a whole new “inshore” offshore management area for Newfoundland and Labrador, for potentially even faster wind developments. That’s all on top of activity related to areas onshore.

With both our own questions and fielding more from people trying to understand what’s happening, Atlantic Business Magazine has attempted to provide at least some greater clarity on changes to the regulation of heavy industry offshore tabled in the House of Commons, and the changes still under discussion behind closed doors in St. John’s.

 

Accord Acts changing

Generally speaking, people may understand offshore oil development in the region is covered by the Atlantic Accords. “Atlantic Accords” includes both the 1982 Canada-Nova Scotia Accord (revised in 1986), and the 1985 Canada-Newfoundland Accord (or, if just one, it’s “Atlantic Accord”).

Beyond these political agreements, laws were introduced at the provincial and federal levels to give detail and legal life to the agreed approach for offshore oil and gas management and revenue sharing. In Nova Scotia, the life-giving law is the Canada-Nova Scotia Offshore Petroleum Resources Accord Implementation Act, while Newfoundland and Labrador has the Canada-Newfoundland and Labrador Atlantic Accord Implementation Act. These are the “Accord Acts.” Conversationally, or in related coverage, it’s not unusual for people to refer to the Acts when they really mean the foundational, political accords, or vice versa. But the Accord Acts are what detail and dictate everything from the number of appointments to each province’s offshore regulatory board, provincial and federal seats, to timelines for ministerial decisions on proposed work, to the permits required through offshore oil and gas exploration and production.

What the federal and provincial governments are doing now are the most significant changes to the Accord Acts since the laws were established in the 1980s.

Of course, it was oil and gas when all of this came together. It may feel pedantic to highlight the fact or point out there is a difference between the Atlantic Accords and the Accord Acts, but the Atlantic Accords are specific to petroleum resources and these political agreements aren’t being amended in the work ongoing. What they’re working on now is just the Accord Acts, to add details related to renewable energy.

More recently, there has been a surge in interest in renewable power projects offshore Atlantic Canada, and particularly offshore wind farms. In clarifying the management of offshore wind farms, the federal government first settled the Canadian Energy Regulator Act and worked to settle the Offshore Renewable Energy Regulations. Nationally, it sees the Canada Energy Regulator (CER) taking the lead on offshore wind, with related rules in place, unless agreed otherwise. That’s just to say Canada does have laws covering offshore wind.

But here, thanks to the Accords and the laws behind them, both Nova Scotia and Newfoundland and Labrador had regulatory bodies already established and operating as an Eastern offshore watchdog. They have staff with expertise in regulating specifically offshore heavy industry. It made sense to look at allowing an expansion of the existing boards here—the Canada-Newfoundland and Labrador Offshore Petroleum Board (CNLOPB) and the Canada-Nova Scotia Offshore Petroleum Board (CNSOPB)—and have the staff, as is now expected, take the lead on wind power projects, in addition to oil and gas. Even just the staff familiarity with the local geography and environment is considered a plus by several individuals familiar with both offshore oil and wind industry who have spoken with Atlantic Business Magazine about the decision to use the local boards instead of the national regulator. Both boards will be renamed as “energy regulator” to reflect their broader mandate.

A federal Bill tabled in the House of Commons (C-49), through first reading on May 30, proposes the change as part of a long list of changes to the old Accord Acts. The Bill has yet to receive second reading. Before taking effect, outside of Ottawa, mirror changes will eventually also have to be introduced at the provincial level and clear the provincial legislatures. In Newfoundland and Labrador, there was a suggestion they could be introduced as early as the fall sitting, though that’s still to be determined.

Oil and gas changes

The federal Bill cracking open the Accord Acts is not unlike a budget omnibus Bill in that the initial headlines can’t cover all of the changes proposed. In this case, while politicians federally and provincially have emphasized Bill C-49’s changes related to regulation of offshore wind developments, little was said about changes not related to wind power.

These are proposed changes specific to management of offshore oil projects. Some are minor edits. Others may see a higher profile in the months ahead, depending largely on response from individuals and companies active in Canada’s offshore oil and gas industry.

As an example, one change proposed would introduce a 25-year term on significant discovery licences for oil and gas. That’s new.

Why 25 years? “The 25-year term is considered a reasonable timeframe to expect an operator to move from beyond the exploratory stage to the evaluation of potential production,” stated an emailed response from staff with Natural Resources Canada, in response to questions.

“The specific 25-year term was chosen following a review of international peer jurisdictions and extensive negotiations with the oil and gas industry. Other offshore jurisdictions have different land tenure systems, but none have licenses with an indefinite tenure,” it stated.

In a breakdown of the Bill, staff with McCarthy Tetrault have highlighted the fact the 25-year limit would not apply to existing licences.

Another example of a change proposed is in relation to marine protected areas. In at least one initial news report on the Bill, coming out of the briefing held in Ottawa, it was described as having clauses to, “allow the ministers to stop activities in (protected) waters covered by the Accords.” In a sense that’s true. The power was there before, but the pathway to hopefully avoid legal snafus, drawn-out cases and costs not so much. The changes proposed would help with that. To go a little deeper, there are a number of ways marine protected areas—when designated—might affect existing oil and gas interests. Protection of a large offshore area can easily clip or even encapsulate an existing exploration license area, for instance. The Bill proposes the introduction of a legal provision for “negotiations for compensation” with affected companies. Atlantic Business Magazine was told having the clause in the Act will provide certainty to industry on how the issue would likely be approached. As a theoretical, for example, when an established or proposed marine protected area overlaps with an existing interest, the updated law would make it clear governments can negotiate the surrender of the oil company interest, with agreed compensation in return. If an agreement can’t be reached, the federal minister could seek to cancel the interest anyway, and issue what it deems fair compensation. Of note, the Bill doesn’t specify what the compensation would have to be.

There’s more. At Cox & Palmer, partner Todd Stanley mentioned he’s noted the governments appear to also be, “creating regulatory authority over access to installed infrastructure for the development of satellite fields.” When reached by Atlantic Business Magazine this week, the former deputy minister and Newfoundland and Labrador deputy attorney general who has extensive experience as lead counsel on matters relating to the offshore was reviewing Bill C-49, writing observations expected to be published on the firm’s site in the near future.

Again, it remains unclear what if anything might become an industry or public issue, or a hiccup in the federal and provincial legislatures, as the federal C-49 and eventual provincial mirror bills proceed.

 

Nova Scotia offshore wind

The laws giving life to the Accords for Nova Scotia and Newfoundland and Labrador already have some differences. It’s also where things start to get a little more complicated.

Nova Scotia has “Schedule 1” attached to its existing Accords Act. It’s a very detailed description, down to latitude and longitude references, describing agreement on what exactly constitutes the Nova Scotia inshore versus offshore area—provincial area in the salt water.

Apart from any other legal considerations, as you approach the shore of any province, it can become difficult to definitively say what would be in provincial or federal jurisdiction. As described by West Coast Environmental Law: “The boundaries for coastal provinces typically include all land to the “low tide mark” (the level reached by the tide at low water), as well as all “inland waters,” meaning the area between headlands such as bays, harbours, and coves (historically referred to as inter fauces terrae, “within the jaws of the land”), including the seabed in those areas.”

Basically, if you have a bay, set a line across the mouth and anything within the bay can be argued as wholly provincial area, and the responsibility of the province to manage when it comes to proposed developments like wind turbines. It creates what has been referred to as an “inshore” management area. The province can theoretically set regulations allowing it to move even more quickly in certain matters than might be possible in a jointly managed area further from shore.

The trouble in setting this area as a going concern comes when people start to dispute things like where to rightly set the line—what the headlands are, for instance. And if a great deal of activity is potentially going to come around these closer-to-shore areas, it makes sense for governments to sit down and spell out exactly where the lines are.

In the context of the Accords, Nova Scotia moved on gas projects, including offshore-to-onshore pipelines, which is surely part of what accounts for the differences in the legal details and differences between what it has in place with the federal government, and what Newfoundland and Labrador has in place. In Schedule 1, Nova Scotia and Canada have already set coastal details. In Newfoundland and Labrador, not so much.

And in Nova Scotia, right now, proponents like EverWind Fuels have already been public about their interest in seeing offshore wind development, to help facilitate green hydrogen and ammonia developments. Offshore wind can help power them and their desire to grow. Public discussion of offshore wind is, generally speaking, more advanced.

The Government of Nova Scotia has an announced target for 5 GW of electricity from offshore wind by 2030. At the time of introduction of C-49 in Ottawa, the Government of Canada stated: “Passing this legislation is a priority for Canada and for Nova Scotia and Newfoundland and Labrador. Nova Scotia has announced its intent to have the proposed new Canada-Nova Scotia Offshore Energy Regulator launch a call for bids by 2025, and it is the Government of Canada’s intent to meet this timeline.”

The Nova Scotia government has since released the first module of an Offshore Wind Roadmap for the province. It includes the 2025 goal related to the jointly managed offshore area. However, per the document, the province hasn’t discounted the idea of getting to licensing (issuing seabed rights good for wind installations) in “nearshore” provincial area as early as next year.

“The first commercial offshore wind project(s) in Nova Scotia may play a role in decarbonizing Nova Scotia’s grid. With this, the province of Nova Scotia is investigating opportunities to provide offshore wind developers with further off-take certainty as a ‘buyer of last resort,’ should early projects not secure off take through (possible clean fuel production) or export routes,” the government stated in the first piece of its roadmap.

 

 

Newfoundland and Labrador “inshore”

In Newfoundland and Labrador, there is no similar roadmap and fewer formal target dates for offshore wind licensing rounds. That can in part be explained by the much greater onshore area, with a lands process ongoing. Onshore wind is, apart from anything else, cheaper to develop than offshore. However, the need to define the inner boundary for the offshore area is also a hang-up.

The very fact the work was being undertaken was revealed in a comment by Premier Andrew Furey, in response to questions at a press conference about Bill C-49. When Furey began talking about an “inshore” area for regulation, it was not at all clear in the moment what he was talking about. Cox & Palmer’s Todd Stanley said it’s something he’s looking at closely.

“Newfoundland and Labrador has never had a detailed definition as in Nova Scotia, where the inner boundary of the CNSOPB’s jurisdiction has been carefully set out, with the effect of leaving a number of inland bays and inlets within the ‘jaws of land’ as being defined to be within Nova Scotia, and not in the offshore area, despite being salt water. This was never an issue for the Newfoundland and Labrador petroleum industry, where all discoveries have been hundreds of kilometres offshore, but may be more of an issue for near shore offshore renewable projects. This is very technical work, but if agreed between the parties should result in areas in Newfoundland and Labrador that are within the ‘jaws of land’ being defined as being outside the jurisdiction of the (joint regulator) and as a result entirely regulated by the province,” he said, in an email.

Elements of Bill C-49 make it clear all of the regulations in the offshore won’t automatically apply in the provincial area—including rules around land tenure activities, general regulation of projects and mechanisms for delivering related revenue to the government. In whatever is ultimately deemed provincially controlled area, the province would have the ability to set its own timelines, requirements, fees.

“Going forward, any renewable energy project in provincial waters will be regulated by the province and any project in the joint management area (further offshore) will be regulated by the Offshore Energy Regulator [still known for now as the CNLOPB]. Federal laws of general application, such as the [federal] Impact Assessment Act, would apply throughout,” federal officials told Atlantic Business Magazine.

 

The Newfoundland and Labrador MOU

This brings us to a “memorandum of understanding” (MOU) first referenced locally by Newfoundland and Labrador Premier Andrew Furey. Exactly what the MOU might cover remains unknown. But it has been confirmed it at least covers drawing the line to designate the “inshore” area. And the plan is, once available, those lines will be codified under the federal-provincial Act as they are for Nova Scotia.

“There have been meetings between provincial and federal officials as we continue working through defining the boundaries and the MOU language and those discussions are continuing,” stated provincial Department of Industry, Energy and Technology staff this week, in an emailed response to questions.

“The purpose of the MOU, which was requested by Newfoundland and Labrador, is to develop offshore and nearshore wind in a sustainable manner as quickly as possible,” the response stated.

Follow up questions seeking to clarify if the MOU was going to in any way further address how this new “inshore” provincial area might be regulated received no response as of deadline.

It’s entirely unclear if the province is at all capable of managing the regulation of an “inshore” wind development area.

It’s worth pointing out Crown lands evaluations in the existing onshore system for wind projects were developed specific to entirely onshore projects. In other words, as of last public update, the province had no criteria yet established for evaluating a development proposal for, say, an ammonia plant onshore paired with wind power from “inshore” turbines in a coastal bay. And there has been no public comment on whether or not any of the companies with wind-hydrogen-ammonia projects currently being considered for Crown land grants in Newfoundland and Labrador have offshore wind in their plans for the long-term.

All but one proposed wind-hydrogen-ammonia development in Newfoundland and Labrador has yet to see a registration for environmental assessment. The EA process also allows for staged submissions, so that long-term plans of companies are not necessarily included in initial project registrations.

 

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