Introduction

On March 24, 2011, the Government of Canada and Government of Quebec reached an agreement to regulate the development of petroleum in the Gulf of St. Lawrence (the “Accord”).1 The Accord affirms “Québec will benefit from all revenues derived from the development of petroleum resources… as if these resources were on land.”2 The Accord establishes objectives to ensure shared management of regulatory responsibilities and will adopt, “as much as possible, an approach which is consistent with the petroleum management regimes outside the Accord area.”3

The concepts behind the Accord are now being advanced with the introduction of Bill C-74 (the “Act”).The purpose of the Act is stated:

The purpose of this Act is to regulate the development of petroleum in the joint management area by promoting, among other things, transparency, the sustainable management of resources and best practices to ensure personal safety and environmental protection while maximizing social and economic benefits.5

Brief History

The necessity of the Accord has its roots in Canada’s Constitutional division of powers. The matter of Reference re Offshore Mineral Rights determined the federal government has jurisdiction over the continental shelf and territorial sea.6 As a result, as one company noted, in order to “to drill on its Québec exploration licence, an agreement between the Québec and Federal governments is required and this agreement requires federal government recognition of such licence.”7 The Accord is an important development for the region and follows already existing accords established between Canada and Nova Scotia and Newfoundland.

Bill C-74

On the date of this post, the Act has only received first reading.8 The application of the Act is confined to the joint management area – the respective area within the Gulf of St. Lawrence, as defined by Schedule 1 of the Act and any pipeline beginning from the joint management area carrying on elsewhere, so long as the pipeline is within the borders of Quebec. The Act forms part of the transitional phase contemplated by the Accord:

During the first pre-discovery “transitional phase,” both Governments will establish a joint regulatory function using both Governments' existing regulatory capacity. Once there is a commercial discovery of petroleum resources, a second “permanent phase” would be triggered; in this phase both Governments will jointly establish a new, independent offshore board, through additional legislation.9

In this transitional phase, a framework is created to ensure joint management: regulations may not be made by the Federal Energy Minister without the Provincial Energy Minister’s approval,10 the Accord may only be jointly amended,11 decisions made by Ministers under the Act must be made jointly,12 and the National Energy Board and Quebec Energy Board must exercise their powers and perform their duties as prescribed by the Act jointly.13

The intended cooperation and overlap is further indicated by approval for the respective Ministers to establish an Oil and Gas Committee that will serve an advisory function.14 Additionally, both Ministers will give approval for the issuance of interests in the joint management area.15

Of interest to the energy industry is that the Act adopts Québec’s standard for exploration licences: an exploration licence confers the exclusive right to develop the portions of the joint management area that are licenced for exploration, should petroleum be found.16 Where no exploration licence is in effect, an interest may be granted based on the Federal call for bids system.17

From Old Harry to new restrictions on fracking, oil and gas development in Québec has been both promising and controversial.  It remains to be seen whether the Accord facilitates that province’s energy industry - or even survives this fall’s federal election.