Starting in 2008, the oil exploration and production industry generally, and the shale gas industry specifically, have drawn increasing attention from developers, governments, environmental groups and citizens alike. The most recent report of the Bureau d’audiences publiques sur l’environnement (“BAPE”) number 307 on the issues raised by shale gas exploration and production in the Utica Shale of the St Lawrence Lowlands (the “BAPE Report”) is but the latest step in a process that the Québec Government has committed itself to completing in order to assist it in determining the relevance and sustainability of developing this industry in Québec.

Back in 2008, the St Lawrence Lowlands became the province’s prospective El Dorado for natural gas exploration and production after work was completed by Junex. Developers soon jumped on the bandwagon and proceeded with exploratory drilling in the region. In 2009, when citizens and environmental groups expressed growing concerns and opposition, the BAPE was entrusted with a first mandate on the sustainable development of the shale gas industry in Québec. In 2011, the BAPE published its first report, which noted a substantial level of uncertainty and lack of scientific knowledge on the potential impacts of shale gas exploration and production, and proposed that a strategic environmental assessment (“SEA”) be conducted to address this deficit in knowledge. The government at the time therefore mandated a committee of experts to conduct a SEA on shale gas.

On January 30, 2014, after the Comité sur l’évaluation environnementale stratégique completed its work, the BAPE was entrusted with another mandate under section 6.3 of the Environment Quality Act (CQLR, c Q-2) (“EQA”) to inquire into and hold public hearings on issues relating to exploring and producing shale gas in the Utica Shale of the St Lawrence Lowlands.

The BAPE began its mandate on March 31, 2014. From March 31 until April 17, and then from June 2 to June 18, public hearings were held in Saint-Hyacinthe, Bécancour and Saint-Agapit. A mission was organized in Pennsylvania from July 7 to July 11 to allow the commissioners to meet with government officials and stakeholders about shale gas exploration and production activities.

The BAPE Report was publicly released on December 15, 2014.

This is the first of three bulletins on the BAPE Report and deals with environmental issues.

Environmental protection issues were central to the reflection that the BAPE conducted on shale gas exploration and production. A number of stakeholders referred to the potential impacts of these activities on water, agricultural land, the climate and biophysical environment. The scientific uncertainty and lack of knowledge as to the industry’s environmental impacts were targeted by several interventions throughout the public hearings. What were the BAPE’s main findings in that respect?

Environmental Regulatory Framework

The Ministère du Développement durable, de l’Environnement et de la Lutte contre les changements climatiques (“MDDELCC”), the province’s ministry of sustainable development, the environment and the fight against climate change, is responsible for applying the Environment Quality Act (“EQA”). The regulations ancillary to this umbrella act provide a framework for certain activities associated with the shale gas industry, such as water withdrawal, shale drilling activities, hydraulic fracturing or fracking, the management of wastewater and residual materials as well as the reduction of GHG emissions.

Bear in mind that the drilling work is only authorized under the Mining Act for the purposes of exploring for or producing oil or natural gas in shale and any fracturing operation intended to explore for or produce oil or natural gas if a certificate of authorization is obtained under section 22 of the Environment Quality Act (“EQA”). This regulatory framework is completed by the Regulation respecting the filing of information on certain drilling and fracturing work on gas or petroleum wells. Furthermore, in July of 2014, the MDDELCC published interim guidelines on gas and oil exploration. According to the ministry, the goal of these guidelines is to define the parameters within which the minister may exercise his discretionary powers when granting certificates of authorization under section 22 of the EQA. However, unlike a regulation, these guidelines are not binding on developers.

According to the BAPE, this framework is insufficient and should be enhanced by adopting a regulation respecting the environmental assessment of gas exploration and production. This new regulation would include an obligation to first obtain a certificate of authorization covering all of the activities, beginning with the initial field work up to the definitive closing of the well. The BAPE also stresses that the environmental assessment procedure provided for in this new regulation should include a coordination and collaboration mechanism for all of the various ministries and agencies likely to want to have a say on the potential health and environmental impacts of gas and oil activities.

Water resources

These are the words that the BAPE uses to summarize the stakeholders’ main concerns regarding water resources: “[TRANSLATION] The industry’s consumption of vast quantities of water, the use of chemical products in hydraulic fracturing operations and the risk that gas will migrate to the aquifers […]”. The potential consequences associated with these issues include water shortages, contamination of surface and ground water, and possibly even the contamination of drinking wells. The BAPE therefore examined the water resources issue from various perspectives - beginning with the water supply perspective and continuing with the water resource protection perspective, which covers the risks of contamination.

The information obtained by the BAPE in the context of its mandate reveals that a significant proportion of the St Lawrence Lowlands population draws its drinking water from private wells. The BAPE also noted that the municipal, agricultural and piscicultural water requirements in the St Lawrence Lowlands region account for a major portion of the water withdrawals in that area. The BAPE believes that hydraulic fracturing would entail the constant and sustained withdrawal of significant quantities of water over long periods of time. Water requirements are determined based on use and must respect the environment’s capacity to satisfy these requirements. Where there is a conflict of use, the BAPE concludes that, within the St Lawrence Lowlands territory, the water requirements of the agricultural and piscicultural industries should be considered as having priority over the water requirements of the gas industry. In so doing, the BAPE recognizes the necessity of satisfying the needs of the population before reconciling the needs of ecosystems with economic activities.

The BAPE also considered the issue of protecting water resources, taking into account the risks associated with shipping, handling and storing drilling and fracturing products. The issue of disclosing these drilling and fracturing products was one of the core concerns raised by stakeholders. Based on studies conducted by the BAPE, 62 different chemical compounds have been used in wells drilled between 2006 and 2010. These chemical compounds were evaluated in order to determine their toxicity. While results show these compounds to be highly toxic prior to use, once injected into wells, their dilution and transformation drastically reduce this toxicity. Even so, the BAPE recommends that gas companies be required to document all ingredients used in drilling and fracturing, and that their potential environmental impacts be assessed in the context of their application for a certificate of authorization.

The contamination risk associated with gas wastewater was also the subject of several interventions. The risk stems from the fracture flowback water that consists of fracturing water and water that was already in the rock fissures before fracturing. The volume of fracture flowback water per shale gas well is estimated at 10,000 m3. The BAPE points out that very little is known about the risks posed by the potential migration of these wastewaters into the environment. The BAPE recommends that these waters be reused so as to reduce the quantities of water withdrawn from and returned to the environment. It also specifies that, according to the MDDELCC, municipal sanitation works were not designed to handle wastewater generated by the shale gas industry. As a result, these waters will need to be treated on the sites run by gas companies. To this end, the BAPE recommends that gas companies be required to draw up a water management plan that would be filed with the application for a certificate of authorization. The plan should demonstrate to the MDDELCC and other stakeholders that the companies optimize the re-use of flowback water and are able to treat wastewater adequately before returning it to the environment.

As for water resources, the BAPE reports major uncertainties and a lack of knowledge of the water flow regime that will be used should the shale gas industry be authorized to move forward with shale gas exploration and production activities in Québec.

Climate change and GHG emissions

The issue of what impact the expansion of Québec’s shale gas industry will have on the province’s GHG emissions has already been the subject of several interventions. Many worry that developing this energy source will make achieving the Québec government’s GHG reduction goals more difficult. The scenarios available to date show that in the short term, shale gas industry activities could increase Québec’s GHG emissions by 3%. In the long term, the estimated increase is 23.2%. However, the BAPE emphasizes that these estimates do not include fugitive emissions that occur after a well is closed.

The approach proposed by the BAPE concludes that Québec should be able to honour these commitments due to the implementation of the cap-and-trade system for GHG emission allowances. Should the developers be authorized to go forward with shale gas exploration and production activities in Québec, they would be subject to this system.

It is clear from the BAPE Report that there remain major uncertainties and a significant lack of knowledge on potential environmental impacts of shale gas exploration and production activities. Therefore, we could expect the government to mandate a team of experts (the same or another) to conduct a supplement scientific study on the potential environmental impacts of shale gas exploration and production activities, which would focus on the areas identified by the BAPE as presenting a significant lack of knowledge. In any event, if exploration and production activities are to be authorized in the St Lawrence Lowlands, it is likely that this will be preceded by significant changes to the legal framework, especially regarding the protection of water resources, in terms of quality and supply.