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 second of three bulletins on the BAPE Report and deals with land issues.

Read Another Setback for Quebec's Shale Gas Industry Part 1 - Environmental Issues, our first bulletin in this series on this subject.

It is clear from the BAPE’s observations that a number of stakeholders fear that shale gas operations are incompatible with the land’s residential and agricultural uses. The BAPE notes, moreover, that, contrary to what has been seen in most shale gas producing regions in North America, the St Lawrence Lowlands is at the heart of the province’s most densely populated region, which is largely devoted to agricultural use.

92% of permits granted on private land -- The need for harmonious co-habitation

Unlike most other North American regions where shale gas is produced, in Québec, extraction activities like mining exploration and production generally take place on public land, in remote areas, isolated from large urban centres. These so-called isolated regions cover more than 92% of the territory, but in the St Lawrence Lowlands, over 92% of the area covered by shale gas exploration licences is located on private land. This information is important when it comes to assessing the social acceptability of shale gas exploration and production in Québec. Indeed, the scope of the impacts these activities might have on communities is in large part associated with the density of uses and existing developments, especially residential and agricultural uses.

This observation prompted the BAPE to take an interest in how the municipalities’ urban planning and territorial development instruments interact with the Mining Act, which sets out the legal framework for shale gas exploration and production. This issue is of the utmost relevance, seeing as the Mining Act has, even to this day, always taken precedence over the urban planning and territorial development tools used by municipalities. Fully aware of the challenges of balancing shale gas exploration and production activities with the residential and agricultural uses of the land, the BAPE expresses the view that the Act respecting land use planning and development should be revised to confer territorial development powers on municipalities, thus giving them a say in how the shale gas industry will operate, if indeed it is authorized to move forward with shale gas exploration and production activities, based on the subsidiary status principle. Since the latest version of the Mining Act was adopted in 2013, section 304.1.1 of that act and section 6, paragraph 1(7) of the Act respecting land use planning and development give regional county municipalities the power to delimit any territory that is incompatible with a mining activity. However, please note that these provisions are not yet in force. The BAPE believes that any future legislation respecting oil and gas should grant regional county municipalities the power to delimit, in their land use development plan, any territory that is not compatible with oil and gas industry activities. This recommendation is part of a larger vision of decentralizing or regionalizing development planning for this industry through the use, for example, of regional land and natural resource commissions.

The fact that the territory is inhabited has also prompted the BAPE to examine the interplay between exploration rights and surface owner rights, more specifically the possibility that a developer might resort to expropriation in order to carry out exploration work on private land. The BAPE reports that owing to changes made to the Mining Act in December 2013, the holder of a natural gas exploration licence and the owner of surface rights are required to enter into a mutual agreement; expropriation is not possible at the exploration stage. That said, section 194.0.1 of the Mining Act specifically provides that exploration work is not absolutely required in order to explore for shale gas. As it happens, the Minister of Energy and Natural Resources can authorize an expropriation during the production phase. In other words, an agreement between the owner of the surface rights and the developer is not a precondition for producing shale gas. A developer might therefore be authorized to use expropriation procedures to carry out production work on private land without first having done any exploration work, and this without any mutual agreement between the developer and the property owner. Remember that in the case of traditional mining activities, 92% of the area covered by the gas exploration licences granted are located on public land. As we can see, while expropriation may be justified in cases of traditional mining activities that take place almost entirely on public land, the BAPE believes that a special procedure is required in cases where shale gas activities are concerned. The BAPE cites the example of British Columbia and Alberta, where no one can engage in exploration activities on private land without first obtaining the landowner’s consent. If no agreement is reached, a mediation or arbitration procedure takes place before the Surface Rights Board. The goal of this procedure is to reach an agreement that is satisfactory to both parties and ensures the harmonious cohabitation of all stakeholders.

On this issue, the BAPE states that a clear guideline must convince the government of the need to favour harmonious cohabitation among the various stakeholders. If the shale gas industry is authorized to move forward with shale gas exploration and production activities in the St Lawrence Lowlands, the BAPE believes that the government should team up with municipal and regional authorities to develop a framework agreement that could be used as a model by landowners on which the industry wants to set up facilities. In the case of agricultural producers, the BAPE is leaning in favour of a specific framework agreement between the Union des producteurs agricoles and shale gas developers similar to what has already been seen in the case of Pipeline Saint-Laurent. Interestingly, the BAPE cites a guideline formulated in its 2011 report respecting the minimum distances to maintain between wellholes and certain facilities, such as residences, public buildings, sites where water is withdrawn for human consumption or food processing, public roads, railways, pipelines, high tension power lines, high water marks, and so on. The BAPE insists that these minimum distances, designed in part to ensure safety and give neighbouring owners peace of mind, must be determined jointly with the MDDELCC based on scientific studies.

Ensuring the survival of agricultural activities

According to the BAPE, the mandate of the Commission de protection du territoire agricole du Québec (“CPTAQ”) does not include a broad analysis of environmental impacts. Rather, the CPTAQ’s role is to protect agricultural land. Its mission, as described on its web site, is to guarantee that future generations will be able to rely on land that lends itself to the exercise and development of agricultural activities. As such, the CPTAQ must see to the agricultural land’s protection and contribute to making this goal a central concern within the community. Even so, section 97 of the Act respecting the preservation of agricultural land and agricultural activities provides that where an application for a permit or authorization provided for in the Environment Quality Act is designed to replace agriculture by another use on a lot situated in an agricultural zone, that permit or that authorization shall not be granted unless the CPTAQ has previously authorized the use other than agriculture that is applied for. Section 12 of the Act respecting the preservation of agricultural land and agricultural activities provides that the CPTAQ must give proper consideration to the fact that it is in the general interest to preserve agricultural land and agricultural activities. Section 62 of the Act respecting the preservation of agricultural land and agricultural activities specifies the criteria that the CPTAQ must take into consideration when rendering a decision, such as the soil capability of the lot and of the neighbouring lots; the possible uses of the lot for agricultural purposes; the impact on the preservation of water and soil resources in the territory of the local municipality and in the region; and the availability of other sites.

The connection between the Act respecting the preservation of agricultural land and agricultural activities and the Mining Act is not completely similar to the one between the Mining Act and the Act respecting land use planning and development discussed above. First, the Mining Act does not take precedence over the Act respecting the preservation of agricultural land and agricultural activities. Shale gas exploration or production projects in agricultural territory must therefore be authorized by the CPTAQ if the lot is to be used other than for agricultural purposes. But because the Mining Act takes precedence over the Act respecting land use planning and development, the process before the CPTAQ is somewhat different. Since the municipality does not have the power to regulate shale gas exploration and production activities, the first step of the CPTAQ authorization process, namely the municipality’s assessment of whether the project complies with the local municipality’s zoning by-law or, where applicable, interim control measures, is no longer required and the CPTAQ will not take it into consideration in its analysis.

Borrowing observations from the analytical report of the SEA, the BAPE recognizes the need to clarify the role of the CPTAQ as a shale gas industry regulating authority. The BAPE also mentions that the MDDELCC should consult Québec’s Ministry of Agriculture, Fisheries and Food in the context of the environmental authorization procedure so as to enhance the assessment of impacts likely to affect the land and agricultural activities.

The BAPE Report emphasizes the need to take the broader context of shale gas exploration and production activities into consideration when it comes to assessing whether Québec should move forward with the development of this industry. The St Lawrence Lowlands is at the heart of the province’s most densely populated region, which is largely devoted to agricultural use, and therefore, potential conflicts of land use must be addressed at the very outset. Whether exploration and production activities will be authorized in this region is still not confirmed. And if it is, we could hardly believe that the legal framework will be the same as it is for extractive activities in remote areas. It is likely that, if Québec moves forward with the development of this industry in the St Lawrence Lowlands, changes to the current legal framework respecting the interaction between, on the one side, exploration and production rights, and, on the other side, landowners rights, are to be expected.