On May 2, 2007, new federal regulations were passed which will allow for oil sands development on a specified portion of the Fort McKay First Nation reserve lands in northern Alberta.

The Fort McKay First Nation Oil Sands Regulations SOR/2007-79 (the Regulations) were prepared at the request of Fort McKay First Nation (Fort McKay) to establish an appropriate regulatory regime for the development of an oil sands mine on its reserve lands. The Regulations are specific to an oil sands project on Fort McKay Indian Reserve No. 174C and will not apply to other First Nations, other reserve lands, or other federal lands.

In 2004, the Fort McKay received 23,000 acres as part of its Treaty Land Entitlement Settlement Agreement with the federal and provincial governments. Approximately 8,200 acres of those lands contain significant oil sands deposit. Fort McKay has publicly announced its intention to develop its oil sands resource. Subject to satisfactory commercial arrangements, the Fort McKay lands may be included in Shell Canada’s proposed expansion of its existing oil sands mining operation.1

Off-reserve oil sands development is normally governed by an extensive, comprehensive set of provincial statutes and regulations. Reserve land, however, is under federal jurisdiction and the federal government does not have a regulatory regime specifically designed to address oil sands mining activities. Accordingly, federal regulations were needed to create regulatory certainty, to effectively manage environmental, health and safety, and other related impacts of a proposed oil sands mining project, and to enable the leasing of the lands for oil sands development.

The Regulations incorporate aspects of the existing provincial regulatory regime for oil sands mining activities, including many of the laws and regulations administered by the Alberta Energy and Utilities Board and Alberta Environment. Pursuant to the Regulations, the government of Alberta will take on certain responsibilities for administering and enforcing the Regulations on behalf of the Government of Canada.

Two other regulations are contemplated to advance an oil sands project on Fort McKay lands: a tenure regulation and a royalty regulation. The tenure regulation will establish terms and conditions for oil sands development. The royalty regulation will establish royalty rates and related matters. These three regulations, together with a Canada-Alberta-Fort McKay First Nation agreement for administration and enforcement, will create a comprehensive regulatory regime for the oil sands project on the Fort McKay Indian Reserve No. 174C.

It is important to note that the new Regulations do not ensure that an oil sands project will go ahead. Once the Regulations are made, the project proponent will still need to seek regulatory approvals under the newly established regulatory regime for the project and existing federal legislation (i.e. the Canadian Environmental Assessment Act, the Fisheries Act, etc.). However, the Regulations provide a critical first piece: they establish of a regulatory regime and assure regulatory certainty.

It is believed that the Regulations are the first to be passed under the First Nation Commercial and Industrial Development Act, c. 2005, c. 53 (FNCIDA). FNCIDA came into force on April 1, 2006 and enables the federal government to enact regulations for the regulation of complex, large-scale projects on Indian reserve lands. Prior to FNCIDA, efforts of First Nations to develop major commercial and industrial projects were being hindered by a lack of adequate laws and standards to govern the development or operation of the business activity. This “regulatory gap” (as it is known) created uncertainty and discouraged financing and investment. The passing of this Regulation is an encouraging sign that FNCIDA will deliver on the opportunities it was designed to create.