The Federal and Nova Scotia regulations that require oil and gas companies to submit seismic data to Nova Scotia’s offshore oil and gas board are not ultra vires, the Nova Scotia Supreme Court recently held in Geophysical Service Inc. v. Canada – Nova Scotia Offshore Petroleum Board, 2014 NSSC 172 [GSI v. Canada – NS OPB] .
In an earlier post (Seismic Data Held by a Board: A Warning Before You Look), we described how Geophysical Service Incorporated (GSI), a geophysical services company headquartered in Calgary that creates and markets offshore seismic data, has commenced about two dozen lawsuits against oil and gas companies, off-shore regulatory boards, and at least one province. In these claims, GSI asserts that it retains full rights of ownership in seismic data shot by GSI for its own use and licensed to third parties, notwithstanding that the data has been disclosed to Canadian regulatory authorities pursuant to a regulatory framework requiring the same.
This recent decision out of Nova Scotia marks an important step in considering the underlying legal merit of GSI’s claims.
In GSI v. Canada – NS OPB, the Court considered GSI’s challenge to the Canada-Nova Scotia Offshore Petroleum Board’s authority to make certain regulations relating to the collection and storage of seismic data generated by private companies. In particular, the Court considered whether sections of the relevant regulations were vires or ultra vires (within the powers or beyond the powers of) the enacting legislation (identical Federal and Nova Scotia Acts). The impugned sections require oil and gas operators to submit seismic data to the Board. Under the scheme of the legislation, a period of “privilege or confidentiality” applies to such data for 10 years. Thereafter the Board may put it in the public domain.
The part of the statutes pursuant to which the challenged regulations were made states that:
… the Governor in Council may, for the purposes of safety and the protection of the environment as well as for the production and conservation of petroleum resources, make regulations … concerning the exploration and drilling for, and the production, processing and transportation of, petroleum and works and activities related to such exploration…
After canvassing principles of statutory interpretation, including that subordinate legislation accord with the purposes and objects of the parent enactment, the Court noted that the purposes and objectives of the relevant legislation were clearly the “exploration for and the development and ultimate production of petroleum products from Nova Scotia’s offshore resources.” Against GSI’s protestations, the Court found that seismic surveys constitute an early part of “exploration”. The Court concluded by stating:
I find that the impugned Regulations are vires and are part of the overall legislative and regulatory scheme of the Acts. The fact that the information supplied by the Applicant to the Board for many years, pursuant to authorizations and upon agreed terms and conditions, is no longer confidential are the rules of the industry in Nova Scotia. They are the “governing authority’s rules” and they are enabled by the governing statutes. They are the same rules by which the Applicant undertook to participate in this exploration more than a decade ago.
As a result, while numerous GSI claims remain outstanding, including those based on contractual claims brought against licencees of seismic data, this important decision indicates that at least the Federal and Nova Scotia provisions that require companies to provide seismic information to Nova Scotia’s Board are vires the enacting legislation.