In recent years, the Saint-Lawrence lowlands, along the Saint-Lawrence River (more extensively to its south) approximately between Québec City and Montréal, have been the subject of exploration work to determine their potential for natural gas from shale. A large part of this territory is privately owned, with various land uses including agricultural and urban, a relatively easy access to requisite infrastructures and well positioned to reach important northeastern US markets.

Results from such work were encouraging and announcements made indicated the play was moving at a good pace towards potential development of a new industry for Québec. The Québec government was publicly supportive, all in announcing its intention of adopting specific hydrocarbon legislation in line with its sustainable development principles.

In the summer 2010, as awareness of the play's potential grew, opponents became more vocal. The government was being urged to at least not rush into things without first completing more in-depth verifications. Indeed, a moratorium was being proposed by some.

It is in this context that in late August 2010, the Québec government mandated a public enquiry by the "Bureau d'audience publique sur l'environnement" ("BAPE") in the concerned regions.

In so doing, the government emphasized its continued support and indicated there would be no moratorium and that the BAPE enquiry would not question whether the industry should be allowed to move forward (a given for the government). Rather, the BAPE mandate was limited to gathering scientific and independent information to better understand the industry and its challenges and risks, as well as to propose guidelines for moving towards harmonious coexistence of shale gas activities with the concerned populations, the environment and other existing land uses, including in reference to applicable legislative and regulatory provisions.

The Minister of Natural Resources and Wildlife ("MNRW") also announced three work groups (liaison with elected representatives; environmental; industry) to assist in the process of developing new hydrocarbon legislation, several times previously announced, to replace the applicable Mining Act provisions.

In the fall of 2010, the Québec Oil and Gas Association held public information meetings which were generally contentious.

One of the issues at the forefront concerns the important water use in hydraulic fracturing (fracking) operations, feared underground water contamination and waste water treatment. Indeed, this led to certain municipal and regional authorities starting to prohibit or limit access to their water sources and waste treatment facilities for such activities.

In early October 2010, the government announced that any drilling/fracking activities would thenceforth require a specific certificate of authorization ("CA") under Section 22, Environment Quality Act (the "EQA").

The February 28, 2011, BAPE report was publicly released on March 8, 2011. Amongst its numerous findings and recommendations the BAPE recommended:

  • improving collaboration between MNRW and the Ministry of Sustainable Development, Environment and Parks ("MSDEP") and MSDEP being given responsibility for application of all legislative and regulatory provisions concerning protection of the environment;
  • granting to municipal/regional authorities some powers on local aspects of the industry;
  • more immediately, proceeding to a complete shale gas strategic environmental assessment on all aspects of the industry ("SEA");
  • prohibiting fracking during the SEA, except for SEA specific purposes.
  • In announcing its intention to proceed to the SEA, the government indicated it would take the time required to ensure safe and proper development of this industry, otherwise it won't occur at all.

On May 12, 2011, the SEA committee and its initial 11 members, having a variety of relevant expertise, backgrounds and interests, were announced by MSDEP. After replacement in August of a resigning industry member, the committee is comprised of three members from government, two from universities, two from municipal, one from private business, one from environmental organizations and two from civil society. The committee will also have access to governmental and outside expertise.

The committee's mandate (18 to 30 month term), is designed to cover all relevant questions and challenges (including socio-economic, scientific, acceptability, health and safety, environmental, monitoring, continued acquisition of knowledge).

The committee will report annually, with first report due in May 2012. Its final reports shall respond to the questions and challenges examined and propose changes to applicable laws and regulations.

During the SEA, fracking operations are prohibited except to increase available scientific knowledge and the CA required for any such activity will have to be the subject of the committee's prior recommendation.

An Act to Limit Oil and Gas Activities, in force since June 13, 2011, prohibits oil and gas activities in the part of the Saint-Lawrence River and its islands upstream from Anticosti Island and revokes, without compensation, existing oil and gas related mining rights to the extent they concern such area. It further provides an exemption from prescribed work requirements under the Mining Act for holders of licences to explore for petroleum, natural gas and underground reservoir until a date to be determined by the MNRW, but no later than June 13, 2014, with suspension of the term of any such permit resulting therefrom and deferral of its expiration date and in certain circumstances, of reporting requirements.

On June 10, 2011, two regulations came into force providing for:

  • the obligation to obtain a CA for any drilling work seeking to explore or exploit petroleum or natural gas from shale and related fracking, prescribed requirements for obtaining a CA, including information required and public consultation obligations;
  • information concerning such operations that must be communicated to MSDEP, particularly within the context of the SEA.

In conclusion, although Québec is well-known as a resource rich jurisdiction, potentially tapping into its promising shale gas resource is more recent and less well understood.

It was felt a little over a year ago that this play, relatively short-term, could lead to creation of a new industry for Québec, with potentially interesting returns.

Although no moratorium is in place, current uncertainty has essentially suspended further shale gas exploration in Québec at least to the end of the SEA, with exploration companies involved, for now, focusing efforts elsewhere.

The controversy surrounding this industry is of course not unique to Québec; for example, France has recently substantially restricted such activities on its territory.

Hopefully, once the SEA is completed and the applicable rules adjusted, this play will be able to quickly resume in a balanced and sustainable manner.