Trudeau Announces Federal Government Spending to Support Canada’s Energy Sector

By the McLennan Ross Energy, Environmental and Regulatory and Corporate & Tax Teams

On Friday April 17, 2020, Prime Minister Justin Trudeau announced additional measures specifically to support Canada’s energy sector. These new measures include the following:

• $1.7B of funding to clean up orphan wells in Alberta, Saskatchewan and British Columbia. This funding to clean up orphan wells is expected to “maintain’ 5,200 jobs in Alberta alone;
• The Federal Government will provide credit though BDC and EDC to help medium-sized energy companies; and
• The Federal Government will also create a $750 Million emission-reduction fund which will focus on the reduction of methane, to create jobs in efforts to cut pollutions, including $75 Million to assist offshore industry cut emissions in Newfoundland and Labrador.

The Federal Government expects this funding to maintain 10,000 jobs across the Country. Prime Minister Trudeau mentioned in his address to the nation that “our goal is to create immediate jobs in these provinces while helping companies avoid bankruptcy and supporting our environmental targets”.

This new federal funding is in addition to the Government of Alberta’s announcement on March 2, 2020 that they would be providing a $100 Million loan to Orphan Well Association for the decommissioning of 800 to 1000 orphan wells. Premier Kenny stated that this measure was expected to create 500 direct and indirect jobs in the oil services sector.

Additional information about these commitments from the Federal Government are expected to surface in the next coming days. McLennan Ross will continue to monitor these new measures and provide all necessary updates.

In the interim, if you have questions regarding Energy, Environment, and Regulatory matters please reach out to Sean Parker or JoAnn P. Jamieson.

If you have questions regarding Corporate Commercial Securities matters please reach out to Marco Marrelli, Dani Fialkov, Pat Haughian, or Mohamed Denny.

COVID-19 – Compliance with Federal Environmental Requirements

By the McLennan Ross Energy, Environmental & Regulatory Team

In recognition of the compliance challenges many companies are encountering during the COVID-19 pandemic, the federal Minister of Environment and Climate Change Canada (the “ECCC”) has recently announced the ECCC’s intended approach during the crisis. While companies are expected to continue to comply with all applicable laws and regulations, and to operate in a manner that is safe and protects human health and the environment, ECCC will exercise discretion and take into account any challenges that regulated parties are facing when considering enforcement action.

Expectation of Compliance

The announcement is clear that regulated companies are expected to continue to comply with all environmental laws, regulations, operating permits and approvals. This includes compliance with all obligations to notify public authorities of an unauthorized release of pollutants, particularly where such release may cause risk to human health or the environment. At all times, regulated companies are expected to continue operating in a manner that is safe and protective of human health and the environment.

The COVID-19 pandemic and the corresponding self-imposed and regulated quarantine protocols may have a significant impact on the ability of companies to meet existing regulatory requirements. In particular, regulated companies may experience workforce shortages in the form of reduced access to personnel and contractors at a facility. If there are insufficient resources to conduct an operation in full compliance of environmental obligations, companies should consider revising operation plans or reducing production levels, as necessary, to ensure compliance.

Non-Compliance Issues

Where compliance is not possible due to COVID-19, regulated parties are expected “to act responsibly to minimize the effects and duration” of any non-compliance and should, to the extent possible identify and document:

• the nature and dates of any non-compliance;
• how COVID-19 contributed to the non-compliance; and
• the actions taken to prevent or minimize any risk to human health and the environment, including steps taken to come into compliance at the earliest opportunity.

Prior to taking enforcement action, the ECCC will continue to consider any damage to the environment on a case-by-case basis, which includes a consideration of any other aggravating factors and all reasonable measures taken by an individual or company to mitigate and to comply.

Due Diligence Going Forward

The ECCC is signaling its clear expectations that regulated entities continue to maintain environmental compliance to the best of their abilities. It is therefore critically important for companies to plan for what may be a prolonged state of abbreviated operations at their physical work sites, and to implement and exercise the appropriate level of due diligence to prevent incidents.

Provided that the company can demonstrate that certain violations or non-compliance events resulted from the COVID-19 pandemic, and the company took reasonable measures to minimize any risk to human health and environment, there is a low likelihood of sanctions being imposed. However, prevention of those incidents in the first place is, as always, the better approach.

Environmental Reporting Suspended in Alberta Due to COVID-19

By the McLennan Ross Energy, Environmental & Regulatory Team

On March 31, 2020, the Minister of Environment and Parks issued Ministerial Order 17/2020, which suspends certain environmental information reporting requirements in Alberta, with the exception of reporting requirements applicable to drinking water (the “Order”). See Order here.

Authority to Issue the Order

The Order was issued under the authority of section 52.1(3) of the Public Health Act, which provides the Minister with power to make an order, without consultation, to suspend or modify the application or operation of all or part of an enactment if the Minister is satisfied that the application or operation of all or part of the enactment is not in the public interest.

The Order identifies the “hardship of having to comply with routine reporting requirements pursuant to the terms and conditions of approvals, registrations, licenses and dispositions” during the COVID-19 public health emergency as to why the suspension is needed.

Scope of the Order

The operation of three pieces of legislation are modified to the extent necessary to give effect to the suspension of the following:

1. Environmental Protection and Enhancement Act – all requirements to report information pursuant to provisions in approvals and registrations;
2. Water Act – all requirements to report information pursuant to the terms and conditions for licences or approvals; and
3. Public Lands Act – all disposition requirements to submit returns or reports are suspended.

All information must still be recorded and retained, and made available upon request by Environment and Parks, or in the case of energy activities, the Alberta Energy Regulator.

The Order does not suspend reporting requirements pertaining to drinking water facilities.

Termination of the Order

The Order lapses on August 14, 2020, unless it is continued earlier by the Minister or the Lieutenant Governor in Council under the provisions of the Public Health Act.

The Order may also be terminated earlier under the provisions of the Public Health Act if the underlying public health emergency order in Alberta is terminated, or if the Minster of Environment and Parks is satisfied that the Order is no longer in the public interest.

Bill 12: The Effects on Pipelines and Orphan Wells amid COVID-19

By the McLennan Ross Energy, Environmental & Regulatory Team

Introduction

On March 31, 2020, the provincial government introduced Bill 12, the Liabilities Management Statutes Amendment Act, 2020. Bill 12 proposes changes to the Oil and Gas Conservation Act ("OGCA") and the Pipeline Act, with the theme of enhancing cleanup obligations under both Acts. The Government states that Bill 12 is intended to provide increased authority to the Alberta Energy Regulator (“AER”) and the Orphan Well Association (“OWA”) to effectively maintain and manage orphan wells and associated infrastructure, while protecting landowners and ensuring environmental and public safety.

Under pressure to boost the Alberta economy in light of the recent COVID-19 pandemic, the Government hopes to facilitate increased remediation and reclamation work, creating new jobs. Earlier in March, the Alberta Government provided an additional $100 million to the OWA to help address the significant inventory of orphaned and abandoned wells, and sites that must be reclaimed. While the practical effect of Bill 12 is best seen as an increase in the authority of the OWA to utilize those funds, the general theme of the proposed amendments is that they will impose a positive obligation on licensees and working interest participants to provide “responsible management” of wells, facilities, and associated sites through their entire life cycle.

Increased Obligations

The most significant change to both Acts is the addition of new language to the OGCA and Pipeline Act that will impose on oil and gas operators a positive obligation to prevent impairment of and damage to their facilities and sites, and to remediate those facilities and sites if necessary. Currently, the statutes only address operators' obligations to suspend, abandon and reclaim wells, facilities and sites.

Consistent with this overall change, the Bill gives the OWA the authority to provide “reasonable care and measures to prevent impairment or damage” at wells and pipelines where a licensee or approval holder fails or is unable to do so in a manner that is satisfactory to the AER. The proposed amendments would also allow for entry onto the land in order to enact these measures. The OWA will also be able use the orphan well fund to monitor the behaviour and condition of orphan wells and facilities. These changes are significant, as they are intended to empower the OWA to deal with orphan wells and facilities before they become environmental liabilities. In addition, the use of the word “reasonable” will likely broaden the OWA’s ability to step in where it deems the participants have not met their standards.

The addition of “remediation” obligations along with the previous “reclamation” obligations could have a significant impact on cleanup obligations generally, as it could elevate those obligations to fall under the Tier 1 and Tier 2 guidelines under the Environmental Protection and Enhancement Act (“EPEA”). Again, when viewed in the context of the general theme of the Bill, this change will impose a positive obligation on licensees and working interest participants to remediate, as necessary, in accordance with OWA standards.

In addition, the proposed changes to the legislation will allow the OWA to utilize abandoned, viable wells to produce oil and operate pipelines with the consent of the owner/holder of the mineral rights. It will also give the OWA increased authority to bring in outside companies to operate these wells and pipelines until a buyer is found.

Takeaways

If passed, these new provisions will immediately result in new obligations on licensees and working interest participants to take reasonable care and prevent impairment and damage to wells and facilities. Bill 12 will give significantly broadened authority to both the AER and the OWA with respect to the management of orphaned and abandoned wells, as well as pipelines. The new provisions will create new opportunities for companies in both the energy and insolvency sectors to work with these bodies throughout the remediation and reclamation process.

For further information on potential new opportunities or obligations your business may have under these new provisions, please contact any member from our Environment, Energy, and Regulatory practice group.