Thank you very much, Chair. Thank you very much for inviting us to be part of your meeting this morning.
Managing the exploration and development of Canada’s oil and gas resources on federal lands in the Northwest Territories, Nunavut, and northern offshore is a federal responsibility. The Minister of Indian Affairs and Northern Development is charged with this responsibility.
The department works in partnership with northern governments and aboriginal people to govern the allocation of crown lands to the private sector for oil and gas exploration and development; set, assess, and collect royalties; coordinate related scientific research to inform oil and gas management; and approve benefit plans before each oil and gas activity and development takes place.
Collaborating with other government departments and stakeholders, the northern oil and gas program ensures the existence of a transparent and robust regulatory regime characterized by the application of a market-based approach where the private sector explores and develops crown lands, and in return a fair return on development revenues accrues to the crown, and there are significant economic opportunities for communities.
Specifically for the Beaufort Sea, the department has been working with the Inuvialuit institutions and communities every step of the way since the signing of the Inuvialuit Final Agreement in 1984. The department's oil and gas program also involves activities associated with the preparedness for dealing with pending and emerging oil and gas development opportunities that are currently in the planning stages in the north. Among those activities has been the emergence of a coordination and promotion role for greater science in support of the knowledge base necessary for sound decision-making.
Between 2002 and 2010, INAC led the development and implementation of a science program in support of northern energy development. INAC is also actively involved in the environmental studies research fund mandated by the Canada Petroleum Resources Act, which finances environmental and social studies pertaining to exploration, development, and production activities on Canada’s frontier lands through levies on oil and gas licences. The program is also involved in shaping research conducted through Natural Resources Canada’s program of energy research and development, and specifically its frontier oil and gas portfolio.
Management responsibilities pursuant to the Canada Petroleum Resources Act rest with the Minister of Indian Affairs and Northern Development Canada, while the National Energy Board administers the Canada Oil and Gas Operations Act. Other legislation concerning land use and environmental protection are fundamental to the sustainable development of oil and gas resources in the north. These aspects are managed by independent boards set up pursuant to land claim agreements, and where these authorities are maintained, by the regional divisions of INAC in the Northwest Territories and Nunavut.
The Canadian Environmental Assessment Act applies offshore in the Beaufort, and an environmental assessment under this act is triggered when an application is made to the National Energy Board, as federal regulator, to undertake an offshore project. The minister reports to Parliament on the administration of oil and gas lands in the Northwest Territories, Nunavut, and the northern offshore on a yearly basis.
The issuance of licences to explore for oil and gas is governed by the Canada Petroleum Resources Act. The rights issuance cycle is composed of four stages. In the first phase, preliminary consultation with aboriginal organizations, communities, territorial governments, and expert authorities, particularly in renewable resources, are used to assess and support rights issuance within a particular region, identify exclusion zones, and confirm the terms and conditions of the licences.
In the second phase, a call for nominations allows industry to specify lands of interest for inclusion in a subsequent call for bids. The third formal phase is a call for bids, open for the statutory minimum of 120 days. And finally, of course, there is the issuance of an exploration licence following acceptance of a winning bid by the Minister of Indian Affairs and Northern Development.
Exploration rights issued pursuant to an open, competitive bidding process confer an exclusive right to apply to drill for petroleum and to apply for a production licence to produce discovered oil and gas. The successful bidder is expected to spend the dollar value of the proposed work during the first period of the licence and is required to drill one well during this first period to continue the licence into the second period. It should be noted, though, that the approval of these activities and specifically the drilling of a well is subject to National Energy Board regulatory approvals. The licence only confers the right, not the authorization to drill. The National Energy Board assesses drilling plans when they are filed for review, and drilling will not occur unless the National Energy Board is satisfied that drilling plans are safe for workers and the environment.
Calls for nominations have been held annually in the Beaufort-Mackenzie region since 1989, with the support of the Inuvialuit and informed by their concerns. Emphasis is placed on the protection of the environmentally or culturally sensitive areas in the decision-making process. To this end, Indian and Northern Affairs Canada relies upon scientific and traditional knowledge to make informed decisions regarding rights issuance.
The ecosystem of the Beaufort Sea is well studied. One consequence of the long history of oil and gas exploration extending over several decades has been the growth of scientific knowledge about the Beaufort Sea ecosystem, geology, and physical operating environment. Programs such as the Beaufort Sea project of the 1970s, the Beaufort environmental monitoring project of the 1980s, and the recent research program from 2002 to 2010 and currently researched under ArcticNet all provide a scientific foundation upon which decision-making is undertaken to issue rights.
A pragmatic understanding has also developed in local communities based on direct experience of oil and gas activities fused with traditional knowledge. This experience and the research initiatives have yielded critical information used in INAC’s day-to-day activities. One consequence has been that large areas of the Beaufort Sea have been excluded from nomination, including all areas proposed as marine protected areas and all nearshore waters along the Yukon coast.
To synthesize Beaufort Sea information, INAC’s northern oil and gas program launched an online information system called the petroleum and environmental management tool. This web-based tool integrates key information on environmental and socio-economic factors to help make informed decisions regarding oil and gas management.
Current interest in the north dates from the mid-1990s, and renewed interest in the offshore Beaufort sea from 1999. Recently, this interest extended to deeper-water areas of the outer continental shelf in the central Beaufort sea.
In 2007 and 2008, the Minister of Indian and Northern Affairs issued rights extending to deeper-water areas of the Beaufort sea: a total of six parcels are currently subject to a total work commitment of close to $2 billion.