Vol. 143, No. 25 — December 09, 2009

Registration

SOR/2009-315 November 26, 2009

CANADA OIL AND GAS OPERATIONS ACT

Canada Oil and Gas Drilling and Production Regulations

P.C. 2009-1890 November 26, 2009

Whereas, pursuant to subsection 15(1) of the Canada Oil and Gas Operations Act (see footnote a), a copy of the proposed Canada Oil and Gas Drilling and Production Regulations, substantially in the annexed form, was published in the Canada Gazette, Part I on April 18, 2009 and interested persons were given an opportunity to make representations to the Minister of Natural Resources and the Minister of Indian Affairs and Northern Development with respect to the proposed Regulations;

Therefore, Her Excellency the Governor General in Council, on the recommendation of the Minister of Natural Resources and the Minister of Indian Affairs and Northern Development, pursuant to subsection 14(1) (see footnote b) of the Canada Oil and Gas Operations Act(see footnote c), hereby makes the annexed Canada Oil and Gas Drilling and Production Regulations.

CANADA OIL AND GAS DRILLING AND PRODUCTION REGULATIONS

INTERPRETATION

1. (1) The following definitions apply in these Regulations.

“abandoned”, in relation to a well, means a well or part of a well that has been permanently plugged. (abandonné)

“Act” means the Canada Oil and Gas Operations Act. (Loi)

“artificial island” means a humanly constructed island to provide a site for the exploration and drilling, or the production, storage, transportation, distribution, measurement, processing or handling, of oil or gas. (île artificielle)

“authorization” means an authorization issued by the Board under paragraph 5(1)(b) of the Act. (autorisation)

“barrier” means any fluid, plug or seal that prevents gas or oil or any other fluid from flowing unintentionally from a well or from a formation into another formation. (barrière)

“Board” means the National Energy Board established by section 3 of the National Energy Board Act. (Office)

“casing liner” means a casing that is suspended from a string of casing previously installed in a well and does not extend to the wellhead. (tubage partiel)

“commingled production” means production of oil and gas from more than one pool or zone through a common well-bore or flow line without separate measurement of the production from each pool or zone. (production mélangée)

“completed”, in relation to a well, means a well that is prepared for production or injection operations. (complété)

“completion interval” means a section within a well that is prepared to permit the

(a) production of fluids from the well;

(b) observation of the performance of a reservoir; or

(c) injection of fluids into the well. (intervalle de complétion)

“conductor casing” means the casing that is installed in a well to facilitate drilling of the hole for the surface casing. (tubage initial)

“development plan” means the development plan that is approved by the Board in accordance with section 5.1 of the Act. (plan de mise en valeur)

“drilling program” means the program for the drilling of one or more wells within a specified area and time using one or more drilling installations and includes any work or activity related to the program. (programme de forage)

“environmental protection plan” means the environmental protection plan submitted to the Board under section 6. (plan de protection de l’environnement)

“flow allocation procedure” means the procedure to

(a) allocate total measured quantities of oil, gas and water produced from or injected into a pool or zone back to individual wells in a pool or zone where individual well production or injection is not measured separately; and

(b) allocate production to fields that are using a common storage or processing facility. (méthode de répartition du débit)

“flow calculation procedure” means the procedure to be used to convert raw meter output to a measured quantity of oil, gas or water. (méthode de calcul du débit)

“flow system” means the flow meters, auxiliary equipment attached to the flow meters, fluid sampling devices, production test equipment, the master meter and meter prover used to measure and record the rate and volumes at which fluids are

(a) produced from or injected into a pool;

(b) used as a fuel;

(c) used for artificial lift; or

(d) flared or transferred from a production installation. (système d’écoulement)

“fluid” means gas, liquid or a combination of the two. (fluide)

“formation flow test” means an operation

(a) to induce the flow of formation fluids to the surface of a well to procure reservoir fluid samples and determine reservoir flow characteristics; or

(b) to inject fluids into a formation to evaluate injectivity. (essai d’écoulement de formation)

“incident” means

(a) any event that causes

(i) a lost or restricted workday injury,

(ii) death,

(iii) fire or explosion,

(iv) a loss of containment of any fluid from a well,

(v) an imminent threat to the safety of a person, installation or support craft, or

(vi) pollution;

(b) any event that results in a missing person; or

(c) any event that causes

(i) the impairment of any structure, facility, equipment or system critical to the safety of persons, an installation or support craft, or

(ii) the impairment of any structure, facility, equipment or system critical to environmental protection. (incident)

“lost or restricted workday injury” means an injury that prevents an employee from reporting for work or from effectively performing all the duties connected with the employee’s regular work on any day subsequent to the day on which the injury occurred whether or not that subsequent day is a working day for that employee. (blessure entraînant une perte de temps de travail)

“minor injury” means an employment injury for which medical treatment or first aid is provided and excludes a lost or restricted workday injury. (blessure sans gravité)

“multi-pool well” means a well that is completed in more than one pool. (puits à gisements multiples)

“natural environment” means the physical and biological environment. (milieu naturel)

“near-miss” means an event that would likely cause an event set out in paragraph (a) of the definition of “incident”, but does not due to particular circumstances. (quasi-incident )

“operator” means a person that holds an operating licence under paragraph 5(1)(a) of the Act and an authorization. (exploitant)

“permafrost” means the thermal condition of the ground when its temperature remains at or below 0°C for more than one year. (pergélisol)

“physical environmental conditions” means the meteorological, oceanographic and related physical conditions, including ice conditions, that might affect a work or activity that is subject to an authorization. (conditions environnementales)

“pollution” means the introduction into the natural environment of any substance or form of energy outside the limits applicable to the activity that is subject to an authorization, including spills. (pollution)

“production control system” means the system provided to control the operation of, and monitor the status of, equipment for the production of oil and gas, and includes the installation and workover control system. (système de contrôle de la production)

“production project” means an undertaking for the purpose of developing a production site on, or producing oil or gas from, a pool or field, and includes any work or activity related to the undertaking. (projet de production)

“proration test” means, in respect of a development well to which a development plan applies, a test conducted to measure the rates at which fluids are produced from the well for allocation purposes. (essai au prorata)

“recovery” means the recovery of oil and gas under reasonably foreseeable economic and operational conditions. (récupération)

“relief well” means a well drilled to assist in controlling a blow-out in an existing well. (puits de secours)

“rig release date” means the date on which a rig last conducted well operations. (date de libération de l’appareil de forage)

“safety plan” means the safety plan submitted to the Board under section 6. (plan de sécurité)

“seafloor” means the surface of all that portion of land under the sea. (fond marin)

“slick line” means a single steel cable used to run tools in a well. (câble lisse)

“support craft” means a vessel, vehicle, aircraft, standby vessel or other craft used to provide transportation for or assistance to persons on the site where a work or activity is conducted. (véhicule de service)

“surface casing” means the casing that is installed in a well to a sufficient depth, in a competent formation, to establish well control for the continuation of the drilling operations. (tubage de surface)

“suspended”, in relation to a well or part of a well, means a well or part of a well in which drilling or production operations have temporarily ceased. (suspension de l’exploitation)

“termination” means the abandonment, completion or suspension of a well’s operations. (cessation)

“waste material” means any garbage, refuse, sewage or waste well fluids or any other useless material that is generated during drilling, well or production operations, including used or surplus drilling fluid and drill cuttings and produced water. (déchets)

“well approval” means the approval granted by the Board under section 13. (approbation relative à un puits)

“well-bore” means the hole drilled by a bit in order to make a well. (trou de sonde)

“well control” means the control of the movement of fluids into or from a well. (contrôle d’un puits)

“well operation” means the operation of drilling, completion, recompletion, intervention, re-entry, workover, suspension or abandonment of a well. (travaux relatifs à un puits)

“wire line” means a line that contains a conductor wire and that is used to run survey instruments or other tools in a well. (câble)

“workover” means an operation on a completed well that requires removal of the Christmas tree or the tubing. (reconditionnement)

“zone” means any stratum or any sequence of strata and includes, for the purposes of the definition “commingled production”, section 7, subsection 61(2), sections 64 to 66 and 73, subsection 82(2) and section 85, a zone that has been designated as such by the Board under section 4. (couche)

(2) In these Regulations, “delineation well”, “development well” and “exploratory well” have the same meaning as in subsection 101(1) of the Canada Petroleum Resources Act.

(3) In these Regulations, “drilling installation”, “drilling rig”, “drilling unit”, “drill site”, “installation”, “production installation”, “production operation”, “production site” and “subsea production system” have the same meaning as in subsection 2(1) of the Canada Oil and Gas Installations Regulations.

(4) The following definitions apply for the purposes of paragraph 5(4)(c) of the Act:

“production facility” means equipment for the production of oil or gas located at a production site, including separation, treating and processing facilities, equipment and facilities used in support of production operations, landing areas, heliports, storage areas or tanks and dependent personnel accommodations, but not including any associated platform, artificial island, subsea production system, drilling equipment or diving system. (matériel de production)

“production platform” means a production facility and any associated platform, artificial island, subsea production system, offshore loading system, drilling equipment, facilities related to marine activities and dependent diving system. (plate-forme de production)

(5) For the purpose of section 5.11 of the Act, “installation” means an onshore or offshore installation.

(6) For the purpose of section 58.2 of the Act, an onshore or offshore installation is prescribed as an installation.

PART 1

BOARD’S POWERS

SPACING

2. The Board is authorized to make orders respecting the allocation of areas, including the determination of the size of spacing units and the well production rates for the purpose of drilling for or producing oil and gas and to exercise any powers and perform any duties that may be necessary for the management and control of oil or gas production.

NAMES AND DESIGNATIONS

3. The Board may give a name, classification or status to any well and may change that name, classification or status.

4. The Board may also

(a) designate a zone for the purposes of these Regulations;

(b) give a name to a pool or field; and

(c) define the boundaries of a pool, zone or field for the purpose of identifying it.

PART 2

MANAGEMENT SYSTEM, APPLICATION FOR AUTHORIZATION AND WELL APPROVALS

MANAGEMENT SYSTEM

5. (1) The applicant for an authorization shall develop an effective management system that integrates operations and technical systems with the management of financial and human resources to ensure compliance with the Act and these Regulations.

(2) The management system shall include

(a) the policies on which the system is based;

(b) the processes for setting goals for the improvement of safety, environmental protection and waste prevention;

(c) the processes for identifying hazards and for evaluating and managing the associated risks;

(d) the processes for ensuring that personnel are trained and competent to perform their duties;

(e) the processes for ensuring and maintaining the integrity of all facilities, structures, installations, support craft and equipment necessary to ensure safety, environmental protection and waste prevention;

(f) the processes for the internal reporting and analysis of hazards, minor injuries, incidents and near-misses and for taking corrective actions to prevent their recurrence;

(g) the documents describing all management system processes and the processes for making personnel aware of their roles and responsibilities with respect to them;

(h) the processes for ensuring that all documents associated with the system are current, valid and have been approved by the appropriate level of authority;

(i) the processes for conducting periodic reviews or audits of the system and for taking corrective actions if reviews or audits identify areas of non-conformance with the system and opportunities for improvement;

(j) the arrangements for coordinating the management and operations of the proposed work or activity among the owner of the installation, the contractors, the operator and others, as applicable; and

(k) the name and position of the person accountable for the establishment and maintenance of the system and of the person responsible for implementing it.

(3) The management system documentation shall be controlled and set out in a logical and systematic fashion to allow for ease of understanding and efficient implementation.

(4) The management system shall correspond to the size, nature and complexity of the operations and activities, hazards and risks associated with the operations.

APPLICATION FOR AUTHORIZATION

6. The application for authorization shall be accompanied by

(a) a description of the scope of the proposed activities;

(b) an execution plan and schedule for undertaking those activities;

(c) a safety plan that meets the requirements of section 8;

(d) an environmental protection plan that meets the requirements of section 9;

(e) information on any proposed flaring or venting of gas, including the rationale and the estimated rate, quantity and period of the flaring or venting;

(f) information on any proposed burning of oil, including the rationale and the estimated quantity of oil proposed to be burned;

(g) in the case of a drilling installation, a description of the drilling and well control equipment;

(h) in the case of a production installation, a description of the processing facilities and control system;

(i) in the case of a production project, a field data acquisition program that allows sufficient pool pressure measurements, fluid samples, cased hole logs and formation flow tests for a comprehensive assessment of the performance of development wells, pool depletion schemes and the field;

(j) contingency plans, including emergency response procedures, to mitigate the effects of any reasonably foreseeable event that might compromise safety or environmental protection, which shall

(i) provide for coordination measures with any relevant municipal, provincial, territorial or federal emergency response plan, and

(ii) in an offshore area where oil is reasonably expected to be encountered, identify the scope and frequency of the field practice exercise of oil spill countermeasures; and

(k) a description of the decommissioning and abandonment of the site, including methods for restoration of the site after its abandonment.

7. (1) If the application for authorization covers a production installation, the applicant shall also submit to the Board for its approval the flow system, the flow calculation procedure and the flow allocation procedure that will be used to conduct the measurements referred to in Part 7.

(2) The Board shall approve the flow system, the flow calculation procedure and the flow allocation procedure if the applicant demonstrates that the system and procedures facilitate reasonably accurate measurements and allocate, on a pool or zone basis, the production from and injection into individual wells.

8. The safety plan shall set out the procedures, practices, resources, sequence of key safety-related activities and monitoring measures necessary to ensure the safety of the proposed work or activity and shall include

(a) a summary of and references to the management system that demonstrate how it will be applied to the proposed work or activity and how the duties set out in these Regulations with regard to safety will be fulfilled;

(b) a summary of the studies undertaken to identify hazards and to evaluate safety risks related to the proposed work or activity;

(c) a description of the hazards that were identified and the results of the risk evaluation;

(d) a summary of the measures to avoid, prevent, reduce and manage safety risks;

(e) a list of all structures, facilities, equipment and systems critical to safety and a summary of the system in place for their inspection, testing and maintenance;

(f) a description of the organizational structure for the proposed work or activity and the command structure on the installation, which clearly explains

(i) their relationship to each other, and

(ii) the contact information and position of the person accountable for the safety plan and of the person responsible for implementing it;

(g) if the possibility of pack sea ice, drifting icebergs or land-fast sea ice exists at the drill or production site, the measures to address the protection of the installation, including systems for ice detection, surveillance, data collection, reporting, forecasting and, if appropriate, ice avoidance or deflection; and

(h) a description of the arrangements for monitoring compliance with the plan and for measuring performance in relation to its objectives.

9. The environmental protection plan shall set out the procedures, practices, resources and monitoring necessary to manage hazards to and protect the environment from the proposed work or activity and shall include

(a) a summary of and references to the management system that demonstrate how it will be applied to the proposed work or activity and how the duties set out in these Regulations with regard to environmental protection will be fulfilled;

(b) a summary of the studies undertaken to identify environmental hazards and to evaluate environmental risks relating to the proposed work or activity;

(c) a description of the hazards that were identified and the results of the risk evaluation;

(d) a summary of the measures to avoid, prevent, reduce and manage environmental risks;

(e) a list of all structures, facilities, equipment and systems critical to environmental protection and a summary of the system in place for their inspection, testing and maintenance;

(f) a description of the organizational structure for the proposed work or activity and the command structure on the installation, which clearly explains

(i) their relationship to each other, and

(ii) the contact information and position of the person accountable for the environmental protection plan and the person responsible for implementing it;

(g) the procedures for the selection, evaluation and use of chemical substances including process chemicals and drilling fluid ingredients;

(h) a description of equipment and procedures for the treatment, handling and disposal of waste material;

(i) a description of all discharge streams and limits for any discharge into the natural environment including any waste material;

(j) a description of the system for monitoring compliance with the discharge limits identified in paragraph (i), including the sampling and analytical program to determine if those discharges are within the specified limits; and

(k) a description of the arrangements for monitoring compliance with the plan and for measuring performance in relation to its objectives.

WELL APPROVAL

10. (1) Subject to subsection (2), an operator who intends to drill, re-enter, work over, complete or recomplete a well or suspend or abandon a well or part of a well shall obtain a well approval.

(2) A well approval is not necessary to conduct a wire line, slick line or coiled tubing operation through a Christmas tree located above sea level if

(a) the work does not alter the completion interval or is not expected to adversely affect recovery; and

(b) the equipment, operating procedures and qualified persons exist to conduct the wire line, slick line or coiled tubing operations as set out in the authorization.

11. If the well approval sought is to drill a well, the application shall contain

(a) a comprehensive description of the drilling program; and

(b) a well data acquisition program that allows for the collection of sufficient cutting and fluid samples, logs, conventional cores, sidewall cores, pressure measurements and formation flow tests, analyses and surveys to enable a comprehensive geological and reservoir evaluation to be made.

12. The application shall contain

(a) if the well approval sought is to re-enter, work over, complete or recomplete a well or suspend or abandon a well or part of it, a detailed description of that well, the proposed work or activity and the rationale for conducting it;

(b) if the well approval sought is to complete a well, in addition to the information required under paragraph (a), information that demonstrates that section 46 will be complied with; and

(c) if the well approval sought is to suspend a well or part of it, in addition to the information required under paragraph (a), an indication of the period within which the suspended well or part of it will be abandoned or completed.

13. The Board shall grant the well approval if the operator demonstrates that the work or activity will be conducted safely, without waste and without pollution, in compliance with these Regulations.

SUSPENSION AND REVOCATION OF A WELL APPROVAL

14. (1) The Board may suspend the well approval if

(a) the operator fails to comply with the approval and the work or activity cannot be conducted safely, without waste or without pollution;

(b) the safety of the work or activity becomes uncertain because

(i) the level of performance of the installation or service equipment, any ancillary equipment or any support craft is demonstrably less than the level of performance indicated in the application, or

(ii) the physical environmental conditions encountered in the area of the activity for which the well approval was granted are more severe than the equipment’s operating limits as specified by the manufacturer; or

(c) the operator fails to comply with the approvals issued under subsection 7(2), 52(4) or 66(2).

(2) The Board may revoke the well approval if the operator fails to remedy the situation causing the suspension within 120 days after the date of that suspension.

DEVELOPMENT PLANS

15. For the purpose of subsection 5.1(1) of the Act, the well approval relating to a production project is prescribed.

16. For the purpose of paragraph 5.1(3)(b) of the Act, Part II of the development plan relating to a proposed development of a pool or field shall contain a resource management plan.

PART 3

OPERATOR’S DUTIES

AVAILABILITY OF DOCUMENTS

17. (1) The operator shall keep a copy of the authorization, the well approval and all other approvals and plans required under these Regulations, the Act and the regulations made under the Act at each installation and shall make them available for examination at the request of any person at each installation.

(2) The operator shall ensure that a copy of all operating manuals and other procedures and documents necessary to execute the work or activity and to operate the installation safely without pollution are readily accessible at each installation.

MANAGEMENT SYSTEM

18. The operator shall ensure compliance with the management system referred to in section 5.

SAFETY AND ENVIRONMENTAL PROTECTION

19. The operator shall take all reasonable precautions to ensure safety and environmental protection, including ensuring that

(a) any operation necessary for the safety of persons at an installation or on a support craft has priority, at all times, over any work or activity at that installation or on that support craft;

(b) safe work methods are followed during all drilling, well or production operations;

(c) there is a shift handover system to effectively communicate any conditions, mechanical or procedural deficiencies or other problems that might have an impact on safety or environmental protection;

(d) differences in language or other barriers to effective communication do not jeopardize safety or environmental protection;

(e) all persons at an installation, or in transit to or from an installation, receive instruction in and are familiar with safety and evacuation procedures and with their roles and responsibilities in the contingency plans, including emergency response procedures;

(f) any drilling or well operation is conducted in a manner that maintains full control of the well at all times;

(g) if there is loss of control of a well at an installation, all other wells at that installation are shut in until the well that is out of control is secured;

(h) plans are in place to deal with potential hazards;

(i) all equipment required for safety and environmental protection is available and in an operable condition;

(j) the inventory of all equipment identified in the safety plan and the environmental protection plan is updated after the completion of any significant modification or repair to any major component of the equipment;

(k) the administrative and logistical support that is provided for drilling, well or production operations includes accommodation, transportation, first aid and storage, repair facilities and communication systems suitable for the area of operations;

(l) a sufficient number of trained and competent individuals are available to complete the authorized work or activities and to carry out any work or activity safely and without pollution; and

(m) any operational procedure that is a hazard to safety or the environment is corrected and all affected persons are informed of the alteration.

20. (1) No person shall tamper with, activate without cause, or misuse any safety or environmental protection equipment.

(2) A passenger on a helicopter, supply vessel or any other support craft engaged in a drilling program or production project shall comply with all applicable safety instructions.

21. (1) No person shall smoke on an installation except in those areas set aside by the operator for that use.

(2) The operator shall ensure compliance with subsection (1).

STORING AND HANDLING OF CONSUMABLES

22. The operator shall ensure that fuel, potable water, spill containment products, safety-related chemicals, drilling fluids, cement and other consumables are

(a) readily available and stored on an installation in quantities sufficient for any normal and reasonably foreseeable emergency condition; and

(b) stored and handled in a manner that minimizes their deterioration, ensures safety and prevents pollution.

HANDLING OF CHEMICAL SUBSTANCES, WASTE MATERIAL AND OIL

23. The operator shall ensure that all chemical substances, including process fluids and diesel fuel, waste material, drilling fluid and drill cuttings generated at an installation, are handled in a way that does not create a hazard to safety or the environment.

CESSATION OF A WORK OR ACTIVITY

24. (1) The operator shall ensure that any work or activity ceases without delay if that work or activity

(a) endangers or is likely to endanger the safety of persons;

(b) endangers or is likely to endanger the safety or integrity of the well or the installation; or

(c) causes or is likely to cause pollution.

(2) If the work or activity ceases, the operator shall ensure that it does not resume until it can do so safely and without pollution.

PART 4

EQUIPMENT AND OPERATIONS

WELLS, INSTALLATIONS, EQUIPMENT, FACILITIES AND SUPPORT CRAFT

25. The operator shall ensure that

(a) all wells, installations, equipment and facilities are designed, constructed, tested, maintained and operated to prevent incidents and waste under the maximum load conditions that may be reasonably anticipated during any operation;

(b) a comprehensive inspection that includes a non-destructive examination of critical joints and structural members of an installation and any critical drilling or production equipment is made at an interval to ensure continued safe operation of the installation or equipment and in any case, at least once in every five-year period; and

(c) records of maintenance, tests and inspections are kept.

26. The operator shall ensure that

(a) the components of an installation and well tubulars, Christmas trees and wellheads are operated in accordance with good engineering practices; and

(b) any part of an installation that may be exposed to a sour environment is designed, constructed and maintained to operate safely in that environment.

27. (1) The operator shall ensure that any defect in the installation, equipment, facilities and support craft that may be a hazard to safety or the environment is rectified without delay.

(2) If it is not possible to rectify the defect without delay, the operator shall ensure that it is rectified as soon as the circumstances permit and that mitigation measures are put in place to minimize the hazards while the defect is being rectified.

DRILLING FLUID SYSTEM

28. The operator shall ensure that

(a) the drilling fluid system and associated monitoring equipment is designed, installed, operated and maintained to provide an effective barrier against formation pressure, to allow for proper well evaluation, to ensure safe drilling operations and to prevent pollution; and

(b) the indicators and alarms associated with the monitoring equipment are strategically located on the drilling rig to alert onsite personnel.

MARINE RISER

29. (1) The operator shall ensure that every marine riser is capable of

(a) furnishing access to the well;

(b) isolating the well-bore from the sea;

(c) withstanding the differential pressure of the drilling fluid relative to the sea;

(d) withstanding the physical forces anticipated in the drilling program; and

(e) permitting the drilling fluid to be returned to the installation.

(2) The operator shall ensure that every marine riser is supported in a manner that effectively compensates for the forces caused by the motion of the installation.

DRILLING PRACTICES

30. The operator shall ensure that adequate equipment, procedures and personnel are in place to recognize and control normal and abnormal pressures, to allow for safe, controlled drilling operations and to prevent pollution.

REFERENCE FOR WELL DEPTHS

31. The operator shall ensure that any depth in a well is measured from a single reference point, which is either the kelly bushing or the rotary table of the drilling rig.

DIRECTIONAL AND DEVIATION SURVEYS

32. The operator shall ensure that

(a) directional and deviation surveys are taken at intervals that allow the position of the well-bore to be determined accurately; and

(b) except in the case of a relief well, a well is drilled in a manner that does not intersect an existing well.

FORMATION LEAK-OFF TEST

33. The operator shall ensure that

(a) a formation leak-off test or a formation integrity test is conducted before drilling more than 10 m below the shoe of any casing other than the conductor casing;

(b) the formation leak-off test or the formation integrity test is conducted to a pressure that allows for safe drilling to the next planned casing depth; and

(c) a record is retained of each formation leak-off test and the results included in the daily drilling report referred to in paragraph 83(a) and in the well history report referred to in section 88.

FORMATION FLOW AND WELL TESTING EQUIPMENT

34. (1) The operator shall ensure that

(a) the equipment used in a formation flow test is designed to safely control well pressure, properly evaluate the formation and prevent pollution;

(b) the rated working pressure of formation flow test equipment upstream of and including the well testing manifold exceeds the maximum anticipated shut-in pressure; and

(c) the equipment downstream of the well testing manifold is sufficiently protected against overpressure.

(2) The operator of an offshore well or a well in a sour environment shall ensure that the formation flow test equipment includes a down-hole safety valve that permits closure of the test string above the packer.

(3) The operator shall ensure that any formation flow test equipment used in testing an offshore well that is drilled with a floating drilling unit has a subsea test tree that includes

(a) a valve that may be operated from the surface and automatically closes when required to prevent uncontrolled well flow; and

(b) a release system that permits the test string to be hydraulically or mechanically disconnected within or below the blow-out preventers.

WELL CONTROL

35. The operator shall ensure that adequate procedures, materials and equipment are in place and utilized to minimize the risk of loss of well control in the event of lost circulation.

36. (1) The operator shall ensure that, during all well operations, reliably operating well control equipment is installed to control kicks, prevent blow-outs and safely carry out all well activities and operations, including drilling, completion and workover operations.

(2) After setting the surface casing, the operator shall ensure that at least two independent and tested well barriers are in place during all well operations.

(3) If a barrier fails, the operator shall ensure that no other activities, other than those intended to restore or replace the barrier, take place in the well.

(4) The operator shall ensure that, during drilling, except when drilling under-balanced, one of the two barriers to be maintained is the drilling fluid column.

37. The operator shall ensure that pressure control equipment associated with drilling, coil tubing, slick line and wire line operations is pressure-tested on installation and as often as necessary to ensure its continued safe operation.

38. If the well control is lost or if safety, environmental protection or resource conservation is at risk, the operator shall ensure that any action necessary to rectify the situation is taken without delay, despite any condition to the contrary in the well approval.

CASING AND CEMENTING

39. The operator shall ensure that the well and casing are designed so that

(a) the well can be drilled safely, the targeted formations evaluated and waste prevented;

(b) the anticipated conditions, forces and stresses that may be placed upon them are withstood; and

(c) the integrity of gas hydrate and permafrost zones — and, in the case of an onshore well, potable water zones — is protected.

40. The operator shall ensure that the well and casing are installed at a depth that provides for adequate kick tolerances and well control operations that provide for safe, constant bottom hole pressure.

41. The operator shall ensure that cement slurry is designed and installed so that

(a) the movement of formation fluids in the casing annuli is prevented and, where required for safety, resource evaluation or prevention of waste, the isolation of the oil, gas and water zones is ensured;

(b) support for the casing is provided;

(c) corrosion of the casing over the cemented interval is retarded; and

(d) the integrity of gas hydrate and permafrost zones — and, in the case of an onshore well, potable water zones — is protected.

WAITING ON CEMENT TIME

42. After the cementing of any casing or casing liner and before drilling out the casing shoe, the operator shall ensure that the cement has reached the minimum compressive strength sufficient to support the casing and provide zonal isolation.

CASING PRESSURE TESTING

43. After installing and cementing the casing and before drilling out the casing shoe, the operator shall ensure that the casing is pressure-tested to the value required to confirm its integrity for maximum anticipated operating pressure.

PRODUCTION TUBING

44. The operator shall ensure that the production tubing used in a well is designed to withstand the maximum conditions, forces and stresses that may be placed on it and to maximize recovery from the pool.

MONITORING AND CONTROL OF PROCESS OPERATIONS

45. The operator shall ensure that

(a) operations such as processing, transportation, storage, re-injection and handling of oil and gas on the installation are effectively monitored to prevent incidents and waste;

(b) all alarm, safety, monitoring, warning and control systems associated with those operations are managed to prevent incidents and waste; and

(c) all appropriate persons are informed of the applicable alarm, safety, monitoring, warning or control systems associated with those operations that are taken out of service, and when those systems are returned to service.

WELL COMPLETION

46. (1) An operator that completes a well shall ensure that

(a) it is completed in a safe manner and allows for maximum recovery;

(b) except in the case of commingled production, each completion interval is isolated from any other porous or permeable interval penetrated by the well;

(c) the testing and production of any completion interval are conducted safely and do not cause waste or pollution;

(d) if applicable, sand production is controlled and does not create a safety hazard or cause waste;

(e) each packer is set as close as practical to the top of the completion interval and that the pressure testing of the packer to a differential pressure is greater than the maximum differential pressure anticipated under the production or injection conditions;

(f) if practical, any mechanical well condition that may have an adverse effect on production of oil and gas from, or the injection of fluids into, the well is corrected;

(g) the injection or production profile of the well is improved, or the completion interval of the well is changed, if it is necessary to do so to prevent waste;

(h) if different pressure and inflow characteristics of two or more pools might adversely affect the recovery from any of those pools, the well is operated as a single pool well or as a segregated multi-pool well;

(i) after initial completion, all barriers are tested to the maximum pressure to which they are likely to be subjected; and

(j) following any workover, any affected barriers are pressure-tested.

(2) The operator of a segregated multi-pool well shall ensure that

(a) after the well is completed, segregation has been established within and outside the well casing and is confirmed; and

(b) if there is reason to doubt that segregation is being maintained, a segregation test is conducted within a reasonable time frame.

SUBSURFACE SAFETY VALVE

47. (1) The operator of an offshore development well capable of flow shall ensure that the well is equipped with a fail-safe subsurface safety valve that is designed, installed, operated and tested to prevent uncontrolled well flow when it is activated.

(2) If a development well is located in a zone where permafrost is present in unconsolidated sediments, the operator shall ensure that a subsurface safety valve is installed in the tubing below the base of the permafrost.

WELLHEAD AND CHRISTMAS TREE EQUIPMENT

48. The operator shall ensure that the wellhead and Christmas tree equipment, including valves, are designed to operate safely and efficiently under the maximum load conditions anticipated during the life of the well.

PART 5

EVALUATION OF WELLS, POOLS AND FIELDS

GENERAL

49. The operator shall ensure that the well data acquisition program and the field data acquisition program are implemented in accordance with good oilfield practices.

50. (1) If part of the well or field data acquisition program cannot be implemented, the operator shall ensure that

(a) a conservation officer is notified as soon as the circumstances permit; and

(b) the procedures to otherwise achieve the goals of the program are submitted to the Board for approval.

(2) If the operator can demonstrate that those procedures can achieve the goals of the well or field data acquisition program or are all that can be reasonably expected in the circumstances, the Board shall approve them.

TESTING AND SAMPLING OF FORMATIONS

51. The operator shall ensure that every formation in a well is tested and sampled to obtain reservoir pressure data and fluid samples from the formation, if there is an indication that the data or samples would contribute substantially to the geological and reservoir evaluation.

FORMATION FLOW TESTING

52. (1) The operator shall ensure that

(a) no development well is put into production unless the Board has approved a formation flow test in respect of the development well; and

(b) if a development well is subjected to a well operation that might change its deliverability, productivity or injectivity, a formation flow test is conducted within a reasonable time frame after the well operation is ended to determine the effects of that operation on the well’s deliverability, productivity or injectivity.

(2) The operator may conduct a formation flow test on a well drilled on a geological feature if, before conducting that test, the operator

(a) submits to the Board a detailed testing program; and

(b) obtains the Board’s approval to conduct the test.

(3) The Board may require that the operator conduct a formation flow test on a well drilled on a geological feature, other than the first well, if there is an indication that the test would contribute substantially to the geological and reservoir evaluation.

(4) The Board shall approve a formation flow test if the operator demonstrates that the test will be conducted safely, without pollution and in accordance with good oilfield practices and that the test will enable the operator to

(a) obtain data on the deliverability or productivity of the well;

(b) establish the characteristics of the reservoir; and

(c) obtain representative samples of the formation fluids.

SUBMISSION OF SAMPLES AND DATA

53. The operator shall ensure that all cutting samples, fluid samples and cores collected as part of the well and field data acquisition programs are

(a) transported and stored in a manner that prevents any loss or deterioration;

(b) delivered to the Board within 60 days after the rig release date unless analyses are ongoing, in which case those samples and cores, or the remaining parts, are to be delivered on completion of the analyses; and

(c) stored in durable containers properly labelled for identification.

54. The operator shall ensure that after any samples necessary for analysis or for research or academic studies have been removed from a conventional core, the remaining core, or a longitudinal slab that is not less than one half of the cross-sectional area of that core, is submitted to the Board.

55. Before disposing of cutting samples, fluid samples, cores or evaluation data under these Regulations, the operator shall ensure that the Board is notified in writing and is given an opportunity to request delivery of the samples, cores or data.

PART 6

WELL TERMINATION

SUSPENSION OR ABANDONMENT

56. The operator shall ensure that every well that is suspended or abandoned can be readily located and left in a condition that

(a) provides for isolation of all oil or gas bearing zones and discrete pressure zones; and, in the case of an onshore well, potable water zones; and

(b) prevents any formation fluid from flowing through or escaping from the well-bore.

57. The operator of a suspended well shall ensure that the well is monitored and inspected to maintain its continued integrity and to prevent pollution.

58. The operator shall ensure that, on the abandonment of any offshore well, the seafloor is cleared of any material or equipment that might interfere with other commercial uses of the sea.

INSTALLATION REMOVAL

59. No operator shall remove or cause to have removed a drilling installation from a well drilled under these Regulations unless the well has been terminated in accordance with these Regulations.

PART 7

MEASUREMENTS

FLOW AND VOLUME

60. (1) Unless otherwise included in the approval issued under subsection 7(2), the operator shall ensure that the rate of flow and the volume of the following are measured and recorded:

(a) the fluid that is produced from each well;

(b) the fluid that is injected into each well;

(c) any produced fluid that enters, leaves, is used or is flared, vented, burned or otherwise disposed of on an installation, including any battery room, treatment facility or processing plant; and

(d) any air or materials injected for the purposes of disposal, storage or cycling, including drill cuttings and other useless material that is generated during drilling, well or production operations.

(2) The operator shall ensure that any measurements are conducted in accordance with the flow system, flow calculation procedure and flow allocation procedure, approved under subsection 7(2).

61. (1) The operator shall ensure that group production of oil and gas from wells and injection of a fluid into wells is allocated on a pro rata basis, in accordance with the flow system, flow calculation procedure and flow allocation procedure approved under subsection 7(2).

(2) If a well is completed over multiple pools or zones, the operator shall ensure that production or injection volumes for the well are allocated on a pro rata basis to the pools or zones in accordance with the flow allocation procedure approved under subsection 7(2).

TESTING, MAINTENANCE AND NOTIFICATION

62. The operator shall ensure

(a) that meters and associated equipment are calibrated and maintained to ensure their continued accuracy;

(b) that equipment used to calibrate the flow system is calibrated in accordance with good measurement practices;

(c) that any component of the flow system that may have an impact on the accuracy or integrity of the flow system and that is not functioning in accordance with the manufacturer’s specifications is repaired or replaced without delay, or, if it is not possible to do so without delay, corrective measures are taken to minimize the impact on the accuracy and integrity of the flow system while the repair or replacement is proceeding; and

(d) that a conservation officer is notified, as soon as the circumstances permit, of any malfunction or failure of any flow system component that may have an impact on the accuracy of the flow system and of the corrective measures taken.

TRANSFER METERS

63. The operator shall ensure that

(a) a conservation officer is notified at least 14 days before the day on which any transfer meter prover or master meter used in conjunction with a transfer meter is calibrated; and

(b) a copy of the calibration certificate is submitted to the Chief Conservation Officer as soon as the circumstances permit, following completion of the calibration.

PRORATION TESTING FREQUENCY

64. The operator of a development well that is producing oil or gas shall ensure that sufficient proration tests are performed to permit reasonably accurate determination of the allocation of oil, gas and water production on a pool and zone basis.

PART 8

PRODUCTION CONSERVATION

RESOURCE MANAGEMENT

65. The operator shall ensure that

(a) maximum recovery from a pool or zone is achieved in accordance with good oilfield practices;

(b) wells are located and operated to provide for maximum recovery from a pool; and

(c) if there is reason to believe that infill drilling or implementation of an enhanced recovery scheme might result in increased recovery from a pool or field, studies on these methods are carried out and submitted to the Board.

COMMINGLED PRODUCTION

66. (1) No operator shall engage in commingled production except in accordance with the approval granted under subsection (2).

(2) The Board shall approve the commingled production if the operator demonstrates that it would not reduce the recovery from the pools or zones.

(3) The operator engaging in commingled production shall ensure that the total volume and the rate of production of each fluid produced is measured and the volume from each pool or zone is allocated in accordance with the requirements of Part 7.

GAS FLARING AND VENTING

67. No operator shall flare or vent gas unless

(a) it is otherwise permitted in the approval issued under subsection 52(4) or in the authorization; or

(b) it is necessary to do so because of an emergency situation and the Board is notified in the daily drilling report, daily production report or in any other written or electronic form, as soon as the circumstances permit, of the flaring or venting and of the amount flared or vented.

OIL BURNING

68. No operator shall burn oil unless

(a) it is otherwise permitted in the approval issued under subsection 52(4) or in the authorization; or

(b) it is necessary to do so because of an emergency situation and the Board is notified in the daily drilling report, daily production report or in any other written or electronic form, as soon as the circumstances permit, of the burning and the amount burned.

PART 9

SUPPORT OPERATIONS

SUPPORT CRAFT

69. The operator shall ensure that all support craft are designed, constructed and maintained to supply the necessary support functions and operate safely in the foreseeable physical environmental conditions prevailing in the area in which they operate.

70. (1) The operator of a manned installation shall ensure that at least one support craft is

(a) available at a distance that is not greater than that required for a return time of twenty minutes; and

(b) suitably equipped to supply the necessary emergency services including rescue and first aid treatment for all personnel on the installation in the event of an emergency.

(2) If the support craft exceeds the distance referred to in paragraph (1)(a), both the installation manager and the person in charge of the support craft shall log this fact and the reason why the distance or time was exceeded.

(3) Under the direction of the installation manager, the support craft crew shall keep the craft in close proximity to the installation, maintain open communication channels with the installation and be prepared to conduct rescue operations during any activity or condition that presents an increased level of risk to the safety of personnel or the installation.

SAFETY ZONE

71. (1) For the purposes of this section, the safety zone around an offshore installation consists of the area within a line enclosing and drawn at a distance of 500 m from the outer edge of the installation.

(2) A support craft shall not enter the safety zone without the consent of the installation manager.

(3) The operator shall take all reasonable measures to warn persons who are in charge of vessels and aircraft of the safety zone boundaries, of the facilities within the safety zone and of any related potential hazards.

PART 10

TRAINING AND COMPETENCY

72. The operator shall ensure that

(a) all personnel have, before assuming their duties, the necessary experience, training and qualifications and are able to conduct their duties safely, competently and in compliance with these Regulations; and

(b) records of the experience, training and qualifications of all personnel are kept and made available to the Board upon request.

PART 11

SUBMISSIONS, NOTIFICATIONS, RECORDS AND REPORTS

REFERENCE TO NAMES AND DESIGNATIONS

73. When submitting any information for the purposes of these Regulations, the operator shall refer to each well, pool and field by the name given to it under sections 3 and 4, or if a zone, by its designation by the Board under section 4.

SURVEYS

74. (1) The operator shall ensure that a survey is used to confirm

(a) for an onshore well, the surface location; and

(b) for an offshore well, the location on the seafloor.

(2) The survey shall be certified by a person licensed under the Canada Lands Surveyors Act.

(3) The operator shall ensure that a copy of the survey plan filed with the Canada Lands Surveys Records is submitted to the Board.

INCIDENTS AND NEAR-MISSES

75. (1) The operator shall ensure that

(a) the Board is notified of any incident or near-miss as soon as the circumstances permit; and

(b) the Board is notified at least 24 hours in advance of any press release or press conference held by the operator concerning any incident or near-miss during any activity to which these Regulations apply, except in an emergency situation, in which case it shall be notified without delay before the press release or press conference.

(2) The operator shall ensure that

(a) any incident or near-miss is investigated, its root cause and causal factors identified and corrective action taken; and

(b) for any of the following incidents or near-misses, a copy of an investigation report identifying the root cause, causal factors and corrective action taken is submitted to the Board no later than 21 days after the day on which the incident or near-miss occurred:

(i) a lost or restricted workday injury,

(ii) death,

(iii) fire or explosion,

(iv) a loss of containment of any fluid from a well,

(v) an imminent threat to the safety of a person, installation or support craft, or

(vi) a significant pollution event.

SUBMISSION OF DATA AND ANALYSIS

76. (1) The operator shall ensure that a final copy of the results, data, analyses and schematics obtained from the following sources is submitted to the Board:

(a) testing, sampling and pressure surveys carried out as part of the well and field data acquisition programs referred to in section 49 and testing and sampling of formations referred to in section 51; and

(b) any segregation test or well operation.

(2) Unless otherwise indicated in these Regulations, the operator shall ensure that the results, data, analyses and schematics are submitted within 60 days after the day on which any activity referred to in paragraphs (1)(a) and (b) is completed.

RECORDS

77. The operator shall ensure that records are kept of

(a) all persons arriving, leaving or present on the installation;

(b) the location and movement of support craft, the emergency drills and exercises, incidents, near-misses, the quantities of consumable substances that are required to ensure the safety of operations and other observations and information critical to the safety of persons on the installation or the protection of the environment;

(c) daily maintenance and operating activities, including any activity that may be critical to the safety of persons on the installation, the protection of the environment or the prevention of waste;

(d) in the case of a production installation,

(i) the inspection of the installation and related equipment for corrosion and erosion and any resulting maintenance carried out,

(ii) the pressure, temperature and flow rate data for compressors and treating and processing facilities,

(iii) the calibration of meters and instruments,

(iv) the testing of surface and subsurface safety valves,

(v) the status of each well and the status of well operations, and

(vi) the status of the equipment and systems critical to safety and protection of the environment including any unsuccessful test result or equipment failure leading to an impairment of the systems; and

(e) in the case of a floating installation, all installation movements, data, observations, measurements and calculations related to the stability and station-keeping capability of the installation.

METEOROLOGICAL OBSERVATIONS

78. The operator of an offshore installation shall ensure

(a) that the installation is equipped with facilities and equipment for observing, measuring and recording physical environmental conditions and that a comprehensive record of observations of physical environmental conditions is maintained onboard the installation; and

(b) that forecasts of meteorological conditions, sea states and ice movements are obtained and recorded each day and each time during the day that they change substantially from those forecasted.

DAILY PRODUCTION RECORD

79. The operator shall ensure that a daily production record, which includes the metering records and other information relating to the production of oil and gas and other fluids in respect of a pool or well, is retained and readily accessible to the Board until the field or well in which the pool is located is abandoned and at that time shall offer the record to the Board before destroying it.

MANAGEMENT OF RECORDS

80. The operator shall ensure that

(a) all processes are in place and implemented to identify, generate, control and retain records necessary to support operational and regulatory requirements; and

(b) the records are readily accessible for inspection by the Board.

FORMATION FLOW TEST REPORTS

81. The operator shall ensure that

(a) in respect of exploration and delineation wells, a daily record of formation flow test results is submitted to the Board; and

(b) in respect of all wells, a formation flow test report is submitted to the Board as soon as the circumstances permit, following completion of the test.

PILOT SCHEME

82. (1) For the purposes of this section, “pilot scheme” means a scheme that applies existing or experimental technology over a limited portion of a pool to obtain information on reservoir or production performance for the purpose of optimizing field development or improving reservoir or production performance.

(2) The operator shall ensure that interim evaluations of any pilot scheme respecting a pool, field or zone are submitted to the Board.

(3) When the operator completes a pilot scheme, the operator shall ensure that a report is submitted to the Board that sets out

(a) the results of the scheme and supporting data and analyses; and

(b) the operator’s conclusions as to the potential of the scheme for application to full-scale production.

DAILY REPORTS

83. The operator shall ensure that a copy of the following is submitted to the Board daily:

(a) the daily drilling report;

(b) the daily geological report, including any formation evaluation logs and data; and

(c) in the case of a production installation, a summary, in the form of a daily production report, of the records referred to in paragraph 77(d) and the daily production record.

MONTHLY PRODUCTION REPORT

84. (1) The operator shall ensure that a report summarizing the production data collected during the preceding month is submitted to the Board not later than the 15th day of each month.

(2) The report shall use established production accounting procedures.

ANNUAL PRODUCTION REPORT

85. The operator shall ensure that, not later than March 31 of each year, an annual production report relating to the preceding year for a pool, field or zone is submitted to the Board including details on the performance, production forecast, reserve revision, reasons for significant deviations in well performance from predictions in previous annual production reports, gas conservation resources, efforts to maximize recovery and reduce costs, and any other information required to demonstrate how the operator manages and intends to manage the resource without causing waste.

ENVIRONMENTAL REPORTS

86. (1) For each production project, the operator shall ensure that, not later than March 31 of each year, an annual environmental report relating to the preceding year is submitted to the Board and includes

(a) for an offshore installation, a summary of the general environmental conditions during the year and a description of ice management activities; and

(b) a summary of environmental protection matters during the year, including a summary of any incidents that may have an environmental impact, discharges that occurred and waste material that was produced, a discussion of efforts undertaken to reduce pollution and waste material and a description of environmental contingency plan exercises.

(2) For each drilling installation for an exploration or delineation well, the operator shall ensure that an environmental report relating to each well is submitted to the Board within 90 days after the rig release date and includes

(a) a description of the general environmental conditions during the drilling program and a description of ice management activities and downtime caused by weather or ice; and

(b) a summary of environmental protection matters during the drilling program, including a summary of spills, discharges occurred and waste material produced, a discussion of efforts undertaken to reduce them, and a description of environmental contingency plan exercises.

ANNUAL SAFETY REPORT

87. The operator shall ensure that, not later than March 31 of each year, an annual safety report relating to the preceding year is submitted to the Board and includes

(a) a summary of lost or restricted workday injuries, minor injuries and safety-related incidents and near-misses that have occurred during the preceding year; and

(b) a discussion of efforts undertaken to improve safety.

WELL HISTORY REPORT

88. (1) The operator shall ensure that a well history report is prepared for every well drilled by the operator under the well approval and that the report is submitted to the Board.

(2) The well history report shall contain a record of all operational, engineering, petrophysical and geological information that is relevant to the drilling and evaluation of the well.

WELL OPERATIONS REPORT

89. (1) The operator shall ensure that a report including the following information is submitted to the Board within 30 days after the end of a well operation:

(a) a summary of the well operation, including any problems encountered during the well operation;

(b) a description of the completion fluid properties;

(c) a schematic of, and relevant engineering data on, the down-hole equipment, tubulars, Christmas tree and production control system;

(d) details of any impact of the well operation on the performance of the well, including any effect on recovery; and

(e) for any well completion, suspension or abandonment, the rig release date.

(2) The report shall be signed and dated by the operator or the operator’s representative.

OTHER REPORTS

90. The operator shall ensure that the Board is made aware, at least once a year, of any report containing relevant information regarding applied research work or studies obtained or compiled by the operator relating to the operator’s work or activities and that a copy of any report is submitted to the Board on request.

PART 12

CONSEQUENTIAL AMENDMENTS, TRANSITIONAL PROVISION, REPEALS AND COMING INTO FORCE

CONSEQUENTIAL AMENDMENTS

Canada Oil and Gas Certificate of Fitness Regulations

91. (1) The definition “société d’accréditation” in section 2 of the French version of the Canada Oil and Gas Certificate of Fitness Regulations (see footnote 1) is repealed.

(2) The definition “certifying authority” in section 2 of the English version of the Regulations is replaced by the following:

“certifying authority” means, for the purposes of section 5.12 of the Act, the American Bureau of Shipping, Bureau Veritas, Det norskeVeritas Classification A/S, Germanischer Lloyd or Lloyd’s Register North America, Inc. (autorité)

(3) Section 2 of the French version of the Regulations is amended by adding the following in alphabetical order:

« autorité » Pour l’application de l’article 5.12 de la Loi, s’entend de l’American Bureau of Shipping, du Bureau Veritas, du Det norskeVeritas Classification A/S, du Germanischer Lloyd ou du Lloyd’s Register North America, Inc. (certifying authority)

92. Section 4 of the Regulations is replaced by the following:

4. (1) The following installations are prescribed for the purposes of section 5.12 of the Act:

(a) each production installation, accommodation installation and diving installation at an offshore production site; and

(b) each drilling installation, diving installation and accommodation installation at an offshore drill site.

(2) Subject to subsections (3) and (5) and section 5, a certifying authority may issue a certificate of fitness in respect of the installations referred to in subsection (1), if the certifying authority

(a) determines that, in relation to the production or drill site or region in which the particular installation is to be operated, the installation

(i) is designed, constructed, transported and installed or established in accordance with

(A) Parts I to III of the Canada Oil and Gas Installations Regulations,

(B) the provisions of the Oil and Gas Occupational Safety and Health Regulations listed in Part 1 of the schedule to these Regulations, and

(C) the provisions of the Canada Oil and Gas Diving Regulations listed in Part 2 of the schedule to these Regulations, if the installation includes a dependent diving system,

(ii) is fit for the purpose for which it is to be used and can be operated safely without polluting the environment, and

(iii) will continue to meet the requirements of subparagraphs (i) and (ii) for the period of validity that is endorsed on the certificate of fitness if the installation is maintained in accordance with the inspection, maintenance and weight control programs submitted to and approved by the certifying authority under subsection (5); and

(b) carries out the scope of work in respect of which the certificate of fitness is issued.

(3) For the purposes of subparagraph (2)(a)(i), the certifying authority may substitute, for any equipment, methods, measure or standard required by any Regulations referred to in that subparagraph, equipment, methods, measures or standards the use of which is authorized by the Chief or Chief Conservation Officer, as applicable under section 16 of the Act.

(4) The certifying authority shall endorse on any certificate of fitness it issues details of every limitation on the operation of the installation that is necessary to ensure that the installation meets the requirements of paragraph (2)(a).

(5) The certifying authority shall not issue a certificate of fitness unless, for the purpose of enabling the certifying authority to determine whether the installation meets the requirements of paragraph (2)(a) and to carry out the scope of work referred to in paragraph (2)(b),

(a) the person applying for the certificate

(i) provides the certifying authority with all the information required by the certifying authority,

(ii) carries out or assists the certifying authority to carry out every inspection, test or survey required by the certifying authority, and

(iii) submits to the certifying authority an inspection and monitoring program, a maintenance program and a weight control program for approval; and

(b) if the programs are adequate to ensure and maintain the integrity of the installation, the certifying authority approves the programs referred to in subparagraph (a)(iii).

93. (1) Paragraph 6(2)(a) of the Regulations is replaced by the following:

(a) is sufficiently detailed to permit the certifying authority to determine whether the installation meets the requirements of paragraph 4(2)(a); and

(2) Paragraph 6(2)(b) of the Regulations is amended by striking out “and” at the end of subparagraph (v) and by adding the following after subparagraph (vi):

(vii) the structures, facilities, equipment and systems critical to safety, and to the protection of the natural environment, are in place and functioning appropriately, and

(viii) in respect of an offshore drilling installation or an offshore production installation, the structures, facilities, equipment and systems to meet the requirements of the provisions of the Canada Oil and Gas Drilling and Production Regulations listed in Part 3 of the schedule to these Regulations are in place and functioning appropriately.

94. Subsections 7(1) and (2) of the Regulations are replaced by the following:

7. (1) If the certifying authority determines that, when the installation is maintained in accordance with the programs submitted to it under subparagraph 4(5)(a)(iii), the installation will meet the requirements of paragraph 4(2)(a) for a period of at least five years, the certifying authority shall endorse on the certificate of fitness an expiration date that is five years after the date of issuance.

(2) If the period of time referred to in subsection (1) is less than five years, the certifying authority shall endorse on the certificate of fitness an expiration date that is the number of years or months in that lesser period after the date of issuance.

95. Subparagraphs 9(1)(a)(i) and (ii) of the Regulations are replaced by the following:

(i) that any of the information submitted under subsection 4(5) was incorrect and that the certificate of fitness would not have been issued if that information had been correct,

(ii) that the installation no longer meets the requirements of paragraph 4(2)(a), or

96. The French version of the Regulations is amended by replacing “société d’accréditation” and “société” with “autorité” in the following provisions with any necessary modifications:

(a) the definition “plan de travail” in section 2;

(b) section 5;

(c) subsection 6(1);

(d) subsection 8(1);

(e) section 9;

(f) the heading before section 10; and

(g) section 10.

97. The schedule to the Regulations is replaced by the schedule set out in the schedule to these Regulations.

Canada Oil and Gas Installations Regulations

98. (1) The definition “société d’accréditation” in subsection 2(1) of the French version of the Canada Oil and Gas Installations Regulations (see footnote 2) is repealed.

(2) The expression “(société d’accréditation)” at the end of the definition “certifying authority” in subsection 2(1) of the English version of the Regulations is replaced by the expression “(autorité)”.

(3) Subsection 2(1) of the French version of the Regulations is amended by adding the following in alphabetical order:

« autorité » S’entend au sens de l’article 2 du Règlement sur les certificats de conformité liés à l’exploitation du pétrole et du gaz au Canada. (certifying authority)

99. Paragraph 14(1)(c) of the Regulations is replaced by the following:

(c) drilling safety systems and associated equipment will operate safely and in accordance with the manufacturer’s specifications;

100. The portion of subsection 64(1) of the Regulations before paragraph (a) is replaced by the following:

64. (1) Subject to subsection (2), every operator shall prepare, adhere to and maintain, in respect of every offshore installation, an operations manual that contains the following data:

101. The French version of the Regulations is amended by replacing “société d’accréditation” with “autorité” in the following provisions with any necessary modifications:

(a) the definition “certificat de conformité” in subsection 2(1);

(b) subsection 68(1);

(c) subsections 68(3) and (4); and

(d) section 69.

TRANSITIONAL PROVISION

102. An operator at the time of the coming into force of these Regulations shall comply with the requirements of section 5.

REPEALS

103. The Canada Oil and Gas Drilling Regulations (see footnote 3) are repealed.

104. The Canada Oil and Gas Production and Conservation Regulations (see footnote 4) are repealed.

COMING INTO FORCE

105. These Regulations come into force on December 31, 2009.

SCHEDULE
(Section 97)

SCHEDULE
(Paragraphs 4(2)(a) and 6(2)(b))

CERTIFICATION STANDARDS

PART 1

PROVISIONS OF OIL AND GAS OCCUPATIONAL SAFETY AND HEALTH REGULATIONS

1. Sections 3.2 to 3.11

2. Section 5.1

3. Section 6.3

4. Sections 7.1 to 7.6

5. Section 9.5

6. Sections 9.11 and 9.12

7. Subsection 9.14(1)

8. Subsection 10.6(1)

9. Sections 10.9 to 10.11

10. Sections 10.14 to 10.16

11. Section 10.18

12. Sections 10.24 and 10.25

13. Section 10.27

14. Sections 10.35 to 10.37

15. Subsection 10.38(1)

16. Subsection 10.38(4)

17. Section 11.7

18. Section 11.9

19. Section 13.11

20. Subsection 13.16(4)

21. Section 14.13

22. Section 14.19

23. Sections 15.3 to 15.5

24. Sections 15.9 to 15.11

25. Section 15.13

26. Sections 15.21 and 15.22

27. Section 15.44

28. Subsections 15.47(1) and (2)

29. Subsection 15.49(2)

30. Section 15.50

31. Section 17.13

32. Paragraphs 17.14(b) and (c)

33. Paragraph 17.14(e)

34. Subparagraph 17.14(f)(i)

35. Section 18.2

36. Sections 18.6 to 18.8

PART 2

PROVISIONS OF CANADA OIL AND GAS DIVING REGULATIONS

1. Paragraphs 9(5)(h) to (j)

2. Subsection 12(1)

3. Paragraph 12(2)(d)

4. Paragraph 12(2)(g)

5. Paragraph 12(2)(i)

6. Paragraphs 12(2)(k) to (p)

7. Section 13

8. Sections 14 to 17

9. Paragraph 18(a)

10. Paragraph 18(c)

11. Subsection 19(1)

12. Paragraph 19(2)(a)

13. Section 23

14. Paragraph 25(a)

PART 3

PROVISIONS OF CANADA OIL AND GAS DRILLING AND PRODUCTION REGULATIONS

1. Paragraph 5(2)(e), except in respect of support craft

2. Paragraph 19(i)

3. Paragraph 22(b)

4. Section 23

5. Section 25

6. Paragraph 26(b)

7. Sections 27 to 30

8. Sections 34 and 35

9. Subsection 36(1)

10. Section 37

11. Paragraphs 45(a) and (b)

12. Sections 47 and 48

13. Paragraphs 62(a) to (c)

REGULATORY IMPACT
ANALYSIS STATEMENT

(This statement is not part of the regulations.)

Issue and objectives

The Drilling and Production Regulations are an amalgamation and modernization of the Drilling Regulations and the Production and Conservation Regulations that currently exist, in mirror form, under the Canada Oil and Gas Operations Act (COGOA) and the Offshore Accord Acts (see footnote 5) (the Acts). These Acts govern the technical and operational aspects of the exploration for, and production of, oil and gas resources on Canada’s Frontier lands. (see footnote 6)

The Acts are administered by three regulators, respectively

• Canada-Newfoundland and Labrador Offshore Petroleum Board
  — Canada-Newfoundland Atlantic Accord Implementation Act
• Canada-Nova Scotia Offshore Petroleum Board
  — Canada-Nova Scotia Offshore Petroleum Resources Accord Implementation Act
• National Energy Board
  — Canada Oil and Gas Operations Act

Regulation continues to be required to ensure that activities related to the drilling for, or production of, oil and gas are carried out in a manner that is safe, protects the environment and ensures that resources are not wasted.

The Regulations address three main issues. First, the Standing Joint Committee on the Scrutiny of Regulations requested that the regulators address the high level of duplication between the Drilling Regulations and the Production and Conservation Regulations. Second, the prescriptive nature of the regulations had created increased administrative challenges and costs that affected regulatory efficiency and effectiveness. Regulators observed increased numbers of requests from companies to use new or cost-effective technologies and processes not reflected in the Regulations. The flexibility to develop more efficient and effective regulatory processes was limited by the existing Regulations, which contained prescriptive and detailed information requirements specificity regarding the number of copies and timing of applications and specific reference to authorized activities. Further, while not currently exercised, the Acts allow authority to be given to the Boards, through regulation, to deal with certain production matters by way of an Order.

Lastly, advances in research into the causes of accidents (injuries and spills) and approaches for effective risk management for safety and environmental protection have led to the development of management systems-based models that are increasingly used to better manage risks in international jurisdictions and by industry.

Modernizing the Regulations improves the existing regulatory framework to support the frontier and offshore oil and gas industry’s continued growth and contribution to Canada’s economy and competitiveness while maintaining the highest standards for safety, environmental protection and management of resources.

Description

There are six main areas of change as a result of amalgamation and modernization:

1. The Drilling Regulations and Production and Conservation Regulations are amalgamated and updated into a single Drilling and Production Regulations.

2. The Regulations have been written in a goal-oriented style, which combines goal-based, performance-based and prescriptive elements, depending upon the circumstances.

3. The Regulations require companies to have a management system to ensure compliance with the Regulations and the Act.

4. The Regulations have been updated to align with current regulatory drafting approaches and standards.

5. The Regulations provide improved flexibility to develop regulatory process efficiencies, including providing the Boards with the authority to deal with well spacing and associated production matters by way of an Order.

6. Consequential amendments to the Installations Regulations and the Certificate of Fitness Regulations under the Acts are made.

The Regulations are predominantly operational and technical in nature. The primary topics in the Regulations include safety, appropriate conservation of the hydrocarbon resource and the protection of the environment during activities undertaken for the drilling and production of oil and gas. The Regulations also outline the information that must accompany regulatory applications as well as identify specific reporting requirements.

The Regulations do not alter existing environmental screening and assessment processes that may apply to proposed drilling or production projects, such as the Canadian Environmental Assessment Act, the Mackenzie Valley Resource Management Act, the Inuvialuit Final Agreement, the Labrador Inuit Land Claims Agreement and the Nunavut Land Claims Agreement.

Amalgamation of existing regulations

The Standing Joint Committee on the Scrutiny of Regulations observed the high level of duplication between the existing Drilling Regulations and the Production and Conservation Regulations and recommended that the duplication be addressed. The Regulations address that recommendation.

Goal-oriented

Goal-oriented regulation is a hybrid approach that includes prescriptive and goal- or performance-based elements. Prescriptive regulation dictates the means by which compliance is achieved, including what is to be done, by whom and how it is to be accomplished. Goal- or performance-based regulation sets regulatory goals or performance objectives to be achieved and allows companies to identify the means to meet them.

Since the development of the existing regulations, the frontier and offshore oil and gas industry has been exploring for, and planning to exploit hydrocarbons from, more technologically complicated and physically challenging environments with more varied hazards and risks. Advancements in equipment, techniques, safety management and environmental management have also occurred.

Prescriptive regulations, by their nature, are written to address a specific set of circumstances and generally cannot address each circumstance, activity or facility design that can create hazards and that should be managed.

A prescriptive approach is also unable to adapt quickly to technological changes and improvements to best practice. Changes relating to outdated requirements must be affected through regulatory amendment. Alternatively, operators must apply, pursuant to the Acts, for exemption from, or equivalency to, specific provisions in the Regulations. However, the Acts restrict exemptions to requirements related to equipment, methods, measures or standards.

The goal-oriented approach retains the regulatory objectives of safety, protection of the environment and conservation of resources while enhancing regulatory clarity and efficiency. The majority of the Drilling and Production Regulations are written in a goal- or performance-based style with clear regulatory objectives or goals. The prescriptive elements are present in the management system elements (section 5), information requirements for reporting (Part 11) and information requirements related to applications for authorizations and well approvals (Part 2).

Management systems

The Regulations include a requirement for companies to develop and implement a management system to ensure compliance with the Act and the Regulations (sections 6, 18 and 102 [103 in the Accord Act Version]). These systems ensure that companies have documented policies and procedures for how they carry out their activities while ensuring compliance and safety, environmental protection and conservation of resources.

The management system components (section 5) include processes to set policies and performance objectives, proactively identify hazards, evaluate risk and identify mitigation, establish clear responsibilities and accountabilities, have trained and competent personnel and establish systems of document management, reporting, evaluation and continual improvement.

The inclusion of management systems requirements strengthens the existing regulatory framework and is more consistent with other international jurisdictions and with other high-hazard industries. In particular, human and organizational factors are systematically addressed, complementing the technical and equipment aspects in the Regulations. Further, it ensures that companies proactively evaluate the project-specific hazards and risks and identify the most appropriate technology, design and operational requirements for the circumstances.

In the Drilling and Production Regulations, the Government’s role in management of safety, environmental protection and prevention of waste shifts from prescribing how companies must operate to identifying clear regulatory goals and objectives while ensuring that companies have processes in place to effectively identify and manage safety and environmental issues through the lifespan of each project from planning through decommissioning.

Management systems for safety and environmental protection are well established in industry both in Canada and internationally. There are several recognized international and Canadian standards specific to the design and implementation of quality, safety and environmental management systems. The Norway, United Kingdom and Australia oil and gas regimes all have management-systems-based regulatory requirements related to hazard identification and risk management. In Canada, the Safety Management System Regulations were implemented under Canada’s Railway Safety Act in 2001 and safety management system requirements were added to the Civil Aviation Regulations in 2005. The National Energy Board’s goal-oriented Onshore Pipeline Regulations, 1999 include requirements related to all essential management systems elements.

Many, if not all, operators currently have and use elements of management systems in their day-to-day project planning, execution and decision-making. During the extensive stakeholder engagement process, no concerns were raised regarding the management systems sections of the Regulations.

The Drilling and Production Regulations recognize that the management system should correspond to the size, nature and complexity of the operator’s operations, activities, hazards, and risks associated with the operations. Arrangements coordinating the management and operations of the proposed work or activity among owners of installations, contractors, the operator and others, as applicable, must also be in place.

Current regulatory drafting approaches and standards

The Regulations were developed using current regulatory drafting approaches and standards with three main resultant changes.

First, certain types of provisions are no longer included. The existing regulations include “these regulations apply to” provisions. Modern federal regulatory drafting approach is to allow the regulations to speak for themselves. Also, the current regulations contain provisions related to the types of programs that require an authorization, specify conditions of authorizations and state that an operator must comply with authorizations and conditions. The requirement for an authorization, the authority for a Board to attach conditions to an authorization and the requirement to comply with authorizations, including conditions, are in the Acts. Accordingly, these types of provisions are not included in the modernized Regulations.

Second, standards are no longer incorporated by reference. Standards are, and will remain, important tools in the frontier and offshore oil and gas industry. Moving the standards out of the Regulations allows for innovation, project/regional specificity and timely use of new standards. Operators become responsible for identifying appropriate standards, codes and practices to be applied for specific projects and for their use in achieving compliance. Moving the standards out of the regulations also reduces the numbers of requests for exemption or equivalency.

Third, the Drilling and Production Regulations update the specific approvals required for projects subject to authorizations. These include Well Approvals for certain activities (sections 10 to 13) as well as three other program-specific approvals where the Boards require specific oversight related to production matters:

• flow system, flow allocation procedure and flow calculation procedures (section 7);
• formation flow test (section 52); and
• approval for an operator to commingle production (section 66).

These sections now clearly identify the criteria under which each approval would be granted and, as necessary, suspended or revoked.

Improved opportunities for regulatory efficiency

The amalgamation and revised structure of the regulations improve regulatory efficiency and clarity by organizing requirements by functional theme (e.g. Training and Competency, Measurement, Records Management) rather than the existing separation of requirements by project phase (i.e. drilling and production activities).

Updating the authorizations and approvals language and prescriptive information requirements allows the Boards to administratively develop efficient application processes addressing such issues as project type and scope, filing requirements, format, number of copies and timing of applications. These changes also allow the development of administrative processes and tools to enhance coordination and cooperation across jurisdictions without a need for legislative amendment.

The shift to goal-oriented Regulations reduces much of the current volume of operator requests for exemptions or equivalencies that stem from outdated or non-applicable prescriptive requirements in the regulations.

The Regulations also provide the Boards the authority to deal with well spacing and related production matters by way of an Order (section 2). The need for appropriate well spacing to protect correlative rights can be circumstance-specific or regional in nature and specific requirements can be influenced by the resources (oil or gas) or formation characteristics. The regulatory objective of protection of correlative rights can be effectively achieved through the use of an Order with greater flexibility of application and tailoring of requirements than through regulation.

The Regulations contain information requirements related to applications for Development Plans, authorizations and approvals as well as reporting. While information requirements may be prescribed in regulations, they may also be communicated effectively through the use of administrative tools such as guidelines or interpretation notes issued by the Boards. Accordingly, the updated information requirements focus on those requirements where regulatory certainty regarding timing or content continues to be needed to enhance regulatory efficiency.

Specific information requirements were retained in relation to

• Part II of a Development Plan relating to a proposed development of a pool or field, that shall contain a Resource Management Plan (section 16);
• information that must accompany an application for an authorization, including a project-specific Safety Plan, an Environmental Protection Plan, Contingency and Emergency Response Plans, an execution plan and a schedule (sections 6 through 9); and
• information requirements related to reporting (Part 11).

Consequential amendments

Consequential amendments to the Installations Regulations and the Certificate of Fitness Regulations under the Acts were required as a result of the proposal.

In the Installations Regulations, two provisions (sections 14 and 64) refer to the existing Drilling Regulations and therefore required minor amendments.

In the Certificate of Fitness Regulations, an amendment was made to the sections referring to the updated Regulations as well as to the scope of work for the Certifying Authority.

The Certificate of Fitness Regulations was amended to update the list of provisions in the Regulations and account for the shift from prescriptive to goal-based provisions in respect to what the Certifying Authorities were considering. The scope of work was adjusted to focus the evaluation on whether the structures, facilities, equipment and systems to meet the requirements of the listed provisions in the Drilling and Production Regulations “are in place and functioning appropriately” [new subparagraph 6(2)(b)(viii)].

Finally, for clarity, (a) the format of the Certificate of Fitness Regulations was adjusted to specifically identify the installations for which a Certificate of Fitness is required [new subsection 4(1)]; (b) corrections to terms in the definitions section were made to address issues identified by the Standing Joint Committee; and (c) the name of one certifying authority was updated to reflect a recent corporate name change (section 2).

Mirror regulations

Mirror regulations create a consistent and predictable regulatory framework for drilling and production activities in all three Frontier jurisdictions in Canada.

While identical in most respects, three differences exist between the Canada Oil and Gas Operations Act version and the Offshore Accord Act versions. First, because COGOA applies to both onshore and offshore frontier areas, requirements specific to onshore activities exist in the COGOA version only. Second, requirements related to worker impairment and fatigue exist in the Offshore Accord Act versions only (section 73). The Canada Labour Code Part II applies to COGOA-regulated projects so duplicative requirements are not to be included in the COGOA version of the regulations. Finally, the Offshore Accord Act versions contain a requirement to include, in the annual production report (section 86), information on operating and capital expenditures (see section on “Concerns” below). Under COGOA, this requirement is dealt with administratively, project by project, as it may not be required in every case.

Rationale

Canada is committed to the development of frontier and offshore energy resources in a safe, economically competitive, environmentally and socially responsible manner to the mutual benefit of all stakeholders.

The Drilling and Production Regulations improve the existing regulatory framework to support the frontier and offshore oil and gas industry’s continued growth and contribution to Canada’s economy and competitiveness while maintaining the highest standards for safety, environmental protection and management of resources.

The Regulations will, for drilling and production activities, resolve regulatory duplication, move from a prescriptive to a goal-oriented style, incorporate a management systems approach, facilitate regulatory process improvements and reduce the administrative burden.

Consultation

Stakeholder consultations

Starting in early 2005 and through mid-2008, the Frontier and Offshore Regulatory Renewal Initiative (FORRI) members conducted an extensive stakeholder consultation program on the draft proposal. The program included early engagement of potentially interested parties, meetings and workshops, and a release of, and comment period on, an early version of an amalgamated draft regulation with specific goal-oriented provisions.

In April 2007, COGOA and Offshore Accord Act versions of updated draft regulations were released for stakeholder information and comment. A backgrounder, a cover letter and the draft regulations were released by way of direct mail, emails, meetings and phone calls. The information was sent directly to all previously identified and interested stakeholders, as well as regulated companies and drilling contractors, industry organizations, certifying authorities, non-governmental organizations (NGOs), labour groups and Aboriginal groups. All information was also made available on the National Energy Board (NEB) Web site.

A four-and-a-half-month-long comment period was provided, during which two rounds of workshops were offered and held; meetings were held upon request with interested stakeholders.

The Canadian Association of Petroleum Producers (CAPP) and some of its member companies provided consolidated comments and views. Three workshops were held specifically with CAPP and member companies.

In February 2008, proposed consequential amendments to the Certificateof Fitness Regulations and the Installations Regulations were released for stakeholder comment, accompanied by explanations of the proposed changes. A meeting was held with certifying authorities in March 2008 and comments were received. The proposed consequential amendments were also discussed with CAPP and its member companies in June 2008.

Updated drafts of the regulations were released for information in May 2008 and additional consultation with industry occurred.

All written comments received were posted on the NEB Web site. All comments were considered and, where appropriate, revisions to the proposal were made. Information on the comments received and how they were dealt with were provided directly to those who commented as well as posted on the Internet.

Engagement and consultation with Aboriginal groups

In 2005, information on the proposed amalgamation and modernization of the Drilling and Production Regulations was provided by mail directly to potentially interested Aboriginal groups in the Northwest Territories and Nunavut.

For the April 2007 release of the updated draft Regulations and start of the stakeholder engagement period, the draft Regulations, cover letter and backgrounder were mailed directly to potentially interested Aboriginal groups in the Frontier areas. These included Aboriginal groups in the Northwest Territories, Nunavut, coastal areas of British Columbia, Nova Scotia, New Brunswick, Prince Edward Island, Quebec and Newfoundland and Labrador.

The background information provided with the draft Regulations stated the following:

• The Regulations are technical in nature and outline requirements placed on the company related to such issues as environmental protection, resource conservation and safety. The Regulations would not impose requirements on people using the land or harvesting resources.
• On a project-by-project basis, potential impacts on land use and resources would continue to be identified during the application approvals process, which would include any environmental assessment requirement. These requirements would not change with the proposal.

In addition to the information provided, meetings were held with interested Aboriginal groups, Aboriginal land claim organizations and co-management boards in the Northwest Territories. Information about scheduled public workshops and the standing offer to hold additional meetings and workshops upon request were also provided.

One request for clarity regarding Aboriginal consultation in respect of the draft Regulations was received and a response provided.

No written comments were received from Aboriginal groups about the proposal.

Concerns

CAPP and its participating member companies expressed two concerns with the consultation drafts of the Drilling and Production Regulations that it believes remain outstanding. In both cases, discussion of the issue was held during meetings and a written response provided to CAPP and its participating member companies.

Concern 1: The requirements to include information on operating and capital expenditures, including the cost of well operations in the Annual Production Report for the Accord Act versions (section 86).

This requirement exists in the Accord Act versions of the regulations. CAPP questioned whether the Accord Acts provide the authority to impose requirements, through regulation, on companies to report operating and capital expenditures.

The subject information is part of a list of requirements specific to obtaining information about how an operator manages, or intends to manage, the petroleum resources without causing waste. The Annual Production Report is a tool by which the Boards are made aware of how an operator is conducting its production operations.

Information about capital and operating expenditures is directly related to the purpose of the Act, is within the scope of the Act and therefore may be included in the Regulations.

The purpose of the Acts includes the promotion of, in respect of the exploration for and exploitation of petroleum resources, conservation of the petroleum resources. Preventing waste is critical to conserving the resource. Production plans are regularly updated in consideration of the characteristics of the reserve/field/ pool, production information, well performance, equipment and technology and costs.

Requiring the reporting of operating and capital expenditures, including the cost of well operations, in the Annual Production Report will ensure that the Canada-Newfoundland and Labrador Offshore Petroleum Board and the Canada-Nova Scotia Offshore Petroleum Board receive the information necessary for regulatory oversight to ensure appropriate production and management of the resource in order to prevent waste. The information will also be used, with other information as needed, to verify whether the operator is in compliance with section 65 of the Regulations, which requires an operator to ensure maximum recovery of oil and gas resources from a pool or zone and that wells are located and operated to provide for maximum recovery. Recovery, as defined in the Regulations, includes recovery of oil and gas under reasonably foreseeable economic and operating and capital conditions.

Information on operating and capital expenditures has been, and will continue to be, required for all projects in the Newfoundland and Labrador and Nova Scotia offshore areas. Alternatively, the Boards have the authority, under the Acts, to issue an order to obtain files and records for all reasonable purposes related to the commencement, continuation or increase of production. Inclusion of the information requirement in the Annual Production Report provides regulatory clarity and reduces the need to issue a Board order.

Concern 2: The use of the term “zone” means any stratum or any sequence of strata and includes, for the purposes of the definition “commingled production”, section 7, subsection 61(2), sections 64 to 66 and 74, subsection 83(2) and section 86, a zone that has been designated as such by the Board under section 4 (couche) (Note: 82 (2) 85 of the COGOA Act version, and 83 (2) of the Accord Act versions).

CAPP and its member companies expressed concern that the use of the term “zone” in all three versions of the Drilling and Production Regulations would imply that zones are to be treated as distinct separate entities from pools, causing unnecessary detail and complexity in relation to allocation, measurement and associated reporting requirements. CAPP and its member companies were of the view that the use of “zone” in relation to certain provision in the Regulations would be impractical to implement accurately.

CAPP’s concerns were considered and the use of “zone” in the Regulations was clarified through modifications in both the definitions section and in certain provisions, specifically section 4 dealing with designation of zones. Written responses to CAPP and the member companies were provided in both October and December 2007 and further clarification was provided in a meeting held in June 2008.

Management of oil and gas resources at the zone level is a production issue and is related to conservation of resources and prevention of waste. Requirements related to allocation, commingled production, measurement and reporting, also applicable to production from a pool, are necessary for effective regulatory oversight when production occurs from the zone level. To ensure clarity of application, the Regulations were modified to impose these requirements only on zones designated as such by the respective Board.

Pre-publication in the Canada Gazette, Part I

The Drilling and Production Regulations were pre-published in the Canada Gazette, Part I, on April 18, 2009, with a 45-day comment period. Comments were received from CAPP and the Canadian Association of Oilwell Drilling Contractors.

In general, both sets of comments supported modernization of the regulations in a goal-oriented style. The comments included suggested revisions to specific provisions, comments on anticipated costs and views and recommendations on more general regulatory matters such as administration of the regulations and guidelines. The complete text of those comments and responses to each point raised can be found in the Compilation of Comments and Responses which can be obtained upon request from the contact indicated at the end of this RIAS.

A summary of comments specific to the Regulations follows:

Summary of Comment	Summary of Response
The definition of “pollution” is too broad and does not identify a trigger or required impact.	The definition has a threshold clearly defined as releases outside the limits in the authorization. The provision was revised to more clearly reference releases subject to the authorization without a need to cite limits in the authorization itself.
Subsection 7(2): The word “allocate” appears to be missing from the provision.	The provision was revised to add the word “allocate”.
Paragraph 9(f): It was suggested that including a description of the methods to select chemicals in the Environmental Protection Plan would be onerous. It was recommended that only chemical selection processes inconsistent with existing guidance be required in the Environmental Protection Plan.	The purpose of the Environmental Protection Plan is to set out the procedures, practices, resources and monitoring necessary to manage hazards to and protect the environment from the proposed work or activity. The plan is used by personnel working on the installation. Procedures for the selection and use of chemicals are essential components of the plan so that they are communicated to personnel and available for use. In developing the plan, companies may use existing guidance in the selection of the appropriate chemical selection methods to be included. To improve clarity, the wording “a description of the methods for the selection of chemicals...” was revised to “the procedures for the selection of chemicals…”
Subsection 19(i): The provision should be modified to more clearly allow operators to implement mitigation as a precautionary measure before repairs can be undertaken.	The wording in section 19 “shall take all reasonable precautions to ensure safety and environmental protection” provides a clear regulatory objective while providing operators flexibility to identify the means to meet the requirements of subsection (i). The suggested revision is therefore not necessary.
Paragraph 25(a): the requirements related to support craft are covered by section 69 and support craft should be deleted from section 25.	The provision was revised to remove “support craft” from paragraph 25(a).
Paragraph 25(b): the five-year outside interval for comprehensive inspections should be removed as there is a clear regulatory objective.	Goal-oriented regulation is a mixture of goal-based, performance-based and more prescriptive styles of requirements. The current regulations prescribe a four-year maximum interval. Continued prescription of a maximum interval, revised to five years for consistency with many industry standards and codes, will contribute to ensuring safety, environmental protection and prevention of waste.
Section 27: the provision does not allow the operator to assess the risk, apply mitigation measures and then plan the work to be performed.	Subsection (2) was added to reflect the recommendation.
Section 51. The operator should decide on the need for testing and sampling, rather than the regulator. The current wording “based on whether there is an indication that the data or samples would contribute substantially to the geological and reservoir evaluation” is subjective.	Section 51 clearly places the responsibility on the operator to determine the need for testing, based on the criteria in the provision. The regulatory criteria in the provision regarding whether there is a need for testing and sampling is in the current regulations and is considered clear.
Section 67: the requirement to notify the Board of emergency flaring or venting of gas should provide flexibility to use reports or records currently prepared by the operator.	While the provision had the recommended flexibility, it was revised to provide clarity about other types of reports or records that could be used. This same revision was made to section 68, burning of oil.
Section 69: recommendation to include reference to certification in the provision and to include reference to recognized standards and applicable regulations.	Reference to certification is not needed, as this provision is not referred to in the Certificate of Fitness Regulations. With respect to reference to recognized standards and applicable regulations in the provision itself, these terms are considered too vague to serve as effective regulatory objectives. Operators would identify the means to meet the requirements of this provision.
Definition of Incident and section 76 Incident Reporting: recommendation to remove requirement to notify the Board of near misses (Note: section 75 in the COGOA version).	Near miss recording and investigation by operators is considered essential for continually identifying hazards and for evaluating and managing associated risks. Near misses can also be used as an indicator of safety and environmental protection performance. The incident reporting provision requires that operators notify the Board of each incident but does not require the submission of the investigation report. Since an operator would be generating records of near misses, it is not considered onerous that the Board be notified of these incidents. Upon consideration of the comments received, five revisions were made to clarify “near misses” and incident investigation. First, to improve clarity, a definition of “near miss” was created and the reference removed from the definition of incident. Explicit reference to “near miss” was included in section 75/76 and to other provisions where the term “incident” was used (sections 5(2)(f), 77(b) and section 87 (COGOA version) or 88 (Accord Act versions). Second, the words “persons” and “support craft” were added to both the definition and section 75/76 to improve regulatory clarity. Third, paragraph (a) was revised to ensure consistency with paragraph (b). Fourth, the list of incidents and near misses for which investigation reports must be submitted to the Board was revised to focus the reporting requirements on events listed in the definition of incident with higher potential for safety or environmental consequences. Of note, a spill is, by definition, included in “pollution.” Lastly, the use of “incident” in subsection 70(2) was revised to “fact”, as the circumstances described in that provision did not fall within the definition of incident.
Section 86 Annual Production Report (Accord Act versions only): recommended removal of requirement to estimate costs	This issue was discussed extensively with stakeholders during development of the regulations. The rationale for the inclusion of operating and capital expenditures in the Accord Act versions of this provision, as well as an explanation of how these requirements are within the scope of the Acts, was provided in the Regulatory Impact Analysis Statement (RIAS) published with the regulations in the Canada Gazette, Part I. The RIAS also explains how the information is required for effective regulatory oversight to ensure appropriate production and management of the resource in order to prevent waste and its relevance to maximum recovery. However, in response to some of the comments, the provision was modified to improve clarity. The requirements related to provision of provision of estimates of operating expenses for the current year and the next two years was moved to a separate subsection (2) and the term “forecasts” was revised to “estimates.”
Section 90 (COGOA version)/ section 91 (Accord Act versions): recommendation to remove this section or to add clarity as to the intent of the section and the types of reports to be identified.	The provision contains a clear regulatory requirement. As discussed during the consultation process during the development of the regulations, the scope of studies or applied research must be within the scope of the regulations. This provision has been revised to allow operators to make the Board aware of the report(s) at least on an annual basis, reducing any burden to inform the Board on a more frequent basis.

Other revisions

In addition to revisions made in response to stakeholder comments, minor revisions were made to clarify wording and address gaps.

First, two changes were made in the list of required elements in plans that must accompany an application for an authorization. In the Safety Plan section (COGOA version only), paragraph 8(g) was revised to add “marine land fast ice” to the list of circumstances where measures to ensure protection of the installation must be included in the plan. This revision is consistent with current practice and will promote regulatory certainty and clarity. In the Environmental Protection Plan section (all three versions) paragraph 9(c) was inadvertently missed in earlier versions of the regulations and was inserted to ensure consistency with paragraph 8(c) Safety Plan.

Second, the management systems requirements were clarified with respect to holders of existing authorizations. Section 18 of the regulations requires operators to ensure compliance with the management system referred to in section 5. An “operator” is, by definition, the holder of an authorization. To ensure clarity, a transitional provision was included requiring all operators, at the time that the regulations come into force, to comply with section 5.

Finally, three revisions were made to the list of provisions in the Drilling and Production Regulations listed in Part 3 of the Schedule to the Certificate of Fitness Regulations. These revisions adjust the scope of work for the Certifying Authority for consistency with current practice.

• 5(2)(e) was modified to exempt support craft
• 45 was limited to paragraphs (a) and (b)
• 62 was limited to paragraphs (a) to (c)

Implementation, enforcement and service standards

Under the Acts, the National Energy Board, the Canada-Newfoundland and Labrador Offshore Petroleum Board, and the Canada-Nova Scotia Offshore Petroleum Board are responsible for ensuring compliance and enforcement of these Regulations within their respective jurisdictions. Compliance and enforcement provisions exist under the Acts and, therefore, no change to compliance and enforcement authorities or responsibilities will result from the Regulations.

Contacts

Technical issues

Michael Hnetka
Advisor, Regulations
Frontier Lands Management
Natural Resources Canada
580 Booth Street
Ottawa, Ontario
K1A 0E4
Telephone: 613-992-2916
Fax: 613-943-2274
Email: mhnetka@nrcan.gc.ca

Media contact

Media Relations
Natural Resources Canada
Telephone: 613-992-4447
Email: media@nrcan.gc.ca

Footnote a
R.S., c. 0-7; S.C. 1992, c. 35, s. 2

Footnote b
S.C. 1994, c. 10, s. 7

Footnote c
R.S., c. 0-7; S.C. 1992, c. 35, s. 2

Footnote 1
SOR/96-114

Footnote 2
SOR/96-118

Footnote 3
SOR/79-82

Footnote 4
SOR/90-791

Footnote 5
Canada Newfoundland Atlantic Accord Implementation Act; the Canada Nova Scotia Offshore Petroleum Resources Accord Implementation Act (Offshore Accord Acts).

Footnote 6
Frontier lands are lands in the Northwest Territories, Nunavut and Sable Island and the offshore areas of the Artic, Hudson’s Bay, James Bay, Gulf of St. Law-rence, Bay of Fundy and the offshore areas of British Columbia, Nova Scotia and Newfoundland and Labrador.

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