ARCHIVED — Vol. 146, No. 26 — December 19, 2012

Registration

SOR/2012-250 November 30, 2012

NORTHWEST TERRITORIES WATERS ACT

Regulations Amending the Northwest Territories Waters Regulations

P.C. 2012-1584 November 29, 2012

His Excellency the Governor General in Council, on the recommendation of the Minister of Indian Affairs and Northern Development, pursuant to paragraph 33(1)(n) of the Northwest Territories Waters Act (see footnote a), makes the annexed Regulations Amending the Northwest Territories Waters Regulations.

REGULATIONS AMENDING THE NORTHWEST TERRITORIES WATERS REGULATIONS

AMENDMENT

1. Paragraphs 3(a) and (b) of Schedule IV to the Northwest Territories Waters Regulations (see footnote 1) are replaced by the following:

Item

Column I




Water Use/
Deposit of Waste

Column II



Water Use and Deposit of Waste Permitted Without a Licence

Column III

Water Use and Deposit of Waste Requiring a Type “B” Licence

Column IV



Water Use and Deposit of Waste Requiring a Type “A” Licence

3.

(a) oil and gas exploration,

Deposit of drill waste by injection into an underground formation or reservoir that is authorized under paragraph 5(1)(b) of the Canada Oil and Gas Operations Act

Deposit of drill waste to a sump

Deposit of drill waste other than deposit of drill waste to a sump or by injection into an underground formation or reservoir

(b) oil and gas production, processing and refining,

Deposit of drill waste by injection into an underground formation or reservoir that is authorized under paragraph 5(1)(b) of the Canada Oil and Gas Operations Act

None

Deposit of waste other than deposit of drill waste by injection into an underground formation or reservoir

COMING INTO FORCE

2. These Regulations come into force on the day on which they are registered.

REGULATORY IMPACT
ANALYSIS STATEMENT

(This statement is not part of the Regulations.)

Issues and objectives

Since being initiated in 2005, the northern regulatory review has focused on concrete operational-level improvements to areas of federal responsibility, building a longer-term regulatory improvement agenda, and engagement of key stakeholders. Working with partners, the government has already made improvements to the northern regulatory system as part of the Northern Strategy commitments to promote northern economic and social development and environmental protection. As part of Canada’s Action Plan to Improve Northern Regulatory Regimes, announced in May 2010, an amendment is being proposed to improve the efficiency of the Northwest Territories Waters Regulations.

In the Northwest Territories, the underground disposal of drill wastes produced in conjunction with the drilling of wells for oil and gas exploration or production is currently regulated under both the Northwest Territories Waters Act and the Canada Oil and Gas Operations Act. The regulation of this activity under both acts causes duplication and confusion in the permitting and monitoring of oil and gas well drilling operations. Downhole injection is one of several options for the disposal of drill wastes, but the other means of disposal are not subject to the same duplication in approval process. The duplicative regulatory requirements for downhole injection of drill wastes could act as a disincentive to its use when, depending on project- and location-specific circumstances, it might be the best option. The preferred situation is one in which there is a level regime governing the authorization of all disposal options.

The objective of the proposed amendment to the Northwest Territories Waters Regulations, made under the Northwest Territories Waters Act, is to remove the duplicative regulatory approval requirement for the disposal of drill wastes by downhole injection. As per the proposed amendment, the downhole disposal of drill wastes would no longer require a water licence under the Northwest Territories Waters Regulations. However, the activity would continue to require an authorization under the Canada Oil and Gas Operations Act and would be subject to monitoring and enforcement by the National Energy Board. The proposed amendment would not change the environmental screening and assessment processes; therefore, there would be no reduction of oversight to ensure environmental risks are identified and the appropriate mitigative measures taken. Other associated activities requiring the use of water or the deposit of waste into waters would continue to be regulated under the Northwest Territories Waters Act and its Regulations.

Description

The National Energy Board is an independent federal agency established in 1959 by the Parliament of Canada to regulate international and interprovincial aspects of the oil, gas and electric utility industries. The mandate of the National Energy Board is to regulate pipelines, energy development and trade in the Canadian public interest. The Board is responsible for regulating oil and gas activities in Canada’s North. This includes promoting worker safety and the protection of the environment with respect to oil and gas exploration, development and production.

The Northwest Territories Water Board and the land and water boards of the Mackenzie Valley (the Mackenzie Valley Land and Water Board, the Gwich’in Land and Water Board, the Sahtu Land and Water Board and the Wekeezhii Land and Water Board) are institutions of public government established under the Northwest Territories Waters Act and the Mackenzie Valley Resource Management Act, respectively. The mandate of these boards is to provide for the conservation, development and utilization of land and waters in a manner that will provide the optimum benefit for all Canadians and for the residents of the Northwest Territories in particular. They regulate the use of waters and the disposal of wastes through the preliminary screening of project proposals and the issuance of water licences and land permits.

A drill operation commonly consists of a rotating drive connected to a drill string capped with a drill bit. Rock and sediment fragments are ground or broken off as the rotating drill string is pushed further into the ground. Drilling fluids are injected into a drill hole to aid in the drilling process. The fluids aid in removing cutting fragments from the drill hole, lubricate drilling, and assist in maintaining specific drilling conditions. Drilling fluids contain a variety of chemical additives and can be water, saltwater, or oil based. The combined drilling fluids and cuttings generated from the drilling process, referred to as drill wastes, are collected at the drill site. The available options for disposal of drill wastes include downhole injection, disposal in a sump, which is a pit dug in the permafrost and then capped, and treatment and disposal at a centralized treatment and disposal plant. Downhole injection of drill wastes involves the injection of fluids from oil and gas operations including, but not limited to, produced water, fluids containing drill cuttings, and drilling completion and work-over fluids. These drill wastes are processed into consistent slurry which can then be injected into a well that is authorized for that purpose by the National Energy Board under the Canada Oil and Gas Operations Act.

Currently, in the Northwest Territories, drill wastes are commonly managed through the use of sumps or transported outside of the Northwest Territories. For the period from January 2009 to June 2011, four exploratory wells were drilled in the Northwest Territories. The drill wastes from three of the exploratory wells were transported to approved disposal sites located in British Columbia. Part of the drill wastes from the fourth exploratory well were disposed of in a sump and part were transported to an approved disposal site located in Alberta. Similarly, for the period from January 2009 to June 2011, 10 development wells were drilled in the Northwest Territories. The drill wastes from 6 of the development wells were disposed of using sumps. The drill wastes from the remaining 4 development wells were transported to an approved disposal site located in Alberta.

Sump disposal may be a less desirable waste disposal option in the North due to issues with long-term sump stability and the efficacy of permafrost as a permanent barrier for containing waste. These concerns may also grow with climate change and increased flooding events associated with a warming North. Trucking waste long distances is seen as a less favourable and more expensive waste disposal option in some situations when limited road infrastructure and transportation costs are considered.

Other jurisdictions, both within Canada and the United States, permit the use of downhole injection wells and consider their use a common practice for the management of drill wastes. While downhole injection is currently permitted in the Northwest Territories, the existing regulatory overlap is an obstacle to its use by industry. The proposed amendment is expected to increase industry’s interest in the use of downhole injection, and, acknowledging the appropriate regulatory reviews and environmental assessments, the use of downhole injection is expected to reduce the use of sumps and the long-distance transportation of drill wastes to disposal sites.

Currently, the downhole injection of drill wastes is regulated by the National Energy Board, under the Canada Oil and Gas Operations Act, and by the Northwest Territories Water Board in the Inuvialuit Settlement Region or by the land and water boards in the Mackenzie Valley, under the Northwest Territories Waters Act. An oil and gas operator who currently wants to dispose of drill wastes via downhole injection requires an authorization under the Canada Oil and Gas Operations Act as well as a Type “A” water licence under the Northwest Territories Waters Regulations. The Regulations provide for a Type “A” or Type “B” water licence to use water or to dispose of waste in water. Specifically, a Type “B” licence is required to deposit drill wastes resulting from oil and gas exploration to a sump, and a Type “A” licence is required for deposit of drill wastes by any means other than to a sump, including downhole injection.

In order to streamline the regulation of downhole injection of drill wastes applications in the Northwest Territories, an amendment to the Northwest Territories Waters Regulations is being proposed. Under the proposed amendment, the disposal of drill wastes by downhole injection would no longer require a water licence pursuant to Schedule IV of the Northwest Territories Waters Regulations. The application for a National Energy Board authorization that includes downhole injection of drill wastes would continue its regulatory course pursuant to the Canada Oil and Gas Operations Act.

Applications for downhole injection in the Northwest Territories must undergo a preliminary screening by the appropriate regulatory board or authority. A preliminary screening reviews an application for completeness and determines whether the proposed project may have significant environmental impacts or raise public concern. If potential significant impacts or public concern are identified, the application is forwarded to the appropriate review boards for a more thorough environmental assessment. Applications for downhole injection must adhere to this process.

Under the current regulatory and review regime, the National Energy Board receives an application for a downhole injection authorization, and either the Northwest Territories Water Board or one of the land and water boards of the Mackenzie Valley, depending on the location of the project, receives an application for a Type “A” water licence to dispose of waste in relation to a downhole injection operation. As neither the Northwest Territories Water Board nor any of the land and water boards of the Mackenzie Valley have the technical expertise to review these applications, they would then forward this to the National Energy Board for preliminary screening. The National Energy Board would conduct a preliminary screening of applications for safety, integrity, and environmental protection. If the application is deemed complete and satisfactory with no significant impacts or concerns identified, the National Energy Board may then authorize the disposal of waste in conjunction with a water licence issued by either the Northwest Territories Water Board or one of the land and water boards of the Mackenzie Valley. Generally, a public hearing is held in relation to a Type “A” water licence.

If, during the National Energy Board’s screening process or the Northwest Territories Water Board’s or the land and water boards of the Mackenzie Valley’s public hearing, it is determined that further environmental review is required, the application would be forwarded to the appropriate review body (the Environmental Impact Review Board in the Inuvialuit Settlement Region or the Mackenzie Valley Environmental Impact Review Board in the Mackenzie Valley). From this point, the appropriate environmental assessment would be conducted to determine whether the project would proceed and any required mitigative measures. After successful completion of the applicable review, both the National Energy Board and either the Northwest Territories Water Board or one of the land and water boards of the Mackenzie Valley would authorize the disposal of waste, while the well would be subject to further monitoring and enforcement by the National Energy Board.

Under the proposed amendment, the Northwest Territories Water Board or one of the land and water boards of the Mackenzie Valley would no longer receive an application for downhole injection of drill wastes. The National Energy Board would continue to receive an application for downhole injection. This application would be included in an application for an operations authorization, an approval to drill a well, and/or an approval to alter the condition of a well, all of which are authorized under the Canada Oil and Gas Operations Act. After successful screening and completion of the applicable reviews, the National Energy Board may grant an authorization.

The initial project screening and any further environmental assessments and reviews are identical in the current and the proposed regimes. The difference between the current and the proposed regulatory system is that the proposed amendment removes the requirement for a water licence to dispose of the drill wastes by downhole injection. This also removes the requirement for a public hearing associated with a Type “A” water licence application. Any requirements for the use of water or any other deposit of waste would still require a water licence and as such require a public hearing if certain thresholds for water use or public concern are met. While the National Energy Board generally does not conduct a hearing for the review of applications under the Canada Oil and Gas Operations Act, the opportunity for public review and comment remains during the screening and impact assessment stages of project review. An application that includes downhole injection of drill wastes would trigger an environmental screening process as would any other application associated with a project requiring regulatory approval. Opportunities for input and participation in the review of project proposals still remain during any of the environmental screening processes legislated under the Mackenzie Valley Resource Management Act or the Western Arctic (Inuvialuit) Claims Settlement Act.

Consultation

Two rounds of consultations were undertaken between March 2010 and March 2011. Consultation packages were distributed for comments and informed recipients of opportunities to discuss the proposed amendment. Packages were mailed out to the Aboriginal organizations of the Northwest Territories, the Government of the Northwest Territories, various federal government departments and agencies, regulatory and review boards of the Northwest Territories, environmental and special interest groups, and industry associations. Consultation sessions were undertaken in Inuvik, Yellowknife, and Prince Albert.

Frequent requests were made for more information on the National Energy Board’s regulatory process and on the activity of downhole injection of drill wastes. These requests were addressed with the second round of consultations in which the National Energy Board provided a detailed presentation on their regulatory role, and technical details surrounding the downhole injection of drill wastes.

Suggestions were made for implementation meetings between relevant institutions to discuss the transition process and the means by which information would be shared between institutions. This will be incorporated into the implementation plan. Concerns were raised over any potential loss of opportunities for parties to comment on, and stay informed of, potential downhole injection of drill wastes activities. Parties expressed concerns that the removal of the requirement for a Type “A” water licence, and with it the requirement for a public hearing triggered by a Type “A” water licence application, would remove these communication opportunities. It was explained that while the Type “A” water licence and the associated public hearing process would be removed, the requirement for an environmental impact evaluation or assessment is not removed for projects requiring a National Energy Board authorization under the Canada Oil and Gas Operations Act. Any proposed drilling or production activity or operation must undergo an environmental impact evaluation under Section 11 of the Inuvialuit Final Agreement in the Inuvialuit Settlement Region, or Part 5 of the Mackenzie Valley Resource Management Act in the Mackenzie Valley. Downhole disposal of drill wastes would commonly be reviewed as a component of a larger project review. The project would require the appropriate screening and impact assessment based on the location and perceived impacts of the project. There is an opportunity for public review and comment associated with every screening and assessment process. Accordingly, the appropriate channels of communication and opportunities for public participation would remain.

The observation was made that the current and proposed Schedule IV of the Northwest Territories Waters Regulations are prescriptive in nature. The observation was made that the current wording and division of Type “A” and Type “B” water licences by method of waste deposit, and the proposed removal of a water licence for downhole injection of drill wastes, may act to favour or prescribe one practice over others. The concern is that an applicant for a licence to deposit wastes, based on the required licence application and review structure, would select the easiest or quickest authorization to obtain, rather than the most appropriate method of waste deposit. Suggestions were provided on alternative licensing structures surrounding Type “B” and Type “A” water licences. Upon review, these alternative structures proved ineffective in providing an efficient, effective, and predictable regulatory structure for waste disposal activities for proponents and regulators alike. Additionally, the boards’ environmental impact evaluation process will determine if an inappropriate or unfavoured waste deposit method has been proposed, and will request alternatives if warranted. The National Energy Board’s regulatory review and authorization process, which would replace the need for a water licence for downhole injection of drill wastes under the proposed amendment, should not be viewed as an “easier” option for proponents in contrast with other boards’ environmental impact evaluation and review processes. The National Energy Board regulatory and authorization process requires an equally stringent and complete review of any application that includes downhole injection of drill wastes. Appropriate drill wastes management options would be selected based on a thorough evaluation and review of the proposed project and the safety, environmental, social, and economic contexts in which it would be undertaken.

Another observation was made that the proposed amendment may not reduce regulatory timelines. The main objective of this proposed amendment is not to reduce lengthy regulatory timelines, which could occur in select circumstances, but to remove duplication in the current regulatory regime and in so doing improve the administrative effectiveness of the regulatory bodies involved.

Consulted organizations generally appear satisfied with the National Energy Board’s expertise on the regulation of downhole injection of drill wastes. Organizations agree that there is no need for the duplication of regulatory authorizations, and that the National Energy Board has the resources and expertise to evaluate, review, monitor, and enforce the activity of downhole injection of drill wastes. The most common concerns expressed were that organizations wish to remain informed of potential downhole injection activities in their respective jurisdictions, and seek the reassurance that opportunities to participate in the relevant evaluation and review processes have not been removed. Organizations were reassured that opportunities to participate in and stay informed of evaluations and reviews shall remain intact.

This proposal was prepublished in Part Ⅰ of the Canada Gazette on April 7, 2012, for a consultation period of 30 days. No comments were received from Aboriginal groups, stakeholders or from the public in general.

“One-for-One” Rule

The proposal results in a decrease in administrative burden on business and results in an “OUT” under the “One-for-One” Rule. The administrative burden will be lessened as downhole injection activities will no longer require a Type “A” water licence and public hearing. The average annualized savings for each stakeholder is projected to be approximately $5,377. The average annual savings for all stakeholders is projected to be $32,264.

Small business lens

The small business lens does not apply to this proposal, as there are no costs (or insignificant costs) on small business.

Rationale

The proposed amendment would effectively reduce the duplicative regulatory burden imposed by the Canada Oil and Gas Operations Act and the Northwest Territories Waters Act. The expected outcome of the proposed amendment would include greater efficiency in the regulation of oil and gas activities in the Northwest Territories, and improved administrative effectiveness by the National Energy Board, the Northwest Territories Water Board and the various land and water boards in the Mackenzie Valley. This would be achieved by removing the requirement for a Type “A” water licence as the proposed activity would be considered by the National Energy Board. In circumstances where a Type “B” water licence is still required for associated activities, there would be no mandatory public hearing as is the case with a Type “A” water licence and the regulatory approval time period could be reduced. The various Boards would still have the option to hold a hearing in relation to a Type “B” water licence if it was deemed to be in the public interest. The proposed amendment would not result in a less rigorous environmental impact evaluation process, as proposed oil and gas activities would still undergo the same environmental screening and/or assessment processes.

It is important to note that all proposals for drill wastes management would be reviewed for regulatory completeness, safety, environmental protection, and site and project suitability by the National Energy Board. Other activities related to oil and gas drilling and production activities in the Northwest Territories would continue to be assessed and regulated under the appropriate legislations. Land use permits may still be required for land access and a water licence would continue to be required for water uses or other deposits of waste associated with exploration or production activities.

Implementation, enforcement and service standards

The proposed change would take effect upon registration of the amending regulation. At the time of registration letters would be sent out to all those organizations contacted during the information and consultation process to inform them of the amendment.

Implementation of the amended regulation would involve coordination meetings between the relevant institutions to ensure no loss or reduction in the rigor of the evaluation and regulatory review processes or monitoring, and enforcement. The evaluation and regulatory review processes for the authorization of the downhole injection of drill wastes will be reviewed two years after registration of the amending regulation to ensure the process meets the intended purpose of reducing administrative burdens and improving regulatory efficiency.

Contacts

Gilles Binda
Acting Director
Land and Water Management Directorate
Northern Affairs Organization
Aboriginal Affairs and Northern Development Canada
Gatineau, Quebec
Telephone: 819-994-7483
Fax: 819-997-9623
Email: Gilles.Binda@aandc-aadnc.gc.ca

Christopher Morton
Water Policy Analyst
Land and Water Management Directorate
Northern Affairs Organization
Aboriginal Affairs and Northern Development Canada
Gatineau, Quebec
Telephone: 819-994-3956
Fax: 819-997-9623
Email: Christopher.Morton@aandc-aadnc.gc.ca