Overview of Environmental Regulatory Regime Related to Alberta Oil Sands Activities

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1 Overview of Environmental Regulatory Regime Related to Alberta Oil Sands Activities

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3 ABOUT This overview contains a brief review of the environmental regulatory aspects relating to oil sands project development in Alberta. If you have any additional questions with respect to environmental issues associated with oil sands activities, please contact Dufferin Harper in our Calgary office at or at dufferin. harper@blakes.com. For permission to reprint this document, please contact Amanda Mueller in our Calgary office at or amanda.mueller@blakes.com. Blakes regularly produces reports and special publications on Canadian legal developments. For further information about these reports and publications, please visit us at The law is stated as of June 2015.

4 OVERVIEW OF ENVIRONMENTAL REGULATORY REGIME CONTENTS I. Introduction 1 1. Oil Sands Description Surface mining In situ 2 2. Canadian Legal System 3 3. Provincial Regulation of Oil and Gas Activities 4 4. Oil Sands Environmental Assessments 5 5. Oil Sands Project Approvals 5 6. Concerns of Affected Parties Including Aboriginals 6 7. Monitoring and Enforcement 6 8. Conservation, Reclamation and Abandonment 7 9. Liability Programs Other Concerns and Issues GHG emissions Water Wildlife Cumulative impacts Joint provincial-federal government monitoring 10 II. Federal Regulation of Oil and Gas Activities NEB CEAA Fisheries Act SARA and MBCA GHG Emissions 12

5 BLAKE, CASSELS & GRAYDON LLP III. Potential Permits and Approvals, Necessary for an Oil Sands Project to Proceed Oil and Gas Requirements Mines and Minerals Act Exploration Regulation Oil Sands Royalty Regulation, Oil Sands Tenure Regulation Oil Sands Conservation Act Oil Sands Conservation Rules Surface Rights Act Indian Oil and Gas Regulations under Indian Oil and Gas Act Canada Oil and Gas Operations Act Pipeline Requirements Provincial pipeline under the Pipeline Act Federal pipeline under the National Energy Board Act Export Requirements National Energy Board Act Environmental Requirements Environmental Protection and Enhancement Act Water Act Navigation Protection Act Transportation of Dangerous Goods Act, Canadian Environmental Assessment Act, Utility Requirements Hydro and Electric Energy Act 20 IV. AER Directive

6 OVERVIEW OF ENVIRONMENTAL REGULATORY REGIME I. INTRODUCTION Alberta has 170 billion barrels of proven oil reserves, which represents the third largest reserves in the world. The vast majority of Alberta s oil reserves (approximately 168-billion barrels) are associated with the oil sands. 1

7 BLAKE, CASSELS & GRAYDON LLP 1.0 OIL SANDS DESCRIPTION The oil sands comprise approximately 140,200 square kilometres and are located in three major areas in northeast Alberta. Oil sands are a mixture of sand, water, clay and a heavy viscous oil called bitumen. There are two means of extracting bitumen depending on the depth at which it is located, either by surface mining or through the use of in situ techniques. After extraction, the bitumen must be separated from the sand and water before it can be used by refineries to produce usable crude oil and petroleum products. Bitumen is currently sold in two principal forms, synthetic crude oil (SCO) and a bitumen blend. Mined product is generally converted into SCO, whereas in situ product is generally converted into a bitumen blend, which involves mixing the bitumen with a diluent (a very light hydrocarbon liquid, the density and viscosity of which is lower than bitumen) so that it will flow in pipelines. 1.1 SURFACE MINING Surface mining is used to extract deposits that are less than 75 metres from the surface. Approximately 20 per cent of the potentially recoverable bitumen is shallow enough to be mined. Mining involves the removal of oil sands from the land surface through the use of shovels and trucks. The material is then moved to a facility where the sand, water, fine clays and minerals are separated from the bitumen. Approximately two-to-four barrels of water are used per barrel of oil produced from surface mining. Wastewater from the extraction process is then sent to tailings ponds. As of June, 2015, there were seven operating oil sands mining projects in Alberta, with two more approved. 1.2 IN SITU The majority of oil sands deposits (approximately 80 per cent) are too deep to be mined and are exploited using in-situ techniques. The most common in-situ techniques are cyclic steam stimulation (CCS) and steam-assisted gravity drainage (SAGD), both of which involve steam to heat the bitumen, allowing it to flow into a well where it is transported to the surface. Approximately 0.5 barrels of water are used per barrel of oil produced from in situ methods. As of June, 2015, over 50 in situ projects have been approved in Alberta, of which approximately 35 are operating. No tailings ponds are required for in-situ recovery methods. 2

8 OVERVIEW OF ENVIRONMENTAL REGULATORY REGIME 2.0 CANADIAN LEGAL SYSTEM The division of powers between federal and provincial governments is set out in the Constitution Act, Generally, the federal government has jurisdiction over matters of interprovincial, national and international scope, while the provinces have jurisdiction over matters of a local or private nature. The two levels of government exercise constitutional powers in respect of different but sometimes overlapping aspects of energy development, transportation and marketing. Balancing the federal government s authority over trade and commerce and national matters with the provinces resource ownership (discussed below), for example, presents a challenge in determining which level of government is responsible for regulating a particular matter. Jurisdiction will typically be determined based upon the location, dominant nature and/or scope of the matter and certain other factors. In the event of a conflict or inconsistency between federal and provincial statutes, the doctrine of paramountcy may apply to give effect to the federal statute. The federal government has authority to make laws regarding the regulation of trade and commerce in interprovincial and international trade, including the import and export of natural resources. The federal government also regulates pipelines and other means of transportation that cross provincial and international boundaries and reserves the power in certain instances to declare a local project to be for the general advantage of Canada and thereby assume regulatory authority over such local project. As well, the federal government has authority in relation to Indians, and lands reserved for Indians, which can lead to federal involvement in oil and gas projects that impact upon aboriginal interests. Finally, the federal government retains a general power to make laws for the peace, order and good government in relation to all matters not exclusively assigned to the provinces. Each province has authority over property and civil rights and in respect of exploration for, and conservation and management of, non-renewable natural resources within such province. Further, certain provinces including Alberta guarantee Aboriginal Peoples the right to fish, hunt and trap for food in all seasons. This can lead to additional provincial involvement in oil and gas projects that impact upon such rights. Some matters, such as environmental concerns, were not contemplated in 1867 when Canada was formed and therefore were not assigned to either level of government in the Constitution Act. In that regard, the Supreme Court of Canada has subsequently determined that both levels of government may enact laws regarding the environment in respect of and ancillary to existing constitutionally-listed heads of power. 3

9 BLAKE, CASSELS & GRAYDON LLP 3.0 PROVINCIAL REGULATION OF OIL AND GAS ACTIVITIES Oil sands activities in Alberta are largely regulated by the Alberta Energy Regulator (AER), which is an independent, quasi-judicial agency of the Government of Alberta. The AER is a full life-cycle regulator and is intended to provide sole provincial jurisdiction over all aspects of energy development, from application and exploration, to construction and development, to abandonment, reclamation and remediation. More specifically, in respect of energy resource activities, the AER regulates the disposition and management of public lands, the protection of the environment and the conservation and management of water, in accordance with the: Coal Conservation Act Gas Resources Preservation Act Oil and Gas Conservation Act, the Oil Sands Conservation Act (OSCA) Pipeline Act Turner Valley Unit Operations Act (collectively the Energy Resource Enactments) Environmental Protection and Enhancement Act (EPEA) Public Lands Act Water Act Part 8 of the Mines and Minerals Act (collectively the Specified Enactments) Alberta Environment and Parks (AEP) is a ministry of the Government of Alberta that manages the use of Alberta s landscapes to sustain a healthy environment, a prosperous economy and strong communities. AEP s central mandate is the protection of the environment and the protection and management of water resources. It also addresses climate change and waste management. Prior to March 2014, resource activity applications under the EPEA, the Water Act and/or the Public Lands Act were filed with AEP (previously Alberta Environment and Sustainable Resource Development or ESRD). However, they are now all filed with the AER. Although the AEP continues to collect monitoring and reporting information required as a condition of EPEA authorizations and provide support to industry on data submission, the AER reserves the right to provide final directions regarding any and all monitoring and reporting inquiries. In the event that oil sands activities include electrical energy generation or energy transmission, such operations may trigger additional regulatory requirements under the auspices of the Alberta Utilities Commission (AUC). 4

10 OVERVIEW OF ENVIRONMENTAL REGULATORY REGIME 4.0 OIL SANDS ENVIRONMENTAL ASSESSMENTS Provincial environmental assessments are required prior to the construction and operation of, or issuance of project approvals for, certain oil and gas activities, including oil sands mining projects and certain commercial oil sands extraction, upgrading or processing plants. An environmental assessment examines the environmental effects of a proposed project and other existing and planned activities in the area of the project. An environmental assessment report must be prepared in accordance with the requirements prescribed under the EPEA. 5.0 OIL SANDS PROJECT APPROVALS All oil sands projects, whether they are mining or in situ, require oil sands approvals prior to construction or operation. Oil sands processing plants and bitumen extraction facilities require separate approvals prior to construction or operation. In addition, approvals are required for any associated wells, pipelines, surface facilities, water withdrawals, tailings ponds and sub-surface waste disposal. An application for a commercial project for the recovery or upgrading of crude bitumen must include a brief summary of all aspects of the project, a statement of the general basis and objectives of the application, the types of approvals and permits that are requested, and the relevant legislation under which application is being made. Technical and directly related economic details of the proposed development must also be included. Assessments of biophysical impact, social impact, and benefit-cost are also required. Sufficient information must be provided to permit the overall evaluation of whether the project will result in the economic and efficient use of resources and the protection of the environment. Applicants are required to plan and carry out a suitable program to create public awareness regarding the proposed development, to obtain and incorporate, where feasible, the reaction of interested or affected persons, and to provide documentation to the AER as to the nature and extent of the communication. In addition to considering the interests of the public, the AER considers a wide variety of contextual factors in determining whether it will approve an oil sands project. Generally, such considerations include: the purposes and needs of, and available alternatives to the project, land planning and resource conservation, environmental concerns, water management, social and economic impacts, and public consultations including aboriginal concerns. Major oil sands proposals will normally involve the submission of a Preliminary Disclosure to the Alberta government. The Preliminary Disclosure initiates a review of the project in principle, in terms of the form, timing, location, or any other essential feature of the proposal. If the Preliminary Disclosure is endorsed, the proponent can proceed to the more detailed review and approval process under the OSCA. 5

11 BLAKE, CASSELS & GRAYDON LLP 6.0 CONCERNS OF AFFECTED PARTIES INCLUDING ABORIGINALS After confirming that the application requirements have been met, the AER may issue a notice of application to announce to the public that an application is before it. Persons can file a statement of concern if they feel that they may be directly and adversely affected by an application. If a statement of concern is filed regarding a proposed project, the AER has discretion to order a written or oral hearing between all relevant stakeholders. Proponents must also address aboriginal interests. An estimated 23,000 Aboriginal People live in the Alberta oil sands region, including 18 First Nations and six Metis settlements. Thousands more live off-reserve and off-settlement. The Government of Alberta has a duty to consult and potentially accommodate aboriginal interests whenever a project could have an adverse impact on First Nation treaty rights, although it can delegate procedural aspects of the duty to consult to a project proponent in certain circumstances. Regardless of delegation, project proponents are always encouraged to engage with First Nations as early as possible in the project process. To assist in determining and evaluating consultation requirements, the Government of Alberta has set up the Aboriginal Consultation Office (ACO). The ACO provides consultation management services to each of the government, First Nations, the AER and project proponents. The ACO must make a determination of consultation adequacy before the AER can make a final decision on oil sands activities that require its approval. 7.0 MONITORING AND ENFORCEMENT Oil sands approvals have numerous terms and conditions associated with them, including ongoing monitoring and reporting obligations. In the event that the terms and conditions are not met, the AER may require additional efforts be undertaken to resolve the situation. The AER always reserves the right to modify the terms and conditions of an approval. If a significant mishap or release occurs, the AER may charge an operator for violation of applicable legislation. In addition or in the alternative, the AER may issue an Environment Protection Order (EPO) to an oil sands operator. An EPO can be quite broad in scope and may require an oil sands operator to undertake significant remediation measures to address a mishap or release. 6

12 OVERVIEW OF ENVIRONMENTAL REGULATORY REGIME 8.0 CONSERVATION, RECLAMATION AND ABANDONMENT Oil sands operators must plan for and employ effective conservation and reclamation measures. Conservation refers to the planning, management and implementation of the oil sands activity with the objective of protecting the essential physical, chemical and biological characteristics of the environment against degradation. Reclamation refers to the: Removal of equipment or buildings or other structures or appurtenances Decontamination of buildings or other structures or other appurtenances, or land or water Stabilization, contouring, maintenance, conditioning or reconstruction of the surface of land The process is considered complete only when the site is returned to an equivalent land capability. When an operator has reclaimed portions of the development area, an application can be made for a reclamation certificate. If reclamation is completed, a certificate is issued and any security held with respect to the lands for such reclamation can be returned. After the passage of time a reclamation certificate will protect an operator from being named in a future EPO regarding the reclamation. However, operators remain liable in perpetuity for any infrastructure that is left beneath the surface. When wells are no longer needed or an operator s mineral lease has expired, wells are abandoned. The AER has set strict requirements for environmental protection and public safety regarding abandoned wells. When a scheme, or a portion of it, is to be abandoned, the operator must obtain an abandonment approval from the AER. 9.0 LIABILITY PROGRAMS Oil sands project approval holders may be required to post security in certain instances. The AER has enacted the licenced liability rating program; large facility liability management program; and oilfield waste liability program; all of which involve a comparison of a licensee s or approval holder s liabilities to its assets. If an oil sands approval holder s deemed liabilities in these three programs exceed its deemed assets in the same programs plus any previously provided security deposits (including facility-specific security deposits), it will be required to provide the AER with a security deposit for the difference. 7

13 BLAKE, CASSELS & GRAYDON LLP 10.0 OTHER CONCERNS AND ISSUES 10.1 GHG EMISSIONS Alberta has developed its own provincial greenhouse gas (GHG) emissions reduction regime, which has been in force since July Under the regime any, facility emitting 50,000 tonnes of carbon dioxide (CO₂) or more per year must report its annual GHG emissions, whereas any facility that has emitted more than 100,000 tonnes of CO 2 in any year since 2003 must reduce its emissions intensity (i.e., the quantity of GHG emissions per unit of production) from its emissions intensity baseline. Oil sands exploration involves elevated GHG emissions related to conventional oil and gas extraction methods, primarily due to the production of the heat necessary to bring the bitumen to the surface through thermal in situ techniques. Many oil sands facilities have on-site cogeneration that supplies both electricity and steam. Co-generation is recognized in Alberta as a means by which a facility operator can reduce the emissions intensity of its facility. Although the oil sands industry has reduced GHG emissions per barrel by 28 per cent since 1990, oil sands crude remains approximately six per cent more GHG intensive than the U.S. crude supply average on a wells-to-wheels basis. With some exceptions for newly established facilities, the annual required reduction in GHG emissions intensity for a facility is 12 per cent from its baseline. In 2016 the required reduction will increase to 15 per cent and in 2017 it will increase to 20 per cent. There are four ways companies can meet their GHG emissions reduction requirements on an annual basis: 1. Make improvements to their operations and increase their operational efficiency 2. Allocate Alberta-based emissions credits from non-regulated facilities (offset credits) 3. Allocate emissions credits from other regulated facilities that have increased their efficiencies by amounts greater than required under the SGER (emissions performance credits) 4. Contribute to the Alberta Climate Change and Emissions Management Fund (Fund). The Fund is presently valued at C$15 per tonne, and that value is set to increase to C$20 per tonne in 2016 and C$30 per tonne in 2017 Since its inception in 2007, the Alberta GHG emissions reduction regime has achieved reductions of approximately 61 million tonnes with Fund payments of approximately C$578 million. 8

14 OVERVIEW OF ENVIRONMENTAL REGULATORY REGIME 10.2 WATER Oil sands operations use large volumes of water. Generally, any activity that can possibly disturb either ground or surface water such as the impoundment, storage, consumption, taking or removal of water for any purpose may require an approval or licence under the Water Act. Applicants for water licences need to provide a hydrogeological assessment to estimate the impact that a planned drawdown will have on aquifers and on other users. Water licences generally remain with a project. Further, Alberta s first-in-time, first-in-right principle allows for older licences to have access before newer licences regardless of the amount of water requested and its use. During times of water shortages, this provides some certainty regarding an older licence holder s access to water but increases the uncertainty surrounding newer licence holder s access. Regulatory and policy initiatives are being implemented to improve the efficient industrial use of water in oil sands operations, including AER Directive 081: Water Disposal Limits and Reporting Requirements for Thermal In Situ Oil Sands Schemes (Directive 081). To ensure water is recycled efficiently and any additional water required for operations is effectively used, Directive 081 sets new water disposal limits and maximum monthly facility water imbalances unique to each thermal injection facility. Other water concerns in oil sands operations include muskeg drainage, overburden and formation dewatering, and the prevention of seepage from ponds, pits and landfills WILDLIFE Oil sands projects may impact wildlife such as Woodland Caribou. Woodland Caribou are listed as a threatened species in Alberta and are monitored and protected by the government pursuant to the Wildlife Act. Operators are required to submit yearly Caribou Protection Plans (CPPs) for any new exploration or construction activity projects located in caribou ranges. CPPs describe the industrial activities that companies propose within caribou ranges in the coming year together with the timing of, and mitigation associated with, such activities. 9

15 BLAKE, CASSELS & GRAYDON LLP 10.4 CUMULATIVE IMPACTS The Alberta Land Stewardship Act came into force on October 1, 2009 (LSA). Pursuant to the LSA, the province is broken up into seven regions, including the Lower Athabasca Region, which encompasses the majority of Alberta s oil sands. The Lower Athabasca Regional Plan (LARP) came into effect September 1, 2012, and its regulatory requirements have priority over other provincial regulations affecting the region. LARP is a comprehensive management framework establishing cumulative effects management for air quality, surface water and groundwater in the region. Regional limits have been set for nitrogen dixoide (NO 2 ) and sulphur dioxide (SO 2 ) levels, for the use of groundwater for in situ operations and the disposal of wastewater. Monitoring stations have been installed to monitor air and groundwater quality, and also water quality on the Athabasca River, the main waterway through the oil sands region. Under LARP, oil sands operations are monitored cumulatively on a regional basis, and enforcement triggers are based on the environmental impact of oil sands development as a whole. The regulatory compliance mechanisms under LARP are in addition to project-specific approvals JOINT PROVINCIAL-FEDERAL GOVERNMENT MONITORING In February 2012, the federal and Alberta governments announced the Joint Canada-Alberta Implementation Plan for Oil Sands Monitoring (JOSM) to supplement existing provincial monitoring procedures such as LARP. The goal of JOSM is to implement a world-class monitoring program for the oil sands integrating air, water, land and biodiversity elements. The objectives include ensuring transparency of data collection, improved analysis of existing monitoring data to understand cumulative effects and historical environmental changes, and regular external peer review to ensure scientific integrity is maintained. The Alberta Environmental Monitoring, Evaluation and Reporting Agency coordinates the province-wide environmental monitoring and evaluation process and oversees the current and future work of JOSM. 10

16 OVERVIEW OF ENVIRONMENTAL REGULATORY REGIME II. FEDERAL REGULATION OF OIL AND GAS ACTIVITIES Notwithstanding that an oil sands project may be wholly situated within a province s borders, it may trigger federal involvement by the National Energy Board (NEB) or pursuant to certain federal statutes such as Canadian Environmental Assessment Act, 2012 (CEAA 2012), the Fisheries Act, Species at Risk Act (SARA) and the Migratory Birds Convention Act (MBCA). 11

17 BLAKE, CASSELS & GRAYDON LLP NEB The NEB is established under federal legislation and has jurisdiction in circumstances where an oil sands project involves the interprovincial or international import and export of oil, gas, and electric power. CEAA 2012 CEAA 2012 requires that certain large industrial projects undergo a federal environmental assessment prior to construction, expansion or abandonment. For example, an environmental assessment must take place before the commencement, operation, decommissioning or abandonment of an oil sands mine with bitumen capacity of 10,000 m 3 /day or more or if an oil sands mine increases its area of operation by 50 per cent or more and has a minimum capacity of 10,000 m 3 /day. An oil sands project may trigger the review requirements of both a provincial and a federal environmental assessment. If that occurs, and as a means of reducing overlap, it is possible to have a project undergo a provincial environmental assessment that also satisfies the federal review process. 3.0 FISHERIES ACT Under the Fisheries Act it is an offence for anyone to carry on any work or undertaking that results in serious harm to fish that are part of a commercial, recreational or Aboriginal fishery or to fish that support such a fishery. Furthermore, it is an offence to deposit or permit the deposit of any type and any amount of a deleterious substance in water frequented by fish. Anyone who wishes to engage in any work that may result in the disruption or destruction of a fish habitat, or who desires to deposit a deleterious substance in water frequented by fish, must first provide the Minister of Fisheries and Oceans with plans, specifications, studies and details of the proposed procedures SARA AND MBCA SARA covers all federally listed at-risk species including migratory birds as set out under the MBCA together with their critical habitats. There is a prohibition against harming a species listed under SARA or its residence. The MBCA contains provisions that prohibit the deposit of harmful substances in waters frequented by migratory birds. GHG EMISSIONS Canada has not yet implemented a federal GHG emissions scheme. Currently, the federal government is engaged in discussions with provincial governments, which it hopes will arrive at a national program that aims to reduce emissions. Canada has also stated that it hopes to align its federal GHG emissions regime with whatever regime is implemented in the U.S. 12

18 OVERVIEW OF ENVIRONMENTAL REGULATORY REGIME III. POTENTIAL PERMITS AND APPROVALS, NECESSARY FOR AN OIL SANDS PROJECT TO PROCEED Here is a non-exhaustive list of potential permits, licences, approvals and consents necessary for an oil sands project to proceed, including oil and gas requirements, pipeline requirements, export requirements, environmental requirements and utility requirements. 13

19 BLAKE, CASSELS & GRAYDON LLP 1.0 OIL AND GAS REQUIREMENTS 1.1 MINES AND MINERALS ACT An exploration approval from the Alberta Minister of Energy is required with respect to a preliminary plan for a program of exploration An exploration licence from the Alberta Minister of Energy is required to conduct exploration An exploration permit from the Alberta Minister of Energy is required to operate exploration equipment EXPLORATION REGULATION For land owned by the Crown, the consent of appropriate Minister or Agency of the Government of Canada is needed to conduct exploration Consent of person in lawful possession of private land needed for exploration OIL SANDS ROYALTY REGULATION, 1997 May apply to the Alberta Minister of Energy for an approval of the proposed project May apply to the Alberta Minister of Energy for an approval of an amendment to a project OIL SANDS TENURE REGULATION May apply to the Alberta Minister of Energy during the term of the permit for a lease of oil sands rights May apply to the Alberta Minister of Energy for a primary lease out of a first term oil sands lease May apply to the Alberta Minister of Energy for the continuation of an oil sands lease 14

20 OVERVIEW OF ENVIRONMENTAL REGULATORY REGIME 1.2 OIL SANDS CONSERVATION ACT Need approval from the AER to construct facilities, commence or continue an operation with respect to oil sands Need approval of the AER to construct and operate a processing plant Need an industrial development permit from the AER to use oil sands products as a raw material or fuel in an industrial or manufacturing operation Must register an address for service and an agent to carry out duties under the Oil Sands Conservation Act and accompanying regulations OIL SANDS CONSERVATION RULES No operator may commence, suspend or abandon an oil sands site, an experimental scheme, an in situ operation, a mining operation or a processing plant without approval of the AER No operator shall commence any substantial modification to an oil sands site, an experimental scheme, an in situ operation, a mining operation or a processing plant without approval of the AER No person shall produce gas from a well completed in the oil sands strata prior to obtaining approval of the AER Prior to drilling a well or undertaking any operations preparatory or incidental to the drilling of a well except for the surveying of the proposed well site or continuing any drilling operations, an operator of an oil sands site shall apply for a licence from the AER for evaluation wells, experimental wells, wells associated with an in situ operation, any water supply well of a depth of more than 150 metres, and primary production wells The licencee of a well shall apply for and obtain approval from the AER before suspending normal drilling operations, abandoning the well, plugging back or abandoning a formation in the well, removing casing from the well or resuming drilling operations after a previous suspension or abandonment of the well Unless otherwise approved by the AER, the operator of an oil sands site producing gas with a hydrogen sulphide content of greater than 10 moles per kilomole, or any lower hydrogen sulphide content that the AER may order, shall burn the gas using an incinerator approved by the AER An operator of an oil sands site shall keep any other records and file with the AER any other reports that the board may require An operator shall apply for and obtain approval of the AER for the storage or disposal of oil sands or discord accumulated during mining or overburden removal 15

21 BLAKE, CASSELS & GRAYDON LLP 1.3 SURFACE RIGHTS ACT No operator has a right of entry in respect of the surface of any land until the operator obtains the consent of the owner and the occupant of the surface of the land or has become entitled to right of entry by reason of an order of the Surface Rights Board pursuant to the Surface Rights Act 1.4 INDIAN OIL AND GAS REGULATIONS UNDER INDIAN OIL AND GAS ACT Every person who proposes to conduct exploratory work on aboriginal lands, including land in a permit or lease area, shall first obtain an exploratory licence from the Department of Indian Affairs and Northern Development Before commencing any drilling operations under a permit or lease, an operator shall submit to the band council and to the Department of Indian Affairs and Northern Development a copy of a well licence or other equivalent document issued by the provincial authority responsible for issuing well licences Every person who proposes to drill for and produce oil and gas on aboriginal lands shall, before beginning any drilling or production activities, obtain a well licence, a lease and a surface rights contract Every person who proposes to engage in any surface operations that are related to the exploitation of oil or gas on Indian lands, including an operator who operates under a permit or a lease, shall, before commencing those operations, on application to the Department of Indian Affairs and Northern Development, if the operations require an exclusive right to use or occupy the surface of those lands, obtain a surface lease in respect of those lands; or if the operations require an easement in, or a right to cross over, those lands, obtain a right of way in respect of those lands A permittee or lessee shall not commence production of crude bitumen, other than the extraction of substances under a pilot testing operation, unless specifically authorized to do so under a lease A permittee or lessee may, with the approval in writing of the Department of Indian Affairs and Northern Development, pool a permit or lease area, a portion of a permit or lease area or one or more geological zones that underlie a permit or lease area with any other oil or gas rights, including oil or gas rights that are not governed by these regulations 16

22 OVERVIEW OF ENVIRONMENTAL REGULATORY REGIME 1.5 CANADA OIL AND GAS OPERATIONS ACT On application, the NEB may issue an operating licence, or renew annually, each work or activity proposed to be carried on, subject to such approvals requirements, and deposits as they determine or as may be described by the regulations The NEB requires the submission of a plan satisfactory to the NEB for the employment of Canadians and for providing Canadian manufacturers, consultants, contractors and Canadian companies with a full and fair opportunity to participate on a competitive basis in the supply of goods and service to be used in the work or activity 2.0 PIPELINE REQUIREMENTS 2.1 PROVINCIAL PIPELINE UNDER THE PIPELINE ACT No person shall construct a pipeline or any part of a pipeline or undertake any operations preparatory or incidental to the construction of a pipeline unless the person is the holder of a licence or unless the person is acting pursuant to a direction of the AER authorizing them to do so No pipeline may be constructed on, across, over or under a highway without the approval of the Minister of Infrastructure No pipeline shall be constructed on, across, over or under a road without the approval of the local authority concerned No pipeline may be constructed on, across, over or under an irrigation canal or ditch under the Irrigation Districts Act or a drainage ditch under the Drainage Districts Act without the approval of the owner, or, if approval cannot be reasonably be obtained from the owner without the approval of the AER No ground disturbance may be undertaken in the right of way for a pipeline without the approval of the licensee of the pipeline in accordance with the regulations, or, if approval cannot reasonably be obtained from the licencee, without the approval of the AER No person without the authority of the AER, shall construct a pipeline or part of a pipeline so as to interfere with the present workings of a mine or quarry or obstruct any opening to a mine or quarry No pipeline shall be constructed under a building used or capable of being used as a public building, residence, office, warehouse or factory without the approval of the AER 17

23 BLAKE, CASSELS & GRAYDON LLP 2.2 FEDERAL PIPELINE UNDER THE NATIONAL ENERGY BOARD ACT No company shall operate a pipeline unless there is a certificate in force with respect to that pipeline and leave has been given under the National Energy Board Act to the company to open the pipeline by the NEB Except as otherwise provided, a company shall not begin the construction of section or part of a pipeline unless the NEB has: By the issue of a certificate granted the company leave to construct the line The company has complied with all applicable terms and conditions to which the certificate is subject The plan, profile and book of reference of the section or part of the proposed line have been approved by the NEB Copies of the plan, profile and book of reference so approved, duly certified as such by the secretary, have been deposited by the offices of the registrars of deeds for the districts or counties through which such section or part of the pipeline is to pass No pipeline and no section of a pipeline shall be opened for the transmission of hydrocarbons or any other commodity by a company until leave to do so has been obtained from the NEB A company shall not, without the leave of the NEB, sell, convey or lease to any person its pipeline, in whole or in part; purchase or lease any pipeline from any person; enter into an agreement for amalgamation with any other company; or abandon the operation of a pipeline No company shall take possession of, use or occupy lands vested in Her Majesty without the consent of the governor-in-council No company shall take possession of or occupy lands in an Indian reserve without approval of the governor-in-council No company shall, without the authority of the NEB, locate the line of its proposed pipeline, or construct the pipeline or portion thereof, so as to obstruct or interfere with or injuriously affect the working of or the access of the adit to a mine then open, or for the opening for which preparations are, at the time of such location, being lawfully or openly made No person shall work or prospect for mines or minerals lying under a pipeline or any of the works connected therewith, or within 40 metres therefrom, until leave therefore has been obtained from the NEB When a company has determined the lands that may be required for the purposes of a section or part of a pipeline, the company shall serve a notice on all owners of the lands, so far as they can be ascertained 18

24 OVERVIEW OF ENVIRONMENTAL REGULATORY REGIME No person shall, unless leave is first obtained from the NEB, construct a facility across, on, along or under a pipeline or excavate using power operated equipment or explosives within 30 metres of a pipeline No person shall operate a vehicle or mobile equipment across a pipeline unless leave is first obtained from the company or the vehicle or mobile equipment is operated within the travel portion of a highway or public road 3.0 EXPORT REQUIREMENTS 3.1 NATIONAL ENERGY BOARD ACT Except as otherwise authorized by or under the regulations, no person shall export or import any oil or gas except under an accordance with a licence issued by the NEB 4.0 ENVIRONMENTAL REQUIREMENTS 4.1 ENVIRONMENTAL PROTECTION AND ENHANCEMENT ACT Pursuant to Schedule 1(I) of Environmental Assessment (Mandatory and Exempted Activities) Regulation, an oil sands mine is a mandatory activity that requires an assessment report under the Environmental Protection and Enhancement Act Cannot release a substance into the environment in an amount, concentration or level or at a rate of release that is in excess of that expressly prescribed by an approval issued under the EPEA, a code of practice or the regulations Unless exempted by the regulations, must obtain a reclamation certificate in respect of the conservation and reclamation of land Under the Activities Designation Regulation, may require an approval with respect to waste management Under the Activities Designation Regulation, may require approval for substance release and for the construction, operation or reclamation of an oil sands processing plant 19

25 BLAKE, CASSELS & GRAYDON LLP 4.2 WATER ACT No person may commence or continue an activity that alters the water s flow, level, location or the direction of its flow, or that causes the siltation of water or the erosion of any bed or shore of a water body, or may cause or become capable of causing an effect on the aquatic environment; including drilling or reclaiming a water well or borehole, except pursuant to an approval under the Water Act No person shall commence or continue a diversion of water for any purpose works except pursuant to a license from the AER under the Water Act 4.3 NAVIGATION PROTECTION ACT No work shall be built or placed in, on, over, under, through or across any prescribed navigable water unless the work and site and plans thereof have been approved by the federal Minister of Transport 4.4 TRANSPORTATION OF DANGEROUS GOODS ACT, 1992 No person shall handle, offer for transport, transport or import any dangerous goods unless that person complies with all the applicable safety requirements, the goods are accompanied by all applicable prescribed documents, and means of containment and transport comply with all applicable prescribed safety standards and display all applicable prescribed safety marks. Additionally, an approved emergency response assistance plan that outlines what is to be done if there is an accident transporting the goods must be completed in advance. 4.5 CANADIAN ENVIRONMENTAL ASSESSMENT ACT, 2012 An oil sands mining project may trigger an environmental assessment under CEAA, UTILITY REQUIREMENTS 5.1 HYDRO AND ELECTRIC ENERGY ACT Approval of the AUC is required to construct or operate a power plant Permit/licence is required from the AUC to construct/operate transmission lines AUC approval is required for discontinuing or removing any works or installations forming part of a power plant or transmission lines 20

26 OVERVIEW OF ENVIRONMENTAL REGULATORY REGIME IV. AER DIRECTIVE 023 Here is the information as required in AER Directive 023: Guidelines Respecting an Application for a Commercial Crude Bitumen Recovery and Upgrading Project: 1. Project Description 2. Technical Information Surface Mining Operations Underground Access and Development In-Situ Operations Processing Plant Electrical Utilities and External Energy Sources Environmental Control 3. Economic Information Commercial Viability Benefit-Cost Analysis Economic Impact 4. Environmental Impact Assessment Project Description Environmental Alternatives 5. Biophysical Impact Assessment Air Resources Water Resources Topography, Surficial Geology, and Bedrock Geology Soils and Overburden Vegetation Aquatic Resources Wildlife Resources Land Capability 21

27 BLAKE, CASSELS & GRAYDON LLP 6. Social Impact Assessment Population Services and Infrastructure Land Use Housing Quality of Life Special Groups Historical Resources 7. Environmental Protection Plan Mitigation Measures Environmental Monitoring Environmental Research 8. Conceptual Development and Reclamation Plan Overview of the Development Life-of-Scheme Development Plan 1. Resource Recovery 2. Infrastructure 3. Waste Management 4. Plant Site and Associated Facilities Life-of-Scheme Reclamation Plan 5. Conceptual Plan 6. Restoration of Capability 7. Development and Reclamation Issues 9. Solid Waste Management Plan Description Disposal Methods Location 22

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30 MONTRÉAL OTTAWA TORONTO CALGARY VANCOUVER NEW YORK LONDON BAHRAIN AL-KHOBAR* BEIJING SHANGHAI* 2015 Blake, Cassels & Graydon LLP blakes.com *Associated Office