Enabling Local Innovation? Scott Tessier, Chair and Chief Executive Officer NewLeef, October 2016
SAFETY MOMENT: Working in the harshest environment in the world demands the highest regard for safety Everything we do at the C-NLOPB is seen through the lens of the Ocean Ranger, the Universal Helicopter crash of 1985 and Cougar 491 Ocean Ranger, 1982 84 lost lives Universal Crash, 1985 6 lives lost Cougar 491, 2009 17 lost lives Terra Nova spill, 2004 1000 barrels of crude Cougar Near Miss, 2011, descent halted 38 ft from water Collision, 2011 Maersk Detector and GSF Grand Banks Hibernia spill, 2013 6000 litres from the offloading facility Person Overboard, 2015 West Hercules 2 2
Regulator for Canada-Newfoundland and Labrador Offshore Area World-class, arm s length regulator with a relatively broad mandate Effective agent of independent joint management for governments One of three Canadian offshore regulators, along with CNSOPB and NEB Established in 1985 under the Atlantic Accord to provide regulatory oversight in four areas: Safety Environment Resource Management (includes Exploration) Industrial Benefits 7 Board Members: Chair and CEO (jointly appointed, along with designation of Vice-chair), 3 federal appointees and 3 provincial appointees (currently 1 provincial vacancy and 1 federal vacancy) Board reports to federal and provincial Ministers of Natural Resources, plus Minister of Service NL 2 3
Our Role Regulatory oversight of Operators activities The Atlantic Accord Acts place ultimate responsibility for safety and environmental protection on the Operators Operators are required to mitigate risk to as low as is reasonably practicable (ALARP) Regulatory tools include legislation, regulations, guidance and operational conditions imposed on specific activities Enforcement and compliance tools include notices of non-compliance, orders, revoking of authorizations, prosecution and administrative monetary penalties The Atlantic Accord Acts have enabled the Board to effectively regulate the industry for nearly 30 years 3 4
Canada-Newfoundland and Labrador Offshore Area 29 Exploration Licences (ELs) 56 Significant Discovery Licences (SDLs) 11 Production Licences (PLs) Increased activity beyond 200 miles 431 wells spudded since 1966, including 167 exploration wells 1.5 billion barrels of oil produced from 4 projects Hibernia, Terra Nova, White Rose and North Amethyst 4 5
Offshore Activities Hibernia Terra Nova White Rose Hebron Production in 2017 Sub-sea Expansion Seismic Exploration Drilling 5 6
2016 Exploration Activity Geophysical Programs Regional 2D/3D Seismic Data Acquisition Programs 3 in Eastern Newfoundland 1 in Southern Grand Banks 1 in Offshore Labrador A Geological Program was just completed in the Flemish Pass/Labrador 14 7
Scheduled Land Tenure and Calls for Bids The land tenure system introduced in December 2013 extends the prospect assessment period between the request for nominations and the close of the Call for Bids Categories Low Activity regions - few exploratory wells and limited seismic data acquisition High Activity regions elevated exploration activity levels including 2D and 3D seismic data acquisition and exploration drilling Mature region would have substantial 2D and 3D seismic data coverage extensive exploration/delineation drilling and production activities Time Cycles Four-year cycle for Low Activity category Two-year cycle for High Activity category One-year cycle for the Mature category One-year cycle for any lands not publically announced in the scheduled system Calls for Bids The Board has issued two Calls for Bids; one in the Eastern Newfoundland Region (13 parcels) and one in the Jeanne d Arc Region (3 parcels). The closing date for both is November 9, 2016 15 8
Offshore Safety and Environmental Protection are Paramount Monitoring and Compliance Operators must have a Safety Plan, Contingency Plan, Oil Spill Response Plan, Ice Management Plan, and more Oversight activities include audits and inspections; reviews of Operators daily reports, incident reports, complaints and Workplace Committee meeting minutes The C NLOPB has Special Oversight Measures for higher risk drilling programs such as high pressure and high temperature (HPHT) wells, ultra deepwater wells, and harsh environment drilling where there is increased potential for a well control incident to occur. Bi-annual Safety Forums combined with meetings with Workplace Committees 6 9
Sharing Safety and Environmental Information International Regulators Forum (IRF) The International Regulators Forum (IRF) is a group of 12 regulators of health and safety in the offshore upstream oil and gas industry. It exists to drive forward improvements in health and safety in the sector through collaboration on joint programmes and information sharing. International Offshore Petroleum Environmental Regulators (IOPER) The International Offshore Petroleum Environment Regulators (IOPER) is a collaborative group of 10 regulators from 8 countries whose members are dedicated to raising environmental performance standards within the offshore petroleum exploration and production industry. This includes standards applicable to the industry's normal operations, as well as environmental emergency prevention, preparedness and response. Wells Working Group for the North Sea Offshore Authorities Forum Participation provides an opportunity to stay abreast of key technological developments and state-of-the art well control training, practices and procedures 6 10
Environmental Assessment Strategic Environmental Assessment (SEA) An SEA provides an overview of the biophysical and socio-economic environment, including potential environmental sensitivities and is principally conducted in support of the C-NLOPB rights issuance process Call for Bids issued in that region will not close for a minimum of 120 days after the completion of an SEA or SEA Update Working to update the Labrador SEA in partnership with the Nunatsiavut Government Project Specific Environmental Assessment (EA) No activity can take place without a projectspecific environmental assessment Designated Projects under CEAA 2012, are managed by the Canadian Environmental Assessment Agency (CEA Agency) 11 11
Oil Spill Prevention and Response C-NLOPB is the lead regulatory agency for oil spill response respecting drilling and production installations on site and a resource agency in all other cases Federal and provincial agencies with environmental emergency related responsibilities provide advice Operators are responsible for emergency response. Requirements include: Report all spills to C-NLOPB Contingency plans Annual field countermeasures exercise Take all reasonable measures to respond to and mitigate spill including subsea well intervention and relief well drilling where necessary Financial responsibility for all actual loss or damage resulting from spill or debris C-NLOPB Chief Conservation Officer has authority to intervene in response to the extent of taking over from an Operator 21 12
New External Considerations Paris Agreement on Climate Change Canada-US Commitment to Reduce Methane Zero Routine Flaring by 2030 Federal Environmental Assessment Review 12 13
Climate Change Climate Change is high on the Federal Government s list of Priorities Paris Agreement on Climate Change signed April 2016 Binding agreement with global participation Aim at limiting global warming to 2 degrees Not time limited (no expiration) Countries to prepare national targets Progress to be measured and reported (from 2018) Federal Government announces plans for Carbon Tax (October 2016) C-NLOPB includes climate change in environmental assessment 12 14
Methane Reduction March 10, 2016 President Obama and Prime Minister Trudeau announce joint commitment to reduce methane emissions in offshore oil and gas sector Canada committed to reduce levels by 40-45% below 2012 levels by 2025 Methane regulations expected by the end of 2017 with first requirements coming into force in 2018 The World Bank Group calling for Canada to endorse an international initiative to end the practice of routine gas flaring at oil production sites by 2030 12 15
Federal Environmental Assessment Review The Minister of Environment and Climate Change has established an Expert Panel to review federal environmental assessment processes. The Expert Panel intends to engage broadly with Indigenous people, key stakeholders, and all Canadians. The C-NLOPB conducts environmental assessments under the Atlantic Accord Acts, but is not yet a Responsible Authority under the Canadian Environmental Assessment Act, 2012. The C-NLOPB has been invited to a meeting with the panel in Ottawa in November. 12 16
Back to the Question 12 17
Benefits Plan (Section 45) A Benefits Plan is a plan for the employment of Canadians and, in particular members of the labour force of the province; and for providing manufacturers, consultants, contractors, and service companies in the province and other parts of Canada with a full and fair opportunity to participate on a competitive basis in the supply of goods and services Corporation shall establish an office in the Province with appropriate levels of decision making First consideration to services provided from within the Province and to goods manufactured in the Province Individuals resident in the Province shall be given first consideration for training and employment Expenditures shall be made for R&D to be carried out in the Province and for E&T to be provided in the Province Disadvantaged individuals or groups are to have access to training and employment opportunities and the benefits plan must enable corporations owned or operated by disadvantaged groups to participate in the supply of goods and services Employment R&D and E&T Goods and Services Disadvantaged Groups 18
Research and Development & Education and Training C-NLOPB issued R&D/E&T Guidelines under the Benefits Plan Guidelines in November, 2004 to stimulate expenditure locally in R&D and E&T, not necessarily in innovation. Established a process for calculating R&D/E&T obligation. Obligation in each phase of industry activity addressed (Exploration, development, production) Memorial University of Newfoundland Each Operator s obligation calculated annually Operators not required to submit to C-NLOPB for approval; most submit applications for predetermination of eligibility Marine Institute of Applied Technology 12 19
R&D Eligibility Criteria Must occur in the Province. Expenditures made by Operators, Contractors, Sub-contractors Primarily Oil & Gas related, can include other sectors Generally eligible if meets definition of Scientific Research and Experimental Development (SR&ED) in Income Tax Act - Basic Research, Applied Research, Experimental Development. But not the final word. Initiatives should resolve a scientific or technological uncertainty or make a scientific or technological advancement. C-NLOPB may accept projects that don t qualify under SR&ED Increased R&D capacity in the Province Research in non-scientific areas: socio-economic, environmental, etc. Other eligible R&D expenditures Infrastructure Equipment & Materials Salaries & Wages Overheads, etc. 20
E&T Eligibility Criteria Eligible E&T expenditures include: Establishment and/or enhancement of educational Infrastructure Establishment of E&T Programs Professional training Trades training Technology transfer Support for Chairs, Fellowships and Scholarships Work Terms for students both in and outside the Province Non-Eligible expenditures include: Community Investment Regulatory training requirements Programs may be partially eligible Since the guidelines came into effect (April 2004), producing operators have spent $401 million on Research & Development and Education & Training in the Province - $74 M was spent on eligible R&D and E&T during 2015 - R&D 51%; E&T 49% 21
Environmental Studies and Research Fund (ESRF) ESRF is a national research program which sponsors environmental and social studies. It is designed to assist in the decision-making process related to oil and gas exploration and development on Canada's frontier lands. Funding is provided through levies on frontier lands paid by interest holders such as the oil and gas companies. The ESRF is directed by a joint government/industry/public Management Board comprised of: 4 Federal Government 2 Offshore Boards - 1 C-NLOPB and 1 CNSOPB 4 Petroleum Industry 2 Public - 1 appointed by Natural Resources Canada (NRCan) Minister and 1 by Indigenous and Northern Affairs Canada (INAC) Minister Research Priority Areas - Spill Preparedness and Response, Fate and Effects - Regional Effects Assessment and Management - Seismic - Oil and Gas Liquids Spill Fate and Effects Although innovation in individual studies may be welcomed, encouragement of innovation is not a core component of the ESRF 12 22
To Answer the Question We have a strong role in facilitating local innovation, but success in this regard requires collective effort from: Industry Governments Academia Regulators And All of You 3 23
WEBSITE: CNLOPB.CA TWITTER: @CNLOPB YOU TUBE: C-NLOPB CHANNEL 18 24