1. General Structure of Petroleum Ownership and Regulation
1.1 System of Petroleum Ownership
Canada is a federal state comprised of a federal government, ten provincial governments and three territorial governments. Both the federal government and the provincial and territorial governments have the jurisdiction to make laws (generally referred to as Acts) and other subsidiary legislation (generally referred to as Regulations). Under this system, there is both state (Crown) and private (freehold) ownership of petroleum. In addition, the ownership of petroleum in situ may be split by formation and by substance.
Canada operates on a "tax and royalty" system and not on a "production sharing contract" system. Within this tax and royalty system, there is broad freedom to contract, and detailed laws and regulations accompany the development of petroleum.
Western Canada (primarily Alberta, but also British Columbia and Saskatchewan) currently accounts for approximately 95% of Canadian petroleum production. For this reason and due to editorial limits, our answers focus mostly on the petroleum industry in Alberta and applicable federal laws.
Under the Canadian Constitution, title to the petroleum located in most of Canada's offshore and federally administered onshore lands, including First Nations' reserve lands, vests in the federal Crown. As an exception to the general rule of federal ownership of petroleum on First Nations' reserve lands, some First Nations that have formally settled land claims with the federal government own the petroleum on their lands.
Ownership of petroleum in all other Crown lands vests in the various provincial governments.
Freehold petroleum ownership exists where the outright ownership of mines and mineral rights was historically granted to private persons by the federal Crown.
1.2 Regulatory Bodies
Sections 91 and 92 of the Canadian Constitution allocate a number of "heads of power" that are relevant to petroleum development between the federal and provincial governments. The federal government has jurisdiction over petroleum on federal lands, and over matters that are inter-provincial or international in nature, such as some pipelines and exports. Each provincial government has jurisdiction over the petroleum and related works or undertakings within its borders that do not otherwise fall under federal jurisdiction. The federal and provincial governments share responsibility for environmental protection and the environmental assessment of certain petroleum projects.
As an exception to this division of power, the federal government and each of the provinces of Nova Scotia and Newfoundland & Labrador have an agreement to jointly administer and regulate offshore petroleum development.
Federal and Offshore
In August 2019, the Canada Energy Regulator (CER) replaced the National Energy Board and assumed responsibility for regulating petroleum projects within federal jurisdiction, including certain offshore projects; interprovincial, international and offshore pipelines; and the issuance of orders and licences for the export of petroleum from Canada.
Indian Oil and Gas Canada (IOGC) administers the issuance of petroleum rights on behalf of the federal government on First Nations' reserve lands. Its governing legislation is the Indian Oil and Gas Act. Typically, the development of petroleum on First Nations' reserve lands is conducted in accordance with the laws of the province in which the reserve lands are located.
The Canada-Nova Scotia Offshore Petroleum Board (CNSOPB) and the Canada-Newfoundland & Labrador Offshore Petroleum Board (CNLOPB) share regulatory authority with the CER over their respective offshore areas. The CNSOPB is governed by the Canada-Nova Scotia Offshore Petroleum Resources Accord Implementation Act and the Canada-Nova Scotia Offshore Petroleum Resources Accord Implementation (Nova Scotia) Act (the Nova Scotia Accord Acts), while the CNLOPB is governed by the Canada-Newfoundland and Labrador Atlantic Accord Implementation Act and the Canada-Newfoundland and Labrador Atlantic Accord Implementation Newfoundland and Labrador Act (the Newfoundland Accord Acts).
In Alberta, the Ministry of Energy administers Crown petroleum resources, though it has delegated many of its responsibilities to the Alberta Energy Regulator (AER) under the Responsible Energy Development Act (REDA). The AER is a "single window" agency that is responsible for regulating the petroleum industry in Alberta and conducts environmental assessments associated with petroleum activities. Gas utility pipelines are regulated by the Alberta Utilities Commission.
In British Columbia, the Ministry of Energy and Mines administers Crown petroleum resources, though it has delegated many of its responsibilities to the British Columbia Oil and Gas Commission (BCOGC) under the Oil and Gas Activities Act. Under the Utilities Commission Act, the British Columbia Utilities Commission (BCUC) has some regulatory authority over intra-provincial pipelines.
Saskatchewan has not delegated regulatory authority to an administrative agency; petroleum development is instead regulated by its Ministry of Energy and Resources under The Energy and Mines Act.
1.3 National Oil or Gas Company
There is no Canadian "National Oil Company" (NOC) as that term is generally understood. However, the federal government has ownership interests in certain companies, such as Trans Mountain Corporation and the Canada Hibernia Holding Corporation. In addition, the Alberta government has made investments in the Keystone XL pipeline project and the Coastal GasLink Pipeline Limited Partnership.
1.4 Principal Petroleum Law(s) and Regulations
Federal and Offshore
The Canada Petroleum Resources Act governs the allocation and administration of production royalties and rights to explore for and develop petroleum on federal lands.
The Canada Oil and Gas Operations Act governs the exploration, production, processing and transportation of offshore petroleum throughout offshore marine areas controlled by the federal government.
Together with the Indian Oil and Gas Regulations, the Indian Oil and Gas Act creates the regulatory framework for petroleum exploration and development on First Nations' reserve lands.
The Nova Scotia Accord Acts and Newfoundland Accord Acts implement the agreements between the federal government and each of the Nova Scotia and Newfoundland & Labrador provincial governments concerning the shared management of offshore petroleum.
The Canadian Energy Regulator Act (CERA) establishes the regulatory framework governing the CER and provides for interprovincial and international pipelines, petroleum export, and certain offshore projects.
The Mines and Minerals Act governs Crown petroleum leases and Crown production royalties in Alberta.
The Oil and Gas Conservation Act (OGCA) governs petroleum exploration, development, production, processing and abandonment activities in Alberta.
The Oil Sands Conservation Act (OSCA) governs the exploration, development, production, processing and abandonment of activities undertaken in connection with Alberta's oil sands.
The Orphan Fund Delegated Administration Regulation delegates certain responsibilities to the Orphan Well Association (OWA), an industry-funded association intended to oversee the decommissioning of "orphan" petroleum facilities left behind by insolvent, bankrupt and defunct petroleum companies.
The Gas Resources Preservation Act requires persons seeking to export natural gas from Alberta to first obtain an export permit.
The Pipeline Act governs the construction, operation and abandonment of provincially regulated pipelines in Alberta.
The Environmental Protection and Enhancement Act is the main piece of environmental protection legislation in Alberta.
The Surface Rights Act governs surface rights in Alberta and creates the Surface Rights Board to adjudicate disputes between freehold surface owners and companies wishing to conduct petroleum operations.
In British Columbia, the material legislation includes the Petroleum and Natural Gas Act, the Oil and Gas Activities Act, the Dormancy and Shutdown Regulation, the Pipeline Regulation, the Environmental Management Act, the Environmental Assessment Act and the Surface Lease Regulation.
In Saskatchewan, the material legislation includes The Crown Minerals Act; The Mineral Resources Act; The Oil and Gas Conservation Act; The Pipelines Act, 1998; The Environmental Management and Protection Act; and The Surface Rights Acquisition and Compensation Regulations.
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