EXECUTIVE SUMMARY[1]SPONSORS

The purpose of the Workshop was to review the legal issues that will arise if exploration or development occurs in the ocean area commonly described as BC Offshore.

1. Background

Four basins[2] underlie the Pacific Ocean around Vancouver Island, as shown on the attached sketch. Of these, the Queen Charlotte Basin (in the Hecate Strait between the mainland and the Queen Charlotte Islands) perhaps offers the best prospects - an estimated 9.8 BBO of oil and 25.9 TCF of gas. More than 40 years ago, Shell, Exxon-Mobil, Chevron, Petro-Canada and CFOL acquired permits from GOC for the entire area, and three Companies, Conoco, Haida Resources, and Offshore Oil & Gas acquired permits from the BC government. Some seismic was done, and between 1967-9 14 wells were drilled, all dry. Dry holes were also drilled on Graham Island in the Queen Charlotte Islands.

In 1972, Canada announced that ". . that exploration and drilling for oil would be excluded from sensitive offshore zones. . .".[3] The Government of BC followed in 1982 with an Order-in-Council creating an Inland Marine Zone and establishing regulations banning drilling in it.[4] In 1986, the farmee Chevron proposed renewed exploration, and the GSC did more seismic. But the Nestucca Barge and Exxon Valdez oil spills intervened. The Province announced in 1989 that there would be no drilling for at least five years. That ban was later extended.

BC later established a review of the "moratorium" by a panel of scientists, which reported in 2002 that there is no scientific basis for a moratorium, and never was. It did say that environmental and socio-economic concerns must be addressed. In 2003, Canada set up a review process in three parts: First, a review to be established by Royal Society of Canada Science Panel; Second, a public consultation process (chaired by Roland Priddle); Third, a First Nations consultation process (chaired by Cheryl Brooks). When it receives all of these Reports, Canada will make a decision - possibly in late 2004.

The Royal Society report dealt with science gaps relating to the fishery, marine life, the seabed, and other issues. It made a list of areas needing further research, but concluded that, provided an adequate regulatory regime is put in place, there are no science gaps that need to be filled before lifting the moratoria on oil and gas development. It added that there was little potential for conflict between such development and the unique sponge reefs in the area, and other proposed marine protection areas. It noted however that further scientific inquires must occur before actual drilling takes place, although these should not delay the process having regard to all the other issues that must first be settled.

The Workshop also heard a review of the latest geophysical study, which indicated that there are good prospects in the deep Tertiary zones and lower Jurassic. The early wells penetrated only to the upper Cretaceous. It is possible that reserves could rival Newfoundland offshore, but present estimates are highly speculative. There are risks of spillage from petroleum production accidents, but of all marine spills in the world, only 3% in 2002 were from production events.[5] Finally, the Workshop heard that new engineering designs make drilling platforms, and emergency abandonment, safer.

2. "An adequate regulatory regime"

It is a major task to establish an adequate regulatory regime. One must decide upon a tenure system, a taxation system, rules to encourage local benefits, and rules to protect the environment and other users of the ocean. The Workshop reviewed all of these issues.

a) Taxation and royalty regime

Petroleum producers look first to "below ground" issues. If prospects are pleasing, they assess "above ground" situation. The first aspect of that is the cost and availability of a market. The next is the fiscal regime.

Around the world an immense variety of regimes are in place. These offer differing approaches to the relationship between the owner of the resource (usually government) and an entrepreneur brought in to do the work: lease or concession (59 countries), joint venture (31), production sharing contract (40), service contract (2), and hybrids(16). With the lease/concession model, government hands off to the entrepreneur, in return for a reward, an exclusive right to produce and passes title to any production. In a joint venture, government is a partner at all stages. Under a production-sharing contract, government retains control of production while sharing the fruits with the entrepreneur. Under a service contract, government retains control at all levels, and the entrepreneur is engaged to perform services. All of these arrangements usually provide terms about duration, relinquishment, domestic sourcing & supply obligations, management regime, proof of fiscal stability, employment & training standards, title to assets, development plans, and performance guarantees.

The lease/concession approach is popular with large companies because by and large under this approach reserves can be "booked", i.e. set aside for the entrepreneur, and because the decisions when and where to drill and when and how to put into production are left with the entrepreneur.

In those schemes where government does not retain ownership or a partnership interest as product moves to market, some provision for reward is established, and again there are many different approaches. These include production-tied return like production bonuses, rentals, royalties, corporate income tax, or production sharing, but also more general sources of revenue such as the signature bonus, profit sharing, special taxes, value added tax, import duties, sales taxes, turnover taxes, property taxes, and excise taxes.

Bonuses, whether signature or production, can be negotiated or set by statute or set by public auction. In North America, the auction system prevails for government-owned resources, and usually permits the entrepreneur to nominate the area of interest. The negotiated bonus is popular in Asia, the Middle East, Africa, Eastern Europe and CIS republics. The signature bonus is of course a "sunk" cost, lost forever to the entrepreneur if there is no production, and huge signature bonuses are a disincentive except where the industry is bullish about discovery, production, and marketing. Production bonuses may be triggered by many events: a discovery, a licence application, the start of the production, achievement of certain levels of production, or cumulative production. These bonuses permit governments to maximize return at high production levels, and are popular in Asia and Africa. They impact "forward" economics, i.e. costs after production.

Rentals, usually annual rentals, are often fixed by statute or negotiation, and offer some annual return to government whether or not there is any discovery or production. If the entrepreneur can offset them against royalties, they can be used as a lever to force production or abandonment of a concession. They are popular all over the world, but again, as "sunk" costs, can be a disincentive.

Royalties are payments related directly to the gross value or amount of the production, usually expressed as a percentage of one or the other and often based on wellhead price. They have the advantage of a share in production revenue in a way easy to calculate and of course involve only forward economics. Around the world, there is a remarkable variety of royalty rate, for example 1.25% in Papua-New Guinea and 25% in Texas offshore. To encourage greater production, royalties can be set on a sliding scale, with the rates lower as production rises. This is employed by China and several other countries, probably in an attempt to stabilize revenues. On the other hand, some countries (eg Germany onshore) do the opposite - their royalties jump as production increases, perhaps because lower royalties for small production will encourage more attempts to produce in doubtful fields. There are other variations.[6]

In deciding on a fiscal policy, government must consider many factors, including feasible sharing of the divisible income with the entrepreneur, the demand for a sharing of the risks, resource policy objectives, economic policy objectives, administrative policy objectives, the legal framework, and the internal distribution of government take among levels of government. Commonly experienced risks include huge price fluctuations, cost overruns in novel developments, and mistakes about the size of reserves. Resource policy must assess ways to promote exploration[7], cost-efficient operations, reserves maximization, marginal field development, and the marketing of gas. Government must ask how much it wants, how to structure its take, and how to stabilize it.[8] These goals must keep in mind the huge capital costs and risks in connection with petroleum exploration, production, and marketing, and to what degree government wants to foster development and competition. The structuring of the take must reflect production risks, the profitability for the entrepreneur and when it will come, and how the entrepreneur can be encouraged to continue to hunt and harvest, and the need to stabilize government revenues. Finally, government must offer a system that is seen by the public as well as the industry as fair and credible.

If it is to encourage production, BC’s fiscal system needs to make exploration attractive in these circumstances: The oil & gas potential of the BC offshore is largely unknown; offshore development will be a high cost, high risk activity; BC will be competing for oil & gas investment opportunities with many other jurisdictions around the world; and Government take world-wide has declined in the past decade. Government should ask: If we build it, will they come?

b) Tenure system

The challenge to Government is to create a tenure system that will foster confidence on the part of industry and the public, and justify the huge expenditures involved. Industry needs to know it will have sufficient time to explore the lands granted, which in offshore areas tends to be very large, and that it will have sufficient time to develop production, which may involve new technology, the development of needed infrastructure, and the raising of enormous amount of capital. Finally, it needs to know that it will be entitled to produce the discoveries, and this right will justify the investment and risk. And it must balance this need for a degree of certainty from the outset with the need for a system of regulation sufficiently adaptive to deal with future unforeseen issues.

A tenure system for oil and gas interests has three components: what rights are granted, the process by which these rights are granted, and the manner in which are they registered in a land registration system. Rights can be granted by leases in the traditional way, but also by concession agreements, production sharing contracts, service agreements, licences and permits. The form of tenure is far less important than the actual substance.

Canadian East Coast experience is instructive. Three forms of tenure are offered: the exploration licence, the significant discovery licence and the production licence. The Hibernia, Terra Nova, Sable and Whiterose projects have all proceeded under that system. The "exploration" licence grants rights for a limited period to explore, normally include the shooting and evaluation of seismic and the drilling of one or more exploratory wells. This requires exploration as a condition of any future right, and prevents "banking" interests. If a licence expires, so do the rights. If a significant discovery is made, the licence holder has a right to apply for a declaration to that effect and has a right to a "significant discovery" permit. In recognition of the problems inherent in "working up" a new discovery to production, this permit has no expiry date, but is subject to re drilling and development orders to encourage work. If all goes well, the permit holder next seeks a declaration of "commercial discovery", and a production licence. This has a term of 25 years, with a habendam[9] clause.

To attract the entrepreneur, the rights-granting process must be seen to be transparent, objective and competitive. A fair and sensitive bidding process meets this test. A discretionary system may not. The bid process need not be a money auction, but rather can be, as it is on the Eastcoast offshore, a more sophisticated challenge to the bidder to meet not only minimum requirements about financing, stability, experience, and expertise, but also to commit to the specified work commitment. In such a system, all bidders know the selection criteria, and a fairness audit can offer assurance of evenhandedness by decisionmakers.

It is essential also that rights and security interests be recorded in a searchable and reliable registry, so that lenders and buyers can be assured as to security of tenure. Although limited, the security system under the Atlantic Accords has met industry needs.

Lastly, there must be a system for protection of title and security interests in chattel on or in the sea or the seabed. This may involve an extension of the local provincial system to the offshore, or it could be set up under the Oceans Act.

c) Local benefits

Government understandably wants not only to maximize revenues from the offshore, but also to find work for as many citizens as possible, and to improve the economies of coastal communities. In BC, this is a special problem because those communities have been hard-hit by setbacks in the fishing, mining, and logging industries.

It must be acknowledged, however, that the modern petroleum extraction industry is technologically sophisticated and globally competitive. For example it contracts internationally for seismic and drilling services. Offshore rigs are used and re-used around the world. The industry also prefers "asset sharing". Even at peak levels of activity, the offshore will likely be serviced by a single supply base and heliport. This is unlike onshore production, as in Alberta, where widely scattered field service work has offered opportunity to rural residents to work fairly near home, and permitted small towns - elsewhere dying - to stay alive and even prosper.

That said, the coastal communities along the Hecate Strait have historically provided industrial supplies and services to the mining, forestry fishing and tourist industries. They lack offshore industry-specific knowledge and experience, but can invest in specialized infrastructure, equipment and training when there is some certainty of sustained industry need (which will only occur if exploration drilling is successful). An inventory indicates many human and commercial resources.[10] This is very different from the east coast, where the relatively undeveloped nature of the industrial base meant that policy intervention was necessary to induce benefits.

The question for government is whether to look to a benefits-based regulatory model, as opposed to a revenue-based model. Even if it would offer local benefits, Government has a wide range of choices, from relatively non-interventionist to extremely interventionist. Minimal intervention would include helping local suppliers to become aware of industry opportunities and helping offshore entrepreneurs to become aware of local supply with perhaps voluntary benefits agreements and non-binding performance targets. This would be nothing like the East coast regime, which requires the filing and approval of benefits plans as a condition of a development permit. More interventionist efforts may include permit conditions, mandated local employment and procurement quotas, or even state ownership.

The Atlantic Accords, conscious that even shared revenue principally benefited Canada because of the working of the federal Equalization Program, and because of the depressed economy in the 80's, found it very important to pursue local benefits. Detailed benefits policies sought to ensure that provincial residents were the primary beneficiaries of industrial and business opportunities, employment and training and R&D, unfortunately with little in the way of an enforcement regime.[11]

Any aggressive intervention today would face challenges under the Charter of Human Rights and Freedoms, which permits local preferences only to assist socially and economically disadvantaged residents of a province where the province’s rate of unemployment is above the national average. It could also face challenges under NAFTA.

In conclusion, some form of local benefits regulatory regime is probably a political necessity. But there is less scope and less need for an interventionist approach on the West Coast.

d) The Fishery

The BC fishery and any offshore development must share the ocean. Are they necessarily in conflict? In Newfoundland, representatives of the fishing sector view oil and gas development as a positive move for the province, but monitor activities to ensure sustainable use of the marine environment.

Again, it is a matter - as the Royal Society of Canada Science Panel has said - of adequate regulation. The oil and gas industry must be cognizant of, and operate within the legislative frameworks that govern and protect the fishing industry.[12]

Rather than governmental regulation, it may be best if the two industries work together. There is a model. One Ocean was established by and for the petroleum and fishing industries in Newfoundland and Labrador in 2002. The initiative was not driven by government mandates but by a mutual recognition of the need to promote understanding and awareness of each sector’s operational activities. The structure of One Ocean is comprised of an Industry Board, with equal representation of the petroleum and fishing sectors, an independent chairperson, and an independent secretariat. One Ocean brings together the two principal ocean users in this province. Industry representatives sit face-to-face to discuss operational activity issues, as well as government mandates and legislative frameworks. It offers a model for a harmonious relationship on the West Coast.

e) The Environment

The 1986 Report of Joint Federal-BC Environmental Assessment Panel reported that the Moratorium should be lifted provided there was adequate ongoing regulation, and listed 90 areas of concern. The 2002 Report of BC Scientific Review Panel concluded: "no inherent or fundamental inadequacy of the science or technology" existed to justify a blanket moratorium on offshore oil & gas activities, but expressed concern in 15 areas. It suggested the development of an integrated federal-provincial regulatory framework. It also expressly adopted a strong form of the precautionary principle. Finally, the 2004 Report of the Royal Society of Canada Science Panel concluded that there were areas of ongoing concern, and adopted another form of the precautionary principle: "In the face of scientific uncertainty, it is preferable to err on the side of caution." It added that the "the absence of full scientific certainty shall not be used as a reason to postpone decision-making".

What means of ongoing regulation presently exist? The broad scope of Canadian Environmental Assessment Act ‘triggers’ ensures all offshore oil & gas activities must undergo assessment under that Act. The BC Environmental Assessment Act also applies to "offshore oil and gas facilities". The Canada-BC Agreement for Environmental Assessment Cooperation (2004) applies. Many other statutes are engaged.[13]

What remains to be decided? First, how the precautionary principle will be interpreted and applied. Second, whether the regulatory structure for environmental assessment in the BC offshore will offer a single integrated management body. Finally, the perennial challenge: to establish an environmental regulatory structure sufficiently flexible to respond to new issues but also to provide regulatory certainty, pursuant to the rule of law.

3. Governance Issues

Before the legal issues can be addressed, one must ask which form of government shall deal with them. There are many models, and many very basic issues. These include the constitutional status offshore of the two levels of government, aboriginal rights and interests.

a) Constitutional issues

In the BC Offshore Reference[14] the Supreme Court of Canada borrowed international law concepts about sovereignty to decide issues between BC and Canada. The Supreme Court accepted this definition of "territorial sea": a belt of sea adjacent to its coast. The Court held that the Territorial Sea was outside the limits of the Colony of British Columbia when it joined Confederation and thus it did not acquire jurisdiction over the Territorial Sea when it joined Canada.

In 1984 the Supreme Court also affirmed that the waters underlying the continental shelf were the governmental responsibility of Canada.[15]

There remained an argument over the border between the Territorial Sea and "inland waters." In 1986, the BC Court of Appeal held[16] (and the Supreme Court affirmed) that, because of the terms creating the Colony of BC in 1866, the waters and submerged lands between Vancouver Island and the mainland were part of that Colony and of the modern province. It accepted this modern definition of "inland waters": the waters and submerged lands to a width of three miles seaward of the coast of the mainland but where the mainland coast is deeply indented or has a fringe of islands in its immediate vicinity, seaward from baselines enclosing these features. As a result, the Court held that the waters enclosed by Queen Charlotte Island and by Vancouver Island were part of the inland waters of British Columbia. It approved this approach:

In localities where the coast line is deeply indented and cut into, or if there is a fringe of islands along the coast in its immediate vicinity, the method of straight baselines joining appropriate points may be employed in drawing the baseline from which the breadth of the territorial sea is measured.

TheCourt however added:

It is important to note that the question raised in this Reference is not concerned with legislative jurisdiction nor with political or economic considerations. No question arises as to the power of Parliament to legislate in relation to matters within its exclusive legislative jurisdiction as, for example, control over shipping, navigation, trade and commerce, customs, fisheries and defence. The sole question here is the matter of proprietor-ship in lands

In conclusion it may well be that the province of BC has no lawful interest in the Winona Basin and the Tofino Basin, both of which underlie territorial or continental-shelf waters off the west coast of Vancouver Island. It may be however that it does have a proprietary interest in at least part of the waters in the Queen Charlotte Basin and the Georgia Basin. In any event of proprietorship, Canada may regulate in its exclusive areas of jurisdiction in all of these waters, and BC may have jurisdiction to regulate in at least the inland waters. As a result, the possibility of dual and duplicate regimes arises.

Hope was expressed that further litigation will be avoided by some sort of agreement between the two levels of government, but it was recognized that, until the moratorium is lifted, it is not likely that there will be negotiations.

b) First-Nation issues:

No treaty exists with respect to any of the waters under discussion, and therefore the issue of aboriginal title remains. No judicial authority to date warrants the conclusion that the sea cannot be a place respecting which there may be aboriginal title. The coastal Nations were and are sea-going peoples. I t follows that there may be some form of aboriginal title, perhaps usufructual[17], perhaps more extensive, in some of the coastal waters - and perhaps in the lands underlying them. The Haida have commenced suit laying just such a claim, a suit that shall not wait on the treaty-negotiation process.

Even if the question of aboriginal title is resolved, there remains the general duty on the part of government to consult with Canada’s original inhabitants about any proposed governmental action that may affect their traditional activities. This obligation extends to offering reasonable accommodation of their traditional interests.

Again, concern was expressed at the prospect of extended litigation. Again, the hope was expressed that there can be reasonable accommodation achieved at the negotiation table.

c) Models for Governance

Shall each of BC and Canada assert their full constitutional rights, and establish duplicate regimes to regulate the offshore? Or should they agree to cooperate, and establish some method of joint governance? If so, what form shall that new instrument of government take? The Workshop looked at several models.

Atlantic Accords

The Atlantic Accords are the most obvious models, and so the Workshop looked at them.

After Canada won its constitutional point with the Atlantic provinces about the governance of the continental shelf, it offered to share its powers. By agreement Canada and each of Nova Scotia and Newfoundland enacted mirror legislation creating Boards with ½ the members of each named by each level of government, and a chair agreed to by the two governments. Each Board is given jurisdiction over a specific portion of the offshore. Their actions are subject to joint directives from a federal and provincial Minister. The Board may issue a development approval, or licence, without which no step can be taken, and which creates an interest in the area for which the licence is granted. Approval, and ongoing supervision, involves a review of financial responsibility requirements, certification of installations and equipment, compliance with standard and procedures, provision for industrial benefits, reporting requirements, occupational health and safety; and environmental considerations.

By their very nature, some aspects of these provisions are worded in very general terms and are therefore open to interpretation if not confusion, particularly in the absence of unequivocal guidance respecting their application and administration.

The approval process is time-consuming and complex. Only 5 projects have been approved, and only 3 have gone into production. The fact of dual Accords led to a longstanding boundary dispute. And, in an age where process often is streamlined, the statutory Accord process has not.

A new challenge to the Accord scheme has arisen in the past decade. Since 1995, four wells have been drilled for the purpose of exploring prospects in the offshore area adjacent to the west coast of Newfoundland. Three of these wells have been directionally drilled into the offshore area held by offshore exploration licences, using a drill rig located contiguously onshore. This has given rise to problems of duplicate jurisdiction.

The ambition to have the Board be the sole agency regulating the industry was also set back with the enactment of the Canada Environmental Assessment Act. There are also issues about the application of the Canada Access to Information Act.

The hearing and approval process is immensely complicated. A more streamlined but effective process for development approval needs to be created giving more certainty and efficiency to the process, more effective monitoring and decision making by the Boards, and more timely input from interest groups.

The preference for single-window review has led in Nova Scotia to novel efforts to avoid duplication. The Board has encouraged the Memorandum of Understanding process, whereby it and other regulatory agencies settle on a certain rules. It has also tried joint hearings presided over by a panel of representatives from various agencies, who report back joint findings. This has had mixed reviews.

Australia

The Workshop then looked at the Australian system, which also is a federal system, and where also the issue who shall govern the offshore has been a matter of controversy. In 1979 state and national governments agreed on a Offshore Constitutional Settlement. It offered governance of both territorial sea and inland waters to the state, and continental shelf to the national government, but all agreed on a model regulatory law. Moreover, certain central matters are decided by a Joint Authority, which consists of two appropriate Ministers from each level of government. In case of dispute the view of the federal Minister prevails, and there has been a steady expansion of the influence of the federal authority over the past 20 years. Recently, there is increased concern about occupational safety and environmental protection, and this has led to calls for more centralized authority.

In recent years, the need for aboriginal involvement has also been recognized. The High Court has validated non-exclusive aboriginal claims to inland waters, but begged the question whether this applied as well to seabed.

North Sea

A wealth of institutional experience can be learned from offshore Northwest Europe. Implementing some of these lessons can increase the political legitimacy of the governance system.

Ever since Kenneth Dam's classic Oil Resources: Who Gets What How (Chicago: University of Chicago Press, 1976), North Sea offshore oil and gas licensing regimes have been lumped together as being the North Sea "model." Dam's analysis focussed on license allocation systems which he characterized as being "auction systems" (North America) or "discretionary allocation" (North Sea-Norway and the UK).

A discretionary system differs from an auction system perhaps in two respects: firstly, it uses different licensing rounds to alter the nature of the property rights assigned the successful licensee. Secondly, the value of the property rights is not expressed in terms of a cash bonus or a willingness to pay a specified royalty rate, but in licensee acceptance of a set of legal conditions to which he is expected to conform; these can be very constricting, because they may include an exacting work programme. The greater sensitivity of the discretionary system to environmental and political change does lead to differing terms for differing licensing rounds, but grandfather rights are respected. There are several major problems with a discretionary system, and a major plus. Firstly, discretionary systems, because of respect for the licence "contract", become essentially negotiated systems. This creates a second problem, that of transparency. The formal discretionary system, as described publicly, may differ from the informal system, based on negotiated understandings about the meaning and extent of the licence commitments. The second "system" can be far different from the first. A third problem is one the "informal" system is designed to counteract - licence conditions bind the developer in a manner that bonus or royalty bidding systems do not. An approved working programme can include a need to drill wells at particular locations in specified locations to specific depths, a demand for delivery of information to the licensing authorities, or to finance onshore R&D programmes and the like.

A great advantage with the discretionary licensing system is that it is regarded as politically legitimate. Given that property rights in these countries are well defined and contract law observed, offshore licensees have been able to extract enormous amount of hydrocarbons on commercial terms with a minimum of political fuss and bother.

BC Offshore Team

This Team has been set up by GOBC to plan offshore development. They hope this year to conclude arrangements with First Nations and coastal communities, designate marine protected areas, and make an agreement in principle with Canada and First Nations on a fiscal/regulatory regime. In 2005, they look to the commencement of seismic study, and by 2007 hope to have detailed agreement with Canada and First Nations on the fiscal and regulatory regime, and commence an environmental assessment of exploratory activity. They look forward to drilling in 2010.

The draft Pacific Accord (from the 80s) may be the right model. It put aside constitutional issues, and suggested mirror legislation to regulate the industry, with most power in the hands of an independent Board, subject to ministerial veto on critical matters, and provision for a form of royalties for the province.

The Team supports a "single window" regulatory regime, and scientifically sound and environmentally responsible exploration and development. The agency should be responsive, accountable, and objective, and its rules should be transparent, predictable and effective, and licensing should be performance-based and non-prescriptive. First Nations may be represented on the agency, and it should be responsible for tenure, environmental assessment, royalty administration, and licensing and monitoring of exploration and production. The single -tenure system should offer appropriate criteria, terms, obligations, fees, and "fair" transitional arrangements for existing tenures. Environmental assessment should be timely, and based on the idea of co-existence with other ocean users. The royalty regime should offer fair compensation to the province, without impact on the federal transfer rules, and it should provide for benefits for local communities and encourage private investment. First Nations have rights, should share in decision-making, and should share benefits. The industry must contribute to the provincial economy and healthy coastal communities, who should be consulted how to achieve this. Development should co-exist with existing mare-based sectors of the economy, and encourage innovation

Other comment

Throughout the Workshop, those who work in the industry repeatedly asked Government to avoid waste, delay, and duplication in any regulatory process, and warned that it may be open to abuse by persons who have an agenda to prevent development of any kind in any way possible. It was often urged upon Government that it adopt "results-based" regulation principles, "single window" regulatory processes, and to employ what is seen as "best practices" in oil & gas regulation from other jurisdictions.


[1] By Hon R.P.Kerans, Conference Chair.

[2] Winona, Tofina, Georgia, and Charlotte.

[3] Hansard, pp 1507-1508, April 20, 1972

[4] BC Reg 10/82

[5] Oil in the Sea III: Inputs, Fates, and Effects (2002) Ocean Studies Board (OSB), Marine Board (MB), Transportation Research Board (TRB).

[6] Alberta has a very complex formula, where rates vary from 0% to 27% to encourage effort to exploit depleted reserves. The US Gulf coast has a royalty related to the depth of the sea, a reflection of substantial variation in drilling costs. Yet other countries slide royalties depending how long a field is in production, no doubt to adjust to the fact that extraction, production, or marketing costs may go down over time.

[7] Governments who wish to promote exploration have offered incentives of many kinds, including no signature bonuses, no high rentals during exploration, full consolidation of revenues form royalties and tax, accelerated depreciation, reduced revenues for unusually expensive forms of production, avoidance of carried interest, and import duty exemptions for exploration gear.

[8] Of the 59 petroleum-producing countries in the world, 38 employ a combination of income tax and royalties to create revenue, while only three rely solely on royalties. The UK and Ireland employ only the income tax, Australia and Norway rely on royalties plus profit sharing. Nine countries rely on all three sources of revenue. 40 also employ production bonuses, and of these 13 use this method exclusively. The others use it with some form or the other of other revenue sources. Of the 30 countries who rely on participation agreements none do so exclusively.

[9] A term that extends the right to produce until the filed is exhausted.

[10] These include modern well-equipped ports (Prince Rupert, Nanaimo, Port Alberni, Vancouver and Victoria), shipyards, specialized marine equipment suppliers, ocean technology companies, marine survey and naval architects, diving companies, crew and supply boat operators, helicopter and float plane operators, tug and barge operators, trucking companies, rail connections, marine engineering firms with extensive offshore expertise, shipbuilders, dry docks, marine construction companies, and experts in environmental assessment.

[11] The Accord Acts say that an applicant must offer:

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 used in any proposed work or activity referred to in the benefits plan

[12] These Acts include: Canada Shipping Act, Fisheries Act Navigable Water Protection Act, Canadian Environmental Assessment Act, Species At Risk Act, Oceans Act, Coastal Fisheries Protection Act, and Fisheries Development Act.

[13] Oceans Act, Marine Environmental Protection Federal - Oceans Act (MPAs), Canada National Marine Conservation Areas Act (MCAs) BC Waste Management Act (now Envt’l Management Act), BC Heritage Conservation Act BC Aquatic Species Protection Act, Migratory Birds Convention Act, 1994, Fisheries Act (Marine Mammal Regulations), and the Species at Risk Act.

[14] Offshore Minerals of British Columbia [1967] S.C.R. 792

[15] Re: The Continental Shelf Offshore Newfoundland [1984] 1 S.C.R. 86

[16] Attorney General of Canada v. Attorney General of British Columbia [1984] 1 S.C.R. 388 (Re: Strait of Georgia)

[17] Sometimes, aboriginal title is said to be limited to the right to hunt and fish.