Lions Gate Articles

OIL AND GAS REGULATORY COMPLIANCE OUTLOOK

6/12/2018

The regulatory and compliance picture for the oil and gas industry is currently in a state of flux with the migration of responsibilities from the National Energy Board to the Canadian Energy Regulator,and Bill C-69 mired in protracted legislative process.  With debate having resumed on the motion for the second reading of Canadian Energy Regulator Bill C-69 in the Senate on the 27th November 2018, we are still some distance from the bill being passed into law.  The Canadian Energy Regulator Bill seeks to enact the Impact Assessment Act and the Canadian Energy Regulator Act, to amend the Navigation Protection Act and to make consequential amendments to other Acts.   The merits of Bill C-69 are not the focus of this paper.

This article seeks to demystify the status quo and bring some clarity for the oil and gas sector and those who fall under the regulatory umbrella. In our many conversations with oil and gas stakeholders, insurance risk consultants, politicians and academics, there is some confusion over where things are headed, who should be doing what?  There is uncertainty in many areas, apart for the fact that the clock will keep on ticking, and delay will be compounded by more delay.  The outlook is foggy and projections and predictions are on hold pending due process.

Oil and gas companies appear reluctant to jump to adherence to the requirements of CAN/CSA Z246.1 until they have clarity over whether the current regulatory framework will be retained under the new Regulator.  They are playing the waiting game even though most will know credible regulation is coming.  By credible regulation, I infer that the inspection framework will be tightened up, which should send a signal to the industry.  In reading subject matter documents and articles extensively, we at Lions Gate are confident that regardless of the transition and change minutiae, the core requirements for safety and security will be retained and yes, regulated.  It is not a question of if, but more a question of when.  Currently 246.1 is required in Alberta and recommended in British Columbia.

The National Energy BoardOnshore Pipeline Regulations state that when a company designs, constructs, operates or abandons a pipeline, or contracts for the provision of those services, the company shall ensure that the pipeline is designed, constructed, operated or abandoned in accordance with the applicable provisions of the Onshore Pipeline Regulations and CSA Z276, if the pipeline transports liquefied natural gas; and CSA Z246.1 for all pipelines.  Further, when a company designs, constructs, operates or abandons a pipeline, it shall do so in a manner that ensures the safety and security of the public and the company’s employees; the safety and security of the pipeline; and the protection of property and the environment.

As far as we are concerned at Lions Gate there are two safe bets:

  • First, companies will still be required to develop, implement and maintain a security management program that anticipates, prevents, manages and mitigates conditions that could adversely affect people, property or the environment.
  • Second,companies will still be required to develop, implement and maintain an emergency management program that anticipates, prevents, manages and mitigates conditions during an emergency that could adversely affect property, the environment or the safety of workers or the public.

We can see no logical reason why Z276 and Z246.1 or AER Directive 071 would be subject to amendment, so our message to the industry istoadopt a pre-emptive stance. The sooner you achieve a strong safety and security posture, the sooner you see a return on your investment.  By taking action now, you will also avoid joining the ‘Black Friday’ style rush which will certainly result when ‘required’ actually means ‘required’.  Once the inspection regime organizes under the Canadian Energy Regulator, whether you are a level one or level two regulated company, you will want to ensure you meet the necessary compliance requirements.

Lions Gate also foresees the advantage of examining obligations through the lens of occupier liability, recognizing that by advancing to compliance sooner rather than later, companies will reduce exposure to litigation, and protection of reputation and brand will be optimized.

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