Policy recommendations for reforming Canada's approach to licensing and regulating offshore arctic oil and gas


Canada’s system of regulating and licensing offshore oil and gas development requires major reforms to create an Arctic-ready future to protect this region and its people from environmental harm, according to a report released today by The Pew Charitable Trusts.

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The 27-page report, Becoming Arctic Ready, was sent to Prime Minister Harper today and also was submitted to the National Energy Board (NEB), an independent agency that is conducting a public review of offshore oil drilling regulations in this region. The Pew report identifies significant gaps throughout the federal government’s process of Arctic offshore licensing and regulation and provides an 11-step program of policy reforms.

“We are asking Prime Minister Harper to suspend all new offshore oil leasing in the Arctic Ocean until these key reforms are implemented,” said Trevor Taylor, policy director for The Pew Charitable Trusts' Oceans North Canada.

“At the same time, we are asking the National Energy Board not to approve the first deepwater oil drilling in Canada’s Arctic waters. A time-out is needed to consult with Inuit and ensure that world-class standards for oil spill cleanup and other safety measures are put in place before such activities proceed.”

The report’s analysis comes at a critical time because Canada is on the verge of approving its first deepwater oil and gas development in the Arctic. The drilling of exploration wells is the riskiest part of such activities because catastrophic blowouts such as the 2010 Deepwater Horizon Gulf of Mexico disaster are most likely to occur during this phase.

Yet Canada has not yet implemented key recommendations made in 1990 by a federal-provincial-Inuvialuit review board that examined shallow-water oil drilling in the Beaufort Sea. Major gaps identified at that time included the inability to adequately contain and clean up a major oil spill in the Arctic’s icy, remote waters, inadequate assessment of potential liability and a lack of consultation with Inuit about proposed oil development.

The NEB is holding hearings in Inuvik, N.W. T. next week as part of its Public Review of Arctic Safety and Environmental Offshore Drilling Requirements. The review, scheduled to conclude in December, was set up in part to consider proposals from industry to weaken the same-season relief well rule – a requirement that an oil spill or blowout must be stopped before the ocean freezes up again. That is Canada’s strongest protection against multiyear blowouts. In the wake of the Gulf of Mexico oil spill, the NEB broadened the review to include other Arctic offshore drilling requirements.

"Requiring that operators have the capability to kill a blowout and contain a spill in the same season is essential to safeguard the Arctic from devastating environmental damage,” said Louie Porta, science and policy analyst for The Pew Charitable Trusts' Oceans North Canada and co-author of the report.

“We urge the NEB to include this requirement as part of its plan for improving oil spill cleanup and response in Arctic waters."

However, the NEB oversees only part of the process. Indian and Northern Affairs Canada (INAC) handles licensing. Following the Gulf of Mexico oil spill, Inuit leaders asked INAC to stop all new licensing in order to reassess what reforms were needed to proceed responsibly with hydrocarbon development. Instead, INAC has issued three offshore Arctic oil licences in 2010 and 2011, including one that allows the deepest offshore drilling ever permitted in the Beaufort Sea. Pew’s report underscores the importance of Inuit’s request to the federal government and adds an additional voice to the call for a time out on new leasing. 

Some of the Pew report’s key recommendations for reform include:

  • Engage in meaningful consultation with Inuit groups at key stages of the process, from participation in early environmental assessments to decisions about oil-spill preparedness and royalty sharing.
  • Mandate a strategic environmental assessment of a proposed licensing area in the Arctic Ocean before calling for industry nominations of potential exploration sites.
  • Require that operators meet minimum Arctic-based standards for drilling performance and environmental protection before bids on offshore licences are accepted and ensure that companies have the financial resources to meet worst-case oil-spill liability requirements.
  • Ensure that Arctic-tested standards for offshore oil-spill preparedness and response capacity are in place before authorizing exploration and maintain the intent of the same-season relief well policy to protect the Arctic and its people from multiyear blowouts.
  • Add a mechanism for government review and cancellation (with compensation) of existing tenure rights on long-term leases in justifiable circumstances such as dramatic environmental changes, industrial accidents or national security issues.