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Anticipating and Avoiding Environmental Protection Disputes during Decommissioning of Oil and Gas Projects Offshore Canada

Daniel Watt 1

Introduction

Decommissioning an offshore oil and gas project involves the risk of adverse effects on the marine environment and those who rely on marine resources. Concerns from stakeholders such as environmental groups, Indigenous peoples, and commercial fisheries are thus inevitable. Operators are therefore well-advised to anticipate and seek to minimize stakeholder concerns over environmental issues.

Canada’s regulations on decommissioning, however, are relatively untested. Only one Canadian offshore project has been fully decommissioned: the Cohasset-Panuke Project (Cohasset) ceased production in 1999 and was fully decommissioned and abandoned in 2006.2 Since then, the Atlantic regulatory regime3 has been amended by the Energy Safety and Security Act,4 while more recently, the Canadian Environmental Assessment Act, 2012 (CEAA 2012)5 was replaced with the Impact Assessment Act (IAA).6 Indigenous law has also evolved considerably. Aside from significant spills, therefore, anticipating what environmental disputes may arise in decommissioning involves a degree of speculation.

The law, Cohasset experience, and current climate of project approvals suggest that the likeliest source of environmental disputes during decommissioning will be interest groups, Indigenous peoples, and other stakeholders opposing regulatory approval. For context, this paper outlines decommissioning methods and processes. Potential areas of dispute are then examined in light of the regulatory framework, the Cohasset experience, and other examples. The paper concludes with some suggestions for how to avoid or minimize disputes.

For ease of reference, the Accord Act is referred to throughout.

The Decommissioning Process

The optimal decommissioning method will depend on several factors, including environmental considerations. Three primary methods are as follows:

1. Complete removal—often asserted as the most environmentally sound strategy,7 this requires deconstructing the installation and removing the pieces to onshore sites for disposal, reuse, or recycling. The work can be dangerous and intensive. Further, complete removal can, paradoxically, disrupt marine biotic communities.
2. Partial removal—involves removing certain components to shore for disposal, reuse, or recycling, while leaving others in place or relocating them to another marine location.
3. Secondary uses—platforms are re-purposed in place or at another location, for uses such as: renewable energy, port and harbour infrastructure, search and rescue bases, vessel navigation bases, meteorological stations, and aquaculture.

The work required will depend on the method and other considerations. The typical process will involve planning, cessation of production, well plugging and abandonment, removal of hazardous products and hydrocarbons, platform preparation (or “hook down”), topsides removal, substructure removal, subsea infrastructure removal, site remediation, topsides and substructure reuse and recycling, and monitoring for pollution of any components or material left in situ.8

The method and process proposed will invariably engage environmental considerations and the risk of opposition.

The Regulatory Framework

The regulation of decommissioning in Canada involves both international and domestic law.

International Obligations

Canada is party to treaties that address offshore decommissioning. The genesis of the international framework was the 1958 Geneva Convention on the Continental Shelf, which confirmed coastal states’ rights to construct installations on the continental shelf and to explore and exploit its natural resources.9 It also required that abandoned installations be “entirely removed.” 10

The 1982 United Nations Convention on the Law of the Sea (UNCLOS) eclipsed the Geneva Convention, giving coastal states the exclusive right to construct, authorize, or regulate offshore installations within territorial seas and exclusive economic zones, or on the continental shelf.11 UNCLOS also permits partial removal under certain conditions.12

The 1972 Convention on the Prevention of Marine Pollution by Dumping of Wastes and Other Matters13 and the 1996 Protocol 14 are also relevant. The 1996 Protocol allows for disposal at sea of platforms or structures where the coastal state approves the dumping by issuing a special permit, the conditions and criteria for which are set out in the protocol.15

Key provisions of these instruments have been enacted in Canadian legislation.16

Accord Act and the Canada-Nova Scotia Offshore Petroleum Board

The primary regulatory legislation in the Nova Scotia offshore comprises the Accord Act and its provincial mirror legislation, which establish the Canada-Nova Scotia Offshore Petroleum Board (CNSOPB).17 CNSOPB is responsible for administering the legislation and managing offshore resources.18 Its responsibilities include environmental protection and licensing and offshore exploration and development, among other duties. The Accord Act provisions and other legislation applicable to approval processes are discussed below.

Disputes over Decommissioning Approvals

The proponent or operator must obtain approvals and authorizations for decommissioning during project development and before decommissioning operations commence. Environmental assessments (EAs) or impact assessments (IAs) and public input are required at both stages. Depending on the project, the public input may involve full hearings. It is at the specific authorization stage that the operator is most likely to encounter opposition. Such opposition may result in applications for injunctive or other relief. Even absent litigation, approvals may be delayed, denied, or issued with undesirable conditions. To minimize these risks, the approval process must be deftly managed.

Approval and Authorization Process

Two tiers of approval for decommissioning are required under the Accord Act:

• First, a “development plan” containing the basic terms of the proposed project must be submitted and approved.19
• Second, authorizations to carry out specific works or activities in the context of the project, called “work authorizations,” must be applied for and issued.20

Approval stages are lightning rods for opposition. Decisions made by the operator at each stage can foment immediate environmental disputes or lay the groundwork for future opposition.

Development Plan

The development plan is the basic document governing reservoir development and is necessary for a production licence.21 It must include provisions for decommissioning.22 CNSOPB by policy also requires a “decommissioning and abandonment program” to be in the Development Plan.23

Development Plans, and their decommissioning programs, must satisfy, among regulatory components, an environmental impact statement (EIS), and a public review.24 Both components engage public input into the proposed decommissioning.

Public Reviews

CNSOPB may “conduct a public review in relation to the exercise of any of its powers or the performance of any of its duties where the Board is of the opinion that it is in the public interest to do so.” 25 Its policy is to require a public review for the approval of major development projects.26 Depending on the scale of the proposed project and the degree of public interest it engages, CNSOPB may either request written public submissions or appoint a commission responsible for conducting a public hearing.

Environmental Impact Statements, Impact Assessments, and Environmental Assessments

The development plan will also trigger either an IA under the IAA or an internal EA by the CNSOPB. The following applicable works trigger an IA under the IAA:27

34 The drilling, testing and abandonment, in an area set out in one or more exploration licences issued in accordance with the Canada Petroleum Resources Act, the Canada–Newfoundland and Labrador Atlantic Accord Implementation Act or the Canada-Nova Scotia Offshore Petroleum Resources Accord Implementation Act, of offshore exploratory wells in the first drilling program, as defined in subsection 1(1) of the Canada Oil and Gas Drilling and Production Regulations, SOR/2009-315.

35 The construction, installation and operation of a new offshore floating or fixed platform, vessel or artificial island used for the production of oil or gas.

36 The decommissioning and abandonment of an existing offshore floating or fixed platform, vessel or artificial island used for the production of oil or gas that is proposed to be disposed of or abandoned offshore or converted on site to another role.

40 The construction, operation, decommissioning and abandonment of a new offshore oil and gas pipeline, other than a flowline as defined in subsection 2(1) of the Canada Oil and Gas Installations Regulations.

Accordingly, development projects and certain required works, such as well abandonments or decommissioning activities, will trigger an IA under the new IAA.

It is clear that the IAA will not restore responsibility to conduct federal IAs to the CNSOPB.28 However, it is not yet entirely clear whether IAs of designated offshore projects will be conducted by the new Impact Assessment Agency or whether the minister of environment and climate change must refer such projects to the more onerous review panel process.29

Regardless of who conducts IAs for the decommissioning of offshore projects, there will certainly be requirements for public consultation and input at both the planning and assessment phases. In the planning phase (following which the agency must determine whether a designated project will require an IA), the agency “must ensure that the public is provided with an opportunity to participate meaningfully . . . including by inviting the public to provide comments. . . .” 30 If the agency conducts a resulting IA, the agency must again ensure an opportunity for meaningful public participation in the IA31 and must invite the public to comment on the draft IA report.32 If the IA is referred to a review panel, the panel must “hold hearings in a manner that offers the public an opportunity to participate meaningfully” in the IA.33 The hearings will generally be public.34

Projects that do not trigger the IAA will still be subject to a so-called “Accord Act” EA conducted by CNSOPB. The Guidelines specify that EAs for works that do not engage IAA will mirror the process prescribed by the 1992 Canadian Environmental Assessment Act (CEAA 1992).35 The comprehensive study report required of proponents must consider, among other things, public comments.36

Authorizations for Decommissioning Work

Authorization must also be obtained for the work the decommissioning plan entails.37 An EA is required.38 As noted above, an IA under the IAA will be triggered by certain activities. Further, depending on the level of public interest in the project, CNSOPB may exercise public review powers.

The EA/IA process and public review discussed above are equally applicable to work authorizations. Work authorizations thus also involve public input and a risk of opposition. The risk of opposition to the proposed operations exists at both approval stages. However, opposition to decommissioning is more likely to occur at the work authorization stage, when decommissioning stands alone under the regulatory spotlight. Conversely, if all goes as planned, development plans are approved decades before decommissioning commences. Opposition during project development is less likely to focus on the decommissioning plan.

The development plan remains relevant to avoiding environmental disputes. However, an approved development plan cannot be amended without CNSOPB approval.39 If an amendment is sought during the decommissioning phase, there may be greater pressure on CNSOPB to conduct a public hearing or to seek more public input. This alone can cause delay and foment opposition. As discussed below, the Cohasset experience bears this out.

Moreover, the public perception of the plan’s legitimacy may be undermined, particularly if the proposed method is partial removal or is less costly for the operator. The story will invariably be framed as the operator seeking to cut corners at the expense of the environment—even if the evidence suggests partial removal is optimal from an environmental perspective.

Sources of Disputes

Probable sources of dispute are suggested by the potential effects that will be assessed in the EA/IA process. For instance, the following non-exhaustive litany of factors must be considered under the IAA: changes to the environment or to health, social, or economic conditions and the positive and negative consequences of these changes that are likely to be caused by the carrying out of the designated project (including “cumulative effects”); any impact on Indigenous groups and any adverse impact on Indigenous or Treaty rights; the purpose of and need for the project; alternative means of carrying out the project that are technically and economically feasible, including through the use of best available technologies, and the effects of those means; alternatives to the project that are technically and economically feasible and directly related to the project; Indigenous knowledge provided with respect to the project; the extent to which the designated project contributes to sustainability; the extent to which the project’s effects hinder or contribute to the government of Canada’s ability to meet its environmental obligations and its commitments in respect of climate change; considerations related to Indigenous cultures; community knowledge provided with respect to the designated project; public comments; any assessment of the effects of the project conducted by or on behalf of an Indigenous governing body; and, the intersection of sex and gender with other identity factors.40 This list provides fertile ground for potential opposition to any activity associated with an offshore petroleum project.

Aside from the obvious likelihood of challenges from environmental groups, the Cohasset experience suggests that decommissioning operations may also conflict with fish and fish habitat and, depending on the area, the current use of resources by Indigenous peoples.

Environmental Groups

Environmental groups are an obvious source of challenge to decommissioning. The European reaction to Shell’s decommissioning of the Brent Spar, an oil storage facility, was extreme, but illustrative. The Brent Spar was redundant. In 1991, Shell commissioned independent studies and, after three years of consultations, endorsed deep water disposal in the remote North Atlantic. The method was deemed superior in the areas of safety, environmental impact, and cost. International, regional, and UK regulations then permitted the proposed dumping.

Despite its legality, the 1995 UK approval of Shell’s proposal triggered an immediate, dramatic, and occasionally violent public backlash. Greenpeace activists occupied the Brent Spar as it was being towed to the disposal site. Protestors boycotted, vandalized, and shot at Shell service stations in Germany. Germany’s chancellor and other heads of state argued against Shell’s plan at the June 1995 G7 summit in Halifax.

Shell eventually abandoned the operation. It re-initiated consultation and engaged governments, consultants, scientists, and public input. Ten years and £60,000,000 later, Shell cut up the Brent Spar. Large parts of it were used to construct a ferry terminal in Stavanger, Norway.

The Brent Spar decommissioning illustrates the politically volatile character of offshore oil and gas operations. It also underlines the importance of operators looking beyond mere compliance with existing regulations when navigating the decommissioning process—and the potentially costly effects of failing to do so.41 Shell had a regulatory green light, but an insufficient degree of stakeholder consensus regarding its plan ultimately doomed that plan.

Indigenous Peoples

The Crown has a constitutional duty to consult with, and, where appropriate, to accommodate, Indigenous peoples in relation to action that may adversely impact claimed or established Indigenous or Treaty rights.42 Decommissioning activities may adversely affect Indigenous or Treaty rights, such as those relating to fishing. In such cases, the Crown will be subject to a duty to consult and, where necessary, to accommodate applicable Indigenous groups before giving regulatory approval for the activities.

The consultative process adds a layer of complexity to project approvals and increases the risk of dispute and litigation. Damages, injunctive relief, or orders to complete consultation prior to the activity taking place are some of the remedies available for breach of the duty to consult.43

Cohasset is again instructive. In 1990, nine years before decommissioning, the proponent’s development plan stated:

When the Cohasset and Panuke fields have been depleted, the production facilities will be removed. Wells will be abandoned in accordance with all regulations, and well jackets removed to a level below the seabed. Residual hydrocarbons in the flowlines will be flushed out to the Cohasset facility, and the flowlines recovered for possible future use . . .44

The proponent thus committed to complete removal. This reflected the requirements of the Geneva Convention, rather than UNCLOS and London Convention provisions, which permitted partial removal.

In 2003, the successor operator, EnCana, proposed to disconnect the subsea flow lines, cables, and manifold ends and leave them on the seabed. It applied to amend the development plan. This triggered an EA under CEAA 1992 and a forty-five-day consultation involving written public comment. During this process, Indigenous groups expressed concern that the EA and consultation process failed to address impacts on Indigenous rights to access fisheries resources. The Native Council of Nova Scotia wrote that “the EA was devoid of information as to our . . . issues, concerns, interests and needs, and our current use of resources and future uses.”45 At the time, Mi’kmaq peoples participated in the commercial fishery as an incident of Treaty rights following R v. Marshall.46 The council complained that there was a failure to discharge the duty to consult.

Although the plan ultimately received regulatory approval, the council’s concerns exposed the project to possible delay, claims for damages, or injunctive relief. Since 2004, jurisprudence has only strengthened the duty to consult. Today, it seems likelier that litigation, rather than public complaint, would result.

An inquiry from an Indigenous association about EnCana’s liability post-decommissioning47 also resulted in CNSOPB requiring EnCana to submit an adequate plan addressing post-abandonment ongoing liability as a condition of its approval.48

The Crown cannot delegate its duty to project proponents, but it may require proponents to consult with Indigenous groups as a precondition to approval. Whether the Crown or operators bear the consultative work, the Cohasset experience confirms the value of incorporating Indigenous consultation into the approvals process.

Commercial Fisheries

The third potential source of discord is commercial fisheries. Indeed, commercial fishing interests articulated strong reservations about Encana’s Cohasset proposal, citing potential harm to biomass (quahog), hazards to gear, and obstruction of fisheries.49

The EA was in favour of the proposal, noting the partial removal option would be less disruptive for the environment than complete removal,50 and the board ultimately approved the plan. However, CNSOPB’s approval was subject to the conditions that EnCana undertake mitigation and follow-up measures, remove the topsides of the subsea installation, and submit an adequate plan addressing post-abandonment ongoing liability.51

Conclusion

Risk of opposition to decommissioning over environmental issues exists at the approvals required during project development and during decommissioning operations. Even if litigation does not erupt, the costs of project delays—particularly if the installation is no longer earning its keep—are reason enough to try to anticipate, address, and minimize other stakeholders’ concerns over environmental issues.

The examples examined above suggest that operators should consider the following when planning for and seeking approvals of decommissioning operations:

• EnCana’s proposal for partial removal may have been opposed by commercial fisheries and Indigenous groups even though that plan was contained in the originally approved development plan. However, the amendment itself, and the public consultation it triggered, might have been avoided by more flexible drafting of the decommissioning program in the development plan. Moreover, had the possibility of partial removal been included in the original development plan, the proposal would perhaps have been subjected to less scrutiny.
• Operators should consult with, anticipate, and address the interests of other commercial and non-commercial stakeholders in proposed decommissioning operations. The Brent Spar incident suggests that this should include efforts to gauge and manage public perception of the proposed operations.
• Where decommissioning operations have the potential to impact Indigenous or Treaty rights, direct consultation with Indigenous groups by the operator may be an effective method of achieving consensus and Indigenous support for the selected operations. Operators might also foster the support of affected Indigenous groups with impact benefits agreements or provisions in statutorily required benefits plans.
• Where proposed operations may impact fishery interests, anticipating and addressing those impacts through the EA/IA process might help achieve consensus in selecting operations. Monitoring environmental changes, as well as changes in fishing technology, will enhance the extent to which the operations respond to the fishery’s interests.
• The Cohasset experience suggests that where partial removal is contemplated, anticipating and establishing terms of continuing liability and financial responsibility early on may help achieve consensus with relevant stakeholders.

Notes

1  Partner, McInnes Cooper LLP, Halifax. This paper draws on McInnes Cooper’s Offshore Oil and Gas Decommissioning Best Practices (2016), which, of course, the author highly commends.

2  Since the writing of this paper, two additional gas projects offshore Nova Scotia have been decommissioned: Encana’s Deep Panuke project and ExxonMobil’s Sable Offshore Energy Project. The decommissioning of these projects will offer additional insights in the future.

3  Canada–Nova Scotia Offshore Petroleum Resources Accord Implementation Act, SC 1988, c 28 [the Accord Act]; Canada-Nova Scotia Offshore Petroleum Resources Accord Implementation (Nova Scotia) Act, SNS 1987, c 3; Canada–Newfoundland and Labrador Atlantic Accord Implementation Act, SC 1987, c 3; Canada–Newfoundland and Labrador Atlantic Accord Implementation Newfoundland and Labrador Act, RSNL 1990, c C-2.

4  Energy Safety and Security Act SC 2015, c 4 [ESSA].

5  Canadian Environmental Assessment Act, 2012, SC 2012, c 19, s 52 [CEAA 2012].

6  Impact Assessment Act, SC 2019, c 28, s 1 [IAA].

7  A Fowler et al, “A Multi-Criteria Decision Approach to Decommissioning of Offshore Oil and Gas Infrastructure” (2014) 87 Ocean and Coastal Management at 20.

8  “Decommissioning in the North Sea: Review of Decommissioning Capacity” (2014) at 1–99, online (pdf): Decom North SeaArup <decomnorthsea.com/uploads/pdfs/projects/Decommissioning-in-the-North-Sea-Demand-vs-Capacity_low-res.pdf> [perma.cc/7ERW-LPKD]; J Groot, “Engineering Aspects of Decommissioning” in M Hammerson, ed, Oil and Gas Decommissioning: Law, Policy and Comparative Practice (London: Globe Law and Business, 2013).

9  1958 Geneva Convention on the Continental Shelf, 29 April 1958, 450 UNTS 11 art 5 (entered into force 10 June 1964) [Geneva Convention].

10  Ibid, art 5(5).

11  United Nations Convention on Laws of the Sea, 10 December 1982, 1833 UNTS 3 arts 2, 60, 80 (entered into force 16 November 1994) [UNCLOS].

12  Ibid, arts 1(5), 60(3), 194, 210(5) and 216.

13  Convention on the Prevention of Marine Pollution by Dumping of Wastes and other Matters, 29 December 1972, 1046 UNTS 120 (entered into force 30 August 1975) [London Convention].

14  1996 Protocol to the Convention on the Prevention of Marine Pollution by Dumping of Wastes and Other Matter, 7 November 1997, 36 ILM 1, art 1(4.1) (entered into force 3 March 2006) [1996 Protocol].

15  Ibid, art 4, Annex I, Annex II, para 17.

16  The Oceans Act, SC 1996, c 31 (incorporates the provisions of UNCLOS that confirm Canada’s sovereignty and sovereign rights in its respective maritime zones). See also the Canadian Environmental Protection Act, 1999, SC 1999, c 33 (CEPA) at Division 3; the Regulations Respecting Applications for Permits for Disposal at Sea, SOR/2001-275, which has been replaced with the Disposal at Sea Application Permit Regulations, SOR/2014/177 (incorporates the provisions of the London Convention and 1996 Protocol).

17  Accord Act, supra note 3. Decommissioning may also require compliance with a number of other, primarily federal, statutes.

18  Ibid, ss 8, 18.

19  Ibid, s 143.

20  Ibid, ss 140, 142.

21  Ibid, s 143(1).

22  Nova Scotia Offshore Petroleum Installations Regulations, SOR/95-191, s 42 [Installation Regulations].

23  CNSOPB, Guidelines on Plans and Authorizations Required for Development Projects (16 August 1995) at para 5.8 [Guidelines].

24  Ibid at para 2.

25  Accord Act, supra note 3 at s 44(1).

26  Ibid, s 44(1); Guidelines, supra note 23 at para 2.4.

27  Physical Activities Regulations, SOR/2019-285, ss 34–36, 40.

28  Pursuant to s 87 of ESSA (adding ss 142.02 to the Accord Act), effective 26 February 2016, CNSOPB was given authority to hold public hearings, a precondition to qualify as a “responsible authority” under CEAA 2012 for designated projects, which would enable CNSOPB to conduct EAs under that legislation: CEAA 2012, supra note 5, s 15(1). However, draft regulations identifying the projects for which CNSOPB would be responsible under CEAA 2012 were never enacted, and with CEAA 2012’s repeal, the attempt at restoring CNSOPB responsibility for federal EAs/IAs appears stillborn.

29  Under the IAA, the default position is that IAs of most designated projects are conducted by the Impact Assessment Agency unless the minister of environment and climate change exercises her discretion to refer IAs of such projects to the more onerous review panel process if the minister considers that process to be in the public interest. See IAA, supra note 6, ss 36(1). However, the minister must refer projects under the jurisdiction of the other federal “life-cycle” regulators—the Canada Energy Regulator (CER) (formerly National Energy Board) and Canadian Nuclear Safety Commission (CNSC)—to review panels: IAA, ibid, ss 43. At present, projects under CNSOPB or Canada–Newfoundland & Labrador Offshore Petroleum Board (CNLOPB) jurisdiction are not subject to the same mandatory panel review. But Bill C-69, which enacted the IAA, includes amendments to the IAA make projects under CNSOPB/CNLOPB jurisdiction subject to the mandatory review panel and other unique requirements currently applied to the CER and CNSC: see Bill C-69, An Act 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, ss 2–8.1.

30  IAA, supra note 6 at s 11.

31  Ibid, s 27.

32  Ibid, s 28(1).

33  Ibid, s 51(c).

34  Ibid, s 53(3).

35  Canadian Environmental Assessment Act, SC 1992, c 37 [CEAA 1992]; Guidelines, supra note 23 at para 2.3.

36  Guidelines, supra note 23 at para 2.4.

37  CEAA 1992, supra note 35, ss 140, 142.

38  Ibid, s 142(4)(b).

39  Accord Act, supra note 3 at s 143(5).

40  IAA, supra note 6 at s 22(1).

41  “Brent Spar Dossier” (2008), online (pdf): Shell UK <www.shell.co.uk/sustainability/decommissioning/brent-spar-dossier/_jcr_content/par/textimage.stream/1426853000847/32a2d94fa77c57684b3cad7d06bf6c7b65473faa/brent-spar-dossier.pdf> [perma.cc/5NY5-2F2K] at 4–128.

42  Haida Nation v British Columbia (Minister of Forests), 2004 SCC 73 [Haida].

43  Ibid at paras 13–14; Rio Tinto Alcan Inc v Carrier Sekani Tribal Council, 2010 SCC 43 at para 37.

44  LASMO, “Cohasset Panuke Development Plan” (7 March 1990) at 5.8.2.

45  Letter from the Native Council of Nova Scotia to CNSOPB (18 November 2004).

46  R v Marshall [1999] 3 SCR 456.

47  Letter to the CNSOPB by the Netukuliemkewe’l Commission (21 July 2004).

48  CNSOPB, “Application to Amend the Cohasset Development Plan: Decision Report” at para 7.8 [Decision Report].

49  Letter to the CNSOPB by Clearwater Seafoods (22 June 2004); Letter to the CNSOPB by Seafood Producers Association of Nova Scotia (23 June 2004).

50  Jacques Whitford Environmental Limited, “CEAA Screening Level Environmental Assessment Cohasset Panuke Phase II Decommissioning,” prepared for EnCana Corporation in April 2004.

51  Decision Report, supra note 48 at para 7.8.