FREDERICTON – A discussion paper containing 116 recommendations for the environmental management of New Brunswick's oil and natural gas industry was released today. The recommendations include proposals to augment the province's existing regulatory framework.
“The proposals contained in this discussion paper would make our
existing regulations even stronger and would ensure we are prepared if
the industry expands in our province,” said Natural Resources Minister
Bruce Northrup. “...we look forward to receiving constructive
feedback on these recommendations from New Brunswickers.”
The discussion paper, entitled Responsible Environmental Management of Oil and Gas Activities in New Brunswick,
is organized according to a set of 12 principles announced by the
provincial government late last year. The principles address a full
range of oil and gas activities from exploration to well abandonment.
A second discussion paper was also released related to the sharing of
financial benefits associated with the potential development of the
natural gas industry.
Northrup also announced plans for legislative changes affecting the
province's royalty regime and penalties for violations of the Oil and Natural Gas Act.
The measures in the plan for Responsible Environmental Management of Oil and Gas Activities in New Brunswick focus on:
● protecting water and the environment; and
● protecting communities and landowners.
The provincial government will receive comments on the discussion papers
until July 18. You can share your views online at: http://www2.gnb.ca/content/gnb/en/corporate/promo/natural_gas_from_shale/consultation.html
Details of a related citizen engagement tour planned for
June will be announced in the coming weeks. Up to 10 public meetings are expected to be arranged around the province for community feedback.The locations will be publicized on the province's natural gas website at:
Following are highlights of the discussion paper. Its full content can be viewed online at: http://www2.gnb.ca/content/gnb/en/corporate/promo/natural_gas_from_shale/consultation.html
Protecting and managing water
Proposed measures include:
● mandatory pre-seismic well water testing, which was first announced June 23, 2011, and post-seismic water well testing;
● mandatory pre-drilling well water testing, also announced June 23, 2011, and post-drilling well water testing;
● appropriate set-backs between oil and gas facilities and water supplies, wetlands, and watercourses;
● establishing surface water and groundwater monitoring requirements;
● establishing requirements for monitoring of petroleum wells for leaks, corrosion or deterioration;
● establishment of a hierarchy of preferred water sources for
hydraulic fracturing. For example, use of recycled waste water must be
● mandatory assessments of proposed water sources that consider the needs of other water users, including ecological needs;
● water use reporting by the operators of oil and gas activities; and
● strategic water use planning.
Oil and gas well integrity and waste management
Proposed measures include:
● enhanced casing and cementing standards for oil and gas wells;
● assessment of geological containment prior to hydraulic fracturing;
● pressure testing of equipment prior to hydraulic fracturing;
● mandatory waste management plans that will require the chemical
analysis of all wastes and approval of disposal locations before wastes
leave the site;
● requiring the use of "closed loop" (no open pits) systems for
handling drill fluid, and the use of closed containers for receiving
● requiring petroleum operators to follow waste management guidelines
that address such issues as flowback water and naturally occurring
● requiring petroleum operators to implement measures to prevent
spills and leaks, and ensure notification and response protocols are in
place should spills and leaks occur;
● imposing chemical management requirements for fracture fluids and other chemicals; and
● setting standards for storage tanks and containers, including mandatory leak detection systems and secondary containment.
In addition to the above measures, the discussion document contains
recommendations for addressing a variety of issues, including air
emissions, noise and visual impact, and emergency planning. The document
re-affirms the provincial government's commitment to having companies
publicly disclose the contents of fluids used in hydraulic fracturing
and enhancing public access to information about oil and gas activities.
Revenue sharing discussion paper
Northrup also released for public comment the discussion paper on
sharing financial benefits associated with the development of the
natural gas industry.
“On June 23, 2011, we announced our intention to develop a program to
share the royalties from natural gas activities with landowners who host
a producing well on their property as well as with nearby communities,”
said Northrup. “Under our proposed program, a property owner would
receive one half of one per cent of the royalty on natural gas collected
by the province. As well, a total of two per cent of the royalty
collected by the province will be shared with municipalities and local
service districts within a 25-kilometre radius of the centre of a
producing well pad. This funding will be available to support
Comments on the proposed revenue sharing program should be submitted by
July 18. The citizen engagement tour planned for June will also receive
comments on the revenue-sharing discussion paper.
The provincial government would maintain its current royalty rate for
natural gas at 10 per cent, as a minimum, but would introduce an
economic profit royalty of 40 per cent of the profit from a resource
“The current 10 per cent royalty ensures a minimum payment to the
province but, on its own, does not capture the true value of the
resource as prices increase,” said Northrup. “Adding an economic profit
component ensures that the province would maximize revenue as prices
increase or as projects mature.”
The basic royalty component of 10 per cent for natural gas is based on
the actual selling price or fair market value at the time and place of
production, less deductions. Deductions include processing costs to make
the gas transportable and the costs of transporting the gas to the
consumer markets. The deductions are unchanged.
For the economic profit royalty component, the allowable costs will
include the gas field processing costs, transportation costs, capital
costs, an overhead allowance and an accepted investment allowance.
Northrup said he will be introducing legislative changes to increase
penalties that can be levied against a company that violates the Oil and Natural Gas Act.
According to existing legislation, fines of between $640 and $10,400 are
applicable for most violations. The maximum penalty under the proposed
changes would be $1 million.
As well, the Department of Natural Resources would be empowered to
impose the penalties. At present, a charge must be laid in provincial
court and penalties imposed by a judge.
Northrup said the legislative changes pertaining to the imposition of
penalties and changes to the royalty regime will be made in the fall
session of the legislature.