OUR GREAT MINDS

    by Christopher Payne

    Fracking Regulation in Newfoundland & Labrador

    The proposed plan to access Green Point shale in western Newfoundland using hydraulic fracturing (commonly referred to as “fracking”) has raised the issue of how Newfoundland and Labrador will regulate fracking. Fracking has been a controversial subject in the province, and throughout North America, due to concerns that the injection of chemical treatments into reservoirs can contaminate groundwater or surface water and have other adverse environmental impacts.

    Fracking can provide a means to produce oil and gas from reservoirs that would otherwise be uneconomical to operate. If fracking is successful in Green Point, Newfoundland and Labrador would benefit through royalty payments and the creation of significant employment opportunities. The province will be faced with the difficult task of addressing environmental protection and public safety concerns in a manner that does not prevent or unnecessarily impede a project that can benefit it.

    Regulatory Issues

    Regulators are concerned with four main issues regarding fracking: (1) fluid disclosure, (2) waste disposal, (3) well integrity, and (4) water usage.

    Fluid Disclosure: The trend in fracking regulation in North America has been to require public disclosure of the components of fracturing fluids, including details regarding the Chemical Abstract Service (CAS) numbers and the concentration of each chemical. Disclosure requirements are intended to address stakeholder concerns regarding the potential safety and environmental impacts of such chemicals.

    Waste Disposal: Fracking can result in the surfacing of fracturing fluids and water that requires management and disposal. Regulations regarding waste disposal deal with issues such as waste reporting, logging, monitoring programs, and operating parameters.

    Well Integrity: Given the nature of the fracturing fluids used and the potential for adverse environmental effects, well integrity is critical to fracking operations. Well integrity requirements establish standards for casing, well testing and monitoring, and reporting.

    Water Usage: Fracking operations require significant volumes of water, which is generally withdrawn from surface and groundwater resources. To minimize environmental impacts, regulators require permits to be obtained prior to withdrawing such water, and impose metering and reporting requirements on operators.

    How Will NL Regulate Fracking?

    The oil and gas industry in Newfoundland and Labrador is regulated through the Canada-Newfoundland Atlantic Accord Implementation Act, regulations made there under and through other provincial legislation. While the province does not have legislation, regulations, or guidelines specifically focused on fracking, the existing regulatory regime addresses most of the major fracking-related concerns, such as well integrity, waste disposal, and water usage. The notable omission, and the primary focus of critics in the province, is the lack of a requirement for public disclosure of fracturing fluids.

    Newfoundland and Labrador’s main options with respect to fracking regulation are (1) to place a moratorium on it pending further environmental assessment; (2) to rely on existing legislation and regulations; or (3) to implement new or amend existing legislation, regulations, or guidelines.

    While some jurisdictions, including New York and Quebec, have suspended fracking operations due to environmental concerns, the more common approach of regulators in North America has been to allow fracking, provided that it is performed responsibly. The potential benefits of fracking, coupled with the precedent established in other jurisdictions, make it unlikely that Newfoundland and Labrador will place a moratorium on it.

    The most efficient way for the province to regulate fracking is to rely on its existing regulatory regime and evaluate whether amendments are required to ensure operators follow safe industry best practices. In doing this, the province will likely be influenced by the Guiding Principles for Hydraulic Fracturing established by the Canadian Association of Petroleum Producers in 2012, which provide recommended standards for disclosure of the components of fracking fluids, ensuring the integrity of wells and identifying, evaluating, and mitigating potential risks of transporting, storing, and disposing of fluids used in fracking.

    The lack of a requirement for public disclosure of fracturing fluids will continue to be a main subject of debate in Newfoundland and Labrador regarding this process. I expect that pressure from stakeholder groups and the trend for regulators in other jurisdictions to require operators to publicly disclose fracturing fluids will lead to the province imposing this obligation on operators.

    Chris is a lawyer in the St. John’s office of Cox & Palmer, practicing primarily in the areas of corporate and commercial, tax, and energy and natural resources law. He can be reached at cpayne@coxandpalmer.com.

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