Saskatchewan updates law on oil and gas conservation

By Patrick Maguire, Marie Buchinski and Chuck Davies, Bennett Jones LLP
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Alberta is well known for its oil sands, with some of the most significant oil reserves in the world. However, those interested in Canadian resource plays should also pay close attention to Alberta’s neighbour to the east, Saskatchewan, and recent legislative amendments intended to assist companies investing in Saskatchewan’s energy and resource industries and provide the best support services and business and regulatory systems available.

Patrick_Maguire Partner Bennett_Jones
Patrick_Maguire
Partner
Bennett_Jones

Changes to the Oil and Gas Conservation Act (OGCA), which governs the regulation of resource development operations in Saskatchewan, came into effect on 1 April, along with the Oil and Gas Conservation Regulations, 2012, and the Petroleum Registry and Electronic Documents Regulations.

One purpose of the amendments is to harmonize the OGCA with Alberta’s Oil and Gas Conservation Act, and to support the Saskatchewan government’s Process Renewal and Infrastructure Management Enhancements (PRIME) policy initiative, which is to be completed by 2013. PRIME supports a single-window, web-based information management system to streamline and modernize business and regulatory systems and provide 24-hour access to petroleum-related data.

Some key changes

A single electronic registry system: The amendments to the OGCA facilitate Saskatchewan’s participation in the Petroleum Registry of Alberta, which gives stakeholders centralized access to comprehensive and reliable petroleum-related information. Certain reports and documents must now be submitted to the registry electronically and the Saskatchewan Ministry of Energy and Resources is able to electronically receive and disseminate industry forms, reports and other information.

Changes to the application and transfer processes: It is now more apparent that companies cannot level or prepare a well site prior to issuance of a licence. Proponents are still permitted to survey or conduct operations to suspend or abandon a well or facility site without a licence. While waste processing facilities must be licensed, a transitional section provides for retrospective licences.

Licences for wells and facilities must be held in the name of the owner or working interest participant. Where such facilities are sold or transferred, the minister is authorized to shut a well or facility if a vendor has not applied for a transfer of licence within 14 days after signing the agreement for sale. This requirement applies to agreements signed prior to 1 April.

The minister is now also authorized to direct the transfer of a licence if the transfer is in the public interest (including back to the legal and responsible owner of the property), where the minister believes the proposed transferee has the right or obligation to receive it, “whether or not the person consents to the transfer”.

Oversight for non-oil-and-gas substances: The amendments clarify the government’s oversight of non-oil-and-gas substances, including the storage and sequestration of carbon dioxide and other greenhouse gases in subsurface caverns. The amendments also expand the regulation-making power under the OGCA to include matters such as noise; the completion, chemical treating and fracturing of wells; and sales and marketing contracts related to oil, gas, water, products or other substances.

Increased penalties and broader enforcement: Obligations are imposed on operators of wells or facilities, in addition to the obligations on the owners of those facilities. Operationally, the legislation broadens record keeping requirements and changes venting and testing requirements, and setback requirements for wells. The minister’s enforcement powers now contemplate making a public declaration regarding a licensee or working interest participant that has not complied with the OGCA or associated orders, or that has outstanding debt to the province.

Marie Buchinski Partner Bennett Jones
Marie Buchinski
Partner
Bennett Jones

The declaration can name directors, officers, agents, or other persons who were directly or indirectly in control of the licensee or working interest participant at the time of the failure, regardless of whether the failure arose before or after 1 April. For persons named in a declaration, the minister may refuse to consider licence or transfer applications; require the submission of deposits before granting licences or transfers; and suspend a licensee’s operations.

In addition to administrative penalties, the maximum fine for offences is increased to C$500,000 (US$500,000) for each day or part of a day during which an offence continues, or a prison term of up to one year, or both. The convicting court may also issue orders requiring repair or mitigation of environmental damage; and require compensation for corrective actions. The OGCA now includes provisions for vicarious liability, and liability for directors, officers and agents of a corporation in certain circumstances.

The above changes have operational, practical and legal implications for those involved with resource development in Saskatchewan. It is imperative that resource companies understand the changes to their legal obligations, and the implications of non-compliance.

Patrick Maguire and Marie Buchinski are partners and Chuck Davies is an associate at Bennett Jones, a law firm with offices in Calgary, Toronto, Edmonton, Ottawa, Dubai, Abu Dhabi, Doha and a representative office in Beijing.

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