Goodmans via Mondaq | 16 June 2015

Canada Enacts Mandatory Payment Disclosure Rules

The government of Canada recently enacted the Extractive Sector Transparency Measures Act, which imposes new mandatory reporting standards for payments made by Canadian extractive companies (mining, oil, and gas) to foreign and domestic governments, including aboriginal entities. The act solidifies Canada’s international commitment to deter and detect corruption and is intended to align the Canadian reporting requirements with those of the US and EU.

The act was introduced into the House of Commons in October 2014 and received royal assent on 16 December 2014. The Act came into force on 1 June 2015.

Overview of the Act
The Act applies to any entity, including controlling entities, engaged in the commercial development of oil, gas, or minerals. The commercial development of oil, gas, or minerals includes exploration, extraction, and the acquisition or holding of a permit, license, or lease or any other authorization to carry out the exploration or extraction of oil, gas, or minerals. The entity must also be listed on a stock exchange in Canada or have a place of business in Canada, do business in Canada, or have assets in Canada and, for at least one of its two most recent financial years, meet at least two of the following conditions:

  • Have at least CAD 20 million in assets
  • Have generated at least CAD 40 million in revenue
  • Employ an average of at least 250 employees

Payments to be Reported
Each applicable entity must report all payments to foreign and domestic governments, including aboriginal groups, made in relation to the commercial development of oil, gas, or minerals that are at least in the prescribed amount for a particular category of payment or, where no amount is prescribed, CAD 100,000.

Such payments include

  • Taxes other than consumption taxes and personal income taxes
  • Royalties
  • Fees, including rental fees, entry fees, and regulatory charges, as well as fees or other consideration for licenses, permits, or concessions
  • Production entitlements
  • Bonuses, including signature, discover, and production bonuses
  • Dividends other than dividends paid as ordinary shareholders
  • Infrastructure improvement payments
  • Any other prescribed category of payment

The Hill | 15 June 2015

Oil Lobby Confronts Image Problem in Arctic Drilling

The oil industry has identified public perception as one of the top issues it faces as it seeks to drill in the Arctic Ocean.

American Petroleum Institute (API) officials said that, throughout the world in places such as Canada and Russia, oil drillers have a century of experience operating in Arctic conditions and they are not worried about their ability to drill north of Alaska.

But convincing the public of those qualifications is proving a challenge.

“We need to secure public confidence,” Richard Ranger, a senior advisor at API who oversees Arctic drilling policy for the group, told reporters.

“There’s obviously a significant debate, and we recognize the fact that the idea that we can operate safely and have operated safely in the Arctic is as not broadly realized across the public as we think it should be,” he said.

As oil producers eye the largest untapped hydrocarbon resource in the world, where the federal government estimates up to 36 billion bbl of oil and 137 Tcf of natural gas sit, it is important the industry gets its ducks in a row.

Royal Dutch Shell is preparing to drill exploratory wells in northwest of Alaska in the Chukchi Sea this summer, though other companies such as ConocoPhillips and Statoil hold leases there as well and more lease sales are likely in the coming years.

The industry is trying to explain to the public that it is safe and that environmental damage is rare, but it is a difficult task, Ranger said.

“Our challenge as an industry and as people who work in the industry is, it’s too easy for us to default to technical arguments, and people’s eyes simply glaze over,” he said.

Corporate Social Responsibility Vital to Industry Operations

Corporate social responsibility (CSR) programs are now a critical part of oil and gas project development. As companies continue to work in more densely populated communities, they have gotten better at working with local authorities to protect the interests of the people their operations affect. However, plenty of work remains to be done to improve CSR efforts, a group of experts said.

Houston, TX - OTC 2015 - Panel speakers during the Corporate Social Responsibility: Technical Sessions at the Offshore Technology Conference here today, Thursday May 7, 2015. The OTC hosts the meeting at the NRG Park which has over 90,000 attendees from around the world to see the latest technology in the energy industry. Photo by © OTC/Nathan Weber 2015 Contact Info: Keywords: 15OTC_Technical Sessions

Panelists discuss corporate social responsibility at the Offshore Technology Conference on 7 May 2015.

In a panel discussion held at the Offshore Technology Conference in Houston, representatives from five national and multinational companies discussed the role CSR programs will play in the industry moving forward.

Mary-Grace Anderson said that, as the global demand for energy increases, CSR will become even more essential to industry operations. She is the vice president of safety, environment, and social performance at Shell.

Anderson said operators need to exploit a variety of energy sources to meet the rising global demand, and this need will force them to work more frequently in urban environments. Focusing on CSR will make it easier for operators to mitigate the possibility of unexpected issues happening within these environments, and early engagement with local communities will help build trust and allow operators to better share in the benefits of a project.

“In developing projects and in operating our facilities, we need to balance short- and long-term interests,” Anderson said. “Integrating societal and environmental considerations with our technical, operational, and commercial considerations into our project management processes and our business decisions from the earliest stages of our projects … is where we can make the most difference.”

Anderson spoke about the need for further collaboration between operating companies, local communities, and governments, focusing in particular on Shell’s global investment programs. Shell spent approximately USD 160 million on voluntary social investment in 2014, and a big part of its work was in the development of science, technology, engineering, and mathematical programs for students, parents, and educators. It also has spent more than USD 3 billion on goods and services from minority- and female-owned businesses in the last 3 years.

“Our intention is to … help each project become sustainable in the long term through collaborative efforts with communities and partners, and this can involve corporations, academia, and regulators. We find the larger the collaboration we can have, typically the better solutions we get,” Anderson said.

Natalie Stirling-Sanders, a global manager of local content, supplier diversity, and sustainable procurement at ExxonMobil, discussed her company’s plan for sharing the benefits of local content with the local community.

Stirling-Sanders said two of the key elements of developing a CSR program were understanding the needs of the local community and assessing those needs at an early stage. By finding out what the community wants early on in a project, the company can then customize its front-end definition to fit those wants. It is also crucial to maintain a regular flow of information with people in the community and maximize the existing resources.

A well-executed CSR program is not the same as a philanthropic effort, Stirling-Sanders said.

“In a lot of situations, the industry finds itself with communities that want more than philanthropy,” she said. “They want jobs, contacts, better infrastructure, and better education. When CSR is done well, there can be a symbiotic relationship between businesses and community.”

Ana Paula Grether presented the outline of Petrobras’ CSR policy. Grether, an advisor in social responsibility guidance and practices with the company, said it has launched social investment initiatives in select areas of operation that focus primarily on job protection, community relations, and environmental conservation.

Grether said that, through these initiatives, the company created more than 20,000 jobs in the last 8 years and conserved more than 935,000 hectares of wildlife habitat in Brazil, numbers that highlight its goal to improve the communities in which it works.

“For us, social responsibility is a mechanism for integrating management of Petrobras business and activities in its relations with our communities,” Grether said.

Geneviève Mouillerat, vice president of global projects and construction at Total, spoke mostly about the work her company has done to support local content on the CLOV project offshore Angola. Mouillerat, who directed the project, said CSR efforts centered on creating shared value for both the country and the company, in part by establishing employee pride in the work being produced.

Training programs are at the heart of Total’s efforts to build value. Mouillerat said the company trained Angolan employees for 2 years before hiring them to work on its floating production, storage, and offloading unit. The company also hired Angolans to work in its fabrication yards at an early stage in the project.

“In-country value is evolving to include the individuals working in the country,” Mouillerat said. “Personally, I’m proud to be part of this challenge and part of this project where we had so many Angolans trained and working on the facilities.”

Paulino Jeronimo, an executive administrator at Sonangol, said that, despite these improvements, there is still plenty of work needed to make local content in Angola more economically viable for the country.

“In terms of quality, we are almost there, but we’re still missing one important point, and that is the pricing. We want to continue working with operators to help become more competitive,” he said.

The panelists each talked about the importance of establishing a clear strategic emphasis during the late stages of a project that accounts for the needs of the local community. Stirling-Sanders said ExxonMobil had developed a system to address the social issues that arise in the shift to the production stage. However, she said communities must be prepared for the economic realities that come with post-project stage work, as the shift to production means the loss of construction jobs typically filled by local content.

“There is a lot of short-term work and lots of construction activity in [the project phase], and, especially for the community, it’s a huge adjustment when you move into production. I think one of the keys is helping all the stakeholders understand that that’s what it looks like from the very beginning and assure that the expectations are understood,” Stirling-Sanders said.

Stephen Whitfield is a Staff Writer for Oil and Gas Facilities.

Borden Ladner Gervais via Mondaq | 20 May 2015

Alberta Court of Appeal Decision a Reminder of the Importance of Municipal Approvals Before Oil and Gas Operations

The Alberta Court of Appeal recently issued a tough reminder that oil and gas service companies need municipal approvals to operate—and not just assumptions or assurances that those approvals will come.

In Site Energy Services Ltd. v Wood Buffalo (Regional Municipality), 2015 ABCA 106, the applicant, Site Energy, leased four lots in the Hamlet Commercial District for temporary offices, parking, washrooms, security, and fuel storage to support its work on a pipeline project. It applied to the respondent, Wood Buffalo, for development permits. Wood Buffalo refused the application because it categorized the use as an “Industrial Support Facility”, which was neither a permitted nor discretionary use in the district under the land use bylaw.

Rather than appeal the refusal, Site Energy continued operating because it anticipated reaching “an understanding” with Wood Buffalo. It had, on other occasions, commenced operations without permits in anticipation of subsequent approval.

Wood Buffalo issued a stop order, requiring Site Energy to remove its equipment and buildings. Site Energy appealed the stop order to the Subdivision and Development Appeal Board, arguing that the use could and should be recategorized as a “business support facility,” a discretionary use in the district. The board upheld the stop order and appears to have reasoned that it could not issue development permits for the alternate use because only the stop orders (and not the earlier refusal) had been appealed.

The Daily Signal | 13 May 2015

The Valley of Missed Opportunity: One Town’s Fight for Economic Revival

Marian’s Pizza Shack sits 10 miles north of the Pennsylvania line, an invisible boundary that separates this small business from economic opportunity.

After 23 years in business, owner Marian Szarejko has decided to sell her pizza shack.

“There are no jobs here,” Szarejko said. “Business has gone down so much that I am dipping into my savings just to keep this afloat.”

Szarejko’s decision echoes a common theme that has plagued the southern tier of upstate New York for years—a lack of economic development.

“If I owned a place in Pennsylvania, I wouldn’t be thinking of closing. I would be thinking about expanding,” Szarejko said. “The difference is they did fracking.”

The issue of high-volume hydraulic fracturing, commonly referred to as fracking, has emerged as a contentious national debate. Communities and states are deciding whether to embrace or ban the new form of natural gas extraction.

But nowhere is the issue as real as it is for upstate New Yorkers who see the prosperity of neighboring communities in Pennsylvania.

New York and Pennsylvania are two of five states that sit above the nation’s largest natural gas field, the Marcellus Shale.

New York bans fracking. Pennsylvania allows it.

Business for Social Responsibility | 7 April 2015

Column: Don’t Forget the Ethics

Those of us in the corporate responsibility profession often assume that definitions of “good” and “bad” are easily defined. The vocation is full of binary assumptions and pseudoscientific rankings: Reach the top of this index, adhere to that code, apply this new standard. This is the stuff upon which the profession is made.

There are many good reasons why this is the case. Environmental limits are scientifically defined. Human rights are clearly set out in declarations and covenants on which near-universal international consensus exists. Development that lifts people up from poverty is undeniably a good thing.

But I feel uneasy by this sense of certainty. Something is niggling inside of me—is our thinking too lazy?

There are many times when “good” and “bad” are not easily defined. Consider each of these scenarios, where wise and responsible people could reach very different conclusions on what the “right” course of action should be.

  • Plenty of countries have poor human rights records and inadequate governance. Is it “right” for companies to stay clean by not entering those markets, or is it “right” for companies to invest in and engage with them to improve human rights protections?
  • The entertainment industry has come under criticism for the portrayal of torture and human rights abuses in film, TV, and games. Are films that portray torture promoting torture or exposing it?
  • Governments have a duty to enforce laws that protect the rights of their citizens. But how do we balance surveillance activities without violating the right to privacy? When is it right for a company to collaborate with law-enforcement agencies?
  • The printing of 3D objects has the potential to offer huge social and environmental benefits. But what should companies do to make sure that the software and hardware making 3D printing available isn’t misused for nefarious applications?
  • And my favorite one: Is it “right” to design ever more sophisticated weapons systems that are more likely to hit their target?

While we can always refer to universal standards and international codes, they often leave significant room for maneuver in how to achieve them. Indeed, different schools of thought in ethics will lead us to different courses of action: A utilitarian focused on the greatest happiness of the greatest number would reach a different conclusion than someone taking a rights-based approach. For some, intent matters more than outcomes, and for others, outcomes matter more than intent.


The Associated Press | 18 February 2015

Report Says Dutch Authorities Put Gas Revenues Ahead of Citizen Safety

An independent report into natural gas drilling that has triggered a rash of small earthquakes in the northern Netherlands said on 18 February that energy companies and the government put production ahead of people’s safety in their decision making.

The Dutch Safety Board has issued a report of an investigation into the manner in which the safety of the inhabitants of the province of Groningen was taken into account when decisions on extraction of natural gas in Groningen in past years were made.

The Dutch Safety Board reached the conclusion in a report prompted by dozens of small but damaging earthquakes caused by gas drilling that have rocked the northern province of Groningen for years, causing structural damage to thousands of buildings.

Companies and government bodies involved in drilling, including Shell, ExxonMobil, and the Ministry for Economic Affairs, formed a “closed system” in which “security concerns in practice played an inferior role,” the safety board said.

It added that they should now repair their relationship with locals in part by “acknowledging that, until 2013, they did not take sufficient care with the security of citizens of Groningen.”

Blakes Lawyers via Mondaq

Procedures Introduced To Administer and Coordinate First Nation Consultation

On 4 February 2015, the Aboriginal Consultation Office (ACO) and the Alberta Energy Regulator (AER) released the Joint Operating Procedures for First Nations Consultation on Energy Resource Activities. The procedures were released in accordance with Energy Ministerial Order 105/2014 and Environment and Sustainable Resource Development Ministerial Order 53/2014.

The procedures expand upon the Government of Alberta’s Policy on Consultation with First Nations on Land and Natural Resource Management released on June 3, 2013, and the Government of Alberta’s Guidelines on Consultation with First Nations on Land and Natural Resource Management released on 28 July 2014.

The purpose of the procedures is to help facilitate First Nation consultation related to energy projects in Alberta. The procedures introduce new processes to administer and coordinate the operations of the ACO and the AER on matters related to First Nation consultation. The procedures also encourage the ACO and AER staff to  engage one another informally, as needed, to coordinate the processing of individual energy resource development files or applications.

4 February 2015

A Workshop Reflection—What Will Your Tight-Rock Project Legacy Be?

Social responsibility is the newest evolving element within the health, safety, security, environment, and social responsibility sector of the upstream petroleum industry. In December, the Society of Petroleum Engineers held a workshop to discuss social responsibility issues related to project development. The workshop, titled Beyond Conventional Oil and Gas: New Social Opportunities and Risks, was held 2–4 December in Banff, Alberta, Canada. Workshop presenters Robert Sandilos with Chevron and Caleb Wall with Environmental Resources Management have compiled lessons from the workshop. Both, along with other social responsibility presenters, will be on hand at the 2015 SPE E&P Health, Safety, Security, and Environmental Conference—Americas on 16–18 March in Denver, where a special poster session will showcase the lessons from this and other social responsibility workshops.

This article is a brief exploration of a few key threats and opportunities, the sum of which will likely define the life-cycle legacy of most tight-rock developments, as discussed during the Banff workshop.

  • Evaluating social risks and impacts
  • Management frameworks for environmental and social risks
  • Water use in unconventional development
  • Industry impacts on community health
  • Industry relationships with indigenous peoples
  • Stakeholder engagement

Evaluating Social Risks and Impacts
In many prospective tight-rock basins globally, very few if any wells have been drilled. Stakeholders on both sides of the drilling divide start at the same place, but industry opponents have the advantage of a clean slate—no oil and gas activity (although there well may be pollution problems and environmental impacts already). A significant opportunity for industry is to set the full-field development bar high for all operators through government regulation and voluntary actions. A significant challenge for industry, in being transparent about operations, is to clearly communicate timing, specific activities, and mitigations from leasing through to plugging and abandonment.

Management Frameworks for Environmental and Social Risks
Numerous tools and management systems have been developed by operators and consultants to attempt to integrate social performance into now-traditional environmental impact assessments. A significant opportunity is to describe and plan better to manage societalrisks throughout the life cycle, most of which diminish significantly as drilling and completion moves on to long-term production. Potential economic and community investment benefits, of course, are the key long-term opportunities. The leading challenge over the life cycle of most projects is maintaining environmental protection, and the most fundamental is casing, cementing, and wellbore integrity.

Water Use in Unconventional Development
Reducing fresh and, in some regions, brackish water use is a primary objective of all tight-rock operators. Fortunately, water use declines substantially as a hydraulic-fracturing-dependent drilling program is completed. A life-cycle challenge is that this long-term view is often not very important to local residents or policy makers during water-stress or drought conditions such as those have persisted in parts of Texas and California since the shale boom really began in 2008. Two of the most important social responsibilities over the life of any upstream project surround water use are

  • The commitment to maximize recycling and reducing or eliminating use of fresh water and increasingly usable brines
  • The need to keep produced water in the pipe for safe disposal unless it is feasible to provide acceptable quality water for beneficial use

Industry Impacts on Community Health
This area is probably the fastest emerging set of local public concerns with oil and gas operations, and the most difficult to address for the long term with current data and messages. Changes in population, workers, and incomes stress health assets and relationships. Completion-phase hydraulic-fracturing-chemical use and production-phase air emissions continue to raise public questions notwithstanding industry and government actions or assurances. As indicated during several presentations, there is a current need for additional science-based health data and research, which should address long-term operations as well as drilling and completion activity.

Land Acquisition and Involuntary Resettlement
Access and resettlement are almost always looked at as early-development-phase issues, but there are important long-term elements as well. In North America, actual resettlement is rare, but long-term land-use impacts from energy development on population and wildlife habits are common. Public safety, education, transportation infrastructure, and ecosystems are all affected by any wide-spread industrial development, even if long-term facilities are of modest size. Early communication, consultation, and life-cycle impact mitigation are equally important in addressing land-use impacts and in maintaining community consent for responsible oil and gas development.

Industry Relationships with Indigenous Peoples
Relationships with local residents, regardless of their heritage, are both the oldest and the newest societal responsibility factors. Whether projects are located around subsistence or suburban communities, maintaining a positive local relationship is arguably the single most important external factor in life-cycle project success, beyond wellhead prices. As in the case of land use and impacts, there are opportunities for life-cycle local partnerships, including public safety, education, infrastructure, and ecosystems. These can enhance relationships and mitigate long-term ignorance, dependency, or animosity.

Stakeholder Engagement
This subject was fitting as the final one in the Banff workshop because engagement with local communities and the full range of stakeholders is critical and must be contemporaneous with any new project, from preleasing to plugging and abandonment. The needs, messages, and issues will vary, and any industrial project of scale will have local impacts. It may be not be possible for to leave a clean slate, but it is possible for tight-rock projects to leave a positive social, economic, and environmental legacy behind.

Read more about the 2015 SPE E&P Health, Safety, Security, and Environmental Conference—Americas here.

Torys via Mondaq | 28 January 2015

Column: Relationship Building With Aboriginal Communities Will Come Into Focus for Resource Players

The Supreme Court of Canada has released two recent seminal decisions that will significantly impact resource development projects where Aboriginal interests might be affected. As mergers and acquisitions activity in the infrastructure, oil and gas, and mining sectors unfolds in 2015, we expect buyers of and investors in Canadian targets involved in resource development to pay increasing attention to whether appropriate consultation and accommodation have occurred with local Aboriginal communities, particularly those with existing or potential title claims.

While the practical effect of these decisions will principally be driven by the circumstances of each resource development project, we anticipate due diligence reviews in the transaction process to become more focused on ascertaining potential risks and liabilities associated with possible infringement on Aboriginal title.

Read the full column here.

Denver Business Journal | 15 January 2015

Colorado Makes It Easier To File Complaints About Oil and Gas Activities

The Colorado Oil and Gas Conservation Commission (COGCC), the state agency that oversees the multibilllion-dollar industry, launched a “new, more streamlined process” for filing and handling complaints about oil and gas operations.

COGCC’s complaint website makes it easier to file complaints and also makes it easier to track the agency’s process for addressing, closing, and communicating about the complaints, the agency said.

The process has a new, dedicated webpage for filing complaints.