Osler, Hoskin, and Harcourt via Mondaq | 11 September 2015

Quebec Adopts New Transparency Measures in Mining, Oil and Gas Industries

On 11 June 2015, the Quebec National Assembly introduced Bill 55—an act respecting transparency measures in the mining, oil and gas industries (Bill 55), in view of imposing transparency measures in the mining, oil and gas industries. These transparency measures, the bill states, are meant to discourage and detect corruption, as well as foster the social acceptability of natural resource exploration and development projects.

Under Bill 55, the concerned entities will have to file an annual statement to the Autorité des marchés financiers declaring all payments of more than CAD 100,000 made to a government, a government entity, and a native nation. The statement would be made public by the concerned entities for a period of 5 years. This includes taxes, royalties, fees, production entitlements, dividends, bonuses, contributions for infrastructure construction or any other type of payment determined by regulation. Payments made to native nations, however, would benefit from a 2-year exemption and would only need to be reported from June 2017.

Rigzone | 24 August 2015

Spend More To Save More? CSR Programs Can Save Operators Millions

It is likely one of the last things on the minds of petroleum companies these days as they work to stay afloat amid falling oil prices.

However, investing socially in the communities where they operate practically guarantees profits in the long run and is a relatively low-cost measure to take during an economic downturn, said Jim Sisco, president and founder of ENODO Global, a consulting firm specializing in risk analysis and population-centric engagement.

Social investments can include improving education, infrastructure, health care, and job training for locals.

“As companies attempt to identify ways to save money, such as reducing operating costs and eliminating staff, they will have to identify new solutions or creative ways to save,” Sisco said.

One of those ways, known as corporate social responsibility (CSR), is to help meet the basic needs of communities—primarily in emerging countries—which, in turn, can substantially lower security costs.

“Companies that are able to design and develop good community engagement programs are more profitable because they face less negative impacts from strikes, attacks, and sabotage, which could impact them by millions of dollars,” Sisco said. “That’s the bottom line.”


Orrick | 14 August 2015

Column: Secret Recipes—Fracturing Fluid Fracas

As today’s method of hydraulic fracturing combined with horizontal drilling in shale formations rose to prominence in recent years, so too did the public’s concern over chemicals contained within fracturing fluid. Even before the existence of state mandatory disclosure laws, like the one enacted in Wyoming in 2010, there was a fair amount of general information publicly available about the composition of hydraulic fracturing fluid. However, much information remains confidential as trade secrets.

But what exactly is hydraulic fracturing fluid anyway? The hydraulic fracturing fluid used today consists of three types of ingredients: a “base fluid” (usually water), small solid particles (often sand) called “proppants,” and a cocktail of various chemical additives that help to make a fracture more successful and more productive. Typically, the base fluid and the proppants together comprise approximately 99% of the fracturing fluid. So, it is really only this last 1% of fracturing fluid composition (i.e., the cocktail of chemical additives) that has been the subject of recent controversy.

Over the past decade, public support has grown substantially for regulations that would require companies to disclose their fracturing fluid ingredients. As hydraulic fracturing became more common and widespread, some people began to worry that fracturing fluids could find their way into groundwater. In response, many people began to ask questions about what was contained within fracturing fluid, and, although there was already significant information available to the public, many companies balked at the idea of revealing the specific contents of fluid recipes that they had spent considerable sums of money to develop.

It was only a matter of time before state legislatures responded to the public concern for disclosure.

Fuel Fix | 29 July 2015

Two Injection Wells Shut Down After Oklahoma Quakes

Oil and gas operators shut down two wastewater injection wells in northern Oklahoma on 28 July and reduced operations at a third after several earthquakes centered in the town of Crescent rattled the state

Stephens Production and Devon Energy each voluntarily closed one well, and Stephens reduced operations at another well by 50%, Oklahoma Corporation Commissioner Matt Skinner said.

“In this case, we didn’t have to issue a directive. We simply called them up and said what we were looking at,” Skinner said. “In terms of fast cooperation from the industry, there’s always exceptions to the rule, but broadly speaking we’ve had very fine cooperation.”

Crescent is a town of about 1,400 people approximately 35 miles north of Oklahoma City. Earthquakes in the area recorded by the US Geological Survey include a magnitude 4.5 quake at 1:12 p.m. Monday that is the strongest reported in the state so far this year. In all, more than 15 temblors of magnitude 2.0 or stronger were reported on 27 July by the Oklahoma Geological Survey. An additional nine quakes ranging from 2.2 to 4.1 were recorded through the early evening of 29 July.

There were no immediate reports of injuries or damage in the area, although people reported feeling the 4.5 quake as far as 650 miles away in Indiana and Minnesota, according to the USGS.

San Antonio Express-News | 9 July 2015

Farmers Would Benefit From Crude Oil Exports, too, Oil Industry Leaders Tell House Agriculture Panel

The House Agriculture Committee convened a hearing on 8 July to study how crude exports could affect rural America, but, instead of gleaning insights from farmers or livestock producers, the panel turned to oil industry leaders.

Over 2 hours, those witnesses—including Continental Resources Chief Executive Officer Harold Hamm and Texas Railroad Commission Chairman David Porter—argued that oil exports could drive more domestic crude production, with benefits rippling nationwide.

“Crude oil exports would spur new American energy production, foster economic growth, and provide direct benefits to rural America and our nation as a whole,” said Porter, who heads the Texas Railroad Commission that oversees energy in the state.

Hamm stressed that recent surges in US oil and gas development have yielded big benefits for landowners and mineral rights holders, including farmers who are using royalties and rental payments from drilling to sustain their operations.

“Royalty payments to more than 10 million landowners across America have contributed greatly to the support of the family farms and ranches and the rural way of life,” Hamm said.

EHS Journal | 6 July 2015

BP Agrees To Settle Deepwater Horizon Claims for USD 18.7 Billion

BP announced on 2 July 2015 that its United States Upstream subsidiary, BP Exploration and Production (BPXP), has executed agreements with the US federal government and five US Gulf Coast states to resolve claims made by federal, state, and more than 400 local government entities. In the agreement, BP has committed to paying up to USD 18.7 billion spread over 18 years.

Settlement Terms
Terms of the proposed agreement are as follows:

  • Clean Water Act (CWA) civil penalty—USD 5.5 billion over 15 years.
  • Natural Resource Damages (NRD)—USD 7.1 billion to the United States and the five Gulf states over 15 years. This is in addition to the USD 1 billion already committed for early restoration. BPXP will also set aside an additional USD 232 million to cover any further natural resource damages that are unknown at the time of the agreement.
  • Economic and Other Claims—USD 4.9 billion will be paid over 18 years to settle economic and other claims made by the five Gulf Coast states (Alabama, Florida, Louisiana, Mississippi, and Texas).
  • Local Governments—Up to USD 1 billion will be paid to resolve claims made by more than 400 local government entities.

The NRD and CWA payments are scheduled to start 12 months after the agreement becomes final. Total payments for NRD, CWA, and state claims will be made at a rate of approximately USD 1.1 billion a year for the majority of the payment period.

The New York Times | 1 July 2015

Oklahoma Court Rules Homeowners Can Sue Oil Companies Over Quakes

The Oklahoma Supreme Court ruled on 30 June that homeowners who have sustained injuries or property damage from rampant earthquakes they say are caused by oil and gas operations can sue for damages in state trial courts, rejecting efforts by the industry to block such lawsuits from being decided by juries and judges.

The case has been closely watched both by the energy industry and by hydraulic fracturing opponents across the United States, and the 7-to-0 ruling opens the door for homeowners in a state racked by earthquakes to pursue oil and gas companies for temblor-related damage.

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: todd@corporateeventimages.com 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.