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Regulations for oil field development and operations in Canada

Abstract

Canada can be described as the 5th largest producer of energy in the world, and it produces about 6% of all the global energy suppliers. It is important to understand that in Canada, there is the existence of Canada’s federal system of government. Canada can be described as a federation of around ten provinces and three territories.

However, this is in exception to Quebec, which is a common law jurisdiction. The Constitution of Canada divides the legislative authority of the federal Parliament and the provincial legislatures. This paper looks at Regulations for oil field development and operations in Canada.

Key words: Federal Crown, Provincial Crown, Concession-based, Direct-based

Introduction

The Federal Parliament has powers over matters of interprovincial, international scope and national. The provincial legislatures often have a jurisdiction over matters that are of a local nature. It is critical to note that participants in the oil and industry fields have to be subjected to both federal as well as the provincial regulators because these different levels of government overlap each others in authority when it comes to natural resource development. Canada is blessed with oil and natural gas and in fact currently it has the world’s third largest proven reserves of crude oil.

Discussion

The ownership of oil and gas in Canada is split between the Federal Crown and the provincial crown. It is important to understand that different interest groups are often administered by the federal crown. In most cases, for example, in the Case of Alberta, which is the largest producing area in Canada, the provincial Crown is the owner of around 81% of the mineral rights. However, it is important to understand that different interest groups in Canada often have varying claims as well as interests when it comes to land and natural resources. In fact, these interests are constitutionally and statutorily protected.

There are several acts in Canada that are in respect to oil and Gas regulations. Firstly, there is the drilling and production regulation which is an amalgamation as well the complete modernization of the Drilling, as well as Production and Conservation Regulations. These acts are administered by three main regulators. They include the National Energy Board, the Canada-Nova Scotia Offshore Petroleum Board and the Canada-Newfoundland and Labrador Offshore Petroleum Board. The regulations are often kept in place in order to ensure that the activities that are related to the drilling and production of oil and gas are being carried out in a safe manner that protects the environment and ensures that the different resources are not wasted in any way.

There are several federal statutes and regulations that often govern oil and gas exploration. The first is the National Energy Board Act. It is this act that establishes the National Energy Board that is supposed to deal with energy-related issues under the authority of the Crown (Federal). This includes the administration of oil and gas

These interests include conservation, production, construction, the operation of pipelines, tariffs on the pipelines and the inter-provincial trade of oil and gas. Further, it is also the National Energy Board that is responsible for the exportation and the importation of oil and gas into Canada. Another Key statute used in the regulation of oil and gas in Canada is the Canadian Environmental Assessment Act.

This Act sets out rules which are intended to ensure that indeed projects are substantially reviewed in order to avoid detrimental environmental effects as well as encourage sustainable growth and development. The third important Federal statute is the Canadian Environmental Protection Act. It is this act that can be said to be the main instrument for the provision of protection of the Canadian environment, as well as human health. It is of the essence to comprehend that this includes the prevention as well as the complete management of risks which are posed by hazardous substances.

Read about extraction of oil from cloves

The oil and gas regime that exists in Canada can be described as concession based as compared to direct participation. This, therefore, means that the crown does not directly participate in oil and gas projects. In most cases, the owner of the mineral rights, which can be the Crown or at times the owners of freehold estates, often grant a company a lease which gives them the right to explore and drill minerals for a certain term in exchange for a certain amount of rental fees, consideration and royalty interests in the different recovered minerals.

When it comes to permitting rights, there are the freehold leases and the provincial crown leases and licenses. The freehold leases are often set for a certain term, and it often grants the lessee, the right to explore and drill mineral substances. This is often done by the lessee in exchange for rental fees, royalty interests in the minerals that are recovered and a certain amount of consideration. It is important to note that the lease is often automatically extended in an indefinite manner if there is continuous production that comes from the lands; however, if there is no production at all, the lease often expires at the end of the initial primary term.

The provincial Crown leases and licenses share the same concept, however, it is important to note that under the provincial Crown leases and licenses, there is a specific area that is targeted for exploration and there are two types of extensions. There is the indefinite extension of the lease that often comes because of continued production from the fields, and then there is the definite extension where a period is given to the lessee.

In most provinces, it is often five years. It is important to understand that the current regime that exists in Canada can be described as being generic because the same royalty rates and rules apply equally to all the oil sands projects. This, therefore, means that the different projects are often assessed according to their net revenue principle, and this means that a lower royalty will automatically apply to gross revenues, and a high rate obviously applies to net revenue.

This move is done in a bid to encourage both innovation and development and ensure that indeed the Crown does not impose substantial taxes on any operator until the project becomes profitable. There are often two main considerations that are used in order to determine whether a project is taxed at a higher or lower royalty rate. The first is whether the project is profitable and the second is the current price of oil. In many provinces, before a project can be said to be profitable or has reached its payout, a royalty of 1% to 9% is often paid to the gross revenue.
However, after a project has become profitable, a net revenue is often taxed at a net royalty rate of around 25% to around 40%

There is also the existence of income taxes. The first income tax is the corporate income tax rates. The Federal and Provincial crowns impose tax on the taxable income of the corporations. The federal corporate tax rate is around 15%; the provincial corporate tax, on the other hand, can vary between 5 to around 16%. This is entirely dependent on the area where the oil field is located.
The Canada’s competition act contains civil and criminal provisions that are aimed at the prohibition of a variety of anti-competitive conduct.

The Canada’s competition act establishes a pre-transaction notification and transaction review regime. This act is important as it gives broad powers to the Commissioner of Competition to investigate fully whether a certain transaction is likely to prevent or even lessen competition substantially. If a transaction is known to raise these concerns, then the Commissioner may apply to the Competition Tribunal in order to get a remedial order. This competition act is important as it ensures that indeed there is fair competition and that companies do not try and create monopolies with the main aim of manipulating the market.

In regards to foreign ownership limits, the Canadian government encourages foreign investments that contribute to employment opportunities, as well as economic growth in Canada. However, it is critical to note that foreign investments that are known to exceed certain monetary thresholds (the current is C$330 million) must be reviewed under the federal Investment Canada Act. The foreign investments that are reviewed are often approved if they are seen to meet a ‘net benefit to Canada’ test.

Conclusion

In conclusion, the regulations for oil field development and operations in Canada are controlled by both the Federal Crown and the Provincial Crown. Each of the Crown’s have an interest in oil and gas and consequently they come with their rules and regulations. The regulations range from taxation, ownership, development, foreign investment, and control of competition. These regulations ensure that the resources are not wasted and that the benefit from the natural resources trickles down to the people.

References

Canada. (2008). Government of Canada modernizes Indian Oil and Gas Act. Ottawa, Ont.: Indian and Northern Affairs Canada.
Canada. (1963). Office consolidation of the Canada oil and gas land regulations and oil and gas land orders. Ottawa: Queen's Printer.
Canada Oil and Gas Lands Administration. (1984). Drilling for oil and gas on Canada lands: Guidelines and procedures. Vanier, Qué.: Canada Oil and Gas Lands Administration.
Ron Deyholos, D. C. (2013). Canada. European Lawyers reference series , 1-16.




 

Canada/ US Relations- The Closest Allies or Bad Neighbors?


The United States of America and Canada are two nations that have been extremely close for decades on end. The fact that these two great nations are neighbors further improves the state of affairs between the two nations in a way no other two countries in the world can match (Beisner, 2003). Just like two siblings, they may occasionally run into problems and conflicts with each other. However, the most impressive thing is the fact that these two nations are able to resolve these conflicts and surge forward in the pursuit of both individual and mutual happiness.

Trade

Trade is a factor that has brought Canada and the United States of America close over the years. The fact that both nations share and exhibit an entrepreneurial spirit is vital in the pursuit of capitalism in these two states. Capitalism has played a great role in the development of the individual economies of both these nations (Thompson, Randall, 2002). It has enabled Canadian and American folk alike, to exercise their entrepreneurial muscle in attempts to better themselves and their lives.

his has over the years resulted in the development of close Canadian-American ties that have been viably exploited in the world of business. When two individuals live as neighbors, it is inevitable that they will interact, share ideas and consult on matters; in other words, build a relationship. This relationship between Canada and the USA has resulted in the development of a working business relationship that sees the Canadian and American citizens enjoy the best of both worlds. Some of the main commodities that are traded between the USA and Canada include lumber, wheat, television rights and magazines. These are some of the commodities that are responsible for generation of business worth about 1 billion US dollars every day (Beisner, 2003).

The numbers of trucks that cross from either side of the Canadian-American border are a clear indication of the strong ties that exist between these two states. Canada chiefly supplies lumber and wheat to the USA while the USA supplies Canada with electronic and print media in forms of magazines, journals and television among other commodities. The trade between Canada and the USA has witnessed a meteoric rise over the years with the period after the First World War being the greatest. The end of this war identified the USA as a major trade partner of Canada, unlike before where Britain had that privilege. The harmonization of tariffs between USA and Canada has also contributed immensely to the growth of the Canadian-American relationship. The established of a free trade area and an undefended border has been a key player in the development of Canadian-American trade. The ability of entrepreneurs to move freely between Canada and the USA in search of markets or products has largely shaped the economic landscape of these two countries. For this reason, these two nations continue to be close allies.

Migration

Migration is defined as the movement of an individual from one place to another due to one reason or the other. The migration of Canadians into America and vice versa is very much alive today. The number of American citizens who have moved to Canadian states to live and work is significantly high. The number of Canadians who have moved to America in pursuit of the American dream cannot also be ignored (Beisner, 2003). The migration of individuals in this manner seeks to highlight the existent state of affairs between these two nations. For individuals to migrate freely and at will means that the co-existence between America and Canada is very sound. This migration is not new, both countries having experienced it for years and years. As early as the teething days of Canada as a nation, many individuals were migrating from Canada to the USA and vice versa. These individuals were either attracted by business opportunities or by peace, factors that were elusive in the early days. It was common to hear of Canadian families relocating to the USA in search of jobs at textile factories that paid far better than the textile factories in Canada.

The USA -Canada border is the longest undefended border in the world. Ekan claims that this fact reminds the entire world of the close relationship that Canada and the USA continue to enjoy (2008). The ability of citizens from both sides of the divide to migrate and move freely between the two countries is testament of the strong ties between these two close allies. The number of America-Canadian families has steadily been on the rise over the years. In these families, each of the two partners comes from one side of the border. This has also strengthened the relations between these two states, seeing that they are practically related to each other.

After 9/11, there were some stringent measures that were put in place to guarantee America’s security at the Canadian border. These slightly impacted on the movement of Canadian and American citizens (Beisner, 2003). However, the result is that these two nations settled the matter and have come up with measures that allow the free, but supervised movement of citizens as opposed to not settling the matter at all. This has been a stepping stone in fostering Canadian-American relationships as they are. The ability of American and Canadian citizens to cross both borders freely is a symbol of the strong relationship that exists between Canada and America.

Diplomacy

The state relations between Canada and the USA have always been maintained at optimum. The diplomatic ties that exist between Canada and the USA are a product of many years of commitment, hard work as well cooperation between these two nations (Thompson, Randall, 2002). In the beginning, the relations between Canada and America were not as rosy, with America even attempting an invasion of Canada that failed miserably. The occurrence of these events many years ago resulted in the development of a hostile and uncooperative relationship between these two nations. Another situation that greatly affected the diplomatic ties between Canada and America is the dispute over the Northwest Passage.

The dispute arose from the fact that America claimed the passage lay on International waters while Canada claimed jurisdiction over the passage. These hiccups that were experienced between Canada and America took their toll on the diplomatic ties. The diplomatic relationship was at an all time low before the First World War. However, President Franklin Roosevelt and Prime Minister William Lyon ensured they mended fences at the outset of World War II. The need to develop close diplomatic ties and maintain them arose from the fact that both nations saw the need to defeat the Axis powers. This, in effect, would guarantee continued prosperity like they had previously witnessed. This resulted in the development of close ties between the two states with Canada even helping America in the making of the atomic bomb. The existence of diplomatic ties goes even before the start of the world war, with leaders occasionally showering the other nation with numerous accolades and praises.

The origin of these close diplomatic ties can be said to be in 1947 when President Harry Truman said “Canada and the United States have reached the point where we can no longer think of each other as 'foreign' countries.” This came at the tail end of the world war after both nations had experienced close economic and military cooperation (Beisner, 2003). This can as well be the cradle of the beautiful relationship that these two nations experience today.

War and Conflict

The United States of America and Canada have been close allies even in times of war or conflict. The alliances that these two nations have formed on virtually every occasion serve to prove the close relationship that these two states have. Canada and America have fought alongside each other in almost every war that they have taken part in. From the war in Afghanistan, to the Gulf War, to the Kosovo War and even to the Korean War, Canada and USA have fought on the same side of the battlefield. This has had a tremendous effect on the relationship between Canada and America, seeing that it influences the way they think and operate. In all these wars, Canadian and American armed forces have developed friendships and close ties that have extended to the foot soldiers on the ground (Beisner, 2003).

This has played a role in fostering the good relationship between these two states. However, there have been instances in which these two nations have not agreed on which direction to take. Two case scenarios that depict this disagreement are the Iraq War and the Vietnam War. In these two instances, Canada stood on the opposition and refused to join the USA in the war as an ally. In both of these cases, the USA has suffered major casualties with her losing the Vietnam War. Some critics argue that the success of the USA in war depends on the position of Canada. This is a far-fetched theory that has no direction, bearing that one bases this theory on two instances alone. All in all, the military of these two nations continue to foster good, deep relations that are mutually beneficial to both parties.

Military and Security

The military of these two nations have a good working relationship. The fact that these two nations also have a fruitful relationship between the security organs is further proof that America and Canada are close allies (Ek, 2008). The world has always been an unsafe environment, and the need for protection is consistent year in, year out. In order to ensure national security to the nation and in extension to the neighbors, close cooperation between security organs is not only necessary but also mandatory. This will enable the security organs of both nations to share information that will enable each country to protect itself from internal or external harm. The working relationship between American organs such as the Federal Bureau of Investigation (FBI) and Intelligence organs with their Canadian counterparts has played a vital role in ensuring that both states are well protected (Thompson, Randall, 2002).

Through the sharing of intelligence, these organs are capable of stopping impending attacks before they occur. This gives the government the upper hand since it is no longer acting in a retaliatory capacity. This has been a significant boost for the development of ties between Canada and America. The closely forged relationship between American and Canadian forces is not new, these two nations having joined hands in World War II. Roosevelt and Lyon agreed to have Americans join the Royal Canadian Air Force (RCAF) in order to boost their chances in the War. This resulted in 49, 000 Americans joining RCAF. After 9/11, America realized that she should do more to protect her borders from all sides. This saw the upgrade of security all through the country, even along the Canadian border. Canada was very supportive of America in this time and in their plan of action, a feat that saw them cement their fruitful working relationship.

Culture

Being a constitutional monarch, Canada is still under the rule of the queen. This is the case now and has been the case for many years. Canada’s position puts her under the influence of British customs, even though part of Canada is French-speaking. The culture of the Canadian people is greatly influenced by the British while the Americans seemingly have no culture. Being a conglomeration of different people from different parts of the world, it is impossible to clearly point out the cultural traits of the American people. Being an amalgamation of many people with diverse cultures has its own benefit, seeing that the USA has adopted various cultures of these different people to come up with their own ‘traditions’. The interaction between America and Canada has seen the passing on of American influences on Canadians and vice versa (Beisner, 2003). Many Americans have picked up Canadian habits or behaviors while many Canadians have picked up American behaviors, as well.

This has happened for so long to the point that many Canadians are constantly afraid of being Americanized. This is especially so in the English speaking part of Canada where the residents speak the same tongue as the Americans. By exporting their rich culture to Americans, the Canadians have been able to significantly influence how Americans think and act. On the other side of the coin, Americans have exported their ‘liberal’ nature over to Canada. This is evidenced by the fact that a seemingly conservative Canada is now allowing the importation of magazines, movies, television rights, literature as well as sports from America with minimal supervision. This is a great milestone insofar as the Canadian government is concerned, seeing that Canada was once a largely conservative country that fiercely opposed such actions. Over the years, tourism between these two countries has also ballooned with the number of tourists visiting each country rising significantly (Ek, 2008). This appreciation of each other has also played a key role in improving the existent relations between Canada and America. These factors continue to depict the close relations that America and Canada enjoy.

Environmental Conservation

Being a large country has its own perks, but it also comes with its fair share of responsibilities. The developed manufacturing industries in both of these countries have played a key role in building the economies of these two nations (Thompson, Randall, 2002). However, the active role that they play in the pollution of the environment continues being a serious threat especially in this era in which climate change is no longer purely theoretical but a reality. Ek argues that the industrial emissions by these manufacturing companies have the potential of completely destroying the environment around these two nations (2008). It also bears heavily on the governments of both nations to oversee the conservation of the environment around them. This is because if these pollution are not regulated, then the result will be an unending blame game as to who is responsible for the environmental degradation.

The proposal of the ‘Acid Rain Treaty’ in the late 80’s sought to control air pollution and the subsequent formation of acid rain that affected the environment. Though it received plenty of resistance in the early stages, Mulroney (the chief protagonist in that narrative) emerged victorious with the signing and ratification of the Air Quality Agreement in 1991. This has seen both governments consult twice every year on trans-border air pollution. The development of the Commission for Environmental Cooperation oversees the regulation of pollution levels from industries throughout North America, a factor that continues to yield fruits in the fight against environmental pollution. This has also helped to make America and Canada better neighbors due to their active participation in the fight against environmental degradation in North America. The fact that both countries heavily support the forestation process is a significant boost to their environment. It also gives America and Canada another issue over which they can consult and further develop their relationship.

Drugs

Drugs are a serious problem in the society today. Very many young men and women lose their lives due to drug abuse and drug overdoses. This problem is neither geographical nor racial, and it can affect anyone. In Canada and the USA, drug abuse is still a serious problem with which the government has to contend. Worse than drug abuse, is the problem of drug trafficking, which is rampant in both the USA and in Canada. A survey carried out on the American-Canadian border found out that Canada serves as the central source of marijuana and MDMA (ecstasy) for the American market while America serves as a transit body for cocaine on its way to Canada (Beisner, 2003). The drug abuse propagated by the trafficking of these drugs is a significant social problem in both America and Canada. The willingness to work together, shown by these two governments to eradicate this persistent problem, further proves that these two states are close allies willing to work together to solve a common problem.

Conclusion

The fact that the United States of America and Canada are neighbors is undeniable. It is also undeniable, that these two countries are in reality akin to two siblings; they may quarrel once in a while, but there is really no bad blood between them (Thompson, Randall, 2002). They all strive to ensure that they are happy and that their neighbor is happy, a factor that is vital in maintaining their relationship. The ability of these two nations to work with synergy and with a commitment to one another shows the depth of the relationship that these two countries have. It is not debatable that America and Canada are close neighbors who work together for their mutual benefit. This mutual understanding and concern over the years are what has molded this relationship that the two countries now enjoy. It then goes without saying, in the words of John F. Kennedy, "Geography has made us neighbors. History has made us friends. Economics has made us partners, and necessity has made us allies. Those whom nature hath so joined together, let no man put asunder."


References

Beisner, R. L. (2003). American foreign relations since 1600: A guide to the literature. Santa Barbara, Calif: ABC-CLIO.
Ek, C. (2008). Canada-U.S. relations in focus. New York: Nova Science Publishers.
Hillmer, N. (1989). Partners nevertheless: Canadian-American relations in the twentieth century. Toronto: Copp Clark Pitman.
Lustig, N. (1992). North American free trade: Assessing the impact. Washington, DC: Brookings Inst.
McDougall, J. N. (2006). Drifting together: The political economy of Canada-US integration. Peterborough [u.a.: Broadview Press.
Stern, R. M., University of Michigan., University of Michigan., & University of Western Ontario. (1989). Trade and investment relations among the United States, Canada, and Japan. Chicago: University of Chicago Press.
Thompson, J. H., & Randall, S. J. (2002). Canada and the United States: Ambivalent allies. Athens [u.a.: Univ. of Georgia Press.