Thank you, Mr. Hawkins. The motion is in order. To the motion.
Question.
Question has been called. Motion is carried.
---Carried
Since the start of the 17th Assembly, the Standing Committee on Economic Development and Infrastructure (“the committee”) has worked steadily on the complex matter of hydraulic fracturing in the Northwest Territories (NWT), looking at horizontal hydraulic fracturing in particular. We have gathered information, undertaken study tours, monitored government strategic planning, and stayed abreast of developments in scientific knowledge and public policy.
Most recently, this work led the committee to review the proposed Hydraulic Fracturing Filing Regulations, including observation of public engagement across the NWT in which hundreds of residents have shared passionate and insightful views.
Hydraulic fracturing is clearly a matter of great significance to residents and to the future of the NWT. The committee continues to insist on meaningful public consultation and to recognize the vital need for a diversified economy – one that provides all communities in all regions with opportunities – and an environment that will sustain present and future generations.
As knowledge and best practices respecting hydraulic fracturing operations, regulation and impacts continue to evolve, so does the committee’s understanding. As such, the committee agrees that engagement, consultation and investigation must continue into the 18th Assembly. Here, we contribute to this process with a report on our work during this Assembly, highlighting areas that have not been adequately addressed and providing comments on the proposed regulations. We identify six themes emerging from our work and make eight recommendations.
As we have previously reported, it is beyond the committee’s mandate and capacity to comprehensively address all regulatory and policy issues associated with hydraulic fracturing. We look forward to the work of the next Assembly and our successor committee, and we encourage all residents to review the committee’s reports and recommendations, including the Research Summary: Hydraulic Fracturing Filing Regulations, tabled on June 4, 2015.
The following themes emerge from the committee’s work on hydraulic fracturing.
“Wicked” Problems:
The matter of hydraulic fracturing in the Northwest Territories cannot be separated into independent discussions of economic, environmental, or human concerns. Regulation of this industry in our unique northern environment poses a “wicked” problem, a high-stakes issue impacted by complex and sometimes competing factors, including insufficient knowledge, infrastructural capacity, wide-ranging perspectives, and significant economic, environmental and social considerations.
A Precautionary Approach
Though associated activities continue, no hydraulic fracturing activity is taking place in the NWT, largely due to remoteness and a world-wide industry downturn. While resource extraction holds profitable potential, the NWT is not currently positioned to take advantage, while scientific knowledge and understanding of the cumulative and long-term impacts of hydraulic fracturing and its processes on human health, landscapes, water and wildlife are poorly understood, particularly at local and regional levels, as is the capacity of hydraulic fracturing infrastructure – even the best available today – to maintain its integrity over time. Further knowledge is needed and the absence of evidence of harm today does not mean that protective measures should not be taken by government and by proponents.
Economic Potential
Shale oil and gas development has significant socio-economic impacts associated with the creation of many permanent and temporary high-paying jobs, and offers possibilities for economic growth to NWT communities and regions, including those where such needs are keenly felt. Young people and those seeking to enter or re-enter the workforce need training and employment opportunities that will enable them to continue to work in and contribute to their home communities.
The committee’s work and the work of our colleagues in the Legislative Assembly has highlighted training, employment and revenue needs across the NWT, particularly in light of the current downturn in oil prices and exploration. The GNWT’s approach to economic development, which includes hydraulic fracturing, will be of significant concern during the next Assembly.
Water is Fundamental to Life
Territorial and transboundary waters are essential to northern life and to Aboriginal traditions in the NWT. Waters ensure healthy, productive ecosystems, but they are currently subject to increasing pressures, including continuing low-water conditions and extra-jurisdictional impacts. Water remains a priority issue for the GNWT and for residents.
Pursuit of Global, Regional and Local Knowledge:
To keep abreast of a rapidly developing field in which much remains unknown, all decision-makers must be in continual pursuit of the best available knowledge. Discussing the state of scientific knowledge about the impacts of hydraulic fracturing, the Council of Canadian Academies reported,
“There has been no comprehensive investment in research and monitoring of environmental and health impacts for either the implementation of best current practices or in the case of accidental releases that cannot be reduced to zero. Many of the pertinent questions are hard to answer objectively and scientifically, either for lack of data, for lack of publicly available data, or due to divergent interpretations of existing data.”
All monitoring must include local and regional conditions, and the further pursuit of, and response to, knowledge of unique northern operating conditions, including permafrost, remote communities with limited municipal infrastructure, and winter roads, is essential.
Roles for Residents
Members of the public are typically well-educated in the matters in which they address the GNWT and the assumption of an “uneducated” public has been recognized “as a form of stakeholder silencing.” The pursuit of partnerships “with those willing to share the risks” demonstrates the GNWT’s willingness to engage with variant stakeholders and perspectives, and the GNWT has a responsibility to form and foster partnerships between industry, communities and Aboriginal governments.
As discussed in the committee’s research summary, the draft Hydraulic Fracturing Filing Regulations (HFFR) put forward by the Department of Industry, Tourism, and Investment (ITI) draw extensively on the National Energy Board’s Filing Requirements for Onshore Drilling Operations Involving Hydraulic Fracturing (NEBFR).
It is both expected and desirable that the GNWT will not manage its new duties exactly as federal departments and agencies have done, but rather that the GNWT will strive for a truly northern approach, one that includes fair and effective benefits for all residents, honours enshrined Aboriginal rights, and assures protection of air, human health, land, water and wildlife. It is equally expected and desirable that territorial statutes and regulations will at minimum match, if not better, their predecessors.
Despite this, the proposed regulations eliminate many requirements in place under the NEB, including requirements respecting environmental assessment, proof of financial responsibility, management systems, safety culture and planning, human factors, lessons learned, northern working environments, environmental protection plans, well descriptions, groundwater protections, wellbore integrity, well control systems, well completion and hydraulic fracturing operations, hydraulic fracturing design, well suspension and abandonment, and waste management. Notably, the requirement that a proponent must demonstrate “how hydraulic fracturing will be conducted safely while protecting the environment” is among those eliminated. These are further detailed in the committee’s Research Summary: Hydraulic Fracturing Filing Regulations, which also assesses how the proposed regulations address the GNWT’s identified “four areas of interest to Northerners” (baseline surface and groundwater information, public disclosure of chemical additives, air quality, and enhanced reporting).
Any regulatory framework must encompass clear minimum standards for evaluation of all applications, demonstrate fully capacity and firm parameters for enforcement with meaningful consequences to non-compliance, and review and account for areas not carried over from federal requirements to ensure that all issued have been addressed.
The committee previously highlighted the risks of human error and its potential for serious impacts. When Members toured the Bakken in 2013, they were not informed of a significant oil spill. Inadequate monitoring was a factor and the spill itself was not reported in the media until two weeks later.
In its research summary, the committee noted that human error is a repeated cause of hydraulic fracturing incidents. These include the mistaken injection of fracturing fluids into a shallow aquifer in Alberta and the “Innisfail blowout,” when an Alberta operator drilled too near a producing well, and these and a lack of long-term knowledge complicate the claim that hundreds of thousands of wells in Canada have been hydraulically fractured “without incident.” Researchers at Pennsylvania State University advocate increased incident analysis and public disclosure of results to encourage better management practices and to avoid similar incidents.
Effective regulation of hydraulic fracturing requires “planning, people, partnerships” and the committee has recommended that the GNWT develop strong partnerships between industry, communities and Aboriginal governments.
The committee also continues to recognize the role of industry partners in setting best practices. For example, when reviewing Saskatchewan’s self-disclosure-based regulatory system, the committee noted its requirements for comprehensive baseline water and geological data and flowback monitoring, explicit guidelines for contaminated water management and disposal, and provisions for environmental protection, remediation and enforcement. However, the proposed regulations refer to “industry best practices” as a standard nine times, while the role of the regulator in approving “best practices” remains unclear.
The committee has “highlighted the need to enhance and establish training facilities and opportunities for workers both in the oil industry and related service fields” and identified workforce readiness “as a key piece of Sahtu exploration readiness.”
If residents are to benefit from any development associated with hydraulic fracturing, they must be prepared to do so. Skills- and trades-based training is vital, but it does not stand alone. Financial management training could support residents in managing new and/or increased wages, while business training and mentorship could support local and Aboriginal businesses. Many of these are not currently available or specific to oil and gas development, and despite the current lull in activity, any training would need to begin promptly.
Communities would also need to be prepared for increased demands on already strained local infrastructure, including recreational facilities, roads, and water supplies, as well as potentially increased substance abuse and crime, including sexual crimes. The committee has also heard of many negative social impacts associated with industry work camps, while increased sex trafficking and abuses of prostituted women often accompany increased resource extraction activities.
The benefits of development, including increased employment and business opportunities, higher wages and royalties, are best enjoyed in communities that are healthy, stable and well-prepared for rapid and significant change. Such principles apply in all regions that could be impacted by hydraulic fracturing, including the Sahtu, Deh Cho and Beaufort-Delta.
Any hydraulic fracturing regulatory framework must account for human factors, including error. Government oversight must ensure that reliance on self-monitoring in such a competitive industry does not hamper compliance. Budgeting for the Office of the Regulation of Oil and Gas Operations (OROGO) must not restrict access to expert advice from partners at the Alberta Energy Regulator or the NEB.
Any preparations must also include community support, including capital planning, work training, and strengthened supports, as well as plans to integrate newcomers into NWT communities, account for varied needs in all affected regions. The committee recommends a critical assessment of the economic costs and benefits associated with hydraulic fracturing in the NWT, including anticipated pre- and post-development impacts.
The committee previously recommended that any territorial hydraulic fracturing framework include “a strategy to gather environmental and geological baseline data, with federal support.” The GNWT’s response noted collaborative efforts through the Environmental Studies Research Fund (ESRF) and a regional study, proposed in 2013. The committee recognizes these and projects currently underway as well as a provision in the proposed regulations requiring proponents to submit baseline surface and groundwater data.
Continued local and regional monitoring, including effective measurement of air and water quality and effective mitigation strategies to address all results, can better scientific understanding of hydraulic fracturing’s immediate, long-term and cumulative impacts. Without this, any initial framework is of little practical use. Notably, regulatory and scientific inattention and unpreparedness elsewhere have prevented regulators and researchers from establishing useful baselines, leaving it “too late in many oil and gas areas to collect true baseline data.”
The committee has repeatedly highlighted the need for a quality management program for all stages of any drilling process, yet the proposed regulations eliminated related provisions in place under the NEB. Enforcement capacity, with meaningful consequences to non-compliance, is required to confirm operators’ statements and to perform checks to ensure that operators maintain their conditions of approval. During a tour of Saskatchewan, the committee heard that despite increasing permit applications and revenues, enforcement was hampered by program funding that did not grow accordingly.
Under the proposed regulations, the regulator may waive any requirements, a sweeping power the committee has highlighted for further review.
The committee also understands that Alberta is currently contemplating a formal review of the mandate of the AER which, like OROGO, combines a mandate of industry growth with that of industry regulation. The next Assembly may wish to monitor any such review.
Any regulatory framework must include a strategy for establishing and maintaining such a framework, including regional and local monitoring as well as baselines for all impacted regions. Further, baseline data is needed not only for surface and groundwater but also air quality and greenhouse gas emissions, forest health, land, permafrost and wildlife as well as geology and seismicity, all areas highlighted by the committee in the past. Data collected under disparate umbrellas must be marshalled to create an effective and accessible baseline framework.
Effective enforcement demands clear parameters for proponents’ submissions, stringent requirements, careful and regular monitoring and meaningful penalties for non-compliance. OROGO’s inspection and enforcement capacity must reflect a commitment to regular inspections and to proportional growth as needed and to ensure transparency and the fair application of any regulatory exceptions. Strict parameters must apply to any exercise of the regulator’s authority to exempt operators from any requirements.
As discussed, the cumulative and long-term impacts of hydraulic fracturing remain largely unknown, while local and regional impacts are unique to local and regional conditions. In its first report on hydraulic fracturing, the committee wrote,
The central Mackenzie Valley is home to many species of wildlife. Land consumption and disturbance, habitat fragmentation and noise pollution are areas of serious concern for Members as well as for the people of the Northwest Territories. Strategies to monitor the impacts of industry on wildlife and habitat should include the development of independent and project-specific environmental monitoring.
The committee also points to the Environmental Studies Research Fund (ESRF), funded by industry and previously managed by the NEB. Though the fund existed before devolution, it has since become a GNWT responsibility. It is unclear whether funding was carried over, or if the NWT fund has begun from scratch.
Members have repeatedly highlighted GCT as an alternative to venting, flaring and incineration. GCT reduce wastage of natural gas, offering economic benefits and reducing impacts on air quality and climate by reducing methane and other greenhouse gas emissions, volatile organic compounds (VOCs), and particulate emissions (e.g., soot and ash). As previously noted by the committee, both Alberta and British Columbia have set clear targets for flaring reduction, while as of 1 January 2015 all newly fractured or re-fractured wells in the United States are required to use GCT. Additionally, there are no territorial regulations respecting incinerator stack testing, and industrial flaring at other sites within the NWT has resulted in significant emissions exceedances in the past, due in part to incinerators operating at inappropriately low temperatures (low efficiency).
Despite this, the NWT does not have flaring reduction targets in place, and while the regulations address GCT, operators may forego them where “impracticable” or “based on an economic evaluation.” The Committee is concerned this may result in the effective absence of GCT in any development and that enforcement would prove prohibitively difficult.
The proposed regulations require flaring reporting only where flaring takes place for more than 72 hours, within 500 metres of a residential area, or involves sour or acid gas, or if air quality exceedances are identified in a proponent’s initial emissions assessment. Since such assessment would take place before any approval, drilling, or on-site work, it appears unlikely that any such exceedances would be identified.
Similarly, while the proposed regulations permit incineration at 99 percent efficiency as an alternative to both flaring and GCT, neither industry nor regulators typically differentiate between flaring and incinerating, complicating monitoring and reporting. Efficiency also ranges between 66 and 99 percent, dependent on a wide range of factors, including weather.
The committee further notes that while in Alberta and British Columbia, the minimum public notification radius for flaring is 1.5 kilometres, while it here appears to be unspecified, and that proponents’ submissions regarding air quality do not appear to be included in the (voluntarily) publicly disclosed pre-fracture report, despite being part of any proponent’s required Environmental Protection Plan.
The committee has previously recommended that any hydraulic fracturing policy include requirements to quantify, report, and manage greenhouse gas emissions, a requirement reflected in the proposed regulations, though evaluation parameters and/or enforcement mechanisms remain unclear. The committee also seeks to determine how the proposed regulations engage the Greenhouse Gas Strategy: 2011-2015.
Additionally, the GNWT recently committed to taking action to support international efforts to limit the increase in global temperature to below two degrees Celsius, while it is estimated that up to 80 percent of fossil fuels resource world-wide must remain in the ground to prevent catastrophic climate change. The committee asks how these factors may impact the GNWT’s approach to flaring regulation, greenhouse gas emissions management and mitigation, and/or growth of the NWT’s oil and gas industry.
As detailed in the research summary, the proposed regulations eliminate environmental assessment requirements, including consultation and socio-economic assessment in place under the NEB. The post-devolution landscape provides an ideal framework for environmental assessment, as overseen by territorial regulators, specific to the potential impacts of hydraulic fracturing on unique territorial environments.
The committee understands that human health concerns are among those raised by participants in public engagement on the proposed regulations.
The Yukon Select Committee completed its final report in January 2015 and included two recommendations related to human health, one respecting the collection of health-related baseline data and the other, a human health risk assessment to be undertaken by the territory’s Chief Medical Officer. In Alberta, where substantial hydraulic fracturing activity takes place, the AER is currently developing “a new process for handling recurring multi-year and multi-stakeholder complaints involving human health concerns.”
Scientific knowledge has advanced since the committee began its work on hydraulic fracturing at the start of the 17th Assembly. The disposal of wastewater by deep-well injection is increasingly linked to induced seismicity, or earthquake activity, as is horizontal hydraulic fracturing itself. Residents of Fox Creek, Alberta, previously experienced roughly one measurable earthquake per year, yet regional monitors have detected 160 since December 2013, including two at 4.4 on the Richter scale. The British Columbia Oil and Gas Commission attributes 231 “seismic events” to both wastewater disposal and fracturing in the Montney Basin between August 2013 and October 2014, including a 3.8- and 4.4-magnitude earthquake, respectively. These are reported to be the strongest associated with hydraulic fracturing recorded globally to date.
Local and regional geology are also factors in seismicity, again demonstrating the need for useful baselines not restricted by arbitrary boundaries (e.g., provincial borders or proponent land blocks), while the proposed regulations do not provide baseline parameters for notification of suspected seismic events or for related suspension or termination of operations.
Conscientious management of all water resources remains a priority issue for residents, and many factors contribute to decisions on the regulation of water use as well as local and regional water studies. These include regulatory frameworks, regional geology and hydrology, stages of development, proximity to communities and to above- and below-ground water sources, water condition, technology and infrastructure capacity, and disposal options.
In its research summary, the committee considered a number of water contamination incidents associated with hydraulic fracturing, including those mentioned previously, 38 fracture communications incidents in Alberta and British Columbia prior to 2010, and the inappropriate injection of wastewater into 452 California aquifers.
The committee agrees that the pre-fracture disclosure of fracturing fluid ingredients and drilling chemicals is vital. However, such disclosure remains imperfect, often excluding proprietary information and impeded by a general lack of scientific understanding of the wide variety of chemicals used and their interactions with each other, with formation geology, and with surface water and groundwater (e.g., in flowback).
Landscape change due to increased oil and gas development is the primary management concern for boreal caribou, yet the proposed regulations eliminate requirements expressly addressing boreal caribou, as well as requirements addressing other wildlife and heritage resources with particular attention to species at risk. During its Bakken tour, the committee observed that,
When questioned about wildlife concerns, a State legislator noted his view that wildlife could move and take care of itself! This situation demonstrates to the committee that if adequate planning to address wildlife and other environmental concerns does not take place in advance of and alongside development, it will likely be neglected. Wildlife is highly valued in the Northwest Territories and the Department of Environment and Natural Resources and Sahtu leadership have significant roles in ensuring continued wildlife and habitat protection.
In the NWT the Bathurst and Bluenose-East caribou populations also urgently need conservation and management action, while the habitat provided by boreal forests is under extreme environmental pressures.
Any regulatory framework must include an overall environmental mitigation strategy recognizing the unique demands and impacts of hydraulic fracturing and addressing the matters noted above, including clear plans to monitor and manage emissions and flaring, to mitigate and manage material effects on air quality, and to evaluate air quality through specific and measurable requirements as well as micro-seismic monitoring. The committee recommends that the GNWT monitor the work of other jurisdictions, including Alberta and Yukon, in their studies and best practices, including work on hydraulic fracturing and human health.
Additionally, the committee again urges water withdrawal limits that would account for developmental stages and periods of low water as well as the development of tracer chemical standards and development plans indicating both sources and limits. Industry must demonstrably minimize water use.
Respecting spills and other incidents, any regulatory framework must be prepared to respond to such events, which are often unpredictable, even with stringent precaution. Fracturing chemicals and fluids, including wastewater, released into transboundary waters, either intentionally or accidentally, would also require address.
Much of this work would be required prior to any hydraulic fracturing.
Reporting and disclosure are essential and encompass monitoring, testing, and data storage protocols. While under the proposed regulations, all public disclosure remains voluntary; there are no minimum standards to guide or otherwise encourage disclosure.
The committee observes that separation between GNWT participation in FracFocus.ca and any GNWT online database storing other publicly disclosed information (e.g., the pre-fracture report) may cause confusion amongst stakeholders and the general public.
The matter of voluntary versus mandatory disclosure as well as public disclosure has been one of great public discussion. The committee recognizes that the pre-fracture report outlined in the proposed regulations would contain a wide range of information. However, public disclosure remains voluntary, including the manner and time of disclosure. Excepting the voluntary disclosure of annual environmental and safety reports, it also remains unclear which provisions of the proposed regulations enhance post-fracture reporting. Arguably, the number of NEB provisions eliminated in the proposed regulations would result in reduced reporting.
In keeping with the GNWT’s post-devolution authority, the committee recommends amendments to the Petroleum Resources Act to address mandatory disclosure and legislated privilege periods. Until that time, it is expected OROGO would continue the NEB’s practice of explicitly requesting that operators waive such privileges.
Storage, treatment, transportation, and disposal of waste materials, including emergency planning and protection of vulnerable communities and habitats, remain key areas in committee discussion. Members point to Kennetcook, Nova Scotia, where hydraulic fracturing wastewater has sat in open storage pits for more than two years, subject to flooding and overflow, due to regulatory ill-preparedness and mismanagement.
Transporting waste out of the Northwest Territories on the winter road system appears to be an adequate temporary solution; however, industry emphasized that in order to advance to production, a made-in-the-North water treatment or disposal system must be found.
However, even with current technology and best practices, wastewater cannot be re-integrated into the water table or re-used except, typically, for later stages of hydraulic fracturing. Even then, the general robustness and applicability of wastewater recycling remains poorly understood and large quantities of freshwater remain a core requirement as brackish or saline water damages both formations and equipment.
Any regulatory framework must implement and enforce stringent waste management requirements, including transportation and emergency management expectations.
On-surface storage of waste materials (e.g., lined pits) remains unacceptable to the committee, which again emphasizes its support of tank storage only. Additionally, emerging scientific knowledge must be taken into account in any future pursuit of deep-well injection in our region. Risk assessment must account for the possibility of restricted access in other jurisdictions.
Casing, Cementing, Logging and Drilling
As the committee has repeatedly emphasized, stringent casing and construction regulation, including compliance monitoring and enforcement, as well as regular monitoring and maintenance of suspended and abandoned oil and gas wells, are essential to reducing methane leakage and the risk of inter-well communications. The committee has recognized the existence of best practices.
Nevertheless, insufficient scientific and practical understanding of the long-term impacts of active, suspended and abandoned wells leave considerable uncertainty respecting the ability of even the most stringent rules to prevent leakage and communications over extended periods. Further, the regulations appear to eliminate requirements respecting blow-out prevention specific to hydraulic fracturing and previously in place under the NEB.
Any regulatory framework must impose clear and stringent well construction standards and require thorough, consistent and long-term well monitoring, including procedures to effectively and efficiently identify and address any loss of integrity.
As the committee has previously recommended, any regulatory framework must address the full lifespan of a well, including abandonment and decommissioning.
Sufficient securities are a vital component of development, as demonstrated in other jurisdictions. Saskatchewan has implemented a liability management program, while Alberta is currently facing an increasing number of newly orphaned wells, presenting public environmental, financial and logistical liability. Further, the Auditor General of Alberta, reviewing securities policies for mines and the oilsands, recently reported,
“improvements are needed to both how security is calculated and how security amounts are monitored. Without these improvements, if a mine operator cannot fulfill its reclamation obligations and no other private operator assumes the liability, the province is at risk of having to pay substantial amounts of public money.”
A review of territorial securities policies and the implementation of clear securities criteria are required to aid the GNWT in preventing the negative impacts experienced elsewhere. The GNWT must continue the NEB’s practice of refusing surety bonds as proof of financial responsibility.
This concludes the committee’s Report on Hydraulic Fracturing and the Northwest Territories. All committee reports and tabled documents are available online at the Legislative Assembly website (www.assembly.gov.nt.ca).
Mr. Hawkins.
