Order Amending the Order Prohibiting Certain Activities in Arctic Offshore Waters: SOR/2021-272

Canada Gazette, Part II, Volume 156, Number 1

Registration
SOR/2021-272 December 21, 2021

CANADA PETROLEUM RESOURCES ACT

P.C. 2021-1030 December 17, 2021

Whereas the Governor in Council considers that it is in the national interest to continue to prohibit any person from commencing or continuing any work or activity authorized under the Canada Oil and Gas Operations Act footnote a on the frontier lands that are situated in Canadian Arctic offshore waters and in respect of which the Minister of Northern Affairs has administrative responsibility for natural resources, until a review of Canada’s designation, in 2016, of those waters as indefinitely off limits to future offshore Arctic oil and gas licensing is complete;

And whereas Canada, the Inuvialuit Regional Corporation, Nunavut Tunngavik Incorporated and the governments of Yukon, the Northwest Territories and Nunavut are jointly developing the assessments to be considered by the review, and those assessments are to be completed in 2022;

Therefore, Her Excellency the Governor General in Council, on the recommendation of the Minister of Northern Affairs, pursuant to subsection 12(1) footnote b of the Canada Petroleum Resources Act footnote c, makes the annexed Order Amending the Order Prohibiting Certain Activities in Arctic Offshore Waters.

Order Amending the Order Prohibiting Certain Activities in Arctic Offshore Waters

Amendment

1 Section 2 of the Order Prohibiting Certain Activities in Arctic Offshore Waters footnote 1 is replaced by the following:

Coming into force

2 This Order comes into force on the day on which it is registered.

Repeal

3 This Order is repealed on December 31, 2022.

Coming into Force

2 This Order comes into force on the day on which it is registered.

REGULATORY IMPACT ANALYSIS STATEMENT

(This statement is not part of the Order.)

Issues

The Order Prohibiting Certain Activities in Arctic Offshore Waters was brought into force on July 30, 2019, and was set to expire on December 31, 2021.

The extension of this Order is required as an interim measure to assure the ongoing prohibition of oil and gas activities in the Arctic offshore and to preserve the terms of the 11 active exploration licences in the Beaufort Sea. This will allow Canada to consider the climate and marine-based assessment reports prepared in collaboration with the territories, Inuvialuit and Inuit organizations to inform next steps on the Arctic offshore moratorium.

Background

On December 20, 2016, the Government of Canada announced, as part of the Joint Arctic Leaders Statement, an indefinite suspension on new oil and gas licences in Canada’s Arctic waters (the Arctic offshore moratorium), to be reviewed every five years through a climate and science-based assessment. The moratorium acknowledges the important balance between the historic value of the Arctic waters for Northern Indigenous peoples and the value of establishing a strong, sustainable Arctic economy and ecosystem supported by science-based management. While the moratorium suspends the issuance of new oil and gas licences, it does not suspend oil and gas activities nor does it suspend the terms of the 11 affected active licence holders, exposing a gap in the regime and requiring a solution.

In 2017, Crown-Indigenous Relations and Northern Affairs Canada (CIRNAC) officials consulted extensively with territorial and Northern Indigenous stakeholders (governments of the Yukon, the Northwest Territories, and Nunavut, Inuvialuit Regional Corporation, Nunavut Tunngavik Incorporated and the Regional Inuit Associations), the Canadian Association of Petroleum Producers and the active oil and gas licence holders on their future interests in the Arctic offshore. In October 2018, Canada announced, in its Next Steps on Future Arctic Oil and Gas Development, to freeze the terms of the existing licences and to protect them from expiring for the duration of the moratorium. Next steps also included the co-development, with territorial and Northern Indigenous governments, of a framework for a science-based assessment every five years that accounts for marine and climate change science, and the negotiation of a Western Arctic offshore oil and gas co-management agreement with the governments of the Yukon, the Northwest Territories and the Inuvialuit Regional Corporation.

On July 30, 2019, the Governor in Council made the Order Prohibiting Certain Activities in Arctic Offshore Waters, pursuant to section 12(1) of the Canada Petroleum Resources Act, R.S.C. 1985. The Order prohibited all oil and gas activities in the Arctic offshore and suspended the terms of all active oil and gas licences in the western and eastern Arctic offshore areas. This order was set to expire on December 31, 2021, in conjunction with Canada’s consideration of the five-year science-based review report and next steps for the moratorium. The reports were delayed due to federal and Nunavut election processes and are expected to be complete in January or February 2022.

An exploration licence has a nine-year, fixed term in which a licence holder is required to complete the drilling of an exploration well. The extension of this Order prevents the active licences from expiring while Canada considers the climate and marine-based assessment reports prepared in collaboration with the territories, Inuvialuit and Inuit organizations to inform next steps on the Arctic offshore moratorium.

The Order will also allow Crown-Indigenous Relations and Northern Affairs Canada officials to continue to collaborate with Northern partners and to advance new climate and marine-based research in respect of meeting Canada’s 2016 commitment to review the moratorium every five years.

Without extending the Order, existing licences would have begun to expire after December 31, 2021. Canada would not have been able to meet the commitment to freeze the terms of existing licences to preserve existing rights, or to meet Canada’s moratorium review commitment.

Objective

  • To provide protection to active Arctic offshore licence holders for the duration of the moratorium, pending a decision by Canada on next steps;
  • To complement the policy intent of the moratorium and to suspend further capital investment while providing protection to active licence holders and to preserve their rights;
  • To respond to the interests of territorial governments and to respect the rights of Northern Indigenous peoples regarding future oil and gas and economic development potential in the offshore; and
  • To establish a path forward for the strategic management of Arctic offshore oil and gas in collaboration with partners.

Description

The Order is a one-year extension of the Order that was made on July 30, 2019, and which was set to expire on December 31, 2021. It continues to prohibit any person or oil and gas licence holder from beginning or continuing any work or activity in Canada’s Arctic waters and preserves the rights of active oil and gas licence holders. The Order freezes 11 active exploration licences in the Arctic offshore, preventing the licence holders from carrying out work and preserving the terms of their licences.

The Order is intended as an interim measure to allow Canada to consider the climate and marine-based assessment reports that were jointly developed with Northern partners to inform next steps on the moratorium. The Order will expire on December 31, 2022.

Regulatory development

Consultation

In 2017, CIRNAC consulted extensively with territorial and Northern Indigenous governments and industry representatives on their future interests in the Arctic offshore. There was consensus among the stakeholders that future oil and gas development in the offshore could provide real economic development opportunities for Northerners and all Canadians.

The governments of the Yukon, the Northwest Territories and Nunavut, the Inuvialuit Regional Corporation, Nunavut Tunngavik Incorporated and the Regional Inuit Associations fully supported the measure to freeze the terms of the 11 active exploration licences in the Beaufort Sea to prevent them from expiring while the moratorium remains in place. Further, the Canadian Association of Petroleum Producers, and each of the licence holders representing the 11 licences, which includes Imperial Oil, BP Canada, Chevron Canada, ConocoPhillips Canada, and Franklin Petroleum Canada Limited, supported a measure to freeze the 11 exploration licences.

In November 2021, CIRNAC officials consulted with the three territorial governments, Nunavut Tunngavik Incorporated and Inuvialuit Regional Corporation who confirmed their support to extend the Order for one year (until December 31, 2022) which will continue to freeze the terms of the exploration licences and allow for consideration of the assessment reports in 2022. Industry stakeholders were also informed and are supportive of the Government’s intent to extend the Order.

Modern treaty obligations and Indigenous engagement and consultation

As required by the Cabinet Directive on the Federal Approach to Modern Treaty Implementation, an assessment of modern treaty implications was conducted on the proposal. The assessment did not identify any modern treaty implications or obligations. Throughout 2017, Canada consulted extensively with territorial governments and Northern Indigenous groups on their future interests in the Arctic offshore. As a direct result of those consultations, in 2018 Canada announced next steps on future Arctic Oil and Gas development in collaboration with Northern Indigenous groups.

The Order applies to federal lands in Canada’s Arctic waters, and applies directly to the suspension of federally regulated oil and gas activities. The Order does not impact the rights of Modern Treaty rights holders as it does not infringe on their traditional territories nor does it infringe on their traditional wildlife harvesting, traditional lifestyle or traditional migratory or transiting routes.

In further recognition of Indigenous Treaty rights in the North, section 3 of the Canada Petroleum Resources Act explicitly provides that nothing in the Act shall be construed as to abrogate or derogate from any existing Indigenous or treaty rights of Indigenous peoples of Canada under section 35 of the Constitution Act, 1982.

Instrument choice

Extending the Order Prohibiting Certain Activities in Arctic Offshore Waters is the only way to ensure that the terms of the existing exploration licences are suspended before their expiry. This approach also aligns with the intent of the moratorium and allows Canada to work with and consult territorial and Northern Indigenous governments on future decisions in relation to Arctic offshore oil and gas development.

Regulatory analysis

Benefits and costs

The Order to prohibit the active oil and gas licence holders in the Arctic offshore from continuing any work or activity is not anticipated to result in any impacts in the form of deferred benefits (i.e. foregone profits from production in the licence area) to the affected licence holders as well as Northern and Indigenous economies. There are no other anticipated quantitative costs of the Order to the licence holders.

The active licence holders have invested time and capital to plan for and to exercise their right to explore for oil and gas within the extent of their licence area. Since the 1970s, 69 significant discoveries of proven oil and gas deposits in Canada’s Arctic offshore have been made. The licence holders have an option to develop these deposits when market conditions and technology favour profitability, benefitting the licence holders as well as territorial governments and Northern Indigenous communities. Based on an assessment of current economic conditions, as well as feedback received from oil and gas stakeholders, it is not expected that any measurable oil and gas production would have occurred in the near term without an extension of the Order.

The Order results in two important benefits. First, while none is expected, it ensures the protection of the Arctic waters and the marine environment from the potential adverse impacts from oil and gas development for the duration of the Order, enabling climate and marine-based research to proceed. Second, it freezes the terms of the 11 active exploration licences in the Beaufort Sea which prevents their expiration and loss of rights to licence holders. While the Order may be viewed as having potential costs to licence holders (i.e. foregone profits), the licence holders had no plans to exercise their rights due to unfavourable market conditions before the moratorium was announced,

Small business lens

There are no associated impacts on small businesses as a result of this Order.

One-for-one rule

The one-for-one rule does not apply, as there is no incremental change in administrative burden on business.

Regulatory cooperation and alignment

The Order complies with the December 2016 Joint Arctic Leaders’ Statement to work with Northerners to preserve the Arctic offshore from the potential adverse impacts from oil and gas activities and to build Canada’s marine and climate-based knowledge base to assure that future oil and gas development in the region is evidence-based and meets Canada’s domestic and international climate goals.

Arctic oil producing nations bordering Canada’s maritime boundary have issued indefinite oil and gas moratoriums in their respective jurisdictions. The current U.S. administration has recommitted to the 2016 United States-Canada Joint Arctic Leaders’ Statement banning oil and gas activities in the Beaufort and Chukchi Sea, while Greenland banned new oil and gas rights in its territorial waters. In addition, the October 2021 Arctic Strategy policy paper issued by the European Union called for an Arctic-wide ban on new oil and gas development to protect the vulnerable Arctic environment.

Strategic environmental assessment

In accordance with the Cabinet Directive on the Environmental Assessment of Policy, Plan and Program Proposals, a preliminary scan concluded that a strategic environmental assessment is not required as the Order only supports the important impacts on the environment caused by the Arctic offshore moratorium. The ongoing five-year science-based review associated with the Arctic offshore moratorium will include a strategic environmental assessment in the western and eastern Arctic offshore areas.

Gender-based analysis plus

A preliminary gender-based analysis plus (GBA+) was done to assess the impacts of the proposal on diverse groups in society, with a focus on Northern First Nations, Inuit and Métis and other Northern residents. The assessment, carried out in 2017, draws on consultations with territorial and Northern Indigenous governments, and industry, on their future interests in the Arctic offshore, and is informed through subsequent assessments related to the “Sustainable Arctic Economy” element of the Arctic and Northern Policy Framework initiative.

A number of key studies that examined gender participation in the mineral resources extraction sector found a strong bias against Indigenous and racialized women in the traditionally male-dominated resources extraction sector in the North. The 2020 Ensuring the Safety and Well-Being of Inuit Women in the Resource Extraction Industry study concluded that the sector offers “considerable possibilities for economic prosperity and security for Inuit communities and Inuit women,” though it pointed out that significant challenges remain that may disproportionately affect Inuit women in the workplace. The study recommended additional research and data collection to better understand bias in the workplace and to develop tools to address it.

The 2021 Reclaiming Power and Place: The Final Report of the National Inquiry Into Missing and Murdered Indigenous Women and Girls provides additional insight into the risks and challenges associated with gender-related participation in the natural resources extraction sector. The report recommends that prior to the commencement of a resource development project, a review should be undertaken to assess the risks that the project may pose to Indigenous women, girls and two-spirit people, and address mitigating measures. The Final Report acknowledges the documented phenomenon correlating spikes in violence against Indigenous women, girls and two-spirit people in the resources extraction sector. The Report also identifies the unique characteristic of the sector that employs mostly single men with readily disposable income, that may lead to a burgeoning local sex industry that exposes vulnerable women and girls to sexual abuse and violence, and also leading to higher rates of sexually transmitted infections. The Report provides that women and girls that are employed in the sector must have equal access to the same benefits as men at each stage of a project’s development, and that plans need to be put in place to afford training and equal opportunity for women in the workplace and that measures be put in place to minimize exploitation.

The 2021 Liard Aboriginal Women’s Society’s Never Until Now study found that the employment of women in the sector, across all age groups, education levels and experience levels are concentrated in lower-paying jobs. It also confirmed that Indigenous and racialized women experienced high levels of harassment and discrimination in the workplace, and that they were often unclear with how to report and dispute these behaviours.

The Order will support collaboration with territorial and Northern Indigenous governments and other Northern stakeholders to develop a path forward for the strategic management of oil and gas resources in Canada’s Arctic waters. A GBA+ would be conducted should the Arctic offshore moratorium be revoked and oil and gas development in the North be allowed to commence. The Government of Canada will encourage applying culturally competent GBA+ approaches that will help ensure that equality, diversity and inclusion considerations are an integral part of the many important considerations that influence this initiative and its outcomes.

Implementation, compliance and enforcement, service standards

The Order came into force on the date on which it was registered.

Contact

Mireille Lajoie
Acting Director
Petroleum and Mineral Resources Management Directorate
Northern Affairs
Crown-Indigenous Relations and Northern Affairs Canada

25 Eddy Street, 10th Floor
Gatineau, Quebec
K1A 0H4
Telephone: 613‑889‑9493
Email: mireille.lajoie@rcaanc-cirnac.gc.ca