BC Cabinet to Ban LNG Pipelines
from Converting to Oil
The BC government says it will block companies from converting any future natural gas pipelines into pipelines that could carry oil or diluted bitumen. But that is not going far enough, says one aboriginal nation.

Natural Gas Minister Rich Coleman said [October 27^th] he has prepared new cabinet regulations that would effectively ban any company from building a natural gas pipeline and then, in the future, trying to "reverse" it to carry oil to the coast. "It was always our intention to not have them be able to reverse," Coleman said in an interview.

"It's very difficult to reverse a gas pipeline actually, it's not as simple as some people think it is."

The move is primarily to address concerns raised by First Nations whose territories could be affected by natural gas pipelines built to feed proposed liquefied natural gas projects on BC's northwest coast.

Many First Nations are more agreeable to the idea of a natural gas pipeline than an oil pipeline, because a natural gas spill is less environmentally damaging than oil.

The ban is also a warning to oil and gas companies that they can't use a natural gas project as a foot in the door to a pipeline, and then later turn around and sell it to another company with oil ambitions. Read The Vancouver Sun article. 

Mines Act Amendments
The government recently introduced Bill 4, Miscellaneous Statutes Amendment Act (No.2), 2014, which proposes amendments to the Mines Act. This legislative amendment to the Mines Act will ensure there is more time available, if required, to conduct thorough investigations into offences under the act and for a decision by Crown counsel on whether to pursue charges. Currently, the Province has six months to one year to pursue charges for offences committed under the act, depending on the nature of the offence. The amendment will increase this limit to three years from when the Chief Inspector of Mines first learns of the incident, aligning with other natural resource legislation, such as the Forest and Range Practices Act and Environmental Management Act.

Canada Introduces Payment Reporting Legislation:
What Mining and Oil & Gas Companies Need to Know
On October 23, 2014, the Government of Canada introduced its long-awaited legislation to mandate disclosure of public payments made by mining and oil & gas companies for the commercial development of oil, gas and minerals. The Extractive Sector Transparency Measures Act (the "Act") follows over a year of industry consultations and an industry and civil society-led roundtable, both of which Davis LLP has covered extensively (see previous bulletins from November 13, 2013, January 17, 2014 and March 3, 2014). With the introduction of the Act, a number of key details for the payment reporting scheme have been clarified, which are reviewed in this bulletin.

The Basic Payment Reporting Obligation
The Act applies to any entity engaged in, or controlling other entities engaged in, the commercial development of oil, gas or minerals anywhere in the world so long as the entity: (a) is publicly listed in Canada; or (b) has a place of business in Canada, does business in Canada or has assets in Canada and that, based on its consolidated financial statements, meets at least two of the following conditions for at least one of its two most recent financial years: (i) $20 million in assets; (ii) $40 million in revenue; and/or (iii) 250 employees.

Read the full article by Graham Erion and John Munnis with Davis LLP.

Connecting to the Grid: BC Sets
Rates, Terms for LNG Industry
[On November 4th], the BC Government introduced the Domestic Long-Term Sales Contracts Regulation under the Clean Energy Act setting rates and terms for liquefied natural gas (LNG) customers proposing to use electricity from the BC Hydro grid.

LNG proponents will pay $83.02 per megawatt hour (MWh) for electricity delivered at LNG export facilities, plus full cost of connecting to the BC Hydro system and any transmission system upgrades necessary to serve the facilities. Compared to $54.34/MWh, being the average rate paid by established industrial customers in the province in 2014. This is some impressive negotiation by government.

Earlier in the day, BC Hydro announced that it has signed a power purchase agreement with LNG Canada (the Shell led consortium) to supply electricity to a portion of the proposed LNG facility in Kitimat, BC. Terms of the deal were not announced, but it is expected that LNG Canada will purchase 200 MW or approximately 2,000 GWh/year from BC Hydro to serve its ancillary (non-compression) load requirements.

The BC Government news release also commented that the 3,000 GWh/year earmarked for LNG development in BC Hydro's 2013 Integrated Resource Plan (IRP) will be taken by LNG Canada and Fortis BC's Tilbury LNG plant in Delta, BC.

[This] news shows that LNG companies are choosing BC's electricity, even paying the new "latecomer" industrial rate, because it is the cost-effective option when factoring in BC's GHG emissions compliance costs. You need to get to 0.16 of CO2e, or purchase carbon offsets or pay into a technology fund. Grid electricity in BC lower GHG emissions and reduces project costs. Read the full article by Warren Brazier with Clark Wilson LLP. 

Province Introduces Innovative,
Flexible Forest Licence
The Province has created a new type of forest licence that allows emerging, innovative forestry companies to more effectively respond to fluctuations in the supply of wood fibre, Forests, Lands and Natural Resource Operations Minister Steve Thomson announced [October 27^th].

The new supplemental forest licence allows companies to harvest wood only when traditional, business-to-business fibre supplies are reduced. This helps ensure that licence holders – bioenergy companies, pellet producers and secondary manufacturers – have ongoing access to the fibre supply they need to operate.

The new licence also allows the Province to include conditions in licences that encourage the harvesting of less marketable and harder to access wood, helping to make greater use of the existing allowable annual cut.

The legislation follows up on a recommendation made by the Special Committee on Timber Supply in its 2012 report, and is consistent with strategies identified in the Province's 2012 Mid-Term Timber Supply Action Plan. The new licence is not available to sawmills, which traditionally have more stable supplies of wood. Source: Government of BC 

Water Use in BC: Recurrent Short-Term
Water Use Approvals are Lawful
In yet another indication of the increasing prominence of water use issues in BC, the Supreme Court of British Columbia recently upheld the practice of the BC Oil and Gas Commission to grant recurrent short-term water approvals for oil and gas activities under the Water Act. In Western Canada Wilderness Committee v British Columbia (Oil and Gas Commission), 2014 BCSC 1919, (a case first reported on here) the petitioners, Western Canada Wilderness Committee and Sierra Club of British Columbia Foundation, alleged that the Commission's practice of granting recurrent short-term water use approvals to the same oil and gas companies for the same location was in violation of the Water Act. The Court disagreed, holding that there was nothing illegal about the Commission's practice of evaluating each successive application for an approval on a fresh basis and according to established criteria.

Facts
Under the Water Act, the ownership of all water in British Columbia, as well as the right to use it, is vested in the Crown. The government, through various agencies, may issue licences or short-term approvals to use water. In this case, the narrow issue was the Commission's practice of issuing recurring short-term approvals. However, because the Ministry of Forests, Lands and Natural Resources Operations (FLNRO) employs a similar practice of issuing short-term approvals to various users (land or mine owners, municipalities, water users' communities, federal and provincial ministries, and so on), the case has implications that go beyond the oil and gas industry.

Read the full article by Toby Kruger with Lawson Lundell LLP. 

Environmental Appeal Board Decisions
A number of Environmental Appeal Board decisions were released in the month of October. These include the following:

Water Act

• Steven Vestergaard v. Engineer under the Water Act [Stay – Application Denied]

Environmental Management Act

• Randy Wells v. Director, Environmental Management Act [Preliminary Issue of Jurisdiction – Appeal Dismissed]
• Emily Toews; Elisabeth Stannus v. Director, Environmental Management Act [Application for Order to Produce Documents – Granted in Part]

Wildlife Act

• Robert P. Thompson v. Regional Manager (Kootenay-Boundary Region) [Final Decision – Appeal Dismissed]
• Philip Woodcock v. Deputy Director of Wildlife [Consent Order – Appeal Allowed in Part]

Visit the Environmental Appeal website for more information.

The Granddaddy of all Canadian-U.S. Trade Disputes
is about to Rear Its Ugly Head Again
A recent dispute over "country of origin labelling" for meat products underscores the fact that Canada and the U.S. still have their share of trade disputes.

Yet lurking in the background is a massive trade issue that you haven't heard about for a while: softwood lumber, the granddaddy of all Canadian-U.S. trade disputes. Canada exported $7.4-billion worth of lumber in 2013, the highest amount since 2006. The United States is the destination for the bulk of that wood, and U.S. lumber producers have for decades demanded the U.S. government collect tariffs on Canadian lumber. After decades of dispute, Canada and the U.S. agreed to a nine-year truce in 2006. Under the agreement, the U.S. agreed to return more than $5-billion in duties collected from Canadian lumber companies, and a ceasefire in trade litigation.

If you thought we've achieved lumber peace in our time, you might be premature. We've now entered the final year of that truce, which is set to expire on Oct. 12, 2015. There are signs this historic trade grievance is set to return with a vengeance. U.S. housing starts are heating up. As U.S. construction grows, demand for Canadian lumber increases, something that will inevitably antagonize U.S. lumber producers who have long argued that Canada's industry is unfairly subsidized. Read the Financial Post article.