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Oil and Gas Commission gets a failing grade for water regulation

August 17, 2010

Last week’s events should have sounded some alarm bells for people wondering how the BC government regulates the oil and gas industry in Northeastern BC. 

  • On Monday (August 9th) the Oil and Gas Commission (OGC), a one-window government agency responsible for both regulating and promoting the oil and gas industry, released a report on how it regulates the industry’s water use [link updated Oct 19/2011].  Much of the report is aimed at reassuring the public that the industry doesn’t really use that much water. 
  • On Tuesday (August 10th) the Ministry of Environment issued a press release – Streamflow and Water Supply Conditions – confirming that some regions of the province are experiencing a level 3 drought – including the Peace River, where most of the province’s oil and gas activity is concentrated.  A level 3 drought means that fish and water supplies are at risk unless it rains soon. 
  • The next day (August 11th) the OGC notified the oil and gas industry that it was suspending its rights to remove water from four water basins flowing into the Peace River (although not, interestingly, from the Peace River itself).  

Tourmaline May 14 2.jpgThe OGC’s directive to suspend the water rights comes 3 weeks after the Commission issued a bulletin “urging industry to be diligent in licenced water withdrawals and ensure withdrawals are in compliance with permit approvals.”  The Vancouver Sun’s Scott Simpson covered the controversy at the time, including the possibility that the extractions may force BC Hydro to import additional power from out of the province this year. 

The oil and gas industry has not historically been a major water user; however, that’s changed dramatically with the rapid increase in the use of hydraulic fracturing, known to its critics as fracking.  Fracking is a process in which large quantities of water are injected into the ground  to shatter rock containing oil and gas and force it out of the ground.  Not only does fracking use large amounts of water, but it also contaminates that water.  The controversies of fracking are manifold, and have been documented elsewhere – including this year’s award-winning documentary, Gasland

Regulation of water for fracking in BC

Oil and gas companies take water from streams and rivers to frack because they are allowed to.  In BC if you or I want to use water from a stream (for anything other than domestic use) we need to apply to the Ministry of Environment (MOE) either for temporary permission to use water for less than 1 year or for a water licence” if the water will be used for longer than a year.  There are rules about who can apply and other water users can appeal the MOE’s decision to grant a water licence to the Environmental Appeal Board

Under s. 17 of the Oil and Gas Commission Act, it is the OGC, and not the MOE, that has the power to issue temporary permission to use water for less than 12 months to an oil and gas company.  If an oil and gas company wants to use water for longer than 12 months they are still supposed to apply to the MOE, who after all are supposed to be the experts when it comes to regulating water. 

For the most part (West Coast is only aware of one exception) oil and gas companies are not applying for water licences.  Instead they apply to the OGC for short-term (12 month) approvals, applying repeatedly for all their projects in a region, to skirt the more rigorous requirements of the MOE’s long-term water licence process.  The OGC, in its recent report, describes how frequently these short-term approvals are granted. 

The Commission issues short term water approvals under the Water Act (Section 8). In fiscal 2009, the Commission issued 807 approvals, with a total maximum approved withdrawal of 78,569 dam3 [78,569,000 m3].

The Commission’s report, other than mentioning the possibility of “an extension”, is silent about what happens when the authorized 12 months is up.  The answer seems to be that the Commission is happy to issue another short-term approval to the same company for the same project or projects essentially upon request. 

In the view of West Coast, this is illegal.  Section 8 of the Water Act clearly indicates that short-term approvals should only be granted where water is “required for a term not exceeding 12 months.”  There is no provision in the Act authorizing the OGC to grant an extension, which is in effect what they are doing when they allow repeated short-term approvals for the same project. The intent of the Water Act is clearly that if a user will require water for a term of longer than 12 months the user should apply to the MOE for a long-term water licence. 

In addition to the questionable legality, by authorizing the oil and gas industry’s water use through a series of rolling temporary approvals, the OGC has adopted an extremely non-transparent and unaccountable approach.

  • All water licences issued by the MOE, both short- and long-term, are available on-line and can be searched by stream, user, etc.  Not so with OGC short-term approvals.  Researcher Arthur Caldicott was able to obtain one sample approval, and was told that to obtain others he would need to request them based upon the Oil and Gas Commission application number. 
  • The MOE will usually require applicants for licences to notify other water users and those who might be affected by the water use.  Those potentially affected can object to the licence and/or appeal any licence issued to the Environmental Appeal Board.  There is no such notice given for the OGC’s short-term approvals (while an appeal is still theoretically possible, it must be brought within 30 days of the issuance of the approval, which is difficult if a would-be appellant has been given no notice that the approval has been given). 
  • MOE licences usually require detailed information about where the water may be taken and how it will be used.  By contrast, some of the OGC short-term approvals extend to wells that have not even been built yet, give no indication of where even existing wells are be located, and list multiple possible locations from which water may be taken. 

For an example of a OGC short-term approval and a company’s application for it, see the documents obtained by Arthur Caldicott. 

This is not to say that hydraulic fracturing will be any less water-intensive if oil and gas companies have to apply for water licences through the more rigorous MOE process.  At least one company has already chosen to apply for a longer-term licence – because this licence will give it a green light to build a pipeline (something not possible under the OGC short-term approvals).  However, at least the MOE licences are more transparent, and force the MOE to scrutinize the impacts of the water extractions to build the pipeline on other users and the environment. West Coast has criticized the significant weaknesses with BC’s water licensing system, in relation to run-of-river power, and recommended changes to improve the system. But having an MOE licence is still better than a series of poorly regulated short-term approvals.

Comments on the Oil and Gas Commission’s Report

Before leaving this topic, it is worth mentioning that throughout the water use report [link updated October 19, 2011], the Oil and Gas Commission has sought to give the impression that the water extracted by the oil and gas industry is inconsequential:

  • Although (as the report notes in passing) 99% of the oil and gas industry’s water use occurs in Peace River Country, the report compares the industry’s water use against province-wide useage.  There is little information about how the oil and gas industry compares to other users in the Peace River area, or whether the industry’s use impacts water flows in the Peace River country, particularly during a drought year. 
  • The Report uses a “rarely used” measurement known as cubic decametres to describe the water quantities being withdrawn.  This gives the impression that the figures are smaller than if the more commonly used measure of cubic metres had been used.
  • While the OGC assures the reader that “Routine day-to-day operations often require much less water” than the short-term approvals allow the oil and gas companies to take, there is no indication in the report that the OGC has actually audited any industrial users to determine how much water they are actually using or whether they are complying with the approval conditions. 
  • The report does not compare actual use versus the available flow in the region’s streams.  Two days after this report was released the oil and gas industry was ordered to stop extracting water from four water basins; the report gives no indication as to the basis for this order, or the OGC’s evaluation of the impacts that oil and gas extractions are having or could have on these or other water basins. 

There has been a perception that the Oil and Gas Commission – which is funded in large part from industry revenues – is a captured regulator.   It’s report does nothing to reverse that perception. 

Note: this post focuses on the legal issues associated with the OGC’s regulation of surface water extraction.  This should in no way be taken as endorsing the use of groundwater for fracking. 

Andrewblogphoto.jpgBy Andrew Gage