On April 5, 2011, the Alberta Government released its draft Lower Athabasca Regional Plan (“LARP”), which sets out the Government's plan for managing economic growth and environmental sustainability in northeastern Alberta, an area that contains most of the province's oil sands resources.
Significant to energy companies is that LARP establishes five new conservation areas in which oil sands activity is prohibited. Generally, these areas appear to be on the periphery of most of the bitumen-rich areas, but companies should review all lease locations nonetheless to ensure they are not affected. Companies with existing petroleum and natural gas leases in the new conservation areas are largely unaffected. LARP also establishes management frameworks for air quality, water quality and quantity and biodiversity, which may impact future industrial decision-making in the region if scientifically established limits are being approached.
Importantly, LARP must be implemented by any bodies that make land-use decisions for the region, which would include municipal governments, provincial ministries, as well as boards and agencies, such as the Energy Resources Conservation Board (“ERCB”) and Alberta Environment.
As part of LARP, the Government proposes to designate an additional 16 percent of the region's land base as conservation areas, on top of the existing six percent of the region already protected as wildland provincial parks.
There are five proposed new conservation areas: Canadian Shield Wildland Park, Richardson Wildland Park, Gipsy-Gordon Wildland Park, Birch River Conservation Area, and Dillon River Conservation Area. In all of these areas, oil sands and mineral development, as well as commercial forestry, will be prohibited. It appears that companies with existing oil sands leases, mineral leases or timber licences within those areas will have their dispositions rescinded pursuant to the Proposed Lower Athabasca Integrated Regional Plan Regulations.
From a review of a map of the proposed conservation areas, it appears that these areas are mostly on the periphery of the bitumen rich regions and that the most prospective oil sands areas are largely unaffected.
Companies with petroleum and natural gas (PNG) leases in the new conservation areas will likely be able to retain their leases and develop future projects, as long as those new projects relate to the PNG rights they already hold. Specifically, these companies will be able to continue all subsurface and surface activities needed to explore for, develop and extract PNG under existing leases, as well as renew existing subsurface and surface dispositions for existing activities. Applications for new surface dispositions, such as approvals for a well or pipeline, that are necessary to access an existing subsurface right will also be honoured. Applications for seismic programs associated with existing subsurface rights will continue to be reviewed through the current application and approval process. However, companies with existing surface or subsurface approvals cannot use those approvals to access new subsurface rights within a protected area.
LARP indicates that tenure holders subject to cancellation as a result of LARP, such as oil sands and mineral lease holders in the newly established conservation areas, will be compensated pursuant to the Mineral Rights Compensation Regulation (the “Compensation Regulation”) under the Mines and Minerals Act. According to LARP, the intent of this legislation is to return affected companies to the position they were in prior to obtaining the cancelled tenure. Notably, under the existing Compensation Regulation, it appears that these companies cannot be compensated for potential lost revenues they may have earned through the development of their leases.
Under the Compensation Regulation, persons whose mineral leases are cancelled are to be compensated by the Crown for the following expenditures:
- If the lessee is the original lessee:
• The amount paid to the Crown as a bonus to acquire the lease;
• The amount paid to the Crown as rental payments; and
• The amount paid to the Crown in application fees.
- If the lessee is not the original lessee:
• An amount equal to the value of the consideration paid by the lessee to acquire the lease;
• The amount paid to the Crown as fees in connection with registration of the transfer and issue of the lease; and
• The amount paid to the Crown as rental payments.
- A development allowance, which is the amount of money determined to have been fairly and reasonably expended by the lessee, or others having a demonstrable interest in the lease, in exploring for or developing minerals in the location during the period of time the lessee held the cancelled lease;
- A reclamation allowance, which is the amount of money determined to have been fairly and reasonably expended by the lessee, or others having a demonstrable interest in the lease, on abandonment or reclamation work necessitated by the exploration for and development of minerals in the location during the established eligibility period; and
- An interest allowance, which is the interest owed on the amount of compensation determined under the first two points enumerated above.
Air, Water and Biodiversity Management Frameworks
Regional management frameworks for air quality, surface water quality, and groundwater have been developed and will be implemented under LARP. These management frameworks are intended to assist decision-making around future activities and management of existing activities by setting science-based environmental limits and triggers. Limits are clear boundaries in the system not to be exceeded, while triggers are warning signals to allow for evaluation and adjustment. The frameworks involve ongoing monitoring, evaluation and reporting.
Using these various management frameworks, decision-makers will make choices about activities permitted in the region based on the established limits and triggers. If environmental conditions are approaching their limits, further development may be restricted.
The ambient air quality limits and triggers in the air quality management framework are based on accepted Alberta ambient air quality guidelines for nitrogen dioxide (NO2) and sulphur dioxide (SO2). The indicators chosen for the groundwater management framework include measurements of various water quality indicators, such as total dissolved solids, napthenic acids and other chemicals, as well as change in groundwater surface elevation. The surface water quality management framework is based on provincially-used water quality guidelines and uses various chemical concentrations as indicators. The Government is also committed to updating the surface water quantity management framework for the Lower Athabasca River by 2012.
LARP also anticipates a biodiversity management framework, slated for implementation by 2013, to apply to public multi-use lands. This framework will identify biodiversity conservation areas in the region, set targets for selected biodiversity indicators (namely, vegetation, aquatic and wildlife) and address caribou habitat needs. In addition, the Government intends to develop a regional land disturbance plan by 2013 to support the biodiversity framework. The plan will introduce a land disturbance limit and management triggers. The plan will not prescribe site-specific practices or tools for integrated land management but will mandate integrated landscape management for industry operators on a larger scale. Such initiatives may include shared road networks and reducing land disturbance to the productive forest land base.
LARP also foresees a new progressive reclamation strategy for oil sands mining operations, and the establishment by 2012 of a tailings management framework for mineable oil sands operations to complement existing ERCB Directive 074.
Timing of Implementation
The draft LARP released on April 5 is still subject to public comment, consultation and potential change over the next two months. Minister for Sustainable Resource Development, Mel Knight, has stated he would like to have the final draft of LARP before Cabinet in 90 days.
LARP will not be implemented until Bill 10, Alberta Land Stewardship Amendment Act, 2011, is passed by the legislature. Bill 10 had its second reading on March 8, 2011. It is noteworthy that Bill 10 presently contains a provision permitting any person “who is directly and adversely affected by a regional plan” to request a review of a regional plan within 12 months from the date the regional plan comes into force. The Stewardship Minister must then establish a panel to conduct a review of the regional plan. As such, even after it is implemented, LARP may be subject to further review and change.