+ RMA Rural Municipalities
of Alberta

Resolution 10-18S

Tenure Extension Requirements for Unconventional Development

Date:
March 20, 2018
Expiry Date:
April 1, 2021
Active Status:
Active
Sponsors:
MD of Greenview
District:
4 - Northern
Year:
2018
Convention:
Spring
Category:
Energy
Status:
Intent Not Met
Vote Results:
Carried
Preamble:

WHEREAS the Mines and Minerals Act and associated regulations are the authority for administration and regulatory procedure regarding tenure and tenure extension; and

WHEREAS the draft Water Conservation Policy for Upstream Oil and Gas is an update of the Water Conservation and Allocation Policy for Oilfield Injection (2006) and places a greater emphasis on the use of alternative water sources such as industrial or municipal wastewater and impaired quality ground water, and is extended to oil sands mining, conventional enhanced recovery, and hydraulic fracturing water use; and

WHEREAS the Alberta Energy Regulator initiated a multi-stakeholder panel in the Area-Based Regulation Pilot Project in the M.D of Greenview, which examined the draft Water Conservation Policy for Upstream Oil and Gas and presented 23 consensus recommendations for improving the use of alternate sources of water and supporting the implementation of the policy; and

WHEREAS the draft Caribou Range Plan requires industry to engage in integrated land management to reduce the environmental impacts and fragmentation of landscape through regional access plans, multi-use corridors, and phased restoration to in the protection of caribou and restoration of caribou habitat; and

WHEREAS the federal Species at Risk Act will require similar actions to protect and restore other threatened and endangered species across the province; and

WHEREAS the current tenure process encourages the fracturing of the landscape and reduces orderly development of energy resources as industry is focused on planning activities around maintaining tenure; and

WHEREAS industry and municipalities support actions to reduce ecological footprint and environmental impacts, and seek to protect endangered species in Alberta through compliance with provincial and federal legislation and regulation, while maintaining and enhancing economic prosperity;

Operative Clause:

THEREFORE, BE IT RESOLVED that the Rural Municipalities of Alberta (RMA) requests the Government of Alberta review and examine tenure extension requirements for unconventional resource development, removing the need for industry to plan activities around securing tenure, and thereby allowing more orderly development and reduced impact on the environment.

Member Background:

Tenure

Tenure systems enable companies to explore for, and develop Alberta’s resources, such as petroleum and natural gas. Alberta’s Crown petroleum and natural gas rights are issued in the form of licenses or leases through a competitive bid system. The tenure ends when an agreement holder can no longer prove it is capable of producing resources in paying quantities, is lost through rental or royalty payment default, or by voluntary surrender.

When tenure holders wish to extend their tenure, they are required to engage in a process called “holding the land.” With conventional resources, wells are required to demonstrate reasonable reserves in the area where an extension is sought. This process was developed to prevent companies from holding and not developing their leases.

When applied to unconventional resource development, such as hydraulic fracturing or horizontal drilling, the target for tenure extension is a well-defined geological formation, such as the Duvernay or Montney. Companies are required to drill wells away from current development in order to hold the lease to land where it is already known that the resource exists creating isolated patches of development.  Therefore, the current tenure extension process does not allow for orderly development creating non-optimal disturbance on the landscape and adds significant costs to operators. The additional drilling, roads, pipelines and infrastructure required to extend tenure increases industry’s overall footprint and further fragments the landscape.

Issue

The discussion about tenure extension emerged as a supplementary issue in the Area-Based Regulation (ARB) Pilot Project in the M.D of Greenview. The ARB approach was initiated by the Alberta Energy Regulator to make geographically-specific rules and practices that consider the unique environment, energy resources, and communities of targeted areas in collaboration with the people that live, work and recreate in those locations. The pilot project involved a multi-stakeholder panel which developed recommendations specific to water use by the energy sector within the M.D of Greenview. The panel involved representatives from municipalities, environmental organizations, industry, and Indigenous and Metis groups. The panel presented 23 recommendations aimed at improving the use of alternative sources of water and supporting implementation of the draft Water Conservation Policy for Upstream Oil and Gas.

During the panel, there was discussion of the current energy tenure system. The current effects of the requirements for extending tenure holdings was seen by panel members to hamper the ability to implement the draft Water Conservation Policy for Upstream Oil and Gas. This issue was outside the panel’s scope as defined in their terms of reference, but the panel felt that altering tenure extension requirements would help achieve environmental and economic outcomes across the province.

The Government of Alberta is in the process of receiving feedback on the draft Caribou Range Plan, which will be followed by a number of plans under the federal Species at Risk Act for the protection of threatened or endangered species across the province. These plans have a number of significant potential impacts on municipalities and industry throughout Alberta. In its current form, the range plan would require industry to engage in integrated land management, including best practices to reduce their ecological footprint through regional access plans, multi-use corridors, and phased restoration. Alterations to tenure extension will allow industry to comply with changes to regulations and reduce their environmental footprint, reduce costs to operators, and maintain industry prosperity.

Recommendation

Changes to tenure extension requirements would reduce the need for industry to plan activities around maintaining tenure. Particularly, but not limited to, unconventional development, these changes would allow for more orderly development, reducing environmental impacts and fragmenting of the landscape. These changes are required as soon as possible as there are a number of tenure expirations occurring in 2019 and 2020

There are a number of benefits to changing tenure extension requirements. There is potential for acceleration of provincial revenue streams as production from wells would be in focused development areas, rather than if wells were drilled to secure tenure away from the existing development. More orderly development would allow for improved water management, especially reduced impacts on aquatic ecosystems through improved water recycle and reuse planning. It also allows for reduced land fragmentation through focused development. Changes to tenure extension would also encourage operators to increase the use of alternative water resources in unconventional resources development.

RMA Background:

RMA has no active resolutions directly related to this issue.

Government Response:

Alberta Energy

The province owns 81 per cent of the mineral resources in the province, which includes unconventional oil and gas resources. Alberta Energy (AE) manages these publicly owned resources on behalf of, and for the benefit of, all Albertans.

Alberta’s open and competitive petroleum and natural gas tenure system, which includes unconventional oil and gas, is the foundation of the successful energy industry in our province. AE continues its work to optimize the value of oil and gas resources for Albertans. This includes supporting the Alberta Energy Regulator (AER) with policies that enhance unconventional oil and gas production.

The system is designed to ensure equitable treatment for all operators regardless of size or asset focus, as well as to maximize revenue to Albertans as the resource owners. The tenure system ensures that, in alignment with provincial policies, resources are available at the time an operator is willing and able to develop them. This helps discourage speculative behaviour by operators and ensures Alberta’s petroleum and natural gas resources are developed.

AE firmly supports achieving the province’s economic, environmental, and social outcomes for Alberta’s landscape, and these outcomes are being considered together in many government initiatives, such as regional planning and caribou range plans. AE has and will continue to responsibly administer the petroleum and natural gas tenure system, on behalf of Albertans, to achieve Alberta’s economic, environmental, and social outcomes.

Alberta Energy Regulator

The AER reviews all applications it receives to ensure energy development is safe, environmentally responsible, and meets all requirements associated with the application. The AER is responsible for issuing licenses to drill wells and recover energy resources only after companies have acquired a site’s mineral rights from Alberta Energy.

The AER has also made significant progress on a number of recommendations from the pilot it conducted between August 2016 and June 2017 to test the area-based regulation approach.

Development:

The Government of Alberta’s response indicates some progress made from the from the area-based regulation pilot project that occurred in the MD of Greenview, but the intent of the resolution is not addressed through the pilot or other means, as the tenure system remains the same. This resolution is assigned a status of Intent Not Met and the RMA will continue to work with the Government of Alberta to fulfill the intent of this resolution.

Provincial Ministries:
Energy
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