While federal and provincial governments involved in Canada's East Coast offshore petroleum boards say they are reviewing a recent Senate committee report recommendation noting an alleged conflict of interest in how the boards regulate the industry, governments deny the boards' structure allows for such a conflict.

In the wake of the Gulf of Mexico oil well blowout this spring, Newfoundland and Nova Scotia offshore petroleum boards have been set under a microscope.

The only oil and gas being pumped from Canadian waters these days comes from areas under their jurisdiction. Three oil production fields operate off Newfoundland where a new well was just drilled, while one gas production project is located off Nova Scotia.

They were part of the focus of the Senate Natural Resources Committee's three-month study of Canada's offshore oil and gas industry this spring, sparked by the Gulf spill.

In its 77-page concluding report released this month, the committee recommended that the Canadian, Nova Scotia and Newfoundland governments take a deeper look at the offshore boards' structure and role to determine whether there's a conflict within their regulatory roles.

Witnesses told the committee that United States President Barack Obama separated the commercial and safety sides of his country's offshore regulatory regime after noting, in the wake of the Gulf oil spill, that regulatory officials had been too close to industry.

In Canada, the federal government already had separate agencies promoting and regulating the health and safety of the offshore oil and gas industry in the Arctic.

But on the Atlantic coast, joint federal-provincial offshore petroleum boards for Newfoundland and Nova Scotia are responsible both for "maximizing hydrocarbon recovery, value and benefits," and "environmental protection and safety," the committee noted.

"Is that a conflict that runs into them not being able to do the latter as aggressively as they might? They argue that that is not the case. We'd just like to see that tested and reassured," the committee's deputy chair, Liberal Senator Grant Mitchell, noted at a press conference announcing the report's release Aug. 18.

NDP MP Jack Harris (St. John's East, Nfld.) said he supports taking a closer look at the boards. He is his party's deputy energy critic for the Atlantic region and, as a trained lawyer, also had standing at an inquiry into offshore helicopter safety called last year after a chopper carrying oil workers to Newfoundland-based offshore rigs crashed, killing 17. That is another part of the industry regulated by the Canada-Newfoundland and Labrador Offshore Petroleum Board.

"At least from the public's point-of-view, the regulator has a dual role. While they're not promoting the industry, they're working on the development of the industry, and they're working very closely with the industry," said Mr. Harris last week.

In a submission to the helicopter inquiry, a lawyer for the Communications, Energy and Paperworkers Union local 2121 noted a "culture of cooperation" between the C-NLOPB and industry that meant "the focus on safety is lost and any impetus to correction is dissipated."

Both Nova Scotia and Newfoundland governments are now planning to amend the Atlantic Accord Acts that govern the offshore boards to strengthen sections focused on occupational health and safety.

From the environmental side, Memorial University seabird ecologist Bill Montevecchi also said he sees the board showing industry bias.

"It essentially has the most minimal and inadequate mandates for environmental protection. It's development first. It's oil industry dominance. There's no question about that."

He said that independent monitors should be on board oil platforms to evaluate the industry's effects on the environment affecting marine animals and sea birds.

"How environmental reporting works with the C-NLOPB is essentially self-reporting from the industry," said Prof. Montevecchi.

Another biologist who has studied wildlife in the region, Gail Fraser of York University, told a Commons committee also studying the offshore industry this spring that she was involved in submitting five access to information requests to the Newfoundland board about oil spills, including one on methods used to determine the effects of an oil spill on wildlife. All five were denied as privileged information under the Canada-Newfoundland Atlantic Accord Act.

"In the current system, transparency is not a public right but is administered as a privilege granted by the industry when it decides whether or not to release information," Prof. Fraser told the committee.

While critics have been most vocal about the Newfoundland board, an Ottawa Citizen article earlier this month noted that most of the appointees to both the offshore boards made by the current Conservative government have had close ties to the petroleum industry or little environmental experience. The provincial and federal governments share board appointment duties, which they say is done based on merit and qualifications.

Liberal natural resources critic Geoff Regan (Halifax West, N.S.) said the governments should ensure they appoint individuals with a combination of the right kinds of skills.

"I also know that these boards, among their staffs, they have expertise related to both [the oil and gas industry and the environment] and that's important. But I think it's worth examining [appointments]," he said.

He said he supported reviewing the structure of the boards.

"I haven't concluded that there is a conflict, but I accept that it's something to look at, as the [Senate] committee had suggested."

But he cautioned that further separation of the boards' roles could lead to duplication and overlap.

"What you don't want, I think, is to have two federal agencies or departments and two provincial agencies or departments—so you have four agencies dealing with the offshore in one province," he said.

The current structure is beneficial because it takes a "holistic approach," David Pryce, a representative of the Canadian Association of Petroleum Producers told the Senate committee. He emphasized that the boards' first priority is safety.

Officials from Nova Scotia's department of energy and Newfoundland's department of natural resources said the current board structure clearly defines that governments are in charge of promoting the industry, while the boards protect safety and the environment.

Even with its commercial responsibility, Tracy Barron of the Nova Scotia department of energy said human health and safety are paramount. The two provincially-appointed members of her province's board are selected through a public application process. A legislative standing committee confirms the candidates' qualifications.

Nova Scotia board spokesperson Tanya Taylor White said there are enough checks and balances within the board's legislative framework to address potential conflicts of interest.

It has a chief conservation officer and chief safety officer who report to the board and not the CEO, who is responsible for day-to-day board operations. Its health and safety department run separately from its rights and resources department, which issues land development licences to companies.

Neither board accepts oil and gas royalties. They go directly to government.

Sean Kelly, a Newfoundland board spokesperson, said board members and staff follow a code of conduct.

"We maintain a professional relationship with oil and gas companies," he said. "We facilitate the land rights issuance process...we do not promote the industry."

Spokespersons for the Newfoundland and Nova Scotia governments and Natural Resources Canada, the federal department leading this file, all said they were reviewing the Senate report's six recommendations. Other recommendations included calls for a review of industry liability for spill damage and further study into when to use relief wells.

"The current [board] structure is effective and does not produce an inherent conflict of interest," wrote Newfoundland department of natural resources spokesperson Ken Morrissey in an email to The Hill Times. "While confident there is no inherent conflict, Newfoundland and Labrador will continue to evaluate opinions on this matter as they are brought forward."

No government agency offered a timeline for their review of the report or possible implementation of recommendations.

kshane@hilltimes.com

The Hill Times