overview of the permitting requirements for lng projects in british columbia

OVERVIEW OF THE PERMITTING REQUIREMENTS FOR LNG PROJECTS IN BRITISH COLUMBIA

TABLE OF CONTENTS

1. Introduction .......................................................................................................................... 1

2. Review Processes ................................................................................................................ 2

a. Environmental Assessment ..............................................................................................................2

i. Canadian Environmental Assessment Act – Decision Statement ..............................................2

ii. B.C.EnvironmentalAssessmentAct–EnvironmentalAssessmentCertificate ........................2

b. Technical Review Process of Marine Terminal Systems and Transshipment Sites .......................4

3. Provincial Legislation .......................................................................................................... 5

a. Oil and Gas Activities Act – Facility Permit .......................................................................................5

b. Water Act – FLNRO/OGC ..................................................................................................................5

c. Environmental Management Act – Ministry of Environment ..........................................................6

d. Heritage Conservation Act – Oil and Gas Commission/Forest, Lands and Natural Resource Operations .....................................................................................................6

e. Public Health Act – Ministry of Health ..............................................................................................7

4. Federal Legislation .............................................................................................................. 7

a. Fisheries Act – Fisheries and Oceans Canada/Environment Canada ..............................................7

b. Navigation Protection Act – Transport Canada .................................................................................8

c. Canadian Environmental Protection Act – Environment Canada .....................................................8

d. Species at Risk Act – Environment Canada/DFO .............................................................................8

e. Railway Safety Act – Transport Canada ............................................................................................9

f. Migratory Birds Convention Act – Environment Canada ..................................................................9

g. National Energy Board Act – Export Licence ....................................................................................9

5. Other Considerations .......................................................................................................... 9

1OVERVIEW OF THE PERMITTING REQUIREMENTS FOR LNG PROJECTS IN BRITISH COLUMBIA

OVERVIEW OF THE PERMITTING REQUIREMENTS FOR LNG PROJECTS IN BRITISH COLUMBIA

Introduction

Thelegislativeregimeaffectingthedevelopmentandoperationofaliquefiednaturalgas (LNG) export facility and marine terminal project in British Columbia (B.C.), includes government approvals, licences, permits and other regulatory requirements typically associatedwithsuchaproject.Whileeachprojectmustbeanalyzedforitsownspecificpermitting requirements, this overview provides an outline of the major environmental protection and non-environmental project permits, licences, etc., that are typically needed to undertake LNG terminal construction and operation activities.1

Certain provincial and federal permits or review processes are critical to pursue early on anLNGproject’sdevelopmentbecausetheyeitherhavealongleadtimeorasignificantlinkage to acquiring a “social licence” to proceed with the development. The set of permit requirements that support the commencement of early works or site preparation activities are also critical to a project’s progression.

(S. 11 Order)

1 This overview does not discuss upstream tenure or permitting requirements, or pipeline development.

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OVERVIEW OF THE PERMITTING REQUIREMENTS FOR LNG PROJECTS IN BRITISH COLUMBIA2

Review Processes

a. Environmental Assessment

An important feature of both the provincial and federal regulatory regimes is that when a legislated environmental assessment (EA) review process applies, as is typically the case with any LNG project,aclearlydefinedhierarchyoflegislativeauthorityexists.Most,ifnotall,project-relatedpermitting decisions by various federal and provincial authorities cannot precede a respective ministerial decision on the EA of the project. This requirement is clearly stated in both provincial and federal EA legislation.2 In each case, other regulators are prohibited from exercising authority or issuing approvals prior to the EA determination. However, permit application activities, including regulatory consultation, can, in some cases, occur in parallel to an EA.

Canada and B.C. both have statutory EA requirements. As a result, LNG projects may be required to comply with the Canadian Environmental Assessment Act (CEAA) and the B.C. Environmental Assessment Act (BCEAA). Under both regimes, EAs are proponent initiated and driven.

ItmaybebeneficialforanLNGprojecttopursueanEAprocessthatconcurrentlymeetstherequirements for the federal CEAA and the provincial equivalent, the BCEAA. The key to this strategy is to avoid an EA that encompasses additional associated project components, such as pipeline and/or power, and focus on the provincial EA process as the principal venue in order to takeadvantageoftheregulatedtimelinesinBCEAAandprovideforefficientconcurrentreviewatthe federal and provincial levels. Management of both federal and provincial EA requirements is critical to the success of this strategy.

Changes made in 2012 to the CEAA support the replacement of the federal EA process with the provincial EA process through “substitution” (i.e., one EA process and both the provincial and federal ministers render a decision on the result), or “equivalency” (i.e., one EA process and a provincial decision only) on request from the B.C. government. Since 2012, the federal government has allowed several projects to proceed in B.C. through substitution.

i. Canadian Environmental Assessment Act – Decision Statement

An LNG project will require an EA under the CEAA if it includes one or more activity, such as a marine terminal, listed in the Regulations Designating Physical Activities.3 The CEAA assessment is potentially narrower than its provincial counterpart, as the legislation only requires review of aspects of the environment under federal jurisdiction (such as impacts on the marine environment, migratory birds and transboundary effects). Review of impacts on aboriginal communities is also mandated. The CEAA also contains requirements for aboriginal and public consultation. The end result of the CEAA process is an assessment report from the Canadian Environmental Assessment Agency,whichdeterminesthesignificanceofpotentialimpacts and makes recommendations on whether or not a project should proceed. The decision on whether a project can proceed is made by either the Minister of Environment or the federal Cabinet, depending on the outcome of the EA. If approved, the proponent will be provided with a Decision Statement, which includes mandatory conditions for the project.

The CEAA process begins with an initial screening process to determine whether a federal EA is required and whether a panel review is necessary (i.e., where the project is complex and public interest is elevated). Once the screening is complete, the federal government will also consider requests for “substitution” or “equivalency” from the province.

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2 See: Sections 6 and 7 of CEAA and Sections 9 and 10 of BCEAA.3 Chemical plants were removed from the Regulations in 2013. Thus, the LNG plant itself will not trigger an EA under CEAA.


If substitution is not ordered, the EA will proceed through a series of steps similar to those under the BCEAA. These are subject to a number of mandatory decision points and legislated timelines.

ii. BC Environmental Assessment Act – Environmental Assessment Certificate

The BCEAA Reviewable Project Regulation requires that an EA be completed for a project that includes a new natural-gas processing plant facility with the design capacity to process natural gas at a rate of greater than 5.634 million m3/day.4

Therefore, most, if not all, LNG projects proposed in B.C. will be subject to the BCEAA. The scope of the EA review and amount of information required is in part dependent on the complexity of the project and stakeholder (including other regulatory agencies) level of interest. The end result of the EA is an environment assessmentcertificate(EAC).

TheBCEAAisoverseenbytheB.C.EnvironmentalAssessmentOffice(EAO),abranch of the Ministry of the Environment. The EAO manages the EA process within regulated timeframes and has substantial authority under the legislation for establishing the scope and activities of the process.

ThefigurebelowillustratestheBCEAAprocess:

Environmental Assessment Process

Project Description

Determination that the project is reviewable

(Section 10 Order)

Scope and process review

determined(Section 10 Order)

Application information

requirements(Section 11 Order)

PUBLIC COMMENT

PERIOD

PUBLIC COMMENT

PERIOD

(30 days)Pre-Application Stage

(no timeline)Application Review Stage

(180 days) Decision(45 days)

Application prepared and

submitted

Application evaluated for completeness

Certificate returned

Project cannot proceed

Certificate issued

Project authorized to proceed to

permitting stage

Application review

Assessment report

Project decision by ministers Further

assessment required

WORKING GROUP REVIEW

FIRST NATIONS CONSULTATION

NOT APPROVED

APPROVED

4Plantsthathaveadesigncapacityoflessthan5.634m3/daywillbereviewableiftheyalsoproducesulphuremissions≥twotonnes/day.


The process under the BCEAA commences with a project description (PD) prepared by the proponent and submitted to the EAO. There are several aspects of the PD that must be included inorderfortheEAtoproceed,andtherefore,thefirstportionoftheprocessisanevaluationofcompleteness. The EAO will review the package and release a public notice in the form of the issuanceofasection10order.ASection10orderconfirmstheprojectisreviewableundertheBCEAA and details the general conditions for the commencement of an EA. The proponent then

works with the EAO to draft the terms of reference or application information requirements (AIR) for the EA. A draft is developed and reviewed in consultation with an EA working group established by the EAO. The draft AIR is also subject to a public comment period beforeitisfinalizedandasection11orderisissued,which directs the proponent to undertake the required studies and investigations of the environmental impacts, if any, of the LNG project.

The project proponent will then complete the investigations and studies required in support of the development of an EA report, referred to as the EAC

application. There are no legislated timelines for the completion of the studies, and given factors such as seasonality issues, they can frequently take a year or more to complete. Draft versions of the EAC application may be reviewed by the EAO and/or an EA working group and, once formally submitted, will be evaluated for completeness for 30 days. Once accepted as complete by the EAO, the EAC application is subject to a 180-day legislated review stage that includes both a public comment period and feedback from the EA working group. The EAO will then generate an assessment report that will be accompanied by its recommendations on whether or not the project should be approved and any relevant outstanding issues or conditions that may be required.

ThefinalstageoftheEAprocessisareviewoftheEAOassessmentreportandrecommendations,by the provincial minister(s) involved. Over the course of 45 days, the minister(s) will decide whether the project is approved or not, or whether further assessment is required to render an approval. If approved, the EAC will then be issued and the project can move to the permitting stage. In some instances, application for provincial permits can be processed concurrently with the EA.

b. Technical Review Process of Marine Terminal Systems and Transshipment Sites

The Technical Review Process of Marine Terminal Systems and Transshipment Sites (TERMPOL) is an extensive, voluntary process focusing on vessel safety and vessel operation in Canadian waters along proposed shipping routes to and from a proposed LNG terminal. The TERMPOL Review Process 2001 Guidelines (Technical Publication 743) provide a framework that can be used to determine the studies and technical information required to support the review. Strategically, the goal for an LNG proponent in participating in the TERMPOL study is to demonstrate the safety of LNG shipping and the functioning federal regime that governs and monitors marine safety.

A TERMPOL review committee (TRC) will typically be established under the TERMPOL process for an LNG project and will likely include representatives from Transport Canada Marine Safety, Fisheries and Oceans Canada (DFO), Environment Canada, Canadian Coast Guard, Aboriginal andNorthernDevelopment,andFirstNations.Onceformed,theTRCdefinesthescopeofstudy through consultation with the proponent on their proposed activities and the availability of relevant information.


Provincial Legislation

a. Oil and Gas Activities Act – Facility Permit

The OGC is responsible for overseeing oil and gas operations in B.C., including exploration, development and reclamation. The OGC has authority to issue a permit to construct and operate an LNG facility under the Oil and Gas Activities Act (OGAA) and related regulations.

The OGC has been delegated as the legislative authority under several provincial acts to issue a variety of permits that may be required for an LNG project, including cutting permits for timber harvest, Crown land tenure, and those that deal with water crossings, short-term withdrawals and changes in and about a stream.

The former OGAA Pipeline and Liquefied Natural Gas Facility Regulation was amended in July, 2014 and bifurcated into two separate regulations: (i) the Pipeline Regulation, which is now limited to pipeline-related matters in British Columbia, and is distinct from the jurisdiction and mandate of the British Columbia Utilities Commission pursuant to the provincial Utilities Commission Act; and (ii) the Liquefied Natural Gas Facility Regulation (LNGFR).

The LNGFR governs the standards that each LNG facility permit applicant, and ultimately permit holders, must abide by when designing, constructing, operating, maintaining, decommissioning and reclaiming an LNG facility. In particular, an LNG facility must comply with the standards published by the Canadian Standards Association as CSA Z276, Liquefied natural gas (LNG) – production, storage, and handling. The LNGFR covers a wide scope of technical requirements for LNG facilities, beginning with the LNG facility permit application process, through the construction, operation, decommissioning and reclamation phases. Notably, the LNGFR sets forth notice and reporting requirements for all project applicants and permit holders during variousprojectphasesandenablestheOGCtomakeindividualfacility-specificdecisionsbasedon such reports. Further, the LNGFR sets out overarching occupational health and safety program requirements, including emergency response planning.

Significantly,thejurisdictionoftheLNGFRislimitedtoLNGfacilitysitesthemselves,asopposedto upstream aspects of natural gas extraction, production and transportation.

Thefacilitypermitapplicationincludesregulatedconsultationandnotificationrequirementsassociated with the application for both relevant public and First Nation entities.

Concurrently with the release of the LNGFR, the OGC published the Liquefied Natural Gas Facility Permit Application and Operations Manual (LNG Facility Manual). The LNG Facility Manual provides an overview of the current provincial LNG scheme, as well as detailed guidelinesfortherulesandproceduressetforthintheLNGFR.Morespecifically,itcoversa range of issues relating to the life cycle of an LNG facility, from environmental matters to shipping,wateruse,noisecontrol,flaringandventing,engineeringandgeotechnicalmatters,and site restoration post-operations, among many others.

b. Water Act – FLNRO/OGC

The B.C. Water Act requires licensing for use of surface water. Ordinarily, long-term water licensing under the Water Act is the administrative responsibility of FLNRO. However, the OGC administers short-term use of water by the oil and gas industry under section 8 of

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the Water Act. Currently, groundwater use does not require a licence, but this will change in 2015 when the Water Sustainability Act comes into force and the Water Act is repealed. Under section 140 of the Water Sustainability Act, groundwater users will be required to apply for licences, and under section 83 of the new act, the Lieutenant Governor in Council will have the power to restrict or prohibit certain activities in relation to groundwater.

Section 9 of the Water Act and the Water Regulationrequiresnotificationorapprovalof“changesinandaboutastream.”Notificationsaretypicallyusedforworksthatdonotinvolveany diversion of water, may be completed within a short period of time and will have minimal impact on the environment or third parties. An approval is a written authorization for changes in and about a stream that are of a complex nature. The OGC also administers approvals for changes in and about a stream in respect of an oil and gas activity. Section 9 Water Act applications for project activities often require similar information as those required under section 35 of the federal Fisheries Act. Provisions similar to section 9 have been included in the new Water Sustainability Act.

For LNG facilities, fresh water may be needed for water-tower cooling requirements. The water licences will establish both volume and equipment requirements for use of surface water.

c. Environmental Management Act – Ministry of Environment

The Environmental Management Act (EMA) is the principal environmental statute in B.C. Under the EMA,waste(whichincludesairemissions,effluentandrefuse)cannotbereleasedinto the environment except in accordance with a permit or a regulation. There are several LNG project activities that could require EMA permitting. For example, dredge disposal is an area of activity that will likely require EMA approvals from the Ministry of the Environment (MOE), depending on the material and the location ultimately selected.

Other project activities that will likely require EMA-related permitting include:

• Wastewaterdischarge(includingcoolingwater)–effluentpermitundersection14 of the EMA

• Storm water management during construction and operations – requires compliance with the Petroleum Storage and Distribution Facilities Storm Water Regulation

• Any provincial regulated material, for example, mercury removed from natural gas feedstock in minute quantities. The collection and disposal of mercury would need to comply with the Hazardous Waste Regulation.

Certain EMA-related permits, such as section 14 EMA permits, are administered by the OGC in relation to oil and gas activities. Most of these decisions, whether administered by OGC or the MOE, are subject to a public consultation period.

d. Heritage Conservation Act – Oil and Gas Commission/Forest, Lands and Natural Resource Operations

A permit is required under the Heritage Conservation Act (HCA) for investigative work to identify any archaeological, historical and/or paleontological resources that may be found within the proposed areas of project activities. These permits are usually issued by the Archaeology Branch of the Ministry of Forest, Lands and Natural Resource Operations (FLNRO). Depending onthefindingsoftheseinvestigations,aletterofclearancefromFLNROconfirmingthereareno expected resource impacts associated with the proposed project activities or a section 12


permitforproposedalterationsofidentifiedheritagesite(s)wouldbeissued.Alterationscouldincludevariouscontrolledactivitiesunderthesupervisionofqualifiedprofessionals,such as the systematic collection of heritage materials through excavations and/or measures that prevent any damage to or degradation of the heritage resources.

Pursuant to a protocol agreement between the Oil and Gas Commission (OGC) and FLNRO, upon completion of archeological impact management measures or the determination that none are required, the OGC will issue a section 12 permit under the HCA in respect of oil and gas activities. These efforts and government review cycles can require substantial time to complete.

e. Public Health Act – Ministry of Health

The operation of a construction camp in the course of an LNG project development is a regulated activity under the Public Health Act (PHA). A camp operator must comply with the requirements of the Industrial Camps Regulation to ensure potential risks to human health are managed appropriately. Depending on the volume of wastewater associated with the onsite sewage system required to support the industrial camp operation, a permit pursuant to the Sewerage System Regulation may be required. If the system is less than the threshold volume (i.e., 22,700 L/day), the regulation under the PHA will ap-ply. If the system is over the threshold volume, a permit under the EMA is required. This permittingprocessisnotexpectedtorequireasignificantamountoftimetorevieworapprove, but the designers of the camp need to be in close consultation with the Health Authority to ensure full compliance with the requirements.

The other aspect of the camp design that will likely require approval concerns the supply of drinking water. Depending on the source of the drinking water and whether a water system is required to be constructed, the Drinking Water Protection Act may apply.

Federal Legislation

a. Fisheries Act – Fisheries and Oceans Canada/Environment Canada

The Fisheries Act prohibitsseriousharmtofishthatarepartofacommercial,recreationaloraboriginalfishery,ortofishthatsupportsuchafishery.Seriousharmtofishincludesharmtofishhabitat.TheDFOinterpretationofcommercial,recreationaloraboriginalfisheryisbroadandlikelycapturesany fresh or salt-water bodies adjacent to proposed LNG facilities in B.C.

An LNG proponent whose project has the potential to resultinseriousharmtofish(orfishhabitat)shouldattempt to develop its project in a manner that will not cause such harm, so that an authorization under the Fisheries Act is not needed. However, if such harm cannotbeavoidedorsufficientlymitigated,authorizationwill be needed from the DFO under section 35(2) of the Fisheries Act to permit such a result.

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The DFO adopted policies in late 2013 to guide it and proponents on when authorizations will be issued and what terms are likely to be imposed.

Thefailurebyaproponenttoobtainanauthorizationwhereharmtofishorfishhabitatoccurs(or to comply with one if issued) is an offence.

b. Navigation Protection Act – Transport Canada

The Navigation Protection Act (NPA) requires approval of works that are to be placed on, over or under certain designated navigable waters, with some exceptions for minor works that are set out in regulations. “Navigable waters” has been held by the courts to include any “aqueous highway” that is capable of supporting a vessel of any size (including a raft or canoe). Approvals are issued by Transport Canada and focus on impacts to navigation.

The NPA prohibits works over navigable waters that are listed in a schedule to the NPA, which includes three oceans, 97 lakes and 62 rivers across Canada. If a work is proposed on a Schedule 1 waterbody, a notice of proposed work must be provided to the Minister of Transport, who will make a determination of whether the work will substantially interfere with navigation. If the work will not substantially interfere with navigation, then no approval is required and construction can move forward in accordance with regulations. For works that will substantially interfere with navigation, an approval is required. Thus, only works associated with the LNG plant that will substantially interfere with navigation on waterways listed in the schedule, will require approvals. Furthermore, if a work is included in the definitionofa“minorwork”inregulations,theworkcanbeconstructedwithoutapproval,provided it complies with any conditions in the regulations in relation to that construction.

The NPA also prohibits dewatering of navigable waters. This prohibition applies to any navigable water, not just those listed in the schedule. There is no approval power granted to the minister in respect of such dewatering, although there is a power granted to the federal Cabinet to order an exemption if it is in the public interest.

c. Canadian Environmental Protection Act – Environment Canada

Environment Canada is the permitting authority for the deliberate disposal of approved substances at sea under the Disposal at Sea Regulations under the Canadian Environmental Protection Act (CEPA). Approved substances include dredged material that must be moved to keep shipping channels and harbours clear for navigation and commerce. Both the proposed dredged materials and the receiving environment must be reviewed to ensure that the activitiesdonotresultinsignificantenvironmentaleffects.

d. Species at Risk Act – Environment Canada/DFO

The Species at Risk Act (SARA) prohibits the killing, harming or harassing of species listed as endangered or threatened, the damage and destruction of their residences, and the destructionofcriticalhabitatthathasbeenidentifiedinarecoverystrategyandsubjecttoa protection order by the minister or the federal Cabinet. While these prohibitions do not automatically apply to all species throughout Canada, they do apply to aquatic species and migratory birds. The key risk to be managed for LNG projects will likely be with respect to marine species, in particular marine mammals that may be impacted by shipping activities. While SARA does contain provisions for permitting, the conditions for their issuance are such that they are highly unlikely to be available for LNG-related activities. Therefore, project planning must include measures to avoid the prohibited impacts and must take any


recoverystrategiesintoaccount.Furthermore,SARAmandatesspecificconsiderationand planning for all listed species when an EA under CEAA is conducted, regardless of whether any prohibitions apply.

e. Railway Safety Act – Transport Canada

Constructionoformodificationstorailways(e.g.,constructingormodifyingasiding)toan LNG project site may require approvals. Obtaining Transport Canada approvals can often be a lengthy process.

f. Migratory Birds Convention Act – Environment Canada

The Migratory Birds Convention Act (MBCA) and associated regulations set out the legal requirements for the protection of migratory birds and their nests. Of particular note, “incidental” impacts on migratory birds’ nests and their eggs are prohibited, and there is no permitting regime to allow such activity.

Environment Canada provides technical information and key breeding dates as guidelines to help proponents determine the periods when the risk of destroying a migratory bird nest oregg,orotherwisecontraveningtheMBCAandregulationsisparticularlyhigh.Specificsof the timing and extent of the proposed activities, and the migratory bird species and their expected use of the project site, need to be taken into account in construction schedules. Appropriate measures need to be decided on a case-by-case basis, and it is the responsibility of those in charge of the project to determine these measures.

g. National Energy Board Act – Export Licence

The export of natural gas from Canada requires an export licence issued pursuant to the National Energy Board Act, which is administered by the National Energy Board (NEB).TheNEBcanonlyissuesuchalicenceforanLNGprojectifitissatisfiedthereissufficientgastomeetdomesticneeds.

Other Considerations

A number of other regulatory requirements must be considered. They include, but are not limited to:

• Early Works/Construction – Typically, project activities will require permits or approval from the municipality within which the project is situated. Municipalities derive their authority from the provincial Local Government Act. Examples of municipal regulatory requirements include permits for land use or development, building permits, occupancy permits, dust control, noise management and storm water management. The responsibility for acquiring these permits may be delegated to a prime contractor along with management of the provincial Occupational Health and Safety Regulation requirements (discussed below).

• Logistics/Transportation – Equipment and materials being delivered to a facility site via roads or B.C. railways will need to comply with the provincial Transportation Act and the requirements of the B.C. Commercial Vehicle Safety and Enforcement (CVSE) agency. Marine transportation will be subject to all of the federal legislation and international guidelines for shipping administered by Transport Canada and the Canadian Coast Guard.

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For further information, please contact:

Janice H. WaltonCounsel | [email protected]+1-604-631-3354 Tony Crossman Partner | [email protected]+1-604-631-3333

Katie JamiesonAssociate | [email protected]+1-604-631-3374

Lars OlthaferPartner | [email protected]+1-403-260-9633

Duff HarperPartner | [email protected]+1-403-260-9710

Sandy Carpenter Partner | Calgary [email protected] +1-403-260-9768

Charles KazazPartner | Montré[email protected]+1-514-982-4002 Jonathan KahnPartner | [email protected]+1-416-863-3868

Transport Canada also administers the requirements under the federal Transportation of Dangerous Goods Act. Any imported materials, equipment or commercial goods will be subject to the federal legislation that is operationally managed by the Border Services Agency. This includes tariffs, duties, prohibitions, inspections, etc.

• Health and Safety – Typical requirements include construction health and safety, workplace insurance, drug and alcohol prohibition, etc. RequirementsaredefinedasapplicableundertheOccupational Health and Safety Regulation, the Workers Compensation Act, the Skills Development and Labour Statutes Act, the Railway Safety Act, the Employment Standards Act and the Safety Standards Act.AdditionalLNGfacility-specifichealthandsafetyrequirements,specificallyemergencyresponseplanning,are also outlined under the LNGFR.

• Hazardous Substances-Amanagementplanfortoxicorhazardoussubstances(asidentifiedunder CEPA or the EMA’s Hazardous Waste Regulation) is typically required. This would generally be developed and addressed during the EA.

This guide is intended as an introductory summary. Specific advice should be sought in connection with particular projects or transactions.

overview of the permitting requirements for lng projects in british columbia

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