Some Day the Sun Will Shine and Have Not Will Be No More
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PURPOSES OF THE ACCORD
The purposes of this Accord are:
to provide for the development of oil and gas resources offshore Newfoundland for the benefit of Canada as a whole and Newfoundland and Labrador in particular;
to protect, preserve, and advance the attainment of national self-sufficiency and security of supply;
to recognize the right of Newfoundland and Labrador to be the principal beneficiary of the oil and gas resources off its shores, consistent with the requirement for a strong and united Canada;
to recognize the equality of both governments in the management of the resource, and ensure that the pace and manner of development optimize the social and economic benefits to Canada as a whole and to Newfoundland and Labrador in particular;
to provide that the Government of Newfoundland and Labrador can establish and collect resource revenues as if these resources were on land, within the province;
to provide for a stable and fair offshore management regime for industry;
to provide for a stable and permanent arrangement for the management of the offshore adjacent to Newfoundland by enacting the relevant provisions of this Accord in legislation of the Parliament of Canada and the Legislature of Newfoundland and Labrador and by providing that the Accord may only be amended by the mutual consent of both governments; and
to promote within the system of joint management, insofar as is appropriate, consistency with the management regimes established for other offshore areas in Canada.
JOINT MANAGEMENT
The two parties agree to establish the Canada-Newfoundland Offshore Petroleum Board, hereinafter called “the Board”, to administer the relevant provisions of the Canada-Newfoundland Atlantic Accord Implementation Act as enacted by the Parliament of Canada and the Legislature of Newfoundland and Labrador, and other relevant legislation.
The Board shall consist of seven members: three of whom shall be appointed by the Government of Canada and three of whom shall be appointed by the Government of Newfoundland and Labrador. The Chairman shall be jointly appointed by both governments. Members of the Board shall not be public servants of Canada or Newfoundland and shall be subject to conflict of interest guidelines.
In the event that after three months of consultation, the two governments fail to agree on the Chairman, the Chairman shall be chosen by a panel consisting of one nominee from each government who shall agree on a third person to chair the panel. In the event that the nominees fail to agree on the Chairman of the panel, the Chairman shall be selected by the Chief Justice of Newfoundland. The decision of the panel shall be binding on both governments.
The first members of the Board shall be appointed by each government for staggered terms of four, five and six years respectively in order that only two members retire in any one year. The Chairman shall be appointed for a term of seven years. Subsequently, members and the Chairman shall be appointed for terms of six years. On completion of a term, members and the Chairman may be reappointed for further terms. They shall hold office during good behaviour. Each government may appoint one alternate member to serve as a member in the absence of one of the members nominated by that government.
The quorum of the Board shall be four of the members.
The offices of the Board and its staff shall be located in Newfoundland.
The Board may from time to time establish or change its rules and procedures including provisions for reasonable notice of meetings.
The Board may review and make recommendations to the two governments with respect to proposed amendments to the legislation implementing the Accord and the regulations made thereunder.
The Board shall keep the Government of Canada and the Government of Newfoundland and Labrador informed of its decisions in a timely manner.
Both governments agree that the Board should make its decisions on the basis of consensus. Members of the Board are not to act as nominees of the government which appointed them. In the absence of consensus, decisions will be made by the Board on majority vote.
The Board shall provide both governments with full and complete access to all information held by the Board. In addition, the Board shall require applicants, permittees, and licencees to concurrently file copies of all material filed with the Board with both Governments.
The Board shall report promptly and concurrently to the designated department or Agency of both governments any significant event or information received by the Board.
The Board shall meet at least once monthly and at any other time at the call of the Chairman, or at the call of any two members. The Board shall also meet when requested by either one or both of the two governments, to review any matter referred to it by a government.
The Board shall select and appoint a Chief Executive Office through an open competitive process. Alternatively, the two governments may appoint the Chairman of the Board as Chief Executive Officer. The appointment of a separate Chief Executive Officer is subject to the approval of both governments. Failing agreement, the arbitration process set out for the appointment of the Chairman shall apply for the selection of a Chief Executive Officer. The Chief Executive Officer shall be fully accountable to the Board.
The Board shall, upon the recommendation of the Chief Executive Officer, appoint sufficient staff to fully carry out its functions under the Accord legislation. The staff shall be selected on the basis of merit, generally following a public competition and shall be employees of the Board. When requested by the Board, both governments will take action to facilitate mobility between employment in the federal and provincial public services and employment in the Board, including secondments and portable pensions.
The Chief Executive Officer shall prepare a budget for the Board on an annual basis. Following approval of the budget by the Board, it shall be submitted to both governments for their consideration and approval. The budget shall be sufficient to permit the Board to carry out its duties under the legislation implementing the Accord. Each government shall pay one-half of the approved annual cost of Board operations.
The Board shall establish, maintain and operate a facility in Newfoundland for the storage and curatorship of all geophysical records and geological and hydrocarbon samples relating to the offshore area.
The Board shall prepare an annual report and submit it to both governments by the end of the first quarter of the following calendar year. The report, which shall contain an audited financial statement and a description of the Board’s activities during the previous year, shall be tabled in the House of Commons and the House of Assembly by the Minister of Energy, Mines and Resources and the designated Newfoundland Minister respectively. Provision will also be made in the legislation implementing the Accord for the Government of Canada and the Government of Newfoundland and Labrador to have access to the books and accounts of the Board for the purposes of an audit.
DECISIONS IN RELATION TO OFFSHORE MANAGEMENT
For the purposes of defining the role of the Board and Ministers, decisions on offshore resources shall be divided as follows:
decisions, made by Parliament, the Government of Canada, or Federal Ministers (clause 22);
decisions made by the Newfoundland Legislature, the Newfoundland Government or Provincial Minister (clause 23);
decisions made by the Board subject to no ministerial review or directives (clause 24); and
decisions made by the Board subject to the approval of the appropriate Minister (Fundamental Decisions, clause 25), or subject to directions from the Ministers of both governments (clause 33a).
Decisions made by Parliament, the Government of Canada or Federal Ministers alone comprise:
decisions related to Canadianization policy (e.g., discretionary Canadian Ownership requirements);
decisions made under legislation of general application not specifically related to oil and gas exploration and production (e.g., Fisheries Act, Canada Shipping Act, Immigration Act); and
decisions related to the application
of federal taxes.
Decisions made by the Newfoundland Legislature, the Newfoundland Government, or Provincial Ministers alone comprise:
the royalty regime and other provincial-type revenues (see clause 37);
decisions related to provincial laws of general application having effect in the offshore pursuant to clause 61.
The Board shall make all other decisions relating to the regulation and management of petroleum-related activities in the offshore area. Except for fundamental decisions, as set out in clause 25, all decisions of the Board shall be final. Without limiting the generality of the above, such final decisions shall include:
The Declaration of Discoveries:
declaration of significant discoveries and commercial discoveries
Production Licence
granting and renewal of a production licence
exclusion of lands from a production licence
Compliance Functions:
prosecution, notices, and orders regarding offenses
The Administration of Regulations Respecting “Good Oilfield Practice”:
orders relating to waste
entry into pooling and unitization agreements
administration of technical regulations related to safety, environmental protection, resource conservation, and other matters during the exploration, development and production phases
production installation, facility and operations approvals, certification of fitness
oil and gas committee appellate functions
The Exercise of Emergency Powers (which may be vested in the Chief Executive Officer) Respecting Safety, Spills and Conservation:
orders to prevent waste (excluding waste from flaring of gas or unsound recovery methods)
taking action or directing action to repair, remedy or mitigate the impacts of an oil spill
orders, evidence of financial responsibility, inquiries.
Where a fundamental decision is made by the Board, notice of that decision will be transmitted to both governments before the decision becomes final. Both governments will then consider the decision and advise the Board whether its decision may stand and be put into effect or whether either one or both of the governments disagree with the decision. Fundamental decisions primarily affecting pace and mode of exploration and pace of production are:
Rights Issuance, comprising
the calling for proposals relating to the granting of an interest in lands and the selection of the proponent to whom an interest is to be granted;
the direct issuance of an interest in lands;
the determination of the terms and conditions to be contained in an Exploration Agreement;
the variation of the terms and conditions contained in an Exploration Agreement; and
the continuation of any provisional lease or the variation in the conditions now applying in such lease.
Extraordinary Powers, comprising the issuance of orders:
directing an interest holder to drill a well;
requiring the commencement, continuation, increase or suspension of production;
cancelling the rights of an interest holder; and,
requiring an interest holder to introduce specific measures to prevent waste.
Fundamental decisions primarily affecting the mode of development are:
Approval of the development plan with respect to:
the choice of production system,
the planned level of recovery of the resource in place,
the pace and timing of the implementation of the project, and
any fundamental revision to any of the foregoing.
It is the objective of this Accord that consensus be sought and reached between the two governments with respect to fundamental decisions as defined in clause 25. Where agreement cannot be reached between governments on a fundamental decision within thirty days following receipt of the Board’s decision, the following shall apply:
in the national interest, and subject to clause 26 (b), the Federal Minister will be responsible for approving a fundamental decision taken by the Board until a period when national self-sufficiency and security of supply are reached, or, having been reached, are lost. Once Canada reaches a period in which self-sufficiency and security of supply are reached, the Provincial Minister will have the power to approve a fundamental decision taken by the Board, subject to the normal exercise of the Government of Canada’s authority over exports. The determination of whether self-sufficiency and security of supply, as defined in clause 28, have been reached will be made in the manner set out in clause 27; and
the Provincial Minister will be responsible for approving fundamental decisions taken by the Board primarily affecting the mode of development as defined in clause 25 (c), subject to the Federal Minister’s right to override the Provincial Minister’s approval or veto if it unreasonably delays the attainment of self-sufficiency and security of supply.
In the absence of agreement, the determination of whether self-sufficiency and security of supply as defined in clause 28 have been attained, and whether a decision by the Provincial Minister has caused an unreasonable delay in the attainment of self-sufficiency and security of supply, will be made by a three person arbitration panel as provided for under clause 5 of this Accord. Both governments agree to accept the decision of the arbitration panel as final and binding for the purposes of this Accord.
National self-sufficiency is achieved in any calendar year when the volume of suitable crude oil and equivalent substances available from domestic Canadian hydrocarbon productive capacity is adequate to supply the feedstock requirements of Canadian refineries necessary to satisfy the refined product requirements of Canada. Suitable crude oil and equivalent substances are those which are appropriate for processing in Canadian refineries and which are potentially deliverable to Canadian refineries.
Security of supply is realized when the achievement of self-sufficiency as defined above is anticipated in each of the next ensuing five calendar years, giving full consideration to anticipated additions to productive capacity, and anticipated adjustments to refining capacity.
In determining the above requirements, the volumes of crude oils having the quality characteristics required for the production of speciality refined products and which are not available from Canadian sources shall be excluded.
To minimize the regulatory uncertainty faced by industry associated with potential shifts in the role of Federal and Provincial Ministers, the determination of self-sufficiency and security of supply will be fixed for periods of five years. Each determination shall be conclusive and binding on the parties. For the first 5-year period, which commences on the proclamation of legislation implementing this Accord, both governments agree that the requirement of selfsufficiency and security of supply has not been met.
In the event of a sudden domestic or import supply shortfall, the Board will undertake to increase production, if requested by the federal government, consistent with good oil field practice. In addition, should Canada’s obligations under the International Energy Agency (IEA) oil-sharing agreement be triggered, the Federal Minister would, during the period these obligations continue, be able to direct the Board to take such measures as are necessary to comply with Canada’s obligations under the IEA and as are fair and equitable in relation to other hydrocarbon producing regions of Canada.
The contribution of petroleum resources from the offshore area to the achievement of selfsufficiency and security of supply shall be equitable in relation to the other hydrocarbon producing regions of Canada.
SUSPENSIVE VETOES
Where a government exercises its authority under this Accord with respect to a fundamental decision, the other government may delay the execution of that decision for a period of three months in order to give further opportunity to reach consensus.
MINISTERIAL DIRECTIVES
In the public interest, Ministers may jointly direct the Board in writin concerning:
fundamental decisions
(described in clause 25);
the public review process (clause 34);
Canada and Newfoundland benefits; and
studies and the provision of policy advice.
The Board shall carry such directives into effect.
During the first month of each calendar year the Board shall provide to both Ministers a plan outlining the Board’s intentions regarding the areas to be made available for exploration and development during that calendar year. If, upon review, it is felt that the proposed plan does not provide for an adequate level of effort towards the achievement of selfsufficiency and security of supply, the appropriate Minister as determined under Clause 26 (a) may reject the plan and inform the Board of the reasons for so doing and the Board shall bring forward an alternate plan consistent with these views.