PART 1 - WHO CONTROLS THE OFFSHORE?
How is Offshore Oil & Gas Different?
The offshore oil and gas industry will present many unique legal issues to government, stakeholders, businesspeople and interest groups. One of the most fundamental of these issues can be summed up by asking, "which level of government has the authority to regulate and control the exploration and development of B.C.’s offshore resources?
Control over most of B.C.’s resource based industries is quite clear. Generally speaking, forestry, mining and aquaculture are governed by the provincial government; while fisheries, with some exceptions, is governed by the Federal Government. These jurisdictions, or this splits in control, are laid out Canada’s Constitution.
Offshore oil and gas is a unique industry because it combines the extraction of hydrocarbons (normally under provincial control) with the marine environment (normally under federal control). Add to this the Federal Government’s control over navigation and shipping, and a joint mandate over the environment, and the stage is set for a political power struggle, as occurred in Newfoundland.
The Atlantic Experience
When Newfoundland joined Canada in 1949, it negotiated a deal that saw it losing a degree of independence in return for certain benefits. During negotiations, Newfoundland failed to turn its mind to its offshore resources, and did not reserve any rights in them as against the Federal Government. However, when in the 1960’s the Federal Government attempted to assert rights over the seabed minerals in contemplation of developing them, the Newfoundland government became outraged that it was being cut out. In 1969, Newfoundland took the Federal Government to the Supreme Court of Canada, seeking a declaration that the seabed resources were Newfoundland’s to control. The Court found that the offshore resources belonged to the Federal Government because Newfoundland had not specifically reserved rights to the minerals when they entered into Confederation. Newfoundland was not pleased with this decision and vowed to continue fighting.
How British Columbia is Different
In 1967, British Columbia posed much the same question to the Supreme Court of Canada. The Court found that the seabed and its resources, from the mean low water mark to the outer limit of the Territorial Sea (12 nautical miles), was within the exclusive control of the Federal Government.
However, like Newfoundland, British Columbia wasn’t satisfied with this answer. In 1981, the Province declared the entire coast an "Inland Marine Zone" (figure #1), in an attempt to assert its jurisdiction over the area. This declaration was political at best, and had little, if any, legal significance.
In 1982, BC returned to the Supreme Court to ask the Court if the seabed resources between Vancouver Island and the mainland, particularly the seabed of Queen Charlotte Straight, Johnstone Straight, Georgia Straight and Juan de Fuca Straight, were within the jurisdiction of the Province.
In deciding for the Province, the Court looked to the unique history of British Columbia. The Court found that when the Province was originally created as a colony by the British Parliament in 1866, its borders were defined with the most western outer limit of the Province being the "Pacific Ocean". The court contemplated the meaning of "Pacific Ocean" and found that the water and seabed between Vancouver Island and the mainland were not commonly considered part of the Pacific Ocean and were therefore within the jurisdiction of the province.
Importantly, we know from the Geological Survey of 1998 that the hydrocarbon reserves under these areas of Provincial control, particularly the Georgia Basin, contain minimal oil, but do contain modest natural gas reserves (6.5 trillion cubic feet). We further know from the 1998 Survey that the majority of BC’s offshore oil (9.8 billion barrels) and gas (26 trillion cubic feet) lies under the Queen Charlotte Basin in the Queen Charlotte Sound and Hecate Straight.
Unfortunately for the BC government, the question posed to the Supreme Court in 1982 did not include a question as to who controls the bulk of the resources, those being under Queen Charlotte Sound and Hecate Staight. As a result, there is no binding authority that states specifically that those areas are under the control of the Federal Government. Indeed, if the Supreme Court were to find that Hecate Straight and Queen Charlotte Sound were not part of the "Pacific Ocean" proper, than the seabed resources would fall within the boundaries and the control of the Province. However, politicians may wish to settle this question themselves.
Present Status of Jurisdictions
As it stands now, the province clearly has jurisdiction over the resources under the Queen Charlotte Straight, Johnstone Straight, Georgia Straight and Juan de Fuca Straight. The Federal Government, arguably, has jurisdiction over the vast majority resources under Queen Charlotte Sound and Hecate Straight. Whether the province will attempt to capitalize on its self-pronounced "Inland Marine Zone" and assert jurisdiction over the reserves under Hecate Straight is questionable as it would likely mean a long and drawn out legal battle. In the following article I will discuss how a similar battle was settled on the Atlantic coast, and why the approach taken there is likely the best approach for B.C.
Before closing, it is interesting to note that the B.C. government could avoid a dispute over jurisdiction in Hecate Straight and still explore and develop a portion of the Queen Charlotte Basin. Maps forming part of the 1998 Geological Survey Canada show that a portion of this massive petroleum reserve lies under Graham Island. This oil can be accessed from Graham Island without the jurisdictional complications and the added complexity of drilling in the marine environment. The reserves directly under Hecate Straight might also be reached by drilling from land using directional and horizontal drilling. Although such ideas may successfully avoid a conflict of jurisdictions with the Federal Government, they still contain serious social, economic and political issues with respect to drilling on Hadaii Gwai.
G. Darren Williams is a marine and admiralty lawyer working with law firm of Giaschi & Margolis in Vancouver. For more information on offshore oil and gas, as well as other marine law topics, visit AdmiraltyLaw.com, or email Darren Williams at williams@AdmiraltyLaw.com.
