BC OFFSHORE OIL AND GAS LAW

British Columbia's unemployment rate has continued to rise in recent months. With steady increases from 7.4% in February, 2001, to 7.7% in September, to 8.2% in October, 2001, there is little doubt that British Columbia needs to aggressively pursue policies of economic growth.

The potential for economic growth through the development of British Columbia's offshore oil reserves is increasingly becoming a reality. The Atlantic Coast's experience with offshore development has been positive, with thousands of direct and indirect jobs being created, and millions of dollars in government revenue flowing through to social programs and debt reduction. The construction of the Hibernia installation (figure 1) created some 32,000 person years of employment. Getting to that point was not easy though. The Federal and Provincial governments, particularly Newfoundland, spent years fighting over whom would control and benefit from the offshore resources. In the end, the governments agreed, under the Atlantic Accords, to share the responsibility and the benefits of developing the offshore. As mentioned in last month's Offshore Oil and Gas Law column, a similar agreement on the West Coast (i.e. a Pacific Accord) is likely the most efficient and effective route to developing the Queen Charlotte Basin.

An important part of the political resolution contained in any offshore Accord is the recognition that local economies should benefit to the maximum degree from the development of their offshore areas, subject of course to scrupulous environmental and workers' safety regulations. Under the Atlantic Accords, any plan for development must be submitted to the Offshore Petroleum Board for review. The Board will not review the development plan unless it contains a local Benefits Plan, the object of which is to give residents of the province, including manufacturers, consultants, contractors and services companies, "first consideration" for training, employment and contracts for the work programs for which the Plan was submitted.

The "first consideration" component of a Benefits Plan requires that the developer and their contractor look first to the local (within the province) "residents" when hiring employees. To be a "resident", you must lived in the province for at least 6 months (BC Election Act). However, because employers have the right to establish minimum qualifications required for candidates, if there are no, or not enough, residents that meet these requirements, then the employer is free to look elsewhere. Newfoundland lost many jobs and millions of dollars when it didn't have the skilled labourers to meet the demand of developers. British Columbia should take note of this lesson and ensure that it has sufficient numbers of skilled workers.

The "first consideration" concept also applies to contracts for goods and services originating in the province, though the criteria is slightly different. The Accord regime holds that goods and services manufactured and supplied in the province must be given first consideration, provided those goods and services are competitive in terms of fair market price, quality and delivery. In other words, if British Columbian companies are not able to provide the right type of goods and service on time and at a fair price, the contracts will simply be awarded to companies outside of the Province.

This "first consideration" approach seems to make sense; if it is British Columbia that is taking the risk in developing its offshore, than shouldn't it be British Columbians, including First Nations, that stand to gain the most? The Charter of Rights and Freedoms would appear to present a problem to this concept though.

The Charter of Rights and Freedoms (the "Charter") is a schedule to the Constitution Act of 1982. The purpose of the Charter is to protect certain rights of individuals against infringements by the government. One of the rights that is protected is the right "to move to and take up residence in any province and to pursue the gaining of a livelihood in any province" (section 6). It would appear though that the government, through the Accord regime, is violating the Charter by discriminating against Canadian who are not residents of British Columbia. How can this be?

The answer lies in British Columbia's embarrassing unemployment rate, and section 6(4) of the Charter. Section 6(4) states that, provided a province's employment rate is lower than the national average, the government is permitted to discriminate by giving its residents first consideration. Therefore, because British Columbia's employment rate is lower than the national average, the government (i.e. the British Columbia Offshore Petroleum Board) would be permitted to discriminate against non-residents, being workers from Alberta or Newfoundland and require that British Columbians be hired.

Whether the "first consideration" component of the Accord regime is illegal under the NAFTA is questionable and beyond the scope of this particular article, but will have to be addressed in the future.

In closing, it is crucial to realize that in order to utilize the "first consideration" concept, and maximize the benefits to residents of the province, British Columbia must be prepared for development by having sufficient numbers of skilled workers, competitive rates for services, quality products and prompt delivery. These requirements will apply to everyone from shipyards, welders, engineers, marine architects, to skippers, vessel owners, and crewpeople. Failure to do so will mean that many jobs and millions of dollars will flow out of the Province.