New Brunswick proposes to fine energy sector, collect greater share of profits

FREDERICTON – New Brunswick is proposing a number of extra costs for the energy sector including stiffer fines and a greater share of the industry’s profits as the cash-strapped province seeks to develop its oil and natural gas resources.

The provincial government released a discussion paper Thursday containing 116 recommendations that address a number of issues including well design, royalties and protection of water supplies.

For companies that violate resource development rules, the paper recommends fines as high as $1 million — a steep hike from the range of $640 to $10,400 fines that exist now.

The recommendation comes after Natural Resources Minister Bruce Northrup alleged last fall that Windsor Energy had violated the Oil and Natural Gas Act by conducting seismic testing in Sussex without the consent of town council.

The matter was referred to the RCMP who later concluded there were no grounds for charges.

Northrup said Thursday the proposed changes would give his department the ability to act right away on any violations.

“We weren’t able to do that in the past,” he said. “But I feel very confident from here on in that we’ll be able to act on every situation on that day or the next day as far as imposing fines, hauling back the licences and suspending the licences.”

The paper also calls for a greater share of royalties to go to the province and landowners where natural gas and oil wells are located.

Under that proposal, the government would continue to receive a 10 per cent royalty on the value of any gas or oil coming out of the ground, but it would also collect 40 per cent of an energy firm’s profit.

Municipalities within a 25-kilometre radius of gas and oil wells would receive two per cent of whatever the government collects, while landowners with wells on their properties would get 0.5 per cent.

For landowners, that’s expected to be about $8,000 each in 2015 and about $74,000 in 2031 if the industry grows as projected, the government said.

Angie Leonard of the Canadian Association of Petroleum Producers said it’s too soon to comment on the paper’s recommendations.

“The royalties that were announced today are quite vague and we’ll have to look at that in depth,” she said.

“We are very happy the government is taking these steps to clarify the regulatory regime in New Brunswick and we’ll certainly be taking a look at them in more depth and taking advantage of the comment period to give some comments from an industry perspective.”

The public will have 60 days to offer input before the government comes back to the legislature this fall with its formal response.

The paper comes as a number of companies are exploring for shale gas in the province despite a public backlash to fracking from people who say the process threatens water supplies — a position the industry disputes.

Fracking involves the use of high volumes of water and chemicals pumped into a well to fracture layers of rock to release trapped pockets of shale gas.

Denis Landry, the Liberal natural resources critic, said the government should provide the public more time to offer feedback on the contentious issue.

“It took two years to get to where they are now,” Landry said.

“They should take the same time to give the chance to people who want to look at that paper and want to look further into all the details.”

The Liberals continue to call for a moratorium on shale gas development and want a special committee of the legislature to be established to study the industry.

The Conservation Council of New Brunswick said it remains opposed to shale gas development, regardless of whether there are rules governing it.

“It doesn’t matter what type of regulations we bring in. It’s not an industry that is suitable for New Brunswick or probably anywhere in the world,” said spokeswoman Tracy Glynn.

“We’ve seen cases in Quebec with leaking well pads and issues with the amount of water that’s used.”

Environment Minister Bruce Fitch said the proposed regulations would ensure environmental protections are in place before any oil or gas well is approved, and monitoring of each site would continue.

Three test wells for shale gas were drilled in New Brunswick between 2008 and 2010 and all three were fracked. A fourth such test well was drilled late last year but has not been fracked.

Northrup said he didn’t expect any wells to be fracked this year.

In all, there have been 82 gas wells drilled in the province since 1990, 49 of which have been fracked.

The Natural Resources Department estimates up to 200 gas wells could be drilled and fracked each year if enough gas reserves are found.

Last month, researchers from the University of New Brunswick said fracking should not proceed until there is an environmentally sound option for the disposal of the waste water that is a byproduct of the process.

The discussion paper recommends reusing the waste water or holding it in tanks for later disposal at an approved facility like the one that exists in Debert, N.S.