Vol. 147, No. 1 — January 2, 2013

Registration

SOR/2012-293 December 14, 2012

FIRST NATIONS COMMERCIAL AND INDUSTRIAL DEVELOPMENT ACT

Haisla Nation Liquefied Natural Gas Facility Regulations

P.C. 2012-1742 December 13, 2012

Whereas the Haisla Nation has requested by resolution of its council that the Minister of Indian Affairs and Northern Development recommend to the Governor in Council the making of the annexed Regulations and, in accordance with paragraph 5(1)(a) of the First Nations Commercial and Industrial Development Act (see footnote a), the Minister has received that resolution;

Whereas the Haisla Nation is a First Nation within the meaning of the First Nations Commercial and Industrial Development Act (see footnote b);

Whereas jurisprudence in relation to the Constitution Act, 1867 (see footnote c) leaves some uncertainty with respect to the application of some provincial laws to reserve lands, and the intention of the annexed Regulations is to ensure that certain laws set out in Schedule 2 to those Regulations apply as federal law to the project lands, within the limits of federal constitutional authority;

Whereas the annexed Regulations specify provincial officials by whom, and provincial bodies by which, powers may be exercised or duties must be performed;

And whereas in accordance with paragraph 5(1)(b) of the First Nations Commercial and Industrial Development Act (see footnote d) an agreement has been concluded between the Minister of Indian Affairs and Northern Development, the Province of British Columbia and the council of the Haisla Nation for the administration and enforcement of the Regulations by those provincial officials and bodies;

Therefore, His Excellency the Governor General in Council, on the recommendation of the Minister of Indian Affairs and Northern Development, pursuant to section 3 (see footnote e) of the First Nations Commercial and Industrial Development Act (see footnote f), makes the annexed Haisla Nation Liquefied Natural Gas Facility Regulations.

HAISLA NATION LIQUEFIED NATURAL GAS FACILITY REGULATIONS

INTERPRETATION

Definitions

1. The following definitions apply in these Regulations.

• “incorporated laws”
  « textes législatifs incorporés »
• “incorporated laws” means the statutes, regulations and other legislative instruments of British Columbia, or the portions of them, set out in Schedule 2, as amended from time to time and as adapted by sections 13 to 43.
• “project lands”
  « terres du projet »
• “project lands” means the lands set out in Schedule 1.

Provincial Interpretation Act

2. The incorporated laws are to be interpreted in accordance with the British Columbia Interpretation Act (R.S.B.C. 1996, c. 238), as amended from time to time, and, for that purpose, references to “enactment” in that Act are to be read to include the incorporated laws.

Other expressions

3. For greater certainty, the adaptations in sections 13 to 43 are to be interpreted to be part of the incorporated laws to which they apply.

APPLICATION OF LAWS

Incorporation by reference

4. Subject to section 5, the incorporated laws apply to the project lands.

Restriction

5. (1) A provision of an incorporated law applies only if the provision of the law of British Columbia that it incorporates is in force.

Restriction

(2) For greater certainty, an incorporated law applies only to the extent that it is within the limits of federal constitutional authority.

Incorporation of procedural matters

6. (1) Unless otherwise provided and subject to any adaptations set out in sections 13 to 43, the following are to be carried out in accordance with the laws of British Columbia, whether or not those laws have been set out in Schedule 2:

• (a) the enforcement of incorporated laws;
  
  
• (b) the prosecution of an offence, or any other proceedings, in relation to the contravention of an incorporated law;
  
  
• (c) the review or appeal of an action or decision taken, or of a failure to take an action that could have been taken, under an incorporated law;
  
  
• (d) any requirements for notice or service in relation to an action to be taken under an incorporated law.
  

Related powers

(2) For the purposes of subsection (1), a person or body that has a power, duty or function under a law of British Columbia has the same power, duty or function in respect of any actions taken under that subsection.

Offences and penalties

7. If contravention of a law of British Columbia that is incorporated in these Regulations is an offence under the laws of British Columbia, contravention of the incorporated law is also an offence and is subject to the same penalties as under the laws of British Columbia.

Financial requirements under lease

8. If the incorporated laws require a cash deposit or other financial security to be given, those requirements do not displace, but instead apply in addition to, the requirements of any lease of the project lands in relation to cash deposits or other financial security.

INAPPLICABLE FEDERAL REGULATIONS

Exclusion

9. The Indian Reserve Waste Disposal Regulations do not apply to the project lands.

CONSTRUCTION STANDARDS

Conformity with British Columbia standards

10. Construction of and alterations to buildings on the project lands must be done in accordance with the British Columbia Building Code and British Columbia Fire Code, as amended from time to time.

Occupancy permit

11. (1) No building on the project lands is to be occupied unless the Haisla Nation, or a person authorized by the Haisla Nation, has issued an occupancy permit for that building.

Occupancy permit

(2) The Haisla Nation, or a person authorized by the Haisla Nation, must issue an occupancy permit for a building within 15 days after it receives written confirmation by a person registered or licensed as a professional engineer under the Engineers and Geoscientists Act (R.S.B.C. 1996, c. 116) that the building was constructed in accordance with section 10.

TRANSITIONAL PROVISION

Survival of rights

12. Any permits, authorizations, orders or exemptions — including any amendments to them — issued by the British Columbia Oil and Gas Commission in relation to the project lands prior to the coming into force of these Regulations are considered to have been issued under these Regulations and to be valid for the purposes of these Regulations.

ADAPTATIONS APPLICABLE TO ALL INCORPORATED LAWS

British Columbia statutes and regulations

13. Unless otherwise indicated, the statutes and regulations referred to in sections 18 to 43 are statutes and regulations of British Columbia.

Interpretation of incorporated laws

14. (1) The incorporated laws are to be read without reference to any of the following:

• (a) spent provisions and provisions making consequential amendments to other enactments that are not incorporated laws;
  
  
• (b) provisions appointing a person, providing for the remuneration of a person, or establishing or continuing a provincial body, program or fund;
  
  
• (c) provisions relating to the internal management of a provincial body;
  
  
• (d) provisions requiring or authorizing monies to be paid from the Consolidated Revenue Fund of British Columbia;
  
  
• (e) provisions authorizing the Lieutenant-Governor in Council, a Minister or a provincial body to make regulations of general application, except to the extent required to make the regulations set out in Schedule 2.
  

Interpretation of incorporated laws

(2) Despite paragraph (1)(b),

• (a) a person appointed to a position under a law of British Columbia that has been incorporated by reference in these Regulations is considered to have been appointed to the same position for the purposes of these Regulations, for so long as that person remains in that position under the law of British Columbia; and
  
  
• (b) a provincial body, program or fund established or continued under a law of British Columbia that has been incorporated by reference in these Regulations is considered to have been established or continued for the purposes of these Regulations.
  
  

Specified officials and bodies

(3) For greater certainty, a person or body that has a power, duty or function under a law of British Columbia incorporated by reference in these Regulations has the same power, duty or function under these Regulations, subject to the adaptations set out in sections 18 to 43.

Interpretation of adapted laws

(4) For greater certainty, if a law of British Columbia is adapted by these Regulations, a reference to that law in an incorporated law or in any notice, form, instrument or other document issued under an incorporated law is to be read as a reference to that law as adapted by these Regulations.

Exclusion

15. Unless otherwise provided by these Regulations, a provision of an incorporated law that imposes an obligation, liability or penalty on an owner, occupier, public authority, public body or unspecified person or entity does not apply to Her Majesty in right of Canada or federal ministers or officials.

Limitation on searches and inspections

16. A power to search or make inspections under an incorporated law, including the power to enter a place, does not include a power to enter or search, or to inspect anything in, a federal government office, without the consent of the person who is or appears to be in charge of that office.

Limitation on production of documents

17. A power to seize, remove or compel the production of documents under an incorporated law does not include a power to seize, remove or compel the production of a document in the possession of the federal government, without the consent of the person in possession of the document.

ADAPTATIONS TO THE ENVIRONMENTAL MANAGEMENT ACT AND REGULATIONS

Municipalities

18. The Environmental Management Act and the regulations made under it set out in Schedule 2 are to be read without reference to any powers conferred on a municipality or an employee of a municipality.

ENVIRONMENTAL MANAGEMENT ACT

Adaptation to Part 4

19. For the purposes of Part 4 of the Environmental Management Act, the standard to be applied for remediation is a standard consistent with industrial land use.

Adaptation to section 40(1)(b)

20. In section 40(1)(b) of the Act, a reference to “the applicable municipality” is to be read as a reference to “the director”.

Adaptation to section 55(6)

21. Section 55(6) of the Act is to be read as follows:

(6) Her Majesty in right of Canada and Her Ministers and officials, and the Haisla Nation and its council and employees, do not incur any liability and are not to be considered a responsible person under this Act as a result of any bylaw, law, permit, license, approval or other document adopted or issued under the Indian Act (Canada), or a land code adopted under the First Nations Land Management Act (Canada), that authorizes the removal or deposit of contaminated soil from or on the project lands.

Adaptation to section 61(1)

22. In section 61(1) of the Act, a reference to “government” is to be read to include Her Majesty in right of Canada and the Haisla Nation.

CONTAMINATED SITES REGULATION

General adaptation

23. For the purposes of the Contaminated Sites Regulation, the standard to be applied for remediation is a standard consistent with industrial land use.

General adaptation

24. For greater certainty, the power of the director to require financial security under section 48(4) of the Regulation does not include the power to require financial security from Her Majesty in right of Canada.

ADAPTATION TO THE FOREST PRACTICES BOARD REGULATION

General adaptation

25. The Forest Practices Board Regulation applies only insofar as it relates to the Wildfire Act.

ADAPTATION TO THE INTEGRATED PEST MANAGEMENT REGULATION

Adaptation to section 1 “Crown land”

26. For the purposes of the Integrated Pest Management Regulation, the project lands are to be considered as private lands.

ADAPTATION TO THE OCCUPIERS LIABILITY ACT

Adaptation to section 1 “occupier”

27. The definition of “occupier” in section 1 of the Occupiers Liability Act is to be read to exclude the Haisla Nation.

ADAPTATIONS TO THE OIL AND GAS ACTIVITIES ACT AND REGULATIONS

OIL AND GAS ACTIVITIES ACT

General adaptation

28. For the purposes of the Oil and Gas Activities Act and the regulations made under it set out in Schedule 2, the project lands are to be considered as unoccupied Crown land.

Survival of rights

29. Instead of granting a permit or giving an authorization under the Act, the commission may rely on a permit issued, or other authorization given, under the Indian Act (Canada) in relation to the project lands.

Adaptation to section 1(2) “specified enactment”

30. (1) The definition of “specified enactment” in section 1(2) of the Act is to be read without reference to the Land Act, the Forest Act and the Heritage Conservation Act.

Adaptation to section 1(2) “specified provision”

(2) The definition of “specified provision” in section 1(2) of the Act is to be read without reference to paragraphs (b) to (d).

Adaptation to section 23(5)

31. Section 23(5) of the Act is to be read without reference to paragraph (a).

Adaptation to section 34(2)(a)(i)

32. In section 34(2)(a)(i) of the Act, a reference to the Land Act is to be read as a reference to the Indian Act (Canada).

Adaptation to section 53(3)

33. The powers of the commissioner under section 53(3) of the Act do not include the power to make an order against Her Majesty in right of Canada.

Adaptation to section 56(1)

34. In section 56(1) of the Act, a reference to “government” is to be read to include Her Majesty in right of Canada.

Adaptation to sections 74(2)(a) and 76(6)(a)

35. In sections 74(2)(a) and 76(6)(a) of the Act, a reference to “person” is to be read to exclude Her Majesty in right of Canada.

ADMINISTRATIVE PENALTIES REGULATION

Adaptation to section 2(1)

36. Section 2(1) of the Administrative Penalties Regulation is to be read without reference to section 36(1) of the Act.

Adaptation to section 3

37. Section 3 of the Regulation is to be read without reference to section 19 of the Environmental Protection and Management Regulation.

ENVIRONMENTAL PROTECTION AND MANAGEMENT REGULATION

Adaptation to sections 6(b) and (d)

38. Sections 6(b) and (d) of the Environmental Protection and Management Regulation are to be read to apply only to wildlife habitat areas and wildlife habitat features located outside the project lands.

Adaptation to section 7(1)(b)

39. (1) Section 7(1)(b) of the Regulation is to be read to apply only to resource features located outside the project lands.

Adaptation to section 7(1)(c)

(2) Section 7(1)(c) of the Regulation is to be read to apply only to cultural heritage resources located outside the project lands.

ADAPTATION TO THE PUBLIC HEALTH ACT

Adaptation to section 99(1)(d)

40. Section 99(1)(d) of the Public Health Act is to be read as follows:

(d) section 11 [failure to make reports];

ADAPTATIONS TO THE WEED CONTROL ACT AND REGULATIONS

WEED CONTROL ACT

General adaptation

41. For the purposes of the Weed Control Act and the regulations made under it set out in Schedule 2, the project lands are not to be considered as land, premises or property in a municipality.

WEED CONTROL REGULATION

Adaptation to Schedule B

42. Schedule B to the Weed Control Regulation is to be read without reference to the sentence “If that cost is not paid it may, under section 8 of the Act, be collected and recovered as taxes in arrears under the Municipal Act or as unpaid taxes under the Taxation (Rural Area) Act”.

ADAPTATION TO THE WILDFIRE ACT AND REGULATIONS

General adaptation

43. For the purposes of the Wildfire Act and the regulations made under it set out in Schedule 2, the project lands are to be considered as private lands.

COMING INTO FORCE

Registration

44. These Regulations come into force on the day on which they are registered.

SCHEDULE 1
(Section 1)

PROJECT LANDS

Those lands in the Bees Indian Reserve No. 6, more particularly known and described as

In the Province of British Columbia, in Range 4, Coast District, the whole of Bees Indian Reserve No. 6, more particularly described as all of Lots 1, 3 and 4 on Plan 96252 and Lots 2-1 and 2-2 on Plan 97774, recorded in the Canada Lands Surveys Records in Ottawa. Together these lots contain about 70.63 hectares.

SCHEDULE 2
(Section 1, subsection 6(1), paragraph 14(1)(e), sections 18, 28, 41 and 43)

INCORPORATED LAWS

STATUTES AND REGULATIONS

• Drinking Water Protection Act, S.B.C. 2001, c. 9, other than sections 31(4) and 38
  Drinking Water Protection Regulation, B.C. Reg. 200/2003
• Environmental Management Act, S.B.C. 2003, c. 53, other than sections 23 to 38, 40(1)(a), 40(1)(b)(i), (ii), (iv) and (v), 44(2)(b)(iii) and (e)(iii), 53(3)(e) and 59(4) to (7)
• Conservation Officer Service Authority Regulation, B.C. Reg. 318/2004, other than sections 1(2)(a) to (a.2), (a.4) to (c), (d) to (g) and (i)
• Contaminated Sites Regulation, B.C. Reg. 375/96, other than sections 41(3)(h) and 48(1) to (3)
• Environmental Data Quality Assurance Regulation, B.C. Reg. 301/90
• Environmental Impact Assessment Regulation, B.C. Reg. 330/81
• Hazardous Waste Regulation, B.C. Reg. 63/88, other than sections 27(10)(b) and 35(7)(b)
• Municipal Wastewater Regulation, B.C. Reg. 87/2012
• Ozone Depleting Substances and Other Halocarbons Regulation, B.C. Reg. 387/99
• Permit Fees Regulation, B.C. Reg. 299/92, other than sections 3(5) and 5(1)(c)
• Petroleum Storage and Distribution Facilities Storm Water Regulation, B.C. Reg. 168/94
• Spill Cost Recovery Regulation, B.C. Reg. 250/98
• Spill Reporting Regulation, B.C. Reg. 263/90
• Waste Discharge Regulation, B.C. Reg. 320/2004
• Integrated Pest Management Act, S.B.C. 2003, c. 58
• Integrated Pest Management Regulation, B.C. Reg. 604/2004
• Occupiers Liability Act, R.S.B.C. 1996, c. 337, other than section 8
• Oil and Gas Activities Act, S.B.C. 2008, c. 36, other than sections 12, 28, 34(3) to (5), 36(1) and 104
• Administrative Penalties Regulation, B.C. Reg. 35/2011, other than section 7
• Drilling and Production Regulation, B.C. Reg. 282/2010
• Environmental Protection and Management Regulation, B.C. Reg. 200/2010, other than sections 4(b), 5(b), 6(a) and (c), 7(1)(a), 19, 25(b) and (e) to (g) and 26 to 39
• Fee, Levy and Security Regulation, B.C. Reg. 278/2010
• Oil and Gas Activities Act General Regulation, B.C. Reg. 274/2010, other than sections 7 and 24 to 26
• Pipeline and Liquefied Natural Gas Facility Regulation, B.C. Reg. 281/2010, other than section 11(b)
• Public Health Act, S.B.C. 2008, c. 28, other than sections 3 to 10, 12 to 14, 16, 17, 22, 26 to 29, 34(3), 36, 40, 49, 50, 56(5)(c), 60(2)(b) and (c), 61 to 89, 91, 95 and 99(1)(a) to (c), (e) to (g) and (i), (2)(b) and (c) and (3)(b)
• Sewerage System Regulation, B.C. Reg. 326/2004
• Water Act, R.S.B.C. 1996, c. 483, other than sections 2, 27 and 28
• Ground Water Protection Regulation, B.C. Reg. 299/2004
• Water Regulation, B.C. Reg. 204/88, other than sections 24 to 32
• Weed Control Act, R.S.B.C. 1996, c. 487, other than section 8
• Weed Control Regulation, B.C. Reg. 66/85
• Wildfire Act, S.B.C. 2004, c. 31, other than section 4
• Forest Practices Board Regulation, B.C. Reg. 15/2004
• Wildfire Regulation, B.C. Reg. 38/2005

OTHER LEGISLATIVE INSTRUMENTS

Protocols issued under section 64 of the Environmental Management Act:

• Protocol 2: Site-Specific Numerical Soil Standards
• Protocol 3: Blending, Mixing, or Dilution as a Remediation Approach
• Protocol 4: Determining Background Soil Quality
• Protocol 6: Eligibility of Applications for Review by Approved Professionals
• Protocol 7: Regulation of Petroleum Hydrocarbons in Water under the Contaminated Sites and Special Waste Regulations
• Protocol 9: Determining Background Groundwater Quality
• Protocol 10: Hardness Dependent Site-Specific Freshwater Water Quality Standard for Cadmium and Zinc
• Protocol 11: Upper Cap Concentrations of Substances
• Protocol 12: Site Risk Classification, Reclassification and Reporting
• Protocol 13: Screening Level Risk Assessment
• Protocol 14: Requirements for Determining Barite Sites
• Protocol 16: Determining the Presence and Mobility of Nonaqueous Phase Liquids and Odorous Substances
• Protocol 17: Requirements for Notifications of Independent Remediation and Offsite Migration

REGULATORY IMPACT
ANALYSIS STATEMENT

(This statement is not part of the Regulations.)

Executive summary

Background

First Nations across Canada are increasingly developing plans for complex commercial and industrial developments on their reserve lands. These projects have economic development benefits such as employment and business opportunities for First Nation members and significant ongoing revenue for First Nation governments, as well as for the provinces in which First Nations reserves are situated.

Provinces have in place extensive regulatory regimes to address commercial and industrial projects, including standards pertaining to environmental protection, health and safety. However, there are legal uncertainties that arise with respect to whether aspects of provincial regulatory regimes apply on First Nation reserve lands, given federal legislative authority in relation to reserve land. This creates what is known as a regulatory gap. A regulatory gap exists because current federal legislation does not provide the tools required to regulate complex commercial and industrial developments on reserve land. Regulatory gaps create investor uncertainty regarding what rules apply on reserve land, increasing the complexity, time and cost required to advance a project on reserve.

The First Nations Commercial and Industrial Development Act (FNCIDA) was developed in order to facilitate economic development on reserve by addressing regulatory gaps. FNCIDA enables the Government of Canada to create a regulatory regime for a specific project, on a specific piece of reserve land, by legislatively replicating or incorporating by reference relevant provincial laws. In practice, this means that projects under FNCIDA are required to meet standards similar to those that apply in the rest of the province. The use of FNCIDA provides legal certainty and enhances confidence for investors, developers and the public by ensuring that they are dealing with regulations and regulators that they know and understand.

The Haisla Nation, located on the northern coast of British Columbia, has utilized FNCIDA to address regulatory gaps with respect to the development of a liquefied natural gas facility on its Bees Indian Reserve No. 6. This facility has been under assessment since 2005 and has secured the required regulatory approvals, including permits from both the British Columbia Environmental Assessment Office and the Canadian Environmental Assessment Office and a 20-year licence to export liquid natural gas from the National Energy Board. According to the timeline for development of the facility, the construction is expected to commence in 2012 and the operation, in 2015. The remaining barrier to the project is regulatory gaps on reserve land. Establishing legal certainty through the Regulations will enable the project to move forward within its anticipated timelines, generating significant net benefit.

Issue

The Haisla Nation is planning for the development of a liquefied natural gas export facility, in conjunction with a consortium of corporate partners (Kitimat LNG), on its Bees Indian Reserve No. 6 in British Columbia. Both the federal and provincial governments have already issued key regulatory approvals for the project, but it cannot proceed until regulatory uncertainties, caused by the fact that the development will take place on reserve lands, are addressed. The federal government currently does not have a regulatory regime specifically designed to address the technical, health, safety and environmental issues pertaining to the production and export of liquefied natural gas. The Province of British Columbia, through its Oil and Gas Commission (BCOGC) has a comprehensive regulatory framework that is capable of regulating such an LNG project. However, there are legal uncertainties that arise with respect to whether aspects of provincial regulatory regimes apply on First Nation reserve lands, given federal legislative authority in relation to reserve land.

In the absence of an adequate federal regulatory regime to ensure environmental protection, health and safety, and investor certainty, the proposed liquefied natural gas project would likely not proceed, thereby depriving the Haisla Nation and British Columbia of significant direct and indirect economic benefits. The Regulations, together with a Canada-British Columbia-Haisla Nation agreement for administration and enforcement, known as a tripartite agreement, will create a comprehensive regulatory regime for the proposed liquefied natural gas facility on the Haisla Nation’s Bees Indian Reserve No. 6.

Objectives

Recent studies and reports have identified the need for all levels of government to work in partnership with First Nations communities to modernize and improve legislative and regulatory frameworks to facilitate economic development on reserve lands. By creating opportunities for First Nations to participate fully in the Canadian economy, much can be done to address the socioeconomic gap that is faced by many First Nations communities.

The Regulations will assist in providing the legal and operational environment required for the Haisla Nation’s private sector partners to commit to proceeding with the development of the liquefied natural gas facility on Bees Indian Reserve No. 6.

The primary goals of the Regulations are to

• allow environmental and other related impacts of the proposed liquefied natural gas facility project to be effectively managed;
• further address legislative and regulatory barriers to economic development in First Nations communities; and
• provide certainty for investors, developers and the public while minimizing costs.

Description

The parties primarily affected by these Regulations are the project proponent Kitimat LNG; the Haisla Nation; the Province of British Columbia, including the BCOGC, which will administer and enforce much of the proposed regulatory regime; the Government of Canada and the population of surrounding communities.

As the Regulations are project-specific, they will apply only to the Haisla Nation’s Bees Indian Reserve No. 6, with a total land area of approximately 70.63 hectares.

The Regulations reproduce, with some minor adaptations, the Province of British Columbia’s regulatory regime that would be applicable to liquefied natural gas facilities located on provincial land. Key provisions contained in the Regulations relate to emergency response, facility operations, storage of materials, operation of equipment and environmental management. Federal health, safety and environmental legislation would apply to this project as it does for other federal lands.

The FNCIDA requires that the tripartite agreement be entered into to ensure the performance of administrative, monitoring, compliance and enforcement activities by the BCOGC and provincial officials with respect to the project. Provincial and BCOGC officials will perform these activities for the Haisla Nation liquefied natural gas project as they would for similar projects located off-reserve.

To ensure the ongoing consistency of on- and off-reserve regulatory regimes, the Regulations have been drafted to incorporate provincial laws as they are amended from time to time. As a result, it is expected that amendments to the Regulations will be required only if British Columbia creates entirely new statutes or regulations, or if changes to British Columbia’s existing laws necessitate new adaptations in the Regulations.

Regulatory and non-regulatory options considered

A number of regulatory and non-regulatory options were considered to enable this project to proceed on Haisla Nation reserve land.

1. Regulatory standards contained within project lease

Governments can elect to impose regulatory standards as terms and conditions of the leases they grant, rather than placing these standards in regulations. This option was considered but rejected because remedies available under contracts are insufficient to properly regulate a project of this scale and complexity for an extended period of time.

2. Unique federal regulation

Rather than reproducing the Province of British Columbia’s regulatory regime for liquefied natural gas operations, the federal government could have created its own unique regulation for liquefied natural gas facilities. This option was rejected for many reasons:

• The costs of both developing and implementing the regulation would have been higher than those in the chosen approach;
• The time needed to develop the regulation would have been prolonged, risking the inability to meet commercial timelines for this project;
• The Government of British Columbia would not have been willing to take on administration and enforcement responsibilities under a unique federal regulation, requiring the creation of a significant federal administrative infrastructure;
• It was not the preferred approach of the First Nation or of the First Nation’s commercial partners; and
• A unique federal regulation would have undermined the policy objective of creating a similar regulatory regime on and off reserve.

3. First Nation laws under the First Nations Oil and Gas and Moneys Management Act

The First Nations Oil and Gas and Moneys Management Act, which came into force on April 1, 2006, is optional legislation that gives First Nations who choose to come under the Act the authority to make their own laws respecting oil and gas development and to issue their own leases. The Haisla Nation considered this option but determined that it presented significant practical and legal difficulties.

4. Status quo / No regulatory regime

If no regulatory regime were established, the proposed LNG project would be commercially unfeasible due to the high level of investor uncertainty and risk attributable to an uncertain regulatory regime on reserve land. This option was rejected because it would deprive the Haisla Nation and British Columbia of the significant economic benefits resulting from such a large project.

Benefits and costs

The estimated cost of the project that would be realized under the Haisla Nation Liquefied Natural Gas Facility Regulations is $8.5 billion over a period of 10 years in terms of construction, operating, and administrative costs. The total benefit is estimated to be approximately $24.5 billion for a period of 10 years following the enactment of the Regulations, represented by sales revenues for liquefied natural gas (LNG). The net benefit of this initiative is valued at $16 billion.

The parties primarily affected by these Regulations are the project proponent, Kitimat LNG, the Haisla Nation, the Province of British Columbia, including the BCOGC, who will administer and enforce much of the regulatory regime, the Government of Canada and the population of surrounding communities. The quantitative and qualitative cost-benefit analyses for the proposed project indicate a significant positive impact.

The baseline scenario for this analysis is a “no project” scenario and the regulatory scenario is a “project” scenario. It is evident through consultations with Kitimat LNG and the Haisla Nation that the project can only proceed if the facility is located in the desired location on Bees Indian Reserve No. 6. The Regulations will enable the facility to be constructed and operated on Bees Indian Reserve No. 6 by reproducing the provincial regulatory regime on reserve. Therefore, the baseline scenario of “no project” represents the current situation and equates to no costs and no benefits. With regulations, there would be benefits to the proponent, the Haisla Nation and the Kitimat district and costs to the proponent and the Government of British Columbia.

Benefits

Gross revenue from sale of liquefied natural gas — The Regulations would facilitate the construction and operation of a liquefied natural gas facility by Kitimat LNG. Therefore, the primary monetary benefit would be the gross revenue from sales of liquefied natural gas from this facility. Gross revenue for the purposes of this analysis has been calculated by multiplying the projected annual output of the facility (5 to 10 million metric tons per annum) by the estimated price for LNG under long-term contracts. As part of Kitimat LNG’s export licence application, the company commissioned an LNG market assessment outlook which estimated that “through 2015 . . . the ex-ship LNG prices for Far Eastern Markets will be between $12 and $18 per million Btu (British thermal units).” (see footnote 1) For the purposes of the cost-benefit analysis, an average price of $15 per million Btu is used.

Distribution of benefits from the sale of liquefied natural gas — The main distributional impacts related to this project are in terms of rent and taxes paid by the proponent Kitimat LNG to the various levels of government. Kitimat LNG will pay corporate taxes to Canada and British Columbia as well as rent and property tax to the Haisla Nation for the lease of reserve land.

Employment — The Kitimat LNG facility will provide employment opportunities to Haisla Nation members and residents of the Kitimat region during the construction and operational phase of the facility. It is also anticipated that local businesses will benefit during construction and operation of the facility through the provision of supplies and services. With respect to employment for Haisla members, Kitimat LNG suggests that there may be a total of more than 100 full-time positions at the facility once it is in operation. Using the Diavik Mine (NWT) Aboriginal workforce as a proxy, we approximate that 30% of the workforce at the Kitimat LNG facility will also be Aboriginal. Therefore, 30 full-time jobs would be filled by Haisla members. Additionally, Kitimat LNG estimates a total of 500 full-time positions during the construction phase of the facility. It is assumed that the majority of these positions would be filled by individuals with a specialty in oil and gas facility construction (from British Columbia or possibly elsewhere in Canada). An additional 70 positions will be filled during the operational phase of the LNG; these will presumably be filled by residents of British Columbia.

Capacity building and economic development on reserve lands — The construction and operation of a large and complex commercial enterprise on reserve land serves as an example to industry and First Nations that such projects are possible. It sets an example of effective cooperation between multiple levels of government and industry, and builds capacity within the First Nation that will assist in pursuit of additional partnerships to further economic development.

Established regulatory regime for liquefied natural gas on reserve lands — By incorporating provincial legislation that fills gaps created by an absence of federal legislation governing certain aspects of the project, the Regulations provide for a regulatory regime on the reserve, and provide regulatory certainty for industry and investors.

Costs

The main costs associated with this project are the capital and operating costs of the liquefied natural gas facility. While these costs are not a direct result of the Regulations (as the proponent would also have to take on these costs if the facility was located on provincial lands), they are important as they demonstrate the net benefits of the project enabled by the Regulations.

Cost of constructing the liquefied natural gas facility (capital costs) — Kitimat LNG will incur major capital costs for the construction of the LNG facility. According to Kitimat LNG’s export licence application, the company expects to be operational by 2015, at which point it may contemplate an expansion of the facility to increase its output capabilities. The export licence application stated that the company estimated that the first phase of the project would cost $3 billion and that the expansion of the facility would cost $1.5 billion and may be completed around 2018. (see footnote 2)

Cost of acquisition, production, liquefaction and transportation of liquefied natural gas during the operational phase (production costs) — Kitimat LNG will incur costs associated with the acquisition, production, liquefaction and transportation of liquefied natural gas. Estimates of each of these costs have been determined based on the estimated output of the Kitimat LNG facility as mentioned prior. For the purposes of these calculations, figures were obtained from sources with free, publicly available data and analysis, including current statistics and projected figures. (see footnote 3)

Cost of complying with the Regulations — Kitimat LNG will be required to comply with regulations in relation to the production and storage of liquefied natural gas. As previously noted, the Regulations incorporate many provincial enactments relevant to the regulation of liquefied natural gas facilities. Therefore, the cost of complying with these Regulations would be equal to costs incurred by the company were the facility to be constructed off-reserve.

Cost of monitoring and enforcing the Regulations — An agreement between the governments of British Columbia, Haisla Nation and Canada has been negotiated, in which provincial officials will perform administrative and enforcement activities under the federal regulations. While the province will incur the costs of these activities, they are not expected to be of any different magnitude than if the project were to be realized off-reserve. However, as noted above, costs will be incurred under these Regulations as the baseline scenario is “no project” and are therefore included in the cost-benefit summary table. The administrative costs that would be borne by Canada, such as monitoring the implementation of the Regulations, are considered negligible.

Cost-benefit statement

Costs, Benefits and Distribution		Base Year (2012)	Final Year (2021)	Total (PV) (see footnote 4)	Annual Average
A. Quantified impacts in millions of present value dollars (in 2012 dollars)
Costs	Stakeholders
Capital costs	Kitimat LNG	3,000	0.0	3,945	632
LNG production	Kitimat LNG	0.0	1,354	4,547	728
Monitoring and enforcement	Province of British Columbia	0.0	0.125	0.558	0.089
Total costs		3,000	1,354	8,493	1,360
Benefits	Stakeholders
Revenue from LNG sales	Kitimat LNG	0	7,305	24,537	3,928
Total benefits		0	7,305	24,537	3,928
Net benefits				16,043
B. Quantified impacts (in non-dollars)
Benefits	Stakeholders
Employment (jobs)	Haisla Nation	0	30
Employments (jobs)	Province of British Columbia	500	70
Total benefits		500	100
C. Qualitative impacts
Benefits	Stakeholders	Description of cost or benefit
Capacity building and economic development on reserve lands	First Nations	The construction and operation of a large and complex commercial enterprise on reserve land will illustrate to industry and First Nations that such projects are possible on reserve lands. It sets an example of effective cooperation between multiple levels of government and industry and builds internal capacity within the First Nation that will help them pursue other partnerships and further economic development.
Established regulatory regime for LNG on reserve lands	Industry and investors	By incorporating provincial legislation that fills gaps created by an absence of federal legislation governing certain aspects of the project, the Regulations provide for a regulatory regime on the reserve, and provide regulatory certainty for industry and investors.
Costs	Stakeholders
Compliance costs for the proponent	Kitimat LNG	Kitimat LNG will incur some costs with respect to complying with the proposed regulatory regime. These costs are difficult to determine as many compliance activities are reactionary in nature and therefore not easily predictable. Furthermore, these costs are considered to be of a low magnitude in relation to the overall costs of constructing and operating the facility. Therefore, compliance and enforcement costs have not been monetized for this analysis.
Administrative costs to Canada	Government of Canada	Canada may incur some negligible costs related to the administration of these Regulations, likely by way of semi-annual meetings with the Province of British Columbia and the British Columbia Oil and Gas Commission.

The full cost-benefit analysis is available upon request.

“One-for-One” Rule

As the Regulations will, to a large extent, replicate the Province of British Columbia’s regulatory regime, and will only apply to one specific project on Haisla Nation Bees Indian Reserve No. 6, it is expected there will be no alteration in the level of compliance and administrative costs on small business. As a result, the “One-for-One” Rule does not apply to this proposal.

Small business lens

The small business lens does not apply to this proposal, as there are no costs to small business.

Consultation

The Haisla Nation Liquefied Natural Gas Facility Regulations were published in Part Ⅰ of the Canada Gazette on July 28, 2012, for a 30-day comment period. During this comment period, one comment was received from Haisla Nation. This comment was technical in nature, and was provided only to enhance the clarity of provisions relating to referential incorporation within the Regulations. All stakeholders directly impacted by this proposal have been involved in its development and all comments received following prepublication were supportive.

The parties primarily affected by these Regulations are Kitimat LNG, the Haisla Nation, the Province of British Columbia, the BCOGC, and the Government of Canada, namely Aboriginal Affairs and Northern Development Canada. The development of the Regulations has been ongoing since the summer of 2011, with regular face-to-face meetings with officials from each of the affected parties. All parties have reviewed and commented on successive drafts of the Regulations.

Consultations regarding the proposed project have taken place with other interested parties as part of various project-related approvals processes. First Nations consultation was conducted for the area scoped under the Canadian Environmental Assessment Act (CEAA) assessment process. The unique result is that the only First Nation claiming traditional territory for the area of land and sea as scoped is the Haisla Nation. The location of the project lands is a rare example within British Columbia where there is no overlapping traditional territory claim. The Haisla Nation invited the proponent to locate the facility on Bees Indian Reserve No. 6 and, before the environmental assessment had concluded, the proponent agreed.

The District of Kitimat, the Regional District of Kitimat-Stikine, the Northern Health Authority, the BCOGC, numerous provincial ministries and federal departments, and the Haisla Nation were members on, or provided input to, the Project Working Group. Further, Kitimat LNG has consulted other First Nation communities on its own initiative with respect to other aspects of the project such as pipeline development.

Consultation was also undertaken as a component of the public hearing process required for the export licence granted by the National Energy Board in October 2011.

Consultation is currently underway with affected stakeholders with respect to the federal TERMPOL process, which is designed to assess all navigable risks and related issues pertaining to the movement of ocean tankers in local waters.

Regulatory cooperation

The Regulations are supported by the key stakeholders, which include the Haisla Nation; the Province of British Columbia; the BCOGC; the Government of Canada; namely Aboriginal Affairs and Northern Development Canada; and Kitimat LNG. The associated Tripartite Agreement was developed in conjunction with the Province of British Columbia and the Haisla Nation. All parties have reviewed and commented on successive drafts of the Regulations and Tripartite Agreement.

Rationale

The project can only proceed if the facility is located in the desired location on Bees Indian Reserve No. 6. In the absence of an adequate federal regulatory regime to ensure environmental protection, health and safety, and investor certainty, the proposed liquefied natural gas project could not feasibly proceed on reserve land. The benefits significantly outweigh the costs and consultations have not resulted in any significant objections to the project or demonstrated any negative impacts of the project to other sectors. As a result, the decision to proceed with the Regulations presents the most cost-effective means by which to ensure the level of regulatory certainty required.

Implementation, enforcement and service standards

One of the primary reasons these Regulations have been developed is to establish a full range of regulatory compliance and enforcement mechanisms that are not otherwise provided for under federal legislation. The Regulations include the following mechanisms for encouraging compliance and for detecting and penalizing non-compliance:

• Requirements for industry to obtain various licences and approvals;
• Requirements for industry to keep records, make reports, and provide information on request;
• Authority for government officials to inspect, investigate, search and seize;
• Authority for government officials and bodies to issue directives and orders;
• Fines and other financial penalties for non-compliance and offences; and
• Authority for government officials to make applications to court for various orders.

Compliance and enforcement provisions, to a large degree, reproduce provisions in the regulatory regime of the Province of British Columbia that apply to similar projects off-reserve. These provisions form a compliance and enforcement ladder, so that minor infractions of regulations can be addressed with measured responses, and more serious infractions can be addressed with more powerful remedies.

Because the Regulations reproduce, with minor adaptations, the provincial regime, provincial officials have the expertise necessary to administer and enforce the Regulations. An agreement among the Government of British Columbia, the Haisla Nation and the Government of Canada, namely Aboriginal Affairs and Northern Development Canada, has been finalized under which the BCOGC and provincial officials will perform administrative and enforcement activities under the Regulations. As the Regulations and Tripartite Agreement have been developed in close consultation with affected stakeholders in order to address one specific project, on a specific parcel of reserve land, issues relating to implementation, including communication, outreach, cooperation and coordination, have been addressed.

Performance measurement and evaluation

To ensure the regulatory regime continues to perform as anticipated, a Management Committee, comprised of officials from each of the parties which have executed the Tripartite Agreement, will be formed within 60 days of the Agreement commencing. This Committee will meet at least once every six months to ensure the performance of administrative, monitoring, compliance and enforcement activities is being carried out as they would for similar projects located off-reserve.

On the fifth anniversary of the commencement of the Haisla Nation Liquefied Natural Gas Facility Regulations, the Tripartite Agreement requires that the Management Committee undertake an overall review of the regulatory regime to ensure the ongoing effectiveness and efficiency of the legal and administrative arrangements.

Contacts

For enquiries in English:

Brian Kinzie
Lands Officer, Special Projects
Lands and Economic Development
Aboriginal Affairs and Northern Development Canada
British Columbia Region
1138 Melville Street, Suite 600
Vancouver, British Columbia
V6E 4S3
Telephone: 604-666-5132
Fax: 604-775-7149
Email: Brian.Kinzie@aadnc-aandc.gc.ca

For enquiries in French:

Kris Johnson
Senior Director, Lands Modernization
Aboriginal Affairs and Northern Development Canada
10 Wellington Street, Room 1230
Gatineau, Quebec
K1A 0H4
Telephone: 819-994-7311
Fax: 819-994-5697
Email: Kris.Johnson@aadnc-aandc.gc.ca

• Footnote a
  S.C. 2005, c. 53
• Footnote b
  S.C. 2005, c. 53
• Footnote c
  30 & 31 Vict., c. 3 (U.K.)
• Footnote d
  S.C. 2005, c. 53
• Footnote e
  S.C. 2010, c. 6, s. 3
• Footnote f
  S.C. 2005, c. 53
• Footnote 1
  Poten and Partners, October 2010, “2015-2035 LNG Market Assessment Outlook for the Kitimat LNG Terminal,” p. 24.
• Footnote 2
  Kitimat LNG National Energy Board Licence Application, December 9, 2010, p. 4.
• Footnote 3
  For the purposes of these calculations, we assume that feedstock natural gas prices are $1 per thousand cubic feet (Mcf) [natgas.info, “Liquefied natural gas chain,” www.natgas.info/html/liquefiednaturalgaschain.html]. Regarding liquefaction costs, we have used an average cost of $1.50/Mcf for liquefying the natural gas (Penn State Extension, February 19, 2012, “Understanding the Role of Liquefied Natural Gas; Part 1,” http://extension.psu.edu/naturalgas/news/2012/ 02/understanding-the-role-of-liquefied-natural-gas-part-1). Lastly, it is possible that the facility will have to pay LNG shipping costs. These costs have been estimated at $0.28 per MMBtu (Center for Energy Economic, “How much does LNG cost?”, www.beg.utexas.edu/energyecon/Ing/LNG_introduction_09.php).
• Footnote 4
  PV represents present value. The time period of 10 years as well as an 8% real discount rate was used.