1968-1978

Conflict over Drilling in Lancaster Sound

 

by Margaret A. Davidson and William E. Rees

 

In 1968 and 1969, the Department of Indian Affairs and Northern Development (DIAND) granted exploration permits for approximately 14 million acres of the offshore in the eastern high Arctic to 12 oil companies. By 1970, these companies had pooled their permits and resources to form Magnorth Petroleum Ltd., the most active landholder in the Northwest Passage. The following year, Magnorth entered into a farm-in arrangement with Northern Natural Gas Co. of Omaha Ltd., under which the latter agreed to spend $2 million each year for five years on exploration in exchange for a 25 per cent interest. Norlands Petroleums Limited, a wholly-owned subsidiary of Northern, replaced Northern in the joint operating agreement and began exploration activities.

 By 1974, Norlands had identified promising geologic structures for hydrocarbons in Lancaster Sound and applied to DIAND to drill a single expendable exploratory well in an unprecedented 914 metres of water. (No wells had been drilled in water deeper than 600 metres in the Arctic.) Norlands proposed to begin drilling in 1975.

 During an interdepartmental review of the proposal, the Department of Fisheries and Environment (DFE) had recommended that the approval-in-principle be deferred until deficiencies in the proposal were rectified and DFE's environmental concerns met.1 For example, Norlands' application stated that biological productivity in Lancaster Sound is low, but DFE scientists were aware of the region's large seabird and mammal populations and were concerned about the potentially disastrous consequences of an oil spill. Even at this early stage, DFE recommended that Norlands' proposal be referred for public review to the federal Environmental Assessment and Review Process (EARP), which had been implemented just that year.

DIAND granted approval-in-principle to Norlands on 9 August 1974, notwithstanding the depth of the water, hazardous ice conditions, scanty information on other factors affecting drilling, and little appreciation of existing and potential alternative uses of the area. The approval-in-principle was valid for three years and was subject to various terms and conditions, including a general requirement for environmental studies. DIAND apparently did not consult with native peoples' organizations or Inuit communities that might be affected by the project. Its modus operandi prompted one DFE official to comment that there seemed to be:

 an overwhelming attitude of "gung ho" about both the Norlands proposal and the DIAND decision to give approval-in-principle at this time....It seems extraordinary that the very first test well in the world at such a depth should be contemplated in so hostile an environment as the Canadian Arctic.2
Under the approval-in-principle, the joint DIAND - DFE Arctic Waters Oil and Gas Advisory Committee (AWOGAC) stipulated the requirements of a programme of environmental studies for Norlands to complete. However, Norlands was not given specific details of the environmental requirements until seven months after receiving the approval-in-principle.

Because only a small company and a single well were involved, AWOGAC defined the study focus narrowly, requiring site-specific biophysical data but neither social nor economic impact analyses. These baseline study stipulations were considered minimal requirements by AWOGAC, but they were substantially more rigorous than those required of other operators in the high Arctic. In the company's view, they were "very onerous and all-encompassing. Norlands is not an unlimited funding company for every conceivable environmental study for the eastern Arctic."3 Norlands proposed a programme of studies in response to AWOGAC's environmental requirements, which DIAND and AWOGAC approved, and began work in September 1975. Norlands was praised for the thoroughness of this work when it was completed in 1976. Norlands planned to drill in 1977.

 

Changing Government Attitudes

Through 1976 and 1977, public awareness of the risks of offshore drilling grew, and government began to recognize the potential advantages of a more comprehensive (i.e., broader than site-specific) approach to assessing the environmental implications of drilling proposals. In response, DIAND established its Northern Program and the Northern Environmental Protection Directorate, while DFE continued to press DIAND and AWOGAC to have Norlands' proposal referred to EARP. DIAND was reluctant to initiate so complete a public review, but did agree to DFE's suggestion to carry out a joint environmental overview of the effects of drilling in Lancaster Sound. Dr Allen Milne and Brian Smiley of DFE were given this task, and Norlands agreed that the results of its own environmental studies could be included in the overview report.

 Also indicative of DIAND's changing attitude was the establishment of the Eastern Arctic Marine Environmental Studies programme (EAMES) in the autumn of 1976 to facilitate EARP reviews of exploratory drilling proposals. These studies were to be funded mostly by industry, were to be developed in consultation with Inuit communities, and were to be managed by a joint government-industry-native committee. Unlike previous environmental studies, EAMES was to consider socio-economic as well as biophysical implications of developments. The programme was designed to permit regional rather than site-specific consideration of these areas by EARP, and encompassed Lancaster Sound, Baffin Bay, and Davis Strait.

 Norlands apparently believed itself to be exempt from EAMES requirements (even though Lancaster Sound was one of the EAMES study areas) because it had an approval-in-principle and had already conducted environmental studies. Even though DIAND had initiated EAMES, the department did not ask Norlands specifically to comply with the programme's requirements. However, one DIAND o ficial noted later that the company should have realized that the rules affecting its plans had changed.4

Referral to EARP- "Special Status" for Norlands

Norlands' approval-in-principle was due to expire on 9 August 1977. In May, Norlands' president wrote to the assistant deputy minister of DIAND, stating:

As Norlands has fulfilled the approval-in-principle proposal requirements ... we are anxious to proceed toward the drilling phase so that we can contribute effectively to the "national need to know" about our frontier hydrocarbon resources. Would you please advise what [further] requirements are necessary, if any.5
According to Norlands, DIAND did not respond to this request and the company did not pursue the matter. Instead, Norlands applied to drill a surface well about 488 metres deep in the 1977 drilling season. DIAND denied this application on grounds that the company had not satisfied requirements of the approval-in-principle. Norlands subsequently appealed to the minister of Indian Affairs and Northern Development for a two-year extension of the approval-in-principle to conduct the necessary additional studies. In light of the substantial amount of money Norlands had spent in the preceding eight years6 and the government's often-stated policy of encouraging frontier exploration, Norlands wanted assurance that once it finally had satisfied the terms and conditions of the approval-in-principle, it would be permitted to drill.

 This request was denied also, and the minister of Indian Affairs and Northern Development stated that no drilling authority would be issued until a full environmental impact assessment had been carried out. The minister indicated that his department already had referred Norlands' proposal to EARP and that the Lancaster Sound area would receive special attention and priority because an approval-in-principle had been issued. The minister went on to state:

 A panel will be formed and it will issue in the near future guidelines for the Environmental Impact Statement. An Environmental Impact Statement is being prepared and will be sent to the Panel early this fall.7
 In the spring of 1977, DIAND officials apparently decided that the environmental overview report being prepared by Milne and Smiley of DFE would serve as the environmental impact statement (EIS), even though an EARP panel had not yet been chosen nor guidelines issued. In the absence of formal EARP guidelines, DIAND decided that Norlands' approval-in-principle requirements and EAMES guidelines would be used to evaluate the report.

 Milne and Smiley were not told that their report was to become an environmental impact statement until it was half finished. They were concerned that the report would not fulfil the EAMES and EARP requirements for an environmental impact statement. DIAND later agreed, informing Norlands that the report would form only the basis of the EIS.

Norlands was naturally becoming uneasy about these arrangements and, in October 1977, asked DIAND for clarification of the "special status" its proposal had been granted. DIAND replied that "special status" meant that EARP would deal with Lancaster Sound as the top-priority EAMES area, and that:

this revised ranking, the fact that no new specific guidelines are being required, together with the fact that the criteria developed for EAMES and the a-i-p, will be used in the EARP review ... will expedite the process. It is not possible to guarantee that there will be no deficiencies as a result of the federal EARP ... however, it seems highly unlikely at this time that any deficiencies will be "severe".8
 DIAND gave this assurance even with the knowledge that social and economic impact studies and consultation with native communities were major objectives of EAMES and should precede any EARP review.

 The Milne/ Smiley report was at the printer by the time guidelines for the environmental impact statement, based on EAMES criteria and the approval-in-principle requirements, had been assembled. It was delivered to DIAND early in March 1978. DIAND prepared a deficiency statement based on a comparison of the report with the guidelines, and sent the report and the deficiency statement to Norlands in April 1978. One DIAND official commented: "This was not fair to Norlands but the criteria were the only thing available that the public would be aware of at the EARP hearings."9

The deficiency statement noted that the Milne/ Smiley report would not allow consideration of regional clearance for Lancaster Sound. This was not surprising since neither its authors nor Norlands had been informed that regional clearance of the area was at issue. On the contrary, Norlands had initially been directed by AWOGAC to carry out site-specific studies and was never required to comply explicitly with EAMES objectives. The company's site-specific data had been incorporated into the Milne/Smiley report. On the other hand, the deficiency statement failed to point out that no socio-economic impact analysis had been done, even though such studies were a major objective of the EAMES programme.

 On review of the report and deficiency statement, Norlands realized it would have to prepare its own environmental impact statement and produced one two months later. However, even this last-minute effort was of no avail. In 1978, the environmental assessment panel conducting the EARP concluded that a recommendation for or against exploratory drilling at that time would be arbitrary, and suggested that, instead:

 the responsible federal coordinating and planning body [the Department of Indian Affairs and Northern Development] use the time available from a deferment of drilling to address on an urgent basis, with adequate national and regional public input and taking into account the various forces at work, the best use(s) of the Lancaster Sound region.'°
 This was a remarkably forthright finding for Canada's environmental assessment and review process, which has been lacking in rigour,11 and for a panel whose proceedings had been a fiasco of timing and organization.12 The conclusion of the Lancaster Sound Environmental Assessment Panel was the inevitable result of a decade of policy confusion within DIAND. It was DIAND, Ottawa's lead agency north of 60°, and not Norlands' proposal, that finally was called to account by EARP. The environmental assessment panel's charge to DIAND provided a timely opportunity for the department to initiate a more comprehensive and coherent approach to regional planning and development in the North. That approach was the establishment of the Lancaster Sound Regional Study, and the drafting of a land-use planning policy for northern Canada.

 

Margaret Davidson is a consultant in Vancouver; William Rees is an Associate Professor in the School of Community and Regional Planning at the University of British Columbia. Their article is based on: M.A. Davidson, "Policy and Decision-making in the North: The Case of Lancaster Sound" (Vancouver: School of Community and Regional Planning, the University of British Columbia, 1981), unpublished MA thesis.

 

Endnotes

 1. In 1979, the Department of Fisheries and Environment became two departments-the Department of the Environment and the Department of Fisheries and Oceans.

2. Stewart, R.W., Director General, Pacific Region, Department of Fisheries and Environment. Letter to A.G. Redshaw, Regional Manager, Water, Lands, Forests and Environment, Department of Indian Affairs and Northern Development (DIAND). 18 September 1974.

3. Raleigh, J., President, Norlands Petroleums Limited. Letter to Hon. J. Buchanan, Minister of Indian Affairs and Northern Development. 6 December 1974.

4. Snow, N., Renewable Resources Branch, DIAND. Personal communication to M. Davidson. 14 August 1979.

5. Raleigh, J., Letter to E. Cotterill, Assistant Deputy Minister, DIAND. 3 May 1977.

6. Norlands already had spent approximately $2 million on environmental studies. Daae, D. Norlands Petroleums Limited. Personal communication to M. Davidson. 13 August 1979.

7. Allmand, W., Minister of Indian Affairs and Northern Development. Telex to A. Rutgers, Vice President, Exploration, Norlands Petroleums Limited. 25 July 1977.

8. Ruel, M., Director, Northern Environmental Protection and Renewable Resources Branch DIAND. Letter to J. Raleigh, President, Norlands Petroleums Limited. 27 October 1977.

9. Lf ken, O., Renewable Resources Branch. DIAND. Personal communication to M. Davidson. 15 August 1979.

10. Federal Environmental Assessment Review Office. Report of the Environmental Assessment Panel: Lancaster Sound Drilling. Ottawa, 1979, p. 73.

1l. See Rees, W.E., "EARP at the Crossroads, Environmental Assessment in Canada." In Environmental Impact Assessment Review, I :4, December 1980. pp. 355-377.

12. For a description of the Lancaster Sound EARP, see Harvison, P., "Lancaster Sound: Confusion and Confrontation." In Nature Canada, 8:2, April June 1979, pp. 36 47.
 

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