Shale Gas Regulate Before Fracking Begins

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Shale gas refers to natural gas that is trapped in microscopic spaces within highly impermeable rock. Until recently, it was not possible to efficiently extract natural gas from this type of rock. However, over the last few years, industry has developed new, cost-effective techniques for hydraulic fracturing (“fracking”) of this rock. This has increased overall access to shale gas. Although there have not yet been any fracking operations for shale gas within Ontario, the province’s geology suggests that there may be potential shale gas resources. In our 2010/2011 Annual Report, the ECO highlighted environmental concerns related to fracking and provided a brief overview of Ontario’s current regulatory framework (see Part 6.1 of the ECO’s 2010/2011 Annual Report). Among these concerns are the large amounts of water consumed in the process, the chemicals that are used, and the resulting wastewater and air pollution generated.

The Minister of Natural Resources has the authority to regulate natural gas extraction under the Oil, Gas and Salt Resources Act (OGSRA). However, the existing regulatory framework – primarily, O. Reg. 245/97 (Exploration, Drilling and Production) made under the OGSRA and the Provincial Standards for the Oil, Gas and Salt Resources of Ontario – pre-dates unconventional natural gas extraction processes and, therefore, was not developed with fracking in mind. As a result, the ECO recommended in our 2010/2011 Annual Report that the Ministry of Natural Resources (MNR) and the Ministry of the Environment (MOE) review and publicly report on the sufficiency of the regulatory framework to protect water resources and the natural environment from shale gas extraction. Neither ministry has followed through with this recommendation.

An Update on Potential Shale Gas in Ontario

In 2012, the Ontario Geological Survey (OGS) published its preliminary results of an evaluation of southern Ontario’s potential shale gas resources. This review began in 2009 and analyzed both newly drilled and previously collected rock samples to assess the province’s shale gas potential. Results showed that the Rouge River Member of the Blue Mountain Formation and the Collingwood Member of the Cobourg Formation have the best shale gas potential in southern Ontario. This information eventually will help the government assess the energy potential of the formations and the implications for groundwater quality and public health. However, no analysis was conducted on the economic potential of the resource.

Despite the geological potential in Ontario, as of April 2013, MNR has only received one application (in 2006), submitted pursuant to the Provincial Standards under the OGSRA for exploration, to drill for natural gas in Ontario’s shale rock. MNR told the ECO that this well “did not encounter an economic quantity of gas and was subsequently plugged on July 10, 2007, without completing a hydraulic fracture treatment.”

Although there has been only one well drilled to explore for shale gas in Ontario, media reports indicate that a number of companies may be engaging in the preliminary stages of fracking development by acquiring mineral rights for natural gas in southern Ontario. In southern Ontario, mineral rights are generally owned by the surface land owner, who is free to lease his or her mineral rights as they see fit. Ontario does not require registration of these leases on title, nor does the government regulate the terms of such lease agreements between private parties. As such, it is possible that a number of lease agreements have been made for shale gas rights, but such information unfortunately is not readily accessible by the public. In response to an information request from the ECO on such lease agreements, MNR reported that even the ministry does not have convenient access to this information.

The Regulation of Fracking Across Canada

Federal Activities

In Canada, the regulation of natural resources, including oil and natural gas, is generally a provincial responsibility. However, there has been some work on fracking underway at the federal level. For example, Environment Canada has initiated a review, expected to be completed by March 2014, of the reporting requirements under the National Pollutant Release Inventory, which currently exempts oil and gas exploration and drilling. The federal Minister of the Environment has also requested the Council of Canadian Academies (an independent, not-for-profit organization) to provide an evidence-based assessment of the state of knowledge regarding the potential environmental impacts of fracking and the associated mitigation options.

Provincial Activities

Provinces with identified shale gas potential include British Columbia (BC), Alberta, Saskatchewan, Ontario, Quebec, New Brunswick, Nova Scotia, and Newfoundland and Labrador. Whereas Ontario does not have an explicit fracking policy in place, most of these other provinces have established policies related to shale gas and hydraulic fracturing – either prior to or post shale gas and fracking development.

So far, Canadian production has been concentrated in Alberta and BC and both provinces are addressing environmental issues as they emerge. For example, in response to a rare interaction between two wells in Alberta that resulted in the accidental release of fracking fluids at the surface, the Alberta government put forward draft regulations aimed at managing risks associated with fracking operations. Alberta has also released a discussion paper, Regulating Unconventional Oil and Gas in Alberta, which considers managing the cumulative effects of the oil and gas industry and taking a more regional approach. The BC Oil and Gas Commission began using a website (www.fracfocus.ca) to act as an online resource for information on hydraulically fractured wells, including an online disclosure of chemicals used by companies; Alberta also uses this online registry.

Saskatchewan modified its royalty rate to encourage shale gas exploration and production, and New Brunswick released a new set of rules for industry – Responsible Environmental Management of Oil and Natural Gas Activities in New Brunswick – earlier this year. Included in the rules is a “dispute resolution mechanism,” that will see the provincial government (and not individual property owners) handle the remediation of water or other environmental issues and seek compensation from industry.

In 2011, the Quebec government limited shale gas activity on a regional basis. That same year, Nova Scotia began a multi-year review of hydraulic fracturing, which is still underway. No hydraulic fracturing will be approved in Nova Scotia during the review.

Industry Initiatives

Industry organizations, such as the Canadian Association of Petroleum Producers (CAPP), are developing guiding principles and operating practices that support and encourage transparency in this sector. For example, CAPP has developed seven operating practices thus far that address environmental issues ranging from disclosing chemicals used by industry to performing baseline groundwater testing.

EBR Application for Review on Fracking

In October 2012, two applicants submitted an application under the Environmental Bill of Rights, 1993 (EBR) requesting a review of the OGSRA and several regulations under the Environmental Protection Act as they relate to the waste management of fracking fluids (see Section 2.4.1 of the Supplement to this Annual Report). In January 2013, MNR and MOE agreed to undertake the requested review, although neither ministry provided a firm date for when they plan to complete the review. The ECO will report on this review once it is completed.

ECO Comment

Natural gas is an important fuel that is used to generate electricity and power industry, and also heat homes, businesses and institutions. Arguably, there are economic and social benefits that accrue to the ability to access more of this energy resource. However, these benefits do not come without potential drawbacks, as there are serious environmental concerns related to the extraction of natural gas from shale rock. This delicate balance of benefits and drawbacks makes shale gas a vital public policy issue.

There are major water use and wastewater concerns related to shale gas and hydraulic fracturing that must be addressed. Conventional fracking uses significant amounts of water and generates large amounts of wastewater. If hydraulic fracturing were to take place in Ontario for shale gas extraction, the government must ensure that water takings and the generated wastewater are managed properly. There are also important land rehabilitation issues. The public will need certainty that the land will be restored to its pre-well state once industrial operations come to an end. There is also a growing debate related to the amount of methane released during shale gas extraction, making some researchers question the effects of shale gas extraction on greenhouse gas emissions.

Ontario is in a unique position; this province has a long history of oil and natural gas extraction, and already has regulations in place that apply to these operations. Yet there is no policy or regulation that specifically addresses the unique concerns related to fracking. Sufficient regulation is necessary for safeguarding properties, citizens and the environment. Experiences like those in Alberta highlight the importance of having a regulatory framework that addresses the technical elements that are specific to fracking. Shale gas production has increased dramatically in recent years in other jurisdictions, and there is a growing body of information on the topic from academia, industry and regulators that can help inform Ontario’s regulatory approach. The Ontario government can learn some lessons from Quebec. When shale gas activity began, Quebec had no regulation that specifically addressed this activity, so the government relied on its existing legislation to govern initial exploration. Natural gas leaks were unfortunately detected in some of the shale gas wells, which led to various environmental reviews and a halt to exploration and drilling activities. From this experience, it would be wise and prudent for regulators to develop rules before allowing industry to proceed.

Fracking is a complex process that comes with many environmental concerns. Additionally, since fracking is a dispersed industrial process (it requires wells, roads, and other facilities that can be spread out across a large area of land), it is possible that future projects may occur in areas that have conflicting land uses, like prime agricultural lands or significant natural heritage features, and this could generate public backlash. In this case, the Ontario government can learn some lessons from itself. Solar energy generation projects have faced numerous siting issues in this province, resulting in rule changes for where these projects can occur. Given that solar panel installations are relatively benign in comparison to shale gas projects, it is obvious that land use issues must be considered before any shale gas extraction takes place.

Proactive regulation that places Ontario ahead in terms of safety and environmental issues could be advantageous for residents and industry alike. Other jurisdictions, like New Brunswick and Illinois, are developing rules for fracking operations before major industry developments occur. The work undertaken by industry to encourage transparency and best practices for shale gas extraction demonstrates that industry wants to develop shale gas resources responsibly and to educate the public about what it is doing. This is commendable. However, government should not rely on industry to do its own job; as the regulators, it is MOE and MNR’s role to set appropriate standards for this developing process, and establish/ensure suitable inspection and enforcement provisions.




This is an article from the 2012/13 Annual Report to the Legislature from the Environmental Commissioner of Ontario.


Citing This Article:
Environmental Commissioner of Ontario. 2013. "Shale Gas: Regulate Before Fracking Begins." Serving the Public, ECO Annual Report, 2012/13. Toronto: The Queen's Printer for Ontario. 119-123.