Shoddy regime crippling investment

Under the existing Yukon fiscal and regulatory regime, the territory is not a good place for companies to invest, says the Canadian Association of…

Under the existing Yukon fiscal and regulatory regime, the territory is not a good place for companies to invest, says the Canadian Association of Petroleum Producers.

“Yukon contains eight sedimentary basins with potential oil and gas deposits,” the association notes on its website.

“Most exploratory wells have been drilled in southeast Yukon.

“However, industry is looking for a more effective regulatory and fiscal environment before increasing oil and gas development.”

The online remarks predate the controversial Yukon Environmental and Socioeconomic Assessment Act, which took effect in November 2005, ostensibly to streamline permitting processes for industry through an independent review board.

But the new assessment process has not achieved the regulatory certainty that industry requires, said petroleum association vice president Greg Stringham.

“The pieces are in motion, but they just haven’t been finalized yet in the process in getting all of the parties that need to be on side — in particular governments and aboriginal groups,” Stringham said Thursday.

“Some parties are saying (the assessment process) is a step forward, others are saying it’s a step sideways.”

Last week, the Yukon Minerals Advisery Board criticized the assessment process, noting the “streamlined process” doubled wait times for industry awaiting permits.

“Failure to present a regime that provides for regulatory certainty, and timely project permitting will almost certainly lead to a diminished ability for Yukon to participate in the current prosperity of the worldwide mining industry,” wrote the advisery board in its report.

The petroleum industry has similar concerns.

Work has to be done, said Stringham, diplomatically.

“More importantly, we need to move forward on the fiscal environment and the regulatory process for insuring the lands can be put up.

“At this point in time we’ve been saying, ‘Get the fiscal regime in place, so the royalty and tax regime  are understood so that you have everybody on the same side.’

“They’ve been working hard to do that since devolution. That’s been the biggest struggle.”

Industry has been “patiently waiting and seeing” what the Yukon government will do to create fiscal and regulatory regimes for the oil and gas industry for the last year or so, Stringham said.

The situation is getting critical.

“With the amount of natural gas activity that is now just on the other side of the border in BC and trickled out of Alberta into northeastern BC, it’s getting to the point where there’s relatively strong interest and a willingness to commit, but there are not rules in place for them to be able to do that, and there are not land sales for them to be able to capture or bid on lands that they could then drill on,” he said.

The very basic rules are missing, he said.

“How do you put land out for bid? How does the process work?

“Where do I send my letter to? And what is the application process?

“And once that’s in place, what royalty will I pay? How much do I pay on oil? How much do I pay on gas?

“What are the rules? They are completely unknown at this moment.”

The government has consulted with the association, but none of the rules have been finalized.

Even the disposition change that the Yukon government announced last year has yet to materialize for industry.

“Right now, the government chooses which land that they put out for post, whereas in most other jurisdictions the industry says, ‘We’d like to go into this area, can you put it up for bid?’” said Stringham.

“And then, if there are reasons that it can’t be, they take it off for bid.

“But other than that, they pretty well let industries decide where they’d like to bid.

“Here, it has been more of government picking and choosing the small little areas that they want to put out first.”

The government’s intent to reverse this aspect of the disposition process is controversial in the Yukon.

Conservation groups, like the Canadian Parks and Wilderness Society, have argued the government needs to study the land base and develop comprehensive land-use plans before putting the oil and gas industry in the driver’s seat to target its own exploration.

Industry is intrigued by the Yukon’s great, unexplored potential.

They realize that it lies between Alberta and Alaska — and could contain vast reserves of gas and oil.

“We don’t know that much about (the Yukon), to be honest,” said Stringham.

“There’s a belief that there is strong potential, but yet not much exploration, seismic or other stuff hasn’t been done yet.”

The government has been doing “lots of consultation,” Stringham added.

“I think what’s really needed, beyond that, is to bring those groups together that are involved in their consultation and try to bring it to closure now.

“That would really be helpful.

“I think (the Yukon government) is doing the right things; it’s just a matter of increased urgency.

“We’re getting to the point where there’s interest going back into other jurisdictions, because the foundation (in the Yukon) is not there.”

John Masterson, director of the oil and gas management branch, did not respond to a request for an interview before press time.