Regulatory Approach to the Offshore Oil and Gas Sector in Canada

The Frontier Offshore Regulatory Renewal Initiative (FORRI) has received comments and questions from stakeholders and Indigenous groups with respect to performance-based requirements in the draft policy intent for the Framework Regulations. The questions and answers found below have been developed in response and to assist in advancing awareness and understanding of the regulatory approach being proposed.  

What are performance-based and prescriptive regulatory requirements, and what is a hybrid model approach?

• Performance-based regulatory requirements specify performance goals and expectations that must be achieved by the offshore industry, without specifying the measures and methods that must be implemented to achieve compliance. In other words, it specifies the outcome that must be achieved, but does not specify “how.”
• Prescriptive regulatory requirements define the specific technical and procedural requirements for operating in the offshore industry, detailing what is to be done, by whom, and precisely how it can be accomplished. It states what must be done but does not state the desired outcome.
• A hybrid model approach combines both prescriptive and performance-based elements, taking advantage of the benefits offered by both styles of regulation.

Why are the Framework Regulations using a hybrid model approach?

• Performance-based requirements in regulations:
  • provide the offshore industry with the opportunity to select, develop, and adopt safety and environmental management practices and technologies best suited to specific locations, activities, and individual company circumstances.
  • require the regulator to evaluate and approve how regulatory goals will be achieved through the proposed safety and environmental practices and measures, if those practices and measures reflect good/best practice based on acceptable technologies and methods. The regulator then conducts inspections and audits to verify the offshore industry’s compliance with the proposed measures and processes to ensure that regulatory goals are achieved.
  • create an expectation that the offshore industry will adapt newer technologies and practices as these approaches evolve to enable safer and more efficient operations.
  • are more suitable when regulated entities are diverse, and the risks and operations are variable.
•  Prescriptive requirements in regulations:
  • are often quickly out of date, and fail to keep pace with best industry practices and technological change.
  • often limit the commitment by the offshore industry to take proactive actions to increase safety beyond compliance, by allowing them to focus instead on “checking the boxes” to ensure compliance is achieved. This can cause a false sense of safety and diminish efforts towards proactive risk management and mitigation.
  • are more suitable when the regulated entities are similar, the risks well understood, and the operations and associated risks are comparable across projects.
• FORRI saw value in incorporating both elements of prescriptive and performance-based requirements in the modernized regulations:
  • prescriptive, largely where the necessary management methods (plans, programs, systems), operational standards and reporting requirements need to be specifically defined to achieve the desired outcomes.
  • performance-based where there is a need to provide flexibility to the offshore industry to determine the means to achieve regulatory objectives, typically where there are multiple ways of achieving a single desired outcome depending on specific circumstances (i.e. hazards, risks, and environmental conditions).

Are performance-based requirements appropriate for the Canadian offshore?

• The flexibility offered by performance-based requirements in regulations allows for better consideration of varying environments of offshore areas in Canada, and ensure activities are regulated according to the demands of the environmental factors at play (e.g., ice conditions, deep water, etc.).  
• This approach is suitable for regulating the diverse suite of installations and work places that currently operate (or may eventually operate) in the different operating conditions present from the East Coast of Canada to Arctic environments.
• As the industry evolves, performance based requirements ensure that Canada is constantly expecting industry to keep pace with the most appropriate technologies and practices for the work or activity that is taking place.

How will regulators manage the transition towards a hybrid model approach in regulations?

• The regulators will continue to operate under a robust permission-based system, wherein industry must receive permission from the regulator before any operation or activity commences.
• The regulators have been operating under a hybrid regulatory regime since 2009, when the performance-based Canada Oil and Gas Drilling and Production Regulations (and mirror provincial regulations) were brought into force, and have been adapting to performance-based requirements since that time.
• The National Energy Board has operated with performance-based regulatory requirements under some of the National Energy Board Act regulations for some time.
• The regulators are implementing change management measures for all staff.

FORRI partners include: Natural Resources Canada, Crown-Indigenous Relations and Northern Affairs Canada, the Newfoundland and Labrador Department of Natural Resources, and the Nova Scotia Department of Energy and Mines