1. 41 st Asia Pacific Economic Cooperation Energy Working Group 2011 Regulating British Columbia’s Natural Gas Presented by: Paul Jeakins BC Oil and Gas Commission May 10 th 2011

2. 41 st Asia Pacific Economic Cooperation Energy Working Group 2011 Regulating British Columbia’s Natural Gas Topics Commission Overview Resource Overview Regulatory Structure Strategic/Tactical/Operational approaches – Basin Management

3. Stakeholders Engineering Division Regulatory Affairs & Stewardship Division Project Assessment & Compliance Assurance Corporate Services Division Board of Directors Commissioner Office of the Commissioner Corporate Planning and Performance Internal Audits Corporate Affairs Government Relations Stakeholder Relations Internal and External Communications Finance & Administration Information Technology Records Management Human Resources Organizational Development Property Management Permit Revision & Issuance Compliance & Inspection Enforcement Tenure Administration First Nations Consultation Resource Development Environmental Planning/Analysis Regulatory Management & Development First Nations Liaison Drilling & Production Engineering Pipeline & Facilities Engineering Waste Management Reclamation Petroleum Geology Reservoir Engineering Public Safety Including the Provincial Government as represented by the Minister of Energy and Mines Chief Executive Officer and Vice Chair of the Board Commission Overview 3

4. Resource Overview 4 Northeast B.C. is about 1/5 the size of the province. The oil and gas industry now accounts for more than half of total revenue generated by the natural resource sectors in B.C. All of B.C.’s producing oil and gas is in northeast B.C. Agriculture is the second leading industry in northeast B.C. About 1.5 per cent of the province’s population is in northeast B.C. B.C.

5. 1 2 3 4 Horn River Basin Shale 11,900 sq km 75-170 Tcf marketable natural gas 97 Bcf cumulative production* Montney Tight gas/shale 15,281 sq km 77-176 Tcf marketable gas 577 Bcf cumulative production* Cordova Embayment Shale 2,590 sq km 30-68 Tcf marketable gas Early development Liard Basin Shale 1,150 sq km Early development Shift to unconventional gas Northern British Columbia is home to four geographic basins which are recognized sources of shale gas. * 2010 production numbers Resource Overview 5 5 5

6. BC Energy Plan 6 2 Meeting Provincial Targets BC’s Energy Plan:  Grows the Economy  Reduces Greenhouse Gas Emissions  Focuses on Environmental and Economic Leadership  The Commission’s Energy Plan Achievements: A 30 per cent reduction in total flared volumes from 2008 to 2009. Annual flared volumes have decreased 23 per cent since 2006. A 56 per cent reduction in solution gas flaring since 2006 and a 92 per cent reduction since 1997. From 1996 to 2009, natural gas production increased by 40 per cent and the amount of gas flared per unit of natural gas production decreased by 54 per cent. Ninety-seven per cent of solution gas is currently conserved. Well cleanup and well test flaring decreased by 28 per cent from 2008 to 2009 due to increases in inline testing in the Montney and Horn River Basin plays.

7. OGAA Oil and Gas Activities Act TECHNICAL REGULATIONS CONSULTATION & NOTIFICATION ENVIRONMENTAL PROTECTION & MANAGEMENT ADMINISTRATIVE PENALTIES Drilling and Production Geophysical Exploration Pipelines 7 Oil and Gas Activities Act Extensive consultations with communities, local government, First Nations, landowners, environmental organizations, industry associations and companies starting in 2002. OGC BoardCabinet

8. Highlights  Consolidation of a number of Acts  Allows for innovation Technical regulations allow for technical innovation. Allows either companies or government to propose special projects.  Modernizes oversight Enables Commission to link past behaviour to current and future operations. New review and appeal provisions.  Strengthens regulations Consultation and notification, and environmental protection.  Level playing field All operators – all activities.  Competitiveness and flexibility Harmonization with other jurisdictions. Flexibility on ground. Flexibility for new technologies, developments and approaches. Quick, responsive changes to technical regulations.  Single window regulator  Updates for unconventional approach 8 Oil and Gas Activities Act

9. Social Input 9 Consultation and Notification Objective  To resolve potential issues prior to application process.  Gives those affected by industry the opportunity to voice concern.  OGAA distinguishes the two as separate processes: Consultation A two way exchange of information between industry and those affected by industry. Notification The supply of information to potentially affected parties. Objective  Avoid, minimize and mitigate potential adverse impacts on First Nations rights.  Foster relationships with First Nations communities.  Act as facilitators between First Nations and industry.  Enhance decision-making by integrating First Nations input.  Integrate traditional knowledge with science and research. First Nations Consultation

10. OGAA Information Session--ver 1-0 Wildlife Water Quality Wildlife Water Quality Wildlife Riparian Areas Wildlife Riparian Areas Wildlife Range Wildlife Old Growth Wildlife Invasive Plants Wildlife Resource Features / Cultural Heritage Wildlife Forest Health Wildlife Soil February, 201110 Permitting Phase Operations Phase Environmental Protection and Management 10 The Environment

11.  Managing resources at a landscape level (1,000,000 + ha > Shift to unconventional driver for this approach)  Establishing basin boundaries  Linking surface and subsurface: Footprint analysis Environmental Stewardship Plan Basin/Tenure approval approach  Regular reports for each basin  Environmental management: Protection of groundwater Source water Multi-well pads Utilizing common corridors Seismic lines Minimizing flaring Basin Management Horn River Basin Liard Cordova Embayment East Kootenay 11 Regulatory Structure

12. 12 Tactical Operational Strategic and tactical management helps operational level management Strategic 12 Regulatory Structure

13. Government environmental objectives Regulatory requirements Permit conditions Inspections and audits Operational / site level plans Operational level management Operational Level 13 Regulatory Structure

14. 14 Regulatory Structure Basin Management – Water Key features of water basin management

15. Moving Forward  Expectations for regulatory oversight and constraint on industry activity are increasing. o Regulatory models are becoming more complex.  Expectations for greater transparency of industry activity and performance are increasing. 15 Commission:  Continued commitment to transparency through reports and updates.  Further progress on basin-level management on natural gas plays.  Continued emphasis on environmental values such as water and wildlife. Regulatory Structure

16. Regulating British Columbia’s Natural Gas More information www.bcogc.ca Paul Jeakins Deputy Commissioner (RAS) Paul.Jeakins@gov.bc.ca 41 st Asia Pacific Economic Cooperation Energy Working Group 2011