A year ago I wrote a blog post : “The six conditions that must be satisfied for Quebec to become an oil producer.“

On the eve of Premier Couillard’s first budget (June 4,2014) it is time to revisit the blog post and take stock of how Quebec is doing on the oil front.

Oil

Little additional exploratory work has been done although Petrolia Inc. wants to resume work close to the town of Gaspé and, along with other juniors, will carry out drilling programmes this Summer on Anticosti Island.  Shortly before its defeat in April the Marois government agreed to partly fund the exploration programmes of juniors on Anticosti Island.  The Couillard government is reviewing these agreements. While not opposed to oil exploration, Premier Couillard takes the view that government should not be in the very risky business of oil exploration, especially at a time of tight money and large structural deficits.

Political Will

There is considerable political will as demonstrated by this morning’s press conference by the Environment and Natural Resources Ministers on the Government’s Action Plan on Hydrocarbons.  The three major political parties are in favour of oil exploration and development provided that it can be done safely and in an environmentally sound manner. The problem is how to convince a population wary of the oil industry. Oil exploration and development will have to be accepted by local populations.  The July 2013 Megantic tragedy does not help and neither do much publicized oil spills and pipeline failures.  The population understands that oil will remain a major energy source (even in Quebec) for the next 25 years but the burden of proof is on industry to demonstrate that it can operate safely and on government to show that it can regulate competently.  For Government, the preferred oil projects will be those in isolated, non-environmentally sensitive areas with light infrastructure needs.

Adequate Laws

Little progress has been made to date on this front but government is determined to adopt the necessary legislation in 2015. In order to get local communities onboard legislation will probably include some revenue sharing with municipalities.  What has come to the fore, however, is that Quebec is woefully ill equipped to regulate the industry and will have to hire experienced personnel.

Environmental Approvals

Government’s position is that oil and gas are industrial sectors like any other and that they should be treated as such.  In other words, there should, as a rule be no moratorium, except in the Saint-Lawrence.  There should, however, be stringent regulations.  This is why government will commission a “strategic” environmental study of the entire oil and gas sector in Quebec.  This study should enable government to reassure the public and guide government as to what can and cannot be authorized in Quebec.

Oil Prices; Alberta Oil

Oil prices remain conducive to exploration in Quebec.  In fact, Quebec mainland oil (i.e., Gaspesie Oil) could have a transportation advantage over Alberta oil.  Speaking of oil transportation, Quebec is generally supportive of Enbridge’s 9B pipeline reversal project.  It uses existing pipeline facilities and is designed to feed Quebec’s two active refineries.  Government is more circumspect regarding TransCanada’s ambitious Eastern Gateway project, including its proposed Grand Cacouana terminal on the Saint Lawrence to export Alberta oil to Europe.  It is not yet clear in government’s mind whether the economic benefits outweigh the political and environmental opposition but it has called for a full blown environmental review of several aspects of the project, including the port.

Third Party Agreements

The election of a federalist premier in Quebec has been warmly welcomed in Ottawa and will simplify dealings with federal authorities and a fortiori neighbouring provinces. Quebec plans to start negotiations with Ottawa regarding the Old Harry offshore oil field shared with Newfoundland and Labrador.