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IOGC prepares a management plan each fiscal year. Following is the overview from IOGC's
Management Plan for fiscal year 2009-2010.
Table of Contents
Plan Overview
1. Introduction
2. The Planning Context for IOGC
3. Summary of IOGC Management Plan
o Vision for 2009-10 and Beyond
o 2009-10 Criteria for Prioritization and Organizational Priorities
o Key Initiatives Overview
o Operations Overview
o Strategic Foundations
IOGC Co-Management Board
First Nations Outreach
Human Resources
Communications
1. Introduction
Indian Oil and Gas Canada (IOGC) is responsible for management of oil and gas on Indian
reserve lands across Canada, primarily south of the 60th parallel. IOGC is mandated to:
fulfill the Crown's fiduciary and statutory obligations related to the management of oil
and gas resources on First Nation lands; and
further First Nation initiatives to manage and control their oil and gas resources.
IOGC works to meet these responsibilities in partnership with individual First Nations and
with the Indian Resource Council (IRC), a representative voice for over 130 First Nations
with oil and gas interests.
IOGC is always available to go out and meet with First Nations to explain IOGC roles and
functions, to build a working relationship and to develop capacity and understanding of the
oil and gas operations occurring on reserve lands. The life cycle of an oil and gas agreement
can be complicated as it moves from negotiation of agreements to administration of those
agreements, royalty management, collection of funds, environmental assurance and
production compliance. IOGC is committed to working with First Nations throughout the
process to ensure each First Nation community can work within the legislative and regulatory
regime to best address their community needs.
IOGC also maintains ongoing liaison with the IRC to keep them apprised of what is
happening and to work jointly on the resolution of issues that are of mutual concern. The IRC
appoints six of the nine representatives to the IOGC Co-Management Board. Regular
meetings of the Board are held which also include reports on progress with respect to IOGC’s
Management Plan. This is supplemented with ongoing updates to Board members though
their Board liaison.
The 2009-10 Management Plan outlines IOGC’s strategic and high-level operational
priorities and deliverables for the fiscal year. It captures the roles the organization fulfills:
Working with First Nations as both a regulator and a trustee, to facilitate management
of oil and gas resources; and
Negotiating agreements with industry using a two key approach which requires both
First Nation and IOGC approvals.
IOGC is a special operating agency within Indian and Northern Affairs Canada (INAC). This
management plan is aligned to the objectives of INAC’s Lands and Economic Development
sector, with deliverables that fit within the Lands strategic outcome, specifically:
It also supports INAC’s Internal Services strategic outcome for an effective and responsibly
managed and operating department, through implementation of applicable polices and
approaches.
The work included in the IOGC Management Plan also addresses management expectations
set out in the Management Accountability Framework (MAF) developed by the Treasury
Board of Canada. The MAF reflects the current elements of management responsibility in the
public service.
The 2009-10 plan builds on last year’s while taking into account the changed economic
climate. The plan and the priorities allow for informed decisions including resource
allocations for the year.
Finally, the emphasis of IOGC’s planning process for 2009-10 has been to develop a plan that
is both realistic and actionable, while taking into account IOGC’s organizational capacity.
The Management Plan is intended to be inclusive and informative, so that employees, clients
and stakeholders all understand the strategic agenda (through its key initiatives) as well as the
operational plans.
The industry outlook for oil and gas at the start of 2009 is less certain than in recent years.
The economic slowdown has resulted in sharp declines in markets and oil prices, which in
turn have caused companies to reduce their planned capital expenditures. At the same time,
many companies, including the small and medium-sized producers with which IOGC and
First Nations work, are experiencing difficulty in raising investment capital.
The National Energy Board predicts that crude prices are expected to average in the range of
US $50 to US $75 per barrel in the near-term. Although global inventory levels are low and
the Organization of the Petroleum Exporting Countries (OPEC) has recently committed to
production cuts, the market continues to be focused on the economic downturn and falling
demand.
For industry, the sharp downturn in commodity prices presents an opportunity for
improvement in capital efficiencies, reducing overall costs. But lower costs continue to be
offset by market uncertainties. Exploration and drilling have both been reduced substantially,
and many large capital investments have been put on hold. Alberta land sales are the lowest
in ten years; however Saskatchewan sales continue to be strong.
As a result of current prices, western Canada’s oil and gas producers have moved their
attention from the ‘prize’ of the oil sands to a renewed focus on conventional oil and gas
recovery. Changes in the resource profile of conventional production mean smaller pools and
production volumes, higher decline rates and shorter production timelines.
Industry experts continue to predict that oil and gas prices will go up from current levels.
Industry also continues to work hard to find new technologies that will help keep costs down.
The regulatory and environmental framework in which the oil and gas industry works puts
upward pressures on costs. Saskatchewan is strengthening its regulatory regime. Alberta has
new royalty structures, recently announced incentives and a new land use framework that
establishes regional land use plans, with a new regime for compliance enforcement.
The labour market for skilled workers in Western Canada is still relatively tight in the first
quarter of 2009, but has eased somewhat from a year ago.
In summary, the economic outlook for 2009-10 is cautious, reflecting the current uncertainty
mirrored in the world.
IOGC continues to work with First Nations to support greater First Nation involvement and
participation in the management of the resources underlying their lands.
First Nations continue to demonstrate growing aspirations; increased concerns regarding the
roles played by the Provinces in relation to exploration and production on reserve lands; and
increased expectations regarding timeliness of service delivery.
Treaty Land Entitlement additions continue to increase the land base and the demand for
services. Saskatchewan reserves are experiencing increased development, and many First
Nations in that province are new to oil and gas development. As a result, there is an
increasing need at the First Nation level for greater oil and gas capacity development and
training.
A number of significant initiatives are moving ahead that continue to impact both the overall
landscape and direction.
Three FNOGMMA First Nations are scheduled to vote on a decision to proceed with
taking over full management and control, opening the door to other First Nations that
may wish to pursue this model.
Joint Technical Committee-1 (JTC-1) work on modernizing the Indian Oil and Gas
Act has been introduced in Parliament, setting the scene for a focus on development of
modern Regulations.
Joint Technical Committee-2 (JTC-2) work has focused on continuous change for the
IRC Business Centre and IOGC Board improvements. Discussions in 2009-10 may
result in greater clarity to the overall vision and the steps leading to that outcome.
The new companies operating on First Nations lands are typically small and have been
impacted by the slowing oil and gas economy and reduced availability of capital. With costs
high, capital scarce, and an increasingly tough environmental framework for operating and
mitigation of existing projects and facilities, delays in projects seem inevitable.
Alberta has implemented its new royalty framework effective January 1, 2009 and has since
announced various incentives involving royalty reductions or royalty credits to help small and
medium sized companies. However, the programs are not available on First Nation lands, and
will not help the companies operating in Saskatchewan and British Columbia.
Companies that are on the margin are at increasing risk of bankruptcies. First Nation owned
companies may fall into default because their joint venture partners are in trouble. There may
be an increase in insolvencies and defaults by companies, including band-owned companies.
The trends in the oil and gas economy will have an impact in 2009-10 activity levels on First
Nations lands. Investments are made based on return. Business deals on First Nation lands
may not be as favorable in the near-term, with some First Nations choosing not to go to the
market place until prices improve.
The amendments to the Indian Oil and Gas Act are expected to receive Royal Assent in 2009-
10 but will not come into force until the regulations are modernized. The focus in 2009-10
will be development of new regulations to support the Act and ongoing dialogue and
consultations during their development.
The January 2009 Speech from the Throne articulated the Government of Canada’s priority
of addressing the economic crisis through investments in infrastructure to stimulate growth,
protecting the stability of financial systems, ensuring access to credit for business and
consumers, and protecting the vulnerable.
Budget 2009 set out the details of the plan. Highlights of Budget measures affecting First
Nations and oil and gas include:
In addition to these areas of stimulus, the budget announced measures to limit discretionary
spending (through limits on conferences, hospitality and travel), and it confirmed ongoing use
of strategic reviews of program spending intended to result in savings stemming from:
INAC is expected to be part of the review for 2009-10, although it not been confirmed. The
review will look at the least effective and lowest priority programs to identify five per cent to
be "given up"; reinvestment requests can be made but are not assured.
Implications to IOGC are expected to include an ongoing focus on ensuring that legislative
and regulatory regimes will support economic development, ongoing support of First Nation
capacity development and working with Lands and Economic Development colleagues to
align operations and to seek oil and gas spin-off opportunities. It will also involve ongoing
support of work by the IRC and FSIN Business Centers of Excellence to facilitate viable First
Nation businesses and workforce training to ensure Aboriginals can capitalize on emerging
economic development opportunities.
IOGC continues to build on its strengths, which include a sound management structure and
accountabilities plus knowledgeable and dedicated staff who offer a mix of academic and
technical skills.
With more retirements expected in the next five years, IOGC could lose significant
institutional memory. Therefore, the agency will continue work to further succession
planning and passing on knowledge before people leave.
Growing Treaty Land Entitlement demands in Saskatchewan have resulted in a request for
more resources. If provided by INAC’s Financial Management Committee (FMC), the
Management Plan will be adjusted with added deliverables.
It is anticipated that 2009-10 will entail an even greater need to work in partnership with First
Nations. The economic environment will increase First Nation needs for revenue forecasts
and associated planning. The move back to more conventional production will bring with it
opportunities for development of enhanced oil recovery royalty structures. Impacts resulting
from the new Alberta Royalty Formula will need to be addressed along with any increase in
corporate insolvencies or changes in company development plans.
Other anticipated demands include: work to modernize the Indian Oil and Gas Regulations
and associated business practices and systems; meeting requirements that stem from the
strategic review of INAC programs; supporting the new economic development framework;
First Nation capacity development; and other policies or directives set by INAC that IOGC
may need to implement.
At the same time, Public Works and Government Services Canada has proposed jointly
funded lease refit upgrades for IOGC offices. The proposal is under consideration pending a
decision by the First Nation. Should the refit occur, it is anticipated to affect people and
operations as a result of a short-term move to swing space during the renovations and any
impacts of changes to update fit up standards.
The agency is small enough to enjoy good communication internally and to provide a
supportive environment for training and learning. On the other hand, being a small
organization means it may be difficult to set priorities or to provide depth of coverage.
High workload levels continue to be on ongoing challenge with increasing complexity to the
work being faced. In the absence of additional resources, the focus for the coming year will
be to set priorities, to assess risks and to standardize more operating practices (see key
initiatives for further details).
In the near to medium term, IOGC will continue to focus on being a modern regulator, while
fulfilling its trust relationship with First Nations.
Being a modern regulator entails having in place a sound management regime with strong
leadership and commitment, a foundation of ethics and values and a focus on planning and
management of resources, risk and performance. It means having clear criteria for decision-
making and ensuring a fair return to First Nations. It is also cost effective and has a
competitive and SMART legislative and regulatory regime that is well understood,
transparent, consistently applied and responsive to changes in the business climate. IOGC
continues to see progress towards this goal as a result of its key initiatives to improve
business practices and to modernize the Indian Oil and Gas Act and Regulations.
Fulfilling the trust relationship means working closely with First Nations leadership to
facilitate management of their oil and gas resources. A “two key” process requires First
Nation and IOGC approvals prior to issuing any new agreements. IOGC is always available
to meet with First Nations to provide information, to explain operations, to develop capacity
and to facilitate informed decision-making. The trust relationship also means exercising a
duty of care, a duty to protect and avoidance of conflict of interest.
The longer term vision calls for First Nations to take over management and control of their
resources, either individually or collectively.
On the individual front, IOGC continues to work with the three FNOGMMA First Nations
who are scheduled to hold a vote in fall 2009 to determine whether they wish to assume
management and control of their resources. The timing for other First Nations in entering
FNOGMMA will range from near to mid to longer term, depending on the interests of
individual First Nations and whether they have the economy of scale to successfully take on
this role.
On the collective front, the Indian Resource Council has indicated that in the short to medium
term, the interest of their membership is in increasing their participation and involvement in
the management of oil and gas resources. The IRC appoints six of the nine representatives on
the IOGC Co-management Board. The move to collective control of oil and gas resources by
a First Nation institution is viewed by IRC members as a goal for the longer term.
Organizationally, the vision (see figures 1 & 2) is based on an organization that is a
workplace of choice, that can recruit competitively, retains staff and has a culture that is
innovative, values driven and performance based, whose employees are empowered,
accountable and who strive for excellence.
2010-11 - - 2011-
2009-10 Longer Term
12
Key Strategies
IOGC
Management / Change Agenda
Operations
Responsible
Federal
Stewardship:
- Inventory
Management
- Negotiations
Modernize Indian
Management
Oil & Gas Act &
- Agreement Regulations First Nation Institution
Management IOGC recognized Collective First Nation
RIMS 2
- Environment as a Modern Management & Control
Interest Automation
Management Regulator (all or some of IOGC
Land Statutory functions)
- Royalty
Management Alberta New
Royalty Formula
- Compliance
Management
- Policy
Management
- Corporate
Management
- IOGC Co-
Management Board
- IRC Partnership
First Nation
Governance: A number of First Nations
2-3 First Nations
Land and FNOGMMA exercise management and
under FNOGMMA
Resources control over their oil and gas
- FN Governance
Internal Services
- Support DIAND Initiatives
Responsible Federal Stewardship of oil and gas rights by managing and regulating the
disposition, administration and royalty collection of First Nation oil and gas interests
Role is similar to that of land-owners and Provincial departments of Energy with
added Guerin-type fiduciary responsibilities
Sound Management Regime that ensures a fair return and is cost effective and efficient:
With the aforementioned vision and operating environment, IOGC used a risk-based
assessment to prioritize its top objectives for 2009-10 in the following order:
Indian Oil and Gas Act and Regulations modernization (with RIMS 2 where it
supports implementation of regulatory changes)
Royalty billing, including associated backlogs and reconciliation (incorporating
Interest royalty billing components and Alberta new royalty formula)
Staffing vacant positions, addressing succession planning and workplace culture
Other backlogs.
The following risk-based criteria were also set out to prioritize backlog items.
It is not clear at the time of writing this plan whether the previously noted funding issues will
be satisfactorily resolved or whether the office refit will take place. As a result, some of the
planned key initiatives or operational plans may require adjustments to reflect funding
shortfalls. Should the requested TLE funds be approved, plans will need to be revised to
incorporate additional commitments related to replacement agreements currently in process
and new additions that are expected to occur.
Outcome
Amendments to Act receive Royal Assent and Amendments to Regulations are drafted to be
more reflective of current industry practices and to provide a statutory regime to effectively
manage First Nation oil and gas resources with certainty and transparency.
Deliverables 2009-10 (full project plan and deliverables provided in Section 4 of the
Management Plan)
Amendments to the Indian Oil and Gas Act receive Royal assent
Amendments to Regulations completed and in approvals process
Development of Treasury Board submission for implementation funding
Ongoing consultations with First Nations and briefings as requested
Outcome
As proposed amendments to the Indian Oil and Gas Regulations are developed, new
functions added will need automation and changes to existing business practices will require
modifications to existing system requirements. IOGC will need to renew its current RIMS
system to address these changes and ongoing life-cycle management. The project will also
incorporate ongoing work to redesign the management of the royalty process.
Deliverables 2009-10 (full project plan provided in Section 4 of the Management Plan)
Interest Automation
Outcome
Design and automation of IOGC business processes to support charging and collection of
outstanding monies, including associated interest, on land and royalty payments.
Deliverables 2009-10 (full project plan provided in Section 4 of the Management Plan)
Outcome
Deliverables 2009-10 (full project plan provided in Section 4 of the Management Plan)
Outcome
Complete evaluation and address the impacts of Alberta’s new royalty formula to leasing
provisions, business processes and systems.
Deliverables 2009-10 (full project plan provided in Section 4 of the Management Plan)
completion of design specification for Alberta new royalty framework (AB NRF) calculations
(50% of programming completed)
Outcome
Development, in partnership with First Nations, of agreements and documents required for
ratification votes by First Nations to assume management and control of oil and gas resources
and monies on their lands.
Deliverables 2009-10 (full project plan provided in Section 4 of the Management Plan)
Operations Overview
Detailed plans for IOGC operational activities are found in Section 5 of the 2009-10
Management Plan. The following provides an overview of activity responsibilities, by
division.
Executive Division
Land Division
assess proposals from interested companies re: subsurface rights in order to ensure
they represent fair return
facilitate negotiations with First Nations in reaching agreements with companies
provide title verification and confirm acreage for pooling purposes
issue oil and gas permits, leases and associated surface rights to companies
administer oil and gas agreements throughout the life of the agreement
ensure all proposed oil and gas surface agreements undergo environmental assessment
in accordance with the Canadian Environmental Assessment Act (CEAA) and screen
all assessments to ensure environmental impacts are mitigated
perform field inspections and review environmental audits of surface leases
enforce regulatory and contractual compliance with use of Alternate Dispute
Resolution (ADR) tools
support Treaty Land Entitlement and Additions to Reserve program
Production Division
monitor production on First Nation reserve lands to ensure that oil and gas reserves
are being produced in accordance with federal and provincial regulations
monitor production from wells and as necessary, conduct field inspections to ensure
that reported production volumes are accurate
conduct technical reviews of leases for continuance or termination
process royalty submissions and amendments
assess the prices reported by the company to actual sales price for each product or
other agreed to standard
manage authorized deductions from gross royalties, such as gas cost allowance and
trucking
perform audits on royalties submitted pursuant to a risk based audit cycle
reconcile royalty statements to ensure accuracy
maintain the data systems to track leasing, production, royalties and associated
revenues and providing office informatics services; and
IT support to the organization
Strategic Foundations
Outcome
The Co-Management Board provides oversight and input to ensure IOGC is integrated with
its key stakeholders.
Deliverables 2009-10
Meetings will be held quarterly to ensure integration and communication between the
Board and IOGC’s Executive
IOGC will work with the IRC’s Board Liaison on an ongoing basis to provide
information and to seek direction of areas of interest and priority to the Board.
IOGC Board will hold a retreat on the vision of First Nation control and will meet
with JTC-2 to flesh out an action plan and next steps to implement the vision.
Outcome
IOGC increases its outreach activities with First Nations, resulting in improved working
relationships, greater First Nation capacity and mutual understanding of each other’s
aspirations and interests.
Deliverables 2009-10
Plan for a number of presentations to producing First Nations involving all divisions
Actively offering to meet with First Nations and to explain IOGC roles and functions,
to build capacity and understanding of oil and gas operations on reserve lands and to
seek opportunities to work in partnership with each other
Provision of information packages to newly elected Chiefs and Councils
Ongoing presentations and meetings between IOGC CEO and First Nation Chiefs and
Councils with a dual focus on the business at hand and capacity development.
Human Resources
Outcome
Human resources programs support IOGC’s business requirements within the context of
separate employer authorities and evolving Public Service renewal.
Deliverables 2009-10 (full project plan provided in Section 4 of the Management Plan)
Communications
Outcome
Deliverables 2009-10 (full project plan provided in Section 5 of the Management Plan)