Newfoundland Fossils Demand Big Federal Bailout While Drilling Program Faces Legal Challenge
Fossils in Newfoundland and Labrador are warning that the industry crash brought on by the coronavirus pandemic has thrown exploration commitments worth billions of dollars into limbo, raising questions about the province’s previous plan to double the size of its oil and gas sector by 2030.
Premier Dwight Ball, Natural Resources Minister Siobhan Coady, and what the Globe and Mail describes as “a host of oil and gas industry players” are urging the federal government to “step up” with a support plan for offshore fossils, just two weeks after a (possibly smaller) host of three environmental groups launched a court action asserting that Ottawa had approved an offshore drilling program without a proper assessment.
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The mid-May application by Halifax’s Ecology Action Centre, the Sierra Club Canada Foundation, and World Wildlife Fund Canada “seeks a judicial review quashing a regional study of exploratory drilling east of Newfoundland, arguing the work did not meet legal requirements,” The Canadian Press reported in mid-May. “It also seeks to stop the federal environment minister from using the study as the basis for regulation that would exempt similar exploratory projects in the region from evaluation of their potential environmental harms.”
Ecojustice lawyer James Gunvaldsen-Klaassen said the proposed regulation “flies in the face” of the environmental scrutiny envisioned in the newly-adopted federal Impact Assessment Act. “It’s something that could be very good in terms of looking at the big picture and looking at things that are common to a whole region,” he said. “But if it’s not done right, it can set a bad precedent, and that’s what we’re worried about here.”
Both news reports go back to mid-October, 2018, when Newfoundland and Labrador introduced a new growth strategy for its oil and gas sector that envisioned more than 100 new exploration wells and output of 650,000 barrels of oil or equivalent per day by 2030. “Newfoundland and Labrador has tremendous opportunity in offshore oil and gas,” Coady said at the time. “By focusing on our competitiveness, driving exploration, ensuring innovation, and working together, we will achieve the vision we all want of a thriving, growing oil and gas industry.”
The federal environment minister subsequently assigned a committee to assess the 735,000-square-kilometre exploration area. The group’s report was published in March. “In their court application, the environmental groups argue the committee did not properly assess the effects of drilling in the area, including possible malfunctions, accidents, oil spills, and blowouts, or the combined effects with other activity in the region,” CBC writes. “They say the committee failed to conduct a regional assessment under the law, instead deferring outstanding elements of the work to the Canada-Newfoundland and Labrador Offshore Petroleum Board, which regulates the province’s oil and gas activity.”
The groups contend the process was rushed, and they were given insufficient time to review materials and provide feedback.
In a letter to Environment and Climate Minister Jonathan Wilkinson in February, the committee members said they were proud of their work, but noted that “the abbreviated time” of under a year to complete the assessment had been a challenge. “This not only limited the committee’s ability in preparing the report but also reduced public confidence in the committee’s work and the opportunities for others to contribute,” they wrote.
The report added that the size of the study area was “one of the largest challenges” during the assessment, “given the extent and the diverse and dynamic nature of this very large offshore environment.”
Yet in early March, Wilkinson proposed a regulation based on the committee report that exempted proposed exploratory drilling projects from the Impact Assessment Act. “The objective of the proposed ministerial regulation is to improve the efficiency of the assessment processes of offshore oil and gas exploratory drilling, while maintaining the high standards of environmental protection for these projects,” he wrote.
The environmental groups say the regulation is based on an unlawful and flawed assessment and would have “an immediate and irreversible impact,” CBC says.
But this week, the focus was on production, not protection. “We’re asking the Prime Minister. We need to see some action,” Ball said. “They’ve stepped up on many occasions to support Newfoundland and Labrador, and we’re asking for them to step up once again for our province which urgently needs support for the oil and gas industry.”
Citing Newfoundland and Labrador Oil and Gas Industries Association (NOIA) CEO Charlene Johnson, the Globe says more than a dozen of the province’s fossils have recently shut down. “Investment is fleeing Newfoundland’s offshore sector,” the paper writes, “and with Norway readying to open up more rounds of offshore exploration, Ms. Johnson said, it will be tough to persuade offshore players to stay in the province without federal support—particularly given that ‘Norway will have such attractive incentives to draw them there’.”
That country’s massive sovereign wealth fund “recently announced it will divest from four major Canadian oil companies,” the Globe adds. “Even so, the country is forging ahead with the expansion of its own offshore drilling sector.”
“It’s a real toss-up because the minute Norway approves (incentives), it’s going to be very hard to entice them to stay in our waters,” Johnson told The Canadian Press. “These decisions are being made now. We’ve had over a dozen companies end their membership in NOIA because they’re closing up shop here.”
So now—in the midst of a pandemic and a climate emergency, with Ottawa under immense pressure to build back better through a green recovery program—Newfoundland and Labrador is pressing for the kind of lavish fossil exploration incentives Trudeau’s dad, then-prime minister Pierre Elliott Trudeau, introduced in 1981.
Coady “said the province and industry have had ‘almost daily’ conversations with federal Natural Resources Minister Seamus O’Regan, who represents a St. John’s riding, to request similar exploration supports. But they have seen little movement from the federal government,” the Globe writes. “What’s particularly frustrating, Ms. Johnson said, is that the industry has answered swaths of questions put to it by Ottawa, including potential returns on offshore investment, details on the number of workers in the sector, Newfoundland’s carbon footprint, and the sector’s fiscal impact on the province and country.”
“We have provided ample data and evidence. There’s no logical reason why our request should not be supported,” she said. “It’s very frustrating, and we’re at a point now where’s it’s over to you, Prime Minister, and your cabinet colleagues, to help our province so we can prosper.”
In an e-mail to the Globe, O’Regan “didn’t say if Ottawa is considering Newfoundland’s requests for exploration investment, but he said the province’s commitment to net zero emissions by 2050 is ‘good for our environment and good for our economic competitiveness’,” the paper writes.
“Around the world, investors are increasingly looking for this commitment,” O’Regan added. “[Newfoundland] has a good product to sell—a sweet, light crude with a fraction of the emissions.”
“We all have friends and family who are worried about their jobs,” the minister tweeted separately, following a conversation with Johnson. “Oil and gas is in a state of upheaval out west, and around the world. But I am a champion of our offshore. Together we will get through this.”
In an April 20 letter, Coady told O’Regan the province appreciated a C$75-million fund to help the industry reduce its greenhouse gas emissions, but needs a system similar to Norway’s to stimulate exploration through “direct tax payments”, The Canadian Press writes.
Jim Keating, acting CEO of Crown-owned OilCo, warning that the province’s dream of doubling oil and gas output by decade’s end is in doubt. “I’d say that plan is extremely jeopardized,” he told CBC News.
“There is some sense to making these investments now, because oil companies are still looking for opportunities and we believe we still have them here,” he added. “But the industry is notorious for having long cycles. If we’re caught on the wrong side and miss that window of investment, or it goes somewhere else, it might not come back at all.”