Newfoundland a hurdle to regulatory reforms
The federal government’s push to beef up and centralize regulatory reviews of major energy projects is running into a big and unpredictable hurdle: Newfoundland and Labrador’s offshore oil industry.
If history is any indication, messing with Newfoundland’s oil is fraught with risk, especially as the province struggles to get itself out a nasty recession.
“Newfoundland has always been a fighting province,” said one observer who follows the sector in Atlantic Canada. “Anything that goes against perceived ownership of resources, whether it’s fisheries or oil and gas, they will fight the federal government on it.”
At issue is the federal Liberal government’s plan to reform the National Energy Board and the Canadian Environmental Assessment Agency to strengthen environmental protection — including evaluating major energy projects based on their impact on greenhouse gas emission reduction targets — as part of its campaign promise to restore public trust in energy regulation.
Just last week, in one of many signs the federal government will follow through, the NEB said it would widen its study of the Energy East pipeline from Alberta to New Brunswick to include much broader climate change impacts, a move that’s expected to make it harder for the $15.7 billion project to proceed.
Sensing trouble, the Newfoundland and Labrador Oil
& Gas Industries Association, which employs more than 10,000 people, fired a warning shot last week to Jim Carr, the federal natural resources minister, that the changes could stall industry exploration and development, while stepping into provincial jurisdiction and duplicating work already done by the provincial regulator.
In a letter made public Monday, NOIA said oil and gas royalties are expected to contribute $902 million to the province in 2017, which would be more than federal transfers payments estimated at $745 million. “Our members — and Newfoundlanders and Labradorians — will not accept the loss or delay of the benefits of these valuable resources while we struggle to pay for the demands of an aging population,” it wrote. “In a time where global exploration spending has been reduced by 75 per cent, we are competing for the remaining 25 per cent — competing against jurisdictions that can offer the certainly required for investment decisions of this magnitude.”
Newfoundland is recovering from a double economic shock in the past three years due to low oil prices and declining production from its three legacy fields — Hibernia, Terra Nova and White Rose. Two new projects are ramping up — Hebron, which is expected to start producing oil at the end of the year, and the West White Rose project, which is moving forward with construction after costs were cut and a motivated provincial government made terms more attractive. Exploration is also rebounding after the discovery of major new fields.
It’s a fragile comeback and NOIA said it has all the groundwork in place to pursue nationbuilding projects comparable to Norway’s. It also wants the Canada-Newfoundland and Labrador Offshore Petroleum Board to stay in charge to avoid regulatory delays. In addition, it said that under the Atlantic Accord between the province and the federal government, it’s up to the Newfoundland and Labrador’s natural resources minister to decide if all regulatory requirements, including environmental, are met.
The accord, signed in 1988 to manage offshore oil and gas, led to big fights between provincial premiers and prime ministers including Conservative Stephen Harper (one of the reasons the federal Liberals scooped all seats in the last election), but also Liberal Paul Martin, who dared to push for changes.
Former Newfoundland and Labrador Premier Brian Peckford, who himself challenged Prime Minister Justin Trudeau’s father Pierre over offshore jurisdiction, said the federal government’s latest regulatory reform plans could run afoul of provisions of the accord, which give the provincial minister power over the “pace and timing of a project.”
In an emailed statement, Peckford suggested said Newfoundland’s government “should be all over this.”
In June, Newfoundland’s Natural Resources Minister, Siobhan Coady, was critical, but measured, of the federal government’s regulatory reform plans. “What we don’t want to have happen is for any slowdown in the environmental assessment process,” she told CBC News. “We want to make sure it’s thorough and well done, like it has been done over the last 30 years.” Coady did not respond to a request for comment.
The Canadian Association of Petroleum Producers will voice concerns of its own, said Paul Barnes, manager of Atlantic Canada and the Arctic.
“We want to see a role for the offshore petroleum board because they are the lead regulator here, we wouldn’t want to see a centralized agency assume many of those responsibilities,” he said.
With Alberta’s NDP government staying largely on the sidelines, Saskatchewan Premier Brad Wall and former B.C. Premier Christy Clark quitting politics, Newfoundland could be the last line of defence against Ottawa’s expanding power grab over provincially owned natural resources through environmental oversight.