Task force says oil sector needs help
Report outlines key recommendations to boost global competitiveness
The group tasked with figuring out how to increase the Newfoundland and Labrador oil and gas sector’s chances of making a recovery has released its recommendations.
Two days after it received the 35-page document, the provincial government publicly released the “Report of the Newfoundland and Labrador Oil and Gas Industry Recovery Task Force” on Thursday.
The 21-person group was created last fall to determine how to best allocate $320 million the federal government gave to the province to support its struggling offshore oil industry. So far, $254.5 million has been allocated or earmarked for activities tied to existing offshore installations.
The report contains 52 recommendations. In a news release Thursday, the province said it will review and implement recommendations that fall under its control. The report has also been forwarded to federal Natural Resources Minister Seamus O’regan and the Canadanewfoundland and Labrador Offshore Petroleum Board (CNLOPB).
IMPORTANT SECTOR
At the end of 2019, direct employment tied to oil and gas projects in the province stood at almost 6,800, but the sector has shed thousands of jobs since then. A low price for oil and a downward trajectory in global demand tied to the COVID-19 pandemic hurt the local offshore sector.
Construction of the West White Rose concrete gravitybase structure was suspended last year and its future remains in doubt, with no guarantees coming from new owner Cenovus Energy.
Exploration and drilling programs elsewhere in Newfoundland’s offshore sector have been postponed, and many decisions concerning the future of other projects such as Bay du Nord and the Terra Nova life extension are on hold.
The task force’s recommendations emphasize the need for a renewed commitment to the province’s offshore sector. The report says both the province and federal government need to make the responsible and sustainable development of Newfoundland and Labrador’s offshore resources part of Canada’s collective effort to achieve net-zero greenhouse gas (GHG) emissions by 2050.
Regarding the two streams of funding from the federal fund announced last year (90 per cent for operators and the remainder for companies that support their work), the task force said the deployment of what hasn’t been allocated needs to be fast-tracked to aid the local economy.
The task force wants the province to create a Newfoundland and Labrador oil and gas authority, something similar to the United Kingdom’s Oil and Gas Authority and Norway’s Petroleum Directorate. It would work to maximize the economic benefits of oil and gas, while also investigating the development of an energy transition plan to support a climate-neutral economy that takes advantage of the province’s renewable resources.
REVIEWS, COLLABORATION
The report requests a review of the federal government’s regional environmental assessment process, and collaboration among all sides to make exploration more attractive. That would come, in part, through new incentives such as writing off the costs of unsuccessful wells against royalty payments and new incentives for drilling appraisal wells. The report noted that relative to places such as the U.K. and Norway, the province is largely unexplored, with less than seven per cent of its 1.5 million square kilometres of offshore area under licence.
The task force also says there is a need to improve the region’s overall cost competitiveness. Newfoundland and Labrador’s harsh environment and the distance between land and the offshore can make it a costly place to do business compared to areas where there are more resources and infrastructure in place, the report states.
It suggests Newfoundland should follow the lead of other jurisdictions by offering timely incentives and tax breaks to encourage more investment. It found there are fiscal, regulatory and approval structures in place that deter investment in the province’s oil sector. The task force suggests those issues merit further discussion.
REACTION
Task force co-chair Bill Fanning told The Telegram the most pressing action in the report is to get people back to work.
Beyond that, he said, there are elements that relate to how quickly decisions are made — the need to streamline processes — more agile development plans and exploration approval programs to move projects through the system more quickly.
“Competing jurisdictions are far more efficient in doing that,” Fanning said.
Provincial Industry, Energy and Technology Minister Andrew Parsons described the report as a call to action.
“It means a lot to the province,” Parsons said, adding he is impressed with the quality of the document.
Parsons said that what struck him was that, with the crisis in the offshore oil and gas industry unfolding, the task force completed comprehensive work in a short time.
Parsons said he supports an oversight committee for implementing all the task force’s recommendations, and he expects the task force will get a debriefing within two weeks.
As for putting the province’s industry more in line with places such as Norway, Parsons noted Newfoundland and Labrador is not a sovereign nation and any attempt to replicate the offshore innovations of other countries cannot happen solely through the province’s initiative.
NOIA
Charlene Johnson, CEO of Noia (Newfoundland and Labrador Oil and Gas Industries Association) first saw the report Thursday afternoon and looked forward to closely reading the document.
She said many things Noia has called for were addressed, such as a strong focus on exploration and a recommendation to establish a provincial authority.
Another welcome recommendation was to expand the provincial exploration incentive introduced last fall, she said.
These are the types of actions needed to be globally competitive, Johnson said.
The timelines are aggressive — 85 per cent are within six months, but Johnson says they are achievable.
“All of us in the industry, led by the provincial government, we just need to roll up our sleeves together and get it done,” Johnson said.
“There’s no reason why it can’t. It’s too important not to do it.”
The CNLOPB, in a statement, said it looks forward to reviewing the report and discussing with governments and those who have contributed, whose work is appreciated.
In a statement provided by his office, Natural Resources Minister Seamus O’regan said, “Our government is proud of the offshore, and we believe in its future. It’s a critical part of Canada’s low-emissions energy future. Our government stepped up with nearly $400 million to lower emissions and get people back to work; we look forward to working with the province on that in the weeks and months ahead.”
HEALTH AND SAFETY
Health and safety also got some attention in the task force’s report. Among its recommendations are that the provincial and federal governments commit to immediate implementation of the Atlantic Occupational Health and Safety regulations under the Accord Act.
In 2014, the Offshore Health and Safety Act, sponsored by Newfoundland and Labrador Senator David Wells, became law and included transitional safety regulations set to expire after five years to to ensure an earlier enactment of permanent regulations to be written. Wells said in 2018, the Liberal federal government extended these transitional regulations to Dec. 31, 2020. Bill S-3 sought to revive and extend the transitional regulations for two years, to the end of 2022.
In February, it passed in the Senate with an amendment put forth by Wells to reduce the extension to one year, to ensure sooner enactment of permanent regulations. But he said the House of Commons allowed it to languish.
“He knows very well our tragic history,” Wells said, referring to O’regan.
“It frustrates me, as a person who has had friends die and get injured in the offshore, to see this with no priority whatsoever.”
Johnson, who made a presentation to the Senate standing committee in February, said as far as she knows the regulations are on track and there is additional input.
As for the task force’s report, Wells said anything the provincial government can do to advance collective efforts to get the offshore back up and running is important and welcome.