A brouhaha brews between Newfoundland and Ottawa over potential changes to the offshore oil regulatory process

A brouhaha brews between Newfoundland and Ottawa over potential changes to the offshore oil regulatory process

Why Newfoundland and Ottawa clashed over proposed changes to offshore oil and gas assessments

ANDREW BELL is not a fan of the federal government’s discussion paper on environmental and regulatory reviews for natural resources projects.

Bell is the chair of the Newfoundland and Labrador Oil & Gas Industries Association, the organization that represents almost 600 companies involved in supplying products and services to the province’s offshore oil industry. He is also the CEO of The Bell Group, the St. John’s-based family business that includes K&D Pratt—an industrial service and supply firm that does a lot of work in the petroleum industry. Bell doesn’t like much of what he has read in Ottawa’s 24-page discussion paper that was released in June of 2017.

“We won’t stand for this. We hope the public, and not just in Newfoundland and Labrador, will send a message to the federal government that it can’t centralize everything and take it all back and control it. Provinces need to have control of their own destiny,” Bell says.

While the discussion paper is short on details, the main points contained in it have been more than enough to alarm NOIA and others involved in the East Coast offshore oil and gas industry. And their chief concern is the paper’s proposal to create a single government agency responsible for conducting impact assessments and coordinating consultation with indigenous peoples for offshore oil and gas projects. The paper says assessments would be conducted jointly with ‘life-cycle regulators’. In the case of Newfoundland and Labrador and Nova Scotia, the life cycle operators would be the offshore petroleum boards.

The discussion paper has leaders in the offshore oil industry like Bell wondering why Ottawa is considering changes to a regulatory process they feel has served the region well since it was created in 1985 with the Atlantic Accord. Their question is simple—if it isn’t broken, why is the federal government trying to fix it?

In this case, when Justin Trudeau and the Liberal Party defeated Stephen Harper’s Conservatives in the 2015 federal election, it was inevitable Ottawa would attempt to reverse at least some of what Harper had done on the regulatory front in regards to oil and gas development. Trudeau’s focus on addressing climate change and his ‘sunny ways’ messaging, is in contrast to the Harper way, and during the Conservatives final years in office the party was often accused of being too cozy with the oil and gas industry and making changes to the regulatory process to speed up the approval and development of Canada’s oil and gas resources at the expense of proper oversight.

Whether you buy into those criticisms or not of the Harper years probably depends what side of the political and ideological fence you sit on. But Bell is not happy that Ottawa is seriously considering taking away any authority for regulating the exploration and development of petroleum resources in Atlantic Canada from the Canada- Newfoundland and Labrador Offshore Petroleum Board and the Canada-Nova Scotia Offshore Petroleum Board, and putting it in the hands of a central agency.

He also questions the paper’s reasoning for proposing changes to the way offshore exploration and development is regulated. In the paper’s ‘Path Forward’ section, the objectives of the review are stated as follows: “to ensure we honour our commitment to regain public trust in environmental assessment and regulatory processes in a manner that advances reconciliation with indigenous peoples, protects the environment and allows resources to get to market.”

Bell wonders what public trust Ottawa must regain, at least in Atlantic Canada. He thinks the offshore petroleum boards already have that trust. “We’ve asked the question of the feds and have not gotten a response of where this mistrust is coming from,” Bell says. “We see no reason that there should be mistrust. The [offshore boards] have delivered a robust, environmental, health and safety stewardship over the offshore industry in excess of 30 years.”

As for the operators who are investing in Atlantic Canada’s offshore, the Canadian Association of Petroleum Producers is speaking for them on this issue. Paul McDonald, CAPP’s director of climate and innovation, says it is looking at the discussion paper as a chance to build confidence and awareness in the way oil and gas is regulated. But it is worried what Ottawa is mulling over will duplicate what is already being done, making the regulatory process more time consuming and costly and scaring away investment.

In fact, CAPP maintains this is already happening. Oil prices have declined 70 per cent since 2014 and CAPP says investment in the Canadian upstream industry has declined by 65 per cent during that same period. McDonald says the industry wants high standards for health, safety and the environment and a strong regulatory process. But he says this is not the time to add layers of bureaucracy to it that won’t necessarily improve matters with oil and gas prices still much lower than the heady days of 2012-2013 and companies investing in only the most cost effective developments. “We are looking at duplication in these processes, which really don’t serve anyone and have an impact on our competitiveness,” McDonald says. “As we move forward with this process, we’re looking at elimination of any duplication and unnecessary regulatory burden.”

Not everyone following the issue is as worried about the proposed changes in the discussion paper as Bell and McDonald are. The Sierra Club of Canada’s Gretchen Fitzgerald thinks having a single government agency responsible for impact assessments has merit. Fitzgerald is the national program director of the Sierra Club of Canada, and she says there is a conflict in the mandates and roles of the C-NLOPB and C-NSOPB. They are responsible for facilitating exploration and development of petroleum resources in their respective offshore areas as well as environmental protection. “That’s a conflict and it permeates a lot of these decisions,” Fitzgerald says.

Fitzgerald says creating a single government agency that works with the offshore petroleum boards on assessments is an approach that can work. The agency would be at arm’s length from the industry and provinces who are struggling economically and whose dependence on the oil and gas industry could be viewed as influencing their decisions in these matters. Ultimately, if it’s done right, Fitzgerald says this new agency could provide better oversight of oil and gas development and reduce the risks associated with such activities. “It’s a huge responsibility to be doing what they are doing in the offshore,” Fitzgerald says. “There is a massive risk to the environment and it behooves the industry to have the highest level of regulatory enforcement.”

A high level of regulatory enforcement is laudable. However, if a government is considering changing something that already works it can send the wrong message to investors. Herb Emery, the Vaughn Chair in Regional Economics at the University of New Brunswick, says the federal government’s policy decisions indicate it doesn’t see a future in developing hydrocarbons.

He also notes investors are taking notice and cancelling development plans— like TransCanada Corp.’s decision late in 2017 to scrap the planned Energy East pipeline. When the Calgary-based company made the announcement, one of the reasons it cited included a “careful review of changed circumstances.” It is possible what is proposed in the discussion paper was part of the changed circumstances TransCanada was referring to. “The exporting of natural resources is a big part of what Canada has always done,” Emery says. “The scale of what we are doing to investment opportunities in Canada is insane and no one is talking about it.”

Bell is willing to talk about it, and he’s not happy with what he sees. In May of 2017, Husky Energy announced it was going ahead with the West White Rose extension project, a $3.2-billion development that will add 75,000 barrels per day of production coming from Newfoundland and Labrador when it reaches peak production in 2025. Yet Bell worries that if the federal government implements some of the discussion paper changes to how offshore projects are assessed, West White Rose could be the last one the province witnesses.

“Time is money. What we are dealing with here is more time, more bureaucracy, more red tape, more hurdles and hoops to jump through. It’s making us uncompetitive in the global environment,” Bell says. “Look at Guyana. Oil was discovered there in 2015 and it looks like the country will be producing by 2019-2020. That sets a new benchmark, and it can be done with a robust environment, health and safety assessment. Why can’t we do the same? We seem to want to put more bureaucracy in and drive up costs.”

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