Researchers say NL mistakenly used offshore subsidies to “double down” on fossil fuels
A political scientist who studies the province’s oil sector said that the offshore oil subsidies funded by the federal government of Newfoundland and Labrador are “abusive of funds” and are another step in the wrong direction for the province’s economy.
Angela Carter, an associate professor at the University of Waterloo, said that it is increasingly difficult to see the government provide hundreds of millions of dollars in public funds to oil companies without taking effective measures to build an oil-independent economy.
“What oil producers are trying to do is get everything they can from the remaining reserves,” Carter, author of this book in 2020 Fossils: The Environmental Policy of the Canadian Petroleum Said in a recent interview.
“They rely on troubled governments like Newfoundland and Labrador […] Get support or bailout for the last few drops. This is not done for the benefit of the government, but for the benefit of private individuals. “
She worries that the latest offer-$205 million in cash and $300 million in royalties for Terra Nova field owners-will encourage other oil companies to seek similar treatment.
Since December 2020, the government of Newfoundland and Labrador has provided more than $280 million in funding to oil companies to restart projects at risk or keep them running.
The funding comes from a 320 million Canadian dollar fund provided by Ottawa to the province, which is dedicated to the safety improvement, maintenance and upgrade of oil industry facilities, research and development, and clean technology.
“This is about our province’s work,” Federal Minister of Natural Resources Seamus O’Regan told reporters when announcing the grant in September last year. “This is related to the future of our industry.”
The royalty breakthrough sets a precedent: consultants
Until the tentative agreement was announced on June 16, the province had been preparing to abandon the aging Terra Nova oil field.
By providing rest time to its owners, the government will charge 35 million US dollars in royalties-about one-tenth of the total expected amount of the remaining 80 million barrels of the oil field.
Governor Andrew Fury and Secretary of Energy Andrew Parsons stated that if the project is not carried out, there will be no royalties at all. They said that because the funds came from Ottawa, the move did not cost Newfoundland and Labrador a penny, nor could it be used elsewhere.
“We will recover funds from indirect work and the resulting direct work,” Parsons told reporters in mid-June. “I think this is a very good move for this province […] We have protected the future, saved jobs, and we are using resources for the best interests of the province. “
Rob Strong is a consultant for St. John’s and has decades of experience in the industry. Like Carter, he believes that the government provided Terra Nova with a $300 million royalty reduction, which is a precedent.
“If I were an oil company, I would look for the same deal,” he said in an interview this week.
Strong said he was worried that Newfoundland and Labrador’s negotiating position “is not as good as we were led to believe.”
He said that other jurisdictions, such as Guyana, produce the same light sweet crude oil, but with similar emissions but lower prices.
Layoffs in the oil sector
Carter questioned whether the government should provide public funds to oil companies, especially based on promises of stability and employment.
“The industry is interested in mining profits, but we were told […] This is related to employment,” she said. “This is a double blow to the oil industry. “
She pointed out that a January 2021 study by Jim Stanford, an economist at the Center for Future Work, showed that despite the increase in production, the Canadian petroleum industry has been layoffs since 2014. According to the report, the petroleum industry is not a reliable source of future employment.
According to the welfare report submitted by the operator, in Newfoundland and Labrador, direct employment in offshore projects dropped from nearly 13,750 positions in 2014 to approximately 4,500 in 2019. This decline was mainly due to the end of construction of the Hebron project, which started pumping oil in 2017.
According to a report from the provincial offshore regulatory agency, as of May 2021, the province’s production level is the highest level in a decade.
“A lot of (petroleum) jobs are construction jobs, and they are temporary,” said Chris Severson-Baker, the Alberta Regional Director of the National Energy Think Tank Pembina Institute.
He said in an interview that once the construction is completed, the company will increasingly turn to automation and artificial intelligence to lay off employees.
“They are cutting costs everywhere,” he said. “And this is before any real decrease in global demand. This is a response to the competitive price environment that has been around for some time for oil and gas.”
The province says it is undergoing a green transformation
In Newfoundland and Labrador, these jobs are particularly unstable, and the government has not made meaningful efforts to build new industries for workers to turn to when the fields are exhausted, or—as in the case of Terra Nova—when progress stops, Because the owner wanted to quit, Carter said.
She said that the government chose to hand over federal funds to oil companies instead of directly supporting laid-off workers through retraining or retirement plans. This is an “abuse of funds.”
“Furey must create a [team]And let the people in the room figure out what will happen next,” she said. “We have provided a lot of public support and research funding… to find out how to join this oil boom. So, now the same thing, we need to do it again. “
Furey’s spokesperson Meghan McCabe said that the green transition is underway.
She said in a statement on Tuesday: “We are developing a renewable energy plan for our province with a clear and sustainable long-term vision.”