Federal government approves controversial Bay du Nord oil project

The federal government has formally approved the Bay du Nord offshore oil megaproject off eastern Newfoundland.

Megaproject off eastern Newfoundland may go into production as early as 2028

With water depths of some 1,200 metres, Equinor's Bay du Nord project will use a floating production, storage and offloading vessel, better known as an FPSO, like the one illustrated. Equinor officials say a final investment decision is expected within two years, with first oil before the end of the decade. (Equinor)

Federal Environment Minister Steven Guilbeault formally approved the Bay du Nord offshore oil megaproject Wednesday, making a decision that will infuriate environmentalists but boost the Newfoundland and Labrador economy.

In a statement Wednesday evening Guilbeault said he has determined that the project would not cause "significant adverse environmental effects" with the implementation of mitigation measures.

"We accept the conclusions of the Impact Assessment Agency of Canada on the Bay du Nord project," Guilbeault said while speaking with reporters.

Guilbeault said the decision was difficult to make, but pointed out that the project is subject to 137 conditions, including one that the project would have to meet net zero emissions by 2050. 

In a statement Wednesday evening, Equinor called the federal environmental decision "an important milestone" for the project.

"We now look forward to progressing this key investment in Canada — which has the potential to produce the lowest carbon oil in the country," said the company's statement.

Environment minister approves controversial Bay du Nord project

1 year ago
Duration 1:48
Featured VideoEnvironment Minister Steven Guilbeault says he's approved the project on the condition that it reaches net-zero by 2050.

Environmental activists and climate scientists have long panned the proposed Bay du Nord development, saying it flies in the face of the federal government's climate goals.

The decision comes despite disagreement within Prime Minister Justin Trudeau's Liberal cabinet. In February, Radio-Canada reported that cabinet members from Quebec, Ontario and British Columbia were opposed to its approval.

The Newfoundland and Labrador government has fiercely championed the project, with Premier Andrew Furey lobbying fellow Liberals for months. 

At a St. John's news conference Wednesday evening, Furey called the approval a "giant step forward" for the project, and a key part of an economic recovery for the government, which is facing sky-high debt.

"We poured all our energy into making sure that all parties involved provincially, nationally and internationally understood the value of this project," said Furey, whose government will be releasing a budget on Thursday — the same day as the federal government.

Furey said the approval is evidence of a collaborative relationship between the provincial and federal governments, and he personally called Trudeau to promote the merits of the project.

However, Furey said there were no negotiations between the two governments, and the provincial government didn't have to agree to any terms in order to secure approval of Bay du Nord.

Years in the making

Norwegian oil company Equinor and its partners plan to develop the oil field at the Flemish Pass, about 500 kilometres east of St. John's. Bay du Nord will be the first project to move the offshore oil industry into such deep waters, with drilling to go more than a kilometre underwater. 

Newfoundland and Labrador Premier Andrew Furey welcomed the federal environmental approval of Bay du Nord at Confederation Building in St. John's. (Peter Cowan/CBC)

The Equinor plan is to use a massive floating production, storage and offloading vessel, commonly known as an FPSO, capable of producing up to 200,000 barrels daily.

The project will be Newfoundland and Labrador's fifth offshore oil field to move into production since Hibernia launched in 1997. Bay du Nord would begin pumping oil as early as 2028.

​Bay du Nord — seen as an economic lifeline to Newfoundland and Labrador, whose economy has been dependent on offshore oil royalties and labour — has been years in the making. ​

Equinor deferred the project in 2020 after oil prices plummeted in the early months of the COVID-19 pandemic, but announced it was forging ahead in 2021. 

The company says the project, which it has not yet officially sanctioned, will produce about 300 million barrels of oil, generate $3.5 billion in government revenues, and create thousands of jobs. 

Newfoundland and Labrador Natural Resources Minister Andrew Parsons said the provincial government will be meeting with Equinor with the goal of developing a benefits agreement that will also take into consideration any possible changes to the size of the project. 

Parsons said the province is considering the option of taking an equity stake in the project.

"It is not a decision that has been made by government at this point. That will be a part of conversations going forward," he said.

Environmental concerns

Guilbeault's decision on whether Bay du Nord would proceed was originally scheduled for December, but was delayed until March 6. Guilbeault missed that deadline too, and the federal government said it needed more time to assess whether the project is likely to cause "significant adverse environmental effects." 

The federal government last week released a climate plan that included measures to reduce emissions from oil and gas, but stopped short of limiting plans for production.

The N.L. government and proponents in the oil industry have touted the so-called "low-carbon" content of the oil that would be produced by Bay du Nord, calling the project a crucial part of a transition to renewable energy. Climate scientists and environmentalists have scoffed at the description. 

Newfoundland and Labrador's offshore industry does emit fewer emissions during extraction than other producers, but extraction accounts for only about 15 per cent of a barrel's total emissions. When that oil is burned for energy, it produces just six per cent less carbon than diluted bitumen from Alberta's oil sands.

The Intergovernmental Panel on Climate Change released a new report last week warning that the Paris Climate agreement goal of limiting global warming to 1.5 C above pre-industrial levels is all but out of reach. On Monday, UN Secretary General Antonio Guterres said investing in new fossil fuel infrastructure would be "moral and economic madness."

Furey said his government is still committed to achieving net zero emissions by 2050, but insisted Bay du Nord should be part of a transition to renewable energy. Furey said he hopes the approval of Bay du Nord will give other companies more certainty that other potential offshore projects could be approved.

"Hopefully do they not only recognize the regulatory certainty, they recognize the environmental differentiator that our product has," he said.

Read the full Environmental Assessment Decision on Bay du Nord: Mobile users: View the document
(PDF 864KB)
(Text 864KB)
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Darrell Roberts is a reporter for CBC Newfoundland and Labrador in St. John's.

With files from David Cochrane, Terry Roberts, Malone Mullin, Chris Rands and Brian Morris

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