Nfld. & Labrador

Unanswered questions casting shadow on $6.8B oil announcement, says Opposition

Keith Hutchings says the province needs to make an agreement about who will make payments to the UN, and get solid answers about the new federal environmental assessment process

Risks remain about UN payments and federal regulatory board, says Keith Hutchings

Hutchings said his party didn't know about the Bay du Nord agreement before it was announced on Thursday. (John Gushue/CBC)

The Liberal government's announcement of a $6.8 billion offshore deepwater oil project is good news for Newfoundland and Labrador as long as a few pressing questions can be answered, says Opposition natural resources critic Keith Hutchings.

In particular, the Progressive Conservative MHA would like the province to hammer out a firm agreement with the federal government over who will foot the bill for the project's payments to the United Nations.

"All costs that come off this are coming off the royalties and benefits that can accrue to the partners, that can accrue to the federal government, and most importantly from our perspective, that can accrue to Newfoundlanders and Labradorians," said Hutchings on Sunday.

Keith Hutchings is the MHA for the Ferryland district and the Opposition's natural resources critic. (Paula Gale/CBC)

The Bay du Nord oil project, in the Flemish Pass Basin, will be developed about 500 kilometres off the coast of St. John's and at an approximate depth of 1,200 metres.

It could be the first oil field to fall under the United Nations Convention on the Law of the Sea, which Canada signed in 2003.

The convention requires countries to make payments to a UN body called the International Seabed Authority for the exploitation of resources like oil on the continental shelf beyond the 200 mile limit.

Premier Dwight Ball told CBC Thursday that the federal government will make the payments, but Hutchings pointed out that there is not yet a formal agreement about that.

"Just saying it's the federal government's responsibility is no guarantee," he said, adding that not having this worked out yet is "extremely worrisome."

The Canada-Newfoundland and Labrador Offshore Petroleum Board (C-NLOPB) regulates the province's offshore. (CBC)

Similarly, Hutchings said there are too many unanswered questions about the federal government's new environmental assessment process.

He insists that assessments should stay within the wheelhouse of the Canada-Newfoundland Offshore Petroleum Board, the province's offshore regulatory body.

"Why wouldn't the feds want to get this resolved so everybody can have a fair understanding of what the rules of the game are going to be going forward?"

Lessons from the past

Hutchings, who was first elected in 2007, was part of Danny Williams's Tory government when Newfoundland and Labrador moved off equalization payments.

There are lessons to be learned from how that windfall was handled, he said.

He believes the government that holds power when money begins to flow from the Bay du Nord project should create a four-year plan with annual spending caps and annual commitments to debt repayment.

Premier Dwight Ball and Natural Resources Minister Siobhan Coady announced the Bay du Nord project on July 26. (Ted Dillon/CBC)

"I think history has shown us we need to set targets … and let the public know what those targets are in regards to expenditures and in regards to paying down your debt."

He thinks the Liberals' decision to buy a 10 per cent stake in the Bay du Nord was a good one, as long as government can reasonably manage the loan it will need to make the purchase.

"[Equity] gives a return of the project over an extended period of time over and above royalties, which is always good," he said.

Safety and climate change

With the Bay du Nord project in 1,200 meters of water — the SeaRose, for comparison, works in 120 metres at the WhiteRose field  — Hutchings said the government needs enhanced safety regulations.

He acknowledged that the depth and distance from shore could also require new environmental regulations.

The SeaRose floating platform is in 120 metres of water. The Bay du Nord project will be in 1,200 meters. (CBC)

Climate change should also be part of the discussion around the project, he said.

Hutchings is vocal about his opposition to carbon taxes, but said there is an opportunity to use some of the money earmarked in the Bay du Nord agreement for the development of industry "innovation."

"Some of that innovation should be aimed at the reduction of greenhouse gas emissions," he said.

Read more articles from CBC Newfoundland and Labrador

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