Nfld. & Labrador

Province loses Hibernia royalty dispute in N.L. Supreme Court

A judge has dismissed the Newfoundland and Labrador government’s bid to set aside the decision of an arbitrator that could have affected the calculation of royalties from the Hibernia offshore oil project.

Earlier filings to arbitrator indicated that potential ‘windfall’ for government was at stake

A Newfoundland and Labrador Supreme Court judge has dismissed a provincial government application related to a royalty dispute involving the Hibernia offshore oil project. (CBC)

A judge has dismissed the Newfoundland and Labrador government's bid to set aside the decision of an arbitrator that could have affected the calculation of royalties from the Hibernia offshore oil project.

Newfoundland and Labrador Supreme Court Justice Robert Stack dismissed the government's application, made in 2016, and ordered costs to be paid to the oil companies.

"I am unable to conclude that the award is unreasonable in any respect," Stack wrote in his 69-page decision.

"The interpretations chosen by the tribunal were justifiable in light of the facts and the law. The tribunal's analysis, along with the legal and factual conclusions it arrived at, were therefore within the range of acceptable outcomes, and the award possesses the requisite justification, transparency and intelligibility to be reasonable."

Potential 'windfall' for province at stake

At issue was whether the oil companies could deduct certain operating insurance costs as part of the complex series of calculations used to determine how much in royalties are paid to the province.

Neither side has disclosed how much was at stake in the dispute.

But in past filings made to the independent arbitration panel, the oil companies behind the Hibernia project indicated that a decision against them would "bring about a windfall for the province."

Those companies — including ExxonMobil Canada, Chevron Canada, Suncor Energy, Murphy Oil, and Statoil Canada — sent the matter to arbitration in 2013.

In December 2015, the arbitration panel sided with their interpretation of the royalty agreement.

Costs of court action unclear

It's not clear how much the province's unsuccessful appeal will cost.

According to Stack's decision, private practice lawyers appeared on behalf of the province.

Natural Resources Minister Siobhan Coady is out of the country at an oil and gas conference in Scotland.

But in an emailed statement sent on her behalf late Tuesday night, the minister said "the cost of counsel for this matter is not available at this time."

No decision has been made on whether the matter will be appealed to a higher court.

"The Supreme Court decision regarding Hibernia royalties is currently under review," Coady indicated. 

ExxonMobil Canada, meanwhile, issued a statement saying it is "pleased with the Supreme Court's decision."