Nfld. & Labrador

Feds promise help for struggling N.L. oil workers, while province offers exploration incentives

The federal natural resources minister is promising an imminent announcement on aid to the industry, something the sector has been pleading for for months.

Premier Andrew Furey says incentive program will provide exploration deposit rebate if drilling doesn't happen

Natural Resources Minister Seamus O'Regan, seen here in 2017, says there will be an announcement focused on offshore oil workers coming as soon as Friday. (Fred Chartrand/Canadian Press)

The federal natural resources minister says help, in some form, is on its way for Newfoundland and Labrador's offshore oil sector, a promise that comes after months of the industry petitioning, pleading and protesting for aid.

Seamus O'Regan told CBC Radio's St. John's Morning Show on Thursday there were will be "clear mention" of some sort of aid as early as Friday.

While he gave no specific details of what that announcement would entail, he said it would focus on the people affected in the sector, which has been battered in recent months by the pandemic and an international production war that depressed oil prices.

"Our focus certainly with the offshore will be on workers," O'Regan said.

"We want to make sure that, as best we can, that we can make sure that workers are looked after, and we make sure that the industry remains competitive in a world that is changing very quickly."

At a rally last week, organized by Unifor and attended by hundreds of offshore workers, industry representatives and supports, some workers spoke of the anxiety rippling through their lives amid current layoffs and uncertainty about the future.

"We're going to be working with province, industry and unions on that, but we'll have more details on that coming up," O'Regan said.

O'Regan did not say whether any aid would be offered to offshore oil companies or the industry at large, where several projects have been disrupted or delayed, including Husky Energy announcing on Sept. 9 that it could not go ahead with its $2.1-billion West White Rose extension without government aid.

Husky wanted government investment in the project, akin to when the federal government spent $431 million in the 1990s on a stake in the Hibernia project in return for future royalties.

When asked about helping the industry, in the same way now, O'Regan said, "The industry in some respects is still going quite strong. You know, Hibernia and Hebron are still going strong, but there's no question it's going through an awful lot.

"It is a mature industry. We're not where we were in 1993."

The contractor that directs drilling operations on the Hibernia oil platform, Parker Drilling, said it began laying off workers in June, after the platform's operator announced it would suspend drilling for 18 months to save money.

All work on Husky's West White Rose extension, like this concrete gravity structure, has been paused as the company says it faces financial challenges with the project. (Husky Energy)

Province to offer incentives

On Thursday morning, the provincial government announced a few details of a new incentive program it hopes will encourage more offshore exploration, which Premier Andrew Furey called "creative thinking."

As it stands, when companies apply to explore in the province's offshore, they must put down a 25 per cent deposit of their total planned bid. If a company doesn't complete its drilling work within a set amount of time, they lose that deposit, which is then added to the province's general treasury.

Instead of that money going into the provincial bank account, this incentive will hold it aside and offer it back up to exploration companies through a rebate or other mechanism yet to be determined.

The default rate on such deposits has historically been 37 per cent, said Andrew Parsons, the minister of industry, energy and technology.

But in the past that extra money coming in year-to-year has caused budget headaches, as it's entirely dependent on companies completing work, or not, he said, so sending it all to one spot to be reinvested in the sector makes sense.

"This is not funded by taxpayers. This is money actually invested by the industry, and it's absolutely near impossible to actually budget this, because it's hard to know what this amount would be in any given year,"  he said.

The goal, according to the province, is to encourage more exploration, which creates jobs and investments, and could lead to actual projects.

Andrew Parsons is the minister who oversees the offshore oil sector in Newfoundland and Labrador. (Government of Newfoundland and Labrador)

Charlene Johnson, chief executive officer of Noia — N.L. oil and gas industries association —  which represents the service and supply sector of the industry, said she's pleased that the province "has a vision" that oil and gas is important, and that the industry will be around for decades. Johnson said she hopes the federal government's announcement will be in line with that. 

"For each $100-million well, it brings with it 400 workers. But it's the discoveries that bring the long-term sustainability to our industry," she said.

The Canadian Association of Petroleum Producers (CAPP) is also happy with Thursday's announcement, but noted the lack of action in addressing what could see thousands of workers out of a job if the industry continues to suffer.

"With the province's offshore industry producing lower carbon-per-barrel oil than many of its competitors, we have an incredible opportunity to meet growing global demand," said Paul Barnes, director of CAPP, Atlantic Canada and Arctic in a statement. 

"We are hopeful that the federal government will also provide much-needed support so that Newfoundland and Labrador can reach its full potential."

Parsons said many details of the program still need to be worked out, but with exploration bid deposits due in November, the province wants to get the word out to companies that there could be cash perks for choosing Newfoundland and Labrador.

"Right now exploration budgets around the world are being very dramatically reduced, so we want to put this incentive out now as they go into the final stages of their planning," he said.

The 'Atlantic Loop'

O'Regan's comments come one day after the speech from the throne, which notably didn't mention the oil sector but focused on green energy and floated the idea of the "Atlantic Loop" — a new phrase described in one line as a project to use clean power in an effort to wean the Maritimes off coal.

O'Regan said hydroelectric power would be tied into the Maritimes' electrical grid, with transmission lines built from Quebec to flow into New Brunswick and Nova Scotia.

O'Regan called it "a huge, huge opportunity for Newfoundland and Labrador," particularly for power from Muskrat Falls, and said overall it works toward the goal to reduce greenhouse gas emissions.

Amid clean energy projects and the need to reach Canada's emission targets set out in the Paris Agreement, O'Regan said there is still room for offshore oil.

"The fact of the matter is, oil will be with us for some time," said O'Regan.

"We want to make sure that Newfoundland is well provisioned and that we are able to sell to the world a very good product as we transition toward a lower emission economy."

Read more from CBC Newfoundland and Labrador

With files from The St. John's Morning Show

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