False hope or a golden age? Politicians debate N.L.'s offshore amid oil market flux
Politicians offered up contrasting visions of the government's role in the province's offshore oil industry during Wednesday's leaders debate, ideologies that come as the wider financial sector signals a declining appetite for investing in oil and other fossil fuels.
While NDP Leader Alison Coffin didn't call for curtailing the industry — she said the offshore holds "tremendous potential" for Newfoundland and Labrador — she used some of her televised debate time to slam the Liberals' recent investment decisions in the offshore.
"It is foolish for us to throw good money after bad. There has been no promise of guaranteed jobs," Coffin said.
The federal government gave $320 million to the province in September to spend on a sector that has been battered by the pandemic and roller-coaster global prices, and in the months following, the Liberals began handing it out. In December, $41.5 million went to Husky Energy to keep 331 jobs and its idled West White Rose project inching along, while the Hibernia platform got $38 million to create 148 jobs by 2022. Another $175 million could potentially go to the operators of the Terra Nova floating production, storage and off-loading vessel in an announcement that came just a day prior to the Liberals calling the election.
None of that spending satisfied the NDP.
"I think that we need a reasonable solution to diversify our economy. The people working in the oil and gas industry do not need government making poor decisions and giving them false hope," said Coffin.
Progressive Conservative Leader Ches Crosbie defended supporting the sector with public funds.
"It's not pushing taxpayer money into a black hole. It's an investment in our future. It's an investment in jobs. It's an investment in growth," he said.
Rumblings of change
Crosbie urged people to consider the "enormous potential wealth" in the offshore, and painted a vision of a glowing future built on oil.
"We have a golden age coming around the corner in this province. I will never give up on this province. The offshore is how we're going to realize on that," he said.
Globally, the golden age of oil itself is looking increasingly like it's already occurred. The environmental argument toward battling climate change — an existential threat fuelled by fossil fuels, with 2020 tying for the hottest year on record — that has been ramping up around the world has, of late, found solidarity in the financial sector.
The sector can't just cross its fingers and hope for the best.- Rory Johnston
The CEO of BlackRock, the world's biggest asset manager with some $8.7 trillion US worth of investments, warned its clients — which include some of the largest American corporations — in late January they needed to show climate transition plans or risk being dumped.
A day later, rating agency Standard & Poor's issued bad news for more than a dozen oil and gas companies, warning it could downgrade some, and gave a negative outlook to others. That list included two players in Newfoundland and Labrador's offshore, Suncor and Exxon Mobil.
One financial analyst said Standard & Poor's rumblings may not have much material impact on the province's offshore immediately — at this stage it won't translate into making it harder for oil companies to borrow money, for instance — but it does signal not to bank on business as usual anymore.
"All of this indicates the sector can't just cross its fingers and hope for the best. You do need to see change on the point of management to recognize that this is the new trend," said Rory Johnston, the managing director and market economist at Price Street Inc., a firm that analyzes the financial industry.
Johnston agreed there are considerable resources remaining in Newfoundland and Labrador's offshore, but pumping a lot of public funds into the sector is a challenge.
"It's the opposite of hedging a bet, right? You're doubling down on one sector," he said, pointing to Alberta's mega-investment in the Keystone XL pipeline. That project was killed by U.S. President Joe Biden on his first day of office, with the fallout likely to spur big job losses in Alberta.
Johnston said in the short-term, oil can continue to be a big boost for the province's coffers, particularly if it fuels a transition. But in a world that promises more disruptions — despite the potential he sees for a spike in oil prices as the pandemic fades — the government should be getting prepared.
"In the long run … well-regulated, well-integrated, diversified economies are always going to be the best way to go. And I think that's probably the way that Alberta needs to continue down that path, and I think Newfoundland and Labrador are in a similar situation," he said.
In the debate, Liberal Leader Andrew Furey was not asked directly about oil and gas expenditures. He did, however, during other points of the debate, frame his government's spending in the sector as an accomplishment of his time in office.
The Liberals' costed election platform, released on Thursday, vowed to continue supporting industry workers and providing incentives to industry to drill for future oil prospects. The party also pledged to achieve net-zero greenhouse gas emissions by 2050.
On debate night, Coffin said the NDP, instead of supporting oil companies, would put money into other areas of the province.
"It is smarter to invest in providing strong public services and a viable foundation for environmental sustainability and protect our industry and let the profitable businesses make those decisions," Coffin said. The NDP released their platform prior to Wednesday's debate, a plan that did not include price tags for its promises.
The PCs have not yet released their platform, and on debate night Crosbie didn't specify what investments his party would make, but criticized the Liberals' moves thus far, particularly holding onto the $175 million earmarked for the Terra Nova operations, which has not yet been spent, pending an agreement at the end of March.
The provincial election is Feb. 13.