Nfld. & Labrador·Weekend Briefing

Justin Trudeau, offshore oil and hopeful thinking: Andrew Furey's federal long shot

New premier Andrew Furey has made a point of noting he is in contact with Prime Minister Justin Trudeau. As John Gushue writes, the province's requests are not easy to satisfy.
Premier Andrew Furey and Prime Minister Justin Trudeau smile during a videoconference. Furey tweeted the photo on Sept. 3. (Andrew Furey/Twitter)

About two weeks after Andrew Furey took over the reins of the Newfoundland and Labrador government, he issued a tweet that was for the public consumption but perhaps had one person most in mind: the prime minister of Canada.

Indeed, Justin Trudeau was also the key content of the tweet. It showed a video conference with the two telegenic Liberal leaders, laughing as they talked about things.

"A good conversation today with Prime Minister @JustinTrudeau," Furey wrote. "The first of many conversations we will be having as our province moves forward within this great federation."

Furey may be a political rookie, but that's state-of-the-art noncommittal political language there. What actually was said will, of course, not be tweeted or shared publicly.

Instead, a focus on the laughter. Surely the conversation must have moved on to the fact that Newfoundland and Labrador has a budgetary if not existential crisis, but the public face is congenial, friendly, even — oddly — happy.

About a month earlier, Furey tweeted something similar: a photo of himself on the phone with Trudeau. "It's great to hear he is looking forward to building on Newfoundland and Labrador's relationship with our federal partners in Ottawa."

Phrases like "great to hear" may or may not be great to actually hear, especially when we don't really know what "building on Newfoundland and Labrador's relationship" really means.

Back to that relationship shortly.

The next frontier

On Tuesday, the day before the first budget came down on Furey's watch, an interesting document came out from the provincial Department of Industry, Energy and Technology.

It was the latest call for bids for parcels of land for offshore oil bids. Putting out bids for exploration right now may seem odd timing, given that Husky Energy is at the moment rather desperate to find a path to keep the idled West White Rose project on its feet, and that includes federal aid. (One suspects this will be on the agenda for the "many conversations" ahead for Furey and Trudeau.)

This map is contained in an oil and gas resource assessment that the provincial government released this week. It shows parcels of land to be put out for bids in the Orphan Basin. (Nalcor Energy Oil and Gas)

This kind of thing happens regularly, though, and one thing I've learned over the years is that oil companies look at time very differently than, say, politicians.

Politicians famously have short-term horizons, governed at most by the four-year (if that) election cycle, and often by polling cycles every few months.

Oil companies often think a generation or two ahead. Think about this: the Hebron-Ben Nevis oil field was found in 1981. The Hebron oil project did not go into production until 2017. That's a level of patience that would test any normal premier. Speaking of which, 11 premiers punched the clock during those 36 years.

The call for bids (that formally happens in November) is one thing, but what was released laid out — in rather robust language for a technical document (you can read the whole thing here) — how much oil is potentially out there, not to mention natural gas, which is now as it has been for decades an undeveloped resource.

The resource assessment focuses on a "most likely" case of recovering 11.1 billion barrels of oil, and 24.5 trillion cubic feet of natural gas, in parcels of deeper-water land in the Orphan Basin. The area is due east of Newfoundland, and north of the Jeanne d'Arc Basin on the Ground Banks, where all of the existing fields are.

In all, the government says there is now "63.6 billion barrels of oil and 224.1 trillion cubic feet of gas in just 10 per cent of the province's offshore."

To put those oil projections in context, here's the base line: since 1997, production has been more than 1.8 billion barrels. That's a fifth of the potential touted in the new parcels, and less than three per cent of whole shebang.

Finance Minister Siobhan Coady, while reporting that this year's budget will bring in substantially less oil revenue than previous years, pointed out a reality for the government.

"While less reliant on oil revenues than previous governments," she said, "oil continues to represent a large portion of our provincial revenues."

There's a very big but

But — and there is a very huge but — no one expects there to be a rush to develop that oil (and, yep, natural gas).

First, the global energy industry, especially oil, has been in turmoil for some years now. Oil prices started to collapse in 2014. Rebounds have been modest, compared with prior peaks. The oil industry tends to be cyclical over the years anyway, no matter how often oil producers forget that their crests are, always, temporary.

The Hibernia platform went into production in 1997, the first of several fields off Newfoundland's east coast. (HMDC)

Second, the COVID-19 pandemic has turned every industry on its head, and that includes energy.

Third, public attitudes about oil and the environment have changed considerably — including here. Climate change rallies have drawn (in pre-COVID times, anyway) huge crowds. Canada is a signatory to the Paris Agreement, the international climate change accord. A carbon tax is in effect.

Federal Natural Resources Minister — and, significantly in this context, provincial cabinet representative —Seamus O'Regan has been touting lower-carbon options.

He has not ruled out federal assistance to oil companies, but everyone in Ottawa knows that doing anything for oil companies in the midst of a pandemic — when things are so chaotic that a federal budget that was postponed in March cannot even be completed — is a very, very tough sell.

Mr. Mulroney wades into the debate

That didn't stop former prime minister Brian Mulroney from getting involved in the case. Mulroney was the guest Thursday night at a fundraiser for the Progressive Conservative Party, appearing by videoconference.

"In this negotiation, I would tell them as well, failure is not an option," Mulroney told provincial Tories, describing what he would do if he was PM now.

"I want a deal with Newfoundland and Labrador, and by God if I have to go down there and do it myself, we're going to get one that is fair to Newfoundland and Labrador, and bring greater prosperity to the province."

Former prime minister Brian Mulroney came to St. John's in January, to deliver a eulogy for John Crosbie. Mulroney has credited Crosbie with making the case for federal spending on Hibernia. (Paul Daly/The Canadian Press)

Mulroney does have a track record with looking at a huge, controversial asks involving Newfoundland and Labrador's offshore. When Gulf Canada Resources dropped out of the consortium behind Hibernia in 1992 (Gulf owned a quarter of the project), Mulroney's government formed the Canada Hibernia Holding Corporation, picking up an 8.5 per cent equity stake.

That was not an easy sell. Hibernia, which has gone to turn over billions of dollars to the federal government, was often described as as boondoggle in the national press.

But it was also a very different era. The key environmental issue for Mulroney's government was acid rain. Greenhouse gases were understood then, but were not yet top political issue. Earth Day, after all, was revived as an annual event only in 1990.

It's fairly easy, though, for a long-retired ex-PM to bring out the brio and rouse the party faithful, especially when another party is in power, at both Parliament Hill and Confederation Building.

Which brings us back to those "many conversations" that Andrew Furey is hoping to have with Justin Trudeau.

For now, at least the prime minister is taking his calls. Some former premiers could not always count on that.

Read more from CBC Newfoundland and Labrador 

ABOUT THE AUTHOR

John Gushue

CBC News

John Gushue is the digital senior producer with CBC News in St. John's.

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