Canada’s Offshore Petroleum Boards Under Fire for Conflict of Interest

Rumoured changes to the way the federal government makes decisions about offshore oil and gas projects have fishermen and environmentalists crying foul on Canada’s East Coast.

The changes would give offshore petroleum boards in Nova Scotia and Newfoundland and Labrador a major hand in future environmental assessments, a move that Gretchen Fitzgerald of Sierra Club Canada calls a “betrayal.”

“This is more than what the oil companies would have got under Stephen Harper,” Fitzgerald, director of Sierra Club Canada’s Atlantic region chapter, told DeSmog Canada.

Offshore oil and gas boards were originally designed to promote oil and gas development. But now they may be assigned a major role in assessing the environmental risk that development poses. These conflicting roles — part regulator, part promoter — is a major source of concern.

For Ottawa, the stakes are high. In 2015 the Liberals were elected in part on the promise to “make environmental assessments credible again.”

DeSmog Canada took a deep dive into the murky waters of offshore petroleum boards to help understand the concerns about the proposed changes.

What are offshore petroleum boards?

There are two such entities in Canada — the Canada-Newfoundland and Labrador Offshore Petroleum Board (C-NLOPB) and Canada-Nova Scotia Offshore Petroleum Board (C-NSOPB). Both were created shortly after the Atlantic Accord of 1985, which established joint management and resource sharing of offshore oil and gas resources.

“The boards were created and primarily designed to ensure economic benefits from oil and gas development,” said Angela Carter, assistant professor of political science at the University of Waterloo and expert in Newfoundland’s offshore regulatory structures.

“Environmental responsibilities are a secondary concern. So there’s something very wrong about the Boards taking on lead environmental assessment responsibility.  — that is not their primary function.”

The chair and CEO of Newfoundland and Labrador’s offshore board previously worked at Chevron, while his counterpart on the Nova Scotia board was the former CEO of Sproule, a Calgary-based petroleum consulting firm. Other board members have industry experience with companies including ExxonMobil, Nexen, Encana, the Maritimes Energy Association, Lasmo and offshore fields including Hibernia, Terra Nova, White Rose and the Sable Offshore Energy Project.

There are no marine biologists on either of the boards, Carter pointed out.

Newfoundland and Nova Scotia both have significant economic stakes in the development of offshore resources, with plenty of potential revenue from royalties and taxes on the line.

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Both provinces are facing fiscal woes, so their governments — which jointly appoint board members with Ottawa — aren’t exactly advocating for environmental laws that would restrain future development prospects. For example, Newfoundland recently excluded emissions created by offshore oil and gas projects from its greenhouse gas legislation.

“The supposed prosperity that this industry was supposed to bring hasn’t panned out in either province,” Fitzgerald said. “But they’re desperate for the royalties.”

What are the potential changes being proposed?

In mid-2017, the federal government released a discussion paper about its broader overhaul of the environmental assessment processes in Canada.

While the discussion paper only made a handful of references to offshore oil and gas projects, it set off serious alarms for fishery and environmental groups.

That’s because it proposed that future environmental assessments of offshore oil and gas projects would be “jointly conducted” between a new federal “impact assessment” agency and the relevant offshore petroleum board. The Canadian Environmental Assessment Agency currently heads up assessments for major offshore projects, so this would be a significant shift.

Fitzgerald said it would effectively be a de facto abdication to the offshore boards, pointing to an ongoing court case over an oil drilling lease in the Gulf of St. Lawrence, which the federal government passed up the opportunity to intervene on despite having the ability to. As she put it, the federal government is often very reluctant to step in.

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While the potential change doesn’t go as far as some would like — with industry and politicians calling for the delegation of offshore boards as “responsible authorities” like the National Energy Board and Canadian Nuclear Safety Commission, which have the power to conduct environmental assessments — recent precedent suggests boosters may get close to the same thing.

“In a way, they are delegating to the provinces what is supposed to be a federal responsibility over our endangered species and over our oceans to a board that’s in a conflict of interest position from the get-go,” Fitzgerald said.

Okay, what would be a better way of doing things then?

Well, listening to the expert review panel on environmental assessments appears to be a good start.

The four-person panel advocated strongly for a single agency to perform all environmental assessments: “An authority that does not have concurrent regulatory functions can better be held to account by all interests than can entities that are focused on one industry or area and that operate under their own distinct practices,” the panel wrote.

According to critics, taking this approach would help avoid the conflicting mandates of both promoting and regulating resource development. As the East Coast Environmental Law Association put it in a recent policy paper, this would promote “impartiality, accountability and public trust.”

Carter said Newfoundland and Labrador’s offshore board has a long-standing problem of lack of transparency and accountability, something which must be rectified with any new assessment arrangement.

“A cornerstone of environmental assessments has to be a free flow of information with the public and ample input from independent experts,” she said. “Transparency is fundamental to environmental assessment, but communicating with the C-NLOPB Board has been compared to meeting a wall of silence.”

Industry often criticizes the duplication of environmental assessments between federal and provincial governments. In a recent presentation by the Canadian Association of Petroleum Producers, the lobby group argued that the 2012 reforms resulted in a “fragmented, repetitive licence by licence approach” for offshore activities.

Creating a single, neutral agency responsible for all assessments could feasibly resolve that issue.

What’s next?

We could see draft legislation in the next few weeks.

The Canadian Environmental Assessment Agency recently told Canadian Press it will “ensure that the views of Canadian, as well as facts and evidence, will guide project decisions moving forward.”

However, “evidence-based decision-making” can be difficult to pull off when dealing with a lack of baseline data to assess environmental impacts, which Carter said is the case in the offshore.

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“Right now, given the climate crisis, we need to be winding down fossil fuel extraction,” Carter concluded. “We need regulatory regimes that are focused on managing the decline of fossil fuel production, not ones that are focused on streamlining regulatory processes so we can get more oil out faster.

“That’s the opposite direction we ought to go if we’re interested in climate stability.”