After months of secrecy — and a few vague threats to withdraw from carbon pricing altogether — the provincial government of Newfoundland and Labrador has finally unveiled its federally approved climate plan.

While many details around its implementation remain unclear, what we know so far suggests that the big winner is the province’s oil and gas industry.

Filled with exemptions for large producers and consumers alike, the carbon pricing framework was designed to spur plans to double Newfoundland and Labrador’s offshore oil production by 2030.

“The way the [Dwight] Ball government has chosen to roll this out is to say: ‘there is no real carbon tax here, it doesn’t apply to anything, don’t worry, keep your head down, ignore this,’ ” Memorial University political scientist Russell Williams told The Narwhal.

“That’s exactly the opposite motivation for why we adopt carbon pricing systems in the first place.”

The centrepiece of the Newfoundland and Labrador climate plan is the controversial Muskrat Falls hydroelectric project, anticipated to come fully online in 2020. When this occurs, the province hopes to completely decommission the bunker oil-burning generator in Holyrood, which emits roughly 10 per cent of the province’s total 10.3 megatonnes of greenhouse gas emissions.

The remainder of the provincial carbon pricing scheme emphasizes just how little anyone will be required to pay. For example, the province is upping fuel taxes from four cents on gasoline and five cents on diesel to 4.42 and 5.32 cents respectively.

The provincial plan exempts home heating fuel, off-grid diesel generators, aviation fuel, the interprovincial ferry system and municipalities.

“Consider the exemption on home heating fuel,” Williams said. “This exemption is for everybody, and for as much home heating oil as you can consume. This is really counter-productive in a carbon-pricing environment.”

After factoring in exemptions, only 76 per cent of total greenhouse gas emissions in Newfoundland and Labrador are subject to carbon pricing. The provincial government also advises that it reserves the right to scrap all this should any other province refuse to set a plan or abide by the federal backstop.

“Given developments elsewhere in Canada, it’s excellent that the government of Newfoundland and Labrador isn’t outright rejecting carbon pricing,” University of Waterloo political economist Angela Carter told The Narwhal.

“But at the same time, this is a free pass for the offshore oil industry. The reality is that they will be paying a very small fee on a fraction of their emissions.”

Offshore oil industry dominates

Plans for Newfoundland and Labrador, put forward by the Liberal government, anticipate more than 100 new offshore exploration wells will be drilled in the next decade.

“That is absolutely remarkable,” Carter said, “because based on the data I’m seeing, there have only been 151 wells drilled into the offshore on Canada’s east coast since 1955.”

“The emphasis more than ever is on situating Newfoundland as the preferred location for oil extraction.”

Newfoundland and Labrador has become increasingly dependent on the petrochemical industry.

When Hibernia — an oil field about 300 kilometres offshore from Newfoundland — first came online in 1997, mining and oil extraction made up 11 per cent of the province’s GDP. By 2007, it reached a high of 47 per cent. Oil revenues, meanwhile, accounted for 30 per cent of the province’s revenue by 2010. After the 2014-2015 oil crash, mining and oil extraction dropped to 24 per cent of provincial GDP in 2017 while royalties declined by nearly 80 per cent between 2011 and 2017.

The industry also represents about 20 per cent of the province’s total emissions, a share expected to climb as new projects come online.

The provincial government’s stated intention is to double offshore oil production by 2030.

In her latest comparative study of carbon pricing plans in Canada’s oil producing provinces, Carter found that climate policy in Newfoundland and Labrador has always reflected its dependence on offshore oil.

“An industry-friendly approach has been built into the core principles of the province’s approach to regulating large emitters,” she told The Narwhal.

“Earlier climate documents were very frank in terms of acknowledging that the oil sector is driving along the rise in provincial emissions. But even the mandate of the Office of Climate Change from its inception was to give equal weight to environmental sustainability and economic growth. There was an emphasis on protecting industry and economic competitiveness from the get-go.”

The carbon price regulations reflect that industry-friendly approach. There are exemptions for agriculture, fishing, forestry, offshore and mineral exploration, methane venting and fugitive emissions. New entrants or “significantly modified” facilities are also exempt from the first three years of production, followed by a five-year phase-in.

Doubling oil production by 2030 guarantees the province will not meet its emission reduction targets. But this is par for the course in the Canadian carbon pricing strategy.

‘The underbelly of oil dependence’

Williams argues that the lax carbon pricing in Newfoundland and Labrador is representative of the broader failings in the federal system.

Canada’s national carbon pricing plan is not designed to slow growth in industries, Williams said.

“At best, it’s intended to try and get consumers to reduce their emissions, to try and wash out what’s going on on the large industrial side.”

But ultimately, he said, “the climate plan is a federal responsibility” while provinces have to pay “for all the services that voters clearly really want, like healthcare.

“The provinces badly need money. Natural resource revenues are really hard to ignore as a solution to that problem.”

Carter warns that the call of oil revenue is a siren song. Weaning the province off its dependence on oil and gas is as important for sustainable economic development as it is for the environment.

“The underbelly of oil dependence was revealed to us by the oil price crash at the end of 2014,” she told The Narwhal. In the three years following the crash, the province packed on debt to pay for basic services in the absence of the oil revenues it had become accustomed to.

“We can see what it does to our economy. It’s not a reliable industry.”

A bigger shift is happening globally as well that could start to see oil and gas prices permanently depressed. Carter said a much larger conversation needs to happen around the concern of stranded assets.

“Decarbonization is underway globally. What if we are moving away from a fossil fuel-powered energy system?”

“That means Newfoundland is putting all of its hopes on an industry that’s in decline.”

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A moratorium on oil and gas development on a large piece of the continental shelf between Southwest Nova Scotia and Cape Cod called Georges Bank will be extended for seven years, protecting the ecologically diverse waters beloved by fishermen and environmental groups in the region.

The shallow waters of Georges Bank, located about 100 kilometres off the Nova Scotia coast is abundant in haddock, halibut and scallops and is a refuge for endangered turtles and whales that migrate through the nutrient-rich corridor.

The shelf is also thought to be home to large quantities of natural gas.

Nova Scotia recently announced it will renew legislation, Bill C-64, this fall that maintains the moratorium, following a similar decision announced by the federal government before parliament broke for summer.

According to Mark Butler, policy director at the Ecology Action Centre in Halifax, the provincial decision to extend the moratorium “passed at the very last minute.”

“It’s quite amazing, really, but nonetheless it passed.”

Many were holding their breath as the end of the current sitting of Parliament neared. “There was a fair amount of pessimism, so I think everybody was surprised at what happened in the final hours of the House of Commons,” said Butler about Bill C-64. “It passed first, second and third readings in one vote, which is unusual I understand.”

Spill in Georges Bay Would Have “Devastating Effect”

Throughout the history of the moratorium, fishers and groups representing the industry have been outspoken about the importance of the various fisheries on Georges Bank to the regional economy.

“It would be really tough if you had a spill there because of the currents,” said veteran fisher Dale Richardson on his way from his home in Little Harbour on the southern tip of Nova Scotia to Georges Bank to fish for swordfish. “It’s a mixing ground for that Bay of Fundy, northeast seaboard area. The dissipation of an oil slick would be unreal there. It could affect the whole Bay of Fundy and southwest coast of the province.”

Georges Bank has a diverse ecosystem with more than 100 fish species and many more of birds and marine mammals because the nutrient-rich Labrador Current washes over the shallow waters and meets the warmer Gulf Stream. Phytoplankton grows much faster there than on other continental shelves, setting up a feeding cycle for a complex eco-system.

A map of the Gulf of Maine shows the Canada/U.S. border cutting through Georges Bank. Credit: NOAA

While Richardson is a swordfisher in summer, his main occupation is as an inshore lobster fisher. He and the other 10,000 licensed lobster harvesters working off Canada’s East Coast rely on Georges Bank and other breeding grounds to grow a significant proportion of the nearly 75,000 tons of lobster landed in 2013 worth $680.5 million.

“It would have a devastating effect,” said Richardson of any accident involving petroleum on Georges Bank. “It would certainly affect anything that spawns and stays on the surface like lobster larvae, herring and things on or near the surface all the time.”

Lobster, herring, swordfish, bluefin tuna, scallops, cod and haddock — the list of commercial species that rely on Georges Bank as a breeding and feeding ground is significant. Many other important species also live there at certain times of the year including whales such as the endangered North Atlantic right whale, sea turtles, sharks and many species of seabirds.

The Battle for Georges Bank

Georges Bank is a sub-sea plateau of 28,800 square kilometers — about the size of Belgium — that was an island before the last ice age just 12,000 years ago. For the last 400 years, it’s been one of the world’s most productive fishing grounds.

In 1984, the International Court of Justice in The Hague ruled on a dispute between the U.S. and Canada, dividing Georges Bank between the two countries with the U.S. getting about four fifths.

About 40 years ago, oil companies drilled exploratory wells on Georges, but found nothing. The activity led to calls from fishers and environmental groups on both sides of the border to place a moratorium on oil and gas activity. Both countries did so in 1988, banning drilling until the year 2000.

On the Canadian side, the legislation also called for the creation of a joint federal provincial Public Review Panel, which later recommended extending the moratorium through 2012. The U.S. extended their moratorium a third time, setting an expiration date of 2017. The Canadian and provincial governments only extended theirs through 2015.

This fourth and latest moratorium will protect Georges Bank until 2022 from petroleum related activity by the oil companies that continue to hold exclusive exploratory rights on the Canadian portion of Georges.

Fisheries regulators in the U.S., however, are currently considering opening nearly 13,000 square kilometres of Georges Bank to commercial fisheries. The Fishery Management Council in New England state voted to reopen the area in June although the final decision rests with the National Oceanic and Atmospheric Administration.

A phytoplankton bloom illuminates Georges Bank. Credit: NASA via Stuart Rankin on Flickr.

Calls for More Research, Regulation Before Moratorium Lifted

The rich marine ecosystem of Georges Bank is at risk from more than a well blow out or oil spill, according to a massive 529-page study by the Maritime Region of the Federal Department of Fisheries and Oceans.

Seismic testing and a wide array of impacts from toxic drilling wastes or produced water can negatively impact the mortality of eggs and larvae and have sub-lethal effects up through the food chain.

Others worry drilling for oil or gas could crowd out the centuries-old fishing industry.

“The area around the rig would close down even if there were no impacts from seismic or produced water or drill muds,” Mark Butler said. “Just the simple loss of access would be enough to hurt the fishing industry.”

Still, not all fishers are against the opening of Georges to the oil industry.

Dale Richardson said he’s not “100 per cent against drilling.”

“I just think we need to have more research. We have a tendency here in Nova Scotia and Canada to come in with the most lax regulations compared to the North Sea or other places. I’m not real comfortable with them going there yet.”

Looking into the future, Butler would rather see the moratorium become permanent than risk further last minute extensions.

“We obviously need to drastically change what types of energy we use and how we use it,” he said.

“Maybe by 2022 we’ll all come to realize we shouldn’t risk important areas like Georges Bank for nonrenewable resources. Maybe we’ll be over the hump by then.”

Image Credit: James Brooks 

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Nova Scotia is potentially on the hook for millions of dollars in decommissioning costs as ExxonMobil prematurely winds down production at a massive offshore gas project near Sable Island.

In 1997 the province’s Liberal government negotiated a deal with Exxon to get the Sable Offshore Energy Project, about 190 kilometres off the coast of Nova Scotia, up and running. As part of that arrangement, Nova Scotia promised to pay a portion of decommissioning costs at the end of the project’s life.

The costs, expected to be in the millions, will be deducted from the $1.7 billion in royalties collected by the province since operations began in 1999.

Nova Scotia Energy Minister Michel Samson said a portion of the royalties have been set aside to pay the province’s contracted share of the decommissioning, but added he “[didn’t] have the exact numbers.”

"Knowing this was a potential liability for the province, the moneys have been set aside,” Samson told a press conference last Thursday.

Mark Butler, policy director for the Ecology Action Centre in Halifax, attended the initial assessment hearings for the project in the late 1990s.

“Back when I went through the hearings, we were critical of the royalty arrangements, but the government was keen to get some activity off our coast. I think they thought the Sable project would be the start of many more projects, so they were willing to give the industry a pretty nice deal.”

Butler told DeSmog Canada the Ecology Action Centre fought against the agreement from the beginning, advising the Nova Scotia government to reject the deal. Nearly 20 years later, Butler said he and others are saying we told you so.

“It was a bad deal,” he said. “Royalties for offshore hydrocarbon projects should be separate from the development costs of the company.”

“I am totally perplexed as to why this should be a government responsibility,” he added. “It’s a private project.”

Exxon said the exact date of decommission — which will include capping underwater wells and dismantling five offshore platforms — won’t be known for another year. Exxon is interested in providing commercial access to the offshore infrastructure to another company, but so far has been unable to generate interest.

Gas production from the Sable project has been steadily declining for seven years.

Nova Scotia has only one other offshore petroleum project — operated by Encana — but renewed interest in oil production off Canada’s east coast in the last year could mean more to come.

Butler said Nova Scotia should avoid disadvantaging itself in future offshore deals.

“Oil companies go around the world and bargain for a living whereas with Nova Scotia it’s a once in a lifetime thing they do when they’re hungry for the business.” 

Given that other companies like Shell and BP are now seriously considering further offshore projects, Butler believes the Nova Scotia government should learn a valuable lesson from the experience with Exxon.

He added that, while the Ecology Action Centre is opposed to further petroleum production off the coast, if development does go ahead “the current royalty regime should not be replicated for this non-renewable resource.”

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