Sharks, sea turtles, corals, wolffish — the 1,200 kilometre Laurentian Channel off the southwest coast of Newfoundland is home to tremendous biodiversity.

And that’s the reason it’s set to become Canada’s newest Marine Protected Area, a designation designed to conserve and protect vulnerable species and ecosystems.

There’s just one catch: draft regulations for the proposed 11,619 square-kilometre protected area allow oil and gas exploration and drilling for much of the year. In addition, the government has reduced the size of the protected area by more than one-third from what was originally planned.

Documents obtained by The Narwhal paint a picture of a disturbingly close relationship between the Department of Fisheries and Oceans (DFO) and the Canadian Association of Petroleum Producers (CAPP) and provides clues of how a “marine protected area” ended up allowing offshore oil drilling.

Canada is in a hurry to classify more marine areas as “protected” to meet an international target to protect 10 per cent of its oceans by  2020. Whether an area that allows offshore drilling will even qualify as protected is the subject of heated international debate.

ICYMI: Is Canada Fudging the Numbers on its Marine Protection Progress?

But “high confidence estimates” of up to 257 million barrels of oil and four trillion cubic feet of natural gas put the Laurentian Channel in the crosshairs of conservation and resource extraction.

The documents — obtained by The Narwhal via access to information legislation — reveal that lobbying meetings took place between government and industry without being recorded properly in the federal registry and that the Department of Fisheries and Oceans provided the oil industry lobby group with an advance copy of a presentation.

CAPP received advanced copy of DFO presentation

The Department of Fisheries and Oceans conducted more than 30 consultations since mid-2014, when a proposed regulatory framework for the the Laurentian Channel was first distributed.

Stakeholders included the fishing industry, oil and gas players, the Shipping Federation of Canada, environmental organizations, academics, Indigenous groups and various governments. The last consultation of this kind occured on October 28, 2016, with the Canada-Newfoundland and Labrador Committee on Oceans Management.

CAPP is listed as only having two consultations with DFO as part of this process: once on May 19, 2016, and another on Oct. 20, 2016.

But on the morning of the second meeting, Stephen Snow — DFO’s manager of oceans for Newfoundland and Labrador — sent an intriguing e-mail to Jennifer Matthews, a policy analyst at CAPP.

Both parties indicated that a call occured on Oct. 19 between Snow and CAPP, with the DFO manager beginning his Oct. 20 e-mail as “a follow-up from our discussion yesterday.” Then, Snow explained that he was attaching a draft presentation about marine conservation targets that he would be presenting that afternoon.

“As we have now concluded consultations with all stakeholders, we have not been giving out the presentation as it contains sensitive information from a DFO perspective that needs to be accompanied with the ‘Presenter,’ ” Snow wrote.  Following that, he specifically requested that CAPP “not share or distribute the power point and delete it as we agreed.”

Excerpt from documents released to The Narwhal via Freedom of Information Legislation. The e-mail exchange shows Stephen Snow, DFO’s manager of oceans for Newfoundland and Labrador, requesting CAPP review, then delete, a presentation regarding marine conservation targets.

This communication raises some big questions, according to Gretchen Fitzgerald,  director of Sierra Club Canada’s Atlantic region chapter.

“It seems like there’s some advanced notice and even some discussions that are happening alluded to in the e-mail that would make you think there’s a little bit too much collaboration going on,” Fitzgerald told The Narwhal.

“It’s just worrying when you see people getting documents in advance of what’s supposed to be a public multi-stakeholder consultation, and being given more opportunity to prepare and an inside-track on these consultations that are supposed to put everybody on an equal footing.”

Stella Ruddock, communications officer for DFO, said in an interview with The Narhwhal that the presentation was sent out early as CAPP had employees in Halifax as well as on the ground in Newfoundland, where the meeting was held, and that it was an attempt to “try to speed up the process of getting the meeting going on time.”

She said that DFO requested that CAPP not share the presentation as “there were maps in the presentation that DFO felt might be misconstrued, I guess, if they weren’t accompanied by the presenter. They felt that if it got out, if it was circulated without the presenter, it might be misunderstood.”

Ruddock couldn’t comment on which specific maps were considered sensitive, or if it’s standard practice for DFO to send out a draft presentation to stakeholders prior to a consultation.

10 CAPP members meet with DFO days after draft regs published

On June 27, 2017 — only three days after the draft regulations for the marine protected area were published in the Canada Gazette — CAPP and at least six other industry heavyweights met with DFO for 45 minutes.

That list included senior representatives from BP, Shell Canada, ExxonMobil, Nexen, Suncor and Statoil. However, e-mails from both CAPP and DFO made reference to “10 CAPP members,” suggesting more may have been present in the room.

Only CAPP and ExxonMobil actually registered the communication in the federal lobbying registry.

ICYMI: BP Wants to Drill Underwater Wells Twice the Depth of Deepwater Horizon in Canada

All companies should have registered the meeting, regardless of it being organized by CAPP, said Duff Conacher, founder of Democracy Watch.

“My opinion is that the companies violated the Lobbying Act by failing to register the meeting in the monthly communications registry,” Conacher said.

BP wasn’t even registered to lobby the federal government (and hadn’t been since 2014).

DFO wanted voluntary commitment not to drill in conservation area

A scenario note prepared for DFO’s senior assistant deputy minister of ecosystems and fisheries management Kevin Stringer noted that CAPP members “will likely raise questions on the intention of the government to prohibit or limit current or future oil and gas activities in MPAs in general, but more specifically in the proposed Laurentian Channel Oceans Act MPA.”

It also noted that DFO’s main objective for the meeting was to ascertain if CAPP would be willing to “demonstrate its marine stewardship commitment” by supporting a statement that “no calls for bid on leases in the Laurentian Channel will ever be issued in support of the long-term conservation of the area.”

It appears DFO did not meet that goal.

A summary of the meeting e-mailed out on July 10, 2017, stated that “there was some discussion about Laurentian Channel but not in detail or in any conclusive way; there was agreement to have an ongoing dialogue.”

Fitzgerald of Sierra Club said in an interview with The Narwhal that it was “quite startling” to see the number of senior representatives who met with DFO on June 27.

“I actually didn’t realize they were so interested in this piece of marine seascape,” she said. “But I think to them, it’s about their right to all the oceans on the East Coast of Canada. That’s the only reason they would assemble such a cast of characters.”

CAPP’s submission claims no serious impacts on marine mammals

Following the publication of the draft regulations on June, there was a 30-day window for public comment.

On July 21, three days before the window closed, CAPP sent its final comments to DFO. Signed by Paul Barnes — the director of the Atlantic Canada and Arctic regions for the association — the letter outlines CAPP’s argument for why it thinks that seismic and drilling activity in the region wouldn’t be seriously harmful to species and ecosystems.

Specifically, CAPP emphasized there have been no documented marine mammal injuries or deaths as a result of seismic surveys. In addition, it noted that impacts of drilling and production at two large offshore sites in Atlantic Canada have had negligible impacts on sediment and water quality monitoring.

Rodolphe Devillers, geography professor at Memorial University of Newfoundland and lead researcher at the Marine Geomatics Research Lab, reviewed CAPP’s final submission and said in an interview with The Narwhal that the facts presented appear accurate. However, he added the caveat:  “It’s just always a question of what facts they select in their letters and not others.”

For example, it’s true that there haven’t been any documented marine mammal mortalities as a consequence of seismic surveys, as it’s very difficult to relate deaths to specific sources.

It’s also consistent with the conservation objectives listed in the federal government’s draft regulations, with a particular focus on preventing “human-induced mortality.”

But as noted by Devillers, the overarching objective of the MPA is to “conserve biodiversity through the protection of key species and their habitats, ecosystem structure and function, and through scientific research.”

To him, and many other ocean scientists, that overarching objective requires the prevention of a wide range of disturbance and harms, not just deaths — something largely unknown due to a lack of scientific studies in the region.

“We do know as scientists that seismic activities do have a number of impacts, which can be loss of hearing, challenges to feed and communicate … Those affect the primary objective of the MPA.”

Seismic testing ‘serious’ pollutant: scientists

A 2013 report by Dalhousie University biologist Lindy Weilgart concluded that at least 37 marine species have been shown to be impacted by seismic testing, and that airgun noise “must be considered a serious marine environmental pollutant.”

On June 22, 2017 — incidentally, a single day before the government released its draft regulations — an article was published in Nature Ecology & Evolution that concluded seismic surveys can double or triple the death rates of zooplankton within a 1.2 kilometre radius. The authors wrote: “Significant impacts on plankton by anthropogenic sources have enormous implications for ocean ecosystem structure and health.”

Devillers voiced similar concerns about CAPP’s positioning on potential contamination.

In the final submission, CAPP said that no drill waste or petrogenic hydrocarbons have ever been detected “outside the 500 metre safety zone during drilling or operations phases” of nearby offshore projects. But Devillers noted that “even if it’s within 100 metres, it’s an impact on the ecosystem.”

“Sometimes things go wrong,” he said. “How willing are we to accept that things can go wrong? Even if it’s one chance in 50 years or something, that’s not acceptable. And they cannot guarantee that this will not happen.”

A simple fix could set clear standard for marine protected areas

A simple solution to all of this would be to amend the Oceans Act to prohibit all extractive activities in Marine Protected Areas, said Linda Nowlan, staff lawyer with West Coast Environmental Law.

Currently, each distinct protected area  is governed by an individual regulation, which can prohibit and allow certain activities. That’s why the Laurentian Channel Marine Protected Area allows oil and gas activities while the nearby St. Anns Bank Marine Protected Area banned them.

In comparison, Canada’s “National Marine Conservation Areas” — which include Ontario’s Fathom Five National Marine Park and Quebec’s Saguenay-St. Lawrence Marine Park — have a blanket prohibition of oil and gas activities.

Nowlan suggested the federal government should take advantage of its ongoing amendments to the Oceans Act to prohibit all “harmful activities,” including oil, gas and mineral exploration and development.

“It sets the bar from the start so industries can’t go into negotiations and whittle down protection, which is what seems to have happened in Laurentian Channel,” Nowlan said.

The government is expected to release the final regulations this year.

The Narwhal’s reporters are telling environment stories you won’t read about anywhere else. Stay in the loop by signing up for our free weekly dose of independent journalism.

“This is the biggest challenge as we have at the moment as a company,” Ben van Beurden, chief executive of oil giant Shell, said recently. “The fact that societal acceptance of the energy system as we have it is just disappearing.”

Speaking at the annual CERAWeek energy conference in Houston on March 9, van Beurden described the growing tensions between his industry, which has created our fossil fuel dependent energy system, and the public, which is demanding a switch to clean energy: “I do think trust has been eroded to the point where it starts to become a serious issue for our long-term future.”

The world’s largest oil companies are increasingly faced with public pressure to do something about their impact on climate change. And increasingly we’re seeing their chief executives responding. The question is though, how much is for real and what's just greenwash?

It’s been just over a year since the Paris climate deal was agreed in December 2015 and slowly corporate annual reports are being filed. In these, companies take stock of the year’s changes and assess the future risks to their business. Meanwhile new strategies and corporate statements are being issued. Statoil recently released a climate roadmap and ConocoPhillips has come out in support of the US remaining part of the Paris Agreement.

But what are we to make of all of this? Do the actions of these oil giants match the big words put out by their chief executives when it comes to climate change? Has anything really changed since Paris?

Royal Dutch Shell

It feels like Shell is going through a bit of an identity crisis. On the one hand, it’s been pretty clear about the risk climate change poses to its business and the need to transition to renewable energy. But on the other hand, it sees this as a slow, decadal process and has a record of lobbying against climate action.

Last week headlines were made when Shell announced it was selling off most of its Canadian oil sands assets. Mixed in with this also was the news that it would now be tying 10 percent of its directors’ bonuses to how well they manage greenhouse gas emissions in their operations.

It also aims to invest $1 billion in renewable energy by the end of the decade.

But a look at the bigger picture shows that while these are steps in the right direction, they’re relatively small steps given Shell’s total annual spending comes to $25 billion.

And according to a recent article written by Shell’s climate advisor David Hone, the company has “no immediate plans to move to a net-zero emissions portfolio over our investment horizon of 10-20 years”.

That said, Shell appears to be somewhat ahead of the curve compared to other oil majors. Maybe it's making up for lost time, or perhaps it doesn't want to be left in the dust. Either way, it's not entirely burying its head in the sand. In its annual report last year for the year up to December 2015 it was the first company to recognize that policy action and legal risks due to rising climate change concerns are mounting. These same concerns are repeated in this year’s report.

However, this comes after the Guardian revealed that Shell knew of the impact fossil fuels would have on the climate as far back as 1991. In a film on temperature and sea level rise the oil giant accurately predicts what scientists now all agree on about climate change.

Yet, despite the company’s own data, it has spent decades investing in unconventional oil and gas projects. Projects which it has always known are incompatible with tackling climate change.

BP

Meanwhile, BP is facing significant pressure to boost production. Part of this effort means it continues to expand into more and more challenging projects in search of bigger returns. But it’s having some trouble.

After strong public opposition to its plans to drill in the pristine waters of the Great Australian Bight it pulled out of the deepwater venture. And now it’s planning a similarly controversial project: drilling for oil near a recently discovered coral reef off the coast of Brazil.

The company also isn’t performing as well as it would have hoped, with share prices currently sitting 30 percent lower than before its Deepwater Horizon disaster.  All of this has led to rumours of takeovers, with reports last week that Exxon was eyeing up the British oil giant.

And as it continues to lay off workers from its drilling operations on the North Sea, a DeSmog UK investigation shows BP has been working hard to boost its social license by putting BP-branded tutors in primary and secondary schools all across Aberdeen.

In the US, however, BP chief executive Bob Dudley seems encouraged by the change in winds that came with a new White House administration. Dudley recently said that the political situation meant business is much more open now, saying that the White House is “very interested” in BP, “more so than at any times in the last eight years”.

As BP continues to push into riskier projects – and riskier in all senses of the word, from its operations to the climate and the marine environment – it will be interesting to see what its annual report (yet to be published) makes of all of this. Last year’s simply recognizes the impact that complying with climate change regulations and laws may have on its profit margin.

Chevron

Compared to last year, Chevron’s come a long way. Whereas its chief executive John Watson boasted last year that the world will always need Big Oil this year it too has publicly recognized to its investors that climate change lawsuits can pose a risk to its profits.

In its annual report for the year up to December 2016 it states: “increasing attention to climate change risks has resulted in an increased possibility of governmental investigations and, potentially, private litigation against the company.”

But amidst growing demand from shareholders for corporate disclosure on climate risks, Chevron this month said in a quietly released report that a transition to lower-carbon energy sources would pose only a “minimal risk” to its operations because it’s investing in these options too. It then goes on to explain that oil and gas will remain the fundamental energy sources.

ExxonMobil

Like BP, Exxon fails to go beyond the impact of climate regulations on its profits. The company however continues to be in the spotlight, from investigations into its long history of funding climate denial to former chief executive Rex Tillerson becoming part of the new White House administration – the same Rex Tillerson who, as Exxon's chief, went by the alias 'Wayne Tracker' when emailing colleagues to discuss climate change.

Since Tillerson left the helm, Exxon has made some attempts to improve its climate credentials. The new chief executive Darren Woods publicly endorsed the Paris climate deal and just weeks after he took over from Tillerson, Susan Avery, a climate scientist, was appointed to the company’s board.

This comes after the company’s shareholders failed to do just that during Exxon’s annual general meeting last summer. During this meeting three other climate related initiatives were voted down including one to stress test the business to avoid 2C warming.

However, no major shift on strategy was announced during Woods' first speech on March 1 since being appointed to lead Exxon. Instead, investment priorities will continue to be in oil and gas.

The company also appears to be taking full advantage of the new US administration’s warm welcome to oil lobbyists as it pushes for weaker regulations on the oil and gas industry.

Photo: Drew Kolb via Flickr | CC 2.0

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Norwegian oil major Statoil will be pulling out of its Canadian oilsands project after nearly a decade with an expected loss of at least USD$500 million.

In yet another sign that Canada’s oilsands – one of the most polluting fossil fuel projects on the planet – is becoming increasingly costly, Lars Christian Bacher, Statoil’s executive vice-president for international development and production, said in a statement: “This transaction corresponds with Statoil’s strategy of portfolio optimisation to enhance financial flexibility and focus capital on core activities globally.”

The 14 December announcement comes just weeks after Prime Minister Justin Trudeau approved the controversial Kinder Morgan Trans Mountain pipeline and the Enbridge Line 3 pipeline in a move to facilitate growth in the oilsands and create jobs.

The international energy giant will sell all of its oilsands assets to the mid-sized Alberta-based Athabasca Oil Corp effective 1 January 2017 in a deal that could produce about 80,000 barrels of oil a day with reserves expected to last up to 70 years. It is estimated to be worth up to CAD$832 million. The deal will also see Statoil retain a stake of just under 20 percent in Athabasca.

Statoil was one of 13 companies operating in the oilsands that had signed a long-term contract with Texas-based pipeline operator Kinder Morgan to ship oil via the Trans Mountain pipeline. However, it is now unclear what will happen with its contract, the National Observer has reported. According to Statoil Athabasca will have the option to enter the agreement.

The move is the latest in a string of losses for oilsands operators since global oil prices began to plummet in 2014, triggering other European companies such as Shell and Total to pull out of projects and resulting in tens of thousands of jobs being lost across Alberta.

And while Trudeau has said recently that tar sands and pipeline expansion will be “integral” to the country’s climate plans, Statoil’s head of sustainability, Bjorn Otto Sverdrup, tweeted on the day of the company’s announcement that Statoil’s exit from the oilsands “bends our cost and emission curves. Building resilience.”  

Today we announced @Statoil exit of oil sands which bends our cost and emission curves. Building resilience @CFigueres @IEABirol @topnigel https://t.co/WvvZYoN0q3

— Bjørn Otto Sverdrup (@BSverdrup) December 15, 2016

Photo: Lawrence Sauter via Statoil

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Companies in Alberta’s oilsands are scrambling to find a way to reclaim tens of thousands of kilometres of seismic lines cut into the boreal forest before regulations that mandate the recovery of endangered caribou habitat are implemented in late 2017.

But while crews experiment with planting black spruce in piles of dirt during minus-25 degree weather in a bid to repair the forest, the Alberta government continues to lease massive segments of the region for further exploration and still hasn’t mandated reclamation of seismic lines.  

The controversy over caribou habitat and wolf culls in Alberta has stewed for years, but the issue of seismic lines has been largely overlooked. It’s these linear corridors cut through the forest (used to set off explosive charges to locate oil and gas deposits) that encourage predators like wolves to infiltrate what remains of fragmented caribou habitat.

“I don’t think a lot of people thought these seismic lines were a big deal,” said Scott Nielsen, an Alberta Biodiversity Conservation Chair and University of Alberta professor. “But … there are these cascading effects that you can’t anticipate.”

In a century of oil and gas development, hundreds of thousands of kilometres of these wolf freeways have been cut through Alberta’s forest. In one section of the Lower Athabasca region alone, south of Fort McMurray and extending out to Cold Lake, there are 53,000 kilometres of seismic lines.

“We still face the legacy of a tremendous amount of linear disturbances from the initial phases of exploration in the oilsands,” Nielsen said. “So it’s become a major conservation concern — or crisis — really.”

In 2012, the federal government released a recovery strategy for endangered caribou that demands that 65 per cent of their ranges be “undisturbed.” Right now, some Alberta caribou herds have as little as five per cent of their ranges left undisturbed.

“Trying to recover things after they’ve happened is a heck of a lot harder than preventing habitat disturbance in the first place,” Nielsen said.

Restoration Costs Estimated $10,000 Per Kilometre

Some industry players are already voluntarily putting their minds to finding a way to piece the fragmented forest back together — even though restoration costs roughly $10,000 per kilometre.

“With caribou being listed [as endangered] and these areas being defined as critical habitat — that’s why there’s a bit of a mad rush to deal with the legacy of disturbances that we have,” Nielsen said.

Companies Push Ahead with Restoration Despite Lack of Government Requirement

Devon Energy, an oilsands company involved in seismic line restoration since 2011, is trying to make it harder for wolves to move around in caribou ranges.

“Seismic lines, not just seismic lines but roads and trails out in northern Alberta, make it easier for wolves to travel and hunt more efficiently,” Amit Saxena, senior lands and biodiversity manger with Devon, told DeSmog Canada. “They are increasing the spatial overlap between wolves and caribou, more than pre-disturbance levels.”

Saxena said while most companies are doing what they can to ensure new seismic lines come with a lighter footprint — by reducing their width and straightness — there is still a lot of work to do to inhibit wolf movement on the thousands of kilometres of legacy lines crisscrossing the province.

“Sometimes we actually put up wooden or snow fences at 500 metre intervals along the line, and sometimes we’ll do log rollback and brush clearing, making big piles,” he said. “That not only impacts wolf movement on the line but also human movement on the line so that limits the amount of ATVs and quads that go down those lines that will ultimately negatively impact the recovery of the line.”

Devon is working toward the federal government’s target of 65 per cent undisturbed habitat in caribou ranges and prioritizes line recovery based on their habitat value for caribou. The company is also working to offset disturbance in new ranges with conservation in others.

But Saxena pointed out that since there is “no carte blanche requirement” from the province for seismic line restoration, companies are trying to find ways to balance the restoration with other priorities.

“We have to be realistic about it also,” Saxena said. “Industry priorities do play a role in there.”

Tree planting along seismic lines in the ALGAR historic restoration project area. Image from COSIA.

COSIA Pilot Project Tests Caribou Habitat Reclamation Techniques

Kris Geekie, director of community consultation and regulatory affairs for Nexen, said his company is exploring new seismic line restoration techniques in caribou habitat through the Canadian Oil Sands Innovation Alliance (COSIA) as part of the Algar Historic Restoration Project.

“We’re looking at an area nobody is currently active in. There are no oilsands leases within that area and what we’re testing is how can we restore [seismic lines] faster, what are the appropriate treatments, and what are the tactical plans specifically for managing forest fragmentation from seismic lines,” Geekie said.  

Geekie said Nexen, along with other oilsands companies like Statoil, Shell and ConocoPhillips, are working on 390 kilometres of seismic lines throughout the Algar region.

“The pilot is specifically designed to find out if we can improve the sustainability [of caribou] in that area. Basically, the less linear disturbance in the area, and the less access for wolves, is one way we can improve the sustainability of caribou herds.”

Caribou Recovery Plan Still to Come: Province

Alberta Environment and Sustainable Resource Development (ESRD) is currently formulating the province’s caribou recovery plan, according to public affairs officer Duncan MacDonnell — although it’s too early to tell what role seismic line restoration will play in the plan.

“We must have caribou recovery plans ready to go by the end of 2017,” MacDonnell said. “It’s our responsibility to meet those plans according to the [federal] criteria.”

None of the provinces have filed their caribou recovery plans yet, he said, adding the variety of caribou ranges in Alberta alone has contributed to the delays in the draft plan’s release.

“How far [ESRD goes] in terms of restoration schedules or plans, we have no idea yet,” MacDonnell said.

He added ESRD is carrying out a wolf cull in the Little Smoky and A La Peche caribou ranges as an interim measure while the province prepares its recovery plans. Those plans are expected to include some restriction on new development in caribou ranges. 

Nexen seismic line replanting. Photo from Boston College Center for Corporate Citizenship via Youtube.

Alberta Government Continues to Sell Energy Leases in Caribou Range

Yet the Alberta government’s recent sale of energy leases in caribou range has onlookers concerned not enough is being done to protect caribou habitat despite government promises.

Carolyn Campbell from the Alberta Wilderness Association said the government is “sending mixed messages” when it comes to caribou recovery.

In early March, the province came under fire for putting 21,000 hectares of energy leases in caribou habitat up for auction. Campbell said the day after her organization issued a news release on the auction, the government quietly announced the sale would be delayed.

Since then, several new small lease sales in that range have been announced.

“Alberta is being highly inconsistent right now,” Campbell said.

“The problem with new leasing is it creates new rights holders — energy companies — who have a time limit to prove up those leases and under weak rules that enables them to put down new well-sites, new roads, new pipeline infrastructure.”

Campbell said new energy lease sales continue while the government is perpetually delaying the release of range-specific recovery plans. She said Alberta initially committed to releasing the first plan, for the Little Smoky and A La Peche herds, in 2014.

“Time is running out for these caribou. It would be pretty inappropriate to try to run the clock out to 2017,” she said.

She added the current rules for habitat disruption are “unacceptably weak for an endangered species” even when paired with recent efforts to restore disturbed land.

“Even though some companies are getting interested in reclamation, the net effect with all the new leases and activity is ongoing degradation,” Campbell said.

“New lease sales should be totally deferred until there are strong range plans in effect.”  

Image Credit: Alex MacLean

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Climate campaigners and tar sands blockaders widely celebrated the announcement last month that the Norwegian energy company Statoil was halting plans for a multi-billion dollar tar sands project in Alberta, Canada. The company cited rising costs of labor and materials in Alberta, and also blamed “limited pipeline access” for “squeezing away the Alberta margins a little bit,” a point that anti-Keystone XL activists have taken as a clear sign of victory.

Don’t take your eyes off of Statoil, however. The company is quietly reallocating the estimated $2 billion investment to pursue a massive deepwater offshore project off the east coast of Newfoundland, in harsh, sub-Arctic conditions adjacent to an area drillers refer to as “iceberg alley.”

A win for Athabasca, a loss for the North Atlantic

The Statoil decision to mothball its tar sands project for at least three years is a clear win for the northern Alberta boreal forest and the First Nations peoples who live downstream in Fort Chipewyan. The atmosphere will also be spared an estimated 777.4 million metric tons of carbon dioxide.

Statoil's decision to shelve the in situ project also helps prove the concept that, as Bill McKibben tweeted, “battling pipelines is a good idea [because] it makes it more expensive to do bad stuff.” It also dampens "the invevitability argument," the idea that rapid tar sands development will happen with or without the Keystone XL pipeline.

Coming on the heels of a May announcement by Total SA and Suncor Energy that work would be suspended on an $11 billion tar sands project (a decision that cost those companies $1.65 billion), Statoil's announcement indicates that fighting pipelines can be effective by applying a sort of people-powered carbon tax to fossil fuel development.

As recently as December 2013, Statoil Canada president Stale Tungesvik told The Globe and Mail that he was “still fighting for doing both,” referring to the Corner tar sands project and development of the Bay du Nord deepwater offshore find in the Flemish Pass off of Newfoundland.

However, for now — and in no small part because of the lack of pipeline capacity out of Alberta — Statoil can only afford to invest in one project, and the company has calculated better returns on the deepwater offshore play that has received little media attention and little public resistance.

Statoil’s North Atlantic Plans

In the summer of 2013, Statoil and its partner Husky Energy made a massive discovery of oil in the deepwater Flemish Pass Basin, off of Newfoundland. Called Bay du Nord, this was the third, and largest, of Statoil's recent discoveries in the area. Estimated at 300 to 600 million barrels of recoverable light crude, Bay du Nord was the largest oil discovery in the world in 2013, Statoil's largest discovery since 2010, and the company's largest discovery ever outside of Norway.

The other two plays, called Mizzen and Harpoon, are both expected to yield in the hundreds of millions of barrels. Exploration and appraisal wells are currently being drilled or analyzed in all three locations, all within 10 to 15 miles of each other.

The Flemish Pass Basin sits about 300 miles east of St. John's, Newfoundland, under some 3,600 feet of water. The reservoirs themselves are more than one mile under the seabed.

The Bay du Nord play sits in the Flemish Pass Basin, appearing on the far right in turquoise blue. Image credit: CNW Group/Statoil Canada Limited

Geir Richardsen, Statoil Canada’s vice-president of exploration, hopes that the Bay du Nord well will be producing crude by 2020 if all goes to plan. 

“Canada is a core area for us," Richardsen said. “It’s an environment where we hope to create good value.”

Newfoundland’s Oily Ambitions

Canada’s offshore oil industry has historically been limited to three fields clustered in the Jeanne d'Arc basin, about 100 miles southwest of the Flemish Pass basin in a broader region known as the Grand Banks. Output from these fields peaked in 2007 and the national and provincial governments seem dead set on helping boost production by any means necessary.

Derrick Dalley, the minister of natural resources for Newfoundland and Labrador, said that the Bay du Nord discovery “proves there is oil in our province’s deepwater basins, and it will encourage increased offshore exploration activity.”

Bay du Nord would be Canada’s first foray into deepwater drilling — the Jeanne d’Arc fields are only about 300 feet deep. And while many residents of Newfoundland worry about the safety of drilling Canada’s first deepwater offshore oil wells, the provincial government is aggressively working to help Statoil get to the oil as soon as possible.

Ministers of the province of Newfoundland and Labrador announced in June that public funds, through the Crown corporation Research and Development Corp., will chip in $1.5 million on top of Statoil’s $2.4 million for three research projects geared towards deepwater drilling in such harsh sub-Arctic environments.

Farrah Khan, of Greenpeace Canada, told the CBC that “it's especially galling that Newfoundland and Labrador is using public money to advance a very risky industry.”

The government of Newfoundland and Labrador also created its own Crown corporation to capitalize on what it hopes to become an offshore bonanza. In 2007, Nalcor Energy was formed, and has since been investing in hydroelectric projects, energy marketing, and, crucially, offshore energy infrastructure.

You don’t have to look far to find the inspiration for Nalcor. “We’re modeling ourselves after Statoil,” said Jim Keating, vice president of Nalcor’s oil and gas division, referring to the quasi-public structure as an “arms-length” state-owned oil company.

Who else is working off the Canadian coast?

The massive Statoil discovery underscores a busy time in exploration off of Canada’s eastern shore. On top of Statoil’s Flemish Pass plays, a number of companies, mostly foreign, are at various stages of tapping the crude under the North Atlantic.

Exxon Mobil already operates in two of the fields in the Jeanne d’Arc basin (see map above) — Hibernia (1.2 million barrels) and Terra Nova (>370 million barrels). The company is currently ramping up operations in the Hebron heavy oil field also in the Jeanne d’Arc basin, which is estimated to have 400 to 700 million barrels of recoverable crude.

Exxon also leads investment and operations of the first and only offshore natural gas project in Canada, called the Sable Offshore Energy Project, off the coast of Nova Scotia (see map below).

The Sable Offshore region is the small cluster of yellow, orange and green, connected by pipline to the island. The Shelburne Basin fields are the yellow blocks on the left. Image credit: Nova Scotia Department of Energy (click for larger version)

Royal Dutch Shell, doing business locally as Shell Canada Limited, is leading a partnership, along with Suncor and ConocoPhillips, to explore the deepwater off of the south shore of Nova Scotia. The companies recently paid close to $1 billion for exploration rights on four parcels in the Shelburne Basin (see map above), roughly 150 miles south of Halifax.

Chevron is currently drilling its third exploration well in the Orphan basin, roughly 30 miles northwest of the Flemish Pass.

Husky Energy is partnering with Statoil on the Flemish Basin plans, as described above. Huksy also has the majority interest in the White Rose field in Jeanne d'Arc, with Suncor holding the minority stake. 

With so many projects in development off of Canada's East Coast — from conventional offshore to deepwater to gas drilling — the region seems to be on the cusp of a mini-bonanza. Many investors are predicting that 2015 will be "big year for offshore oil in Canada" as more exploratory wells are drilled and more companies invest in the area, many seeking easier profits and less resistance than they're encountering in the Alberta tar sands. 

But drilling offshore in the North Atlantic has its challenges. In future posts, DeSmogBlog will investigate the risks of drilling in this particular harsh environment, the infrastructure demands and impacts on local populations, and the climate threat that emerges as the size of these oil discoveries are better understood. We will continue to monitor the situation off of Newfoundland, Labrador and Nova Scotia, and will report important developments.  

The Narwhal’s reporters are telling environment stories you won’t read about anywhere else. Stay in the loop by signing up for our free weekly dose of independent journalism.

Coal, the fossil fuel that largely sparked the industrial revolution, may be facing the beginning of the end — at least in terms of generating electricity.

There are increasing signs of the demise of the world’s dirtiest fossil fuel, from a global oversupply to plummeting prices to China starting to clean up its polluted air.

Last week, the Carbon Tracker Initiative published an analysis — Carbon Supply Cost Curves: Evaluating Financial Risk to Coal Capital Expenditures — identifying major financial risks for investors in coal producers around the world.

Saying the demand for thermal coal in China, the world’s largest emitter of toxic greenhouse gases, could peak as early as 2016, the analysis also highlights $112 billion of future coal mine expansion and development that is excess to requirements under lower demand forecasts.

“In particular it shows that high cost new mines are not economic at today’s prices and are unlikely to generate returns for investors in the future,” said an accompanying media release.

“Companies most exposed to low coal demand are those developing new projects, focused on the export market . . . With new measures to cap coal use and restrict imports of low quality coal in China, it appears the tide is turning against the coal exporters.”

The analysis added that China’s desire to reduce imports will impact prices and asset values for export mines in the U.S., Australia, Indonesia and South Africa.

“King Coal is becoming King Canute, as the industry struggles to turn back the tide of reducing demand, falling prices and lower earnings,” Anthony Hobley, CEO of Carbon Tracker Initiative, said.

A recent article in Mining Weekly also says the coal industry is indeed facing tough times.

The article noted Coal Association of Canada president Ann Marie Hann agreed that about half of the global coal output at current pricing was being produced at a loss.

“Until a global rebalance between demand and supply takes place and the global economy rebounds, the coal industry will unfortunately probably see some more bad news over the coming months,” Hann said.

The story added that the prices for thermal coal, which is used to generate electricity, had fallen in recent years from about $190 per tonne in mid-2008 to $75 per tonne this year, while metallurgical coal (used to make steel) had dropped from a high of more than $300 per tonne in late 2011 to less than $120 per tonne.

To perhaps make matters worse for the coal industry, it is being publicly attacked by the oil and gas sectors, which are trying to position themselves as cleaner fossil fuels.

According to the Responding to Climate Change website, a number of the world’s leading oil and gas companies voiced their concerns about climate change at last week’s UN Climate Summit, arguing they can offer a future coal cannot.

“One of our most important contributions is producing natural gas and replacing coal in electricity production,” Helge Lund, Statoil’s chief executive, was quoted as saying.

Kevin Washbrook, a director for Voters Taking Action on Climate Change, a Vancouver organization that has fought against a proposed new coal export facility at Fraser Surrey Docks, agrees the thermal coal sector is in decline.

“I think coal is in everyone’s sights these days because coal is climate change,” Washbrook told DeSmogBlog. “Coal has to be on the chopping block for sure.”

Washbrook added the UN, the International Energy Agency, big banks and insurance companies are acknowledging that the vast majority of coal must stay in the ground if humankind is to avoid catastrophic, runaway climate change.

“We need to see this current downturn [in the thermal coal sector] for what it really is — our last good opportunity to leave coal behind and start the transition to emission-free energy sources.”

Photo Credit: Arnold Paul, Wikimedia Commons

The Narwhal’s reporters are telling environment stories you won’t read about anywhere else. Stay in the loop by signing up for our free weekly dose of independent journalism.