Liberals quietly approve new offshore royalty framework for N.L.

Last week the provincial government quietly enacted a new generic oil royalty regime for the province, without any explanation of what they were doing.

Natural Resources Minister Siobhan Coady said the government didn’t issue a news release to announce what they were doing, because she felt like there was nothing to announce.

The royalty regime is identical to what the Tory government drafted two year ago, and the whole story of the past two years is a little bit strange.

The issue goes all the way back to November 2015, just days before the start of the general election campaign, when the Progressive Conservative government announced that they were enacting a new generic royalty regime which would cover future offshore oil developments.

But then less than a month later, the Tories were voted out of office before they could get around to actually enacting the generic royalty regime they announced.

Then for a while, nothing happened.

When the Liberal government introduced “The Way Forward,” their signature policy blueprint, they included a commitment, saying, “By March 31, 2017, our Government will enhance Newfoundland and Labrador’s regulatory framework by implementing a Generic Royalty Regime and regulations.”

But the Liberal government missed their own deadline, and didn’t actually give formal cabinet approval to the oil royalty regulations until May 2. At the time, the government didn’t hold a public announcement or issue a news release about this.

And in August when Tory MHA Keith Hutchings asked what was going on with the province’s royalty regime in the House of Assembly, Coady neglected to mention that cabinet had already approved it months earlier.

“It is something that we have been working on,” Coady said, at a time when the regulations were already approved by cabinet.

“There was a lot of work done by the former administration; we've been working on the foundations and basics in which they had done. A lot of work has gone into developing the regulations around that. We expect those regulations by the fall.”

Ultimately, the regulations were passed in the N.L. Gazette, the final requirement for formally enacting them, on Nov. 1.

The actual regulations are sufficiently complicated so that Hutchings couldn’t even tell whether they were the same as when the Tories drafted them two years ago.

“Are they what we had brought in in November 2015?” Hutchings said.

“My biggest concern, if this is what it looks like it is, is the secrecy and the reluctance to let the legislature know, to let the industry know, to let everybody know that these are done.”

Hutchings said that two years of dithering doesn’t exactly inspire confidence from the global oil companies who need to work with the government to get projects off the ground.

So what was the government doing that it took two years to get this done?
Coady said that they were doing “due diligence” and getting energy consulting company Wood Mackenzie to check over the regulations and make sure they were globally competitive.

Unsurprisingly, Wood Mackenzie said the regulations were good, and no changes were made, because they were the same company that helped the Tories draft the regulations back in 2015.

“They were the ones that had been working with the government to begin with, so again they reviewed it and said it’s internationally competitive,” Coady said.

The oil industry players aren’t thrilled with the current situation.

“We’re disappointed that the province proceeded with it,” said Paul Barnes, with the Canadian Association of Petroleum Producers.

“It will certainly increase the cost to industry compared to the last regime.”

Barnes said that there are concerns about increases in tax, as well as potential regulatory changes could add to cost as well.

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