Offshore Energy's New Strategic Tools

Nar friggin' clue, me son

Newfie energy minister Steve Crocker and Energy NL chief executive Charlene Johnson excited at finding less gas offshore. Image: VOCM

On Tuesday, newly appointed provincial energy minister Steve Crocker released released a new report that says there’s about 9.7 trillion cubic feet of natural gas in the Jeanne d’Arc basin ready for development.

Sitting next to him was former Pea Sea finance minister Charlene Johnson, these days working as the chief executive officer of Energy NL, a company that represents the supply and service companies for the provincial offshore.

Crocker called the report a “strategic tool” and “significant milestone” that will provide “the clarity and confidence needed by investors for future exploration and development.”

According to a news release issued by Crocker, the “assessment determined that the natural gas resource base ranges from 8.1 to 11.3 trillion cubic feet (tcf) with a best estimate of 9.7 trillion cubic feet.” There’s potentially as much as 30 tcf in the whole of the offshore.

This is a bit like getting excited about an amplifier that goes to 11. A 2023 report by the Canada-Newfoundland and Labrador Offshore Energy Regulator put the natural gas reserves in the whole of the offshore at around 11 tcf, including about four trillion cubic feet off Labrador. That one is linked in the technical report Crocker released and actually it’s really the most reliable one since the regulator isn’t - unlike Crocker - trying to hype the offshore for development.

Put that to one side. A study done in 2020 for Crocker’s department by the provincial government’s oil and gas company and Beicip-Franlab found there was “24.5.trillion cubic feet of gas potential[ly] offshore Newfoundland and Labrador” on top of the 12.6 tcf already proven to be there, probably there, or possibly there in the industry’s three-tiered resource estimate format. That one has vanished but you’ll find others from the provincial government’s second oil company that cover each new call for bids on offshore parcels. One of them suggests there’s as much as 40 tcf in two basins offshore Labrador.

This new report doesn’t tell us anything we don’t already know from other provincial government agencies, in other words. What’s worse, the authors of the latest study - according to the report itself - are employees of Crocker’s own department and it took them two years to copy the same work others have done and keep up to date annually for the same provincial government. They’ve had this report sitting around since at least January, by the way since they linked to the 2023 CNLOER report in January of this year. It’s in the footnotes.

All bad enough, except that Monday’s release and report tells us that “Budget 2023 included $4.7 million to conduct the Natural Gas Resource Assessment in the offshore area to define further and understand the range of estimated recoverable gas within the Jeanne d’Arc Basin,” with another $1.0 million to cover more work. So now the government is so desperate for news they pretend that money in the budget for staff salaries is new “investments.” This smells like a made-up project.

There’s more. it gets even worse. Crocker’s new study upped that theoretical potential by another six trillion cubic feet but there’s no explanation anywhere in the report that reconciles all the varying estimates within such a short time or why the government cranks out so many. If, as Crocker claimed Monday, this was about giving the industry clarity and confidence, adding yet another report from yet another official source with yet another set of different numbers would be - like Trump’s steel tariffs that drive up the costs of ships he wants to build - pretty much the definition of what you don’t need.

Less clarity = less confidence.

Simple math.

And none of it really explains why a lower estimate than the ones we were assured before would bring them all running like MAGA voters looking for a new red hat would give potential investors now something that before kept them from developing local natural gas. People in the industry understand that more information sometimes lowers estimates, such as the 2023 assessment for White Rose but what Crocker blew around the media centre was a whole other kind of natural gas.

What Crocker didn’t tackle is why there’s been no gas development offshore despite there being plenty out there. Let’s do the job for him.

A huge part of it is the regulatory burden. That makes development more expensive than it is worth given the market prices for natural gas. This is not a new story. We’ve known this problem since 1997 and no politician has been willing to tackle it. Guaranteed it is not on the provincial agenda even though fast-tracking projects is very much on the federal government’s list of priorities.

Another huge obstacle to development is the lack of a gas royalty regime. Companies want to know their financial cut. There’s no way of knowing in Newfoundland and Labrador since it would have to be negotiated. That’s all made worse since the provincial government lies to people by claiming there is is one. There’s a website and a pdf showing the regime. Read down to the bottom though and you’ll see a little comment that tells you the whole thing is crap. “In order to implement the Natural Gas Royalty Regime, detailed Natural Gas Royalty Regulations will be developed.” That line been there the better part of 20 years so when exactly will Crocker’s crowd get around to it? Talk about MIA policy.

Another reason there’s been no interest in offshore gas development is the politicians. There are the passive aggressive deterrents to development like the lack of a royalty regime and the massive, unnecessary regulatory regime. Then there is the aggressive deterrents, like Danny Williams’ attacks on investors in oil, forestry, and anyone else he targeted with his Trumpian tirades before there was a Trump.

Another form of that aggressive discouragement was the neglect and indifference from politicians who for decades have just not cared to do actual work. When they had a chance to develop gas cheaply, the crowd that Charlene Johnson hung with - f’rinstance - wanted so desperately to saddle taxpayers with the stupidity of Muskrat Falls they wouldn’t even look at natural gas for making electricity with. In one case, they even shut down a well onshore because it showed natural gas. Government hostility to development, sometimes passive aggressive, sometimes just aggressive, is also a reason.

Not like there’s any shortage of gas to develop but to go with the Newfie problem of hostility to development strangling the east coast, there’s the political complexity on the west coast, where there’s even more gas than the Jeanne d’Arc. The problem in the Gulf is that development would need the agreement of six governments to make new regulatory regimes and the negotiation of three new offshore regulatory agreements between Ottawa and each of New Brunswick, Prince Edward Island, and Quebec. Then there’d have to be an agreement among the regulators since some of the biggest fields would overlap different federal-provincial jurisdictions.

For politicians like Crocker, forking out money taxpayers in Newfoundland and Labrador don’t have for a report we don’t need is easier than doing real work, like say sorting out the gas royalty regime - it’s only been on the go for 30 years - or lightening the massive regulatory burden from both the province and the federal government on the just the east coast offshore. No one is developing gas offshore Newfoundland and Labrador because it’s too costly and they know that generations of politicians like Crocker are just not serious.

All of it is the same as the garbage report last week from health about policing. Gets a few headlines, fools the punters, and makes it look like they are working.

Meanwhile, as far as natural gas goes, Clarity was unavailable for comment. Confidence did not return phone calls or email or text messages.

No one will be looking to develop gas any time soon, in other words, not without this report and certainly not with it.

Here’s a bonus column because this couldn’t wait until Wednesday.

For Friday, expect some comments on the First Ministers’ meeting in Saskatchewan.