The Bay du Nord Compaction
NL the victim of weakness, ignorance, and hypocrisy
The agreement says that even though the offshore falls under the federal government's constitutional jurisdiction, the federal and provincial government will share management of the resources. The agreement gives the federal and provincial governments some exclusive powers. All the major ones, including whether or not to go ahead with a project, belongs to the two governments equally.
In practice, the agreement gives the province the lead in all but one situation: when Canada's supply of crude is not secure. That's when the federal minister can approve a development regardless of what the province wants. The wording implies that the two governments were concerned the province might not approve a development when the country needed it.
There's no hint of any thought that the federal government might want to stop a project. That's because in the context at the time, the federal government was essentially giving the province almost the same right to control the offshore that it would have if the resource was on land and therefore totally inside provincial jurisdiction.
That's the significance of the 1985 deal. It has worked very well for almost 40 years.
We know the Accord is an agreement of constitutional importance not just because of what politicians said at the time but also because of two specific parts of the agreement itself and the federal law that puts the Accord into action. That's where you can see the intent put to action.
Clause 64 of the agreement allows that it can be made formally a part of the constitution under the amending formula.
As well, the federal implementation Act says that if there is a conflict between the enabling legislation and any other act, the enabling legislation takes precedence.
The Impact Assessment Act, 2019 tosses all that aside. The IAA takes the right to make a decision about a project offshore Newfoundland and Labrador away from the province and gives it exclusively to the federal government. That wipes away one of the three fundamental strategic objectives for the province in the original negotiations and one of the benefits of the Accord to the province.
In 1985, the Government of newfoundland and Labrador wanted three things:
provincial control and administration,
revenue that would end dependence on federal hand-outs, and
Those three broad categories covered five major policy issues Cabot Martin identified in 1975 while he was working as a senior policy advisor for the provincial government. Two of those issues were provincial autonomy and social disruption.
Autonomy was another was of saying “have” province, which really meant ending the dependence on cash from Ottawa. The provincial government wanted the people of Newfoundland and Labrador to make decisions for themselves about things exclusively in provincial jurisdiction. They did not want to take instructions from people who had no interest in the province or its people.
This attitude and the importance of self-determination was something brought home forcefully after the Accord with John Crosbie’s sneering comments that in rejecting the Meech Lake Accord, Newfoundlanders and Labradorians wanted to have their cake and vomit it up too or that they were biting the hand that fed them in opposing what the federal government wanted.
Social disruption meant the impact of offshore oil development. This was an initial concern based on the experience seen in Scotland. Local control of the pace of offshore development – including the power to halt or delay a project - was a key part of managing the social, political, and environmental impacts of offshore development. It was something of great concern to people who had traditionally made a living on and from the sea. Most people in Newfoundland and Labrador recognized oil was temporary but fishing and the environment was renewable. The provincial government knew that the best people to manage the resources responsibly were those most greatly affected by them. They fought for it, with overwhelming public support in 1985.
The federal government understood that as well, implicitly, in the 1985 agreement. But the 2019 IAA sets up a very interesting question for what happens should the federal government do anything with Bay du Nord except clear the project through the assessment act without any conditions or restrictions. Should environmental activist Stephen Guilbeault reject the application, approve it with restrictions, or – more likely approve it but blackmail the province through a back-room political deal – he would set up a case for the courts.
Legally, the courts would have a time figuring out what the federal parliament meant when it passed the Impact Assessment Act and created the conflict between the two Acts in the first place. Federal lawyers might claim the IAA falls under the part of the Accord that says the federal government has exclusive power to make certain types of decisions.
Problem is the right to cancel a project, block a project, or deny a licence - all of which are other ways of looking at a rejection under IAA - aren't about Canadian ownership of offshore companies or federal taxes. Those are two exclusively federal decisions under the Accord.
And they aren't the other exclusively federal area, either. Section 22 sub (b) of the Accord covers "decisions made under legislation of general application not specifically related to oil and gas exploration and production (e.g., Fisheries Act, Canada Shipping Act, Immigration Act)."
The IAA applies to different types of projects – not just oil and gas – and it applies across the country, the IAA isn't anything like the three Acts cited as a specific examples in the agreement itself. They covered general rules about offshore safety, fisheries protection, or work permits and work visas. Those are technical and administrative. The IAA goes way beyond that in effect.
The 2012 Canadian Environmental Assessment Act respected the Atlantic Accord. It allowed the offshore regulatory board set up under the Accord to serve as a federal authority to conduct an assessment. There’s nothing like that in the Impact Assessment Act. It trashes the Atlantic Accord. That’s what lies underneath the current delay with the Bay du Nord project. How we got here is another thing.
If you appreciate Bond Papers’ coverage of events affecting Newfoundland and Labrador, please consider becoming a subscriber.
Newfoundland and Labrador is in the current political and economic jam because of long-term developments nationally and provincially.
One of the long-term federal changes is in the way politics works. Political parties used to be big tents that could bring together different people from different parts of the country with sometimes radically different ideas. There days parties are exclusive clubs, sorted by ideology, much as in the United States. Since 2015, the federal Liberals have pitched themselves to urban elites on the left of the political spectrum. They’ve cobbled together enough votes in ridings clustered in Ontario, southern British Columbia, and in scattered other spots to form a government. They aren’t interested in anything that doesn’t fit the ideological agenda, even if your province elects six of seven members of parliament to the Liberal benches.
Another long-term shift is in the political centre of gravity nationally. It’s moved farther west. As economist Richard Saillant described in his 2016 book, A tale of two countries. There are two regions in the country, set apart from one another by demographics. One “can likely afford to sustain the status quo for itself.” The other – particularly noticeable in Atlantic Canada – “could well be stuck between the financial abyss and the politically suicidal prospect of scaling back social programs, to the point of turning its residents into second class citizens.”
A key long-term provincial shift is the changed attitude to the offshore and the Atlantic Accord. Since Danny Williams, governments in Newfoundland and Labrador treat the Accord merely as a code word for the latest federal hand-out. They ignore the strategic principles from the 1970s and 1980s that underpin the agreement. They just want a cheque.
As Williams famously said, all principle converts to cash. It’s the slip-and-fall lawyer’s only thought and Williams applied it ruthlessly. Nowhere is that more obvious than in the relationship between Ottawa and St. John’s since 2003. Williams may have used the language of 1970s nationalism to whip up popular support for his projects but his actions and the fall-out from related decisions made Newfoundland and Labrador dependent once again on the kindness of federal strangers.
Bill Marshall was provincial energy minister in 1985. He told an audience marking the 20th anniversary of the Accord that the politicians then in charge didn’t understand what the Accord was about. Marshall was right. But it wasn’t just politicians and bureaucrats who didn’t care about the powers in the Accord. They just mirrored the public attitude. Folks enjoyed their lifestyle built on one-time oil windfalls. They loved government over-spending and wanted nothing to do with changing anything once the oil money dried up. They chased crazy ideas about getting Equalization while still being one of the richest provinces in Canada. Many support converting the province to a territory in the mistaken belief the federal government would look after everything. At the very least, they want the federal government to bail the province out on Muskrat Falls, overspending, or paid sick leave. The answer to everything is a cheque from Ottawa.
As noted at SRBP in 2017, the “problem we have is not a lack of options and opportunities to sort out the government finances ourselves. The problem facing Newfoundland and Labrador is that the leading people of the province, not just the politicians but all the leading people, don't have the stomach for making the kinds of decisions needed. They don't even want to talk about sensible things. They talk about foolishness like Equalization or fight against imaginary ‘austerity’ instead.”
There have been shorter-term as well that helped create the current Bay du Nord problem. The provincial Liberals since 2015 have aped their federal cousins on most issues. Not only do the local Liberals follow their federal cousins, neither Dwight Ball nor Andrew Furey have confronted the federal government publicly or privately even when - like with Bay du Nord or Bill C-69 - the federal plan is fundamentally opposed to provincial interests. They wanted their hand-outs.
Furey is even weaker on these issues than Ball, if that’s possible. Furey, for example, makes a big deal of his personal relationship to the Prime Minister. it is the key to everything. Like Dwight Ball, Furey is also keen to get whatever cash he can in order to avoid making any real changes in the way the provincial government operates. That’s combined to make the provincial government impotent.
You can see it in the way Furey talks about environmental issues federally, perfectly in line with Ottawa. That’s what he did in Glasgow. At home, he tells a different story. You can see this in the way both Premiers reacted passively and meekly to both Bill C-69 (the IAA legislation) in 2019 and Bay du Nord.
In 2019, Ball conceded the federal legislation was acceptable and merely tried to carve out a minor exemption for exploration for the province. He ignored entirely the fundamental clash between the Accord and the IAA, relegating merely to a need for the federal government to honour the agreement. It was the last on his list of issues. He also told threatened to use the Accord’s dispute resolution mechanism to deal with the issue. Problem: there is no dispute resolution mechanism in the Accord like the one he mentioned.
As for the exemption for exploration, that is now being challenged in court by a coalition of environmental groups and Indigenous people from Quebec. Its no accident that in delaying a decision on Bay du Nord for another 40 days, environment minister Steven Guilbeault mentioned the need to consider the claims by environmental activists, environmental groups, and Indigenous groups who want to kill the project and the oil and gas sector offshore Newfoundland and Labrador.
For his part, Furey’s main talking point has been about what Justin Trudeau knows of the province. Ottawa hears us. The Prime Minister hears us. Our Great Father in Ottawa knows the lamentations of his children and will not forsake them.
Father Furey used those kinds of lines last fall to calm his flock’s concerns about the cabinet shuffle that saw his tag-team partner Seamus O’Regan demoted and two ministers in natural resources and environment with a clear mandate to slash emissions in the oil and gas sector of the Canadian economy. And Furey used them again to dismiss concerns that the Prime Minister and his cabinet will either reject Bay du Nord or impose demands on the province to curtail exploration or shutter future developments after Bay du Nord.
You can see the federal understanding of the province’s political weakness in two recent examples. First, both Seamus O’Regan and environment minister Steven Guilbeault like to talk about how much money the federal government has given Newfoundland and Labrador lately. They won’t talk of the decision. They will talk about gobs of cash. You could take it as a mild version of Crosbie’s hand-biting in one sense: it’s a mild warning to pipe down and remember who pays the bills. In another sense, it is the classic patronizing local politician. Give him time, O’Regan pleaded. Trust us. Don’t rock the boat, as if expressing legitimate concerns is wrong. In another sense, it is really just pitching to what the crowd wants: a hand-out.
The other is in Guilbeault’s comments to the Canadian Club of Toronto last week. When asked about environmental issues and oil and gas, Guilbeault said nothing of Newfoundland and Labrador. He talked about western Canada’s oil and gas. Guilbeault is not coming to Newfoundland and Labrador, of course. But he mentioned a couple of times his plans to travel very soon to Alberta to get everyone onside there with the emissions plan.
Guilbeault’s focus on the west also reflects the shifting political dynamics of Canada. The IAA applies across Canada and will affect projects in western Canada when they turn up. Those are far more dangerous for the federal Liberals politically than Newfoundland and Labrador is. That’s why they are holding up Bay du Nord but courting Albertans. The financial cost to killing Bay du Nord would be small. The political cost would be small as well: possibly only a seat or two in Newfoundland and likely neither of the two seats in metro-St. John’s. This is not your father’s Liberal party. Nor is it your mother’s Progressive Conservative Party, no matter how much Tim Powers tried to persuade Jane Adey last Friday that Seamus was John Crosbie reborn.
Approving the project, would have bigger costs. It would put the Prime Minister at odds with the constituency he very clearly pitched to with both the Impact Assessment Act, 2019, and the appointment of Guilbeault as environment minister. Approving Bay du Nord would also embolden opponents of the governments agenda in western Canada who have launched a legal challenge to it on constitutional grounds. Newfoundland and Labrador has a good case to join the challenge but they begged off in 2019.
The federal government has its own internal problems that mirror the external fight between environmental radicals and those interested in a more pragmatic approach to shifting the country to greener fuels. Guilbeault told the Canadian Club last week he will deliver a plan to reduce greenhouse gas emissions in Canada by the end of the month. The oil and gas section will be a placeholder, he said, indirectly confirming an earlier report by Reuters that the oil and gas section might be delayed until 2023.
That sounds like it is related to the problems Radio Canada reported in February over Bay du Nord. Some cabinet ministers, including deputy prime minister and finance minster Chrystia Freeland, apparently want the project approved, Others, apparently including Guilbeault, want to kill it.
The dispute both within cabinet and across Canada are not about the need to transition from oil and gas to other forms of energy but about the pace of transition. People like Guilbeault are firmly on the side of drastic changes without concern for the near- and medium-term consequences for both Canada and Newfoundland and Labrador. At the same time, federal ministers and many others know that to meet the emission targets, the federal government would have to do much more than kill Bay du Nord.
That’s a political challenge they do not want to take on. That’s what makes Bay du Nord so attractive. It’s an easy target. in the ideal solution, the federal government will approve the project, potentially with modest changes or restrictions. Behind closed doors, though, they will tie one of Furey’s pet cash asks to slashing production, cancelling exploration, or some other combination of things that will make Newfoundland and Labrador pay for someone else’s benefit.
In that sense, there is very real chance Bay du Nord will look a lot like Muskrat Falls, which Danny Williams intended to work just that way: the locals paid the full cost while everyone else gets free and heavily discounted electricity for decades into the future. The only difference is that while Williams’ sell-out was in plain, the Bay du Nord compact will likely have some sort of cover or distraction.
Strategically, Canada needs to sustain domestic energy supplies as it transitions to greener energy. In Newfoundland and Labrador, the existing legacy projects will dwindle as companies extract the last of the known reserves. With current projections, Bay du Nord would be the last project offshore with the others long closed by the time Nature will take care of older NL projects. There is a need for oil for things other than fuel.
Strategically, oil extraction isn’t where the oil industry racks up the greatest emissions. That’s in the refining and consumption stages. If Canada really wants to cut emissions, they will need to hit downstream of Bay du Nord and other projects. The emissions plan can allow for continued extraction even at new projects like Bay du Nord. For one thing, Canada and the world will need oil during the transition. For another, the world will continue to use petroleum products - plastics the biggest among them - for decades to come.
That’s why - strategically - if the federal government wanted to cut emissions in the extraction phase, it would look to dirtier projects like the oilsands. A by-product of shuttering oilsands extraction is that it would also cut down on some of the heaviest greenhouse gas emissions during refining. According to the federal government’s energy regulatory agency, Alberta’s oil and gas emissions are 46 times that of Newfoundland and Labrador. If you need to cut emissions by 25% better to start there than with the place that produces relatively low-emission oil extraction and where a slash to the smaller oil and gas sector would cut far deeper economically.
The claim in Newfoundland and Labrador that local oil is greener often gets laughs. The reason is the people saying it don’t explain the point. They leave out the important comparison. Greener than what? Well, greener than much of western Canada’s production.
The argument logically goes that as the country transitions away oil and gas, it makes sense to shutter the heaviest sources of greenhouse gases first. Those with lower emissions can continue to meet Canada’s energy needs, export demand, and the need to lower emissions all at the same time.
It’s not just Bay du Nord. Other developments, like the proposed natural gas project that includes the Miawpukek First Nation and more than 70 other First Nations from Ontario to British Columbia would also offer export opportunities to Europe as it transitions from Russian oil and gas. That’s a viable project for the near-term since it relies on gas reserves in the Jeanne-d’Arc basin where the four existing projects are already in production with three in back half of their production lives. Piped ashore, the gas can be shipped to markets in North America or Europe far easier than it could from other Canada natural gas projects.
Canada needs to balance the transformation from oil and gas to greener fuel. Right now, Guilbeault and other lazy myopic activists are looking for an easy target, not a sound plan that meets the country’s strategic needs. They found one in Newfoundland and Labrador, which they perceive as weak, servile, and easily ignored. Its political, bureaucratic, and other elites give them good reason to believe that’s true. Some of them are already committed to the same agenda as Guilbeault and the 118 groups campaigning against Bay du Nord, relying on the same simplistic arguments.
Newfoundland and Labrador is in the very spot the Atlantic Accord was supposed to avoid. The Accord is all but dead. Newfoundland and Labrador is at the mercy of people who have no concern for the people, the place, or their future. They are acting like colonialists, imposing their will on others who they perceive as weak, inferior, and powerless. The irony should not be lost that so many who do this would claim in another context that they want to decolonize Canada. Their hypocrisy is exceeded only by their ignorance.
We didn’t get here by accident. Some of the blame belongs to people outside Newfoundland and Labrador. Mostly, responsibility rests with those in Newfoundland and Labrador who, since 2003, ignored the bitter lessons of experience and gave away hard-won gains without anything in return.
Like the people outside Newfoundland and Labrador, they didn’t know. They didn’t want to know.
And they did not care.