Oil Production in Newfoundland and Labrador

Newfoundland and Labrador is the eastern most province of Canada. The majority of the province’s population can be found on the island of Newfoundland, as most of the province’s source of economy. As the island is located next to the Atlantic ocean, fisheries and fish products have been of the main exports for the province, yet within the last 30-40 years or so, oil has increasingly become an export that contributes to a growing provincial economy.Exploration in Newfoundland waters first began in the 1960s although, there was no rush in finding oil in Newfoundland because at the time, it was much less expensive for oil companies to drill elsewhere in the world. Things changed in 1973 when oil prices increased dramatically and the interest in the possibility of finding oil in Newfoundland also increased.

Before any oil was found, but exploration was ongoing, the provincial government of Newfoundland set up a series of regulations on how oil resources were to be developed in the event of discovery, to ensure the maximization of local benefits.In 1979, the Hibernia oil field was discovered, proving that Newfoundland and Labrador had economic potential in the oil industry (Fusco, n. d. ). This discovery meant that the regulations that the provincial government created would have to be implemented. The Hibernia oil field discovery ignited a series of disagreements between the federal government of Canada and the provincial government of Newfoundland.The federal government had their own goals for development and believed that Newfoundland should not have the administrative or decision making authorities for offshore mineral resources, stating that “oil was too important of a commodity to have under provincial control” (Crosbie, 2003). This dispute resulted in years of legal battles over jurisdiction of offshore projects.

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In 1985 the Atlantic Accord was signed, this accord initiated a joint management system for the province’s offshore resources.The accord also included the creation of the Canada-Newfoundland and Labrador Offshore Petroleum Board (CNLOPB), a board of six members in charge of managing offshore resources on behalf of both the federal and provincial levels of government (Fusco, n. d. , Fraser, 2009) (See Appendix A for more information on the CNLOPB). Hibernia finally began its oil production in 1997 followed by three more oil field productions; Terra Nova in 2002, WhiteRose in 2005 and Hebron, which is expected to begin production in 2017 (See Appendix B for a map of the locations of oil fields off the coast of Newfoundland). This case study relates to Lesson 9 of the course, which looks at Energy resources that could be found in Canada.

Challenges and Opportunities Nearly twenty years passed after the Hibernia oil field was discovered before any official production was made. This demonstrates the magnitude of difficulty the province of Newfoundland experienced just to begin to have oil as one of their main exports.The regulations that Newfoundland and Labrador had implemented after the discovery of Hibernia clearly conflicted with the plans of the federal government, which were to increase profits that would benefit the government of Canada as opposed to the people of Newfoundland.

The government of Canada wanted to gain an equity stake in the project with increased royalties during times of high oil prices. Newfoundland’s regulations also limited benefits for the oil companies that would be drilling in Hibernia stating that the province was asking for too much and that the companies wanted a fair share of the benefits.Another large obstacle and devastating event surrounding Hibernia, was the sinking of the Ocean Ranger drilling unit, which not only sank completely, undoing all the work that had been done but also resulted in the death of all 84 crew members (Collier, 2010). Investigations later revealed that there were construction flaws and that the crew lacked appropriate training and equipment in the event of an emergency.

After this disaster, it was decided that Hibernia would be a Gravity Base Structure (GBS), which is an oil platform that is held in place by gravity.Even more challenges were faced with this decision because many of the engineers that worked on the GBS had little experience in this type of structure. Additionally, due to the complicated nature of this project, most of the workforce came from other countries who had more experience which ultimately resulted in less jobs for locals (Fusco, n. d. ). In regards to the environment, oil production in Newfoundland waters, although it may serve as economic gold, also brings the possibility of environmental destruction for the ocean.Since fisheries and fish products are some of Newfoundland’s main exports, the fear that exploration and drilling in important areas of fisheries may interfere or damage the overall marine ecosystem is an important challenge.

Furthermore, oil spills continue to be one of the oil industry’s largest environmental hazards. Not only would the marine ecosystem be affected but any life surrounding the ocean would be permanently damaged (Higgins, 2011). Despite the overwhelming challenges, the overall opportunities that offshore oil production would bring to the province of Newfoundland and Labrador would be worth all of the difficulties.This venture would serve as a boost in the province’s general economy which was particularly helpful during the 1990s after the cod fishing industry took a dive for the worst (n. a.

, 1998 Fisheries). Not only would the economy be benefitting but the local people would also have new opportunities for employment. All of the challenges that the government of Newfoundland faced in the development stages of this venture ultimately gave the government the experience it needed in order to maintain, control, and manage all future oil field developments.This can be seen in the quick and effective development of the Terra Nova and White Rose oil fields. There are other issues surrounding the Hebron field, for example, the type of oil that is found in that location is particularly difficult to extract. These issues are part of the reason as to why oil production at Hebron is scheduled to only begin in 2017 (Fusco, n. d.

). Case Lesson Connection In Lesson 9 of the course, it is discussed that crude oil and petroleum contributes to about 31. 3% of the country’s energy resources (Mulrennan, Lesson 9, slide 7).Although Alberta has about 39% of Canada’s remaining conventional oil reserves, Newfoundland and Labrador offshore developments come second with 28%, not including the oil sands in Alberta, which in that case would account for over 95% of oil in Canada (National Energy Board, 2007). The case study which was examined in Lesson 9 looked implicitly at oil sands in Alberta, in particular, how the extraction of this type of oil is devastating for the environment.

Development in Newfoundland is also not environmentally friendly, since drilling in the ocean results in the destruction of certain marine habitats.The threat of possible oil spillage that also continues to be an issue. However, both Alberta and Newfoundland and Labrador have been working to tighten regulations surrounding the environmental hazards in oil sands and offshore oil production respectively. The Alberta government has demonstrated through the implementation of regulations and outlined plans for measures in protecting the environment, as well as the CNLOPB in Newfoundland who have also instilled regulations in regards to environment protection.The benefit of having a joint management system, such as the CNLOPB is that the federal government is as involved in all issues surrounding offshore oil, including the environment (Fraser, 2009). Similarly, as per the reading for Lesson 9, the responsibility of the federal government in pollution control and environmental protection is crucial in attaining results on a national level. References 1. Canada-Newfoundland and Labrador Offshore Petroleum Board.

http://www. cnlopb. nl. ca/ 2. Collier, K. (2010). The loss of the Ocean Ranger, 15 February 1982.

Newfoundland and Labrador Heritage Web site. http://www. heritage. nf. ca/society/ocean_ranger. html 3. Environmental Defence (2010).

Duty calls: Federal responsibility in Canada’s oil sands. Pembina Institute and Equiterre. http://www. econcordia. com/courses/environmental_issues/lesson9/PDF/ed-fedpolicy-report-oct2010-web-redo. pdf 4.

Crosbie, J. C. (2003). Overview paper on the 1985 Canada-Newfoundland Atlantic Accord. Royal Commission on Renewing and Strengthening our Position in Canada. 206. Retrieved from http://www.

exec. gov. l. ca/royalcomm/research/pdf/Crosbie. pdf 5.

Fusco, L. (n. d. ). Offshore oil: an overview of development in Newfoundland and Labrador. Memorial University of Newfoundland.

Retrieved from http://www. ucs. mun. ca/~oilpower/documents/NL%20oil%207-25-1. pdf 6. Fraser, G. S. (2009).

The Canada-Newfoundland Atlantic Accord implementation act: transparency of the environmental management of offshore oil and gas industry. Marine Policy. 33(2), 312-316. http://0-dx. doi.

org. mercury. concordia.

ca/10. 1016/j. marpol. 2008. 07. 012 7.Higgins, J.

(2011). Oil and the environment. Newfoundland and Labrador Heritage Web site. http://www.

heritage. nf. ca/society/oil_environment.

html 8. House, J. D. (2003). Myths and realities about petroleum-related development: Lessons for British-Columbia from Atlantic Canada and the North Sea. Journal of Canadian Studies. 37(4), 9-34.

http://0-search. proquest. com. mercury. concordia. ca/docview/203556887? accountid=10246 9.

National Energy Board. (2007). Canadian Energy Review 2007 – Energy Market Assessment. http://www. neb. gc. a/clf-nsi/rnrgynfmtn/nrgyrprt/nrgyvrvw/cndnnrgyvrvw2007/cndnnrgyvrvw2007-eng. html#s4_4 10.

n. a. (1998) Fisheries. Newfoundland and Labrador Heritage Website. http://www. heritage. nf.

ca/society/fishery. html 11. Mulrennan, M. E.

(2013). Canadian Environmental Issues (GEOG 203) Lesson 9. Concordia University. Appendix A CNLOPB Organization Chart – http://www.

cnlopb. nl. ca/pdfs/orgchart. pdf Appendix B Location of Newfoundland oil fields – http://www.

cbc. ca/news/canada/newfoundland-labrador/story/2012/05/31/nl-hebron-development-approval-531. html