Newfoundland and Labrador must improve policies to tap oil and gas potential

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Appeared in the St. John's Telegram, April 9, 2024
Newfoundland and Labrador must improve policies to tap oil and gas potential

Newfoundland and Labrador's oil and gas sector remains a key component of the provincial economy. But with the ongoing sanctions on Russia's energy sector and recent attacks on commercial vessels in the Red Sea by Yemen's Houthi rebels, the province has an even greater opportunity to help Europe and the world overcome its energy supply challenges. To seize this opportunity, policymakers in St. John’s must remove the barriers that hamper investment in the province’s oil and gas industry.

Unfortunately, according to a new survey, Newfoundland and Labrador is dimming in the eyes of energy investors. The study surveys senior executives in the oil and gas industry, tracking their perception of the policy environment in energy-producing jurisdictions across Canada and the United States. This year, Newfoundland and Labrador ranks among the least-attractive jurisdictions (14th out of 17).

Why is this happening?

In short, government red tape. For example, 100 per cent of survey respondents for Newfoundland and Labrador said the stability, consistency and timeliness of environmental regulations is a deterrent to investment. And 100 per cent expressed concerns over regulatory duplications and inconsistencies. Moreover, 88 per cent of respondents said uncertainty over the administration, interpretation, stability, or enforcement of existing regulations was a deterrent to investment, and that the cost of regulatory compliance discourages investment.

Finally, 86 per cent said uncertainty about what areas are protected as wilderness or parks, marine life preserves or archaeological sites is a deterrent to investment while, 80 per cent said that fiscal terms—including licences, lease payments, royalties, production taxes and gross revenue charges—hinder investment.

Of course, recent federal policies also hurt the province’s investment climate. For instance, the Trudeau government enacted Bill C-69, which imposes complex, uncertain and onerous review requirements on major energy projects. While this bill was declared unconstitutional, uncertainty remains until new legislation is introduced. Similarly, during the COP28 climate conference in Dubai last December, the Trudeau government announced its plan to cap greenhouse gas emissions in the oil and gas sector, adding to the uncertainty for investors. Again, bad policy hurts investment.

Indeed, investment in Newfoundland and Labrador’s oil and gas sector plummeted from $4.9 billion in 2014 to $1.2 billion in 2023, a 75 per cent decrease. Less investment translates into less financial capacity to develop new energy projects, infrastructure and technologies, and less capacity to produce and export. Investment is key to develop the province’s energy industry, which supports the livelihoods of nearly 1,400 families, with wages up to 86 per cent higher than the province’s average wage.

Premier Furey should seize today’s opportunity, cut the red tape, create a more competitive policy environment to investment and help Newfoundland and Labrador supply the world with oil and gas.