Feds write cheque for $320M to support workers, lower emissions for N.L.'s struggling offshore

After months of repeated industry setbacks, lobbying and a rare public rally by workers, the federal government responded with a big injection of cash Friday into the struggling Newfoundland and Labrador oil sector.

Natural Resources Minister Seamus O'Regan revealed during a news conference in St. John's that Ottawa will hand over $320 million to the provincial government, with the only caveat being that it be used to support workers and reduce carbon emissions.

"This is about jobs in our province. This is about the future of our sector," O'Regan told the small gathering of politicians and industry leaders at the Johnson Geo Centre.

The announcement comes after six months of crushing losses for the province's offshore oil industry. Workers took to the steps of Confederation Building last week to speak about the anxiety they feel amid layoffs and cutbacks.

The money is coming from the dividend the federal government receives from its 8.5 per cent equity stake in Hibernia, the first of four projects to begin producing oil on the Grand Banks in 1997.

The money is on top of the $75 million Ottawa committed in April to an offshore emissions reduction fund.

Premier Andrew Furey called it a "great announcement" and said a special task force will be established to make sure the province gets "the best return to the workers and the industry."

The news was greeted with cautious enthusiasm by those who speak for oil producers and the hundreds of companies that supply the industry.

"To say that we're pleased to see hundreds of millions of dollars come with virtually no strings attached, that is good news," said Charlene Johnson, CEO of the province's oil and gas industries association, known as Noia.

"It's always been about getting people back to work. It's always been about ensuring our industry is globally competitive," she added.

But big questions remain. Will it be the shot in the arm needed to get construction reactivated on the idled West White Rose project? Will it motivate Suncor to move ahead with an expensive life-extension program on the Terra Nova FPSO, which is anchored in Conception Bay and hasn't produced oil in nearly a year? Will it jump-start a handful of exploration programs that were put on hold after a pandemic and oil price war sent shock waves throughout the industry?

It's too early to say, said Paul Barnes, who speaks on behalf of the Canadian Association of Petroleum Producers.

But Barnes is worried about a possible delay in spending approvals, since he said the task force will have 90 days to make its recommendations.

He said oil companies will be making investment decisions "very soon," and any delays in allocating the money could affect that process.

"Hopefully that task force can report in very short time because our industry is in dire states at the moment and we need some of that money put into action," said Barnes.

A spokesperson in the premier's office said the intention is the allocate the money "as soon as possible."

The task force will be chaired by Karen Winsor and Bill Fanning, two former oil executives who are members of the province's Oil and Gas Industry Development Council — the group to which the task force is reporting.

The council will select other members of the task force, which will include representation from the oil companies, said Paul Barnes.

Furey said the task force will work on an "emergent" basis to get the money out as quickly as possible.

O'Regan said the money could be spent on safety improvements, maintenance and upgrades of existing offshore infrastructure, environmental services and clean technology.

But it's not exactly what the industry had been lobbying for.

Noia was calling for exploration incentives and investment tax credits, but O'Regan acknowledged Friday that will not happen.

"Incentives are a subsidy and we ran on a mandate of no subsidies for oil and gas companies as a political party," said O'Regan.

Husky Energy is also proposing that the federal government purchase an equity stake in its stalled West White Rose project.

Husky has hit a cash crunch because of the pandemic, and is now reviewing not only the West White Rose project, which is 60 per cent complete, but its entire operations in offshore Newfoundland.

O'Regan did not rule out a federal investment in White Rose, saying, "We are very much at the table."

Husky responded with a statement Friday afternoon, calling the federal investment a "first step" and saying it will work with the province to determine how the funding can be invested.

"The funding announced today will not assist in moving West White Rose forward for the 2021 construction season," the Husky statement reads.

"However, we welcome further engagement with both levels of government, at the earliest opportunity, to find a creative pathway to restarting a project that is an opportunity to develop a net-zero emissions facility and employ Newfoundland and Labrador workers."

Meanwhile, PC Leader Ches Crosbie criticized the announcement, saying it didn't go far enough and that it will take too long for the money to circulate.

"It's not putting anybody back to work on Monday, or even a month from Monday. Or even three months from Monday, since they've got 90 days to decide how to spend the money," he said.

Crosbie is strongly in favour of the federal government becoming a partner in the West White Rose project, and condemned O'Regan and the federal Liberals for so far refusing to make the required investment, which he said would pay off right away.

"We will get immediate investment return in terms of jobs, in terms of the incomes taxes, in terms of the economic activity in a sure-fire investment," he said.

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