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Coast-to-coast race under way in Canada to attract new money Nova Scotia joins British Columbia in promising to end regulatory duplication and overlap; will also lift pressure on multinationals to create local jobs, economic benefits Gary Park PNA Canadian Correspondent
Sitting on C$1.5 billion in exploration commitments and a possible C$3.1 billion in pipeline construction, but troubled by five dry holes this year, the Nova Scotia government has done an about-face in its efforts to promote exploration — in the process put itself in head-to-head competition with British Columbia.
In a new 300-page energy policy released Dec. 12, Nova Scotia has decided to strip away regulations and merely ask, rather than compel, multinationals to create local jobs and economic benefits.
The plan was unveiled one week after British Columbia promised a simpler regulatory regime as part of its attempt to entice C$24 billion in new investment over five years.
Just a few months ago, Nova Scotia Premier John Hamm was insisting on a higher percentage of direct benefits to his province, going as far as warning he might set specific quotas along with penalties for companies that did not comply.
Now, he said, the emphasis will be on how to attract, not discourage, exploration.
End to absolute benchmarks The Sable Offshore Energy Project — Canada’s first and so far only producing offshore gas field — saw about C$620 million of a total C$2 billion spent in Nova Scotia, a percentage Hamm thought should have been greater.
In unveiling the new policy, he said his government “can’t set absolute benchmarks. What we have to do is determine with every project what is attainable in Nova Scotia.”
That will start immediately with the government reducing the “level of provincial regulation” for PanCanadian Energy Inc.’s C$1 billion Deep Panuke offshore gas project, which is due to come on stream in 2005 at 400 million cubic feet per day.
“Unless we have successful exploration, the industry is not going to get any bigger in Nova Scotia than it is today,” Hamm told a news conference.
He said there is an urgent need to achieve success in the next three or four years. “We need to be sinking holes in the seabed, finding product,” Hamm said. “If we don’t find any more product, we are not going to have a lot of use for our energy strategy.”
New Nova Scotia policy Under the new policy, the province will:
• Remove a law that requires gas distributors to build pipelines to all regions of the province within seven years.
• Allow multinational companies to voluntarily negotiate local job creation and economic benefits instead of having the Canada-Nova Scotia Offshore Petroleum Board regulate the amount of money to be spent in the province.
• Create an Energy Department with its own minister in 2002.
• Establish an offshore energy trust fund to invest a percentage of the province’s gas royalties to generate income for government programs, similar to a C$12-billion (US$7.7-billion) fund in Alberta.
• Step up its efforts to promote renewable energy sources and improve the environment, including reductions of 25 percent in sulfur dioxide emissions and 30 percent in mercury emissions by 2005.
No offshore royalty changes But no changes were recommended for the offshore royalty regime, despite concerns in the province that royalties last year from the Sable generated less than C$6 million, barely enough to cover the budget of the Nova Scotia Petroleum Directorate, which administers the royalty program.
Debora Walsh, Halifax manager of the Canadian Association of Petroleum Producers, said the policy deals with concerns raised in recent years by the industry and congratulated the government for “engaging many of the stakeholders, including the upstream oil and gas industry” in its discussions.
She said producers are in agreement with the policy objectives, including the government’s desire to have natural gas liquids remain in the province for the development of a petrochemical industry.
But Walsh said the industry was “delighted” to hear Hamm say a petrochemical sector was a medium- to long-term goal and would not happen without a “critical mass.”
On gas distribution in Nova Scotia, the government has decided to seek a “viable” system after Sempra Atlantic Gas Inc., a subsidiary of San Diego-based Sempra Energy Inc., announced in September that it was abandoning a 25-year franchise to build a C$1.3 billion pipeline network and make gas available to more than 70 percent of households.
Economic Development Minister Gordon Balser told the news conference that the “old system clearly failed ... natural gas will not be delivered by government order.”
A number of major players Along with PanCanadian Energy, the major players in lease sales over recent years have been Marathon Canada Ltd., Murphy Oil Co. Ltd., Norsk Hydro Oil & Gas Canada Inc., Hunt Oil Ltd., Imperial Oil Ltd., Kerr-McGee Corp., Chevron Canada Resources Ltd., Shell Canada Ltd., BP Canada Energy Co. and Petro-Canada, plus a host of junior companies.
Most have established ambitious exploration programs for the next three years, prompting El Paso Corp. to move ahead with plans for a possible C$2.5 billion pipeline to markets in Canada and the northeastern United States, while Maritimes & Northeast Pipeline LLC plans to spend about C$590 million to add about 1 billion cubic feet per day of capacity to its existing system from Sable.
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