How Atlantic Canada lost its chance with the oil and gas industry.
by Brian Lee Crowley
As Paul Theroux once wrote, gain a modest reputation for being unreliable and you will never be asked to do a thing. We in Atlantic Canada have now gained a reputation for being an unreliable jurisdiction for offshore oil and gas exploration. The result? We’re no longer being asked to host exploration activity.
The problem with spoiling your reputation is that once people have come to mistrust you, once they find your word is not reliable, once they discover that you care only about yourself and never about others, they stop taking an interest in you. Then even if you do better, it takes a long time to get anyone to notice.
You’ll find no shortage of people around here who will tell you that the offshore oil and gas industry has just been discouraged by the dearth of new discoveries. When it costs you between $40-million and $150-million per exploration well to drill in the Atlantic Canadian offshore, your tolerance for dry holes is severely tested.
But that explanation is too pat. Consider, for example, that the cost of exploration is so high here that even the oil and gas majors don’t go in alone. They seek out partners to share the cost, and the risk. There are majors associated with the offshore that have extremely promising seismic for specific drilling locations and are looking for three or four partners among their peers. They can’t even get the other majors to take a look.
So if even promising scientific data about the geology of specific potential exploration wells cannot entice the big companies to come to the table, something more than poor drilling results is at work.
That something more is that we’ve got a bad rep, and the companies have fled to friendlier places where not only are the chances of finding oil and gas superior, but government policy is much more supportive of the exploration and development industry.
Am I being unfair to Ottawa and the provinces who have just announced that they’ve agreed to tackle the problem of regulatory overburden in the offshore? After all, this has been one of the most pressing complaints of the industry, that compared to similar jurisdictions, in the North Sea, the Gulf of Mexico, or off the Australian coast, it can take as much as twice as long to get needed regulatory approvals. Such delays and uncertainty add hugely to the cost of exploration.
The reason that my criticism of our governments’ efforts is totally justified is that complaints about regulatory overburden have been pervasive ever since the offshore got going. It took years for our governments even to deign to recognise the problem. Then it took them 27 meetings just to reach an agreement that they would come up with a better process. And we still only have an agreement that we intend to do better, with no substantive detailed agreement on what “better” will actually look like. We’re still nattering long after the industry has quietly slipped from the room, closing the door behind it, more convinced than ever that we really have little interest in seeing them invest here on the east coast.
Yes, we’re still talking, and we might eventually come up with a better process. But that will only give us what we should have had in the first place, and we must deal with the legacy of frustration and disappointment we have created in the minds of people whom we would like to see invest billions of dollars in our region, dollars that are energetically being wooed every day by people who have not sullied their reputation as we have.
Reputation does matter. In the early 1970s British Columbia brought in some very punitive mineral royalty legislation and created a regulatory climate that drove mining investment out of what had been one of the world’s top mining jurisdictions. Victoria seems finally to have got the regulatory and tax burden right, but it is only this year that investment has started to flow back into the industry.
As one of the authors of a recent study of the industry’s investment intentions rightly notes, a bad reputation lasts a long time. British Columbia has made real efforts to reform, but companies need to have confidence that a good policy climate when they start exploration will be in place when the mine enters production many years in the future. That’s why BC only rates 44th out of 64 major mining jurisdictions world wide as a place mining executives want to invest. BC destroyed the industry’s confidence, and they just went elsewhere, putting in Quebec, Chile and other places the dollars that otherwise would have created jobs and opportunities for British Columbians.
Not only can it happen here, but it has. And we are still in denial about it. What a way to treat the region’s greatest economic opportunity in a generation.
Brian Lee Crowley is president of the Atlantic Institute for Market Studies (www.aims.ca), a public policy think tank in Halifax. E-mail: [email protected]