The Canadian government has agreed to cover expenses related to a proposed deepwater oil project that may arise under a United Nations agreement, sparking criticism from environmental organizations who argue that taxpayers should not be subsidizing oil companies. Federal Fisheries Minister Joanne Thompson confirmed this decision during an event announcing Newfoundland and Labrador’s partnership with Norwegian energy firm Equinor for the development of the Bay du Nord offshore oil field.
The Bay du Nord project, which would be Canada’s initial deepwater oil facility and the first outside the nation’s exclusive economic zone as defined by the United Nations Convention on the Law of the Sea (UNCLOS), has faced ongoing questions about who would bear the costs associated with UNCLOS obligations. Newfoundland and Labrador have consistently contended that Canada should assume these responsibilities.
The exact financial contribution from Canada is still being determined, as stated by John Fragos, press secretary for federal Finance Minister Francois-Philippe Champagne. Officials from the Newfoundland and Labrador government mentioned during a media briefing that the fees could amount to $1 billion.
Under the terms of the UNCLOS treaty ratified by Canada in 2003, the country is obligated to make payments to the International Seabed Authority for any resource extraction beyond the exclusive economic zone, which extends 370 kilometers or 200 nautical miles from the coastline. Payments commence after five years of production, starting at one percent of the production value or volume and incrementally increasing annually until reaching seven percent, which remains constant for the project’s duration.
Bay du Nord, located farther offshore than any other oil facility worldwide, is anticipated to be the first project triggering these obligations. Fisheries Minister Thompson affirmed the federal government’s commitment to covering the fees, with negotiations ongoing to determine the specifics.
Policy analyst Danielle LaBrash emphasized the importance of Canada fulfilling its UNCLOS commitments while suggesting that Equinor and BP, the companies involved in Bay du Nord, should be responsible for these expenses. She described any potential payment by Canada on behalf of Equinor as a subsidy and a direct transfer of wealth from Canadians to an international oil company.
Environmental Defense’s associate director, Julia Levin, warned that Canada would breach its pledge to cease subsidizing oil and gas firms if it were to pay the UNCLOS fees for the Bay du Nord project. Thompson highlighted the significance of Bay du Nord for the federal government in bolstering the economy amid evolving global dynamics.
Equinor is expected to make a final investment decision on Bay du Nord in the coming year.