27 September 2007

Offshore R & D funding: a simple question

Exxon and Murphy are suing the federal government over offshore regulations on research and development related to the offshore.

The new regulations were introduced in 2004 by the offshore regulatory board, which is jointly managed by the federal and provincial governments.

But here's the thing: if the current R & D regulations are considered a violation of NAFTA, shouldn't we wonder what implications that has for the newly minted Hebron deal?

Tha association representing the oil producers made a submission to the energy plan that said:
The Canada-Newfoundland and Labrador Offshore Petroleum Board (C-NLOPB) recently implemented new research and development (R&D) guidelines which outline the amount of money operators have to spend on R&D over the life of their projects. It is CAPP’s position that the R&D guidelines should not prescribe amounts to be spent on R&D, as this will create a substantial cost burden to Newfoundland and Labrador operators. CAPP continues to work with operators to lobby for modifications to the new R&D requirements.
The only reference to R & D regulations in the energy plan is the one that says the offshore board makes the regulations.

And the Hebron memorandum of understanding sets a fixed amount:

Fixed R & D amount of CAD $120 million over the life of the project, provided such commitment meets the C-NLOPB’s requirements.

Now it is subject to the offshore board requirements, but if the MOU sets a fixed amount ,that amount would likely prevail in the development application approval.

And that's the question:

  • Is the fixed amount negotiated for Hebron R & D the same, higher than or lower than existing offshore requirements?*


Update (2012):  The CNLOPB amount would have been much higher than the flat amount demanded by the provincial government.