20 June 2013

The Article 82 Question #nlpoli

Statoil announced on Wednesday that it had found an unspecified quantity of oil in its Harpoon property about 500 kilometres offshore Newfoundland.

That would be about 310 miles and therefore is obviously outside the Canadian 200 nautical mile exclusive economic zone under the United Nations Convention on the Law of the Sea.

It’s still within 350 nautical miles so Canada still has the right to exploit the resources.

But it is far enough out to trigger Article 82 of the Law of the Sea convention.

Article 82
Payments and contributions with respect to the exploitation of the continental shelf beyond 200 nautical miles
1. The coastal State shall make payments or contributions in kind in respect of the exploitation of the non-living resources of the continental shelf beyond 200 nautical miles from the baselines from which the breadth of the territorial sea is measured. 
2. The payments and contributions shall be made annually with respect to all production at a site after the first five years of production at that site. For the sixth year, the rate of payment or contribution shall be one per cent of the value or volume of production at the site. The rate shall increase by one per cent for each subsequent year until the twelfth year and shall remain at seven per cent thereafter. Production does not include resources used in connection with exploitation. 
3. A developing State which is a net importer of a mineral resource produced from its continental shelf is exempt from making such payments or contributions in respect of that mineral resource. 
4. The payments or contributions shall be made through the Authority, which shall distribute them to States Parties to this Convention, on the basis of equitable sharing criteria, taking into account the interests and needs of developing States, particularly the least developed and the land-locked among them.
Anybody given any thought to what kind of a financial hit that will make on a provincial government so heavily dependent on oil revenue?

They might want to do it because, as SRBP noted in 2009,  the financial implications of Article 82 plus the lack of a royalty regime for oil or natural gas is likely weighing heavily in calculations by private sector companies about exploration and development offshore.