A decade ago, the offshore regulatory board reduced its estimate of the recoverable reserves in the Terra Nova field from 405 million barrels to 354 million barrels.
Danny Williams was trying to squeeze additional transfer payments out of the federal government in the guise of getting provincial oil royalties that the federal government supposedly took back.
The whole thing was a fraud of the first magnitude but hundreds of thousands of people in Newfoundland and Labrador fell for it.
“With each passing day,” Williams wrote to Prime Minister Martin on May 21, 2004, “Newfoundland and Labrador is losing out of significant revenues from these diminishing non-renewable resources…”.
Williams was looking for a transfer payment from Ottawa equal to 100% of the province’s oil royalties, in addition to the oil royalties themselves regardless of whether or not the province qualified for Equalization. “I therefore urge you… to act promptly on the proposal that our government first submitted to your Minister of Natural Resources…”.
Fast forward a decade.
“There is untapped potential for more oil at Terra Nova. Developing an economic plan to capture and produce these smaller fields is a key focus area for Suncor and our partners in Terra Nova,” the Telegram reported that Suncor’s Brent Janke told the annual NOIA conference in St. John’s this week.
Last year, the offshore regulatory board increased its estimate of recoverable reserves at the field from 419 million barrels to 506 million barrels. 419 is more than the estimate in 2004 before the board lowered the estimate back then. Basically within the past 10 years, official estimates of the amount of oil at Terra Nova has gone down and then gone back up to more than before.
An oil industry saying holds that big fields tend to get bigger, according to Janke [quoted by CBC]. Sometimes it means that developers find more oil. Sometimes, it means that changed technology allows developers to recover more of the oil that’s in place.
That’s why Williams’ letter never really sparked any reaction from anyone in Ottawa or anyone else familiar with oil development. In itself, the change in estimates didn’t mean much over the long haul.
What Williams was looking for would have been worth something like $10 billion over the past five years with the prospect of billions more to come. That’s on top of the oil royalties which – as Williams later acknowledged – the province had collected in full all along without losing a penny.
What Williams settled for was a single cheque for $2.0 billion and another $600 million or so that came along later.
As it turned out, if the federal government had done nothing in 2004, the extra oil at Terra Nova coupled with current high oil prices will have produced royalties from the original royalty agreement that will dwarf the handout Williams made out at the time to be some amazing victory.
We got it, Williams yelled when he got back from Ottawa in January 2005 with the one cheque in his pocket.
Like the May 2004 letter and the claim about irreplaceable losses, nothing was further from the truth.