Ottawa must change its policies on granting offshore oil and gas leases to companies in the Arctic if it wants to protect Canada’s national interests, says MP for the Western Arctic Dennis Bevington.
Bevington addressed the House of Commons during adjournment proceedings Wednesday evening with demands for new laws following the recent sale of offshore exploration leases in the Beaufort Sea to a British company with $220 in the bank.
Franklin Petroleum Ltd. was issued leases for nearly one million hectares in the Arctic for $7.5 million of promised work on Sept. 12.
Bevington said Canada must create new policies to ensure that only companies with the “assets, experience and safety record” are given leases to parcels in the Beaufort.
“What we see now is a company that cannot financially handle this kind of investment in the Arctic and will undoubtedly pick other partners for it,” he said. “If the company or the other partners are successful in finding a significant discovery in that area, the companies then have the right to that resource. That resource remains with them.”
The Canadian Petroleum Resources Act does not currently allow the minister of Aboriginal Affairs and Northern Development (AANDC) to decide on lease transfers. Bevington said federal legislation must be modified to require ministerial approval on the transfer of leases post-auction, similar to what is done internationally in countries like Norway.
“It flies in the face of logic,” he told The Journal. “If you give the minister full authority to say ‘no’ to a lease, which is the case now, why would you not have him have full authority to say ‘no’ to a transfer?”
Franklin’s owner Paul Barrett recently indicated Russia and Korea are in interested in partnering on the new leases, which Bevington said Canadians ought to be concerned about, considering the nationwide objections to China’s proposed takeover of Nexxen’s oilsands leases in Alberta.
“I’m sure that Canadians are very concerned with the idea that two people in Britain can transfer over a lease for 9,000 square kilometres of Beaufort Sea to some other country,” he said. “I’m not saying one country shouldn’t have that, or another, but it’s clear that Canadians are concerned about this…Most Canadians have a real concern about turning over natural resources to the control of a state-owned company.”
Greg Rickford, parliamentary secretary for AANDC, defended the current legislation, stating that the bidding process, which is based on the single criterion that the highest bidder wins, is “open and transparent.”
“The process has four phases, which include community engagement, call for nominations, call for bids and the issuance of exploration licences. It is a public process through and through,” he said.
The bidding system stipulates a minimum bid be set at $1 million, and that a financial deposit of 25 per cent of that bid be made before a licence is awarded. A letter of credit is all that is needed to make the deposit.
Environmental assessments needed before exploration
Bevington has also argued that environmental assessment must begin before leases are handed out, based on a federal cabinet directive requiring departments to conduct strategic environmental assessments (SEAs) before adopting new policies, plans or programs which may have significant environmental effects.
SEAs are currently conducted for new bidding rounds by boards in Nova Scotia and Newfoundland for offshore development on the east coast.
But Rickford said another layer of assessment is unnecessary, since exploratory activities require authorization from the National Energy Board.
“Let me be clear. Lands are not sold in the process. Rights issuance does not provide permission to conduct exploratory activities,” he said.
“Only after a rigorous review process and environmental assessments does the National Energy Board authorize exploration. By law, the company needs to demonstrate that it has the financial capacity to afford potential liabilities in the event of a major incident.”