Ottawa approves Bay du Nord oil development off coast of Newfoundland and Labrador

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Ottawa has approved a new oil development off the coast of Newfoundland and Labrador, just one week after the federal government said the oil and gas sector needs to cut its emissions nearly in half by the end of the decade.

Environment Minister Steven Guilbeault approved the Bay du Nord development on Wednesday despite pressure from some political parties and environmental groups to reject it. In his decision, Mr. Guilbeault said the project “is not likely to cause significant adverse environmental effects.” He gave it the green light with 137 conditions, including that the development have net-zero emissions by 2050.

In a statement, Mr. Guilbeault, a long-time environmentalist who has never owned a car, said the project is subject to “some of the strongest environmental conditions ever.”

The decision was released the same day his department said it is developing guidelines that will require any new oil and gas project that is subject to a federal assessment to show it has “best-in-class” emissions performance.

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Norway energy giant Equinor first proposed the Bay du Nord development for the Flemish Pass Basin, about 500 kilometres off the coast of St. John’s, four years ago. Originally set to tap up to 300 million barrels of oil over a 30-year lifespan, Bay du Nord could produce closer to one billion barrels through potential tie-in projects because of nearby discoveries in 2020.

Calgary-based Cenovus Energy Inc. holds a 35-per-cent stake in the $12-billion project, which it picked up after its acquisition of former Bay du Nord partner Husky Energy in 2021.

Equinor spokesperson Alex Collins said the company welcomed Mr. Guilbeault’s decision, and in a statement said the project has the potential to produce the “lowest carbon oil” in Canada.

Offshore oil drilling has vastly lower emissions than onshore production, particularly compared with Alberta’s oil sands, which comprise most of Canadian production. A 2021 analysis by data firm Rystad Energy put the average carbon dioxide produced in the oil sands at around 73 kg per barrel of oil. That’s compared with a 17 kg average for the offshore sector, although the top performers were closer to 7 kg.

The federal Liberals were not unanimous in support of the project, sources told The Globe and Mail. Not only was it approved just a week after Ottawa said the sector must cut emissions by 42 per cent below 2019 levels, but also on the heels of comments from UN Secretary-General Antonio Guterres that new fossil-fuel infrastructure investments are “moral and economic madness.”

Sources said the internal debate was a less-heated echo of the tensions around the proposed Teck Resources Frontier oil sands mine in 2020. Teck shelved that project before the federal government had to decide. Sources with direct knowledge said Atlantic MPs and ministers strongly supported the Bay du Nord project, while Liberals from Quebec and B.C. raised concerns.

The Globe is not identifying the sources because they were not permitted to disclose the private discussions.

Newfoundland and Labrador Liberal MP Ken McDonald said on Wednesday that Bay du Nord would supply “good, clean oil.” He said opposing the project would be akin to “turning my back on family, and in Newfoundland and Labrador, family means everything.”

Groups such as Greenpeace and Environmental Defence condemned the approval of the project, saying it would worsen the climate crisis. The Bloc Québécois and NDP also oppose the development.

Equinor executive Al Cook told investors in June that emissions from Bay du Nord would be around 8 kg per barrel. On Wednesday, Ms. Collins said the company expects to make a final investment decision in the next couple of years, with first oil in late 2028.

The Bay du Nord project put the federal government between a rock and a hard place, said Chris Bataille, an energy economist and researcher affiliated with the Canadian Energy and Emissions Data Centre at Simon Fraser University.

The oil the project would extract is lighter, easier to process and has lower emissions than the heavy oil sands bitumen from Alberta. As such, adding Bay du Nord to Canada’s oil production inventory would not lead to a large increase in emissions.

“Where the big emissions are will be where that oil is turned into a refined petroleum product and combusted,” he said.

Newfoundland and Labrador is traditionally a have-not province, with fewer economic options than Western Canada. It’s closer to Europe, too, which is trying to ween itself off Russian oil and gas in response to the war in Ukraine.

“It’s not an easy decision,” Mr. Bataille said.

“You’re going to get people on the environmental side saying, ‘No, we were just told no new reserves, why are you doing this?’ And on the other hand, it’s a lower-income region and it’s much lower intensity oil. There are strong arguments either way.”

Natural Resources Minister Jonathan Wilkinson said that while emissions created by offshore oil production are significantly lower than in the oil sands, he wouldn’t opine on whether one sector is more plausible than the other in the scheme of Canada’s climate goals.

“The more that we do with respect to reducing emissions, I think the more competitive our oil and gas sector becomes in a world that is going to value low-carbon intensity products,” he said.

The Newfoundland and Labrador government welcomed the federal green light, and said in a statement that it will help the province meet global demand for “responsible, lower carbon oil.” Based on 2019 emissions data, the provincial statement said, the project would contribute less than 0.1 per cent of the sector’s emissions and less than 0.03 per cent of Canada’s total emissions.

With a report from Kelly Cryderman

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