N.L., oil firms at odds over billion-plus in deductions

Rob Antle
Send to a friend

Send this article to a friend.

Dispute relates to every barrel ever pumped offshore

The Newfoundland and Labrador government is at odds with the operators of the province's three producing fields over transportation costs charged on every barrel of oil ever pumped on the Grand Banks.

Those transportation costs total $1.6 billion to date, according to a report by the auditor general.

More than $1 billion of that total relates to Hibernia.

The government and Hibernia operators are currently in a formal process aimed at resolving the issue.

Kathy Dunderdale

The Newfoundland and Labrador government is at odds with the operators of the province's three producing fields over transportation costs charged on every barrel of oil ever pumped on the Grand Banks.

Those transportation costs total $1.6 billion to date, according to a report by the auditor general.

More than $1 billion of that total relates to Hibernia.

The government and Hibernia operators are currently in a formal process aimed at resolving the issue.

Natural Resources Minister Kathy Dunderdale said the dispute involves "significant money," but declined to put a dollar value on the amount.

At the simplest level, money claimed by the oil companies for transportation costs is deducted from the formula that determines royalties paid to the province.

But the two sides disagree on what is eligible for deduction.

They are currently in talks on the matter. If unsuccessful, binding arbitration would be the next step.

Meanwhile, Auditor General John Noseworthy urged the government to speed up its work on oilpatch figures.

"I think they should be auditing a little sooner," Noseworthy said.

In his report released Wednesday, Noseworthy said that transportation costs have a significant impact on the royalties paid to the province.

He noted that Terra Nova and White Rose have never been audited.

Terra Nova has never provided the government with actual transportation costs, he noted.

And White Rose uses estimates not approved by the minister.

Dunderdale acknowledged that "we are absolutely behind" on audits.

While the province has a three-year plan in place to catch up, that work "slipped a little bit" because of Hebron negotiations.

But the minister maintains the work will be done on time.

Dunderdale stressed that the province has not lost any of the royalty cash to which it may be entitled - although she acknowledged the treasury hasn't actually received any of it yet either.

"We are collecting money - we're collecting our royalties all the time," Dunderdale noted. "The audit is to ensure that we have all that we were entitled to."

The Hibernia matter could move to the formal arbitration phase within weeks.

The government plans to deal with the transportation cost issue at Terra Nova and White Rose after the conclusion of the Hibernia process.

rantle@thetelegram.com

Organizations: Hibernia

Geographic location: Terra Nova, White Rose, Newfoundland and Labrador

  • 1
  • 2
  • 3
  • 4
  • 5

Thanks for voting!

Top of page

Comments

Comments

Recent comments

  • MJ
    July 02, 2010 - 13:19

    So let me get this straight, the oil companies are using their transportation cost, to ship our oil to other provinces or countries for refining, to reduce our royalties. It is amazing how bad of a deal we get from our offshore oil. Danny really has his work cut out from him. They should be charged extra for not refining it here. .

  • Paul
    July 02, 2010 - 13:12

    Kudos to the Newfoundland government and John Noseworthy.

    I agree with the Auditor General, audit now.

    The government should also release just who the beneficeries of this trans-shipment are.

  • Graham
    July 02, 2010 - 13:10

    Of course, you know for sure the oil companies will find loopholes to exploit to their advantage. Of course, they will claim unreasonable amounts for transportation.

    Guilty until proven innocent.

  • MJ
    July 01, 2010 - 20:00

    So let me get this straight, the oil companies are using their transportation cost, to ship our oil to other provinces or countries for refining, to reduce our royalties. It is amazing how bad of a deal we get from our offshore oil. Danny really has his work cut out from him. They should be charged extra for not refining it here. .

  • Paul
    July 01, 2010 - 19:49

    Kudos to the Newfoundland government and John Noseworthy.

    I agree with the Auditor General, audit now.

    The government should also release just who the beneficeries of this trans-shipment are.

  • Graham
    July 01, 2010 - 19:46

    Of course, you know for sure the oil companies will find loopholes to exploit to their advantage. Of course, they will claim unreasonable amounts for transportation.

    Guilty until proven innocent.