Junior oil company taken to task by CNLOPB

Ashley
Ashley Fitzpatrick
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Shoal Point Energy complains after losing offshore licence and $1 million

After losing an offshore exploration permit in western Newfoundland, with an accompanying $1-million deposit, Shoal Point Energy has blamed an uncertain regulatory environment in Newfoundland and Labrador.

The Shoal Point drilling site on the Port au Port Penninsula.

The Canada-Newfoundland and Labrador Offshore Petroleum Board (CNLOPB), on the other hand, suggests the company’s losses should come as no surprise.

Offshore exploration licences are awarded by the CNLOPB with requirements for specific activity, required spending on oil exploration, within set dates. The measure is meant to ensure companies do not simply sit on permits, keeping other interested companies from being active in the area.

Shoal Point Energy had yet to live up to its commitments in the area offshore to which it has lost access, known as EL 1097R.

The licence area covers about 500,000 acres, reaching from just off Corner Brook, up along the coastline off Gros Morne National Park.

As reason for its inactivity to date, the company pointed to a delay by the provincial government in providing guidelines required for an environmental review of its suggested projects.

It also says the CNLOPB rejected a proposal that would have allowed for an extension on the company’s licence, leaving out the area around the park.

Complete loss of both the existing licence and deposit “due to a change in the regulatory environment beyond its control” is unfair, Shoal Point Energy’s leadership stated, offering $250,000 for a partial licence renewal.

“We are disappointed by this decision,” Mark Jarvis, CEO of Shoal Point Energy, said of the rejection of that proposal.

“We feel that our proposal recognized and respected the importance of Gros Morne National Park, a UNESCO world heritage site. Our proposal balanced a desire to protect this unique and beautiful park with a desire to safely and responsibly develop a much-needed economic opportunity on the west coast of Newfoundland.”

Swift response from regulators

The company’s statement was issued Thursday night.

Shortly after 1 p.m. Friday, the CNLOPB responded with a statement of its own.

“In making this decision, the board considered that this licence was issued based on conventional exploration work. Nearly eight years … has passed and minimal exploration has been undertaken,” it stated.

As for the request for a renewal, even a partial renewal of the permit, the statement from the CNLOPB notes it already granted a one-year extension in 2012.

It has since considered and rejected three separate proposals for another one-year extension, with the latest being issued Dec. 12.

“The proposal submitted by Shoal Point Energy does not identify a plan to proceed with activity to fulfil the drilling obligation on the licence and instead identifies ‘a physical and legal impossibility to undertake a drilling program’ in the only format now contemplated,” reads the Board’s statement.

It adds another extension on the licence would require the company to forfeit its $1-million deposit, meaning the money would have been given up regardless.

The province has taken the position the losses by Shoal Point Energy were completely unrelated to a new moratorium on onshore and onshore-to-offshore fracking — brought in by the government in November. 

“This is purely a land tenure issue and is separate from the current policy on hydraulic fracturing,” reads a statement from Natural Resources Minister Derrick Dalley, provided through a spokeswoman.

It goes on to state the province had no work proposals involving fracking in hand when it decided to bring in the moratorium.

Meanwhile, speaking to reporters at an event in St. John’s, Premier Kathy Dunderdale reiterated her support of the fracking moratorium.

“We need to first really inform ourselves (on fracking), we need to make that information available to the people of the province and then we need to do a comprehensive review of it with public consultation,” she said, “and until all of that happens, you know, we’re not going to encourage development of our resources if the people of the province don’t want it, or don’t want it done in a particular way.”

Costly expectations

The renewal of the company’s licence a year ago locked Shoal Point Energy into the one-year timeline for completing environmental review and obtaining all regulatory approvals for an exploration program, despite the fact a proposed onshore-to-offshore drilling program would have been the first of its kind for the province.

It was also despite the fact the company’s suggested projects had been met with fierce opposition from people living in the region and from anti-fracking groups with further reach.

The idea of drilling onshore to offshore and then fracking in areas adjacent to Gros Morne National Park were particularly controversial, drawing cautions and pointed questions from otherwise unengaged groups and individuals.

Similarly, news of the company’s lost licence did not go without notice.

“We are so pleased to see the offshore board listening to the voices of those in the region and across the country and the world who spoke out on this issue,” said Heidi Verheul, a community outreach co-ordinator with the Sierra Club’s Atlantic Canada chapter, in a statement interpreting the board’s decision.

“We are grateful that the CNLOPB has recognized that there are sensitive marine areas where fracking should not take place,” said Mary Gorman of the Save Our Seas and Shores Coalition in the same release.

She similarly ties the board’s decision to the environment and response to members of the public, rather than lapsed timelines and failed commitments.

Shoal Point has now lost the largest of three licences in the region it holds interest in, with the three totalling about 720,000 acres.

The company still has rights to the areas known as EL 1070 and EL 1120. Those licences cover 220,000 acres.

afitzpatrick@thetelegram.com

Organizations: Canada-Newfoundland and Labrador Offshore Petroleum Board, UNESCO, Sierra Club Seas and Shores Coalition

Geographic location: Gros Morne National Park, Corner Brook, Newfoundland Atlantic Canada

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  • david
    December 14, 2013 - 10:01

    I am no fan of fly-by-night exploration companies that get into projects far beyond their depth, simply gambling that they'll get bought out at some point. And that's precisely what this is. But the government of Newfoundland, in its infinite resource development wisdom (!), decided to award these licenses to such a company, so that point was made irrelevant. And the location of the licenses was the same then as it is now ---- next to a National Park. Did no one bother to look at the map? But it is laughably predictable that the CNLOPB would enjoy being the bully to a small exploration company...after all, they must all be a bit tired of being laughed at, ignored and stepped over by the big multi-nationals that they "oversee". Must be nice to flex the muscles, even if it is just in the mirror. Having said that, it is classic government BS to have originally awarded licenses, and then make up the rules and then change them long after companies invest time and money in them. Ask any company what is the biggest risk in investing in Newfoundland, and the predictable pandering for votes is at the top off the list. Some companies get a net benefit from this myopia, like those who get cash and concessions thrown at them to come here, or get bribes to stay long after they have no market-based reasons. Others, like energy companies, have to include political risk along with the long list of other, enormous financial risks they take in the business they're in. Having their exploration worlk halted midstream, or having their eventual discoveries expropriated, is the M.O. of Venezuela and Russia....and Newfoundland. Don't kid yourself, we're on the list.