Sidebar: R&D dollars

Ashley
Ashley Fitzpatrick
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A challenge under the North American Free Trade Agreement — to rules set by the CNLOPB in 2004 on research and development spending — is still making its way through arbitration.

The International Centre for the Settlement of Investment Disputes is working on the case. It was brought forward on Dec. 19, 2007 by ExxonMobil's Canadian holding company and Murphy Oil Corp. after they failed to find favour within the Canadian court system. 

According to the manager of the CNLOPB’s department of industrial benefits, Jeff Bugden, the new rules on R&D emerged from a Statistics Canada chart showing, across the country, R&D expenditures as a percentage of gross revenue. The numbers were used to establish a benchmark for spending by companies operating offshore Newfoundland and Labrador. 

Companies already operating offshore were called upon to spend more on R&D, and spend locally.

ExxonMobil’s Canadian holding company and Murphy Oil Corp. have argued the approval of Hibernia and Terra Nova development plans constituted approval of their R&D spending commitments. They have stated these should not be altered retroactively.

In 2010, they stated the rules set in 2004 force them to spend an additional $189 million, combined, over the lifespan of the Hibernia and Terra Nova oilfields.

They are looking for a combined $65.4 million in compensation. They are also seeking interest and taxes on all money awarded; all costs associated with the arbitration proceedings, including professional fees and disbursements; and any other relief the tribunal deems appropriate.

Bugden said the spending on R&D is no small matter, as it has the potential to lead to profitable enterprises. Research can lead to new technologies or advanced information on various aspects of working in heavy industrial activities in harsh environments, for example.

“Those capabilities are potentially exportable,” he said.

A hearing on the merits of the legal challenge was held in Washington, D.C. Oct. 19-22, 2010. Post-hearing documentation has been filed, with the last filing being Nov. 8, 2011.

Between 1990 and 2008, the Hibernia consortium and Petro-Canada reported spending more than $250 million on R&D on the Hibernia and Terra Nova oilfield projects.

 

Organizations: Hibernia, Statistics Canada, Murphy Oil Petro-Canada

Geographic location: Terra Nova, Newfoundland and Labrador, Washington, D.C.

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