- Government of Newfoundland and Labrador has committed to dismantling its energy corporation, taking subsidiaries Nalcor Oil and Gas, possibly adding in Bull Arm, and creating a separate, oil-centric Crown corporation.
Why?
“We want to put a new focus on the oil industry, because it has huge potential,” Finance Minister Tom Osborne said Tuesday.
In his budget speech — in the last paragraph before the conclusion — he confirmed the Liberals are taking Nalcor Oil and Gas out of Nalcor Energy and will create a new company.
“It would work directly with the Department of Natural Resources to accelerate the growth and opportunity of our petroleum industry, returning significant value to the people and economy of Newfoundland and Labrador,” Osborne said.
Taking questions from reporters later, the minister said planning for the change is underway.
It’s not clear how many people would move from under the umbrella of Nalcor Energy to the new corporation, and what might be required in terms of money for branding, marketing or administration.
There was a suggestion — but not confirmation — that anyone now with Nalcor Oil and Gas would make the move to the new company.
“We’re not going to privatize this,” Osborne said after being asked if the province was setting up to take the new company public. “That’s not in the plans today.”
Osborne said there were also no immediate plans to make changes to equity investments in offshore oil and gas projects. At the same time, he said if anything was potentially of benefit to Newfoundlanders and Labradorians it would be considered.
It’s also unclear if there will be changes to the current leadership or board of directors of Nalcor Oil and Gas.
There were general endorsements for the existing oil corporation, its staff and lead Jim Keating.
The planned changes as announced will require new legislation, and Osborne said the company still needs to be designed.
“Greater details will be put forward over the coming weeks and certainly the coming months. But this is going to happen,” he said, adding there is no hidden agenda in the move.
“We want to make sure that this industry reaches its full potential,” he said.
Natural Resources Minister Siobhan Coady told reporters it was about potential and allowing the oil company to focus on oil and gas.
She was also asked if Nalcor Energy Bull Arm Fabrication, another Nalcor Energy subsidiary focused on the oil industry, would be included in the new company. There was no clear yes or no answer.
Progressive Conservative critic Keith Hutchings said he is surprised by the change.
“There’s no apparent reason for doing it,” he said in the lobby of Confederation Building.
Hutchings said the creation of Nalcor Energy was intended to bring the province’s work on both renewable and non-renewable energy resources under a single umbrella. And to date, he said, new interest and increased commitments to exploration spending have been realized under Nalcor Oil and Gas.
“It’s been a good operation and it’s run well. So why you would change that? Is it just for smoke and mirrors for some reason?”
He said the PCs are concerned the change will be followed by a sale of some Crown corporation assets.
That was not something suggested by either Osborne or Coady.
NDP Leader Lorraine Michael said she is unsure why the change is happening.
“I’d like to have, number one, a rationale for why they’re doing it, why they’re setting it up as a separate Crown corporation,” Michael said, wondering if there was any analysis whatsoever to suggest a benefit from the move. “And number two, details. There are absolutely no details. And yet, we have almost $800 million once again going into Nalcor and oil and gas development from our budget.”
The provincial government will pump $723.9 million into Nalcor Energy in the 2018-19 fiscal year, supporting the work of all of the Crown corporation’s subsidiaries.
As of its last quarterly update, there are 15 lines of business either a wholly owned or partial subsidiary of Nalcor Energy. Two of those are inactive. Seven are centred on various aspects of the Muskrat Falls hydroelectric project. The others are Nalcor Energy Oil and Gas, Bull Arm Fabrication, Newfoundland and Labrador Hydro, Energy Marketing, Churchill Falls (Labrador) Corp. (CFLCo) and the Twin Falls Power Corp.
Nalcor Energy president and CEO Stan Marshall attended Tuesday’s budget speech, and said he didn’t ask for anything to be carved out of Nalcor.
So what does the change mean for parent Nalcor Energy?
“Not very much, really,” Marshall said. “Oil and gas, while we value the people there, there’s only about 25 people associated with that out of 1,500. We do share some services, but we understand where the province is coming from, trying to get more focus on that area. So, you know, we wish them well.”
Marshall said he remains focused on the development of the Muskrat Falls project.
Noia president Charlene Johnson said the announced change for the province’s oil company is a good move.
“It didn’t come from us, but we certainly welcome it,” she said. “At a time when we’re doing so much exploration, the oil and gas company, they had been turning profits, generating dividends. Alone, they’ll have a very strong financial portfolio, which is good when you’re going with investment or financing.”
