Workers in this province won’t be building a key piece of the Hebron oil rig, but the provincial government will get a $150-million cheque to make up for it.
The derrick equipment set (DES) for the Hebron oil platform will not be built in the province, despite terms in the Hebron development agreement which required that work to be done here.
For months, the provincial government led by Premier Kathy Dunderdale has been in a tussle with lead developer Exxon Mobil over whether it was even possible for the DES work to be done here.
But after a mediation process and negotiations, Dunderdale announced Thursday the government has agreed to let the work get done elsewhere, but Exxon will pay compensation.
The $150 million won’t be paid until June 2016, as part of the agreement, but Dunderdale announced right away what the money will be spent on.
The government will put some of the cash towards a new science building at Memorial University. Some of the money will also go to building two new operating rooms at the H. Bliss Murphy Cancer Clinic in St. John’s. In Happy Valley-Goose Bay, some of the money will be used to build extensions to the long-term care facilities.
“The days of us watching others benefit from our resources are long gone. Our government has a long-term vision for Newfoundland and Labrador, and that is to ensure we are full partners at the table when it comes to resource development,” Dunderdale told reporters. “Our No. 1 priority has always been to ensure that the people of Newfoundland and Labrador receive maximum benefits from the Hebron project.”
Under the terms of the Hebron benefits agreement, the government had never been able to stop Exxon Mobil from taking the work out of the province. But the agreement set up an arbitration process that would have potentially forced Exxon to provide alternate work or cash in lieu.
By settling for $150 million, the government sidestepped that process, which could have dragged on for much longer.
Natural Resources Minister Jerome Kennedy said the settlement is a sign of success.
“We then went through the mediation process without success, in that a result wasn’t reached during mediation, but we are here today to announce what I would suggest
is a very successful conclusion,” Kennedy said. “Having spent 20 years in a courtroom process, there’s never any guarantee of success. What we have done here today is achieve what we consider to be a very fair result, and one that allows us to get on with business.”
By putting the money primarily into infrastructure, Dunderdale said, the province is effectively getting a comparable amount of work from the project, but at the end of it all, gets to keep the fruits of the labour.
“Because of the way that we’ve invested the money, it is going to generate much more work than would have happened — three times the number of jobs that would have been generated through the DES — and create important pieces of infrastructure that stay in this province and serve the people of this province for many, many years to come,” she said.
Robert Cadigan, executive director of the Newfoundland and Labrador Oil Industry Association, said he’s sad to see the work go elsewhere, but that the government made an important point by insisting Exxon honour the terms of the benefits agreement, or pay the price.
“If you sign a benefits agreement, just as royalties are set in stone, the benefits need to be treated in the same manner, and need to be respected,” he said. “Proponents of the project need to do everything in their power to ensure that the benefits agreement is honoured.”
Cadigan pointed out that since the $150 million is in the same ballpark as what it would have cost to build the DES, Exxon is effectively paying for the module twice.
Two other topsides modules for the Hebron rig will still be built in the province.
Memorial University president Gary Kachanoski was at Thursday’s announcement. When he spoke to reporters, he was beaming.
He said a new science building has been an important project for the university for a while.
“We wanted to have a shovel in the ground very quickly. It’s a long process to build this, so this is a game-changer for us,” he said. “It is our highest priority and we’re just absolutely delighted at the government’s strong support for this.”
The NDP wasn’t quite so cheerful, though. In a late afternoon news release, New Democrat Leader Lorraine Michael said she was disappointed with how things had turned out.
“We were looking for jobs and skilled trade workers and that is not what we are getting,” said Michael. “There will be some jobs for skilled workers, but not oil industry jobs, not the particular skilled workforce we were hoping to develop from the Hebron deal.”