Speech By :
Honorable A. Brian Peckford P. C.
To the Newfoundland Ocean Industries Association on June 22, 2017 on the occasion of their 40th Anniversary.
Yesterday, Today and Tomorrow.
Thank you for inviting me on this special occasion–the 40th anniversary of your organization. I remember well its beginnings . I was Minister of Mines and Energy at the time .
This is downtown St . John’s.
I have many connections with this area of the city.
My father was born at number one Duckworth Street . My mother was born and raised on Maxie Street and Hayward Avenue. My father went to Bishop Field College , my mother Prince of Wales College.
On Water Street —My father worked for Marine Agencies , owned by a Norwegian . My mother for the department store , the Royal Stores .
I had an aunt who worked for Furness Withy . Another aunt with Long brothers .
I had an uncle who had a butcher shop on Water Street West , another uncle worked for Dicks and Company , and another for fifty years with Harvey and Company. And still another uncle with Crosbie and Company, and another with Gerald S . Doyle and United Agencies and one with S. Milley .
My Grandfather Young worked for the Royal Stores on Water Street for fifty years .
My Grandfather Peckford had rooms on the bottom of Temperance Street where the Terry Fox Memorial stands today. He fished out of the harbour for fifty years , and went to the seal fishery for forty nine. He was a survivor of the 1898 Greenland Disaster. He had the first motorized inshore fishing boat in the country. . A motor by the way that was used for drilling for oil in Parsons Pond on the northwest coast of the island. Grandmother Peckford ran a store at one Duckwoth Street . The building is there today; the Battery Cafe. I had a great uncle , Allan Peckford, that had a retail store on Franklyn Avenue –later moved on to New York.
I worked here on New Gower Street with City Welfare and later with the Liberal Reform Group in a building just down the street from here. I also worked with the Provincial Department of Health and Welfare in an old wooden building near the old Hotel Newfoundland before the Confederation Building was built.
And if memory serves , it was my administration that invested with others( Cabot Developments , Manufactures Life Insurance, and Commonwealth Holiday Inns) in the first Convention Centre at this hotel then called The Raddison to the tune of $3 million. The total project including the first office tower was $65 million. The project was led by the local firm Cabot Developments which involved assembling 160 properties with no expropriation.
And I think my administration helped to save the old Newman Building and wine cellars just a little west of here on Springdale Street.
And I have happy memories of partying while a University Student in the pubs of the downtown streets .
You might say ,then , that I have a genetic predisposition to this area of St. John’s.
Therefore, I am truly home in a family and work context .
I became Minister of Mines and Energy on September 14, 1976. And from a work related point of view , it is hard to beat being Minister of Mines and Energy in 1976— given the promise of offshore riches.
Of course, I wasn’t offered the job —I asked for it!
When the vacancy arose , I asked to see the then Premier, Frank Moores, and boldly stated : I want that job!
Well, for whatever reason , he said yes.
And I was off!
Of course, there was the obvious learning curve as it related to Newfoundland Hydro , as our Crown Corporation was then called, and the various mining operations and concepts of the Mining business . But all that paled in comparison to the Mt Everest learning curve that confronted me in the strange new world of offshore oil and gas .
Without the competent assistance of the late Stev Milan and Cabot Martin , that job would have be far more difficult. But even then I spent many an evening and night at the Eastern Canada building on Empire Avenue pouring over terms like : geological reservoir , porosity , permeability, millions and billions of barrels , millions or billions of cubic feet, risers , production platforms , drilling rings and many many more. I remember meeting the janitor one day with a questioning look on his face ; it was 6 AM and I was leaving the building and he was coming to work.
These were heady days indeed as we proceeded to establish a case for jurisdiction of the minerals resources on the continental shelf. This action , of course, was met with trepidation by the industry and scorn by the then Federal Government . How could this fledgling little Province of half a million souls with 95 % of its population on an island out in the North Atlantic make such a claim?
And , of course, it was at this time that business leaders here in St. John’s began to see , notwithstanding the Province’s claims, that whatever happened on jurisdiction , there was a good chance that increased activity would occur . Hence , I remember Mr. Emberly visited my office in 1976 /77 discussing the possibility of what is now this highly successful organization that we see here before us.
Many battles awaited us .
As we proceeded to establish our case on jurisdiction we met with the industry , mainly in Calgary , where most of the Canadian Oil Company Headquarters were located . It was almost comical , if it wasn’t so momentous , to attend such meetings!
Here was this small group of four of five of us sitting down in the Board Room of the International Hotel watching ourselves being outnumbered by 10 , 15 or 20 company representatives , all of whom were not impressed with what was our obvious agenda. In particular, that they would quite likely have to live with two sets of regulations , one Federal and one Provincial.
One incident in particular highlights the tenor and atmosphere then prevailing.
The Total Eastcan oil company had certain alleged rights off Labrador that were provided by an earlier administration . They would not be recognized by us in our new regulatory set up given the dubious manner in which they were obtained . After being made aware of this , in one of our Calgary meetings , I was requested by the company representatives to take a phone call from their global President that evening, who was in Paris. I agreed to the call, and that evening was subjected to a rather irate oil executive , who in broken English , lectured me on the global oil industry and complained about how unfairly they were being treated. The discussion became very heated . The only thing that sticks with me is that , in my normal animated fashion , I ended the conversation by saying something along the lines —-that , if the cap fits you will have to wear it.
I am sure there were incidents like that , which once circulated amongst the industry , together with other similar conversations I would have had with Federal bureaucrats and politicians , that led to the impression by many that they were all dealing with an out of control bayman, who somehow lucked into being Minister of Energy .
Of course, to be brutally honest , as some in this room may be able to attest, there were many right here, in the Province , who felt exactly same way .
There was the cry–that I had oil on the brain! A national newspaper highlighted that I was the the bad boy of Confederation, CBC would highlight the Federal position through Jean Chrétien and ignore us, the Globe an Mail condemned the Hibernia Project, the mayor of this city attacked us, and the Board of Trade was ambiguous.
But never mind. We prevailed.
Then there was this one time in New York . All the oil company executives were to gather there and I was to meet them . It concerned whether they would accept the Province’s regulations and move on. Obviously , there was a lot at stake. There was no doubt, of course, that the companies had collaborated before the meeting to have a united front.
But, there was one problem , Petro Canada , the then Federally owned Crown Corporation. It was refusing to attend the meeting.
All the executives wanted all companies present so that a unanimous decision could be given to the Minister.
All the companies sent a strong unanimous message to then President, Hopper, of Petro Canada. Attend or else!
Of course, Petro Canada backed down and came to the meeting . The message to me was loud and clear: we do not like having to deal with two Governments who contend jurisdiction in the area where we want to work , but we will accept it and hope a resolution comes soon.
Of course, soon was not to be. An arduous process of on again , off again talks ensued between the Federal Government and the Provincial Government spanning into my years as Premier. My second book details this period of heightened tension and often acrimony that characterized this period . And it was exacerbated by other very major issues like the fishery and the constitution on which Federal Provincial agreement was also elusive.
And in the midst of this was your organization caught between the two Governments and yet trying to grow and having to speculate about what would eventually happen .
Thankfully , there were many members of NOIA( and I think I remember each one ) who were very supportive of the Province’s efforts and were steadfast to the end . They realized , and this is fundamentally critical: that a strong Provincial presence in the exploration and development of these new resources was essential in order to ensure a strong local industry participation. They understood with us that token involvement of the Province would bring minimal local industry benefits .
There was not then and is not now an appreciation of the obstacles that beset the Province in its pursuit of an offshore agreement that would treat this Province the same as other oil producing Provinces. And similarly , the historic nature of the deal.
Four major obstacles were :
1. A Federal Government that really did not believe in this Province having the same rights and privileges as other oil producing provinces . It was part of that philosophy of a strong central Federal Government . It was thought that further sharing of powers with the Province would further Balkanize the nation and cause all kinds of undefined problems in other Provinces and the country as a whole.
2. A national press that was at best ambigious towards the Province’s position and at worst highlighted the Federal Position without the equal coverage of the Province’s position . Both the Globe and Mail newspaper and CBC , the Nations’ s public broadcaster, are guilty parties on this score.
3. A nation that had other issues that preoccupied them and hence real support outside the Province, was difficult .
4. And then there was Nova Scotia —this Province signed an offshore deal with the Federal Government whose terms were less that what we were advocating , undermining our position , and as a result made it much, much more difficult for us to stand firm . At this juncture it was a close call that we remained steadfast.
A poll at that time showed us behind on the issue —- most thought we had fought the good fight and it was time to stand down and take the lesser deal. No doubt the Federal Government had similar polls , and hence thought the chances of our capitulation were great. Sometimes you provide information —other times you withhold information . I admit I withheld the information on this poll.
Let me share now three specific things ( which I don’t think I have publicly revealed until now) that might help give a sense of the mind set and difficulties of the time:
1. The Federal Government, in discussing an agency like what became later the Offshore Petroleum Board , advanced the position that it was obvious that this agency would be headquartered in —-Ottawa. This was said in such a matter fact way –you know —-I mean it was obvious–where else could it be located?
2. When we insisted that any such agency would have to be stationed in this Province , the question was asked : but where would the children of the Board employees go to school?
3. At one point I was forced to visit secretly the Quebec Government to persuade them to cease in their efforts with the Federal Government to ensure industrial benefits for Quebec from any Newfoundland offshore deal.
It may be difficult , now, for younger people in this audience and others unfamiliar with the early years to believe this kind of thing could have occurred. But it did!
And then to add to that –we lost our claim to jurisdiction in the Supreme Court of Canada!
But——With a new Federal Government , a new day dawned . Brian Mulroney and Pat Carney true to their word and that of their party, negotiated in good faith with William Marshall , my Energy Minister, and a strong negotiating team , and the Atlantic Accord was born .
The Province would receive royalties as if the resource was on land, a $300 million fund was to be established to front end necessary infrastructure and training, federal equalization payments would not be lost dollar for dollar, the Province was to be the principal beneficiary , management powers were to be provincial and the offshore board to oversee it all would be headquartered in St. John’s are some of the Accord’s provisions. It was and is historic.
In the long troubled history of economic development in this place , there is no equal to the principles established and positive provisions that this Accord affords; that establishes principles that hitherto fore were only dreamed of .
Hundred Million dollar plus mistakes litter the landscape —-From the Newfoundland railway of the nineteenth and twentieth centuries to two early pulp and paper enterprises of the early twentieth century, to endless fishery debacles ( the fishery restructuring agreement alone was $110 million) before and after Confederation , to the Upper Churchill Contract, John Doyle mining ventures , to the John Shaheen refinery , Labrador Liner Board Mill, to today’s $160 million cost for loosing at NAFTA as a result of an unfortunate expropriation of the Grand Falls industrial properties and now the troubled Muskrat Falls Project—who knows the final cost?
Since 2005 , direct cash to the Provincial Treasury in the form of offshore royalties total $20 billion according to the Public Accounts and Budgets of the Provincial Government .
This year the Government predicts it will receive $902,765,000. million in offshore oil royalties . Compare that to the total in mining taxes and royalties this year of $41,000,000. This year that offshore royalty total is more than all Federal Government cash transfers to the Province.
Who would have believed that that Smallwoodian claim of Federal mana from heaven would take second place to something we generated ourselves?
And that it is being accomplished with a much reduced oil price!
Let us not forget , without the Accord —there would be no royalties , no entitlement to any monies —–simply federal transfers , the amount decided at the whim of the Federal Government. And in your case as an industry, the degree to which local industrial activity occurred would be much diminished from what we see today, likely in Halifax and other Maritime centres and Quebec.
Things seldom come to this place automatically –Geography, history and culture have often negatively affected our fate. They must be fought for , put in legal documents and then continually fought for by our leaders. That means the Accord was not only fought for in the 1980’s but its provisions must be aggressively supported and maintained in every new project or project expansion. One must fight just as hard to enforce what we fought so hard to get in the first place .
During the nineteen nineties ,when I was consulting in western Canada , I was always amazed at the number of Newfoundlanders in the offices of oil companies in Calgary , trained in Newfoundland , because of the Accord . It was rewarding indeed when theses employees would ask to meet and thank me when they heard I was at their offices.
I do not know ,now , who it was that first uttered to me the concept of ‘not a project but an industry .’ It was early on when I was a Minister in the late 1970’s. But it stuck with me. And I remember that it was embraced by NOIA’s early supporters and founders like Harry Pride , Rick Emberly , Lee Shinkle, Rob Strong , David Fong and Jan Furst , and Christine Fagan , and Moyà Cahill .
So much like those of us in Government who were seeking a different tomorrow , these early NOIA pioneers , entrepreneurs, also saw the potential —-for a new business opportunity , to launch into areas previously unknown , but confident that they could learn , adapt, ,create , and innovate.
And perhaps we need to be reminded about one critical concept that is embedded in the Accord , one of its primary purposes , which is the law of the Canadian Parliament and the Legislature of this Province: it is —–‘Section 2(c) to recognize the right of Newfoundland and Labrador to be the principal beneficiary of the oil and gas resources off its shores , consistent with a strong and united Canada. ”
Not a special opportunity , not some preference —but the right—–!
It was under this right that we were able to bargain for a Gravity Based Structure . It did not come automatically or by accident . Did you know that when we first proposed this no company or the Federal Government were in favour of it? We were almost laughed out of the room!
Because of this hard bargaining , then , came Bull Arm —and now Argentia.
And now you , NOIA, can boast of a membership of 600 covering all aspect of the offshore industry . The largest association of its kind in the country.
And many of your members headquartered here demonstrate a global reach –something that is often forgotten when talking about our offshore. I was reminded of this recently when I came across the growth and reach of one of your members: Technip. The President , Mr. Jason Muise says :
‘We currently have projects running for Brazil, the US, UK, Norway, France and Asia Pacific. We are doing work for both the subsea and offshore business lines.
I frequently make reference to external stakeholders , the 105 international projects we have supported from St. John’s during the last 4 years.
Without the Atlantic Accord we would not be here today. ‘
The session preceding this one had a Technip representative talk of Satellite Tie Backs for Marginal Fields. How appropriate!
This is a tangible example of what has been accomplished !
Of course , we all recognize the present challenging environment and , that barring some major event, $100 dollar oil price is unlikely again. The American shale revolution has drastically transformed the global oil and gas landscape . Shale wells in the Pembia area and Eagle Ford area and other US basins can now break even at $30 oil and some can make a profit at less than $50. Poland signed its first LNG US contract in April. And Shale oil is being shipped to Europe.
This shale industry has become extremely nimble driving costs down dramatically . Listen to this from the Wall Street Journal , March 31 this year :
‘MIDLAND, Texas—Using a proprietary app called iSteer, Brian Tapp, a geologist for EOG Resources dashed off instructions to a drilling rig 100 miles away. This tool is among the reasons the little-known Texas company says it pumps more oil from the continental U.S. than Exxon Mobil Corporation or any other producer.
A rig worker received Mr. Tapp’s iPhone alert and tweaked the trajectory of a drill bit thousands of feet underground, to land more squarely in a sweet spot of rock filled with West Texas crude.’
Of course , all of you at this conference are well aware of the challenges for the future . This is most aptly reflected in your agenda here this week: Untapped Resources , Surviving and prospering in a period of unprecedented Disruption , and Current and Future exploration.
But just as the American shale operators are becoming nimble so too are many offshore operators. Just recently McKinsey and Company , a global multi faceted consulting company , produced an article by two of its experts entitled ‘Taming the Mad Dog , making Oil Projects work in a Low Price Environment .’
Mad Dog is an oil development in the Gulf of Mexico sponsored by BP, BHP Billiton, and Chevron . In 2013 it’s cost came in at $20 Billion. Too much ! By applying real sensible design and planning and using the latest technology , the project is now $9 billion —and , of course, a go!
Starlee Sykes of BP said:
‘Every element of the project has gone through a rigorous review. Roughly, I would say it’s probably two-thirds reengineering and one-third negotiating with suppliers. We originally said we would produce 90 percent of Mad Dog 2’s resources at 65 percent of the original cost, but we are now actually planning to produce 100 percent of the resources at less than 50 percent of the cost.’
And right here some of us remember when Hibernia was to produce no more than 500 million barrels.
But lo and behold it has already produced over 1 billion! A lot of it because of adapting to new technology.
Suncor announced last month that it has applied for regulatory permission to build a new Alberta oil sands plant called the Lewis Project 25 kilometres north east of Fort McMurray that could eventually produce up to 160,000 barrels a day. The company also received approval in March for its Meadow Creek East project , to produce 80,000 barrels a day using new technology reducing both water and energy use.
And to add some greater optimism to this , consider the International Energy Agency’s latest commentary about future oil supplies :
‘IEA: GLOBAL OIL DISCOVERIES AT RECORD LOW IN 2016
Oil discoveries declined to 2.4 billion barrels in 2016, compared to an average of 9 billion barrels per year between 2000 and 2015.
Investors shouldn’t rely on U.S. shale producers to save the market. American shale production is expected to grow by 2.3 million barrels a day or more over the next five years, but that isn’t enough to make up for declining output elsewhere, says the IEA.
“To meet rising demand and offset underlying declines, the industry needs to approve production of around 18 billion barrels of new resources each year between now and 2025.’
It is not unrealistic ,then , to state that, if in this area of the world we can find the
resources , be nimble enough through efficient operation , to keenly adapt to new
technology as it arises , that ongoing development of the offshore is indeed possible ,
if not probable.
Not unlike obstacles of the recent past , this industry here is strong enough that , with
enlightened public policy , the future can be bright.
And this point is boldly asserted by the recent announcement of the $ 2.2 billion White
Rose West Project.
How fitting and timely!
In the fall of 1988 , knowing I would be resigning in the spring of 1989 , I secretly travelled to New York to meet with Mobil Oil. I wanted to know what their best information was on projects like Hibernia. Could I get some personal assurance that the future was promising.?
This was a confidential exercise ; explaining my intentions of resigning and this was a personal undertaking.
I wanted to know what the chances were of more oil.
The company said yes, they would agree to see me ( one analyst in a secure room) and that the information provided would have to be confidential and I was to sign a confidentiality agreement . All was agreed.
So I asked three questions . They were:
Were there similar projects producing less oil than thought. No.
Were there similar projects producing around the same as predicted? No?
Were similar projects producing more . Yes!
So it has not been a surprise to me to see what has happened .
That was then , this is now!
And so we know that challenges will always be with us. And that change is a constant.
But just as we faced super challenges in the last forty years we are now better able to face and overcome the challenges of the future –going further afield to the Flemish Pass Basin , Orphan Basin which hold great promise and has attracted tangible industry investment and that new surveys show has potential of over 20 billion barrels of oil.
On June 7 , 1988 I opened this conference .
At the end of my remarks I said this ;
‘You and I , in our different fields , I in public policy and you in technology must be more creative . It is left to you and me to dream—-to smash down the conventional wisdoms of today and build a better tomorrow. ‘
I said another time : ‘That while I must worry about today, I must work harder for tomorrow because I want it to be better than yesterday.’
This is our perpetual quest !
A tremendous foundation has been laid through this organization !
We must now prevail!
We will not fail!
En Avant! Onward and Upward!
Thank you !