THE STANDING SENATE COMMITTEE ON ENERGY, THE ENVIRONMENT AND NATURAL RESOURCES
EVIDENCE
OTTAWA, Thursday, October 23, 2025
The Standing Senate Committee on Energy, the Environment and Natural Resources met this day at 8 a.m. [ET] to examine and report on Newfoundland and Labrador’s offshore petroleum industry; and, in camera, for the consideration of a draft agenda (future business).
Senator Joan Kingston (Chair) in the chair.
[English]
The Chair: Before we begin, I would like to ask all senators to consult the cards on the table for guidelines to prevent audio feedback incidents.
Please make sure that your earpiece is away from all microphones at all times. Do not touch the microphone. Activation and deactivation will be managed by the console operator. Please avoid handling your earpiece while your microphone is on. Earpieces should either remain on the ear or be placed on the designated sticker at each seat. Thanks for all that.
My name is Joan Kingston. I am a senator from New Brunswick, and I am the Chair of the Standing Senate Committee on Energy, the Environment and Natural Resources. I would like to ask my colleagues to introduce themselves.
Senator Arnot: My name is David Arnot. I’m a senator from Saskatchewan.
[Translation]
Senator Galvez: Rosa Galvez from Quebec.
[English]
Senator D. M. Wells: David Wells, Newfoundland and Labrador.
Senator Fridhandler: Daryl Fridhandler, Alberta.
[Translation]
Senator Youance: Suze Youance, Lauzon division, Quebec.
Senator Miville-Dechêne: Julie Miville-Dechêne from Quebec.
[English]
The Chair: I would like to welcome you here this morning. I am told that Mr. Jean-Philippe Prost, Director General, Analysis and Operations Branch at Natural Resources Canada is going to be the one giving the opening remarks. Would the others like to introduce themselves to the committee?
Ray Walsh, Regional Director, Fisheries Management, Newfoundland and Labrador Region, Fisheries and Oceans Canada: Good morning. Ray Walsh. I am the Regional Director of Fisheries Management in Newfoundland and Labrador.
Jackie Janes, Regional Director, Aquatic Ecosystems, Newfoundland and Labrador Region, Fisheries and Oceans Canada: Good morning. My name is Jackie Janes. I am the Regional Director of Aquatic Ecosystems for Fisheries and Oceans Canada, or DFO, also based in St. John’s, Newfoundland and Labrador.
Jean-Philippe Prost, Director General, Analysis and Operations Branch, Natural Resources Canada: Good morning. Jean-Philippe Prost, Director General in the Fuels Sector of Natural Resources Canada, or NRCan, based in Ottawa.
Cheryl McNeil, Acting Director, Offshore Management Division, Analysis and Operations Branch, Natural Resources Canada: Good morning. Cheryl McNeil. I am the Acting Director of the Offshore Management Division at Natural Resources Canada, based in St. John’s, Newfoundland and Labrador.
The Chair: Thank you. Mr. Prost, would you like to begin?
Mr. Prost: Thank you, Madam Chair, for the invitation to speak to the committee this morning.
[Translation]
My name is Jean-Philippe Prost, and I am a director general with the Fuels Sector at Natural Resources Canada. I am joined by my colleague, Cheryl McNeil, Acting Director of our Offshore Management Division.
I would like to start by acknowledging that we are gathered on the unceded traditional territory of the Algonquin Anishnaabe Nation.
[English]
I am pleased to speak with you about the offshore petroleum industry in Newfoundland and Labrador and the role of Natural Resources Canada.
The offshore petroleum industry in Newfoundland and Labrador has a rich history and is governed by a unique legislative and regulatory framework. In 1985, the governments of Canada and Newfoundland and Labrador signed an agreement known as the Atlantic Accord, which established a joint federal-provincial management regime for petroleum in the Canada-Newfoundland and Labrador offshore area.
The accord is implemented through mirror federal and provincial legislation known as the Accord Acts. The Minister of Energy and Natural Resources, and by extension Natural Resources Canada, is the federal lead working closely with our joint management partner: Newfoundland and Labrador’s Department of Industry, Energy and Technology.
The Accord Acts also established an independent joint federal-provincial regulator, which is the Canada-Newfoundland and Labrador Offshore Petroleum Board, to oversee safety, environmental protection, resource management and industrial benefits for offshore petroleum in this area.
As the committee may recall from its study of Bill C-49 last year, the board was recently renamed the Canada-Newfoundland and Labrador Offshore Energy Regulator to reflect its expanded mandate to include offshore renewable energy.
In the context of offshore petroleum, the Minister of Energy and Natural Resources and his provincial counterpart are responsible for specific items outlined in the Accord Acts.
Examples include making appointments to the regulator, approving the regulator’s budget, ratifying select regulator decisions known as “fundamental decisions” and making regulations. In addition, Natural Resources Canada is responsible for collecting offshore petroleum revenues, such as royalties, and for transferring the entirety to the province.
We also work closely with other federal departments and agencies whose mandates intersect with the offshore petroleum industry. Examples include organizations such as Environment and Climate Change Canada, which is the federal lead for climate policy; the Impact Assessment Agency of Canada, which is responsible for undertaking federal impact assessments of designated offshore petroleum projects; and Fisheries and Oceans Canada, which is the federal lead for matters such as the protection of fish and fish habitat and fisheries management.
Today, I am joined by two of my colleagues from DFO who are based in St. John’s. They introduced themselves earlier.
[Translation]
In recent years, Natural Resources Canada, working closely with provincial governments, regulators and stakeholders, advanced a number of important regulatory modernization initiatives such as the Frontier and Offshore Regulatory Renewal Initiative and the Atlantic Occupational Health and Safety Initiative.
These initiatives have modernized the regulatory framework.
More recently, the Governments of Canada and Newfoundland and Labrador made targeted changes to the petroleum provisions of the Accord Acts, or Bill C-49, which I mentioned earlier, including amendments related to land tenure, marine conservation and alignment with the Impact Assessment Act.
[English]
Beyond the legislative and regulatory framework, I would like to close by taking a few minutes to speak briefly about the industry in general.
Since the 1960s, there has been significant investment in the Canada-Newfoundland and Labrador offshore area, with over 500 wells drilled and over $80 billion of industry spending. This has led to a number of oil discoveries and, ultimately, production at four major projects, namely Hibernia, Terra Nova, White Rose and Hebron.
All these projects are located hundreds of kilometres offshore in the Jeanne d’Arc Basin, which is currently the only basin in Canada in the offshore area.
To date, these four projects have produced approximately 2.4 billion barrels of oil, and their remaining reserves are estimated at approximately 1.2 billion barrels. This means the existing projects are positioned to continue producing for multiple decades to come.
Most recently, the West White Rose facility, which is an extension of the White Rose project, is in the process of commissioning, and we are expecting the first oil in 2026.
Equinor’s proposed Bay du Nord project, with reserves estimated at approximately 1 billion barrels, is a potential fifth project that would be located in a new basin — the Flemish Pass. A final investment decision is expected by Equinor in 2027, and if sanctioned, the first oil is expected in 2031.
[Translation]
I will conclude by saying that, because of the nature of its location, offshore oil in Newfoundland and Labrador is not constrained and is available to both domestic and international markets. In addition, it is one of the least carbon intensive upstream production areas in the world.
As a final point, I would like to conclude by highlighting that the offshore petroleum industry in Newfoundland and Labrador delivers important economic benefits. It represents a significant portion of the province’s gross domestic product and results in hundreds of millions of dollars in annual royalties. The four producing projects employ thousands of people.
In addition, the province has a well-established supply industry with hundreds of companies providing goods and services.
[English]
Thank you for your attention, and we are available to answer your questions.
The Chair: We will start with some questions.
[Translation]
Senator Galvez: Thank you very much to our witnesses this morning. It is nice of you to come and answer our questions.
[English]
This is a very important subject: initiating more extraction of oil in a very delicate ecosystem. Therefore, it is extremely important that we have the right facts given by the right scientific experts. I was very astonished and surprised about an article from the CBC in 2022, saying that the union representing scientists at Fisheries and Oceans Canada, or DFO, accused lobbyists, industry, senior members of the department and at least one politician of undermining the work of members in Newfoundland and Labrador. This letter was leaked, and there is a lot of information there.
I want to know what is being done to have expert scientific data validated and confirmed for all these studies that you need to do in order to make a good assessment about whether this is a good idea and a good investment. What measures are in place to ensure the integrity of DFO’s scientific work?
Ms. Janes: Thank you for the question, senator. DFO provides expert information and knowledge to the lead regulatory authorities. The lead regulatory authorities are the Impact Assessment Agency of Canada for designated projects and the Canada-Newfoundland and Labrador Offshore Energy Regulator for environmental assessments. We have a number of processes. We have scientific advice processes. We will gather information and run science advice processes and then provide that rigorous information and expert advice to the lead regulatory authorities to help inform their analysis and decision-making processes.
Senator Galvez: I am asking specifically about this whistle-blower case in 2022. Was there any action taken? What is the result of what happened at that time?
Ms. Janes: I’m sorry, senator, but I’m not familiar with that whistle-blower case.
Senator Galvez: Can we send you the information and you can answer regarding this specific case?
Ms. Janes: Yes, please do.
Senator Galvez: You are right, Mr. Prost. Last year, we expanded the mandate of the regulator to include wind energy. Have you been provided with a comparative study on the economic, social and environmental reasoning and argumentation on why — at this specific moment when Canada has not attained any of its greenhouse gas emissions targets — we are not doing any wind energy, but instead we’re going into oil?
Mr. Prost: Thank you for the question, senator. Obviously, I cannot speak for why a decision has been made or not made in the past. The only thing I can say is that the purpose of Bill C-49 and the legislation that passed last year is to provide a legislative and regulatory framework to allow for the development of wind energy in the offshore area. After that, it is a question of investments and whether investors will decide to launch projects in the area. That would be regulated by the regulator that we have in place in Newfoundland.
However, I cannot speak to the timing of that decision.
Senator D. M. Wells: Could I ask Senator Galvez if she would circulate that question to the clerk so that we can all benefit from that question and response?
Senator Galvez: Yes. My office will send that.
Senator D. M. Wells: Thank you to the witnesses for coming. This question is for Mr. Prost, but whoever is able to answer, I would be happy with that. What is the mechanism for transferring the royalties or the financial benefits from the operators to the province?
Mr. Prost: The way it functions is that the money is collected by NRCan — by the federal government — and then retransmitted to the province. The money is not going directly from the operators to the province but channelled through the federal government. As I said, the entirety of the royalties that we collect on behalf of the province is sent to the province.
Senator D. M. Wells: Is it as a direct transfer?
Mr. Prost: Yes, dollar for dollar.
Senator D. M. Wells: I will ask about the Bay du Nord. I know that’s the first potential deepwater production. Can you talk about the differences between the existing production, which is not in deep water, and the potential for further deepwater exploration and production?
Mr. Prost: Thank you for the question. Yes, you are right: The Bay du Nord is quite distinct from the other projects that we currently have operating offshore. The main difference is that the Bay du Nord is situated more than 500 kilometres from the shore, whereas the others operate within 300 kilometres or 400 kilometres. That’s a big difference.
The other difference is that the Bay du Nord will be situated outside of the 200-nautical mile exclusive economic zone, or EEZ, and it is therefore a project that will be undertaken under UN regulations, specifically the United Nations Convention on the Law of the Sea, or UNCLOS. That’s a big difference, because that is another set of regulations that will apply to the project.
As you mentioned, since the project is in very deep water, the seabed will be one kilometre from the platform. That’s also a significant difference compared to the other projects because it is more technically difficult to operate at that distance from the shore.
Senator D. M. Wells: Is there comfort that Equinor is doing that, as they drill at those depths in Norway right now?
Mr. Prost: I cannot answer that question. As far as I know, the Bay du Nord will be the first project in the world to be that far from the shore and at that depth.
Senator D. M. Wells: You noted that offshore Newfoundland is among the least carbon-intensive petroleum production in the world. Can you expand on that, please? Tell us what your measurements are and how you make the distinction between other projects, including land-based projects.
Mr. Prost: As I mentioned, the offshore area is emitting less carbon. To give you a couple of numbers, roughly speaking, the offshore area of Newfoundland is producing between 4% and 5% of all the crude oil that is being exploited in Canada, but the emission is 0.6%. That gives you an indication of that.
When it comes to the carbon intensity of the oil produced offshore, based on our calculations, a barrel of oil produced in the offshore area contains 13 kilograms of CO2 equivalent per barrel. If you compare that to conventional light, which is the equivalent that would be produced onshore, there are 49 kilograms of CO2 equivalent per barrel. You can explain that by the fact that the way we operate offshore is quite different technically speaking from the way we operate onshore. The quality of the crude also makes a big difference.
[Translation]
Senator Miville-Dechêne: Thank you for being here.
I am not an expert on matters of petroleum, so I am going to ask you a bit of a basic question. You mentioned 500 drill sites. There are also reserves that have been developed and are now capped, meaning that covers are put in place to keep the gas in. Explain to me a little bit what is done after the petroleum has been extracted to ensure that the rest does not seep or spill.
Mr. Prost: That is a very technical question. I am not sure I can answer that precisely and, most importantly, accurately. I can get back to you with a written response if you would like, since I do not think my colleague would be able to give you a technical explanation of how that is done.
Senator Miville-Dechêne: Is that the case, Ms. McNeil?
[English]
Ms. McNeil: I can’t offer a technical explanation. What I would say is that we have a very robust regulatory regime in place in the offshore area, which has environmental protections built in. The Canada-Newfoundland and Labrador Offshore Energy Regulator administers those regulations.
There are a number of plans that an operator would need to submit in order to produce in the offshore area and in order to ensure that they produce safely. There are a number of mechanisms that the regulator has in place to ensure that happens. We look at it up front, ensuring that those rules and the regulations are in place to ensure that the environment is protected.
[Translation]
Senator Miville-Dechêne: I would like to get an easily understood written response, if possible.
I would like to come back to the Bay du Nord project. If I understand correctly, it has not started yet? Has it been suspended? What is happening on that front?
Mr. Prost: That is right, the Bay du Nord project has not started. Indeed, they have not started, and no work has been undertaken. The project has not yet been approved by Equinor, which is the operator that will manage the project. A couple years ago, Equinor put the project on hold due to fluctuating petroleum prices and the complexity of the project. They put the project on hold not to stop it, but to try to find a way to make it commercially viable. Work is ongoing. We hope that the company will make an investment decision in 2027, with a projected start date of 2031. The department, the province and Equinor are in discussions to ensure that the project can move forward.
Senator Miville-Dechêne: The year 2031 is roughly when global demand for petroleum will peak. Will this project be viable?
Mr. Prost: Equinor would probably be in a better position to answer that question. Projections indicate that there will be a plateau, followed by a slow decline in demand for petroleum. That said, there will always be demand for petroleum and a need to supply petroleum to the markets. As I pointed out earlier, the advantage of petroleum produced in offshore Newfoundland is that it is relatively low in carbon. That is an attractive solution for a number of countries which, even though they are going through the energy transition, still need oil and could have access to oil that is relatively low in carbon.
Senator Youance: Thank you to the witnesses for being here.
Mr. Prost, you gave the figures for the number of oil barrels that have already been extracted, which is around 2.4 billion. That leaves 1.2 billion barrels, or about half of what has been developed. If we make long-term projections, can development stay viable? I ask because the quantities are going to decline. Do we not have an obligation to keep reserves for future generations?
Mr. Prost: Thank you for your question.
The first thing I would like to clarify is that the figure I mentioned of 1.2 billion barrels is the number of barrels in the reservoirs that are currently being exploited. For example, I mentioned that Bay du Nord was estimated to have reserves of a billion barrels. That is another billion barrels on top of that figure.
I would also add, as I said in my opening remarks, that there is currently only one basin off Newfoundland that is being exploited, but the offshore area of Newfoundland is very large, and reserves have been identified in other locations. If new projects were implemented or other reservoirs were opened, that number could increase. I do not have the figures with me right now, but it is relatively difficult to estimate how much petroleum is contained underground, especially when it is under the sea. Research has been done and indicates that there are still vast reserves of oil and natural gas off the coast of Newfoundland and Labrador.
Senator Youance: I would like to continue in the same vein as Senator Miville-Dechêne’s question. You mentioned regulations to ensure that everything goes smoothly, that the technical aspects of closing the wells go smoothly. I could also give the example of the noise from seismic surveys conducted at the bottom of the sea, which disturb marine wildlife and birds. My question is the following: Do you have any oversight responsibilities when it comes to operational activities? If so, how is oversight carried out? Are there any public reports on the matter?
Mr. Prost: As I mentioned, the regulator is responsible for ensuring that offshore operations comply with regulations. It is not Natural Resources Canada’s responsibility but that of the regulator to ensure that this is done. The regulator must also ensure that this is done in accordance with environmental protection plans developed by operators and validated by the regulator. There are a number of measures that are taken and checks that are done by the regulator. If you are interested in having more details on that, I understand that you will be meeting with the regulator next week; he will probably be better able to answer that question about how he ensures that regulations are followed.
[English]
Senator Arnot: I have three questions, Mr. Prost. Sir, after the 2018 spill and the 2024 fines that were imposed, what new requirements has NRCan put in place for real-time spill and wildlife impact reporting?
Ms. McNeil: I’ll take that question. Thank you, senator.
We haven’t put anything specifically new in place since 2018 or 2024. We did undertake amendments to the Accord Acts through Bill C-49, as Mr. Prost mentioned. In that, we ensured continued environmental protections, but we did not specifically, to my knowledge, put anything new in place.
Senator Arnot: Thank you. Mr. Prost, what emissions budget has NRCan estimated for the Atlantic offshore area between now and 2035? How do you expect projects like the Bay du Nord to stay within it without shifting the burden to others?
Mr. Prost: Apologies but could you repeat your question?
Senator Arnot: What emissions budget has NRCan estimated for the Atlantic offshore area between now and 2035, and how do you expect projects like the Bay du Nord to stay within that emissions budget?
Mr. Prost: What do you mean by “emissions budget”?
Senator Arnot: Third question: Has NRCan modelled scenarios where late-decade projects become uneconomic due to shifting demand in the world, and have those risks been shared with the provinces and labour partners?
Mr. Prost: Are you talking about the possibility of the decommissioning of projects? As I said, the projects that are currently operating have a lifespan of several decades. I’m not sure I understand your question.
Senator Arnot: Answer the questions in writing, please, sir. Thank you.
Mr. Prost: Will do.
Senator Fridhandler: Mr. Prost, for clarification, when you spoke about the remaining 1.2 billion, I think that was the number of remaining reserves. I think it’s important — and you can correct me if I’m wrong — that you’re talking about recoverable reserves. There is a very small percentage of reserves in any oil reserve formation that gets recovered under current technology. There is also the potential in the decades to come that we will see methods that will improve recovery. I know it’s more onshore, but offshore as well. I think the possibility is that depletion isn’t the entire reserve. It’s a small percentage of what is in the reserve.
Mr. Prost: That is correct.
Senator Fridhandler: You spoke about the direct revenue benefits to Newfoundland from royalties. Do you track the indirect benefits in your department to Newfoundland from the offshore operations?
Mr. Prost: We do not track that as a department. I’m pretty sure that the province probably is tracking that information, but if you’re interested, I’m sure that we could find that information for you.
Senator Fridhandler: We have a number of witnesses. There are a lot of different silos of expertise that we will be hearing from as we move through this.
Regarding active drilling now in licences offshore — aside from what has been done, as we have talked historically — what are the prospects in the near term that are on the table now for further activity offshore, if any?
Mr. Prost: There are different types of drilling, as you know. There is exploratory drilling and production drilling. In terms of exploratory drilling, over the past couple of years, there was no drilling. As far as I know, there is no exploratory drilling that is currently contemplated in the offshore area.
When it comes to the future, as you may know, there is a call for bids that is currently active in the area. The call for bids opened in April and will end early November, so we’ll know soon whether there is interest from investors to drill new exploratory drills.
That being said, the West White Rose project is being commissioned at the moment and will drill wells for production. That’s the current activity that we know of. As I said, if the Bay du Nord were to be approved by Equinor, that will be new drillings being made.
Senator Fridhandler: Relative to drilling that is occurring offshore globally, are there barriers to entry in the Canadian offshore that may be causing the reduced activity, or do you think we’re on par and competitive relative to the attractiveness of drilling?
Mr. Prost: That’s a hard question to answer because given the decision made by companies to drill, they are taking into consideration a lot of different factors. There is the expectation of demands and the price of oil and the relative weight they put into different investments in their own portfolios. It’s hard to pinpoint one reason why that is.
In terms of barrier to entry, obviously only big players are able to do that, and most of them are already operating in the offshore area of Newfoundland. I know very well the regulatory framework and also the area. I think that’s more for economic reasons that we have that current situation.
Senator Fridhandler: We’ve seen the decommissioning of offshore Nova Scotia production activity. Are there lessons learned, and is it comparable? I know it’s mostly gas offshore Nova Scotia, and it’s probably quite different, but are there lessons learned from that decommissioning activity?
Mr. Prost: I have to admit that I have limited expertise in terms of the decommissioning of the Nova Scotia area, but I will say that, yes, obviously there are lessons learned. There are also lessons learned from our international partners. We are in relations with other jurisdictions that are operating offshore and have better experience in decommissioning oil infrastructure. We have a lot of knowledge in terms of how to handle these types of situations.
[Translation]
Senator Galvez: Mr. Prost, I am shocked that you are unable to answer my colleagues’ questions, especially the very relevant questions from my colleague Senator Arnot. When I read about your mission, the following comes up:
[English]
Natural Resources Canada’s responsibility for climate commitments include leading Canada’s 2030 Emissions Reduction Plan, advancing the net-zero transition in the natural resources sector and supporting federal operations to become greener and more climate resilient, yet for most of the questions directed with respect to the increase of emissions, the impact on the environment and our engagement with net zero by 2050, you have said it’s better to ask Equinor, because it depends on how much money there is or what is the bidding or what are the contracts that are going to be signed.
How do you personally see your role in helping Canada attain its legally binding targets to reach net zero by 2050? I understand the Prime Minister says, “I don’t want to talk about targets. I want to talk about results.” So talk to me about results.
Mr. Prost: Thank you for your question. With all due respect, I don’t think that my personal opinion is important here in terms of what my role is. My area of expertise in NRCan is in the regulation of the offshore area from a technical standpoint. When it comes to the environmental assessment or when it comes to the emissions, that’s not under my responsibility. That’s why I can undertake to get information from my colleagues at NRCan to answer these questions, but I’m not in a position to answer these questions.
Senator Galvez: Isn’t your department in a position to answer these questions?
Mr. Prost: As I said in my opening remarks, we are not operating in a vacuum. When it comes to the environmental targets, we work with our colleagues at Environment and Climate Change Canada. We are working with the Impact Assessment Agency of Canada. We are working with our colleagues at Fisheries and Oceans Canada and with the regulators.
Senator Galvez: Will you find the person or the group or your collaborator — because it is supposed to be a whole-of-government approach — that can answer the questions that have been asked today and send it to the clerk, please?
Mr. Prost: We will answer in writing.
Senator Galvez: Thank you.
Senator Arnot: Ms. McNeil, will NRCan publicly identify and exclude ecologically sensitive areas before lease offerings and then publish the data used?
Ms. Janes: My understanding of the way the call for bids process works, which my colleague outlined, is that they open up areas, and the offshore companies can express interest in those areas. Some of the areas recently put out in the call for bids do cut across existing conservation areas, such as the Northeast Newfoundland Slope. There is overlap between those two things. They are not excluded from the call for bids.
Senator Arnot: Is NRCan developing a regional cumulative effects baseline beyond just project-by-project reviews? Will that be reported publicly each year?
Ms. McNeil: There was a regional assessment conducted under the Impact Assessment Agency of Canada with respect to petroleum in the Newfoundland and Labrador offshore area. This is what we rely upon with respect to looking at cumulative effects in the offshore area.
Senator Arnot: Will every project face a binding emissions budget under the cap? What will happen if that is exceeded?
Ms. McNeil: That is a question for our colleagues at Environment and Climate Change Canada. For the Bay du Nord project, as part of the environmental assessment that was approved by the federal government in 2022, there is a condition that the Bay du Nord project must achieve net zero by 2050. That would be the one new project being contemplated in the offshore right now. That is a condition that is placed on that project.
Senator Arnot: When will all environmental monitoring data, including the impacts on seabirds and marine animals, be made fully open and machine readable?
Mr. Prost: I have a hard time answering that question because it’s not in the mandate of my department. I suspect that is a question that will have to be asked of Environment and Climate Change Canada.
Senator Arnot: Do current bid terms actively encourage workforce transition into offshore wind and marine renewables? If so, how is that enforced?
Ms. McNeil: There are not specific conditions with respect to the workforce. It wouldn’t be something that would fall under the jurisdiction of Natural Resources Canada. With respect to offshore Newfoundland, there are currently no plans in place with respect to offshore wind. There is a call for information for offshore wind, which is open in the Canada-Nova Scotia offshore area right now.
Senator D. M. Wells: Thank you, panel. I want to ask a couple of things. There have been a number of peak oil predictions over the generations. I know the first was in 1970 and then 2000. It’s a moving number. A lot would depend on the economics of the petroleum industry worldwide.
With the new technologies that regularly occur — like directional drilling, deepwater exploration and drilling and the opening up of other basins besides the Jeanne d’Arc Basin, the Flemish Pass and the exploration in the Orphan Basin — are there any assessments of future potential in the other basins besides the one that is producing now and the one that the Bay du Nord will be in and also the potential for the Orphan Basin?
Mr. Prost: Yes, it’s not directly by my department, but the provinces, the regulators or OilCo, which is owned by the province, are doing these types of assessments. As I said, they have launched a series of assessments of the potential outside of the current basin — the Jeanne d’Arc Basin — which is currently being exploited. Yes, there is prospective research such as seismic data surveys being done to assess the potential of the areas in the Newfoundland and Labrador area.
Senator D. M. Wells: Thank you for that. I have a question for Mr. Walsh. Is there a level of conflict that DFO has to deal with regarding the petroleum sector and the fisheries sector? If so, how is the conflict resolution dealt with?
Mr. Walsh: Thank you for the question, senator. Certainly, we have fishing activities in the offshore areas for groundfish, shellfish and other species. We maintain regular dialogue with our partners and stakeholders in the fishing industry. Information that we receive from our partners and information that we have within DFO around historical fishing activity and current fishing activity is shared through our colleagues in Aquatic Ecosystems, which is provided to the regulators and those involved in the assessment of impacts.
Senator D. M. Wells: Anything under the United Nations Convention on the Law of the Sea, or UNCLOS, and anything on the seabed or below the seabed of the continental shelf is controlled by the neighbouring state. Outside the 200-nautical mile limit, anything in the water column is under the regulatory control of the Northwest Atlantic Fisheries Organization, or NAFO. For projects that are outside the 200-nautical mile limit but are still under the continental shelf, specifically the Grand Banks, what mechanisms are in place to mitigate any issues that member states under NAFO — not including Canada — would have?
Mr. Walsh: As a member of NAFO, Canada provides information through an information-sharing regime on any activity — research or exploratory — with NAFO and subsequently to its members. Then the members are able to participate directly in the assessments and provide input directly to the Impact Assessment Agency of Canada and others that are doing work on NAFO. We facilitate the information, but then it’s up to the contracting parties to interact directly.
Senator D. M. Wells: Is that on a regular basis or during annual general meetings? How is that done?
Mr. Walsh: Right now, there are semi-annual updates provided by Canada in coordination with the regulator in Canada, sharing information through Canada’s delegation to NAFO on a semi-annual basis.
Senator D. M. Wells: Do member states respect the petroleum activities highlighted outside the 200-nautical mile limit?
Mr. Walsh: I’m not aware from my involvement of any direct conflicts. Maybe that is something that other colleagues have information on.
Senator D. M. Wells: Thanks so much.
[Translation]
Senator Youance: I wanted to talk about the rights of Indigenous peoples. The United Nations Declaration on the Rights of Indigenous Peoples emphasizes that these groups have the right to free, prior and informed consent for natural resource development projects. That principle is also in Canadian law. Who are the holders of Indigenous rights in offshore regions, and how is that principle of prior consent and consultation applied in the region?
Mr. Prost: There are two parts to your question. I will maybe start by answering the second part, about rights.
The operations currently being carried out in offshore areas are far removed from the traditional fishing grounds of Indigenous peoples, so there is no direct impact. That said, there may be an indirect impact. As you said, the federal government is responsible for ensuring that there are consultations and consent. The way the Canadian government approaches this issue is by incorporating those consultations into the various existing regulatory or review processes. As a result, when the impact agency conducts an impact assessment, public consultations are held and Indigenous peoples are consulted within that framework. The exact same is true for regulators; they have the tools available to ensure that those consultations are carried out.
I would add that under Bill C-49, which came into force in June, the regulator has the option of creating a consultation fund to facilitate consultation with the various communities.
Senator Youance: Can you talk about what the consultation process looks like, or would another organization be better suited to answer this question?
Mr. Prost: The regulator could certainly answer in detail. It can be done in various ways; direct consultations can be held with submissions or public consultations.
There are various ways to ensure that consultations are carried out. There are also various ways for the regulator to ensure that operators, which are also in the process of developing their operating plans, carry out those consultations. It is a tool that exists.
Senator Youance: Thank you.
Senator Miville-Dechêne: Mr. Prost, I will try to rephrase my question. You said that your specialty was regulation, so are there any mechanisms in place, or should those who exploit petroleum create a fund for potential disasters, particularly in terms of closing wells and of everything environment-related?
Is there anything in place? Are petroleum companies required to set aside funds, or are they waiting for a disaster to happen, at which point the government needs to rush in and fix the problem? I am talking about potential spills.
Mr. Prost: Yes, the operating principle for offshore operations is the polluter pays principle. That means that when there is a spill, it is the operator’s responsibility to contain it and dispose of it.
For that to happen, the government ensures that operators have the necessary financial resources to be able to handle those issues. A billion dollars must be set aside to deal with potential spills, given that no-fault liability would apply in that case and the operator would be fully liable.
Senator Miville-Dechêne: That is a very specific fund. Are they asked to set aside money for certain environmental issues that are perhaps a bit less serious, such as environmental protection or the closing of wells that I mentioned earlier? Are there also responsibilities on that side? Do you require wells that no longer contain oil to be cleaned up within a specific time frame?
Mr. Prost: The regulator who managed the relationship with the operator is responsible for ensuring that. As I said, ensuring that there is $1 billion available for operators, that is what the fund…. In fact, it is not a fund, but the government makes sure that they have a strong enough backbone to deal with that kind of situation. That is the context.
Senator Miville-Dechêne: We are talking about a billion dollars; is it withdrawn from their account and put into a separate account, or are you just making sure that they have the money? We know that in some places in Canada, there is not always enough money to deal with the aftermath of petroleum extraction.
How do those billion dollars technically work?
Mr. Prost: The operator must prove that it has assets worth a billion dollars.
Senator Miville-Dechêne: Very good.
[English]
Senator Arnot: Mr. Walsh, on the spill response lessons learned, what concrete operational changes to closures, reimbursements and wildlife recovery have been implemented since the 2018 spill?
Mr. Walsh: Thank you for the question, senator. I’m sorry, but I don’t know if any of my colleagues have information on that, but that would be outside of my area of expertise.
Senator Arnot: I’ll try question number seven. On cod recovery, how is DFO ensuring its cod rebuilding plan is directly reflected in offshore licensing decisions?
Mr. Walsh: Thank you, senator, for the question. Currently, the stock status for northern cod was updated based on an assessment in 2024. It’s no longer considered in need of rebuilding. From a DFO framework, it’s currently at or near the healthy zone, so there is no need for a rebuilding plan requirement anymore.
Senator Arnot: On Fisheries and Oceans Canada’s veto, what specific criteria would cause DFO to block or exclude a lease area? Are those criteria public before bidding begins?
Ms. Janes: DFO doesn’t exclude lease areas. The Canada-Newfoundland and Labrador Offshore Energy Regulator puts out the call for bids. Companies that have an interest in those areas will express an interest to the regulator. If that eventually results in a licence, how the operators will be impacted by that will depend on if there are other provisions in place — for example, if there is a marine refuge or a marine protected area. In a marine protected area, there is no oil and gas exploration or production permitted. In a marine refuge, there is the potential to have exploration under certain conditions. There are more rigorous pre-drilling and post-drilling requirements put on the operator.
We have had exploratory drilling in the Northeast Newfoundland Slope. That occurred a couple of years ago. BP was the lead company. That well did not result in a find, so there was no follow-up drilling done in that marine conservation area.
If an operator were to look to have a production licence in a marine conservation area, then there would need to be further consideration in that area, because of its protected status, as to whether the area of the licence would have to be carved out of the marine conservation area, but that has never occurred in the Newfoundland offshore area to date.
Senator D. M. Wells: Again, thank you panel. I want to explore a little more about the conditions around liability and the amount that the operators have to have in reserve should there be a wellhead spill. I don’t think there has ever been a wellhead spill in the Newfoundland offshore.
You mentioned $1 billion. That’s the condition of licence for them to have proven $1 billion. That could be through the banks. I’m sure the large companies like Chevron and ExxonMobil would easily have that. That would not prohibit a civil suit either, I would imagine, to have additional resources.
Mr. Prost: That’s right. The legislative regime set three components of financial requirements when it comes to operators. The first, as I mentioned, is absolute liability, so it’s no-fault liability. The second is financial responsibility, which is to ensure that the regulator has unfettered access to funds for cleanup and remediation. And the third is the financial resources, so that’s the $1 billion in assets to correspond to the absolute liability limit. These are the three financial requirements for operators to be able to operate in the offshore area.
Ms. McNeil: I would add that $1 billion is a threshold. If the well was seen to be in a riskier area, it could be increased by the regulator as well.
Senator D. M. Wells: My last question is about the potential exclusion zones for production. If there is an exclusion zone based on corrals or whatever special properties are in the area, does that preclude production with respect to directional drilling underneath the sensitive area? Or has that been done and not been tested?
Ms. Janes: That’s a great question, senator. My understanding is that in a marine protected area, all exploration and production are prohibited. I’ve not come across the question about directional drilling, so I would need to look into that and get back to you.
Senator D. M. Wells: Sure, because I don’t think it has happened and therefore it has not been tested, but it is interesting because the marine protected area would be the marine part and perhaps not below the marine part. Thank you, and I thank the panel as well.
Senator Galvez: My last question relates to understanding how these things work. We have seen some projects in which the government says, “I will facilitate this. I will build a pipeline for a company, and it is an investment.” So we invest $20 billion or $30 billion, and then it turns out that it was not an investment. Actually, it is a cost, and it is an expense, and it will take a long time.
In this case, who oversees the economic plan so that we don’t find ourselves in the same situation? Who did the economic impact analysis? Was this a lawyer or company who did this? Are we sure that this will work? When will we recoup our money if there is any assistance? I’m sure the government will assist in some way somehow. How will we recoup our money?
Mr. Prost: In the offshore area of Newfoundland, there is no direct investment from the government in these operations. So that question does not apply.
Senator Galvez: There will definitely be impacts. The company will not face these costs. We are going to face these costs, so there will be impacts. Check any project.
Mr. Prost: It’s hard to answer that question directly because it is a hypothetical question. As I said, there are financial requirements put on the operators in the offshore area, and there is no-fault liability. From that perspective, that’s what the regulatory framework dictates to handle. If you are talking about direct investment of the government in projects, that’s not the case in the offshore area of Newfoundland.
Senator Galvez: Thank you.
The Chair: That brings us to the end of our time with you. Thank you very much, Mr. Prost and all of the others who answered our questions. I would like to remind you that there were several questions that required a written answer. The clerk will be in touch with you about those, and we would like to see them in a couple of weeks. That would be great.
Mr. Prost: We will answer all these questions.
The Chair: Thank you again for your time. We appreciate it.
(The committee adjourned.)