Mr. Speaker, on September 12, the Minister of Aboriginal Affairs and Northern Development issued offshore exploration leases to more than 9,000 square kilometres of the Beaufort Sea to Franklin Petroleum, a U.K. company, for $7.5 million in promised work.
Franklin has no experience in the Arctic. According to its most recent corporate filing, it had $220 in the bank and a corporate value of minus $32,000. It is unlikely this company will actually do any work. Instead, it now has exclusive control over a vast area of the Beaufort Sea.
Now that Franklin has these leases, section 85 of the Natural Resources Development Act allows it to transfer the leases to anyone by only notifying the minister of the transfer. No approval is required.
Internationally, it is common that transfer of leases require ministerial approval. This is how things are done in the North Sea. Norway requires approval of the minister before licences can be transferred. Its law states:
Transfer of a licence or participating interest in a licence for petroleum activities may not take place without the approval of the Ministry.
Franklin Petroleum could just sit on these leases and do no work without any penalty. No jobs will be created while companies able to do this work will be excluded for many years. How does this help the economy or work in the national interest of Canada?
The oil patch is scratching its head as to why the minister did this when he could have decided to not issue any leases as per the Canada Petroleum Resources Act which states:
The Minister is not required to issue an interest as a result of a call for bid.
The Canadian Business magazine, on October 10, questioned this decision, stating:
How could a little-known British firm with two employees and no producing assets end up owning the largest oil lease ever issued in the Canadian Arctic?
Long-time oil patch analyst, Paul Ziff, said:
We're talking about one of the most environmentally sensitive areas in Canada.... This type of award flies in the face of public concern.
Nigel Bankes, professor and chair of Natural Resources Law, University of Calgary, said:
...I don’t think that we have seen a give-away on this scale since the giveaways that occurred before the first major discovery of oil and gas resources in the Arctic in Prudhoe Bay (Alaska) in 1969. Following that discovery federal policy makers resolved to be more demanding of international oil companies. This most recent decision looks like a step back in time.
Professor Bankes has put forward three recommendations that the minister should have followed, if he were doing his job.
First, carry out a strategic environmental assessment before making the significant decision to open up a new area to exploratory drilling.
Second, develop and implement a scheme for the pre-qualification of bidders in an effort to ensure that those who are bidding on these blocks have the assets, the experience and the safety record to engage in this type of activity.
Third, tighten up the bidding system, either to change the standard practice to a cash bidding system, or to require that a minimum work bid must at least cover the cost of the estimated exploratory well that must be drilled during the first period of the licence.
Having a strategic environmental assessment actually follows the current cabinet directive on these types of development and is the process used in developing the off shore oil and gas off Newfoundland and Nova Scotia.
Unfortunately, the minister did not do his job and failed to protect the national interests of Canada by not doing due diligence on these leases. This is a disgrace.