Province gets $150M as Hebron work goes elsewhere

James
James McLeod
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At a news conference Thursday, Premier Kathy Dunderdale (centre) announced a $150-million payment to the province in compensation for the  building of a third module for the Hebron offshore oil project. Two modules will be built at Bull Arm and Marystown. Dunderdale was joined for the announcement by Natural Resources Minister Jerome Kennedy (left) and Finance Minister Tom Marshall. — Photo by Gary Hebbard/The Telegram

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.”

 

jmcleod@thetelegram.com

Twitter: TelegramJames

 

Organizations: Exxon Mobil, H. Bliss Murphy Cancer Clinic, Newfoundland and Labrador Oil Industry Association

Geographic location: Hebron, Newfoundland and Labrador, Happy Valley Goose Bay

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Comments

Recent comments

  • Observer
    November 07, 2012 - 13:39

    A Business Man, Having read your posts, I believe you are in disguise. Only interested in the Avalon and lining your pockets while having total disregard for the rest of Newfoundland and Labrador leads me to believe you are actually a member of Cathy Dunderdale's circus. If you are not a member of Cathy's circus, you should be, you posess all the required attributes and then some. It's people like you that make the world a better place. "Hopefully you understand sarcasm when you read it." Have a wonderful day.

  • John
    October 13, 2012 - 22:41

    I'll start by saying I'm sure NL has a more than competent skilled workforce-who else would have built 2/3rds of what Alberta enjoys?? With that said, I agree with the gov't. Sometimes you are better off walking from these big organizations with their stupid rules and reg's that need to be followed. I have seen companies fall to some of the antics these firms impose. Let others do the work and take the risk. In the meantime, build and enjoy the educational and long term facilities being offered to you.

  • Sumgudby
    October 13, 2012 - 07:47

    Another Newfie joke!!!!!! Way da go Kathy , I guess the big boys showed how unprepared you are to play at this playground . Worse again is your control over the cabinet members became very real when Jerome said he as unwilling to take on the fight because of the uncertain outcome.. Jerome Kennedy afraid of a fight . I guess that's what happens when you are neutered by your leader. This money is a joke and I would guess a tax deduction because of its applied status to the different organizations . If this is the case the oil company gave nothing. The person who spun this as a good deal for Newfoundland and Labrador must be the same person who spun the the good, bill 29 is for the province. Kathy wake up your advisers are causing you a lot of hurt. The things you are doing may be good for he province. However with all the hold back of information and bill 29 you have created a mind set of distrust . Time to wake up girl !! This lack of trust is not going away.

  • Reality Check
    October 12, 2012 - 22:21

    When Newfoundland can offer skilled employees on all levels (from entry level to top management), then more businesses will come ....until then, people will be moving to the mainland to find work and Newfoundland will be filled with empty towns and villages. NL has to wake up to the reality of the situation on the Province. People are going to Alberta and other areas of the world to find decent work. NL can either choose to thrive and worry about developing skilled workers or do nothing about it except complain.

  • MBC
    October 12, 2012 - 14:36

    Did these 3 MHAs play a role in Dumb, Dumber and Dumber? Or maybe they took a course in Economic's at our 2nd rated university: know only for low tuition. If these benefits are so good why not let Modules #1 and #2 be built offshore as well????

  • Dan
    October 12, 2012 - 14:23

    @ A business man, without high paying jobs in the trades, govt won't get the taxes it needs to hire those people you want in health and education. I agree we need more in health and education but the money for them has to come from somewhere...

    • a business man
      October 12, 2012 - 17:35

      Not true Dan. Any province, state or country can have a vibrant economy that does not encompass high paying jobs in the trades. I want us to become one of those jurisdictions. We can have technology, marketing, education, health care and many more industries that may lots of taxes. That is why this agreement is good: the government is supporting the development of white collar jobs in the health sciences and not supporting the development of blue collar trades jobs. Sounds great to me!

  • sparky
    October 12, 2012 - 14:18

    I was going to give "my 5cents worth" but from reading the comments here,I can see that unimpressed has said it all! You`re a very smart man sir.

  • Calvin
    October 12, 2012 - 13:37

    Jack, am I missing something here? Are these buildings the government is talking about going to build themselves? Or maybe just drop out of the sky already constructed? No, they are going to be built in Newfoundland by Newfoundlanders. And the construction will be done by, you guessed it, tradespoeple. Only thing is, a wider variety of tradespoeple will be required for these constrcution projects, whereas the oil project employs specialized tradespeople, not all of which can be found in the Newfoundland workforce. Hence, jobs going to workers from outside the province. If all these workers from Alberta you speak of were coming home for big projects, would the province be as adamant as it is that there is going to be a labour shortage? Apparently we are short workers now, what happens when another big project starts and there are no workers? Jobs go outside the province. Personally, I think the government should have either held out for more money, or held out until Exxon agreed to build the DES here, but they didn't. So why blast something good just for the sake of it?

  • a business man
    October 12, 2012 - 13:34

    Dan, with all due respect, I am more interested in health care jobs and education jobs. I have no interest in finding jobs for apprentices, or in developing our expertise in construction. I am quite happy with the agreement. And YES, MUN is a well know university with credentials known around the world.

    • Brad
      October 12, 2012 - 15:33

      I find it ironic you slate the construction workforce is lazy and too entitled, but yet you are probably too lazy to train new workers yourself. Quite the double standard..

  • a business man
    October 12, 2012 - 13:03

    How pathetic is your workforce when a company decides to pay 150M to the government to avoid working with local workers? pathetic! like a previous poster said, you must be incompetent, unskilled and inefficient. It says a lot when a company whose sole objective is profit decides that a 150M penalty is better than working with newfoundlanders. It says when a company is willing to pay twice to avoid newfoundland's workers. Frankly, I cannot blame them. Overall, this is good for the company and good for every newfoundland citizen. Sure, SOME people miss out on job opportunities, BUT everyone wins with a new science building at Memorial, with new operating rooms at the H. Bliss Murphy Cancer Clinic, and with extensions to the long-term care facilities. This is actually perfect. We make a deal that denies a small number of people to chance to work, and in exchange, WE ALL get better health care services. This is actually quite democratic. The majority is clearly served with this decisions, even though a small number of people suffer. This is great! The Premier is remind us why we put her in office.

  • David
    October 12, 2012 - 11:32

    Here's something to think about: How unprepared, incompetent and/or unreliable is a province's work force when a company feels that paying out a penalty of $150 million is a better, risk-management decision for them as a company than to deal with all the variables in Newfoundland's labour sector? No one lays out $150 million just for 'kicks'....it is a pretty damning indictment of this province's track record in offshore oil work to-date, no matter what the 'spin' from government is.

    • You must be fresh off the turnip truck
      October 12, 2012 - 21:29

      More like how loose of a contract was it that the company would gladly pay a $150 million penalty and ship the work off elsewhere. We don't know what was given up in royalties and rights to 'secure' the work. I'd bet that it was worth a hell of a lot more than $150 mil. Dunderdale was part of Williams' all star negotiation team. That's enough for me to know we got screwed.

    • david
      October 13, 2012 - 10:39

      If E-M paid $150 million, you can be pretty sure that it was worth that much to them at the very least...quite likely more. Yes. No argument. I get it...do you? So what does that bit of reality tell you? That the risk and cost of TRYING to do business in Newfoundland is worth AT LEAST $150 million to avoid having to deal with it. If E-M was, in a moment of complete candor, admit that the value to them of getting out of this coerced swindle was $300 millon, and they only had to pay $150, that would tell us that the cost of doing business here is TWICE as bad as they've revealed with this settlement.....so think about that one, too....Einstein.

  • Worst government ever
    October 12, 2012 - 11:16

    The health care infrastructure I could understand but a new science building for the university? Come on, if it were not for imported students that facility would be downsizing left right and center. First government gives away the work, then they use our money to give away education for foreigners. What a crock

  • unimpressed
    October 12, 2012 - 09:26

    Kudos to exxon for standing up to NL and Labrador. I am surprised that any corporation would do work in Nl and Lab when the culture of trades is to strike at will . They call it their right ,Corporation call it extortion. Hope this is a wake up call to those trades who try to hold big corporations ransom. It is a big world with lots of choices and Newfoundland should realize that they are only small fries. Learn from business friendly Alberta,

    • a business man
      October 12, 2012 - 13:05

      I was born an raised in newfoundland and would never invest another dollar in that province if I could invest it elsewhere. The workforce is too entitled, and the skills that they are offered are offered elsewhere for cheaper. Other than resource based businesses, there is no reason why any sane employer would CHOSE to operate in newfoundland.

  • Morley
    October 12, 2012 - 09:07

    Reality check. The EEz is Federal jurisdiction. Thanks to Pickford's vision and getting Atlantic Accord we now get some shared benefits in this jurisdiction. Two out of three modules plus 150 million is better than we should expect, given the availability of skilled workers for this and other development projects on the table.

  • Unimpressed
    October 12, 2012 - 09:06

    Why would any big business want to do work in NL and Lab. Workers are walking of job sites , threatening to strike and playing games with the Companies. Kudos to Exxon for their play and I hope Newfoundlanders and Labradorians learn from thjs as They are not the only game in this world. LEARN FROM BUSINESS FRIENDLY ALBERTA..

  • Scott Free
    October 12, 2012 - 09:01

    A drop in the tank! what an insult; our Tory government is pandering to big oil again. With oil companies pumping hundreds of thousands of barrels a day out of our oilfields, $150M is a paltry sum to offset the loss of hundreds of jobs, thousands of man hours of work, and it's associated spinoffs. This is akin to the perverbial slap on the wrist. The oil and gouge industry is laughing all the way to the bank at our expense. Stop the Dunderdale Gong Show!

  • Dan
    October 12, 2012 - 08:42

    Just another give away for the friends of the PCs! A manufactured deficit this year and next and now a give away of jobs and expertise! No solution to the lack of jobs for apprentices just excuses to bring in foreign workers ( which we DON'T need) we have the workers but working for peanuts is not what a lot of people want. Oh an MUN is NOT a second rate university! MUN is a well known university with credentials known around the world

  • Cold Future
    October 12, 2012 - 08:26

    No more giveaways-except for the fish, the oil, the minerals and oh yes the hydroelectric power from Labrador. Remember a recent premier extolling the benefits of having a 5% share and the clout we would have with a seat at the boardroom table for Hebron-you don't suppose he was wrong or slightly incorrect.

  • Harvey
    October 12, 2012 - 08:16

    Going back in time again....just giving in to big business. What in the hell is wrong with this gov't?

    • a business man
      October 12, 2012 - 13:19

      Option 1 was building locally and putting construction workers to work. Sounds great for them, what was to the rest of use get? Where is our benefit from the oil? The oil can be used to benefit a group larger than the construction workers................Option 2 is allowing the company to build elsewhere in exchange for The government will put some of the cash towards a new science building, two new operating rooms and extensions to the long-term care facilities. It seems clear to me that Option 2 benefits a group that is larger than the selected workers who could have been hired. it seems clear to me that Option 2 will offer a benefit to every citizen in the province, not just local construction workers. It seem to me that Option 2 will share the benefits of the oil on a greater level than will option 1. For those reasons, I support Option 2.

  • M. Kelly
    October 12, 2012 - 07:44

    Selling the shop again!!!...that sounds familiar!!!!

  • steve
    October 12, 2012 - 07:39

    Why is the money already spoken for? I'm sure you could find an endless list of worthy causes to spend it on, but don't we have a huge deficit right now, and the largest per capita debt in Canada? Isn't this boom time the time when we should be not only balancing the budget annually but also paying off that debt? How can any government in good concience leave that massive millstone around the necks of generations to come who will not have the oil wealth to pay it off? It may not be a huge burden now with low interest rates, but if interest rates go back up even to their historical average over the past 30 years, the debt will be a crushing burden. If you think we say outmigration during the cod moratorium, wait until the oil runs out and the debt comes home to roost. We will then be looking back at this period in our history and asking why we didn't deal with the debt, and why we kept racking up deficits during the height of the boom. Don't repeat your story about much debt has already been paid off Tom, it's still the largest per capita debt in Canada.

    • Eli
      October 12, 2012 - 07:55

      And there's Muskrat Falls to come. My god, the woman is in Disney World.

  • wtf
    October 12, 2012 - 07:31

    That's $150 million in 2016. That's about $125 to $130 million in 2012 dollars. On the west coast we were promised a new hospital. So far we got a hole in the ground with no real plans to go any further than that. A $125 million towards the fairly tale hospital would have helped ensured that some of oil benefits got outside the Avalon.

    • Derek
      October 12, 2012 - 10:58

      Good to see the province getting the money, but Newfoundland and Labrador do not end at Gobies, when are they (gov) going to wake up and realize that people live all over this province.

    • a business man
      October 12, 2012 - 13:21

      With all due respect, I am not really concerned about ensuring that oil benefits get outside the Avalon. In fact, I would prefer if all the oil benefits were directed to the Avalon. Just my two cents

  • Calvin
    October 12, 2012 - 07:27

    I really have no problem with the NDP, but it seems like Lorraine is just blasting the government for the sake of doing it. The province is screaming about a labour shortage now, so when government turns this debacle into a small bonus, the "opposition" figures they should just bash them anyway. The jobs created by this will provide work for a less specialized workforce, so more Newfoundlanders will get work from this. I think government should have held out and forced Exxon to build the DES here, but this is an acceptable alternative.

    • Jack
      October 12, 2012 - 07:58

      Calvin, Lorraine Michael has every right to lash out at Kathy Dunderdale and her incompetent move to sell out the province, and I'll explain why. Dunderdale's boneheaded decision to take the $150 million payout instead of building a module in our own backyard will result in lost construction jobs this province needs, bright tradespeople will stay in Alberta instead of coming home and contributing to our economy, and lost GDP that will add up to more than the payout. Secondly, Dunderdale is not getting the money until 2016, but is already planning to spend it. If she had any smarts like the Norwegian and Azerbaijani Governments, the Newfoundland and Labrador Government should create a sovereign fund to prepare this province for the day we don't have oil anymore. Therefore, due to lost construction and skilled trades jobs and poor financial management with money we won't have, Lorraine Michael has every right to lash out at Premier Dunderdale for not representing our best interest instead of big oil.

    • a business man
      October 12, 2012 - 13:13

      But Jack, I and many other are happy with the payout instead of construction jobs. I would rather have new science building, new operating rooms and extensions to the long-term care facilities. I get no benefit from new construction jobs. Sure, you might, but you are not my family so I really don't care what you want. And I respect that you don't care about what I want. But we are both equal as citizens, and I am very happy that there no construction jobs. Overall, I promote the growth of white collar jobs, and promote the loss of blue collar jobs. This decision is consistent with my long-term vision for newfoundland, so I am very happy. Whether you like it or not Premier Dunderdale IS representing the interests of the citizens. Maybe not your interests, but certainly mine.

  • Erax
    October 12, 2012 - 07:16

    What a load of spin from the government. No trades jobs, and most of the money going to a second rate university in St. John's.

    • a business man
      October 12, 2012 - 13:08

      Actually ERAX, I am happy there is no trades jobs gain out of this. I make my money from dealing with non-trade businesses, so this is in my best interests. If there were ANY trades jobs gains, this this would be less advantageous for ME. SO I am happy with the agreement.

  • J
    October 12, 2012 - 07:09

    This could probably be interpreted as Exxon's opinion of NFLD's industrial productivity on large scale projects. I'm waiting to see when the first wildcat strike will occur. Maybe I should start an office pool, maybe choices which year and by what union??

  • Ben
    October 12, 2012 - 07:06

    Surprise, surprise...the NDP are not happy. I have yet to hear them say anything positive. If someone was thinking abt coming to this province and spoke to the NDP, they would stay away. They are the most negative people around. I know they are the opposition but it is quite sad! We are building 2 of the modules here...we made the most of not building the 3rd.

  • Frank M
    October 12, 2012 - 07:00

    Since the Province will not recieve the settlement from Exxon Mobile until June 2016 (9 months after the next General Election) is it safe to assume that the infrastructure promises of a new Science Building at MUN and additional hospital operating rooms will not commence construction until after 2016? Exxon Mobil is wealthy enough to write a cheque tomorrow for that settlement amount. Very Easily.

  • Jack
    October 12, 2012 - 06:59

    Today's the day I lost complete respect for Kathy Dunderdale and Tom Marshall as they not only sold out the province and taking away much needed construction jobs in the process, but also spending money they don't have. Building the third module in this province would have brought much needed construction and skilled trades jobs in this province and adding it to our GDP, which will be worth more than $150 million payout. As a result of their incompetence, our bright and talented tradespeople will stay in Alberta instead or working at home. Secondly, the Dunderdale Government already has plans for that money, money they don't have at this time. A wise leader would have put that money into a "rainy day" or sovereign fund so that Newfoundland and Labrador will prepare themselves for the day they don't have oil anymore. Most major oil producing countries, notably Norway and Azerbaijan, already have sovereign funds in place to prepare for a time they have no oil, and Newfoundland and Labrador must do the same. In light of Kathy Dunderdale selling this province out to big oil and taking away much needed construction jobs to keep our tradespeople home instead of Alberta, and not managing our money properly, their decision to take a payout is a dumb move, and we will pay the price for her incompetence. Time for Dunderdale to be recalled and removed from office, and then replace her with a leader whom will serve Newfoundland and Labrador's best interest instead of selling to province and our jobs out.

  • whats next
    October 12, 2012 - 06:39

    hold on to your shirt folks, more giveaways and just another photo-op for the dunderdale gang.