Court scrutiny underway for $12 billion oil & gas project off Canada

Norwegian state-owned energy giant Equinor is dealing with a court challenge regarding the development of its controversial Bay du Nord offshore oil project, located in Canada, as Ecojustice works to overturn the government’s approval of this mega project, arguing that it spells disaster for the climate and local ecosystems.

At the start of February 2023, Offshore Energy reported that Equinor had a court fight on its hands that week with Ecojustice challenging the government’s approval of the $12-billion Bay du Nord oil and gas project off the coast of Newfoundland and Labrador, in a bid to overturn it, thanks to a lawsuit submitted by environmentalists. However, the court hearing was postponed, after Equinor asked for it to be adjourned.

Things changed last week, as the court case against Equinor’s Bay du Nord oil project was heard in federal court in Ottawa while demonstrators gathered outside to call for the cancellation of Bay du Nord, marching to the nearby Norwegian Embassy in Ottawa.

During the hearing, Ecojustice’s lawyer, Joshua Ginsberg, argued that the Canadian government had a duty to consider the full impact of the project, including the downstream emissions, as not doing so breaches the Canada Environmental Assessment Act. On the other hand, Equinor’s lawyer, Sean Sutherland, requested for the court to dismiss the case.

“The Bay du Nord oil project is not just a climate disaster waiting to happen, but also poses a massive risk to our environment in terms of oil spills. This is a risk the Norwegian majority state-owned company Equinor, behind the Bay du Nord project, has repeatedly downplayed,” highlighted Ecojustice in its statement.

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Following delays, Equinor received approval to develop the Bay du Nord project in April 2022, after the Canadian government found itself between a rock and a hard place due to energy security concerns while it was contemplating whether to greenlight the development of the project.

When the approval was granted, the government claimed that Bay du Nord would be among the world’s lowest carbon projects per barrel of oil. The approval did not sit well with environmentalist groups, which vowed to work tirelessly “to ensure the project does not proceed,” embarking on more protests and a lawsuit.

The lawsuit was filed by Ecojustice on behalf of Équiterre, Sierra Club Canada Foundation, and Mi’gmawe’l Tplu’taqnn Incorporated (MTI) on the grounds that the project’s approval “overlooks significant risks the project poses to local ecosystems and fails to account for significant downstream emissions,” which describe the pollution emitted after the oil has left the extraction site, including refining, transporting, and burning the oil for energy.

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Ecojustice claims that downstream emissions were not considered when Bay du Nord was approved with 137 conditions, despite accounting for 90 per cent of the emissions the project would generate, thus, Canada’s environmental law charity believes that these emissions were likewise excluded from the condition that the project become net-zero by 2050.

Colleen Thorpe, Executive Director at Équiterre, commented: “All promises and commitments made at COPs, be it COP27 on climate or COP15 on biodiversity, must be translated into tangible actions to reduce hydrocarbon production and protect life. Bay du Nord goes against both of these goals: the project undermines our targets for GHG (greenhouse gas) emission reductions and risks irreparable harm to marine life and migratory birds.”

Moreover, Ecojustice underscores that the federal government fell woefully short in its constitutional duty to consult with affected First Nations communities when assessing the impacts of Bay du Nord, since oil spills and increased shipping activity stemming from the project could cause “cataclysmic harm” to sensitive marine ecosystems and species vital to the economic and cultural well-being of communities.

Chief George Ginnish of Natoaganeg, Co-Chair Chief, Mi’gmawe’l Tplu’taqnn Incorporated, stated: “The Mi’gmaq communities in New Brunswick are deeply concerned about the impact this project will have on aquatic species. In particular, we raised how the increased shipping involved could negatively impact culturally important species like the Atlantic salmon and the federal government responded by taking marine shipping out of the scope of the impact assessment.

“They limited a consultation process to suit their needs and the needs of the proponent but have failed to address how this project could negatively affect our rights. The federal government talks about having a comprehensive consultation process but their actions on this file tell another story.”

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To illustrate its point, Ecojustice points out that a single oil spill could devastate critical species that migrate through the spill area, including Atlantic salmon, humpback whales, and Atlantic cod, a species currently considered vulnerable to extinction.

Gretchen Fitzgerald, National Programme Director, Sierra Club Canada Foundation, said last week: “Approving Bay du Nord in spite of science showing that the risk of oil spills from the project is unacceptable and knowing we have no way to contain or clean up a spill once it occurs is beyond reckless. We know there is no room left in the global carbon budget for this project, and hope that our arguments will get heard this week in court.”   

Furthermore, Ecojustice underlines that Steven Guilbeault, Canada’s Minister of Environment and Climate Change, faced widespread backlash from environmental groups and members of the public when the project was first approved in April 2022, just days after the United Nations released a statement saying funding new fossil fuel projects was “moral and economic madness.”
 
Ian Miron, lawyer at Ecojustice said: “Minister Guilbeault’s decision to approve this massive new oil and gas project is short-sighted and not in line with Canada’s climate commitments. Bay du Nord will lock the province and Canada into further dependence on fossil fuels at a time when the science demands we take urgent action against the growing climate crisis.

“Canada is the only G7 country that has increased its emissions since ratifying the Paris Agreement in 2015; this is coupled with having the highest fossil fuel subsidies and public financing of the oil and gas industry of any G20 country. Canada needs to do better — that starts with following its own laws and considering the real impacts of Bay du Nord.”

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According to Sierra Club Canada Foundation, the Impact Assessment Agency of Canada’s environmental assessment report outlines that Equinor sees the risk of a major spill for Bay du Nord as very low (0.00013). However, scientists at Fisheries and Oceans Canada (DFO), who contributed to the review of the environmental impact statement (EIS), refute this assumption and say that extrapolating the data provided by the oil company on the 40 wells under consideration for their 30-year production life, there is actually a 16 per cent chance of an extremely large spill occurring.

Additionally, the DFO mentioned, among other criticisms, that the conclusions found in Equinor’s environmental impact statement (EIS) “lack credibility“ and that it “is not considered a reliable source of information for decision-making processes.” In the review conducted by the DFO in 2019 but published in January 2022, the DFO mentions it “had insufficient information to complete an ecosystem-based assessment”, that the “risks were significantly underestimated” and that “risks of cumulative small events or activities were not assessed.”

The DFO concludes that mitigation measures for vulnerable marine ecosystems were not included in the EIS and that no details were presented to the formal environmental effects monitoring programme. The most recent estimates indicate that Bay du Nord could produce between 300 million and one billion barrels of oil over its lifetime.

As the current Canadian regulations do not require a company to contain a major oil spill within a prescribed time frame, Equinor estimates, in the event of a spill, it would take 18 to 36 days to install a well-capping system at the site and up to 115 days to install a relief well. Sierra Club Canada Foundation interprets this to mean that Bay du Nord’s oil could spill into the Atlantic Ocean for days at a time and “wreck havoc on marine habitat.” In contrast, Alaska’s regulation requires a capping system to be in place within 24 hours of a spill.

The non-profit organisation further elaborates that the degree of responsibility is also an issue since in Canada, an operator is only liable if it is found to be at fault. If an accident is caused by a collision with an iceberg or an extreme weather event, liability is unclear. In contrast, operators in the UK, Russia, and Greenland are liable for any pollution caused, regardless of the reason.

The organisation also emphasises that Canada’s regulations do not prevent oil companies from drilling in sensitive marine ecosystems or culturally significant or high-risk areas, as the risk assessment process does not include communities or local stakeholders, indigenous groups, or even the general Canadian public.

Conor Curtis, Head of Communications with Sierra Club Canada, said: “Canada and Equinor are putting marine ecosystems at incredible direct risk while contributing to climate change that will also devastate oceans. Newfoundland and Labrador have vital fishery and tourism industries that would also be threatened by Equinor’s Bay du Nord oil project.

“We have other energy and employment solutions now like wind energy. There is no reason to risk the health of our ocean, marine life and ecosystems while putting taxpayers at risk of paying for cleanups.”

In the meantime, Equinor’s plans for the development of the Bay du Nord project located in the Flemish Pass basin, approximately 500 kilometres east of St. John’s, Newfoundland and Labrador, in the Atlantic Ocean entail an FPSO vessel, suitable for the tie-back of adjacent discoveries and future prospects. To this end, Salt Ship Design disclosed in September 2022 that it had designed a hull for a harsh environment FPSO, which would serve on the Bay du Nord project.

The Norwegian player is working on early-phase concept studies for this project with the final investment decision expected in the next couple of years while the first oil could be achieved as early as late 2028. Previously, the FID was anticipated in 2021 and the first oil in 2025.

Another project, which Equinor is working to develop West of Shetland is facing opposition from environmentalists. This project is called Rosebank and the FID is slated for 3Q 2023.

If sanctioned, the Rosebank project is expected to create £8.1 billion of direct investment – including the development, operation and decommissioning of the field – based on Equinor’s projections.

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