Nova Scotia fishermen hailed the new law as a victory by a group of underdog Maritimers over a
huge U.S. oil company. Last week the Nova Scotia legislature passed a bill to stop oil and gas drilling on the fish-rich
Georges Bank until the year 2000. The ban— aimed at preventing a potentially damaging oil spill—will take effect if similar federal legislation passes this summer.
The result would kill Texaco Canada Inc.’s plans to develop a major new oilfield on the Canadian portion of the bank,
350 miles south of Halifax. The Nova Scotia legislation has also left other oil companies worried about the possibility of similar embargoes off British Columbia, the Arctic islands and in the Beaufort Sea. Said Ian Doig, a Calgary-based oil analyst and editor of the newsletter Doig’s Digest “Changing the rules off Nova Scotia has implications for the entire oil industry.”
The Nova Scotia law reinforces a decision by federal Energy Minister Marcel Masse last month to change the CanadaNova Scotia offshore jurisdiction agreement and to impose a 12-year moratorium on Georges Bank exploration. Texaco officials charge that the
decision was made rashly and without proper scientific evidence. They also say that the company was never allowed to fully present its side of the story. Said Texaco spokesman Brian Hay: “The way this was handled raises disturbing questions about how energy policy is made in Canada.” But government officials say that the decision was a compromise between doing nothing and banning drilling permanently. And Texaco’s experience illustrates what can happen when corporate and regional interests clash. Said Nova Scotia Energy Minister Kenneth Streatch: “When the debate is over a thriving fishing industry and an oilfield which may or may not be there, we will take the fishery every time.” Texaco Canada is a subsidiary of White Plains, N.Y.-based Texaco Inc., which recently emerged from bankruptcy after a restructuring and which last week was involved in a takeover battle with U.S. financier Carl C. Icahn. Texaco sparked the fisheries controversy last year when it announced that it would seek permission from the Canadian government to drill exploratory wells
on the Georges Bank. Texaco officials say that geological studies by the federal government estimate that the area contains two billion barrels of oil, nearly double the size of the rich Hibernia field off Newfoundland. That announcement mobilized fishermen who expressed concern that an oil spill would destroy the Georges Bank fishery, which employs 6,000 people and generates $300 million annually. With financial backing from local fishing companies, the fishermen began aggressively lobbying against Texaco.
Texaco responded by conducting extensive environmental studies and by opening information offices in South Shore towns in an attempt to convince the suspicious fishing community and government regulators that the risks from drilling were minimal and that any spill could be controlled. But the company’s campaign had to endure rumors that it was conducting secret exploratory tests from fishing boats.
Texaco’s image suffered again during a dinner held in Halifax last October when Texaco Canada Resources thenpresident William Gatenby became embroiled in a heated argument with National Sea Products Ltd. president Gordon Cummings after the oilman had
lectured a group of Nova Scotia businessmen about their unwillingness to take risks. Said one provincial official: “That was the turning point for Texaco’s support within the Nova Scotia business community.”
The drilling ban is the latest in a long series of frustrations for Texaco since it acquired the drilling rights to 2.3 million acres on the northeast corner of Georges Bank in 1964. From 1970 to 1984 its exploration plans were on hold while Canada and the United States settled a jurisdictional dispute over the fertile bank. And there were further delays as the Nova Scotia and federal governments worked out an arrangement for administering offshore oil development. Now, after pouring $12 million into environmental studies and exploration, Texaco has not found a single barrel of crude. At the same time, the company’s conventional oil reserves have steadily declined. Said David Stenason, an oil analyst
with Montreal-based brokerage house Lévesque Beaubien Inc.: “The loss of whatever is under Georges Bank could have major implications for its longterm corporate strategy.”
In terms of the oil industry as a whole, Doig said that if Ottawa uses the Georges Bank as a precedent, there could be major difficulties. He added the industry is concerned that it might also suffer a drilling ban in the environmentally sensitive North or offshore British Columbia, where Ottawa is currently trying to work out jurisdictional arrangements similar to the one that governs the waters off Nova Scotia. And if that happens, Texaco’s failure to manage public opinion in the Maritimes may prove damaging to more than just its own long-term fiscal health.
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