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April 10, 2000
(Mines and Energy)

The following statement was issued today by Paul Dicks, Minister of Mines and Energy. It was also read in the House of Assembly:

On March 10, 2000, Government received the Canada-Newfoundland Offshore Petroleum Board�s decision regarding an application by the Hibernia Management and Development Corporation to increase the annual oil production rate from 49.2 million barrels per year to 65.6 million barrels per year.

The CNOPB�s decision was to approve the request. I wish to advise that I have written to the CNOPB on behalf of government to advise them that government will not approve the increase at this time.

Under the Accord Acts, the CNOPB�s decision is subject to the approval of the federal and provincial ministers. If the decision is not communicated to the board within a 30-day period of receipt of the request, approval is deemed to have been given to the request.

If the production increase had been approved, more oil would have been taken from the field at a lower royalty rate. Over the life of the project, this would have negatively impacted royalties to the province.

This was clearly unacceptable. The province has repeatedly said it should not be disadvantaged by any production increase. To date, government is not satisfied that the province is being kept whole. To address this issue, the province has had very frank but good discussions with the owners. Unfortunately, we did not come to an agreement prior to the expiration of the 30 day period. To protect the province�s position and the best interests of the people of Newfoundland and Labrador, it was necessary to advise the CNOPB that the production increase request was refused.

I think it is important to point out that the province was not looking to reopen the royalty agreement. We recognize that an agreement was entered into with the Hibernia owners. We also recognize that substantial benefits accrued to Newfoundland and Labrador in terms of jobs that were created during construction of the Gravity Based System at Bull Arm. We also recognize that a foundation was laid upon which the province was able to build and launch an oil industry. Having said that, we also recognize that we cannot be expected to lose money based on our current agreement or to subsidize a higher annual rate of production.

It is not our intention to publicly speculate on what the province would require to bring about a resolution to this issue. It is important for the province to keep its options open.

A legitimate question is: where do we go from here? We will continue to discuss the issue with the Hibernia owners. We are hopeful that a solution can be found that is acceptable to all parties. If and when that occurs, the refusal can be rescinded.

This is an issue of importance to the province. I believe it is in the best interest of all concerned to deal with this issue in a businesslike and timely manner. That is our intent. This government will continue to work with the Hibernia owners to achieve an agreement that will allow for an annual production rate increase that is fair to both the Hibernia owners and the people of Newfoundland and Labrador.

2000 04 10                                                     1:55 p.m.

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