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Report of the Terra Nova Development Project Environmental Assessment Panel

Executive Summary

The Terra Nova Development is a proposal to develop the petroleum resources of the Terra Nova oil field. The field, with approximately one billion barrels of oil in place, is located on the northeast section of the Grand Banks. The Proponents are Petro-Canada, Mobil Oil Canada Properties, Husky Oil Operations Limited, Murphy Oil Company Limited, Norsk Hydro AS and Mosbacher Operating Limited. Petro-Canada will operate the development on behalf of the Proponents.

The Proponents will use a floating steel monohull production, storage and offloading vessel; semi-submersible drilling rigs; and, shuttle tankers to transfer produced oil from the site to storage facilities onshore or directly to markets. Drilling centres will be located in open glory holes, 10 m deep and 15 m wide, from which flowlines trenched in the ocean floor will carry oil to flexible risers leading to the production platform. Production is scheduled to commence in 2001.

The Proponents submitted their development application and environmental impact statement to the Canada-Newfoundland Offshore Petroleum Board on August 5, 1996. On December 2, the Board referred the application documents to the Environmental Assessment Panel, which had been jointly appointed by the federal and provincial governments. The Panel, having reviewed the documents and, having sought and received additional information from the Proponents, commenced public hearings on April 22, 1997. The Panel heard 20 oral presentations and received over 70 written submissions.

Taking into account all the information provided by the Proponents, submissions by government departments and agencies, and representations by non-governmental groups and individual members of the public, the Panel has concluded that the Project can proceed subject to the recommendations which, for convenience, are grouped in the concluding chapter of this report. Two fundamental recommendations that provide a context for all the others are: that a precautionary approach should inform all aspects of the development; and, that the Board must be provided with adequate resources for the exercise of its mandate to monitor and enforce the conditions of development.

A precautionary approach implies prudent foresight, the recognition of uncertainty, and error on the side of caution when decisions must be taken in a domain where knowledge is incomplete.

The Panel is convinced that it is vitally important to the interests of the Province that the Proponents should observe the spirit and intent of the Atlantic Accord. Notwithstanding the provincial endorsement of the principle of global competitiveness, and realizing that the monohull and the shuttle tankers will, perforce, be built in foreign yards, the Panel acknowledges the Proponents' assurances that Newfoundland yards and businesses will be given all reasonable assistance in making competitive bids on remaining work. This implies employment opportunities for Newfoundland workers in the preproduction phase, which will involve, in total, some 2,300 person years of work. In the operations phase of some 18 years' duration, the Panel is pleased to record the Proponents' expectations that the vast majority of the 400-500 permanent workers will be Newfoundlanders and Labradorians.

The recommendations of the Panel tend to require full recognition of the Atlantic Accord and legislation thereunder, and the adoption of management strategies, including training opportunities and a labour relations regime, that will maximize opportunities for Newfoundland workers and Newfoundland businesses. In consideration of the fact that the Proponents have indicated in very positive terms that Terra Nova should be regarded as the foundation of a strong offshore petroleum industry for Newfoundland, the Panel's recommendations also tend to the development of a highly trained workforce and of business expertise, calculated to be able to optimize both local and export opportunities.

The Panel also believes that the Project should provide occasions for technology transfer and recommends that foreign suppliers of mechanical or electronic components of sub-sea systems, for example, should be required to establish appropriate manufacturing and assembly facilities in Newfoundland.

In respect of all those matters relating to the benefits plan, the Panel believes that the Proponents, the Board and the Government of Newfoundland and Labrador should be equally assiduous in keeping citizens of the Province fully informed as to what is happening to their resources and what benefits the Province is deriving from their depletion.

The relatively small size of the Project, in comparison with Hibernia, for example, informs the public perception that it will not entail negative social impacts. The Panel concurs and believes that the communities in or near which developments are likely to occur, have sufficient infrastructural capacity to absorb the entailed economic expansion without undue social disruption or inflationary pressures. The Panel does not believe that mitigative measures, as in the Hibernia case, are warranted.

The Panel believes that extreme weather and ice regimes at the production site pose the most serious difficulties for the developers. The weather, sea-state and ice data used by the Proponents are, the Panel believes, the best available; and design criteria for the production system should ensure a safe operation. This is particularly so since the floating system will permit employment of avoidance strategies in extreme conditions. Nevertheless, the Panel recommends continued efforts to improve operational forecasting abilities in respect of both weather and iceberg trajectories. The menace of ice floes and hard-to-detect growlers and bergy bits are of particular concern. Overall, the Panel recommends adherence to a precautionary approach, a clearly defined command structure, a zero tolerance for oil spills, and safety systems and evacuation procedures that conform to the highest possible standards of design and operation.

The Panel believes that the management of environmental impacts in areas of larger scale developments over a longer time offers a useful means of testing the appropriateness of planned regulatory and management regimes. In this context, the Panel is concerned that the available literature indicates uncertainties in respect of cumulative impacts on the general ecosystem. Noting that, in the North Sea, for example, regulations have become more stringent over time, the Panel proposes that the near pristine conditions of the Grand Banks should not be a justification for less stringent standards, and, in any case, recommends the conscious adoption of a precautionary approach.

The Panel realizes that the treatment and waste materials guidelines have been recently reviewed. Since, however, the application of currently available technology achieves results that clearly exceed present standards for discharges of oil-based muds and cuttings, the Panel believes that the reviewers did not follow a precautionary approach and that a new review should be undertaken at the earliest possible time. The Panel notes with approval that the Proponents have undertaken to use state-of-the-art technology that will exceed existing standards.

The Panel is aware that the Proponents cannot be held responsible for future developments which occur on the Grand Banks, and, that the identification and measurement of cumulative impact is difficult and uncertain, especially in the context of natural variation over time. It is for this reason that the Panel's recommendations urge a careful and systematic peer-reviewed monitoring program to provide a sound basis for adaptive management decisions and an invaluable data legacy for the more adequate evaluation of future development.

In devising such a program, the Panel is persuaded that the Proponents should identify all monitoring and research programs in the Grand Banks area, including those undertaken at Hibernia, or by Memorial University of Newfoundland or the Department of Fisheries and Oceans, for example, with a view to exploiting all possibilities for effective synergistic integration. The Panel also believes that the monitoring program should be subject to third-party auditing and compliance monitoring, and that the results of reviews by the Board, or by government departments or agencies, should be placed in the public domain.

Apart from the possibility of a major oil spill, discharges into the sea of oil-based drilling muds, a variety of chemicals, and produced water represent the greatest environmental hazards of the Project. Ecological concerns in other jurisdictions have led to the adoption of reinjection technology as the superior method for disposal of both drill cuttings and produced water. The Proponents indicate that reinjection of cuttings from the planned floating production system is virtually impossible. The Panel believes that design features to allow retrofitting to accommodate such a process would be a prudent decision in anticipation that regulatory standards in the future will be adjusted upwards. In the meantime, non-toxic oils and the treatment of cuttings by the best available technology to minimize oil and chemical contents must constitute a minimum requirement. In respect of produced water, the Proponents assert that the mitigative measures they propose, together with the dilution factor, will render such discharges harmless. Nevertheless, while recognizing the difficulties associated with the process, the Panel is aware that reinjection is a proven technology in other jurisdictions, and recommends that a precautionary approach would require its adoption for the Terra Nova Development.

In respect of major oil spills, the Panel is convinced that given the nature of the environment, mitigative measures will likely be ineffective. It is, therefore, absolutely essential that prevention must be the first priority and that all systems and processes must be designed with that priority clearly in mind. Thus, a very important recommendation by the Panel is that the Proponents must adopt a zero-tolerance policy for oil spills of any kind and must take all necessary preventative measures to ensure the successful implementation of such a policy. This implies that all offshore workers must be thoroughly trained, educated and sensitized to their environmental responsibilities.

The effect of light on seabirds in the Project area was brought to the Panel's attention. The Panel believes that a co-operative effort with Hibernia management would permit monitoring of such effects and permit the development of appropriate mitigative measures, should such be required, before production at Terra Nova begins.

The transport of oil from the site to shore is clearly a matter of concern. In particular, the large seabird colonies of the Avalon Peninsula and of the potentially disastrous consequences for those colonies in the event of a large oil spill must be recognized. The Panel is also aware that no coastal zone management regime is in place along the shores of Avalon and recommends that one should be created. While the Panel is satisfied that the proposed double-hulled, ice-strengthened shuttle tankers represent the best available technology, it nevertheless concurs with a recommendation of Environment Canada that a comprehensive review of the transport of oil from offshore sites is necessary.

In conclusion, the Panel believes that if construction and operation conform to the detailed information provided by the Proponents, and if the Proponents meet their commitment to best available technologies and minimal discharges, and if the recommendations included in this report are implemented, the Project will meet all regulated standards and be environmentally acceptable. Nevertheless, it is difficult to muster enough wisdom at the beginning of an 18-year period to predict that an optimum development will occur and that minimal environmental impact will result. The chances of success will be enhanced, however, if both the Board and the Proponents are fully committed to adaptive changes in standards, in technologies, and in management practices. These in turn will be facilitated by a first-rate monitoring program, by proper reviews of its results, and by proper compliance monitoring by the Board.