Chapter XI: "Offshore Petroleum Politics: A Changing Frontier in a Global System" - Peter Clancy, (SFX)
In the new millennium, the underlying business and political coordinates of Canadian offshore petroleum are unsettled, to say the least.119 On the Atlantic coast, where investment has been mounting since 1995, petroleum operators and governments are negotiating regulatory change through an energy roundtable. On the Pacific, where a longstanding moratorium persists, corporate rights holders have made it clear that they will not return to offshore activity until federal and provincial authorities have resolved First Nations title claims and jurisdictional overlaps to the satisfaction of all major stakeholders. In the Arctic, a series of 1990s Aboriginal rights settlements opened the way for expanded resource project planning that included the offshore shelf. However it also raised questions of how the myriad planning and management authorities -- federal, territorial and Aboriginal -- would interact in regulating major project initiatives. Do such trends reflect “business as usual” for the offshore branch of the petroleum staple trade, or has it entered a new phase?
In this chapter, the offshore petroleum sector is explored from a series of different perspectives. It is best understood, I believe, as a staple resource domain poised between local, national and international forces. Local conditions are significant variables, for an industry that operates on three coasts and under multiple state authorities. At the same time, local interests have frequently struggled for voice and influence in offshore policy regimes oriented toward higher powers. For their part, sovereign states have advanced new jurisdictional claims to continental shelf formations, extending terrestrial petroleum regimes to the sub-sea. This was not without tension between provincial and central governments, on questions ranging from rights allocation to environmental protection, safety conditions in the offshore workplace, and industrial and employment linkages to adjacent economies.
Finally, offshore petroleum has evolved rapidly into a global domain. While the commercial roots are on the US Gulf Coast, where Texas independents underwrote early exploration in the late 1940s, the international oil giants and their subsidiaries soon rose to prominence. By the time new offshore basins drew attention in Europe, Latin America, West Africa and the Asia-Pacific, a fully rounded multinational complex (including not just operators but service firms) assumed a predominant competitive position. This meant that the development of second and third generation prospects would pose tensions between host states and overseas capital, particularly over the terms of domestic and foreign participation. The offshore represents a global frontier in one final, physical, sense, as advances in technology, finance, equipment and expertise have pushed operational prospects into deeper waters and more severe climate zones. This transforms the calculus of commercial viability while at the same time posing formidable new challenges to state authorities.
So far, this description points to a classic mature staple sector, where
hydrocarbons are extracted from a remote and physically challenging hinterland, by highly capitalized enterprise, to realize profit from sale and consumption in distant markets. Along the commercial chain, virtually every significant step is potentially mediated by a state presence, though private capital remains the prime mover. There are, however, reasons to look more closely at this political economy of the offshore domain, particularly from the perspective of Hutton’s post-staples hypothesis. To begin, offshore oil and gas is a relative late-arrival to the staple trade. This means that its regulatory regimes have been infused with social policy concerns that were not present in the formative eras of terrestrial petroleum. Other features arise from the “offshore” location, where a thrust toward integrated oceans policy has emerged in recent decades and threatens to erode the sectoral autonomy of the petroleum domain. In sum, there seem to be several prospective post-staple traits here that are worthy of examination.
The balance of this chapter surveys certain analytical threads that shape the politics of offshore petro-politics, both retrospective and prospective. It begins by exploring the distinctiveness of the offshore petroleum domain, with particular attention to the spatial and temporal dimensions of offshore policy. It then considers the political organization of offshore petroleum capital, the impact of technology as a political variable, and epistemic contributions to decision-making and power relations. Attention then turns to the challenges of offshore management in federal systems, with particular attention to the Canadian policy experiment with joint (federal-provincial) management structures. Offshore petroleum policy is revealed as part of a wider phenomenon of marine federalism and oceans governance. Finally, the chapter closes with some reflections on the strengths and capacities of Canada's management regime for this important offshore staple.
Offshore Petroleum as a Distinct Political Economy
Offshore petroleum can be treated, politically and commercially, as an industry sui generis. This is not a new proposition. Repeatedly during the 1950s, American oil interests pressed both Congress and the administration with arguments that the offshore petroleum industry was, by nature, qualitatively different from its onshore counterpart (Baxter 1993; Lore 1992). Government was urged to legislate, tax and regulate accordingly. Realistically, of course, the offshore industry can never be detached completely from the land-based energy and hydrocarbon policies of sovereign states (Fant 1990; Richards and Pratt 1979). As Brownsey points out in the previous chapter, the early legal and policy templates for industry development were forged in terrestrial contexts.
Over time, however, the divergences have become as pronounced as the similarities, in both corporate and state circles. To begin, offshore petroleum exists by virtue of complex engineering and technology systems that are among the most dynamic on the globe (Fee and O'Dea 1986; Kash 1973). Moreover, the transfer of these technologies, from one hydrocarbon prospect or basin to another, is furthered by intra-firm and inter-firm transactions. Similarly, developments in the law of the sea have conferred crucial jurisdictions over continental shelf resources to national and regional authorities, enabling such states to fashion novel development strategies (Chircop and Marchand 2001, Fitzgerald 2001; Hendreth 1986; Silva 1986; Stalport 1992).
Equally significant is the diffusion of public policy and regulatory practice (Nelsen, 1991; Noreng 1980). The jurisdictional status and regime structures for offshore petroleum have diverged increasing from their terrestrial counterparts (ACPI 2001; Fant 1990). Nor has the offshore petroleum sector functioned in policy isolation. A continuing thread of overlaps and intersections with other ocean businesses -- marine transport, communication, fishing and others
-- complicates the rounded management of hydrocarbon resources. In addition, a new type of policy challenge has emerged in recent years, in the form of ocean policy and governance. These frameworks are predicated on integrated resource management of extensive ocean areas, usually in reference to ecosystem health and integrity. To date, they have no counterpart in terrestrial oil and gas administration, where a "pillared" regime normally distances petroleum from the related agriculture, forestry, wildlife and water resources (Cicin-Sain and Knecht 2000; Goldstein 1982). Offshore, however, such emerging meta-frameworks complicate the political context for oil and gas capital in a variety of ways, as explored later in the chapter (NRC 1997).
Spatial and Temporal Dimensions
Policy diffusion can be explored in at least two dimensions, the spatial and the temporal. The spatial is evident on any global petroleum map that highlights the interplay of offshore basins and geo-political authorities. When operations were pioneered in Gulf of Mexico in the postwar period, the coastal states vied with Washington to claim legal jurisdiction. The resulting judicial settlement limited Louisiana, Texas, California and the rest to a coastal strip of three nautical miles, with the balance of the offshore continental shelf falling to the federal Department of the Interior (Gramling 1996; Lore 1992). When new offshore plays began in the North Sea, in the late 1950s, the coastal nations had a different pre-occupation. Negotiating boundary limits, they carved the region into a series of national sectors. Beginning in the southern waters adjacent to the Netherlands and England, the exploration frontier moved slowly across the North Sea. As most of the world-class fields were found in the middle to northerly reaches, the major beneficiaries proved to be the United Kingdom and Norway, unitary states in which the central governments enjoyed exhaustive jurisdiction (Dunning 1989; Nelsen 1991; Noreng 1980; Jenkin 1981).
In Canada, the geo-politics of offshore claims parallelled the American pattern. In the early 1960s, both the coastal provinces and Ottawa asserted resource jurisdictions to the continental shelf. This resulted in parallel regulations and permitting systems, a highly unsatisfactory situation for explorationists who often responded by taking out dual permits in order to fortify their legal positions. In arguments that foreshadowed later disputes, the provinces claimed an offshore jurisdiction as part of their pre-confederation powers while Ottawa asserted its treaty power. The Supreme Court of Canada offered its first authoritative ruling in the BC Offshore Reference case of 1967, where it found in favour of a federal jurisdiction. However this proved only to be an opening salvo. The Pacific coast was again the battleground in the Strait of Georgia dispute, where the BC Court of Appeal found in favour of the province in 1976. Eight years later, the Supreme Court of Canada agreed, confirming the distinction (on the west coast at least) between provincial subsea ownership of an 'inner' shelf between the mainland and Vancouver Island and federal ownership of an 'outer' shelf beyond the Strait (Townsend Gault, 1983).
It is in this context that Ottawa's eastcoast strategy must be understood. Undeterred by the Offshore Reference 1967, and buoyed by the early drilling results off their own shores, the eastern provinces intensified their own jurisdictional claims. In addition, each province had colonial precedents that might point toward a Strait of Georgia outcome. Despite its prevailing legal advantage, based on 1967, Ottawa's constitutional position was far from unassailable. As a result, the Trudeau government entered negotiations with the Atlantic provinces, toward an intergovernmental protocol on shared resource management. This led to an agreement in 1977, signed by the three Maritime provinces (but not Quebec or Newfoundland) that designated revenue sharing and administrative arrangements for both the Gulf of St. Lawrence and the ocean continental shelf (Chronicle-Herald, 1977).
Here were the seeds of a new approach to joint federal-provincial management, that is explored in greater detail below. However the prospects of joint management were far from assured at the time. In Newfoundland, Brian Peckford had enacted a comprehensive regulatory regime of its own, inspired largely by Norwegian experience (House 1985). In Nova Scotia, the Buchanan Conservatives withdrew from the 1977 agreement soon after acceding to power. The dual 1979 discoveries of Hibernia oil (Newfoundland) and Venture gas (Nova Scotia) significantly heightened provincial ambitions. Here, however, the tactical paths of the two provinces diverged. Nova Scotia enacted strong ownership and regulatory measures in 1980, though they were never proclaimed. Instead Buchanan joined Ottawa to strike the 1982 offshore accord, setting aside the ownership issue in favour of shared management controls. Dismissing this deal, Peckford launched a 1983 reference case on Newfoundland's offshore claims, which was trumped by Ottawa's separate reference to the Supreme Court of Canada. The federal victory here did much to fortify its east coast jurisdictional base, concluding two decades of litigation over the spatial politics of Canadian offshore petroleum.
The temporal dimension is equally significant to offshore activity, as revealed by a longitudinal analysis of any offshore geological prospect or basin. This highlights the "life cycle" stages of an offshore play and its tightly-woven policy correlates. Four stages are generally discerned here. The first covers the exploration stage beginning with the taking of legal permits that require a stipulated work program over a designated period of 5-10 years. Prospective explorers are invited to nominate blocks of seabed space which they judge promising. Bids are then invited and awards are made based on the highest level of work commitments. Normally this combines geo-physical, magnetic and seismic surveys, performed by air and sea. Where the results are sufficiently suggestive to merit further investigation, permittees move to exploration drilling, in which holes are sunk at designated locations to test for hydrocarbon reservoirs. While permit holders can handle this work themselves, they can also make deals with other firms to 'farm in' on the exploration play and earn an interest in any discoveries. Significant finds are normally followed up by delineation drilling, to establish field size and boundaries.
The second, development, stage begins when a commercial discovery is declared. Here exploration permit holders have the opportunity to convert their rights into longer term development leases that are tapered to the expected life of the field. At this point, plans are designed for petroleum production systems, which include subsea wells, seabed control facilities and gathering lines, production platforms and pipeline or ship-based transport and storage facilities. It is at this phase that the predominant capital commitments are required. The rights-holders, or operators, often turn to major engineering and construction contractors to fabricate and install major facilities. As well, state authorities exercise powers of regulatory approval over development activities as they unfold.
The production phase begins when oil, natural gas or other petroleum liquids begin to flow. This is far from a simple management challenge. Rates of flow will vary over the life of a reservoir, and extraction practices can affect both the volume and the duration of production. 'Reservoir management' is a central challenge if maximum returns are to be realized. While the production stage is more modest in its capital and labour components, supply and service is a continuing function over the life of the project. As production continues, it is also common for initial investors to sell their holdings, so that ownership (and possibly business strategy) may change. The public policy challenges of managing field or basin transitions from emergent to expansive to mature conditions are complex, and have not always been recognized by state authorities. For example, the state has an interest in maximizing and extending hydrocarbon extraction, even as rates of flow decline. This can be at odds with operator interests in terminating operations as soon as marginal returns on the field fall below those of other corporate holdings. It raises questions, in turn, of how the operator scale and structure influences field tenure.
Eventually the hydro-carbon yield diminishes to the point where closure takes place. This final phase entails the permanent sealing off of well facilities and the de-commissioning of offshore installations. Because of its pioneering place in offshore history, the Gulf of Mexico was the first region to confront this challenge. Hundreds of offshore platforms have been abandoned and thousands will face this situation in future years. A variety of industry protocols and state regulations have emerged in response. Options range from complete removal of facilities above the sea floor, to partial dismantling to below navigable depths, to virtual abandonment in place. The US 'rigs to reefs' program highlights the potential roles of abandoned jacket structures in sustaining pelagic and benthic eco-systems that originated during production years (Dauterive, 2000). The only offshore production system to have reached this stage on the Scotian Shelf was the Cohasset-Panuke oil project, where the flow of oil ended in 1999. A further strategic attribute of de-commissioning involves the business opportunities to provide the engineering and construction techniques that continue to evolve to meet this need. Parallel to this are the public policy questions of long-term operator liability and financial contingencies that need to be met before the final phase commences.
As with any cycle framework, there is no strict unidirectionality here. Stages can be arrested, reversed and reset. For example, the Gulf of Mexico was widely regarded as a spent basin (the “dead sea”) by the early 1990s, with exploration activity stalled and production volumes sinking sharply. Yet in 1995, a new boom began, with the advent of deepwater drilling (in subsurface depths exceeding 1 000 feet) and deep structure drilling (exceeding 15 000 feet below seabed). This gave dramatic new life to what was regarded hitherto as a mature and declining sector (Gurney 1997; US MMS 2003). To restate, the prospects for offshore comparative analysis, on both spatial and temporal dimensions, are both rich and promising.
Offshore Petro-Capital as a Political Factor
This section follows the political economy tradition, by exploring the organization and power quotient of ocean capital. It can be seen that the offshore petroleum industry displays sufficient uniqueness of upstream operations to be considered a distinct sub-industry within the hydro-carbon sector. This being said, a plethora of intriguing questions remain. How does offshore segment express its shared interests on political and policy questions? Is the "field" or "basin" a relevant political denominator? What are the prospects for coalition or alliance along the offshore value chain, from exploration to construction to production and beyond? The role of farm-ins and joint ventures has long been recognized as a source of industry solidarity (House 1980). Is it especially pronounced offshore, given the capital commitments and heightened risks?
Then there is the question of associational structures giving voice to offshore interests. This is normally a complicated terrain of trade associations, business coalitions, technocrats and consultants that can be expected to consolidate common interests and narrow the range of variance (Berry 1974). Relations between "petroleum" and other "ocean industries" are also pertinent, both as an indicator of potential alliance and an index of inter-industry rivalry.
These are more complicated problems than may first appear. There are few if any oil companies that restrict their operations to offshore waters alone. More commonly, a firm involved in upstream activities (i.e. exploration, extraction and transport) assembles a portfolio of properties and positions in properties, of varying degrees of risk, in its efforts to acquire proven and commercially exploitable reserves. This quite likely combines different fields, basins and petroleum provinces, within a single nation or beyond. Within such firms, an intricate internal process dictates where exploration and development funds will be spent in a given year. Consequently, regional and project managers bring a range of prospects to the corporate table where they compete for annual appropriations. Relative attractiveness can change over time, according to exploration results, market conditions and political contexts. Nevertheless, so long as a firm is committed to an exploration play, through the holding of exploration rights, farm-ins on wells or equity in development projects, that company bears a significant interest in the success of the play. It can be expected to participate in industrial collective action to enhance that interest.
So long as the prospective sedimentary geology is confined to a single state jurisdiction, as for example in Alberta in the period 1918-58, the lines of political mobilization and intervention may be relatively straightforward. The upstream industry depended on provincial tenure and licensing policy, and the Alberta Petroleum Association (renamed the Canadian Petroleum Association in 1952) functioned as the collective voice of the major companies in dealing with the government in Edmonton. However as prospectivity proliferates into multiple state jurisdictions, the challenges of aggregating and articulating the concerns of shifting subsets mount. The CPA, like other trade associations servicing increasingly diversified memberships, opted for specialized internal sections or divisions where the relevant business constituencies could coalesce for particular concerns and campaigns, while remaining part of the umbrella association and reporting through its board of governors. The Saskatchewan and British Columbia divisions were established in this way.
A separate vehicle, the Independent Petroleum Association of Canada, was formed to represent companies whose activities concentrated in the upstream (exploration and production) stages. This sprang in part from post-war policy tensions with the foreign owned "majors" over the shape of the Canadian oil market. With an interest in supplying the largest possible domestic market (at a time when oil exports were tightly controlled), the prairie independents pushed for a coast to coast pipeline network. The foreign-owned majors, already supplying the Quebec and Maritime markets from their offshore sources, pushed for a west-east divide (House 1980). While the CPA and IPAC enjoyed similar membership numbers by the 1970s, the companies securing acreage on the east coast offshore were largely, though not exclusively, foreign owned majors. This, together with the American precedent, may explain why the offshore corporate segment sought stand-alone representation at an early date.
In the US, a specialized offshore association emerged shortly after the war. The Offshore Operators Committee or OOC was organized before 1950, to speak for the offshore upstream segment of American petroleum. Over the past half century it "has evolved into the Oil and Gas industry's principal representative regarding regulation of offshore exploration, development and producing operations in the Gulf of Mexico" (OOC). In particular, the OOC focuses on regulatory rulemaking processes by government agencies. In 2002, the OOC numbered 70 operating companies and 25 service companies. It should be noted that many if not most of these firms maintain parallel memberships in the American Petroleum Institute or API (the omnibus voice of integrated oil) and other more specialized industry associations numbering more than a dozen.
In Canada, an analogue to the OOC appeared in two frontier regional associations. Their formation reflected the start of offshore drilling, with the first exploratory well drilled on the east coast in 1966 and the first in the Arctic five years later. The offshore exploration permit holders banded together in two regional clusters in the early 1970s, each numbering about two dozen firms. For the federal northlands this took the form of the Arctic Petroleum Operators Association or APOA. On the Atlantic continental shelf, the parallel body was the East Coast Petroleum Operators Association or EPOA. Here the costs of collective action were met by an assessment on the acreage holding member companies (Eastern Offshore News).
In 1983, the EPOA merged with the larger Canadian Petroleum Association as the Offshore Operators Division or OOD. Three years later, the Arctic producers followed suit. (This coincided with the mid-decadal market slump and massive industry retrenchment efforts.) The offshore group was renamed the CPA Frontier Division, with two parallel regional arms that shared a staff officer. This structure acknowledged that the frontier members all operated under Canada Lands legislation, but also that the east coast regulatory boards and basins presented unique elements not found in the Arctic. In fact the CPA went further by opening regional offices in Halifax and St. John's. Today this arrangement continues as the Atlantic section of the Canadian Association of Petroleum Producers or CAPP.
Even within the CAPP bloc, it would be wrong to assume a uniformity of corporate interests in offshore matters. To cite only the most recent development, the turn of century mega-mergers have created a new tier of international interests that dwarf, in scale, all other oil producers. The appearance of these "super majors" -- Exxon Mobil, Chevron Texaco, Total-Elf-Fina, and Conoco-Philips -- has altered the offshore business in a number of ways. First it has halved the number of giant players in the international petroleum game, curbing the amount of exploration rivalry. In addition, the rationalization of budgets, staff, rights-holdings and planned projects, that occurred as these giants sought economies from their consolidation, has cut significantly the amount of exploration capital being directed at high risk basins. This has a knock-on impact in the offshore service and supply sector, which finds itself squeezed ever-harder by these same tendencies. Furthermore it reinforces the tendency of mega-firms to limit their interest to truly giant finds, passing over promising prospects whose profit potential fails to match their newfound scale. Of course there are many other corporations that can exploit this situation. Instead of targeting the global elephant fields, they seek portfolios of more modest scale, specializing in prospects that the supermajors decline or abandon, or concentrating on secondary or tertiary extraction from maturing fields that are being abandoned by their initial developers (Mitchell 2001; Noreng 2002, Yedlin, 2004).
It is important to note that this does not exhaust the range of offshore corporate interests. Indeed petroleum was a relative latecomer to business in the oceans sector, preceded by such major industry groups as shipbuilding, marine transport, cable and communications and commercial fishing, to name the most prominent. Traditionally the ocean was treated as open space in which separate core industries pursued independent operations. This changed in the 1970s, however, as "ocean industries" began to be recognized in government circles as a strategic growth sector (Beale 1980). The federal government's industrial strategy exercise of 1977 launched consultations in 22 designated sectors, including ocean industries (French 1980).
The possibility also existed for an umbrella grouping of marine-oriented firms and sectors that were in the business not of petroleum extraction per se, but rather of selling specialized goods and services to the offshore petroleum operators (Voyer 1983). In Nova Scotia, this was realized in 1982, with the organization of the Offshore Trades Association of Nova Scotia or OTANS. That year, a delegation of Nova Scotia business people visited Aberdeen, Scotland, to better understand the potential for offshore linked industry. There "the group saw tremendous potential, but they also learned that the oil and gas industry is a truly global business with plenty of natural barriers to entry" (OTANS).
From the outset, the Offshore Trades Association combined advocacy ("to support the maximization of Atlantic Canadian participation in the supply of both goods and services"), market intelligence on business opportunities ("meetings with industry leaders" and "information bulletins") and member networking (with one another and with the lead offshore operators). The original membership of thirty grew to 200 within a few years. While the offshore supply and service sector has waxed and waned along with the offshore business cycle, OTANS numbers over 500 members in 2004 and now describes itself as Canada's largest oil and gas industry association.
Looking beyond these patterns of sectoral affinity, a series of market factors will inevitably shape the timing and intensity of political representations. Offshore developments cannot proceed without assured markets and these become integral to political coalition building. Then there are the so-called "cycle" factors that stem from the phase of project development. There is room for considerable ambiguity here. On one hand, industry political agendas can be expected to reflect the changing imperatives the field life cycle, and the "basin development" hypothesis deserves sustained attention. At the same time, fields are likely to include multiple projects at different stages of development. Today on the Scotian Shelf, for example, the Cohasset oil field has been decommissioned, Sable gas is in production and Deep Panuke is in an early development stage. The muting or offsetting impact of such multi-phase priorities can provide state authorities with considerable room for manoeuvre.
Several possible trajectories can be seen here. Over time, offshore petroleum networks can shift their shapes. This begins as a classical industrial clientelism, in which state agents bargain with petroleum operators and the offshore service sector over the terms of development for the resource. With time, however, it evolves toward something new, whose outline is not yet entirely clear. It may be a form of business-government concertation, driven by high level elite accommodation as illustrated by the Atlantic Energy Roundtable. Already there is an evident drive to restructure the regulatory regime toward a simplified, flexible and discretionary form of performance-based regulation. Alternately, it may evolve toward a broader ocean pluralism, in which the offshore petroleum block finds its public policy concerns being settled by a diverse network of stakeholder interests. The sections below help to clarify these possibilities.
Technology as a Political Variable
One of the strong sources of business and political solidarity for offshore petroleum has been its reliance on advanced technology. After all, these advances were instrumental in creating the offshore industry (Gurney 1997; NRC 1980). It is worth recalling the primitivity of early offshore exploration in the Gulf of Mexico region and the dramatic changes that have followed. In the 1940s, drilling barges were dragged into shallow, swamp water positions and submerged. As ambitions turned toward open water, military-surplus landing ships were refitted with derricks and drill support systems (Szell 1979). The first authentic "standing" rig, the Kerr-McGee 16, went a dozen miles offshore in 1947 to drill in 18 feet of water. In the half century since, the Gulf of Mexico geological province (and its industrial and political regimes) have been transformed repeatedly.
Successive waves of innovation have been dramatic, as evidenced each year at the Offshore Technology Conference in Houston (OTC). The results have improved the prospects for locating petroleum deposits, opened access to ever more remote sites, altered the techniques of collection, storage and transport of products, and (through resurvey and rediscovery processes) turned apparently mature and exhausted sites and basins into new, high growth prospects (US DOE 1997; US DOE 1999).
Among these transformative technologies would be the following. In exploration, three and four dimensional seismic image measurement has dramatically refined the accuracy of pre-drill intelligence. This, incidentally, has a major implication for offshore regions that have been "inactive" in recent decades, either by formal moratoria policies (as in BC and NWT) or by lapses in exploration rights-holding. The reopening of such areas facilitates qualitative reappraisals through new seismic campaigns. Second, directional drilling has become far more sophisticated, allowing both angular and horizontal access to reservoirs and the sub-surface linkage of small, complex deposits. In offshore environments, this provides great flexibility in drilling multiple wells, in significantly dispersed configurations, from a single platform, and utilizing seabed lines to gather the product together. Finally, techniques of "measurement while drilling" allow ongoing well data to be compiled in a single step with well drilling. In super-high cost environments, where single wells can cost $50-75m in shallow water and twice that amount in the greater depths of the continental slope, these represent dramatic economies.
In production, the most visible technology symbols are the new structures above the surface. This includes a variety of production platforms ranging from jacket towers to semi-submersibles to compliant towers. It also extends to floating systems for production, storage and offloading (FPSOs) that offer an alternative to pipeline transit. Until recently, the FPSO option was restricted to oil field development. However in the past few years it has been extended to gas fields as well, with ship-based plants to liquify and store natural gas before offloading to LNG tankers (the so-called FLNG systems).
While the technical and engineering dimensions of offshore operations have been widely celebrated, the societal implications of complex systems have been seriously neglected. One promising analytic school which sought to capture this phenomenon was the "technology assessment system." By mid-decade, an Office of Technology Assessment had been established in the US Congress and in Ottawa, the Science Council had taken up the theme. This was advanced "as a policy tool for alerting public and private policy-makers to the likely consequences of making a decision either to deploy a particular technology or to choose from among competing technologies" (Kash 1973: 3-4). One of the most elaborate first-generation technology assessment projects, based at the University of Oklahoma, tackled US outer continental shelf oil and gas operations. In Canada, a similar perspective was advanced by the Science Council of Canada and shed considerable light on the emerging offshore industry (Gibbons and Voyer 1974; Keith et al 1976)
For its part, offshore industry has expressed frustration that step-changes in technology advance have not been adequately recognized or appreciated by either the policy establishment or the interested public. This is a cause of corporate frustration since, it is argued, many such advances have altered, sometimes decisively, the risk equations of offshore activities. This is especially pertinent to a sector whose periodic political crisis moments - the Santa Barbara blowout of 1968, the Mexican Ixtoc 5 blowout in 1975, the Ocean Ranger loss in 1982 and the Piper Alpha platform fire of 1988 - are fifteen to thirty years in the past.
At the same time, the relentless drive toward new technologies raises questions of reliability, transferability and risk of unintended consequences. In western states, the organized public will continue to pose such questions as long as offshore operations are underway (Coalition 1989; Freudenburg and Gramling 1994; Jenkins-Smith and St. Clair, 1993). Indeed, with offshore operators seeking and obtaining permission to drill in 10,000 feet of water, and to sub-floor depths of 25,000 feet, it could hardly be otherwise (Oynes 2003). The result ensures that project assessment (both environmental and socio-economic) is a central and politically-charged terrain. It has precipitated familiar policy debates on the roles of "prescriptive" versus "performance based" regulations, varieties of industry self-regulation or third party certification (Pratt et al 2002).
Science, Knowledge Domains and Epistemes
At such points, the contribution of the epistemic approach to ideas and particularly to scientific ideas becomes evident. Peter Haas points out its essential tenets: organized knowledge is harnessed to problem-solving; research specialists are linked together in networks; and their analysis and recommendation are connected to decision-makers (Haas 1992). Such models offer a disciplined approach to the hierarchy of policy ideas, to professional advocacy and science. In particular, they help explain how some frameworks and outlooks become established while others do not, as well as accounting for shifting fortunes (the rise and fall) among paradigms. Finally, for policy study it offers a valued perspective on bureaucratic politics and technical rule-making.
How might this apply to the case of offshore oil and gas? One obvious point of departure is in core scientific disciplines. Petroleum geology, petroleum engineering and marine engineering constitute the foundations for prospecting, well design and offshore structures, respectively (Atlantic Geoscience Society, 2001; PCF 2000; Selley 1998). Certainly these are accompanied by well organized networks. For instance, the American Association of Petroleum Geologists is the largest formal grouping in the geology profession. It is also worth noting that the offshore industry maintains its research ties to the academy principally through these disciplines.
But as Haas reminds us, an epistemic community is something less and something more - it congeals around a practical policy problem. When whale survival becomes an issue, the challenge is to model whale numbers, aggregations and movements. Here the competing analytic threads within cetology become operative. So as a starting point, the internal debates within the offshore disciplines require attention.
This may cover the first generation of offshore operations and may still remain central. But there are serious questions about their sufficiency today. It is necessary to account for the rise of parallel knowledge domains among lawyers, ecologists and economists. This is well-illustrated today in the debates about oceans governance, addressed below.
It is also revealing to consider the role of the social sciences in shaping thought about offshore petroleum activities and impacts. These are still the questionable guests at the offshore petroleum smorgasbord and their status and contribution remains unclear. Social science skills are of undoubted relevance, both to offshore capital and state agencies, given the centrality of environmental and social impact to regulation-making, project approval and political legitimation. In practice, however, this has been neither acknowledged nor fulfilled. One study of the Environmental Studies Program for the US offshore, under the auspices of the US Mineral Management Service, found that socio-economic dimensions had not been systematically integrated into the OCS research program ten years into its mandate. This occurred in an American regulatory regime where social impact-oriented research was explicitly mandated in support of the licensing regime (Gramling 1996; Laska and Seidlitz, 1993; NRC 1992; Seidlitz and Laska 1994). In Canada, where no comparable research mandate is stipulated, there is even less evidence that such knowledge is regarded as a valuable much less essential part of the regulatory toolkit.
For example, in the mid-1980s, Canadian offshore regulator COGLA identified "social benefits" as one of three required categories (along with business contracting and employment benefits) for offshore rights-holders to address in order to gain permit and license approvals. This offers an instructive glimpse into the regulator's understanding of social relations in the offshore. One element was defined as the gauging of the community "impacts" likely to flow from project activities. Another element required license applicants to undertake community "consultation" work to inform local residents about prospective activities. The third designated community "support" obligations in such areas as hiring, training and infrastructure use. In effect, the "social" category was defined so as to acknowledge any non-commercial or "cultural" contingencies, particularly in rural and remote communities beyond the regional metropoles where offshore bases tend to cluster. They became the residual local category. Often these duties were deemed satisfied by identifying local facilities that were subject to stress from the influx associated with the construction phase, offering a job rotation option for local residents, and maintaining a store-front information contact point. None of these responsibilities is inherently insignificant, and each has a plausible rationale. However they represent a poor gloss on what "social research" could represent, going beyond service to consumers and exploring instead pressing questions of citizen mobilization and empowerment, at varying spatial levels and through new or reassigned institutions, forums and initiatives.
Such findings suggest that the relationships between industry, state regulators and social science require systematic attention. It is important to explore how offshore science studies - both baseline and impact oriented - are planned and conducted. What is the role of the gray-knowledge sector of consultants and free-lance experts in shaping epistemic templates, as they are engaged to fill the technical and legal requirements of licensing. One intriguing study, pertinent to this topic, is Wildavsky and Tenenbaum's (1981) analysis of the politics of petroleum reserves estimation in America in the 1970s. Overall, an expanded awareness of the impact of applied knowledge in decision-making can point social and policy analysis in fresh directions.
Federalism and the Offshore Domain
The history of commercial petroleum in federal systems is, in significant part, a history of intergovernmental conflict (Fitzgerald 2001; Laendner 1993; Hunt 1989). It has pitted national governments against provinces and states, and provinces against one another, in struggles over issues of jurisdiction, resource ownership, fiscal policy, environmental security and domestic industrial and employment benefits, to name only the most prominent. What began on land has carried over to the water, where Washington faces coastal states from Maine to Alaska, and Ottawa faces provinces from Newfoundland to British Columbia. A similar dynamic occurs in Australia (Cullen, 1990; Haward, 1989). In such cases, there seems to be a strong proclivity for constitutional litigation, in which central and regional governments advance sovereign claims which are determined by judicial review. In the US, Canada and Australia, central authorities emerged legally dominant from this phase. Supreme Courts generally found the national case for sovereign powers over continental shelf resources to be superior to provincial and state arguments for historic (colonial) entitlements.
In the opening decades of offshore petroleum (1950-70), such jurisdictions may well have appeared to be self-contained and exhaustive. That is, all political questions pertaining to offshore petroleum were considered to fall under national jurisdiction. If continental shelf regions were valued economically for their petroleum reserves alone, this arrangement might have been sustained indefinitely, with federal authorities administering leases, collecting royalties and regulating extractive projects in much the same way as did Texas and Alberta on land. However the very fact of ocean jurisdiction introduced complicating factors. One was the presence of coexisting and potentially rival industries, such as fishing, marine transport and coastal tourism, which had substantial (and historically prior) claims to ocean use (Doyle 1978; Goldstein 1982). Their effective political mobilizations not only challenged offshore resource administrators to expand their policy repertoires, but they also provided provincial and state authorities with avenues to reassert an offshore presence. The fishing resource offers a prime example. Apart from the internal waters of bays, estuaries and the coastal strip, Canadian provincial involvement in marine fisheries centres on land-based processing and sale (Pross and McCorquodale 1990). However this has been more than sufficient to enable provincial authorities to champion the economic interests of their fishing sectors in the face of risk or threat from oil interests. On the Atlantic coast, fisherman compensation programs for oil and gas disruption became pressing concerns following the Hibernia and Sable discoveries of the late 1970s (Heber 1986). Moreover, once the joint federal-provincial management board structure emerged, in 1982, the provinces enjoyed direct leverage over key petroleum management decisions, by virtue of the ministerial veto. Thus Nova Scotia was able to trigger, unilaterally, the 1987 moratorium on petroleum exploration on Georges Bank, in the name of protecting one of the region's richest fisheries (Baetz 1993).
Another key political conditioning issue was the heightened awareness of ocean ecology beginning in the 1970s. This owed much to the damaging environmental episodes mentioned earlier, together with tanker spills, marine mammal welfare campaigns and a growing appreciation of the scale of shore-based pollution. The ocean commons were revealed as a profoundly complex yet fragile environment that was in desperate need of integrated and effective governance (Silva 1986). Here policy issues are linked, overlaps abound and intergovernmental and inter-agency conflicts are latent in all commercial and regulatory actions (Mann Borghese 1998; Wilder 1998). Such recognition hastened the breakdown of the traditional sectoral approach to ocean resources. Previously separate domains -- of oil, fish, transport, communications, parks and protection – are now increasingly aggregated, creating a new era of ocean politics. In Canada, the new guiding principles principles include ecosystem management, the precautionary approach, and integrated decision-making (Canada 2002). A new repertoire of policy instruments and planning tools is emerging, that includes coastal management areas, large ocean management areas, and marine protected areas.
While the institutions of ocean governance are still rudimentary, they do provide a new political space that is being actively contested by an expanding range of interests. The risks of this situation have not been lost on the offshore petroleum bloc, which recognizes the potential of holistic ocean policies to erode or even displace sectoral resource regimes (ACPI 2001; PRC 2002). Much will depend on how the existing regulatory arrangements are reconciled with new initiatives, and where the seats of ministerial and bureaucratic authority are lodged. As a result, the interface between the respective management regimes will be politically contested for the forseeable future.
State Strength and Capacities
Another key dimension of offshore politics involves the capacities of coastal states to manage hydrocarbon resources. On one level this invokes familiar analytic debates about strong and weak states, coherence and fragmentation, autonomy and permeability (Ikenberry, 1988; Fossum, 1997). Important as this is, it is a complex and intractable analytic problem. Part of the answer turns on properties of state management institutions (Clarke and McCool, 1996). Another part depends on the policy sub-sectors being assessed and the ability to aggregate these findings at a more general level (Andersen, 1993). A panoply of policy instruments figure in any effort at offshore management and while borrowing, learning and diffusion is common, any such configuration is a path-dependent construct.
Particularly intriguing, however is the application of this perspective to the offshore. In Atlantic Canada, for instance, a curious institutional hybrid has emerged over the past twenty-five years. Its roots lay in the federal-provincial disputes over offshore resource ownership and the stakes were exacerbated by the energy (OPEC) price spikes of the 1970s. As Atlantic offshore exploration began to yield significant discoveries (particularly the twin Hibernia oil and Venture gas strikes of 1979), the need to resolve uncertainties over state jurisdiction became more urgent, with industry interests hesitating to move forward so long as their tenures remained cloudy. It was at this point that the dual "ownership" dispute was transformed into a joint "management" regime, by virtue of a series of negotiated intergovernmental accords.
The concept of the joint federal-provincial offshore management board has a mixed provenance, originating in the 1970s. It is interesting to note parallel negotiations over power-sharing relations, at Aboriginal land claims tables and through co-management schemes put forward in other renewable resource fields (Clancy 1990; 1999). In petroleum however, the prototype was the tri-province Maritime Offshore Agreement of 1977. It was succeeded by the Canada-Nova Scotia offshore petroleum deal of 1982, which was transcended, in turn, by the 1985 (Canada-Newfoundland) Atlantic Accord and the revised Canada-Nova Scotia deal a year later (Crosbie 2003). Talks on a parallel Pacific Accord between Ottawa and British Columbia were underway after 1987 but halted, as mentioned earlier, with the decision not to lift the longstanding westcoast moratorium. However the prospects for inter-basin policy learning remain strong (House 2002).
Nevertheless, a new template for offshore management was established by the east coast accords - of jointly appointed petroleum boards supported by professional staff, exercising delegated regulatory powers under federal and provincial statutes and mandated to coordinate the essential administrative functions for the oil and gas sector. While the boards enjoy substantial autonomy as crown agents, they are responsible to designated federal and provincial ministers, who also exercise powers of review, confirmation and overide of select types of decisions through "an elaborate series of trumping arrangements" vis-à-vis the boards (Brown, 1991). At each level of government, a range of bureaux and agencies are bound into the board structure by formal memoranda of agreement, while industry and public interests seek access through a shifting network of advisory committees.
A plethora of research questions attend the joint board structure. How "open" is it to organized lobbies? Within its broad jurisdictional template, which are the formative or valence areas? How meaningful are the options for ministerial appeal and how have they been exercised? The capital-state bargaining literature certainly has a role to play here, particularly as petroleum basins have been developed, to date, largely on a "project" basis in which each sponsoring consortium advances an omnibus plan for public assessment and determination.
This highlights the question of issue boundaries and characteristics: In policy terms, how is the "offshore development" field most usefully delineated? Derek Fee advances the interesting concept of the "petroleum exploitation strategy". It consists of "those instruments, both legal and fiscal, that define the relationship between the state and oil companies involved in the petroleum exploitation process" (Fee 1988:32).
For Fee, this highlights the range of critical variables that need to be addressed in any new venture. Three elements -- the exploitation agreement, licensing policy, and taxation -- form the core of his approach. It is worth noting that this model was developed in reference to leading oil supply states during the OPEC era. A more nuanced version could presumably be developed for the separate category of offshore petroleum basins. Drawing on the Canadian experience, a survey of pertinent offshore management issue areas and instruments is presented in Figure 1.
Figure 1 Here
Each of these begs attention in its own right. As a group, however, they invite questions about how such target policy categories or fields are defined and how their boundaries may shift over time (multiplying or collapsing). As an example, consider the case of natural gas deregulation. During the late 1980s, by the initiatives of the Mulroney government, the western producing provinces and the National Energy Board, natural gas prices went from being closely regulated to being market driven. This was accompanied by a new role for pipeline carriers, from being merchant carriers of bundled gas supplies to selling a transit service in a flexible sales market between producers and final consumers. A longstanding edifice of sectoral regulation was dismantled and the structure of gas transmission and delivery was transformed. This constituted the most dramatic regulatory reorientation in decades. In key respects, however, it is incorrect to suggest that state oversight was abandoned here. While pricing and contracting were decontrolled, a variety of other regulatory layers remained in place, to ensure competitive dealing and social dimensions such as environment and safety. Doern and Gattinger describe this as a system of “managed competition” in which a coordinated regulatory regime disappeared while unconnected layers of special regulations remain stacked on the industry (Doern and Gattinger 2003). With sector relations now redefined, competitive forces set loose, the available policy instruments altered and the prospects for coordination reduced, the balance of state capacities has evidently changed.
Offshore Petroleum Regulation in the New Millennium
In the years since 2000, the offshore regulatory system has come under wholesale political challenge of a sort not seen for a generation. This is evident on all three coasts, though the configurations of players, interests and processes is distinct in each case. A common signifying theme, however, is that the offshore regulatory regimes -- those broad state structures of rules and values -- are past time for review and overhaul. While this case is advanced most frequently by offshore petroleum capital, it is not necessarily resisted by federal or provincial state agents, who themselves strain against strictures of the 1980s “joint” political settlement.
The case for regulatory change is quite concise. Offshore resources administration, it is said, is a multi-layered construct whose elements are not well integrated. Consequently, its workings are slow, repetitive and often working at cross-purposes (CAPP 2002). This balkanized character is due partly to the ambitious scope of offshore regulation, which covers sectors from environmental protection to health and safety to rights and royalties and business benefits. It is also due to the incremental growth of these functions, normally in separate policy silos, over thirty years and more. The result, it is suggested, is not rational, from either the industry or the public service perspective. It is expensive to comply with and unpredictable in results. Furthermore it presents huge challenges of coordination, across two (sometimes three) levels of government and more than a dozen major departments and agencies. This has been acknowledged, in the state realm, by the design of offshore energy accords, joint federal-provincial management authorities, and memoranda of agreement between lead departments and agencies. Yet the MoA process has been glacial, remains incomplete, and reveals at best a mixed record of achievement.
What, then, is the alternative? The offshore petroleum operators talk of regulatory simplification or rationalization, limiting the range of policy goals, shortening the length of regulatory cycles, shifting from prescription to performance-based regulation, or achieving regulatory efficiency as an industry competitive advantage. The overarching theme is the need for greater predictability and greater certainty in relations between state and stakeholders. Such a policy discourse causes alarm in other reaches of the offshore policy network, most visibly in the environmental NGOs but also in offshore business supply circles, the fishing sector and the coastal publics. Perhaps for this reason, the recent review initiatives have had varying degrees of political visibility. The three major initiatives are briefly described below.
On the Atlantic coast, the process kicked off in November 2002, when a high level business-government conference was convened in Halifax under the name of the Atlantic Canada Energy Roundtable or AERT. The catalyst here was the Canadian Association of Petroleum Producers, which had already flagged "regulatory efficiency and effectiveness" as a pressing public policy concern. However more immediate driving pressures came the disappointing results of early drilling on the deepwater continental slope (depths exceeding 200m), and the regulatory "time out" declared by leading operator EnCana, in suspending its Deep Panuke project application early in 2003.
The AERT brought together senior leaders and staff from four federal departments (Industry, DFO, NRCan and ACOA), energy ministers from NS, NB and NFLD, and CEOs from 25 leading petroleum companies. The industry premise was that "the Atlantic Canada regulatory framework is dated and inefficient; this increases costs and cycle times" (Protti 2002). Of particular concern was the new burden imposed by the Canadian Environmental Assessment or CEAA process, which was extended to the Atlantic offshore region after 2001. Government representatives were certainly willing to enter the dialogue. Since Ottawa embraced the discourse of 'smart regulation' in its fall 2002 throne speech, and the offshore provinces recognized that the exploration bubble of the late 1990s had deflated if not burst. Thus this inaugural roundtable meeting was propelled by a confluence of commercial and political concerns.
The structure of this exercise is one of its most notable features. First, it drew representation from the most senior levels of the respective organizations. As a result, their endorsement of a continuing work program, with agreement to review the results at regular intervals, ensured not only that follow-up would occur but that tangible progress was expected. Second, under guidance from discussion papers from CAPP and the Atlantic Canada Economic Council, among others, two leading themes were identified for future work by middle level and technical officials. One dealt with “regulatory issues” with the goal of broad spectrum regulatory renewal along streamlined, performance-based criteria. The second involved “industrial opportunities” and the need for a competitive contracting environment in which current international project procurement practices would form the basis for a new benefits regime and pave the way for an export-oriented Atlantic supplier base (AERT 2003). In 2005 the Roundtable reported mixed progress in delivering results. Firm commitments have been agreed for coordinated regulatory review of future offshore projects, within significantly shorter timeframes. But consensus was not reached on a series of industry cost concerns: for more discretionary rules on safety and environmental protection; on flow testing of new discoveries; on formal environmental assessment of exploratory wells; and on industrial benefits reporting protocols (AERT 2005).
In the north, the timeframe is similar but the process is somewhat different. It is generally recognized that major pipeline infrastructure will be required to sustain long term natural gas activities. At least two possible projects were evident by the year 2000. The Mackenzie Valley Project proposed to link three major gas fields in the Delta to the Alberta trunk system through a large diameter pipeline with an initial capacity around 1Bcf/day. The Alaska Gas producers Pipeline proposed, to connect north slope gas "over the top" of the arctic coast and down the Mackenzie Valley, with a capacity four times that of the Mackenzie line.
With such major projects in the offing, and Aboriginal groups in settled claim areas indicating their interest in joint ownership, the issue of northern pipeline project regulation was back on the agenda after almost 25 years. In November 2000, a committee of regulatory agency heads was convened, to explore ways of coordinating the regulatory processes that mandated separate public hearings (at least eight in number). Eighteen months later the Chairs Committee released a Cooperation Plan endorsed by three federal agencies, the GNWT and two of its boards, and four Aboriginal settlement boards. It sets out general terms for a joint environmental assessment process, a coordinated regulatory process, consolidated information requirements, shared technical support resources, and a public involvement plan. In addition, an estimated 3-4 year template of phases and outputs was forecast, covering the time from the filing of a preliminary information package or PIP to complete certification and permitting (NPEIARCC 2002). Notably, this plan was agreed prior to the filing of any project applications. Since then, the Mackenzie Valley group triggered a formal regulatory review by filing its preliminary plan in June 2003.
The west coast situation offers a different face again. As seen earlier, there are several signs that British Columbia may frame a regulatory and management system that meets or exceeds the streamlining features described above. The moratorium has offered an umbrella under which such preparations may occur.
Whatever the outcomes, this proliferation of review and redesign initiatives speaks to the degree of political flux in offshore regulatory regimes. The range of political agendas and policy priorities is broad. Obviously these initiatives are advanced in differing scales, and they should be interpreted accordingly. It is a massive undertaking to restructure a multi-agency, consolidated regulatory process. It is quite another to seek the tightening of permitting procedures within a single agency. In the Arctic and Pacific, there is an opportunity to build or restructure the regime in periods of comparative political calm, while capitalizing on the experience of the Atlantic coast. Equally, the new bargains are being negotiated in settings of varying political and commercial urgency. The reality of competition between Canada’s three offshore coastal regimes cannot be denied, given the shared involvement of the offshore corporate sector. Each regime exhibits certain sources of comparative political and commercial advantage. Only the east coast has reached the offshore production threshold. Only the north has made significant progress in accommodating Aboriginal title and treaty interests. Only the west coast is in a position to fashion new arrangements on a relatively blank canvas. On each coast, agencies have histories of interaction that can be alternately emancipating or paralysing.
It should be evident that in Canada, offshore petroleum politics reflects many of the classic staple resource features. It is clear that the possibility exists for a petroleum staple trade in all of Canada’s continental shelf regions. Capital seeks to appropriate a valued product and draws upon extensive technical and organizational capabilites to achieve this. The vitality of this staple trade depends upon market conditions external to the host economy, in this case the notoriously volatile markets for oil and gas. Nonetheless, in an energy world where fossil fuels will be relied upon to provide the predominant bridging supply for the next three to four decades, political and business interest is virtually assured, subject to favourable conditions. This, however, says nothing about the pace or scale of offshore production over this time. Despite some forty years of offshore exploration in Canada, the geological and commercial potentials are still far from clear. Petroleum ‘prospectivity’ refers to the estimated physical potential of sedimentary formations. It is a dynamic variable, highly sensitive to seismic and drill tests results and always assessed in a comparative (inter-field or inter-basin) context. A single result pointing toward a major find can reorient industry attention and positive follow-up testing can prompt a virtual stampede of interest.
As with most staples, the host states plays a co-determining role in development prospects. It is evident that state agencies can impinge on the industry through a variety of elements that make up an offshore petroleum strategy. This includes regulatory measures aimed at crown rights, royalties, health and safety, environment, and industrial and employment benefits. Mature staple states often adopt quasi-mercantilist outlooks, utilizing crown ownership to stipulate the terms of access while at the same time seeking to lever maximum commercial linkages and domestic surplus retention. The institutional and administrative arrangements for designing and delivering these measures are important co-determinants of offshore performance. A federal structure complicates the search for strategic consistency, through possible jurisdictional tensions that can be mediated through the courts, fiscal instruments or inter-governmental accommodation. An intriguing institutional innovation – the joint federal-provincial management board – has shifted the political focus from disputed ownership to harmonized regulation.
Whatever the state presence, its interests in managing field and basin development on a rounded basis are, at some point, likely to collide with the narrower extractive project focus of corporate sponsors. Finally, it should be remembered that the commercial and political underpinnings of staple industries are likely to change over time. The Canadian joint offshore boards are institutional products of the 1975-85 energy crisis era. Their capacities to adapt to subsequent regime changes, including energy price decontrol, new technological capabilities and shifting paradigms of project regulation, will co-determine the pace and scale of staple growth. There are now increasing pressures for policy convergence, and Canada's offshore future may yet involve a single cluster of offshore capital (indigenous or external) in a dominant investment position, facing a single (unitary or joint) regulator.
Despite the cluster “mature staple” properties mentioned above, there are a number of striking ways in which the offshore petroleum sector exhibits “post-staple” attributes. This is particularly evident in the growing influence of metropolitan or post-material political forces in the offshore sector. This may start from the fact that the industry in question does not occupy a spatial hinterland in the classic sense of a social formation resident in a material extraction zone. Indeed it is striking how socially uninhabited the offshore petroleum shelves really are. This creates a context of ambiguity on matters of stakeholding and representation. The petroleum staple “community” is restricted in size (by the capital intensity of the operations) and transitory in its presence (rotating in and out of offshore workplaces). Meanwhile the shore-based “community” that might claim a stake based on physical proximity (coastal residence) or livelihood (fisheries) is, as we have seen, largely disconnected from the petroleum staple.
Second, the political templates for offshore regulation have been forged over three decades of dramatically shifting public and governmental values. Where industry regulation aimed traditionally at stabilizing the conditions for production and profit, the new trajectories of social regulation deal with the externalities of material production, for workplace health, safety and environmental security. As we have seen, these fields are now central arenas of political conflict between offshore capital and state authorities. Corporate resistance to offshore social regulation mounted rapidly through the 1990s. It is now reflected in a series of concerted business-government initiatives, such as the Atlantic Energy Roundtable (with parallels in the North Sea and the Gulf of Mexico), aimed at reducing the social costs of offshore operations while redefining the locus of regulatory initiative. This is the world of harmonized and coordinated reviews, performance-based standards and the so-called smart regulation, where the private/public interface is being presently redefined.
Finally, it is clear that the offshore petroleum sector is far from insulated, politically, from the spill-over impacts of other fields. Of particular interest here are the potential challenges from new, holistic resource management paradigms and new social group claims. Ocean governance strategies, which seek to marshall a wider array of stakeholders under the banners of integrated management, ecosystem modelling and sustainable development, pose a potential threat to resource management regimes (like offshore petroleum) based on single sector extraction. On the other hand, the recent legal claims by Aboriginal Peoples to offshore resource ownership, which have won some degree of judicial recognition, stand to insert yet another policy template onto the offshore domain.
In so many respects, offshore petroleum is poised at a sensitive juncture. Perhaps the most significant political chapters remain to be written.
1. I wish to acknowledge financial support from the Social Sciences and Humanities Research Council of Canada, under the project "Policy Innovation and Management on the Eastern Continental Shelf: the Politics of Offshore Petroleum Development in Nova Scotia and Louisiana.”
Figure 1 - Offshore Petroleum Management Issue Areas and Instruments
Offshore Policy Issue Areas
1. Determining Jurisdiction
Continental shelf jurisdiction; International convention; Constitutional powers; boundary and federalism litigation; joint management board.
2. Allocating rights to explore and extract
Auction or concession: exploration, commercial discovery, production licenses; Moratorium; state "back-in" provisions.
3. Project Assessment/ Approval
Project proposal; Panel review; Public hearing; Project licensing; Terms and conditions; discretionary deviations.
4. Royalty and Taxation
Cash royalty; Royalty in kind; Royalty relief; depletion allowance; State oil company.
5. Health and Safety
Statutory prescriptions; Codes of conduct; Operator management systems; Third-party standards and audits.
6. Environmental Security
Project environmental assessment; Statutory prescriptions on equipment or processes; Environmental effects monitoring; Operator management systems; Third-party standards and audits.
7. Industrial and Employment Benefits
Procurement plan review (undertakings, bid lists, award pre-screening, designated items, domestic content levels); Employment plan review (training, hiring levels); Audits; Performance links to future rights allocation.
8. State Regulatory Reform
Streamlining of multi-agent processes; Joint project assessments; Statutory incorporation of private industry standards; Use of performance-based standards; reduced regulatory cycle times;
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