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NEWS: NAFTA tribunal ruling favours Exxon against Newfoundland

Council of Canadians trade campaigner Stuart Trew writes, “A NAFTA tribunal has decided in a 2-1 ruling that a general requirement for oil producers in the Hibernia oil field off the coast of Newfoundland to invest some of their profits in research and development in the province was an illegal ‘performance requirement’. Exxon Mobil and Murphy Oil, in their joint April 2009 memorial, called the millions they were paying into provincial R&D and Education and Training transfers ‘unnecessary’ and not based on ‘commercial need’. They also claimed the measure upset the firms’ NAFTA right to fair and equitable treatment, Article 1105(1), by ‘failing to provide a stable regulatory framework for the conduct of petroleum development in the Newfoundland offshore area’.”

He adds, “The NAFTA Chapter 11 loss for Canada highlights the relative powers of multinational oil and gas firms over governments under international investment treaties. Like in the AbitibiBowater dispute, also against Newfoundland and Labrador and which the federal government settled for $130 million, provincial rights under the Constitution to manage resources sustainably and in the interest of the public are being undermined by private investment tribunals siding with big business. …It is cause enough to tear up the NAFTA Chapter 11 pages related to investor-state disputes and to refrain from signing any more investment treaties until the process has been gutted or radically revised. That includes with the EU in the Comprehensive Economic and Trade Agreement.”

Today’s Globe and Mail reports, “Unless (Newfoundland and Labrador Premier Kathy) Dunderdale (now) agrees to change the regulation (requiring Exxon to pay into the research and development fund), Ottawa could end up paying Exxon’s share of oil industry’s research spending for the foreseeable future –an amount the company estimated at $65-million – in addition to covering its past contributions. …The Canada-Newfoundland and Labrador Offshore Petroleum Board, which issued the rule eight years ago, has no intention of changing course despite the NAFTA ruling, its chairman, Max Ruelokke, said in an interview from St. John’s. ‘The guidelines will still apply and we have informed governments of that,’ Mr. Ruelokke said. …The Canada-Newfoundland and Labrador Offshore Petroleum Board argued its 2004 regulation was merely a clarification of long-existing legislation – approved by both Ottawa and Newfoundland – that companies operating off the East Coast provide industrial benefits to the province, including R&D spending.”

The Globe and Mail article also notes, “(The Canada-Newfoundland and Labrador Offshore Petroleum Board chair) confirmed that it would take a directive from both governments to the board to change that decision. In absence of such a directive, Ottawa will not only likely have to repay Exxon for its past expenditures but cover any ongoing research spending the company is required to make by the Canada-Newfoundland and Labrador Offshore Petroleum Board. A spokeswomen for provincial Natural Resources minister Jerome Kennedy said the government is still reviewing the NAFTA decision, while an official at the Foreign Affairs and International Trade said Ottawa is ‘assessing the final decision to determine the best way forward’. …Trade lawyer Lawrence Herman, of Cassels Brock, said he expects the two governments will work out an agreement to change the regulations and split the costs of the NAFTA ruling.”

On September 28, 2007, the Council of Canadians and the Communications Energy Paperworkers union issued a joint media release stating that the NAFTA challenge by Exxon-Murphy Oil was an attack on Canadian sovereignty, We also issued an action alert calling on our supporters to send a message to Prime Minister Stephen Harper highlighting, “This is another example of why Canada needs a meaningful national energy strategy to satisfy our need for national energy security and an ecologically secure future. While you speak of Canada becoming an ‘energy superpower’, the reality is that Canada is becoming nothing more than an energy satellite exporting our resources at minimal royalty rates to the United States, while importing 850,000 barrels of oil a day to meet our own needs.” That action alert – Exxon’s NAFTA lawsuit shows need for national energy strategy – can be read at Stuart Trew’s blog from this week can be read at

Today’s Globe and Mail report can be read at