National Review

Murky waters

Amidst growing cynicism, govt must provide full reporting on BPC deal

As Bahamas Petroleum Company (BPC) continues its highly controversial exploratory oil drilling in Bahamian waters, the lack of transparency involving critical issues associated with the company’s project is becoming even more stark. Meanwhile, the contradictory and murky signals being sent by government as it relates to the exercise is increasingly worrying.

For starters, the Minnis administration, which has pushed a climate change agenda in international circles, has failed to articulate a clear policy on oil drilling in Bahamian waters.

Prime Minister Dr. Hubert Minnis in opposition suggested he would be accepting of drilling for oil if the right regulatory environment and environmental protections were put in place.

However, last month, the prime minister told reporters he is “totally against” drilling for oil in The Bahamas, but said the government could not get out of the deal entered into by a previous administration.

After Minnis’ statement, several of his Cabinet ministers — Darren Henfield, Frankie Campbell and Iram Lewis — said they also do not support oil drilling.

In the House of Assembly in December, Elsworth Johnson, the former minister of state for legal affairs, said he did “every contortion” that he possibly could legally for the government to get out of the deal, “but somebody drafted that tight”.

BPC — which was incorporated in 2005 by the law firm of the now PLP leader — entered into a licensing agreement with the Christie administration in 2007. The company has since received a number of extensions.

Incredibly, Attorney General Carl Bethel said last month the licensing agreement is “not a public document” but may become public if the government is required to produce it as part of a judicial review environmental groups have since secured in their challenge to the government’s decisions to allow BPC’s exploratory well to go ahead.

Bethel also said at the time that notwithstanding the prime minister’s personal views on this matter, the government must act legally.

The personal views of Minnis and his ministers are less important than articulating a clearly stated policy position on the oil drilling issue — not just seat-of-the pants pronouncements when reporters ask questions on the sidelines.

Personal views aside, the government has mounted a defense to legal action filed by environmental groups challenging its decisions to authorize BPC’s drilling of its exploratory well, Perseverance #1.

During a recent hearing, the government’s attorney, Aidan Casey, a British queen’s counsel, pointed to an affidavit that was filed by BPC CEO Simon Potter, which indicated that if a stay was granted, BPC would see a significant negative impact.

“You can well see that BPC might choose to have no further involvement with this exploration and that any further commercial operator, looking at what happened to BPC, might say ‘well we’re not going to get involved either’,” Casey said.

The judge, Petra Hanna-Adderley, did not grant that stay as the environmental groups — Waterkeeper Bahamas Ltd. and Save the Bays (STB) — had requested, but granted leave for those groups to pursue judicial review. Each side claimed a win after her ruling.

Last week, the government, in the words of the environmental groups’ legal team, “removed a major obstacle to the hearing” of the case when it withdrew its application for security of costs. 

“So many times in the past, public interest litigation has been derailed and priced out of justice by security of cost applications, which would require those bringing actions in the public interest to ensure due process and lawful development to put up funds before they can actually have their day in court,” the legal team noted.

Interestingly, the official opposition took issue with the government’s decision to withdraw the application for security of costs.

Progressive Liberal Party (PLP) Chairman Fred Mitchell said the decision was “a show of weakness and a lack of political will on the part of the government”.

Royalties and fees

As we await the judicial review, there is a pressing need for clarification on multiple matters connected to what BPC is doing and exactly what the government agreed to on behalf of the Bahamian people.

While the government determined it cannot get out of the deal with BPC, the attorney general — obviously seeking to allay the worries some Bahamians have that the country would not get its fair share from any oil production BPC may undertake in the future — announced in the senate last month that the government intends to renegotiate the scale of royalty fees that would be paid to the Consolidated Fund, but also to the sovereign wealth fund “for the immediate benefit of every Bahamian”.

The current royalty rate is between 12 percent and 25 percent of the net petroleum won and saved from the licensed area, significantly lower than the 45 percent and 75 percent of the net selling value advised by the Commonwealth Secretariat.

Bethel has said that BPC could face a new tax if it refuses to renegotiate royalty rates, which he called “abysmally low”.

On Monday, Potter said in BPC’s agreement with the government, the company had already agreed to “a significant increase in royalties compared to the law”. Potter was not responding to anything the AG said, but when he called into Love 97’s “Issues of the Day” with Wendall Jones, he said should oil be found in commercial quantities, “that would see a huge payback for the government”.

He also advised that it would take five years for oil production to start should oil be found in commercial quantities and should BPC be granted approvals to develop an industry.

Former Minister of State for Finance James Smith, who is also a director of BPC, predicted recently that the government will exhaust its capacity to help those in need during what is projected to be a protracted economic downturn caused by the COVID-19 pandemic, and suggested it would be foolhardy for The Bahamas not to exploit its oil resource if BPC’s exploratory drill confirms oil exists in commercial quantities.

But BPC’s oil production, if it is allowed to commence, would be of no help in solving the urgent problems Smith underscored.

It is clear then that no one hoping for some national benefit from a potential oil industry should expect any quick benefits to flow our way.

As it relates further to telling revelations regarding the government’s arrangements with BPC, the attorney general disclosed recently that BPC and the government have “a difference of opinion” on the licensing fees the company owes.

“They’ve sent the money, sent a check, but we’ve not accepted it,” he was quoted as saying in the Tribune. “They’ve tendered what they say the amount is, but we don’t agree. We’re now engaged in discussions that we call a ‘reconciliation’.”

In a February 25, 2020 letter granting BPC environmental authorization, Environment Minister Romauld Ferreira advised the company that within 60 days it “shall pay to the ministry any and all outstanding fees (if any) for the period up to 2018 and in addition shall pay any license fees as determined by the minister for the periods 2019 and 2020”.

When he called into Jones’ show on Monday, Potter downplayed the issue, as he did in his response to the Tribune on the same matter days earlier.

He told Jones: “The company has paid its licensing fees over a number of years. We paid them in advance and as the AG has said we’ve made payments, we’ve offered to make further payments and it’s just the reconciliation that needs to occur.”

Reporting

That BPC has been allowed to commence its exploratory drilling without its fees paid up as stipulated in that February letter to the company raises significant questions surrounding the legitimacy of its agreement with the government. It is stunning that the matter has not been cleared up nearly a year later.

STB Chairman Joseph Darville on Sunday called on BPC to provide public transparency on its licensing fees.

“According to the terms of their own license, they should’ve paid an excess of $10 million by now,” Darville said.

He added, “BPC must reveal the precise state of its dealings with the government regarding any and all licensing fees or be forced to do so by the authorities.”

On this score, we think STB’s call for transparency is misplaced.

It is the government that is obligated to provide a full reporting on these matters.

Ferreira, the environment minister, failed to do so when he contributed to the budget debate in Parliament back in June, four months after he granted BPC environmental authorization. Parliament provides the ultimate national platform for the reporting on critical national matters like oil drilling. The budget debate is usually when ministers cover all critical areas of their portfolios with important details.

It speaks volumes that Ferreira has not done so.

BPC, a public company listed on the AIM Market of the London Stock Exchange, appears to be flailing amid strong pushback to what it is doing — although it repeatedly insists drilling is taking place fully within the law and that its dealings are transparent, in line with its strict legal obligation to ensure the veracity of the facts contained in its public statements on all matters.

The Minnis administration, which came to office promising the full enactment of the Freedom of Information Act, and highlighting a commitment to transparency on all matters impacting the national interest, has done a poor job in bringing clarity to this most critical national issue. 

The bits and pieces of information trickling into the public domain add to widespread cynicism that exists on this and other issues.

The time has long passed for the prime minister or the relevant minister to provide a full reporting to Parliament on this matter: state a policy position on oil drilling; table all agreements the government of The Bahamas entered into with BPC; provide confirmation of and evidence to show BPC has adequate insurance policies for its exploratory exercise; provide a full and clear reporting on the issue of BPC’s licensing fees and inform what it (the government) would consider to be reasonable royalties.

The Bahamian public deserves no less.

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Candia Dames

Candia Dames is the executive editor of The Nassau Guardian.

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