NS to Pay Exxon Mobil $100m as Hospital Replacement Postponed

12 02 2016

by James Hutt

Sable Offshore Energy Project (SOEP) Photo credit: CAPP

As Nova Scotia is forcing low income seniors to pay more for drugs and the province’s largest hospital is literally swimming in rodents and disease, tax payers are being asked to cough up $100 million to pay off one of the largest oil companies on the planet.

The CBC has revealed that the Nova Scotia government owes an additional $98 million to multinational oil and gas corporation Exxon Mobil and its partners. The money will be refunded from royalties earned by the province for Canada’s first offshore natural gas project –the Sable Offshore Energy Project (SOEP).

Meanwhile, Atlantic Canada’s only tertiary level hospital, the Victoria General Hospital, is falling apart and patients live in “nightmarish conditions.” The 67 year old hospital’s state became a crisis last September when one of the buildings flooded and cancelled 106 surgeries and forced the relocation of 50 patients.

VG Hospital Photo Credit: Tim Krochak, Chornicle Herald

But the hospital has been plagued with problems for decades. Tests found Legionnaire’s disease found in the facility in the early 80’s and it remained untreated until the death of a patient in 2005. It flooded previously in 2012 and again in 2013. In 2015, the Health Authority closed two floors due to bed bug infestations and cancelled operations when surgical instruments were contaminated with airborne debris.

Governments from all parties passed down the problem to their successors until it became impossible to ignore the mould and weird substances smeared all over nightstands. Yet, the government has only earmarked $1.5 million for planning the replacement of the VG hospital. In contrast, the Liberals have budgeted $56.4 million to help build the new Halifax Convention Centre.

Sable Offshore Energy Project

Even more striking, is the tab the province owes for the Sable Offshore Energy Project (SOEP) decommissioning. While the province refuses to make public just how much taxpayers are on the hook for, it has said that is responsible for the “vast majority” of the abandonment costs.

SOEP, located just off the National Park Reserve of Sable Island and 225km off of the coast of Nova Scotia, has been producing natural gas since 1999.

At the time, SOEP was projected to have a lifespan of 25 years, while SOEP partners promised new discoveries could extend that project life. For the first 5 years, SOEP produced between 400 and 500 million cubic feet a day. Soon after, production declined and the project struggled to operate at full capacity.

By the fall of 2012, production had fallen to 60 percent, to 200 million cubic feet per day. By 2013, Exxon Mobil had issued a tender to hire a company to plug and cap several of the project’s 21 wells.

Now, Exxon Mobil and its partners expect to start decommissioning the Sable project in 2017.

Almost all of the gas produced over the 17 years has been exported to New England. In return, Nova Scotia has earned $1.9 billion in royalties.

According to the private 1997 agreement between the province and SOEP partners, a large portion of the cost of decommissioning the massive offshore project will be subtracted from the royalties the province has already collected.

In January, the National Energy Board forced Exxon Mobil to disclose that $42 million has been allotted for abandoning the onshore Goldsboro gas plant, the project’s processing facility. Decommissioning and abandoning the marine facilities is expected to be much more expensive.

Now, due to an unexpected increase in estimating abandonment costs by Exxon Mobil, the province’s share of that bill jumped by $98 million. So whatever the undisclosed portion taxpayers are on the hook for, the price tag just became much more expensive and it could continue to grow.

The Department of Finance says it has been allocating funds over the past couple years for the projects decommissioning and will continue to do so.

The Liberal government has admitted that there is no clear deadline for when a decision will be made about replacing the aging hospital. The only option the Liberal government seems to be considering is privatizing health services and facilities by rebuilding it as a private public partnership (P3).

Nova Scotia’s experience with P3s includes a number of P3 schools, which have been plagued by cost overruns, delays and issues surrounding community control of the schools. In health care, P3’s hospitals have been a disaster, consistently running over budget and time, and often providing less services than promised.

The 1997 agreement precludes the current Liberal government, but it speaks to a culture that pervades all political parties in the province. The message is clear: Nova Scotia has plenty of room in its budget to bail out corporations, but none to keep patients in hospitals — or even above water.

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