Liberals’ gamble on oil and gas in Budget 2025 ‘worrisome’, says MUNL researcher

The provincial government is putting Newfoundlanders and Labradorians’ future at risk, says a Memorial University researcher who is calling the Liberals’ continued massive investment in the fossil fuel sector is a “very risky bet.”

In her April 9 budget speech, Finance Minister Siobhan Coady reaffirmed the province’s commitment to subsidizing the offshore oil industry, despite projections that paint a grim picture for the global fossil fuel sector.

“With over 650 leads and 20 basins mapped there is much opportunity in offshore Newfoundland and Labrador, especially with its low carbon per barrel,” Coady said Wednesday, promising $90-million investment in oil exploration between 2026-2029 and highlighting $20 million for energy business development and another $1 million to continue assessing the province’s offshore gas resources. 

“What we see, unfortunately, in this budget is $111 million in subsidies for oil and gas exploration, for oil and gas development funds and so forth,” says Angela Carter, a Memorial University Associate Professor of political science and Canada Research Chair in Equitable Energy Governance and Public Policy. “This is a misuse of public funds at a time of climate crisis and also economic insecurity given where global oil demand is going.”

Carter, who authored the 2021 book Fossilized: Environmental Policy in Canada’s Petro-Province, points to the International Energy Agency’s 2024 World Energy Outlook, which projects the world will reach peak oil demand within the next five years before going into decline.

“This is really worrisome for governments like Newfoundland and Labrador that depend on covering budget shortfalls with revenues from oil, because the evidence is clearly demonstrating that all exporters are going to be affected, in particular governments that depend on oil revenues, in particular the places where oil is very expensive,” Carter says. 

“The highest cost producers are going to bear the largest revenue losses per barrel as we move forward […] and Newfoundland and Labrador is very, very exposed given the dependence that we’ve had on oil. So the issue then with the budget for 2025 is that it’s still very much depending on oil production increasing, as well as prices for oil that seem to be overrated, certainly in today’s world.”

‘Not the time for dramatic changes’: Coady

On Wednesday Coady stressed the economic uncertainties resulting from U.S. President Donald Trump’s tariff threats. The province is anticipating slower growth and a $372-million deficit, she announced, highlighting the $200-million contingency fund the Liberals announced earlier this year in response to the U.S. trade war. 

Previously, the province had projected a return to surplus in the 2025-2026 fiscal year, and Coady said Wednesday that while the province could force a balanced budget, “now is not the time to make dramatic changes to ensure that we’re back to balance.”

Instead, the finance minister announced investments in healthcare, education, and business development — with no new taxes. Provincial spending is expected to reach $11 billion this year, driven largely by major investments in healthcare and justice infrastructure, along with support for business initiatives.

All in on fossil fuels

The province projects that offshore royalties will account for 15 per cent of the province’s projected revenue for 2025-26.

Global oil production is projected to peak by 2030, due to increased clean energy production and net-zero goals, which aim to limit global warming and stay below 1.5°C or 2°C above pre-industrial levels.

“The issue then with the budget for 2025 is that it’s still very much depending on oil production increasing, as well as prices for oil that seem to be overrated, certainly in today’s world,” Carter explains, pointing to the budget projection that Brent oil will sit at US $74 per barrel in 2025. “So that’s the average that the government is assuming and it’s working its budget analysis off of that. But today, the price is at $63, more than $10 less per barrel. That has enormous impacts across our economy. So basically the government is anticipating the price of oil is much higher than it is right now. That could be a very risky bet.”

In 2023, the Canada Energy Regulator (CER) released a report on the future of Canada’s oil and gas industry in a net zero world. It projected a sharp decline in Newfoundland and Labrador’s oil and gas industry in the next decade and a 99 per cent drop by 2050. The report suggested that even if Canada misses its net-zero target, production in Newfoundland would still drop 80 per cent. 

Carter said oil companies are also cautious about investing in the province as oil production declines. “For exposed oil producers, and that’s Newfoundland and Labrador—these are the places in the world that are going to suffer first and hardest from global oil demand declining.”

In its report, CER projected oil production to decline faster in Newfoundland and Labrador, in contrast to Alberta and Saskatchewan. CER Chief Economist Jean-Denis Charlebois told CBC that as the demand for fossil fuels decreases the price of oil and natural gas globally will also decrease. “And that means that only the most efficient producers, from the perspective of managing production costs, including the cost of emission-lowering technologies, will be able to continue producing,” he said.

Major oil producers with investments in Newfoundland and Labrador’s offshore oil industry, including BP and ExxonMobil, are investing more in renewable energies. 

“They’re no longer bidding on offshore exploration parcels. They’re collecting less geophysical data. They’re drilling fewer exploration wells, particularly over this last decade,” says Carter. “There is a clear decline in that initial stage of oil activity, which is exploratory-well drilling. So if we look clear-eyed at our offshore, what we’re noticing is that firms seem to be very quietly stepping away, even while the provincial government is still pinning its hopes on expanding production. That doesn’t look to be the reality offshore.”

Market volatility can lead to delays in key projects on which the province relies. In 2023, Equinor put the Bay du Nord project on hold due to high costs and inflation and to date has not indicated yet whether the project will go ahead. Still, it’s  one of the projects the province is banking on to help boost Newfoundland and Labrador’s economy.

Carter said she doesn’t understand why the provincial government has so much hope in a project that was postponed due to inflation. “We are in a moment of extreme market volatility right now, and those costs are still very high in our offshore.”

In March Equinor released its annual report, which said little about Bay du Nord but noted that the project is still facing a legal challenge from the Sierra Club Canada Foundation and Mi’gmawe’l Tplu’taqnn Incorporated—representing nine Mi’gmag First Nations in New Brunswick—who have argued proper consultation was not carried out with Indigenous communities. A decision from the Federal Court of Appeal is expected this year.

Carter says the province’s confidence in Bay du Nord is “interesting” because in its report to shareholders, Equinor “mentioned investments they were making in onshore wind in Sweden and mining in the U.S., Brazil for oil — but there was no mention of Bay du Nord or the Flemish Pass in the report.”

Instead of focusing on a declining industry, Carter says the province should stop subsidizing oil expansion and instead invest in sectors that will help secure the province’s economic future. “Take those available public dollars and orient towards fostering and ensuring the development of energy efficiency, clean energy tech, the transition—an equitable transition so that workers and communities that are most exposed can get a soft landing into that new economy.”