The Tribune

* Trust chief: 'Crumbs' no offset to 'incredible risk'

* Backs AG's pledge to obtain better BPC deal

* Activist: How deal unbreakable if we renegotiate?

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamian people must get more than the "peanuts and crumbs" if the Government ultimately decides to approve commercial oil exploration, the National Trust's top executive urged yesterday.

Eric Carey, the Bahamas National Trust's (BNT) executive director, told Tribune Business he backed the attorney general's pledge to secure "the best deal possible" on the public's behalf given the "incredible risk" this nation is taking in permitting such activities.

While he and the Trust remain vehemently opposed to any oil exploration in Bahamian waters, Mr Carey called for full transparency from Carl Bethel QC and the Government by ultimately sharing any revisions to the Bahamas Petroleum Company's (BPC) royalty rates with the public "so we know what we're getting".

Speaking after Mr Bethel blasted the former Christie administration for potentially short-changing the Bahamian people with "the lowest royalty rates on the planet", the Trust's executive director also called for "sufficient funds" to be allocated to an insurance product that would cover clean-up costs associated with oil spills and related pollution.

"We should not be going into a deal like this risking everything for peanuts. We don't want to get a percentage of the crumbs that are left," Mr Carey told Tribune Business.

"If this goes ahead, God forbid, I hope that the attorney general and the Government negotiate a better deal and share the details with the Bahamian public so we know what we're getting, what we're risking and what the potential benefits to the country might be."

BPC’s existing commercial terms with the Government involve a ‘sliding scale’ of royalty fees, with the rates tied to production (the daily volume of oil, measured in per barrel terms) that is extracted from Bahamian waters.

The royalty rates range from a low of 12.5 per cent for 75,000 barrels per day to a peak of 25 per cent for 350,000 barrels per day or more, with a production licence granted for 30 years. However, Mr Bethel on Monday blasted these rates as being "abysmally low" and "in the pits", putting the Bahamian people in line to receive the lowest return of any nation on their country's potential natural resources.

Disclosing the findings of a Commonwealth Secretariat report that showed, under the present structure, the highest royalty rate BPC will pay is some 20 percentage points below the lowest rate in other nations, Mr Bethel argued that the former government missed the chance to negotiate a better deal for the Bahamian people when the leases for the oil explorer's five licence areas came up for renewal in 2015.

Instead of renegotiating higher royalty rates for the benefit of the Public Treasury and proposed Sovereign Wealth Fund, Mr Bethel said his predecessors left the structure that has existed from 2007 to the present day untouched and only increased the seabed lease rates for those five areas from $57,500 to $250,000.

The attorney general then argued that the former Christie administration compounded that error by allowing the royalty rates to be based "on the net value of extracted petroleum", which is the value after BPC has deducted all its production and investment costs.

This, Mr Bethel said, would have left the Government and Bahamian people at the mercy of BPC's accountants and external auditors to determine this nation's share from the potential extraction of its natural resources as they would be responsible for certifying the company's production and investment costs.

He added that basing royalties on the "net petroleum value" was also contrary to global best practice as most oil producing countries base their share on "gross tax at the well head" in their agreements with private companies to ensure they get a better return.

Some observers would argue that any renegotiation of BPC's royalty rates is premature given that the company has yet to confirm the presence of commercial oil quantities below the Bahamian seabed. It is still drilling its Perseverance One exploratory well in waters 90 miles west of Andros, in an operation that is expected to take 45-60 days, which means the results will not be known for some months.

Mr Carey, though, gave total support to the attorney general's stance. "It would leave us with crumbs," he said of the present royalty rates. "We'd be taking the entire risk to our future, our marine environment, our livelihoods, our tourism and our fisheries for peanuts.

"We've seen it in a number of other developing countries where oil is found, the environment is destroyed and peanuts are left in the national economy..... I'm pleased the attorney general has shared this with the Bahamian public.

"Notwithstanding the view we have that we still don't support the extraction of fossil fuels, in the event the Government decides to approve it we hope for the highest possible environmental standards. And if we are going to extract it we should have the best deal possible.

"I hope the attorney general and this administration, or any other administration, going forward will make sure they extract the true worth from an economic perspective on behalf of the Bahamian people. Having next to zero returns means we will have taken this incredible risk for the marine environment with little in return. That is quite scary."

Besides ensuring that BPC and any other successful oil explorer contributes appropriate sums to the proposed Bahamian sovereign wealth fund, Mr Carey also called for a portion of royalty payments to be diverted to "an insurance fund to protect the marine environment in the event there is some oil spill".

However, one environmental activist yesterday revealed she was confused over Mr Bethel's pledge to renegotiate BPC's royalty rates - even to the extent of imposing a new tax on the company should it prove inflexible - just one after he said its licences and other agreements were legally watertight and unbreakable.

"I continue to be at a loss as to how, one second, the Government does one thing and, in the next second, it does the exact opposite," Sam Duncombe, reEarth's president, told Tribune Business.

"Carl Bethel now says they're going to work out a better deal for us. The only deal we want is to stop this right now, but if the deal was unbreakable before how now all of a sudden is it negotiable. I have great problems with that.

"I was actually speaking to someone earlier today about that, and we kept going over it and saying how did we get here? How is this possible? How come we don't negotiate a better deal if we're going to go through with this?" she asked.

"The reality is at this point in time I already thought my trust in government had been shattered. It's at an all-time high of being completely disgusted with the duplicity. One minute the deal is unbreakable, the next minute they want to negotiate more money."

Casuarina McKinney-Lambert, the Bahamas Reef Environment Education Foundation's (BREEF) executive director, said that based on Mr Bethel's comments the existing agreement with BPC "appears to be a terrible deal for The Bahamas and the Bahamian people".

Noting that BPC and the Government were still negotiating over outstanding licence fees before Perseverance One was drilled, she added: "If there were to be oil extraction down the line it would in no way come close to the value of what we would be risking."

Activists have repeatedly argued that, by allowing oil exploration to take place in its waters, The Bahamas' is potentially risking more than $8bn in annual tourism and fisheries activity (based on pre-COVID output) compared to what BPC says could be up to $5bn in royalties revenues over the 10-20 year lifetime of a successful find.

BPC would counter that this $5bn would be on top of the annual $8bn generated by tourism and fisheries, and represents the so-called 'game changer' that the Bahamian economy has required for more than a decade and now needs more than ever due to the fiscal/GDP blow-out produced by Hurricane Dorian and COVID-19.