Does “One Size Fit All?”
Reflecting on Governance and North Sea Licensing Systems
Jerome Davis
Canada Research Chair (Oil and Natural Gas Policy)
Dalhousie University
Background Paper: BC Offshore: Potential and Problems
A MASC Workshop for Lawyers
Dunsmuir Lodge, Sidney B.C. March 18-21, 2004
PLEASE NOTE: This is a background paper for discussion only. Do not quote or
cite without the express permission of the author
Does “One Size Fit All?”
Reflecting on Governance and North Sea Licensing Systems
Jerome Davis
Canada Research Chair (Oil and Natural Gas Policy)
Dalhousie University
1. Introduction: Auction versus Discretionary Licensing Systems
This paper might be characterised as an “outlier” in a panel largely focussed on Canadian
governance modalities and objectives. It is to address the “European experience” with regard to
offshore governance regimes. In fact, one might better argue that there is a diversity of European
experiences which might be discussed in this context. The author is poorly placed to encompass the
wealth of European experiences, due not only to constraints of paper length, but also to the depth of
knowledge that is required for such an exercise.
So rather than focus on the wide diversity of offshore issues and the variety of ways in
which European states confront these. I shall focus briefly on one set of offshore governance issues,
those of offshore oil and gas licensing (or, in the Danish case, concession) policies offshore
Northwestern Europe. Ever since Kenneth Dam’s classic Oil Resources: Who Gets What How
(Chicago: University of Chicago Press, 1976), North Sea offshore oil and gas licensing regimes
have been lumped together as being the North Sea “model.” Dam’s analysis focussed on license
allocation systems which were characterised as being either one of two governance models:
“auction systems” (North America) and “discretionary allocation” (North Sea—Norway and the
UK). In Canada the debate over the Liberal’s National Energy Policy in which the Federal
Government attempted to impose many of the elements of Dam’s “discretionary allocation” on
Canadian provinces and oil multinationals has further reinforced characterisation of a North Sea
“model” often in unfortunate terms.
In this context I will advance these arguments:
My first argument is as follows: Lumping all Northwestern European licensing allocation
systems into one “discretionary” approach can be misleading in several respects. Firstly, there is an
element of discretion in any allocation system, even that of auctions. Secondly, the North Sea
“model” should not only comprise the UK and Norway, but also two other hydrocarbon exporting
nations: Denmark (oil and natural gas) and the Netherlands (natural gas), both of whom have
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substantial offshore activities, and represent variations of the “model” theme. Thirdly, realising that
discretion figures into any offshore licensing regime and that the North Sea model should also take
Danish and Dutch policies into account makes for a richer appreciation of offshore governance
issues in Northwest Europe, and how these might enter any Canadian academic or policy-maker
discourse.
My second argument, and one which is very pertinent for any panel discussion on the legal
aspects of governance issues is that European offshore allocation regimes are as much a function of
what might be termed the differing national property rights systems as they are of adopting a
“Norwegian” or a “British” or (for that matter) an “Iranian” model of license allocation. Such a
property rights approach is indeed vital for the study of the creation, adaptation, or abandonment of
many North Sea licensing practices.
My third argument is that there is a tendency in oil policy/governance circles to assume that
“one size fits all,” here the North American royalty auction/bidding systems. Other forms of oil
licensing regimes are ascribed somewhat negatively to Third World and Transitional governance
systems (predominantly various forms of production sharing regimes). I will argue that in terms of
the richness of solutions to various ownership problems, and of political legitimacy, the diverse
North Sea experiences might be of relevance in designing specific future Canadian offshore
regimes.
2. What are Property Rights? A Theoretical Note
Key to an understanding of my arguments is an appreciation of what constitutes a property
right. There are many overlapping definitions of the concept. I shall utilise that of the MIT
Modern Dictionary of Economics. According to this source, property rights are:
Those rights pertaining to the permissible socially sanctioned use of resources, goods and
services (Pearce, 1986, p. 364)
Note that property rights are not ownership rights, here. Rather ownership comprises various sets of
property rights:
-
Ownership of an asset consists of the following rights:
To use the asset
To change its [the asset’s ] form and substance
To transfer all rights through sale
Note ownership of an asset is not unfettered because some restrictions are generally imposed by
private contract or law (Ibid).
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Ownership of oil and natural gas resources throughout the North Sea (indeed in most nations both
inside and outside of Europe) is vested in the nation state. Such ownership must necessarily
impinge on the rights exercised by the licensee and her partners. Here of particular importance is
the “fettered nature” of the state’s ownership rights. These are not only fettered by the nature of the
license “contract” but are also impinged upon by other factors. For example in both Canada and
Western Europe, state ownership rights have been affected by economic union. But, whereas the
issues raised by NAFTA may have created some problems in Canadian exploration, exploitation
and sale of hydrocarbons in North America, the problems created by the EU, particularly as regards
a common energy policy, have had a major impact with far-reaching implications, even for such
non-EU members as Norway.
2. Argument One: Diversity in Unity
In that this argument is in fact making several contentious points at one and the same time, I
shall for reasons of time and space confine myself to the “discretionary” element of auction and
discretionary allocation systems, and to the contentious issue of state “participation” in offshore
activities, and then use my points here to argue for a more nuanced position towards Northwestern
European offshore licensing regimes. I will be happy to expand on both in any panel discussion.
2.1. Auctions and Discretionary Allocation: Questions of Neutrality and Complexity
Auctions, we are told, are not discretionary; they are “neutral.” On the other hand, licensing of
hydrocarbon rights on the basis of work programs and the use of consecutive licensing rounds to
alter the over-all nature of a licensing system as has happened in Norway, Great Britain, and
Denmark is “discretionary.” For the sake of argument we will lay efficiency criteria to one side and
focus on the nature of the two systems. I will argue that neither system is “neutral.”
A state license auctioneer is a monopolist. But in order to auction exploration, exploitation,
processing, and transportation rights to a particular area, the auction must attract bidders. This
requires communication between the auctioneer and potential bidders. It is not infrequent that
bidders will advance preconditions, auctioneer acceptance of which will determine the degree of
bidder interest. The state auctioneer, if she is wise, will take such preconditions into account in the
period in which the auction is “designed.” Auction participation might depend on the nature of the
potential properties on offer. If the potential is thought to be too small, potential bidders might
lobby for other additional properties as a precondition for their auction participation. Similarly, the
form of bidding is not neutral; bonus bidding auctions can preclude smaller independent oil firms
from participation, as these cannot afford the sums involved for a successful bid. Royalty auctions
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allow for smaller independent participation but have undesirable consequences for the development
of any high cost fields found under such an auction. Astute oil companies are aware of these and
other factors and do in fact “lobby” the state auctioneer. Another similar problem is that the
definition of a “qualified” bidder as the basis of qualification can be discretionary. This clearly
impacts on auction entry and the nature of bidding. The technical design of the auction itself can be
a matter of choice. Finally, the “neutrality” argument rests on the allocation of oil prospects alone;
in fact, returns on oil company investment depend on a series of variables outside the specific
license terms of entry. The state retains discretion with regard to taxation schemes aimed at
appropriating company rents. Environmental regulations may change, imposing costs on license
operators. Detailed questions of transport charges, tariffs, and pipeline access may have to be
resolved. Finally, the knotty problem of hydrocarbon valuation, perhaps the most contentious
problem of them all, can lead to conflict with regulatory authorities.
A discretionary system differs from an auction system perhaps in two respects: firstly, it uses
different licensing rounds to alter the nature of the property rights assigned the successful licensee.
Secondly, the value of the property rights is not expressed in terms of a cash bonus or a willingness
to pay a specified royalty rate, but in licensee acceptance of a set of legal conditions to which he is
expected to conform; these can be very constricting, as in the inclusion of an exacting work
programme; but alternatively they may not be as onerous as is commonly thought. Thus, the
Netherlands authorities have been very liberal as to their demands of a successful applicant as
compared to the Norwegian authorities. (For many years, this could be seen in a free-wheeling
Dutch system where successful license applicants could be “mom and pop” organisations working
from their “headquarters” in an apartment building).
What is important to recognise here is that the greater sensitivity of the discretionary system
to environmental and political change does lead to differing terms for differing licensing rounds. It
is important to recognise here that such changes are not retroactive. A demand that successful
applicants in licensing round five allow for state participation on a non-carried interest basis does
not mean that winners of round four applications two years previously are forced into similar terms.
Licensing “contracts”, with some notable exceptions, are respected. (For instance, this does not rule
out the possibility that to qualify for round five, a round four winner may have to agree to state
participation on his licenses should she find commercially exploitable hydrocarbons. Neither does it
apply to the imposition of special taxes as rent capture mechanisms, but this latter has also been a
characteristic of auction systems).
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There are several major problems with a discretionary system and a major plus. Firstly,
discretionary systems become essentially negotiated systems. (Cases in point here are the stories
behind the passage of the U.K. Oil Tax Act of 1975, described as the single most complex piece of
legislation to pass the House of Commons, a twenty year U.K. controversy over “marginal fields”
and the abolition of royalties, the two “renegotiations” of the Danish concession, the Marathon
Heimdal controversy in Norway, and these are but a few of the more significant).
This creates a second problem, that of transparency where it is necessary to separate what
might be termed the formal discretionary system, as prescribed publicly, and an informal system, a
system which reflects the actual (as opposed to public) implementation of licensing policies. The
second “system” can be far more lenient than the first. Examples of this are not hard to find. After
its Fulmar find, a find which led to a new North Sea “play”, Royal Dutch/Shell (Shell) were
reoffered all the blocks in the Fulmar area which they had previously surrendered. The value of
these blocks had increased due to the new knowledge, but rather than licensing these to new
entrants, British authorities favoured Shell. Similar stories abound elsewhere. The British Gas
Moracombe Bay field was reoffered to Gulf who had in error surrendered the area through ignoring
evidence of a natural gas find. (Gulf Oil refused. BG developed the field which is now the “swing”
field for all British North Sea gas). When the continental natural gas consortium imposed lower
contractual prices for Norwegian natural gas, the American Independent, Marathon, was faced with
economic losses from its Heimdal field. To alleviate these losses, the Norwegian authorities
incorporated Marathon’s Heimdal field into its gas gathering/transmission network, enabling
Marathon to recoup its losses. Finally any deeper examination into how royalties and taxes are in
fact collected by North Sea governments reveals that North Sea rent capture regimes remain more
notorious for their “bark” than for their “bite.”
A third problem is that such systems “bind” licensees to their commitments in a manner that
bonus or royalty bidding systems do not. This limits operator discretion. A working programme
requiring the drilling of a certain number of wells at particular .locations to specific depths commits
the operator to drilling that number of wells under the conditions specified. Similarly, there can be
additional demands as to licensee delivery of information to the licensing authorities, to finance
onshore R&D programmes and the like. In this respect, it is interesting to observe that the UK is
moving away from such demands in an attempt to attract interested parties to prospects offshore
UK, launching diverse initiatives to this end -PILOT, the Fallow Fields, and Brown Fields
programmes, Prospect Licenses, and “Share Fairs”- (Townsend, 2003, p.1).
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A great advantage with the discretionary licensing system is that it is regarded as politically
legitimate by the respective voting publics in Northwest Europe. Given that property rights in these
countries are well defined and contract law observed, offshore licensees have been able to extract
enormous amount of hydrocarbons on commercial terms with a minimum of political fuss and
bother. (This notably does not apply to other property rights regimes such as may exist for example
in Russia, or Kazakhstan where the oil companies are currently encountering major property rights
problems).
2.2. North Sea Licensing: The Question of Variety
A second major point in our argument here is that lumping all licensing practices into one
“North Sea governance” model can lead to misunderstandings as to the subtleties of North Sea
practices. A closer look at North Sea practices reveals major differences in how this “model” in fact
functions. I have already pointed to the differences in block allocation systems between the
Norwegian system, where licensees for many years were subject to strict controls and were virtually
all major oil companies, and that of the Netherlands where block allocations, drilling programs, and
relinquishment provisions were granted on a far more liberal basis. There are many other additional
examples which could be added to the list: the nature of special petroleum taxes, royalty systems,
transport regimes, pace of offshore developments, and so forth. For the purpose of brevity I shall
refer to state participation systems here. This example should not be misconstrued. This is NOT an
argument for state participation.
All four major European oil and gas provinces have been characterised by government
participation in its various forms. What is of interest here is how this participation has evolved. The
British first created and then privatised the British National Oil Corporation. The British
government also privatised the British Gas Corporation in a move aimed at liberalising the British
natural gas market. The Norwegian state first created Statoil, a firm which until now has a
dominant position in the Norwegian offshore through its part ownership of producing licenses, and
through its control of the Norwegian offshore pipeline network; it additionally created another
company, Petoro, which is charged with managing (and in some cases disposing of) the State’s
Direct Financial Interest (SDFI). The Dutch rather than create a state company assigned
responsibility for state participation to an already existing state firm, the Dutch State Mines. Here,
state offshore participatory interests were quietly managed in an offshore division with a staff of
around 20 employees. (This is now a division of the Energie Beheer Nederland BV (EBN) recently
hived off DSM as a separate company (Netherlands Ministry of Economic Affairs, 2003)).
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Denmark’s Danish Oil and Natural Gas (DONG), originally created to take responsibility for
natural gas transportation, has had its role expanded, an outcome of a round of negotiations with the
then sole concessionaire of Danish offshore rights, in 1981. It is now an active North Sea operator
in the Danish and Norwegian sectors.
Even from this limited sampling, the governance modalities of participation vary immensely.
The BNOC followed the classic participation model, providing the state owners with some security
of supply, a “window” into oil MNE licensee strategies, a reduction of dependence on oil MNEs, a
share of the rents involved in oil exploitation, and promotion of the domestic share of offshore
activities (Grayson, 1981, pp. 175-196). Statoil not only performed these classic functions but also
through its control of offshore pipelines captured any rent element involved in offshore transport,
and (in conjunction with the Norwegian Petroleum Directory) indirectly controlled the rate of
resource exploitation. The administration of the Norwegian SDFI properties was also a feature
which made Statoil participation different from those of its neighbours, at least until this function
was allocated to Petoro. With the increased internationalisation of Statoil and activities (and the
prospect of its privatisation), the Norwegian state created another state company Petoro to
administer its SDFI, but, as importantly, to serve as a watchdog over Statoil’s disposition of the oil
and gas produced by these properties. Petoro controls roughly a third of the total proven reserves in
the Norwegian offshore which is its only corporate focus. Statoil is left with about 20 percent. And
the third state company, Norsk Hydro retains about 10 percent. This multiplicity of state oil
companies makes Norwegian governance unique in terms of state participation on licenses.
The Danish DONG existed primarily to control pipeline access to continental markets, as
participation until the 1980’s was an impossibility. With a changed Danish licensing system,
DONG participation in offshore licenses was characterised by involving other non-oil Danish
interests in offshore exploration and development. DONG’s participation in offshore licenses took
place through a company, DENERCO, which had among its members some of the leading private
firms in Denmark. Thus a major objective of Danish state participation was to give private Danish
firms access to the opportunities afforded by offshore Danish licenses. The Dutch EBN participates
on all Dutch offshore licenses, although there are exceptions, and participates at rates as high as 40
percent (before 2003, these could be higher). Here the objective apparently is more a rent capture
objective than that of a “window” or purveyor of oil and gas interests to private Dutch companies.
The Dutch state through the EBN has quietly exercised rights to several trillion cubic feet of
offshore natural gas and has done so largely unnoted by the literature on the North Sea offshore.
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Nor has the existence of state participation dampened oil company interest in these areas.
There are roughly 15-25 exploration wells (fifteen in 2002 with nine discoveries) drilled in the
Norwegian offshore every year and this average has been maintained for twenty years (Quinlan,
2003, p.1). Some 20 wells are drilled in the Netherlands offshore which now accounts for one third
of the 2.75 Tcf produced in that country annually. The success rate for wells was a reported 50
percent last year. Danish exploration drilling has never reached the heights of the other provinces,
but it too remains roughly constant, with DONG taking on active operator responsibilities for many
holes. Only in the British sector has activity declined. From an average of around 80 –90
exploration holes in the 1990’s, the number of exploration wells has slumped noticeably, falling as
low as 44 in 2002 (Quinlan, 2003, p.2). Company interest in these provinces remains more a
function of future potential than of whether a country requires state participation or not.
The point of these examples is not to declare for or against participation, or any particular one
of the variants describe above. The point is purely to indicate that state participation can have
widely differing implications, and should be seen in context before one passes judgement. In other
words, one size really does not fit all.
3. Argument Two: National Property Rights Systems- Causes of Diversity?
State owners of potential oil and natural gas all are confronted with the same problem when
approached by an oil firm as to the possibilities of exploring for and developing any potential
hydrocarbons in their offshore areas, that of determining the licensing regime under which its
ownership rights will be exercised. This, I have argued, is in turn a function of the property rights
system characterised by that particular state. Yet I have not operationalised what is meant by this. I
argue that in the process of drawing up the basic offshore laws, the establishment of the institutions
of governance, and in the process of regulating offshore activities, legislators and regulators are
sensitive to external signalling from various domestic and oil company applicant and licensee
interests. Noll expresses this thought best in discussing American regulatory agencies in another
context. In addition to feedback from the regulated parties, the regulatory agency receives
additional signals:
From each theatre of external judgement- courts, Congress, constituents, executive
branch budget process, and press – the agency receives a flow of success indicators: actions
that express approval or disapproval of the agency’s decisions. It is plausible that agencies will
view the public interest as being served if the success indicators show approval. ..(1985, p. 41)
It is my argument, firstly, that external signal feedbacks are vital in terms of regulatory or
governance activities is characteristic of all offshore licensing regimes (i.e. this U.S. character-
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isation is not the exception, but the rule), and, secondly, that these signals constitute the parameters
of what institutions, what uses of oil and gas resources, are socially sanctioned for any given North
Sea oil and gas governance regime.
What affects social sanctions and external signalling here and why do these differ between
national governance systems? Definitive answers to this question are difficult. The following
generalities are the best that I can do at present:
Firstly, differing societies attach differing degrees of faith in markets as a sole means of
allocating user rights to publicly owned assets. Key to the North American auction allocation of
license rights is the perception that the winning price bid for a license will accurately reflect every
future licensee earnings contingency for the duration of the license. Contract prices are complete in
the sense that they account for every future possibility. Other societies are more sceptical as to
whether prices bid for licenses in year one will reflect actual values in years two through twentyfive, given the unpredictability of oil markets, technological developments, and world reserves
forecasts. This is particularly true of rent capture. It should be emphasized that this characteristic is
not confined to oil and gas resource use. (For example, perhaps with the exception of the UK, many
European states have been very sceptical of the use of auctions for spectrum allocation, a use of
auctions which has been regarded as legitimate in the United States for over a decade). Curiously,
experiments with bonus or royalty auctions have been confined to British licenses, and, although
virtually all North Sea licensing systems are introducing new forms of license allocation today,
none of these is based on auction institutions. .
A second relevant property right/governance variable might be the over-all putative value of
the licensing rights awarded in terms of their potential contribution to community welfare. The
closer this relationship is to a 1:1 relationship, the greater the salience of oil and gas governance
issues, and the more sensitive the local community is to governance issues. Here it is particularly
notable how much more political Norwegian regulatory effort is when compared to those of the
Netherlands, Denmark or the United Kingdom. Up until ten years ago, it was required that each and
every oil or gas development plan be reviewed and passed upon by the Norwegian legislature, the
Storting. Storting committee reports remain among the most valuable sources of research
information on many of these fields.
A third variable is what might be termed the insider-outsider variable: Given community
ownership of oil and gas rights, should these be awarded on an equal basis to all comers, or should
members of the community have preferential treatment? In most European countries, incorporating
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the demands of local industry or those of a national champion are seen as a legitimate goal of
offshore oil and gas governance. Licensing regimes tend to reflect this either formally in terms of
licensing law (Norway and Denmark) or informally through licensing practices (the Netherlands
and- allegedly- the United Kingdom). In Norway, there has been a practice of giving Norwegian
state and private firms (Statoil, Norsk Hydro, and, for a time, Saga Petroleum) privileged access to
prime licenses. Danish licensing policy is somewhat schizophrenic. There is one concession for the
Danish national champion, A.P. Moeller, which has retained ownership of producing rights to the
productive Central Graben, and a more modern licensing system for all other participants in which
A.P. Moeller is prominently absent. In the Netherlands, the Royal Dutch/Shell- Esso (now Exxon
Mobil) partnership Nederlandse Aardolie Maatschappij (NAM) in fact has exercised a decisive
influence, in part through its North Sea activities and dominance of the Schloctern gas fields and,
in part, through its 50-50 partnership with the Dutch state in the national transmission and
marketing giant Gasunie, a relationship which is currently under revision. Similarly, there have
been allegations that BP and Royal Dutch Shell have received preferential treatment in the UK
sector, although hard evidence here is difficult to come by.
Fourthly, a single comprehensible set of external signals to a set of regulators may not be
possible due to regional, ethnic, or administrative fragmentation. In such cases, governance systems
are liable to be administratively complex with multiple jurisdictions (as is the case in Canada) or
imposed by one group upon one or more other groupings (the Nigerian ruling elite and the Ogoni
peoples). While there are regional (Norway, the Netherlands) or national (England and Scotland)
differences among North Sea countries, they uniformly have strong unitary governments. It has
been implied (Fossum, 1995) that such offshore areas as the Canadian may not be suited to a
“North Sea model” due to the shared ownership of Canadian offshore areas and the degree of
Federal-provincial conflict involved in their governance. I am less certain about Fossum’s
implication.
Finally, differing societies may view revisions of contractual obligations differently.
Curiously, given much of what is written about them, arbitrary state revision of license terms is
rare in North Sea governance regimes. The British Labour Government insistence that producing
consortia voluntarily sell the British National Oil Corporation participating shares of their
producing licenses (see Corti and Frazer,1982) and the Danish Government’s 1981 negotiated
revision of its 1963/64 concession with A.P. Moeller are perhaps two of the more questionable
episodes here in what otherwise is a surprisingly good record. A third celebrated case did not deal
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with license rights, but with Marathon’s Norwegian contract to sell Heimdal natural gas to
Continental markets.
4. Conclusion. Argument Three. One Size Fits All: Possible Implications for Canada?
What are the possible implications of our arguments for the Canadian offshore? My
following observations are more points for debate than thoroughly thought through options for
Canadian offshore governance. My training is not a legal training. I am not thoroughly acquainted
with the intricacies of the Canadian offshore governance regime, and policy mistakes in this area
can last for 25 years and cost many billion dollars. With these caveats in mind several points appear
to be of interest.
Firstly, I have noted the “one size fits all” approach in informal conversations with Canadian
experts. Two examples from Atlantic Canada will suffice. The two Permanent Boards (CNSOPB
and CNOPB) have virtually all the vital competencies regarding offshore licensing and regulatory
policy. There is (was?) a plan afoot to merge these two regulatory instances, a plan which
Newfoundland/Labrador has opposed. To outsiders, the rationale for merging seems overwhelming. Indeed, many of the issues dividing the two federal-provincial regimes seem petty (for
example the differing certifications required of offshore drilling rigs). Yet, it must be stressed that
many regulatory issues involve incredible precision and are likewise incredibly detailed, and details
in offshore governance regimes are very important. Given the differing historical circumstances of
the two licensing regimes, the importance of details, and, above all, differences in the nature and
size of resources discovered and the salience of these to the respective provincial governments,
there could well be advantages in having two boards rather than one. (This does not mean that
economies of scale in terms of technical staff support and the like need be foregone).
Secondly, I have become aware that developments offshore Newfoundland may have been
hampered by the royalties charged by the authorities. These are seen as necessary for the province
and federal government to implement the economic provisions of the Atlantic Accord, but at the
same time, they are a hindrance to commercial development of offshore discoveries. (Note, as
royalties are charged net of transport, but before other development costs are deducted, they are
seen as a cost which impacts severely on oil company ROR’s for offshore fields). A solution to this
problem in the North Sea has been found. One repeals royalties and substitutes a petroleum revenue
tax for the royalty. This has the benefit of being levied on profits net of costs, and is far less
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regressive. (Such a solution has been found in the UK 10 percent increase in corporate taxes in
return for abolition of all royalties for British offshore fields; note that the UK offshore fields are
“ring fenced” however). In the Atlantic Accord context, it is unlikely that such a (discretionary?)
solution could be found.
Thirdly, I have been impressed by the radically different political environments impacting
on present and future offshore governance regimes. Thus, the fishing communities of Nova Scotia
and Newfoundland have radically different attitudes towards offshore activities. Off the British
Columbia coast, issues of fishing rights, environmental protection, and First Nation concerns make
the communities’ conflicts in the Atlantic Provinces look like “child’s play.” Similarly, Ottawa is
going to have to arrive at offshore agreements with Quebec. In all instances, it is tied to the Atlantic
Accords and to the institutional arrangements underpinning these accords. I have no doubt that
policy-makers are very much aware of the problems in applying the one size of the Atlantic Accord
to BC and Quebec. What I am arguing here is that the nature of the offshore licensing regime be
taken into account when one examines the nature of the issues here. For success, both provinces and
Ottawa may have to abandon the one size fits all bonus/royalty auction systems used in offshore
Atlantic Canada. I have not had time to go into detail regarding the wealth of institutional
experience which can be learned from offshore Northwest Europe. Can Canadian learn from these?
I believe they can, and implementing some of these lessons can increase the political legitimacy of
the governance systems concerned.
This is not an unequivocal endorsement of the various governance systems in the North Sea;
but one can learn as much from failure as from successes, and North Sea countries have had their
fair share of both.
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