A Fair Distribution of Oil and Gas Revenues for Newfoundland and Labrador: A Feasibility Study by © Dongjun Lee A thesis submitted to the School of Graduate Studies in partial fulfillment of the requirements for the degree of Master of Arts in Environmental Policy School of Science and the Environment /School of Graduate Studies /Environmental Policy Institute Memorial University of Newfoundland – Grenfell Campus September 2020 Corner Brook Newfoundland and Labrador Abstract This study aimed to investigate a way to a sustainable future of Newfoundland and Labrador through the introduction of a Sovereign Wealth Fund (SWF) using the province’s oil and gas resources. The theoretical frameworks for this study are the capital approach of weak sustainability, environmental justice, and resource curse. With these frameworks, a comparative case study analysis has been adopted to investigate cases of two jurisdictions that are already successfully operating SWFs funded by oil and gas revenue to build more sustainable societies by sustaining their economic, environmental, human, and social capitals. Based on the case studies, this feasibility study examined the following questions: 1) What impacts did the Norwegian SWF have on the sustainability of Norway? 2) What impacts did the Alaskan SWF have on the sustainability of Alaska? 3) How does the oil and gas industry affect Newfoundland and Labrador's sustainability and what improvements should be made? 4) Will Newfoundland and Labrador be able to ensure sustainability with their oil and gas revenue? The study concludes that introducing a SWF could help to ensure the sustainability of Newfoundland and Labrador, with several supporting policies, such as diversified funding sources, building a framework that can benefit local people, and achieving social consensus. ii General Summary This study aimed to investigate a way to a sustainable future of Newfoundland and Labrador through the introduction of a Sovereign Wealth Fund (SWF) that is collected from non-renewable resources revenues and is managed by the provincial government. The cases of Norway and Alaska that are already successfully operating SWFs are investigated and are compared using SWOT analyses to draw lessons for Newfoundland and Labrador's sustainability. The study uses as theoretical frameworks the concepts of sustainability and environmental justice. It concludes that introducing a SWF could help ensure the sustainable development of Newfoundland and Labrador, economically, socially and environmentally. Several supporting policies are recommended, such as diversified funding sources for the proposed SWF, building a framework that can effectively benefit local people from using their oil and gas resources, and achieving social consensus. iii Acknowledgment During my graduate studies, I went through many issues in my personal life. I am grateful that there were people around me who helped me. I am grateful that there were always people around me during that time. I would like to thank my supervisor Dr. Gabriela Sabau and Dr. Roza Tchoukaleyska for guidance and support to finish my degree. I would not be able to finish my thesis without their help. I also would like to thank my friends in my country who always give supports and cheer me up; Dr. Youah Lee at Korea Institute of Energy Research, Dr. Jihyo Kim at Korea energy Economics Institute, Dr. Sul-ki Lee and Minji Kim at Korea Institute for Industrial Economics & Trade. Finally, I am grateful to my family for all the supports in my life. iv Table of Contents 1. Introduction .................................................................................................................... 1 1.1 Introduction ................................................................................................................ 1 1.2 Research Background: Oil and Gas Industry in Newfoundland and Labrador .......... 4 1.3 Research Objectives and Questions ........................................................................... 9 1.4 Overview of This Study .......................................................................................... 12 2. Literature Review ....................................................................................................... 14 2.1 Introduction ............................................................................................................. 14 2.2 Wealth and Sustainability ........................................................................................ 16 2.3 Non-renewable Natural Resources and Sustainable Development ......................... 24 1) The “Resource Curse” ....................................................................................... 27 2) Global Environmental Justice ............................................................................ 31 2.4. Sovereign Wealth Funds ........................................................................................ 35 2.5 Conclusion ............................................................................................................... 39 3. Research Methods ...................................................................................................... 41 3.1 Introduction .............................................................................................................. 41 3.2 Research Design ....................................................................................................... 42 4. Case Study 1: Norway ................................................................................................ 48 4.1 Introduction ............................................................................................................. 48 4.2 Norway’s SWF: The Government Pension Fund .................................................... 49 4.3 The Sustainability of Norway and the Oil and Gas Industry ................................... 53 4.4 SWOT Analysis ........................................................................................................ 68 v 4.5 Conclusion ................................................................................................................ 73 5. Case Study 2: Alaska .................................................................................................. 75 5.1 Introduction .............................................................................................................. 75 5.2. Alaska’s SWF: The Alaska Permanent Fund ......................................................... 76 5.3 The Sustainability of Alaska’s Oil and Gas industry ............................................... 79 5.4 SWOT Analysis ....................................................................................................... 93 5.5 Conclusion ............................................................................................................... 98 5.6 Summary of the Norwegian Model and the Alaskan Model .................................... 99 6. Addressing Sustainability Challenges in Newfoundland and Labrador and Its Oil and Gas Industry ............................................................................................................ 103 6.1 Introduction ........................................................................................................... 103 6.2 Oil and Gas Industry and the Capitals in Newfoundland and Labrador ............... 104 6.3. Discussion on the Potential SWF for Newfoundland and Labrador .................... 127 6.4 Conclusion ............................................................................................................. 140 7. Conclusion .................................................................................................................. 143 7.1 Summary and Conclusion ...................................................................................... 143 7.2 Policy Recommendations ...................................................................................... 151 7.3 Recommendations for Future Research ................................................................. 154 References ....................................................................................................................... 156 vi List of Tables Table 1. CO2 Emissions to Air in Norway 1990 - 2018 ................................................. 61 Table 2. Number of Employees in Oil and Gas Industry in Norway 1990 - 2018 ...... 63 Table 3. The SWOT Matrix for the Case Study of Norway ......................................... 73 Table 4. The APF Balances and Dividends .................................................................... 81 Table 5. Greenhouse Gas Emissions to Air in Alaska 1990 - 2015 ............................. 88 Table 6. Alaska Oil and Gas Industry Employment .................................................... 91 Table 7. The SWOT Matrix for the Case study of Alaska ........................................... 98 Table 8. Summary of the SWOT Analysis ................................................................... 102 Table 9. The Oil and Gas Industry's Contribution to the GDP in Newfoundland and Labrador ......................................................................................................................... 106 Table 10. Oil and Gas Royalties and the Newfoundland and Labrador government’s revenue ........................................................................................................................... 107 Table 11. Net Debt of the Provincial