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Spill raises new questions about fast-growing N.L. oil industry

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Newfoundland and Labrador’s ambitious plans to dramatically expand the province’s lucrative offshore oil and gas industry got a nasty jolt on Nov. 16.

Amid a fierce winter storm, an estimated 250,000 litres of oil spilled into the ocean from Husky Energy’s SeaRose platform, about 350 kilometres from St. John’s.

It was the largest spill in the history of the province’s offshore industry, and has prompted calls for regulatory change.

Critics are calling for tighter control of the industry, just as the province moves to expand the size and range of offshore drilling, and fast.

“This incident, we hope it will shine a light on the laws and how we undertake offshore oil and gas in Canada and how we regulate it if and when it proceeds,” said Gretchen Fitzgerald of Sierra Club Canada Foundation.

“If they are going to undertake this large industrial activity in the rough waters of the North Atlantic there has to be a better regulatory scheme.”

Gretchen Fitzgerald is Atlantic director of the Sierra Club of Canada. (Robert Short/CBC)

There are currently four platforms producing oil off Newfoundland: Hibernia, Hebron, Terra Nova and SeaRose.

Expansion plans include a proposed 100 new exploration wells and over 650,000 barrels of oil per day by the year 2030.

This long-term vision also includes “shortened time from prospectivity to production.”

Going deeper

The expansion will also take the industry into uncharted territory with its first deepwater drilling site at Bay du Nord in the Flemish Pass, after announcing an agreement with Norway’s Equinor earlier this summer.

The remote Bay du Nord parcel, about 500 kilometres east of St. John’s, lies in more than 1,100 metres of water — 10 times deeper than the SeaRose, the current deepest site.

Premier Dwight Ball called the announcement a “new frontier” for the province’s offshore industry, but deepwater expansion also raises fresh concerns about worker safety and the possibility of a swift cleanup if another spill were to occur.

Oil royalties promise a much-needed economic boost for the financially strapped province.

A report this month from the Conference Board of Canada predicts Newfoundland and Labrador will lead all provinces in economic growth in 2019, just a year after having the weakest economic outlook in 2018, with oil revenue getting all the credit.

Recommendations will be implemented, premier says

In an interview, Ball said the November spill was “unfortunate” and reiterated his government’s prioritization of worker and environmental safety.

The premier said his government would consider regulatory changes, including more transparent, public and accessible summaries of operators’ safety plans, based on the findings of the SeaRose investigation.

“Once this investigation is done and completed, if there’s changes that will need to be made, we’re more than willing to implement those changes,” Ball said.

Dwight Ball says the government is committed to implementing any changes that come from the investigation into Husky’s spill on Nov. 16. (Katie Breen/CBC)

The premier said his government is looking to other jurisdictions around the world as it plans to expand its industry and prepare for potential incidents in the future.

The Canada-Newfoundland and Labrador Offshore Petroleum Board (C-NLOPB) regulates the industry’s development in the province, as well as its safety and environmental responsibilities.

The spill occurred as Husky began to restart production on Nov. 16 as the storm began to wane — a decision that was up to the company, not the offshore board.

Operators like Husky are responsible for following their own internal safety and environmental plans that are approved by the board, which monitors and investigates if things go wrong.

Production on the SeaRose remains halted as the offshore board investigates whether the company followed its own internal procedures.

You should never use this word around safety, but we just felt that we got lucky.– Lana Payne, Unifor

Husky provides its procedures to the board, but a Husky spokesperson told The Canadian Press in an email that the company “does not disclose its specific operating procedures publicly for security and commercial reasons.

Critics say operator transparency is a key area of possible reform, especially as the industry braces for expansion into even riskier conditions.

Ball said his government is giving Equinor time to properly assess the deepwater drilling site before construction is tentatively slated to begin in 2020.

He said his government will look to other jurisdictions as it prepares for new deepwater ventures, adding that he considers the industry’s track record to be fairly clean over the long term.

“Our track record when you look at it is pretty solid,” said Ball.

Pair of offshore tragedies

The province’s offshore industry doesn’t have a history of multiple major oil spills, but it has been marked by devastating tragedies.

The memory of the 1982 Ocean Ranger disaster still haunts the province. An offshore rig sank during an intense storm, claiming the lives of all 84 people on board.

In March 2009, Cougar Flight 491 crashed into the ocean while carrying workers and staff to the oil fields, killing 17 of the 18 people on board.

After an inquiry into helicopter safety, commissioner Robert Wells in 2010 called Newfoundland’s offshore conditions “probably the harshest in the offshore world,” citing bitterly cold water, high winds, sea ice, fog, severe sea states and long helicopter flights.

Unifor wants separate board for safety

Wells recommended establishing a stand-alone, independent safety regulator for the province’s offshore industry.

The recommendation was echoed by the provincial NDP after the recent SeaRose spill, asking the premier to establish a separate safety and environmental board similar to those in Norway and the United Kingdom.

Lana Payne, Atlantic regional director for Unifor, which represents about 700 offshore oil workers on the Hibernia and Terra Nova rigs, said the industry has seen some safety improvements since the helicopter safety inquiry.

Lana Payne is the Atlantic regional director for Unifor. (Sherry Vivian/CBC)

But she said the union still sees room for more — including establishing a separate safety and environmental board, especially in light of the recent close call.

“You should never use this word around safety, but we just felt that we got lucky,” Payne said.

There were 81 people on board the SeaRose at the time of the spill, and while there were no injuries, the incident called to mind another safety incident on the same rig not long ago.

There’s going to be a lot of pressure on the system to get things done quickly, and when you do that in an environment like the offshore things can go amiss– Lana Payne, Unifor

An investigation by the offshore board found the company failed to follow its ice management plan during a 2017 near-miss with a large iceberg. The rig was not disconnected as the iceberg approached, with 84 people and upwards of 340,000 barrels of crude oil onboard.

Fitzgerald thinks Environment Canada and the Department of Fisheries and Oceans should have regulatory power, to ensure people with more environmental expertise oversee the industry.

More federal involvement in the industry would also help keep national environmental priorities like climate change and protecting endangered species in view, Fitzgerald said.

Payne said at a minimum, the regulator needs more expertise and staffing for the rapidly expanding sector.

“There’s going to be a lot of pressure on the system to get things done quickly, and when you do that in an environment like the offshore things can go amiss,” Payne said.

“We’ve got to do everything possible here to make sure it doesn’t happen.”

Read more articles from CBC Newfoundland and Labrador

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5 ways to reduce your mortgage amortization

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Since the pandemic hit, a lot of Canadians have been affected financially and if you’re on a mortgage, reducing your amortization period can be of great help.

A mortgage amortization period is the amount of time it would take a homeowner to completely pay off their mortgage. The amortization is typically an estimate based on what the interest rate for your current term is. Calculating your amortization is done easily using a loan amortization calculator which shows you the different payment schedules within your amortization period.

 In Canada, if you made a down payment that is less than the recommended 20 per cent of the total cost of your home, then the longest amortization period you’re allowed to have is 25 years. The mortgage amortization period not only affects the length of time it would take to completely repay the loan, but also the amount of interest paid over the lifecycle of the mortgage.

Typically, longer amortization periods involve making smaller monthly payments and having a much higher total interest cost over the duration of the mortgage. While on the other hand, shorter amortization periods entails making larger monthly payments and having lower total interest costs.

It’s the dream of every homeowner to become mortgage-free. A general rule of thumb would be to try and keep your monthly mortgage costs as low as possible—preferably below 30 per cent of your monthly income. Over time, you may become more financially stable by either getting a tax return, a bonus or an additional source of income and want to channel that towards your principal.

There are several ways to keep your monthly mortgage payments low and reduce your amortization. Here are a few ways to achieve that goal:

1. Make a larger down payment

Once you’ve decided to buy a home, always consider putting asides some significant amount of money that would act as a down payment to reduce your monthly mortgage. While the recommended amount to put aside as a down payment is 20 per cent,  if you aren’t in a hurry to purchase the property or are more financial buoyant, you can even pay more.

Essentially, the larger your down payment, the lower your mortgage would be as it means you’re borrowing less money from your lender. However, if you pay at least 20 per cent upfront, there would be no need for you to cover the additional cost of private mortgage insurance which would save you some money.

2. Make bi-weekly payments

Most homeowners make monthly payments which amount to 12 payments every year. But if your bank or lender offers the option of accelerated bi-weekly payment, you will be making an equivalent of one more payment annually. Doing this will further reduce your amortization period by allowing you to pay off your mortgage much faster.

3. Have a fixed renewal payment

It is normal for lenders to offer discounts on interest rate during your amortization period. However, as you continuously renew your mortgage at a lower rate, always keep a fixed repayment sum.

Rather than just making lower payments, you can keep your payments static, since the more money applied to your principal, the faster you can clear your mortgage.

4. Increase your payment amount

Many mortgages give homeowners the option to increase their payment amount at least once a year. Now, this is very ideal for those who have the financial capacity to do so because the extra money would be added to your principal.

Irrespective of how small the increase might be, in the long run, it would make a huge difference. For example, if your monthly mortgage payment is about $2,752 per month. It would be in your best interest to round it up to $2,800 every month. That way, you are much closer to reducing your mortgage amortization period.

5. Leverage on prepayment privileges

The ability for homeowners to make any form of prepayment solely depends on what mortgage features are provided by their lender.

With an open mortgage, you can easily make additional payments at any given time. However, if you have a closed mortgage—which makes up the larger percentage of existing mortgages—you will need to check if you have the option of prepayments which would allow you to make extra lump sum payments.

Additionally, there may also be the option to make extra lump sum payments at the end of your existing mortgage term before its time for renewal.

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Mortgage insurance vs. life insurance: What you need to know

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Your home is likely the biggest asset you’ll ever own. So how can you protect it in case something were to happen to you? To start, homeowners have a few options to choose from. You can either:

  • ensure you have mortgage protection with a life insurance policy from an insurance company or
  • get mortgage insurance from a bank or mortgage lender.

Mortgage insurance vs. life insurance: How do they each work?  

The first thing to know is that life insurance can be a great way to make sure you and your family have mortgage protection.

The money from a life insurance policy usually goes right into the hands of your beneficiaries – not the bank or mortgage lender. Your beneficiaries are whoever you choose to receive the benefit or money from your policy after you die.

Life insurance policies, like term life insurance, come with a death benefit. A death benefit is the amount of money given to your beneficiaries after you die. The exact amount they’ll receive depends on the policy you buy.

With term life insurance, you’re covered for a set period, such as 10, 15, 20 or 30 years. The premium – that’s the monthly or annual fee you pay for insurance – is usually low for the first term.

If you die while you’re coved by your life insurance policy, your beneficiaries will receive a tax-free death benefit. They can then use this money to help pay off the mortgage or for any other reason. So not only is your mortgage protected, but your family will also have funds to cover other expenses that they relied on you to pay.

Mortgage insurance works by paying off the outstanding principal balance of your mortgage, up to a certain amount, if you die.

With mortgage insurance, the money goes directly to the bank or lender to pay off the mortgage – and that’s it. There’s no extra money to cover other expenses, and you don’t get to leave any cash behind to your beneficiaries.

What’s the difference between mortgage insurance and life insurance?

The main difference is that mortgage insurance covers only your outstanding mortgage balance. And, that money goes directly to the bank or mortgage lender, not your beneficiary. This means that there’s no cash, payout or benefit given to your beneficiary. 

With life insurance, however, you get mortgage protection and more. Here’s how it works: every life insurance policy provides a tax-free amount of money (the death benefit) to the beneficiary. The payment can cover more than just the mortgage. The beneficiary may then use the money for any purpose. For example, apart from paying off the mortgage, they can also use the funds from the death benefit to cover:

  • any of your remaining debts,
  • the cost of child care,
  • funeral costs,
  • the cost of child care, and
  • any other living expenses. 

But before you decide between life insurance and mortgage insurance, here are some other important differences to keep in mind:

Who gets the money?

With life insurance, the money goes to whomever you name as your beneficiary.

With mortgage insurance, the money goes entirely to the bank.

Can you move your policy?

With life insurance, your policy stays with you even if you transfer your mortgage to another company. There’s no need to re-apply or prove your health is good enough to be insured.

With mortgage insurance, however, your policy doesn’t automatically move with you if you change mortgage providers. If you move your mortgage to another bank, you’ll have to prove that your health is still good.

Which offers more flexibility, life insurance or mortgage insurance?

With life insurance, your beneficiaries have the flexibility to cover the mortgage balance and more after you die. As the policy owner, you can choose how much insurance coverage you want and how long you need it. And, the coverage doesn’t decline unless you want it to.

With mortgage insurance through a bank, you don’t have the flexibility to change your coverage. In this case, you’re only protecting the outstanding balance on your mortgage.

Do you need a medical exam to qualify? 

With a term life insurance policy from Sun Life, you may have to answer some medical questions or take a medical exam before you’re approved for coverage. Once you’re approved, Sun Life won’t ask for any additional medical information later on.

With mortgage insurance, a bank or mortgage lender may ask some medical questions when you apply. However, if you make a claim after you’re approved, your bank may ask for additional medical information.* At that point, they may discover some conditions that disqualify you from receiving payment on a claim.

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5 common mistakes Canadians make with their mortgages

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This article was created by MoneyWise. Postmedia and MoneyWise may earn an affiliate commission through links on this page.

Since COVID-19 dragged interest rates to historic lows last year, Canadians have been diving into the real estate market with unprecedented verve.

During a time of extraordinary financial disruption, more than 551,000 properties sold last year — a new annual record, according to the Canadian Real Estate Association. Those sales provided a desperately needed dose of oxygen for the country’s gasping economy.

Given the slew of new mortgages taken out in 2020, there were bound to be slip-ups. So, MoneyWise asked four of the country’s sharpest mortgage minds to share what they feel are the mistakes Canadians most frequently make when securing a home loan.

Mistake 1: Not having your documents ready

One of your mortgage broker’s primary functions is to provide lenders with paperwork confirming your income, assets, source of down payment and overall reliability as a borrower. Without complete and accurate documentation, no reputable lender will be able to process your loan.

But “borrowers often don’t have these documents on hand,” says John Vo of Spicer Vo Mortgages in Halifax, Nova Scotia. “And even when they do provide these documents, they may not be the correct documentation required.”

Some of the most frequent mistakes Vo sees when borrowers send in their paperwork include:

  • Not including a name or other relevant details on key pieces of information.
  • Providing old bank or pay statements instead of those dated within the last 30 days.
  • Sending only a partial document package. If a lender asks for six pages to support your loan, don’t send two. If you’re asked for four months’ worth of bank statements, don’t provide only one.
  • Thinking low-quality or blurry files sent by email or text will be good enough. Lenders need to be able to read what you send them.

If you send your broker an incomplete documents package, the result is inevitable: Your mortgage application will be delayed as long as it takes for you to find the required materials, and your house shopping could be sidetracked for months.

Mistake 2: Blinded by the rate

Ask any mortgage broker and they’ll tell you that the question they’re asked most frequently is: “What’s your lowest rate?”

The interest rate you’ll pay on your mortgage is a massive consideration, so comparing the rates lenders are offering is a good habit once you’ve slipped on your house-hunter hat.

Rates have been on the rise lately given government actions to stimulate the Canadian economy. You may want to lock a low rate now, so you can hold onto it for up to 120 days.

But Chris Kolinski, broker at Saskatoon, Saskatchewan-based iSask Mortgages, says too many borrowers get obsessed with finding the lowest rate and ignore the other aspects of a mortgage that can greatly impact its overall cost.

“I always ask my clients ‘Do you want to get the best rate, or do you want to save the most money?’ because those two things are not always synonymous,” Kolinski says. “That opens a conversation about needs and wants.”

Many of the rock-bottom interest rates on offer from Canadian lenders can be hard to qualify for, come with limited features, or cost borrowers “a ton” of money if they break their terms, Kolinski points out.

Mistake 3: Not reading the fine print

Dalia Barsoum of Streetwise Mortgages in Woodbridge, Ontario, shares a universal message: “Read the fine print. Understand what you’re signing up for.”

Most borrowers don’t expect they’ll ever break their mortgages, but data collected by TD Bank shows that 7 in 10 homeowners move on from their properties earlier than they expect.

It’s critical to understand your loan’s prepayment privileges and the rules around an early departure. “If you exit the mortgage, how much are you going to pay? It’s really, really important,” Barsoum says.

She has seen too borrowers come to her hoping to refinance a mortgage they received from a private or specialty lender, only to find that what they were attempting was impossible.

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