Local content tracking has become increasingly important in recent years. This focus on local content has been driven by a number of factors, including the desire to maximize economic benefits for local communities, the need to comply with government regulations, and the importance of environmental and social sustainability. A few great examples include the Local Content Act and results in Guyana, the Bay du Nord negotiations in Newfoundland, and the growing popularity of Community Benefit Agreements across North America.
The Local Content Act and Results in Guyana
One of the most significant developments in local content tracking in recent years has been the release and implementation of the Local Content Act in Guyana in 2022. This law requires companies operating in the country’s petroleum sector to give preference to local suppliers and service providers, and to provide opportunities for local employment and training.
Since the implementation of the Local Content Act, Guyana has seen significant growth in its local content capabilities. On the ground in Guyana, it’s apparent that the act has made a huge difference in the number of local benefits being received. The Local Content Secretariat, the government body responsible for regulating the act, recently estimated that the act has brought an additional US$700 in business into the local economy. The act has driven investments in local infrastructure and training, partnerships between local and international businesses, as well as spill-over effects to other industries.
The Bay du Nord Negotiations in Newfoundland
Another area where local content tracking has been in the spotlight is the Bay du Nord negotiations in Newfoundland, Canada. Bay du Nord is a large offshore oil field that has the potential to provide significant economic benefits to the region.
In 2020, the Government of Newfoundland and Labrador released a draft agreement for the development of the Bay du Nord field that included a commitment to local content requirements. Under the agreement, the operator of the field would be required to provide opportunities for local employment and training, and give preference to local suppliers and service providers.
A formal agreement is currently being negotiated between the Government of Newfoundland & Labrador and Equinor (the company hoping to develop in the Bay du Nord oil field). This agreement has been subject to significant debate. Some stakeholders believe that the proposed local content requirements go too far. With all benefits or local content agreements, balance is key as unrealistic or unachievable terms can severely hinder investment. However, assuming this project goes forward, this agreement will be a win for both Equinor and local communities.
Community Benefit Agreements
A growing trend in local content has been Community Benefit Agreements (CBAs), which are agreements between project developers and local communities outlining the benefits that will be provided to the community (as a result from a project).
There have been notable examples of successful projects with CBAs in the United States and Canada. For instance, in the US, offshore wind development and the construction of stadiums are increasingly subject to CBAs. Benefits from these agreements include commitments to local hiring, training and apprenticeship programs, investment in infrastructure, and partnerships with local businesses. Similarly, in Vancouver, the city has enacted a CBA Policy in which all developments with over 45,000 square metres of gross floor area must include a CBA. This policy focuses on local, inclusive employment, social procurement, and local procurement.
The use of CBAs demonstrates the potential for local communities to benefit from development. By establishing strong relationships with local communities and making commitments to support their economic, social, and environmental well-being, project developers can enhance their reputation, reduce opposition to their projects, and ensure long-term sustainability.
Balance is Key
Regulations targeting local content are becoming more common because they work. These examples demonstrate that local content requirements can drive investments in local infrastructure, create opportunities for local employment and training, and provide a more sustainable future for communities. In the future, it may be uncommon to see any major projects move forward without significant public consultation and a governing mechanism to ensure that local communities benefit from the development.
- Written by Matt Adams with the support of ChatGBT.
Matt Adams is the CEO of NetBenefit Software. Based on the east coast of Canada, Matt has spent his career (and more of his social life than he’s willing to admit) in the Environmental, Health, and Safety (EHS) and Environmental, Social, and Governance (ESG) software space.