Natural Resources Committee on Feb. 3rd, 2011

[Nathan Cullen, NDP, Skeena—Bulkley Valley, BC]

You said you wanted them to be short, and you're taking 20 minutes of their time.

[The Chair, Conservative, Leon Benoit]

Mr. Cullen, order, please.

Go ahead, Mr. Anderson.

[David Anderson, Conservative, Cypress Hills—Grasslands, SK]

I'm just.... My region has benefited from oil and gas development, and I keep saying it in here because we do have oil and gas development in rural areas, with rural people farming the lands, working on the land. We have gas pipelines across our land.

One of the things we have...or there are several things we have. We have jobs, and our young people are staying in the area because of them. We have a service industry that provides jobs for many people. We have local manufacturing that's taking advantage of this as well.

It's interesting to me that in none of your material here do I see you talking about any of those possible advantages. I do see you talking about the cost of wages going out of the area, dividends going out of the area, the cost of equipment coming in, and those kinds of things.

In your figures here, where you talk about $230 million coming to the Quebec government per year, likely, out of this, I see no benefits included there. I'm just wondering, are you aware of those benefits? If so, why aren't they mentioned?

[The Chair, Conservative, Leon Benoit]

Go ahead, please, Mr. Welt.

[Thomas Welt]

I heard two questions there. The first was in terms of keeping this for future generations. It is not only for future generations, but it's a general rule that if you think you can get much more later, why would you sell it at a loss? I don't really understand this.

Actually, if you sell it today, you will lose money. Normally you keep it for a time when the price is going up. It is a totally normal commercial approach.

[David Anderson, Conservative, Cypress Hills—Grasslands, SK]

That's the same argument we heard, yes.

[Thomas Welt]

Actually, first, Quebec does not need it. Quebec has all the power that is needed. The price is low and the risks are high. The benefits for Quebec in terms of just money are very little, and practically none if you take everything in consideration. It's only a small fraction of 1%; that's the best guess.

[David Anderson, Conservative, Cypress Hills—Grasslands, SK]

But in your presentation you talk about $230 million coming to the treasury and $600 million coming off the trade deficit. That's substantial. And that's from your own presentation.

[Thomas Welt]

Yes--

[The Chair, Conservative, Leon Benoit]

Mr. Anderson, your time is up. We have to end the panel.

Give a very short response if you'd like, Mr. Welt, very short, because the time is up.

[Thomas Welt]

Your second question was that we have not mentioned also the benefits. This was your question, yes? But I just answered the question of what the Quebec community would get: very little.

At $6 per thousand cubic feet, they will get maybe $200 million per year. But if you subtract all of the costs of what the Quebec community must provide, in terms of roads, contamination, and so forth, and the slew of actions that Quebec must take in order to obtain this small amount, in my view it is negative. In my view, nothing will go to the Quebec treasury.

[The Chair, Conservative, Leon Benoit]

Thank you.

Mr. Welt, Mr. Bonin, and Mr. Egan, thank you for being here before our committee, giving your presentations, and answering questions.

We will now suspend the meeting for a couple of minutes as we change panels.

[The Chair, Conservative, Leon Benoit]

Could I have the witnesses and the members take their places?

For our second panel, we have with us Will Koop, coordinator, British Columbia Tap Water Alliance. From Apache Canada, we have Timothy Wall, president, and Natalie Poole-Moffatt, manager, public and government affairs.

Welcome to all of you today. I'm looking very much forward to your presentations.

We'll take the presentations in the order on the agenda. We have first, from the British Columbia Tap Water Alliance, Will Koop, coordinator.

Go ahead, Mr. Koop, for up to seven minutes, please.

[Will Koop, Coordinator, British Columbia Tap Water Alliance]

Merci beaucoup.

Bonjour. Thank you for the opportunity to appear before this committee.

My name is Will Koop. I'm a researcher and author of numerous reports and a book concerning the protection of public drinking water sources in British Columbia.

A year ago I created a website called “Stop Fracking British Columbia” when I began to investigate energy corporations in northeast B.C. mining enormous volumes of fresh water to hydraulically fracture or “frack” deep shale gas deposits. Although water is a fundamental component of fracking, it's only one of numerous other environmental and social concerns.

B.C. shale developments are far removed from where I live. An 18-hour vehicle journey from Vancouver just to get to the outer edge of the vast energy zones leads to the international energy companies. I visited the area twice, in May and September 2010.

As a result, I produced three reports that touch on some of the dynamics of these issues. The titles are: “The World's Biggest Experimental Frack Job!”, which is about Apache Canada; “24/7 Less Peace in the Peace”, which is about Talisman Energy; and “Encana's Cabin Not So Homey”, which is about the issue of cumulative effects. In addition, I produced two YouTube videos called “My Very First Frack” and “The Komie Commotion”.

Quebeckers concerned about deep shale gas developments have translated my cumulative effects report and the videos into French on their website blogs.

Our provincial regulator, the B.C. oil and gas commissioner, stated to this committee on December 14 that the environmental and social consequences from deep shale gas developments in northeast B.C. are “responsible” and in order. I am here to tell you that they are not.

For instance, in my report “Encana's Cabin Not So Homey”, I described how the rush to develop B.C.'s non-renewable deep shale gas is occurring without cumulative environmental effect studies: “Northeast British Columbia's shale gas race will undoubtedly become and remain one of the most significant environmental and public planning issues facing First Nations, the Province, Regional Districts, regulators, communities, and residents alike”. Given the backdrop of ever more lax and non-existent legislation regulations, these developments can be understood as distinct social and political failures.

I included a quote from a 1986 Ministry of Environment report that aptly summarizes what the B.C. government has failed to undertake: “strategic planning precedes the sale of petroleum rights”. This ensures that all parties involved are aware of the concerns and constraints associated with development in an area before development is proposed.

In 1991 the Ministry of Environment released a report urging the government to implement cumulative effect studies in the energy zone, which it failed to undertake. The concerns by ministry staff about the absence of cumulative effects studies continued with the creation of the BC Oil and Gas Commission of 1997. In 2003, the commission finally published a lengthy two-volume report on how to possibly implement cumulative effects studies in northeast B.C. However, the matter was ignored.

Since 2003 the government has leased thousands upon thousands of hectares of public lands to energy companies without conditions to conduct cumulative effect studies and without consulting the public. On November 23, when Canada's representative, Richard Dunn, was asked by this committee to comment on the state of cumulative effects studies in British Columbia, Mr. Dunn stated, “It would not make sense to do a cumulative effects assessment”.

Mr. Dunn's response is not only an affirmation that cumulative effect studies have been ignored, but also a disturbing statement about the energy corporation's attitude and philosophy, including Mr. Dunn's comments about Canada being on “the forefront of environmental and economic stewardship”. Encana has significant leased areas and corporate partnerships throughout northeast B.C. and elsewhere.

There is only one long-term cumulative environmental effect study in western Canada. It was conducted by Ernst Environmental Services on Pioneer Natural Resources Canada Inc.'s oil and gas operations in the Chinchaga area of B.C. and Alberta. Unfortunately, that ten-year study was terminated after the company was acquired in November 2007 by TAQA North, a Saudi Arabia company owned by the Abu Dhabi National Energy Company, with deep shale gas leases in northeast B.C.

In 2005 Jessica Ernst of Ernst Environmental Services had her well water in Rosebud, Alberta, contaminated with methane, ethane, and other hydrocarbons after Encana fractured there for coal bed methane gas.

As Monsieur Parfitt testified before this committee on December 2, the cumulative effects issue is further complicated by the fact that the B.C. Oil and Gas Commission has provided little accurate or comprehensive data on public resource issues by energy companies, such as the water withdrawals list he referred to.

This long list released by the B.C. Oil and Gas Commission regarding companies operating in the Horn River basin failed to provide accurate information, incorrectly suggesting that little water was needed for the fracking operations from 2009 to 2010.

I wrote in my last report that Encana had apparently conducted the world's largest fracking operation on multi-well pad 63-K , in the Horn River basin, next to Two Island Lake, doubling the resource figure that Apache Canada had given earlier, when it announced the world's largest fracking operation a few kilometres away.

I estimated that Encana used about 1.8 million cubic metres of fresh water, which is equal to 700 Olympic swimming pools, about 78,000 tonnes of specially mined frack sand, which would be about 800 rail cars, and about 35,000 cubic metres of toxins. And I said that this operation might be a template or an indication of many more operations in the future.

The B.C. government does not mandate energy companies to publish this and related data, but it ought to. Encana's public relations officer in its Calgary headquarters later said to me in a telephone conversation that Encana was concerned about the information in my report. I responded that I was only too happy to change the information if Encana would provide me with its own final figures from pad 63-K. I then e-mailed a number of questions to Encana, which I have attached to this report and can release to you later. But I have not received a response. As I read from this committee's transcripts, Encana promised to provide this committee with the water and frack sand data on pad 63-K but has yet to do so.

The absence of long-term, integrated, strategic cumulative effects planning, the lack of accurate resource-use data by the Oil and Gas Commission, and little governmental oversight or monitoring of the energy developments in northeast B.C. are not the only concerns. Many landowners who are directly affected by the energy developments have told me of their concern that they seem to have few rights and stakeholder privileges. They state, for instance, that high-pressure toxic gas facilities should not be established so close to residences. Air quality standards are deficient. There are few or no air-monitoring systems. Water tables used for residents and agriculture are changing. B.C.'s mining legislation gives priority to developers to access and develop private property.

Dave Core, of the Canadian Association of Energy and Pipeline Landowner Associations, provided this committee with some of the concerns on November 25.

The concerns I have raised to this committee about legislative and regulatory deficiencies and monitoring oversight in British Columbia are not isolated. In our submission to the National Energy Board in June 2006 regarding Kinder Morgan's Anchor Loop project, I reported that the Alberta government failed to act on the recommendations of a special committee appointed by Alberta's executive cabinet in 1972. That committee recommended that the tar sands might be developed over a 750-year period, not over a 50-year period.

The Alberta government suppressed the report until it was leaked three years later to Mel Hurtig, who then released the study. The special governmental committee, headed by the Alberta Ministry of the Environment, understood the magnitude of the environmental consequences of energy companies proposing to mine the tar sands at that time. In that same report, the committee made strong statements of concern about multinational energy corporations and strong statements about Canada's energy security as it related both to protecting the environment and to providing long-term energy supplies found in Canada for the long-term use of Canadians.

Thank you.

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Koop, for your presentation.

We will go now to Mr. Wall. I don't know if you're going to split your presentation, Mr. Wall. You have up to seven minutes.

[Timothy Wall, President, Apache Canada Ltd]

My name is Tim Wall. I am the president of Apache Canada. I've been with Apache for about 20 years, and I'm a petroleum engineer by background, so an engineer in my base.

I've been in Canada for about a year and a half, and many of the things Mr. Koop talked about are in our area of operations. The Encana things that he mentioned, we are a fifty-fifty partner in those things. We are big in British Columbia. We're a big gas producer there in the Horn River and several areas in British Columbia. We just purchased the assets of BP petroleum in Alberta. So we're in Alberta, British Columbia, and Saskatchewan. Those are our big producing assets. We're doing exploration work in shale over in the New Brunswick area.

Apache is a bit different. We go into the communities. We did this in New Brunswick and tried to get many groups together to talk about what we do and how we do it. We work with the communities as well as we can. This really originated in the Fort Nelson area with the Horn River producer group and the first nations groups there. We worked with those guys and brought the producers together with the first nations and the community to try to get everybody to be on the same page and to understand what we do there.

There are a couple of things I would like to address that Mr. Koop talked about. He talked about water, and we do use water in our fracking operations. These are horizontal wells. It's amazing what's happened over time; as you get in and do these types of operations, how you optimize and get better every day. You're inventing things. One thing Mr. Koop didn't mention was a plant that we built just to produce saline water. There is a saline-producing zone at depth, and we actually produce water from the Debolt. It's salt water. It's non-potable. It has a little H₂S, but we bring it to the surface, we clean it up, and we do our frack operations with it. It's a closed loop. We take the water back, we clean it up again, and pump it in the next frack, as much as we can.

It's an ongoing process. I think that's just an innovative idea. I think there will be lots of innovative ideas as industry gets better at it. The shale operations, as I said, are ongoing in the United States, they're ongoing in Canada, mostly in the Horn River and in Montney and some of those areas. You'll find that we'll get much better at what we do.

The water he talked about in 63-K, some of that was fresh water. I have to go with that. It was as we were commissioning our water plant. Toward the end, and in the frack jobs we're doing now, they're almost all water plant, using the water out of the Debolt water system, which is not fresh water by any stretch of the imagination.

There is a point about regulations. We are regulated in B.C. Natalie can talk a bit about that.

[Natalie Poole-Moffatt, Manager, Public and Goverment Affairs, Apache Canada Ltd]

As we all know, British Columbia has some of the toughest regulations when it comes to oil and gas. It started the Oil and Gas Commission in 1998. It's world-renowned. People very much appreciate the hard work they do there. The Oil and Gas Activities Act was strengthened over the last two years and put through government in 2010. It has some of the toughest environmental regulations as well.

B.C. has just created the Ministry of Natural Resource Operations, which is streamlining to make sure all the regulations are going through one arm, so they don't have to worry, cross-government, about catching all the things they're doing. As well, there is the Ministry of Environment. British Columbia has great regulatory regimes and works with the environmentalists as well as the companies to ensure regulatory approval.

[Timothy Wall]

In closing, as I pointed out before, I am a petroleum engineer. Designing frack jobs is what we did in college in the 1970s and the 1980s. Everybody wants to treat this as new technology. Pumping fracks have existed.... Thousands and thousands of fracks have been pumped all over North America, all over the world.

In the United States we pump them on a regular basis, especially in tighter rock in the central United States. It's not a new technology by any stretch of the imagination. We would call these “water fracks“, high-volume water with sand. The water breaks open the formation, and the sand pops the formation. You create flow channels, and the sand holds the flow channels open. They are limited in extent; because of the energy you pump they tend to be somewhat localized.

On a pad right now, we've limited our footprint. Pad drilling is what we've gone through in Horn River, where one pad can drain 2,000 acres. We drill 16 wells or so on a pad and limit the size of the footprint we have in the areas. You space those wells. Right now, depending on the well pad, they're about 300 or 400 metres apart to get connectivity between wells. It's not as if the fracks go on forever. They're in a small, limited area, and that's how you effectively drain an area.

I have something about the well bores we've talked about before. They are at depth. These wells will be drilled to 3,000 metres at depth and then horizontals are laid out flat at a 90-degree angle into the reservoir. They're cased all the way down and they're pressure-tested. They have integrity. We would ensure that. We would not pump a frack job if they didn't. A lot of things industry does are common practice that we don't go out and tell people we do. It would be imprudent for us to do anything but do the best we can and get these assets developed and try to improve the communities we're in.

That's it.

[The Chair, Conservative, Leon Benoit]

Thank you all very much for your presentations.

We'll go directly to questions now, starting with Mr. Tonks. You have up to seven minutes.

[Alan Tonks, Liberal, York South—Weston, ON]

Thank you, Mr. Chairman.

I got one question in last time. I didn't leave any time for me.

Anyway, thank you for being here. We've heard Mr. Koop, who has looked at what he believes is a deficiency in the cumulative effects with respect to the fracking processing. We had a professor from Cornell University yesterday who outlined the toxicity of not only the flowback, which comes as a result of the process of horizontal fracking or hydraulic fracking, but also 30% of the residue stays in the ground. He indicated he had a serious concern with respect to the water and water table implications and so on.

You have leaned heavily with respect to the rigours of the British Columbia environmental assessment process. Could you outline how that process relates to the cumulative effects? Because I take it that is where residents have a major degree of concern. It's not what they see now; it's what the overall long-term effects will be.

[Timothy Wall]

In the Horn River area—I don't know if you've seen pictures—there aren't many people there. It's 60 kilometres away from Fort Nelson to the north, so there's nobody there.

In our little handout.... I don't know if you guys have a copy of the handout on addressing the environment. You can see that people who work for us in the areas.... We're part of the communities we're in. We'll be in the Fort Nelson community for 50 years, probably, developing these assets. We are part of that community, and we have to be able to walk into the community and understand what people's needs are. I think we need to understand the cumulative effects of that. We're doing the best we can and trying to be as prudent as we can to optimize our jobs, to be able to create innovative solutions with the water.

I guess the question was the regulatory effects on it.

[Natalie Poole-Moffatt]

Of course all the way through we have to go to the Oil and Gas Commission and get permits, whether for tenure or lease. Throughout that process, we submit to the Oil and Gas Commission.

We've worked with Geoscience B.C., which is doing water impact studies up in northeastern B.C. We've been working closely with them for exactly these reasons. We opened an office in Fort Nelson a year ago. We've employed seven people up there—well, four, and we have three jobs out—because it's really important to us on the ground to ensure responsible ownership of the development we're creating.

The Debolt plant is one perfect example Tim talked of. We've also reduced our environmental footprint with our pad reductions. Each step of the way, we're looking to optimize all our productive abilities. We work with the Oil and Gas Commission continuously, as with the Department of Natural Resources, as we do with the Ministry of Environment.

[Alan Tonks, Liberal, York South—Weston, ON]

Okay.

Mr. Koop, you started off by characterizing British Columbia's environmental process as “ever more lax”. You also indicated an historic chronology with respect to how the concepts of cumulative impacts in fact had been avoided, if you will. You're far better acquainted with the environmental assessment practices of British Columbia, then. You've heard the response. I saw that you stayed and listened to the witnesses who we had before. You know that there is a moratorium that has been requested in Quebec. You know that there is a moratorium in Pennsylvania, I think. Obviously, from those moratoriums in other jurisdictions there are concerns.

What would you be looking for with respect to changes in the environmental protection act that exists in the environmental assessment process in British Columbia?

[Will Koop]

In British Columbia? The Environmental Assessment Act process and legislation was introduced in 1995. When the B.C. Liberal administration came in, they started to remove things and water it down. There was a tremendous amount of pressure by companies to do so, and they're sympathetic to that, so they started doing that. And they did it across the board. So we have an atmosphere in British Columbia where we've gone back in time. We've gone back to the 1980s with the Social Credit government. We're headed backwards--sorry about that.

What I'm saying is that this has become a problem. And there's a bigger problem. What we also see is we see the tar sands, we see the federal government allowing things to go on to the Fisheries Act, etc. The way I'm looking at it now is that the tar sands have lowered the environmental bars and are creating kind of a ripple across Canada. In British Columbia there's apparently very little that the public thinks it can do with the government to change these things. They're very concerned about what's going on, but they seem very powerless.

I don't know if that really answers your question. I don't know where we're going to be going, but what I'm trying to say is, listen, we see this in the United States, we see this in Quebec here right now. There's a big rush to develop all these things. Let's slow down, let's take a look. I've been up there to see things. I've heard some of the reports by the first nations in their presentation to the National Energy Board about new pipeline corridors, their concerns about what's going to happen to the wildlife. Sure, there are no people who live in this area. As Tim says, there's wildlife, there are fish, there are streams. This is wilderness full of wildlife.

[Alan Tonks, Liberal, York South—Weston, ON]

Okay, thank you very much.

Thank you, Mr. Chairman.