Mr. Chairman, honourable members, I want to thank you for the invitation to meet with you on the subject of competitiveness of the sector.
First, just a bit about my organization. The Canadian Association of Petroleum Producers is a trade organization. We have 130 producer-members that produce various hydrocarbon products, from natural gas, to crude oil, to bitumen and sulphur. Our members produce more than 90% of Canada's hydrocarbon products. We also have about 150 associate members that provide the ancillary services to the upstream industry. It's important to understand that we are representing the upstream industry. We don't represent the downstream, the marketing and refining, and the large-pipe transmission. There are other associations that do that business.
In 2009 the upstream industry will invest approximately $34 billion. While this is down from the $50 billion of each of the previous two years, we still remain a significant part of the Canadian economy. Of note, some $22 billion is spent on the conventional oil and gas business, drilling about 12,000 wells this year. Also of note, we employ about 500,000 people across Canada.
I think these facts are indeed relevant in considering the economic success of portions of the agricultural sector. Much of the conventional oil and gas business occurs in agricultural areas across Canada. Historically, seasonal skilled and unskilled labour is drawn heavily from the rural communities. Permanent jobs are also often filled by farm family members. The work involved ranges from drilling rig and geophysical hands, to truck drivers, to construction workers such as welders, to facility operators and engineers and area superintendents.
Further, business arrangements with landowners related to surface access result in rental agreements that provide annual cash payments for that access. In some cases, rural landowners own the subsurface mineral rights and rely on our sector to develop those resources on their behalf, again contributing to revenues to the rural communities. This all serves to augment farm incomes that can be used to support the farming business.
There are several other key interface areas between our two sectors. Perhaps the most obvious is the fact that the upstream oil and gas industry is a supplier of the raw hydrocarbon products that become the fuel source for the agricultural sector. Policy and regulatory measures that support a competitive upstream industry result in secure, reliable energy supply that becomes the feedstock for those fuels.
One area of overlap or commonality is the potential for both sectors to be contributors to the global energy mix. Notwithstanding today's market downturn, the global energy demand is forecast to increase dramatically as countries such as China and India continue to expand their economies. While traditional oil and gas hydrocarbons will continue to be a dominant supplier of that energy into the foreseeable future, renewable energy and biofuels in particular can play a growing role. Of course it will be important that such fuels are able to compete in a market economy. In other words, it's important to let the market dictate the nature of the energy mix by ensuring policies are in place and are equitably applied.
As well, as Canada and North America look to define the rules for managing carbon emissions, biofuels will be successful if their emissions are understood and managed on a life-cycle basis. And that's not to say we should pick winners or losers based on a biofuel-type emission profile. Rather, we need to ensure that any fuel type has the same opportunity to compete within a common policy and regulatory environment.
On the matter of climate change, the agricultural sector has the potential to be an important carbon sink. Policies need to recognize this opportunity and encourage farming practices that result in sequestration of carbon. More specifically, if there is a cost barrier to farmers it needs to be addressed to make this a viable option. That might entail things like a farming tax treatment or an exchange of cash for credits, or some combination of these or other ideas. While some of this has been going on, I think we need to make sure that the mechanisms are in place to allow that to be performed more broadly across Canada to ensure the opportunity is realized. In our view, such a mechanism should be light on administration so that maximum value is realized by the participants.
The upstream industry has important interactions and relationships with the agricultural sector in a number of ways. I have already touched on the financial arrangements and benefits. The other areas relate to the fact that agriculture and the upstream oil and gas industries are land-based resource industries that often share the same land base, and this has the potential to result in some conflict.
Water use and water quality are sometimes raised as issues of concern on the premise that our industry competes with agriculture for a finite resource. In fact, the provincial regulatory requirements are such that industry water use is licensed only if, through testing, we can demonstrate such use will not impact other licence holders and local water users. Similarly, our industry is subject to water well testing requirements to ensure the integrity of local water supplies.
Site reclamation rules are in place prescribing restoration criteria to ensure land is restored to an equivalent land capability, and of course rental payments continue to the landowner until the province grants a reclamation certificate.
The oil and gas industry has established an orphan well program whereby industry funds and conducts restoration work on orphan sites or those sites where companies are no longer viable, thus absolving the landowner of any liability. To date, we've spent about $100 million to eliminate those historic orphans. Regulators have agreed to conduct monthly physical health tests of each oil and gas company to ensure future orphans are minimized.
CAPP and its members participate in numerous synergy or multi-stakeholder groups designed to foster dialogue on various issues and to build relationships.
I raise all these points to indicate we are aware of and sensitive to the issues and concerns, to advise that there are rigorous provincial regulatory measures in place to control our industry's activities in these areas, and also there are voluntary initiatives to promote good-neighbour relations and to eliminate the potential for liability burdens.
In summary, there are key areas of interface between our sectors. The oil and gas industry is a source of jobs to augment farm income. The upstream oil and gas industry is a secure, reliable energy supplier to meet the agricultural sector fuel needs. Energy demand growth means all fuel types, like biofuels, can play a role in meeting that demand, but to be a sustainable source it needs to fit in and compete within the marketplace. The agricultural sector can play a significant role in carbon management as a carbon sink. And both sectors share the same land base, creating the potential for conflict; however, provincial policy and regulatory frameworks and relationship management strategies can and do help manage that conflict.
Thank you. I made it under the wire.