Thank you.
Good afternoon, Mr. Chairman, and members of the committee.
My name is Nancy Malone, and I am the vice-president of operations for the Canadian Association of Oilwell Drilling Contractors, or the CAODC, as we like to call ourselves.
We want to thank the committee for the invitation to provide CAODC's perspective on the Canadian Environmental Assessment Act's statutory review.
But first, I would like to describe the makeup of our membership so you understand who I represent. CAODC represents virtually all of the drilling and service rig contractors in Canada. Our 42 land-based drilling contractors, two offshore drilling contractors, and 85 land-based service rig contractors own and operate 811 land-based drilling rigs, three offshore drilling rigs, and nearly 1,100 land-based service rigs.
Our members are located mostly in western Canada, but we are starting to work in central Canada and with some land-based activities in Atlantic Canada. As well, we work with the offshore drilling contractors in Newfoundland.
Drilling and service rig contractors are hired by oil and gas companies to provide the equipment and labour necessary to drill oil and gas wells. Oil and gas companies typically don't have the capacity to own the specialized equipment or to employ the skilled labour required to do this work.
At peak activity during our winter months, our members employ approximately 12,000 people through their crews. Due to the seasonality of our business, this number can fluctuate down to about 4,440 during the spring break-up months. In simpler terms, for every active rig, there are approximately 25 direct jobs and approximately 125 indirect jobs created.
Along with the seasonality of our business, the cyclicality sees our activity move through peaks and valleys based on the global commodity prices. For example, in 2009 during the global recession we drilled approximately 9,300 wells. By the end of this year, we should have that bumped back up to about 12,500 wells. But that's really not the peak of our business. Our peak was in 2006, when we drilled more than 23,000 wells, but this was due to strong natural gas prices at the time. Today we're operating more in an environment of strong oil prices and weak natural gas prices.
We're just one of the many service sectors that exist to support ongoing oil and gas exploration and development in Canada. The conventional oil and gas sector alone contributes $63 billion to the overall Canadian economy. We are proud of that contribution we make to Canada's overall financial well-being.
Unfortunately, as service providers in the services sector we don't have complete control over our own destiny. The health of our clients, the oil and gas-producing companies, dictates the level of our success each year. So we watch very carefully for the issues that may challenge our clients' ability to continue to invest in our country.
As a Canadian industry, we cannot control one of the biggest factors that contributes to our success or decline, and that's global commodity prices. Inside of our borders, however, we can work with local, provincial, and national stakeholders to ensure that our business can continue to operate efficiently through the ups and downs of the marketplace.
Included in that work is a goal to ensure that Canadian provincial and federal regulatory frameworks are consistent and efficient, and that they enable environmental and economic performance. A competitive regulatory regime benefits both the resource owner and the investor.
That's why I am here today to speak to you about CEAA and the opportunity this committee has to improve a necessary regulatory process, but also to strengthen Canada's position in the global market.
I'm speaking from the perspective of a group of companies that feel the immediate impact when their customers are delayed in pursuing their projects in any way.
Contrary to popular belief, the oil and gas industry is required to operate under a comprehensive regulatory framework. Our industry believes in the fundamental necessity of regulations. It establishes an equal playing field for all players. However, in recent years much of the regulatory structure has become unnecessarily complex with too much overlap between departments and provinces.
CAODC members encounter these complexities every day because of our multiple work sites in multiple jurisdictions. From safety to transportation, each jurisdiction has its own rules, which makes it challenging for our members to operate consistently across borders.
On a broader scale, our clients face similar hurdles with respect to planning for new projects, except in their case the timelines for receiving approvals are the biggest challenge. As a consequence, investment windows may pass because the regulatory process moves more slowly than market opportunities. These types of delays end up trickling down to our members and we lose work as a result.
In western Canada we've seen two initiatives that are working to eliminate some of these complexities by having government and industry stakeholders at the table. The Alberta regulatory enhancement project and the new west partnership agreement are two examples of where all stakeholders are moving towards the same goal, a strong but streamlined regulatory process.
Perhaps the most important output of this process has been the unprecedented inter- and intra-governmental coordination. Provincial and departmental counterparts are starting to communicate in ways we've never seen before, all to the benefit of the regulatory system. Not only are there cost savings, the system is moving toward tighter integration with fewer duplicate processes. Over the course of this statutory review, we would encourage you to examine and apply the types of practices that these two initiatives have undertaken.
The Government of Canada needs to signal to the rest of the world that it is serious about maintaining appropriate levels of regulation, but it is also responsive to changes in the larger business context. In our industry, Canada is known as one of the highest cost basins in the world to develop, partly because of our geology, and partly because of our exacting regulatory environment.
The latter piece is not a negative factor. Responsible operators and their shareholders are not scared of regulations, but they do take them into account when they're evaluating competing projects around the world. They have a solid understanding of both the provincial and federal regulations, as well as the politics that surround our industry in Canada.
The perfect example of this knowledge was demonstrated in 2007, when the Alberta government made disastrous changes to its royalty structure. Investment flew out of Alberta, some to be seen in Saskatchewan, but a lot to the United States and the rest of the world. Alberta, and by extension Canada, was branded as an unstable jurisdiction for business.
Many bridges have been rebuilt between the industry and the provincial government, as well as investors, since then. Investors, in particular, needed solid reassurances that our region's regulatory structure is responsive, but also reasonable in its scope. With this in mind, I would remind you that none of our members would disagree with the need for regulation. But they do become frustrated when federal regulations duplicate or unintentionally trump provincial regulations.
Provincial governments are likely the best source of expertise, information, and enforcement within our industry. As an example, I would use the ERCB, the Energy Resources and Conservation Board in Alberta. There is no need to layer repetitive regulations and assessments onto the industry.
In terms of regional sustainable development planning, our western provincial politicians are elected to make decisions on the policies and practices that will directly impact their constituents. They are knowledgeable around the diversity of economic, environmental, and social considerations that must be accounted for in creating public policy. This includes regional planning and development.
CAODC, along with the rest of the upstream industry, is supportive of sustainable development. However, we believe that good sustainable development practices must take into account the entire list of considerations that I mentioned.
We also believe that environmental assessments are not a tool to interfere with the legitimate role of provincial jurisdictions to make decisions around resource development or related policy decisions. An environmental assessment is a tool. It describes how a resource should be developed, and it identifies any major issues with respect to the environment. It's a tool to enable responsible development.
In summary, Canada has always been known for its abundant natural resources. Be it agriculture, forestry, mining, or petroleum products, we are a nation that has grown on its ability to harvest and sell its resources internationally. Currently we have a wonderful opportunity to become a global energy power. Part of this exercise will be to demonstrate to Canadian citizens, and to rest of the world, that our policies reflect a clear understanding of how to responsibly and sustainably develop our resources.
As contract service providers, CAODC and its members are not generally directly affected by the Canadian Environmental Assessment Act. However, our clients are, and therefore we take great interest in this issue. Our industry develops Canada's oil and gas resources in the most responsible manner possible with today's technology and practices, but we're always looking to improve, and we will.
When reviewing CEAA and its scope, the focus should be on continuing to deliver responsible environmental outcomes. But we also believe that the review process can become more streamlined and competitive in its regulatory view.
On behalf of CAODC and its members, I want to thank you again for this opportunity, and I look forward to any questions that you may have.
