Thank you, Mr. Chair. Good morning, ladies and gentlemen. Thank you for the opportunity to address this committee today.
I am Ted Howell, president and CEO of NOIA. We're an industry association representing the petroleum supply and service sector in Newfoundland and Labrador and in the Atlantic region.
In 2006, Newfoundland and Labrador's budget projected almost a billion dollars in revenue from oil production, translating into some 20% of provincial spending. Beyond direct revenues to the treasury, the petroleum industry provides much-needed economic stimulus to the province. In 2004, the last year for which detailed economic analysis is available, petroleum activity accounted for 24.3% of provincial GDP and 17,000 direct and indirect jobs.
These fiscal and economic benefits are helping and can continue to help the province become a stronger contributor to the Canadian federation. While strong reserves of bitumen are concentrated in Alberta's oil sands, Canada's reserves and production of conventional oil are declining. To foster a secure and diversified conventional hydrocarbon energy supply, continued exploration and development of Canada's highly prospective frontiers here on the east coast and in the Arctic is much needed.
Therefore, NOIA maintains that a portion of royalties and other government revenues derived from petroleum production should be reinvested in the industry in order to contribute to its growth and success for the benefit of the province and the country as a whole. Although the Atlantic accord enables the Government of Newfoundland and Labrador to manage key aspects of petroleum resources off our shores, the Government of Canada retains significant areas of responsibility and authority, and therefore can establish policies and target investments to stimulate offshore activity, foster development, and strengthen the industry.
NOIA recommends that the federal government invest in three key areas: attracting exploration through geophysical marketing initiatives and appropriate fiscal incentives, providing new resources to the Canada-Newfoundland and Labrador Offshore Petroleum Board, and establishing a petroleum-focused office of Natural Resources Canada in St. John's.
On exploration attraction, our offshore is critically under-explored, with 132 wells drilled, as compared to 3,500 wells in the North Sea, an area of approximately comparable size. Without exploration, development cannot occur and no new production comes on stream to replace rapidly depleting reserves. To encourage replacement-level reserve growth and avoid a gap in development, new investment is urgently needed.
Consistent with Gerry's comments, NOIA recommends that the Government of Canada provide direction and targeted funding to the Geological Survey of Canada for collection and analysis of geophysical data on Newfoundland and Labrador offshore for distribution to potential investors.
Further, as matured jurisdictions around the globe are implementing changes to their fiscal regimes to attract exploration, Newfoundland and Labrador is at risk of falling further behind in global competition for its investments. NOIA recommends that the Government of Canada work with industry to develop and implement an appropriate and effective fiscal incentive program, with the goal of attracting exploration investment to the east coast offshore region.
With respect to the C-NLOPB, the C-NLOPB is the federal-provincial authority that administers, monitors and regulates every aspect of offshore petroleum operations to ensure that our resources are developed safely, strategically, and to the best benefit of the people of the province and the country.
The industry has grown substantially since 1985, when the board was established. NOIA recommends that the Government of Canada provide funding to ensure ample resources for the C-NLOPB, matched to the growth of the industry.
With respect to the Natural Resources Canada office, the Atlantic accord recognizes the important role the Government of Canada plays in offshore development. Section 49 of the accord commits to establishing regional offices with appropriate levels of decision-making for all departments directly involved in activities relating to offshore areas. The department most directly involved is Natural Resources Canada, particularly in terms of its role of providing input to the C-NLOPB. NOIA recommends that a Newfoundland and Labrador office of the energy branch of Natural Resources Canada be established to facilitate decision-making and industry growth.
In conclusion, by investing a portion of revenues derived from oil and gas production, the Government of Canada can strengthen the province's petroleum industry, stimulate activity offshore Newfoundland and Labrador, and foster sustainable resource industry development for the benefit of the province and the country as a whole.
Thank you, ladies and gentlemen.