Thank you, Mr. Chair.
The National Energy Board is the federal regulator for offshore oil and gas drilling and production in Canada. At the same time, the areas off the shores of Nova Scotia and Newfoundland and Labrador are administered by joint federal-provincial offshore petroleum boards. The NEB has a close working relationship with these offshore boards and with other regulators in Canada and around the world. When an accident happens anywhere, we learn from each other. This is considered standard operating procedure for all safety regulators.
We have also been working with land claims agencies, such as the Inuvialuit Game Council, and for the past 20 years with communities that could potentially be affected by Mackenzie Delta and Beaufort Sea drilling.
The most recent authorization for offshore drilling issued by the board was for Devon Paktoa C-60. This exploratory oil well was drilled in about 11 metres of water, between December 2005 and March 2006. The previous offshore well drilled in this area was the Imperial Isserk I-15 well, which was drilled in 1989. This was also a shallow oil well. It was drilled in just 10 metres of water.
The earliest possible date on which future drilling may occur in the Beaufort Sea, if the NEB approves it, will be 2014. It will be at a depth of 700 metres. This contrasts with the BP Macondo MC252, in the Gulf of Mexico, in 1,500 metres of water, which is the subject of the current emergency response.
There are currently no active authorizations or approvals for offshore exploration or production activities under the board's jurisdiction.
What brings us here today is an accident of major proportion in the Gulf of Mexico. The NEB is actively monitoring this situation. The focus now is to stop the leak and protect the environment. Once this is done, people will be able to focus on explaining what happened, why, and what has been learned. On Tuesday, May 11, the NEB announced that it is starting a review of Arctic safety and environmental offshore drilling requirements in light of the oil spill in the Gulf of Mexico. Full details of this review will be announced and this process will be public and consultative.
The NEB administers the current Canada Oil and Gas Operations Act, known as COGOA; parts of the Canada Petroleum Resources Act, known as CPRA; and the Canada Oil and Gas Drilling and Production Regulations. These have very strong wording. These acts call on the NEB, when it considers whether to grant an authorization, to ensure that oil and gas activities are safe, that they protect the environment, and that they conserve oil and gas resources. Before any project is approved, the NEB must satisfy itself that the operator's drilling plans include robust safety, emergency response, and environmental protection plans that meet the board's high standards.
To make sure that we meet the strict requirements of the acts, the NEB relies on a team of skilled and experienced experts. The NEB has 85 people who focus entirely on safety, engineering, the environment, geoscience, socio-economic issues, and lands. NEB staff review every single application to make sure that workers and the public will be safe and that the environment will be protected.
In addition to making sure that applications meet the requirements of COGOA and its regulations, NEB staff conduct stringent environmental assessments to make sure that projects under our jurisdiction comply with the Canadian Environmental Assessment Act. An authorization for drilling and production activities will not be granted unless a comprehensive environmental assessment has been completed. Any project that is approved by the NEB is subjected to a number of conditions in areas such as safety, the environment and emergency response. To make sure operators comply with these conditions, NEB staff are out in the field conducting inspections and auditing the company's management plans.
For offshore projects, the operator also needs to obtain a certificate of fitness from an independent certifying authority to ensure that the vessel and drilling equipment are appropriate, are in good condition, and are capable of undertaking the proposed activity.
After drilling has been approved, the acts administered by the NEB board allow it to take over the management and control of any work or activity if the board is not satisfied that an operator is living up to its commitments. The acts provide for a fine of up to one million dollars, imprisonment for up to five years, or both. The board can also suspend or revoke authorization for failure to comply with the provisions of the acts, the regulations, or the authorization.
In the case of spills or incidents under the board's jurisdiction, the NEB is the lead federal agency. The operator is fully accountable and responsible for spills and damage. A critical requirement under the board's legislation is the need for companies to provide proposed emergency response and contingency plans. The board assesses these plans before any authorization to drill can be issued.
The board also has emergency response management programs. Our staff has participated in 22 spill-response exercises over the past five years. I have a number of examples in my speaking notes, and I'll just refer to them here. I'll just outline the first one, which is actually happening today in Inuvik. It is an orientation and communication exercise for a Beaufort Sea oil spill. That is just one of the examples of the many things that must happen as we move towards the possibility of offshore drilling in the Beaufort Sea.
With respect to liability, NEB-regulated companies are fully responsible for anticipating, preventing, mitigating, and managing incidents and oil spills of any size or duration. If there is a hydrocarbon spill and the operators are at fault, they are 100% responsible for paying all costs and damages. There is no limit to how much they would have to pay. If there is a hydrocarbon spill and the operators are not at fault, they are still responsible for paying costs and damages, up to a limit of $40 million.
Before drilling, the operator must provide the NEB with a financial security, which is available to the NEB to cover the cost of a potential cleanup. The National Energy Board determines the amount of the security deposit. There is no set maximum amount.
In addition, under the terms of the Inuvialuit Final Agreement, an operator is responsible for restoring damaged wildlife and for compensating Inuvialuit hunters, trappers, and fishers for their loss of subsistence or commercial harvesting opportunities. The NEB may require the operator to provide financial security for this amount up front.
In conclusion, the purpose of my testimony here today is to tell you why we at the National Energy Board believe we have in place both an adequate regulatory framework and the necessary emergency response assets. At the same time, we have a fundamental responsibility to review the lessons learned from the Deepwater Horizon accident in the Gulf of Mexico.
Thank you, Mr. Chair.
