Natural Resources Committee on May 13th, 2010

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

I think the committee would like to have chapter and verse with respect to that kind of probability.

Relief wells appear to be the fail-safe. I know it's premature to draw that absolute conclusion, but does the NEB regulatory framework make it mandatory if the NEB says that's what has to happen? Is that the legal regime that compliance would have to occur under?

[Gaétan Caron]

It is our policy, and industry knows that. That is why last fall they filed an application by letter to have us vary that and replace it with something else. We stopped that hearing because we thought the issue now with the Gulf of Mexico required closer and broader attention.

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

I appreciate that, but would you say your terms of reference in terms of focus are more looking at relief-well capability, simultaneous to development?

[Gaétan Caron]

Moving forward?

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

Yes.

[Gaétan Caron]

It includes that as a key element. It's the last line of defence, though. In the gulf right now, we already know that to finish that first relief well will take three months.

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

I'm saying that possibly, in retrospect, that should have been the first line of defence.

[Gaétan Caron]

Possibly.

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Tonks.

We go now to Ms. Gallant for up to two minutes. Go ahead, please.

[Cheryl Gallant, Conservative, Renfrew—Nipissing—Pembroke, ON]

Thank you, Mr. Chairman.

Through you, how, if at all, is your organization--and, for that matter, oil companies--required to work with the government operations centre, formally OCIPEP, the Office of Critical Infrastructure Protection and Emergency Preparedness?

I'm wondering too a bit about security. Are there no-fly zones around the air space near oil rigs? Are there security checks on the workers who work on the rigs? In terms of perimeter security, you mentioned that you review their plans. Is there a perimeter security plan for the location of the oil rigs?

[Gaétan Caron]

Dr. Dixit has specific answers for that, if you would allow him to answer the question.

[Dr. Bharat Dixit]

The first question that I recall was around whether there is a zone where outside parties cannot come in. There is a safety zone around the drilling platform, approximately 500 metres around, so it's only authorized entry that can be permitted.

I'm sorry, I cannot recall the rest of your questions.

[Cheryl Gallant, Conservative, Renfrew—Nipissing—Pembroke, ON]

Do you coordinate with or do exercises with the government operations centre?

[Dr. Bharat Dixit]

Yes, we're very much part of that. In fact, my team leader is dealing with those security and safety matters right now, today, in Ottawa.

[Cheryl Gallant, Conservative, Renfrew—Nipissing—Pembroke, ON]

And are there any no-fly zones in and around oil rigs?

[Dr. Bharat Dixit]

There is no no-fly zone, primarily because they are quite remote. The one that is being proposed for the Beaufort Sea is approximately 180 kilometres away, and nobody would actually want to fly over there just for the fun of it.

[Cheryl Gallant, Conservative, Renfrew—Nipissing—Pembroke, ON]

Is there any type of security check required on people who work on oil rigs?

[Dr. Bharat Dixit]

That's generally done by the operators themselves to make sure they are drug-free, they have clean records, etc.

[Cheryl Gallant, Conservative, Renfrew—Nipissing—Pembroke, ON]

Thank you.

[The Chair, Conservative, Leon Benoit]

Thank you very much, Ms. Gallant.

Thank you to both of you, gentlemen, for coming today. This has been a really helpful start to our study and we have had some good information here today. So thank you very much.

Gentlemen, probably some members of the committee will want to have a short chat with you away from the table.

We will suspend the meeting while our next group of witnesses comes forth.

[The Chair, Conservative, Leon Benoit]

We will resume the meeting.

We have a considerably larger panel this time.

Welcome to all of you.

We'll just go through the presentations in the order in which the groups appear on the agenda. After everyone has made their presentations, we'll go to questions from the members.

Again, thank you all very much for being here.

We'll start with Anne Drinkwater, president of BP Canada.

Just go ahead and start with your presentation. I'll introduce the others as we get to their presentations. Go ahead, please.

[Anne Drinkwater, President, BP Canada Inc.]

Mr. Chairman, members of the committee, thank you for the opportunity to speak to your committee today.

I have some prepared remarks relating to the April 20 incident on the Transocean Deepwater Horizon drilling rig and on the resources and expertise BP is bringing to bear in the spill response effort.

Just over three weeks ago, 11 people were lost in an explosion and fire aboard the Transocean Deepwater Horizon drilling rig, and 17 others were injured. My deepest sympathy and condolences go out to the families, friends, and colleagues who have suffered such a terrible loss, and to those in communities along the gulf coast whose lives and livelihoods are being impacted.

The root cause of this tragic incident is unknown at this time, and figuring out what happened and why it happened is a complex process. We are cooperating with the joint investigation by the departments of Homeland Security and the Interior and investigations by the United States Congress.

In addition, BP has commissioned an internal investigation, whose results we plan to share so that we can all learn from these terrible events. As a responsible party under the Oil Pollution Act, we will carry out our responsibilities to mitigate the environmental and economic impacts of this incident.

I would like to acknowledge the support that BP is getting from the industry, from federal, state, and local authorities, and from the affected communities. The response is being managed within a unified command that was established within hours of the accident. Overall there are approximately 13,000 people involved. And I know that the Government of British Columbia has also offered emergency response technicians to the United States Coast Guard.

BP responded quickly and aggressively to the spill, and we continue to attack this very aggressively on three fronts: in the subsea, to stop the flow of oil and secure the well; on the surface; and on the shoreline. Our number one priority is to shut off the flow.

In the subsea, we are pursuing multiple options in parallel. We are working on an operation, known as “top kill”, aimed at stopping the flow of oil from the well. This essentially works by injecting multi-sized particles to plug the blowout preventer, or BOP, followed by using heavyweight drilling mud and ultimately cement to permanently seal off the well. This is a proven industry technique and has been used worldwide, but never in 5,000 feet of water.

We are also working on two relief wells. Work on the first relief well, which began on Sunday, May 2, continues. As of May 10, it had reached 9,000 feet, and it is expected to take some months to complete. The second relief well will commence at the end of this week.

Moving on to containing the flow, we are also continuing the work on a subsea oil recovery plan using a containment dome that will sit over the leaks and direct oil upward though a pipe. A containment dome measuring about four feet in diameter and five feet high is being readied to lower over the main leak point. This small dome will be connected by drill pipe and riser lines to a drill ship on the surface to collect and treat oil. It is designed to mitigate the formation of large volumes of hydrates.

In summary, BP continues to do everything it can in conjunction with governmental authorities and other industry experts to find a solution to stem the flow of oil on the seabed or contain it before it reaches surface.

On the surface, BP has launched a massive operation. BP's team of operational and technical experts are working in coordination with several federal and state agencies, organizations, and companies. As I said, approximately 13,000 people are involved in the response, including shoreline defence and community outreach.

Over 1.5 million feet of boom has been installed to contain the spill and protect sensitive coastal areas, with more than a million more feet available.

Over 500 response vessels are being used, including skimmers, tugs, barges, and recovery vessels. These include specially built oil spill response vessels with two oil-water separators. This allows for continuous response operations, as separated water can be decanted back into the boomed area. There are 37 aircraft, both fixed-wing and helicopters, that are deployed to support the response effort.

We are also attacking the area with coast guard approved biodegradable dispersants, which are being applied from planes and boats. We have also developed and tested a technique to apply dispersant at the leak point on the seabed. The EPA is carefully analyzing options for the possible future use of this technique.

To protect the shoreline, we are implementing what the United States Coast Guard has called the most massive shoreline protection effort ever mounted. Fourteen staging areas, in four states, have been set up to protect sensitive shorelines. We have rapid response teams ready to deploy to any affected areas, to assess the type and quantity of oiling so the most effective cleaning strategies can be applied.

The community response has been superb. We have 1,000 local vessels contracted for a variety of tasks and more than 4,000 volunteers who have been trained to assist.

We intend to do everything in our power to bring this well under control and to mitigate the environmental impact of the spill. I can assure you that we, and the entire industry, will learn from this terrible event and emerge from it stronger, smarter, and safer.

This concludes my remarks, Mr. Chairman.

[The Chair, Conservative, Leon Benoit]

Thank you very much for your presentation, Ms. Drinkwater.

We will now go to the second presentation. From the Canadian Association of Petroleum Producers, we have with us today David Pryce, vice-president of operations; and Paul Barnes, manager, Atlantic Canada.

Welcome, gentlemen. Go ahead with your presentation of somewhere around eight minutes.

[David Pryce, Vice-President, Operations, Canadian Association of Petroleum Producers]

Thank you, Mr. Chairman, and members of the committee.

As a Canadian association we're able to provide broad industry views on policy and regulation, as well as information on the state of the industry. We're not able to talk, obviously, about the circumstances of the Gulf of Mexico--as I say, we're a Canadian organization--and neither are we able to speak specifically to company plans.

CAPP appreciates the opportunity to convey our initial thoughts both on the emergency response assets and on the current policy and regulatory regime for offshore oil and gas drilling and production, as noted in this committee's invitation to appear. We're also prepared to contribute further information as may be required or useful as this study proceeds.

CAPP and its members certainly believe that the incident in the Gulf of Mexico is a tragic and unfortunate event. It is in the interest of all stakeholders that we collectively take the time to consider the findings and recommendations arising from this investigation of the incident. This measured approach will allow us to fully understand the circumstances under which this incident occurred and assess whether there is an opportunity to improve our regulatory system or industry operating practices. Canadians, governments, and industry all have a vested interest in achieving the right outcomes from this study.

We have a number of key themes for this study today. To provide some context, the International Energy Agency projects that world energy demand will grow by about 40% over the next 20 years, with crude oil and natural gas expected to meet 40% of that growth in demand.

Global offshore crude oil production represents about 38% of the world's energy supply, and the Canadian offshore crude oil production represents about 12% of Canada's crude energy supply.

The offshore regulatory regime and industry operating practices have evolved over a number of decades, resulting in a robust regulatory system in place today.

All forms of energy development do pose environmental and safety risks. The challenge for government policy, and regulators and indeed industry collectively, is to take reasonable measures to mitigate the risks such that incidents are unlikely to occur, and then to be prepared to respond in the event an incident does occur. Again, as I said, we need to make sure we take the time to learn from the gulf incident prior to determining what the next steps might be.

With respect to the emergency response assets, we believe we should be targeting both an understanding of prevention and an understanding of the measures of preparedness. Both government's and industry's focus is on prevention first. That means understanding the risks and the measures that can be taken to control those risks.

Industry approaches all activity with a goal to complete that activity without incident or injury. Risk is assessed and mitigative measures are applied to achieve a risk level that is as low as is reasonably practicable without eliminating the possibility of conducting an activity. Companies having gone through that assessment will determine whether or not they think there is reason to proceed, and if they do, they will propose those risk strategies as part of their application, which is then subject to the judgment of acceptability by the regulator.

In addition to meeting corporate and regulatory expectations with respect to prevention, companies must also demonstrate capability to respond to any incident with a view first to containment, and ultimately recovery and cleanup. Response capability means ensuring access to necessary equipment. It also means ensuring an effective management system, typically referred to as an incident command system, which integrates companies and regulatory agencies to provide and define leadership responsibilities and execution throughout the duration of an incident. Training is a key component of competent response capability, and companies are required to conduct response exercises on a frequent basis.

With respect to Atlantic Canada response capability, operators typically employ a three-tiered response capability system with respect to equipment. Tier one would involve company-owned equipment on site. Tier two would involve equipment contracted and locally situated onshore, and companies may have their own stock of equipment onshore. Tier three would be internationally situated equipment. This provides for immediate response capability and scalable access to more equipment as needed. All this needs to be lined out before approvals are obtained.

The Eastern Canada Response Corporation is an entity that provides a third party supply of that equipment in Atlantic Canada and it is an entity certified by Transport Canada under the Canada Shipping Act.

With respect to northern Canada, there is currently no industry spill response equipment in the Arctic offshore, as there is no activity at the moment. Industry would put in place, and would expect to be required to put in place, a spill response plan, with equipment, and presumably with a similar strategy as employed on the east coast with tiered response capabilities. These plans would certainly be fit for a purpose to meet the expectations of Arctic operations, and operators would be required to have their spill response capability in place to receive approval to drill or produce.

With respect to the regulatory requirements, every offshore operator must have authorization from a requisite board to pursue offshore activity, and authorization submissions from operators must include a safety plan, an environmental plan, and a contingency plan. All three plans must provide extensive details on how a company will meet expectations with respect to equipment, personnel, and processes in the areas of safety, environmental protection, and contingency.

All plans must meet the regulations of the federal and provincial governments and the guidelines of the offshore petroleum boards, and plans are approved prior to activity occurring. The application for authorization also must include, in the case of a drilling installation, a description of the drilling and well control equipment, and in the case of production installation, a description of the processing facilities and control equipment.

Drilling a relief well is also an option and can be pursued in the event of a blowout. Companies would have those plans identified as they make their applications. I think it’s important to understand that companies don’t view that as the immediate response. It needs to be ready and available as quickly as possible, but they also need to be looking at what they can be doing throughout the incident.

The offshore boards from Newfoundland and Nova Scotia and, presumably, the NEB, when there’s activity in the north, would do regular inspections of the operators to ensure equipment is in place, it meets regulations, and it is functional, and functional in real-time circumstances.

The northern operators are additionally required to follow the same-season relief well capability policy. It’s a policy that was established in 1976 and requires companies to demonstrate their ability to drill a same-season relief well. We've already heard that the board is intending to review that policy, and in fact is expanding that review in a broader sense. CAPP supported the premise of the review and we support the premise of the broader review. I’m sure our members in the association would be interested in engaging in that.

With respect to the regulatory adequacy, the industry has been operating in Canada's offshore since the late 1960s. During this time, hundreds of wells have been drilled, and there have been incidents; there have been four blowouts, two in the north and two in Atlantic Canada. I think the most recent ones in Atlantic Canada were in the 1980s. Anytime we have incidents, we and the regulators take the opportunity to learn from those.

I think one can take from this that there is an effective regulatory regime and sound operating practices by industry in place to manage the risks. Having said that, it doesn’t mean we should be complacent. As such, we support this study and the intent of it. We support the NEB's plans to do a review as well. We would also point out, and I think you understood it from the NEB, that there are periodic reviews of any of the regulations that are in place.

In recent years, the regulatory regimes around the world have been moving from a more prescriptive model to a goal-oriented model. Canada has also been moving in that direction. Goal-oriented regulation is not intended to decrease the standards or weaken the regulation. It is intended to put a higher onus on industry to be accountable for its decisions and to be compliant, and it also requires the operators to design their operations to be the most effective and fit for purpose, allowing both for innovation and incorporation of new practices. Industry remains accountable for what they do and the regulator remains accountable to ensure that we meet the goals of the regulations.

To conclude, risk management is a fundamental premise of public policy. It's evident everywhere, from rail and air travel to our road system, so it's not unique to the oil and gas industry.

The current regulatory system is designed to minimize and manage risk in a way that is deemed to be sufficiently protected and recoverable such that Canada's offshore resource can be developed.

Industry accepts that the study and other regulatory reviews that occur from time to time may identify opportunities for improvement of regulatory requirements. In fact, we continually contribute to those reviews to provide our advice around that.

So we would encourage a balanced approach, drawing on the learnings from the gulf, to any changes contemplated that provide for an appropriate level of protection while still enabling the possibility of development of this important offshore resource.

Thank you.

[The Chair, Conservative, Leon Benoit]

Thank you very much, Mr. Pryce.

We'll go now to our third group of witnesses, who are from the Inuvialuit Game Council: Lawrence Amos, who is the treasurer; Norman Snow, who is the executive director; and Steven Baryluk, who is the resource management coordinator.

Welcome, gentlemen.

Go ahead, Mr. Amos, with your presentation.