Ladies and gentlemen, thank you for the opportunity to present this morning. The BP Deepwater Horizon rig, which exploded and sank in the Gulf of Mexico on April 20, was an exploratory drilling platform.
If there is any good news about the ensuing oil spill, it is that emergency responders had a full month to contain the oil before it washed ashore in the environmentally sensitive marshes and wildlife sanctuaries of Louisiana. Of course, they failed. However, the only reason they had any grace was due to a full regulatory process informing whether to drill, where to drill, and how to drill. The lease did not directly occupy an environmentally sensitive area.
Please refer to chart number 1 in the package I have distributed. In the Arctic, Greenland, Norway, and the U.S. all have regulatory processes governing both the leasing stage, which decides whether to allow a drilling program and where to allow it, and the exploration stage, which decides how to drill. The NEB's regulatory process kicks in only halfway through, at the exploration stage.
Two weeks ago, committee members asked witnesses how Canada's regulatory process differs from that in the U.S. Please allow me to answer that question.
If you refer to map 1 in the package you can see Shell's leases in the U.S. Beaufort and BP's recent leases in the Canadian Beaufort. These leases are about 400 kilometres apart in distance, but light years apart in the regulatory process guiding their placement and exploration.
I'm going to talk not about the development stage here, but only exploration, because that is the risky phase the Deepwater Horizon was in when it exploded. The American process that led to Shell's permit is fully regulated pursuant to the national environmental protection act.
This process started in 2003 when the Minerals Management Service, or MMS, probed whether to open up portions of the Beaufort coast to exploratory drilling. The agency completed this four-volume regional environmental impact statement that established whether leasing should occur at all; which leasing alternative would be preferable from an environmental and socio-cultural perspective; the environmental consequences of leasing; and the likely trajectory of an oil spill, given currents, prevailing winds, and landforms.
The MMS also completed this comprehensive risk analysis that detailed the probability and implications of an oil spill in the Beaufort. The MMS had decided at this point whether and where to allow drilling. They designed lease number 195 the following year and refined its environmental assessment to the local scale, producing this document.
Shell purchased the rights to an array of very specific parcels in 2005—you can see the specific parcels on your map—and submitted an exploration plan dealing with how it proposed to drill, accompanied by this further operational environmental assessment customized to its proposed activities in 2007.
Shell then filed a regional exploration oil discharge prevention and contingency plan in 2007 and a full oil spill response plan in 2009. All of the American processes are transparent, with opportunity for full public consultation, and the resulting documents are in the public domain.
Now, you should note that all of Shell's regulatory submissions were informed by, streamlined, and benefited from this stack of environmental information compiled by MMS in 2003 and 2004.
Now for the Canadian side: the Canadian process that led to BP's exploration licence started in the spring of 2007 with a nomination process initiated by staff at Indian and Northern Affairs Canada. Using maps generated from previous industry nominations, they consulted local Inuvialuit communities and other government departments. Based upon these results, they issued a call for industry nominations for lease areas in autumn 2007.
Once industry nominates which areas they're interested in, INAC refers to an innovative petroleum and environment management tool that contains maps of habitat for species such as the polar bear, the ringed seal, and the bowhead whale, and their sensitivity to oil spills, as well as the geologic potential to determine whether the likely economic opportunity outweighs the environmental risk. It appears to always do so. The process is not documented, so I'll actually use the user guide to that system to stand in for the documentation.
Requests for bids were developed and posted in February 2008. Four months later in early June, the sealed bids were opened and the lease awarded to BP, the highest bidder. The entire Canadian leasing process, up until requests for bids are posted, is unregulated and subject to ministerial discretion.
On this basis, BP is granted its exploration licence, a contractual relationship whereby the company commits to spend its bid amount, $1.2 billion, within five years to drill its first exploratory well. At this point, the key decision on whether to allow drilling and where to generally allow it has been taken.
Now the NEB process kicks in, governing how exploration takes place.
To be fair, BP hasn't had the time to go through the full NEB process, so I will use materials from Devon Corporation to represent BP's filings. Devon was a company that searched for gas in the offshore Beaufort and instead struck oil in 2007.
The NEB requires a checklist of approvals and authorizations laid out as their drilling program authorizations under the Canadian Oil and Gas Operations Act. These requirements include development of a safety plan, an oil spill response plan, and an environmental protection plan. The NEB also conducts an environmental screening. Of all these, the most extensive requirement was the comprehensive environmental assessment like this one, prepared by Devon.
Inuvialuit also administers a separate environmental screening process, and Devon's submission to that process was simply a scaled-down version of this. Although this comprehensive assessment is similar to the 2007 Shell document, Devon's is the last of its kind. This is no longer required in Canada.
BP will develop an oil spill response plan. I would use Devon's plan to stand in for this; however, in Canada, these plans are confidential and not open to public scrutiny. We do know that Devon's worst-case scenario was a blowout lasting seven days before being capped.