Natural Resources Committee on May 25th, 2010

[The Chair, Conservative, Leon Benoit]

Thank you very much, Mr. Herring, for keeping it under the allotted time.

We go now to the next witness, from the Eastern Canada Response Corporation: James Carson, president and general manager.

Go ahead, please, Mr. Carson.

[James Carson, President and General Manager, Eastern Canada Response Corporation]

Thank you very much, Mr. Chairman.

Good morning. As the chairman mentioned, my name is Jim Carson and I'm president and general manager of ECRC.

This morning I would like to give you a brief overview of Canada's oil spill response regime, and in particular ECRC.

The present network of four private sector funded and operated response organizations significantly improves Canada’s marine oil spill response capabilities. This network was the result of extensive consultations and negotiations among the petroleum and shipping industries, environmental groups, the Canadian Coast Guard, and Environment Canada.

The regime in place provides an improved response capability by having full-time employees, trained contractors, state-of-the-art response equipment, predetermined response strategies developed in partnership with government agencies, and prepositioned equipment in response centres.

Each response centre can achieve increased response capability through the use of its inventory and the cascading of additional equipment and response personnel from our other response centres. Response contractors supply additional response personnel, services, and equipment as needed.

The network of four certified response organizations is funded and operated by the private sector. The costs are borne by the petroleum and shipping industries that require the services of a response organization.

ECRC is one of four response organizations certified by Transport Canada's marine safety division as a response organization under the Canada Shipping Act. As a certified response organization, ECRC can provide arrangements to ships and oil handling facilities that require arrangements under the Canadian law.

Our mission is to maintain a state of marine oil spill response preparedness that is consistent with the legislation and capable of providing a real response at an affordable cost to our members. We also seek to provide value-added preparedness services to all our members, and assume a leadership role in preparedness to oil spill response within the community at large.

ECRC is a privately owned company whose role is to provide marine spill response services, when requested, to a responsible party, the Canadian Coast Guard, or any other government lead agency. These response services include operational management, specialized response equipment, and operational personnel.

ECRC uses a version of the incident command system called the spill management system as a tool for managing its spill response activities. SMS is designed to meet the response requirements within the Canadian legislative context. It allows ECRC’s spill management team to manage the operational response from an emergency mode to a project mode of operations. The SMS is a structured process allowing the spill management team to fulfill its initial response and tactical phase responsibilities, while focusing on a movement toward the strategic or project phase of the response.

ECRC’s geographic area of response covers all navigable waters south of the 60th parallel of latitude for all of the provinces of Canada, with the exception of British Columbia and the ports of Saint John, New Brunswick, and Point Tupper, Nova Scotia. ECRC is headquartered in Ottawa and operates six fully staffed response centres in Sarnia, Ontario; Montreal, Quebec; Quebec City; Sept-Îles; and Halifax. The average size of our warehouse is 16,000 square feet; and our largest warehouse is in St. John's, Newfoundland, at 36,000 square feet.

The corporation has developed a standard format and completed 32 area response plans for ECRC’s geographic area of response. Each of our three regions has developed a schedule to review and update these area response plans on a three-year cycle.

ECRC owns specialized oil spill response equipment and maintains contracts with spill response contractors, consultants, and specialists. ECRC has also established mutual aid support agreements with the two response organizations on the east coast, as well as the one in British Columbia on the west coast.

ECRC is also a member of the Global Response Network, a collaboration of seven major international oil industry-funded oil spill response organizations, whose mission is to harness cooperation and maximize the effectiveness of spill response services worldwide.

ECRC has 38 full-time employees and maintains a complement of approximately 520 response contractors and advisors, of which 470 are trained annually. In the Great Lakes we have approximately 70 contractors and 20 regional advisors. In the Quebec and Maritimes region we have approximately 260 contractors with 30 advisers. In Newfoundland we have approximately 70 contractors and 10 regional advisers. We also have 10 advisers at the national level.

The company conducts a number of mandatory operational and table-top exercises on an annual basis, as required under its response plans submitted to Transport Canada for certification purposes. Equipment maintained in a state of preparedness includes the following: oil containment boom--60,000 metres or 200,000 feet; skimmers--we have in excess of 100 different types; boats--in excess of 100 different types; on-water storage--16,000 tonnes; and then, of course, we have the miscellaneous and ancillary equipment to support the above.

In conclusion, ECRC was established in 1995 as a result of the changes to the Canada Shipping Act following the Brander-Smith report. The result is an example of government and industry working together to achieve success in the development and implementation of an oil spill preparedness regime in Canada that is cost-effective, has worked well, and has met the needs of Canadians for the last 15 years.

I've also included a map of Canada showing the location of ECRC's six response centres, as well as those of the other three response centres.

Thank you very much, Mr. Chairman.

[The Chair, Conservative, Leon Benoit]

Thank you very much, Mr. Carson, for being within the timeline, and for your very helpful presentation.

We have, as the final witness today, Mr. Craig Stewart, director of the Arctic program with the World Wildlife Fund of Canada.

Please go ahead, Mr. Stewart, for up to seven minutes.

[Craig Stewart, Director, Arctic Program, World Wildlife Fund (Canada)]

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.

[The Chair, Conservative, Leon Benoit]

Mr. Stewart, you're almost at seven minutes. You're going to have to summarize in thirty seconds, please, so we can get to questions. Thank you.

[Craig Stewart]

Okay.

This deficiency is well recognized by the federal bureaucracy. Over the past three years, they have designed a process called a Beaufort regional environmental assessment, which would be analogous to and even better than what the MMS did in 2003. The Inuvialuit supported it; industry supported it; we supported it; federal departments supported it; and the government killed it in budget 2010.

WWF does not believe an NEB inquiry alone can address these issues, which stretch beyond its present jurisdiction. The NEB is placed in a potentially untenable position when a $1.2-billion contract, which requires a well, results from an unregulated process before their regulatory administration even begins.

Canada needs a consistent set of regulations that safeguard our environment, our coastal communities, and our industries. If the NEB cannot choreograph such a nationally inclusive process, then a time-limited commission of inquiry should be struck with the purpose of raising Canada's oversight of offshore oil and gas management at least to standards set by the Arctic Council in 2009. As we have seen, the American regulatory process has proven inadequate to prevent a significant disaster, and our regulatory process is weaker than that of the Americans.

[The Chair, Conservative, Leon Benoit]

Thank you very much to all of you for your presentations.

We will now get directly to questions and comments. We have about four minutes each, starting with Mr. Regan, and Mr. Tonks if there's time left.

Go ahead, Mr. Regan.

[Geoff Regan, Liberal, Halifax West, NS]

Just on that point, Mr. Chair, I don't think that's what the rules say. We should go back to that perhaps at the next meeting and discuss what we decided in terms of the time and how it's allocated.

To the witnesses, thank you very much for being here today.

Mr. Adams, first of all, did you mention in your comments what you found in terms of reflectivity? You had a different word for that. Secondly, based upon research you've done, what could you say in a couple of sentences about what you think the impact would be of a major oil spill—or, as you call it, a leak or blowout—in these waters?

[Dr. William Adams]

First of all, the presence of oil and the presence of biological activity make the ice much less reflective, and there's a lot more energy absorbed from the sun, so the melting processes are enhanced by the presence of oil.

Secondly, the main conclusion of our work with regard to an oil spill would be that should there be a major blowout somewhat similar to the one in the gulf, which independent people are estimating at as high as 70,000 barrels per day—our analysis was based on a 1,000-barrel-per-day blowout—because of the conditions in the Beaufort Sea, it would not likely be stoppable for at least a year, and possibly more than a year if we couldn't get a relief well in because of ice conditions in the second year.

Basically, if there were a blowout in the Beaufort Sea or in the Arctic, particularly in the moving pack ice area, we do not have a base of knowledge to be able to predict what would happen. On the other hand, from what we've seen in terms of the albedo changes, it's possible that a major blowout could have severe impacts on the stability of the sea ice, and that could have major climatic impact.

[The Chair, Conservative, Leon Benoit]

Mr. Tonks, go ahead. You have two minutes.

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

Thank you, Mr. Chairman.

I get a queasiness with respect to the regulatory framework, which, as you have pointed out, Mr. Stewart, is not sufficiently comprehensive along the lines of those of the United States, Norway, and others. We don't have to explore that at the moment, other than to say that even with the stringent regimes in place, we have that terrible catastrophe in the gulf.

In talking about response, Mr. Herring, you talk about 200,000 feet of boom in the United States. They're talking miles and miles of boom. This situation is just running rampant. The bottom line on all of this is that from my perspective, the public is looking for us to make the right decisions on their behalf. In retrospect, would it be your position that when drilling is allowed at the outset, the legislative and response regimes should provide for the simultaneous development of a relief drilling rig so that if blowout preventers did not work--and they haven't worked in spite of that regime in the United States--there would always be a parallel simultaneous fail-safe in place?

In terms of cost, in the present situation the costs are abhorrently out of perspective from what would have been projected before the gulf experience took place. My question is whether you would accept a simultaneous relief well after a decision has been made to allow drilling in the first place as an appropriate governmental first step.

Maybe Mr. Herring or anybody could answer that.

[The Chair, Conservative, Leon Benoit]

Mr. Herring, go ahead.

[Don Herring]

I think, sir, what we would like to see are the results of what took place in the gulf before we make decisions about what we should be doing here. I think there are some important learnings, obviously, that we can gather from that exercise.

You heard the previous panel talking about what takes place in Newfoundland and Nova Scotia. Certainly that's where most of our experiences have been recently in the past 40 years, and we think that both the regulation and the operating procedures have stood the test of time very well.

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Tonks.

We now go to Madame Brunelle for a round of four minutes.

Go ahead.

[Paule Brunelle, Bloc, Trois-Rivières, QC]

Thank you, Mr. Chair.

Good morning, gentlemen.

Mr. Stewart, you mention “opening of a new area for petroleum activities” and “exploration” in the chart, which you submitted to us, entitled “comparison of offshore drilling regulatory requirements related to environmental assessment in Canada, U.S., Greenland and Norway”. In your opinion, is one of those countries a model that we should follow?

[Craig Stewart]

The strongest of the four is Norway. However, there are guidelines that were put together by the Arctic Council and published last year, and none of the countries actually meet the standards set by the Arctic Council. Canada's regulation is among the weakest; Norway's is the strongest.

I would suggest that Norway would likely be a case example to follow, but we need to set the bar higher, given the possibility of a disaster in the Arctic and the implications of the disaster. We need to set the bar higher.

[Paule Brunelle, Bloc, Trois-Rivières, QC]

It seems to me that, environmentally, Canada is definitely weak. There is no environmental assessment when a new area is opened.

Is that related to what you told us: “The entire Canadian leasing process up until bid requests are posted is unregulated and subject to ministerial discretion.” and “... the key decision on whether to allow drilling and where to generally allow it has been taken.”?

Is there a link between those two things?

[Craig Stewart]

Merci pour la question.

We believe the link between the unregulated front end of the process and the subsequent risk is strong. If you look at map 2--I didn't get to it, but it was handed out in the package--you will see that oil and gas leases are very broad compared with the specific leases in the United States, and that these leases directly overlap with environmentally sensitive areas.

The result is that should an explosion happen there, and a spill, you would have almost no time to clean it up before ecological harm occurred, unlike what happened in the gulf where they had a month. We believe that the fact that there is ministerial discretion and there is no body of...or documentation done at the front end to make sure that leases are placed in appropriate areas, that does directly result in more leases being given out without the due diligence that would otherwise be required.

[Paule Brunelle, Bloc, Trois-Rivières, QC]

Thank you.

Mr. Adams, I appreciate your work and I will certainly have the pleasure of reading it.

You are studying the effects of spills on ice. I get the impression that we cannot anticipate the effects and the extent of all that, and that is why you are telling us that we must assess the degree of risk and introduce a moratorium in the meantime.

In your opinion, what stage is the research at? Should it be a long moratorium? Is research only in its early stages? Are there a number of you doing this type of research?

[Dr. William Adams]

Thank you for your question.

To clarify, I am not actively doing research now. I'm reporting the greatest spill that was ever done experimentally and some of the results from the 1970s. There is work being done now in Canada, but it's actually at a lower level than what was done for the Beaufort Sea work.

I do believe there should be a moratorium, because if you look at the oil leasing that has gone on in the Beaufort Sea, it certainly includes and extends out into the moving pack ice. I believe drilling in that area would be extremely risky. I don't agree, though, that the moratorium should include the landfast ice, where drilling has been done safely for many years. There are techniques to drill safely in that region, but I don't believe it would be safe, or worth risking what could potentially be quite catastrophic should there be a blowout in the moving-ice gyre, in the Beaufort Sea.

I agree very much with one of the other intervenors at the committee here, in terms of the process. But there are programs going on now in Norway. I think they are bragging about the fact that they're spending $10 million. We spent something like $50 million in this program in the seventies, in present-day dollars, so it was a very large program. It did not continue after about 1978, unfortunately, although Bedford Institute does have an arctic oil program of research. They're having great difficulty even being able to spill a few barrels of oil. We spilled a lot of oil in our tests, and probably something similar should be done, and continued. I believe that's a very important process to understand the oil-ice regime before we can assess the risk.

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Adams.

Merci, Madame Brunelle.

Mr. Cullen, go ahead, please.

[Nathan Cullen, NDP, Skeena—Bulkley Valley, BC]

Thank you, Chair.

Thank you to our witnesses.

I want to get to this Beaufort Sea partnership. This was between industry, Inuvialuit, and yourselves. It was submitted more than a year ago to the government, so here's the alignment: we have Inuit, environment groups, and the industry all saying this is what we need to go ahead with.

What has happened to it since, Mr. Stewart?

[Craig Stewart]

The Beaufort Sea partnership is a partnership between the Inuvialuit, the Department of Fisheries and Oceans, and involves a number of other federal departments, also the governments of the Yukon and the Northwest Territories, and includes CAPP and WWF.

We all agreed that a stronger process was needed and that, even though it's still soft in the absence of a regulatory process, there needed to be much more diligence at the front end. So we developed an integrated management plan for the Beaufort Sea in partnership. That document was approved by all the departments, all the participants, tabled last June of 2009, and it presently remains unfunded and unauthorized. It's sitting with the Minister of Fisheries and Oceans and hasn't gone anywhere.

[Nathan Cullen, NDP, Skeena—Bulkley Valley, BC]

So that's where the ball is right now just in terms of the development of this: it's with government.

I want to get into this notion of one of the criticisms of what's happened in the gulf, which is that British Petroleum was given a pass on certain environmental standards, that they were allowed to sort of skate through this, that it was an exploratory well. They did, and now, I think, the U.S. is certainly sitting with some regret.

In Canada in 2005, we moved from a more intensive environmental assessment of exploratory wells to a screening process. Is that not simply applying the BP lesson for the entire industry in Canada? What am I wrong about in that statement?

[Craig Stewart]

No, you're correct. In 2005 we had a regulation that required, under the Canadian Environmental Assessment Act, a comprehensive environmental assessment. That was similar to what Shell did in 2007 and it's similar to what BP omitted to do--was given a pass on--in the Gulf of Mexico. The controversy that erupted from BP getting that free pass in the Gulf of Mexico is in part what led to the splitting up of the Minerals Management Service, as announced by Secretary Salazar.

Ironically, in 2005 we removed that entire requirement for the entire industry for the entire country. That's what Devon had to go through. We no longer require that step at all.