Natural Resources Committee on May 25th, 2010

[Geoff Regan, Liberal, Halifax West, NS]

That's unless you as chair say, look, we're going to have strict times, and if we ask witnesses to speak for seven minutes, we encourage them to try to stick to the issues that are of most interest to the committee. Obviously we can do that. We can give them an idea of that ahead of time. Then, when they're at seven minutes, we can say, “I'm sorry, that's it.”

Really, what we need to have here is an exchange of information and to get at the questions that are of greatest interest to the committee.

That said, I appreciate this very much, and I don't blame the witnesses at all. It's just a challenge we have as a committee to manage this a little better.

This is a serious matter, obviously. We're all watching what's happening in the Gulf of Mexico. There are no guarantees that it couldn't happen in Canada or off our shores. We're seeing now, in fact, that Greenland is proposing that Davis Strait have drilling in deep waters adjacent to Canadian waters. We should be concerned about that. There's not much sign the government is concerned about any of this, so it is a serious matter.

But let me turn, in the few minutes I have, to the questions at hand. Let me talk about the nature of the offshore petroleum boards for a moment.

Maybe you could tell us what numbers of employees you have who are focused on environmental protection.

[Max Ruelokke]

Mr. Regan, we have a total of 69 employees at present. Our environmental affairs group numbers six.

[Stuart Pinks, Chief Executive Officer, Canada-Nova Scotia Offshore Petroleum Board]

At the Canada-Nova Scotia Offshore Petroleum Board, we have approximately 38 staff in total.

We have an operations, health, safety, and environment group that is combined, and it has about seven or eight people. Two of them, day to day, work directly on environmental protection, along with the manager, but a number of the other people in the operations group will tend to environmental issues as well.

[Geoff Regan, Liberal, Halifax West, NS]

Thank you.

Mr. Ruelokke, I'm looking at a document that I think is from your website or from a basin exploratory drilling program environmental assessment.

On the second page, it says:

Physical recovery of spilled oil off the coast of Newfoundland will be extremely difficult and inefficient for large blowout spills. There are two main reasons for this. First, the generally rough sea conditions mean that containment and recovery techniques are frequently not effective. Second, the wide slicks that result from subsea blowouts mean that only a portion of the slick can be intercepted.

You spoke earlier about the expectation that any oil that flowed would be more likely to move away from Newfoundland rather than toward it. I suppose that's because of the Gulf Stream. The Labrador current would be coming in one direction, but the Gulf Stream mainly would carry it over toward Europe. Is that right?

[Max Ruelokke]

It would be the Gulf Stream, as well as the prevailing winds, which are generally southwesterly in our area. So yes, the winds and currents would have that effect.

[Geoff Regan, Liberal, Halifax West, NS]

I see on the next page that the document says, “There could be adverse effects on the fishery, mostly in terms of market perception viz a viz potential tainting of the product.” You're saying that this area particularly isn't directly in the middle of where there's a lot of fishing, although there are some draggers and trawling going on in that area.

It also says that “losses to the fishery would be mitigated through a financial compensation program to a not significant level”, which suggests that you can't mitigate those losses to a significant level. Am I reading this correctly?

[Max Ruelokke]

I think you are. I think we always have to be cognizant of the fact that if oil escapes into the ocean environment, there's going to be some consequential damage to the fish stocks.

[Geoff Regan, Liberal, Halifax West, NS]

One of the concerns we've had here, I think, is that we've heard BP's executive vice-president for the U.S. saying that BP assumed that the blowout protectors there would work. My impression is that they're not really tested. I don't know if this is the first test of blowout protectors or not, in the gulf, but if so, they've failed miserably.

How can you give us some confidence that the blowout protectors that would be in place at the Orphan Basin, for example, would work?

[Max Ruelokke]

I'll let Jeff answer that. Jeff is currently one of our senior managers, but prior to that, for a long time Jeff was our well operations engineer, and he is very well versed in blowout preventer controls.

[Jeff Bugden, Manager, Industrial Benefits Power and Regulatory Coordination, Canada-Newfoundland and Labrador Offshore Petroleum Board]

Thank you, Mr. Chairman.

The whole concept of the blowout preventers is to act as a well barrier. It's intended to be one of at least two well barriers that must be in place at all times. The primary well barrier while drilling is in fact the drilling fluid itself, which prevents oil and gas from flowing into the well and keeps the well under control. The BOP stack is routinely tested—function-tested, pressure-tested—in accordance with established standards, so this instance in the Gulf of Mexico is not the first time that a BOP has ever been used or activated. These BOPs come into play throughout the operation of a well, and are routinely function-tested and pressure-tested.

In fact, one of the elements we routinely do, and one of the elements we are going to focus extensively on in respect of the current operations with the Stena Carron, is to provide extensive oversight of that testing, including the blowout preventer itself, as well as the acoustic control system and the ROV intervention system. We're going to have witnesses on board the installation to oversee those activities, including a representative of the certifying authority, and we will examine those records and tests to ensure that they meet prescribed standards. We intend to bring a level of oversight to this operation over and above what is normally exercised.

Thank you.

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Regan.

Go ahead, Madame Brunelle.

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

Good morning, Mr. Ruelokke.

I am interested in the impact on Îles de la Madeleine. You are saying that you had spills. Has the impact on Îles de la Madeleine really been quantified in terms of fishing?

Something else worries me. In the event of an accident, has compensation been set aside for Quebec? When we look at Old Harry, we realize that 60% of the drilling rights are in Quebec. Are you drilling for our resources?

[Max Ruelokke]

With respect to the first question, which I understand to have asked if there was any spill in the area around Îles-de-la-Madeleine, the spills that we had in our jurisdiction were from activities associated with the production platform, so the spills were in the area of the Grand Banks that we know as Jeanne d'Arc Basin. They were very distant from the Îles-de-la-Madeleine.

We have currently one exploration licence that is active. A company called Corridor Resources has some plans in the future to drill in the area you refer to as Old Harry, but our exploration licence is maintained to be at least one kilometre east of the boundary that we see between the area that's inside Newfoundland and Labrador's offshore area and the area that isn't, which I understand is presently being negotiated between Quebec and Canada. We are trying to make certain that the activity that occurs will be within our jurisdiction and not in another jurisdiction.

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

I have one concern. Could you clarify for me what the federal government's role is in the extraction process? Natural resources are under provincial jurisdiction. Since the oil extraction takes place in the sea, is it under federal jurisdiction?

[Max Ruelokke]

My understanding is that our board--the Canada-Newfoundland and Labrador Offshore Petroleum Board--and the Nova Scotia board have jurisdiction within our own physical boundaries. For offshore areas outside those boundaries, the National Energy Board is the regulator, so that would apply in the Arctic and I would presume in the Gulf of St. Lawrence as well.

[The Chair, Conservative, Leon Benoit]

Go ahead; you still have a few seconds.

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

Mrs. Dalton, you say that you have had few spills. What does that mean? What are we talking about? What does “few“ mean?

In the conclusion of your presentation, you also told us that you have responsible operators and that they are required to comply with the standards in place.

Given the recent events in the United States, do you feel that the standards in place are sufficient? Should we not consider reviewing them to make them a little tougher?

[Diana Dalton]

I think we certainly operate to the highest of standards. Both the Newfoundland board and us, and the NEB, are members of the International Regulators' Forum. They are the main countries who have offshore operations around the world. We meet every year on specific safety issues so we are aware of the latest standards, technologies, accidents that have happened and what has happened as a result. We are constantly able to update how we are able to approach issues should they arise in our jurisdictions.

We're extremely vigilant about new standards and new technologies This industry is a very highly technical industry, and the changes in the technology are so rapid it's very difficult to keep ahead of them sometimes. This International Regulators' Forum is a way we are able to stay on top of the latest changes and to make changes in order to address issues that may arise.

[The Chair, Conservative, Leon Benoit]

Merci, Madame Brunelle.

Mr. Cullen, go ahead, please.

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

Thanks, Chair.

Thanks to the witnesses.

I guess what we have to be critical of is that the assurances offered today probably sound pretty similar to the assurances offered in the gulf around British Petroleum's project. I'm sure they didn't imagine a blowout like the one that's occurred and their inability to stop the blowout. I'm sure all the things were tested and the regulations were in place.

What we have to get at is whether the situation is different. Does Canada have stronger regulations? Could a similar scenario happen for us?

Mr. Ruelokke, do we know what went wrong in the Gulf of Mexico, particularly with regard to the BP spill?

[Max Ruelokke]

We've heard some information that has not really been fully substantiated and that probably won't be fully substantiated until the actual BOP stack that was at fault in this case is recovered. But the understanding we have is that what occurred is not something that we would have ever been allowed to see happen here in Canada.

Mr. Bugden referred to the dual barrier system we require when all wells are being drilled. As he said, the first barrier is the drilling fluid itself, the drilling mud, which has a high specific gravity, and it's high enough to counterbalance the hydrostatic pressure of the hydrocarbon. Before that barrier is removed, ordinarily there's another barrier put in place for the cement plug--actually it's concrete, but the industry uses the term cementing--so that you seal a certain length of the well bore, perhaps as much as 30 metres or 40 metres.

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

To return us to British Petroleum, though, at the beginning of this you said we don't know, we won't know for some time. There was a poll on the weekend that said almost eight out of ten Canadians said it was probably a good idea to pause deepwater drilling until we do know.

If there's some piece that malfunctioned that's also being employed in deepwater drilling in Canada, would it not be prudent or conservative to suggest that the company drilling an even deeper well than the one that was drilled in the gulf be paused until we know the actual procedure or piece that went wrong? Would that be prudent?

[Max Ruelokke]

We certainly gave that some consideration. The situation now with the Stena Carron is that they have identified a number of drilling targets or areas in the substrata that could contain hydrocarbons. They're a considerable distance away from achieving either of those targets yet.

What we require--and Chevron has signed on to this--so that when you move from an area of very low risk you're not encountering hydrocarbons, prior to entering a target where there is enhanced or increased risk, there would be an operations timeout. We, Chevron, and the Stena people would review the situation to make sure everything we need is in place to be able to control this hydrocarbon, if in fact it's encountered--

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

I guess that's my question, then. Once that pause happens before you enter into the enhanced risk zone, when you're actually drilling oil at 2,600 metres depth, is that the point you'll say we need to know what happened in the gulf before we start extracting oil from the sea floor, to make sure there isn't a malfunctioning part or a procedure we don't want to repeat here?

[Max Ruelokke]

We will certainly do two things. We will make sure the dual barrier concept remains valid, and both barriers would have to be in place. Before there's any potential to take away the drilling mud, we'll make sure there's a cement plug in place. We'll also make sure that the blowout preventer is fully tested so we can verify it can function, and it will function, when it's necessary to do so. We will make sure that is done. Chevron has assured us they want to do that, and I'm sure the folks at Stena have the same objective we all have, to have a safe, well-drilled exploration well.