Natural Resources Committee on June 15th, 2010

[The Chair, Conservative, Leon Benoit]

Mr. Cullen, your time is up.

Thank you, Mr. Newkirk, for your answers.

[Kerry Newkirk]

You're welcome.

[The Chair, Conservative, Leon Benoit]

We go to Mr. Anderson now for up to seven minutes.

[David Anderson, Conservative, Cypress Hills—Grasslands, SK]

Thank you, Mr. Chair.

One of the things we should note is that we've been doing offshore drilling for 40 years in this country and around the world. Certainly these discussions and questions have been asked several times before. I think the legislation and regulations are actually a response to what's been asked in the past.

I'm going to ask a general question, and probably Mr. Corey could answer this best. There's some suggestion and there has been a committee here that the reason the problems happen in the Gulf of Mexico is that BP was cutting safety corners. Given the fact that we've had this long history—you were saying in 40 years of offshore drilling our largest spill has been 1,000 barrels, which was contained—is there a need right now for a radical change of direction, a radical change in regulation, in order to continue to drill safely in Canada?

[Mark Corey]

Thank you for the question.

I think we would say that we have a very sound regulatory system in Canada. We have three independent arm's-length regulators. Their primary responsibility is the protection of safety of the people working in the offshore, the protection of the environment, and ensuring that operations are run appropriately. Having said that, we are watching the events in the gulf as they unfold. We've been working with the provinces. Other departments have taken a number of steps to heighten our vigilance to make sure we are learning the lessons.

The last thing is we are watching what's going to happen in the U.S. We're watching for the results of their inquiry. We will learn those lessons and we will make what we consider to be a strong system stronger as a result of that.

[David Anderson, Conservative, Cypress Hills—Grasslands, SK]

I'd like to talk a little bit about Canada's role. We've heard testimony here before. We've been watching what's happening in the Gulf of Mexico. We've also offered some aid to the Gulf of Mexico.

Mr. Brown, I'm just wondering what Environment Canada has done. Have you participated at all in the Deepwater Horizon challenges down there? Have you sent folks? What's your role there? Do you have one?

[Dr. Carl Brown]

We've played a fairly substantial role, some of it in the background. Staff from my section were first contacted by science advisers from the National Oceanic and Atmospheric Administration on the morning of April 21, so the day after the incident. For the past few weeks, we've been in discussions with scientific advisers from NOAA, from the U.S. Department of Homeland Security, the U.S. Environmental Protection Agency, and the U.S. Coast Guard, and we've been providing information on the fate and behaviour of the oil that spilled. Environment Canada has analyzed forensically a number of Gulf of Mexico oils over the past number of years through collaborations with U.S. Minerals Management Service, part of the Department of the Interior. We've also measured the effectiveness of chemical dispersants on those oils, so we provided some of that information. We also discussed the appropriateness of some of the countermeasures that could be used, especially in situ burning efficiency and the air emissions. Canada has a lot of experience in this from the Newfoundland offshore burn experiments that I mentioned earlier.

We also have had an inquiry whether our oil spill lab can do some analysis of oil samples in the future, if need be. Environment Canada sent seven staff from the marine aerial reconnaissance team--MART. These are people with the Canadian Ice Service, in partnership with Transport Canada's national aerial surveillance program--NASP. These specialists are able to observe and visually detect and validate marine oil so that cleanup and enforcement activities can take place.

[David Anderson, Conservative, Cypress Hills—Grasslands, SK]

Thank you. I'll cut you off there.

I do want to take a minute to ask Mr. Bowden this. Can you talk a little bit about the different technologies that are being used in the gulf? I think one of the most tragic things is watching the oil come up onto the shoreline. We've been told that some of the dispersants work and some of them don't seem to. You talk about your company producing skimmers. We've heard about burning as a way of dealing with oil as well. Can you talk about some of the different technologies and how they seem to be working in the gulf?

[Ron Bowden]

As I mentioned, the information was quite difficult to obtain from the gulf. The technologies that exist today have been improved through time. Basically, we want to recover the oil and not the water, for one. Secondly, introducing dispersants to oil spills is controversial, because in fact we're adding chemicals, for one. We're adding another product, and this product reacts with the oil, making it less adhesive to recovery operations. So it can hamper recovery operations if there's too much, depending upon the quality of the oil, etc. There are many, many factors.

I think Mr. Cullen had a very good question earlier with respect to the Arctic recovery versus non-Arctic. There does not exist today technology that can recover oil from ice or under ice, in snow. This is very important to think about. If we have a spill like the gulf spill, we're skimming oil from water, or we'll have to separate the oil from the water. It's already an emulsion. That's also very difficult. There are many different environments. The technology... There are different types of machines. In the gulf they're having difficulty. In fact, the Exxon Valdez, for example, was a ship that released oil in a bay. The oil in the gulf is being released from one mile below the surface, so by the time it reaches the surface, it's already dispersed. So imagine this, for example, in the Arctic. You can't lay boom around ice; you can't recover oil from the surface because it's hampered by the ice or under the ice. So it's quite a different scenario. There is really no solution or method today that we're aware of that can actually recover oil from the Arctic.

The gulf spill is unique in a way. It's not a rupture that's containable. By the time it got to the surface there was such a volume that it was beyond containment. This is why we see this 40% of the area of the gulf that is already closed for fishing. The surface area is massive. There are many different aspects.

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Anderson.

We go now to the second round.

From the Liberal Party, we have Mr. Tonks, for up to five minutes.

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

Thank you, Mr. Chairman, and thank you to all of you for being here.

Mr. Bowden, I'm impressed with your common sense approach: make good choices. You talk about turning off the faucet, and if you can't turn off the faucet, you go to the main. In the case of the Gulf, the main is the natural geological fissure through which the oil is going, and they can't stop it. So there's no main to turn off, except by asking Mother Nature to cooperate. It ain't happening. It's dramatically pointing out that we have to look at our legislation.

My question out of that is probably to Mr. Corey. Mr. Corey, you indicated on your slide that the National Energy Board is conducting a comprehensive review and in the meantime has cancelled its written hearing on the same-season relief well capability. When did the National Energy Board become aware that a relief well would be a very real alternative—and not just a same-season relief well, but in lieu of what's happening, perhaps a regime change that would require, in deep-sea conditions, a relief well at the same time as the main bore would be undertaken? When did the board embark on that kind of question?

[Mark Corey]

Mr. Chair, I could start and then I would probably ask Indian and Northern Affairs to fill it in.

In terms of the basic principles, the National Energy Board and the other boards have always required that companies drilling in the offshore have contingency plans in place to drill a relief well. In the Arctic, because of its remoteness, the requirement was that they had to demonstrate that they could do a same-season relief well, because the drilling season is much shorter in the Arctic than it is elsewhere. They were asked to review that.

In view of what's happened in the gulf, they've cancelled their review of that; the requirement is still in place. They're actually launching a much broader review, for which on Thursday, June 10—last week—they announced the scoping exercise, in which they have said what things they're looking into. They're doing a fundamental review of it now.

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

That's helpful. I need to ask just one more question, because Mr. Bains has questions.

In the meantime, you said , if you look at the same page, there's a moratorium on all gas activities on the Georges Bank. That's on the one hand. In the next stage, there have been several additional measures—not a moratorium, but several additional measures—with respect to Orphan Basin.

In view of the tragic circumstances and the emergent reality that has come out of the gulf, could we be assured that it wouldn't be just different or additional measures, but should there not be a moratorium throughout all of the basins?

And who is responsible to give that direction in cooperation with the offshore agencies that have been mentioned at various times?

[Mark Corey]

Mr. Chair, to deal with the issue in the accord area specifically with Newfoundland and Labrador, the oversight is provided by the Canada-Newfoundland and Labrador Offshore Petroleum Board. They issue the licence; they're the ones who make decisions.

We would underline that on May 20 they announced a number of, I would say, very significant steps—greatly heightened vigilance on that Chevron one. They established a team to provide regulatory oversight. They meet with the board's oversight team regularly. In fact, they are required to provide the board's well operations engineer with copies of field reports on things like the blowout preventer stack, the function test of the acoustic control system, the function of the remotely operated vehicle intervention. These are all key things to make sure that a blowout does not occur.

They're monitoring closely. They're also meeting every three weeks with the group. They have staff who are actually on board the rig. I would say the biggest measure is that prior to penetrating any of the drilling targets—those are areas that are the most prospective, where they think they might actually encounter oil or gas—they have a time out. They sit down with the board and go over it again to make sure that everything is in place and is running and that they are prepared. This is an unusual step; it has never been taken before.

They also make sure that representatives of the offshore board are on the Stena Carron at all the key points—when there are cementing operations, and for the casings, and things like that.

They've greatly heightened their vigilance on this project to make sure that all of the safety precautions are rigorously observed.

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

But the bottom line in those additional measures is that there hasn't been a direction, nor has there been any department taking the initiative to say that even same-season capability has to be there. Isn't that right?

[Mark Corey]

Actually, Mr. Chair, one of the things that is in this plan is that the company has had to demonstrate that they have contingency plans to drill a relief well immediately, if there are any problems—for example, if there is a blowout.

So absolutely, they do have contingency plans for drilling a relief well.

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Tonks.

Thank you, Mr. Corey, for the answer.

We go now to Mr. Harris for up to five minutes.

We never get to the second round, so no one remembers the order.

Go ahead.

[Dick Harris, Conservative, Cariboo—Prince George, BC]

Thank you, ladies and gentlemen.

I want to ask a couple of questions, if I have time. First of all, we've talked about the liability of a company in the event of a spill. I've seen the numbers of $30 million, $40 million, and then a financial responsibility of $250 million; yet you have said that in fact the liability is unlimited.

I'm wondering what regulations or authority the government has to assess 100% of the cost of the cleanup and the damage to an operator. Where does that regulation exist specifically?

[Eric Landry]

If you look at the broader regime, the companies are responsible for preventing, mitigating, and managing the spill. If they cause a spill, they must clean it up and pay for losses and damage under federal legislation.

So in the accord areas, it would be under the accord act, and in non-accord areas it would be under the Canada Oil and Gas Operations Act.

[Dick Harris, Conservative, Cariboo—Prince George, BC]

I guess my question is, does the government have to take them to court to get them to do that, or can they just impose it because of a regulation or legislation that exists?

[Eric Landry]

There is what is termed absolute liability, so without having to prove fault, the offshore boards and the National Energy Board can access those amounts.

In the case of accord areas, that amount is fixed at $30 million, and in the north—I'll turn to Mimi—it is $40 million. With respect to anything above those amounts, you have to demonstrate negligence on the part of the company.

[Dick Harris, Conservative, Cariboo—Prince George, BC]

So you have to go to court. Okay.

I want to go quickly to an offshore spill resulting from a tanker ship. It's my understanding that there are and have been tanker ships running in and out of Kitimat on the west coast for some time now, under a provision that we have. They are operating under some very strict safety regulations, as far as the ships' hulls and the pilots and everything are concerned. There's another application by Enbridge, for example, and they're promising to put pilots on the ships, and pilot tugs in and out of the inlet from the open water and back from Kitimat, and double hulls on the ships. This appears to me to have covered all of the possible safety precautions that one can take to almost guarantee that a ship would not have an accident in the inlet while going in and out.

Am I pretty close on my assumption of that?

[D/Commr René Grenier]

Transport Canada is the lead agency responsible for the oil spill preparedness and response regime. It's also responsible for legislation for ships, especially tankers. They would be the authority to answer your question in detail.

We are working with them. We are taking every precaution to make sure that we look at every angle to make sure that a tanker going in and out of a port is secure.

[Dick Harris, Conservative, Cariboo—Prince George, BC]

Okay.

My last question is just a simple one. Do first nations have a final veto on any oil and gas exploration anywhere in our country?

[Mimi Fortier]

I'll address that for the north. It's not a veto per se, but beyond first nations, the aboriginal groups include Inuit in the north. In accordance with their land claim agreements, they co-manage environmental assessment boards. They have members on those boards. They have a large say in what happens in the regulation of oil and gas activities.

Under the Inuvialuit Final Agreement there was a major hearing by the Environmental Impact Review Board, for instance, in the early 1990s, which put up major questions on the operator's plan to drill. In essence, the operator did not go forth with that drilling program.