Natural Resources Committee on June 17th, 2010

[Kevin Roche]

No.

We have to qualify that by saying we have to understand the findings of all of this. I'm saying that if you have a drilling program approval that requires you to have two barriers and maintain two barriers, then nobody in that chain of command should ever, ever decide to go back to having only one barrier, which is what the BOP situation is. There's a lot of confusion and there are mixed messages about what happened with the BOP. We won't know for sure. But if you don't have a good cement bond in the beginning--which is your barrier when you're getting ready to leave... You have a cased hole, and you're supposed to have centralizers on the casing to make sure all the cement goes all the way outside of that casing. If that casing is leaning to one side because it's not centralized properly, and you didn't get cement all the way up through it, and you get ready to leave that well, now you've displaced the mud inside of that casing and let the formation fluids go. What happens is that anything in that well can shift up into the BOP and block all of your fail-safe functions.

Now you have six rams. In answer to the question that was raised earlier, a BOP doesn't just cut the pipe off, it also seals around a number of different diameters of tools that we're using, so by design you have redundancy six times over in the BOP. But if you push everything up inside the BOP because it's not cemented properly, now you have a catastrophe, because that last resort you have can't close around that diameter because it wasn't designed to close around that bigger diameter, and it couldn't share that big diameter.

[Mike Allen, Conservative, Tobique—Mactaquac, NB]

How much time do I have, Chair?

[The Chair, Conservative, Leon Benoit]

You have one minute.

[Mike Allen, Conservative, Tobique—Mactaquac, NB]

Typically, what is the ratio of wells drilled to successful wells? Your company has been doing this for how many years? I do know there's a lot of mapping and a lot of things done that way. Is there a typical ratio of total wells built to successful wells?

[Kevin Roche]

Then you break it down into exploratory and wildcat versus development. In the exploratory phase, it's one in ten. Once you figure out the geology from that good well, your success ratio after that could be 50% to 80% once you have the model done. On the exploration side, it could be one in ten.

[Mike Allen, Conservative, Tobique—Mactaquac, NB]

Thank you very much.

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Allen.

We will go now to the second round of questioning, starting with Mr. Tonks for up to five minutes.

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

Thank you, Mr. Chair.

It's always a challenge to follow Mr. Allen and Mr. Cullen on these kinds of technical issues.

Mr. Roche, the testimony we've heard up to now, combined with observations of what's happened in the gulf, has led the committee to the notion that a relief well would be an approach that would compensate for the breakdown of the two-barrier technology you've described. You have said, though, that the trajectory issues with respect to a relief well at the depths we're talking about would militate against a simple interface. Yet, in the gulf that is the only backup that appears to be possible at this point. Everything has failed, and they're talking about a same-season relief, something which in the arctic might be a little bit difficult.

From a technical and a professional perspective, how do you marry the reality of what's happening in the gulf with the incongruity of your answer with respect to trajectories? Would you not say that the trajectory issue against all of the other options and the failure of the two-barrier system is the only alternative, and that professionally, from an engineering perspective, you should find a resolution to the trajectory issue and get on with a relief regime in deep-sea drilling?

[Kevin Roche]

How I rationalize that is that a relief well is just another well. All it's providing is an alternate conduit so you can relieve the pressure in the well that's failed, so you can fix it. There's a whole technology here at play. If you could close those BOPs that the well is flowing through now, with all the flow they've had, they may in fact create a worse situation because the fluids will blow out under the BOP, and then you'd never be able to fix that conduit.

If you've had so many sequential failures in all of the redundancy systems you've created, and you get to where you are now, the reason a relief well is needed is that everything else you could do has other risks with it.

But if you stop and think about it, if you have a well here that you're drilling in this location and you go a mile away and drill a well in the other location, both wells have the same challenge, in that if people don't follow the procedures, you could have a relief well blowout. Now you've got two blowouts. What do you do then? Do you get another relief well that drills into both of those?

My point is that from an engineering perspective, you've got to focus on prevention first. That's one basic rule in our industry. You never ever go back to a one-barrier piece. As soon as you make that failure—we need to understand why that step was taken—then you need to decide how you're going to fix that.

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

Thank you for that, Mr. Roche.

Professor Fraser, with respect to the California detailed response regime that you talked about, do you think the federal government should have an overall contingency response in place with respect to a major oil spill? We've heard about hand-offs, and we've heard about your difficulty in acquiring information under the Freedom of Information Act and the Atlantic accord and so on.

If there was one predominant response regime that was accountable through the federal government and its ministries, following the California example, do you think that would give us some comfort?

[Dr. Gail Fraser]

Because there's always the probability that the government may have to handle a spill because of the failure of the operator to be able to deal with it, it seems as if there should be a complete detailed capability of the government being able to take over a spill, as a backstop.

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Tonks.

I go finally, for this round, to Mr. Anderson for up to five minutes.

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

Mr. Roche, I think there were some safety concerns about BP in the past. They had some problems with a refinery, and I'm not sure that those problems were addressed to the satisfaction of a lot of people. There were reports that the drillers had some concerns on the rig as well, but they were overruled by BP. I'm wondering what would cause BP to make those decisions that they're going to remove one of the safety barriers. Do you have any insight into that?

[Kevin Roche]

I think that's probably one of the most important findings we'll get from the investigation. Anything I say is only speculation.

We've all heard in the various press releases that there was an issue around budgets and timing and schedules on the well, but that should never ever take precedence over making sure you've got the barriers in place.

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

So for the decades that your folks have been drilling wells, this double system has worked well.

Do you think there's a need for a third barrier, a triple barrier? You're saying that the way it's set up now works well, as long as the companies are willing to abide by the present regulations and rules.

[Kevin Roche]

As I said, I've been 32 years in the business, and I've run drilling operations in many parts of the world. I've never experienced a blowout. If you manage the process and make sure people understand the expectations, that there are no shortcuts in this particular case at all, no discretion, it's worked really well to this point.

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

We probably won't have someone with your expertise back here again, unless we extend these hearings a long time, but can you run us through how a well is drilled and what the process is? We've only got three minutes here, so I know you're not going to be able to fully cover that.

You put the rig on site. Can you run us through what happens when the safety barriers go in, to the completion of the well, if possible?

[Kevin Roche]

For an offshore floating operation, you get to the location, drill a 30-inch diameter hole, and run surface casing, so all of the tools are big and bulky at that stage. Then you put your BOP on and you start drilling smaller, consecutive-sized holes. You go from 30 inches at 200 feet, and you can drill down gradually with a smaller hole size, down to seven or eight and a half, then to a five-inch hole, anywhere up to 35,000 feet. You case every section of that hole off so that you start with 30 inches, then you go to 20, 13, 12, nine and five-eighths, seven inches, all the way to the bottom, and then five inches as a liner goes all the way there. You cement those casing strings all the way along the sides and then perforate holes in them to get into the formation, and that's how your oil and gas come in and flow up.

Water weighs 8.3 pounds a gallon. Formation pressures can be up to 16 pounds per gallon coming the other way. While you're drilling that hole and setting those pipes to create a pressure integrity conduit, you use a mixture—barite and other chemicals—so that you take water at 8.3 pounds a gallon and make it 18 pounds a gallon, and you pump that into the well as you drill the hole. Then that 16-pound-per-gallon force that oil and gas want to come in with, you're holding that down with the mud at 18 pounds a gallon. That's barrier number one.

Barrier number two, as you're drilling, is the BOP. As long as you keep that 18-pound-per-gallon mud in the well, it's going nowhere. It stays right where it is. To make the oil flow at the end, you put in all these special valves; then you reduce the weight of the fluid column under a controlled condition so that you let the formation fluid come in slowly, and then you send it for the production train. That's the gist of it.

Every time you run a casing string, you're holding it back with that mud weight, but when you get it done, you cement the outside and then you have a big plug in that thing until you drill through it again. Every time you drill through that cement plug, you have a different set of rams in that BOP that close on the different sizes of pipe that you used to make that hole.

The BOP has four sets of rams that are set for different sizes, but it also has an annular, which can close on any size, from 18 and three-quarters down to three and a half inches. They're another redundancy, but they're typically there for lower pressure holdbacks, whereas the big rams and the shears are the stuff that keep you from the 10,000- or 15,000-pound pressure.

So those are your barriers: the mud weight, the cement, the casing, and ultimately the BOPs.

The third barrier concept...I assume you're talking about the relief well.

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

Unless you have some other suggestion.

[Kevin Roche]

The relief well concept to this date, and it may change from what we find here in the investigation, is an after the blowout fact. The idea of drilling two wells together, the idea of trajectory...you can drill two wells together, but in order to make them come together you have to stop, go away, and figure out how you're going to make that happen. That's the only issue. It's not a deal breaker. You can run them both together, but you still have to stop at a certain point in time and figure out how you're going to make them come together that doesn't hold you back.

The idea of drilling two wells together at the same time is a different concept than the relief well concept. You can have the same procedural problems and failures on the relief well as you have on the primary well.

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

So safety considerations would be the same for both wells.

[Kevin Roche]

Exactly. You're doing the same process.

[The Chair, Conservative, Leon Benoit]

Mr. Anderson, your time is up. Thank you very much.

Thank you very much to the witnesses. You've been very helpful this morning. We really do appreciate you coming, so thanks again.

I'll have to suspend the meeting for two to three minutes as we set up the video conference and get the next witnesses to the table.

[The Chair, Conservative, Leon Benoit]

We will resume this meeting.

For the second hour, we have two witnesses from the Government of the Northwest Territories: the Honourable Robert McLeod, Minister of Industry, Tourism and Investment, and Peter Vician, Deputy Minister, Department of Industry, Tourism and Investment. Thank you very much for coming today.

After the first presentation, via video conference from Memorial University in Newfoundland, we have Kelly Hawboldt, associate professor, faculty of engineering and applied science.

We will start with the witnesses in the order in which they appear on the agenda. We will begin with the Minister of Industry, Tourism and Investment from the Northwest Territories.

Go ahead, please, Mr. Minister.

[Robert McLeod, Minister, Department of Industry, Tourism and Investment, Government of the Northwest Territories]

Thank you, Mr. Chairman. I'm very pleased to be here and also to have my MP and our neighbouring territory's MP sitting in on this committee.

We want to thank you and committee members for giving the Government of the Northwest Territories the opportunity to appear before you to speak about its perspective on an issue that is on the minds of so many Canadians these days: emergency responses to drilling for oil and gas in the offshore.

Today's meeting represents important work, and the Government of the Northwest Territories appreciates that this committee is being proactive in gathering information on an issue that is so important to the people of Canada and to the people of the Northwest Territories. I believe it is efforts like this that will lead to improvements in the measures used to guard against the risk of offshore drilling incidents so that the terrible images we've seen over the past two months from the Gulf of Mexico are not repeated here in Canada.

Mr. Chairman, when I was invited by your committee to appear at this meeting, there was no question in my mind that the Government of the Northwest Territories had to have its voice heard on this issue. While the Minister of Indian and Northern Affairs, the Minister of the Environment, and the National Energy Board all have varying degrees of responsibility when it comes to development of oil and gas in the Beaufort offshore, I am here today representing the Government of the Northwest Territories, the elected government of the people of the Northwest Territories. The people of the Northwest Territories look to our government to provide leadership, engagement, and action on issues of importance to them. This is clearly one of those issues.

For our government, the chief concern regarding offshore oil and gas exploration and development is the Beaufort Sea. The petroleum potential of this region is substantial and represents a tremendous opportunity for our territory. The Government of the Northwest Territories recognizes this opportunity and has consistently advocated for oil and gas development in our region, both onshore and offshore, provided it can be done in a responsible manner and provided that benefits from that development are maximized for Northwest Territories residents.

We see this development as crucial to our territory as we develop our economy. Our territory must diversify its economic base. We need jobs and business opportunities for people in all of our regions and communities. That is why we have been supportive of responsible oil and gas development. It will assist us in allowing our territory, our communities, and our people to become more self-sufficient.

However, the Government of the Northwest Territories does not support oil and gas development at any cost. The tragic events and the resulting oil spill in the Gulf of Mexico have demonstrated the significant potential environmental risks of hydrocarbon exploration in offshore waters. Those risks would be increased in the Beaufort Sea, where operating conditions are often harsh and the remoteness of the area makes access difficult.

The Government of the Northwest Territories does not want a repeat of the Gulf of Mexico in the Beaufort. Neither do the people we serve. We have been hearing that loud and clear in recent weeks. We have heard it from leaders such as former NWT premier Nellie Cournoyea, and we have heard it from, in particular, the Inuvialuit people, who have strong attachments to the Beaufort Sea region. That is why the Government of the Northwest Territories wants to ensure that there is satisfactory technology in place to protect the Beaufort Sea ecosystem before offshore drilling proceeds there.

What are the Government of the Northwest Territories' expectations for oversight of offshore drilling in the Beaufort? First of all, let me state that we have confidence in the ability of the National Energy Board, which has regulatory oversight for offshore drilling in the Canadian Arctic, to come up with the appropriate measures to ease the concerns of northerners about offshore drilling in the Beaufort Sea. The NEB is one of the best in the world at what it does, and we recognize that.

The NEB has proven this again by deciding to hold a comprehensive public review of arctic safety and environmental offshore drilling requirements, and it will not consider any drilling applications in the offshore until that review is complete.

The Government of the Northwest Territories is supportive of this review and welcomes the opportunity for a public discussion among government, regulators, industry, and other interested parties on this issue of critical importance to our people. We also intend to be active participants in it.

The incident in the Gulf of Mexico has highlighted the need to gain a better understanding of what went wrong there and what could go wrong in the Beaufort offshore. As I mentioned earlier in my remarks, and I cannot stress this enough, we cannot have another Gulf of Mexico in the Beaufort. The effects would be too catastrophic on the ecosystem and our people for us to allow that to happen. Therefore, we need an open and frank discussion about how the government, regulators, and industry would prevent such an event from happening. Northerners need to be shown, and it needs to be proven, that blowout well mitigation and oil spill remediation technologies could work in the Beaufort and the arctic.

The Government of the Northwest Territories also believes the federal government can play a greater role in providing the comfort northerners require if drilling in the Beaufort offshore is to occur. Specifically, there is a need for the federal government to provide adequate environmental measures to protect the Beaufort and the Canadian arctic. This could be done by investing in areas that will improve accessibility and infrastructure in the arctic. It could come through improving northern marine transportation, through development of ports and barge landings, and even creating new icebreaking capabilities.

It could come through improved roads, bridges, and airports, or it could come through a renewed effort to train and equip northerners to deal with hydrocarbon accidents in an arctic environment, an area, I might add, Canada was once a leader in during the Beaufort exploration heyday in the 1970s and 1980s.

Mr. Chairman, I just came from a series of meetings in Washington, D.C., with oil and gas representatives and U.S. congressmen and senators, such as Dan Boren, Lisa Murkowski, and Mark Begich. I was there to promote the importance of the Mackenzie gas project and the development of arctic gas in general to the North American economy and environment. But obviously the issue of how to protect offshore ecosystems and still have responsible oil and gas development was on the minds of everyone I talked to in Washington. That not only drove home to me the seriousness of the situation in the United States, but also what is at stake in the Beaufort and in the arctic.

It has only strengthened the resolve of the Government of the Northwest Territories to continue to work to ensure that hydrocarbon exploration and development in the Beaufort offshore, and indeed the entire Northwest Territories, is done in a way that not only benefits our people and our economy, but leaves future generations an environment they can enjoy.

Mr. Chairman, I will end my remarks there. Thank you for your time.