Natural Resources Committee on Nov. 2nd, 2010

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

Thank you for that.

Do I have just another minute or so?

[The Chair, Conservative, Leon Benoit]

Actually, your time is up, Mr. Tonks. Thank you.

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

Oh, okay. Thank you, Mr. Chairman. Thank you to the witnesses.

[The Chair, Conservative, Leon Benoit]

We go now to the Bloc Québécois, to Madame Brunelle, for up to seven minutes.

Go ahead, please.

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

Thank you, Mr. Chair.

Good morning, gentlemen. It is a pleasure to welcome you here.

Mr. Ruelokke, I found your presentation very interesting. The citizens of the Magdalen Islands, in Quebec, are very concerned. We are located only 80 km from your field, and this part of Quebec is very dependent on fishing and tourism. We are very close to your coast, only about 100 km away.

You are probably aware that a moratorium has been imposed on all operations until 2012. It has been imposed by the government of Quebec.

People are worried. We want to wait until an environmental and strategic study has been carried out. We want to wait until it is finished. The ecosystems of the Gulf of St. Lawrence are very fragile. The fishing industry is the main industry and it is very important for the population.

There is another concern. We see that Newfoundland and Labrador will get the benefits from this field. Some are wondering if Quebec oil will be pumped out. There might be some impacts, hypothetically.

I wonder why you are allowing Corridor Resources Inc. to operate instead of waiting until the Quebec strategic environmental assessment is finished.

[The Chair, Conservative, Leon Benoit]

Mr. Ruelokke.

[Max Ruelokke]

Thank you very much.

Let me just explain perhaps what has occurred in the licensed area that contains the structure known as “Old Harry”. It's an exploration licence that was issued to Corridor Resources some time ago and is within the Newfoundland and Labrador offshore area only.

The only activity that has occurred to date is that quite recently, back in October, Corridor Resources carried out a geo-hazard survey, a shallow seismic survey to look at the sediments immediately beneath the seabed. There has been no application to drill a well, and if there is a plan to drill a well, then Corridor Resources will be required to carry out an environmental assessment of what the results would be of drilling that well.

But as I say, at this point in time we have not received an application to drill a well. When we do, we will require the environmental assessment to be done, and it will take into account all the property, all the area that is surrounding. And that's not only in the Newfoundland area, but it will take into account, for example, the fisheries you mentioned, which are so very important to the people in the Îles de la Madeleine.

There was a strategic environmental assessment done of the entire area that contains that licence back a number of years ago, and there was some cooperation at that time, of course, as there always is, with other jurisdictions. It was done before my time at the board, so I'm not personally familiar with it, but I do believe that it was comprehensive and that people from Quebec were engaged in that effort.

Again, just to recap, there has been no well drilled in that area, and there won't be one until an environmental assessment is done and unless an environmental assessment concludes that the well can be drilled without preventing undue hazards to the environment.

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

Do you expect the preliminary studies to be carried out? When do you expect this drilling to be done, or receiving applications to drill?

[Max Ruelokke]

My understanding is that Corridor is actively seeking companies to participate with them in drilling an offshore well. Corridor does not have experience in offshore drilling; their primary experience is land-based in New Brunswick and Nova Scotia and in the exploitation of land-based oil and gas.

Unless and until they can find a partnership that would contain a company that would have the experience and the ability and the technical capability to drill a well, there won't be one drilled. But if they do that, then they have up until...exploration licences are set by the Atlantic Accord act as having nine years in length.

The accord provides that the first well should be drilled during the first five years of that licence. That five-year period is up until the January 15, 2013, I think. If Corridor were to drill a well, they would have to drill it prior to that time. At this point in time, they have not yet found a partnership that would allow them to do that.

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

We have read in the papers that they are doing seismic surveys, among other things, and that this might create hazards for some large mammals. This would mean that they have been authorized to do those seismic surveys. It is what you are telling us, is it not?

[Max Ruelokke]

Yes, they did. They were authorized back in very early October--I think October 4--to conduct a shallow geo-hazard seismic survey. That was done, I believe, in the period from October 11 to October 16. A fisheries observer was on board to make sure all the appropriate procedures were put in place so that there weren't any marine mammals in the area when the seismic work was done and no fishing activity was interfered with. The survey has now been completed.

That survey was authorized by the board, yes.

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

One last thing. You stated that, in case of a spill, there are three systems. You also said, unless I am mistaken, that you are able to face a spill of 150 barrels. That does not seem to be very much. Perhaps there was a mistake in translation.

In case of a major spill, you said it would be difficult to deal with large quantities of oil spilled in the ocean, such as we saw in the US, and that you have to do more research before having a more definite plan.

Last May, when we had some witnesses, we learned that relief wells are not being contemplated by the operators because they would be too expensive. Do you not think that it is much too early to give authorizations to the operators and that there might be a danger of having a spill but no solution? You are still at the research stage, if I understand correctly.

[Max Ruelokke]

I referred earlier to all the documentation and all the plans and procedures that companies have to have in place. I think there were two questions, and I'll answer the second one first.

The question was whether companies do all the work they should to prepare for emergencies that happen and whether there is some sort of cost analysis. We don't make any assessment of what it costs a company to be prepared. We do insist that they be prepared and that they demonstrate to us, through submission of detailed plans and procedures, that they are prepared to deal with any and all emergencies that arise. I refer to the contingency plans, emergency response plans, and oil spill plans; all of those are reviewed in detail by our experts and by experts in other agencies that we deal with.

With respect to the scenario of dealing with a large spill, you may recall that I referred to a three-tiered response. The tier one response would be for a small spill of less than 100 barrels. A small spill of this type can be adequately dealt with by equipment that is always available on site, and supply vessels are on the actual production installations. A tier two response would typically be capable of dealing with a spill of 100,000 barrels or less. Such a spill would be dealt with using resources that are available in Newfoundland alone. A tier three response, which is anything larger than 100,000 barrels or so, would likely require national and perhaps international resources. It would be similar to what was done in Macondo.

I think the one message I'd like to leave with you is that while the traditional spill response is still appropriate and still important, there is much more focus on prevention of accidents. In the event that an accident happens, we will be looking at the containment effort that was successful with Macondo to see how that can be used in our own area, if in fact we have a situation in which it is required.

[The Chair, Conservative, Leon Benoit]

Merci, Madame Brunelle.

We go now to Mr. Cullen. You have up to seven minutes.

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

Thank you, Chair, and thank you, witnesses, for being here.

I'll try to keep my questions short, as I've got a lot to get through.

Mr. Ruelokke, was there a consideration of a pause in the Chevron drilling project once the BP spill had happened in the gulf? Did you folks contemplate putting things on hold until you had found out what had actually happened?

[Max Ruelokke]

Yes, we contemplated it, but we very quickly realized that all the proper procedures and processes were in place. Chevron had the right people and the right equipment. We permitted them to spud that well. I think it was probably some 20 days after the Macondo well blew out.

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

I ask because the Macondo well was about 5,000 feet in depth. The Chevron well is much deeper--8,500 feet, give or take.

[Max Ruelokke]

Yes, that's correct.

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

We know that the pressures and the factors that get involved do not produce a linear graph. It goes up exponentially the deeper you get. Without knowing what the mechanical and procedural failure was in the gulf, was it not inherently risky to approve? If some equipment that had failed in the gulf--equipment that everyone believed to be safe before the gulf spill--was also being employed by Chevron, was that not a risky decision that could have had some implications?

[Max Ruelokke]

I think there's a certain amount of risk involved in any decision regarding offshore oil and gas activity. It's how well that risk is understood and analyzed and assessed that allows you to move forward. In our case, we became aware fairly quickly that what had happened in the Macondo incident was a result of failure to adhere to proper procedures. There were all kinds of warnings about an influx of hydrocarbons into the well bore in the days and even weeks before the blowout, but for some reason they were ignored.

We looked at it in the context of the rig. That rig, the Stena Carron, had just finished drilling a well in the Laurentian Basin in the middle of the winter in water deeper than at Macondo. It was in 1,600 metres of water, so it was slightly deeper than the Macondo.

I spent time on that. I was very impressed with the skill and capability and safety culture in place on the rig. I had also visited her when she transferred over to Chevron, and the thing that really impressed me very much was the commitment that Chevron and the Stena Carron people had made to something they called their “stop work authority”. That was about the most rigorous example of a positive safety culture that I've ever seen, and I've been in this industry a little over 30 years.

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

Let me interrupt you for a second.

I believe you believed it was safe. I also suspect that the folks in the gulf thought the BP rig was safe in terms of regulators.

I'm going to turn to the National Energy Board for a moment.

Is the review you're conducting right now reviewing the leasing process that happens in the Arctic as well, Mr. Caron?

[Gaétan Caron]

No, it does not, Mr. Cullen. It's a policy matter in which the board is not involved.

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

Okay. Does it review the east or west coast?

[Gaétan Caron]

No.

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

Is there review of the the tar sands operations, or shale gas?