Natural Resources Committee on Nov. 2nd, 2010

[Cheryl Gallant, Conservative, Renfrew—Nipissing—Pembroke, ON]

That's quite encouraging to hear.

Now back to the BP spill: were any of the measures that failed to plug the well measures your boards would have deemed to be an acceptable part of a company's emergency response plan should such a spill have occurred in Canadian waters?

[Gaétan Caron]

I'll go first, Ms. Gallant.

What we will find about that very question will be the result of our reading the January 2011 report that was published by an independent commission asked for by President Obama.

I will quote Professor Mark Fleming, from Saint Mary's University, who spoke at the IRF conference in Vancouver two weeks ago. He said—and that was the best learning for me in Vancouver—accidents happen because people don't do what they're supposed to do.

That goes back to the point Mr. Pinks was making, that management systems must exist. We, the regulators, must hold industry accountable for not only there being a documented management system, but to improve continually, by verifying through audits that the CEO is committed, the working levels are committed, and when people at the front line see a safety flaw, they talk about it.

The one thing I'm learning from the gulf so far, based on what I've read--and we've read only a small part of what we're going to know in January--is the safety culture aspect. This board would be inside the tent of the culture that would prevail in an offshore drilling rig, and we would know if it isn't there. We have the power to stop operations if we find it that way.

[Cheryl Gallant, Conservative, Renfrew—Nipissing—Pembroke, ON]

Very good.

Does Canada have any containment technology that was not deployed in the gulf, either at the wellhead or in the outer perimeter of the spill?

[Max Ruelokke]

Not that I'm aware of. Had there been equipment available in Canada, or anywhere internationally, I think it would have been deployed. There was a huge influx of resource into the Gulf of Mexico to attempt to deal with that spill, from all over the place.

[The Chair, Conservative, Leon Benoit]

Thank you, Ms. Gallant.

We go now to Mr. Pomerleau, for up to five minutes.

[Roger Pomerleau, Bloc, Drummond, QC]

Thank you, Mr. Chair.

I want to thank the witnesses for meeting with us today.

As a complete layperson about these matters, my question will be similar to my colleague's, Mr. Allen.

In the mind of the public, British Petroleum, a well-known, rich and serious corporation certainly had appropriate safety equipment to drill. It certainly had trained personnel. It had an emergency plan. There were emergency procedures that were well known. It certainly had international contacts in case of major problems, like all big corporations have. It obviously had lots of experience and a lot of data collected over the years about what might happen.

Despite all that, there was a blowout that lasted for several months and, today, according to media reports, the most recent estimate of the cost of the operation is $40 billion, which may not even be the final amount.

At the National Energy Board, you talk about strengthening your regulations. What makes you so sure that you will be able to set up something better than all that, especially in relation to the Arctic — which Mrs. Gallant referred to — since drilling in the Arctic is a whole other kettle of fish, a more complex and dangerous proposition, I believe?

[Gaétan Caron]

Mr. Pomerleau, I agree with you about all the things you have mentioned. As a new member of the committee, you ask very relevant questions. I would not dare tell you that I am sure about anything except that one must always be very careful.

I want to tell Canadians and Quebeckers that we have a regulatory regime that is focused on three things.

First, we have to do all we can, as regulators, on matters of safety and the environment to ensure that any drilling is done safely, that the environment is protected, and that the native communities are protected since they would be the first victims of any incident. However, I cannot give you any guarantee that there will never be an accident. Canadians should not believe that accidents would never happen.

As to the second step of regulatory process, if there were to be an accident, even if that probability is very low, the consequences would be very significant. So, we have to be prepared, as regulators, to ensure that the operator, helped if necessary by civil society, by the departments and the public agencies, has taken all the steps required to make sure that, in case of an accident, we would be able to contain and stop the event as quickly as possible.

The third step is to believe that we can always learn and do better. So, I can tell Canadians that the regulatory agencies will never be satisfied with existing regulations and will always try to find the additional measures that could be included in a process that, by definition, is aimed at always improving what we do.

Finally, as regulators, we work at arm's length from the government. We are not involved in policymaking. That being said, there is a process that we follow. If an application were to be received — we expect that we may receive one in 2012 or later — for drilling to start in 2014 or later, our role would be to look at it objectively to see if it meets all regulatory requirements and standards. Even if the operator were to tell us that everything will be fine, our reaction would be to ask how, in case something went wrong, we would be able to use all the infrastructures required to face the issue appropriately in the public interest.

Our public Arctic review is precisely aimed at answering the important question you have asked.

[Roger Pomerleau, Bloc, Drummond, QC]

Mr. Pinks and Mr. Ruelokke, do your Boards intend to go as far as that in reviewing your own regulations, in your own fields?

[Max Ruelokke]

We've just concluded, as one of my colleagues mentioned earlier, a new set of drilling and production regulations that came into effect the first of January this year. We've reviewed those; they were obviously put in place prior to the incident in the Gulf of Mexico happening. We've reviewed those, and to this point--and they are regulations that we all have, the three boards share, and the three governments--we have not identified any shortcomings or any changes that are necessary in those regulations because of what has happened in the gulf.

Having said that, ongoing review of regulations is a matter of the course of business for all the boards, and we each have a responsibility, in fact, to provide advice to governments in the event that we see things in the regulations that need to be changed. But to this point, we haven't seen anything in the new regulations that we need to change.

[The Chair, Conservative, Leon Benoit]

Merci, Monsieur Pomerleau.

Mr. Pinks, you had something to add briefly?

[Stuart Pinks]

I was just going to add that I agree with what Mr. Ruelokke has communicated. Our boards--all three boards, actually--assist in providing technical advice to the governments on drafting regulations. As you're aware, the drilling and production regulations have been updated. There is work being done. There is a full suite of regulations under the accord act. Seven or eight of them have been promulgated, and some of them are on the older side--they were promulgated back in the 1980s--so we're looking at those as well.

There are definitely lessons learned from things like the Deepwater Horizon incident. There was a similar type of incident in Australia a year earlier. Learning from major incidents like that will be taken into account as we provide advice to governments. Governments write the regulations, but we provide the advice to them.

[The Chair, Conservative, Leon Benoit]

Merci, Monsieur Pomerleau.

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

[Devinder Shory, Conservative, Calgary Northeast, AB]

Thank you, Mr. Chair.

Thank you to the witnesses for coming and sharing their information on the subject they specialize in. Of course this is one of the subjects I might not have come across if I were not an elected member and a member of this committee, so thank you for sharing this information.

I understand that our government is of course committed to the safe and sustainable development of natural resources, which of course involves offshore drilling as well. I also understand that these are all arm's-length regulators; they have strict guidelines; there is an application process in place; there are some requirements for strict training; and the applications have to satisfy the regulators even before they can move to the next step.

I believe we as Canadians are all concerned with what happened in April in the U.S.A. with the oil spill and with whether we are prepared for that kind of an accident. That is a key question I myself ask. I also know that following that accident, the NEB announced they will be doing some review of our active drilling process.

My question is threefold. What does NEB wish to achieve from that review? Is there any chance to make any changes or amend the current regulations if required? And when do we expect any review to be finalized?

[Gaétan Caron]

Thank you, Mr. Shory.

Our expectation is that by the the end of phase three, with the publication of a public report, we will very clearly specify what operators must submit to us in the future in order to persuade us to approve an offshore well in the Arctic. So it is about the information they will be required to file with us to seek to persuade us.

As you know, Mr. Shory, as an independent quasi-judicial administrative tribunal, we have all the legal powers to say yes or no to an application to drill a well, based on what the industry submits to us. And if we say yes, we have every power to impose the conditions that the National Energy Board finds are appropriate for that well to be drilled safely, to protect the environment and to protect communities.

Fortunately, when Parliament passed the Canada Oil and Gas Operations Act, the purpose of the act was stipulated in the preamble to the act. So as independent board members, we are guided and in fact bound by the act, which says we look at three things: safety, environment, and conservation of the resource, so that when you develop a resource you don't waste it. A fourth item was added recently: open access. When there is a pipeline, the public interest requires this pipeline to be shared so that you don't build unnecessary facilities.

So that is what we hope to achieve, Mr. Shory. It is to have public debate, public input, people asking each other questions. The end point is what applicants will be required to file with us to seek to persuade us to say yes to an application to drill a well.

As for whether regulations would need to change, the process of deciding to change regulations is a policy gesture, so we have Ottawa departments to work on policy. And as Mr. Pinks said, we are always there to provide technical assistance when there is a need. We have broad powers under the regulations we have now. Given those, we are not doing this review with the goal of seeking to amend the regulations, but if we find something meaningful in terms of improving the framework, the policy world will be involved in our review. We have major Ottawa departments registered in our review--DFO, NRCan, INAC, and I'm missing quite a few--and they'll decide whether they want to initiate regulatory action and will provide technical assistance if they so decide.

When will this be? Our answer so far, Mr. Shory, has been that we're going to take the time to do it right. Phase one is in progress and cannot possibly end until the report from the independent public U.S. commission is complete. And if people still have things to tell us, we'll keep listening to them.

Phase two is about asking each other questions. It will start in the spring and will presumably take several months. We haven't affirmed a date, Mr. Shory, and with your permission I will not give you a date, because our commitment is to do it right.

[Devinder Shory, Conservative, Calgary Northeast, AB]

Absolutely.

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Shory. Your time is up.

We will go to the final round, three minutes each, starting with Mr. Tonks.

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

Thank you, Mr. Chairman.

Mr. Ruelokke, hypothetically and from your knowledge of the industry, in an application for a specific deep-water drilling proposal, do you believe a specific capping and containment technology should be mandated in the response regulations through the NEB or the appropriate vehicle, and is a relief technology required with a specific capping? In other words, from your experience, could you ever envisage that we would reach that point, that we would have a technology that would be mandated through the legislation? Could you comment on whether a relief or something similar to it, in terms of relieving the pressure while the containment initiative was taking place, could be done under safe circumstances?

[The Chair, Conservative, Leon Benoit]

Mr. Ruelokke.

[Max Ruelokke]

Thank you, Mr. Tonks.

What we would always want to see deployed or available, or being readily available to be deployed if required, was the best available technology. I think that's what this company, the Marine Well Containment Company, is moving toward, advancing the state of the art in terms of the best available technology.

The emphasis always is and always will be, of course, on prevention, on making sure that the barrier system that prevents any hydrocarbons from uncontrolled release into the environment is robust, sound, and solid. It was a failure of the barrier systems that permitted the Macondo blowout. It was a failure of the barrier systems that permitted the Montara well in Australia to blow out.

But the specific question you ask, whether we would mandate a certain kind of technology, I think we'll be moving toward that. As I said earlier, we'll obviously watch it very closely as it is developed and we will want to make sure that the wells that are going to be drilled in our jurisdiction have the same kind of support and.... I'm struggling for a word here. I'll just go on without that word. We want to make sure that if something is currently available, let's say in the Gulf of Mexico, it would be available in our area, if need be. The best available technology will have to be deployed.

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

Wouldn't it require a relief well to—

[Max Ruelokke]

No, it wouldn't require a relief well. The problem is a relief well—not a problem, it's a fact--will take a long time to be successful. There has been a lot of discussion about drilling a relief well simultaneously with the original well. The problem there is that any time you start to drill a well you have to know what the target is. You don't know where the target is because you don't know if a blowout is going to occur on your exploration well, where in the well that will be, and therefore where your relief well should be targeted. The other thing that we always have to bear in mind about relief wells is that drilling another well presents an additional set of risks. Every well is risky to some degree, and you're doubling the amount of risk if you have to drill two wells for every well you're going to use to explore or produce.

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Tonks.

We go now to Mr. Harris, for three minutes.

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

Thank you, Mr. Chair.

Thank you, gentlemen, for your testimony today. I'm hearing once again from you basically what we heard last May, I guess it was, and that was that the design, the technology of the equipment that's being used--in our case, deep-sea drilling--is state-of-the-art equipment. You seem to be repeating what you said back in May, that accidents happen when the operators of the equipment fail to either use it properly or disregard possible hazards that develop or were already present in the environment the equipment is going to operate in.

On the equipment itself and the methods of drilling, they're studied seven ways from Sunday, but as I think you said, Mr. Caron, accidents happen when someone does something they're not supposed to do or disregards a possible hazard. So that's human error and that's what causes a lot of accidents, not just in the welling industry.

So I'm really pleased to hear about this culture of safety regime that the industry has gone into. That is, in a way, operating beyond the regulations that are already in place. And on this stop-work authority, as I understand it, if anybody on the drilling rig notices something, they have the authority under this new structure to shut the thing down and explain why they did it later. They can take that step singularly.

[Max Ruelokke]

That's correct, and where it's in place--and it's not in place for every operator, but we will certainly endeavour to see that it does become in place--it's not just an authority that you have to stop the work, it's actually a responsibility you have. If you see something that you think is unsafe, even though it's beyond your technical realm, if you believe it's unsafe, you have a responsibility to stop it.

When you go offshore for the first time on a particular installation, you'll be given a fairly intense orientation. I did that twice on the drill ship I'm referring to, the Stena Carron, and both times, the main emphasis in the induction was all about the stop-work authority and what that actually meant and what your role as a worker was in making sure you did that if you had to.

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

Mr. Caron, it's my understanding, from what I'm hearing, that when there's an application for drilling, the aspect of how a spill or a leak would be mitigated is given absolutely the same priority as the actual operation. You're going to drill. How are you going to do it? You have to answer all the questions, but if anything happens, the mitigation is given the highest priority as part of the decision-making process.