Natural Resources Committee on Nov. 18th, 2010

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

Is there a ratio of the number of employees in the service sector to the well? Is there any data of that kind on what the employment would mean?

Further to that question, what would be the most common technological expertise that would be required?

[Michael Binnion]

There must be a ratio, but I don't know it. I know there are many more people employed in the service sector on an employment basis than in the exploration and production companies, but I'd have to defer to someone who knows that exact number.

In terms of types of jobs, there are just so many. There's construction, because we construct well sites; there's all kinds of labour around the rig itself; there are so many different services that show up there, from cementing to logging to monitoring of your drilling to the rig itself. There are so many different specialty services on a rig site. There are typically 50 to 100 people working on a rig at one time. There are all kinds of different qualifications, from labour all the way to people who are highly trained.

It's a bit tough to bring that down, but you're on to the point that is my current challenge in Quebec: to bring that point exactly down for people on the south shore.

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

You talked about 50 to 100 people on the well. Then, in response to one of the questions, you also said it has been advantageous to the agricultural community in the west because your footprint is quite small.

What is the size of the footprint?

[Michael Binnion]

That footprint would probably be somewhere around a 100 by 100-metre lease while operations are going on. Lease sizes have grown a little bit now, as we're now putting many wells on one platform or one pad, which means we have far fewer pads, but the one pad you have is slightly larger. They're going to as high as 120 by 120, maybe even 150 by 120. The key thing is that once the operation is finished, the well in shale gas produces for 10 to 50 years or so, and those 100 people and all that machinery all go away. This is very easy for farmers to deal with, and they continue to be paid their lease payments for the life of the well.

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

When you look at the regulatory framework and how it has evolved over time with respect to shale gas, what is there within the regulatory framework that you think has worked and has stimulated shale development?

[Michael Binnion]

When Campbell in British Columbia started to deregulate, the B.C. oil and gas business, which had been somewhat languishing, suddenly took off. That was certainly one thing that was successful. We've seen the impacts of the royalty review on the business in Alberta; there is something that did the opposite of stimulating activity.

I have to say, when I look at jurisdictions, and I've worked in several jurisdictions around the world, including the United States and Canada, but also overseas, that Canada—centred, really, in Alberta, where there's a lot of expertise that B.C. and Saskatchewan draw on as well—has one of the best, if not the best, regulatory systems in the world. This is not to say to the people back home that it doesn't have room for improvement.

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Allen.

We go now to the second round. We can go until 12:05, so we should be able to go with five minutes each.

We'll start with Mr. Tonks.

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

Thank you very much, Mr. Chairman.

Thank you, Mr. Binnion, for being here. It's always instructive for the committee to have someone who is actually on the ground and has experience of the kind you've had.

My questions are in relation to the strategic argument that you've used vis-à-vis the relationship that China and Europe have played with respect to the fluctuations and the monopoly, if you will, that led to extreme pricing changes and probably influenced investment strategies and so on.

My question is, first, what is presently happening with respect to Chinese investment? In fact, are the Chinese engaged to the same extent as you've outlined for our interest in the North American context? Are they interested and are they engaged in either investment strategies or technology and development strategies that would impact on pricing and supply/demand?

[Michael Binnion]

I'll give you some anecdotal answers. I know that there is large investment going into natural gas infrastructure on mainland China. Just close to home, there are two large investments that have been made—I know that CNOOC definitely made one and may have made both of them—into the Horn River shale. The real headline was that Encana, our top gas producer, had made a deal to obtain capital from a Chinese oil company in shale gas in Canada, associated with tying up long-term supplies of natural gas that had the potential to be exported to Asia.

I think the answer to your question is yes, but those are a couple of anecdotes that would support it.

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

All right.

The second question is somewhat related to that. Concerning shale gas development, you've made the statement that cap and trade is not the direction to go; it is the carbon tax.

How would that influence investment decisions? Could you walk us through that a bit?

What would be the difference in the application of a cap and trade system with respect to the shale gas, as it would be reflected in investment and in research and so on, as compared with a carbon tax?

[Michael Binnion]

The objection I have to cap and trade systems is that they depend on carbon certificates and they depend on those carbon certificates being limited. The experience in Europe is that political imperatives will then change the number of certificates. This means trusting that we're not going to just print more certificates when a political imperative comes up.

All the discussion in America around the coal-fired industry, which is 50% of electricity in the United States, saying that they have to be given certificates for this whole thing to work, to me just defeats the whole idea of it in the first place. The carbon tax, as I said, is a far more neutral, less distorting way to do it, because it allows consumers, based on price decisions, to make decisions about emissions rather than allowing people to make them based on who's going to get the certificates.

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

Right.

[Michael Binnion]

So in terms of investment, I think a carbon tax system would be a more predictable environment for business to invest in than a cap and trade system based on government's controlling and limiting the number of certificates it issues.

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

Are you involved in the present hearings that are going on in Quebec?

[Michael Binnion]

I am through our Quebec Oil and Gas Association. I am in that our company has also put in its own separate memoir. But the association itself has members who are presenting at the BAPE right now.

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

I see.

In terms of hydraulic fracturing—and questions have been raised by Mr. Cullen and others—does the research satisfy the industry, and can you satisfy, through an environmental assessment, that the risks can be contained? You've said that the problems are with surface spills, ponds, tank leaks, and so on. But you rather diverted away from the actual fracturing process.

[Michael Binnion]

Opponents of natural gas, which are organizations like ProPublica and groups like that in particular, are all funded by political action committees and foundations associated with the Democratic Party, which is also strongly associated with the coal lobby.

The public relations coup that our opponents managed was to link problems associated with conventional drilling, which have existed for 100 years--and we continuously get better at that--to hydraulic fracturing. By making that link in the public's mind, they've been able to point to problems caused by conventional drilling and say, “Oh, you see? This hydraulic fracturing is dangerous.” But we are starting to win back on that issue. We now have a growing number of independent studies and reports showing that the idea that a few trucks pumping water on surface will break through one or two kilometres of solid rock is, if you really think about it, almost ridiculous on the face of it, yet in the public's mind it's a concern.

Within safe depths, the potential for us to fracture to surface or into aquifers is negligible--immaterial--and that's backed up by studies by MIT and the Ground Water Protection Council. Worldwatch has done a review, and Frac Attack has done a review. Most recently the department of environment and energy in New York State has put out a comprehensive report, which I think is going to be a 1,220- or 1,300-page study, and they have concluded that the risks are negligible. Finally, the 2004 EPA study, which was a study of fracking in coal bed methane, which is far closer to surface, also concluded that the risks were negligible.

I think that's one issue on which we're on really solid ground, but it has highlighted that conventional drilling can occasionally disturb aquifers and that human errors in procedures on surface can occasionally create the potential for groundwater contamination, and that's the issue we need to address.

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Tonks.

Go ahead, Mr. Anderson, for five minutes.

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

Thank you, Mr. Chair, and thank you, Mr. Binnion, for being here today.

Decades ago one of our premiers made that comment that we were going to leave the oil in the ground for Saskatchewan residents. I think that was possibly the worst decision that was ever made in our province, because by the time things were done, we were left decades behind our neighbour province, which had decided to make that development.

I'm a bit concerned, because I think I'm hearing some of the same arguments or some of that same discussion today. It just about destroyed us--well, it did destroy us--in terms of population growth. We were leading the population in the west at the time, and when it was done, our population was a third of what Alberta's is. Our economic development lagged by many years. We spent decades taking equalization from the federal government before we were finally able to get away from that.

We've had good development recently, particularly in my area in southeast Saskatchewan. It's made a huge difference to the local economy. This morning you were talking about some of the things that it's impacted. Our young people are able to stay in the communities and stay around. I think that's a concern for all of us who have any rural areas in our ridings.

You mentioned the construction jobs. We have lots of folks around with backhoes and trackhoes and that kind of thing, and it makes it easier for those of us who live there to get services as well. I mentioned employment for our young people, and it's certainly boosted the economy, both locally and in terms of export.

We were talking a little earlier about the impact in Quebec in particular, and I see that the document that was prepared for us by the analysts states that the most noteworthy shale formations in Canada include the Horn River shale in northeast British Columbia and the Utica shale natural gas field in Quebec, which is what we're talking about.

Can you tell me a little bit about the contributions that shale gas in the Utica field can make to the Quebec economy?

[Michael Binnion]

I have to say that what you said about the experience of Saskatchewan is just so obvious to people like us who live in western Canada.

I think I said, walking in, that I was coming from a part of the country where they teach about oil and gas in elementary school and ending up where people really don't know the very basics of oil and gas. Then, in addition, they haven't grown up with the types of impacts you're talking about in a place where it just becomes second nature. It's really hard to convince people of what we know is right in front of our faces in western Canada.

The benefits you talked about are exactly it. It's going to be extraordinarily positive for people on the south shore, who I think are reasonably entrepreneurial. I'm sure they will jump on these opportunities once they understand what they are and once they become real.

I don't know what more to say about that. Part of our communications effort right now on the south shore is to try to show people what it is and why they can have it.

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

I actually think if those of us who have experienced that could communicate it, that would probably help out as well. But it has transformed my part of the world from being an area where it was strictly agricultural, where the small towns were dying. We have young people who are staying around. We have the service industry—you talked about that this morning. We have good employment. We have good-paying jobs, typically in the oil and gas sector, even the ones that you wouldn't call skilled occupations. I encourage people to take a look at those kinds of things when they're thinking about whether or not to encourage this kind of development.

[Michael Binnion]

We do have a diaspora in Alberta from Quebec of people who sought jobs in Alberta, and I know a number of people who are from Drummondville, or somewhere in the regions in Quebec, who are saying, if we could ever have the chance to actually go home and operate in our own experience, our own expertise, this would be....

I had a couple of them at our last conference, actually—with booths at the oil and gas conference in Montreal—trying to promote to people the idea that if they wanted to start up a mud business, or this kind of business, and if they wanted to start it up in Drummondville, or in Trois-Rivières, or some place like that....

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

I guess there are misconceptions, too, about the impact. You talked about surface impact and size, but typically now it's a very small installation left on the property. At home, most everything is done through pipelines. It's oil there mainly, but through pipelines and that kind of thing, so there's very little above ground, very little disturbance, and people have been very happy with the fact that they have that development there.

[Michael Binnion]

We had a golf tournament in Fairlight in Saskatchewan. We have an oil field there in the Antler area, and we have a golf tournament for all the local landowners. They were all asking: When are you drilling more wells? When are you coming back?

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

They've just moved in with oil in our area, and I know that people are looking for the opportunity to have those wells on their property. They're three miles from where I live right now, so I'd love to have a few of them.

I wanted to just follow up a bit. You had mentioned later infrastructure needs and said that the federal government could have some responsibility there. What sorts of infrastructure development are needed for shale gas? It's probably different in different parts of the country.