Natural Resources Committee on Nov. 23rd, 2010

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

It's the actual process. If those wells hadn't been drilled and producing, one would imagine that the concrete casings and all that wouldn't be in the ground and the contamination of water wouldn't have happened, I assume.

[Kevin Heffernan]

That's correct, but realize also that we've drilled thousands, millions in fact, of wells—

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

Sure.

[Kevin Heffernan]

—in North America over the last 50 years, and this has not been a widespread issue.

I don't know the regulatory regime in Pennsylvania, but I can assure you that if you look at western Canada, at Alberta and British Columbia in particular, that's not a commonplace concern.

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

Has Talisman ever been fined for infractions?

[James Fraser]

We have been fined in Pennsylvania three times in the last three years a total of $21,000. None of it was for contaminating surface water.

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

Has it been fined at any time in Canada?

[James Fraser]

You know, I don't have the answer to that, sir.

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

Just so we understand this, when methane gets into a drinking water supply, the water is completely undrinkable. We now have a volatile substance that can be burned right out of folks' tap water.

[Kevin Heffernan]

It depends on the methane concentrations in the aquifer. In fact, there's readily available technology that allows the methane to be separated from the water. It's used in western Canada and probably even in Ontario and Quebec and the Maritimes. Basically, it's a separator that separates the gas from the water.

[The Chair, Conservative, Leon Benoit]

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

We go now to Devinder Shory for up to seven minutes.

[Devinder Shory, Conservative, Calgary Northeast, AB]

Thank you, Mr. Chair.

And thank you to the witnesses for coming out this morning.

First of all, Mr. Chair, I'm very happy to see one thing, which is that the witnesses in this matter of our study, previous witnesses and today's witnesses, are very consistent on the issue of the contamination. They're basically consistently answering in the same manner as we heard before.

This summer, I was in Fort Mac and Dawson Creek on a visit, and I heard about the oil sands mining. I heard someone saying that it costs approximately $700 million to bring out the first drop of oil.

Anyone can answer my questions.

First, how long does it take to drill and actually produce shale gas? I heard that it costs $8 million or $20 million. Also, how does the cost of bringing shale gas to the market impact the price?

[The Chair, Conservative, Leon Benoit]

Who would like to start?

We'll have Mr. Fraser, and then we'll have Mr. Heffernan, if you'd like to add.

You can go ahead.

[James Fraser]

Thank you, Mr. Chair and Mr. Shory.

I believe the question is what the cost is and how it compares with other processes.

[Devinder Shory, Conservative, Calgary Northeast, AB]

I would say, how long does it take?

[James Fraser]

To drill one of these wells typically takes 30 to 60 days, depending on how deep it is. In some areas in which we operate, it's as little as 20 days; in other areas, such as British Columbia, it takes about 45 days to drill a well. Then we complete the well, whereby we fracture stimulate it. That typically can take another two weeks.

Part of the process, though, is that we use what we call pad drilling, whereby we drill multiple wells from the same surface location, and that reduces the disturbance on the surface. If we do multiple wells, then of course it's additive. It's 30 days to 45 days per well to drill a well.

We could typically be drilling wells for 90 to 120 days and then fracture stimulate for another month or so. Then that equipment moves off and that well goes on to the production phase, in which it will produce with a simple wellhead, which looks like a Christmas tree, for as long as 50 years. The surface disturbance is very minimal after the initial drilling and completion phase.

[Devinder Shory, Conservative, Calgary Northeast, AB]

Do you think the cost of bringing shale gas to market impacts the price as well?

[James Fraser]

Absolutely. Shale gas production in North America is a supply-demand phenomenon. That's why the price of gas is down; it's the supply, due to the success of the shale plays in North America. The consumer benefits from the lower costs. But yes, the price is impacted by the cost to develop the resource, or vice versa.

[Devinder Shory, Conservative, Calgary Northeast, AB]

I also heard, Mr. Fraser, in your presentation that shale gas is cleaner than other competing fuels; for example, coal oil or heating oil. It seems that shale gas is not an environmentally challenging issue; it seems as though it is an opportunity.

In your opinion, what is needed to increase the levels of production?

[James Fraser]

Mr. Chairman, a couple of things can increase production. First, you're right that the chemistry of shale gas is typically very high in methane, CH₄, and that means it's a pure source of energy. Therefore, because it contains very little CO₂, typically it is much cleaner burning than other fuel sources, such as coal, for example, and fuel oils.

As to what's required, we think a robust regulatory environment is required. In every area in which we operate, we have to be very open and transparent in the process we take. We think that is a big component of it.

Then we just let the free market operate. Our business is driven by supply and demand, and our goal is to have a fuel source that we can bring to the North American continent at a very competitive price. As a company, our goal is to get our operating costs down to the point where it's economic to do so.

[Devinder Shory, Conservative, Calgary Northeast, AB]

You just talked about the regulations. We all understand that in Canada our provinces have jurisdiction too in regard to exploiting all natural resources, basically. Of course, admittedly, shale gas is a relatively new resource.

In your opinion, do you find that any one province is a model that other provinces should follow in issuing the licences or permits accordingly?

[James Fraser]

Mr. Chairman, right now the regulatory environment in British Columbia is quite robust. That is the place where shale gas is the most evolved in Canada.

Alberta would be a close second. They have a long-standing oil and gas extraction industry. They have long-standing regulation of very robust regulatory environments.

So British Columbia would be the first example I would use and Alberta the second, mainly because British Columbia is more mature in the development of shale gas than Alberta is at this point in time.

[Devinder Shory, Conservative, Calgary Northeast, AB]

We were talking about contamination in the water. Approximately how much water do you use to trace shale gas?

[Kevin Heffernan]

The amount of water used varies a great deal from one place to another. Some shale gas developments use no water. Others—and Horn River is an example that people are probably familiar with—use a great deal of water. It's a function of the mineralogy, the geology, the depth, the length of the well, and the number of fracture stages that are being completed in each well. So there probably is no answer. We say that typically shale gas development requires something between 3,000 cubic metres and 60,000 cubic metres per well. That's simply a function of the geological variability and the depth requirement.

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Shory.

We go to the second round, for three minutes each, starting with Mr. Coderre.

Go ahead, please, Mr. Coderre.