Natural Resources Committee on Feb. 15th, 2011

[The Vice-Chair, Liberal, Alan Tonks]

So it's between the witnesses, then.

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

Yes.

[The Vice-Chair, Liberal, Alan Tonks]

To our witnesses on video, we've had problems with our translation, so if we could just wait a moment....

[The Chair, Conservative, Leon Benoit]

Okay, where were we?

Mr. Bloom, would you like to complete your answer?

[Douglas P. Bloom]

Okay, let me try to....

[The Chair, Conservative, Leon Benoit]

If you remember the question.

[Douglas P. Bloom]

I'll give you an answer. Hopefully it matches up with the question.

[Voices]

Oh, oh!

[The Chair, Conservative, Leon Benoit]

You can kind of talk about whatever you want here.

Go ahead.

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

The question was on whether a good time to develop the resource is when the prices are low.

[Douglas P. Bloom]

Thank you. We've seen what's really been driving the expansion of our business. Our business is a gas gathering, processing, and transportation business, so we are the connection to the supply--which in our case is in northeastern B.C. and northwestern Alberta--and markets. What's driving us is really the rapid increase in production growth that we're seeing in these unconventional gas plays.

In response to your question about low prices and whether this is the right time to develop, I suppose you'd really have to ask a producer to get their perspective on it. However, what we've seen in our producer customers--and we deal with many--is that they have applied some very advanced technologies that are helping to substantially reduce the cost of developing natural gas, especially in these unconventional plays. Even though prices are probably lower than they'd like them to be, they're nevertheless able to support and sanction their projects, which in turn creates a demand for the infrastructure that we provide.

At the end of the day, their cost competitiveness is critical to them, as it is with us, and it's really advances in technology that have allowed them to reduce their costs and operate within what we would generally perceive as a relatively low price environment.

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

Is shale gas more cost-competitive now than conventional gas? Is that what you're implying?

[Douglas P. Bloom]

In some basins it is more cost-competitive than conventional gas. It's hard to make a generalization like that, because each basin and each producer has a different cost situation, and supply basins are different.

That said, what we've seen, not only in the basins that we connect customers in in northeast B.C. but also in the other supply basins in which Spectra Energy is active in North America, is that these unconventional gas plays have become among the more leading and most cost-competitive regions to produce gas from. In some cases we're still seeing continued development of conventional gas, but in other areas we're seeing declines in conventional gas production. From that, I think you could make the assumption that in those areas, additional conventional gas production isn't as cost-competitive.

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

To the folks at Cenovus, I'm just wondering if you can give us a bit of an explanation of your involvement with the Chipewyan Prairie Dene First Nation and the aboriginal folks around your developments. We've talked about that a bit today. I'm just wondering about your perspective on that.

[The Chair, Conservative, Leon Benoit]

Go ahead, Mr. Campbell.

[Jim Campbell]

Thank you.

We're very interested in ensuring that aboriginal communities share in the benefits associated with our operations. I can't speak to specific commercial arrangements we've made with the first nations, but as I mentioned in my remarks, in 2009 we spent $187 million with aboriginal businesses. The number I got this morning was that in 2010 we spent $125 million with aboriginal businesses in procuring either services or materials.

For example, one of the aboriginal businesses that provides services to us started out a few years ago providing catering services in one of our camps. That year, 2007, we paid them $177,000. Last year, they had grown their business with us to $12 million. We think that's great for them. They're building capacity, they're employing people, and we're proud to be associated with that.

[The Chair, Conservative, Leon Benoit]

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

Mr. Coderre, you have up to five minutes. We're in the second round.

[Denis Coderre, Liberal, Bourassa, QC]

Thank you, Mr. Chair.

Thank you very much.

Mr. Bloom, the first thing I was impressed with is that you have a program called “Call Before You Dig”. Maybe if you come to Quebec for shale gas, it might be appropriate to have the industry calling people before they dig.

It's a joke, but it's pretty serious, in a sense, that you have that cultural principle to be inclusive. What's your view? We saw there is shale gas and it might be the future, but it seems there was a major problem, specifically in Quebec, in the relationship with the industry and the population. Some of the people want to be aware of a situation before having to see what's going on in the field.

What advice would you give to our committee about what the relationship should be with new energy? I'm asking because it's new for us, although it's not new in western Canada.

[Douglas P. Bloom]

Thank you.

I'll start by saying I'm not personally familiar with the situation in Quebec and some of the issues you refer to. I can speak about the kinds of things we do in our business.

In many cases we expand our infrastructure in areas where we haven't had natural gas gathering and processing infrastructure before. In those areas it's very important for us to get into the local communities and begin consultation early. We consult with communities, we consult with landowners who could be in areas where we would situate pipelines or other facilities, we consult with first nations communities, and we try to take their input and reflect it in the development plan that we arrive at when we apply for new facilities.

[Denis Coderre, Liberal, Bourassa, QC]

This is a question for Mr. Campbell and Mr. Bloom. We had a person who was in charge of the round table for the future of energy, and we were talking about the problems regarding what I call the regulatory process or the monitoring process. Now I'm pleased to see, Mr. Campbell, that you have new technology, but it seems that at some level, the right hand doesn't know what the left hand is doing at the government level, or at least there is a perception there.

So Mr. Bloom, since you've been involved with the regulatory affairs since the beginning in 1987--and Mr. Campbell, you're living it too--what would be your recommendation for that purpose? I believe there is a problem with the monitoring process. I agree with the panel and what they were talking about, but you live it every day. We can talk about smart regulation or whatever. What's your position on that?

Mr. Campbell can go first, and then Mr. Bloom.

[The Chair, Conservative, Leon Benoit]

Go ahead, Mr. Campbell.

[Jim Campbell]

Thank you, Mr. Chair.

I think a number of the panels that have reported recently have pointed out issues concerning monitoring. I think from Cenovus' perspective, we want to ensure that the communities where we live and work are better off, so we want to ensure that our operations are safe. We want to ensure that the monitoring of our operations is as good as it can be and makes our stakeholders more comfortable that we're doing the right things.

From Cenovus' perspective, we would hope that the various levels of government--federal, provincial, and sometimes municipal--and the industry would work together to design the best possible monitoring system we can have. I think that's what has begun now, and we'll work with those organizations to ensure it happens.

[Denis Coderre, Liberal, Bourassa, QC]

Mr. Bloom, do you believe that when we talk about a national strategy with regard to the issue of monitoring, we should probably take a look at the provincial and federal levels more specifically?

[Douglas P. Bloom]

Could you help me with what you mean by monitoring? I'm just not sure I'm following.

[Denis Coderre, Liberal, Bourassa, QC]

Monitoring might refer to issues with the water, the environment, or the air, or to the relationship between government and industries. You made the point that the regulatory process was okay. The last panel of several panels said we might have a situation at the National Energy Board that we should take a look at.

I'd like to hear from you on this, because you have industry perspective. You're living it.

If there's no problem, there's no problem, but I believe that specifically when you look at what Dr. Schindler said regarding some of the monitoring processes, specifically those for the water, the fish, and all that....

I'm not an expert and I'm not a scientist, and that's why we have witnesses. From your own perspective, do you believe that the monitoring process right now for oil sands or natural gas is accurate?