Natural Resources Committee on March 1st, 2011

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

Thank you, Chair.

Thank you, gentlemen.

Mr. Lehrmann, just for the committee's interest, the study we're engaged in right now is on the energy security of Canada, a topic relatively undeveloped here in the country. We've heard from a number of energy companies, a number of oil companies, that they have no aversion to, and in some cases they desire, an energy strategy for Canada. Do you, as Chevron's representative here today, have any opinion on that?

[Jeff Lehrmann]

I think for any business, certainty in the environment in which we operate is of value to our business, so to understand the policies of whatever area we operate in is important. It can add value for us to make current and future business decisions.

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

In terms of export policy, in terms of foreign ownership policies, when it comes to the energy sector, has the Government of Canada given explicit direction to you, given you any sense of what the guidelines are for Chevron over the next 10 or 50 years?

[Jeff Lehrmann]

Based on my knowledge, there has been no direct suggestion that would give indication to our business interests here in Chevron or in Canada. We are looking at the vast resource potential that is here within Canada, in Atlantic Canada, in Alberta, and in the Arctic. We believe that we can bring to bear our expertise and our performance to be able to realize those resources for the benefit of Canada and potentially the rest of the world.

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

Thank you.

To Minister Skinner, with regard to the Wells report, we heard from the mayor of Bay Bulls, and heard what I think committee members would agree was an impassioned plea. One of the recommendations that came out of the report asked for the C-NLOPB to create an independent safety authority. In order to do that, I believe Newfoundland has to do it in conjunction with the federal government.

Have discussions begun to create such an independent safety authority?

[Shawn Skinner]

The Province of Newfoundland and Labrador has supported that recommendation. We have engaged with federal officials on trying to see that recommendation get satisfied.

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

Do you have a sense of when that will be created? Do you have a timeline, do you have a deadline, as to when the independent authority would be established?

[Shawn Skinner]

At this point in time, I can't give you any timeline. There are a number of legislative amendments that we see would need to be made. It does involve the C-NLOPB. It does potentially involve Nova Scotia, maybe, in terms of the accord that Nova Scotia has. A number of things would have to be done.

At this point, I'm not in a position to give you a timeline. We immediately supported the recommendation. We immediately contacted the federal government. We are hoping to, with some urgency, move it forward. But I don't have any sense of a timeline at this point.

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

Thank you.

Mr. Lehrmann, there have been some questions over the regulations that exist in Canada on the three coasts. The three coasts are obviously very different operationally. They look very different to you as a company.

This is your field of expertise, this exploration and development. Does Chevron believe there are some places in the ocean environment where it's not suitable to drill for oil?

[Jeff Lehrmann]

Each opportunity is dependent on many factors. There's the subsurface, the sea conditions if we're talking offshore, the available technology, and the practices. Our role in the partnership there is to comply with all regulations and requirements as we see fit, to bring to bear our capabilities there.

I'll go back to our operating principles: do it safely or not all, and there's always time to do it right. If we do not believe it's safe to execute any operation, we will not do it.

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

To that specific question, then, a recent report from a U.S. presidential panel on Arctic drilling said that there's no ability to deal with blowouts in Arctic conditions. That's on the U.S. side; I assume it has to be similar for the Canadian side--the same water, the same ice, the same conditions.

You won a bid for $103 million for drilling rights in the Arctic. You're bidding again for another $103 million for 200,000-plus hectares. The same-season relief well has been argued against by your company and other companies...the ability to drill same-season relief wells, which we know is a challenge in the Arctic.

After the experiences in the gulf, though, is it not prudent, under the stipulations that Chevron claims, to put a halt to continuing to develop these leases if you're not able to contain a blowout in a same-season manner?

[Jeff Lehrmann]

I would have to go back to the performance in the Beaufort during the sixties and seventies, when almost 90 wells were drilled and executed efficiently without blowout there. I look at the performance over the last three decades since that time with regard to advancements of technology and capabilities that have come to bear. We have the NEB review, which is going to explore those very questions there.

We're going to be a primary participant in that discussion, because we believe we can bring to bear the capabilities and the processes to be able to effectively and safely operate in the Beaufort. The reason for our commitment there is that there are vast resources that have been discovered there. We personally, at Chevron, have ten discovery leases in that area.

So the potential is proven there. It's an important energy source for Canada and the world. We're committed to working with the regulators to find efficient ways to explore and produce there.

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

I understand that, and I understand that the resources may be vast. The question I have....

You speak proudly of Chevron's record, but there of course have been blemishes, if we can say...the Ecuadorian experience, what's happened in New Jersey, Salt Lake City, the Shetland Islands, Angola, California, the Louisiana gulf itself. There have been problems. The company is not without blame in cases of spilling many millions of barrels, in some cases.

I don't understand, though; if you're committed to environmental stewardship and protection of the environment, we know the importance of at least having the capacity of the same-season relief well, which is currently on the books in Canada. Your company and others argued against this regulation, partly because same-season relief wells are impossible to drill in an Arctic environment. The U.S. presidential panel came down and said that there's no ability to deal with blowouts in Arctic conditions, and warned against issuing any permits on the U.S. side. This is not a panel struck by Greenpeace; these are folks who work in the industry. They were set up by the President.

Shell has scrapped its plans to drill in the Arctic this year. You folks are going ahead.

[Jeff Lehrmann]

Let me just clarify, Mr. Chairman, that Chevron has not requested the sanctions and relief policy being dropped. We have never argued that. What we have made a commitment to is applied technology and advancement to accomplish the goals of what we want to do there.

In 2006 we entered into a technology development program with Cameron International to develop a new generation of secondary well containment that is advanced far beyond what we use today, which enables both shearing and sealing at the same time there.

We're in the process. The proof of concept has been accomplished there. We're in final testing there. We're looking forward to getting certification for that. That type of technology and capability we would be bringing to bear in the NEB review.

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Cullen.

We'll go now to the government side, to Mr. Anderson, for up to seven minutes. Go ahead, please.

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

Mr. Lehrmann, it's great to have you here today.

I want to follow up on the technology issue. Before last summer, we had talked about the blowout preventers and had some folks in to explain how they worked. What's different about the new technology that you're talking about, in terms of containment?

[Jeff Lehrmann]

Much of the design of the technology is very akin to many of the recommendations that came out of the Macondo incident in the Gulf of Mexico. It's really looking at the capability to handle very large pieces of pipe, very heavy pieces of pipe, and the ability to shear that pipe and seal it in the same operation.

We've proven that the concept works. We're doing the testing, both for a system that would be installed at surface and for a system that would be installed subsea. That's been focused on the Arctic environment, but, as you can imagine, many people have inquired about that system, based on the outcome of the Gulf of Mexico incident.

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

You mentioned a little bit earlier about abandoning the Lona well. I'm just wondering, can you tell us—I don't think the committee has actually covered this—what you do when you abandon an offshore well? What's the procedure and what's the final result?

[Jeff Lehrmann]

As we shared, among many of the incremental requirements with the CNLOPB was a review of the termination program before we were to execute it, based on the information that we gained through the reservoirs, the pressure, and the conditions that we had.

We worked with the regulator to review that. The regulator then approved it, as well as was on site to observe the operation. What's involved with an abandonment or well termination program is once you're completed to TD, you've got a well bore in the well where you've installed a series of, in this case, four different sets of pipe or casing. It is then secured and placed with cement that both holds that in place as well as holds back the pressure and the fluids there. Below that, you have an open-hole section.

The program is designed to set cement plugs across those intervals to contain the pressure or the migration pathways of those fluids as you move up the well bore. In this case, we set four cement plugs in the open-hole lower section.

Then in the casing section, we set mechanical devices—packers, cement retainers—that then sealed that part of the well bore, set a cement cap on top of that, pressure-tested each one of those plugs to ensure it would hold and had integrity, and then on the last cap on the top of the surface, near the sea floor, we set that final plug. It is tested, both positively and negatively, and we take the pressure off to make sure that it holds back that pressure.

Once all of those conditions are met there, our philosophy is to keep at least three different barriers to flow in the well bore at all times and in the final abandonment.

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

Minister Skinner, we've had quite a lot of discussion about shale gas at the committee over the last couple of months. I take it that you're comfortable with the development of shale gas, that you think it can be done safely. Is that accurate?

[Shawn Skinner]

We don't really have any shale gas, so it's not something I would want to pass a comment on. It's not something that, in my time of being minister, we've had any discussion on. It's not really something we have in the province.

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

One of the other things we talked about to the mayor the other day was manpower. He talked about the positive effect of the oil and gas industry on his community.

I'm just wondering, what are you doing to address the manpower issue? Do you believe you're going to have one in the future? In western Canada we do have challenges with that, and I'm just wondering what you folks are doing about that.

[Shawn Skinner]

We certainly have manpower--or personpower--problems in trying to get people ready for the developments that are currently occurring and that we see occurring into the future.

About four years ago we struck a skills task force to do a review of the projects we had going and the potential projects we saw coming to Newfoundland and Labrador. We worked with the unions to identify the requirements—the people who would be needed, the specific job requirements. We did inventories of the people we had available. We worked with the unions to see how many people working in western Canada or in Ontario or other parts of the world we might be able to bring back, and we made investments in our high schools and our junior high schools to attract our younger people into the skilled trades. With this, we have been able to increase the number of people we have available. We've also tried to attract non-traditional people, such as women and persons with disabilities, while working on our immigration policy. We don't have a lot of immigration in Newfoundland and Labrador, but we've developed an immigration policy and we are trying to attract more immigrants into the province.

We've had some success in reducing what we felt was going to be a shortage of supply, but still there will be opportunities for people to come in and work in Newfoundland and Labrador as these projects mature and as new projects come on stream.

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

You talked a bit about the necessity to diversify, and you are the minister responsible for forestry, agrifoods, and natural resources. I'm wondering if you could address that a bit more. What kinds of things are you doing to diversify your economy? You have some new resources, but I'm wondering if there are additional initiatives that you're taking.

[Shawn Skinner]

The principle we have as a government is that we will use the money that we make from our non-renewable resources to try to make sure we put money into our more renewable resources, and we have certainly done a lot. To use forestry and agrifoods as an example, we are opening up more land. We have a lot of land in Newfoundland and Labrador. Very little of it has been prepared for agriculture, so we have programs. Working with the federal government through the Growing Forward program, we have funds available for farmers to open up more land. We've done work with the local agriculture industry, the Newfoundland and Labrador Federation of Agriculture, to attract younger people into agrifoods and into the agriculture industry. We are working with a lot of our research firms to find spin-off opportunities that would come from our oceans.

We've basically used the oceans for the last 500 years to extract resources, to take fish out of the water. We now have industries here in Newfoundland and Labrador that are helping us with things like using remotely operated vehicles, working in harsh Arctic conditions, North Sea conditions, using the wind and tides. We now refer to a blue economy, by which we mean the ocean. There are spin-off industries and the expertise we're developing here in Newfoundland and Labrador can be taken elsewhere. We're doing things with ice studies and icebergs that come down from the Arctic and pose hazards to ships and to offshore oil rigs.

So there's work like that we're doing. We're trying to diversify our industries, trying to build on our successes. Wind farms are a big thing. We have a lot of wind in Newfoundland and Labrador. We have a couple of pilot projects going. One is off our southern coast, where we're powering a whole community, a community called Ramea, with wind energy. It's a pilot project, and we'll look at those results over the next couple of years and see what other isolated rural communities we're able to provide electricity to by using wind power as opposed to diesel generation.