Good afternoon. I'm Richard Dunn, vice-president of government relations for Encana. I appreciate the opportunity to be here and talk to you on what innovation means to the natural gas industry in Canada. As you know, this is a significant industry that accounts for some 500,000 jobs.
Today I'll outline how innovation continues to change our business, not only from technical perspectives but also how innovation has brought industry-wide changes, structural changes, the likes of which are unprecedented in North American industry.
Innovation in the sector takes many forms, from incremental operating improvements to cutting-edge R and D efforts focused on improving both technological efficiencies and ensuring the resource is developed as responsibly as possible.
Encana, the largest natural gas producer in Canada, has been at the forefront of industry advancements such as pad drilling and multi-stage hydraulic fracturing. These huge technological leaps have allowed us to unlock natural gas from formerly inaccessible unconventional reservoirs, such as shale and tight rock formations. Innovative production methods, and development and deployment of cutting-edge technology, such as polycrystalline diamond bits, mean we've been able to access a wealth of natural gas resource in Canada, certainly estimated at well over hundreds of years of supply at current production rates—current production rates being some six trillion cubic feet a year, and recent estimates placed the western Canada resource at 4,600 trillion cubic feet, so a vast amount when compared to current production rates.
In addition to our own internal focus on innovation, we support external R and D efforts through third-party partnerships with academia. Recently, for example, Encana made a five-year pledge of $1 million to support research activity at the University of Calgary's Institute for Sustainable Energy, partnering with Alberta Innovates—Technology Futures, which is a Government of Alberta-sponsored organization dedicated to helping industries find solutions and move technologies to market. A portion of this investment was directed toward an endowed chair dedicated toward research in unconventional natural gas.
Backed up by cutting-edge core analysis facilities, the chair, along with associated grad students, focuses on unlocking the technical challenges of Canada's unconventional reservoirs, thereby further enhancing Canada's energy supplies.
The industry puts a high value on collaboration as it applies to innovation. At Encana, for example, we have an environmental innovation fund that has invested over $40 million over the last three years to economically improve the industry's environmental performance and to provide capital for projects that focus on implementing innovative technology.
A significant portion of these investments is directed to early stage start-up companies and industry projects. An example of this is the funding of Seal Well Inc.'s development and testing of ultra high-integrity well sealing plugs made of a fusible metal alloy. Targeted for use in the abandonment of wells at the end of their producing life, this product is being developed as a secure, long-life, and cost-effective alternative to conventional cement abandonment plugs.
Producers certainly recognize the importance of collaboration and innovating together on areas of responsible development. A good example of this is the B.C. implementation plan for the management of boreal caribou, established through the collaboration of industry partners along with the B.C. oil and gas commission and the B.C. ministry of the environment.
This plan manages access to land for development during the critical calving period and includes such items as promoting the use of meandering seismic lines, which limit the line of sight between predators and prey. Industry has committed to provide up to $10 million in funding over the next five years for boreal and mountain caribou research. In fact, just before coming here we were on a conference call approving the program for this year's research, a large part of which is collaring and tracking caribou and the calves.
Another item promoted in the boreal caribou plan is the use of pad drilling. Pad drilling means multiple horizontal wells are drilled from a single pad of about 250 metres by 250 metres on the surface. These wells tap into about 15 square kilometres of reservoir buried thousands of metres deep, accessing tens of billions of cubic feet of natural gas.
This innovation of the single pad eliminates the need for hundreds of vertical wells and well sites, along with associated roads and pipelines. It's a case where technological innovation has produced a win-win of cost-effective operations while minimizing the environmental footprint on the land.
As producers, we recognize that shale gas production is certainly a water-intensive process through the hydraulic fracturing, and we supported R and D efforts to ensure sound water stewardship. For example, in 2009 a collaboration of companies operating up in the Horn River Basin up in northeast British Columbia worked with the province of B.C. to examine non-potable water alternatives for our operations. This was accomplished through Geoscience BC, a provincially funded government organization that has launched a number of projects to identify and map subsurface aquifers suitable for water sources in the basin.
The Debolt source water treatment plant, a partnership between Encana and Apache, highlights the results of these efforts and provides a tangible example of companies working together to minimize surface water impacts. Supplying essentially all the water needed for both companies' hydraulic fracturing operations in the Two Island Lake area, the facility produces water from the Debolt formation, which is a deep subsurface aquifer containing saline water unfit for agricultural or human use.
Finding alternative water sources is just one way the industry, principally through the Canadian Association of Petroleum Producers, CAPP, has taken a proactive approach to address concerns regarding hydraulic fracturing. The industry has developed a series of industry-wide hydraulic fracturing operating practices, which are designed to protect the quality and quantity of groundwater. Companies are implementing these practices in real and meaningful ways. For example, all producers have committed to disclosure of chemicals used in hydraulic fracturing and have collaborated with provincial regulators to implement mandatory reporting systems of same.
Additionally, in Encana's case as well, we have worked closely with our fluid suppliers to implement the practice called the fluid additive risk assessment, with the result of moving to the use of greener hydraulic fracturing fluids. At Encana we're proud—having implemented this practice—of taking the step to eliminate the use of diesel, benzene, and heavy metals, such as cadmium, arsenic, chromium, lead, and mercury in our hydraulic fracturing fluids. Further, we have shared this work with both regulators and other companies operating in the industry.
Innovation is also apparent in the way industry is working to find new markets for our products. The advancements in unconventional natural gas have created a new supply and demand dynamic of sustained low commodity prices due to the great abundance of unconventional natural gas we've unlocked in the past few years. At the same time, our traditional customer, the United States, does not need us to the extent it once did, due to the prolific shale plays being developed south of the border as well. The U.S. market is shrinking dramatically for Canada, as is the level of U.S. investment in the Canadian natural gas sector.
In response, industry and Encana have embarked on a number of initiatives to boost domestic consumption, such as providing liquefied natural gas for a recently announced pilot by CN Rail that runs locomotives on liquefied natural gas. The environmental benefits of natural gas in transportation are clear, up to 30% fewer CO2 emissions and up to 90% less smog-causing particulate matter. Continued government support and commitment to implementing the natural gas road map, which includes a commitment to research and development, will help hasten the transport sector's option of increased natural gas use.
However, increasing domestic consumption is clearly not enough; we also need to find new markets, with the U.S. market shrinking. Through Encana's partnerships with global investors such as China National Petroleum Corporation and Mitsubishi, we know that Canadian producers' technological sophistication and commitment to responsible development, along with Canada's supportive political and regulatory climate, are major enablers in attracting foreign direct investment.
This is important because we are witnessing a paradigm shift as we move from a model of U.S.-based investment and export to Asian-based investment and export.
Asian investors are seeking a reliable long-term supply to meet the needs of their growing economies. At the same time, Canadian producers need to diversify markets. This has resulted in industry applying its innovative focus to LNG export, with a number of terminals planned for the west coast.
The LNG market is rapidly evolving as these proposed facilities continue to advance to both project and regulatory approvals. Canada is very well positioned to supply feedstock to world markets, particularly Asia, where energy demand is robust and increasing.
Canada has a long, proud history as an export nation, and a political will exists both federally and provincially to diversify our markets for natural gas. This is crucial for the industry's continued success; however, Canada is certainly not alone in recognizing the export opportunity. We must all continue to implement policies that will provide us with a competitive and level playing field in order to compete with LNG projects in the United States and Australia.
The adoption of measures such as CAPP's proposed tax reclassification for LNG facilities will positively influence investment decisions still to be made for these west coast facilities and will ultimately help us realize the commercial potential of these new markets.
In closing, whether exemplified through operational improvements, support for research and academia, collaborative efforts by industry players to address stakeholder concerns and minimize the environmental impact, or by seeking new markets and end uses for our projects, innovation has been and continues to be fundamental to the success of the Canadian natural gas industry. That same spirit of innovation that has radically changed the industry in recent years will be just as pivotal in years to come as we capitalize on the new market opportunities before us while leading the way in responsible development of the world-class resource we're endowed with.
Thank you very much.