Mr. Speaker, I am pleased to speak on the bill before us today. Some consider Bill C-25 a minor amendment to the Canadian Petroleum Resources Act, but I would like to think it can be viewed as an important message to industry.
Thousands of jobs in my riding are directly or indirectly dependent on the current boom in the petroleum sector. But if industry's confidence in government intentions were to be eroded many of those jobs could be lost.
Although this amendment only directly affects one oil company and community, I hope it is an indication this government realizes the importance of providing our resource based industries with predictability and stability in the policy environment. If this government starts sending signals to the private sector that it is safe to make long term investment plans, it will lead to economic growth and the creation of far more permanent jobs than government can hope to achieve through any temporary make work projects.
There is a long history leading up to this current amendment. The first oil well was drilled at Norman Wells in 1920. Since then it has grown to be the fourth largest producing field in the country. In 1944 Imperial Oil and Canada signed the Norman Wells proven area agreement which included just under 3,300 hectares within its boundaries. When the Canadian Petroleum Resources Act came into force the Norman Wells proven area was exempted from the new act. Just as the bill before us does
today, subsequent renewals and agreements have been similarly exempted.
This amendment does two things. It extends the timeframe past the current expiration date of 2008 which allows Imperial to plan for long term recovery. The amendment also changes the 1944 boundaries to incorporate the entire field. Changing the boundaries to exclude non-productive portions and include new fringe areas results in an addition of 350 hectares to the old proven area.
Canada and Imperial will not have to determine whether oil comes from pockets inside or outside the former boundaries. This will solve potential administrative problems for royalty and share calculations.
The government undertook numerous consultations when arriving at this agreement. Pursuant to the spirit and intent of the land claim agreement under negotiation with the Sahtu Dene and Metis during the same period, the government initiated discussions with them to ensure that the views of the long term stakeholders would be taken into consideration when contemplating any prospective changes to the proven area agreement.
Most other people living in Norman Wells are in some way directly dependent on the oil and gas extractive industries. Many will leave once oil production ceases, however the vast majority of the Sahtu peoples will remain.
The Sahtu agreed to this amendment at the end of March. It became apparent that Imperial's planned investment of $30 million for this fiscal year might be jeopardized if concurrence from the Sahtu was not forthcoming. Although it is probably not binding, the Sahtu made their acceptance contingent upon the enactment of Bill C-16, the Sahtu Dene and Metis Land Claims Settlement Act.
I am not generally a cynic, but I cannot help wondering about the timing of these two respective bills in the House. What would happen if Bill C-16 were held up indefinitely or even defeated? Would the government also have to repeal this bill?
I fully appreciate that this represents a significant opportunity for the Sahtu peoples to apply some indirect pressure on the government to proclaim an agreement they have anticipated for decades. But is it responsible of the government to enter into verbal agreements of this nature linking any two pieces of legislation?
The government also consulted with the Canadian Association of Petroleum Producers to seek its views on the principles of the amendment. The government assured CAPP this agreement would not set a precedent for the issuance of rights anywhere else in Canada.
Again the government gave assurances it cannot guarantee, this time promising this agreement would not be linked to decisions in the future. As we all know it is the job of lawyers to find precedents they can use to the advantage of their clients. Governments have also been known to fall. How can this government give a guarantee to other petroleum producers that this agreement does not set a precedent down the road?
Over the past decades the resource based industries have struggled against global recession, depressed prices, unpredictable policy and investment climates and increasing taxation from all levels of government.
Although the Ministry of Natural Resources has just released a report stating that Canada falls somewhere in the middle of the international competitive range with respect to taxation rates in mining, that is not the perception of the industry. The mining industry looks at the high marginal tax rates. Those have driven Canadian exploration and investment dollars overseas to South America. This government has the opportunity to reverse that trend by developing policies to encourage domestic investment.
In the petroleum sector depressed oil prices have resulted in massive layoffs and extensive restructuring of the industry. In the last couple of years we have seen a surge in natural gas prices leading to the current boom, but oil prices remain low and the future uncertain.
The cost overruns at Hibernia would not have been debated so strenuously if oil prices were stable at $50 U.S. a barrel, but they are not. Oil prices have just barely hit $17 on the heels of a five year low, dipping below $14.
In this erratic global market, oil companies must make significant investment decisions based on many factors, not just the price of oil. Confidence in government policy is a critical component in those decisions.
This amendment in giving force to the Norman Wells amending agreement signed in April provides Imperial Oil with the security of tenure it needs for long term planning. It has been assured there is time to realize a return on major investments in new technology. These investments are essential to maximizing production from this field.
This amendment is good for Imperial because it provides a stable planning environment. It is good for the Sahtu Dene and other local residents because they can rely on employment opportunities and a cash infusion into the local economy for
several more years. It is good for the Canadian people because it will generate additional oil revenues and royalties.
I hope this amendment means that the government now recognizes it cannot cripple our natural resource industries through unfair taxation or short-sighted policy initiatives.
Canada is very dependent on revenues generated by the petroleum sector. The imposition of additional taxes such as the rumoured carbon tax could dramatically curtail growth in this sector, throwing many thousands of people out of work. There must be a balance between environmental concerns and jobs for young Canadians.
According to the Ministry of Natural Resources, Canada is expected to remain a net oil exporter until 2008. Within 25 years we will still export 75 per cent of our heavy oil production but we will import almost twice as much light oil. To offset these effects government must encourage domestic exploration for more reserves.
The decline in northern exploration has been so dramatic that even the National Energy Board was scheduled to permanently close its office in Yellowknife in March.
To date, aside from Bent Horn in the eastern Arctic offshore, no new major oil or gas prospects have been found in the Northwest Territories, indicating there are not enough reserves to warrant field development or pipeline construction.
With exploration levels falling off, industry must invest in technology to improve recovery from known reserves.
Since 1981 new technology has increased the yield from the Norman Wells field from 17 per cent to 40 per cent. This is attributable to horizontal drilling, water injection and other improvements in recovery techniques.
More recently, in February approval was granted for a propane injection pilot project in the proven area. It will assess the technical merits of a propane miscible flood for achieving increased levels of recovery over a three year period. At the end of that time Imperial should have a pretty good idea how much more oil is recoverable from the field.
As of December 1992 a little over half of the recoverable reserves remained in the ground, approximately 125 million barrels, but this may improve substantially if the propane injection proves feasible. It could ensure that the field produces far more oil than previously thought possible thus ensuring stability in the regional economy for another 20 to 25 years.
Major investment in this technology is practical in light of the security that this amendment offers.
In summary, I would like to voice my support for this bill because it provides predictability for Imperial's planning horizon and is profitable for the regional economy. It will give Imperial the confidence and security of tenure necessary for it to invest in new technology to maximize recovery from this field. This amendment will also provide economic stability and long term employment opportunities in the Norman Wells region.
Finally, it is my hope that the royalties and revenues which accrue to Canada from maximizing the productive capacity of this field will contribute to the reduction of our national deficit.