Proceedings of the Standing Senate Committee on
Energy, the Environment and Natural Resources

Issue 5 - Evidence - March 11, 2008


OTTAWA, Tuesday, March 11, 2008

The Standing Senate Committee on Energy, the Environment and Natural Resources met this day at 5:30 p.m. to examine and report on emerging issues related to its mandate.

Senator Tommy Banks (Chair) in the chair.

[English]

The Chair: I see a quorum. It is my intention, barring any objection, to conclude this meeting at exactly 6:25 p.m. — we can all be guided by that on the clock — for a variety of reasons, including the fact that I have to catch an airplane and other senators have places where they have to be.

I would like to mention that we are fairly well along with our analysts and in completing our work plan, which I will report on because we will be working on it within the next couple of weeks. We will have it pretty well nailed down by the time we come back.

Travel to the Arctic, where we are all going, will be during the week of June 2. The plan is to leave on a Sunday — it might be June 1 — and we will be done and home on the Saturday. Please mark that in your calendars. It is a committee workweek. This is not an option. We are all going. It is not a break.

Today, so that we can take the greatest advantage of our guests, we will hear advice about our travel there. We have with us Patrick Borbey, Assistant Deputy Minister, Northern Affairs, Indian and Northern Affairs Canada, INAC; Giles Morrell, Director, Oil and Gas Resources Management, Northern Affairs, INAC; and Sheila Riordan, Director General, Northern Oil and Gas, also from INAC. They have a presentation and then we will have questions.

Patrick Borbey, Assistant Deputy Minister, Northern Affairs, Indian and Northern Affairs Canada: It is a pleasure to be here with my colleagues. I want to explain that Sheila Riordan is the new director general responsible for the area of Northern Oil and Gas. It is her second day on the job, so I thought I could have her here but spare her the duties of having to present and answer questions. For the real expert, you will have to look to my right, to Mr. Morrell.

We have a deck, which we will fly through as quickly as we can. If you look at the map in the corner of the first page, it indicates the responsibilities for oil and gas in the North. INAC is responsible for oil and gas when it comes to the Northwest Territories and Nunavut and the offshore in the Arctic, while NRCan, Natural Resources Canada, is responsible for the offshore in the Atlantic and Pacific, as well as north of Quebec and Hudson Bay.

The Chair: Where we are going is INAC's responsibility. We will not be doing much in the Eastern Arctic with this committee. Other members of the committee will be travelling with the fisheries committee to Nunavut and thereabouts. We will be concentrating on Yellowknife, Inuvik and Tuktoyaktuk. You can help us out by bearing that in mind.

Mr. Borbey: You will see that the Yukon is not highlighted there. In the Yukon, we have a devolution agreement in place. Onshore oil and gas development is now the responsibility of the Yukon and offshore remains a federal responsibility.

I woud also mention that NRCan has some responsibilities with respect to pipelines. For example, the Alaska Pipeline Project would be under NRCan while the Mackenzie Gas Project is the responsibility of Industry Minister Prentice. He carried that with him to Industry Canada. However, we are working closely with them and other federal bodies that have some regulatory responsibilities.

On the next page —

[Translation]

I will make my presentation in English, but you have a copy in both languages and you may ask questions in either language, as you choose.

[English]

The next page is simply the list of issues we want to cover today in terms of the structure of our presentation.

Slide number 3 is a reminder that the North is vast, huge and varied. It has carbon resources from peat to coal, oil and gas, and we have to remember that diamonds are also a by-product of carbon.

It is also varied from the sub-frontier offshore, a great diversity, to the basins onshore adjacent to the provinces, to the onshore and offshore basins, and even to the remote Arctic offshore. I will explain that later.

I basically want to emphasize the spectrum of opportunity in the North. It goes from single gas well pools to multiple major fields to a promise of future huge discoveries.

One of the issues we tackle and grapple with is the incomplete information on geological potential, which would suggest there will be more major discoveries as that information becomes more complete.

The map on the next page indicates areas that show petroleum resource potential in the North. We have our geological provinces in various colours. The green areas are where there is maximum oil and gas potential, and you can see they extend from Northern B.C./Alberta into the southern part of the Yukon and the Northwest Territories. There is an area around Norman Wells where there are important oil discoveries and some gas as well. Then there is the delta that is highlighted in the North, and that is where the major finds have occurred with respect to the Mackenzie Gas Project.

Senator Cochrane: Where would that be located?

Mr. Borbey: The green area. If you look north of the Yukon and Northwest Territories in green, it is partly onshore with the delta and partly offshore in the Beaufort Sea.

In the Arctic islands, there are two areas of high potential. The first one is the Sverdrup Basin, which is the larger green area you see in the middle of the Arctic islands. To the right of that is Lancaster Sound where there have already been discoveries. In fact, I think there was a shipment of oil in the 1970s, Mr. Morrell, if I remember well, from that area.

Giles Morrell, Acting Director, Oil and Gas Resources Management, Northern Affairs, Indian and Northern Affairs Canada: Not actually from Lancaster Sound. We had oil shipments out of the Sverdrup Basin in Bent Horn for a number of years. That field has now been abandoned.

Mr. Borbey: To the far right of the map, you can also see an area in green that shows potential, and that reaches into the offshore of the East Coast.

The areas in pink, blue or dark pink are areas of high mineral potential but not oil and gas potential. In yellow are areas of lower potential. That does not mean there will not be some discoveries and that there are not reserves that possibly can be found there as well.

If we go to the next slide, in terms of what has been discovered, 1.7 billion barrels of oil and 31 trillion cubic feet of natural gas have been discovered. That is out of an estimated potential of 153 trillion cubic feet of gas, and represents about 33 per cent of Canada's remaining resources of conventional gas. For crude oil, there is a total of 8.4 billion barrels, which represents about 25 per cent of our remaining resource.

That sounds pretty impressive, but I want to remind senators that the Russians already have about 360 times the production of oil from the Arctic as Canada has. Alaska, just in the Prudhoe Bay gas project, has discovered 35 trillion cubic feet of gas. There is also significant potential in other parts of the Arctic.

Senator Cochrane: Could you go back to where Russia has its development on this plan?

Mr. Borbey: I have not shown Russia on the map, but throughout the Russian Arctic there are important gas finds. They are already exploiting a lot of gas fields, and there are large areas of potential discoveries as well. Russia's production already dwarfs the total production of Canada, the U.S. and anyone else in the Arctic.

Senator Cochrane: I did not know that.

Mr. Borbey: We have some estimates. An oil and gas assessment was recently carried out through the work of the Arctic Council. Canada is a member of that council. It is an interesting report and shows some of those results in terms of Russia versus other parts of the Arctic. We can provide the links to that report if you want more information, if that would be of interest.

The Chair: It would be. Would you please send that link to our clerk?

Mr. Borbey: I will do so.

I am moving on to slide number 6. Our legislative authority is provided under two acts — the Canada Petroleum Resources Act, CPRA, and the Canada Oil and Gas Operations Act, COGOA. Those are the acts administered by the Minister of Indian and Northern Affairs. They cover the regulatory, administrative and policy roles that support the minister's responsibility for oil and gas management north of 60 in the area I described as mandated by Parliament. We will talk more about those acts in the next little while.

Slide number 7, outlines INAC's operational mandate for oil and gas through the various pieces of legislation. We issue, register and administer petroleum rights through the Canada Petroleum Resources Act. The royalty regime is also administered under the CPRA. Rights issuance, royalty regimes and amount of royalty regime are addressed in subsequent slides.

We are also responsible for the administration of Norman Wells. That is a Crown interest through the Norman Wells Self-Government Framework Agreement. If you are thinking of location, that you may want to visit; Norman Wells is the only major production area for oil in the Canadian North. I would say it is roughly halfway between Yellowknife and Inuvik. I will talk a little more about Norman Wells later.

The Chair: Is there an airfield at Norman Wells?

Mr. Borbey: Yes. It is a community of a few thousand.

Mr. Morrell: It is significantly smaller than that. It is on the scheduled air route up to Inuvik.

The Chair: We should take that into account.

Mr. Borbey: They stop at Norman Wells to refuel on the way to Inuvik.

We administer benefit plan requirements under the Canada Oil and Gas Operations Act. Benefit plans are a requirement for all work and activities and no approval can be issued unless the minister has approved or waived the requirement of a benefit plan. Companies submit an annual report which includes a summary and statistics of work undertaken, expenditures, wages, work months, employment and value of goods and services purchased. Governor-in- Council consent is required prior to the National Energy Board issuing an approval for the development plan under COGOA. Obtaining Governor-in-Council consent is on the recommendation of the minister of INAC.

We also have a role to play in Environmental Studies Research Funds through the CPRA. Environmental Studies Research Funds are overseen by a management board with government, industry and public representatives which allocates funds for environmental and socio-economic research projects. These funds are secured by levying oil and gas companies' exploration and development licences on a per-hectare basis. The minister approves the levies.

Last year, total levies were approximately $2 million across the North and the East Coast offshore. About one- quarter of that amount was directed exclusively at northern research projects.

The Chair: Before we leave that subject, can you give us two minutes on the royalty regime? I am presuming that all land and resources in the territories are Crown resources. Is that correct?

Mr. Borbey: You have a mix of Crown lands and lands that are settlement lands under various land claims. Agreements have been reached in terms of royalty management on settled lands. The royalty regime applies on the rest with Crown lands.

The Chair: The royalty we are talking about is the royalty paid by a developer to. . . ?

Mr. Borbey: It is paid to the Crown.

The Chair: It is paid to the Crown, in right of Canada?

Mr. Borbey: In some cases it is shared with the land claims signatories or beneficiaries. If it is owned by the Inuvialuit, the royalties belong to them because they have subsurface rights in addition to surface rights to some of those lands, depending on what they have selected through the land claims process.

The Chair: Therefore, to put it more simply, there is no Government of Canada revenue that would derive from a settled land claim because they own the mineral rights.

Mr. Borbey: Mr. Morrell, is it the case that we do not make any royalty on a settled land claim where they own the subsurface rights?

Mr. Morrell: That is correct. Under some of these land claims, the Aboriginal groups are some of the largest private landowners in Canada as they own subsurface mineral rights. They set their own royalty regime and take 100 per cent of any development from those lands.

On Crown lands — everything else — the royalty flows to the Crown. However, there is a share that goes back under some of the land claims agreements.

The Chair: Except in the Yukon where this committee did the devolution agreement, the Crown rights are the Crown in right of Canada as opposed to the territory. Is that right?

Mr. Morrell: That is correct.

Senator Milne: On that point, I believe that neither Nunavut nor Nunavik have subsurface rights.

Mr. Borbey: I am not familiar enough with the Nunavut land claim. It is not one of my responsibilities.

Senator Milne: I can tell you because that just came through the Standing Senate Committee on Legal and Constitutional Affairs.

Mr. Borbey: I cannot speak to that. However, I can tell you that, under the Nunavut land claims agreement, Nunavut Tunngavik Inc., NTI, the signatory to the land claim, has subsurface rights as well as surface rights for large tracts of land.

The offshore is a bit more complicated. If there is a gold deposit on settlement land that belongs to NTI and they have subsurface rights, then every dollar of royalty will go to NTI. None of it will come to us or to the Government of Nunavut.

Similarly, in the Yukon, if it is settled land under some of the First Nations' self-government agreements, those First Nations own the subsurface rights and will therefore benefit from 100 per cent of the royalties there.

The Chair: I am sorry to have interrupted.

Mr. Borbey: Actually, we are skipping ahead because there is a discussion on royalties later on.

Regarding page 8, exploration rights issuance under the CPRA, rights are issued to companies through a competitive bidding process. Blocks of exploration interests are identified by industry through what we call a ``call for nomination'' process. Only certain areas of the North are open on an annual basis for nomination by companies. These are the Central Mackenzie Valley, the Beaufort Sea, the Mackenzie Delta and the Arctic islands of Nunavut.

Companies make work expenditure bids for the exploration rights. These represent the dollar value of an exploration work plan during the initial term of a licence. Companies leave a deposit of that amount which is worked down as the companies perform the work to which they have committed.

The issuance of an exploration licence gives a company the right to explore on the land. When I say ``land,'' this includes offshore. However, it does not give the company permission to actually conduct any activity on that land or water.

To conduct work or activity, the company must get the appropriate permits from the land and water board for that particular area, as well as the approval of the National Energy Board to conduct that activity — for example, the drilling of an exploration well.

Senator Cochrane: Where is the Mackenzie Delta project now? I have not heard anything about it in the past year or two. Where is it and what is happening to it?

Mr. Borbey: The Mackenzie Gas Project, as I mentioned earlier, is the responsibility of Industry Canada which is the overall lead. However, I can give you the information we have.

The joint review panel that was created to review the project from an environmental assessment perspective has completed its work in terms of hearings. It is now in a report writing stage. We expect the report to be delivered to the government within the next six months. We are hoping that by early fall, maybe late fall, we will have a report that will make recommendations to the government.

The government will then need to consider those recommendations. They will need to consider if they agree with all of them or whether there is a need to modify or send them back to the review panel. At that point, the government will be able to signal to the National Energy Board, NEB, that, from a government perspective, the project is ready to go ahead in terms of an environmental assessment. The NEB will have to conclude its own process before it can issue authorization for pipeline construction. At that point, the companies have to make a decision whether to proceed based on the economics. Then the second phase of the regulatory process kicks in, which is the permitting process for access to land and for the use of waters in the process of constructing the pipeline, which can take a fair amount of time.

There are probably thousands of permits involved, given the fact that this is a huge project — $16 billion according to the latest estimates. Even in the most optimistic scenario, there will not be any gas flowing south for several years. Mr. Morrell, am I in the right ballpark?

Mr. Morrell: The target year is still 2014.

Mr. Borbey: It will be six to seven years.

Senator Cochrane: Is there a suggested route?

Mr. Borbey: A preliminary route has been identified for purpose of review.

Senator Cochrane: Is that through the Yukon?

Mr. Borbey: No. It would be through the Mackenzie Valley. The precise route will have to be determined based on land access agreements. In some cases, we are talking about travelling through territory that is settled land. Aboriginal groups that have settled land claims will have to agree to the route and to the conditions under which access will be permitted. The Dehcho First Nations area is unsettled so we are still in negotiations. They are Crown lands but that does not mean we can proceed without due consideration for the rights of the Dehcho. There is still a great deal of work to be done in that area where there are three major gas fields.

Senator Milne: I believe some people are digging in their heels on the issue.

Mr. Borbey: The Dehcho would like to have their land claim settled. They have gone to court and we have a court settlement whereby money would flow to the Dehcho if the pipeline flows. They have an open invitation to be part of the Aboriginal Pipeline Group so that they can share in the benefits of the work. There are difficult negotiations that need to be continued with the Dehcho.

Page 9 speaks to the continuation of the process for issuing oil and gas rights. The exploration licence has a fixed term to a maximum of nine years, which is set by law, and is split into two periods. Companies are required to drill during the first period — typically four to six years — to extend that licence to full term. Should a company fail to drill, the Crown can take the licence back.

Should a discovery be made, the company can apply for a significant discovery licence over the lands to which the discovery extends. This determination is made by the National Energy Board. The significant discovery licence can hold the lands until the company is ready to develop the discovery. In the North, the remoteness of many areas is such that there is a long lag time between discovery and eventual development.

When a company is ready to develop, it can apply for a production licence, which normally has a 25-year term that can be extended if the field is still producing. It should be noted that production arrangements for certain fields, such as at Norman Wells, were established under earlier regimes. In the case of Norman Wells, it was through the Normal Wells Agreement of 1944.

The Chair: Did you say 1944?

Mr. Borbey: Yes. I will come back to that later.

The graph on page 10 shows some of the activities with respect to exploration licences, which are shown in pinkish purple. The number of actual wells drilled are shown in light blue, and the yellow line shows the value of the work bids on an annual basis. Thus, you can see the activity over the last number of years. There was a bit of a peak in the last year associated with a huge bid that was filed by Imperial Oil and ExxonMobil for exploration in the offshore Beaufort Sea. Of course, we can expect that, as the Mackenzie Valley gas pipeline moves into approval, there will be significant increases in exploration and drilling, not only in the Mackenzie Delta but in the surrounding areas both onshore and offshore.

The next page shows an interesting map indicating the onshore border of the Northwest Territories and the Yukon to the left, and the delta is right in the middle. The grey areas designate where exploration licences have been issued. The huge grey area toward the north of the map is last year's bid by Imperial Oil and ExxonMobil for $585 million. The commitment is to work over the period during which the licence would be valid — about nine years.

That area is equivalent to about 205,000 hectares. Recently, we completed the first phase of our call for nominations for the current year. Four huge parcels in the offshore have been identified and are up for the call for bids. Those are highlighted in the black line. Those areas are about four times the size of the bids from last year. We expect to have results from those bids by this June. We are looking forward to seeing them. Much of the activity is moving north. Obviously, companies are interested in looking at potential sites further north and into the Beaufort Sea.

Page 12, which we have covered to a certain extent, is about the Norman Wells area. We have five producing fields for approximately $25 million per year in royalties. We also have a one-third interest in the production. The origins of Norman Wells go back to the 1920s when Imperial Oil discovered oil in that area. It was developed primarily for local use because there was no pipeline and no opportunity to develop the resource further.

In 1942, during World War II, the U.S. was looking for a secure source of fuel to meet its wartime needs in the Pacific theatre. We worked with the U.S. to issue exploration permits in the Norman Wells area in 1943. Today's production basically stems from that activity. We have an oil pipeline that extends from Norman Wells to the border of Alberta. As I said, the government has a one-third interest in that operation, which brings in about $100 million per year in revenue in addition to the royalties.

Page 13 can be covered quickly. We have talked a bit about the land claims agreements that are with the Gwich'in, the Sahtu, the Dene and Metis, and the Tlicho. We are in negotiation with the Dehcho but an interim resource development agreement has been reached. Each one of those land claims or agreements has a certain set percentage of royalty sharing, both in terms of the first $2 million as well as above and beyond the $2 million.

Senator Milne: I am looking at the percentage figures in the material.

Mr. Morrell: Every land claim seems to be unique. To a different degree, there is a balance between land, money and other aspects of the claim. This particular feature showing the royalty share does not present the full picture, so you have to look at the whole claim.

Mr. Borbey: You can see the Nunavut Land Claims Agreement and the provisions there in terms of the royalties.

What we do not show here is the land claims settlement with the Inuvialuit. That is their region. Instead of royalty sharing with the Crown, the Inuvialuit received a larger quantum of private lands for which they received 100 per cent royalties at rates they set themselves. They ended up choosing more land in exchange for not getting a share of royalties on Crown land. Again, it is the way Mr. Morrell was saying: Each land claims agreement is slightly different and it is difficult to compare each one in relation to the actual return for an Aboriginal group.

The Chair: Is the government interest in the Norman Wells group a proprietary interest or is it for profit? Do they own shares?

Mr. Borbey: How is it shared?

Mr. Morrell: It is not a shareholder, it is net interest.

The Chair: That is dangerous.

Mr. Borbey: On the next page, we talk about the research I mentioned before. We have research activity carried out under the Environmental Studies Research Funds, which I described briefly earlier. We also have a significant amount of research projects that have been conducted in support of the environmental assessment and review process for the Mackenzie Gas Project. We are working with Environment Canada, the Department of Fisheries and Oceans and Natural Resources Canada on various elements of research there.

There is also a program at NRCan called the Program of Energy Research and Development with which we cooperate. As well, we do work through the Arctic Council. The most recent product of that work is the oil and gas assessment in the Arctic, which is well worth the read. It is a pretty impressive piece of work. There is a good executive summary that provides information across the Arctic. The technical name is the Assessment of Oil and Gas Activities in the Arctic. It was released in January in Norway.

The Chair: It is written down right here.

Mr. Borbey: With regard to our policy role, we are getting prepared for induced oil and gas development that will result from the Mackenzie Gas Project and the new wave of exploration in the Beaufort Sea. Oil and gas perspectives must be considered in the department's policy development, whether it deals with devolution or sustainable development. Our role requires collaboration with other government departments, industry and stakeholders in policy and development, particularly with regard to environment and sustainable development and in areas such as the Oceans Actions Plan, the NWT Protected Areas Strategy and regional environmental assessments. We also participate in forums that look at effectiveness and improvements to the regulatory and legislative environment.

The Chair: What is ``induced''?

Mr. Borbey: Basically, you have latent potential resources in the North that are not being explored on an active basis. Having an infrastructure or other activity such as a tax regime does induce further activity, including the potential for significant additional discoveries and fines. Again, we have incomplete data from a geophysical perspective. There is potential out there and people will be enticed into developing that potential through the presence of infrastructure.

Mr. Morrell: With regard to the Mackenzie Gas Project, once that piece of infrastructure is in place, there will be a gas pipeline from the Mackenzie Delta down to the rest of North America. Additional space or capacity on that pipeline will be open for gas from other fields that might be developed in the Mackenzie Delta. There is other supporting infrastructure that will facilitate further development.

The Chair: Are the inducements also for tax holidays and things to induce development and to make it less risky and more attractive?

Mr. Morrell: No, it is not that kind of inducement. It is induced by the project. There are no tax holidays or whatever.

Mr. Borbey: It is like how building the railway during the turn of the century opened up the West and other opportunities.

I have covered a lot of our challenges, but we also have high-cost and difficult physical environments as well as a lack of infrastructure. Furthermore, we must operate in various seasons. I was in the Beaufort region recently and it was minus 75 degrees with the wind chill. It is difficult to operate in that environment.

We have a complex regulatory environment that leads to long approval times and uncertainty. A lot of it is the direct result of lands claims agreements. We have a regulatory regime that, by and large, has been created through the settlement of land claims. That is the difference from the situation south of 60. Improvements could be made and that is one of the initiatives we have with Minister Strahl who named a special representative that is now conducting consultations with northerners, industry and environmental and government stakeholders. His name is Neil McCrank. You may hear about that when you are travelling.

We need to manage development in the North with a perspective balanced between cultural and environmental issues and sensitive ecosystems. We must also deal with the issue of Crown lands versus Aboriginal-owned lands. Resources overlap and you must have a regime that works to deal with both interests. We are always looking to establish a consistent, competitive and practical oil and gas regime in that environment.

Looking ahead, right now we are seeing some resurgence in exploration. We are hoping that exploration leads to new finds and, eventually, to new development. The Mackenzie Gas Project will have a huge impact in that region. There is renewed interest in the Beaufort Sea and that can lead to interesting developments, in particular for the Inuvialuit in that region. I mentioned the northern regulatory regime and how we need to look at improvements and ways to make it work easier while respecting the nature of that regime and the land claims. We have the northern strategy in which the government has made a number of commitments, including the Arctic research station. We are still developing the plans for that; nothing has been decided in terms of location. Nellie Cournoyea will tell you where she thinks it should be, but we are still working with the various stakeholders. One of the aspects of that research station is to help further the research and sustainable resource development in the Arctic. That is a niche Canada can develop. Consultations with stakeholders in the North take time. It is extremely important to do it well. When it is not done well, we end up in litigation. That is also part of our challenge in looking ahead.

I took more time than I planned so I apologize. I am sure there are a lot of questions.

[Translation]

Senator Nolin: You must have watched last week's budget presentation with great interest, both the speech and the relevant documents accompanying it. On this topic, I would like you to explain the meaning of the expressions, ``Comprehensive Northern Strategy'' and ``Vision for the North.'' I presume you were involved in developing them, and I would like you to enlighten us about this subject.

Mr. Borbey: The government has a special interest in the Arctic and the north, but the government is not alone; I believe all Canadians share that interest. Important events are taking place involving climate change, resource development, the price of petroleum products, minerals, and the unrealized potential. There also are a number of social issues, such as education, for example. Thus, there is a great convergence of issues leading us to consider the needs of this region of Canada.

The government's approach is based on four pillars. The first is sovereignty. Commitments have been made to protect Canada's sovereignty in the north. Canada's sovereignty is not really at issue, except for a few small areas in the Beaufort Sea, just off the coast, over which there is some disagreement with the United States. Still, these are minor disputes that do not spoil our relationship with our Arctic neighbours.

We have also noted certain activities by the Russians. Yet our relationship with the Russians is more collaborative than competitive. We are also discussing Hans Island with Denmark. We are working closely with all our Arctic neighbours.

The second aspect relates to economic and social development. The commitments on the Mackenzie project are intended to ease and accelerate the regulatory process so that new mining projects can proceed. Commitments have been made on social projects by the government and others, particularly in the housing sector.

The third pillar is the environmental component. Commitments have been made for the development of the parks network in the Northwest Territories and the expansion of Nahanni Park. Other commitments have been made, as part of the oceans strategy, to create marine reserves.

The fourth pillar is governance, which will provide greater autonomy for the territories. We would like to continue our work developing the territories, with whom we have been negotiating for some time, in hopes of reaching a devolution agreement. As for Nunavut, we want to begin negotiations on an agreement on devolution of provincial responsibilities such as the management of land and natural resources.

Senator Nolin: Who is the minister responsible for these strategies?

Mr. Borbey: The Prime Minister has identified our minister as the minister responsible. Still, the work is spread horizontally, involving a number of government departments and agencies.

Senator Nolin: We often hear the word ``strategy'', and yet it is hard to find out who is responsible for establishing the goals and making sure they are achieved. Things start off well, but when they deteriorate, it is hard to find out who was responsible. That is why I asked you the question. Your minister, therefore, is the one responsible?

Mr. Borbey: Our minister's mandate includes responsibility for the north.

Senator Nolin: It is his statutory responsibility.

Mr. Borbey: He has to work with his cabinet colleagues, for instance, the Minister of Fisheries and Oceans.

We have mentioned building a new icebreaker. These are very important vessels, particularly in their scientific applications. With the International Polar Year, this project is a highlight of the strategy. An icebreaker meets the goals related to both sovereignty and science. It also makes it possible to get better information on the health of the Inuit. The Amundsen is a floating health clinic. It moves from community to community, conducting the first comprehensive health survey of Canada's Inuit.

From that perspective, we are talking about an integrated strategy in which all the elements come together to support northern development.

[English]

Senator Milne: I must leave, but perhaps you can answer my question after I have gone and I will read the transcript with great interest.

When we talk about oil and gas exploration and how many cubic feet or barrels of reserves there are, we are not told what percentage is recoverable. In what form are the oil reserves there? Are they in shale as they are in the tar sands, or are they of higher quality? The percentage that is recoverable is usually quite low compared to the figure that is quoted to us for reserves.

Mr. Morrell: The numbers we quoted in the deck are conventional oil and gas — that is, high quality and recoverable. In comparison with oil shale, for example, recovery is much higher. In the North, there are basically undeveloped conventional resources of oil and gas so this is high quality stuff.

Senator Trenholme Counsell: I want to focus on the northern strategy and the future Arctic science station. As someone with a deep scientific interest, I believe this should be a priority. As a nation, we should have an active centre for scientific development and knowledge exchange as a reference point for the people who live in the North and for the companies there.

Therefore, your choice of words is not reassuring, and I am sure they reflect the actual situation. Will you comment on that?

Mr. Borbey: I am being careful with my words because we have been asked to develop a proposal for the government on fulfilling the commitment made in the Speech From the Throne. The Speech From the Throne contained a few key words. It said this is a facility to be built by Canadians, but for the world. This is to be a world- class facility, so we are setting a fairly high standard for the Arctic. The speech also spoke about a balance between research in resource development and in protection of the environment.

There are some clues about where the government wants to go, but at this point we have to put forward a proposal, which will come a little later. At this point, we are consulting and engaging with the scientific community. We want to start engaging with northerners as well to get their views, but the first priority will be to define the key science program that Canada needs to pursue in the North and the Arctic. We will have to focus on the key strategic priorities because we cannot do anything.

Senator Cochrane: Are you speaking of the permanent research facility in the North?

Mr. Borbey: Yes.

Senator Cochrane: Can you give us an overview of the plan? How much money will be invested overall? What sort of research will be conducted and who will be involved?

Mr. Borbey: Those are all the questions on which we have been asked to come forward with a proposal or options to the government.

Senator Cochrane: So you cannot do that today.

Mr. Borbey: We are not in a position to do that now. There is no shortage of opinions of people who are interested in this, and I am sure you will hear some during your travels. We want to hear the opinions and feed them into the decision-making process.

We want to build on the success of the International Polar Year. Canada has achieved a high level of success through that program. It is the largest commitment in the Arctic. We will be breaking some new ground in key areas of science, be it the study of ice flows, looking at permafrost issues and climate change impacts, or social science issues such as the health of our Inuit population. We want to be able to build on the success of the legacy of the International Polar Year. It is called the International Polar Year, but it is actually two years of observation and a couple more years in terms of outreach, education, data management and sharing of results internationally.

[Translation]

Senator Nolin: Mr. Borbey, in the federal governance structure, is there a cabinet committee that provides support to your minister in his responsibilities for the north? How does that work?

Mr. Borbey: That gets us into the machinery of it, a bit.

Senator Nolin: We are asking you questions based on our experience, to some extent. It is quite easy to predict the roadblocks that may appear. If it is poorly structured in the beginning, it certainly will not achieve the desired goals. That is why we are asking these questions.

Mr. Borbey: Without breaking cabinet confidentiality, I can tell you that our plan was presented and approved by the priorities and planning committee. That committee, chaired by the Prime Minister, looked into the issue. We had to present specific elements to various committees of cabinet. Still, with regard to the action plan, we tried to get as many committees as possible together at one meeting so as to ensure that each of the different committees — social, economic, defence, security — could work from a common basis.

Senator Nolin: In other words, so that nothing fell between the cracks.

Mr. Borbey: That is what we are trying to do. The specific initiatives will go to the committees with responsibility in those fields, but there is no single committee that oversees northern issues. Still, we try to coordinate it as much as possible.

Senator Nolin: That is your responsibility; yours and your minister's.

Mr. Borbey: My deputy minister chairs a committee of deputy ministers that provides coordination for the entire public service. I chair a subcommittee of assistant deputy ministers. Working groups and subcommittees also look at specific aspects of the strategy.

[English]

Senator Trenholme Counsell: Am I correct in understanding that, in the most recent Speech From the Throne, this centre was proposed and it was the first time that happened?

Mr. Borbey: Yes, the recent Speech From the Throne highlighted this commitment.

Senator Trenholme Counsell: The idea of a science centre?

Mr. Borbey: Yes.

Senator Trenholme Counsell: Then you have not been working on this for very long?

Mr. Borbey: There is a process by which particular initiatives find themselves into the Speech From the Throne; advice is sought and as good public servants, we provide the best advice possible.

Senator Trenholme Counsell: Thank you. Kudos to you and yours.

Mr. Borbey: There is a lot of international motivation for this as well. Major investments have been made in the Antarctic and the Arctic by our partners. Canada is responsible for the second largest chunk of the Arctic, and we need to make sure we are at the top of our game from a science perspective.

Senator Cochrane: I want to thank you because I think you are on top of it. I will be following the progress.

The Chair: We will stop now. Do you have to go somewhere?

Senator Trenholme Counsell: The world will not end if I do not get there.

The Chair: I will continue and you are welcome to continue, if you like. I have a couple of questions I want to ask.

However, we are excusing senators who need to go places now. Senator Trenholme Counsell, please ask another question.

Senator Trenholme Counsell: It is wonderful to have this briefing. I assume we will have others before our trip. I think this is exceedingly important, and tonight was exceedingly valuable, so thank you.

The Chair: I want to ask one last question before we go. Senator Brown, do you have a question?

Senator Brown: I want to ask if you have heard anything about gas hydrates. At the gas symposium I was at in Calgary, they talked about it. I think you have it documented here with respect to 153 trillion cubic feet of natural gas. Apparently, they do not know what to do with them yet, but gas hydrates are responsible for as much as 21,688 trillion cubic feet of dissolved methane gas in water. That may be the largest single carbon sink anywhere. They were asking about induced possibilities. They have no idea how to recover these yet, but they are there.

The Chair: Is someone looking at that question?

Mr. Borbey: It is a good question. You are right, the potential is enormous there. Mr. Morrell may want to provide an answer, and we could follow up with further information. Our colleagues at NRCan are quite interested in this area.

Mr. Morrell: Yes. Canada has been involved in an international scientific program investigating gas hydrates for many years, largely because one of the key sites is actually on the Mackenzie Delta. That is one of the few areas where there are large accumulations of hydrates onshore at depths of 500 to 700 metres in the Mackenzie Delta, underneath the layer of permafrost in the delta.

It is a unique situation there, and it is the site where we have drilled experimental test holes to examine the scientific properties of these hydrates and to look at whether they are producible in any sort of commercial volume. The results have been encouraging but that question is still very much out there. We do not know how to characterize that vast potential resource. Can it be tapped or not? That is one of the questions we hope to have answered soon.

The Chair: Where is it being held — I am talking about the onshore part — by the permafrost?

Mr. Morrell: It is actually a solid crystal structure. It forms in a certain envelope of temperature and pressure, so it is generally beneath the permafrost in the delta.

The Chair: Notwithstanding the drilling, mining or extracting, if temperature changes go nuts, one assumes that some hydrates would simply escape, would they not?

Mr. Morrell: That is one of the scariest scenarios that has been put forward for global warming. I believe the current view is that, in the Mackenzie Delta, there is enormous thermal inertia, and it will take many millennia for the temperature to change that significantly in order to see that kind of effect. The situation on the deeper continental slopes might be somewhat different.

Senator Brown: I am interested to see if they had done anything on it, because I had never heard of gas hydrates before. Methane gas is being drilled all over southern Alberta now for what they call coal bed methane, and I actually have methane gas in my domestic water supply in my home. I am not kidding. It is a phenomenon. When you turn on the bathroom taps in the late evening, you can get three or four charges of gas that you can actually light with a match. It burns with a brilliant blue flame and then the water takes over. Apparently that is happening quite often in southern Alberta now.

The Chair: We will keep at that. In your view, is the research Canada is doing into the hydrates sufficiently funded? Are we welcome at the international table to which you refer?

Mr. Morrell: This is research that has been ongoing for several years. Canada's contribution is well recognized. We have had various international partners over those years, Japan and the United States being two of them.

Right now, I am not sure what the immediate plans are for the future of that research program.

The relevance of hydrates to the Canadian energy future is something being looked at by the Council of Canadian Academies. That was one of the questions posed to their organization. It is a group of people with broad-ranging interests who have been asked to look at the ins and outs of hydrates.

The Chair: Is someone somewhere doing some kind of concentrated, definable research into the question or is it being looked at ``in the air''?

Mr. Morrell: That is exactly what is happening. There is experimentation being done this winter in the Mackenzie Delta on the well site there. They are examining the production possibilities for hydrates. This is active, ongoing research.

The Chair: One assumes if there are hydrates under the permafrost, then there are also hydrates under the water someplace. Is that so, or is it just on the land, in the delta?

Mr. Morrell: The extent of the hydrates in the delta is not fully known. They have been encountered in many wells drilled there; they have been recognized.

Hydrates themselves are not new to the oil and gas industry. They can form under certain conditions of temperature and pressure in pipelines. They have been regarded as something of a nuisance to be controlled so as not to have a kind of scale buildup of hydrates within pipelines.

However, the possibility of hydrates as a resource is something relatively new and has not been developed by the industry.

Mr. Borbey: You will be talking to Natural Resources Canada. We would encourage to you explore that further with them. They are the lead organization and could really help with that. A demonstration site has been developed in the delta, as Mr. Morrell mentioned. I think it is close to Inuvik, if I remember accurately. It is of some interest.

The Chair: We might actually see it if it is close enough to Inuvik to get to. We are going in June and we may have to walk through stuff we do not want to walk through.

RADARSAT was touted by successive governments as a useful tool in terms of establishing and maintaining sovereignty. Do you have a concern about its sale to a foreign company?

Mr. Borbey: That is not a question for me to comment on. I can certainly attest to the fact that RADARSAT-1 and of course, RADARSAT-2 which is being launched, are important instruments to be able to support various objectives in the North. Some of those objectives are linked to sovereignty, but a lot are basically just for safety, security and a better understanding of our environment.

It is not a tool that necessarily provides us with a significant amount of additional information from a perspective of identifying geophysical potential in the North. That has to be done through other techniques which the government is also supporting. It has been announced the government is supporting further research in this area through NRCan.

However, I can tell you, having been on a couple of icebreakers, that they certainly find the RADARSAT information extremely helpful in terms of understanding the movement of the ice and to allow better planning for whatever shipping may be happening.

However, the captain also reminded me that he will not go somewhere he cannot see with his eyes, or unless he has a pilot in a helicopter who can see what the conditions may be. The size of a ridge in the ice will not be easily determinable by technology such as RADARSAT.

I can only comment on what I have encountered with respect to RADARSAT. It has been a very helpful, supportive instrument. However, what happens in the future is in the hands of others.

The Chair: Does the Canadian Coast Guard use unmanned flying vehicles?

Mr. Borbey: Yes, the Amundsen has the capacity to launch unmanned probes. I do not know what technology is available but they do have it.

I was there recently. I was on the Amundsen, spending the winter moving through flaw leads in the Beaufort Sea. It is quite an interesting project funded under the International Polar Year.

To answer your question, we do have that capacity. We do not usually send flags with our unmanned submarines. We use them for more useful purposes.

The Chair: I was not thinking of submarines, actually. I was thinking of the flying ones.

Mr. Borbey: I was talking about underwater probes.

The Chair: I am really apologetic. You are probably happy about the shortness of this meeting, however. It is remarkable information, but there is a confluence of coincidences here that have us short.

We may ask you to come back one more time. However, more likely, we will have some written questions that will arise from what you have talked about today. We will send those to you and hope you will respond to them when you are able to. Some of them might be arising out of things you have said or things that we might want to visit.

Thank you. I am grateful.

[Translation]

Mr. Borbey: It has been our pleasure to appear before the committee. It will also be our pleasure to help you decide which places you want to visit.

[English]

We are happy to help you in the field if we can. We have people in Yellowknife and Inuvik. Certainly, we would be very happy to help you with your deliberations.

The Chair: We are going to Yellowknife, Inuvik and Tuktoyaktuk and, based on what you said today, we will see if we can stop off at Norman Wells on the way. We will likely be taking you up on your kind offer.

The committee adjourned.


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