Proceedings of the Standing Senate Committee on
Energy, the Environment and Natural Resources
Issue 8 - Evidence - June 8, 2010
OTTAWA, Tuesday, June 8, 2010
The Standing Senate Committee on Energy, the Environment and Natural Resources met this day at 5:15 p.m. to study the current state and future of Canada's energy sector (including alternative energy); (topic: Canadian offshore oil/gas exploration and drilling: the current status of operations/applicable regulatory rules and regulations); and the Order Amending Schedule 2 to the Canada National Marine Conservation Areas Act, together with the Report to Parliament entitled "Gwaii Haanas National Marine Conservation Area Reserve and Haida Heritage Site," tabled in the Senate on Tuesday, June 8, 2010, pursuant to the Canada National Marine Conservation Areas Act, S.C. 2002, c. 18, sbs. 7(1).
Senator W. David Angus (Chair) in the chair.
[English]
The Chair: We are in public now. For the record, this is a regular meeting of the Standing Senate Committee on Energy, the Environment and Natural Resources. In the notice calling the meeting this evening, you will see that we will hear from the officials from Natural Resources Canada and from the minister, Christian Paradis.
Before that, I would ask your consent that, although it was not included in the notice, we address the aspect we discussed in camera, which is a request we have received from the government, from the Minister of the Environment, to approve or disapprove an amendment that is proposed to the Canada National Marine Conservation Areas Act that would allow for the creation of a national marine conservation area in the Gwaii Haanas, formerly named the Queen Charlotte Islands. It would be a marine conservation reserve and a Haida heritage site. We have arranged for everyone to have a package of material on this. We have had a discussion, not a profound discussion, off the record. Otherwise we have had fulsome understanding between us.
Without further ado, may I take it that I have everyone's consent that we put this on the agenda even though it was not on the notice?
Hon. Senators: Agreed.
The Chair: Thank you for that. Senator Banks, I recognize you.
Senator Banks: When we first received this today and when it was first referred to, I had serious reservations, which I expressed to the deputy chair and to the chair, about dealing with something like this almost sight unseen. However, on looking at it more carefully, I have come to understand what it is.
So that senators understand, some senators here were members of this committee when we passed the Canada National Marine Conservation Areas Act, which is included in the materials before you. Section 5 and section 7 of that act describe what is before us today. Put most simply, the meat and potatoes of a conservation act are in here. Section 5 says the Governor-in-Council can amend the act by adding to the schedule descriptions of those areas. Section 7 says that when it does, as the chair described to us in camera, it must seek the approval of the relevant committees of both houses of Parliament, which have in each respect 31 days in which they must respond, failing which the order-in-council comes into effect. If either house objects or expresses reservations, there is a procedure to go through.
The meat and potatoes are here. My first worry was that there were amendments to the meat and potatoes, to the act we passed, but there are not. If you look at the big binder book and turn to the second-last tab, which says order-in-council, you will see it is an order-in-council which, precisely as described in section 5, sets out a description, no less and no more than that, of the area that is to be considered in Schedule 1 of the act. What happens to that area, how it will be dealt with, what goes on there, what is permitted and what is not, is set out in the act that we passed I believe two years ago.
All we are approving here today, chair, which I am happy to see because otherwise I would object vehemently to passing something almost sight unseen, is the protected document that is in that part of the binder that says amendment. The whole thing is a description, including a coming-into-force provision that says it will come into force on the day it is registered, which will be either 32 days after it was tabled in Parliament or on the day on which both the Senate and House of Commons committees have approved it. Based on that, I move we approve it now.
The Chair: Thank you, Senator Banks. Is there a seconder?
Senator Neufeld: So moved.
The Chair: It was seconded by Senator Neufeld.
Before I call the question, is there any discussion?
Senator Mitchell: Yes. I would like to reiterate and emphasize what Senator Banks has said to make the point that essentially this is to the ocean what national parks are to the land. It is the first in the world, certainly the first in Canada. It is of the magnitude in the ocean that the Nahanni National Park Reserve of Canada, relatively recently established, is on land. For that reason, it both is significant environmentally and establishes a great precedent for future and further national marine reserves.
It should be noted that about 10 per cent of the land mass of Canada is now under national parks jurisdiction. This is the first and a relatively small portion of the water area of Canada that will be under national marine reserve jurisdiction. I would hope and encourage more of this to be done relatively quickly in the future. Sable Island was mentioned by Senator Dickson. That is one prospect. There are many others. It is important that the government be encouraged to proceed as well.
I am with Senator Banks in that I think we need not be concerned with the configuration of the order-in-council versus the act. I think the act has the guts of what this means, and the order-in-council describes the area to which it will be applied. I happily support it. In doing so, we are part of something that is very significant, historic and important.
The Chair: Thank you, Senator Mitchell. It is World Oceans Day, and we have the president and CEO of Parks Canada, which has the administration of the act, in the room with us, Mr. Latourelle. It is a momentous occasion. I hope the vote will go well. I will now call the question.
All in favour of the motion, which I understand will be something like the following: It is agreed that your committee, to which was referred an order amending Schedule 2 to the Canada National Marine Conservation Areas Act, has, in obedience to the order in reference of Tuesday, June 8, 2010, examined the said amendment and reports the same with approval.
Senator Banks: That is what I meant to say.
The Chair: You said it so very well.
It has been moved and seconded. All in favour?
Hon. Senators: Agreed.
The Chair: Contrary-minded, if any?
I declare the motion carried unanimously. Thank you very much.
Senator Banks: I have one short comment. Please ensure that everyone involved understands that this is not a precedent that we will accept documents, proposals, bills, motions or anything else and deal with them on the day we receive them before we have had a chance to read them.
The Chair: I think the president of Parks Canada will acknowledge I made the same point this morning when the matter was first broached to me, and I added other conditions, which I have shared with some of you personally.
We have delivered the goods. We are all very pleased to have done this. It will be my pleasure to put this into the Senate tomorrow in compliance with the motion.
We have a very interesting evening before us, with witnesses from Natural Resources Canada.
Good evening ladies and gentlemen, colleagues, guests in the room and our viewers on the CPAC network and the World Wide Web. We are continuing this official meeting of the Standing Senate Committee on Energy, the Environment and Natural Resources.
My name is David Angus. I am chair of the committee. We also have present Senator Grant Mitchell from Alberta, who is the deputy chair; our able researchers from the Library of Parliament, Sam Banks and Marc Leblanc; Senator Tommy Banks from Alberta, my predecessor as chair; Senator Robert Peterson from Saskatchewan; Senator Elaine McCoy from Alberta; our able clerk, Ms. Lynn Gordon; Senator Judith Seidman from Quebec; Senator Fred Dickson from Nova Scotia, an expert in offshore matters; Senator Bert Brown from Alberta, the only elected senator; and Senator Linda Frum from Ontario.
[Translation]
Minister, I wish you a warm welcome. These are special emergency hearings, which we decided to call in light of the events that have taken place in the Gulf of Mexico following the Deepwater Horizon tragedy.
We have heard surveys saying that most, at least 50 per cent, of Canadians are in favour of putting an immediate end to Canadian offshore drilling and we wonder why. If we understand correctly, we do not have any drilling taking place at present on the West coast or in the Arctic. In the Atlantic, we have gas drilling in Nova Scotia and oil drilling in various fields off the coast of Newfoundland and Labrador.
We have already held three meetings. Canadians are very surprised by the situation because false information is circulating in the Canadian media. Clarifying the situation will do a great service to Canadian citizens.
Mr. Minister, we have followed your own statements in the House of Commons and elsewhere. You know all about what is happening in this important area for Canada. That is why I insisted that you appear before us this evening. We realize that you have plenty of other concerns and we respect that. Thank you very much for being with us this evening and, without any further delay, I give you the floor, Mr. Minister.
[English]
Hon. Christian Paradis, P.C., M.P., Minister of Natural Resources: I thank the committee for this opportunity to appear before you today. It is always a pleasure to be here and to have more than 30 seconds to respond as in Question Period and the House of Commons. I was on my feet last Monday in the Committee of the Whole. It was a good opportunity to communicate what is going on in this regard.
I think this evening will be useful. I am here with Mr. Mark Corey and Mr. Eric Landry from my department, who are experts in the area under discussion. They will address the committee later after I give my presentation and take some questions.
[Translation]
The Chair: So, if I understand correctly, Mr. Minister, you are going to make your preliminary statement, you are going to answer a few questions and then you are going to leave, but your officials will remain with us.
[English]
Mr. Paradis: Yes, we will do that.
The disastrous oil spill in the Gulf of Mexico has raised many questions and concerns. Canadians want to know what measures are in place to prevent such a catastrophe in our waters. They want to know what measures in place to deal with the consequences in the unlikely event of a spill in our offshore.
[Translation]
Canadians are more than justified in asking these questions. That is why I am here; as you said, Mr. Chair. I want the Honourable Senators to have the opportunity to ask these questions on behalf of Canadians.
It is also an opportunity for me to assure the committee and Canadians that the regulation of Canada's offshore is strong, modern and robust. I can say with confidence that our system is one of, if not the very best in the world. As the Minister of Natural Resources, my legislated responsibilities regarding oil and natural gas exploration, development, production and transportation cover five main offshore areas: Offshore Newfoundland and Labrador, Offshore Nova Scotia, the Gulf of St. Lawrence, Hudson Bay, and Offshore British Columbia.
[English]
As the committee is aware, my colleague, the Minister of Indian Affairs and Northern Development Canada, is the lead minister for oil and gas related matters in the Arctic and all areas north of 60 degrees. My colleague and I take these responsibilities very seriously.
The regulatory system is overseen by three boards: the National Energy Board, the Canada-Newfoundland and Labrador Offshore Petroleum Board and the Canada-Nova Scotia Offshore Petroleum Board.
In the context of the events in the Gulf of Mexico, it should be noted that a primary element of the mandate of all three of these boards is the protection of public and worker safety and the environment. No drilling takes place until and unless the boards are convinced that every practical step has been taken to provide for the safety of the environment and the safety of workers.
The committee has heard in recent weeks from the chairs of both the Newfoundland and Labrador and the Nova Scotia boards. I am sure honourable senators are also aware of the appearance of the chair of the National Energy Board before the House of Commons Standing Committee on Natural Resources.
[Translation]
It is not my intention to repeat their very thorough explanations of the extensive regulation and enforcement of Canada's offshore. I would, however, draw the committee's attention to one aspect of their statements — that, for all three boards, safety and environmental protection come before all other considerations.
Honourable senators and all Canadians are aware that the three Boards are watching the events in the Gulf of Mexico very closely and are now determined to learn from the lesson given to their American neighbour.
The National Energy Board is conducting a review of Arctic safety and environmental offshore drilling requirements. We have solid and robust regulations, but it is always possible to improve them in light of the conclusions to be drawn from the events currently taking place in the Gulf of Mexico.
The Canada-Newfoundland and Labrador Board has put special oversight measures in place for current drilling projects. The Governments of Canada and Nova Scotia have also announced a three-year extension of the oil and gas moratorium on Georges Bank in Nova Scotia.
[English]
I am confident that Canada's safeguards will stand up to scrutiny, and if they do not, they will be strengthened. I want to emphasize that Canada's regulation and oversight does more than minimize the risk of an incident. Our regulatory regime also includes the measures we need to ensure a proper response to any incident that may occur.
I emphasize that companies are required to provide emergency response and contingency plans before any authorization to drill is issued. That includes demonstrating that they have the financial capacity to respond.
[Translation]
Once a drilling authorization is issued, Canada's regulators may audit the company's safety and emergency management system at any time. In addition, operators are responsible for all costs and have the primary responsibility for a spill of any kind.
It should also be noted that a company called the East Coast Response Corporation exists to provide further support to industry as required. Mr. Corey can provide further information on this subject.
While companies have primary responsibility, Chief Conservation Officers may, at any time, intervene or assume responsibility for responding to a spill in place of the operator.
[English]
On the government side, a robust framework for emergency response is in place. This is led by the offshore boards, with the support of Natural Resources Canada. There are clear assignments for responsibility and action, with roles defined for all players. This includes necessary collaboration among federal departments and between the federal, provincial and territorial governments.
Agreements are in place with the Canadian Coast Guard and Fisheries and Oceans Canada. Additional federal departments, including Public Safety Canada, Transport Canada and Indian and Northern Affairs Canada, can contribute as necessary and appropriate.
[Translation]
Environment Canada is the federal government's expert in the detection of spills. It uses aerial surveillance and satellite imagery for detection and tracking. It can provide advice about spill trajectory, weather and sea-state forecasts, the location of sensitive ecosystems and clean-up and remediation options.
The Atlantic Regional Environmental Emergencies Team can be called in by the offshore boards to provide environmental advice as needed.
[English]
At Natural Resources Canada, all of our emergency management plans for energy, including those for the offshore, were updated last fall. I assume Mr. Corey will be able to address that point.
I should note that our emergency measures are tested regularly to ensure we are well practiced and ready to mount a fast, effective and coordinated response. In fact, Natural Resources Canada and the Canada-Newfoundland and Labrador Offshore Petroleum Board, with the Canada-Nova Scotia Offshore Petroleum Board as an observer, conducted a table-top exercise to test our response to a hypothetical emergency in the offshore as recently as March of this year.
In short, I am pleased to offer the committee and all Canadians this assurance. They can have confidence in our country's capacity to minimize the risks associated with resource development in the offshore and frontier lands. They can be equally confident of our capacity to respond to any emergency.
This is not to say that we cannot do any better. I look forward to what we learn from the reviews I have just mentioned. Most certainly, we will also learn from the incident in the Gulf of Mexico. It has provided a terrible reminder of the reason Canada takes such extreme care in the pursuit of these resources. It reminds us that we can always know more, and we should take every opportunity to learn.
I believe the committee's study of the current state and future of Canada's energy sector is just such an opportunity. I would respectfully encourage honourable senators to include safety systems and regulations in their examinations, especially as they relate to exploration in frontier lands and the development of unconventional sources of energy.
[Translation]
Once again, Mr. Chair, I thank you for this opportunity for myself and NRCan officials to appear before you today. I would like to take a moment to respond to your questions. Then, with your permission, I would ask my officials to provide you with a short technical overview on offshore issues and to respond to your detailed questions.
The Chair: Thank you very much, Mr. Minister. We will go ahead with some questions.
Senator Mitchell: Mr. Minister, thank you very much for being here. It is important for the members of the committee to benefit from this sort of cooperation.
[English]
I am taken by your point in your presentation where you said, "I am confident that Canada's safeguards will stand up to this scrutiny." That was in reference to the kind of review.
However, there is an indication — and I would like you to confirm this — that actually standards for dealing with offshore drilling may have been reduced or changed, at least, in December. Prior to those changes, I understand, it was required that a company doing offshore drilling had to have a plan, had to identify the rig that could do a relief well, and so on. Now, as a result of the changes, there need not be a plan. Certainly the Newfoundland board does not mention relief wells at all in its latest guidelines.
Can you tell the committee whether there is a qualitative, significant change? In the absence of plans for relief wells, what does the government have in mind? Looking at the situation in the Gulf of Mexico, relief wells might be the only thing that will save the day.
Mr. Paradis: I pursued the question because there is some confusion around this. First, we enforce world-class standards. We had the approach of the goal-oriented regulations that were adopted in December. The purpose of those was to ensure that we allow the flexibility to have the best technology, given the specificities of the areas where the projects are. Previously, we used to have a regulation where we were checking boxes. However, some boxes at the time might not be appropriate given the specificity of the project. This is what we bear in mind.
Each applicant company must have a safety plan. That is still there. They must also have an environmental protection plan, an emergency response plan and backup contingency plans. Our regulators can look at the safety and emergency management system at any time. Joint emergency response exercises between my department and the boards are also conducted.
That we are going towards a goal-oriented relationship does not mean there is an absence of regulation. This is another style of regulation. Our principal allies are all going toward these kinds of standards, which are world-class. I must assure the committee that Canada's regulators will still scrutinize each drilling application rigorously.
Senator Mitchell: However, it still begs the question: You are not giving up on relief well drilling, are you? Are you saying you are or that under these specific kinds of tailor-made packages of drilling regulations, you would require a relief well drilling plan in some cases but not in others? Do you have another technology that works better than what has been used in the Gulf of Mexico to this point?
Mr. Paradis: The idea is to be flexible to allow new technologies if there are some better technologies. We do not want to have check boxes that will be outdated in five or six years.
The point is we are not giving up on the relief well. I spoke about emergency and contingency plans, and the offshore boards' guidelines specify that these plans must address relief well arrangements. There is no giving up there, for sure.
Senator Mitchell: I think there are 50 rigs in the world that have the capacity to drill at the depths of, say, Chevron Canada Limited's Orphan Basin site. Is there any effort, any way or any possibility to ensure one of them is close enough to make a difference if there is a problem? If they are halfway around the world and already committed, what can be done to get them? Have you considered some contingency in that regard?
Mr. Paradis: I want to ensure I understand your question. As you know, it was announced on May 12 that Chevron would review all the plans and processes in place. On May 20, they went further with very strict conditions to be followed. As I said, they can monitor at any time. The monitoring process now is on a periodic basis instead of being with a large basis now.
[Translation]
They can go there weekly or bimonthly rather than monthly. They can also show up on the platform at any time in order to conduct the necessary inspections.
The Canada-Newfoundland and Labrador Board, like the National Energy Board, is paying close attention to what is going on in the Gulf of Mexico, so that we can not only improve the regulations in place, but also see whether we need to add to the requirements and prerequisites contained in the contingency and emergency plans.
Compared to what is taking place elsewhere in the world, it is interesting to see that our regulatory boards are now proactive, since they are actually studying what is taking place in the world and contributing both their expertise and an exchange of information. Also they want to expand their knowledge so that they improve the system already in place.
[English]
Senator Banks: Minister, in a way I will re-plow the ground that Senator Mitchell did just now. Due to the attention that is being paid by Canadians today and because of the emergent situation you have referred to, I will ask you to give us a couple of examples of the ways in which we are better than they are. You just said to us that Canadians can have confidence in our country's capacity to minimize the risks associated with resource development in the offshore and frontier lands, and they can be equally confident of our capacity to respond to any emergency.
Without being cynical, let me suggest that, if you had asked the Australian minister before they had a disaster there, he would likely have said similar words. Likewise, if you had asked the responsible parties in Louisiana a month and a half ago whether everything was okay, they probably would have said you can absolutely rely on the fact that they have minimized the likelihood of something bad happening and they have in place the means to mitigate anything that does happen.
Everyone believes that everything is alright until something goes wrong. Although nobody will know what went wrong here for a long time, it seems that someone made a mistake. It is not that the requirements were not there. It is not that the regulations were not there on paper. It is not that the safety procedures were not clearly laid out or that the manual was not correct. It seems that someone made a mistake.
As you said, the likelihood of such an event is extremely remote because of the improvements in technology, but it turns out that it happened. If something like that were to happen in Canada today, God forbid, where we are drilling a well off Newfoundland, tell us the ways in which we are better. Is there more intrusive, careful or frequent inspection? Is there a greater frequency of people looking over other people's shoulders to ensure that there are no mistakes? Just assure Canadians that we are better than they are.
[Translation]
Mr. Paradis: This is a very interesting question. Obviously we followed what happened in the States very closely when President Obama made his announcements.
[English]
One major reform he announced was to split the Minerals Management Service into three. He was not quite happy about how that regulation board was working.
[Translation]
We can be glad that here we have an independent board like the National Energy Board, which is now over 50 years old.
[English]
The National Energy Board has a good track record. We are confident because we have a high level of science there, and high standards are being applied.
[Translation]
There need be no doubts about this since we have full confidence in our regulator. The same goes for the Canada-Newfoundland and Labrador Offshore Petroleum Board and the Canada-Nova Scotia Offshore Petroleum Board; it is exactly the same sort of regulatory framework and the same work methodology. So it is a problem we do not have here since we are already there.
[English]
Senator Banks: Sorry, while you are on that point, it could also have been said that, until a few weeks ago, Louisiana had a perfect system because they did not have a problem, either. What is the difference? What are we doing better or differently?
[Translation]
Mr. Paradis: I come now to governance and the level of operations. As far as what happened in the Gulf of Mexico is concerned, people tend to believe more and more that it was a matter of human error. This is indeed the conclusion that should be drawn officially. When we know what happened, a report will be made. Certainly our regulatory boards will take note of this so that they find out how to improve our regulations and ensure that something like this does not happen again. These are unlikely tragedies, but there is still a risk and this is why we have responsible regulatory boards.
Should there be a spill, we need to have a plan ready and that is why we are asking for emergency response plans, because we want guarantees. Also, at the government level — and Mr. Corey can talk to you about this in detail — simulations are even carried out, involving various departments, such as Fisheries and Oceans Canada and Public Safety Canada, and of course our department, whose role I spoke about earlier. It is a matter of taking a coordinated approach by the government and these are some of the current practices.
When we saw that the United States gave up their governance model in favour of a model more like ours, we were shown once again that we were headed in the right direction. We are happy to see that there is a six-month moratorium to do some studies and see what happened so that some conclusions can be drawn. That is exactly what happens in Canada.
And this brings me to Senator Mitchell's intervention. Regarding Denmark, there are people who say to us: "These waters are close to where we live; what is happening on that level?" My colleague, Minister Prentice, will soon take part in an Arctic summit and he plans to raise these questions: "What is happening with regulations in Denmark? How can we coordinate the whole thing better?" The National Energy Board has already had some proactive discussions with its counterparts in Denmark because we all share the same territory. I can tell you that there is activity in this area.
There is nevertheless a risk. We are never completely safe. If, as a government, we could take action to ensure zero risk, we would do so. But there is no such action at present. Unfortunately it may never exist, but we are going to do everything we can to aim for zero risk. That is our goal.
[English]
Senator Banks: Thank you.
Senator Peterson: Thank you, minister. Along those same lines, the chair of the Canada-Newfoundland and Labrador Offshore Petroleum Board says it appears that the blowout in the Gulf was caused by questionable methods and would not be condoned in Canada's offshore. That is, our policies, training and equipment are such that it will not happen. Is that a statement we can rely on, or is it a little aggressive?
[Translation]
The Chair: Do you understand the question? He stated that it could not happen here. He is asking whether this response is too aggressive.
Mr. Paradis: I do not know the premise on which this individual based such an assertion. In the government, we make sure we have emergency plans, which are submitted to us. We make sure we give all the necessary powers to the responsible authorities so that they can exercise greater control. That is what was announced last May 20 via the Canada-Newfoundland and Labrador Offshore Petroleum Board.
Last Friday I was disappointed to read an erroneous story in the Ottawa Citizen, which actually created confusion. The newspaper reported that companies did not need to prove their relief well capacity. Which is completely false. Instructions from all the boards indicate that operators are always required to submit plans showing their relief well capacity. That is an established fact.
I could not say to you, as a minister: "There will never be an incident." I do not know. There are risks. We have to take every means available to avoid such a situation and, to do so, we must use science. Technology is evolving and we have to keep aiming for zero risk. It is like everywhere else. What is happening in the Gulf of Mexico is unfortunate. However, it is an opportunity for us to improve our regulations.
[English]
Senator Peterson: BP is drilling in the Gulf, and that is in the heart of offshore ocean drilling. The Chevron well is 450 miles off the coast of Newfoundland. Are they required to have ships contracted and available? It seems to me it would take an awfully long time to get equipment and supplies up there, particularly if there is no requirement of them to have these on contract and available immediately.
Mr. Paradis: The emergency plan must include information about the availability of a rig to do a relief well. There is also information about the equipment needed and the rig needs. The plan must certainly spell out and plan a contingency for relief wells; that is part of their directives. Chevron was included in that.
I acknowledge that there was a lot of confusion last Friday, especially with an incorrect story that appeared in the Ottawa Citizen. That is why I want to take the opportunity to correct it on the record. No drilling will be possible in Canada unless a relief well capacity plan is submitted to the responsible agency. That does not exist. This is not the case in Canada.
Senator Peterson: I have one final question on the liability coverage insurance. In the Gulf, it has been increased from $100 million to about $10 billion. What are our coverage requirements on the Chevron rig?
Mr. Paradis: Regarding the liability regime, there are the Canada Oil and Gas Operations Act and the regulations under it, the Canada Oil and Gas Drilling and Production Regulations. I refer to that because we have all the details in these slides. Then there is the Arctic Waters Pollution Prevention Act. Depending on where the operators are, some law will apply. In the East Coast, they have an absolute liability depending on whether they are offshore or onshore, always assuming that you are south of 60 degrees.
The operators have an absolute responsibility. If my memory is correct, it goes to $40 million of absolute responsibility or liability. After that, they have unlimited liability, which falls under civil liability. Once again, there was confusion about a cap. No, there is absolute liability, which means that the operators are responsible regardless — that is, if there was fault or neglect, they have to pay anyway. Over that cap, they have civil liability, and they are still responsible for the third party.
This is why the agency's regulator had a demonstration of financial capacity from the operators. When the operators submit to drill, they have to demonstrate that they have the capacity to pay in case of a spill. This is part of the requirements.
I want to correct my answer. It is $30 million, and then the $40 million will go north of 60. I refer you to the act and to the regulations. All the details are in there.
[Translation]
I do not want to mislead the committee, but there is a very detailed plan with respect to liability.
The Chair: Like a good lawyer from the Quebec Bar, you have given us a good explanation of the difference between an absolute wrong and negligence. The burden of proof is different.
Mr. Paradis: I think that this is an important principle, Mr. Chair.
[English]
Senator Seidman: A recent survey was done in Canada following the catastrophic event in the Gulf. Most Canadians said that they are in favour of stopping any kind of drilling exploration until we can properly review the risks. In fact, a certain proportion of Canadians are in favour of stopping any exploration or drilling offshore altogether. What would you say to these Canadians, who are clearly so concerned and worried about the risks as we see people's livelihoods in the Gulf ruined probably for decades? It has a profound impact on our environment.
Mr. Paradis: There is no drilling in the Arctic waters; there is no drilling in the Beaufort Sea; there is no drilling in the B.C. coast, either. In fact, there is a moratorium on drilling on the B.C. coast. The only drilling in place is with Chevron, east of Newfoundland, which is monitored strictly with stronger conditions that have been in place since May 20.
[Translation]
What I want to say to Canadians is always the same thing. We are happy to see that the Obama administration is looking at our position with regard to governance. The changes that were announced are in keeping with the spirit sought by the National Energy Board.
Secondly, there is no authorization to drill in the North, nor in the Beaufort Sea, nor in the Arctic. No drilling authorization will be given as long as the regulatory boards are not convinced that workers' health and protection of the environment are ensured.
And before we get there, there are still stages to be completed, because in practice we will have the time to draw full conclusions from what occurred in the Gulf of Mexico before there is even the possibility of making a drilling project a reality. At present we are in the study stage. Nothing is happening at present.
I can reassure Canadians by saying that the regulatory boards, the two in the East and the National Energy Board, are working very actively to review the entire process, overall. At the industry level, in the beginning, as you know, there was a study concerning relief wells specifically. That was cancelled and now there is an overall study. Even the industry is asking to take a bit of a break and to look at what is happening with regard to regulations so as to have a better understanding of what happened in the Gulf of Mexico. So no one is in a hurry right now to do any drilling. We want to draw conclusions and improve our regulations.
That is what is happening now and, as I said, in spite of all the seriousness of this tragedy, the extent of the damage, we can nevertheless see in it an opportunity to improve our ways of doing things. In the United States, that is why they decided on a six-month moratorium on projects that are under way, to get a better understanding of how things stand. Here, at a practical level, nothing is taking place as I speak to you. That is the current situation.
Senator Seidman: Thank you.
[English]
Senator Neufeld: Welcome. I am sorry I had to miss a little of what you had to say, but you understand that sometimes votes take place. The bell went, so several of us had to go.
You have answered the questions quite well, but I want to push a little further from the questions of Senator Banks. I understand your position on the boards and the National Energy Board that oversees it. It is a little different from what was in the U.S.
What kinds of people are employed by the National Energy Board? What are their qualifications? Does the National Energy Board employ many drilling engineers, engineers for downhole operations, engineers for cleanup, engineers for all of those things to have oversight on what is happening? I appreciate that you are saying there is stricter oversight since the blowout in the gulf. That should help Canadians a bit. Please give us a sense of the number or the quality of the people the National Energy Board has, not the Atlantic board but the National Energy Board.
[Translation]
Mr. Paradis: I do not have the figures in front of me, but I would be pleased to send them to you. Certainly some experts are hired; obviously they are the ones conducting the evaluation and inspection process. As I also said earlier, exchanges of information are taking place with counterparts elsewhere in the world, but also with Natural Resources Canada. There are officials within my department who are responsible for doing research. We also have the research funds within my own department to see, should there be a spill, how we can best respond, what would be most efficient for ensuring a quicker response. This support is also provided by the National Energy Board.
I promise that we will check the figures; I do not have them with me and I cannot give them to you by heart. We have figures, though, for the Canada-Newfoundland and Labrador Board. We are talking about 70 employees; and for the Canada-Nova Scotia Board, we are talking about 38 employees. There are engineers, oil experts and administrators.
[English]
We will have the same numbers that will be provided to the committee for the National Energy Board. I make the commitment to do it.
Senator Neufeld: We would appreciate that very much. I am not a drilling engineer and I do not know about that, but it would be nice for Canadians to know the background of these people.
I do not expect you to have this on hand, either, but you also mentioned that within your own ministry you have those kinds of people employed to work with the National Energy Board and the two Atlantic boards. Along with the National Energy Board, can you send us the qualifications of the people who work in your ministry who are ultimately responsible and oversee this? If you could send that along, it would be helpful.
Mr. Paradis: Absolutely. As I said in my opening statement, there is experience in other departments, such as Environment Canada. I said upfront where Environment Canada can be an expert. Public Safety has some expertise as well. I want to emphasize that an exercise was done last spring to ensure everything is coordinated.
I would be happy to provide numbers and details about the expertise we have in our own department and at the National Energy Board, but I want to flag for the committee that the expertise goes beyond that.
Senator Neufeld: That is great. I think that will give some comfort to people.
Did I understand you to say that Chevron is committed to a relief well on the deepwater?
Mr. Paradis: They have to. That is in the guidelines, and they have to provide a plan to demonstrate they have the capacity to drill a relief well. Once again, I state that the story we read last Friday in the Ottawa Citizen was not correct. These kinds of stories have Canadians confused and, moreover, fearing the entire process. This was not correct. That is why I want to state it clearly and firmly on the record here.
The Chair: We have been working behind the scenes to see if we can find this article from Friday. Are you sure it was Friday, or could it have been Thursday?
Mr. Paradis: It was on the front page of the Ottawa Citizen on Friday.
The Chair: It was Friday on the front page?
Mr. Paradis: Yes.
[Translation]
I do not wish to appear embittered about this, but it is the type of story that is seen on the front page and things have to be put in perspective. Indeed, Chevron had to, like all other companies and anyone wanting to drill there, show the capacity to build a release well if needed. It is quite clear. There are no exceptions in Canada.
[English]
The Chair: It is important. I see that this is an article from the Montreal Gazette, which is in the same group as the Ottawa Citizen, also on Friday. It refers to the Tories. I do not know who they are; I guess you do not, either.
Mr. Paradis: I would assume, Mr. Chair, that it was syndicated. I think this is the same story.
The Chair: It says "Tories watered down drilling regulations."
Mr. Paradis: Exactly. That is the story.
The Chair: Is this story not true?
Mr. Paradis: It is not true.
The Chair: The day before, the story was "Ban on tankers, offshore drilling not legally binding." That was the story on Thursday about the West Coast. It says it is not legally binding. Is that article also not true?
[Translation]
Mr. Paradis: As I said earlier, there is an offshore drilling moratorium in British Columbia; that is one thing. This moratorium goes back to 1972 if I recall correctly. We said, at the federal level, that nothing would change in this regard.
Secondly there is the exclusion zone.
[English]
The tanker exclusion zone goes from Alaska to Washington State. We are monitoring that strictly as well. There was some confusion about that, but the state of the matter is very clear: There is a moratorium on drilling off the British Columbia offshore and a tanker traffic exclusion zone from Alaska to the State of Washington.
The Chair: Senator Neufeld, I just wanted to get those dates correct. You are still on.
Senator Neufeld: We got off of it, but there is no tanker ban. There is an agreement that the ships stay in open water from Alaska to Washington.
Mr. Paradis: Exactly.
Senator Neufeld: They cannot come up the Inside Passage. Oil is delivered from the Port of Vancouver. There is significant shipping of petroleum products on the Inside Passage for British Columbia's and Canada's purposes. That is what you were saying. I totally agree with you.
Mr. Paradis: Yes.
Senator Neufeld: I want to continue with the relief well. Let us suppose something happens in Canada similar to what has happened in the Gulf of Mexico. What time frame is Chevron committed to for at least starting a relief well? One does not simply go down to the pool hall and get a drilling ship. That takes a while. There must be conditions imposed by the Canadian government. What are they?
Mr. Paradis: A relief well must be started within 12 to 14 days.
Senator Neufeld: If a well exploded and was releasing 10,000 to 15,000 barrels per day, is there enough capacity to contain that much oil at sea for 14 days until a ship arrives?
In the Gulf of Mexico, they say it will take at least another two months to drill the relief well. We will not drill a relief well overnight either. I understand that Canada is helping in the Gulf of Mexico. We shipped some of our materials there. Has Canada still enough oil booms and skimmer ships to take care of an oil spill here?
Mr. Paradis: Yes. Fisheries and Oceans Canada has the equipment. When they provided booms to the United States, it was calculated that we would maintain necessary capacity in Canada. DFO has intervention equipment at 82 sites across Canada. The department calculated that the 3,000 metres of ocean boom provided to the United States does not jeopardize our intervention capacity in Canada.
Senator Neufeld: I assume the materials sent were from the West Coast or elsewhere where no drilling is taking place.
Mr. Paradis: I do not know exactly where the materials came from. DFO could provide details on that. However, 82 sites are spread across the country to ensure Canada can respond quickly.
Senator Neufeld: You say with confidence that Canada's system is one of the best, if not the best, in the world. I do not dispute that. I am sure we have very good systems.
The Atlantic offshore petroleum boards appeared before the committee. I cannot remember the gentleman's name at the moment. He began by saying what happened in the Gulf of Mexico would never happen in Canada because we have different rules and regulations. He explained some of those.
I asked him whether our downhole procedures are similar to those of the U.S. regarding safety and all of those issues that arise once you are poking into the oil. He said they are, which is contradictory to how he started.
In the ministry's estimation, do we have better technology for downhole procedures than the U.S. has? I am not talking about inspection. I understand that Canada has done little offshore drilling compared to the U.S. or other places in the world. It would surprise me that Canada would have better technology. Maybe you can disabuse me of that notion. I do not think our technology is any better than what is in the U.S. I would say our technology is probably similar.
[Translation]
Mr. Paradis: A while ago, your colleague asked exactly the same question. As I said, I was not present. I do not know what premise he based his comments on.
As the minister, I can tell you that it would be misleading to tell people that there is not any risk. There are always risks. The government's role is to put in place the necessary regulations and personnel required to aim for zero risk.
Unfortunately we may never get there, like anything else, but we have to make sure that all the equipment and regulations are there.
[English]
I spoke earlier about the goal-oriented regulation that I call "intelligent regulation." Instead of checking boxes, potential updated regulations in the next five years will create intelligent regulation that will take into account location, climate, soil type, and so on. That allows flexibility to ensure we use the best technologies.
We have to keep in mind the guidelines requiring all project operators to demonstrate their capacity for a relief well. I said earlier that we are on track, and I am glad to see the Americans coming on track as well. It means Canada is up to speed.
When it was decided to reform the Minerals Management Service, it was split into three branches. We have good governance. The National Energy Board has a good track record; it has been successful for the last 50 years. It has the entire confidence of this government, and we will continue to operate that way.
However, I will never say there is no risk at all. That is not true. There are risks. We have to manage the risks as much as possible.
Senator Neufeld: I do not want you to go away thinking there are no risks. I have been around too long for that. You can tell by the colour of my hair.
The Chair: There is no risk of another question; I will risk cutting you off. The officials will remain for as long as we want.
Mr. Paradis: I am running out of time. I apologize for that.
Senator Lang: I want to return to the question of deepwater drilling and the well we are drilling off Newfoundland. It seems from the evidence and testimony we have heard that there is a significant difference in risk between deepwater and shallow-water drilling of wells.
Perhaps this is not a fair question, but I will put it to you: Does Canada do anything differently regarding inspections and requirements for deepwater drilling versus shallow? I understand the well we are drilling off Newfoundland is 2,600 metres deeper than the well in the Gulf of Mexico. Could you give us an overview from that point of view?
Mr. Paradis: That is a fair question. Details were announced on May 20. The Canada-Newfoundland and Labrador Offshore Petroleum Board announced several additional measures to the robust regulatory oversight requirements already in place. I want to ensure it is not perceived that no oversight existed previously.
There are three main points. First, the board established a team to oversee operations and will increase the frequency of site inspections. The inspections will occur every three to four weeks instead of months. Inspections can be done at any time. Second, Chevron is required to provide the board with ongoing reports on the safety mechanisms in place. Third, prior to penetrating any targets, Chevron must ensure the board is satisfied it is safe to proceed.
Senator McCoy: My understanding of the situation in the Gulf of Mexico is incomplete. I do say it is not just one person's fault, and I am sure Senator Banks will agree with me. It is a series of things that failed. There is Transocean, which is the drilling company. Then there is Halliburton, which put the mud down the pipe that did not keep the explosion from happening. Then there is Cameron who manufactured the blowout preventer, which did not work. I just want to make sure we do not fasten in on a single actor or a single incident. Really it was a complex event and a convergence of unusual events.
Another piece of the puzzle, apparently, is that there is shale gas or gas hydrates where they are drilling in the Gulf of Mexico, and these have a tendency, which has been ignored and not well understood, to put tremendous upwards pressure and can cause an explosion, like what happened.
What geology do we have at Chevron's site and other potential offshore sites? Do we have the same geology?
Mr. Paradis: I will address the first point, and the officials will be able to answer the second point. To be honest, I cannot comment about the geology, but it is a fair question.
On the first point, I just said the National Energy Board said it would review the entire process from the beginning to the end. At the end, we have to keep in mind what our government can do if there is a spill. There were many questions, and I emphasized again that an exercise was held last spring to ensure there is good coordination between the departments.
My point is that I totally agree with you. We cannot see it only from sector to sector. It must be reviewed as a whole, which is exactly what we are doing.
Senator McCoy: I want to congratulate you, minister, on your constant reiteration that there is no possibility that we can eliminate risk. It is always a balancing act, and I compliment you on being brave enough to say it in public. Thank you.
Senator Dickson: I, too, minister, would like to echo Senator McCoy's words. You have given an excellent presentation. To make that statement for all Canadians to hear, if they stay up until 4 a.m., goes to your credibility, and people can definitely trust you.
Coming from the East Coast, Nova Scotia, the connections with Newfoundland are pretty close. We have to look from the East Coast perspective to balance the risk against the opportunity. I would appreciate your comments about the expertise and the hands-on measures taken by the safety officers, particularly your federal appointees on the board and the people who work for the respective boards there.
As I understand it, many rigs that come to drill offshore are inspected before they do the work, and many of them end up three to five months in the shipyards up on the East Coast to be refurbished, which is good from our perspective. Many of these rigs come from the gulf, and it seems to me that if they need this kind of work when they come up to Canada, there must be some laxness in the enforcement of the regulations down in the United States, if they do have any regulations. I would appreciate your comments. It is an example of the effectiveness and the skill of our regulators on the East Coast.
Mr. Paradis: Yes. We must keep that in mind. The bottom line is that we want to ensure the environment is protected and the safety of the workers is ensured. To arrive at and to achieve these ultimate goals, we need to review the entire process. This is exactly what the National Energy Board is doing right now, and the board work closely with the East Coast offshore petroleum boards as well.
As I said earlier in relation to what was happening in the North and the Arctic issues, the industry said it wanted to take the time to look at what happened in the Gulf of Mexico to ensure we have a good conclusion there, but we will see it as a whole. That is why in the meantime with Chevron, as I said, on May 20 it was a pretty quick response. The National Energy Board went out on May 11 saying that it will stop the relief well review and will proceed with an entire review, given what is happening in the Gulf of Mexico. On May 12, the Canada-Newfoundland offshore board went out saying they will review the process for the Chevron drilling. On May 13, we extended the moratorium in Nova Scotia. Finally, on May 20, the Canada-Newfoundland offshore board went out with these measures that I just spoke about. The bottom line is that I think the office of the chair of the National Energy Board said the boards want to learn as much as possible to better improve our regulations.
I am not afraid to say that having goal-oriented regulations is a good idea. This is a world-class standard and an intelligent regulation that takes everything into account, such as climate, where the operators are and what they have to deal with. I think this is a step in the right direction overall.
Senator Dickson: It is. Thank you very much, minister.
Senator Brown: I wanted to ask a question that may not have an answer yet but may trigger one. Rather than heap regulation upon regulation, I wonder whether we could get the engineers to work on stacking blowout preventers. They have been in business for a long time and have used blowout preventers for generations. If it is possible to make a blowout preventer that can handle the 2,200 pounds of pressure at that depth to begin with, plus whatever force of oil and gas comes up, I want to know whether anyone is thinking of asking them if they could stack one on top of the other.
From what I understood about the explosion in Louisiana, the valve simply did not close on the blowout preventer. If we had another blowout preventer above that and another one above that, we would not have to worry about relief wells.
Mr. Paradis: When I was talking about being goal-oriented, it is to ensure we have the flexibility and the room, if we have new technology that is more effective, to keep this. As I stated earlier, having this is not an absence of regulation. This is a style of regulation that ensures the regulations will improve with technology.
I do not know whether my officials have more details on that. I cannot go further than this, but I will take note of your question and check that out. We are monitoring everything to ensure we improve our regulations.
Senator Brown: I think they should look at that. We are in a different environment than when we are above ground.
The Chair: Good point.
[Translation]
Mr. Minister, thank you very much. You have been very generous with your time, which is precious, we know. We will continue with your officials.
[English]
Mr. Paradis: I hope that in my next meeting they will be as generous as today. I might get in trouble now. Thank you very much, senators. I appreciated the visit.
[Translation]
The Chair: Here, in the committee, it is like your name, it is paradise!
[English]
Senator McCoy, you will have a big chance now, if you are staying.
Senator McCoy: I am sorry; I have another commitment. I thought we were sitting until seven o'clock.
The Chair: I would like to introduce Mr. Mark Corey, who is an incredible public servant with great knowledge, according to the minister. He is Assistant Deputy Minister of Natural Resources Canada. With him is Mr. Eric Landry, Frontier Lands Management Division, Petroleum Resources Branch. Also now at the table is Mr. Tim Shanks, Advisor, Environment, Energy Sector. I am a keen golfer, and that is quite an unfortunate name. I think you probably had to put up with some teasing over the years.
Tim Shanks, Advisor, Environment, Energy Sector, Natural Resources Canada: It is not the first time I have heard it.
The Chair: Thank you all for being here. I know you have a tight schedule and many demands for these committees, but this is important. I think the minister put it very well: He wants to disabuse the Canadian public of any fears they might have. As we can see, this disaster is not getting any better.
Do you have a statement you want to make first, Mr. Corey?
Mark Corey, Assistant Deputy Minister, Energy Sector, Natural Resources Canada: How much time do we have?
The Chair: The clerk just asked me the same thing. We are good for as long as you are because we are privileged to have you here. Should we set a limit of 7:45 p.m., colleagues? Let us say half an hour, plus.
Mr. Corey: It is an important subject, so we are really at your disposal. We will stay as late as you need us to stay.
The Chair: You are okay, Senator Lang, until 7:45 p.m.?
Senator Lang: Until midnight.
The Chair: The chair will be here, as will Senator Neufeld.
Ladies and gentlemen, you do have a statement entitled "Canada's Offshore Oil and Gas Regime," and Mr. Corey is about to present it to us.
Mr. Corey: I will move through it quickly. We have been looking pretty closely at the proceedings and witnesses the Senate committee has had. To change an old phrase slightly, nothing focuses the mind quite like having to face a standing committee the next evening.
We thought it might be best to go through a description of the legislative framework and the regulations that guide it, some of the safety and the liability provisions, the environmental assessment processes and provisions, some of the Government of Canada's emergency response plans, the roles and responsibilities of the various players, and then finish looking at the events that are unfolding before us in the Gulf of Mexico. It is a bit more of a technical briefing, and we thought it might be good to get some of the fundamentals of the system out.
The Chair: That is terrific. All of us will be delighted to hear that. Before you start, though, I want to congratulate you on the minister's preparation. I know you all were very involved in it. He said to me that he was very pleased with the way you have him in the picture, because it is difficult stuff.
Mr. Corey: Yes.
The Chair: We will be delighted to have our own briefing now from you.
Mr. Corey: You should know as well that the people sitting behind me have not spent much time at home for the last few weeks, weekends or evenings. We have been working 24/7 on this.
The Chair: We are glad you are following our proceedings. If you feel we are something doing wrong, I hope you will feel comfortable sharing that with us. We really are trying to do the best we can to get the public well-informed on this subject, as you are.
Mr. Corey: We will start with slide 3. There are two basic acts to really understand how offshore oil and gas is governed in Canada. On slide 3, the first act is the Canada Petroleum Resources Act, which was passed in 1985, referred to as the CPRA. This basically provides authority to issue interests. It governs the leasing of federally owned lands and it governs the royalties. The land administration side is covered by that act.
The second act you will hear mentioned frequently is the COGOA, the Canada Oil and Gas Operations Act, dating from 1986. This act governs the exploration and exploitation of oil and gas. It provides the measures we take relating to the environment, conservation resources and joint production arrangements. This one contains a lot of the safety, and the actual operations are governed under this act. Those are the two key acts.
Turning to slide 4, the first body that has broad responsibilities is the National Energy Board. The NEB Act was passed in 1959, so it is a group that has been in operation for a long time. The National Energy Board is the arm's-length independent regulator. It regulates all the offshore activity, with the exception of the two accord areas, which we will come to next. It is the lead agency in emergency situations in non-accord areas, and it regulates oil and gas activity in these areas.
Within these other areas, as well, north of 60, Indian and Northern Affairs Canada is responsible for collecting, managing and administering royalties. INAC also provides the land tenure function. INAC issues the leases and puts out the bids. In the South, Natural Resources Canada does that.
The Chair: Did you already tell us about these accord and non-accord areas? What are they? Do they have to do with Newfoundland and Labrador and Nova Scotia?
Mr. Corey: Exactly. That is the next slide. In 1987 and 1988, we set up special arrangements with Newfoundland under the Canada-Newfoundland Atlantic Accord Implementation Act and with Nova Scotia under the Canada-Nova Scotia Offshore Petroleum Resources Accord Implementation Act. In those areas we have set jurisdictional issues aside and have agreed to a co-management framework.
We have boards in both of those that really report to the two governments. They are independent boards, like the NEB, however; they are arm's length. The boards do both the land administration functions, in that they are responsible for the leases and for bids, and they are responsible for the safety. However, Natural Resources Canada collects the royalties and manages the financial side of things.
The boards really focus on safety, protection of the environment and the actual operations. Our minister has stressed this. We have independent, arm's-length boards that oversee the safety and environmental assessment functions in the offshore.
The Chair: We find this business of reporting to both governments a possible weakness. Does it work okay?
Mr. Corey: I think so, in the sense that, again, they are independent. They are basically nominated by both governments. Once they are established, they are independent.
For example, there is a chief safety officer in both of them, and that officer cannot be overruled, either by the board or by governments. They truly are independent and at arm's length.
The Chair: Therefore, Premier Williams cannot say "Do this" while Minister Paradis says, "No, no. Do that." Is that correct? They decide on their own and can take note? That is always the risk when you have two bosses.
Mr. Corey: They do not take direction directly from the government, no. Like the National Energy Board, they are independent, arm's-length organizations.
Senator Lang: May I follow up on this and compare our system to what is happening in the gulf? Was that chief safety officer totally independent, or is there a different system there?
Mr. Corey: I can give you a little bit of information to compare with the United States.
Senator Lang: I think that is a very important point.
The Chair: As long as we do not destroy his flow.
Mr. Corey: It actually does clarify things. The previous practice in the United States was that all of the land tenure management functions and all of the inspection, investigation and enforcement functions were handled in the Minerals Management Service. Therefore, it was all in one area.
President Obama has announced he is keeping it within the Department of the Interior but is splitting it into three different divisions. The grants, the leases and the permits will be issued by the Minerals Management Service land tenure division. A separate group will deal with royalties and revenues, and a third group will deal with inspections, investigation and enforcement.
They are splitting those functions up. I would emphasize that the regulators in Canada have always been at arm's length from the government, and we have separated out, for example, the collection of royalties and revenues. That is still done by the Government of Canada.
That just gives you a bit of background on the status of the boards.
Slide 6 contains some things that are required by all of the regulators. There is a development plan before drilling can commence. Environmental assessments are required actually at two different points in the process. There are safety and training plans, environmental protection plans — and again you can see there are a number of them — and certificates of fitness. They have to go through certain things related to financial responsibilities and liability, which I can give more information on after. There are a number of steps they go through to drill a well, reporting right up to terminating the well. That is a basic summary, but there is a long list of things that a company has to go through before getting a licence to drill an exploratory well and before getting a licence to go into production. It is a fairly long process.
Slide 7 shows another area where I think there has been some confusion. I am hoping this will help to clarify it a bit.
Before a call for bids is issued, for example in the North, INAC will assess environmental, social and cultural considerations. They have about 40-plus years of experience going back, and they have a lot of data and information. For some areas, they simply say, "We are setting this area aside; we will not issue any leases in this area because it is sensitive." The Atlantic Canada boards conduct a broad strategic environmental assessment that accomplishes the same kind of thing. Through the assessment, the boards will look broadly at an area and say, "Are there factors that would cause us not to put leases out here?" Based on those assessments, the boards will then issue a call for bids, and the winner will be the company that comes in with the top bid. At that point, the company must go through an environmental assessment process before it can begin drilling. For every subsequent activity, the boards are looking at doing an environmental assessment. There was some confusion on that. There is an environmental assessment at that stage as well, which they do before they can drill.
The Chair: I believe the current omnibus bill before the house, Bill C-9, the budget implementation bill, has everything but the kitchen sink in it. Is there not something in it about environmental assessment in a streamlining thing that is causing the confusion?
Mr. Corey: No.
The Chair: It has not passed yet.
Mr. Corey: No. That concerns the streamlining of the regulatory process.
The Chair: Generally?
Mr. Corey: Yes.
The Chair: However, it does not mitigate what needs to be done?
Mr. Corey: This will not change the requirement for environmental assessments before drilling. That will still be a requirement.
The Chair: You may ask a question on this point, Senator Neufeld, because you and Senator Frum are studying that bill.
Senator Neufeld: In the North, INAC does the environmental assessment; is that correct?
The Chair: That is above 60 degrees.
Senator Neufeld: Above 60 degrees?
Mr. Corey: INAC would do the preliminary assessment. Again, from their knowledge, they would set areas aside. In the Atlantic accords areas, the boards would do the strategic environmental assessment. Once they get to the point of actually drilling, it is the company that would have to do that.
Senator Neufeld: I am fine with that, then. I was a little confused. I am glad you clarified that. INAC does a certain part of it because of their long term up there and their knowledge. Actually, the National Energy Board will do the environmental assessment on drilling.
Mr. Corey: They will require the company to do it, absolutely.
The Chair: Senator Dickson, you have a question for clarification?
Senator Dickson: Yes. Once Bill C-9 goes through, will the Newfoundland and Nova Scotia boards have the same jurisdiction to do the environmental assessments?
Mr. Corey: Yes. That is being discussed right now, and they are looking at that. The boards currently have that authority. We are looking at how that will be managed in the future.
Senator Dickson: Will that require an amendment to Bill C-9?
Mr. Corey: I do not know. We will have to look into that and get back to you.
Slide 8 underlines the point the minister made. The operators have clear responsibility for preventing, mitigating and managing oil spills. They are liable for cleaning up a spill and for paying for losses or damages. This is the point that the minister was making, and it is slightly different but very similar. The Atlantic boards require that anyone who enters into drilling have a $30-million absolute liability fund. This is usually a line of credit to which the board has access. In the North, it is $40 million.
"Absolute liability" means that you do not have to prove fault or negligence. Even if there is a spill through no fault or no negligence of the operator, that is for third-party liability. Again, that is not for cleanup, because the operators are responsible for their expenses. That is the first thing. This is for people who have received damages and who have sustained losses. That is money they have access to through the boards without having to prove fault.
The second level is that there is $70 million, and this is common for all of them. The regulator has to have access to the funds, through bonds, insurance or promissory notes. This one requires proof of fault or negligence. That is a second fund that is set up so that third parties can tap into it if there are losses.
The third one is that the operators have to demonstrate financial capacity with about $250 million. The amount depends a bit on the well and on the circumstances. This is to show that the company has the financial resources so that if there is an accident and the company is sued, it will actually have resources to pay for the damages.
Again, as the minister underlined, over and above this, if there are lawsuits from other people and there is fault, it is unlimited; people can sue for any amount. These are things contained in the legislation that the boards do to ensure there is a basic minimum. You should look at these as the minimum levels.
Slide 9 talks about how the operators are responsible for the costs of spill cleanup and response and they must have plans in place in case of an emergency. If requested by an operator or deemed needed by the regulator, the regulator can actually take over. For example, if any of the boards were concerned and decided that they did not think the operator was doing a good job in a cleanup, they could come in and take over. The response plans are regularly tested in cooperation with the regulators, Natural Resources Canada, NRCan, and other provincial and federal agencies.
Slide 10 talks about the fact that NRCan has an emergency management plan. Under structure and role, there is an emergency management group, and then there are three levels of activation. The response refers to the processes that we would go through in dealing with an emergency. We have training on it.
On March 25, 2010, a number of us, including myself, participated in a tabletop exercise where we had a simulation. The simulation was in the Atlantic, so we had the Canada-Newfoundland and Labrador Offshore Petroleum Board participate by phone. We walked through what we would actually do if we had an emergency. This one was interesting. It involved a ship crashing into a rig. There was a fire and an explosion. The question was what we could do, how we would coordinate it, and what steps we would take. We practised that as recently as March.
The Chair: For our understanding, you say a tabletop. Is it literally a tabletop? Are you out there in the ocean?
Mr. Corey: No. Basically, it is a group of people around the table. We have people who communicate with us by conference call. The Canada-Newfoundland board and other people participated by phone. A facilitator walked us through the exercise and would give us more information, saying, for example, "It is a certain time. This is the new information coming in. What would you do?" We would then all respond as to what we would do. We would then be told, "It is a certain time later. This information is now coming in. What would you do?" It was a simulation, but it was just around the table talking about how to address the situation.
The Chair: This was before the event in the Gulf of Mexico?
Mr. Corey: Yes, absolutely.
Some questions have been asked about the other agencies. NRCan does have a number of responsibilities, which we have outlined. INAC is responsible for legislative and regulatory oversight north of 60. Environment Canada provides the advice and runs the environmental assessments for drilling production programs; that department also has the Regional Environmental Emergencies Team it can call in, which brings more resources into an emergency situation. The Coast Guard — and the minister was talking about this — maintains 82 equipment depots across the country. They would play a key role as well in any spill. Transport Canada has a national aerial surveillance program and spill tracking detection. They would play a key role. Fisheries and Oceans would play a key role in a number of things. These are just some of the key players.
How much money do you have set aside in case of a spill? That question has come up before. The answer is that the way emergency situations occur, it would be whatever resources are required to deal with it.
I can recall the ice storm of 1995, a major emergency in Eastern Ontario and Western Quebec. At the time, I was printing topographic maps and was managing mapping information for the Government of Canada. Our printing presses ran 24 hours a day, 7 days a week, and we provided topographic maps for the Canadian Armed Forces for their deployment. We figured out the resources afterwards. In an emergency situation like this, I think you would find that it would be the same. It would be whatever it takes to deal with the emergency, and that would be the primary order of the day.
The last slide shows a little bit about what is happening since the Gulf of Mexico incident.
We have had many questions about our comparison to the U.S., so we have talked about the Canadian system relative to the American. The second thing we would say is that we have done a number of things to heighten vigilance since the event in the Gulf of Mexico. The minister has outlined most of them. On May 11, the NEB announced that it will be conducting a comprehensive review. On May 12, the Province of Newfoundland and Labrador announced an independent assessment; I think it is Captain Mark Turner who will be undertaking that for the province. On May 13, there was a joint decision between the Minister of Natural Resources Canada and the Nova Scotia Minister of Energy to extend the moratorium on oil and gas activities in Georges Bank until the end of 2015. On May 20, the Canada-Newfoundland and Labrador Offshore Petroleum Board announced a number of additional measures on the Chevron drilling project, which the minister outlined. That is the second part where we have done a number of things.
The third part really is captured in the minister's quote, which is that we can benefit a lot from what has happened. The important thing is to ensure that the projects respect the safety and security of the workers and the environment. I think the minister has also been very clear saying that we will be learning from this. If we can further strengthen the system, we will be watching closely and will take every step we can to ensure that we do strengthen the system.
The Chair: Mr. Corey, that is very helpful. I think my colleagues would all agree. You are the ones who hopefully know the answers. You have a whole shopping list of measures that were already there before April 20, plus you have talked a bit about the shoring up that has taken place in the interim. One group of people told Senator Dickson and me on Thursday night that this could set the offshore drilling industry back 20 years. Another said there is a terrible fear of overreaction simply because it is great to have quotes like this from the minister. How can you go wrong when you say that? However, are we doing things to get in a position to make quotes like that that could be deemed by experts like you as too much simply to allay public fears? I do not know. I am just telling you what we are hearing. We know that hearsay is a dangerous thing, and it is not admissible evidence. I turn it over to you on that.
Mr. Corey: That is a very good question. So far the government has had a measured reaction. The Prime Minister has been fairly clear on that. He does have confidence in the boards, all three of them, that we will be watching closely to see what lessons can be learned and how we can improve further. A number of steps have been taken in the interim to ensure that we are very vigilant right now as we watch events unfold in the Gulf of Mexico. That is pretty clearly the role the government has taken so far on it. It has, I think, taken a fairly measured approach.
The Chair: Of course, like you, we are watching the different announcements and declarations. The Premier of Newfoundland and Labrador is here in town and will be speaking tomorrow at the Canadian Club of Ottawa. He has said he is not declaring a moratorium on the Orphan Basin. He said he has confidence. Are we in sync? This is a classic case of the feds and the provinces and the overlapping oversight responsibilities where clearly you have an opportunity to reassure people, if you would like to.
Mr. Corey: You could talk about the fact that we have very regular contact at pretty much all levels between the provincial governments and the federal government as this unfolds. I know that our minister has been in fairly frequent contact, particularly with Minister Dunderdale in Newfoundland. I know deputies have been talking. I have been in contact with my assistant deputy minister counterpart, particularly in the government of Newfoundland, which is where much of the attention is focused now. We have been working with the Canada-Nova Scotia board as well. We have been working closely with Indian and Northern Affairs Canada and others regarding events in the North.
This is where partnerships are important. Good working relationships are important. I think I could characterize the relationships between the federal and provincial and territorial governments as being very good right now.
Senator Mitchell: In your presentation, Mr. Corey, you emphasized quite a bit the importance of the environmental assessment process for creating some sense of security and ensuring things will be done well. We received the budget bill, Bill C-9, today in the Senate. We will be passing that at the end of August. It calls for ministerial powers to integrate, some would say reduce, the significance of the environmental assessment process. Have you considered that in light of what you are saying in your presentation? Can we be reassured that environmental assessments will sustain the highest value and will not be diluted?
Mr. Corey: Yes. That initiative is being led by Environment Canada with another part of our department, the Major Projects Management Office. The bottom line is that, no, environmental assessments will not be weakened or diluted. The same requirements for environmental assessments will still be in place for the offshore under that bill.
Senator Mitchell: Are they excluded from that bill?
Mr. Corey: No, but basically that is talking about the organization and how the environmental assessment process is managed. For example, the requirements on the companies to do environmental assessments will remain the same. They will still have to go through the environmental assessment process.
Senator Mitchell: When it comes to relief wells, I may not have entirely followed the minister, but it seemed to me that the one argument is that in fact relief well requirements were changed in December. He is saying, no, they have not been changed, because there is a guideline that will determine what needs to be done for relief well requirements. There is a fundamental difference between a regulation and a guideline.
Could you clarify that difference and tell me how the minister can say both those things at the same time?
Mr. Corey: I will start off, and then I can get Mr. Shanks to speak to it as well.
It is very clear; the story in the Ottawa Citizen was actually incorrect. In the Atlantic accord areas, and as well in those areas that are still under National Energy Board jurisdiction, there is a requirement to have plans for a relief well if required. In the Arctic, because of the difficulties and the logistics of getting a second drill ship up there if there is an accident on the first one, there is a requirement to have a second drill ship up there so that you can actually drill a relief well in the same season.
In the Atlantic, there is not that requirement, because you can get a drill ship there much quicker, but there is a requirement to have a plan to get a second drill ship there to drill a relief well if it is required in the event of an emergency.
Mr. Shanks: What you are referring to is that the style of regulation changed last year. We have gone from prescriptive regulations to goal-based regulations. As the minister said, that allows for the flexibility for the offshore boards to apply the best available technologies. That does not take away from the requirement for relief wells. The offshore boards still have the opportunity and the authority, and they are doing exactly that, applying those principles to the offshore.
In other words, if a better technology came along, they would have the flexibility to use that technology; but for right now — for the Chevron well, for example — there is a requirement to drill a relief well.
Senator Mitchell: I think Chevron has said that in the Orphan Basin project, the worst case scenario for a blowout and spill would be about 10 days. I may be getting this wrong, but at the same time they say it would take about 11 days to get the rig up there to start drilling the relief well. That does not make sense.
The minister said it would take 12 to 24 days to get a ship drilling rig up. How can you be so sure that it would be 12 to 14 days? Who knows where those ships are now and what kind of contractual obligations they already have? Can we free one up to get there? How long does it take to drill 2,600 metres once you get it there?
Eric Landry, Director, Frontier Lands Management Division, Petroleum Resources Branch, Natural Resources Canada: Chevron has an arrangement with a company to have a rig available in the case of an emergency, and the 12 to 14 days the minister mentioned is the time it would take the rig to come up and start drilling the relief wells. As for drilling relief wells, as you have seen in the U.S., it can take several months.
Senator Mitchell: Is the ship just sitting there waiting to be called up? If it is not, how do you know it will only be 12 to 14 days away?
Mr. Landry: The Canada-Newfoundland and Labrador Offshore Petroleum Board would have the details on that. From my discussions with the chair of the board, my understanding is that Chevron has an arrangement to secure a rig, and the time it would take would be 12 to 14 days to get the rig here.
The Chair: I should say that witnesses from Chevron will appear here on Thursday morning at 8 a.m. I think you folks know that, but I would like all our viewers to know as well.
Senator Neufeld has a supplementary on the point of Senator Mitchell.
Senator Neufeld: As I understood the minister's response when I asked that question, in its permits Chevron must have access to a drill ship within a maximum of 14 days, 12 to 14 days, that can be on site. That means Chevron must be paying some company out there that has a drill ship that can drill on those kinds of waters and that could quit what it is doing now or come out of port and go up and do the work. That is what I understood.
Mr. Landry: That is my understanding.
Senator Neufeld: That is their commitment.
Mr. Shanks: They have a ship on standby, and the transit time from the gulf is about 11 days.
Senator Neufeld: It is if that is where it comes from.
Mr. Shanks: If that is where it comes from.
Senator Lang: If I can follow up on that, let us go up to the Arctic so we can clearly understand that. Did you say, Mr. Shanks, or perhaps it was Mr. Corey, that up in the Arctic, if a relief well is required for where the drilling is occurring, the proponent must have a second rig on site or close by because of the nature of the ice and all the other factors they face up there?
Mr. Shanks: Yes, that would be a condition of drilling that the National Energy Board would impose on the operator.
Senator Lang: Has that always been the condition imposed in the past as well?
Mr. Shanks: In fact, there has not been any drilling in the deepwater portions, but, yes, operators have to demonstrate that they can drill a same-season relief well in the Arctic. That has been the policy.
Senator Lang: I do not know what your relationship is with INAC and their responsibilities in the North, but it seems to me that if you have the National Energy Board and, in this case, the provinces involved in the regulatory process, maybe it is time we look in the Arctic for the same type of regulatory process to be put in place with the NEB. Has any thought been given to that? I understand that is where a lot of the expertise is from the point of view of the oil and gas business.
Mr. Shanks: Could you repeat the question?
Senator Lang: The regulatory process in the Arctic is set up differently through INAC, as opposed to what it is for example on the East Coast. Has any thought been given to looking at whether the regulatory process in the North for the coasts off Yukon or the Northwest Territories should copy what is happening in the East Coast?
Mr. Shanks: I see, like joint management regimes.
Senator Lang: Yes.
Mr. Shanks: The territories have certainly expressed interest in their offshore areas, as has Quebec — for example, the Gulf of St. Lawrence — New Brunswick and P.E.I. Certainly, NRCan has entertained having discussions with provinces, and INAC, similarly, in the North, on joint management regimes. It has been entertained, yes.
The Chair: Mr. Shanks, you should be aware that the good senator hails from the Yukon. He is looking for influence up there.
Mr. Shanks: Yes, I have spent a lot of time in the Yukon.
Senator Lang: You are familiar with what we are speaking of. It is something that should be looked at. With respect to treating the North differently than the East Coast on a regulatory basis, it seems to me that in view of how well the regulatory process seems to be working in Newfoundland and Labrador and Nova Scotia, maybe in the future we should look at the Northwest Territories and the Yukon.
Mr. Corey: Just to clarify the point, revenue sharing and so forth should be a question for Indian and Northern Affairs Canada and ministers.
In terms of the regulatory oversight, the systems are similar in that the National Energy Board is the arm's-length organization that oversees all of the safety and environmental assessment and all of the oversight of operations there. In that sense, they are similar.
Senator Lang: There is definitely an undertone here that the system we have in place offshore, our enforcement, and the measures we take give us much more comfort than what happened in the Gulf of Mexico. I asked the question about the chief safety inspector, and the response given to me was that the U.S. has split up that function into a number of divisions through the federal department down to the Gulf of Mexico.
Under their system and the way it is running in the Gulf of Mexico, was that chief safety inspector at arm's length from the governing organization, or was there a relationship there so that the chief safety inspector did not have the freedom to make those decisions? I want to see whether there is a difference.
Mr. Corey: I wish we could answer that question, but we do not know.
The Chair: It is not up to these witnesses to tell us about the facts in the gulf.
Senator Lang: Mr. Chair, I think it is because we are comparing ourselves.
Could you get me an answer to that?
Mr. Shanks: One element you can think about in the comparison is that offshore in Newfoundland we have one well drilling, and a lot of resources from the offshore board are focused on that one well. In the Gulf of Mexico, of course, there are rigs scattered everywhere. It is possible that they did not have the resources to cover off all of those inspections. I do not know, and I do not know what level of rigour their routine would have.
Clearly, the scale of operation in Canada is far smaller. I think one of the reasons we have seen the six-month time out in the U.S. is simply for them to stand back and ask the questions: What are our processes? How many rigs are out there? How many inspectors do we actually have?
I saw in the news today that Great Britain has doubled its effort in inspections just today.
Mr. Corey: As officials of the Government of Canada, we cannot speculate on the problems they had in the United States or the causes. We will have to wait to see what their review says on that.
Senator Lang: Mr. Chairman, I am not trying to speculate or put anyone on the spot here. I understand we are dealing with one well off Newfoundland, and I am told that off the Gulf of Mexico there are up to 50,000 wells, to give a perspective of what they are dealing with there.
Mr. Shanks: There are certainly many wells, but there are not that many rigs.
The Chair: We are not hearing about Hibernia because they are not drilling there. It is in production. It is an operating well.
Senator Lang: I understand that. What I wanted to know was under the regulations, and I would like you to look that up. We are told that we are different than they are, that we have better enforcement. I am just wondering whether their chief safety inspector had, prior to this accident, under legislation, that arm's-length freedom to make a decision that could not be overruled. That was the only question I had. Whether or not they utilize it is another matter.
Mr. Shanks: We can certainly come back with that information, if you like.
Mr. Corey: It would be helpful to put this into perspective. These numbers were given to us by one of the boards the other day. We will have to check to see whether they are correct. There are about 4,000 facilities in the United States. In Newfoundland and Labrador, I think there are about six facilities.
The Chair: What do you mean by facilities?
Mr. Shanks: A rig.
The Chair: In operation?
Mr. Corey: Yes, in operation. Nova Scotia has I think five platforms. Even if the numbers are not exactly right but are close — and we will get back to you with the right numbers — there is a difference of several orders of magnitude between the number of wells we have and the number of wells in the U.S.
The Chair: With respect to feeling our system is better and safer, the comparison the minister and his officials have given us is sort of like banking. The proof is in the pudding there. Hopefully, good pudding exists here. Anyway, that is what these hearings are about.
Senator Peterson: Thank you, gentlemen, for your presentation. I think we all agree that offshore deepwater drilling is very specialized. How do you think the technical expertise of the regulator compares to the technical expertise of the drilling companies?
Mr. Corey: On that one, I would have to reflect back on what the Prime Minister said. He has full confidence in all three boards and their technical expertise. These people are world-class regulators. They attend international conferences every year where similar groups from around the world get together.
Our three boards get together during the year and compare notes. Due to so much change in the industry — technology is changing, as are methods — they have to stay current. I would say the Government of Canada has a lot of confidence in the expertise of these three boards.
Senator Peterson: I ask because it seemed in the Gulf of Mexico that the U.S. was asking the oil company what was going on, and I think the oil company was struggling to tell them. I just hope we do not get into that same situation. It is very specialized.
Mr. Corey: Also, in Canada, all boards have the authority to intervene and to take over directly if they feel the operator is not responding properly to the crisis. To do that, they have to have the expertise and the capability, and they must maintain that capability.
Senator Peterson: I sure hope so. I think I read somewhere that with a blowout, the oil would travel up to maybe 100 kilometres. Why would that be?
Mr. Corey: That is difficult to say. You might be referring to some modeling done relative to the Chevron well. They ran a computer model with certain parameters regarding where they thought it would disperse. There are many factors and variables to determine how long the oil spill lasted, how much was actually spilled, conditions of the spill, and so on. It is hard to say.
Senator Peterson: I am just surprised they come up with them so quickly. Thank you.
Senator Frum: You mentioned there have been several additional measures to make the system more robust. I am wondering whether there have been any changes in the regime in how the blowout preventers are inspected. I ask because the Minerals Management Service did a small study in 2002 and found that almost a third of blowout preventers they looked at were flawed or faulty. Furthermore, there is a sense that many drillers were not surprised when the failure happened because there was a sense that people were aware of the flaws and continued. I am just wondering what changes, if any, have happened in Canada in that respect.
Mr. Corey: That is a very good question. Mr. Landry could provide more detail in a moment.
Regulators insist on multiple levels of protection. For example, the chair of the Canada-Newfoundland and Labrador Offshore Petroleum Board talked about the first level of protection being the drilling mud and the hydrostatic pressure it exerts. That is the first level of protection against a kickback. Second, many procedures were put in place for the cementing of the piping and well. That must be in place. On top of that, there is the blowout preventer, which is the third level.
Regulators rely on multiple levels. There are multiple levels within the blowout preventer as well. There is an automatic function, which will automatically shut the well. For example, one that is a dynamically positioned will move off station and lose contact. There is one that can be operated by remote control and another that can be operated by sending something down. There is also one that can be operated manually by connecting an underwater device to the side.
The regulators can insist on multiple levels of production on this. In that way, we are not relying on only one thing, which if it fails will lead to a blowout.
Mr. Landry: I will leave it to Mr. Shanks to answer, because it is beyond my technical expertise.
Mr. Shanks: I just want to agree with Mr. Corey: They call it levels of redundancy. In the case of the gulf, and one of your colleagues mentioned it earlier, I think we can safely assume a cascade of things went wrong.
Clearly the blowout preventer will be the focus of many reviews coming up, in both Canada and the United States.
Senator Frum: Presumably part of that will be the sense that there were warnings and studies and warnings at the time. Again, how do we have the comfort here of knowing that similar warnings will be respected?
Mr. Landry: I can speak to that. In the additional measures that the Canada-Newfoundland board imposed on the Chevron well, prior to hitting any target zones, Chevron will need to have an operations time out. At that point, they will test the safety measures on the blowout preventers. The regulator will need to be comfortable that it is safe to proceed. Prior to getting in a dangerous area, they will need to test the equipment.
Senator Frum: Does that imply that Canada will have a stricter regulatory system the U.S. had with respect to how to deal with warnings?
Mr. Landry: These are additional safety measures that the board is taking for the Chevron well.
Senator Frum: Since April 20?
Mr. Landry: Yes.
The Chair: We have about 12 to 14 minutes, and there are two more senators after you, Senator Banks.
Senator Banks: I will try to go as quickly as I can.
When you were talking about inspectors, Senator Lang brought up the question of the credibility and reliable of people who might not be at arm's length. I want to talk about the environmental assessments that occur at different stages here.
I want you to imagine I am the guy who goes home on the bus and cannot sleep tonight. I turn on the television and this committee comes up, and I hear you say that the environmental assessment will be conducted by the company. This is the company that has some reason to believe there is oil down there, and the company is now required to conduct an environmental assessment to determine the extent of the potential environmental problem and whether it is okay to go ahead and drill.
I think the guy who got home on the bus that night would question the idea of the company doing the environmental assessment to decide whether it will be able to exploit this resource. Can you satisfy that guy?
Mr. Corey: The important thing to underline is that these are done under the auspices of the Canadian Environmental Assessment Act. The requirements are very rigorous. It is not the company that decides what they will look at. The government, through the Canadian Environmental Assessment Act, decides the factors that will be taken into account. Mr. Shanks might want to talk about some of the specifics because it is a fairly rigorous process.
Senator Banks: I do not want to waste time, but at the end of the process, who decides what the report says?
Mr. Corey: The company writes it, but the board either accepts it or rejects it, depending on the quality of the report.
Mr. Shanks: In the case of the environmental assessments conducted under the act, as the minister mentioned earlier, there are experts from Environment, Fisheries and Oceans Canada, Transport Canada, Natural Resources Canada, all of whom get involved in the assessment of the body of work that is provided by the operator. They go through page by page asking whether it is right, whether it is acceptable.
Usually it is several months of iteration back and forth, with study, questions, answers, that kind of thing, that results in a final report that is then blessed by the Minister of the Environment.
Senator Banks: From my long list, I have selected only one more question.
The minister and you have talked about the guarantees that are in place by whoever holds the rights, I suppose, and they are passed on to the actual drillers. The oil company has to put up guarantees and to prove that it has the resources, and you have talked about the $350 million and the aggregate that the company has to show what it has; but do you know what? No one in Louisiana or Florida cares that there are guarantees in place and that someone in the end will be responsible. That does not make any difference today to those people.
We are talking about other stuff. I just want you to understand that some of our concerns with respect to the effects of, God forbid, a problem — may it never happen — have really nothing to do with how much of a guarantee is in place for financial liability or whether the company, BP or someone else, goes broke, which would be awful. That is not the concern. The concern is the stuff showing up on the shore, and everyone knows what a disaster that would be. If it happened in the Arctic it would be egregiously more difficult. That is a statement rather than a question, chair.
The Chair: It is. Go to your list for a question.
Senator Banks: Okay, I will ask a theoretical question, then. I think I know the answer, but we need to have you explain the answer. We all understand that there are always risks. If you do this there are risks, but the reason there is a moratorium against doing this on the West Coast is because they were not prepared to take that risk, and there was political pressure to ensure that that risk would not be taken on the West Coast, at least for the moment.
Therefore the short answer is you could eliminate the possibility of anything bad happening by not doing any offshore drilling. What is the bet? What is the argument about the bet? Where is the balance?
Mr. Corey: Again, that is a very difficult question. To look at the balance, you would have to look at the economic benefits, for example, that have flowed both to Newfoundland and Labrador and to Nova Scotia from this. You could point to the fact that significant funds are transferred every year to those provinces through these accord agreements. You could look at the fact that that has lifted the economies of those provinces dramatically, and it has provided many economic benefits.
On the other hand, as you say, there are risks. There are risks, and there are advantages. They are hard to quantify, but that is at least an indicator of them.
Senator Banks: Just like in coal mining.
Mr. Corey: Yes.
Senator Neufeld: I want to talk a bit about the liability. I read here on slide 8, "Operator liable for cleaning up a spill and paying for losses and damages if at fault or negligent." Then it lays out what you said: $30 million to $40 million absolute liability. I understand that. In the Gulf of Mexico, that is maybe a day, maybe a day and a few hours. Then the slide says $70 million "in a form that ensures a regulator will have access to funds" — which includes bonds, insurance and promissory note, which I assume is from the company — and this requires proof of fault or negligent. Then there is $250 million, which again is about 12 days or 14 days in the gulf.
If something similar happens on the East Coast, do you have to prove fault or negligence before the oil company goes out there? Would it not be Chevron's responsibility? Or do I read that the ministry or the government has to prove the company is at fault before those funds would be expended to clean up losses or damages? Is the operator carte blanche, open the chequebook, and actually get at it and do all the work, and the fault is found out afterwards?
Mr. Corey: First, the primary responsibility for dealing with it is with the operator. Operators must demonstrate that they can deal with the spill and that they have resources they can bring in. Then there is a broader regional team that can be brought in if more resources are needed. In other words, they continue to draw the resources in to deal with it. That is the operator's responsibility. They are paying for that.
Senator Neufeld: Are they paying for everything?
Mr. Corey: Yes.
Senator Neufeld: So often one hears, "Well, I am not at fault; someone else is at fault. I am not going to do that."
Chevron has deep pockets, and $250 million for Chevron is similar to what it would be to BP, I assume.
The operator of that well would have to go out and carte blanche pay everything up front, and if some legal things happen afterwards, they happen afterwards, and the dollars and cents are managed at that time; is that correct? That gives me comfort if that is true.
Mr. Corey: They are responsible for any of those cleanup costs, yes.
Senator Neufeld: They are responsible for it. You do not have to prove fault. What I want to get really clear is this: If something goes wrong, Chevron picks up the total bill as directed by the Government of Canada in what has to take place to clean it up, look after the people and so on. Is that correct?
Mr. Corey: If it is their spill, they are responsible for the cleanup.
Senator Neufeld: It is their well, so it would be their spill. I am not talking about someone else's spill; I am talking about their spill.
Senator Banks: What happens after you reach the $350-million limit? Who is on the hook now?
Mr. Corey: I should clarify: That is third-party liability. That is for damages that other people have sustained. That is for those other liability things. That is not for the cost of the cleanup; that is different.
Senator Neufeld: Then at the bottom of slide 8 it says, and this is interesting, "Additionally, under Inuvialuit Final Agreement, operator responsible for restoring damage to wildlife and compensating Inuvialuit hunters, trappers and fishers for loss of subsistence and commercial harvesting." If they are responsible for all of what you just told me, why does it say "additionally"? That bothers me a little bit. It would not matter whether it is on the East Coast, the West Coast or in the Arctic; is that correct? What is the difference?
Senator Lang: I think I can answer this. It is part of their agreement. It is a separate agreement, and it is written into that agreement, so that is an additional responsibility.
Senator Neufeld: I understand that, but why is the word "additionally" necessary if it is just to accept the agreement? Do the fishers on the East Coast have no agreement? That is the question. If you have to clean it all up on the East Coast, what is the difference from cleaning it all up in the Arctic? Is it the same thing? Are we talking about the same thing or different things?
Mr. Corey: Again, our understanding is that what is in the agreement we are mentioning because it is in the agreement. INAC is responsible, but we thought we would mention it because it is in the agreement and it shows up on our maps.
Senator Neufeld: Is it just an agreement, nothing else? It means nothing more than that.
Mr. Corey: To come back to your second point, the operator is liable for cleaning up a spill and paying for losses or damages. That is clear.
Senator Neufeld: You have at the end of that sentence "if at fault or negligent," and that part worried me. However, I am comforted as long as we do not care about the "at fault or negligent" until it is all cleaned up, and you have assured me that the company is responsible to get out there and do that.
Mr. Corey: The way the system works, if there was a blowout, the first thing that would happen is the operator would swing into effect; they would have a plan in place and would start cleaning it up. That would be at their expense. All the plans are premised on the operator swinging into operation, drawing more resources in, and those things are paid for by the operator who has the primary responsibility. That is what we mean when we say that they are liable for the cleanup and spill costs.
Senator Neufeld: You also said that if the NEB or the other boards are not happy with the cleanup they can actually take over. At whose cost would that be done? Who pays that? Is that paid for? Is the government reimbursed right away, or does that go through a court process?
Mr. Landry: There are provisions under the Canada Oil and Gas Operations Act, COGOA, that allow the government to recoup its costs.
Senator Neufeld: If the government or the boards do it, they will foot the costs and then probably be reimbursed from the company through a court process. Is that correct?
Mr. Landry: Yes, for both the boards and the government.
Senator Neufeld: You say INAC has regulatory oversight north of 60. Have they complete regulatory oversight north of 60? Have they the same people in place as at the National Energy Board to do the things you do on the East Coast?
Mr. Landry: The legislation that applies north and south of 60, COGOA and the Canada Petroleum Resources Act, is the responsibility of both ministers. Any legislative or regulatory amendment needs to be approved by the Minister of Indian Affairs and Northern Development and our minister.
The Canada Petroleum Resources Act is administered by our colleagues at INAC north of 60. South of 60, it is administered by Natural Resources Canada. The NEB administers the Canada Oil and Gas Operations Act north and south of 60.
Mr. Corey: We may not have said this as clearly as we should. The granting of leases, the collecting of royalties and the setting of royalty rates — all land tenure functions — are done by Indian and Northern Affairs Canada. The regulator of the drilling operations is the National Energy Board because it is the arm's-length, independent group that oversees environmental protection and safety. They oversee operations themselves.
Senator Neufeld: My question arises from slide 11, which says that INAC has responsibility for legislative and regulatory oversight. That says to me that INAC has regulatory oversight. You have clarified that for me.
Mr. Corey: The National Energy Board regulates safety and the environment.
Senator Neufeld: Thank you. That makes me happier.
Senator Mitchell: Is it possible to get live examples of the kind of agreement that you refer to with the propriety information redacted?
Mr. Corey: Which kind of agreements?
Senator Mitchell: You spoke about agreements in Inuvialuit.
Mr. Corey: Yes, we could probably do that.
Mr. Shanks: The Inuvialuit Final Agreement is a public document.
Senator Banks: In concert with that, is it also possible for us to receive a typical lease agreement with an oil company, again with propriety information and names redacted?
Mr. Corey: We will check whether that is possible.
Senator Banks: That will be very handy if it is typical in the sense that it demonstrates the things you talk about and how responsibility is devolved.
Mr. Corey: We will check to see what we can do that will be helpful and enlightening.
The Chair: Will you read and summarize that for the committee?
Senator Banks: No, chair, you will.
The Chair: You are the one who asked. I will only do it.
Senator Seidman: Time is marching on. We have mostly agreed, as did the minister, that despite regulations and oversight, the odds are such that there will be an accident. Because of the Deepwater Horizon oil spill in the Gulf of Mexico, we have discovered that the technology to deal with such a catastrophic event does not exist. Technology exists to drill 2,500 metres in deepwater, but it does not exist to stop a blowout, or even to do an effective cleanup. Could you discuss this situation?
Mr. Corey: If we were to agree with that, we would not allow drilling offshore.
Senator Seidman: I am pleased to hear that.
Mr. Corey: I do not think we would agree with that. As Mr. Shanks said, layers and levels of safety are established. The minister said there is always risk. We cannot avoid it; we must deal with risk. That is what risk management is all about. We identify risks and take measures to try to prevent events from happening in those areas.
If the question is whether we can guarantee there will never be an accident in the offshore, that is very difficult. If you ask whether we have a strong system in place to try to prevent an accident, we could say that. Are we taking special measures in light of what happened in the Gulf of Mexico to heighten our awareness? That is also happening. Will we learn from the events in the Gulf of Mexico? We will.
You have to look at the situation in terms of risk management. However, to say an accident is inevitable and we have no way to prevent it, we would not agree with that.
Senator Seidman: The odds are that an accident will happen as more drilling and more rigs are in the offshore. At least, we all agree that we cannot say an accident will not happen.
What is evident from the Gulf of Mexico spill is that there was not technology to deal with the blowout. Otherwise we would not be sitting here approximately 60 days later with oil spewing into the water. It is the case that technology does not exist to deal with this.
The Chair: I do not think that follows, but you are the witness.
Mr. Shanks: There is a vast array of technology. You also have to look at the procedures taken. In this particular case, the blowout preventer was supposed to work. However, what about the procedures followed on the rig that led to the series of events?
In addition to reviewing the technology moving forward, we will probably find ourselves also looking at practices and procedures.
Senator Seidman: We heard a witness from the World Wildlife Fund in Canada that told us blowout preventers have been questioned by the industry since 2002. Chevron, in particular, believes that the technology is flawed. They are trying to develop a completely different technology to shut off the spill if it should occur. Do you know anything about that?
Mr. Corey: That is the function of the regulator. The regulator must look at the technology being used and has to be satisfied that it is sufficient and reasonable. As our minister said, the regulators will not issue a licence and will not allow drilling to proceed unless they are convinced sufficient oversight and safety measures have been taken.
Again, I would say that is a good question for the regulators. They are the ones who look at that information and satisfy themselves that the technology is sufficient.
Senator Seidman: Does the government have to satisfy itself as it gives out licences for exploration and drilling that, indeed, there is as much control of risk as there could possibly be?
Mr. Corey: The government is responsible for the overall regulatory framework and for the rules that apply. The regulators operate within that framework. They go to the specific questions about whether safety is assured in a given case or project using particular technologies. That is what the boards do at arm's length from government.
Senator Seidman: Okay.
The Chair: In other words, Senator Seidman, the regulators are supposed to do these things. The government puts the rules and laws in place, but it does not always mean they are followed. That is where liability arises when situations occur.
It does not mean the technology does not exist. It means that they did not use it properly. We heard that a cascading effect of a series of events almost led to the perfect storm. Mistakes were made.
Is that not the point, Senator Lang?
Senator Lang: That is part of the point. The other point is whether the government is doing its due diligence. Is it overseeing and taking its responsibility.
The Chair: That is it.
Senator Dickson: You do not have to supply answers to my questions now. I want to return to something Senator Mitchell referred to at the beginning of the session. The chair and Senator Seidman also mentioned it.
First, it would be helpful if we had a short memorandum about the difference between prescriptive regulation and goal-oriented regulation, because we are talking about requirements. Other people are talking about guidelines. I have a general sense of what is going on, but it would be helpful if we had such a memorandum so that we understand and we could, as Senator Seidman said, flash it up and say this is what it is all about. I think that is very important.
Mr. Corey: I have made a note of that, and we would be pleased to provide something to you on that.
Senator Dickson: To everyone.
The Chair: It will come to the clerk and then we will deal with it.
Senator Dickson: Second, have you or the offshore boards in Eastern Canada identified provisions in the legislation, the regulations or in the framework of your goal-oriented legislation that require updating? If so, which ones? Why? When will they be put into force?
Mr. Corey: Again, if you would prefer, we can get back to you on that.
Senator Dickson: Sure, get back to me on that.
Mr. Corey: Okay.
Senator Dickson: Last but not least, in Atlantic Canada, are there vacancies on those boards in Nova Scotia and Newfoundland now? In other words, are alternate members serving versus permanent members? You do not have to answer that now, but I would like you to get back to me. If there are vacancies, when will you make the appointments?
The Chair: You have accepted the Senate, though.
Senator Dickson: It does not pay that much, which is another problem. The Senate does not pay that much and neither does the board, but representing some companies down there might.
Senator Lang: Why not just quit?
The Chair: Gentlemen, I have just one question. I understand the Minister of the Environment has been in Greenland today. We have heard they are gearing up for very active drilling. We understand they are involved in that group of nine regulators where you all interchanged. We understand that if, God forbid, they had an accident, their currents and streams could well bring the oil towards our shores. What if any involvement do you have in overseeing and ensuring that they do it properly, the way we do it?
Mr. Corey: As you mentioned, Minister Prentice has stated publicly that he intends to seek formal assurances that Greenland is properly regulating its drilling program during his upcoming meeting. On top of that, Greenland officials have been meeting proactively with Canadian officials. For example, they met with the National Energy Board to discuss matters related to health, safety and the environment and the Canadian Coast Guard in relation to international cooperation in the case of an oil spill.
Also, we have looked at the framework for the Greenland offshore. It is fairly similar to Canada's framework, and we think the regulatory standards are fine. The word I have is "high." They require a number of the same approvals we do.
Having said that, again, Minister Prentice has stated publicly that he intends to seek assurances that they are properly regulating it because of the impact this would have on Canada if ever there were an accident up there.
The Chair: I have heard him say that. I am comforted to some degree. We do not deal often with Greenland, and some person there says do not worry, Mr. Prentice, we will do it. Does it go beyond that? How do we enforce or ensure that the assurances are good and valid?
Mr. Corey: It is difficult because it is in their territorial waters. However, they are neighbours. As I mentioned, we have had some meetings with the NEB and with the Coast Guard to see whether we could collaborate with them. We would be willing to help them in any way that we could.
Minister Prentice has said that we will be raising it to ensure that they are raising the level of vigilance that we would want them to raise.
The Chair: Thank you for that. I am very appreciative of your coming. Do any of the three of you have anything else you would like to say to the committee? You have been very generous with your time and have been open in answering our questions, knowing that the mission we are on is not to do a big, in-depth review but simply to reassure the Canadian people that nothing is rotten in the state of Denmark here, and it is pretty good.
Mr. Corey: To conclude, the government has made it very clear that it is very concerned with the events in the Gulf of Mexico. It has stated a number of times that we have a strong regulatory system in Canada, that we have taken a number of measures since the event in the gulf to ensure that we are even more vigilant, and we will be watching the events in the gulf closely to see what lessons we can learn from them.
I think those are the key things. Again, we want to be as helpful as we can, so if there are any further questions, you could have the clerk contact us and we would be pleased to provide any supplementary information we can.
The Chair: You do have a note of the things you have undertaken so far to produce?
Mr. Corey: We have a list, and we will get back to you.
The Chair: We really appreciate it. First of all, accept our sincere thanks for your appearance, especially under the tight, difficult time problems you have had, and furthermore for agreeing to produce that information. Please pass on our renewed thanks to Minister Paradis for his cooperation and assistance. Thank you very much.
Does any senator have anything to say before I adjourn the meeting? Hearing nothing, I will declare the meeting adjourned.
(The committee adjourned.)