Proceedings of the Standing Senate Committee on
Energy, the Environment and Natural Resources
Issue 20 - Evidence - March 3, 2011 (afternoon meeting)
ST. JOHN'S, Thursday, March 3, 2011
The Standing Senate Committee on Energy, the Environment and Natural Resources met this day at 1:09 p.m. to study the current state and future of Canada's energy sector (including alternative energy).
Senator W. David Angus (Chair) in the chair.
[English]
The Chair: Good afternoon, ladies and gentlemen.
Honourable senators, we have with us this afternoon Mr. Kevin Aylward and Mr. Chris Montague from the NunatuKavut Development Corporation. I think you know from your binders that this is going to be a fascinating presentation.
I am David Angus. I am a senator from Quebec — and have been a senator for 18 years — and I chair this committee, which is a real privilege. My deputy chair is Senator Grant Mitchell from Alberta. We have two folks with us from the Library of Parliament, Marc LeBlanc and Sam Banks. They are our invaluable researchers and counsellors. We have Senator Robert Peterson from Saskatchewan, and Senator Daniel Lang from the Yukon Territory. I think you know Ms. Gordon, our efficient clerk. Senator Bert Brown is from Alberta. He is the only elected senator. Next to Senator Brown is Senator Elaine McCoy of Alberta. Next to Senator McCoy is Senator Richard Neufeld of British Columbia, a former Minister of Energy, Mines and Resources in that province.
We are concluding our Maritime trip here in St. John's, Newfoundland.
Kevin Aylward, Chief Executive Officer, NunatuKavut Development Corporation: Mr. Chairman, thank you very much and we extend a warm welcome to the committee. I am sure you are enjoying your time in this great province.
I am the CEO for NunatuKavut Development Corporation, a 100 per cent Aboriginal-owned corporation, owned by the NunatuKavut Community Council. I am going to introduce the President of NunatuKavut Community Council, NCC. It was formerly known as the Labrador Metis Nation a number of years ago. Mr. Montague, who is the elected president of his council, will provide an overview of where the organization concerning Aboriginal rights in the province, with Ottawa, with a land claim that has been filed, and link that to the Lower Churchill hydro project that you have heard a lot about in the last few weeks. Mr. Montague has a perspective that he would like to outline, and we hope it will be a valuable contribution to your hearings.
Thank you again for the invitation — very kind — and to Ms. Gordon who has been a great help with the logistics in getting us here. We appreciate the help of your staff.
Chris Montague, President, NunatuKavut Community Council, NunatuKavut Development Corporation: Honourable senators, I am greatly honoured to be part of this gathering, and I certainly welcome you to this part of the province, although I am from Labrador. What we will do is talk a bit about our people, our ambitions, our resources, and how we can work together to build a stronger Canada. That is the bottom line.
Labrador never governed itself. Our people, the Inuit people from Southern Labrador and from Northern Labrador, were the inhabitants of the coast of Labrador and to this very day make up the great majority of the people living there. Our communities have existed for a long time. Sometimes I think that people wish we had not been there for so long because Labrador is very rich in aquatic resources such as seals, whales and fish. Labrador was considered a place to be exploited and used for the economic benefit of people from the outside.
Very little was developed in Labrador for Labrador people. Our organization is trying to develop the Labrador's resources with conservation in mind, while including other people. However, Labrador should be developed by Labradorians, both by our group, NunatuKavut, and by the people of Labrador.
The Chair: Does your group represent the Inuit?
Mr. Montague: We represent the Southern Inuit. Nunatsiavut represents the Northern Inuit. There is an overlap. I could technically be part of either group, but I live in Southern Labrador. I would like to see my area developed hand- in-hand with the people on the north coast.
The Chair: You do not represent the Innu groups that signed an agreement and appeared with the premiers of Nova Scotia and Newfoundland and Labrador when they announced the project. You do not represent the Metis either; is that correct.
Mr. Montague: We were formerly called Metis. We were known as Inuit Metis. When we looked at our history, we came to realize that we did not developed like a Metis community, but grew, adapted and modernized into an Inuit community. This development is confirmed in our research, court rulings, et cetera.
At one time, the Inuit along the coast of Labrador, except for a small handful in Nain and Hopedale, identify themselves as Labradorians, the people of Labrador. Before 1949, Aboriginal groups were not recognized and if you were recognized as an Aboriginal group in this country, before we joined Canada, it was certainly not an advantage. It was a great disadvantage. I find the good thing about joining Canada is that we can express ourselves freely as Aboriginal people. This is one of the reasons why I am a proud Canadian, because of the acceptance and recognition of who we are.
The Chair: I want to add one other little clarification, because when we were in Halifax there was a big headline in one of the local newspapers saying that Metis groups opposed the Muskrat Falls project. Do you represent those groups?
Mr. Montague: Yes, overall, we do not necessarily oppose the project as we unfold here, but we are questioning the process, which is a serious difference.
The Chair: Excellent.
Mr. Aylward: You are seeing with Metis groups that the media themselves are just transitioning that this is an Inuit group, so it is only in the last few weeks that some of them are getting it. We have been talking to all of the media to say it is not Metis, it is now Inuit and it is NunatuKavut, and so you will see that transition over the next period of time.
The Chair: That is excellent. Anything we can do to help get their clear message out we will do.
Mr. Aylward: Thank you very much; we appreciate it.
Mr. Montague: We deeply appreciate that.
Sometimes when we make a change in Labrador — we are still a little bit isolated — it takes a bit of time for things to filter outside of the territory.
Honourable senators will see in the outline that the first item is the Lower Churchill hydro project impact on the land claim and that NunatuKavut is seeking impact benefits from Nalcor, including compensation for the Upper Churchill. Just to clarify that, we were people who actually used the interior, and we feel we should be part of the process. The idea of an impact benefits agreement would be more along the lines of a litmus test of the level to which we will be consulted and accommodated in the overall process.
If you remember a little while ago, it hit national and international news that we worked with a developer from Toronto to set up a wind farm on the Forebay near the Upper Churchill project. We would have tied in the wind farm with the Upper Churchill project, saved on the water for when the wind stopped, and shipped the 1,000 megawatts of power out over TransÉnergie through Quebec, which would have been a great deal for ourselves, the Innu, the province, the Innu of Québec, the Québec government, and for our developers.
Investors came up with the $2.5 billion for the project. The province did not have to pay a cent. There would be no flooding or anything else like that, and the project would be labour intensive and create a lot of work for people both in Newfoundland and in Labrador.
When you are building a project like this, you are actually building it for the overall community and the people surrounding you. It looked like a very good project, but for some reason the provincial government said that it did not fit into the 30 year plan and they would not allow an environmental assessment to proceed on the project. If we were talking about development, this was our preferred route.
We still have a partnership with SUEZ Energy, who are still wondering if we can put up a wind farm on the height of land — probably not the 1,000 megawatt wind farm but probably 100 megawatt or something else like that — and take part in creating energy for the province and opening a door to a very green project.
The Chair: It is very helpful. I am starting to see it much more clearly. You are going to have a court hearing on March 9.
Mr. Montague: Yes.
The Chair: Did those hearings start this morning?
Mr. Montague: They start this evening.
The Chair: Will you be there?
Mr. Montague: We will be going back.
Mr. Aylward: Yes, we will fly back up.
Mr. Montague: We will be making a statement on how we feel about the proceedings and we will be waiting for the decision of the court.
The Chair: Thank you. You have made a real effort to be here and we appreciate it, and we are listening carefully.
Mr. Montague: We appreciate that, sir.
Mr. Aylward: The reason for us challenging the joint review panel at this point is the lack of process that we have seen throughout the last few months, and the duty to consult and accommodate with NunatuKavut. In addition, there are outstanding environmental issues, which we have outlined in writing. We have had to take an action which we did not want to take because we were asking the panel to review it appropriately. We are hoping that it can come back to get that process straightened out in the next few weeks so that NunatuKavut can be properly consulted by the proponent, which is the provincial Crown. The Nalcor utility and Newfoundland and Labrador Hydro are owned by the provincial Crown, and we are asking for them consult properly, because NunatuKavut has an Aboriginal right and it has a treaty right.
Mr. Montague: We want to take part in the federal-provincial joint review panel environmental assessment process in identify our concerns but we want it to be a fair, ongoing process that recognizes our people as Aboriginal people, as the courts already have done.
The Lower Churchill hydro project has an impact on our land claim. Meetings have been held with senior Nalcor officials concerning NunatuKavut's duty to consult requirements and our request for impact benefits and for participation in the project on the accommodation level; not necessarily insisting on the impact benefits to go right away. We are concerned about the environment. This is our homeland, and we are concerned about the level to which we will be taken into this process.
We have further identified NunatuKavut's environmental issue on the project description of the Muskrat Falls site. There has been a change, because before this particular time — I believe it was November 24 — the project was to be in sequence with the larger Gull Island hydro project first, and then to do the Muskrat project. By switching the projects around, we are concerned about the hydrology and the impacts that can happen by reversing the project.
The Gull Island project is squarely on top of our traditional trap lines that we have held for the last two centuries, five generations, in our family. The deferring of that project into some nebulous future is going to affect not only the hydrology but will also have social impacts. We do not even know if that project is going to be developed, or when it is going to be developed.
One thing is certain; there is a change that had to be addressed. The panel asked for a description of the changes. As far as I am concerned, Nalcor refused to address those questions until after the hearings were called, and I think they were addressed inadequately. As a result, the whole process of the hearings — even on the environmental section — is off the rails.
We are bringing into question the validity of the hearings. The point is that we could not seem to get many answers from anyone. We pushed it right up to the last minute and pleaded for the information. We pleaded to have time to disseminate the information before it went to the panel. We pleaded to settle our level of consultation before it went to the panel. Up until Friday of last week, we were not getting any answers and had no other choice but to go to the courts.
I believe that the court will look at this, and I firmly believe that there will be many questions brought up that will have to affect the panel, to redefine, to actually get the process back on the rails and begin again. People have to have an adequate chance to take part in this process. The courts, of course, will make that decision.
The Chair: Are you taking this position because you feel that if you go along with the project without an agreement on the land claim it will be going counter to what you are arguing in the land claim case?
Mr. Montague: Partially, but the overall fact is that we have already gone through the courts, and the courts have recognized our actual level of consultation. We believe that the process has not taken that level of consultation into account, so once we go through the process and the public hearings the panel itself does not have the power to actually determine the extent of our level of consultation.
The other thing is that they would not be able to determine if the provincial government and the proponent have lived up to their expectations and their duties. We see that if we go through this process — already recognized under the law — and we are not recognized to that level then we will be approving being left out of the process totally, which would be unfair.
I know the government is sort of stuck on the idea of a land claim, and we do have a land claim filed with the federal government, but until that time there is a duty to consult that the province has to deal with. Unlike the mantra which the province and the proponent are using — we will only deal with you after a land claim — the courts have already instructed them to deal with us on a level of accommodation, not just a mere duty of notice, but a level of accommodation in the Supreme Court ruling back in 2006. The province is stuck on a land claim.
They go on another false idea of law; that there are three levels of land claims. One is an asserted land claim, the other one is under negotiation, and the final one is an accepted land claim. From my reading of documents, I understand there are two types of land claims. There is an asserted land claim that has various strengths, and there is an accepted land claim, which would be of course the Nunatsiavut government in Labrador. Other than that there are two asserted land claims. Ours land claim is backed up by a court decision and a treaty.
We would have to say that we had done our best to avoid any confrontation. We prefer to come to agreements and to participate and to look for opportunities — not for easy answers — for opportunities to participate, to benefit from things that are happening in our homeland, and in the meantime, of course, protect our land and our traditions. That will always be a difficult problem. Naturally, when we discuss this we want to put it on the level that the courts have put it, instead of taking away that right and trying to push through this process by excluding us.
The Chair: When they did the Upper Churchill project back in the 1960s did you have all of your rights recognized?
Mr. Montague: I will give you an example of what happened. My father was a trapper, the old style trapper; paddle into the country, portage up over things. There were no roads back then. When the Churchill Falls and Twin Falls projects started our family moved in to work on those projects. Ironically, I believe my older brother was the first resident engineer for the Gull Island project when they were drilling years ago.
Anyway, he came out on his summer vacation. There was only one way to fly out of there into Goose Bay and he happened to see the son of one of the former trappers that he knew on the trapline and asked him to come into this area and see his father's trapline before it was flooded. He told him he could stay at the house they were living in and that he would show him around the area. He thought it was a great idea. About a week or two later he flew into Churchill Falls to see his father's trapline before it was flooded. Unbeknownst to anyone, he was stopped at the airport, like everybody was, and asked which company he worked for. He said he did not work for a company; he was coming to see his father's trapline before it was flooded. They said, "No, you are not.'' They held him in the airport terminal until the next flight and he never did see his father's trapline before it was flooded. You see, that was quite often the attitude in Labrador. Projects were done for people on the outside not for the people of Labrador, and they never were, but we are trying to change that now.
Back in those days, we were unaware of any Aboriginal rights and we accepted the flooding of an area larger than Prince Edward Island. We saw the destruction of our traditional traplines. We witnessed the changing of rivers and not just the Churchill River. My hometown is North West River, a little trapping town. The river that flowed by there, its headwaters were cut off. It completely changed the environment there. Of course, the Kanairiktok River going into the North was cut off as well. That is why there is no overflow going out through those dams to bring any semblance of what used to be there. It was just dammed off.
I was present for the closing of one dam. What happened is that you see a river going by and then all of a sudden it is dry, and then you see pools of fish getting to pools of water about the circumference of the outer rim of this table. As the water went down you would see the fish piled on top of one other, and then you see hundreds of fish dying in this pool. This would be happening down the river.
People are not aware of the amount of destruction. There was no environmental assessment done at that time; it was a job to be done. It was only Labrador; nobody cares about it anyway. We will just dam it off and away it goes. This is why we have a process now, which we greatly appreciate. The Canadian government has engaged with the provincial government, and it is an opportunity for us to take part in what is happening.
We will see many of our traditions put under water if this project goes ahead — our land, our way of life, and the areas where we hunt. We are grappling with those impacts. When I say we are looking for an impact benefits agreement I am not really sure if the rank and file of our organization even wants the project. I would think that maybe they look at the benefits, but there are impacts, and it is something that I have to bring back to my people. Do we want a repeat of what has happened before, or if something happens like this should we not be included? Should we be considered for some benefits if this is inevitable?
The hydro project is influencing our way of life in Labrador. If you look at page 4 of our presentation, you can see that our land claim extends to Western Labrador.
We will look at the strength of our land claim. We, of course, look at the occupation of Labrador. As far as Aboriginal people are concerned, Inuit were fairly latecomers to North America. From academic studies, and from what we have covered so far in our archaeology, it looks like we have been here since the early 1500s, possibly to the 1300s, as truly Inuit. There were different groups of Inuit along the coast of Labrador. They were not a homogeneous group. From the earliest discourses, we found out — which were recorded by the Moravians when the treaty was signed — that our populations were southern and northern. They were asked if there any other Inuit people along the coast, and they said yes, but we are the good guys. The guys in the north are the bad guys. I suppose that if you went to the north they would say that they are the good guys, and south are the bad guys. We do have multiple populations here in Labrador.
We have a strong claim in the early maps that we have included in our presentation. You will see that these maps of the south coast of Labrador all have Inuit toponyms. You can see that on page 5, but I think you have a larger copy of a map. We have taken several of the earliest maps and put the names of the places on there, so all of the toponyms are actually Inuit.
Here is one of the hand drawn maps from about 1766-1767. As you can see, along here is Sandwich Bay — this would be called Lake Melville — all the way in here, right into the lakes, right into the heads of the rivers as far as they went, the names were all Inuit toponyms.
Indeed, when Louis Fornel set up a trading post in the 1740s on the site of my hometown of North West River, he referred to the actual south post of Labrador as the Eskimo Coast. Lake Melville was called Eskimo Bay. The Churchill River was called the Eskimo River, and Eskimo Island, because Eskimo's lived there.
The first European names and the earliest toponyms that we get from actual native sources all referred to the Eskimo or to the Inuit, and that is why quite often, traditionally, people always associated the coast of Labrador with Inuit people.
We talk about the strength of our claim on page 6, and our affidavits were actually part of the reason why the Labrador boundary was drawn as it was in 1927. You can see there a picture of my great-great-aunt and her husband, who was a Scotsman. She was Inuit. Her sister was my great-great-grandmother.
The Chair: Where did this Scotsman come from?
Mr. Montague: He came from Scotland.
The Chair: I know he came from Scotland, but how did he get into the picture?
Mr. Montague: He got into the picture, of course, with the Hudson Bay, HBC; he came over with the fur trade.
Some of the Europeans who came over with the fur trade married into the local population. The overall point was that a Metis group would form its own society whereas in Labrador there were so few people coming in, they came in at different times, married into the population, and were absorbed into the community. Hence, they were considered foreigners but their children were considered Labradorians. Even to this day, if you move to Labrador and you have a Labrador wife and live in one of our communities, you could be there for 60 years and you would still not be a Labradorian, but your children would be. It is just a way that we have.
Another important thing to look at is the Labrador Treaty of 1765. I know that the provincial government often talks about the land claim, but before the land claim, we happened to uncover the treaty of 1765 made between the Governor of Newfoundland and our people on the south coast of Labrador down in the Straits. This was a treaty of peace and friendship which recognized our rights in Labrador. On the other hand, we recognized the right for the British to come in, trade, and harvest their resources.
This is a copy of a commemorative map made in the 1760s, commissioned by Sir Hugh Palliser, and, of course, would be sent over to the Board of Trade and probably to King George III himself. The map was drawn by Captain James Cook and it has all of the soundings on it. As you can see, you have Inuit characters on the side; you have the flagship, the actual Guernsey and the Niger. If you look very, very closely, coming in through the narrows you can see the longboat, and kayaks following the longboat, going to agree to the treaty.
I was able to present a larger copy of this map to former Prime Minister Paul Martin at Kelowna one time, but there is a long story behind that. We presented a large copy also to Minister Jim Prentice when he was in office.
Mr. Aylward: This treaty map and the new land claim documents have been filed in Ottawa since May of 2010 — only in the last few months. This information is new to the federal government. We believe it is one of the first Inuit treaties.
Mr. Montague: It is the first because I believe in the Constitution document in the 1980s they said there were no Inuit treaties that had been brought forward at that time. We have brought it forward. Our people have treaty rights, which is not something to be addressed in the future but to be addressed now for the honour of the Crown and for the benefit of all.
Mr. Aylward: We are attempting to get the provincial Crown to understand that Governor Palliser's name is on Government House paper, so this is a credible treaty — and that maybe the provincial Crown should come to the table. That is what we are working on, and we appeal to you senators.
Mr. Montague: The treaty was formally reported to the British Lords and to the Privy Council in 1769. It is protected under the Constitution Act, and we are the beneficiaries of the treaty. I have to say that we have to thank the federal government for the research. Presentations were also made in the province to Nalcor and to the provincial government.
We are very grateful to the federal government for working with us on their implementation and a myriad of other things that they are doing, and especially for the land claim. We have received more support from the federal government of Prime Minister Harper than any other government. We were able to get the information and do studies of almost $1 million and almost that amount again, in related Powley studies and study of the history of Labrador.
When we began, there was hardly any history of southern Labrador at all because there were no churches or institutions along the coast until the 20th century. However, when we were finished we were able to write — and I should not say that we are completely finished now — a history of Western Civilization from a southern Labrador perspective. We were a very important part in that history and we are very, very pleased.
When I asked the academics to do the research I said, "Do not look to prove anything for us. Look for the truth. We want to find out the history and make a contribution to the history of Canada.'' We certainly have, and I thank the federal government for its support in that endeavor.
As well, the NunatuKavut governmental recognition has founded several areas, several programs. We are working hand-in-hand with the government to bring benefits to our people, our communities and to Canada.
We were legal interveners in the Powley decision, and in that Powley decision we were looked at as a Metis community outside of Red River. In 2006, the Supreme Court of Newfoundland recognized our duty to consult. In paragraph 121, it said that we had a "high probability'' of success if we were going into a land claim, and we are on the "high end of the spectrum'' there.
The Newfoundland government decided to appeal, and the Court of Appeal supported the original decision and said, "The respondents have established a prima facie connection with pre-contact Inuit culture and a continued involvement with traditional Inuit lifestyle.'' Those items really supported us.
It said that we were to be consulted, not on a peripheral sense in just a mere duty of notice, but because of this prima facie recognition, we were to be accommodated. The province did not like that, and so they brought it to the Supreme Court of Canada. The Supreme Court of Canada looked at the province's appeal and dismissed it with costs. Clearly, the courts recognized our duty to be consulted and accommodated as Aboriginal people.
We continue in research, and the research knowledge grows. We have sent this new knowledge to INAC and they are looking at our land claim. We want our level of accommodation to be honoured in the panel discussions for the Lower Churchill, and for any other developments happening in our homeland, as it should be under Canadian and provincial law. We want the opportunity to take part in building a better Canada. I am certain we can use our viewpoints to add to our own prosperity and the prosperity of the country.
I think the province has to be moved from its false premise that there has to be a land claim before we are accommodated, but in the meantime, we would ask honourable senators to do what you can to move our land claim forward. That would make the people of our province very happy.
The Chair: Thank you very much, Mr. Montague, very interesting.
Senators, I think we have heard the position of these witnesses. We have their written documents. I do not think we need to have any questions, do we? Is everybody comfortable?
Mr. Aylward: I would like to thank the chair and the committee very much for hearing us today. We appreciate the opportunity. Understanding the mandate of your committee, we are interested in Aboriginal partnerships for energy, the environment and natural resources. Significant developments are starting to occur in Newfoundland and Labrador and we appreciate the chance to apprise you of those developments and to provide some input.
The Chair: We wish you good luck. Thank you for coming and putting us in the picture.
Mr. Montague: The important thing is that we want to set up partnerships and work with industry, with government, and we find that quite often without the land claim appendage they are using it as an excuse to block some of our partnerships. We have very good partnerships that would contribute to our people and to the people of the province.
The Chair: Senators, we now welcome Mr. Robert Cadigan, President and CEO of the Newfoundland & Labrador Oil & Gas Industries Association.
Robert Cadigan, President and Chief Executive Officer, Newfoundland & Labrador Oil & Gas Industries Association: Welcome to Newfoundland and Labrador. I am delighted to be here and to see that the committee has come out to St. John's. I think that is very positive in itself.
The Newfoundland & Labrador Oil & Gas Industries Association, NOIA, supports the objectives of these proceedings. We understand the goals of the committee to help strengthen our nation's energy future in all regions, while respecting provincial jurisdictions in energy matters.
The Newfoundland & Labrador Oil & Gas Industries Association is Canada's largest offshore petroleum association. We have some 500 members in Canada and throughout the world. We are based in St. John's. Our mission is to promote the development of East Coast Canada's offshore hydrocarbon resources and to facilitate our membership's participation in the oil and gas industry. Our members provide products and services for all aspects of the petroleum industry from exploration through development and into the production phase.
We strongly believe that we must develop our offshore resources safely, and our industry is known locally for its steadfast dedication to safe work practices. Of course, stewardship of our natural resources and protection of our environment remains of unwavering importance to those of us who work and live here on the East Coast.
The Chair: As you know, we took an interest in the aftermath of the Gulf of Mexico situation.
Mr. Cadigan: Yes.
The Chair: I believe we invited you to come to our specialized hearings where we tried to determine if there was any imminent danger for Canada.
Mr. Cadigan: Right.
The Chair: Did you follow our hearings or see our report?
Mr. Cadigan: We certainly did follow the hearings and the report and certainly, it seemed a fairly balanced review, which is always important. The Senate Committee, the National Energy Board's review of safety and environmental drilling requirements is important, and locally, we have had the Wells inquiry of the Flight 491 disaster as well.
We believe that these events will lead to safer practices in the industry, but we also need to be cognizant of the regulatory burden placed on industry and potential negative impacts on competitiveness of exploration and development in what really is a global industry.
We also need to understand, I guess, the importance of research and development to our industry. Research and technology are always making progress. Both government and industry must continue to work together to develop the tools and implement those technologies in our operations.
Certainly, we are pleased to see the announcement from the Marine Well Containment Company with the development of a technology that can collect 60,000 barrels of oil per day, which can significantly reduce risk and mitigate in the event of a disaster.
Our members have full confidence in the regulatory environment in Newfoundland and Labrador, a regulator of the Canada-Newfoundland and Labrador Offshore Petroleum Board, C-NLOPB, and certainly, the role of the National Energy Board and the Government of Canada.
I would like to give you a sense of the value of the industry in Newfoundland and Labrador. We all know that global demand for oil is expected to double by 2050 as economies in both developed and the developing world grow and the standard of living improves in countries like China and India. We have seen high oil prices. Yesterday, the Brent crude price for oil was about $115, so we are seeing an escalation in prices.
In terms of the industry, we employ about 4,500 people in Atlantic Canada and those are direct employees. When you factor that out into indirect and induced, we are in excess of 10,000 people employed in this industry. Over 80 per cent of the employees in the oil and gas industry in Atlantic Canada are Canadian. Certainly, there are some specialty folks from other countries to support projects and development.
We have had cumulative capital expenditures of about $11 billion in the Newfoundland and Labrador offshore, and we expect that to exceed $20 billion by 2017 when Hebron comes on stream.
In addition to the capital expenditures, each production facility contributes about $300 million or so in annual operating expenditures and right now, we have cumulative operating expenditures of over $1 billion a year. It is a significant economic contributor.
The offshore royalties are substantial and contribute, as you probably know, over 30 per cent of the 2010 provincial budget for Newfoundland and Labrador. The cumulative benefits will not only enable the province to end years of deficit financing, but have also enabled the province to invest in infrastructure. We have seen improvements in roads, hospitals and so on, that are a direct result of the benefits of this industry.
The Atlantic Accord equalization offset provisions expire in 2012. That particular component, in addition to the 30 per cent, made up about 8.9 per cent of Newfoundland and Labrador's 2010 Budget. With that included, we are almost 40 per cent of provincial revenue, a very important and significant contribution.
Certainly, excluding Newfoundland and Labrador, nationally, we estimate the impacts in Canada from the existing projects of Hebron for the life of field to be approximately $64 billion. Not only is it a significant contributor to Newfoundland and Labrador, it is a significant contributor to the economy of Canada.
I would just like to draw your attention to slide 1. It is a good news story so far. It has contributed greatly to the province's employment. For those of us who have been around St. John's for a long time, you see it in real estate and in vehicle sales. It has a significant impact.
The difficulty for all of us is that we peaked in production in 2008. If you look at the production profile, as we go out to 2035, you can see the decline after 2008. We see a bump in 2017 when Hebron comes on stream and then a decline as the Hebron resource is extracted.
While we have a great run so far, it is critical that we find a way to flatten the decline in this production curve. Certainly, some of the satellite field developments around existing facilities will help flatten that out. Some small field developments are not reflected in this production profile and there is a significant discovery in the Mizzen, which is in the Flemish Cap Basin, about 1,500 metres of water, roughly. There are going to be two additional exploration wells drilled in that basin and, hopefully, we may see that as our next development.
The Chair: What basin? We focused on Chevron in the Orphan Basin.
Mr. Cadigan: Right.
The Chair: On this first chart, is that Hibernia Main or is that another?
Mr. Cadigan: In the production profile chart, it is Hibernia Main. Hibernia South has not been integrated into that chart, so what it will really do, it will take the Hibernia field, which you see in blue, and it will flatten out the decline, so it will level out a bit in the nearer term.
Senator Lang: Depending on the success.
Mr. Cadigan: I do not think it is depending on the success. I think we have identified about 225 million barrels and, generally, if you look at Newfoundland and Labrador's offshore reserves at the point of development, they always tend to turn upward. If you look at any of the existing developments, the reserve estimates have always improved over time rather than shrink over time. Hibernia South will have an impact on this as well.
Looking at the production profile, we have discovered 2.8 million barrels of oil. Based on the Geological Survey of Canada estimates, there remains a potential of about 6 billion additional barrels of oil, and the Nova Scotia regulator, projects about 2.6 billion barrels in Nova Scotia waters.
In terms of the gas side of the industry, we have good potential in Newfoundland and Labrador. We have discovered over 10 trillion cubic feet, TCF, of gas. To put that into perspective, if you look at Deep Panuke in Nova Scotia, that is about .8 of a TCF. We have an estimated 60 remaining to be discovered and a fair bit of that potential will be on the Labrador Shelf.
The technology exits to develop this resource. We have seen developments in Norway such as Snorvit, which brings gas from about 140 kilometers offshore to a liquefied natural gas, LNG, plant on shore. That technology is applicable to the Labrador Shelf and to our offshore. The technology does exist, but with prices under $4 for natural gas right now, it is not economical to bring those resources to market. We will hope for future increases in natural resource prices, as I know Western Canada will as well. We do not have to tell this committee that from an environmental perspective, natural gas is extremely positive. If you look at a greenhouse gas map of North America, you see where the greenhouse gases come from, and electricity generation is probably one of the larger contributors. Natural gas resources, in either the United States or here in Canada, have the potential to provide a solution over the long term.
The next slide is headed, "NL versus North Sea.'' That is not a hockey game. That is actually two regions. In Newfoundland and Labrador, we have had about 140 exploration wells to date. In the North Sea, there have been about 4,000 exploration wells. If you look at the map, the exploration wells are in black. If you look at the North Sea, it is fairly heavily concentrated. If you look off the East Coast of Canada, Newfoundland and Labrador, you will see a far smaller volume of exploration activity. You have to compare the potential resources of each of the areas, but if you just look at it from a high level, we have seen little in the way of exploration compared to some other regions.
Senators may ask why our volume of exploration activity is so low. It is partially due to our environment. We have one of the harshest environments in the world. We have icebergs, sea ice, high sea states and fog. Sometimes, we have all of those things at the same time. That weather obviously has an impact on the cost of drilling and exploration. International oil companies always strive to minimize financial risk and we see that if you look at the flight of capital to the oil sands. It is based on a quantifiable resource. The companies command each their developments costs, their production costs. The price of oil is a variable, but for the most part, the resource is not. We know the resource exists.
In the case of the offshore, to explore is extremely expensive and in areas of the Grand Banks, the Jeanne d'Arc Basin, water depths are generally in the hundred metres, and a well can cost in the vicinity of anywhere from $50 to $100 million in shallow water. When you go to the deeper frontier basins — you mentioned the Orphan Basin, the Mizzen, where Statoil had their significant discovery, in those basins, you are talking about $200 million plus just to drill one well.
The Chair: Drilling one well?
Mr. Cadigan: Just drilling the well. That is not seismic. It does not include any of those costs incurred prior to the drilling.
The Chair: Can you tell us what the red squares represent?
Mr. Cadigan: The red squares are exploration permits in the Greenland offshore.
The Chair: Yes, I thought so.
Mr. Cadigan: The upper left-hand corner is the James Bay area.
The Chair: That is what I thought.
Mr. Cadigan: I do not know the history of those wells, but they were probably drilled in the 1970s and 1980s during the big grant period.
The Chair: That is not what is going on now.
Mr. Cadigan: No.
The Chair: That is whatever has been drilled.
Mr. Cadigan: Right.
The Chair: The black dots are all the Eastern and Arctic —
Mr. Cadigan: Exactly. Every black dot is a well that was drilled.
The Chair: At some point?
Mr. Cadigan: At some point, yes.
We have talked about the cost and find rates are typically 10 per cent or less in the offshore. Find rates in Newfoundland and Labrador have historically been better than that and the size of the finds in the Newfoundland and Labrador offshore have generally been fairly large, high flow rates, a good reservoir, so that is in our favour.
The third slide in my deck shows the historic exploration wells drilled in Newfoundland and Labrador.
Senator McCoy: Did I hear you correctly saying traditionally, in oil and gas, it is a one-in-four find rate?
Mr. Cadigan: No, it is about 10 per cent —
Senator McCoy: One in 10.
Mr. Cadigan: Yes, and that is considered a good find rate in an offshore area.
Senator McCoy: In the offshore area.
Mr. Cadigan: Yes.
Senator McCoy: Are you getting better?
Mr. Cadigan: Yes, we are a little bit better than that.
On the exploration chart, you will see that in the 1970s and into the 1980s, there was a substantial amount of drilling associated with the PIP grant program. That program financed and de-risked drilling for a lot of, at the time, our Canadian companies.
The amount of activity that has occurred since the expiry of that program has been limited. Even last year, which we considered a good year for exploration, we had two deep-water wells and one in shallow water.
WE must realize that most of Canada's offshore discoveries were found in the period of the PIP grants in the 1980s. Terra Nova, Hibernia, White Rose were all found in the early to mid-1980s — Hibernia, in its case, 1979. Hebron, which will begin construction 2012, with First Oil in about 2017, was discovered in 1981. When we take that into account with the production profile, I mean, that is of grave concern to those of us working in the industry and to people in Newfoundland and Labrador in general.
With the important impact on GDP, 40 per cent of GDP is from the oil and gas industry, 30 per cent of provincial revenue, we need to find ways to encourage drilling activity in the frontier basins throughout Canada's offshore.
Where do we go from here? In 2008, partially due to some lobbying we did with the federal government, they established the Atlantic Canada Energy Office here in St. John's. Atlantic Canada Energy is sort of a collection of the departments that impact the offshore. There are some NRCan employees, there are some employees from ACOA, and we have one GSC employee.
The importance of this office speaks to its ability to improve dialogue. We have a lot more contact with the federal government than we traditionally had and it provides a good base of information to inform decision makers in Ottawa. That was an important step.
The other thing that the federal government can do is through the Geological Survey of Canada. The GSC has played a vital role in providing information for the defining steps in exploration, of which initial basin assessment is one. This information provides a base for all explorers to assess its potential and to make decisions as to whether to invest in the offshore in Canada and Newfoundland and Labrador.
In Greenland, we have seen an excellent example of a frontier jurisdiction using non-proprietary seismic data to attract explorers. Through their national oil company, Nunaoil, they collected non-proprietary seismic data and made it available to prospective explorers. In two rounds of land sales in Greenland, they have had about 13 international oil companies interested in exploration, in the Baffin Bay area while we have had about five explorers in Newfoundland and Labrador.
It is really important for explorers to have up-to-date potential resource assessments. Some of the resource assessments are based on data and analysis obtained over 10 years ago. Technology has advanced substantially in that period of time, so I think there is room for some additional work.
As NOIA, we believe that the Government of Canada needs to provide direction and targeted funding to the Geological Survey of Canada to collect and analyze and provide geological data to provincial investors in our offshore. We need to have up-to-date potential resource assessments and we need to have up-to-date basis analysis.
On another front, we have recent initiatives of the Government of Newfoundland and Labrador on the release of digitized seismic data and this is the release of data after the exclusivity period is over. Generally, that is about five years from the collection of seismic data. Right now, the oil companies would provide paper copies of seismic data. They provide an interpreted version. It is not raw data and, on paper, it is really of little benefit to explorers or potential explorers. The Government of Newfoundland has come and said they want to see digitalized seismic data provided by the companies at the expiration of this exclusivity period, and to date, that is in the purview of the Canada-Newfoundland Offshore Petroleum Board. For that change to occur, it is going to require the Government of Canada and the Government of Newfoundland to provide direction to the board to implement a procedure to require that digital data.
With digital data, a company can take that data, process it and assess an area that another company decided not to move forward with or decided to pass over. That is an important "ask'' of the Government of Canada.
In addition, we have many impediments to exploration and some of these impediments are a way to provide — it is a no-cost way for the Government of Canada to help. If we look at seismic, about 4,900 kilometres of seismic data is shot for every well drilled in Newfoundland and Labrador. If you look at other jurisdictions like Norway, the ration is about 1,950 per exploration well. It is very simple: the larger the volume of data, the more exploration.
NOIA responded to the Canadian Transportation Agency's open invitation for comments in 2009 on proposed modifications to the coastal trading licence application guidelines. These guidelines were put in place to regulate the transportation of goods and provide business security and business opportunity to Canadian ship owners and ship builders. Inadvertently, they have become a direct impediment to seismic activity in Newfoundland and Labrador and the Canadian offshore in general. We have raised this issue with every minister and every committee we have spoken to in terms of the federal government. It is a vexing issue.
Oil companies planning a seismic program must first follow prudent business practices. The company goes out with an expression of interest, they qualify bidders, and ultimately, they will award a contract to a seismic provider. Once the contractor is contractor is chosen, the foreign vessel — usually, it is a foreign vessel — has to be approved by the CTA and during that approval process and period, any Canadian vessel owner can protest within 30 days of that initial application. That protest slows the process down. It slows down the approval. In Newfoundland and Labrador, we have a fairly short season. We have sea ice off the coast of Labrador. We have sea ice that comes in, in terms of our offshore, off the eastern portion of the island. The season is short. We do not have time for delays.
The other issue in terms of this CTA ruling is the vessel is really only a component of the seismic technology. Most of the modern seismic vessels, have fully integrated technology on board. You do not throw the seismic equipment onto it, go to sea, and run your lines.
The problem we have is there is a Canadian seismic provider, who does not have technology in keeping with the technology that the oil companies are looking for. We have seen applications for seismic consistently contested by a Canadian firm. Their particular vessel, the last time I checked, was laid up in Louisiana. If it is classified as laid up by the Classification Society of North America, it means it needs remedial work to go to sea. This organization does not have a vessel at the ready, is not able to meet the technology requirements of the operators, the oil companies, but yet, for some reason, can protest every single seismic application.
Last summer, Husky Energy wanted to conduct a seismic program in the Sydney Basin, which is off the southeast corner of Newfoundland and Labrador, and off the coast of Labrador. They went through their due diligence, did their EOIs, picked a contractor and then went to get approval to bring this vessel into Canada to do this work. Inevitably, it was protested and the process was delayed. One of the positive things in the outcome, which to me did not seem like a big deal, but to people around the industry on the marine side, they were really surprised to see that the CTA actually acknowledged the technology to be used for this particular seismic program. It seems common sense to me that you consider the technology to be used, but, apparently, that was actually a first. That is a positive indication. However, we do have to find ways to eliminate what I would call frivolous protests.
In this case, a small exploration company that had a small parcel adjacent to Husky, wanted to do an add-on program. The Husky program was approved.
In the Husky program, the company that protested did not even respond to the expression of interest, so it did not go in and say, "We want to do this business.'' They waited until Husky had made the decision and then they protested, which is an extremely unfair way for them to go about dealing with a business opportunity.
As soon as that company went to get approval — the vessel had already been approved for the Husky program — it was protested as well. One program was approved, but the adjacent program had to go through a rigorous process that slowed down the progress and put the whole program in jeopardy.
We need to see some changes. In the original consultation, we asked that seismic vessels be exempt from the regulations of the Coastal Trading Act. With our request, the Province of Newfoundland and Labrador and CAPP, the Canadian Association of Petroleum Producers, there were only really three submissions out of 20 that in any way spoke to seismic vessels or seismic activity. Despite that, we did not see a change in the regulations and we are still suffering the same problems. That is one area where you may be of assistance in your report.
The other area that is affected as well in terms of seismic is really the first step in exploration. Speculative seismic is often collected at the expense of the seismic company, often down when they are transiting the basin. They may be coming from the North Sea to the Gulf of Mexico and swing through and run some seismic that they hope to sell to potential explorers.
There were a fair number of these "spec'' programs in the early days in the industry and it created some base information for companies to make decisions on exploration. Currently, speculative seismic activity is all by nonexistent in Canadian waters. There was a program proposed a couple of summers ago in Nunavut and the program was basically pulled off the table during the CTA protest.
We acknowledge that the latest rulings took technology into account, but again, this is an unintended use of the regulations to frustrate a well-intended process and we must find ways to stop this. A simple solution is an exemption for seismic vessels.
The Chair: Concerning the Canadian Transport Agency, I do have a little bit of background knowledge on is the shipping industry. We recently removed the duty on importing foreign vessels.
Mr. Cadigan: Yes.
The Chair: That is surely going to be helpful to these operators. As you say, only one seismic operator is operating under a Canadian flag. As you point out, that operator is not technically adequate.
Does this recent action resolve the problem?
Mr. Cadigan: No, the problem is not resolved. The last revision of the duty remission was in 2004, and I know there have been some more recent changes.
The Chair: The duty is off —
Mr. Cadigan: Yes, off other vessels. The duty is a component. It is a positive change, but the duty does not change the process you have to go through to get a seismic probe program approved. That is the problem. The duty reduces cost somewhat, but it does not make the process any easier. If an international oil company is looking at doing work in Newfoundland and Labrador or doing work in Angola or somewhere else in the world, the time, effort and risk associated with getting vessels into Canada to do that seismic work has an impact. It makes us a jurisdiction that is a little more difficult to deal with.
It is our belief that seismic vessels should be exempt — it is a simple solution — because, otherwise, you can have a protest every time and the protest takes time and it requires resources to deal with those protests.
Senator Lang: Does the provincial government support your position and have they written to the federal government, and if they have, can we have a copy of that letter?
Mr. Cadigan: Yes, we can provide copies.
During the 2009 consultation, the province, the Canadian Association of Petroleum Producers and NOIA issued a letter. They are pretty much the key stakeholders in terms of Newfoundland and Labrador in this issue.
Another issue, which comes under Transport Canada's purview, is the length of time and the cost to bring foreign flag, especially vessels, into Canada. It is a constant issue raised in our dialogue with the drilling contractors and other contractors. We have seen recent signs of cooperation with Transport Canada starting to work more closely with the Classification Society, so there is not so much duplication, and our own C-NLOPB has a part to play in this whole process. However, when we talk about specialty vessels, we are talking about a drill ship, a harsh environment drill ship or drill rig to come into Canada to drill a well. We are talking about supply boats when Canadian flag vessels are not available. We are talking about dive vessels, for example, to do subsea work or subsea development. In each of these cases, there is a time and cost issue to obtain the appropriate approvals. There are no Canadian vessels to replace these foreign flag vessels, so it is not an issue of protecting Canadian ship building or Canadian assets. It is simply a matter of regulatory regime that has not been updated, to my knowledge, since about 1988. It is a big issue and it is an important issue.
One example I can give you is Lona 0-55 well, which you referred to earlier in the Orphan Basin. The drill ship, Stena Carron, came in to drill that well. It was under a long-term contract to Chevron and they made a deal with ConocoPhillips to bring the vessel into drill in the Laurentian Basin south of Newfoundland and then to move into the Orphan Basin in early summer to complete the Lona 0-55 well. Stena Drilling is the owner of the vessel, a brand-new build. It had worked in the Shetland Islands and then came to Newfoundland to drill two wells. Based on dialogue with the drilling contractor, I found out it cost in excess of $5 million to get that vessel into Canada.
Some of those costs are legitimate; things like the survival suits, for example, the regulatory environment in Canada being somewhat different from other jurisdictions. Much of the cost has to do with using the Classification Society marine consultants and others to shepherd the approval of this vessel through the process. Certainly, in our view, to add costs like that in an area that has not seen enough activity and, again, with the risks of a decline in production, this is something the Government of Canada should look at closely. We have raised this issue at every opportunity, most recently with Minister Merrifield, who is the junior minister of transport, not quite his area.
The Chair: The person you have to see is Minister Strahl.
Mr. Cadigan: Minister Strahl is next on my list. Actually, some of the documentation we have provided today, we will provide directly to the minister as an "ask.'' Again, it would be helpful if you could consider that in your report.
We talked about duty remission. We hope to see that extended again in 2014.
We do have some other regulatory impediments. If we look at the legislation that regulates our offshore, it was designed at a time when we really did not have production. In our view, we are starting to get to the point where even that legislation needs to be reviewed and it needs to keep pace with current realities.
In Canada, you can get a significant discovery license, SDL, for an oil or gas discovery. The award is based on variable evidence. There is no clear — you have to have certain pieces of information in order to support that claim. It is variable, so I guess it is a consultative process. You will not find full agreement between the oil companies and government on this issue.
An SDL is held in perpetuity. Hebron, for example, was discovered in 1981, and construction is to begin in 2012. If the partners had not decided to proceed now, they could hold it forever. There is no obligation to develop. In other jurisdictions, such as the U.K., for example, they have sort of a collaborative field process, with which you may be familiar, whereby the company and the regulators come together and say, "Why can you not develop this?'' If there are technological reasons, okay, that can be a reason for that SDL to be held, but the holder of the SDL or the holder of the holder of the licence actually has to work with the regulator to find a way to develop or to justify non-development. We do not have that in Canada and I think that is a potential issue. The price of oil will certainly limit that desire.
The small number of explorers, five or six in Newfoundland and Labrador, stack projects up around the world. They have to decide when to develop, when to invest. If you have a jurisdiction where you can hold a discovery indefinitely, certainly, I would think, that would be a little lower on the list than a jurisdiction where you have a tighter time frame to develop that discovery. That is one example where I think a regulatory improvement can be made.
We need to work together. The C-NLOPB as a regulator certainly is sufficient and has our respect, but the direction of the C-NLOPB comes from Newfoundland and Labrador and the Government of Canada. The Government of Canada needs to step up and take its responsibility in terms of ensuring that the corporate directions are given to make sure that we do see development and we see that production curve flatten out somewhat; hopefully, even rise a little bit, but flattening out, I think, would be something we would be happy to see.
While I have been speaking in terms of offshore oil, I also want to note that the development of Muskrat Falls and Gull Island are also important projects for Newfoundland and Labrador and for NOIA members. While many of our members are strictly offshore contractors, many of the fabricators and other companies involved in developments will be working on Lower Churchill as well.
It is an important opportunity to reduce greenhouse gas emissions and replace some coal-fired generation in Nova Scotia. I am sure you have heard about that during your visit. We want to support the province's "ask'' that the Government of Canada consider loan guarantees to help reduce the financing costs for the project.
In summation, I would like to emphasize that while we are seeing a tentative return of exploration on Canada's East Coast after decades of little or small amounts, we must do all we can to assist it. Offshore exploration in a harsh environment is costly. It is the rate-determining step for the oil and gas industry. Without exploration, there would be no new discoveries. Without new discoveries, there can be no new developments. Without developments to contribute to major capital project spending in the region, no production will come on stream to replace our depleting resources. Fiscally, that will be very painful for Newfoundland and Labrador.
I would like to thank you for the opportunity to speak with you today. We are delighted to see you come here. I would like to end by saying that regular engagement like this is important and we are delighted to be here and we thank you for your time.
The Chair: Thank you very much, Mr. Cadigan.
Can you talk about Old Harry, or is that not within your purview?
Mr. Cadigan: We know that there is a project description on Old Harry from Corridor Resources. It is ready for drilling.
The Chair: Perhaps you could give us some description of Old Harry because we understand that it is not just the Gulf of St. Lawrence, but it extends into Newfoundland. There has been a boundary dispute and there are concurrent or multi-jurisdictional issues.
Mr. Cadigan: If you look at the western part of the Province of Newfoundland and Labrador and the Magdalen Islands, Old Harry extends toward the coast of Newfoundland and Labrador, but also towards the coast of Quebec in the Gulf of St. Lawrence, roughly north of the Magdalen Islands.
Senator McCoy: Could the committee get that copy of that map?
Mr. Cadigan: Sure. I am not a surveyor, so I will mark the location of Old Harry. It will be a rough estimation of its location.
We have seen delays in the Laurentian Basin south of Newfoundland and Labrador until the boundary was settled between Nova Scotia and Newfoundland and Labrador. In the case of the Old Harry prospect, it straddles a border that has not been agreed to. The provinces must agree, but I think everyone probably concurs that part of the field is within the border of Newfoundland and Labrador.
The C-NLOPD is assessing that project description and working towards issuing the appropriate permits. Politically, it is a bit messy, no doubt, and we are hopeful to see that the Province of Quebec manages to come up with a jurisdictional framework so that, ultimately, that resource can be developed and we all share from the benefits.
The Chair: Would you like to see it developed?
Mr. Cadigan: Sure, we would.
Senator McCoy: I am pleased you raised the issue of the Geological Survey of Canada. This is actually a nationwide issue. It is a huge issue in Calgary, partly through attrition, people getting old and retiring, and partly through a funding issue. The government has not necessarily provided the resources to recruit the necessary expertise. One could argue that it is a subsidy to industry because, after all, it has been providing a public service.
On the other hand, one could also say it is providing a very necessary marketplace regulatory function by allowing free flow of information, which opens up opportunities to large and small, rich or poor. I imagine your members and your colleagues in CAPP, and so forth, are gathering steam on this issue.
Mr. Cadigan: Yes.
Senator McCoy: I would like to encourage you to contact others who are impacted by this and perhaps give us a little more of a briefing on that issue. You could perhaps submit something in writing to our committee so that we have a better understanding.
Mr. Cadigan: Yes.
Senator McCoy: The other place where it is so critically important, of course, is in the Arctic. Although there are some photo ops, wonderful donations to create labs 10 years from now, et cetera, there is an ongoing data collection program that is being neglected, and I think it is a critically important issue. I want to underscore your position on that and ask you to give us more of a briefing.
Mr. Cadigan: We will.
Senator Neufeld: On the chart, I see that the decline of Hebron is quite a bit faster than what you experienced with Hibernia. I can tell where Terra Nova started. The other ones, I cannot tell unless I thought it was just straight down, so I am assuming probably in those areas.
You said that last year there were only three wells drilled, one shallow, and two deep. Obviously, when you look back, you see that the drilling that was done in the 1980s has actually come to fruition.
Is your organization fearful that unless many wells are actually drilled, capped and waiting for production facilities, that you are totally dependent on new exploration wells with spines to actually keep up that production?
Mr. Cadigan: Senator, the answer is variable, but there are a number of significant discoveries in the Jeanne d'Arc area, for example, that may be tied into existing infrastructure. If we look at the White Rose project, as an example, the North Amethyst field was brought on stream first of last year and it is about 70 million barrels. There is a pilot well program under way at West White Rose. One well was drilled and another well, a gas injection well, will be drilled this year. The purpose of that is to test that reservoir, get more information, and for Husky Energy and partners to decide where they are going to go with that particular potential resource.
Husky announced last year some additional reserves at a deeper layer than they are producing from right now. I think it is going to be a combination of seismic work in the areas adjacent to existing production, SDLs in the area of existing production, and new developments. We have to bear in mind that with Hibernia, Terra Nova and White Rose, any finds in those vicinities, to a large degree, will replace production that we are losing, you know, in terms of the decline in the resource.
To flatten the curve, we need to see some additional development. It is not a hopeless situation. I think Newfoundlanders are optimistic and we have faith in our potential resources. With 6 million barrels potentially out there, which is twice what we have already managed to identify and produce from, you know, I do not think the future is black. The flip side is that there are significant impediments to attract new entrants. There are impediments for existing companies to get seismic programs, which get the front end, going. Personally, I would be cautiously optimistic, but concerned.
Senator Neufeld: I am an optimistic person, too. I come from an area where there is oil and gas, so I understand that.
You are saying that there has to be a fair amount of new drilling to keep that decline from declining further. You do not have wells just waiting to be drilled. You do not have wells that are known producers or could be producers. It is all going to be new or almost all of it is going to be new drill from here on in to try and reduce that decline?
Mr. Cadigan: Yes, that is the predominant answer. If you look at the North Sea, because of the volume of infrastructure and so on, a 10-million-barrel field would be considered a great find.
In our offshore, that line is somewhere between 30 million and 50 million. Additional discoveries and developments will enable some of these smaller fields to become economical in terms of proximity to new infrastructure and cost as well.
Senator Neufeld: As a matter of interest, slide 2, you say that is James Bay, the black dots on the very west side of the map.
Mr. Cadigan: Yes, it looks like James Bay to me.
Senator Neufeld: When did you say those were drilled? Are those recent or really old, or is it just someone out there seeing if there was something there?
Mr. Cadigan: To be honest, I have no idea, but even if you look at the bottom end of Baffin Island, you will see a couple of black dots. That is a significant discovery made by Husky Energy back in the mid-1980s. I assume that it was probably driven by the PIP grants in that period.
Senator Neufeld: Okay, thank you.
Senator Lang: I want to thank you for coming. Please be sure to leave a copy of your requests with the clerk. If you have provincial support please send us a copy of that communication as well. Is that okay?
Mr. Cadigan: That is excellent.
The Chair: On behalf of committee members, I would like to thank our witnesses for appearing this afternoon. It has been a very interesting discussion.
(The committee adjourned.)