Address by the Honourable John F. Hamm, MD, MLA
Premier of Nova Scotia
CAPL Dinner - Calgary
February 26, 2001

Good evening and thank-you. It's good to be back in Calgary. It's good to be talking to a room full of people who have such a clear focus.

You are the landmen. You look at land. You evaluate resource potential. You manage investments. Acquisitions. Dispositions.

In Nova Scotia, we're more in the disposition game today - I hope we've successfully sold the last crown owned oil and gas corporation in Canada. I know more than a few of you in this room are at least as interested as I am in how that turns out!.

But, acquisition and investment is what I really want to talk about tonight. There's tremendous excitement building in Nova Scotia about development investments and exploration commitments.

I also want to talk to you about why the east coast energy industry is an important part of creating a stronger Canada. A Canada that has strong economies in the west, the centre and the east.

I believe we have a country with opportunities in every corner. Alberta and Nova Scotia have much in common already - and tonight I want to demonstrate that we will have a lot more in the future.

To start us off, I want you to look at the energy picture in the so called frontier areas. That's where the oil and gas industry has placed the arctic and the east coast.  I guess it's called the frontier because it's new -- full of unknowns and has more than a few risks. But, as you know very well, frontiers have many opportunities too.

I know a lot of people here in Calgary usually look north when you say frontier. I don't blame you. The roughly 200 trillion cubic feet of gas potential in the western and eastern arctic is a big number - and it's in your back yard so to speak.

But, tonight I want talk to you about what we see in our back yard.

Here's what most of you have seen as the estimate of Nova Scotia's natural gas potential... around 20 trillion cubic feet.

But remember that number was generated in the early 80's. And it really just looked at the Scotian shelf. And it was developed before we knew very much about deepwater hydrocarbons.

Now we have new seismic, new exploration and new geological assumptions

So here's the number your industry is talking about today.

More than 40 trillion cubic feet of potential across the Nova Scotia offshore area.

That's not a surprising number given the recent discoveries by PanCanadian and the huge increase in seismic across the offshore. There are some that think even bigger.

The New York investment firm Goldman Sachs did a report last summer that drove the number up to as much as 100 trillion cubic feet. If you take a total east coast perspective, the numbers rise again.

Newfoundland has major gas reserves in the Grand Banks area.

When you couple this with some significant discoveries offshore Labrador--- it doesn't take much to get up to an outside number of 160 trillion cubic feet off the east coast in terms of overall potential.

Well that's the outside - and even if you take out some of the hype - you still have some very respectable numbers - numbers that can become a reality very quickly. And in the East we have a very important edge --- proximity to markets.

I am pleased to see that plans for a northern pipeline are once again being considered.

A major challenge of course is to get it built. The cost is high with many technical challenges to overcome. And even when it is connected to the North American system, large American markets still are far away.

We faced some of those challenges several years ago when Maritimes Northeast built the pipeline to new England.

Now the pipe is in place and the New England and Eastern Canada markets are only hundreds of kilometres away.

The cost of bringing new production into play is billions of dollars less. All this helps bring Nova Scotia into the front and centre of international offshore oil and gas investment.

We were a frontier and we're being tamed quickly. The infrastructure for future success is already in place. and a key component in our latest offshore project - PanCanadian's Deep Panuke.

I am sure all of you have heard about PanCanadian's decision announced last Friday. What a solid endorsement of our offshore momentum. A year ago the company announced a discovery - every time they drilled the gas just kept on flowing.

Today they are doing the engineering and design for development.

Here's what they think it will look like. One central field with separate gas and liquids lines to shore. Total investment one billion dollars to develop a trillion cubic feet of gas.

I met with David Tuer, President of PanCanadian earlier today to personally thank him and his board for the vote of confidence they have given to our offshore and their commitment to Nova Scotia.

It's decisions like these that are helping to turn Halifax into an another energy centre for Canada. On top of PanCanadian's announcement, SOEI has decided to move ahead on the second phase of the Sable offshore Energy Project and start bringing more fields into production.

It's important to recognize that this second phase is being engineered and managed in Halifax. That's a welcome first. In the past the critical up front work has been done elsewhere.

In order to grow from a project into an industry we needed a stronger commitment to local development.

We made this goal clear to the industry - and I am very pleased to note the contract award to Kaverner SNC-Lavalin Offshore earlier this month supports us in that.

The work will be done in Nova Scotia. SOEI Tier II has yet to be officially sanctioned, but work is now underway on this billion dollar plus project.

Doing the work in Nova Scotia is a tribute to our workforce, our educational strengths and our attractiveness as a place to live, work and play. We expect to grow as an energy centre because it makes sense for your industry.

With SOEI II and Deep Panuke underway - Nova Scotia is looking forward to a lot of engineering, construction and fabrication activity over the next few years.  We have just completed a study of our fabrication capability.

We are looking at billions of dollars in work that will lead  to gas production in Nova Scotia approaching a billion cubic feet a day by the middle of this decade.

But, as I said earlier - we think there's plenty more where that came from! The east coast energy potential just keeps on growing. Nova Scotia now has a very diverse mix of oil and gas companies who have placed their bets on our offshore.

Here's the latest picture. 50 active exploration blocks with exploration commitments topping $1 billion within 5 years.  A forecast of more than 40 wells over the next four years.

A lot of that interest is in the deep waters.  Marathon hopes to drill the first modern deep water well offshore Nova Scotia late this summer or early fall.

Kerr McGee was in Halifax last week to talk about plans for exploration work a year from now in two of their seven blocks.

They also talked about drilling a couple of wells a year for the next three years.

PanCanadian, Shell, Chevron/PetroCanada, BP Canada and Anadarko are just a few of the others who are focused on the deepwaters.

In fact the BP Anadarko commitment for $97 million in exploration on one block last fall set a record.

Exxon/Mobil is looking for more gas around Sable island. As is Shell.

We have some smaller companies too - Canadian Superior, Richland and Marico.

And PanCanadian continues to explore as well as develop. It has the largest acreage offshore and very big plans. Fifteen wells to be drilled within four years - four of them this year at a cost of $105 million for PanCanadian.

Our future is also out in the Laurentian Sub-basin. These blocks between Nova Scotia and Newfoundland have been suspended for decades. However, we now see the potential of a solution in the very near future.

A federally appointed Arbitration Tribunal has been reading written arguments about the validity of the current line for several months now.

The case wraps up with oral arguments in two weeks time.

The Tribunal has 90 days after the end of the oral arguments to render a decision.  We expect that to happen by mid-June. Regardless, once the matter is settled, Nova Scotia and Newfoundland can get on with exploration.

I will work with Newfoundland to make the sub-basin attractive to industry.

I also want to direct some attention to the growing interest in our onshore oil and gas industry.

The two sponsors of tonight's dinner - Hunt Oil and Northstar Energy - are concentrating on several blocks of land onshore.

More than 100 kilometres of seismic was shot last summer - as much as five times that amount  will be shot this year. We should see some exploration drilling this year too.  Coal bed methane is also in our future.

Recent discoveries in other parts of the Maritimes and the rapid development of markets all add up to a lively potential onshore as well as offshore.

Where does that potential lead us?

Well, we think with the kind of exploration we have underway and the strength of markets for natural gas — it's reasonable to look at a total of six projects under various stages of development offshore Nova Scotia by the middle of the next decade.

We can see production in excess of 2 billion cubic feet of gas a day. That's equal to all of New England's current daily natural gas consumption.

Where all that gas eventually goes, how its developed and where it all fits in with Nova Scotia's priorities is part of another important process we have underway. We are beginning to revise our energy strategy.

The world has changed significantly since we last did the job more than a decade ago.

Electrical markets are more open. We have privatized our electrical utility.

It is now part of Emera — a local energy company with interests in electricity, the Maritimes Northeast Pipeline - and has just purchased an electrical utility in Maine.

Most recently they partnered with Pengrowth and PanCanadian to win the bid for Nova Scotia Resources Limited.

Electrical generation opportunities are growing along with natural gas. Opportunities for Nova Scotia to provide electricity for export. Your industry will have an opportunity to help us build a strategy that enhances the business case for development in Nova Scotia.

The strategy will take a long-term approach. It will ask how can we best achieve our goals in a way that is consistent with our values and principles.

The stakes are high. With half a dozen or more projects on the horizon, we have significant economic and fiscal opportunities ahead if we can get it right.

And speaking of fiscal opportunities, I want to spend a few moments talking about that - and my ongoing campaign for Fairness.

Looking to the future, Nova Scotia income from the offshore will amount to hundreds of millions of dollars per year in the form of corporate taxes and royalties.

Your industry would have every reason to believe that those revenues would put us in a position to provide a very competitive tax climate and significant reductions in debt.

This was the thinking in 1889, 1898 and 1912 when northern properties and their great wealth, owned by all Canadians, were given to Quebec, Ontario and Manitoba.

This was the thinking in 1930 when all subsoil resources in Manitoba, Saskatchewan and Alberta were given to the provinces.

This was the thinking in the 1950s and 60s when Alberta received equalization without penalty for oil and gas revenues.

Similar treatment for Nova Scotia would allow us to accelerate economic growth which would help finance major investments in economic infrastructure, such as education and training, for all the opportunities facing us in Nova Scotia.

You and most Nova Scotians would believe that this would lead to more economic growth and start the cycle again.

This is exactly what we want to happen. In fact - I'd like to think the following statement would be delivered in the not too distant future in Nova Scotia:

Being in this strong fiscal position enables us to continue to provide the infrastructure which is necessary to foster economic growth. That infrastructure includes an efficient transportation system, high-quality education and health care.... It is those factors which enable us to attract investment and encourage job growth and the creation of wealth through the private sector.

Some of you would remember those are the words of your Economic Development Minister, Jon Havelock only a few weeks ago.

When we say we want to accomplish what Alberta has done - that's exactly what I mean. We want to use our new dollars from our natural resources just as you have been able to do. And we want to use them to permanently transform our economy.

There is just one problem in reaching this admirable objective: the tens of billions we expect to receive from the oil and gas industry over the next 20 to 30 years will be very significantly offset by a reduction in payments from Ottawa.

In effect, the economic rents and taxes paid by your industry won't stay in Nova Scotia to improve our economy - instead, most of them will immediately flow back to Ottawa.

To reach this conclusion we did a little crystal balling on what might happen.

Now I have to tell you - we put some very positive assumptions into this model - just to see what would happen - and the result was this:

Over the next 30 years,  from royalties and corporate taxes, the federal government would get 30 billion and Nova Scotia would get to keep six.

As I say that is the upside - but even if you back off on those assumptions - cut the revenues in half - the numbers are still large - and the relationship is the same - our natural resources revenues save Ottawa a fortune and leave us little further ahead than we are today.

That was not the deal we signed fifteen years ago.

Fifteen years ago Ottawa and Nova Scotia agreed to settle our differences over ownership of the offshore.

We believe we brought those resources with us when we joined Confederation. I still believe that. But, we put that aside because we were told we could use the benefits from the offshore to transform our economy.

We gave up our right to set the development rules. We agreed to joint regulation. In return we were promised that we would be the prime beneficiaries of offshore development. Here are the exact words from the Offshore Accord we in Nova Scotia signed and Ottawa signed.

The objective was clear and I quote:

"to recognize the right of Nova Scotia to be the principal beneficiary of the Petroleum Resources in the Offshore area, consistent with the requirement for a strong and united Canada."

Our latest analysis shows that just will not happen.

Of each new dollar that flows in from the offshore, Nova Scotia will see the incremental gain of $0.19 while Ottawa will see a gain of $0.81.

If you hear a catch of frustration in my voice here - I think you will understand why.

We don't think that outcome is fair to Nova Scotia - and ultimately it's not fair to the future of Canada.

It's also not right when it comes to the development of the oil and gas industry.

Our people need to see a clear connection between your industry's actions and their benefits. It's a given in Alberta that the oil and gas industry benefits the province. In Nova Scotia it's clear that the oil and gas industry benefits Ottawa!

We need to clearly align the interests of the royalty owner with that of the royalty developer. We need to minimize costs and increase netbacks to you and to the people of Nova Scotia. That's the business environment we are committed to --- and that is what the campaign for fairness is all about.

I opened my speech here tonight with the observation that opportunities from coast to coast strengthen our country. I believe that strong, prosperous provinces build our nation.  Again - our country grows strong when all regions grow. Allowing Nova Scotia and Newfoundland to strengthen the East create balance in our nation. A strong west - a strong centre and a strong east are critical ingredients for a strong country.

I am seeking support all across Canada for the idea that we be able to keep the incremental revenues from our offshore. That is the key to developing a strong diversified economy like the one you have here in Alberta.

I ask you tonight to see your interest as an industry - and as citizens of this country to support us in our goals.

That is the key to getting Nova Scotia off equalization and becoming a strong contributor to the Canadian economy.

Thank you.