HANSARD

Printed and Published by Nova Scotia Hansard Reporting Services

ECONOMIC DEVELOPMENT COMMITTEE

Mr. Michel Samson (Chairman)

Mr. Brooke Taylor

Mr. William Dooks

Mr. Mark Parent

Mr. Howard Epstein

Mr. Charles Parker

Ms. Marilyn More

Mr. Wayne Gaudet

Mr. Harold Theriault

IN ATTENDANCE:

Mrs. Darlene Henry

Legislative Committee Clerk

WITNESSES

Offshore/Onshore Technologies Association of Nova Scotia

Mr. Paul McEachern

Managing Director

Mr. Tom Hickey

Chairman of the Board

Mr. Barry Clouter

Vice-Chairman

Mr. Richie Mann

Member at Large

Mr. Neal Dawe

Policy and Communications

HALIFAX, TUESDAY, MARCH 22, 2005

STANDING COMMITTEE ON ECONOMIC DEVELOPMENT

9:00 A.M.

CHAIRMAN

Mr. Michel Samson

MR. BROOKE TAYLOR (Chairman): I think we'd better bring our meeting to order. Michel is in transit, allegedly. Anyway, I will fill in until Michel gets here. Michel Samson is our Chairman. Perhaps we could begin by asking members to introduce themselves, please.

[The committee members introduced themselves.]

MR. CHAIRMAN: Okay, we want to welcome our witnesses here, members of the Offshore/Onshore Technologies Association of Nova Scotia and perhaps we could ask the witnesses to introduce themselves, if they would please.

MR. PAUL MCEACHERN: Mr. Chairman, thank you very much for the invite. My name is Paul McEachern. I'm the Managing Director of the association and senior staff officer. To my left is Mr. Tom Hickey who is the Chairman of the association and President and CEO of Frontline Safety. With me, on my right, is Mr. Barry Clouter who is Vice-Chairman of the Board and Regional Director, Americas, of CHC Global, which is Canadian Helicopters; Mr. Richie Mann, who is a member of our executive and Mr. Neal Dawe who is the policy analyst with the association.

[9:10 a.m. Mr. Michel Samson took the Chair.]

MR. CHAIRMAN: Good morning, Mr. McEachern. The way we usually start, Mr. McEachern, is if you have some opening comments to make to the committee and following that I'm sure that members of the committee will have questions for you. Have the members introduced themselves yet?

SOME HON. MEMBERS: Yes.

MR. CHAIRMAN: Then, Mr. McEachern, the floor is yours.

MR. MCEACHERN: Thank you, Mr. Chairman. Copies of our statement were provided to the clerk yesterday so hopefully you have them but for the record, we thank you very much for the opportunity to appear before this committee. OTANS is an association that represents about 450 companies on the supply and service side of the oil and gas industry. The companies - such as ExxonMobil, Shell, Marathon and the like - are represented by a different organization called the Canadian Association of Petroleum Producers.

Presenting, as I mentioned, are our witnesses today Mr. Hickey, Mr. Clouter, Mr. Mann and myself. The current situation in the industry today, which I suspect is why we've been asked to appear before you, is that as of today, the industry in Nova Scotia employs approximately 2,000 people. It brings millions of dollars in royalties, and a lot more now that the agreement has been concluded with the federal government, as well as taxes and payrolls to the province. The job numbers which we mention, Sable reported as of July that there are 1,427 people working directly for that project. As I mentioned, we represent about 450 member companies, each of which has an interest, to some extent, in the development of the offshore. Today, based on the figures that we have from the Canada-Nova Scotia Offshore Petroleum Board, we are comfortable saying that at least 2,000 people are directly employed in the industry in Nova Scotia and that number could actually be a bit higher, depending on the multiple.

So, as of today, we do have a viable industry but there is clearly room to grow. Our objectives, as the association in the near future, that we share with the Nova Scotia Government are to see that the Deep Panuke project moves to a development stage and to reinvigorate offshore exploration. As well, within the association, we have an objective to keep members informed on all types of energy activity and to promote Nova Scotia as a viable market for energy.

The accomplishments of the Atlantic Energy Roundtable have been important. These are crucial steps in the right direction, addressing key issues as raised by industry and government. The recent Offshore Royalties Agreement, which was the subject of meetings here, I believe, last week between the Nova Scotia Government and Government of Canada are vitally important to this industry and to the province. The agreement is probably the most important shift in fiscal federalism in favour of Nova Scotia in the past 40 years.

Receiving 100 per cent of offshore royalties will have a positive financial as well as a psychological impact on Nova Scotians. In the past, industry detractors have consistently claimed that the province didn't receive enough benefit from the industry but now Nova Scotians will see it as in their direct interest to have the offshore industry continue to develop as this well means more money for education, health care and the other services benefiting the whole population.

The industry will only grow with exploration and development. Clearly, the first likely development will be the proven reserves at Deep Panuke. EnCana, which is the owner of the discovery, does not regard Panuke as a core business priority of the corporation. The company is Alberta-based and has focused primarily on its on-land assets. However, EnCana is giving positive signals that they are examining ways to develop this project in an economically viable manner. Panuke's development would be of significant interest to all Nova Scotians. In the short term, development would mean contracts and jobs for many local firms and the people that they employ. As more firms win contracts and work offshore, they will build their reputations and increase the chances of more Nova Scotian companies finding partners and work in other jurisdictions around the globe. Making the local supply and service community globally competitive will, in return, increase the appeal of our region to international operators for continued investment.

Also, over the long term, all of Nova Scotians would benefit from the additional royalties that the project would produce. Other developments are in the planning stages, as well, with the Sable operators looking to find new satellite fields, they are continuing to examine ways of expanding production around Sable and I will get back to that in a moment.

It is important to keep in mind that the offshore is a cyclical industry where exploration will not always be regular or predictable. I have a handout I will pass along to you as a chart, which is a history of the cyclical industry of drilling in Nova Scotia. We will hand that out in a moment. Our best estimates are that exploration will be in the level of two to five exploration wells per year for the next two to three years. Now the reasons for this are many. First, the cost of operating in our region is relatively high. Costs associated with harsh weather conditions, regulatory concerns, taxation rates and other matters all impact on the economies of an exploration project. Major operators will always take a long-term global view of their exploration investments. Until our region is more competitive with others around the world, operators are not likely to increase their investment here.

Moreover, the availability of drilling rigs has become a real problem. In the global market, there are many more prospects than there are rigs to drill on them and there is only a certain number of drilling rigs which are able to operate in the Eastern Canadian offshore because of the weather conditions. Therefore, operators have limited assets and they will be deployed in areas where operators can make the fastest return on that investment. Therefore, frontier areas such as Nova Scotia, are less likely to be seen as priorities when oil is $50 a barrel and can be extracted in other jurisdictions around the world on a shorter time line.

Exploration will continue to ebb and flow but if we have a major new discovery here, the psychological impact would be significant on the international operators and there is reason to be hopeful that such a discovery is waiting to be found. For example, the global ratio of wells drilled to significant discoveries is 1 in 10 to 1 in 15 whereas here, in Nova Scotia, that ratio is closer to 1 in 5. Our offshore is very lightly explored. There have been less than 200 wells drilled compared to 50,000 wells in places such as the Gulf of Mexico

and the North Sea. Clearly, the Nova Scotia region has prospectivity. The challenge becomes how to increase exploration to prove some of that vast potential.

Some explorers have already expressed a great deal of confidence in our region. For example, Marathon Oil is telling its stockholders that the company intends to return to the 2002 deepwater discovery at Annapolis and to have that project producing by the end of the decade. Canadian Superior continues to be eager to return to exploring their prospects offshore, believing that a major find on their field is imminent. Also, as you may be aware, EnCana and their partner, Marauder Resources, have plans for at least one well later this year.

[9:15 a.m.]

OTANS is also pleased to see that the environmental assessments of BEPCo, Bass Exploration and Production of Canada's, proposed multi-well exploration program have determined that there is little risk of negative environmental impacts. They have a program of up to three wells planned over the next year or two.

Another aspect of the energy industry onshore is liquified natural gas. Two major LNG facilities are on the horizon for our province. Anadarko's Bear Head facility is starting to grant construction contracts and Keltic Petrochemical's plans continue to develop. Their environmental application, I think, is before regulators now. Those projects will mean millions of dollars, hundreds of jobs in construction and manufacturing, as well as creating full-time employment when the facilities are operational.

To ensure that exploration and development continues off our shores, there are steps that need to be taken to improve the current regulatory structure. Regardless of what the current activity level may be, these steps are essential to laying the foundation for future success in our industry. Governments, local businesses and operators must all be prepared when the next discovery is made and the next project developed.

There are several steps that still need to be taken. There is progress being made on these. I'm highlighting these as projects which governments are working on. One is reducing the cost of drilling a well. Exploration wells in Atlantic Canada can cost up to $30 million Canadian, more than in competing regions around the world. It is due in part to problems with the regulatory system.

Regulatory boards must start to consider the cost impacts of regulation and the capital constraints of operators and move quickly to performance or goal-based regulations that could lead to cost reductions and encourage exploration. Right now, the regulatory regime which was developed in the 1970s and 1980s, is more prescriptive, telling you how to do something rather than what your objective should be.

Another thing that needs consideration is a federal Act called the Coasting Trade Act. The CTA is being used to create, or could be used to create, a monopoly for Canadian-flagged rigs. Offshore drilling rigs are truly global assets and can't be considered in the same way as other ships and vessels. There is a recommendation from this association to have the Coasting Trade Act changed so that rigs would be exempt. The policy direction from the federal Cabinet for interpretations on intention to reflag issue is needed.

Just to explain, there are no Canadian-flagged rigs as of today, but we had a situation here a couple of years ago, the rule is if you have a Canadian-flagged drilling rig you have to be taken first, regardless of the price. Some companies - at least one company - has tried in the past to reflag a Bahamian-flagged rig to Canadian, so that it would be guaranteed a contract regardless of price. It threatened exploration, some exploration was delayed for months while this was worked out.

Another aspect where there is progress being made is on seismic. OTANS has advocated for streamlining of seismic regulations and was pleased to see that Fisheries and Oceans Canada, in their code of practice for mitigating seismic noise in the ocean environment, has recognized the importance of maintaining the role of the Canada-Nova Scotia Offshore Petroleum Board as the single window regulator on offshore matters.

Previous proposals would have established another regulatory layer under DFO which would have added to cost and uncertainty to the regulatory process, something the region must avoid in order to attract investment. Government therefore is doing their part to improve the business climate and the provincial government was very strong in advocating a reasonable consensus on how to revamp the seismic regulations.

Making this progress move forward means that all stakeholders will have to play their role. Governments, producers and suppliers all have to ensure that they are serious about making the industry work. It is important to keep in mind that while government can set the climate, they cannot force companies to spend their money here. To some extent, the fate of this resource is beyond the control of government and is beyond the control of this association.

Premier Hamm has been a staunch champion of this industry, working very closely with all the players to help development and he continues to play that role. But large, multinational corporations simply have a different outlook from that of government or the local supply community on occasion. They see the industry in a global sense, where assets must be weighed against assets all over the globe. Moreover, they can take a much longer timeline view of project development. While governments focus on the electoral cycle, for example, and suppliers on quarterly earnings, these large operators are often looking years, if not decades, down the road. So the question again becomes, how do we grow the industry here, in Nova Scotia?

Following the agreement on offshore revenue sharing, there is an opportunity for a full public debate on how to grow the industry to the benefit of the resource owners, which is, of course, Nova Scotians. As we have seen, Nova Scotians now have a real direct stake in the future of the offshore, as its revenues will be a key source of funding for a variety of government services. Developing those resources and collecting the associated revenues, will require that emphasis be placed on the offshore, which may mean beefing up the Nova Scotia Energy Department. There are several projects such as a digital basin atlas, that would add significant value to the prospectivity of our region. I know that you had witnesses here from the department last week who were talking about this.

As you know, offshore land is parcelled out to the operators who successfully bid on that parcel. These companies have no knowledge of what is happening in the blocks next to theirs and indeed, no one currently has all the information in one location. Creating an accurate exhaustive digital basin atlas, which is really a geologic tool, which could be viewed electronically by operators around the world, would be an invaluable tool for exploration attraction, which is a very big role for the Nova Scotia Department of Energy. Moreover, it would give the Energy Department the ability to study those findings and learn more about how the offshore geology is structured and how hydrocarbon plays may be found.

In order to ensure that Nova Scotia receives the best possible development arrangement with operators it may also be necessary to bring in negotiators with expertise and experience in the industry to deal directly with operators on the province's behalf. This is a global industry, it is very complex and there can be no substitute for having experienced, respected negotiators representing our interests at the table.

I want to make it clear that these comments are not at all meant to be a slight to the current Energy Department or the excellent work that its staff and its minister are doing. It is true that there are areas where additional funding could help develop the department's capacity to better represent the province vis-à-vis the offshore industry.

There is past evidence to suggest that government can indeed have a significant impact on decisions regarding offshore development and exploration. For example, when PanCanadian was looking at decommissioning the Cohasset oil field, provincial government scientists within the Energy Department suggested the possibility of a gas field below that oil play. Today that play is known as Deep Panuke.

Also, in the early stages of the Sable Project, it looked as if it would not move forward. However, when government experts within the Department of Natural Resources, as it was at the time, suggested an alternative development strategy for the project, Sable went ahead and formed the foundation of what we have as an industry today.

As you can see, government has a clear and important role to play in encouraging the development of the offshore. Through improving the capacity of government to interact with operators and make constructive suggestions regarding their projects, Nova Scotians can have a direct impact on how this natural resource is developed.

In conclusion, given the potential of this industry to reshape the financial realities of the province, we must strive to put aside the Party politics, work together and find a way forward, and that includes operators and the supply community, as well as those who participate in government. OTANS was pleased to see the tripartite support for Premier Hamm and his Campaign for Fairness. All Parties supported the Premier's initiative because he was right and it was the right thing for the people of the province.

Now that we have the royalty deal in place, it is more important than ever for all Nova Scotians to look for ways to develop the offshore in order to build a better province. Constructive criticism is always welcome, but simply saying the other side is always wrong gains the province nothing. I'm hopeful that through co-operation from government and industry, we will see the appropriate investments made in the province's energy industry, to ensure our offshore grows to benefit all of the province. Thank you.

MR. CHAIRMAN: Thank you, Mr. McEachern. Mr. Epstein.

MR. HOWARD EPSTEIN: Despite the name of your association, I didn't hear anything about the onshore. Can you just let us know what, if anything, is happening onshore?

MR. MCEACHERN: There's a couple of things happening on shore. As I mentioned, the liquified natural gas terminal at Bear Head is probably the largest investment in the energy industry since Sable, so that, in itself, is a big thing.

I think you're talking about the drilling prospects onshore, there are parcels of land that have been let out to exploration companies for oil and gas. Probably the most interesting one isn't conventional oil and gas but it's coal-bed methane which is being explored for in Pictou County. There is, as you know, large blocks of coal there and there has been exploration in that area for some time and there is hope that that methane can be used either in local distribution programs in Pictou County, or put into the Maritimes & Northeast Pipeline.

MR. EPSTEIN: Any progress in that?

MR. MCEACHERN: I know that there's a company called Stealth Exploration which has been doing some work. I'm not familiar with just how far they are on their program but I think the details of that would probably be available - as to just how far they are going - from the geologic section of the Department of Energy.

MR. EPSTEIN: When we had witnesses from the department here with us they gave us an estimate of what they considered to be the volume of gas potential on the offshore. I'm wondering if you have any figures and, if so, can you explain to us how you get them?

MR. MCEACHERN: I get my figures from the same sources the witness directed at you. We don't have an independent assessment. We are a business association. Those numbers are scientific estimates based on the work of the Canada-Nova Scotia Offshore Petroleum Board, the GSC, the Geologic Service of Canada, and the Department of Energy. Those numbers are the numbers that we work from, as well.

MR. EPSTEIN: So is the industry working with a 40 tcf figure? Is that generally the magnitude that you have in mind, or do you have a different number in mind?

MR. MCEACHERN: Well, I think there was an estimate from the Canada-Nova Scotia Offshore Petroleum Board released two and a half years ago, that they estimated that there could be up to 40 trillion cubic feet of gas found on the slope of the deep water. I think that there has been about 6 trillion cubic feet of gas discovered in Nova Scotia. The final estimate for the total between the Scotian Shelf and the deep water escapes me right now but the numbers that we do get are those which are provided to us by scientists from both the federal and provincial governments.

MR. EPSTEIN: Okay. Can I just ask you about something - I guess it's on Page 3 of your presentation. It had to do with the ratio of wells drilled to significant discoveries. I was a little curious about this because it didn't seem to me to reflect my understanding of the actual number of significant discoveries out there. Can you just tell me how many significant discoveries you think are out there at the moment?

MR. MCEACHERN: I would have to get the number from the Canada-Nova Scotia Offshore Petroleum Board. The number would escape me right now but it would be in that ratio of probably about 1 in 5 has been. . .

MR. EPSTEIN: Well, that means 40. I mean, if you. . .

MR. MCEACHERN: Yes. An SDL licence - I guess what you have to understand is the definition of a significant discovery licence. A significant discovery licence is not necessarily a commercial discovery. A significant discovery licence is a legal term in the regulations of the accord, that a company will drill and find petroleum. They declare a significant discovery so that they hold the rights to that petroleum reservoir. It doesn't necessarily mean - a discovery of significant and discovery of commercial are two different things.

MR. EPSTEIN: Okay. I know what an SDL is. My understanding is, for example, if you look at something like SOEP, that they have about 25 or 26 SDLs, of which they only found commercially attractive, six, to get the project going. So there is quite a difference.

MR. MCEACHERN: They had three and three, that's right. Mobil had three, Shell had three and the rest are held - they're satellite fields which they are in the process of now working on for - I know that they are doing work on two, for example - CenAlta and Arcadia - where they are doing work on putting those significant discovery licences into the Sable project.

MR. EPSTEIN: Okay. So what I was really concerned about was whether we're comparing the same things in that paragraph, because you're making a suggestion that the discoveries on our offshore seem to be a better bet than discoveries elsewhere. You're saying to us, well, we find, two or three times more frequently, SDLs will be found from the drilling. I'm wondering if that's, indeed, the same basis of comparison. That is, you're not comparing with actual wells elsewhere. Are you comparing with potential wells?

MR. MCEACHERN: Are you asking if the ratio of discovery is the same in other areas of the world? Is that what you're asking me?

MR. EPSTEIN: Well, I'm testing to see whether you're comparing exactly the same things in the paragraph on Page 3, when you're comparing our ratio of discovery with that elsewhere in the world?

MR. MCEACHERN: Yes, we are.

MR. EPSTEIN: Okay. If that's the case, wouldn't that make it much more attractive to be here?

MR. MCEACHERN: I'm going to ask Tom to answer this.

MR. TOM HICKEY: One of the things, Mr. Epstein, on that is the cost of the well.

MR. EPSTEIN: Yes, I understand that.

[9:30 a.m.]

MR. HICKEY: I think that's the major issue that seems to be the stumbling block for some of the oil companies, although the discoveries are here, what they're doing is looking at the cost of exploration and when they can move the rig 10 kilometres in the Gulf and save themselves $7 million to $10 million on a rig move, it all comes backs to your point, too, on significant versus commercial and that's where I think it ties in.

MR. EPSTEIN: When we look at the handout that you gave us about the total number of wells drilled offshore from 1980 through to 2004, which is, really, I guess, the complete picture, there is an average of five, maybe six, wells drilled each year and yet, now, we're in a period where, as you were telling us, you're expecting maybe two to three wells to be drilled each year. Have you any estimate for us as to how many years you think that's likely to go on before the numbers go back up to the average or exceed the average?

MR. HICKEY: I think until they find a commercial discovery well. To be honest with you, if we could figure the geology out we would be a lot stronger. The companies have had non-commercial discoveries over the past few years, enough to keep their interest here, but I think if this year we had a large commercial discovery you would see a lot of people coming to town next year. But it's one of those things where it's based on the success of each well. So right now they're in a low.

MR. EPSTEIN: If there is a success, it will spur interest and activity by other companies?

MR. HICKEY: No doubt about it.

MR. EPSTEIN: Okay, thanks for now.

MR. CHAIRMAN: Mr. Dooks.

MR. WILLIAM DOOKS: Mr. Chairman, just a couple of questions. Your organization has 450 members, how many would be businesses that have their business within the province?

MR. MCEACHERN: The vast majority of them. I think that there would probably be about 15, I believe, that are based in Alberta; probably another 15 that would have headquarters in the United States; and a few from the U.K., but probably in excess of 400.

MR. DOOKS: Give me a range of what they supply.

MR. MCEACHERN: Well, they supply just about everything. It's everything from engineering services to environmental work. Let me run you through what some of our companies are doing for Sable as of today. They're doing engineering work, they are doing supply boat work, they're providing offshore medical services, they're providing customs brokerage, helicopters, specialized tools, metal fabrication - what else do we have here - one of them includes a temporary staff placement, shipping registry, insurance, law, painting.

MR. DOOKS: Maybe if we could touch a little bit on the staffing. What is the percentage of Nova Scotians who have the right to work on the offshore? Is there a percentage of workers on the rigs that have to be residents of Nova Scotia?

MR. MCEACHERN: There are some rules that used to be in place for supply boats, but there has been a sharing agreement between Newfoundland and Nova Scotia. At one time if you had a supply boat contract, for example, for a Nova Scotia-based supply boat and you went to Newfoundland, you would have to ditch the crew. There is an agreement now between the Governments of Newfoundland and Nova Scotia that that doesn't necessarily have to take place anymore. The majority - I'm just looking at the staff numbers here in this report - the employment head count for Sable right now, as of September 30, 2004, is 975 and I don't know if they have residency in this report or not, but obviously the vast majority of them would be residents of the province.

MR. DOOKS: Hopefully. Should the offshore become more active, and hopefully it does, what about the training, would we have the trades that are necessary to support the offshore industry in Nova Scotia should the industry become more aggressive? When we think of the offshore, for some reason, we think of only the people who are actually employed on the rigs or the supply vessels but in saying that, we must have our fabricators, our welders, our machinists, everything on base, on land, to support the industry. So, I guess the question is, if the industry should become more aggressive, we'll say, in the next two years, would we have the supporting staff onshore available to assist in the management?

MR. HICKEY: We say, give us that problem. We're a group of business owners, the members who are involved and that would be a great problem for us to have right now. So, I think that it is kind of a chicken-and-egg thing. Do we train the people before they're required or do we work with them? I think the community colleges are doing a good job with their welding programs and getting people trained for the offshore, but I think, in time, we could grow the industry step by step. But I think right now we can definitely facilitate anything that's required offshore.

MR. DOOKS: I know we'd welcome that problem but indeed it is a reality that if all of a sudden we heard that there were going to be 10 rigs come off the coast, we would be in a situation, I believe, here in Nova Scotia to supply the staffing for the base of that.

When you talk about a well costing $30 million more, we talk about regulatory problems and other things. What would be the percentage of the cost of that $30 million as far as regulatory demands are imposed upon them, is it $5 million extra, $1 million?

MR. MCEACHERN: No, that's $30 million.

MR. DOOKS: Yes, but $30 million in regulatory problems, it says, this is due in part to the problems with regulatory systems.

MR. MCEACHERN: Let me give you an example. That $30 million is based on a $100 million well in the deep water off Nova Scotia, which would be in 5,00 feet of water and would go down two miles. In order to have a significant discovery licence, which Mr.

Epstein was asking about earlier, which means that the company that has spent the money then has the right to extract the resource, you have to do something called testing and logging. Testing can cost, on a deep-water well, $30 million. It's very, very expensive to do that in deep water, the technology is almost beyond the range of the technology there in order to get an SDL. What we would like to do is have a look at some way of cutting down that cost. Oil companies have other ways to provide the information to regulators that the regulators need in order to prove that the reservoir is there rather than just testing in deep water. In shallow water it's cheaper, far cheaper, for example, Sable is only in about 185 feet of water.

MR. DOOKS: So the $30 million comes from testing?

MR. MCEACHERN: Yes. Which is a requirement of the regulations.

MR. DOOKS: But how do you get around that, I mean other than saying all of a sudden someone gives you the information but . . .

MR. HICKEY: Just from a simplicity standpoint, what's happened in technology and drilling is they do what they call wireline logs now. Basically, things that are in the pipe tell them almost as much information from logging the well as the well test would do. At the end of the well, when they find a discovery, what they would do is take on well-testing gear. That would take an extra 10, 15 or 20 days. They flow the well and they find their volumes. What they're doing now and it's in Alberta through coil tubing and a bunch of different procedures is they're basically taking that information and gaining almost as much knowledge from the well without well testing. So what they're doing is reducing their well costs but they're gaining the same information from it. The way the regs are here, you don't have an option to do that. They're calling it performance-based regulations, which is basically saying, how you're going to evaluate your well is up to the operator.

MR. DOOKS: Is that because it was government regulation or is that because of industry . . .

MR. HICKEY: Government regulation only.

MR. DOOKS: So if they were relaxed, in fact, things would be cheaper?

MR. HICKEY: Exactly.

MR. DOOKS: I think, Mr. Chairman, that will be enough questions for now, and maybe I'll have a couple later on.

MR. CHAIRMAN: Mr. Taylor.

MR. BROOKE TAYLOR: Thanks to our guests for the presentation this morning. During your presentation Mr. McEachern, you spoke about the Coasting Trade Act and the fact, I guess, according to your presentation that it's being used to create monopolies for Canadian-owned rigs. You didn't really expand on that as much as I would like.

MR. MCEACHERN: The CTA, the Coasting Trade Act, was designed after the Second World War to assist Canadian ships. Its intentions were well meaning at the time. In essence, at the time, if you had a cargo which had to go from a Canadian port, the advantage was to get a Canadian ship, because they had first dibs on the business. What has happened is that - I'll give you the example. There was a company that is no longer here, that was a deep-water well for one of the oil companies a couple of years ago, where they went out to bids and they got several bids on a rig. This company lost the bidding process. What it did was, it announced that it intended to reflag a Bahamian-based rig. What that would do is, it would invoke the Coasting Trade Act so that, regardless of the price that the company was charging, the oil company would be required to pay for that particular rig rather than a more competitive vessel.

The problem with that is, for example, in the supply boat business, we have a competitive market here. We have four companies based in Halifax. We have Maersk, we have Karlsen, we have Secunda and we have Atlantic Towing. We don't have that in the rig business. There are usually one or two here. What you're doing is, you're literally holding a company up to ransom, forcing them to pay a price that is not in the market. What it does, it may, in the short-term, provide benefit to that individual company but, in the long-term, it acts as a detriment to expanding exploration here. So that's the problem with it on offshore rigs.

MR. TAYLOR: If your recommendation to exempt rigs from the CTA was approved, what about the job impacts? Is it logical to think that there may be some Canadian job losses, for example, or is it in the reverse?

MR. HICKEY: One of the big issues for us was who we represent, which are the companies. We looked at our members to see who this was going to affect because there could be job losses within our members. The fact of the matter was, there was only one company in Canada that provided the rig services. So strictly from a competition standpoint, the rigs are coming from other places and they are not manufactured or made, or flagged in Canada, so it shouldn't have any impact.

MR. MCEACHERN: I'll give you an example. For example, Rowan, which has been a long-time player here, is based in the Gulf of Mexico. They are American-flagged rigs. There are at least 160 Nova Scotians which work for Rowan as of today, even though Rowan is not currently operating in the offshore there. They have taken a Nova Scotia crew over to the North Sea with their own Rowan Gorilla V. Just because you have a Canadian-flagged rig, doesn't necessarily increase the amount of Canadians working on that rig.

MR. HICKEY: I think if Rowan had two or three rigs here, strictly from a business point of view, it's cheaper for them to use Nova Scotians on the rig, three weeks on, three weeks off, than to fly people back from Houston, up to Nova Scotia, put them in hotels, and they've got 120 people on the rig at a time. It doesn't make business sense for them. If we had two or three rigs here, I think you'd see a lot more Canadians working.

MR. TAYLOR: What about the tax structure, like, as far as your corporate taxes? I know, allegedly, a steamship company flies a flag of convenience and it's alleged that it's done for tax breaks and things of that nature, to hire cheaper employment. Obviously, this, perhaps, is more complex and you can shed some comprehension on it.

MR. MCEACHERN: The thing is, the thing was registered in the Bahamas for a reason. It wasn't because they were drilling a lot of holes in the Bahamas. I suspect that the thing would probably have been reflagged Bahamian as soon as the Nova Scotia project was completed. So that company would have been using the Canadian flag as a flag of convenience.

MR. TAYLOR: Where is the recommendation then - as you understand it, you said - is that a recommendation OTANS has made to the government or. . .

MR. MCEACHERN: It is something that is being worked on. There is a body called the Atlantic Energy Roundtable which is led by the Nova Scotia Department of Energy, its Newfoundland counterpart and the federal government, as well as OTANS, the Newfoundland association and CAPP. We are working through that body now to see what changes can be made. Obviously, this is a decision of the federal government. I can't speak on behalf of the Nova Scotia Department of Energy but I think they're interested in seeing what can be done to make sure that companies are coming in here with good intentions, rather than using the Canadian flags as a flag of convenience.

[9:45 a.m.]

MR. TAYLOR: Just shifting gears a little bit, fishermen and other stakeholders seem to be quite concerned from time to time, relative to seismic testing and things of that nature. I know that OTANS has done a lot of work in supporting this, as you pointed out, the streamlining of these seismic regulations. People are quite concerned about drilling, different groups. How do you plan on mitigating, I guess, if you will, the concern that is shared by many about - not necessarily by everybody but there are people that, you know, the red flag goes up as soon as you mention seismic testing.

MR. HICKEY: I think the biggest thing we can do - and the operators can also help with - I'm from Glace Bay so I'm well aware of the fishing community. The key, I think, there is education. They have an industry, they've worked in it for a long time and there is

a perceived threat with new technology and new things coming to town. I think what we've got to do is better educate the people who are in the field.

We work all over the world. I mean, you see fishing boats fishing close to the rigs because the legs of the rigs tend to bring a lot more fish. I think we've got to look outside of our borders, look at the international market and educate the people who have the concerns. They are real concerns, they have jobs and they have livelihood in that industry. I think we have got to give them some type of an education on how it works everywhere else. I think that's the key component that's missing right now. I don't blame them one bit for being concerned. I think we've just got to better educate.

MR. MCEACHERN: Just to clarify something, so I don't leave you with the wrong impression, the changes that Department of Fisheries and Oceans are working on are not to loosen or be less stringent on seismic. The concern we had was that, at the time when we are trying to cut down the amount of red tape - and, Mr. Taylor, I know of your work on the provincial Red Tape commission, it's the same thing. The concern was that we didn't want two approval processes. We were asking for one.

So the rules of the Department of Fisheries and Oceans are going to be as stringent as they ever were, it's just that there's going to be a co-operative arrangement between the CNSOPB and DFO on making sure that that approval goes through the system once, rather than go through it twice.

MR. TAYLOR: Thank you.

MR. CHAIRMAN: Thank you, Mr. Taylor. I guess I could ask a few questions on behalf of our caucus. Certainly, Mr. McEachern and your members, thank you for your presentation. I do appreciate, certainly, the message that you were trying to convey of the need to work co-operatively and to be positive about this industry. I would submit to you it's not just a matter of convincing the politicians of that. At the end of the day, we've all been sent here to represent the people back home and I can tell you, if you're looking for who you need to convince, it's not only the nine people around this table, it's the folks back home who more and more are giving up on Nova Scotia's offshore, are disappointed at continually hearing of negative new stories coming from our offshore, whether it's the abandoning of licenses or the lack of activity.

I would certainly encourage your association that in its efforts to undertake to educate, that it certainly look at all Nova Scotians, not simply at their representatives, because at the end of the day, they are the ones who send us here with a mandate to represent them.

Just to talk to some of the realities that we face here today in 2005, you indicated that the industry, itself, is represented by the Canadian Association of Petroleum Producers?

MR. MCEACHERN: The oil companies, yes.

MR. CHAIRMAN: Now, they had a lady who was a representative here. I think her name was Debbi or Debra. . .

MR. MCEACHERN: Debra Walsh.

MR. CHAIRMAN: Debra Walsh. Where is she now?

MR. MCEACHERN: Debra Walsh is in Calgary. Her replacement is at Founders Square in the ExxonMobil offices.

MR. CHAIRMAN: Does CAPP still have an office here in Nova Scotia?

MR. MCEACHERN: They gave up their office on Hollis Street. They have, I think, one staff remaining. They had a staff of three and they have one staff remaining. Their office is actually in the ExxonMobil offices in Founders Square.

MR. CHAIRMAN: You indicated that there are about 2,000 people currently working in this area, about 1,427 with Sable. Other than Sable, what other projects do we have in our offshore that are working right now in employing people?

MR. MCEACHERN: Well, there are a couple of streams here. It's obvious we have one rig drilling now, which is drilling development wells for ExxonMobil, Gold Santa Fe, and as I mentioned in my presentation, we are still waiting to see when EnCana and Canadian Superior will be drilling this year but there is no exploration underway as of this time. I think there is an expectation that there will probably be two, maybe three seismic programs this year.

MR. CHAIRMAN: I guess that's the concern it comes down to. We talk about an offshore industry but in reality we have a project, the Sable project is what we have here in Nova Scotia.

MR. HICKEY: That's exactly right. I think what we are here for and what we are trying to do is make this a more attractive place to do business for some of the perceptions that are out there but we are not faulted by the fact that there is one project on the go. What we are trying to do is grow an industry. Currently, that's a one-project industry.

MR. CHAIRMAN: The reason I raised it, Mr. Hickey, is that it is important that we be honest with Nova Scotians . . .

MR. HICKEY: No doubt about it.

MR. CHAIRMAN: . . . in making sure that they understand the reality of this and that right now we don't have an industry, we have a project.

MR. HICKEY: Well, the one thing we can do now is promote exploration. If they are not exploring, they won't find anything and that's what we are really trying to do.

MR. CHAIRMAN: Exactly, and I guess the frustration is that we have watched the Department of Energy go from the Department of Economic Development and become a stand-alone department for approximately six years now and yet we are still down to one project. So I certainly appreciate where Mr. McEachern would like to see more investment in the Department of Energy and I guess Nova Scotians are telling us they would like to see more success before seeing more investment in that department. Ever since it has changed and left Economic Development, really there are very few success stories to be told by that department so the idea of pumping more money into it right now, I tell you, is a tough sell.

MR. HICKEY: I am also a taxpayer and I agree with what you are saying. I guess what we are thinking, specifically, is around the Deep Panuke and the negotiations for the province on behalf of that project. I think that's the expertise that you are focused on, not to grow the department specifically but make sure we get the best deal if Deep Panuke goes ahead for the province that we can.

MR. CHAIRMAN: Sure, and I appreciate that. I found it interesting in your presentation, and members around the table may correct me, but your point about a basin atlas actually seems like quite a great idea but I have to tell you, Mr. McEachern, that's the first we hear of it. We did not hear of that from the Department of Energy, to my recollection, at least, in their presentation and so this initiative, you have informed us of something new today that the deputy and her staff certainly did not raise with us as a project that they are exploring or anything.

MR. MCEACHERN: I remember reading the transcript myself and I don't recall if those particular words are there but there was talk that there is a need for work on improving the attractiveness of the area and exploration attraction is one of the big mandates of the government. They are working closely with us on ways of not only reinvigorating exploration but probably attracting new players here as well.

MR. CHAIRMAN: I just want to get a better perspective of where we are. You have indicated that the Gulf of Mexico and the North Sea have had approximately 50,000 wells drilled. How many years have they been drilling?

MR. MCEACHERN: Oh, the first well in the Gulf of Mexico was in the 1930s but that's basically since the Second World War.

MR. CHAIRMAN: Since the Second World War. I guess if you still break it down, even throughout all of those years, divided by 50,000 and we are two to five here in Nova Scotia, where do we stand in a global perspective when you look at those kind of figures?

MR. MCEACHERN: I think that is self-evident. If you look at the way companies look at this particular area, usually you will find that the Nova Scotia and Newfoundland projects are put under the frontier section of their companies, for example. So it is an under-explored, new, potential frontier. It is not considered a centrepiece of production, that's obvious, but it's part of their portfolio of stuff which is considered more potential than real right now.

MR. CHAIRMAN: I guess we are getting mixed messages because in one sense we are frontier and we are not that well developed yet. The price of a barrel of oil is at an all-time high. The price of natural gas is probably as high as it has been in a long time and yet Nova Scotians are confused here because they are saying, well hold on now, all of the climate that would seem to say that there should be a booming industry here is just not happening. We are still down to one project and six years after that project and under this administration, we are still only at one project yet the climate can never be better. In fact, while you are saying it's cyclical, I fear where the next cycle is going because right now where we should be at a high, we are at a low. I can't imagine when the price of oil goes down and the price of natural gas goes down that you are going to see more exploration taking place off the coast of Nova Scotia as a result. So what needs to take place, if it's not the perfect time now, what else needs to be done before we start seeing significant exploration work off our coast?

MR. MCEACHERN: Well, there are certain things. Government is not the cause of all problems, nor is it the solution to all and government does have a role to play. As I have outlined in my presentation, they do have a role to play and they are trying but it is somebody else's money. Most companies right now, actually with the price of oil going up, one of the reasons the price of oil is going up is part of a psychology in Iraq. The second is that actually exploration programs on all the super majors have been downsized so there is less exploration and what they are doing is focusing most of the exploration dollars that they have on those areas of the world where they know they drill a hole and pump it up in a hurry while oil is at $50 a barrel. Those are some of the realities.

We also have to remember that most oil companies, this is a boom time, as anyone who has to fill up their gas tank will know, it is a boom time if you have shares in ExxonMobil, it's not if you own a car but the oil companies, just as you saw that display I had on the cyclical area of drilling, oil companies do expect that the price of oil will go down eventually and I think you will probably see a realignment. But right now I think what you are seeing is let's get into the areas where we know we can put a hole in the ground and pump it out in a hurry while the price is at a high. Eventually oil companies have to replace more resources than they pump out of the ground. Otherwise, they eventually go out of business but right now there is a short-term emphasis on a lot of companies to get into places,

particularly West Africa. For natural gas it's Qatar and I believe Venezuela as well. We were just down in Venezuela.

So I think what is happening is we are seeing some short-term profit taking and the long-term prospects as far as where they will explore are being put off to one side. I do expect a return to this. We genuinely do expect that things will start to revive but it is a chicken and egg scenario. You are still going to have oil companies which are going to explore here. It's not going to be at the pace that all of us around this table, or in my association, would like right now.

MR. CHAIRMAN: One of the interesting things, you have provided us with a graph of the total wells drilled offshore. I am wondering if you also have a graph to show us the seismic activity that is taking place off Nova Scotia.

MR. MCEACHERN: I don't have it here but I think we could provide that to you.

MR. CHAIRMAN: Could you give us a guess, in your own perspective, where are we with seismic activity? Are we where we should be? I think you mentioned you expected two to three seismic projects this year, if I am not mistaken. The question is, I know you said in your presentation that we haven't properly mapped out our offshore, and drilling wells certainly isn't the only way we are going to do that. We need to do it through seismic activity so the question is, where are we at on that issue?

MR. HICKEY: I guess this is our OTANS sales pitch. We've heard a lot from the oil companies on seismic and on what they found. We have actually asked the geologist from the department to come in and speak about what is out there. We are having a breakfast in a couple of weeks and that is literally what it is about, are we getting a perception from the oil companies on one thing and our own geologists are telling us something different, so our members want to know the same information. So what we are doing is we are having a breakfast about what the scientists actually feel is out there, what the seismic is showing. We are all looking forward to that but I would recommend it might be a good education session for a lot of folks, and that's with no cynicism.

MR. CHAIRMAN: I guess just before I close this round, I could certainly suggest to OTANS it may want to invite some of the politicians it is looking to educate on this issue to that breakfast.

[10:00 a.m.]

MR. MCEACHERN: Consider yourself invited. It's 7:30 in the morning.

MR. CHAIRMAN: So be it. Mr. Parker.

MR. CHARLES PARKER: I want to return to the issue around seismic testing that my colleague mentioned earlier. I represent an area along the north shore of this province, in Pictou County, where a lot of fishing families live and it's a very important industry and all along the whole coast of Nova Scotia, it's our major export from coastal Nova Scotia. There is concern, naturally, about seismic testing and the impact on the fishery. I wanted to ask specifically about the testing that was done a little over a year ago in the Cabot Strait off Cheticamp. That is an area where there is a lot of larvae of species of various fish that float along with the tide and certainly, can impact our fishery on the Northumberland Shore.

I guess, first of all, can you tell us anything about that seismic testing? What were the results? Is there something under the water there that is commercially viable? We never heard what the results of the testing were.

MR. MCEACHERN: I think you had better ask the Department of Fisheries and Oceans and CNSOPB for the definitive report, but it is my understanding that the results were benign.

MR. PARKER: You mean there was very little there?

MR. MCEACHERN: Very little problem.

MR. HICKEY: Do you mean the results of seismic with respect to what's in the ground, or seismic with respect to what effect it has on the fish habitat?

MR. PARKER: Particularly in respect to what may be there in the ground.

MR. MCEACHERN: Oh, I'm sorry. It is my understanding, there was testing done by Corridor Resources off Inverness County in an area where there was also a small discovery of, I believe, gas in the 1970s. They are hoping, from what I understand, to move forward with additional exploration in that area which will probably be 15 to 20 miles out to sea.

MR. PARKER: So, it's not over yet, there's more testing to come?

MR. MCEACHERN: It's part of the exploration process. Companies have seismic programs in order to see whether or not it's worthwhile to do further exploration. It's my understanding that there is interest in additional exploration in that area.

MR. PARKER: You mentioned earlier that part of the process where you're finding a balance is education. How do you convince fishermen that seismic testing is okay?

MR. HICKEY: That's the billion dollar question, I think, from the fishermen that I know. I think it's facts and figures on exactly what's happening in other parts of the world.

In Brazil, at times, the workers fish off the side of the rig on their time off. I think the realities are there and I think what we have to do is combine them and actually talk to the fishermen about them.

My friends ask me when I go back to Glace Bay, you're in the industry, what do you think? All I can talk about is it's not something that has never been done before, it's being done in most other parts of the world. I think what we have to do is bring those facts to the fishermen, they're a tough group and their livelihood is based on continued fishing. Like I said, we're not reinventing the wheel.

MR. PARKER: So is there any initiative by OTANS to perhaps sit down with fishermen and discuss issues?

MR. HICKEY: We've done it a little but I guess the question there is whose responsibility is it? That may fall back to the operators, but we would be willing to work with them and with government on any way we can get the message out.

MR. PARKER: I guess a related issue that I brought up at our last meeting with the Department of Energy, was around seaboard clutter that is left behind after a drilling operation and in particular, the decision that was made with EnCana to leave pipeline, concrete and other items on the seaboard floor. Again, that's a concern to fishermen, is it going to get caught up in their nets or have an environmental impact that's not good. I would just like to get your comments, is that a policy that OTANS is supporting or is it a new policy that you've worked out with the Department of Energy, or what?

MR. MCEACHERN: We're a business association so we don't write government policy but there was an assessment done on the environmental impacts of removing all of that material. I believe that the Canada-Nova Scotia Offshore Petroleum Board, in conjunction with Environment Canada and others, determined that it was best to leave some of it where it was - most of it, I believe, is buried, pipelines certainly are and they're clean. We sent a submission to the CNSOPB advocating that EnCana's application be approved. I do believe that the Ecology Action Centre also had a similar position, that is was more environmentally acceptable to leave that material where it was than try to extract it.

There is a position in the Energy Strategy, from what I understand, in which they are trying to maintain that there are only certain corridors where this type of activity is allowed, so that you don't have the problem that you're alluding to.

MR. PARKER: This was different, though, than what had originally been agreed to. At first they had fully agreed, under their contract, that they would take up all that was left behind and have a clean slate, but then they amended the agreement and they were allowed to leave it there. Do you know what cost saving that was to EnCana?

MR. MCEACHERN: No, I don't. I would suspect it would be in the millions but I really don't know what the estimate is.

MR. PARKER: Any ballpark figure what it might have saved the company?

MR. MCEACHERN: If I take a swing at that ball, I'll miss it. I have no idea, I really wouldn't know. I'm not trying to avoid the question, I simply don't have a guesstimate. It would be in the millions.

MR. PARKER: In the millions of dollars. Certainly, a significant savings then to the company involved?

MR. MCEACHERN: Yes.

MR. PARKER: If I have time, Mr. Chairman, I want to switch gears here and ask about the Laurentian field off eastern Nova Scotia, towards Newfoundland. That has been a controversial issue out there for years and there has been very little activity occurring. Can you give us an update on what is happening out there?

MR. MCEACHERN: I actually was talking to CNSOPB about this about a week ago. It's my understanding that if exploration is not allowed it is about to be allowed in that area. I believe there is still a dispute between two of the companies over very old licences - I think it's ConocoPhillips and ExxonMobil, as to the ownership rights on those. Until that is clarified, there probably will not be anything done on the Nova Scotia side. There is exploration underway on the seismic side on the Newfoundland side of that boundary.

MR. PARKER: Is it a dispute between companies or a dispute between provinces?

MR. MCEACHERN: I think it's a dispute between the companies. I think it is between Conoco and ExxonMobil.

MR. PARKER: On the French corridor there, is there anything actively happening there?

MR. MCEACHERN: There has only been one well drilled in the French corridor and that was in 2001. I don't think they came up with anything, other than a trace of hydrocarbons. But they are doing seismic on the Newfoundland side and we expect that they probably will do some on the Nova Scotia side next year. Conoco had hoped to do something this year but they don't have a resolution of their discussions with ExxonMobil, I believe.

MR. PARKER: So there's not a whole lot happening there are the present time?

MR. MCEACHERN: Not yet.

MR. PARKER: I have one final short snapper. A few years ago we heard a lot of hype around another pipeline between Shelburne and the Eastern Seaboard, I believe it was Boston. Can you give us any update on that? Is that still a dream?

MR. HICKEY: That's El Paso and basically a competitive market, they need to find more gas, so we're back to our original thing, we have to get out there drilling. They won't move ahead unless they can put gas in the pipeline.

MR. PARKER: So it's on hold at the moment?

MR. HICKEY: Yes, today they don't have it.

MR. PARKER: Thank you.

MR. CHAIRMAN: Thank you, Mr. Parker. Mr. Taylor.

MR. BROOKE TAYLOR: Just a couple of quick questions. I apologize, I had to step out for a few moments. The digital basin atlas that you referred to in your presentation, do other jurisdictions have such a tool?

MR. MCEACHERN: The British Government does.

MR. TAYLOR: There's none in Canada?

MR. MCEACHERN: No. The only offshore that's worthy of exploration is off Nova Scotia and off Newfoundland. I think the idea is, as technology develops, most of this stuff is done digitally now and it's expensive to get this type of system up and going, it's probably going to cost a couple of million dollars the first time, between Newfoundland and Nova Scotia, over a number of years. It's basically a record keeping exercise so that you have the ability to decipher the geologic information over wide areas. It would be something that would be done over years.

You have records which are kept in the Department of Energy, records that are kept in the Newfoundland Department of Energy, and the two boards, plus public information from the oil companies after a number of years.

Mr. Samson, you were in Houston last year, I don't know if you were at the digital seismic display. It's that type of an exercise where they actually will take old data and put it through a computer and have another look at it, and it has helped find projects around the world. I'll give you a good example where that has done something of benefit, a new look at the Buzzard oil field off the North Sea, for example. They had been drilling that place for 20 years and they hadn't found a drop. They put it through this type of process where they reconfigured all the data and they found a field almost the size of Hibernia, it was the biggest

discovery in the North Sea in the last 20 years. This would not be just government, I think it would be government, the regulators, the companies being involved in this sort of thing.

MR. TAYLOR: But the Americans have no such . . .

MR. MCEACHERN: The Americans have it.

MR. TAYLOR: So, it's Britain and the United States.

MR. MCEACHERN: Yes. It's just like any other type of record management within your government, you have to improve it every once in a while. It probably cost you a lot of money when you went to electronic databases within government.

MR. TAYLOR: In terms of OTANS' membership, are the Retail Gasoline Dealers of Nova Scotia members?

MR. MCEACHERN: No, sir, they are not.

MR. TAYLOR: The price of crude seems to be going through the sky lately. How does that impact? Obviously, we know there are cost implications, but regarding exploration, we're talking about having essentially only one project - although I think there's an optimistic future out there - do you receive direct feedback relative to that from some of your members in a way that really would impact whether or not they would proceed at any given particular time? Is there anything you can share with the committee along those lines?

MR. MCEACHERN: Nobody likes paying higher prices for anything, so it is a business cost. It's not an issue that is normally one - I've been with the board for five years. It's a cost of doing business, it goes up and it goes down.

MR. TAYLOR: I'm sure it's relevant.

MR. MCEACHERN: It is as much to you as it is to me, I had to fill up yesterday too.

MR. TAYLOR: That's all, Mr. Chairman, thank you.

MR. CHAIRMAN: Mr. Theriault.

MR. HAROLD THERIAULT: Thank you for your presentations, they were very interesting. I, too, represent fishermen and have for years and Mr. Parker asked how you could work with fishermen. You can tell fishermen stories all day and they won't believe you but if you give them the chance to have the hands-on, to be involved in what you're doing, to feel and touch, if you do something in the dark and go tell a fisherman this is what

happens, this is the way it is, they'll never believe you. Let them be involved if you want to get through to them.

Can you tell me or this panel how it costs $30 million more to drill a well off this

coast? I know it is deeper water. You need a longer drill bit. (Laughter) Is it a $30 million drill bit?

[10:15 a.m.]

MR. HICKEY: One thing is the rig move when they come up for one well at a time. Right now, EnCana is looking at doing some work in the Summer, possibly. I think the rig move is in the $6 million to $7 million range if the rig comes up, does one well and leaves, so that's one part of what they're talking about. The second is, it's a Schlumberger or a well testing company that is charging their day rate, so the rig stays for an extra 15 days and the rig is $0.25 million a day, plus, and then I don't know what the day rates are on the well testing gear, but those are the costs they are talking about. It is basically time, the day time on the rig and the rig move are the two biggest costs that they would have.

MR. THERIAULT: You said earlier that you'll find they will spend more money later when the price of oil reduces. As a businessperson - I'm a small businessperson - when the time is good is when I invest. Why wouldn't the oil companies invest in spending more money now while the money is there?

MR. HICKEY: I'm a business guy too and I thought the same way. I will tell you straight up, we've asked the oil companies and the representatives of, I don't know what their logic is and it's a good question to direct at them. I think what they do is play the games themselves, too, and there are reasons why they're doing what they're doing. But for the most part, the quicker they can sell a barrel at $50-plus, that's their main focus now. They are not small business where they're trying to write down profits.

MR. THERIAULT: I don't know how they're going to spend $30 million more per well and sell oil cheaper than they're selling it now, that's impossible. I don't believe that and I can't believe that.

MR. HICKEY: We're not here it represent the oil companies and I'm not disagreeing with your argument.

MR. THERIAULT: Thank you, that's all I wanted to know.

MR. CHAIRMAN: If I could ask a few more questions. Mr. McEachern, one of the issues that came up a few years ago was the issue of contracting for work on our offshore. You will probably recall, I believe, it was platform work that the Irving Shipyards had bid on and it went to - if I'm not mistaken - a Louisiana company who was successful in that.

Again, the issue of Nova Scotia content in our offshore came up and the fact that for one project, it is essential that we try to maximize as much of our work here.

The other issue that came up and if I'm not mistaken it was known as sole-sourced contracting, where the contract for some of the work was being put out as a package, rather than in smaller contracts, which would allow Nova Scotian companies to bid on it. Where are we at with regard to those two issues since they were first raised by OTANS and others?

MR. HICKEY: I guess my main comment there is that is a tough pill for the supply industry to swallow, too, the fact that we've backed off of local benefits. What we understand is if there's no pie to cut up, we don't have any work, so the main focus for all the supply sector for OTANS right now is to do whatever we have to do to build the industry.

One of the messages we heard from the operators was, we're a global business, they wanted the local supply community to back off benefits. Nothing affects our members more than not chasing benefits and I'm a local supplier. What we have done is if there's no industry here, we've nothing to cut up, so at least on the short term, that's where we stand on it.

MR. CHAIRMAN: I appreciate what you're saying, Mr. Hickey. My issue with that would be if we have an industry, should we not now at this down period be putting in place whatever regulatory changes need to be done, so that if we do have another project that comes in or a dozen projects that come in, that these issues are not going to come up again, that we're going to have a clear set of rules with certainly my hope and I'm sure the hopes of Nova Scotians, that these changes will have been made to this contracting so that as much as possible, Nova Scotian companies can benefit from this. What I'm hearing from you is no changes have been made and it's an issue that will be tackled again once we move from one project to an industry. I'm curious as to why are we not making this change now so that it's in place?

MR. HICKEY: Today we're trying to get exploration activity happening so we're not talking about, how do we benefit the supply community now. What we're talking about is increasing exploration. So from a business standpoint, I don't think this is the time for us to negotiate or even set regulations in place on local benefits. If there's nothing hard and fast today, when we have a couple of significant finds and we move those policies into place, I think we'll be in a much better position. Paul, you can. . .

MR. MCEACHERN: The other thing is, the other man's grass is always greener. Last year, this issue came up, or two years ago, this issue came up. You think you're all alone. This is an issue around the world. It's called EPCI contracting and it's the latest management trend in the industry. Like all trends, it'll go through its cycle and then they'll come up with something else.

We are very good in this province at finding what's wrong. This is part of our job, too, is try to boost economic activity. But this same issue has come up in other areas of the world and I found it funny, everybody thinks that everybody else has got the answer. The Government of Western Australia is facing the same thing. Based on their perspective from around the globe, they think that we are doing a better job than they are and when we look at it from our perspective, we think they're doing a better job.

I think one of the things that we have to do is compare apples to apples on this thing. For example, during this period, I think one of the things that we should actually look at is, what is it we are capable of doing here, for example, and go after that aspect of the business and, perhaps, recognize that there are certain aspects of what is a global business that we are never going to be able to compete upon? So focus on what's realistic for us to locally acquire. Other than that, I can't add much more to what Tom has already said.

MR. CHAIRMAN: No, and I appreciate that this is a challenge. It surprised me a bit because the concerns that I have just raised there are the concerns that came from OTANS, yet, I seem be hearing today the justification for why this took place by OTANS for a concern that they raised, themselves. You seem to have, as an association, convinced yourselves of why this took place and why it will probably take place again, for concerns that you clearly indicated to Nova Scotians where you felt your association and your members had been wronged. I think Nova Scotians agreed with you but . . .

MR. HICKEY: Mr. Samson, at the time we suggested it, we did not ask for the contract to be awarded locally, okay? We asked for the opportunity to compete on that contract. That really was the issue. It is a very complex and difficult issue that we wrestle with all the time. We can either look backward or we can look forward and recognize what the reality of the world is today, and that the business association that I work for is designed in order to increase the employment of Nova Scotians, which are employed by Nova Scotia firms. That remains its primary objective.

Right now, in the year 2005, we have to ask ourselves the question, how is it that we do that? Right now, the best way to increase the number of Nova Scotians that are employed in the offshore, and to provide royalties to the people of the province, is to grow the industry by getting another development project which is Panuke, which is the objective that the board of directors from my work have decided that we will pursue. That project will be far different from the Sable project, just as every project in Newfoundland has been different, as far as how it is done.

Hibernia had almost mandated local contract rules. It cost $5.6 billion. You're never going to see it. As much as we would all like to see that here or you're never going to see another Hibernia here developed in East Coast Canada. It's always a question of balance.

Just to add to that, what I think is probably going to change here in the next couple of years, as I mentioned before, Premier Hamm and the Government of Canada's agreement, this royalty agreement, will actually increase the ability of the people of the province, the business community, to work together to recognize that growing the industry

is not always necessarily about just one factor.

The province, because of what the Premier did over four and a half years, now has a direct stake. I think that the argument was, years ago, that we're not going to get any royalties so we've got to go after the jobs at all cost and now, I guess, it's a question of balance. The Premier and his successors, as the custodian of the resource on behalf of the primary shareholder, which is the people of Nova Scotia, are going to have to determine the proper balance between the level of employment and the level of taxation.

MR. HICKEY: I guess, on Paul's comment, too, I think the one thing everyone around the table - we're all actually interested in the same goal which is to get the oil and gas industry up to a level that benefits all Nova Scotians, so I think we can't lose sight of that. With respect to EPCI and local content, there is nothing we would like better than to have those things in place. I think the timing is the critical point.

MR. CHAIRMAN: That's the point and, Mr. McEachern, at no point did I suggest that what OTANS was asking was to get the entire contract when the issue is sole-sourced.

MR. MCEACHERN: No, I just wanted to clarify it for the record.

MR. CHAIRMAN: In fact, if I'm not mistaken, when those contracts were bundled - I think the association was asking for it to be broken down - about the only part of that actual contract that Nova Scotia was in a position to bid on, I believe, was some of the engineering work which was a very small aspect but still would have had, at least, a significant impact on that industry here.

I guess my question was more, what have we done to try to see to it that in the future, there might be a way of breaking down those contracts? I guess what I'm hearing is that this is what is happening globally and we should expect that to happen here in Nova Scotia again the next time because it is happening globally. If that's the case, then so be it.

OTANS, initially, when the royalty arrangement was announced had suggested - I believe, Mr. Brownlow - that a certain portion of that money be set aside to deal with some of the offshore issues. Is OTANS still pursuing that suggestion or has it abandoned that suggestion?

MR. MCEACHERN: No. There are two points, just for the record. What the Premier of the province decided to do on debt was applauded by the members of the board for whom I work. The second is, there was a stated government policy for a segregated fund. Whether

or not that segregated fund is a way in which it should go or whether it's just through direct expenditures to do the things that we have asked for, that's a question for government to decide.

There was a gentleman - I think it was Mr. Dooks who was asking, for example - we have raised the same thing as well. We were suggesting that they invest in aspects of the industry other than direct support of OTANS member companies. This was not a grab or a request for funds for our companies but for the industry, in general.

They're starting to put some money into training. I believe there is a very large scholarship program to be announced later on today. That would be good. If we can make sure that when the department - perhaps, if it does - comes to the Legislature and asks for permission to expand monies to help it negotiate a good deal on behalf of the people of the province on Panuke, we think that that's a good thing as well. That's reinvesting in the industry.

Whether or not it's a segregated fund, I think that we would like to use it unless there is an opening gamut for the whole province now to start considering what we should do with this offshore. If we get $1.15 billion, which is the estimate, I think, that the deputy provided on royalties from Sable, maybe now is the time to start talking to the people of Nova Scotia about, well, if you've got $1.15 billion from Sable which is one project, maybe we can get another $800 million or $1 billion out of the next one which is Panuke, and is that to our advantage?

MR. HICKEY: One of the things, I guess, from our standpoint, we made a suggestion on reinvestment. What we have done now is gone back to do our homework on where, possibly, that could come from. I think we're still behind the suggestion that if we can reinvest in the offshore with some of either the savings from interest or other areas, if we can reinvest on the offshore we think it would be good for the industry, in general.

MR. CHAIRMAN: I guess, if I can just make the last point before going, you might even want to look at the abandoning of offshore permits because that seems to be a nice little revenue generated. . .

MR. HICKEY: That's been considered, for sure.

MR. CHAIRMAN: The $4 million helped balance the books last year so you might want to look at that. The way we're going right now in reducing administration, it looks like each year that's going to continue to bring money. You may want to look at that one. With that, Mr. Taylor.

[10:30 a.m.]

MR. TAYLOR: Mr. Chairman, I would be somewhat remiss if I didn't take this opportunity to ask a former colleague of mine, Mr. Richie Mann - it states here that Richie is a member at large and I'm sure that that's metaphorically speaking, but Richie, I'm wondering, as a member at large with OTANS, exactly what capacity do you have with OTANS? Maybe you could come to the mike and give us a statement. It's quite a varied background. It's not Question Period or anything.

MR. RICHIE MANN: Thank you, Mr. Taylor. It's good to see you too. (Laughter) Well, last year, when the OTANS election of officers was on, I ran for a seat on the board. I was employed at the time as the Vice-President of Business Development with Fabco Industries. Part of Fabco's business was offshore-related fabrication and servicing the offshore industry. I was successful in seeking a seat on the board and subsequently ran for a position on the table officers, the executive committee. I have done that again this year. We have a six member executive committee, so I serve on that. As well, I also work on a couple of the committees of the OTANS board. As always, just trying to help out however I can.

MR. HICKEY: One of his key roles is advising me before we go into this committee. (Laughter)

MR. MANN: Mr. Hickey needs no advice. He is one of the rising stars and leading business people in this industry.

MR. TAYLOR: Well, I'm certain your - what they call résumé, has its advantages at times.

MR. MANN: Well, it's not an unfamiliar room to me.

MR. TAYLOR: Great. Thanks, Richie.

MR. MANN: Some of the debates were more lively. (Laughter)

MR. TAYLOR: Thank you, Mr. Chairman.

MR. CHAIRMAN: Mr. Parker.

MR. PARKER: I just had a couple of, sort of, big picture questions I guess I wanted to just throw out there to you. I have heard it said that oil is going to hit $80 a barrel. It's $55 or $56 now. Maybe that's related to the oil supply in our world. Some say we have already extracted more than 50 per cent of whatever was there to begin with. Are we running out of oil on a world-wide basis, or do you see that $80 scenario, perhaps, happening? I would like some comment on that.

MR. MCEACHERN: Barry?

MR. BARRY CLOUTER: I'm in the helicopter business with CHC Helicopters. I just came back from South America; Venezuela and Equador. We also have a major operation in Africa. The exploration and drilling that's going on around the world - as a matter of fact, we cannot keep up with the demand for helicopter services in the world. Venezuela is an example. Let me tell you this figure. They're paying about 3 cents a litre for fuel in Venezuela today. Unbelievable. A guy fills up his car and it costs him $1 U.S. To answer your question, we have seen no signs of slowing down. The opportunities are just massive.

MR. PARKER: Do you have any idea what percentage of the world's oil and natural gas we have already extracted out of the ground?

MR. CLOUTER: I wouldn't have any idea.

MR. MCEACHERN: That's been a debate since the 1950s. You're right, they're predicting $80 a barrel. I remember during the first Gulf War, it was supposed to be $100.

MR. CLOUTER: I heard a guy last night on the news saying it was going to be $30, so who do you believe?

MR. MCEACHERN: The oil companies will traditionally base their long-term economic prospects on under $35 a barrel, right now. Now, they may be increasing that a bit but if you ask one of the super majors what their long-term prospect price is, their internal prospect price is on project, it will go right - well, it used to be $28 a barrel, it's probably no more than $35 now. We know it will come down.

MR. PARKER: So, again, we really don't know, you're saying, then, what amount we have already taken out over the world's crude that's in the ground and what is actually left.

MR. HICKEY: It's literally a billion dollar question.

MR. MCEACHERN: That's a question for scientists far above my station.

MR. CLOUTER: I have a presentation that I have in the office that was given to our executive, like, six months ago. I'm prepared to share that with you. It's a global scenario. I would be just guessing at the numbers but I would be prepared to supply that to the Chairman, if he wishes.

MR. PARKER: Yes, could you? That would be of interest.

MR. CLOUTER: I will. It's a very interesting document.

MR. PARKER: If you could supply that to our committee or the Chair.

MR. HICKEY: One of the other things, on that note, too, though, is, there are some interesting alternative energy sources coming into play with wind power and things. We see ourselves, as an industry and an association, getting more involved overall in the energy . . .  

MR. PARKER: In alternate sources.

MR. HICKEY: Yes. I think it's positive for the environment.

MR. PARKER: I had a second question I wanted to ask. What do you see the Nova Scotia oil and gas business looking like here in our province in 10 years, 20 years, 30 years? Could you just give us realistically what you think it is going to look like for Nova Scotians down the road.

MR. HICKEY: Realistically, we need to find more gas if we're going to have an industry, that's as clear and cut as it can be. If we had a significant find this year, I think you would see a lot of companies and a lot of people spark more interest in coming.

In Houston, at OTC in May, one of the opening breakfast seminars was on East Coast exploration, so they still have interest in our offshore, it's not done. The seismic results are positive and like I said, from that breakfast, it's going to talk a little more about that. I think what we have to do is increase exploration.

I never, ever thought we could have seen the province and feds work as closely together as they have on the roundtable. I compliment the federal government and the province for literally working together and making changes. Hopefully, we will get more gas and our industry is going to grow.

MR. MCEACHERN: As I mentioned in the presentation, the best predictions are from those who actually own the money that will be used for investment. Marathon and its partners are telling the investment community that they expect to be producing from Annapolis by the end of the decade. That, actually, hasn't even been licensed as a significant discovery because in order to get that designation you have to test.

Deep Panuke will be developed. You're not going to leave one trillion cubic feet of gas in the ground. The question is whether or not it will be from EnCana or whether it will be from another company, but they will be developed. EnCana is working very hard on scenarios on how to get that gas to the market.

The price of natural gas has gone from $1.80 a unit to almost $7 since the day they turned on the taps at Sable. You were asking how much will the price of gas be, and I'm talking about natural gas, the best projections available to the Government of Canada, the

year before Sable came on, was that gas would hit $5 a unit in the year 2005. It hit $12 a unit nine months after Sable. It all depends on whether or not there's a shortage.

Panuke's and Marathon's Annapolis projects are considered highly probable projects by the producing community.

MR. HICKEY: One of the key priorities for us as a board this year is to do whatever we can to work with the province and the operator to get Deep Panuke to production. Back to your point on the industry, we see that as a key, they found it, what do we have to do to work together to get it producing?

MR. PARKER: Thank you.

MR. CHAIRMAN: Thank you, Mr. Parker. Just a final few questions. With the El Paso project, one of the issues that did come up was where the pipeline would come ashore. One of the things that all of us, as elected officials, and I'm sure as a government, want to see was as much benefit from our offshore as possible. The question was whether we could justify a fractionation plant and have our own industry here where we would be able to break down the gases and be able to create a new industry in itself.

One of the issues we had with the Sable project is that we were told that there just is not enough capacity coming into that pipeline to justify setting up a petrochemical industry with that. Basically, the message was if you can bring us more gas then at that point, maybe you can have a petrochemical industry. What makes it challenging with the El Paso project is they're suggesting putting the pipeline ashore at a different location. By doing that, my fear is that we will again be told, well unfortunately at that new location we don't have enough gas and can't justify a petrochemical industry, if you get us more gas, maybe we can do it.

Maybe this isn't something OTANS involves itself in but have you made any sort of representation or does OTANS have a position on such issues? In other words, should OTANS and government be trying to convince El Paso to have that pipeline joining the existing one at Goldboro so that at that point, hopefully, we can attract a petrochemical industry to set up using our own gas? I know that Keltic Petrochemicals have suggested that but it's my understanding that they're looking at bringing in gas, not using Nova Scotia gas to do so. I'm just curious, does OTANS involve itself in those kinds of discussions or are you happy to see development and are not specifically concerned where it's going?

MR. MCEACHERN: Your question involves the tertiary stage, the secondary stages of development. We have an interest in maintaining some kind of a cluster of interest. For example, on the other side of the water from where you are - you mentioned Keltic - you also have Sable gas coming ashore, you'll have Panuke gas coming ashore through that pipeline. The one thing that you should remember is between Keltic and Anadarko, the most likely place for it for long term, mid-stream petrochemical development in Nova Scotia is going

to be in the Richmond County, Guysborough County corridor. If it's going to happen, that's where it's going to happen.

MR. CHAIRMAN: I think it's safe to say and I can certainly say that I do hope that is the case. Certainly, we're interested in doing whatever is possible to ensure that is going to take place.

One of the statements you made earlier on a very valid question about the supply crew arrangement, you indicated there is a new agreement in place between Nova Scotia and Newfoundland. You further followed that up by saying ditching the crew does not necessarily have to take place. I guess I'm looking for a bit more reassurance from you because just last week I got a call from someone in Richmond County who had the possibility of going to work on one of the supply vessels off Newfoundland. His question was, when I hit the wharf do I have to take my boots and gear with me because they're going to send me home? He asked if that had been changed and I couldn't give him a definite answer because I did receive a letter back from the Premier when I had written previously and he gave me an assurance that in the end was really no assurance because he also made mention of an agreement and he hoped that this would no longer take place. He certainly didn't leave it as a definite that this practice was going to come to an end.

MR. MCEACHERN: It's my understanding that depending on the length of the contract, the longer . . .

MR. HICKEY: I missed the question, sorry.

MR. MCEACHERN: It's on supply boat crewing. I think it's the longer the term of the contract. It was automatic that if you went over to Newfoundland for 30 days, you literally ditched everything but the master and the engineer and left them in Halifax to take up a Newfoundland crew and Newfoundland boats did the same. I don't think that has been completely eradicated but I think the longer term contracts - I can get a specific answer to your specific question depending on the length of it. I know where to get it but I don't have it with me right now.

MR. CHAIRMAN: I would appreciate that. I know that if you talk to the Nova Scotia crew members, they would be quick to point out that Newfoundland crews are not treated the same here in our province when they arrive. Now whether that's the case or not, I don't know, maybe that's their own bias, but they certainly didn't feel we were treating Newfoundland crews the way they were being treated there. You are correct, they just hoped they never had to go ashore because the longer they stayed at sea they could keep working but the minute they hit that wharf, boots and everything off the boat and they were sent back home.

One of the things I would like you to touch on was when we had the deputy here a few weeks ago, she indicated about us competing with other jurisdictions and she talked about the North Sea and Africa and everything else. What I pointed out to her was that the one jurisdiction which I see as one of our biggest competitors right now that you haven't mentioned, is Newfoundland, and where do we stand compared to Newfoundland? I think we're hearing with the cynicism of our offshore coming from our own constituents, part of that is when they look across the Strait to Newfoundland and say, wait a minute, obviously their industry was more valuable with the royalty arrangements and secondly, there appears to be much more interest in offshore companies in Newfoundland. One of the responses the deputy gave very simply was, well they have oil and we don't. Is it that simple or what is OTANS view of where we stand compared to Newfoundland?

MR. HICKEY: Back to talking on EPC, talking about it being a global industry. Eastern Canada is an industry. No one else in the world views us as Nova Scotia and Newfoundland, so we have to come to the reality that we're a small pocket in the world in the oil and gas sector. Paul has done a really good job working with NOIA, the Newfoundland Offshore Industries Association, to bring the two associations closer, to start doing more things together. We have to get that small-mind mentality out of our heads if we're going to compete globally. So, us versus Newfoundland, I think we just have to wash those comments and start dealing with we are Eastern Canada to the offshore world.

MR. CHAIRMAN: You might be misunderstanding my comments, it's not a question of us versus them, it's a question of is Newfoundland doing anything different that we're not doing because there's more interest out there. I'm not saying it's us versus them but is there something that Newfoundland is doing that maybe Nova Scotia can learn from, or is it just as the deputy said, they have oil and we don't have oil?

MR. HICKEY: Her answer is pretty accurate. They've found more than we have.

MR. MCEACHERN: They have found more than we have and as I said before, the other man's grass is always greener. It has been 22 years since there has been a discovery in Newfoundland. Everything that they're pumping out of the ground today was discovered during the PIP grants of the 1970s and 1980s whereas we have had two discoveries of gas. So that, I guess, if you want to weigh things on one scale, is to the Nova Scotia advantage. I think what Newfoundland has done is, oil is easier to get to market and I guess to pick up on Tom's thing, I know from a provincial government revenue point of view, oil being pumped out of Newfoundland waters goes to the Newfoundland Treasury but oil being pumped out of Newfoundland waters is great news for my companies. We have companies here that have built part of White Rose, have built part of Terra Nova, are hoping that Hebron/Ben Nevis will go ahead because you will see work in this harbour and across this province in the Strait of Canso as well, just as Newfoundland companies benefited on Sable. I'm hoping to hear very soon of a fourth project in Newfoundland, just as I'm hoping to hear of a second project in Nova Scotia.

[10:45 a.m.]

MR. CLOUTER: Just to add to that, I can tell you that the oil companies looked at Nova Scotia and Newfoundland as Eastern Canada and they talked in terms of that when they talked to us about helicopter business. Let's talk Eastern Canada, it's not a separated jurisdiction in their minds.

MR. CHAIRMAN: No, I appreciate that. I appreciate Mr. Hickey's comment there. Mr. McEachern has done a great deal of work to bring Newfoundland closer and maybe if we had had Mr. McEachern on our negotiations on the Laurentian Sub-basin, we may have had a better outcome of that.

MR. CLOUTER: You might have been signing Ode to Newfoundland in Glace Bay, Mr. Chairman. Be careful what you ask for.

MR. CHAIRMAN: Well, exactly. My colleague from Glace Bay actually thought they were going to eat up his constituency when they drew that line. I guess just in closing, from my own perspective, it is very easy to criticize our offshore industry and while you may have seen a lot of our comments here today as being critical, it is important that we look back to learn from what has happened in our industry to see what changes can be made in the future when we do, hopefully, have another project that those concerns will be addressed. We can't go forward if we don't at least glimpse back to see what happened if we are going to continue to move this industry forward. I think that is what our objective is here today and I think a lot of questions from members are to see what have we learned over the past number of years and how prepared are we for the next project to make sure that whatever - I shouldn't say mistakes but - shortcomings and benefits may have happened in the Sable project that we can try to make sure that that doesn't occur in the future.

I think we are all optimistic about our offshore industry. I think we are all, deep down, praying that there will be another major find but at the end of the day our constituents who send us here are skeptical and there needs to be a better education taking place throughout our entire province so that Nova Scotians truly understand because they do get mixed messages. They believe there is an industry out there which we know is one project that we need to grow to become an industry and once we can all work collectively towards that, I believe we will have the proper framework to have this province move forward and for us to reap more benefits from that.

MR. HICKEY: One point to note on that, too, is the oil companies are smart, shrewd business players. We didn't find out about Marathon discussing next steps, locally. They are talking to shareholders in Houston and New York so these guys, they are intelligent, they will do what is right for their companies and we have to respect that too, I think.

MR. CHAIRMAN: I appreciate that, too, Mr. Hickey. With that, Mr. McEachern, if you or any of your members wish to make a few closing comments, you have about 10 minutes and if you don't take that 10 minutes, members, we have a few matters to deal with.

MR. MCEACHERN: We'll leave you in peace. Thank you very much for the invite. Thank you very much from all of us.

MR. CHAIRMAN: Thank you. Members, I suggest we recess for two minutes.

[10:49 a.m. The committee recessed.]

[10:51 a.m. The committee reconvened.]

MR. CHAIRMAN: I will call the committee back to order just for a couple of minutes. We do have the matter of upcoming witnesses. Right now we have on schedule ACTRA to appear before us on April 5^th. Now I think we all realize what ACTRA was looking for and I believe it is safe to say they have been granted it. So I have asked Darlene, with the committee's support, to contact them to see if they still do wish to appear before us in light of the recent developments and if they do not, then at that point we need to decide who our next witnesses should be and I am open to suggestions from members as to who they would like to see appear next. Mr. Epstein.

MR. EPSTEIN: I think that's the way to approach it. I think it is pretty clear that ACTRA and the Director's Guild had a very focused concern and they were keen to come as soon as possible and in advance of the budget. Clearly what they had in mind was the announcement, I think, that has already been made so it may even be that either they are not interested really in even talking with us anymore or the timing might not be so pressing for them. But asking them is certainly the right thing.

MR. TAYLOR: I think you will find, if I could, Mr. Chairman, that they still have some issues that they would like to bring forward. I think you will find that but again I could be wrong.

MR. CHAIRMAN: That's why I've asked Darlene to find out exactly for us.

MR. TAYLOR: Good initiative, yes.

MR. EPSTEIN: If it is the case or even if they still want to come and they still want to come on that date that has already been scheduled, we still have to turn our minds, I guess, to what comes next. My suggestion is if we look at the potential witness list that we consider the possibility of bringing in the Office of Economic Development along with NSBI maybe. We certainly have a number of outstanding issues with them. The Snairs Bakery item has

been one that has been a recent example but how they spend their money continues to be a big preoccupation.

I would suggest that there is maybe a second item that we might add to that. It's been a while since I think we have looked in a focused way on some Cape Breton issues and I kind of think it's time we had a look at the Cape Breton Rail issue. There are hearings coming up about that whole problem of the potential of abandonment of that line would have a real negative impact on Cape Breton. So I guess my suggestion is we think about those two items as maybe being two that we would add to the list as kind of priority items coming up.

MR. CHAIRMAN: If that is agreed . . .

MR. TAYLOR: Very much so.

MR. CHAIRMAN: . . . then what we will do is we will check with ACTRA. If they still want to come in, we will keep them at their scheduled time. If they don't, what I am suggesting is we put in the Office of Economic Development and NSBI and in the letter to Economic Development and NSBI, we should probably mention specifically that the Snairs Bakery issue will be raised just so that they are aware beforehand and any other outstanding recent developments, I guess, on that but at least that they be aware on that. Then the next one we will try to get in is Cape Breton Rail and there are hearings coming up there and I think it would be great to have them in to learn more about where they stand and the business case for that. We will try to set dates. We are still trying to clear up this schedule so we have been knocking off a number of the witnesses so we are still trying to fit in two a month until we clear this. If there are any other matters . . .

MR. PARKER: Well, I was going to raise the last one there, the twinning of Highway No. 101 and other highways in our province and the impact it has on this province. To me that's an important issue too. Highways are always in vogue.

MR. CHAIRMAN: Okay. Does the committee want to put a third one right now or wait until we see where we are with ACTRA and when we meet next and then maybe that's who we can put on our schedule of witnesses after that if that's agreed with the committee.

MR. TAYLOR: I was just going to suggest that it may be fodder for a meeting in the near future - I would think that other caucuses are hearing from the retail gasoline dealers in Nova Scotia. Again, there's not much probably that I could add to the debate but I've been receiving a lot of correspondence from them, that they are in extreme dire straits. There are potentially hundreds who are on the verge of going out of business.

MR. EPSTEIN: It's not just the retail operators, of course, it's the many customers who are here. We're still faced with that problem that we all grappled with last Summer.

MR. DOOKS: You should make that a priority, Mr. Chairman.

MR. CHAIRMAN: If it's the will of the committee. How about when we next meet on April 5^th, which is in a couple of weeks, we can determine who we want as our next witness. If we have to bump up the retailers, we can certainly do that. But we can add it to the list and I see Darlene already has added it, so we can discuss that the next time we meet about how quickly we want them in and who exactly from that association, I guess, that we want to have in.

MR. PARKER: They can probably decide themselves who they want to bring.

MR. TAYLOR: Maybe by April 5^th it won't be necessary.

MR. CHAIRMAN: Agreed.

MR. TAYLOR: We may not be in business. (Laughter) We're not in camera, are we?

MR. CHAIRMAN: No.

MR. TAYLOR: Strike that from the record, Mr. Chairman.

MR. CHAIRMAN: Yes, I think we can agree to strike that last comment from the record.

MR. PARKER: Don't forget the province in their wisdom will have brought in the regulation by that date.

MR. CHAIRMAN: That being the case, committee members, thank you, and we'll see you on April 5^th .

The meeting is adjourned.

[The committee adjourned at 10:57 a.m.]