Return-path: Envelope-to: arthurcaldicott@highspeedplus.com Delivery-date: Fri, 04 Apr 2003 00:51:27 -0800 Received: from [216.162.198.201] (helo=mail.onenw.org) by mail.highspeedplus.com with ESMTP id 191Mu4-000Mq5-00 for arthurcaldicott@highspeedplus.com; Fri, 04 Apr 2003 00:50:29 -0800 Received: by mail.onenw.org (Postfix, from userid 502) id 1FB919D17; Fri, 4 Apr 2003 00:31:08 -0800 (PST) Delivered-To: cbmwatch@onenw.org Received: from mail.highspeedplus.com (highspeedplus.com [199.175.106.200]) by mail.onenw.org (Postfix) with ESMTP id DA2A69D11 for ; Fri, 4 Apr 2003 00:31:03 -0800 (PST) Received: from [24.66.161.63] (helo=camelot) by mail.highspeedplus.com with SMTP id 191Mtv-000Mpt-00 for cbmwatch@onenw.org; Fri, 04 Apr 2003 00:50:20 -0800 Message-ID: <011e01c2fa87$058f46c0$3fa14218@du.shawcable.net> Reply-To: "Arthur Caldicott" From: "Arthur Caldicott" To: Date: Fri, 4 Apr 2003 00:32:11 -0800 MIME-Version: 1.0 Content-Type: multipart/alternative; boundary="----=_NextPart_000_0110_01C2FA41.A22D6F20" X-Priority: 3 X-MSMail-Priority: Normal X-Mailer: Microsoft Outlook Express 5.50.4807.1700 X-MIMEOLE: Produced By Microsoft MimeOLE V5.50.4807.1700 X-Sequence: 55 Errors-To: cbmwatch-owner@onenw.org Precedence: list X-no-archive: yes List-Id: List-Help: List-Subscribe: List-Unsubscribe: List-Post: List-Owner: List-Archive: Subject: [CBM] Joy MacPhail challenges Neufeld X-Loop: PEP build Jan 28 2003 12:33:20 (http://www.islandnet.com/pep.html) X-UIDL: k@C!!Xhc!!JP="!^Q6!! This is a multi-part message in MIME format. ------=_NextPart_000_0110_01C2FA41.A22D6F20 Content-Type: text/plain; charset="iso-8859-1" Content-Transfer-Encoding: quoted-printable J. MacPhail: I'll continue on with coalbed methane, and I have q= uestions, of course, on offshore oil and gas, which I understand we have no= t got to yet. I'll finish my series of questions on GSX as well, and I have= a few questions on Columbia Trust. Now, on coalbed methane, the minister h= as introduced legislation, and I will be having a substantial number of que= stions at the legislative level in terms of how his legislation is going to= work, but the whole issue around coalbed methane development is what I wan= t to explore now. I understand the Minister of Energy and Mines will appear at a p= ublic meeting tomorrow, Thursday, April 3, in Hudson's Hope. Certainly, the= re's been a news release released by the concerned citizens of Hudson's Hop= e, which reads that there is.. Let me just read from it: "'There is the perception that the meetings so far have been a= n attempt to put the government and industry spin on coalbed methane develo= pment rather than an attempt to seriously consider citizen and landowner co= ncerns,' say the concerned citizens of Hudson's Hope. The current thrust of= the citizens' and landowners' efforts is to push for a moratorium on any d= rilling until full, detailed environmental and social impact studies can be= carried out." [1555]=20 They continue: "So far, despite continuous questioning and requests, the Mini= stry of Energy and Mines and the OGC" - Oil [ Page 5924 ]=20 and Gas Commission that would be - "have not been able to provide such an= example. The citizens and landowners, while not opposed to all development= , are demanding that a plan to do it right be in place before startup. They= assert that a moratorium is necessary to allow the time for study and plan= ning." They then continue on to say, referring to the minister: "His recent open cabinet meeting presentation upset many resid= ents, because it included nothing about environmental and social concerns t= hat surround coalbed methane development wherever it has been done. Accordi= ng to Mr. Metzger" - and Mr. Metzger is a member of the Hudson's Hope conce= rned citizens - "'it was an orchestrated political performance designed to = support the government fast-track position. He will be called on to account= for the serious omissions and discrepancies.'" Anyway, the minister is going to attend that meeting tomorrow in= Hudson's Hope. We will get the update on.. I'm not to going to ask the min= ister to repeat what answers he's giving there, but that's the citizens' co= ncern. Just to carry on, there's an open letter from Larry Peterson, wh= o's a resident of the Peace River valley, dated March 18. It's to the Minis= ter of Energy. It says: "Dear Sir: "In recent weeks many of your constituents have become increas= ingly aware of the potential for a massive coalbed methane drilling program= sponsored and encouraged by yourself as Minister of Energy and the corresp= onding bureaucracy that promotes it as a very clean energy source for the p= eople of B.C. if it is done right, as you like to say." I'm not going to read the whole letter. It's actually a very goo= d letter. He goes on then to say: "From the extensive research done by some very concerned and d= edicated people, it has become abundantly clear that this type of drilling = program can endanger and have serious long-term consequences to the entire = Peace River drainage system and the precious aquifers, rivers and streams w= hich are the lifeblood of the entire region." He then goes on to say.. This is Larry Peterson of Peace River v= alley. "We have sadly learned from first-hand experiences of farmers = and ranchers and other residents of the Powder River basin in Wyoming and i= n Colorado, who have for more than the past ten years had to deal with the = tremendous impact that coalbed methane drilling has had upon their aquifers= , rivers, lakes and streams. Their lifestyle has been forever altered, the = social fabric torn - the short-term gain derived by the state government fo= r long-term pain when the coalbed methane development was rushed in to prov= ide funds to overcome the state government deficit." Mr. Peterson goes on to say - sound familiar? - it was not done = right: "There, as here, a few test holes were proposed here and there= , and soon tens of thousands of closely spaced wells were developed. When i= t was not done right, they experienced the consequences. Once-pristine rive= rs and streams now bubble with methane gas, salt water and heavy metal-lade= n runoff that kills cattle, wildlife and fish. Vegetation dies and refuses = to grow again. People's water wells dry up or become contaminated to the po= int that they can light up their kitchen tap with a match. Once valuable ra= nch and recreation land decreases in value and in some cases is not even se= llable." I've got one other letter to read into the record and then a ser= ies of questions based on this. This letter is dated March 20 from Mrs. Ter= ry Webster, who also copied me on the letter: "Dear Mr. Neufeld: "My husband and I are landowners in Hudson's Hope. Although ou= r subsurface rights have not yet been sold, we have been informed, thanks t= o our own research and phone calls, that the rights are likely to be auctio= ned off in April or May of this year. "To say that we are displeased would be the understatement of = the decade. We have spent most of our adult lives building this ranch, and = just as we are preparing to quit our jobs and farm on a full-time basis, co= albed methane arrives and threatens to endanger our buffalo ranching operat= ion and our lifestyles in general. [1600] "The Oil and Gas Commission continues to assure us that all dr= illing operation will proceed in a safe fashion, but I am not reassured by = their statements. The March 17 issue of the Vancouver Sun criticized oil an= d gas drilling firms as follows" - and she quotes from the Vancouver Sun ar= ticle. "'The oil and gas compliance review report says 38 to 44 percent of = drilling companies active in B.C.'s north failed to comply with sewage disp= osal and water protection regulations according to audits in January 2002.'" Her letter then goes on: "Further, at the workshops offered by the Oil and Gas Commissi= on on Saturday, March 8, I listened to the presentation from the Water, Lan= d and Air Protection representative responsible for the draft guidelines fo= r disposal of surface water for coalbed methane. At first, I was greatly re= lieved to see stringent guidelines. Then I heard that these guidelines are = minimums and any company that wishes to exceed them, up to ten times the li= sted amount, simply contacts the Oil and Gas Commission. Of course, the Oil= and Gas Commission won't have the staff to deal with these issues, as seen= by the article referred to above. "Why is water protection given over to the Oil and Gas Commiss= ion rather than to Water, Land and Air Protection, where it belongs? The an= swer, of course, is to streamline the process for foreign and national oil = companies. Who stands to lose from this? The landowners, obviously." Mrs. Terry Webster then goes on to say: "Water disposal is just one issue. The extended flaring period= s offered under the experimental scheme are also of great concern to us as = my husband has suffered from asthma all his life. When you add that to 'wel= ls at any density,' I can see that air quality could become intolerable for= us in our home. "Next, we add the constant disruption caused by the crews that= will be drilling. I have looked at the Alabama slides on the Internet that= show typical well sites, and I cannot imagine our ranch being converted fr= om its present pastoral beauty to that type of industry mess." Those are just some of the examples. Just before I start my ques= tions, will the minister be attending the Hudson's Hope meeting tomorrow? Hon. R. Neufeld: Yes, I will be. In fact, I will be going up to = Fort St. John later tonight, so she knows [ Page 5925 ]=20 my whole itinerary. I will speak about the energy plan that we have in the = province at the Dawson Creek Chamber of Commerce. I'll be meeting with a nu= mber of first nations over some other issues. I will have some meetings wit= h the public, some private meetings with some of the people from Hudson's H= ope and also a public meeting. Before I sit down, as far as public meetings go, I should maybe = put on the record the number of public meetings we've had in Hudson's Hope.= In fact, June of last year was the first one - talking to the folks at Hud= son's Hope about the development of petroleum and natural gas in their area= , which is inclusive of coalbed methane. We've had two public meetings in M= arch that were attended by my ministry, Water, Land and Air Protection and = Sustainable Resource Management to bring forward and actually try to answer= the people's questions from Hudson's Hope. I can tell you that I can understand why some of those people wo= uld be concerned after listening to the environmental law society go throug= h the province trying to instil some fear into people. There have been mist= akes made in the U.S.A in development of coalbed methane. I don't defend th= at at all. That's the United States of America. We've had our people to those basins to review what went wrong; = why it went wrong. In fact, at the ministry level we want to do it right al= so. We want to make sure there isn't the impact on people - regardless of w= hether they live in Hudson's Hope or on Vancouver Island, where there's bee= n a well drilled; or in the East Kootenays, where there have been about 16 = wells drilled; or in the Tumbler Ridge area, where there have been about 11= or 12 wells drilled for coalbed methane. We don't want to see unnecessary = impact on any of those people or landowners. We've had those meetings to bring forward the ministry's viewpoi= nt and to listen to the individuals who are concerned about coalbed methane= development. I'm going there to talk to them a little bit more about it an= d also about the benefits of coalbed methane and the benefits that could ha= ppen in the community of Hudson's Hope if we, in fact, move forward with th= is proposal. [1605]=20 J. MacPhail: I have a series of questions that arise out of the = government's move forward on coalbed methane production. Just to put it in = context for the people who are listening, in order to get the methane out o= f the coalbeds, what is done is that water pressure is applied. Basically, = the methane is pushed out along with the water, so there are water quality = issues and water quantity issues. Well, there's water production produced. I'm fine for the minist= er's staff to correct.. I'm trying to put it in lay terms here. Feel free t= o stand up and correct it. There's water production that arises out of coal= bed methane production, which has some concerns around that. What water quality issues and problems may arise with the produc= ed water? I think the term "produced water" is the technical term that aris= es out of the water that results from coalbed methane production. Hon. R. Neufeld: The member is basically correct in the way she = described it. The difference is that water is pumped out to release the coa= lbed methane from the coal seams. There is a lot of water that has to be pu= mped before the coalbed methane will come to surface, and so there are obvi= ously some issues around disposal of water. [J. Weisbeck in the chair.] Depending on where you're at, depending on the geology, some of = that water can actually be potable. In fact, in some of the terrible basins= in the U.S., some of the communities are pretty happy, because they didn't= have a source of water prior to the drilling for coalbed methane, and now = they have potable water. Some of the water needs very little treatment, and= it can be released to the environment either by spraying it on farmland fo= r irrigation purposes or by releasing it into streams - those kind of thing= s - if it's potable water. All of that has to be done under the regulation of the Oil and G= as Commission. You don't just pump the water and put it wherever you want. = There are those who infer that that's what happens, but it's not in fact wh= at happens. The Oil and Gas Commission will permit the removal of the water= , and they will test the water to make sure it isn't toxic. If it is toxic,= it has to be disposed of in a disposal well, one that's approved of by the= Oil and Gas Commission. That would be a well that's spent - an old gas wel= l or an oil well, where there are caverns 6,000 to 8,000 feet below surface= , where you can actually pump that kind of water into them. It's usually sa= lt water - high in salt quantity. It's not very much different from the conventional natural gas i= ndustry and the oil industry. There's an awful lot of water produced out of= natural gas wells and oil wells that is disposed of in the same way. I'll go the U.S. again. When they started drilling for coalbed m= ethane, they obviously did it a little differently than they do it today. A= s we move forward, we always learn. The procedure in B.C. is that it's gove= rned under the Petroleum and Natural Gas Act and also under the Waste Manag= ement Act for the water and the other things that might be involved with dr= illing the well. They will drill a well, usually about - how many feet, on averag= e, in the Hudson's Hope area? - 3,000 feet. They'll drill a well. It's not = as large a drilling rig as you would use in conventional natural gas or oil= . They will then set casing - that means steel tubing - from surface right = down to the coalbed seam they want to exploit. Then that casing will be cem= ented, not inside the casing but outside the casing. It's cemented between = the soil, the strata that it goes through and the pipe. Then there is a smaller pipe put down the centre. What you do is= pump the water up through the larger casing, and through the smaller casin= g finally will come the coalbed methane as you take all the water off. That= seals it from the aquifers that you would be using [ Page 5926 ]=20 for domestic use - probably wells ranging from 100 feet deep, something to = that effect. They're sealed from those domestic water wells. [1610]=20 Early on, when they did it in the U.S., they didn't use casing. = They didn't cement it. They didn't do anything. They just drilled a well an= d pumped the water out. Obviously, that was the wrong thing to do. That was= 20 years ago. Times have changed. There are places in the U.S. where, actually, communities are pr= etty happy about the development of coalbed methane. We should also remembe= r that coalbed methane is cleaner than most natural gas. Most natural gas h= as high quantities of H2S, poison gas. The coalbed methane does not have th= at in it and actually, with very little treatment - in fact, no treatment i= n some cases - can be put right in the pipeline for domestic or commercial = use. J. MacPhail: How will baseline water quality be determined? Hon. R. Neufeld: Baseline water quality from the well? Is that w= hat the member is asking? Yes, that will be done under regulations that are in place by Wa= ter, Land and Air Protection, which the Oil and Gas Commission administers = with someone from Water, Land and Air Protection. That's been going on for = some 40 years in northeastern British Columbia in the drilling of conventio= nal natural gas and oil, so those people have the qualifications to determi= ne what's potable water and what's saline water. J. MacPhail: Well, I am going to explore some of this in estimat= es for the Ministry of Water, Land and Air Protection. It's one of these di= lemmas that British Columbians face, where the minister responsible for the= economic activity refers the public to the Ministry of Water, Land and Air= Protection, and then we find out it's actually been delegated to the Oil a= nd Gas Commission. I understand in this concern that water quality protection is go= ing to be the responsibility of the Oil and Gas Commission. How will the re= gulations around all of this be determined - by public consultation? Hon. R. Neufeld: The legislation and regulations are in place. M= aybe I wasn't explicit enough. We have wells in northeastern British Columb= ia that have been producing water for 40 years that we've been disposing of= , testing to find out how you dispose of it and where you dispose of it. Al= l those regulations are in place. As I said, they've been around for a long= time, and they're sufficient. In fact, they're fairly stringent - probably= more stringent than our neighbours just east of us. J. MacPhail: Yes, but I understand that compliance is not great = by any stretch of the imagination. The last.. Well, it may not be the last = one - I'm not sure - but the 2001 compliance audit conducted by the Oil and= Gas Commission had a fairly high non-compliance rate in this area. Is the = minister aware of that, and what's being done to improve it? Hon. R. Neufeld: The member has maybe not been informed correctl= y about that. There were some water non-compliance issues that had nothing = to do with wastewater or produced water from wells. That had to do with wor= king in the oil and gas industry out in the muskeg, where water trucks - ju= st give me a minute, and I'll get it through - actually go to streams and l= oad water to take to the well, because you need water at a well to drill a = well. They did something wrong in some cases. They pumped water out of= streams that they shouldn't have. They pumped water out of the stream to u= se in the drilling process and actually affected some beaver houses. That's= something that shouldn't have happened, but it did happen, and those compa= nies had to rectify that. J. MacPhail: Yes, I understand that, but thank you to the minist= er for putting it on record. I understand the difference, but there is an i= ssue of turning.. This is going to be almost self-regulation by the industr= y, and parts of the industry have been shown to be, in other areas of resou= rce extraction, in non-compliance at a substantial level. The minister says= it's not going to be self-regulation. Perhaps he could put that explanatio= n on record. [1615]=20 Hon. R. Neufeld: It's not self-regulation. There is a set of rul= es and regulations that they have to live up to. They're fairly extensive a= s to the tests - how many tests have to be made, how many gallons or litres= or cubic metres of water can be pumped into different wells, which wells i= t can be pumped into. Annual reports and in fact monthly and probably, in s= ome cases, daily reports have to be made to the Oil and Gas Commission. The Oil and Gas Commission will monitor that, as they have in th= e past, and continue to monitor it. I know they have just recently hired, I= believe, another six compliance officers at the Oil and Gas Commission to = deal not specifically with Hudson's Hope but with the industry as a whole, = because as we move forward in British Columbia, there's actually an interes= t in developing the oil and gas industry in the province. It provides well-= paying jobs, and there are people that want to invest in the province. The = Oil and Gas Commission, to respond to that, had to beef up the number of pe= ople who work at the commission to be able to do that compliance testing. Introductions by Members K. Johnston: I have the pleasure today to welcome to the gallery= 80 grade 10 social studies students from the largest high school in Vancou= ver, Killarney Secondary. I'm very delighted they have come here under the = guidance of Ms. Nicol, Mr. Koutsonikas, Miss [ Page 5927 ] Zogaris and Miss Fransblow. They're enjoying their day in Victoria. They've= had tours all around the city today and are now here to watch government i= n action. Would the House please join me in welcoming this group of great k= ids. Debate Continued J. MacPhail: This government has been promoting coalbed methane = extraction.. I guess it was this time last year we were debating this in th= e Legislature, and more flexibility was given. Then the regulatory requirem= ents were clarified, I think, in October of last year. Now legislation is b= eing introduced, but I'm not discussing the legislation, Mr. Chair. What ha= s been the increased activity in the area of coalbed methane extraction sin= ce this government has been promoting it for over a year? Hon. R. Neufeld: There are no commercial activities happening in= British Columbia. In fact, as I spoke earlier, I believe there are 16 well= s that have been drilled in southeastern British Columbia by a company call= ed EnCana. That activity began under the last administration, which you wer= e a part of, that promoted the extraction of coalbed methane. I believe at = that time.. In fact, when I asked questions about it when I was in oppositi= on, the Minister of Energy and Mines assured British Columbians that the Pe= troleum and Natural Gas Act would be sufficient to regulate the coalbed met= hane industry. I concur with that. In fact, it is too stringent in some are= as. We want to move forward with being able to encourage people to d= rill in the province. In the northeast we've had about 11 wells drilled. As= we speak - that's an interesting one - in the southeast the water, with so= me treatment, can be dispersed into the streams by Water, Land and Air Prot= ection. That's being monitored. In the northeast it's a little bit more hea= vy saltwater, and they haul the water from Tumbler Ridge all the way north = of Fort St. John to a preapproved disposal well - preapproved by the Oil an= d Gas Commission with heavy compliance. Those kinds of things are happening= as we speak in the province, and there's interest in the Princeton area, a= s we speak, about developing coalbed methane there also. Maybe the other part I neglected to talk about earlier is the co= nsultation process that goes on prior to the drilling of coalbed methane an= d what happens in the Oil and Gas Commission. This is a bit in response to = the letters the member read into the record. I appreciate that she did that. [1620]=20 The district of Hudson's Hope. I think there have been four land= sales in the district of Hudson's Hope dating back a number of years, 2=BD= years - four different sales. The consultation that took place with the co= mmunity, with the district of Hudson's Hope, with the mayor and council var= ied anywhere from 14 weeks to 62 weeks with the council. Actually, in the c= onsultation process through the mineral titles branch, the community asked = that some areas be removed from the sale prior to the sale, and in fact, we= complied with that. We have worked closely with the community of Hudson's = Hope on which parcels should be put up for sale. There's a two-step process. You have to actually communicate and= consult with the first nations. That's a requirement, and we do that befor= e the land is put up for sale. We also communicate with the community that = would be affected. In this case, it happened to be Hudson's Hope. In other = regions it could be the regional district that you communicate with. Those are fairly lengthy consultations that go on - 62 weeks - b= efore you actually have a land sale. After that, that doesn't mean you can = just go ahead. You still have to have consultations again with first nation= s. That's done with the Oil and Gas Commission and the proponent. You also = have to have negotiations with the communities that would be affected. When= I spoke earlier about the meetings in March - in fact, as far back as June= of last year and into March of this year - they are responding to those ki= nds of consultations. Then the proponent has to have his or her own consult= ation with the communities and with first nations. What I'm trying to say here is that there is an awful lot of com= munication with the people that are affected in the area and with first nat= ions. Once the proponent has had those consultations, they may or may not b= e awarded a right to drill on the land that they purchased the right to dri= ll on. There is a pretty significant process that has to be undertaken by t= he proponent, by the Oil and Gas Commission and by the communities. I should also put on the record that during the 62-week consulta= tion process with the district of Hudson's Hope - the member read into the = record that landowners didn't know this was going to take place - the mayor= and council were kind enough to mail a letter to every landowner that was = affected in the district of Hudson's Hope, letting them know what was takin= g place, so they actually knew that was happening. That was two years ago o= r a year and a half ago. We think we have done a pretty good job of consultation. As I sa= id earlier, there are obviously some fears out there. When people start goi= ng around the province instilling fear in people about what happened somepl= ace else or whatever, for whatever reason they want to do that, it's certai= nly understandable why people would want to have more information. That's one thing this ministry is all about and the Oil and Gas = Commission is all about. We have websites. We have everything on the websit= e - the land sales, the areas, where they're happening, when they're happen= ing, all those kinds of things - to try and consult with both aboriginal an= d non-aboriginal communities. J. MacPhail: In the fine tradition of all previous Ministers of = Energy that I know, the minister is filibustering his own estimates. That m= ay be the passion he has for all of this. Certainly, previous Energy minist= ers [ Page 5928 ]=20 that I've worked with filibustered their own estimates as well. The minister is quite correct. Nine experimental projects are un= derway, but they were established as experimental projects. This government= is going to get into the business of coalbed methane extraction in a subst= antial way. I wanted to ask the minister.. I know that EnCana is working wit= h Fording Coal, and of course, they've arranged their own price cut on that= . The government is now going to become the middleman in those kinds of arr= angements. What other companies actually have expressed interest in coalbed= methane extraction? As a layperson, I know there's a huge untapped resourc= e already available for extraction in natural gas. What other companies hav= e expressed interest? [1625]=20 Hon. R. Neufeld: There are quite a number of companies - EnCana,= Anadarko, Talisman, Fording Coal, now Teck Cominco - that have interest in= developing coalbed methane on their freehold land. There's Devon. There ar= e quite a number of companies that are very interested in the development o= f coalbed methane. J. MacPhail: Well, I understand that there's a substantial reduc= tion in the royalty payments between natural gas and coalbed methane. I act= ually have the details of.. I always feel the necessity to do this so that = the public can understand that royalty is a method of taxation the industry= pays to the government. The difference - paying less royalties for coalbed= methane production - is really a subsidy. In this particular case, there i= s a substantial subsidy being offered to coalbed methane extraction compani= es from those who might actually produce natural gas. Why is that? Hon. R. Neufeld: Yes, there is a difference between the royalty = that would be paid on coalbed methane as compared to conventional natural g= as. There's also a time frame that we had in the legislation that, because = of the large upfront costs before you can have a project commercialized - t= hat means into production - they have a royalty credit up until, I think, F= ebruary 2004 of $50,000. J. MacPhail: Why is there a substantial reduction in the royalti= es for coalbed methane? Isn't that a subsidy? Hon. R. Neufeld: No it's not, because it's across the whole indu= stry. There are different royalty rates for different production of differe= nt oils. The member may not remember, but during her administration there= was quite a huge reduction in a field called the Hayfield for oil to actua= lly encourage the development of that oil in that region because of the cos= t of developing it. It's not uncommon to do those kinds of things. It's not= a subsidy; it's across the whole coalbed methane industry. The member laughs, but as I said, under her administration they = did a number of those kinds of things also. Maybe it was funny then - I'm n= ot exactly sure - but it was to try and get some investment going in some o= f those areas. There are other things that you can do, also, to change the rate= for natural gas in areas that are high cost - maybe deep wells or maybe sh= ale gas or anything like that. You can actually encourage the development o= f it. It creates economic activity in the province. It creates jobs - in fa= ct, really good-paying jobs. The member may not have been here, but we talked about the amoun= t of royalties that are coming to the province. This year they're expected = to be about $1.7 billion in royalties from oil and gas. That all goes to pa= y for hospital care and for schools and all those types of things. It's act= ually a good industry, and we need and use those products every day in our = daily lives. J. MacPhail: I don't need a sales pitch. My point is this: this = is a government that said there would be no subsidies to industry. My gover= nment gave subsidies to industry for the very reasons that this minister is= now spewing off as his own. My government gave subsidies, and this minister is standing up a= nd saying: "We're doing exactly the same thing." The answer is: you're righ= t. The minister is finally telling the truth. He's doing exactly the same t= hing. He's giving subsidies to industry. This is a subsidy. It's a subsidy that spreads across the coalbe= d methane industry. It's gas extraction. It's to promote the royalties that= will be paid across the coalbed methane industry at a lower rate than natu= ral gas extraction. It walks like a subsidy, smells like a subsidy and dril= ls like a subsidy. It is a subsidy. [1630]=20 The minister stands up and says: "Well, your government did it t= oo. Maybe the member didn't remember that." I do; I acknowledge it. It gave= huge impetus to the industry. In fact, thank God, in the 1990s there was s= uch expansion of the oil and gas industry because of targeted help to that = industry directly. Thank God, because we would be in a terrible economic si= tuation today without that expansion of the industry. It was targeted help = from the government to the industry. That's called a subsidy. This government is carrying on doing exactly the same thing, exc= ept that they say they're not. In fact, they are. They're subsidizing the c= oalbed methane extraction industry to the tune that the coalbed methane, in= some circumstances, will be paying only three-quarters of the royalties th= at conventional gas pays. In some circumstances coalbed methane will only b= e paying half the royalties that natural gas extraction pays. In some circu= mstances.. No, that's half too. They're getting a subsidy by this governmen= t of anywhere from a half to a quarter reduction in their royalties. That's= a subsidy. Hon. R. Neufeld: It's not a subsidy when it's across the whole i= ndustry. There's a significant difference. We [ Page 5929 ]=20 just went through half an hour talking about coalbed methane extraction as = compared to conventional natural gas extraction. It's completely different.= What we have done is put a royalty process in place that will encourage th= e development of coalbed methane across the province of British Columbia. W= e put it across the whole industry. When that member was part of government, what they did was targe= t different companies doing the same work. That's different. That is pure s= ubsidy to one company. There is a huge difference in what we have done here= , and the member may not like it, and that's fine. It's not a subsidy as far as I'm concerned. She says it's a subs= idy. Listen. What we ought to do is get on with the business of creating th= e jobs in the province of British Columbia, get on with creating wealth, ac= tually make some money for the province and put people to work so that we c= an continue to pay for health care and education. J. MacPhail: Well, thank God all of this wealth was created in t= he 1990s, because it's the only thing that's keeping this government going = now, by their own admission. It's the only thing working. I just asked the = minister to tell me how, under his great government, coalbed methane extrac= tion has expanded. Zero. None. So, thank God for that awful decade of decli= ne - that decade of decline that greatly expanded resource extraction, oil = and gas extraction. Thank God the previous government actually did some exp= erimental projects. This government's achieved absolutely nothing. The minister tries to say: "No, it's a completely different indu= stry. It's not a subsidy." Boy, I'll tell you, "How many angels dance on th= e head of a pin?" would be an interesting question to ask this minister. Se= e how he can dance his way out of that one. The Petroleum and Natural Gas Act regulates coalbed methane and = natural gas because they're like products. If the minister wants to change = that, good. But until he does that and goes against what the rest of the wo= rld actually defines as what natural gas is, which includes coalbed methane= extraction, it's a subsidy. The reduction in the royalties is a subsidy - = full and straight up. I'm very happy, actually, to use targeted tax relief for industr= ies that do create jobs, but it's hypocritical of this government. That wou= ld be nothing new, but to hide their hypocrisy is pretty new. They take gre= at comfort in their arrogant, overwhelming majority to actually not even bo= ther to hide their hypocrisy. In this case, the minister is trying to hide = it. [1635]=20 Hon. R. Neufeld: Again, if there was ever an arrogant government= , it was the one that just got booted out of the province of British Columb= ia and ended up with two people in this House. I will again state for the record - and maybe the member may con= cur, and she may not - that the royalty rate for coalbed methane is across = the whole industry of coalbed methane. That, in my view, is not a subsidy b= ut is an incentive to get the industry started, to get it working so that w= e can actually generate some jobs and some activity in the province. I thin= k that's good news for British Columbia. I think we should look forward to = that with a lot of joy. I think we should look forward to an expanded miner= al industry in the province and to well-paying jobs and the taxes that that= industry pays. I'm really happy to hear the member concur with me that the extr= action of coalbed methane is very important to the province. She thought it= was important when she was in government. She still thinks it's important = to the province of British Columbia. With that in mind, I think we should m= ove forward. J. MacPhail: On July 29, 2002, this minister released a news rel= ease saying: "Fees Eliminated to Help Foster Oil and Gas Development." Fees= eliminated will be: "Pipeline plan approval, compressor or pump station sp= ecifications approval, compressor or pump station annual inspection, farm t= ap installation whether or not drawings are approved by the chief inspectin= g engineer, issue of certificate under section 2 of the Pipeline Act, Surve= yor General examination of well site plans." Can the minister update the Legislature on how this has been a b= enefit to the industry? Hon. R. Neufeld: Actually, again we're talking about the Oil and= Gas Commission, which is fully funded by the industry. The taxpayer of Bri= tish Columbia does not fund the Oil and Gas Commission. How it's funded is = through fees from industry. As I said earlier, each well drilled costs so much money. Some o= f that's used for consultation with first nations and operation of the busi= ness. The other portion is given to first nations so they can build some ca= pacity. The Oil and Gas Commission was fully funded, in fact, in a surplus = position. The small amount of money that all those fees brought - and all t= he work that went with maintaining them, with all the paperwork that goes w= ith them - had nothing to do with reducing how careful we are about the env= ironment. It was just a way - I guess, instituted maybe by the last governm= ent.. In their own way, they thought they would be getting more money. But we don't get money from the Oil and Gas Commission. The Oil = and Gas Commission is fully funded internally by the industry, not by the p= eople of British Columbia. J. MacPhail: I'm getting a sense from the tone of the minister t= hat he doesn't like being asked questions. That was just a straight-up ques= tion. I'm not quite sure why he has to get so antsy about it. I could actua= lly try to do it in the same way that the sheep do, which is praise him fir= st about all the great work he's doing, and maybe he'd be a little less pet= ulant. I'm just collecting the stuff, doing my job, Mr. Chair. So maybe he = could just.. [ Page 5930 ]=20 What is the update from the Oil and Gas Commission about the ext= ra economic activity generated by this? Hon. R. Neufeld: Again to the member, if she's talking about the= same fees and the reduction of those fees, it had nothing to do with encou= raging the industry. It had everything to do with uncomplicating a process = that had, actually, no bearing on what was happening at the Oil and Gas Com= mission. It is funded 100 percent by the industry. The industry fees that go into funding the Oil and Gas Commissio= n were sufficient. In fact, the Oil and Gas Commission has a surplus as we = speak today. So there was no need to do those kinds of small things. If the= re needs to be more money going into the Oil and Gas Commission to operate = it, there are simpler ways to do it - by increasing the levy on natural gas= and oil produced that would actually fund the Oil and Gas Commission. All we were trying to do was to remove some needless red tape fr= om the system and continue on with having those compliance officers or thos= e people who were working in the commission doing all that red tape and pro= cessing that paperwork, actually out doing the work that they should. http://www.legis.gov.bc.ca/hansard/37th4th/h30402p.htm --- Checked by AVG anti-virus system (http://www.grisoft.com). Version: 6.0.443 / Virus Database: 248 - Release Date: 1/11/2003 ____________________________________________________________ Questions? Please email acaldicott@dogwoodinitiative.org ------=_NextPart_000_0110_01C2FA41.A22D6F20 Content-Type: text/html; charset="iso-8859-1" Content-Transfer-Encoding: quoted-printable

           J.= =20 MacPhail: I'll continue on with coalbed methane, and I have questions, = of=20 course, on offshore oil and gas, which I understand we have not got to yet.= I'll=20 finish my series of questions on GSX as well, and I have a few questions on= =20 Columbia Trust. Now, on coalbed methane, the minister has introduced=20 legislation, and I will be having a substantial number of questions at the= =20 legislative level in terms of how his legislation is going to work, but the= =20 whole issue around coalbed methane development is what I want to explore=20 now.

           I=20 understand the Minister of Energy and Mines will appear at a public meeting= =20 tomorrow, Thursday, April 3, in Hudson's Hope. Certainly, there's been a ne= ws=20 release released by the concerned citizens of Hudson's Hope, which reads th= at=20 there is…. Let me just read from it:

           "'There=20 is the perception that the meetings so far have been an attempt to put th= e=20 government and industry spin on coalbed methane development rather than a= n=20 attempt to seriously consider citizen and landowner concerns,' say the=20 concerned citizens of Hudson's Hope. The current thrust of the citizens' = and=20 landowners' efforts is to push for a moratorium on any drilling until ful= l,=20 detailed environmental and social impact studies can be carried=20 out."

[1555]=20

They continue:

           "So=20 far, despite continuous questioning and requests, the Ministry of Energy = and=20 Mines and the OGC" — Oil

[ Page 5924 ]=20

and Gas Commission that would be — "have not been= able to=20 provide such an example. The citizens and landowners, while= not=20 opposed to all development, are demanding that a plan to do it right be i= n=20 place before startup. They assert that a moratorium is necessary to allow= the=20 time for study and planning."

They then continue on to say, referring to the minister:

           "His=20 recent open cabinet meeting presentation upset many residents, because it= =20 included nothing about environmental and social concerns that surround co= albed=20 methane development wherever it has been done. According to Mr. Metzger" = — and=20 Mr. Metzger is a member of the Hudson's Hope concerned citizens — "= 'it was an=20 orchestrated political performance designed to support the government=20 fast-track position. He will be called on to account for the serious omis= sions=20 and discrepancies.'"

          &nbs= p;Anyway,=20 the minister is going to attend that meeting tomorrow in Hudson's Hope. We = will=20 get the update on…. I'm not to going to ask the minister to repeat wh= at answers=20 he's giving there, but that's the citizens' concern.

           Just t= o=20 carry on, there's an open letter from Larry Peterson, who's a resident of t= he=20 Peace River valley, dated March 18. It's to the Minister of Energy. It says= :

"Dear=20 Sir:
         &nb= sp; "In=20 recent weeks many of your constituents have become increas= ingly=20 aware of the potential for a massive coalbed methane drilling program=20 sponsored and encouraged by yourself as Minister of Energy and the=20 corresponding bureaucracy that promotes it as a very clean energy source = for=20 the people of B.C. if it is done right, as you like to say."

          &nbs= p;I'm=20 not going to read the whole letter. It's actually a very good letter. He go= es on=20 then to say:

           "From=20 the extensive research done by some very concerned and dedicated people, = it=20 has become abundantly clear that this type of drilling program can endang= er=20 and have serious long-term consequences to the entire Peace River drainag= e=20 system and the precious aquifers, rivers and streams which are the lifebl= ood=20 of the entire region."

          &nbs= p;He=20 then goes on to say…. This is Larry Peterson of Peace River valley.

           "We=20 have sadly learned from first-hand experiences of farmers and ranchers an= d=20 other residents of the Powder River basin in Wyoming and in Colorado, who= have=20 for more than the past ten years had to deal with the tremendous impact t= hat=20 coalbed methane drilling has had upon their aquifers, rivers, lakes and= =20 streams. Their lifestyle has been forever altered, the social fabric torn= —=20 the short-term gain derived by the state government for long-term pain wh= en=20 the coalbed methane development was rushed in to provide funds to overcom= e the=20 state government deficit."

          &nbs= p;Mr.=20 Peterson goes on to say — sound familiar? — it was not done rig= ht:

           "There,=20 as here, a few test holes were proposed here and there, and soon tens of= =20 thousands of closely spaced wells were developed. When it was not done ri= ght,=20 they experienced the consequences. Once-pristine rivers and streams now b= ubble=20 with methane gas, salt water and heavy metal-laden runoff that kills catt= le,=20 wildlife and fish. Vegetation dies and refuses to grow again. People's wa= ter=20 wells dry up or become contaminated to the point that they can light up t= heir=20 kitchen tap with a match. Once valuable ranch and recreation land decreas= es in=20 value and in some cases is not even sellable."

          &nbs= p;I've=20 got one other letter to read into the record and then a series of questions= =20 based on this. This letter is dated March 20 from Mrs. Terry Webster, who a= lso=20 copied me on the letter:

"Dear Mr.=20 Neufeld:
         = ;  "My husband and I are landowners in Hudson's Hope.= =20 Although our subsurface rights have not yet been sold, we have been infor= med,=20 thanks to our own research and phone calls, that the rights are likely to= be=20 auctioned off in April or May of this=20 year.
         &n= bsp; "To=20 say that we are displeased would be the understatement of = the=20 decade. We have spent most of our adult lives building this ranch, and ju= st as=20 we are preparing to quit our jobs and farm on a full-time basis, coalbed= =20 methane arrives and threatens to endanger our buffalo ranching operation = and=20 our lifestyles in general.

[1600]

           "The=20 Oil and Gas Commission continues to assure us that all drilling operation= will=20 proceed in a safe fashion, but I am not reassured by their statements. Th= e=20 March 17 issue of the Vancouver Sun criticized oil and gas drillin= g=20 firms as follows" — and she quotes from the Vancouver Sun ar= ticle.=20 "'The oil and gas compliance review report says 38 to 44 percent of drill= ing=20 companies active in B.C.'s north failed to comply with sewage disposal an= d=20 water protection regulations according to audits in January=20 2002.'"

           Her le= tter=20 then goes on:

           "Further,=20 at the workshops offered by the Oil and Gas Commission on Saturday, March= 8, I=20 listened to the presentation from the Water, Land and Air Protection=20 representative responsible for the draft guidelines for disposal of surfa= ce=20 water for coalbed methane. At first, I was greatly relieved to see string= ent=20 guidelines. Then I heard that these guidelines are minimums and any compa= ny=20 that wishes to exceed them, up to ten times the listed amount, simply con= tacts=20 the Oil and Gas Commission. Of course, the Oil and Gas Commission won't h= ave=20 the staff to deal with these issues, as seen by the article referred to= =20 above.
         &= nbsp; "Why=20 is water protection given over to the Oil and Gas Commissi= on=20 rather than to Water, Land and Air Protection, where it belongs? The answ= er,=20 of course, is to streamline the process for foreign and national oil=20 companies. Who stands to lose from this? The landowners,=20 obviously."

          &nbs= p;Mrs.=20 Terry Webster then goes on to say:

           "Water=20 disposal is just one issue. The extended flaring periods offered under th= e=20 experimental scheme are also of great concern to us as my husband has suf= fered=20 from asthma all his life. When you add that to 'wells at any density,' I = can=20 see that air quality could become intolerable for us in our=20 home.
         &n= bsp; "Next, we add the constant disruption caused by the crews that w= ill be=20 drilling. I have looked at the Alabama slides on the Internet that show= =20 typical well sites, and I cannot imagine our ranch being converted from i= ts=20 present pastoral beauty to that type of industry mess."

           Those = are=20 just some of the examples. Just before I start my questions, will the minis= ter=20 be attending the Hudson's Hope meeting tomorrow?

           Hon= . R.=20 Neufeld: Yes, I will be. In fact, I will be going up to Fort St. John l= ater=20 tonight, so she knows

[ Page 5925 ]=20

my whole itinerary. I will speak about the energy plan that we have in t= he=20 province at the Dawson Creek Chamber of Commerce. I'll be meeting with a nu= mber=20 of first nations over some other issues. I will have some meetings with the= =20 public, some private meetings with some of the people from Hudson's Hope an= d=20 also a public meeting.

           Before= I=20 sit down, as far as public meetings go, I should maybe put on the record th= e=20 number of public meetings we've had in Hudson's Hope. In fact, June of last= year=20 was the first one — talking to the folks at Hudson's Hope about the d= evelopment=20 of petroleum and natural gas in their area, which is inclusive of coalbed= =20 methane. We've had two public meetings in March that were attended by my=20 ministry, Water, Land and Air Protection and Sustainable Resource Managemen= t to=20 bring forward and actually try to answer the people's questions from Hudson= 's=20 Hope.

           I can = tell=20 you that I can understand why some of those people would be concerned after= =20 listening to the environmental law society go through the province trying t= o=20 instil some fear into people. There have been mistakes made in the U.S.A in= =20 development of coalbed methane. I don't defend that at all. That's the Unit= ed=20 States of America.

           We've = had=20 our people to those basins to review what went wrong; why it went wrong. In= =20 fact, at the ministry level we want to do it right also. We want to make su= re=20 there isn't the impact on people — regardless of whether they live in= Hudson's=20 Hope or on Vancouver Island, where there's been a well drilled; or in the E= ast=20 Kootenays, where there have been about 16 wells drilled; or in the Tumbler = Ridge=20 area, where there have been about 11 or 12 wells drilled for coalbed methan= e. We=20 don't want to see unnecessary impact on any of those people or landowners.<= /P>

           We've = had=20 those meetings to bring forward the ministry's viewpoint and to listen to t= he=20 individuals who are concerned about coalbed methane development. I'm going = there=20 to talk to them a little bit more about it and also about the benefits of= =20 coalbed methane and the benefits that could happen in the community of Huds= on's=20 Hope if we, in fact, move forward with this proposal.

[1605]=20

           J.= =20 MacPhail: I have a series of questions that arise out of the government= 's=20 move forward on coalbed methane production. Just to put it in context for t= he=20 people who are listening, in order to get the methane out of the coalbeds, = what=20 is done is that water pressure is applied. Basically, the methane is pushed= out=20 along with the water, so there are water quality issues and water quantity= =20 issues.

           Well,= =20 there's water production produced. I'm fine for the minister's staff to=20 correct.… I'm trying to put it in lay terms here. Feel free to stand = up and=20 correct it. There's water production that arises out of coalbed methane=20 production, which has some concerns around that.

           What w= ater=20 quality issues and problems may arise with the produced water? I think the = term=20 "produced water" is the technical term that arises out of the water that re= sults=20 from coalbed methane production.

           Hon= . R.=20 Neufeld: The member is basically correct in the way she described it. T= he=20 difference is that water is pumped out to release the coalbed methane from = the=20 coal seams. There is a lot of water that has to be pumped before the coalbe= d=20 methane will come to surface, and so there are obviously some issues around= =20 disposal of water.

           [J.=20 Weisbeck in the chair.]

           Depend= ing=20 on where you're at, depending on the geology, some of that water can actual= ly be=20 potable. In fact, in some of the terrible basins in the U.S., some of the= =20 communities are pretty happy, because they didn't have a source of water pr= ior=20 to the drilling for coalbed methane, and now they have potable water. Some = of=20 the water needs very little treatment, and it can be released to the enviro= nment=20 either by spraying it on farmland for irrigation purposes or by releasing i= t=20 into streams — those kind of things — if it's potable water.

           All of= that=20 has to be done under the regulation of the Oil and Gas Commission. You don'= t=20 just pump the water and put it wherever you want. There are those who infer= that=20 that's what happens, but it's not in fact what happens. The Oil and Gas=20 Commission will permit the removal of the water, and they will test the wat= er to=20 make sure it isn't toxic. If it is toxic, it has to be disposed of in a dis= posal=20 well, one that's approved of by the Oil and Gas Commission. That would be a= well=20 that's spent — an old gas well or an oil well, where there are cavern= s 6,000 to=20 8,000 feet below surface, where you can actually pump that kind of water in= to=20 them. It's usually salt water — high in salt quantity.

           It's n= ot=20 very much different from the conventional natural gas industry and the oil= =20 industry. There's an awful lot of water produced out of natural gas wells a= nd=20 oil wells that is disposed of in the same way.

           I'll g= o the=20 U.S. again. When they started drilling for coalbed methane, they obviously = did=20 it a little differently than they do it today. As we move forward, we alway= s=20 learn. The procedure in B.C. is that it's governed under the Petroleum and= =20 Natural Gas Act and also under the Waste Management Act for the water and t= he=20 other things that might be involved with drilling the well.

           They w= ill=20 drill a well, usually about — how many feet, on average, in the Hudso= n's Hope=20 area? — 3,000 feet. They'll drill a well. It's not as large a drillin= g rig as=20 you would use in conventional natural gas or oil. They will then set casing= —=20 that means steel tubing — from surface right down to the coalbed seam= they want=20 to exploit. Then that casing will be cemented, not inside the casing but ou= tside=20 the casing. It's cemented between the soil, the strata that it goes through= and=20 the pipe.

           Then t= here=20 is a smaller pipe put down the centre. What you do is pump the water up thr= ough=20 the larger casing, and through the smaller casing finally will come the coa= lbed=20 methane as you take all the water off. That seals it from the aquifers that= you=20 would be using

[ Page 5926 ]=20

for domestic use — probably wells ranging from 100 feet deep, some= thing to=20 that effect. They're sealed from those domestic water wells.

[1610]=20

           Early = on,=20 when they did it in the U.S., they didn't use casing. They didn't cement it= .=20 They didn't do anything. They just drilled a well and pumped the water out.= =20 Obviously, that was the wrong thing to do. That was 20 years ago. Times hav= e=20 changed.

           There = are=20 places in the U.S. where, actually, communities are pretty happy about the= =20 development of coalbed methane. We should also remember that coalbed methan= e is=20 cleaner than most natural gas. Most natural gas has high quantities of H2S,= =20 poison gas. The coalbed methane does not have that in it and actually, with= very=20 little treatment — in fact, no treatment in some cases — can be= put right in the=20 pipeline for domestic or commercial use.

           J.= =20 MacPhail: How will baseline water quality be determined?

           Hon= . R.=20 Neufeld: Baseline water quality from the well? Is that what the member = is=20 asking?

           Yes, t= hat=20 will be done under regulations that are in place by Water, Land and Air=20 Protection, which the Oil and Gas Commission administers with someone from= =20 Water, Land and Air Protection. That's been going on for some 40 years in= =20 northeastern British Columbia in the drilling of conventional natural gas a= nd=20 oil, so those people have the qualifications to determine what's potable wa= ter=20 and what's saline water.

           J.= =20 MacPhail: Well, I am going to explore some of this in estimates for the= =20 Ministry of Water, Land and Air Protection. It's one of these dilemmas that= =20 British Columbians face, where the minister responsible for the economic=20 activity refers the public to the Ministry of Water, Land and Air Protectio= n,=20 and then we find out it's actually been delegated to the Oil and Gas=20 Commission.

           I=20 understand in this concern that water quality protection is going to be the= =20 responsibility of the Oil and Gas Commission. How will the regulations arou= nd=20 all of this be determined — by public consultation?

           Hon= . R.=20 Neufeld: The legislation and regulations are in place. Maybe I wasn't= =20 explicit enough. We have wells in northeastern British Columbia that have b= een=20 producing water for 40 years that we've been disposing of, testing to find = out=20 how you dispose of it and where you dispose of it. All those regulations ar= e in=20 place. As I said, they've been around for a long time, and they're sufficie= nt.=20 In fact, they're fairly stringent — probably more stringent than our = neighbours=20 just east of us.

           J.= =20 MacPhail: Yes, but I understand that compliance is not great by any str= etch=20 of the imagination. The last…. Well, it may not be the last one ̵= 2; I'm not sure —=20 but the 2001 compliance audit conducted by the Oil and Gas Commission had a= =20 fairly high non-compliance rate in this area. Is the minister aware of that= , and=20 what's being done to improve it?

           Hon= . R.=20 Neufeld: The member has maybe not been informed correctly about that. T= here=20 were some water non-compliance issues that had nothing to do with wastewate= r or=20 produced water from wells. That had to do with working in the oil and gas= =20 industry out in the muskeg, where water trucks — just give me a minut= e, and I'll=20 get it through — actually go to streams and load water to take to the= well,=20 because you need water at a well to drill a well.

           They d= id=20 something wrong in some cases. They pumped water out of streams that they= =20 shouldn't have. They pumped water out of the stream to use in the drilling= =20 process and actually affected some beaver houses. That's something that=20 shouldn't have happened, but it did happen, and those companies had to rect= ify=20 that.

           J.= =20 MacPhail: Yes, I understand that, but thank you to the minister for put= ting=20 it on record. I understand the difference, but there is an issue of turning= ….=20 This is going to be almost self-regulation by the industry, and parts of th= e=20 industry have been shown to be, in other areas of resource extraction, in= =20 non-compliance at a substantial level. The minister says it's not going to = be=20 self-regulation. Perhaps he could put that explanation on record.

[1615]=20

           Hon= . R.=20 Neufeld: It's not self-regulation. There is a set of rules and regulati= ons=20 that they have to live up to. They're fairly extensive as to the tests R= 12; how=20 many tests have to be made, how many gallons or litres or cubic metres of w= ater=20 can be pumped into different wells, which wells it can be pumped into. Annu= al=20 reports and in fact monthly and probably, in some cases, daily reports have= to=20 be made to the Oil and Gas Commission.

           The Oi= l and=20 Gas Commission will monitor that, as they have in the past, and continue to= =20 monitor it. I know they have just recently hired, I believe, another six=20 compliance officers at the Oil and Gas Commission to deal not specifically = with=20 Hudson's Hope but with the industry as a whole, because as we move forward = in=20 British Columbia, there's actually an interest in developing the oil and ga= s=20 industry in the province. It provides well-paying jobs, and there are peopl= e=20 that want to invest in the province. The Oil and Gas Commission, to respond= to=20 that, had to beef up the number of people who work at the commission to be = able=20 to do that compliance testing.

Introductions by Members

           K.=20 Johnston: I have the pleasure today to welcome to the gallery 80 grade = 10=20 social studies students from the largest high school in Vancouver, Killarne= y=20 Secondary. I'm very delighted they have come here under the guidance of Ms.= =20 Nicol, Mr. Koutsonikas, Miss

[ Page 5927 ]

Zogaris and Miss Fransblow. They're enjoying their day in Victoria. They= 've=20 had tours all around the city today and are now here to watch government in= =20 action. Would the House please join me in welcoming this group of great=20 kids.

Debate Continued

           J.= =20 MacPhail: This government has been promoting coalbed methane extraction= …. I=20 guess it was this time last year we were debating this in the Legislature, = and=20 more flexibility was given. Then the regulatory requirements were clarified= , I=20 think, in October of last year. Now legislation is being introduced, but I'= m not=20 discussing the legislation, Mr. Chair. What has been the increased activity= in=20 the area of coalbed methane extraction since this government has been promo= ting=20 it for over a year?

           Hon= . R.=20 Neufeld: There are no commercial activities happening in British Columb= ia.=20 In fact, as I spoke earlier, I believe there are 16 wells that have been dr= illed=20 in southeastern British Columbia by a company called EnCana. That activity = began=20 under the last administration, which you were a part of, that promoted the= =20 extraction of coalbed methane. I believe at that time…. In fact, when= I asked=20 questions about it when I was in opposition, the Minister of Energy and Min= es=20 assured British Columbians that the Petroleum and Natural Gas Act would be= =20 sufficient to regulate the coalbed methane industry. I concur with that. In= =20 fact, it is too stringent in some areas.

           We wan= t to=20 move forward with being able to encourage people to drill in the province. = In=20 the northeast we've had about 11 wells drilled. As we speak — that's = an=20 interesting one — in the southeast the water, with some treatment, ca= n be=20 dispersed into the streams by Water, Land and Air Protection. That's being= =20 monitored. In the northeast it's a little bit more heavy saltwater, and the= y=20 haul the water from Tumbler Ridge all the way north of Fort St. John to a= =20 preapproved disposal well — preapproved by the Oil and Gas Commission= with heavy=20 compliance. Those kinds of things are happening as we speak in the province= , and=20 there's interest in the Princeton area, as we speak, about developing coalb= ed=20 methane there also.

           Maybe = the=20 other part I neglected to talk about earlier is the consultation process th= at=20 goes on prior to the drilling of coalbed methane and what happens in the Oi= l and=20 Gas Commission. This is a bit in response to the letters the member read in= to=20 the record. I appreciate that she did that.

[1620]=20

           The=20 district of Hudson's Hope. I think there have been four land sales in the= =20 district of Hudson's Hope dating back a number of years, 2=BD years —= four=20 different sales. The consultation that took place with the community, with = the=20 district of Hudson's Hope, with the mayor and council varied anywhere from = 14=20 weeks to 62 weeks with the council. Actually, in the consultation process= =20 through the mineral titles branch, the community asked that some areas be= =20 removed from the sale prior to the sale, and in fact, we complied with that= . We=20 have worked closely with the community of Hudson's Hope on which parcels sh= ould=20 be put up for sale.

           There'= s a=20 two-step process. You have to actually communicate and consult with the fir= st=20 nations. That's a requirement, and we do that before the land is put up for= =20 sale. We also communicate with the community that would be affected. In thi= s=20 case, it happened to be Hudson's Hope. In other regions it could be the reg= ional=20 district that you communicate with.

           Those = are=20 fairly lengthy consultations that go on — 62 weeks — before you= actually have a=20 land sale. After that, that doesn't mean you can just go ahead. You still h= ave=20 to have consultations again with first nations. That's done with the Oil an= d Gas=20 Commission and the proponent. You also have to have negotiations with the= =20 communities that would be affected. When I spoke earlier about the meetings= in=20 March — in fact, as far back as June of last year and into March of t= his year —=20 they are responding to those kinds of consultations. Then the proponent has= to=20 have his or her own consultation with the communities and with first=20 nations.

           What I= 'm=20 trying to say here is that there is an awful lot of communication with the= =20 people that are affected in the area and with first nations. Once the propo= nent=20 has had those consultations, they may or may not be awarded a right to dril= l on=20 the land that they purchased the right to drill on. There is a pretty=20 significant process that has to be undertaken by the proponent, by the Oil = and=20 Gas Commission and by the communities.

           I shou= ld=20 also put on the record that during the 62-week consultation process with th= e=20 district of Hudson's Hope — the member read into the record that land= owners=20 didn't know this was going to take place — the mayor and council were= kind=20 enough to mail a letter to every landowner that was affected in the distric= t of=20 Hudson's Hope, letting them know what was taking place, so they actually kn= ew=20 that was happening. That was two years ago or a year and a half ago.

           We thi= nk we=20 have done a pretty good job of consultation. As I said earlier, there are= =20 obviously some fears out there. When people start going around the province= =20 instilling fear in people about what happened someplace else or whatever, f= or=20 whatever reason they want to do that, it's certainly understandable why peo= ple=20 would want to have more information.

           That's= one=20 thing this ministry is all about and the Oil and Gas Commission is all abou= t. We=20 have websites. We have everything on the website — the land sales, th= e areas,=20 where they're happening, when they're happening, all those kinds of things = — to=20 try and consult with both aboriginal and non-aboriginal communities.

           J.= =20 MacPhail: In the fine tradition of all previous Ministers of Energy tha= t I=20 know, the minister is filibustering his own estimates. That may be the pass= ion=20 he has for all of this. Certainly, previous Energy ministers

[ Page 5928 ]=20

that I've worked with filibustered their own estimates as well.

           The=20 minister is quite correct. Nine experimental projects are underway, but the= y=20 were established as experimental projects. This government is going to get = into=20 the business of coalbed methane extraction in a substantial way.

           I want= ed to=20 ask the minister…. I know that EnCana is working with Fording Coal, a= nd of=20 course, they've arranged their own price cut on that. The government is now= =20 going to become the middleman in those kinds of arrangements. What other=20 companies actually have expressed interest in coalbed methane extraction? A= s a=20 layperson, I know there's a huge untapped resource already available for=20 extraction in natural gas. What other companies have expressed interest?

[1625]=20

           Hon= . R.=20 Neufeld: There are quite a number of companies — EnCana, Anadarko= , Talisman,=20 Fording Coal, now Teck Cominco — that have interest in developing coa= lbed=20 methane on their freehold land. There's Devon. There are quite a number of= =20 companies that are very interested in the development of coalbed methane.

           J.= =20 MacPhail: Well, I understand that there's a substantial reduction in th= e=20 royalty payments between natural gas and coalbed methane. I actually have t= he=20 details of…. I always feel the necessity to do this so that the publi= c can=20 understand that royalty is a method of taxation the industry pays to the=20 government. The difference — paying less royalties for coalbed methan= e=20 production — is really a subsidy. In this particular case, there is a= =20 substantial subsidy being offered to coalbed methane extraction companies f= rom=20 those who might actually produce natural gas. Why is that?

           Hon= . R.=20 Neufeld: Yes, there is a difference between the royalty that would be p= aid=20 on coalbed methane as compared to conventional natural gas. There's also a = time=20 frame that we had in the legislation that, because of the large upfront cos= ts=20 before you can have a project commercialized — that means into produc= tion — they=20 have a royalty credit up until, I think, February 2004 of $50,000.

           J.= =20 MacPhail: Why is there a substantial reduction in the royalties for coa= lbed=20 methane? Isn't that a subsidy?

           Hon= . R.=20 Neufeld: No it's not, because it's across the whole industry. There are= =20 different royalty rates for different production of different oils.

           The me= mber=20 may not remember, but during her administration there was quite a huge redu= ction=20 in a field called the Hayfield for oil to actually encourage the developmen= t of=20 that oil in that region because of the cost of developing it. It's not unco= mmon=20 to do those kinds of things. It's not a subsidy; it's across the whole coal= bed=20 methane industry.

           The me= mber=20 laughs, but as I said, under her administration they did a number of those = kinds=20 of things also. Maybe it was funny then — I'm not exactly sure —= ; but it was to=20 try and get some investment going in some of those areas.

           There = are=20 other things that you can do, also, to change the rate for natural gas in a= reas=20 that are high cost — maybe deep wells or maybe shale gas or anything = like that.=20 You can actually encourage the development of it. It creates economic activ= ity=20 in the province. It creates jobs — in fact, really good-paying jobs.<= /P>

           The me= mber=20 may not have been here, but we talked about the amount of royalties that ar= e=20 coming to the province. This year they're expected to be about $1.7 billion= in=20 royalties from oil and gas. That all goes to pay for hospital care and for= =20 schools and all those types of things. It's actually a good industry, and w= e=20 need and use those products every day in our daily lives.

           J.= =20 MacPhail: I don't need a sales pitch. My point is this: this is a gover= nment=20 that said there would be no subsidies to industry. My government gave subsi= dies=20 to industry for the very reasons that this minister is now spewing off as h= is=20 own.

           My=20 government gave subsidies, and this minister is standing up and saying: "We= 're=20 doing exactly the same thing." The answer is: you're right. The minister is= =20 finally telling the truth. He's doing exactly the same thing. He's giving= =20 subsidies to industry.

           This i= s a=20 subsidy. It's a subsidy that spreads across the coalbed methane industry. I= t's=20 gas extraction. It's to promote the royalties that will be paid across the= =20 coalbed methane industry at a lower rate than natural gas extraction. It wa= lks=20 like a subsidy, smells like a subsidy and drills like a subsidy. It is a=20 subsidy.

[1630]=20

           The=20 minister stands up and says: "Well, your government did it too. Maybe the m= ember=20 didn't remember that." I do; I acknowledge it. It gave huge impetus to the= =20 industry. In fact, thank God, in the 1990s there was such expansion of the = oil=20 and gas industry because of targeted help to that industry directly. Thank = God,=20 because we would be in a terrible economic situation today without that=20 expansion of the industry. It was targeted help from the government to the= =20 industry. That's called a subsidy.

           This= =20 government is carrying on doing exactly the same thing, except that they sa= y=20 they're not. In fact, they are. They're subsidizing the coalbed methane=20 extraction industry to the tune that the coalbed methane, in some circumsta= nces,=20 will be paying only three-quarters of the royalties that conventional gas p= ays.=20 In some circumstances coalbed methane will only be paying half the royaltie= s=20 that natural gas extraction pays. In some circumstances…. No, that's = half too.=20 They're getting a subsidy by this government of anywhere from a half to a= =20 quarter reduction in their royalties. That's a subsidy.

           Hon= . R.=20 Neufeld: It's not a subsidy when it's across the whole industry. There'= s a=20 significant difference. We

[ Page 5929 ]=20

just went through half an hour talking about coalbed methane extraction = as=20 compared to conventional natural gas extraction. It's completely different.= What=20 we have done is put a royalty process in place that will encourage the=20 development of coalbed methane across the province of British Columbia. We = put=20 it across the whole industry.

           When t= hat=20 member was part of government, what they did was target different companies= =20 doing the same work. That's different. That is pure subsidy to one company.= =20 There is a huge difference in what we have done here, and the member may no= t=20 like it, and that's fine.

           It's n= ot a=20 subsidy as far as I'm concerned. She says it's a subsidy. Listen. What we o= ught=20 to do is get on with the business of creating the jobs in the province of= =20 British Columbia, get on with creating wealth, actually make some money for= the=20 province and put people to work so that we can continue to pay for health c= are=20 and education.

           J.= =20 MacPhail: Well, thank God all of this wealth was created in the 1990s,= =20 because it's the only thing that's keeping this government going now, by th= eir=20 own admission. It's the only thing working. I just asked the minister to te= ll me=20 how, under his great government, coalbed methane extraction has expanded. Z= ero.=20 None. So, thank God for that awful decade of decline — that decade of= decline=20 that greatly expanded resource extraction, oil and gas extraction. Thank Go= d the=20 previous government actually did some experimental projects. This governmen= t's=20 achieved absolutely nothing.

           The=20 minister tries to say: "No, it's a completely different industry. It's not = a=20 subsidy." Boy, I'll tell you, "How many angels dance on the head of a pin?"= =20 would be an interesting question to ask this minister. See how he can dance= his=20 way out of that one.

           The=20 Petroleum and Natural Gas Act regulates coalbed methane and natural gas bec= ause=20 they're like products. If the minister wants to change that, good. But unti= l he=20 does that and goes against what the rest of the world actually defines as w= hat=20 natural gas is, which includes coalbed methane extraction, it's a subsidy. = The=20 reduction in the royalties is a subsidy — full and straight up.

           I'm ve= ry=20 happy, actually, to use targeted tax relief for industries that do create j= obs,=20 but it's hypocritical of this government. That would be nothing new, but to= hide=20 their hypocrisy is pretty new. They take great comfort in their arrogant,= =20 overwhelming majority to actually not even bother to hide their hypocrisy. = In=20 this case, the minister is trying to hide it.

[1635]=20

           Hon= . R.=20 Neufeld: Again, if there was ever an arrogant government, it was the on= e=20 that just got booted out of the province of British Columbia and ended up w= ith=20 two people in this House.

           I will= =20 again state for the record — and maybe the member may concur, and she= may not —=20 that the royalty rate for coalbed methane is across the whole industry of= =20 coalbed methane. That, in my view, is not a subsidy but is an incentive to = get=20 the industry started, to get it working so that we can actually generate so= me=20 jobs and some activity in the province. I think that's good news for Britis= h=20 Columbia. I think we should look forward to that with a lot of joy. I think= we=20 should look forward to an expanded mineral industry in the province and to= =20 well-paying jobs and the taxes that that industry pays.

           I'm re= ally=20 happy to hear the member concur with me that the extraction of coalbed meth= ane=20 is very important to the province. She thought it was important when she wa= s in=20 government. She still thinks it's important to the province of British Colu= mbia.=20 With that in mind, I think we should move forward.

           J.= =20 MacPhail: On July 29, 2002, this minister released a news release sayin= g:=20 "Fees Eliminated to Help Foster Oil and Gas Development." Fees eliminated w= ill=20 be: "Pipeline plan approval, compressor or pump station specifications appr= oval,=20 compressor or pump station annual inspection, farm tap installation whether= or=20 not drawings are approved by the chief inspecting engineer, issue of certif= icate=20 under section 2 of the Pipeline Act, Surveyor General examination of well s= ite=20 plans."

           Can th= e=20 minister update the Legislature on how this has been a benefit to the=20 industry?

           Hon= . R.=20 Neufeld: Actually, again we're talking about the Oil and Gas Commission= ,=20 which is fully funded by the industry. The taxpayer of British Columbia doe= s not=20 fund the Oil and Gas Commission. How it's funded is through fees from=20 industry.

           As I s= aid=20 earlier, each well drilled costs so much money. Some of that's used for=20 consultation with first nations and operation of the business. The other po= rtion=20 is given to first nations so they can build some capacity. The Oil and Gas= =20 Commission was fully funded, in fact, in a surplus position. The small amou= nt of=20 money that all those fees brought — and all the work that went with m= aintaining=20 them, with all the paperwork that goes with them — had nothing to do = with=20 reducing how careful we are about the environment. It was just a way —= ; I guess,=20 instituted maybe by the last government…. In their own way, they thou= ght they=20 would be getting more money.

           But we= =20 don't get money from the Oil and Gas Commission. The Oil and Gas Commission= is=20 fully funded internally by the industry, not by the people of British=20 Columbia.

           J.= =20 MacPhail: I'm getting a sense from the tone of the minister that he doe= sn't=20 like being asked questions. That was just a straight-up question. I'm not q= uite=20 sure why he has to get so antsy about it. I could actually try to do it in = the=20 same way that the sheep do, which is praise him first about all the great w= ork=20 he's doing, and maybe he'd be a little less petulant. I'm just collecting t= he=20 stuff, doing my job, Mr. Chair. So maybe he could just….

[ Page 5930 ]=20

           What i= s the=20 update from the Oil and Gas Commission about the extra economic activity=20 generated by this?

           Hon= . R.=20 Neufeld: Again to the member, if she's talking about the same fees and = the=20 reduction of those fees, it had nothing to do with encouraging the industry= . It=20 had everything to do with uncomplicating a process that had, actually, no= =20 bearing on what was happening at the Oil and Gas Commission. It is funded 1= 00=20 percent by the industry.

           The=20 industry fees that go into funding the Oil and Gas Commission were sufficie= nt.=20 In fact, the Oil and Gas Commission has a surplus as we speak today. So the= re=20 was no need to do those kinds of small things. If there needs to be more mo= ney=20 going into the Oil and Gas Commission to operate it, there are simpler ways= to=20 do it — by increasing the levy on natural gas and oil produced that w= ould=20 actually fund the Oil and Gas Commission.

           All we= were=20 trying to do was to remove some needless red tape from the system and conti= nue=20 on with having those compliance officers or those people who were working i= n the=20 commission doing all that red tape and processing that paperwork, actually = out=20 doing the work that they should.

 
http://www.= legis.gov.bc.ca/hansard/37th4th/h30402p.htm
 

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