The Nova Scotia Legislature

The House resumed on:
September 21, 2017.

Public Accounts Committee -- Wed., May 23, 2001

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HALIFAX, WEDNESDAY, MAY 23, 2001

STANDING COMMITTEE ON PUBLIC ACCOUNTS

8:00 A.M.

CHAIRMAN

Mr. Howard Epstein

MR. CHAIRMAN: Good morning. We are going to call to order this meeting of the Standing Committee on Public Accounts. Today our business is to hear from representatives from OTANS which now stands for, apparently, the Offshore/Onshore Technologies Association of Nova Scotia. I would like to welcome our guests today. With us we have Mr. Bill Johns, who chairs the board and along with him, I believe, Mr. Paul McEachern, Mr. Troy Ritcy, Tim Brownlow, Jay Abbass - welcome, Mr. Abbass, it is nice to see you back here in this Chamber - we have Ray Ritcey and Russell Yates. Did I get everyone who is here with you Mr. Johns, is that right? Did I miss someone?

MR. BILL JOHNS: I think we are missing two but they should be joining us.

MR. CHAIRMAN: All right, that's fine, thank you. Of course, along with us today is the Auditor General, Mr. Roy Salmon. Our normal method of proceeding is to invite our witnesses to make an opening statement, if they wish. Following that we will move to questioning by members of the committee. The way that is done is we will move through the three caucuses and they will ask questions for a period of 20 minutes each and we will do that after your introductory statement. Mr. Johns, do you wish to make a statement to us?

MR. JOHNS: Yes, thank you. Mr. Chairman, members of the committee, thank you for this opportunity to share our thoughts on the direction of both the offshore and onshore oil and gas industry here in Nova Scotia. Let me begin with some introductions. As pointed out, my name is Bill Johns, I am the current Chairman of OTANS. Joining me this morning are: Troy Ritcy, Vice-Chairman; Tim Brownlow, who is our past chairman; Jay Abbass, who is a member of our executive committee; Ray Ritcey, who is also here as an executive committee member; and Ian Tillard, who isn't here as yet, chairs our Regulatory Review Committee; and of course, Paul McEachern, who many of you already know, is our managing director.

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This morning we want to talk to you about the state of both the offshore and onshore oil and gas industry here in Nova Scotia, where we see it going and where we see opportunities for government and business to work together to enhance our economic future. First let me provide you with some background on OTANS.

The Offshore/Onshore Technologies Association of Nova Scotia was formed in 1982 to help Nova Scotian companies and their employees access opportunities brought on by the exploration on the Scotian Shelf. The size of the membership of the association is a good economic barometer of the growing importance of the sector. Just a few years ago, OTANS membership was 115. Today there are over 420 Nova Scotian companies, employing over 40,000 people involved in some capacity providing goods, services and expertise to the energy sector in the province.

Our role is multifaceted. We act as an advocate for the Nova Scotia oil and gas business interests, we work closely with government in promoting investment in the oil and gas industry. The most recent example of that co-operation was the trade mission to Houston earlier this month, led by Premier Hamm. It was the largest such mission to date with more than 68 companies participating and 170 individuals. This is a record and it just gives you an idea of the level of interest of Nova Scotia businesses and these types of trade missions. The government's participation in these trade missions is very important to us; it helps open doors and it facilitates the opportunities as they arrive.

As a follow-up to that, two members of your committee, Mr. Downe and Mr. Holm, were part of the Nova Scotian delegation. We are aware of several successful agreements by companies as a result of that mission, and we will have more to say on those as they are ready for public announcement.

This morning I want to briefly review where we are as an industry from the OTANS point of view, then I would like to provide you with our perspective on what needs to be done by all stakeholders, including business within the oil and gas industry, government, and the public, to ensure we maximize the economic benefits for our province.

Where we are - 2001. Today Nova Scotia, and indeed all of Atlantic Canada, is the focus of a large wave of interest and activity in the energy sector. Geology, geography and economics have all collided to offer Nova Scotia its best economic opportunity since Confederation. The news is full of promising developments. You have heard a lot of these before, but I will review some of them.

Tier 1 of Sable is currently pumping 500 million cubic feet a day. The SOEI partners are now on the verge of proceeding with the development of Alma, the fourth of the planned six gas fields. PanCanadian wants to have gas producing from Deep Panuke by 2005. Maritimes & Northeast has plans to add compression and looping to almost double its capacity to both domestic and U.S. markets. There are at least three proposals on the drawing

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board to add more transmission pipeline capacity to markets. Sempra Atlantic Gas has been awarded the franchise to distribute natural gas in the province and has begun to roll out the distribution system in the Halifax Regional Municipality.

Then there is the exploration phase that is picking up steam. We are in a very under-explored area of the world. Let me put this in perspective. This year about 15,000 wells will be drilled in Western Canada. In the past 30 years only about 150 wells have been drilled on the Scotian Shelf; that's about one for every 500 square miles. So it's clear the real work of the exploration and discovery has yet to begin.

So what lies ahead? We have estimates of offshore potential of up to 100 trillion cubic feet (TCF). Keep in mind that Sable has 3.5 TCF in recoverable reserves. So the potential is certainly there and it's clear the industry is willing to spend the dollars to find that oil and gas. Oil companies have currently committed $1 billion over the next five years.

Then there's the Deep Panuke project, PanCanadian's, and PanCanadian's project is encouraging on a number of fronts. First of all, the company is budgeting $1 billion of private money to bring the field and its 1 TCF to shore by the middle of the decade. But it is just as significant that the discovery is on a different geological structure than the Sable project.

On top of that, the quality of companies taking a financial stake in the potential is another encouraging sign. We have a blue-chip portfolio of companies. Names such as Marathon, Kerr McGee, Anadarko, British Petroleum, Richland Minerals, ExxonMobil and Shell. They are well known where it counts: the boardrooms of Houston and the trading floors of Wall Street. When these companies take a stake in a play, the rest of the industry stands up and takes notice.

If you recall, before the ExxonMobil merge, Mobil had come here and talked about its 125 projects that it had worldwide competing for internal funding. Several times over that period, the Eastern Canada oil and gas sector was referred to as one of their "Magnificent 7", one of their crown jewels, and that is an important one.

More companies are now checking out their own prospects for investment in Atlantic Canada; that's good news. One measure of our success should be how many new companies, both large and small, are coming to Nova Scotia or are being developed by Nova Scotia companies to participate in this industry.

ExxonMobil is looking at drilling as many as nine wells over the next four years in the waters around Sable. Geologists with the Petroleum Directorate believe they have a good chance at making three significant discoveries. Marathon is moving exploration into deeper waters, with drilling planned for the last quarter of the year and this is really important, this is the first deepwater well off Canada.

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PanCanadian has 15 projects of their own which they are going to be drilling over the next few years. I think there is a total of something like 50 wells going to be drilled off the province, 20 of which are deepwater. The PanCanadian well project adds up to a further $500 million investment on top of the money already earmarked for Deep Panuke. Shell, too, has plans for a well this year.

Despite the advances in exploration technology, drilling a well is still an expensive gamble. Here is how the geologists at the Petroleum Directorate estimate the odds: a 1 in 3 chance of discovering a pool of 100 BCF; a 1 in 5 chance of striking a field with the reserves of 300 BCF. The fact is there are no up to date, definitive estimates of the potential for the region. Only more seismic, and drilling and hopefully, more discoveries will flesh out these real numbers.

If you recall, other than Deep Panuke, the last major discovery that was made here was in the 1970's and 1980's. We need these exploration projects and we are seeing encouraging signs of 3-D seismic activity taking place at an increasing pace, and it is going to be sustained over the next few years. These are all precursors to drilling, and hopefully for their production.

What we do know for certain is drilling to date has found 200 million barrels of oil and 6.3 TCF of gas. Obviously the oil companies believe there's a lot more out there waiting to be discovered and developed.

Now let's see what all these numbers could add up to. The Petroleum Directorate's geological staff sees as many as six opportunities unfolding over the next 10 to 15 years:

1. Sable: with three of the six fields in operation, and work on Alma progressing, all of Tier 2 could be operating by 2006-07.

2. PanCanadian is expected to file a development plan this fall for Deep Panuke. Production is expected by 2005.

3. Recalling the 1-in-3 odds around Sable, the Directorate expects to see a twin of the current SOEI project.

4. The Deep Panuke discovery is on a carbonate bank that extends for 375 miles; therefore a second such discovery and development in the coming decade is considered likely.

5. Because of its geological similarities to the Sable Sub-basin, the government's geologists are providing at least one project-size discovery in the Laurentian Sub-basin.

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If you recall the Premier's remarks yesterday at the press conference - this is not news, it has been referred to before - the Laurentian Sub-basin is estimated to have three Sables and a Hibernia in it, just to put it in laymen's terms as far as the size.

6. Finally, with the more than 20 deepwater exploration blocks and the advances in deepwater technology, a project-size discovery is considered a high possibility.

Onshore exploration is at the very earliest stages. But there are plans underway by such companies as Northstar and Hunt for exploration this summer. I will come back to other onshore opportunities and challenges in a moment.

That is a snapshot of what could happen. Our job, as business leaders and citizens, and your job as legislators, is to turn that theory into reality. Making the most of the unprecedented opportunity now facing Nova Scotia and the entire East Coast is not a foregone conclusion. We have to recognize that we can all do a better job of working together to achieve the desired end. The objective should always be to take Nova Scotia from a project-driven, start-up oil and gas industry to a stand-alone, sustainable world-class oil- and gas-driven economy. Another objective should be to achieve the similar kinds of benefits currently being realized by our sister province, Alberta.

Many times over the years, whether you are talking about Halifax or Saint John's, Newfoundland, they have been compared to where Aberdeen, Scotland, and Stavanger, Norway, were 30 years ago. If you take a look at similar climatic conditions, fishing-based economies, they are kind of depressed, the size of the populations were more or less similar, and you take a look at where Aberdeen and Stavanger are now. They have moved ahead in leaps and bounds, they are world-class cities, their labour force is highly skilled. There are good, well-paying jobs in a sustainable, long-term industry that has taken their dependence off the fishery.

Recent moves by government are a recognition of the work left to be done in this regard. The Premier's Campaign for Fairness has had the strong support of the OTANS board and membership. We have helped spread the word on the need for our fairer share of the royalties. For example, we co-sponsored the launch of the campaign and set up a second speaking engagement for the Premier in Sydney to explain the aims of the campaign.

OTANS representatives went to Calgary to support the Premier when he met with the industry leaders in that city. OTANS has pledged to continue to assist the government on this campaign, because we believe that the issue transcends politics. It is a matter of importance to all our members, not just as business leaders but also as citizens. The need to refocus our attention to improve the standard of living of Nova Scotians is clearly a major goal of the recently launched energy strategy process.

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The trend across North America and around the world has been to develop, implement and monitor energy strategies and policies that achieve desired social objectives. Nova Scotia cannot afford to get these strategies wrong. We do not have the financial strength to rebound from mistakes. That is a well known fact.

I want to take you through some of the issues and challenges that now face the province, if we are to take full advantage of this unprecedented opportunity. We will have a more detailed set of comments when we submit our recommendations to the panel overseeing the design of the strategy. Some of our formal comments will include the following: the need to support business efforts at increasing our share of the benefits; the necessity of ensuring we have a globally-competitive fiscal regime; a massive streamlining of the regulatory process; and the perception or reality of a shortage of skilled workers.

Let's move to another area here and talk about the benefits picture a bit. It is a given that all of us want to see more and more of the work and spinoffs from the energy sector done here in Nova Scotia. We want the technology transfer; we want the work; we want the employment; the indirect spending, everything that goes along with it. Already OTANS members have built a considerable résumé of accomplishment, supplying goods, services and expertise. Now we are working at improving our performance and ensuring that the local economy continues to see an upswing and spinoff activity as a result of what is happening.

However, no one really knows for certain what the economic impact of the energy sector is on the Gross Domestic Product, GDP, of the province, nor do we have any definitive way of addressing the positive impact it is having on our businesses, their employees or even the taxation revenues of the government.

We do have some numbers. The energy strategy discussion document reports the SOEI exported just under $1 billion worth of natural gas in its first year of production; $1 billion, that is a lot of money. Royalties to the province came in around $12 million. These will grow as investors pay down the cost of constructing the project. Again, in layman's terms, if you take a look at the size of that $1 billion, which is growing, it is bigger than Michelin's, it is my understanding from informal discussions with government members, it is rivalling Tourism, and it has a steeper curve and potential than Tourism does in the province. Stop and think about those big three.

The potential is here for the oil and gas. I am sure you are all well aware of it, but we have to move things forward. The official numbers on the Nova Scotian content, Tier 1 of Sable for example, show a 34 per cent of expenditures, or about $740 million, was spent in the province. But, there is no overall picture of what the industry means to the economy today, and no hard numbers on what the industry could mean to Nova Scotia. This is essential. It is a move-forward driver, we need it. It is needed before you can even begin to do effective planning on what the province should strive for as the industry matures and expands.

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Just digressing here for a minute, one of the things that we are told, because of my day job we do business both in Newfoundland as well as in Nova Scotia, if you take a look at the benefits reporting requirements that are in Nova Scotia, they are much more onerous than they are in Newfoundland. That is just reporting. We are so driven by this reporting process we have and sometimes I am not really sure whether or not the tail is wagging the dog on this one. It is an impediment to doing business. It is not a showstopper but it is a significant one, one that has been registered to us from our member companies and from some of the operators as well.

OTANS, when we talk to the energy sector here, I will have a few comments on that, we are going to be limiting our comments to the oil and gas aspects of the policy because that is what our members have charged us to do.

OTANS believes that the energy strategy should become a living document which lays out where we want to go in detail, with specific plans on how we reach these targets. In other words, do the math and then devise a truly realistic, measurable, industrial strategy for the development of the local side of the energy sector. This means real co-operation between government, industry, labour and the research and development community. Should we, for example, set a target of fabricating the majority of project work here by 2003? Perhaps it is time to put a petroleum engineering program in place at DalTech. Issue a policy to utilize natural gas as an economic engine for attracting new business to the province and for ensuring that existing businesses and homeowners significantly utilize the fuel of choice around the world. Make the strategy clear, accountable and realistic.

Let's talk about a competitive fiscal regime here for a few minutes. This is a complicated but critical component of ensuring we expand. I am not here today to advocate tax cuts, but you must take the long-term view. The average time cycle of a project, from mineral rights acquisition to the gas coming ashore is in the range of 7 to 10 years. That number is coming down with technology, of course, but right now it is in the 7 to 10 year range.

Companies must be able to have stability in understanding the costs of doing business. Stability, that is a key word. Set your royalty regimes, establish the tax regime to ensure you maximize public benefits and stick to them. Measure and track the results to ensure optimization. Such numbers go into the analysis of whether developing a Nova Scotia project is going to give companies a reasonable rate of return. We can't go changing the rules after they are set in motion. When you are coming back and you are trying to get more money out of a company after the project is up and running, it doesn't send out good messages. It is kind of like, you go and you buy a car, we agree on a price, a delivery schedule and a payment scheme. Then a year later, the dealer comes back and wants more money. That's not the way you do business, that's not the signal we want to send out.

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Remember, we aren't the only place in the world where they can invest. You have heard this before. Yes, we want the public to get a good rate of return for the use of the public's resources but changing the rules once the game is underway sends out the wrong signal. I refer to the example I just gave you. You may get more from a project now underway, but the fact that you changed the rules on one project may mean you lose another one or you hinder another one that may be on the drawing board.

Let's talk about the streamlining of the regulatory process here for a minute. In your information packages that should be handed out - I don't know how many of you are familiar with this slide that was developed by Sable. It shows 11 or 12 different agencies, boards, regulatory authorities, et cetera, the hoops companies have to jump through. It is a complicated affair, it is a messy affair. The amount of regulation is increasing. Everybody is using the streamlining words, but it is not happening folks, it is not happening quickly enough.

The questions of where, how and who should provide regulatory oversight to the entire industry is a complicated and sensitive issue. Oversight is required to protect the public interest. We support this notion. However, in Nova Scotia and in Atlantic Canada in general, there is a significant need for government and the regulatory agencies to better work together to streamline these underlying processes and enable a clearer picture of accountability. If you look at that slide again, you are going all over the place to buy that car.

While we will not speak to all aspects of where the regulatory oversight may be streamlined, we will speak to several instances where significant improvement is required in both offshore and onshore oil and gas in Nova Scotia. There are a number of regulatory issues that need to be addressed. These are presented in a proactive framework in order to present some ideas for the future. I will just talk about some lingering issues here that need to be addressed specifically. I have got about six and no more than eight or nine.

1. There is an obvious need to determine and confirm jurisdictions between departments for both federal and provincial agencies and resolve any differences and rationalize where overlap exists, i.e., getting the CNOPB and CNSOPB who have largely the same mandates but their trickle-down effects of the regulations are quite different. We have to get them to act more together.

2. Streamline the regulatory review and approval process. This may require new approval procedures that assign accountability to see approval through the entire process. There may still be interdepartmental jurisdictions and have the same approval steps required, but the overall procedure needs to be overseen by one identifiable body or person.

3. Improve or initiate the early warning or early planning for approvals at the conceptual stage of projects. Perhaps this means creating a regulatory road map at the onset of each project. This should include the participation of all stakeholders and should assign

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specific individuals within each stakeholder group to ensure early intervention. They need clear mandates.

4. Promote interprovincial co-operation. Become active in identifying areas that require co-operation and identify responsibilities and procedures that will resolve issues. Yesterday's boundary issue was one; labour shortages, regulatory overlap, promotion of the East Coast Canada region are a few examples.

5. Monitor and review the pace of development in other jurisdictions. They are our competitors for new investments. We can also learn from their approach and experiences. We are a global industry and people are getting tired of hearing that, maybe some are and some aren't, but we are, we are competing for the oil investment dollars, whether we are talking Russia; whether we are talking Africa, the current hot spot; or Brazil; Indonesia, wherever you want to talk about, we are in a global position here and we have to look at it that way.

6. Resolve the issues that are holding up the development of gas distribution in Nova Scotia. Why is our gas being used by domestic and export customers before us? The current situation is doing enormous damage to the potential implementation of the onshore gas industry in Nova Scotia and may have been prevented with early intervention at the government and regulatory stages with all stakeholders participating. The path forward is not clear, but there may be a facilitating role for the provincial government to bring the agencies, distribution companies, gas commodity marketers and energy services providers into alignment.

7. The Government of Nova Scotia must become a champion of the onshore natural gas distribution and service industry. Look to other jurisdictions for example of how they ensure their local industries developed and thrived. Alberta, Aberdeen, the lower 48 States, all utilize natural gas as their primary fuel source. Does the government want Nova Scotia gas to drive the Nova Scotia gas economy or would they rather see it flow to our neighbours down south? OTANS strongly encourages you to roll up the sleeves and solve the problems here.

[8:30 a.m.]

8. Actively support and facilitate consultation between the oil and gas industry, government agencies and the fishing industry. The hearings stage should be considered the latter stage of consultation and should be the culmination of successful prior discussion. This should not be a project-based activity, but should be ongoing. This is likely best accomplished with professional facilitation. This should also be an activity that is conducted with the First Nations in Nova Scotia.

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9. Identify what kind of resources will be required to effectively implement a streamlined regulatory regime. Commit the resources required to oversee, execute and expedite the process. In this particular case, you know, to refer to one of the offhand examples I gave here a little while ago about tourism, fisheries and Michelin and comparing the size with oil and gas here in the province, tourism, yes, is growing, but it is not growing anywhere as fast as oil and gas. Within the Civil Service in the province here, there are 200 employees in Tourism. The Petroleum Directorate, I understand, is around the 30 mark, 25 to 30, and I will talk a little bit about that afterwards.

Let me give you a couple of examples of what we are talking about. The Newfoundland and Nova Scotia accords are mirror legislation. They are virtually identical, but when it comes to how they are interpreted, it is another story. Take the case of synthetic-based drilling muds. In Newfoundland drilling muds don't need to be taken back to shore. In Nova Scotia they have to. The difference can add up to $5 million to the cost of drilling one well in Nova Scotia, and that is a sister province. On an offshore well they have a $5 million advantage. It is a big one. How people with similar scientific backgrounds can come up with such different views on our environmental production is a mystery, but it is no mystery when it means it costs more to drill here than in Newfoundland.

Another case is benefits reporting. I talked about this one a little earlier. The oil and gas companies and OTANS see more paperwork in Nova Scotia than in Newfoundland, but it is questionable as to its real value. As I mentioned earlier, despite the more stringent benefits reporting practices, Nova Scotia still has no real overall picture as to the economic value of the sector. In formal discussions we have had over time, most recently down in OTC, it has been suggested by more than one or two people with related interest in the business that we are so focused in Nova Scotia, I think, on filling in the blanks on this benefits reporting issue that we are sometimes missing the forest for the trees. There is a lot to be said for focusing on the process, early education of the companies, encouraging them to get out there and JV, to get the ecology, get the resources they need early in the process to sell their wares to the oil patch because they are competing globally.

OTANS believes that the economic benefits, worker safety and protection of the environment are all in need of continued enforcement. We are not advocating a dilution of enforcement in any of those areas, but there are over a dozen regulatory agencies involved in overseeing offshore and onshore development. Again, I point to the handout that we gave you. We strongly encourage the governments to develop a specific initiative focused on streamlining the regulatory process with the objective of improving the foundation for attracting and developing businesses in and around the province.

Let's talk briefly to the labour issue, the labour question. The very fact that we are even debating whether Nova Scotia has the number of skilled workers needed speaks to the profound change in our economic prospects. The fact is that with the development of Alma,

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Deep Panuke and the White Rose field over in Newfoundland, the pace of offshore development is rapidly accelerating. These are long-term projects. We have gone from the early stuff where we have done the initial 2-D and 3-D seismic work, you have done the exploration work, now you are moving into the phase where you are talking about a project here with 15, 20, 25 years of continued employment. There is kind of four phases and things and these three projects out there right now are in the mature phase. They have gone through those earlier three phases and now they are in the long-term phase.

The rollout of the planned Sempra Atlantic gas distribution system and the development of a viable onshore gas industry require new and skilled technical resources. Mr. Larry LeBlanc of PanCanadian was the first to raise the question publicly last year. The question is, do we have the people in numbers and skills needed to take on these projects? Well, the answer is somewhat ambiguous. Partly in response to the question, the Nova Scotia Government commissioned a detailed examination of the fabrication and infrastructure capabilities. Fourteen major fabrication facilities were part of the study, as well as all of the relevant labour unions.

I am oversimplifying, but the general answer is, yes, we can handle the work. However, there is a pressing need to ramp up the training. The fact is, fabrication is a huge part of the benefits picture. The indirect spending that goes along with that fabrication is incredible. But we are also going to need well-trained workers to operate the completed facilities and design the next stage of the developments.

The President of the Nova Scotia Community College, Ray Ivany, has been working hard on this and it appears that the government is listening. There was a small increase in investment for such training in the last provincial budget. We are all well aware of the multitude of financial pressures facing the government, but training more Nova Scotians adds to the employment numbers, generates taxes and contributes to the overall wealth of society. It is an investment worth pursuing.

The Petroleum Directorate - shift gears here. This may come as a surprise to some of you, but this business association is advocating that government add to its ranks. The Nova Scotia Petroleum Directorate was established to oversee the development of the most important economic opportunity to come our way in nearly a century. They are to provide the energy leadership on behalf of the government, but its ability to do what it was established to do is being seriously jeopardized. Its budget two years ago was approximately $6.5 million, today that budget has been slashed to $4.8 million. The impact on this developing industry has been significant. We continue to struggle with the same obstacles that have been in place for some time, with no apparent resolution in sight.

Let's put this into context. We know that gas exports are worth $1 billion. We have another $1 billion in exploration commitments. We have perhaps another $1.5 billion to develop Tier 2 of Sable. Then there is $1 billion PanCanadian wants to spend on Deep

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Panuke. Add somewhere between $500 million and $1 billion for a gas distribution system and you have $5 billion in investment for the next 7 to 10 years. That does not even include the spinoff benefits because, as I said, there is no one who has a really good fix on these. A rough rule of thumb on indirect benefits you see on spending is usually about a 7 to 1 number for every dollar invested in a region. By the time it trickles down and gets recycled, it becomes $7.00.

Those are big numbers; $5 billion in investment and a department to oversee that we develop the industry properly, has a budget of less than $5 million and less than 30 people. Compare that to Tourism, as I said earlier. The tourism industry is worth a little over $1 billion to the province. They have a department of about 200 permanent staff and a budget of $39 million. Food for thought.

The Petroleum Directorate has a critical role to play, but it is not really in the game when it lacks the financial resources and, even more importantly, the human resources it needs to fulfill its mandate. The Petroleum Directorate needs to act as an effective advocate for benefits and investment. It needs the ability to gather the type of economic data I spoke of earlier. It needs funds to ensure that Nova Scotian workers are trained to take advantage of the jobs being created.

We fully understand the many demands for funds from the provincial Treasury, but if we are to grow the economy, create the jobs, develop our resources and stand on our own two feet, Nova Scotia has to put the resources in place for the job to be done correctly, now. In fact, we advocate massive streamlining of the regulatory overlap. OTANS believes it is critical that the bureaucracy be of the size that allows it to effectively enforce its regulations, while not holding up the pace of developments.

In Houston earlier this month, senior oil company officials voiced similar concerns. The fact of the matter is, delays cost money. Delays cost opportunities and jobs. I just want to give you another example. This is a pie chart that was presented to us down in Houston. It was done by Mr. David Hager who is the VP of Kerr-McGee, and these are in U.S. dollars. I will just put it up there to give you an indicator and you will see on the slide, we are talking about a time value, the cost of delays. If you look on the left of the pie chart, the project the size of a $2.7 billion U.S. investment, it is going to trickle down into - their numbers - a royalty regime of $712 million with roughly $540 million profit for them.

If you look at the right of the pie chart, it shows what happens when this project has slipped three years. Let's think about the Laurentian Sub-basin here. The value of that project, the net present value - never mind that, just talk about it as a trickle-down effect to the province - $383 million versus $712 million that it had before. The profit for the oil company has slipped from $352 million from $540 million. This is significant.

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While other competing jurisdictions around the world are streamlining regulations and beefing up their approval staff, we aren't doing either. It will cost us much more in the long run than we think we are saving today.

I guess to recap, OTANS is ready to work with government and all other stakeholders to turn the opportunity of the oil and gas sector into the engine of economic growth. We applaud the government for its willingness to consult on a new energy strategy. We urge all of you to ensure the words to be written result in positive action. If we have made mistakes in the past, there is nothing wrong with taking corrective action. The core of this strategy must ensure we are maximizing the utilization of our natural gas, both offshore and onshore Nova Scotia. All of us in the private and public sectors have a responsibility to leave this province in better shape for our children. We are ready to help, we trust you are as well.

The four key messages I want to leave with you here: (1) Boundary dispute, it has to be done, it has to be resolved quickly; (2) The regulatory process, that has to be streamlined and we have to beef up the Petroleum Directorate; (3) The potential for oil and gas is bigger than fisheries, tourism and Michelin; and (4) We have to be wary of the moratorium creepage which is coming on, that is a bad sign for business. We have a skilled labour shortage and we have to watch the signals that we are sending out; the after-the-fact taxation stuff, like this municipal taxation which is going on.

Anyway, I have rambled on here enough. I want to thank you very much for the opportunity to address you and I will turn it back over to your chairman.

MR. CHAIRMAN: Mr. Johns, thank you very much for your presentation. We are now going to move to the questioning and I will start for the first period of 20 minutes with Mr. John Holm of the NDP.

MR. JOHN HOLM: Mr. Chairman, one can hardly clear one's throat in 20 minutes in terms of this particular topic. I shouldn't be presumptuous, but I think that all members of this House share the optimism of what the oil and gas industry has for Nova Scotia and the positive impacts. Certainly, I know that I am very encouraged by the number of new players who are coming on the scene, the new big players. Again, it is heightening the awareness of the offshore and it is sending a very clear message that yes, indeed, this is a major play in the East Coast. When it is more than one of the big guys involved, but they are all starting to pay attention, then it sends a very strong message.

I think that it is also fair to say that certainly we, in our caucus, support the notion of the Campaign for Fairness in terms of what Nova Scotia should be getting out of it in terms of the royalties. That having been said, how successful is the campaign going to be? I would like to say that it is going to be successful but whether it is or not, time only will tell.

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There are a number of things I would like to touch upon. First of all, just for clarification in terms of one of the last slides you showed us, and you talk about the accelerated project versus the slipped three years, and you are talking about the losses. Are those losses that you say occur over that three year period of time, that as a result of it being three years later coming on-stream that the revenues have dropped for the provinces in terms of royalties by that amount over the three year period and the profits have been lost over that three year period?

MR. JOHNS: Paul, do you want to talk to that one a little bit.

MR. PAUL MCEACHERN: Mr. Holm, I don't know if you were in Houston for this, actually, I think you came a day later. This is a presentation based on a theoretical project in the Gulf of Mexico. The royalty provisions which are cited in this are not expected to be those which are in current operation in the Province of Nova Scotia or even in the Province of Newfoundland and Labrador. The theory behind this slide is just to give you a thumb-sketch example of the cost of delay as seen by one of the major investors in the Nova Scotia offshore today. The idea behind showing you this is certainly not to give you these as definitive numbers, this is an example provided by one of the oil companies. The cost of delay can be significant not only to the private sector, but to the public sector through the accrual of royalties. That is simply all it was designed to do. It certainly wasn't designed as, this is an explanation of exactly what would happen on a Sable 2 or a Deep Panuke.

MR. HOLM: I certainly was interested by the royalty rates because I didn't anticipate Nova Scotia would get anything close to that, first of all. The other thing is that somebody might argue that instead of being lost, it is deferred and that we may be a little bit later coming in but the royalty regimes will be continuing on for a longer period of time. So it is not necessarily a total loss.

I want to go back to a number of things. You talked about, for example, the benefits. You talked about the value of our exports in natural gas last year being over $1 billion. Of course, most of that is in something that had the value added at that point in time. That is the value of the export going out of the province, but it isn't having value added so we are not getting necessarily - after it has been developed - all of the spinoff, extra activities taking place with that. So, certainly, I am encouraged by your comments about the use of the gas within the province. I would like to see a petrochemical industry being developed as more systems come on-line. I would like to see the distribution system being established throughout the province and, of course, the on-stream systems and so on can be tapping in.

In terms of the actual benefits, and you are talking about paperwork and we seem to be spending more time on filling in the blanks and that kind of thing, I am interested in how

government can encourage, sometimes maybe even a little bit more force, the major players to be actually looking to Nova Scotia businesses to be providing the goods and services that they need. We can talk royalties. We know that that is peanuts in terms of the greater scheme

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of things. The major benefits are having Nova Scotians working, Nova Scotia businesses having access to the resources and the taxes and so on that are going to be coming from that as the economy grows. That strikes me as being where we stand to gain the greatest amount of benefits. If your companies prosper and employ Nova Scotians, you are paying taxes, they are paying taxes and we have the overall benefits.

So what can we do to encourage those companies to look towards Nova Scotian companies? I have had private discussions with a number of you about some situations where I have heard that Nova Scotia companies may get looked at, but that the companies are used to dealing with certain players around the world. We can talk about the fact that, yes, the companies can invest elsewhere and we have some uncertainties, for example around the Laurentian Basin, but in terms of where governments can actually invest their money, there aren't too many parts of the world that are more stable than Atlantic Canada. So I think that is in our favour.

We also have, as you pointed out, the geography. We are close to the major markets. Yes, they can invest in South America or they can invest in Australia, but it is one heck of a long pipeline to get it to Boston. So we have some built-in advantages. So what can we do either for the Petroleum Directorate or the Canada-Nova Scotia Offshore Board, what can we be doing to encourage that technology transfer to Nova Scotia businesses and to be encouraging those companies to lay out what they are going to be needing? They have a pretty good idea well in advance of what goods and services they are going to need. If that can be laid out, that gives Nova Scotia businesses an opportunity to be preparing for that.

What can we or should we be doing to require that? You talked about the 34 per cent Nova Scotian content. Well, they didn't meet that target and of course there are no penalties if they don't. What can we do to encourage them to look to Nova Scotians and Nova Scotia businesses for that?

MR. JOHNS: It is a good point, Mr. Holm. Just before I address those, I would like to point out a couple of members who joined us here. Ian Tillard is one of our board members, he also chairs our Regulatory Committee - a very important committee within OTANS - and Russell Yates, who is also a board member.

Back to your points. The short answer is, and it sounds a little bit like rhetoric here, but, again, we are competing globally. We are truly globally in provision of all of these services. If you take a look at anybody who has actually done bidding for the various oil companies here, you have a look at what benefits a Nova Scotian company actually gets; basically, all else being equal, we will get the job. That is more or less how it works. That is an important one.

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One of things in a larger picture, which we have to do down here, we have a certain psyche down here in the Maritimes, in Atlantic Canada in general, where we are not used to succeeding. We have a little bit of this mentality of tin-cup federalism. When people come here from Calgary, come here from Aberdeen, Houston, they have expectations of success. That is just their mindset. The Atlantic Canadian mentality and the Maritimes mentality is not always focused on or used to succeeding. We are not always used to standing on our own two feet. This is going to take some education. This is going to take some education and this is going to take a while to change this mindset.

Now, as we trickle down from that, encouraging benefits, and I spoke a little bit earlier in the paper here, our companies have to get it into their heads that they are globally competitive - we just talked about that - in order to do that, to flush that out, the employees and the companies have to get involved, whether it is with joint ventures, whether it is getting the technology, they have to go out on their own and find it. They have to be aggressive. It is a little bit of change in mentality for us down here, but we are getting better; we are learning.

We need to have promotion of the province and the province's oil and gas companies, whether it is through organizations like ourselves or the work the Petroleum Directorate is doing; whether we are talking trade shows here or whatever. Just to finish off comments on that - if any of our other board members have any, please offer them - right now we are no longer in our infancy here; we are not a mature business, but we are walking a little bit. We have stopped crawling and we are walking.

The provinces now have to learn the tools to doing business, getting on the bids network, learning how that works. All the companies in the gas patch file all their work on the bids network. It is very simple, you can go in, automatically download, every single day you can see every single opportunity that is out there. They all work the same way, whether we are talking exploration, talking seismic, talking production, fabrication, whatever. The companies have to get out there and they have to be aggressive, and it is our role to lead and show them and offer their venues. Troy, did you want to add to that one?

MR. TROY RITCY: I think one very important way that we can address the situation is to initiate a structured corporate management program. It has been relayed to us as OTANS, and we relay it to our membership, that possibly we are not meeting all the demands of each individual producer or major oil company, that our levels of capability are seen by the oil and gas companies as a certain structure.

But if we show to them through an initiative, that we can conduct with you or by ourselves, that says that these are the levels of achievement that each company has, these are the levels of health, safety, environment, and control that they are looking for, this is the level of training and years of experience that we have that each of those require then, if we can show them that it already exists, and you can tell them it already exists, through a corporate

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management program that adheres to what they are asking for, so generally they tell us that they have to go elsewhere because it is not available here, but they don't tell us what exactly the level is that they require here. After the fact they have gone elsewhere to get qualified companies to do so, in fact we actually had it available here but it wasn't known to them, or they used it as an excuse to be overlooked.

MR. HOLM: If I could, Mr. Chairman, just picking up on that point that goes back to what I was talking about in the very beginning. We can talk about expectations for success, as you did, Mr. Johns, and I think that Nova Scotians' attitude is changing, if we ever didn't have the entrepreneurial skill here - I think that we do - certainly the discussions about joint ventures and all that, that is all very valuable, but when we take a look at talking about companies having to look here for Nova Scotia business, that goes back to exactly what I was saying. We can have the skill sets here, we can have the companies that are willing to put together the joint ventures to meet the needs, but if we aren't told what those companies need, they will go elsewhere. We have to have some kind of a way, as others have.

[9:00 a.m.]

You talked about Norway, you talked about Scotland and you talked about Alberta, some of those jurisdictions put in place - how can I put it - encouragements, sometimes with little sticks attached, so that the big players were forced to look to provide the benefits and get the services in the jurisdiction where they are getting our resource. Let's not forget, they are making billions of dollars over time from our resource. Nova Scotians and Nova Scotia businesses deserve to get a chunk of that back.

If we are not going to require those companies to look to Nova Scotia businesses, they have - maybe I shouldn't use the word but I will anyway - I have been advised by some, incestuous types of relationships with other companies that they traditionally deal with around the world. Their natural inclination is not necessarily to look to Nova Scotia to find, can your business provide this service, or can your business provide the service, and/or what you would need in the way of technology transfer or advance notice about certain kinds of skill sets or equipment or whatever in order to be able to meet the needs. That is where I am coming from.

What do we do to ensure that these big players actually are required - I am not talking 100 per cent - to look to Nova Scotia and justify going elsewhere, if we can provide an equal or better service at a competitive cost? We have to have some kind of encouragement if we are going to start that.

MR. CHAIRMAN: I think Mr. Ritcey had some comments on that point, is that correct?

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MR. RAY RITCEY: Mr. Holm, I will try to give you my interpretation or an answer to your question. I think it is a little bit of both. You talked about maybe having some sort of stick there and maybe that might be applicable. I would kind of like to take the carrot approach that would say, I think that in this jurisdiction we do have skill sets, we do have skill sets that are world class, maybe some of the companies that are here and maybe some of the companies that plan on coming here aren't fully aware of all of our skills and all of our abilities.

Troy alluded to some of the initiatives that are underway to demonstrate that we have quality management programs available, in place, that can demonstrate to those companies that we have skill sets that can match anyone. I believe that both offshore and onshore companies, where we can demonstrate that we have the skill sets, those companies will look to Nova Scotians and look to Nova Scotians first to do that work. I think, over time, and I think we are starting to see it now that we will see more and more Nova Scotians and Nova Scotia companies doing the work. That should be the expectation of everyone in this province and the companies that are coming here. I see those two things happening.

MR. JOHNS: Just one follow-up on that, if I may. Your example of Norway and the North Sea, just to put that in perspective, the Norwegian oil and gas industry was virtually, entirely state controlled, the oil and gas companies where Statoil virtually ran that thing from start to finish. They had much more control than we do.

MR. HOLM: That is valid. There have been different models, but the point is that in all cases, whether it be in Norway or Scotland there were local economic development groups that provided encouragements to get those companies. Sometimes there was a little bit of clout involved in that. Right now we have, for example, the Canada-Nova Scotia Offshore Petroleum Board, which supposedly monitors what is or isn't being done in terms of Nova Scotian content. They have no clout, or they don't seem to exercise any clout in trying to ensure that those contents - there are no penalties imposed upon anybody.

I go back to that, and I think it is fair to say that the general perception of the public of Nova Scotia is that Nova Scotians have not been getting our full fair share from the industry in terms of distribution. I have said it before, it galls the heck out of me to see the Premier in New Brunswick eating a hamburger cooked over - it is symbolic - Nova Scotia's gas and we don't have it available here. That puts Nova Scotia businesses at a competitive disadvantage. So we have to resolve those kinds of issues. There is no question about that.

The key is how exactly that is going to be done, indication and willingness to work with government, but there are major issues there.

MR. CHAIRMAN: I am afraid the first 20 minute tranche is up. I move now to the Liberal caucus and we will start with Mr. Don Downe.

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MR. DONALD DOWNE: I want to welcome Bill and all the members of OTANS here. It is an excellent presentation. I just now got a copy of it and it is worth reading again, I am sure, and I want to congratulate you for your presentation, Bill. A couple of quick questions and one became very obvious to me. We compare resource industries in saying who is the biggest and so on and so forth, they are all important in Nova Scotia, farming and fishing, they are all part of the mosaic of economic opportunity. But clearly the petroleum industry, that is worth billions of dollars and it is really going to be one of the future planks of economic stability for this region and for this province for many years to come, doesn't seem to have the priority that this government should give it in regard to the size and scope and the demands of a growing industry, a nurturing industry.

I concur on the fact that it almost appears that we should have a minister specifically for the petroleum industry. If ever you needed a minister alone, it is in this industry. It is without question one of the most dynamic and one of the most aggressive ones. It needs to have that independence. We have got ministers floating around doing 14 different portfolio activities and they can't focus their attention on one that is going to be one of the major economic drivers in the future of this province. So the sense I get is that we need a single minister and a ministry that is actually going to do this job.

Number two, we concur and support the fact that in priorities of government there has to be a priority in regard to making sure that we have the tools to equip our individuals with regard to their industry as we compete in other areas. In other words, the dollars that are currently in the Petroleum Directorate are not adequate to meet the types of comments you have made today in knowing what our competition is, what is happening around the world, where are we at right now, where do we stack up, or how do we stack up.

Taxation. It appears that the fact that now the whole lateral line or the whole pipeline is now back to a taxation review. We have got one minister over there who talks about now we are going to start charging you a higher tax on a pipe on the pipeline. You have one minister who is in charge of the Petroleum Directorate, you have a minister who is in charge of NSRL, you have a Minister of Service Nova Scotia and Municipal Relations who is now taxing a process, sending signals, internationally by the way, because a signal is not just sent to the local people here. These signals are sent world wide that once you get here, we are going to take advantage of you whatever way we can. So I think you are absolutely right on, you know, when you establish a set of rules or guidelines, for goodness sakes be consistent with it.

My suggestion would be, I know that the minister said he would be sitting down with the companies, he has been sitting down with the municipalities, but I don't think that has really worked. I think it should be just given to the URB, let them decide on how that whole structure of taxation should be dealt with and get on with the professionalism of how we should manage the activity in Nova Scotia. It appears to me that we are not looking very

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professional at this point. It is not a matter that we don't want to get the taxes, it is a matter of the process that we have gone through. I think it is a bit embarrassing.

It must be embarrassing for an industry as big as yours. I know in agriculture when somebody is out hammering away at agriculture all day long, you get fed up because you know how important it is to the economy and how important it is to rural Nova Scotia and the same is true with your industry. It must bother you, it must gall you when people who have that much information are pounding the blazes out of an industry that you spend your lifetime building and knowing what the potential is. So, you know, it must be very frustrating from an industry point of view saying gosh, there are a lot of good things out here that we have to start building on, but it doesn't mean that we should take away from the fact that champions such as government should be in the front and centre saying that we need to make sure what we are doing here is for the long-term best interests of all Nova Scotians. You are not asking anybody to give anything away, simply just making sure that we have consistency and a champion out there for that process and complement that particular aspect.

I want to build on the job side. I think what I have heard and seen and talked to the industry is that in Newfoundland companies are there and we have Newfoundlanders working for companies and that is all well and good. But in Nova Scotia I sense the industry as saying we don't want to work for somebody else, we want to be the industry here and we want Nova Scotians working for us, where they are putting money on the table and we are putting money on the table and we are building an industry, an industry that is going to be sustainable today, it is going to be sustainable tomorrow, and it is going to be world-class and exportable anywhere in the world, and we will be another North Sea or an Aberdeen, but we are not going to be a North Sea or an Aberdeen here with the way we are establishing the infrastructure for economic development within the industry itself as I see it.

I think there has to be, maybe this will come out in the energy strategy, but what I would like to see is a focus on the ability where I guess - as John was talking, he and I had this conversation in Houston - we have the project here now and many more that will come, we hope, and the sooner the better, but we need to make sure that we sit down with the companies. I know when I talked to the president of ExxonMobil, our guy who is down there now, Jeff, there has to be some way that when companies as big as ExxonMobil, say, look, we want you to do business with company x in Nova Scotia, whether they are a Troy Ritcy who is now partnered with somebody else, or it is a Tim Brownlow Irving company partnering with somebody else, to give them a chance to make that product right here. If they can do it at cost, they can do it on specs, they can do it on a safety basis, well, why the hell can't we have that business here in Nova Scotia? Why does it have to be somewhere else in the world?

That is the kind of aggressiveness I think that government has to show and the industry has to show to these players that we want you here, we will be consistent on our regulatory side. We will lay out a blueprint that is going to be straightforward. We will give

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you a road map of how we are going to do business but, by gosh, we want business done here in Nova Scotia. We don't want you to set up a temporary office where we only employ Nova Scotians today, but when you decide to go, so do the jobs go. We want them here long term.

So I sense that is what you are saying. That is certainly where I think we should be going and I think we should be making sure that Opposition, government, and everybody take that strategy and run with it because, you know, Fred Smithers is kind of like the grandfather of this industry in some ways. He is not that old. He is a good golfer, all that kind of stuff, but that is the kind of people who have been around for awhile and many others who have been expressing these kind of concerns to build long-term viability. I think we need to do it and I think this government has to start addressing that issue immediately with industry and maybe you are doing it with the energy strategy, I don't know, but I haven't seen it yet, but it sure as hell has to start right away in my view.

The work shortage, the staff shortage, the labour shortage, I have been going to conferences about that. I have talked to Ray Ivany about it. I know that they are trying to ramp up, but we need to know where we are going as an industry so we know the skills that are going to be required today and five years from now. I think what we need to do is develop that as part of our long-term strategy of economic stability within that industry. Labour has to be a key component of any successful industry in regard to this.

I get a little excited about this, as you know, and I want to welcome you, I want to make you feel that we appreciate your efforts in being here. My question is, do you think government has caught on to - well, I won't ask that question - I was going to ask the question, do you think this government has finally caught on? I mean, I remember the first comments that were sent out there. It scared everybody in the industry, what was happening with this government. Do you think government is starting to catch on to the dimension, the size, the potential and the scope of where we are going with the offshore?

MR. JOHNS: Let me address a few of those and then what I would like to do is turn it over to Tim Brownlow who has considerable background experience, not only from the public perspective but also the private perspective. I will use the three P's here which is something I am thinking both yourself and John Holm had been speaking of previously - punch, priority and payola. I will use the punch one first, let's talk about that, having to do with say CNSOPB, one of the earlier points that was made. If an oil company or an operator is not making their benefits, there is no real hammer there. The only hammer that is there is, we pull your project. There is no incremental hammer there. It is certainly something to be considering. Speaking frankly, over in Newfoundland, the CNOPB and CNSOPB are equally charged and are both provincial and federal responsibilities. Over in Newfoundland, you are watching the Newfoundland government use a lot more hammer within the CNOPB. I am suggesting to you here that we should have Nova Scotia look at doing that, as well. I am not here to government bash. This is all kind of working. We all have the same common goal.

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Right now, we have the infrastructure up and running and we have to do more than fine-tune, we need some pretty serious surgery, but we have got things up and running.

The second part about it is priorities, which, Don, you mentioned. This is nothing new. OTANS, for how many years, Tim, have we been recommending that there should be a specific minister charged with the oil and gas?

MR. BROWNLOW: Since before my time.

MR. JOHNS: Since before his time. This is nothing new. A second and the third one before I turn it over to Tim is the payola part of it. We talked about the slashing budget which is going on at the Petroleum Directorate. If we want to make money, we are going to have to spend money. We are going to have to belly up to the bar. Okay, having said that, Tim, do you want to address some of this?

MR. BROWNLOW: Yes, I will address a few things. One, I think to better facilitate the benefits coming to the province, maybe what the provincial government should look at doing is put an ombudsman under some sort of confidentiality agreement in the offices of the oil companies in Houston, Calgary, whatever the case may be.

AN HON. MEMBER: Ombudsman?

MR. BROWNLOW: Ombudsman or call it whatever you like, yes. When you are going through the bidding process, when companies are looking at moving into the area, they don't know about xyz company or abc company when the bid comes out. I noticed a lot of that on the Sable project when it first started until more Nova Scotians were into their Houston office or their Calgary office. They just didn't know about our company. So educate them on our companies and make sure they are well aware before they move their offices here.

The other part I guess, Bill, if I may, again is the streamlined approach. We have a project by project by project, we are not an industry. In order to make that industry, I can't emphasize it enough, we have to streamline the approach and get the companies in. Don't compromise on safety to the employer, don't compromise on the environment, but get the companies in investing their dollars in our offshore. Then we can create an industry. A lot of this will naturally gravitate to the province once the industry is here. But if we keep going on this project-by-project basis, that is all we will be is a project by project. If I may . . .

MR. CHAIRMAN: There is only limited time in each session and I think Mr. MacKinnon has some questions as well.

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MR. RUSSELL MACKINNON: Mr. Chairman, I would like to go back to the opening remarks. Mr. Johns, you indicated what you would like to see are a greater number of employees within the Petroleum Directorate or within a government body that would support the petroleum industry. I was a little perplexed because at the same time you were saying there should be less regulation, meaning less government intervention because of all the overlapping functions. Maybe what we are looking for is perhaps a more co-ordinated effort. I was wondering if you could clarify where we are coming from here? You are looking to increase the complement at the Petroleum Directorate and, on the other hand, reduce regulatory bodies such as the Department of Environment and Labour, that sort of thing. Could you clarify that?

MR. JOHNS: I will start and then I will offer this over to . . .

MR. MACKINNON: Perhaps in short succinct fashion would be good because I know time is of the essence.

MR. JOHNS: Okay, we need to streamline the regulatory process. Instead of having to go to 12 different places to buy your car, one- or two- or three-stop shopping. In order to get there, we are going to have some work involved in that.

MR. MACKINNON: So would that mean that not necessarily increase the complement within government, but to realign the resources within these various government agencies to make them more efficient and effective to meet the needs of all stakeholders?

MR. JOHNS: I can't tell you how to do your job.

MR. MACKINNON: No, no. What you are saying is, presently, it is not working effectively.

MR. JOHNS: Actually, I would like to turn this over, if I could, to Ray Ritcey, please.

MR. RAY RITCEY: Mr. MacKinnon, maybe I can take a stab at that question. I am going to answer that question first and then I want to make a couple of comments on what Mr. Downe has sort of provided . . .

MR. MACKINNON: I would like you to focus on this question because we are very focused . . .

MR. RAY RITCEY: You asked a question on whether or not the net impact would be an increase or decrease, I think, on government and regulatory processes. We spoke in terms of streamlining regulatory processes, not necessarily government. If you took them both together, maybe that net effect would be a reduction. My guess would be probably a reduction in overall requirement in terms of resources. But what we need as an industry is

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to ensure that there is the accountability and the streamlining of those processes there so that we can improve the timeline for us to do business. I think that is probably all I can say on that. The net effect would be, some might go up and some might come down.

MR. MACKINNON: My next question, Mr. Chairman, is with regard to, I believe you made reference to the Laurentian Sub-basin. Obviously that is the big issue of the day, particularly after yesterday's decision that was handed down. I notice off the coast of Donkin-Morien, Hunt Oil has some rather substantial leaseholds there, both of which some preliminary wells were drilled back in the 1970's, one in 1972 and one in 1974, neither of which are even near to where the boundary dispute is. Where does OTANS stand in terms of supporting Hunt Oil to proceed presently, regardless of that boundary dispute?

MR. CHAIRMAN: Who is going to tackle this one?

MR. JOHNS: Tim, do you want to try that?

MR. BROWNLOW: I wasn't aware that the land off Cape Breton was part of the boundary dispute. I thought that was more on the moratorium that was put around the island with reference to the fishery. If it is part of the boundary dispute, I don't - Paul, do you know?

MR. MCEACHERN: It is my understanding from government announcements that Hunt Oil's plans are basically tied up while it rectifies a dispute with the fishing community. As you know, Dr. Theresa MacNeil has been appointed by the Canada-Nova Scotia Offshore Petroleum Board to oversee a review of how the fishery and the petroleum sector interact. That is what is holding Hunt's plans in abeyance, as well as those of Corridor Resources. It is not necessarily the boundary dispute.

MR. MACKINNON: I would suggest perhaps on the western part and the northern part of Cape Breton, I would agree with you. The public meeting that I attended with Hunt Oil and Petroleum Directorate officials and fishermen and representatives from the coal mining industry and so on might give a slightly different picture, but I will leave that with you.

Part of the major problem in proceeding with the Laurentian is really what happened is back in 1980's when the federal government negotiated an agreement with Nova Scotia, there was a boundary included, as I understand it, as well as an agreement, whereas the following year, when the agreement was concluded with Newfoundland, there was no boundary included. So that kind of puts us in the rather suspended animation that we are in now. Where does OTANS stand in terms of helping to bring some resolve to that, because obviously you are talking interprovincial activity here. Not from a government point of view, but from an industry point of view, what has OTANS done to help resolve that particular situation?

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MR. JOHNS: Okay, I am not sure that I understand your question correctly here, but I think I'll answer it. Please tell me if I am wrong here. Right now, the net effect of yesterday's decision has very little to do with day-to-day business. The jurisdictions are still drawn up from within the accord. CNOPB is still operating as per normal, so the day-to-day effects are not affected by the boundary issue because the boundary issue, the way I understand things, is not relevant to day-to-day governing. You cross that line and the rules are still clear for the oil companies.

MR. MACKINNON: Okay, I will attach that to the regulatory process. As you know, last year, perhaps the year before, the Newfoundland chap who was killed on one of the offshore platforms, when Nova Scotia tried to take jurisdiction from an occupational health and safety point of view, the CNSOPB - I hope I have the initials right - they indicated that they had jurisdiction. The regulatory process there is extremely weak in terms of occupational health and safety. In order to change that it would require mirror legislation both from the provincial perspective and also federally, which would mean effectively opening up the offshore accord. Has OTANS taken a look at that and the implications of that in terms of proceeding with the offshore development?

MR. CHAIRMAN: Excuse me. Mr. MacKinnon has flagged an important issue for us, but you might want to think about that for a minute. We have to move to the next caucus for their questioning. I have Mr. Jon Carey from the PC caucus to start.

MR. JON CAREY: I would like to compliment you on your presentation and the information that is there. One of my concerns and questions would be, the streamlining regulations, as you have said, we no longer are a baby in this industry, we are growing and have advanced. Have we not been able to learn from the errors and experiences of other jurisdictions? I guess I am more interested in hearing your group's comments than I am to saying a lot about it myself. I am interested in whether you feel what specifics we should be looking at to streamline. For example, do we need an Atlantic regulatory body? Is there co-operation that needs to be done between provinces and so on? I am looking for that kind of information, the specifics that we could use, perhaps.

MR. JOHNS: Okay, I will turn that over to Tim Brownlow.

MR. TIM BROWNLOW: That was one suggestion that was made at the NOIA conference last year. I presented a paper that we are looked at around the world as one region. We are not looked at as Nova Scotia, Newfoundland, we are looked at as the East Coast of Canada; as a matter of fact, North America's next frontier. Since we have mirror legislation on the accord Acts between the two provinces, is it necessary to have two boards? One board would be sufficient, it would make it much easier to move back and forth, and we support that.

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MR. CAREY: As a former business person I never wanted government involvement, but you are indicating that the Petroleum Directorate should be beefed up. Mr. Downe indicated that perhaps there should be a Minister for the Petroleum Directorate. Also, to what extent would be adequate participation by government? Do you see what Mr. Downe is saying as accurate? Would you have a different opinion on that, and the numbers that you would like to see involved from the government's position?

MR. JOHNS: That is a good point. Basic history here, if you take a look at the last ministers who have been involved as head of the Petroleum Directorate, head of the oil and gas interests, you have Minister Balser, Premier Hamm, before that there was Mr. Manning MacDonald and Premier MacLellan before that. These are all good politicians but they didn't have the depth of experience in the oil and gas industry. We are in a fast-paced, ever-changing world on this one. The scope is expanding and just bringing the level of awareness and education to the general public is very, very important and it is going to take some early management. Ray, do you want to talk to that?

MR. RAY RITCEY: Mr. Carey, we made a comment in this presentation and we might be somewhat biased in our approach, given that we are speaking on behalf of the onshore, offshore oil and gas industry, but we believe as Nova Scotians that our future rests with how we handle this industry. We honestly, really believe that we are at the crossroads now, that the decisions that are taken today by government will impact on future generations of Nova Scotians. So with respect to that, and we are not here to go into a political minefield here, and I am cautious in how I am saying this, but we really want the government and the industry, both business and the oil and gas industry itself, as well as all the citizens, to make decisions that are necessary to grow this industry for the benefit of Nova Scotians.

[9:30 a.m.]

With respect to your question, we see that the Petroleum Directorate, one way that can be handled from a government perspective is we think that it needs both the human resources and the financial resources to ensure that that happens. With respect to the regulatory side of it, that is another matter. Whether or not you lump those all together or not, we see that someone has to be above that and ensure that all those processes, both government and regulatory, are streamlined so that the decision-making of companies, both Nova Scotian and outside of Nova Scotia, know who is accountable and streamline those decision processes. That is going to work for all of us.

MR. CAREY: Finally, I don't want to hog all the time, but I am very excited and I think everyone, as has been said in the House, sees this as a time of tremendous opportunity for Nova Scotians. We have concerns, of course, for our young people. Are we getting them trained and getting the jobs and the opportunities that are there? I guess I would just like to question if you feel we are on course with that, and what the opportunities, possibly, for onshore development are going to be.

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MR. JOHNS: I can speak a little bit to that one and then I will defer back to Ray. The short version is, we need to ramp up, and quickly. This isn't one we can sit on. We have to get ahead of this game plan. We are competing for not only the opportunities on a worldwide basis but for employees. Now, why don't I hand this back over to Ray, again.

MR. RAY RITCEY: If I can add to what Bill said, I think it is critical - Mr. Downe mentioned this earlier - that Nova Scotians, the government, not just look at this industry as jobs. I think that is a mistake, I think you have to go broader than jobs. You have to look at what I call the social economics. If you look at all social economics inclusive of jobs, then that is the way you should be looking at this industry. It is more than just jobs. On the jobs, I think we, as Nova Scotians, if we can demonstrate - as Troy talked about earlier - that we have the right people, that we have the skills and that we are proactive in going after companies, and maybe there are some other incentives that have to be brought along to make those companies recognize that Nova Scotians bring capabilities to the table, then I think, just because of where we are situated, we will start to see, not that we haven't seen, incremental benefits, jobs, royalties, taxes, infrastructure, all those things that go with it, that will happen in due course.

MR. CHAIRMAN: Mr. Brownlow, were you about to help us?

MR. BROWNLOW: If I may, on the skills inventory side. We have to make sure that we don't do a knee-jerk reaction and go out and train hundreds of people for tens of jobs. We ought to make sure that we talk to the companies and make sure that we do have the right numbers.

MR. CHAIRMAN: Mr. Carey, are you finished your questioning?

MR. CAREY: That is fine, thank you.

MR. CHAIRMAN: We move now to Mr. Chataway.

MR. JOHN CHATAWAY: Good morning, Mr. Chairman. Good morning, people. It certainly was a great thing that you people have come forward and laid the facts that you have laid before us. I certainly do expect to read Mr. Johns' report, because it is excellent. I think more and more people as they go along are beginning to understand this is maybe our biggest industry. From five years ago we have come a great way. In five years we have begun to understand it is very important. In another five years we are going to be thinking that much again. How very important it is, when you compare it in the report, basically, tourism is very important, but you say we are potentially bigger than that. I think it is a wonderful thing. Obviously, tourism is very important.

[Page 28]

I was thinking, in the movie business, five years ago, basically, if you wanted to make a movie in Nova Scotia you would bring in all your people and do all this sort of stuff. You would say, oh, that is very nice, nice scenery, blah, blah, blah. However, nowadays, we are beginning to develop that industry, we have the people. So all you would do is bring in some actors and things like that but, basically, we can do that ourselves and everybody in the world knows that we are very capable of doing it. I think the same thing, even more so, with being in the oil business. That is just great.

Certainly, one of the conditions where I live on the South Shore, for many years fishing has been a very important thing, even before Nova Scotia became part of Canada. It was an extremely important industry, it is still about, I think, a third of our economic activity. The fishermen are very concerned, making sure they don't have their industry hurt. Obviously, Nova Scotians express some concerns about that. Particularly, I do know in southwestern Nova Scotia or southern Nova Scotia there is a 10 year moratorium, I believe it was, for no exploration for oil going on there.

I just wonder if you would have any comment or, possibly, how did Aberdeen get along in the North Sea? I know they were fishing there. I am sure they still are. How are they getting along? Basically, I just wondered how often you would meet with fishermen's organizations to talk about potential problems and things like that so that we are working out the problems, we are not saying, you can fish or you can't find oil, but to do it together. I just wondered how we are going along in that regard.

MR. JOHNS: That is a good observation. Good question. You hit something which is very sensitive to us. We launched quite a campaign there last year, and we happen to have the Chairman of that campaign right behind me here who can probably speak to it much better than I can. Jay.

MR. ABBASS: Actually, I was going to suggest that Tim Brownlow should answer this question because he has actual, first-hand experience in the offshore, knows Aberdeen, has been there, has spoken with fishermen and people in the industry. Tim, why don't you take that one.

MR. BROWNLOW: Thanks for the buck, Jay. (Interruptions) I have met, in Aberdeen, with the fishing community. I have gone to Peterhead, which is the largest whitefish port in the U.K. They actually line up, end to end, to go down the pipeline, who is going to fish it first. The oil companies and the fishing industries have joined forces, they joint manage their fishery together with the oil companies. They have a committee that meets, I think, bi-monthly to discuss if there are any problems, whatever the case may be. The two industries were at loggerheads to a certain extent in the very beginning but they agreed to disagree and put their problems behind them and worked together. It seems to have worked very well there. It seems to have worked very well in the Norwegian sector as well.

[Page 29]

I think our basic problem here is that we need to educate, not only our fishermen but our own oil executives and oil companies as to exactly how important the fishery is to us and how important the oil and gas industry is as well.

MR. CHATAWAY: I appreciate that. We basically all have to co-operate with the people. Maybe it is an education factor or things like that. It is very important, what you people are involved with. It is also very important for fishing. We have to be able to get them all together. Hopefully, I am under the impression that you are certainly going in the right direction.

The other thing is the socio-economic and environmental impact, of course. You people, OTANS, say you have something to say with that. Basically, you are telling all Nova Scotians, here is how important this is, and what we should be involved with.

I guess you were certainly predicting many things that the government and other people should be doing and things like that. I am sure everything is not perfect. You are saying the Petroleum Directorate has 30 people and maybe it needs some more. Are there any sort of specific jobs out of all the things you would like to see happen? What are the three top jobs that we should be accomplishing in that direction, going forward now, that we do not necessarily do as well as we could?

MR. JOHNS: The three top jobs, as I understand your question, . . .

MR. CHATAWAY: You may have 10 but we just want to hear about three.

MR. JOHNS: This will be a committee answer here.

MR. CHAIRMAN: Any volunteers? Mr. Tillard, are you going to join us?

MR. IAN TILLARD: Yes, I will just speak to sort of the regulatory aspect of that and I think it is more of a summary of what has been said. I think the role at the directorate at this point was more of an advocacy and a co-operation to spearhead that role. That is not just within interprovincial, but also between federal, provincial and with the other provinces as well. It is a very big job and there are a lot of different groups that have to sort of come to an understanding, and this may involve a lot of other groups, such as First Nations and you also mentioned the fisheries. So there is a whole big role there to facilitate that and get that moving forward. I think whatever it takes to make that happen somebody has to be at the front of that and put the energy and the direction to that to move it forward.

MR. CHAIRMAN: Mr. Johns.

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MR. JOHNS: Just for clarification, the three jobs you wanted, were they, as I understood things, three that are not out there for the average public, the three top jobs they have, or the three top jobs we are advocating for within the Petroleum Directorate?

MR. CHATAWAY: Basically, you are recommending on the OTANS, what would you feel would be better improved if we did things, and that was a very good comment about the regulatory functions and how to bring them together. I guess I would like to know, are we working in that direction or are you optimistic that we are making progress in that? That is only one, we have two more.

MR. RAY RITCEY: Mr. Chataway, I will take a stab at that. I think Mr. Tillard identified one of the three. I think in our presentation, and Bill commented on this, there are two others, one, we want to ensure that Nova Scotia is getting its benefits, maximizing the benefits from the this opportunity. So however you want to characterize that job from a job function, we think that could be one, as well as someone to streamline the regulatory processes. The other part of that is within that job function, and maybe they already exist, is to ensure that the competitive fiscal regime that exists is maximized benefits for Nova Scotia. So those three specific areas which we talked about in this report, we think that is where a good focus could be as a start.

MR. CHAIRMAN: I think Mr. Langille has a quick question.

MR. WILLIAM LANGILLE: How much time do we have?

MR. CHAIRMAN: Two minutes, sir.

MR. LANGILLE: First of all, you are business leaders and you are Nova Scotian business leaders working in the best interests for Nova Scotia, and I appreciate that. I have some questions but, obviously, we are running out of time. I have a lot of concerns about the industry and I have a concern that we are sending gas out of the province for the past year and five months. Our people have not had the opportunity to have natural gas here, a very limited supply, anyway. Our by-products are going out. We have no petrochemical plants in place right now. I am concerned about the quality of pipe going to the Canso Causeway, the lateral.

I am concerned about Sempra Gas. Are they hedging now because of the high-pressured gas on the shoulders of the road or is it the price of gas? They showed that they are very efficient and competitive when it comes to trying to secure the agreement for Nova Scotia to have the contract but, yet, they are hedging when they are marketing the gas in Nova Scotia, and I am very concerned about that because I look around, I look at Truro and I look at other places, at what they are doing. Is it a stalling pattern or what? These are concerns of mine. You raised a concern and it was what you said about agreeing on a price, to receive more from the company that you agreed on, and I think you were talking about

[Page 31]

government there but you didn't elaborate. That is a concern of mine, just what are you referring to?

MR. CHAIRMAN: I am sorry, Mr. Langille has raised some very interesting points, but at this point we are almost finished and, certainly, I have to now move back through three quick rounds of just under five minutes each, so back to Mr. Holm.

MR. HOLM: I appreciated hearing those concerns of Mr. Langille. Those are issues we have been raising for quite a number of years, and certainly the issue of pipe and so on, those concerns are broadly shared. Just a couple of things briefly and, certainly, you had talked about the importance of the industry in the future, no question about that, and you talked earlier about the value of it being a $1 billion industry and compared it with tourism.

Obviously, we cannot lose sight of the fact that the other parts, fishing, agriculture, are also important driving engines in the economy and they will continue to be, and when we are talking about the $1 billion value of the gas that is being exported, that is $1 billion worth of gas that is being exported, as is the money, but $1 billion in tourism is $1 billion being spent in Nova Scotia and that money is recycling here, whereas the money that is being paid to the big companies for our gas isn't, necessarily.

I want to go back and I am going to pose one specific question, if I may. You had talked about the Petroleum Directorate and you talked about the Canada-Nova Scotia Offshore Petroleum Board. I would like to ask, as succinctly I can, what, other than shortage of money and manpower, specifically are the problems and what specifically would you like to see done to address what you see as problems?

MR. JOHNS: I am going to turn this one over to Tim.

MR. BROWNLOW: The Petroleum Directorate, I know we were talking here about financing, staffing and whatnot. It seems to be the problems coming out of the offshore all seem to land on the Petroleum Directorate's lap, whether it is skills inventory, training, Laurentian, whatever the case. Give them the tools to do their job. That is all we are asking. That is about as specific as I can get.

With the Canada-Nova Scotia Offshore Petroleum Board, they were set up as a single window. Let them do their job. Let them be the single window. The single window seems to have many panes (Interruption) cracked. They were set up to enforce the regulations. Let them do it without being impeded to do so.

MR. HOLM: Without being?

MR. BROWNLOW: Impeded.

[Page 32]

MR. HOLM: And what are the impediments to them doing it?

MR. BROWNLOW: Impediments are other regulatory bodies, whether they are federal, provincial, or what have you, again, getting back to the duplication.

MR. HOLM: So, in fact, the whole idea of the regulatory. Maybe just for the sake of just throwing out one of Mr. Langille's concerns, could you make any comments on, for example, the whole issue of the Sempra distribution and the distribution system in Nova Scotia, your views on how that was or wasn't being handled, addressed?

MR. JOHNS: I will turn that over to Ray Ritcey, please.

MR. RAY RITCEY: I think, Mr. Holm, in answer to that question, as we outlined in the paper, this is an issue that we believe is near and dear to all our hearts as Nova Scotians, that natural gas produced off our province must be utilized both onshore, onshore domestically, broader than it is today. So we have that and we have posed the question for you, we don't have the answer as to how to fix it. We would like to be involved with all the stakeholders to help resolve those issues but we believe, fundamentally, it is critical to this province that we have a successful, viable, economic distribution system, and when we have that we will have the economic engine to grow this province and bring many more benefits than have been outlined in this paper here today.

MR. HOLM: And you have no suggestions on how to do that?

MR. RAY RITCEY: I said what we can do is we can work together to come up with those. I think that is a necessary first step.

MR. CHAIRMAN: To Mr. Downe.

MR. DOWNE: The CNSOPB and the Newfoundland counterpart - are they currently working together and do you see that there should be a mandate for those two organizations to be streamlined with one set of regulations that will govern in the offshore Atlantic? That is what companies are looking at, we are one region, we are not two distinct provinces. Can you tell me where that is and have you had any input in trying to make sure that those two regulatory bodies will have one harmonized set of guidelines?

MR. JOHNS: Good point. In an ideal world, we would love to see - and the rest of the world would love to see - one body, whether it is CNOPB, CNSPOB, it is mirror legislation which goes on. The fact of the matter is it gets interpreted differently within the different provinces. The rest of the world looks at us as Eastern Canada, oil and gas combined; they don't see Nova Scotia oil, Nova Scotia gas, vice versa. The more we can do to give that perception of being open for business - and not just bankers' hours - we are truly

[Page 33]

going out and facilitating that process, and that would be a huge step forward, Don, if that could ever be done. However, I think that is a challenge that will take . . .

MR. DOWNE: It is clearly a direction that we, as legislators, should be looking at and giving some recommendation to. It appears that in the current system you have ministries that have power unto their own; we have silos within government that still exist. If you had one minister in one portfolio who had the power to be able to do what needed to be done, you wouldn't have the roadblocks that currently exist. Clearly, that signal needs to be given today to government. Lastly, Bush has gone out and said we are going to go and drill where we never drilled before. What does that mean to Georges Banks? And what do you see George Bush's plan along the Eastern Seaboard with regard to drilling potentials?

MR. JOHNS: Okay, I am going to take the first part of that question. OTANS, as we said earlier, we really support the idea of one minister who is truly charged; one captain in charge of the ship. Let me be clear on that one. On the Georges Bank issue, as far as Mr. Bush's intentions, we have corresponded with Mr. Bush, Mr. Cheney because he has spoken at our conventions as recently as a couple of years ago, and who wants to field the rest of that on the Georges Bank and potentials?

MR. BROWNLOW: If I may, right now I don't believe the Americans are looking too hard at the East Coast, but I think they will be looking at the East Coast very hard depending on energy shortages. There are brownouts predicted this year in New York City. Oil and gas reserves are there. I was involved myself in drilling in the Baltimore Canyon back in the late 1970's and there has been some activity down in that area. There is a moratorium on, but with him lifting the moratorium in Alaska, who knows? West Coast, Florida, East Coast, they could be coming very shortly to do that. How that will affect us, when you have your own gas close to your own backyard, you don't need someone else's.

MR. RAY RITCEY: If I can add to that, the Bush policy, as we have stated in our paper here, Nova Scotia needs an effective energy strategy and energy policy. My expectation, the expectation of OTANS is that it is probably one of the most fundamental issues that we are dealing with here as an industry, and the end result of it is that we should be able to maximize the oil and gas revenues, and therefore much of what is in Bush's policy that he issued a few days ago would be captured in an effective strategy developed and implemented by the Nova Scotia Government.

MR. CHAIRMAN: Okay, over to the PC caucus and Mr. DeWolfe.

MR. JAMES DEWOLFE: Welcome gentlemen. I can only wish that we had more time allotted to this subject. With the expertise that you have provided us here today, it would be certainly useful. There are so many things, like safety, that I would like to get into, and so on, but I will have the opportunity to talk with Tim in the future, I am sure, and discuss some of these things as I do have a great interest in it. I guess I am wondering, Mr.

[Page 34]

Johns, what opportunities do you see for Nova Scotia in terms of industrial growth in the sectors of the economy associated with the offshore?

In a nutshell, and I only have two minutes, I believe, what is your vision of Nova Scotia, given the boundary disputes, the streamlining and all the concerns that you have shared with us? You know and I know that they are going to get addressed. These concerns are going to come to some sort of resolve. So I am just wondering what vision do you have of Nova Scotia?

MR. JOHNS: The short answer to your question, I know you are time-pressed, I will just refer to something I said during the speech. If you think of where Nova Scotia was 5 or 10 years ago, just have that in the back of your mind, travel to Aberdeen, Scotland, travel to Stavanger, Norway, you will just see the whole socio-economic model has expanded. Pick an industry. Everything will be affected. This is not the panacea for all our answers, but it is a huge growth engine for us. It is all there.

MR. DEWOLFE: So you see great potential. I will pass quickly then.

MR. CHAIRMAN: Okay, in that case, Mr. Barnet.

MR. BARRY BARNET: I am going to be very quick and I am not expecting an answer here. You can give it to me later if you want, Mr. Johns. Employment - first of all when I finished school in the 1980's, to get a job in the offshore in Nova Scotia you had to go to Calgary first and get some experience. I know that that has changed because I have spoken to constituents of mine who have received training and experience here and now work here. The second thing, with respect to the regulatory climate in Nova Scotia, I have experienced the change myself since being elected to this House that has happened here in the last five or six years, post-Westray, in Nova Scotia.

I will relay a brief story. Two separate briefings from senior staff people in the Province of Nova Scotia ended up with the same conclusion at the end of a briefing. It was that they referred to the Westray Report and at the last of both of those separate briefings, the comments were exactly the same. They commented, in the final chapter, the final sentence, in the Westray Report which says, "and the mine blew up." I guess part of the issues that you brought to us today were issues surrounding employment and regulation. One of the things that we try to do in Nova Scotia and I think, to some extent, it is good, is we have separated out the promoter from the regulator in industry. That, hopefully, will resolve issues surrounding health and safety and who is responsible for what. Your little chart that you have shown, it actually transcends into other industries as well. I have spoken to people in the housing industry and all kinds of industries that could show a similar chart with respect to regulatory process.

[Page 35]

My final comment was with respect to one thing that you said that I think was most important here today and that is the attitude for change in Nova Scotia and the attitude that we have to accept the fact that we can succeed. It is my view that that has to start right here in these Chambers. It has to start with the politicians first. We have to lead by example and show Nova Scotians that it is not about partisan politics, it is not about who is going to score political points. It is about doing the right thing for the right reasons.

My final comment or question is going to be, does the industry need a minister or does the industry need a trained workforce and a streamlined regulatory system? To me, I think that the industry needs a trained workforce and a streamlined regulatory system more than it needs a stand-alone minister. Can you comment on that?

MR. CHAIRMAN: Actually, what I might do is point out that we are almost out of time. So, Mr. Johns, if you are going to respond to any of those points, what you might do is perhaps incorporate it with any final comments that you might want to offer us, as well.

MR. JOHNS: Okay, the short answer is, yes, yes, yes, on those three points. We need a dedicated minister, we need the royalty regime, and we need the skilled labour force. They are part and parcel, it is a process and it is a solution.

MR. CHAIRMAN: I think Mr. Abbass has some comments to offer as well.

MR. ABBASS: The member has pointed out something that is quite correct. It doesn't just boil down to adding a minister, name a minister responsible for one portfolio and one only. So much of it boils down to attitude and the member is correct, this is an all-Party industry, this is all-Party issue. It is too bad that no one got in a plug for the Premier's Campaign for Fairness. I think this is one example of an issue that does transcend Party lines. (Interruptions) Yes, that is correct, Mr. Holm briefly mentioned the campaign - if there is one thing that could be an impediment or a barrier to our children - and our children's children as politicians like to say - enjoying the benefits or the legacy of this industry, it is the way the math works under the current equalization scheme.

The Premier is showing as much leadership within his caucus and more than any member of his caucus, he is the defacto Minister of Energy and he has taken the bull by the horns with this campaign. Any support that any member of any Party can give to that campaign, should be given. The next time one is talking to his or her MP, next time an operator is talking to the Prime Minister, next time anyone is lobbying anyone on the federal side of things, this goes to the very root of whether we are going to enjoy the legacy of the oil and gas industry in the same manner that Alberta has enjoyed that legacy.

MR. CHAIRMAN: Mr. Johns, very quickly, thank you.

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MR. JOHNS: Just finally, we would like to thank you all for the opportunity to address you here this morning. If you have any further questions or concerns, we would be pleased to answer them or if you would like to invite us back at any other point in time on specific issues or anything like that. Thank you, we found it constructive and informative.

MR. CHAIRMAN: Thank you very much, Mr. Johns, and thank you to all of the delegation that accompanied you. It was a very interesting session and it may be that we will take you up on that proposal. As you can see, either we are going to have to start having three hour meetings or we will have to invite you back for a second two hour round.

Let me point out to committee members that we meet next on the June 6th. It is not clear whether at that point we will be hearing from representatives of the tourism industry or from PanCanadian. PanCanadian may be available on that day, if not, they will be available one week after that, but we will have a meeting on the June 6th, so we will see you then. Thank you all very much.

We stand adjourned.

[The committee adjourned at 10:02 a.m.]