Thank you, Mr. Chair.
Let me say right from the get-go, I appreciate the opportunity to present by video conference. It is probably a lot nicer in Ottawa: I think it was minus 28 degrees this morning in Calgary.
As mentioned, I'm Richard Dunn, vice-president of government and regulatory relations for Encana Corporation. Just a quick blurb about Encana: we are the second-largest producer of natural gas in North America, with production of some 3.3 bcf a day, that's 3.3 billion cubic feet a day. That represents about 5% of North America's total production. We are 100% North American, with 40% of our production in Canada and some 60% in the United States, with a market capitalization of about $25 billion Canadian.
The natural gas industry in North America is undergoing a technological renaissance that will go down as one of the biggest game-changers in the history of Canadian energy. Technology has unlocked vast new supplies of natural gas, providing an abundance the like of which none of us has seen in our careers. As a result of the new and fast-advancing horizontal drilling and stimulation techniques, North American natural gas resources are now estimated to be in the range of 100 years to 150 years of supply at current production levels. This technology has unlocked world-class places such as the Horn River and Montney Basins in northeast B.C. It offers significant promise in new producing regions across the country, including Quebec and New Brunswick.
I can create a picture of what this technology in action looks like. I am talking about multiple horizontal wells from a single pad location, which is roughly 200 metres by 200 metres on the surface. This taps into some 13 square kilometres of reservoir buried thousands of metres deep and accesses tens of billions of cubic feet of natural gas. You can have several high-tech operations under way at the same time. In one well, a high-tech well log is being run; another well is being completed, with as many as 24 separate stimulations in the horizontal well bore; and still another well is being prepared for production.
We look forward to showing the committee a truly high-tech operation sometime in the near future.
Canada is at the forefront of this energy renaissance. It's also at the forefront of environmental and economic stewardship. Communities do not have to choose between the vast economic opportunities that natural gas offers and the protection of their environment. What allows us to achieve this balance? First, we make use of best practices in quality engineering design across the breadth of our operations. Second, we observe solid regulations, which oversee all aspects of our development. These regulations pertain to diverse areas such as drilling, water management, air emissions, wildlife impact, and worker health and safety. Protection of groundwater is highly regulated throughout all phases of our operations. Regulations are in place to deal with the storage of saline water, setbacks of producing wells from local water wells, and protection of aquifers. From a design perspective, we've heard that engineering steelcase systems, which are fully cemented externally, provide multiple barriers to the migration of fluids from well bores to groundwater aquifers.
In Canada, we support the disclosure of increased information regarding the composition of the frac fluids we use in hydraulic fracturing. However, we go further. We are working to ensure that, wherever possible, we use the most environmentally responsible hydraulic fracturing fluid formations and fluid management practices. The industry as a whole is pressing forward with reducing our environmental footprint by drilling many wells—up to 16 in the Horn River from a single pad—from the same location, recycling water where practicable, and searching for new sources of water that would not otherwise be used. As an example, together with our partner Apache, Encana recently invested more than $50 million in a plant that provides a water supply from deep saline aquifers. This otherwise unusable water, as salty as sea water, is a substitute for fresh surface water that would otherwise have been used for fracturing.
I'd like to turn to the economic impact of the industry and spend a few minutes on the huge economic benefits that our industry provides across the country, including jobs.
According to figures from the American Natural Gas Alliance, in 2008 natural gas supported more than 600,000 jobs across Canada and contributed more than $100 billion to Canada's GDP. The studies show that every Canadian province has natural-gas-related jobs, and spending in the west brings significant benefits to the rest of Canada. Approximately 15% of the economic benefits from the investment in natural gas in western Canada goes to other provinces, much of that to Ontario and Quebec. Encana's spend includes millions of dollars directed toward Ontario- and Quebec-based suppliers, from high-tech suppliers to consultants to manufacturers, including such companies as Hoerbiger, Quadra Chemicals, and Tenaris Steel. As well, the industry brings significant benefits to local service sectors where we operate. In B.C., for instance, even though the service sector is relatively immature, more than 50% of our spend is directed toward local service providers, including a significant amount with aboriginal-owned businesses.
However, with the marked increase in shale gas production in North America, the price of natural gas has dropped, responding to basic supply and demand. As well, it's expected that the natural gas commodity prices will be low for the foreseeable future. Canadian shale gas plays are facing great challenges to compete in the northeast U.S. markets that we once supplied handily. The simple fact is that with the development in North American shales, the U.S. does not need our product to the extent that it did. While we have tremendous resources, we also face some inherent disadvantages, such as increased costs from operating in a northern climate and long distances to transport our gas to market. Large shale gas supplies are being tapped in Pennsylvania and Michigan, near our traditional and core markets. In large part due to these competitive challenges, since 2008, Canadian production has decreased some 20%, while over the same period the United States production has increased some 20%.
What can we do about these competitive challenges? In the short term, industry continues to improve its efficiencies. Provincial governments as well have done an excellent job in creating a competitive environment. One important thing the federal government can do is to adopt the CAPP federal budget proposal that will temporarily level the playing field by proposing an equivalent tax treatment to that afforded in the U.S. to natural gas developers. This tax treatment is roughly equivalent to the current tax treatment afforded to manufacturers and processors in Canada.
In the longer term, the health of the industry will be dependent upon creating markets both domestically and abroad, expanding natural gas use as a means of addressing the pressing demands to reduce carbon emissions. Natural gas is the cleanest burning fossil fuel, and greenhouse gas benefits through natural gas displacing hydrocarbon fuels in industries such as transportation and power generation are significant, providing between a 20% to 50% reduction in greenhouse emissions per unit of energy. Increased use of natural gas will create jobs and more government revenue through taxation and royalties.
Additionally, to turn to foreign markets, in transitioning to a middle-class society, Asia represents the other major market opportunity for natural gas. China, for instance, is expected to quadruple its natural gas consumption by 2020. Asia is injecting billions of dollars into growing our natural gas industry to meet its own energy needs. As part of this, LNG facilities on the west coast and supporting pipeline infrastructure will be required to access this market opportunity.
In conclusion, the Canadian natural gas industry is a responsible, sustainable, well-regulated industry that is a major contributor to the Canadian economy, yet this industry is facing significant competitive challenges. To maintain and grow markets domestically and internationally, it requires access to foreign investment and export markets, support for strategic infrastructure programs, and bridging fiscal policies so we'll continue to ensure this industry does not become further marginalized.
Thank you.