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Proceedings of the Standing Senate Committee on
Energy, the Environment and Natural Resources

Issue 2 - Evidence, April 23, 2001 (afternoon)

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VANCOUVER, Monday, April 23, 2001

The Standing Senate Committee on Energy, the Environment and Natural Resources met this day at 1:30 p.m. to examine such issues as may arise from time to time relating to energy, the environment and natural resources.

Senator Nicholas W. Taylor (Chairman) in the Chair.

[English]

The Chairman: Honourable senators, we are meeting today in Vancouver to consider two issues. This morning we heard witnesses on Bill S-15, the Tobacco Youth Protection Act. This afternoon we will be hearing from other witnesses as part of our study of energy-related issues.

The first witness this afternoon is Gerry Scott, Director of Climate Change Campaign at the David Suzuki Foundation. Thank you very much for joining us today. Another is Jim Fulton, an old friend of mine, who used to be an MP for a constituency in northern British Columbia. I think it was Skeena, was it not it? A further witness will be Dermot Foley, which is a good Irish name.

Perhaps each of you would give us three, four or five lines on what you would like us to know about you.That would be of some help. We will start off with you, Gerry.

Mr. Gerry Scott, Director, Climate Change Campaign, David Suzuki Foundation: I apologize, Mr. Chairman. We should have informed you through your staff that Mr. Fulton would lead off for us today. We have a written brief; it is in the prepared kit.

I am the director of the Climate Change Campaign, which is one of the projects of the David Suzuki Foundation. Dermot is our research director within that campaign and, of course, Jim Fulton is the executive director for the Foundation as a whole. With those few words of explanation, perhaps I could turn over the floor to Jim, and thereafter we will be prepared to answer any questions directed to any of us.

The Chairman: His is the only presentation? Very well.

Mr. Jim Fulton, Executive Director, David Suzuki Foundation: Mr. Chairman, first, I would like to say that we regret that all of our documents are not in both official languages, but we do have some that are, and if any of the senators would like to have those documents in French, we will be glad to make them available.

I will just take you quickly through what is in the package so that you have some sense of the kind of things we produce. The red covered book, "Canadian Solutions," deals with the kinds of policy changes that would be practical and affordable steps for Canada to take in order to fight climate change. The light blue covered one, "Taking Our Breath Away, the Health Effects of Air Pollution and Climate Change," has been a very useful tool. We are now working with the Ontario Medical Association, the B.C. Medical Association and a wide range of interest groups all across the country dealing with some of the pollution impacts of burning fossil fuels.

In the other side of the kit you will find a green covered book, "Climate Crisis: Energy Solutions for B.C."That is a much more in-depth, region-specific look at how a province of the size and with the population of British Columbia can easily meet and exceed the Kyoto proposal for 6 per cent cuts. There are also a few news releases in the folder, particularly in relation to Kyoto.

We are hoping that one of the steps that your committee will take, Mr. Chairman, is to urge the House and to urge the government to move on and ratify Kyoto within the next 12 months.

The submission is where I would like to start. I intend only to quote from some parts of it for the record and then we will be glad to answer questions.

We appreciate the opportunity to appear before this committee of the Senate and we thank you for your interest in the important and pressing issues that are associated with Canadian energy production and use.

We are increasingly concerned about the performance of our nation vis-à-vis energy development and use trends and associated airborne emissions, both criteria air pollutants and greenhouse gases. We are concerned because these trends are reinforcing and deepening our reliance on fossil fuels, both for domestic use and export-driven economic development. This growing reliance cannot be divorced in policy analysis from the associated impacts: more air pollution, more greenhouse gases and more price volatility. At the same time, the almost limitless expansion of fossil fuel energy supplies undercuts the development and growth of cleaner alternatives such as efficiency measures and renewable energy.

We believe that we are at a very significant crossroads in energy policy-making, with the federal government's decision within the next decade determining whether or not Canada meets its international treaty commitments in critical areas such as climate protection and clean air. Given those commitments and the dramatic impacts of climate change documented most recently by the Intergovernmental Panel on Climate Change, Working Group II, it is imperative that all arms of government determine energy policy with consideration of the full implications, not just immediate economic gains.

The full implications of our present energy policies include:

First, the risk of Canada's continually increasing emissions violating our obligations under the Framework Convention on Climate, Change, the Kyoto Protocol, and possibly trans-boundary air quality agreements with the United States.

Second, further threats to public health through deterioration of regional air quality and through ongoing climate change. The Government of Canada has stated in submissions to the United States that fossil fuel pollution in Canada results in 16,000 premature deaths annually here.

Third, long-term price pressures for domestic users of oil and gas, resulting in a rising percentage of expenditures on energy with a less than optimum economic and social return. Energy production is capital intensive, not labour intensive, and is concentrated in a relatively small number of locales, so the benefits are not distributed evenly.

Fourth, Canada is missing the opportunities associated with new energy technologies such as winds, solar, geothermal and others. These investments are being made in Europe, the United States and elsewhere, but not in Canada, with the result that we will not benefit from the new industries and new employment. Germany, for example, now has 35,000 people employed in the wind industry, exporting all over the world.

Fifth, significant direct impacts upon natural resource users in Canada as a result of unimpeded climate change, including those in agriculture, fisheries, forestry and tourism. This is particularly worrisome for a number of highly resource-dependent regions and for First Nations. I am sure that Senator Adams is more than aware of the meetings that are going on right now in the North, examining the immense impacts that have taken place in the that region already from climate change.

Sixth, the growing impacts upon individuals, businesses and communities as climate change results in more violent and severe weather abnormalities such as droughts, floods, forest fires, severe storms and heat waves.

In the following presentation we include an overview of the science of climate change and of Canada's current energy trade patterns. In addition, we summarize the findings of a recent report, "Climate Crisis, Energy Solutions for B.C." In this information kit we have included a copy of that report and two other relevant reports from our foundation which I referred to a moment ago.

Perhaps the senators would turn now to almost the end of the presentation, to the second page from the back, under the heading: "Recommendations." I will go through those, and that will give you a sense of where we think your committee might well spend some time and make some recommendations to the House that I think would be of benefit to the country.

In order to meet our Kyoto commitments and to provide Canadians with a buffer from the uncertainties of the energy market, we need to diversify our sources of energy and to reduce overall demand. In particular, federal leadership on energy efficiency and renewable energy is needed. We urge you to advocate the following actions to the Government of Canada:

One: Ratify the Kyoto protocol in 2002, the tenth anniversary of the Rio Earth summit and the year when many other nations throughout the world will be ratifying.

Two: Reject the "continental energy pact," which will drive up greenhouse gas emissions in line with increased oil and gas production, and concentrate instead on energy efficiency and renewable energy alternatives, in cooperation with the United States and Mexico where that is appropriate, such as on motor vehicle efficiency standards.

Three: Engage in a comprehensive review and updating of energy efficiency standards for all major appliances and industrial equipment. We have some great examples that we can tell you about in terms of some of those.

Four: Implement the R-2000 standard for new housing for all of Canada. If the standard is beyond the jurisdiction of federal statute, then a financing program which eliminates the difference in price between R-2000 and a regular house should be implemented.

Five: Develop and enforce a new corporate average fuel efficiency standard for automobiles that is based on the potential of mass deployment of technologies available today such as gas-electric hybrid vehicles. We flagged that one as a sort of special one, Mr. Chairman, that you might be interested in pursuing. The legislation was passed on this option for fleet efficiency in 1981. I was there, and voted on it at that time. We have had five prime ministers since then. That measure was also passed by the Senate. The only thing that is required to bring it into existence is to get somebody to pop it in a taxi and run it over to the Governor General for Royal Assent. However, for 20 years it has been languishing.

Six: Provide incentives for the development of low impact renewal sources of electricity such as wind, solar and micro-hydro. These incentives may be used to encourage utilities to purchase renewable energy, or to encourage producers to build new projects where the electricity can be marketed. At the same time, subsidies to fossil fuel production and use must be curtailed.

Finally, seven: As a means of encouraging the adoption of renewal technologies by utilities and other users of electricity, and in order to achieve the Kyoto climate treaty target in a cost effective manner, implement an economy-wide economic instrument such as a carbon tax or a carbon trading system with a firm national limit on overall emissions.

Mr. Chairman, I would be glad to answer any general questions you may have. Mr. Scott will answer specific questions on climate. In terms of any technical questions that require a detailed answer, Mr. Foley will answer those.

The Chairman: Thank you. Do you feel it is possible for Canada to stick to the Kyoto agreement if the United States does not, in view of the free trade pact that ties our economies together so tightly?

Mr. Fulton: We certainly do. Our overall assessment is that while we have obviously an enormous economic relationship with the United States, we also have an environmental relationship with the United States and with the rest of the world. The best science in the world, the greatest consensus ever reached on science, is through the Intergovernmental Panel on Climate Change, and they indicate that we need to achieve a 60 per cent reduction in emissions worldwide to stabilize the atmosphere. Therefore it is a situation for Canada, with our long and honoured track record of when we ratify, when we move forward with countries all over the world, to ratify sectoral multilateral, multinational agreements. We are as good as our word. If Canada were to back out of the Kyoto ratification process now simply because George Bush has another plan in mind, that would be irrational.

The science is in place on climate change, and what we need to do to stabilize the atmosphere is also known. We have written several reports, among them one which determined that Canada, with the off-the-shelf technologies now available, can achieve, in a cost effective way, 50 per cent reductions in emissions.

Canada is one of the most inefficient energy users on earth. We are the largest per capita energy user, and the second largest per capita greenhouse gas emitter. us, we release per capita in Canada the equivalent of about eight metric tonnes of carbon dioxide each per year, whereas the average person in India or Africa releases about one metric tonne of carbon dioxide to the atmosphere. There is, therefore, some huge, global reasons for us to abide by this undertaking, not least of which is that Canada has had a long and honoured history in terms of our national signature. Mr. Scott, I am sure, would like to add to that important question.

Mr. Scott: There are several underlying assumptions in the economic debate about Kyoto, and I would put "economic debate" in quotation marks because I think that the view of the economic side of this protocol has been extremely narrow, and quite often characterized by, I think, what could be termed a degree of scare-mongering from some sectors on some occasions. We believe that a more balanced look at the opportunities and the different ways of achieving the levels agreed upon at Kyoto will, in fact, lead to some very positive results, even in a narrow economic way. I stress the word "narrow" because, in a broader sense, there are many changes, shall we say, that would result from different energy policies that are not always quantified and counted as part of the economic side.

Mr. Fulton referenced the federal government's figure of the number of deaths from air pollution, but we also know from Health Canada, from Environment Canada and from provincial health agencies that we are spending billions of dollars per year on health care associated directly with air quality, and that number is probably much larger since we are seeing more and more medical evidence emerge on the relationship with asthma. Thus the figures that Environment Canada would use, which is in the billions, relating to the costs of air pollution do not include this strengthening link related to asthma.

I digress. I would like to come back more generally to the specific question of how we look at the relationship to the U.S.-Canadian economy. In a Kyoto protocol scenario, it is our view that we can, in fact, have economic advantages by moving to efficiency.

Efficiency is removal of waste, and in almost every conventional business situation, waste is the enemy. If you talk to General Motors, or if you talk to the people who run this hotel where we are presently sitting, waste is what they are chasing and trying to eliminate every day. Except, that is, in energy, because of a number of structural deficiencies in the system where often the people who pay the bills in energy are not the people who are looking at capital costs. This is particularly true in many commercial buildings, but it is also true within companies.

I would refer you to a book called Cool Companies, written by a Joe Romm, who used to be the equivalent of an assistant deputy minister in the U.S. federal energy department. I think his position was something like undersecretary of state in that instance. His book goes case by case, looking at Boeing, looking at big insurance companies and how they have wrung this waste out of their operations, and often it is possible because of the silo effects, even within big companies. We are all familiar with that in relation to large institutions in the public sector, as well as in the private sector. However, Mr. Romm has demonstrated that not only are there great cost savings available by knocking down energy use, but often double digit productivity increases from employees. For instance, people who are in production facilities increasing productivity with better lighting which happens to use less energy. There are many instances of this type of thing.

One of my favourite examples is the Canterra Tower in downtown Calgary, which, ironically, houses many oil companies who are fighting Kyoto. It is managed and owned by Oxford Properties, one of the largest real estate firms in Canada. Today, as we speak, they are operating at 28 per cent below Kyoto. They have reduced it in that time because of energy efficiency applications ranging from ventilation, to air-conditioning, to lighting and heating, and so on. In addition, of course, they have happier tenants, which means that the building is always full, at premium rates.

Mr. Chairman, I have, perhaps, taken too much of your time but I do believe, with these reports and many others, we have the evidence to show that if we can achieve that level of efficiency, we, in fact, could have an economic advantage from implementing the Kyoto standards, rather than a disadvantage which is based on this continuous waste of energy and is the equivalent of burning money.

Senator Spivak: I have not read your whole report, but I have looked at an executive summary of the International Panel on Climate Change. It seems to me that most of the facts relating to this situation should already be in mainstream discourse. In addition, everyone should immediately be struck by the fact that it began with Michael Porter quite some time ago; that with respect to the comparative advantage theory, it is smarter and in the long run. It is economically beneficial, as you have said, to go with eco-efficiency, which is what you are talking about. The other area of concern, of course, is health.

Therefore I just want to ask one question, and then I want to ask you more specifically about how we can focus our work. My understanding is that even to meet our Kyoto challenge, we must now reduce our emissions by 26 per cent. However, in order to keep the temperature change at an increase of three degrees would mean that emissions worldwide would have to be reduced by 60 or 70 per cent. Obviously, no government is about to tackle that, and no government in its right mind would give us a carbon tax. How would we even begin to get that done?

Therefore, if that is indeed the case, I have two questions to ask you. First of all, it would appear to me that a general strategy has to be focussed on enlightened self-interest: will it be good for us; will we make money out of it? The second thing is how are we to prevent getting really unhealthy and sick.

Many people have talked about this. David Schindler, for example, talks about a fresh water crisis and a fisheries collapse. What, then, are we to leverage in relation to what we might put in our report, whatever contribution that may make, so as to apply more pressure in the direction that we should be going? In other words, what should we concentrate on?

Mr. Dermot Foley, Policy Analyst, David Suzuki Foundation: As Gerry mentioned earlier, the economic advantage, the gain, of moving to efficiency and improving energy efficiency, is spread throughout the entire economy. All across Canada during this last winter in particular, we have seen the highest prices, historically, for natural gas that consumers have ever paid. We have also seen some of the highest prices for gasoline. Therefore the message that efficiency reduces the cost, the money that is going out the door, that message is really powerful, and I think there is a receptive audience for that.

As an example, I was looking recently at the Alberta government's Web site on their rebates and all the money they are giving out, and they have extensive statistics on how much money is going out to consumers, which in turn, of course, goes to the gas company. It is not really the consumers' money; it just goes through the system.

However, that Web site also has three points on energy efficiency, such as turn down the thermostat in your house, wear sweaters indoors, and put a blanket around your hot water heater. A government that cares about consumers and citizens really should take a little more initiative and actually go beyond that sort of thing and start thinking about these long-term solutions. When you implement energy efficiency throughout the economy, the savings go on year after year, whereas a rebate takes you through only one bad winter. When the next winter comes, we will see what the market does. Therefore I think there is a really receptive audience out there for efficiency, plus the gains that you get from that efficiency are the gains you get from reducing greenhouse gases as well. In other words, there is a way to market this concept, and I think there are things that the government - the federal government, in particular - can do to try and make those programs take off.

Mr. Fulton: I have a few things I would like to add to that. One is that I think we have to keep in mind the scale of energy use that is going on in Canada. We use the same amount of energy per year as India. There is a billion people in India. For example, in some provinces such as Alberta - and I know our chairman is abundantly aware of this - over the past 12 months wind energy produced in Alberta at four cents a kilowatt hour is now competitive, nose to nose, with natural gas in Alberta. The European Union, by 2010, will be at least 20 per cent on renewals, and that will give them all kinds of advantages, not the least of which is related to this report that we produced, with figures that the federal government is now using. Last year, 16,000 Canadians died prematurely as a direct result of fossil fuel pollution. The figure is probably 10 times that in the United States. It is important to get these kinds of morbidity and mortality figures out to the public, that 160,000 people are dying in the United States, that 16,000 in Canada are dying as a result of this type of pollution. The U.S. is now saving $150 billion to $200 billion a year as a result of energy efficiency measures. These are the things that taxpayers and the citizenry like to hear about. In other words, what are the benefits of meeting the Kyoto standards, and what are the benefits of going beyond the Kyoto standards?

I think we need to remember, one of the reports that Parliament produced between 1989 and 1991 was out of balance. I recall quite clearly that my seat-mate for those three years was Paul Martin, and Paul Martin now has a reasonably large job in the government. He is the Minister of Finance. When we tabled that report we came to a conclusion on the first page that "climate change for Canada is second only to all-out nuclear war in terms of its impact." Paul Martin agreed with that, and signed that. He also signed the report calling for 20 per cent cuts from 1988 levels by 2005.

Senator Spivak is right: We promised. We committed in 1997 in Kyoto to 6 per cent cuts below 1990 levels by 2012; no later than 2012. Right now, we are up between 13 and 14 per cent, so we are going exactly in the wrong direction.

In Alberta, every 150,000-barrel tar sands plant that comes onstream is the equivalent of 1.35 million cars being added to the roads in Canada every day. That is the upstream emission of carbon dioxide into the atmosphere. We have to start waking up here. We cannot keep just adding more coal, adding more tar sands, adding more gas, adding more oil.

How many Canadians know that not only are we the largest provider in the world of energy to the United States, and - I would bet that George Bush does not know this - we provide more oil and more gas into the United States than we use ourselves. How many Canadians know that? Canadians can barely pay their heating bills at the end of month, and we have Premier Klein giving them little cheques in the mail. Those cheques are going straight back to the oil companies, and straight back into the pockets of the shareholders. That money should be spent for wind, for solar, for tidal, for efficiency, for conservation, for jobs that are labour intensive. Those are our energy needs. We are the global gluttons on energy and the global pigs.

Senator Spivak: I will vote for you, Jim. People like yourselves can get the facts straight - and one of them I did not know, about this $115 to $200 billion a year. However, here is the question I am asking: Who do we need in order to form a coalition? The Senate has resources, and we have some influence - at least the chairman has influence with this government.I no longer have any influence.

The Chairman: I do not have any influence. I cannot even control you.

Senator Spivak: The point is, I agree that we must think about the strategy. We must look at what benefits health and eco-efficiency, but who should we be targeting in the country, or writing hundreds of letters saying, "do this." By the way, Paul Martin, I think, would do that if he could. That is my view, but perhaps I am wrong.

Mr. Scott: Certainly, it would be Mr. Martin with respect to the budget. We met with Mr. Martin most recently, I think it was, a year ago or 18 months ago. Mr. Fulton and I met with the minister to try and influence, of course, the policy changes. Many of them deal with two really big areas, and I think your term "eco-efficiency" could be a rallying cry - it may not be those words, but certainly that concept could be a rallying cry for Canadians who do want relief on energy pricing. The critical thing there is that they do not really care about unit costs; they care about the bottom line on the bill. I think if we focus on the bottom line on the bill, we get at this efficiency concept that you referenced. Both sides of that concept would reverberate, the "eco," the public health, the environmental health, and the "efficiency" side related to the bottom-line energy expenditures of businesses, of public agencies such as hospitals and schools that are constantly facing budgetary pressures, as well as individual households. I think that is one area where your committee can actually provide strategic leadership in getting Canadians focussing on those notions of "Let us stop burning our money in something called energy waste." I do think there is potential there.

With respect to how do we engage more people, and you used the term "coalition." The answer is yes, we need it bigger than that, in the sense that we need your committee to help particularly businesses see the economic advantage of reducing this form of waste.

With that object in mind, we mailed Joe Romm's book to the CEOs of the 500 largest corporations in this country, and we mailed it to 250 provincial and federal cabinet ministers. We also mailed it to 150 mayors of the largest cities, and regional governments in Canada. We got back very interesting and very positive responses from these CEOs in government and private industry. Many of those letters were addressed to David Suzuki.

Interestingly enough, our partners in this little project of the free book distribution were two of the largest gas utilities in the country, who have aspects of their business that deal with efficiency and reducing demand. The comments were supportive in many ways, and saying, "Help us, give us the tools to achieve this kind of efficiency that the author of this book and that you folks talk about."

Again, I think, that is where your committee can provide some leadership, by packaging some of these stories and some of these techniques of efficiency.

The Chairman: I just have one question on something that bothers me a bit. You were talking about pricing. In the last week now I read a couple of things that were interesting. One was that Saskatchewan has the biggest uranium deposit in the world now and can extract uranium at one quarter of the cost of any other competitor. I also read that a stock brokerage outfit in New York did the analysis, and I think you bore them out this morning with your comment that the cost of natural gas generation of electricity is around 4 cents per kilowatt, or 4.4 cents, but the atomic plant cost is only 2.2 cents.

While I was in China for a couple of weeks to talk to the minister of energy there, they told me that they are not converting their coal power plants to natural gas; they are converting them directly to atomic power; that that would be a pollution free, cheap source of electricity.

I should mention that Jim Gray, who has been Mr. Natural Gas in Canada for many years, said in his last speech that the only thing that would control natural gas pricing would be atomic energy; that that would be the only thing that could undercut it and bring the price down as far as the public is concerned.

Now what do you have to say about nuclear power?

Mr. Fulton: Mr. Chairman, I would be glad to start on that one. It is worth remembering that there has not been a new nuclear plant built in North America for a third of a century.

The Chairman: I know that is true of North America, but they are building such plants in France, Spain, Germany, China - everywhere except North America. It seems to be a rite of passage that since we were the first to drop the bomb, so we are the first ones to try to patent it afterwards.

Mr. Fulton: There are a number of very good studies which I will make sure come into your hands regarding the full cycle cost of nuclear energy. It is always quoted that as it goes into the grid, it costs less than coal, less than gas and less than oil, but not when you add in the realtime costs, particularly those related to the storage of the waste afterwards. There is no site on earth where the waste has been properly and permanently disposed of. It has been left for future generations to pay the costs. The reason for that is that it has been too costly for our generation to pay the real costs of dealing with the waste.

There is a direct comparison here to what is happening in terms of climate change. Since the beginning of the industrial revolution, when it was 280 parts per million of carbon dioxide in the atmosphere, we are now at 368 parts per million, so that is a 30 per cent increase.

The point that I am making is that we are now doing the same thing with fossil fuels as we did for a while in the 1950s and 1960s with nuclear power: We passed the cost of the waste on to future generations. What we are doing now is that we have jacked that pollution up into the atmosphere, to the point where all the senior scientists on earth are warning us that we must reduce our emissions by 60 per cent. If you are a heart patient and your doctor says, "Reduce your consumption of product X by 60 per cent," if you want to live, you do it. If you want to die, you die.

What we are saying is that we are passing on the costs of this kind of pollution of the atmosphere to future generations, for example, in terms of the kinds of extreme weather that are now being documented by the international insurance industry. Here in Canada, we have the example of the winter storms in Eastern Canada, and all of these other things, and unless we start doing full-cycle analysis of the costs of different fuel sources, we will never really get to the solution.

We do know, for example, that the ecological impacts of solar photo voltaic panels is pretty low. We do know that those wind farms in Alberta producing electricity at 4 cents a kilowatt hour are pretty low in terms of their ecological impact. However, as you go back up the carbon chain from light to heavy, and you move from natural gas to light crude, to heavy crude, to tar sands, and all of a sudden when you get to tar sands you realize that there is a gigantic belching of carbon dioxide at the point of production. That makes the tar sands enormously different from those other cleaner fuels. Coal, of course, is even dirtier, in most cases.

If the Senate could do one particular thing, that would be to produce a nice, accurate grid. You have some very fine research people, whom I recognize here today, who work through the parliamentary library and for the Senate, and to produce a state-of-the-art, accurate grid for Canada for all of the large sources of electrical production, and balance them against each other in terms of the long term job production benefits, impact on the atmosphere, impact on health - for example, why are so many people dying in the Toronto-Windsor-Montreal corridor and nobody is talking about it? Why are so many people dying between this hotel and Hope every year?

Mr. Chairman, if the Senate started producing accurate information and getting it to the public about what our energy options are, I think that would be very well received. When we did our power-shift across Canada with David Suzuki, in every single place we went to, our sessions were completely sold out; we had to turn people away. As well, we had every industry you can imagine in attendance there; the auto manufacturers, the petroleum industry, were all trying to get in. Everybody wants to get in and learn more about how it is that we can get 50 per cent reductions in a cost-effective way without disrupting Canada's economy. Right now, we have Parliament squawking and squeaking, and peeping and popping about not being able to achieve the Kyoto standard of 6 per cent. If we do not start going in that direction in terms of reduction, all bets are off. The last time we interrupted the carbon cycle on this planet, there was mass extinction.

Senator Adams: I would like to ask some further questions about wind generation. Before I became a senator, I used to be an electrician. I still keep my hand in. I do not want to lose my trade, and so every time I go home, I do a little bit of electrical work.

You mentioned that Germany was employing of about 35,000 people in making electricity through wind generation, with windmills.I think, if I am not mistaken, we went through the Alberta set-up about ten years ago, around Pincher Creek, somewhere in that area. Around, 15 or 20 years ago, someone or some company started up something like that, but I do not know what happened to it. I guess the government was not really very much interested. But somebody was putting money into such a scheme at that time, building a wind generating plant.

At any rate, do we now have any future in that new technology? Are we here in Canada able to follow the example of Germany, Switzerland, Finland and the rest of Europe?

Mr. Scott: The technology has taken immense strides in the last decade, in particular. This industry started in a mass way in Denmark, and they now have 14,000 people working in that industry. As we noted in the introduction, Germany is at 35,000 employees, I think. A lot of this is export-driven, and they are constantly refining the technology for efficiency, for cost factors, for all sorts of different kinds of applications.

This is in position now in Europe, and I believe it will be in North America, and certainly in Asia, within five years. We will be looking at large, offshore wind farms.Therefore, much of the energy in research and development on the technology side is now directed at offshore wind farms where there is, of course, even more space and more opportunity. Furthermore, the technology is driving the costs down. In countries such as India, it is bringing about new, high-tech industries as well as applications where they are leap-frogging, in some regions, over coal-fired production, for example.

The point that we would make here is that Canada has to get into the game. The United States may be turning its back on Kyoto, but just in the last two months in the northwest there have been two very significant announcements: One from Florida Light and Power that the largest wind farm in North America, at 300 megawatts, will be on the Oregon/Washington border. Subsequent to that, the Bonneville Power Authority, BPA, which is probably the largest or one of the largest energy agencies in the United States, ordered an additional thousand megawatts of wind, which will come from northwest producers.

Throughout the American midwest, the changing economics of wind, which is driven by the technology, have resulted in many of the farm states in the midwest having very active wind programs, both private sector and public sector. Wind is competitive with natural gas in almost every instance now where there is the wind resource, which is much of North America. Farmers are now gaining positive cash flow from siting windmills in their fields. In Texas, in Minnesota, in Iowa, and in many other of these midwestern states you are seeing really positive developments in this area. I believe the Saskatchewan wind announcement of ten days ago included provision for siting on private agricultural property with the same kind of approach. The technology is really evolving.

Again, if we can draw attention to the opportunities for Canadian economic activity in this area, not just in siting windmills but in getting into the productive side of this industry where there are new jobs, new industries and now opportunities, I think that has potential for us. Certainly if it can be done in a sophisticated economic situations such as Denmark and Germany, it is not that far from home for us to look at those same opportunities.

Senator Adams: Yes. We were at the climate change conference in Whitehorse about a month ago and we went to see the installation there by Yukon Energy. That consisted of a couple of windmills, one of 650 kilowatts and the other of 150 kilowatts. We now have a windmill installed at Rankin. It is only 60 kilowatts, so it is not very big, but at least they have cut down a little bit on power production and reduced the burning of diesel fuel that was previously used for generating power in the community.

With respect to renewable resources, our minister, Ralph Goodale, who was up there in Whitehorse for about a couple of hours, made the announcement that the government intended to establish some new energy policy in relation to climate change. He mentioned that the government would be putting up the money, and the sum of over a billion dollars was mentioned, as well as 40-something, I do not know exactly what it is to be. What I am also not sure of is whether that money will be spent on methods such as wind generation or whether it will be used in an attempt to reduce the C02. He did not say anything about that, but he did say that they have a billion dollars to spend.

Perhaps you people would have a better idea of what the minister intends to do with that money that he mentioned in Whitehorse. Perhaps you have more connection with and knowledge of that area, since you are concerned about climate change and renewable energy.

Myself, in my community of Rankin Inlet, I am paying 40 cents per kilowatt hour, in contrast to what you might pay in B.C. of perhaps eight or ten cents per kilowatt hour. Fuel costs are very high up there in Rankin. Both fuel and electricity costs are very high, and people cannot afford them. Even though they build their own houses, the people in the Arctic, in the North, cannot afford to pay the power and the heating bills.

Mr. Fulton: I do not think there is much doubt that there are many areas of Canada that are ideally situated to be pilot projects for renewables. We are looking at one with First Nations people in the interior of B.C., and I understand you have a representative from Ballard appearing here this afternoon. We have had discussions with Kip Smith about the possibility of using one of their first-produced 250 watt stand-alone systems to go into that area and use micro-hydro, wind and solar - in other words, use different sources to produce the basic energy supply, and then use the Ballard fuel cell as a redistributor of the power, using it more as a battery system for distributing that power in the community.

We have had some expressions of interest from the federal government in studying some of the other sites, particularly First Nations communities, that are rural, remote, often roadless, many of them even without an airport, accessible either by boat or by small aircraft, basically diesel-driven. Quite often these diesel plants are right in the downtown area, and they produce very nasty particulate matter.We know that those diesel systems are directly linked to some of the more serious respiratory issues.There is also a noise issue, and they are inefficient.

There is a whole range of places where the federal government could spend its money, rather than doing what has been done for the last quarter century, namely, as was found by the Auditor General, shovelling more than $40 billion, handed out in little brown envelopes, to the oil industry across this country through tax measures, and it is high time -

The Chairman: If I may, just for a second, mention the tax. Nobody has covered the fact here that the hydrocarbon industry is like the whisky business: it is taxed, so that when you get it at the pump, nearly two thirds of the price is tax. The same applies even to natural gas; we have had a carbon tax for years. Natural gas, because of the royalties paid on it, it is not a lot less but still around 15 per cent government tax.

These alternatives that you talk about, you say that they will be competitive with today's price, but what is the government to do when it loses all this revenue they now get from hydrocarbon? It is sort of like a sin tax, in a way.

Mr. Scott: First of all, we recognize that the change would be very gradual; that this transformation from the carbon-based fuels to renewables and, hopefully, efficiency would be quite a gradual change. There will be no big, immediate drop-off in revenue. However, we must also come back to two parts of that scenario, and those are that, first of all, there are big tax inputs into that industry. The Auditor General quantified them, we are spending money and, yes, we are making some money, but the tax revenue component in it is not without cost in the sense of those direct subsidies, incentives and tax provisions.

Second, through climate change, through regional air pollution, there is a big cost factor in the production and use of fossil fuels. Therefore, if we are weighing and balancing this situation in a purely economic sense, as Mr. Fulton pointed out earlier, and I think we have all made reference at different times to the fact that the cost side of fossil fuel use has to be measured, and that cost is made up of violent weather, whether it is floods, human health, crop damage, and on. We must therefore tote up those losses and costs and figure out who is paying them. When we have crop loss from fossil fuel use, as there is in Abbotsford, we know that the fossil fuel industry is not paying the freight. The public sector is bearing it. Thus we do have to look at the full cycle on the cost and benefits side.

Mr. Fulton: I was just about to refer you to a section in our presentation. It is the background section, and in the last paragraph of that section there is a worthy quote for you to keep in mind:

Other expected effects include changes in soil moisture content, increases in sea level and increased prospects for extreme weather events, floods and droughts.

The worldwide insurance industry has already noticed an increase in natural disasters over the past half century. Weather-related natural disasters have increased four fold since 1950, with the costs increasing 14 fold. By 1998, the economic costs arising from natural disasters surpassed $90 billion US. Between 1984 and 1998, economic losses in Canada rose by over 30 times, increasing from $39 million to $1.45 billion.

It is these kinds of costs that we would really encourage you, in your report, to start reflecting back to the Canadians.

The Chairman: Thank you very much. We have come to the end of your time, but we will let Senator Spivak ask one more question.

Senator Spivak: I have a great many more questions, but I will ask just one quick one with respect to the Care Coalition. You are part of that coalition, right?

Mr. Scott: No, no.

Senator Spivak: That is a coalition with the Pembina Institute?

Mr. Scott: We work with Pembina on many issues.

Senator Spivak: Very well. They asked Paul Martin for two things: tax credits, and I forget what else.

Mr. Scott: For both producers and consumers. Those were the two legs of it, with a number of utility companies.

Senator Spivak: Yes, but now a billion dollars is being allocated, I guess, in previously unallocated money - I hope that is accurate?

Mr. Scott: Most of that billion dollars that Minister Goodale announced at the Whitehorse conference came in the mini-budget which was presented in the fall of last year, and most of that money is, I think, allocated at this point in time.

The effort from the Care Coalition is to get new tax provisions, both on the producers' side and the consumers' side, that would act as incentives for renewable power generation and use, including wind.

Senator Spivak: I see. I had not realized that most of that billion dollars had already been allocated, because I was about to ask you, where should that money go? In other words, what and where are your priorities? For example, say we had another $500 million to $1 billion dollars?

The Chairman: That question requires more than a two-minute answer.

Senator Spivak: Yes, it does. I am just asking, what is your priority?

Mr. Fulton: I think if you look at the list, it is fairly well laid out in the brief. We really believe that a big hunk of effort needs to come nationally to inform Canadians about how we are to get to that 6 per cent Kyoto promise, and how we are to get to the 50 to 60 per cent reductions that we must reach. Canadians must get this on their radar. As Senator Adams knows probably better than anybody else, when you start speaking to elders north of 60, you realize that they see climate change. Polar bears are down 20 per cent in body weight since 1990. Fifty per cent of the Arctic ice cap has melted away since 1960. The kinds of erosion and population and species loss north of 60 is phenomenal. If Canadians got a grip on what is really happening in our North, the government would be driven to renewables, rather than waffling around looking for ways to keep burning more coal.

Mr. Scott: Mr. Chairman, I will be brief. Apart from spending money, we would just make the plea that issues such as standards be examined. Often we do not need to spend a cent to get the greatest gains. We have the technology out there for the buildings that we described earlier; we have the best architects on green buildings in the world, right here in Canada, many of them in B.C; we know the automobile technology is there: let us put it into mass play, sector by sector. We do not need to spend the taxpayers' hard-earned money. We need standards that give consumers, industry, business, hospitals and schools the opportunity to save money.

The Chairman: That is a good closing comment. Thank you very much, gentlemen. We appreciate very much your being here this afternoon. You have certainly given us a great deal more in written material to study.

I now welcome Mr. Stephen Kukucha. Maybe you could give us a line or two about your experience, to help us realize what an expert we have before us today.

Mr. Stephen Kukucha, Senior Advisor, External Affairs, Ballard Power Systems: Mr. Chairman, Senators Spivak and Adams, I am Ballard Power Systems' senior advisor for external affairs here in Vancouver.

With respect to my background, I am actually a lawyer by training, but have some experience with the federal government. One of my previous positions was as a senior advisor to the federal Minister of the Environment. In other words, I have recently left the federal government and moved into the private sector, and I am enjoying the experience. Ballard is a unique and neat company to be part of, and I am very excited about that. I assume you all have a copy of our presentation?

The Chairman: Yes.

Mr. Kukucha: What I thought I might do to begin with is to show you some of the technology, if that would be in order, and give you the "Fuel Cell 101," lecture, for lack of a better expression. If I may approach?

Those are the components for a fuel cell. If you turn to the first slide, what I will do is walk you through exactly how a fuel cell works.

The heavy plate was one of the first plates we had developed at Ballard Power Systems. A fuel cell consists of two plates sandwiched together with a membrane electrode assembly in between, which is the piece - yeah, that is the membrane electrode assembly. Both Senator Taylor and Senator Adams have one.

To show you some of the advances we have made in the technology, the heavy plate was, as I said, one that Ballard had developed a few years ago. They were hand-machined and very heavy, as you can see, and the material costs were quite high. We have since moved into the new technology, the lighter-weight plates which are manufactured, and you can certainly see the different weight and the different -

The Chairman: How many of those are in there, to run a car?

Mr. Kukucha: They differ for a car or a bus or a portable unit, actually, and the actual number of cells that are in a fuel cell itself for a vehicle is not disclosed. We do not disclose that publicly.

Senator Spivak: But is this one?

Mr. Kukucha: That is half of one. If you take the other plate, that goes in between, and then you take this plate, and if you hold that together, the middle part of the fuel cell is the little piece that Senator Taylor has in his hand, and that is called the membrane electrode assembly. How it works is that you put hydrogen into one side of the plate and it goes through all the grooves, and you put oxygen into the other side of the plate and it goes through the grooves. This is called a proton exchange membrane fuel cell, and the membrane electrode is in the middle. The protons pass through the membrane and the electrons go around the membrane. It is a very simple chemical process whereby you are hiving the electrons off a hydrogen source to create pure energy. The only by-product from that is a little bit of water and a little bit of heat. There are no pollutants whatsoever, and no greenhouse gases.

The Chairman: The fuel can be anything?

Mr. Kukucha: Well, that is one of the challenges for fuel cells right now, is fuel infrastructure. What powers this fuel cell here is hydrogen. You can use either gaseous hydrogen or liquid hydrogen, and that can come in different forms. You can reform methanol to produce hydrogen, you can reform natural gas to produce hydrogen, you can use it in its pure form of gas or liquid, but to take those steps you probably need a reformer, if you are not going to use pure hydrogen.

The Chairman: Can you use water or gasoline?

Mr. Kukucha: You can actually use water. One of the ways to produce hydrogen is through electrolysis. That would require an electrolizer, and a company in Toronto called Stuart Energy is producing electrolizers. Effectively, you plug their unit into the wall with an electric cord and a hose, and out comes hydrogen.

Senator Spivak: Therefore, this process does not require another energy source, really? Does it require electricity, or is it self-sustaining - I do not understand that.

Mr. Kukucha: It actually requires electricity, because what occurs in the electrolysis process is that the electricity breaks the water down into hydrogen and other components. Water it is really H2O, so it is two parts hydrogen and one part oxygen. The electricity breaks that in half and separates the hydrogen out. Therefore you actually do need grid-based electricity for that.

Whereas with the methanol, it is a slightly different story. If you turn to the second slide, our component here is the blue figure on the diagram, the fuel cell stack in the middle. On the slide you are looking at right now, Senator Spivak, if you have methanol or natural gas coming in on the left-hand of the slide, you would need to have an on-board or off-board fuel reformer, which would break the hydrogen away from the methanol or the natural gas, and that would create the hydrogen to power the fuel cell.

Senator Spivak: Do you mind if we ask questions through this?

The Chairman: We have only 45 minutes for this witness.

Senator Spivak: Very well.

The Chairman: I suggest, senator, that you take some notes on the edge of the slide, and we will come back to it later.

Mr. Kukucha: The first slide is really the chemistry, and it is a very simple and elegant process for producing electricity, because you are simply cleaving off electrons.

The second slide really runs you through some of the things that have to go around a fuel cell in an automobile or a physical plant to make it work. Because the fuel cell itself creates DC power, it does not create power that you could utilize. You could not plug directly into a fuel cell without some other components around that. These, then, are some of the other things that you need to produce usable electricity from a fuel cell.

The next slide talks about some of the things, the forces that are driving the need for fuel cells, and I am sure some of the testimony you have heard here today refers to some of them. Clearly, the environmental concerns about energy production. Something which is not commonly known is that fuel cells are about twice, if not significantly more tune as efficient as an internal combustion engine. Internal combustion engines average about 20 per cent efficiency, whereas a fuel cell has about 40 per cent efficiency. If you use it in a co-gen. Application, where you are capturing the heat as well, you move to about 80 per cent efficiency. Therefore they are significantly more efficient, meaning you need less fuel.

Some of the other things which are driving the development of fuel cells, as we see in California today, is utility deregulation and the need for increased power. One of the great things about fuel cells as well is that you get a steady stream of constant premium power, whereas with the electricity grid you have some ups and downs and spikes and peaks, which cause your power not to be so constant. Whereas with fuel cells, it is a constant and a premium sort of power.

One of the other things that we are seeing clearly in California, which we have not yet seen in Canada, is transmission constraints.Even if you did have the capacity to produce power, you have to transmit it to homes and to vehicles, if you are using electricity to power vehicles, which is done in California, so there are constraints on the grid.

Ballard has three product lines, and we are fairly diversified in that we not only produce fuel cells for cars and buses but also small, portable applications for generation and also stationary purposes. I believe it was either Gerry Scott or Jim Fulton who referred to our 250 kilowatt unit, which is a quarter-megawatt of power. We are currently producing 12 of those units for demonstration in the field. Those could be used to power a building or a home, or a series of homes. Thus we are not just in the car and bus business; we are also in the stationary and portable business.

The next slide I refer to, the one with the arrows on it, shows how we are building our different markets. It will be easier for us to get into the portable power market because of the technology. One of the more difficult markets to get into is the automobile market. Therefore, all of the lessons that we learn between now and about 2005 with respect to automobiles, we will translate that into bringing down the costs, and also improving the technology efficiency slightly for the automobile market.

As I mentioned, in the next slide I refer to some of the portable power applications, opportunities and solutions that we have. In terms of currently available portable power, take for example a Coleman generator or something small that you would use to power your cottage or cabin or, if there is an ice storm, you could have something that would power your facility. The challenge with those is that they are powered by gasoline or diesel, and they give off emissions and fumes, so you cannot use them indoors for fear of asphyxiation.

With a fuel cell, on the other hand, we refer to its "sitability," because you can site them anywhere. They are clean, quiet, there are no vibrations and there are absolutely no emissions. In a situation like an ice storm, you would have power indoors to power your essential needs and could wait out the storm, as long as you had hydrogen canisters with which to power that fuel cell. We think there is a very good market there for premium applications, either for home offices or emergency purposes, where generators are currently being used or could be used.

The Chairman: The hydrogen canisters, are they the same as welders use?

Mr. Kukucha: There are a number of different ways in which you can store hydrogen, either gaseous hydrogen like welders, or there is a substance called metal hydrides which can store a significantly larger amount of hydrogen.

We will be releasing our first product this year, which will be powered by a hydrogen canister, and again, we have not publicly disclosed which ones.

Senator Spivak: For boats, that would be great.

Mr. Kukucha: Absolutely. That is another market we would envision. With respect to a distribution network for hydrogen, what we are anticipating is something as simple as picking up your propane tank such as people use for their barbecues or for their little generators, and it is just as safe and just as convenient.

On the next page there is a photograph of one of our demonstration units for our portable fuel cell. This was our prototype unit. We do not anticipate that the commercial unit, which will be launched this year, would be significantly larger than this.

Some of partners we are working with, Coleman, Honda, Yamaha, they are very big brand names, and we are anticipating a very successful commercial launch of our product, which will be the first commercial fuel cell product for sale in the world.

Senator Spivak: When?

Mr. Kukucha: Again, because we are a publicly-traded company, I cannot disclose exactly when we will be doing that, but it will be sometime in 2001. We are very excited about the opportunity.

Another application mentioned on the next slide is stationary power, and this is the bigger units, the one that Gerry and Jim referred to. Again, all the same drivers are available for this application as there are for the portable application: that you can site it anywhere, it is clean, it is quiet, it does not give off any emissions. However, with this market we see a real solution to the energy crisis that is occurring in places like California, and which may occur in Canada if we are not careful about how we develop our energy supply. With deregulation, what you are seeing is increasing demands on the grid, and what stationary fuel cells do is provide distributed generation power. Therefore, instead of a grid, a central plant somewhere, fuelled by either coal or natural gas, producing energy and being transmitted over electrical wires, you would have a fuel cell unit, either at your home or in your neighbourhood or at your building, which would provide power for you there. In peak times, you could use it to power buildings, but in down times, when there is less electricity load on the grid, you could sell that power back to the grid, so you actually have a revenue-generating capacity within your own building. We think there is a great market for that as well, both now and in the near future.

On the next page there are actually photographs of two of our units. The big unit on the left is a 250 kilowatt quarter-megawatt unit, and that would power roughly a small office building or a McDonald's - I like to use the example of a McDonald's restaurant because it uses a lot of power. This would adequately power a McDonald's restaurant 24 hours a day with power to spare. This unit is actually being tested by a utility called Cinergy in Crane, Ohio, at a military base right now.

The Chairman: Obviously, there is no picture of a person standing there. Is that thing ten stories high or just six feet?

Mr. Kukucha: You can put some context in it with a building. It is about eight feet high, and it is actually probably as long as your table.

The other unit which you see here on the right is a one kilowatt unit, which is a unit we will be marketing in Japan. What Japan has done is they have flipped the problem around and said, "Let us move to individual homes having one kilowatt units for their base load of power, and then the grid, the electricity grid, will power peaks beyond that." This, then, is the type of unit that will be powering homes in Japan in the very near future. They have taken a different route in relation to de-regulation.

The Chairman: What voltage do these units generate? Is it the regular household voltage, or can you go to step-up transformers if you want it?

Mr. Kukucha: They actually produce DC power and the converters inside -

Senator Adams: The DC, not the AC power?

Mr. Kukucha: With the portable unit, you can basically plug your computer right into it. The portable unit also has a sensor in it, and we are anticipating that if the power goes out in your home, the portable unit will kick in right away, so there will be no interruption or disruption of power whatsoever.

Now, moving into the transportation field with the next slide, these markets are tougher to get into, and we need to drive the cost down on the unit significantly, because it is a very competitive field. However, it really is the largest potential market for us in the fuel cell business, with over 182 billion dollars annually in sales. That is a market that we are driving towards. We have a publicly-stated target of being in commercial sales for automobiles by 2007 and 2008. We are currently selling to all the major automobile makers, including Ford, DiamlerChyrsler, Honda, General Motors and others. Ford and DiamlerChrysler are major shareholders in Ballard, but we also have a number of other customers, including Honda, Nissan and most of the other major auto-makers.

On the next slide, we explain that a number of the characteristics for portable and stationary power are similar for cars. They are clean, they produce no pollutants or greenhouse gases whatsoever, they produce premium power, they are very high-performance, and there are no moving parts, so the maintenance is very lower. Such vehicles are very nice to drive, and I would invite all of you out to Ballard one time when we have a vehicle here to drive one. We do not have one there today, unfortunately, but I would encourage you all to come out another time and view it.

Two of the other unique characteristics of fuel cell vehicles are the design freedom. A fuel cell is not like an engine: it does not have to be in the front, and there is much more flexibility. You can put it anywhere in the car, which is a unique opportunity for auto-makers. However, what we think is one of the most outstanding characteristics is the on-board power. The fuel cell that we use to power a vehicle is about 830 kilowatts, and cars do not necessarily need 80 kilowatts of power, so you can take this to the beach and turn it on, and you are producing no emissions whatsoever, and you have a full range of power for your vehicle. You can have it as a home office, a fax machine. Some of the concept cars I have seen have dishwashers and washing machines and -

Senator Spivak: I read somewhere that you could drive your car to the office, plug it in and power the office.

Mr. Kukucha: Essentially, you can do that as well, and you can do that at your home.

Senator Spivak: You could sell the power when you are not using it because you are in the office all day, and that would also be an advantage.

Mr. Kukucha: Absolutely. One of the unique characteristics of fuel cells is that you could take this home and power your whole house. The challenge is, though, if you drive your car away, you have no power for your house.

However, it does provide a myriad of opportunities, and that is what is exciting about it. One of the key things, we think, is that it really is environmentally friendly and it is a solution to the air quality problems we have in this country, in certain urban regions, and also to some of the challenges we face from a greenhouse gas perspective. Regardless of the policy stance taken across the border, we think this is a real solution to some of the commitments which the Kyoto protocol requires our country to meet at this time.

Just to show you some of the developments in relation to how far we have come over the years, our next slide talks about the power density. One of the challenges in producing fuel cells commercially is to produce the power density you need, which is 80 kilowatts for a car, but also bring the costs down, and that is why I have shown you the plates which I have shown you. The really heavy plate on the far right was first produced in 1991, and with the size and weight of that fuel cell, it only produced five kilowatts. However, in the short span of about eight, nine years we have brought the technology to the point where we can produce 80 kilowatts in the same size of cell, and the cost is dramatically lower because of the materials we are now using. In other words, we are making dramatic leaps and bounds in the technology every day. Critics of the technology will suggest it is not there, and that it costs too much.I would suggest that it may not be available right now, but the challenges and the opportunities -

Senator Spivak: Is that the size that would go in a car, 80 kilowatt?

Mr. Kukucha: That is correct.

Senator Spivak: How does that compare to an internal combustion engine? Is it smaller?

Mr. Kukucha: Size-wise, it is actually smaller, and it produces obviously less heat and no emissions, and you can put it anywhere in the car, effectively.

The next few slides really are pictures of some of the products we have. In 1999, Ford unveiled its P2000 which the government helped promote, and we did that on Parliament Hill. Our CEO was there, as well as Bobby Gaunt from Ford. DaimlerChrysler, our other shareholder, has R-5s which are the Mercedes A classes. I like to refer to Bill Clay Ford's quote at the bottom of that slide where he basically states that fuel cells will finally end the 100-year reign of the internal combustion engine; that this is the technology that will take over. Those are fairly bold comments from an auto-maker, so we are very excited about that.

The next slide refers to something called the California fuel cell partnership, which is an initiative in the state of California where all of the major auto-makers, oil companies, fuel providers, government agencies and technology providers have built a facility to demonstrate the technology in vehicles, and to refine the technology to make it commercially available within the next six-plus years. This is a major step in ensuring that fuel cells will be available for the automobile market.

One of the points I will be getting to later in the presentation is the active involvement of certain governments, both in the United States and in Europe, and we think Canada has an opportunity to build upon that, especially on all the great work that the country has already done in helping to develop this industry.

The next slide refers to some of the buses we have. We did a demonstration here in Vancouver a number of years ago with TransLink, and that is the bus on the left. The bus on the right is the current test bus, the new generation bus, which we have in Palm Springs at the present time.

Senator Spivak: What is the cost right now?

Mr. Kukucha: With a fuel cell bus you can break the cost down in a number of different ways. There is the hardware cost for the bus; there is an increase in operating costs because, right now, there is no hydrogen infrastructure and different servicing requirements.

The two proposals - I apologize for being long-winded, senators, but there is a simple answer. The two bus programs we have running right now which incorporate all of those things, we have about 20 buses operating in California and the cost of that program is about $43 million Canadian. We have 30 buses operating in Europe at the cost of about $60 million Canadian. Thus if you were to roll it all into one, and that includes engineering support and having people in the field, it costs about $2 million per bus to run the program. Our goal is to have the price of fuel cell buses commercially comparable to electric trolley buses within the next five years.

Senator Spivak: Which is what?

Mr. Kukucha: Trolley buses are about $800,000 to $900,000 Canadian. CNG buses are about $600,000 or $700,000 Canadian. The benefit, obviously, of trolley buses is that they are also non-polluting.

One of the new technologies we are working on, and I refer to the challenges we face with providing fuel, hydrogen to fuel cells. We are working on a technology which produces power to the fuel cell with direct methanol. On this slide is the go-cart that we have produced right here with DiamlerChyrsler.

The next few slides are really the substance of what I wanted to chat with you about today. Ballard has been around since 1979 here in Vancouver, and we started off as a lithium battery company and shifted into proton exchange membrane fuel cells in 1983. Right now, we consider ourselves world leaders in the technology. We have three very large facilities here in British Columbia that employ over 800 people right now, an R&D facility, a manufacturing facility and then a facility for our stationary power products.

Some of the things Ballard has done this year alone is generated over $175 million in direct and indirect compensation, $33 million in taxation, and we have spent - and this is the figure we are most proud of - over $130 million for capital in R&D, and up to $500 million over the last five years. What has allowed us to do that to a large extent has been the great support we have received from the federal government over the years. Between 1981 and 2001, the federal government has committed over $112 million to our industry. Ballard has been the recipient of a large part of that, about $50 million. We are proud to say that the majority of that is repayable, and we will be repaying those dollars once we start commercially selling product.

Other people in the industry have benefited from the federal government's support as well, to the tune of about $62 million, and that is both industry and universities. There are a number of different departments helping to deliver that support, including Industry Canada, NRCan and Environment and DND.

Some of the things that the government is currently involved in are: the Canadian transportation fuel cell, which deals with fuelling infrastructure and helping provide the fuel you need for fuel cells; some R&D and technology development activities with the fuel cell innovation centre, as well as an organization called Fuel Cells Canada. We are very encouraged as well by the announcement of the Sustainable Technology Fund. However, that is not strictly for fuel cells; it is for a number of different technologies, but we think fuel cells can access those funds for our development.

To put it all in context, I guess, in the next slide, Canada has been very generous in moving through the R&D phase. The challenge we see for the industry in Canada today is that everyone else is catching on. The United States, the European Union and Japan are really starting to fund the industry very aggressively, both through its manufacturing and commercialization phase. Some of the figures I have referred to earlier: there is the California bus project for about $43 million, and about $156 million was spent by the United States alone last year in fuel cell developments with a proposed $200 million for next year. There is also a tax credit proposal right now before Congress for upwards of $750 million Canadian over the next five years.

The Chairman: Are fuel cells patentable, or do they use - you say everybody is catching on.Does that mean that fuel cells are not patented? In other words, anyone can get into the business?

Mr. Kukucha: The technology is patentable, and we have over 500 patents. However, there are different types of fuel cells. We have proton exchange membrane fuel cells. There are also solid oxide fuel cells and molten carbonate fuel cells. Even though we use proton exchange membrane fuel cells, some of the processes we use and the technologies we use are patented. One of our largest competitors is a company called United Technologies, which has been producing materials for the space shuttle for years, and they have proton exchange membrane fuel cells as well.

We believe we are the world leader, and will continue to be the world leader, based on the patents that we have, but there is clearly a loss of research dollars by way of money going into commercializing the technology, which could be a threat to the industry here, and specifically to Ballard, over the next few years.

The figures are self-evident. I think they outline a significant amount of spending from other government agencies across the globe to try and catch up to where we are today because of the great work the Canadian government has done.

What I guess I would ask for today from the honourable senators is continued support for the industry: Continued support and work through R&D efforts and technology efforts, and continued support for the fuel cell infrastructure issue. There are already programs in place that are very successful.

Two large gaps that we see in the potential strategy that the federal government has towards the fuel cell industry is that sometimes there is a lack of coordination amongst all of the federal departments at play here, and we think there is an opportunity for a national commercialization strategy for this technology. I am not sure how that would be structured within the federal government, but we do see a really great opportunity here for the federal government to take a further leadership role as we move into commercialization.

One of the other things we think would be significantly helpful in moving the technology along and matching some of the investments that are occurring in other countries is a transit bus demonstration program, or actually a transit bus commercialization program. We have done great work with the demonstration programs here in Vancouver, but both Europe and California have now taken the next step, and we would really like to see Canada take the step after that, to ensure that some of the manufacturing capacity and some of the other industrial benefits stay here in Canada for the next phase of the industry's development.

We do not have a firm proposal right now. We are finalizing some of those details, and we expect that the CEOs of our company and XCELLSIS, which is the fuel cell bus engine company, to be heading up to Ottawa before the summer recess to make a proposal to ministers within the Canadian government for support for that program.

I have talked about our different product lines: we would target fuel cell buses for federal government support. We will be commercializing our portable unit this year, and we think that will take off in the marketplace. The automobile market, where the large benefits will come from an air quality and greenhouse gas perspective, is a few years down the road and the real bridge to that is a successful commercial introduction of transit buses. That will help put the infrastructure in place for fuelling. It will also help sensitize consumers to the technology, let people know that this technology does work and inspire in them some confidence that if they do purchase a fuel cell product for the transportation sector, it will work and it will work effectively. Those are some of the key things I was hoping to chat with you about.

The last two slides really go into some of the environmental benefits and economic benefits, which we have already touched upon.

I wanted to leave some time for questions. We see a real opportunity for the government to be engaged in the next phase of the industry's development. As we move into a manufacturing and commercialization phase, the benefits from a job creation perspective and industrial benefits perspective are great, both in Western Canada and across the country.

I apologize, Mr. Chairman and Madam Deputy Chairman, for the length of time I have taken, but I appreciate the opportunity.

Senator Adams: You are putting portable generators in buses and cars. How long term is that? An engine may run out of oil causing you to burn your engine out. How does this compare to environmentally friendly energy?

Mr. Kukucha: For portable units they will last as long, if not longer, and we are targeting for significantly larger than your standard generators. For automobiles we are targeting - and we have met these targets for a number of products already - for as long as an internal combustion engine would last, over 150,000 hours or over 5,000 hours. The product, to be successful, has to be as functional as the commercial products that are out there now. Through our tests, we have had great success in terms of longer durability and reliability with this technology. We firmly believe it will outperform all other technology, but at a minimum, we will meet all the current standards that are there, both from an automobile and a portable perspective, when we come to market.

Senator Adams: They clog up sometimes. Do you have any way, right now, of cleaning it or do you have to take it apart? How does the system work?

Mr. Kukucha: One of the great things about fuel cells is that there are no moving parts. What moves through the fuel cell are streams of gas, so there is less repairs and there is lower maintenance. We have some minor technological hurdles to get over, but we are working on those.

The Chairman: What does wear out on them, if they quit after 250,000 miles?

Mr. Kukucha: Well, the membrane in between would be what would degrade to a certain degree, and it also depends on what fuel you are using. The more impurities there are in the fuel, the larger the degradation you will have.

The Chairman: I have a question in my mind on the motor. Like, if you have a gasoline tank on a car, it is fairly dangerous. The other thing, of course, is here you are producing hydrogen. Is it produced in such a way that you could develop a hydrogen leak in your house, and somebody who still has not quit smoking gets blown to kingdom come in a hurry?

Mr. Kukucha: Let me address the questions separately. First with regard to storage on board the vehicle, a company called Dynotek in Calgary is probably the current world leader in hydrogen storage technology, and their tanks are in most of the hydrogen fuel cell vehicles on the road today.

The Chairman: Is it necessary to have a tank? If you are doing the fuelling with hydrogen, does the fuel go into the hydrogen tank to give you a certain amount of storage and then run the hydrogen through the machine, or is it a continuous process so that there is very little hydrogen around at any time?

Mr. Kukucha: If you are storing gaseous hydrogen on board, you need a steady stream of hydrogen into the fuel cells. That is one way to power the fuel cells, so you would need a 5,000-psi fuel cell tank with stored hydrogen in there. You could have a methanol tank on board, which would be in liquid form, and then you would have to convert the methanol to hydrogen, so that would have different opportunities and challenges attached to it. But you do need a storage tank for fuel on board the vehicle at this time.

With regard to the safety of hydrogen, we are very much of the opinion that hydrogen is a very safe fuel. We would suggest that it is probably safer in some respects than gasoline because of the fact that it is so lightweight that it disperses into the air if there is a leak.

Senator Spivak: Then if you had your "`druthers," because the question of fuel is puzzling to me, would you not rather have a plug-in electrical system, then you would not need to have fuel storage on board?

Mr. Kukucha: You actually need fuel storage on board for a fuel cell vehicle.

Senator Spivak: Oh, regardless of the type?

The Chairman: Either that or a long extension cord.

Mr. Kukucha: It is a battery vehicle. Let me talk briefly about the difference between battery and fuel cells. Battery vehicles are really the ones that you plug in and the battery stores the energy in the battery. Then it runs out and you have to plug it in again. Whereas fuel cells are powered by the fuel going into them, so as long as there is fuel, you will have electricity and power.

Senator Spivak: What, then, are you doing when you are plugging in a fuel cell? What are you doing?

Mr. Kukucha: Right now, technically, you do not have to plug in the fuel cell vehicles. One of the visions for fuel cell vehicles is that you go home and you would plug in your fuel cell vehicle and you can put power back into the grid or power back into your home.

Senator Spivak: Oh, I see. With respect to plugging it in, you are not getting power into your fuel cell, you are giving power out?

Mr. Kukucha: Correct, correct.

Senator Spivak: Thus you always have to have an on-board fuel source?

Mr. Kukucha: Yes, you do.

The Chairman: Could you not generate that in the home, plug in a hydrogen source there?

Mr. Kukucha: Let us take the Stuart Energy fuel appliance as an example. You could have one of those in your home, and you would have it plugged into the wall and into a garden hose and that would produce hydrogen, but you would still need to store the hydrogen on board your vehicle somehow. Some of the technologies, you could store it as gas, you could store it within hydrides. There are different types of hydrides. There are metal hydrides and sodium hydrides, which is a chemical hydride.

Senator Spivak: I think I have some of the Ballard material at home, the package that you put out with the annual report and everything, but is that a good explanation of the technology, or can you refer us to something that is a better source of explanation, a more detailed explanation, of the technology itself, the opportunities and the challenges? Do you know what I am getting at?

Mr. Kukucha: Yes.

Senator Spivak: Is there something that has been written by somebody on this particular type of fuel cell?

Mr. Kukucha: Our annual report is a very good place to start, and there have been a number of very good articles. What I would like to do is send you a videotape which outlines all of those in detail, if I could, through the clerk.

The Chairman: Thank you, we appreciate it. I have one more question. If you are sending it to the committee, perhaps you could make about 12 copies.

Mr. Kukucha: Absolutely.

Senator Adams: You were talking about B.C. and California where you have good weather. When the temperature is minus 60 or minus 70, how do these fuel cells work?

Mr. Kukucha: Fuel cells, when they are operating, they do produce water, so there is water and water vapour in the fuel cell, and if it goes below a certain temperature, that water can freeze. But the reality is that we are very close to overcoming that issue and that challenge which we phase with the technology, so that is not an issue anymore, in our eyes.

Senator Adams: Right now, you have no difficulty with cold temperatures?

Mr. Kukucha: No. The buses that we operated in Chicago were operating in significantly inclement weather, under minus ten degrees, and they operated with no problem whatsoever. Thus we have overcome that hurdle in transit buses and we believe we can, in very short order, overcome it in vehicles.

Senator Adams: As long as the bus gets started in the garage and it is minus 10 outside, there is no problem?

Mr. Kukucha: When we come to the commercial market with the actual fuel cell car itself, you should be able to start it in the average temperature in which you would be able to start your regular internal combustion car.

Senator Adams: A generator might cost $5,000. Let us say that I want to buy a 5-kilowatt fuel cell. How does gas compare to the fuel cell, cost-wise?

Mr. Kukucha: Because of the different units we have out, portable, automotive and transit, we are not disclosing the actual per kilowatt cost of each unit. It is higher than your average power generation, but it is a value proposition, really. This is both environmentally friendly and it will provide power in an uninterrupted and premium way when the grid will not, so we believe there is an opportunity for a premium price there. Right now it is not cost competitive, but it will be in short order when we come to commercial market. We believe that for the portable unit it is cost competitive.

The Chairman: Also you mentioned earlier that there is a certain income from the sale back from the system.

Mr. Kukucha: Exactly.

Senator Spivak: I have one more question. There are no more technological barriers to the operation of this thing, just financial ones; is that correct? Is there any technology that you do not know about and are not sure about, et cetera?

Mr. Kukucha: It is our position that there are no more fundamental barriers to coming to market with this technology. We are going through the process of driving down the cost and making the cells them more reliable right now. There are a couple of areas in which the technology needs to develop for it to be more applicable in a real commercial way to automobiles, and that is in the storage of hydrogen on board the vehicle. Dynatek and some other companies are very successful right now in using hydrides, and are almost there with the solution, but they do not quite provide the range.

Senator Spivak: It is not like fusion, for example?

Mr. Kukucha: No.

The Chairman: Mr. Kukucha, thank you. We found your presentation quite fascinating and we look forward to receiving your videotapes.

Mr. Kukucha: Thank you very much. I will send those videotapes along. Unfortunately, I have to take the fuel cell plates back.

The Chairman: Our next witnesses are Gary Hamer and Odette Brassard from the B.C. Energy Aware Committee. Please proceed.

Ms Odette Brassard, Coordinator, B.C. Energy Aware Committee: Honourable senators, the blue folder is our most recent annual report. The other folder is something that we will be sending to local governments this week. If you open it, inside there is a pocket with case studies, and at the end of the annual review, at the very end, you will find some case studies. These case studies are community energy planning case studies on different planning levels. This will, I hope, put some more meat on the skeleton that we will have a chance to give to you in a few minutes.

I come from a varied background, but basically a communications background. I was hired five years ago to take care of this committee and make sure that their new venture, which is to get into action with local governments in British Columbia, was realized on a daily basis. Thus I am the one who keeps the group of varied stakeholders together and working on implementing community energy planning in British Columbia.

The Chairman: Mr. Hamer, when you describe yourself, tell us who or what is behind the B.C. Energy Aware Committee. Is this a group, a coalition of companies, and if they are companies, what is their business, or is it financed like the TB society, or just how is it run?

Mr. Gary Hamer, Energy Efficiency Manager, B.C. Gas Utility Ltd.: You are taking away the information I have for you on my second or third slide, so I will get to the -

The Chairman: If that is the case, do not worry about it. Just talk about yourself, then.

Mr. Hamer: Very well. I am the Chair of the B.C. Energy Aware Committee for this year. My employer is B.C. Gas Utility, which is the largest natural gas distributor in the province, and one of the founding members of the Energy Aware Committee.

My background and training is as a chemical engineer. I started in the oil patch in Alberta and moved out to British Columbia in 1986 and have been working with B.C. gas for about 10, 11 years now.

The Chairman: That is opposite to the usual migration, I guess.

Mr. Hamer: Well, the climate has something to do with the fact that I moved here.

Senator Banks: So you are seconded by your company?

Mr. Hamer: It is not a secondment. My job is with B.C. Gas as energy efficiency manager, so this fits well with the work of the committee. I would typically spend between five and ten per cent of my time on committee work. This past week was probably a little busier than most. However, my senior vice-president recognizes that this is something that we must participate in, seeing as how we want to be one of the leaders in energy in the province, so this does fit very well with my work mandate and my personal interests.

I really do believe that we have to get to the design elements in order to make a significant difference with regard to our energy consumption patterns.

To begin the presentation, honourable senators, I would like to thank you very much for inviting the Energy Aware Committee to your hearing. As I said, I will be speaking on behalf of the Energy Aware Committee as their chair. We are a non-partisan group, so some of the things that I say may be more my own personal opinion, having worked in the energy business for the last 15 years or thereabouts, and the positions I feel comfortable talking about are those of my organization, B.C. Gas, and our efforts in and around energy efficiency.

The reason that I preface that remark with some provisos is that we are such a diverse group, and we need to make sure that we are not saying something that might be offensive to one of our other member organizations.

The Energy Aware Committee was established in 1993 as an advisory group to the B.C. Energy Council, and after the Energy Council was disbanded, the Energy Aware Committee decided to continue with its work, adopting a mandate that would include concrete actions to promote and implement community planning in B.C. Thus today we continue as a group of public and private agencies dedicated to the promotion of community energy planning.

As I said, I work for B.C. Gas. We also have Centra Gas, which is the gas distributor on the island, Pacific Northern Gas Ltd., which looks after the area from Prince George to Prince Rupert, so we have the three gas utilities in the province. We have the major electric utility, B.C. Hydro. West Kootenay Power has not chosen to join us yet. They are in the Kootenays, primarily. We also have the B.C. Transit Authority, as well as TransLink.

Senator Banks: What is TransLink?

Ms Brassard: It is the transportation network for the Greater Vancouver Regional District. It used to be called B.C. Transit but with the long, complicated political story in B.C., it was split and became a semi-independent body that is run by the region entirely.

Senator Banks: Sorry to interrupt you, but it is a network for various different municipally operated transit systems?

Ms Brassard: It is a transportation network for the Greater Vancouver Regional District, so there is one single head for running the region, and that is TransLink.

Senator Banks: So B.C. Transit would be included within TransLink?

Ms Brassard: No. B.C. Transit covers all transportation systems outside of the GVRD, so it would cover Victoria, Prince George, and all the other municipalities in the province.

Mr. Hamer: We also have the Planning Institute of B.C., which is a member organization, and we have strong representation with three planners on our committee from that organization.

The Union of British Columbia Municipalities has probably carried us since we morphed into the committee that we are today, and they provide office space and administrative support and venues which we can get to in municipalities throughout the province. The Ministry of the Environment, Lands and Parks has been a strong member since inception as well, and they continue to support us.

The mandate of the Energy Aware Committee is to promote and assist with the implementation of CEP, community energy planning, that is. Our target audiences are elected officials, engineers and planners for the cities, as well as the developers who work in those municipalities and utilities, to help optimize the utilities that are provided to the communities. One group that I left off there was First Nations. We are starting to become more active with First Nations, or First Nations have actually shown an interest in approaching us on helping to plan for their own community energy plans.

You might wonder why we concentrate our work on these audiences.

The Chairman: Before you get to that, what is your budget?

Mr. Hamer: It is about $100,000. Ms Brassard is our only part-time employee, and that is a half-time employment. The rest of the person power comes from the member utilities and organizations.

The reason we have chosen the audiences that we have is that planning decisions made by local governments are the most important factors in determining energy use and impact on the environment for years to come. A decision that is made today with regard to transportation or land use or siting and infrastructure carries its consequences with us and will be paid for by our great-grandchildren for years to come.

Let me describe what we view community energy planning to be. That is integrating all energy considerations into regional and municipal planning initiatives, and I have listed a few of the initiatives that you might want to cover there: regional gross strategies, official community plans, development plans and green and better building initiatives. B.C. actually has a green buildings initiative, as they call it, and they have all of the infrastructure set up. They just need some clients now. However, this is a way of looking at the energy considerations for infrastructure that is built within communities.

The purpose of CEP is to maximize energy use and minimize impact on the environment. Finding alternatives to traditional energy sources allows for varied and cleaner choices of energy sources. It requires leaderships from all levels of government and willingness on the part of industry to invest in research and development and take some chances. It also requires rethinking on how public and private partnerships can work together.

I mentioned the different energy sources. Part of the community energy plan goes to what energy sources are indigenous to that community, and whether they can be harnessed for the good of the community, so that the dollars stay within the community as opposed to flowing out to the place where the hydrocarbon energy might be produced.

I would like to quote from a fellow committee member, Stephen Reese of TransLink. Stephen is a trained planner with much to say about our need to radically change many things, some of them addressed through CEP.

It is hoped that this standing committee could help bring about some change of government structures that were set up around the time of the birth of our nation. The structures were intended to facilitate the quick and easy harvest of natural resources that were and are sold inexpensively as exports, particularly hydrocarbon fuels and electricity.

While the federal government is often reluctant to get involved in things that are deemed to be in the provincial domain, it is important that the national government help eliminate some of the jurisdictional structures that can get in the way. Did I mention that the Energy Aware Committee is a non-partisan group and tries to refrain from taking political stands?

A community energy plan thrives on partnership between municipalities, utility companies and other organizations, and depends on active engagement from all sides. All parties have much to gain from recognizing the other's needs, skills and resources and continuously working together towards common goals.

Some of the jurisdictional structures that I mentioned that we find get in the way include such things as the City of Vancouver that, as a charter city, has adopted for its energy efficiency measures the modern National Energy Code. The rest of the municipalities in the province, because they are not charter cities, have taken the position that the Municipal Act precludes them from adopting the same or similar standard.Whether that is fact or fiction, it seems to be getting in the way of making things that are happening in Vancouver widely available to other municipalities. I throw that out as an example.

Other things include east/west and those types of regional versus municipal problems that get in the way of just using energy more effectively.

The next slide is "Why worry about carbon-based energy?" We deem that the consumption of carbon-based energy is the single most important benchmark for community sustainability. The more you use the less likely you are to be a sustainable community. Like energuides labelling for homes, they have energuides for homes which say that if you rate 100, you are a fully sustainable home. That means you do not have to bring any utilities in. The same could be said for a municipality, if it rated 100 on a certain scale, it would mean that there are no external energy sources coming into the community. It seems like a far reach today, but I think it is possible.

With respect to carbon-based fuels, the costs are unpredictable, to say the least. Many of our customers still ask when the price will drop. My prediction is that it will not, and that we are probably best off to use today's prices as forecasts. That is probably a conservative estimate. Used at the current rate, reserves will be depleted in this century.

Senator Banks: May I ask on what you based that opinion?

Mr. Hamer: Well, with conventional reserves, numbers that I have heard vary anywhere from 30 to 75 years of proven reserves. On that basis, if we continue to use it as we do now, or expert it as we do now or at a faster rate, we will run out at some point in time.

Senator Lawson: My question will be really short. It will obviously be a function of price, and if we told you that gas was going to be twice the price, you would give us a different answer, would you not?

Mr. Hamer: Yes. I actually heard the president of Highland Valley Copper speak on this matter about seven or eight years ago now, and when they were considering whether or not hydrocarbons were a renewable or non-renewable resource, he said, "It is a moot point. If we conclude that in 20 to 30 years time we will move to some other energy source, we will never run out, will we?" We recognize that natural gas is certainly a transitional fuel. It is the best hydrocarbon fuel with regard to emissions currently, but we will likely move to something else, particularly if prices continue or go up at a rate faster than they have.

Senator Spivak: The point is that it depends on what you are talking about. If you were to dynamite down mountains, as they are doing for, I forget what, copper or something in South America - Canadian companies are going down there and removing whole mountains. If you could remove the Rocky Mountains, you would probably get a lot of oil and gas.

Senator Lawson: They are not going away.

Senator Spivak: That is what I mean. You say we will never run out.

Mr. Hamer: I am not sure I can answer that question, but certainly, we have always seemed to have enough. As I say, I started working in the oil patch in about 1981, and we always seemed to have this rolling average that seems to keep extending itself, and it is somewhere between 35 and 70 years, and it has never changed.But you are right; we could look harder for it.

Senator Spivak: What I am trying to point out is that they have not calculated the costs. The life cycle, the real cost, which they never want to talk about, you could go on forever.

The Chairman: Let us continue with your line.

Mr. Hamer: Certainly the local air quality is directly affected by our hydrocarbon-based use within communities. Vancouver is a prime example with the smog sloshing up and down the valley as the day develops.

There are barriers to community energy planning, on of which are short planning cycles. Even though our actions may have impacts that last decades, such as constructing a building that is expected to last 50 years, decisions are often based on a much shorter time period.

I was involved in a building that went up, and when they started looking for money to meet the project budget, they looked for a five-year pay-back, and if things did not have a five-year pay-back they did not do them. Yet we are talking about a 50-year building.

Initially, doing something different will cost more than the "business as usual" scenario. The classic example is being an early adopter, like being the first to buy a DVD player. Something that is rare costs more until it is widely available. Our impact on the climate is difficult to assess.

Senator Banks: It is also true, though.

Mr. Hamer: Point well taken. I am not sure if we will ever fully understand the human impact on climate change. I will leave it at that.

Leadership is needed in Canada pertaining to economic versus environmental issues. As Paul Hawkin and Emery and Hunter Levins say in their book, Natural Capitalism, "We do not include the cost of clean air and water in our current economic models." Paul Hawkin has an interesting point, suggesting that if you make something, you and your children are responsible for it forever, until it goes away. It could be an interesting way of looking at things. I suggest that perhaps one thing that is missing is a national charter of rights and protections for the environment.

I heard Senator Ted Kennedy speak about the basic human right to clean air and clean water. The United States looks at it slightly differently than we do. Apparently we do not have anything in our Charter that ensures that we have the right to those things.

The Chairman: We have not decided whether it is a federal or a provincial responsibility, that is why.

Mr. Hamer: We are unsure of what our communities are, and what they want to become. Are our communities only to serve as dormitories or are they to serve as complete communities where people can work and live and play?

With respect to the next slide, the heading here is "Opportunities afforded by community energy planning." We can create green businesses and a cleaner economy. In Denmark, the fastest growing economy is wind power. It is creating more jobs than any other industry in that country. More important to us as Canadians, this part of the country is uniquely positioned to combine the Pacific Northwest's technology base with our need to diversify our economy beyond harvesting our resources. Economic, environmental and social concerns do not have to be mutually exclusive. The free marketplace motivates older companies to adopt new consumer demands. We are recommending a new paradigm where first cost and long term environmental impacts are put into the same balance sheet, and I mentioned the building scenario.

Our treatment of capital expenditures versus ongoing operating costs need to change. Life-cycle cost analysis needs to be embraced as the best way to evaluate the long term impact of capital projects, particularly for public buildings. The idea that if something pays back in ten years and the building is expected to be there for 40 years, why not do that?

My next heading is: Collaboration between private and public bodies. This committee really allows an opportunity for some of our organizations to get together and share some of what seem like diverse ideas, and we do find a lot of common ground. Private businesses can become bigger equity partners with municipalities to own and operate infrastructure that is needed to serve residents. Communities are empowered to define their priorities regarding energy, the limited impact to the environment and the amount of money spent on energy outside the community. I touched on that before: exploiting energy sources within a community not only means jobs can be created but fewer dollars need to flow out of the community on traditional energy sources. An example might be the Burnaby incinerator, which will be producing electricity in the near future.

The case study that I would like to talk about is the city of Kamloops. The B.C. Energy Aware Committee was involved with the city of Kamloops in 1997 in creating a community energy plan. That plan, if implemented as planned, has the potential to significantly reduce capital cost investment requirements as well as the energy costs for not only the municipality but the entire community. Other benefits are increased local employment, increased use of local energy resources and reduced air emissions.

One of the things that we did learn in the Kamloops case study was that there were a number of things, all discussed on our Web site, which I will touch on in just a minute. There were seven lessons: One was to keep it personal. There has to be ownership of this community plan right throughout the municipality, and that all planners and engineers and elected officials adopt it. One of the important things, too, is to nurture organizational links. The community energy plan thrives on active partnership between municipality, utility companies and other organizations. Pooling the skills and resources makes it easier to achieve common goals. There is an importance in collaborating to negotiate comprises with the partners.

The next slide illustrates something that was part of the discussion and exploration in the community energy plan for Kamloops. At the top you will see the traditional community, dominated by dead-end streets and cul-de-sacs. It is single-use with no activity centre for the neighbourhoods. It is basically a typical dormitory used by single families at night and empty during the day. That is the traditional neighbourhood. It is built for the car. The lower one is the alternative design. Notice that the streets have been connected. It is a grid system now, much easier to get around. The main arteries are part of the grid, to create the transit system. You can see that right in the centre there is a public area that is for people only, not for transportation.

In this scenario, the arteries part in the middle to allow islands of activity that concentrate and can be custom-fit to each neighbourhood's size and character. The objective is to create a strong pedestrian-transit orientation while co-existing with the car. You will see that there would probably be a main artery or main transit link straight down the centre of this community, so that people in the general area can walk to the transit and then be shuttled out of the community. The "sub-hub," as it is referred to, can also become a focal point for cultural and civic activities.

A minimum of residential densities for single and multi-family dwellings are necessary to ensure viability of commercial enterprises in the neighbourhood. There is also mixed use here. You will see in the legend here that there are businesses as well as residences.

From an energy point of view, increased travel mode choices result in a better transportation sector. Anchor loads were created for small energy district systems that can enhance thermal efficiency. What I mean by that is that there is an opportunity to create electricity and use what would otherwise be thermal waste as low grade energy that could heat water, for instance, so that it is creating energy within the community. You can create sites for distributed energy generation that can increase choices for the power sector.

Ms Brassard: I would like to add something here about this second example. Today, if you want to take a walk, I would like to invite you to go to Granville Island, which is a neighbourhood just outside of the downtown in Vancouver, where this experiment has been pushed much further than what the residents of Kamloops were ready to do in this example. The top image is actually an existing sub-hub of Kamloops that is called Upper Sahilie. In a consultation process that we engaged in with all the community and all the stakeholders there, we did reach this compromise with the local residents on how far they were ready to go towards saving energy in this community neighbourhood.

However, if you go to Granville Island you will see a very daring example of a community plan at work. Included are heavy industrial, commercial, cultural and residential multi-family units of condos and rentals in a place that feels good. At the idea of having in your neighbourhood Lafarge Cement, for example, I am sure you would all go, "Yikes, I do not want them in my neighbourhood." But tonight, if you have a chance, go walk by Lafarge Cement on Granville Island. Their next-door neighbour is the Emily Carr School of the Arts, and the neighbour on the other side is the theatre, a live theatre. Then next door to that is a shopping centre. It is actually a public market where all the farmers come in the morning at three o'clock and set up shop for the day. It is walkable, cyclable, scootable for people with disabilities; it is a neighbourhood where people know each other and they take responsibility for their safety.

This second model will save you money in health care, in safety features, security. You do not need the police there. So many people are walking about there at night that you do not need policemen; we are policing the area with each other. Also, there is no problem for the provider of electricity, because the loads are totally balanced between night and day, so they do not have to provide overcapacity because it is totally balanced during the day.

My invitation to you is that I hope you go to Granville Island tonight. It is the best example of this model.

Senator Spivak: The density is terrific.

Ms Brassard: It is the total mixed land use and density, and it works and it is friendly. Absolutely.

Mr. Hamer: This next slide shows you a screen shot here from our newly-launched Web site, which has fairly significant information in it, including the tool kit, and we have a sample for your perusal. As well, this is a document for the community energy plan for Kamloops and this is a document from workshops that we held with municipalities for the GVRD region.

Mr. Hamer: There is extensive information, therefore, available on this Web site to all of our target audience: elected officials, planners, developers and, of course, the general public. I invite you to take a look at that Web site.

The next slide shows how we promote the best of B.C. in the area of community energy planning. This trophy contains four products that are indigenous to the province: wood, glass, aluminium and concrete, and we send it around like the Stanley Cup to the municipality that has the best energy plan that year.We presented the first award in 1998 to the city of Vancouver for the Lower Lonsdale re-development, in which they specified that any new buildings had to be district- energy-system ready. In 1999, the city of Surrey won for its East Clayton project and a dense mixed-use subdivision is the keynote there. In 2000, the city of Coquitlam won for their Northeast Coquitlam Official Community Plan and they hope to have 25,000 people there, with a good portion of that population living, working and playing in the community.

I am now on my last slide. We are suggesting that change is needed in order that we take the planning decisions that have an invisible effect on our energy use and, therefore, cost. The way that we plan our communities and build our buildings, we are stuck with that for the life of those communities and buildings. Therefore we need to look at the long term impact of the liveability factors, such as the quality of the air and the water and the environment. We need to provide municipalities with information so that they can make informed decisions.

There is one point that I did not put on this slide there, and that is that we need to learn how to work together. Different levels of government, government and utilities, utilities and municipalities, and municipalities and civil rights groups. I will stop talking soon and let you ask questions, but I would like to invite the federal government to consider joining the Energy Aware Committee and help us support our work in B.C.. I think what you might find is that you can take what we have, which is a unique Canadian product, it is not available anywhere else in Canada, and then try to instil that idea right across the country. A lot of really good work has been done here. I just joined the committee a year and a half ago, so I cannot take much credit for the results, but the way that we look at energy through community energy plans is very interesting. To my mind, the Energy Aware Committee is unique in Canada, and it can serve as a model of collaboration which will lead to greater satisfaction amongst our largest energy users, namely, the communities in B.C.

The Chairman: Thank you, Mr. Hamer.

Senator Spivak: Thank you for a very great presentation, because it addresses the fundamental question of how everything is linked and how land use is really at the heart of a lot of things. You mentioned that this is unique to Canada but, of course, it is not unique to the United States, because there are communities in the United States, and there are people, professionals, who have made a career out of such projects.

I am wondering if there is any cross information with the United States. There is a community in Florida that has done this sort of thing, and there are also some communities in the east, and perhaps you might have information about those communities as well that we could utilize? I am just wondering if you have used those examples.

Ms Brassard: Actually, one of the main contractors that we used to work with local governments here comes from Portland, Oregon, and he actually works across the United States. Through him, we have a lot of information about what is happening there, but I have to say a little smugly that he comes here to B.C. and he says, "You guys may not have a charter of rights for your environment in Canada, but you are still doing better here in B.C. than in a lot of places that I see in the United States." We take comfort in that, but that does not stop us from trying even harder.

Senator Spivak: You do you have some information on that? I am wondering how we can access the literature. I have read about it in the past, but I do not have a file on it, or access to the literature that relates to different community planning in the United States which is more pedestrian-friendly and all those other things that you are talking about.

Ms Brassard: Actually, one of the places you may want to start is our Web site, because the library on our Web site is divided by subject, and on many issues we send you back to the United States for models, templates, ideas and white papers or whatever.

Senator Adams: What is your annual budget?

Mr. Hamer: Our annual budget is about $100,000.

Ms Brassard: That was last year. This year it is a higher figure.

Mr. Hamer: What we have found is that about $20,000 comes from B.C. Gas, another $20,000 from B.C. Hydro, and about $6,000 from the each of the other two gas utilities, and about $1,000 from the Planning Institute of B.C., so that effectively pays for a half-time salary. The other monies that we have coming in are typically brought in on a project basis. Certainly, it is a challenge for us to balance the funds and do all the good things that we think are out there, so we are looking for core funding - not from you, in particular, but throughout the province we are looking to get a larger role from the provincial government that would provide some core funding and allow us to promote what they want us to promote, which is looking at energy from a community perspective.

Senator Adams: Are you satisfied with the Kamloops project?

Ms Brassard: I think I want to clarify here that our involvement is on a short term and contractual basis with every municipality. For example, Kamloops was a bit of an exception because it was a pilot project. At the time that we took on that community energy plan, there was no other municipality in B.C. that had a community energy plan, so we wanted to supply a model for other municipalities to learn from and say, "These are the base lines that we are looking at here. If we do this, then we can reduce our energy costs of infrastructure by 10 or 15..." or whatever percentage we were able to show them. We basically did a share-cost arrangement with them whereby we provided them with the facilitator that we use, who is this facilitator from Portland, Oregon, and a company here in town to work together on making a full-blown community energy plan for them, and with them, of course. They, in return, gave us time from people who were local government employees as well as utility, B.C. Gas, B.C. Hydro, Weyerhaeuser, which is a big pulp and paper company there. The hospital gave us a person also. So all this together came to about $100,000 in value for the work that is in this report. However, we put up $50,000 and they put up the rest. This is typically how we work with municipalities. We try to find part of the money at least in donations, and they find some, and we work together.

Senator Banks: I have a comment, just to clarify my rude interruption earlier, for which I apologize. I am an Albertan and I started to worry in about 1950, I think, when the first doomsayers said that we would be running out of fossil fuels. However, I have given up worrying about it. It would be equally true, I think, to say we are going to run out of coffee here, but we can make some more coffee. I think the estimates that you are talking about do not include the unconventional reserves, such as the tar sands, which are becoming conventional very fast because there the cost of production is down to $11 now, so it is quite conventional.

I will ask you three questions. Earlier on in your presentation, you said that one of your purposes was to maximize energy use, and since you are on the record I presume that is not exactly what you meant?

Mr. Hamer: I think the second part of that statement was while minimizing environmental impact.

Senator Banks: You mean, maximize the efficiency of energy use, because what you said was maximize energy use which, if I were the marketing guy for Pacific Gas, that would be my job. That is not what you are talking about?

Mr. Hamer: No, it is to get the most value out of every gigajoule of gas.

Senator Banks: Perhaps you would explain something, because I did not understand it. You said that Vancouver was a chartered city and the other municipalities in British Columbia are not. I do not understand that.

Mr. Hamer: My understanding -

Senator Banks: They are incorporated, are they not?

Ms Brassard: Yes, but "charter" does not mean that the others are not incorporated. It just means that Vancouver, under the Societies Act of B.C., is independent from the Municipal Act. The Municipal Act has been written for other municipalities.

There are a few exceptions to the charter. In other words, they can pretty much write their own ticket on most things, and I am not a lawyer but I understand that they have more freedom, so they are perceived, anyway, more than other municipalities as being innovative and trying new things. Sometimes the Municipal Act is interpreted by other municipalities as being a barrier to some new things like, for example, photovoltaic plates and that kind of thing. Lawyers agree or disagree, and there is all kinds of discussion at the moment about that, but I think that, basically, a lot of municipalities would like to be able to do what Vancouver is doing, which is writing their own tickets.

Senator Banks: The city of Vancouver, then, is a different kind of beast?

Ms Brassard: Yes. It has a special Societies Act for itself.

Senator Banks: Very interesting, thank you.

Mr. Hamer: My understanding is that the city of Montreal is a charter city and I think there is one other one in Canada.

Ms Brassard: Toronto.

Senator Banks: Really? Thanks. I will check that out. What is the committee's view, if it has one, and if you are able to articulate it - and I am asking this question because of the de-regulation stuff that is going on, what just happened to Pacific Gas & Electric, et cetera - as to the advisability or desirability of the ownership of public utilities in private as opposed to public hands? Your constituent members are both. Does the committee have a view? Can the committee have a view, and if not, do you have a personal view?

Mr. Hamer: I think we are well served by having B.C. Hydro as a Crown corporation. I think the provincial government has been rather happy with the money that is flowing into the coffers as a result of the deals they made to the south. We hope that we will be paid for some or all of it. With regard to the desirability of having a publicly-traded company, with B.C. Gas being one, and trading on the TSE, I must say I like working for a private company.

Senator Banks: Is a publicly-traded company, as opposed to a publicly-owned one, able to fully take into account the public interest?

Mr. Hamer: Our requirements as a monopoly within a franchise area insist that we do. We have requirements for public trust and safety. The utilities commission to which we report insists that we look after the public interest, and so we operate our systems in a safe fashion, and so on. I think it can be done, whether the companies are public or private.

The Chairman: Thank you very much, Mr. Hamer and Ms Brassard. We found your presentation quite interesting, and thank you for taking the time to prepare a submission to us as well as answering our questions. I wish you both every success in your careers.

Ms Brassard: Thank you very much.

The Chairman: The next witness is the last witness for the day, but we are still very alert. Mr. Austin from the Independent Power Association of B.C. .

Mr. Austin, you might just explain a little bit. The Independent Power Producers in Alberta are usually wind and biomass and stuff like that. Are yours hydro?

Mr. David Austin, Director, Independent Power Association of B.C: In Alberta they cover a broad range of resources, and the same is true in British Columbia.However, in British Columbia it is a much smaller industry, and that is basically because of government policy, which is, with this particular government and B.C. Hydro, that they have not been particularly interested in the private sector investing in this area.

The Chairman: Perhaps I will ask another question that is always of interest to the panel. Perhaps you would take a couple of minutes to tell us some of the highlights of your career.

Mr. Austin: Very well. I started off practising law in the electricity business, and did a lot of work with B.C. hydro. I was over in London, England, with one of the top law firms in the world doing international finance and banking. I came back, and ended up in British Columbia, and have been doing work in relation to independent power. I think it is fair to say that it is my very expensive hobby, because of the absence of development in this particular province. Perhaps with a change in government we might see some more business in that particular area.

The Chairman: Very well. Go ahead.

Mr. Austin: I do not have any formal presentation, but through my experience in making speeches or public appearances, or in trying to explain to the media some of the issues in relation to electricity, there is one thing that I always find: There is a fundamental misunderstanding of the two components of electricity, and it is these units that seem to throw people off and send them off in the wrong direction to do things horribly wrong in relation to critiques and/or articles in the press. Perhaps, if you know about this, you will just bear with me for a minute; if you do not, then you might find it of interest.

Electricity has two fundamental components: one is the capacity side and the other is the energy side. When you were coming down to this meeting room, you got in an elevator, with a notice therein that tells you that the capacity of the elevator is so many people. That is one way to measure that elevator. Another way to measure that elevator is to know how many trips that elevator can make, up and down, in a given day, and what the total number of people is that it can move in a 24-hour period. That is energy.

We then take this discussion over to the electricity site. When people talk about megawatts, they are talking about capacity. In British Columbia there is 10,000 megawatts of installed capacity. That tells us absolutely nothing, except about the ability of that machinery to meet the peak loads at eight o'clock in the morning and at five o'clock in the afternoon. The more fundamental measurement, or the key measurement, is what is the ability of that machinery to work 24 hours a day, 7 days a week, 365 days a year? In the case of British Columbia, that machinery can produce approximately 50,000 gigabit hours of energy.

Therefore, with electricity, you have the subset of capacity and you have the subset of energy. If you go back to my example of the elevator, and we talk about, say, the peak in the middle of the winter, can that electrical system meet that peak? More important, can that electrical system deliver up enough electrons 24 hours a day, 7 days a week, 365 days a year, to serve everybody's particular load?

Therefore, when you see articles in the press talking about megawatts, that is the capacity side, and if someone starts prattling on about the capacity side, that is only one feature of it. You also need to find out what the energy side is, which is the gigawatt hours or megawatt hours or kilowatt hours. You are looking for a time factor. It is very important that you understand that difference as you listen to people across the country explain certain things.

The last panel were talking about distributive energy. Distributive energy and renewable energy are very nice concepts, such as, for example "We have 50 megawatts of installed capacity in windmills."However, the windmills do not operate 24 hours a day, 7 days a week, 365 days a year. They are subject to variations in the weather, just like a hydro-electric system is. Therefore it is the energy ability of renewables that is often overlooked in terms of their importance in providing the energy that is required.

In terms of formal presentation, I do not -

Senator Banks: I am sorry, I just want to make sure that I understand what you just said. If I have a power station that generates - when you say "capacity" you are talking about generating capacity?

Mr. Austin: Right, like an engine; how much horsepower.

Senator Banks: I see. The engine is capable of putting out 100 horsepower or whatever, but the fact is that it cannot put out 100 or whatever all the time, because there will be some down time or I will need to replace it, so it must take a rest. Your second comment is what it can actually deliver, not its capacity, did I understand that?

Mr. Austin: Exactly right. The other thing is what you just talked about: It has to have down time, but also, what kind of fuel does it use? Is it using wind as a fuel, or water as a fuel, or natural gas as a fuel? The fuel will determine how much energy it can produce. If you are running it on coal, you can rest assured that your coal pile is there and you will be producing, say, at a 90 per cent capacity factor, whereas if it is water in British Columbia, you are lucky if you hit 60, 65 per cent capacity on a year-round basis.Therefore, when people are thinking in terms of energy policies, they often lose the distinction and come up with things that do not make a heck of a lot of sense.

Senator Banks: Capacity is not ability.

Mr. Austin: It is just horsepower. It is the ability to work, not the work itself. At least that is what the electrical engineers tell me.

The Chairman: Move on.

Mr. Austin: In terms of the list - and I will go through this quickly - deregulation in the electricity sector in British Columbia is basically non-existent. It is a government command-and-control type of approach to electricity. In relation to a competitive market, they have shown absolutely no interest in that, and the monopoly called B.C. Hydro has been happy to go along with that.

With respect to green energy commitment, I think I have been in this industry too long, because I went through this phase when I first started, and I noticed that when prices went down for certain types of energy, the commitment to the environment went with it. The only way that I really see a green energy commitment is to build it into the building codes and appliance standards and what not.

With respect to the impact of the California energy crisis, that crisis, initially, was totally misrepresented in the media. It was described as a function of deregulation. That simply was not the case. California's problem is also Washington and Oregon's problem, and to some extent Alberta's problem, and is also our problem: Nobody up and down the West Coast has built any new generation in the last ten years. To put some figures to that, in the last ten years the California economy, with growth in the 4 to 5 per cent range, needed 10,000 megawatts of capacity. What did they build? Roughly 2,000. They are only 80 per cent short.The state of Washington is about 3,000 megawatts short, Oregon is about the same. In British Columbia, our only good luck is that our economy has been so dismal that we are not in the same boat as everybody else on the West Coast. If you go back further than ten years, everybody overbuilt and then the mantra amongst the planners was, "If we are short we will borrow it or buy it from our neighbors." That is akin to everyone on the block thinking, "I can borrow a cup of sugar from my neighbour if I run short." If everybody thinks that way, what inevitably happens is that they meet one day on the front street and bang their cups together. That is exactly what is happening on the West Coast. Deregulation in California exacerbated the problem. The problem was also masked for quite a few years by the large snow packs up and down the West Coast.

The integrated North American power grid -

The Chairman: Just before you leave that, you have not given the reason. You mean everyone overestimated their capacity?

Mr. Austin: They did not underestimate it; they just decided as a matter of policy that they were going to borrow it or buy it from somebody else. Nothing more complicated than that, so they are all trying to borrow -

The Chairman: That is what we did in Alberta. We were going to borrow it from B.C..

Senator Lawson: If we are talking about regulated utility, there is a natural interest in them trying to expand the rate base. Why weren't they trying to do that?

Mr. Austin: They had overexpanded in the 1980s, so the regulators said, "We do not want to make that mistake again."

Senator Lawson: Is that the case?

Mr. Austin: It was a combination of the regulators and the utility industry executives saying, "Fine, we are not going to build because previously we overbuilt," so effectively what happened is that they went to the underbuilt situation. I know that sounds astonishing, but this was evident six or seven years ago.

Senator Banks: It happens in the department development all the time.

Mr. Austin: In relation to the integrated North American power grid, what you should do there is take a look at the handout that I brought, entitled "The Real Threat to America's Power," a photocopy of an article in Fortune Magazine.

Your next problem in the electric business is the transmission systems. The money has not been going into that, either. Thus you are planning all these gas-fired thermo plants up and down the West Coast and elsewhere. That is great. However, first of all, you have a problem getting the gas to these plants, but there is less resistance to gas transmission than there is to electrical transmission. You put the plants in place and then how are you going to get the electricity to market, assuming that you have not put it right next to the load?

Take Con. Edison in New York as a classic example. They have sufficient generating capacity to meet the peak load in the middle of winter. But what is Con. Ed. doing right now? As quickly as it can it is building six small gas-fired generating stations as close to the load as possible.They sort of ring Manhattan, in order that they can get around the transmission problems. Therefore we have the capacity. It is not an energy problem in, say, New York City's case; it is a problem of getting this electricity to the customers at five o'clock on the hottest day in the summer. However, if the plant is located in upstate New York and it is gas-fired, fine, I can keep it running, but I cannot get those electrons into Manhattan because I have transmission problems.

Throughout North America, once the "generation" problem is solved - and it will be solved - the next problem you will see is moving the electrons to market. Therefore, with respect to this concept of an integrated North American power grid, the message is: wait a second, we have a few more steps to overcome before we even start thinking about that. The West Coast is as integrated as North America comes, because you can ship electrons from Hudson Hope, British Columbia, to San Diego without any problem, except that you will have capacity constraints at certain times. This Fortune Magazine article is an excellent article on what those really mean.

Senator Spivak: Tell us why you are only addressing the supply and not the demand? Why are you not talking about conservation?

Mr. Austin: Because I think conservation has been something that has been, and is being, properly addressed through building codes and appliance standards. The reality is that a lot of the new demand has come from the technology industry.

Senator Lawson: What about price?

Mr. Austin: The prices in relation to those particular industries, you need to look at it in terms of percentage of the total product output. For example, something like the Web server farms, which are basically warehouses stuffed full of computers, so that instead of having computers on-site you centrally locate them, then even there the total cost of operating those centres in relation to electricity is probably about 20 per cent.

Senator Spivak: One figure I will just throw out at you has to do with SUVs, for example, and the supply of gas.If you made those cars more energy efficient simply by three more miles per gallon, it would be the same as opening up the ANWR reserve in the north.

Mr. Austin: I appreciate that, but on the electricity side you do not see that elasticity. People have been trying to go to high conservation modus for the longest period of time: they have been insulating their houses; for those who heat with electrically, they have been double- and triple-glazing their windows, so this idea that there is a huge amount of electrical energy efficiency that can be converted overnight is not true.

Senator Spivak: Not overnight.

Mr. Austin: But they have been working on this for quite some time.

The Chairman: As the chair, I am trying to keep the interruptions to a minimum at this stage so that you can at least get through your presentation.

Mr. Austin: You can interrupt me; it does not really matter. The thing is, again, when I first started in this industry I saw all this sort of thing in the 1980s. Then the price of the product dropped; it virtually dropped off the map with it.

I had a relative who was building in the early 1980s. He was an architect who was doing the top work in energy efficient homes. He soon found that he had to change his marketing pitch to his clients to comfort and solar greenhouses and those types of things, because nobody was interested in energy efficient homes when the price dropped. He kept designing to a very high standard, but the market was not interested.

The Chairman: Keep going. Do you want some questions now?

Mr. Austin: Hang on. With regard to the impact of NAFTA on the energy sector, and we will throw in the continental energy policy that, presumably, is on the horizon at the U.S./ Canada level, the Americans have opened up their markets to the Canadians but the Canadians, at least in this part of the world, have not opened their markets to the Americans. Right now the Americans have shortfalls in terms of their electricity requirements, but once they solve those problems they will be looking to Canada to open up its markets.

There was a bill before the U.S. Congress last year, entitled the Electricity Competition and Reliability Act, at the House of Representatives level, and it is referred to in this article, "Canadian Access to U.S. Electricity Markets and Income Taxes." That is where Congress was looking for reciprocity. That particular provision was dropped. Believe it or not, we had the chairman of B.C. Hydro down there - and I may be incorrect on this; I certainly know he was down there, because the article indicates - or the interview from The Globe and Mail, indicates that he was actively lobbying against reciprocity. I understand that Hydro Quebec were also down there doing the same thing. I think that is not the way to go. If you are obtaining access to their market and saying, "Yes, we like the idea of being able to sell to California, despite the fact that they might not pay," then I think you better be concerned about opening up your own markets. For example, in British Columbia the Americans can only sell to one or two of B.C. Hydro's 1.5 million customers, whereas B.C. Hydro can sell freely up and down the coast.

What I failed to mention earlier is that everybody talks about California and its energy problems because of deregulation. Washington and Oregon are totally regulated and they are also short on capacity. They are talking about rolling brown-outs or black-outs in Washington this summer. They are also talking about shutting down, as an interim measure, the entire aluminium industry in Washington and Oregon for the next two years.

On the continental energy policy, at least on the electricity side, I am not sure what is going on. I do not understand that at all, because the United States have been the ones pushing to open up their markets to Canadians, not the other way around, so I am not sure why people are talking about the continental energy policy, except perhaps with respect to the oil and gas business in relation to Mexico.

Finally, here is a nice thorny problem: This was the Americans wanting to build a national gas thermal plant just across the border, to the east of Vancouver. It was effectively right on the border. Gas would come from Canada and the investment would go into the state of Washington. It was a $600 million or $700 million plant, and all of the air pollution comes into Canada.

The twist on this is that the plant was not to be interconnected to the U.S. transmission grid directly; it was to be hooked into B.C. Hydro's plant across the border, and then the electrons would flow through B.C. Hydro's system and back down to the United States. That was one plan. The other plan that they did not really want to talk about was in relation to B.C. Hydro as a buyer, but that is a whole other story.

That is the type of thing that has landed in the National Energy Board's lap because the transmission line comes across the border, and the National Energy Board still has not figured out just how far we need to go in looking at the environmental impacts of this sort of project. Do we look at the transmission line itself or do we look at the entire plant and its air pollution impacts on the Greater Vancouver area?

In the state of Washington right now it is been turned down twice by their Environmental Review Board, but that project may be around for a while. That is an interesting example of how things might work, at least on the Canada/U.S. side, if you are thinking about more electricity trade. Remember, it is bilateral; it just does not go only one way.

The final thing is that whether there is anything that perhaps the federal government might be able to do to get more information out in the market about electricity. It is a secret industry. It makes the bond market look wide open. This whole concept of the Crown corporations across the country holding this information like this and saying, "We do not want to tell you; that is top secret." That is not the way to go. If we are to have opened up markets, and if we are to have freer trade, then we must get the information out there. I can learn more about what B.C. Hydro does through filings with the Federal Energy Regulatory Commission in Washington, D.C. than I can in Canada. Therefore, there is one thing that I would say, and that is that that is very important.

The Chairman: Perhaps just before the others get into their questions, I will take advantage of the chairman's prerogative. I am not sure I understand your comment about transmission lines, or perhaps I do; I understand that, also being an engineer, that you can only have so much. When we talk about building generating capacity, that is understandable: you can build a generator, I can build a generator, and so on and so forth.However, it does not really make sense to build three or four power lines. How are you recommending that those be built? It seems to me as if the Americans would be coming in here to build those power lines like they would a highway. You do not have everybody out building their own road; you just have one highway bringing the power.

Mr. Austin: It does not matter whether it is a state or a private monopoly that is involved on the transmission side. The reality is that more investment has to go into those transmission lines or those electrons are not going to move anywhere. That is the problem.

The Chairman: I agree with that, but I was trying to get around your - I gather that you are in favour of free enterprise, and you figure that the more generators go in, the better things are going to be, but what I am saying is that you cannot make a trunk line, high power lines, free and competitive, can you?

Mr. Austin: Yes. They are doing it right now. That is the same as the gas pipelines.

The Chairman: But we made common carriers out of them.

Mr. Austin: That is what they have done in the United States on the electrical transmission lines. That has already been done.

The Chairman: They can build a private line, but then they have to take anyone else's power?

Mr. Austin: Yes.That is already being done.

Senator Banks: Just as a quickly, I am sure you have considered this a zillion times and have an opinion on it. If someone came along, which they will eventually, and offered the Province of British Columbia $100 billion for B.C. Tel, what would your advice be?

Mr. Austin: The Province of British Columbia does not own B.C. Tel, so they probably would want to offer a hundred gazillion dollars for B.C. Hydro.

Senator Banks: Sorry, B.C. Hydro, right.

Mr. Austin: My first response is that, in terms of the generating assets, the major hydro-electric projects should not go into private hands. As evidenced by Alcan's Kemano project, the private sector has shown no ability to better operate large hydro-electric facilities than has the public sector.

Senator Banks: Then what is your view of Ontario's having privatized the nuclear generating industry?

Mr. Austin: In terms of the nuclear generation in Ontario, that is quite distinct from unique assets such as Niagara Falls. Would I tell you to privatize the Niagara Falls hydro-electric generating plant in Ontario? The answer is no. Would I say the nuclear industry in Ontario? If you can find someone to buy it, probably that would be a good thing, because the private sector can, and does, operate those things and they are not unique; you can duplicate them.

Senator Banks: Very well.

Senator Adams: Has the demand for power on the commercial side gone up in the last 10 or 15 years?

Mr. Austin: I think at the commercial level, that is true. The demand has gone up on the commercial account side. I think almost any utility would tell you that. It is basically through the increase in electronic gear.

Senator Adams: What about the household data?

Mr. Austin: What skews the household data is the fact that people are building bigger houses, so you have to look at it on a square metre basis, and I do not have that number in my head.

Senator Adams: In California, they are talking about a shortage of natural gas in the future. They need more money to buy more energy. I have heard that they will run out of natural gas in 10 years. Now they want Alberta's natural gas. Is that true?

Mr. Austin: Let us go back to your question about the use of electricity in California and the price. If the price goes up, are we going to see a decline in demand? The reality is that electricity rates are higher in the state of New York than they are in California, and I am not aware of any huge difference in electricity consumption in Oregon or California. Therefore you can push up the rates in California quite substantially before you hit rates like they have in New York, and I do not think you will see a huge difference in demand. There is a certain amount of elasticity.

If you go back to the question of what is the total percentage of electricity required for a particular industry, in the aluminium industry it is high, while in others it is not, so they take the costs. You must then also look at the U.S. rates and the Canadian rates versus the worldwide competitors. Europe, for example; the rates in Europe are very high.

Senator Adams: Let us say you build a plant on the U.S. border and you come back to Canada to hook on to the transmission line. Is there an agreement between B.C. and the U.S. regarding the sale of power and the cost per kilowatt?

Mr. Austin: I do not understand that proposed generating plant on the Canada- U.S. border. To me it is good technology, horrible location, and I am not afraid to say that. But why they want to hook into the Canadian grid and not directly into the U.S. grid, I think, is a function of the local county zoning laws; they would need to go through a great deal of regulatory review to do it on that side of the border, whereas on the Canadian side of the border they found an old railway right-of-way and said, "Okay, let's run this into British Columbia."

In the electricity business, the reality is that if you want to know where the electrons are going and who will be using them, follow the transmission lines. My own personal view is that, in this case we are discussing, I think B.C. Hydro was very much interested in purchasing electricity from that plant, but because of the resistance to it, they were not prepared to say that publicly. As a matter of fact in the material that followed the U.S. regulators, the SE-2, B.C. Hydro was somewhat identified as a potential buyer for that electricity.But the idea of generating it in the United States, paying B.C. Hydro's transmission charges for that short trip across Canada, which are not on the basis of distance but on the basis of postage stamps and running it back down to the United States, it makes no sense to me whatsoever.

Senator Adams: A few years ago we went down to San Francisco. They would like to see Canada build a pipeline down to California because they have an easement right-of-way. They cannot go through anybody's else's property.

The Chairman: I have another question. Back again to the pipeline, the trunk lines. You were saying that, right now, we do not have enough power, but the day may come where we have more power than we need. In Alberta, many years ago - and a lot of people have forgotten this - we used the opposite of rationing, pro-rationing. Do you see that as a possibility down the road, if the trunk lines are adequate or more than adequate, and we have more power generating facility than that, or do you see a cut-throat war?

Mr. Austin: I see cut-throat war. I see on the U.S. side of the border Chapter 11's, the old inefficient plants get knocked off, and the people who were smart enough to build them close to where the demand is and therefore do not incur such high transmission charges and have them properly situate in relation to the natural gas transmission lines, they will be the winners. The losers will be the groups who did not think all this through, or put it out in the wrong location, or will be incurring higher gas transmission charges than their competitors and higher electrical transmission charges.

The Chairman: In spite of the shortages that we have, you are saying that they should design in such a way, and place in such a way that there might be surpluses down the road, because when that day comes, they want to be able to compete?

Mr. Austin: That is what some of them should do, but, remember, if we go to the example of what you said about building apartments or buildings in Edmonton, there is this ability to overbuild and there is this ability to underbuild, so that is called the free market. If they overbuild and people start taking hits on the equity side, well then, I guess the price of electricity comes down.

The Chairman: You think the free market can be used to bring in energy alternatives, like wind, and hydro instead of biomass?

Mr. Austin: If I were a developer on the renewables side, I would be marketing my output on the basis as an alternative to gas; not as something that is necessarily greener or environmentally better, but as a hedge in the portfolio.

The Chairman: I see. Any other questions?

Senator Spivak: The big companies are doing that. I mean, Shell and all those companies, they are trying to reposition themselves as energy companies, not just gas and oil companies, or is that just window dressing?

Mr. Austin: If you take into consideration the total investment to date, the total amount of energy that they produce, and the total amount of energy on the electricity side that is consumed in the markets, the amount of investment in the renewables by some large companies who are touting that as an alternative is pretty darned small.

Senator Spivak: Here, but it is not in Europe.

Mr. Austin: There they are looking at it from the perspective of price, and remember, their prices are going higher even than California's.

The Chairman: Would you take your pre-market solutions as far as atomic power?

Senator Spivak: Nuclear power.

Mr. Austin: Yes, I would, because I am pretty darned sure that the free market will not build a nuclear power station. The other thing is I am also aware that the free market is not perfect, and there are times when governments have to intervene in the free market, but the reality is that, at least if it is a free market, the government can do something. Where government really falls flat on its face is trying to regulate its own Crown corporations. It just does not work.

The Chairman: Especially after they fill the board with their own appointees.

Mr. Austin: Exactly. In the case of British Columbia, you have B.C. Hydro owned by the government of B.C.; the government of B.C. owns and appoints the B.C. Utilities Commission that is supposed to be looking after the affairs of B.C. Hydro, so what happens if B.C. Hydro does something it is not supposed to? How is the B.C. Utilities Commission supposed to penalize it? The only way I know is through financial penalties, and is one branch of government about to make money out of the pocket of another branch of government? The answer is no.

The Chairman: Thank you very much, Mr. Austin. You have been a breath of fresh air with which to finish the day, although the others were all very good, too. Yours was a little more blunt.

Mr. Austin: Through experience.

The committee adjourned.

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