Proceedings of the Standing Senate Committee on
Energy, the Environment and Natural Resources
Issue 13 - Evidence - November 24, 2009
OTTAWA, Tuesday, November 24, 2009
The Standing Senate Committee on Energy, the Environment and Natural Resources met this day at 5:15 p.m. to examine and report on the current state and future of Canada's energy sector (including alternative energy).
Senator W. David Angus (Chair) in the chair.
[English]
The Chair: I call to order this meeting of the Standing Senate Committee on Energy, the Environment and Natural Resources, as we continue our study into the current and future state of Canada's energy sector.
[Translation]
Welcome to all to this meeting of the Standing Senate Committee on Energy, the Environment and Natural Resources. I am David Angus, a senator from Montreal, in Quebec.
[English]
I am the chair of the committee.
I would like to welcome all honourable senators, as well as any members of the public present in the room, or with us on the CPAC network or, indeed, on the World Wide Web, with which we are proudly connected.
Without further ado, I would like to introduce the Deputy Chair, Senator Grant Mitchell from Alberta. We have our people, Sam Banks and Mr. Leblanc from the Library of Parliament. We have Senator Tommy Banks from Alberta, Senator Rob Peterson from Saskatchewan, Senator Pana Merchant from Saskatchewan and Senator Nick Sibbeston from the Northwest Territories. To my immediate left is our clerk, Lynn Gordon, and to her left, a senator whom I believe our witness knows, Richard Neufeld, from British Columbia; and from Montreal, Quebec, Judith Seidman; from Alberta, Bert Brown, and last but not least, from the Yukon territory, Senator Dan Lang.
We are fortunate tonight to have with us Dr. Carmen Dybwad. Dr. Dybwad is from Calgary, Alberta. She is the Vice-President of Business Development and External Relations of the Canadian Energy Research Institute.
Prior to joining the institute, in early 2009, Ms. Dybwad served for two years as President of the Energy Council of Canada.
[Translation]
She joined the council after having been for seven years a board member of the Energy Council of Canada. She also held positions in the areas of planning and energy at SaskPower, Sask Tel and in the Saskatchewan public service.
[English]
In addition, Dr. Dybwad has served as an assistant professor at the University of Regina. She has a very impressive CV. I say ``Dr. Dybwad'' because she has her PhD in resource development planning, which is exactly the subject matter of our study.
We are delighted you could be here this evening. I know you have past contacts with Senator Neufeld and I believe other members of our committee.
We believe you all have a copy of Ms. Dybwad's opening remarks, which she has so kindly shared with us in advance. In addition to this material, we do have six slides with tables and figures that I believe the witness will take us through.
You may now proceed with your opening remarks. I understand it is gloves off tonight. You came alone, unchaperoned, and we will have a great dialogue.
Carmen Dybwad, Vice-President, Business Development and External Relations, Canadian Energy Research Institute: Thank you, Senator Angus. I am actually not sure how to respond to that opening introduction. It is certainly one of the best introductions I have ever had.
Honourable senators, on behalf of the Canadian Energy Research Institute, I thank you very much for the invitation to appear before you. CERI is particularly honoured to have the opportunity to provide information to help you in this initial fact-finding phase of your report on the current state and future of Canada's energy sector.
By way of background, CERI is a cooperative research organization established by government and industry parties in 1975. Our mission is to produce relevant, independent and objective economic research on energy and environmental issues to benefit business, government and the public. While CERI does not comment on policy, it does believe that the process of rational decision making requires a clear understanding of the economics of the energy sector. With this in mind, CERI conducts and produces its research, and I am proud to say that much of that research will inform my comments today.
I will also stop and say, be warned. Numbers will follow, but that said, I am hoping that we do not get too bogged down into too many of the specific numbers. That is why I have my security binder here. You can get lost in the values. Sometimes you are talking about heat; sometimes you are talking about volume numbers; sometimes you are talking about barrels per second and sometimes it is barrels per year and barrels per month. It can be a bit of a quagmire.
With your indulgence, if you follow through in terms of the general magnitude and the trends of where things are going, I think the most important thing when you are talking about a number of the economics are the factors that underlie both the supply and the demand of energy. With that foundation in mind, we will have a very good discussion today. However, there will be numbers.
The Chair: Dr. Dybwad, just before you get into the text of your overview, Senator McCoy, whom I believe is well known to you, has joined us. Welcome, Senator Elaine McCoy, from Alberta.
Senator McCoy: Thank you.
Ms. Dybwad: You did point out I am from Saskatchewan. I am proud to be amongst some senators from Saskatchewan. Go Riders! I say that with all due deference to the senator from Montreal as well.
[Translation]
The Chair: We try to speak a little French since we are in a minority today in this committee; there is only me, Marc Leblanc and Judith. So we need at the very least to show our colours a little.
[English]
Ms. Dybwad: We have an overview. I will start with the general and move into the specific. With that, to set the framework, I will talk about overall demand in terms of energy.
The Energy Information Administration, which is part of U.S. Department of Energy, recently issued its 2009 International Energy Outlook. This publication projects that global energy consumption will increase by 44 per cent from 2006 to 2030.
Canada, endowed as it is with significant and varied energy resources, is a net energy exporter. This projected growth in energy demand is of significant importance to all of us. I am, of course, sure that this has not escaped anyone's notice and it probably forms the rationale for the establishment of this committee and the mandate it has currently been given in terms of looking at the energy future.
This projected growth in energy consumption will be across the board. In other words, it is expected that energy use by all fuel types, whether you are talking coal, gas, oil, or nuclear renewables will increase. That being the case, I would love to be able to give you an extensive and exhaustive overview of the current and future state of all of those fuel sources, but given the realities of time and expertise, I will restrict my comments to the current state and prospects for Canada's petroleum industry. When I say ``petroleum industry'' I am talking principally about natural gas and oil.
With your indulgence, I propose to give you an overview of the projected growth of Canada's oil and gas supply in terms of deliverability. I will then discuss how important the petroleum sector is to the Canadian economy. Following that, I would like to outline some of the threats and opportunities that there are for Canadian petroleum export markets.
The Chair: Supply is of great interest to us. Have you some projections on demand?
Ms. Dybwad: I have a bit for the United States and we will get into that. Principally the United States is our biggest market, so we will talk specifically about that as we go on.
Given the nature of your inquiry, I am certain some of what I will be saying you will have heard before, and sadly some repetition is unavoidable. However, I do hope that by focusing on serious research I will be able to provide you with some new information and some new insight into the current state of Canada's energy sector and offer some plausible scenarios as to how the future may unfold. I am quite certain that as you proceed with your deliberations you will hear a number of projections about the future, and I do want to ensure that you realize some of those things are quite speculative and maybe not quite as realistic as they could possibly be.
I will now delve a little more into oil and gas. I will start by setting the global demand context for petroleum for the next 20 years. For the most part the figures I have are either for 20 years or 25 years or in that general neighbourhood.
This point has been made before the committee by other witnesses, but I will reiterate that the world's dependence on fossil fuels — and fossil fuels include coal — will not disappear in the foreseeable future; this even with a concerted global effort to increase the share of electricity generated by renewables.
This is neither good nor bad. It is neither saintly nor evil. It is just a matter of fact grounded in reality. What our energy systems are now is how they have evolved over the last 150 years, and we have come to rely very heavily on fossil fuels. Again, it is just a statement of fact and that will not go away any time soon.
The EIA in the report that I cited earlier expects liquids to remain the dominant energy source through to 2030, and most likely for many years after that.
The administration projects the world use of oil to grow from roughly 86 million barrels per day in 2006 to 91 million barrels per day in 2015 and to 107 million barrels per day in 2030.
Now, that is the total amount that is projected to increase in terms of demand. The percentage share of energy consumption filled by liquids is projected to fall. Currently it is at about 36 per cent. Over that time frame it will fall to about 30 per cent. Over the 2006 to 2030 time frame, the percentage share of liquids will fall but the absolute quantity consumed will actually increase.
Similarly, global consumption of natural gas is expected to grow from 104 trillion cubic feet in 2006 to 153 trillion cubic feet in 2030.
These are the EIA's projections for world demand for oil and gas, and while other projections will differ somewhat depending on the assumptions upon which their projections are based, a projected growth in fossil fuel consumption is, barring some major upset condition, expected to continue.
Within this time frame, what is Canada's oil and gas supply response likely to be? We have demand; now we have supply. Let me start by providing a thumbnail sketch of the current composition of Canada's crude oil production. It will come as no surprise, and certainly given the Western makeup of the committee, that the vast majority of crude oil is produced in Western Canada.
In 2008, 2.4 million barrels a day out of a total Canadian production of 2.7 million barrels a day came from Western Canada; 1.2 million barrels a day from the oil sands production. Atlantic Canada, in that same year, 2008, produced 342,000 barrels a day, and that accounts for approximately 13 per cent of the total Canadian oil production. The vast majority comes from Western Canada.
In 2006, oil sands production — often referred to as unconventional oil — caught up to conventional crude oil production for the first time in Canada. Right now they are roughly equivalent.
It is expected that oil sands production will continue to grow while conventional production will gradually decline. The exception to this is the expected growth of light crude oil production from Saskatchewan's Bakken field.
Senator Merchant wanted to make sure that I said something about Saskatchewan, so there is one little statistic, anyway, that its light crude production will increase. In Atlantic Canada, the crude oil supply is expected to increase when Hebron comes on stream in about 2017.
Since the bulk of Canadian crude production is expected to come from the oil sands, I will focus my discussion of supply projections on that projection. CERI's methodology for projecting oil sands and synthetic crude oil, SCO, production volume is based on the summation of all announced projects with a wide variety of assumptions pertaining to the project's schedules delays, the technology, the state of development and so on.
The method by which the projects are delayed or the rate at which production is likely to come on stream is based on CERI's past experience from monitoring the progress of various oil sands productions.
Our 2009 oil sands update-projection outlook, which we just released two weeks ago, looked at four possible scenarios in terms of production out of the oil sands. The first we called the unconstrained scenario, and that was where all oil sands projects went ahead on schedule and as planned. It was basically a fantasy scenario because, of course, nothing ever goes completely as planned. This scenario was viewed as implausible. I will talk a little bit about what that would have looked like if every announced project was to go ahead.
The three plausible scenarios are energy security, realistic and protracted slowdown. Energy security which, roughly speaking, is the next most aggressive projection, would see the United States very much leaning towards increasing its product from Canada, for all of the reasons that go along with energy security. We are a secure source politically, we are close by, and we have pipelines that are much easier to maintain the flow on than tankers and those sorts of things. We have political stability. It is realistic, which is probably the Goldilocks scenario; it is the ``just right'' one. A protracted slowdown would talk about what the likely projections would be if we continue to be in the same sort of economic morass that we are in now.
With those three scenarios, the bitumen capacity projects are presented in Figure 1, which I believe was provided to you. The top line in blue is the energy security. The red line in the middle is the realistic, and the protracted slowdown is the bottom line that is in the green colour.
For the realistic scenario we would see peak production in 2015 about 1.7 million barrels a day, up from about 1.2 million now, and 4.5 million barrels a day in 2030. If you go off to the end of the graph up to about 2040, 2041, the realistic projection would be slightly over 5 million barrels a day. If the energy security scenario were to play out, it would be up to about 6.4 million barrels a day. The protracted slowdown would be about 3.6 million barrels per day.
I mentioned earlier that if all the announced projects went ahead unconstrained we would be closer to about 7.2 million barrels a day. That is not realistic. That level of production would actually precipitate many constraints in terms of resources. It probably would cannibalize itself if that were to take place.
With those figures, those are the projections that CERI is looking at in terms of the oil sands going forward.
Natural gas production and export also figures very prominently in Canada's energy mix. Export demand for natural gas increased by 153 per cent from 1990 to 2008. During that same time period domestic demand increased by 33.6 per cent. The annual marketed production increased by 64.6 per cent from 1990 to 2008, but it should be noted that it reached its peak level in 2001. During this 18-year period, the increase in production brought about an increase in demand that resulted in a drop of 40 per cent in marketable reserves for known conventional gas.
I can add that during my time at the National Energy Board, that was the state in terms of Canada's gas market. It was very much plateaued and was just drilling to basically make up the losses in terms of the production curves.
That said, as is the case with oil, Canada's natural gas future can best be described as unconventional because, in the last little while, that scenario has changed.
As with conventional oil, conventional natural gas production in Western Canada is in decline. There is no doubt about that. Fortunately this decline can potentially be made up with supply from a new gas resource base, and that is shale gas. Canada's largest shale gas reserve potential is in Northeastern British Columbia, and Senator Neufeld will know this very well. The biggest plays there are the Montney and the Horn River, and I believe the Cordova is another one that is likely to come on.
While this is good news, it must be balanced with the fact that our largest natural gas consumer — customer — the United States has an even greater supply of shale gas and is further along in its production. In short, the dynamics of the natural gas market in North America are changing rapidly. What this means for Canada is a little uncertain at this time and will certainly be the subject of some serious studies going forward.
The United States has had the largest global increment of growth in terms of natural gas production for the last two years. That is according to the BP Statistical Review of World Energy in 2008. Certainly, the market potential for gas is not as great as it has been.
In terms of dispatch protocols out of the basins, the Montney and Horn River out of British Columbia are probably more expensive, and they are less well developed than certainly the big fields down in the States. They are probably not looking at adding a lot to supply for the next little while, and certainly not at the price that natural gas is today.
What does petroleum mean to the economy? This is really the heart and soul of what I would like to be able to provide you with today, and is certainly a take that will be different from things that you hear from other people.
Aside from the obvious energy security and direct services that oil and gas provide Canadians, the petroleum industry provides all of us with economic security as well. As I noted earlier, to aid the process of rational decision making and attitudes towards the petroleum industry, policy-makers, business leaders and indeed Canadians in general require a clear understanding of the value and contribution of the petroleum industry to the economy. Indeed, it is important that the impacts of hydrocarbon developments on key macroeconomic variables such as GDP, employment and government revenues in each particular province or territory be understood.
To this end, CERI recently completed a comprehensive assessment of the role of the petroleum industry to the national and provincial economies to 2033. The study calculated economic impact on the following types of energy in the following provinces and territories. In Alberta we took a look at conventional oil, conventional gas, coalbed methane, oil sands and major capital projects like upgraders and those sorts of things.
In B.C. we took a look at conventional oil, conventional gas, shale or tight gas, and major capital projects. In Saskatchewan we took a look at conventional oil and conventional gas. In Manitoba we looked at conventional oil, because there is oil in Manitoba. In Quebec we took a look at major capital projects. In Nova Scotia we looked at conventional gas, and in the Northwest Territories, major capital projects. Clearly that would be the Mackenzie Valley pipeline.
Due to insufficient data, analysis was not possible for several sources of energy, such as the oil sands in Saskatchewan. They differ somewhat from the oil sands in Alberta in terms of the geology. Nor did we look at the large potential for shale gas plays in Quebec, but there is certainly a great deal of potential there as well.
The total economic impact of the petroleum industry in Canada is summarized in Table 1. This table illustrates the total GDP impacts from the upstream oil and gas activities as well as the impacts associated with other capital projects. For example, the Enbridge Northern Gateway Pipeline, which would run from the oil sands to the West Coast; the Kitimat LNG Inc. liquefaction project; the Quebec LNG re-gasification terminal; the Mackenzie Valley pipeline; and in Nova Scotia the Deep Panuke offshore project.
The columns in Table 1 show the GDP impacts in all the provinces as a result of oil and gas industry investments made in the province, indicated by the column title. In terms of the columns, it would be all of the investments made in Alberta read this way, B.C., Manitoba, and so on.
The rows show the GDP impacts for the given province identified in the row title. As a result you can see the oil and gas investments made in each province and how they spill over into other provinces. I will use my home province as an example once again, Saskatchewan. Go Riders!
All oil and gas activities in Saskatchewan create an impact of $14 billion in Alberta. If you go to Saskatchewan and you look across to Alberta, you see $14 billion. All of the oil and gas activities in Saskatchewan have a $14-billion impact on Alberta. If you go down the list, they have a $16-billion impact on Ontario. The elephant in the room is Alberta, which has an impact of $116 million in Ontario. The oil and gas activities in B.C. create a total GDP impact of $13 billion in Alberta. The total national GDP impact from all investment analyzed by this study will approach $3.6 trillion over the next 25-year time frame of the study. That is what the oil and gas industry is likely to mean to the Canadian economy, given the projections I mentioned at the outset, over the next 25 years, but the GDP is only a portion of it.
Similarly, Table 2 and Table 3 respectively summarize the federal and provincial tax impacts of the petroleum industry. The largest tax impact, on a federal basis, comes from Alberta's oil and gas activities, followed by British Columbia and Saskatchewan. The same holds true for provincial tax impacts as well.
Table 4 reflects the incremental employment as a result of the investments in the upstream and other capital projects analyzed by CERI. Over the 25-year study, total employment in the thousands of person years will increase incrementally by 24 million.
Royalties are also important. Royalties payable to the province where development takes place will total $429 billion over the 25 years, or approximately $17 billion per year.
The Chair: If I may, you said that there are many different sources of energy and that you are focusing on oil and gas for the purposes of these illustrations. I am focused on the scope of our study so it would be useful for me to know where certain information can be obtained.
Quebec does not have an oil and gas industry, it has another tremendous energy industry in its hydro production. Does your institute have similar documentation for those areas?
Ms. Dybwad: No, but for a price we would love to model it for you. This was an IO, input-output, model we developed specifically for the petroleum industry, so it is based on the relationship within that sector. It comes from Canada's system of national economic accounts. To look at the relationship in terms of the impact of building a dam in Quebec or a nuclear plant in Ontario, you would have to look at the existing accounts and the relationship in those industrial sectors and then build a model from that. We have not done that work.
Senator McCoy: Do these figures include the royalties?
Ms. Dybwad: The royalties are separate figures that I can provide to the committee. They accrue only in the province where the resource occurs and are, therefore, specific to each province. Royalties accrue in Saskatchewan, British Columbia and Alberta but not in Quebec.
I will move on and speak to markets. Our largest and only market is the U.S. When I am in the States, I tell them that we love them dearly because they pay their bills. They are a good market.
It is well known in Canada, less so in the United States, that the largest exporter of total petroleum to the United States is Canada. For example, the Energy Information Administration's import statistics report notes that the U.S. imported 2,007 thousand barrels per day of crude oil from Canada. The next largest amount that the U.S. imported was 1,057 thousand barrels per day from Mexico, followed by imports from Venezuela, Nigeria and Saudi Arabia in that order. Many Americans think that their principal source of imported oil is Saudi Arabia but it is fifth on the list. Certainly, Canada is number one. In terms of total petroleum imports, including unfinished oils, lease condensates, refined products and natural plant liquids, from Canada into the United States, we top the list. The U.S. imported 2,524 thousand barrels per day of total petroleum from Canada, followed by 1,159 thousand barrels of total petroleum per day from Mexico. In 2008, Canada exported over 1.9 million barrels per day to the United States, which was the equivalent of 19 per cent of total U.S. imports. The U.S. demand for Canadian oil is expected to reach 2.9 million barrels per day in 2015.
Clearly, Canada plays a vital role in terms of U.S. energy security. However, Canada's petroleum industry also makes a significant economic contribution to the U.S. economy. CERI conducted a study of the impacts of the Canadian oil sands development on the U.S. economy — similar to the one done to measure the impacts of the petroleum industry on Canada's economy referenced above. The results of this study indicate that because Canada and the U.S. are major trading partners, there are significant economic benefits to the United States from increased economic activity in the oil sands. As investment and production in the oil sands ramp up in Canada, the pace of economic activity quickens and demands for U.S. goods and services increases rapidly. As a result, an estimated 343,000 new jobs would be created in the United States between 2011 and 2015. The increase in demand for U.S. goods and services would continue to climb throughout the period adding an estimated U.S. $34 billion to U.S. GDP in 2015, U.S. $40.4 billion in 2020, and U.S. $42.2 billion in 2025. It must be noted that these figures are for the oil sands only. If you were to talk about the total petroleum industry in Canada, the numbers would be much greater.
I will make one quick note that while the U.S. is our largest market by a significant amount because exports to other jurisdictions are only 24,000 barrels per day, there is increasing interest in diversifying our markets by looking to China and other Asian economies. The reason for this is two-fold. First, there is reason to believe that U.S. demand, in particular for gasoline, will stagnate; and second, there is a risk that American climate change policies might threaten the importation of Canadian bitumen. That said, the issue of environmental concerns and how they affect the petroleum markets is significant, and I will discuss this in more detail further in my presentation.
The increasing presence of Asian interests in the oil sands — China, Korea and Japan — as well as plans to increase pipeline capacity, either by expansion of existing capacity or building new capacity to the West Coast, is a sign that the foundations for future market diversification are being put in place. The potential for new markets for Canadian bitumen is something that CERI is also actively taking a look at.
What does all this mean? In addition to energy security provided to Canada — indeed, to North America — by the petroleum industry, the economic benefits of development are significant and diffuse. The benefits of the development of Canada's petroleum resources do not fall on any one industry or on any one region in Canada, but are broadly shared across industrial sectors and regions, both domestically and in the United States. Developing Canadian petroleum resources — in particular, those associated with the oil sands — will require hundreds of billions of dollars of investment over the next several decades. This investment will give rise to a long-lived, robust period of increased economic activity in Canada and will increase economic activity across many sectors throughout North America.
However, there is always a ``but,'' is there not?
What about the environmental concerns? No economic analysis is complete if it does not consider the burdens as well as the benefits of development, or what we used to call a cost-benefit analysis. All development creates a negative externality in the form of an environment impact. What is important is that these impacts are recognized; and once recognized, that steps are actively pursued to reduce or mitigate them.
The environmental impact of the petroleum industry, specifically the oil sands, has become the bête noir of Canada's international reputation. Of late, environmental concerns associated with the oil sands development have intensified for not only the industry, but for governments as well. While ongoing efforts to promote Canadian energy developments have met with success, there is a growing backlash associated with dirty oil.
What is fact and what is fiction and what is being done to reduce the impacts? These are important questions since failure to address these issues pose a threat to the continued development of our petroleum resources in that it could jeopardize access to markets for our products.
One of the front-and-centre environmental concerns is the use of water in the oil sands. CERI is currently undertaking a detailed assessment and report that will provide an independent assessment of the reality of water requirements and issues surrounding the oil sands. Although the final report will not be available until the end of the year, our preliminary analysis indicates that a barrel of gross crude bitumen requires an average 1.154 barrels of water per barrel of bitumen.
On a marketable product basis — so we are talking about bitumen and SCO — the average is 1.164 barrels of water per barrel of marketable product. This indicates that the oft-quoted numbers that the oil sands require two to four barrels of water per barrel of bitumen could be overestimated. This is because these figures rely upon regulatory values for water allocations, and not the make-up water, which is more reflective of actual steady-state water withdrawals.
It should be noted that the CERI report will also provide a discussion of the technologies that have the potential to substantially decrease water usage in the extraction of bitumen. These technologies include: vapour extraction; toe-to- heel air-injection, THAI; electro-thermal dynamic stripping; optimized SAGD; solvent assisted SAGD; cold solvent process; in-situ upgrading; enhanced solvent extraction process; and wedge wells.
Not only do these bitumen extraction technologies have the potential to decease water consumption, they will also decrease the use of natural gas and natural gas emissions of GHGs. As a result, they will decrease the total supply cost of oil sands production.
If there is one thing I want to stress, it is technology, technology, technology. Technology is really what has allowed the development in the oil sands and that is what we are going to rely on going forward. Technologies will be necessary to reduce our water impacts. Those increased technologies will also very much reduce our GHG emissions.
The Chair: As you have strayed from your text to make that comment, and I noticed that you do need to have a little sip of water, grab a breath.
Technology, technology, technology. I have an impression, following a trip Senator Banks and I and other members of the committee took a few years ago, that a lot of the technology is and has been discovered or developed, but it is hidden away in labs and not being applied in the field. That is something that I find hard to explain to my opposite numbers in the States, the U.K. and so on.
Ms. Dybwad: I will stray very much from my area of expertise. Certainly, you will want to hear from the people who understand how technologies and innovations roll out.
I think there is this marvellous thing they call the ``valley of death,'' in between when you come up with a technology and when you can put it in place and make it commercial. That requires a fair amount of money, a certain amount of risk and a certain amount of incentive as well.
You are absolutely correct; there are a number of these technologies that probably are just waiting to be put into place and waiting to be commercialized. However, it takes a long time and it does take a certain amount of money to put them in place.
The Chair: It also takes the will of the people. I only mention this because, as you said, we are in focus and Canada's reputation is being unfairly sullied, perhaps. I think you suggested that. It has been compared to Big Pharma — let us get the full bang for the Vioxx buck before we move on to another pharmaceutical product that is already in the lab and waiting.
I do not know what is fact and what is fiction, but I put it to you that we would be interested in hearing more on that subject.
Ms. Dybwad: Probably some of the people you would like to hear from would be the folks who could tell you how innovations roll out. There are probably a fair number of people in the industry that would like to talk to you about what kind of incentives exist in terms of tax write-offs for these sorts of things. It is likely that there is a whole array of assistance that could be provided to facilitate some of those things.
You just have to look at carbon capture and sequestration and how long that is in terms of being rolled out. My friends from EnCana would say there very much is a commercial application of it in Southern Saskatchewan, in the Weyburn fields; but it has not become universally accepted and it is a technology that you would think would have been. They have been talking about it for 20-some years. I remember in my days at SaskPower, we were already talking about it and that was in 1988.
It takes a long time for these things to come out, and often times it is not even just the technologies that are in place. There are a lot of other things. What are the liabilities? Who owns the pore space? There are a lot of paper issues and a lot of legislative things.
It is technology, technology, technology and maybe the other commensurate part that falls more in your bailiwick is that it is also the paper; the words and the legislation make a difference as well.
To continue: We will decrease the total supply costs of the oil sands. Of course, if you can decrease the supply costs, that also assists in terms of its development.
This leads to the next issue and that is the GHGs — what the prospects are for reduced emissions in the oil sands. In 2008, CERI released an eye-opening series of reports that looked at the economic viability of various fuels that could be used in the bitumen extract process. These fuel options were considered as ways in which the industry could ``green up'' its image by reducing its emissions and no longer be producing dirty oil. To this end, CERI coined the phrase ``green bitumen'' to designate bitumen extraction processes and techniques that emit no more GHGs than are produced in the production of conventional oil.
The 2008 Green Bitumen Report was very high level report and sought to determine the relative costs associated with the oil sands industry's ongoing reliance on natural gas versus a switch to nuclear energy, gasification with carbon capture and storage, or the continued reliance on natural gas with CCS. The report concluded that, by 2030, the oil sands industry could dramatically reduce its emissions to levels below that of conventional oil production in Canada, but at a substantial cost. There is always a cost associated. Of course, this was dependent upon the type of technology examined and the potential price of carbon.
A summary of the report findings are presented in Figure 2, which is not necessarily a cakewalk in terms of reading, so I will point out the highlights to you. The green line is the oil sands marketable product production, which goes up over time, as we would hope. The dotted line on the top indicates the total emissions associated with that increase; as your production goes up, unmitigated, so do your total emissions.
The wedges in are the various types of technologies or techniques that we looked at, and each of those wedges would reduce those emissions from that dotted line by the amount of the wedge. If you had a carbon capture and sequestration with widespread adoption, that would give you a big bang for your buck. If you introduced some nuclear technologies into the oil sands, you would get another reduction. If you used coal gasification — synthetic natural gas, in other words — you would get another decrease. That grey bar at the bottom is the total emissions that you would have if you put some of those other techniques in place. It is fairly dramatic.
The take-away from this is that it is actually possible to reduce the number of emissions from the oil sands. You can use these techniques — coal gasification or nuclear — or, as I mentioned earlier, some these other techniques, whether it is THAI or vapour extraction, where you use solvents to reduce the viscosity of the oil sands. Anything that reduces your use of natural gas will reduce the amount of emissions. There is room there.
The bottom line is that all costs money and probably all hinges on what the price of carbon will be. The higher the price of carbon, the more incentive there is to put in place those technologies that will reduce the emissions. That is pretty much the beginning and end of story in terms of those sorts of things.
While a comprehensive plan for oil sands development has not been announced, there is a desire to better understand some of the development options for the oil sands and the impact that technology could have on GHG emissions and other sources of air pollutants. To this end, CERI is currently working on a new study that will revisit that 2008 Green Bitumen Report with the intent of taking an extremely in-depth look at the economics and emissions associated with respect to the various production technologies, and see how much more we can gain in terms of emission reductions.
The finding of the study will be timely in that the global economy is starting to show signs of recovery. This, in turn, will lead to a rebound in demand for commodities that will bid up commodity prices. This recovery will not slow down the movement opposing oil sands development, though.
Even though the U.S. government has recognized the need for Canada's oil sands and oil sands products and, in that regard, has even expedited the regulatory process for the Clipper pipeline, which will bring more oil products down into the States, it does not mean that the oil sands industry and policy-makers can become complacent. In fact, the industry needs to consider all the options as it attempts to shed the dirty oil image, and the government needs to understand what role carbon prices could play in helping to hasten the move towards green bitumen.
I think this is a good place for me to end my formal comments. Senators, thank you for your attention and I welcome any further questions you may have.
The Chair: Dr. Dybwad, thank you for that tremendous presentation. Colleagues, I think you would agree it is exactly on point. It is the most ideal introduction for us into the state of play as it now stands and the urgent need for a change in the way we are doing things.
Senator Mitchell: Thank you, Dr. Dybwad. That was really almost a table of contents for much of what we are trying to do in our study.
You made some very interesting assessments of the amount of economy that oil production will account for across the country. I think it totals $3.5 trillion of GDP in the next 25 years, or by 2033 or 2034. I think we will have a total of about $50 trillion of total GDP over that period of time in Canada. Therefore, this accounts for less than 7 per cent of our total GDP. It is interesting because I thought it might be more.
Ms. Dybwad: You have done the figures; I have not. I must admit that, when pulling this together, I thought it would be lovely to be able to talk about the various sectors. I did not know what agriculture or forestry would be, for example. We have only done the work on the oil and gas sector. It does not include coal. As was pointed out by Senator Angus, it does not include electricity or any of the other things. Energy writ big will, of course, account for a much larger portion. This is just the oil and gas sector.
Senator Mitchell: I do not mean to diminish it, because $3.5 trillion is significant. It would be a significant hit if it were hurt. However, it is not 30 per cent of our economy in this country, interestingly enough.
That brings me to my next question. It sounds like you have not done these studies on green bitumen yet but, do you have some assessments of what the impact on the contribution of this sector to GDP would be, given the achievement of certain different levels of emission reductions by 2020, for example? There are a lot of those floating around.
Ms. Dybwad: No, we have not done that work yet. We will look at some of the dispatch in terms of some of the technologies: If the price of carbon is $50 a tonne versus $120 a tonne, what kinds of technologies will come on?
We have not done the piece of work to indicate what that impact will be on the overall economy. I think you are hearing from the National Round Table on the Environment and on the Economy. I suspect they have a better handle on that and have done some work. However, I do not want to presuppose what Dr. Page will say in that regard.
Senator Mitchell: I know we want to hear from them and will look forward to reading your study, because you are coming from a different point of view — an energy point of view. It is interesting that whatever is done to reduce carbon emissions in the energy industry will likely take technology.
Investment stimulates GDP. Why is it that investment in technology to reduce carbon emissions does not stimulate GDP?
Ms. Dybwad: That is probably part and parcel of what President Obama is talking about when he talks about ``green jobs.'' Anything you do that results in a higher level of investment certainly has some spinoff effects.
Senator Mitchell: It may not actually reduce GDP.
Ms. Dybwad: That report is supposed to be complete at the end of March.
Senator Mitchell: You mentioned THAI, the toe-to-heel air injection system. I am interested in that for many reasons but mainly because the gases stay underground and are never emitted. It is great for carbon emission reduction and it is a great argument to use when trying to sell our oil sands oil to the U.S.
Have you done any assessments of where that is? I know at least one company is doing it.
Ms. Dybwad: I think Petrobank is doing the THAI. This could be dangerous. I will hear about it if I have the wrong company.
No, I do not know exactly where they are in terms of the process or how commercial it is or whether any of the findings are out yet.
Senator Mitchell: Do you feel an urgency about climate change?
Ms. Dybwad: Senator, you have put me in a difficult situation.
Senator Mitchell: I do not want to do that, so I can withdraw the question.
Ms. Dybwad: I could be dangerous. I was not kidding. I have been doing this for a very long time. I remember the meeting I was at in 1988 when I worked for SaskPower. We started to talk about carbon capture and sequestration. At that time, we were talking about biological sequestration in woody matter. That was 21 years ago. They are still asking the same question. At that meeting, the question was how do we know what to do because we do not know the price of carbon. Twenty-one years later, we are still having that debate.
In answer to your question, I felt a great deal of urgency 21 years ago. The more time that slips past, I probably have less of a feeling of urgency because I am not sure we can dial it back fast enough.
The Chair: You are not sure of what?
Ms. Dybwad: I am not sure we can dial back carbon emissions fast enough to have an overall impact. I will make the assumption that anthropogenic carbon dioxide has an impact. I think we are probably into adaptation.
Senator Mitchell: It is terrifying.
Senator Lang: What assumptions are you making on the price of a barrel of oil? Currently, we are looking at roughly $80 per barrel.
During this last recession, the price went down to slightly below $40 per barrel. Projections are that it will continue to increase. The price of oil will obviously play a major role in your study.
Ms. Dybwad: I think we simply assumed $100 per barrel over the course of the 25 years as the average at par with the United States.
Senator Lang: Your study is predicated basically on our trade with and demand from the United States because that is our major selling partner. We are starting to read more on the question of exactly what is available. How much is available we develop?
Where does your company stand with respect to the fact that some projections indicate that we have peaked, especially at the current price? Where does that put us?
Ms. Dybwad: Senator Angus pointed out that I have a PhD in resource development planning, but I am principally an economist. Allow me to give you the economist's answer. We will never run out because the price will continue to go up until a point where it becomes too painful. At that point, we will find another substitute for oil.
As you are aware, Canada has the second largest reserves of oil in the world after Saudi Arabia. Will we run out any time soon? No, but the price of oil will continue to go up as demand goes up. How fast and at what level? That is a guessing game that everyone gets involved with. Every now and then somebody throws a dart and gets it right. That is in hindsight more than anything.
I do not know where the price will go and when we finally get to the breakpoint where the pain associated with the price of a barrel of oil is too high. Some people would have thought it was at $140 a barrel, but that was barely a blip.
In terms of overall reserves, the price will continue to increase and reserves will continue to be brought online. Are we past the point of all the cheap stuff? Yes. All of the oil reserves we have now are harder to get at. It is also heavier, under a lot of water and more sour; in other words, it has more sulphur in it. This is not light sweet crude any more. Very little of that is left in the world. Everything else is simply more expensive to access.
There are wild varying estimates in terms of how much shale oil exists in the Bakken Formation. If people think that the oil sands produce dirty oil, shale oil is worse. It is simply a question of how badly you want it and what you are willing to pay for it.
Senator Lang: You raised the question of shale gas primarily in Northern British Columbia where I gather there is a vast quantity. It is not totally defined, but it is there. It is being discovered throughout the United States. You mentioned the cost of producing that gas. What is the cost comparison of producing it in the U.S. versus in Northern British Columbia? Have you any idea?
Ms. Dybwad: These are ballpark figures. Every shale play will be different, so each one will cost a different amount of money to bring it online. There are all of those caveats associated with those sorts of things.
I have heard numbers from, let us be conservative, $2 per MMCF in the United States to Montney and Horn River where you are probably at $5 MMCF or $6 MMCF. I think Senator Neufeld probably knows this as well. It is considerably more expensive currently.
Part of the problem is that Northeastern British Columbia does not have the infrastructure that there is in the United States. Not only do they have large plays, but also they are in places that are reasonably well developed. Therefore, pipelines are already running through there and all those other sorts of things. That takes away from the cost, depending on which side of the border you are looking at. In terms of dispatch, the basins in Northeastern British Columbia will not come on as quickly as those in the United States because they will be more expensive by several dollars per MMCF.
Senator Lang: You did not mention the Alaska gas pipeline as a resource for the Americans. Is that because of shale gas?
Ms. Dybwad: It will be hard to speculate, but yes. Again, the state of play in terms of shale gas is new. The future is very uncertain. It has caused concern in not only Alaska, but Canadian natural gas as well in the North in terms of when it will come online.
A low commodity price coupled with relatively significant tolls on the pipeline begs the question whether that will price it out of the market.
Senator Merchant: Thank you for the information you have given us today.
I will speak as someone from Saskatchewan. Our provincial government and premier have expressed concern that a high growth province like Saskatchewan may be punished unjustly because we want to develop our resources. Minister Prentice said:
The Canadian approach has to reflect the diversity of the country and the sheer size of the country, and the very different economic characteristics and industrial structure across the country.
Do you feel that national emission targets are a workable solution for this country?
Ms. Dybwad: May I defer on that question? I think that is probably a political question that I am not comfortable answering.
If there is to be a price for carbon, it probably has to be determined on a larger scale than simply individual pockets.
I respectfully decline to answer any political questions if I may.
Senator Merchant: This is a concern we have in Saskatchewan.
Ms. Dybwad: That is fair enough. If we had an opportunity to sit down and work through what the impacts would be for a specific policy, I would feel far more comfortable answering that question. However, without having done that work, I do not wish to speculate.
Senator Merchant: Thank you. I appreciate that.
Because we are approaching December and we are all looking forward to Copenhagen, could I ask you a question about that, or is that also too political?
Ms. Dybwad: Ask your question and I will let you know.
Senator Merchant: It now appears that we will not be able to reach binding agreement. We are waiting to see what other countries will do and what the U.S. will do. Do you feel that Canada should wait or do you think we could be a leader in that area? Is that too political a question as well?
Ms. Dybwad: It is always difficult with carved-in-stone targets. I alluded to the fact that we have probably passed the point of being able to dial back our emissions by a large amount. My sense is that what you should be looking for in a policy is a great degree of flexibility. Set the targets in terms of ensuring that emissions are reduced, but you have to leave everyone with the opportunity to find the best way forward. What will work in Quebec in terms of reducing emissions will be very different from Saskatchewan, and you want to allow everyone to have those options and that flexibility. That is the easiest way to go.
While a target in terms of emissions is fine, a target in terms of renewables can be counterproductive, for example, saying that you need to have 20 per cent of wind farms. The specifics of an energy system peculiar to a jurisdiction will dictate what is reasonable and what is not reasonable, and maybe wind farms are not the way to go. Maybe conservation is the better way to go in one place, or carbon capture in another place.
You want to allow people to be flexible. You want to have a goal. This is goal-oriented regulation. Do not dictate in terms of how the goal should be met. Set out the goal and allow them to find their best way forward. I will leave it at that.
Senator Merchant: I will stop asking questions because I think I am getting a little too political.
The Chair: You gave a good try to do indirectly what you were not able to do directly. I commend you both the questioner and the witness.
The next questioner is Senator McCoy. We will pitch you two ladies and see what we get here.
Senator McCoy: No doubt enlightenment all around the table, as is usual.
Ms. Dybwad: I would say so.
Senator McCoy: I notice your introduction said that CERI makes a habit of not commenting on policy, let alone politics, but you do a great deal of economic and other related analyses, and that has been your strength. I appreciate the difficulty that you face.
Let me start with a couple of questions I have on a factual basis. Earlier you were giving us the projected demand on a global basis, yet virtually 100 per cent of our external market is the U.S.A., and we have our eyes on the Asian market.
Do you have numbers that would be consistent in terms of time and terminology and so forth for the U.S. market, the Chinese market, and perhaps a little broader into the Asian market but certainly China? Japan and Korea might be other targets we would be looking at. Do you have those projections as well?
Ms. Dybwad: I realize that I have probably obfuscated some of what I have said. There will be demand in terms of the product, such as oil, diesel fuel, gasoline, et cetera. However, when you look at demand for the product coming out of the oil sands, the limiting factor is what refineries can take, because that is really, where the demand is.
For example, the United States has a high demand for gasoline and diesel fuel, et cetera. When you look at bitumen, whether you are talking about bitumen or SCO, synthetic crude oil, we do not do as much in terms of finished products, but you are looking at those products going into refineries. It is what refineries can take.
There will be a large growth in terms of China, but we have to consider whether they have the proper configuration of refineries to be able to take the kind of product we send out. You need sophisticated refineries because of the nature of our oil.
For the most part, our products are sent into the Midwest, which is PAD 2. You have an energy background, so you know what it is. We are only recently realizing that maybe we should be sending the product to the refineries in the Gulf Coast.
There is a bit of obfuscation. We have a lot of demand for energy products, but when we talk about the products we sell, we are basically selling to refineries. The refineries have to be able to handle the product, and not all refineries are created equal. Does that answer your question?
Senator McCoy: That is a very good contextual answer. Do you have the facts? Do you have those projections?
Ms. Dybwad: As I say, we are expecting that we will send about 2.9 million barrels over the next five or so years. I alluded to taking bitumen markets and that is a huge question right now in Alberta. We are currently in the process of firming up some work with the Alberta government to look at just that issue. It is a huge concern, because we are talking about increasing supply. We need to look at what can reasonably be sold into the U.S. market and whether there is any room for an increase. We will look at the Asian markets as well.
I always like to give specific answers to the questions. What will affect our ability to sell into those markets is the refineries and where they are already accessing some of their petroleum products. If we look at the Gulf of Mexico, we are looking at displacing Venezuelan and Mayan or Mexican heavies out of there, because they have even less of a supply. In terms of total demand, we may be able to move into that area. That is a displacement market.
The Asian market would be a new market that we have not yet tapped. Of course, we need the pipelines to get there. The Kinder Morgan pipeline transports about 300,000 barrels a day, which is not all that large, and most of that goes into the Western States.
In terms of what is likely to be increased demand, almost 3 million barrels a day into the U.S, some of that will be displacement. An increase in that will probably be a displacement of heavies from other countries, and then new markets, which would be the Asian markets. How big those will be is a matter of conjecture and a certain amount of study going forward.
Senator McCoy: You say that you are just beginning to flesh out the details of that study. Am I hearing you correctly?
Ms. Dybwad: Yes.
Senator McCoy: Will that information be made available to us at some time?
Ms. Dybwad: The details of the study, we are probably looking at work that will be done by the end of March.
Senator McCoy: Perhaps we could follow up with you.
Ms. Dybwad: Absolutely.
Senator McCoy: It is a key piece of information for us to understand both the Asian and the U.S. market, and I am delighted with the context.
Senator Lang: I just want to follow up on the question of diversification of the customers, in particular, with the oil sands. Obviously, there has been a major change in the past year vis-à-vis ownership with the investment by the Chinese.
Ms. Dybwad: The Koreans as well.
Senator Lang: The Japanese have a significant investment, too. That is the foundation for change as far as where the commodity may go.
If a pipeline were built from the Fort McMurray area over to Kitimat, would the refinery that you spoke about be built in China from the point of view of shipping the product and then having it refined in China?
Ms. Dybwad: Again, it would go back to the market question. Will the market be for refined products? If so, you would do the refining in Alberta. If there is less of a market for refined products and it is more for crude oil, you would ship the crude oil to refineries in China. Malaysia has a large number of refineries as well.
Senator McCoy: Coming from Alberta and having professionally grown up there, the oil and gas industry — that is, the fossil fuel energy — is huge and all-consuming. When I step back and look at the global numbers, even those of Canada, in terms of oil, we are only producing about 3 per cent of the global resource. That is not quite the energy superpower that our egos sometimes lead us to say. You are nodding. Do you agree?
Ms. Dybwad: Actually, I am laughing inside. When I was walking over here, I was thinking about what questions I might anticipate. It is funny you should say that because we are number 15 in terms of energy exports. We export to one market. You have hit the nail on the head. We export not a terribly huge amount. Saudi Arabia is number one; Russia is number two. I believe we are number 15.
Senator McCoy: We are a super supplier from an American point of view, which is wonderful. I do not need to sell more than I have. That is not a problem.
Ms. Dybwad: You are absolutely correct. We are not a super power in that regard.
Senator McCoy: Yes, in the global context.
Ms. Dybwad: We are not in Russia's league by any stretch of the imagination.
Senator McCoy: That is in oil and natural gas as well.
What percentage of the total U.S. market do we have now?
Ms. Dybwad: We have 19 per cent of their imports.
Senator McCoy: Yes, but that is their imports.
Senator Banks: That is of oil.
Ms. Dybwad: That is oil, yes. We used to have a larger share in terms of electricity, but that has reduced a fair amount in the last little while. This is why I have the big book with me.
Senator Banks: We also have debt.
Ms. Dybwad: It is about 15 per cent of the gas, and that is at jeopardy now. With a number of pipelines that have been bringing more gas into the Eastern markets of the United States, it has actually pushed out a fair amount of Alberta and Canadian gas. I should not say how much, however, because I will get the number wrong.
Senator McCoy: It seems to me that the U.S. supplies 40 per cent of its own oil needs. Is that right?
Ms. Dybwad: I am not sure.
Senator McCoy: That would represent maybe a one-third of their needs. Maybe you can supply that information later.
Ms. Dybwad: I can. I am not overly familiar with all of the American numbers.
Senator McCoy: That is okay. You will supply it later.
Let us go to Figure 2 on total emissions. The pale yellow wedge represents captured emissions. What is that exactly?
Ms. Dybwad: Those are the captured emissions of the gasification at the plant. That is the emissions captured associated with the syngas.
Senator McCoy: What is ``emissions reduced through SNG?''
Ms. Dybwad: That is the synthetic natural gas, which is the coal gasification. You would be making gas from coal as opposed to natural gas.
Senator McCoy: I am confused.
Senator Mitchell: It has not started yet.
Senator Angus: That will start in 2017.
Ms. Dybwad: I will get my book out. You will capture a certain amount of emissions when you make the syngas. The bigger chunk is what will happen if the Alberta government and the Canadian government kick into gear with widespread adoption of CCS. In other words, you can capture a certain amount at the plant gate, and if you have a much larger scale CCS program, 60 per cent of that would actually be associated with the oil sands. That is the large chunk of CCS that you see. The other part is just with respect to coal gasification for the oil sands.
Senator McCoy: Yes and the emissions reduced through synthetic natural gas, which is SNG.
Ms. Dybwad: It is that tiny burgundy area.
Senator McCoy: Are we having 27 conversations here? I cannot quite hear you.
Ms. Dybwad: It is the tiny burgundy line. It is almost minuscule.
Senator McCoy: In the yellow line, you are saying that you are capturing CO2 while you are making synthetic natural gas.
Ms. Dybwad: There you go. If you had a bigger program with which you did CCS, the portion of that which would be associated with the oil sands is about 60 per cent. That is that big band.
Senator McCoy: Yes, I see that.
I am sorry to rush you, but there is some pressure to move along.
Ms. Dybwad: That is okay.
Senator McCoy: You said that this all costs a lot of money.
Ms. Dybwad: Yes.
Senator McCoy: There is no cost shown that I see, unless I am misinterpreting this table.
Ms. Dybwad: No. I just gave you the abbreviated version. I have the entire report, which has all the associated costs with each one of them. If the price of a tonne of carbon goes to this much, it is this. Quite frankly, it is a huge pile of tables and things. I will make sure that Ms. Gordon gets a copy of these and you can go through it.
Senator McCoy: That would be much appreciated by our analysts.
Ms. Dybwad: I thought it was too much detail to put in here, but I have it all here for you if you want it. I would be delighted to do that.
Senator McCoy: I am looking for an abatement curve for Canada. I am looking actually for about 10 or some regional abatement curves across Canada because I could not agree with you more. Every energy profile is regional, so it varies from sea to sea to sea. Therefore, the abatement curves will do the same.
The closest thing we have to any kind of credible regional impact study so far is the report sponsored by the TD Bank Financial Group, the David Suzuki Foundation and the Pembina Institute. They commissioned M.K. Jaccard and Associates Inc. to conduct an in-depth study. However, I have not seen an abatement curve.
The National Round Table on the Environment and on the Economy has these wedges. It is implicit in the Jaccard studies, which he has done for Canada, Alberta and B.C. and now for public consumption through the TD Financial Group. In addition, it is implicit through your wedge study.
Ms. Dybwad: Yes.
Senator McCoy: First, have you seen any at all? I do not know whether I need to ask this next question; I am quite sure you are competent. You could have asked to produce such things.
Ms. Dybwad: I made mention of the fact that we were doing a new green bitumen report, so I will read from the deliverables on that report. One of the deliverables in this is an abatement cost curve for each of the technology options that are applicable to the oil sands. We will have one for the oil sands but not for every jurisdiction.
Senator McCoy: That would be very helpful. That picture has not been widely shared, and I believe it helps to visualize the task ahead.
Ms. Dybwad: You are talking about the McKinsey report.
Senator McCoy: Yes, I am talking about the McKinsey abatement curve.
Ms. Dybwad: It will look a little like that, and it will be for the technologies in the oil sands.
Senator McCoy: Yes, exactly, it will just be pertinent to our own facts instead of theirs.
Senator Neufeld: You spoke about the growth of oil consumption. Most of your report deals with oil and not much with natural gas. Where I come from, we do not produce a lot of oil, but we do produce a lot of natural gas.
You are projecting a 25 per cent growth of oil from now until 2030. Your brief also says that the growth in the same period of time in natural gas will be 50 per cent, twice as much.
British Columbia is not in decline; Alberta is in decline, and I am not sure about Saskatchewan. British Columbia is the only jurisdiction in the last eight years that increased production and its reserves at the same time.
Where is that gas going? You say that there may not be much sale of it in the U.S. It is obviously going somewhere. Could you tell us about that?
Ms. Dybwad: It would be much better if the Hal Kvisle were here from TransCanada Corporation; he could tell you exactly where it is going. Much of it is going to the oil sands, and a large amount is going to the regular customers across Canada, so they drop some off in Alberta, Saskatchewan and across the way.
You have hit the nail on the head, senator. It is a demand issue. It is probably a good thing it is not necessarily well defined now, because they are doing a lot of in-well storage now. In other words, they are not tapping into it because that market is not there. There is a great push to try to bump up demand right now. Many of the large players are focused on increasing demand for natural gas because that is the way out of it. There is not as much incentive to develop it at the price of gas now, so they are looking at increasing the amount of demand as the way to be able to drill and bring that on stream.
The natural gas market is in a state of flux. The prices are low right now, and they are searching for an increase in markets. It will be very interesting, given the amount of shale gas that exists in the United States now, and you have hit the nail on the head, senator. We are awash in gas, whereas a few years ago that did not seem to be the case.
Senator Neufeld: I will agree that there is a great deal of shale gas around, and when you talk about the last pipeline from the North, I do not think those are rumours. I believe that gas will be up there a long time before it comes to market simply because of the access to the other gas.
Shale gas has been developed in the Barnett shale for the last eight years. That is where that technology is coming from that is going into the Horn.
The Montney is tight gas, which they have been playing with for a long time, so it is two different total strata, the Horn to the Montney, which goes into Alberta. It has been around for a while. Quebec has a lot of shale gas, by the way, that we know of or that we expect.
Much of that shale gas is in states that are heavily populated. Shale gas is a little different to drill for than conventional gas, and when you start dropping a drilling rig right next to New York, you may find a different group of people there to say welcome as you would in a town in Texas.
You talk about the increase in natural gas consumption from 1990 to 2008, but you did not give me the oil figures. I do not need that information right now. You can give that to the clerk, so I can make the comparison. We are going to grow by 50 per cent in the next 30 years, according to this paper. Oil will grow by about 25 per cent. I would like to have confirmation of those numbers.
Ms. Dybwad: I will take that as an undertaking.
Senator Neufeld: You also have barrels per day, and you show what the U.S. imported from Canada, specifically, Alberta and Saskatchewan, and from Mexico. You never put any numbers after that for Venezuela, Nigeria and Saudi Arabia. Can you give us those numbers, too?
I understand that Venezuelan crude — and maybe I am wrong — is ``dirty,'' and I do not like using that term. I believe it is heavy crude, and although it may not be from bitumen, it is heavy crude. Is that correct?
Ms. Dybwad: Yes, that is the stuff that I said we will back out of the Gulf refineries, that we might be able to take up.
Although I said I would not say anything political, I sometimes cannot help myself. Because Canada is an open and transparent democracy, we fall very much critic to our oil production processes, and, of course, they are considered dirty. Let us realize there is no such thing as clean oil, yet we have the best practices. I suspect that people would be mortified if they tried to get into Azerbaijan and looked at the oil fields there, and, similarly, at Mr. Chavez's oil fields.
While we certainly have a long way to go in terms of making things better, those are probably the best practices you will see anywhere, and you can get in, look at them and take pictures of them.
Senator Neufeld: I have seen pictures and the process is amazing.
When we had Minister Raitt here, I asked her about dirty oil, and they get it from Venezuela. The federal government, the Government of Alberta, if not all the provinces need to have a strategy regarding the GDP numbers that we see in your graphs. This affects every part of Canada, not just Alberta. It involves a huge amount of money. We need to do a better job in the United States than we have been doing. We must try to get our message out that this is not dirty oil compared to others. Maybe we should start from the positive side by indicating the things that we are doing to clean up carbon capture and storage and so forth.
Do you agree with me that we need a strategy, other than Alberta's?
Ms. Dybwad: In a word: yes, absolutely, but I can never say just one word. You learn this early when you say someone else is doing something, and your parents say, ``If he jumps off a bridge, will you too?'' We should never compare ourselves and say, ``We are so much better than everyone else.'' The story should be that we recognize what we have; we are making efforts; and, certainly, we want to be a partner in this with the Americans, as I believe they have a fair amount of funds in terms of technologies that could be applied. There is a great deal of partnership that we can have. I believe that President Obama has made that overture in terms of helping us make a better case. As you noted, the economic spinoffs are big for them. The more they get involved in technologies that they can apply in the oil sands, the bigger the economic impacts.
I will answer your other question: Canada, 2,007 thousand barrels a day and Mexico, 1,057 thousand barrels a day. You asked for Venezuela, which is a whole 1,000 barrels per day less than Canada. It is 1,007 thousand barrels a day. Nigeria, 877,000 thousand barrels a day and Saudi Arabia, 745,000 thousand barrels a day. Those are the August numbers. I can provide numbers after that period to you.
Senator Neufeld: You commented on carbon capture and storage. Actually, I think carbon capture and storage, CCS, is one way that we will be able to abate the GHGs to a certain degree. How much that will be at the end of the day, I am not sure.
In British Columbia, we have been doing this inadvertently for a long time, but we are now starting to see the benefits. Spectra Energy is involved in a large project. They have drilled the wells and are looking to see how much it will cost them to store the carbon from the plant in Fort Nelson that will service the Horn River. That has been going on for quite a while. Norway has been doing it for decades. We have not done it because we have not decided to do it. For the 20 years you talked about, everyone was pushing away because it cost too much money. We should have been thinking a little differently on what we should have been doing 20 years ago. I think it will come. That is more of a statement than a question.
On July 8, 2008, you made a submission to the Science and Technology Committee at the NATO Parliamentary Association in Ottawa about Canada's energy strategy. I would love to have a copy of that submission because I am not sure of Canada's strategy, to be frank. I know what the strategy is in my home province, but I definitely cannot tell you what it is in Canada. If I could have a copy of that, I would like to read it.
Ms. Dybwad: I think it was less of a strategy and more of a plea that said that we need a strategy.
Senator Neufeld: That is fine, but I would like to see it.
Ms. Dybwad: I will have to check my home computer and see if I still have it; if I do, I will send it your way, or the clerk's way.
The Chair: That is what our study is all about, so it would be wonderful.
Senator Banks: Did I understand you to say that the numbers you were talking about for the other countries —
Ms. Dybwad: Those are the imports.
Senator Banks: We do not need them now, but there is a second set after that as well.
Ms. Dybwad: Yes, those numbers referred to imports into the United States.
Senator Banks: Thank you. I will not ask you any political questions. I will only ask you economic questions. You are an economist, an energy economist.
Would you agree that with respect to historical projections of finite resources, particularly with respect to oil, that they are always and have always been wrong? I have a list that I will bring to a future meeting of seven occasions on which it has been said we are running out, the most recent of which was in 1970, which outlined the world's resources. We have produced far more than what was regarded as the world's resources then, and we are a long way from running out.
The Chair: Do you mean the world?
Senator Banks: Yes. As further illustration of my question, in the 1960s, when we were talking about Canada's known energy resources, we did not include oil from the oil sands. Am I right in saying that all predictions have been incorrect? In addition, when we are talking about projections of when we will run out of oil and thus the supply will affect the demand and therefore the price, we must always bear in mind that we are talking about known reserves. This information does not take into account, for example, all of the oil on the eastern slope of the Rockies in Colorado or the oil field that contains 60 billion barrels underneath the city of Paris. Am I right?
Ms. Dybwad: Yes. That is why you often see the caveat that says ``economic'' or ``with given current technologies'' because, you are right, the oil sands, any of the stuff you now get, whether it is gas or oil that requires fracking, that was not available to us before. It is a combination, you are correct, of economics, when it becomes valuable enough —
Senator Banks: That is what you said, how badly we need it.
Ms. Dybwad: Ingenuity and innovation. Human ingenuity is an absolutely amazing thing. I certainly hope that comes to bear with a number of the other issues that we have to deal with, that our ability to be just in time in terms of our innovations and ingenuity will come into play.
If you look at the economically recoverable reserves 20 years ago, they are completely different now, different techniques and different technologies.
Senator Banks: Speaking of that and sequestration, which in one case at least you referred to Weyburn, what EnCana is doing there is, am I sort of right in thinking that the fact that there is sequestration going on there is incidental to the purpose for which the CO2 is being injected into the wells?
If you had looked at the projected recovery from those wells before EnCana started injecting CO2 into them, they were finished. The reason for the injection of the CO2 is the effect it has on releasing more of the 30 per cent or 40 per cent conventional oil in a well that cannot be extracted otherwise. Is that right?
Ms. Dybwad: Right. Most of the carbon capture is incidental to EOR, enhanced oil recovery. That is exactly right. Of course, going back to the economics, those activities are undertaken first because there is an economic return when you talk about enhanced oil recovery that you do not get when just sequestering.
Senator Banks: That comes down to what you said about how important technology will be in however we solve these problems. I hope we will be hearing from Mr. Newell at some point about the technology fund. I mentioned that to the chair and the deputy chair because he has a handle on that subject.
You said that you thought we were probably at the point of not being able to do much to wind down CO2 anymore and that we have to deal pretty well with adaptation.
Ms. Dybwad: That is a level of science that I am probably not familiar with, but I can bravely go out on a limb.
Senator Banks: I am only talking about the economics.
Ms. Dybwad: In terms of the concentrations, the amount we are pouring in and our ability to actually be able to stop and turn back the tonnes of carbon dioxide that we put in the air; that is a monumental task. Maybe that runs afoul of what I said in terms of human ingenuity and innovation.
Senator Mitchell: I am banking on human ingenuity.
Ms. Dybwad: We will have to get really smart in a hurry. I do not know how we overcome the existing energy systems that we have. It will take a long time to turn around.
Senator Banks: In the same sense that demand and shortage affects the price; when the price gets high enough, you go to the source that is harder to get at. The reverse is also true, is it not? That is, if we wanted to say that conservation and efficiency were part of the adaptation to which you referred, that if we were to be sure that there is a fully internalized price — if all of the true costs were internalized in the cost to the consumer, do you think that would have a salutary effect upon conservation and efficiency?
Ms. Dybwad: Economists have two to one said a carbon tax is the way to go. Make it a price because people will respond to prices appropriately. That is not a political answer.
Senator Banks: No, it is not. It is an economic answer.
Ms. Dybwad: It is not on, even in the industry. If you talk to the industry, they say give us a price and a tax so we know what it is, and we will go from there.
Senator Banks: Since you deal with the industry, would we be correct to assume that the industry accepts that it has to happen, that it is part of the mitigation that is involved so please just tell us the rules?
Ms. Dybwad: This is real fundamental economics. It goes back to Keynes when they were talking about interest rates. High interest rates are not a problem; low interest rates are not a problem. It is the volatility in between them, and it is not knowing. Whatever the interest, you can adjust to it. The same is true with regard to a price of carbon. High or low, whatever, we will adjust. Just tell me what it is.
Senator Banks: Thank you.
Ms. Dybwad: To go back to your consumers, you must remember that the largest amount of emissions comes from transportation, not in the production of oil and gas. Was it Winnie the Pooh who said, ``I have seen the enemy, and it is us''? If you really want to decrease the amount of emissions, it is at the consumption end, full stop.
Senator Banks: That was the basis of my question about the internalization of the true costs.
Senator McCoy: Much of the costs are in the consumption, trucking, for example.
Senator Brown: Thank you very much for your presentation. The trillions of dollars we are talking about and the impacts of producing oil and gas fascinate me.
If we shut down the oil and gas industry right now, what industries would continue to operate? Would the industries involving transportation, farming, construction, air transportation, manufacturing, tourism, electricity and mining continue to operate? Is there anything left that we used to do with muscle and hard work but now depend on energy to do?
Ms. Dybwad: I do not think I have an answer to that.
Senator Brown: How much of our economy is affected by the energy we produce. I think it is very close to 100 per cent.
The Chair: I believe that is a rhetorical question.
Ms. Dybwad: I am thinking the same thing. The bottom line is energy use goes up in lockstep with population and GDP, and the more advanced we are, the more our dependence on artificial energy as opposed to just solar energy.
Senator Banks: If that happened, you would see a huge increase in the roots and vegetable collection business.
Ms. Dybwad: You would see a huge drop in population too, in a big hurry, and it would not be a pleasant decrease.
Senator Sibbeston: My question is about the Mackenzie pipeline. In the Northwest Territories, the prospect of a gas pipeline was dealt with in the early 2000s, and the Aboriginal people, particularly in the Mackenzie Delta area, realized there was a real possibility of their involvement. They established an Aboriginal pipeline group, which is involved with the major companies that eventually came forward I believe in 2003 to propose the Mackenzie Valley gas pipeline.
Since that time, the situation has changed quite a bit in terms of the availability of natural gas, the shale gas in other parts of our country, and perhaps the price of gas has gone down. Do those factors have a bearing on whether the gas pipeline eventually becomes a reality?
Ms. Dybwad: Senator, I would have to speculate, but I do not see any other way around it. I suspect that should the licensing be given by the joint review panel and the National Energy Board, it will rest with the proponents to decide what they think the price of gas will be moving forward and given the time frame it will take for them to build that pipeline, will the gas prices have recovered by then? We saw gas bubbles before. People thought the gas price would never recover, and it did. I think that the answer is yes. If they gaze into their crystal ball and figure the price of gas will be sufficient that they will be able to make a go of it if they proceed, then they likely will. Could there be another 30 years as between the Berger report and the current review for the pipeline? Could it stand another 30 years? I do not know.
Senator Sibbeston: A few years ago, when the project was proposed, they were very interested and certain of the merits of the pipeline. In recent years, there seems to be some doubt, even in the federal government. There was a report saying that it did not seem as if they wanted to be involved in any way. What do you think has created this doubt?
Ms. Dybwad: There are two things. The price of the commodity has dropped, and the price of the project is high. I will assume that the associated toll that would be required to recoup those costs would be significant. When you add the price of the commodity and the tolling prices, you have very expensive gas coming out, so we are back to basic economics again. Why would I pay $6 MMCF for gas out of Mackenzie when I can get it for $2 MMCF from wherever else?
Senator Sibbeston: Does the same apply to the prospect of a gas pipeline from Alaska?
Ms. Dybwad: Yes, it will be expensive too, because the gas commodity price does not matter where it comes from. It is the same. There is no differential in terms of gas as there is for crude oils. You are just paying for transportation costs, and those will be very expensive pipelines.
Senator Sibbeston: You talked about the shale gas that is present in the U.S. and other parts of Canada. Is shale gas readily available? Is the technology in place to get it out of the ground and have it available?
Ms. Dybwad: As Senator Neufeld said, it is new, but it is coming along. Every shale plate is different, so it requires a slightly different technology, but they are learning as they go along.
The Chair: Dr. Dybwad, on behalf of my colleagues on the committee, thank you. It was a very enlightening presentation and a wonderful approach to the subject matter. I believe you have indicated a willingness to give us a little more information through the clerk.
Ms. Dybwad: Absolutely.
The Chair: If we may come back to you during the course of our study, we would love to.
Ms. Dybwad: I would be delighted. If you have any other questions, my colleagues are far more learned than I, and if I do not know the answer, we would certainly endeavour to find it for you. If you require any other studies and background, we are certainly at your disposal.
The Chair: I had about 100 questions, but I will refrain from asking other than for context. I understand your organization is a non-profit. Would you fit under the rubric of a think tank?
Ms. Dybwad: Some of my colleagues break out in hives if you say ``think tank.'' Yes, we are basically a think tank.
Senator McCoy: Do you prefer to be referred to as a research institute?
Ms. Dybwad: Yes.
The Chair: Are you associated particularly with big oil?
Ms. Dybwad: No, our subscribers are the federal government through NRCan, the Alberta government through the DOE, the Saskatchewan government through CIC, and the B.C. Utilities Commission is a member. We have some governments, and certainly, we have oil and gas members, the Bank of Canada, and a number of financial institutions including Deloittes, EPCOR and Enmax. We cover the waterfront.
Senator McCoy: You have conducted major electricity studies.
Ms. Dybwad: We have. As expertise ebbs and flows within an organization, we probably do not have the level of electricity expertise that we once had. I would love to bring it back; because of my days at SaskPower, I like electricity. When you start talking about energy systems, electricity will be incredibly important. It is not so much our bailiwick right now, as I say. Because of the ebb and flow of expertise, we are very much more oil sands and natural gas, with a little bit of nuclear.
The Chair: You have a little bit of nuclear?
Ms. Dybwad: Can you be a little bit nuclear?
Senator McCoy: How about a little bit radioactive?
The Chair: The only reference I saw concerning nuclear power was on nuclear emissions reductions in the production of the oil sands or the bitumen, but we did not get into nuclear as a primary energy source.
Ms. Dybwad: We have one researcher, or maybe one and a half researchers, who tinker in that area rather than it being a principal area of focus.
The Chair: Is the Canadian Nuclear Association similar to your institute, but with a focus on nuclear?
Ms. Dybwad: They are more like CAPP. They are a lobby group. We have done work in the past and continue to do work for the Canadian Nuclear Association in the same regard that we would do work for CAPP or anyone else.
The Chair: Are there any further questions, colleagues?
Thank you so much once again.
(The committee adjourned.)