Proceedings of the Standing Senate Committee on
Energy, the Environment and Natural Resources
Issue 17 - Evidence - February 8, 2011 (Morning meeting)
MONTREAL, Tuesday, February 8, 2011
The Standing Joint Committee on Energy, the Environment and Natural Resources met this day at 8:10 a.m. to review the current state and future of Canada's energy sector (including alternative energy).
Senator W. David Angus (Chair) in the chair.
[Translation]
The Chair: Good morning to you all. This is a regular meeting, although not entirely, since we are in Montreal today, in the beautiful province of Quebec. Today we are continuing our study on the current state and future of Canada's energy sector, including alternative energy.
We are very pleased this morning to be hearing from our Montreal witnesses. They are Mr. Normand Mousseau, professor of physics and Canada Research Chair in computational physics. Good morning, Mr. Mousseau. Welcome to the committee.
Our second witness is a man we know well, as he has appeared before the committee previously in Ottawa. He made a long and very interesting presentation and certainly a significant contribution to our study. I refer to Professor Pierre-Olivier Pineau, Associate Professor, Department of Management Sciences, École des hautes études, Montreal.
Our third witness this morning is Mr. Benoit Gratton, Chairman and Director of Procurement for the Cascades Group, a well-known forestry corporation in Quebec.
Benoit Gratton, Chairman, Director of Procurement, Cascades Group, Industrial Gas Users Association: Well, mainly in the recycled products area; within the pulp and paper industry, we deal in recycled products.
The Chair: This morning, we will be discussing areas for cross-Canada cooperation with respect to energy and the adoption of a collaborative approach to intergovernmental commitments.
My name is David Angus, I am a senator from Quebec and I am chair of the committee. To my right is Senator Grant Mitchell, from Edmonton, who is Deputy Chair of the committee. To his right, are our two researchers from the Library of Parliament, who assist us with our research and the preparation of our reports. Their names are Marc LeBlanc and Sam Banks.
I would also like to introduce another Quebec senator, Paul Massicotte, from Montreal; a senator from British Columbia and former Minister of Natural Resources in that province, Senator Richard Neufeld, who is an expert on the subject matter and issues that concern us; next to him is a senator from Saskatchewan, Robert Peterson, a former director of Cameco Inc., another man well acquainted with the issues of interest to us; and, another senator from Alberta, Senator Bert Brown, the only elected senator, who has considerable involvement in matters related to Senate reform, as well as extensive knowledge of the energy sector; to my left is Ms. Gordon, our clerk; the senator from the Yukon Territory, Senator Daniel Lang, who brings us a perspective on issues in the Far North, in the territories and at the international level; my predecessor, from Alberta, Senator Tommy Banks, a member of the Order of Canada and a very accomplished man. Perhaps you knew him in another life, when he was a band leader, a role he still plays, or almost, in the Senate, and he and others were actually behind the idea of doing this in-depth study of the energy sector.
You all know that it is impossible to carry out a study of the energy sector without looking at the environment and climate change, which are obviously of tremendous concern, and making the connection between the two.
We have determined that, despite the enormous resources we have here in Canada and the tremendous good fortune we have enjoyed for so long, there are some barriers between the provinces, which hinder the development of a strategic plan for an energy system that would be far more efficient, healthier, greener and perhaps more renewable.
It is therefore with that in mind that we are here this morning. We are in Quebec this week gathering the facts. Yesterday we had an opportunity to visit some large companies, including Hydro-Quebec, and talk with the Chief Executive Officer, Mr. Vandal, and in the afternoon, with Gaz Métropolitain. Last evening, we were looking at the shale gas sector with one company that is heavily involved in that area.
Professor Mousseau, I invite you to make your opening statement.
Normand Mousseau, Professor of Physics and Canada Research Chair in Computational Physics of Complex Materials, University of Montreal: Mr. Chairman, I am a physics professor at the University of Montreal and I am interested in the energy question as sort of a sideline. I do research on Alzheimer's disease, I work in nanotechnology as a theorist, and I also work on the energy issue. I have devoted several books to that topic in the last few years, including one on shale gas which came out a few months ago, and another one on energy independence for Quebec.
I cannot guarantee that what I say today will be original, because you have already been looking at this issue for some time now.
As you are certainly aware, in Canada, the system that governs our federation makes it difficult to develop a national energy policy in Canada because natural resources fall within provincial jurisdiction. The result of that is that everything related to hydroelectric power, oil and gas, wind power and so on are largely under provincial jurisdiction.
In fact, federal responsibilities in Canada are more abstract and more remote from day-to-day activities. We may not always see them, but they are there and are significant. It is also a question of economic development, something which is crucial and also falls within federal jurisdiction. Energy is at the centre of economic development, at both the local and national levels, in terms of our global competitiveness.
In Canada, the federal government is also largely responsible for funding research — in other words, mastering new technologies, something which is certainly a national responsibility. Furthermore, in some cases, federal financial support through tax measures or direct subsidies to some sectors of the Canadian economy also has an impact.
As you will have noted in our report, Canada has vast energy resources, including hydrocarbons, uranium ore, and hydroelectric and wind resources.
Clearly, resources are not always counted in this fashion, but just by way of example, Quebec's wind energy resources are estimated to be 14,000 terawatt hours, which is 150 times the amount of hydroelectric power currently produced in Quebec on an annual basis. Therefore, Quebec's wind energy resources alone represent four times the North American demand for electricity.
The Chair: And have yet to be developed.
Mr. Mousseau: They are not developed. Building is underway.
The Chair: But the potential is huge.
Mr. Mousseau: Yes, and that does not include the potential that exists in other provinces. So, when you add it all up, we have absolutely incredible resources in Canada.
Let us just say that, at the present time, Canada does not have a national policy. It is therefore difficult for the provinces to make real progress, work together and particularly manage the environmental issues associated with hydrocarbons and other energy resources.
If you build a hydroelectric dam, there are environmental costs. Developing wind farms also has environmental costs. So, it is not only about hydrocarbons, although they certainly play a very significant role in the entire energy mix.
The Chair: And, as you suggested, both of these areas, energy and the environment, fall within provincial jurisdiction. Correct?
Mr. Mousseau: And that causes problems.
The Chair: It causes problems but, as I understand it, it would not necessarily prevent the development of a federal policy on both energy sectors, would it?
Mr. Mousseau: Well, I do think there is a need to proceed with caution.
The Chair: Yes.
Mr. Mousseau: There is also the matter of research. For example, in that area, it is clear that the federal government is not doing its job. The fact is that most of the funding that should be going into research on renewable energy is currently being devoted to CO2 capture.
As far as I know, hydrocarbons are not a form of renewable energy. Also, our funding is very tight, which means that our first choice is technology.
The national energy policy during the Trudeau years caused a great deal of damage in terms of Canadian unity, particularly in Alberta, where it has had a major effect on relations with the federal government. It also prompted Brian Mulroney, when he was elected in 1984, to get rid of that same policy, which had only been in effect for several years.
The Chair: A policy or a program? I always wonder what the difference is between a national energy policy and a program.
Mr. Mousseau: It was a policy in the sense that the idea was to create Canadian energy giants and ensure Canadian ownership and control of natural resources.
There was also a program, but it was first and foremost a policy based on a direct vision that went well beyond just the details, if you will. I think that when you have a vision, it can be said that it is a policy.
Today, the energy question is not resolved. In my opinion, Dutch disease, which there has been little discussion of here in Canada, is something that may affect us as oil prices raise. We have already seen some destabilization.
Dutch disease — I imagine you know what it is since you have been on the committee for some time now — refers to a situation where too much money is invested in one sector, which then becomes too prominent within an economy, thereby destabilizing the economy of the country as a whole, and destroying other industries, as a result of inflation. Wages become imbalanced and investments flow primarily into a single sector.
The development of the oil sands, which requires massive investments and large numbers of personnel — and through the connection between the price of a barrel of oil, for example, and the Canadian dollar — we have already seen that there is a cost for those non-hydrocarbon producing provinces, including Ontario and Quebec, which are major hubs for industrial development, and with respect to which there has not really been any discussion or debate.
I believe people are aware of this, but there has been no real effort to say what should be done and if we will just wait to see whether the crisis hits or not. The situation is unclear.
Therefore, as a matter of national unity, it is critical that the federal government support the diversity and integration of different energy sources.
Once again, the federal government has pretty well put all its eggs in a single basket — namely, hydrocarbons. For quite some time as well, although that is less the case now, it also supported the development of nuclear energy, something that was funded in large part by the federal government, and therefore, by all Canadians. This is an industry which is centralized in Ontario.
However, there has been no federal support for other energy sources, such as renewable energy, where the federal government is completely absent. And, in terms of energy conservation and standards-setting, we have always trailed behind the United States.
With respect to household appliance standards, for example, they basically follow U.S. standards. The same applies to the auto sector; standards have just been announced that are practically identical to the ones in the United States.
The Chair: Is that because the transportation sector falls within federal jurisdiction, thereby requiring regulations at that level?
Mr. Mousseau: Yes. In fact, they can be at two levels. Quebec had proposed adopting automobile standards before the federal government did so. The federal government finally adopted the same standards as California.
The Chair: Yes. That is why there is no longer any consistency between regulations in Quebec, for instance, and other regulations.
Mr. Mousseau: Yes, but they are also different standards. There are energy efficiency standards, but there are other standards as well, related to wearing seat belts and so on.
The Chair: Yes. But that is one of the barriers, as I understand it. Because when Mr. Charest announces very good regulations to lower GHGs, or greenhouse gas emissions, for example, it is less than what we have elsewhere. That is what was explained to us. That may not be so, but we will see.
Mr. Mousseau: As far as standards go, we are currently adopting U.S. standards.
The Chair: Yes, across the board?
Mr. Mousseau: For the auto sector, but also in many other areas as well. And, in my opinion, that is part of the challenge for Canada: we have vast energy resources, we are a major energy producer, but at the same time, we are a dwarf in terms of our position internationally.
Canada conducts itself as if it were a colony as regards its development of its own energy resources and its international stature in the energy sector. We currently have the largest oil and gas resources of any country in the world. We can decide how to count those resources. Politically, we have decided to say: "We have as much oil and as many oil reserves as Saudi Arabia."
In fact, if we include future developments, there is no doubt that we have much larger oil and gas resources than Saudi Arabia in the oil sands.
We also have uranium and other resources and yet, despite that, Canada refuses to take a leadership role globally in the energy sector. We have no ties of any kind with any major group such as OPEC, for example. We are nowhere near the decision-making centres.
Basically, as is the case in many areas, Canada has abdicated what should be a global leadership role in development. Why? Because, first of all, we have a single-client policy: 99.7 per cent of Canada's oil is exported to the United States. It is impossible to take a global leadership role when you only have a single client because, ultimately, we are more dependent on that client than the client is on us.
Other than hydroelectricity, Canada's overall energy resources are basically controlled by private, and often foreign, interests. In other words, Canada has abdicated any role in developing its own energy industry, either directly or via the provinces. The provinces are doing no better. However, I do not want to only criticize.
The Chair: In your view, is it a total abdication?
Mr. Mousseau: It is an historic abdication.
The Chair: Is it a provincial or federal abdication, or both?
Mr. Mousseau: Both. Canada never achieved political maturity, and that reality is not exclusive to this area. Canada left the fold of Great Britain to enter the fold of the United States and, except for certain periods, we have never really had a national leadership policy. We have been content to follow.
Following the North American Free Trade Agreement, we also considerably reduced our control over oil and gas through the clauses we signed onto under this agreement. For example, Canada has no strategic oil and gas reserves. That means we have no gasoline reserves, for example. We have no reservoirs. If we were to encounter a major problem, we would have to turn to the United States for our gasoline supplies.
The United States has very significant reserves, almost one billion barrels that it has access to. Those are strategic reserves, which are for protection from a crisis. Canada does not have that.
And, because of NAFTA, we would actually be incapable of building a reserve quickly because we have to export almost 80 per cent of our oil to the United States, whatever our economic circumstances, since we have to consider Americans to be no different from Canadians, in terms of our oil exports.
At the same time, the eastern part of the country — Ontario and Québec — is very much exposed to the international oil market, despite our significant resources and oil production. Every year, we produce almost 135 million tons of oil. We consume some 90 million tons, so we should be all right, except that we export 90 million tons. That means we have to import 45 million tons of oil on an annual basis.
Furthermore, Canada does not have any energy giants. The United States has no direct energy policy, but it does have several energy giants, including Exxon and others, which manage their global energy policy. Also, Americans are very active internationally with respect to energy policy.
England and the Netherlands have energy giant Shell; Norway has energy giant Statoil, which is approximately 65 per cent owned by the government, even though it is officially a private energy giant.
Canada has no energy giants. Once again, we have abdicated, if you will, our role as a global leader. Canada has not reacted to what is the most significant energy revolution in a long time: shale gas. That has resulted in a drop in the price of natural gas today to only one quarter of the price of oil in terms of density, for the same energy. Therefore, per gigajoule, natural gas is now four times cheaper than oil. This is something that has never been see before.
The impact in Canada is huge. We saw that in Ontario, where it has just been announced that coal-fired plants will be replaced with natural gas plants, whereas several years ago, they were still talking about replacing them with renewable energy.
However, at $4 or $4.50 a gigajoule, it is absolutely inconceivable that renewable energies could be developed. Natural gas is now so cheap that nothing can possibly compete with it, other than coal. Even in Quebec, they are currently building the Romaine project at a cost of $0.12 or $0.12 or $0.10 per kilowatt/hour. Basically, natural gas is currently producing electricity on the private market at $0.05 a kilowatt/hour.
There is also the question of wind energy. Ontario had an ambitious plan, but how can you build wind farms at $0.12 or $0.15 a kilowatt/hour if natural gas is so cheap today that it is being sold for $0.05? It is impossible.
So, there has been a major upset in the energy sector in North America which affects the entire planet, and there has been no reaction from the federal government. And yet this directly affects our ability to compete for things like natural gas exports.
The United States produces more shale natural gas than it imported from Canada last year. This also directly impacts our ability to export natural gas and to develop the resource, either in Quebec, New Brunswick, Saskatchewan, British Columbia, Alberta or Nova Scotia. Almost all the provinces are affected.
Will we be prepared for the future? Most of the investments in research on renewable energy today are in CO2 capture. But the energy basket in future is going to be far larger than simply removing the CO2 from oil or from coal.
Canada has to have a presence in the renewable energy sector, not only for technological reasons, but also for the competitiveness and knowledge that go with that.
I am a physicist and researcher and this is something of great concern to me. I see that we currently do not have an intelligent federal program on solar energy, wind energy, or second- or third-generation biomass energy.
We also have very little in the way of coupled energy, such as hydro-wind, for example, something that could be done across provincial borders.
Also, the federal government has confused oil and gas production with the protection of its national consumption. Norway, which is a major producer of oil and gas said: "We are producing oil to export it. But that does not prevent us from being a green economy."
Norway has huge hydroelectric resources, but approximately 50 per cent of the energy it uses is renewable; indeed, like Quebec, only 50 per cent comes from hydrocarbons. The global average is 85 per cent from hydrocarbons.
So, nothing justifies Canada's now having a policy which defends the use of oil and gas to the detriment of other energy sources, such as is currently the case. We must set our sights on exports. The market and global demand for oil and gas is there.
If Canada decided to be completely green and not use a single molecule of oil, we could sell our entire production abroad without a problem. China is willing to take it. There is an international oil market. If we put our oil on a ship, it will end up somewhere. That is not a concern.
The Chair: But a policy like that is not green, since it involves producing those resources for export.
Mr. Mousseau: Not the production, no. I agree.
The Chair: So it's not totally green.
Mr. Mousseau: I agree. It is somewhat similar for Norway, but this is certainly something we could work on. However, I do not think that justifies the federal government's opposition to introducing energy efficiency measures for vehicles that are stricter than those in the United States. There is no justification for that. You get the sense that the federal government feels the need to defend the oil industry, saying that we need it and that it has to be used here. Unlike Venezuelans, Canadians pay the world price for oil. By defending oil and Canadian use, in actual fact, the federal government is not defending Canadians or protecting them from high prices. And that, too, is serious: to support an industry, the government is prepared to make Canadians pay, rather than protecting them by developing infrastructure, reducing energy consumption or co-funding public transit, for example.
We could set vehicle standards that are similar to the ones in Europe, for instance, as opposed to the U.S. standards, while at the same time moving towards a decrease and protection for Canadians' buying power. That is not something that we are doing currently. We have to target exports if we want to produce this energy.
The federal government has levers that do not infringe on provincial areas of jurisdiction: investments in research, transportation standards, energy efficiency standards, support for a transition to clean energy, and a carbon tax. The only way to control something is to put a price on it, but that is what you have to do.
In terms of support for the renewable energy sector, it may be time for the federal government to support something other than oil and gas through direct and indirect tax measures, as well as through direct funding. Hydroelectricity has received zero support from the federal government. Why, then, has the nuclear industry received, and does it continue to receive, billions of dollars?
Ontario says: "We would really like to have nuclear power plants to replace the old ones, but in order for that to happen, the federal government has to pay". Therefore, the federal government — in other words, all Canadians — is paying to build nuclear power plants, even though that is not the case for other energy sources.
I also think that Canada must become a major international player. That is not easy because it does require a major change in federal policy. It is absolutely critical that the government play its role in that area. That means developing a new approach to clients. It means significant diversification of our client base so that we are not dependent on the United States in terms of the energy question, because this has far too much impact for Canada to simply agree to be the servant of the United States.
We must protect ourselves. I would say that a national energy policy is essential in order to protect Canadians in a highly volatile energy market, to enable the development of a diversified basket of energy offers and to keep Canada moving towards the production of greener energy. While China, Korea and other countries were investing astronomical sums of money in green energy through their economic stimulus plan in the midst of the recession, Canada was content to build roads and bridges and to invest in buildings, without putting any money into green energy development. And that is a loss.
As a result, we have already fallen behind compared to our competitors, and that continues to be the case. At this point, we are not even treading water; Canada is actually regressing, and that is an untenable situation, in my opinion.
The Chair: Mr. Mousseau, we completely understand your perspective. I would simply like to mention that the Senate is part of the federal system, and that a major part of our mandate, as independent senators, is to protect, promote and defend provincial interests. That is exactly why we showed some leadership in initiating this study, because we were aware of the situations you have just described. We are engaging in this dialogue with all of you in order to raise these important issues. At least that is a small beginning.
Mr. Mousseau: Yes. I recognize that this was not particularly original.
The Chair: Thank you very much for your presentation. Rather than moving to questions immediately, I would like to hear the presentations of all our witnesses. Professor Pierre-Olivier Pineau, I would invite you to now make your opening statement.
[English]
Pierre-Olivier Pineau, Associate Professor, Department of Management Sciences, HEC Montréal: Thank you very much. I decided to speak in English because the first time I appeared before the committee last April, and I spoke in English, so I decided to just to continue in the same vein.
Thank you for inviting me again. Congratulations on your interim report, I enjoyed it very much. I think it was a great report, and I am looking forward to the final report.
I will be briefer than last time I appeared, and briefer than Professor Mousseau, because I am not sure I have much more to add to what I already presented. I have a few slides on Pan-Canadian energy collaboration, which is an extremely important issue and right on the topic.
I have three main points. I believe there is an appetite for collaboration in Canada, and I will back that with a few examples of many groups that want to have more collaboration. I also think the federal government can take the lead. That is a key point that we have to remind everyone, and I will bring back some examples that Professor Mousseau already mentioned. However, there are challenges, and if we want to overcome these challenges, it is extremely important to understand what these challenges are and the barriers to more collaboration. My last slide, I will speak a little bit about on these barriers to more collaboration in Canada.
First, on collaboration, many groups in Canada are working toward more collaboration on a Canadian energy framework or even a Canadian energy policy. I have a slide with a list of groups, many think tanks, but also energy groups or energy associations. Even Natural Resources Canada alleged in 2005 that more electricity transmission in Canada for increasing trade would be beneficial for everyone.
It is very important that the Senate, your committee, is aware that achieving collaboration relies on many groups and people, so that you can bring them on board and have many allies to count on.
More recently, the David Suzuki Foundation, the Canadian Academy of Engineering and the Trottier Family Foundation have launched a project called the Trottier Energy Futures Project, which will study Canada as a whole to identify which energy systems to implement. Their engineers are very involved and the David Suzuki Foundation is very involved, the idea being to have an overall framework for energy for Canada.
That goes directly with the Winnipeg consensus that you have probably heard about, which is an initiative from Alberta originally but captures everyone in Canada, and they also want a Canadian energy framework. When you have groups as diverse as the David Suzuki Foundation and the oil producers in Alberta calling for a Canadian framework in energy, I think we have a source of hope that we can achieve that. Even though there are difficulties that I will mention later, Canadians want that kind of coherence in the energy sector.
The federal government can play a big role there. I will bring the Canadian Agreement on Internal Trade, AIT, back on the table. I already mentioned it when I came in April, but there have been some developments. If you recall, the Canadian Agreement on Internal Trade is monitoring internal trade in Canada, and energy, of course, is one of the sectors in which we have trade. However, that chapter is empty in the AIT. Basically, there are no rules governing energy trade within the AIT in Canada.
In January of this year, a draft chapter was written, and we have to make sure that this chapter is actually bringing more trade in energy, especially in electricity, into Canada. I will repeat myself, but if we want to better allocate energy resources, we will have to trade more across provinces so that hydro from hydro-rich provinces can flow into hydro- poor provinces, and then they will rely much less on coal and natural gas to produce their electricity. That would be a win-win situation; everyone would make more money. Basically, we would improve the wealth of everyone if we were trading more, especially in electricity.
The Chair: Just on this recent chapter, did that come out of the meeting of all of the provincial energy and resource ministers that took place at the World Energy Congress, or is it something different?
Mr. Pineau: It is actually not totally transparent how it came out and, actually, I have not read the draft chapter. I do not think the draft chapter is public.
The Chair: Who writes it?
Mr. Pineau: It is probably delegates from these energy ministries across the provinces. They have a website where I get my information. I am not an insider; I just look at it to see if there is any progress. There should be more focus on this kind of initiative, so that we can actually put pressure in the fact that there is more progress.
We are currently negotiating a free trade agreement with the EU, but we do not have free trade in Canada. It makes no sense that we are negotiating with other countries when we do not have free trade in energy across our provinces. This is a key issue: Free trade in energy inside Canada is a fundamental piece of the global framework. We cannot have a Canadian energy framework if we do not trade energy freely across provinces.
The Chair: It is not just energy either; it is many other products.
Mr. Pineau: Absolutely. Labour is another issue, but the committee here is on energy, so that is why I focused on that. The federal government can actually put a little more pressure on that kind of initiative.
Professor Mousseau also mentioned regulatory issues for gasoline consumption of cars, I will come back to that. Environment Canada, in their analysis on the cost benefits of the new rules, the new emission standards for cars, showed that the benefit of implementing the current standards were three times greater than the costs. Basically, by having these really weak standards that we have, we will make Canadians three times richer than what they actually will have to pay to get to the better technology.
The question I am asking is why the Canadian government is not implementing stronger standards, because there is still money to be made in implementing stronger standards. Environment Canada showed, in their cost benefit analysis, that the energy savings that will come from the more strict regulatory standards in consumption will bring benefits. We can get more benefits there, more money. We have to be reminded of that again, that saving energy, consuming less energy, will make Canada richer.
The Canadian government could take the lead on that transportation issue and say, "We will go beyond what the Americans are doing; we will look at the EU, and the reason for that is that we want to make Canada wealthier. We want to help Canadians save money." As individuals, sometimes Canadians do not always realize some computational failures, namely, that by paying a little more for a more efficient car, they will save much more over the usage of the car. There are more ways to save money, and if we want to make Canadians stronger, then sometimes we have to help them a little by implementing regulations that will help them make good decisions.
That does not prevent the Canadian government from implementing a carbon tax in addition and many more market incentives, but sometimes relying on regulation is acceptable. We do rely on regulations. Therefore, why not rely on stronger standards to actually help everyone?
The last point I want to discuss is the obstacles for these reforms and how we can get more collaboration among Canadians. One of the biggest groups that will have a hard time seeing more electricity trade, which is a key piece of the pan-Canadian collaboration framework, is consumers having access to cheap hydro. We see that in Quebec; there is a very strong resistance to having a price increase. We cannot start trading electricity if we keep low prices in Quebec. The same thing applies to British Columbia and Manitoba. They will not accept a higher price easily. However, there are ways to increase prices in such a way that people will accept the changes.
I will point out the Iranian example. I know Iran seems very far away and does not seem to be an example for us, but, in December, they increased their gasoline price four times. They said, "We will remove subsidies in gasoline in Iran," so the government decided to increase the price of gasoline four-fold in one day. At the same time, they sent the equivalent of $80 directly to all Iranians' bank accounts. They told the Iranian population that they will send that amount of money, these transfers, every two months to everyone.
That is an example of a very bright economic approach to increase the price and ensure that people are accepting, namely, by making equivalent transfer payments to the consumers or to the whole population in such a way that they will not complain. That could be done in Quebec, Manitoba and B.C. People will actually accept paying higher electricity prices if, in return, they receive a direct payment. Alberta, to some extent, did that at one point in the past when the price of natural gas was high; there were some transfer payments. People will accept paying a little more. There are innovative ways to change policies in such a way that we basically change a system. We have to be creative, and if Iran can be creative, I think Canada can be creative.
That is the first resistance; we have to overcome this barrier to change. If more hydro electricity is freed by efficiency measures in Quebec, Manitoba and B.C., then there will be more electricity flowing into Alberta, Saskatchewan and Ontario, and producers in these provinces will not be happy. Alberta's electricity producers will not be happy having a lot of BC Hydro, cheap B.C. imports. Therefore, we also have to manage these resistances. We have to make sure these producers find ways to not lose too much. I do not have a very good solution for that. They will have to accept that business is changing and, with more trade, they will have to face more competition, and if they have higher costs, then they will sell less.
However, we have to realize that although Alberta and Ontario have a more deregulated electricity market, they will not be happy if more trade comes from other provinces. There is a paradox: They have more internal trade and a more competitive system, but they do not welcome trade from other provinces. We have to be aware of that.
In addition, because the global change will result in consumers using less of their products, we will have to ensure that the suppliers of refined petroleum products do not block any of these changes. There is a lobby for having low-efficiency standards for cars.
The reason the federal government did not implement stricter standards on vehicle efficiency is because of the automobile industry and, to some extent, maybe the refined petroleum products industry. We have to consider that and realize that some other groups are not as powerful and not as well represented. The global interests of Canadians have to be maintained, and we should implement stronger standards, even though there is no strong lobby behind these stronger standards.
I tried to be brief. I will stop here, and if you have questions, I will be happy to answer them.
The Chair: Thank you very much, professor. That was very interesting, and I am sure we will have questions. I already have a long list of senators.
[Translation]
We will move on now to Mr. Benoit Gratton, Chairman of the Board of the Industrial Gas Users Association and Director of Procurement for Cascades Inc., a multinational company that produces packaging and fine paper products. I believe you sent us your two documents.
Benoit Gratton, Chairman of the Board, Industrial Gas Users Association, Director of Procurement, Cascades Group: You received both documents — the brief as well as the SlideDeck PowerPoint presentation.
The Chair: Great. Please proceed, Mr. Gratton.
Mr. Gratton: Thank you very much, Mr. Chairman.
[English]
I will give my presentation in French for the most part, but for everyone's convenience I have provided you all with the PowerPoint presentation and the transcript in both English and French. I will gladly answer any questions at the end, in either English or French.
[Translation]
It is an honour for me to appear before you this morning to present our energy vision as an industrial consumer, but also as the representative of a Canadian company that has demonstrated its leadership in sustainable development since 1964.
I am passionate about energy and my entire career has been centered around energy for the past 22 years. As early as 1988, I was already working on a project to convert urban bus engines to natural gas at l'École polytechnique in Montreal. I have been responsible for energy procurement at Cascades since 2002.
Cascades is a Canadian company whose head office is located in Kingsey Falls, Quebec and that employs nearly 12,500 people who work in some 100 production units worldwide. Cascades specializes in packaging and tissue products composed primarily of recycled fibres.
The Chair: Just for the benefit of my colleagues from other provinces, could you tell us where exactly Kingsey Falls is located in the province?
Mr. Gratton: Kingsey Falls is located midway between Quebec City and Montreal, approximately 50 kilometres south of Drummondville.
The Chair: So, it is in the Estrie region?
Mr. Gratton: Yes, in the heart of Quebec.
Some of the products that Cascades manufactures are tissue paper, toilet paper, paper towels and hand towels, cardboard and corrugated packaging, specialized papers, such as security paper, as well as all kinds of packaging.
Like other players in the pulp and paper industry, Cascades is a large consumer of energy, mainly electricity and natural gas.
My work at Cascades has led to my involvement in the Industrial Gas Users Association or IGUA. This association, whose head office is in Ottawa, represents the interests of large gas consumers in Quebec, Ontario and Manitoba.
I am currently chairman of the board of the IGUA, which represents approximately 35 member companies. Part of our mandate is to ensure that the conditions associated with the transportation and distribution of natural gas are fair and, to that end, we make representations to regulatory bodies such as the Régie de l'énergie, the Ontario Energy Board and, naturally, to the National Energy Board at the federal level.
I am particularly pleased to see that a Senate committee is concerned about energy. Indeed, energy has had a lead role in economic development for more than a century now, and here are the reasons why.
First of all, low energy costs attract or retain manufacturing companies. These companies are often the engine of an entire economy that develops around them. We need only to think of the construction of plants, of housing for employees, and the service-oriented companies that develop around these mills to meet the needs of employees, as well as the taxes paid that all of society benefits from.
With automation and energy, plant productivity rises, which improves the quantity of goods produced or exported, thereby generating more collective wealth.
However, you will not find me to be an irresponsible user. If it is true that energy engenders economic prosperity, wasting it or using it badly is simply out of the question.
Page 5 shows you carbon emissions from 1980 to the present. Carbon emissions from the use of fossil fuels have risen steadily around the planet for decades. While the trend has been improving for the past few years in industrialized countries, the same cannot be said of emissions in Asian countries, which are growing at an alarming rate.
We must reduce our use and use all available energy more efficiently. I believe the clerk also distributed a page that shows total carbon emissions worldwide for the different countries. Canada is in seventh place. And just about every country in the world has succeeded in lowering its carbon emissions. China, on the other hand, as we can see on the chart, saw a 13 per cent increase between 2008 and 2009, and emissions are continuing to grow.
On page 6, I would like to come back to Cascades and tell you about what we have been able to do and how we have done our share to reduce carbon emissions.
Since 1964, Cascades has continually innovated in terms of sustainable development, and that is still the case today. Cascades is interested in the three components of sustainable development: social, environmental and economic.
On page 7, you have information about our paper manufacturing processes, which use mainly recycled fibres, thereby avoiding the use of no fewer that 37million trees annually. The trees that are saved therefore continue to absorb CO2 and compensate for a portion of gas emissions produced by burning fossil fuels.
Cascades has succeeded in reducing its consumption of water to only 10 cubic meters per metric ton of paper produced, which is six times less than the Canadian industry average. Finally, because the beneficial use of waste is an integral part of our corporate culture, we also reclaim our mill residue, in order to limit to the greatest extent possible the amount of waste sent to landfill sites.
On page 8, we talk about the fact that, since 1998, Cascades has innovated by setting up an energy action group made up of engineers who work full time to improve energy efficiency in our mills. Among its achievements, are heat recovery, reduced water consumption, improvements to lighting, and improvements to building enclosures as well as heating, ventilation and air conditioning systems.
Several years later, Cascades created a power income fund, which has grown over the years by reimbursing investments from the savings generated by the mills that use it. All of this has been done internally, without outside subsidies.
The Chair: Do you provide incentives to your employees in order to encourage this kind of success?
Mr. Gratton: Yes. Efficiency is part of our corporate culture. We have a number of tools for promoting efficiency, including publicity and employee appreciation awards, and this is something that all our employees feel very strongly about.
The Chair: What you have achieved is very impressive.
Mr. Gratton: Thank you. Page 9 briefly discusses the development of new forms of energy.
There is no doubt that Canada is a major player in developing traditional energy sources. What is less visible and needs to be developed is skill and innovation in such areas as energy efficiency and new and green energy development.
At the same time, we must proceed with caution. These new energy sources will not be in a position to replace all other forms of energy overnight. New types of energy are often costly. And when the high cost makes Canadian industry less competitive, there is a danger that companies will leave Canada and relocate somewhere where energy is more affordable.
At the same time, some projects are highly cost-effective and should be encouraged. However, we must begin by making better use of our energy.
The Chair: That is very interesting. We have witnesses, both here and in British Columbia who —
[English]
They say to us that green management and production policies go right to the bottom line and that the big incentive, of course, is —
M. Gratton: Is the savings we get from it.
[Translation]
The Chair: Is that something that you have observed?
Mr. Gratton: Yes, absolutely.
[English]
The Chair: It is a big driver of your policy.
[Translation]
Mr. Gratton: Yes. We should point out that, at Cascades, we say:
[English]
"We were green before green was trendy."
[Translation]
And that is the corporate philosophy, in a way. I should also point out that the Lemaire brothers started the company by going to the dump and taking out the waste that could be reclaimed. That is how they gradually became involved in paper recycling and paper production with used materials removed from landfill sites.
[English]
The Chair: He refers to the Lemaire brothers, they were the founders and are the principal shareholders, although it is a public company now.
Mr. Gratton: It is a public company, but they still own some 30 per cent of the shares.
The Chair: Yes. Therefore, they were visionaries in this hearing.
Mr. Gratton: Absolutely.
The Chair: Thank you. Continue, please.
[Translation]
Mr. Gratton: An enormous amount of energy is released in the form of heat by all nuclear and thermal power generation plants. Yet at the same time that we are wasting that energy by releasing it into the air and water, there are hundreds of homes and businesses a few kilometres away that are burning fossil fuel for heating.
Refrigerated warehouses and dozens of other industrial users simply release that surplus heat, even though that heat could be used for heating water or air. Finally, energy must be at the centre of new urban development in terms of the movement of hot and cold air, transportation optimization, and so on.
One final example of more efficient energy use — and Mr. Pineau referred to this earlier — is natural gas used to produce electricity in Ontario with overall efficiency of 50 to 60 per cent at best, which could replace electricity in Quebec as a heating source using equipment that has an efficiency yield of more than 92 per cent. The hydroelectricity that is saved, this noble energy, could then be used in Ontario or elsewhere.
On page 11, you have several examples of how recovered energy is used at Cascades.
First of all, approximately eight kilometres away from the Cascades Rolland Fine Paper Mill in Saint-Jérôme is a landfill site owned by Waste Management. The waste decomposition process forms methane, the same CH4 molecule that is the main constituent of natural gas.
Cascades has reached an agreement with Waste Management and Gaz Métro to recover biogas at the landfill site, bring it to the plant and recover that energy by using it as heating fuel. Cascades has been doing this since 2005 as a way of replacing natural gas. There is a dual impact: we reduce our consumption of gas and avoid releasing methane emissions into the atmosphere. Methane is a greenhouse gas with 21 times more impact than CO2.
Along the same lines, we had a plant located near a waste incinerator in the Toronto area. That incinerator was releasing huge amounts of heat every year, while at the same time, we were consuming huge quantities of natural gas to produce our paper. So, we installed a steam supply line which carries the heat from the incinerator to our production plant. We have a similar facility in the Vancouver area as well.
Finally, in Kingsey Falls, Cascades became a pioneer in the energy field by installing a cogeneration plant back in 1991 which was producing electricity with natural gas and using waste heat to dry paper in three of our mills. As you can see, there are ways to make better use of our energy while at the same time enhancing business competitiveness and protecting the environment.
On page 12, we ask the following question: should we be promoting programs that subsidize energy efficiency?
Unfortunately, these programs have not always proven to be effective. They have been costly to administer and have occasionally helped users that would have undertaken similar projects in any case. Also, they have sometimes encouraged projects that made little sense, being based on too lengthy a period before some return on the investment.
For example, Quebec's Fonds Vert has cost Cascades and Boralex almost $1 million a year since 2008. That is $3 million that we have spent on that fund which would have greatly benefited our plants, had we been able to invest it in our own energy efficiency measures.
We must avoid mixing energy costs with social programs. At the beginning of our presentation, we showed the importance of energy costs for our global competitiveness. Any special charge imposed on energy users to support social programs automatically reduces our competitiveness and, in turn, the number of mills and jobs, and our ability to pay part of the government's social costs. It is therefore essential to keep the two budget lines separate and to help those in need using actual government revenues.
In closing, page 13 presents information about our main infrastructure for natural gas transportation, the TransCanada pipeline.
For several years now, we have seen a substantial increase in natural gas transportation costs in Canada. Transportation and distribution costs in Quebec and Ontario can represent as much as 50 per cent of total gas costs for an industrial user.
The TransCanada pipeline network has a capacity which is almost twice what is required to meet current and expected requirements. In the private sector, overcapacity leads to reduced capacity and eventually a write-down of assets.
TransCanada continues to have end-users absorb all of its costs, including a rate of return on redundant assets. The only way to put an end to this practice is to participate in public hearings at the National Energy Board.
The IGUA is the only group that represents end-users of natural gas. It has a limited budget, unlike TransCanada pipelines, which includes representation costs in its rate base.
There is a cost recovery method available to provincial participants which allows the IGUA to recover its representation costs. Your support for a similar system at the federal level would be greatly appreciated, and enable better development of gas transportation systems in Canada.
In closing, I would like to thank you for your attention and remind you that energy is a major issue for industrial users. We are at your service should you feel we can be of assistance in guiding your choice of energy strategies for this country.
The Chair: Thank you very much, Mr. Gratton. That, too, was a very helpful and impressive presentation. Your company seems to be a leader in the field. That is wonderful.
We are now going to start the question period. I have a list of senators who are interested in asking questions and I will proceed in the usual manner, with the first question from the Deputy Chair.
Senator Mitchell: I would like to thank all of you very much for your presentations. They were most interesting, I appreciate them and I know that all my colleagues did as well.
[English]
My first question is to Mr. Gratton, but everyone can comment. One of the big controversies about dealing with climate change is that it will have negative economic consequences. There is lots of evidence that it will not, but there is lots of belief that it will. Your presentation of the experience of your company directly confronts that, that actually dealing with emissions of all kinds and efficiencies is good business. It clearly applies to your industry.
Could you comment more generally on how it would apply to other industries, as well? Could you also comment — and this is more difficult to grasp — on whether there are consequences for certain industries over other industries? Do you think it applies universally — certainly to manufacturing industries? What happens to the energy, the oil industry, for example, from my province?
Mr. Gratton: I believe energy efficiency would benefit all Canadians, and not only specific sectors. For example, with the waste heat recovered from the incinerator, the incinerator sells us that waste heat. We pay them, and they get more wealth out of it. At the same time, we reduce our own green house gases. Therefore, it pays both ways.
At the point that all the industries will be able to get value for their waste heat streams to other Canadians who need heat, sometimes low quality heat that is required to heat commercial buildings or even houses, we will create value by using that. Secondly, in regard to the Canadian economy and the value of producing and exporting oil or natural gas, I think that demand for both of these energies has been growing over time.
The Chinese, just last year, superseded the United States in the number of cars sold in one year; and still over a billion Chinese people are waiting to get their own cars. I think the demand for oil and gas will continue to grow, and we are not jeopardizing the production industry by being more efficient with the consumers.
Mr. Pineau: I would just underscore the fact that in Alberta all the oil sands producers are extremely active in energy efficiency because they want to reduce their environmental impact. We do not have to sell them energy efficiency issues because they are improving on these aspects all the time.
We need to decrease oil consumption, and over the next few years, I do not think it will happen. Therefore, we should do all we can to decrease our consumption. The core business of the oil producers will be affected if we move toward smaller cars, more car sharing and more public transit. We have to do that for the benefit of society. These companies will not be able to sustain the growth they want and the profit level they want if we actually do what we need to do to shift our transportation and mobility habits toward what we need.
It is true that that industry, over the long run, will suffer. However, there will still be a need to produce oil, and although it will decrease over the next 40 years, we will still need to have oil. Alberta will still sell a lot of oil even though we are moving toward less and less oil because it is there, reliable, safe and secure, and there are many arguments for production in Alberta.
Mr. Mousseau: I would say as a physicist and the head of Calcul Québec, which is the super computing group in Quebec, I would dispute your first statement that there is no evidence for global warming. All models are showing there is indication for global warming.
Senator Mitchell: No, no. I believe there is evidence for global warming, believe me.
Senator Neufeld: I think you have the wrong guy.
Senator Mitchell: You misunderstood. Absolutely, I believe there is a global warming. I do not believe that fixing it will hurt economies is what I thought I was saying and what I meant to say.
[Translation]
The Chair: He said there are others who have doubts.
Senator Mitchell: I do not think there will be a negative impact on the economy if we try to fix the problems associated with climate change.
[English]
In fact, I believe fixing climate change will stimulate the economy.
Mr. Mousseau: I would agree with that statement.
Senator Mitchell: Just to follow up a little further, in practically every hotel that I have stayed at outside of Canada and probably outside of North America, I walk in the door and put my key card in a slot right by the door. Until I do that, none of the lights go on, nor the air conditioner; there is no power. When I walk out, I take it out, and they all go off.
It seems to me that that is free money, yet every single hotel I have ever stayed at in Canada does not have that, even brand new hotels. It is not even a question of converting it with a brand new hotel. Why do we not do that here? Is it because the power rates are so cheap that it does not pay to put this extra little technology in the door? What is it about our attitude toward this? With big corporations, it could save millions of dollars.
Mr. Gratton: I think it is more a matter of culture than a matter of cost. We could even have those devices at home.
Senator Mitchell: Yes, that is right. That is exactly it.
Mr. Gratton: That would be very easy. A few years ago Hydro-Québec did not have switches for the lighting at their head office.
The Chair: You mean it was always on all the time.
Senator Mitchell: The question of how we should deal with greenhouse gas emissions most effectively, I ask everyone, and I asked you unofficially, but now I will ask you officially. First, do you believe we need to deal with greenhouse gases? Second, on emissions, do you believe that we should price carbon, and if so, what is the most effective way to price it?
[Translation]
Mr. Mousseau: One of the global realities is that oil production is stagnating and has been for several years now. So, if we want to avoid an explosion in prices, we have to reduce our consumption so that we have enough oil to meet demand.
It is not so much a matter of our running out of oil; rather, the problem is that production is becoming increasingly difficult to guarantee. And part of the issue is obviously greenhouse gas emissions. This is not just an economic issue; we have to do it.
There are two ways of affecting people: of course, there needs to be education, but at some point, you also need to ensure that prices reflect the position and values. If prices do not reflect the values, it is extremely difficult for people to maintain long-term action. For example, if you can use your car to go downtown and it is far more economical to do so, rather than taking public transit, you will use your car.
So there has to be a cost put on it. The most obvious way of accomplishing that would be through a tax on carbon, which is the easiest thing to calculate for both governments and industry. It is much easier to see where you are going when prices are clearly established.
At some point, there has to be stability and a way of predicting what is going to happen in order to make decisions about investments: some investments may be very important, and if you are not sure they will be cost-effective, you will not make them.
As far as I am concerned, introducing a tax on carbon in that context, both in order to reduce greenhouse gas emissions and to protect ourselves from increased oil and gas costs, particularly oil, is absolutely essential.
[English]
The Chair: Does anyone else want to answer that?
Mr. Pineau: I believe we need to reduce greenhouse gases, and even if we do not believe in climate change, there are many other good reasons, all the economic reasons, the congestion, the productivity losses in cities, accidents and obesity trends. People have to be more active if they walk or cycle or just take the bus. There are correlations in all these issues. Therefore, just for the health and wealth of society, we need to act even if we do not believe in climate change, which actually I do believe in. All the reasons are for action.
I am also in favour of a carbon tax, but even without a carbon tax, we can do many things. The building codes in Canada are not good, so we need to have much stricter, more rigorous building codes. The federal government can take a lead there, and provinces have to follow. In transportation, we can do much without a carbon tax by just providing alternatives.
As Professor Mousseau said, if you have good bus routes going downtown and covering many areas, people will take the bus. All the municipalities, all the cities in Canada complain that they do not receive the funding for public transit. That is not a climate change issue. It is part of it, but if we would fund more public transit, everyone would gain. Companies would be more profitable because labour could come more easily to their offices.
Therefore, all the reasons are for action. I would love a carbon tax, but it is not needed. We do not need to have a carbon tax to act and have a huge impact. It is really buildings and transportation, those two main sectors, as well as electricity. If we deal with more trading on electricity, better building codes and more public transit, even without a carbon tax, we can actually achieve more. If we have a carbon tax but do nothing with respect to building codes, trading electricity and improving public transit, then people will pay the tax, continue business as usual and nothing will change. The carbon tax, actually, would be a bad idea if we do not do these other things that are needed.
Senator Mitchell: Professor Pineau, you mentioned the importance or advantage of east-west trade in electricity. I have often thought that in Alberta, for example, I can buy alternative energy from Bullfrog Power Inc. in Southern Alberta, a long way from my home. They feed it into the grid, and then somehow virtually it would get to me; I might pay a little more for that, perhaps.
It would be possible to do the same thing. Someone in Saskatchewan could decide that the power is cheaper in New Brunswick and buy it from there. Why not? All these companies that argue about this say that they want to be competitive, that they have to be competitive and not to give them more costs. Therefore, let us be competitive. Let me buy it anywhere in Canada, and then we will find out where the lowest costs are. Their reply would be that, no, that would be too expensive, that we could never do that. Is it too expensive to do an east-west grid?
Mr. Pineau: I am not a big advocate of an east-west grid, but definitely we — Quebec — should have more ties with Ontario, and Ontario with Manitoba, and B.C. with Alberta. There was an initiative from Quebec to be involved in New Brunswick. That was a win-win situation. Hydro-Québec wanted to buy NB Power for all good reasons — economics, environment — but the politics were such that it could not be sold. Also, it was a communication disaster. I do not know who advised the premier in New Brunswick, but it was a catastrophe in how the project was presented to the people of New Brunswick. Hydro-Québec and NB Power wanted to make that deal because it made sense; it was good economics.
I am not saying that Quebec should try to sell electricity to Alberta. I am just saying that regionally there are many good trades to be made that are not made in which everyone would win. We are not active enough in reaching that goal.
Mr. Gratton: The infrastructure was built in North America according to the population. The grid is basically built on the West Coast, from south to north or the opposite, and on the East Coast. That is why there are not many links between Eastern North American and Western North American available to float the power from one side to the other.
However, there is a lot of possibility from north to south. Currently, there is a lot of trading between Ontario and the United States, Ontario and Quebec, Quebec and the United States. It is the same on the other side of the country between Alberta and B.C., B.C. and the State of Washington, down to California. It is currently traded at the capacity of the infrastructure, the network.
Senator Lang: Professor Mousseau, I was wondering if you were aware of the federal government's $500 million green fund. I believe — and correct me if I am wrong — that it was set up under Canada's Economic Action Plan. It is monies that are being made available across the country for renewable types of energy technologies and installations.
In our case, in the Yukon, we were very fortunate. We accessed $80 million to go ahead with a $170 million addition to our grid for renewable resources with our hydro. It tied in the grid plus it increased our hydro capacity.
You stated that there was no policy by the Government of Canada to fund renewable resource projects. Have you no knowledge of the green fund?
Mr. Mousseau: That is really a drop in the bucket compared to the amount of money that has been spent. In that sense, to me, it is almost nothing. I agree, it is $500 million, but it is really nothing when you look at the billions of dollars that were spent on road infrastructure, for example, in the last two years and all types of projects. It is barely a stadium in Quebec, a bit more, but not much.
I agree that this money is there, but it is just a small add-on. When you look at South Korea, it was a significant fraction of the total amount of money that was put there.
Senator Lang: Well, it is not a drop in the bucket back home. It is very significant to the rate payer and to our economic future where I come from in our great country, in which we are so fortunate to live.
On a point that Professor Mousseau made — and perhaps the other witnesses can comment — you talked about the dependency of our oil and gas exports being made available to one buyer, namely, the American market. I believe we supply 70 per cent of the energy requirements for the United States currently, between hydro, oil, gas and all other exports. I think the figure is 70 per cent. It is very high. Fortunately for us, they buy it because we would be in a lot of trouble if they did not.
You talked about diversifying the economy, and I believe all of us around this table would be in favour of diversifying our economy and looking for new customers.
An application has been put forward to build a pipeline from Alberta to British Columbia, to export oil to other countries, and it would also maybe provided a port to export our liquefied natural gas, LNG. I would like to hear your comments. Do you think that we, as the federal government and the provinces, should be supporting such an initiative if it meets our environmental responsibilities?
Mr. Mousseau: Yes and no. One of the factors is that this industry is already extremely profitable. I think it should be supported, but I am not sure it should be funded.
Senator Lang: I did not say funded.
Mr. Mousseau: I think it should be supported. Canada should have a direct policy of diversifying its consumer base to be able to take a real lead. As long as we depend on a single consumer, we cannot do that. It is essential that we move in this direction.
The Chair: Do you have any comments?
Mr. Gratton: Before exporting energy to other continents, if we can have an edge and use that edge to be more competitive, we would be better off putting more money into our industry, developing what we can develop with that energy, which is the raw material of several industries.
Mr. Pineau: The energy sector is very important in Canada, but we should not overstate and not think Canada is primarily relying on energy or even natural resources. These sectors are very important, but Canada's economy is really a service economy. If you look at the statistics, I do not have exact ones in mind, the majority of the GDP in Canada is the service industry. We do have a lot of business in energy, but it is not as big as the energy lobby would like Canadians to believe.
In The Globe and Mail this weekend, there was a section on Canada and oil, and the importance of oil in the Canadian economy. It is not as large as they want us to think. Even in Alberta, it is not as dominant as some people want us to think. I am not saying that we should ignore that sector, but we should not think the Canadian economy is only energy.
We should export; but all these projects that you mentioned would be more accepted if we had a strong energy efficiency and conservation policy in Canada so that we can be legitimate to citizens when we tell them, "Yes, we do export, but we are leaders in terms of energy consumption." As long as we are not exemplars in our consumption, then people will doubt that these projects are very good, because they will just be sold as more consumption. We have to be credible in our policies.
Senator Lang: On a different issue entirely, Mr. Gratton, I want to say that I appreciate your observations as a company and what you have done. Obviously, what you have done has not only met your green objectives, it has been economically positive for your company in the long run. You could stand as a model for many other companies in not asking for subsidies but proceeding and making innovative changes so that you can meet your bottom line.
The Chair: You know, senator, that we have a saying here in this province, "Québec sait faire" — Quebec knows how to do things.
Senator Lang: Your final observations had to do with the National Energy Board, and it was a very concrete suggestion. Have you appeared before the National Energy Board to voice your concerns about the TransCanada Pipelines Limited and what they charge? If you did appear, did you get any results, and did you request compensation for the cost of appearing?
Mr. Gratton: We are currently on a five-year agreement. We are on the last year of that agreement. This agreement, according to TransCanada Pipelines five years ago, was supposed to bring tolls in the range of $1.00, $1.01, $1.02 per GJ transported over the pipeline.
The revised request for interim tolls for 2011 is currently in the range of $2.22.
Senator Lang: That is twice the amount.
Mr. Gratton: It is more than twice the amount. There is a huge problem with TransCanada Pipelines, namely, that is the system is just overbuilt. If you continue to pay for an overbuilt pipeline, then you pay twice as much as you are supposed to pay.
A total rearrangement of the rates is required. Of course, if I was in the shoes of TransCanada Pipelines, I would not change a thing because I am entitled, as TransCanada Pipelines, to earn revenue on every dollar of my assets. Therefore, I would not want to write down my assets.
This is why that needs to be debated in front of the Ontario Energy Board, OEB, and we are currently not allowed to receive any money for our appearance at the hearing.
Senator Lang: You are not allowed? Have you requested it, and they have said that they do not have the legal authority to provide that, or they just do not want to provide that?
Mr. Gratton: Yes. There is something new in the law since 2010 that would allow the National Energy Board, NEB, to provide cost-recovery. However, so far, the OEB has said, "It is in the hands of the government, and the government should force us to give you back that money."
Senator Lang: What is OEB?
Mr. Gratton: Sorry, not OEB. NEB, sorry, the National Energy Board.
Senator Lang: What magnitude of dollars are we talking about?
Mr. Gratton: For this rate case, for a five-year rate case, we might be talking about $300,000, $400,000. That is for expert witnesses who we must bring to the table to show how a better model would work, for the lawyers who we need to bring in and the preparation of everything for that case.
Obviously, it is extremely difficult for 35 members to carry that on their shoulders on behalf of the entire population.
Senator Banks: Thank you, witnesses. It is nice to see you again, Mr. Pineau.
Professor Mousseau, I just need amplification or a correction in this; you said that we are in a jam if there is an international energy problem, that Canada is obliged, notwithstanding everything else, to continue its exports at the same level. That is not my reading of NAFTA. Would you tell me where that is? My understanding is that unless and until we regulate and restrict exports, there is no such obligation on us with respect to exporting to the United States.
Mr. Mousseau: I do not have the number of the treaty with me, but essentially it is a most-favoured-nation clause. It is not called that in NAFTA. Essentially, we cannot treat Americans differently than Canadians.
Senator Banks: However, that refers to price, not whether we are actually sending the oil there. Am I right?
Mr. Mousseau: That refers to price. However, if there was a crisis, we cannot say that we will not sell to the Americans because we need the fuel in Canada. We have to keep the door open to the Americans. The price can change, of course, but we cannot keep the oil in Canada. We have to ensure that we keep something over three years or five years average in terms of percentage.
Senator Banks: I will have to read it again.
Everywhere we go, we hear from many witnesses that the consequences of doing all this good work will be beneficial and will not cause any lasting harm. I would just like you to comment on the fact that the last time we had a national energy policy in Alberta — and I am just speaking anecdotally — it also happened to be the time that interest rates were at 21 per cent.
When that national energy policy was put into place, I watched the trucks going down the road. There was an immediate consequence because the people who are required to invest large amounts of very patient capital on very risky undertakings are not prepared to do that in certain circumstances, namely, those circumstances set out in the National Energy Program, NEP. Therefore, the exploratory trucks left down the road.
Do you think that we can do it differently now than we did then?
Mr. Mousseau: I will give the example of Norway. In 1973 or 1974, Norway decided that the development of its oil industry should be driven by the government. Every new investment for exploitation had to be controlled at 51 per cent or more by the government, with 49 per cent participation from the private sector.
Norway has had no problem attracting funding. The model has changed; it is no longer exactly that model today, but it is still a model where the state is very involved — 77 per cent of the revenues for oil go to the state, which is twice what it is in Alberta. The main thing is that the model has to be clear. The first few years — and we have seen it in Alberta in the last few years — companies will try to blackmail by saying, "I will leave. I will shut the door." In the end, the resources are there, so there is no other place to invest. Therefore, I am pretty sure that in the end they will come back.
Mr. Pineau: With electricity, my proposal is actually to remove the National Energy Program that we had because the NEP was lowering the price of oil in Canada, so preventing export at the world price. That is exactly what we currently do in electricity. We have a low price of electricity that prevents us selling at the market price abroad. We have to sell first in Quebec, and once the Quebec needs or Manitoba needs, or B.C. needs are satisfied, then there can be exports at the market price. However, Hydro-Québec or BC Hydro could not sell as much as they want at the market price.
My proposal is that we should remove our current provincial energy program. We do have that in electricity. I do not understand why more people are not complaining about that, because we do have these regulations forcing electricity prices to be very low in some provinces, which prevents selling at the market price. We would not see the issues we had during the National Energy Program with this proposal for electricity.
For transportation, all these proposals would make everyone wealthier. The cost, in terms of habits and the way of life, would be that we would need to make people switch from an individual car-based way of life to a more car- sharing, car-pooling, public transit way of life. In the end, it would make them happier. However, people have to change their habits, and that is very costly in terms of psychological pain. It is similar to if you have a diet, but you want to have a healthier diet, there is a cost; the cost is not monetary, it is a psychological cost.
I do not foresee any economic problems or issues if we were doing the right things. It is a political and sociological cost.
Senator Banks: Both of the things that you just talked about require intervention, if I can put it that way, on the part of the government. In your case, Professor Mousseau, it would require that the government become a proprietor, in a sense, and invest heavily in business. In your case, Professor Pineau, it would require mandates with respect to transportation because we have tried cajoling; we have tried arguing; and we have tried lanes in which you have to have at least two people in the car. We have tried all that. We have tried education, and we have tried begging.
To do what you are talking about, Professor Pineau, it would require mandates from the government. To do what you are talking about, Professor Mousseau, I think it would require the government to say, in the example that you gave, "We will now become majority investors in oil exploration." Is it the case that we have to go that route?
Mr. Mousseau: This is not what I was recommending. I was just saying, in response to your previous comment, that it is not true that industry will fly if you set up such a thing. However, that is not what I am recommending because these resources are a provincial matter, so I do not think that the federal government could come in Alberta and say, "I am buying half of it," without a revolution.
I am not recommending this at all. I just wanted to say that, in large part, it is important that the rules are clear. Then once the rules are clear the investment will take place.
I am recommending still that Canada develops a position of leader at the international level. I was saying that one of the problems is that we do not have a national leader in terms of a private company that is dominant and a major player in the energy sector. That is the situation. I do not have a solution for that. One has to look at other ways, then, to establish Canada.
Mr. Pineau: I am not asking for more government intervention in electricity rather just slight changes. For example, in Quebec, the government has already put a slight increase in their budget in 2014 for electricity prices to bring them closer to the market price. It is already built-in, we could increase prices very easily in Quebec without more government intervention.
In transportation, all the initiatives that have already been implemented were not coordinated, nor was there congestion pricing in cities or enough public transit options. We need to be more aggressive, not have more government intervention. We need more congestion pricing and more aggressive policies for public transit, with the same involvement of the government.
Senator Neufeld: I thank you all for your presentations.
Mr. Gratton, I appreciate what you said, and you are a leader. I come from a province that has the largest forest- based economy in Canada, namely, British Columbia, and the industry in general has shown much of the same things that you talk about, whether it is generation of electricity from waste, waste wood. I think the industry in British Columbia generates close to 5,000 megawatts of its own electricity from waste that used to go to landfills. The forest industry has come a long way, at least in my province, and I appreciate what you have said.
Mr. Mousseau and Mr. Pineau, I agree with some of what you say and sort of disagree with other parts. I live in an area of British Columbia that produces all of its oil and gas, and I can remember what Senator Banks talked about when the National Energy Program came in place. We went to nothing. I almost lost my business. I was in the oil and gas business, so I know it quite well, and it was devastating for many families where I live, absolutely devastating.
When you talk about Canada on the world stage as an energy giant, I do not disagree with that, I think we should be. In Canada, a Canadian company is certainly one of those that actually leads pretty well. However, I also got a feeling from your testimony when you talked about the NEP that we used to have, that we just spoke about, that maybe we need to do those kinds of things again.
Did I misunderstand you, or do you think that we need to have a national oil company, and if in fact we do, do we need a national electricity company that would come in and nationalize the electricity in certain provinces? Would you correlate that the same way?
Mr. Mousseau: That is not what I said. I explained why we are such a dwarf on the international scene. Part of the explanation is the fact that we have no energy giant. I did not say that we have to create one.
Senator Neufeld: Okay.
Mr. Mousseau: It is just an explanation of why we are where we are. When I indicate where the federal government should be, I do not mention that we should create a new energy giant either private or public.
Senator Neufeld: Oh, private, yes. You want an energy giant, right?
Mr. Mousseau: No, I said that we do not have one, and that is hurting us. I am not saying that we have to create one. It is hard to say that this morning I am creating one; that is not what I am saying.
Senator Neufeld: It happened, at one point.
Mr. Mousseau: If it did not happen, it did not happen, so we do not have one, and that is it. However, that does not prevent Canada then trying other ways to be on the right level on the international scene.
Senator Neufeld: Okay.
The Chair: I would like to make a point here. I do not know whether it is relevant, but there was a time in my life that I was the chair of the Senate Banking Committee, and there was much discussion in Canada about us needing a national champion. We had these big banks, the Royal Bank of Canada, for example, that were up to fourth, fifth and sixth place in the ranking of the world, and they were slipping way down to seventeenth and eighteenth place. There was a great outcry that, with globalisation and the financial services sector, Canada needs a national champion in banking.
We continued the way we were, and now our banks are way down and low on the list, and we are being told we have the greatest banking system in the world. We survived the meltdown and the crises. I do not know whether it is relevant to this part of the debate, but it just seemed to me to be such a good analogy. I wanted to put it on the record.
Senator Neufeld: Thank you, Mr. Chair. That is an interesting observation.
You both talked about free trade in energy, free trade in electricity. Free trade in electricity says to me that someone wants something for nothing, and there is always a big pocket some place at the federal government to pay for a bunch of things.
I wonder if you could tell me why you think there is difficulty in Alberta. Alberta and British Columbia trade electricity and have done so for a long time. I am familiar with that. We trade with the U.S. on-peak and off-peak. We have agreements with some states to sell electricity. When you talk about free trade for electricity, what stopped Ontario from dealing with Quebec to build a line and import some of that clean electricity? I know how and why the system was built, I was responsible for BC Hydro for eight years, so I have a pretty good idea.
What stops that? I do not know if any of you have even studied what happens between Alberta, B.C. and Saskatchewan in the Trade, Investment and Labour Mobility Agreement, TILMA — the first one of its kind in Canada. Actually, our biggest problem is trying to get some of the organizations, such as engineers, to agree to a standard set of agreements across those provinces. We have huge amount of trouble getting that done, but we have embarked on it or looked to British Columbia's carbon trade, which is revenue neutral and is the first one in North America.
Many of those have started in British Columbia and are big things, and obviously with much controversy too — I was there when we were getting shot at.
Have you studied that? When you talk about free trade and electricity, what stops provinces from looking at other provinces to buy their electricity?
Mr. Pineau: Nothing stops them. The problem is the consumption subsidy that B.C.'s, Manitoba's and Quebec's consumers receive. You are well aware of this heritage pool, and that is not in accordance with any free trade agreement. You cannot preserve that under a free trade agreement.
Of course, they can trade surpluses, but these kinds of indirect consumption subsidies that are given to these local consumers because of history are outdated. We should just move on to a system where everyone is paying the market price, exactly the same as after the National Energy Program was scrapped when everyone was paying the world price for oil.
The only thing I am advocating is that everyone should pay the market price for electricity so that we do not give an energy subsidy to consumers. To think coherently about energy, we need to remove these subsidies.
Senator Neufeld: You know, people in British Columbia do not think they are receiving a subsidy. When I was there as minister, they thought they were overpaying. I used to receive thousands of letters and emails, which I can guarantee you do when you raise rates. British Columbians have paid for that system, and it is regulated, so there is a fair rate of return to the shareholders, which are British Columbians.
It is easy for you to sit there and say, "Well, they should be paying market rates." You should come to British Columbia, run, get appointed as the minister and go to British Columbians and say, "You know, you are all subsidized in your electricity rates, we want to increase them hugely so that you are paying the same rate as they are in California." You would die the first day, guaranteed. You are gone.
Mr. Pineau: I worked for five years in Victoria. I went on radio shows in Vancouver to say these things. I have ridden on that, so I know British Columbia extremely well, and it is exactly the same situation here.
I am saying that you can organize transfer payments to make people agree, especially since the biggest energy consumers, residentially speaking, are the wealthier people. Therefore, now the system is such that we have wealthier citizens receiving the larger share of hydro electricity and the poor citizens not able to consume much, and this is socially unfair. There are many arguments and many economic approaches to change a system.
Senator Neufeld: It is easy, as an individual, to say that. It is a little tougher when you have to stand on the podium.
Mr. Pineau: I know politically it is extremely difficult.
Senator Neufeld: Professor Mousseau, have you studied many of the things that I talked about, with what is happening in British Columbia?
Mr. Mousseau: There have been many studies. No, I did not look in detail into these. I have looked a little at the gas industry and what you are doing with shale gas, et cetera, to compare the situation in North America a bit, but I did not look at the question of hydro electricity.
Senator Neufeld: I would suggest you go on the website and have a look at the BC Energy Plan. I produced two of them. They are relatively in depth. Look at the environment ministry and find out what we have done in British Columbia with many of these things to encourage natural gas production, because we are the second largest gas producer in Canada. Look at how we deal with our electricity, greenhouse gases and labour and mobility, and it might make you feel much better about what is happening in Canada.
[Translation]
The Chair: That is why we are having this national dialogue.
Senator Massicotte: I would like to thank all our witnesses for being here this morning. I very much appreciated your presentations. This is a very interesting debate that affects, not only Quebecers, but all Canadians, and has a global impact.
I would like to make a few comments in response to what you shared with us earlier and ask for your reaction.
Having listened to your comments, Mr. Mousseau, just by way of summary, I would say you are telling us we have a problem because of one important customer, namely the United States. In that sense, we are not sufficiently diversified. We are highly exposed, as any company or organization is when it depends on a single client. It is a troubling monopoly.
We have no energy giants. That is a negative point and it may not be a very good position to be in. Furthermore, we have no national strategy. That is a fact. Of course, the Constitution states that natural resources fall within the purview of the provinces. We do not have enough money at the federal level and not much of a sense of how to deal with energy.
Mr. Pineau, you talked a great deal about the fact that energy prices do not reflect their actual cost. Consequently, we are wasting energy or not using it efficiently.
However, you, Mr. Gratton, have given us clear and highly indicative examples to show that corporations can take action in their own interests, while at the same time, meeting the interests of the community, even at the global level. But that is a great sampling. And this is a very good debate.
We can look at the federal and provincial governments and certainly pick out the parts that are not working well. You have given us some good examples of the lack of consistency.
It is quite true that we have subsidized some oil companies, but not others. However, the dilemma is that there are ultimately choices to be made. And, in that case, it is the Prime Minister and the Cabinet, with the approval of Parliament, who decide to take this or that direction.
It is true that there are a number of people, and that will continue to be the case, even though you may not agree, because there is always a different point of view. It is also true that every time you make a decision, there is a good side to it, just as there are disadvantages and a minority who will not agree.
So, what is the solution? That is what I am interested in: what should we be doing in future?
Right from the start, looking back on history — even the studies clearly show this — every single industrial policy that could be called a national policy that you could name, or any government's industrial policy, has thus far been ineffectual. So far, they get it wrong in Quebec just as often as they do in Canada. When the government tries to choose winners, it really gets it wrong. In the market, as for consumers, things change very quickly. Governments, including China, do not react quickly enough to changing circumstances for consumers or in the market. And often, government mistakes have lasting effects.
The problem I have is that, despite your comments, I am not confident that the federal government can choose a particular policy in terms of moving ahead with the wind or solar energy.
People have made choices. Ontario made a lot of choices. And when you look at what Denmark and Spain have done, it is clear that serious mistakes were made by choosing the wrong technology, which was too costly, so that subsidies had to be cancelled. There are a lot of cancelled contracts because of financial pressures.
I am wondering whether the solution does not lie with the market. In other words, rather than saying: "Mr. Government, get out of the market but make sure the price for consumers and the price that Cascades is going to pay reflects the total costs, including the cost of carbon." How do you react to that? Rather than saying: "Mr. Government, we want to move you in this direction," maybe the government should get out of the market altogether and let the market decide.
Mr. Mousseau: I agree that we should not be choosing a favourable energy source. For example, a tax on carbon has the advantage of neutrality in terms of technological solutions. In other words, you set a price that you feel is correct for environmental and other costs, oil and gas and so on, and then you let people go where they want.
However, in terms of research and development, at some point, you have to support different alternatives in order for them to develop and to provide Canada with the necessary know-how to move forward. And that is seriously lacking at this time.
So, in that sense, we have no vision. What I am suggesting is not that we choose a winner. In fact, it is exactly the opposite; it is that we diversify. Currently, the federal government has chosen one winner, which is the oil and gas sector. It had a winner previously with the nuclear industry, which it is now in the process of abandoning.
So, on the contrary, I think we should be supporting the entire basket of energies, but that when we develop policies, we also have to regularly review them. It is important to set goals that are separate from technology and make it possible to support technology in order to move in the right direction, while at the same time making adjustments as you go along. Because, as you say, things change quickly.
However, everything is not always a losing proposition, if you look at Hydro-Quebec's policies, for example, or what British Columbia is doing; there I think the choices that were made in terms of hydroelectricity and the investments made have been very profitable, compared to the private sector.
Mr. Pineau: I fully agree with you. As regards electricity, I would say that the government should remove itself somewhat from pricing and let the market price prevail.
Currently, the federal and provincial governments are making huge investments in highway infrastructure. So, there is government involvement. The government is choosing to add more bridges, roads and highways. That is a sector where there is very little competition. Alternatives are not given a chance to develop. And it is because current governments are choosing highway infrastructure that we are facing the current problem.
The solution is for the government to play a role in transportation by offering more alternatives, such as rail, public transit and more tax incentives for car pooling. That is the direction we should be moving in. For the time being, we have all our eggs in one basket — namely, the use of individual cars — and that is the problem.
With respect to buildings, another major energy-consuming sector, all that is needed is for the government to continue to be involved in the National Building Code, but with very good standards. Unfortunately, there are too many market weaknesses, which means that the people who are buying buildings do not naturally choose the best buildings; rather they opt for buildings that are financially profitable, because they have a planning horizon which is too short to allow them to make the right choices. Through the National Building Code, they have to be forced to live up to better standards.
Mr. Gratton: I think the carbon tax would have a positive effect, in that it would force emitters to pay. But who will use these funds and how?
As a company, if we take extensive early actions, we do not want to continue to pay a tax that will allow the laggards to catch up with us. This is a debate that could be partially resolved with a carbon exchange. There again, if there is a carbon exchange, what will the reference year be? Will we consider the fact that recycling means that fewer trees are being cut down? Will we consider the fact that, by removing tons and tons of old paper from our waste management system, we are also making a positive contribution to the environment?
If the answer to all those questions is yes, then we would obviously agree with the idea of a carbon exchange.
[English]
Senator Peterson: Professor Mousseau, you talk quite forcefully about what I would like to call a Canadian energy strategy rather than the other name. To achieve that, do you think we need an environmental strategy that is workable with an energy policy?
Mr. Mousseau: The environmental policy has to be there for many sectors, not only energy, but clearly energy is closely linked at this point to the question of greenhouse gas emissions.
Senator Peterson: I suggest that they are very strongly connected because if you want to try to protect the environment, you will have to have an energy strategy that will work with it.
We also talk about a carbon tax, which used in that sense will never happen because of the nature of it. I suggest that we need to call it an energy surcharge or something similar because in the political world, and all this discussion, the overarching thing we have to keep remembering is that politics is still very much involved. We can say that we should do this or do that, but at the end of the day, when it comes to voting, that becomes a factor.
It is the same thing with the transferring of power, Mr. Pineau, that I would suggest that hydro rich provinces are using cheap energy to stimulate industrial development. They will not give that to another province to compete against it. At the same time, then, how will you raise cost for consumers who will pay more so that that can keep happening? We have all these political difficulties. I suggest we keep them in mind.
Senator Brown: Mr. Gratton, I was very impressed with what you had to say about the Cascades Inc. presentation and what your company is doing. I think it is much better that private industry does those kinds of improvements.
You mentioned that incinerator gas is reused for heat. Do you know anything about the Plasco Energy Group? They are a company just outside of Ottawa that takes all the garbage, including washers and dryers, sinks, vegetables, paper and plastic and run it through some fuel cells that have no smoke stacks. Nothing escapes from the plant. It produces a gas that they have not even named yet, but it all goes to generators that are right on site, and the energy produced from that gas goes directly into the Ottawa grid.
They also work with everything that comes out of it that is not gas — aggregates that go to the paving of roads and all kinds of fertilizer that goes to farms. The water that is produced from a tonne of garbage is also potable, but they use it for irrigation at this point in time. It is an amazing company, and it is moving into Red Deer, Alberta. They are building a plant in Spain, three in Portugal and in other European countries. I just wanted to mention them.
You mentioned that natural gas has an oversized pipeline. I wonder if you are taking into consideration the extreme differences in the amount of natural gas that is used in Canada in the summer as opposed to what is used in the winter. I think that is the answer to your oversized pipeline.
Mr. Gratton: On oversizing, on the main pipeline, we draw on average something in the range of 4 Bcf per day. This is the most positive expectation, and the system has a capacity of over 7 Bcf. Most of that gas is transported on an equal daily volume in winter or summer. The excess is stored in the summer near the consuming region, and that storage is used during the winter to cover for the temperature differences.
Senator Brown: I would comment that a new pipeline would be built at extreme cost compared to the ones that have been already built.
I have one other comment. It is said that we do not have an energy giant in Canada. We have Encana Corporation, which owns larger plays of natural gas in Canada and in the United States than any other company. We also have the largest energy giant in the world, it is called the Alberta oil sands, and we share a small portion of it with Saskatchewan. It is the largest energy giant in the world. There are 88 million barrels of oil a day used in the world, and we supply 40 per cent to the biggest consumer — well, the biggest in North America, anyway — the United States. We supply 40 per cent of their imported oil now. I think China may use more oil.
[Translation]
The Chair: I see that the next witness has already arrived. On behalf of my colleagues on the Senate committee, I would like to extend my sincere thanks to you for your assistance and expertise, your interest in the issue, your comments and your briefs, which were well presented and well prepared.
Professor Mousseau, I hope you have noted that a federal organization is deeply involved in the issue facing all of us, not only as Canadians or Quebeckers, but as citizens of the world. We must restructure our energy production system for the future and for our grandchildren.
As I said earlier: "Quebec has the know-how!"
This meeting of the Senate Committee on Energy, the Environment and Natural Resources is being held in Quebec to research this issue for the purposes of our in-depth study on the energy sector in Canada.
This morning, we heard from interesting witnesses, and yesterday we visited Hydro-Quebec, Gaz Métropolitain and Questerre.
This morning, we are very proud and lucky to have this opportunity to extend a warm welcome to you. Mr. Claude Robert is here representing his company, the Groupe Robert Inc. Several witnesses who appeared before us have spoken very favourably of the Groupe Robert Inc., a company that I am well acquainted with, since I live in Magog, in the Estrie region. I even used the good services of your company for several years. And when someone explained to us what happened with Robert Transport in cooperation with the Quebec government, I believe, as part of a pilot project to use in trucks, everyone seemed to be of the view that this was a great breakthrough and an example to be followed by the rest of the country in future.
Thank you very much, Mr. Robert, for being with us today. I would just like to introduce the senators in attendance this morning.
My name is David Angus, and I am a senator from Quebec. I am Chair of the committee; to my right is Senator Grant Mitchell of Edmonton, Alberta. He is the Deputy Chair of the committee; also with us are our researchers from the Library of Parliament, Marc LeBlanc and Ms. Banks; another Quebecker, Senator Paul Massicotte; Senator Richard Neufeld of Vancouver, British Columbia, who is a former Minister of Natural Resources and held other important portfolios in British Columbia; Senator Robert Peterson of Saskatchewan, a former director of Cameco Inc., a prominent businessman and fundraiser in Saskatchewan; the only elected senator, Senator Bert Brown of Alberta; and, to my immediate left, a lady you know well, I believe, Ms. Lynn Gordon, our extremely capable, efficient and pleasant clerk, as you will have noted; to her left, from the Yukon Territory, is Senator Daniel Lang, who was a member of the Yukon Legislative Assembly, has had a distinguished career and whom we are lucky to have with us now in the Senate; and, my predecessor, a member of the Order of Canada, Senator Tommy Banks, who has proved himself in many different areas of endeavour.
Mr. Robert, I invite you to make your opening statement.
[English]
Claude Robert, President and Chief Executive Officer, Robert Transport Inc.: I have prepared a very brief presentation that I have given to you. I will not go into detail on this because you will have a lot of time to read. My goal is more to get your attention on some of our concerns and many of the things that we have to go through.
I will give you a brief history of the company. It is 60 years old and has about 2,500 employees located mainly in Quebec and Ontario, and a small operation in Indiana.
The Chair: Where in Indiana?
Mr. Robert: In Fort Wayne, Indiana.
Over the years, I would qualify us as being a company that has always been looking forward for the best practices in the industry. That is to say that we always went after new technology. This is not something we just do today; this is something that we have done for the last 20 years.
Naturally, when you do something like this, it involves travel. I have travelled to Europe probably 20 times, which is a conservative guess, to see new technologies, see new things that they use over there with the equipment, to improve fuel economy, the way we operate our equipment, et cetera. We brought back a lot of new technology that they use over there to Canada and North America that we have been forcing the original equipment manufacturer, OEM, companies to install on our vehicles. It is always a struggle because these people like their old habits. They like to do things the old fashion way. However, the old fashion way was good yesterday, and it has been good, as you know, but today it is not good enough.
For the last two and a half years, we have been working with Westport Innovations Inc., in Vancouver, to learn the product; we start to understand the product. We did that because we had explored mostly all of the avenues we could with, for example, tires, efficient tires on the vehicles; aerodynamics; driver control, having a control of the driver's attitude while he is driving. We have monitoring systems in the vehicles so that we can tell the drivers what to do and the best practice to be used for fuel efficiency, and so on.
The Chair: Is Westport Innovations in Vancouver also a trucking business?
Mr. Robert: No.
The Chair: They bring to you the expertise that you are speaking of right now.
Mr. Robert: Yes. I will go back to Westport later, if you permit.
Once the Americans, in 1998 and 1999, decided to go with the U.S. Environmental Protection Agency, the EPA imposed many norms and standards to the evolution of the pollution coming out of the engines over the next 10 years. However, at the same time, they increased the fuel consumption. Right now, for example, we use exhaust gas recirculation, EGR, on our engines. The exhaust goes back into the engine, and you use more fuel to burn it a second time.
Therefore, all that we did over the years with the engine manufacturers to fight to get more fuel economy from the engines was contradicted by this.
The Chair: You were actually using more fuel.
Mr. Robert: EPA came in with standards that have forced people to, in fact, use more fuel to reduce pollution. At the end of the journey, to accomplish a certain amount of work, before you were using, let us say, 50 gallons of fuel; today to do the same amount of work, you have to use 70 gallons of fuel on the pretext that you are reducing pollution and improving the environment.
Now the Americans are recognizing that it was not the right way to go, and there was discourse by President Obama not too long ago that was clearly indicating that any devices to improve environment should not translate to additional fuel consumption.
The Chair: As a matter of interest, sir — and I apologize for interrupting — does it follow that by using 40 per cent more fuel, as you say, another 20 gallons over your original 50 gallons, that that is actually increasing the emissions of greenhouse gases?
Mr. Robert: It does, in fact, put more gas into the air because you are burning more fuel. However, the fuel that you are putting in the air is not as polluting, but there is more of it. At the end of the journey, there has been very little improvement.
The Chair: Additionally, it costs more to you.
Mr. Robert: To give you an idea, from 2000 to 2010, the cost of this new technology to the industry just on the engine, the premium on an engine is roughly about $20,000.00 per truck.
Therefore, that is serious. Our company, once we realized that there was nothing more we could do to improve our fuel economy, wanted to bring our contribution to reduce the harm to the environment and the pollution into the air, so this is when we approached the people from Westport Innovations.
We went through many struggles. We also had to make an agreement with Gaz Métro to supply us with the LNG for our trucks. After we came to an agreement with both Westport Innovations and Gaz Métro, then we had to convince the people that build the trucks to build them with that new technology, which is another challenge. When you approach Mr. Pigott, the owner of PACCAR Inc., and tell him that you want a truck that performs like this, this and this, he does not need a guy from Rougemont, Quebec, to come and tell him what to do into the future, let me tell you. We had to be very convincing, and we had to commit to a certain number of trucks to get there, because otherwise, forget it.
We had been able to take the following steps: step one, make an agreement with Westport Innovations; step two, make an agreement with Gaz Métro for the supply; and, step three, make an agreement with the engine manufacturers and the truck manufacturing. We are now faced with step four, to deal with the democracy and the bureaucracy. The bureaucracy involves Transport Canada that does not authorize me to carry LNG. They will authorize me to carry hydrogen, propane and oxygen. They will authorize all the cryogenic gases, but they have never used LNG in transport. They have no regulations. Now they have to dig and create a regulation.
Now we are stuck with Transport Canada. When you try to have a station for refuelling in your yard, then you have to deal with the municipality and the province on the environment. You have to deal with all these people who know nothing about LNG, who know nothing about natural gas, but they want to look important and want to ensure they preserve everything, and everything that does not have to be preserve also.
We are stuck in the middle of this, and presently after two and a half years, we have three trucks with Westport engines in our yard, and we cannot get gas to put in them. I have ordered, as was mentioned, 180 trucks over a period of three years, so we will receive 60 trucks. Our first truck is going to Vancouver to be verified as a pilot test. The truck will be in Vancouver in a matter of weeks — two, three, four, at a maximum — and ready to ship to us, which they will, but still we do not have the permit to refuel the truck.
The Chair: In Rougemont or wherever?
Mr. Robert: Yes, also we can refuel in Boucherville or in Toronto. It has been two and a half years.
The Chair: Who manufactures the trucks?
Mr. Robert: In this particular case, it is Peterbilt. We have selected Peterbilt, which is a subsidiary of PACCAR.
I would like to leave one message with you, and then after that I can answer all the questions you want to ask. One thing is clear: We will not build a country by having people with no decision-making capacity and no will to make a decision. They are just going by a book that was written 10, 15, possibly 20 years ago, and they will just go by what is in that book.
If you come with new ideas that are not in the book, then it is a new procedure all over. You have to start from scratch in trying to develop something, when in fact there are many good engineers that can be looking into the best practice, putting the best practice in place, and giving the go ahead because this is the future. Once you look in front of you, you look into the future. When you look into your mirror, you are looking into the past; it is behind you. I keep saying that these people do not have a windshield; they only have mirrors. Therefore, they only look backward; they do not look forward.
Because of the problems we are having, we try to use every opportunity to sensibilize our politicians and members of our governments to listen to this message. It applies to trucking and many other situations in the economy.
I do not think we have the right attitude toward the future. Everyone is complaining; everyone is asking the government to give this and that, but no one wants to pay the tax that goes with it. They expect everything to be granted and feel that they should receive it, but they do not want to do anything for it.
I am the kind of guy who asks my employees, "What can you do for the company?" I will tell them what I can do for them, but we have to start by asking what they can do for the company. I think the same applies for the country, namely, in what the citizens are able to do for the country — and, yes, the country will be able to do something for them in return.
These are some of the bottlenecks that we are facing and with which we are dealing. It is very frustrating for Gaz Métro, us, the manufacturers and such people because we are facing situations where, at this stage, it is not the origin of the gas and whether it comes from Quebec or Alberta. To start with, we need to develop a network of natural gas because every time you use a litre of natural gas, you reduce the impact on the GHGs by 25 per cent to 28 per cent.
We need to have an alternative. Maybe in 25 years from now, it will all be electrical. Maybe it will be hydrogen. Maybe it will be — I am not smart enough; I am not an engineer; I cannot foresee that far. Maybe only Jules Verne could see that far, but not me.
One thing I do know is that the combustion engines that were supposed to disappear in 2010 are here for another 15 to 20 years now because people still find ways to improve the combustion engine. Naturally, people such as those at Westport Innovations have come in with new technology, new ways of doing it. It is my belief that they will take us ahead for the next 10 or 15 years. In 15 years from now, maybe it will be a different technology, and maybe we will burn a different type of energy, but right now, we have no alternative.
We produce a lot of petroleum, as you mentioned earlier, which is great. Our country will get better the more we can sell. We need an alternative gas, such as natural gas. A lot of natural gas is lost in the air, and we need to recoup as much as possible and transform it into energy to use in our engines. I believe that is the way of the future.
To accomplish this, we need to get a level of harmonization across the country. Right now the fight is taking place in Quebec. We have the support of the Quebec government on financial support for amortization and so on. Quebec is unique in that. B.C. has a special program to reduce tax and give a credit for the end-user because LNG trucks are running in B.C. Many LNG trucks are running in the southwest United States — California, Texas, Washington State, et cetera. In the U.S. it is like the egg and the chicken: If you do not have a refuelling station you cannot have an LNG truck; but if you do not have LNG trucks, no one will build a refuelling station.
People need to agree on things and stop disagreeing on everything. My vision is that we need to have a network of refuelling stations for LNG. We do not need one at every door because with diesel trucks, we have a range of about 600 miles. As long as we have the critical areas across the country covered, perhaps a station every 100, 150 or 200 miles, that will accommodated everyone. We will have that on the main highway, and people will be able to travel across the country running on LNG. It is only a matter of time.
I met a friend from a company in Alberta that picks up milk and so on, and because Alberta already has some infrastructure, he will receive his truck sometime next week or the week after. We are still waiting for ours because we are battling against the federal government and everything else at this end, whereas in Alberta, they are already permitted to carry LNG within the province, and also in B.C. The western end of Canada is already on the right track; they are doing things right.
In Eastern Canada, it is a new misery. We ask Transport Canada, for example, why they do not talk to the people in B.C. and Alberta because they do this all the time. Why can they not just take the same best practice they use and use it in Eastern Canada? What is the problem? The answer is that they need to do a study because it is something new for us here. We say that they should talk to the others, harmonize.
This is one of the biggest issues that I wanted to bring to your attention. Would you believe that there is new technology on tires, for example? If you use one tire instead of two, you could reduce your fuel consumption by 10 per cent. Would you believe that we cannot travel across the country with single tires? If I drive into Manitoba, I have to take them off and put twin tires. We are supposed to be a country; we have 10 provinces.
If I have a complaint or an observation, it is that for years the federal government that has power has shovelled the power and the control into the provinces. Now, each province does what they want. They do not talk to each other much. They usually fight with each other and become the centre of the world. They do not think that we are a country and that we need to do things the right way all across the country. Not having any specifics for Quebec, specifics for Ontario, specifics for B.C. or specifics for Newfoundland is ridiculous. This is what we are facing today. It is a roadblock and this roadblock is impacting our economy to a level that is unbelievable.
I was in Germany two weeks ago; I spent a week in Germany. You travel from Germany to Switzerland to France, back to Luxemburg, back to Holland, and they are all the same. You never stop. They just say "Welcome" and "Au revoir," and that is it; that is the end of it.
What is wrong with our country? We have all kinds of standards that apply to Quebec that are not recognized in Ontario, and vice versa with other provinces. I am talking about Quebec-Ontario, but I could talk about every province because it is the same. As an industry, we are very concerned about all this.
We need an alternative energy, and natural gas can be that, and that is the reason I am here. In Eastern Canada, to give you an idea, we use absolutely none of the gas or the petroleum produced in Western Canada. The pipeline goes through Sarnia, Ontario, and Ultramar Ltd. has large refinery in Saint-Romuald, Quebec. They have to buy their crude oil from overseas and receive it by boat, while we have plenty of energy in Canada. There is something wrong.
If you try to build a pipeline to accommodate that, you will have about 50,000 people who oppose it, people who just want to argue for the sake of arguing. In French we say, "être pour le fait d'être contre." This is characteristic of people today: "Not in my yard; not in my neighbour's yard; maybe somewhere else." However, where is the future? The future means changing, and we must start somewhere.
These people will say, "We want to change the environment, we want to change this." My response is to say, "That is great, but what are you prepared to do, yourself? Tell me what you will do. Find a solution." They can be critics, but they do nothing. If you put them in front of the facts and tell them to find a solution, then they will say that there is no need for a solution. Why is that?
I have the privileged of having a natural gas line in front of my house. I live on a large farm, and all the buildings on the farm are heated with natural gas. Imagine if I was using fuel right now, knowing that the price in Montreal was over a $1.03 yesterday.
In the old days, in our industry, labour represented about 36 per cent of our costs and fuel was about 10 per cent. Today, diesel or fuel is roughly 40 per cent of our costs and labour is down to about 29 per cent — and not because we pay our drivers less. The price of fuel for our trucks went from 25 cents a gallon, when I started in the industry, to $4.50 a gallon today.
I will tell you an experience I had with that typical guy that says, "Oh, fuel is bad; trucks are bad; everything is bad." I was at a supper and a person was complaining about the "damn trucks.'. When they introduce themselves, they asked me what I do in life. I said, "I am a trucker." Naturally that person felt a little embarrassed. During the conversation, I asked why they talk against trucks. The person did not know what to say. I said, "I will tell you just one thing. If you want to know what trucking is all about, you should follow the people that collect the garbage and go into a depot. Take your Mercedes to go there, and take your garbage bag directly to the landfill, and then you will appreciate what trucking is all about. Those are the residuals. Now, everything you eat in your fridge and cupboards came by trucks, but I will just talk about the garbage." Naturally, the conversation ended very quickly.
Trucking is part of the vitality of the economy; if the trucking network is not operating efficiently, then nothing will happen. Why do we need support on natural gas and going this way? I do not believe, first, that the petroleum crisis is over. It is good for Canada whenever we can export. However, if we are smart enough to export the volt and live on commodities that are less expensive, that would be very smart, because we will reduce deficits, begin to rebuild our economy and do things differently.
Presently, we have to import fuel that has an impact on our trade balance. As you know, our trade balance is already in deficit. We need to find ways to rebalance our economy, start manufacturing at a very effective cost and be able to sell our goods to other countries, the United States or others. To accomplish this, well, certainly we need to change. For me, energy is one of the things that we have in Canada that we need capitalize on, and we need to have the infrastructure and everything else that goes with it.
Those were some of the messages that I wanted to bring to your attention. I am more than happy to answer any questions.
The Chair: Well, sir, it is very refreshing and very interesting. Given our schedule, I will have to restrict you, colleagues. I had about eight questions myself, which I will not ask now because I think you may be available later.
Mr. Robert: Yes.
Senator Mitchell: Thank you very much, Mr. Robert. Apart from the frustration with the bureaucratic differences, et cetera, do you believe that there needs to be some form of incentive structure to encourage trucking companies such as yours — you are making the conversion without incentives — to make that conversion more broadly? Where do you think the initiative should come from to create this network of LNG stations? Would that be government-funded, or is there an association of trucking companies or fuel companies that could do that?
Mr. Robert: This is a very good question. As you know in Quebec, the government has recognized the need, but it is only for a portion of Quebec. First, Premier Charest has committed to reducing GHGs by 20 per cent, the same as the industrial level. To accomplish this, he has given the right to depreciate vehicles at 60 per cent, any vehicle bought 2010 and after.
Second, he recognizes that if you use natural gas, you reduce your impact on the environment by 25 per cent. He has allowed the possibility of amortizing an additional 85 per cent of the value of the vehicle.
The Chair: Is that any trucking company or only Robert Transport?
Mr. Robert: No, that is for every company. I fought for everyone.
The Chair: Very good.
Mr. Robert: A truck normally is about $140,000. However, let us say that it is $100,000.00, in which case a natural gas truck will be $200,000 because of the two fuel tanks. The portion of the injection and the computer that goes with it to run the engine costs roughly about $25,000 to $30,000, but the two fuel tanks cost about $35,000 a piece. Once you add this up, it is $100,000.
Senator Mitchell: You are talking about two LNG fuel tanks? You do not have a gasoline and LNG conversion or hybrid?
Mr. Robert: We have a little diesel tank. I do not know if anyone has ever explained to you how it works.
Senator Mitchell: No.
Mr. Robert: To initiate the fuel or whatever, you need either of two things, either a spark or compression. If you have a high level of compression, you will have an explosion, and you will have energy that comes out of it. It is the same for natural gas. With natural gas, the proof is that you can take natural gas and compress it forever; we use LNG, liquefied natural gas. If we put gas into the piston, we will compress it forever. What do we do to light them up?
Westport Innovations has developed a technology where the injector drops one drop of fuel. That drop of fuel creates a spark. At the same time the gas comes in and bang, the piston goes down. That is how you create your energy, and your contribution.
Over the coming years, they will have a new technology, and Westport Innovations is working on having a real spark plug, like on your car. It will be a diesel engine with a spark plug. Instead of having the drop of diesel, there will be a spark plug that sparks the gas, and the explosion goes, and you recoup the energy.
That system will be even more environment-friendly. In fact, some of these engines are running right now. They use them on buses and in all kinds of specialized equipment, but they are small engines. They are not made to do what we call "over the road." Now, they are developing and manufacturing medium-high engines, which would have a capacity of 13 litres and up. Engines with a capacity of 15 and 16 litres are the big engines for trucks; 12 and 13 litres are considered medium, but it is a happy medium that does the job. In 2012, we will have these engines with spark plugs.
We will use LNG in the tanks because we get greater autonomy with it, and we can compress a lot of gas in it. This LNG is transformed into gas at low pressure, which is injected into the piston, and then the spark from the spark plug will initiate it. This is coming in two or three years' time.
In the meantime, everyone will use LNG to do it. If you use compressed natural gas, the volume and the density of the gas that you are using is so small that you need to have multiple tanks for a distance of only about 200 miles, whereas with LNG tanks, you can get a distance of up to 600 miles, and these tanks are explosion proof. The beauty of natural gas is that if get into an accident, the probability that the tank will explode is practically zero because the fitting will break first. It is a small aluminium or stainless steel tube and as soon as the LNG is released, because it is at minus 260 degrees, it turns into gas. You do not see it.
In fact, if you were at Gaz Métro and asked them for a demonstration, they would put a small amount of gas into a pail, and by the time we speak and look around, it would be gone. It looks like dirty wash water, but by the time you look at it, it is gone.
This is why the risk is totally different compared to other products such as propane and so on. People do not understand the product; they do not inquire enough about it. However, if you were to go on the Internet and search on "LNG," you would have enough lectures for at least a month's time. It is all over the world. People are using it with as a mix of 50-50 with fuel everywhere else. If they run out of LNG, then they switch to 100 per cent fuel; that is all.
However, now the technology that is being developed here is much more sophisticated. To answer your questions about the support we need, yes, we do need support. We need support for infrastructure. People do not really want money. People want recognition so that we can have the cash flow to pay for the vehicle.
Regarding the cash flow, if we can finance a piece of equipment over a period of 6 years, for example, we need to be able to recoup the value of the vehicle over a period of 6 years. The vehicle lasts 10 or 12 years. It will generate profit after that, and we will pay income tax.
Therefore, government will never be losing. It will defer some of its revenue to a later time, but at what cost? We will provide a reduction. One truck can reduce the carbon tonnage by about 50 tons per truck per year. If you multiply that by the numbers of truck travelling in Canada, just imagine the amount. They say trucks produce 35 per cent to 40 per cent of greenhouse gas emissions. If the trucking industry switched to natural gas, that would settle about 36 per cent to 40 per cent of the commitment for 2020.
I think it is very important that the people in finance understand this part, because we, the end users, are looking at it from two standpoints. Buying, we have to pay for the vehicle, so we need the cash flow. Operating the vehicle, we pay no tax right now in Quebec and Ontario, which is giving us an edge to help us recoup that substantial investment we have to make.
Senator Mitchell: You pay no tax on what?
Mr. Robert: No fuel tax.
Senator Mitchell: You pay no fuel tax on LNG?
Mr. Robert: Yes. Not only that, but the cost of natural gas has been pretty flat for the last year and a half to two years, whereas the cost of crude and fuel is curving up like this, and it will not stop. You know that; I know that; everybody knows that.
The more natural gas we can use, the more natural gas we can produce, the better it will be for the environment. On the other hand, you should not be surprised to see our industry tomorrow; I have seen cars in B.C. running on natural gas. It is much more efficient than the hybrid. All we need is to have an infrastructure, a network to refill that tank.
Senator Mitchell: Thank you.
Senator Brown: I am very interested in your industry and what you are trying to do with LNG. We had the natural gas association before the Energy Committee just a week or two ago. The witnesses brought up two problems. One is building the LNG stations close enough together to allow a truck to move from one to the other without running out of fuel. They also said you have to worry about LNG conversions for the huge number of trucks that are in the system today. You mentioned a 10-year or 12-year cycle for a new truck. In that case, we need to find out how to help you pay for conversion of your engine.
We have the problems of the LNG islands or stations or whatever you want to call them. The only way the government could get at that would be some kind of breakdown in some allowances on taxes, as I understand it. I think that is probably a direction that the country would look at fairly positively because of two things: Not only are you reducing the amount of fuel you are using, but also you are reducing gases. You said 35 per cent of GHGs.
Mr. Robert: It is between 25 per cent and 27 per cent.
Senator Brown: Sorry, 25 per cent.
Mr. Robert: Depending on the application.
Senator Brown: Yes. Have you calculated any of the other pollutants that come from diesel, over and above greenhouse gases? GHG is not really a pollutant gas. It is a gas everyone worries about for the environment, but there are also some really stinky gases behind it. I was a farmer for many years and I know what diesel smells like; I know what diesel buses smell like, and I know the kind of smoke they give off. That would also be part of the calculation of the amount of change that we would get from using LNG.
Mr. Robert: Absolutely.
Senator Brown: Have you got any figures for those gases as well, or are you just focusing on GHGs?
Mr. Robert: I have many documents that I could leave with the clerk. That will give you a lot of specificity about the technical aspect and also about the end result at the end of the exhaust pipe.
One thing is clear: Right now the trucks are built into the environment of the United States Environmental Protection Agency. Once the spark ignition comes in, as I mentioned, in 2012, they will be able to eliminate everything such as exhaust gas recirculation. They will eliminate the particle filter under the vehicles, and they will eliminate also the selective catalytic reduction, SCR, which is ammonia that they put back into the exhaust pipe to clean the residue into the vehicles.
This is the perfect proof that running on natural gas with the perfect spark to light it up not only will eliminate knocks, eliminate the GHGs and the carbon and all these things but also will bring it to a step so far ahead. However, we still have to cope with the Americans and the EPA, and as I said before, Transport Canada has not done the exercise of saying, "What is the best practice in terms of the environment for the engine running in Canada?" Transport Canada has simply copied and pasted what is done in the United States; and the U.S. is are still on the technology of EGR, particle filters and SCR, so we are stuck with this.
When I was in Europe, the people said, "Claude, all this is behind; look in the mirror. We have new technology." We try to import. Believe me, we try to import trucks from Europe that are Euro 6, which means 2012 standards, and Transport Canada will not let us bring them in.
Senator Brown: I am looking for better arguments and stronger arguments to help you with the dilemma of switching to LNG.
You made a comment about trucks being allowed to run on single tires instead of doubles. I know there are many trucks carrying things like potato chips, which you can put an awful lot of in a transport truck, but there is also vehicles that carry drill pipe and stuff like that. We would not be able to get away with them having single wheels or single tires, would we?
Mr. Robert: You are right.
Senator Brown: Unless we got a big broad thing for that.
Mr. Robert: Yes, you are right. We have a heavy-haul division that carries pieces like windmills and stuff like that. For those big heavy loads, we have to use the twins, no question, but 90 per cent of the trucks on the road can use singles tires. That would do the job and be a saving.
The other aspect that we sometimes forget, which you can see in my presentation, is that we pull long combination vehicles, LCVs, now between Quebec and Ontario. They are doing the same in Alberta and B.C. and are starting to do it in Saskatchewan, as well. Some with special permits are going to Manitoba. Using LCVs produces a reduction of 40 per cent of the gas impact, just by using two trailers with one truck in the front.
A federal MP from Ontario said, "No, the rail is better." It is true the rail is better, because the rail companies benefit from having a monopoly; they are the only organization in Canada that can make that level of profit. However, with LCV, we can compete with them any time and have a much lower level of GHGs than we have today. We have to fight and fight and fight to convince people to run long combination vehicles. People are saying, "You are running your LCV at 90 kilometres an hour; it is dangerous because motorists could come in at 120 kilometres an hour" — even though the speed limit is 100 kilometres an hour — "and they could hit you from the back." I was on the autobahn in Germany and we were driving at 200 kilometres an hour and the trucks were running at 90 kilometres an hour in the right lane; it is natural.
People see problems when they do not exist. Sometimes they use their creativity to think about the problems instead of talking about the solutions.
Senator Brown: Thank you for your information. I would just advise that the more information we can get, the better we can try to help you.
The Chair: Yes. We will be dealing with two views here.
Senator Banks: If there is a Transport Canada impediment, we might be able to do something about that quite directly. However, I am confused, because as you pointed out, there are LNG vehicles, cars and trucks all over the place in Alberta and British Columbia. Obviously Transport Canada has not stopped whatever authorization might have been required in Alberta and British Columbia and maybe elsewhere. What specifically is the impediment that Transport Canada puts in the way of your doing what you want to do? I do not understand it. Has it to do with the trucks, or has it to do with the fuelling?
Mr. Robert: It is a combination of the two, to be honest with you. There is a network in Alberta and B.C., so if there is an incident or an accident, you could always go to another trucker or another station to provide an emergency plan. In Eastern Canada, there is no network. There are two in Montreal for all of Eastern Canada; we own one and Gaz Métro owns the other. If something happens, one of these two will have to provide backup to the other.
As I said before, it is a little like the riddle of the chicken and the egg. Until you start there is no infrastructure, but once you start you will begin to have the backup that there is in Western Canada that provides that if there is an incident, you can pump the gas from one tank to the others and get the truck out of the ditch, for example. That is the type of incident. Similarly, if you have a leak in a refuelling station, they want to make sure that you have enough capacity to pump back the fuel and put the gas back into a tank while they are doing the repairs and so on.
As there is nothing in Eastern Canada, they do not want to issue the permits.
The Chair: What permits are you referring to?
Mr. Robert: Permits for transporting and refuelling.
The Chair: What Senator Banks wants to know is whether it is from Transport Canada or from the Quebec government or from one of the other departments.
Mr. Robert: You need to start with a permit from Transport Canada.
The Chair: Okay. Is that what you are trying to get at?
Mr. Robert: Then, after that, you need to get the permit from the environment department in Quebec. Third, you have to go to the municipal government in the city to get the right to install a refuelling station.
You have to get these three, but you have to start at the top of the list. The top of the list is the permit to transport the LNG in a tanker. These permits are hard to get. They come from Transport Canada. Their requirements are that if you have a problem with the tanker on the road you must have some backup to take over.
We need to start somewhere. Give us some permits, and we will have trailers. If we do not get permits, we will not be able to provide any service.
Senator Banks: I hope we will pursue that with Transport Canada.
The Chair: I hope we will, too. Sir, we are here to hear this. I think you have a very good case.
Senator Lang: I want to follow up a bit more on the issue raised by Senator Banks because obviously it is immediate. Do you have indications from the municipal and Quebec governments that they will give you the permits if Transport Canada gives the authorization? Where are you with Transport Canada? Does it look like you are coming close to a decision in the immediate future?
Mr. Robert: For the last three months we have been told that we are close to getting a permit.
The Chair: From Transport Canada?
Mr. Robert: Yes. We were still meeting this Monday, yesterday. My people were meeting with people from Transport Canada, hoping we could get things going quickly, but we still do not know yet.
The refuelling station is another issue with the cities. To be frank, we are not there yet, so we decided to use a portable tank, like a tanker, to refuel from the tank into the truck, until we can get a municipal permit. They told us it could take as long as six months to a year before we get a municipal permit.
The Chair: From which municipalities?
Mr. Robert: Boucherville, where we are, and Mississauga in Ontario. Those are the first two. Gaz Métro would like to install one.
We made a presentation two weeks ago. An MP from Rivière-du-Loup, Mr. Généreux, I think, supports having an LNG station in Rivière-du-Loup because he feels that the Irving Oil people who control LNG in the Maritimes would make a station available there so that trucks could travel from the Maritimes to Rivière-du-Loup and from there eventually to Quebec City, where we have accepted that they can fuel at our place, and from our place then on to Toronto and back and forth. However, we need to have this installed and supported by the municipalities. This is the struggle we have right at this moment.
[Translation]
The Chair: Do not give up; hang in there.
[English]
Mr. Robert: I have spoken to the environment ministry of the Quebec government, and they are slowly trying to get out of the picture, recognizing that the practice we are implementing is based on the best practice in Western Canada and in the United States.
Now there is another player in the picture in Quebec, the people responsible for housing or something like that, who are looking over the city with respect to the environment and so on. This follows the big problems Toronto had with propane about six or eight months ago; they had a big explosion. We explained to them that LNG and propane are totally different, two different worlds.
The Chair: Yes.
Mr. Robert: As I said, something has to be done nationally to say that this is the best practice and everybody has to obey according to this. As long as you obey these standards, you go; that is it. We will conform to this.
The Chair: Sir, I will ask you to try to keep your answers short. I have three senators on my list of questioners.
Senator Peterson, Senator Neufeld and Senator Massicotte, you have one question each. I apologize, but we have two other witnesses to come before lunch, and we are already 45 minutes behind. It is not like in Ottawa.
Senator Peterson: Thank you for your frank and insightful presentation. It is rather astounding when 60 per cent to 70 per cent of the greenhouse gas emissions are transportation and you have all this push back. It is just incredible. You told me earlier that your trucks have to be manufactured in the United States because we are either too lazy or too inept to come up with our own standards. It is crazy.
What are the major differences in building a refuelling station for LNG as opposed to diesel? Why would it be so difficult? Or maybe it is not difficult, but why is it perceived as difficult?
Mr. Robert: I do not have any clue. As you know, the tanks themselves are very strong, cryogenic tanks. The walls are that thick. The possibility that the tanks will explode is mostly from Mission Impossible. You could break a hose, and if you break a hose the tank will empty out very slowly until you close the valve. As it touches the ground or it does something, it will be gone in the air. We do not understand, to be honest with you.
The Chair: You are right on the money here, and I think you can see and feel from us that we are listening carefully, and we are shocked. However, we do understand that Premier Charest has bought into your project and that they have given you a tax and other amortization incentives. Can he not give a directive to the government saying, "Look, facilitate this thing. Make Monsieur Robert smile"?
Mr. Robert: Well, as I said earlier, I think the bureaucrat has a lot to do with it. As you know, when you try to move something, even if you have a minister or something like this pushing an issue, quite often nothing happens. That is because we have to go through all the steps of the bureaucracy. It is so frustrating for the minister and everybody like you.
The Chair: Yes.
Senator Peterson: I applaud you for soldiering on, in spite of all these difficulties. Congratulations.
Senator Neufeld: Mr. Robert, coming from British Columbia, I have been an advocate for LNG for transportation fuels for a long time. I do not come from Vancouver; I actually come from Northern British Columbia, where we produce it. I spent 25 years in the trucking industry. I can relate to almost everything you spoke about and the frustration you have.
Mr. Chair, you reminded me when I was questioning the other people that in Quebec there is an old saying that you do it right. Maybe with Mr. Robert's problem here we could try to get that done right, because we have done it right in B.C. and Alberta already. That is just a point to put on the table. I think it is great that you are using Westport, a British Columbia company.
I do not really have a question for you. I just want to say that we need a person like you to talk not only to the government but also to the environmental movement, which actually wants to curtail the drilling of natural gas and the production of natural gas. We need it in our transportation fuels, just simply for the greenhouse gas effect. I would love it if you would do those kinds of things, because you actually come from the ground, where the wheel turns, where the rubber hits the road, and I can appreciate all those things you say that you have talked to us about. However, you need also to work on the environmental movement with us.
The other thing is to be careful what you wish for, because you do not want the federal government to regulate everything. Hours of service might work for long haul truckers, but it does not work in the oil and gas industry, not worth a darn. I just remind you of those kinds of things.
Mr. Robert: Oh, no, I know.
Senator Neufeld: Sometimes we get something that we do not want.
The Chair: What you said is interesting because the next two witnesses are from the environment movement, and they are listening carefully.
You have the last quick word, Senator Massicotte.
[Translation]
Senator Massicotte: Thank you very much, Mr. Robert. My question was answered, and I would just like to make one comment.
I want to thank you for your efforts. It is clear that you are making a difference in your industry and within society. Do not give up the struggle. These problems involve red tape, and we are also going to try and provide whatever assistance we can from our end. So, congratulations to you, and keep up the good work!
Mr. Robert: Thank you.
[English]
The Chair: Mr. Robert, you have a tremendous initiative here. We are listening carefully, and if we can help you in any way, keep us informed.
[Translation]
Please do not give up, Mr. Robert.
Mr. Robert: Thank you very much.
[English]
The Chair: Senators, I am pleased to present our next witness.
[Translation]
Welcome, Mr. Bonin. Patrick Bonin is the Coordinator of the Climate and Energy Campaign for the Quebec Association to Stop Atmospheric Pollution.
[English]
This means, colleagues, that he leads the charge against atmospheric pollution.
We appreciate your coming this morning, Mr. Bonin. I will not go into more detail as I am sure you will tell us about your organization.
[Translation]
Tell us about yourself, as well as your arguments and ideas with respect to our study. Please proceed.
Patrick Bonin, Coordinator, Climate and Energy Campaign, Quebec Association to Stop Atmospheric Pollution: Thank you, Mr. Chairman. And thank you all for being here today. I will be making my presentation in French. However, I will be available to take your questions in English, if you prefer.
I am the Coordinator of the Energy and Climate Campaign for the Quebec Association to Stop Atmospheric Pollution or AQLPA. I should also point out that I am a director of Action Climate Network Canada, which represents more than 85 Canadian NGOs working on climate change issues.
I am also the AQLPA delegate to UN international conferences on climate, the last two of which took place in Cancun and Copenhagen, as you surely are aware.
Unfortunately and fortunately, we were contacted last week about making a presentation. As a result, I did not have time to finalize a brief. However, for the most part, the notes and references I mention today will be available to you in a few days.
The Chair: And please feel free to forward them to us.
Mr. Bonin: Absolutely.
The Chair: As soon as you can.
Mr. Bonin: The AQLPA, or Quebec Association to Stop Atmospheric Pollution, was established in 1982. Initially, its mission was to combat acid rain. That mission evolved, such that we now focus on atmospheric pollution. That means working on all the issues associated with atmospheric pollution including, of course, pollutants that affect health, the environment and the CO2 level — greenhouse gas emissions, in other words.
We have been part of many — indeed, all — of the major debates in Quebec on energy, starting with a public debate on energy in around 1995, and the debate in Quebec in the early 2000s about the natural gas power plant, Le Suroît, which led to a complete shift in Quebec in terms of energy and, therefore, a shift towards renewable energy.
To begin with, I want to say that we are very pleased to note that the Senate committee is taking an interest in our energy future, as this is a critical issue.
I would also like to point out, right from the outset, that we find it somewhat illogical that we are appearing before you in a context where the only federal bill to come forward, Bill C-311, was defeated by the Senate with no debate whatsoever on the issue, even though it had been passed by members of Parliament in the House of Commons.
There is a real lack of understanding on our part as far as this is concerned, and I invite you to comment on this. We saw it as a major piece of legislation. It was the first bill that enabled us to set credible, scientifically-based targets on climate change, and it was the ideal place to address energy issues. We are struggling to make the connection between the current consultation and the bill's unilateral rejection by the Senate. Other than Senator Brown, to my knowledge, you are all unelected, however respectable you may be, and yet you voted down a decision by elected members of Parliament. I would be interested in hearing your comments on that later on.
The Chair: There are several sides to that coin. We will leave that issue for later. However, we have noted your comments. If the bill did not pass, it was really the fault of my colleague here. No, that is not true.
Senator Mitchell: It is not true.
The Chair: This is an issue that was resolved in another forum, but you have made your views known.
Mr. Bonin: Indeed. Thank you. To begin with, I would like to describe the current international context as regards action on climate change. As you know, the Intergovernmental Panel on Climate Change, or IPCC, acknowledged back in 2007 that human activity is responsible for most of the global warming we are now experiencing.
There are also a number of indicators. The National Oceanic and Atmospheric Administration in the United States has identified ten indicators that confirm global warming trends. They are physical indicators relating to the temperature over the continents, the temperature of the continents and the oceans, as well as ocean levels, temperature, overall humidity, the general tropospheric temperature and many others as well. I would be pleased to provide those ten indicators to you; they clearly show the global warming that is currently affecting us.
Like other countries, Canada had its warmest winter yet last year. There is some variation, but we are talking about four to six degrees higher for Canada. That is one reality of climate change, and as I say, the IPCC has been quite clear on that.
Canada recognized the importance of action on climate change when it signed the Climate Change Framework Convention. More recently, Canada signed the Kyoto Protocol — which, unfortunately, has not been respected and still is not respected by Canada — and also signed the Cancun Accord not long ago, in December.
The Cancun Accord recognizes, once again, that an increase of two degrees Celsius should be the limit in order to avoid catastrophic climate change globally.
If we look at what those two degrees Celsius mean for developing countries, we are talking about a 25 to 40 per cent reduction in greenhouse gas emissions over 1990 levels by 2020.
The Chair: I just have a question. Were you here for Mr. Robert's presentation?
Mr. Bonin: Yes.
The Chair: Before you finish, perhaps you could comment. He says he is making a considerable effort to help governments achieve their greenhouse gas reduction targets. Do you have any comment to make on Mr. Robert's testimony? Please continue. Forgive me for interrupting.
Mr. Bonin: Of course. I will respond to Mr. Robert's arguments, which I do not agree with for the most part, for several reasons, including the current framework and method being used to develop shale gas in Quebec, something which has ignited a very heated debate.
Continuing my presentation on the global reality, at the present time, the targets which were on the table at Cancun call for global warming of 3.5 degrees Celsius.
I do not know whether that is why you are laughing, Mr. Brown, but 3.5 degrees Celsius is 1.5 degrees higher than the 2 degrees Celsius set internationally. And, again, that is to avoid catastrophic climate change.
At this point, despite what is on the table, according to the IPCC, all the industrialized countries, including Canada, will have to strengthen their targets in order to have a 50-50 chance of avoiding the 2 degrees Celsius. We are far from having accomplished that for the time being, either nationally or internationally.
That is particularly the case since Canada had no climate change plan of action. Even more so because, if you look on Environment Canada's website, it says that Canada has barely achieved one third of the target it set, which was 17 per cent below 2005 levels by 2020.
Just last week, the Chief Economist for the International Energy Agency stated that the international target of 2 per cent will not be met, primarily for two reasons: the lack of leadership on the part of countries that should be acting as role models in reducing emissions, and also, the emergence of shale gas at the international level.
I will not comment on the lack of leadership, knowing full well what is happening in Canada these days. I think my position on that is clear.
On the other hand, as regards shale gas, what is currently occurring and, according to the International Energy Agency's chief economist, the emergence and abundance of natural gas on the market, because of the possibility of developing shale gas, are hindering the emergence of renewable energy sources at the international level.
He cites the example of the United States, saying that investment in renewable energy last year dropped by 50 per cent because of shale gas development.
So, we are seeing natural gas compete with other renewable energy sources that we should be moving towards. In terms of the 2020 targets we discussed, I have to point out that the IPCC is talking about an 85 to 95 per cent reduction in emissions for industrialized countries. That means practically zero emissions in industrialized countries in order to avoid catastrophic climate change.
I know that you met with officials from Questerre yesterday. I do not know whether they gave you an overview of what shale gas development in Quebec actually involves. This is an area of 10,000 square kilometres between Montreal and Quebec City, south of the St. Lawrence River, between the St. Lawrence and Highway 20. It is the most densely populated area in Quebec, or just about. It includes farmland and is very densely populated.
We are talking about 10,000 wells that they would like to develop in Quebec, with huge environmental impacts, in terms of both air and water quality.
The Chair: You say they are planning 10,000 wells?
Mr. Bonin: Yes, 10,000, 15,000 or 20,000 wells; the number has not been determined.
The Chair: So far there are 30. Is that correct?
Mr. Bonin: So far, there are 30, 12 of which have had leaks or produced emissions, including of methane, because methane is the only emission that is currently quantified.
This is right in the centre of Quebec. We will be dealing with this for 200 years; so there is a problem. If we accept the idea that by 2050, we should practically have wiped out all our emissions, we have far too much natural gas.
From an environmental standpoint, it is clear that people know little about the life cycle analysis of shale gas. In fact, there is very little analysis available. I can give you the most recent example: last November, the Environmental Protection Agency in the United States produced a study with recalculations based on oil and gas production emission factors. They doubled the level of emissions attributable to oil and gas production in the United States in their inventory, simply because they had underestimated development-related emissions, including emissions from shale gas development, where we are seeing an increase of up to 9,000 times what was expected. What that means in concrete terms is that the emissions released in Quebec in one year were added to the U.S. assessment, simply by changing the factors.
Currently, the Bureau d'audiences publiques en environnement in Quebec is reviewing the shale gas development issue. It has been noted that there is no data available on greenhouse gas emissions. The Ministry of the Environment has no data on the impact of greenhouse gas emissions or shale gas development because of leaks, of the pipelines and so on.
The Chair: Did you appear before the BAPE when it held hearings on shale gas development?
Mr. Bonin: Yes. The AQLPA presented a relatively comprehensive brief with a plan that would potentially allow for intelligent shale gas development to occur in Quebec.
I want to point out that, at this time, a petition that has been signed by 130,000 people has been presented to the Quebec National Assembly demanding a moratorium on shale gas development. Why? Well, precisely because there is no information available.
I quickly touched on greenhouse gases. Basically, the EPA study mentions that, according to the new figures, the difference between natural gas and coal is possibly nil, or barely 25 per cent, based on an analysis of the entire life cycle. I will be pleased to forward those studies to you.
The Chair: And has that been proven scientifically?
Mr. Bonin: With respect to coal?
The Chair: Yes.
Mr. Bonin: The comparison with coal?
The Chair: Yes?
Mr. Bonin: No.
The Chair: Are you saying the difference is nil?
Mr. Bonin: Well, depending on the study you are looking at. The study conducted by Professor Hobart at Cornell University considers that all the emissions related to exploration and development would mean that shale natural gas could actually emit more carbon. And again that is subject to the numbers that are used.
The Chair: Yes.
Mr. Bonin: Exactly. But that is the reality. If you are able to present us with something that clearly shows, in black and white, that there will be environmental gains in terms of greenhouse gases, we are obviously very interested in seeing that.
Another point to consider is that the EPA is currently conducting a study on the environmental impacts of shale gas; that study will be published in March of 2012.That is about the most comprehensive study available. Between now and then, we will be missing a great deal of data, and even the Institut national de santé publique in Quebec is saying the same thing — that data is sorely lacking.
The Chair: So, things are not going so well in Quebec when it comes to shale gas!
Mr. Bonin: Well, I would say that is the case all across Canada. If a decision is made to shift from coal, or other polluting energy sources, to shale gas, and that is deemed to be the solution, without our having any studies to rely on, we believe that is extremely problematic. I am talking here about greenhouse gases. In terms of air quality, it is quite clear; some modelling that has been done in Hainsville, in the United States, clearly shows the projections for 2,000 wells, and we are talking about a significant increase in polluting emissions, including nitrogen oxides and volatile organic compounds which create smog and, with increased periods of smog, all the health and environmental problems that go along with that. These are actual models based on approximately the same number of wells that is contemplated in Quebec. An air quality problem has been identified in that regard.
The Institut national de santé publique tabled a preliminary report which also talks about the lack of studies and the air quality problem as being a very serious concern.
I imagine that you have heard about the water quality issue associated with shale gas exploration. We are talking about the use of millions of litres of water for each fracturing; tons of chemicals are injected underground with every fracturing; we are also talking about possibly 50 per cent of the water products and chemicals remaining underground once the fracturing has occurred, causing potential water flow problems from the low strata to the higher strata.
In that regard, I will be very pleased to table a document prepared by Mr. Durand, a retired professor from the University of Quebec in Montreal, who tabled a brief with the BAPE on that subject.
The Chair: You will soon be hearing from the representative of Horne Lake Development in British Columbia, who may not share your opinions. But this is important, and we have made a note of it.
Mr. Bonin: Ultimately, we think there has to be jurisdictional management of energy. As you are well aware, energy falls within provincial jurisdiction. At the same time, there are federal powers and responsibilities that are related to energy.
In that sense, if you are contemplating a pan-Canadian energy policy, it must be developed in cooperation with the provinces and based on what the provinces are doing, fully respecting their powers and jurisdiction.
The federal government does have a role to play, if only with respect to greenhouse gases, where it happens to be the major player. The federal government should also be looking at the different air quality standards, surface waters, grants and tax measures.
At the present time, oil and gas companies all across Canada are receiving some $1.4 billion, if not more, in the form of different grants or tax breaks. I am sure you can understand that, if you support a budget with these kinds of measures, that is extremely problematic for us, knowing that 70 per cent of Canadians are against that type of funding.
In closing, I would like to come back to the issue of offshore drilling, with respect to which you recently published a report entitled Facts do not justify banning Canada's current offshore drilling operations.
As members of the St. Lawrence Coalition, which is looking at offshore development, we were very surprised by this report and its conclusions, because if you look at what is happening around the world, in the wake of the BP disaster, it is exactly the opposite. People are talking about the need for more caution, and yet the message from the Senate committee goes in the complete opposite direction from the global trend.
There is a strategic environmental assessment underway in Quebec on offshore oil development. It is important to look at this and review the scientific assessments that have been done. The last strategic environmental assessment on the St. Lawrence River resulted in a moratorium on oil and gas exploration and development in the St. Lawrence.
The upcoming strategic environmental assessment will deal with the Gulf of St. Lawrence. I think that it would a good idea for your committee to look at that report, as soon as it becomes available.
In closing, I would like to comment on Mr. Robert's presentation. A study will be published in March analyzing opportunities for Canada if it makes the shift from coal to natural gas, as one of the options. According to the responses or recommendations that I have seen thus far from the study, it talks about a minimal decrease in greenhouse gas emissions for some of the reasons I referred to earlier with respect to shale gas. It is important to consider all the investments that would be needed to change the infrastructure and make modifications, and that would probably result in a reduction in emissions of barely 25 per cent over a certain period, by which time we should be much further ahead. So, investing money in supporting non-renewable energy sources like shale gas is questionable. There are currently other alternatives in Quebec, including biogas and biomethane produced from residual material, which is a renewable resource and far less damaging for the environment in terms of life cycle, as well as producing fewer greenhouse gas emissions.
Senator Mitchell: Thank you very much, Mr. Bonin. I must say that I share your passion and your frustration with the meagre progress that has been made on climate change.
I should also say that when the Chair said it was my fault that Bill C-311 was defeated, he was only joking.
I sponsored that bill and was terribly frustrated with the result. Liberals voted in favour of Bill C-311.
[English]
Having said that, I am very concerned with climate change, as you are, and I just cannot understand why we cannot do more. There are economic advantages to fixing it; there are competitive advantages in the world; there is leadership in the world; and there is our place in the world.
I get frustrated with your side, your presentation in a way, because every time a solution is proposed for climate change, there is always a problem. It comes often from the environment groups: We cannot do nuclear because there is danger with waste; we cannot do hydro sometimes because it will ruin vast tracts of land; we cannot do wind because it creates health problems or kill birds; we cannot do solar — even now it has been displaced in the U.S. in certain places — I am exaggerating for emphasis, perhaps; we cannot do LNG because of what you have just argued.
However, first, let us just say that the studies against using LNG — namely, that it is not an advantage over coal — are very thin because I think the preponderance of evidence will show that it will be a great advantage. Second, let us say that we have every truck in this country using LNG and that the government policy is to support other forms of alternative energy also, underlining that LNG is a transition field.
We have to be practical in the political sphere. We have to bring in practical policies. We cannot fight and undermine every single solution. I think, with all due respect, that you limit the possibilities and frustrate those in business and government who want to do something concrete; when everything is wrong, nothing works.
Ultimately, you are driven to the conclusion that we can only use very limited forms of energy that are not in any way, shape or form competitive, and that are not even practical in many ways. I am saying this as someone who cares deeply about where you are coming from and wants to do as much as you want to do. Could you comment on that?
[Translation]
Mr. Bonin: We are facing a potentially catastrophic situation globally; we have to find a solution. You are proposing solutions whose environmental impacts are unknown and about which we have very strong suspicions that they may well create even more problems in terms of air quality, water quality and greenhouse gas emissions.
You say that there are no solutions, that no solutions are being proposed — that is an argument that is trotted out over and over again by the industry. It is a PR strategy aimed at environmental groups in Quebec with respect to shale gas development. It is completely wrong.
We have proposed and actually put on the table millions of different solutions. There are sources of renewable energy out there: we have a wind potential of approximately 4,000 megawatts in Quebec; nothing, or practically nothing, is being done in Quebec in terms of energy efficiency; we could easily electrify the vehicle fleet by 2020, by introducing different levels of electrification. Geothermal energy, solar energy and biogas, which I referred to earlier, all exist.
They say we object to everything, but that is not true. We object to bad or phoney solutions, or solutions that are put forward without being supported by documentation that tells us what the environmental impacts will be.
Right now, that is the only problem. We are not saying we are against shale gas; we are calling for a moratorium because we do not have the information we need in Quebec to make informed decisions about shale gas. Our position is that we should proceed with caution, have the data in front of us, and apply the precautionary principle which says that, when you are not certain, when there is a risk that what is contemplated will cause problems or even have catastrophic consequences, you do not move ahead until you have the scientific data; and the lack of scientific data is not a reason to go ahead.
I am very sorry to hear you say that we are against everything. I could present a whole range of solutions, but it really is the federal government doing absolutely nothing on climate change. It does not even have a plan of action. And you say it is environmentalists who are preventing progress?
I am sorry, but you should take a look at what is being done these days by federal members of Parliament, and compare that to what is going on in a Senate committee which rejected the only bill we had, and which would have prompted people to ask questions about what is being done now and what the solutions are.
[English]
Senator Banks: Mr. Bonin, there are those of us here who are sympathetic to many of your views but who also understand what Senator Mitchell has just said. You said that you can bring up a poll that says that 70 per cent of the people are opposed to that kind of development.
Mr. Bonin: I meant subsidies, sorry.
Senator Banks: However, 100 per cent of the people like to be warm in the wintertime and like to drive their cars, but that is an aside.
You said that you have some studies that show that shale gas might be as bad for the environment as coal. Would you please forward them to the clerk when you can so that we can have them?
You do not need to refer to them now; just send them to the clerk, please, so that we can have them because I think we would find them very interesting.
Senator Peterson: Thank you for your presentation.
Salvador Dali said that we should not worry about perfection because we will never achieve it.
You talk passionately about climate change, which is greenhouse gas, and that is good. Sixty per cent to 70 per cent of it has been attributed to transportation. Why would your group not become a champion for Robert Transport?
Mr. Bonin: For what, sorry?
Senator Peterson: Robert Transport and their efforts.
Mr. Bonin: In Quebec it is 43 per cent of GHGs comes from transportation.
The Chair: That is a high number.
Mr. Bonin: It is high, and it is problematic. In the rest of Canada, it is a bit less.
We are obviously working on transportation; this is now our mission. Mr. Robert said that LNG as a solution is white, and there is no question about it. That is what I heard. This is not what I see when I look at Réseau des ingénieurs du Québec, the engineer network in Quebec. They have questions about using LNG in trucks because of where the gas is coming from. Is it coming from shale gas in Quebec, where we do not know what the possible impacts are? I do not see where it comes from, but there are impacts.
Also the network of the engineers — and I can give you that reference as well — have concerns about leakage. I do not know if Mr. Robert is there to come in to talk about it, but I think he had enough time, so I will take my time.
[Translation]
There are problems with the way the valve functions: the engineers say that the valve has to let out more pressure, which releases methane emissions into the atmosphere. Methane is 21 times more powerful as a warming factor than CO2, and, in the short term, it is 78 times more powerful a factor than CO2. The issue for the planet, if we want to avoid catastrophic climate change, is to cap emissions in 2015 and reduce them after that. If we release methane into the atmosphere that is 78 times more powerful a factor, we are not helping ourselves in the least.
Canada has begun to take action by introducing improvements for things like heavy vehicle transmissions, but there are other ways of making far more worthwhile gains, such as through aerodynamic design or working on tires, versus giving huge subsidies to encourage an industry we are not absolutely sure of.
LNG might be an attractive option if it uses biogas — in other words, gas from landfill sites that is recovered, captured and used; not by taking fossil fuels from underground and releasing them into the atmosphere.
That is the problem at this point. We must not put that back into the atmosphere. We agree with the concept of capturing the methane and producing biogas. However, we have to ask the right questions and bring forward solutions once we have given thought to all these issues.
[English]
Senator Peterson: Do not forget my opening statement. We have to do something because just sitting around and doing nothing is not good.
Senator Lang: I appreciate the passion that you obviously feel about the issue. At the same time, I think it is safe to say on behalf of the general public that we expect organizations such as yours to bring constructive, logical, reasonable alternatives forward if what we currently do to meet our present energy needs is doing the things you say to the environment.
The environmental movement is becoming big business around the world, and to some degree, with some justification. It is a major concern to all of us. We all have to breathe 24 hours a day.
I would like to know how many members you have in your organization. Where do you receive your financing, and do you receive financing from outside the country, indirectly or directly, to run your organization?
[Translation]
Mr. Bonin: We have approximately 15,000 members in Quebec, and possibly more. We receive funding as a non- profit organization. To my knowledge, however, we do not receive any money from outside the country. We receive statutory funding from the Quebec Ministry of the Environment. In fact, it is a joint program with the Quebec Ministry of the Environment. Otherwise, we self-fund our activities through various projects. We do not receive any funding from special foundations or other organizations.
The Chair: Senator Neufeld is the senator from British Columbia. He is well acquainted with the Horne Lake project.
[English]
Senator Neufeld: Thank you for your presentation. I appreciate your passion, also.
Mr. Robert said that using LNG in the transportation industry would reduce the greenhouse gas emissions by 25 per cent, which is a significant reduction. Would you agree that that is a step in the right direction? I do not want to talk about shale gas because that is a different thing. However, would you agree that we should be pursuing those kinds of things?
[Translation]
Mr. Bonin: We must aim for lower greenhouse gas emissions, and if it is a 25 per cent reduction, that could be valuable. However, we have to be sure that they are real reductions and that they can be achieved at reasonable cost without compromising the development of other alternatives, that might allow us to do that at a lower cost and with less impact.
[English]
Senator Neufeld: That would be a great thing that you could present to us. You could present something that would cost less and have a lower impact when moving goods all across this great nation, North America or around the world other than what we use today. Tell us if there is something we can use that is better.
Are you aware that we have been producing shale gas in British Columbia for quite a few years now?
Mr. Bonin: Yes.
Senator Neufeld: It is in its infancy, I guess you could say. It started in the Barnett shale field in Texas some 10 to 15 years ago, where they developed the technology. You talked about shale gas. Shale gas and natural gas are the same thing. They will have different components where they come from in different strata, but they are exactly the same thing.
Are you comfortable with us continuing to drill for that gas in Western Canada, both in Alberta and British Columbia, and continuing to pipe that to Quebec, or would you like to see Quebec have an opportunity to develop a great resource of shale gas that is said to be there — it is still not proven — that could be economically viable? It would help the province and create many jobs. Would that not be a good idea?
[Translation]
Mr. Bonin: Right at the outset, there is a major difference between the exploration and development now taking place in British Columbia and what is being done in Quebec. In Quebec's case, we are talking about the most densely populated region in the province and one which is at the centre of Quebec's history, a farming area. And what is contemplated is the construction of three or four wells every square kilometre, along with a pipeline system. With 10,000, 15,000 or 20,000 wells, just imagine the kind of pipeline system that would have to be built and the disruption that would cause. That is why people are saying: "Wait a minute. Where are we going with this? Tell us exactly what we are talking about." The reality is not the same as in Northern British Columbia.
That said, it may be that you went ahead with this too quickly in British Columbia, without a proper assessment of the environmental impacts. All the studies have to be considered. Just last week, France decided to place a moratorium on shale gas exploration and development because they see that there are issues and questions that have yet to be answered.
In the United States, they have put millions of litres of diesel underground. They had to suspend the Clean Water Act and the Clean Air Act in order to go ahead with shale gas development. If that is what is needed in order to go ahead, well, you can do that in British Columbia because you make your own decisions, but in Quebec, that is not an option. The people of Quebec do not agree that it is appropriate to go ahead showing total disregard for the environment and without knowing about the environmental, social and economic impacts.
At this point in Quebec, no economic gain is contemplated, or almost none. The figure that has been advanced is $200 million in yearly revenues for Quebeckers, and out of that $200 million would have to come whatever amounts are needed to pay for roads, health problems, social costs and water decontamination. The social and environmental costs are such that this project is not even attractive in economic terms.
If you are able to provide us with a strategic plan saying that, yes, you are going to be serious about this, that there is a global climate change problem, that you are going to set targets as a government and develop a coherent energy strategy that will enable you to achieve those targets, I may be prepared to come on board at that point. Yes, that could work.
However, we are not just talking about climate change. We have to see what is happening with the air and water. If you present a climate change policy which reflects the science, and an energy policy which is closely aligned with it, we will not oppose that.
Thus far, however, you have rejected the only policy we could have had, the only legislation on climate change, and you are attempting to develop an energy strategy which will be aligned with what, exactly? We have no idea. You can say what you like, but we want a coherent plan for Canada, and for Canada to take a position and work with the provinces, At the present, however, that is not the case.
[English]
Senator Neufeld: You need to actually come to British Columbia before you make those kinds of statements and figure out exactly what is happening on the ground. I know it probably would not be positive — I can almost bet on that — but we do have some pretty good controls in place; we do have the Climate Action Plan in place. We are the only province in Canada that has a revenue-neutral carbon tax. We have a whole bunch of things in place. Before you say that British Columbia is bad, you should come and have a look.
Mr. Bonin: I am not saying that British Columbia is bad. I am saying that you can go with it if you want. However, in Quebec, we are seeing problems exist with shale gas exploitation. We do not want to go quickly into that development without knowing the impacts.
The Chair: That is a good point, sir. We have heard and read the newspapers about the Premier of Quebec saying that there will be no development of shale gas in Quebec until they are convinced and satisfied that it will be done in a safe way.
We have your testimony, and we hear that also, so for the moment, I think things are probably okay.
[Translation]
Because of limited time, we will now move on to hear from our witnesses from Greenpeace who, I imagine, basically share your views.
For now, our doors are always open in Ottawa. We would like you to come and see us, and if you have something to say, we are always ready to listen. Thank you very much for your testimony, Mr. Bonin.
Mr. Bonin: Thank you very much.
[English]
The Chair: We will now hear from a very patient man, Mr. Éric Darier.
[Translation]
Mr. Darier was here this morning at 8:00 a.m. and had several cups of coffee with us. I want to commend you for your patience, Mr. Darier and, I imagine, for your exceptional interest in climate and environmental issues.
Mr. Darier, I would like to wish you a very warm welcome to the committee. As I understand it, you are the Director of Greenpeace in Quebec. You submitted a brief.
[English]
We all have it, I think, in the two official languages. We are looking forward, frankly, to what you have to say, sir. Without further ado, you have the floor, and then we will try to give you as much time as we can.
[Translation]
As you can see, our clerk is very strict with me because it is rare for us to be here in Quebec, and we want to hear from all our witnesses. Please proceed, Mr. Darier.
Éric Darier, Director, Greenpeace in Quebec: Mr. Chairman, thank you for inviting me to appear today, and especially for this opportunity to talk to you about Canada's energy future.
Before moving directly to the subject of today's discussion, I would like to first welcome you to Quebec and let you know that a petition bearing more than 120,000 names and calling for a moratorium on shale gas exploration and development in Quebec will be presented today in the National Assembly.
For your information, this petition, generated using the petition system at the National Assembly, is the second largest petition based on the number of signatures. The first one was the petition calling on Premier Jean Charest to resign. A moratorium would be an opportunity to step back and obtain more detailed information.
The Chair: Perhaps you hope that today's petition will have more of an effect than the one concerning Mr. Charest?
Mr. Darier: Yes. I think it is a question of time.
The Chair: But I believe he is still there.
Mr. Darier: Yes. It is always a question of time in politics, as you know.
The Chair: Exactly.
Mr. Darier: A moratorium would be an opportunity to take a step back and gather more detailed information about the impacts of shale gas development. It would also give us a much needed period for reflection to ensure that we develop the best possible energy strategy, one that would reflects both environmental constraints, such as climate change, water quality and air quality, and greater energy independence as part of our economic strategy.
Greenpeace is inviting you to start a real energy revolution. To that end, we sent you a document, in both languages, called Energy [R]evolution, which you have received. It is a 12-page summary.
That document you already have summarizes a more detailed 120-page study. I was very pleased to hear some of the previous commentary. Here is the plan: you have alternatives and there are many of them, laid out in those 120 pages, explaining how Canada can move away from dirty energy, like fossil fuel-based and nuclear energy, by 2050.
This study, which was adapted to Canada, is based on an international study carried out by Greenpeace and the European Renewable Energy Council. It provides a blueprint for building a future based on renewable strategy around the globe. It identifies ways of gradually phasing out fossil fuels and reducing CO2 emissions, while at the same time guaranteeing energy security by providing energy to 2 billion people with no access to electricity and creating millions of green jobs around the planet.
The Energy [R]evolution Scenario shows how renewable energy sources could provide 96 per cent of the electricity produced in Canada and meet 92 per cent of our total heating demand by 2050.
I would just like to mention, as an aside, that all of this is based on technology scenarios which currently exist and technological innovation that is already available. These are not abstract concepts.
If followed, this scenario creates 72,000 jobs in the renewable energy sector between now and about 2030. The total savings in fuel costs could be as high as $228 billion, or $5.3 billion a year in Canada.
Canada can undertake an energy revolution by developing energy efficiency and renewables, while gradually phasing out its coal-, oil- and nuclear-based sources of energy supply.
The solution is to massively invest in renewables and in local communities able to develop them. However, continuing to subsidize polluting fossil fuel-based energies will not put Canada on the road to a green energy future.
To successfully combat climate change, an energy revolution is critical. As has already been said, that revolution is already underway at the international level, and even here in the country, since renewable energy markets are emerging.
In the first edition of the Energy [R]evolution, published in January 2007, Greenpeace was predicting renewable energy production potential of 158 gigawatts by 2010. However, much of the heavy lifting remains to be done — in other words, making radical changes to the way we produce, distribute and consumer energy.
This new paradigm is the focus of the Energy [R]evolution scenario, which really means, in terms of some of the important components, energy efficiency and electrified transportation.
The Chair: These examples you are giving are the key components of the energy revolution you are talking about?
Mr. Darier: Indeed, and you have all the details in those 120 pages. I have no intention of reading all 120 pages. In fact, energy efficiency means reducing total energy consumption by 38 per cent. It is really all about saving energy and using it efficiently. As you said, electrified transportation is important, because the transportation sector is a major contributor of greenhouse gas emissions, as is cogeneration, in cases where it is appropriate, of course.
The Chair: Are you aware of the fact that we agree with you that there must be an energy revolution?
Mr. Darier: Absolutely, and I hope we can come up with a plan.
The Chair: We share your views regarding the need to find ways of doing that.
Mr. Darier: We have to make the transition. I also think there is a need for renewable electricity, renewable heat — geothermal but also solar energy. There is a tremendous need as well for efficient transportation.
In terms of renewable primary energy, we think that, by 2050, 74 per cent of primary energy demand will be made up of renewables, compared to 15 per cent today. And, obviously, we are also talking about the gradual phase-out of the tar sands by 2030.
The Chair: That is another revolution — the advanced energy revolution?
Or is it the same one, just later on?
Mr. Darier: In fact, there are different scenarios depending on the direction we want to take and how quickly we want to get there. That is it, basically.
The Chair: I see. Thank you.
Mr. Darier: These scenarios associated with the energy revolution will create more jobs. By 2015, an advanced energy revolution — in other words, the most advanced scenario — would lead to the creation of more than 67,000 jobs in the renewable energy sector.
The Energy [R]evolution scenario would create some 52,000 jobs in the renewable energy industry, again by 2015.
In conclusion, we must first move away from fossil fuel-based energies by 2050 and start preparing the transition right now — I hope that will begin right here, today — in other words, how we are going to achieve this. If we want to be successful, we must start immediately.
Second, the $1.4 billion in subsidies currently paid to oil companies must be terminated, and you will have a good opportunity to do that. If you want some work, the federal budget will soon be brought down, and the Senate has an important role to play with respect to the budget. It would be a good idea to take away those subsidies for oil companies that are already making quite substantial profits, thank you very much, and are not in need of public subsidies. That $1.4 billion could be redirected to the renewable energy sector and energy conservation, for example.
Thirdly, we must provide incentives to use clean and renewable energy, rather than the oil sands. That includes offshore oil — we are talking about Old Harry here — or Arctic oil and, of course, shale gas.
In conclusion, we should be encouraging use of 21st century energy sources, not those that were in use during the last century. And we are counting on you to do that.
The Chair: Thank you very much, Mr. Darier. We appreciate your cooperation and your understanding of the time pressures we are under. I would like to give my colleagues an opportunity to ask their questions. We will start with Senator Mitchell, followed by Senators Brown, Lang, Massicotte and Banks.
[English]
Senator Mitchell: On the issue of renewable electricity, you say that the electricity sector will pioneer renewable energy, that 96 per cent will come from renewable, the bulk coming from wind and solar. Those sources of energy are not consistent, so they need to be complimented by something else. Are you suggesting that only 4 per cent would come from hydro?
Mr. Darier: No. It depends; first, some of the scenarios are based on a global scenario, and basically some of the Canadian figures and data that we could find were included into that model. Those were some of the figures showing that it could actually be done.
It varies enormously from province to province. Obviously, in Quebec, that 96 per cent is actually from hydro. We have to look at it, as well, in terms of the pan-Canadian vision; there is a lot of diversity, and it is a picture which is very regionalized.
Again, I think we will have to look at where it could come from, yes.
The Chair: Just so we understand, these are basically global figures, and you are trying to adapt them, is that correct?
[Translation]
Mr. Darier: Yes. In fact, the numbers with respect to the energy data were adapted to Canada. That gives you a direction. Obviously, we are talking about 2050. Will it be 90 per cent or 88 per cent?
I think it is important to have a vision, and that is the purpose here today — for the government to develop a vision in terms of the direction we want to take, and after that, the only thing left to do is plan the transition —
The Chair: Those are arrows.
Mr. Darier: — and determine how to implement it right away and what policies need to be developed. For example, I am suggesting that you do away with subsidies for oil companies, which do not need them, as a first step, and that those resources be redirected.
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Senator Mitchell: When you talk about abolishing subsidies of $1.4 billion to oil and gas companies, it would be a very powerful argument if those were clear cut cheques written to oil companies, for example, "Here is $1.4 billion, go out and do your business." However, the frustration I feel with that is that they are not clear cut cheques. I think they are a reduction in royalties. What is the standard royalty level, anyway?
Do you have any evidence of governments actually writing cheques to oil companies, which they are not writing to wind companies, if you see what I mean? It is so much more powerful a case than this reduction in royalties argument.
[Translation]
Mr. Darier: As senators, you are the experts. One of the primary responsibilities of the Senate is to examine budgetary and tax issues. I believe that indirect and direct subsidies to oil companies have been identified. This is the kind of work you could take on to ensure that Canadian taxpayers are not subsidizing companies that do not need that money, given that they are making huge profits, and that this public money is used to develop a long-term vision — which includes reducing our dependency on fossil fuels and redirecting those resources to areas such as energy efficiency or renewable energy, in order to send a clear message to the industry and investors in all sectors, and particularly the renewable energy and construction industries, because that means insulating buildings.
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The Chair: I think he has just written your speech.
Senator Mitchell: I was just going to say, I was across the way from the legislature, from Ed Stelmach. I think Ed Stelmach actually tried that because he increased royalties, and look what happened to him. It is not easy. Thank you very much.
Senator Brown: I am really impressed by your pamphlet. It seems that in spite of all the different energies you are talking about, your graph on page 9 shows that the best way to reduce the problems of both ESG and energy is efficiency.
If I read this graph correctly, it looks as though 60 per cent of everything that you have proposed is actual efficiency. I think that is a wonderful idea. Some of the car companies are responding to that now, and I know that there are washing machines, stoves and all kinds of things that have energy efficiency ratings.
I have to complement you on this graph because if that is your main goal, then I think it may be achievable.
[Translation]
Mr. Darier: Yes, all of this is based on technologies that are already available. Here we are not talking about things that do not yet exist or are not already in place. There are many other examples of European countries with a per capita gross domestic product similar to Canada's but a lower energy intensity. So, there are other models out there with respect to what can be done there. The future is really all about energy efficiency and conservation. That is a very concrete example, as you see there.
I would actually suggest that you read the 2006 Quebec Energy Strategy which very clearly identifies energy efficiency and conservation as the number one priorities.
Programs may be needed to enhance building efficiency and building conservation, which would have the advantage of creating a lot of jobs all across Canada in the construction industry. In my opinion, that is one of the most important things that should be done.
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Senator Brown: I would just further comment that your timeline here is reasonable as well because your graph starts at 2007. Of course, it is 2011 now, but take 10 years off, and you have 39 years. That would be the lifespan of virtually every appliance and everything that we are using. All of the cars that we use today would be gone, and we would have more efficient ones. I think it is a great idea.
[Translation]
Mr. Darier: Thank you. I also think it is important. Yes, it is spread over a 40-year period, but in order to achieve that, we have to start right now. We are counting on you to push this, because otherwise, we will not succeed.
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The Chair: I think you have a convert here. He might be one of the first big Alberta oil men to join Greenpeace.
Senator Lang: I note in your comments that you talk about phasing out nuclear energy, phasing out the oil sands and, obviously, you intend to lower the demand for energy in order for us to attain that.
You also said that you wanted to provide energy to the 2 billion people who do not have it already. You are saying that you are prepared to increase the energy to an additional 2 billion people from the 5 billion to up to 7 billion, is that correct?
[Translation]
Mr. Darier: Yes, it is. What is important, at the international and global level, is for a lot of people in southern countries to want to achieve the same thing that we do.
First of all, we have to allow people to escape extreme poverty. That is where new technologies — photovoltaic solar energy, for example — could be a solution in some southern countries and in certain places.
At the same time, however, this prompts us, as large energy users, to say: can we continue to enjoy a good quality of life while at the same time reducing the amount of energy we consume very substantially? The very clear answer in this document is yes.
For example, if Canada followed this scenario and succeeded in reducing its energy consumption by about 40 per cent, as suggested, or 60 per cent, if you include energy efficiency and conservation, that would send a message to southern countries that northern countries are also doing their share. That would result in greater energy fairness and enable many people living in southern countries to escape the extreme poverty they currently face.
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Senator Lang: What I do not understand, and perhaps you can clarify it for me, is that we will phase out the oil sands and phase out nuclear energy, yet we will provide more energy to an additional 2 billion people who exist in the world today, and we will have another increase of an additional 2 billion people. Therefore, we will provide more energy to an additional 4 billion people.
I do not know how you can say that we will be able to do this with solar energy.
[Translation]
Mr. Darier: No. There are many alternatives. Solar energy is one, but there are many other alternative energy sources. I believe you will be hearing from some witnesses this afternoon who will be able to give you more detailed information in that regard. It is feasible, though.
I would just like to remind you, once again, that the scenario developed by Greenpeace and the European researchers was based on technologies that are already available. There is nothing strange or far-fetched about these scenarios. In fact, they are based on technologies that are currently available.
It is tough, is it not, when you depend on something like oil and fossil fuels and are used to them, to imagine how you can possibly get along without them. Some companies obviously have no interest in losing their markets and therefore want us to remain dependent to a certain extent. But I believe there is now a consensus among scientists and experts, including Greenpeace, which is one of the organizations that prepared that report. There are also a lot of other reports that have been produced by other paragovernmental or environmental organizations which clearly show that there are alternatives.
So, it is simply a matter of thinking about the future, and perhaps thinking of the next generation, of your children and grandchildren, who will have to manage the climate change problem. It is about helping to put them on the right track now and envisioning a world that will not be the same in 2050, one way or another, and we may as well ensure that it is a better world and start planning it right now.
Senator Massicotte: Thank you, Mr. Darier, for being with us this morning. Your presentation is excellent and very instructive. It provides a great deal of information.
I recognize, and I believe the committee does as well, that the technology is available. There is always room for improvement, and we can achieve all the targets we set using today's technology. However, our concern is that there is a price associated with all of that.
Mr. Darier: Yes.
Senator Massicotte: Just look at the cost per kilowatt of solar energy in Quebec; it is four to five times the price of electricity. Wind energy is 100 per cent higher than the price of hydro.
So, the real issue is: will consumers agree to these changes?
If we follow your reasoning and think it is important, what I hope, in terms of the atmospheric impact of the tons of pollution we are releasing into the air. . . I think we can accept it, but there is tremendous resistance.
Look at the problems we are having in Quebec. The government continues to raise the cost of electricity ever so slightly, even though we are only paying about half of what other Canadian cities are paying, and possibly only one quarter of the price they are paying in New York or California. It is not about technology or logic; it is a matter of getting people to agree to pay that price.
The other question is: what technologies? Do you not agree that we can establish certain principles, along the lines of a certain percentage for wind energy and another percentage for solar energy; but why not let the market fight it out and why not let consumers decide what the choices they want to make?
As I see it, the solution has to be a price that includes all the costs for society, for the use of that energy and, rather than asking the government to impose things, I think consumers should be allowed to decide for themselves.
Consequently, the price must reflect the total cost for society of using a certain technology or a certain natural resource.
What do you think of my suggestion, as an alternative to a government allocation?
Mr. Darier: Thank you for your question. I have three quick answers.
Yes, the technologies exist. You heard about one this morning involving transportation in Mr. Robert's presentation.
I will leave it to one of my colleagues who will be appearing this afternoon, and who is an expert on transportation, to answer your question and present the reasons why this technology which was introduced to you this morning may not actually be the best way to reduce greenhouse gases. I will leave it up to him to answer your question, and I do suggest you ask him about that this afternoon.
The second answer to your question is: I think the role of any government is to develop a vision. That really means laying out where we are going as a society. The big problem now — and this has been the case for 20 or 30 years — is that there is very little in the way of vision.
There is some cynicism as well. We were talking about this earlier; there is some cynicism among people who are saying to themselves: we do not know where we are going. A government comes along and introduces a program; then another one comes along and takes that program away. The factor that is most disruptive for economic players is instability, and that also applies to citizens. It is very difficult to ask people to have a vision when sometimes — unfortunately, very often — their governments do not.
Let me give you an example: no one had heard anything about shale gas in Quebec until June of last year in the media. It was completely unknown. Then, all of a sudden, we see pamphlets coming out of both the government and industry, without there ever having been a societal debate. Now we are seeing the reaction.
If we at least had an idea of where we are going in terms of our long-term vision, maybe it would be possible to bring both the people and the economic players on board to make it happen.
What can be done, then? I think that finding an effective way to do away with the direct or indirect subsidies to the oil industry would be a good way to send a message, not only to the oil companies, which do not need these subsidies, but also to society as a whole. We should be getting the message out that we believe there has to be a transition to a time, post-oil and post-fossil fuels, where we will be focusing on energy conservation, energy efficiency and renewable energy.
I just want to say that since Germany introduced a feed-in tariff system — that means that consumers who buy photovoltaic energy, for example, are given the assurance that the electricity company will buy back, at a given price, any surplus electricity they produce. This has had a large impact on electricity production in Germany and has enabled the emergence of a whole sector providing renewable energy.
I think we should be considering very simple mechanisms that will bring people on board as well as motivating society as a whole, including the economic players. We must have a vision. Without a vision, where are we going? Otherwise, it will just be the status quo, and we will face huge problems.
[English]
The Chair: Good questions and good answers. The last question goes to Senator Banks.
Senator Banks: Believe it or not — I know you believe it — we understand those alternative sources of energy. We have heard about them from many people over many years.
The Chair: We have heard about the pros and the cons.
Senator Banks: One side and the other. However, we know that they exist and that some of them will produce energy. You are suggesting that we ought to reduce the subsidies to oil and gas companies — and we have heard that before too, today as well as at other times. However, would we not have to make subsidies elsewhere? For example, pursuing Senator's Massicotte's line of questioning, we know that presently the alternative sources of energy production are all more expensive than the existing ones.
The Chair: They are at least twice as expensive.
Senator Banks: Who will pay the difference? Do you think that it is politically possible that the people will say, "Oh, well, we think this is so important that we will pay that difference," or do you think that there has to be a subsidy moved from one energy production sector to another?
[Translation]
Mr. Darier: Thank you for your question. Indeed, the core problem is the transition. How can we make the transition?
What would be needed — and this applies to any emerging sector, whether it is renewable energy or something else — is a period of subsidization. I suggest that some of the subsidies currently being paid to the oil companies be transferred to the renewable energy industry. I think that would just be a first step, as part of a long-term vision. That is absolutely critical.
Many experts are available to tell you which technologies and which sectors are the most appropriate in terms of meeting energy needs with less environmental impact. That is the major challenge we are facing.
As you so rightly pointed out, the problem is not a lack of information. Rather, it is a lack of political will. We are counting on you to do what is needed: you are senators, you have already had a career, and you have nothing more to lose; so, do this for future generations. Please help Canada develop a vision of what needs to be done by 2050, and start that work now so that you can be proud of what you have accomplished.
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The Chair: Thank you for that final word.
[Translation]
Mr. Darier: Thank you.
The Chair: Mr. Darier, as I said at the outset, you are extremely patient. As far as we are concerned, you were worth the wait.
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The Chair: Your testimony was worth waiting for; it was excellent, and also these other documents.
Mr. Darier: Thank you.
The Chair: Colleagues, the formal meeting is adjourned.
(The committee adjourned.)