Proceedings of the Standing Senate Committee on
Energy, the Environment and Natural Resources
Issue 18 - Evidence - February 17, 2011
OTTAWA, Thursday, February 17, 2011
The Standing Senate Committee on Energy, the Environment and Natural Resources met this day at 8:07 a.m. to study the current state and future of Canada's energy sector (including alternative energy).
Senator W. David Angus (Chair) in the chair.
[English]
The Chair: Good morning. This is a regular meeting of the Standing Senate Committee on Energy, the Environment and Natural Resources. This morning we will continue our study on developing a framework for a strategic way forward in the energy sector.
Everyone seems to agree that there is a great need to develop some clear arrows and signposts for how Canada will develop strategy in the future in light of the huge population explosion around the world, the issues with climate change and the need for a more efficient system for more sustainable sources of energy.
We are well on our way with our study. I think we have interacted with you gentlemen from CAPP in the past and we are certainly looking forward to hearing from you today.
We started this study back in June, 2009, and issued an interim report called Attention Canada! Preparing for Our Energy Future last June. You are familiar with the dialogue that we believe we have successfully promoted in this important area of energy.
I would like to introduce the senators that you will be addressing and hearing questions from. My name is Senator Angus. I am a senator from the Province of Quebec and I am chair of this committee. From the Library of Parliament are our two valuable resource people, Mr. Marc LeBlanc and Ms. Sam Banks.
We have some visiting senators this morning replacing other senators. The first is Senator Mercer, from Halifax, Nova Scotia, who is sitting in this morning for Senator Peterson, from Saskatchewan. Also present is another fine senator from the Maritimes, Senator Robichaud, from New Brunswick. We are joined by Senator Massicotte, from Quebec; our clerk, Lynn Gordon, whom I am sure you have dealt with; Senator Neufeld, from British Columbia; Senator Seidman, from Montreal, Quebec; Senator Dickson, from Halifax, Nova Scotia; and Senator Brown, whom you must know well. Senator Brown is the only elected senator, coming from the great province of Alberta. Finally, we have another visitor this morning, who is one of our newest senators. We are delighted to have Senator Meredith, from Ontario, here this morning.
I am very pleased to welcome, by video conference from Calgary, the Canadian Association of Petroleum Producers, otherwise known as CAPP.
Mr. Dave Collyer was appointed President of the Canadian Association of Petroleum Producers on September 15, 2008, after serving as president and country chair for Shell in Canada. In his current position, Mr. Collyer is responsible for leading CAPP's activities in education, communications and policy/regulatory advocacy on behalf of its members, who represent over 90 per cent of the upstream petroleum production in Canada.
Dave Collyer, President, Canadian Association of Petroleum Producers: Thank you very much, Mr. Chair, and members of the committee. It is nice to see some familiar faces around the table and we very much look forward to having an opportunity to present to you and to have a conversation about some issues that we think are important to Canada. We are familiar with your study and I would like to contribute to that constructively, so I look forward to the opportunity to engage this morning.
Thank you for the video conferencing opportunity, which helps us from a scheduling flexibility standpoint. We understand that we have your attention for the next couple of hours. We thought we would make some opening remarks, both to provide some overall context for our perspective on energy in Canada and to provide a bit of an overview of our views on both the natural gas part of the energy sector and the oil part of the energy sector — oil sands being an important part of that overview.
Mr. Huffaker, will talk to the natural gas side and Mr. Stringham will speak to the oil side of the business. I will provide some overall summary comments and then we would be happy to engage in a dialogue with you.
I would like to start with a broad perspective on energy. It is important to ground any discussion of the Canadian energy system in the global context. There are some realities, some hard truths in which we need to ground that discussion of energy in Canada. You touched on some of them briefly in your opening remarks.
I will make three important points. The first is that global energy demand continues to grow at a rapid pace. Numerous studies — some of which I am sure your committee has looked at — suggest that energy demand could grow by 35 per cent to 50 per cent globally over the next 20 or 25 years. Some studies suggest the doubling of energy demand by about 2050. Frankly I think there is little doubt that trend will not be far off those numbers.
That trend is driven by two key considerations: the first is population growth increase, largely in the developing world; the second is the expectation, and I think the emerging reality, that in many countries around world, the standard of living will increase. The reality is that people will have an expectation around standard of living and resultant energy use that is more aligned with what we enjoy in the developed world today. That expectation will drive a very significant increase in energy demand, which then has very significant implications on how we meet or supply that energy demand.
The second point I would like to make in that broad context is that our view is that globally we will need all forms of energy developed responsibly to meet that demand increase. There is no doubt that renewables and other forms of energy that are becoming more important will play a larger role in meeting that energy demand. It is also very clear, however, that hydrocarbons — and natural gas and crude oil in particular — will be an important part of the energy supply mix for quite a long time to come.
I think we would be collectively much better served to have a discussion about how, both in Canada and globally, we advance all forms of energy development in a responsible manner, as opposed to the discussion we tend to have often about which form of energy is a better form of energy. The hard reality is that given the projected growth in energy demand, we will need all forms of energy developed responsibly. That is where the focus and I think the opportunity for Canada lies going forward.
Third, in the broad context, as conventional supplies of crude oil and natural gas decline, we will see an increasing role for unconventional sources of supply in both natural gas and crude oil.
That moves us to the Canadian context and some very general observations about Canada. I think we are uniquely positioned and we have a tremendously positive opportunity going forward to play a key role in meeting the global energy supply needs, and certainly in meeting Canadian energy supply needs.
We are a resource-based economy in many respects. We are a large exporter of energy, and I think it is very important that our energy circumstance in Canada be well understood in terms of its implications for policy in this country. Our economic base and our dependence on natural resources makes us unique among developed countries, which has some very different implications for the policy that this country pursues going forward, as opposed to many other developed countries to whom our policies are often compared.
We believe that we need to look at energy in what we call the "3E" context — economic growth, energy security and reliability, and environmental and social performance. Our polling — and I would will happy to talk about this in more detail later — suggests that most Canadians, irrespective of geography and political persuasion, view the oil and gas industry in a similar light. I think Canadians understand and appreciate the contribution is not just to Alberta or to Western Canada; it is a contribution that is made across the country.
Canadians understand the importance of energy security and reliability. I would extend that into the United States — we will talk about that a bit in the oil sands context in particular — and they have an expectation around improvements in environmental and social performance. However, I would say that Canadians, for the most part, are pragmatic about that. They want to see that performance demonstrated. They want assurances that industry and governments are committed to improvement in environmental and social performance, but they do not expect a silver bullet, for this to happen overnight. They understand this will happen over a period of time. I think continuous improvement is the key element in that consideration. In many respects, I would argue that the views of our industry are well aligned with those of most Canadians.
I want to emphasize that our industry is very much focused on two key areas that we believe strongly influence the reputation we have and our social licence to develop and operate. The first is performance improvement and the second is communications. We believe that both are extremely important and that they are inextricably linked.
We need to continue to improve performance. In the absence of that, our communications efforts are rather hollow. At the same time, if we improve performance and do not communicate that effectively with our stakeholders, the implications of that in terms of social licence are not well understood and we lose the benefit of the performance improvement. Therefore, we think both are extremely important. The regulatory and policy environment in which we operate influences that considerably.
The Chair: Mr. Collyer, would you briefly elaborate on your perception of this "social licence to operate" to which you referred three times?
Mr. Collyer: It is fundamentally important. We need the support of our stakeholders to do what we do. We need to engage effectively with our stakeholders. I think social licence is linked very much to those "3Es." We need to demonstrate that there is an economic benefit to Canadians, and I think we can do that. We do have a tremendous economic impact across the country: We are the largest single private sector investor in Canada, and our companies are 25 per cent of the value of the TSX. I think that element of our interaction with stakeholders is well understood.
Energy security and reliability is critically important for our quality of life and to make the economy work. I think most Canadians understand that.
Social licence is largely dependent on how we perform and communicate with our stakeholders on a day-to-day basis. That is an important element of what we do as an industry. Unless we can maintain the support of our stakeholders, and I think we have the strong support across the country — our polling suggests that we do — then our ability as Canadians to realize the benefits of the industry and the tremendous opportunity we have in front of us will be mitigated or impaired to some extent. We need to maintain the support, not only of the people who live close to where we operate, but the broad support of Canadians, as well as from policy-makers and key influencers in the country, to realize the advantages and benefits I believe this industry can bring to the country.
The Chair: Thank you for that and I hope you will understand and appreciate why I made that intervention at that point. I believe your organization represents, among many other oil and gas producers, the controversial energy source that lies up in Fort McMurray region. Therefore, I wanted to have a context understood in part by our viewers, who are many — there are more than those just in this room. We are on the CPAC network and on the World Wide Web, and we have our own dedicated website. Given the second issue, communication, all of this needs to be clearly understood.
Before you continue, Senator Linda Frum from Ontario has joined us to the right of Senator Massicotte.
Greg Stringham, Vice-President, Markets and Oil Sands, Canadian Association of Petroleum Producers: Good morning. I want to spend a few minutes with you talking about the oil part of our business. Oil is a very global commodity, and we are seeing all the events in the world today that surround what is happening with crude oil. Canada is itself a very important part of that global market.
First, it is important to Canadians from a supply and economic benefits perspective. However, it is also broader than that, expanding to North America and throughout the globe as an important part of the oil portion of the total energy mix that Mr. Collyer talked about.
As most of you know, today in Canada, about one half of our oil comes from conventional sources from Western Canada to offshore Atlantic Canada, and the other one half of our oil comes from the oil sands. That is a very diverse mix across the country. As we look to the future, we have a strong endowment, as you well know, in the oil sands of a very long period of resource potential. However, that potential will only be realized if it can be done in an economically and environmentally sustainable manner. I think that is the real key to capitalizing on this endowment Canada has been given in its natural resource of oil.
As I look at the opportunities associated with that, it really does become something broader than just the economic performance that is permeating across the country. In the future, this source of oil will continue to grow from all of those forms. In particular, I think it is important to note the critical role of technology in that development.
Recently, we had been on a relatively flat or declining profile for our conventional oil across Canada. However, new technology has even enabled that such that now we are able to develop some of the tight oil — the oil that was very difficult to extract earlier in places like Saskatchewan and Manitoba — which had previously been inaccessible because technology had not advanced. While technology can open up these new resources, it will be critical for the continuing environmental performance for the operation of the social licence that has been discussed.
One of the important parts of this development is that the future resource that we have in Canada is being recognized around the world; it is attracting global attention from a variety of sources. As you well know, we have had European investment that came through the forms of companies like Total and Statoil. Recently, we have had a great deal of interest from Asian countries: Korea, China and even recently from Thailand.
Therefore, the profile of Canada's resource endowment, particularly on the oil side, has garnered international attention. That is why it is critical for us to be able to ensure that the investment coming in, the job creation it has and the environmental performance all come up to and continue to be at world-class standards.
From that perspective, we have three opportunities and challenges I would like to address. The first of those is clearly the environmental performance. We as an industry know that we must continue to improve environmental performance, particularly as it relates to the oil sands, which is gathering international attention from an investment and environmental performance perspective.
The industry has continued to reduce its greenhouse gas emissions intensity. As we have developed the oil sands over the last 20 years, we have been able to reduce that by about 39 per cent per barrel. That has really been driven by technology, but it also indicates a commitment on behalf of the industry to continue that trend as we see the growth of this oil resource being developed for the needs of Canadians and beyond.
The second opportunity is really this question of market access. Canada is an exporting nation and that applies equally to the oil products we produce. We meet Canadian needs but we also export that oil, primarily to our neighbour to the south, the United States. We see greater opportunities for that to be developed as other countries, like oil from Mexico and oil formerly coming from Venezuela, leave that market and provide an opportunity or a void in that market for Canadian oil to fill.
There is an opportunity to look at the growing markets around the world. As we have seen in Asian investment recently, there is a great deal of interest in a discussion of opportunities for markets into that growing economy, and even beyond Asia into countries like India that are interested in that now.
The third area is technology. As I mentioned in the beginning, technology and innovation have been the key to unlocking this resource. There have been many cooperative efforts within the industry and between government and industry on that technological innovation. This is where the high-tech portion of the economy comes together to be able to enable greater environmental performance, greater economic recovery and opportunities across Canada for jobs and job development.
We have seen a great deal of green or clean technology development in Ontario, Quebec, New Brunswick and other parts of the country. These technologies have been applied to the development of our oil resources and are an important part of our continuing growth on the oil side.
In conclusion, we know that the opportunities for the development of oil in Canada are still strong and world renowned, but we also know that as we develop, we must continue to lighten our footprint on air emissions, land impact and the quality of the water being used by the industry for the development of this resource.
Part of the public confidence that needs to be continued and developed even more comes from transparency, openness and the application of technology to the environmental part of our business.
Tom Huffaker, Vice-President, Policy and Environment, Canadian Association of Petroleum Producers: When we talk about the gas sector in North America today, it tends to be the story of the shale gas revolution, which has changed profoundly the supply and market picture. To put it in context, as recently as the middle of the last decade, here in North America we were talking about the need for as many as 20 liquefied natural gas import projects. We were talking about trying to get Russian gas into North America and we had concerns about rapidly rising prices. We were in a bad reserve position in North America, or at least perceived to be on natural gas. Fast forward to the present and, of course, we recognize that we have tremendous commercial reserves in North America. If we are struggling with anything in the industry, it is the challenging price environment. Many prognosticators predict will run in the $4 to $6 range and maybe towards the low end of that for quite a while. The assessments in the United States are that their commercial reserves have tripled in the last five years as a result of shale gas development; and their production is up about 16 per cent. Close to 50 per cent of American production is unconventional, as broadly defined, which includes shale.
To this changed external and internal environment, the Canadian industry brings some tremendous strength. As you probably know, Canada has long been the number three gas producer globally. We have a tremendously dynamic entrepreneurial industry. It is highly technological and sophisticated and adaptive. Our members and other smaller Canadian producers who are active in this space range from firms as small as a handful of direct employees working with contractors up to large Canadian companies that are dominant producers not only in Canada but also in the United States. The global super majors are present here as well. We have well established production in Alberta, British Columbia and Nova Scotia; some gas production in Saskatchewan and elsewhere; and coming production in Quebec and additional locations in the Maritimes.
We benefit from a well-integrated North American market and pipeline system. While I mentioned that U.S. production is up sharply over the last five years, Canadian production is down by 15 per cent. Our exports, which once accounted for about 18 per cent of American supply, now account for about 14 per cent of American supply.
However, our shale resources are as productive and robust as they are in the United States. They are not as far down the development curve in terms of coming to market as the American shale resources. Of course, they are further from the major markets and that involves a cost. However, as our colleagues from the Canadian Society for Unconventional Gas told this committee, estimates of Canadian reserves are up two to three times over 1990 commercial reserves, and those numbers are probably very conservative. We at CAPP are forecasting a possible rebound, which will not be sharp, with a total turn around in Canadian production that could come as soon as 2011 or 2012. If it comes and is not unconnected to price and policy, that rebound will be driven by production coming out of such places as the Horn River and the Montney in British Columbia. We project that the production out of those basins could be as large as or larger than six billion cubic feet per day by 2020. To put that in context, North America produces something in excess of 80 BCF per day. Therefore, a basin producing six BCF per day is truly huge.
The current price of gas is a great challenge. Some of the basins in Canada, in particular the Horn and the Montney, might turn out to be relatively low-priced to produce from; but we have many basins in Canada at the high-cost end of the North American supply basins, which is a challenge. When we add in the distance to the major North American markets and the fact that the hugely robust shale gas resources in the United States are starting to come online in the Eastern U.S., you are able to see the challenge immediately. That is traditional export market for us. Over time, we certainly feel the stress of that and we see the possibility of pressure not only pushing us out of that market but also pushing American gas into traditional markets of the Canadian industry in Central and Eastern Canada.
Market growth is needed to address this competitive challenge with the United States to gain the tremendous economic, social and jobs benefits from this tremendous Canadian resource. Within this market growth, there is obviously, a place for policy. We see the heavy vehicles space as part of the answer. We have been working closely with groups like the Canadian Natural Gas Vehicle Alliance through ventures such as the Canadian Natural Gas Initiative. We have spoken to some senators concerning these ventures. We see that as an important piece of the story. We probably see the needs of the oil sands industry as the biggest growth opportunity for the industry. I am sure we will talk more about that later. We see the power generation sector as a growth opportunity in terms of what has been set in motion with Canadian policy. We view moving to a natural gas cogent standard for the coal generation as a positive step but the biggest factor over the long term will be how the United States deals with the transition from a very heavy reliance on coal to a greater reliance on natural gas. We also see West Coast exports as an important part of the puzzle.
I will mention a few points on the policy side and the things that in our view the federal government could do that would be helpful. The government could embrace the role that natural gas can play as part of the response to GHG management and climate change by moving to this lower GHG fuel. The government could have the best possible regulatory environment with high environmental standards for transportation and development in the gas industry. The government could take steps to address the fiscal challenge relative to our competitiveness with the United States because we do not feel that the fiscal environment for investment in the sector is as positive in Canada as it is in the United States. The government could be supportive of those export options in the long run.
Mr. Collyer: I will make three comments to wrap up our piece and then I will turn to questions.
First, as Mr. Huffaker suggested, we believe that natural gas should be a foundational element in consideration of the future energy supply mix in Canada and that it warrants a higher profile in terms of future energy policy and energy system discussions in Canada. We are firmly of the view that oil sands is a tremendous asset to Canada and that it is incumbent on industry, governments and regulators to ensure that the asset is developed in a responsible manner, both environmentally and socially. Third, we recognize that there are opportunities for continuous improvement in terms of industry performance, government policy environment and our regulatory construct in Canada.
I make the case that we begin collectively from a position of strength, not weakness. We have a sound record of performance in the oil and gas sectors in Canada. We have the collective capability to improve over time; and that is what our industry expects to do. We understand that. I think it is also well aligned with what Canadians expect of the oil and gas industry and of governments and regulators.
If we can do all of that, and I firmly believe we can, then hydrocarbons, both natural gas and crude oil, will play a significant role in Canada's energy system for a long time to come and that will benefit people across the country, not just in those parts of the country where there is producing activity.
Senator Neufeld: Gentlemen, thank you for your great presentations. They are useful to this committee and all Canadians.
You talked about the oil and gas industry being 25 per cent of the value of the TSX. Can you tell me the dollar value?
Would you agree with me that many people across Canada, regardless of where they live, have investments in the shares of those companies, and depend on the good health of those shares for their retirement or their better way of life?
Mr. Collyer: We will undertake to get you the dollar value. Given the variability in the market, I hesitate to pick a particular number on any given day, but we will undertake to get that information to you.
Regarding your comments with respect to the interest in the oil and gas industry being widely held is absolutely correct. There are many pension funds, for example, that are heavily invested in the oil and gas sector through their portfolios.
Senator Neufeld, you raise a good point because we often do not shed enough light on this aspect of the industry. We talk about the direct employment benefits; there are 500,000 people or thereabouts across the country who are directly or indirectly employed in the oil and gas sector. We talk about the royalties and the income taxes that are generated from the oil and gas sector, but we often do not talk about the extent to which individual Canadians are invested in this sector. That is an important point that warrants more attention.
I will undertake to get the committee the number with respect to the total value of investment in the oil and gas sector. I do not have that information off the top of my head.
Senator Neufeld: You touched on the employment figure of 500,000 people across Canada. It is widely perceived that only Albertans hold those jobs, although I live in British Columbia and know that it is untrue. I am aware of how many people are employed in all three Western provinces and many are from Newfoundland and Labrador. Do you have a breakdown of that 500,000 as represented across the country?
I am also under the impression that much of the technology, the building of equipment, et cetera, happens in Ontario. This aspect of the industry provides a great many jobs to people in Ontario, most particularly in the manufacturing sector.
I am interested in seeing those numbers, Mr. Collyer.
Mr. Collyer: We have specific data for oil sands because we have done a considerable amount of work to understand the supply chain across both Canada and into the United States.
You are correct in the observation that employment related to the oil and gas sector extends well beyond Alberta and Western Canada in two respects. First, there are many Canadians, particularly from Atlantic Canada, who commute in one way or another to Western Canada to work on these projects, whether it is from an operating standpoint or during the construction phase. Certainly, in the supply chain, there are many people employed in Ontario, Quebec and other parts of the country directly related to providing goods or services to the oil sands.
I will ask Mr. Stringham to speak to the specific issue that you raised, namely the employment and supply chain that extends across the country.
Mr. Stringham: The committee is probably aware that the Canadian Energy Research Institute, a group located at the University of Calgary has looked at this broad Canadian aspect of what this means to the oil and gas sector. We can get that full study to you. Their study looked at the investment in the oil sands over the next 25 years. They illustrate that the industry will generate about $1.7 trillion in gross domestic product across the country. They have broken that down by employment. The industry will create about 11 million person years of employment. Converting it to jobs for just the oil sands, it goes from about 112,000 direct jobs today up to about 500,000 direct jobs as it progresses into the future.
Then they broke it down by area and split it up among the different provinces. Of course, the bulk of that happens on construction in Alberta. From that GDP impact, there is $55 billion generated for Ontario; for British Columbia, it is $45 billion; and for Quebec, it is $23 billion. I can continue down the list. That is an excellent source of how that is spread around.
I can give you an anecdote that is probably one of the best ones I have heard. Canadian Natural Resources Limited purchased their conveyor system for their Horizon Project, from New Brunswick. It was constructed and built in New Brunswick and put on vehicles and trains, moved across the country and assembled and put in place when it arrived. That is in addition to all the vehicles, trucks, manufactured pumps and valves that come out of the heartland of Ontario and Quebec.
Senator Neufeld: I believe that more of that kind of information that we can communicate to Canadians bodes well for the industry and for all of us. I agree that we will be using petroleum products well into the future; technology will just change how we use it.
My next question about is market diversification. I understand that we have to diversify. We cannot continue to depend on one customer, although that one customer has been a good customer and will continue to be a good customer. However, it bothers me when we see that the U.S. may only import 1 per cent of their natural gas in 25 years, compared to 14 per cent today.
I worry, especially for gas from the Horn River and Montney basin. With the recent investment by China of $5.5 billion into north-eastern B.C., I think that bodes well.
We have to look at other markets that require tanker traffic on the West Coast. We are not new to tanker traffic on the West Coast; it has been in place bringing oil from Alaska down into the lower 48 for the last 40 years or so. However, there are moves afoot — I am sure you have heard it — of people saying that they want to stop all tanker traffic.
We have been shipping oil out of the Port of Vancouver for over 50 years — and quite safely, by the way. I think you will agree with me on that point. I think it is imperative that we get more information out to people all across Canada of the importance of being able to ship LNG, liquefied natural gas out. Not that long ago, we thought we would have to bring it in and now we are looking at shipping it out. We also have to discuss the movement of that oil through a pipeline to be built from Fort McMurray to Kitimat. That is important.
We need politicians to understand how important it is for employment, investment and retirement incomes across Canada so that we can continue to enjoy the country that we enjoy.
Could you expand on that and help me with how your industry is looking specifically at some politicians here in Ottawa talking about absolutely no tanker traffic on the West Coast of British Columbia, although on the East Coast they import all their oil. There is tanker traffic on the East Coast. It comes from Venezuela, Norway and the Middle East to provide all the major use of gasoline and diesel fuel. However, these people think we should not have it on the West Coast. Can you tell me how your industry will handle that issue?
Mr. Collyer: My first observation is it is never good for any producer of any commodity or product to be solely dependent on one market. I completely agree with your point that the United States has been a great market and will continue to be a great market for Canadian natural gas and crude oil. However, market diversification is in the interest of the industry and for Canada, for all of the reasons that you described such as the economic benefit that flows to Canadians. The drivers for that market diversification are different with respect to natural gas and crude oil. Market diversification is a good thing in any circumstance.
With the emerging supply of natural gas, shale gas in particular, in the United States and given the geographic location of our reserves in Western Canada relative to markets in North America, we are in a situation where it is increasingly important that we alleviate the supply/demand situation in Western Canada through other markets.
I think LNG is reasonably well accepted in terms of export opportunity. The Kitimat project appears to be moving forward; I think it is important that it do so. If we look at the natural gas business over time in Western Canada, there is a reasonable likelihood we will be looking to expand LNG export facilities on the West Coast. That is clearly an important priority for our industry and we need to move forward.
On the crude oil side, I find all the opposition to crude oil tanker movements ironic when, as you point out, they happen globally every day. We believe, as others do, that these movements can occur safely. It is important that there be public policy support for tanker movement on the West Coast.
I think it is important that we think about West Coast exports of crude oil to the Asian market in the broader public policy context. As you well know, governments, both federal and provincial, are increasingly trying to develop greater ties and linkages to Asian countries. What we can do in technology, on supply, and with the increasing integration of investment in oil sands with the potential market opportunity, affords us the opportunity to increase the focus on exports of crude oil from the West Coast.
It is important, but there is clearly opposition to it. That opposition comes largely from environmental groups that would prefer that we not develop oil sands and the linkages to Aboriginal First Nations communities on the West Coast.
I think it will be a combination of public policy support, as well as a concerted effort by our industry, the pipelines and export projects being developed to engage effectively with Aboriginal groups, local communities, et cetera, to develop the support and get the social licence I talked about earlier.
We all must realize that this can be done safely. There is an extremely long track record of safe crude oil movements in and out of ports on both coasts of Canada, and there is no reason to think that will not continue into the future.
Mr. Stringham: Senator Neufeld, you are correct: Many oil and petroleum products move out of our West and East coasts right now. For example, Newfoundland and Labrador, for its offshore access, relies primarily on having tankers move in and out of the Port of Montreal and others. As you mentioned, shipments of oil for decades have gone through the Port of Vancouver into other markets.
I want to be clear, though, that exports are not just to new and Asian markets. Last year we had about 80,000 to 100,000 barrels a day moving out of the Vancouver port, and 90 per cent of that ended up going down into the California market.
It is another way to get into markets that are taking the types of oil that are declining elsewhere in the world, or that have other geopolitical ramifications, to be able to rely on Canada as a friendly, secure supply of the resource. Even into Kitimat, there are petroleum products that move in and out of there on a regular basis already. It is not anything new on either of our coasts and we believe it can be done in a safe manner.
Senator Massicotte: Thank you for being with us this morning. You are obviously knowledgeable on energy and are probably quite knowledgeable on the environment.
The world has a dilemma whereby we are immense consumers of energy, petroleum products included. We are used to it. In fact, the poor people of our planet also want to increase their standard of living, which explains what you see in China and other emerging countries. They will also increase their use of energy. We are very stuck with it. We are not flexible as to the cost. However, from the planet sense, we have a serious environmental problem.
I want your opinion. How do you round the peg; how do you get there? Is it simply a consumer problem? As an industry, I know you are taking measures to reduce your footprint but it is not significant in a relative sense. How do you see this developing over the next 20 years from a consumer sense?
Mr. Collyer: I have a few observations. First, I suggest that our efforts have been significant. Let us look at the statistic that Mr. Stringham talked about a moment ago; namely, a significant 39 per cent reduction in the emissions per barrel over the period 1990 to 2006. Over the same period, production has been increasing, so emissions from the oil sands have increased. However, that is a significant improvement in performance and indicative of the kinds of performance the industry can deliver.
I also observe that over that same period, the emissions, on a unit basis of comparable measure on the downstream side in terms of use of crude oil, were reduced by about 11 per cent. Therefore, over that same period of time, industry has delivered an improvement in the emissions per barrel, which is about four times what we have delivered on the consumer side.
In answer to your more general question about the dilemma around energy going forward, we are firmly of the view that we need approaches that cut across the economy. Industry has a role to play; there is no question about that. We need to be responsible about the role we play in energy production and greenhouse gas emissions. At the same time, we have to come to grips with the fact that 80 per cent of the emissions, for example with crude oil, occur in the use of energy, not in its production.
If we are to realize the sorts of greenhouse gas emission reductions that the country is committed to and that have been set as an objective more broadly, internationally, we have to change the way we use energy across the economy. From my perspective, that does not mean that we necessarily need to reduce the growth opportunity for crude oil and natural gas in Canada. We need to have access to export markets because that is where the significant growth is. We need to get focused. Frankly, policy-makers have to confront the issue of what we do with the consumption side and how we change the use of energy. That cuts across the way we construct our buildings, the way we move people around since a lot fuel use occurs in transportation. It means lifestyle changes and impacting people. We have to come to grips with that.
I think we need to get the message out to people that there is a cost associated with changes in the energy system and that cost will come in dollar terms, in some cases. In other cases, it will come in terms of impact on lifestyle and behaviour. We have to realize that and have that open and honest conversation.
As I mentioned earlier, that does not necessarily mean that we have to restrict or reduce the opportunity for Canada to realize the benefits of its natural gas and crude oil resources. However, it does imply that we, as producers, need to do our part in reducing greenhouse gas emissions. We have a good track record for doing that. I think there are some very promising technologies being developed within our industry that give me a fair bit of encouragement that we can stay on the path we have been on. We have been delivering significant reductions in BOE, barrel of energy, over the last 20 years. I think that will continue.
Mr. Stringham: Your question is a good one senator. One of the answers, but not the only answer, lies in this technology development that we have in our country. We are leading in many areas. We can also then export that technology to developing countries. As you know, Canada's greenhouse gases are 2 per cent of the entire globe. That does not mean we should not do our part to reduce, but there is a great opportunity for the technologies we are developing and using here to be exported and used in developing countries so they can leap-frog their development and attain the lower emissions and better efficiency use that we are moving on.
In the oil sands in particular, we have been able to deal with greenhouse gas emissions primarily through energy efficiency; that is, using lower amounts of energy in order to extract the oil. By doing so, we can reduce the amount of water the steam we use to try to warm up this heavy oil to make it transportable. Using technologies like lower temperature waters, and propane and butane instead of water will allow us to continue down the path of continually reducing our energy use and thus the associated greenhouse gas emissions. We can export those technologies to other heavy oil places in the world.
Senator Massicotte: You said earlier that in the last 15 years you increased your efficiency from oil sands by about 40 per cent. From those numbers, can we project that there will be another 40 per cent increase in productivity efficiency over the next 15 years?
Mr. Stringham: It depends on technology development. We believe that the current pilot-scale technologies can continue that trend. Some of the new breakthrough technologies that are not commercial yet would reduce it even further as they move away from using heat-sourced extraction to the use of propanes and butanes. In that way, you do not put any heat into developing this resource, which could have a step change in the way that this is being developed.
Senator Seidman: I quote:
CAPP's mission statement is to enhance the economic sustainability of the Canadian upstream petroleum industry in a safe and environmentally and socially responsible manner . . .
Mr. Stringham, in your presentation you said that technology is critical for social licence to operate. I would like to explore this a little more, specifically with regard to the BP Deepwater Horizon spill in the Gulf of Mexico. Following that spill, we discovered how little R&D had been done in the area of emergency responses — specifically the technology to respond to these kinds of crises.
You talked about technology. I would like to know a little more about anything that might have changed specifically in the area of the technology to deal with these kinds of crises that can have severe impact on the environment and are part of this social licence that we need to have with all stakeholders and with the public.
I would also like to know anything you can tell us about scientific research that the industry might be doing on the potential toxins and exposures to them in air and water. We are hearing more and more about these toxins in discussions on shale gas and this has impeded progress specifically in my home province of Quebec.
Mr. Stringham: Technology is one aspect of the social licence to operate. Transparency is also key; being open and accessible to provide the confidence that they understand the developments.
In particular, I can use the example of the oil sands. I will come back to your offshore question. One of the key things that we have found about technology and transparency surrounding the oil sands is having the data available for all kinds of scientific experimentation, research and analysis to take place. One example is the air quality in the area of Fort McMurray. People had a question in the past about the air quality and whether it was changing over time. There is a stakeholder group called the Wood Buffalo Environmental Association, which includes representatives of industry, governments, environmental groups and social leaders in that area. They have researched and evaluated what is important for understanding air quality. In addition, they have put in place about 15 remote air quality monitoring stations that are available 24 hours a day, seven days a week on the Internet. That information shows the trends, the data and the analysis of the air quality. They are doing the science and understanding what they need to evaluate and the impacts of the air quality, while including transparency to allow all people to look at it. That has added a great deal of confidence to the social licence that we talked about.
Fort McMurray and the surrounding First Nations communities have complete access and can have input through the dialogue at the Wood Buffalo Environmental Association. That has helped to provide the confidence and understanding. Technology of this remote monitoring has helped greatly the social licence to operate. That is one example of what has been done through science and transparency. Does that help?
Senator Seidman: That helps; and I am grateful to hear about that.
Mr. Stringham: That is one example of what can be done in monitoring water or offshore developments. We believe that very high quality standards and requirements are in place for offshore developments prior to drilling in Canada. Certainly, we can learn from incidents that occur around the world. That development must be evaluated in advance of everything put in place along with the emergency response plans necessary before the development proceeds. That is all part of the public hearings and public evaluation that goes into the assessment of well drilling.
Mr. Huffaker: Senator, your question, at least in part, went to fracking fluids. Allow me to make a couple of comments. Fracking in various ways has been used for decades; thousands of wells have been fracked in North America. It is our belief and understanding that the record on this process is good and that when done correctly, it is very safe. There have been a handful of cases where the technology was not deployed correctly, and those cases have presented problems.
The industry is highly focused as are the regulators across Canada on groundwater safety. We take seriously the volumes of water used and the safety of groundwater. The industry is looking carefully at moving away from certain compounds that have been used historically in fracking. As you know, those compounds tend to be in the thousands in terms of the total composition because most fracking is done with water and sand. Even in small volumes, some chemicals present a concern. As well, the industry is examining greater disclosure of the compounds used. Both of those efforts are works in progress.
Mr. Collyer: I am not sure whether the committee is familiar with the report from the distinguished and independent Royal Society of Canada Expert Panel. The report entitled Royal Society of Canada Expert Panel: Environmental and Health Impacts of Canada's Oil Sands Industry looked in some detail at the environmental and health impacts associated with the oil sands. They identified opportunities for improvement and they highlighted that there are a number of misconceptions about the detrimental impacts of oil sand activities on health and environment. They debunked many of the myths. That is an example of an area where technology has been applied to ensure that these issues are being addressed. Is there opportunity for improvement? Absolutely. We all acknowledge that there is room for improvement.
The industry is coming together in the area of technology collaboration. In an industry that is inherently competitive, we have come to realize that getting together on the environmental area to share, accelerate and deploy that technology is absolutely critical. A good example of that is a recent announcement by a number of companies on work being done collaboratively on tailings reclamation, which would make a significant difference in both the surface footprint and the amount of water that is used in oil sands mining recovery. That is one example of an area where technology collaboration is having a significant impact. It is a step change improvement in the tailing side of our mining business.
Senator Seidman: There is no question that you have a lot to communicate in this area in terms of the kind of research that you are doing — specifically, the scientific research. The subject of how to communicate more effectively with the public has come up repeatedly. Have you looked at ways of improving your communications strategy so you can reassure us about your research?
Mr. Collyer: We spend a fair bit of time thinking about communications. First, I will talk about what we do and then talk about third parties, which is an equally important piece.
We have a portfolio of communications activities in the oil and gas sector. I hope you have seen some of the advertising we have been doing on oil sands. That is only one example, but it is one means by which to get our message out about environmental performance in particular. You will notice in those ads that we are talking about what has been demonstrated, what has been done on the ground, and the spokespersons for those ads are the people who are doing it, which we think is also important.
We just published the Responsible Canadian Energy report; this particular one is a subset of that report, specifically targeted to oil sands. There is also a broader report that looks at the entire industry. It is a composite of performance metrics, best practices and success stories, which is another means by which to get the message out.
We are increasingly using social media and other tools that are becoming prevalent. We conducted a series of oil sands dialogues last fall. We went to five cities in Canada and three in the United States and had round table discussions with key stakeholders about what we are doing on oil sands. It was an open dialogue to get their perceptions and views on how the industry is performing. In the near future, we will be issuing a report summarizing those dialogues and the industry response to the feedback.
We are undertaking quite a number of initiatives, over and above presentations and various other means by which to engage. However, I would definitely recognize and note the challenge we have in trying to get our message out around a rather complex subject in a manner that is understood by Canadians. I think it is also a challenge for governments and that we need to work collectively on that challenge.
Equally important for our industry is to have third party voices speaking to some of these issues. I think the Royal Society report, an independent objective assessment, is a very good contribution to the dialogue around oil sands. It helped to debunk some of the myths and highlighted some of the opportunities for improvement.
Academia and independent scientists, third parties who do not have a vested interest in the issue and are well regarded and respected by the public, have an important voice in this discussion. The public needs transparency and confidence that issues are being addressed, and that they understand that the data is being presented in a fair and objective manner.
We are supportive of more transparency, more openness; I think we all need to be supportive of that. We will do what we can to get the message out, but we need third party voices as well and the government also has a role to play.
The Chair: I would like to add a word on this communication on the oil sands. As a mini-punishment to the chair of this committee, in December 2009, I was dispatched to the United Nations Copenhagen Conference on Climate Change. At all hours of the day and night, we Canadians were besieged with negative comments about the oil sands, and we did not have a defence. The communications gap was prevalent at that time. It shocked me as well as the minister and other members of the delegation. Each day Canada was elected the "fossil of the day." We had tremendously bad publicity, not just for your industry but for the country as well.
I have noticed a tremendous uptake in your efforts and not only in the ads. I want to make the point in response to Senator Seidman; you say we have to do this to make Canadians aware and appreciate this economic engine. However, it is not just in Canada. This committee has travelled to the United States and almost every congressional representative and senator we met had this perverted, negative view. They do not want to hear the other side, so you have a huge mountain to climb.
As one knows in communications, if you get off on the wrong foot and you get into a hole, it is harder to dig out. One has to be proactive. I am hoping this will happen with the shale gas, because that is getting off on the wrong foot in Quebec, as you know.
That is just a comment. I still have the scars from Copenhagen and there is no way you will get me to Cancun.
Mr. Collyer: I think your points are well taken. We acknowledge we were slow off the mark on the oil sands. We are trying to be faster off the mark on shale gas and we have plans around that as well. It is an ongoing concerted effort and we need help from others who share similar perspectives.
Senator Brown: I am concerned about public relations. For the last three years, I sat in the Alberta caucus every week and there were many complaints about how the members of Parliament were listening and hearing things about the oil sands. I think you were about two years behind the mark before you came out with the programs that you have now. I really appreciate those programs because it took off a lot of pressure and I think you are turning it around.
Your biggest challenge now is to try to teach the Americans — or rather, get them in reverse. There was an awful lot of bad publicity that went out in the U.S. as well. Big magazines were doing a trash job on the oil sands, as far as I am concerned.
Now you have some good stuff out there. I have noticed the programs that are coming out. I just hope you have a plan for covering more of the United States because it is your biggest customer and our biggest customer.
There is also a book entitled Ethical Oil, which pretty much gives the true picture of what the oil sands do and do not do. It also puts out a lot of information from people who intend to destroy the energy industry. They want to go completely without oil or natural gas or anything.
In the book, you will learn that many of the same people buy shares in the oil sands, in all the companies that are operating in the oil sands; then they use the money to put their own face on things. It is quite startling. You have some big enemies out there.
I hope that you will continue to try to get to the public, both in Canada and in the United States, because you are right; Canada's pollution is actually less than 2 per cent of global pollution. We should not have to hide our head in the sand on this thing. We should be able to fight for it.
Mr. Collyer: I think your points are well taken, Senator Brown. We were slow off the mark; we acknowledge that. We are very much committed to this over the longer term, and you will see us continue to be focused on communication. It is Canada, the United States and Europe. All three are important.
As Canadians, we have to understand that the oil sands are caught up in a much broader international debate about climate change, related policy and the use of hydrocarbons. We can influence that to a certain extent, and we have to operate within that reality.
I think it is also important that we recognize that those who oppose the oil sands are doing so in a context that is not only directly related to the oil sands impacts but is in a broader context. Unfortunately, in the eyes of our opponents, the oil sands have taken on a rather iconic status with respect to trying to make a point about climate change and the off hydrocarbons movement. The visuals associated with oil sands mining tend to reinforce that.
We need to do what we can do to improve performance. We need to get our message out about what we are doing, and we need to continue to demonstrate that we are acting responsibly on the greenhouse gas side. It is vitally important that we communicate these items to all concerned parties.
A key part of our storyline, and how we engage, is going down the supply chain, with respect to both Eastern Canada and the United States, to demonstrate more directly the economic benefit being derived from the oil sands and bringing some balance to the conversation.
Most Canadians understand the 3E message I discussed earlier. If you look at oil sands in a more balanced context, you come to a balanced view. Many Americans derive a direct economic benefit from the oil sands. However, getting that economy and jobs message out, as well as continued responsible environmental performance, is critically important in terms of U.S. support. Europe is more challenging, and we have to acknowledge where some of the pressure is coming from, internationally. It is tougher to demonstrate the economic benefit and the energy security benefit in a European context and therefore, the focus tends to be much more on the environmental side.
Mr. Stringham: Senator Brown, you are correct in that the United States is an important market, and is a little disconnected from this. One of the efforts we have completed and will be using is this third party discussion we talked about earlier.
We have gathered from our companies the names of almost 1,000 companies in the United States. I think we have 45 different states now covered by that that have companies that are supplying goods and services to the development of the oil sands. We have approached these companies and they are speaking about their companies and the related employment benefits to the oil sands. We are employing this direct method to get the message out the American public through the voices of the people employed by the oil sands.
Senator Meredith: Gentlemen, thank you for your presentation today. I am certainly learning a lot about this industry. I have a couple of questions with respect to a national energy strategy. Others have appeared before this committee to talk about the need for a national strategy plan as we map out Canada's energy future.
What role should the government play and what have you done to work with government agencies along the lines of a national strategy? I would like comments from all three of you gentlemen, if you could.
Mr. Collyer: We are broadly supportive of the notion of a national energy strategy. CAPP is involved with many of the groups working on the energy strategy area. You might have heard from the Energy Policy Institute of Canada. Bruce Carson and David Emerson and others are involved in that. We are participating in that group. We are involved in what is being called the "think tank group," a group of a dozen or so think tanks that also are helping to advance this notion of energy strategy.
We are encouraged by the way those discussions are going. I think an energy strategy can put a lot of these discussions in a broader context and put a lot of the individual policy decisions in a broader framework. That is critically important. It is also critically important to find a way through the sectoral and jurisdictional issues that potentially get in the way of us coming together as a country to realize the benefits we receive from our energy industries.
For all those reasons, I think an energy strategy is an important initiative. I do not think we should underestimate the challenge in finding a common view on some rather difficult issues. One of the great things about Canada is its diversity and one of the great challenges in Canada is its diversity. There are different interests across the country and different energy production and consumption mixes.
It is fundamentally important that we try to become aligned over energy because it is critically important to our future as a country. If we can become aligned and bridge some of those internal differences, we can realize the economic benefit and proceed responsibly around energy development. At the same time, we can represent ourselves as a country much more effectively in the international domain.
I do not think it is constructive for us to attend international meetings and air our internal debates in an international context. We have seen a number of examples of that in the past few years. That is not a good thing for Canada and I do not think it helps us in terms of representing our interests internationally.
Energy is a tremendous asset to this country: It is critically important to our quality of life and it is of enormous benefit for our economy. I think that anything that important ought to mobilize people to come together to find a way through to a common strategy and direction. Such a strategy will provide a framework within which we can make the decisions we need to make to advance that agenda.
We are supportive of it, but also realistic about the challenges in coming to an energy strategy granular or specific enough to drive decision-making going forward.
Mr. Stringham: We have been working with governments, as well. The federal and provincial governments have an energy ministers' meeting every year. Clearly, this topic of energy strategy is on their agenda for this upcoming meeting here in Alberta. As part of that meeting, one of the key elements they have expressed interest in is having the strategy foundations in place. However, one of those relates back to an earlier question: How educated are Canadians on our energy sphere? Do Canadians understand how much hydro we have, what offshore developments are happening, what shale gas is, what other energy forms we are getting, renewals and solar power.
Having the public understand what an energy strategy means is fundamental, in addition to the policy elements Mr. Collyer discussed.
Mr. Collyer: It is important that industry and other stakeholders engage in this dialogue. I do not think a national strategy that is top-down driven will be a recipe for success. We have to bring together a diversity of stakeholders. Industry and business have a role to play, as do governments.
We need an honest conversation about energy in Canada. A discussion about energy strategy is a way to facilitate or encourage that conversation. Too often, we jump to discussions or observations about the future that are not well supported by analysis and are not realistic in terms of implementation. We need to get the costs and the benefits of different choices in front of people so they can make informed decisions. Again, an energy strategy is a way to help encourage those conversations.
Senator Meredith: I have another question for you. Mr. Collyer, you talked about the 3Es — the economic value that energy adds to Canada, energy security and the environment.
I understand that Enbridge is about to begin a large project that crosses over Aboriginal lands. Can you elaborate more on that project and what are you doing to reduce the impact on the environment?
Mr. Collyer: Are you referring to the Northern Gateway Project?
Senator Meredith: Yes.
Mr. Collyer: I cannot speak to the specifics of what Enbridge is doing on that particular project, but I can speak to how we normally engage with stakeholders on those types of projects.
First, there is an approval process and regulatory requirements concerning the implementation of these projects. Regulatory requirements dictate how we address the environmental issues. I do not want to leave the impression that we are driven solely by environmental obligations, but we have a rigorous and thorough regulatory approval process in Canada, both provincial and federal, that stands up well against any international competitors. We work with a robust regulatory framework.
In all of these projects, we have an obligation to consult with First Nations and Aboriginal communities to make efforts to accommodate. There are many good examples of cases where the energy industry has worked effectively with Aboriginals and other stakeholders to realize benefits for both parties, whether through community development, jobs or economic opportunities.
Our approach on any of these projects, Enbridge's Northern Gateway Project included, is to work within the regulatory construct, to engage with stakeholders, to address their concerns and accommodate their interests in the course of developing the project. That is also a regulatory obligation.
Mr. Huffaker: We all need to do a better job of communicating the regulatory system. Too often there is an impression that we do not have a dense, highly sophisticated regulatory system in Canada that is absolutely world class. We all need to communicate that more effectively to Canadians and to Americans.
Senator Meredith: My final question is with respect to GHGs. Mr. Collyer, you mentioned that you reduced GHGs to 39 per cent. What other steps will you take to improve those reductions in terms of their environmental impact?
Please comment on the environmental groups that want to see higher standards and enforced federal guidelines.
Mr. Collyer: Yes, I have three comments. Technology will be the key leader going forward in reducing greenhouse gas emissions. It has led to many improvements to date and it will lead to many improvements going forward. The oil sands receive the greatest prominence in discussions. It is important to note that oil sands crude production is only marginally higher on a whole lifecycle basis than other crude supplies in the United States. Three areas hold promise for future greenhouse gas emissions reduction from oil sands. The first is ongoing energy efficiency and how we use energy in our operations. That is good business. We have a long track record of demonstrating improvement and we will continue to do so.
The second area is carbon capture and storage. We need to be realistic about the breadth of the application of carbon capture and storage, but it will have application in certain projects. Shell is advancing the Scotford Upgrader outside of Edmonton with the Quest Carbon Capture and Storage Project, which demonstrates the applicability of carbon capture and storage. We have an ongoing project that Cenovus operates in Saskatchewan.
The third is the area that Mr. Stringham spoke about earlier. I think it holds great promise: 80 per cent of the resource in the oil sands is in situ and is amenable to non-mining recovery. Improvements in recovery processes in situ offer the potential for step change improvement in greenhouse gas emissions.
We need to look across the economy at how we will reach our greenhouse gas reduction targets and how we will come to an appropriate balance of the interests across the economy and the various sectors to reach those targets. Our industry is committed to doing its part, but we also need to be realistic that this will take a much broader effort across the economy, and it will affect all Canadians. We all need to align around those issues.
Energy strategy is a means by which to facilitate those discussions and come to some alignment on how we reach these targets; what the economic implications are; and how to make the tough choices with respect to energy security, such as environmental performance versus economic development versus energy security. We can have them all, but we have to make choices along the way.
The Chair: We have been told repeatedly that the cheapest and cleanest source of energy is conservation. It is inherent in your comments in terms of efficiency.
Senator Dickson: Mr. Collyer, it is great to see you again. You are always welcome on the East Coast. I am sure that Senator Robichaud and Senator Mercer will agree that you have done good work on the East Coast. It is great to see you this morning in your new role as president.
Senator Neufeld, a native of British Columbia, naturally stressed the great wealth of the provinces of British Columbia, Alberta, Saskatchewan and Manitoba. My questions will focus on the East Coast and our neighbour, Quebec.
My first question relates to the new technologies. Will they be positive for offshore exploration on the East Coast? Are there any new technologies that will be able to access the tight shut-in gas off Nova Scotia that we imagined was there? I hope that it is there. I can see Senator Mercer smiling; it better be there.
Mr. Collyer: Thank you for your comments. I greatly enjoyed working on the East Coast and returning there in my new role.
There have been tremendous advances in seismic technology over the last few years. Progressively, we are getting better at offshore technology and being able to reduce the costs associated with smaller developments. There are a number of promising technologies related to the subsurface side, horizontal drilling and lower cost well technologies, all of which need to maintain focus on environmental performance to ensure that we operate safely and environmentally responsibly.
The crux of the issue is whether the resource exists. The challenge in Nova Scotia is that the exploration cycles we have observed over the last several years have not turned up a sufficiently large resource to justify economic development. Clearly, there are a number of smaller opportunities in proximity to the existing fields. It is great to see the Deep Panuke Project coming on stream. I hope there will be opportunities to develop some of those other resources.
It is important to note that these things tend to go in cycles. Exploration will be active for awhile. If we achieve great results, it is fabulous, but if we do not, people go away, assimilate their information, and return for another go at it. I hope that will happen on the East Coast.
Senator Dickson: My second question relates to markets in the Northeast, in particular for electricity. As you know, Newfoundland and Labrador are looking at new hydro projects of the Lower Churchill in two phases. In Nova Scotia there is some interesting work on the tidal side, but for 20 years down the road. New Brunswick has an interest in that as well.
Given that there is shale gas, what opportunities are there in the Northeast United States for East Coast surplus electricity? Quebec controls part of the gateway to the Northeast U.S. What will happen to any surplus electricity from the Maritime provinces, in terms of the current market and the market in 20 years?
Mr. Collyer: The change in the outlook for natural gas will have a significant impact on the electricity generation sector. It was not that long ago that natural gas prices were in excess of $10 per 1,000 cubic feet, Mcf. Obviously, it enhances the competitiveness of alternatives. We are looking at a world where we likely will have much lower and much more stable natural gas prices and an abundant supply of natural gas for quite a period of time. That will create a different competitive context in terms of what electricity generation from Canada is competing against. It creates a very different economic environment in terms of the natural gas export market.
I believe that export of energy, open borders and facilitating trade with the United States is an area where there is a commonality of interest across the country. We ought to be looking at that as one of the areas we can get aligned around. Export markets are important to a number of different provinces and sectors and ensuring that we have competitive access to those markets and are able to compete to the extent that the market allows us to is important.
Mr. Huffaker: Regarding the type of renewables in your part of the country, it is not absolutely clear in the short run how those will be treated or viewed in the United States. In the long run, it is clear they are moving towards standards on hydro, tidal and other things that will lead to a beneficial treatment of those sorts of resources.
I know there have been some arguments in the U.S. over the treatment of hydro. However, I think we can expect over the longer term — and it is hard to predict how long — the environment will be favourable in the U.S. to power generated from those sorts of sources.
Mr. Collyer: The single biggest issue in the North American gas market and the electricity generation market more broadly, are what happens with coal-fired generation in the United States? We have a clean electricity generation sector in Canada that has the opportunity or potential to export. We have an increasingly available supply of natural gas.
In addition, U.S. policy decisions made with respect to coal-fired generation will have a profound impact on both the natural gas and electricity generation sector in Canada. Our government needs to be mindful of that when they look at policy as it pertains to energy in the United States. What happens with coal-fired generation in the U.S. is the single biggest policy decision that will affect the North American energy market in the near future
Senator Dickson: My next question relates to your choices as to a carbon tax, cap and trade and/or regulation. Do you have any views on that; do you prefer any of those or none?
Mr. Collyer: We think there are some basic principles that ought to apply to carbon policy in Canada. We too quickly jump to mechanisms as opposed to the more fundamental questions about what sort of policy construct we want. We have been open about saying that we need to focus on technology development and policy that encourages investment in technology because we need to reduce on-the-ground emissions in Canada. We need a balanced approach to policy. We need to be mindful of what the U.S. is doing in policy, but not necessarily follow it directly. It makes sense to be mindful of what your major market is doing.
I cannot tell you that there is unanimity among our members as to which approach they would prefer. I would say that people would generally prefer a market-based mechanism; for example, cap and trade or a carbon tax type approach. Those drive more economic efficiency. This goes back to my comments earlier about this being a solution across the economy, but it is important from our perspective that it be a broad based market measure that affects consumers as well as producers.
The regulatory approach is more difficult and challenging. It certainly is an option. If we look at where the U.S. is going, the EPA looks like they will regulate greenhouse gas emissions.
I would also observe something that is sometimes forgotten — not by the folks sitting around your table but by the public: We are operating in the provinces where the majority of Canadian oil and gas production comes from. Effectively, we have a carbon tax in British Columbia and a carbon tax or levy in Alberta. We operate under those systems today.
I think most of our members would say pricing carbon is the right approach as opposed to the regulatory approach. Whether that is done via a carbon tax or a cap and trade very much depends on the particular design.
Senator Dickson: Mr. Huffaker, you made some remarks that the fiscal environment could be better in Canada versus other jurisdictions. Would you like to elaborate on that statement?
Mr. Huffaker: This pertains to natural gas production. In the United States, completion and development expenses for wells are subject to 100 per cent immediate deductibility. That is the expenses for non-exploration wells. They are able to deduct development and completion costs completely in the first year. We have a 30 per cent declining basis, which drags it out over quite a few more years. We think that difference puts Canadian oil and gas development at a disadvantage. We have a specific proposal before the federal government asking that they consider moving to a more rapid schedule on gas, in particular, given the deeply competitive challenge we face on gas in North America.
Senator Frum: Good morning, gentlemen. It is nice to see you again; I met some of you when I was on Senator McCoy's visit to the oil sands last summer. From that visit and from your presentation this morning, I know you have done an excellent job at presenting a thoughtful and frank situation.
To bring us into current events and to follow up on Senator Brown's comments about public relations, it has actually been a tough couple of weeks. I want to give you the opportunity to address some of the remarks made by Dr. David Schindler in respects to the Regional Aquatics Monitoring Program, RAMP, which he has called a "dismal failure." A lot of attention has been given to the fact that maybe the environmental impact on the Athabasca River has not been properly diagnosed or presented to the public.
Can you address those comments and given us your perspectives?
Mr. Stringham: Thank you for that question. Water monitoring it is one of the confidence builder's we discussed earlier.
RAMP is the Regional Aquatics Monitoring Program. It is administered on the Athabasca River and over 10 years of historical data has been collected by monitoring on that system.
The question that you raised by Dr. Schindler was regarding the accessibility to the data there and what it might imply. Each year that group provided an annual report that put it out there, but the data was not transparent, to go back to my theme of transparency. In December, the RAMP group put that data on the Internet.
The Royal Society of Canada report included one year's work on the science and research available on all of that data and others in the environmental aspects. The society said that from their perspective, the scientific data showed no additional impact of the industry on that river quality. That has led to both the provincial and federal governments putting their water and monitoring panels in place to look at the quality of the monitoring to get this transparency more available to the public.
Dr. Schindler has taken a look at some of that data as well and said he has found some areas. That is what Royal Society of Canada also looked at. They said they have not found any areas of issue. Therefore, we now expect there will be an enhanced amount of monitoring and transparency. We are cooperating to ensure the water quality is well understood by the scientific community, but more importantly by the communities that live and work around that water, and use it every day.
We have been monitoring that for many years. Dr. Schindler raised some questions. The Royal Society of Canada came back and addressed those questions in their report. However, we also know going forward that there will be much greater transparency available to the publicly and to the scientific community to look at that resource. I think that will provide the confidence that people need to have.
Senator Robichaud: I congratulate you on your presentation. You painted a very positive image of the industry as it is now and as you see it in the future. You have used all the right words — "openness," "transparency," "technology" — and I think you are making a great effort to give Canadians a true picture of the industry. However, you have also been the subject of negative ads that throw a cloud over everything you do and say. I feel that this is not right because people are not getting a true image of the industry.
You have talked about your efforts and a few times, you mentioned water. Of course, water is a main preoccupation of people. In however many minutes we have left, can you reassure me and everyone here that you are making all the efforts, when you use water, to use the least amount; and whatever is given back to nature comes in such a form that it is not polluted? If you can reassure me, I think that would be positive.
Mr. Stringham: The water issue is one of the most topical issues for the Canadian public. In our efforts to ensure that discussion continues, you have seen some of our advertising that addresses the water issue and what we are doing with it.
Let me start with what is being done on the oil sands and then I will ask Mr. Huffaker to talk about what is being done in the natural gas developments.
In the oil sands, as you know, the mining projects make up about one-half of the production from the oil sands. They draw their water source from the Athabasca River that has been the focus of the regional monitoring program. We have discussed Dr. Schindler and the Royal Society in that regard.
From that perspective, the oil sands draw just under 1 per cent of the total water use out of the Athabasca River. There is a lot of water available, so the water quantity is not a specific issue that has been raised as a concern throughout the year.
The concern that has been raised is what happens during the winter period? There is no dam or control on this river, so during the winter period, the flows are lower and in the spring they are very high. The opportunity to look at that is to say whether there is any impact during the low flow periods.
The governments have established a regulation and a policy to restrict the amount of water that industry could draw from that river if it gets down to one of the low flow periods — for example, a 100-year drought. If that were to affect the ecosystem, then the industry would not be able to draw as much water from that source. We have not reached that point, but the policy is still safely in place.
Companies, in advance of that have expanded either natural lakes in the vicinity or built lakes beside their facilities to draw water off during the high flow periods and store it in case they need to draw it in the low flow periods. There are ways to naturally accommodate the flow issue.
On the quality issue, it is a matter of scientific monitoring to ensure that the water quality in that river is not affected. That water in the Athabasca River flows through natural occurrences of oil that is sitting and coming out of the ground. Remember, the reason we can mine this is because the oil is so close to the surface that it has naturally affected the water systems in that area.
However, the regulations require — and the monitoring ensures — that no water that is used in the process of those mining facilities is ever released back to the natural ecosystem. Even the rain that falls on the mining process must be gathered up and is then used in the process and recycled over and over again.
In fact, the reason they have the large tailings ponds now is because recycling is required. They are to the point where around 80 per cent to 85 per cent of their water is continuously recycled through those ponds. They only draw a small make-up amount from the Athabasca River.
We talked about the other 80 per cent of the resource for the oil sands being in the underground or the drilling, non-mining area. In that area, they use steam as well. They need the water to do that, but the new projects in place are going down below the oil sands resource and drawing saline water, water that could not be used for any other purpose, from the deep underground aquifers in that area. They bring that salty water to the surface, use it for their steam and when they are finished with it, put it back down into the salty reservoir it came from underneath the oil sands. In that way, they have no impact on the groundwater or freshwater in that area. That trend is continuing for the development of many of these drilling or non-mineable oil sands resources.
They, too, must then monitor the water quality in the region. That is the specific aspect of the advertisements that we have looked at, taking the scientists that are responsible for the water quality in that area and putting them on television to show the public that is what they are doing and how they are monitoring it. That is a quick summary of what is being done on the water side.
Mr. Huffaker: I will focus on the gas side, on the shale gas story, because I think that is where people are concerned about water issues.
Senator, you framed the question perfectly by focusing on the fact that it is about the volume and whether we are doing damage to any water in the natural hydrological system. We sometimes get too complicated about that, but those two issues concern the Canadian public.
Many of the same things that are happening in natural gas are happening or being deployed increasingly in shale gas development. Our members are focused on more recycling of what freshwater they do have to use in production — and there is quite a bit of water used in shale gas production. They are recycling the water they are using and also increasingly focusing on, where possible, exploiting non-potable, saline, brackish water sources rather than drawing off of the freshwater system.
Of course, the second side of it is pollution. We are very focused on ensuring there is not damage to aquifers, and that damaged or polluted water is not released into the natural system. There is a lot of focus on getting better on both sides of that equation.
Mr. Collyer: I hope you and the public takes confidence from what we say as an industry. I hope you have confidence in the regulatory system in Canada.
Ultimately, groups like the Royal Society and the independent scientific review of the data — robust monitoring systems, third party review, et cetera — are what will bolster the confidence of the public; and the transparency around the reporting of that data is extremely important. As an industry, we are supportive of doing that. I think that will supplement or, hopefully, corroborate the information that we, regulators and governments are providing to the public.
The reality is that Canadians, the public generally, have a lot of confidence in scientists and independent observers, as do we. I think that is an important step forward in terms of increasing the confidence of the public in the information they are being provided and giving them the certainty or the assurance that this is being done responsibly, as we all want it to be.
The Chair: I want the witnesses to understand that we are in the process of planning a fact-finding trip to Calgary, Edmonton and Fort McMurray later this year. We will be in touch with you about your ideas as to how we can best spend our time and resources, and we look forward to your cooperation during our visit. Obviously, we are interested in looking into the technology side of things, which has been emphasized by many witnesses as the key — not just on the oil and gas side of things, but in reference to coal.
Alberta has huge coal resources — hundreds of years of resources in reserves, we are told — yet it is so expensive technologically to produce power in a clean way from that resource at the present time. We are interested in getting to the bottom of that topic and many other things.
Mr. Collyer, we will be interested in going on the Internet and having a look at the report to which you referred. If there is anything else that you feel would help us in our deliberations, you might keep in mind that our clerk, Ms. Gordon, is here with her team and she will circulate any materials to us.
Thank you so much for being available. I know it was an early start in Calgary, at 6 a.m. However, you got there on time and it has come through very well on camera.
(The committee adjourned.)