Proceedings of the Standing Senate Committee on
Energy, the Environment and Natural Resources
Issue 16 - Evidence - February 28, 2012
OTTAWA, Tuesday, February 28, 2012
The Standing Senate Committee on Energy, the Environment and Natural Resources met this day at 6:10 p.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 evening, ladies and gentlemen, colleagues and our honoured guests. This is a meeting of the Standing Senate Committee on Energy, the Environment and Natural Resources.
We continue our study that is well into three years on Canada's energy sector, and our efforts to get Canadians talking about energy, to have a dialogue and, in the process hopefully, to develop some parameters for Canadian energy strategy for the future, taking into consideration the boom in population, obviously increasing the need for energy going forward. Canada is a large if not the largest per capita consumer of energy. That is what you would expect given our geography. One of the lacunae, as we say in Quebec, in our study so far has been the absence of knowledgeable representatives of our northern communities.
Today we are privileged to have with us, from the Government of the Northwest Territories — and from Yellowknife, I think principally — the Honourable David Ramsay, MLA, Minister of Industry, Tourism and Investment. I think that is the right portfolio; it keeps changing. With him is Peter Vician, Deputy Minister, Department of Industry, Tourism and Investment. We have all done a bit of homework. We are not experts, but we will enjoy hearing from you.
I want to make sure that you know who we are. I am Senator David Angus from Montreal, Quebec, and I chair this committee. To my right is Senator Grant Mitchell of Alberta, deputy chair of the committee. To his immediate right are our analysts and researchers from the Library of Parliament, Mark LeBlanc and Sam Banks. Next to Sam Banks, from Saskatchewan, is our uranium expert, among other things, Senator Robert Peterson. To his right is our direct link with the northern communities, and someone who I think you know well, Senator Sibbeston. To his right is the newest member of our committee, from the other end of our country, Newfoundland and Labrador, the Honourable George Baker.
Going to my left now we have our very able clerk, Lynn Gordon; and a former minister from British Columbia, Senator Richard Neufeld; a lady you just met, from Montreal, Senator Judith Seidman; and another man from the Yukon Territory, Senator Daniel Lang. To his immediate left, from Montreal, Quebec, Senator Paul Massicotte; and, last but not least, our elected senator, Bert Brown from Alberta.
It is great to have you all here. I think our guests know that we are webcast and on CPAC, cable network. We have our own dedicated website, www.canadianenergyfuture.ca. It is not just what you see in the room. I have learned the hard way that journalists have their ears to the microphones over in their offices; they do not have to come out even. We have an interested audience out there and you are not alone here. We are also very interested.
This topic is the flavour of decade. It is called energy, and it is called working and melding together with the environment and with the economy, the Triple E. We are nearing the conclusion of this in-depth study and we are hoping to come out with our report on or about June 1. We are kind of filling in the blanks. We have been looking forward with great anticipation to having you folks here tell us about the energy situation up where you live and all things related.
I believe you have an opening statement, minister.
Hon. David Ramsay, MLA, Minister of Industry, Tourism and Investment, Government of the Northwest Territories: I do. Thank you very much Mr. Chair. It is a pleasure to be here in Ottawa to give you a presentation on energy in the Northwest Territories.
I am the Minister of Industry, Tourism and Investment with the Government of the Northwest Territories; I am also the Minister of Transportation in the Northwest Territories. I have my Deputy Minister, Peter Vician, to my right. I have been in Yellowknife now for 31 years. My family moved north to Yellowknife in 1980 from Saint John, New Brunswick. I was born in Saint John, New Brunswick. The North has been good to my family, to me and to many other people who call the North home.
Again, I have a prepared statement that I would like to provide members tonight. Thank you very much for the invitation to address the Standing Senate Committee on Energy, the Environment and Natural Resources.
Despite having a land mass of nearly 1.2 million square kilometres, 14 per cent of the total of Canada, the Northwest Territories is sometimes left off the map when it comes to national policy discussions. The Government of the Northwest Territories appreciates the interest of your committee in the unique challenges and tremendous opportunities in Canada's North.
With respect to energy, our key challenge is the lack of infrastructure and the crushing costs of basic services that our residents grapple with every day. For example, the southern part of our territory does have hydroelectricity, but the cost is 27 cents per kilowatt hour — double that of the Yukon and a number of times more expensive than in southern jurisdictions.
The Chair: If you do not mind if I interrupt occasionally, I read the briefing notes and found out that you did have some hydroelectricity. Could you be more specific than saying the southern part of your territory? Where is it and how does it get transported or transmitted?
Mr. Ramsay: We have hydro installations located approximately 225 kilometres northwest of Yellowknife, on the Snare River system. South of Great Slave Lake, on the Taltson River system, we have a hydro facility there as well that provides hydroelectricity to communities in the South Slave region. Both projects were born out of resource development in our territory. We also have a small dam in Blue Fish, located in close proximity to the city of Yellowknife. We do not have a great deal of hydro today, but we are looking to advance the potential in our territory. It is important to us that we move that forward. There are opportunities there. Of course, it takes sizable capital dollars to achieve hydro development in our territory.
The Chair: What percentage of the electricity in the N.W.T. is generated by that hydro? Do you know roughly? Is it 15?
Mr. Ramsay: It is 74 per cent by consumption.
The Chair: Thank you. Carry on, sir.
Mr. Ramsay: Yellowknife is a hydro centre. Obviously, the majority of the population lives in Yellowknife; that is, roughly 20,000 persons of the 43,000 who call the Northwest Territories home. That is why the numbers are like that.
Two thirds of our 33 communities rely on diesel fuel to generate electricity. This comes at a cost of approximately 50 cents per kilowatt hour. As we all know, fuel prices are not forecast to decrease.
We often hear that this is the age of investment in Canada's North and maintaining Arctic sovereignty is often cited as a key priority of the federal government. One of the best ways to maintain Canada's sovereignty in the North is to have people living there in self-reliant and sustainable communities. Sustainable energy systems are the backbone of a sustainable society and they require infrastructure to make them work.
The Government of the Northwest Territories recognizes the importance of sustainable energy systems in the North. For example, the Northwest Territories leads Canada in the installation of commercial-sized wood pellet boilers as the cost of heating oil continues to rise. It was $1.62 per litre in Inuvik recently.
The Government of the Northwest Territories has installed biomass systems that can generate heat at the equivalent of 60 to 70 cents per litre.
The Chair: Where do you get the wood pellets from?
Mr. Ramsay: They are imported from Quesnel, B.C., and also from La Crete, Alberta.
As well, the Diavik diamond mine is constructing a 9.2-megawatt wind farm at their site, located approximately 300 kilometres northeast of Yellowknife. The blades for the turbines are being transported up the ice road as we speak, and installation will be commissioned by December 2012. When industry starts making these kinds of investments, there is an economic case that can be made.
Finally, many people might be surprised to learn that Fort Simpson, the home of Senator Sibbeston, is also home to a new operating solar project larger than any installed in Alberta or Saskatchewan. Solar power does not seem to fit with our long winters, but Fort Simpson receives more annual sunlight than Paris, Berlin or Tokyo.
I thank Senator Sibbeston. It was nice to have a chance to catch up with him earlier.
The high cost of conventional energy creates a more accessible entry point for renewable technologies, and our cold climate and geographic conditions forces us to think outside of the box. We urge the federal government to do the same and partner with us to make the investments that unlock our energy potential.
The Northwest Territories has tremendous conventional energy resources as well. In that light, it is ironic that we pay some of the highest fuel prices in Canada yet sit on top of the oldest, continuously operating oil wells in North America, and a sea of natural gas. Approximately 16.2 trillion cubic feet of natural gas and 1.2 billion barrels of oil have been discovered in the Northwest Territories. The potential is currently estimated at 81.2 trillion cubic feet of natural gas and nearly 7 billion barrels of oil. This has translated into renewed activity lately. A recent land sale for petroleum exploration rates generated $536.2 million in work expenditure bids for 13 parcels covering 1.1 million hectares in the Mackenzie Delta and the Sahtu regions of Northwest Territories. That is central Mackenzie.
We are focusing more on our robust offshore energy reserves. The United States Geological Survey estimates that the area north of the Arctic Circle has an estimated 90 billion barrels of undiscovered recoverable oil, 1,670 trillion cubic feet of recoverable natural gas, and 44 billion barrels of recoverable natural gas liquids in 25 geologically defined areas thought to have potential for petroleum.
The Northwest Territories has, within its territorial waters, a piece of those resources in the Beaufort Sea which extends to the North Pole. Industry recognizes significant potential in the offshore. In 2008, companies committed to spend $1.2 billion to develop their petroleum exploration licences in the offshore. Work is moving ahead to develop these leases. In 2008-09, Imperial Oil completed three dimensional seismic and gravity surveys and undertook a field data collection program. The information gathered will be used to support the Ajurak exploration drilling program, the plan for which is currently in development. In 2009-10, British Petroleum completed 3-D and 2-D seismic surveys and undertook a field data collection program. Just last week Chevron put forth an application to conduct seismic data collection programs in the Canadian Beaufort Sea.
Chevron plans to run a 3-D and 2-D seismic data collection during the open water season of 2012, or during the same period in subsequent years. The purpose of the collection is to evaluate petroleum reserves in the area. In addition to offshore potential, the Northwest Territories remains interested in the long-term goal of working with industry and the federal government to harness oil and gas resources and develop the Mackenzie Gas Project. This is a nation- building project that could play a key role in pulling Canada out of economic slump. The numbers speak for themselves.
Construction and operations of the project will require over 208,000 person years of employment. It is estimated that the Mackenzie Gas Project could contribute $68 billion to the Northwest Territories economy and over $86 billion to the Canadian economy.
The impacts of global warming are being felt all over the world and especially in Canada's North. Delivery of natural gas to the North American market will mean the displacement of dirtier, coal-powered electricity generation. Natural gas will be the transition fuel to a lower carbon economy. It is also a fuel we would use in the North. We have done a number of studies for the conversion of communities to natural gas from the Mackenzie Valley pipeline, displacing imported oil. Natural gas is cleaner, cheaper and local; key attributes of a sustainable energy system.
The Northwest Territories also has significant hydro electric potential. The federal government played a central role in developing our existing hydro facilities in the South and North Slave region. This legacy infrastructure resulted from past mining development. The Snare hydroelectric facility was developed by industry and the federal government in 1948 to supply power to Yellowknife and the giant gold mine. The Talston facility in the South Slave region was supported by the federal government while leveraging the energy requirement of the Cominco at Pine Point in the 1960s. It is these types of partnerships that we need to return to: partnerships that support economic development that benefits all of Canada while leaving behind a legacy of energy infrastructure that will benefit generations to come.
There has been a great deal of discussion lately around the need for a national energy strategy. The Government of the Northwest Territories supports further work in this area and will stay involved in ensure that any national energy strategy considers the unique challenges and opportunities in Canada's North. The Northwest Territories will play host to the 2013 federal-provincial-territorial Energy and Mines Ministers Conference in Yellowknife. We will be using that opportunity, as we are with this one, to promote energy potential in the North. In closing, Canada and the Government of the Northwest Territories need to work together to think outside the box and make wise, forward looking investments that will support the sustainability of our northern economy.
Relatively small commitments will ensure that our population continues to see a long-term viable future for themselves in Canada's North.
We need the assistance of the federal government to help reign in our costs of energy cost of living so our businesses can grow, and our residents can realize a better sense of energy security at the household level. This is done through targeted infrastructure spending in creating sustainable options for N.W.T. citizens in which they can feel a sense of ownership and pride.
The Government of the Northwest Territories knows that energy and resource development will play a pivotal role in the future and development of our territory. We hope that Canada will help us demonstrate our people's leadership in these sectors by helping us achieve our vision for sustainable northern communities in the Northwest Territories.
Once again I would like to say thank you very much for the opportunity to make the presentation.
The Chair: Thank you very much, minister. That was a very optimistic and forward looking opening, and I congratulate you for it. I will ask a couple of questions myself.
You talked about the need for collaboration with you all by the federal government, but you did not mention the two federal regulatory bodies that you are subject to, namely the National Energy Board of Canada and the Department of Aboriginal Affairs and Northern Development.
Is there a problem? Do you have issues? This is not a bad place if you do have issues with those organizations. They tell us good things and that they are cooperating well. Minister Duncan has great plans for the future and he gave us a very bullish piece of testimony here one night.
That would be my first question and the other is on the Beaufort Sea. You went out of your way to say we have a piece of those subsea resources and you refer to it as the Canadian Beaufort. I wonder who your neighbours are up there or who you perceive them to be, from a sovereign point of view.
I see the man from the Yukon saying they are all his, but I know they are not. Maybe they are. I wonder about Russia and places like that.
Mr. Ramsay: I will attempt to answer the questions and then I will have my deputy minister cover any bases that I may have missed.
First, I believe we have a solid working relationship with the federal government. It has been refreshing the amount of attention that has been paid to the Northwest Territories. We have an unprecedented amount of partnership in the area of infrastructure dollars that have come north via programs like the Building Canada plan and CSIF. We have spent just over $1 billion in the last five years in infrastructure in the Northwest Territories. We are currently looking at finishing another sizable capital project across the Mackenzie River. We have a $150 million commitment from the federal government to construct an all-weather road between Inuvik and Tuktoyaktuk. We are continuing to move forward with that.
With regard to our relationship with the regulators, with NEB, I have had the opportunity to sit down with Chairman Caron just recently. He was in Yellowknife. They have been working closely with our government, and we certainly do not have complaints in that regard.
As we move forward, though, we have devolution on the horizon. We are currently negotiating a conclusion to our devolution agreement with the federal government. Whatever that regulatory arena is two years from now, we are going to inherit that process, and there is talk now that there will be some changes. The federal government, of course, had the McCrank report. Subsequent to that, John Pollard has been doing some work with Minister Duncan and AANDC. We will wait and see how that plays itself out, but we have seen a substantial decline in the amount of exploration in our territory, even though our resources are there. The exploration dollars and the investment is going to the Yukon and to Nunavut, and we need to try to find a way forward that is going to bring those investment dollars back to our territory so that we can develop the resources that we do have in the Northwest Territories.
As for the Beaufort, obviously there is a dispute there. There is an arena for that to be settled in, I am sure, but we certainly do have a substantial interest in the Canadian Beaufort Sea that is offshore of the Northwest Territories. For some further information, we will go to my deputy minister.
The Chair: Thank you very much.
Would you like to comment now, Mr. Vician, or shall we go to other questions?
Peter Vician, Deputy Minister, Department of Industry, Tourism and Investment, Government of the Northwest Territories: Mr. Chair, I will just make a quick comment. Obviously, the offshore issue is not a matter for the territorial jurisdiction currently. At this point it remains the federal jurisdiction, and it will be for a number of years. Of course, the minister has indicated the boundary issue to the west with the United States and of course it is a front and centre issue, one we will continue to participate in and discuss. That will be the big issue for the years to come. Candidly, it is one that we are all looking at in the short term from a jurisdictional perspective but one we are looking at carefully, as the minister has indicated, from the economic potential and the wealth of that energy resource that exists currently on the offshore.
Mr. Ramsay: Further to my deputy minister's comments, in our devolution agreement there are some provisions in there as we go forward to negotiate on offshore. We are looking down the road for those opportunities through devolution.
Senator Sibbeston: I certainly welcome Mr. Ramsay and Mr. Vician. It is always nice to see someone from the North. I often talk about the North, but they may treat what I say with a little bit of suspicion. However, with you they would not do that because you are directly from the North.
In the North we have tremendous potential. A gas pipeline is a real possibility and there is the possibility of hydro development. We have ongoing diamond mines. Through the years there will be other mineral development. We also have the eventual potential up in the Arctic. As global warming occurs and the ice and the sea open up, there will be tremendous transportation into an area that is very rich.
Our potential is really good, but because we in the Northwest Territories are not a province, we do not control the land and resources. The federal government still has a big hand in the North. If you come from the North, you come from a long history of colonialism and federal government having a big hand. We have made great advances. While you in the South may take it for granted that someone is elected and becomes a minister, we in the North have just had that experience in the past 20 years or so. In the past, prior to having people elected ministers, we have had federally appointed officials in government.
It is nice to see someone like Mr. Ramsay now be the minister.
With all the potential that we have in the North, what do you see as the role of the federal government? What does the federal government need to do so that we can get at development of the resources? Would you also comment on what the mood is in the North these days with respect to development?
Years ago in our history a lot of the Aboriginal people resisted; they were afraid of development. It would have overwhelmed them and it would have killed them, but now they have developed through land claims and they are now in a position where they can take advantage of the development. I am curious to know from Mr. Ramsay what he sees as the mood, the situation with respect to Aboriginal support for any developments and also then the question of what do they expect the federal government to do.
The Chair: That is a good question, Senator Sibbeston.
Mr. Ramsay: Thank you, Senator Sibbeston, for the question. To the first part of your question, we are resting a lot of our future on the negotiation of the devolution deal that will finally give the Northwest Territories control over the lands, waters and the development of our resources. I cannot underestimate how important that is to our territory to see the conclusion of that, to get those decisions made in the Northwest Territories by people from the Northwest Territories and not made here in Ottawa.
The Chair: On that point, when you use the term "devolution," we hear it a lot about Scotland these days. It means you would be put in the same position as the provinces with respect to natural resources, or does it have a further implication?
Mr. Ramsay: No, it is very similar to that, Mr. Chair. As I was mentioning, we would make decisions on resource development, not AANDC, not the federal government. That would rest on us. We are looking forward to the day when we can make decisions for ourselves. In a way, it is a coming of age for our territory. Once we do have a devolution agreement signed, there will be a number of positions transferred to the Northwest Territories as well, in addition to that responsibility that I talked about.
It is important that we continue to move that forward, and the momentum is there to accomplish that. We have several groups that have signed on to the devolution deal. We do not have the support of all the Aboriginal governments in the Northwest Territories to continue to pursue the negotiation of that deal, but our government is committed to advancing it. We have struck out with this government trying to get the Aboriginal groups back to the table, back to working with us towards devolution. We are moving forward and we will continue to move forward.
On Senator Sibbeston's second question about the attitude and the way people are looking at resource development in the Northwest Territories today, I think the mindset is starting to change. Folks can see what jobs and opportunities can bring. A good example of that this winter is that there is activity again in the Sahtu, in Norman Wells, in Tulita. People are working. A lot of people are moving around the territory, in-territory migration for employment from an area of our territory that does not have a great deal of employment right now, and that is in the Beaufort Delta in Inuvik. People are going to Norman Wells to work. We are hoping to see some of that spin-off, economic activity helping other regions. Certainly in the Dehcho, we need a find a way and means to stimulate the economy there. We have the Prairie Creek mine, the Canadian zinc. That is 150 jobs down in the Dehcho region. Also, if you look at the Mackenzie gas project, the Aboriginal pipeline group's involvement in that project, they are representative of Aboriginal groups across the territory. They are one-third owner of the Mackenzie gas project, so that is a substantial commitment by Aboriginal people in the Northwest Territories in support of the Mackenzie gas project.
On a smaller scale, we were in Vancouver at the Cordilleron Roundup Mining Conference a few weeks back, and I met with a number of folks from smaller communities, like Colville Lake and Fort Good Hope, that are interested in mining. They are interested in developing the resources that they have on their doorsteps. I think they see the way forward is going to be through resource development of one form or another. That is how they will avail themselves of jobs and opportunities. We need, as a government, to encourage them to continue that type of mindset so that we can set the stage for the future, and that is resource development in our territory.
Senator Sibbeston: Can you tell us what you expect the federal government to do in order to get some of these big projects in the North going?
Mr. Ramsay: Being a territory, we do have a limited ability to raise our own revenues, and right now we have a federally imposed borrowing limit. That is currently being worked on with my colleague, the Minister of Finance, and the Finance officials here with the Government of Canada. We are hoping for a resolution to that that will free up some money for us to invest in strategic pieces of infrastructure.
Where I see the Government of Canada's role in helping is partnering with us. Again, I talked of our coming of age, you know, this Tuktoyaktuk-Inuvik highway and the $150 million commitment, that is a 75-25 cost share with the Government of Canada. It is projects like that where we really need the federal government's help. We obviously do not have the financial wherewithal to complete a project like that. Looking forward, we want to construct an all- weather road down the Mackenzie Valley, the Mackenzie Valley Highway. We are definitely going to need a partner in the federal government to ensure that that happens so we can connect communities and address the high cost of living. That is how I see the federal government fitting into our plans, being a partner with us and working with us to develop our territory. It is not just for the betterment of the residents in the Northwest Territories. The Northwest Territories is a treasure trove of resources that will benefit not just the residents in the Northwest Territories but in fact the entire country of Canada.
The Chair: What is the population of the N.W.T, sir?
Mr. Ramsay: We have 43,000 people.
Senator Lang: I would like to welcome the minister here today and our neighbour to the east of the Yukon. Just as a slight correction to the deputy minister when he talked about the Beaufort Sea, there is a part of that that does apply to the Yukon, and I am sure that it can be worked out as we move along. Of course, the major problem is with the Americans and Canada in respect to the actual boundary itself there.
I would like to go to another area that is of concern to you and to the federal government, and that is the question of the regulatory system and how it is functioning or not functioning at the present time. You mentioned in your opening remarks about the fact that there is less and less investment coming into the territories, and I think primarily in part because of the difficulties that investors are finding with the environmental regulatory process.
The McCrank report, I gather, was done and completed in 2008. This is 2012. What changes are you going to be making to the regulatory process that will spur this further investment that you are obviously looking for in the Northwest Territories?
Mr. Ramsay: On the regulatory process, you are right. The McCrank report is a few years old now. We have had John Pollard working with John Duncan in trying to develop a way forward on the regulatory process in the Northwest Territories. Some people cite the regulatory process as one of the reasons, but I believe it is not the entire reason that we have seen investment dollars in exploration diminish in the territory, but it probably is a big factor. We also have two unsettled land claims in the Northwest Territories, so there is some uncertainty in that regard for investors.
However, as we move forward, right now it is the federal government's call on the regulatory process. The talk is to go down to one board to manage everything, but that has to be thoroughly vetted with our government and the Aboriginal governments in our territory as we move forward. I mentioned earlier that we will inherit whatever the federal government does when our devolution agreement is finally negotiated and concluded. We have to walk very softly. We have the relationships that we are trying to build with the Aboriginal governments and our relationship with the federal government, and if the federal government wants to come in and make some sweeping changes to the regulatory process in the N.W.T., we are going to pay attention, but it is going to be hard for us to get offside of the Aboriginal groups in our territory or the federal government. It is going to be a fine line to walk for our government. We have not discussed yet as a cabinet what our line going forward will be. We have not really realized what it is exactly that the federal government will do, so we are early on in that process. Certainly change is coming, and we will be watching closely what the federal government is going to be doing.
Senator Lang: Just to follow up on that, perhaps you could identify for us what you see as the timeline for some decisions being made, both in the area of the regulatory reform, results of the McCrank report, and secondly in respect of your devolution agreement. You said you were negotiating that. I thought you had come to a conclusion on that.
Mr. Ramsay: We came to an agreement on the AIP, the agreement in principle, which set the stage for the negotiations to begin. We are currently negotiating with the federal government. The timeline on a completed devolution agreement is anywhere between 18 and 24 months. Those timelines are, I think, realistic, and we can conclude that.
On the regulatory side of things, the federal government is the big push behind that, and we will be at the whim of their timelines. They are probably going to try to get something in place and get out and do consultation. I would say that happens this year, but again, it is the federal government. It is not our government that is doing this, so we will have to wait and see how long that is going to take.
We were hopeful that whatever changes they make, they do them before we inherit it, and that the changes that they do make are going to be conducive to us having the ability to get those investment dollars back and have an environment in the Northwest Territories that is open for business and getting folks back there.
Senator Mitchell: I would like to follow up on the environmental review process. Two things strike me. You say it looks like just now they are starting the consultation, but this has been a debate, an issue for many years, and certainly this government has been in power for six years. Are you saying they are just now looking at consolidating those various agencies, departments and boards that they actually control and they could, one would presume, have some authority over consolidating?
Mr. Ramsay: Thanks very much, Senator Mitchell. It has been a number of years, but the fact is in the Northwest Territories it is a very complex and convoluted political environment with land claims. I believe the federal government has been treading carefully when it comes to regulatory reform. I believe, going forward, they will have to do the same, understanding the complexity and the nature of land claims in the Northwest Territories and water boards that are set up under those land claims.
It will be very tricky for the federal government to get any meaningful regulatory reform done, but at the end of the day I think they will push forward and we will get something, but it remains to be seen what that will be. Whatever it is, we inherit it at the end of the day.
Senator Mitchell: In this situation it is not as simple as just the federal government dealing with federal jurisdiction? It also has the special land claims-related solutions, boards and so on, which you just cannot run roughshod over, I guess.
Senator Sibbeston: They have the force of the Constitution, actually. These land claim agreements are not just agreements that can be readily changed. They are constitutionally bound, so it is very difficult to change.
Senator Mitchell: Is not one of the problems with these boards that they do not have adequate capacity, they do not have the resources to do the job? Whose responsibility would it be to break that logjam? I guess ultimately it could fall on you, and how do you feel about that? Is it not the federal government that could fund these better?
Mr. Ramsay: Yes, that is correct. Capacity has been an issue, and that is under the purview of the federal government. Some of the other issues for people going through the processes, when you are investing sizable dollars, you want some surety and timelines. You want to ensure that things will be done in a fashion that will give you some peace of mind.
With those capacity issues, that has been a challenge. I think that certainly will be addressed in any changes. Perhaps the notion of going to one board, you might be able to fund and provide the capacity for one board more easily.
Senator Mitchell: My colleagues would be surprised if I did not ask something about climate change. You mentioned a couple of things in your report. Could you elaborate on those? Generally how do you feel about the effect of climate change on the North? We were talking earlier about structural effects and the adaptation that has been in place for a long time.
What do you think about policy to deal with climate change and its implication for the development of energy resources like yours?
Mr. Ramsay: Obviously the North is ground zero for climate change. We were feeling it much more than Southern Canada would.
A couple of years ago I was on a trip to Sachs Harbour on Banks Island, and we had a boat trip along the southern part of the island. As we were going to shore, you could actually see parts of Banks Island falling into the sea. If that did not tell you something, nothing does. That always left an impression on me that things are changing. They have lost, I think, 30 feet of shoreline on some parts of southern Banks Island.
We have had a lot of shoreline erosion also in the community of Tuktoyaktuk on the Arctic coast. It has had a huge impact on our road infrastructure and our airports, with the permafrost and the heaving, and it has cost us a tremendous amount of money to maintain our infrastructure because of the warming.
We have also seen an increase of species that are not native to the Northwest Territories in the last number of years. We have white-tailed deer, magpies in Yellowknife, cougars and coyotes and things like that. They are getting salmon in the Mackenzie River, as far down as Norman Wells. Things are changing, the environment is changing, and the elders will tell you that. They are seeing many changes in our territory.
As far as policy, we are looking at reducing greenhouse gas emissions as much as we can and playing our part in trying to protect the environment. We are also looking government wide. We have had a number of government-wide programs that look at biomass. As mentioned in my opening remarks, we put a number of wood-pellet boilers in to try to displace some of the diesel that we are burning.
We are trying, wherever we can, to mitigate our carbon footprint and what we were doing to the environment. We are trying our best. Again, we are challenged because we are such a small jurisdiction, and our communities are so isolated. We have 33 communities spread over 1.2 million square kilometres, so it is challenging. It is hard to just take a community off of diesel if you do not have anything to go to, and that is the challenge that we are up against.
Senator Brown: I just wanted to ask you about the fact that you have sizable deposits of natural gas. Apparently you are not using them for heating; you are using woodchips and whatnot. I wonder why you cannot build smaller pipelines. The Mackenzie line is 40 years old and I do not think it has been built yet. If you have all that natural gas, I wonder why you cannot have some smaller lines which would take over a number of things right now. We have been finding LNG in southern Vancouver that is building for transportation trucks, LNG as well.
That would solve two of your problems. One is your problem with heating and your other problem is with transportation. Are you looking at any of those things?
Mr. Ramsay: That is a good question. We have a couple of communities on natural gas and we have had issues with both of those in the last couple of years, in Norman Wells and Inuvik. The situation in Inuvik is quite dire. The well that the town is on is running dry. We have just over a year left on the supply of natural gas to the community of Inuvik. We are looking at a solution to run a small pipeline from another well. It is estimated to cost somewhere between $60 and $70 million to do that. Also the community of Tuktoyaktuk has looked at running a small pipeline from a well into the community of Tuktoyaktuk. However, in Tuktoyaktuk, where you have 1,100 people, if you are going to spend $30 million to run it, then the economics of it have to come into play, obviously.
It is the same situation in Inuvik. We are trying to sort things out for a solution on Inuvik and how we go forward. We may have to drill a new well and get a line into Inuvik, but it will be a costly process.
We are really excited about the opportunity the Mackenzie gas project will bring to communities up and down the Mackenzie Valley, where we can connect to the pipeline and see communities get off of diesel. However, it is a very expensive undertaking to run even small pipelines from wells into communities. We are talking, in some cases, a pretty sizable distance as well. Wherever possible, though, we really need to try to get communities off of diesel. We are doing our best to do that. Again, it is a real challenge when the communities are so isolated.
Senator Brown: I know you have a problem with trucking in the North, too. I wonder if you are trucking diesel. Can you not truck LNG, or can you not truck natural gas itself?
Mr. Ramsay: Our government has not taken a look at the possibilities on LNG. Going forward, obviously that is something we are going to have to do. Everything should be on the table and we should be looking at all of our options.
One of my colleagues from the Yukon was talking about LNG in the Yukon. That is something we really need to give some consideration to. We have so much natural gas in the Northwest Territories; we need to be doing something with it. First and foremost, we need a pipeline to get it to market. We are hopeful that that will happen soon.
Senator Brown: You mentioned natural gas liquids in your presentation. Is that natural gases dissolved in water or in bubbles in water? What are natural gas liquids?
Mr. Ramsay: That would be propane, methane, butane — the "anes."
Senator Neufeld: Thank you for being here, minister and Mr. Vician. It is good to see you. You talked in your speech about Imperial Oil doing 3-D seismic and those things. Is that around Norman Wells? That would be for exploration for oil, would that be correct?
Mr. Ramsay: Yes, there is a sizable shale oil play across the river from Norman Wells. It would stretch all the way from just south of the community of Tulita to north of Fort Good Hope. It is a huge play and there are a number of companies involved in it. Husky is drilling two wells over there this winter and a number of companies will drill wells next winter.
There is a great deal of excitement about what is happening across the river from Norman Wells. Some intelligence that I have from industry is that things are looking really good on that first Husky well. We are very excited about the prospects for a big development in the Sahtu region of our territory.
Senator Neufeld: That is very good to hear.
You talked about your hydroelectricity generation and the cost of 27 cents a kilowatt, I think you said. Is all of your electricity generated by a private company in the Northwest Territories?
Mr. Ramsay: I will have my deputy minister answer that question.
Mr. Vician: The majority of the power generation, either in the thermal or in the hydro communities, is generated by the public corporation fully owned by the GNWT, which is the Northwest Territories Power Corporation, NTPC. In the case of a couple of small thermal communities, that is generated by Northline Utilities, which is a subsidiary of ATCO Power out of Alberta. The majority is generated by the Crown Corporation. In the case of Yellowknife, for example, the distribution of the power is through another subsidiary company of ATCO, Northland Utilities. Again, they purchase the power from NTPC.
Senator Neufeld: I am interested to know why the cost is that much for your hydroelectricity when the two plants that you talked about were built in 1948 and 1960. Obviously, the capital costs are long gone. The federal government contributed to them, which means there would be no cost.
Can you tell me why that hydroelectricity, if it is done by the Government of the Northwest Territories, still costs you 27 cents? I am a little mystified there.
Mr. Vician: Part is due to the cost of that capital and the sale of those facilities to the corporation. We still carry on the books a large component of the sale value because those projects were not originally owned by the Crown. In the case of Bluefish, for example, it was owned by the mining corporations and sold to the N.W.T. power corporation, so we are still carrying the costs of that on the books. The overhead and the cost of rehabilitation continue to plague the system. There is a lot of refurbishment over the last decade and continues to be. In the case of Bluefish, for example, entire dam replacement is under way. Those costs are borne through. Finally, there is the overall administration of a system of that complexity through the transmission and the overheads, et cetera, associated through the personnel that need to be there to administer a system dispersed across the Northwest Territories. Those costs continue to plague us.
The minister has indicated 27 cents. In the case of Colville Lake, when you go to cost service calculations, you look at a rate of $2.30 a kilowatt hour, but we do not charge that rate out. I do not think anyone could cope with that. There are programs to subsidize, but we have a multiple rate zone system. While 27 cents may sound like a lot, we consider that to be the reasonable end of scale in the Northwest Territories.
Senator Neufeld: I guess you blend all those costs of the generation of electricity in the Northwest Territories into one pot and that is how you come up with 27 cents. If that is the case, I guess you have different pricing for different areas. When you are on diesel, as I listened to the minister, it was as high as 50 cents. You do some difference. You do not blend it all and say this is how much it costs. Maybe that is too technical.
Mr. Vician: It is an interesting question because just a few years ago, we actually had 33 rate zones, one for each community. There was a complex process. You can imagine a public utility board review of 33 rate zones, in some cases for only 200 or 300 people in some communities. The variance was anywhere from somewhere in that low teen range to $2.30. The GNWT had a responsibility to step in and balance that through a subsidy program. Over the last two years, we have gone to a new rate rebalancing process and created seven zones across the territory that deal with how to capture different zones and thermal zones in the northern region of the territory, bring it all under one roof and come up with a balanced rate, which is somewhere in the range of 47 to 50 cents today. The user would use it at this point. It is complex for a small population that is dispersed so broadly.
Senator Neufeld: Yes, it would be. I understand that.
I am quite familiar with the Canadian Zinc Corporation mine at Prairie Creek. You said there are 150 jobs. Is it working now? What is transpiring there? I think that mine would be a huge benefit. It is not one that they have to start with; it is already there. Everything has been done. It is just a matter of building a road and getting investment in there to start mining it. Maybe you can help me out a bit there?
Mr. Ramsay: I believe the Prairie Creek Mine is going through the final permitting phase. We are excited about the prospects of opening the Prairie Creek Mine and diversifying our mining portfolio. We have rested our laurels for the most part on diamonds. We have a lot of prospects out there, lead zinc being one; rare earth being another at the Nechalacho project at Thor Lake; that is, gold, bismuth and cobalt. There are a number of interesting projects that we are hoping can continue to move along, but Prairie Creek is an exciting one. We are hopeful that it will get across the goal line soon and we will get those 150 jobs for the Dehcho, where they are desperately needed.
Senator Neufeld: As a matter of note, the first time the mine was staked was in 1926. That is how long people have been working in there. In my earlier life, when I was still driving a truck — and it would be have been in 1969 — I moved the first camp from the W.A.C. Bennett Dam into Prairie Creek Mine for the company that I worked for. Before that, they worked in tent camps.
That is a little bit of history for you. I can give you more, too.
The Chair: I thought it was when you were sent out by the premier for the annexation of the N.W.T. by B.C.
Senator Peterson: If you do not own the resources it must be difficult to negotiate deals or try to do partnering, for example Ekati and Diavik. What was your take on that?
Mr. Ramsay: Thank you very much senator. One way we get around that is the negotiation of impact benefit agreements, and also socioeconomic agreements and value added type of industries. The diamond mines were first established with Ekati, then later the Diavik Mine at a cut and polish processing in Yellowknife. That worked to a small extent for a number of years. We are currently trying to rekindle that value added industry in Yellowknife. There is one polishing company in Yellowknife. We are currently negotiating with another one to come in.
We get the benefits through the jobs and economic opportunities for businesses. The majority of them are Aboriginal businesses that get contracts and do work at the mines. There are spinoffs of a grand scale economically for residents and businesses in the territory. Even though we do not control the resource, we get the spinoff economic opportunities as a result of it.
Senator Peterson: You are not getting your fair share are you?
Mr. Ramsay: No.
Senator Peterson: On Ekati and the decommissioning, is that fully funded?
Mr. Ramsay: I believe it would be. We are not going to have another situation in the Northwest Territories like a giant mine where there is no contingency plan or money backing up the reclamation of a mining project. Ekati is a big mine and those safeguards will be in place. Obviously it was a big undertaking. I am not 100 per cent sure as to whether it is fully funded. There would be substantial money to reclaim that mine once it is decommissioned.
Senator Peterson: Who would have negotiated that deal? You were not at the table. Was it the federal government?
Mr. Ramsay: Yes.
Senator Peterson: You would have to look to them if there is any shortfall?
Mr. Ramsay: Yes, and that has been an issue with other contaminated sites in the Northwest Territories. We have been going back and forth with the federal government on who is responsible for what. That is a discussion we continue to have.
Senator Peterson: Good luck with the negotiations. I hope you get that done quickly. It will be a lot better for you.
Senator Baker: I congratulate the witnesses on their excellent presentation, and very thorough and competent explanation of the situation in the Northwest Territories.
Just one question: To the general public watching this and listening to you, you have diamonds in the Northwest Territories. If you talked to a geologist 20, 30 years ago — or back in my university days — there was no such thing as diamonds in Canada. It would be the dream, but now you have the diamonds; the rarest, most precious minerals you can think of. The Chinese and all these entrepreneurs that want to get their hands on it, and so on. You have all the resources you outlined here tonight and yet you mentioned in your address — you did not put in your address, but as an aside — that your exploration dollars were down, and that your exploration was down. That is a great conflict in my mind.
Anyone watching would wonder — with the diamond mines where everybody flocks to, and workers on the planes through Toronto going to the Northwest Territories — why on earth your exploration dollars would be down. Is it you do not give the same deal to prospectors that they do in other parts of the country? Is there something different about the Northwest Territories to cause that?
Mr. Ramsay: That is a very good question, one that our government is trying to wrap its mind around. We are trying to move forward with a plan to address the reasons why we are seeing a decrease in exploration and investment in our territory. In the backdrop we have all the resources in the world. We are sitting on oil, gas, diamonds, minerals, you name it; it is in the Northwest Territories. As we move forward we are working on development of a mining strategy, mineral strategy and also a comprehensive economic strategy that will hopefully set the stage for the growth of our territory.
We can look at a few different things as reasons why the investment dollars have gone elsewhere. There are opportunities elsewhere in Nunavut and the Yukon. We talked quite a bit about the regulatory environment in the Northwest Territories not being conducive to investment, people having to wait inordinate amount of time to get approvals, and capacity issues. The mining sector is a smaller type of fraternity, and word travels quickly. Once the regulatory process gave someone the wrong opinion of investing in the N.W.T., perhaps our reputation got damaged. We need to ensure our reputation is one that is not damaged. We are going to do everything we can in the next three and a half years to make sure we get the investment dollars and the exploration companies back to our territory to get jobs and opportunities for our people. Being the Minister of Industry, Tourism and Investment it is my goal to ensure that three and a half years from now, out of the three territories, we want to be number one. We have the resources and there is no reason why we should not be number one when it comes to exploration dollars out of the three territories. We will strive to be the best.
Senator Baker: Good for you.
The Chair: Are there any other questions, colleagues?
There being none, on behalf of all the senators I would like to thank you both very much. I think you have given us a pretty good snapshot of the wealth that is potentially up there to be unlocked. If there is any message that you would like us to highlight in our report that you have not highlighted in your comments tonight, minister, feel free to communicate to me through the clerk. One of the things we are about is educating the people. We are getting them to talk about the resources and natural sources of energy that we are blessed with in this country. As Senator Neufeld told me the other day, Canada is an energy powerhouse and we should be proud of it. We should work with it, make it even better and exercise all of the responsibilities that come with that.
If there are no questions, did you want a closing word, sir?
Mr. Ramsay: Thank you very much. It certainly was a pleasure being here with your committee this evening and I share your enthusiasm. Going forward, the Northwest Territories will be front and centre when it comes to energy in this country. We want to be a big player and we need to think big. We have all the opportunity in the world on our door step and we intend to move forward on that.
I was over in Labrador in Goose Bay and had the opportunity to attend a meeting of the Northern Development Ministers. We enjoyed some great hospitality, so I wanted it mention that. I look forward to the committee's report when it is concluded.
We had a chance to talk to your analyst, Mark LeBlanc, when we were here earlier. We gave him our cards. If there are questions or concerns that you have, we would be happy to answer and get you further information. Any chance we have to speak about the Northwest Territories and the opportunities that we have, we fully intend to do. Thank you very much for the opportunity. It was a pleasure.
The Chair: Colleagues, it would be fair to mention you have a very articulate and energetic advocate from the Northwest Territories in our Senate; Senator Patterson. There is not a day that goes by when he does not beat your drum because he has to compete with Senator Lang, who has a delegation from the Yukon coming to one of our meetings.
(The committee adjourned.)